CHAPTER I

INTRODUCTION

Finance is always termed as a life blood in all walks of life and the cases of business movement as we need no reason to wonder. Business depends upon the funds as they cause production of goods and its channel of distribution. Hence, finance plays a vital role in every activity. Activity related to the term so called operation and financial performance. Fund can be acquired and mobilize as well as many ways and the mobilized fund carefully handled by means of planning, controlling and channelizing those funds as such. Because of rich forecasting the future is to be carried by the management by decision making. Which decision making process depends upon financial controls, operating performance after all that misappropriation of funds can be duly averted from the unpredicted financial risks.Financial statements include balance sheet and profit and loss account. Financial statements are prepared mainly for decision making. Performance includes the operating and financial performance. The operating performance evaluates the capacity of overcoming business risk, the operating efficiency and operating profitability. The financial performance encounters the financial risks, Strengthens solvency and liquidity risks.Ration analysis is a powerful tool of ratio analysis. It is used as a device to analyze and interpret operating efficiency and financial health of firm. Ratio helps the management in decision making and control.The day to day operation is lacked by the working capital and allocation of funds, acquisition of those financial activities. But, for which financial statement is focused on, with the view to controlling aforesaid activity to be seen effectively.

They are mainly monitored and put it under scanner for taking next step in the course of business without financial performance of operating efficiency the business. Those above mentioned activities provide platform for overcoming business risk, and enhancing the operating efficiency and profitability of the firm. On it helps to face financial risks and possibly strengthen solvency and position of the company.

STATEMENT OF THE PROBLEM

Performance appraisal of an enterprise is very useful in providing relevant and meaningful and accurate information to the parties like managers, investors, Government employees, creditors and society. More modern business organizations are expected to contribute something to various segment of the society.The present study is related to ACC (formerly the Associated Cement Corporate limited) which is one of the private sector organization which runs with profit. When the most of the public sector organizations are functioning at loss, ACC (formerly the Associated Cement Corporate limited) is functioning with the sizable amount of profit.

It means a matter of pride that this organization has been operating with profit for long period. Therefore it is appropriate to make a study on the performance of ACC (formerly the Associated Cement Corporate limited). Hence the present study is an attempt to evaluate the operating and financial performance of ACC (formerly the Associated Cement Corporate limited).

NEED FOR THE STUDY

A firms success and its survival in the market depend upon the effective operating and 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 and long-term planning. Financial analysis is the process of identifying the financial strength and weakness of the firm. It is the only one way to measure the firms liquidity, solvency, profitability and efficiency.

OBJECTIVES OF THE STUDY

The following objectives are framed to study the operating and financial performance of ACC (formerly the Associated Cement Corporate limited) in India.

1. To analyze the financial statements of ACC (formerly the Associated Cement Corporate limited) with respect to financial performance of liquidity and solvency.1. To measure the operating efficiency of the company using various turnover.1. To offer suggestion for improving the financial performance and operating performance of the company.

METHODOLOGY OF THE STUDY

Methodology of the study includes the methods used for collecting and analysis data.

a. Collection of dataThe study of financial performance of the enterprise necessitates accurate and reliable of data. Therefore, the methodology used for the collection of data is secondary data.

1. Secondary DataMajor emphasis for this study is given to the secondary data. It is taken from the published source of the company like the annual reports, magazines and the financial official records. The data were also collected from ACCs official website.

b. Data Analysis

All the collected data were processed and subdivided into convenient forms of tables to suit the study and for interpreting the results. Necessary statistical tools were used for drawing inferences in the tables.

c. Tools usedThe tools and techniques used to fulfill the objectives of the study are Ratio Analysis

LIMITATIONS OF THE STUDY

1. The reliability and accuracy of calculation depends very on the information found in the annual reports.1. The present study is restricted to ratio analysis of only.1. For five years and not an exhaustive one. The study period is restricted to five years, so it is impossible to assess the performance of the firm accurately and critically.

AREA OF THE PERIOD OF THE STUDY

All manufacturing units of ACC (formerly the Associated Cement Corporate limited) are taken up for study. The period of study is five years. i.e., from 20072008 to 2011-2012.

CHAPTER SCHEME

CHAPTER I

This chapter deals with the introduction, statement of the problems , needs objectives, methodology , limitation, area and chapter scheme.CHAPTER II

This chapter reveals with the Review of Literature.

CHAPTER III

This chapter deals with the profile of the company.

CHAPTER IV

This chapter deals with data analysis and interpretation.

CHAPTER V

This chapter findings, suggestions and conclusion.

CHAPTER IIREVIEW OF LITERATUREINTRODUCTIONThe ratio analysis is one of the most powerful tools of financial analysis. It is the process of establishing and interpreting various ratios (quantitative relationship between figures and groups of figures). It is with the help of ratios that the financial statements can be analyzed more clearly and decisions made form such analysis.The ratio refers to the numerical or quantitative relationship between two variables or items. A ratio is calculated by dividing one item of the relationship with the other. The ratio analysis is one of the most useful and common method of analyzing financial statements. The ratio analysis is one of the most powerful tools of financial analysis. It is the process of establishing and interpreting various ratios. It is with the help of ratios that the financial statements can be analyzed more clearly and decisions made from such analysis[footnoteRef:1]. [1: (E.Gordon, N.Jeyaram, N.Sundram, R.Jayachandran, 2005).]

Ratio analysis is one of the techniques of financial analysis where ratios are used as a yardstick for evaluating the financial condition and performance of a firm. Analysis and interpretation of various accounting ratios gives a skilled and experienced analyst, a better understanding of the financial condition and performance of the firm than what he could have obtained only through a perusal of financial statements[footnoteRef:2]. [2: (Dr. S.N.Maheshwari, 2007).]

MEANING OF RATIOA ratio is only a comparison of the numerator with the denominator. The term ratio refers to the numerical or quantitative relationship between two figures. A ratio is the relationship between two figures, and obtained by dividing the former by the latter. Ratios are designed to show how one number is related to another. It is worked out by dividing one number by another.Ratio analysis is an important and age old technique of financial analysis. The data given in financial statements, in absolute form, are dump and are unable to communicate anything. Ratios are relative form of financial data and very useful technique to check upon the efficiency of a firm. Some ratios indicate the trend or progress or downfall of the firm[footnoteRef:3]. [3: (R. S. N. Pillai and Bagavathi, 2000).]

A ratio is nothing but a simple arithmetical expression of the relationship of one number to another. It may be defined as the indicated quotient of two mathematical expressions. In simple language ratio is one number expressed in terms of another and can be worked out by dividing one number into the other[footnoteRef:4]. [4: (E. Gordon, N. Jeyaram, N.Sundram, R. Jayachandran, 2005).]

Ratios are relationships expressed in mathematical terms between figures which are connected with each other in some manner. Obviously, no purpose will be served by comparing two sets of figures which are not at all connected with each other.

Ratios can be expressed in two ways. Times: When one value is dividend 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 * 100 =80%

Accounting ratios are, mathematical relationship expressed between inter-connected accounting figures[footnoteRef:5]. [5: (Dr. S. N. Maheshwari, 2007). ]

A ratio is a simple arithmetical expression of the relationship of one number to another. In simple language ratio is one number expressed in terms of another and can be worked out by dividing one number into the other.For example, if the current assets of a firm on a given date are 5,00,000 and the current liabilities are Rs 2,50,000 then the ratio of current assets to current liabilities will work out to be 5,00,000/2,50,000 or 2. Such types of ratios are called simple or pure ratios[footnoteRef:6]. [6: (Manmohan and Shiv N. Goyal, 1987).]

