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

BONAFIDE CERTIFICATE

Certified

that

this

project

report

titled

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

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
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.

CHAPTER I
1.1 INTRODUCTION
FINANCE
Before we begin, first lets 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

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
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 firms 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
7

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 customers
financial position, solvency, credit standing, profitability, etc. Financial statements help
the bankers and lenders to decide whether to extend loans to the customers.
(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.

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 Companys 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 wellestablished 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.

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.

10

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
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 organizations 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.
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 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.
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 Indias 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 Honble 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 companys 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.
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,
13

ICL International Limited,

Trishul Concrete Limited,
PT. Coromandel Minerals Resources,
Indo Zinc Limited.
Coromendal InfoTech india ltd.
Mandya Sugars Ltd.
PRODUCTS
It producesSCHEMATIC
3 types of cement
Products,
they are:
DIAGRAM
OF MANUFACTURE
OF CEMENT
(a) 53 Grade Cement
(b) 43 grade cement
(c) Portland Pozzolana Cement

CEMENT MANUFACTURING PROCESS

CALCA

CALCAREOUS MATERIAL
(LIME STONE FROM MINES)

RIGHT
14
PROPORTION
MIX

ARGILLACEOUS MATERIAL
(CLAY, BAUXITE)

KILN
1400 C TO 1500 C

CLINKER

GRINDING WITH
GYPSUM

CHEMICAL AND
PHYSICAL TEST

CEMENT

DESPATCH

CHAPTER-II
2.1 REVIEW OF LITERATURE
According to John.N.Meyer (2000) in his study on Financial PerformanceThe
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.

15

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 metaanalyses 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.

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

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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:
Companys annual report
Companys website
Manual
PERIOD OF STUDY
The study covers a time period of 5 years from the financial year
2012
3.3 OBJECTIVES OF THE STUDY
PRIMARY OBJECTIVE
17

2007-2008 to 2011-

 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:

I.

Comparative statements
Common size statements
Ratio analysis
Trend Analysis

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

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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
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
19

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
(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)

20

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 firms business operations. These ratios
may be related to sales (or) investments.

(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

21

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.

(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
22

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

(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

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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 companys
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.

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

24

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 CURRENT LIABILITIES

CURRENT

(Rs. In lakhs)

(Rs. In lakhs)

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

CHART 4.1.1
CURRENT RATIO

25

3
2.6

2.5

2.3

2.2
1.9

2
1.5

1.3

1
0.5
0
2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

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
its short term obligation.

4.1.2 LIQUID RATIO (OR) QUICK RATIO

26

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

QUICK LIABILITIES

QUICK RATIO

2007-2008

( Rs. in lakhs)
181920.19

( Rs. in lakhs)
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

Source: Secondary Data

CHART 4.1.2
LIQUID RATIO
27

2.5
2

2.2
1.9

1.8
1.5

1.5
1

1
0.5
0
2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

INTERPRETATION
The ideal liquid ratio is 1:1. From the above analysis, we know that the companys 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

EQUITY

DEBT-EQUITY

2007-2008

( Rs. in lakhs)
181150.58

( Rs. in lakhs)
332110.82

RATIO
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

Source: Secondary Data

CHART 4.1.3
DEBT-EQUITY RATIO
29

0.6

0.6

0.55

0.55

0.52

0.5
0.4
0.28

0.3
0.2
0.1
0
2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

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 companys 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

TOTAL TANGIBLE

PROPRIETARY

2007-2008

( Rs. in lakhs)
332110.82

ASSETS ( Rs. in lakhs)

309859.75

RATIO
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

Source: Secondary Data

CHART 4.1.4
PROPRIETARY RATIO
31

1.2

1.2

1.2
1.15
1.1

1.1

1.1
1.05
1

1
0.95
0.9
2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

INTERPRETATION
From the above analysis, we know that the companys 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 firms 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
2007-2008

