Executive Summery

This summer training report is prepared at “KRISHAK BHARATI CO-OPERATIVE

LIMITED.” at Surat on “Ratio Analysis” as a part of curriculum of the MBA program.

KRIBHCO is one of the biggest co-operative sectors of Asia which manufactures

fertilizer. KRIBHCO has setup a Fertilizer Complex to manufacture Urea, Ammonia & Bio-

fertilizers at Hazira in the State of Gujarat, on the bank of river Tapti, near Kawas village, 15

Kms from Surat city and 20 Kms from Surat Railway Station on Surat – Hazira State Highway.

During the training period from March to 9 th may to 9th july,2010. i have studied

different departments at KRIBHCO. I observed different activities of them. I have studied

Finance & Accounting and various section in finance and account department.

Main activities of F & A Department are financial planning, Capital & Revenue

budgeting, Ratio analysis, SWOT analysis etc.

In short, KRIBHCO handles its all functions efficiently. It operates at its effective level

by performing the sequence of operations, and acquires the maximum profits among leading

manufacturers of fertilizers- urea.

The Objectives are:

To know the financial condition of the company.

To study cash management.

To study inventory management.

To analyze the liquidity position of the company.

To study receivable management and company’s credit policy.

To achieve these objectives, I have studied Ratio analysis methods for

analysis which are as in the project.

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Industrial profile

Introduction of fertilizer Company:

We all know that India lives in village. There are many as five lacks and seventy five thousand village in her fold. 75% of the population of our country lives in village. Out of 70% of the people earn their living from agrobased industries. So that the prosperity of our country depends on village and advancement of agriculture. The co-operative movement is contributing since long towards the advancement on the field of agriculture. So that we are on the path of progress.

Therefore the progress of our country basically due to development of village and agriculture. The co-operative societies are giving their full support since last many years for the development of villages and its agriculture activities which resulted in continuous progress of the country.

In general when we discuss about the development of villages we will have to give priority for the development of agriculture of the villages. In consideration of the development of agriculture and the activities of cooperative society. It is presumed that India has made a stupendous progress in the field of agriculture with entire and fruitful support of cooperative society. The cooperative societies have played key role for the development of villages and its agriculture. The cooperative society has further made a giant step in both the sectors i.e. world of agriculture and agro-life.

The agriculture has played glorious part of the reconstruction of our country which covers such as county’s income growth, creation of employment, increase in export, providing required raw materials to the industries, food arrangements for the periodically increasing population, initiated basic required of human life, controlling the price rise, successful in planning, development and protection of dairy business and ushering in socialism etc.

To increase the agriculture products as well as progress of farmers the credit goes to cooperative activities for providing sufficient loan, fertilizers, seeds and related instruments, arrangement of buying-selling of agro products goods at reasonable rates.

It has been noted very carefully by Late Pandit Jawaharlal Nehru that cooperative society and their societies and their activities shares full support as key role for the development of agriculture and reconstructions of villages keeping main intention of better cooperative economic development of village.

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The Gujarat state stands on top with progress in the field of cooperative and around 35000 cooperative societies are active in development of villages.

The poet had said, “The farmer is the father of mankind”. The poet can express only his emotional feelings but hard reality is that to become the father if mankind, the farmers have to undergo pangs which bruise his spirit often and on. He has to fight against vagaries of monsoon, exploitation of the vested interest, hunger and malnutrition and very poor and painful life.

WHAT DO YOU MEAN BY CO-OPERATIVE ?

A cooperative is an autonomous association of persons united voluntarily to meet their common social and cultural needs and aspirations through jointly owned and democratically controlled enterprises. Cooperatives are based on the values of self-help, self-responsibility, democracy, equality and solidarity.

Fertilizer Industry Scenario in India

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In India, First of all in 1906,A Single Super Phosphate (SSP)

manufacturing unit was set up at Ranipat near Chennai (Madras) with annual capacity of

6000 tones per annum.

1. Public Sectors

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 Sectors

There are only two fertilizer manufacturing societies in Co-operative sector.

Indian Farmers Fertilizers Cooperative Ltd. (IFFCO)

Krishak Bharati Cooperative Ltd. (KRIBHCO)

3. Private Sectors

There are 17 companies in private sector, which are producing fertilizer.

Gujarat Narmada Valley Fertilizer Co. Ltd. (GNFC)

Hindustan Lever Ltd. (HLL)

Hari Fertilizer

ICI India Ltd.

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Indo Gulf Fertilizers & Chemicals Corporation Ltd.

Mangalore Chemicals & Fertilizers Ltd. (MCFL)

Southern Petro Chemicals Industries Corporations Ltd.

Nagarjuna Fertilizer & Chemical Ltd. (NFCL)

Shri Ram Fertilizer & Chemicals Ltd.

Tuticorian Alkali Chemicals & Fertilizer Ltd.

Zuari Agro Chemicals Ltd.

Bindali Agro Chemicals Ltd.

Chambal Fertilizer & Petrochemical Corporations Ltd. (DEPCL)

E.D.I. PASSY (I) LTD.

Gujarat State Fertilizer Company (GSFC)

The Role Of The FERTILIZER In The National Economy

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AGRICULTURE INDUSTRY SERVICES ENVIRONMENT

As critical input in crop production

Fertilizer use promotes. It promoters agriculture growth food security & rural

Fertilizer industry promotes

Use of gas, sulfur etc.

Foreign Exchange saving

Distribution network promotes domestic world trade; credit Banking, services, and research, transport and storage services.

The proper use of Fertilizer’s can help in

1-maintainance of soil structure

2-prevention of soil erosion and degradation.

3-control of deforestation

Growth of Fertilizer Industry

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One of the most significant achievement of the post Independence period of our Country has been the ability to achieve self-sufficiency in food grain production. This achievement is due to the rapid growth and improvement of Fertilizer industry. The Fertilizer industry is growing at the rate of 4% for the last 10 years and has been contributing a significant part of G.D.P.

The growth and importance of Fertilizer industry in India can be divided in to three distinct phases, these are given below:

1. Pro Green Revolution Period2. Green Revolution Period3. The Post Green Revolution Period

1. Pro Green Revolution Period:

This period is described in 1952-1953 era where increased growth of food grains took place however this increased production in food grains took place due to increased irrigation methods. In this phase the land under agriculture was made more, during this period about 80% of the country's population was involved in Agriculture either directly or indirectly. During this period the fertilizer's which were manufactured were Super Phosphate & Ammonium Sulphate. Irrigation was thought to be heart of Agriculture.

2. Green Revolution Period:

During this phase Government stated the programmed aimed at making our country self sufficient in Food Products. This was the period between the years 1959-1960. This plan laid the emphasis on production of High Yielding Varieties. To make this plan a success there was a high need to make soil fertile by providing it with nutrients like Phosphorus, Nitrogen and Potassium.

3. The Post Green Revolution Period

The world's population along with Indian population has kept on growing at an alarming rate; the fertilizer companies all over India are trying to expand their scale of operations in order to increase the production rate. The demand for fertilizers per year is increasing. The current demand of fertilizers in India is 18 million tones.

- According to Fertilizer Association of India.

Company profile

INTRODUCTION OF KRIBHCO:

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Krishak Bharti Co-operative Limited

Krishak Bharati 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.

“KRIBHCO” the world’s premier fertilizer producing co-operative has an outstanding track record to its credit in all spheres of its activities. Since 17 th April 1980 as a national level co-operative society promoted by Government of India authorized to manufacturing and distribution of fertilizers. Late Smt. Indira Gandhi, former Prime Minister of India laid the Foundation Stone on February 5, 1982. 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.

KRIBHCO plant is one of the largest and most modern fertilizer compels in the co-operative sector in the world. It has two phases on UREA plants consisting of two streams of

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1520 MTPP with an annual capacity to produce 14.52lakh.MT of urea equipment to 6.68 lakhs MT interns of nutrient nitrogen.

Location:

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–Ahmadabad main line.

KRIBHCO multiunit co-operative societies were promoted jointly by IFFCO and the agricultural co-operative all over the country.

HISTORY AND DEVELOPMENT

“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 are supplied through chemical fertilizer. Fertilizer response studies have proved that 1 kg. Of fertilizer can increase the food grain production by 8-10 kg. Fertilizer production is of permanent importance for this country because Fertilizer increases agriculture productivity.

The trial production of Urea commenced from November 26, 1985 and within a very short time of 3 months, the commercial production commenced from March 01, 1986. Since then, it has excelled in performance in all areas of its operations.

The total Project cost was Rs. 890 crore as against the estimated cost of Rs. 957 crore. This shows a saving of Rs. 67 crore (approximately 7%) in Capital Cost of the Project, which is a rare feature in the history of a Public Sector Unit.

PROJECT ZERO DATE 31st MARCH, 1981

FOUNDATION STONE LAID BY

Late Smt. Indira Gandhi then the Prime Minister Of India on 5th February 1982

PROJECT COMPLETION 31st MAY 1985

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ISO certificate: (I) KRIBHCO plant ISO 9001-2000

(II) KRIBHCO plant ISO 14001

(III) KRIBHCO Marketing office ISO 9001-2000

GLOBAL COMPACT PRINCIPLES ADOPTED BY KRIBHCO

Globalization has resulted in providing free flow of goods and services throughout the world. This has brought significant advantages and benefits to several countries. However, the benefits have been shared unequally amongst the more and the less advanced organizations and countries.

In these circumstances it has become all the more necessary to provide broad framework and direction to promote equally social objectives in the field of human rights Labour standards environment protection etc. The UN Secretary General Mr. Kofi Anann first proposed the ‘Global Compact’ in his address to the World Economic Forum on 31st January 1999.Today a large number of companies from all regions of world, international labour and civil society organizations are engaged in the Global Compact.