DEFINITION OF RATIOSAccording to Accountants Handbook by Wixon, Kell and Bedford, a ratio is an expression of the quantitative relationship between two numbers.[footnoteRef:7] [7: (E. Gordon, N. Jeyaram, N.Sundram, R. Jayachandran, 2005).]

According to Kohler, a ratio is the relation, of the amount, a, to another, b, expressed as the ratio of a to b; a: b (a is to b); or as a simple fraction, integer, decimal, fraction or percentage.[footnoteRef:8] [8: (R. K. Sharma, 1992).]

Ratios can be defined as Relationships expressed in quantitative terms, between figures which have caused and effect relationships or which are connected with each other in some manner or the other[footnoteRef:9]. [9: (T. S. Reddy & Y. Hari Prasad, 2002)]

STEPS IN RATIO ANALYSISThe first task of the financial analyst is to select the information relevant to the decision under consideration from the statements and calculates appropriate ratios.The second step is to compare the calculated ratios of the same firm relating to past or with the industry ratios. This step facilitates in assessing success or failure of the firm.The third step involves interpretation, drawing of inferences and report-writing. Conclusions are drawn after comparison in the shape of report or recommended course of action[footnoteRef:10]. [10: (R. S. N. Pillai and Bagavathi, 2000 & R. K. Sharma, 1992).]

NATURE OF RATIO ANALYSISRatio analysis is a technique of financial statements. It is the process of establishing and interpreting various ratios for helping in making certain decisions. Ratio analysis is a powerful tool of financial analysis. In financial analysis, a ratio is used as an index or yardstick for evaluating the financial position and performance of a firm. However, ratio analysis is not an end in itself. It is only a means of better understanding of financial strengths and weaknesses of a firm. Analysis of financial statements is a process of evaluating relationship between component parts of financial statements to obtain a better understanding of the firms position and performance[footnoteRef:11]. [11: (R. S. N. Pillai and Bagavathi, 2000 & Manmohan and Shiv N. Goyal, 1987).]

USES AND SIGNIFICANCE OF RATIO ANALYSIS.1. Managerial Uses of Ratio Analysis.0. Helps in Decision-MakingFinancial statements are prepared primarily for decision-making. Ratio analysis helps in making decisions from the information provided in these financial statements.0. Helps in Financial Forecasting and PlanningRatio analysis is of much help in financial forecasting and planning. Planning is looking ahead and the ratios calculated for a number of years work as a guide for the future.0. Helps in CommunicatingThe financial strength and weakness of a firm are communicated in a more easy and understandable manner by the use of ratios. Thus, ratios help in communication and enhance the value of the value of the financial statements.0. Helps in Co-OrdinationBetter communication of efficiency and weakness of an enterprise results in better co-ordination in the enterprise.0. Helps in ControlRatio analysis even helps in making effective control of the business. The weaknesses or otherwise, if any, come to the knowledge of the management which helps in effective control of the business.

0. Other UsesThese are so many other uses of the ratio analysis. It is an essential part of the budgetary control and standard costing. Ratios are of immense importance in the analysis and interpretation of financial statements as they bring the strength or weakness of a firm.1. Utility to shareholders/InvestorsAn investor in the company will like to assess the financial position of the concern where he is going to invest. His first interest will be the security of his investment and then a return in the form of dividend or interest. Ratio analysis will be useful to the investor in making up his mind whether present financial position of up his mind whether present financial position of the concern warrants further investment or not.1. Utility to CreditorsThe creditors or suppliers extend short-term credit to the concern. They are interested to know whether financial position of the concern warrants their payments at a specified timer or not. Current and acid-test ratios will give an idea about the current financial position of the concern.

IV Utility to EmployeesThe employees are also interested in the financial position of the concern especially profitability. The employees make use of information available in financial statements.

V Utility to GovernmentGovernment is interested to know the overall strength of the industry. Government may base its future policies on the basis of industrial information available from various units. The ratios may be used as indicators of overall financial strength of public as well as private sector[footnoteRef:12]. [12: (E. Gordon, N. Jeyaram, N.Sundram, R. Jayachandran, 2005 & R. K. Sharma, 1992).]

IMPORTANCE OF RATIO ANALYSIS1. Aid to Measure General EfficiencyRatios enable the mass of accounting data to be summarized and simplified. They act as an index of the efficiency of the enterprise. As such they serve as an instrument of management control.1. Aid to Measure Finance Solvency.Ratios are useful tools in the hands of management and other concerned to evaluate the firms performance over a period of time be comparing the present ratio with the past ones. They point out firms liquidity position to meet its short term obligations and long term solvency.1. Aid in Forecasting And PlanningRatio analysis is an invaluable aid to management in the discharge of its basic function such as planning, forecasting, control etc. the ratios that are derived after analysing and scrutinizing the past result, helps the management to prepare budgets to formulate policies and to prepare the future plan of action etc.1. Facilitate Decision-MakingIt throws light on the degree of efficiency of the management and utilization of the assets and that is why it is called survey or of efficiency. They help management in decision-making.1. Aid in Corrective ActionRatio analysis provides inter firm comparison. They highlight the factors associated with successful and unsuccessful firms. If comparison shows an unfavorable variance, corrective actions can be initiated. Thus, it helps the management to take corrective action.

1. Aid in Intra Firm ComparisonIntra firm comparisons are facilitated. It is an instrument for diagnosis of financial health of an enterprise. It facilitates the management to know whether firms financial position is improving or deteriorating by setting a trend with the help of ratios.1. Act as a Good CommunicationRatios are an effective means of communication and play a vital role in informing the position of and progress made by the business concern to the owners and other interested parties. The communications by the use of simplified and summarized ratios are more easy and understandable.1. Evaluation of EfficiencyRatio analysis is an effective instrument which, when properly used, is useful to assess important characteristics of business liquidity. Solvency, profitability etc. a study of these aspects may enable conclusions to be drawn relating to capabilities of business.1. Effective ToolRatio analysis helps in making effective control of the business measuring performance, control of cost etc. effective control is the keynote of better management. Ratio ensures secrecy[footnoteRef:13]. [13: (R. S. N. Pillai and Bagavathi, 2000 & Manmohan and Shiv N. Goyal, 1987).]

LIMITATIONS OF RATIO ANALYSIS1. Lack of Adequate Standards.There are no well accepted standards or rules of thumb for all ratios which can be accepted as norms. It renders interpretation of the ratios difficult.1. Limited Use of a Single RatioA single ratio does not convey much of a sense. To make a better interpretation, a number of ratios have to be calculated with is likely to confuse the analyst.1. Window DressingWindow-dressing means manipulation of accounts in a way so as to conceal vital facts and present the statements in a way to show better position than what it actually is. By doing so, it is possible to cover up bad financial position. Therefore, ratios based on such figures are not reliable.1. Personal BiasRatios have to be interpreted and different people may interpret the same ratio in different ways. It clearly noted that ratios are only tools and the personal judgments of analyst are more important. The analyst has to carry further investigations and exercise his judgments in arriving at a correct diagnosis.LIMITATIONS OF ACCOUNTING RATIOSRatio analysis is based on financial statements which are themselves subject to limitations. Thus, ratios calculated on the figures given in the financial statements, also suffers from similar limitations.1. No Allowances for Price Level ChangesA change in the price level can seriously affect the validity of comparisons of ratios computed for different time periods. For instance, a firm which has purchased an asset at a lower price will show a higher return, than the firm which has purchased the asset at a higher price.