GROSS PROFIT
( Rs. in lakhs)
248372.12

SALES
( Rs. in lakhs)
355446.91

GROSS PROFIT
RATIO (%)
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

Source: Secondary Data

CHART 4.1.5
GROSS PROFIT RATIO

33

80
70

74

70
63

60

60

57

50
40
30
20
10
0
2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

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

SALES

NET PROFIT

2007-2008

( Rs. in lakhs)
63754

( Rs. in lakhs)
355446.91

RATIO (%)
18

2008-2009

43217

383912.30

11

2009-2010

35434

410070.28

2010-2011

6810.36

388807.36

2011-2012

29297

472252.57

Source: Secondary Data

CHART 4.1.6
NET PROFIT RATIO
35

18

18
16
14
11

12

10
8

6
4

2
0
2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

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

SALES

OPERATING

2007-2008

(Rs. In Lakhs)
113056

(Rs. In Lakhs)
355446.91

PROFIT RATIO (%)

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

Source: Secondary Data

CHART 4.1.7
37

OPERATING PROFIT RATIO

35

32

30

27

25

21

20

20
15

12

10
5
0
2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

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

CAPITAL EMPLOYED

RETURN ON

2007-2008

(Rs. In Lakhs)
63754

(Rs. In Lakhs)
403483.22

INVESTMENT (%)
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

Source: Secondary Data

CHART 4.1.8
39

RETURN ON INVESTMENT

16

15

14
12

10

10
7

6
4

2
0
2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

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.

40

IV 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.
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

AVERAGE STOCK

STOCK

2007-2008

(Rs. In Lakhs)
291692

(Rs. In Lakhs)
8572

TURNOVER RATIO
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

Source: Secondary Data

CHART 4.1.9
41

INVENTORY TURNOVER RATIO

60

54

50
40

34

32

31

29

30
20
10
0
2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

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

AVERAGE DEBTORS

DEBTORS

2007-2008

(Rs. In Lakhs)
355446.91

(Rs. In Lakhs)
28564.16

TURNOVER RATIO
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

Source: Secondary Data

43

CHART 4.1.10
DEBTORS TURNOVER RATIO
20

20
18

15

16
14

12

12

12

10

10
8
6
4
2
0
2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

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

CREDITORS

CREDITORS

(Rs. In Lakhs)

(Rs. In Lakhs)

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

Source: Secondary Data

45

CHART 4.1.11
CREDITORS TURNOVER RATIO
1.2
1.01

1
0.8
0.6
0.4

0.33

0.33

2007-2008

2008-2009

0.45

0.47

2009-2010

2010-2011

0.2
0
2011-2012

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

NET FIXED ASSET

FIXED ASSETS

(Rs. In Lakhs)

(Rs. In Lakhs)

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

Source: Secondary Data

47

CHART 4.1.12
FIXED ASSETS TURNOVER

1.1

1.2
0.9

1
0.8

0.8

0.8

0.8
0.6
0.4
0.2
0
2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

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

WORKING CAPITAL

WORKING CAPITAL

(Rs. In Lakhs)

(Rs. In Lakhs)

