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CHAPTER-1
INTRODUCTION AND DESIGN OF THE STUDY
INTRODUCTION OF FINANCE
In the modern-oriented economy, finance is one of the basis
foundations of all kinds of economic activities. It is the master key, which
provides access to all the sources for being employed in manufacturing and
merchandising activities.
Finance is the lifeblood of an enterprise, every enterprise, irrespective
of size, needs finance to carry on its operation’s and to achieve its target’s. in
our present day economy finance is the provisions of money at the time when
it is required and without adequate finance, no enterprise can possibly
accomplish its objectives.
According to the American Institute of certified public accountants,
financial statements reflect, “A combination of recorded facts, accounting
conventions and personal judgments and conventions applied them
materially.”
FINANCIAL MANAGEMENT
Financial management is an management which is related to deal
management is concerned with the acquisition, financing and management of
assets with some overall goal in mind.
1
Financial management influences the profitability or return on
investment of a business. The choice of capital investment decisively affect
the profitability of an undertaking.
Financial management affects the solvency position of a business.
Solvency refers to the ability to service debts paying interest and repaying
principle as these become due. Profitability and nature of debts both concerns
of financial management-govern the solvency aspect.
THE BASIC OBJECTIVES OF FINANCIAL MANAGEMENT ARE
1. Ensuring a fair return to shareholders.
2. building up reserves for growth and expansion
3. Ensuring maximum operational efficiency by efficient and effective
utilization of finance.
4. Ensuring financial discipline in the organization.
FINANCIAL STATEMENT
The financial statement provides a summary of the accounts of
business enterprises. The balance sheet shows the result of operation during
ascertain period.
TYPES OF FINANCIAL STATEMENTS
1. A balance sheet
2. An income statement
2
BALANCE SHEET
A tabular statement of summary of balances carried forward after an
actual and constructive closing of books of account and kept according to
principles of accounting. A balance sheet is a snapshot of a business’
financial condition at a specific moment in time, usually at the close of an
accounting period. A balance sheet comprises assets, liabilities, and owners’
or stockholders’ equity. Assets and liabilities are divided into short- and long-
term obligations including cash accounts such as checking, money market, or
government securities. At any given time, assets must equal liabilities plus
owners’ equity. An asset is anything the business owns that has monetary
value. Liabilities are the claims of creditors against the assets of the business.
INCOME STATEMENT
Income statement also referred as profit and loss statement (P&L),
earnings statement, operating statement or statement of operations is a
company’s financial statement that indicates how the revenue is transformed
into the net income. It displays the revenues recognized for a specific period,
and the cost and expenses charged against these revenues, including write-offs
(e.g., depreciation and amortization of various assets) and taxes. The purpose
of the income statement is to show managers and investors whether the
company made or lost money during the period being reported.
3
STATEMENT OF CHANGES IN OWNER’S EQUITY/RETAINED
EARNINGS
The term ‘Owners equity” refers to the claims of the owners of the
business (shareholders) against the assets of the firm. It consists of two
elements; (i) paid-up share capital, i.e. the initial amount of funds invested by
the shareholders; and (ii) retained earnings/reserves and surplus representing
undistributed profits. The statement of changes in owners’ equity simply
shows the beginning balance of each owner’s equity account, the reason for
increases and decreases in each, and it’s ending balance.
STATEMENT OF CHANGES IN FINANCIAL POSITION
The basic financial statements, i.e.; the balance sheet and the profit and
loss account or income statement of a business reveal the net effect of the
various transactions on the operational and financial position of the company.
The balance sheet gives a static view of the resources of a business and the
uses to which these resources have been put at a certain point of time. The
profit and loss do not operate through profit and loss account. Thus, for a
better understanding another statement called statement of changes in
financial position has to be prepared to show the changes in assets and
liabilities from the end of one period to the end anther point of time. the
objective of this statement is to show the movement of funds during a
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particular period. The statement of changes in financial position may take any
of the following two forms.
i) Funds Flow Statement
ii) Cash Flow Statement
FINANCIAL ANALYSIS
Financial analysis (also referred to as financial statement analysis or
accounting analysis) refers to an assessment of the viability, stability and
profitability of a business Sub- business or project.
It is performed by professionals who prepare reports that make use of
information taken from financial statement and other reports are usually
presented to top management as one of their bases in making business
decisions. Based on these reports, management may:
Continue or discontinue its main operation or part of its business.
Make or purchase certain materials in the manufacture of its
product
Acquire or rent / lease certain machineries and equipment in the
production of its goods ;
Issue stocks or negotiate for a bank loan to increase its working
capital;
Make decisions regarding investing or lending capital;
5
Other decisions that allow management to make an informed
selection on various alternatives in the conduct of its business.
NEED FOR THE STUDY
A firm’s success and its survival the market depend upon the effective
financial management. It guides and regulates all the management activities of
a firm. Management of finance is an important task in any organization. It
requires both short-term-term planning. Financial anlaysis is the process of
identifying the financial strength an weakness of the firm. It is the only one
way to measure the firm’s liquidity, solvency and profitability.
Financial management is a crucial factor in every enterprise emproper
financial management leads to an under-utilization of the available resources
and making the finance skill limited. Hence here the present study aims to
create awareness among the management of the finance limited regarding the
importance of financial management.
STATEMENT OF THE PROBLEM
The cement industry currently enjoys a good time with remunerative
prices driven by a buoyant demand in the short term. Cement industry
represents an important segment of the Indian economy. The India cements
Ltd incurred losses in 2002. one possible reason for such down cycle might
6
be poor financial health. Since the cement producing companies face threats
to their viability, this study bears a relevance to the present day problems.
7
REVIEW OF LITERATURE
Vasanthamani (1982)1 studied the financial performance of the
cement limited. The objective of the study was to evaluate the financial
performance of India cement limited with a view to analyze the future
performance potential. The study covered the period from 1969 to 1989 the
researcher found that the gross profit ratio and the net profit ratio were
increasing considerably. The liquidity position of the company was able to
meet the creditors out oh its current asset. The quick ratio also revealed that
the quick reliabilities were met out quick asset. Without any difficulty. The
leverage of the company revealed that its own capital was more then its
borrowed capital.
Karthikeyan(1989)2 has studied as financial performance of selected
companies. His study has tried to identify the relationship between the
financial forecasting models 300 companies were selected and the data
relating to the financial performance variables were analyzed. The nine
financial analysis. variables were net sales , total assets ,gross profit ,profit
before taxed dividends, retained earnings, cash flow and net worth.
G.Ravindaran (1990)3, has studied the financial performance of India
cements limited. His objective was to study the financial position of the
company for the period of 5 years from 1986 to 90. He concluded that the
financial position of the company was not continuously steady. The rate of
return had a declining trend till 1988-89. He found that the company in spite
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of earning huge gross profit the net profits was comparatively very low,
because of high operating costs. He also stressed the need for maintaining a
desirable collection and payment period.
Mr.S.Vijayakumar Bharathi (1992)4, in his study on the financial
performance of PRICOL can electronic industry has been analyzed, the
company's financial position bring the 'Z' score test of Edward Ahman of
USA. According to this test the fmancial position of the company was found
to be sound and that these in hardly any change of getting into bankruptcy in
the near future. The financial analysis also depicts that through the sales has
increased steadily over the study period, but because of high increase in
operating costs, the net profit .had started declining, over the and of the study
period. Measures were also suggested for improvements. The company's
shorter liquidity position was found to be satisfactory. The investment in fixed
assets has increased phenomenally by nearly 7 times.
Mr.Siddharth G.Das (1994)5 attempted to ascertain efficient or
otherwise use of working capital in selected pharmaceutical firms in India. In
his study on “Working Capital Turnover in Pharmaceutical Companies”
Having studied the data of ten years, he concluded that the overall working
capital turnover ratio was 9.03 times. However, the study also revealed that
working capital turnover ratio declined gradually over the period under
review.
9
Debasish Sur (1997)6 attempted to assess the efficiency of working
capital management in terms of working capital ratio, quick ratio, ratio of
current asset to total assets, ratio of current assets to sales and composition of
working capital. The study revealed that the working capital management was
inefficient during the study period. The study recommended for special
attention to the management of inventories, which constituted the highest part
of current assets.
Dr.M.Selvam, Mrs.S.Vanitha, and Mr.M.Babu (2002)7, they studied
about A study on Financial Health of Cement Industry-with special reference
to India Cements Limited.from 1998 to 2002. The objectives of this study are
to examine the overall financial performance of India Cements Limited and to
predict the financial health and viability of the India Cements Limited. They
were studied to predict financial health of India Cements Limited using 'Z'
Score Analysis and Multiple Discriminant Analysis. This study would also be
useful to all companies, policy makers and researchers for appraising
financial health of corporate sector in general and cement companies in
particular.
Sri.Iswatia and Muslich Anshoria (2005)8 they studied about the
influence of intellectual capital to financial performance at Insurance
Companies in Jakarta Stock Exchange. The purpose of this empirical study is
to investigate the influence of intellectual on insurance company’s
performance especially financial performance. This study uses empricial data
10
from Indonesia Capital Market Directory 2005 that is issued from Jakarta
Stock Exchange. This research use quantitative analysis. The main conclusion
from this particular study is intellectual capital has influence on Bank’s
performance.
Mr.M.Kannadhasan (2005)9 in the study of risk evaluation of
financial performance in manufacturing industry from 2000 to 2010. The aim
of this study was company from a study a banker’s perspective. They were
used analyzed with the help of ratio analysis and also through the application
of statistical tools such as mean, and standard deviation. They concluded has
made the realistic recommendation for the improvement in operational and
managerial efficiency of the company as to maintain and increase further by
effective utilization and control of the assets.
S.Vanitha and M.Selvam (2007)10 studied financial performance of
Indian manufacturing companies during pre and post merger. The study is
about before totally 58 companies were identified at random with help of
lottery method and accordingly 30% from the total population was taken as
size i.e 17 companies out of 58. the conclusion emerging from the point of
view of evaluation is that the merging companies were taken over by
companies with reputed and good management. Therefore, it possible for the
merged firms to turn around tested with a sample size before coming to a
conclusion.
11
OBJECTIVES OF THE STUDY
The following are the main objectives of the present study.
1. To study the need and importance of financial statement
analysis in the organization.
2. To examine the overall financial performance of India cements
ltd
3. To predict the financial health and viability of the India cements
ltd.
4. To offer suitable suggestions on the basis of findings.
SCOPE OF THE STUDY
The Scope of the present study confines to the financial performance of
India Cements Ltd. The study on financial performance focuses on liquidity,
solvency, profitability, shareholders wealth and Edward Altman’s Z-score
(health) analysis of the study unit.
METHODOLOGY
The work carried out in this study are based on the information
collected from accounts ledgers, financial records and other documents in the
annual reports of the company were exclusively used for this study. Further
analysis was carried out through the interpretation of the above documents,
12
discussion with the accounts officer and the company secretary of the
company. The other sources include experts and executives opinion.
SAMPLE DESIGN
At the present study intends to analyses the financial performance of
India cements limited on the production of cement. The reseach design starts
with the selection of India cements limited, as a core unit. Period of the
present study covers a period of 10 years starting from .
DATA ANALYSIS
In order evaluate the financial performance of India cements limited
the data are analyzed through various tools and techniques for a period of 10
years from 2000-01 to 2009-10.
Tools and techniques of Financial Analysis
Financial statement analysis is defined as the process of identifying
financial strengths and weaknesses of the by properly establishing
relationship between the items of the balance sheet and the profit and loss
account. There are methods or techniques that are used in analyzing financial
statements ,such as
i) Ratio analysis.
ii) Edward Altman’s z-score(health) analysis.
13
STATISTICAL TOOLS USED
The data collected from various sources and were analyzed by mean,
standard deviation analysis, and co- efficient of variation.
MEAN
Arithmetic mean is commonly called as average. Mean or Average. is
defined as the sum of the given elements divided by the total number of
elements.
FORMULA
X =
STANDARD DEVIATION
Standard deviation of a statistical data is defined as the positive square
of the arithmetic mean of the squared deviation of their arithmetic mean of the
series under consideration. The Standard deviation is denoted by s(sigma).
The Standard deviation is also know as “Root mean square
deviation” because it is the square root of the arithmetic mean of the squares
of the deviation. Square of the standard deviation is called variance.
FORMULA
Sd =
14
CO-EFFICIENT OF VARIABLE
The Co-efficient of variable is reported as a percentage and calculated
from the average and Standard deviation as follows:
Co-efficient of variation (C.V) =
LIMITATIONS OF THE STUDY
The financial data required for the present study has been
obtained from secondary data.
The study is limited for the of last 10 year’s only.
The study does not cover area’s of financial management
such as, capital budgeting, dividend policies…etc.,
All the data collected for analysis is obtained from
published annual reports of the company so, is a chance for error in
sufficiency which may affect the analysis.
