beena-ambuja

AMBUJA CEMENT Ltd.

A FINANCIAL STATEMENT ANALYSIS OF AMBUJA CEMENT Ltd. Project Report Submitted to Prof. Riddhi Sanghvi Faculty Member, NGI – MBA College, (Affiliated with GTU) On Date 28 JULY, 2011. th

In partial fulfillment of the requirement for MBA programme Sem - II Batch 2010-12 Submitted by Bina H. Raval

NGI-MBA

1

AMBUJA CEMENT Ltd.

A PROJECT REPORT ON AMBUJA CEMENT Ltd.

NGI-MBA

2

AMBUJA CEMENT Ltd.

Preface

As a student of MBA it is important to study practical things with theoretical knowledge of financial management. The Financial Analysis of “AMBUJA CEMENT LIMITED-KODINAR” based on the Annual reports for five consecutive years from the year 2006 to 2010. The basic objective behind making such analytical reports is to have the knowledge of Financial structure and corporate environment. Moreover I can develop written communication and analytical skill. The report contains information about financial condition of the company. It also highlight future plan of the company. Also it contains growth rate of company in various aspects and financial soundness of company. From this financial statement analysis, I learnt a lot.

NGI-MBA

3

AMBUJA CEMENT Ltd.

Acknowledgement This successful project report has been made possible through the direct and indirect cooperation and guidance of various people for whom I wish to express my appreciation and gratitude.

First foremost, my intellectual debt is to those people who have contributed significantly guidance to complete my project report successfully. I am extremely thankful to my faculty member Prof. Riddhi Sanghvi who guided me and my principal sir Dr. Ved Vyas Dwivedi (NGI-MBA) who give me this golden opportunity. I am extremely thankful to Mr. S.K Udaiwal (D.G.M. H.R) ACL, Kodinar for getting me acquainted to the company and giving me the golden opportunity to carry out this interesting training at Ambuja Cement Ltd. I would like to thank Mr. Harshad Patel (G.M., H.R. Dept), Mr. Sunil Kumar (Sr. officer, personnel dept.) who helped me a lot to do my project successfully. I am extremely thankful to Mr. Ajit Kachhela (Mechanical Engineer),ACL who helped me a lot. He gave me knowledge about production system, Transportation system, Import & Export policy and also many other areas about Ambujanagar Plant

NGI-MBA

4

AMBUJA CEMENT Ltd.

DECLARATION I the undersigned Raval Bina H. a student of M.B.A. of Noble Engineering College, Junagadh. Hereby declare that the project work presented in this report is my own work and has been carried out in charge of M.B.A. section. This work has not been previously submitted to any other university for any examination.

Date: 28/07/2011

Signature

Place: Junagadh

Raval Bina H.

NGI-MBA

5

AMBUJA CEMENT Ltd.

Executive Summary

My Financial Analysis project is on “AMBUJA CEMENT LIMITED-KODINAR”. Main objective of this project is to know the financial strengths and weaknesses of ACL LIMITED For that I had taken the five consecutive years’ annual report from 2006 to 2010. In addition to these annual reports of ACL LIMITED I had also used various Books and Web based information to cover the current trends of the company and its competitors, as well as the whole industry. To analyze the firm, I have used various calculation based ratios and also study some other statements like Trends analysis, DU-Pont Charts etc. I found that the ACL LIMITED is doing well in general. Most of the graphs and Ratios are supporting me to say ACL LIMITED a good company. ACL is consistently going ahead.

NGI-MBA

6

AMBUJA CEMENT Ltd.

INDEX

    1

2 3 4 5 6 7 8 9 10 11 12

CERTIFICATE PREFACE ACKNOWLEDGEMENT EXECUTIVE SUMMARY GENERAL INFORMATION 1.1 HISTORY 1.2 COMPANY AT GLANCE 1.3 EXISTING MANAGEMENT BODY 1.4 COMPANY VALUES 1.5 DEPARTMENTS OF COMPANY 1.6 DIFFERENT PRODUCTION UNITS 1.7 MISSION & VISION 1.8 ORGANIZATION CHART 1.9 AWARDS & ACHIEVEMENTS 1.0 SWOT ANALYSIS 1.1 PORTER’S FIVE FORCES MODEL 1.2 PURPOSE OF STUDY INTRODUCTION TO FINANCIAL ANALYSIS TREND ANALYSIS HORIZONTAL ANALYSIS VERTICAL ANALYSIS DU PONT ANALYSIS RATIO ANALYSIS FINDINGS RESULT AND SUGGESTION CONCLUSION BIBLIOGRAPHY ANNEXURE

NGI-MBA

I II III 7 8 10 12 13 14 15 16 17 18 20 22 24 26 33 49 57 65 69 79 81 86 88 90

7

AMBUJA CEMENT Ltd.

General Information

NGI-MBA

8

AMBUJA CEMENT Ltd.

Ambuja Cements Ltd. (ACL) is one of the leading cement manufacturing companies in India. The Company, initially called Gujarat Ambuja Cements Ltd., was founded by Narotam Sekhsaria in 1983 with a partner, Suresh Neotia. Sekhsaria’s business acumen and leadership skills put the company on a fast track to growth. The Company commenced cement production in 1986. The global cement major Holcim acquired management control of ACL in 2006. Holcim today holds little over 46% equity in ACL. The Company is currently known as Ambuja Cements Ltd.

The company started its commercial production in October in 1986. Later the company in order to expand its production setup and another plant in Kodinar itself called Gaj Ambuja Line-1 in 1992 followed by the third one Gaj Ambuja Line-2 in 1998 making the total production to reach approximately three million tons per annum marks.

ACL has grown dynamically over the past decade. Its current cement capacity is about 25 million tones. The Company has five integrated cement manufacturing plants and eight cement grinding units across the country. ACL enjoys a reputation of being one of the most efficient cement manufacturers in the world. Its environment protection measures are on par with the finest in the country. It is one of the most profitable and

NGI-MBA

9

AMBUJA CEMENT Ltd.

innovative cement companies in India. ACL is the first Indian cement manufacturers to build 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 customers. The Company has its own fleet of ships. ACL has also pioneered the development of the multiple bio-mass co-fired technologies for generating greener power in its captive plants. Ambuja Company is the first company to introduce the concept of bulk cement movement by sea in India. This resulted in speedier transportation and brought many coastal markets within easy reach. Ambuja cements have 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 seven 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. ACL has always met tough challenges and seized the opportunities that have come its way. It has nurtured the same spirit of enterprise and search for cutting-edge technology with which it started. It thus continues to be the driving force and in many ways a benchmark for the cement industry in India.

NGI-MBA

10

AMBUJA CEMENT Ltd.

COMPANY AT A GLANCE



DIVISIONS:

Ambuja cement Ltd. Gaj Ambuja cement Ltd. Line-1 Gaj Ambuja cement Ltd. Line-2

 YEAR OF ESTABLISHMENT :

Sept., 1986

 INVESTMENT :

Rs. 86 crores

 PROMOTORS OF THE CO. :

Mr. Narrotam Sekhsaria Mr. Suresh Neotia

 REGISTERED OFFICE: -



CORPORATE OFFICE:

P. O. Ambujanagar, Taluka- Kodinar, District-Junagadh, Gujarat - 362 715

Mumbai

NGI-MBA

11

AMBUJA CEMENT Ltd.



BANKER: -

Bank of India Bank of Baroda ANZ Grind lays Bank Punjab National Bank



AUDITOR: -

M/s.Dalal & Shah M/s. Chaturvedi & co. M/s. P.M. Nanabhoy



SIZE OF THE FIRM:

Large scale unit

 COMPETITORS

Ultra tech cement Jaypee cement Sanghi India cement Grasim

NGI-MBA

12

AMBUJA CEMENT Ltd.

EXECUTIVE MANAGEMENT TEAM

NAME Mr. Onne van der Weijde



DESIGNATION Managing Director

Mr. B.L. Taparia

Company Secretary & Head Corporate Services

Mr. Sanjeev Churiwala

CFO

Mr. Ghassan Broummana Mr. S.N. Toshniwal

Head - Technical Support Services

Mr. J.C. Toshniwal

Business Head (North)

Mr. Ajay Kapur

Business Head (West & South)

Ms. Meenakshi Narain

Joint President (HR)

Mr. Shakti Arora

Head - Central Purchase Officer

Business Head (East)

NGI-MBA

13

AMBUJA CEMENT Ltd.

