“Ratio Analysis in Selected Dairy Plants of Gujarat”

India is the highest milk producing country in the world. Over the years, the milk procurement by cooperative dairy plants, particularly in Gujarat state, has increased and consequently the processing capacities of dairy plants have also increased. However, there was a lack of research on the performance of these dairy plants over a considerable period hence this research was undertaken to analyse the financial performance of these dairy cooperatives and bring out the output which could be used for improving the performance as well as for opening new research areas in this direction. The present study was conducted by selecting 12 dairy plants of different size from the state of Gujarat. The financial statements of the dairy plants were collected from the Annual reports of the dairies and subsequently the financial ratio technique was applied to evaluate the performance of the dairy plants. From the analysis it could be concluded that- the Liquidity position of the selected dairy plants was satisfactory (Current ratio 1.24), the figures of leverage ratios indicate that the selected diary plants used to borrowed capital upto 80 % of total funds. Also, the Overall working capital position of the industry as measured by Debtors, Inventory and Creditors turnover ratio, was found to be satisfactory. The category wise computation of financial ratios indicated that Small dairy plants used lower proportion of borrowed funds and their debt servicing capacity measured by Interest coverage ratio was better than the industry. Also, the Total assets Turnover & Current assets turnover of Small Plants (5, 8) was better than Industry (4,7)., indicating better management of assets by Small plants. With respect to profitability, the Gross profit ratio, Return on Assets (ROA) and Return on Equity (ROE) of small plants (7.9%, 2.06% & 10.65%) was found to be higher than Industry (6.26%, 1.40% & 8.63%). Analysis of the cost structure of the selected dairy plants indicated that the major costs for dairy industry were – Raw material cost (84.5%), packaging (3.53%), Power and fuel (2.10%) and processing (1.30%). The Medium sized dairy plants scored relatively poor on all major financial ratios as compared to other two categories indicating a scope of further research in this area.