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the business.
RESEARCH METHODOLOGY: Need for Fixed Asset Management: Fixed Assets play very important role in relating companys objectives the firms to which capital investment vested on Fixed Assets. These fixed assets are not convertible or not liquid able over a period of time the total owner funds and long-term liabilities are invested in fixed assets. Since fixed assets playing dominant role in total business the firms has realized the effective utilization of fixed assets. So ration contribution very much in analyzing and utilized properly it effects long term sustainability of the firms which may effect liquidity and solvency and profitability positions of the company. The idle of fixed assets lead a tremendous in financial cost and intangible coat associate to it. So there is need for the companies to evaluate fixed assets performance analysis time to time by comparing with previous performance, Comparison with similar company and comparison with industry standards. So choose a study to conduct on the fixed assets analysis of KESORAM CEMENT using ratio in comparison with previous year performance. The title of the project is analysis on Fixed Assets Management.
IMPORTANCE:
Fixed Assets are the assets, which cannot be liquidates into cash within one year. The large amount of the company is invested in these assets. Every year the company investment a additional fund in these assets directly or indirectly the survival and other objectives of the company purely depends on operating performance of management in effective utilization of their assets. Firm has evaluated the performance of fixed assets with proportion of capital employee on net assets turnover and other parameters, which is helpful for evaluating the performance of fixed assets.
SCOPE:
The project is covered of Fixed Assets of KESORAM CEMENT drawn from Annual Report of the company. The fixed assets considered in the project are which cannot be converted into cash with one year. Ratio analysis is used for evaluating fixed assets performance of KESORAM CEMENT INDUSTRIES. The subject matter is limited to fixed assets it analyses and its performance but not any other areas of accounting, corporate, marketing and financial matters.
METHODOLOGY:
Data for my study was obtained by browsing through net and from different books relating to Financial services, fund and also from the brochures of Company. Primary sources Secondary sources
Primary Sources include data ascertained from employees And interaction with different people at work place. Secondary Sources basically comprise Companys Manuals, Records, Brochure, standards and Internet etc. The data used for analysis and interpretation from annual reports of the company that is secondary forms of data. Ratio analysis is used for calculation on purpose. The project is presented by using tables, graphs and with their interpretations. No survey is undertaken or observation study is conducted in evaluating Fixed Assets performance of KESORAM CEMENT INDUSTRIES. books,
SOURCES OF DATA:
The data gathering method is adopted purely from secondary sources. The theoretical content is gathered from eminent texts books and reference and library at Kesoram Cement Industries. The Financial data and information is gathered from annual reports of the company internal records. Interpretation, Conclusions and Suggestions are purely base on my opinion and suggestions provided by the project guide.
LIMITATION:
The study period of 45 days as prescribed by Osmania University. The study is limited up to the date and information provided by Kesoram Cement and is annual reports. The report will not provide exact Fixed Assets status and position in Kesoram Cement, it may varying from time to time and situation to situation. This report is not helpful in investing in Kesoram Cement Industries either through disinvestments or capital market. The accounting procedure and other accounting principles are limited by the company changes in them may vary the fixed assets performance.