15
CHAPTER SCHEME
The present study of the researcher entitled “A study on financial
statements analysis”, the India Cements Limited, Sankari West, Salem, has
been organized into six chapters.
Chapters I: Deals with introduction mainly concerned with the design of the
study viz., methodology used related literature and limitations
of the study
Chapters II: Deals with profile of the company.
Chapters III: Deals with present the data related to the evaluation of the
performance of the sample unit through ratio analysis.
Chapters IV: Deals with the health analysis using z-score.
Chapters V: Deals with the system analysis.
Chapters VI: Deals with finding, suggestions, and conclusion.
16
REFERENCES
1. Vasanthamani.K "A study of the financial performance of India
Cements Limited", M.Com, Dissertation PSGCAS-1982
2. Karthikeyan, "Financial performance of selected companies" - An
Analytical Study", M.Com., Dissertation PSGCAS - 1989.
3. Mr.G.Ravindaran "An analysis of the financial performance of
LG.Balakrishnan & Brothers limited, M.Com dissertation-1990.
4. Mr.S.Vijayakumar Bharathi. "An analysis of the financial performance
of PRICOL, "M.Com. Dissertation-1992.
5. Siddharth M.R. Das G. (1994), “Working Capital Turnover in
Pharmaceutical Companies”, The Management Accountant, March
1994, pp.151-153.
6. Debasish Sur (1997), “Working Capital Management in Colgate
Palmolive (India) Ltd. – A Case Study”, The Management Accountant,
November 1997, pp.828-833.
7. Dr.M.Selvam, Mrs.S.Vanitha, and Mr.M.Babu, "A study on Financial
Health of Cement Industry-"Z" Score Analysis in India Cements
Limited", Bharathidasan University, Tiruchirappalli-620 024.
8. Sri. Iswatia and Muslich Anshoria, "The Influence of Intellectual
Capital to Financial Performance at Insurance Companies in Jakarta
Stock Exchange", Faculty of Economics Airlangga University.
9. Mr.M.Kannadhasan, MBA, MFT, M.Phil, (Ph.D)," Risk evaluation of
Financial Performance in Manufacturing Industry" Trichy-14
10. S.Vanitha and M.Selvam," financial performance of Indian
Manufacturing companies during pre and post merger", Ph.D.
Research Scholar, Tiruchirappalli- 620 024.
17
CHAPTER – II
COMPANY PROFILE
The India Cements Limited was established in 1946 and the first plant
was setup at Sankaragar in Tamilnadu in 1949.since then it has grown in
stature to seven plants spread over Tamilnadu and Andhra Pradesh. The
capacities as on march 2002 have increased multifold to a million tons per
annum.
India being the second the largest cement producer in the world after
china with a total capacity of 151.2 Million tons (m.t) has not a huge cement
industry.
The history of the cement industry in India dates back to the
1889.when a Kolkata based company started manufecturing cement from
argillaceous. But the industry
Started getting the organized shape in the early 1900s.
In 1914, India cement company ltd was established in porbandar with a
capacity of 10000 tons and production of 1000 installed. The world war gave
the first initial thrust to the cement industry in India and the industry started
growing at a fast rate in terms of production, manufecturing units and
installed capacity.
This stage was referred to as the nascent stage of Indian cement
industry.
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In 1927 concrete Association of India was set up to create public
awareness on the utility of cement as well as topropagate cement
consumption. The cement industry in India saw the price and distribution
control system in the year 1956 established to ensure fair price model for
consumers as well as manufectures later in 1977, government authorized new
manufacturing units (as well as existing units going for capacity
enhancement) to put a higher price tag fir their products a couple of years
later government introduced a three-tier system with different pricing on
cement produced high medium and low cost plants cement industry in any
country , plays a major role in the growth of the nation cement industry in
India was under full control and supervision of the government. However it
got relief at a large extent after the economic reform. But government
interference especially in the pricing is still evident in India.
In spite of being the second largest cement producer in the world India
falls in the list of lowest per capital consumption of cement with 125kg. the
reason behind this is the poor rural people who mostly live in mud huts cannot
afford to have the commodity. Despite the fact the demand and supply of
cement in India has grown up. In a fast developing economy like india there is
always large possibility of expansion of cement industry
19
COMPANY HIGHLIGHT
The company is the largest producer of cement in south India. The
company’s plants are well spread with three in Tamilnadu and four in Andhra
Pradesh which later to all major markets in south India and Maharashtra. The
company is the market share of 28% in the south. It aims to achieve a 35%
market share in the near future. The company has access to huge limestone
Top 10 cement companies in India
India world’s second largest cement producer after china is the home to
a number of top cement companies. As various infrastructure projects road
networks and housing projects are coming up money of which are backed by
the government the cement industry by in India is growing at a great pace
these days. With the capacity of 151.2 million.tones (mt) the Indian cement
industry is truly big in size and hence accommodates a number of cement
companies in the market. Not only that move growth is further expected in the
coming years. which will also lead to the growth of top cement companies in
India. Let’ s have a look at the top 10 cement companies in India.
FOLLOWING ARE THE LIST OF TOP 10 CEMENT COMPANIES IN
INDIA.
Acc limited
Gujarat ambuja cements limited
Ultratech
20
Grasim
India cements
Jk cement ltd
Jaypee group
Century cement
Madras cement
Birla corp.
ECONOMIC OVERVIEW
The performance of the Indian economy in 2007-08 continued to be
good with GDP growth at 9% despite rise in crude oil prices and financial
turbulence. The reasons are the flow of substantial capital investment the
fairly satisfactory performance of the industrial sector which recorded a grow
the of 8.5% and the development of the services sector which grow at 10.8%
during the year the manufacturing and services sector together accounts for
25% of the nator’s economy. Further the adverse impact of the rising which
touched USD 155.5 billion in 2007-08 recording a healthy growth of 23%
over the previous fiscal. Imports grew by 27% year or gear to USD 235.9
billion during 2007-08 the trade deficit widening to USD 80.4 billion. On the
agricultural front the total food grain production in 2007-08 however has been
commendable and ps estimated at 227.32 million tomes this is 10 million
tones move than the production achieved in 2006-07 representing an increase
21
of 4.6% the union budget 2008-09 has addressed most of these concerns
through pts focus or infrastructure, agriculture, healthcare, education and
rural development, Agriculture, rural development social account for over
37% of the total central plan getlay for 2008-09 the government and the
reserve bank of India are also seized off the problem of inflation and have
come out with fiscal and monetary measure to corb pts rising graph.
INDUSTRY SCENARIO
Indian is the 2nd largest cement producer in word china the cement
industry in India has been enjoying pts best period with a healthy growth in
demand in the past two years. the industry has been operating at its nearful
capacity during this period .the cement prices have been steady throughout the
year with this firm demand position.
A review of regional pattern of growth in cement demand reveals the
following
2007-08 2006-07
North 12.17% 10.44%
East 5.65% 5.87%
South 9.71% 12.90%
West 14.00% 9.10%
Central 6.05% 8.90%
overall 9.80% 9.90%
22
CEMENT PRODUCTION AND GROWTH
Domestic demand plays a major role in the fast growth of cement
industry in India. In the domestic demand of cement has passed the economic
growth role of India the cement consumption is expected to rise move than
22% by 2009-10 form 2007-08. In cement consumption the state of
Maharashtra leads the table with 12.18% consumption followed by Uttar
Pradesh terms of current production Andhra Pradesh leads the list with
14.72% of production white Rajasthan remains second position.
The production of cement in India grew at a rate of 9.1% during
20006-07 against the total production of 147.8 MT in the previous fiscal year.
During April to October 2008-09, the production of cement in India was
101.04 MT comparing to 95.05 during the same period in the previous year. .
During October 2009,the total cement production in India was 12.37 MT
compared to a production of 11.61 MT in the same month in the previous
year. The cements companies are also increasing their productions due to the
high market demand . the cement companies have seen a net profit growth
rate of 85%.with this huge success the cement industry in India has
contributed almost 8% to India ‘s economic development.
Technology up- Gradation
Cement industry in India is currently going through a technological
change as a lot of up gradation and assimilation is taking place. Currently,
23
almost 93% of the total capacity is based entirely on the modern dry process,
which is considered as more environment – friendly. Only the rest 7% uses
old wet and semi-dry process technology. There is also a huge scope of waste
heat recovery in the cement plants, which lead to reduction in the emission
level and hence improves the environment.
Merger and acquisition in cement industry in India
Ultra tech cement is going to absorb its sister concern Samruddhi
cement to become biggest cement company in India.
World’s leading foreign funds like HSBC, ABN Amro, Fidelity,
Emerging market fund and asset management fund have together
bought 7.5% of India cements (ICL) AT A COST OF US$ 124.91
million.
Cimpor , a cement company of Portugal, has bought 53.63% stake
that Grasim Ingustrirs had in Shree Digvijay cement
French cement company Vicat SA bought 6.6% share of Sagar
cement at a cost of US$ 14.35 million.
Holcim now holds 56% stake of Ambuja cement, previously it
held 22% of stake. The company utilized various open market
transaction to increase its stakes. It invested US$ 1.8 billion for
that.
24
Recent investment in the Indian Cement Industry
In a recent announcement the second largest cement company in
south India, Dalmia cement declared that it’s going to invest more then US$
652.6 million in the next 2-3 years to add MT capacity
Anil Ambani –led reliance infrastructure is going to build up
cement plants with a total capacity of yearly 20 MT in the next 5
year. For this the company will invest US$ 2.1 billion.
India cements is going to set up 2 thermal power plants in
Andhra Pradesh and Tamilnadu at a cost of US$ 104 billion.
Anil Ambani-led reliance cementation is also going set up a MT
Integrated cement in Maharashtra. It will invest US$ 463.2 million
for that.
Jaiprakash association ltd has signed a Mou with Assam mineral
development corporation limited to set up a 2 MT cement plant.
The estimated project cost is US$ 221.36 million.
Rungta mines (RML) is also planning to invest US$ 123 million
for setting up a 1 MT cement plant in orissa.
25
INDIA CEMENTS
India cements is one of the well known cement companies in India. It
has a big market base in the infrastructure as well as the real estate segment.
The high quality products and services at affordable cost make it one of the
most preferred cement companies in the country. More and more industry
segments are opting for the products of India cement.
PROFILE OF INDIA CEMENTS LTD
Shri Sankaralinaga lyer was a pioneer of heavy industry in the south.
Primarily a banker, he ventured into the field of industry with a rare devotion
and confidence with the prime objective of developing major industries I the
state with his banking experience and interest in exploring the mineral
potential of south India, he went ahead boldly with his scheme of building a
cement plant in the vicinity of Thaliyuthu, where extensive deposits of
limestone were assuredly available. Shri Sankaralinga Iyer with his energy
and drive gave the cement project a realistic form and content.
FOUNDERS OF THE INDIA CEMENTS LTD
Two men with vision to inspire dreams for an industrial India. Two
men with the ability to translate those dreams into reality. And the ability to
build enduring relationships…. To build the future.
In his task of establishing the enterprise, Shre Iyer was ably assisted by
Shri T.S.Narayanaswami, who is always identified with the formation and
26
running of The India cements limited. Shri T.S. Narayanaswami was the
catalyst who saw the project through numerous hurdles and made it emerge as
a viable and marketable proposition.
He looked beyond cement to Aluminium production, Chemicals and
Plastics and Shipping after he adfully established the India Cements’ potential
for expansion. A pioneer industrialist and visionary, Shri T.S.Narayanaswami
played a dynamic role in the resurgence of industrialissation in free India.
SOME OF THE MAJOR MILESTONES OF INDIA CEMENTS
It is the largest producer of cement in the southern part of
India
The company has three cement plants in tamil nadu and
four in the state of Andhra Pradesh
According to recent surveys, the company has a market
share of arount 28% in the states of South India. It has aiming to
increase the market share to arount 35% over the next few years.
The main business objective of the company is to make
use of the vast limestone resource and expand the production by
proper management and optimization of the existing plants.
There are around 10,000 stockist who distribute products
and services of the company
27
The company has its regional offices in all the staes of
South India and also in Maharastra.
The plants of India cements are located in different regions of the
states of Tamil Nadu and Andhra Pradesh. The following table will give an
idea of their location
Plant location State
Sankar Nagar Tamil Nadu
Dalavoi Tamil Nadu
Dalavoi Tamil Nadu
Sankari Tamil Nadu
Yeramguntla Andhra Pradesh
Chilamkur Andhra Pradesh
Vishnupuram Andhra Pradesh
PRODUCTS AND SERVICES
The products offered by India cement cater to the various market and
industrial segments in the country. They are designed in such a way so as to
keep pace with the changing market trends and consumer tastes and
preferences. Some of the well known brands that are produced by the India
cements ltd are:
Sankar Sakthi, Raasi gold and Coromandel king: These brands of
cement have that high strength in them to meet the requirements of
the infrastructure and development sector. The high capacity of the
28
cement helps them to withstand high pressure and be water resistant
even in case of the rainy season. The cost of the brand is also
affordable which make them very much preferred by the consumers
all over the country.
