FINANCIAL RATIO ANALYSIS

CHAPTER-I
1.INTRODUCTION :
When we observed the financial statements comprising the
balance sheet and profit or loss account is that they do not give all the
information related to financial operations of a firm, they can provide
some extremely useful information to the extent that the balance sheet
shows the financial position on a particular date in terms of structure of
assets, liabilities and owners' equity and profit or loss account shows
the results of operation during the year. Thus the financial statements
will provide a summarized view of the firm. There fore in order to
learnt about the firm the careful examination of in valuable reports and
statements through financial analysis or ratios is required.

1.1 Design of the study:

Ratio analysis is one of the powerful technique which is widely
used for interpreting financial statements. This technique serves as a
tool for assessing the financial soundness of the business. The idea of
ratio analysis was introduced by Alexander Wall for the first time in
1919. Ratios are quantitative relationship between two or more
variables taken from financial statements.
Ratio analysis is defined as. "The systematic use of ratio to
interpret the financial statement so that the strength and weakness of
the firm as well as its historical performance and current financial
condition can be determined.
In the financial statements we can find many items are co-related with
each other For example current assets and current liabilities, capital and
long term debt, gross profit and net profit purchase and sales etc.
Whole taking managerial decision the ratio of such items reveals the
soundness of financial position. Such information will be useful for
creditors, shareholders, management and all other people who deal with
company.

1.2 Statement of the problem:

Ratio Analysis is one of the techniques of financial analysis
where ratios are used as a yardstick for evaluating the financial
condition and performance of a firm. Analysis and interpretation of
various accounting ratios gives a better understanding of financial
condition and performance of firm. Trend ratios indicate the direction
of change in the performance improvement, deterioration or
constancy- over the year.and profitability of mathura H1: There
relationship between radio analysis management and profitability of
mathura.

1.3 SCOPE OF THE STUDY

As it is very difficult to decide any inference from the mass of
figures included in financial statements. So in order to judge
accurately the financial health of the firm, it is generally regroup
and analyze the figures as disclosed by these financial statement.
The use of Ratio Analysis or Accounting Ratios enables
conclusions to be drawn from the figures as to know the earning
capacity, operational efficiency, and financial condition etc. of a
concern.
The study includes the calculation of different financial ratios. It
compares Five years financial statements of the company to
know its performance in these different years.
To know whether the company is growing or incurring losses or
it is stagnant in its performance.

1.4 IMPORTANCE OF THE STUDY:

4

Thus it is needed for following purposes:

The ability of the firm to meet its current obligation.
The limit or extent to which the firm has used its borrowed funds.
The efficiency with which the firm is utilizing in generating sales
revenue.
The operating efficiency and performance of the company .
1.5OBJECTIVES OF THE STUDY:
Main Objective is to study the different ratios used in
Mathura cots pin thirupur
To know the mills financial performance based on ratios.
To find out the companies efficiency based on past and
present profitability ratios
To study the liquidity position of the company.
To improve its future performance by analyzing its
financial statements.
1.6 LIMITATION OF THE STUDY:
The study is done only on the Balance sheet and profit and
Loss A/c
Study is based on information provided by the company.
The limitation of ratio analysis is itself a limitation in
achievement the set objective.

1.7 CHAPTERIZATION OF THE STUDY:

CHAPTER I: Deals with Introduction
5

 CHAPTER II: Deals with Review of literature

CHAPTER III: Deals with Company profile
CHAPTER IV: Deals with Data Analysis

and

Interpretation
CHAPTER V: Deals with Finding Suggestion and
Conclusion

1.8 HYPOTHESIS:
Ho:There is no significant relationship between current
asset and fixed asset.
H1:There is a significant relationship between current
asset and fixed asset.
Ho:There is no significant realasionship between current
asset and fixed asset.
H2:there is a significant relasionship between current asset
and fixed asset.

1.9 TOOLS USED IN THE STUDY

a.
b.
c.
d.
e.

Current ratio
Quick ratio
Inventory/Stock turnover ratio
Gross profit ratio
Net profit ratio
6

f. Working capital turnover ratio

g. Debtors turnover ratio
h. Debt collection period

1.10 METHODOLOGY OF STUDY

Research design
Data Collection
1.10.1 RESEARCH DESIGN:
The research design is a pattern or an outline of research project
working. It is a statement of only essential elements of study, those
that provide basic guidelines for the details of the project. The present
study is being conducted followed by Descriptive Research Design.
1.10.2SAMPLING METHOD & SIZE:
The study employed the use of secondary data which is collected from
the Report and Accounts of Mathura cots pin from 2011-2015

DATA SOURCE:
Primary Data
Secondary Data
Primary Data

The research vehicle for primary data collection is unstructured

interview with the managers to get information regarding all variables
for the performance of a firm.
Secondary Data
It is collected from Annual Report, relevant files & records
of Ambuja cement pvt ltd.

CHAPTER-II
REVIEW OF LITERATURE
KhatikS.K,VargheseTitto(2013)

Financial

analysisof

authority of India limited states that financial analysis is used to

analyze whether an entity is stable, solvent, liquid or profitable
8

enough to be invested in financial analysis is just like doctor who

examine the fitness of the human body. For analysis of the
financial position of the SAIL, gross profit ratio, net profit and
operating ratio, productivity investment and solvency ratios are
calculated.
Rakesh and Kulkarni (2012) analyzed the Gujarat textile industry
working capital evaluation on selected five company for the
eleven years and performed ratio analysis, descriptive statistics
etc. The study concluded with all the company financial
performance with sound effective as well as current and quick
ratio, current asset on total asset, sales, turnover etc. are analyzed
with the help of hypothesis and used ANOVA. In this research
also researcher followed this attributes.

Marimuthu, K.N(2012) Financial performance of Tex-tile

industry : A study of listed company of Tamil nadu states that
Coimbatore is known as Manchester of South India. 76% of
India's total textile market is from Erode (Tex-City or Loom-City
of India) and 56% of knitwear exports come from Tirupur. Each
company could invest on the basis of current performance
compared with previous year or with other company. Decision
making, additional investment, liquidity position changes in
working capital depend upon the performance & return of
company reports. Funds are highly required for day-to -day
business operations of the firm and how to utilize it and in
9

what way should avoid loses from the investment are discussed
here plus, it happens by ineffective management. The objective
of the paper is to analyze the performance of textile industry in
the selected companies from Tamil Nadu. In addition, the data
collected from the CMIE and used the tools of ANOVA and
descriptive statistics
Zahid and nanik (2011) concludes the overall performance of the
textile sector was adversely affected by crisis through analysis of
income statement, debt payment ability, management and
inventory sales, receivables, productivity, fixed assets, etc.
Nusrat and Assocham (2013) analyzed the performance of sector
analysis on 28 textile companies from BSE with the attributes of
net sales, net profit, interest cost, raw material, power and fuel
cost.
Virambhai (2010) textile industry productivity and financial
efficiency focused on industrys current position and its
performance. It concluded the company/management should try
to increase the production, minimize the cost and operating
expenses, exercise proper control on liquidity position, reduction
of power, fuel, borrowing funds, overheads, interest burden, etc
Ajay Kumar (2011) discussed on Indian textile industry analysis
with inflation, textile production, sales, Income, PAT, Income,
etc. and found the export and import performance in the crisis
period.
10

 South Asia network of economic research institute report on

Impact of financial crisis on Textile industry of Pakistan
(2011) March by Imran Alam states when developing countries
saw record declines in their stock markets. These declines were
registered in those sectors which were dependent on the markets
of developed world. Its repercussions were seen in developing
countries also. Ongoing financial crisis has affected them
through many channels. However, exports, employment and
investment are suspected to
affected most. Textile sector is the most important sector of
Pakistans economy, contributing about 57% to the export
earnings and 46% to the employment. The results revealed that
rising unemployment rate; high cost of production, lower
demand and exchange rate volatility in foreign countries had
Unpleasant impact on Pakistans export indents. The main cause
of the above mentioned deteriorating conditions is said to be the
ongoing financial crisis.

CHAPTER III:
INDUSTRY PROFILE:

11

Ambuja Cements Ltd (ACL), a part of a global conglomerate Holcim,

is one of Indias leading cement manufacturers and has completed over
25 years of operations. The company, initially called Gujarat Ambuja
Cements Ltd, was founded by Narotam Sekhsaria in 1983 in
partnership with Suresh Neotia. Global cement major Holcim acquired
management control of Ambuja in 2006. The Company has also made
strategic investments in ACC Limited.
The company has entered into a strategic partnership with Holcim, the
second largest cement manufacturer in the world from 2006. Holcim
had, in January, bought a 14.8 per cent promoters' stake in the GACL
for INR 21.4 billion.
Ambuja Cements Limited, formerly known as Gujarat Ambuja Cement
Limited, is a major cement producing company in India.[2] The
Group's principal activity is to manufacture and market cement and
clinker for both domestic and export markets.

