Ratio Analysis

1.1 INTRODUCTION
RATIO ANALYSIS:

Financial analysis is the process of identifying the financial strengths and weaknesses
firm by properly establishing relationship between the items of the Balance sheet and the
profit and loss account. Financial analysis can be undertaken by the management of the firm
or by parties outside the firm, viz owners, creditors, investors and others. The nature of
analysis will differ depending on the purpose of the analyst.

Trade creditors are interested in firm’s ability to meet their claims over a very short
period of time. Their analysis will therefore, confirm to the evaluation of the firm’s liquidity
position.

Suppliers of long term debt, on the other hand, are concerned with the firm’s long
term solvency and survival. They analyze the firms profitability over time, its ability to
generate cash to be able to pay interest and repay principal and the relationship between
various source of funds (capital structure relationship) long term creditors do analyze the
historical financial statement to make analysis about its future solvency and profitability.
Investors, who have invested their money in the firm’s share, are most concerned about the
firms’ earnings. They restore
more confidence in those firms that show steady growth in earnings,as such, the
analysis of the firms present and future profitability. They are interested in the firm’s
financial structure to the extent it influence the firms earnings, ability and risk.

Management of the firms would be interested in every aspect of the financial analysis.
It is theirs overall responsibility to see that the resources of the firms are used most
effectively and efficiency and that the firms financial condition is sound.

SCOPE AND EVOLUTION OF FINANCIAL MANAGEMENT:

Nearly two decades ago the scope of the financial management was to the raising of
funds whenever needed and significance used to be attached to the day –to-day financial
decision -making and problem sloving, until about the middle of the century, the financial
management is generally defined only matter pertaining to the right side of the Balance sheet.

DEFINITION:

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The study of financial management has undergone significant change over the over
years. As a result of the environment conditions, finance in the early 1900 concentrated
heavily on the legal issues relating to insurance of security such as mergers, consolidations
and formation of new. However radically changes occurred during the depression of the
1930’s where the financial was still descriptive, legalistic subject, but the emphasis shifted
from expansion to survival. Also during 1940’s and early 1950’s it continued, viewed from
the outside rather than from the stand point and stock prices were beginning to receive
attention. Later in 1950’s the major emphasis began to shift you assets analysis. In 1960’s
witness balance sheet with a focus on optimal mix of securities and to cost of capital. Further
refinement of capital asset pricing model for valuating financial assets brought with the
application of those ideas to financial management in 1970’s. So far in the 1980’s the witness
a number of intellectual advances in the valuation of the firm in an uncertain world. Inflation
averaged 10% in the early 1980’s fluctuated widely led to the creation of a new financial
institutions and industries thus making financial management objected to various changes
with these things as a cost of capital, structure planning where incorporated in the subject.

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1.2 INDUSTRY PROFILE

The history of the cement industry in India dates back to the 1889 when a Kolkata-
based company started manufacturing cement from Argillaceous. But the industry started
getting the organized shape in the early 1900s. In 1914, India Cement Company Ltd was
established in Porbandar with a capacity of 10,000 tons and production of 1000 installed. The
World War I gave the first initial thrust to the cement industry in India and the industry
started growing at a fast rate in terms of production, manufacturing units, and installed
capacity. This stage was referred to as the Nascent Stage of Indian Cement Company. In
1927, Concrete Association of India was set up to create public awareness on the utility of
cement as well as to propagate cement consumption.
The cement industry in India saw the price and distribution control system in the year
1956, established to ensure fair price model for consumers as well as manufacturers. Later in
1977, government authorized new manufacturing units (as well as existing units going for
capacity enhancement) to put a higher price tag for their products. A couple of years later,
government introduced a three-tier pricing system with different pricing on cement produced
in high, medium and low cost plants.

INTRODUCTION TO CEMENT:
In the most general sense of the word, a cement is a binder, a substance that sets and
hardens independently, and can bind other materials together. The word "cement" traces to
the Romans, who used the term opus caementicium to describe masonry resembling modern
concrete that was made from crushed rock with burnt lime as binder. The volcanic ash and
pulverized brick additives that were added to the burnt lime to obtain a hydraulic binder
were later referred to as cementum, cimentum, cement and cement. Cement used in
construction is characterized as hydraulic or non-hydraulic.draulic cements (e.g., Portland
cement) harden because of hydration, chemical reactions that occur independently of the
mixture's water content. They can harden even underwater or when constantly exposed to
wet weather. The chemical reaction that results when the anhydrous cement powder is
mixed with water produces hydrates that are not water-soluble.
Non-hydraulic cements (e.g., lime and gypsum plaster) must be kept dry in order to
retain their strength.

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CEMENT INDUSTRY IN INDIA:

INTRODUCTION
Cement is a key infrastructure industry. It has been decontrolled from price and
distribution on 1st March, 1989 and deli censed on 25th July, 1991. However, the
performance of the industry and prices of cement are monitored regularly. The constraints
faced by the industry are reviewed in the Infrastructure Coordination Committee meetings
held in the Cabinet Secretariat under the Chairmanship of Secretary (Coordination). Its
performance is also reviewed by the Cabinet Committee on Infrastructure.
India, being the second largest cement producer in the world after China. With the
government of India giving boost to various infrastructure projects, housing facilities and
road networks, the cement industry in India is currently growing at an enviable pace. More
growth in the Indian cement industry is expected in the coming years. It is also predicted
that the cement production in India would rise to 236.16 MT in FY11. It's also expected to
rise to 262.61 MT in FY12.
MAJOR PLAYERS IN INDIAN CEMENT INDUSTRY:
There are a number of players prevailing in the cement industry in India. However,
there are around 20 big names that account for more than 70% of the total cement
production in India. The total installed capacity is distributed over around 129 plants, owned
by 54 major companies across the nation.
Following are some of the major names in the Indian cement industry:
Company Production Installed Capacity
ACC 17,902 18,640
Gujarat Abuja 15,094 14,860
Ultratech 13,707 17,000
Grasim 14,649 14,115
India Cements 8,434 8,810
JK Group 6,174 6,680
Jaypee Group 6,316 6,531
Century 6,636 6,300
Madras Cements 4,550 5,470

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TECHNOLOGY UP-GRADATION
Cement industry in India is currently going through a technological change as a lot of
up gradation and assimilation is taking place. Currently, almost 93% of the total capacity is
based entirely on the modern dry process, which is considered as more environment-
friendly. Only the rest 7% uses old wet and semi-dry process technology. There is also a
huge scope of waste heat recovery in the cement plants, which lead to reduction in the
emission level and hence improves the environment.
TOTAL PRODUCTION
Major players in cement production are Ambuja cement, Aditya Cement, J K Cement
and L & T cement. India’s cement industry has witnessed tremendous growth on the back of
continuously rising demand from the housing sector, increased activity in infrastructure, and
construction boom, according to RNCOS’ latest research report titled, ‘Indian Cement
Industry Forecast to 2012’.
The country’s cement production is projected to grow at a compound annual growth rate
(CAGR) of around 12 per cent during 2011-12 - 2013-14 to reach 303 million metric tonnes
(MMT), as per the RNCOS research report.
India is the second largest cement producing country with 137 large and 365 mini
cement plants. The large plants employ 120,000 people, according to a recent report on the
Indian cement industry published by Cement Manufacturers Association (CMA). Cement
production in the country is expected to increase to 315-320 million tonne (MT) by end of
this financial year from the current 300 MT.
The cement production touched 14.50 MT, while the cement dispatches’ quantity was
registered at 14.28 MT during April 2011, as per provisional data released by Cement
Manufacturer’s Association (CMA).
GOVERNMENT INITIATIVES
The cement industry is pushing for increased use of cement in highway and road
construction. The Ministry of Road Transport and Highways has planned to invest US$ 354
billion in road infrastructure by 2012.
Housing, infrastructure projects and the nascent trend of concrete roads would continue to
accelerate the consumption of cement.
Increased infrastructure spending has been a key focus area. Finance Minister Pranab
Mukherjee has proposed to earmark US$ 47 billion for infrastructure development during
2011-12.

