kesoram cement

CONTENTS

INTRODUCTION

Financial statements are the outcome of summarizing process of accounting. Financial statements provide a summarized view of financial position and operations of the firm. The financial statements s essentially is interim reports presented annually and reflect a Division of the life of and enterprise. They are the means to present the firms. Financial position to owners, creditors and the general public.

As these statements are used by investors and financial analyst to examine the firms performances in order to make investment decisions they should be prepared very carefully and contains as much information as possible.

According to John N. Myer,

The financial statement provide a summary of a business enterprise, the balance sheet reflecting the assets liabilities and capital as on a certain date and the income statement showing the results of operations during a certain period

Financial ratio analysis is the systematic use of ratio to interpret financial statements so that the existing strengths and weaknesses of a firm as well as its historical performance and current financial conditions, can be determined and there by helps the analyst to draw conclusions regarding financial operations like:

Short term long term planning.

Measurement and evaluation of financial performance

Study of financial trends

Decision making for investments and capital expenditure

Diagnosis of financial sickness.

The above conclusions can be drawn by reducing the information from financial statements to a small set of indices or percentage values that then form the basis for measuring different aspects of firms activities.

NEED AND IMPORTANCE OF THE STUDY:

Financial management is a managerial activity, which is concerned with the planning and controlling of the firms financial resources. The Tobacco is one of the successful organizations in India. It is believed that the company makes profits year after year in spite of volatile environment. It is known fact that the success of any organization depends upon prudent financial management. This situation has created an interest to study and analyze some of the financial aspect of this organization. Hence a study has been under taken on the proposed topic Financial Analysis through a comparative study in Tobacco.

OBJECTIVES OF THE STUDY The following are some of the objectives that are set for the study that was conducted on the area of the comparative analysis. To examine the solvency of the Tobacco, and know the current financial position and liquidity position. To assess the profitability position of the Tobacco,to make some useful recommendations. To see whether the firm has maintained adequate investment in current assets or not. To analyze the financial position of the Tobacco,to know the cement sector in India and also to know the profile of the Tobacco. To compare the yearly performance of the common size and comparative statements

SCOPE OF THE STUDY

The study limited to Tobacco. All the departments of Tobacco are involved in this study. The study based on availability on Tobacco past 5 years data. The study focuses on to find out comparative statements.

The study also focuses on the ratios depending upon the statements.

To understand the financial position of Tobacco for the current year.

As it is not researchers direct observation but the secondary sources of information provided by the company. Most of the data is based on secondary data.

Due to time limitation only five years annual reports have taken under the study.

The scope of the study limited to collecting the financial data published Annual Reports of the company.

The study is confined to only one cement that is Tobacco As it is not researchers direct observation but the secondary sources of information provided by the company. Most of the data is based on secondary data.

a

METHODOLOGY OF THE STUDYMethodology is a systematic procedure of collecting information in order to analyze and verifying a phenomenon. The collection of data is done through two principal sources viz.

(1) Primary data

(2) Secondary data

Primary Data:

It is the information collected directly without any reference. In the study, it was mainly interviews with concerned officer and staffs either individually or collectively. This study does not include any primary data.Secondary Data: The secondary data is collected from printed books, like text books, magazines, company website, newspaper, annual reports of Tobacco Ltd. Company and Financial Management books.

The data includes:

1. Collections of requires data from annual report of Tobacco Industries Limited.

2. Reference from text book and journals relating to Financial Management and articles published in business dairies like the Economics times, Business line etc.

LIMITATIONS OF THE STUDY

The study has been confined to know the comparative analysis of assets and liabilities at Tobacco factory.

The study having limited scope of gathering sufficient financial information as it is confidential.

Time period for the Project was also limited.Due to time limitation only five years annual reports have taken under the study. This study based on historical data and interim reports of the Tobacco Industries Limited.

The study does not include all the aspects of Tobacco.COMPANY PROFILE

History of the company

The Company was incorporated on 18th October, 1919 under the Indian Companies Act, 1913, in the name and style of Tobacco Cotton Mills Ltd. It had a Textile Mill at 42, Garden Reach Road, Calcutta 700024. The name of the Company was changed to Tobacco Industries & Cotton Mills Ltd. on 30th August, 1961 and the same was further changed to Tobacco Industries Limited on 9th July, 1986. The said Textile Mill at Garden Reach Road was eventually demerged into a separate company.

Tobacco industry is one of the leading manufacturing of cements in India. Incorporated by the promoters of Birla Group Company. It is a dry process cement plant. The plant capacity is 8.28 lakh per annum .It is located at basanthnagar in karimnagar District of Andhra Pradesh. This is 8Km. Away from the Ramagundam Railway, linking Madras to New Delhi.

The company's first unit at Basanthnagar with a capacity of 2.1 lakh tones per annum incorporating Humboldt suspension pre -heater system was commissioned during the year 1969. The second unit was set up in the year 1971 with a capacity of 2.1 lakh tones per annum and the third unit with a capacity of2.5 lakh tones per annum went on steam in the year 1978. The coal for this company is supplied by Singareni Collieries and the power is obtained from APSEB. The power demand for the factory is about 21MW Tobacco got DG sets of 4MW each installed in the tear 1987.

Tobacco has set up a 15 MW captive power plant to facilitate for an uninterrupted power supply for manufacturing of cement started on 24th August, 1997 per hour 12 MW, actual power is 15MW.

Tobacco industry distinguished itself among all the cements factories in India by bagging the national productivity award consecutively for tow years that is for the year 1985-86and 1986-87.

One among of the industries gains in the country today serving the nation on the industrial front,Tobacco industries Limited has a chequered and eventful history dating to the twenties when the industrial House of Birla acquired it with only a Textile Mill under its banner in 1924.

