A Study on Financial Analysis of Agricultural Mills in South India D
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A STUDY ON FINANCIAL ANALYSIS OF AGRICULTURAL MILLS IN SOUTH INDIA D. Sirpy1, K. Iyyappan2 1Final year MBA, School of Business, PRIST University, Vallam, Thanjavur. 2Assistant Professor, School of Business, PRIST University, Vallam, Thanjavur. ABSTRACT term and long term obligations were given Finance is a field that deals with the study of wherever applicable. which includes the dynamics of assets and Keywords: Financial Performance, Ratio liabilities over time under conditions of Analysis, Spinning Mills & Rice mills. different degrees of uncertainty and risk. Finance can also be defined as the science of 1. INTRODUCTION money management Financial statement Rice is the seed of the monocot plant analysis (or financial analysis) is the process Oryza sativa (Asian rice). As a cereal grain, it is of reviewing and analyzing a company's the most widely consumed staple food for a large financial statements to make better economic part of the World's human population, especially decisions.. Financial statement analysis is a in Asia and the West Indies. It is the grain with method or process involving specific the second highest world-wide production, after techniques for evaluating risks, performance, Maize (corn). Rice is one of the most important financial health, and future prospects of an food crops of India in terms of area, production organization. Four of the rice mills exhibited and consumer preference. China and India positive percentage change in owned funds contributed 30.25 per cent and 22.43 per cent and also recorded an increasing trend in net respectively of the World’s rice production in profits. The current ratios and quick ratios 2011-12 (Source: www.drd.dacnet.nic.in). India for three rice mills were above two and one is the second largest producer and consumer of respectively indicating the healthy liquidity rice in the World. Rice production in India status of these rice mills. There was an crossed 100 million tonnes in 2011-12 increasing trend in the gross profit ratio of accounting for 22.88 per cent of global two mills while it was decreasing trend in the production. In some states of the country, viz., case of remaining mills. The constraints faced Andhra Pradesh, Kerala and West Bengal, rice is by the rice millers were irregular power a monoculture crop and the source of prosperity supply, non-availability of adequate labour, and livelihood of a majority of the population. scarcity of raw materials and unfair levy Andhra Pradesh ranks third in terms of the system as 75 per cent of the total production nation's rice-growing area (47.52 m ha) but is submitted to Government as levy. The second in terms of rice production (144.2 m research design of the study is descriptive tonnes) in 2010 -11 (Source: indiastat.com). Rice research design and secondary data was is the primary source of carbohydrates and collected from the published websites of protein besides, rice also contains small organization for the research. The tools used quantities of fat, ash, fibre and moisture. It has for analysis is comparative ratio analysis of very high calorific value (363 K cal) than any the balance sheet. Suitable ratios were framed other cereal crop with easily digestible and calculated to know the financial carbohydrates (80.40 per cent) and high quality performance of the company. The findings protein (6.76 per cent) with biological value as from the analysis were discussed in detail and high as egg protein, due to high content of amino suggestions for corrective actions like acids. Vitamins and mineral are present largely maintain good solvency in order to meet short in bran and germ. Rice is obtained by milling paddy. The practice of milling is as ISSN (PRINT): 2393-8374, (ONLINE): 2394-0697, VOLUME-5, ISSUE-4, 2018 78 INTERNATIONAL JOURNAL OF CURRENT ENGINEERING AND SCIENTIFIC RESEARCH (IJCESR) old as the cultivation of rice itself and finds applied multiple regression models on the reference even in Vedic literature. Different selected industries by taking data for the period types of milling equipments for shelling 2001-2008. The study concluded that the main /polishing of rice existed in Indian homes many variables determining capital structure of centuries ago. The discovery of parboiling was industries in India were agency cost, assets one of the most important achievements in food structure, non-debt tax shield and size. The science and the credit for this discovery goes to coefficients of these variables were significant at India. The Indian textile industry has a one per cent and five per cent levels. significant presence in the economy as well as in the international textile economy. Its 3. METHODOLOGY contribution to the Indian economy is manifested In this chapter, the characteristic features in terms of its contribution to the industrial of area selected for the study, the methods used production, employment generation and foreign in sampling, the nature and sources of data and exchange earnings. It contributes 20 percent of statistical tools and techniques used in data industrial production, 9 percent of excise analysis are discussed. collections, and 18 percent of employment in the The methodology is presented under the industrial sector, nearly 20 percent to the following headings. countries total export earning and 4 percent to the 3.1 Selection and description of the study Gross Domestic Product. In human history, past area and present can never ignore the importance of 3.2 Sampling design textile in a civilization decisively affecting its 3.3 Nature and sources of data destinies, effectively changing its social 3.4 Analytical tools and techniques used scenario. 