KRIBHCO has embraced the universal principles of “global compact” in the key areas of human rights, labour standards, environment and anti-corruption. These principles are –

Human Rights

Business should support and respect the protection of internationally proclaimed human rights and Make sure they are not complicit in human rights abuses

Labor Standards

i. Business should uphold the freedom of association and the effective recognition of the right to collective bargaining.

ii. The elimination of all forms of forces and compulsory labor.

iii. The effective abolition of child labor.

iv. Eliminate discrimination.

Environment

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Business should support a precautionary approach to environmental challenges;

Undertake initiatives to promote greater environmental responsibility; and

Encourage the development and diffusion of environmentally friendly technologies.

Anti corruption

Business should work against all forms of corruption, including extortion and bribery.

PPRODUCTSRODUCTS

KRIBHCO is manufacturing Nitrogenous Fertilizers and Allied Products viz.: Urea, Ammonia Liquid, and Bio-fertilizer. Besides, it’s also has a 30 Mega Watt Power Plant of its own for generation of Power to meet its requirement. KRIBHCO has also been assigned the job of Operation & Maintenance of “Heavy Water Plant” of Department Of Atomic Energy.

MISSION

1. To contribute to agriculture & rural development in the regions.

2. Services to members of cooperatives society by selecting financing.

3. Managing society desirable and commercial profitable investment opportunity preferable at multiple locations.

VISION

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KRIBHCO will become one of the leading fertilizer producers in the world funding growth through:

Efficient Production

Efficient Distribution

Efficient diversification

Efficient Utilization of Resources

We want   to be a  world  class  organization  that represents the farmer community and maximizes returns to them  through specialization  in  agricultural  inputs   and  products  and  other  diversified   businesses   that   maximize  stakeholder  value.

OBJECTIVES OF KRIBHCO

MAIN:

1. To increase the urea installed capacity, maintaining its market share.

2. To ensure optimum utilization of existing plant and machinery, through proper maintenance.

3. To diversify into other core sector like power, LNG terminal/port, chemicals etc.

OTHERS:

1. To enlarge product mix through product development

2. To continue and intensify efforts towards rural development and Co operative movements.

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AWARDS

Industrial Relations:

All India Organization of Employees (AIOE) Awards 1990 in the field of Industrial Relations.

Winner of Gujarat state Award for the year 1996 under Group-A Industry category-1.

Productivity:

FAI- “ Best Production Performance” (Runners up) Award: 1988-89. Golden Jubilee memorial trust Award 1997-98 for Outstanding Achievement in

Productivity by Southern Gujarat Chambers of commerce and Industry. FAI Award on Production, Promotion and marketing of Bio-Fertilizer: FAI Best performance Award for performance of Bio-Fertilizer plant from fertilizer

Association of India for the year 2002 for the third time. KRIBHCO has received the certificate of excellence for the year 2001-02 in process

Industry from the Indian institute of industrial engineering, Mumbai. KRIBHCO has received “National productivity Award for three consecutive years

1999-00, 2000-01 & 2001-02. KRIBHCO has received “Excellence in Improving Productivity” conferred by South

Gujarat Chamber of commerce and Industry for the year 2007-08.

Energy Conservation:

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National Energy Conservation Award (second prize) by Ministry of power 1994-95 and 2000-01.

Safety:

The Royal Society for the Prevention of Accidents (ROPSA), U.K. Award for Safety to KRIBHCO’s Hazira complex for the year 1989-90.

National Safety’s council, U.S.A, awarded “ Award for Honour” in the year 1989-90, 1990-91, 1993-94 and 1996-97 for nitrogenous fertilizer sector for operating more than 22 million man hours without occupation injury or illness for the period from 20-09-1992 to 31-12-1995.

National safety (Runners up) Award 1994 by Govt. of India Ministry of Labour. Gujarat State Safety Award 1995 for lowest disabling injury index by Gujarat Safety

Council.

Environment Protection:

FAI- “Environmental Protection Award “1989, 1991 & 1993. KRIBHCO has bagged the Gopalkrishna Singhania Memorial Environment Award given

by Indian merchant’s chamber for outstanding contribution toward control of Air & Water pollution in fertilizer industries for the year 1990-91.

Nehru memorial national award 1996 for control of pollution and energy. Award by Council for Ecological Futurology and Environment for Dedication to

Environment-2001

Other Awards:

KRIBHCO receives Samarpit Rajbhasha Seva Saman by town official Language Implementation Committee, Noida for the year 2006-07.

KRIBHCO receives Star Industry of Surat 2008 conferred jointly by leading news-paper Gujarati Mitra and Consumer Forum.

KRIBHCO won Sarvottam Stall Prize in Pusha Krishi Vigyan Mela at New Delhi. KRIBHCO receives AMITY HR Excellence Award for the year 2008 by Amity

International Business School. KRIBHCO receives Gold Star award of Excellence from Institute of Economic studies

for its overall excellence performance.

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KRIBHCO receives the Rajbhasha Award from Honb’le Minister of Chemical and Fertilizer for 2002-03, 2003-04, and 2004-05.

KRIBHCO was awarded First Prize for production, promotion and Marketing of Bio-fertilizer for the year 2004-05 on 1st of December ‘o5 by FAI.

IIIE – ENTERPRISE EXCELLENCE Award for the year 2003-04. KRIBHCO has won Indira Gandhi Rajbhasha Purashkar (2nd) for 2003-04. KRIBHCO – Hazira – pot plants exhibition received the 2nd prize in the first National

Horticulture exhibition and flower show for the year 2002. FAI- Best video Film Award 1987, 1990,1991,1992,1993,1994,1995,1996 and 1998. FAI Technical Innovation Award: 2001-02 to two KRIBHCO officers. SHIELD & CERTIFICATE awarded by Rajbhasha Vibhag, Home Ministry, GOI for

PROMOTION OF HINDI AS AN OFFICIAL LANGUAGE for the year 1993-94. “Best House keeping” Award to KRIBHCO’s Hazira complex from Baroda Productivity

Council- Awarded 5 times from 1988-89 to 1991-92.

Environment Management

KRIBHCO has long been at the forefront of Environmental protection. The society recognizes its responsibility to protect the environment and is committed to regulated all its activity using best available technology to mitigate adverse environmental impact, if any that may arise out of its operations. The comprehensive environmental protection plant based on a principal of “Reduce, Recycle and Re-use”

KRIBHCO has created a green belt by planting more than one lakh trees and developing lush green lawns in an area of about 100 Acers. Beside this, a demonstration farm has been developed in an area of above 41 Acers.

Environmental Management System (EMS) of KRIBHCO has been certified as in-line with international standard ISO 14001-2004.

QQUALITYUALITY P POLICYOLICY

Management of KRIBHCO, Hazira Plant is committed to operate and maintain its Fertilizer manufacturing complex through quality assurance, environmental, protection and go to the satisfaction of customers.

KRIBHCO – Hazira Plant shall achieve this Quality Policy through following Objectives:-

1. Continually upgrading technology to improve plant efficiency and reliability.

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2. Maintaining and improving the safety and environmental performance.

3. Improving the skills and knowledge of personnel.

4. Continuously improving the Quality management system.

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 6523 cooperative societies as on march 31,2008 as against 6044 as on march 31 2008. 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, 2009 was Rs.390.68 crore.

2004-052005-06

2006-072007-08

2008-09

5000

5200

5400

5600

5800

6000

6200

6400

6600

5624 5732 5790

6044

6523

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OORGANIZATIONRGANIZATION C CHARTHART OFOF KRIBHCO:- KRIBHCO:-

GOVERNMENT OF INDIAGOVERNMENT OF INDIA

||

MINISTRY OF AGRICULTUREMINISTRY OF AGRICULTURE

||

DEPT. OF FERTILIZER & CHEMICALDEPT. OF FERTILIZER & CHEMICAL

||

CHAIRMANCHAIRMAN

||

BOARD OF DIRECTORBOARD OF DIRECTOR

||

MANAGING DIRECTORMANAGING DIRECTOR

||

OPERATIONAL DIRECTOROPERATIONAL DIRECTOR

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BOARD OF DIRECTORS

(As on March 31, 2009)

CHAIRMAN Shri Chandra Pal Singh

VICE- CHAIRMAN Shri R.K. Dhami

DIRECTORS Shri V.R Patel

Shri V. Sudhakar Chowdary

Shri Mathew C. Kunnumkal

Shri Deepak Singhal

Shri Shiv Narayan Prasad Mishra

Shri S.S Jagmod

Shri Ponnam PrabhakarMANAGING DIRECTOR Shri B.D. Sinha

MARKETING DIRECTOR Dr. V.P.Singh

FINANCE DIRECTOR Shri R. Karma

OPERATIONS DIRECTOR Shri I.N. Bansal

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INVESTMENTS

JOINT VENTURES:

1. Oman India Fertilizer Company SAOC (OMIFCO)

KRIBHCO Society is one of the lead sponsors of Oman India Fertilizer Company (OMIFCO) with equity investment of US$ 69.5 MM (Equivalent to INR 328.53 crore) representing 25% of paid up equity capital of OMIFCO.

OMIFCO produced over 19.52 lakh MT urea for the year ended 31st December 2008, which is 121% of the annual rated capacity. This is the highest production achieved by OMIFCO in any financial year since inception. OMIFCO has produced 7 million MT Urea since inception.

KRIBHCO is handling and marketing 50% of the urea produced by OMIFCO. For the calendar year 2008, OMIFCO paid a dividend of 73.5% on paid-up capital.

2. Gujarat State Energy Generation Limited (GSEG)

Gujarat State Energy Generation Limited (GSEG) is a joint venture company with Gujarat State Petroleum Corporation Limited (GSPCL), other Government of Gujarat companies, KRIBHCO and GAIL India Ltd. KRIBHCO has invested 30.2% equity (Rs. 48.75 crore) in GSEG.

GSEG had declared a dividend of 5% for the third consecutive year 2007-08. GSEG has achieved a provisional pre-tax profit of Rs. 9.34 crore during the Financial Year 2008-09.

