an analytical study of financial analysis

8/13/2019 An Analytical Study of Financial Analysis

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ASUMMER TRAINING PROJECT REPORT

ON

An Analytical Study of Financial Analysis

AtINDIAN FARM FORESTRY DEVELOPMENT CO-OPERATIVE LTD.

Subm it ted fo r the part ial fu l f i l lment of the requirement for theaward

Of

Post Graduation Dip loma in Management

Academic Session

2013-2014

SUBMITTED BY:

KANCHAN KAHNANI(121127)

UNDER THE SUPERVISION OFConsultant (F&A), IFFDC Mr. S. K. De

Faculty Mentor: Mr. Prashant Kumar Yadav


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ACKNOWLEDGEMENT

During my course of study inIndian Farm Forestry Development Co-operative

Ltd., many played an important role in my life. I take this opportunity to thank them

for their constant support, inspiration and encouragement during the completion of my

course.

I would like to profusely thank Mr. S.K.DE,Consultant (F&A),IFFDC my

supervisor, for his suggestions and opinions and for promptly answering all my

queries regarding the project. Without his guidance, support and inspiration, this

report would not have materialized.

I take this opportunity to express my deepest sense of gratitude to

Mr.Prashant Dev Yadav, my Faculty Mentor who has spared his precious

moments whenever I needed..He has been very kind and helped me to prepare my

project.

Last but not the least I pay reverence to the supreme the Almighty God

for his benevolence and blessings bestowed upon me.

.

Kanchan Kahnani


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DECLARATION

I declare that the project report entitled An Analytical Study of Financial

Analysis At INDIAN FARM FORESTRY DEVELOPMENT

CO-OPERATIVE LTD has been prepared under the guidance of Mr.S.K.De,Consultant (F&A), IFFDC. I further declare that this is my original work as part of

our academic course.

Date: Kanchan KahnaniPlace:


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EXECUTIVE SUMMARY

The audited attached Balance Sheet of Indian Farm Forestry Development Co-

operative Ltd. as at 31stmarch 2013 and also the Profit and Loss Account andCash Flow Statement of the year ended on 31STMarch 2013.The company

responsibility is to express an opinion on the fianancial statements based on thecompany audit.

The audit report in accordance with the auditing standards

generally accepted in India.The Financial Statement are the responsibility of the

social management.The Financial statement signify the company turnover,assetand liability.The comparative statement,ratio,cash flow statement,fund flow

statement based on regular studies.


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TABLE OF CONTENT

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


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INTRODUCTION

Meaning of Financial Statement

Financial statements refer to such statements which contains financial information about an

enterprise. They report profitability and the financial position of the business at the end of

accounting period. The team financial statement includes at least two statements which the

accountant prepares at the end of an accounting period. The two statements are: -

The Balance Sheet Profit And Loss Account

They provide some extremely useful information to the extent that balance sheet mirrors the

financial position on a particular date in terms of the structure of assets, liabilities and owners

equity, and so on and the Profit and Loss account shows the results of operations during a certain

period of time in terms of the revenues obtained and the cost incurred during the year. Thus the

financial statement provides a summarized view of financial position and operations of a firm.

Meaning of Financial Analysis

The first task of financial analysis is to select the information relevant to the decision under

consideration to the total information contained in the financial statement. The second step is to

arrange the information in a way to highlight significant relationship. The final step is

interpretation and drawing of inference and conclusions. Financial statement is the process of

selection, relation and evaluation.


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Features of Financial Analysis

To present a complex data contained in the financial statement in simple andunderstandable form.

To classify the items contained in the financial statement inconvenient and rationalgroups.

To make comparison between various groups to draw variousconclusions.

Purpose of Analysis of financial statements

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


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Procedure of Financial Statement Analysis

The following procedure is adopted for the analysis and interpretation of financial

statements:-

The analyst should acquaint himself with principles and postulated of accounting. Heshould know the plans and policies of the managements that he may be able to find out

whether these plans are properly executed or not.

The extent of analysis should be determined so that the sphere of work may be decided.If the aim is find out. Earning capacity of the enterprise then analysis of income statement

will be undertaken. On the other hand, if financial position is to be studied then balance

sheet analysis will be necessary.

The financial data be given in statement should be recognized and rearranged. It willinvolve the grouping similar data under same heads. Breaking down of individual

components of statement according to nature. The data is reduced to a standard form. A

relationship is established among financial statements with the help of tools & techniques

of analysis such as ratios, trends, common size, fund flow etc.

The information is interpreted in a simple and understandable way. The significance andutility of financial data is explained for help indecision making.

The conclusions drawn from interpretation are presented to the management in the formof reports.


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Analyzing financial statements involves evaluating three characteristics of a company: its

liquidity, its profitability, and its insolvency. A short-term creditor, such as a bank, is

primarily interested in the ability of the borrower to pay obligations when they come due. The

liquidity of the borrower is extremely important in evaluating the safety of a loan. A long-term

creditor, such as a bondholder, however, looks to profitability and solvency measures that

indicate the companys ability to survive over a long period of time.

Long-term creditors consider such measures as the amount of debt in the companys capital

structure and its ability to meet interest payments. Similarly, stockholders are interested in the

profitability and solvency of the company. They want to assess the likelihood of dividends and

the growth potential of the stock.

Comparison can be made on a number of different bases.

Following are the three illustrations:

1. Intra-company basis:-This basis compares an item or financial relationship within a company in the current year with

the same item or relationship in one or more prior years. For example, Sears, Roebuck and Co.

can compare its cash balance at the end of the current year with last years balance to find the

amount of the increase or decrease. Likewise, Sears can compare the percentage of cash to

current assets at the end of the current year with the percentage in one or more prior years. Intra-

company comparisons are useful in detecting changes in financial relationships and significant

trends.


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2. Industry averages:-

This basis compares an item or financial relationship of a company with industry averages (or

norms) published by financial ratings organizations such as Dun & Bradstreet, Moodys and

Standard & Poors. For example, Searss net income can be compared with the average net

income of all companies in the retail chain-store industry. Comparisons with industry averages

provide information as to a companys relative performance within the industry.

3. Intercompany basis:-

This basis compares an item or financial relationship of one company with the same item or

relationship in one or more competing companies. The comparisons are made on the basis of the

published financial statements of the individual companies. For example, Searss total sales for

the year can be compared with the total sales of its major competitors such as Kmart and Wal-

Mart. Intercompany comparisons are useful in determining a companys competitive position.

Tools of Financial Statement Analysis:-

The analysis and interpretation of financial statement is used to determine the financial position

and results of operations as well. A number of methods or devices are used to study the

relationship between different statements. A financial analyst may use following methods:-


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Ratio Analysis Fund Flow Statement

Cash Flow Analysis

Comparative StatementRatio Analysis:

Fundamental Analysis has a very broad scope. One aspect looks at the general (qualitative)

factors of a company. The other side considers tangible and measurable factors (quantitative).

This means crunching and analyzing numbers from the financial statements. If used in

conjunction with other methods, quantitative analysis can produce excellent results.

Ratio analysis isn't just comparing different numbers from the balance sheet, income statement,

and cash flow statement. It's comparing the number against previous years, other companies, the

industry, or even the economy in general.

Ratios look at the relationships between individual values and relate them to how a company has

performed in the past, and might perform in the future.

Meaning of Ratio:

A ratio is one figure express in terms of another figure. It is a mathematical yardstick that

measures the relationship two figures, which are related to each other and mutually

interdependent. Ratio is express by dividing one figure by the other related figure. Thus a ratio is

an expression relating one number to another. It is simply the quotient of two numbers. It can be

expressed as a fraction or as a decimal or as a pure ratio or in absolute figures as so many

times. As accounting ratio is an expression relating two figures or accounts or two sets of

account heads or group contain in the financial statements.


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Meaning of Ratio Analysis:-

Ratio analysis is the method or process by which the relationship of items or group of items in

the financial statement are computed, determined and presented.