ASSETS
Assets may be described as valuable resources owned by a business which were acquired at a measurable money cost. As an economic resource, they satisfy three requirements. In the first place, the resource must be valuable. A resource is valuable if (i) it is cash / convertible into cash; or (ii) it can provide future benefits to the operations of the firm. Secondly, the resource must be owned. Mere possession or control of a resource would not constitute an asset ; it must be owned in the legal sense of term. Finally, the resource must be acquired at a measureable money cost. In case where an asset is not acquired for cash/promise to pay cash, the test is what it would have cost had cash been paid for it. Assets have three essential characteristics; They embody a future benefit that involves a capacity, singly or in combination with other assets, In the case of profit oriented enterprises, to contribute directly or indirectly to future net cash flows, And in the case of not-for-profit organizations, to provide services: The entity can control access to the benefit; and, the transaction or event giving rise to the entitys right to, or control of, the benefit has already occurred. It is not necessary, in the financial accounting sense of the term, for control of access to the benefit to be legally enforceable for a resource to be an assets, provided the entity can control its use by other means. It is important to understand that in an accounting sense an asset is not the same as ownership. In accounting, ownership is described by the term equity plus liability. The accounting equation relates assets, liability, and owners equity: Assets =Liability+ Owners Equation is the mathematical structure of the balance sheet. 8
Assets are usually listed on the balance sheet. It has a normal balance sheet. Assets are usually listed on the balance sheet. It has a normal balance, or usual balance, of debit (i.e. asset account amount appear on the left side of a ledger). Similarly, in economics and assets any form in which wealth can be held. Probably the most accepted accounting definition of asset is the one used by the
International Accounting Standards Board. The following is a quotation from the IFRS Framework; An asset is a Resource controlled by the enterprise as a result of past events and from which future economic benefits are expected to flow to the enterprise. Assets are formally controlled and managed within larger organization via the use of asset tracking tools. These monitor the purchasing, upgrading, servicing licensing, and disposal etc., of both physical and non physical assets. The assets in the balance sheet are listed either in order of liquidity promptness with which they are expected to be converted into cash or in reserve order, that is, fixity or listing of the least liquid (fixed) first followed by others. All assets are grouped into categories, that is, assets with similar characteristics are put in one category. The assets included in one category are different from those in other categories. The standard classification of assets divides them into (1) Fixed assets or Tangible assets, (2) Current assets or Intangible assets, (3) Investments, and (4) Other assets. Tangible fixed assets are those, which have physical existence and generate goods and services. Included in this category is land, building, plant, machinery, furniture, and so on. They are shown in the balance sheet, in accordance with the cost concept, at their cost to the firm at the time they were purchased. Their cost is allocated to /charged against/spread over
their useful life. The yearly charge is referred to as depreciation. as a result , the amount of such assets shown in the balance sheet every year declines to the extent of amount of depreciation charged in that year and by the end of the useful life of the asset it equals the salvage value, if any. Salvage value signifies the amount realized by the sale of the discarded asset at the end of its useful life. Intangible assets do not generate goods and services directly. In a way, they reflect the rights of the firm. This category of assets comprises patents, copyrights, trademarks and goodwill. They confer certain exclusive rights to their owners. Patents conger exclusive rights to use an invention, copyrights relates to production and sale of literary, musical and artistic works, trademarks represent exclusive right to use certain names , symbols, labels, designs and so on .intangible fixed assets are also written off over period of time. Intangible fixed assets lack physical substance and arise from a right granted by the government or another company. Intangibles may be acquired or developed internally. Examples of rights granted by the government are patents copyrights and trademarks. While an example of a privilege granted by another company is a franchise. Other types of intangibles include organization costs, leasehold improvements, and goodwill. Organization costs are the expenditure incurred in starting a new company. An example would be legal fees. Leasehold improvements are expenditures made by a tenant To his are her leased properties, such as the cost of putting up paneling. Goodwill represents the amount paid. For another business excess of the fair market value of its tangible net assets .for example , if a company A paid $1000000 for a company Bs net assets having a fair market value of $ 84000 , the amount paid for goodwill is $ 16000. Goodwill can be recorded only when a company purchases another business. The amount paid for the goodwill of a business may be based upon the acquired firms excess earnings over Other companies in the industry. Internally developed goodwill (e.g., goof d customer relations) is not recorded in the accounts.
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OTHER ASSETS
When non current assets cannot be properly placed into the asset classifications already discussed, they may be included in the Other Assets category. Placement of an item in this classification depends upon its nature and dollar magnitude. However, this classification should be used as a last resort.
