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.
1

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.

To analyze the financial statements of ACC (formerly the Associated Cement

Corporate limited) with respect to financial performance of liquidity and
solvency.

To measure the operating efficiency of the company using various turnover.

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 data
The 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 Data
Major 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 used
The 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.

2

The present study is restricted to ratio analysis of only.

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 II
REVIEW OF LITERATURE
INTRODUCTION
The 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 analysis1.
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 statements2.

1 (E.Gordon, N.Jeyaram, N.Sundram, R.Jayachandran, 2005).

2 (Dr. S.N.Maheshwari, 2007).
6

MEANING OF RATIO
A 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 firm3.
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 other4.
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.

3 (R. S. N. Pillai and Bagavathi, 2000).

4 (E. Gordon, N. Jeyaram, N.Sundram, R. Jayachandran, 2005).

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 figures5.
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 ratios6.

5 (Dr. S. N. Maheshwari, 2007).

6 (Manmohan and Shiv N. Goyal, 1987).
8

DEFINITION OF RATIOS
According to Accountants Handbook by Wixon, Kell and Bedford, a ratio is an
expression of the quantitative relationship between two numbers.7
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.8
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 other9.
STEPS IN RATIO ANALYSIS
The 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
action10.

7 (E. Gordon, N. Jeyaram, N.Sundram, R. Jayachandran, 2005).

8 (R. K. Sharma, 1992).
9 (T. S. Reddy & Y. Hari Prasad, 2002)
10 (R. S. N. Pillai and Bagavathi, 2000 & R. K. Sharma, 1992).
9

NATURE OF RATIO ANALYSIS

Ratio 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 performance11.

11 (R. S. N. Pillai and Bagavathi, 2000 & Manmohan and Shiv N. Goyal, 1987).

10

USES AND SIGNIFICANCE OF RATIO ANALYSIS.

I

Managerial Uses of Ratio Analysis.

a

Helps in Decision-Making
Financial statements are prepared primarily for decision-making. Ratio analysis
helps in making decisions from the information provided in these financial
statements.

b Helps in Financial Forecasting and Planning

Ratio 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.
c

Helps in Communicating
The 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.

d Helps in Co-Ordination
Better communication of efficiency and weakness of an enterprise results in better
co-ordination in the enterprise.
e

Helps in Control
Ratio 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.

11

Other Uses
These 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.

II

Utility to shareholders/Investors
An 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.

III

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

12

V Utility to Government
Government 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 sector12.

12 (E. Gordon, N. Jeyaram, N.Sundram, R. Jayachandran, 2005 & R. K. Sharma, 1992).

13

IMPORTANCE OF RATIO ANALYSIS

1

Aid to Measure General Efficiency

Ratios 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.

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.

Aid in Forecasting And Planning

Ratio 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.

Facilitate Decision-Making
It 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.

Aid in Corrective Action

Ratio analysis provides inter firm comparison. They highlight the factors
associated with successful and unsuccessful firms. If comparison shows an
14

unfavorable variance, corrective actions can be initiated. Thus, it helps the

management to take corrective action.

Aid in Intra Firm Comparison

Intra 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.

Act as a Good Communication

Ratios 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.

Evaluation of Efficiency
Ratio 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.

Effective Tool
Ratio 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 secrecy13.

13 (R. S. N. Pillai and Bagavathi, 2000 & Manmohan and Shiv N. Goyal, 1987).

15

LIMITATIONS OF RATIO ANALYSIS

1

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.
2

Limited Use of a Single Ratio

A 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.
3

Window Dressing

Window-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.
4

Personal Bias

Ratios 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 RATIOS
Ratio 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.
16

1 No Allowances for Price Level Changes

A 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.

2 Incomparable
Not 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.
3 Change of Accounting Procedure
Comparison 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 etc
4 Qualitative Factors are Ignored
Ratios 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.
5 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 purposes14.

14(R. S. N. Pillai and Bagavathi, 2000 & E. Gordon, N. Jeyaram, N.Sundram, R. Jayachandran, 2005).).

17

CLASSIFICATION OF RATIO
Financial 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.
a

Classification of Ratio by Statements

The traditional classification is based on those statements from which information is

obtained

for

calculating

the

ratios.

The

18

ratios

are

classified

as

follows.