HISTORY:
Ambuja Cements was set up in 1986. In the last decade the company
has grown tenfold. The total cement capacity of the company is 18.5
12

million tones. Its plants are some of the most efficient in the world.
With environment protection measures that are on par with the finest in
the developed world. The company's most distinctive attribute,
however, is its approach to the business. Ambuja follows a unique
homegrown philosophy of giving people the authority to set their own
targets, and the freedom to achieve their goals. This simple vision has
created an environment where there are no limits to excellence, no
limits to efficiency. And has proved to be a powerful engine of growth
for the company. As a result, Ambuja is the most profitable cement
company in India, and one of the lowest cost producer of cement in the
world.
When the company started out, it approached the cement business with
an open mind. To compete with the older, established players who had
already written off their plant cost, it was important to have the lowest
capital cost per ton of cement. Their plants would have to be set up in
record time. Their capacity utilization would have to be above 100%.
And their power consumption would have to set a record low these
were the main theme of company.
Today, Ambuja is the 3rd largest cement company in India, with an
annual plant capacity of 16 million tonnes including Ambuja Cement
Eastern Ltd. and revenue in excess of Rs.3298 crore.
In 1993, Ambuja Cement set up a complete system of transporting bulk
cement via the sea route. Making it the first company in India to
introduce bulk cement movement by sea. Others followed and today,
about 10% cement travels by this new route.
13

Port terminal of the company is situated at Muldwarka, Gujarat: Its an

all weather port, 8 kms from the companys Ambujanagar plant.
Handles ships with 40,000 DWT. It is also equipped to export clinker
and cement and import coal and furnace oil.
In 2013 the company approved a proposal, wherein Ambuja will first
acquire from Holderind Investments Ltd., Mauritius (Holcim), a 24%
stake in Holcim India for a cash consideration of Rs 3,500 crores,
followed by a merger of Holcim India into Ambuja. These intragroup
transactions will result in Ambuja holding 50.01% stake in ACC.In
addition, the Board also provided its approval for Ambuja to make
commercially reasonable efforts to invest upto Rs 3,000 crores to
acquire an economic ownership in ACC of up to 10% without
triggering a mandatory open offer, subject to shareholders and
regulatory approvals as applicable.
Bulk Cement Terminals of the company:
Surat: Bulk Cement Terminal with a storage capacity of 15,000 tonnes
has bulk cement unloading facility.
Panvel: Strategically located near Indias biggest cement market, has a
storage capacity of 17,500 tonnes and a bulk cement unloading facility.
Galle: 120 kms from Colombo, Sri Lanka. Handles 1 million tonnes of
cement annually.
Cochin: The latest addition to our configuration of Bulk Cement
Terminal

14

Ambuja Cement exports almost 17% of its production in a very

competitive international environment. For the last ten years, Ambuja
Cement remains Indias highest exporter of cement.
Busiiness area of the company:
The company is engaged in manufacture and market cement and
clinker for both domestic and export markets.
Milestones:
2010
On 24th February 2010, Ambuja Cements Ltd (ACL)
inaugurated its cement plant (grinding unit) at Dadri, Uttar Pradesh.
Capacity: 1.5 million tonnes..
On 27 March, 2010, Ambuja Cements Ltd (ACL) inaugurated
its cement plant (grinding unit) at Nalagarh, Himachal Pradesh.
Capacity: 1.5 million tonnes.
In December 2010, the Dadri Grinding Unit in its very first
year of operation received the Integrated Management System (IMS)
Certification, including ISO 9001:2008, ISO 14001:2004, and OHSAS
18001:2007 by BSI (U.K.).
2009 The Company launched its knowledge initiative i.e. Ambuja
Knowledge Center,to enable industry professionals get a firsthand feel
of the world of cement and concrete. During the year, three centers
became operational in the cities of Jaipur, Ahmedabad and Kolkata.

15

2008 The Company also sets up the Corporate Communications

department, thus marking its deep commitment to be a responsive
organisation, answerable and accountable to its

key internal and

external stakeholders.
2009 The Company launched its knowledge initiative i.e. Ambuja
Knowledge Center,to enable industry professionals get a firsthand feel
of the world of cement and concrete. During the year, three centers
became operational in the cities of Jaipur, Ahmedabad and Kolkata.
Opening of Dadri Plant On 24th February 2010, Ambuja Cements Ltd
(ACL) inaugurated its cement plant (grinding unit) at Dadri, Uttar
Pradesh. Capacity: 1.5 million tonnes.
On 27 March, 2010, Ambuja Cements Ltd (ACL) inaugurated its
cement plant (grinding unit) at Nalagarh, Himachal Pradesh. Capacity:
1.5 million tonnes.
In December 2010, the Dadri Grinding Unit in its very first year of
operation received the Integrated Management System (IMS)
Certification, including ISO 9001:2008, ISO 14001:2004, and OHSAS
18001:2007 by BSI (U.K.).
Achievements/ recognition:
Achievements
Environment protection measure that conform to the worlds best.
Benchmarking quality standards for the industry.
Reinventing cement transportation.
16

Ambujanagar has won 'Best Environmental Excellence in Plant

Operation' National award by NCBM 2009
'Certificate of Appreciation' for Accident Free million man hour our
worked Gujarat Safety Council Baroda 2009
Recognition
National Award for commitment to quality by the Prime Minister of
India.
National Award for outstanding pollution control by the Prime Minister
of India.
ISO 9002 Quality Certification.
ISO 14000 Certification for environmental systems.
Best Award for highest exports by CAPEXIL.
Economic Times Harvard Business School Association Award for
corporate excellence.

COMPANY HISTORY
Ambuja Cements Ltd. (ACL) is one of the leading cement
manufacturing companies in India and commenced cement production
in 1986. Initially called Gujarat Ambuja Cements Ltd, the Company
17

later became Ambuja Cements Ltd. In 2006, global cement major

Holcim, acquired management control of the Company. Today, Holcim
holds a little over 50% equity in ACL.

ACL has grown manifold over the past decade. Its current cement
capacity is 27.25 million tonnes. The Company has 5 integrated cement
manufacturing plants and 8 cement grinding units across the country.
ACL enjoys a reputation of being one of the most efficient cement
manufacturers in the world. Its environment protection measures are
considered to be on par with the finest in the country. It is also one of
the most profitable and innovative cement companies in India.

ACL is the first Indian cement manufacturer to build a captive port with
three terminals along the country's western coastline to facilitate timely,
cost effective and environmentally cleaner shipments of bulk cement to
its customers. The Company has its own fleet of ships. ACL has also
pioneered the development of the multiple, bio-mass, co-fired
technology for generating greener power in its captive plants.

Milesontes: 1981

18

- The Company was Incorporated on 20th October, as Ambuja Cements

Pvt. Ltd. It was jointly promoted by Gujarat Industrial Investment
Corporation Ltd. (GIIC) and N.S. Sekhsaria and his associates, Vinod
K. Neotia and Suresh Mulani, for setting up a cement project in the
joint sector. The Company was converted into a public limited
company on 19th March, 1983 and its name was changed to Gujarat
Ambuja Cements, Ltd., on 19th May, 1983.

- The Company's object is to manufacture cement.

- The Company adopted the latest dry process precalcination

technology incorporating five stage preheater for the main pyro
processing system of the cement plant. For grinding the raw material,
the Company undertook to instal the latest air swept roller mills of
polysius design which were extremely energy efficient.

- A computerised process control system with field instruments

supplied by Larsen & Tourbo was also being installed to give
consistently high quality cement with maximum productivity.

- In addition, electronic packing machines were being obtained from

Haver & Boecker, West Germany, and reverse air baghouse equipment
from Zurn Industries, USA.
19

- The company entered into an agreement with Krupp Polysius AG,

(KP) West Germany, for supply of plant, equipment and service for the
project, KP agreed to supply raw material and coal grinding vertical
roller mills, homogenising and kiln feed, burning, cooling and coal
firing equipment and pneumatic transport pumps.

- KP have a collaboration agreement with Buckau Wolf India, Ltd. who

are supplying the balance items of the main plant as per KP design. The
scope of the agreement with KP provides for complete engineering of
the plant, technical documentation and information and supervision of
erection and commissioning of the project.

1983

- All shares subscribed for by signatories to the Memorandum of

Association, promoters, etc.

1985

20

- A letter of intent was received to increase the installed capacity from

7,00,000 tonnes to 14,00,000 tonnes per annum.