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3. Urvarak Videsh Limited (UVL)

Urvarak Videsh Limited (UVL) is a joint venture company prompted by KRIBHCO, National Fertilizers Limited (NFL) and Rashtriya Chemicals and Fertilizer Limited (RCF)

To set up Joint-ventures in India and abroad for manufacturing, mining, long term tie ups for nitrogenous, phosphatic and pottasic fertilizers and fertilizer raw materials including exploring the possibility of making investments and rendering consultancy service in India and abroad. The has made an initial contribution of equity of Rs.5.00 lakh in the above company.

4. KRIBHCO Shyam Fertilizer Limited (KSFL)

“KRIBHCO Shyam Fertilizer Limited (KSFL)” is a joint venture company of KRIBHCO and M/S STL Fertilizer Pvt. Ltd. Which operates the Shahjahanpur Fertilizer complex. On March 30, 2009 KRIBHCO bought 25% of equity of KSFL from its JV Partner pursuant to the JVagreement. Consequently the shareholding of Society in KSFL has increased from 60% to 85%.

OTHERS:

Nagarjuna Fertilizers and Chemicals Ltd (NFCL)

The Society has an equity participation of Rs.10.00 crore in NFCL, which is 2.15% of NFCL’s paid up share capital of Rs.465.16 crore. Actual Production during the year was 13.78 lakh MT which is equivalent to 115.40% capacity utilization.

SSALESALES

Sales are accounted for on the basis of Released orders issued to customers. Sales in the state of Gujarat are accounted for on dispatch basis and sales through Krishak Bharti Sewa Kendra’s are accounted for on cash and carry basis.

TTURNOVERURNOVER

The turnover of the KRIBHCO is round about 2300 crores.

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MMARKETARKET S SHAREHARE

The market share of the KRIBHCO is decided by the Co-operative Society. So the 20% share is their own and the 80% share is decided by the Government of India

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Accounting & finance department

Introduction:-

Finance is the blood of the business. “Finance Management is that managerial activity which is concerned with the planning and controlling of the firms financial resources.” Finance management is the most important activity of the firm and it means that the firm secures capital, if needs and employees it.

Finance management is mainly concerned with raising fund in the suitable manner using the funds as profitably as possible, planning future operations and controlling current performances and future developments through financial accounting, cost accounting, budgeting and other functions.

Before the proposal is concurred, financial department has to scrutinize all the steps which are involved in formulation of proposal according to certain rule, regulation, etc. This are know as principle guiding activities relating to concurrence such as delegation of power, purchase procedures and govt. Notifications issued from time to time.

The Finance and Accounts Department of KRIBHCO plant is located in the Administration Building, which is situated outside the Plant factory gate. The Finance & Accounts (F&A) Department is a service department and its main function is to co-ordinate the financial activities at Plant Site. The F&A department maintain the records as required under various statute and get the same audited by Statutory Auditors under the functional supervision and guidance of KRIBHCO CO-OPERATE OFFICE at NOIDA.

The Object of the Finance Department :-

To pre-audit and examine each proposal as per procedures lay down by the society. Whether procurements are being made or work orders are being executed on the

economical rate. Selections of parties are as per approved vendor list. Deviation, if any, of Norms In Terms (NIT) have been granted on proper justification and

after approval of the competent Authority.

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It also includes assessing the accounting principle used and significant estimates made by the management as well as evaluating the overall financial statement presentation

FUNCTIONS OF FINANCE DEPARTMENT:

This department has strength of 54 people and is being headed by two chief managers. Under them 11 senior managers are there.

The main activities of this department are as under:-

Budgeting (capital and revenue)

Inventory Management

Work Order Concurrence

Purchase Order Concurrence

Lodging and settlement of insurance claims

Payment of salaries

Maintaining records in cash book, bank book and general ledger.

Internal Audit

Payment to Foreign Vendor

Various Sections at finance department

Excise Section/ Service Tax J.G.BHAVSAR

Excise duty is on commodities that are manufactured. It is central base.

Service duty is on the services provided.

Excise duty is on the removal base, when company moves good out from the factory, it

raise excisable invoice - passing of excise on the buyer – if any disparity then file the

claim.

Single coding for all the transaction in India.

Uses PAN bases for registration

Registration in 30 days in XM – Excise duty

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Before/ in-advance XT – Service tax

Excise duty in 5 days raise invoice and do deposit.

Service in 14 days raise invoice and then deposit on receipt base i.e. whenever get

amount.

File excise return < 50 lakh monthly – E - payment.

Contains Litigation process.

KRIBHCO producing fertilizer – Exempted product so no excise duty so no CENVAT.

On NEPHTA – specific exemption as use to produce fertilizer natural gas.

90% - no excise duty – no CENVAT.

If urea not used for fertilizer, excise duty has to be paid.

Sales Tax J.G.BHAVSAR

Types of sales tax

State level – 1964

Central level – 1956

From 1-april-2006- VAT in Gujarat, before VAT it was GSCT

Reasons for collection of TAX: To remove inequality, To feed local body – Panchayat,

Sources of income/ fund

In KRIBHCO, 90 % Raw material so no credit – full tax payment only 10% process so

get credit or can claim input tax cannot get double benefit tax.

Monthly filing of return for KRIBHCO as paying tax for more than 60,000 per month.

Turnover of more than 1 crore CA or statutory account to be appointed.

Rules of VAT :

Opportunity to genuine traders, to collect tax and make payment to government

Procurement tax – input tax

Manufacture and sales collected tax from customer and paid so trader tax is compensated.

Credit invoice is required

Cycle of purchase and sales

So at the last kribhco has to bare whole tax.

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Schedules of taxes:-

Schedule 1 – Agriculture products – NIL tax for 57 items included all exemptions.

Schedule 2 – 86 item

Vast items – raw materials, needs etc 4 % to 5 %

Different items – gems, jewellery, oil, petrol, liquor, naphtha 1% to 16%, 20%, 60%

Schedule 3 – Single line item

Items excluding schedule 1 & 2

All items – 12.5%

Additional tax – 2.5%

Credit can be given on tax invoice

Tax invoice raised by person registered

He can collect tax and then can avail tax

Registered person has to get TIN i.e. Tax Identification Number

In KRIBHCO fertilizer ministry has decided that for essential product low tax has to be paid,

subsidies are given, if high production then different cost of goods sold is calculated and then

selling price is to be determined.

Budgeting A.L.AGARWAL

Estimation of funds

Optimum utilization

April to March

Types of budget

Revenue budget – short term

Capital budget – long term

Revenue budget

Last year is considered as base year

Estimation on last year expenses

Revenue budget reviewed by all departmental head

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Then comes to account departments

For abnormal expenditure requires justification

Sittings and readings and then final budget is prepared

Capital budget

Capital like machines not working information passed to head of

the department for replacement.

Departmental head prepares estimation

Then comes to accounts department

Reading, reviewing and then final budget is prepared

Capital expenditure can be postponed

From accounts department budget is send to Board Of Director

Board of director does proper review of the budget

Revised budget

Last 2 to 3 months of year end

To re-check budget

Every year revised budget is prepared and scrutinize

Annual budget/ plan

Annual plan is made for next 5 years

It is 5 year planning of finance of the company

It is made on the basis of past and current experiences, facts and

figures

It is also inclusive of hypothetical figure

Sale of scrap P.G.SONI

95% Ammonia used to make urea

Unutilized machine & catalyst scarp

Wood platelet used for packaging transport

Selling scrap to MSTC

Brokerage to MSTC

Meeting to public commission

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Decide scrap value

Within /outside

State tax “c” form 2%

GVAT Gujarat sales tax 4% +1%

Advance payment of sale of scrap

Invoices given as per payment

Surplus Material P.G.SONI

Moving , slow moving and non moving items are inclusive

Slow and non moving becomes surplus

MSTC

Meeting

Reserve

Coding price

Sale

Sale of Industrial Urea P.G.SONI

Production of Ammonia

95% is used to make urea

5% is sold outside as raw material and for various purposes

Sale order has to be made

Monthly quantity or annual sales of ammonia and urea is fixed

Ammonia price is fixed globally

Penalty cost is around Rs 200 to maximum of security deposit amount

Sales are made only to Farmer’s co-operative society

Only 0.01% are sold to industrial companies

Price of urea is kept around 40000 per metric ton to farmers

27 | P a g e

For industries it is kept at 42000 metric tones

ARGON

It is the Gas used by wielder to cut the sheets

Plant is started from last 3 years

Steel company are the major consumers

It is calculated as per NM3 - Normal meter cube

1 normal meter cube is Rs 26

Finance concur A.D.GANDHI

General outline

Procurement is to be determined

Procurement is scrutinize

Draft are purchased

Contract proposals are made

Proposal for procurement/award of contract

Procedure of finance concurrence

Procurement / contract proposals are sub divided into 2 categories:-

o Capital procurement

o Revenue procurement

Procurement is done on the basis of Material Purchase Requisition (MPR)

Material department is responsible for developing a list of approved vendors

On receipt of proposal, it is entered in inward register

Stages of finance concurrence

Pre - award level

Post- award level

Pre – award level:-

28 | P a g e

i. Duly approved MPR in “Principle Approval”

ii. Enquiry has been issued by Purchase/User departments to society’s Vendors/

Contractors

iii. 2 stages bidding procedure has been followed whenever required

iv. Terms and conditions are as per the society’s standard terms and in case of

deviations, same are duly approved before the issue of NIT

v. Parties have been given time for submission of bids as per purchase procedure

and emergent procurements have been approved

Post – award level

i. Bids received and stored

ii. Bids opened by Tender Opening Committee on the specified date /time/venue

iii. Bids consists of 2 parts

a. Technical

b. Commercial

iv. Conducting negotiations with the LEVEL-1 bidders

v. Evaluation of bids will loading criteria

vi. Proposal for techno-commercial terms are crystallized, proposal accepted and

rejected

vii. Proposal sent to finance department

viii. Price bids will be opened

ix. Quotation comparison statement

x. Bids are invited on single stage

xi. Basis of loading considered in QCS

a. Price basis

b. Terms of payment

c. Delivery period

d. Performance bank guarantee

xii. Based on QCS status proposal for placement of PO/WO will be made by

Purchase/User department

xiii. In case negotiation in rates are required, the same will be done L-1 party only