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The infrastructure sector has received an impetus in the form of increased funds and
tax related incentives offered to attract investors for tapping the infrastructure opportunities
around the country. Introduction of tax free bonds, creation of infrastructure debt funds,
formulating a comprehensive policy for developing public private partnership projects are
some announcements which will give a fillip to the infrastructure sector which is the
backbone of any economy.
NEW INVESTMENTS
 After exceeding the projected cement production of 290 MT, the Cement
Manufacturers Association (CMA) is targeting a production increase up to 320 MT
by the year end.
 Holcim Group, has increased its stake from 46.44 per cent to 50 per cent stake in
Ambuja Cement through the creeping acquisition route. It has also increased its
stake in ACC to reach 50.1 per cent.
 The Builders Association of India (BAI) plans to set up a cement manufacturing
plant at a cost of US$ 677.97 million at Anantpur in Andhra Pradesh. The plant
would have a production capacity of 10 MTPA and is expected to be ready in two
years.
 Shree Cement plans to set up a two MT clinkerisation unit near Raipur,
Chhattisgarh, with an investment of US$ 225.12 million.
 BK Birla Group outfit, Kesoram Industries, is setting up a 2,000 tonne a day
packaging unit in Medak district of Andhra Pradesh at a cost of US$ 1.76 million,
according to a filing by the company to the stock exchanges. The proposed unit
would cater to the packing needs of its cement manufacturing unit at Sedam in
Karnataka.
 Birla Corporation, the flagship company of the M P Birla Group, is planning to set
up a one MT cement plant in Assam at an investment of around US$ 99 million. The
company has signed a memorandum of understanding (MoU) with the Assam
Mineral Development Corporation to this effect.
 Giving further push to industrial development in the State, the Government of Orissa
through its single level window clearance committee has approved four major
projects involving an investment of US$ 274.02 million.
 The Hyderabad-based Sagar Cements Ltd and Vicat Group of France’s US$ 563.82
million worth joint venture (JV) plant is likely to commence operations next year.

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 My Home Industries Limited (MHI), a 50:50 joint venture (JV) between the
Hyderabad-based My Home Group and Ireland's building material major CRH Plc,
plans to scale up its cement production capacity from the existing five MTPA to 15
MTPA by 2016. The company would undertake this capacity expansion at a cost of
US$ 1 billion.
 Rain Commodities Ltd, which manufactures Priya Cement, has acquired Birla
Cement and Industries Ltd from Yash Birla Group for an undisclosed sum. Cement
and gypsum products have received cumulative foreign direct investment (FDI) of
US$ 2,316.27 million between April
 2000 and February 2011, according to the Department of Industrial Policy and
Promotion (DIPP).

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1.3 COMPANY PROFILE

Bharathi Cement Corporation Limited (BCCPL) is a subsidiary of Vicat Group. The

Vicat Group manufactures Cement, Ready-Mixed Concrete, Concrete Product (Precast) and
Aggregates. In 1817 Louis Vicat discovered artificial cement. His son, Joseph, created Vicat
Company in 1853. The Group continues expanding under the President Jacques Merceron-
Vicat and is present in 11 countries (France, US, Turkey, Senegal, Switzerland, Egypt, Italy,
Mali, Kazakhstan, Mauretannia and India). The Vicat Group has 6,700 employees and
generates sales of Euros 2 billion.
Bharathi was founded by the promoters of Sakshi Telugu Daily &Sakshi TV, under
the chairmanship of Smt. Y.S. Bharathi Reddy and managing director Markus Oberle from
Vicat.And senior professionals with vast experience in Power, Cement, Infrastructure,
Ready-Mixed Concrete, Aggregates and Waste Management.
Before vicat, Bharathi Cement is a company that has been promoted by the Sakshi
Group, which has interests in media and power. It is controlled by Y.S. Jagan Mohan
Reddy, the Member of Parliament (MP) from Kadapa and son of former Andhra Pradesh
chief minister Y.S. Rajasekhara Reddy.
Apart from the Sakshi group, Bharathi Cement has been co-promoted by India
Cements Ltd., Dalmia Cement (Bharat) Ltd. and N. Prasad, vice-chairman and founder of
Matrix Laboratories Ltd.
The Sakshi group bought Raghuram Cements in 2007 and renamed it Bharathi
Cement
Bharathi expects to have a capacity to produce 5 million tonnes (mt) of cement by the
end of 2010. so the company makes a deal with vicat for global partner both for technology
and getting a pan-India footprint”.
Bharathi in October commissioned a 2.5 mt capacity plant in Andhra Pradesh Kadapa
district with an investment of Rs700 crore. The second phase of the plant expansion, with an
additional investment of Rs720 crore for another 2.5 mt capacity, would be completed by
December
In India, Vicat already has a 51:49 joint venture with Sagar Cements Ltd to build a
5.5 mt, $625 million cement plant at Gulbarga in Karnataka.

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An analyst tracking the cement industry for an Indian brokerage said Vic at will have
a 10 mt cement-making capacity in south India, making it the fastest capacity ramp-up from
a low base by any cement manufacturer in India.
MISSION STATEMENT
  To partner our customers in building the best, by delivering superior quality cement
that’s produced with best-in-class technology. To grow by building lasting relationships
with business associates and contribute to the well-being of society
CAREERS
We value the human resources - a vital asset. People are always the strength of
'Bharathi Cement'. Recognizing this, the Company gives great importance to provide
Professional Management, a work culture that allows its members a space to learn, innovate
and grow. It gives its people the freedom to think differently, and work as a team to achieve
organizational goals
STRENGTHS
•STATE OF THE ART PLANT
Bharathi cement corporation Limited has set up most modern cement plant with state
of the art technology at Nallalingayapalli, Kamalapurammandal, Kadapa district of Andhra
Pradesh.
  This area is known for its superior quality Narzi lime stone deposits, possessing high
lime content that gives high early strength and ultimate long term strength. Another
characteristic feature of this lime stone is low alkali, magnesia and low chloride contents
which are highly desirable parameters for concrete durability.
  The state of the art technology adopted at the plant consists of Vertical Roller mill of
LOESCHE, Germany for grinding of cement to achieve the optimum fineness, and
controlled particle size distribution of cement particles.
 •GERMAN TECHNOLOGY
The Bharathi Cement plant has the most advanced Vertical Roller Mill (Type 63.3)
from LOESCHE, Germany. This mill has a capacity of producing 360 tons per hour and is
equipped with a 6,700 KW gear box.
The mill is designed to produce a range of high quality cements such as Ordinary Portland
Cement (OPC), Portland Pozzolona Cement (PPC), Pozzolona Slag Cement (PSC) and
Ground slag at varying fineness. It has a rated capacity of 360tph OPC at 3000 Blaine and
300tph of ground slag at 4000 Blaine

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• Homogenized mining
• Online process control
• Exclusive R&D facility for continuous product improvement
TECHNICAL SUPPORT
•MOBILE CONSTRUCTION ADVISOR
At Bharathi we believe in total customer satisfaction. Bharathi cement offers
laboratory testing facilities of concrete at your door step. Your concrete is tested under
standard laboratory conditions and test certificates are issued. The services of experienced
civil engineers can be availed
•GOOD CONSTRUCTION PRACTICES
 •SUGGESTED CONCRETE MIX DESIGNS
 •SOCIAL RESPONSIBILITY
At Bharathi Cements, our commitment to quality makes us go beyond. We at
Bharathi Cement have Mobile Construction Advisers. With a full-fledged technical team,
this service brings you best construction practices from the globe. The Mobile Construction
Adviser further offers concrete lab services, concrete cube testing, training for masons and
site supervisors
SOCIAL RESPONSIBILITY OF BUSINESS
Bharathi cement has introduced accidental insurance scheme for masons. Each mason
is covered for an amount of Rs.100000 for one year under this scheme. The premium is paid
by Bharathi Cement Corporation Limited. This is a great moral booster for masons and their
families
TECHNICAL SERVICES OFFERED
• Demonstrations, Tips on good construction practices, informative lectures and onsite
video presentations
• Onsite training for masons and site supervisors
• Advice on concrete mix proportion
• Testing of fresh and hardened concrete ensuring its superior quality
• NDT (Non Destructive Testing) facilities
POWER SOURCE
Right now the co. drawing power from the state electricity grid. But, we are planning
a captive power plant in two years. We are looking at a generation capacity of 30 MW

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AIMING MARKET SHARE

5% market share of Indian cement industry in about 10 years.

