ASSIGNMENT 1

Financial Ratio Analysis

G19018 Himanshu Shrivastava

G19039 Shahid Akhtar
G19042 Silky Mukerjee
G19045 Surabhi Jha
G19049 Vani Samyukta Josyula
Table of Contents
1. Executive Summary…………………………………………...…………………2
2. Introduction to Company………………………………………………………...3
3. Key Financial Highlights…………………………………………….…………..3
4. Ratios for Analysis & Justification of Ratio Choice……………….…………….4
5. Interpretation & Analysis of Selected Individual Ratios-UltraTech……………..4
6. Interpretation & Analysis of Selected Individual Ratios-Ambuja………….…….8
7. Synopsis…………………………………………………………………………11
8. Summary of Analysis …………………………………….……………………...12
9. Comparison of Performances …………………………………….………………13
10. Expectations for Future Performance…………………………………………….14

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Executive Summary
This report shows the Financial Performance Evaluation of Ultratech Cement and Ambuja Cement.
Different financial ratios are evaluated such as liquidity ratios, asset management ratios, profitability
ratios, efficiency ratios are used measure the best performance of the company.
For Ultratech Cement we see that Operating profitability, Manufacturing Profitability is decreasing.
Its Short-term borrowings are increasing but at a lower rate, than long term borrowings. There is a
reduction in capacity utilization or reduction in sales or production. Decrease in Operating Profit
Margin Shows Decline in sales. Decrease in total asset turnover ratio indicates improper management
of assets and reflects production management problems. However, this is not a clear indicator to
analyse the company’s current situation. Analysis hints either company is planning for some
expansion or company is unable to meet its operating expenses and wants to be seen as fit; thus, long-
term loans will maintain company’s image also give them a long repayment period and less rate of
interest. The company is facing risk of default.The firm is raising money through debt financing,
adding too much of debt financing can lead to default. The company is exposed to higher liquidity
risk. The company is exposed to higher liquidity risk. The company will find it challenging to pay
operating and other expenses in near future. Sustainability to be investigated because revenue is
decreasing, borrowing is increasing.
For Ambuja Cement, Gross Profit, Operating Profitability, and Overall Asset Efficiency are all
increasing. Tax Management and Management of overhead costs is improving. Dependence on Short
Term Debt has significantly decreased. The company currently is facing no liquidity risks and default
risk. However, we can see that there is a Potential Deterioration in Product Mix and Procurement,
Deterioration of Net Working Capital Management driven by increase in current liabilities and
inefficient use of current assets such as receivables, inventory etc, and deterioration in Finished
Product Inventory Management suggestive of reducing customer preference. So, sustainability in
future can be challenge.
We hope this report will be helpful for the management of the company who are responsible for
taking decisions and formulating plans for future. This report will show a clear picture about Ultra
Tech and Ambuja Cement company’s performance in the last five years.

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Introduction to Company

UltraTech Cement
Industry: Cement
Founded: 1983
Headquarters: Mumbai, Maharashtra, India
Key people: K.K. Maheshwari, Managing Director
Revenue: US$3.7 billion (2011–12)
Net Income: US$450 million (2011–12)
Parent: Aditya Birla Group

UltraTech Cement is a subsidiary of Grasim Industries Ltd. UltraTech Cement has 18

integrated plants one clinkerisation plant 25 grinding units and seven bulk terminals. Its
operations span across India, U.A.E., Bahrain, Bangladesh and Sri Lanka.

Ambuja Cements Introduction

Industry: Cement
Founded: 1983
Headquarters: Mumbai, Maharashtra, India
Key People Suresh Kumar Neotia, Founder
Narottam Sekhsria, Co-Founder, Chairman
Bimlendra Jha, Managing Director and C.E.O.
Revenue: ₹76,378.1 million (US$1.1 billion)
Parent: Lafarge Holcim

Ambuja Cements Ltd. is a part of the global conglomerate Lafarge Holcim; in the year 1981,
Ambuja Cements Ltd (A.C.L.) was incorporated as Ambuja Cements Pvt Ltd. The formation
of the company took place as a venture between the public sector Gujarat Industrial
Investment Corporation (GIIC) and Narottam Sekhsaria & Associates. On May 19, 1983, the
company was consolidated into a limited public entity. The company has eight cement
grinding units and five integrated cement manufacturing plants . It is the first Indian cement
manufacturer that has a captive port with three terminals along the country's western
coastline to facilitate timely cost-effective shipments to its customers. The main activity of
Ambuja Cements is to manufacture and market cement and clinker for both domestic and
export markets.

