INTRODUCTION TO FERTILIZER INDUSTRIES

Before introducing organization KRIBHCO (a Fertilizer producing unit). I feel necessary to give an overview of
the Indian Fertilizer Industries.
“INDIA LIVES IN VILLAGE” said Mahatma Gandhi decades ago. It is true even today. Like every developing
economy. The economy of India is also agro-based. More than two-third of its population depends on agriculture as a
mean of livelihood and nearly 30% of its national income is derived from the agriculture sector. The prosperity of the
industrial sector is also closely linked with agriculture’s large proportion of agriculture product is also exported.
Therefore, agriculture base of the country must be strengthened, if accelerated, economic growth is to be achieved.
To attain this objective, agriculture practices have to be improved from their traditional pattern to a higher
technological lane involving better irrigation and use of better and use of better quality seeds, fertilizers, insecticides &
pesticides. Therefore, chemical fertilizers are king-pin in this process and fertilizer industries plays quite a major role
in increasing food production in the country and also helps to modernize the out look of the common farmers and
make them innovative and respective to the new technology and changing and situations.

“A fertilizer is any material, organic, inorganic, natural or systematic, that is placed on or incorporated into the
soil to supply plants with one or more of the chemicals elements necessary for normal growth.
Fertilizer is the material, which supplies the chemicals elements required for plant growth. Primary nutrients
like nitrogen, phosphates and potassium (required for fertilizer land) are supplied through chemical fertilizer. Fertilizer
response studies have proved that one-kg. of Fertilizer nutrient application can the food grain production by 8-10 kg.

Fertilizer production is of permanent importance for this country because Fertilizer increases agriculture
productivity. One hand population increasing but on the other hand the supply of land is totally inelastic i.e. fixed. So
we have to produce more, without any increase in arable land area. This can be done if productivity goes up. And
Fertilizer plays a major role in productivity escalation.

On one hand population has been increasing but on the other hand the supply of land is totally inelastic i.e.
fixed. So we have to produce more, without any increase in cultivatable land area. This can only be done if
productivity goes up. And fertilizer plays a major role in productivity escalation.

As this is a vital commodity it is in the interest of nation that farmers get fertilizers at reasonable rate and in
adequate quantity. Looking to the poor economic condition of Indian farmers Government of India framed fertilizer
policy in 1977 based on Marathe Committee Report. The purpose behind introducing this policy was to supply
fertilizer to resource poor farmers at a price they could afford, so as to increase the consumption of fertilizer, to
increase food production, and ensure fair return to fertilizer producers.

With this twin objective, Retention Price Scheme (RPS) for fertilizers came into picture. In this scheme
Government has brought the fertilizer under the purview of Essential Commodities Act (ECA) in which the retail price
of fertilizer to the farmer is notified by the Government of India from time to time. This retail price to the farmer is
uniform throughout the country and is subject to local taxes applicable under the respective states.

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 Further under ECA, the Government also operates a system of distribution control in which the manufacturers
including the handling agents for the imported fertilizers are directed to sell specified quantities of fertilizers in given
states/union territories. While doing so, the logistics of fertilizer distribution including storage, transportation, handling
etc. are also suitably regulated conforming to overall supply plans of the Government to meet the requirement in all
the parts of the country.

Now manufacturers also should get reasonable rate of return as an incentive for producing fertilizers.
Manufacturers should get at least that much, which can enable them to remain in the industry.

Government of India fixes the price of fertilizers in such a way that manufacturer’s cost of production including
cost of marketing is covered and the manufacturer gets a 12% post tax return on net worth of the unit at pre-defined
capacity utilization. Norms are fixed for consumption of raw material, utilities, services, capacity utilization,
depreciation etc. The price so fixed is called Retention Price (RP). This price is reviewed every three years.

In a nutshell fertilizers can not be sold in open markets and producing unit has almost nil say in fixing
fertilizer price. Then how to increase profits? By operating plants efficiently.

The work of administering the Retention Price Scheme (RPS) is entrusted to Fertilizer Industry Co-ordination
Committee (FICC) which works under the control of Department of Chemicals and Fertilizers.

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 FERTILIZER INDUSTRY SCENARIO IN INDIA
In India, first of all in 1906, a single super phosphate (SSP) manufacturing unit was set up
at RANIPAT near CHANNI (MADRAS) with annual capacity of 6400tones per annum.

1. PUBLIC SECTOR

• The Fertilizer And Chemicals Travancore Ltd. (FACT)

• Hindustan Fertilizer Corporation Ltd. (HFC)
• Madras Fertilizer Ltd. (MFL)
• Hindustan Copper Ltd. (HCL)
• Naively Lignite Corporation Ltd. (NLC)
• Pyrites, Phosphates And Chemicals Ltd. (PPCL)
• Pradeep Phosphates Ltd. (PPL)
• Rashtriya Chemicals And Fertilizers Ltd. (RCFL)
• National Fertilizer Ltd. (NFL)

2. CO-OPERATIVE SECTOR

Those are only two fertilizer manufacturing societies in co-operative sector

• Indian Farmers Fertilizers Co-Operative Ltd. (IFFCO)

• Krishak Bharti Co-Operative Ltd. (KRIBHCO)

3. PRIVATE SECTOR

There Are 17 Companies in Privates Sector, Which Are Producing Fertilizer

1. Gujarat Narmada Valley Fertilizer Co. Ltd. (GNFC)
2. Hindustan Lever Ltd.(HLL)
3. Hari Fertilizer
4. ICI India Ltd.
5. Indo Gulf Fertilizers & Chemicals Corporation Ltd.
6. Mangalore Chemicals & Fertilizer Ltd. (MCFL)
7. Southern Petro Chemicals Industries Corporations Ltd.
8. Nagarjuna Fertilizer & Chemical Ltd. (NFCL)
9. Shri Ram Fertilizer & Chemicals

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 10. Tuticorian Alkali Chemicals & Fertilizer Ltd. (Continued…)

11. Zuari Agro Chemicals Ltd.

12. Bindali Agro Chemicals Ltd.
13. Chambal Fertilizer & Chemicals Ltd.
14. Coromandal Fertilizer Ltd. (CFL)
15. Deepak Fertilizer & Petrochemicals Corporations Ltd. (DEPCL)
16. E.D.I. Passy (India) Ltd.
17. Gujarat State Fertilizer Company (GSFC)

The Role of the FERTILIZER in the National Economy

AGRICULTURE INDUSTRY SERVICES ENVIRONMENT

As critical input in crop
production
Fertilizer use promotes. It
promoters agriculture
growth food security & rural
Fertilizer industry Distribution network The proper use of Fertilizer’s
promotes promotes domestic world can help in
trade; credit Banking,
Use of gas, sulfur etc. 1-maintainance of soil
services, and research,
structure
transport and storage
Foreign Exchange saving
services.
2-prevention of soil erosion
and degradation.

3-control of deforestation

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 Krishak Bharati Cooperative Limited

( KRIBHCO )

“KRIBHCO” the world’s premier fertilizer producing co-operative has an outstanding track
record to its credit in all spheres of its act ivies. Since 17 th April 1980 as a rational level Co-operative society
to manufacturing and distribute. Chemical fertilizer and allied farm imputes “KRIBHCO” imbibed the co-
operative philosophy fulfilling its commitment to strengthening and promoting the cause of agriculture
development and co-operative movements in the country.
Krishak Bharti co-operative limited popularly known as “KRIBHCO” has been registered as
national level co-operative society under the provision of the multi-state co-operative societies act, 1984.
The ”KRIBHCO” hazira unit is located around 15 kms, west of Surat and lies on the north of
river Tapti. An all weather road from Surat to hazira connects the plant site with the city. The cannel belonging
to irrigation department is running on the plant site and is feeding water from ukai. A railway feeder line
apporx.. 55 kms. Long has connected the site with Bombay –Ahmedabad main line.

Besides marketing its products “KRIBHCO” carries out various other programmed like farmers
benefit programmed, sanket Haran bima yojana, marketing of BVFCL (Brahmputra valley fertilizer
corporation limited) vred seed multiplication programmer, gramin vikas trust (rural development trust)

MEMBERSHIP: -

A cooperative thrives on the trust of, its members. Membership of “KRIBHCO” is open to government
of India, national state and district and village level cooperative society. At the initial stage, way back in
June, 1981 the total membership in ”KRIBHCO” was only 221 cooperative societies which rose
significantly to 6044 cooperative societies as on march 31,2005 as against 5790 as on march 31 2004.
Phenomenal progress made by the society becomes a testimony to the ever-increasing membership over
the years.
The total paid up share capital as on March 31, 2005 was rs.39, 354.15 lakh as against rs.49,
170.72lakh in the previous year. During the current financial year, the society has refunded share capital
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 of rs.9700 lakh to “IFFCO” and government of India respectively .the state –wise membership with share
capital contribution as on March 31, 2005 vis-à-vis march 31 2004.