MARKETING STRATEGY AND TARGETS

Bharathi Cement already has a strong network of 600 dealers and 1000 sub-dealers,
and is growing each day. We will strengthen the dealer network for the next phase.
Bharathi Cement would focus on Andhra Pradesh, Tamilnadu, Karnataka, Goa,
Kerala and parts of Maharashtra in the initial phase and progressively increase the footprint
in other parts of the country.
In the first three states we have already established a strong network of distributors and in
the other three states we will be strengthening our network in the next few months.
The approximate ratios of the dispatch will be 50% by road network and 50% by rail
network
RAW MATERIAL SOURCING
The Nallalingyapalli-Kamalapuram belt in Kadapa district of Andhra Pradesh has rich
limestone quarries. The company has also tied up with RTTP for Fly Ash and Slag will be
procured from Jindal Steel, Tornagal, and Karnataka.

MISSION
To become a leader In Cement businessand provide total solutions.
1. Quality policy
2. Commitment to customer satisfaction,
3. Quality awareness, desire for excellence and
4. Continual improvement is our motto.

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BCCPL VISION
BCCPL will be the national leader in Cement Industries, which make
everybody life mere comfortable, easy & safe.
1. Co-operation
2. People development
3. Environmental concern
4. Professionalism
5. Speed
CULTURAL INITIATIVES
 BCCPL family day.
 Independence Day.
 Republic day.
 Community development programmes.
 Public relations programmes.

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2.1 NEED FOR THE STUDY

Ratio analysis is very useful to raise relevant questions on a number

of managerial issues. It provides clues to investigate those issues in detail

 Liquidity ratio measures the firm’s ability to obligations.

 Leverage ratios show the proportions of debt and equity in financing the
firms asset
 Activity ratios reflect the firms efficiency in utilizing its assets.
 Profitability ratios measures overall performance and effectivencess of
the firm

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2.2 SCOPE OF THE STUDY

 The study is exclusively conducted at Bharathi Cement Ltd

 The study is confined to finance department.
 The study is limited only to various ratios, even through a brief insight was given to
other aspects.
 The study includes the trends of Bharathi Cement Ltd performance only for the last
four years.

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2.3 OBJECTIVES OF THE STUDY

 To study the liquidity position of the firm.

 To study the operating efficiency
 To analysis the effectiveness in the utilization of assets
 To study relationship between debt and equity
 To evaluate existing projects performance though ratio analysis
 To conduct an in depth study in the working of organization

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2.4 RESEARCH METHODOLOGY

The data collected from secondary sources is called secondary data. In other
words, the primary data are those data which are collected a fresh and for the first
time. Primary data happened to be original in character. On the other hand secondary
data are those data which have been already collected by someone and which have
already being passed through the statistical process.

For the study of all objectives the following methodology is adopted. The data was
collected from already published sources.

The sources:

a) Annual reports of the company.

b) Textbooks relating to the financial management

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2.5 LIMITATIONS OF THE STUDY

As the time spent by the researcher on the project and the period of time
considered for analyzing the financial performance is less, it is not possible to have
generalization, the chances of errors is more.

 As it is not the researcher direct observation but secondary sources of

information provided by the company.
 The information provided in the company balance sheet is only the data source
available.
 The information available in the balance sheet has taken from the published annual
reports, so it has limitations.

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THEORETICAL BACKGROUND
NATURE OF RATIO ANALYSIS:

Ratio analysis is a powerful of financial analysis. A ratio is defined as “the indicate

quotient of two mathematical expressions” and as the relationship between two or more
things. In financial analysis a ratio is used as a bench mark for evaluating the financial
position and performance of a firm. The absolute accounting figure reported in the financial
statement do not provide a meaningful understanding of the performance and financial
position of a firm. An accounting figure conveys meaning when it is related to some other
relevant information. For example a RS 5 cores net profit may look impressive, but the firms
performance can be said to be good or bad only when the net profit figure is related to the
firm’s investment. The relationship between two accounting figures can be said or expressed
mathematically is known as a financial ratio. Ratio’s help to summarize the large quantities
of financial data and to make quantitative judgment about the firm’s financial performance.

OBJECTIVES OF THE STUDY ANALYSIS

Ratio Analysis is the principal tool for analysis of financial statements. Other
conducts it not only by management but also like suppliers, banks tending, and institutions,
prospective investors etc.

The following are usually the objectives for which ratio analysis is conducted.

I. To evaluate financial position and performance of a firm.

II. To indicate the trend or progress or down fall of a firm.

III. To assess the credit worthiness of a firm,

IV. To assess the efficiency with which working capital is being used in a firm.

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IMPORTANCE OF THE RATIO ANALYSIS:

The Ratio Analysis is the most powerful toll of the financial analysis. These people
use rations to determine those financial characteristics of the firm in which they are
interested. With the help of ratios, one can determine:

 The ability if the firm to meet its current obligations.

 The extent to which the firm has used its along-term solvency by borrowing
funds.
 The efficiency with which the firm is utilizing its assets in generating sales
revenue.
 The overall operating efficiency and performance of the firm.
STANDARD OF COMPARISION:

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

 Project ratio, i.e ratios developed using the projected, or proforma, financial statements of
the same firm.

 Projected ratio, past ratios i.e ratios calculated from the past statements of the same firm,
competitors ratios, i.e ratio of some selected firms, especially the most progressive and
successful competitors, at the same past in time.

 Industry ratio, i.e ratios of the industry to which firm belongs.

LIMITATIONS OF RATIO ANALYSIS

Standards for Comparison

Ratios of a company have meaning only when they are compared with some standards
and it is always a challenging job to find and adequate standard.

Company Differences

Situations of two companies are never same. Similarly the factors influencing the
performance of a company in one year change in another year. Thus, the comparison of the

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ratios of two companies becomes difficult and meaningless when are operating in different
situations.

ADVANTAGES OF RATIO ANALYSIS:

1. It facilitate inter firm comparison. It reveals how well it serves. As a useful

aid in financial forecasting future trends can be known in advance based on
ratios relating to part sales, profits and financial position.

2. It facilitates comparative study of the performance and, progress of a firm

over a period of years. Such a study will reveal the directions in which the
firm is moving.

3. It serves as a useful tool for cost control. It reveals now efficiently a firm is
managed and how effectively its assets are utilized.

Principle advantages of ratio analysis:

 To help the management in planning and forecasting

 To help the management in decision making

 To summarize briefly the result of detail complicated conditions.

 It is possible to assets efficient of the enterprise through the technique of ratio

analysis.

Price Level Challenges

The interpretation and comparison of the ratios are also rendered invalid by the
changing value of money; a change in the price level can seriously affect the validity of
comparison of ratios computed for different time periods.

RATIO TOOLS USED:

Several ratios, calculated from the accounting data can be grouped in to various
classes according to financial activity or function to be evaluated. As stated earlier, the parties
interested in financial analysis are short and long term creditors, owners and management.
Short term creditors main interest is in the liquidity position or the short term solvency of the
firm. Long term creditors, on the other hand, are more interested in the long term solvency

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and profitability of the firm. Similarly, owners concentrate on the firms performance. They
have to protect the interest of all parties and see that the firm grows profitability.

In view of the requirements of the various users of ratios. We may classify them in to
the following four important categories.

1. Liquidity ratios
2. Leverage ratios
3. Activity ratios
4. Profitability ratios
1. LIQUIDITY RATIOS:

Liquidity refers to the ability of a firm to meet its obligations in the short-term,
usually one year. Liquidity ratios by establishing a relationship between cash and other
current assets to current obligations, provide a quick measure of ability.
The most common ratios which indicate the extent of liquidity or lack of it are;
a. Current ratio

b. Quick ratio

c. Cash and Net working ratio

CURRENT RATIO:

The current ratio measures the extent to which the claims of short-term
creditors are covered by assets that can be quickly converted into cash. Most companies
should have a ratio of at least one, because failure to meet these commitments can lead to
bankruptcy. The ratio is defined as follows:
Current Assets
Current Ratio = -------------------------
Current Liabilities

Current assets include cash and those assets which can be converted into cash within a year,
such as marketable securities, debtors and inventories. All obligations maturing within a year
are included in current liabilities. Current liabilities include creditors, bill payable, accrued
expenses, short-term bank loans, income-tax liability and long-term debt maturing in current
year.

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As a conventional rule, a current ratio of 2 to 1 or more is considered satisfactory.

The higher the current ratio, greater the short-term solvency.