FIXED ASSETS:
Fixed assets are those, which are required and held permanently for a pretty longtime in the business and are used for the purpose of earning profits. This successful continuance of the business depends upon the maintenance of such assets. They are not meant for release in the ordinary course or business and the utility of these remains so long as they are in working order, so they are also known as capital assets. Land and building, plant and machinery, motor vans, furniture and fixture are some examples of these assets. Financial transactions are recorded in the books keeping in view the going concern aspect of their business unit. It is assumed the business unit has a reasonable expectation of continuing business at a profit for indefinite period of time. It will continue to operate I the future. This assumption provides much of the justification for recoding fixed assets at original coat and depreciating them in a systematic manner without reference to their current realizable value. It is useless to show fixed assets in the balance sheet at their estimated realizable values if there is no immediate expectation of selling them. Fixed resale, so they are shown at their book values (i.e., cost less depreciation provided) and not at their current realizable values. The market value of a fixed asset may change with the passage of time, but for accounting purpose it continues to be shown in the books at its book value, i.e., the cost at which it was purchased minus depreciation proved up to date The cost concept of accounting, depreciation calculate4d on the basis of historical costs of old assets is usually lower than that of those calculated at current value or replacement value. These results in more profits on paper, which if distributed in full, will lead to reduction of capital. 11
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Cement, which plays an important role in Nation Building activity, the Government of India, had de-kucensed the cement industry in the year 1966 with a view to attract private entrepreneurs to argument the cement production. Then Kesoram decided to set up a few Cement Plants in the Country. Birla supreme is popular brand of Kesoram Cement from its prestigious plant of Basanthnagar, in A.P., which has outstanding track record in performance and productivity, serving the nation for the last two and half decades. It has proved its distinction by bagging several national awards and state awards. It also has the distinction of achieving optimum capacity utilization. Kesoram offers a choice of top quality Portland Cement for light, heavy constructions and allied applications. Quality is built to every fact of the operations. As is the preference for quality, so is the demand for the product. The limestone is rich in calcium carbonate, a key factor that influences the quality of the final product. The dry process technology used in the late computerized monitoring overseas the manufacturing process. Samples are sent regularly to the bureau of Indian Standards, National Council of Construction and Building Material for certification of derived quality norms. The company has actively undertaken promotional measures for promoting their product through different media, which includes the use off hoardings. Compliments, Newspapers etc., Kesoram Cement is undertaking the marketing activities extensively in the states of Andhra Pradesh, Karnataka, Tamilnadu, Kerala, Maharashtra and Gujarath. In A.P. sales depots are located in different areas like Karimnagar, Warangal, Nizamabad, Vijayawada and Nellore. In other estates it has opened around 10 depots. The market share of Kesoram Cement in the all India Cement market is 1.19% in A.P. it is a 7.05%.
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AWARDS:
Kesoram Cement captured various awards including national awards for productivity technology conservation and several state awards. For the year 1989, Kesoram bagged Best Family Planning Effort in the State by the Federation of A.P. Chambers of Commerce & Industry and National Awards for mines safety for two successive years 1985-86 & 198687. It also bagged the National Award for Energy Efficiency for the year 1989090 fir the best performance among all cement plans in India. This award installed by National Council for Cement and Building and Material (NCBM) in association with the department of power, ministry of energy, Govt. of India. Kesoram bagged the prestigious A.P. State Productivity Award in 1987-89, also annexed the state award for industrial Management in the state and vazamany Ratna and Best Efforts of an Industrial Unit in the state to developed Rural Economy was bagged for its contribution towards the social responsibility and rural and community development programmes. For the year 1991 it bagged May Day Award of the Gove. Of A.P. Best Management and the Pandit J.Nehru Silver Rolling Trophy for the Industrial Productivity effort in the State of A.P., by FAPCCI. The Indira Gandhi Memorial National Award for excellence in industry. Best Management Award of the Govt. of A.P. for the year 1993, and it got the prestigious award ISO-9002 award for its quality. During the last 3 years the Govt. of A.P. has given the following awards: Best Management award for the year 1993. Best Industrial Retain Award for the year 1994. Best Industrial Retain award for the year 1995. Environment and Mineral conversation award for the year 1995. To keep the ecological balance, they have also undertaken massive tree plantation in factory and township areas and they have been nominated by Government of India of VRIKSHAMITRA AWARD. Best effort of an industrial unit in the state for Rural Development for the year 1994-95, presented by Chief Minister in March, 1996 and Best Family Welfare Award for the year 1996-97.
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INTRODUCTION OF CEMENT
The 85 years old Indian Cement Industry is one of the cardinal and basic infrastructure industries, which enjoys core sector status and plays a crucial role in the economic development and growth of a country. Being a core sector is industry was subject to price and or distribution controls almost uninterruptedly from world war-II to 1982. when the Government of India announced the partial decontrol of prices and decontrol manufacturing cement became increasingly attractive industry and the industry experienced substantial expansion. As the supply in response to the 1982 partial decontrol was significant in March 1989. Price and distribution control were finally dispensed with. It was one o the first major industries in the country to be so deregulated.
DEFINITION OF CEMENT:
Cement may be defined, as it is a mixture of calcium silicate and aluminates which have the property of setting and hardening under water the amount of Silica, Alumns which is present in each crust are sufficient to combine with calcium oxide [Cao] to form the corresponding calcium silicate and aluminates.