It grew from strength to and spread its activities to never fields like Rayon, pulp, transparent paper, Spun pipes, Refractoriness, Tyers and other product.

Looking to the wide gap between the demand and supply of a vital commodity Cement which plays an important role in national building activity, the government of India had delicensed the cements Industry in the year 1966 with a view to attract private entrepreneurs to augment to cement production. Kesoram rose to the occasion and decided to set up a few cement plants in the country.

Birla supreme is a popular brand of Kesoram Cement from its prestigious plant of Basanthnagar in A.P. which has outstanding track record in performances and productivity serving the nation for the last two and half decades It has proved its distinction by bagging several national awards and state awards. It also has the distinction of achieving optimum capacity utilization.

Kesoram offers a choice of top quality Portland cement for light heavy constructions and allied applications. Quality is built to every fact of the operation.

The plant layout is national to being with the lime stone is rich in calcium carbonate a key factor the influence the quality of the final product. The dry process, Technology used in the latest computerized monitoring oversees. The manufacturing process samples are sent regularly to the bureau of India Standards national council of construction and building measures for News Papers, Magazines hoardings etc.

Tobacco undertaking marketing activities extensively in the states of Andhra Pradesh, Karnataka, Tamilnadu, Karla, Maharastra and Gujarat. In A.P. sales deposits are located in different areas like Karimnagar, Warangal, Nizamabad, Vijayawada and Nellore. In other states it has opened around 10 depots. The market share of Kesoram Cement in all India Cement Market is 1.19%. In A Andhra Pradesh it is a 7.05%.

GROWTH

The First Plant for manufacturing of rayon yarn was established at Tribeni, District Hooghly, West Bengal and the same was commissioned in December, 1959 and the Second Plant was commissioned in the year 1962 enabling it to manufacture 4,635 metric tons per annum (mtpa) of rayon yarn.This Unit has 6,500 metric tons per annum(mtpa)capacityason31.3.2007.

The plant for manufacturing of transparent paper was also set up at the same location at Tribeni, District Hooghly, West Bengal, in June, 1961. It has the annual capacity to manufacture 3,600 metric tons per annum (mtpa of transparent paper.

The Company divered into manufacturing of Cast Iron Spun Pipes & Pipe Fittings at Bansberia, District Hooghly, West Bengal, with a production capacity of 45,000 metric tons per annum (mtpa) of cast iron spun pipes and Pipe fittings in December, 1964.

The Company subsequently diversified into the manufacturing of Cement and in 1969 established its first cement plant under the name 'Kesoram Cement' at Basantnagar, Dist. Karimnagar (Andhra Pradesh) and to take advantage of favourable market conditions, in 1986 another cement plant, known as 'Vasavadatta Cement', was commissioned by it at Sedam, Dist. Gulbarga (Karnataka). The cement manufacturing capacities at both the plants were augmented from time to time according to the market conditions and as on 31.3.2007 have annual cement manufacturing capacities of 0.9 milliontonsand3.65milliontonsrespectively

The Company in March 1992, commissioned a plant at Balasore known as Birla Tyres in Orissa, for manufacturing of 10,00,000 mtpa automotive tyres and tubes in the first phase in collaboration with Pirelli Ltd., U.K., a subsidiary company of the world famous Pirelli Group of Italy - a pioneer in production and development of automotive tyres in the world. The company as on 31.3.2007 had the manufacturing capacities of 1.95 million tyres, 1.4 million tubes and 1.1 million flaps per annum in thesaidPlant.

It has small manufacturing capacities of various chemicals at Kharda in the State of West Bengal also. It has the annual manufacturing capacities of 12,410 mtpa of Caustic Soda Lye, 5,045 mtpa of Liquid Chlorine, 6,205 mtpa of Sodium Hypochlorite, 8,200 mtpa of Hydrochloric Acid, 3,200 mtpa of Ferric Alum, 18,700 mtpa of Sulphuric Acid and 1,620,000 m3 of purified Hydrogen Gas.

AWARDS:TOBACCO Bagged prestigious awards including national award for productivity technology conservation and several state awards for the year1984, Tobacco bagged Best family planning effort in the state of the Federating of A.P. Chamber of commerce and Industry. Also national award for two successive years, 1985 and 1986 and National award for Mines safety For two years 1985-86 and 1986-87.It has also bagged the National Award

For energy efficiency for the year 1989-90 for the performance among all cement plants in India. Thus award installed by national council for cement and building material (NCCBM) in association with energy Govt of India.

National Award for excellence industry Best Management award of the Govt of A.P for the year 1993.

Tobacco industry has also won the award for workers welfare including family planning for the year 2000-01 of the federation of Andhra Pradesh chambers of commerce and industry, which was presented by the humble chief minister of Andhra Pradesh Sri N.Chandra Babu naidu.

PROFILE OF CEMENT INDUSTRY:

The Indian Cement industry is the second largest cement producer in the world, with an installed capacity of 144 million tones. The industry has undergone rapid technological up gradation and vibrant growth during the last two decades, and some of the plants can be compared in every respect with the best operating plants in the world. The industry is highly energy intensive and the energy bill in some of the plants is as high as 60% of cement manufacturing cost. Although the newer plants are equipped with the latest state-of-the-art equipment, there exists substantial scope for reduction in energy consumption in many of the older plants adopting various energy conservation measures.

The Indian cement industry is a mixture of mini and large capacity cement plants, ranging in unit capacity per kiln as low as 10 tpd to as high as 7500 tpd. Majority of the production of cement in the country (94%) is by large plants, which are defined as plants having capacity of more than 600 tpd. At present there are 124 large rotary kiln plants in the country.