1. Liquid Ratio

1. Gross Profit Ratio

1. Return on Investment

2. Current Ratio

2. Operating Ratio

2. Return on Share

3. Proprietary Ratio

3. Operating Profit

4. Debt equity Ratio

Ratio

Holders
3. Funds

5. Fixed assets Ratio

4. Expense Ratio

4. Stock Turnover

6. Capital Gearing Ratio

5. Net Profit Ratio,

5. Debtors Turnover

And etc..,

Etc..,

6. Fixed Assets
Turnover
7. Earnings per Share

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

Classificatio of Ratios by Users

19

Ratios
For
Management

1. Operating Ratio
2. Return on
investment
3. Stock turnover
4. Debtors Turnover
5. Debt Equity
6. Fixed Assets
turnover
7. Creditors Turnover
8. Net profit Turnover
9. Long term liquidity
10. short term
liquidity
11. working capital
turnover and etc..,

Ratios
For
Creditors

1.
2.
3.
4.
5.
6.
7.

1. Current Ratio
2. Solvency Ratio
3. Debt Equity Ratio
4. Creditors Turnover
5. Fixed Assets Ratio
6. Assets Cover
7. Interest Cover ,etc..,

Ratios
For
Shareholders

1 .Ratio on
shareholders ,funds
2. payout ratio
3. Capital Gearing
4. Dividend Cover,
5. Dividend yield 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.

20

Classification by Relative Importance

Primary Ratios

Secondery Ratios

Growth Ratios

II Classification of Ratio by Purpose/Function

This 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 view15:

ANALYSIS OF SHORT-TERM FINANCIAL POSITION (OR) TEST OF LIQUIDITY

The 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.

15 (T.S.Reddy, Y.Hari Prasad Reddy,Cost & Management Accountancy (2002),Margham

Publication,Chenai.17.( Page 13.4).

21

A Liquidity Ratios
B Current Assets Movement (or) Efficiency Ratios
(A)Liquidity Ratio
Liquidity refers to the ability of a firm to meet its current obligation as and when they
become due.
( i ) Current Ratio
Current ratio is the relationship current assets and current liabilities

Current Assets
Current Ratio = Current Liabilitie s

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 Ratio

Quick 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
22

and bank balances, bills receivables, debtors, short-term investments. Quick liabilities
indicate creditors, bills payable, outstanding expenses.

Quick Assets
Quick Ratio = Quick Liabilitie s
Quick Assets = Current Assets - Stock
Quick Liabilities = Current Liabilities - Bank over draft
The quick ratio of 1:1 is usually considered to be good and satisfactory.
i

Absolute liquid ratio (or) cash position Ratio

Cash position ratio (or) Absolute liquidity ratio relates the sum of cash and

Marketable securities to the total quick liabilities.

Cash position Ratio =

Cash Marketable Securities

Quick LIabilitie s

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 Ratios

Funds 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 period

23

Debtors/ Receivable Turnover

Debtors 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.

Turnover
Debtors Turnover Ratio = Debtors

b Average Collection period ratio

The average collection period represents the average number of days for which a firm has
to wait before its receivables are converted into cash

No.of Working Days

Average collection period = Debtors Turnover

(ii) Fixed asset turnover ratio

This 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.

Net Sales
24
Fixed asset turnover ratio= Fixed Assets

A Working Capital Turnover Ratio

Working 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.

Sales
Working capital Turnover ratio = Net Working Capital

25

ANALYSIS OF LONG-TERN FINANCIAL POSITION (OR) TEST OF SOLVENCY

Solvency 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 Ratio
The 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.

External Equity
Debt equity ratio = Internal Equity

External Equity = long term debt+ current liabilities

Internal 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 Ratio
This ratio establishes the relationship between share- holders funds and total assets of the
firm.

Share Holders Funds

Total Assets
Proprietary Ratio =

26

(iii) Solvency Ratio

The ratio indicates the relationship between the total outsider liabilities to total assets of a
firm.

Total Liabilitie s to out Siders

Total Assets
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 ( After Depreciati on)
Share Holdersfun ds
Fixed assets to net worth ratio =

(v) Interest coverage ratio

The 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.

Pr ofit before Interest & Taxes

Fixed Interest Ch arg es
Interest coverage ratio =

27

ANALYSIS OF PROFITABILITY (OR) PROFITABILITY RATIO

A General profitability ratios
i

Expenses ratios: Expenses ratio indicates the relationship of various expenses to

net sales. The operation ratio reveals the average total variations in expenses.