Key Financial Highlights

UltraTech Cement
Key Financial Highlights
• Market cap of over Rs. 1200 billion
• Approximately 2,68,000 shareholders
• Over 98 percent of shares dematerialized 43,98,328 GDRs as on 31 March 2019
• Dividend of 115 percent
• EPS of Rs. 89.48 as on March 31, 2019

Ambuja Cement

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Key Financial Highlights
• For the six months that have ended on June 30, 2019, Ambuja Cements Ltd revenues
increased 5% to Rs.138.99B.
• Net income increased 22% to Rs.11.18B.
• Favourable market conditions reflect an increase in demand for the company's
products and services.
• Net income benefited from Other Income increase from Rs.1.68B to Rs.3.73B,
• Materials Purchase decrease of 11% to Rs.6.04B (expense).

Ratios for Analysis & Justification of Ratio Choice

Financial Performance Analysis is the process of evaluating a company's financial
statements and understanding of the financial health of the company for a better decision
making.
Trend analysis indicates what has happened in the past and what will happen in future.
Trend analysis includes Liquidity Ratios, Profitability Ratios, Asset Management Ratios and
Debt Ratios.
Liquidity ratios measure ability of a company to meet its short-term debt. It Indicates ability
of a company to pay off its short-term liabilities.
The Quick ratio measures a company’s ability to meet its short-term liabilities with its most
liquid assets.
Current ratio An indication of a company's ability to meet short-term debt obligations,
Profitability Ratios help analyze the company’s earning for the amount spent. Under
profitability ratios, we evaluate Gross Profit Margin, Net Profit Margin, Core Profit and
Operating Profit Margins.
Gross profit margin measures the gross earnings of the company on its sales.
Net profit margin measures the earnings after tax of the company on its sales.
Liquidity ratios are the ratios that measure the ability of a company to meet its short-term
debt obligations. Under liquidity ratios, we evaluate Current Ratio and Quick Ratio.
The Quick ratio measures a company’s ability to meet its short-term obligations with its
most liquid assets.
Current ratio is indication of a company's ability to meet short-term debt obligations, the
higher the ratio, the more liquid the company is.
Asset Turnover Ratio: The asset turnover ratio indicates how efficiently assets are used to
generate revenue. Under this, we evaluate total asset turnover, fixed assets turnover ratio,
core assets turnover ratio, non-core turnover ratio.
The debt management ratio is interpreted as the proportion of a company’s assets or equity
that are financed by debt.
Debt to Asset ratio measures how efficiently a firm manages its debt.

Interpretation & Analysis of Selected Individual Ratios-UltraTech

PROFITABILITY RATIOS:
1) Gross Profit Margin (-0.37%)
Key Drivers: Processing Cost Management, Product Mix, Procurement

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Product Gross Value-added Margin (Product Mix, Procurement) (-0.78%)
Processing Cost Management (-0.41)
This Shows that GPM is driven by processing cost, cost cut can be an issue in growth
sustainability. There is also a Potential problem in procurement.

2) Operating Profit Margin (-1.95%)

Key Drivers: Manufacturing Profitability (Captured by GPM), Overhead Cost Control
Manufacturing Profitability (Captured by GPM) (-0.37%)
Overhead Cost Control (+1.58%)
This shows that OPM is driven by overhead cost control. This will be a potential
sustainability issue. A decrease in manufacturing profitability shows that the company will
find it challenging to pay operating and other expenses.

3) Core Profit Margin (-3.86)

Key Driver: Operating Profitability, Interest Cost Management
Operating Profitability (-1.95%)
Interest Cost Management (+1.91%)
Operating profitability is decreasing, shows that the company will find it difficult to manage
its day to day operating expenses.
Interest Cost depends on Quantum of borrowings (+33.47%) i.e., borrowings per revenue is
high; therefore, their ability to repay is less.
Short term borrowing (+3.52%)
Long Term Borrowing (+29.95%)