The Ordinary Portland Cement (OPC) enjoys the major share (56%) of the total cement production in India followed by Portland Pozzolana Cement (PPC) and Portland Slag Cement (PSC). A positive trend towards the increased use of blended cement can be seen with the share of blended cement increasing to 43%. There is regional imbalance in cement production in India due to the limitations posed by raw material and fuel sources. Most of the cements plants in India are located in proximity to the raw material sources, exploiting the natural resources to the full extent. The southern region is the most cement rich region while other regions have almost same Cement production capacity.

THEROTICAL CONCEPTS

The term financial analysis refers to the process of determining financial strength and weakness of the firm by establishing strategic relationship between the items of the balance sheet and profit and loss account and other operative data.

Financial analysis is a process of evaluating the relationship between component parts of a financial statement to obtain better understanding of a firms positions and performance.

By Metcalf and TirardFinancial statement analysis is largely study of relationship among various financial factors in a business as a disclosed by single set of statements. And a study of the firm of these factors in a series of statement

By Myers

The purpose of financial analysis is to diagnose the information contained in financial statements so as to judge the profitability and financial soundness of the firm.

NATURE

The financial statement is prepared on the basis of recorded facts. The recorded facts are those that can be expressed in monitory terms. The accounting records and financial statements prepared from those records are based on historical costs. The financial statements are prepared periodically generally for the accounting period.

Financial statements as composed of data, which are the result of combination of:

Recorded facts concerning business transaction.

Convention adopted to facilitate the accounting technique.

Postulates or assumptions made to personal judgment used in the application of the correction and postulates.

Types of financial analysis:

We can classify various types of financial analysis into different categories depending upon

The material use

The method of operation/ modes operandi of analysis

According to material use of financial analysis is of two types: External Analysis

Internal Analysis

EXTERNAL ANALYSIS:

The analysis is not done by outsiders who do not have access to the detailed internal accounting records of the business firm do not do the analysis. These outsiders include investors, potential investors, creditors, potential creditors, government agencies, credit agencies and the general public for financial analysis these external parties is to the firm depend almost entirely on the published financial statements. Thus surveys only limited purpose. However the recent changes the government regulation requiring business firm to make available more detailed information to the public through audited publish account has considerably improved the position of the external analysis.

INTERNAL ANALYSIS:

The analysis conducted by the persons who have access to the internal accounting records of a business firm is known as internal analysis. Such an analysis can therefore be performed by executives and employee of the organization as well as government agencies which have statutory powers vested in them. Financial analysis that can be affected depending upon the purpose to be achieved.

On the basis of modus operandi:

According to the methods of operation followed in the analysis, financial analysis can also of two types.

Horizontal analysis

Vertical analysis

Horizontal Analysis:

This makes to possible to focus attention on items have changed significantly during period under review. It is also called as dynamic analysis. It refers the comparison of financial data of company several years. The figures for this type of analysis are present horizontally over a number of columns. The figures of various years compared with standard base year. A base year chooses as beginning point.Vertical Analysis:

It refers to the study of relationship of the various items in the financial statements of one accounting period. In this type of analysis the figures from financial statements of a one year compared with a base selected from the same years statements. It is also known as static analysis.

Procedure of financial statement analysis:

There are three steps involved in the analysis of financial statements those are:

(1) Selection

(2) Classification

(3) Interpretation

The first step involves selection of information relevant to the purpose of analysis of financial statements. The second step involved in the methodical classification of the data and third step included drawing of interest and conclusions.

The following procedure is adopted for the analysis and interpretation of financial statements

The analyst should acquaint himself with the principles and postulates of accounting. He should know the plans and policies of the management so that he may be able to find out whether these plans are properly executed or not.

The extent of analysis should be determined so that the spear of work may be decided. The aim is to find out the earning capacity of the enterprise then analysis income statement will be under taken on the other hand if financial position is to be studied then balance sheet analysis is required.

The financial data given in the statement should be reorganized and re-arranged. It will involve the grouping of similar data under same heads, breaking down of individual components of statements according to nature. The data is reduced to a standard form.

A relationship is established among financial statements with the help of tools and techniques of analysis such as ratios, trends.

The information interpreted in a simple and understandable way. The significance and utility of financial data is explained for helping in decision making.

The conclusions drawn from interpretation are presented to be management the form of report.

Objectives of Financial Statement:

The Financial Statement are the source of information on the basis of which conclusion are drawn about the profitability and financial position of a concern. They are the major means employed by firms to present their financial position of owners, creditors and the general public. The primary objective of principles Board of America State the following objectives of financial statements.

Obligations of a business firm. To provide reliable information about changes such economic resources and obligations to provide reliable financial information about economic resources and.

To provide financial information that assists in estimating the earning potentials of business.

To disclose to the extent possible other information to the financial statements that is relevant to the needs of the users of these statements.

To provide reliable information about changes in net resources arising out of business activities.

Characteristics of Ideal Financial Statements:

The financial statements are prepared with a view to depict financial position of the concern. A proper analysis and interpretation of these statements enables a person to judge the profitability of financial strength of the business. The financial statement should be prepared in such away that they are able to give a clear and orderly picture of the concern. The ideal financial statements have the following characteristics.

Comparability:

The results of financial analysis should be in a way that can also be in compared with the figures of other concerns of the same nature.

Analytical Presentation:

The information should be analyzed in such a way that similar data is presented at the same place a relationship can be established in similar type of information. This will be helpful in analysis and interpretation of data.