ParticularExpenses
X 100
Net
Sales
Particular Expenses Ratio =

ii

Net Profit Ratio

Net 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 Pr ofit after tax

X 100
Net Sales
Net profit ratio =
OVER ALL PROFITABILITY RATIOS

Return on Share holders Investments(or) Net Worth

Return on shareholders funds is the relationship between net profits (after interest

and Tax) and the propitiators funds.

Net Pr ofit ( After Interest & Tax )

Shareholde rs Funds
Return on Shareholders Investment =
28

ii

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.

Net Pr ofit after tax Pr eference dividend

No. of . Dquity sShares
EPS =

BALANCE SHEET RATIOS

1. Current Assets to proprietors Fund Ratio
It 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.
Current Assets to Proprietors Fund

Current Assets
Pr oprietors 'fund

2. Capital Gearing Ratio

The 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.

CapitalGearing

29

Fixed Interest Bearing Funds

EquityShare Holder 's Funds

3. Reserves to equity Share Capital Ratio

It reveals the policy pursued by the company with regard to growth and distribution of
dividends.

Reserve to EquityShareCapitalratio

Re venue Reserve
EquityCaptial

4. Return of Assets
This ratio is calculated to measure the assets to ascertain whether assets are being utilized
properly or not.

Re turn on total Assets

Net Pr ofit after tax

Total Assets 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.

Re turn on Capitalemployed

Pr ofit beforeint erest and tax

Capital Employed

Share holders Fund+ Long-term Loans

Capital employed =

(or)
Total Assets Current Liabilities

30

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

Sales toCapitalemployed Ratio

Sales
Capital Employed

2. Total Assets turnover Ratio

This ratio is calculated by dividing the net sales by the value of total assets.

Total Assets turnover Ratio

Net Sales
TotalAssets

FINANCIAL RATIO
1. 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.
Ratio of Inventory to Working capital

Working Capital = Current Assets Current Liabilities.

31

Inventory
Working Capital

2. Fixed Assets Ratio

This ratio explains whether the firm has raised adequate long term funds to meet its fixed
assets requirements.

Fixed Assets Ratio

Fixed Assets
CapitalEmployed

3. Ratio of current assets to fixed assets

This ratio establishes the relationship between the current assets and fixed assets16.

Ratioof current assets to fixed assets

Current Assets
Fixed Assets

REVIEW OF PREVIOUS STUDIES

Gale 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 significant17.

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).]

17

[Gale, B.T., Market share and rate of return, the review of economical statistical vol.IV, No.4 November]

32

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 made18.
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 average19.

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.

18

[Jain, D.C Analysis of financial statement in Cement Companies in India,Rajasthan University Jaipur, 1967].

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].

33

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 management
Kanna 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 kiln20.

20

[Kanna and Subramanian, financial performance and the cement industry, large and medium, 1972-1979 march. Yojana1981].

34

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 shares21.
Pondey (1990) attempted to study the following: (a) Indian evidences and empiricalbased 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.

21

[P.C. Chamoli, A panorama of capital structure planning of Indian Cement Industry, Lok. Udyog, Dec 198, p.23]

35

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 strategies22.
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.

22

[N. Chandrasekaran, Determinants of profitability in cement industry, - cement industry. Vol.20. No.4 Oct-Dec 1993]

36

CHAPTER - III

PROFILE OF THE COMPANY

THE ASSOCIATED CEMENT COMPANIES LIMITED
ACC (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.

37

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:
2007 ACC partners with Christian Medical College for treatment of HIV/AIDS in Tamil Nadu
2007 Sumant Moolgaokar Technical Institute completes 50 years and reopens with new
curriculum
2008 Ready mixed concrete business hived off to a new subsidiary called ACC Concrete
Limited.
2008 ACC Cement Technology Institute formally inaugurated at Jamul on July 7.
2008 First Sustainable Development Report released on June 5.
2008 ACC wins CNBC-TV18 India Business Leader Award in the category India Corporate
Citizen of the year 2008
2008 Project Orchid launched to transform our Corporate Office, Cement House into a green
building.
2009 ACC received the Jamanalal Bajaj "Uchit Vyavahar Puraskar" of Council for Fair
Business Practices.
38