Blended cement: the company also produces some of the pure
brands of blended cement to fulfill the needs and preferences of the
market. The blended cement is produced by various technological
methods with a combination of mineral mixtures and gypsum. The
produce goes through a stringent testing process in the high scale
laboratories.
Sulphate resisting protland cement: India cement is also a known
name in the manufacture of sulphate resisting Portland cement. It
is mainly known as slag cement and is very much required in case
of normal constriction process.
1946 Incorporation of The India Cements Limited.
1949 Commissioning of first cement plant at Sankarnagar-Installed
capacity 1 lac tones per annum.
1963 Commissioning of second cement plant at Sankaridrug-Instaled
capacity 2 lac tones per annum.
1969 Capacity expansion at Sankarnagar touches 9 lac tones per annum.
1969 Awarded Merit Certification for Outstanding Export Performance
(1968-1969)
1971 Capacity expansion at sankari durg to 6.00 lakh tones per annum.
1990 Acquisition of coromandel cement plant at cuddapah-installed
29
capacity rises to 2.6 million tones per annum. The India cements
ltd. Becomes the largest producer of cement in south India.
1990 Conversion of sankarnagar plant to dry process with the increased
capacity of 1.00 million tones per annum.
1991 India cements ventures into shipping. Sets up a shipping division.
1994 ISO 9002 certification for sankarnagar plant
1994 Floats successfully US$ 50 million GDR issue.
1995 Announces issue of 1:1 bonus shares.
1996 India cements’ green field cement plant at Dalavoi commences
commercial production. Installed capacity 0.9 million tones per
annum
1997 India cements acquires aruna sugars finance ltd. Renamed as India
cements capital & finance ltd.
1997 India cements acquires cement plant of visaka cement industry ltd.,
at Tandur, Ranga Reddy district of Andhra Pradesh. Installed
capacity 0.9 Million Tonnes
1998 India cements acquires cement corporation of india’s yerraguntla
cement plant at Andhra Pradesh. Installed capacity 0.4 million
Tonnes.
1998 India cements acquires Raasi cement ltd., at Nalgonda District of
Andhra Pradesh. Installed capacity 1.8 million tones
1999 India cements acquires cement plant of Shri Vishnu Cement Ltd., at
Nalgonda District of Andhra Pradesh. Installed capacity 1.0
Million Tonnes
1999 Turnover sails over the Rs.1000 crore mark.
2001 India cements divests its stake in Sri Vishnu Cement Limited.
2001 Group’s overall capacity reaches 9 million tones
2004 The unique waste heat recovery system for generation of power
from waste gas at vishnupuram cement plant was commissioned
30
during novermber 2004, for a capacity of 7.7 MW of power.
2004 The company through its special purpose vechicle M/s coromandel
electric co ltd has commissioned a (gas based) captive power plant
at Ramanathapuram for a capacity of 17.4 MW and the same has
started supplying power from the month of November 2004.
2005 The company has successfully completed an equity issue in the
international market during October 2005 by issuing 25,613,796
Global Depositary shares (GDSs) at USD 4.326 per GDS, (each
GDS representing 2 underlying equity share of Rs 10 each) and
raised an amount of Rs 497 Crores including a premium of Rs 446
crores.
2006 The company has issued unsecured Zero Coupon Convertible
Bonds due 2011 (FCCBs)
2006 The company has issued unsecured zero coupon convertible bonds
due 2011(FCCBs) for US $75 million to investors outside India at
an initial conversion price of Rs.305.57 per share.
2007 The Hon’ble high court of judicature at madras vide its order dated
25th July 2007 sanctioned the scheme of amalgamation of Visaka
cement industry limited with the cements lid.
2007 The company has converted the Sankari plant from wet process to
dry process and commissioned the plant.
2007 The company has privately placed 2,07,89,000 equity shares at a
price of Rs.285/- per share(including premium of Rs.275/- per
share) by way of qualified institutional placement in December
2007.
2008 The company has revived its shipping business with the purchase
of two ships(dry bulk carriers)with a total capacity of 79843 DWT.
2008 The company has successfully bid for the Chennai franchise of the
31
DLF-IPL20/20 cricket tournament - “Chennai super kings”.
2008 The company has completed and commenced commercial
production of the million tonne grinding plant at Chennai.
2009 The company has completed and commenced commercial
production of the million tonne grinding plant at parli
(maharashtra).
2009 The company’s subsidiary, namely, Trishul concrete products
limited has completed and commenced commercial production of
the one lakh cu.m ready mix concrete plant at Hyderabad(Andhra
Pradesh)
2009 the line of 1.2 MT at malkapur was commenced operations from
march 2009
2009 The upgraded capacity of kiln 1 to 3000 TPD(1700 TPD) at
Vishnupuram started functioning from April 2009
2010 The corporate office of the company was shifted in February, 2010
to its own building “Coromandel Towers” at 93, Santhome High
Road, Karpagam Avenue, MRC NAgar, Chennai 600 028.
MANAGEMENT
The India cements ltd is a professionally managed company headed by
Mr.N.Srinivasan , vice chairman and managing director. The day-today affairs
of the company are managed by him assisted by key personnel in functional
area. The board of directors are ultimately responsible for the management of
the affairs of the company.
32
Shri.N. Shinivasan Vice Chairman & Managing Director
Shri. B.S.Adityan Director
Shri..R.K.Das Director
Shri Shinivasan Director
Shri.
A.Sankarakrishna
n
Director
Ms.Rupa
Gurunath
Director
Shri.
N.R.Krishnan
Director
Shri. Manickam Representing life insurance corporation of india
Shri. K.P.Nair Nominee of IDBI Bank ltd
Shri.
K.Subramanian
Representing housing & urban development corporation
ltd
Auditors:
Messrs, Brahmayya & co.,
Messrs. P.S. .Subramania lyer & CO.,
Chartered accountants, Chennai.
NAME OF THE ASSOCIATE / SUBSIDIARY COMPANIES
Industrial chemicals & Monomers Ltd Sudsidiary Company
ICL Securities Ltd Sudsidiary Company
ICL Financial Services Ltd Sudsidiary Company
ICL International Ltd Sudsidiary Company
Trishul Concrete Products Ltd Sudsidiary Company
PT. Coromandel minerals Resources, Jakarta Indonesia Sudsidiary Company
Coromandel Electric Company Ltd Associate Company
33
Unique receivable Management Private Ltd Associate Company
Coromandel Sugars Company Ltd Associate Company
India Cements Capital Ltd Associate Company
Rasi cements Ltd Associate Company
Coromandel Travels Ltd Associate Company
COMPANY HIGHLIGHT
The company is the largest producer of cement in south India.
The company’s plants are well spread with three in Tamilnadu and four
in Andhra Pradesh which cater to all major markets in south India and
Maharashtra.
The company is the market leader with a market share of 28% in the
South. It aims to achieve 35% market share in the future. The company
has access to huge limestone resources and plans to expand capacity by
de-bottlenecking and optimization of existing plants as by acquisitions.
The company has a strong distribution network with over 10000
stockists whom 25% are dedicated.
The company has well established brands–sankar super power,
coromandel super power and Rasi Super Power.
Regional offices in all southern states and maharasthra offices /
representative in every district.
Technical cell to all queries / doubts tech.cell @ indiacements .co.in
34
CHAPTER – III
DATA ANALYSIS AND INTERPRETATION
3.1 RATIO ANALYSIS
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. Ratios are relationship expressed in mathematical
terms between figures which are connected with each other in some manner.
Ratios can be expressed in two ways.
TIMES
When one value is divided by another, the unit used to express the
quotient is termed as “Times”. For example if out of 100 students in a class,
80 are present, the attendance ratio can be expressed as follows:
= 80 / 100 = 0.8 Times.
PERCENTAGE
If the quotient obtained is multiplied by 100, the unit of expression is
termed as “Percentage”. For instance, in the above example, the attendance
ratio as a percentage of the total number of students is as follows:
= 0.8 x 100 = 80%.
35
CLASSIFICATION OF RATIOS
LIQUIDITY RATIOS
Liquidity refers to the ability of a concern to meet its current
obligations as and when these become due. The short-term obligations are met
by realizing amounts from current, floating or circulating assets. The current
assets should either be liquid or near liquidity.
i) Current Ratio
ii) Liquid or Acid Test or Quick Ratio
iii) Absolute Liquid Ratio
SOLVENCY RATIO
Long-term solvency ratios convey a firm’s ability to meet the interest
costs and repayments schedules of its long-term obligations.
i) Debt-Equity Ratio
ii) Fixed Asset to Proprietors Fund Ratio
iii) Current Asset to Proprietors Fund Ratio
iv) Proprietary Ratio
v) Reserves to Capital Ratio
ACTIVITY RATIO
The activity ratios are also known as turnover or efficiency ratios. They
indicate the efficiency with which the capital employed is rotated in the
business.
36
i) Stock / Inventory Turnover Ratio
ii) Working Capital Turnover Ratio
iii) Capital Turnover Ratio
iv) Fixed Assets Turnover Ratio
PROFITABILITY RATIO
Profitability is an indication of the efficiency with which the operations
of the business are carried on. Bankers, financial institutions and other
creditors look at the profitability ratios as an indicator whether or not the firm
earns substantially more than it pays interest for the use or borrowed funds
and whether the ultimate repayment of their debt appears reasonably certain.
The following are the important profitability ratios.
i) Net Profit
ii) Gross Profit
iii) Operating Profit
iv) Return on Investment
v) Return on Capital Employed
37
I. LIQUIDITY RATIO
CURRENT RATIO
The ratio of current assets to current liabilities is called current ratio. In
order to measure the short-term liquidity or solvency of a concern,
comparison of current assets and current liabilities is inevitable. Current ratio
indicates the ability of a concern to meet its current obligations as and when
they are due for payment.
An increase in the current ratio represents improvement in the liquidity
position of a firm while a decrease in the current ratio indicates that there has
been deterioration in the liquidity position of the firm. A ratio equal or near to
the rule of thumb of 2:1 i.e., current assets double the current liabilities is
considered to be satisfactory.
FORMULA
Current Assets Current Ratio = ------------------------------
Current Liabilities
38
TABLE 3.1
CURRENT RATIO
(Rs. In Crores)
YEARCURRENT
ASSET CURRENT LIABILITY
RATIO
2000-01 1406.15 359.43 3.91
2001-02 1413.41 312.02 4.52
2002-03 1315.82 452.07 2.91
2003-04 1308.17 242.83 5.38
2004-05 1368.45 321.18 4.26
2005-06 1512.42 387.05 3.90
2006-07 1717.52 983.53 2.18
2007-08 2149.42 983.53 2.18
2008-09 2143.54 1153.32 1.85
2009-10 2876.45 1274.10 2.25
Mean 3.33
S.D. 1.22
C.V 36.49
Source: Annual report of India Cements Limited
INTERPRETATION
The table 3.1 show that it can be observed that the average current ratio
is 3.33 is high when compared to the rule of thumb of 2 : 1. The standard
deviation is 1.22 and the co-efficient variation is 36.49. The higher current
ratio for the 10 years is 5.38 in 2003-04 and lower current ratio is 1.85 in
2008-09. In all the years, the current ratio was good except in the year
2008-09.
39
CHART NO. 3.1
CURRENT RATIO
3.91
4.52
2.91
5.38
4.263.9
2.18 2.181.85
2.25
0
1
2
3
4
5
6
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
YEARS
RA
TIO
40
LIQUID RATIO
Quick ratio also known as acid test or liquid ratio is a more rigorous
test of liquidity than the current ratio. Quick ratio may be defined as the
relationship between quick / liquid assets and current or liquid liabilities. An
assets is said to be liquid it can be converted into cash with in a short period
without loss of value. In that sense cash in hand and cash at bank are most
liquid assets. The other assets which can be included in the liquid assets are
bills receivable, sundry debtors, marketable securities and short term or
temporary investment.
Usually, a high acid test ratio is an indication that the firm is liquid and
has ability to meet its current or liquid liabilities in time and on the other hand
a low quick ratio represents that the liquidity position is not good. As a rule of
thumb or as convention quick ratio of 1:1 is considered satisfactory.