Brief:

Possible, the financial statements should be presented in brief. The reader will be able to form an idea about the figures. On the other hand, if figures are given in details then it will become difficult to judge the working of the business.

Promptness:

The financial statement should be prepared and presented at the earliest possible, immediately at the close financial year, statements should be ready.

Importance of Financial Analysis:

The financial statements are mirrors, which reflect the financial position operating strength or weakness of the concern. The statements are useful to Management, Investor, Creditors, Bankers, Workers, and Government and public and large. George O may points out the following major uses of financial statements:- As a report of steward ship

As basis of fiscal policy

To determine the legality of dividends

As guide to advice divided action

As a basis for the granting of credit

As information for prospect investors in an enterprise

As a guide to the value of investment already

As a aid to government supervision

As a basis for price or rate regulation

As basis for taxation

The utility of financial statement to different parties

Management:

The financial statements are useful for assessing the efficiency for different cost centers. The management is able to exercise cost control through these statements. The efficient is able to decide the notice of the management. The Management is able to decide the course of action to be adopted in future.

Creditors:

The trade creditors are to be paid in a short period this liability is met over of current assets. The creditors will be interested in current solvency of the concern. The calculation of current ratio and liquid ratio will enable the creditors to assess urgent financial position of the concern in relation to their debts.

Bankers:

The Bankers are interest to see the loan amount is secure and the customer is also able to pay the interest regularly. The bankers will analysis the balance sheet to determine financial strength of the concern and P&L A/c will also be studied to find out the earning position. These statements also help the bankers to determine the amount of securities it will ask from the customers as a cover for the loans.

Investor:

The investors include both short term and long-term investors. They are interested payments in the security of principle amount of loan and regular interested payments in the concern. The investors will study the long-term solvency of the concern will the help of financial position but it will also study future prospects and expansion of the concern. The possibility of paying back the loan amount in the fact of liquidation of the concern is also taken into considerationTrade Association:

This association provides service and protection to the member. They may analysis the financial statements for the purpose of providing facilities to these members. They may develop standard ratios and design uniform system of accounting.

Stock Exchange:

The stock exchange deals in purchase and sale of different securities of different companies. The financial statement enables the stockbrokers to judge the financial position of different concerns. The fixation of prices for securities etc. is also based on these statements.

Methods of devices of Financial Analysis:

The analysis and interpretation of financial statements issued to determine the financial position and result of operations as well. A numbers of method of devices are used to study the relationship between different statements. An effort is made to use those devices, which clearly analyze the position of the enterprise. The following methods of analysis are generally used.

Comparative Statements

Tend Analysis

Common Size Statements

Fund flow Analysis

Cash flow Analysis

Ratio Analysis Comparative Statements: The comparative financial statements are statements of the financial position at different periods of time. The elements of financial position are shown in comparative forms so as to give an idea of financial position at two on more periods. Any statements prepared in a comparative form for financial analysis purposes. Not only the comparison of the figures of two periods but also be relationship between balance sheet and income statement enables an in depth study of financial position and operative results. The comparative statements may show.

Absolute figures (rupees amount)

Changes in absolute figure that is increase or decrease in absolute figures.

Absolute data in term of percentages.

The analysis is able to draw useful conclusions when figures are given in a comparative position. The figures of sales for a quarter, half-year or one year may tell only the present position of sales efforts. When sales figures of current periods of time, similarly, comparative figures will indicates the trend and direction of financial position and operating results.

The financial data will be comparative only when same accounting principles are used in preparing these statements. In case of any deviation in the use of accounting principles this fact must be mentioned at the foot of financial statements and the analysis should be careful in using these statements. The two comparative statements are:

Balance Sheet

Income Statement

Comparative Balance Sheet:

The Comparative balance sheet analysis is the study of the trend of the same items, group of items and computed items in two or more balance sheets of the same business enterprise on different dates. The changes in periodic balance sheet items reflect the conduct of business. The changes can be observed by comparison of the balance sheet at the beginning and at the end of a period and these changes can help in forming an opinion about the progress of an enterprise. The comparative balance sheet has two columns for the data of original balance sheet. A third column is used to shown increased in figures. The fourth column may be added for giving percentages of increases or decreases.

Guide lines for interpretation of Comparative Balance Sheet:

While interpreting Comparative Balance Sheet the interpreter is expected to study the following aspects: Current financial position and liquidity position.

Long-term financial position.

Profitability of the concern.

For studying current financial position or short-term financial position of a concern, one should the working capital in both the years. The excess of current assets over current liabilities will give the figures of working capital. The increase in working capital will mean improvement in the current financial position of the business. An increase in current assets complained by the increase in current liabilities of the same amount will not shown by provement in the short-term financial position. The long-term financial position of the concern can be analyzed by studying the changes in fixed assets, long-term liabilities and capital. The proper financial policy of concern will be to financial fixed assets by the financial institutions or issue of fresh share capital. An increase in fixed assets should be compared to the increase in long-term loans and capital.

It is the increase in fixed assets is more the increase in long-term securities then part of fixed assets has been financed from the working capital. On the other hand, if the increase in long-term securities is more than the increase in fixed assets the fixed assets have not only been financed from long-term sources but part of working capital has also been financed from long-term sources. A wise policy will be finance fixed assets by raising long-term funds.

The next aspect to be studied in comparative balance sheet question is the profitability of the concern. The study of increase or decrease in retained earnings various resources and surpluses will enable the interpreter to see whether the profitability has improved or not. An increase the balance sheet of profit and loss accounting and other resources created from profits will means an increase in profitability to the concern.

After studying various assets and liabilities an opinion should be formed about the financial position of the concern. One cannot say if short-term financial position is good then long-term financial position must be given at the end.