Ratio analysis is an attempt to derive quantitative measure or guides concerning the financial

health and profitability of business enterprises. Ratio analysis can be used both in trend and static

analysis. There are several ratios at the disposal of an analyst but their group of ratio he would

prefer depends on the purpose and the objective of analysis.

While a detailed explanation of ratio analysis is beyond the scope of this section, we will focus

on a technique, which is easy to use. It can provide you with a valuable investment analysis tool.

This technique is called cross-sectional analysis. Cross-sectional analysis compares financial

ratios of several companies from the same industry. Ratio analysis can provide valuable

information about a company's financial health. A financial ratio measures a company's

performance in a specific area. For example, you could use a ratio of a company's debt to its

equity to measure a company's leverage. By comparing the leverage ratios of two companies,

you can determine which company uses greater debt in the conduct of its business. A company

whose leverage ratio is higher than a competitor's has more debt per equity. You can use this

information to make a judgment as to which company is a better investment risk.

However, you must be careful not to place too much importance on one ratio. You obtain a better

indication of the direction in which a company is moving when several ratios are taken as a

group.

Objective of Ratios:-


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Ratios are worked out to analyze the following aspects of business organization-

A) Solvency-

1) Long term2) Short term3) ImmediateB) Stability

C) Profitability

D) Operational efficiency

E) Credit standing

F) Structural analysis

G)Effective utilization of resources

H)Leverage or external financing

Steps in Ratio Analysis:-

The ratio analysis requires two steps as follows:

1] Calculation of ratio

2] Comparing the ratio with some predetermined standards. The standard ratio may be the past

ratio of the same firm or industrys average ratio or a projected ratio or the ratio of the most

successful firm in the industry. In interpreting the ratio of a particular firm, the analyst cannot

reach any fruitful conclusion unless the calculated ratio is compared with some predetermined

standard. The importance of a correct standard is oblivious as the conclusion is going to be based

on the standard itself.


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;lClassification of Ratio:-

CLASSIFICATION OF RATIO

BASED ON FINANCIAL BASED ON FUNCTION BASED ON USER

STATEMENT

1] BALANCE SHEET 1] LIQUIDITY RATIO 1] RATIOS FOR

RATIO 2] LEVERAGE RATIO SHORT TERM

2] REVENUE 3] ACTIVITY RATIO CREDITORS

STATEMENT 4] PROFITABILITY 2] RATIO FOR

RATIO RATIO SHAREHOLDER

3] COMPOSITE 5] COVERAGE 3] RATIOS FOR

RATIO RATIO MANAGEMENT

4] RATIO FOR

LONG TERM

CREDITORS


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Based on Financial Statement:-

Accounting ratios express the relationship between figures taken from financial statements.

Figures may be taken from Balance Sheet, P& L A/C, or both. One-way of classification of

ratios is based upon the sources from which are taken.

1] Balance sheet ratio:

If the ratios are based on the figures of balance sheet, they are called Balance SheetRatios. E.g.

Ratio of current assets to current liabilities or debt to equity ratio. While calculating these ratios,

there is no need to refer to the Revenue statement. These ratios study the relationship between

the assets & the liabilities, of the concern. These ratios help to judge the liquidity, solvency &

capital structure of the concern. Balance sheet ratios are Current ratio, Liquid ratio, and

Proprietary ratio, Capital gearing ratio, Debt equity ratio, and Stock working capital ratio.

2] Revenue ratio:

Ratio based on the figures from the revenue statement is called revenue statement ratios. These

ratios study the relationship between the profitability & the sales of the concern. Revenue ratios

are Gross profit ratio, Operating ratio, Expense ratio, Net profit ratio, Net operating profit ratio,

Stock turnover ratio.

3] Composite ratio:

These ratios indicate the relationship between two items, of which one is found in the balance

sheet & other in revenue statement.

There are two types of composite ratios-

a) Some composite ratios study the relationship between the profits & the investments of theconcern. E.g. return on capital employed, return on proprietors fund, return on equity capital etc.


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

Based on Function:-

Accounting ratios can also be classified according to their functions in to liquidity ratios,

leverage ratios, activity ratios, profitability ratios & turnover ratios.

1] Liquidity ratios:

It shows the relationship between the current assets & current liabilities of the concern e.g. liquid

ratios & current ratios.

2]Leverage ratios:

It shows the relationship between proprietors funds & debts used in financing the assets of the

concern e.g. capital gearing ratios, debt equity ratios, & Proprietary ratios.

3] Activity ratios:

It shows relationship between the sales & the assets. It is also known as Turnover ratios &

productivity ratios e.g. stock turnover ratios, debtors turnover ratios.

4] Profitability ratios:

1. It shows the relationship between profits & sales e.g. operating ratios, gross profit ratios,operating net profit ratios, expenses ratios

2. It shows the relationship between profit & investment e.g. return on investment, return onequity capital.

5] Coverage ratios:

It shows the relationship between the profit on the one hand & the claims of the outsiders to be

paid out of such profit e.g. dividend payout ratios & debt service ratios.


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Based on User:-

1] Ratios for short-term creditors:

Current ratios, liquid ratios, stock working capital ratios

2] Ratios for the shareholders:

Return on proprietors fund, return on equity capital

3] Ratios for management:

Return on capital employed, turnover ratios, operating ratios, expenses ratios

4] Ratios for long-term creditors:

Debt equity ratios, return on capital employed, proprietor ratios.

Liquidity Ratio: -

Liquidity refers to the ability of a firm to meet its short-term (usually up to 1 year) obligations.

The ratios, which indicate the liquidity of a company, are Current ratio, Quick/Acid-Test ratio,

and Cash ratio. These ratios are discussed below


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Current Ratio:-

This ratio compares the current assets with the current liabilities. It is also known as working

capital ratio or solvency ratio. It is expressed in the form of pure ratio.

E.g. 2:1

Formula:

Current ratio =LibilitiesCurrent

AssetsCurrent

The current assets of a firm represents those assets which can be, in the ordinary course of

business, converted into cash within a short period time, normally not exceeding one year. The

current liabilities defined as liabilities which are short term maturing obligations to be met, as

originally contemplated, with in a year.

Current ratio (CR) is the ratio of total current assets (CA) to total current liabilities (CL). Current

assets include cash and bank balances; inventory of raw materials, semi-finished and finished

goods; marketable securities; debtors (net of provision for bad and doubtful debts); bills

receivable; and prepaid expenses.


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L iquid Ratio:-

Liquid ratio is also known as acid test ratio or quick ratio. Liquid ratio compares the quick assets

with the quick liabilities. It is expressed in the form of pure ratio. E.g. 1:1.

The term quick assets refer to current assets, which can be converted into, cash immediately or at

a short notice without diminution of value.

Formula:

Liquid ratio =sLiabilitieQuick

AssetsQuick

Quick Ratio (QR) is the ratio between quick current assets (QA) and CL. Quick assets refers to

those current assets that can be converted into cash immediately without any value

strength.Quick assets include cash and bank balances, short-term marketable securities, and

sundry debtors. Inventory and prepaid expenses are excluded since these cannot be turned into

cash as and when required.

Quick Ratio indicates the extent to which a company can pay its current liabilities without

relying on the sale of inventory. This is a fairly stringent measure of liquidity because it is based

on those current assets, which are highly liquid. Inventories are excluded from the numerator of

this ratio because they are deemed the least liquid component of current assets. Generally, a

quick ratio of 1:1 is considered good. One drawback of the quick ratio is that it ignores the

timing of receipts and payments.


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Cash Ratio:-

This is also called as super quick ratio. This ratio considers only the absolute liquidity available

with the firm.

Formula:

Cash ratio =sLiabilitieCurrentTotal

SecuritiesMarketableBankCash

Since cash and bank balances and short term marketable securities are the most liquid assets of a

firm, financial analysts look at the cash ratio. If the super liquid assets are too much in relation to

the current liabilities then it may affect the profitability of the firm.


