t financial performance

A STUDY ON THE FINANCIAL PERFORMANCE ANALYSIS OF THE INDIA CEMENTS LTD, ARIYALUR

Submitted By

DURGA.P

Reg. No: 811311631020

A PROJECT REPORT

Submitted to the

FACULTY OF MANAGEMENT STUDIES

In partial fulfillment for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

J.J. COLLEGE OF ENGINEERING AND TECHNOLOGY

TIRUCHIRAPPALI-620009

ANNA UNIVERSITY CHENNAI

CHENNAI 600 025

July, 2013

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BONAFIDE CERTIFICATE

Certified that this project report titled “A STUDY ON THE FINANCIAL PERFORMANCE ANALYSIS OF THE

INDIA CEMENTS LTD, ARIYALUR” is the bonafide work of Ms. P. DURGA (Reg.No. 811311631020) who

carried out the research under my supervision. Certified further, that to the best of my knowledge the

work reported herein does not form part of any other project report or dissertation on the basis of

which a degree or award was conferred on an earlier occasion on this or any other candidate.

INTERNAL EXAMINER DIRECTOR – DoMS

EXTERNAL EXAMINER

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ACKNOWLEDGEMENT

First of all, I thank the almighty who has been with us throughout the endeavour and helped me

in completing this project successfully.

I am deeply indebted to our college Advisor Dr. V. SHANMUGANATHAN B.E., M.Sc. (Engg),

Ph.D., and our Principal Dr. S. SATHIYAMOORTHY M.E., Ph.D., of J.J. College of Engineering and

Technology, Trichy for giving me an opportunity to undergo M.B.A course during 2011-2013.

I am grateful to express my sincere thanks and deep sense of gratitude to our MBA Department

Advisor Dr. K. ABDULLAH BASHA M.A., M.Phil., Ph.D., and our Director Dr. Sw. RAJAMANOHARANE

M.Tech., MBA., PGDCA., PGDMM., SLET., Ph.D., and our faculty members for the guidance to do my

project work.

Words in my lexicon fall short to express my feelings towards the internal guide of my project

Dr. KAVITHA SHANMUGAM MBA., M.Phil., SLET., Ph.D., Professor Department of Management

Studies, for her timely help in completing this project report.

I am grateful to Mr.R.GURU NADAN (AGM) HR, Mr.K.VENKATESAN (AGM) A/C &

Mr.P.TAMILARASAN OF THE INDIA CEMENTS LIMITED for providing necessary information that helped

me in the prompt completion of the project.

Last but not the least, with limitless humility; I thank my parents and friends, who bestowed me

with enough courage to accomplish this treatise.

DURGA.P

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ABSTRACT

The present study of the research entitled “A Study on The Financial Performance

Analysis” was conducted in The India Cements Limited. The details regarding the history and

accounting policies of the company were collected through discussion with the company

officials. The study was based on secondary data from records, reports and profile of the

organization. Introduction about the project title “The Financial Performance Analysis” and

Profile of the company are discussed. The need, objectives, scope and limitations of the study are

studied.

The main objectives of the study is to make an analysis on the financial performance of

the company for 5 financial years, to calculate profitability turnover & financial ratios to assess

the financial position of the firm, to study the efficiency and liquidity position using ratios, to

study the trend of financial performance of the company, to assess individual financial segments

and put forth the strengths and weaknesses of the financial elements of balance sheet through

trend analysis.

The data for 5 financial years i.e., from 2007 – 2008 to 2011 – 2012, were collected and

used in the present study.

The tools used in this study are ratio analysis, trend percentages of income statement and

Balance sheet, common size balance sheet, comparative balance sheet and ratio analysis. Charts

and tables are used for better understanding. Through ratio analysis the company could

understand the Profitability, Liquidity, Leverage, Turnover positions of the company. Through

trend percentage of income statement and balance sheet, the company can visualize their growth.

The comparative balance sheet reveals the comparison between various year periods. This study

will be useful for owners, creditors, suppliers, customers, department managers and others to get

insight about financial soundness.

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CHAPTER –I

1.1 INTRODUCTION

FINANCE

Before we begin, first let’s understand the origin of word “FINANCE.”If we trace the

origin of finance, there is evidence to prove that it is as old as human life on earth. The word

finance was origin from French word. In the 18th century, it was adapted by English speaking

communities to mean “the management of money.” Since then, it has found a permanent place in

the English dictionary. Finance is now organized as a branch of Economics. Finance is an art of

managing various available resources like money, assets, investments, securities, etc.

At present, we cannot imagine a world without Finance. In other words, Finance is the

soul of our economic activities. Hence, Finance has now become an organic function and

inseparable part of our day-to-day lives.

1. DEFINITION

According to John N. Myer (1985), “the financial statements provide a summary of the

accounts of a business enterprise, the balance sheet reflecting the assets, liabilities and capital as

on a certain date and the income statement showing the results of operations during a certain

period”.

According to Anthony (1976), “ financial statements, essentially, are interim reports,

presented annually and reflect a division of the life of an enterprise into more or less arbitrary

accounting period more frequently in a year”.

Financial statements are broadly grouped into two groups.

1. Income Statements (Trading, Profit and loss Account)

2. Balance Sheets

2. MEANING OF FINANCIAL MANAGEMEN

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Financial Management means planning, organizing, directing and controlling the

financial activities such as procurement and utilization of funds of the enterprise. It means

applying general management principles to financial resources of the enterprise.

3. SCOPE/ELEMENTS

Investment decisions includes investment in fixed assets (called as capital budgeting).

Investments in current assets are also a part of investment decisions called as working

capital decisions.

Financial decisions - They relate to the raising of finance from various resources which

will depend upon decision on type of source, period of financing, cost of financing and

the returns thereby.

Dividend decision - The finance manager has to take decision with regards to the net

profit distribution. Net profits are generally divided into two:

Dividend for shareholders- Dividend and the rate of it has to be decided.

Retained profits- Amount of retained profits has to be finalized which will depend

upon expansion and diversification plans of the enterprise.

4. FUNCTIONS OF FINANCIAL MANAGEMENT:

Estimation of capital requirements

Determination of capital composition

Choice of sources of funds

Investment of funds

Disposal of surplus

Management of cash

Financial controls

5. FINANCIAL PERFORMANCE ANALYSIS

Financial performance analysis is the process of identifying the financial strengths and

weaknesses of the firm by properly establishing the relationship between the items of balance

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sheet and profit and loss account. It also helps in short term and long term forecasting and

growth can be identified with the help of financial performance analysis.

The dictionary meaning of ‘analysis’ is to resolve or separate a thing into its element or

components parts for tracing their relation to the things as a whole and to each other.

The analysis of financial statement is a process of evaluating the relationship between the

component parts of the financial statement to obtain a better understanding of the firm’s position

and performance. This analysis can be undertaken by management of the firm or by parties

outside the firm, namely, owners, creditors, investors and others.

6. TYPES OF FINANCIAL STATEMENTS

Financial statements include

A Balance Sheet

An Income Statement

A Statement of Changes

A Statement of Changes in financial position: It is fund flow and cash flow

statement.

The financial statement is prepared with a view to depict financial position of the concern.

A proper analysis and interpretation of this statement enables a person to judge the profitability

and financial strength of the business.

7. IMPORTANCE OF FINANCIAL STATEMENTS

(a) For management: Till recently, the feeling was that financial statements are meant only

for owners of the concern and to satisfy legal requirements. Now it is realized that financial

statements are of utmost help to the management of a concern. Management will be able to take

effective decisions only when correct and reliable information is at its disposal. If information is

not available, management can neither plan nor fulfill the functions of operation and control.

(b) For the Financiers: Besides managements, financial statements are also of great

importance to the financiers and lenders. Lenders need information regarding customer’s

financial position, solvency, credit standing, profitability, etc. Financial statements help the

bankers and lenders to decide whether to extend loans to the customers.

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(c) For the Creditors: A Trade creditor is another class for whom financial statements are

important. Trade credit implies extending facilities of deferred payment for credit purchases by

buyer. All these facts are revealed by financial statements with the help of solvency ratios, cash

and fund flow analysis, etc.

(d) For Investors: Present and prospective investors are interested in studying financial

statements to assess earning capacity, growth potential and efficiency of management. Financial

statements provide such information readily to shareholders and debenture holders.

8. LIMITATIONS OF FINANCIAL STATEMENTS

Financial statements are normally prepared on the basis of accounting principles,

conventions and past experiences. Therefore, they opt not communicate much

about the profitability, solvency, stability, liquidity, etc., of the undertakers to the

users of the statements.

Financial statement emphasizes on disclose only monetary facts, i.e., quantitative

information, but qualitative information is ignored.

Financial statements disclose only the historical information. It does not consider

changes in money value, fluctuations of price level, etc. Thus, correct forecasting

for future is not possible.

Influences of personal judgments leads to opportunities for manipulation while

preparing financial statements.