2009 ACC is allotted coal blocks in Madhya Pradesh and West Bengal.
2009 ACC's new Grinding plant of capacity 1.60 million tonnes inaugurated at Thondebhavi in
Karnataka.
2010 Kudithini Cement Grinding Plant inaugurated in Karnataka on January 4, 2010 with a
capacity of 1.1 MTPA of Portland Slag Cement.
2010 ACC 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.
2011 ACC enters its platinum jubilee year - the first company in the cement industry to achieve
this status
2011 ACC 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
2012 World'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
2012 Central Control Room Building at ACC Chanda Plant, Maharashtra set up as a Green
building, the first of its kind in an industrial environment

39

CHAPTER IV
DATA 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 .

40

4.1. LIQUIDITY RATIO:

4.1.1. CURRENT RATIO:
Current Ratio =

Current Assets
Current liabilities
TABLE 4.1.1

YEAR

CURRENT ASSETS

CURRENT LIABILITIES

RATIO

(Rupees in corers)

(Rupees in corers)

2007-2008

2,203.04

2,058.50

1.07

2008-2009

2,735.20

2,741.20

0.99

2009-2010

2,294.47

3,152.22

0.72

2010-2011

2,753.35

3,746.42

0.73

2011-2012
3,617.94
Source: Secondary Data

3,664.38

0.98

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).

41

DIAGRAM NO 4.1.1
CURRENT RATIO

RATIO
1.07
0.99

0.98

0.73

0.72

42

RATIO

4.1.2. QUICK RAIO (OR) ACID TEST RATIO

Liquid Assets

Quick Ratio =

Liquid Liabilities
TALE 4.1.2

YEAR

LIQUID ASSETS

LIQUID LIABILITIES

RATIO

(Rupees in corers)

(Rupees in corers)

2007-2008

1051.64

1,392.23

0.76

2008-2009

1315.08

1,777.36

0.74

2009-2010

961.07

2,060.34

0.46

2010-2011

1,314.43

2,093.96

0.62

2011-2012
1,927.98
Source: Secondary Data

2,610.36

0.73

The 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)

43

DIAGRAM NO 4.1.2
QUICK RAIO (OR) ACID TEST RATIO

5; 2007

1; 2011

4; 2008

2; 2010

3; 2009

44

4.1.3 ABSOLUTE LIQUID RATIO:

Absolute Liquid Ratio =

Absolute Liquate Assets

Absolute Liquate Liabilities
TABLE 4.1.3

YEAR

ABSOLUTE LIQUATE

ABSOLUTE LIQUATE

ASSETS

LIABILITIES

(Rupees in corers)

(Rupees in corers)

2007-2008

743.48

1392.23

0.53

2008-2009

984.24

1777.36

0.55

2009-2010

746.38

2060.34

0.36

2010-2011

1080.03

2093.96

0.51

1652.56

2610.36

0.63

2011-2012
Source: Secondary Data

RATIO

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

45

ABSOLUTE LIQUID RATIO

0.63
0.53

0.55

0.51

0.36

2007-08

2008-09

2009-10

RATIO

2010-11

46

2011-12

4.2. ACTIVITY RATIO

4.2.4 DEBTORS TURN OVER
Sales
Debtors Turn Over =
Debtors
TABLE-4.2.4

YEAR

SALES

DEBTORS

TIMES

(Rupees In Corers)

(Rupees In Corers)

2007-2008

7,141.62

289.29

24.68

2008-2009

7.888.60

310.17

25.43

2009-2010

8,648.11

203.70

42.45

2010-2011

8,521.47

178.28

47.79

2011-2012
Source: Secondary Data

10,012.33

260.41

38.44

As 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).

47

DIAGRAM -4.2.4
DEBTORS TURN OVER RATIO

TIMES

47.79
42.45
38.44

24.68

25.43

4.2.5 AVERAGE COLLECTION PERIOD:

48

Average Collection Period =

No of Working Days
Debtors Turn Over
TABLE 4.2.5

YEAR

NO OF WORKING

DEBTORS TURN OVER

AVERAGE

DAYS

(TIMES)