MAJOR MILESTONES FOR HAZIRA PLANT

PIB Clearance for the Project 17.04.1980

Land acquisition 07.07.1980
Project Zero Date 31.03.1981
Foundation Stone laying by Late PM Smt. Indira Gandhi 05.02.1982
Project Completed 31.05.1985
Plant Completed 26.11.1985
Mech. Completion of Plants: 30.04.1984
a. 1st Phase of Ammonia & two streams of Urea plants 31.08.1984
b. 2nd Phase of Ammonia & two streams of Urea plants
Receipt of gas for - Phase-1 18.09.1985
- Phase-2 06.11.1985
Commencement of Trial production - Ammonia 14.11.1985
- Urea 26.11.1985
Start of Commercial Production Ammonia & Urea 01.03.1986

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PERFORMANCE HIGHLIGHTS :-

Highest monthly urea Production Dec.2007

1.662 Lack MT
Earlier Record (Jan.2005)
1.661 Lack MT

Highest Avg. Daily Urea Prod. In Feb.2008

5374 MT
Earlier Record (2004)
5363 MT

Highest monthly Urea Sales March.2008

4.75 Lack MT
Earlier Records (Dec.2007)
4.36 Lack MT
Highest Total Annual Urea Sale 36.26 Lack MT
Earlier Record (2006-07) 34.63 Lack MT

Highest annual Bio Fertilizer Production

953 MT
Earlier Record(2005-06)
775 MT
Highest Annual Bio-Fertilizer Sales 957 MT
Earlier Record (2006-07) 784 MT
Highest Annual Seed Production 1.68 Lack Quintals
Earlier Record(2005-06) 1.60 Lack Quintals
Highest Annual Seed Sales 1.67 Lack Quintals
Earlier Record(2005-06) 1.53 Lack Quintals

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 Theoretical Aspect
FINANCIAL STATEMENT ANALYSIS

Nature and Component of Financial Statement :-

Companies issue annual report after the close of each fiscal year Financial Statements are at the
centre of the annual report. Other components of the annual report are the board of directors’ report,
management discussion and analysis (MDA), corporate governance report and voluntary disclosures.
Board of directors’ report provides an analysis of the performance of the company during the fiscal
year covered in the report. MDA provides futuristic information such as management’s perception
about the business environment (including competition) in the next and subsequent fiscal years,
company’s strategy to take advantage of future opportunities and to face potential threats, and the
risk-management strategy corporate governance report provides a report on the company’s
compliance to the corporate governance code. Voluntary disclosures provide financial and non-
financial information in addition to information required to be disclosed in accordance with generally
accepted accounting principles (GAAP) and other laws and regulations.
Following are the components of financial statements:
(a) Balance sheet, which lists the assets, liabilities and equity at the balance sheet date
and thus provides information on the financial position of the company at the end of
the fiscal year.
(b) Income statement—profit and loss account—which lists out income and expenses for
the fiscal year and thus provides information on the operating results for the fiscal
year.
(c) Cash flow statement, which presents cash flows from operating activities investing
activities, and financing activities during the fiscal year.
(d) Accounting policies and explanatory notes, which provide explanations and
clarifications to facilitate understanding of numbers appearing in financial statements
and also additional information that is relevant to users of financial statements.

In addition to the above. International Financial Reporting Standards (IFRS) require a company to
present a statement showing changes in equity for items (e.g. revaluation reserve) that bypass the
income statement.
The financial statements are the end product of the financial accounting process. The
financial statement information presented in concise and capsule form and the financial information
relating to the financial position of the firm. Therefore, the financial statements are the depiction of the
financial position of a firm. The financial statements are prepared by the firm.
“To communication with different parties about the Financial position of the firm (These other parties
who Are the user of financial information include the Shareholder, creditors, bank financial
institutions, Financial analysts, investors, etc.), and To analyze the operation and performance of the

8
 firm for Further planning. The basic source which provides the financial Information is the annual
report of the company which is presented by the company to it’s the shareholder at the annual
general meeting. This annual report contains the balance sheet, report, the income statement, the
auditor’s report together with number of schedules, annexure, key operation statistics for last few
years etc. Though the presentation of annual report is a statutory requirement under the companies
act 1956, However, it is also medium of communication with the present as well as prospective
investors and creditors of the company besides the annual report Quarterly or half yearly unaudited
results may also be announced by the company clause 43-A of the listing agreement(with the stock
exchange) requires every listed company public unaudited quarterly result but it does mean that the
non corporate firms do not prepare the financial statement. Every firm big or small prepares the
following financial statement.

1. BALANCE SHEET
2. THE INCOME STATEMENT

Two other key financial statements which are usually prepared by corporate firm are.

a. Statement of appropriate of profit

b. Statement of change in financial position

1. BALANCE SHEET

The balance sheet is regarded as the most significance and basic financial statement of a firm.
The balance sheet is prepared by a firm to present a summary of financial position at a given point of time,
usually at the end of a financial year. It shows the state of affairs of the firm a point of time. It presents the
assets of the firm (i.e. the resources of the firm), the liabilities of the firm (i.e. obligations) and the contribution
of the owners of the firm. The Balance sheet in fact balance the assets of the firm against its financing (which
can be debt and owners funds) i.e. the total value of the assets must be equal to total claim against the firm
and the income statement can be stated as

TOTAL ASSETS = TOTAL CLAIMS (DEBTS + SHAREHOLDER)

= LIABILITIES + SHAREHOLDER EQUITY.
It may be noted that the balance sheet relevant at a particular point of time. It is like a financial
snapshot at a point of time. Before and after which the position may be different. So, the balance sheet is a
status report.

2. INCOME STATEMENT

The INCOME STATEMENT is, also known as the profit and loss account or the statement of
earning summarizes the revenue, and expenses of the firm for an accounting period. It gives details of
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sources of income and expenses and thus it provides the summery of the operating result of the firm for a
specific period. It match the revenue with the costs that are incurred in generating the revenue and shows the
different between the two as the net profit made net loss incurred during the period. The INCOME
STATEMENT shows the results of the operation of the firm doing a period. The INCOME STATEMENT
therefore it a show report or a status report. The INCOME STATEMENT depicts the earning capacity of firm in
terms of the net profit it helps understanding the performance of the firm during the period under
considerations.
The companies’ act 1956 does not provide any Performa for the INCOME STATEMENT.
However, 211 of the companies act, 1956 provides that the INCOME STSTEMENT of a company shall gives
true and fair view of the profit or loss of company during a financial year. The part 2 of the 6 to the companies
act 1956, provide some requirements as to the INCOME STATEMENT of the company.

3. STATEMENT OF THE APPROPRIATION OF PROFIT

It is also called the profit & loss appropriation though it is not necessary as per the provision of the
companies act, 1956 to prepare the statement, still most of the companies sprit the INCOME STATEMENT
into two parts i.e. the INCOME STATMENT and P & L appropriate account where in it income statement
bifurcated in to two main parts i.e. the dividend to the share holders and the profits retained in the firm.
If there income statement a prior period item e.g. excess provision of income tax or providing
statement ion for tax for a previous year than it is also known in the P & L appropriation account. It may be
observed that the purpose of preparing account is to show separately the preposition of profit.

4. STATEMENT OF CHANGE IN FINANCE POSITION (SCFP)

The BALANCE SHEET and the INCOME STATEMENT are two common financial statements
and are also known as traditional financial statement. The BALANCE SHEET depicts the financial position at
a point of time and the INCOME STATEMENT shows the net results of operations of the firm during a
particular period but both the information regarded the change in financial position ever the period for a meter
understanding of the financial position, it income statement essential to know the movement of the
funds/cash during the period for the income statement purpose, another financial statement may be prepare
and it income statement known as the SECP, the SCFP shows how the firm generated the funds during the
period. It is historical record of where the funds came from and how they were used there can be different
sources of funds from where the firm might have procured the funds and these can be different out lets use
where the funds might have been used a comparative review of these sources and uses of funds is known as
the SCFP. The SCFP can be prepared on two basic i.e. the working capital basic income statement and the
cash basic.
When SCFP prepare on the working capital basic, it is also termed as the funds flow statement.
The SCFP prepare on the cash basic is also shown as the cash flow statement. The techniques of

10
preparation of the SCFP (both working capital basic and basic and cash basic) have been discussed in the
next chapters.
Thus, the four financial statements discussed above give and describe the financial position of
the firm the change in financial position during the year and the reasons for change in the SE during the year.

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 OBJECTIVES OF FINANCIAL STATEMENTS

1) Useful Information

The financial statement of business enterprise should provide information, within the limits if
financial accounting, that is useful to present and potential investors and potential investors and creditors in
making rational investment and credit decision. Financial statement should be comprehensible to investors
and creditors who have a reasonable understanding of business and economic activities. In a financial
accounting and who are willing to spend the time effort needed to study financial statement.

2) Required and sufficient information

Financial statement of business enterprise should provide information that help investors and
creditors assess the prospects of receiving cash from dividend of interest and form the proceeds from the
sale, redemption or maturely of securities or loans there prospects are ability to obtain enough cash through
its earning and financial activities to meet its obligations when due and its other cash operating needs, to
reinvesting earning resources and activity and pay cash dividend and (2) By perceptions of investors and
creditors generally about that ability, which affects market price of the enterprise income statement ES
securities relative to those of others enterprise. Thus financial account and financing statement should
provide information that helps investors and creditors assess the enterprise prospects of obtaining net cash
inflows through its earning and financing activities.

3) Primary Information

The financial statement of a business enterprise should provide information about the economics
resources of an enterprise which are sources of prospective cash Inflows to the enterprise to its obligation to
transfer economics resources to other , which are causes of prospective cash outflows from the enterprise
and its earning which are the financial results, which are the financial results of its operation and other events
and conditions that effects the enterprise since that information income statement useful to investors and
creditors in assessing and enterprise income statement ability to pay cash dividends, and interest and to
settle obligation when they mature it should be the focus of financial accounting and financial statements.

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Traditional and modern approaches to financial statement analysis :

Modern approach is the integrated approach under which an analyst takes an analysis as a part of business
analysis.

Analysts combine industry analysis, economy analysis and financial statement analysis to get an insight into
the ability of the company to generate adequate cash flows in future. Based on those insights, analysts
forecast the future performance of the company, which forms the basis for valuation of the company. Under
the traditional approach, financial statement analysis was considered in isolation and focus of the analysis
was to evaluate the past performance of the company. Moreover, under the traditional approach, analysts do
not consider non-financial information in evaluating the performance of a company. Modem approach is to
use non-financial information to evaluate the performance of a company. For example, employee turnover,
which indicates the ability of the company to retain knowledge, is’ important parameter in evaluating the
performance of a knowledge-driven company, such as, a company operating in pharmaceutical or software
industry. Similar! Employee satisfaction, customer satisfaction, customer retention period are some H the
parameters that are used to evaluate the performance of companies operating in the service sector (e.g. a
company providing telephony services).

