THE FINANCIAL ANALYSIS OF AMBUJA CEMENT LIMITED.doc

THE FINANCIAL ANALYSIS OF AMBUJA CEMENT LIMITED

INTRODUCTION TO THE TOPIC

Financial analysis refers to an assessment of the viability, stability and profitability of a business, sub-business or project.

It is performed by professionals who prepare reports using ratios that make use of information taken from financial statements and other reports. These reports are usually presented to top management as one of their bases in making business decisions. Based on these reports, management may: 1. Continue or discontinue its main operation or part of its business; 2. Make or purchase certain materials in the manufacture of its product; 3. Acquire or rent/lease certain machineries and equipment in the production of its goods; 4. Issue stocks or negotiate for a bank loan to increase its working capital; 5. Make decisions regarding investing or lending capital; 6. Other decisions that allow management to make an informed selection on various alternatives in the conduct of its business.

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DMTR N.M.D.COLLEGE GONNDIA

THE FINANCIAL ANALYSIS OF AMBUJA CEMENT LIMITED

OBJECTIVES OF STUDY

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

2) This Financial analysis study will helps in accessing the viability, stability and profitability of Ambuja Cement Company.

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

4) Financial analysis helps in making effective business decisions.

RESEARCH METHODOLOGY 2|Page

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THE FINANCIAL ANALYSIS OF AMBUJA CEMENT LIMITED

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

A)

Selection of subject:

Selection of subject or topic for dissertation work is a very important job for researcher. The difficult task is the information which is required for the purpose of research. It should be easily available. Researcher has chosen this subject after discussion with guide and with other person.

B) Title of dissertation: 3|Page

DMTR N.M.D.COLLEGE GONNDIA

THE FINANCIAL ANALYSIS OF AMBUJA CEMENT LIMITED

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

C) Collection of data: The research methodology would like to gather information for carrying out analysis by using the following method during research study.

Secondary data:  Financial search is the systematic design, collection and analysis of data and finding relevant to specific financial aspects of the company.  The data was collected through financial statements like: 1) 2) 3) 4)

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Annual reports. Balance sheet. Profit and Loss Account Other articles.

DMTR N.M.D.COLLEGE GONNDIA

THE FINANCIAL ANALYSIS OF AMBUJA CEMENT LIMITED

HYPOTHESIS

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

1. That the financial structure of the company is appropriate. 2. That the profitability of the company is satisfactory. 3. That company uses the fixed asset’s efficiently. 4. That the liquidity position of the concern is satisfactory

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DMTR N.M.D.COLLEGE GONNDIA

THE FINANCIAL ANALYSIS OF AMBUJA CEMENT LIMITED

INTRODUCTION

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

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

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

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More importantly, its plants are some of the most efficient in the world. With environment protection measures that are on par with the finest in the developed world. But the company’s most distinctive attribute is its approach to the business. Ambuja believes its most valuable assets aren’t cement plants. They are the people who run the plants. This unique vision is encapsulated in the company’s homegrown philosophy of giving people the authority to set their own targets, and the freedom to achieve their goals. It’s called ‘I can’’ This simple vision has created an environment where there are no limits to excellence, no limits to efficiency. And has proved to be a powerful engine of growth for the company.

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

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HISTORY OF AMBUJA CEMENT: Ambuja Cements Limited was earlier known as Gujarat Ambuja Cements Limited (GACL). The company was set up in 1986. In this short span Ambuja Cements has achieved massive growth and presently, the total cement capacity of the company is 16 million tonnes. The company has three subsidiaries, viz, Ambuja Cement Rajasthan Limited (ACRL), Ambuja Cement Eastern Limited (ACEL) and Ambuja Cement India Limited (ACIL). Ambuja also has a strategic investment in ACC through its subsidiary (ACIL). Ambuja Cements is the most profitable cement company in India, and the lowest cost producer of cement in the world. One of the major reasons that Ambuja Cements is the lowest cost producer of cement in the world is its emphasis on efficiency. Power consists over 40% of the production cost of cement. The company improved efficiency of its kilns to get more output for less power. Thereafter Ambuja Cements set up a captive power plant at a substantially lower cost than the national grid. The company sourced a cheaper and higher quality coal from South Africa, and a better furnace oil from the Middle East. As a result, today, the company is in a position to sell its excess power to the local state government. Ambuja cement 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 has a port terminal at Muldwarka, Gujarat. It is an all weather port that handles ships with 40,000 DWT. The port has a fleet of 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. The Surat terminal has a storage capacity of 15,000 tonnes and Panvel terminal has a storage capacity of 17,500 tonnes. Both the terminals have bulk cement unloading facility. The port at Galle, 120 km from Colombo, Sri Lanka, handles million tonnes of cement annually. 8|Page