QUICK RATIO:

The ratio establishes a relation between quick assets or liquidity assets and current liabilities.
An asset is liquidity if it is can be converted into cash immediately or reasonably soon
without a loss of value. Cash is the most liquid asset.

Other assets which are considered to the relatively liquidity and include in quick
assets are book debts. (Debtors and bill receivable) and marketable securities (temporary
quoted investments). Inventories are considered to be less liquidity. Inventories normally
require some time for realizing into cash; their value also has a tendency to fluctuate. The
quick ratio is found out by dividing quick assets by current liability.

Current Assets – Inventories

Quick Ratio= --------------------------------------
Current Liabilities

Generally a quick ratio of 1 to 1 is considered to represent a satisfactory current financial

condition.

CASH RATIO:

Since cash is the most liquidity asset, a financial analyst may examine the ratio of
cash and its equivalent to current liabilities. Trade investment of marketable securities are
equivalent of cash, therefore, they may be include in the computation of cash ratio.

Cash + Marketable securities

Cash Ratio= --------------------------------------

Current Liabilities

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There is nothing to be worried about the lack of cash if the company has reserve
borrowing power. In India, firms have credit limits sanctioned from banks, and can easily
draw cash.

NET WORKING CAPITAL RATIO

The difference between current assets and current liabilities excluding short-term
borrowings is called Net Working Capital (NWC) or Net current Assets (NCA) NWC is
sometimes used as a measure of a firm’s liquidity.

Net Working Capital

NWC Ratio= -----------------------------

Net Assets

It is considered that between two firms, the one having the longer NWC has the
greater to meet its current obligations.

2. LEVERAGE RATIOS:

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 etc, are more concerned with the firm’s long
term financial strength. As a general rule, there should be an appropriate mix of debt and
owner’s equity in financing the firm’s assets.

The manner in which assets are financed has a number of implications. First, between
debt and equity, debt is more risky from the firm’s point of view. Second, employment of
debt is advantageous for share holders in two ways;

a. They can retain control of the firm with a limited stake and

b. Their earning will be magnified.

When the firm earns a rate of return on the total capital employed higher than the
interest rate on the borrowed funds. Third, a highly debt- burdened firm will find difficulty in
raising funds from creditors and owners in future. The owners equity is treated as a margin of

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safety by creditors; if the equity base is thin, the creditors risk will be high. Thus, leverage
ratios are calculated to measure the financial risk and the firm’s ability of using debt to
shareholder’s advantage.

Total Debt Ratio:

Several debt may be used to analyze the long term solvency of a firm.
Computer debt ratio by dividing total debt (TD) by capital employed (CE) or a total Net
Assets (NA). Total debt will include short and long term borrowings from financial
institutions, debentures/bonds, differed payment arrangements for buying capital equipment,
and bank borrowing, public deposits and any other interest bearing loan. Capital employed
will include total debt and net worth (NW).

Total Debt

Debt Ratio = _____________________

Total debt + Net worth

Debt – Equity Ratio:

This relationship describing the lender’s contribution for each rupee of the
owner’s contribution is called debt equity ratio. Debt equity ratio can also be computed by
dividing total debt by net worth.

Total Debt

Debt – Equity Ratio = __________________

Net worth

Equity Ratio :

This is also called as capital employed to net worth ratio. This can be found
out by calculating the ratio employed or net assets to net worth.

Capital employed

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Ratio Analysis

Equity Ratio = __________________

Net worth

3. Activity Ratios:

Activity ratios are employed to evaluate the efficiency with which the firm manages
and utilizes its assets. These ratios are also called turnover ratios, because they indicates the
speed with which assets are being converted or turned into sales. Activity ratios thus involve
a relationship between sales and assets. A proper balance between sales and assets generally
reflects that assets are managed well, several activity ratio can be calculated to judges the
effectiveness of asset utilization.

Inventory Turnover :

This ratio indicates the efficiency of the firm is selling its product. It is
calculated by dividing the cost of goods sold by the average inventory.

Cost of goods sold

Inventory Turnover = _________________

Average Inventory

The average inventory is the average of opening and closing balances of

inventory. In manufacturing company inventory of finishing goods is used to calculate
inventory turnover.

Days of Inventory Holdings (DIH) :

We obtain days of inventory holdings (DIH) when the number of days in a

year (Day, 360) are divided by inventory turnover.

360

DIH = _________________

Inventory Turnover

Average Collection Period:

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Ratio Analysis

The average number of days for which book debts remain outstanding is called the
average collection period (ACP) and can be computed as follows.

360

Average Collection Period = ________________

Debtors turnover

Raw Material Inventory Turnover:

The raw material inventory should be related to material consumed and work
in process to the cost of production.

Material consumed

Raw material Inventory Turnover = __________________________

Average raw material inventory

Asset Turnover ratios:

Assets are used to generate sales. Therefore a firm should manage it’s assets
efficiently to maximize sales. The relationship between sales and assets and assets is called
turnover. Several assets turnover ratios can be calculated.

Net Assets turnover:

The firm can compute net assets turnover simply by dividing sales by net assets (NA).

Sales

Net Assets Turnover = ______________

Net Assets

Total Assets Turnover:

Analysts like to compute the total assets turnover in addition to or instead of the net
assets turnover. This ratio shows the firm ability in generating sales from all financial
resource committed to total assets.

Sales

Total Assets Turnover = ________________

Net Fixed Asset

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Ratio Analysis

Fixed Assets Turnover:

Sales

Fixed Assets Turnover = ___________________

Net Fixed Assets

Current Assets Turnover:

A firm also likes to relate net current assets (or net working capital gap) to
sales. It may thus compute net working capital turnover by dividing sales by net working
capital.

Sales

Current Assets Turnover = _________________

Net current assets

Working Capital Turnover

A firm may also like to relate net current assets to sales. It may also
calculate net working capital turnover as dividing sales by net working capital.

Sales

Working Capital Turnover = ________________

Net current assets

4.Profitability Ratios:

Profit is the difference between revenue 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. Therefore the financial manager should continuously evaluate the
efficiency of company in terms of profits. The profitability ratios are calculated to measure
the operating efficiency of the company.

Generally, two major types of profitability ratios are calculated:

1. Profitability in relation to sales

2. Profitability in relation to investment.

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Ratio Analysis

MEASURES OF PROFIT

Profit can be measured in various ways. Gross profit (GP) is the difference
between sales and the manufacturing cost of goods sold. A number of companies in India
define gross profit differently. They define it as earnings before depreciation, interest and
taxes (EBIT). The most common measures of profit is profit after taxes (PAT) or net income
(NI) which is a result of the impact of all factor on the firm’s earnings.

Taxes are not controllable by management. To separate the influence of taxes,

therefore, profit before taxes (PBT) may be computed. If the firms profit has to be examined
from the point of view of all investors (Leander and owners), the appropriate measure of
profit is operating profit. Operating profit is equivalent of earnings before interest and taxes
(EBIT). When the firm does not have non-operating income. This measures of profit shows
earnings arising directly from the commercial operations of the business without the effect of
financing. The concept of EBIT may be broad ended to include non-operating income if they
exist on an after tax basis, profit to investors is equal to EBIT (1-T), where ‘T’ is the
corporate tax rate.

GROSS PROFIT MARGIN

The first profitability ratio in relating to sales is the gross profit

margin (or simply gross margin ratio). It is calculated by dividing the gross profit by sales:

Sales – Cost of Goods Sold Gross Profit

Gross Profit Margin= ---------------------------------- (or) ------------------

Sales Sales

The gross profit margin reflects the efficiency with which management
produces each unit or product. This ratio indicates the average spread between the cost of
goods sold and the sales revenue.

A high gross profit margin ratio is a sign of goods management. A gross margin
ratio may increase due to any of the following factors:

Higher sales Prices, cost of goods remaining constant,

1. Lower cost of goods, sold, sales price remaining constant,

2. A combination of variations in sales prices and costs, the margin widening, and

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Ratio Analysis

3. An increase in the proportionate volume of higher margin items.

NET PROFIT MARGIN

Net profit is obtained when operating expenses, interest and taxes are subtracted from gross
profit. The net profit margin ratio is measured by dividing profit margin ratio is measured by
dividing profit after tax by sales.

