India Cements

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.

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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

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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.

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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;

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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

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be poor financial health. Since the cement producing companies face threats

to their viability, this study bears a relevance to the present day problems.

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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.

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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

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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.

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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,

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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.

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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 =

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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.

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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.

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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.

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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

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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

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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

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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%

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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,

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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.

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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.

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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

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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

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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

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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

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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


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


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


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


(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


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


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


(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


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


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


(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


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


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


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


(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


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


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


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


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


(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


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


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


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


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


(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


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


(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


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


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


(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


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


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


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


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


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


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


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.

103

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.

108

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






130

FORM – III






131

FORM – IV






132

FORM – V






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

140

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