INTRODUCTION (Ratio analysis)

The ratio analysis is the most powerful tool of financial analysis. Several ratios
calculated from the accounting data can be grouped into various classes according to
financial activity or function to be evaluated.

DEFINITION:

“The indicate quotient of two mathematical expressions and as “The relationship

between two or more things’’.

It evaluates the financial position and performance of the firm. As started in the
beginning many diverse groups of people are interested in analyzing financial
information to indicate the operating and financial efficiency and growth of firm. These
people use ratios to determine those financial characteristics of firm in which they
interested with the help of ratios one can determine. The ability of the firm to meet its
current obligations. The extent to which the firm has used its long-term solvency by
borrowing funds. The efficiency with which the firm is utilizing its assets in generating
the sales revenue. The overall operating efficiency and performance of firm. Alexander
wall is the pioneer of ratio analysis. He presented a detailed system of ratio analysis in
the year 1919. Ratio analysis is important one for all management accounting for
decision making. Ratio analysis of financial statements stands for the process of
determining and presenting the relationship of items and groups of items in the
statements. Ratio analysis is a powerful tool of financial analysis. It is a process of
identifying the financial strengths and weakness of the firm by properly establishing
the relationship between the different items of balance sheet and profit and loss account
for a meaningful understanding of the financial position and performance of the firm.

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INTRODUCTION OF FINANCIAL ANANLYSIS

Financial analysis refers to an assessment of viability, stability and

profitability of a business, sub business or project.

It is performed by professionals who prepare reports using ratios that

make use of information taken from financial statements and other
reports. These reports are usually presented to top managements as one
of their bases in making business decisions. Based on these reports,
management may:

1. Continue or discontinue its main operation or part of its business;

2. Make or purchase certain materials in the manufacture of its product
3. Acquire or rent/lease certain machineries and equipment in the production of its
goods;
4. Issue stocks or negotiate for a bank loan to increase its working capital;
5. Make decisions regarding investing or lending capital;
6. Other decisions that allow management to make an informed selection on various
alternatives in the conduct of its business.

MEANING OF FINANCIAL ANALYSIS

Financial analysis is the process of identifying the financial strengths and weakness of
the firm. It is done by establishing relationships between the items of financial
statements viz., balance sheet and profit and loss account. Financial analysis can be
undertaken by management of the firm, viz., owners, creditors, investors and others.
Objectives other financial analysis of financial statements may be made for a particular
purpose in view. To find out the financial stability and soundness of the business
enterprise. To assess and evaluate the earning capacity of the business to estimate and
evaluate the fixed assets, stock etc., of the concern. To estimate and determine the
possibilities of future growth of business. To assess and evaluate the firm’s capacity
and ability to repay short and long term loans NATURE OF RATIO ANALYSIS Ratio
Analysis is a powerful tool of financial analysis.

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A ratio is defined as "the indicated quotient of mathematical expression" and as "the
relationship between two or more things". A ratio is used as benchmark for evaluating
the financial position and performance of the firm. The relationship between two
accounting figures, expressed mathematically, is known as a financial ratio. Ratio helps
to summarizes large quantities of financial data and to make qualitative judgment about
the firm's financial performance. The persons interested in the analysis of financial
statements can be grouped under three head owners (or) investors who are desired
primarily a basis for estimating earning capacity. Creditors are the people who are
concerned primarily with Liquidity and ability to pay interest and redeem loan within a
specified period. Management is interested in evolving analytical tools that will
measure costs, efficiency, liquidity and profitability with a view to make intelligent
decisions.

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 TYPES OF FINANCIAL ANALYSIS

TYPES OF
FINANCIAL
ANALYSIS

ON THE BASIS OF ON THE BASIS OF

MATERIAL USED MODUS OPERANDI

EXTERNAL INTERNAL VERTICAL HORIZONTAL

ANALYSIS ANALYSIS ANALYSIS ANALYSIS

ON THE BASIS OF MATERIAL USED

According to it, financial analysis can be of two types:

(A) EXTERNAL ANALYSIS:

External analysis is done by outsiders who do not have access to the detailed internal
accounting records of the firm. For Financial Analysis, these outsiders depend almost
entirely on the published financial statements. These outsiders include investors,
potential investor creditors, government agencies, credit agencies and the general
public. The main objective of such analysis varies from any party-to-party.

(B) INTERNAL ANALYSIS

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Internal Analysis are conducted by the persons who have access to the internal
accounting records and the other related information of a business firm. This internal
analysis is conducted for measuring the operational and managerial efficiency of the
firm. This analysis is performed by the employees of the organization as well as
government agencies, this analysis is quite comprehensive and reliable.

ON THE BASIS OF MODUS OPERANDI

According to it, Financial Analysis can be of two types:-

(A) HORIZONTAL ANALYSIS:

Horizontal analysis refers to the comparison of financial accounts of a company for

several years. The figures of the various years are compared with standard or base year,
this comparison focuses attention on items that have changed significantly during the
period under review. So, horizontal analysis is useful for long term analysis and
planning.

(B) VERTICAL ANALYSIS:

Vertical Analysis refers to the process of evaluating the relationship of the various items
in the financial statement of one accounting period. In vertical analysis, the figures from
financial statement of a year are compared with a base selected from the same year’s
statement. So, it is a study in terms of information at a particular data only.

METHODS OF FINANCIAL ANALYSIS

The analysis and interpretation of the financial statement is used to determine the
financial position and result of operation, number of methods are used to analyze the
relationship between different financial statement such as

(A) COMPARATIVE STATEMENT:

The comparative financial statements are statements of the financial position at

different period of time, in this financial data two or more year are placed and presented
in adjacent columns in order to facilitate periodic comparison. The presentation of such
data enhance the usefulness of these reports and brings out more clearly the nature and
trend of changes affecting the profitability and financial position of firm. The two types
of comparative financial statements are prepared:

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1) Comparative Balance Sheet.

2) Comparative Income Statement.

(B) COMMON –SIZE STATEMENT:

The common size statement represents the relationship of different items of a financial
statements with some common item by expressing each item as a percentage of
common items. In common-size balance sheet, each item of the balance sheet is stated
as a percentage of total of the balance sheet. Similarly in common-size income
statement, each item is stated as percentage of net sales. Thus, the common-size
statement is useful in Intra-firm as well as inter-firm comparison for the same year as
for several years.

(C) TREND ANALYSIS:

The trend analysis is a technique of studying several financial statement over a series
of years because the financial statement can be easily analyzed by computing trends of
series of information, this method determines the direction upward and involves the
computation of the percentage relationship that each statement item bears to the same
item in the base year, generally the starting years of the base year are taken as 100 and
trend ratios for other years are calculated on the basis of base year.

(D) FUND FLOW ANALYSIS:

Fund flow analysis is a technical device designed to analyze the source from which
additional funds were derived and the use to which these sources were put. It is an
effective tool to analyze changes in the working capital of the business enterprise
between beginning and the ending financial statement dates. Fund flow analysis is
helpful in accessing the growth of the firm, it results in financial needs and in
determining the best way of financing these needs.

The fund flow analysis consists of:

1) Preparing schedule of changes in Working Capital.

2) Statement of sources of application of funds.

(E) CASH FLOW ANALYSIS:

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Cash flow analysis is a technique to analyze the cash position of a business enterprise.
Cash flow analysis provide information about the cash flow of an enterprise is useful
in providing users of financial with a basis to access the ability of the enterprise to
generate cash and cash equivalents and the needs of the enterprise to utilize those cash
flows.

(F) RATIO ANALYSIS:

Ratio analysis is a technique of analysis and interpretation of financial statements. It is

a process of establishing and interpreting various ratios. A ratio, “is an expression of
the quantitative relationship between two numbers” and used as a bench mark for
evaluating the financial position and performance of a firm. Ratio has wide applications
and are of immense use in business enterprise for diagnose business problems, make
better business decisions and formulate better business plans.

Ratio analysis is very powerful analytical and planning tool used for evaluating firms
strengths, weakness, opportunities and threats. Different parties are interested in ratio
analysis for gaining a proper information contained in financial statement of a firm for
a different purpose. There are many ratios available for evaluating a firms financial
performance. In financial ratio analysis, profitability ratio helps to measure a firms
financial return, while liquidity efficiency and gearing ratios help to measure a firms
financial risk. One ratio may not throw light on any area of performance of the firm.
Therefore, a group of ratios must be preferred.

For the purpose of financial analysis, financial ratio is divided into four categories:

(1) LIQUIDITY RATIOS:

The liquidity refers to the maintenance of cash, bank balance and those assets which
are convertible into cash in order to meet the liabilities as when arising. So, the liquidity
ratio analyzes the firms short term solvency and its ability to pay off the liabilities.

(2) LEVERAGE RATIO:

Financial leverage refers to the use of debt finance, while debt capital is a cheaper
source of finance, it is also risker source of finance. For analysis by financial leverage
method two types or ratios are commonly used.

(a) Structural ratio

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(b) Coverage ratio

Structural ratios are based on properties of debt and equity in the financial structure of
firm.

Coverage ratio shows the relationship between debt servicing commitments and the
sources for meeting these burdens.

(3) ACTIVITY RATIOS:

The activity ratios measure the efficiency and effectiveness with which the resources
of a firm have been utilized. These ratios are also called turnover ratios, because they
indicate the speed with which assets are being turned over into sales. So, activity ratio
shows the relationship between sales and assets.

(4) PROFITABILITY RATIOS:

Profitability reflects the final result of business operations. These are two types of
profitability ratios.

(a) Profit Margin Ratio

(b) Rate of Return Ratio

A Profit Margin Ratio shows the relationship between profit and sales.

Rate of Return Ratio shows the relationship between profit and investment.

(5) COST-VOLUME-PROFIT ANALYSIS

Cost volume profit analysis is a technique for analysis of the relationship between cost,
volume and profit at different levels of sales as production. The three factors of cost
volume profit analysis is cost, volume and profit are interconnected and dependent on
one another and these relationship is an important tool used for the profit planning, cost
control and decision making. Cost-Volume-Profit analysis refers to a technique of
determining the relationship between the variations in cost with the variations in
volume and also with profit.

STANDARDS OF COMPARISON

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The ratio analysis involves comparison for a useful interpretation of the financial
statements. A single ratio in itself does not indicate favorable or unfavorable condition.
It should be compared with some standard.

Standards of comparison are:

1. Past Ratios

2. Competitor's Ratios

3. Industry Ratios

4. Projected Ratios

Past Ratios: Ratios calculated from the past financial statements of the same firm.

Competitor's Ratios: Ratios of some selected firms, especially the most progressive and
successful competitor at the same point in time.

Industry Ratios: Ratios of the industry to which the firm belongs.

Projected Ratios: Ratios developed using the projected financial statements of the same
firm

TIME SERIES ANALYSIS

The easiest way to evaluate the performance of a firm is to compare its present ratios
with past ratios. When financial ratios over a period of time are compared, it is known
as the time series analysis or trend analysis. It gives an indication of the direction of
change and reflects whether the firm's financial performance has improved, deteriorated
or remind constant over time.

CROSS SECTIONAL ANALYSIS

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Another way to comparison is to compare ratios of one firm with some selected firms
in the industry at the same point in time. This kind of comparison is known as the cross-
sectional analysis. It is more useful to compare the firm's ratios with ratios of a few
carefully selected competitors, who have similar operations.

INDUSTRY ANALYSIS

Its ratio may be compared with average ratios of the industry of which the firm is a
member. This type of analysis is known as industry analysis and also it helps to
ascertain the financial statements.
Financial standing and capability of the firm & other firms in the industry. Industry
ratios are important standards in view of the fact that each industry has its
characteristics which influence the financial and operating relationships.

METHODS OF ANALYSIS:

A financial analyst can adopt the following tools for analysis of the financial
statements. These are also termed as methods of financial analysis.

A. Comparative statement analysis

B. Common-size statement analysis
C. Trend analysis
D. Funds flow analysis

Ratio analysis Parties interested in financial analysis the users of financial analysis can
be divided into two broad groups.

Internal users :
1. Financial executives
2. Top management

External users:
1. Investors

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2. Creditor
3. Workers
4. Customers
5. Government
6. Public

Researchers Significance of financial analysis financial analysis serves the following

purpose:

To know the operational efficiency of the business: The financial analysis enables the
management to find out the overall efficiency of the firm. This will enable the
management to locate the weak Spots of the business and take necessary remedial
action.

Helpful in measuring the solvency of the firm:

The financial analysis helps the decision makers in taking appropriate decisions for
strengthening the short-term as well as long-term solvency of the firm.

Comparison of past and present results:

Financial statements of the previous years can be compared and the trend regarding
various expenses, purchases, sales, gross profit and net profit can be ascertained.

Helps in measuring the profitability:

Financial statements show the gross profit, & net profit. Inter‐firm comparison: The
financial analysis makes it easy to make inter-firm comparison. This comparison can
also be made for various time periods.