CLASSIFICATION OF CEMENT:
Cement is three types 1) Puzzolantic Cement 2) Natural Cement 3) Portland Cement
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1) Puzzolantic Cement: It consists of silicates Calcium and Aluminum; it shows the hydraulic properties when it is in the form of powder and being mixed with suitable preparation of lime. The rate of hardening is much slower and the comprehensive strength developed is about a half of Portland cement. Is us found more resistant to the chemical action that others. 2) Natural Cement: This is natural occurring material. It is obtained form cement rocks. These Cement rocks are claying lime stones containing silicates aluminates of calcium. The selling property of this cement is more than the Portland cement but is comprehensive strength is half of its.
3) Portland Cement: a) Ordinary Portland Cement b) Rapid Hardening Portland Cement c) Low Heat Cement d) White Or Colored Cement e) Water Proof Portland Cement f) Portland Slag Cement g) Portland Puzzolana Cement h) Sulphate Resisting Cement i) Oil Well Cement
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In determining the expenses for a period, it is therefore important to include an amount to represent the consumption of fixed assets during that period (that is, depreciation) In essence; depreciation involves allocating the cost of the fixed asset (less any residual value) over its useful life. To calculate the depreciation charge for an accounting period, the following factors are relevant: the cost of the fixed asset; the (estimated) useful life of the asset; the (estimated) residual value of the asset. What is the relevant cost of a fixed asset? The cost of a fixed asset includes all amounts incurred to acquire the asset and any amount that can be directly attributable to bringing the asset into working condition. Directly attributable cost may include: Delivery costs Costs associated with acquiring the asset such as stamp duty and import duties Costs of preparing the site for installation of the asset Professional fees, such as legal fees and architects fees Note that general overhead costs or administration costs would not costs of a fixed asset (e.g. the cost of the factory building in which the asset is kept, or the cost of the maintenance team who keep the asset in good working condition) The cost of subsequent expenditure on a fixed asset will be added to the cost of the asset provided that this expenditure enhances the benefits of the fixed asset or restores any benefits consumed. This means that major improvements or a major overhaul may be capitalized and included as part of the cost of the asset in the accounts. However, the costs of repairs or overhauls that are carried out simply to maintain existing performance will be treated as expenses of the accounting period in which the work is done, and charged in full as an expense in that period. 24
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DEPRECIATION METHODS
1. STRAIGHT-LINE METHOD
This is the simplest and most widely used depreciation method. Under this method an equal portion of the cost (above salvage value) of the asset is allocated to each period of use. The periodic depreciation charge is expressed as
Depreciation =
2. UNITS OF PRODUCTION METHOD Where the use of equipment varies substantially from year to year, the units-ofproduction Method is appropriate for determining the depreciation. For example, in some year logging operations may be carried on for 200 days, in other years for 230 days, in still other years for only 160 days, depending on weather conditions. Under this method, depreciation is computed for the appropriate unit of output or production (such as hours, miles, or pounds) by the following formula:
This method has the advantage of relating depreciation cost directly to income. 26
3. DOUBLE DECLINING BALANCE METHOD The double declining balance method produces the highest amount of depreciation in the earlier years. It does not recognize salvage or scrap values. Instead, the book value of the asset remaining at the end of the depreciation period becomes the salvage or scrap value. Under this method, the straight-line rate is doubled and applied to the declining book balance each year. Many companies prefer the double declining balance method because of the greater write-off in the earlier years, a time when the asset contributes most to the business and when the expenditure was actually made. The procedure is to apply a fixed rate to the declining book value of the asset each year. As the book value declines, the depreciation becomes smaller.
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However, a business may not with to keep an asset until the end of its physical life. There may be a point when it becomes uneconomic to continue to use the asset even though there is still some physical life left. The economic life of the asset will be determined by such factors as technological progress and changes in demand. For purposes of calculating depreciation, it is the estimated economic life rather than the potential physical life of the fixed asset that is used.
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The firm should evolve strategies regarding the following two factors.