FORMULA
Quick / Liquid Assets Liquid Ratio = -----------------------------------
Current Liabilities
41
TABLE 3.2
LIQUID OR QUICK RATIO
(Rs. In Crores)
YEARQUICK ASSETS
CURRENT LIABILITIES
RATIO
2000-01 1209.60 359.43 3.36
2001-02 1219.10 312.02 3.90
2002-03 1162.40 452.07 2.57
2003-04 1149.10 242.83 4.73
2004-05 1166.80 321.18 3.63
2005-06 1298.60 387.05 3.35
2006-07 1469.02 433.99 3.38
2007-08 1798.80 983.53 1.82
2008-09 1752.60 1153.32 1.51
2009-10 2408.20 1274.10 1.89
Mean 3.014
S.D. 0.97
C.V 32.18
Source : Annual report of India Cements Limited
INTERPRETATION
The table 3.2 shows that it can be observed that the average current
ratio is 3.014 is high when compared to the rule of thumb of 1:1 the standard
deviation is 0.97 and the co-efficient of variation is 32.18. The higher liquid
asset is the 4.73 in 2003-04 the 10 years. The lower liquid asset of is 1.51
2008-2009. The liquid ratio of the study units is good because in all the years,
the liquid ratio was above the rule of thumb of 1:1.
42
CHART NO 3.2
QUICK RATIO
3.36
3.9
2.57
4.73
3.633.35 3.38
1.821.51
1.89
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
YEARS
RA
TIO
43
ABSOLUTE LIQUID RATIO
The absolute liquid ratio is calculated along with current ratio and
liquid ratio. The absolute liquid ratio is calculated by the formula,
FORMULA
Cash & BankAbsolute Liquid ratio = -------------------------
Current Liabilities
The acceptance norm for this ratio is 50% or 0.5 : 1 i.e. Rs. 1 of
absolute liquid assets are considered adequate to pay Rs.2 worth of current
liabilities in the time as all the creditors are not expected to demand cash at
the same time. Absolute liquid assets include cash in hand and at bank and all
other marketable securities or temporary investments.
44
TABLE NO. 3.3
ABSOLUTE LIQUIDITY RATIO
(Rs. In Crores)
YEAR CASH & BANKCURRENT LIABILITY
RATIO
2000-01 9.63 359.43 0.027
2001-02 2.85 312.02 0.009
2002-03 6.05 452.07 0.013
2003-04 3.72 242.83 0.015
2004-05 2.92 321.18 0.009
2005-06 43.62 381.05 0.114
2006-07 230.18 433.99 0.530
2007-08 425.64 983.53 0.433
2008-09 85.20 1153.32 0.074
2009-10 53.81 1274.10 0.042
Mean 0.127
S.D. 0.191
C.V 150.986
Source : Annual report of India Cements Limited
INTERPRETATION
From the table 3.3 it shows that the absolute liquidity ratio of India
cements limited is it can be observed the average absolute liquidity ratio It is
0.127. The standard duration is 0.191 and the co-efficient of variation is
150.986. The higher of the 10 year 0.530 in 2006-07 and the lower absolute
liquidity ratio is the 0.009 in 2004-05.
45
CHART NO. 3.3
ABSOLUTE LIQUIDITY RATIO
0.027 0.009 0.013 0.015 0.009
0.114
0.530
0.433
0.0740.042
0.000
0.100
0.200
0.300
0.400
0.500
0.600
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
YEARS
RA
TIO
46
II. SOLVENCY RATIO
DEBT EQUITY RATIO
This ratio is ascertained to determined long-term solvency position of a
company debt equity ratio is also called “External-Internal Equity Ratio”.
The ratio indicates the proportionate claims of owners and the
outsiders against the firm’s assets. Therefore, interpretation of this ratio
depends primarily upon the financial policy of the firm and upon the firm’s
nature of business. A ratio of 1:1 may be usually considered to be a
satisfactory ratio although there cannot be any rule of thumb or standard norm
for all type of business. Generally, a low ratio is considered as favourable
from the long-term creditors point of view because a high proportion of
owners funds provide a larger margin of safety for them at the time of
liquidations of the firm. But caution should be taken, as a very high ratio may
be unfavourable from the point of view of the firm also because the firm may
not be able to get credit without paying very high rates of interest and without
accepting undue pressures and conditions of the creditors.
FORMULA
Debt Debt-Equity Ratio = ----------------------------------
Shareholders Fund
47
TABLE 3.4
DEBT EQUITY RATIO
(Rs. in Crores)
YEAR DEBTSHAREHOLDERS
FUNDRATIO
2000-01 1880.70 806.36 2.33
2001-02 1793.10 620.11 2.89
2002-03 1778.43 418.74 4.24
2003-04 2047.31 1360.75 1.50
2004-05 1987.24 1275.30 1.55
2005-06 1552.24 1743.01 0.89
2006-07 2058.75 2208.53 0.93
2007-08 1811.51 3321.11 0.54
2008-09 1988.03 3631.39 0.54
2009-10 2132.73 4135.82 0.51
Mean 1.59
S.D. 1.16
C.V 72.86
Source : Annual report of India Cements Limited
INTERPRETATION
The table 3.4 shows that the debt equity ratio of India cements Limited
is it can be observed the average debt equity it is 1.59. The standard deviation
is 1.16 and the co-efficient of variation is 72.86. The higher ratio of 4.24 was
registered in the year 2002-03. The lowest ratio of 0.51 was registered in the
year 2009-10. The ratio was expressing decreasing trend in latter part of the
study period.
48
CHART NO. 3.4
DEBT EQUITY RATIO
2.33
2.89
4.24
1.5 1.55
0.89 0.93
0.54 0.54 0.51
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
YEARS
RA
TIO
(%
)
49
PROPRIETARY RATIO
Proprietary ratio is also known as equity ratio. It establishes the
relationship between the proprietors or shareholders fund and the total
tangible assets of the firm. It is an important ratio for determining the long-
term solvency of the firm. The formula for calculating proprietary ratio is
FORMULA
Shareholders Funds Proprietary Ratio = -----------------------------
Total Assets
50
TABLE NO. 3.5
PROPRIETARY RATIO
(Rs. In Crores)
YEARSHAREHOLDER
FUND TOTAL ASSET RATIO
2000-01 806.36 3116.40 0.25
2001-02 620.11 3149.90 0.19
2002-03 418.74 3065.10 0.13
2003-04 1360.75 3256.80 0.41
2004-05 1275.30 3476.10 0.36
2005-06 1743.01 3692.90 0.47
2006-07 2208.53 4846.50 0.45
2007-08 3321.11 6263.10 0.53
2008-09 3631.39 6950.10 0.52
2009-10 4135.82 8293.00 0.49
Mean 0.38
S.D. 0.12
C.V 31.58
Source : Annual report of India Cements Limited
INTERPRETATION
From the table 3.5, it shows that the solvency ratio is India Cements
Limited is given below and it can be observed that the average ratio is 0.38.
The standard deviation is 0.12 and the co-efficient of variation is 31.58 the
higher solvency ratio for the 10 year is 0.53 in 2007-08 and the lower
solvency ratio is 0.13 in 2002-03. And the ratio shows an increasing trend,
that express solvency position of the firm is increasing.
51
CHART NO. 3.5
PROPRIETARY RATIO
0.25
0.19
0.13
0.41
0.36
0.470.45
0.53 0.520.49
0
0.1
0.2
0.3
0.4
0.5
0.6
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
YEARS
RA
TIO
52
RATIO OF CURRENT ASSET TO PROPRIETORS FUND
The ratio is calculated by dividing the total of current assets of the
amount of shareholders funds. It indicates the extent to which the proprietor’s
funds are invested in current assets.
FORMULA
Current Assets Current assets to shareholders = ------------------------------------
Funds ratio Shareholders Fund
53
TABLE NO. 3.6
RATIO OF CURRENT ASSET TO PROPRIETORS FUND
(Rs. In Crores)
YEARCURRENT
ASSETSHAREHOLDERS RATIO
2000-01 1406.15 806.36 1.74
2001-02 1413.41 620.11 2.27
2002-03 1315.82 418.74 3.14
2003-04 1308.17 1360.75 0.96
2004-05 1368.45 1275.30 1.07
2005-06 1512.42 1743.01 0.86
2006-07 1717.52 2208.53 0.77
2007-08 2149.42 3321.11 0.64
2008-09 2143.54 3631.39 0.59
2009-10 2876.45 4135.82 0.69
Mean 1.273
S.D. 0.800
C.V 62.84
Source : Annual report of India Cements Limited
INTERPRETATION
The table 3.6 express that the current asset to proprietors fund ratio of
India Cements Ltd can be observed the average ratio is 1.273. The standard
deviation is 0.800 and the co-efficient of variation is 62.84. The higher for the
10 year is 3.14 in 2002-03. The lower ratio of 0.59 in 2008-09. The ratio
shows a decreasing trend, so the proposition of current assets was reduced to
minimum.
54
CHART NO. 3.6
RATIO OF CURRENT ASSET TO PROPRIETORS FUND
1.74
2.27
3.14
0.96 1.070.86 0.77
0.64 0.59 0.69
0
0.5
1
1.5
2
2.5
3
3.5
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
YEARS
RA
TIO
55
RATIO OF RESERVES TO EQUITY CAPITAL
The ratio establishes the relationship between reserves and equity share
capital. It indicates how much profits are generally retained by the firm for
future growth. Higher the ratios better the position of the firm.
FORMULA
Reserve Ratio of Reserves to Equity Capital = -----------------
Equity Capital
56
TABLE NO. 3.7
RATIO OF RESERVES TO EQUITY CAPITAL
(Rs. In Crores)
YEAR RESERVES SHARE
CAPITAL RATIO
2000-01 642.88 163.48 3.93
2001-02 456.52 163.59 2.79
2002-03 255.15 163.59 1.56
2003-04 1197.16 163.59 7.31
2004-05 1111.71 163.59 6.79
2005-06 1527.24 215.77 7.07
2006-07 1948.16 260.37 7.48
2007-08 3039.24 281.87 10.78
2008-09 3348.96 282.43 11.85
2009-10 3828.65 307.17 12.46
Mean 7.202
S.D. 3.52
C.V 48.87
Source : Annual report of India Cements Limited
INTERPRETATION
The above table 3.7 shows, the reserves to equity capital ratio of India
Cements Ltd is it can be observed the average ratio is 7.202. The standard
deviation is 3.52 and the co-efficient of variation is 48.87. The higher for the
10 year is 12.46 in 2009-10. The lower ratio of 1.56 in 2002-03. The
increasing trend of this ratio express the solvency and financial stability is
increased.
57
CHART NO. 3.7
RATIO OF RESERVES TO EQUITY CAPITAL
3.93
2.79
1.56
7.316.79 7.07 7.48
10.7811.85
12.46
0
2
4
6
8
10
12
14
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
YEARS
RA
TIO
58
III. ACTIVITY RATIO
STOCK TURNOVER RATIO
This ratio is also called stock velocity ratio. It is calculated to ascertain
the efficiency of inventory management in terms of capital investment. It
shows the relationship between the cost of goods sold and the amount of
average inventory. Stock turnover ratio is obtained by dividing the cost of
sales by average stock.. The ratio is helpful in evaluating and review of
inventory policy. It indicates the number of times the inventory is turned over
during a particular accounting period.
Inventory turnover ratio measures the velocity of conversion of stock
into sales Usually, high inventory turnover/stock velocity indicates efficient
management of inventory because more frequently the stocks are sold, the
lesser amount of money is required to finance the inventory. A low inventory
turnover ratio indicates an inefficient management of inventory. It may also
be mentioned there that there are no ‘rule of thumb’. The norms may be
different for different firms depending upon the nature of industry and
business conditions.
FORMULA
Net Sales Stock turnover ratio = –––––––––––––––
Average inventory
59
TABLE 3.8
STOCK TURNOVER RATIO
(Rs. In Crores)
YEARCOST OF
GOODS SOLDAVERAGE
INVENTORYRATIO
2000-01 295.93 196.48 1.50
2001-02 260.29 194.24 1.34
2002-03 205.96 153.41 1.33
2003-04 247.50 159.07 1.55
2004-05 285.04 201.60 1.41
2005-06 402.98 213.82 1.88
2006-07 513.38 248.50 2.06
2007-08 638.02 350.64 1.81
2008-09 680.13 390.93 1.73
2009-10 873.24 468.19 1.86
Mean 1.65
S.D. 0.28
C.V 16.99
Source : Annual report of India Cements Limited
INTERPRETATION
The table 3.8 shows that the stock turnover ratio of india cements
limited is worked out and is known in above Table 3.5. From the above table,
it can be observed that the average stock turnover ratio is 1.65. The standard
deviation is 0.28 and the co-efficient of variation is 16.99. The higher stock
turnover ratio of the ten year is 2.06 in 2006-07 and the low stock turnover
ratio is 1.33 in 2002-03. During the study period of stock turnover ratio shows
horizontal trend.