Information disclosed by financial statements is based on accounting concepts and

conventions. It is unrealistic because of the difference in terms and conditions,

and changes in economic situations.

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1.2 COMPANY PROFILE

This section discusses the profile of “The India Cements Ltd” with regard to its History,

mission, vision, milestones, manufacturing units, subsidiary companies, products, manufacturing

process etc., in detail.

HISTORY

Shri.T.S.Narayanswami and Shri.N.SankaralingaIyer first incorporated the company

“The India Cements Ltd” in 1946 and the first plant was setup at Sankar Nagar in Tamil Nadu

in 1949. The Company is the largest producer of cement in South India. The Company’s plants

are well spread with three in Tamil Nadu and four in Andhra Pradesh, which cater to all major

markets in South India and Maharashtra. The Company is the market leader with a market share

of 28% in the South. It aims to achieve a 35% market share in the near future. The company has

access to huge limestone resources and plans to expand capacity by de-bottlenecking and

optimization of existing plants as well as by acquisitions. The company has a strong distribution

network with over 10,000 stockiest of whom 25% are dedicated. The company has well-

established brands Sankar Super power, Coromandel super power and Raasi super power

with Marketing Regional offices located in all Southern states and Maharashtra. Besides, Stock

depots in each town of major districts/industrial towns.

MISSION

Aiming High

We should be one of the largest cement companies in the country. Our growth in size will

be through continuous review of potentials of the existing manufacturing resources, strategic

acquisitions and expansions.

Core competency

Cement will be the mainstay. However, they shall venture in to related fields, which

afford purposeful synergy.

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Quality quest

Product quality, consistency and customer service will be pursued as an act of faith

throughout the organization.

Modern mindset:

In an environment, which is intensively competitive, they shall be futuristic in outlook

and effective in management.

Pursuit of excellence:

The growing size of the business permits them to have an R&D setup of their own. We

shall continuously challenge methods, systems, and operating parameters. They shall constantly

review our manufacturing systems to upgrade quality and value of their products.

Human Resources

They consider people as their valuable assets. Their HRD systems will be totally

proactive and tuned to provide excellent working environment and transparent organizational

culture for creativity, innovation and participation.

Value Addition

ICL will continuously strive to enhance its value to its customers, shareholders and

employees.

Community Welfare

As the organization grows, as a good corporate citizen, they shall be sensitive to the

welfare and development needs of the society around them.

VISION

In this journey, clarity of vision, a readiness to cultivate a global mindset, effectiveness,

harnessing of human resources to enhance job and knowledge skills of employees, a strong

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accent on R&D and innovation and a move away from selling to innovate marketing in

recognition of the fact that the customer is truly king, are some of the strategies that will help

corporate to survive and succeed.

However, it must be remembered that it is not enough to adopt a set of values and just

leave them in place. In order to move with the changing times, values and ideas must be

ceaselessly re-examined so as to ensure that they are in tune with the organization’s goals.

The India cements Ltd is committed to contribute its might in making the 21 st century an

“Indian Century”.

MILESTONE

1946 incorporation of the India Cements Ltd.

1949 Commissioning of first cement plant at Sankarnagar-installed capacity 1 lakhtons

per annum.

1963 Commissioning of second cement plant atSankaridrug- installed capacity of 2 lakhs

tons per annum.

1969 Awarded Merit certification for outstanding export performance (1968-1969).

1971 Capacity expansion at SankariDurg at 6 lakhs tonnes per annum.

1990 Acquisition of Coromandel cement plant at Cuddapah District of Ansdhra Pradesh–

with installed capacity rises to 2.6 million tons per annum. The India cements Ltd

becomes the largest producer of cement in South India.

1990 Conversion of Sankarnagar plant to dry process with the increased capacity of 1

million tons per annum.

1991India cements ventures into shipping. Sets up a shipping division.

1994 ISO 9002 certification for Sankarnagar plant.

1994 Floats successfully US$ 50 million GDR issue.

1995 Announces issue of 1:1 Bonus shares.

1996India cements’ green field cement plant at Dalavoi commences commercial

production. Installed capacity 0.9 million tons per annum.

1997 India cements acquire M/s. Aruna sugars finance Ltd. and renamed as India

cements capital and finance Ltd.

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1997India cements acquire Cement plant of Visaka cement industry Ltd., at Tandur,

Ranga Reddy district of Andhra Pradesh. Installed capacity 0.9 million tonnes.

1998India cements acquire Cement Corporation of India’s Yerraguntla cement plant at

Andhra Pradesh. Installed capacity 0.4 million tones.

1998 India cements acquiresRaasi cement ltd., at Nalgonda district of Andra Pradesh.

Installed capacity 1.8 million tones.

1999India cements acquires cement plant of Shri Vishnu cement ltd., at Nalgonda district

of Andhra Pradesh. Installed capacity 1.0 million tones.

2001 India cements divests its stake in Shri Vishnu cement Ltd to M/s. Italia Cementi,

which is joint venture company of Zuari Industries and made sizeable profit to cut down

debt position.

2004 The unique waste heat recovery system for generation of power from waste gas at

Vishnupuram cement plant was commissioned during November 2004, for a capacity of

7.7 MW of power. This plant was set up through Japanese tie up and started earning

carbon credits besides reducing power cost for the company.

2004 The company through its special purpose vehicle M/s Coromandel electric Co Ltd

has commissioned a (gas based) captive power plant at Ramanathapuram for a capacity

of 17.4 MW and the same has started supplying power from the month of Nov 2004.

2005 The company has successfully completed an equity in the international market

during Oct 2005 by issuing 25,613,796 global depositary shares(GDSs) at USD 4.3226

per GDS, (each GDS representing 2 underlying equity shares of Rs.10 each) and raised

an amount of Rs.497 crores including a premium of Rs.446 crores.

2006The company has Issued unsecured zero coupon convertible bonds due

2011(FCCBs) for US$75 Million to investors outside India at an initial conversion of

Rs.305.57 per share.

2007 The Hon’ble high court of judicature at Madras vide its order dated 25 th July 2007

sanctioned the scheme of amalgamation of Visaka cement Industry limited with The

India Cements ltd.

2008 the company has revived its shipping business with the purchase of two ships (Dry

bulk carriers) with a total capacity of 79843 DWT.

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2008 the company has successfully bid for the Chennai franchise of the DLF-IPL 20/20

cricket tournament-“Chennai super kings”.

2008 The company has completed and commenced commercial production 1 million tone

grinding plant Chennai.

2009 the company has completed and commenced commercial production of the 1

million ton grinding plant at Parli (Maharashtra).

2009 The company’s subsidiary, namely, Trishul concrete products Ltd has commenced

its commercial operations and completed production of 1 lakh cum ready mix concrete

plant at Hyderabad in Andhra Pradesh state.

2009 The number II line of 1.2 MT at Malkapur was commenced operations from March

2009.

2009 The upgraded capacity of Kiln I to 3000 TPD (1700 TPD) at Vishnupuram started

functioning from April 2009.

2010 A new cement plant was started at Banswara, in Rajasthan.

2011 ISO 9001 certification for Dalavoi Plant.

2011 A Power plant was started at Sanakar Nagari.

2012 the company has purchase its third bulk carrier ships (Dry bulk carriers) with

capacity of 52489 DWT and the total capacity of the fleet at 132332 DWT.

2012 A Power plant was in-process at Vishnupuram plant.

MANUFACTURING UNITS

The company has eight factories and two Grinding units. They are situated in the following

areas:

1. Sankar Nagar – Tamil Nadu.

2. SankariDurg – Tamil Nadu.

3. Dalavoi – Tamil Nadu.

4. Chilamkur – Andhra Pradesh.

5. Yerraguntla – Andhra Pradesh.

6. Vishnupuram – Andhra Pradesh.

7. Malkapur – Andhra Pradesh.

8. Banswara -Rajasthan.

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9. Chennai Grinding unit – Tamil Nadu.

10. Parli Grinding Unit – Maharashtra.

SUBSIDIERY COMPANIES

Industrial chemicals and Monomers Limited,

ICL Securities Limited,

ICL Financial Services Limited,

ICL International Limited,

Trishul Concrete Limited,

PT. Coromandel Minerals Resources,

Indo Zinc Limited.

Coromendal InfoTech india ltd.

Mandya Sugars Ltd.

PRODUCTS

It produces 3 types of cement Products, they are:

(a) 53 Grade Cement

(b) 43 grade cement

(c) Portland Pozzolana Cement

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CALCA

CEMENT MANUFACTURING PROCESS

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SCHEMATIC DIAGRAM OF MANUFACTURE OF CEMENT

CALCAREOUS MATERIAL (LIME STONE FROM MINES)

ARGILLACEOUS MATERIAL (CLAY, BAUXITE)

RIGHT PROPORTIO

N MIX

DESPATCH

GRINDING WITH GYPSUM

CLINKER

KILN 1400° C TO 1500° C

CHEMICAL AND PHYSICAL TEST

CEMENT

CHAPTER-II

2.1 REVIEW OF LITERATURE

According to John.N.Meyer (2000) in his study on “Financial Performance”“The

financial statement provides summary of accounts of a business enterprise, the balance sheet

reflecting assets, liabilities and capital as on a certain date and the income statement showing the

result of operation during a certain period”.