Comparative Income Statement:

The comparative income statement gives and idea of the progress of a business over a period of time. The changes in absolute data in money values and percentages can be determined to analyze the profitability of the business like comparative balance sheet income statement also has four columns. First two columns give figures of various items for two years third and fourth columns are used to show increase or decrease in figures in absolute amounts and percentages respectively.

1.Classification of Ratios

A) Liquidity Ratios and current assets movement or efficiency ratios.

B) Long-term Financial or test of solvency.

C) Analysis of Profitability ratios.Analysis of capital structures.

Liquidity RatiosSolvency RatiosProfitability RatiosCapital Structure Ratios

1.Current Ratio

2.Quick Ratio

3.Absolute Ratio

Current Assets

Movement or Efficiency Ratios.

1. Inventory/stock turnover ratio.

2. Debtors Turnover Ratios.

3. Average Collection period.

4.Creditors Turnover Ratio

5.Average payment Ratio

6. Working capital Turnover Ratio.1. D.bt-Equity Ratio.

2. Funded debt Ratio.

3. Proprietory Ratio.

4. Solvency Ratio.

5. Proprietary Funds Ratio.

6. Fixed Assets Ratio.

7. Interest Coverage Ratio.

8. Ratio of Current assets to Proprietary funds.a) General Profitability Ratios.

1. Gross Profit Ratios.

2. Operating Ratio.

3. Operating Profit Ratio.

4. Net Profit Ratio.

b)Overall Profitability Ratios:

1. Return on share-holders investment.

2. Return on equity capital.

3. Earning Per share.

4. Return on Capital employed.

5. Capital Turnover Ratio.

6. Dividend Yield Ratio.

7. Dividend Pay-out Ratio.

8. Earning Yield Ratio.1. Capital Gearing Ratio.

2. Total investment to Long-term Liabilities.

3.Ratio of Current Liabilities to Share holders Funds.

4.Ratio of Reserve to Equity Capital.

2. Importance and User of Ratio Analysis:

The Ratio Analysis is the one of the powerful tools of financial analysis. It is used to analyze and interpret the financial health of the enterprise. It is with the help of ratios that the financial statement can be analyzed more clearly and decision made for such analysis.

i) Importance:

1. Simplifies changes in financial condition of the Business.

2. It facilities to inter-firm comparison which reveal strong and weak firms.

ii) Uses:

1. It helps in decision making.

2. Help in financial forecasting and planning.

3. Financial strength and weakness can be easily communicated.

4. Helps in effective control of business from deviations.

5. It is essential part of budgeting control and standard costing.

6. It is helpful in assessing the financial position of the concern where the shareholder/investor is going to invest.

7. Helps in knowing the financial position of the company to extend credit to the concern for creditors.

8. It helps in knowing the profitability of the concern because fringe benefits are related to the volume of profits earned.

iii) Limitations of Ratio Analysis: Ratios are based only on information that has been recorded in the financial statement. They suffer from inherent weakness of accounting records such as historical approach.

Ratios are not only the indicators; they cannot be taken as final decision regarding good or bad financial position of the business.

Ratios will give misleading results with the effects in price level are not taken into account.

No fixed standards can be laid down for ideal ratio; it may differ from industry to industry.

They can be easily window dressed to present better picture of financial and profitability of outsider.

Different people interpret ratios in different ways which leads to bias. As it is only the means, not and end in it.

COMPUTATION OF LIQUIDITY RATIOS:

CURRENT RATIO:

CURRENT RATIO = CURRENT ASSETS

---------------------------

CURRENT LIABILITIES

QUICK RATIO:

QUICK RATIO = QUICK ASSETS

----------------------------- CURRENT LIABILITIES

CASH RATIO or ABSOLUTE LIQUID RATIO:

RATIO = CASH+MARKETABLE SECURITES

-------------- ---- -------------------

CURRENT LIABILITIES

COMPUTATION EFFICIENCY RATIOS:

STOCK TURNOVER RATIO: RATIO = COST OF GOODS SOLD

--------------------------------

AVERAGE STOCK

DEBTORS TURNOVER RATIO:

RATIO = SALES

------------- DEBTORS

WORKING CAPITAL TURNOVER RATIO:

RATIO = SALES

--------------------

NET WORKING CAPITAL

COMPUTATION FOR PROFITABILITY RATIOS:

OPERATING RATIO:

RATIO = COST OF GOODS SOLD+ALL OTHER EXPENSES

----------------------------------------------------------------

SALES

CURRENT LIABILITIES TO WORKING CAPITAL:

RATIO = CURRENT LIABILITIES

--------------------------------------

NET WORKING CAPITAL

CURRENT ASSETS TO WORKING CAPITAL:

RATIO = CURRENT ASSETS

COMPARATIVE BALANCE SHEET OF

AS ON 31ST MARCH 2004 & 2005

PARTICULARS20042005AMOUNT INCREASE OF DECREASE% CHANGE

Assets

A) Current Assets, Loans & advances inventories1,96,03,49,2112,03,06,62,2467,03,13,0353.59