COMPANY VALUES

1. Delighted Customers My actions speak more about my company than a mere advertisement. My function, however remote to the customer, ultimately leads to satisfying him. My connection to him is like God. I may not see it. But, it exists. 2. Inspired Employees I don't need orders to trust my colleagues. I don't need orders to seek challenges. Or to meet them either. That, I know, is I CAN. 3. Enlightened partners I will build enduring relationships with my dealers and suppliers. The full benefit of our engagement with dealers and suppliers will only come when they act as partners in satisfying the customer. I will, therefore, create winwin associations between my dealers, suppliers, my company and my customers. 4. Energised Society I will energise, involve and enable people around me to realize their potential. The communities around me are a part of my support system. A small improvement in their life will have a multiplier effect for everyone. 5. Cleaner Environment - Pollution control I will leave a cleaner planet for my children. For this, I don’t need the rule book. 6. Cleaner Environment – natural resources

NGI-MBA

14

AMBUJA CEMENT Ltd.

I will use Nature responsibly and conserve its resources. If I allow Nature to replenish itself, it will provide me with a permanent livelihood. And, the benefit will extend even to my children’s children.

DEPARTMENTS AT AMBUJANAGAR

1)

Personnel Department

2)

H.R.D Department

3)

Account Department

4)

Sales & Distribution Department

5)

Administration Department

6)

Land Department

7)

Stores Department

8)

Costing Department

9)

Security Department

10) Electronic Data Processing Department 11) Purchasing Department 12) Packing Department 13) Bulk Cement Terminal Department 14) Mines Department 15) Project Planning & Development Department 16) Civil Department 17) Instrumentation Department 18) Electrical Department 19) Mechanical Department 20) Diesel Generator Department & Thermal Power Plant 21) Research & Development Department 22) Laboratory Department

NGI-MBA

15

AMBUJA CEMENT Ltd.

23) Production Department 24) Hospital 25) Audit Department

DIFFERENT PLANTS & SUBSIDIARY COMPANIES, THEIR LOCATION & PRODUCTION UNITS 1. AMBUJANAGAR 40km. away from Veraval in Saurastra, Gujarat. This location consists of three units namely: a. Ambuja b. Gaj Ambuja Line – 1 c. Gaj Ambuja Line – 2 2. DARLAGHAT: Near Simla in Himachal Pradesh with one unit. 3. GADCHANDUR: Near Chandrapur in Maharastra with one unit. 4. BHATINDA: Punjab – Grinding unit. 5. ROOPNAGARSS: Punjab – Grinding unit

NGI-MBA

16

AMBUJA CEMENT Ltd.

MISSION & VISION OF THE COMPANY

NGI-MBA

17

AMBUJA CEMENT Ltd.

ORGANISATION CHART

Unit Head

Head Commercial

Head Works

Head BCTMuldwarka Headp&c

Sanand (GU) Plant Head Amb

Head plant

Plant Head Gaj

Head Mines Head-HR Head-Gaj

Headmaint

Head Prod

Head Prod

Head-Opm

HeadMech

HeadMech

Head maint

Head E&I

Head E&I

Head min res

Head

Head Civil

Head DG

QC Manager

Head operations

Head proj Head AFR Head Dev Civil Process Eng

QC Manager

Head Trg & De Head-A/c Head Environment Head OH&S

Head Civil NGI-MBA

18

AMBUJA CEMENT Ltd.

Head QA&RD Academy AWARDS AND ACHIVEMENTS

2004-2005 Ernst & Young ‘Entrepreneur of the Year’ (Manufacturing) Asian Institute of Management Award for ‘Environmental Excellence’ Genentech 'Environment Excellence Award' in the Gold category by Genentech Foundation to GACL, Bhatinda o 'Environment Week awards' for plantation, air, noise and water pollution control and community development o 'Safety Week awards' for safer mining o o o

•

2005-2006

'Asian CSR Award' (Environment Excellence) 2005 for corporate sustainable development at GAC (India) Works o Centre for Science and Environment Green rating Project award to GACL (second rank) o 'Best Environment Management Practices Award' for the Ropar unit from the State Pollution Control Board o Capelin 'Certificate of Export Recognition' to GACL (Mumbai) in recognition of outstanding export performance o Awards won by the Maratha Limestone Mine of Maratha Cement Works (a unit of Ambuja Cements Ltd) Upparwahi o

•

2007

In Mines Environment & Mineral Conservation Week–Indian Bureau of Mines o 'Corporate Excellence Award 2007' awarded to ACL by the Indian Institute of Materials Management, Chandigarh o Dun & Bradstreet 'American Express Corporate Award 2007' to ACL o 'National Award for Environmental Excellence' in Opencast Mining from NCBM (2nd place – to Abuja’s Sugala Limestone Mine) o

• o

2008

'Certificate of Merit' by Rajasthan State Productivity Council, Jaipur

NGI-MBA

19

AMBUJA CEMENT Ltd.

'Gobar Times Green Schools Programmed Awards' by Centre for Science and Environment (CSE) For the Year 2008 : Ambuja Public School : Rabriyawas o

MAJOR ACHIEVEMENTS

 Most profitable cement company in India.  Lowest cost producer of cement in the world.  Its environment protection measures are at par with the best in the world. The pollution levels 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 to 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.  First company to introduce the concept of bulk cements movement by sea in die.

NGI-MBA

20

AMBUJA CEMENT Ltd.

SWOT ANALYSIS

NGI-MBA

21

INTERNAL ENVIRONMENT

AMBUJA CEMENT Ltd.

POSITIVE 1) Lower energy cost due to improved value coal and use of non conventional fuels. 2) Lower transportation cost due to increased transport through sea router fro bulk shipping. 3) Excellent management team to cope with changing environment. 4) Very less dependent on government coal and power. 5) High distribution efficiency and sound to cope up with economic situation. 6) Processing own Jetty and Ships useful for timely and cheap transport.

NEGATIVE 1) No national geographic coverage as in case of competition. 2) Very limited fragmentation of plant, which avoid is presence in very sub regional markets. 3) The pace of new capacity addition by the industry has not been as fast as previously, therefore pricing pressure.

EXTERNAL ENVIRONMENT

STRENGTH

WEAKNESS THREATS

OPPORTUNITY 1) Company’s financial condition is good so can start a new manufacturing unit and can increase production. 2) Basic raw material is easily available so can reduce cost and can compete other. 3) Housing construction in the urban, & affordable housing loan provision by bank can hike demand. 4) Can get more foreign exchange by increase bulk cement capacity through the ship.

1) Threats from the economic cycles. I.e. Recession or growth. 2) Government policies, local political changes & interruption in management. 3) Exchange rate fluctuation having direct effect on bottom line as well as on export. 4) Market competitor’s price.

NGI-MBA

22

AMBUJA CEMENT Ltd.

Porter’s Five Forces Model NGI-MBA

23

AMBUJA CEMENT Ltd.

THREATS OF NEW ENTRANCE Unorganized player New upcoming units

BUYER POWER

NEW ENTRANTS u

Large volume buyers Real estate contractors Foreign countries

RIVALRY SUPPLIER SUPPLIER POWER Local suppliers Different inputs -Raw material Gypsum Silica Red clay Fly ash Coal

Ultra tech cement Jaypee cement Sandhi ACC

BUYER

THREAT OF SUBSTITUTE

SUBSTITUTES

NGI-MBA

Fly ash Silica

24

AMBUJA CEMENT Ltd.

PURPOSE OF STUDY

PRIMARY OBJECTIVE :  To assist in decision making the accounting analysis.  To provide reliable financial information about economic resources & obligations of a business firm.  To provide other needed information about changes in such economic resources and obligations.

SECONDARY OBJECTIVE:  To know the details of other departments and its work system in the company.  production department Raw Material 1. Lime stone 2. Gypsum 3. Silica 4. Red clay 5. Fly ash 6. Coal 

Types of Cement : 1. PPC(Pozolonz Port line Cement) 2. OPC(Ordinary Port line Cement)

NGI-MBA

25

AMBUJA CEMENT Ltd.