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Investment/ Shareholder

Earnings Per Share:-

Earnings per Share are calculated to find out overall profitability of the organization. Earnings

per share represent earning of the company whether or not dividends are declared. If there is only

one class of shares, the earning per share are determined by dividing net profit by the number of

equity shares. Earnings per Share measures the profits available to the equity shareholders on

each share held.

Formula:

Earnings per share =ShareEquityNo.of

ProfitNet


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The higher Earnings per sharewill attract more investors to acquire shares in the company as it

indicates that the business is more profitable enough to pay the dividends in time. But remember

not all profit earned is going to be distributed as dividends the company also retains some profits

for the business.

Dividend Per Share:-

Dividend Per Share shows how much is paid as dividend to the shareholders on each share held.

Formula:

Dividend per Share =SharesOrdinaryNo.of

rsShareholdeOrdinarytoPaidDividend

Dividend Payout Ratio:-

Dividend Pay-out Ratio shows the relationship between the dividends paid to equity shareholders

out of the profit available to the equity shareholders.

Formula:

Dividend Payout ratio = 100*shareperEarning

shareperDividend

Dividend Payout ratio shows the percentage share of net profits after taxes and after preference

dividend has been paid to the preference equity holders.


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Gearing:-

Capital Gearing Ratio:-

Gearing means the process of increasing the equity shareholders return through the use of debt.

Equity shareholders earn more when the rate of the return on total capital is more than the rate of

interest on debts. This is also known as leverage or trading on equity. The Capital-gearing ratio

shows the relationship between two types of capital viz: - equity capital & preference capital &

long term borrowings. It is expressed as a pure ratio.

Formula:

Capital gearing ratio =surplus&reservecapitalEquity

loansecuredcapitalPreference

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

concern.


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Profitability:-

These ratios help measure the profitability of a firm. A firm, which generates a substantial

amount of profits per rupee of sales, can comfortably meet its operating expenses and provide

more returns to its shareholders. The relationship between profit and sales is measured by

profitability ratios. There are two types of profitability ratios:

1. Gross Profit Margin2. Net Profit Margin.

Gross Prof it Ratio:-

This ratio measures the relationship between gross profit and sales. It is defined as the excess of

the net sales over cost of goods sold or excess of revenue over cost. This ratio shows the profit

that remains after the manufacturing costs have been met. It measures the efficiency of

production as well as pricing. This ratio helps to judge how efficient the concern is I managing

its production, purchase, selling & inventory, how good its control is over the direct cost, how

productive the concern , how much amount is left to meet other expenses & earn net profit.


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Gross profit ratio= 100*

SalesNet

ProfitGross

Net Prof it Ratio:-

Net Profit ratio indicates the relationship between the net profit & the sales it is usually

expressed in the form of a percentage.

Formula:

Net profit ratio = 100*SalesNet

NPAT

This ratio shows the net earnings (to be distributed to both equity and preference shareholders) as

a percentage of net sales. It measures the overall efficiency of production, administration, selling,

financing, pricing and tax management. Jointly considered, the gross and net profit margin ratios

provide an understanding of the cost and profit structure of a firm.

Return on Capital Employed:-

The profitability of the firm can also be analyzed from the point of view of the total funds

employed in the firm. The term fund employed or the capital employed refers to the total long-

term source of funds. It means that the capital employed comprises of shareholder funds plus

long-term debts. Alternatively it can also be defined as fixed assets plus net working capital.


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Capital employed refers to the long-term funds invested by the creditors and the owners of a

firm. It is the sum of long-term liabilities and owner's equity. Return on Capital Employed

indicates the efficiency with which the long-term funds of a firm are utilized.

Formula:

Return on capital employed = 100*SalesNet

NPAT

Financial:-

These ratios determine how quickly certain current assets can be converted into cash. They are

also called efficiency ratios or asset utilization ratios as they measure the efficiency of a firm in

managing assets. These ratios are based on the relationship between the level of activity

represented by sales or cost of goods sold and levels of investment in various assets. The

important turnover ratios are debtors turnover ratio, average collection period, inventory/stock

turnover ratio, fixed assets turnover ratio, and total assets turnover ratio. These are described

below:


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Debtors Turnover Ratio (DTO):-

Debtors Turnover Ratio is calculated by dividing the net credit sales by average debtors

outstanding during the year. It measures the liquidity of a firm's debts. Net credit sales are the

gross credit sales minus returns, if any, from customers. Average debtors are the average of

debtors at the beginning and at the end of the year. This ratio shows how rapidly debts are

collected. The higher the Debtors Turnover Ratio, the better it is for the organization.

Formula:

Debtors turnover ratio =DebtorsAverage

SalesCredit


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I nventory or Stock Turnover Ratio (I TR):-

Inventory Turnover Ratiorefers to the number of times the inventory is sold and replaced during

the accounting period.

Formula:

Stock turnover ratio =stockAverage

soldgoodsofCost

Inventory Turnover Ratio reflects the efficiency of inventory management. The higher the ratio,

the more efficient is the management of inventories, and vice versa. However, a high inventory

turnover may also result from a low level of inventory, which may lead to frequent stock outs

and loss of sales and customer goodwill. For calculating Inventory Turnover Ratio, the average

of inventories at the beginning and the end of the year is taken. In general, averages may be used

when a flow figure (in this case, cost of goods sold) is related to a stock figure (inventories).

F ixed Assets Turnover (FAT):-

The Fixed Assets Turnover ratio measures the net sales per rupee of investment in fixed assets.

Formula:

Fixed assets turnover =assetsfixedNet

SalesNet


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This ratio measures the efficiency with which fixed assets are employed. A high ratio indicates a

high degree of efficiency in asset utilization while a low ratio reflects an inefficient use of assets.

However, this ratio should be used with caution because when the fixed assets of a firm are old

and substantially depreciated, the fixed assets turnover ratio tends to be high (because the

denominator of the ratio is very low).

Propr ietors Ratio:-

Proprietary ratio is a test of financial & credit strength of the business. It relates shareholders

fund to total assets. This ratio determines the long term or ultimate solvency of the company.

In other words, Proprietary ratio determines as to what extent the owners interest & expectations

are fulfilled from the total investment made in the business operation.

Proprietary ratio compares the proprietor fund with total liabilities. It is usually expressed in the

form of percentage. Total assets also know it as net worth.

Formula:

Proprietary ratio=fundTotal

fundyProprietar

OR

Proprietary ratiosliabilitiecurrentassetsFixed

fundrsShareholde


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Stock Working Capital Ratio:-

This ratio shows the relationship between the closing stock & the working capital. It helps to

judge the quantum of inventories in relation to the working capital of the business. The purpose

of this ratio is to show the extent to which working capital is blocked in inventories. The ratio

highlights the predominance of stocks in the current financial position of the company. It is

expressed as a percentage.

Formula:

Stock working capital ratio=capitalWorking

Srock

Stock working capital ratio is a liquidity ratio. It indicates the composition & quality of the

working capital. This ratio also helps to study the solvency of a concern. It is a qualitative test of

solvency. It shows the extent of funds blocked in stock. If investment in stock is higher it means

that the amount of liquid assets is lower.

Debt Equity Ratio:-

This ratio compares the long-term debts with shareholders fund. The relationship between

borrowed funds & owners capital is a popular measure of the long term financial solvency of a

firm. This relationship is shown by debt equity ratio. Alternatively, this ratio indicates the

relative proportion of debt & equity in financing the assets of the firm. It is usually expressed as

a pure ratio. E.g. 2:1


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Formula:

Debt Equity Ratio =fundholdershareTotal

debtterm-longTotal

Debt equity ratio is also called as leverage ratio. Leverage means the process of the increasing

the equity shareholders return through the use of debt. Leverage is also known as gearing or

trading on equity. Debt equity ratio shows the margin of safety for long-term creditors & the

balance between debt & equity.