Short term borrowings are increasing but at a lower rate, than long term borrowings. This
shows that either company is planning for some expansion or company is unable to meet its
operating expenses and wants to be seen fit; thus, long-term loans will maintain company’s
image also give them a long repayment period and less rate of interest.
Avg. Interest rate on borrowings:
The interest cost per rupee of sales (+1.91%) This shows an increase in finance cost, which
means a firm is raising money through debt financing, adding too much of debt financing can
lead to default.
Interest cost per total borrowing (-1.64%) This is reducing because significant borrowings are
long term.
Sustainability to be investigated, as the core profit margin is decreasing

4) Net Profit Margin (-3.86%)

Key Drivers: Core Profitability, Non-Core Income, Income Tax management
Core Profitability (-3.86) Sustainability to be investigated, as the core profit margin is
decreasing.
Non-Core Income (0%) No non-core income.
Income Tax management (-1.03%) Inefficient tax management.

5) Net Cash Profit Margin (-3.40%)

Key Drivers: Operating Profit Margin, Operating Net working Capital
Operating Profit Margin (-3.86%) This Shows Decline in sales.
Operating Net working Capital (+0.46%) Needs to be investigated because revenue is
decreasing, borrowing is increasing.

EFFICIENCY RATIOS:

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6) Total Asset Turnover Ratio (-0.13)
Key Drivers: Non-current asset efficiency, Net Working Capital Efficiency

Non-current asset efficiency (0.41)

Net Working Capital Efficiency (-40.18) It indicates the ineffectiveness of the company in
using its working capital. This also indicates excessive debts.

Decrease in total asset turnover ratio indicates improper management of assets and reflects
production management problems.
Non-current asset efficiency is also very low, which means that the company is not using the
assets efficiently. However, this is not a clear indicator to analyze the company’s current
situation.

7) Total Asset Intensity Ratio (+0.21)

Key drivers: Non-Core Asset Intensity Ratio (+0.08), Core-Asset Intensity Ratio (+0.33),
Fixed Asset intensity ratio (+0.34), Other non-Current Asset intensity ratio (+0.41)

Increase in intensity ratios is undesirable; this signifies a reduction in capacity utilization or

reduction in sales or production.

8) Net Working Capital Turnover ratio (-40.18%)

Key Drivers: Net operating working capital turnover ratio (-0.01%) & net financial working
capital turnover ratio (-21.74%)

The decrease in net financial working capital turnover shows that the company is mainly
dependent on long term loans i.e., financial current liabilities are much more than financial
current assets.

9) Net Working Capital Intensity ratio (-0.20)

Key Drivers: Operating net working capital (-0.01) and Financial net working capital
intensity ratio (-0.19)

Operating net working capital is negative, shows short term borrowings are not used.
Financial net working capital is negative, shows huge long-term loans, risky situations.

Working Capital Analysis Ratio:

10) Operating Net Working Capital Intensity (-0.01%)

Key Drivers: Operating Current Asset Intensity (-0.90%) Operating current liability intensity
(0.57%)

Drivers for Operating Current Liability intensity ratio are Creditors Intensity ratio (1.18%)
and other current liability intensity ratio (-2.68%)
Creditors Intensity ratio (1.18%): Trade payables have increased because of an increase in
bargaining power with the supplier this indicates more extended credit period and delayed
payments due to shortage of funds.

Other current liability intensity ratio (-2.53%)

Operating current liabilities have increased, also because provisions for future liabilities are
made in this financial year.

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Drivers for Operating Current Asset Intensity (-0.90%) are
Receivable Intensity (0.70%), Inventory Intensity (+1.29%), Other Current Asset Intensity
(-0.24%)

There is an increase in inventory intensity ratio and receivable intensity ratio; this might lead
to a cash crunch situation.
Slight Decrease in other Current Asset Intensity ratio is usually insignificant because net
balances in other current asset are typically very less.

11) Receivable Turnover ratio (-1.73%) this shows delayed collection or collection cycle
inefficiency, that might lead to cash crunch.

12) Inventory Turnover ratio (-1.65%) There might be process inefficiency because finished
goods and stock to trade intensity ratio are approximately zero, i.e., customer preference is
not a negative driver. Raw material, spares, and stores, Work In progress is increasing this
shows that there is some process inefficiency.

13) Current Ratio (-0.69)

The decline in this ratio shows a reduction in the ability to generate cash.
14) Quick Ratio (-0.69)
The decline in this ratio shows a reduction in the ability to pay debts.