Net Income

Net Profit Margin = -----------------------

sales

OPERATING EXPENSES RATIO

The operating expense ratio is an important ratio that explains the

change in the profit margin (EBIT to sales) ratio. This ratio is computed by dividing
operating expenses viz., cost of goods sold plus selling expenses (excluding interest) by sales.

Operating Expenses

Operating Expenses Ratio= ------------------------------

Sales

RETURN ON INVESTMENT (ROI)

The term investment may refer to total assets or net assets. The funds employed
in net assets is know as capital employed. The conventional approach of calculating ROI is to
divide PAT by investment. It is more appropriate to use the following measures of ROI for
comparing the operating efficiency of firms.

EDIT (1-T)

ROI = ----------------

Total Assets.

RETURN ON NET WORTH:

The return on net worth is net profit after taxes dividing by net worth.

Profit after Taxes

RON= -----------------------------

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Ratio Analysis

Net Worth

DATA ANALYSIS & INTERPRETATIONS

Definition and importance of financial function:

Finance is the process of commission of accumulated funds to productive use Finance

helps to direct the flow of economic activity and facilitate its smooth operation; Finance is
the agent that produces this result.

There are many definitions of finance of all the best was of how ward and upon as
that administrative area of set of administrative functions in an organization which have to do
with the management of flow of cash. So that the organization will have the means to carry
out its objectives as satisfactorily as possible and at the same time meet its obligations as they
become due.

Finance is concerned with the task of providing funds needed by the enterprise on the
terms that are most favorable towards the attainment of organizational goals and it covers
financial planning, forecasting of cash receipts and disbursements, rising of funds and
financial control. The area of operation manager values from one company to another and
industry-to-industry etc.,

Significance of financial management:

Financial management is the managerial activity, which is concerned with the

planning and controlling of the firm’s financial resources.

The subject of financial management as of immense interest both to the academicians

and the practicing managers. The practicing managers all interested in these subjects became
among the most crucial decisions of the firm all those which result to finance, and on
understanding of the theory or

Financial management provides them with conceptual and analytical insights to make
the decisions skillfully. As a separate activity as discipline it is of recent origin, it was a

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Ratio Analysis

branch of economics till 1890. Today financial management is recognized as the most
important branch of business administration.

RATIO ANALYSIS

Ratio analysis is a powerful tool of financial analysis. A ratio is defined as “the

indicated quotient of two mathematical expressions” and as “the relationship between two or
more things”. In financial analysis, a ratio is used as a benchmark for evaluating the financial
position and performance of a firm.

Types of Ratios

Several ratios, calculated from the accounting data, can be grouped into various
classes according to financial activity of function to be evaluated. The management is
interested in evaluating e4very aspect of the firm’s performance. They have to protect the
interest is in the liquidity position or the short-term solvency of the firm; Long-term creditors
are more interested in the long-term profitability and financial condition. IN the view of the
requirements of the various users of ratios, we may classify them into the following
categories.

 Liquidity Ratios
 Leverage Ratios
 Activity Ratios
 Profitability Ratios

1. LIQUIDITY RATIOS

Liquidity Ratios measure the ability of the firm to meet its current obligations. In
fact, analysis of liquidity needs the preparation of cash budgets and cash and fund flow
statements; but liquidity ratios, by establishing a relationship between cash and other current
assets to current obligations, provide a quick measure of liquidity.

A. Current Ratio

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Ratio Analysis

The current ratio is a measure of the firm’s short-term solvency. It indicates the availability of
current assets in rupees for every one rupee of current liability. A ratio of greater than one
means that the firm has more current assets than current claims against them.

Current ratio is calculated by dividing current assets by current liabilities.

Current ratio = Current assets / Current labilités

TABLE NO : 4.1

Years Current Assets ( in Current Liabilities(in Current Ratio

Crores) Crores)

2013-14 313,112,005 86,229,274 3.63

2014-15 343,123,264 79,938,108 4.29

2015-16 277,203,371 133,280,414 2.08

2016-17 301,924,932 130,061,660 2.32

2017-18 337,265 129,620,400 2.60

GRAPH NO: 4.1

CURRENT RATIO
5
4.5 4.29
4 3.63
3.5
3 2.6
RATIO

2.5 2.32 RATIO

2.08
2
1.5
1
0.5
0
2013-14 2014-15 2015-16 2016-17 2017-18
YEARS

INTERPRETATION:

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Ratio Analysis

From the above table no 4.1 shows that current ratio of the company is gradually
fluctuating that is 3.63,4.29,2.08,2.32, and 2.6.

The standard ratio of the company must be 2:1. It shows that the current ratio of the
company is below of the standard ratio. So it is considered satisfactory of the company.

B. QUICK RATIO

Quick ratio is also called acid test ratio, establishes a relationship between quick or
liquid assets and current liabilities. An asset is liquid if it can be converted into cash
immediately or reasonable soon without a loss of value cash is the most liquid asset. Quick
assets are debtors and bills receivables and marketable securities.

Quick ratio is found out by dividing quick assets by current liabilities.

Current assets - Inventory

Quick ratio =
Current Liabilities

Quick Assets
Quick ratio =
Current liabilities

TABLE NO : 4.2

Years Current Invent Quick Current Ratio

Assets Assets Liabilities

2013-14 313,112,005 86,293,250 226,818,755 86,229,27 2.63

4

2014-15 343,123,264 82,873,616 260,249,648 79,938,10 3.26

8

2015-16 277,203,371 74,338,239 202,865,132 133,280,41 1.52

4

2016-17 301,924,932 92,240,814 209,684,118 130,061,66 1.61

0

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Ratio Analysis

2017-18 337,491,265 80,506,086 256,985,179 129,620,40 1.98

0

GRAPH NO : 4.2

QUICK RATIO
3.5 3.26
3 2.63
2.5
1.98
2 1.61 RATIO
RATIO

1.52
1.5
1
0.5
0
2013-14 2014-15 2015-16 2016-17 2017-18
YEARS

INTERPRETATION:

From the above table no 4.2 shows that quick ratio of the company is gradually
decreasing year by year are 2.63,3.26,1.52,1.61 and 1.98. The standard ratio of the company
must be 1:1. It shows that the Quick ratio of the company is below of the standard ratio in the
year 2015-18.

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Ratio Analysis

C. CURRENT ASSETS TO FIXED ASSETS RATIO

Current assets

Ratio of CA to FA = ----------------------------------

Fixed assets

CURRENT ASSETS TO FIXED ASSETS RATIO TABLE NO: 4.3

Years Current Assets Fixed Assets Ratio

2013-14 313,112,005 546,796,293 0.57

2014-15 343,123,264 599,138,795 0.57

2015-16 277,203,371 658,421,983 0.42

2016-17 301,924,932 628,490,919 0.48

2017-18 337,491,265 420,816,860 0.80

GRAPH NO : 4.3

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Ratio Analysis

CURRENT ASSETS &FIXED ASSETS RATIO

0.9 0.8
0.8
0.7
0.6 0.57 0.57
0.48
0.5 0.42
RATIO

0.4 RATIO
0.3
0.2
0.1
0
2013-14 2014-15 2015-16 2016-17 2017-18
YEARS

INTER PRETATION

From the above table no 4.3 the absolute of the company is gradually increased and
decreased year by year. Compared to 2015-16 it is equal in 2013-15 i.e., 0.57,0.57. Later it is
decreased in the 2015-16 i.e. 0.42. After it is increased in 2016-17,0.48 it was its highest
0.80:1 during the year 2017-18, which was due to high current assets.

D.NET WORKING CAPITAL RATIO

Net working capital

Net working capital = ---------------------------------------------

Net assets

NET WORKING CAPITAL RATIO TABLE NO: 4.4

Years Networking Net Assets Ratio

Capital

2013-14 226,882,731 774,272,560 0.29

2014-15 263,185,156 862,323,951 0.31

2015-16 143,922,957 802,344,940 0.18

2016-17 171,863,272 800,354,191 0.21

2017-18 207,870,865 628,687,725 0.33

GRAPH

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Ratio Analysis

NETWORKING CAPITAL RATIO

0.35 0.33
0.31
0.29
0.3
0.25 0.21
0.2 0.18 RATIO
RATIO

0.15
0.1
0.05
0
2013-14 2014-15 2015-16 2016-17 2017-18
YEARS

INTER PRETATION:

The absolute of the company is gradually increased and decreased year b year. The
net working capital ratio of CCSL in 2014-15 is 0.29,in the year 2014-15 it increase to 0.31,
in the year 2015-16 it decrease to 0.18, in the year 2016-17 it increase to 0.21 and year 2017-
18 it raises to 0.33, in the year 2015-16 is lowest ratio and in the year 2017-18 is the highest
ratio.