- 146,44,500 No. of equity shares issued at par out of which the

following shares were reserved for firm allotment: 38,24,448 shares to
GIIC; 21,20,000 shares to overseas companies of non-resident Indian
promoters on repatriation basis and 15,50,052 shares to N.S. Sekhsaria,
Vinod K. Neotia and their associates.

- Out of the balance 71,50,000 shares, 28,60,000 shares to non-resident

Indians with repatriation rights and 8,75,500 shares to employees
(including Indian working directors)/workers and business associates of
the Company were reserved for preferential allotment. The remaining
34,14,500 shares were offered for public subscription during
November. Out of the oversubscription, 33,50,000 shares were retained
and allotted to the public.
1986
- 20,00,000 No. of equity shares issued at par of which 2,00,000 shares
allotted to private promoters and their associates and the balance of
18,00,000 shares offered and allotted to the equity shareholders as
rights in prop. 1:1.
1988

21

- Production declined marginally to 8,02,301 tonnes due to heavy rains

in July-August 1989 coupled with flash floods on 16th July.

1989
- The 12.6 MW diesel generating sets which were imported during
1988-89 were commissioned during the year.

1990
- Necessary approvals were received for setting up another cement
plant with 1 million tonne capacity per annum at village Suli, Tehsil
Arki, District Solan of Himachal Pradesh.

1991
- In order to meet long-term working capital requirements, the
Company issued 10,00,000 - 17.5% secured redeemable nonconvertible debentures on private placement basis. These debentures
would be redeemed in three equal annual instalments commencing at
the end of the 6th year from the date of issue of the debentures, at a
prem. of 5% of the face value of the debentures.

- In order to part finance its expansion projects, the Company proposed

to issue 52,62,500 No. of equity shares of Rs.10 each at a prem. of
22

Rs.190 per share. Out of the total issue, 50,00,000 shares were to be
offered to the existing equity shareholders of the Company as rights in
the prop. of 1:4 and the balance of 2,62,500 shares were to be offered to
the employees, directors and the business associates of the company.

- In order to part finance its expansion projects, the Company also

proposed to issue 52,62,500 - 17.5% secured redeemable nonconvertible debentures aggregating to Rs.210.50 crores. Out of the total
issue, 50,00,000 debentures were to be offered to the equity
shareholders of the Company on rights basis in the prop. of 1 debenture
for every 4 equity shares held and the balance of 2,62,500 debentures
were to be offered to the employees, directors and business associates
of the Company.

- Each non-convertible debenture would be attached with a detachable

warrant and the holder of one such warrant would be entitled to apply
for and be allotted one equity share of the Company at a price of
Rs.300 per equity share (Rs.10 towards face value and Rs.290 as
prem.).
- The warrant holders at the time of exercising their right/option to
subscribe for their equity shares entitlement would have further option
either to pay a price of Rs.300 per share of the Company or to
surrender the equivalent number of debentures as subscription for
allotment of equity shares.

23

- GACL Finance Ltd., Concrete Investments, Ltd., and Indo Nippon

Special Cements, Ltd. are the subsidiaries of the company.
1992
- The Company undertook bulk cement transportation, by sea, to the
major markets of Mumbai, Surat and other deficit zones on the West
Coast. Transportation was to be carried out by three specially designed
ships. The units bulk terminal at Kodinar and one at New Mumbai was
completed and work on the third terminal near Surat began.

1993
- 51,60,165 rights equity shares allotted at a prem. of Rs.190 per share
(49,66,815 shares, prop. 1:4; 90,850 shares to employees and 1,02,500
shares to Associates); 1,10,281 shares of Rs.10 each allotted at a prem.
of Rs.215 per share on exercise of warrants by warrant holders.

1994
- The Company's muller location 1.5 million tonne cement project with
clinkeriation facility at site in H.P and grinding facility both at Suli &
Ropar in Punjab was commissioned. Land was acquired at Sahranpur to
serve as another site for grinding cement.

- The Company also undertook to set up a new unit, `Gajambuja

Cement' with an installed capacity of 9.4 lakh tonnes, at the existing
24

premises. The kiln was fired on 1st March 1993 and the unit produced
its first batch of clinker on 4th March, 1993.

- The Company undertook to set up the third 1 million tonne cement

plant at Ambujanagar. Orders for plant and machinery were placed and
the plant was expected to be commissioned by December 1996. This
will increase the company's total cement capacity to 4.5 million tonnes.

- 45,65,044 shares allotted on conversion of warrants. 12,21,994

allotted on conversion of aurobonds. 375 rights shares kept in abeyance
allotted. 3,02,19,749 bonus shares issued in prop. 1:1 10,00,000 shares
allotted to IFC Washington. 4,404 rights shares kept in abeyance
allotted.

1995
- The Company proposed to install one more cement mill at Himachal
plant.

- 11,251,829 shares allotted on optional conversion of FCCBs. 7,724

Rights shares kept in abeyance allotted. 7,350 shares allotted on
conversion of tradeable warrants.

25

1996
- Two more ships `Ambuja Keerti' and `Ambuja Shakti' were added to
the Fleet. The Company has submitted a proposal to revive Modi
Cements Ltd. to IDBI during the year.

- Another 19724 No. of equity shares allotted on conversion of

warrants.

1997
- 100,000,000-10% non-convertible redeemable pref. shares of Rs. 10
each allotted and 30,000,000-12.75% non-convertible redeemable pref.
shares of Rs. 10 each redeemed.

- Gujarat Ambuja Cements Ltd's (GACL) Kodinar plant is set to

commence commercial production with an enhanced capacity by midApril.

- Gujarat Ambuja Cement Ltd. has offered to set up a multi-crore

cement plant in Jammu and Kashmir.

- Gujarat Ambuja Cement Ltd. (GACL) was set up in 1981 as a joint

sector company, promoted by Narottam Sekhsaria and Gujarat
26

Industrial Investment Company (GIIC). Its cement plant which was

commissioned in 1985 was set up in technical collaboration with Krupp
Polysius, Germany, Bakau Wolf and Fuller KCP.

- Gujarat Ambuja Cement Ltd. (GACL) is setting up two new units

with a capacity of 1.5 m.t. each through its subsidiaries.

- The company has signed a memorandum of understanding (MoU),

with the promoters of Modi Cement to take control of the sick company
and has prepared a revival proposal to be submitted to the Board for
Industrial and Financial Reconstruction (BIFR).

1998
- Gujarat Ambuja Cements to set up a $20 million clinker Grinding unit
in Sri Lanka.

1999
- Gujarat Ambuja is proposing to set up a greenfield cement plant with
a six million tonne capacity in phases in Andhra Pradesh.

27

- Gujarat Ambuja is setting up a 0.50 MT bulk terminal and a

packaging facility at Tuticorin for Rs 16 crore to increase its presence
in the south, especially Tamil Nadu.

- Maratha Cements Ltd, a wholly-owned subsidiary of Gujarat Ambuja

Cements is to be amalgamated with the latter.

- The company has proposed a bonus shares in the ratio of 1:1.

2000
- Cement giants Larsen & Tubro (L&T) and Gujarat Ambuja Cements
have entered a unique agreement to reduce transportation costs in
despatching bulk cement in Gujarat.

- The Company has entered the fray for setting up a slag cement unit
near the integrated steel complex of Jindal Vijayanagar Steel Ltd. in
Karnataka.

- The Company has entered into a contract with a Soinhalese firm,

Mahaveli Marine Cement, to supply around 2.5 lakh tonnes of cement
annually.

28

- Eastern Ambuja Cement, a 92-per cent subsidiary of Gujarat Ambuja

Cement, is in talks with Orissa-based Shiva Cement for a possible joint
venture.

- The Company has kickstarted its operations in Sri Lanka with the
setting up of a cement terminal in the port of Galle, in the south of the
island country.

- Ambuja Cement Eastern, a subsidiary of Gujarat Ambuja Cements is

making a preferential allotment of equity to its promoters to mop up Rs
30 crore to part-finance its Rs 130-crore expansion project.

- ICRA has downgraded the non-convertible debenture (NCD)

programmes of the company.

- Fitch India has assigned a rating of Ind AAA to the Rs 50 crore NCD
programme of the company.

2001
- The Company has completed the issue of FCCBs of about $100
million issued in the international markets.

29

- Gujarat Ambuja Cements Ltd., the fourth largest cement maker in the
country, has closed its issue of secured non-convertible debentures after
raising the targeted Rs 200 crore.

- Gujarat Ambuja Cements Ltd is planning to issue fresh equity shares

on a prefrential basis to non-promoter groups.

- Gujarat Ambuja Cements Ltd (GACL) has received Rs 200 crore from
foreign equity investor, Warburg Pincus, as part of its proposed Rs 360crore investment in the form of equity shares and convertible ants.