Liquidity Analysis Ratio

15) Liquidity Analysis Ratio (-50.47%). This indicates that the company is exposed to higher
liquidity risk.
16) Net Operating Cash Flow Yield (-9.22%) This indicates that the company’s ability to
generate cash is decreasing
17) Free Cash Flow Yield (-66.39%) This indicates that the ability to free cash flow is
decreasing maybe because they are investing heavily to grow their venture rapidly.

Financing/Capital Structure Analysis Ratios

18) Debt-Equity Ratio (0.43) Increase in this ratio indicates an increased risk of default.
19) Debt to Asset ratio (0.17) It is a solvency ratio, also known as Financial Leverage of the
company. This shows that the company’s ability to pay off its debts with its assets is
reducing.
20) Total Leverage Ratio (0.43) This indicates that long terms borrowings have increased on
a huge scale.
21) Total Debt Ratio (0.56) This shows that the company’s long-term borrowings have
increased on a huge scale, and thus its ability to pay off its debts with its assets is reducing.
22) Degree of Financial Leverage (0.43) This indicates that the company’s ability to service
interest is reduced and thus, its risk of default is increased.
23) Interest Coverage Ratio (-3.76) Low interest coverage ratio shows that company's has
high debt burden, and thus there is a possibility of default.
24) Retention Ratio (0.03) There is a slight increase in retention ratio, which usually
indicates that the company is planning for reinvestment.

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Interpretation & Analysis of Selected Individual Ratios-Ambuja
Profitability Ratios
1) Gross Profit Margin: (Increased by 2.59%)
Key Drivers: Procurement, Product Mix, Processing Cost Management
Gross Profit Margin is positive, they can pay operating and other expenses without problems.
Product Gross Value-Added Ratio is a negative driver, decreased by -3.49. That implies that
the contribution done by Procurement and Product Mix is negative. But since the gross profit
margin is positive, there is a positive contribution made by Processing Cost (+5.98%). If
gross profit margin is driven by processing cost, it is not sustainable in future. Since PGVAM
is negative, we have a potential procurement or product mix problem.
2) Operating Profit Margin: (Increased by 3.47%)
Key Drivers: Manufacturing Profitability (Captured by GPM), Overhead Cost Control
For Ambuja cement, both Operating Profit Margin and Gross Profit Margin are positive.
Operating Profit Margin increased by 3.47% and gross profit margin increased by 2.59%.
The overhead costs reduced by (2.59-3.47) = -0.88. It is a positive driver in our case.
Reduction of overhead costs implies company was able to control their operating expenses
and improve Operating Profit Margin.

3) Core Profit Margin: (Increased by 3.48%)

Key Drivers: Operating Profitability, Interest Cost Management
Operation profitability increased by 3.47%. Interest cost is Operating Profit Margin-Core
Profit Margin. It is 3.47-3.48 = -0.01%.
Interest Cost Management is driven by Quantum of Borrowings and Average Interest Rate on
Borrowings.
i) Quantum of Borrowings (decreasing by -2.5%) tells us whether debt is
sustainable. If we are borrowing more rupee/revenue, our ability to repay reduces.

Short term borrowings per rupee of sales is reducing by -2.59%.

Long term borrowings per rupee of sales is increasing by +0.08%.

Since the short borrowing is reducing, that means company is more sustainable
and is able to meet its operating expenses smoothly. The company’s short-term
borrowings have reduced that implies that company has reduced its risk of not
being able to repay the debt. So, risk of default reduced by -2.59%. The
company’s long-term debt has increased by 0.08%, implying that the company is
investing into some long-term projects.

ii) Average Interest Rate on Borrowings (decreasing by -0.01 %) implies that lenders
do not consider the company to be of high risk. They charge low interest rates and
hence it becomes easy for the company to borrow.

4) Net Profit Margin: (increased by 5.16%)

Key Drivers: Core Profitability, Non-Core Income, Income Tax management
Net Non-Core Income/Sales is reducing by -1.03%. It is a negative driver.
Income Tax/Sales is reducing by -2.71%. As the income tax cost is reducing, it is a positive
driver.