Parties interested in Financial Statement Analysis :

The following parties are interested in financial statement analysis:

(a) Mergers, acquisition and divestitures

Restructuring of business involves mergers, acquisitions and divestitures, in restructuring, whole or a
part of an undertaking change hands. Both the parties use financial statement analysis to estimate
the intrinsic value of business from their own perspective and based on their own assumptions.
Intrinsic value forms the benchmark in negotiating price with the counter party.

Merchant bankers use financial statement analysis to identify target companies for their clients.

(b) Managers
Managers pursue the core objective Function of ‘maximization of value of the firm’. They use financial
statement analysis to evaluate alternative strategies and to compare actual results of strategic
decisions with expected result. Managers use financial statement analysis to value business from
investors’ perspective. Therefore, goal of financial statement analysis by managers is similar to the
goal of financial statement analysis by equity analysts.

(c) Financial management

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 Managers use financial statement analysis to evaluate the financial management decisions (e.g.
capital structure decisions and dividend decisions) on future profitability and risks. Managers also use
financial statement analysis to estimate the intrinsic value of equity shares to determine the timing for
issuing equity share and timing for buying back shares. Managers buy back shares when shares are
under-priced, that is, when shares are traded in the capital market at a price below the intrinsic value.
Similarly, managers issue new shares when shares are over-priced or are traded at a price close to
the intrinsic value.

(d) External auditors

An external auditor expresses her opinion on the true and fairness of information provided in financial
statements. She uses financial statement analysis to evaluate the reasonableness of the financial
statements as a whole. She also uses financial statement analysis to assess the ability of the
company to sustain present level of activities. This is necessary to evaluate the validity of the ‘going
concern’ assumption.

(e) Directors and top management

Directors and top management of a company that is engaged in different businesses or that has
customers or assets in different geographic locations, use financial statement analysis to evaluate the
performance of different businesses and geographical segments. Financial statement analysis aids in
understanding and appreciating financing, investing and operating activities and thus improves the
quality of oversight function of the board of directors.

(f) Employees and trade Unions

Employees use financial statement analysis to evaluate the sustainability and growth of the company.
This helps them to plan their career. A trade union uses financial statement analysis to understand
the profitability and the financial position of the company. This understanding is essential to formulate
strategy in collective bargaining negotiations.

(g) Customers
Customers use financial statement analysis to evaluate the sustainability and growth of the company
and its financial strength. This is important to assess the ability of the company to supply goods and
services over a long period of time. Customers also use financial statements to estimate the
profitability of products that the customer procures from the company. Although such an estimate is,
at best rough, it helps the customer to negotiate price with the company.

(h) Regulators and government

Regulators and government uses financial statement analysis for different purposes. For example, the
income tax department uses financial statement analysis to evaluate the accuracy of the tax return.
Government and regulators frame policies for different industries taking into account, among other
things, the attractiveness of the industry and the financial position of reprehensive firms operating in

14
the industry. Financial statement provides insights into the attractiveness of the industry and financial
position o representative firms.

15
 LIMITATION OF FINANCIAL STATEMENT

1) They are essentially internal reports and therefore, can not be final because the actual gain or loss of
a business can be determined only when it is sold or liquidated. The allocation of revenue and costs
to an account. Periods involves personal judgment. The problem involves the achievement of a
satisfactory matching of cost with revenue and cost transactions flow continuously thought the life of a
business enterprise yet they must be “cut off” at each balance sheet.

2) The financial statements shows exacts amounts, which gives an impression of finality and which
gives impression may ascribe to those amount the is own concepts of value where as the statement
may nave been set up on the basis of value different value standards. Passels does the stated quay
of an assets represent the amounts of cash that would realized on liquidation even the cash balance
would be reduce in the expenses incidental to the liquidity process. The balance sheet income
statement prepared on the basin come statement of a going concern concepts where it income
statement assumed that the enterprise statement will continue in business. Fixed asset are
customarily stated at historical revenue in the income statement by why of depreciation.

3) Both the BALANCE SHEET and INCOME STATEMENT reflects transactions that involve money
value of many dates under in factionary condition. The depreciation against current revenue by
companies may be inactive of current economy realities and increase in sales volume stated in
rupees may or may not be the result of a larger no. or units.

4) Financial statement do not reflect many factors which affects financial condition and operating results,
because they cannot be stated in terms of money such factors includes materials merchandise and
supplier, the reputation and pressing of company with the public the crediting rating of the company
and the efficiency, loyalty , and integrity of management continents liabilities customarily are not and
usually cannot be stated definitely in rupees similarly, some items that involves obligation by the
corporation to make future payments are not shown as liabilities and the debt of unconsolidated
affiliated companies are often not fully reflected in financial statement.

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 TOOLS/TECHNIQUES OF ANALYSIS STATEMENT
OF FINANCIAL STATEMENT

The AFS can be undertaken in different persons and for different purposes, therefore the
methodology adopted for the AFC may be varying form one situation to another however the following
some of the common techniques of AFC.

1. Fund Flow Statement

2. Cash Flow Statement
3. Comparative Financial Statement
4. Common Size Statement
5. Ratio analysis statement

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 Fund Flow Statement

The balance sheet of a company provides information on assets and liabilities of the firm at the
reporting date. The change in the carrying amount of assets and liabilities during the reporting period reflects
the outcome of the operating, investment and financial decisions of previous and current periods and also, in
some cases, the effect of economic events of those periods. The profit and loss account summarizes the
outcome of operating decisions and in some cases, the effect of economic events the current period. The
balance sheet and the income statement are prepared on ‘accrual accounting’ basis and, therefore, does not
present cash flow for the year directly. The fund flow statement and cash flow statement summaries the
outcome operating, investment and financing decisions.

Every business may be big or small, final accounts are prepared to know the financial position of that
specific period. The financial statement, income statements disclose the income of particular period where as
the balance sheet disclose the value of various assets and liabilities. The assets and liabilities are always
changed from time to time during a specific period a specific period. Some funds are generated and some are
spent. The surplus of inflow over outflows is known as increase or decrease of funds. The balance sheet
shows increase or decrease in fixed as current assets and liabilities but how these changes have come is not
explained, for this a separate statement is prepared. This statement is known as funds flow statement, which
clearly shows how fund have come in and how the some are used.

Definition:-
“The fund flow statement described the sources from which additional were derived and used to
which these sources where put to use.”
- R.N. Anthony

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 Importance of Fund Flow Statement

 Fund flow statement determines the financial consequences of business operation. It shows
how the funds were obtained and used in the past. Financial manager can take corrective action.
 The management can formulated its financial policy dividend, reserve etc. on the basis of the
statement.
 It serves as a control device, when comparing with budgeted figures. The financial manager
can take remedial steps if there is any deviation.
 It points out the causes for changes in working capital.
 It enables the bankers, creditors or financial institution in assessing the degree of risk
involved in granting credit to the business.
 The mgt. can rearrange the firms financing more effectively on the basis of the statement.
 Various uses of funds can be known and after comparing them with the use of previous year,
investment or downfall in the firm can be assessed.
 The statement compared with the budget concerned will show to what extent the utilization
was unplanned.
 It cells whether sources of funds are increasing or decreasing or decreasing or constant.

Limitation of Fund Flow Statement

 The statement lake originality because it is only re-arrangement of data oppressing account
books.
 It indicate only the past position and not future.
 It indicates funds flow in a summary form and it does not show various changes, which takes
place continuously.
 When both aspects of transaction are current, they are not considered.
 When both aspects of a transaction are non-current even then they are not included in this
statement.

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 Cash Flow Statement
A cash flow statement presents a summary of investment, dividend and financing decisions with a focus on
movements in cash and cash equivalents during the reporting period. A fund flow statement explains changes in
working capital, while a cash flow statement explains changes in the cash balance (including cash equivalents).
Balances in the cash credit account and bank overdraft account should be treated as part of the cash balance. Cash
flow statement is considered superior to fund flow statement in terms of ‘decision usefulness’. A cash flow statement
helps to assess the ability of the firm to generate and use cash to the benefit of shareholders. It helps to estimate the
amount, timing and uncertainty of future cash flows.

Every businessman needs capital for successful implementation of business capital is needed for
acquiring fixed assets while cash is needed for acquiring current assets or payment of current liabilities. Cash
acquirement or cash planning is very important in every business mgt.

Advantages of Cash Flow Statement

A cash flow statement is of primary importance to the financial mgt. It is an essential tool o short loan
financial analysis. Its main uses are as follow:

 It helps the mgt. in taking short –term financial decision.

 Cash flow statement facilitates to prepare sounds
financial policies. It also helps to evaluate the current cash position.
 A projected cash flow statement can be prepared in order to
know the future cash position of a concern as to enables a firm to plan and co0ordinate its financial operations
properly.
 It helps in taking loan form banks and other financial
institutions. They repayment capacity of the firm can understood by going through the cash flow statement.
 Cash is the soul and heart of the business cash is the pivot
business activity. Business is a source while cash is the end. Therefore, it is very useful.

20
 Limitations of Cash flow Statement

Cash flow statement is a useful tool of financial analysis however it suffers from some limitations, which are
as follow:

 A cash flow statement only reveals the inflow and outflow of

cash balance disclosed by this statement may not depict the true liquid position. There are controversies over
a number of items like cheque, stamps, postal order etc. to be included in cash.
 A cash fund statement cannot be equated with the income
statement. An income statement takes into accounts both cash and non-cash items. Hence a cash fund does
not mean net income of the business.
 Working capital being a wider concept of funds, a fund flow
statement present more complete picture than cash flow statement.