1. IncomparableNot only industries differ in their nature but also the firms of the similar business widely differ in their size and accounting procedures. It makes comparison of ratios difficult and misleading.1. Change of Accounting ProcedureComparison between two variables proves worth provided their basis of valuation is identical. But in reality, it is not possible, such as methods of valuation of stock or charging different methods of depreciation on fixed assets etc1. Qualitative Factors are IgnoredRatios are tools of quantitative analysis only and normally qualitative factors which may generally influence the conclusions derived are ignored while computing ratios. Therefore, it is very difficult to generalize whether a particular ratio is good or bad.1. Unsuitable for Forecasting Ratios indicate what has happened in the past. Since past is quite different from what is likely to happen in future, it is difficult to use ratios for forecasting purposes[footnoteRef:14]. [14: (R. S. N. Pillai and Bagavathi, 2000 & E. Gordon, N. Jeyaram, N.Sundram, R. Jayachandran, 2005).).]

CLASSIFICATION OF RATIOFinancial ratios have been classified in several ways. A number of stand points may be used as base for classifying the ratios. It is a matter of great surprise that no uniformity has been achieved in this regard. Different authors have classified the ratios in varying groups.

1. Classification of Ratio by StatementsThe traditional classification is based on those statements from which information is obtained for calculating the ratios. The ratios are classified as follows.1. Return on Investment2. Return on Share Holders3. Funds4. Stock Turnover5. Debtors Turnover6. Fixed Assets Turnover7. Earnings per Share

1. Liquid Ratio2. Current Ratio3. Proprietary Ratio4. Debt equity Ratio5. Fixed assets Ratio6. Capital Gearing Ratio And etc..,

1. Gross Profit Ratio2. Operating Ratio3. Operating Profit Ratio4. Expense Ratio5. Net Profit Ratio, Etc..,

b)Classification by UsersThis classification is based on the parties who are interested in making the use of ratios.

Classificatio of Ratios by Users

RatiosForShareholders

RatiosForManagement

RatiosForCreditors

1 .Ratio on shareholders ,funds 2. payout ratio 3. Capital Gearing4. Dividend Cover,5. Dividend yield etc..,1. 1. Current Ratio2. 2. Solvency Ratio 3. 3. Debt Equity Ratio 4. 4. Creditors Turnover 5. 5. Fixed Assets Ratio 6. 6. Assets Cover7. 7. Interest Cover ,etc..,1. Operating Ratio 2. Return on investment3. Stock turnover 4. Debtors Turnover5. Debt Equity6. Fixed Assets turnover7. Creditors Turnover8. Net profit Turnover9. Long term liquidity10. short term liquidity11. working capital turnover and etc..,

c ) Classification by Relative Importance

This basis of classification of ratios has been recommended by the British Institute of Management. They are of two types.

II Classification of Ratio by Purpose/FunctionThis is a classification based on the purpose for which an analyst computer these ratios. The modern approach of classifying the ratios is according to purpose or object of analysis. Normally, ratios are used for the purpose of assessing the profitability and sound financial position. Thus, ratios according to the purpose are more meaningful. There can be several purposes which can be listed. For analysis, it is customary to group the purposes into broad headings. The following are the broad categories of accounting ratios form functional point of view[footnoteRef:15]: [15: (T.S.Reddy, Y.Hari Prasad Reddy,Cost & Management Accountancy (2002),Margham Publication,Chenai.17.( Page 13.4).]

ANALYSIS OF SHORT-TERM FINANCIAL POSITION (OR) TEST OF LIQUIDITYThe Short-term creditors of a company like suppliers of goods on credit and commercial banks providing short-term loans are primarily interested in knowing the companys ability to meet its current (or) short-term obligations as and when these become due. The short-term obligations of a firm can be met only when there are sufficient liquid assets.1. Liquidity Ratios1. Current Assets Movement (or) Efficiency Ratios(A)Liquidity RatioLiquidity refers to the ability of a firm to meet its current obligation as and when they become due.( i ) Current RatioCurrent ratio is the relationship current assets and current liabilities Current Ratio =

Current Assets include cash. Marketable securities, bills receivable, sundry debtors, inventories, work-in-progress etc.Current Liabilities are outstanding expenses, short-term advances, income tax payable, dividend payable etc.The current ratio of 2:1 is considered ideal that is for every one rupee of current liability there must be current assets of Rupees 2. If the ratio is less than 2 it may be difficult for a firm to pay current liability. If the ratio more than 2 it is indicated of idle funds.

(ii)Quick Ratio (or) Liquid Ratio (or) Acid- Test RatioQuick Ratio is also called as Acid Test Ratio because it is the acid test of a concerns financial soundness. It is the relationships between quick assets and quick liabilities Assets are those assets which are readily converted into cash. This indicates cash and bank balances, bills receivables, debtors, short-term investments. Quick liabilities indicate creditors, bills payable, outstanding expenses.Quick Ratio =

Quick Assets = Current Assets - StockQuick Liabilities = Current Liabilities - Bank over draft The quick ratio of 1:1 is usually considered to be good and satisfactory.1. Absolute liquid ratio (or) cash position RatioCash position ratio (or) Absolute liquidity ratio relates the sum of cash and Marketable securities to the total quick liabilities.Cash position Ratio =

This ratio is obtained by subtracting both the debtors and bills receivables from the quick assets and dividing the same by quick liabilities.A ratio of 0.75:1 is considered to be safe.

(A) Current Assets Movement (or) Efficiency / Activity RatiosFunds are invested in various assets in a business to make sales and earn profits. The efficiency with which assets are managed directly affect the volume of sales.(i) Debtors (or) receivables turnover ratio and Average collection period1. Debtors/ Receivable TurnoverDebtors turnover ratio indicates the velocity of debt- collection of a firm. But when the information about opening and closing balances of trade debtors and credit sale is not available then the debtors turnover ratio can be calculated by dividing the total sales by the balance of debtors.Debtors Turnover Ratio =

1. Average Collection period ratioThe average collection period represents the average number of days for which a firm has to wait before its receivables are converted into cashAverage collection period =

(ii) Fixed asset turnover ratioThis ratio measures the efficiency of the assets use. The efficient use of assets will generate greater sales per rupee invested in all the assets of concern.Fixed asset turnover ratio=

1. Working Capital Turnover RatioWorking capital turnover ratio indicates the velocity of the utilization of net working capital. This ratio represents the number of times the working capital is turnover in the course of a year.Working capital Turnover ratio =

ANALYSIS OF LONG-TERN FINANCIAL POSITION (OR) TEST OF SOLVENCYSolvency ratio assets the long-term financial condition of the firm. Bankers and creditors are most interested in liquidity. But share holders, debenture holders, and financial institutions are concerned with the long-term financial prospects. (i) Debt-Equity RatioThe debt equity ratio established. The relationship between share holders funds include all long-term and short-term debts while share capital, equity share capital and reserves and surplus.Debt equity ratio =

External Equity = long term debt+ current liabilitiesInternal equity = share capital + Reserves surplus

A debt equity ratio 1:1 is considered desirable (satisfactory). It gives an idea of the amount of capital supplied by the owner. It indicates the availability of assets to long-term creditors at the time of liquidation.(ii) Proprietary Ratio (or) Equity RatioThis ratio establishes the relationship between share- holders funds and total assets of the firm.Proprietary Ratio =

(iii) Solvency RatioThe ratio indicates the relationship between the total outsider liabilities to total assets of a firm.Solvency Ratio =

(iv) Fixed Assets to Net worth Ratio (or) Ratio fixed assets to proprietors

The ratio establishes the relationship between fixed assets and shareholders Funds.Fixed assets to net worth ratio =