According to T.Rajasekar, S.Aravanan (2002) have conducted a study on “Financial

management analysis” which is largely a study of various financial factors in a business as

disclosed by a single set of statement & a study of the trend of these factors as shown in the

Financial statement. Financial statement analysis is an information processing system designed

to provide data for decision making models, such as, the portfolio selection model, bank lending

decision models & corporate financial management models.

According to Santomero & Babbel (2005) in his study on “Financial management

analysis” provides an extensive analysis of financial risk management as performed by insurers

and reports on the current state of this process in the insurance industry. They conclude that

significant improvements in financial risk management are necessary and that even the most

advanced insurers are not doing an effective enough job managing those risks.

According to Dan R.Dalton (2007) in his study on “Financial Performance” meta-

analyses suggest no relationship of a meaningful level. Subgroup moderating analyses based on

firm size, the nature of the performance indicators, and operation of board composition provide

no evidence of moderating influences for these variables as well. The evidence derived from the

meta-analysis and moderating analysis for board leadership structure and financial performance

has the same character.

K. Srinivas (2010) in his study on “Financial performance” has the main objectives of

critically examining and high lighting the financial performance of the company to study the

liquidity and profitability of the company.

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CHAPTER-III

3. RESEARCH METHODOLOGY

In this study the various steps that are adopted by the researcher in studying the research

problem along with the logic behind them are discussed.

3.1 RESEARCH DESIGN

The proposed study is descriptive in nature. Research design is needed because it

facilitates the smooth sailing of the various research operations, thereby making research as

efficient as possible.

3.2 SOURCE OF INFORMATION

Basically, there are two sources of information. The researcher has collected secondary

data for this study.

DATA COLLECTION METHODS

DATA COLLECTION

The data collection is classified into two types.

Primary data

Secondary data

PRIMARY DATA

There is no primary data available for this analysis.

SECONDARY DATA

The secondary data are data are collected from information which is used by others. It is

not direct information.. The secondary data are collected from the following:

Company’s annual report

Company’s website

Manual

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PERIOD OF STUDY

The study covers a time period of 5 years from the financial year 2007-2008 to 2011-

2012

3.3 OBJECTIVES OF THE STUDY

PRIMARY OBJECTIVE

To study the financial performance analysis of “THE INDIA CEMENTS LIMITED”.

SECONDARY OBJECTIVES

To analyze the financial changes over a period of five years.

To analyze the financial statements of the company by using financial tools.

To evaluate the financial position of the company in terms of solvency, profitability,

activity and earnings ratios.

To suggest effective measures in the existing system of the company

3.4 SCOPE OF THE STUDY

This study can be utilized to find out the current financial position.

This study concentrates on all the ratios which are related to the assessment of financial

aspect.

An attempt can be made during this study to understand the efficiency of the company.

3.5 TOOLS FOR FINANCIAL PERFORMANCE ANALYSIS

The data are analyzed using the following tools:

Comparative statements

Common size statements

Ratio analysis

Trend Analysis

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I. COMPARATIVE STATEMENTS

Comparative statements provide information to assess the direction of change in the

business. In these statements, figures for two or more periods are placed side by side to facilitate

comparison. Balance sheet and income statement are alone prepared in a comparative form.

(a) Comparative balance sheet

(b) Comparative income statement

(a)Comparative balance sheet

The comparative balance sheet is helpful in analyzing and evaluating the financial

position of the firm over a period of years. The comparative balance sheet analyze is the study of

the trend of the same items, group of items, and computed items in two or more balance sheet of

the same business enterprise on different dates.

The changes in periodic balance sheet items reflect the conduct of a business. The

changes can be observed by comparison of the balance sheet at the beginning and at the end of

the period and these changes can help in forming an opinion about the progress of an enterprise

(b)Comparative income statement

An income statement shows the operating results (net profit or loss) of a designed period

of time. A comparative income statement shows the operating results for a number of accounting

periods so as to facilitate comparison.

It gives an idea of the progress of a business over a period of time. It gives an idea about

the improvement in sales, profit and other expenses over the previous years.

II. COMMON SIZE STATEMENTS

Financial statements when read in absolute figure are not easily understandable. They are

even misleading. Each items of asset is converted in to percentage to total asset and each item of

capital and liabilities is expressed to total liability and capital fund. Thus the whole balance sheet

is converted in to percentage form i.e., every individual item stated as a percentage of total

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100.such converted balance sheet is known as common size balance sheet. The percentage so

calculated can be easily compared with the corresponding percentages in some other period.

III. RATIO ANALYSIS

Ratio Analysis is a form of Financial Statement Analysis that is used to obtain a quick

indication of a firm's financial performance in several key areas. The ratios are categorized as

Short-term Solvency Ratios, Debt Management Ratios, Asset Management Ratios, Profitability

Ratios, and Market Value Ratios.

In Ratio Analysis, the data, which are provided by financial statements, are readily

available. The computation of ratios facilitates the comparison of firms which differ in size and

financial performance with industry averages. In addition, ratios can be used in a form of trend

analysis to identify areas where performance has improved or deteriorated over time.

Because Ratio Analysis is based upon Accounting information, its effectiveness is limited

by the distortions which arise in financial statements due to such things as Historical Cost

Accounting and inflation. Therefore, Ratio Analysis should only be used as a first step in

financial analysis, to obtain a quick indication of a firm's performance and to identify areas

which need to be investigated further.

1. Liquidity (Short-Term Solvency) Ratios

Liquidity (Short-term Solvency) Ratios attempt to measure the ability of a firm to meet

its short-term financial obligations. In other words, these ratios seek to determine the ability of a

firm to avoid financial distress in the short-run. The two most important Short-term Solvency

Ratios are the Current Ratio and the Quick Ratio

(a)Current Ratio

The ratio of current assets to current liabilities is called current ratio. Current ratio indicates the

ability of a concern to meet its current obligations as and when they are due for payment. The

current ratio of 2:1 is considered as ideal.

Current ratio = Total Current Assets / Total Current Liabilities

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(b) Quick Ratio

This ratio is also called “quick” or Acid test Ratio. The liquid ratio is very useful in

measuring the liquidity position of a firm. This ratio is calculated by dividing Current Assets less

Inventories by Current Liabilities. The ideal quick ratio is 1:1.

Quick Ratio = Total Quick assets / Total Quick Liabilities

2. Solvency ratios (Long-Term)

Solvency ratios assess the long – term financial condition of the firm. Bankers and

Creditors are most interested in liquidity. But shareholders, debenture holders, and financial

institutions are concerned with the long term finanacial prospects.

(a) Debt-Equity Ratio

The Debt-Equity Ratio is calculated by dividing Total Debt by Total Owners' Equity.

Debt includes all long- term and short-term debts. Equity consists of preference share capital,

equity share capital and reserve and surplus.

Debt- Equity Ratio = Debt / Equity

(b) Proprietary Ratio

The Proprietary ratio is the relationship between proprietors’ funds and total tangible

assets. A high proprietary ratio indicates less danger and risk to creditors in the event of winding

up.

Proprietary ratio = Proprietors’ fund / Total tangible assets

3. Profitability Ratio

Profitability ratios measure the profitability of a firm’s business operations. These ratios

may be related to sales (or) investments.

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(a)Gross Profit Ratio

Gross Profit Ratio expresses the relationship between gross profit and net sales. It

indicates the efficiency of production or trading operations.

Gross Profit Ratio = Gross Profit / Sales X 100

(b)Net Profit Ratio

Net Profit Ratio measures the relationship between net profit and sales. It indicates the

efficiency of the overall operations of the firm. It shows what percentage of sales is left to the

owners after meeting all costs.

Net Profit Ratio = Net Profit / Sales X 100

(c)Operating Profit Ratio

Operating Profit Ratio matches operating profit and sales. This ratio shows the

percentage of sales absorbed by the operating profit. Operating expenses includes selling and

distribution expenses and administration expenses.

Operating Profit Ratio = Operating profit / Sales X 100

(d) Return on Investment

Return on investment establishes the relationship between profits and the capital

employed. It is the most widely used to measure the overall profitability and efficiency of the

business.

Return on investment = Net profit (after interest & tax) / capital employed X 100

4. Activity (or) Turnover ratio

Activity ratios measure the efficiency of asset management. The efficiency in (asset

utilization) the use of assets would be reflected by the speed with which they are converted into

sales. Activity ratios indicate the relationship between sales and various assets of the firm.