21
 COMPARATIVE FINANCIAL STATEMENT

In CFS, two or more BALANCE SHEET and/or the INCOME STATEMENT of a firm are present financial data
for two or more years are placed and presented adjacent columns and thereby the financial data I provided a time
perspective in order to facilities data is statement on. In CFS, the BALANCE SHEET and the INCOME STATEMENT
for number of years are presented in condensed form for years to Year Company and to exhibit the magnitude and
direction of changes.
The preparation of the CFS is based on that a statement covering a period of a number of years more meaningful
and significant than for a single year only and that the financial statement for one period represent only 1 phase of the
long and continues his statement history of the firm. Nowadays most of the published, annual report of the companies
provides important of statically information about the company in considered from for the last so many years. The
presentation of such data enhances the usefulness of these reports and brings out more clearly the nature and trends
of changes affecting the profitability and financial position of the firm.
So the CFS helps a financial analyst in horizontal analysis statement of the firm and in established operating and
position trend of the firm the CFS may be prepared to show.

The CFS can be prepared for both the INCOME STATEMENT and BALANCE SHEET.

Comparative Income Statement

A COMPERATIVE INCOME STATEMENT shows the figures different items of the INCOME
STATEMENT s of the firm in a balance sheet terms the a balance sheet changes from one period to another and
if desires, the changes in diving meaningful concludes regarding changes in sales of item cost of goods sold
different expense item etc form the INCOME STATEMENT a financial analysis statement can quickly ascertain
whether sales are increasing or decreasing and how much percentage similarly analysis statement can be made
for other items also.

Comparative Balance sheet

The COMPERATIVE BALANCE SHEET shows the assets and liabilities of the firm on different dates to
make comparison statement of a balance sheet of balances and also of changes if any from on dated to
another’s. The COMPARATIVE BALANCE SHEET may be helpful in analyzing and evaluating the financial
position of the firm over a period of number of years.

22
 Advantages

1) These statements indicate trends in sales, cost of production, profits etc., and helping the analyst to
evaluate the performance, efficiency and financial condition of the undertaking. For example, if the sales
are financial condition of the undertaking. For example, if the sales are increasing coupled with it or better
profit margins, it indicates healthy growth.
2) Comparative Statement can also be used to compare the position of the firm with the average
performance of the industry or with other firms. Such a comparison facilitates the identification of
weaknesses and remedying the situation.

Disadvantages

1) Inter-firm comparison may be misleading if the firms are not of the same age and size, follow
different accounting polices in relation to depreciation, valuation of stock, etc., and do not care to the
same market.
2) Inter-period comparison will also be misleading of the period has witnessed frequent changes
in accounting policies.

23
 COMMON SIZE STATEMENT
The COMMON SIZE STATEMENT represents the relationship of different item of financial statement with some item
by expressing each item as percentage of the common items. In common size balance sheet each item of the
BALANCE SHEET is stated as a percentage of the total of the balance sheet similarly each item is stated as
percentage of the net sale the percentage for the different item are computed In dividing the a balance sheet solute
amount of that item by the common base (i.e. the BALANCE SHEET total or the net sales as case may be ) and them
multiplying by 100. The percentages to calculated can be easily compared at with the corresponding percentage in
some other period thus, the COMMON SIZE STATEMENT is useful not only in intra firm comparison on over a series
of afferent year but also in making inter firm comparison income statement on for the same years or several years.

Interpretation:
In profit & Loss account sales figure is assumed to be equal to 100 & all other figures are expressed
as percentage to sales. Similarly, in Balance sheet the total of assets or liabilities is taken as 100 and all the figures
are expressed as percentage of the total its called Common-size statement.

24
 Research Methodology

Problem statement:

Financial Statement Analysis at KRIBHCO.

Objective:

The Principal objective on” Financial Analysis “of KRIBHCO is to asses the performance of a company based

on Ratio Analysis. These bases find out the position of the KRIBHCO in competitive market of scenario based

on the cash flow, fund flow and common size statement.

Period of Study:

The study is based on the data of last five years.

Objective:

 To study the analysis Financial Performance of KRIBHCO using ratio analysis, cash flow and fund

flow, comparative Financial Statement, common size statement.

 To study the annual report of financial position of the company.

 To study the company history in brief.

Methodology:

Data Collection :

I have collected the data through secondary data collection

Secondary data :

Secondary data means the data which are already collected and used by some body else.

Annual report of the company having been analyzed the data it was arranged in the form of ratios.

25
Research Approach:

Descriptive Study :

Descriptive Study is also used to study the situation. This study helps to describe the situation. A detail

description about present situation can be found out by the descriptive study. Descriptive study involves the

analysis of situation using secondary data.

In this project work the secondary data i.e. annual report of the company is used to find out the ratios and

financial position of the company.

Limitation :

1. As obtaining information from secondary data, it is easy to get it. But it is very difficult to understand.

2 It is very hard job to convince employees of the company to give few minutes from their tight working

schedule.

3 Some of the calculation, shown in the report, has been obtained trough personal discussion.

4 Some of the information which is treated as company secret was no disclosed.

26
 Data Analysis

SOURCES AND APPLICATION OF FUNDS (Fund Flow)

(Rup
ees in crore)

2007-2008 2006-2007 2005-2006 2004-2005 2003-2004

SOURCES
Share Capital and Application 396.08 396.11 394.67 393.59 491.82
Money
Reserves and Surplus 1,982.43 1,891.41 1,779.02 1,666.76 1,602.99
Net Worth 2,378.51 2,287.52 2,173.69 2,060.35 2,094.81

Secured Loan from Bank 0.76 0.41

Unsecured Loan from Bank 223.96
Deferred Tax Balance 0.00 24.61 30.32 35.07 37.42
FUNDS EMPLOYED 2,603.23 2,312.54 2,204.01 2,095.42 2,132.23

APPLICATION
Fixed Assets:
Gross Block (including capital
1,231.58 1,115.10 1,053.69 1,041.26 1,035.42
work-in-progress)

Less: Depreciation 856.29 844.77 829.11 813.70 795.42

Net Block (A) 375.29 270.33 224.58 227.56 240.00

Investments (B) 870.56 807.56 855.67 455.64 455.69
Deferred Tax Assets (C) 4.18
Working Capital:
Current Assets 1,851.78 1,577.00 1,421.00 1,712.05 1,786.48
Less: Current Liabilities and
498.58 342.35 297.24 299.83 349.94
Provisions
Net Working Capital (D) 1,353.20 1,234.65 1,123.76 1,412.22 1,436.54
NET ASSETS EMPLOYED
2,603.23 2,312.54 2,204.01 2,095.42 2,132.23
(A+B+C+D)

27
 CASH FLOW STATEMENT FOR THE YEAR ENDED
MARCH 31, 2008 (R up ee s in L akh)

P articu la rs Y ear E n d ed
31 .0 3 .2 0 0 8 Y ear E n d ed 31.03.200 7
(A ) C a s h F lo w fro m O p e ra tin g A c tiv itie s :
N e t P ro fit B e fo re T a x 2 7 ,2 1 3.5 3 23,153.44
A d ju s tm e n t fo r:
D e p re c ia tio n 2 ,2 7 9 .2 0 1,762.54
In te rest (N et) (8 ,3 64 .1 9 ) (6 ,562 .2 6 )
A m o u n ts c h a rg e d - o ff 7 1 .2 3 211.83
A s s e ts w ritte n -o ff 2 .8 8 20.01
F o re ig n E xc h a n g e R a te F lu ctu a tio n s 30 .1 4 (1.4 6)
L o ss o n S a le o f F ix e d A s se ts (N e t) (13 .2 4) 11.47
D ivid e n d In com e (11,5 5 2.4 8) (11,534.49)
L ia b ilitie s/P ro v is io n s n o lo n g er re q u ire d , w ritte n -b a ck (4 5 4 .9 5 ) (315.29)
P rio r P e rio d D e p re cia tio n (68 .7 2) (1 8 ,0 7 0 .13 ) (0.14) (16,407.79)
O p e ra tin g P ro fit b e fo re W o rk in g C ap ita l C h a n g e s 9 ,1 4 3 .4 0 6,745.65
A d ju stm e nt fo r:
In ve n to rie s 3 ,18 1 .3 6 (9,71 0.7 7)
T ra d e a n d O th e r R e ce iv a b le s (2 1 ,3 0 0.4 4 ) (19 ,3 59.9 5)
T ra d e P a y a b le a n d P ro v is io n s 11,249.6 3 (6 ,869 .45 ) 4 ,1 5 4 .2 0 (24,916.52)
C a s h G e n e rate d fro m O p e ra tio n s 2,27 3.9 5 (18,170.87)

D ire ct T a xe s P a id (N e t o f R e fu n d s) (7 ,24 7 .4 7 ) (3 ,8 23 .1 6 )
C o n trib u tio n to C o o p e ra tiv e E d u ca tio n F u n d (178.1 1) (1 67.2 9 )
D on a tio ns P a id (2 5.00 ) (7 ,4 50 .5 8 ) (17.61) (4,008.06)
N e t C a s h fro m O p e ra tin g A c tiv itie s (A ) (5,1 76 .6 3 ) (22,178.93)

(B ) C a s h F lo w fro m In v e s tin g A c tiv itie s :

P u rcha se o f F ixe d A sse ts inclu d in g C .W .I.P . (12,965 .2 0 ) (6 ,3 85.5 8 )
P ro ce e d s from S a le o f F ixe d A ss ets 2 6 9 .30 16.39
Investm en ts (6 ,3 0 0 .0 0) 4 ,8 1 0.8 3
D ivid e n d R e ce ive d 11,552.48 11,534.49
Inte re st rece ive d 6 ,92 9 .0 5 6 ,6 14 .6 0
N e t C a s h fro m In v e s tin g A c tiv itie s (B ) (5 14 .3 7 ) 1 6 ,5 9 0 .7 3
Continued….