(v) Interest coverage ratioThe ratio is very important from the lenders point of view. It indicates whether the business would earn sufficient profits to pay periodically the interest charges. The higher the number, the more secure the lender is in respect of his periodical interest income.Interest coverage ratio =

ANALYSIS OF PROFITABILITY (OR) PROFITABILITY RATIO1. General profitability ratios1. Expenses ratios: Expenses ratio indicates the relationship of various expenses to net sales. The operation ratio reveals the average total variations in expenses.Particular Expenses Ratio =

1. Net Profit RatioNet profit ratio establishes a relationship between net profit (after taxes) and sales and indicates the effiency of the management in manufacturing, selling, administrative and other activities of the firm.Net profit ratio =

OVER ALL PROFITABILITY RATIOS

1. Return on Share holders Investments(or) Net WorthReturn on shareholders funds is the relationship between net profits (after interest and Tax) and the propitiators funds.Return on Shareholders Investment =

1. Earnings per share (EPS): Earnings per share is an important concepts in measuring the shareholders benefits derived from the company. It si also useful to analyze the companies efficiency among others in market.EPS =

BALANCE SHEET RATIOS1. Current Assets to proprietors Fund RatioIt shows the relationship between current assets and shareholders funds. The purpose of this to calculate the percentage of share holders fund invested in current assets.

2. Capital Gearing RatioThe term capital Gearing or Leverage normally refers to the proportion between the fixed interest (or) dividend bearing funds and non-fixed interest (or) dividend bearing funds. The formula includes funds supplied by debenture holders and preference share holders and the letter includes equity share holders fund and reserve and surplus.

3. Reserves to equity Share Capital RatioIt reveals the policy pursued by the company with regard to growth and distribution of dividends.

4. Return of AssetsThis ratio is calculated to measure the assets to ascertain whether assets are being utilized properly or not.X 100

5. Return on capital employed This ratio is an indicator of the earning capacity of the capital employed in the business. This ratio is considered to be the most important ratio because it reflects the overall efficiency with which capital is used. It is helpful tool for makig capital budgeting decision.

Share holders Fund+ Long-term Loans Capital employed =(or) Total Assets Current Liabilities

TURNOVER RATIOS1. Sales to capital Employed RatioThis ratio shows the efficiency of capital employed in the business by computing how many times capital employed is turned over in a stated period.

2. Total Assets turnover RatioThis ratio is calculated by dividing the net sales by the value of total assets.

FINANCIAL RATIO1. Ratio of Inventory to working capital In order to ascertain that there is no overstocking, the ratio at inventory to working capital should be calculated.

Working Capital = Current Assets Current Liabilities.

2. Fixed Assets RatioThis ratio explains whether the firm has raised adequate long term funds to meet its fixed assets requirements.

3. Ratio of current assets to fixed assetsThis ratio establishes the relationship between the current assets and fixed assets[footnoteRef:16]. [16: [Shashi.K Gupta and R.K. sharma(2002), saravanavel.P(1981), R.S.V Pillai and Bagavathi (1996), S.P Jain and K.L. Narang(2000).]]

REVIEW OF PREVIOUS STUDIESGale has examined the effect of market share on the rate of return of selected firms operating in different market environment using data of 106 firms. He found that high market share is associated with high rate of return and that the effect of share on profitability depends on other firm and industry characteristics such as degree of concentration and rate of growth in the industries in which the firm computer and on the absolute size of the firm. He also found that the relation between rate of return on equity and the equity to capital ratio (a measure of risk in an inter-industry sample of firms ) to be positive and significant[footnoteRef:17]. [17: [Gale, B.T., Market share and rate of return, the review of economical statistical vol.IV, No.4 November]]

Jain, D.C, has analyzed the financial statements of cement companies in India. The study revealed by and large that their financial performance was satisfactory, on the basis of ratio analysis made[footnoteRef:18]. [18: [Jain, D.C Analysis of financial statement in Cement Companies in India,Rajasthan University Jaipur, 1967].]

Ghosh T.p and Roy .M.M have analyzed in their, study to see how for the liquidity of the firm is influenced by the economy and industry. Liquidity characteristics have been chosen for replication of the model used elsewhere to judge the industry and economy influence. Liquidity characteristics are judged in terms of current ratio, since it is widely accepted tool of measuring liquidity. Industry and economy influence on firms liquidity characteristics are statistically significant although not dominating. It seems better to develop industry average and economy average for comparing firms financial characteristics instead of comparing simply with the industry average[footnoteRef:19]. [19: [Ghosh T.P and Roy .M.M: The Industry and secondary influence on firms liquidity a case study of cement industry October, Lok Udyog, 1977].]

Gupta has carried out a study on corporate sickness using financial ratios.He has taken a sample from textile industry and tried to extend it to non-textile units as well. Fifty-Six ratios, classified into two broad categories of profitability ratios and balance sheet ratios were tested. A sample of non-parametric test for measuring the relative differentiating power of the various financial ratios was used.Rao and sarma Applied multiple discriminant analysis to a sample of 60 textiles firms comprising 30 failed and 30 non-failed firms. The discriminant function found to be efficient include 5 financial ratios which were net worth to total assets, debts to turnover, working capital to total assets, retained earnings to total assets earnings before interest and taxes to total assets.

Kaveri (1980) Selected a sample of 254 small units comprising of good, regular and sick unit which has an investment of upto 375 lakhs. Twenty-two ratios were considered for indentify the healthy of small-scale industries of these only five significant ratios were selected on the basis of t-test. The five ratios are the current ratio, stock/cost of good sold, current assets/Net sales. Net profit before taxes/total capital employed and net worth/total outside liabilities. The multiple discriminate analysis technique was applied to assign units in the sample to one of the group viz. good, regular and sick. Accuracy of predication was found to be 76 per cent in the initial sample and 69 per cent in the hold out sample for year before the event.Srivastave (1981) used a combination of operational, technical and financial paramenters to discriminate between the sick and healthy units. He developed a linear discriminant function comprising seven ratio parameters. A computer model was built up by using these financial ratios and the predictive accuracy of the model was computed. The misclassification error was 15% which was reduced to 10 per cent five financial ratios were used. In continuation of the above study. Srivasutava (1985) developed and MDA model to determine the effectiveness of working capital management so that the current operational practices in formulating the policies of working capital managementKanna and Subramainana have studies 10 units in the cement industry to analyze liquidity. Profitability, finance structure and over all performance. They used ration analysis and merit rating to arrive at valid conclusion. They found the financial structure of the industry had declined over the years. Non-availability of funds had affected. Modernization of plants and periodic rehabitation of kiln[footnoteRef:20]. [20: [Kanna and Subramanian, financial performance and the cement industry, large and medium, 1972-1979 march. Yojana-1981].]

P.C Chamoli, has attempted to assess the capital structure pattern of cement industry in both private and public sector. It also makes a comparison of observed ratios by debt-equity with established norms it identifies the factors responsible for the difference between them. It is suggested that if the financial function of the industry is to be made self propelling the gear as well as the pay- out ratios are to be pushed up by financing future expansion with the help of long term debt and not with the help of addition to equity. General reserves should be used to raise dividend on ordinary shares[footnoteRef:21]. [21: [P.C. Chamoli, A panorama of capital structure planning of Indian Cement Industry, Lok. Udyog, Dec 198, p.23]s]

Pondey (1990) attempted to study the following: (a) Indian evidences and empirical-based classification of financial ratios, (b) To examine the intestemporal stability/ change. He selected 612 Indian companies belonging to 61 Manufacturing and processing industries; twenty ratios were computed for each of the above companies on applying the factor analysis, R factor analysis, correlation and percentage, mean, absolute deviations to the sample, ten factors were obtained representing liquidity, profitability, activity and Leverage.Nix cast doubt on the generality of MC Donald and Morris results over time, over ratios and over industries. Similar results was obtained for finish data in perttunen and Martikainen (1989) and for Spanish data by Garcia-Ayuso (1994). By comparing value and equal weighted aggregate financial ratios MC leay and Fields end (1987) fine evidence based on samples of French firms that the departure form proportionality varies from ratio to ratio, from size class to size class and from sector to sector.Chawla in his study focused in several segment of banks, financial statements to provide an assessment of the financial health of different bank groups. The study was based on an analsis of financial and related data available in the annual reports of banks and the reserve bank of India publication. The study covered a period of twenty years from 1969 to 1989.