2. LEVERAGE RATIOS

The short-term creditors, like bankers and suppliers of raw material, are more
concerned with the firm’s current debt-paying ability. Long-term creditors like debenture
holders, financial institutions etc. are more concerned with the firm’s long-term financial
strength

A.TOTAL DEBT RATIO

Several debt ratios may be used 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. Total debt includes short and long-term borrowings from financial institutions,
debentures, deferred payment arrangements for buying capital equipments, bank borrowings,
public deposits and any other interest-bearing loan. Capital employed will include total debt
and net worth (NW).

Total Debt
Debt ratio =
Total Debt + Net worth (Capital Employed)

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Ratio Analysis

TOTAL DEBT RATIOTABLE NO: 4.5

Years Total Debt Capital Employed Total Debt Ratio

2013-14 411,856,449 783,902,491 0.53

2014-15 568,208,088 888,201,200 0.64

2015-16 580,893,778 784,002,435 0.74

2016-17 572,444,654 812,885,375 0.70

2017-18 395,753,183 617,240,000 0.64

GRAPH NO: 4.5

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Ratio Analysis

TOTAL DEBT RATIO

0.8 0.74
0.7
0.7 0.64 0.64
0.6 0.53
0.5
RATIO
RATIO

0.4
0.3
0.2
0.1
0
2013-14 2014-15 2015-16 2016-17 2017-18
YEARS

INTER PRETATION

From the above table no 4.5 shows that the Total Debt Ratio in the year 2013-14 is
0.53. The total debt ratio of the company varied between 0.53 & 0.74. High ratio of company
is favorable to the shareholders & creditors.

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Ratio Analysis

B.DEBT EQUITY RATIO:

The relationship between borrowed funds and owners’ capital is a popular measure of
the long-term financial solvency of a firm. This relationship is shown b the debt-equity ratios.
This ratio reflects the relative claims of creditors and shareholders against he assets of the
firm. The debt considered here is exclusive of current liabilities.

Total debt
Debt equity ratio = ----------------------------------------
Shareholder’s fund
DEBT EQUITY RATIO TABLE NO: 4.6

Years Total Debt Net worth Debt equity Ratio

2013-14 411,856,449 362,416,111 1.14

2014-15 568,208,088 294,115,863 1.93

2015-16 580,893,778 221,451,162 2.62

2016-17 572,444,654 227,909,537 2.51

2017-18 395,7536,183 232,934,542 1.70

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Ratio Analysis

GRAPH NO: 4.6

Debt equity Ratio

3
2.62 2.51
2.5

2 1.93
1.7
RATIO

1.5 Debt equity Ratio

1.14
1

0.5

0
2013-14 2014-15 2015-16 2016-17 2017-18
YEARS

INTER PRETATION

From the above table shows that the Debt Equity Ratio in the year 2013-14 is 1.14,it is
decreasing. The debt equity ratio was moved from 1.14 & 2.62.It was found that during the
year 2015-16 the ratio was very high. It is favorable to the share holders.

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Ratio Analysis

C. CAPITAL EMPLOYED TO NETWORTH RATIO:

Net assets
Capital employed to net worth =
Net worth
CAPITAL EMPLOYED TO NET WORTH RATIO TABLE NO: 4.7
Years Capital Employed Net worth Ratio
2013-14 783,902,491 362,416,111 2.16

2014-15 888,201,200 294,115,863 3.02

2015-16 784,002,435 221,451,162 3.54

2016-17 812,885,375 227,909,537 3.57

2017-18 617,240,000 232,934,542 2.65

GRAPH NO: 4.7

NETWORTH RATIO
4
3.54 3.57
3.5
3.02
3 2.65
2.5 2.16
RATIO

2 RATIO
1.5
1
0.5
0
2013-14 2014-15 2015-16 2016-17 2017-18
YEARS

INTER PRETATION:

From the above table shows that the Capital employed to net worth ratio of CCSL for
2016-17 is 3.57, it is the highest satisfactory. The capital employed to net worth ratio as per
considered is 3:2.so that we have to increases, the capital employed

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Ratio Analysis

3. ACTIVITY RATIOS:

Activity ratio are employed to evaluate the efficiency with which the firm manages
and utilities its assets. These ratios are also called turnover ratios or efficiency ratios. The
efficiency with which the assets are used would be reflected in the speed and rapidity with
which assets are converted into sales. Such ratios are also designated as turnover ratios

A.FIXED ASSETS TURNOVER RATIO

The firm may be wish to know its efficiency of utilizing fixed assets and current
assets separately. The use of depreciate value of fixed assets in computing the fixed turnover
may render comparison of firms of firms performance over period or with other firms.

Net sales
Fixed assets turnover ratio = ----------------------------------------
Net fixed assets
FIXED ASSETS TURNOVER RATIO

TABLE NO: 4.8

Years Net Sales Fixed Assets Ratio

2013-14 941,569,646 546,796,293 1.72

2014-15 998,839,169 599,138,795 1.67

2015-16 809,678,391 658,421,983 1.23

2016-17 1,111,831,603 628,490,919 1.77

2017-18 1,120,359,310 420,816,860 2.66

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Ratio Analysis

GRAPH NO: 4.8

FATR
3
2.66
2.5

2 1.72 1.77
1.67
RATIO

1.5 1.23 RATIO

0.5

0
2013-14 2014-15 2015-16 2016-17 2017-18
YEARS

INTERPRETATION:

From the above table fixed asset turnover ratio in the year 2013-14 is 1.72. It is
decreased up to 2014-15 is 1.67. The ratio was highest in 2017-18 as 2.66 and the same was
lowest in the years 2015-16as 1.23.The ratio explains the sales productivity and effective
utilization of plant and equipment of the company.

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Ratio Analysis

B.WORKING CAPITAL TURNOVER RATIO

The efficiency of business operation is also judged by comparing capital invested to sales.

Sales
Working capital turnover ratio =
Working capital
WORKING CAPITAL TURNOVER RATIOTABLE NO: 4.9

Years Net Sales Working Capital Ratio

2013-14 941,569,646 226,882,731 4.15

2014-15 998,839,169 263,185,156 3.80

2015-16 809,678,391 143,922,957 5.63

2016-17 1,111,831,603 171,863,272 6.47

2017-18 1,120,359,310 207,870,865 5.39

GRAPH NO: 4.9

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Ratio Analysis

WCTR
7 6.47
6 5.63 5.39
5
4.15
4 3.8
RATIO

Ratio
3
2
1
0
2013-14 2014-15 2015-16 2016-17 2017-18
YEARS

INTERPRETATION:

working capital turnover ratio in the year 2013-14 is 4.15. But it is growing year by year up
to 2014-17. But in 2017-18 the working capital ratio decreased to 5.39. This ratio indicates
net working capital has been effectively utilized in making sales.

C.INVENTORY TURNOVER RATIO:

Cost of goods sold

Inventory Turnover Ratio =
Average Inventory
INVENTORY TURNOVER RATIO

TABLE NO: 4.10

Years Sales Inventory Sales Ratio

2013-14 411,694,563 31,692,631 12.99

2014-15 477,398,435 25,655,096 18.61

2015-16 469,176,471 21,511,563 21.81

2016-17 588,172,030 28,890,999 20.36

2017-18 647,008,028 30,581,444 21.16

GRAPH NO: 4.10

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Ratio Analysis

Ratio
25
21.81 21.16
20.36
20 18.61

15 12.99
RATIO

Ratio
10

0
2013-14 2014-15 2015-16 2016-17 2017-18
YEARS

INTER PRETATION:

From the above table shows 4.10,that the Inventory turnover ratio in 2013-14 is 12.99.
it is increased after 2014-16 from 18.61 to 21.81. After it is decreasing in the year 2016-18
i.e., 20.36 and increased in 2017-18 i.e. 21.16. High inventory turnover is indicating good
inventory management.

D.DEBTOR TURNOVER RATIO:

This ratio indicates the average time lag in number of days between sales and cash
collection form debtors. It explains the number of days of credit enjoyed by the debtors.