Bankruptcy and Failure:

Financial statement analysis is significant tool in predicting the bankruptcy and the
failure of the business enterprise. Financial statement analysis accomplishes this
through the evaluation of the solvency position.

Helps in forecasting:

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The financial analysis will help in assessing future development by making forecasts
and preparing budgets

TYPES OF RATIOS:

Management is interested in evaluating every aspect of firm's performance. In view of

the requirement of the various users of ratios, we may classify them into following four
important categories:

A.LIQUIDITY RATIOS:

It is essential for a firm to be able to meet its obligations as they become due. Liquidity
Ratios help in establishing a relationship between cast and other current assets to current
obligations to provide a quick measure of liquidity. A firm should ensure that it does
not suffer from lack of liquidity and also that it does not have excess liquidity. A very
high degree of liquidity is also bad, idle assets earn nothing. The firm's funds will be
unnecessarily tied up in current assets. Therefore it is necessary to strike a proper
balance between high liquidity. Liquidity ratios can be divided into three types:
1) Current Ratio
2) Quick Ratio
3) Cash Ratio

1. CURRENT RATIO:

Current ratio is an acceptable measure of firm’s short-term solvency Current assets

includes cash within a year, such as marketable securities, debtors and inventors.
Prepaid expenses are also included in current assets as they represent the payments that
will not made by the firm in future. All obligations maturing within a year are included
in current liabilities. These include creditors, bills payable, accrued expenses, short-
term bank loan, income-tax liability in the current year. The current ratio is a measure
of the firm's short term solvency. It indicated the availability of current assets in rupees
for every one rupee of current liability. A current ratio of 2:1 is considered satisfactory.
The higher current ratio, greater the margin of safety, the larger the amount of current

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assets in relation to current liabilities, then it indicate more the firm's ability to meet its
obligations. It is a cured –and -quick measure of the firm's liquidity. Current ratio is
calculated by dividing current assets and current liabilities.
Current ratio = Current assets / Current liability

2. QUICK RATIO:

Quick Ratio establishes a relationship between quick or liquid assets and current
liabilities. An asset is liquid if it can be converted into in immediately or reasonably
soon without a loss of value. Cash is the most liquid asset, other assets that are
considered to be relatively liquid asset and included in quick assets are debtors and bills
receivables and marketable securities (temporary quoted investments). Generally, a
quick ratio of 1:1 is considered to represent a satisfactory current financial condition.
Quick ratio is a more penetrating test of liquidity than the current ratio, yet it should be
used cautiously. A company with a high value of quick ratio can suffer from the
shortage of funds if it has slow- paying, doubtful and long duration outstanding debtors.
A low quick ratio may really be prospering and paying its current obligation in time.
Quick ratio is also known as Acid test ratio and liquid ratio.
Quick ratio = Quick assets / Quick liability

3. CASH RATIO:

Cash is the most liquid asset; a financial analyst may examine Cash Ratio and its
equivalent current liabilities. Cash and Bank balances and short-term marketable
securities are the most liquid assets of a firm, financial analyst stays look at cash ratio.
Trade investment is

CURRENT RATIO=CURRENT ASSETS/CURRENT LIABILITY

marketable securities of equivalent of cash. If the company carries a small amount of

cash, there is nothing to be worried about the lack of cash if the company has reserves
borrowing power. Cash Ratio is perhaps the most stringent measure of liquidity. Indeed,

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one can argue that it is overly stringent. Lack of immediate cash may not matter if the
firm stretch its payments or borrow money at short notice.

B.LEVERAGE RATIOS:

Financial leverage refers to the use of debt finance while debt capital is a cheaper source
of finance: it is also a riskier source of finance. It helps in assessing the risk arising
from the use of debt capital. Two types of ratios are commonly used to analyze financial
leverage.

1. Structural ratios
2. Coverage ratios

Structural Ratios are based on the proportions of debt and equity in the financial
structure of firm.
Coverage Ratios shows the relationship between Debt Servicing, Commitments and the
sources for meeting these burdens.

The short-term creditors like bankers and suppliers of raw material are more concerned
with the firm's current debt-paying ability. On the other hand, long- term creditors like
debenture holders, financial institutions are more concerned with the firm's long-term
financial strength. To judge the long-term financial position of firm, financial leverage
ratios are calculated. These ratios indicated mix of funds provided by owners and
lenders. There should be an appropriate mix of Debt and owner's equity in financing
the firm's assets. The process of magnifying the shareholder's return through the use of
Debt is called "financial leverage" or "financial gearing" or "trading on equity".
Leverage Ratios are calculated to measure the financial risk and the firm's ability of
using Debt to shareholder’s advantage.

1. Debt equity ratio:

It indicates the relationship describing the lenders contribution for each rupee of the
owner's contribution is called debt-equity ratio. Debt equity ratio is directly computed
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by dividing total debt by net worth. Lower the debt-equity ratio, higher the degree of
protection. A debt-equity ratio of 2:1 is considered ideal. The debt consists of all short
term as well as long- term and equity consists of net worth plus preference capital plus
Deferred Tax Liability.

TOTAL DEBT EQUITY RATIO = TOTAL DEBT / TOTAL EQUITY

2. Interest Coverage Ratio:

The interest coverage ratio or the time interest earned is used to test the firms’ debt
servicing capacity. The interest coverage ratio is computed by dividing earnings before
interest and taxes by interest charges. The interest coverage ratio shows the number of
times the interest charges are covered by funds that are ordinarily available for their
payment. We can calculate the interest average ratio as earnings before depreciation,
interest and taxes divided by interest.

3. Proprietary ratio:
The total shareholder's fund is compared with the total tangible assets of the company.
This ratio indicates the general financial strength of concern. It is a test of the soundness
of financial structure of the concern. The ratio is of great significance to creditors since
it enables them to find out the proportion of shareholders’ funds in the total investment
of business.

SHAREHOLDERS FUNDS OR PROPRIETOTY RATIO = SHAREHOLDERA

FUND / TOTAL ASSETS

4. Debt ratio:
Several debt ratios may use to analyze the long-term solvency of a firm. The firm may
be interested in knowing the proportion of the interest-bearing debt in the capital
structure. It may, therefore, compute debt ratio by dividing total debt by capital
employed on net assets. Total debt will include short and long-term borrowings from
financial institutions,

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EBIT INTEREST COVERAGE RATIO=INTEREST on debentures/bonds, deferred
payment arrangements for buying equipment’s, bank borrowings, public deposits and
any other interest-bearing loan. Capital employed will include total debt net worth.

5. Capital gearing ratio:

This ratio makes an analysis of capital structure of firm. The ratio shows relationship
between equity share capital and the fixed cost bearing i.e., preference share capital and
debentures.
EQUITY CAPITAL GEARING RATIO = PREFERNCESHARE CAPITAL
+DEBENTTURES +LOANS.

C. ACTIVITY RATIOS:

Turnover ratios also referred to as activity ratios or asset management ratios, measure
how efficiently the assets are employed by a firm. These ratios are based on the
relationship between the level of activity, represented by sales or cost of goods sold and
levels of various assets. The improvement turnover ratios are inventory turnover,
average collection period, receivable turn over, fixed assets turnover and total assets
turnover. Activity ratios are employed to evaluate the efficiency with which the firm
manages and utilize its assets. These ratios are also called turnover ratios because they
indicate the speed with which assets are being converted or turned over into sales.
Activity ratios thus involve a relationship between sales and assets. A proper balance
between sales and assets generally reflects that asset utilization. Activity ratios are
divided into four types: inventory turnover ratio debtor’s turnover ratio Fixed assets
turnover ratio Working capital turnover ratio Total assets turnover ratio
TOTAL DEBTS DEBT RATIO= TOTAL ASSETS

1. INVENTORY TURNOVER RATIO/STOCK TURNOVERRATIO:

Inventory turnover ratio indicates the efficiency of the firms in producing and selling
its products. It’s calculated by dividing the cost of goods sold by average inventory.
STOCK TURNOVER RATIO = COST OF GOODS SOLD / AVERAGE STOCK

2. DEBTORSTURNOVER RATIO:
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Debtor’s turnover ratio indicates the relationship between sales and average debtors.
It’s calculated by dividing sales by average debtors. Higher the turnover ratio indicates
better performance and lower turnover indicates inefficiency.
DEBTORS TURNOVER RATIO = CREDIT SALES / DEBTORS+BILLS
RECIEVABELS

3. FIXED ASSET TURNOVER RATIO:

The firm may which to know its efficiency of utilizing fixed assets and current assets
separately. The use of depreciated value of fixed assets in computing the fixed assets
turnover may render comparison of firm's performance over period or with other firms.
The ratio is supposed to measure the efficiency with which fixed assets employed a
high ratio indicates a high degree of efficiency in asset utilization and a low ratio
reflects inefficient use of assets. However, in interpreting this ratio, one caution should
be borne in mind, when the fixed assets of firm are old and substantially depreciated
the fixed assets turnover ratio tends to be high because the denominator of ratio is very
low.

4. WORKING CAPITAL TURNOVER RATIO:

Cost of goods sold STOCK TURNOVER RATIO = Average inventory NET SALES
DEBTORS TURNOVER RATIO = AVERAGE DEBTORS NET SALES FIXED
ASSETS TURNOVER RATIOS = FIXED ASSETS
This ratio measures the relationship between working capital and sales. The ratio shows
the number of times the working capital results in sales. Working capital as usual is the
excess of current assets over current liabilities. The following formula is used to
measure the ratio.

5. CURRENT ASSET TURNOVEER RATIO:

This ratio is calculated by dividing sales into current assets. This ratio expressed the
number of times current assets are being turnover in standard period. This ratio shows
how well the current assets are being used in the business. NET SALES CURRENT
ASSET TURNOVER RATIO = CURRENT ASSETS
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6. TOTAL ASSET TURNOVER RATIO:

This ratio expresses relationship between the amount invested in the asset and the result
in term of sales. This is calculated by dividing the net sales by total assets. The higher
the ratio means the better utilization and vice-versa.

D. PROFITABILITY RATIOS:

A company should earn profits to survive and grow over a long period of time. Profits
are essential but it would be wrong to assume that every action initiated by management
of a company should be aimed at maximizing profits. Profit is the difference between
revenues and expenses over a period of time. Profit is the ultimate 'output' of a company
and it will have no future if it fails to make sufficient profits. The financial manager
should continuously evaluate SALES WORKING CAPITAL TURNOVER RATIO =
WORKING CAPITAL the efficiency of company in terms of profits. The profitability
ratios are calculated to measure the operating efficiency of company. Creditors want to
get interest and repayment of principal regularly. Owners want to get a required rate of
return on their investment. Generally, two major types of profitability ratios are
calculated: o Profitability in relation to sales of Profitability in relation to investment
Profitability Ratios can be divided into six types:

1. Gross profit ratio

2. Operating profit ratio
3. Net profit ratio
4. Return on investment
5. Earns per share
6. Operating expenses ratio

1. GROSS PROFIT RATIO:

First profitability ratio in relation to sales is the gross profit margin the gross profit
margin reflects the efficiency which management produces each unit of product. This
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ratio indicates the average spread between the cost of goods sold and the sales revenue.
A high gross profit margin is a sign of good management. A gross margin ratio may
increase due to any of following factors: higher sales prices cost of goods sold
remaining constant, lower cost of goods sold, sales prices remaining constant. A low
gross profit margin may reflect higher cost of goods sold due to firm's inability to
purchase raw materials at favorable terms, inefficient utilization of plant and machinery
resulting in higher cost of production or due to fall in prices in market. This ratio shows
the margin left after meeting manufacturing costs. It measures the efficiency of
production as well as pricing. To analyze the factors underlying the variation in gross
profit margin, the proportion of various elements of cost (Labour, materials and
manufacturing overheads) to sale may study in detail

GROSS PROFIT RATIO = GROSS PROFIT / NET SALES x 100

2. OPERATING PROFIT RATIO:

This ratio expresses the relationship between operating profit and sales. It is worked
out by dividing operating profit by net sales. With the help of this ratio, one can judge
the managerial efficiency which may not be reflected in the net profit ratio.

OPERATING PROFIT RATIO = NET OPERATING PROFIT / NET SALES x 100

3. NET PROFIT RATIO:

Net profit is obtained when operating expenses, interest and taxes are subtracted from
the gross profit. Net profit margin ratio established a relationship between net profit
and sales and indicates management's efficiency in manufacturing, administering and
selling products. This ratio also indicates the firm's capacity to withstand adverse
economic conditions. A firm with a high net margin ratio would be in an advantageous
position to survive in the face of falling selling prices, rising costs of production or
declining demand for product this ratio shows the earning left for shareholders as a
percentage of net sales. It measures overall efficiency of production, administration,
selling, financing. Pricing and tax management. Jointly considered, the gross and net
profit margin ratios provide a valuable understanding of the cost and profit structure of
the firm and enable the analyst to identify the sources of business efficiency /
inefficiency.
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NET PROFIT RATIO = NET PROFIT BEFORE TAX / NET SALES x 100

4. RETUN ON INVESTMENT:
This is one of the most important profitability ratios. It indicates the relation of net
profit with capital employed in business. Net profit for calculating return of investment
will mean the net profit before interest, tax, and dividend. Capital employed means long
term funds.