29 | P a g e

xiv. Proposal by purchase department for procurement of required material will be

sent to User department

xv. Proposal of purchase dept after recommendations from User dept will be

forwarded to the finance dept by Purchase dept

xvi. Finance dept will review

xvii. It is reviewed with reference to rate of justification as the viability of the proposal

xviii. Approval of competent authority

xix. Reasonable expenses incurred and availability of provision the budget as

approved by the board

xx. Impact of variation in estimated quantity and that of actual and lowest acceptable

bidder declined

xxi. Letter of Intent, Fax of Intent, Work Order will then be prepared by

Purchase/User dept

xxii. For repeat orders, no downward trend in prices to be taken and repeat orders will

be placed within one year

xxiii. After vetting of PO/WO, same will be recorded on the face as draft order

Payment will be made in finance against PO/WO copy, duly vetted and signed by Competent

Authority and Acceptance of Party

Establishment Section R.G.SHAH

General Outline

Appointment for vacancies by recruitment

Promotions, transfers, suspension, reduction in pay, stoppage of increments etc

Each employee allotted a personal number by personnel department

It is also used for the purposes like

o Salary

o Provident fund

o Welfare schemes

o Medical benefits

o Identity card

30 | P a g e

Personnel dept examine the eligibility of each applicant as per rules and issue sanctions

As per service rules of society, employee to have earned leave at the rate of one day for

every 11 days subject to maximum 33 days

Authority for dealing with cases relating to termination of services, resignation,

retirements, rest with P&A dept. “no dues certificate” from P&A dept

Salary payments & emoluments components

o Basic pay

o Project non practicing allowance

o Over time

o Shift allowance

o HRA

o City compensatory allowance

o Canteen subsidy

o Washing allowance

o Cash handling allowance

o Family planning incentive

o Education allowance

o Transport allowance

o Personal pay

o Dearness allowance

o Magazine allowance

o Medical allowance

For preparation of salary details requirements are:-

o Absentee statement

o OT details

o Late attendance statement

o Leave regularization statement

o Overtime statement

o Personal details

Processed by 27th – 28th of each month

31 | P a g e

Overtime , shift allowance, leave details punched in prior 20th- 25th date of each month

Deduction for leave without pay will be made from salary

Annual Increment

Awarded twice a year – 1st Jan to 30th June

On reaching maximum limit no more increment is allowed

Adhoc increment given to employees in their pay

Dearness allowance

Variable dearness allowance

Salary & establishment section enter. Fixed dearness allowance & variable

dearness allowance

Productivity linked scheme

Provision for bonus, productivity

Advances to offices/ employee

Tour advance

Conveyance loan

House building loan

Salary advance

Leave travel concession advance

Medical advance

Deduction of income tax at source

Section 192 IT act 1961 for deduction

TDS will be required to be deposited within 7 days of deduction

Type of statutory & statistical return & data will be required to be furnished by

establishment

32 | P a g e

Provident fund

Provident fund within 15 days

HBL 1 6%

HBL 2 8%

Attendance

Biometric system- finger print in KRIBHCO

Types of Leave

Casual leave – 14 days

Sick leave – 20 days half / full

Earn leave 1 day from 11 day

Encash maximum 300 leave at a time of retirement upto 3 lakh- no tax

Recruitment – A to T grade, 3% increment in a year, 3 to 4 years gap

Promotion – based on qualification

For e.g. ACA/AICWA – 3 years, 3 % on basic salary increased

Overtime - authorized by head

Total hour of month is divided by basic salary

Shift –

Morning – basic salary

Evening - basic salary + 75

Night – basic salary + 150

Basic salary – fixed by HR department and is based on last month

For verification – increment, abseentism, promotion

33 | P a g e

Raw material Payment B.C.MISTRY

Raw materials are like: - gas, power, water, naphtha

80% of the total expenditure of raw material are covered

Main fuel is gas

Purchased from BPCL, GAIL, RELIANCE

Consumption of 70 crore per month

Main purchased from Reliance and GAIL

10 – 11 crore square cubic meter per month payment of Rs 70 crore

GAIL have own pipeline to transport

Water is obtained from Kakrapal dam and total usage for industrial purpose and

township is Rs 1 crore

Power

Own generation

Extra is obtained from GEB

Extra power generated is sold out to GEB

To generate power GEB have to take license from government

Duty paid is 40 paisa per 1 kilowatt + tax to the government

In plant 7 lakh kilowatt per month is produced

Product Handling Section M.V.PATHAK

For a month requirement is approximately 1.8 lakh bags

Labours are employed and facilities like Provident fund, Gratuity, Incentives,

Bonus etc are paid by the employer to the employee

On extra work done extra incentives are given

Procedure is:-

o Statement is filed

o Number of units and price is determined

o Scrutinization is done

o Send to the product handling department

34 | P a g e

o Goes to Finance and accounting department

o Finally payment is done by HR

Empty Bags/ Urea Handling Payment Section M.V.PATHAK

Purchased from :-

Balaji polyrex

MMT

Dalmia

GDIPO

PVNS

Foreign vendor payment /L.C. payment J.B.SANGHAVI

Purchase from foreign company

Monopoly

Bind by their rule

Terms and condition to be followed

Clearing agent

Remove from dock in 5 & 6 days

Customs have to be paid

Formality of custom

Details of purchase order

Document sends to 5 parties

o Clearing party

o Supplier party

o Supplier bank

o Purchaser bank

o Purchaser party

o All the documents send to all

Terms and condition fully followed no relaxation in value, quality & price

35 | P a g e

Full quality control

Create monopoly

Company is bound by seller’s rules

Condition have to be accepted by both the party

Condition should not be such that if dominate other

Payment done to banker

Money given to bank

Bank → bank transaction

For new purchase order, new letter of credit is issued

For any change in condition also new L.C.

No penalty for delay product

For extension new L.C & purchase send after that only

When goods send & documents send, have to negotiate ,no delay is accepted

For delay, demurrage

It create bad impression of the company to auditions

Custom duty has to be paid

Custom duty sends to clearing agent & then it pays & release goods

KRIBHCO done all transaction through Indian overseas bank

HAEP Section R.T.VORA

HAEP – Hazira Ammonia extension plant

Row Material of nuclear atom is heavy water → Ammonia gas

DE → Department of energy

DE given % production expenses salaries to workers

There are 230 employee working in HAEP

DE Provide 10% service charge to KRIBHCO

KRIBHCO purchase department handles DE row material purchase & get

7.5% service charge

Slabs are prepared on annual base

KRIBHCO earn on average 20 crore annually

Recruitment procedure done by KRIBHCO

36 | P a g e

From heavy water nuclear energy release used to make atomic bomb

RM gas comes from GAIL

Synthetic gas, DN water, raw water is supplied by KRIBHCO

Project started from 1991

Separate software is developed

GSFT-Baroda

RCF – Thal

Total exp for a year around 100 crore reimburse by DE

Different housing colony for this department & all charges & maintenance

by DE

Treated water

o De-mineral water

o Synthetic gas / Ammonia gas

o Raw water

o Nitrogen

Supplied by KRIBHCO

It is on contract base 10 years 2001-2010

Started from 1991 & construction from 1989.

It is secret project, so total production is not known

Codes allotted for each. Amount /tones to be produced

Work Order Concurrence Section Z.A. JARULLA

Contract for a period of 1 or 2 year for RA(Running account) bill payment final

bill payment

Running bills are prepared

Types of contract

Natural gas contract

Maintenance work

Mechanical , technical, electrical work

Civil maintenance

37 | P a g e

Personalized services

Hiring of vehicles

Canteen contract

Miscellaneous contract- man power

Registration of vendors – registration various vendors for purchase

Documents –pre qualified

VAT

PAN number

Certificate of registration

Partnership

Audited annual returns

ITR’S

Documents sent forward to technical department

Raising of indent –user department

For procurement MPR – material

Process requisition is required

Value more than 1 crore –EMD

Earnest money deposit by EMD

For tender min 3 bids & twice in a week

1st EMD is checked & then send to technical department & user department. then

bids are opened

Comparative statement are prepared

Budget are prepared checked if bids & proposal comes under budget estimated &

then final decision – all taken by finance department

Delegation of authority

Up to 5 lakh – DGM

5 to 50 - GM

More 50 - operation

Weighted in finance regarding work order.

Books Section M.V.PATHAK

38 | P a g e

All session prepares bill and submit to books session

Here bills made permanent then no amendment is possible

Work of compilation is done. JV is send to GL

Every month balance-sheet, Profit & loss and various schedules are prepared

Monthly balance-sheet prepared in 5 codes and then converted into 6 digit code

and send to HO and then decoding is done there

Sight balance-sheet, marketing balance-sheet and HR balance-sheet is send to HO

and then HO checks fluctuation

All capitalization is done in this section

Sources of capitalizations are:-

o Indigenous bills

o Foreign vendor payment

o Contract payment

o Miscellaneous

Residential office in-house. Miscellaneous – employees in charge like Purchase

Order officer and others suggest what to purchase, from where, how much

quantity, what type of quality etc

Payment procedure is followed as:-

o Working Capital In Progress a/c Dr

To all deductions a/c

To sundry creditors a/c

Sundry creditor’s a/c Dr

To bank a/c

From each department fixed asset to general voucher

In books section fixed asset register entry is made

In fixed asset register different groups made for different assets

Depreciation reserve for each asset is made and registered

After posting and permanent all GV’S are generated through LAN

Trial balance is prepared in excel sheet and then preparation of balance-sheet,

Profit & Loss a/c, schedules is done through LAN

39 | P a g e

Argon Gas Recovery Plant Ms. MINAL

It’s a Tri-party contract

o Lindage India

o Lindage Germany

o KRIBHCO

Plant made by Lindage Germany

Argon is used as by-product

Excise bills comes to KRIBHCO

Lindage India Make purchase in the name of KRIBHCO

KRIBHCO makes payment of service tax, VAT, Excise duty, Custom Tax

Due to this gets credit from customs

Supply is done by Lindage Germany

Purchase by Lindage India

Contract payment – Plant G.A BAMANIA

If payment not on time per day Rs 500 fine

If company of other city or state, format of undertaking is signed

5% security deposit kept of Work order

Security deposit given after ending date of contract and after thorough checking

Terms and conditions – general

Terms and conditions – technical

Schedule of rate

If security deposit not given then bank guarantee is asked

Have to keep a look on labor laws

For safety at work contractor is responsible for employees, KRIBHCO is not responsible