- The company will buyback shares worth Rs 50 crore at a maximum

share price of Rs 170 per share through the open market route, it said.
Gujarat Ambuja Cements has clocked a 112 per cent rise in net profit at
Rs 53.23 crore during the first quarter of the financial year 2001-02.

2002
-Commercial production commences at Gujarat Ambuja Cements
Maratha Cement Works plant

-Board approves merger of Ambuja Cement Rajasthan with the

company
30

-Mops up Rs 50 cr by issuing non Convertible Debentures (NCD)

-Allots 80 lacs warrants to Affinity Investments, an Affiliate of
Warburg Pincus Equity Partners L.P

-Securities Appellate Tribunal (SAT) directs Sebi to examine Guj

Ambuja deal for ACC stake

2003
-SEBI finds no violation of Regulation 12 of the SEBI (Substantial
Acquisition of Shares and Takeovers) Regulation, 1997 by Gujarat
Ambuja Cements Ltd. with regard to the ACC deal

-Raises $80 million through External Commercial Borrowings (ECB)

2004
-BIFR sanctions the rehabilitation scheme for merger of Ambuja
Cement Rajasthan with Gujarat Ambuja Cements Ltd.

31

-Gujarat Ambuja Cements Ltd has informed that Shri NP Ghuwalewala

has been appointed as the Wholetime Director of the Company at the
Board meeting held today on June 28, 2004

2005 - Gujarat Ambuja Cement Ltd - Issue of Bonus shares

- Gujarat Ambuja gives Rs 25 lakh aid for quake victims

-Ambuja Cements has given the Bonus in the Ratio of 1:2

-Company has splits its Face value of Shares from Rs 10 to Rs 2
2006 - Holcim raises stake in Gujarat Ambuja Cements
- Gujarat Ambuja - Change in Accounting Year
2007
- Company name has been changed from Gujarat Ambuja Cements Ltd
to Ambuja Cements Ltd.
2008
- Ambuja Cements Ltd has appointed Mr. Naresh Chandra as an
additional director.
2009
- The Company launched its knowledge initiative i.e. Ambuja
Knowledge Center,to enable industry professionals get a first-hand feel

32

of the world of cement and concrete. During the year, three centers
became operational in the cities of Jaipur, Ahmedabad and Kolkata.

-Ambuja Cements - Grant of Stock Option under ESOS

2010
- On 24th February 2010, Ambuja Cements Ltd (ACL) inaugurated its
cement plant (grinding unit) at Dadri, Uttar Pradesh. Capacity: 1.5
million tonnes.

- On 27 March, 2010, Ambuja Cements Ltd (ACL) inaugurated its

cement plant (grinding unit) at Nalagarh, Himachal Pradesh. Capacity:
1.5 million tonnes.

- In December 2010, the Dadri Grinding Unit in its very first year of
operation received the Integrated Management System (IMS)
Certification, including ISO 9001:2008, ISO 14001:2004, and OHSAS
18001:2007 by BSI (U.K.).

2011 -Completes 25 years of operation. Celebrates silver jubilee at all

integrated plants.

33

- Achieves water-positive status, as certified by an independent

foundation, Det Norske Veritas. Ambuja Cements gives back to the
community double the amount of water the Company consumes at its
facilities.

- Ambuja Cements Ltd has acquired 85% equity shares of Dang

Cement Industries Pvt. Ltd., Nepal

- Ambuja Cements Ltd has acquired 60% equity shares from the
existing promoters of Dirk India Pvt. Ltd.

2012 - Ambuja Cements announces Allotment of Shares under ESOS

category.
- Ambuja presented 2 awards at the CII Sustainability Awards 2012 by
Honorable President of India.
- Ambuja Cements Limiteds (ACL) integrated plant unit at
Chandrapur, (Maharashtra), the Maratha Cement Works (MCW)
bagged the gold award for the best safety systems under the Large size
category of the FICCI Safety Excellence System Awards 2012
2013 -Ambuja Cement bagged the Asia's Most Promising Brand &
Leader Award at the Asian Brand and Leadership Summit 2013 -ACL
Rabriyawas was awarded "Energy Efficient Unit" during the 14th
National Award for Excellencein Energy Management 2013 -Ambuja
34

Cements has unanimously approved a proposal to first acquire a 24%

stake Holcim
2014 -Ambuja Cement Foundation - Chirawa has won the UNESCO
supported Water Digest Water Award 2013-14 -Ambuja Cement
Foundation - Bathinda won the NABARD 'Partnership Excellence
Award' in the category of "Improving productivity of crops" -Ambuja
launched a premium quality cement product, AMBUJA PLUS in the
state of Rajasthan. -Ambuja launches AMBUJA PLUS in Gujarat
-Ambuja Cement has launched a new TV campaign after four years,
focusing on social awareness.

2015 -Ambuja Cement created another benchmark among cement

industries in India, it obtained a whopping 4.03 times water positive
factor

35

COMPANY PROFILE:
Ambuja Cements Limited is an India-based cement manufacturing
company. The Company is a part of LafargeHolcim. LafargeHolcim is
a supplier of cement, aggregates and concrete. The Company has
approximately five integrated cement-manufacturing plants and over
eight cement-grinding units. The Company has a cement capacity of
approximately 27.25 million tons. The Company manufactures Portland
Pozollana cement (PPC). The Company has developed a way of using
fly ash to produce high strength PPC. The Company's other products
include Ambuja Plus Roof Special and Alccofine Micro Materials. The
Alccofine Micro Materials product line ranges from high strength
concrete additives to special applications in tunnels and dams. The
Company's subsidiaries include M.G.T. Cements Private Limited,
Chemical Limes Mundwa Private Limited, Kakinada Cements Limited,
Dang Cement Industries Private Limited and Dirk India Private
Limited.
Contact Information
Legal Address
P.O. Ambujanagar,, Taluka Kodinar, Dist. Gir Somnath
Junagadh; Gujarat; Map
Postal Code: 362715
Tel: 221137/ 232065/
Fax: 232629
36

Email: investor@ambujacement.com
Website: http://www.ambujacement.com
Full name: Ambuja Cements Ltd.
Previous name(s): GUJARAT AMBUJA CEMENTS LTD (1983)
Status: Listed
Legal Form: Public Limited Company
Operational Status: Operational
EMISid: 1623665
IN-CIN: L26942GJ1981PLC004717
ISIN: INE079A01024
Incorporation Date: 1981
Main Activities
Cement and Concrete Product Manufacturing
Main Products
Power, Cement, Clinker,
More

37

Company Description
Ambuja Cements Ltd. manufactures cement and other allied products.
The company, initially called Gujarat Ambuja Cements Ltd, was
founded by Narotam Sekhsaria in 1983 in partnership with Suresh
Neotia. Ambuja Cement is a brand in India for Ordinary Portland
Cement (OPC) and Pozzolana Portland Cement (PPC). The company's
corporate office is located in Mumbai.
Ambuja Cements Limited was earlier known as Gujarat Ambuja
Cements Limited (GACL). The company was set up in 1986. In this
short span Ambuja Cements has achieved massive growth and
presently, the total cement capacity of the company is 16 million
tonnes. The company has three subsidiaries, viz, Ambuja Cement
Rajasthan Limited (ACRL), Ambuja Cement Eastern Limited (ACEL)
and Ambuja Cement India Limited (ACIL). Ambuja also has a strategic
investment in ACC through its subsidiary (ACIL).

Ambuja Cements is the most profitable cement company in India, and

the lowest cost producer of cement in the world. One of the major
reasons that Ambuja Cements is the lowest cost producer of cement in
the world is its emphasis on efficiency. Power consists over 40% of the
production cost of cement. The company improved efficiency of its
kilns to get more output for less power. Thereafter Ambuja Cements set
up a captive power plant at a substantially lower cost than the national
grid. The company sourced a cheaper and higher quality coal from
South Africa, and a better furnace oil from the Middle East. As a result,
38

today, the company is in a position to sell its excess power to the local
state government.

Ambuja cement is the first company to introduce the concept of bulk

cement movement by sea in India. This resulted in speedier
transportation and brought many coastal markets within easy reach.
Ambuja Cements has a port terminal at Muldwarka, Gujarat. It is an all
weather port that handles ships with 40,000 DWT. The port has a fleet
of seven ships with a capacity of 20500 DWT to ferry bulk cement to
the packaging units. The company has bulk cement terminals at Surat,
Panvel, and Galle. The Surat terminal has a storage capacity of 15,000
tonnes and Panvel terminal has a storage capacity of 17,500 tonnes.
Both the terminals have bulk cement unloading facility. The port at
Galle, 120 km from Colombo, Sri Lanka, handles million tonnes of
cement annually.

