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A study on financial performance of ACC ltd

CHAPTER I

INTRODUCTION

1.1 Introduction

Finance is regarded as the life blood of a business enterprise. This is because

in the modern money-oriented economy, without adequate finance, no enterprises can

possible accomplishes its objectives, as finance is one of the basic foundations of all

kinds of economic activity, it is the master key which provides access to all the

sources, being employed in manufacturing and merchandising activities. Finance is

stated as the process of raising, providing and administrating of all funds to be used in

a business enterprises. It has rightly been said that business needs money to make

more money. However, it is also true that money begets more money, only when it is

properly managed. Hence, efficient management of every business enterprise is

closely linked with efficient management of its finances.

1.2 Meaning and definition of finance

In general, finance may be defined as the provision of money at the time it is

wanted. Different authors have interpreted the word finance differently. And to sum

up their views, the following three main approaches to finance can be considered.

• The first approach confines to the raising of funds and to them study of

financial institution and instruments can be procured.

• The second approach relates to cash

• The third approach views finance as being concerned with rising of

funds and their effective utilization.

Some of the authoritative definitions are as follows:

“Business finance is that business activity which is concerned with the

acquisition and conservation of capital funds in meeting financial needs and overall

objectives of a business enterprise.” By Wheeler, Business-An Introductory Analysis.

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“Business finance can broadly be defined as the activity concerned with

planning, raising, controlling and administering of the funds used in the business.” By

Guthman & Dougall, Corporate financial Policy. All the details relating to the

business transactions can be obtained from the financial statements.

A financial statement is an organised collection of data according to logical

and consistent accounting procedures. Its purpose is to convey an understanding of

some financial aspects of a business firm. It may show a position at a moment of time,

or may reveal a series of activities over a given period of time.

1.3 Importance of finance

The importance of finance has arisen because of the fact that present day

business activities are predominantly carried on by company or corporate from of

organisation.

The advent of corporate enterprise has resulted into:

• The increase in size and influence of a business enterprise,

• Wide distribution of corporate ownership and

• Separation of ownership and management.

The above three factors have further increase the important of finance. Thus every

business whether small, medium or big cannot be started with out adequate amount of

finance. Even an existing concern my required finance cannot be over emphasized and

the subject of finance has become utmost in the present say business activity.

1.4 Ratio analysis

Ratio analysis is a technique of analysis and interpretation of financial

statements. It is the process of establishing and interpreting various rations for helping

in making certain decisions. However, ratio analysis is not an end in itself. It is only a

means of better understanding of financial strengths and weaknesses of a firm.

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The following are the four steps involved in the ratio analysis:

1. Selection of relevant data from the financial statements depending

upon the objective of the analysis.

2. Calculation of appropriate ratios from the above data.

3. Comparison of the calculated ratios with the ratios of the same firm

in the past, or the ratios developed from projected financial

statement or the ratios of some other firms or the comparison with

ratios of the industry to which the firm belongs.

4. Interpretation of the ratios.

1.5 Interpretation of the study

The interpretation of ratio is an important factor, through calculation of ratios

are also important but is only a clerical task where as interpretation needs skill,

intelligence and foresightedness. The inherent limitations of ratio analysis should be

kept in mind while interpreting them. The impact of factors such as price level

changes, change in accounting policies, windows dressing etc.., should also kept in

mind when attempting to interpret ratios.

A single ratio in itself does not convey much of the sense. To make ratios

useful, they have to be furthers interpreted. For example: say the current ratio of 3:1

does not convey any sense unless it is interpreted and conclusions drawn from it

regarding the financial condition of the firm as to whether it is very strong, good,

questionable or poor.

1.6 Use and significance of ratio analysis

The ratio analysis is one of the most powerful tools of analysis. It is used to

device to financial health of enterprise.

A. Managerial use of ratio analysis

1. Helps in decision making

2. Helps in financial forecasting and planning

3. Helps in communicating

4. Helps in co-ordination

5. Helps in control

6. other uses

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B. Utility to shareholders/investors

C. Utility to creditors

D. Utility to employees

E. Utility to government

1.7 Limitations of ratio analysis

1. Limited use of a single ratio.

2. Lack of adequate standards.

3. Inherent limitations of accounting.

4. Change of accounting procedure.

5. Window dressing.

6. Personal bias.

7. Uncomparable.

8. Absolute figures distortive.

9. Price level changes.

10. Ratios no substitutes.

1.8 Comparative statement1.8.1 Comparative Balance Sheet

The competitive balance sheet analysis is the study of the trend of same item

or groups of items and computed item in two or more balance sheet of the same

business enterprise on different dates. The changes can be observed by comparison of

the balance sheet at the end of the period.