only service charge is given

Insurance taken by contractor

Process of terms of payments

o Bills comes to a/c department

o Schedule of rate is checked

40 | P a g e

o Quantity value is checked

o Bills has to be certified

o Payment done in 15 days

Liquidate damage is not disclosed in work order

Payment by electronic i.e. e-payment

Documents required are:-

o IFSC

o Bank a/c number

o MICR Code

Procedure for final bill payment

o Payment within 2 months

o No due certificate

o Taking no certificate

o Statement of material

o No claim certificate

o Final takeover certificate

Contract payment- administration & others D.K.JAIN

If payment not on time per day Rs 500 fine

If company of other city or state, format of undertaking is signed

5% security deposit kept of Work order

Security deposit given after ending date of contract and after thorough checking

Terms and conditions – general

Terms and conditions – technical

Schedule of rate

If security deposit not given then bank guarantee is asked

Have to keep a look on labor laws

For safety at work contractor is responsible for employees, KRIBHCO is not responsible

only service charge is given

Insurance taken by contractor

41 | P a g e

Process of terms of payments

o Bills comes to a/c department

o Schedule of rate is checked

o Quantity value is checked

o Bills has to be certified

o Payment done in 15 days

Liquidate damage is not disclosed in work order

Payment by electronic i.e. e-payment

Documents required are:-

o IFSC

o Bank a/c number

o MICR Code

Procedure for final bill payment

o Payment within 2 months

o No due certificate

o Taking no certificate

o Statement of material

o No claim certificate

o Final takeover certificate

Labour law certificate – IR

Gross value + service tax – value of work + re-imbursement – issued

Contract payment:- Transportation VIKRAM

Transportation of urea to various distributions through railway

Various logistics channel is approached

Destinations decided by government of India

Contract on tender basis

Rate fixed by Government of India

Procedure same as contract payment of plant, administration

Carrying, loading of 1 truck is 10 metric tones

42 | P a g e

Generally, 10 such trucks are used

In nearby areas like Gujarat, Maharashtra, Madhya Pradesh, Rajasthan through trucks and

rest of railways

Bills Payment A.M.S BELIM

Proprietor items - single order

Foreign order - foreign vendor and if have Indian agent he is appointed and order is

placed to Indian agent

Procedure is done in 21 days

Technical and commercial prospects have to be considered

Technical bills rejected if

o Non providing of guarantee

o Terms are not fulfilled

o Bids not proper

Lowest bill is accepted

They are considered for placement of order

Before placement of order, an activity is done known as Pre-Audit order

1 copy sent to the party

After placement, activity starts, it is registered in codes, registrations done up to 33000

orders

Purchase of raw materials, head office comes into picture

Annual rate contract is made

Purchase of spares, tools etc done by purchase department

After placement of order, vendors evaluates the things

Sometimes packaging, forwarding, transportation, insurance, tax etc is paid by

KRIBHCO

Quantification of packaging and forwarding charges for which special packaging requires

E.g:- Tubes, Glass Cassel etc

Excise duty is 8.24% to 10.3% charged on basic by KRIBHCO

As per “C” form, 2% consistent for manufacturing

Placement of order in Gujarat “ Input Tax Credit”

43 | P a g e

Delivery intake on time as on committed date

For uncertain situation of nonpayment KRIBHCO has right for penalty by using reserve

as Liquidate Damage – 5%

Warranty & Guarantee

Installation and commission – supervision staff are sent, technicians, engineers etc are

sent

KRIBHCO release payment in 21 days only after checking and inspecting all the

materials

If vendors ask for advances payment, it is done on bank guarantee

Annual rate contract :- petrol, diesel, gas etc for 1 year contract and for the same value is

predetermined.

Recovery and refund of penalty:- Accounting less than 5000 .If above 5000 all cases are

reviewed and transferred to LD

Payment of security deposit:- KRIBHCO to suppliers. Here for this no expenditure

account is prepared. All entries are directly debited to inventory a/c

Note:- for purchase of heavy water, material etc “C” form and local tax is to be paid even if

purchased from another state. For heavy water plant normal payment is done and for other

materials E-payment.

For Credit purchase 30 days are allotted

For discount allowed 3% payment in 7 days

Inventory management J.R.YADAV

ABC analysis is done

Centralized store department

SRV is prepared

Challan is prepared in which quantity is defined

After materials dispatch from store SIV is prepared

Average method or monthly weighted average price method is used to determine price

SRV, SIV, ISR documents are made

44 | P a g e

ISRV – Internal Store Return Voucher

In ISRV, SIV number is written

SAV – Store adjustment voucher

FAV – Finance adjustment voucher

If mistakes are done, to correct the mistakes SAV is prepared and adjustment is done

Whole inventory divided into –

0 to 49 – general store items

50 to 99 – general inventory items

42 – Furniture

11 – Loose tools

13 – Steel

37 – Cement

Material code is of 10 digit

Procedure for loose tools

If value of loose tools less than written off in the same year

Value greater than 1000 then it is written off in 3 years

If material has to be repaired, has to sent out, voucher is prepared, this comes in rotable

In concept of rotable even if value is 1 crore only 1 item is considered

Total inventory is 103.37 crore and types of items are 73,239

Store and inventory of HAEP is differently managed. Here 25000 items is included and it

costs around Rs 33 crore

In SRV, documents are entered

In ISRV value is entered which is taken from SRV

Non- Moving item:- no transaction of any item for 5 years

Surplus: - if value is not consumable then declare and sold out

Due to LAN system which is Oracle base, whole calculation is done by it.

Performance Highlights:

Highest Total Fertilizer Sales(Urea 38.47 Lac MT, DAP 1.14 Lac MT, MOP 0.90 Lac MT)[Previous 37.76 Lakh MT of Urea during 2008-09]

40.51 Lakh MT

45 | P a g e

Highest Imported Fertilizers Handled[Previous Best was 10.45 Lac MT during 2006-07]

12.12 Lac MT

Highest Seed Sales 2.22 Lac Qtls

Highest KBKs Turnover Rs. 74.97 Cr.

Highest Operational Profit of Traded Products Rs. 43.31 Cr.

Highest Daily Urea Production (13.11.2009) 5638 MT

Highest Monthly Urea Production (December 2009) 167901 MT

Highest Daily Ammonia Production (28.12.2009) 3452 MT

Highest Monthly Ammonia Production (December 2009) 104740 MT

Sources of Income for the Year 2009-10:

Sources of Income Rs. (In Crore)

Sales (Net) 1637.38

46 | P a g e

Concession/Remuneration from Govt. of India 959.69

Other Revenue 286.59

57%33%

10%

Sources of Income for the year ended on 31.03.2010

Sales (Net)

Concession/Remunera-tion feom Govt. of India

Other Revenue

Sales for 5 years:

Year Sales (Rs. In Cr.)

2005-06 1257.3

47 | P a g e

2006-07 1343.97

2007-08 1385.62

2008-09 1512.4

2009-10 1637.39

2005-06 2006-07 2007-08 2008-09 2009-10

1257.31343.97 1385.62

1512.41637.39

Sales (Rs. In Cr.)

Profit before Tax (PBT) andProfit after Tax (PAT)for Last 5 Years:

Year PBT (Rs. In Cr.) PAT (Rs. In Cr.)

2005-06 280.2 192.45

48 | P a g e

2006-07 231.53 193.24

2007-08 272.14 209.2

2008-09 269.34 250.13

2009-10 252.77 228.17

2005-06 2006-07 2007-08 2008-09 2009-100

50

100

150

200

250

300 280.2

231.53

272.14 269.34252.77

192.45 193.24209.2

250.13228.17

PBT & PAT For Last 5 Years

PBT (Rs. In Cr.) PAT (Rs. In Cr.)

Net Worth of the company for last 5 years:

Year Net Worth (Rs. In Crore)

49 | P a g e

2005-06 2173.69

2006-07 2287.52

2007-08 2378.51

2008-09 2549.42

2009-10 2697.13

2005-06 2006-07 2007-08 2008-09 2009-10

2173.692287.52 2378.51

2549.422697.13

Net Worth (Rs. In Crore)

Net Working Capital of the Company for last 5 Years:

Year Net Working Capital (Rs. In Crore)

50 | P a g e

2005-06 1123.76

2006-07 1234.65

2007-08 1353.2

2008-09 1060.21

2009-10 809.09

2005-06 2006-07 2007-08 2008-09 2009-10

1123.761234.65

1353.2

1060.21

809.09

Net Working Capital (Rs. In Crore)

Concept of 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

51 | P a g e

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.

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.

52 | P a g e

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.

4] Inter firm comparison:-

53 | P a g e

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.

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.

54 | P a g e

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.

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:

55 | P a g e

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.

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:

56 | P a g e

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:-

Types of Financial Ratios:

Following 5 types of financial ratios have been covered in this report:

1Liquidity Ratios

1. Current Ratio

2. quick Ratio

2

Solvency Ratio

1. Debt Equity Ratio

2. Capital Gearing Ratio

3. Interest Coverage Ratio

4. Debt Service Coverage Ratio

3

Profitability Ratio

1. Gross Profit Ratio

2. Operating Profit Ratio

3. Net Profit Ratio

4. Return on Investment- ROI

5. Return on Equity- ROE

4

Activity Ratio

1. Inventory Turnover Ratio

2. Debtors Turnover Ratio

3. Working Capital Turnover Ratio

4. Fixed Assets Turnover Ratio

5. Capital Turnover Ratio

5

Invisibility Ratio

1. Earnings Per Share- EPS

2. Dividend Payout- DP

3. Price Earning- PE

Research methodology

I have been permitted the project report on “Ratio Analysis” of the KRIBHCO. The basic

methodology that I have undergone for this project is as follows.