Trend Analysis:In Financial Analysis the direction of changes over a period of years is of initial importance. Time series or trend analysis of ratios indicators the direction of change. This kind of analysis is particularly applicable to the items of profit and loss account. It is advisable that trends of sales and net income may be studies in the light of two factors. The rate of fixed expansion or secular trend in the growth of the business and the general price level. It might be found in practice that a number of firms would be shown price level. It might be found in practice that a number of firms would be shown a persistent growth over period of years. But to get a true trend of growth, the sales figure should be adjusted by a suitable index of general prices. In other words, sales figures should be deflated for rising price level. Another method of securing trend of growth and one which can be used instead of the adjusted sales figure or as check on them is to tabulate and plot the output or physical volume of the sales expressed in suitable units of measure. If the general price level is not considered while analyzing trend of growth, it can be mislead management they may become unduly optimistic in period of prosperity and pessimistic in duel periods. For trend analysis, the use of index numbers is generally advocated the procedure followed is to assign the numbers 100 to items of the base year and at calculate percentage change in each items of other years in relation to the base year. The procedure may be called as fixed percentage method.
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This margin determines the direction of upward or downward and involves the implementation of the percentage relationship of the each statement item beans to the same in the base year. Generally the first year is taken as the base year. The figure of the base year are taken as 100 and trend ratio he other year are calculated on the basis of one year. Here an attempt is made to known the growth total investment and fixed assets of Kesoram Cement Industries for Five years that is 2006-2007 to 2009-20010.
Table-I
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Graph:
120 100 80 60 40 20 0 20062007 20072008 20082009 20092010 20102011 20112012 Series1
Interpretation: From the analysis of the above table it can be observed that the growth rate of total investment of Kesoram Cement Industries is in downward trend which shows table of the Kesoram Cement Industries investment in total investment is decreasing from time to time during the year 2006-2007. It was recorded 100%. But it is decreasing in the year 20092012 which shows that three is a net decrease by 64.37%. the average investment in total assets was found to be Rs. 3,33,466.27 during the review period. During the period of 20062007it is Rs. 44,85,21,389 and it was decreased in the year 2011-2012 Rs.2,887.28.
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Graph:
200 180 160 140 120 100 80 60 40 20 0 20062007 20072008 20082009 20092010 20102011 20112012
Series1
Interpretation: Growth rate in fixed assets, the examination of the above table reveals analysis and interpretation. A. During the year 2006-2007 the assets investment was recorded at 62564.03 and it is decreased to Rs.1,10,519.01 in 2008-2008 the fixed assets investment is quite satisfactory. B. The trend percentage in the year 2006-2007 is taken as the base year as 100% and it was increased to 176.64 in the year 2011-2012. C. The average growth rate in fixed assets Rs.61996.566 in 6 years.
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RATIO ANALYSIS:
Ratio Analysis is a powerful tool of financial analysis. A ratio is defined as The indicated quotient of two mathematical expression and as The relationship between for evaluating the financial position and performance of a firm. The absolute accounting figure reported in financial statement do not private a meaningful understanding of the performance and financial position of a firm. An accounting figure conveys meaning when it is related to some other relevant information.
Ratio help to summarize large quantities of financial data to make qualitative judgment about the firms financial performance.
X 100
This ratio of Fixed Assets to Net Worth indicates the extent to which shareholder funds are sunk into the fixed assets. Generally, the purchase of fixed assets should be financed by shareholders, equity including reserves & surpluses and retained earnings. If the ratio is less than 100% it implies that owners funds are more than total Fixed Assets and a part of the working capital is provided by the shareholders. When the ratio is more than 100% it implies that owners funds are not sufficient to finance the fixed assets and the finance has to depend upon outsiders to finance the fixed assets. There is no rule of thumb to interpret this ratio but 60% to 65% is considered to be satisfactory ratio in case of industrial undertaking.
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3. Fixed Assets as a percentage to Current Liabilities: The ratio measures the relationship between fixed assets and the funded debt and is a very useful so the long term erection. The ratio can be calculated as below.
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4. Total Investment Turnover Ratio: This ratio is calculated by dividing the net sales by the value of total assets that is (Net Sales / Total Investment) or (Sales / Total Investment). A high ratio is an indicator of over trading of total assets while a low ratio reveals idle capacity. The traditional standards for the ratio in two times
6. Gross Capital Employed: The term Gross Capital Employed usually comprises the total assets, fixed as well as current assets used in a business. Gross Capital Employed = Fixed Assets + Current Assets
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100
X100
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Table III
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Graph:
200 180 160 140 120 100 80 60 40 20 0 20062007 20072008 20082009 20092010 20102011 20112012 Series1
Interpretation: a) The Gross Fixed to Net Worth Ratio is fluctuating from year to year. In the year 2006-2007 the gross fixed assets to net worth ratio is 184.65. in the year 20112012fixed assets to net worth to acquire the ratio is 168.87. b) The average net worth to fixed assets ratio i36385.62s Rs. Or fixed assets average ratio is Rs.61996.668 the average percentage of fixed assets to net worth is 168.06. c) The highest ratio recorded in 2006-2007 at 184.65 the lowest ratio is recorded at 151.52 in the year 2011-2012.