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 5) Net Cash Profit Margin: (decreased by -5.62%)
Key Drivers: Operating Profit, Operating Net Working Capital Management.
Operating Profit Margin is increasing by 3.47%.
Operating Net Working Capital Management = Operating Net Working Capital Margin –
Operating Profit Margin = -5.62%-3.47% = -9.09%
Operating Net Working Capital is negative driver and is contributing -9.09%. It means that
the ability to generate funds for growth is reducing. This needs to be investigated as in the
company’s case, current liabilities are reducing.

Efficiency Ratios
1) Total Asset Turnover Ratio: (decreased by -0.0027)
Key Drivers: Non-current asset efficiency, Net Working Capital Efficiency
Between 2016-2017, the Total Asset Turnover Ratio increased, implying efficient use of
resources but between 2017-2018, the Total Asset Turnover Ratio reduced, implying that the
efficiency of usage of assets reduced.
Non-Current Asset Efficiency is increasing by 0.11 and Net Working Capital Turnover is
decreasing by -21.15. It indicates ineffectiveness of company in using its working capital.
This also indicates excessive debts.

2) Total Asset Intensity Ratio: (increased by 0.55%) -Key drivers: Non-Core Asset
Intensity Ratio (-11.30%), Core Asset Intensity Ratio (-12.78%), Fixed Asset
intensity ratio (-14.12%) and Other non-Current Asset intensity ratio (+1.48).Increase
in Total Asset Intensity Ratio shows that for generating per rupee of revenue, we need
more assets. It implies that we are becoming less efficient. We need to investigate
further as all other asset intensity rations are decreasing implying better utilization.
Core Assets Intensity Ratio is decreasing by -11.30%. Fixed Asset Intensity Ratio is
decreasing by -14.12%. From both the above ratios, we can see that Company has
become efficient in terms of capacity utilization. Also, the efficiency of this plant is
driven by Core Assets.

3) Net Working Capital Intensity Ratio: (increased by 11.85%)-Key Drivers: Operating

net working capital (+3.20%) and Financial net working capital intensity ratio
(+8.65%). Net Working Capital Intensity Ratio increase shows the company is taking
more Working Capital per rupee of Revenue. That means it is not being efficient.
i) Operating Net Working Capital Intensity Ratio has increased by 3.20%, implying
the company is using more operating net working capital per rupee of revenue. It
is a negative driver and the company is not efficiently utilizing its Operating Net
Working Capital.
Key Drivers: Operating Current Asset Intensity ratio (+6.39%), Operating Current
Liability Intensity ratio (3.19%)
a) Operating Current Asset Intensity ratio increase means that we are using
more operating current assets for per rupee of revenue generated.

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 Key Drivers: Receivables Intensity Ratio (+1.92%), Inventory
Intensity ratio (0.92%), other Operating Current Assets intensity ratio
(+3.49%)
All of the above are problem areas that needs to be focussed upon.
b) Operating Current Liability Intensity Ratio increase shows that out trade
payables and other current liabilities are increasing.
Key Drivers: Creditors Intensity ratio (+2.52%), Other current liability ratio
(+0.67%)
If the creditors intensity ratio increases, it means that the account payables are
increasing. This can happen due to two reasons –
1) Increase in bargaining power
2) Delaying in payments
If the increase is due to bargaining power, then creditors intensity
increase is a good thing. We can see from below Payment Period calculations
that the bargaining power with suppliers is increasing, so for increase in
creditors intensity ratio is a positive driver.
Bargaining Power Calculations:
Payment Period of Company = 365/creditor T/O Ratio
Payment Period (2016) = 365/ (11.09) = 30.67
Payment Period (2017) = 365/ (8.98) = 40.64
Payment Period (2018) = 365/ (8.66) = 42.14

iii) Financial Net Working Capital Intensity Ratio has increased by 8.65%. Financial
Net Working Capital Intensity ratio shows that our dependence on short term
borrowings has reduced.
4) Current Ratio: (increased by +0.37)-An increase indicates that the company has
increased its ability to generate cash. It shows that the current assets are greater than
current liabilities. It means that the company is using long term funds for Current
Assets. Using long term assets are costliest assets and we are using these high cost
assets in current assets of low value. So, from Managers point of view, current ratio to
be as close to ‘1’ as possible. From Lender’s point of view, they want to have higher
collateral in terms of our current assets. So, lenders want Current ratio > 1.
5) Quick Ratio: (increased by +0.31)-Quick Ratio increase indicates that the company
has improved in its ability to pay debts.