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(a)Stock (or) Inventory Turnover ratio

The Inventory Turnover measure the firm's management of its Inventory. This ratio is also

called velocity ratio. It is calculated to ascertain the efficiency of inventory management in terms

of capital investment. This ratio is helpful in evaluating and review of inventory policy.

Stock turnover ratio = Cost of goods sold / Average stock

(b)Debtors (or) Receivables turnover ratio

The Debtors Turnover ratio gives the number of times accounts receivable are turned

over during the period in relation to net credit sales. It gives the velocity of collection of cash

from debtors. Net credit sales are taken for calculating the debtors turnover ratio as debtors arise

only from credit sales.

Debtors turnover ratio = Credit sales / Debtors

(c) Creditors turnover ratio

The Creditors turnover ratio shows, on an average, the number of times creditors are

turned over during a year. A higher ratio indicates quick settlement of dues and a lower ratio

reflects liberal credit terms granted by suppliers.

Creditors turnover ratio = Credit purchases / Creditors

(d)Fixed Assets Turnover

The Fixed Assets Turnover Ratio measures how productively the firm is managing its

Fixed Assets to generate Sales. When comparing Fixed Assets Turnover Ratios of different firms

it is important to keep in mind that the values for Net Fixed Assets reported on the firms' Balance

Sheets are book values which can be very different from market values.

Fixed assets turnover ratio = Sales / Net Fixed assets

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(e)Working capital turnover ratio

Working capital turnover ratio shows the measurement of companies’ development of

working capital to the generation of sales over a given period. A higher ratio indicates efficient

utilization of working capital.

Working capital turnover ratio = Sales / Working capital

III TREND ANALYSIS

Trend analysis is carried out by calculating trend ratio. Trend analysis is significant for

forecasting and budgeting. Trend analysis discloses the change in financial and the operating

data between specific periods. Trend Analysis is one of the tools for the analysis of the

company’s monetary statements for the investment purposes by investors in order to determine

the financial position of the business. Trend analysis is very helpful in making a comparative

study of the financial statements of several years. Under this technique, information for a number

of years is taken up and one year (usually the first year) is taken as the base year. Each item of

the base year is taken as 100 and on the basis the percentages for other years are calculated.

3.6 LIMITATIONS OF THE STUDY

No primary data is used for the study.

Figures for the analysis are taken from the annual reports.

This study ignore the changes in price level.

Financial statements are records of past events only. Past can never be a 100%

representative of the future.

24

CHAPTER-IV

4.1 RATIO ANALYSIS

I. LIQUIDITY RATIO

Liquidity ratios measure the ability of the firm to meet its current obligations. This

indicates whether the firm has sufficient liquid resources to meet its short term liabilities.

4.1.1 CURRENT RATIO

The ratio of current assets to current liabilities is called current ratio. Current ratio

indicates the ability of a concern to meet its current obligations as and when they are due for

payment.

CURRENT RATIO = Total Current Assets / Total Current Liabilities

The following table 4.1.1 shows the current ratios for the year 2008 to 2012:

TABLE 4.1.1

CURRENT RATIO

YEAR CURRENT ASSET

(Rs. In lakhs)

CURRENT LIABILITIES

(Rs. In lakhs)

CURRENT

RATIO

2007-2008 214941.24 98353.24 2.2

2008-2009 214352.83 115331.62 1.9

2009-2010 287644.83 127410.35 2.3

2010-2011 290385.92 111838.04 2.6

2011-2012 124416.60 93480.61 1.3

Source: Secondary Data

25

CHART 4.1.1

CURRENT RATIO

2007-2008 2008-2009 2009-2010 2010-2011 2011-20120

0.5

1

1.5

2

2.5

3

2.2

1.9

2.3

2.6

1.3

INTERPRETATION

The current ratio of 2:1 is considered as ideal. From the above analysis, we know that the

company has current assets of Rs.1.3 for every one rupee of current liability. There is a small

margin of safety against fall in price. It indicates that the firm has insufficient liquidity to meets

it’s short term obligation.

26

4.1.2 LIQUID RATIO (OR) QUICK RATIO

This ratio is also called “quick” or Acid test Ratio. The liquid ratio is very useful in measuring

the liquidity position of a firm. It means the firm to pay off current obligations, immediately and

as more rigorous test of liquidity than the current ratio.

LIQUIDITY RATIO = Liquid assets / Liquid liabilities

The following table 4.1.2 shows the Liquid ratios for the year 2008 to 2012:

TABLE 4.1.2

LIQUID RATIO

YEAR QUICK ASSET

( Rs. in lakhs)

QUICK LIABILITIES

( Rs. in lakhs)

QUICK

RATIO

2007-2008 181920.19 98353.24 1.8

2008-2009 177303.29 115331.62 1.5

2009-2010 242868.30 127410.35 1.9

2010-2011 240655.02 111833.04 2.2

2011-2012 71064.31 93480.61 1.0


CHART 4.1.2

27

LIQUID RATIO

2007-2008 2008-2009 2009-2010 2010-2011 2011-20120

0.5

1

1.5

2

2.5

1.8

1.5

1.9

2.2

1

INTERPRETATION

The ideal liquid ratio is 1:1. From the above analysis, we know that the company’s liquid

ratio decreased from 1.8 to 1.0 in the year 2008 to 2012. However, it indicates that the firm has

satisfies the ideal ratio and so the firm has a strong liquidity position. Hence there is

effectiveness on the part of the firm towards investment in liquid assets.

II SOLVENCY RATIOS (LONG-TERM)

28

Solvency ratios assess the long – term financial condition of the firm. Bankers and

Creditors are most interested in liquidity. But shareholders,debenture holders, and financial

institutions are concerned with the long term finanacial prospects.

4.1.3 DEBT-EQUITY RATIO

The Debt-Equity Ratio is calculated by dividing Total Debt by Total Owners' Equity.

Debt includes all long- term and short-term debts. Equity consists of preference share capital,

equity share capital and reserve and surplus.

DEBT- EQUITY RATIO = Debt / Equity

The following table 4.1.3 shows the debt equity ratios for the year 2008 to 2012:

TABLE 4.1.3

DEBT-EQUITY RATIO

YEAR DEBT

( Rs. in lakhs)

EQUITY

( Rs. in lakhs)

DEBT-EQUITY

RATIO

2007-2008 181150.58 332110.82 0.55

2008-2009 198802.96 363138.98 0.55

2009-2010 213273.04 413582.40 0.52

2010-2011 245606.74 408976.05 0.60

2011-2012 114640.59 406761.49 0.28


CHART 4.1.3

DEBT-EQUITY RATIO

29

2007-2008 2008-2009 2009-2010 2010-2011 2011-20120

0.1

0.2

0.3

0.4

0.5

0.6 0.55 0.550.52

0.600000000000001

0.28

INTERPRETATION

A standard ratio of 1:1 is considered desirable i.e., debts are to be equal to owners funds.

From the above analysis, we know that the company’s debt equity ratio is decreased from 0.55

times to 0.28 times which is not in satisfactory level. The low Debt-equity ratio indicates that

debt capital which is a less costly source of funds is not used by the business to a desirable

extent.

4.1.4 PROPRIETARY RATIO

30

The Proprietary ratio is the relationship between proprietors’ funds and total tangible

assets. This shows how much of total tangible assets are financed by shareholders’ funds. A high

proprietary ratio indicates less danger and less risk to creditors in the event of winding up.

PROPRIETARY RATIO = Proprietors’ fund / Total tangible assets

The following table 4.1.4 shows the proprietary ratios for the year 2008 to 2012:

TABLE 4.1.4

PROPRIETARY RATIO

YEAR PROPRIETORS’ FUND

( Rs. in lakhs)

TOTAL TANGIBLE

ASSETS ( Rs. in lakhs)

PROPRIETARY

RATIO

2007-2008 332110.82 309859.75 1.1

2008-2009 363138.98 347786.90 1.0

2009-2010 413582.40 360337.88 1.2

2010-2011 408976.05 355625.37 1.2

2011-2012 406761.49 387785.72 1.1


CHART 4.1.4

PROPRIETARY RATIO

31

2007-2008 2008-2009 2009-2010 2010-2011 2011-20120.9

0.95

1

1.05

1.1

1.15

1.2

1.1

1

1.2 1.2

1.1

INTERPRETATION

From the above analysis, we know that the company’s proprietary ratio is equal in the

first year 2008 to last year 2012 as 1.1, with lot of fluctuations with the in-between years and

also it is equal to the standard ratio 1:1. It is in a satisfactory level. It indicates less danger and

risk to proprietors.

III PROFITABILITY RATIO

32

Profitability ratios measure the profitability of a firm’s business operations .these ratios

may be related to sales (or) investments.

4.1.5 GROSS PROFIT RATIO

This ratio is also known as Gross margins or Trading Margin ratio Gross Profits indicates

the efficiency of production or trading operation. A gross profit ratio the different between sales

and direct costs. Gross profit ratio explains the relationship between gross profit and net sales.