Return on Proprietor Fund:-

Return on proprietors fund is also known as return on proprietors equity or return on

shareholders investment or investment ratio. This ratio indicates the relationship between net

profits earned & total proprietors funds. Return on proprietors fund is a profitability ratio, which

the relationship between profit & investment by the proprietors in the concern. Its purpose is to

measure the rate of return on the total fund made available by the owners. This ratio helps to

judge how efficient the concern is in managing the owners fund at disposal. This ratio is of

practical importance to prospective investors & shareholders.

Formula:

Return on proprietors fund = 100*fundsPropriter'

NPAT


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Creditors Turnover Ratio:-

It is same as debtors turnover ratio. It shows the speed at which payments are made to the

supplier for purchase made from them. It is a relation between net credit purchase and average

creditors.

Credit turnover ratio =creditorsAverage

purchasecreditNet

Average age of accounts payable =rationoverCredit tur

yearainMonths

Both the ratios indicate promptness in payment of creditor purchases. Higher creditors turnover

ratio or a lower credit period enjoyed signifies that the creditors are being paid promptly. It

enhances credit worthiness of the company. A very low ratio indicates that the company is not

taking full benefit of the credit period allowed by the creditors.

Importance of Ratio Analysis:

As a tool of financial management, ratios are of crucial significance. The importance of ratio

analysis lies in the fact that it presents facts on a comparative basis & enables the drawing of

interference regarding the performance of a firm. Ratioanalysis is relevant in assessing the

performance of a firm in respect of the following aspects:


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1] Liquidity position

2] Long-term solvency

3] Operating efficiency

4] Overall profitability

5] Inter firm comparison

6] Trend analysis.

1] Liquidity position: -

With the help of Ratio analysis conclusion can be drawn regarding the liquidity position of a

firm. The liquidity position of a firm would be satisfactory if it is able to meet its current

obligation when they become due. A firm can be said to have the ability to meet its short-term

liabilities if it has sufficient liquid funds to pay the interest on its short maturing debt usually

within a year as well as to repay the principal. This ability is reflected in the liquidity ratio of a

firm. The liquidity ratio is particularly useful in credit analysis by bank & other suppliers of short

term loans.

2] Long-term solvency: -

Ratio analysis is equally useful for assessing the long-term financial viability of a firm. This

respect of the financial position of a borrower is of concern to the long-term creditors, security

analyst & the present & potential owners of a business. The long-term solvency is measured by

the leverage/ capital structure & profitability ratio Ratio analysis s that focus on earning power &

operating efficiency.


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Ratio analysis reveals the strength & weaknesses of a firm in this respect. The leverage ratios, for

instance, will indicate whether a firm has a reasonable proportion of various sources of finance

or if it is heavily loaded with debt in which case its solvency is exposed to serious strain.

Similarly the various profitability ratios would reveal whether or not the firm is able to offer

adequate return to its owners consistent with the risk involved.

3] Operating efficiency:

Yet another dimension of the useful of the ratio analysis, relevant from the viewpoint of

management, is that it throws light on the degree of efficiency in management & utilization of its

assets. The various activity ratios measure this kind of operational efficiency. In fact, the

solvency of a firm is, in the ultimate analysis, dependent upon the sales revenues generated by

the use of its assets- total as well as its components.

4] Overall profitability:

Unlike the outsides parties, which are interested in one aspect of the financial position of a firm,

the management is constantly concerned about overall profitability of the enterprise. That is, they

are concerned about the ability of the firm to meets its short term as well as long term obligations

to its creditors, to ensure a reasonable return to its owners & secure optimum utilization of the

assets of the firm. This is possible if an integrated view is taken & all the ratios are considered

together.

5] Inter firm comparison:

Ratio analysis not only throws light on the financial position of firm but also serves as a

stepping-stone to remedial measures. This is made possible due to inter firm comparison


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&comparison with the industry averages. A single figure of a particular ratio is meaningless

unless it is related to some standard or norm. One of the popular techniques is to compare the

ratios of a firm with the industry average. It should be reasonably expected that the performance

of a firm should be in broad conformity with that of the industry to which it belongs. An inter

firm comparison would demonstrate the firms position vice-versa its competitors. If the results

are at variance either with the industry average or with those of the competitors, the firm can

seek to identify the probable reasons & in light, take remedial measures.

6] Trend analysis:

Finally, ratio analysis enables a firm to take the time dimension into account. In other words,

whether the financial position of a firm is improving or deteriorating over the years. This is

made possible by the use of trend analysis. The significance of the trend analysis of ratio lies in

the fact that the analysts can know the direction of movement, that is, whether the movement is

favorable or unfavorable. For example, the ratio may be low as compared to the norm but the

trend may be upward. On the other hand, though the present level may be satisfactory but the

trend may be a declining one.

Advantages of Ratio Analysis:

Financial ratios are essentially concerned with the identification of significant accounting data

relationships, which give the decision-maker insights into the financial performance of a

company. The advantages of ratio analysis can be summarized as follows:

Ratios facilitate conducting trend analysis, which is important for decision making andforecasting.


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Ratio analysis helps in the assessment of the liquidity, operating efficiency, profitabilityand solvency of a firm.

Ratio analysis provides a basis for both intra-firm as well as inter-firm comparisons. The comparison of actual ratios with base year ratios or standard ratios helps the

management analyze the financial performance of the firm.

L imitations of Ratio Analysis:-

Ratio analysis has its limitations. These limitations are described below:

1] Information problems

Ratios require quantitative information for analysis but it is not decisive about analyticaloutput.

The figures in a set of accounts are likely to be at least several months out of date, and somight not give a proper indication of the companys current financial position.

Where historical cost convention is used, asset valuations in the balance sheet could bemisleading. Ratios based on this information will not be very useful for decision-making.

2] Comparison of performance over time

When comparing performance over time, there is need to consider the changes in price. Themovement in performance should be in line with the changes in price.

When comparing performance over time, there is need to consider the changes in technology.The movement in performance should be in line with the changes in technology.

Changes in accounting policy may affect the comparison of results between differentaccounting years as misleading.


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3] Inter-firm comparison

Companies may have different capital structures and to make comparison of performance when one isall equity financed and another is a geared company it may not be a good analysis.

Selective applications of government incentives to various companies may also distortintercompany comparison. Comparing the performance of two enterprises may be misleading.

Inter-firm comparison may not be useful unless the firms compared are of the same size andage, and employ similar production methods and accounting practices.

Even within a company, comparisons can be distorted by changes in the price level.

Ratios provide only quantitative information, not qualitative information.

Ratios are calculated on the basis of past financial statements. They do not indicate futuretrends and they do not consider economic conditions.

Purpose of Ratio Analysis:-

1] To identify aspects of a businesss performance to aid decision making

2] Quantitative process may need to be supplemented by qualitative factors to get a complete

picture.

3] 5 main areas-

Liquiditythe ability of the firm to pay its way


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Investment/shareholdersinformation to enable decisions to be made on the extent of therisk and the earning potential of a business investment

Gearinginformation on the relationship between the exposure of the business to loans asopposed to share capital

Profitabilityhow effective the firm is at generating profits given sales and or its capitalassets

Financialthe rate at which the company sells its stock and the efficiency with which ituses its asset.

Role of Ratio Analysis:-

It is true that the technique of ratio analysis is not a creative technique in the sense that it uses the

same figure & information, which is already appearing in the financial statement. At the same

time, it is true that what can be achieved by the technique of ratio analysis cannot be achieved by

the mere preparation of financial statement.

Ratio analysis helps to appraise the firm in terms of their profitability & efficiency of

performance, either individually or in relation to those of other firms in the same industry. The

process of this appraisal is not complete until the ratio so computed can be compared with

something, as the ratio all by them do not mean anything. This comparison may be in the form of

intra firm comparison, inter firm comparison or comparison with standard ratios. Thus proper

comparison of ratios may reveal where a firm is placed as compared with earlier period or in

comparison with the other firms in the same industry.

Ratio analysis is one of the best possible techniques available to the management to impart the

basic functions like planning & control. As the future is closely related to the immediate past,

ratio calculated on the basis of historical financial statements may be of good assistance to


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predict the future. Ratio analysis also helps to locate & point out the various areas, which need

the management attention in order to improve the situation.