PROFIT BEFORE INTEREST AND TAX / CAPITAL EMPLOYED x 100

5. EARNING PER SHARE:

This ratio is computed by earning available to equity shareholders by the total amount
of equity share outstanding. It reveals the amount of period earnings after taxes which
occur to each equity share. This ratio is an important index because it indicates whether
the wealth of each shareholder on a per share basis as changed over the period.
EPS = PROFIT AVAILABLE TO EQUITY SHAREHOLDERS / NUMBER OF
EQUITY SHAREHOLDERS

6. OPERATING EXPENSESRATIO:
It explains the changes in the profit margin ratio. A higher operating expenses ratio is
unfavorable since it will leave a small amount of operating income to meet interest,
dividends. Operating expenses ratio is a yardstick of operating efficiency, but it should
be used cautiously. It is affected by a number of factors such as external uncontrollable
factors, internal factors. This ratio is computed by dividing operating expenses by sales.
Operating expenses equal cost of goods sold plus selling expenses and general
administrative expenses by sales.

1) Office expenses / Net sales x 100

2) Selling and distribution expenses / Net sales x 100

3) Financial expenses / Net sales x 100

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7. DIVIDEND PER SHARE:
The net profit after tax belongs to shareholders. But the income they really receive is
the amount of earning as cash dividends.
DPS = TOTAL DIVIDEND / NUMBER OF EQUITY SHARES

8. DIVIDEND PAYOUT RATIO:

It measures the relationship between the returns available to equity shareholders and
the dividend paid to them. It reveals what portion of earning per share has been used
for paying dividend and what has been retained for sloughing back.

DIVIDEND PAYOUT RATIO = EQUITY SHARES DIVIDEND / PROFIT AFTER

TAX – PREFERENCE DIVIDEND x 100

E .COMPOSITE RATIO

Composite ratio is also known as Hybrid ratio or Combine ratio.

1) RETURN ON PROPRIETOR FUND:

Proprietors return means the dividend which proprietor get after pay all the external
liability and after tax.
RETURN ON PROPRIETOR FUND = PROFIT AFTER TAX / PROPRIETORS
FUND x 100

2) RETURN ON EQUITY SHARE CAPITAL:

The real owner of the company that is equity shareholders get the return in the form of
dividend and that dividend is given on the basis of their capital they invested in the
company.
RETURN ON EQUITY SHARE CAPITAL = PAT – PREFERENCE DIVIDEND /
EQUITY SHARES AND RES. AND SUR. – MISC. EXP. x 100

3) PRICE EARNING RATIO:

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PRICE EARNING RATIO = MARKET PRICE / EPS x 100

4) DEBTORS TURNOVER RATIO:

The accounts receivable turnover ratio is an accounting measure used to quantify a

company's effectiveness in collecting its receivables or money owed by clients. The
ratio shows how well a company uses and manages the credit it extends to customers
and how quickly that short-term debt is collected or is paid. The receivables turnover
ratio is also called the accounts receivable turnover ratio.

DEBTORS TURNOVER RATIO = CREDIT SALES / DEBTORS + BILLS

RECIEVABLES

5) CREDIT TURNOVER RATIO:

The accounts payable turnover ratio is a short-term liquidity measure used to quantify
the rate at which a company pays off its suppliers. Accounts payable turnover shows
how many times a company pays off its accounts payable during a period.

MEANING OF RATIO ANALYSIS

Now, we have previously learned what ratios are. They are a comparison of two
numbers with respect to each other. Similarly, in finance, ratios are a correlation
between two numbers, or rather two accounts. So two numbers derived from the
financial statement are compared to give us a more clear understanding of them. This
is an accounting ratio. When investors and analysts talk about fundamental or
quantitative analysis, they are usually referring to ratio analysis. Ratio analysis involves
evaluating the performance and financial health of a company by using data from the
current and historical financial statements.

22
The data retrieved from the statements is used to compare a company's performance
over time to assess whether the company is improving or deteriorating, to compare a
company's financial standing with the industry average, or to compare a company to
one or more other companies operating in its sector to see how the company stacks up.

Ratio analysis can be used to establish a trend line for one company's results over a
large number of financial reporting periods. This can highlight company changes that
would not be evident if looking at a given ratio that represents just one point in time.

Comparing a company to its peers or its industry averages is another useful application
for ratio analysis. Calculating one ratio for competitors in a given industry and
comparing across the set of companies can reveal both positive and negative
information.

Since companies in the same industry typically have similar capital structures and
investment in fixed assets, their ratios should be substantially the same. Different ratio
results could mean that one firm has a potential issue and is underperforming the
competition, but they could also mean that a certain company is much better at
generating profits than its peers. Many analysts use ratios to review sectors, looking for
the most and least valuable companies in the group.

Key Takeaways

 Ratio analysis compares line-item data from a company's financial statements

to reveal insights regarding profitability, liquidity, operational efficiency, and
solvency.
 Ratio analysis can be used to look at trends over time for one company or to
compare companies within an industry or sector.
 While ratios offer several types of insight, other types of information and
analysis are usually needed to form a complete picture of a company's financial
position.

Examples of Ratio Analysis Categories

Most investors are familiar with a few key ratios, particularly the ones that are relatively
easy to calculate and interpret. Some of these ratios include the current ratio, return on
equity (ROE), the debt-equity (D/E) ratio, the dividend payout ratio, and the

23
price/earnings (P/E) ratio. While there are numerous financial ratios, they can be
categorized into six main groups based on the type of analysis they provide.

1. Liquidity Ratios
Liquidity ratio measure a company's ability to pay off its short-term debts as they come
due using the company's current or quick assets. Liquidity ratios include the current
ratio, quick ratio, and working capital ratio.

2. Solvency Ratios
Also called financial leverage ratios, solvency ratio compare a company's debt levels
with its assets, equity, and earnings to evaluate whether a company can stay afloat in
the long-term by paying its long-term debt and interest on the debt. Examples of
solvency ratios include debt-equity ratio, debt-assets ratio, and interest coverage ratio.

24
3. Profitability Ratios
These ratios show how well a company can generate profits from its operations. Profit
margin, return on assets, return on equity, return on capital employed, and gross margin
ratio are all examples of profitability ratio.

4. Efficiency Ratios
Also called activity ratios, efficiency ratios evaluate how well a company uses its assets
and liabilities to generate sales and maximize profits. Key efficiency ratios are the asset
turnover ratio, inventory turnover, and days' sales in inventory.

5. Coverage Ratios
These ratios measure a company's ability to make the interest payments and other
obligations associated with its debts. The times interest earn ratio and the debt service
coverage ratio are both examples of coverage ratios.

6. Market Prospect Ratios

These are the most commonly used ratios in fundamental analysis and include dividend
yield, P/E ratio, earnings per share, and dividend payout ratio. Investors use these ratios
to determine what they may receive in earnings from their investments and to predict
what the trend of a stock will be in the future.

For example, if the average P/E ratio of all companies in the S&P 500 index is 20, with
the majority of companies having a P/E between 15 and 25, a stock with a P/E ratio of
7 would be considered undervalued, while one with a P/E of 50 would be considered
overvalued. The former may trend upwards in the future, while the latter will trend
downwards until it matches with its intrinsic value.

Let us take an another example; The income for the year from operations is let us say
1,00,000/- for a given year. The Purchases and other direct expenses cost around
75,000/-. So the Gross Profit of the year is 25,000/-. Now it can be said that the Gross
Profit is 25% of the Operations Revenue. We calculate this as

G.P. Ratio = GP Sales/Revenue ×100

G.P .Ratio = 25,0001,00,000 ×100
G.P. Ratio = 25%

25
One factor to be kept in mind is that ratio analysis is used only to compare numbers that
make sense and give us a better understanding of the financial statement. Comparing
random financial accounts should be avoided.

OBJECTIVES OF RATIO ANALYSIS

Interpreting the financial statements and other financial data is essential for all
stakeholders of an entity. Ratio Analysis hence becomes a vital tool for financial
analysis and financial management. Let us take a look at some objectives that ratio
analysis fulfils.

1) Measures of Profitability:
Profit is the ultimate aim of every organization. So if I say that ABC firm earned a profit
of 5 lakhs last year, how will you determine if that is a good or bad figure? Context is
required to measure profitability, which is provided by ratio analysis. Gross Profit
Ratios, Net Profit Ratio, Expense ratio etc provide a measure of profitability of a firm.
The management can use such ratios to find out problem areas and improve upon them.

2) Evaluation of operational efficiency:

Certain ratios highlight the degree of efficiency of a company in the management of its
assets and other resources. It is important that assets and financial resources be allocated
and used efficiently to avoid unnecessary expenses. Turnover Ratios and Efficiency
Ratios will point out any mismanagement of assets.

3) Ensure a suitable liquidity:

Every firm has to ensure that some of its assets are liquid, in case it requires cash
immediately. So the liquidity of a firm is measured by ratios such as Current ratio and
Quick Ratio. These help a firm maintain the required level of short-term solvency.

4] Overall Financial Strength

There are some ratios that help determine the firm’s long-term solvency. They help
determine if there is a strain on the assets of a firm or if the firm is over-leveraged. The

26
management will need to quickly rectify the situation to avoid liquidation in the future.
Examples of such ratios are Debt-Equity Ratio, Leverage ratios etc.

5] Comparison
The organizations’ ratios must be compared to the industry standards to get a better
understanding of its financial health and fiscal position. The management can take
corrective action if the standards of the market are not met by the company. The ratios
can also be compared to the previous years’ ratio’s to see the progress of the company.
This is known as trend analysis.

Generally, ratio analysis involves four steps:

(i) Collection of relevant accounting data from financial statements.

(ii) Constructing ratios of related accounting figures.
(iii) Comparing the ratios thus constructed with the standard ratios which may be the
corresponding past ratios of the firm or industry average ratios of the firm or ratios of
competitors.
(iv) Interpretation of ratios to arrive at valid conclusions.

ADVANTAGES OF RATIO ANALYSIS

Ratio analysis is widely used as a powerful tool of financial statement analysis. It

establishes the numerical or quantitative relationship between two figures of a financial
statement to ascertain strengths and weaknesses of a firm as well as its current financial
position and historical performance. It helps various interested parties to make an
evaluation of certain aspect of a firm’s performance.

The following are the principal advantages of ratio analysis:

1. Forecasting and Planning:

27
The trend in costs, sales, profits and other facts can be known by computing ratios of
relevant accounting figures of last few years. This trend analysis with the help of ratios
may be useful for forecasting and planning future business activities.

2. Budgeting:
Budget is an estimate of future activities on the basis of past experience. Accounting
ratios help to estimate budgeted figures. For example, sales budget may be prepared
with the help of analysis of past sales.
3. Measurement of Operating Efficiency:
Ratio analysis indicates the degree of efficiency in the management and utilisation of
its assets. Different activity ratios indicate the operational efficiency. In fact, solvency
of a firm depends upon the sales revenues generated by utilizing its assets.

4. Communication:
Ratios are effective means of communication and play a vital role in informing the
position of and progress made by the business concern to the owners or other parties.

5. Control of Performance and Cost:

Ratios may also be used for control of performances of the different divisions or
departments of an undertaking as well as control of costs.

6. Inter-firm Comparison:
Comparison of performance of two or more firms reveals efficient and inefficient firms,
thereby enabling the inefficient firms to adopt suitable measures for improving their
efficiency. The best way of inter-firm comparison is to compare the relevant ratios of
the organization with the average ratios of the industry.

7. Indication of Liquidity Position:

Ratio analysis helps to assess the liquidity position i.e., short-term debt paying ability
of a firm. Liquidity ratios indicate the ability of the firm to pay and help in credit
analysis by banks, creditors and other suppliers of short-term loans.

8. Indication of Long-term Solvency Position:

28
Ratio analysis is also used to assess the long-term debt-paying capacity of a firm. Long-
term solvency position of a borrower is a prime concern to the long-term creditors,
security analysts and the present and potential owners of a business. It is measured by
the leverage/capital structure and profitability ratios which indicate the earning power
and operating efficiency. Ratio analysis shows the strength and weakness of a firm in
this respect.

9. Indication of Overall Profitability:

The management is always concerned with the overall profitability of the firm. They
want to know whether the firm has the ability to meet its short-term as well as long-
term obligations to its creditors, to ensure a reasonable return to its owners and secure
optimum utilisation of the assets of the firm. This is possible if all the ratios are
considered together.