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THE FINANCIAL ANALYSIS OF AMBUJA CEMENT LIMITED

First plant set up in record time When Ambuja set up its first plant in 1986, the accepted time period for installing a plant was 3 years. Ambuja, did it in less than 2 years. And with a significantly lower capital expenditure. In 1993 the company went a step further and bettered its own record. Ambuja's second plant was installed in a mere 13 months - the quickest time for setting up a one million tonne cement plant.

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

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

The facility comprises: A dedicated port at the Gujarat plants, capable of berthing 40,000 DWT vessels, three bagging terminals at Mumbai, Surat and Sri Lanka, and seven special bulk cement vessels. This capability has enabled us to supply fresh cement to many coastal markets – domestic and international.

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Branding a commodity Cement is a commodity, sold largely on price. Ambuja Cement was the first company to create a brand out of cement and command a premium. It was also the first to introduce a special cell, providing technical services to consumers and masons. Today, this has become the norm in cement marketing. The trick of course was to provide a consistently high quality of cement, backed by excellent service. This was reinforced by a strong dealer network. The result is that customers are ready to pay 2-3% premium for Ambuja Cement for the value they receive. Ambuja Cement is the top brand in Western, Northern, Central and Eastern India. Exports

Ambuja Cement exports almost 17% of its production in a very competitive international environment. For the last ten years, Ambuja Cement remains India’s highest exporter of cement. This has been possible for two reasons –  One, the quality of cement matches the best in the world.  Two, the dedicated bulk cement transportation capability at our Gujarat plant.

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The Environment

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

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

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

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

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Major Achievements of Ambuja Cement

  

    

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 cement movement by sea in India

Milestones Building of a cement plant in record 13 months:2.8 kilometer conveyor belt running through three hills was constructed in just 9 months. Introduced a completely new system of transporting cement in India – the bulk cement transportation by sea. Introduced complete blast free limestone mining by using the surface miner in limestone mining for the first time in India. 12 | P a g e

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Created water reservoirs in used up mines and raised the water table in arid areas. Our plants have achieved the lowest pollution levels – comparable with the most strongest Swiss standards.

Recognition:       

National Award for commitment to quality by the Prime Minister of India. National Award for outstanding pollution control by the Prime Minister of India. Eco-Gold Star by TERI Best Export Award by CAPEXIL. Award for Corporate Social Responsibility by Business World – FICCI International Award For Rural Development by Asian Management Institute (AIM) ISO 9002 Quality Certification. ISO 14000 Certification for environmental systems.

Technical Details Established – 1986. Total Capacity – 15 million tonnes. Infrastructure – Dedicated port at Gujarat. Capable of berthing 40,000 DWT vessels with carrying capacity of 20,000 tonnes. Packing terminals at Mumbai, Surat and Sri Lanka.

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TYPES OF FINANCIAL ANALYSIS

TYPES OF FINANCIAL ANALYSIS

ON THE BASIS OF MATERIAL USED

EXTERNAL ANALYSIS

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ON THE BASIS OF MODUS OPERANDI

INTERNAL ANALYSIS

HORIZONTAL ANALYSIS

VERTICAL ANALYSIS

DMTR N.M.D.COLLEGE GONNDIA

THE FINANCIAL ANALYSIS OF AMBUJA CEMENT LIMITED

ON THE BASIS OF MATERIAL USED

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

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

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

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ON THE BASIS OF MODUS OPERANDI

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

(A)HORIZONTAL ANALYSIS: Horizontal analysis refers to the comparison of financial a company for several years. The figures of the various years are compared with standard or base year this comparison focus attention on items that have changed significantly during the period under review.So, horizontal analysis is useful for long term analysis and planning.