COLLECTION PERIOED

2007-2008

365

24.68

15 days

2008-2009

365

25.43

14 days

2009-2010

365

42.45

9 days

2010-2011

365

47.79

8 days

2011-2012
365
Source: Secondary Data

38.44

9 days

As 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

49

AVERAGE COLLECTION PERIOD

16%

27%

2
3
15%

4
5

16%

25%

4.2.6 FIXED ASSETS TURN OVER:

Fixed Assets Turn Over =

Net Sales
Fixed assets

50

TABLE 4.2.6

YEAR

NET SALES

FIXED ASSETS

TIMES

(Rupees In Corers)

(Rupees In Corers)

2007-2008

7,141.62

3,964.00

1.80

2008-2009

7,888.60

5,073.00

1.55

2009-2010

8,648.11

6,315.00

1.36

2010-2011

8,521.47

6,645.00

1.28

2011-2012
10,012.33
Source: Secondary Data

6,643.00

1.50

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

51

TIMES

1.8
1.55

1.5
1.36

1.28

TIMES

2007-08

2008-09

2009-10

2010-11

2011-12

4.2.7 INVENTORY TURN OVER RATIO:

Inventory Turnover Ratio =

Net Sales
Inventory
TABLE 4.2.7
52

YEAR

NET SALES

INVENTORY

(Rupees In Corers)

(Rupees In Corers)

2007-2008

7,141.62

730.86

9.77

2008-2009

7,888.60

793.27

9.94

2009-2010

8,648.11

778.98

11.09

2010-2011

8,521.47

914.98

9.31

1,099.70

9.10

2011-2012
10,012.33
Source: Secondary Data

TIMES

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 20092010 (11.09 times), lowest inventory turnover in the year 2011-2012 (9.10 times). This ratio
fluctuates during the study.

DIAGREM 4.2.7

53

INVENTORY TURN OVER RATIO

11.09
9.77

9.94

9.31

9.1

RATIO

2007-08

2008-09

2009-10

2010-11

4.2.8 TOTAL ASSETS TURNOVER RATIO:

Total Assets Turnover Ratio =

Net Sales
Total Assets

54

2011-12

TABLE 4.2.8

YEAR

NET SALES

TOTAL ASSETS

TIMES

(Rupees In Corers)

(Rupees In Corers)

2007-2008

7,141.62

4,953.26

1.44

2008-2009

7,888.60

5,745.55

1.37

2009-2010

8,648.11

6,932.39

1.25

2010-2011

8,521.47

7,354.84

1.16

2011-2012
10,012.33
Source: Secondary Data

8,221.36

1.22

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

55

TIMES
1.44

1.37
1.25
1.16

1.22

TIMES

4.2.9 SALES TO CAPITAL EMPLOYED RATIO:

Sales to Capital Employed Ratio =

Net Sales
Capital Employed

56

TABLE: 4.2.9

YEAR

NET SALES

CAPITAL EMPLOYED

TIMES

(Rupees In Corers)

(Rupees In Corers)

2007-2008

7,141.62

4,791.00

1.49

2008-2009

7,888.60

5,746.00

1.37

2009-2010

8,648.11

6,932.00

1.24

2010-2011

8,521.47

7,355.00

1.22

2011-2012
10,012.33
Source: Secondary Data

8,221.00

1.21

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 20072008 (1.49) lowest in the year 2011-2012(1.21).

DIAGREAM 4.2.9
SALES TO CAPITAL EMPLOYED RATIO

57

RATIO
1.49
1.37
1.24

1.22

1.21

TIMES

2007-08

2008-09

2009-10

2010-11

4.3 LEVERAGE RATIO:

4.3.10 DEBT EQUITY RATIO:

58

2011-12

External Equities

Debt Equity Ratio =

Internal Equities

TABLE 4.3.10

EXTERNAL EQUITIES

INTERNAL EQUITIES

(Rupees In Corers)

(Rupees In Corers)

2007-2008

289.29

187.95

2008-2009

310.17

2009-2010

203.70

2010-2011

178.28

YEAR

2011-2012
Source: Secondary Data

187.95
187.95
187.95
187.95

260.41

RATIO

1.54
1.65
1.08
0.95
1.38

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

59

DEBT EQUITY RATIO

1.65
1.54
1.38

1.08

RATIO
0.95

4.3.11 DEBT ASSETS RATIO:

Total Debts
Debt Assets Ratio =
Total Assets
60

TABLE 4.3.11

YEAR

TOTAL DEBTS

TOTAL ASSETS

(Rupees In Corers)

(Rupees In Corers)