10. Signal of Corporate Sickness:

A company is sick when it fails to generate profit on a continuous basis and suffers a
severe liquidity crisis. Proper ratio analysis can give signal of corporate sickness in
advance so that timely measures can be taken to prevent the occurrence of such
sickness.

11. Aid to Decision-making:

Ratio analysis helps to take decisions like whether to supply goods on credit to a firm,
whether bank loans will be made available etc.

12. Simplification of Financial Statements:

Ratio analysis makes it easy to grasp the relationship between various items and helps
in understanding the financial statements.

Limitations of Ratio Analysis:

The technique of ratio analysis is a very useful device for making a study of the financial
health of a firm. But it has some limitations which must not be lost sight of before
undertaking such analysis.

29
Some of these limitations are:

1. Limitations of Financial Statements:

Ratios are calculated from the information recorded in the financial statements. But
financial statements suffer from a number of limitations and may, therefore, affect the
quality of ratio analysis.

2. Historical Information:
Financial statements provide historical information. They do not reflect current
conditions. Hence, it is not useful in predicting the future.

3. Different Accounting Policies:

Different accounting policies regarding valuation of inventories, charging depreciation
etc. make the accounting data and accounting ratios of two firms non-comparable.

4. Lack of Standard of Comparison:

No fixed standards can be laid down for ideal ratios. For example, current ratio is said
to be ideal if current assets are twice the current liabilities. But this conclusion may not
be justifiable in case of those concerns which have adequate arrangements with their
bankers for providing funds when they require, it may be perfectly ideal if current assets
are equal to or slightly more than current liabilities.

5. Quantitative Analysis:
Ratios are tools of quantitative analysis only and qualitative factors are ignored while
computing the ratios. For example, a high current ratio may not necessarily mean sound
liquid position when current assets include a large inventory consisting of mostly
obsolete items.

6. Window-Dressing:
The term ‘window-dressing’ means presenting the financial statements in such a way
to show a better position than what it actually is. If, for instance, low rate of depreciation
is charged, an item of revenue expense is treated as capital expenditure etc. the position
of the concern may be made to appear in the balance sheet much better than what it is.

30
Ratios computed from such balance sheet cannot be used for scanning the financial
position of the business.

7. Changes in Price Level:

Fixed assets show the position statement at cost only. Hence, it does not reflect the
changes in price level. Thus, it makes comparison difficult.

8. Causal Relationship Must:

Proper care should be taken to study only such figures as have a cause-and-effect
relationship; otherwise ratios will only be misleading.

9. Ratios Account for one Variable:

Since ratios account for only one variable, they cannot always give correct picture since
several other variables such Government policy, economic conditions, availability of
resources etc. should be kept in mind while interpreting ratios.

10. Seasonal Factors Affect Financial Data:

Proper care must be taken when interpreting accounting ratios calculated for seasonal
business. For example, an umbrella company maintains high inventory during rainy
season and for the rest of year its inventory level becomes 25% of the seasonal
inventory level. Hence, liquidity ratios and inventory turnover ratio will give biased
picture.

31
Ambuja Cement Limited was set up in the late 80s. The cement industry presented an
opportunity of steady growth and ethical competition to the promoters.

However, a decade later, it became one of the world’s most efficient cement
companies producing the finest cement in the world at lowest cost. While adhering to
the most stringent international pollution control norms.

Today, Ambuja is the 3 rd largest cement company in India, with an annual plant
capacity of 16 million tonnes including Ambuja Cement Eastern Ltd. and revenue in
excess of Rs. 3298 crores.

More importantly, its plants are some of the most efficient in the world. With
environment protection measures that are on par with the finest in the developed world.

32
But the company’s most distinctive attribute is its approach to the business. Ambuja
believes its most valuable assets aren’t cement plants. They are the people who run
the plants.

This unique vision is encapsulated in the company’s homegrown philosophy of giving

people the authority to set their own targets, and the freedom to achieve their goals.

It’s called “ I can ”

This simple vision has created an environment where there are no limits to excellence,
no limits to efficiency. And has proved to be a powerful engine of growth for the
company.

As, a result Ambuja has consistently raised the bar in all aspects of the cement
industry. Be it transportation, plant efficiency, brand building, or human resource
development.

33
34
 COMPANY PROFILE

Name Ambuja Cement Company Ltd.

Address QATER No: F219,

HDFC ATM,
Ambuja Nagar,
Kodinar – 362715,
Gujarat,India.

Contact No. (02795) 237829/30/31/32

E-mail acf.ambujanagar@ambujacement.com

Fax No. (02795) 232163

Chief Promoter Mr. Narotam Sekhsaria

Mr. Suresh Neotia
Size Of Unit Large Scale Unit

Form Of Organization Private Limited Company

Bankers State Bank Of India

Bank Of Baroda
Dena Bank
Year Of Establishment September,1986

Main Products Cement

Brand Name Ambuja Cement

Market International Market

Slogan Giant Comprehensive Strength

35
 PRESENT MANAGING BODY

 Mr. Suresh Neotia : Chairman Emeritus

 Mr. N.S. Sekhsaria : Chairman
 Mr. Paul Haribhakti : Vice Chairman
 Mr. Ajay Kapur : Managing Director & CEO
 Mr. Onne Van Der Weijde : Managing Director
 Mr. Sanjeev Churiwala : Chief Financial Officer
 Mr. Rajiv Gandhi : Company Secretary
 Mr. Bernard Terver : Director
 Mr. Bernard Fontana : Director
 Mr. Rajendra P. Chitale : Director
 Mr. Nasser Munjee : Director
 Mr. Omkar Goswami : Director
 Mr. B. L. Taparia : Director
 Mr. Shailesh Haribhakti : Director
 Mr. Haigreve Khaitan : Director

ORGANIZATION STRUCTURE

General organization chart is a blue print of company organization.

Anybody understands a position of employees. General organization
structure process is very important and hard process.
We can understand an authority and responsibility of officers and
employees. And also general structure showed a relationship between
officer to officer, employees to employees. And also shown a group
activity, so best structure means a best result.
According to the observation, authority is in the hand of top level
management and responsibility rests with medium and low level
management.

36
 FORM OF ORGANIZATIO

Whether, a particular type of organization will be suitable to a particular type of

business, motive and incentives, finance requirements, scale of operation etc.

A comparative idea for different forms of business organization is given below:

 Sole proprietorship
 Partnership
 Joint Hindu Family Business
 Co-operatives
 Joint Stock Company
 Public Enterprise
 Private Enterprise

The name of the unit in which I prepared report on Ambuja Cement Ltd. the
name Ambuja Cement Ltd. itself suggest Ambuja is a Public Company.
Ambuja Cement Ltd.is public company having common scale and liability.

HISTORY OF AMBUJA CEMENT

Ambuja Cements Ltd a part of the global conglomerate LafargeHolcim is among the
leading cement companies in India. The company sells cement under the Ambuja
brand.Ambuja Cements Ltd (ACL) was incorporated in the year 1981 as Ambuja
Cements Pvt Ltd. The company was established as a joint venture between the public
sector Gujarat Industrial Investment Corporation (GIIC) and Narottam Sekhsaria &
Associates. In May 19 1983 the company was rehabilitated into a public limited
company. Subsequently the company name was changed to Gujarat Ambuja Cements
Ltd. Further the name was changed to Ambuja Cements Ltd. Ambuja Cements is a
major cement producing company in India. The principal activity of the company is to
manufacture and market cement and clinker for both domestic and export markets. The

37
company has five integrated cement manufacturing plants and eight cement grinding
units. It is the first Indian cement manufacturer having a captive port with three
terminals along the country's western coastline to facilitate timely cost effective and
environmentally cleaner shipments of bulk cement to its customer. The company has
its own fleet of ships.

The company subsidiaries include Dang Cement Industries Private Ltd M.G.T Cements
Private Ltd Chemical Limes Mundwa Private Ltd and Dirk India Pvt Ltd.In the year
1985 the company set up a cement plant in technical collaboration with Krupp Polysius
Germany Bakau Wolf and Fuller KCP. During the year 1988-89 the company
commissioned the 12.6 MW diesel-generating sets. In the year 1991 the company got
necessary approvals for setting up another cement plant with 1 million tonne capacity
per annum at Himachal Pradesh. The company undertook bulk cement transportation
by sea to the major markets of Mumbai Surat and other deficit zones on the West
Coast.In the year 1997 the company started commercial production in Kodinar plant
with an enhanced capacity. In the year 1998 they set up a $20 million clinker Grinding
unit in Sri Lanka. In the year 2000 giants Larsen & Tubro (L&T) and Gujarat Ambuja
Cements entered a unique agreement to reduce transportation costs in dispatching bulk
cement in Gujarat. Also they entered into an annual contract with a Soinhalese firm
Mahaveli Marine Cement to supply around 2.5 lakh tonnes of cement.In the year 2002
the company started commercial production at Maratha Cement Works plant.

In June 2002 they started commercial production in the new 2-million tonne Greenfield
cement plant at Chandrapur Maharashtra. In the year 2004 Ambuja Cement Rajasthan
was amalgamated with the company.In February 2005 the company set up a cement
mill with a capacity of 80 TPH at Darlaghat and commenced commercial production.
They commissioned a captive thermal power plant with two 12 MW Steam Turbo
Generators (STG) with two boilers of 45 TPH capacity each at a cost of Rs.94 crore.
The first STG was commissioned in February 2005 and the second in May 2005. In
July 2005 Indo-Nippon Special Cements Ltd a subsidiary company was amalgamated
with the company. The company set up new clinker capacity at Bhatapara in
Chattisgarh and Rauri in Himachal Pradesh each having a capacity of 2.2 million tonnes
per annum at a cost of Rs. 1600 crore. In 2006 Global Cement Major Holcim acquired
management control of the company.The company commenced commercial production
at two new 2.2 million tonne clinker production lines at Bhatapara (Chattisgarh) and

38
Rauri (HP) in December 2009 and January 2010 respectively. In February 24 2010 the
company inaugurated their cement plant (grinding unit) at Dadri Uttar Pradesh with the
capacity of 1.5 million tonnes. In March 27 2010 they inaugurated their cement plant
(grinding unit) at Nalagarh Himachal Pradesh with the capacity of 1.5 million tonnes.

During the year the company commissioned an additional 30 MW captive power unit
at Ambujanagar (Gujarat). In October 2010 the company signed an agreement with the
Rajasthan State Industrial Development and Investment Corporation to set up a 2.2
million tonne clinkerisation unit in Nagaur district. In December 2010 the Dadri
Grinding Unit in its very first year of operation received the Integrated Management
System (IMS) Certification including ISO 9001:2008 ISO 14001:2004 and OHSAS
18001:2007 by BSI (U.K.).In the year 2011 the company started commercial
production in a new cement mill at a cost of approx Rs. 185 crore at Bhatapara plant.
Also they commissioned a new cement mill of 0.9 million tonne cement grinding
capacity at Maratha Cement Works plant at a cost of approx Rs 61 crore. The company
commissioned a 7.5 MW Wind Mill project in Kutch Gujarat at a cost of Rs 46 crore.
The company increased the installed capacity in Bhatinda grinding unit in Punjab by
0.1 million tonne to reach at 0.6 million tonne. Also they increased the installed capacity
in Farraka grinding unit in West Bengal by 0.25 million tonne to reach at 1.25 million
tonnes.In June 2011 the company made strategic investments in Dang Cement
Industries Pvt. Ltd Nepal and acquired 85% shareholding for Rs 19.13 crore to help
further expansion of capacity in the northern region of India and Nepal. In September
2011 they acquired 60% shareholding in Dirk India Pvt Ltd Maharashtra Rs. 16.51
crore. The company entered into a joint venture for speciality cement manufacturing
facility in Goa with Counto Microfine Products Pvt Ltd.On 24 July 2013 the Board of
Directors of Ambuja Cements approved a proposal to acquire 50.01% stake in ACC. It
was decided that Ambuja will first acquire from Holderind Investments Ltd. Mauritius
(Holcim) a 24% stake in Holcim India for a cash consideration of Rs. 3500 crore
followed by a merger of Holcim India into Ambuja. On 24 May 2016 Ambuja Cement
announced the completion of its Rs 338-crore expansion project at its Sankrail grinding
unit near Kolkata thereby raising the capacity of the unit to 2.4 million tonne per annum
from 1.5 million tonne per annum.On 15 November 2016 Ambuja Cement's overseas
parent company LafargeHolcim announced that its subsidiary Holderind Investments
Ltd. has increased its shareholding in Ambuja Cement Ltd. to 63.11% post the

39
acquisition of additional 3.91 crore shares.On 29 April 2017 Ambuja Cement
announced the launch of a superior composite cement product for better sustainability
under the brand Ambuja Compocem.Ambuja Cement's Board of Directors at its
meeting held on 5 May 2017 approved constitution of a special committee of directors
with majority of independent directors to explore the possibility of a merger of Ambuja
Cement and ACC.