28
 C ontinued...

(R u pees in Lak h)

P articu la rs Y e a r E n d e d 3 1 .0 3 .2 0 0 8 Y e a r E n d e d 3 1 .0 3 .2 0 0 7
(C ) C a s h F lo w fro m F in a n c in g A c tiv itie s :

P ro c e e dfro
s m is s u e /re p a triaotio
f Snh a reC a p ita l (2.75) 143.30

P ro c e ed s from
S h o rt T e rm
Loans 34.95 40 .6 9

In te re s t P aid (531.99) (147.25)

D ivide n d P a id (7 ,8 80 .1 8) (7,862.17)

F o re ig nE x c h a n g e R a te F lu c tu a tio n s (30.14) 1.46

N e t C as h u s e d in F in an c in g A ctiv itie s (C ) (8,410.11) (7,823.97)

N e t ln c re a s e /(D e c re a se ) in C a s h a n d C a s h
(1 4,10 1.11 ) (13,412.17)
E q u iv a le n ts (A + B + C )
C a s h a nCd a s h E q u iv a le n ts a s a t th e b e g in n in g o f th e 77,073.86 90,486.03
year
C a s ha n d C a s h E q u iv a le n ts as a t th e c lo s e o f th e y e a r 62,972.75 77,073.86
N e t ln c re a s e /(D e c re a s e ) in C a s h a n d C a s h (14 ,101 .11) (13,412.17)
E q u iv a le n ts

29
 COMPARATIVE BALANCE SHEET AS ON 30TH
JUNE 2007-08 & 2006-07
Amount
% Increase/
Particulars As at 31.03.2008 As at 31.03.2007 Increase/
Decrease
Decrease
Source of funds
share capital 39,607.93 39,610.68 (2.75) (0.0069)
Reserve and
198,243.15 189,141.73 9099.42 4.81
Surplus
Total 237,851.08 228,752.41 9098.67 3.98
secured loan
75.63 40.69 34.94 85.87
from bank
unsecured loan
22,396.87 0.00 - -
from bank
Differed Tax
0.00 2,461.18 - -
liability
Total 260,323.58 231,254.28 29069.30 12.57
application of
Funds
Fixed assets: 36,802.52 20,804.35 15998.17 76.90
Capital work in
726.23 6,228.62 (5502.39) (88.34)
progress
Investments 87,056.46 80,756.46 6300 7.80
Differed tax
418.38 0.00 - -
Asset
Net current
Asset:
Current Assets,
185,178.30 157,699.67 27478.63 17.43
loan, advances
Less: current
liabilities and 49,858.31 34,234.82 15623.49 45.64
provisions
Total 260,323.58 231,254.28 29069.30 12.57

30
 COMPERATIVE PROFIT & LOSS ACCOUNT
FOR THE YEAR ENDING JUNE 2007-08 & 2006-
07

Amount
Year ended Year ended % Increase/
Particulars Increase/
31.03.2008 31.03.2007 Decrease
Decrease
INCOME FROM
OPERATIONS/ OTHER
REVENUE
Sales (Net of
140,002.80 135,383.39 4619.41 3.41
Discounts/Rebates)
Excise Duty (1,514.47) (986.29) (528.18) (53.55)
Concession/Remuneratio
n from Government of 84,479.12 51,158.77 33320.35 65.13
India
Other Revenue 26,730.12 1918.42 7.73
Accretion/Decretion in
Finished Goods:
Closing Stock 11,020.20 14,696.98 (3676.78) (25.02)
Less: Opening Stock (14,696.98) (6,376.20) (8320.78) (130.50)
Total 246,020.79 218,688.35 27332.44 128.20
LESS- COST OF
OPERATIONS/ OTHER
OUTGOINGS
Consumption of Materials
111,116.20 82,543.07 28573.13 34.62
and Stores:
Purchases : 45,450.07 62,705.03 (17254.96) (27.52)
Employees'
Remuneration and 17,340.21 12,149.55 5190.66 42.72
Benefits
Other Expenses on
Manufacturing,
42,160.46 36,220.55 5939.91 16.40
Administration and
Distribution
Interest 531.99 147.25 384.74 261.28
Depreciation / 2,279.20 1,762.54 516.66 29.31

31
Amortization
218,878.13 195,527.99 23350.14 11.94
Net Profit for the year 27,142.66 23,160.36 3952.30 17.19
Prior Period lncome/
70.88 (6.92) 77.80 1124.28
(Expenditure) (Net)
Profit before Tax 27,213.54 23,153.44 4060.10 17.54
Provision for Taxation 6,293.54 3,829.48 2464.06 64.34
Profit after Tax 20,920.00 19,323.96 1596.04 8.26

32
 COMMON SIZE BALANCE SHEET
AS ON 31st March 2008 and 31st March 2007

Particulars As at 31.03.2008 As at 31.03.2007

Source of funds
share capital 15.22 17.13
Reserve and Surplus 76.15 81.79
secured loan from bank 0.03 0.02
unsecured loan from bank 8.60 0.00
Differed Tax liability 0.00 1.06
Total 100 100
Application of Funds
Fixed assets: 14.14 9.00
Capital work in progress 0.28 2.69
Investments 33.44 34.92
Differed tax Asset 0.16 0.00
Net current Asset:
Current Assets,
71.13 68.19
loan, advances
Less: current liabilities and
(19.15) (14.80)
provisions
Total 100 100

33
 COMMON SIZE PROFIT& LOSS ACCOUNT FOR
YEAR ENDING 31st March 2008 and 31st March 2007
Year ended Year ended
Particulars
31.03.2008 31.03.2007
INCOME FROM
OPERATIONS/ OTHER
REVENUE
Sales (Net of
56.91 61.91
Discounts/Rebates)
Excise Duty (0.62) (0.45)
Concession/Remuneration
34.34 23.39
from Government of India
Other Revenue 10.86 11.35
Accretion/Decretion in
Finished Goods:
Closing Stock 4.48 6.72
Less: Opening Stock (5.97) (2.92)
Total 100 100
LESS- COST OF
OPERATIONS/ OTHER
OUTGOINGS
Consumption of Materials
50.77 42.22
and Stores:
Purchases : 20.77 32.07
Employees' Remuneration
7.92 6.21
and Benefits
Other Expenses on
Manufacturing,
19.26 18.52
Administration and
Distribution
Interest 0.24 0.08
Depreciation /
1.04 0.90
Amortization
Net Profit for the year 100 100

34
 RATIO ANALYSIS
Introduction:-
Ratio analysis is the process of determining and interpreting numerical relationship based
on financial statements. It is the technique of the interpretation of financial statements
with the help of accounting ratio derived from the balance sheet and profit and loss A\c. it
involves the comparison of existing ratios against standards established. The standards
may be set by management as goals expressed in the budgets or may be historical
figures showing performance of the same concern in the past or may be figure reflecting
the performance of the other companies.

Meaning of Ratio:-
A ratio is simply one number expressed in terms of another. It is an expression of
relationship spelt out by dividing one figure by another. It is the quotient of two arithmetic
numbers obtain from financial statement.

“An expression of the quantitative relationship between two numbers.”

- Wixon, kell and Bedford in their book Accountant hand book

“According to J.batty the term accounting ratio is used to describe the significant
relationship which exists between figures show in a balance sheet and profit and loss
account in budgetary control system or any other part of accounting organization.”

Nature of Ratio:-
Ratio are indicators, sometimes they serve as pointer but not in themselves
powerful tools of management. The ratio help to summarized the large quantities of
financial data and to make qualitative judgment about the firm’s financial performance

They cannot be taken as the final result regarding good or bad financial position
of the business. They are at best symptoms and there is the always need to investigate
the facts reveled by them further. Hence ratios are not adequate for taking financial
decision.

It may indication that affirm is weak or strong in a particular area but it must
never be taken as a powerful tool of the management.

35
 Ratio as a matter of fact are tools of quantitative analysis and it is quite possible
that quantitative factors may override numerical aspects with the consequence that the
conclusion from the ratio analysis may get distorted .in a way ratios are an attempt to
delve in the past as financial statement.

THE VARIOUS WAY OF INTERPRETING ACCOUNTING RATIO:-

1] Single Absolute Ratio
2] Group Ratios
3] Historical Comparison
4] Inter-firm Comparison
5] Projected Ratios

The following are the various ways of interpreting accounting ratio:-

1] Single absolute ratio:-
A ratio taken in isolation may not convey much meaning .lf it is expressed in relation to
another aspect it may prove to be more useful. For example, if current ratio is less than
one, it may reveal the insolvency position of the business. Ex:- current assets are not
sufficient to pay current liabilities. Sometimes a single ration may fail to show the exact
financial position of business.

2] Group ratios:-
When group of ratio are calculated and interpreted they convey better idea about the
business operation and efficiency. For example, in addition to calculating current ratio,
Ex. Current assets to current liabilities if liquid ratio Ex. Liquid asset to liquid liabilities, is
also used, it throw better light on the business.

3] Historical comparison:-
Under this method of interpretation, the ratio of current period is compared with ratios of
past year or years. Comparison of ratios over a period of time gives better indication and
sets a trend which again reflects the performance and position of the business. However,
care must be taken to ensure that there is no change in accounting policy and procedure

during the period of comparison.

36
4] Inter firm comparison:-
Under this method, the ratio of the firm is compared with ratio of other firm belonging to
the same industry. But this method may prove to be in effective when different firm use
different accounting policies and procedure.

5] Projected Ratio:-
Sometimes ratio can be calculated based on estimated financial statement, in which case
they constitute standard ratios. The actual ratios are compared with standard ratios. The
variance in ratio indicates the success or failure of the business.

37
 Limitation:-

1] Usefulness of ratios depends upon the abilities and the intention of the
persons who handle them. It will be affected considerably by the prejudice of such
persons.
2] Ratios are worked out on the basis of money value only. They don’t take into
account the real values of various items involved.
3] Historical values are considered in working out the ratios. However, the effects of
changes in the price levels of various items are ignore and to that extent the comparison
and evaluation of proposals through ratio become unrealistic.
4] One particular ratio in isolation is not sufficient to analyze investment proposals or
liquidity analysis. A group of ratios are to be considered simultaneously to arrive at the
conclusion.
5] Ratio analysis is only a technique for making judgment and not a substitute for a
judgment.
6] Ratio are only symptoms, they may indicate what is to be investigated, only a careful
investigation.
7] Liquidity ratio can mislead since current assets and liabilities can change quickly.
Their utility becomes more doubtful for firms with seasonal business.
8] If there is window dressing in financial statement, ratios derived there from will not
serve the purpose. Outsiders can not make out the window dressing of the business.
9] Financial statement suffers from inherent limitations which make ratios inaccurate.
Ratio calculate on the basis of past statements need not necessarily constitute true
indicator of future.