GROSS PROFIT RATIO = (Gross profit / Sales) X 100.

The following table 4.1.5 shows the gross profit ratios for the year 2008 to 2012:

TABLE 4.1.5

GROSS PROFIT RATIO

YEAR GROSS PROFIT

( Rs. in lakhs)

SALES

( Rs. in lakhs)

GROSS PROFIT RATIO (%)

2007-2008 248372.12 355446.91 70

2008-2009 242687.79 383912.30 63

2009-2010 246090.68 410070.28 60

2010-2011 221113.70 388807.36 57

2011-2012 349497.95 472252.57 74


CHART 4.1.5

GROSS PROFIT RATIO

33

2007-2008 2008-2009 2009-2010 2010-2011 2011-20120

10

20

30

40

50

60

70

80

70

6360

57

74

INTERPRETATION

From the above analysis we found that the gross profit ratio is higher every year. In 2008

the gross profit ratio is 70% and increased to 74% in the year 2012which indicates a sign of good

management as it implies that the cost of production is relatively low. It indicates the efficiency

of production (or) trading operations.

4.1.6 NET PROFIT RATIO

34

Net profit refers to the profit after taxes which are available to shareholders. The net

profit ratio brings out the relationship between the net profit and sales. That is, net profit

generated for every hundred rupees of sales revenue is expressed by the ratio.

NET PROFIT RATIO = (Net profit / Net Sale) X 100.

The following table 4.1.6 shows the net profit ratios for the year 2008 to 2012:

TABLE 4.1.6

NET PROFIT RATIO

YEAR NET PROFIT

( Rs. in lakhs)

SALES

( Rs. in lakhs)

NET PROFIT

RATIO (%)

2007-2008 63754 355446.91 18

2008-2009 43217 383912.30 11

2009-2010 35434 410070.28 9

2010-2011 6810.36 388807.36 2

2011-2012 29297 472252.57 6


CHART 4.1.6

35

NET PROFIT RATIO

2007-2008 2008-2009 2009-2010 2010-2011 2011-20120

2

4

6

8

10

12

14

16

1818

11

9

2

6

INTERPRETATION

From the above analysis we find that the net profit ratio is decreasing continuously from

18% to 6% from the year 2008 to 2012, which indicates that there is less profitability in the

company and hence, it has to increase its profitability ratio in future.

4.1.7 OPERATING PROFIT RATIO

36

Operating Profit Ratio matches operating profit and sales. This ratio shows the

percentage of sales absorbed by the operating profit. Operating expenses includes selling and

distribution expenses and administration expenses.

OPERATING PROFIT RATIO = (Operating profit / Sales) X 100

The following table 4.1.7 shows the Operating profit ratios for the year 2008 to 2012:

TABLE 4.1.7

OPERATING PROFIT RATIO

YEAR OPERATING PROFIT

(Rs. In Lakhs)

SALES

(Rs. In Lakhs)

OPERATING

PROFIT RATIO (%)

2007-2008 113056 355446.91 32

2008-2009 104320 383912.30 27

2009-2010 86351 410070.28 21

2010-2011 47330 9388807.36 12

2011-2012 92264 472252.57 20


CHART 4.1.7

37

OPERATING PROFIT RATIO

2007-2008 2008-2009 2009-2010 2010-2011 2011-20120

5

10

15

20

25

30

35 32

27

21

12

20

INTERPRETATION

From the above analysis, we find that the operating profit ratio decreased from 32% to

20% from 2008 to 2001. But in the year 2012 there is a higher operating profit ratio compared to

previous year. This indicates that the operating expenses are increased in the current year

compared to previous year which indicates that there is improvement in the profitability of the

company.

4.1.8. RETURN ON INVESTMENT

38

Return on investment establishes the relationship between profits and the capital

employed. It is most widely used to measure the overall profitability and efficiency of the

business.

RETURN ON INVESTMENT = Net profit (after tax) / capital employed X 100

The following table 4.1.8 shows the Return on investment for the year 2008 to 2012:

TABLE 4.1.8

RETURN ON INVESTMENT

YEAR NET PROFIT

(Rs. In Lakhs)

CAPITAL EMPLOYED

(Rs. In Lakhs)

RETURN ON

INVESTMENT (%)

2007-2008 63754 403483.22 15.80

2008-2009 43217 428771.06 10.08

2009-2010 35434 522705.81 6.78

2010-2011 6810.36 528236.6 1.29

2011-2012 29297 444227.68 6.60


CHART 4.1.8

39

RETURN ON INVESTMENT

2007-2008 2008-2009 2009-2010 2010-2011 2011-20120

2

4

6

8

10

12

14

16 15

10

7

2

7

INTERPRETATION

From the above analysis it could be known that the return on investment ratio has

decreased from 15.80 times to 6.60 times from the year 2008 to 2012. The return on investment

could still generate sufficient return for the stakeholders of the company. Thus, there is no better

profitability and there is inefficiency on the part of management in utilizing the long term

resources of the company.

IV ACTIVITY (OR) TURNOVER RATIO

40

Activity ratios measure the efficiency of asset management. The efficiency in (asset

utilization) the use of assets would be reflected by the speed with which they are converted into

sales. Activity ratios indicate the relationship between sales and various assets of the firm.

4.1.9 STOCK (OR) INVENTORY TURNOVER RATIO

The Inventory Turnover measure the firm's management of its Inventory. This ratio is also

called velocity ratio. It is calculated to ascertain the efficiency of inventory management in terms

of capital investment. This ratio is helpful in evaluating and review of inventory policy.

STOCK TURNOVER RATIO = Cost of goods sold / Average stock

The following table 4.1.9 shows the inventory turnover ratio for the year 2008 to 2012:

TABLE 4.1.9

INVENTORY TURNOVER RATIO

YEAR COST OF GOODS SOLD

(Rs. In Lakhs)

AVERAGE STOCK

(Rs. In Lakhs)

STOCK

TURNOVER RATIO

2007-2008 291692 8572 34

2008-2009 340695 10759 32

2009-2010 374636 12191 31

2010-2011 260985.79 4792.44 54

2011-2012 122754.62 4300.88 29


CHART 4.1.9

41

INVENTORY TURNOVER RATIO

2007-2008 2008-2009 2009-2010 2010-2011 2011-20120

10

20

30

40

50

60

3432 31

54

29

INTERPRETATION

From the above chart we note that the inventory turnover ratio decreased from 34 times

in the year 2008 to 29 times in the year 2012 which indicates that there is slow movement of

stock in the company. Hence there is no efficiency in the movement of stock in the company.

42

4.1.10 DEBTORS (OR) RECEIVABLES TURNOVER RATIO

The Debtors Turnover ratio gives the number of times accounts receivable are turned

over during the period in relation to net credit sales. It gives the velocity of collection of cash

from debtors. Net credit sales are taken for calculating the debtors turnover ratio as debtors arise

only from credit sales.

DEBTORS TURNOVER RATIO = Credit sales / Debtors

The following table 4.1.10 shows the debtors turnover ratio for the year 2008 to 2012:

TABLE 4.1.10

DEBTORS TURNOVER RATIO

YEAR CREDIT SALES

(Rs. In Lakhs)

AVERAGE DEBTORS

(Rs. In Lakhs)

DEBTORS

TURNOVER RATIO

2007-2008 355446.91 28564.16 12

2008-2009 383912.30 33252.52 12

2009-2010 410070.28 41961.85 10

2010-2011 388807.36 25390.19 15

2011-2012 472252.57 23211.16 20


43

CHART 4.1.10

DEBTORS TURNOVER RATIO

2007-2008 2008-2009 2009-2010 2010-2011 2011-20120

2

4

6

8

10

12

14

16

18

20

12 12

10

15

20

INTERPRETATION

From the above analysis we know that the company has higher debtors’ ratio in the year

2012 as 20 times from 12 times in the year 2008. This indicates that there is efficiency in asset

management and the debtors are more liquid in the company.

44

4.1.11 CREDITORS TURNOVER RATIO

The Creditors turnover ratio shows, on an average, the number of times creditors are

turned over during a year. A higher ratio indicates quick settlement of dues and a lower ratio

reflects liberal credit terms granted by suppliers.

CREDITORS TURNOVER RATIO = Credit purchases / Creditors

The following table 4.1.11 shows the creditors turnover for the year 2008 to 2012:

TABLE 4.1.11

CREDITORS TURNOVER RATIO

YEAR CREDIT PURCHASE

(Rs. In Lakhs)

CREDITORS

(Rs. In Lakhs)

CREDITORS

TURNOVER RATIO

2007-2008 20732.38 62394.46 0.33

2008-2009 24247.78 74454.42 0.33

2009-2010 33129.32 72956.88 0.45

2010-2011 35707.59 76779.03 0.47

2011-2012 37647.21 37159.38 1.01


45

CHART 4.1.11

CREDITORS TURNOVER RATIO

2007-2008 2008-2009 2009-2010 2010-2011 2011-20120

0.2

0.4

0.6

0.8

1

1.2

0.330000000000004

0.330000000000004

0.45 0.47

1.01

INTERPRETATION

From the above analysis we know that the company has increased gradually from 0.33

times in the year 2008 to 1.01 times in the year 2012 with regard to creditors’ turnover ratio. This

indicates that there is quick settlement of dues in the company.