Ambuja Cement Limited was earlier known as Gujarat Ambuja Cement Limited
(GACL). The company was setup in 1986. In this short span Ambuja Cement has
achieved massive growth and presently, the total cement capacity of the company is 16
million tonnes. The company has three subsidiaries, viz, Ambuja Cement Rajasthan
Limited (ACRL), Ambuja Cement Eastern Limited (ACEL) and Ambuja Cement India
Limited (ACIL). Ambuja also has a strategic investment in ACC through its subsidiary
(ACIL).

Ambuja Cements is the most profitable cement company in India, and the lowest cost
producer of cement in the world. One of the major reasons that Ambuja Cement is the
lowest cost producer of cement in the world is its emphasis on efficiency. Power
consists over 40% of the production cost of the cement. The company improved
efficiency of its kilns to get more output for less power. Thereafter Ambuja Cement set
up a captive power plant at a substantially lower cost than the national grid. The
company sourced a cheaper and higher quality coal from South Africa, and a better
furnace oil from the Middle East. As a result, today, the company is in the position to
sell its excess power to the local state government.

Ambuja Cement is the first cement company to introduce the concept of bulk cement
movement by sea in India. This resulted in a speedier transportation and brought many
coastal markets within easy reach. Ambuja Cement has a port terminal at Muldwarka,
Gujarat. It is an all weather port that handles ships with 40,000 DWT. The port has a
fleet of 7 ships with a capacity of 20500 DWT to ferry bulk cement to the packaging
units. The company has bulk cement terminals at Surat, Panvel and Galle. The Surat
terminal has a storage capacity of 15,000 tonne and the Panvel terminal has a storage
capacity of17,500 tonnes. Both the terminals have bulk cement unloading facility. The
port at Galle, 120 km from Colombo, Sri Lanka, Handles millions tonnes of cement
annually.

40
 First Plan Set Up in Record Time

When Ambuja Cement set up its first plant in 1986, the expected time period for
installing a plant was 3 years.

Ambuja Cement, did it in less than 2 years. And with a significantly lower capital
expenditure.

41
In 1993 the company went a step further and bettered its own record. Ambuja Cement
Company’s second plant was installed in a mere span of 13 months – the quickest time
for setting up a one million tonne cement plant.

A whole new way of transporting cement: In the early 90’s , almost all cement in India
travelled by rail or road and in bags. A mode that involves deterioration of both, the
quality and volume of cement.

In 1993, Ambuja Cement set up a complete system of transporting bulk cement via the
sea routes. Making it the first company in India to introduce bulk cement movement by
sea. Others followed and today, about 10% cement travels by this new route.

The facility comprises : A dedicated port at the Gujarat plants, capable of berthing
40,000 DWT vessels, three bagging terminals at Mumbai, Surat and Sri Lanka,
and seven special bulk cement vessels.

This capability has enabled us to supply fresh cement to many coastal markets –
domestic and international.

Branding a Commodity

42
Cement is a commodity, sold largely on price. Ambuja Cement was the first company
to create a brand out of cement and command a premium.

It was also the first to introduce a special cell, providing technical services to consumers
and masons. Today, this has become the norm in cement marketing.

The trick of course was to provide a consistently high quality of cement, backed by
excellent service. This was reinforced by a strong dealer network.

The result is that customers are ready to pay 2-3% premium for Ambuja Cement for the
value they receive. Ambuja Cement is the top brand in Western, Northern, Central and
Eastern India.

Exports

Ambuja Cement exports almost 17% of its production in a very competitive

international environment. For the last ten years, Ambuja Cement remains India’s
highest exporter of cement.

This has been possible for two reasons –

 One, the quality of cement matches the best in the world.

 Two, the dedicated bulk cement transportation capability at our Gujarat plant.

43
 SIZE OF THE UNIT

Size of the industry is decided on the capital investment of unit is fixed assets. The size
of industry is classified in four types and they are as under:

(1) Small Scale Industry

(2) Medium Scale Industry

(3) Large Scale Industry

1. Small Scale Industry :

The investment of industry in its fixed assets does not exceed Rs.3 crores are known as
small scale industry.

2. Medium Scale Industry:

The investment of an industry in its fixed assets is more than Rs.3 crores but not exceed
Rs.5 crores are known as medium scale industry.

3. Large Scale Industry :

The investment of an industry in its fixed assets is more than Rs. 5 crores are known
as large scale industry. “AMBUJA CEMENT LTD.” is large scale industry. Its total
capital is Rs.86 crores investment in plant and machinery.

FACTOR AFFECTING LOCATION

Location of a unit is most important factor for consideration of successful working of

any organization. It also plays a vital role in the development of the unit. The total cost
of manufacturing cost of any business unit is higher due to the wrong selection of
location of their business. The main object of an industrial concern is to maximize profit
through minimum of production cost.

Ambuja Cement Ltd. is situated near Vadnagar village in Kodinar. The location of the
plant is very beneficial for its existence as the area is surrounded by limestone, which
is one of the basic raw materials in cement production. Company is also benefited as
the area of the plant site is near the sea cost which facilitates the transportation through
sea route. Ambuja has also developed its own seaport for transporting cement to other

44
destinations. This has helped Ambuja Cement Ltd. to export their product easily
through seaport directly increasing the export of their goods.

1. Input :

In terms of input, about 1.5 tons of limestone is required to produce one ton of cement.
Hence, Location of the plant is based on the limestone deposit. The major cash outflow
comes by way of royalty and cash payments. India’s estimated total reserve of cement
grinding stone is about 90 billion tons.

2. Power :

it is used in raw material grinding. Clinkerization of limestone is done in the kiln

operation and then clinker is grinding with gypsum to form cement. The older plant
required 120 to 130 units per ton of cement produced, while modern energy efficient
plant consume 80 to 90 units per ton. Cement manufacturing is continuous process, so
quality of power plants is important.

3. Coal :

Coal is another major input, which along with electricity forms 40% of total cost. There
is several coal shortage for the industry. The coal is generally imported from certain
African countries, which are unloaded at companie’s Muldwarka port that is near to the
factory site.

4. Labor :

On growing modernization of plants, the requirement for skilled man power has
increased than that of unskilled man power. The cheap availability of labor from the
nearby areas has proved to be great help for the company.

5. transportation :

It is a very important thing to be kept in mind while deciding the location. It costs
widely affects the overall cost. The seacoast is one of the important transportation
modes for exporting companies. The company has its own jetty at dwarka. This reduces
cost of transportation for the cement.

45
 MANUFACTURING PROCESS CHART:

1. MINING & CRUSHING OF LIMESTONE:

Limestone is the basic raw material to produce cement. It is mainly obtaines from the
open cost mining. The limestone is hauled through dumpers up to 70 to 75 mm size.
The crushing of limestone is done through hopper crushed material passed on the
conveyor belt in which the addictive material is added to the material.

2. CRUSHING OF GYPSUM & COAL:

The second stage of cement manufacturing is to crush the gypsum & coal by griddling
machine.

3. MAKE A CINKER :

Clinker is a precondition to make cement. So to make cement of clinker is needed, so,

to make a clinker all crushed material like limestone, gypsum & coal water with the
help of elevator.

4. STORAGE OF CLINKER:

After a making of clinker it storage in a one place. It’s called silo. As per the
requirements clinker is send at required place weighing bin.

5. DRYING OF CLINKER:

After making a clinker, it dried in heating machine at 1200-1400 degree Celsius

temperature. Minimum 1 hour required for drying the clinker.

6. STORAGE OF DRY CLINKER :

After the drying a clinker is stored in one place. It’s called silo. As per the requirements,
clinker is sent at required place through conveyor belt.

7.CRUSHING THE CKINKER & ADDED THE CHEMICAL :

Dried clinker is again crushed in the grinding cement mill. And chemical is added as
per the grade of cement. After adding the chemicals, this all things are mixed in raw
mill. After this process all these mixing material is transferred on to the ruler. Ruler
excludes the wastage & cleans the cement.

46
8. PACKING :

Packing is the final step of cement manufacturing process. Clean cement is again stored
in a silo and at last as per the requirement it comes in weight box through conveyor
belt. After this cement bags which have capacity to include 50 kgs cement in it are used
to pack the cement.

MINING AND CRUSHING OF

MAKE A
CRUSHING GYPSUM AND
CLINKER
LIMESTONE COAL

STORAGE OF DRYING OF STORAGE OF

DRY CLINKER CLINKER CLINKER

CRUSHING THE
CLINKER AND
PACKING
ADDING THE
CHEMICAL

`The Environment

From the outset, Ambuja has believed that a cement plant cannot flourish at the cost
of the environment. That’s why it adheres to the most rigorous international
environmental norms.

The pollution level at all its cement plants are even lower than the rigorous Swiss
standards of 100 mg/NM 3.

At the Gujarat plants, surface miners have been employed to scrape the surface of the
mines. Thus ensuring that all the mining is totally blast free. There is no noise or air
pollution. Similarly at the Himachal Pradesh plant, Ambuja has employed techniques
that have made mining absolutely safe and pollution free.

Not, surprisingly then, the company has consistently won awards for its pollution free
plants. Awards as prestigious as the National Award for Outstanding Pollution
Control and The Eco-Gold Star of Tata Energy Research Institute (TERI).

47
 Major achievements of Ambuja Cement

 Most profitable cement company in India.

 Lowest cost producer of cement in the world.
 Its environmental protection measures are at par with the best in the world. The
pollution level at all its cement plants are lower than the rigorous Swiss
standards of 100 mg/NM3.
 The only cement company to be awarded with the National Quality Award.
 First cement company to first receive the ISO 9002 quality certification.
 Received ISO 14000 Certification for environmental systems.
 India’s largest exporter of cement.
 Received Best Award for highest exports by CAPEXIL.

MILESTONES

Building of a cement plant in 13 months:-

2.8 kilometer conveyor belt running through three hills was constructed in just 9
months.

Introduced a completely new system of transporting cement in India – the bulk

cement transportation by sea.

Introduced complete blast free limestone mining by using the surface miner in
limestone mining for the first time in India.

Created water reservoirs in used up mines and raised the water table in arid

Our plants have achieved the lowest pollution levels – comparable with the most
strongest Swiss standards.

Recognition

 National Award for commitment to quality by Prime Minister of India

 National Award for outstanding pollution control by the Prime Minister of India
 Eco-Gold star by TERI
 Best Export Award by CAPEXIL
 Award for Corporate Social Responsibility by Business world – FICCI

48
  International Award For Rural Development by Asian Management Institute
(AIM)
 ISO 9002 Quality Certification
 ISO 14000 Certification for environmental systems

Technical Details

 Established – 1986.
 Total Capacity -15 million tonnes.

Infrastructure- Dedicated port at Gujarat . Capable of berthing 40,000 DWT

vessels with carrying capacity of 20,000 tonnes.

 Packing terminals at Mumba, Surat and SriLanka

GLANCE :-
Ambuja Cement Ltd is India’s foremost cement company known for its hassle-free,
home-building solutions. Unique products tailor-made for Indian climatic conditions,
sustainable operations and initiatives that advance the company’s philosophy of
contributing to the larger good of the society, have made it the most trusted cement
brand in India.
Ambuja cement Ltd, a part of the global conglomerate LafargeHolcim, s among the
leading cement companies in India. Ambuja Cement has provided hassle-free, home
building solutions with its unique sustainable development projects and environment
friendly practices since it started operations. Currently Ambuja Cement has a cement
capacity of 29.65 million tonnes with five integrated cement manufacturing plants and
eight cement grinding units across the country.
The company has any firsts to its credits – a captive port with four terminals that has
facilitated timely, cost effective, cleaner shipments of bulk cement to its customers, the
company has launched innovative products like Ambuja Plus Roof Special, Ambuja

49
Plus Cool Walls and Ambuja Compocem. The new products not only fulfill Important
customers need but also help in significantly reducing carbon footprints.
Ambuja Cement is the industry leader in responsible use of resources, both natural and
man-made. The company has been certified over five times water positive, a feat
achieved through conservation efforts and increasing water efficiency in its plants. It is
also plastic neutral, by burning as much as over 50,000 tonnes of plastic waste in its
kilns, equivalent to 1.5 times of total plastic used. The company also generated 7.4% of
its power needs from renewable resources.

Sustainable profitable growth is ingrained in the company’s DNA. Ambuja Cement’s

multi-pronged strategy, including triple bottom line accounting method; True Value;
good corporate governance practices; overarching corporate environment policy; and
sustainable supply chain policy have helped cement the company's credentials as a
sustainable manufacturer. Ambuja Cement's Sustainable Development Ambition 2030
provides strategic direction to the company's long-term sustainability vision. All
Ambuja Cement plants are ISO 14001 certified.

Ambuja Knowledge Centres (AKCs), a unique initiative by the company, serves as a

knowledge sharing platform for construction professionals that includes practical
workshops on mix design and quality supervision. Currently, over 30 AKCs are
functional across India.