38
TYPES OF RATIOS:-
Traditional basis of classification of ratio:-

1] Classification on the basis of statement

2] Classification on the basis of time
3] Classification on the basis of nature
4] Classification according to function

Ratios may be classified according to the following bases:

1] Classification on the basis of statement:

a) Balance sheet or position ratios:

They deal with relationship between two items or group of items with are taken form
the balance sheet such as current ratio, debt equity ratio, etc.

b) Profit and loss account or revenue ratios:

These are the ratios which are calculated out of the figures appearing in the profit and
loss account, are gross profit ratio operating profit ratio, etc.

c) Position-cum-revenue ratio:
These ratios are also known as consolidated or combined or complex ratios or inter
statement ratios. They portray the relation ship between items one of which is a part of
the balance sheet and the other of the revenue statement.
Examples of such ratios are return on total resources return on capital employed,
turnover of debtors etc.

2] Classification on the basis of time:

a) Structural ratios:
Ratio computed from data referring to the same point of time; e.g. ratios of a
particular months or year

b) Trend ratios:
Ratio compared between the items referred to different period of time.

39
3] Classification on the basis of nature:
a) Primary ratios:
It measures the size of profit in the relation to capital employed e.g., Operating profit

to capital employed.

b) Secondary ratios:
Also referred to as supporting ratios brings to light strategic facts in the profit earning
structure e.g., stock velocity, debtors velocity, expense ratios etc.

4] Classification according to function:

a) Financial ratios:
Financial ratios include liquidity and solvency ratio. Ratio indicating the liquidity
position of the firm are current ratio, quick-ratio, absolute liquidity ratio. Solvency ratios
include proprietary ratio, debt equity-ratio, capital gearing ratio.

b) Profitability ratios:
Profitability ratios would cover gross profit ratio, net profit ratio, return on capital
employed.

c) Market test ratio:

Market test ratios comprise of dividend yield, fixed dividend cover, price earning ratio, etc.
-:For the more understanding we classify ratio into the following types:-

40
 Classification
of ratios

Analysis of short Analysis of long term Activity ratio

term financial financial position or Profitability ratio
Position or tests tests of solvency
of liquidity - Stock turn over - Gross profit ratio
- Debt-equity ratio ratio - Net profit ratio
- Proprietary ratio - Debtor turns over ratio - Operating ratio
- Current ratio - Solvency ratio - Creditors turnover - Expenses ratio
- Quick ratio - Fixed assets to net ratio - Operating profit ratio
- Absolute worth ratio - Working capital - Return on total resource
liquid ratio - Current assets to net turnover ratio ratio
worth ratio - Fixed assets turnover - Return on capital
- Current liabilities to net ratio employed ratio
worth ratio - Current assets - Return on equity share
- Capital gearing ratio turnover ratio - Return on equity capital
- Fixed assets ratio - Total assets turnover ratio
- Fixed charge cover ratio - Earning per
ratio - Sales to net worth Share
- Dividend cover ratio ratio - Dividend pays out ratio
- Price earning ratio
- Dividend yield ratio
- Book value for share
- Preference Dividend
covers

41
 SIGNIFICANT FINANCIAL RATIOS USES IN
KRIBHCO

1] Current Ratio :-
Current Assets
Current Ratio =
Current Liabilitie s

Current Current
Particular Year Current Ratio
Asset Liabilities
1 2003-04 1786.48 349.94 5.11
2 2004-05 1712.05 299.83 5.71
3 2005-06 1421.00 297.24 4.78
4 2006-07 1577.00 342.35 4.61
5 2007-08 1851.78 498.58 3.71

Current Ratio
6.00

5.00

4.00

3.00
Current Ratio
2.00

1.00

0.00
2003-04 2004-05 2005-06 2006-07 2007-08

The current ratio measures the ability of the firm to meet its current liabilities. Current
assets get converted into cash in the operating cycle of the firm and provided the funds
needed to pay current liabilities. However, in interpreting the current ratio the composition
of current assets must not be overlooked. A firm with a high proportion of current assets
in the form of cash and accounts receivable is more liquid than one with a high proportion

42
of current assets in the form of inventors even though both the firms have the same
current ratio.
The standard ratio generally accepted for this is 2:1.

INTERPRETATION:-

As seen in the data the current Ratio for the years has shown deteriorating trend. The
current Ratio for 2003-04 was 5.11:1 which has come down to 3.71:1 in 2007-2008
Which show that company’s current assets decrease and current liabilities increase so
that we can say that company’s current ratio is decrease.

43
2] Quick Ratio:-
Quick Assets
Quickratio =
Current Liabilitie s

Current
Particular Year Quick Asset Quick Ratio
Liabilities
1 2003-04 1679.71 349.94 4.80
2 2004-05 1565.11 299.83 5.22
3 2005-06 1269.21 297.24 4.27
4 2006-07 1324.89 342.35 3.87
5 2007-08 1635.34 498.58 3.28

Quick Ratio
6.00

5.00

4.00

3.00
Quick Ratio
2.00

1.00

0.00
2003-04 2004-05 2005-06 2006-07 2007-08

It also called the Acid-test Ratio.

The quick ratio is a fairly stringent measure of liquidity. It is based on those current assets
which are highly liquid-inventories are excluded from the numerator of this ratio because
inventories are deemed to be the least liquid component of current assets. Quick assets
are defined as current assets excluding inventories.

The standard ratio is accepted for this is 2:1.

44
INTERPRETATION:-
Again here referring to the data we can see that this ratio is showing the fluctuating trend.
The ratio of 2003-04 was 4.8: 1. It again increases in the year 2004-05.It is in 2005-06
shows a little better position compare to previous year but in the year 2007-08 there is
quick ratio is decrease because of the inventory increase in that year.

45
3] Debt- Equity Ratio:-
Long −Term Debt
Debt −Equity Ratio =
Pr oprietor ' s Fund

Debt-Equity
Particular Year
Ratio
1 2003-04 0:1
2 2004-05 0:1
3 2005-06 0:1
4 2006-07 0:1
5 2007-08 0:1

The standard debt-equity ratio is 2:1.

It means for every 2 share there is 1 debt. If the debt is less than 2 times the equity, it
means that creditors are relatively less and the financial structure of the business is
sound. If the debt is more than 2 times the equity, the states of long-term creditors are
more and indicate week financial structure.

INTERPRETATION:-
From the above chart we can understand that there is no debt because KRIBHCO is total
handling by government, so they are not using out sides debt. Through this we can say
that company’s financial structure is very sound. Because every year they maintain debt-
equity ratio 0:1.

46
4] Proprietary Ratio or Net Worth Ratio:-

The following formula is used:-

Capital Employed
Pr oprietary Ratio =
Total Assets

OR
Pr opritor ' s Fund
Pr oprietaryR atio =
Total Assets

Proprietors Proprietary
Particular Year Total Asset
Fund Ratio
1 2003-04 2094.81 2821.90 0.74
2 2004-05 2060.35 2753.31 0.75
3 2005-06 2173.69 2474.69 0.89
4 2006-07 2287.52 2692.10 0.85
5 2007-08 2378.51 3083.36 0.77

Proprietary Ratio
1.00
0.90
0.80
0.70
0.60
0.50
Proprietary Ratio
0.40
0.30
0.20
0.10
0.00
2003-04 2004-05 2005-06 2006-07 2007-08

This ratio establishes the relationship between the proprietor’s fund (equity + preference
+ capital reserves +free reserves +undistributed profits) and total assets. It is also called
as net worth to total assets ratio.

INTERPRETATION:-

47
A ratio of 0.5: 1 is considered ideal.

Higher the proprietary ratio, stronger the financial position of the organization and vice-
versa.
Form the above chart we can says that in the year 2005-06 proprietary ratio was high (89
%), so that we can says that in that year company’s financial position was very strong but
in the year 2007-08 company’s proprietary ratio (77 %) which is in maintained level so we
can says that company’s financial position is strong.

48
 5] Solvency Ratio :-
lf expresses the relationship between total assets and total liabilities of a business. It is
expressed as a proportion.
 The following formula as used:-
Total Assets
Solvency Ratio =
Total Liabilitie s

Solvency
Particular Year Total Asset Total Liabilities
Ratio
1 2003-04 2821.90 387.36 7.28
2 2004-05 2753.31 334.90 8.22
3 2005-06 2474.69 327.56 7.55
4 2006-07 2692.10 367.37 7.33
5 2007-08 3083.36 723.30 4.26

Solvency Ratio
9.00
8.00
7.00
6.00
5.00
4.00 Solvency Ratio
3.00
2.00
1.00
0.00
2003-04 2004-05 2005-06 2006-07 2007-08

Interpretation:-
No standard ratio is fixed in this regard. It may be compared with similar, such
organizations to evaluate the solvency position. Higher the solvency ratio, the stronger is
its financial position and vice –versa. From above chart we see that KRIBHCO’s solvency
ratio is very high. So the financial position of KRIBHCO is very strong.

49
 6] Fixed Assets to Net Worth Ratio :-
It is obtained by dividing the depreciated book value of fixed assets by the amount of
proprietor’s funds.