 Human Resource Department 

Time Keeping System

For Plant: Shift - A Shift - B Shift - C

06:00am to 02:00pm 02:00pm to 10:00am 10:00pm to 06:00am

For Table Work Job: 09:00am to 01:00pm (01:00pm to 02:00pm – Lunch Time) 02:00pm to 06:00pm  Research & Development Department a) Physical Laboratory b) Chemical Laboratory c) XRF(X-Ray Florescence Spectrometer)  Marketing Department   

Marketing channel distribution in all over saurastra region. Advertisements Transportation facility for a bulk cement through sea in foreign.

NGI-MBA

26

AMBUJA CEMENT Ltd.

Financial Statement Analysis

NGI-MBA

27

AMBUJA CEMENT Ltd.

INTRODUCTION

The primary objective of financial reporting is to provide information to present and potential investors and creditors and other in making rational investment, credit and other decisions. Effective decision making requires evaluation of the past performance of companies and used by investors, creditors, and professional analysis for analyzing and interpreting the information contained in financial statements. Any successful business owner is constantly evaluating the performance of his or her company, comparing it with the company's historical figures, with its industry competitors, and even with successful businesses from other industries. To complete a thorough examination of your company's effectiveness, however, you need to look at more than just easily attainable numbers like sales, profits, and total assets. You must be able to read between the lines of your financial statements and make the seemingly inconsequential numbers accessible and comprehensible.

OBJECTIVE OF FINANCIAL STATEMENT ANALYSIS Financial statement analysis is the collective name for the tools and techniques that are intended to provide relevant information to decision-makers. The purpose of financial statement analysis is to assess a company’s financial health and performance. Financial statement analysis consists of comparisons for the same company over period of time and comparisons of different companies either in the same industry or in different industries. Financial statement analysis enables investors and creditors to

(1) Evaluate past performance and financial position The starting point in the analysis of a company is to look at the record. Information about past performance is useful in judging future performance. For Example, trends of past sales, earning, cash flow, profit margin, and return on investment provide a basis for evaluating the efficiency of a company’s performance and aid in assessing its prospects. NGI-MBA

28

AMBUJA CEMENT Ltd.

An assessment of current status will show where the company stands at present, such as the company’s inventories, borrowings, and cash position. To a large extent, the expectation of investors and creditors about future performance are shaped by their evaluation of past performance and current position. Individual investors are often passive and they rarely intervene in the working of a company as long as the company is reasonably successful. Their evaluation of the company helps them assess prospects for their investments, and investors who are dissatisfied with institutional investors are generally more actives and may insist on major management changes when the company does not fare well. Creditors are concerned with

(2) Predication of future performance Investors and creditors use information about the past to assess the prospects of a company. Investors expect an adequate return from the company in the form of dividends and market price appreciation. Creditors expect the company to pay interest and repay the principal in accordance with the terms of lending. Therefore, they are interested in predicting the earning power and debt-paying ability of the company. Investor and creditors try to balance expected risks and returns. The returns they receive should be commensurate with the risks they perceive. If future returns are expected to fluctuate widely, they are much more difficult to predict then when results are expected to fluctuate within a narrow range. Thus, investors and creditors would invest in, or lend to, high-risk ventures only if they expect adequately high returns and would accept low returns only if the expected risk is low.

SOURCE OF INFORMATION Individual investors and creditors must often depend upon published sources of information about a company. The most common sources of information about listed companies are company reports, stock exchange, business periodicals, and information services. 1) Company Reports:Every company publishes an annual report, which contains valuable financial and other information about the company. Annual reports are the beginning and ending points in obtaining information about individual companies. As a starter they provide an overview of the company’s business, its status and its performance for a series of years. At the end of the information gathering process, annual reports are used to corroborate the vast array of company-specific data assembled from various sources. The typical Indian Company includes the following documents in its annual report: NGI-MBA

29

AMBUJA CEMENT Ltd.

• • • •

Directors’ report Financial statements Schedules and notes to the financial statements Auditor’s report

In addition, some companies provide financial highlights and a summary of financial performance for the past five or ten years. The annual report is sent to the shareholders of the company, free of charge. Listed companies are also required to publish a quarterly statement of financial results within one month from the end of the quarter. These statements are typically not audited unlike the annual financial statements and are published in leading newspapers. 2) Stock Exchanges:Listed companies must file copies of their annual reports, as well as additional documents such as a statement of distribution of share ownership and the quarterly statement, with the stock exchanges in which they are listed. The Bombay Stock Exchange (BSE) is the oldest with it. The National Stock Exchange (NSE) is the other leading stock exchange in India. Both BSE and NSE have number publications giving useful financial and other information about companies. Listing agreements require that companies keep stock exchanges promptly informed of major developments affecting them, such as change of management, bonus and dividend decisions, strikes, and plant closures. 3) Business Periodicals:Business newspaper and magazines are important and, often, timely sources of financial and business news. The Economic Times is the oldest and the most widely read financial daily in the country. Business Line, Business Standard, and Financial Express are the other leading financial dailies in India. All these papers give daily stock prices and carry news items and analytical write-ups on companies. Most general newspapers devote a few pages to business news. Financial and business magazines such as Business India, Business World and Business Today regularly carry studies of companies and industries.

4) Information Services:In recent years, a number of information services have sprung up. Periodical Company and industry studies are brought out by CRISIL and ICRA. These studies

NGI-MBA

30

AMBUJA CEMENT Ltd.

contain condensed financial statements of companies as well as other information such as management, foreign collaboration, major competitors, and industry overview. Several useful studies of financial ratios are also available, notably the ones published by the Center for Monitoring Indian Economy (CMIE). Economic reports and forecasts are available from the government and the Reserve Bank of India and from private sources. Industry-specific data come from the government, trade associations, and a variety of other sources. Analysts in stock brokerage firms and investment advisory services prepare periodic reports on companies and industries for their clients and sometimes for outsiders. Sophisticated users of financial statements invariably seek more information for their purpose. For example, banks and financial institutions often demand additional information for processing loan requests. Similarly, credit rating agencies need considerably more information from companies requesting rating than that available from published reports. In additions, there are many agencies that undertake private information search for a fee. Professional analysts collect information from company executive during plant visits and field trips. 5) Internet & intranet: Search engines like Google go a long way in providing useful information for such projects. Days have gone when you have to wait for hours to gather information related to any particular topic. Information technology and Internet has brought the global world at your fingertip. Local area networks are also key source of information now a day. Increasing interdependence among the various sub units of the business has made LAN networks a future to consider as a useful source of secondary information.

USERS OF FINANCIAL ANALYSIS: Financial analysis is the process of identifying the financial strengths and weaknesses of the firm by properly establishing relationships between the items of the balance sheet and the relationships between the items of the balance sheet and the profit and loss account. Financial analysis can be undertaken by 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.

NGI-MBA

31

AMBUJA CEMENT Ltd.

•

TRADE CREDITORS:

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

SUPPLIERS OF LONG-TERM DEBT

Suppliers of long term debt, on the other hand, are concerned with the firm’s long-term solvency and survival. They analyze the firm’s profitability over time, its ability to generate cash to be able to pay interest and repay principal and the relationship between various sources of funds. Long term creditors do analyze the historical financial statements, but they place more emphasis on the firm’s projected, or Performa, financial statements to make analysis about its future solvency and profitability.

•

INVESTORS

Investors, who have invested their money in the firm’s share, are most concerned about the firm’s earnings. They restore more confidence in those firms that show steady growth in earnings. As such, they concentrate on the analysis of the firm’s present and future profitability. They are also interested in the firm’s financial structure to the extent it influences the firm’s earnings ability and risk. •

MANAGEMENT

Management of the firm would be interested in every aspect of the financial analysis. It is their overall responsibility to see that the resources of the firm are used most effectively and efficiently, and that the firm’s financial condition is sound.

NGI-MBA

32

AMBUJA CEMENT Ltd.