Major Achievements of Ambuja Cement

Most profitable cement company in India.
Lowest cost producer of cement in the world.
Its environment protection measures are at par with the best in the
world. The pollution levels at all its cement plants are lower than the
rigorous Swiss standards of 100 mg/NM3.

39

The only cement company to be awarded with the National Quality

Award.
First cement company to first to receive the ISO 9002 quality
certification.
Received ISO 14000 Certification for environmental systems.
India's largest exporter of cement.
Received Best Award for highest exports by CAPEXIL.
First company to introduce the concept of bulk cement movement by
sea in India.
Ambuja Cements Ltd(ACL) was incorporated in the year 1981 as
Ambuja Cements Pvt Ltd. The company was established as a joint
venture between the public sector Gujarat Industrial Investment
Corporation (GIIC) and Narottam Sekhsaria & Associates. In May 19,
1983, the company was rehabilitated into a public limited company.
Subsequently, the company name was changed to Gujarat Ambuja
Cements Ltd. Further, the name was changed to Ambuja Cements Ltd.

Ambuja Cements is a major cement producing company in India. The

principal activity of the company is to manufacture and market cement
and clinker for both domestic and export markets. The company has
five integrated cement manufacturing plants and eight cement grinding
units. It is the first Indian cement manufacturer having a captive port
with three terminals along the country's western coastline to facilitate
40

timely, cost effective and environmentally cleaner shipments of bulk

cement to its customer. The company has its own fleet of ships. The
company subsidiaries include Dang Cement Industries Private Ltd,
M.G.T Cements Private Ltd, Chemical Limes Mundwa Private Ltd and
Dirk India Pvt Ltd.
In the year 1985, the company set up a cement plant in technical
collaboration with Krupp Polysius, Germany, Bakau Wolf and Fuller
KCP. During the year 1988-89, the company commissioned the 12.6
MW diesel-generating sets. In the year 1991, they got necessary
approvals for setting up another cement plant with 1 million tonne
capacity per annum at Himachal Pradesh. The company undertook bulk
cement transportation, by sea, to the major markets of Mumbai, Surat
and other deficit zones on the West Coast.

In the year 1997, the company started commercial production in

Kodinar plant with an enhanced capacity. In the year 1998, they set up
a $20 million clinker Grinding unit in Sri Lanka. In the year 2000,
giants Larsen & Tubro (L&T) and Gujarat Ambuja Cements entered a
unique agreement to reduce transportation costs in dispatching bulk
cement in Gujarat. Also, they entered into an annual contract with a
Soinhalese firm, Mahaveli Marine Cement, to supply around 2.5 lakh
tonnes of cement.

41

In the year 2002, the company started commercial production at

Maratha Cement Works plant. In June 2002, they started commercial
production in the new 2-million tonne Greenfield cement plant at
Chandrapur, Maharashtra. In the year 2004, Ambuja Cement Rajasthan
was amalgamated with the company.

In February 2005, the company set up a cement mill with a capacity of

80 TPH at Darlaghat and commenced commercial production. They
commissioned a captive thermal power plant with two 12 MW Steam
Turbo Generators (STG), with two boilers of 45 TPH capacity each at a
cost of Rs.94 crore. The first STG was commissioned in February 2005
and the second in May 2005.

In July 2005, Indo-Nippon Special Cements Ltd, a subsidiary company

was amalgamated with the company. The company set up new clinker
capacity at Bhatapara in Chattisgarh and Rauri in Himachal Pradesh,
each having a capacity of 2.2 million tonnes per annum at a cost of Rs.
1600 crore. In 2006, Global Cement Major Holcim, acquired
management control of the company. Today, Holcim holds a little over
50% equity in ACL.

The company commenced commercial production at two new 2.2

million tonne clinker production lines, at Bhatapara (Chattisgarh) and
Rauri (HP) in December 2009 and January 2010 respectively. In
42

February 24, 2010, the company inaugurated their cement plant

(grinding unit) at Dadri, Uttar Pradesh with the capacity of 1.5 million
tonnes. In March 27, 2010, they inaugurated their cement plant
(grinding unit) at Nalagarh, Himachal Pradesh with the capacity of 1.5
million tonnes.

During the year, the company commissioned an additional 30 MW

captive power unit at Ambujanagar (Gujarat). In October 2010, the
company signed an agreement with the Rajasthan State Industrial
Development and Investment Corporation, to set up a 2.2 million tonne
clinkerisation unit in Nagaur district. In December 2010, the Dadri
Grinding Unit in its very first year of operation received the Integrated
Management System (IMS) Certification, including ISO 9001:2008,
ISO 14001:2004, and OHSAS 18001:2007 by BSI (U.K.).

In the year 2011, the company started commercial production in a new

cement mill at a cost of approx Rs 185 crore at Bhatapara plant. Also,
they commissioned a new cement mill of 0.9 million tonne cement
grinding capacity at Maratha Cement Works plant at a cost of approx
Rs 61 crore.

The company commissioned a 7.5 MW Wind Mill project in Kutch,

Gujarat at a cost of Rs 46 crore. The company increased the installed
capacity in Bhatinda grinding unit in Punjab by 0.1 million tonne to
43

reach at 0.6 million tonne. Also, they increased the installed capacity in
Farraka grinding unit in West Bengal by 0.25 million tonne to reach at
1.25 million tonnes.

In June 2011, the company made strategic investments in Dang Cement

Industries Pvt. Ltd, Nepal and acquired 85% shareholding for Rs 19.13
crore to help further expansion of capacity in the northern region of
India and Nepal. In September 2011, they acquired 60% shareholding
in Dirk India Pvt Ltd, Maharashtra Rs 16.51 crore. The company
entered into a joint venture for speciality cement manufacturing facility
in Goa with Counto Microfine Products Pvt Ltd.

44

CHAPTER-IV
DATA ANANLYSIS AND INTERPRETATION
MEANING AND DEFINITION
Ratio analysis is one of the powerful techniques which are
widely used for interpreting financial statements. This technique
serves as a tool for assessing the financial soundness of the
business. it can be used to compare the risk and return
relationship of firms of different sizes. The term ratio refers to
the numerical or quantitative relationship between two items/
variables.
The idea of ratio analysis was introduced by Alexander Wall for
the first time in 1919. Ratios are quantitative relationship
between two or more variables taken from financial statements.
Ratio analysis is defined as, the systemic use of ratio to interpret
the financial statement so that the strength and weakness of the
firm a well as its historical performance and current financial
condition can be determined.
In the financial statement we can find many items are co-related
with each other for example current assets and current liabilities,
capital and long term debt, gross profit and net profit purchase
and sales etc.

IMPORTANCE OF THE RATIO ANALYSIS

45

As a tool of financial management, ratios are of crucial

significance. The importance of the ratio analysis lies in the fact that it
presents facts on a comparative basis and enables the drawing of
inference regarding the performance of a firm.
LIST OF RATIOS
Liquidity ratio
Current ratio
Quick ratio
Inventory/Stock turnover ratio
Gross profit ratio
Net profit ratio
Working capital turnover ratio
Debtors turnover ratio
Debt collection period
Liquidity Ratio:
The importance of adequate liquidity in the sense of the ability of
a firm to meet current /short term obligations when they become due
for payment can hardly be overstressed. The liquidity ratios measure
the ability of the firm to meet its short-term obligations and reflect and
the short-term financial strength/solvency of a firm.

Gross profit ratio:

It is ratio of Gross profit to net sales expressed as percentage. It
shows the relationship between gross profit and sales.
46

Gross profit/ sales*100

TABLE:1.1
Year

G/P

Sales

Ratio

2011-2012 11,945.71

4,959.46

2.40

2012-2013 11,362.17

4,450.97

2.55

2013-2014 10,759.31

4,917.33

2.18

2014-2015 10,116.82

4,566.52

2.21

2015-2016 9,636.89

5,344.18

1.80

CHART

47

Gross Profit radio

300000000
250000000
200000000
150000000
100000000
50000000
0
G/P

2011-2012

2012-2013

Sales
2013-2014

Ratio
2014-2015

Table4:5: Net Profit Ratio

48

2015-2016

Year

Net Profit

Sales

Ratio

2011-2012 807.56

4,959.46

5.20

2012-2013 -228728

4,450.97

9.66

8.37
2013-2014 7421223

4,917.33

8.41
2014-2015 4449324

4,566.52

2015-2016 -13165013

8.01
5,344.18

Interpretation:
49

By analyzing the company financial statements it is recovering from a

decline in profit ,the year 2012-08 and this trend continues till the year
2014

Chart4:5: Net Profit Ratio

Net profit Radio

300000000
250000000
200000000
150000000
100000000
50000000
0

Net Profit

Sales

Ratio

-50000000
2011-2012

2012-2013

50

2015-2016

Types of Ratios
Liquidity Ratios
Liquidity refers to the ability of a firm to meet its short-term
financial obligations when and as they fall due.
The main concern of liquidity ratio is to measure the ability of
the firms to meet their short-term maturing obligations. Failure to
do this will result in the total failure of the business, as it would
be forced into liquidation.
A. Current Ratio
The Current Ratio expresses the relationship between the firms
current assets and its current liabilities. Current assets normally include
cash, marketable securities, accounts receivable and inventories.
Current liabilities consist of accounts payable, short term notes
payable, short-term loans, current maturities of long term debt, accrued
income taxes and other accrued expenses (wages).