46

4.1.12 FIXED ASSETS TURNOVER

The Fixed Assets Turnover Ratio measures how productively the firm is managing its

Fixed Assets to generate Sales. When comparing Fixed Assets Turnover Ratios of different firms

it is important to keep in mind that the values for Net Fixed Assets reported on the firms' Balance

Sheets are book values which can be very different from market values.

FIXED ASSETS TURNOVER RATIO = Sales / Net Fixed assets

The following table 4.1.12 shows the fixed assets turnover ratio for the year 2008 to 2012:

TABLE 4.1.12

FIXED ASSETS TURNOVER

YEAR SALES

(Rs. In Lakhs)

NET FIXED ASSET

(Rs. In Lakhs)

FIXED ASSETS

TURNOVER RATIO

2007-2008 355446.91 403937 0.8

2008-2009 383912.30 471229 0.8

2009-2010 410070.28 462151 0.9

2010-2011 388807.36 487431 0.8

2011-2012 472252.57 427802 1.1


47

CHART 4.1.12

FIXED ASSETS TURNOVER

2007-2008 2008-2009 2009-2010 2010-2011 2011-20120

0.2

0.4

0.6

0.8

1

1.2

0.8 0.8

0.9

0.8

1.1

INTERPRETATION

From the above analysis we know that the company has higher fixed assets turnover ratio

of 1.1times in the year 2012. Thus, a higher ratio in fixed assets turnover ratio is an indicator of

greater efficiency in the utilization of fixed assets.

48

4.1.13 WORKING CAPITAL TURNOVER RATIO

Working capital turnover ratio shows the measurement of companies’ development of

working capital to the generation of sales over a given period. A higher ratio indicates efficient

utilization of working capital.

WORKING CAPITAL TURNOVER RATIO = Sales / Working capital

The following table 4.1.12 shows the working capital turnover ratio for the year 2008 to 2012:

TABLE 4.1.13

WORKING CAPITAL TURNOVER RATIO

YEAR SALES

(Rs. In Lakhs)

WORKING CAPITAL

(Rs. In Lakhs)

WORKING CAPITAL

TURNOVER RATIO

2007-2008 355446.91 116588.00 3.0

2008-2009 383912.30 99021.21 3.9

2009-2010 410070.28 160234.48 2.6

2010-2011 388807.36 178547.88 2.2

2011-2012 472252.57 30935.99 15.3


49

CHART 4.1.13

WORKING CAPITAL TURNOVER RATIO

2007-2008 2008-2009 2009-2010 2010-2011 2011-20120

2

4

6

8

10

12

14

16

33.9

2.6 2.2

15.3

INTERPRETATION

From the above analysis we know that the company has its higher ratio of 15.3 times in

the year 2012 compared to previous years from 2008 as 3 times to 2011 as 2.2. It indicates that

there is efficient utilization of working capital in the company.

50

4.2 COMPARATIVE BALANCE

4.2.1 COMPARATIVE BALANCE SHEET FOR THE YEAR 2007-2008

The following table given below exhibits the comparative Balance Sheet for the year

2007 – 2008.

Rs in Lakhs

PARTICULARS 2007 2008 INCREASE

/DECREASE

AMOUNT

INCREASE

/DECREASE

%

SOURCES OF FUND:

1.Shareholders’fund

(a)Capital 26037.14 28186.74 2149.6 8.26

(b)Reserve and Surplus 194816.20 303924.08 109107.88 56

2.Loan Funds:

(a)Secured Loans 116598.73 97101.68 -19497.05 -16.72

(b)Unsecured Loans 89276.74 84048.90 -5227.84 -5.86

3.Deferred Tax Liability 6029.03 22571.46 16542.43 274.38

Total 432757.84 535832.86 103075.02 23.82

APPLICATION OF FUNDS:

1.Fixed Assets:

(a)Gross Block 385604.41 470869.49 85265.08 22.11

(b)Less: Depreciation 106021.27 124423.54 18402.27 17.36

(c)Net Block 279583.14 346445.95 66862.81 23.92

(d)Capital Work- in- Progress 14275.12 57491.22 43216.10 302.74

2.Investments 5507.49 12928.24 7420.75 134.74

3.Current Assets, Loans and

Advances:

(a)Inventories 22807.39 33021.05 10213.66 44.78

51

(b)Real Estate-Projects in

Progress

2042.47 2042.47 0 0

(c)Sundry Debtors 26021.09 31107.23 5086.14 19.55

(d)Cash and Bank balances 23018.32 42564.04 19545.72 84.91

(e)Loans and Advances 97862.13 106206.45 8344.32 8.53

171751.40 214941.24 43189.84 25.15

Less: Current Liabilities and

Provisions

43399.14 98353.24 54954.10 126.62

4.Deffered Tax Asset 1727.57 0.00 -1727.57 -100

Deffered Revenue Expenses 3312.26 2379.45 -932.81 -28.16

Total 432757.84 535832.86 103075.02 23.82

INTERPRETATION

From the above analysis the share capital increased by Rs.2149.60 lakhs over the

previous year. An amount of Rs.109107.88 lakhs has been transferred to reserves & surplus. We

also find that the secured loans amount to an extent of Rs.19497.05 lakhs is repaid. The

unsecured loan has decreased by an amount of Rs.5227.84 lakhs. In application of funds,

considerably the capital work-in-process increased by Rs.43216.10 lakhs. Investments &

inventories increased by 134.74% & 44.78 %. Comparatively deferred revenue expenditure

decreased to 28.16.

52

4.2.2 COMPARATIVE BALANCE SHEET FOR THE YEAR 2008-2009


2008 – 2009.

Rs in Lakhs

PARTICULARS 2008 2009

INCREASE /

DECREASE

AMOUNT

INCREASE /

DECREASE

%

SOURCES OF FUND:


(a)Capital 28186.74 28243.05 56.31 0.20

(b)Reserve and Surplus 303924.08 334895.93 30971.85 10.19

2.Loan Funds:

(a)Secured Loans 97101.68 103624.99 6523.31 6.72

(b)Unsecured Loans 84048.90 95177.97 11129.07 13.24


Total 535832.86 589348.18 53515.32 9.99

APPLICATION OF FUNDS:

1.Fixed Assets:

(a)Gross Block 470869.49 531357.77 60488.28 12.85


(c)Net Block 346445.95 380825.18 34379.23 9.92

(d)Capital Work- in- Progress 57491.22 90404.11 32912.89 57.25

2.Investments 12928.24 15897.33 2969.09 22.97


Advances:

(a)Inventories 33021.05 37049.84 4028.79 12.20

53


Progress

2042.47 2042.47 0 0

(c)Sundry Debtors 31107.23 35397.81 4290.58 13.79

(d)Cash and Bank balances 42564.04 8519.74 -34044.30 -79.98


214941.24 214352.83 -588.41 -0.27


Provisions

98353.24 115331.62 16978.38 17.26

4.Deffered Tax Asset 0.00 1845.23 1845.23 100

Deffered Revenue Expenses 2379.45 1355.12 -1024.33 -43.05

Total 535832.86 589348.18 53515.32 9.99

INTERPRETATION

From the above analysis the share capital increased by Rs.56.31 lakhs over the previous

year. An amount of Rs.30971.85 lakhs has been transferred to reserves & surplus. We also find

that the secured loans amount to an extent of Rs.6523.31 lakhs is repaid. The unsecured loan has

increased by an amount of Rs.11129.07 lakhs. In application of funds, considerably the capital

work-in-process increased Rs.32912.89 lakhs. Investments & inventories are increased by

22.97% & 12.20 %. Comparatively net current assets, deferred revenue expenditure are

decreased to 0.27% & 43.05%.

54

4.2.3 COMPARATIVE BALANCE SHEET FOR THE YEAR 2009-2010:


2009 – 2010.