The company also works closely with communities that live around its plants, through
its CSR arm, the Ambuja Cement Foundation (ACF). ACF implements need-based and
participatory programmes in the thematic areas of water resource development, health
and sanitation, women empowerment, rural infrastructure, education and agro-
based/skill-based livelihood creation.

The company's most distinctive attribute is its approach to business. Ambuja Cement

follows a unique homegrown philosophy that gives people the authority to set
their own targets and the freedom to achieve their goals. Its focus has been consistent
on two major building blocks that has resonated through its daily operations – Quality
(of products) and Safety (of all those involved in the creation of its products).

VISION:-

To be the most sustainable and competitive company in our industry.

50
MISSION:-

To create value for all

 Delighted customers
 Inspired Employees
 Enlightened Partners
 Energised Society
 Loyal Shareholders
 Healthy environment

51
MEANING OF RESEARCH AND METHODOLOGY

Research Methodology is a way to find out the result of a given problem on a specific
matter or problem that is also referred as research problem. In Methodology, researcher
uses different criteria for solving/searching the given research problem. Different
sources use different type of methods for solving the problem. If we think about the
word “Methodology”, it is the way of searching or solving the research problem.
(Industrial Research Institute, 2010).

According to Goddard & Melville (2004), answering unanswered questions or

exploring which currently not exist is a research. The Advanced Learner’s Dictionary
of current English lays down the meaning of research as a careful investigation or
inquiry especially through search for new facts in any branch of knowledge. Redmen
& Mory (2009), define research as a systematized effort to gain new knowledge.

In Research Methodology, researcher always tries to search the given question

systematically in our own way and find out all the answers till conclusion. If research

52
does not work systematically on problem, there would be less possibility to find out the
final result. For finding or exploring research questions, a researcher faces lot of
problems that can be effectively resolved with using correct research methodology
(Industrial Research Institute, 2010).

NEED OF THE STUDY:

1. The study has great significance and provides benefits to various parties whom
directly or indirectly with the company.
2. To express the relationship between different financial aspects in such a way that it
allows the user to draw conclusions about the performance, strengths and weaknesses
of the company.
3. To diagnose the information contained in financial statement so as to judge the
profitability of the firm.
4. The study helps to know a liquidity, solvency, profitability and turnover position of
the company.

SCOPE OF THE STUDY:

The scope of the study is limited to collecting financial data published in the annual
reports of the company every year. The analysis is done to suggest the possible
solutions. The study is carried out for 5 years (2009–14). The present study is confined
to only Amara raja batteries Limited only.

OBJECTIVES OF THE STUDY

 To study and analyze the financial position of the Company through ratio
analysis.
 To analyze the profitability position of the ARBL.
 To determine the long term solvency position of ARBL.
 To suggest the feasible solution to improve the overall efficiency of the ARBL.

53
1. The objective of study is to forecast and/or determine the actual financial status and
performance of Ambuja Cement Company.

2. The financial analysis study will help in accessing the viability, stability and
profitability of Ambuja Cement Company.

3. The other objective of the study is to measure the operational performance and
achievement of financial objectives.

4. Financial analysis helps in making effective business decisions.

5. Guiding the financial need and requirement of the ambuja cement company.

6. Assessing the performance of bond, stocks, commodities, and other investment

instruments.

7. Making decisions regarding marketing investments of ambuja cement company.

8. Analyzing the performance of securities and insurance.

9. Determining future earning and expenses of ambuja cement company.

10. Evaluating the effect of tax rates, government policies, competitors strategies,
commodity prices etc.

They deal with the balance sheet, spread sheet and database in order to gain a better
insight into firms prospectus. Having a strong hold on the market economic trends and
business scenarios, they offen give recommendations regarding buying and selling of
investments.

RESEARCHMETHODOLOGY:

The main aim of the study is to know the financial performance of the Amara raja
batteries limited, Tirupati, Chittoor Dist. Research Any efforts which are directed to
study of strategy needed to identify the problems and selection of best solutions for
better results are known as research. Research Design In view of the objects of the study
listed above an exploratory research design has been adopted. Exploratory research is

54
one which is largely interprets and already available information and it lays particular
emphasis on analysis and interpretation of the existing and available information.
A. To know the financial status of the company.
B. To know the credit worthiness of the company.
C. To offer suggestions based on research finding. Data Collection Methods Primary
Data Information collected from internal guide and finance manager. Secondary data a.
Company balance sheet and profit and loss account. b. Company’s annual reports c.
Company websites www.amararaja.co.in www.arbl.com d. Books Financial
management: I.M. Pandey Financial management: Prasanna Chandra TOOLS AND
TECHNIQUES Time –series analysis Cross sectional analysis

LIMITATION OF THE STUDY:

The following are the limitation of the study 1. The study was limited to only five years
Financial Data. 2. The study is purely based on secondary data which were taken
primarily from Published annual reports of Amararaja batteries Ltd., 3. There is no set
industry standard for comparison and hence the inference is made on general standards.
4. The ratio is calculated from past financial statements and these are not indicators of
future.

Research is a process of systematic and in-depth study of research of any topic, subject
backed by the collection, presentation and interpretation of relevant data. Methodology
is an important tool in any research work. It acts as a guideline and leads to completion
of research project. It consists of various steps that are generally adapted by researcher
in study in problem along with the logic behind them. On the basis of general
guidelines, a model of the following steps is prepared and presented in the dissertation
work.

A) Selection of subject:

Selection of subject or topic for dissertation work is a very important job for researcher.
The difficult task is to find out the information which is required for the purpose of
research. It should be easily available.

55
Researcher has chosen this subject after discussion with guide and with other person.

B) Title of dissertation:

In view of the objective behind the selection of subject researcher has chosen the topic
entitled “Study of Financial Analysis of Ambuja Cement Ltd., Company.”

C) Collection of data:

The research methodology would like to gather information for carrying out analysis
by using the following method during research study.

Secondary data:

 Financial search is the systematic design, collection and analysis of data and
findings, relevant to specific financial aspects of the company.
 The data was collected through financial statements like:

1) Annual reports.

2) Balance Sheet.

3) Profit and Loss Account

4) Other articles

HYPOTHESIS

The term hypothesis has several meanings. It may be taken to mean a supposition or an
assumption. In general it is taken as a proposal to accept something as true. A
hypothesis is a tentative generalization, the validity of which has gone to be tested.
Hypothesis at its initial stages may be an imagined idea or more given. A hypothesis is
made in order to find out correct explanation of the phenomenon through investigation.
On the basis of hypothesis facts are observed and collected when by verification. In this
project the following areas have been formulated:

56
1) That the financial structure of the company is appropriate.

2) That the profitability of the company is satisfactory.

3) That the company uses the fixed assets efficiently.

4) That the liquidity position of the concern is satisfactory.

57
 LITERATURE REVIEW

LITERATURE REVIEW ON RATIO ANANLYSIS:

A literature review discusses published information in a particular subject area, and

sometimes information in a particular subject area within a certain time period.

A literature review can be just a simple summary of the sources, but it usually has an
organizational pattern and combines both summary and synthesis. A summary is a recap
of the important information of the source, but a synthesis is a re-organization, or a
reshuffling, of that information. It might give a new interpretation of old material or
combine new with old interpretations. Or it might trace the intellectual progression of
the field, including major debates. And depending on the situation, the literature review
may evaluate the sources and advise the reader on the most pertinent or relevant.

The main focus of an academic research paper is to develop a new argument, and a
research paper is likely to contain a literature review as one of its parts. In a research
paper, you use the literature as a foundation and as support for a new insight that you
contribute. The focus of a literature review, however, is to summarize and synthesize
the arguments and ideas of others without adding new contributions.

Literature reviews provide you with a handy guide to a particular topic. If you have
limited time to conduct research, literature reviews can give you an overview or act as
a stepping stone. For professionals, they are useful reports that keep them up to date
with what is current in the field. For scholars, the depth and breadth of the literature
review emphasizes the credibility of the writer in his or her field. Literature reviews
also provide a solid background for a research paper’s investigation. Comprehensive
knowledge of the literature of the field is essential to most research papers.

58
Literature reviews are written occasionally in the humanities, but mostly in the sciences
and social sciences; in experiment and lab reports, they constitute a section of the paper.
Sometimes a literature review is written as a paper in itself.

The review of literature guides the researchers for getting better understanding of
methodology used, limitations of various available estimation procedures and data base
and lucid interpretation and reconciliation of the conflicting results. Besides this, the
review of empirical studies explores the avenues for future and present research efforts
related with the subject matter. In case of conflicting and unexpected results, the
researcher can take the advantage of knowledge of other researchers simply through the
medium of their published works. A large number of research studies have been carried
out on different aspects of the working of public and private sector by the researchers,
economists and academicians in India. Different authors have analyzed financial
performance in different perspective. A review of these analyses is important in order
to develop an approach that can be employed in the context of the study of selected
Manufacturing Enterprises viz. Paper, Cement, Sugar, Steel, Minerals and Metals, Coal
and Lignite, Power, Petroleum and Chemicals and Pharmaceuticals. Therefore, the
present chapter reviews the various approaches to the study on financial analysis and
performance.

PROFIT & LOSS ACCOUNT OF AMBUJA CEMENT :-

PARTICULARS Dec 2018 Dec 2017

INCOME :

Sales Turnover 11,356.76 11,214.87

Other Income 245.03 362.50

Stock Adjustment 76.72 62.83

Net Sales 11,356.76 10,446.85

Excise Duty 0.00 768.02

Total Income 11,678.51 10,872.18

59
EXPENDIATURE :

Raw Materials 1,019.04 1,563.60

Power & Fuel Cost 2,548.99 2,234.20

Other Manufacturing Expenses 0.00 0.00

Employee Cost 679.57 661.37

Selling and Administration Expenses 0.00 75.56

Miscellaneous Expenses 5,294.42 4,034.81

Preoperative Expenditure Capitalized 0.00 0.00

Total Expenses 9,542.02 8,569.54

Operating profit 1,891.46 1,940.14

Profit Before Interest, Depreciation & Tax 2,136.49 2,302.64

Interest & Financial Charges 82.33 107.19

Profit Before Depreciation & Tax 2,054.16 2,195.45

Depreciation 548.09 572.92

Minority Interest before PAT 0.00 0.00

Profit before Tax 1,506.07 1,622.53

Tax 19.06 369.55

Reported Net Profit 1,487.01 1,249.57

Total Value Addition 8,522.98 7,005.94

Preference Dividend 0.00 0.00

Equity Dividend 0.00 555.98

Corporate Dividend Tax 0.00 80.66

Shares in Issue (lakhs) 19,856.50 19,856.45

Earning Per Share (Rs.) 7.49 6.29

Equity Dividend (%) 75.00 180.00

60
Book Value 105.82 100.59

BALANCE SHEET

Particulars
Year 2018 2017
Sources Of Funds
Total Share Capital 397.13 397.13
Equity Share Capital 397.13 397.13
Reserves 20,615.40 19,576.08
Networth 21,012.53 19,973.21
Secured Loans 39.68 24.12
Unsecured Loans 0 0
Total Debt 39.68 24.12
Total Liabilities 21,052.21 19,997.33
Application Of Funds
Gross Block 6,273.62 6,900.88
Less: Accum. Depreciation 0 1,178.89
Net Block 6,273.62 5,721.99
Capital Work in Progress 0 397.92
Investments 11,813.76 11,844.70
Inventories 1,277.76 1,052.50
Sundry Debtors 470.26 307.97
Cash and Bank Balance 3,329.97 3,497.07
Total Current Assets 5,077.99 4,857.54
Loans and Advances 2,021.31 1,795.04
Total CA, Loans & Advances 7,099.30 6,652.58
Current Liabilities 4,004.89 4,497.55
Provisions 129.58 122.31
Total CL & Provisions 4,134.47 4,619.86
Net Current Assets 2,964.83 2,032.72

61
Total Assets 21,052.21 19,997.33
Contingent Liabilities 0 0
Book Value (Rs) 105.82 100.59

62
DATA COLLECTION AND ANALYSIS OF LAST FIVE YEARS:

WORKING CAPITAL TURNOVER RATIO:

Working capital turnover ratio indicates the velocity of the utilization of the net working
capital. This ratio indicates that number of times the working capital is turnover in the
course of time that is in one accounting year and measure the efficiency with which the
working capital is being used by firm. This ratio should be always higher. This ratio
should be always higher.

This is calculated by the following formula :

Working Capital Turnover Ratio = Net sales

Working capital

Working Capital = Current Assets – Current Liabilities

Year Sales Working Capital Ratio

2014 9,978.12 1,032.41 9.66
2015 10,763.96 1,597.27 6.73
2016 10,500.84 1,266.27 8.29
2017 10,455.92 2032.72 5.14
2018 11,356.76 2964.83 3.83

Chart Title

20000
15000
10000
5000
0
1 2 3 4 5

Year Sales Working Capital Ratio

63
INTERPRETATION :-

This ratio shows the velocity of the utilization of working capital. The ratio measures
the efficiency of the company with which the working capital is used by the company.
Hence higher the ratio better it is. From the above analysis it is clear that the company
utilizes its working capital properly and effectively.