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Problem statement:

Financial performance of kribhco ltd based on ratio analysis.

Research Objectives:

Main objective :

1. To analyze the financial performance of the company for last 3 years.

2. To know the current financial trend in the company for last 3 years.

3. To know the position of the company in the Indian fertilizer industry.

Sub-Objective of Study:

To analyze the profitability condition of the company

To analyze the liquidity position of the company

To study receivable management and company credit policy

Scope:

The scope of the study is to describe the current financial trend and financial performance

of the company.

Literature review:

The Indian fertilizer industry has come a long way since the setting up of the manufacturing unit

of Single Super phosphate (SSP) near Chennai in 1906 A new impetus to the growth of Indian

Fertilizer industry was provided by the set up the two fertilizer plants- Fertilizer & Chemicals

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Travancore of India Ltd. (FACT) in Kerala and the Fertilizers Corporation of India (FCI) in

Bihar. This was during the forties and the fifties.

The aim was to create an industrial base that would provide India with self-reliability in food

grains.

India witnessed significant growth of the fertilizer industry during the sixties and the seventies.

By 2003, India had an installed capacity of 12.11 million MT of nitrogen and 5.36 million MT of

phosphate. Today, with 57 large sized fertilizer plants manufacturing a wide variety of the

nitrogenous, complex and phosphatic fertilizers, the Indian fertilizer industry is the 3rd largest

producer in the world. One of the major factors that have led to the rapid increase in the

production capacity of fertilizers in India is the policy environment. With the formulation and

implementation of investor friendly policies, large investments poured into the private, public

and co-operative sectors and this propelled the growth of the Indian fertilizer industry.

Some of the major fertilizer companies in India (in the public sector) are as follows:

National Fertilizers Limited (NFL)

Hindustan Fertilizer Corporation Limited (HFC)

Paradeep Phosphates Limited (PPL)

Fertilizers & Chemicals Travancore LTD. (FACT)

Rashtriya Chemicals & Fertilizers Limited (RCF)

The Fertilizer Corporation of India Limited (FCI)

Steel Authority of India Limited (SAIL)

Madras Fertilizers Limited (MFL)

Reports showed the total installed capacity of fertilizer production in 2004 to be 119.60 LMT of

nitrogen and 53.60 LMT of phosphate. These figures went up to 120.61 LMT of nitrogen and

56.59 LMT of phosphate in 2007. The production of fertilizers was 113.54 LMT of nitrogen and

42.21 LMT of phosphate during 2005-06. The target of production for 2006-07 was set at 114.48

LMT of nitrogen and 48.20 LMT of phosphate. Though the target production was not met, there

was a growth in production during 2006-07 as compared to the production during 2005-06.

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Indian fertilizer industry has reached international levels of capacity utilization by adopting

various strategies for increasing the productions of fertilizers. These include the following:

Expansion and increase in efficiency through modernization and revamping of existing

fertilizer units.

Reviving some of the closed fertilizer plants.

Using alternative sources, such as coal or liquefied natural gas for the production of

fertilizers, especially urea.

Establishing joint venture projects with companies in countries that abound in cheaper

resources of raw materials.

In order to meet the demand for gas, which is one of the prime requirements for the production

of nitrogenous fertilizers, India has entered into joint ventures with foreign companies in a

number of countries. Joint ventures have also been established for the supply of phosphoric acid.

Indian fertilizer manufacturing companies has joined hands with companies in Senegal, Oman,

Jordan, Morocco, Egypt, Tunisia and other countries.

It is, therefore, evident that the Indian fertilizer industry has witnessed extensive growth and

development in a short span of time. With such extensive growth, it is not surprising that the

India ranks among the leading fertilizer manufacturing countries of the world.

Research Design:

Data collection :

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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.

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.

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

Sources of Data:

As described above that this project will require Secondary Data, sources of data will be

1. www.kribhco.in

2. Annual report of the company

Time Frame:

Data are collected for 3 financial years 2007-08, 2008-09 and 2009-2010 which will be

sufficient for describing the current trend of the company.

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Data tabulation/validation:-

After the data collection, the data was tabulated in a Microsoft Excel Sheet .

Analysis of data :

1 Liquidity Ratio Current Ratio

Quick ratio

2 Leverage Ratio Capital structure ratio

-equity ratio

-debt ratio

-debt to equity ratio

Coverage ratio

-interest coverage ratio

-Debt service coverage ratio

3 Activity ratio Capital turnover ratio

Fixed assets turnover ratio

Working capital turnover ratio

-inventory turnover ratio

-Debtor turnover ratio

-creditors turnover ratio

4 Probability ratio Owners’ point of view

-return on equity

-earning per share

Based on investment/assets

-return on capital employed

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Based on sales of firm

-gross profit ratio

-Operating profit ratio

-Net profit ratio

Based on capital market information

-Dividend payout ratio

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.

Data analysis and interpretation

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1Liquidity Ratios

1. Current Ratio

2. Liquid/quick Ratio

1. Liquid Ratios:

It is extremely essential for a firm to be able to meet its obligations as they become due.

Liquidity Ratios measure the firm’s ability to meet current obligations and are calculated by

establishing relationship between current assets and current liabilities. In fact, analysis of

liquidity needs the preparation of cash budget and cash and fund flow statement; but liquidity

ratios, by establishing a relationship between cash and other current assets to current obligations,

provide a quick measure of liquidity, and also that it does not have excess liquidity. The failure

of a company to meet its obligations due to lack of sufficient liquidity, will result in a poor credit

worthiness, loss of creditors, or even in legal tangles resulting in the closure of the company. A

very high degree of liquidity is also bad; idle assets earn nothing. The firm’s fund will be

unnecessarily tied up in current assets. Therefore, it is necessary to strike a proper balance

between high liquidity and lack of liquidity.

A. Current Ratio:

Current ratio is one of the best known measures of financial strength of the company.

Current Ratio is calculated by dividing current assets by current liabilities: Formula:

Current Ratio=

Current assets include cash and those assets that can be converted into cash within a year, such as

marketable securities, debtors and inventories. Prepaid expenses are also included in current

assets as they represent the payments that will not be made by the firm in the future. All

obligations maturing within a year are included in current liabilities. Current liabilities include

creditors, bills payables, accrued expenses, short term bank loan, income tax liabilities and long

term debt maturing in the current year.

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The current ratio is a measure of the firm’s short term solvency. It indicates the availability of

current assets in rupees for every one rupee of current liability. A ratio of greater than one means

that the firm has more current assets than current claims against them.

ParticularYears

2007-08 2008-09 2009-10

Current Assets 173195.07 Cr. 142759.77 Cr. 120501.89 Cr.

Current Liabilities 27506.06 Cr. 29808.48 Cr. 30685.19 Cr.

Current Ratio2007-08 2008-09 2009-10

6.297 4.787 3.927

2007-08 2008-09 2009-100

1

2

3

4

5

6

7

6.297

4.787

3.927

current ratio

current ratio

Interpretation: A generally acceptable current ratio is 2 : 1.

Higher the current ratio, the larger is the amount of rupees available per rupees of

current liabilities, the more is the firm’s ability to meet current obligation and greater is safety of

fund of short term creditors.

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From the above calculation we can say that current Ratio of 2010 is 3.927:1 which is

comparatively lesser then the previous years. It indicates the company dealing not nicely with

their current affairs compare to previous years. Which show that company’s current assets

decrease and current liabilities increase so that we can say that company’s current ratio is

decrease.

B. Quick Ratio:

Quick ratio, also called acid teat ratio or liquid ratio, establishes a relationship between quick or

liquid assets and current liabilities. An asset is liquid if it can be converted into cash immediately

or reasonably soon without a loss of value. Cash is the most liquid asset. Other assets that are

considered to be relatively liquid and included on quick assets are debtors and bills receivables

and marketable securities (temporary quoted investments). Inventories are considered to be less

liquid. Inventories normally require some time for realizing into cash; their value also has a

tendency to fluctuate. The quick ratio is found out by dividing quick assets by current liabilities.

Formula:

Quick Ratio=

ParticularYears

2007-08 2008-09 2009-10

Quick Assets 162236.31 137663.83 119249.13

Current Liabilities 27506.06 Cr. 29808.48 Cr. 30685.19 Cr.

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Quick Ratio2007-08 2008-09 2009-10

5.898 4.618 3.886

2007-08 2008-09 2009-100

1

2

3

4

5

6

7

5.898

4.618

3.886

quick ratio

quick ratio

Interpretation: A generally acceptable quick ratio is 1 : 1.

Higher the ratio higher the company liquidity position.

We can see that Quick ratio of the year 2010 is 3.886:1 which is lesser then all previous years

indicate company’s decresing liquidity position.

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2. Leverage/capital structure /Solvency Ratios:

2 Leverage/capital structure ratio 1. Capital structure ratio

-equity ratio

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-debt ratio

- Debt to Equity Ratio

2. Coverage ratio

-Interest Coverage Ratio

-Debt Service Coverage Ratio

Solvency ratios measure the firm's ability to repay long-term debt.

(A) Equity ratio :

Equity ratio indicates proportion of owners’ fund invested in company.

Traditionally we believed that higher the proportion of owners’ fund lower the degree of risk.

Formula :

Equity ratio = shareholder’s Equity / total capital employed

ParticularYears

2007-08 2008-09 2009-10

Share holders equity 39607.93 39073.33 39068.58

Capital Employed 2378.51 2549.41 2697.13

Equity Ratio2007-08 2008-09 2009-10

16.65 15.33 14.48

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2007-08 2008-09 2009-1013

13.5

14

14.5

15

15.5

16

16.5

17

Equity ratio

Equity ratio

Interpretation :

As we can see higher the proportion of owners’ fund lower the degree of risk. In the above diagram in 2009-10 equity ratio is 14.48 , it is very low than previous year, so companies equity position decrese.