2007-2008

289.29

4,953.26

2008-2009

310.17

2009-2010

203.70

2010-2011

178.28

2011-2012
Source: Secondary Data

260.41

5,745.55
6,932.39
7,354.84
8,221.36

RATIO

0.06
0.05
0.03
0.02
0.03

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

61

DEBT ASSETS RATIO

0.06
0.05

0.03

0.03
0.02

2007-08

2008-09

2009-10

2010-11

4.3.12 PROPRIETOR RATIO:

Share Holders Funds
Proprietor Ratio =
Total Assets

62

2011-12

RATIO

TABLE 4.3.12

YEAR

SHARE HOLDERS FUNDS

TOTAL ASSETS

(Rupees In Corers)

(Rupees In Corers)

2007-2008

4,152.71

4,953.26

2008-2009

4,927.73

2009-2010

6,016.22

2010-2011

6,469.49

2011-2012
Source: Secondary Data

5,745.55
6,932.39
7,354.84
8,221.36

7,192.27

RATIO

0.83
0.85
0.86
0.88
0.87

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

63

RATIO
0.88
0.87
0.86
0.85
RATIO
0.83

2007-08

2008-09

2009-10

2010-11

2011-12

4.3.13. RESERVE TO EQUITY SHARE CAPITL RATIO:

Revenue Reserve
64

Reserve to Equity Share Capital Ratio =

Capital Employed
TABLE 4.3.13

YEAR

REVENU RESERVE

CAPITAL EMPLOYED

(Rupees In Corers)

(Rupees In Corers)

2007-2008

3,964.78

4,791

2008-2009

4,739.85

2009-2010

5,828.20

2010-2011

6,281.54

2011-2012
Source: Secondary Data

5,746
6,932
7,355
8,221

7,004.32

RATIO

0.83
0.82
0.84
0.85
0.85

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 4.3.13
RESERVE TO EQUITY SHARE CAPITAL RATIO

65

RATIO
0.85

0.85

0.84

0.83

RATIO
0.82

2007-08

2008-09

2009-10

2010-11

4.4 PROFITABILITY RATIO

4.4.14 OPERATING RATIO:

Operating Ratio =

Operating profit

100

Sales
66

2011-12

TABLE 4.4.14

YEAR

OPERATING PROFIT

SALES

PERCE NTAGE

(rupees in corers)

(rupees in corers)

(%)

2007-2008

2,005.35

7,141.62

28

2008-2009

1,831.32

7.888.60

23

2009-2010

2,630.83

8,648.11

30

2010-2011

1,803.22

8,521.47

21

1,864.31

10,012.33

19

2011-2012
Source: Secondary Data

As per table 4.4.14 the operating ratio is lowest (19%) in the year 20112012, 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 - 4.4.14
OPERATING PROFIT

67

PERCENTAGE
0.85

0.85

0.84

0.83

PERCENTAGE
0.82

2007-08

2008-09

2009-10

2010-11

2011-12

4.4.15. GROSS PROFIT

Gross profit =

Gross profit

100

Net sales
TABLE - 4.4.15

YEAR

GROSS PROFIT
(Rupees in corers)

SALES
(Rupees in corers)

PERCENTAGE
(%)

2007-2008

2,103.09

7,441.62

28

68

2008-2009

1,942.76

7,888.60

24

2009-2010

2,708.13

8648.11

31

2010-2011

1,901.06

8,521.47

22

2,055.32

10,012.33

20

2011-2012
Source: Secondary Data

As 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

69

PERCENTAGE
31
28

28
22

20
PERCENTAGE

2007-08

2008-09

2009-10

2010-11

2011-12

4.4.16 NET PROFIT RATIO:

Net Profit Ratio =

Net Profit

100

Sales
70

TABLE-4.4.16
YEAR

NET PROFIT
(rupees in corers)

SALES
(rupees in corers)

PERCENTAGE
%

2007-2008

1,217.68

7,141.62

17

2008-2009

1,099.62

7,888.60

14

2009-2010

1,563.85

8,648.11

18

2010-2011

1,074.05

8,521.47

12

1,289.84

10,012.33

13

2011-2012
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 - 4.4.16
NET PROFIT RATIO

71

PERCENTAGE
18

17
14

12

13
PERCENTAGE

4.4.17 PAYOUT RATIO:

Pay Out Ratio =

Dividend per equity share

Earning per equity share

100

TABLE 4.4.17
72

YEAR

DIVIDEND PER EQUITY

EARNING PER EQUITY

PERCENTAGE

SHARE

SHARE

(%)