N. Chandresekaran has made an attempt to examination determinants of profitability in cement industry. Profitability is determined by structural as well as behavioral variables. The other variables, which influence profitability, are growth of the firm, capital turnover ratio etc. the some of the main changes in the cement industry environment during 1980s are from complete control to decontrol, number of new entrants and substantial addition of capacity, changing technology from inefficient wet process to efficiency dry process and from condition of scarcity of cement to near gloat in the market. The companies were involving aggressive marketing strategies[footnoteRef:22]. [22: [N. Chandrasekaran, Determinants of profitability in cement industry, - cement industry. Vol.20. No.4 Oct-Dec 1993]]

Martikainen, Perltunen and yli-olli report deviations from proportionality in the E/P Ratio, Introduced financial ratios can be extended to include market based data. We concentrate mainly on pure financial ratios with both the num rate and the denominator originating from the income statement and / or the balance sheet. Never the less concomitant research has been presented with market based ratios.

CHAPTER - IIIPROFILE OF THE COMPANYTHE ASSOCIATED CEMENT COMPANIES LIMITEDACC (ACC Limited) is India's foremost manufacturer of cement and concrete. ACC's operations are spread throughout the country with 16 modern cement factories, more than 40 Ready mix concrete plants, 21 sales offices, and several zonal offices. It has a workforce of about 9,000 persons and a countrywide distribution network of over 9,000 dealers.Since inception in 1936, the company has been a trendsetter and important benchmark for the cement industry in many areas of cement and concrete technology. ACC has a unique track record of innovative research, product development and specialized consultancy services. The company's various manufacturing units are backed by a central technology support services centre - the only one of its kind in the Indian cement industry.ACC has rich experience in mining, being the largest user of limestone. As the largest cement producer in India, it is one of the biggest customers of the domestic coal industry, of Indian Railways, and a considerable user of the countrys road transport network services for inward and outward movement of materials and products.Among the first companies in India to include commitment to environmental protection as one of its corporate objectives, the company installed sophisticated pollution control equipment as far back as 1966, long before pollution control laws came into existence. Today each of its cement plants has state-of-the art pollution control equipment and devices. ACC plants, mines and townships visibly demonstrate successful endeavours in quarry rehabilitation, water management techniques and greening activities. The company actively promotes the use of alternative fuels and raw materials and offers total solutions for waste management including testing, suggestions for reuse, recycling and co-processing. ACC has taken purposeful steps in knowledge building. We run two institutes that offer professional technical courses for engineering graduates and diploma holders which are relevant to manufacturing sectors such as cement. The main beneficiaries are youth from remote and backward areas of the country.ACC has made significant contributions to the nation building process by way of quality products, services and sharing expertise. Its commitment to sustainable development, its high ethical standards in business dealings and its on-going efforts in community welfare program have won it acclaim as a responsible corporate citizen. ACCs brand name is synonymous with cement and enjoys a high level of equity in the Indian market. It is the only cement company that figures in the list of Consumer Super Brands of India.

MILESTONES:

2007ACC partners with Christian Medical College for treatment of HIV/AIDS in Tamil Nadu

2007Sumant Moolgaokar Technical Institute completes 50 years and reopens with new curriculum

2008Ready mixed concrete business hived off to a new subsidiary called ACC Concrete Limited.

2008ACC Cement Technology Institute formally inaugurated at Jamul on July 7.

2008First Sustainable Development Report released on June 5.

2008ACC wins CNBC-TV18 India Business Leader Award in the category India Corporate Citizen of the year 2008

2008Project Orchid launched to transform our Corporate Office, Cement House into a green building.

2009ACC received the Jamanalal Bajaj "Uchit Vyavahar Puraskar" of Council for Fair Business Practices.

2009ACC is allotted coal blocks in Madhya Pradesh and West Bengal.

2009ACC's new Grinding plant of capacity 1.60 million tonnes inaugurated at Thondebhavi in Karnataka.

2010Kudithini Cement Grinding Plant inaugurated in Karnataka on January 4, 2010 with a capacity of 1.1 MTPA of Portland Slag Cement.

2010ACC acquires 100 percent of the financial equity of Encore Cements & Additives Private Limited which is a slag grinding plant in Vishakhapatnam in coastal Andhra Pradesh. This company became a wholly-owned subsidiary of ACC in January 2010.

2011ACC enters its platinum jubilee year - the first company in the cement industry to achieve this status

2011ACC receives FICCI Award for Outstanding Corporate Vision Triple Impact Business Performance Social & Environmental Action & Globalisation for 2009-10 - a unique award received for the first time

2012World's largest kiln installed at ACC Cement Plant, Wadi, Karnataka with a capacity of 12,500 tonnes per day creating new landmarks for cement industry

2012Central Control Room Building at ACC Chanda Plant, Maharashtra set up as a Green building, the first of its kind in an industrial environment

CHAPTER IVDATA ANALYSIS AND INTERPRETATION

ANALYSIS AND INTERPRETATION OF DATA

Analyzing survey data is an important and exciting step in the survey process. Data analysis and interpretation is the process of assigning meaning to the collected information and determining the conclusions, significance , and implications of the findings. The steps involved in data analysis are a function of the type of information collected ; however returning to the purpose of the assessment and the assessment questions will provide a structure for the organization of the data and a focus for the analysis.The analysis of numerical (quantitative) data is represented is mathematical terms. The most common statistical terms include:

FREQUENCY TABLES:Frequency tables are another form of basic analyses. These tables show the possible responses , the total number of respondents for each part, and the percentage of respondents who selected each answer. Frequency tables are useful when a large number of response options are available, of the differences between the percentages of each option are small. In most cases, pie or bar charts are easier or work with than frequency tables .

4.1. LIQUIDITY RATIO:4.1.1. CURRENT RATIO:Current Assets Current Ratio = Current liabilities

TABLE 4.1.1

YEARCURRENT ASSETS(Rupees in corers)CURRENT LIABILITIES(Rupees in corers)RATIO

2007-20082,203.042,058.501.07

2008-20092,735.202,741.200.99

2009-20102,294.473,152.220.72

2010-20112,753.353,746.420.73

2011-20123,617.943,664.380.98

Source: Secondary Data

As per the Table 4.1.1 the current ratio shows a declining trend during the period of study. This is mainly due to the fact that the current liability and provisions have been increasing every year. The ideal ratio (2:1) has not been achieved during any period under study. Hence, it could be concluded that the liquidity position is far from satisfactory. It was highest in the year 2007-2008(1.07). The lowest current ratio was in the year 2009-2010(0.72).