(B) Debt ratio :

This ratio is use for the long term solvency of the firm

Formula :

Debt ratio = total debt / capital employed

ParticularYears

2007-08 2008-09 2009-10

Total debt 49858.31 50776.12 54605.03

Capital Employed 2378.51 2549.41 2697.13

Debt Ratio 2007-08 2008-09 2009-10

20.962 19.917 20.245

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2007-08 2008-09 2009-1019.2

19.4

19.6

19.8

20

20.2

20.4

20.6

20.8

21

21.2

20.962

19.917

20.245

debt ratio

debt ratio

Interprtion : total debt include the money borrowing from financial

institute ,debenture and etc. here we see that during the current year 2010 debt ratio

is 20.245 that is increase in compare to previous year.

(C) Debt to Equity Ratio:

The relationship describing the lenders’ contribution for each rupee of owners’ contribution is

called Debt-Equity ratio. Debt-Equity ratio is directly calculated by dividing total debt by net

worth.

Formula:

Debt to Equity Ratio=

ParticularYears

2007-08 2008-09 2009-10

Long-term Debt 224.72 92.14 0.23

Shareholders’ Equity 396.08 390.73 390.67

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Debt to Equity Ratio2007-08 2008-09 2009-10

0.567:1 0.236:1 0.0006:1

2007-08 2008-09 2009-100

0.1

0.2

0.3

0.4

0.5

0.60.567

0.236

0.0006

debt to equty ratio

debt to equty ratio

INTERPRETATION:-

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.

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

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that company’s financial structure is very sound. Because every year they maintain debt-

equity ratio 0:1.

(D)Interest Coverage Ratio:

Debt ratios fail to indicate the firm’s ability to meet interest obligations. The interest coverage

ratio or the times interest-earned is used to test the firm’s debt-serving capacity. The interest

coverage ratio is computed by dividing earnings before interest and taxes (EBIT) by interest

charges.

The interest coverage ratio shows the number of tomes the interest charges are covered by funds

that are ordinarily available for their payment. Since taxes are computed after interest, interest

coverage is calculated in relation to before tax earnings. Depreciation is non-cash item.

Therefore, funds equal to depreciation are also available to pay interest charges. We can thus

calculate the interest average ratio as earnings before interest taxes, depreciation and

amortization (EBITDA) divided by interest:

Formula:

Interest Coverage Ratio=

ParticularYears

2007-08 2008-09 2009-10

EBIT 299.54 307.30 288.36

Annual Interest Payment 5.32 10.37 5.18

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Interest Coverage

Ratio

2007-08 2008-09 2009-10

56.304:1 29.633:1 62.852:1

2007-08 2008-09 2009-100

10

20

30

40

50

60

7056.304

29.633

62.852

interest coverage ratio

interest coverage ratio

Interpretation :Earnings before interest and tax are used in the numerator of the ratio because the ability to pay interest is not affected by tax burden , a high interest coverage ratio means that the company can easily meet its interest obligation and lower ratio indicates excessive use of debt .Here we see that in current year 2010 , the interest coverage ratio is 62.85, that is very higher than the previous year. This indicates the good position of kribhco for the meet interest obligation.

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Debt Service Coverage Ratio:

Formula:

Debt Service Coverage Ratio=

ParticularYears

2007-08 2008-09 2009-10

EBIT 299.54 307.30 288.36

Total Debt 224.72 92.14 211.70

Debt Service

Coverage Ratio

2007-08 2008-09 2009-10

1.333:1 3.335:1 1.253:1

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2007-08 2008-09 2009-100

0.5

1

1.5

2

2.5

3

3.5

debt service coverage ratio

debt service coverage ratio

Interpretation :Lenders are interested in debt service coverage ratio to judge the companies current ability to pay of current interest and installment.Here we see in the diagram during the current year 2010, debt coverage ratio is 1.253 : 1 , that is low then the previous year.

3. Activity Ratio:

It is also known as a turn-over / performance ratio , this ratio are to evaluate the efficiency with which the firm manages and utilizes its assets. These ratios are calculated with reference to sale/cost of goods sold and are expressed in term of rate or times.

3

Activity Ratio

(A) Capital Turnover Ratio

(B) Fixed Assets Turnover Ratio

(C) Working Capital Turnover Ratio

a. Inventory Turnover Ratio

b. Debtors Turnover Ratio

c. creditor Turnover Ratio

A. Capital Turnover Ratio:

This ratio indicates the firms ability of generating sales per rupee of long term investment. The higher the ratio , the more the utilization of owners and long terms creditors funds.

Formula:

Capital Turnover Ratio= Total Sales

Capital Employed

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ParticularYears

2007-08 2008-09 2009-10

Total Sales 1385.62 1512.40 1637.39

Capital Employed 2378.51 2549.41 2697.13

Capital Turnover

Ratio

2007-08 2008-09 2009-10

0.583 0.593 0.607

2007-08 2008-09 2009-100.57

0.575

0.58

0.585

0.59

0.595

0.6

0.605

0.61

0.583

0.593

0.607000000000001

capital turnover ratio

capital turnover ratio

Interpretation :

This ratio indicates the companies ability of generating sales per rupee of long term investment. The higher the ratio , the more efficient the utilization of owner’s and long terms creditors fund.

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Here we see in the diagram that during the current year 2010, the capital turnover ratio is 0.607, that is continuous incresing in compare to previous year , that denotes the good utilization of the owners fund.

(B) Fixed Assets Turnover Ratio:

A high fixed assets turnover ratio indicates efficient utilization of fixed assets in generating sales.

Formula:

Fixed Assets Turnover Ratio= Net Sales

Total Fixed Assets

ParticularYears

2007-08 2008-09 2009-10

Net Sales 1385.62 1512.40 1637.39

Total Fixed Assets 368.02 359.44 393.87

Fixed Assets

Turnover Ratio

2007-08 2008-09 2009-10

3.765 4.208 4.157

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2007-08 2008-09 2009-103.5

3.6

3.7

3.8

3.9

4

4.1

4.2

4.3

fixed assets turnover ratio

fixed assets turnover ratio

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 2008 company’s fixed turnover ratio was 3.765 and in the year

2009-10 company’s fixed assets turnover ratio 4.157 so that we can say that KRIBHCO

company’s fixed assets are more utilized and efficiently use their assets.

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(c) Working Capital Turnover Ratio:

Formula:

Working Capital Turnover Ratio= Net Working Capital

Net Assets

ParticularYears

2007-08 2008-09 2009-10

Net Working Capital 1353.20 1060.20 809.09

Net Asset 1721.22 1419.64 1202.96

Working Capital

Turnover Ratio

2007-08 2008-09 2009-10

0.786:1 0.747:1 0.673:1

2007-08 2008-09 2009-100.6

0.62

0.64

0.66

0.68

0.7

0.72

0.74

0.76

0.78

0.8 0.786

0.747000000000001

0.673000000000001

working capital turnover ratio

working capital turnover ratio

Interpretation :-

This ratio enables to know efficient utilization of working capital of an organization.

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As seen in the data this Ratio has shown a decreasing. 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.

Working capital turnover is further segregated into inventory, debtor, and creditor turnover.

1. Inventory Turnover Ratio:

This ratio also known as stock turnover ratio establishes the relationship between the cogs during the year and average inventory held during the year,

Formula:

Inventory Turnover Ratio=

Or

Inventory turnover ratio = sales / average inventory

Average inventory = opening stock- closing stock / 2

ParticularYears

2007-08 2008-09 2009-10

COGS 1111.16 1501.74 966.46

Inventory 109.76 50.96 12.53

Inventory Turnover 2007-08 2008-09 2009-10

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Ratio 10.12 Times 29.27 Times 77.13 Imes

2007-08 2008-09 2009-100

10

20

30

40

50

60

70

80

10.12

29.27

77.13

inventory turnover ratio

inventory turnover ratio

Interpretation:

This ratio indicates that how fast inventory is used/sold. A high ratio is good from the view point of liquidity and vice versa.

To judge whether the ratio of a firm is satisfactory or not, higher ratio shows efficient use of inventory.

As we can see from the graph that in the year 2009-10 ratio is 77.13 times which higher then all the previous years, so we can say that inventory is converted into finished goods highest in this year which indicate the highest efficient use of the inventory.

(B) Debtors Turnover Ratio:

This ratio throws lights on the collection and credit policy of the firm.

Formula:

Debtors turnover ratio = total sales or credit sales / debtors × 360

ParticularYears

2007-08 2008-09 2009-10

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Credit Sales or Total Sales 830.93 907.44 855.45

Debtors 612.86 407.53 264.83

Debtors

Turnover

Ratio

2007-08 2008-09 2009-10

269 Days 164 Days 113 days

2007-08 2008-09 2009-100

50

100

150

200

250

300

debtor turn over ratio

debtor turn over ratio

Interpretation:

The analysis of the debtor’s turnover ratio supplements the information regarding the liquidity

of one item of current asset of the firm. The ratio measure how rapidly debts are collected. A

higher ratio is indicator of shorter time lag between credit sales and cash sales.

As we can see in the year 2007-08 debtor’s turnover ratio is highest 269 days. But for the year

2009-10 this ratio is 113 days. that denotes that companies position is well.to collect the money,

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( C ) Creditors Turnover Ratio:

This ratio shows the velocity of debt payment by the firm. Creditors turnover ratio indicates the average collection period.

Formula:

Creditors turn over ratio =total purchase or credit purchase ÷ creditors × 365

ParticularYears

2007-08 2008-09 2009-10

Credit Purchase or Total Purchase 916.29 527.07 454.50

Creditors 151.22 109.15 107.27

Creditors Turnover

Ratio

2007-08 2008-09 2009-10

60 Days 76 Days 86 Days

2007-08 2008-09 2009-100

10

20

30

40

50

60

70

80

90

100

60

76

86

creditor turnover ratio

creditor turnover ratio

Interpretation :

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A low creditors turnover ratio reflect liberal credit terms Granted by suppliers , while a high ratio shows that accounts are settled rapidly.