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

Source: Secondary Data

49

CHART 4.1.13
WORKING CAPITAL TURNOVER RATIO
15.3

16
14
12
10
8
6
4

3.9
2.6

2.2

2
0
2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

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

INCREASE

/DECREASE

/DECREASE

AMOUNT

SOURCES OF FUND:
1.Shareholdersfund
(a)Capital
(b)Reserve and Surplus

26037.14
194816.20

28186.74
303924.08

2149.6
109107.88

8.26
56

2.Loan Funds:
(a)Secured Loans
(b)Unsecured Loans
3.Deferred Tax Liability

116598.73
89276.74
6029.03

97101.68
84048.90
22571.46

-19497.05
-5227.84
16542.43

-16.72
-5.86
274.38

Total
APPLICATION OF FUNDS:
1.Fixed Assets:
(a)Gross Block
(b)Less: Depreciation

432757.84

535832.86

103075.02

23.82

385604.41
106021.27

470869.49
124423.54

85265.08
18402.27

22.11
17.36

(c)Net Block
(d)Capital Work- in- Progress

279583.14
14275.12

346445.95
57491.22

66862.81
43216.10

23.92
302.74

2.Investments
3.Current Assets, Loans and

5507.49

12928.24

7420.75

134.74

Advances:
(a)Inventories
(b)Real Estate-Projects in

22807.39
2042.47

33021.05
2042.47

10213.66
0

44.78
0

Progress
(c)Sundry Debtors

26021.09

31107.23

5086.14

19.55

51

(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

Less: Current Liabilities and

171751.40
43399.14

214941.24
98353.24

43189.84
54954.10

25.15
126.62

1727.57
3312.26

0.00
2379.45

-1727.57
-932.81

-100
-28.16

432757.84

535832.86

103075.02

23.82

Provisions
4.Deffered Tax Asset
Deffered Revenue Expenses
Total

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.

4.2.2 COMPARATIVE BALANCE SHEET FOR THE YEAR 2008-2009

The following table given below exhibits the comparative Balance Sheet for the year
2008 2009.

52

Rs in Lakhs

PARTICULARS

2008

2009

INCREASE /

INCREASE /

DECREASE

DECREASE

AMOUNT

SOURCES OF FUND:
1.Shareholdersfund
(a)Capital
(b)Reserve and Surplus

28186.74
303924.08

28243.05
334895.93

56.31
30971.85

0.20
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

3.Deferred Tax Liability

22571.46

27406.24

4834.78

21.42

Total

535832.86

589348.18

53515.32

9.99

1.Fixed Assets:
(a)Gross Block

470869.49

531357.77

60488.28

12.85

(b)Less: Depreciation

124423.54

150532.59

26109.05

20.98

(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
3.Current Assets, Loans and

12928.24

15897.33

2969.09

22.97

Advances:
(a)Inventories
(b)Real Estate-Projects in

33021.05
2042.47

37049.84
2042.47

4028.79
0

12.20
0

Progress
(c)Sundry Debtors
(d)Cash and Bank balances

31107.23
42564.04

35397.81
8519.74

4290.58
-34044.30

13.79
-79.98

(e)Loans and Advances

106206.45

131342.97

25136.52

23.67

214941.24

214352.83

-588.41

-0.27

APPLICATION OF FUNDS:

53

Less: Current Liabilities and

98353.24

115331.62

16978.38

17.26

0.00

1845.23

1845.23

100

2379.45

1355.12

-1024.33

-43.05

535832.86

589348.18

53515.32

9.99

Provisions
4.Deffered Tax Asset
Deffered Revenue Expenses
Total

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%.

4.2.3 COMPARATIVE BALANCE SHEET FOR THE YEAR 2009-2010:

The following table given below exhibits the comparative Balance Sheet for the year
2009 2010.
Rs in Lakhs

54

PARTICULARS
SOURCES OF FUND:
1.Shareholdersfund
(a)Capital
(b)Reserve and Surplus
2.Loan Funds:
(a)Secured Loans
(b)Unsecured Loans
3.Deferred Tax

2009

2010

INCREASE

INCREASE

/DECREASE

/DECREASE

AMOUNT

28243.05
334895.93

30717.45
382864.95

2474.40
47969.02

8.76
14.32

103624.99
95177.97
27406.24

86664.36
126608.68
28990.54

-16960.63
31430.71
1584.3

-16.37
33.02
5.78

589348.18

655845.98

66497.80

11.28

531357.77
150532.59
380825.18
90404.11

571020.37
179158.70
391861.67
70288.97

39662.6
28626.11
11036.49
-20115.24

7.46
19.02
2.90
-22.25

15897.33

31397.33

15500

97.50

and Advances:
(a)Inventories
(b)Real Estate-Projects

37049.84
2042.47

44776.53
2042.47

7726.69
0

20.85
0

in Progress
(c)Sundry Debtors
(d)Cash and Bank

35397.81
8519.74

25340.26
5381.34

-10057.55
-1138.40

-28.41
-17.46

131342.97
214352.83
115331.62

186918.61
264459.21
104224.73

55575.64
50106.38
-11106.89

42.31
23.38
-9.63

1845.23
1355.12

2063.53
0.00

218.30
-1355.12

11.83
-100

589348.18

655845.98

66497.80

11.28

Liability
Total
APPLICATION OF
FUNDS:
1.Fixed Assets:
(a)Gross Block
(b)Less: Depreciation
(c)Net Block
(d)Capital Work- inProgress
2.Investments
3.Current Assets, Loans

balances
(e)Loans and Advances
Less: Current Liabilities
and Provisions
4.Deffered Tax Asset
Deffered Revenue
Expenses
Total

55

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%.