Net credit sales

Debtors turnover ratio =
Average Debtors

DEBTORS TURNOVER RATIOTABLE NO : 4.11

Years Net Sales Debtors Ratio

2013-14 941,569,646 121,345,982 7.76

2014-15 998,839,169 125,208,797 7.98

2015-16 809,678,391 100,098,882 8.09

2016-17 1,111,831,603 108,881,625 10.21

2017-18 1,120,359,310 97,854,277 11.45

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Ratio Analysis

GRAPH NO: 4.11

Ratio
14
12 11.45
10.21
10
7.76 7.98 8.09
8
RATIO

Ratio
6
4
2
0
2013-14 2014-15 2015-16 2016-17 2017-18
YEARS

INTER PRETATION:

From the above table 4.11, Debtors Turnover ratio in the year 2013-14 is 7.76. It is increased
in 2014-15 i.e. 7.98. After 2015-16 it is increased i.e. 8.09 and again increases to 10.21 in
2017-18 & it increases to 11.45 in 2017-18.

E.AVERAGE COLLECTION PERIOD

It indicates the time taken to collect money from the debtors.

No. of working days

Average collection period =
Debtor’s turnover ratio

AVERAGE COLLECTION PERIODTABLE NO: 4.12

Years No of working Debtors turnover Average collection

days Ratio period(Days)

2013-14 360 7.76 46

2014-15 360 7.98 45

2015-16 360 8.09 44

2016-17 360 10.21 35

2017-18 360 11.45 31

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Ratio Analysis

GRAPH NO: 4.12

Average collection period(Days)

50 46 45 44
40 35
31
30 Average collection
DAYS

period(Days)
20
10
0
2013-14 2014-15 2015-16 2016-17 2017-18
YEARS

INTER PRETATION :

The average collection period in the year 2013-14 is very high i.e. 46, since it indicates
the speed of their collection. The shorter the average collection period implies the prompt
payments debtors.

F.TOTAL ASSETS TURNOVER RATIO:

This ratio is calculated to find out the contribution made by fixed assets to the sales.
This ratio will indicate the relationship between sales and fixed assets.

Sales
Assets Turnover ratio =
Total Assets

TOTAL ASSETS TURNOVER RATIO TABLE NO: 4.13

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Ratio Analysis

Years Net Sales Capital Employed Ratio

2013-14 941,569,646 783,902,491 1.20

2014-15 998,839,169 888,201,200 1.12

2015-16 809,678,391 784,002,435 1.03

2016-17 1,111,831,603 812,885,375 1.37

2017-18 1,120,359,310 617,240,000 1.82

GRAPH NO: 4.13

Ratio
2 1.82

1.5 1.37
1.2 1.12 1.03
RATIO

1 Ratio

0.5

0
2013-14 2014-15 2015-16 2016-17 2017-18
YEARS

INTERPRETATION:
Assets Turnover Ratio in the ear 2013-14 is 1.20. It decreased in 2014-15, 2015-
16, and increased in 2016-17, 2017-18 i.e. 1.37 and 1.82. This ratio is ideal
capacity the fraction standard ratio 2:1. The company is maintaining satisfactory level. The
Total Turnover Ratio is high because the sales are increasing due to the market condition.

4. PROFITABILITY RATIOS

Profit is the difference between revenues and expenses over a period of time. The
profitability ratios are calculated to measure the operating efficiency of the company.
Generally two major types of profitability ratios are calculated i.e. profitability in relate to
sales and profitability relate to investment. Profitability ratios related on each rupee of sales.
Profitability ratios related to sales are classified below;

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Ratio Analysis

A.NET PROFIT RATIO

Net profit margin ratio establishes a relationship between net profit and sales and
indicates management’s efficiency in manufacturing, administering and selling the product.
This ratio is the overall measure of the firm’s ability to turn each rupee sales into net profit.
This also indicates the firm’s capacity to withstand adverse economic conditions.

Net profit
Net profit Ratio = X 100
Net sale
NET PROFIT RATIO TABLE NO: 4.14

Years Net Profit Net Sales Percentage(%)

2013-14 103,112,094 941,569,646 11.95

2014-15 125,404,766 998,839,169 13.55

2015-16 52,740,065 809,678,391 7.51

2016-17 59,198,440 1,111,831,603 5.32

2017-18 63,723,445 1,120,359,310 5.68

GRAPH NO: 4.14

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Ratio Analysis

Percentage(%)
16
14 13.55
11.95
12
10
7.51
RATIO

8 Percentage(%)
5.32 5.68
6
4
2
0
2013-14 2014-15 2015-16 2016-17 2017-18
YEARS

INTER PRETATION:

From the above table no 4.14 Net Profit Margin in the year 2013-14 is 11.95.Net profit
increased and decrease from 2014-15 i.e. 13.55, 7.51,5.32 and 5.68.

So, overall company net profit is fluctuating. The net profit is satisfactory thus we can
carry say CCSL performance is good.

B.GROSS PROFIT RATIO

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Ratio Analysis

The profit margin measures the relationship between profit and sales.
It is the result of the relationship between prices, sales volume and cost. The gross profit or
gross margin represents the limit beyond which fall in sales

Price is outside the tolerance limit.

Gross profit

Gross profit ratio = X 100

Net sales
GROSS PROFIT RATIO TABLE NO: 4.15

Years Gross Profit Net Sales Percentage(%)

2013-14 529,875,083 941,569,646 56.27

2014-15 521,440,734 998,839,169 52.20

2015-16 340,501,920 809,678,391 42.05

2016-17 523,659,573 1,111,831,603 47.09

2017-18 473,351,282 1,120,359,310 42.24

GRAPH NO : 4.15

Percentage(%)
60 56.27 52.2
50 47.09
42.05 42.24
PERCENTAGE

40
30 Percentage(%)
20
10
0
2013-14 2014-15 2015-16 2016-17 2017-18
YEARS

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Ratio Analysis

INTER PRETATION:

Gross Profit Ratio in the year 2013-14 is 56.27.This ratio shows the average spread between
the cost of goods sold and the sales revenue. The ratio was recorded at low 0.42% and high is
0.56%.It decrease year by year in 2013-14 the ratio is yearly 0.56%., 0.52%., 0.42%. 0.47%
and 0.5. It is a sign of good management.

C.RETURN ON INVESTMENT RATIO

The term investment may refer to total assets ore net assets. The fun employed in net
assets is known as capital employed. Investment represents pool of funds supplied by
shareholder and lender. The conventional approach of calculating return on investment (ROI)
is to divided profit after tax by investment.

Net profit after tax

Formula: Return on investment =
Net assets

RETURN ON INVESTMENT RATIOTABLE NO: 4.16

Years Net Profit after Tax Net assets Ratio

2013-14 103,112,094 783,902,491 0.13

2014-15 125,404,766 888,201,200 0.14

2015-16 52,740,065 784,002,435 0.07

2016-17 59,198,440 812,885,375 0.07

2017-18 63,723,445 617,240,000 0.10

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Ratio Analysis

GRAPH NO : 4.16

Ratio
0.16
0.14
0.14 0.13
0.12
0.1
0.1
RATIO

0.08 0.07 0.07 Ratio

0.06
0.04
0.02
0
2013-14 2014-15 2015-16 2016-17 2017-18
YEARS

INTER PRETATION:

From the above table no 4.16 implies that by observing the above table, negative ratio
was not there. As the company earned profits during the period (2012-2017) because of
improved efficiency of management. The ratio was high at 0.14 during the period of 2013-14
due to the profits incurred during this year. Whatever it may, be the company improved their
efficiency and earned profits and generating funds.
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Ratio Analysis

5.1 FINDINGS

 The current ratio of the CCSL i.e., the ratio between the current assets and current
liabilities crossed 2:1 ratio in the past five years. The current ratio should be 2:1
which is generally treated as ideal. The years 2013-14, increase the current assets,
remaining years small decrease in the current assets. The firm’s economic situation is
well.
 The debtor’s turnover ratio of CCSL i.e., was highest during the years 2013-14 is
11.45 and during the year 2017-18 the ratio 7.76 that is the lowest one. The debtor’s
turnover ratio has increased year by year.
 Fixed assets turnover ratio is in good position in respect of CCSL. It has observed
that, from the past 3years, the ratio of sales to fixed assets is increasing.
 Liquidity position of the company as revealed by the current ratio during the study
period of an annual average was 2.98.
 The impact of the working capital on profitability ratios showed both negative and
positive impact.