Current assets
Current Ratio = ________________

Current liabilities

51

Significance:
It is generally accepted that current assets should be 2 times the
current liabilities. In a sound business, a current ratio of 2:1 is
considered an ideal one. If current ratio is lower than 2:1, the short term
solvency of the firm is considered doubtful and it shows that the firm is
not in a position to meet its current liabilities in times and when they
are due to mature. A higher current ratio is considered to be an
indication that of the firm is liquid and can meet its short term
liabilities on maturity. Higher current ratio represents a cushion to
short-term creditors, the higher the current ratio, the greater the
margin of safety to the creditors.

52

Table: 5.1 CURRENT RATIO

Current

Current

Ratio

Liabilities

Rs. in lakhs

Rs. in lakhs

2011 2012

18483.79

3,226.09

2.03

2012 2013

17860.79

3,147.60

1.90

2013 2014

13603.46

2,843.20

1.95

2014 2015

14227.61

3,010.94

1.75

2015 2016

14116.60

2,764.27

1.54

Year

53

Ratio

Interpretation:
As a conventional rule, a current ratio of 2:1 is considered
satisfactory. This rule is base on the logic that in a worse situation even
if the value of current assets becomes half, the firm will be able to meet
its obligation. The current ratio represents the margin of safety for
creditors. The current ratio has been decreasing year after year which
shows decreasing working capital.
From the above statement the fact is depicted that the liquidity
position of the AMBUJA CEMENT PVT LTD is satisfactory because
all the five years current ratio is not below the standard ratio 2:1.

Chart no: 5.1CURRENT RATIO

40000
35000
30000
25000
20000
15000

Current Liabilities

10000

Current Ratio

5000
0

54

B. Inventory Turnover Ratio:

This ratio measures the stock in relation to turnover in order to
determine how often the stock turns over in the business.
It indicates the efficiency of the firm in selling its product. It is
calculated by dividing he cost of goods sold by the average inventory.

Cost of goods sold

Inventory Turnover Ratio = ___________________

Average Inventory
Significance:
This ratio is calculated to ascertain the number of times the stock is
turned over during the periods. In other words, it is an indication of the
velocity of the movement of the stock during the year. In case of
decrease in sales, this ratio will decrease. This serves as a check on the
control of stock in a business. This ratio will reveal the excess stock
and accumulation of obsolete or damaged stock. The ratio of net sales
to stock is satisfactory relationship, if the stock is more than threefourths of the net working capital. This ratio gives the rate at which
inventories are converted into sales and then into cash and thus helps in
determining the liquidity of a firm.
55

Table: 5.5

INVENTORY TURNOVER RATIO

Cost of goods Average

Year

2011

sold

Inventory

Rs. in lakhs

Rs. in lakhs

24.87

Ratio

895.45

10.57

71.71

888.39

11.23

111.29

933.94

9.81

37.31

983.93

9.89

57.31

924.97

9.25

2012

2012

2013

2013
2014

2014

2015
2015
2016

56

Interpretation:
A higher turnover ratio is always beneficial to the concern. In this
the number of times the inventory is turned over has been increasing
from one year to another year. This increasing turnover indicates
immediate sales. And in turn activates production process and is
responsible for further development in the business. This indicates a
good inventory policy of the company.

Thus the stock turnover ratios of AMBUJA CEMENT PVT LTD,

for the five years are satisfactory.

Chart no.: 5.5 INVENTORY TURNOVER RATIO

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

Average Inventory
Cost of goods sold

57

D. Fixed Assets Turnover Ratio:

The fixed assets turnover ratio measures the efficiency with which
the firm has been using its fixed assets to generate sales. It is calculated
by dividing the firms sales by its net fixed assets as follows:
Sales
Fixed Assets Turnover =________________
Net fixed assets
Significance:
This ratio gives an ideal about adequate investment or over
investment or under

investment in fixed assets. As a rule, over-

investment in unprofitable fixed assets should be avoided to the

possible extent. Under-investment is also equally bad affecting
unfavorably the operating costs and consequently the profit. In
manufacturing concerns, the ratio is important and appropriate, since
sales are produced not only by use of working capital but also the
capital invested in fixed assets. An increase in this ratio is the indicator
of efficiency in work performance and a decrease in this ratio speaks of
unwise and improper investment in fixed assets.

58

Table: 5.7

FIXED ASSETS TURNOVER RATIO

Net
Year

Sales
Rs. in lakhs

Fixed

Assets

Ratio

Rs. in lakhs

2011 2012 4,959.46

6,506.15

66.80

2012 2013 4,450.97

6,917.28

71.78

2013 2014 4,917.33

6,757.41

70.65

2014 2015 4,566.52

6,382.49

78.31

2015 2016 5,344.18

6,673.28

74.11

Interpretation:
59

The fixed assets turnover ratio is increasing year after year. The
overall higher ratio indicates the efficient utilization of the fixed assets.

Thus the fixed assets turnover ratio for the five years are satisfactory
as such there is no under utilization of the fixed assets.
Chart no.: 5.7

FIXED ASSETS TURNOVER RATIO

30000
25000
20000
15000
Net Fixed Assets
10000
5000
0

Financial Leverage (Gearing) Ratios

The ratios indicate the degree to which the activities of a firm are
supported by creditors funds as opposed to owners.

60

 The relationship of owners equity to borrowed funds is an

important indicator of financial strength.
The debt requires fixed interest payments and repayment of the loan
and legal action can be taken if any amounts due are not paid at the
appointed time. A relatively high proportion of funds contributed by
the owners indicates a cushion (surplus) which shields creditors
against possible losses from default in payment.
B. Debt to Equity ratio
This ratio indicates the extent to which debt is covered by
shareholders funds. It reflects the relative position of the equity holders
and the lenders and indicates the companys policy on the mix of
capital funds. The debt to equity ratio is calculated as follows:
Total debt
Debt to Equity Ratio = ____________
Total equity
Significance:
The importance of debt-equity ratio is very well reflected in the
words of Weston and brigham which are reproduced here: Debt-equity
ratio indicates to what extent the firm depends upon outsiders for its
existence. For the creditors, this provides a margin of safety. For the
owners, it is useful to measure the extent to which they can gain the
benefits of maintaining control over the firm with a limited
investment: The debt-equity ratio states unambiguously the amount of
61

assets provided by the outsiders for every one rupee of assets provided
by the shareholders of the company.

Table: 5.9 DEBT TO EQUITY RATIO

62

Total Debt

Total Equity

Year

Rs. in lakhs

Rs. in lakhs

Ratio

2011 2012

7241.39

310.38

0.00

2012 2013

4628.27

309.95

0.00

2013 2014

4221.63

309.17

0.00

2014 2015

3474.18

308.44

0.00

2015 2016

3216.67

306.87

0.01

Interpretation:

The debt to equity ratio is decreasing year after year. A low debt
equity ratio is considered favorable from management. It means greater
claim of shareholders over the assets of the company than those of
creditors. For the company also, the servicing of debt is less

63

burdensome and consequently its credit standing is not adversely

affected. Therefore debt to equity ratio is satisfactory to the company.
Chart no.: 5.9 DEBT TO EQUITY RATIO

40000
35000
30000
25000
20000
15000

Total Equity

10000

Total Debt

5000
0

64

C. Interest coverage ratio

The times interest earned shows how many times the business can
pay its interest bills from profit earned. Present and prospective loan
creditors such as bondholders, are vitally interested to know how
adequate the interest payments on their loans are covered by the
earnings available for such payments. Owners, managers and directors
are also interested in the ability of the business to service the fixed
interest charges on outstanding debt. The ratio is calculated as follows:
EBIT
Interest Coverage Ratio =_______________

Interest charges

65

Significance:
It is always desirable to have profit more than the interest payable.
In case profit is either equal or lesser than the interest, the position will
be unsafe. It will show that there this nothing left for the shareholders
and the position of the lendors is also unsafe. A high ratio is a sign of
low burden of dept servicing and lower utilization of borrowing
capacity. From the points of view of creditors, the larger the coverage,
the greater the ability of the firm to handle fixed charges liabilities and
the more assessed the payment of interest to the creditors. In contrast
the low ratio signifies the danger the signal that the firm is highly
dependent on borrowings and its earnings cannot meet obligations
fully. The standard for this ratio for an industrial undertaking is 6 to 7
times.
Table: 5.10

INTEREST COVERAGE RATIO

DEBIT

Year

Interest

Rs. in lakhs

on

Loans
Rs. in lakhs

66

Fixed
Ratio

2011 2012 1767.75

7241.39

0.24

2012

2087.49

4628.27

0.45

2260.62

4221.63

0.54

3037.66

3474.18

0.87

5030.58

3216.67

1.56

2013

2013

2014

2014

2015

2015

2016

Interpretation:

The Interest coverage ratio is increasing year after year. A high

ratio is a sign of low burden of dept servicing and lower utilization of
borrowing capacity. Therefore this ratio is satisfactory to the company.