As the ratio analysis is concerned with all the aspect of a firms financial analysis i.e. liquidity,

solvency, activity, profitability & overall performance, it enables the interested persons to know

the financial & operational characteristics of an organisation & take the suitable decision.


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Fund Flow Analysis

Fund may be interpreted in various ways as

(a) Cash,

(b) Total current assets,

(c) Net working capital,

(d) Net current assets.

For the purpose of fund flow statement the term means net working capital. The flow of fund

will occur in a business, when a transaction results in a change i.e., increase or decrease in the

amount of fund.

According to Robert Anthony the funds flow statement describes the sources from which

additional funds were derived and the uses to which these funds were put.

In short, it is a technical device designed to highlight the changes in the financial condition of a

business enterprise between two balance sheets.

Different names of Fund-Flow Statement

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

Objectives of Fund Fl ow Statement:-

The main purposes of fund flow statement are:]

To help to understand the changes in assets and asset sources which are not readily evident inthe income statement or financial statement.


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

Sources Applications

Fund from operation Fund lost in operations

Non-trading incomes Non-operating expenses

Issue of shares Redemption of redeemable preference share

Issue of debentures Redemption of debentures

Borrowing of loans Repayment of loans

Acceptance of deposits Repayment of deposits

Sale of fixed assets Purchase of fixed assets

Sale of investments (Long

Term)

Purchase of long term investments

Decrease in working capital Increase in working capital

Steps in Preparation of Fund Flow Statement:-

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

Preparation of the fund flow statement.


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Cash Flow Analysis

Cash is a life blood of business. It is an important tool of cash planning and control. A firm

receives cash from various sources like sales, debtors, sale of assets investments etc. Likewise,

the firm needs cash to make payment to salaries, rent dividend, interest etc.

Cash flow statement reveals that inflow and outflow of cash during a particular period. It is

prepared on the basis of historical data showing the inflow and outflow of cash.

Objectives of Cash Flow Statement:-

1. To show the causes of changes in cash balance between the balance sheet dates.2. To show the actors contributing to the reduction of cash balance inspire of increasing of profit or

decreasing profit.

Uses of Cash Flow Statement

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

Steps in Preparing Cash Flow Statement

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

operation or loss).


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3. Comparison of current items (to find out inflow or outflow of cash).4. Preparation of Cash Flow Statement.

To preparing Account for all non-current items is easier for preparing Cash Flow Statement.

Cash from operation can be prepared by this formula also.

Net Profit + Decrease in Current Assets - Increase in Current Assets

OR OR

Increase in Current Liabilities Decrease in Current Liabilities.

Useful ness of the Statement of Cash Flows

The information in a statement of cash flows should help investors, creditors, and others assess

the following aspects of the firms financial position.

The entitys ability to generate future cash flows.By examining relationships between items in the statement of cash flows, investors and

others can make predictions of the amounts, timing, and uncertainty of future cash flows

better than they can from accrual basis data.

The entitys ability to pay dividendsand meet obligations.If a company does not have adequate cash, employees cannot be paid, debts settled, or

dividends paid. Employees, creditors, and stockholders should be particularly interested

in this statement, because it alone shows the flows of cash in a business.

The cash investing and financing transactions during the period.By examining a companys investing and financing transactions, a financial statement

reader can better understand why assets and liabilities changed during the period.

1. The reasons for the difference between net income and net cash


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Net income provides information on the success or failure of a business enterprise. However,

some are critical of accrual basis net income because it requires many estimates. As a result, the

reliability of the number is often challenged. Such is not the case with cash. Many readers of the

statement of cash flows want to know the reasons for the difference between net income and net

cash provided by operating activities. Then they can assess for themselves the reliability of the

income number.

In summary, the information in the statement of cash flows is useful in answering the following

questions.

How did cash increase when there was a net loss for the period?

How were the proceeds of the bond issue used? How were the expansions in the plant and equipment financed? Why were dividends not increased? How was the retirement of debt accomplished? How much money was borrowed during the year? I s cash f low greater or less than net income?

Cash Flow Statement

Inflow of Cash Amount Outflow of cash Amount

Opening cash balance *** Redemption of preference

shares

***

Cash from operation *** Redemption of debentures ***

Sales of assets *** Repayment of loans ***


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Issue of debentures *** Payment of dividends ***

Raising of loans *** Pay of tax ***

Collection from debentures *** Cash lost in debentures ***

Refund of tax *** Closing cash balance ***

Cash from operation can be calculated in two ways:

Cash Sales Method

Cash Sales(Cash Purchase + Cash Operation Expenses)

Net Profit Method

It can be prepared in statement form or by Adjusted Profit and Loss Account.


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Comparative Statement

The comparative financial statements are statements of the financial position at different period;

of time. The elements of financial position are shown in a comparative form so as to give an idea

of financial position at two or more periods. From practical point of view, generally, two

financial statements (balance sheet and income statement) are prepared in comparative form for

financial analysis purpose. Not only the comparison of the figure of two periods but also be

relationship between balance sheet and income statement may show:

i. Absolute figures (rupee amounts)ii. Changes in absolute figures (increase or decrease in absolute figures)iii. Absolute data in term of percentagesiv. Increase or decrease in terms of percentages

1. COMPARATIVE BALANCE SHEET

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

of items and computed items in two or more balance sheets of the same business enterprise on

different dates. The changes can be observed by comparison of the balance sheet at the beginning

and at the end of a period and changes can help in forming an opinion about the progress of an

enterprise.

The comparative balance sheet has two columns for the data of original balance sheets. A

third column is used to show increase in figures. The fourth column may be added for giving

percentages of increases or decreases.

2. COMPARATIVE INCOME STATEMENT

The comparative income statement gives an idea of a business over a period of time. Thechanges in absolute data in money values and percentages can be determined to analyze the

profitability of the business. It has also four columns. First two columns give figures of various

items for two years. Third and fourth columns are used to show increase or decrease in figures in

absolute amounts and percentages respectivel.


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Objective of Study

To understand the information contained in financial statements with a view to know the strength

or weaknesses of the firm and to make forecast about the future prospects of the firm and thereby

enabling the financial analyst to take different decisions regarding the operations of the firm.

OBJECTIVES:-

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


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COMPANY PROFILE

Indian Farm Forestry Development Co-operative Ltd. (IFFDC) is committed for integrated

rural development and ecological up-gradation through afforestation on abandoned wastelands

with community participation by promoting village level Primary Farm Forestry Co-operative

Societies (PFFCS) and Primary Livelihood Development Cooperative Societies (PLDCS) for

livelihood enhancement of the landless, marginal and small farmers, tribal and women in

particular.

Indian Farmers Fertilizer Cooperative Limited (IFFCO), the promoter organization of IFFDC

started its farm forestry activities for wasteland development since 1986-87 in the states of U.P.,

M.P. and Rajasthan which has been handed over to IFFDC in 1995. More than, 26,900 ha. of

wastelands comprising sodic, rocky, graveled, waterlogged, ravine, nutrient poor soils etc. have

been converted into sustainable multipurpose green forests through 145 village level Primary

Farm Forestry Cooperative Society (PFFCS) with a total membership of 28,500 (38% landless,

51% marginal and small farmers). Special emphasis has been laid on women participation which

is 30% of the total membership.

During last 16 years, IFFDC has successfully implemented various rural development

projects with the financial support from India-Canada Environment Facility (ICEF) of CIDA

(Canada), DFID, UK Govt., World Bank through Rajasthan Government, USAID through

SIFPSA, International Fund for Agriculture Development (IFAD) through Uttarakhand

Government , International Labour Organization (ILO), State Governments, , National Bank for

Agriculture and Rural Development (NABARD), Indian Council of Agriculture Research

(ICAR) IFFCO and IFFCO-Chhattisgarh Power Limited (ICPL).