DIAGRAM NO 4.1.1CURRENT RATIO

4.1.2. QUICK RAIO (OR) ACID TEST RATIO

Liquid AssetsQuick Ratio = Liquid Liabilities

TALE 4.1.2

YEARLIQUID ASSETS(Rupees in corers)LIQUID LIABILITIES(Rupees in corers)RATIO

2007-20081051.641,392.230.76

2008-20091315.081,777.360.74

2009-2010961.072,060.340.46

2010-20111,314.432,093.960.62

2011-20121,927.982,610.360.73

Source: Secondary DataThe ideal quick ratio is 1:1. As per the table 4.1.2 the quick ratio during the period has been showing a increase trend, but it is less than the ideal ratio. Quick paying ability position is comparably increasing doing the study period. The highest was in the year 2007-2008 (0.76).the lowest was in the year 2009-2010 (0.46)

DIAGRAM NO 4.1.2

QUICK RAIO (OR) ACID TEST RATIO

4.1.3 ABSOLUTE LIQUID RATIO:

Absolute Liquate AssetsAbsolute Liquid Ratio =Absolute Liquate Liabilities

TABLE 4.1.3

YEARABSOLUTE LIQUATE ASSETS(Rupees in corers)ABSOLUTE LIQUATE LIABILITIES(Rupees in corers)RATIO

2007-2008743.481392.230.53

2008-2009984.241777.360.55

2009-2010746.382060.340.36

2010-20111080.032093.960.51

2011-20121652.562610.360.63

Source: Secondary Data

The absolute liquid ratio is 0.75:1 is considered to be ideal. As per the table 4.1.3 shows that cash position ratio is lower than 0.75. So it is worsen during the period under study. Cash plus marketable securities as per the ratios are not adequate to meet the immediate obligations. It was highest in the year 2011-2012(0.63). The lowest was in the year 2009-2010 (0.36).

DIAGREAM NO: 4.1.3

4.2. ACTIVITY RATIO4.2.4 DEBTORS TURN OVER SalesDebtors Turn Over =Debtors

TABLE-4.2.4

YEARSALES(Rupees In Corers)DEBTORS(Rupees In Corers)TIMES

2007-20087,141.62289.2924.68

2008-20097.888.60310.1725.43

2009-20108,648.11203.7042.45

2010-20118,521.47178.2847.79

2011-201210,012.33260.4138.44

Source: Secondary DataAs per the table 4.2.4 the debtors turnover ratio have been increasing over the years 2007-08 to 2011-12 (24.68 38.44) and declining from the year 2011-2012. The highest ratio was in the year 2010-2011(47.79).the lowest ratio was in the year 2007-2008 (24.68).

DIAGRAM -4.2.4DEBTORS TURN OVER RATIO

4.2.5 AVERAGE COLLECTION PERIOD: No of Working DaysAverage Collection Period = Debtors Turn Over

TABLE 4.2.5

YEARNO OF WORKING DAYSDEBTORS TURN OVER(TIMES)AVERAGECOLLECTION PERIOED

2007-200836524.6815 days

2008-200936525.4314 days

2009-201036542.459 days

2010-201136547.798 days

2011-201236538.449 days

Source: Secondary DataAs per the table 4.2.5 shows that average collection period is high during 2007 - 2008. Subsequently the ratio showed a declined trend. During 2011-2012 it is low at 9 days.

DIAGREM 4.2.5

4.2.6 FIXED ASSETS TURN OVER:

Net SalesFixed Assets Turn Over = Fixed assets

TABLE 4.2.6

YEARNET SALES(Rupees In Corers)FIXED ASSETS(Rupees In Corers)TIMES

2007-20087,141.623,964.001.80

2008-20097,888.605,073.001.55

2009-20108,648.116,315.001.36

2010-20118,521.476,645.001.28

2011-201210,012.336,643.001.50

Source: Secondary Data

As per the table 4.2.6 the fixed assets turnover has been showing a declined trend. Which is not a healthy sign for the company. This is because the higher ratio betters the effective utilization of assets in 2012. The ratio is 1.50 only through better than previous year. It ought to be increased.

DIAGREM 4.2.6

FIXED ASSETS TURN OVER

4.2.7 INVENTORY TURN OVER RATIO:

Net SalesInventory Turnover Ratio = Inventory

TABLE 4.2.7

YEARNET SALES(Rupees In Corers)INVENTORY(Rupees In Corers)TIMES

2007-20087,141.62730.869.77

2008-20097,888.60793.279.94

2009-20108,648.11778.9811.09

2010-20118,521.47914.989.31

2011-201210,012.331,099.709.10

Source: Secondary Data

As per the table 4.2.7 inventory turnover ratio indicates the number of times the stock has been turned over during the study. The highest inventory turnover in the year 2009-2010 (11.09 times), lowest inventory turnover in the year 2011-2012 (9.10 times). This ratio fluctuates during the study.

DIAGREM 4.2.7

4.2.8 TOTAL ASSETS TURNOVER RATIO:

Net SalesTotal Assets Turnover Ratio = Total Assets

TABLE 4.2.8

YEARNET SALES(Rupees In Corers)TOTAL ASSETS(Rupees In Corers)TIMES

2007-20087,141.624,953.261.44

2008-20097,888.605,745.551.37

2009-20108,648.116,932.391.25

2010-20118,521.477,354.841.16

2011-201210,012.338,221.361.22

Source: Secondary Data

As per the table 4.2.8 the total assets turnover ratio is lowest (1.16) in the year 2010-2011. During the year 2011-2012(1.22) there has been increasing in the total assets turnover. The ratio has been higher in 2007-2008(1.44) and fluctuated every year during the study period.

DIAGREM 4.2.8

TOTAL ASSETS TURNOVER RATIO

4.2.9 SALES TO CAPITAL EMPLOYED RATIO:

Net SalesSales to Capital Employed Ratio = Capital Employed

TABLE: 4.2.9

YEARNET SALES(Rupees In Corers)CAPITAL EMPLOYED(Rupees In Corers)TIMES

2007-20087,141.624,791.001.49

2008-20097,888.605,746.001.37

2009-20108,648.116,932.001.24

2010-20118,521.477,355.001.22

2011-201210,012.338,221.001.21

Source: Secondary Data

As per the table 4.2.9 the sales to capital employed ratio had been a declined trend from the year 2008-2009 (1.37) to 2011-2012 (1.21). The ratio is higher in the year 2007-2008 (1.49) lowest in the year 2011-2012(1.21).

DIAGREAM 4.2.9

SALES TO CAPITAL EMPLOYED RATIO

4.3 LEVERAGE RATIO:

4.3.10 DEBT EQUITY RATIO:External Equities Debt Equity Ratio = Internal Equities

TABLE 4.3.10

YEAREXTERNAL EQUITIES(Rupees In Corers)INTERNAL EQUITIES (Rupees In Corers)RATIO

2007-2008289.29187.951.54

2008-2009310.17187.951.65

2009-2010203.70187.951.08

2010-2011178.28187.950.95

2011-2012260.41187.951.38

Source: Secondary Data

As per the table - 4.3.10 the ideal debt equity ratio is 2:1 and in case of this company, it is not anywhere in near ideal ratio. For instance in 2010-2011, it is low at 0.95:1 and the company is not benefiting from trading on equity that is utilizing debtors money for the benefiter equity share holders.