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS Very few numbers in financial statements are significant in themselves, but meaning inferences can be drawn from their relationship to other amounts or their change from one period to another. The tools of financial statement analysis help in establishing significant relationships and changes. The most commonly used analytical techniques are: 1) 2) 3) 4) 5)

TREND ANALYSIS (Index Analysis) HORIZONTAL ANALYSIS (Comparative Analysis) VERTICAL ANALYSIS (Common size Analysis) DU PONT ANALYSIS RATIO ANALYSIS

NGI-MBA

33

AMBUJA CEMENT Ltd.

TREND ANALYSIS NGI-MBA

34

AMBUJA CEMENT Ltd.

INTRODUCTION Trend analysis involves calculation of percentage changes in financial statement items for a number of successive years. It is an extension of horizontal analysis to several years. Trend analysis is carried out by first assigning a value of 100 to the financial statement items in the following years as a percentage of the base-year value.

Trend analysis over longer periods helps in identifying certain basic changes in the nature of the business. Since many large corporations publish a summary of operating results and selected financial indicators for five years or more, it is possible to perform trend analysis using published reports.

USE OF THE TREND ANALYSIS: • • •

Provide information related to well-observed behavior of accounting an entity. Easier to understand. Most preferred method, reliable for well-established firm.

NGI-MBA

35

AMBUJA CEMENT Ltd.

TREND ANALYSIS: For carrying out the trend analysis, I have selected 2006 as the base year. All the financial data of the year 2006 have been arbitrarily assigned the value of 100.The values of other financial data is expressed in terms of these data as reference data. This analysis is carried out in two phases as balance sheet analysis and profit and loss account analysis.

Balance Sheet Analysis

Profit & Loss Analysis

NGI-MBA

36

AMBUJA CEMENT Ltd.

BALANCE SHEET ANALYSIS: SOURCES OF FUNDS:  SHAREHOLDER’S FUND: YEAR 2006 2007 2008 2009 2010

RS(Cr) 3491.72 4859.26 5672.87 6470.90 7330.10

NGI-MBA

PERCENTAGE 100 127.76 162.46 185.32 209.92

37

AMBUJA CEMENT Ltd.

From the graph given above we can analyze that there is a continuous increase in the Shareholder’s fund of the company over the last five financial years is 109.92%.It shows that company’s credit is increasing

 LOAN FUNDS: YEAR 2006 2007 2008 2009 2010

Rs(Cr) 865.38 338.70 288.67 165.70 65.03

PERCENTAGE 100 39.13 33.71 19.35 7.59

NGI-MBA

38

AMBUJA CEMENT Ltd.

From the above graph we can analyze that there is a continuous decrease in the loan fund of the company until the previous financial year 92.41. In the present financial year there is a sudden decrement in the percentage of the loan funds. It shows that company is making profit.

 TOTAL SOURCES OF FUNDS: YEAR 2006 2007 2008 2009 2010

RS (Cr) 4740.96 5576.76 6342.29 7122.44 7926.01

NGI-MBA

PERCENTAGE 100 117.62 113.77 150.23 167.18

39

AMBUJA CEMENT Ltd.

From the above graph we can analyze that due to an overall increase in the equity funds used there is an overall increase in the sources of funds available to the company except in the year 2006. This shows that on a whole the company is expanding. Grow is 67.18%.

APPLICATIONS OF FUNDS:  FIXED ASSETS: YEAR 2006 2007 2008 2009

RS (Cr) 3124.11 3674.75 5139.97 6165.47

PERCENTAGE 100 117.62 164.52 197.00

NGI-MBA

40

AMBUJA CEMENT Ltd.

2010

6558.45

209.93

From the above graph we can analyze that there is a steady growth of the fixed assets for the company except in the year 2006.This shows efficient utilization of the sources of funds by the company. Ii increase 109.93%.

 INVESTMENTS:

YEAR 2006 2007 2008 2009 2010

RS (Cr) 1133.12 1480.36 332.39 727.01 625.95

PERCENTAGE 100 130.64 29.33 64.16 55.24

NGI-MBA

41

AMBUJA CEMENT Ltd.

From the above graph we can say that there is fluctuating increase and decrease in the investment made by the company but in the year 2009 there is sudden increment in the investment. It is decrease 44.76%.

 CURRENT ASEETS, LOAN AND ADVANCES:

YEAR 2006 2007 2008 2009 2010

RS (Cr) 1177.61 1583.72 2339.45 1979.34 3135.33

PERCENTAGE 100 134.48 198.66 168.08 266.24

NGI-MBA

42

AMBUJA CEMENT Ltd.

From the above graph we can analyze that there is a continuous growth in the current assets, loan and advances of the company. However the major contributors to this growth in the current assets are debtors and other current assets. Inventories contribute a very little portion of the same. The rise in quantity of debtors is a major cause of concern. It is increase 166.24%.

 CURRENT LIABILITIES, PROVISIONS:

YEAR 2006 2007 2008 2009

RS (Cr) 701.59 1168.29 1473.80 1741.09

PERCENTAGE 100 166.52 210.06 248.16

NGI-MBA

43

AMBUJA CEMENT Ltd.

2010

2394.18

341.25

From the above graph we can analyze that there is a continuous rise in the current liabilities and provisions of the company. This shows that the company is expanding its operations on a continuous basis. However on the other hand a similar rise in the current assets is also required. It is increase 241.25%.

 NET CURRENT ASSETS:

YEAR 2006 2007 2008 2009 2010

RS (Cr) 474.12 415.43 865.65 238.25 741.15

PERCENTAGE 100 87.62 182.58 50.25 156.32

NGI-MBA

44

AMBUJA CEMENT Ltd.

From the above graph we can analyze that there is a fluctuation in the net current asset of the company. This also indicates that major part of the company is financed into its dayto-day operations. But in 2010 it again increased. It is increase 56.32%.

PROFIT & LOSS ANALYSIS:  INCOME: YEAR 2006 2007 2008

RS (Cr) 6381.95 5985.91 6410.04

PERCENTAGE 100 93.79 100.44

NGI-MBA

45

AMBUJA CEMENT Ltd.

2009 2010

7332.71 7637.81

114.89 119.67

From the above graph we can analyze that there is a continuous rise in the income levels of the company. Income of the company is dependent mostly on sales of its products. It is increase 19.67%.

 EXPENDITURE:

YEAR 2006 2007 2008 2009

RS (Cr) 4540.35 4080.48 4748.53 5529.41

PERCENTAGE 100 89.87 104.58 121.78

NGI-MBA

46

AMBUJA CEMENT Ltd.

2010

6002.47

132.20

From the above graph we can analyze that there is a continuous rise in the total expenditure of the company. This should be a major cause of concern for the company. It is increase 32.20%.

 PROFIT BEFORE TAX:

YEAR 2006 2007 2008 2009

RS(Cr) 1861.60 2789.36 1969.84 1803.30 NGI-MBA

PERCENTAGE 100 149.83 105.81 96.86 47

AMBUJA CEMENT Ltd.

2010

1661.87

89.27

From the above graph we can analyze that there is a fluctuation in the profit before taxation. Obviously a sharp rise in the profits is not experienced for the present financial year. This is not a good sign for the company. It is decrease 10.73%.

 NET PROFIT:

YEAR 2006 2007 2008 2009

RS(Cr) 1503.25 1846.11 1402.27 1218.37

PERCENTAGE 100 122.80 93.28 81.04 NGI-MBA

48

AMBUJA CEMENT Ltd.

2010

1263.61

84.05

From the above graph we can analyze that there is a fluctuation in the net profit of the company. This present financial year shows a strong net profit for the company compare to the year 2006.It is decrease 15.95%.

BALANCE SHEET ANALYSIS RESULT

NGI-MBA

49

AMBUJA CEMENT Ltd.

NO 1 2 3 4 5 6 7 8

PARTICULARS Share Holders Fund Loan Funds Total Sources Of Fund Fixed Assets Investment Current Assets, Loan & Advances Current Liabilities Net Current Assets

INCREASE (%) 109.92

DECREASE (%) 92.41

67.18 109.93 44.76 166.24 241.25 56.32

PROFIT & LOSS ANALYSIS RESULT NO 1 2 3 4

PARTICULARS Income Expenditure Profit Before Tax Net Profit

INCREASE (%) 19.67 32.20

DECREASE (%) 10.73 15.95

NGI-MBA

50

AMBUJA CEMENT Ltd.

HORIZONTAL ANALYSIS

NGI-MBA

51

AMBUJA CEMENT Ltd.