1.8.2 Comparative Income Statement

The income statement gives the result of the operation of a business. Thecomparative income statement gives an idea of the progress of a business over a

period of time, the changes in absolute data or money values and percentage can be

determined to analyse the functioning of the business.

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1.9 Common size statement

1.9.1 Common Size Balance Sheet

A statement in which balance sheet items are expressed as the ratio of each

asset to total assets and expressed as a ratio of total assets and the ratio of eachliability is expressed as a ratio of total liability is called common size balance sheet.

1.9.2 Common Size Income Statement

The issue in income statement can be shown as percentage of sale to show the

relation of each period to sales. A significant relationship can be established between

items of measure statement and volume of sales. The increase in sales will certainly

increase pulling expense and not administrative or financial expenses. This

relationship is helpful in evaluating operational activities of the enterprise.

1.10 Company profile

The Associated Cement Companies Limited was started during the year 1936

with merger of few companies. The ACC LTD is one of the largest cement producer

among developing economies and the largest integrated companies in the world. Its

annual production in the beginning was 10.205 million tons, which was gradually

increased and expected to increase over the coming years.

ACC is the largest cement producing company in India and is rated as third

largest cement company in the world, with an annual turnover of 11.076 million

tones, including traded cement during the financial year ended 31 st March 2002.

ACC head office is situated at Mumbai. The company’s operations are spread

throughout the country with 11 cement factories, two refractory plants, 11 regional

marketing offices, and several area offices.

1.10.1 Madukkarai cement works

It was the first cement company to convert one of its well processed plants

at Madukkarai to semi-dry process plant with this know-how in the world.

This factory is situated on NH47 with its two captive Limestone Mines, one at

Madukkarai and the other at walayar. Before coming into fold of ACC in the year

1936 this plant (Madukkarai works) was called as Coimbatore Cement Company

LTD.

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ACC has excelled and it remains as a pioneer in the cement industry in Tamil

Nadu.

1.10.2 Company objective

ACC is respected in the industry for its professional style of management and

best business practices. Its core values are based on integrity, emphasis on product

quality and transparency in its dealings with all stakeholders. ACC believes that good

governance generates goodwill among business partners, customers and investors,

earns respect from society, brings about a consistent sustainable growth for the

company and generates competitive returns for the investors. The company is

committed to the principles of good governance. Towards this objective, it has

endowed a chair for Business Ethics at the Management Centre of Human Values,

Indian Institute of Management, Kolkata.

• To strive continuously and maintain the leadership of the cement industry,

through selective acquisition, modernization expansion and establishment of a

wide and efficient marketing network.

To achieve a fair and reasonable return on capital employed, by promoting

productivity throughout the company.

To ensure a steady growth of business by strengthening the companies

position in its core business of cement.

To maintain the high quality of the company’s products and services and ensureit’s supplying at fair prices.

To promote and maintain, fair and harmonious industrial relation and

environment for the effective involvement, welfare and development of staff at

all levels.

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1.10.3 History or background

The incorporation of The Associated Cement Companies Limited was done

on August 1, 1936. The First Board Meeting of ACC was held at Esplanade House,

Mumbai on November 10, 1936. ACC’s first community development venture wasnear Bombay. In 1947 India’s first entirely indigenous cement plant was established at

Chaibasa in Bihar. The Village Welfare Scheme was launched in 1952. In 1957

Technical training institute was established at Kymore, Madhya Pradesh. Blast

furnace slag from TISCO was used at the Chaibasa Unit to manufacture Portland Slag

Cement for the first time in India in 1961. In 1965 ACC’s Central Research Station

(CRS) was established at Thane.

In the year 1968 Advent of computers was included in ACC for data

processing and designing management information and control systems. In 1977 ACC

received ASSOCHAM first national award for the year 1976 instituted for

outstanding performance in promoting rural and agricultural development activities.

Introduction of the energy efficient precalcinator technology for the first time in India.

Full scale commercial production based on MFC technology at Wadi in 1979. In the

year 1984 ACC achieved a breakthrough in import substitution by developing and

supplying a special G type of oil well cement to ONGC. In the year 2004 ACC named

as a Consumer Superbrand by the Superbrands Council of India, becoming the only

cement company to get this status. GreenTech Safety Gold and Silver Awards

awarded to Madukkarai Cement Works and Katni Refractory Works by Greentech

Foundation for outstanding performance in Safety Management System. ACC

received the CFBP Jamnalal Bajaj Uchit Vyavahar Puraskar Certificate of Merit –

2004 from Council for Fair Business Practices.