Inventory Management Ratios

From Ambuja’s Financial Statement:
Raw Materials Intensity Ratio 0.13%
WIP Intensity Ratio 0.21%
Finished Goods Intensity Ratio 0.46%
Stock in Trade Intensity Ratio 0.00%
Stores & Spares Intensity Ratio 0.33%
Finished Product Turnover Ratio -27.20

It suggests that there is an increase in raw materials per rupee of revenue generated, which
implies there is inefficiency in process.

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We can see there increase in the Finished Goods Intensity combined with decrease in the
Finished Product Turnover Ratio imply that goods are moving slower and staying in
warehouse for longer. This a potential problem and needs further investigation.
Liquidity Ratios
1) Liquidity ratio: (increased by 16.84%)-This implies that the company is not exposed
to higher liquidity risks and is able to convert assets into cash.
Financing Ratios:
1) Debt-Equity Ratio: (decreased by 0. 00166)-Since Debt-Equity Ratio is very low, the
company has enough equity to cover its debt and hence risk of default is low.
2) Debt-Asset Ratio: (decreased by 0. 00172)-This shows that the company’s ability to
pay off its debts with its assets reduced by a small margin.
3) Total Leverage Ratio: (increased by 0.01)-The higher the Total Leverage Ratio, the
riskier the company. This indicates that long terms borrowings are increased.
4) Total Debt Ratio: (decreased by -0.03%)-This shows that the company’s long-term
borrowings are decreased slightly and thus its ability to pay off its debts with its assets
is increasing by some extent.
5) Degree of Financial Leverage: (decreased by -0.24%)-This indicates that the
company’s ability to service interest is increased and thus its risk of default is
decreased.
6) Interest Coverage Ratio: (increased by 5.51%)-The higher the interest coverage ratio,
the lower the company's debt burden and the lower the possibility of bankruptcy or
default.
7) Retention Ratio: (increased by 0.37)-There is a slight increase in retention ratio,
which usually indicates that company is planning for reinvestment.

Synopsis
• Operating profitability is decreasing, shows that the company will find it difficult to
manage its day to day operating expenses.
• A decrease in manufacturing profitability shows that the company will find it
challenging to pay operating and other expenses
• Quantum of borrowings i.e., borrowings per revenue is high; therefore, their ability to
repay is less.
• The interest cost per rupee of sales means increase in finance cost, which means a
firm is raising money through debt financing, adding too much of debt financing can
lead to default.
• Sustainability to be investigated, as the core profit margin is decreasing
• Decrease in Net Working Capital Efficiency indicates the ineffectiveness of the
company in using its working capital. This also indicates excessive debts.
• Increase in intensity ratios signifies a reduction in capacity utilization or reduction in
sales or production.
• The decrease in net financial working capital turnover shows that the company is
mainly dependent on long term loans i.e., financial current liabilities are much more
than financial current assets.
• The decline in current ratio shows a reduction in the ability to generate cash.
• The decline in quick ratio shows a reduction in the ability to pay debts.
• Decline in Liquidity Analysis Ratio indicates that the company is exposed to higher
liquidity risk.

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 • Low interest coverage ratio shows that company's has high debt burden, and thus
there is a possibility of default.

Summary of Analysis
UltraTech
1. There is a Potential problem in procurement.
2. The company is finding it difficult to manage its day to day operating expenses.
3. Short term borrowings are increasing but at a lower rate, than long term borrowings.
4. Huge long-term loans, risky situations.
5. There is a reduction in capacity utilization or reduction in sales or production.
6. Decrease in Operating Profit Margin Shows Decline in sales.
7. Decrease in total asset turnover ratio indicates improper management of assets and
reflects production management problems.
a. However, this is not a clear indicator to analyze the company’s current
situation.
8. The company is mainly dependent on long term loans i.e., financial current liabilities
are much more than financial current assets.
9. Operating current liabilities have increased, also because provisions for future
liabilities are made in this financial year.
10. A delayed collection or collection cycle inefficiency, that might lead to cash crunch.
11. A reduction in the ability to generate cash.
12. A reduction in the ability to pay debts.
13. Risk of default is increased.
14. Finished goods and stock to trade intensity ratio are approximately zero, i.e., customer
preference is steady.
15. Analysis hints either company is planning for some expansion or company is unable
to meet its operating expenses and wants to be seen as fit; thus, long-term loans will
maintain company’s image also give them a long repayment period and less rate of
interest.
16. The ability to free cash flow is decreasing maybe because they are investing heavily
to grow their venture rapidly.