4.2.4 COMPARATIVE BALANCE SHEET FOR THE YEAR 2010-2011:

The following table given below exhibits the comparative Balance Sheet for the year
2010 2011.
Rs in Lakhs

PARTICULARS
SOURCES OF FUND:
1.Shareholdersfund
(a)Capital
(b)Reserve and Surplus
2.Loan Funds:
(a)Secured Loans
(b)Unsecured Loans
3.Deferred Tax Liability
Total

2010

2011

INCREASE

INCREASE

/DECREASE

/DECREASE

AMOUNT

30717.45
382864.95

30717.65
378258.40

0.2
-4606.55

6.5
-1.20

86664.36
126608.68
28990.54
655845.98

117786.13
127820.61
29241.67
683824.46

31121.77
1211.93
251.13
27978.48

35.91
0.96
0.87
4.27

56

APPLICATION OF
FUNDS:
1.Fixed Assets:
(a)Gross Block
(b)Less: Depreciation
(c)Net Block
(d)Capital Work- in-

571020.37
179158.70
391861.67
70288.97

592598.51
209150.62
383447.89
103983.05

21578.14
29991.92
-8413.78
33694.18

3.78
16.74
-2.15
47.94

31397.33

16030.97

-15366.36

-48.94

44776.53
2042.47

49730.90
2042.47

4954.37
0

11.06
0

Less: Current Liabilities and

25340.26
5381.34
186918.61
264459.21
104224.73

25440.12
3309.06
209863.37
290385.92
111838.04

99.86
-2072.28
22944.76
25926.71
7613.31

0.39
-38.51
12.28
9.80
7.30

Provisions
4.Deffered Tax Asset
Deffered Revenue Expenses
Total

2063.53
0.00
655845.98

1814.67
0.00
683824.46

-248.86
0.00
27978.48

-12.06
0.00
4.27

Progress
2.Investments
3.Current Assets, Loans and
Advances:
(a)Inventories
(b)Real Estate-Projects in
Progress
(c)Sundry Debtors
(d)Cash and Bank balances
(e)Loans and Advances

INTERPRETATION
From the above analysis the share capital increased by Rs.0.2 lakhs over the previous
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%

57

4.2.5 COMPARATIVE BALANCE SHEET FOR THE YEAR 2011-2012:

The following table given below exhibits the comparative Balance Sheet for the year
2011 2012.
Rs in Lakhs
PARTICULARS

2011

2012

INCREASE/D

INCREASE/DE

ECREASE

CREASE

AMOUNT

EQUITY &
LIABILITIES:
1.Shareholdersfund
(a)Share Capital
(b)Reserve and Surplus
2.Non-Current Liabilities:

30717.65
378258.40

30717.81
376043.68

0.16
-2214.72

5.21
-0.58

(a)Long-term borrowings
125483.65
(b)Deferred tax liabilities
27427.00
(c)Other long term liabilities 19502.43

149653.50
32451.48
16027.21

24169.85
5024.48
-3475.22

19.26
18.32
-17.82

5079.18

6088.56

1009.38

19.87

58183.77
54253.05
87371.22

77205.43
63304.53
66373.27

19021.66
9051.48
-20997.95

32.69
16.68
-24.03

7571.48
793847.83

7155.51
825020.98

-415.97
31173.15

-5.49
3.93

355625.37

387785.72

32160.35

9.04

(d)Long term provisions

3.Current liabilities:
(a)Short-term borrowings
(b)Trade payables
(c)Other current liabilities
(d) Short-term provisions
Total
ASSETS:
1.Non-current assets:
(a)Fixed assets
i.
Tangible assets

58

ii.