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Fixed Assets ratio a various of fixed assets to net worth is a ratio of fixed assets to long term funds which is calculated as:
Fixed Assets (After Depreciation) Fixed assets to long term liabilities = ------------------------------ ---------------X100 Capital Employed
Table IV
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Graph: 200 180 160 140 120 100 80 60 40 20 0 20062007 20072008 20082009 20092010 20102011 20112012 Series1
Interpretation:
a) The fixed assets as a % of long-term liabilities the ratio is functioning from year to year. The fixed assets as a percentage of long term liabilities is recorded at 184.5% in the year 2005 and it is recorded at 152.7% in the year 2007-2008.
b) The highest ratio is recorded at 184.6 % in the 2006-2007 the lowest ratio is 152.7% in 2009-2010.
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Graph:
3.5 3 2.5 2 1.5 1 0.5 0 20062007 20072008 20082009 20092010 20102011 20112012 Series1
Interpretation: a) The ratio was fluctuating trend percentage in review period. b) From the above table it is observed that the ratio was recorded at 3.07 in the 20062007 and I is gradually changing to 3.04 in 2011-2012 which indicates that the current funds are used in the fixed assets which is quite satisfactory. c) The average ratio was recorded at during the 5% review period of time. d) The highest ratio was recorded at 3.12 which are higher that the average ratio. e) The lowest ratio was recorded at 2.44, which is less than the average ratio.
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Table VI
YEAR 2006-2007
RATIOS
2007-2008 1,35,375.24 2008-2009 1,29,553.62 2009-2010 1,42,195.78 2010-2011 1,61,317.74 20011-2012 2,20408.93
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Graph:
Interpretation: a) The ratio was in increasing trend. b) During the year 2006-2007 the ratio was recorded at 31.2 and in the 2011-2012 the ratio was increasing to 76.33.
c) The highest ratio was recorded at 76.33 in the year 2011-2012 which is more than the average ratio?
d) The lowest ratio was 32.5, which is lesser than the average ratio.
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Fixed Assets Turnover Ratio: The Fixed Assets turnover ratio is the relationship
between the sales or cost of goods/capital assets employed in a business.
YEAR 2006-2007
PERCENTAGE
2007-2008 1,35,375.23 2008-2009 1,29,553.62 2009-2010 1,42,195.77 2010-2011 1,61,317.74 20011-2012 2,887.28
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Graph:
3 2.5 2 1.5 1 0.5 0 20062007 20072008 20082009 20092010 20102011 20112012 Series1
Interpretation:
a) The fixed assets turnover is fluctuating trend during the review period of time. During the year 2006-2007 the ratio was recorded as 2.23% and in the 2011-2012 the ratio was decreased to 2.02. b) Average ratio was observed 5% during the review period of time. c) The highest ratio was recorded at 2040% in 2009-2010, which is more than average. d) The lowest ratio was 2.29% in the 2006-2007, which is less than average.
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X100
Table VIII
YEAR
PERCENTAGE
2006-2007 2,03,50,59,123 2,40,99,51,568 2,14,80,89,665 2,3072,27,432 237,45.24 36,253.41 55.5 52.3 50.0 46.0 53.77 55.19 2007-2008 58,955.39 2008-2009 56,993.08 2009-2010 57,148.37 2010-2011 74,321.97 20011-2012 1,10,519.01
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Graph:
Interpretation: a) Fixed Assets to total assets ratio is fluctuating trend during the review period of time. b) During the year 2006-2007 the ratio was recorded as 55.5% and the year 2011-2012 the ratio decreased to55.19. c) Average ratio was observed at 51.14% during the review period of time d) The highest ratio was observed at 55.5% in the year 2006-2007, which is less than average ratio.