60
CHART NO. 3.8
STOCK TURNOVER RATIO
1.51.34 1.34
1.551.41
1.882.06
1.811.73
1.86
0
0.5
1
1.5
2
2.5
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
YEARS
RA
TIO
(%
)
61
CAPITAL TURNOVER RATIO
A company’s annual sales divided by its average shareholder’s equity.
Capital turnover is used to calculate the rate of return on common equity and
is a measure of how well a company uses its stockholders equity to generate
revenue. The higher the ratio is, the more effectively a company is using its
capital. It is called equity turnover.
FORMULA
Net Sales Capital Turnover Ratio = –––––––––––––––––
Net Worth
62
TABLE 3.9
CAPITAL TURNOVER RATIO
(Rs. In Crores)
YEAR NET SALESCAPITAL
EMPLOYEDRATIO (%)
2000-01 295.93 2615.06 0.11
2001-02 260.29 2413.21 0.10
2002-03 205.96 2197.17 0.09
2003-04 247.50 2432.16 0.10
2004-05 285.04 2350.25 0.12
2005-06 402.98 2411.23 0.16
2006-07 513.38 3485.30 0.14
2007-08 638.02 4408.33 0.14
2008-09 680.13 4953.49 0.13
2009-10 873.24 5660.99 0.15
Mean 0.124
S.D. 0.014
C.V 11.29
Source : Annual report of India Cements Limited
INTERPRETATION
The working capital turnover ratio of india cements limited is worked
out and is known in above Table 3.9. From the above table, it can be observed
that the average working capital turnover ratio is 0.124. The standard
deviation is 0.014 and the co-efficient of variation is 11.29. The higher
working capital turnover ratio of the ten year is 0.16 in 2005-06 and the low
stock turnover ratio is 0.09 in 2002-03. During the study period of ten years
stock turnover ratio shows fluctuating trend.
63
CHART NO. 3.9
WORKING CAPITAL TURNOVER RATIO
0.110.1
0.090.1
0.12
0.16
0.14 0.140.13
0.15
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
0.18
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
YEARS
RA
TIO
(%
)
64
FIXED ASSETS TURNOVER RATIO
This ratio indicates the extent to which the investment in fixed assets
contributes towards sales. An increase in this ratio is the indication of
efficiency in work performance and a decrease in this ratio speaks of unwise
and improper investment in fixed assets.
FORMULA
Net Sales Fixed Assets Turnover Ratio = ----------------------
Net Fixed Assets
65
TABLE NO. 3.10
FIXED ASSETS TURNOVER RATIO
(Rs. In Crores)
YEAR NET SALES FIXED ASSET RATIO (%)
2000-01 1256.95 1673.4 0.75
2001-02 1019.11 1701.9 0.60
2002-03 851.58 1714.6 0.50
2003-04 1016.9 1913.9 0.53
2004-05 1162.14 2072.99 0.56
2005-06 1541.75 2145.73 0.72
2006-07 2255.21 3074.06 0.73
2007-08 3044.25 3984.4 0.76
2008-09 3359.49 4647.65 0.72
2009-10 3687.26 5102.65 0.72
Mean 0.66
S.D. 0.101
C.V 15.377
Source : Annual report of India Cements Limited
INTERPRETATION
The fixed asset turnover ratio of India cements limited is worked out
and is known in above Table 3.10. From the above table, it can be observed
that the average fixed assets turnover ratio is 0.66. The standard deviation is
0.101 and the co-efficient of variation is 15.377. The higher working capital
turnover ratio of the ten year is 0.76 in 2007-08 and the low stock turnover
ratio is 0.50 in 2002-03. During the study period of stock turnover ratio shows
fluctuating trend. It shows poor control over inventory.
66
CHART NO. 3.10
FIXED ASSETS TURNOVER RATIO
0.75
0.60
0.500.53
0.56
0.72 0.730.76
0.72 0.72
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
YEARS
RA
TIO
67
WORKING CAPITAL TURNOVER RATIO
This ratio is calculated by dividing the net sales by capital employed. It
measures the efficiency with which a firm utilizes its resources. As capital is
invested in a business to make sales and earn profits, this ratio is a good
indicator of overall profitability of a concern.
FORMULA
Net Sales Working Capital Turnover Ratio = ------------------------------
Net Working Capital
68
TABLE NO. 3.11
WORKING CAPITAL TURNOVER RATIO
(Rs. In Crores)
YEAR SALESNETWORKING
CAPITALRATIO
2000-01 295.93 1046.70 0.28
2001-02 260.29 924.23 0.28
2002-03 205.96 800.65 0.25
2003-04 247.50 1019.10 0.24
2004-05 285.04 1000.97 0.28
2005-06 402.98 1076.74 0.37
2006-07 513.38 1240.51 0.41
2007-08 638.02 940.18 0.68
2008-09 680.13 734.61 0.92
2009-10 873.24 1333.07 0.55
Mean 0.426
S.D. 0.213
C.V 52.88
Source: Annual report of India Cements Limited
INTERPRETATION
The table 3.11 shows that the working capital turnover ratio of India
cements limited is it can be observed that the average working capital
turnover ratio 0.426. The standard deviation is 0.213 and the co-efficient of
variation is 52.88. The higher working capital turnover ratio for the 10 year
0.92 in 2008-09 and the lower ratio is 0.24 in 2003-04. The ratio shows
increasing trend for the period of study.
69
CHART NO. 3.11
WORKING CAPITAL TURNOVER RATIO
0.28 0.28 0.25 0.240.28
0.370.41
0.68
0.92
0.55
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
YEARS
RA
TIO
70
IV. PROFITABILITY RATIO
GROSS PROFIT RATIO
This ratio is also known as gross margin or trading margin ratio. Gross
profit ratio indicates the difference between sales and direct costs. Gross
profit ratio explains the relationship between gross profit and net sales.
The gross profit indicates the extent to which selling prices of goods
per unit may decline without resulting in losses on operations of a firm.
Higher the gross ratio better the result. A low gross ratio, generally indicates
high cost of goods sold due to unfavourable purchasing policies, lesser sales,
lower selling prices, excessive competition, over investment in plant and
machinery, etc.,
FORMULA
Gross ProfitGross profit ratio = ––––––––––– x 100
Net Sales
71
TABLE 3.12
GROSS PROFIT RATIO
(Rs. in Crores)
YEARGROSS PROFIT
NET SALES RATIO (%)
2000-01 134.15 1256.95 10.67
2001-02 79.91 1019.11 7.84
2002-03 225.84 851.58 26.52
2003-04 31.22 1016.90 3.07
2004-05 83.35 1162.14 7.17
2005-06 128.84 1541.75 8.35
2006-07 594.59 2255.21 26.36
2007-08 972.56 3044.25 31.94
2008-09 851.62 3359.49 25.34
2009-10 764.44 3687.26 20.73
Mean 16.79
S.D. 9.87
C.V 58.75
Source : Annual report of India Cements Limited
The table 3.12 shows that the gross profit ratio of india cements limited
is worked out and is known in above Table 3.13. From the above table, it can
be observed that the average gross profit ratio is 16.79. The standard deviation
is 9.87 and the co-efficient of variation is 58.75. The higher working capital
turnover ratio of the ten year is 31.94 in 2007-08 and the low stock turnover
ratio is 3.07 in 2003-04. During the study period of gross profit ratio shows
fluctuating trend.
72
CHART NO. 3.12
GROSS PROFIT RATIO
10.67
7.84
26.52
3.07
7.178.35
26.36
31.94
25.34
20.73
0
5
10
15
20
25
30
35
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
YEARS
RA
TIO
(R
S. I
N C
RO
RE
S)
73
NET PROFIT RATIO
This ratio is also called net profit to sales ratio. It is measures of
management’s efficiency in operating the business successfully from the
owner’s point of view. It indicates the return on shareholders investments.
Higher the ratio better is the operational efficiency of the business concern.
FORMULA
Net Profit Net Profit Ratio = –––––––––––– x 100
Net Sales
74
TABLE NO. 3.13
NET PROFIT RATIO
(Rs. in Crores)
YEAR NET PROFIT NET SALES RATIO (%)
2000-01 48.10 1256.95 3.80
2001-02 119.75 1019.11 11.75
2002-03 201.32 851.58 23.64
2003-04 -116 1016.90 -11.40
2004-05 63.13 1162.14 5.43
2005-06 36.27 1541.75 2.35
2006-07 472.70 2255.24 20.96
2007-08 665.01 3044.25 21.84
2008-09 486.02 3359.49 14.46
2009-10 325.95 3687.26 8.83
Mean 10.17
S.D. 10.78
C.V 106.06
Source : Annual report of India Cements Limited
INTERPRETATION
The table 3.13 expressed that the net profit ratio is the India Cements
Limited is it can be observed the average ratio is 10.17 and the standard
derivation is 10.78. The co-efficient of variation is 106.06. The higher net
profit is 10 year 23.64 in 2002-03. The lower ratio is -11.40 for the 2003-04.
It shows a fluctuating trend.
75
CHART NO. 3.13
NET PROFIT RATIO
3.8
11.75
23.64
-11.4
5.43
2.35
20.96 21.84
14.46
8.83
-15
-10
-5
0
5
10
15
20
25
30
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
YEARS
RA
TIO
(R
S. I
N C
RO
RE
S)
76
RETURN ON INVESTMENT
This ratio is called ‘return on investment’ (ROI) or return on capital
employed. It measures the sufficiency or otherwise of profit in relation to
capital employed. Return on investment is used to measure the operational
and managerial efficiency. A comparison of ROI with that of similar fims,
with that of industry and with that of industry and with past ratio will be
helpful in determining how efficiently the long-term funds of owners and
creditors being put into use. Higher the ratio, the more efficient is the use of
the capital employed.
FORMULA
Operating Profit Return on Investment = –––––––––––––––– x 100
Capital Employed
77
TABLE NO. 3.14
RETURN ON INVESTMENT
(Rs in Crores )
YEAROPERATING
PROFITCAPITAL
EMPLOYEDRATIO (%)
2000-01 324.35 2615.10 12.40
2001-02 285.35 2413.20 11.82
2002-03 32.70 2197.17 1.49
2003-04 130.46 2432.20 5.36
2004-05 216.85 2350.25 9.23
2005-06 277.77 2411.23 11.52
2006-07 744.39 3485.30 21.36
2007-08 1082.42 4408.33 24.55
2008-09 963.77 4953.49 19.46
2009-10 907.08 5660.99 16.02
Mean 13.32
S.D. 7.16
C.V 53.79
Source : Annual Report of India Cements Limited
INTERPRETATION
The table 3.14 revealed that the return on investment is India Cement
Limited is it can be observed the average ratio is the 13.32 the standard
deviation is 7.16. The co-efficient of variation is 53.79. The higher for the 10
year is 24.55 in 2007-08 and the lower return on investment ratio is the 1.49
in 2002-03. The ratio shows a fluctuating trend.
78
CHART NO. 3.14
RETURN ON INVESTMENT
12.4 11.82
1.49
5.36
9.23
11.52
21.36
24.55
19.46
16.02
0
5
10
15
20
25
30
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
YEARS
RA
TIO
(R
S. I
N C
RO
RE
S)
79
RETURN ON CAPITAL EMPLOYED
Return on capital employed establishes the relationship between profits
and the capital employed. It is the primary ratio and is most widely used to
measure the overall profitability and efficiency of a business. The term
‘capital employed’ refers to the total of investments made in a business and
can be defined in a number of ways.
FORMULA
Adjusted Net ProfitsNet capital employed = –––––––––––––––––– x 100
Net capital employed
80
TABLE NO. 3.15
RETURN ON CAPITAL EMPLOYED
(Rs. in Crores)
YEARADJUSTED
NET PROFITS NET CAPITAL
EMPLOYED RATIO (%)
2000-01 48.10 2615.06 1.84
2001-02 119.75 2413.21 4.96
2002-03 201.32 2197.17 9.16
2003-04 -116 2432.16 -4.76
2004-05 63.13 2350.25 2.68
2005-06 36.27 2411.23 1.50
2006-07 472.70 3485.30 13.50
2007-08 665.01 4408.33 15.08
2008-09 486.02 4053.49 9.81
2009-10 325.95 5660.99 5.75
Mean 5.95
S.D. 6.04
C.V 101.53
Source : Annual report of India Cements Limited
INTERPRETATION
The table 3.15 cleared that the return on capital employed of India
cements limited is it can be observed that the average return on capital it
employed is 5.95 the standard deviation is 6.04 and the co-efficient of
variation is 101.53. The higher return on capital employed for the 10 years is
15.08 in 2007-08 and the lower return on capital employed is -4.76 in 2003-
04. The ratio exhibits a fluctuating trend.
81
CHART NO. 3.15
RETURN ON CAPITAL EMPLOYED
1.84
4.96
9.16
-4.76
2.681.5
13.515.08
9.81
5.75
-10
-5
0
5
10
15
20
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
YEARS
RA
TIO
(R
S. I
N C
RO
RE
S)
82
OPERATING PROFIT RATIO
Operating Profit is arrived by dedicating operating expenses from gross
profit. This ratio helps in determining the efficiency with which the affairs of
the business are managed.