CURRENT RATIO :

Current Ratio measures the relationship between current assets and current liabilities .
This ratio highlights the firms ability to meet its short term liabilities from its short term
assets. The standard for the ratio is 2:1. However one should not rely on it blindly. The
current ratio should be subject to qualitative test. It should be remembered that this ratio
is subject to the influence of many financial forces, which may depress or retrieve it
dramatically overnight.

It is represented as follows :

Current Ratio = ___Current Assets___

Current Liabilities

Year Current Assets Current Liabilities Ratio

2014 3574.49 2569.64 1.39
2015 4030.20 2712.64 1.49
2016 3911.83 3848.81 1.02
2017 4857.54 4497.55 1.08
2018 5077.99 4004.89 1.27

64
 Chart Title

12000

10000

8000

6000

4000

2000

0
1 2 3 4 5

Year Current Assets Current Liabilities Ratio

INTERPRETATION :

As per general norms, current ratio should be 2:1. In this regard the current ratio of
Ambuja Cement Ltd. is very low. This ratio further declined in the year 2017. It shows
liquidity position is not satisfactory.

QUICK RATIO :

This ratio measures the relationship between quick assets and quick liabilities. Quick
assets can be immediately converted into cash, so this ratio gives a more immediate
indication of the firm’s ability to settle its current debts. This is more stringent test of
Liquidity than current assets. The firm should a quick ratio in proportion of 1:1 that is
considered as standard. Where this is not so, a substantial “Ash Legged” is usually
maintained. It accesses how liquid the firm would be, if so business operations come to
an abrupt halt.

This is written as :

Quick Ratio= ___Quick Assets___

Quick Liabilities

Year Ratio
2014 1.04
2015 1.18
2016 1.08

65
 2017 1.21
2018 1.41

Chart Title

2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
1 2 3 4 5

Year Ratio

INTERPRETATION:

Quick ratio is used as a measure of the company’s ability to meet its current obligations.
A high quick ratio is an indication that the firm has the ability to meet its current
liabilities in time and on the other hand, a low quick ratio represents that the firms
liquidity position is not good.

FUND DEBT TO NET WORTH RATIO:

This ratio shows the extent to which a firm should employ one debt showed to be
viewed in term of the size of the shareholders fund. If the ratio reveals the high portion
of debt finance in the capital structure, this may indicate an over dependence on external
finance. So financial risk may be high. High debt means usually means high financial
risk. This ratio is important indication of a firm’s long term solvency and key measure
of its financial risk.

It is written as :

66
Fund Debt to Net Worth = ___Funded Debt___

Net Worth

Funded Debt = Loan Fund

Loan Fund = Secured Loans + Unsecured Loans

INTERPRETATION:

This ratio of the ambuja cement company is 0.00 from the last five years. Company
should improve it.

NET PROFIT RATIO :

The net profit ratio establishes the relationship between net profit (after tax)and the
sales in same year. It indicates the efficiency of the management in manufacturing,
selling, administrative and self-financing. This ratio shows the earnings left for
shareholders as a percentage of net sales this ratio is the overall measures of firm’s
profitability.

It is written as:

Net Profit Ratio = Net profit after tax / Sales x 100

Year Ratio
2014 14.99
2015 8.53
2016 10.13
2017 11.94
2018 13.09

67
 Chart Title

2035

2030

2025

2020

2015

2010

2005
1 2 3 4 5

Year Ratio

INTERPRETATION:

Net Profit ratio is used to measure the overall profitability of a concern. It is an index
of efficiency and profitability. This ratio also indicates the firm’s capacity to face
adverse economic conditions such as competition and low demand. Higher the profit,
the better is the profitability.

PROPRIETARY RATIO OR EQUITY RATIO :

This ratio shows the relationship between shareholders fund and the total assets. Any
rise in this ratio indicates the necessity of borrowings and reduction in the amount of
current assets. This ratio measures the extent to which the company’s invested capital
or net worth is tied-up in non-liquid, permanent, depreciable assets.

This is shown as :

Proprietary Ratio = ___Shareholders_Fund___

Total Assets

Year Ratio
2014 2
2015 1.50

68
 2016 1.30
2017 1
2018 1

Chart Title

2019
2018
2017
2016
2015
2014
2013
2012
2011
1 2 3 4 5

Year Ratio

INTERPRETATION:

There is no any changes is proprietary ratio for last 2 years.

ASSET TURNOVER RATIO :

Asset turnover ratio measures the efficiency of the firm in using its total assets to
generate sales. A business organization invests in assets to generate sales and profit.

To calculate this ratio following formula is used:

Asset Turnover Ratio = _____Sales_____

Total Asset

Year Ratio

2014 1.02

69
 2015 0.93

2016 0.62

2017 0.53
2018 0.55

Chart Title

2500

2000

1500

1000

500

0
1 2 3 4 5 6

Year Ratio

INTERPRETATION:

The asset turnover ratio of the AMBUJA CEMENT LTD. is very good. To conclude
we can say that the company is utilizing its total assets appropriately and efficiently.
The asset turnover shows that earning volume is satisfactory according to total capital
invested in the company.

FIXED ASSET TO NET WORTH RATIO :

This ratio established the relationship between fixed assets and the shareholders fund.
The ratio of fixed assets to net worth indicate the extent to which shareholders fund are
sink in to the fixed assets.

The formula to calculate this ratio is as follows:

Fixed Assets to Net Worth = ___Fixed_Assets_(after_dep.)__

70
 Net Worth

Net Worth = Reserve & Surplus + Shareholders Fund – Preliminary expenses

Year Ratio
2014 4.52
2015 6.53
2016 8.60
2017 7.23
2018 9.40

Chart Title

2030

2025

2020

2015

2010

2005
1 2 3 4 5

Year Ratio

INTERPRETATION:

The above data shows that the shareholders fund is mostly used for acquiring and
maintaining fixed assets.

FIXED ASSETS TURNOVER RATIO:

This is also called as net sales to fixed assets. This ratio measures the efficiency with
which a company utilizes its fixed assets. It serves as secondary test of the adequacy of
the sales volume. It is indispensable insuring a total understanding of a company’s
financial statements. Excessive fixed cost may cause drain on working capital. They
may also reduce the profits steaming from high fixed costs per unit of sales.

71
The formula to calculate this ratio is as follows:

Fixed Assets Turnover Ratio = ____Sales_____

Fixed Assets

Year Ratio
2014 0.88
2015 0.79
2016 1.41
2017 1.52
2018 1.56

Chart Title

2030

2020

2010

2000
1 2 3 4 5

Year Ratio

INTERPRETATION:

The ratio in financial year 2018 is more than the preceding years. The company’s fixed
asset is utilized appropriately and effectively in each and every

INVENTORY TURNOVER RATIO:

The inventory turnover ratio is an efficiency ratio that shows how effectively inventory
is managed by comparing cost of goods sold with average inventory for a period.

In other words, it measures how many times a company sold its total average inventory
dollar amount during the year.

Inventory turnover ratio = Cost of goods sold / Average inventory.

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 Year Ratio

2014 11.23

2015 12.02

2016 11.20

2017 9.93

2018 8.89

Chart Title

2030

2025

2020

2015

2010

2005
1 2 3 4 5

Year Ratio

DIVIDEND PAYOUT RATIO:

The dividend payout ratio is the amount of dividends paid to stockholders relative to
the amount of total net income of a company. The amount that is not paid out in
dividends to stockholders is held by the company for growth. The amount that is kept
by the company is called retained earnings.

Year Ratio

2014 51.76
2015 30.31
2016 46.61
2017 30.50

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 2018 26.70

Chart Title

2070
2060
2050
2040
2030
2020
2010
2000
1990
1980
1 2 3 4 5

Year Ratio

INTERPRETATION:

The dividend payout ratio is fluctuating of the Ambuja cement company. There are very
much ups and down in dividend paying to the stockholders. Payment of more dividend
shows the company s profits is higher and vice a versa. From last two years company
paying less dividends to the stockholders as compare to the year 2014. It may interpret
that the amuja cement company retained earnings for gaining future goals or may the
company is facing less profit from last two years.

RATIOS OF THE AMBUJA CEMENT OF 2017 AND 2018

Particulars 2018 2017

Investment Valuation Ratios
Face Value 2 2
Dividend Per Share 1.5 3.6
Operating Profit Per Share (Rs) 9.53 9.77

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Net Operating Profit Per Share (Rs) 57.19 52.61
Free Reserves Per Share (Rs) -- --
Bonus in Equity Capital -- 49
Profitability Ratios
Operating Profit Margin(%) 16.65 18.57
Profit Before Interest And Tax 11.45 12.65
Margin(%)
Gross Profit Margin(%) 11.82 13.08
Cash Profit Margin(%) 18.45 16.86
Adjusted Cash Margin(%) 18.45 16.86
Net Profit Margin(%) 13.09 11.96
Adjusted Net Profit Margin(%) 12.67 11.56
Return On Capital Employed(%) 8.16 8.63
Return On Net Worth(%) 7.07 6.25
Adjusted Return on Net Worth(%) 7.69 6.25
Return on Assets Excluding 105.82 100.59
Revaluations
Return on Assets Including 105.82 100.59
Revaluations
Return on Long Term Funds(%) 8.16 8.63
Liquidity And Solvency Ratios
Current Ratio 1.72 1.44
Quick Ratio 1.41 1.21
Debt Equity Ratio -- --
Long Term Debt Equity Ratio -- --
Debt Coverage Ratios
Interest Cover 20.87 16.11
Financial Charges Coverage Ratio 27.53 21.45
Financial Charges Coverage Ratio 25.72 18
Post Tax
Management Efficiency Ratios
Inventory Turnover Ratio 8.89 10.66

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 Debtors Turnover Ratio 29.19 29.69
Investments Turnover Ratio 8.89 10.66
Fixed Assets Turnover Ratio 1.81 1.52
Total Assets Turnover Ratio 0.54 0.52
Asset Turnover Ratio 0.55 0.53
Debtors Turnover Ratio 29.19 29.69
Average Raw Material Holding -- --
Average Finished Goods Held -- --
Number of Days In Working Capital 44.35 27.67
Profit & Loss Account Ratios
Material Cost Composition 8.97 14.96
Imported Composition of Raw -- --
Materials Consumed
Selling Distribution Cost Composition -- 0.72
Expenses as Composition of Total -- 0.04
Sales
Cash Flow Indicator Ratios
Dividend Payout Ratio Net Profit -- 44.49
Dividend Payout Ratio Cash Profit -- 30.5
Earning Retention Ratio 100 55.51
Cash Earning Retention Ratio 100 69.5
Adjusted Cash Flow Times 0.02 0.01

Basically the ambuja cement company maintain its ratios in three parts that is mention
above: 1) Investment Valuation Ratios

2) Management Efficiency Ratios

3) Cash Flows Indicators Ratios

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COMPARATIVE BALANCE SHEET OF LAST 5 YEARS (rs. in
crores)

Particulars Dec'18 Dec'17 Dec'16 Dec'15 Dec'14

Sources Of Fund
Total Share Capital 397.13 397.13 397.13 310.38 309.95

Equity Share Capital 397.13 397.13 397.13 310.38 309.95

Reserves 20,615.4 19,576.0 18,959.7 9,996.49 9,793.38

0 8 4
Net worth 21,012.5 19,973.2 19,356.8 10,306.8 10,103.3
3 1 7 7 3
Secured Loans 39.68 24.12 15.73 9.45 5.86

Unsecured Loans 0 0 0 13.23 13.23

Total Debt 39.68 24.12 15.73 22.68 19.09

Total Liabilities 21,052.2 19,997.3 19,372.6 10,329.5 10,122.4
1 3 0 5 2
Application Of Funds
Gross Block 6,273.62 6,900.88 6,552.11 11,945.7 11,362.1
1 7
Less: Accumulated 0 1,178.89 610.5 5,853.68 5,135.06
Depreciation

Net Block 6,273.62 5,721.99 5,941.61 6,092.03 6,227.11

Capital Work in Progress 0 397.92 320.02 414.12 690.17

Investments 11,813.7 11,844.7 11,844.7 2,226.13 2,172.73

6 0 0
Inventories 1,277.76 1,052.50 937.54 895.45 888.39

Sundry Debtors 470.26 307.97 395.77 286.36 227.98

Cash and Bank Balance 3,329.97 3,497.07 2,578.52 2,848.39 2,458.12

Total Current Assets 5,077.99 4,857.54 3,911.83 4,030.20 3,574.49

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 Loans and Advances 2,021.31 1,795.04 1,334.61 1,399.45 1,236.35

Total CA, Loans & 7,099.30 6,652.58 5,246.44 5,429.65 4,810.84

Advances
Current Liabilities 4,004.89 4,497.55 3,848.81 2,712.64 2,569.64

Provisions 129.58 122.31 131.36 1,119.74 1,208.79

Total CL & Provisions 4,134.47 4,619.86 3,980.17 3,832.38 3,778.43

Net Current Assets 2,964.83 2,032.72 1,266.27 1,597.27 1,032.41

Total Assets 21,052.2 19,997.3 19,372.6 10,329.5 10,122.4

1 3 0 5 2
Contingent Liabilities 0 0 2,027.62 2,231.98 2,264.89

Book Value (Rs) 105.82 100.59 97.48 66.41 65.19

INTERPRETATION OF BALANCE SHEET OF AMBUJA

CEMENT

1) Total share capital of the Ambuja cement is from the year 2014 is increasing, at the
time of year 2014 the total share capital of the company is 309.95 crores but it raises
little bit in the year 2015 and there was a drastic change from the year 2016 to 2018.
The present total share capital of the ambuja cement company is 397.13 consistently.