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

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METHODS OF FINANCIAL ANALYSIS

The analysis and interpretation of the financial statement is used to determine the financial position and result of operation, number of methods are used to analysis the relationship between different financial statement such as… (A) COMPARATIVE STATEMENT: The comparative financial statements are statements of the financial position at different period of time, in this financial data two or more year are placed and presented in adjecent columns in order to facilitate periodic comparision. The presentation of such data enhance the usefulness of these reports and bring out more clearly the nature and trend of changes affecting the profitability and financial position of firm. The two types of comparative financial statements are prapared: 1) Comparative balance sheet. 2) Comparative income statement. (B) COMMON-SIZE STATEMENT: The common size statement represents the relationship of different items of a financial statements with some common item by expressing each item as a percentage of common items. In common-size balance sheet, each item of the balance sheet is stated as a percentage of total of the balance sheet. Similarly in common-size income statement, each item is stated as percentage of the net sales. Thus, the common-size statement useful in Intra-firm as well as inter-firm comparison for the same year as for several years. 17 | P a g e

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

(D) FUND FLOW ANALYSIS: Fund flow analysis is a technical device designed to analysis the source from which additional funds were drived and the use to which these sourses were put. It is an effective tool to analyze changes in the working capital of a business enterprise between beginning and the ending financial statement dates. Fund flow analysis is helpful in accessing the growth of the firm, it result in financial needs and in determining the best way of financing these needs. The fund flow analysis consists of: 1) Preparing schedule of changes in Working Capital. 2) Statement of sources of application of funds. (E) CASH FLOW ANALYSIS: Cash flow analysis is a technique to analyze the cash position of a business enterprise. Cash flow analysis provide information about the cash flow of an enterprise is useful in providing users of financial with a basis to access the ability of the enterprise to generate cash and cash equivalents and the needs of the enterprise to utilize those cash flows. 18 | P a g e

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(F) RATIO ANALYSIS:

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

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

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(1)

LIQUIDITY RATIOS:

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

(2)

LEVERAGE RATIO: Financial Leverage refers to the use of debt finance, while debt capital is a cheaper source of finance, it is also reskier source of finance. For analysis financial leverage two types or ratios are commonly used. (a) (b)

Structural ratio Coverage ratio

Structural ratio are based on proportions of debt and equity in the financial structure of firm. Coverage ratio shows the relationship between debt servicing commitements and the sources for meeting these burdens.

(3)

ACTIVITY RATIOS:

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

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(4)

PROFITABILITY RATIOS:

Profitability reflects the final result of business operations. These are twp types of profitability ratios. (a) (b)

Profit Margin Ratio Rate of Return Ratio

A Profit Margin Ratio shows the relationship between profit and sales. Rate of Return Ratio shows the relationship between profit and investments. (5)

COST-VOLUME-PROFIT ANALYSIS:

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

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PROFIT & LOSS ACCOUNT:

Rs. in Cr. INCOME : Sales Turnover Other Income Stock Adjustments Total Income EXPENDITURE : Raw Materials Excise Duty Power & Fuel Cost Other Manufacturing Expenses Employee Cost Selling and Administration Expenses Miscellaneous Expenses Less: Preoperative Expenditure Capitalised Profit before Interest, Depreciation & Tax Interest & Financial Charges Profit before Depreciation & Tax Depreciation Minority Interest before PAT Profit Before Tax Tax Profit After Tax Minority Interest after PAT Profit/Loss of Associate Company 22 | P a g e

Dec 2009

Dec 2008

7,721.42 255.81 -49.47 7,927.76

7,102.65 514.39 65.24 7,682.28

945.10 680.72 1,422.75 776.63

572.22 907.80 1,325.77 763.37

272.84 1,452.62

266.82 1,329.20

255.62 0.00

266.76 0.00

2,121.48

2,250.34

22.43

32.60

2,099.05

2,217.74

297.28 0.00

260.10 0.00

1,801.77 584.93 1,216.84 0.00 0.00

1,957.64 567.93 1,389.71 0.00 0.00

DMTR N.M.D.COLLEGE GONNDIA

THE FINANCIAL ANALYSIS OF AMBUJA CEMENT LIMITED

Profit after Minority Interest & P/L of Assoc. Co.

1,216.84

1,389.71

Adjustment below Net Profit P & L Balance brought forward Appropriations P & L Bal. carried down

0.00

0.00

675.84

683.74

1,227.72 664.96

1,397.61 675.84

Equity Dividend Preference Dividend Corporate Dividend Tax Equity Dividend (%)

365.59 0.00 62.13 120.00

334.97 0.00 56.92 110.00

Earning Per Share (Rs.) Book Value

7.58 42.45

8.75 37.25

1.51

223.89

Extraordinary Items

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BALANCE SHEET:

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THE FINANCIAL ANALYSIS OF AMBUJA CEMENT LIMITED

Rs. in Cr. Dec 2009 SOURCES OF FUNDS : Share Capital Reserves & Surplus Total Shareholders Funds Secured Loans Unsecured Loans Total Debt Minority Interest Total Liabilities