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Gross Capital Employed: Gross Capital Employed = Table IX Fixed Assets + Current Assets
YEAR 2006-2007
RATIOS
2007-2008 49,713.32 2008-2009 53,951.48 2009-2010 63,063.52 2010-2011 60,981.33 20011-2012 86,811.40
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YEAR 2006-2007
2007-2008 2,814.67 2008-2009 6,299.57 2009-2010 3,351.28 2010-2011 4,570.92 20011-2012 28,568.32
Interpretation: From the above the profits of Kesoram Cement Industries are in increasing which is good for the company. In the year 2011-2012 the PAT is 28,568.32 lakhs and then it is increasing.
In the year 2007-2008 the PAT is the lowest and in 2008-2009 it observed the highest PAT that is 62999.57 over the years.
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100
YEAR 2006-2007
PERCENTAGE
2007-2008 2,814.67 2008-2009 6,299.57 2009-2010 3,351.28 2010-2011 4,570.92 20011-2012 28,568.32
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Graph:
Interpretation: a) Return on Gross Capital Employed ratio is fluctuating trend during the review period of time. b) During the year 2006-2007 the ratio was recorded at 3.8% and in the year 2011-2012 the ratio was increased to 14.48% and average ratio is 3.9%. c) The highest ratio was recorded at 5.7% in the year 2008-2009 which is more than average ratio. d) The lowest ratio was recorded at 205% in the year 2007-2008 which is the less than the average ratio.
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Return on Fixed Assets: The return on Fixed Assets can be calculated as under:
Profit after Tax Return on Fixed Assets =------------------Fixed Assets Table XI X100
YEAR 2006-2007
FIXED ASSETS
PERCENTAGE
4,137.14 2007-2008 2,814.67 2008-2009 6,299.57 2009-2010 3,351.28 2010-2011 4,570.92 20011-2012 28,568.32
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Graph:
Interpretation: a) Return on fixed assets ratio is decreasing. b) During the year 2006-2007 the ratio recorded as 6.6% & in the year 2011-2012 the ratio decreased 6.15%. c) The average ratio is 6.872%. d) The highest ratio is recorded at 11.05% in the year 2008-2009; the lowest ratio is 4.7% in the year 2007-2008.
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A. ASSETS OWNED BY COMPANY 1. Net fixed Assets Gross Fixed Assets Total Depreciation Less: Lease Adjustment Reserve
1, 12,379.16 53,370.50 ___________ 53.12 ___________ 58,955.39 3,968.36 49,713.32 ___________ 1, 12,637.07 ____________ 44,090.21 24,099.52 10,568.94 __________ 78,758.67 __________
2. Investments 3. All Other Current Assets Total Assets B. (i) DUES TO BE PAID BY THE COMPANY 1. Loans and Deposits 2. Other Liabilities 3. Deferred Tax Liabilities (Net)
(ii) THEREFORE, COMPANYS NET WORTH REPRESENTED BY 1. Equity Share Capital 2. Reserves and Surplus
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A. ASSETS OWNED BY COMPANY 1. Net fixed Assets Gross Fixed Assets Total Depreciation Less: Lease Adjustment Reserve
1, 15,471.98 58,478.89 ___________ 56,993.09 _ ____________ 56,993.09 2,499.03 53,951.48 ___________ 1, 13,443.60 ____________ 44,663.73 21,480.90 12,450.70 _________ 78,595.33 __________
2. Investments 3. All Other Current Assets Total Assets B. (i) DUES TO BE PAID BY THE COMPANY 1. Loans and Deposits 2. Other Liabilities 3. Deferred Tax Liabilities (Net)
(ii) THEREFORE, COMPANYS NET WORTH REPRESENTED BY 1. Equity Share Capital 2. Reserves and Surplus
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A. ASSETS OWNED BY COMPANY 1. Net fixed Assets Gross Fixed Assets Total Depreciation Less: Lease Adjustment Reserve
1, 20,437.89 63,289.52 __________ 57,148.37 _ ___________ 57,148.37 2,819.25 63,063.52 ___________ 1, 23,031.14 ____________ 50,455.24 23,072.27 11,789.04 _________ 85,316.55 __________
2. Investments 3. All Other Current Assets Total Assets B. (i) DUES TO BE PAID BY THE COMPANY 1. Loans and Deposits 2. Other Liabilities 3. Deferred Tax Liabilities (Net)
(ii) THEREFORE, COMPANYS NET WORTH REPRESENTED BY 1. Equity Share Capital 2. Reserves and Surplus
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A. ASSETS OWNED BY COMPANY 1. Net fixed Assets Gross Fixed Assets Total Depreciation Less: Lease Adjustment Reserve
1, 42,353.37 68,031.40 ___________ 74,321.97 _ ___________ 74,321.97 2,901.51 60,981.33 ___________ 1, 38,204.81 ____________ 62,135.45 23,745.25 10,719.11 _________ 96,599.81 __________