Sundry debtors 1,53,56,16,8832,00,79,43,70347,23,26,82030.76

Cash & Bank Balances19,86,09,59024,36,78,5534,50,68,96322.7

Other current assets26,32,18,44421,90,26,144- 4,41,92,300- 16.79

Loans & Advance1,01,35,37,98389,38,37,399-11,97,00,584- 11.81

TOTAL (A)4,97,13,32,1115,39,51,48,04542,38,15,9348.53

B) Fixed Assets Gross Block11,05,59,80,94411,46,77,72,10341,17,91,1623.72

(-) Deprecation 5,33,70,64,4925,84,76,89,13551,06,24,6039.57

Net block5,71,89,16,4525,62,00,82,968- 9,88,33,484- 1.73

(-) Lease adj A/c53,12,107--53,12,107

(+) Capital work in progress18,19,35,0327,92,25,597-10,27,09,435-56.45

5,85,55,39,3775,69,93,08,565- 19,62,30,812- 3.33

(+) Investments39,68,35,62524,99,02,930- 14,69,32,695-37.03

TOTAL (B)62,92,23,75,0025,94,92,11,495- 34,31,63,507- 5.45

TOTAL ASSETS (A+B)11,23,37,07,11311,34,43,59,54042,38,15,934-7.16


Liabilities

A) Sources of funds Capital45,92,66,06045,74,15,090-18,50,976- 0.40

Reserves & Surplus2,92,85,74,1553,02,74,12,3329,88,38,1773.37

TOTAL (A)3,38,78,40,2153,48,29,4229,69,89,2072.86

B) Loans & Funds

Secured loans3,80,07,02,4933,07,68,09,730- 72,39,92,763- 19.05

Unsecured loans60,83,18,7051,38,95,63,46778,12,44,762128.43

TOTAL (B)4,40,90,21,1984,46,63,73,1935,73,51,9991.30

C) Current Liabilities and Provisions

Current Liabilities17,72,82,2821,45,37,59,824- 31,90,62,458- 18.00

Provisions63,71,29,28669,43,29,8415,72,00,5558.98

Deferred tax liability1,05,68,94,1321,24,50,69,25618,81,75,12417.80

TOTAL ( C )3,46,68,45,7003,39,31,58,921- 7,36,86,779-2.13

TOTAL LIABILITIES (A+B+C)11,26,37,07,11311,34,43,59,5408,06,52,4277.16

INTERPRETATION:

In Current assets, inventories, sundry debtors, cash and bank balances have increased and other current assets and loans and advances have decreased. Overall there was an increase of 8.53% in current assets.

Fixed assets the companys gross block has slightly increased by 3.72%. The company should try to improve its gross block. The companys investments have decreased by 37.03%. The company should try to improve its investments. Totally

Fixed assets have decreased to 5.45%/,In liabilities capital has decreased to 0.40%.

Long-term debts, the companys secured loans and unsecured loans have increased by 19.05% and 128.43%. The company should try to reduce its unsecured loans.

Current liabilities there were increased by 18% and provision was increased by 8.98%. The company should try to reduce its current liabilities and provisions.COMPARATIVE BALANCE SHEET

AS ON 31ST MARCH 2005 & 2006


Assets


Sundry debtors 2,00,79,43,7032,01,42,28,44362,84,7400.31

Cash & Bank Balances24,36,78,55319,78,35,667- 4,58,42,686- 18.81

Other current assets21,90,26,14423,17,25,9331,26,99,7895.8

Loans & Advance89,38,37,3991,56,01,54,141- 7,37,82,198- 82.5

TOTAL (A)5,39,51,48,0456,30,63,52,21266,63,16,74212.35


(-) Deprecation 5,84,76,89,1356,32,89,51,67948,12,62,5448.23

Net block5,62,00,82,9685,18,63,52,070-43,37,30,898-7.72

(+) Capital work in progress7,92,25,59752,84,85,36644,92,59,7695.67

5,69,93,08,5655,71,48,37,4361,55,28,8710.27

(+) Investments24,99,02,93028,19,24,4443,20,21,51412.8

TOTAL (B)5,94,92,11,4955,99,67,61,8804,75,50,3850.79

TOTAL ASSETS (A+B)11,34,43,59,54012,30,31,14,09296,87,54,5528.45


Liabilities

A) Sources of funds Capital45,74,15,09045,74,15,090NilNil


TOTAL (A)3,48,29,4223,77,14,58,78428,66,31,3627.65

B) Loans & Funds

Secured loans3,07,68,09,7302,60,51,36,485- 47,16,73,245-15.33

Unsecured loans1,38,95,63,4672,44,03,87,1251,05,08,23,65875.62

TOTAL (B)4,46,63,73,1935,04,55,23,61057,91,50,41312.96


Current Liabilities1,45,37,59,8241,85,59,95,19940,22,35,37527.67

Provisions69,43,29,84145,12,32,233- 24,30,97,608-35.01

Deferred tax liability1,24,50,69,2561,17,89,04,2664,66,87,37,45679.84

TOTAL ( C )3,39,31,58,9213,48,61,79,1119,30,20,1902.74

TOTAL LIABILITIES (A+B+C)11,34,43,59,54012,30,31,14,09296,87,54,5528.45

INTERPRETATION:

From the above financial years we can compare companys financial analysis for the year 2005 & 2006.

In Current assets, the companys inventories, sundry debtors, other current assets, loans and advances have increased but cash and bank balance have decreased to 18.81%. The company should maintain adequate cash resources. Overall there was an increase of 12.35% in current assets.

Fixed assets were increased by 4.14% and investment also increased by 12.81% and there is a slight increase in total fixed assets by 0.79%. The company should try to improve its fixed assets.

In liabilities there was no change in capital, the company should improve its capital and reserves and surplus have decreased to 9.47%Long-term debts, secured loans have increased by 75.62%. The company should decrease its unsecured loans.

Totally the companys financial analysis is satisfactory.