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Ratio Analysis

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Ratio Analysis

5.2 SUGGESTIONS

 It is suggested that better to depend on borrowed capital rather than owned capital.
Because the interest is in expensive.

 The above study indicates a moderate trend in the utilization of working capital and
the financial position of the company. Correct estimation of working capital should be
done and fluctuation in quantum of working capital in relation to sales should be
avoided.

 The company has to attempt to use funds more effectively by keeping an optimum
level of working capital.

 The impact of working capital complete through it is moderately positive over the
study period efforts should be made to ensure positive trend of profitability by prepare
estimation of working capital.

 Since networking capital increased year by year.

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Ratio Analysis

5.3 CONCLUSION

After evaluating and analyzing the liquidity, leverage, profitability, turnover

ratios of Bharathi Cement Ltd. The following conclusion is draw.

Liquidity position of the company was revealed by the current ratio during the study
period was crossed by the ideal ratio, so that Bharathi Cement Ltd, is liquidity position in
future also, the position of the debt the capitalization of the firm is always low. So it is
unfavourable to shareholders and creditors.

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Ratio Analysis

BIBLIOGRAPHY

 S.P.Jain, K.L. Narang, ADVANCED ACCOUNTANCY, 10 TH Edition,

2003, Kalyani Publisher, Ludhiana.

 I.M. Pandey, FINANCIAL MANAGEMENT, 8TH Edition, 2002, Vikas Publishing House
Private limited, NEW DELHI.

 Prasanna Chandra, FINANCIAL MANAGEMENT, 5 TH Edition, 2002, TATA-

MCGRAW HILL, NEW DELHI.

JOURNALS:

 The ICFAI Journal of Applied Finance

 Finance INDIA (INDIA INSTITUTE OF FINANCE )

WEBSITE:

www.grindwellnortonltd.com
www.wikipedia.com
www.moneycontrol.com

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Ratio Analysis

ANNEXURE
BHARATHI CEMENT LIMITED BALANCESHEET FOR THE YEAR 2013-14

Sources of funds 2013 2014

Share holders funds
A) Share capital 3976.36 3976.36
B) Reserves and Surplus 3993.06 3804.74
A) Secured Loans 9244.82 10886.36
B) Unsecured Loans 15069.11 9588.74
Deferred Tax Liability 618.06 424.17
Total 32901.40 28680.37
Application of funds
Fixed Assets -
A) Gross Block 25035.99 20021.36
B) Less Depreciation 6510.29 5417.03
Net Block 18525.70 14604.33
Capital Work In Progress 5604.02 6015.09
Investment - 589.83
Current Assets, Loans and Advances
A) Inventories 9194.04 7075.18
B) Sundry Debtors 6706.59 7197.89
C) Cash and Bank Balance 350.67 247.72

D) Loans and Advances 2070.42 1616.75

18,321.76 16,137.54
Less current Liabilities and Provisions
A) Current Liabilities 9202.11 8090.45

B) Provisions 354.42 586.14

9556.53 8676.59
Net Current Assets 8765.23 7460.95
Differed Tax Assets - -
Miscellaneous Expenditure 6.45 10.17
Total 32,901.40 28,680.37

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Ratio Analysis

BHARATHI CEMENT LIMITED BALANCESHEET FOR THE YEAR 2014-15

Sources of funds 2014 2015

Share holders funds
A) Share capital 3976.36 3976.36
B) Reserves and Surplus 5,108.64 3993.06
A) Secured Loans 16,382.92 9244.82
B) Unsecured Loans 13,733.65 15069.11
Deferred Tax Liability 1,184.79 618.06
Total 40,386.36 32901.40
Application of funds
Fixed Assets -
A) Gross Block 31,824.32 25035.99
B) Less Depreciation 7,666.24 6510.29
Net Block 24,158.08 18525.70
Capital Work In Progress 754.45 5604.02
Investment - -
Current Assets, Loans and Advances
A) Inventories 10,636.86 9194.04
B) Sundry Debtors 7,667.92 6706.59
C) Cash and Bank Balance 2,650.37 350.67
D) Loans and Advances 5,241.68 2070.42
26,196.83 18,321.76
Less current Liabilities and Provisions
A) Current Liabilities 10,188.34 9202.11
B) Provisions 538.25 354.42
10,726.59 9556.53
Net Current Assets 15,470.24 8765.23
Differed Tax Assets - -

Miscellaneous Expenditure 3.59 6.45

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Ratio Analysis

Total
40,386.36 32,901.40

BHARATHI CEMENT LIMITED BALANCESHEET FOR THE YEAR 2015-16

Sources of funds 2015 2016

Share holders funds

A) Share capital 3976.36 3976.36

B) Reserves and Surplus 7179.70 5,108.64
A) Secured Loans 17832.33 16,382.92
B) Unsecured Loans 12271.32 13,733.65
Deferred Tax Liability 2576.95 1,184.79
Total 43836.66 40,386.36
Application of funds
Fixed Assets -
A) Gross Block 35516.23 31,824.32
B) Less Depreciation 9127.88 7,666.24
Net Block 26388.35 24,158.08
Capital Work In Progress 862.01 754.45
Investment - -
Current Assets, Loans and Advances
A) Inventories 12092.91 10,636.86
B) Sundry Debtors 8814.31 7,667.92
C) Cash and Bank Balance 420.10 2,650.37

D) Loans and Advances 5289.66 5,241.68

26,616.98 26,196.83
Less current Liabilities and Provisions
A) Current Liabilities 9319.38 10,188.34

B) Provisions 711.30 538.25

10,030.68 10,726.59
Net Current Assets 16586.30 15,470.24
Differed Tax Assets - -

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Ratio Analysis

Miscellaneous Expenditure - 3.59

Total 43,836.66 40,386.36

BHARATHI CEMENT LIMITED BALANCESHEET FOR THE YEAR 2016-17

Sources of funds 2016 2017

Share holders funds

A) Share capital 3976.36 3976.36

B) Reserves and Surplus 8549.77 7179.70
A) Secured Loans 22645.54 17832.33
B) Unsecured Loans 15460.46 12271.32
Deferred Tax Liability 3123.73 2576.95
Total 53755.86 43836.66
Application of funds
Fixed Assets -
A) Gross Block 38974.86 35516.23
B) Less Depreciation 10734.88 9127.88
Net Block 28239.98 26388.35
Capital Work In Progress 425.37 862.01
Investment - -
Current Assets, Loans and Advances
A) Inventories 14436.48 12092.91
B) Sundry Debtors 11966.16 8814.31
C) Cash and Bank Balance 3463.66 420.10

D) Loans and Advances 6107.54 5289.66

35,973.84 26,616.98
Less current Liabilities and Provisions
A) Current Liabilities 10108.38 9319.38

B) Provisions 774.95 711.30

10,883.33 10,030.68
Net Current Assets 25090.51 16586.30
Differed Tax Assets - -

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Ratio Analysis

Miscellaneous Expenditure - -
Total 53,755.86 43,836.66

BHARATHI CEMENT LIMITED BALANCESHEET FOR THE YEAR 2017-18

Sources of funds 2017 2018

Share holders funds

A) Share capital 3,976.36 3976.36

B) Reserves and Surplus 13,713.91 8549.77
A) Secured Loans 26,486.50 22645.54
B) Unsecured Loans 6,130.29 15460.46
Deferred Tax Liability 3,435.74 3123.73
Total 53,742.80 53755.86
Application of funds
Fixed Assets -
A) Gross Block 40,286.29 3,8974.86
B) Less Depreciation 12,527.20 10,734.88
Net Block 27,759.09 28,239.98
Capital Work In Progress 3,441.21 425.37
Investment - -
Current Assets, Loans and Advances
A) Inventories 11,519.49 14,436.48
B) Sundry Debtors 11,845.80 11,966.16
C) Cash and Bank Balance 1,516.42 3,463.66

D) Loans and Advances 5,581.47 6,107.54

30,463.18 35,973.84
Less current Liabilities and Provisions
A) Current Liabilities 6,853.94 10,108.38
B) Provisions 1,066.74 774.95
7,920.68 10,883.33
Net Current Assets 22,542.50 25,090.51
Differed Tax Assets - -
Miscellaneous Expenditure - -

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Ratio Analysis

Total 53,742.80 53,755.86

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