2) Reserves of the ambuja cement company is improve by the time, as reserves of the
year 2014 was rs 9,793.38 crores but at the present that reserves comes near to rs
20,615.40 crores.

3) There is a very much improvement in the net worth of the ambuja cement company.
The total net worth is increased twice of the year 2014.0

4) Current liabilities of the amuja cement company is increase as compare to the year
2014, at the year 2014 the current liabilities was 2,569.64 cr. But at present in the year

78
2018 its become 4,004.89 cr. The company have to improve it and should try to
maintain the liabilities.

5) The current assets of the ambuja cement company is also increased but its not that
much increased as the current liability increased. Increment in current liability is higher
than current assets from the year 2014-18.

AWARDS AND ACHIEVEMENTS

YEAR AWARDED BY PURPOSE

1989-90 The Economic Times, Harvard Best Corporate
Business School Association Of India Performance Award
1989-90 National Productivity Council Certificate of
Achievement for
Productivity in Cement
Company
1990-91 National Productivity Council Second prize for
Productivity in Cement
industry
1990-91 Gujarat Pollution Control Board 1st prize for environmental
management
1991-92 National Council For Cement And National award for best
Building Material energy performance
1991-92 Bureau of Indian Standards
1992-93 National Productivity Council 2nd best productivity
performance award
1993-94 International Green and Social Best Production and
Council, Hyderabad Product Goal Award
2000-01 National Award 2nd best Environmental
Award
2000-01 Special Export Award Outstanding Export
Award
2002-03 National Award Prevention of Pollution

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 2007-08 National Award Excellence in water
management
2008-09 National Award Best Environmental
excellence in plant
operation
2008-09 Ram Krishna Bajaj National Quality Performance excellence
trophy

2017-18 Gujarat CSR Authority Strategic and Cohesive

Partnership in water
resources.

Cement Facts of India:

India is the world’s second-largest producer in the market for cement in the world,
according to studies and reports released by Construction and Real Estate Developers
Association of India (CREDAI), India Brand Equity Forum (IBEF) and German
statistics provider, Statista and other sources.

India’s cement production capacity stood at nearly 420 million tons, in July 2017.

India’s cement production capacity is expected to reach 550 million tons by 2025. The
Cement industry has around 65 companies having around 260 cement plants.

Top 10 Competative Cement Companies in India in 2018:

1. ACC

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ACC Limited was established in 1936 as Associated Cement Company of India by
entrepreneur FE Dinshaw. It was formed by a conglomerate of 10 independent and
small cement manufacturers operating during that era. ACC is now the largest cement
producer in India and thus ranks as the top cement companies in India.

Further, it is also one of the biggest customers of the domestic coal industry and one of
the biggest clients for freight for Indian Railways.

“ACC plants, mines and townships visibly demonstrate successful endeavours in quarry
rehabilitation, water management techniques and ‘greening’ activities. Presently, it has
about 16 cement works plants across the country,” states the company website.

2. Birla Cement Ltd

Birla Cement Ltd is one of the oldest cement company in India and manufactures
different varieties of cement including Ordinary Portland Cement (OPC), 43 and 53
grades, Portland Pozzolana Cement (PPC), Fly Ash-based PPC, Low Alkali Portland
Cement, Portland Slag Cement, Low Heat Cement and Sulphate Resistant Cement.

This is marketed under brand names of Birla Cement Samrat, Birla Cement Khajuraho,
Birla Cement Chetak and Birla Premium Cement, bringing the product under the
common brand of Birla Cement.

Only Birla Samrat Cement retains its niche identity, being a blended variety of the
commodity.

The company has seven cement producing plants based in Madhya Pradesh, Uttar
Pradesh, Rajasthan and West Bengal.

3. Andhra Cements Ltd

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Andhra Cements Ltd ranks as India’s third largest cement producer in the country. It is
one of the most popular cement brands in India.

The group’s cement facilities are located in the Satna Cluster in Madhya Pradesh which
has one of the highest cement production growth rates in India, according to the website
of its parent company.

The group produces a special blend of Portland Pozzolana cement marketed under the
brand Jaypee Cement.

Andhra Cements Ltd operates modern, computerized process control cement plants
across India.

4. JK Cement Ltd

JK Cement has over 45 years experience in cement production, having entered the
industry in May 1975.

The company began with a single cement production unit at Nimbahera, Rajasthan.

Today it ranks among the topmost cement manufacturers of India and produces a
variety of this essential building material.

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JK Cement was the first company to install a captive power plant, in 1987 at Bamania,
Rajasthan.

It is also the first cement company to install a waste heat recovery power plant to take
care of the need of green power.

Today, at its different locations, the company has captive power generation capacity of
over 100 megawatts (MW).

5. The India Cements Ltd

The India Cements Ltd was founded in the year 1946 by two entrepreneurs, S N N
Sankaralinga Iyer and T S Narayanaswami.

In 1989, TICL had a capacity of 1.3 million tons. Today, the company is one of the
leading and most reputed cement producers of India.

TICL has acquired Trinetra Cement Ltd and Trishul Concrete Products India Cements
has nearly a dozen integrated cement plants in Tamil Nadu, Telangana, Andhra Pradesh
and Rajasthan and two grinding units, Tamil Nadu and Maharashtra.

6. Ramco Cements Ltd

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Ramco Cements Limited is a flagship company of the renowned, Chennai-based Ramco
Group.

It was established in 1961 as Madras Cements Ltd. RCL’s mainstay is Ordinary

Portland cement, produced at manufacturing facilities that include integrated cement
plants and grinding units with a current total production capacity of 16.45 Metric Tons
Per Annum (MTPA).

The company is the fifth largest cement producer of India and also produces Ready Mix
Concrete and dry mortar products.

RCL operates one of the largest wind farms in the country.

It has four satellite grinding units, located at Chengalpattu and Salem in Tamil Nadu,
Kolaghat in West Bengal and Vizag in Andhra Pradesh.

The aggregate grinding capacity of these plants is four million tons per annum.

7. UltraTech Cement Ltd

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UltraTech is the most advertised brand of cement in India under the slogan “Engineer’s
Choice.” Also, it is one of the most trusted cement brand in India.

It is the largest manufacturer of grey cement, Ready Mix Concrete (RMC) and white
cement in India and ranks among the world’s leading producers.

Information available on the company’s website states, it has an installed capacity of

93 Million Tons Per Annum (MTPA) of grey cement, made possible through 18
integrated plants, one clinker processing mill, 25 grinding units and seven bulk
terminals. Its operations span across India, UAE, Bahrain, Bangladesh and Sri Lanka.

UltraTech Cement is also India’s largest exporter of cement with exports to countries
in the Indian Ocean and the Middle East.

With over 100 Ready Mix Concrete (RMC) plants in 35 cities, UltraTech is the largest
manufacturer of concrete in India. It also has a slew of speciality concretes for critical
uses.

8. Orient Cement

Orient Cement is part of the CK Birla Group of companies. Orient Cement’s plant
situated at Devapur in Adilabad District, Telangana, began cement production in the
year 1982.

In 1997, a split-grinding unit at Nashirabad in Jalgaon, Maharashtra was added.

In 2015, On its website, Orient Cement states, it started its commercial production at
its integrated cement plant located at Chittapur, Gulbarga, Karnataka.

With a total capacity of 8 MTPA, an ambitious expansion plan, Orient Cement is

aspiring to reach 15 MPTA by 2020. The product mix includes Ordinary Portland

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Cement (OPC) and Pozzolana Portland Cement (PPC) sold under the brand name of
Birla A1.

9. Binani Cement Ltd

Binani Cement Limited is a company from the Braj Binani Group. It is a major player
in India’s cement industry since 1997.

The company’s website pegs Binani Cement’s production capacity at 6.25 MTPA and
70 MW captive power plants. Binani Cement Ltd manufactures Ordinary Portland
Cement and Pozzolana Portland Cement marketed under the brand ‘Binani Cement.’

Binani Cement Limited now has operations in the United Arab Emirates and China.
Additionally, its products are exported to UAE, Sudan, South Africa, Tanzania,
Madagascar and Namibia, among other countries.

Within India, Binani Cement Ltd sells its products through a network of some 5,000
authorized distributors covering every part of the country.

10. Prism Cement

Also among 10 topmost cement companies of India ranks Prism Cement.

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The company began production at in August 1997. Prism Cement manufactures
Portland Pozzolana Cement (PPC) marketed under brand names Champion and
Champion Plus.

Additionally, the company also manufactures premium quality cement sold under Hi-
Tech and ‘Duratech brands.

Prism Cement has the highest quality standards due to efficient plant operations with
modern state of the art automated controls.

It caters mainly to markets of Eastern UP, MP and Bihar, with an average lead distance
of 406 km for cement from its plant at Satna in Madhya Pradesh.

It has a wide marketing network with about 4,180 dealers serviced from over 170 stock
points, says the company website.

NOTE: A few cement companies in India are subsidiaries of large foreign

conglomerates. Companies listed above are indigenous ventures. Further, the above list
does not signify rankings, sales, popularity or financial standing of any cement
company whatsoever. The listing is purely random.

Future Prospects for Indian Cement

According to reports published by various industry guilds and organizations, India’s

realty sector will witness a construction boom and will add some eight million jobs by
2025 driven by initiatives like new real estate regulatory law and the Goods and
Services Tax.

According to realtors’ body CREDAI and consultant CBRE’s joint report ‘Assessing
the Economic Impact of India’s Real Estate’, the contribution of real estate sector in the
country’s GDP is expected to double at 13 percent by 2025.

“The potential employment opportunities in the real estate sector are expected at 17.2
million jobs by 2025 up from 9.2 million in 2016.

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In the 2017 financial year, India consumed 270 million metric tons of cement. In the
past five years, the cement production in India grew from 207 million metric tons in
2010 up to 407 million in 2017, making it the second largest cement producer globally.

With construction expenditures of around US$ 427 billion, India is fourth largest
construction market worldwide,” it states.

This means, another boom-time for India’s already bustling cement industry.

Shares of Indian cement companies listed on Bombay Stock Exchange and National
Stock Exchange are already trading at premium prices.

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SUGGESTIONS CONCLUSIONS

SUGGESTIONS :

1. Liquidity is required to be improved.

2. Profitability of the AMBUJA CEMENT CO. should also be improved.

3. Proper cash budgeting is required to be followed so that management of cash must

be in favor of the company, it will improve the liquidity.

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LIMITATIONS:

In spite of precautions taken to make the study objective, it cannot be denied

that there are certain procedural and technical limitations. It is not possible to judge all
the parameter to evaluate the efficiency in a wide and dynamic area like financial
analysis.

Some of the limitations of the study are as under:

1. As the research has taken place in a very short tenure, the shortage of time is one of
the limitations of this study.

2. As the report is mainly based on secondary data, limitations of secondary data are
the limitations of the study.

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CONCLUSION:

After examining the analysis of AMBUJA CEMENT COMPANY. It has been

seen that liquidity position of company needs to be improved. The company is
processing with a normal speed. There also need to increase profitability of the
company. The changes in the company s ratios shows that the company is making profit
but not in regular manner, there is fluctuations in profits of the company.

By conducting “RATIO ANALYSIS” of the ambuja cement company, I have observed

that the following areas or items need special attention:

1. Proper utilization of resources

2. Timely using current assets

3. Securing the positions of creditors by keeping secured and unsecured lines within a
particular limit

4. Increasing return on capital assets

5. Average collection period should be minimized

6. Proper utilization of working capital

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BIBLIOGRAPHY

With the help of various books and articles, I have been benefited to complete my
project study. I have given here a list of books.

(1) I. M. Pandey --- Financial Management

(2) R. K. Sharma &

Shashi K. Gupta --- Management Accounting

(3) Prof. Nirmal Jain --- Management Accounting

www. Ambujacement.com

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