HORIZONTAL ANALYSIS: INTRODUCTION: Financial statements present comparative information for the current year and the previous year. A simple approach to financial statement analysis, known as Horizontal analysis, is to calculate amount changes and percentage changes from the previous year to the current year. While an amount change in itself may mean something, converting amount changes to percentages is more useful in appreciating the order of magnitude of the change. USE OF THE HORIZONTAL ANALYSIS: • To obtain the changes among various accounting information in respect to a base year. • This information provides insights related to variances in two results. • This variance facilitates decision-making. • These changes can be obtained for a series of years. • It helps in formation of financial strategies.

NGI-MBA

52

AMBUJA CEMENT Ltd.

HORIZONTAL ANALYSIS: For carrying out the horizontal analysis, I have selected the two financial years of 2009 and 2010. This analysis is carried out in two phases as the balance sheet analysis and profit and loss account analysis.

BALANCE SHEET ANALYSIS:

SOURCES OF FUNDS:  SHAREHOLDER’S FUNDS: YEAR 2009 2010

VALUE (in Cr) 6470.90 7330.10

CHANGE (%) 13.27

Due to changes in the shareholders funds, the total change occurring in the equity funds is not similar to the changes occurring as a result of the changes in the reserves and surplus of the company.

 LOAN FUNDS: YEAR 2009 2010

VALUE (in Cr) 165.70 65.03

CHANGE (%) -60.75

From the above table we can observe that the increment in the total loan funds is mainly due to the increment in the unsecured loan funds being used by the company.

NGI-MBA

53

AMBUJA CEMENT Ltd.

APPLICATIONS OF FUNDS:  FIXED ASSETS: YEAR 2009 2010

VALUE (in Cr) 6164.47 6558.45

CHANGE (%) 6.39

Due to the increase in the depreciation value of the fixed assets then also there is an increment of about 6.39 percent in the value of fixed assets as compared to last financial year.

 INVESTMENT: YEAR 2009 2010

VALUE (in Cr) 727.01 625.95

CHANGE (%) -13.90

Here we observe that there is sudden decrement in the value of investment made by the company which changes up to 13.90 percent compare to the year 2009.

NGI-MBA

54

AMBUJA CEMENT Ltd.

 CURRENT ASSETS, LOAN AND ADVANCES: YEAR 2009 2010

VALUE (in Cr) 1979.34 3135.33

CHANGE (%) 58.40

From the above table we can observe that the increase in the current assets as compared to the previous financial year is about 58.40 percent. However here the analysis of the quality of the current assets for the company is major concern.

 CURRENT LIABILITIES, PROVISIONS: YEAR 2009 2010

VALUE (in Cr) 1741.09 2394.18

CHANGE (%) 37.51

From the above table we can observe that the increase in the current liabilities of the company is around 37.51 percent as compared to the previous financial year. This increase is mostly provided due to the increase in the creditors of the company.

 NET CURRENT ASSETS: YEAR 2009 2010

VALUE (in Cr) 238.25 741.15

CHANGE (%) 211.08

Net current assets are obtained as the difference between the current assets and the current liabilities. From the above table we can observe that the increase in the working capital of the company as compared to the previous financial year is about 211.08 percent.

NGI-MBA

55

AMBUJA CEMENT Ltd.

PROFIT & LOSS ANALYSIS:  INCOME: YEAR 2009 2010

VALUE (in Cr) 7332.71 7637.81

CHANGE (%) 04.16

From the above table we observe that there is an increase in the total income of the company compare to previous year. It shows the good efficiency of the company.  EXPENDITURE: YEAR VALUE (in Cr) CHANGE (%) 2009 5529.41 08.55 2010 6002.47 From the above table we observe that there is an increase in the total expenditure of the company compare to previous year. It shows inverse effect on the company.

 PROFIT BEFORE TAX: YEAR 2009 2010

VALUE (in Cr) 1803.30 1661.87

CHANGE (%) -7.84

From the above table we observe that the decrease in the profit before taxation is significantly high as compared to the previous financial year.  NET PROFIT: YEAR 2009 2010

VALUE (in Cr) 1218.37 1263.61

CHANGE (%) 03.71

From the above table we can observe that the increase in the net profit is significantly higher as compared to previous financial year.

NGI-MBA

56

AMBUJA CEMENT Ltd.

 BALANCE TO BALANCE SHEET: YEAR 2009 2010

VALUE (in Cr) 169.74 269.57

CHANGE (%) 58.81

From the above table we can observe that the increase in the net profit is significantly higher as compared to previous financial year. It shows companies good growth.

NGI-MBA

57

AMBUJA CEMENT Ltd.

BALANCE SHEET ANALYSIS RESULT NO 1 2 3 4 5 6 7

PARTICULARS Share Holders Fund Loan Funds Fixed Assets Investment Current Assets, Loan & Advances Current Liabilities & Provisions Net Current Assets

INCREASE (%) 13.27

DECREASE (%) 60.75

6.39 13.90 58.40 37.51 211.08

PROFIT & LOSS ANALYSIS RESULT NO 1 2 3 4 5

PARTICULARS Income Expenditure Profit Before Tax Net Profit Balance to Balance Sheet

INCREASE (%) 04.16 08.55

DECREASE (%) 7.84

03.71 58.81

NGI-MBA

58

AMBUJA CEMENT Ltd.

VERTICAL ANALYSIS

NGI-MBA

59

AMBUJA CEMENT Ltd.

VERTICAL ANALYSIS INTRODUCTION: Vertical analysis is the proportional expression of each item on a financial statement to the statement total. The results of vertical analysis are presented in the form of common-size-statements in which all the elements within each statement are expressed in percentage of some common number and always add up to 100 per cent. The items in the profit and loss account are usually expressed as percentages of sales, while the balance sheet items are given as percentages of total shareholders’ funds and liabilities or of total assets. Vertical analysis helps in making comparisons of companies that differ in size since the financial statements are expressed in comparable common-size form. Further, a comparison of common-size statements for several years may reveal important changes in the components from one year to the next. USE OF THE VERTICAL ANALYSIS: • • • • •

Give information related to proportion of factors contributing to the assets or the liabilities. Help on focusing which expenses contribute the most, and which contributes the least. Helps in providing information related to high return & low return assets. Help in formation of strategies to achieve high return from assets. Helps in formation strategies to eliminate necessary expenses.

NGI-MBA

60

AMBUJA CEMENT Ltd.

VERTICAL ANALYSIS For carrying out the vertical analysis the financial years selected are 2009 and 2010. The entire vertical analysis is carried out in the various phases as explained below step by step.

BALANCE-SHEET ANALYSIS  SOURCES OF FUNDS: In this analysis the total sources of funds are assumed to be 100 percent and the percentage formation by the debt and equity funds is calculated. TYPESOF FUNDS

2009 R.S(Cr) SHARE 304.74

EQUITY CAPITAL EMP.STOCK OPTION OUTSTANDING RESERVE & SURPLUS SECURED LOAN UNSECURED LOAN DEFF TAX LIAB TOTAL

% 4.28

R.S(Cr) 305.97

2010 % 3.86

0.24

0.003

1.34

0.02

6165.92 100.00 65.70 485.84 7122.44

86.57 1.40 0.92 6.82 100

7022.79 0 65.03 530.88 7926.01

88.60 0 0.82 6.70 100

NGI-MBA

61

AMBUJA CEMENT Ltd.

The graph given above shows the changes occurring in the sources of funds being used by the company in the last two financial years. Analyzing point by point we can observe that there is a decrease of about 0.42 percent in the shareholders funds forming the total sources of funds. Talking about Reserve & Surplus the total holding of it from total sources of fund in the year 2009 is 86.57% and in year 2010 is 88.60% and secured loan the total holding of it from total sources of fund in the year 2009 is 1.40% and in year 2010 is 0.00% and unsecured loan the total holding of it from total sources of fund in the year 2009 is 0.92% and in year 2010 is 0.82%.

 APPLICATION OF FUNDS In this analysis the total application of funds are assumed as 100 and the percentage formation by each of the individual components is carried out by calculation.