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Membership

Indian Farmers Fertilizer Co-operative Ltd. (IFFCO), National Co-operative Development

Corporation (NCDC), Primary Farm Forestry Co-operative Societies (PFFCS), and Primary

Livelihood Development Cooperative Societies (PLDCS) are its members. As on March 31,

2010, 164 Societies are members of IFFDC.

Share Capital

The subscribed and paid-up capital as on 31.03.2013 is Rs. 13.23 crores against the authorized

share capital of Rs.100 crores. Out of this, Rs. 12.54 crores have been contributed by IFFCO,

0.10 crores by NCDC, 0.59 crores by PFFCS, PLDCS and State Co-operatives.

Mission

To enhance the socio-economic status of the people through collective action by

Sustainable Natural Resources Management


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Objectives

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

approach.

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

PLDCS.


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BOARD OF DIRECTORS OF IFFDC

As on March 31, 2013

1. Shri G. P. Tripathi (Chairman)

2. Shri D.K.Bhatt (Vice-Chairman)

3. Shri A.Roy (Director)

4. Shri Lakhan Singh (Director

5. Shri Narayan Lal Ahir (Director)

6. Smt. Shanta Rao (Director)

7. Shri Lakhan Singh (Director)

8. Dr. K.G. Wankhede (Chief Executive)

PARTNERS OF IFFDC

1. Indian Farmers Fertilizer Cooperative Limited (IFFCO).

2. IndiaCanada Environment Facility (ICEF), Canada.

3. Department for International Development (DFID), UK.

4. National Bank for Agriculture and Rural Development (NABARD)


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5. Indian Council of Agricultural Research (ICAR)

6. State Govts.

7. Save the Children, UK.

8. International Fund for Agriculture Development (IFAD).

9. United Nations International Children Education Fund (UNICEF).

10. International Labour Organization (ILO).

11. Japan International Cooperation Agency (JICA)

12. WORLP (Orissa).

13. Programme for Advancement of Gender Equity (PAGE), Haryana.

14. United States Agency for International Development (USAID) State Innovations in

Family Planning Services Agency (SIFPSA), U.P.

15. National Oilseeds and Vegetable Oil Development Board (NOVOD).

16. Ministry of Non-conventional Energy Sources (MNES).

17. National Afforestation and Eco Development Board (NAEB),

18. Govt. of India (NWDB, DNES, JRY & DRDA).

19. Co-operative Rural Development Trust (CORDET).

20. Uttarakhand Gram Vikas Samiti

21. Indicus Analytics Pvt Ltd, New Delhi.


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RESEARCH INSTITUTES / UNIVERSITIES

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

Awards and Honors

IFFDC Ltd as an organization has been honored with following prestigious awards:

1. Indira Priyadarshini Vrikashamitra Puraskar 1999 conferred by the Ministry of

Environment and Forest, Govt. of India for excellence in afforestation and wasteland

development. Five of its promoted PFFCS (Sangwa & Rakhyawal in Rajasthan, Katari &

Madwa in U.P. & Karaiya in M.P.) have also been honored with this award for their

outstanding work in afforestation & wasteland development in different years.

2. IMC Diamond Jubilee Endowment Trust Award, titled Environment, Agriculture and

Rural Development Award 2002conferred by Indian Merchants Chamber, Mumbai for


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outstanding contribution to the cause of promoting the growth of rural economy in the

country.

3. Thrice the Certificate of Appreciation of Corporate Social Responsibility Award

2004-05, 2007 and 2008 conferred by The Energy and Resource Institute (TERI), New

Delhi for efforts made by IFFDC towards initiatives for Corporate Citizenship and

sustainability.

4. Earth Matteraward conferred on Chairman IFFDC by Earth Matters Foundation, New

Delhi for integrated development of wastelands through afforestation in the country.

5. Amity Corporate Excellence Award 2008 conferred

byAmityInternationalBusinessSchool (AmityUniversity), Noida for its outstanding

contribution towards afforestation on wasteland, environment conservation and promoting

the growth of rural economy.

6. Amity HR Workplace Environment Award 2008 conferred by Amity International

Business School (Amity University), Noida on the occasion of 5thGlobal HR summit for its

consistent and inexorable efforts to create a conducive environment yielding success and growth.


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PRODUCT PROFILE

1.0 INTEGRATED FARM FORESTRY PROJECT:

Last sixty years have witnessed an unprecedented rapid growth of population registering

almost three fold increased. These numbers coupled with rapid industrialization, consumerism

and major shift in living style resulted in tremendous pressure on land and water resources to

meet food, fiber, wood, fuel, fodder, medicines, shelter and several other demands of varied

products. Consequently, there has been over exploitation of natural vegetation and other

resources. There has been particularly, utter neglect of land care resulting in its degradation, due

to water erosion (90 m ha), salinity and alkalinity (7m ha) and flooding (20m ha), wind erosion

(50m ha). Another 20m ha canal irrigation areas are under risk of becoming degraded.

The National Wasteland Development Board (NWDB) has reported 158 million ha of

different categories of land under different types of wastelands. It is well recognized that a large

area in the country is degraded due to soil erosion. On the other hand, continued deforestation

and over exploitation has resulted in decline of forest density, and growing stock, unable to cope

with the increasing demand of people and industry for wood, fuel, fodder and other products.

Total 26,910 ha. Wasteland (11389 ha. in U.P., 9100 ha. in Raj., 6429 ha. in MP and 26 ha in

Uttrakhand.) has been afforestated and converted in the lush green forests. At present 145 PFFCS

are managing inventory of 98.17 lakhs plants (35.98 lakhs in UP, 21.86 lakhs in Rajasthan, 40.22

lakhs in MP and 0.10 lakh in Uttrakhand) of such diverse species as Shisham, Subabool,

Accacia, Eucalyptus, Karanj, Bamboo, Neem, Aonla, Guava, etc.


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Nursery Raising:

To ensure good quality seedling as per choice of the community and suitability of the land,

nurseries were raised either at PFFCS level (centralized nurseries) or individual / group level.

The project office provided necessary inputs & trainings for nursery raising and the nurseries

were maintained under technical supervision of IFFDC. Some other species like grafted Mango,

Aonla, Ber etc have also been procured from the various scientific nurseries which are being

raised under the technical supervision of research station. During the year, these PFFCS have

raised 11.93 lakhs saplings of multipurpose species for sale to forest dept., Land Reclamation

Corporation, IFFCO, CORDET and Govt agencies etc.

Trading of Carbon Credits:


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The Afforestation & Reforestation absorb Carbon Di-oxide (CO2) and thus reduce the CO2

in atmosphere. This reduction of CO2 can be used for off-setting the emission of CO2 mainly

through industries in developed countries as per the approved guidelines of United Nations

Frame Work Convention for Climate Change (UNFCCC). It is estimated that by planting 1.00

lakh hectares of new forest, a removal of 10 lakhMT CO2 from atmosphere is possible. Such

reduction in CO2 from atmosphere can betraded as Voluntary Emission Reduction (VER) and is

in demand in developed countries particularly in US and Europe.

2.0 RURAL LIVELIHOOD DEVELOPMENT PROJECTS:

Poor people in rural area tend to be the most dependent on the direct utilization of natural

resources for their livelihoods and are therefore the first to suffer when the resource base is

degraded or destroyed. Some estimates suggest that harvesting of wild plant and animal species

account for up to 50% of the cash income of poor households and that this heavy reliance results

from a lack of alternative livelihood options. Biodiversity, in particular, often offers the greatest

potential for the development of new products which may in turn offer the most opportunity for

alternative and higher levels of income. For Livelihood Development, IFFDC started several

programmes through need based participatory methodologies and improved technologies, which

are as follows -

2.1 WESTERN INDIA RAINFED FARMING PROJECT:

In April 1999, IFFDC took up a project entitled Western India Rain fed Farming Project

(WIRFP) in District Pratapgarh of Rajasthan, supported by the Department for the International

Development (DFID) UK Govt. in 25 core villages for first two years. The project was expanded

to Ratlam district of M.P. in additional 50 core villages w.e.f. January 2002. The project with the

aim to enhance the livelihood of 1,50,000 poor tribal people dominated by Scheduled Tribes


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trainings on Income Generating Activities (IGA) for SHGs and 20 trainings on Farming System

Development, Soil & Water Conservation technologies for Jankars have been imparted.