Rs in Lakhs


INCREASE

/DECREASE

AMOUNT

INCREASE

/DECREASE

%

SOURCES OF FUND:


(a)Capital 28243.05 30717.45 2474.40 8.76


2.Loan Funds:

(a)Secured Loans 103624.99 86664.36 -16960.63 -16.37


3.Deferred Tax

Liability

27406.24 28990.54 1584.3 5.78

Total 589348.18 655845.98 66497.80 11.28

APPLICATION OF

FUNDS:

1.Fixed Assets:

(a)Gross Block 531357.77 571020.37 39662.6 7.46


(c)Net Block 380825.18 391861.67 11036.49 2.90

(d)Capital Work- in-

Progress

90404.11 70288.97 -20115.24 -22.25

2.Investments 15897.33 31397.33 15500 97.50

3.Current Assets,

Loans and Advances:

(a)Inventories 37049.84 44776.53 7726.69 20.85

55

(b)Real Estate-Projects

in Progress

2042.47 2042.47 0 0

(c)Sundry Debtors 35397.81 25340.26 -10057.55 -28.41

(d)Cash and Bank

balances

8519.74 5381.34 -1138.40 -17.46


214352.83 264459.21 50106.38 23.38

Less: Current Liabilities

and Provisions

115331.62 104224.73 -11106.89 -9.63

4.Deffered Tax Asset 1845.23 2063.53 218.30 11.83

Deffered Revenue

Expenses

1355.12 0.00 -1355.12 -100

Total 589348.18 655845.98 66497.80 11.28

INTERPRETATION

From the above analysis the share capital increased by Rs.2474.40 lakhs over the

previous year. An amount of Rs.47969.02 lakhs has been transferred to reserve & surplus. We

also find that the secured loans amount to an extent of Rs.16960.63 lakhs is repaid. The

unsecured loan has increased by an amount of Rs.31430.71 lakhs. In application of funds,

considerably the capital work-in-process decreased Rs.20115.24 lakhs. Investments &

inventories are increased by 97.50% & 20.85 %. Comparatively net current assets increased to

23.38 % & deferred revenue expenditure decreased 100%.

56



2010 – 2011.

Rs in Lakhs


INCREASE

/DECREASE

AMOUNT

INCREASE

/DECREASE

%

SOURCES OF FUND:


(a)Capital 30717.45 30717.65 0.2 6.5

(b)Reserve and Surplus 382864.95 378258.40 -4606.55 -1.20

2.Loan Funds:

(a)Secured Loans 86664.36 117786.13 31121.77 35.91



Total 655845.98 683824.46 27978.48 4.27

APPLICATION OF

FUNDS:

1.Fixed Assets:

(a)Gross Block 571020.37 592598.51 21578.14 3.78


(c)Net Block 391861.67 383447.89 -8413.78 -2.15


Progress

70288.97 103983.05 33694.18 47.94

2.Investments 31397.33 16030.97 -15366.36 -48.94


Advances:

(a)Inventories 44776.53 49730.90 4954.37 11.06


Progress

2042.47 2042.47 0 0

57

(c)Sundry Debtors 25340.26 25440.12 99.86 0.39

(d)Cash and Bank balances 5381.34 3309.06 -2072.28 -38.51


264459.21 290385.92 25926.71 9.80


Provisions

104224.73 111838.04 7613.31 7.30

4.Deffered Tax Asset 2063.53 1814.67 -248.86 -12.06

Deffered Revenue Expenses 0.00 0.00 0.00 0.00

Total 655845.98 683824.46 27978.48 4.27

INTERPRETATION


year. An amount of Rs.4606.55 lakhs has not been transferred to reserves & surplus. We also

find that the secured loans amount to an extent of Rs.31121.77 lakhs is repaid. The unsecured

loan has increased by an amount of Rs.1211.93 lakhs. In application of funds, considerably the

capital work-in-process increased by Rs.33694.18 lakhs. Investments have decreased by 48.94%,

inventories increased by 11.06% & comparatively net current assets increased to 9.80%


58


2011 – 2012.

Rs in Lakhs

PARTICULARS 2011 2012 INCREASE/

DECREASE

AMOUNT

INCREASE/

DECREASE

%

EQUITY &

LIABILITIES:


(a)Share Capital 30717.65 30717.81 0.16 5.21

(b)Reserve and Surplus 378258.40 376043.68 -2214.72 -0.58

2.Non-Current Liabilities:

(a)Long-term borrowings 125483.65 149653.50 24169.85 19.26

(b)Deferred tax liabilities 27427.00 32451.48 5024.48 18.32

(c)Other long term liabilities 19502.43 16027.21 -3475.22 -17.82

(d)Long term provisions 5079.18 6088.56 1009.38 19.87

3.Current liabilities:

(a)Short-term borrowings 58183.77 77205.43 19021.66 32.69

(b)Trade payables 54253.05 63304.53 9051.48 16.68

(c)Other current liabilities 87371.22 66373.27 -20997.95 -24.03

(d) Short-term provisions 7571.48 7155.51 -415.97 -5.49

Total 793847.83 825020.98 31173.15 3.93

ASSETS:

1.Non-current assets:

(a)Fixed assets

i. Tangible assets 355625.37 387785.72 32160.35 9.04

ii. Intangible assets 27822.52 25506.40 -2316.12 -8.32

iii. Capital work-in-

progress

28839.72 14510.31 -14329.41 -49.69

59

412287.61 427802.43

(b)Non-current investments 14947.63 85040.35 70092.72 468.92

(c)Long-term loans and

advances

253681.01 191626.67 -62054.34 -24.46

(d)Other non-current assets 2042.47 0.00 -2042.47 -100

(e)Foreign currency

monetary item translation

difference account

0.00 887.94 887.94 100

2.Current assets

(a)Current investments 1083.34 155.52 -927.82 -85.64

(b)Inventories 49730.90 52580.87 2849.97 5.73

(c)Trade receivables 25440.12 20982.20 -4457.92 -17.52

(d)Cash and cash

equivalents

3309.06 288.24 -3020.82 -91.29

(e)Short-term loans and

advances

31325.69 45656.76 14331.07 45.75

Total 793847.83 825020.98 31173.15 3.93

INTERPRETATION:


year. An amount of Rs.2214.72 lakhs has not been transferred to reserves & surplus. We also

find that the non-current liabilities & current liabilities amount to an extent of Rs.26728.49 lakhs

& 6659.22 lakhs is repaid. In assets, considerably the capital work-in-process decreased

Rs.14329.41 lakhs. Investments are decreased by 85.64% & inventories increased by 5.73 %.

4.3 COMMON SIZE BALANCE SHEETS

4.3.1COMMON SIZE BALANCE SHEETS AS ON 2008-2012

60

The following table given below exhibits the Common size Balance Sheet for the year

2008 – 2011.

Amount in %

PARTICULARS 2008 2009 2010 2011

SOURCES OF FUND:


(a)Capital 5.26 4.79 4.68 4.49


2.Loan Funds:

(a)Secured Loans 18.12 17.58 13.21 17.22



TOTAL 100.00 100.00 100.00 100.00

Application of funds:

1.Fixed Assets:

(a)Gross Block 87.88 90.16 87.07 86.66


(c)Net Block 64.66 64.62 59.75 56.07


Progress

10.73 15.34 10.72 15.21

75.38 79.95 70.47 71.28

2.Investments 2.41 2.70 4.79 2.34

3.Current Assets, Loans

And Advances:

(a)Inventories 6.16 6.29 6.83 6.55


Progress

0.38 0.35 0.31 0.30

(c)Sundry Debtors 5.81 6.00 3.86 3.72

(d)Cash and Bank balances 7.94 1.11 0.82 0.48


61

40.11 36.37 40.32 42.46

Less: Current Liabilities

and Provisions

18.36 19.57 15.98 16.35

21.76 16.80 24.43 26.11

4.Deffered Tax Asset 0 0.31 0.31 0.27

Deffered Revenue

Expenses

0.44 0.23 0.00 0.00

TOTAL 100.00 100.00 100.00 100.00

4.3.2 COMMON SIZE BALANCE SHEET AS AT 31ST MARCH 2012:

The following table given below exhibits the Common size Balance Sheet for the year 2012.

62

Amount in %

PARTICULARS 2012

EQUITY & LIABILITIES:


(a)Share Capital 3.72

(b)Reserve and Surplus 45.58

2.Non-Current Liabilities:

(a)Long-term borrowings 18.14

(b)Deferred tax liabilities 3.93

(c)Other long term liabilities 1.94

(d)Long term provisions 0.74

3.Current liabilities:

(a)Short-term borrowings 9.36

(b)Trade payables 7.67

(c)Other current liabilities 8.05

(d) Short-term provisions 0.87

TOTAL 100.00

ASSETS:

1.Non-current assets:

(a)Fixed assets

Tangible assets 47.00

Intangible assets 3.09

Capital work-in-progress 1.76

51.85

(b)Non-current investments 10.31

(c)Long-term loans and advances 23.23

(d)Other non-current assets 0.00

(e)Foreign currency monetary item translation

difference account

0.11

2.current assets

(a)Current investments 0.02

63

(b)Inventories 6.37

(c)Trade receivables 2.54

(d)Cash and cash equivalents 0.03

(e)Short-term loans and advances 5.53

TOTAL 100.00

INTERPRETATION

From the common size balance sheet analysis the company has raise the share capital in

the every year, compared with the previous year. And the better operation condition in the

transfer of reserve & surplus also is increased.

The repayment of secured & unsecured loans marginally increased to maximize the

growth of the company. In the application area the asset value has increased because of expanded

business activities.