TYPES OF FUNDS

2009 R.S(Cr) FIXED ASSETS 6154.47 INVESTMENT 727.01 NET CURRENT 238.25 ASSETS MISCCELENEOUS 2.71 TOTAL 7122.44

% 86.41 10.21 3.35

R.S(Cr) 6558.45 625.95 741.30

2010 % 82.74 7.90 9.35

0.04 100

0.46 7926.16

0.005 100

NGI-MBA

62

AMBUJA CEMENT Ltd.

From the above graph we can observe that comparing the two financial years there is a reduction of almost 3.67% in the fixed assets constitution in the application of funds. There is an increase of 6.00% in the net current assets constitution of the application of funds. This shows that the company is expanding its operations on a whole. Another important point to be noted is that the investment also decreases 2.31%. This shows that the company is using a very aggressive mode of financing in the recent two financial years. Net current assets are increased 6% than previous year 2009 this shows company has strong liquidity than 2009. To finalize we can say that the company constitutes a majority of its funds on the net current assets or the day-to-day operations financing. So the company needs to manage this working capital arrangement properly.

 PROFIT AND LOSS ANALYSIS INCOME: In carrying out this financial analysis we have assumed the total income of the company equal to 100 percent and by calculation we want to obtain how much percentages each of the components constitutes to the total incomes.

INCOME

2009

NET SALES OTHER REVENUE TOTAL

RS(Cr) 7076.87 255.84 7332.71

2010 % 96.51 3.49 100

NGI-MBA

RS(Cr) 7,390.21 247.60 7637.81

% 96.75 3.24 100

63

AMBUJA CEMENT Ltd.

From above graph we can conclude that net sales of the company increases by 0.24 percent in the year 2010 which indicates higher achievement of sales and overall contribution made by the net sales is 96.55% in the year 2009 and in the year 2010 is 96.75%. Talking about other income we can observe that there is reduction of 0.25 percent in the year 2010 which is not a good sign for the company and overall contribution made by the other income is 3.67% in the year 2009 and in the year 2010 is 3.24%.

 EXPENDITURE: In carrying out this financial analysis we have assumed the total expenditure of the company equal to 100 percent and by calculation we want to obtain how much percentages each of the components constitutes to the total expenses.

EXPENDITURE COST OF SALES INTEREST DEPRECIATION TAX TOTAL

2009

2010

R.S(Cr)

%

R.S(Cr)

%

5229.32 22.43 296.99 584.93 6133.67

85.26 0.37 4.84 9.54 100

5577.95 48.69 387.19 435.37 6449.2

86.49 0.75 6.00 6.75 100

NGI-MBA

64

AMBUJA CEMENT Ltd.

From the above graph we can observe that there is an increase in the formation of each type of the expenses except the purchase, employees, interest and depreciation expenses. Because the cost of sales is increased than the previous year is 1.23%, but may be because sales also increased by 0.24%. However these increases are quite ineffective as to comment on the financial strategy. Tax liability of the company is decreased than previous year is 2.79%.

NGI-MBA

65

AMBUJA CEMENT Ltd.

BALANCE SHEET ANALYSIS RESULT NO 1 2 3 4 5 6 7 8 9 10

PARTICULARS Equity Share Capital Employee Stock Option Outstanding Reserve & Surplus Secured Loan Unsecured Loan Defer Tax Liability Fixed Assets Investment Net Current Assets Miscellaneous

INCREASE (%)

DECREASE (%) 0.42

0.017 2.03 1.40 0.10 0.12 3.67 2.31 6.00 0.035

PROFIT & LOSS ANALYSIS RESULT NO 1 2 3 4 5 6

PARTICULARS Net Sales Other Revenue Cost of Sales Interest Depreciation Tax

INCREASE (%) 0.24

DECREASE (%) 0.25

1.23 0.38 1.16 2.79

NGI-MBA

66

AMBUJA CEMENT Ltd.

DUPONT ANALYSIS

NGI-MBA

67

AMBUJA CEMENT Ltd.

DUPONT ANALYSIS The DuPont Model, developed in 1914 by F. Donaldson Brown of chemical company DuPont de Nemours & Co, is a set of financial ratios and key figures relating to the Return on Investment (ROI). It is a technique that can be used to analyze the profitability of a company using traditional performance figures. It integrates elements of the Income Statement with those of the Balance Sheet. ROI = Net Profit Margin x Total Assets Turnover

The analysis of the DuPont tree (by looking at each branch and its figures) allows the manager/investor to identify the key drivers, as well as their impact on the ROI. Identified weaknesses simultaneously show up potential for improvement. It is especially well suited for benchmarking. Although the DuPont analysis offers a clear overview of the most relevant drivers of the ROI and their interconnection, it cannot replace a detailed analysis. The figures and ratios may only indicate general tendencies and developments.

NGI-MBA

68

AMBUJA CEMENT Ltd.

DUPONT ANALYSIS The DuPont analysis is carried out for the two financial years and its explanation is described by each and every phase.

2009:

RETURN ON INVESTMENT 0.1734%

NET PROFIT RATIO (0.17)

NET PROFIT (1218.37)

COST OF ++ SALES (5229.32)

/

OPER. ++ EXP. (629.18)

INVESTMENT TURNOVER (1.02)

X

SALES (7076.87)

PROFIT (1218.37)

SALES (7076.87)

FIXED + ASSETS (3440.04)

WIP (2564.82)

/

TOTAL INVT. (6970.12)

INVEST MENT. (727.01)

W.C. (238.25)

From the above analysis we can observe that the return on investment for any company is a function of the net profit margin and the asset turnover ratios of the company. We can observe that the net profit margin of the company is dependent on the sales while the asset turnover ratios of the company are also dependent on the sales. We can observe that for the year 2009 the net profit margin is of 0.17 percent which shows that out of the revenue earned of Rs 1 the net profit earned is about 0.17 paisa. We can observe that for the year 2009 the asset turnover ratios for the company is 1.02 percent which reveals that for an Rs 1 investment in the assets of the company the sales obtained is of Rs 1.02. We can also observe that the return on assets for the company is about 0.1734 percent, which shows that for the investment of Rs1 in the company assets the profit obtained by the company is about 0.1734 paisa.

NGI-MBA

69

AMBUJA CEMENT Ltd.

2010: RETURN ON INVESTMENT (0.16%)

NET PROFIT RATIO (0.17)

NET PROFIT (1263.61)

/

INVESTMENT TURNOVER (0.95)

X

SALES (7390.21)

SALES (7390.21)

TOTAL

/ INVESTMENT. (7798.5)

COST OF ++ SALES (5577.95)

OPERATI + NG EXP. (548.65)

PROFIT (1263.61)

FIXED ASSETS (5627.75)

WIP (803.65)

INVEST MENT. (625.95)

W. C (741.15)

From the above analysis we can observe that the return on investment for any company is a function of the net profit margin and the asset turnover ratios of the company. We can observe that the net profit margin of the company is dependent on the sales while the asset turnover ratios of the company are also dependent on the sales. We can observe that for the year 2010 the net profit margin is of 0.17 percent which shows that out of the revenue earned of Rs 1 the net profit earned is about 0.17 paisa. We can observe that for the year 2010 the asset turnover ratios for the company is 0.95 percent which reveals that for an Rs 1 investment in the assets of the company the sales obtained is of 0.98 paisa. We can also observe that the return on assets for the company is about 0.16 percent, which shows that for the investment of Rs1 in the company assets the profit obtained by the company is about 0.16 paisa.

NGI-MBA

70

AMBUJA CEMENT Ltd.

RATIO ANALYSIS

NGI-MBA

71

AMBUJA CEMENT Ltd.

RATIO ANALYSIS The ratio analysis is carried out under the following various subtopics. These subtopics will be explained one by one.

Liquidity Ratios Current Ratio Quick Ratio

Net WorkingCapital Ratio

Profitability Ratios Gross Profit Ratio Net Profit Ratio Return on Equity

NGI-MBA

Activity Ratios Inventory Turnover Ratio Debtors Turnover Ratio

72

AMBUJA CEMENT Ltd.

 LIQUIDITY RATIOS: These ratios would include the following ratios explained as below:

1) CURRENT RATIO: Current ratio is obtained by dividing the current assets of the company by the current liabilities. Generally a current ratio of 2:1 is considered as ideal for the firm. The current assets of the company would include cash, inventories, debtors, loans and advances paid etc. This ratio measures the short term solvency of the firm.