In kribhco creditors turnover ratio in 2007-08 is 60 days and in 2010 is 86 days, so it is increasing compare to the previous year.

4. Profitability Ratios:

Profitability ratios measure the company's use of its assets and control of its expenses to generate an acceptable rate of return. These ratio reflects the final results of business operations. The profibility ratios are broadly classified in four categories :

4 Profitability Ratio 1. Owners’ point of view

return on equity

earning per share

2. Based on assets/investment

Return on capital employed/investment/assets

3. Based on sales of firm

Gross profit ratio

Operating profit ratio

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Net profit ratio

4. Based on capital market information

Dividend payout ratio

Return on Equity (ROE):

Return on equity measures the probability of equity funds invested in the company. This ratio revels how profibility of the owners fund have been utilized by the firm

Formula:

Return on Equity=

ParticularYears

2007-08 2008-09 2009-10

Net Income (PAT) 209.20 250.13 228.17

Equity + Reserves And Surplus 2378.51 2549.41 2697.13

Return on Equity2007-08 2008-09 2009-10

0.088 0.098 0.085

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2007-08 2008-09 2009-100.078

0.08

0.082

0.084

0.086

0.088

0.09

0.092

0.094

0.096

0.098

return on equity

return on equity

Interpretation:

Roe measures the profitability of equity funds invested in the firm. Roe is one of the most indicators of a firms’ profitability and poteintional growth. In kribhco we see in diagram that in compare to previous year , in current year 2010 ,the return on equity ratio is 0.085, that is low to previous is , but utilization of equity fund is quit well.

A. Earnings Per Share (EPS):

The profibility of a firm from the point of view of ordinary shareholder can be measured in terms

of number of equity shares. This is known as earning per share.

Formula:

Earnings Per Share= Profit after Tax

No. of Shares

ParticularYears

2007-08 2008-09 2009-10

PAT 209.20 250.13 228.17

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No. of Shares 0.0063882 0.0063882 0.0063882

Earnings per Share2007-08 2008-09 2009-10

32747.88 39155.00 35717.42

2007-08 2008-09 2009-1028000

30000

32000

34000

36000

38000

40000

32747.88

39155

35717.42

earning per share

earning per share

Interpretation :

The profitability of the firms’ on the point of ordinary shareholders can be measures in the number of share, in the above diagram during the currnt year 2010 eps is 35717.42, which is lower than 2009, that is 39155, but more than the 2008 that is 32747.88, so comparatively performance of kribhco is well.

A. Return on Investment:

ROI is the most importance ratio of all. It is the percentage of return on funds invested in the business by its owners,

Formula:

Return on Investment=

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ParticularYears

2007-08 2008-09 2009-10

Net Income (PAT) 209.20 250.13 228.17

Equity + Reserves And Surplus 2378.51 2549.41 2697.13

Return on investment2007-08 2008-09 2009-10

0.0879 0.0981 0.0846

2007-08 2008-09 2009-100%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0.0879 0.0981000000000001

0.0846000000000001

return on investment

return on investment

Interpretation :Return on investment tells the owner whether or not all the efforts put in to the business has been worthwhile. In kribhco normally roi is more above same during the year 2007-08,2008-09,2009-10.

Gross profit ratio:

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

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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.

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.

This ratio is used to compare departmental probability .

Gross profit ratio = gross profit ÷ sales × 100

ParticularYears

2007-08 2008-09 2009-10

Gross Profit 2188.06 2840.63 2610.89

Net Sales 1385.62 1512.4 1637.39

Gross Profit Ratio2007-08 2008-09 2009-10

15.79 % 18.78 % 15.94 %

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2007-08 2008-09 2009-1014.00%

14.50%

15.00%

15.50%

16.00%

16.50%

17.00%

17.50%

18.00%

18.50%

19.00%

15.79%

18.78%

15.94%

gross profit ratio

gross profit ratio

INTERPRETATION:-

From the above given chart we can understand that in the year 2007-08 gross profit

ratio was 15.79 %. so that in that year gross profit ratio was lowest. And than after company’s

gross profit ratio around 18.79 % and in the year 2009-10 gross profit ratio 15.94 %

B. Operating Profit Ratio:

Formula:

Operating Profitability Ratio=

ParticularYears

2007-08 2008-09 2009-10

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Operating Profit (PBIT) 299.54 307.30 288.36

Net Sales 1385.62 1512.4 1637.39

Operating Profit Ratio2007-08 2008-09 2009-10

21.618% 20.319% 17.611%

2007-08 2008-09 2009-100.00%

5.00%

10.00%

15.00%

20.00%

25.00% 21.62%20.32%

17.61%

operating profit ratio

operating profit ratio

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. Ratio during the year we see in the diagram.

C. Net Profit Ratio:

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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.

Formula:

Net Profit Ratio=

ParticularYears

2007-08 2008-09 2009-10

Operating Profit (PBIT) 209.20 250.13 228.17

Net Sales 1385.62 1512.4 1637.39

Net Profit Ratio2007-08 2008-09 2009-10

15.098% 16.538% 13.935%

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Interpretation:-

From the given data we can say that the profitability ratio in year 2007-08 is 15.10 % and

in the year 2009-10 company’s profitability ratio is 13.94%, that company is not able to

maintain his sales and overall profit decrease in compare to previous year.

A. Dividend Payout Ratio/ dividend yield (DP Ratio):

It provides the guide as a the ability of a business to maintain a dividend payment . it also measures the proportion of earnings that are being retain by the business rather than distributed as a dividend.

Formula :

Dividend yield = dividend ÷ earnings × 100

ParticularYears

2007-08 2008-09 2009-10

Dividends 79.21 71.27 77.67

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2007-08 2008-09 2009-1012.50%

13.00%

13.50%

14.00%

14.50%

15.00%

15.50%

16.00%

16.50%

17.00%

15.10%

16.54%

13.94%

net profit ratio

Earnings 209.20 250.13 228.17

Dividend Payout

Ratio

2007-08 2008-09 2009-10

37.86% 28.49% 34.04%

2007-08 2008-09 2009-100.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%37.86%

28.49%

34.04%

dividend payout ratio

dividend payout ratio

Interpretation : as see in the diagram dividend pay out ratio of kribhco during the year 2007-08 ; 2008-09 .,and in 2009-10 are 37.86 %, 24.49 % and 34.04 % respectively. It denotes that kribhco is able to pay dividend regularly.

Recommendation and conclusion

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Findings and Conclusion

As a tool of financial management, analyzing the performance of a business concern is that of financial ratio analysis.

The importance of ratio analysis lies in facts that it present facts on a comparative basis and enables drawing on the basis of the performance of the company.

( a ) liquidity position :

With the help of ratio analysis we on conclusion regarding liquidity position of the kribhco.

From analysis we can say that current Ratio of 2010 is 3.927:1 which is comparatively

lesser then the previous years. It indicates the company dealing not nicely with their

current affairs compare to previous years. Which show that company’s current assets

decrease and current liabilities increase so that we can say that company’s current ratio is

decrease.

We can see that Quick ratio of the year 2010 is 3.886:1 which is lesser then all previous

years indicate company’s decreasing liquidity position.

( b ) long-term solvency :

As we can see higher the proportion of owners’ fund lower the degree of risk. In the above diagram in 2009-10 equity ratio is 14.48 , it is very low than previous year, so companies equity position decrese.

Here we see that in current year 2010 , the interest coverage ratio is 62.85, that is very higher than the previous year. This indicates the good position of kribhco for the meet interest obligation.

total debt include the money borrowing from financial institute ,debenture and etc.

here we see that during the current year 2010 debt ratio is 20.245 that is increase in

compare to previous year.

Through this we can say that company’s financial structure is very sound. Because every year they maintain debt-equity ratio 0:1.

( C ) operating efficiency :

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Here we see in the diagram that during the current year 2010, the capital turnover ratio is 0.607, that is continuous incresing in compare to previous year , that denotes the good utilization of the owners fund.

in the year 2009-10 company’s fixed assets turnover ratio 4.157 so that we can say that

KRIBHCO company’s fixed assets are more utilized and efficiently use their assets.

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.

( d ) overall profitability :

in current year 2010 ,the return on equity ratio is 0.085, that is low to previous is , but utilization of equity fund is quit well.

From the given data we can say that the profitability ratio in year 2007-08 is 15.10 % and

in the year 2009-10 company’s profitability ratio is 13.94%, that company is not able to

maintain his sales and overall profit decrease in compare to previous year.

kribhco during the year 2007-08 ; 2008-09 .,and in 2009-10 are 37.86 %, 24.49 % and 34.04 % respectively. It denotes that kribhco is able to pay dividend regularly.

Suggestion

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After having completed my summer training 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 three 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.

Limitation

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This research is based on the secondary data and during the study of working capital

there are so many data required from various department which was not disclosed by the

respective department, for example budget of the current financial year.

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

to understand.

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

tight working schedule.

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

discussion.

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

Available information for the study of ratio analysis is limited.

Appendix and bibliography

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BIBLIOGRAPHY

Books

FINANCIAL MANAGEMENT, I.M.PANDEY, EIGHT EDITIONS - 2000, VIKASH

PUBLISING HOUSE PRIVATE LTD.

FINANCIAL ACCOUNTING FOR MANAGER – AMNRISH GUPTA

FINANCIAL MANAGEMENT – BOARD OF STUDY, ICAI

BUSINESS RESEARCH METHODS , DONALD R. COOPER & PAMELA S.

SCHINDLER , EIGHT EDITION , TATA Mc. GRAW-HILL EDITION.

Reports

Company Annual Report from 2006-07 to 2009-10.

Websites

www.kribhco.net

www.kribhcoindia.com

www.kribhco.org .

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