67

Chart no.: 5.10 INTEREST COVERAGE RATIO

10000
9000
8000
7000
6000
5000
4000
3000
2000
1000
0

Interest on Fixed Loans

EBIT

Profitability Ratios
Profitability is the ability of a business to earn profit over a period
of time. Although the profit figure is the starting point for any
calculation of cash flow, as already pointed out, profitable companies
can still fail for a lack of cash.
68

 A company should earn profits to survive and grow over a long

period of time.
Profits are essential, but it would be wrong to assume that every
action initiated by management of a company should be aimed at
maximizing profits, irrespective of social consequences.
The ratios examined previously have tendered to measure management
efficiency and risk.

A. Gross Profit Margin

Normally the gross profit has to rise proportionately with sales.
It can also be useful to compare the gross profit margin across
similar businesses although there will often be good reasons for
any disparity.

Gross profit
Gross Profit Margin = ________________

Sales

Significance:
69

*100

The gross profit ratio helps in measuring the results of trading or

manufacturing operations. It shows the gap between revenue and
expenses at a point after which an enterprise has to meet the expenses
related

to

the

non-manufacturing

activities,

like

marketing,

administration, finance and also taxes and appropriations.

The gross profit shows the gap between revenue and trading costs.
It, therefore, indicates the extent to which the revenue have a potential
to generate a surplus. In other words, the gross profit reveals the mark
up on the sales. Gross profit ratio reveals profit earning capacity of the
business with reference to its sale. Increase in gross profit ratio will
mean reduction in cost of production or direct expenses or sale at a
reasonably good price and decrease in the will mean increased cost of
production or sales at a lesser price. Higher gross profit ratio is always
in the interest of the business.
Table: 5.11
Year

GROSS PROFIT MARGIN

Gross Profit

Net Sales

Rs. in lakhs

Rs. in lakhs

70

Ratio

2011 2012

7052.87

4,959.46

8.53

2012 2013

7925.86

4,450.97

14.99

2013 2014

7904.58

4,917.33

14.13

2014 2015

9275.87

4,566.52

13.33

2015 2016

12543.85

5,344.18

14.36

Interpretation:
In the year 2011, the Gross Profit Ratio was 39% but then it
increased to 40%, which shows a good profit earning capacity of the
business with reference to its sales. But in the year 2013, it decreased to
37% which may be due to increase in cost of production or due to sales
at lesser price. But thereafter, for the succeeding two years, it has
increased considerably, which indicates that the cost of production has
reduced. Therefore the Gross Profit Ratio for the five years reveals a
satisfactory condition of the business.

71

Chart no.: 5.11

GROSS PROFIT MARGIN

45000
40000
35000
30000
25000
20000

Ratio

15000

Net Sales

10000

Gross Profit

5000
0

72

B. Net Profit Margin

This is a widely used measure of performance and is comparable
across companies in similar industries. The fact that a business works
on a very low margin need not cause alarm because there are some
sectors in the industry that work on a basis of high turnover and low
margins, for examples supermarkets and motorcar dealers. What is
more important in any trend is the margin and whether it compares well
with similar businesses.

Earnings after interest and taxes

Net Profit Margin =______________________________ *100
Net Sales

Significance:

73

An objective of working net profit ratio is to determine the overall

efficiency of the business. Higher the net profit ratio, the better the
business. The net profit ratio indicates the managements ability to earn
sufficient profits on sales not only to cover all revenue operating
expenses of the business, the cost of borrowed funds and the cost of
merchandising or servicing, but also to have a sufficient margin to pay
reasonable compensation to shareholders on their contribution to the
firm. A high ratio ensures adequate return to shareholders as well as to
enable a firm to with stand adverse economic conditions. A low margin
has an opposite implication.

Table: 5.12
Year

NET PROFIT MARGIN

Net Profit

Sales

Rs. in lakhs

Rs. in lakhs

74

Ratio

2011 2012

2848.84

4,959.46

8.53

2012 2013

2800.13

4,450.97

14.99

2013 2014

2871.54

4,917.33

14.13

2014 2015

3752.3

4,566.52

13.33

2015 2016

5937.78

5,344.18

14.36

Interpretation:

In the year 2011 the Net Profit is 15.60%, but in the year 2011-2012
it was decreased to 14.14 and 13.29. Which may due to excessing
selling and distribution expenses. But thereafter for the succeeding
years it has been increasing which indicates a better performance of the
company. Therefore the performance of the management should be
appreciated. Thus an increase in the ratio over the previous periods
indicates improvement in the operational efficiency of the business.

Chart no.: 5.12 NET PROFIT MARGIN

75

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

Ratio
Sales
Net Profit

C. Return on Investment (ROI)

Income is earned by using the assets of a business productively. The
more efficient the production, the more profitable the business. The rate
of return on total assets indicates the degree of efficiency with which

76

management has used the assets of the enterprise during an accounting

period. This is an important ratio for all readers of financial statements.
Investors have placed funds with the managers of the business. The
managers used the funds to purchase assets which will be used to
generate returns. If the return is not better than the investors can
achieve elsewhere, they will instruct the managers to sell the assets and
they will invest elsewhere. The managers lose their jobs and the
business liquidates.
Operating profit
Return on Investment =________________
Capital Employed

Significance:

Return on capital employed shows overall profitability of the business.

At first minimum return on capital employed should be determined and
then the actual rate of return on capital employed should be determined
and compared with the normal return. The return and capital employed
is a fair measure of the profitability of any concern with the result that
even the result of dissimilar industries may be compared.

77

Table: 5.13
Operating
Year

RETURN ON INVESTMENT
Capital Employed

Profit

Rs. in lakhs

Ratio

Rs. in lakhs
2011-

2531

310.38

7.38

2434

309.95

13.91

2437.54

309.17

12.79

3190.73

308.44

13.77

4733.93

306.87

14.00

2012

20122013

20132014

20142015

20152016
78

Interpretation:
This ratio indicates that how much of the capital invested is returned
in the form of net profit. This ratio is increasing year after year which
indicates the capital employed is returned in the form of net profit. In
the same manner, returns from capital employed for the succeeding
years are good.
Thus, the Return on Investment ratio for the five years shows the
efficiency of the business which is very much satisfactory.
Chart no.: 5.13 RETURN ON INVESTMENT

45000
40000
35000
30000
25000
20000
15000

Capital Employed

10000

Operating Profit

5000
0

79

D. Return on Equity (ROE)

This ratio shows the profit attributable to the amount invested by
the owners of the business. It also shows potential investors into the
business what they might hope to receive as a return. The stockholders
equity includes share capital, share premium, distributable and nondistributable reserves. The ratio is calculated as follows:
Net profit after taxes and preference dividend
Return on Equity =__________________________________________
Equity capital

Significance:
This ratio measures the profitability of the capital invested in the
business by equity shareholders. As the business is conducted with a
view to earn profit, return on equity capital measures the business
80

success and managerial efficiency. It reveals whether the firm has

earned a reasonable profit to its equity shareholders or not by
comparing it with its own past records, inter-firm comparison and
comparison with the overall industry average. This ratio is of
significant use in the ratio analysis from the standpoint of the owners of
the firm.

Table: 5.14 RETURN ON EQUITY

Net Profit after
Year

Tax
Preference
Dividend
Rs. in lakhs

and

Equity

Ratio

Capital
Rs.
lakhs

81

in

2011

2848.84

561.50

2800.13

561.50

7.83

2012

2012

14.81

2013

2013

1123.00

3752.3

1223.00

2014

2014

2871.54

5937.78

1223.00

2015

2015

13.64

14.73

15.22

2016

Interpretation:
In the year 2011, the return on equity ratio is 5.07 but in the year 2012
it reduced to 4.99, which may due to capital investment. And in the
year 2014-2015 it increased to 3.07 to .86. Therefore the return on
equity ratio for the five years reveals a satisfactory condition of the
business.