Ambuja
Positive Points
1. Tax Management as Positive Driver of Overall Profitability.
2. Operating Profit Margin driven by Reduction of overhead costs.
3. Increase in Overall Asset Efficiency driven by both Non-Current Asset Management
4. Increase in Efficiency of Core Asset & Fixed Asset Management.
5. Dependence on Short Term Debt has significantly decreased. Suggests that the
potential risk of default in Short Term is decreasing.
6. Dependence on Long Term Debt reducing
7. Ability to Service interest has improved.
8. Company is not exposed to liquidity risks.
Areas of Potential Problems
1. Potential Deterioration in Product Mix and Procurement
2. Gross Profit Management increase driven by Processing Cost Management Driven
not sustainable in long-term

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 3. Operating Working Capital Management a potential problem area
4. Non-Core Income Management is a negative driver for Overall Profitability.
5. There is a potential Net Working Capital Management issue.
6. Deterioration of Net Working Capital Management driven by increase in current
liabilities and inefficient use of current assets such as receivables, inventory etc.
7. Deterioration in Finished Product Inventory Management suggestive of reducing
customer preference.
8. Potential Deterioration in Bargaining Power with Customers

Comparison of Performances

Ultratech : The decline in current ratio shows a reduction in the ability to generate cash.
Ambuja : Current Ratio increase indicates that the company has increased its ability to
generate cash.

Ultratech : The decline in quick ratio shows a reduction in the ability to pay debts.
Ambuja : Quick Ratio increase indicates that the company has improved in its ability to
pay debts.

Ultratech : Low interest coverage ratio shows that company's has high debt burden, and
thus there is a possibility of default.
Ambuja : Higher the interest coverage ratio, the lower the company's debt burden and the
lower the possibility of bankruptcy or default.

Ultratech : Decline in Liquidity Analysis Ratio indicates that the company is exposed to
higher liquidity risk.
Ambuja : Increase in Liquidity ratio indicates the ability to Service interest has improved.
Company is not exposed to liquidity risks.

Ultratech : Decrease in Net Working Capital Efficiency indicates the ineffectiveness of the
company in using its working capital. This also indicates excessive debts.
Ambuja : Financial Net Working Capital Intensity ratio shows that our dependence on short
term borrowings has reduced.
Deterioration of Net Working Capital Management driven by increase in current liabilities
and inefficient use of current assets such as receivables, inventory etc.

Ultratech : Finished goods and stock to trade intensity ratio are approximately zero, i.e.,
customer preference is steady, so the bargaining power with customers has increased.
Ambuja : Deterioration in Finished Product Inventory Management suggestive of reducing
customer preference. Potential Deterioration in Bargaining Power with Customers

Ultratech : Sustainability to be investigated, as the core profit margin is decreasing

Ambuja : Sustainability to be investigated, as the gross profit margin is driver by processing
cost, i.e., there is continuous cut in processing cost.

Ultratech : Operating profitability is decreasing, shows that the company will find it
difficult to manage its day to day operating expenses.

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 Ambuja : Increase in Operating Profit Margin is driven by reduction in overhead cost, this
also indicates proper management of day to day operating expenses.

Ultratech : Quantum of borrowings i.e., borrowings per revenue is high; therefore, their
ability to repay is less.
The interest cost per rupee of sales means increase in finance cost, which means a firm is
raising money through debt financing, adding too much of debt financing can lead to
default.
Ambuja : Dependence on Long-Term Debt & Short-Term Debt has significantly decreased.

Expectations for Future Performance

UltraTech
The firm is raising money through debt financing, adding too much of debt financing can
lead to default. The company is exposed to higher liquidity risk. The company will find it
challenging to pay operating and other expenses in near future.
Sustainability to be investigated because revenue is decreasing, borrowing is increasing.

Ambuja
The firm is doing very good in terms of reducing its costs, taxes and asset management.
However, the company is may be facing a potential procurement and product mix problem
along with increase in processing costs. Apart from this, the company is finding it difficult to
manage its net working capital. So ,sustainability in future can be challenge. But identifying
and fixing the above problems can help the company sustain in long run.

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