 It is calculated by applying the following formula:-

Net Fixed Assets

Fixed Assets to Net worth Ratio =
Net Worth or Pr oprietor ' s Funds

Fixed Assets
Net Fixed
Particular Year Net Worth to Net Worth
Asset
Ratio
1 2003-04 240.00 2094.81 0.11
2 2004-05 227.56 2060.35 0.11
3 2005-06 224.58 2173.69 0.10
4 2006-07 270.33 2287.52 0.12
5 2007-08 375.29 2378.51 0.16

Fixed Assets to Net Worth Ratio

0.18
0.16
0.14
0.12
0.10
0.08 Fixed Assets
to Net Worth
0.06
Ratio
0.04
0.02
0.00
2003-04 2004-05 2005-06 2006-07 2007-08

50
Interpretation:-
This ratio shows the extent to which ownership funds are sunk into assets with relatively
low turnover. When the amount of proprietor’s funds exceed the value of fixed assets, a
part of the net working capital is provided by the shareholders, provided there are no
other non-current assets, and when proprietor’s funds are less than the fixed assets,
creditors obligation have been used to finance a part of fixed assets.

The yardstick for this measure is 65% for industrial undertakings. It is a sound principle
that proprietors should subscribe sufficient capital to cover fixed assets, investments in
other companies and a reasonable figure for working capital.

Some analysts deduct intangible assets from the proprietor’s funds, but this would
depend upon the realizable value of intangibles and the purpose of analysis. Losses
should also be deducted and funds payable to others should not be added:

From the above chart we can say that KRIBHCO’s fixed asset is less as compare
to net worth, it means Working Capital of KRIBHCO is near to standard level.

51
7] Current Assets to Net Worth Ratio :-
This is obtained by dividing the value of current assets by the amount of proprietor’s
funds.
 The following formula is used:-
Current Assets
Current Assets to Net Worth Ratio =
Pr oprietor ' s Fund

Current
Current
Particular Year Proprietor Fund Assets to Net
Asset
Worth Ratio
1 2003-04 1786.48 1518.51 0.85
2 2004-05 1712.05 1421.00 0.83
3 2005-06 1421.00 923.65 0.65
4 2006-07 1577.00 1088.13 0.83
5 2007-08 1851.78 1444.39 0.85

Current Assets to Net Worth

Ratio
0.90
0.80
0.70
0.60
0.50
Current Assets to
0.40
Net Worth Ratio
0.30
0.20
0.10
0.00
2003-04 2004-05 2005-06 2006-07 2007-08

Interpretation:-

The purpose of this ratio is to shown the percentage of proprietor’s fund

investment in current assets. A higher proportion of current assets to proprietor’s
fund, as compared with the proportion of fixed assets to proprietor’s fund are
advocated, as it is an indicator of the financial strength of the business. In 2007-
08 KRIBHCO’s ratio is 0.85, which is more than last two year, means
comparatively good from last two years.

52
8] Current Liabilities to Net Worth Ratio :-
This ratio is expressed as a proportion and is obtained by dividing current liabilities by
proprietor’s fund.
 The following formula is used:-
Current Liabilitie s
Current Liabilitie s to Net Worth Ratio =
Net Worth

Current
Current Liabilities to
Particular Year Net Worth
Liability Net Worth
Ratio
1 2003-04 349.94 2378.51 0.17
2 2004-05 299.83 2287.52 0.15
3 2005-06 297.24 2173.69 0.14
4 2006-07 342.35 2060.35 0.15
5 2007-08 498.58 2094.81 0.21

Current Liabilities to Net Worth

Ratio
0.25

0.20

0.15
Current Liabilities to
0.10 Net Worth Ratio

0.05

0.00
2003-04 2004-05 2005-06 2006-07 2007-08

Interpretation:-
This ratio indicates the relative contribution of short-term creditors and owner to
the capital of an enterprise. The standard ratio fixed is 1/3. If the ratio is high, it
means it is difficult to obtain long-term funds by the business. In the last five year
KRIBHCO is achieving less than the standard ratio. So that KRIBHCO’s Current
Liability to Net Worth is not standard one.

53
9] Fixed Assets Ratio :-
It establishes the relation between fixed assets and capital employed.
The following formula is used:-

Fixed Asssets
Fixed Assets Ratio =
Capital Employed

Components of capital employed:-

1. Owners funds
2. Long-term lone
3. Long-term deposits
4. Debentures

Capital Fixed assets

Particular Year Fixed Asset
Employed ratio
1 2003-04 1035.42 2132.23 0.49
2 2004-05 1041.26 2095.42 0.50
3 2005-06 1053.69 2204.01 0.48
4 2006-07 1015.10 2312.54 0.48
5 2007-08 1231.58 2603.23 0.47

Fixed Assets Ratio

0.51
0.50
0.50
0.49
0.49
0.48
0.48 Fixed Assets
Ratio
0.47
0.47
0.46
0.46
2003-04 2004-05 2005-06 2006-07 2007-08

Interpretation:-

54
This ratio enables to know how fixed assets are financed, i.e. by use of long-term funds
or by short-term funds. The ideal ratio is 0.67. This ratio should not be more than 1.From
the above chart we see that company fixed asset ratio is 0.47 in 2007-08.So company
position is not ideal but good financing position.

55
 10] Working Capital Turnover Ratio :-
The term working capital refers to excess of current assets over current liabilities. This
ratio establishes a relationship between working capital and sales.

 The Following Formula is used:-

Net Sales
Working Capital Turnover Ratio =
Working Capital

Working
Working
Particular Year Net Sales capital
Capital
turnover ratio
1 2003-04 979.31 1436.54 0.68
2 2004-05 924.22 1412.22 0.65
3 2005-06 1253.30 1123.76 1.19
4 2006-07 1343.97 1234.65 1.09
5 2007-08 1384.88 1353.20 1.02

Working Capital Turnover Ratio

1.40
1.20
1.00
0.80
0.60 Working Capital Turnover
Ratio
0.40
0.20
0.00
2003- 2004- 2005- 2006- 2007-
04 05 06 07 08

Interpretation :-
This ratio enables to know efficient utilization of working capital of an organization.
Through this chart we can say that KRIBHCO Company’s working capital increase so
that we can say that company’s financial position is going into the good situation.

56
 11] Fixed Assets Turnover Ratio:-
This ratio establishes a relationship between fixed assets and sales.
 The Following Formula is used :-
Net Sales
Fixed Assets Turnover Ratio =
Fixed Assets

Fixed assets
Particular Year Net Sales Fix Assets
turnover ratio
1 2003-04 979.31 1035.42 0.95
2 2004-05 924.22 1041.26 0.89
3 2005-06 1253.30 1053.69 1.19
4 2006-07 1343.97 1115.10 1.21
5 2007-08 1384.88 1231.58 1.12

Fixed Assets Turnover Ratio

1.40
1.20
1.00
0.80
Fixed Assets
0.60 Turnover Ratio
0.40
0.20
0.00
2003-04 2004-05 2005-06 2006-07 2007-08

Interpretation :-
The standard fixed turnover ratio is 5 times. A high ratio indicates better utilization of fixed
assets. A low ratio indicates under- utilization of fixed assets. From the above given chart
we can find out that KRIBHCO company’s fixed assets turnover ratio every year increase.
In the year 2003-04 company’s fixed turnover ratio was 0.95 and in the year 2007-08
company’s fixed assets turnover ratio 1.12 so that we can say that KRIBHCO company’s
fixed assets are more utilized and efficiently use their assets.

57
 12] Current Assets Turnover Ratio :-

It establishes a relationship between assets and sales.

 The Following Formula is used:-

Net Sales
Current Assets Turnover Ratio =
Current Assets

Current
assets
Particular Year Net Sales Current Assets
turnover
ratio
1 2003-04 979.31 1786.48 0.55
2 2004-05 924.22 1712.05 0.54
3 2005-06 1253.30 1421.00 0.88
4 2006-07 1343.97 1577.00 0.85
5 2007-08 1384.88 1851.78 0.75

Current Assets Turnover Ratio

1.00
0.90
0.80
0.70
0.60
0.50 Current Assets
0.40 Turnover Ratio
0.30
0.20
0.10
0.00
2003-04 2004-05 2005-06 2006-07 2007-08

Interpretation :
Just as fixed assets turnover ratio, this ratio indicates the contribution of current
assets to sales. From the above given chart we can find out that KRIBHCO
company’s current assets turnover ratio is less than last two years. In the year
2003-04 company’s current turnover ratio was 0.55 and in the year 2007-08
company’s current assets turnover ratio 0.75 so that we can say that KRIBHCO
company’s current assets are going to decrease.

58
 13] Total Assets Turnover Ratio :-

This ratio establishes a relationship between total assets and sales. This ratio enables to
know the efficient utilization of total assets of a business.

 The following Formula is used:-

Net Sales
Total Assets Turnver Ratio =
Total Assets

Total assets
Particular Year Net Sales Total Asset turnover
ratio
1 2003-04 979.31 2821.90 0.35
2 2004-05 924.22 2753.31 0.34
3 2005-06 1253.30 2474.69 0.51
4 2006-07 1343.97 2692.10 0.50
5 2007-08 1384.88 3083.36 0.45

Total Assets Turnover Ratio

0.60
0.50

0.40
0.30
Total Assets Turnover
0.20
Ratio
0.10
0.00
2003- 2004- 2005- 2006- 2007-
04 05 06 07 08

This ratio establishes a relationship between total assets and sales. This ratio enables to
know the efficient utilization of total assets of a business. A total assets turnover ratio of 2
times or more indicates that assets are utilized efficiently and a ratio below 2 indicates
that the assets are under- utilized.

INTERPRETATION:-

59
From the above given chart we can find out that company’s total assets turnover ratio
every year increase. In the year 2003-04 company’s total turnover ratio was 0.35 and in
the year 2007-08 company’s total assets turnover ratio 0.45 so that we can say that
KRIBHCO company’s total assets are more utilized and efficiently use their assets.