2009 CURRENT RATIO = CURRENT ASSETS CURRENT LIABILITIES = 1979.34 1741.09 = 1.14:1

2010 CURRENT RATIO = CURRENT ASSETS CURRENT LIABILITIES = 3135.33 2394.18 = 1.31:1 Ideal ratio of any company should be 2:1 but here the ratio is 1.31:1 of 2010 and 1.14:1 of 2009, which indicates favorable relationship between current assets and current liabilities. It shows company is growing.

2) QUICK RATIO: Quick ratio is considered to be a better measure of the liquidity of a company as compared to the current ratio. This is because the current ratio includes inventories, which cannot be readily converted into cash. The ideal quick ratio is assumed to be 1:1 for any company.

NGI-MBA

73

AMBUJA CEMENT Ltd.

2009 QUICK RATIO =

CURRENT ASSESTS CURRENT LIABILITIES = 1285.93 1741.09 = 0.74:1

2010 QUICK RATIO =

CURRENT ASSETS CURRENT LIABILITIES = 2216.9 2394.18 = 0.93:1

For any company better quick ratio would be 1:1 but here the quick ratio is 0.93:1 of 2010 and 0.74:1 of 2009, which tells us about liquid position of the company is not very well. But it is better than next year.

3) NET WORKING CAPITAL RATIO: This ratio on a whole shows the ability of the firm to meet its current obligations .Net working capital is obtained as the difference between the current assets and the current liabilities of the firm. Net assets are obtained as the sum total of the fixed assets and net current assets of the company.

2009 NET WORKING CAPITAL RATIO = NET SALES WORKING CAPITAL = 7076.87 238.25 =29.7 Times

NGI-MBA

74

AMBUJA CEMENT Ltd.

2010 NET WORKING CAPITAL RATIO = NET SALES WORKING CAPITAL = 8257.03 741.15 =11 Times Here we can observe that need of the working capital to the total assets is not sufficient which is not a good sign for the company. Company’s net working capital ratio is better than current year.

 PROFITABILITY RATIOS: 1) GROSS PROFIT RATIO: The gross profit margin reflects the efficiency with which the management produces each unit of the product. This ratio indicates the average spread between the cost of goods sold and the sales. It is calculated as follows:

2009 GROSS PROFIT RATIO = GROSS PROFIT SALES =

1803.30 7721.42

X 100

X 100

= 23.35%

2010 GROSS PROFIT RATIO = GROSS PROFIT SALES =

1661.87 8257.03 = 20.13%

X 100 X 100

NGI-MBA

75

AMBUJA CEMENT Ltd.

Here we can observe that company has 20.13 % gross profit of 2010 that is less than 2009, which can be not good for the company so that company can not fulfill its day-today requirement and other operation, which are carried by the company.

2) NET PROFIT RATIO: This ratio establishes the relationship between net profit and sales and indicates the efficiency of the management in manufacturing administering and selling the products. It is calculated as follows:

2009 NET PROFIT RATIO = NET PROFIT SALES = 1218.37 7721.42

X 100 X 100

=15.78%

2010 NET PROFIT RATIO = NET PROFIT SALES = 1263.61 8257.03

X 100 X 100

=15.30% Here we can observe that company has 15.30% net profit, which can be good for the company so that company can fulfill its requirement also they can use for distribution of dividends and also for future projects.

NGI-MBA

76

AMBUJA CEMENT Ltd.

3) RETURN ON EQUITY: This ratio indicates how many times the earnings are obtained as related to the return provided to the shareholders. It is calculated as follows:

2009 RETURN ON EQUITY = PROFIT AFTER TAX X 100 EQUITY FUND = 1218.37 304.74

X 100

= 399.81%

2010 RETURN ON EQUITY = PROFIT AFTER TAX X 100 EQUITY FUND = 1263.61 305.97

X 100

= 412.98% As this year the profit of the company is not good then also they provide their shareholders 412.98% return on their funds, which creates a good image against all shareholders.

NGI-MBA

77

AMBUJA CEMENT Ltd.

 ACTIVITY RATIOS: The various ratios under this topic are calculated as under:

1) INVENTORY TURNOVER RATIO: This ratio indicates how much efficiently the inventories of the company are converted into sales. It is calculated as under:

2009 INVENTORY TURNOVER =

COST OF GOODS SOLD AVERAGE INVENTORY

= 5918.18 811.50 = 7.29 Times

2010 INVENTORY TURNOVER =

COST OF GOODS SOLD AVERAGE INVENTORY

= 6595.16 792.55 = 8.32 Times We can observe that inventory turnover is 8.32 times which is good for the company and if it is low then it indicate high cost of inventory holding which directly lead to increase in cost and low profits.

NGI-MBA

78

AMBUJA CEMENT Ltd.

2) DEBTORS TURNOVER RATIO: This ratio indicates the number of times the debtors’ turnover each year. It is calculated as follows:

2009 DEBTORS TURNOVER =

CREDIT SALES AVERAGE DEBTORS

= 7721.42 188.4 = 40.98 Times

2010 DEBTORS TURNOVER =

CREDIT SALES AVERAGE DEBTORS

= 8257.03 140.19 = 58.89 Times Here we can observe that debtor’s turnover is 58.89 times which is not much good for the company situation but if it would be some more then it would shows greater efficiency of the company.

NGI-MBA

79

AMBUJA CEMENT Ltd.

NGI-MBA

80

AMBUJA CEMENT Ltd.

RESULT OF ALL RATIOS NO 1 2 3 4 5 6 7 8

PARTICULARS 2009 2010 INCREASE DECREASE Current Ratio 1.14 1.31 Increased Quick Ratio 0.74 0.93 Increased Net Working 29.7times 11times Decreased Capital Ratio Gross Profit 23.35% 20.13% Decreased Ratio Net Profit Ratio 15.78% 15.30% Decreased Return on Equity 399.81% 412.97% Increased Inventory 7.29times 8.32times Increased Turnover Debtors Turnover 40.98times 50.89times Increased

NGI-MBA

81

AMBUJA CEMENT Ltd.

FINDINGS

NGI-MBA

82

AMBUJA CEMENT Ltd.

FINDINGS At the end of the financial analysis of the company the following are the various findings:  In the last financial years the inventory holding period increased 7.29times to 8.32times and the debtor’s collection period of the company also increased 40.98times to 58.89times which has a direct impact on the current ratio of the company which increased 1.14:1 to 1.31:1.  After 2007 in the gross profit is decreased 10.73% and the gross profit margin of the company also decreased 3.22%, there are decreases observed in the net profit margins is 0.48% than 2009.  Decrease in net profit indicates that the net profit margins are affected a lot by the operating expenses of the company.  Company is not incurring profit than last year 2009 but it’s giving to shareholders more return on investment that is 412.98% which is 13.17% more than last year, by this observed that company has a good reputation in the market.  Company has a good future and opportunity for growth and development as continues profits are observed.

NGI-MBA

83

AMBUJA CEMENT Ltd.

RESULTS AND SUGGESTIONS

NGI-MBA

84

AMBUJA CEMENT Ltd.

RECOMMENDATIONS & SUGGESTIONS BALANCE SHEET ANALYSIS: (1) SOURCES OF FUNDS: SHAREHOLDER’S FUND: As per study share holder fund increase approximately 109.92% in last five 2006 to 2010. Company tries to increase its capital by using the internal sources like reserve and its own capital.

LOAN FUNDS As per analysis loan fund decrease approximately 92.41% in last five 2006 to 2010 In current year company loan fund is decrease more so tries to reduce by reducing external sources & internal sources.

TOTAL SOURCES OF FUNDS As per study total sources of fund increase approximately 67.18% in last five 2006 to 2010 Company has made more investment in long term fix assets by increasing long internal sources of fund & external sources of fund.

(2) APPLICATIONS OF FUNDS: FIXED ASSETS: As per analysis fixed assets fund increase approximately 109.93% in last five 2006 to 2010 Company has made more fixed assets in all other area. So the fixed assets is an increase

INVESTMENTS: As per study investment fund decrease approximately 44.76% in last five 2006 to 2010 The company has tries to increase in investment in share of subsidiary company increase in investment there is more increase in interest. There is more increase in profit.