FORMULA
Operating Profit Operating Profit Ratio = ----------------------------- x 100
Net Sales
83
TABLE NO. 3.16
OPERATING PROFIT RATIO
(Rs. in Crores)
YEAROPERATING
PROFIT NET SALES RATIO (%)
2000-01 324.35 1256.95 25.80
2001-02 285.35 1019.11 257.99
2002-03 32.70 851.58 3.84
2003-04 130.46 1016.90 12.83
2004-05 216.85 1162.14 18.66
2005-06 277.77 1541.75 18.02
2006-07 744.39 2255.21 33.00
2007-08 1082.42 3044.25 35.56
2008-09 963.77 3359.49 28.69
2009-10 907.08 3687.26 24.60
Mean 45.90
S.D. 75.12
C.V 163.67
Source : Annual report of India Cements Limited
INTERPRETATION
The table 3.16 shows that the operating profit ratio of India Cement
Limited is it can be observed that the average operating profit ratio is 45.90.
The standard deviation is 75.12 and the co-efficient of variation is 163.67.
The higher operating profit ratio for the year 85.56 in 2007-08. The Low
operating profit ratio is 3.84 in 2002-03. The ratio is in increasing trend.
84
CHART NO. 3.16
OPERATING PROFIT RATIO
0.28 0.28 0.25 0.240.28
0.370.41
0.68
0.92
0.55
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
YEARS
RA
TIO
85
3.2 Z – SCORE ANALYSIS
FINANCIAL DISTRESS
Financial distress is a condition when a company cannot meet, or has
difficulty to pay off, is financial obligations to its creditors. The chance of
financial distress increases when a firm has high fixed costs, liquid assets, ore
revenues that are sensitive to economics downturns. Financial distress is a
term in corporate finance used to indicate a condition when promises to
creditors of a company are broken or honored with difficulty. Sometimes
financial distress can lead to bankruptcy. Financial distress is usually
associated with some costs to the company and these are known as costs of
financial distrees.
Financial distress is a situation where a firm’s operating cash flows are
not sufficient to satisfy current obligations and the firm is forced to take
corrective actions, and a firm in financial distress may also face bankruptcy or
liquidation to meet its liabilities. Financial distress can be caused by losses,
dividend reduction or bankruptcy. A good way to measure the possibility of
bankruptcy is to use Z score model (Altman, 1968).
86
INDICATORS OF FINANCIAL DISTRESS
The ratios used for prediction the financial distress include liquidity
ratios, solvency ratios and activity ratios.
Liquidity Ratios
Liquidity ratios measure the firm’s ability to meet its obligations I the
short run.
Solvency ratios
Solvency ratios measure the firm’s ability to meet the debt long run.
Activity ratios
Activity ratios measure the firm’s ability to utilize its assets in an
efficiency manner.
Z- SCORE ANALYSIS
Z –score analysis has been established by Edward I Altman (1968) to
evaluate the general trend in the financial health of an enterprise over a
period. Many of the individual accounting ratios used frequently to predict
the financial performance of an enterprise may only provide warnings when it
is too late to take a corrective action.
The data collected were first analysed with the help of five accounting
ratios. These different ratios are combined into a single measure Z – score
analysis with the help of MDA. The model uses common financial
87
information such as ‘Sales revenue’ and ‘total assets’ to derive five basic
financial ratios.
Components of Z-Score model
Working capital to total assets – X1
Retained earnings to Total Assets – X2
EBIT to Total Assets – X3
Market value of Equity of Book value of liabilities – X4
Sales to total assets – X5
Z-Score (Arrived at using the weightage factors )
For the purpose of predicting the financial health and capability of
India cements limited. The Z – score method has been applied. The data has
been obtained from the company’s financial statements. The Z- Score of the
company has been computed for the last five years (2004-05 to 2008-09).
Formula
Z = 0.012X1 + 0.014X2 + 0.033X3 + 0.006X4 + 0.999X5
“Z” is the overall index and the variables X1 and X4 are computed as
absolute percentage values while X5 is compared in number of times.
MEASUREMENT OF FINANCIAL HEALTH
Altman established the following guidelines to be used classify firms
as wither financially sound or bankrupt.
88
ALTMAN GUIDELINE FOR HEALTHY ZONE
Situation Z –Score Zones
I Below 1.8 Bankruptcy
To fall uncertain to predict fall
II 1.8 to 3.0 Zone healthy Zone
III 3.0 and above Too Healthy Zone
I. Below “Z” score of 1.8, the unit is considered to be in bankruptcy
zone. Its failure is certain and extremely likely and would occur
probably within a period of two years.
II. If a unit has a “Z” score between 1.8, and 3, its financial viability is
considered to be healthy. The failure in this situation is uncertain to
predict.
III. Above “Z” score of 3, the unit is in too healthy zone. Its financial
health is very viable and not to fall.
89
WORKING CAPITAL RATIO
The working capital to total assets ratio is a measure of the liquid
assets of the firm relative to the total capitalization. Working capital is defined
as the difference between current assets and current liabilities. Ordinarily a
firm experiencing consistent operating losses will have shrinking current
assets in relation to total assets.
FORMULA
Working CapitalWorking Capital to Total Assets = –––––––––––––– x 100
Total Assets
90
TABLE NO. 3.17
WORKING CAPITAL TO TOTAL ASSETS
(Rs. In Crores)
YEARWORKING CAPITAL
TOTAL ASSETS
RATIO
2000-01 1046.70 2615.06 40.02
2001-02 924.23 2413.21 38.29
2002-03 800.65 2197.17 34.49
2003-04 1019.10 3408.06 29.90
2004-05 1000.97 3262.54 30.68
2005-06 1076.74 3268.25 32.94
2006-07 1240.51 4267.28 29.07
2007-08 940.18 5132.62 18.31
2008-09 734.61 5619.42 13.07
2009-10 1333.07 6268.55 21.26
Mean 28.998
Source : Annual report of India Cements Limited
INTERPRETATION
Table 3.17 shows the select ratios (Variables) of India Cements Ltd
during the period from 2001-2010. The content of working capital in the total
assets of India Cements Ltd was decreased from 40.02 in 2000-01 to 13.07 in
2008-09. it showed the excessive use of working capital over the years. This
is unfavourable for the efficient running of the India Cements Ltd and it
affects financial health.
91
CHART NO. 3.17
WORKING CAPITAL TO TOTAL ASSETS
40.0238.29
34.49
29.9 30.6832.94
29.07
18.31
13.07
21.26
0
5
10
15
20
25
30
35
40
45
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
YEARS
RA
TIO
(R
S. I
N C
RO
RE
S)
92
RETAINED EARNINGS TO TOTAL ASSET
The ratio of Retained Earnings to Total Assets indicates the efficiency
of the management in earnings, and total assets.
FORMULA
Retained Earning Retained Earnings to Total Asset = ––––––––––––––––––– x 100
Total Assets
93
TABLE NO. 3.18
RETAINED EARNING TO TOTAL ASSETS
(Rs. In Crores)
YEARRETAINED EARNING
TOTAL ASSETS
RATIO (%)
2000-01 642.88 2615.06 24.58
2001-02 456.52 2413.21 18.91
2002-03 255.15 2197.17 11.61
2003-04 1197.16 3408.06 35.12
2004-05 1111.71 3262.54 34.07
2005-06 1527.24 3268.25 46.72
2006-07 1948.16 4267.28 45.65
2007-08 3039.24 5132.62 59.21
2008-09 3348.96 5619.42 59.59
2009-10 3828.65 6268.55 61.07
Mean 39.65
Source : Annual report of India Cements Limited
INTERPRETATION
Table 3.18 shows the select ratios (Variables) of India Cements Ltd
during the period from 2001-2010. The content of retained earning in the total
assets of India Cements Ltd was increased from 11.61 to 61.07. It showed the
increasing trend of retained earnings over the years. The average of retained
earnings to total assets is 39.65.
94
CHART NO. 3.18
RETAINED EARNINGS TO TOTAL ASSETS
24.58
18.91
11.61
35.12 34.07
46.72 45.65
59.21 59.59 61.07
0
10
20
30
40
50
60
70
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
YEARS
RA
TIO
95
RATIO OF EARNING BEFORE INTEREST AND TAXES TO TOTAL
ASSETS
This ratio is a measure of the true productivity of the firm’s assets,
independent of any tax or leverage factors. Since a firm’s ultimate existence is
based on the earning power of its assets, this ratio appears to be particularly
appropriate for studies dealing with corporate failure.
FORMULA
EBIT Ratio of Earning before interest and taxes to total assets = –––––––––– x 100
Total Assets
96
TABLE NO. 3.19
EARNING BEFORE INTEREST AND TAXES TO TOTAL ASSETS
(Rs. In Crores)
YEAR EBITTOTAL ASSETS
RATIO (%)
2000-01 324.35 2615.06 12.40
2001-02 285.35 2413.21 11.80
2002-03 32.7 2197.17 1.48
2003-04 130.46 3408.06 3.82
2004-05 216.85 3262.54 6.64
2005-06 277.77 3268.25 8.49
2006-07 744.39 4267.28 17.4
2007-08 1082.42 5132.62 21.08
2008-09 963.77 5619.42 17.1
2009-10 907.08 6268.55 14.4
Mean 11.46
Source : Annual report of India Cements Limited
INTERPRETATION
Table 3.19 shows the ratios (Variables) of India Cements Ltd during
the period from 2001-2010. The content of EBIT to total assets of India
Cements Ltd was fluctuated trend. The highest ratio was 21.08 in 2007-08 and
the lowest ratio was1.48 in 2002-03. The average of EBIT to total assets is
11.46.
97
CHART NO. 3.19
EARNING BEFORE INTEREST AND TAXES TO TOTAL ASSETS
12.4 11.8
1.48
3.82
6.648.49
17.4
21.08
17.1
14.4
0
5
10
15
20
25
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
YEARS
RA
TIO
98
RATIO OF MARKET VALUE OF EQUITY TO BOOK VALUE OF
DEBT
The ratio of market value of enquiry to book value of debt is a
reciprocal of the familiar debt-equity ratio. Equity is measured by the
combined market value of all shares, while debt includes both current and
long term liabilities. This measure shows show much assets of an enterprise
can decline in value before the liabilities exceed the assets and the concern
becomes insolvent.
FORMULA
Ratio of market Value of equity Market value of Equity= ––––––––––––––––––– x 100
to book value of debt Book value of liabilities
99
TABLE NO. 3.20
MARKET VALUE OF EQUITY TO BOOK VALUE OF DEBT
(Rs. In Crores)
YEARMARKET VALUE
BOOK VALUE RATIO (%)
2000-01 9.15 56.42 16.21765
2001-02 9.83 42.94 22.89241
2002-03 6.36 28.41 22.38648
2003-04 19.56 25.97 75.31767
2004-05 27.04 34.39 78.62751
2005-06 69.73 45.13 154.5092
2006-07 56.74 62.92 90.178
2007-08 57.15 92.13 62.03191
2008-09 28.50 105 27.14286
2009-10 35.25 114.86 30.68954
Mean 57.99932
Source : Annual report of India Cements Limited
From the table 3.20, the thumb rule of debt-equity mix is 1:1. The
analysis of this study cleared that India Cements Ltd did not maintain the
above standard during the study period. The market value of equity was
greater than that of debt during the study period. As a result the ratio of
market value of total equity of book value of debenture was 5265.33 in 2007-
08, which was increased from 180.72 in 2002-03. So the company would be
considered as quite good. Thus the reasonable change in the financial
structure ratio is essential to protect the company for adverse financial
performance.
100
CHART NO. 3.20
MARKET VALUE OF EQUITY TO BOOK VALUE OF DEBT
16.2222.89 22.39
75.32 78.63
154.51
90.18
62.03
27.14 30.69
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
YEARS
RA
TIO
101
RATIO OF SALES TO TOTAL ASSETS
The capital-turnover ratio is a standard financial ratio illustrating the
sales generating ability of the firm’s assets. It is one measure of
management’s capacity in dealing with competitive conditions.