COMPARATIVE BALANCE SHEET

AS ON 31ST MARCH 2006 & 2007


Assets


Sundry debtors 2,01,42,28,4431,84,37,25,247-17,05,03,196- 8.46



Loans & Advance1,56,01,54,1411,16,53,13,167- 39,48,40,974-25.31

TOTAL (A)6,30,63,52,2126,09,81,32,640- 20,82,19,572-3.30


(-) Deprecation 6,32,89,51,6796,80,31,40,37847,41,88,6997.49

Net block5,18,63,52,0705,34,97,91,35916,34,39,2893.15

(+) Capital work in progress52,84,85,3662,08,24,05,6801,55,39,20,314294.03

5,71,48,37,4367,43,21,97,0391,71,73,59,60330.05

(+) Investments28,19,24,44429,01,50,81182,26,3672.91

TOTAL (B)5,99,67,61,8807,72,23,47,8501,72,55,85,97028.77

TOTAL ASSETS (A+B)12,30,31,14,09213,82,04,80,4901,51,73,66,39812.33


Liabilities

A) Sources of funds Capital45,74,15,84045,74,15,0907500.0016


TOTAL (A)4,16,05,00,1403,77,14,58,78438,90,41,35610.31

B) Loans & Funds

Secured loans4,13,36,83,5902,60,51,36,4851,52,85,47,10558.67

Unsecured loans2,07,98,60,9942,44,03,87,125- 36,05,26,131-14.77

TOTAL (B)6,21,35,44,5845,04,55,23,6101,16,80,20,97423.14


Current Liabilities1,61,23,30,5851,85,59,95,199-24,36,64,614-13.12

Provisions76,21,94,06145,12,32,23331,09,61,82868.91

Deferred tax liability1,07,19,11,1201,17,89,04,266-10,69,93,146-9.07

TOTAL ( C )3,44,64,35,7663,48,61,79,111-3,97,43,345-1.14

TOTAL LIABILITIES (A+B+C)13,82,04,80,49012,30,31,14,0921,51,73,66,39812.33

INTERPRETATION:

In current assets, the companys inventories, cash & bank balances other current assets have increased but sundry debtors and loans and advances have decreased. Overall there was increase of 3.30% in current assets. Fixed assets were increased by 9.54% and investments also increased by 2.91%. Total assets were increase upto 28.77%. In liabilities there was slight increase in capital of 0.00016%. The company should improve its capital and reserves and surplus have increase by 11.73%. Long-term debts, secured loans have increased by 56.67% and unsecured loans have decreased to 14.77%. The company should decrease its secured loans. Current liabilities were decreased to 13.12% and provisions it was increased by 68.91%. The company should try to decrease its provisions.Overall the companys financial position is satisfactory.


Liabilities


Reserves & Surplus3,31,40,43,6946,08,69,28,2762,38,38,43,97664.37

TOTAL (A)3,77,14,58,7846,54,43,44,6412,38,38,44,50157.29

B) Loans & Funds

Secured loans2,60,51,36,4856,43,19,70,1652,29,82,86,57555.59

Unsecured loans2,44,03,87,1252,29,60,29,56521,61,68,57110.39

TOTAL (B)5,04,55,23,6108,72,79,99,7302,51,44,55,14640.46



Provisions45,12,32,2331,35,70,49,22159,48,55,16078.04


TOTAL ( C )3,48,61,79,1114,74,94,34,1851,30,29,98,41937.80


INTERPRETATION:

In Current assets, the companys inventories, sundry debtors, other current assets, loans and advances have increased but cash and bank balance have decreased to 18.02%. The company should maintain adequate cash resources. Overall there was an increase of 42.35% in current assets. Fixed assets was increased by 74.25% and investments decreased to 0.49%. Totally fixed assets were increase upto 46.85%.

In liabilities there was slight increase in capital of 0.00015%. The company should improve its capital. Reserves and surplus have increased by 64.37%.

Long-term debts, secured loans and unsecured loans have increased by 55.59% and 10.39%. The company should try to decrease its secured loan.

Current liabilities were increase by 40.68% and provisions also increased by 78.04%. The company should try to decrease its provisionsCOMPARATIVE BALANCE SHEET

AS ON 31ST MARCH 2008 & 2009


Assets


Sundry debtors 2,45,94,52,5812,73,07,35,20527,12,82,62411.03



Loans & Advance2,06,22,47,2614,29,01,79,1912,22,79,31,930108.03

TOTAL (A)8,68,11,49,37212,06,27,29,3243,38,15,79,95238.95

B) Fixed Assets Gross Block16,76,31,75,67018,95,44,39,3912,19,12,63,72113.07

(-) Deprecation 7,21,93,42,5888,11,20,25,87389,26,83,28512.36

Net block9,54,38,33,08210,84,24,13,5181,29,85,80,43613.60

(+) Capital work in progress1,50,80,68,1956,34,59,31,6504,83,78,63,455320.79

11,05,19,01,27717,18,83,45,1686,13,64,43,89155.52

(+) Investments28,87,27,90747,82,66,73718,95,38,83065.64

TOTAL (B)11,34,06,29,18417,66,66,11,9056,32,59,82,72155.78

TOTAL ASSETS (A+B)20,02,17,78,55629,72,93,41,2299,70,75,62,67348.48


Liabilities


Reserves & Surplus6,08,69,28,2769,36,17,93,4893,27,48,65,21353.80

TOTAL (A)6,54,43,44,6419,81,92,09,8843,27,48,65,24350.04

B) Loans & Funds

Secured loans6,43,19,70,1659,71,06,02,0403,27,86,31,87550.97

Unsecured loans2,29,60,29,5652,43,75,36,47214,15,06,9076.16

TOTAL (B)8,72,79,99,73012,14,81,38,5123,42,01,38,7820.39



Provisions1,35,70,49,2213,30,39,27,0561,94,68,77,835143.46


TOTAL ( C )4,74,94,34,1857,76,19,92,8333,01,25,58,64863.42


INTERPRETATION:

In current assets the companys inventories, sundry debtors, cash & bank balances and loans and advances have increased and other current assets were also increased upto 81.63%. Overall there was an increase of 38.95% in current assets.