NGI-MBA

85

AMBUJA CEMENT Ltd.

CURRENT ASSETS, LOAN AND ADVANCES: As per analysis current assets loan and advances fund increase approximately 166.24 % in last five 2006 to 2010 Company has tries to increase in current assets and loan advance. So the right decision of company

CURRENT LIABILITIES, PROVISIONS: As per study current liabilities provisions fund increase approximately 241.25% in last five 2006 to 2010 The company has tries to increase current liability and provisions so the company is not a good in future.

NET CURRENT ASSETS: As per analysis net current assets fund increase approximately 56.32% in last five 2005-06 to 2009-10 Company has tries to increase its net current assets in last years so the good decision in company.

PROFIT & LOSS ANALYSIS: INCOME: As per analysis income fund increase approximately 19.67 % in last five 2006 to 2010 So the company income is increase is the profit is increase in next years \

EXPENDITURE: As per analysis expenditure fund increase approximately 32.20 % in last five 2006 to 2010 Company has tries to increase its all material, product sales, selling exp, depreciation Interested all other expenses are increase. In next years.

PROFIT BEFORE TAX: As per analysis profit before tax fund decrease approximately 10.73 % in last five 2006 to 2010 Company due the tax before profit is low, company has to reduce expenditures.

PROFIT AFTER TAX As per analysis profit after tax fund decrease approximately 15.95 % in last five 2006 to 2010

NGI-MBA

86

AMBUJA CEMENT Ltd.

Company due the tax after tax is increase the company further long term profit is good

DUPONT ANALYSIS The DuPont analysis is carried out for the two financial years and its explanation is described by each and every phase. As per the studies companies ROI is decrease approximately 0.16% as compare to 2009 it is not good for company and ROI is decrease because there is little decrease in profit

RATIO ANALYSIS LIQUIDITY RATIOS 1) CURRENT RATIO: Ideal ratio of any company should be 2:1 but here the ratio is 1.31:1, which indicates favorable relationship between current assets and current liabilities

2) QUICK RATIO: For any company better quick ratio would be 1:1 but here the quick ratio is 0.94:1, which tells us about liquid position of the company, is not very well

3) NET WORKING CAPITAL RATIO: Here we can observe that need of the working capital to the total assets is not sufficient which is not a good sign for the company, It is 11 Times which is very less than previous year.

PROFITABILITY RATIOS: (1) GROSS PROFIT RATIO: Here we can observe that company has 20% gross profit, which can be good for the company so that company can fulfill its day-to-day requirement and other operation, which are carried by the company. however it is less than previous year so company have to find out sales data which are responsible for this.

NGI-MBA

87

AMBUJA CEMENT Ltd.

(2) NET PROFIT RATIO Here we can observe that company has 15.30% Net profit, which can be good for the company so that company can fulfill his requirement also they can use for distribution of dividends and also for future projects.

(3)RETURN ON EQUITY: As this year the profit of the company is not good then also they provide their shareholders 412.98% return on their funds, which creates a good image against all shareholders.

ACTIVITY RATIOS: (1) INVENTORY TURNOVER RATIO: We can observe that inventory turnover is 8.32 times which is good for the company and if it is low then it indicate high cost of inventory holding which directly lead to increase in cost and low profits.

(2)DEBTORS TURNOVER RATIO: Here we can observe that debtor’s turnover is 58.89 times which is not much good for the company situation but if it would be some more then it would shows greater efficiency of the company.

NGI-MBA

88

AMBUJA CEMENT Ltd.

CONCLUSION

NGI-MBA

89

AMBUJA CEMENT Ltd.

CONCLUSION After completing my training in ACL, which is one of the major cement manufacturing unit of India. I conclude that the ACL is a well-developed unit and is progressing day by day. All the departments of the company are very well. Organized and present condition of the company is very good. However, they were fully co-operated during my visit. The company has enough funds to implement new development projects like increase in production capacity etc. The Company’s employees and all the staff were very co-operative. Company has the better future and it can increase its market share and is developing day by day. I can observe that net profit of the company is increasing from the last financial years, which indicate good future and better working of the company. Lastly I wish all the best for the future development of the company.

NGI-MBA

90

AMBUJA CEMENT Ltd.

BIBLIOGRAPHY

NGI-MBA

91

AMBUJA CEMENT Ltd.

BIBLIOGRAPHY

 Prasanna Chandra,” Financial Management- Theory and Practice”, Fourth Edition, Tata-McGraw Hill Publications.  Ambrish Gupta, “Financial Accounting for Management –: An Analytical Perspective”, Pearson Education 3rd Edition 2009  www.stockmarket.com  www.ambujacement.com

NGI-MBA

92

AMBUJA CEMENT Ltd.

ANNEXURE

NGI-MBA

93

AMBUJA CEMENT Ltd.

BALANCE SHEET

Particular

2006

2007

2008

2009

2010

Sources of Funds Equity Share Capital

303.37

304.48

304.52

304.74

305.97

Employees stock option

1.09

0.38

0.34

0.24

1.34

Reserves & Surplus

4,356.39

5,368.01

6165.92

7,022.79

Secured loan

3,187.2 1 317.77

100.00

100.00

100.00

-

Un-secured loan

547.61

230.42

188.67

65.70

65.03

Deferred Tax Liability

383.86

378.38

380.75

485.84

530.88

Total

4,740.9 6

5,370.05

6,342.29

7122.44

7,926.01

4,542.5 0 2,053.3 2 2,489.1 8 541.92

5,231.05

5,706.94

6224.13

8,778.82

2,271.19

2,514.19

2784.09

3,151.07

2,959.86

3,192.75

3440.04

5,627.75

510.03

1,560.75

2564.82

803.65

1,133.1 2

1,288.94

332.39

727.01

625.95

Current Assets loans and advances Inventories

408.82

581.60

939.75

683.24

901.86

Sundry Debtors

89.95

145.68

224.60

152.20

128.18

Cash and Bank balance

378.10

650.79

851.84

880.68

1,748.17

Other current assets

5.04

3.91

23.39

10.17

16.57

Loans and advances

295.70

205.35

299.87

253.05

340.55

Current Liabilities

675.54

1,003.24

493.55

470.56

Net current assets

476.02

418.24

865.65

1,979.3 4 1,741.0 9 238.25

1,297.61

Provision

1,177.6 1 701.59

6.22

4.28

2.71

0.46

7,122. 44

7,926.01 94

Application of Funds Fixed Assets Gross block (-) Accumulate Depreciation Net block Capital Work-in-Progress Investments

7.71 Miscellaneous Expenditure (To the extent not written off)

Total

4,740. 96

5,370.0 6,342.2 NGI-MBA 9 5

1,096.57 741.15

AMBUJA CEMENT Ltd.

PROFIT & LOSS ACCOUNT INCOME Sales Less: Excise duty Net sales Other revenue

2006

2007

2008

2009

2010

7,010.47

6,469.68

7,089.89

7,721.42

742.18

764.84

855.24

644.55

6,268.29

5,704.84

6,234.65

7,076.87

8,257.03 866.82 7,390.21

113.66

193.53

175.39

255.84

247.60

2,517.47

2,135.06

4,477.90

79.03

75.85

32.06

22.43

48.69

326.12

236.34

259.76

296.99

387.19

(10.82)

(9.47)

(21.19)

(19.33)

(11.36)

-

1,926.46

1,661.51

1,803.30

1,635.34

-

785.89

308.33

-

1,841.60

2,712.35

1,969.84

1,803.30

26.53 1,661.87

392.00

737.00

560.00

479.00

3.07 5.28

(0.90) 5.15

2.37 5.20

105.09 0.84

1,503.25

1,769.10

1,402.27

EXPENDITURE Manufacturing and other expenses Interest and Finance Charges Depreciation and Amortization Self consumption of clinker, cement and limestone Profit before tax and exceptional items Exceptional items Profit before tax Provision for Taxation Current tax Deferred tax Fringe benefit tax

Net Profit

NGI-MBA

5,229.32

1,218.37

5,577.95

446.25 (10.88)

1,263.61

95

AMBUJA CEMENT Ltd.

NGI-MBA

96