FORMULA
Sales Ratio of sales to total assets = –––––––––––
Total Assets
102
TABLE NO. 3.21
SALES TO TOTAL ASSETS
(Rs. In Crores)
YEAR SALES TOTAL ASSETS
RATIO
2000-01 1256.95 2615.06 0.480
2001-02 1019.11 2413.21 0.422
2002-03 851.58 2197.17 0.38
2003-04 1016.90 3408.06 0.29
2004-05 1162.14 3262.54 0.35
2005-06 1541.75 3268.25 0.47
2006-07 2255.24 4267.28 0.52
2007-08 3044.25 5132.62 0.59
2008-09 3359.49 5619.42 0.60
2009-10 3687.26 6268.55 0.58
Mean 0.467
Source : Annual report of India Cements Limited
Table 3.21 shows the ratios of India Cements Ltd during the period
from 2001-2010. The content of Sales to Total Assets of India Cements Ltd
was fluctuated trend. The highest ratio was 0.60 in 2008-09 and the lowest
ratio was 0.29 in 2003-04. The average of EBIT to total assets is 0.467. The
sales volume during the study period clearly showed that the cement company
had been successful in achieving the standard ratio through sales.
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CHART NO. 3.21
SALES TO TOTAL ASSETS
0.48
0.4220.38
0.29
0.35
0.470.52
0.59 0.6 0.58
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
YEARS
RA
TIO
104
Z – SCORE WEIGHTAGE FACTORS
Variables of Z-Score
X1 – Working capital to Total Assets
X2 – Retained Earnings to Total Assets
X3 – Earning Before Interest and Taxes to Total Assets
X4 – Market Value of Equity to Book Value to Debt
X5 – Sales to Total Assets
Z – Score
105
TABLE NO. 3.22
Z-SCORE (ARRIVED AT USING THE WEIGHTAGE FACTOR
YEAR X1 X2 X3 X4 X5 Z-SCORE
2000-01 1.286 -0.852 0.149 -0.888 0.121 -0.184
2001-02 1.088 -1.172 0.054 -0.939 -0.427 -1.397
2002-03 0.652 -1.584 -1.580 -1.070 -0.825 -4.406
2003-04 0.126 -0.256 -1.209 -0.893 -1.676 -3.908
2004-05 0.215 -0.315 -0.763 -0.664 -1.108 -2.636
2005-06 0.474 0.399 -0.470 0.535 0.026 0.965
2006-07 0.031 0.339 0.940 0.764 0.499 2.573
2007-08 -1.203 1.105 1.522 1.681 1.161 4.267
2008-09 -1.804 1.126 0.892 0.451 1.161 1.828
2009-10 -0.865 1.210 0.465 1.023 1.067 2.900
Source: Records of India Cements Limited.
From the Table No. 3.22, it is clear that the India cement company
beginning part of five years the company was under grey area that is less than
1.80 and in later period of the study it shows improvement. In the year 2007-
08 the z-score of the study unit is above too healthy zone. In the three years
2006-07, 2007-08 and 2008-09 the z-score was in the healthy zone.
So the z-score analysis clearly indicates that the companies financial
healthiness is improving year after year.
106
CHART NO. 3.22
Z-SCORE (ARRIVED AT USING THE WEIGHTAGE FACTOR
-5
-4
-3
-2
-1
0
1
2
3
4
5
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
YEARS
Z-S
CO
RE
(IN
LA
KH
S)
107
CHAPTER IV
SYSTEM ANALYSIS
VISUAL BASIC – AN OVERVIEW
Visual basic uses event driven programming. In each activities in the
program are triggered by one event or another. The code of Visual Basic
programming is a set independent piece if code that all activated by and so
respond to only the events they have told recognize.
When the application is running, visual basic monitor the windows and
controls in each window for all the events that each control can recognize
mouse movements, clicks, key strokes and so on.
Visual basic also provides sophisticated error handling, source code
management, open IDE extensibility, OLE consent etc.
OBJECTIVES OF VISUAL BASIC
Visual Basic is an ideal programming language for developing
sophisticated professional applications for Microsoft windows. It makes use
of Graphical User Interface for creative robust and powerful application.
GRAPHICAL USER INTERFACE
The graphical user interface uses illustrations for text that enable users
to interactive with an application.
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It is quite a transition form linear programming methods where the user
is guided through a linear path of execution and is limited to a small set of
operations.
In graphical user interface environment the number of options open to
the user is much greater allowing more freedom to the user and the developer.
The graphical interface feature makes it easier to comprehend things quickly.
Apart from being user friendly, visual basic has many special features that it
an interacting tool to work with.
EVENT DRIVEN PROGRAMMING
Visual Basic programs are built around events. Events are various
things that can happen in a program in event driven application, the program
statements are executed only when a particular event calls a specific part of
the code that is assigned to the event.
METHOD
A method is an action that can be performed on objects. It is actually a
built-in procedure that can be invoked to impart some action on a particular
object.
109
SPECIAL FEATURES OF VISUAL BASIC
1. ODBC(Open Database Connectivity)
Microsoft introduced ODBC, database connectivity API that allows
application to communicate with different database management system.
ODBC is based on SQL Access group’s Call Level Interface (CLI)
Specification, which uses SQL to access database. ODBC supports access to
both SQL and non-SQL data.
2. OLE(Object Linking and Embedding)
Is a technology that allows a programmer’s windows based application
to create an application that can display data from many different applications
say MS- Word, MS-Excel etc.,
3. ActiveX
It is a set of components that can be created and utilized by several
applications.
4. MDI FORM
It allows us to open windows within a parent container window. It is
used commonly for document-centric applications where the main objects we
work on all the documents.
110
5. INTEGRATED DEVELOPMENT ENVIRONMENT (IDE)
Visual basic contains many integrated tools to make the application
development process simpler. This collection of tools makes it the integrated
development environment. It is called integrated because we can access
virtually all of the development tools that we need from one scare called an
“Interface”. The IDE is also commonly referred to as the design environment,
the program or just the IDE.
COMPONENTS OF IDE
MENU BAR
It is a line of text that gives access to other features within the
development environment. Some of the menus available are File Menu, Edit
Menu, View Menu, Help, Project Menu, Debug Menu, Add-Ins Menu etc.,
TOOL BAR
The Tool Bar gives easy access to Menu Bar commands that are used
frequently. The items in the tool bar can be customized to suit our
applications.
PROJECT EXPLORER
We can make a quick reference to the various forms, modules and
classes used in the project through Project Explorer. All the objects that make
up an application are packaged into a project.
111
PROPERTIES WINDOW
It exposes the various characteristics of selected objects. The properties
set at design time can be changed during run time.
FORM LAYOUT WINDOW
It shows how the current form looks like and how it is positioned on
the screen at run time.
FORM DESIGNER
This is the workspace where we actually design the visual layout of the
form and the controls that lie on it.
TOOL BOX
It contains the tools that are necessary to build an application interface.
These tools or objects are referred to as controls. Most of them are an intrinsic
part of visual basic and are called built-in or standard controls. Some of the
controls are Text Box, Label Box, Combo Box, List Box, Timer, Picture,
Option Button, Check Box, etc.,
112
1. Pointer:
This is the only one in the tool box that does not drunk a control. It
provides a way to move and resize forms and controls. It should be noted that
it is only used a click tool and not as a control.
2. Text Box:
A text box control, sometimes called an edit field or edit control,
displays information entered at design time, entered by the user, or assigned
to the control in code art van time.
3. Combo Box:
A combo box control combines the features of a text box control and a
list box control can enter information in the text box portion or select an item
from the list box of the control.
4. Timer:
A timer control can execute code at regular intervals by causing a
times event to occur. The Timer control, invisible to the user, is useful for
back ground processing.
5. Label Box:
A label control is a graphical control and we can use to display text
that a upper cant change directly.
113
6. List Box:
The list box will display list of items from which the user can choose
one item. The list can be scrolled if it has more items that can be displayed at
one time.
7. Combo Box:
It is used to draw a combination of list box and text boxes. Allows user
to type in a selection or select from dropdown list.
8. Command Button:
Creates a button that which the user own choose to carry out a
command. The command button carries out a command or action when a user
choose it.
9. Picture Box:
It is used to display graphical images as a container that receives
output from graphical methods or as a container for other controls.
10. Option Button
Option groups with other options buttons display multiple choices.
From which a user can selected any one.
114
11. Frame
It is used to create a graphical or functional grouping for controls. To
group controls, the frame is drawn inside the frame. Buttons, labels, text
boxes, option boxes etc., can be grouped together inside the frames
12. Check box
It is used to create a box that the user can easily use to indicate if
something is true or false or to display multiple choices when the user can
choose more than one.
13. File list box
It used to display a list of files that the user can open, save or otherwise
manipulate.
14. Directory list box:
During run time the user can retrieve information from directories by
selecting a particular directory.
15. Drive list box:
It is used to display all the files and directories in a selected drive.
16. Shape
It is used draw a variety of shapes like rectangle, rounded rectangle,
oval, circle, etc., on the form during design time.
115
OBJECT BROWSER
It allows us to browse through the various properties, events and
methods that are made available to us. We can access it by selecting Object
Browser from the View Menu or pressing F2.
VISUAL BASIC EDITOR: CODE WINDOW
This is the area where we write the code for the application. It is
actually a turbo-charged Text Editor with many productivity tool built-in. By
using Visual Basic IDE, we can see either a form or the code window at a
time.
REASONS FOR SELECTING VISUAL BASIC AS A FRONT END
In ODBC, database connectivity API allows application to
communicate with different DBMS. OLE is technologies that allows a
programmer window based application to create an application that can
display data from many different application say MS-Word, MS-Excel, etc.,
ActiveX is a set of components that can be created and utilized by
several applications. In particular, ActiveX users interact technology to assist
in creating compact and reasonable is an Internet or corporate Internet. Visual
Basic consists of at least one form and one or more objects in the form of
controls. Each control has its own property. By using Visual Basic, we can get
more accurate design screen. Designing concept is very easier in Visual Basic.