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14] Gross Profit Ratio :-

 The following formula is used:-

Gross Pr ofit
Gross Pr ofit Ratio = X 100
Net Sales

Gross Profit
Particular Year Gross Profit Net Sales
Ratio
1 2003-04 219.51 979.31 22.41
2 2004-05 185.83 924.22 20.11
3 2005-06 280.20 1253.30 22.29
4 2006-07 231.53 1343.97 17.23
5 2007-08 272.14 1384.88 19.65

Gross Profit Ratio

25.00

20.00

15.00

Gross Profit Ratio

10.00

5.00

0.00
2003-04 2004-05 2005-06 2006-07 2007-08

It expresses the relationship of gross profit to net sales and is expressed in terms of
percentage. Sales for this purpose means net sales i.e., sales after deducting the value
of goods returned by the customers. Gross profit results from the difference between net
sales and cost of goods sold without taking into account expenses generally charged to
profit and loss account. Cost of goods sold in the case of a trading concern in the
purchase of goods and all expenses directly connected with the purchases of goods,
while in the case of manufacturing concern, it consist of the purchases price of the raw
materials and all manufacturing expenses.

61
A low gross profit may indicate unfavorable purchasing, the instability of the management
to develop sales volume thereby making it impossible to by goods in the large volume,
excessive competition etc.

On the other hand an increase in the gross profit ratio may reflect an increase in the
sales price of goods sold without any corresponding increase in costs; a decrease in cost
without it’s the impacts on the sale price of goods, opening stock valued at a figure lower
than it should have been, over valuation of the closing stock at the end of accounting
period etc. There is no rigid standard to this ratio. Normally 25% to 30% margin is
anticipated.

INTERPRETATION:-
From the above given chart we can understand that in the year 2003-04 gross profit ratio
was 22.41 % that was lowest that’s reason was that in that year government provide less
subsidy so that in that year gross profit ratio was lowest. And than after company’s gross
profit ratio around 20% and in the year 2007-08gross profit ratio 19.65%.

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15] Operating Ratio:-
This ratio establishes a relationship between costs of goods sold plus other operating
expenses and net sales. Operating expenses consist of administrative expenses,
financial expenses, selling and distribution expenses.

 The following formula is used:-

Cost of Good Sold +Operating Expences

Operating Ratio =
Net Sales

C.O.G.S. +
Operating
Particular Year Operating Net Sales
ratio
Expense
1 2003-04 1819.56 979.31 1.86
2 2004-05 1833.23 924.22 1.98
3 2005-06 2451.77 1253.30 1.95
4 2006-07 3067.79 1343.97 2.28
5 2007-08 3300.80 1384.88 2.38

Operating Ratio
2.50

2.00

1.50

Operating Ratio
1.00

0.50

0.00
2003-04 2004-05 2005-06 2006-07 2007-08

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Interpretation :-
This ratio is calculated mainly to ascertain the operational efficiency of the management
in their business operations, as it shows the percentage of net sales that is absorbed by
the cost of goods sold. Higher the operating ratio, the less favorable because it would
leave a smaller margin to meet interest dividend and other corporate need in general for
manufacturing concern operating ratio is expected to touch a percentage of 75% to 35%.
This ratio can also be used as a partial index of overall profitability but can not be used as
a test of financial condition.
From the above chart we can say that, increasing from last two year, which
maintain the overall profitability.

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16] Operating Profit Ratio :-
This ratio establishes the relationship between operating profit and net sales.

 The Following formula is used:-

Operating Pr ofit
Operating Pr ofit Ratio = X 100
Net Sales

Operating Operating
Particular Year Net Sales
Profit Profit ratio
1 2003-04 9998.76 979.31 10.21
2 2004-05 7181.19 924.22 7.77
3 2005-06 11856.22 1253.30 9.46
4 2006-07 2526.66 1343.97 1.88
5 2007-08 3600.69 1384.88 2.60

Operating Profit Ratio

12.00

10.00

8.00

6.00
Operating Profit Ratio
4.00

2.00

0.00
2003-04 2004-05 2005-06 2006-07 2007-08

For calculating this ratio, non-operating expenses and non-operating incomes are
ignored. This ratio is indicates the portion remaining out of every rupee worth of sales
after all operating cost and expenses have been met.

Interpretation:-

65
As above chart we can say that every year company’s operating profit ratio is around
25% so that we can say that company has not proper control on the operating expenses
because in the year 2003-04 operating profit ratio is 10.21% and in the year 2007-08
operating ratio is 2.60%, so that we can say that company is failed to maintain their
operating expenses.

66
17] Net Profit Ratio :-
It expresses the relationship between net profits after taxes to sales.
 The following formula is used:-
Net Pr ofit after Tax
Net Pr ofit Ratio = X 100
Net Sales

Net profit Net profit

Particular Year Net sales
after tax ratio
1 2003-04 152.70 979.31 15.59
2 2004-05 140.59 924.22 15.21
3 2005-06 192.45 1253.30 15.31
4 2006-07 193.24 1343.97 14.38
5 2007-08 209.20 1384.88 15.11

Net Profit Ratio

15.80
15.60
15.40
15.20
15.00
14.80
14.60 Net Profit Ratio
14.40
14.20
14.00
13.80
13.60
2003-04 2004-05 2005-06 2006-07 2007-08

This ratio is widely used as a measure of over-all profitability and is very useful
proprietors, as it gives an idea of the efficiency as well as profitability of the business to a
limited extent. It is the different from the operating ratio in the sense it is calculated after
adding non-operating income like interest or dividend on investment etc., to generating
profit and deducting non-operating expenses such as loss on sale of old assets, provision
for legal damages, etc from such profit.

67
Interpretation:-
From the given data we can say that the profitability ratio in year 2003-04 is 15.59% and
in the year 2007-08 company’s profitability ratio is 15.11%, that company maintain their
profitability ratio through this we can says this thing indirectly that company maintain their
sales.

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 18) Net Working Capital Ratio:

Net Working Capital ( C. A. − C .L. )

Net Working Capital Ratio =
Net Assets

Net
Net Working
Particular Year Working Net Assets
Capital Ratio
Capital
1 2003-04 1436.54 2471.96 0.58
2 2004-05 1412.22 2453.48 0.58
3 2005-06 1123.76 2177.45 0.52
4 2006-07 1234.65 2349.75 0.53
5 2007-08 1353.20 2584.78 0.52

Net Working Capital Ratio

0.59
0.58
0.57
0.56
0.55
0.54
0.53
0.52
0.51 Net Working Capital
0.50 Ratio
0.49
2003- 2004- 2005- 2006- 2007-
04 05 06 07 08

This ratio shows the quantum of working capital in net assets. The working capital of an
enterprise is as important as the fix assets. It is used for running the functions of an enterprise till
share proceeds are realized working capital is an out come of current assets current liability.

69
INTERPRETATION:-
As seen in the data this Ratio has shown a decreasing trend till 2005-06. However it has shown
an improved picture in 2006-07. This is because the increase in net working capital compare than
last year 2005-06.The data of 2007-08 shows that 52% of net assets constitute of working capital.
Through this chart we can say that company’s net working capital increase so that we can say
that company’s financial position is going into the good situation.

70
 CONCLUSION
After analyzing Fund Flow Statement and Cash Flow Statement, I found that this
year’s performance report of cash is not better than previous year. Cash Flow
gives the picture of ability to generate and use of cash. In Cash Flow Statement
and from the Fund Flow Statement income generation of company is higher than
last five year.
Ratio Analysis of organization pointed that it is a profit making and
liquidity ratio and Profitability Ratio of the organization are on satisfactory level
but from the actively ratio of the organization is not as good as it should be.

During our Winter Project in KRIBHCO, We studied various components of the

different department. We observed different activities of them.

The finance and purchase departments under the personnel and administration
department handle the purchase functions, inventory management and financial
ratio. Several steps are followed for the contract of the purchase and long term
service.

All the Project activities are carried out by human resource department in
prescribed way. It also takes care of employee relations. Good employee and
customers relations are the great ingredient in the success of KRIBHCO.

In short KRIBHCO Company handling all the work related with the production or
non-production related they are doing this work very effectively and very
efficiency.

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 SUGGESTION
After having completed my winter project in Krishak Bharti Co-operative Limited,
Hazira, I have come to know its working and understand various departments therein.
The Project makes us able to understand the various aspects of management. After
having a detailed study of the various departments of KRIBHCO, I am giving our
conclusion.
 In liquidity ratio, Standard Ratio for Current Ratio, Quick Ratio and Debt-Equity Ratio are
2:1. Current Ratio and Quick Ratio asset ratio are nearer to the standard, but Debt-Equity
ratio is 0:1 for all the five year, because KRIBHCO is subsidized from by the government.
So there no need to debt. KRIBHCO should reduce its liability to reach standard position.
 KRIBHCO should increase it sales to maintain activity ratios. As we know that
requirement of Urea and other Fertilizer is higher than its production, So KRIBHCO
should use proper sales channel for sales increment.
 A profitability ratio of KRIBHCO is doing well, so there no need to change it profit policies.
 As far as cash management is concerned, cash inflow is efficiently undertaken, but
improvement in cash out flow is payment & disbursement of cash required condrable
attention.
 Company have to reduce differ tax liabilities which is continuously increase in last two
years for the better result of the company.
 The KRIBHCO is achieving more production capacity than installed. On an average, the
KRIBHCO is running on 108 % capacity utilization. It is having a skilled staff to running
the plant. The KRIBHCO is also implementing the good Inventory Control Techniques to
control the stocks of materials with a good purchasing policy.
 Finally, KRIBHCO is having a professional management to control all the activities
carried out therein. So, we would like to conclude that KRIBHCO is having a bright future
to expand and diversify.

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 BIBLIOGRAPHY

KRIBHCO Personnel Manual

Annual Report of KRIBHCO (2007-08)
KRIBHCO at Glance
KRIBHCO Pragati
KRIBHCO News

Book Reference:
Financial management By I.M.Pandey

Websites:
http://www.KRIBHCO.org.
http://www.KRIBHCOsurat.com

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