82

Chart no.: 5.14

RETURN ON EQUITY

1400
1200
1000
800
600
400

Net Profit after Tax and

Preference Dividend

200
0

E. Return on Total assets

This ratio is also known as the profit-to-assets ratio. This ratio
establishes the relationship between net profits and assets. As these two
terms have conceptual differences, the ratio may be calculated taking
the meaning of the terms according to the purpose and intent of
analysis. Usually, the following formula is used to determine the return
on total assets ratio.

83

Return on total assets = (Net profit after taxes and interest / Total
assets) * 100
Significance:
This ratio measures the profitability of the funds invested in a firm but
doe not reflect on the profitability of the different sources of total
funds. This ratio should be compared with the ratios of other similar
companies or for the industry as a whole, to determine

whether the

rate of return is attractive. This ratio provides a valid basis for interindustry comparison.

Table: 5.15RETURN ON TOTAL ASSETS

84

Net
Year

Profit

after

Taxes and Interest

Rs. in lakhs

2011 2012

Total Assets

Ratio

Rs. in lakhs

2848.84

35156.63

5.70

2012 2013 2800.13

32593.54

10.76

2013 2014 2871.54

32556.72

9.98

2014 2015 3752.3

35637.92

10.43

2015 2016 5937.78

36999.3

10.64

Interpretation:
The return on total assets ratio is increasing year after year . This
increasing ratio indicates the effective funds invested. Therefore the
return on Total

Assets ratio for the five years reveals a satisfactory

condition of the business.

Chart no.: 5.15 RETURN ON TOTAL ASSETS

85

40000
35000
30000
25000
20000
15000
Net Profit after Taxes and
Interest

10000
5000
0

Comparative statement:
Comparative study of financial statement is the comparison of the
financial statement of the business with the previous years financial
statements and with the performance of other competitive enterprises,
so that weaknesses may be identified and remedial measures applied.

Comparative statements can be prepared for both types of financial

statements i.e., Balance sheet as well as profit and loss account. The
comparative profits and loss account will present a review of operating
activities of the business. The comparative balance shows the effect of
operations on the assets and liabilities that change in the financial
position during the period under consideration.

86

Comparative analysis is the study of trend of the same items and

computed items into or more financial statements of the same business
enterprise on different dates.

The presentation of comparative financial statements, in annual and

other reports, enhances the usefulness of such reports and brings out
more clearly the nature and trends of current changes affecting the
enterprise.

While the single balance sheet represents balances of accounts

drawn at the end of an accounting period, the comparative balance
sheet represent not nearly the balance of accounts drawn on two
different dates, but also the extent of their increase or decrease between
these two dates. The single balance sheet focuses on the financial status
of the concern as on a particular date, the comparative balance sheet
focuses on the changes that have taken place in one accounting period.
The changes are the direct outcome of operational activities, conversion
of assets, liability and capital form into others as well as various
interactions among assets, liability and capital.

87

STATISTICS ANALYSIS
The result of the regression equation indicates that the coefficient of current ratio is negative (-47.83%). That is the increase or
decrease in working capital (aggressive/conservative) will significantly
affect the profitability of the firm further to examine the extent to
which the use of alternative proxy for working capital management
might provide different results to this end it was replaced by average
days of account receivable variable (collection days). This variable was
regressed against return on capital employed. The result showed
negative correlation between collection days and return on capital
employed (Table5). The implication of this is that the company is
giving incentive for early payment.

CHAPTER-V
5.1 FINDINGS

1) The debtor turnover ratio is good. It shows the collection of debtors

is very prompt.
2) The current ratio of the company has been increased from 1.62 to
1.99, from the 2010to 2014.
88

3) The quick ratio has been increased by years i .e. 1.08, 1.11, 1 .
16respectively from 2012, 2013& 2014 & last year it was constant i.e.
1. It shows that companys liquidity position is good, so it is favorable
to the company
4) The inventory ratio indicates how fast inventory is sold .A high ratio
is good from the viewpoint of liquidity.
5) The working capital ratio have increased in the financial year 201213 I.e. 5.84 & decrease in the next 2 years.
6) Net working capital is a measure of liquidity; inadequate working
capital is the first sign of financial problems for a firm.

5.2 SUGGESTION
The firm should try to bring them more professionalism. From
the study it is found that there is lack of periodic review & analysis
which is leading to inefficient utilization of resources & thus loss.
Therefore it is suggested that the firm should conduct quarterly
analysis. So that the problems can be amended in time.

5.3 CONCLUSION

89

Financing is the backbone of the progress of any company. A

Ratio gives the clear picture of financial condition of the company. The
areas which were assigned to me were all key areas of the finance.
Divisions which also include different departments & functions.

BIBLIOGRAPHY:

Accounting for Managers by J. Made Gowda

Management Accounting by R.S.N.pillai and Bhagavathi
Annual reports of the SKOC,Karur
Review of financial ratio analysis by Salmi and martikainen
Financial ratio analysis,factoranalysis.International journal of
business and managemend

90

BALANCE SHEET IN AMBUJA CEMENT PVT LTD

(Rs crore)
2015

2014

2013

2012

2011

Sources of funds
Owner's fund
Equity share capital

310.38

309.95

309.17

308.44

306.87

Share application money

0.01

Preference share capital

9,996.49

9,793.38

9,176.37

8,496.62

7,762.56

9.45

5.86

5.86

13.23

13.23

23.29

34.63

42.80

Reserves & surplus

Loan funds
Secured loans
Unsecured loans

91

2015
Total

2014

2013

10,329.5
5 10,122.42

2012

9,514.69

2011

8,839.69

8,112.24

10,759.3
1 10,116.82

9,636.89

Uses of funds
Fixed assets
Gross block

11,945.71 11,362.17

Less : revaluation reserve

Less : accumulated depreciation

5,853.68

5,135.06

4,696.78

4,254.45

3,450.43

Net block

6,092.03

6,227.11

6,062.53

5,862.37

6,186.46

414.12

690.17

694.88

520.12

486.82

2,226.13

2,172.73

1,788.45

1,655.84

864.31

Current assets, loans & advances

5,429.65

4,810.84

4,418.73

4,386.35

4,004.25

Less : current liabilities &

provisions

3,832.38

3,778.43

3,449.90

3,584.99

3,429.60

Total net current assets

1,597.27

1,032.41

968.83

801.36

574.65

10,329.5
5 10,122.42

9,514.69

8,839.69

8,112.24

2,228.46

2,173.73

1,789.45

1,656.84

865.31

Contingent liabilities

2,231.98

2,264.89

2,310.02

2,240.01

571.54

Number of equity
sharesoutstanding (Lacs)

15518.97

15497.46

15458.60 15421.84 15343.69

Capital work-in-progress
Investments
Net current assets

Miscellaneous expenses not written

Total
Notes:
Book value of unquoted
investments
Market value of quoted investments

92

Profit loss account

(Rs crore)
2015

2014

2013

2012

2011

Income
Operating income

9,461.40

9,978.12

9,160.35

9,730.30

8,554.26

Material consumed

1,477.90

1,581.11

1,479.69

1,136.55

1,227.06

Manufacturing expenses

2,052.94

2,265.22

2,062.92

2,329.07

2,001.37

589.52

581.58

502.41

478.51

433.20

Expenses

Personnel expenses
Selling expenses

93

2015
Adminstrative expenses

2014

2013

2012

2011

3,809.57

3,621.77

3,464.50

3,313.20

2,915.60

Cost of sales

7,929.93

8,049.68

7,509.52

7,257.33

6,577.23

Operating profit

1,531.47

1,928.44

1,650.83

2,472.97

1,977.03

358.19

428.98

393.62

348.87

247.87

1,889.66

2,357.42

2,044.45

2,821.84

2,224.90

91.79

64.48

65.08

75.66

52.63

625.66

509.53

490.07

565.22

445.15

1,172.21

1,783.41

1,489.30

2,180.96

1,727.12

Tax charges

364.65

287.05

219.55

604.77

474.01

Adjusted PAT

807.56

1,496.36

1,269.75

1,576.19

1,253.11

Non recurring items

24.82

-279.13

-24.25

Other non-cash adjustments

807.56

1,496.36

1,294.57

1,297.06

1,228.86

2,356.86

2,727.05

2,031.58

1,581.81

1,554.21

346.07

628.10

461.79

464.80

411.09

88.46

146.51

94.55

90.00

79.60

1,922.33

1,952.44

1,475.24

1,027.01

1,063.52

Expenses capitalised

Other recurring income

Adjusted PBDIT
Financial expenses
Depreciation
Other write offs
Adjusted PBT

Reported net profit

Earnings before appropriation
Equity dividend
Preference dividend
Dividend tax
Retained earnings

94