DIAGEAM NO 4.3.10

4.3.11 DEBT ASSETS RATIO:

Total DebtsDebt Assets Ratio = Total Assets

TABLE 4.3.11

YEARTOTAL DEBTS(Rupees In Corers)TOTAL ASSETS(Rupees In Corers)RATIO

2007-2008289.294,953.260.06

2008-2009310.175,745.550.05

2009-2010203.706,932.390.03

2010-2011178.287,354.840.02

2011-2012260.418,221.360.03

Source: Secondary Data

As per the table 4.3.11 the debt assets ratio shows the declining trend from the year 2008-2009 (0.05) to 2010-2011 (0.02). This ratio is higher in the year 2007-2008(0.06) lowest in the year 2010-2011(0.02)

DIAGRAM NO 4.3.11

4.3.12 PROPRIETOR RATIO:

Share Holders FundsProprietor Ratio = Total Assets

TABLE 4.3.12

YEARSHARE HOLDERS FUNDS(Rupees In Corers)TOTAL ASSETS(Rupees In Corers)RATIO

2007-20084,152.714,953.260.83

2008-20094,927.735,745.550.85

2009-20106,016.226,932.390.86

2010-20116,469.497,354.840.88

2011-20127,192.278,221.360.87

Source: Secondary Data

As per the table 4.3.12 the proprietor ratio has declined by (0. 87) (2011-2012) from 0.88 (2010-2011). This ratio has grown every year from 2007 to 2010. It was highest in the year 2007-2008(0.83) and lowest in the year 0.83 (2007-2008) .

DIAGEAM NO 4.3.12

PROPRIETOR RATIO

4.3.13. RESERVE TO EQUITY SHARE CAPITL RATIO:

Revenue ReserveReserve to Equity Share Capital Ratio = Capital Employed

TABLE 4.3.13

YEARREVENU RESERVE(Rupees In Corers)CAPITAL EMPLOYED(Rupees In Corers)RATIO

2007-20083,964.784,7910.83

2008-20094,739.855,7460.82

2009-20105,828.206,9320.84

2010-20116,281.547,3550.85

2011-20127,004.328,2210.85

Source: Secondary Data

As per the table 4.3.13 shows the reserve to equity share capital that increased during the period. It increased the year 2010-2011(0.85) and the year 2009-2010 (0.84), it was decreased to 1% by 2009. This ratio was the lowest in the year 2008-2009(0.82) and highest in the year 2010-11 and 2011-12 (0.85).

DIAGEAM NO 4.3.13RESERVE TO EQUITY SHARE CAPITAL RATIO

4.4 PROFITABILITY RATIO

4.4.14 OPERATING RATIO: Operating profitOperating Ratio = 100Sales

TABLE 4.4.14

YEAROPERATING PROFIT(rupees in corers)SALES(rupees in corers)PERCE NTAGE(%)

2007-20082,005.357,141.6228

2008-20091,831.327.888.6023

2009-20102,630.838,648.1130

2010-20111,803.228,521.4721

2011-20121,864.3110,012.3319

Source: Secondary Data As per table 4.4.14 the operating ratio is lowest (19%) in the year 2011-2012, during the year 2009-2010 (30%) there has been increasing in the operating profit. The ratio has been higher in 2009-2010(30%) and fluctuated every year during the period under study.

DIAGEAM NO - 4.4.14OPERATING PROFIT

4.4.15. GROSS PROFIT

Gross profitGross profit = 100 Net sales

TABLE - 4.4.15

YEARGROSS PROFIT(Rupees in corers)SALES(Rupees in corers)PERCENTAGE(%)

2007-20082,103.097,441.6228

2008-20091,942.767,888.6024

2009-20102,708.138648.1131

2010-20111,901.068,521.4722

2011-20122,055.3210,012.3320

Source: Secondary DataAs per table 4.4.15 the gross profit was declined by 22% (2010-2011) from 31% (2009-2010) and fluctuated every year. The gross profit is the lowest (21%) in the year 2011 and higher (31%) in the year. This ratio indicates the degree to which the selling price of goods per unit may decline without resulting in losses from operations to the firm and it also helps in ascertaining whether the average percentage of mark up on the goods is to be maintained.

DIAGEAM NO 4.4.15

4.4.16 NET PROFIT RATIO:

Net ProfitNet Profit Ratio = 100 Sales

TABLE-4.4.16YEARNET PROFIT(rupees in corers) SALES(rupees in corers)PERCENTAGE%

2007-20081,217.687,141.6217

2008-20091,099.627,888.6014

2009-20101,563.858,648.1118

2010-20111,074.058,521.4712

2011-20121,289.8410,012.33 13

Source: Secondary Data As per the table 4.4.16 the net profit ratio is fluctuated every year, this ratio is declined to by 14% (2008-2009) from 17% (2007-2008). Next year, it was increased as 18 %( 2009-2010) from 14 % (2008-2009). The ratio has been higher in 2009-2010(18%) and lowest in 2010-2011 (12%). An increase in the ratio over the previous period indicates improvement in the operational efficiency of the business provided the net profit ratio is constant.

DIAGEAM NO - 4.4.16NET PROFIT RATIO

4.4.17 PAYOUT RATIO:Dividend per equity sharePay Out Ratio = 100Earning per equity share

TABLE 4.4.17

YEARDIVIDEND PER EQUITY SHARE(Rupees In Cores)EARNING PER EQUITY SHARE(Rupees In Cores)PERCENTAGE(%)

2007-200820.0076.7526

2008-200920.0064.6331

2009-201023.0085.6027

2010-201130.5059.6651

2011-201228.0070.5940

Source: Secondary DataAs per the table 4.4.17 the payout ratio is fluctuated every year during the period of under study. The ratio is lowest (26%) in the year 2007-2008 and higher (51%) in 2010-2011. The payout ratio is indicator of the earnings that has been ploughed back in the business. The lower the payout ratio , the higher will be the amount of earnings ploughed back in the business. A lower payout ratio or a higher retained earnings ratio means a strong financial position of the company.

DIAGEAM NO 4.4.17PAY OUT RATIO

4.4.18 RETURN ON ASSETS:Net Profit after TaxReturn on Assets = 100Total tangible Assets

TABLE -4.4.18

YEARNET PROFIT(Rupees In Corers)TANGIABLE ASSETS(Rupees In Corers)PERCENTAGE(%)

2007-20081,217.684,953.0025

2008-20091,099.625,745.5514

2009-20101,563.856,932.3923

2010-20111,074.057,354.8414

2011-20121,289.848,221.3616

Source: Secondary DataAs per the table 4.4.18 return on the assets is fluctuating every year, maximum return came in the year 2007-2008(25%) and minimum return came in the year 2008-2009 and 2010-2011 (14%).

DIAGEAM NO 4.4.18RETURN ON ASSETS

4.4.19 RETURNS ON CAPITAL EMPLOYED:Net Profit +Interest + TaxReturn on Capital Employed = 100Capital Employed

TABLE 4.4.19

Source: Secondary Data

YEARNET PROFIT BEFORE INTEREST AND TAX(Rupees in Corers)CAPITAL EMPLOYED(Rupees in Corers)PERCENTAGE(%)

2007-20081,9304,79140

2008-20091,7375,74630

2009-20102,2946,93233

2010-20111,4617,35520

2011-20121,540 8,22119

As per the table 4.4.19 shows return on capital employed. Return on capital employed has been higher in the year 2007-2008(40%) and lowest in the year 2011-2012(19%). This ratio decreased as 30% (2008-2009) from 40% (2007-2008). Next year, it increased as 33% (2009-2010) from 30% (2008-2009) and declined from the year 2010-2011 (20%) till 2011-2012(19%).

DIAGEAM NO 4.4.19RETURNS ON CAPITAL EMPLOYED

4.4.20 RETURN ON SHARE HOLDERS FUNDSNet Profit after TaxReturn on Share Holders Funds = 100 Share Holders Funds

TABLE 4.4.20

Source: Secondary DataYEARNET PROFIT AFTER TAX(Rupees In Corers)SHARE HOLDERS FUNDS(Rupees In Corers)PERCENTAGE(%)

2007-20081,4394,152.7135

2008-20091,2134,927.7325

2009-20101,6076,016.2227

2010-20111,1206,469.4917

2011-20121,3257,192.2718

As per the table 4.4.20 the return on share holders funds have been fluctuated every year. It was lowest in the year 2010-2011(17%) and higher in the year 2007-2008 (35%). This ratio had 10% vary between 2008- 2009(25%) and 2009-2010 (27%). 1% increased in the year 2011-2012 (18%).