2. Investments 3. All Other Current Assets Total Assets B. (i) DUES TO BE PAID BY THE COMPANY 1. Loans and Deposits 2. Other Liabilities 3. Deferred Tax Liabilities (Net)
(ii) THEREFORE, COMPANYS NET WORTH REPRESENTED BY 1. Equity Share Capital 2. Reserves and Surplus
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A. ASSETS OWNED BY COMPANY 1. Net fixed Assets Gross Fixed Assets Total Depreciation Less: Lease Adjustment Reserve
1, 82,712.44 72,193.43 ___________ 1, 10,519.01 _ ___________ 1, 10,519.01 2,887.28 86,811.49 ___________ 2, 00,217.78 ____________ 87,280.00 36,253.41 11,240.93 __________ 1, 34,774.34 ___________
2. Investments 3. All Other Current Assets Total Assets B. (i) DUES TO BE PAID BY THE COMPANY 1. Loans and Deposits 2. Other Liabilities 3. Deferred Tax Liabilities (Net)
(ii) THEREFORE, COMPANYS NET WORTH REPRESENTED BY 1. Equity Share Capital 2. Reserves and Surplus
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8. Fixed Assets to total assets ratio is fluctuating trend during the review period of time. 9. The fixed assets total assets during the year 2006-2007 the ratio was recorded as 55.5% and the year 2009-2010 the ratio decreased to55.19. 10. In the year 2005-2006 the PAT is the lowest and in 2004-2005 it observed the highest PAT that is 62999.57 over the years.
11. The grass capitol employed ratio was recorded at 5.7% in the year 2006-2007 which is more than average ratio 12. Assets ratio is decreasing the year 2006-2007 the ratio recorded as 6.6% & in the year 2011-2012 the ratio decreased 6.15%.
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SUGGESTIONS
From the financial position of the Kesoram Cement Industry is observed that the ratio fixed assets to turnover is not at all ideal where as a ratio of around 5 is considered as ideal so the company must and should increase the fixed assets turnover ratio. From the financial position of the Kesoram Cement Industry is observed that return on fixed assets not satisfactory throughout all the years, there was a too much fluctuation in the percentage of return on fixed assets so the company should try to decrease the fluctuations, for that the company should concentrate on sales.
From the financial position of the Kesoram Cement Industry is observed that on the basis of ratio fixed assets as percentage to current liabilities, the current liabilities were increasing as fixed assets increasing gradually. For the purpose of purchasing fixed assets the company is utilizing current liabilities. It may cause the company to bare excess interest compare to long term liabilities, so the company should not depend on the current liabilities to invest in fixed assets.
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CONCLUSION
After analyzing the financial position of Kesoram Cement Industries and evaluating its Fixed Assets Management or Capital Budgeting Techniques in respect of Components Analysis. Trend Analysis and Ratio Analysis. The following conclusions are drawn from the project preparation. The financial position of Kesoram Cement regarding investment it has been decreased. The total growth rate in fixed assets is increased during the year 2006-2010from 100% to 176.64%. Regarding the fixed assets as a percentage of current liabilities it is observed it is decreased. Regarding the total investment turnover ratio it is observed that it has been increased over the years considerably i.e., 31.2% to 76.33% during the period 2006-10. Regarding the fixed assets turnover ratio it has been observed that it is satisfactory. Regarding the fixed assets to total assets it been observed that there was increased. As a result it is said to be that the ratio is quite satisfactory. Regarding the profit and gross capital employed ratio it can be observed that it has been increasing over the year i.e., from 3.82% to14.48% As a result of the above it can be said that the ratio is steadily increasing. From the above study it can be said that the Kesoram Cement Industries Financial position on Fixed Assets is quite satisfactory.
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BIBLIOGRAPHY
AUTHOR NAME
I.M.Pandey
Financial Management
DPrasanna Chandra
Financial Management
Financial Accounting
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