2.2 LIVELIHOODS IMPROVEMENT THROUGH INTEGRATED RURAL

DEVELOPMENT (LIIRD) PROJECT

IFFDC is implementing this project since December 2005 in 77 villages covering 11 clusters

of Puri, Nayagarh, Kendrapada, Ganjam, Jagatsinghpur, Kalahandi, Koraput, Bolangir,

Rayagada, Nuapada and Boudh districts of Orissa. The project is based on its participatory

approaches , tested methodologies and technologies on Five J (pentagonal component of rural

development) viz. Jal (water), Jangle (forest), Jameen (land), Janwar (live stock) & Jan (human)

with financial support of IFFCO.

Main objectives of the project are to build capacity and confidence of individuals through

institutional development like self help groups to ensure the up gradation of their skills for

undertaking IGAs; to optimize the efforts with involvement of the concerned state

departments/agencies working in the area of rural development; to federate the Self employed

endeavor into cooperative institution for sustainability; build up the trust and confidence in

cooperative system and strengthen IFFCO's field programmes to benefit the farming community.

2.3 LIVELIHOOD IMPROVEMENT THROUGH COOPERATIVE DEVELOPMENT

(LICD) PROJECT

IFFDC has started its activities since April 2007 to implement this Project in 50 villages

covering 5 districts of Jharkhand viz: Chaibasa, Gumla, Plamu, Hazaribag and Dumka based on


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the participatory approaches and tested methodologies and technologies to develop livelihood

options for the poor rural community by promoting and strengthening villages level Cooperatives

with the support of Dept. of Corporation Govt. of Jharkhand.

To institutionalize the project intervention and its sustainability, 50 village level Primary

Livelihood Development Autonomous Cooperative Society (PLDACS) (one in each village)

with total membership of 1195 (Male829, Female366) have been formed by mobilizing and

organizing the poor rural community. These PLDACS are being nurtured and strengthened

through holding regular meetings of the executive committees to create awareness and sharing

the concept of PLDACS amongst the members. IFFDC is facilitating these PLDACS for

preparation of their annual plans for undertaking livelihood development activities in the coming

years.


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2.4 LIVELIHOOD IMPROVEMENT THROUGH CULTIVATION OF MEDICINAL

PLANTS, AFFORESTATION AND SOCIAL DEVELOPMENT (LIMCAS) PROJECT:

IFFDC is implementing this project in villages Salka, Namana, Narayanpur, Mudgaon,

Raghunathpur and Kathmunda, Dist Sarguja for 4 years (April 07 to March 11) with financial

assistance of IFFCO-Chhattisgarh Power Limited (ICPL) to rehabilitate the displaced families of

the nearby area of the proposed power plant.

The displaced and freckled families were organized into 52 SHGs with membership base of

563 in the project villages to provide them an effective platform to identify for need based

sustainable livelihood options. These SHGs have saved Rs 2.18 lakhs out of which 1.21 lakhs

revolved as inter-loaning benefited to 285 members. It helped in organized the women of the

displaced villages, inculcated the saving habits in the poor tribal community, increased access of

the illiterate women to the banks and increased awareness regarding benefits of the power plant

to be established in this area. 46 SHG members have been covered under Janta Bima Yojna by

ITGI.Total 1085 meetings were conducted

(A) IFFCO Supported Projects

1. Farm Forestry Projects.

2. Livelihood Improvement through Integrated Rural Development (LIIRD) Project in Orissa.

3. Rural Area Livelihood Development Project (RLDP), West Bengal.

4. Integrated Rural Development Project, Shivagangai (Tamil Nadu).

5. Integrated Rural Development Project, Amravati (Maharashtra).


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

(B) NABARD Supported Projects

1. Karaiya-Surkhi Watershed Development Project, Sagar (MP).

2. Watershed Development Projects, Kui, Kukdar, Khurubhata in Chhattishgarh.

3. Watershed Development Projects, D.B.Thanda, Dammanapet, Govindapally in Nizamabad

(Andhra Pradesh).

4. Indo-German Watershed Development Project Pratapgarh (Rajasthan).

5. Wadi Project, Pratapgarh (Rajasthan) & Kawardha (Chhattisgarh).

6. Pilot Project for Integrated Development (PPID), Sagar & Damoh (M.P.).

7. Village Adoption Programme, Bilaspur (C.G.), Mandsaur and Neemuch (M.P.).

(C) Projects Supported by other Agencies

1. Livelihood Improvement through Afforstation, Cultivation of Medicinal Plants and Social

Development (LIMCAS) Project in Sarguja, supported by IFFCO-Chhattisgarh Power Ltd.

(ICPL).

2. National Agriculture Innovation Project (NAIP), supported by ICAR, New Delhi.

3. Rural Non Farm Development Agency (RUDA), Udaipur supported by Govt of Rajasthan.


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4. Clinic Based Reproductive Health Service Project in Allahabad funded by USAID through

State Innovation in Family Planning Services Agency (SIFPSA).

5. Uttar Pradesh Health Systems Development Project (UPHSDP) by IDA in U.P.

6. Livelihood Improvement through Cooperative Development (LICD) in Jharkhand

supported by Ministry of Cooperation, Govt . of Jharkhand.

7. Indus Child Labour Project supported by International Labour Organization (ILO) in M.P.

8. Uttarakhand Livelihood Improvement Project for Himalayas (ULIPH) supported by

International Fund for Agriculture Development (IFAD) in Uttrakhand.

9. Integrated Watershed Development Projects at Chhattarpur & Sheopur supported by Govt. of

M.P. under NAREGA.

10. Formation, management and Capacity Building of SHGs under Swarnjayanti Gram

Swarojgar Yojana of Govt. of M.P.


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RESEARCH METHDOLOGY

RESEARCH

Research comprises defining and redefining the problems, formulating hypothesis or suggested

solutions, collecting, organizing and evaluating data, making deductions and reaching

conclusions. In other words this may be said that the systematic approach concerning

generalization and the formulation of a theory is considered as the report.

RESESARCH METHODOLOGY

Research methodology is a way to systematically solve the research problem. It may be

understood as a science of studying that how research is done scientifically. In it we study

various steps that are generally adopted by a researcher in studying his research along with the

logic behind them.

Thus when we talk about research methodology we not only talk of the research methods but

also consider the logic behind the methods we use in the context of our research study and

explain why we are using particular method or technique and why we are not using others so that

research results are capable of being evaluated either by the researcher himself or by others.

TYPES OF THE RESEARCH

There are various types of researches exist that are conducted as par the requirement of the

problem and the situation.

Some important and popular types of researches are being defined here that are very frequently

used for the purpose of conducting the research study for any given problem.


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DESCRIPTIVE RESEARCH

Descriptive research includes surveys and facts finding enquiries of different kinds. The major

purpose of the descriptive research is description of the state of affairs as it exists at present. In

social science and business research we quite often use the word Ex post facto research for

descriptive research studies. Ex post facto research studies include attempts by researchers to

discover causes even when they can not control the variables.

ANALYTICAL RESEARCH

In the case of the analytical research, the researcher has to facts and information already

available, and analyze these to make a critical evaluation of the material. So in the case of the

analytical research the researcher does not primarily consider on the collection of the data by

using the various methods of data collection.

This research is based on descriptive as well as analytical.

METHODOLOGY OF THE STUDY:-

Research refers to a search for knowledge. It can be defined as a scientific and systematic search

for pertinent information on a specific topic. It is a careful investigation or inquiry specifically

through search for new facts in any branch of knowledge. It is a systematized effort to gain new

knowledge.

Thus, research refers to the systematic method consisting of enunciating the problem,

formulating a hypothesis, collecting the facts or data, analyzing the facts and reaching certain

conclusions in the form of solution towards the concerned problem.