Dec 2008

304.74 6,163.31 6,468.05

304.52 5,367.03 5,671.55

100.00 65.70 165.70 0.00

100.00 188.67 288.67 0.00

6,633.75

5,960.22

6,227.30 2,783.06 3,444.24 2,714.44

5,710.11 2,512.87 3,197.24 1,947.23

722.44

327.82

683.24 152.20 880.90 292.42

938.74 224.60 852.13 352.67

1,584.80 674.04

1,413.93 470.56

-250.08

483.65

2.71

4.28

APPLICATION OF FUNDS : Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Current Assets, Loans & Advances Inventories Sundry Debtors Cash and Bank Balance Loans and Advances Less: Current Liab. & Prov. Current Liabilities Provisions Net Current Assets Miscellaneous Expenses not 25 | P a g e

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THE FINANCIAL ANALYSIS OF AMBUJA CEMENT LIMITED

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DATA COLLECTION & ANALYSIS

WORKING CAPITAL TURNOVER RATIO: Working capital turnover ratio indicates the velocity of the utilization of the net working capital. This ratio indicates that number of times the working capital is turnover in the course of time that is in one accounting year and measure the efficiency with which the working capital is being used by firm. This ratio should be always higher. This is calculated by the following formula 27 | P a g e

DMTR N.M.D.COLLEGE GONNDIA

THE FINANCIAL ANALYSIS OF AMBUJA CEMENT LIMITED

Working Capital Turnover Ratio =

Sales Working Capital

Working Capital = Current Assets-Current Liabilities

Year

Sales

Working Capital

Ratio

2008

7102.65

5960.22

1.192

2009

7721.42

6633.75

1.164

INTERPRETATION: This ratio shows the velocity of the utilization of working capital. The ratio measures the efficiency of the company with which the working capital is used by the company. Hence higher the ratio better it is. From the above analysis it is clear that the company utilizes its working capital properly and effectively. CURRENT RATIO: Current ratio measures the relationship between current asset and current liabilities. This ratio highlights the firms ability to meet its short 28 | P a g e

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term liabilities from its short term assets. The standard for the ratio is 2:1. However one should not rely on it blindly. The current ratio should be subject to qualitative test. It should be remembered that this ratio is subject to the influence of many financial forces, which may depress or retrive it dramatically overnight. It is represented as follows. Current Ratio = Current Assets Current Liabilities

Year

Current assets

Current liabilities

Ratio

2008

2368.14

1884.49

1.257

2009

2008.76

2258.84

0.889

INTERPRETATION: As per general norms, current ratio should be 2:1. In this regard the current ratio of Ambuja Cement Ltd. Is very low. This ratio further decline in the year 2009. It shows liquidity position is not satisfactory.

QUICK RATIO: This ratio measures the relationship between quick asset and quick liabilities. Quick assets can be immediately converted in to cash, so this 29 | P a g e

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ratio gives a more immediate indication of the firms ability to settle its current debts. This is more stringent test of Liquidity than current asset. The firm should have a quick ratio in proportion of 1:1 that is considered as the standard. Where this is not so, a substantial” Ash Legged” is usually maintained. It accesses how liquid the firm would be, if so business operations come to an abrupt halt. This is written as. Quick Assets Quick Ratio = Quick Liabilities

Year

Quick Assets

Quick Liabilities

Ratio

2008

483.65

1884.49

0.257

2009

250.08

2258.84

0.110

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

FUND DEBT TO NET WORTH RATIO: This ratio shows that the extent to which a firm should employ one debt showed to be viewed in term of the size of the shareholders fund. If the ratio reveals a high portion of debt finance in the capital structure, this may 30 | P a g e

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indicate on over dependence on external finance. So financial risk may be high. High debt usually means high financial risk. This ratio is important indication of a firm’s longer term solvency and key measure of its financial risk. It is written as Funded Debt Fund Debt to Net Worth =

Net Worth

Funded Debt =

Loan Fund

Loan Fund

Secured Loan + Unsecured Loan

=

Year

Funded Debt

Net Worth

Ratio

2008

288.67

5671.55

0.05

2009

165.70

6468.05

0.03

INTERPRETATION: This ratio determines the company’s dependence on external fund. It should be always less and we can saw from above table that it has decreased from previous year’s, so it’s good for the company.