Fixed assets were increased by 13.07% and investments increase up to 65.64%. Totally fixed assets were increased upto 55.78%.

In liabilities there was a slight increase in capital of 0.00065%. The company should concentrate on this aspect. Reserves and surplus have increased by 53.80%.

Long term debts, secured loans and unsecured loans have increased by 50.97% and 6.16%. The company should try to reduce its secured loans.

Current liabilities were increased up to 33.05% and provisions up to 143.06%. The company should more concentrate on this factor.

Over all the companys financial position is satisfactory.

CURRENT RATIO:

Financial YearCurrent Assets

(Rs. in Lakhs)Current Liabilities

(Rs. in Lakhs)Current Ratio

2003-0453951.4821480.892.51

2004-0563063.5223072.272.73

2005-0660981.3323745.242.57

2006-0786811.4936253.412.39

2007-08120627.2963342.501.90

Graphical Representation:

INTERPRETATION:

Here for the current ratio in the year 2003-04 was 2.56. In the year 2007-2008 the companys liquidity position is 1.90.It means not satisfactory. So it has to improve the liquidity position to meet current obligations.

QUICK RATIO:

Financial YearQuick Assets

(Rs. in Lakhs)Current Liabilities

(Rs. in Lakhs)Quick Ratio

2003-0433644.8621480.891.56

2004-0540039.4423072.271.74

2005-0635462.823745.241.49

2006-07

49123.2136253.411.35

2007-0840542.1363342.500.06

GRAPH -2

INTERPRETATION:

As a conventional rule, quick ratio should be 1:1 the above data of reveals that quick ratio in year in year 2003-04 was 1.56:1 which is above the conventional rule, it says that a large amount of funds was locked in quick assets where the company is not generating any revenue or return on those assets. In the year 2005-06 is 1.49, in the current year it is 0.06. So the company should improve in this area.

CASH RATIO

YEARSCash and Bank Balance

Rs.in lakhsCURRENT LABILITIES CASH

RATIO

2003-20042439.7821480.890.11

2004-20051978.3623072.270.08

2005-20062483.1323745.240.10

2006-072724.2236253.410.07

2007-0840542.1363342.500.06

GRAPH 3

INTERPRETATION:

The cash ratio to Britannia as a conventional rule the ratio should be 0.15:1. In the year 2003-04 the ratio was 0.11:1. Later decreased to 0.07:1 which the firm has decreased its cash position in the year 2007. In the year 2007-08, the ratio is 0.06.

DEBT-EQUITY RATIO: -

YEARSLONG TERM DEBTS

Rs.in lakhsSHAREHOLDERS FUND

Rs.in lakhsDEBT EQUITY

RATIO

2003-200444663.7334848.271.28

2004-200550455.2337714.591.33

2005-200662135.4541605.001.49

2006-0787250.0065443.441.33

2007-0812148.1398192.091.23

Graph No.4

INTERPRETATION:

As a convention rule of the firm debt equity ratio should 1:1 i.e., for every one equity the firm can raise loan or debenture here for the KCIL in the year 2003-2004, the debt equity ratio was 1.28:1 which is somewhat higher when compare to conventional rule later increaseto 1.34 in 2004 when compare to 2003 and further decreased to 1.28 and finally in the year 2008 it was 1.23.

FIXED ASSETS TURNOVER RATIO:

YEARSNet Sales Rs.in lakhsAverage Fixed Assets Rs. In lakhsRATIOS

2003-04129553.6257974.232.23

2004-05142195.7757070.732.49

2005-06161317.7474321.972.17

2006-07220896.60110519.011.99

2007-0829879.2217188.341.73

Graph No.5

INTERPRETATION

A high fixed assets turnover ratio indicates an efficient utilization of fixed assets and greater operating efficient and profitability. The fixed asset turnover ratio in the year 2003 is 1.87 times later the ratio has been increased to 2.23 times in the year 2003, 2004 it increased to 2.49 in 2004, finally it is decreased in the year 2005 and 2006 it ratio is 2.17 times and 1.99 times. This shows that the firm has been consistently shows the performance and utilization of fixed assets towards sales effectively. In the year 2007-08 the ratio is 1.73.

FINDINGS

There should be effective coordination between the different department like production, sales, purchase, finance, marketing etc., This will enhance the efficiency of the organization.

The fixed assets for all five financial years 2003-2008 has been increased year to year.

Share capital is stable for all the five years.

There should be proper communication between various department and responsibility centers.

Education about the importance of budgeting should be communicated to all concerned authorities, involved directly or indirectly to work according, for the growth of the company. There should be well-organized manpower planning, especially with regard to production

SUGGESTIONS: It is suggested to GOLDEN & GODR FREY PHILLIPS to enhance the dividend percentage year-by-year because they are following constant dividend policy.

It is suggested to VST to issue bonus shares to the share holders, if possible.

Compare to other companies ITC ltd has producing different types of product

CONCLUSION: The dividend paid to share holders is 350 by the VST industries

The dividend declared by ITC is Rs/-250.

The dividend paid by VST industries is more than ITC in the year 2008.

GTC & GPC industries distributed same dividend percentage (250)in the year 2008.

BIBLIOGRAPHY

IM Panday

: Financial Management

M.Y. Khan & P.K. Jain : Financial Management

Prasanna Chandra

: Fundamentals of Financial Management

WEBSITES

www.Google.com

www.vijaielectricals.com

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kesoram cement

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