116
INPUT
FORM – I
117
OUTPUT
118
INPUT
FORM – II
119
OUTPUT
120
INPUT
FORM – III
121
OUTPUT
122
INPUT
FORM – IV
123
OUTPUT
124
INPUT
FORM – V
125
OUTPUT
126
INPUT
FORM – VI
127
OUTPUT
128
CODING
FORM – I
Private Sub CmdRatio_Click()Text21.Text = Val(Text1.Text) / Val(Text11.Text)Text22.Text = Val(Text2.Text) / Val(Text12.Text)Text23.Text = Val(Text3.Text) / Val(Text13.Text)Text24.Text = Val(Text4.Text) / Val(Text14.Text)Text25.Text = Val(Text5.Text) / Val(Text15.Text)Text26.Text = Val(Text6.Text) / Val(Text16.Text)Text27.Text = Val(Text7.Text) / Val(Text17.Text)Text28.Text = Val(Text8.Text) / Val(Text18.Text)Text29.Text = Val(Text9.Text) / Val(Text19.Text)Text30.Text = Val(Text10.Text) / Val(Text20.Text)End Sub
Private Sub Cmd Mean_Click()Text31.Text = (Val(Text21.Text) + Val(Text22.Text) + Val(Text23.Text) + Val(Text24.Text) + Val(Text25.Text) + Val(Text26.Text) + Val(Text27.Text) + Val(Text28.Text) + Val(Text29.Text) + Val(Text30.Text)) / 10End Sub
Private Sub Cmd S.D_Click()a = Val(Text21.Text) * Val(Text21.Text)b = Val(Text22.Text) * Val(Text22.Text)c = Val(Text23.Text) * Val(Text23.Text)d = Val(Text24.Text) * Val(Text24.Text)e = Val(Text25.Text) * Val(Text25.Text)F = Val(Text26.Text) * Val(Text26.Text)g = Val(Text27.Text) * Val(Text27.Text)h = Val(Text28.Text) * Val(Text28.Text)i = Val(Text29.Text) * Val(Text29.Text)j = Val(Text30.Text) * Val(Text30.Text)k = (a + b + c + d + e + F + g + h + i + j) / 10l = Val(Text31.Text) * Val(Text31.Text)m = k - lText32.Text = Sqr(m)End Sub
Private Sub Cmd C.V_Click()Text33.Text = Val(Text32.Text) / Val(Text31.Text) * 100End Sub
Private Sub Cmd Exit_Click()EndEnd Sub
129
FORM – II
Private Sub CmdRatio_Click()Text21.Text = Val(Text1.Text) / Val(Text11.Text)Text22.Text = Val(Text2.Text) / Val(Text12.Text)Text23.Text = Val(Text3.Text) / Val(Text13.Text)Text24.Text = Val(Text4.Text) / Val(Text14.Text)Text25.Text = Val(Text5.Text) / Val(Text15.Text)Text26.Text = Val(Text6.Text) / Val(Text16.Text)Text27.Text = Val(Text7.Text) / Val(Text17.Text)Text28.Text = Val(Text8.Text) / Val(Text18.Text)Text29.Text = Val(Text9.Text) / Val(Text19.Text)Text30.Text = Val(Text10.Text) / Val(Text20.Text)End Sub
Private Sub Cmd Mean_Click()Text31.Text = (Val(Text21.Text) + Val(Text22.Text) + Val(Text23.Text) + Val(Text24.Text) + Val(Text25.Text) + Val(Text26.Text) + Val(Text27.Text) + Val(Text28.Text) + Val(Text29.Text) + Val(Text30.Text)) / 10End Sub
Private Sub Cmd S.D_Click()a = Val(Text21.Text) * Val(Text21.Text)b = Val(Text22.Text) * Val(Text22.Text)c = Val(Text23.Text) * Val(Text23.Text)d = Val(Text24.Text) * Val(Text24.Text)e = Val(Text25.Text) * Val(Text25.Text)F = Val(Text26.Text) * Val(Text26.Text)g = Val(Text27.Text) * Val(Text27.Text)h = Val(Text28.Text) * Val(Text28.Text)i = Val(Text29.Text) * Val(Text29.Text)j = Val(Text30.Text) * Val(Text30.Text)k = (a + b + c + d + e + F + g + h + i + j) / 10l = Val(Text31.Text) * Val(Text31.Text)m = k - lText32.Text = Sqr(m)End Sub
Private Sub Cmd C.V_Click()Text33.Text = Val(Text32.Text) / Val(Text31.Text) * 100End Sub
Private Sub Cmd Exit_Click()EndEnd Sub
130
FORM – III
Private Sub CmdRatio_Click()Text21.Text = Val(Text1.Text) / Val(Text11.Text)Text22.Text = Val(Text2.Text) / Val(Text12.Text)Text23.Text = Val(Text3.Text) / Val(Text13.Text)Text24.Text = Val(Text4.Text) / Val(Text14.Text)Text25.Text = Val(Text5.Text) / Val(Text15.Text)Text26.Text = Val(Text6.Text) / Val(Text16.Text)Text27.Text = Val(Text7.Text) / Val(Text17.Text)Text28.Text = Val(Text8.Text) / Val(Text18.Text)Text29.Text = Val(Text9.Text) / Val(Text19.Text)Text30.Text = Val(Text10.Text) / Val(Text20.Text)End Sub
Private Sub Cmd Mean_Click()Text31.Text = (Val(Text21.Text) + Val(Text22.Text) + Val(Text23.Text) + Val(Text24.Text) + Val(Text25.Text) + Val(Text26.Text) + Val(Text27.Text) + Val(Text28.Text) + Val(Text29.Text) + Val(Text30.Text)) / 10End Sub
Private Sub Cmd S.D_Click()a = Val(Text21.Text) * Val(Text21.Text)b = Val(Text22.Text) * Val(Text22.Text)c = Val(Text23.Text) * Val(Text23.Text)d = Val(Text24.Text) * Val(Text24.Text)e = Val(Text25.Text) * Val(Text25.Text)F = Val(Text26.Text) * Val(Text26.Text)g = Val(Text27.Text) * Val(Text27.Text)h = Val(Text28.Text) * Val(Text28.Text)i = Val(Text29.Text) * Val(Text29.Text)j = Val(Text30.Text) * Val(Text30.Text)k = (a + b + c + d + e + F + g + h + i + j) / 10l = Val(Text31.Text) * Val(Text31.Text)m = k - lText32.Text = Sqr(m)End Sub
Private Sub Cmd C.V_Click()Text33.Text = Val(Text32.Text) / Val(Text31.Text) * 100End Sub
Private Sub Cmd Exit_Click()EndEnd Sub
131
FORM – IV
Private Sub CmdRatio_Click()Text21.Text = Val(Text1.Text) / Val(Text11.Text)Text22.Text = Val(Text2.Text) / Val(Text12.Text)Text23.Text = Val(Text3.Text) / Val(Text13.Text)Text24.Text = Val(Text4.Text) / Val(Text14.Text)Text25.Text = Val(Text5.Text) / Val(Text15.Text)Text26.Text = Val(Text6.Text) / Val(Text16.Text)Text27.Text = Val(Text7.Text) / Val(Text17.Text)Text28.Text = Val(Text8.Text) / Val(Text18.Text)Text29.Text = Val(Text9.Text) / Val(Text19.Text)Text30.Text = Val(Text10.Text) / Val(Text20.Text)End Sub
Private Sub Cmd Mean_Click()Text31.Text = (Val(Text21.Text) + Val(Text22.Text) + Val(Text23.Text) + Val(Text24.Text) + Val(Text25.Text) + Val(Text26.Text) + Val(Text27.Text) + Val(Text28.Text) + Val(Text29.Text) + Val(Text30.Text)) / 10End Sub
Private Sub Cmd S.D_Click()a = Val(Text21.Text) * Val(Text21.Text)b = Val(Text22.Text) * Val(Text22.Text)c = Val(Text23.Text) * Val(Text23.Text)d = Val(Text24.Text) * Val(Text24.Text)e = Val(Text25.Text) * Val(Text25.Text)F = Val(Text26.Text) * Val(Text26.Text)g = Val(Text27.Text) * Val(Text27.Text)h = Val(Text28.Text) * Val(Text28.Text)i = Val(Text29.Text) * Val(Text29.Text)j = Val(Text30.Text) * Val(Text30.Text)k = (a + b + c + d + e + F + g + h + i + j) / 10l = Val(Text31.Text) * Val(Text31.Text)m = k - lText32.Text = Sqr(m)End Sub
Private Sub Cmd C.V_Click()Text33.Text = Val(Text32.Text) / Val(Text31.Text) * 100End Sub
Private Sub Cmd Exit_Click()EndEnd Sub
132
FORM – V
Private Sub CmdRatio_Click()Text21.Text = Val(Text1.Text) / Val(Text11.Text)Text22.Text = Val(Text2.Text) / Val(Text12.Text)Text23.Text = Val(Text3.Text) / Val(Text13.Text)Text24.Text = Val(Text4.Text) / Val(Text14.Text)Text25.Text = Val(Text5.Text) / Val(Text15.Text)Text26.Text = Val(Text6.Text) / Val(Text16.Text)Text27.Text = Val(Text7.Text) / Val(Text17.Text)Text28.Text = Val(Text8.Text) / Val(Text18.Text)Text29.Text = Val(Text9.Text) / Val(Text19.Text)Text30.Text = Val(Text10.Text) / Val(Text20.Text)End Sub
Private Sub Cmd Mean_Click()Text31.Text = (Val(Text21.Text) + Val(Text22.Text) + Val(Text23.Text) + Val(Text24.Text) + Val(Text25.Text) + Val(Text26.Text) + Val(Text27.Text) + Val(Text28.Text) + Val(Text29.Text) + Val(Text30.Text)) / 10End Sub
Private Sub Cmd S.D_Click()a = Val(Text21.Text) * Val(Text21.Text)b = Val(Text22.Text) * Val(Text22.Text)c = Val(Text23.Text) * Val(Text23.Text)d = Val(Text24.Text) * Val(Text24.Text)e = Val(Text25.Text) * Val(Text25.Text)F = Val(Text26.Text) * Val(Text26.Text)g = Val(Text27.Text) * Val(Text27.Text)h = Val(Text28.Text) * Val(Text28.Text)i = Val(Text29.Text) * Val(Text29.Text)j = Val(Text30.Text) * Val(Text30.Text)k = (a + b + c + d + e + F + g + h + i + j) / 10l = Val(Text31.Text) * Val(Text31.Text)m = k - lText32.Text = Sqr(m)End Sub
Private Sub Cmd C.V_Click()Text33.Text = Val(Text32.Text) / Val(Text31.Text) * 100End Sub
Private Sub Cmd Exit_Click()EndEnd Sub
133
FORM – VI
Private Sub Command1_Click()Text34.Text = (Val(Text1.Text) + Val(Text6.Text) + Val(Text11.Text) + Val(Text16.Text) + Val(Text21.Text)Text35.Text = (Val(Text2.Text) + Val(Text7.Text) + Val(Text12.Text) + Val(Text17.Text) + Val(Text22.Text)Text36.Text = (Val(Text3.Text) + Val(Text8.Text) + Val(Text13.Text) + Val(Text18.Text) + Val(Text23.Text)Text37Text = (Val(Text4.Text) + Val(Text9.Text) + Val(Text14.Text) + Val(Text19.Text) + Val(Text24.Text)Text38Text = (Val(Text5.Text) + Val(Text10.Text) + Val(Text15.Text) + Val(Text20.Text) + Val(Text25.Text)End Sub
Private Sub Command2_ Click()End End Sub
134
CHAPTER – V
FINDINGS, SUGGESTIONS AND CONCLUSION
FINDINGS
LIQUIDITY RATIO
The current ratio was within the standard norm during the study period
2000-01 to 2009-10
The quick ratio also stands within the standard norm during the study
period 2000-01 to 2009-10, so the liquidity was satisfactory.
The absolute liquid ratio do touch the standard norm during the study
period 2000-01 to 2009-10
SOLVENCY RATIO
Debt equity ratio shows satisfactory level
Proprietary ratio shows satisfactory level.
Current asset to proprietary fund satisfactory level.
Reserves to capital ratio satisfactory level.
TURNOVER RATIO
The stock turn over shows fluctuating trend.
Working capital turn over ratio shows fluctuating trend during the
study period 2000-01 to 2009-10
135
Fixed asset turn over ratio shows fluctuating trend during the study
period 2000-01 to 2009-10
PROFITABILITY RATIO
Gross profit ratio shows fluctuating trend.
Net profit ratio shows fluctuating trend.
Return on investment shows highly decreasing trend.
Operating profit ratio shows decreasing trend.
Return on capital employed ratio shows decreasing trend during the
study period 2000-01 to 2009-10.
Z-SCORE ANALYSIS
The Working capital to total asset ratio shows gradually decreasing
trend.
Retained earning to total asset shows increasing trend.
Earning before interest and tax to total asset ratio shows decreasing
trend.
Market value of equity to book value of debt shows increasing trend
during the study period 2000-01 to 2009-10.
Sales to total asset ratio shows increasing trend
Z-score analysis shows that, in the later part of the study period, the
company was in the healthy zone. It shows that the financial health of
the company is improving.
136
SUGGESTIONS
Based on the findings the following suggestion are offered for the
improvement of the financial performance of the company.
LIQUIDITY RATIO
Liquidity ratios of the India cements indicate an comfortable position.
The current ratio and quick ratio is standard norm.
TURN OVER RATIO
The ratio of inventory turn over and working capital turn over was
predicting short term solvency position of the company is found to be highly
unsatisfactory. The proportion of inventory turn over ratio shows and
increasing trend 2009-10. The working capital turn over ratio in the last year
increasing trend 2009-10. the fixed asset turn over ratio increasing trend
2009-10.
SOLVENCY RATIO
Debt-equity ratio do not touch standard norm (1:1). So the company
should increase shareholders fund.
Proprietary ratio do not touch standard norm (1:1). So the company
should increase shareholders fund.
Current asset to proprietary fund do not touch standard norm (1:1). So
the company should increase shareholders fund.
Reserves to capital ratio increasing trend 2009-10.
137
PROFITABILITY RATIO
All profitability ratio are shows satisfactory level. In these sales was
high. That is the main reason for the increase is profit. So the company
should maintain the condition for future.
Z-SCORE ANALYSIS:
Based on the findings as observed from the study, the following
suggestions are deemed to be suitable for improving the financial
health of the India cement company
The company have to strengthen the inventory management system
since the inventory is the major contributory to the current assets as
well as the working capital.
Working capital to total asset ratio shows gradually decreasing trend
which indicates an uncomfortable position. So the company should
take steps to increase the working capital.
138
CONCLUSION
The study of financial performance was undertaken in the India
cements limited are financially sound and the performance is improving over
10 years 2000-01 to 2009-10 through there were some fluctuations. The
liquidity position is satisfactory level. The solvency ratio is satisfactory level
and the company's profitability position is satisfactory level, the increased
profit is every year.
The financial health plays a significant role in the successful
functioning of a firm. The India cements ltd should healthy Zone in 2009-10.
Apart from this the company is havening a good background and
sound reputation with which no doubt; it will have an excellent progress in
future.
139
BIBLIOGRAPHY
Principles of Management Accounting, S.N.Maheshwari, Sultan Chand
& Sons, New Delhi, 2007.
Financial and Management Accounting, T.S.Reddy, Y. Hari Prasad
Reddy, Margham Publications, Chennai, 2008.
Management Accounting, Shashi K.Gupta and R.K.Sharma, Kalyani
Publishers, New Delhi, 2003.
Research Methodology, Kothari. C.R., Wishwa Prakashan, New Delhi,
1990.
Statistical Methods, S.P.Gupta.
Visual Basic 6.0 from the Ground up, Gary Cornel,
www.indiacements.co.in
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