3.5 Definition of terms and concepts used in the study 2. REVIEW OF LITERATURE 3.1 Selection and description of the study area In Mansur A Mulla (2002) in his study “The The study was conducted in East Godavari financial health of Shri Venkatesh Co- district of Andhra Pradesh and Coimbatore of operative textile mills ltd”. He found that the tamilnadu, where paddy processing is taken up textile mill under the study was just on the edge extensively by the private sector. East Godavari of financial collapse. The financial position is not was purposively selected to analyse the business in the healthy zone during that period of study. performance of rice mills, since it has the highest Dev (1998) in his study on management number of rice mills in Andhra Pradesh and appraisal of cashew processing industry in Uttar spinning mills in Tamilnadu. Kannada found that the total capital investment 3.2 Sampling design directly varied with the size of the unit. Further, Considering the importance of paddy crop in he concluded that the total capital investment East Godavari district and presence of highest was Rs. 117.5 lakhs for large scale units and Rs. number of rice mills in the state, this area was 36.32 lakhs for small scale units, wherein purposively selected for the study. Maximum majority (80 %) of the fixed capital investment number of rice mills are situated in Kakinada was on building and machinery. (rural), Kajuluru Mandal, Tallarevu Mandal, Ali (2000) used financial ratios for analyzing and Karapa Mandal, Ramachandrapuram Mandal, appraising the business performance of co- Rayavaram Mandal and Peddapuram Mandal. A operative oil mills in Gadag district of Karnataka sample of five rice mills was purposively and found that on overall levels, the condition of selected. large scale unit was very unsatisfactory while 3.3 Nature and sources of data that of the medium scale unit was just The data required for accomplishing the satisfactory. objectives of the study were collected from both Neha Mittal (2011) has studied the primary and secondary sources. The primary determination of the capital structure choice of data collected from the rice mill owners related the selected Indian companies. The main to problems encountered in the rice milling objective was to investigate whether and to what operations. Secondary data were collected from extent the main structure theories could explain the records maintained by the mill owners. These the capital structure choice of Indian firms. It has data pertained to the details of assets and ISSN (PRINT): 2393-8374, (ONLINE): 2394-0697, VOLUME-5, ISSUE-4, 2018 79 INTERNATIONAL JOURNAL OF CURRENT ENGINEERING AND SCIENTIFIC RESEARCH (IJCESR) liabilities, extent of investment made at different Working Capital: The working capital includes points in time, cash inflows and outflows. The cost of raw materials, utilities (like power, oil data were collected for the period from 2007-08 and water charges), processing material (cloth to 2011-12, i.e., five years. bags, tags, labels), wages, salaries, company 3.4 Analytical techniques used overheads (repair and maintenance cost) and In order to analyze the objectives of the study, administrative overheads (stationery expenses the data collected was subjected to analysis and office communication), interest on working through appropriate techniques as follows. capital, license fee, cost of processing and 1 . Percentage Change Analysis advertisement expenses. 2 . Financial Ratio Analysis 3 . Garrett’s Ranking Technique Tools Used For Analysis 3.5 Definition of terms and concepts used in Comparative ratio analysis the study Abbreviation: Modern Rice Mills: Modern rice mills are the LM- Lakshmi Mills units, in which paddy processing is carried out by BASM- Bannari Amman Spinning using rubber roll shellers, a modern technology Mill which is more efficient. Majority of the activities SRSM- Sri Ramakrishna Spinning are carried out using machineries like driers, Mill aspirators, graders, polishers, etc. KPRSM- Kpr Spinning Mill SSP- Super Spinning Mill 4. COMPARATIVE RATIO ANALYSIS: 4.1. COMPARATIVE CURRENT RATIO OF 5 COMPANIES Interpretation: From the above table it is clear that current ratio of Lakshmi mills is high and all other companies current ratio is too low then the standard norms 2:1.