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The training is basically an in house training which intimated me with various aspects of the

project.

Here, while conducting the study I have relied on two types of data, viz. primary data and

secondary data. Based on the outcome of primary and secondary data, various statistics were

prepared.

DATA SOURCES:Data collection is a very important work in the research process. There are

two types of sources from which data can be collected.

1 PRIMARY DATA- Primary data are those which are collected afresh and for the first time

and thus happen to be original in character. There are numbers of methods of collecting primary

data. The data collected through meetings with various managers & employees of Finance and

accounts department. I worked under guidance of Mr. Praveen Agarwal, who gave me his

valuable time and information. He sent me to various sections of Finance & Accounts Dept. and

other departments for collection of data.

Methods of Primary Data:

Observation Method Interview Method Through Schedules

2. SECONDARY DATA- Secondary data means data that are already available i.e. they refer

to the data which have already been collected and analyzed by someone else. Secondary data

may either be published data or unpublished data. One must be very careful in using secondary


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data. One must make a minute scrutiny because it is just possible that the secondary data may be

unsuitable or may be inadequate in the context of the problem which one want to study.

Sources of collection of secondary data:

Balance Sheet Profit & Loss Account Annual Reports

Budget

Accounting Reports Financial Year Book

Research Design

The research will be both descriptive and conclusive.

Descriptive research is a kind of research where the description of the topic is given.

Conclusive research is the kind of research in which the conclusion is given at the end of the

report.

Other sources of information


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FINDING AND ANALYSIS

Calculation and Interpretation of Ratios

1] Current Ratio:

Formula:

Current Ratio=LibilitiesCurrent

AssetsCurrent

YEAR 2010-2011 2011-2012 2012-2013

Current assets139,552,971.36 166,433,899.78 219,493,435.82

Current liabilities 48,969,933.25 64,251,375.00 87508941.80

Current ratio 5.39 3.11 2.46

0

50000000

100000000

150000000

200000000

250000000

2010-2011 2011-2012 2012-2013

139552971

166433899

219493435

48969933 64251375

87508941

5.39 3.11 2.46

Current Assests

Current Libilities

Current Ratio


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Comments:-In IFFDC the current ratio is 5.39 in 2010-11, 3.11 in 2011-12 and 2.46:1 in 2012-

13.Current ratio is decreasing in each year its proof that current ratio should be 2.1 which shows

the company sound position.

2] Liquid Ratio:Formula:

Liquid ratio =sLiabilitieQuick

AssetsQuick

YEAR 2010-2011 2011-2012 2012-2013

Quick Assets 139,552,971.36 166,433,899.78 219,493,435.82

Quick liabilities 48,969,933.25 64,251,375.00 87508941.80

Liquid ratio 5.39 3.11 2.41

Comments:

0

50000000

100000000

150000000

200000000

250000000

2010-2011 2011-2012 2012-2013

139552971

166433899

219493435

48969933

64251375

48508941.8

5.39 3.11 2.41

Quick Assests

Quick Libilites

Liquid Ratio


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The liquid or quick ratio indicates the liquid financial position of an enterprise. In all 3 years the

liquid ratio is different, which is not better for the company. The liquid ratio of the IFFDC has

Decreased in all years.

Liquid ratio of Company is favorable because the quick assets of the company are higher than

the quick liabilities. The liquid ratio shows the companys ability to meet its immediate

obligations promptly.

3] Proprietary Ratio:

Formula:

Proprietary Ratio =fundTotal

fundProprietry

YEAR 2010-2011 2011-2012 2012-2013

Proprietary fund 132244271.89 132327000.00 132354000.00

Total fund 20160857.7 40008770.91 11283053.69

Proprietary ratio 6.56 3.31 11.73


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Comments:Proprietary ration shows relationship between proprietary fund and total fund .The percentage

reduce in 2012 and gradually increase in 2013.Its shows a sound position of Company in terms

of proprietary ratio.

4] Gross Profit Ratio:Formula:

Gross Profit Ratio= 100*SalesNet

ProfitGross

Year 2010-2011 2011-2012 2012-2013

Gross Profit (2314404.70) 7511837.06 5422760.88

Net Sales 1876646131.21 1961740395.95 1681742954.09

Gross Profit Ratio (0.12)% 0.38% 0.32%

0

20000000

40000000

60000000

80000000

100000000

120000000

140000000

2010-2011 20011-2012 2009-2010

132244271.9 132327000 132354000

20160857.7

40008770.91

11283053.69

6.56 3.31 11.73

Proprietary fund

Total fund

Proprietary ratio


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Comments:The gross profit is the profit made on sale of goods. It is the profit on turnover. In

the year 2010-2011 the gross Loss ratio is (.12)%. It has decreased to .38% in the year 2011-

2012 due to increase in sales with corresponding more increase in cost of goods sold.

It is declined in 2012-2013 due to high cost of purchases & overheads. Although the gross profit

ratio is declined during the years2012-13. The net sales increased in 2010-11 and 2011-12 but

declined in 2012-13. and gross profit is increased in 2011-12 but decline in 2012-13.

-2E+08

0

200000000

400000000

600000000

800000000

1E+09

1.2E+09

1.4E+09

1.6E+09

1.8E+09

2E+09

2010-20112011-2012

2012-2013

-2314404.7

7511837.065422760.88

1876646131 1961740396

1681742954

-0.120.38

0.32

Gross Profit

Net Sales

Gross Profit Ratio


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5] Operating Ratio:Formula:

Operating ratio= 100*

SalesNet

COGS

YEAR 2010-2011 2011-2012 2012-2013

COGS 1867127294.53 1950500362.6 1672248355.57

Net sales 1876646131.21 1961740395.95 1681742954.09

Operating ratio 99.492% 99.427% 99.435%

Comments:The operating ratio shows the relationship between costs of goods sold & net

sales. Operating ratio over a period of 3 years when compared that indicate the change in the

operational efficiency of the company.

0

200000000

400000000

600000000

800000000

1E+09

1.2E+09

1.4E+09

1.6E+09

1.8E+09

2E+09

2010-11 2011-12 2012-13

COGS

NET SALES

OPERATING RATIO


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The operating ratio of the company has decreased in 2 year and increase a little in last year. This

is due to increase in the cost of goods sold, which in 2010-2011 was 99.49%, in 2011-2012 was

99.42% & in 2012-2013 it is 99.43%. Though the cost has increased in 2011-2012 as compared

to 2010-2011, it is reduced in 2012-2013

6) Net Profit Ratio:

Formula:

Net profit ratio = 100*SalesNet

NAPT

YEAR 2010-2011 2011-2012 2012-2013

NPAT -2640235.70 6986837.06 4494735.22

Net Sales 1876646131.21 1961740395.95 1681742954.09

Net Profit Ratio (0.14)% 0.356% 0.267%


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Comments:

The net profit ratio shows the relationship between NPAT & net sales. Net profit ratio over a

period of 3 years when compared that indicate the change in the profit efficiency of the

company.

The net profit ratio of the company has decreased in 2 year and increase a little in last year. This

is due to decrease in NPAT which in 2010-2011 was 0.14%, in 2011-2012 was 0.347% & in

2012-2013 it is 0.267%. Though the profit has increased in 2011-2012 as compared to 2010-

2011, it is reduced in 2012-2013

-2E+08

0

200000000

400000000

600000000

800000000

1E+09

1.2E+09

1.4E+09

1.6E+09

1.8E+09

2E+09

2010-2011 2011-2012 2012-2013

-2640235.7 6986837.06 4494735.22

1876646131

1961740396

1681742954

-0.14

0.36%0.27%

NPAT

Net Sales

Net Profi


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7] Cost of Goods Sold Ratio:Formula:

Cost of goods sold Ratio = 100*SalesNet

COGS

YEAR 2010-2011 2011-2012 2012-2013

COGS 1867127294.53 1950500362.6 16

an analytical study of financial analysis

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