Intangible assets

27822.52

25506.40

-2316.12

-8.32

iii.

Capital work-in-

28839.72

14510.31

-14329.41

-49.69

(b)Non-current investments
(c)Long-term loans and

412287.61
14947.63
253681.01

427802.43
85040.35
191626.67

70092.72
-62054.34

468.92
-24.46

advances
(d)Other non-current assets
(e)Foreign currency

2042.47
0.00

0.00
887.94

-2042.47
887.94

-100
100

difference account
2.Current assets
(a)Current investments
(b)Inventories
(c)Trade receivables
(d)Cash and cash

1083.34
49730.90
25440.12
3309.06

155.52
52580.87
20982.20
288.24

-927.82
2849.97
-4457.92
-3020.82

-85.64
5.73
-17.52
-91.29

equivalents
(e)Short-term loans and

31325.69

45656.76

14331.07

45.75

advances
Total

793847.83

825020.98

31173.15

3.93

progress

monetary item translation

INTERPRETATION:
From the above analysis the share capital increased by Rs.0.16 lakhs over the previous
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
59

The following table given below exhibits the Common size Balance Sheet for the year
2008 2011.
Amount in %
PARTICULARS
SOURCES OF FUND:
1.Shareholdersfund
(a)Capital
(b)Reserve and Surplus
2.Loan Funds:
(a)Secured Loans
(b)Unsecured Loans
3.Deferred Tax Liability
TOTAL
Application of funds:
1.Fixed Assets:
(a)Gross Block
(b)Less: Depreciation
(c)Net Block
(d)Capital Work- in-

2008

2009

2010

2011

5.26
56.72

4.79
56.82

4.68
58.38

4.49
55.32

18.12
15.69
4.21
100.00

17.58
16.15
4.65
100.00

13.21
19.30
4.42
100.00

17.22
18.69
4.28
100.00

87.88
23.22
64.66
10.73

90.16
25.54
64.62
15.34

87.07
27.32
59.75
10.72

86.66
30.59
56.07
15.21

75.38
2.41

79.95
2.70

70.47
4.79

71.28
2.34

And Advances:
(a)Inventories
(b)Real Estate-Projects in

6.16
0.38

6.29
0.35

6.83
0.31

6.55
0.30

Progress
(c)Sundry Debtors
(d)Cash and Bank balances

5.81
7.94

6.00
1.11

3.86
0.82

3.72
0.48

19.82
40.11
18.36

22.29
36.37
19.57

28.50
40.32
15.98

30.69
42.46
16.35

4.Deffered Tax Asset

Deffered Revenue

21.76
0
0.44

16.80
0.31
0.23

24.43
0.31
0.00

26.11
0.27
0.00

Expenses
TOTAL

100.00

100.00

100.00

100.00

Progress
2.Investments
3.Current Assets, Loans

(e)Loans and Advances

Less: Current Liabilities
and Provisions

60

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.
Amount in %
PARTICULARS
EQUITY & LIABILITIES:
1.Shareholdersfund
(a)Share Capital
(b)Reserve and Surplus
2.Non-Current Liabilities:
(a)Long-term borrowings
(b)Deferred tax liabilities
(c)Other long term liabilities
(d)Long term provisions

2012

3.72
45.58
18.14
3.93
1.94
0.74
61

3.Current liabilities:
(a)Short-term borrowings
(b)Trade payables
(c)Other current liabilities
(d) Short-term provisions
TOTAL
ASSETS:
1.Non-current assets:
(a)Fixed assets
Tangible assets
Intangible assets
Capital work-in-progress

9.36
7.67
8.05
0.87
100.00

(b)Non-current investments
(c)Long-term loans and advances
(d)Other non-current assets
(e)Foreign currency monetary item translation

47.00
3.09
1.76
51.85
10.31
23.23
0.00
0.11

difference account
2.current assets
(a)Current investments
(b)Inventories
(c)Trade receivables
(d)Cash and cash equivalents
(e)Short-term loans and advances
TOTAL

0.02
6.37
2.54
0.03
5.53
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.