NET PROFIT RATIO: The net profit ratio establishes the relationship between net profit (after tax) and the sales in same year. It indicates the efficiency of the 31 | P a g e

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management in manufacturing, selling, administrative and self-financing. This ratio shows the earning left for shareholders as a percentage of net sales this ratio is the overall measures of firm’s profitability. It is written as Net Profit (after tax) Net Profit Ratio =

Year

Net Profit

× 100

Sales

Sales

Ratio

2008

1389.71

7102.65

19.57%

2009

1216.84

7721.42

15.76%

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

PROPRIETARY RATIO OR EQUITY RATIO: This ratio shows the relationship between shareholders fund and the total asset. Any rise in this ratio indicates the necessity of borrowings and 32 | P a g e

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reduction in the amount of current asset. These ratio measures the extent to which the company’s invested capital or net worth in tied-up in non-liquid, permanent, depreciable assets. This is shown as Shareholders Fund Proprietary Ratio =

Year

Total Assets

Shareholders Fund

Total Asset

Ratio

2008

5671.55

16063.41

0.35

2009

6468.05

17900.24

0.36

INTERPRETATION: As it is stated that the ratio should be less as is possible. Here we can say that the proprietary ratio of the company is satisfactory because all the figures calculated above are small.

ASSET TURNOVER RATIO: Asset turnover ratio measures the efficiency of the firm in using its total assets to generate sales. A business organization invests in assets to 33 | P a g e

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generate sales and profit. To calculate this ratio the following formula is used Sales Asset Turnover Ratio =

Year

Sales

Total Assets

Total Assets

Ratio

2008

7102.65

16063.41

0.44

2009

7721.42

17900.24

0.43

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

FIXED ASSETS TO NET WORTH RATIO:

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THE FINANCIAL ANALYSIS OF AMBUJA CEMENT LIMITED

This ratio established the relationship between fixed assets and the shareholders fund. The ratio of fixed asset to net worth indicate the extent to which shareholders fund are sink in to the fixed asset. The formula to calculate this ratio is as follows: Fixed Asset (after dep.) Fixed Asset to Net Worth=

Net Worth

Net worth =reserve & surplus + shareholder fund – preliminary expenses Year

Fixed Asset

Net Worth

Ratio

2008

13695.27

5671.55

2.41

2009

15891.48

6468.05

2.46

INTERPRETATION: The above data shows that the shareholders fund is mostly used for acquiring and maintaining fixed asset’s.

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THE FINANCIAL ANALYSIS OF AMBUJA CEMENT LIMITED

FIXED ASSETS TURNOVER RATIO: This is also called as net sales to fixed asset. This ratio measures the efficiency with which a company utilizes its fixed assets. It serves as secondary test of the adequacy of the sales volume. It is indispensable insuring a total understanding of a company’s financial statements. Excessive fixed cost may cause drain on working capital. They may also reduce the profits steaming from high fixed costs per each unit of sales. The formula to calculate this ratio is as follows: Sales Fixed Assets Turnover Ratio =

Year

Sales

Fixed Assets

Fixed Assets

Ratio

2008

7102.65

13695.27

0.52

2009

7721.42

15891.48

0.49

INTERPRETATION: The ratio in financial year 2009 is more than the preceding years. The company’s fixed asset is utilized appropriately and effectively in each and every year.

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THE FINANCIAL ANALYSIS OF AMBUJA CEMENT LIMITED

CONCLUSIONS & SUGGESTIONS

CONCLUSION:

After examining the analysis of Ambuja Cement Co. it has been seen that liquidity position of company need’s to be improved. The company is progressing with a normal speed. There is also need to increase the profitability of the company.

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THE FINANCIAL ANALYSIS OF AMBUJA CEMENT LIMITED

1. Liquidity is required to be improved. 2. Profitability of the Ambuja Cement should also need’s to be improved. 3. Proper cash budgeting is required to be followed so that management of cash must be in favour of the company it will improve the liquidity.

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THE FINANCIAL ANALYSIS OF AMBUJA CEMENT LIMITED

In spite of precautions taken to make the study objective, it can not be denied that there are certain procedural and technical limitations. It is not possible to judge all the parameter to evaluate the efficiency in a wide and dynamic area like financial analysis. Some of the limitations of this study are as under:

(a)

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

(b)

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

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THE FINANCIAL ANALYSIS OF AMBUJA CEMENT LIMITED

BIBLIOGRAPHY:

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

(1). I. M. Pandey

--- Financial Management

(2). R. K. Sharma &

---

Management Accounting

---

Management Accounting

Shashi K. Gupta

(3). Prof. Nirmal Jain

www.ambujacement.com

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