The working capital position has recorded growth levels in both current liabilities &

current assets.

Finally the analysis indicates profit margin & the overall performance of the firm is

healthy.

4.4 TREND ANALYSIS

Trend analysis is carried out by calculating trend ratio. Trend analysis is significant for

forecasting and budgeting. Trend analysis is very helpful in making a comparative study of the

financial statements of several years.

64

4.4.1 TREND LINE ON SALES

Trend line on sales from 2008 - 2012 is shown in the below table:

TABLE 4.4.1

TREND LINE ON SALES

Year (x) Sales (y) (Rs. In Lakhs) Dx x 2 Xy

2008 355446.91 -2 4 -710893.82

2009 383912.30 -1 1 -383912.30

2010 410070.28 0 0 0

2011 388807.36 1 1 388807.36

2012 472252.57 2 4 944505.14

Total 2010489.42 10 238506.38


TREND LINE EQUATION: Y x = a + b x

a = ∑y / N

= 2010489.42 / 5

= 402097.884

b= ∑ xy / ∑ x 2

= 238506.38 / 10

= 23850.638

Sales in 2013 = 402097.884+23850.638 (3)

= 402097.884 + 71551.914

= 473649.80

Sales in 2014 = 402097.884+23850.638 (4)

= 402097.884 + 95402.552

= 497500.44

65

Sales in 2015 = 402097.884+23850.638 (5)

= 402097.884+ 119253.19

= 521351.07

TREND PERCENTAGE OF SALES

TREND PERCENTAGE = (Current year / Base year) X 100

The following table shows the trend percentage of sales:

TABLE 4.4.1

(Base year 2008=100) TREND PERCENTAGE ON SALES

YEAR SALES (Rs. In Lakhs) TREND PERCENTAGE

2008 355446.91 100

2009 383912.30 108

2010 410070.28 115

2011 388807.36 109

2012 472252.57 133

2013 473649.80 100

2014 497500.44 105

2015 521351.07 105

CHART 4.4.1

66

2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

0

20

40

60

80

100

120

140

100108 115 109

133

100 105 105

TREND % OF SALES

TREND % OF SALES

INTERPRETATION

It is the tool used to predict the sales figure for the future years based on the past trend.

From above the analysis we can see that the trend analysis shows an increasing trend for the sale

volume till 2015 (up to which the study is carried out). It indicates around 5 % increase in the

sales projection, which is considered to be healthy in the current market scenario.

4.4.2 TREND LINE ON STOCK

67

TABLE 4.4.2

TREND LINE ON STOCK

YEAR (x) STOCK (y) (Rs. In Lakhs) Dx x 2 Xy

2008 33021.05 -2 4 -66042.1

2009 37049.85 -1 1 -37049.85

2010 44776.53 0 0 0

2011 49730.90 1 1 49730.90

2012 52580.87 2 4 105161.74

Total 217159.2 10 51800.69



a = ∑y / N

= 217159.2 / 5

= 43431.84

b= ∑ xy / ∑ x 2

= 51800.69 / 10

= 5180.07

Stock in 2013 = 43431.84 + 5180.07 (3)

= 43431.84 + 15540.21

= 58972.05

Stock in 2014 = 43431.84 + 5180.07 (4)

= 43431.84 + 20720.28

= 64152.12

68

Stock in 2015 = 43431.84 + 5180.07 (5)

= 43431.84 + 35900.35

= 69332.19

TREND PERCENTAGE OF STOCK


The following table shows the trend percentage of stock:

TABLE 4.4.2

(Base year 2008=100) TREND PERCENTAGE ON STOCK

YEAR STOCK (Rs. In Lakhs) TREND PERCENTAGE

2008 33021.05 100

2009 37049.85 112

2010 44776.53 136

2011 49730.90 151

2012 52580.87 159

2013 58972.05 112

2014 64152.12 109

2015 69332.19 108

69

CHART 4.4.2

2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

0

20

40

60

80

100

120100

9276

42

8264

83 80

TREND % OF STOCK

TREND % OF STOCK

INTERPRETATION

From above the analysis we can see that the trend analysis shows an increasing trend for

the stock volume till 2015 (up to which the study is carried out). It indicates around 8 % increase

in the stock value projection, which is considered to be healthy in the current market scenario.

70

4.4.3 TREND LINE ON PROFIT

TABLE 4.4.3

TREND LINE ON PROFIT

YEAR (x) PROFIT (y)

(Rs. In Lakhs)

Dx x 2 Xy

2008 1130.56 -2 4 -2261.12

2009 1043.20 -1 1 -1043.20

2010 863.51 0 0 0

2011 473.30 1 1 473.30

2012 922.64 2 4 1845.28

Total 4433.21 10 -985.74



a = ∑y / N

= 4433.21 / 5

= 886.64

b= ∑ xy / ∑ x 2

= -985.74 / 10

= -98.57

Profit in 2013 = 886.64 - 98.57 (3)

= 886.64 – 295.72

= 590.92

Profit in 2014 = 886.64 - 98.57 (4)

= 886.64 – 394.28

= 492.36

71

Profit in 2015 = 886.64 - 98.57 (5)

= 886.64 – 492.85

= 393.79

TREND PERCENTAGE OF PROFIT


The following table shows the trend percentage of profit:

TABLE 4.4.3

(Base year 2008=100) TREND PERCENTAGE ON PROFIT

YEAR PROFIT (Rs. In Lakhs) TREND PERCENTAGE

2008 1130.56 100

2009 1043.20 92

2010 863.51 76

2011 473.30 42

2012 922.64 82

2013 590.92 64

2014 492.36 83

2015 393.79 80

72

CHART 4.4.3

2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

020406080

100120

100 9276

42

8264

83 80

TREND % PROFIT

TREND % PROFIT

INTERPRETATION

From above the analysis we can see that the trend analysis shows a decreasing trend for

the profit volume till 2015 (up to which the study is carried out). It indicates around 20%

decrease in the PROFIT projection, which is not considered to be healthy in the current market

scenario and hence it has to take steps to increase its profit percentage.

73

CHAPTER – V

FINDINGS, SUGGESTIONS AND CONCLUSION

5.1 FINDINGS

The quick ratio of the company is satisfactory in the year 2012 because it satisfies the

ideal ratio of 1:1 which shows the sound liquidity position and the ability to meet its

current liabilities.

Net profit ratio shows decreasing ratio year after year from 2009 to 2011 as11% to 2%.

But it starts increasing in the year 2012 as 6% and so it is a favorable trend during the

study period.

Fixed asset turnover ratio increased during the year 2012 as 1.1. So it is sufficient to meet

the long term liabilities.

The current assets and unsecured loans have decreased showing administrative efficiency

of the company, but care has to be taken to maintain optimum cash balance.

The sales trend shows a favorable trend in the year 2015 with an increase of 5% from the

base year 2008. Thus it is increasing during the study period which is healthy.

The stock trend shows a favorable trend in the year 2015 with an increase of 8% from the

base year 2008. Thus it is increasing during the study period which is also healthy.

Profit has decreased by 20% in the forecasting year 2015. Hence it has to increase its

sales level by reducing the price level through cheap production costs.

Working capital shows a favorable trend in 2012. This is due to change in current asset

and current liabilities. It indicates efficient utilization of working capital. It also shows

increase in the sales level.

Comparative balance sheet analysis shows the sales and other income figure has been

increased and the loan amounts are repaid every year. It indicates there is a better growth

in the sales levels and operations of the company.

74

5.2 SUGGESTIONS

The liquid position of the concern is satisfactory. So the firm can maintain the same and

can improve little to meet its current obligation as and when they become due.

The company can increase their current assets over the current liability to meet its current

obligations.

The company should make efficient utilization of current assets which will enable the

firm to increase the sales level.

Net profit ratio shows good position. The positive net profit indicates that company will

grow successfully.

From the analysis of fixed asset turnover, it was found that it’s inconsistent over the past

years. So The India Cements Ltd must utilize its fixed assets more efficiently to improve

and increase its sales.

The overall picture looks moderate in its profit. However, there is an increasing trend in

overheads and expenses which need to be controlled through various cost reduction

measures. So that present profitability of the company will be maintained and there will

not be any deterioration of financial position in future years.

75

5.3 CONCLUSION

Finance is the life blood of every business. Without effective financial management, a

company cannot survive in this competitive world. A sound financial management should be

able to monitor and manage the financial position of the company. This is the study of

“FINANCIAL PERFORMANCE ANALYSIS” entitled in, The India Cement Limited. This is

fully based on the past five year’s report. The study also provided knowledge about the ratio

analysis, comparative study, & common size balance sheet, which capture the predicative

variability of company financial statement. By using a combination of financial ratio is

satisfactory. Finally it can be concluded that financial performance of the company is in a good

position which is very healthy.

76

t financial performance

Documents

financial performance

financial position

project work

trend of financial performance

financial years

project title

project reportsubmitted

individual financial