DIAGEAM NO 4.4.20RETURN ON SHARE HOLDERS FUNDS

4.4.21 OVERALL PROFITABLE RATIO (OR) RETURN ON INVESTMENT: Operating profitOverall Profitable Ratio (Or) Return on Investment =100 Capital employed

TABLE 4.4.21

YEAROPERATING PROFIT(Rupees In Corers)CAPITAL EMPLOYED(Rupees In Corers)PERCENTAGE (%)

2007-20081,9934,79142

2008-20091,8995,74633

2009-20102,6446,93238

2010-20111,8127,35525

2011-20121,9218,22123

Source From: Secondery Data

As per the table - -4.4.21 shows the over all profitability ratio during the period had been declined trrend in the year 2010-2011(25%)and 2011-2012 (23%). This ratio was lowest in the year 2011-2012(23%), higher in the year 2007-2008 (42%). It indicates the percentage of return on the total capital employed in the business.

DIAGEAM NO 4.4.21OVERALL PROFITABLE RATIO (OR) RETURN ON INVESTMENT

CHAPTER V

FINDINGS, SUGGESTIONS AND CONCLUSION

The current ratio shows a declining trend during the period of study. This is mainly due to the fact that the current liability and provisions have been increasing every year. The ideal ratio (2:1) has not been achieved during any period under study. Hence, it could be concluded that the liquidity position is far from satisfactory. It was highest in the year 2007-2008(1.07). The lowest current ratio was in the year 2009-2010(0.72).

The quick ratio during the period has been showing a trend, but it is less than the ideal ratio. Quick paying ability position is comparably higher. The highest was in the year 2007-2008 (0.76).the lowest was in the year 2009-2010 (0.46).

The cash position ratio is lower than 0.75.1 so it is worse during the period under study. Cash plus marketable securities as per the ratios are not adequate to meet the immediate obligations. It was highest in the year 2011-2012(0.63). The lowest was in the year 2009-2010(0.36).

The debtors turnover ratio have been increasing over the years 2007-2008 to 2010-2011 (24.68-47.79) and declining from the year 2011-2012. The highest ratio was in the year 2010-2011(47.79). the lowest ratio was in the year 2007-2008(24.68).

Average collection period is high during 2007- 2008. Subsequently the ratio showed a declined trend. During-2011-2012 it is low at 9 days.

Fixed assets turnover has been showing a declined trend. This is not a healthy sign for the company. This is because the higher ratio betters the effective utilization of assets 2011-2012. The ratio is 1.50 only through better than previous year. It ought to be increased .

Inventory turnover ratio indicates the number of times the stock has been turned over during the study. The highest inventory turnover in the year 2009-2010 (11.09) times, lowest inventory in the year2011-2012 (9.10). This ratio fluctuates during study.

The total assets turnover ratio is lowest (1.16) in the year 2010-2011. During the year 2011-2012(1.22) there has been increasing in the total assets turnover. The ratio has been higher in 2007-2008(1.44) and fluctuated every year during the study period.

The sales to capital employed ratio had been a declined trend from the year 2008-2009 (1.37) to 2011-2012 (1.21). The ratio is higher in the year 2007-2008 (1.49) lowest in the year 2011-2012 (1.21).

The ideal debt equity ratio is 2:1 it is not near ideal the ratio. For instance in 2010-2011 ,it is low at 0.95.1 and the company is not benefiting from trading on equity that is utilizing debtors money for the benefit equity share holders.

The debt assets ratio shows the declining trend from the 2008-2009 (0.05) to 2010-2011 (0.02). This ratio is higher in the year 2007-2008 (0.06) lowest in the year 2010-2011 (0.02).

The proprietor ratio has declined by 2011-2012 (0.87) from 2010-2011 (0.88). This ratio has grown every year from 2007-2008 to 2010-2011. It was highest in the 2007-2008 (0.83) and lowest in the year 2007-2008 (0.83).

The reserve to equity share capital that increased during the period. It increased to the year 2010-2011 (0.85) and 2009-2010 (0.084), it was decreased by 2008-2009. This ratio was the lowest in the year 2008-2009 (0.82) and highest in the year 2011-2012 (0.85).

The operating ratio is lowest (19%) in the year 2011, during the year 2009-2010 (30%) there has been increasing in the operating profit . The ratio has been higher in 2009-2010 (30%) and fluctuated every year during the period under study

The gross profit was declined by 22% (2010-2011) from 31% (2009-2011) and fluctuated every year. The gross profit is the lowest (21%) in the year 2011-2012 and higher (31%) in the year. This ratio indicates the degree to which the selling price of goods per unit may decline without resulting in losses from operations to the from and it also helps in ascertaining whether the average percentage of mark up on the goods is to be maintained.

The net profit ratio is fluctuated every year, this ratio is declined to by 14% (2008-2009) from 17% (2007-2008). Next year it was increased as 18% (2009-2010) from 14% (2008-2009). The ratio has been higher in 2009-2010 (18%) and lowest in 2010-2011 (12%). An increase in ratio over the previous period indicates improvement in the operational efficiency of the business provided the net profit ratio constant.

The payout ratio is fluctuated every year during the period of under study. The ratio is lowest (26%) in the year 2007-2008 and higher (51%) in 2010-2011. The payout ratio is indicator of the amount earnings that has been ploughed back in the business. The lower the payout ratio, the higher will be the amount of earnings ploughed back in the business. A lower payout ratio or a higher retained earnings ratio means a strong financial position of the company.

Return on the assets is fluctuating every year, maximum return came in the year 2007-2008 (25%) and minimum return came in the year 2008-2009 and 2010-2011 (14%).

Return on capital employed. Return on capital employed has been higher in the year 2007-2008 (40%) and lowest in the year 2011-2012 (19%). This ratio decreased as 30% (2008-2009) from 40% (2007-2008). Next year, it increased as 33% (2009-2010) from 30%(2008-2009) and declined from the year 2010-2011 (20%) till 2011-2012(19%).

The return on share holders funds has been fluctuated every year. This year was lowest in the year 2010-2011(17%) and higher in the year 2007-2008 (35%). This ratio had 10% vary between 2008-2009 (25%) and 2009-2010 (27%). and 2011-2012(18%).

The over all profitability ratio during the period had been declined trend in the year 2010-2011 (25%) and 2011-2012 (23%). This ratio was lowest in the year 2011-2012 (23%), higher in the year 2007-2008 (42%). It indicates the percentage of return on the total capital employed in the business.

SUGGESTIONS

The above findings lead to make the following suggestions:

The company has to take effective measures to increase the current assets and decrease the current liabilities.

The management should take effective steps for optimum utilization of fixed assets.

The company should make necessary steps to reduce the borrowed capital and increase their equity capital.

The management must take necessary steps to adopt uniform policy relating to current asset and take effective losses. It is also advised to the management to reduce its secured loans and to improve to reserve and surplus.

The management should make use of services of the technical experts in reducing the cost production as for as possible to improve the profitability.

CONCLUSION

The overall financial performance of ACC (formerly the Associated Cement Corporate limited) is not effective with its sound financial position, financial performance should increase with effective manner. The company should increase the operating performance by improving the share value in the market. The company has to take effective measure to improve both the financial and operating performance.

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