(Rupees In Cores)

(Rupees In Cores)

2007-2008

20.00

76.75

26

2008-2009

20.00

64.63

31

2009-2010

23.00

85.60

27

2010-2011

30.50

59.66

51

2011-2012
28.00
Source: Secondary Data

70.59

40

As 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 4.4.17
PAY OUT RATIO

73

1; 20%

5; 20%

2; 20%

4; 20%

3; 20%

4.4.18 RETURN ON ASSETS:

Return on Assets =

Net Profit after Tax

100

Total tangible Assets

74

TABLE -4.4.18

YEAR

NET PROFIT

TANGIABLE ASSETS

PERCENTAGE

(Rupees In Corers)

(Rupees In Corers)

(%)

2007-2008

1,217.68

4,953.00

25

2008-2009

1,099.62

5,745.55

14

2009-2010

1,563.85

6,932.39

23

2010-2011

1,074.05

7,354.84

14

2011-2012
1,289.84
Source: Secondary Data

8,221.36

16

As 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 20082009 and 2010-2011 (14%).

DIAGEAM NO 4.4.18
RETURN ON ASSETS

75

PERCENTAGE

25
23

16
14

PERCENTAGE

14

4.4.19 RETURNS ON CAPITAL EMPLOYED:

Return on Capital Employed =

Net Profit +Interest + Tax

Capital Employed
TABLE 4.4.19

Source: Secondary Data

76

100

YEAR

NET PROFIT BEFORE

CAPITAL EMPLOYED

PERCENTAGE

INTEREST AND TAX

(Rupees in Corers)

(%)

(Rupees in Corers)
2007-2008

1,930

4,791

40

2008-2009

1,737

5,746

30

2009-2010

2,294

6,932

33

2010-2011

1,461

7,355

20

2011-2012

1,540
8,221
19
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 20112012(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 4.4.19
RETURNS ON CAPITAL EMPLOYED

77

PERCENTAGE
40
33
30

20

2007-08

2008-09

2009-10

2010-11

PERCENTAGE

19

2011-12

4.4.20 RETURN ON SHARE HOLDERS FUNDS

Return on Share Holders Funds =

Net Profit after Tax

Share Holders Funds
78

100

TABLE 4.4.20
Source: Secondary Data
YEAR

NET PROFIT AFTER

SHARE HOLDERS FUNDS

PERCENTAGE

TAX

(Rupees In Corers)

(%)

(Rupees In Corers)
2007-2008

1,439

4,152.71

35

2008-2009

1,213

4,927.73

25

2009-2010

1,607

6,016.22

27

2010-2011

1,120

6,469.49

17

2011-2012

1,325

7,192.27

18

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 20072008 (35%). This ratio had 10% vary between 2008- 2009(25%) and 2009-2010 (27%). 1%
increased in the year 2011-2012 (18%).

DIAGEAM NO 4.4.20
RETURN ON SHARE HOLDERS FUNDS

79

PERCENTAGE
35

27
25

17

18

PERCENTAGE

2007-08 2008-09 2009-10 2010-11 2011-12

4.4.21 OVERALL PROFITABLE RATIO (OR) RETURN ON INVESTMENT:

Operating profit
Overall Profitable Ratio (Or) Return on Investment =
100
Capital employed
TABLE 4.4.21

80

YEAR

OPERATING PROFIT
(Rupees In Corers)

CAPITAL EMPLOYED
(Rupees In Corers)

PERCENTAGE
(%)

2007-2008

1,993

4,791

42

2008-2009

1,899

5,746

33

2009-2010

2,644

6,932

38

2010-2011

1,812

7,355

25

2011-2012
1,921
Source From: Secondery Data

8,221

23

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 4.4.21
OVERALL PROFITABLE RATIO (OR) RETURN ON INVESTMENT

81

PERCENTAGE
42
38
33
25

2007-08

2008-09

2009-10

2010-11

23

PERCENTAGE

2011-12

CHAPTER V
FINDINGS, SUGGESTIONS AND CONCLUSION

82

 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 20092010(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 20112012. 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.
83

 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
84

 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% (20082009). 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 20072008 (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%).

85

 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 20102011 (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.

86

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.

87

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.

88

89