62

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.
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)
2008
2009
2010
2011
2012
Total

Sales (y) (Rs. In Lakhs)

355446.91
383912.30
410070.28
388807.36
472252.57
2010489.42

Dx
-2
-1
0
1
2

Source: Secondary Data

TREND LINE EQUATION:

Yx=a+bx

a = y / N

= 402097.884
b= xy / x 2

= 2010489.42 / 5
63

x2
4
1
0
1
4
10

Xy
-710893.82
-383912.30
0
388807.36
944505.14
238506.38

= 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
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)
YEAR
2008
2009
2010
2011
2012
2013
2014
2015

TREND PERCENTAGE ON SALES

SALES (Rs. In Lakhs)
355446.91
383912.30
410070.28
388807.36
472252.57
473649.80
497500.44
521351.07

64

TREND PERCENTAGE
100
108
115
109
133
100
105
105

CHART 4.4.1

TREND % OF SALES
133

140
120
100

100

108

115

109

100

105

105

80
60

TREND % OF SALES

40
20
0

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.

65

4.4.2 TREND LINE ON STOCK

TABLE 4.4.2
TREND LINE ON STOCK
YEAR (x)
2008
2009
2010
2011
2012
Total

STOCK (y) (Rs. In Lakhs)

33021.05
37049.85
44776.53
49730.90
52580.87

Dx
-2
-1
0
1
2

217159.2

Source: Secondary Data

TREND LINE EQUATION:

Yx=a+bx
b= xy / x 2

a = y / N
= 217159.2 / 5

= 51800.69 / 10

= 43431.84

= 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
66

x2
4
1
0
1
4
10

Xy
-66042.1
-37049.85
0
49730.90
105161.74
51800.69

= 64152.12

Stock in 2015 = 43431.84 + 5180.07 (5)

= 43431.84 + 35900.35
= 69332.19
TREND PERCENTAGE OF STOCK
TREND PERCENTAGE = (Current year / Base year) X 100

The following table shows the trend percentage of stock:

TABLE 4.4.2
(Base year 2008=100)
YEAR
2008
2009
2010
2011
2012
2013
2014
2015

TREND PERCENTAGE ON STOCK

STOCK (Rs. In Lakhs)
33021.05
37049.85
44776.53
49730.90
52580.87
58972.05
64152.12
69332.19

67

TREND PERCENTAGE
100
112
136
151
159
112
109
108

CHART 4.4.2

TREND % OF STOCK
120
100

100

80
60
40

92

83

82

76

80

64

TREND42
% OF STOCK

20
0

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.

68

4.4.3 TREND LINE ON PROFIT

TABLE 4.4.3
TREND LINE ON PROFIT
YEAR (x)
2008
2009
2010
2011
2012
Total

PROFIT (y)

Dx

x2

Xy

(Rs. In Lakhs)
1130.56
1043.20
863.51
473.30
922.64

-2
-1
0
1
2

4
1
0
1
4
10

-2261.12
-1043.20
0
473.30
1845.28

4433.21

Source: Secondary Data

TREND LINE EQUATION:

Yx=a+bx
b= xy / x 2

a = y / N
= 4433.21 / 5

= -985.74 / 10

= 886.64

= -98.57

69

-985.74

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

Profit in 2015 = 886.64 - 98.57 (5)

= 886.64 492.85
= 393.79

TREND PERCENTAGE OF PROFIT

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

The following table shows the trend percentage of profit:

TABLE 4.4.3
(Base year 2008=100)
YEAR
2008
2009
2010
2011
2012
2013
2014
2015

TREND PERCENTAGE ON PROFIT

PROFIT (Rs. In Lakhs)
1130.56
1043.20
863.51
473.30
922.64
590.92
492.36
393.79

70

TREND PERCENTAGE
100
92
76
42
82
64
83
80

CHART 4.4.3

TREND % PROFIT
120
100

100

80
60
40

92

83

82

76

80

64
TREND
42 % PROFIT

20
0

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.

71

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.

72

 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.

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 its 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.

73

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 years 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.

74