1.10.4 Administration

1.10.4.1 Board of Directors

Chairman

Mr.Tarun Das

Managing Director

Mr.N.L.Narula

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Deputy Manager

Mr.N.S.Sekhsari

Nominee Director of Unit Trust of India

Mr.N.A.Soonawala

Mr.Amitabh Ghosh

Whole time Director

Mr.O.P.Dubey

Mr.A.L.Kapur

Mr.S.M.Palia

Mr.Cyril.S.Shroff

Mr.Naresh Chandra

Mr.R.K.Vashishtha

Mr.P.K.Sinor

Company Secretary

Mr.A.K.Jain

1.10.4.2 Bankers

State Bank of India

Bank of Baroda

Bank of India

Central Bank of India

Canara Bank

State Bank of Hyderabad

State Bank of Bikaner & Jaipur

Standard Chartered Bank

Bank of America

Citibank, N.A

The Hong Kong and Shanghai

Banking Corporation Limited

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1.10.4.3 Company’s Auditors

Messrs.A.F.Ferguson & Co

Messrs.K.S.Aiyar &Co

1.10.4.4 Solicitors

Messrs Gagrat & Co

1.10.4.5 Registered office

Cement House

121, Maharshi Karve Road

Mumbai 400 020

Website: www.acclimited.com

1.10.5 Ready mix concrete plants

ACC setup India’s first commercial ready mixed concrete plant in Mumbai in

1994. Today the company is the largest manufacture of RMX in India with 10

Mordent plants in Mumbai, Bangalore, Kolkata, Chennai and Delhi. Goa is the latest

on the map for ACC RMX.

ACC pioneering efforts in introducing RMX coupled with the promotion of

bulk cement handling facilities have been responsible for redefining the pace and

quality of construction activity in metropolitan cities and in mega infrastructure

projects.

1.10.6 Research & development

ACC is the only cement producer in India with its own in-house research and

development facility. This unit, recognized by the Department of Scientific &

Industrial Research (DSIR) in the Ministry of Science and Technology, is engaged in

research and development activities related to cement and concrete areas. The R & D

programme addresses a spectrum of activities that cover technical services for quality

and technology up-gradation and development of products and processes in the

company’s core business. Given the inherent variability in the mineral resources used

in cement manufacture, considerable attention has been devoted to continuously

optimizing process conditions including raw materials proportioning to ensure the

highest quality.

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http://www.acclimited.com/






ACC has a unique track record of innovative research and specialized

technological services. Some special products born out of this own in-house research,

include a range of unique products of immense value to the concrete and construction

sectors such as High Performance Concretes, Acconex a non-explosive demolition

agent and ACCMarg a novel technology for flexible pavements suitable for

resurfacing and strengthening roads and highways..

ACC’s concrete expertise has been sought in the restoration of several heritage

buildings in India including the famed CST terminus (formerly called Victoria

Terminus) at Mumbai, churches and royal palaces. ACC has also facilitated the

restoration of numerous buildings and structures valuable to rural communities in our

neighbourhood.

1.10.7 Environment protection

ACC is among the first companies in India to include commitment to

environmental protection as one of its corporate objectives, long before pollution

control norms and regulatory act came into existence. The company inducted the use

of pollution control equipment and high efficiency sophisticated electrostatic

precipitators for cement kilns, raw mills, coal mills, power plants and coolers as far

back as 1966.

1.10.8 Sustainable development

Sustainable development is recognized by ACC as a process of development

that "meets the needs of the present without compromising the ability of future

generations to meet their own needs". ACC believe this constitutes balancing the

Triple Bottom Line - defined as the achievement of three interdependent and mutually

reinforcing goals of economic development, social development, and environmental

protection. ACC’s Vision declares the company’s commitment to sustainable

development. The Vision statement narrates these areas as:

Delivering enduring value to investors and other stakeholders

Welfare of community around us

Developmental work in the areas of health, hygiene, education and

infrastructure

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Being a socially responsible organization fulfilling its obligation to the

community, society and nation

Assisting the community members in developing opportunities for self –

employment Commitment to Environment Protection

Adopting latest technologies to protect and upgrade the environment around

our units

Surpass international norms in controlling all types of pollution

Conservation and protection of all natural resources that we utilise.

Commitment towards nation building

1.10.9 Corporate social responsibility

ACC defines Corporate Social Responsibility as the way a company balances

it’s economic, social and environmental objectives while addressing stakeholder

expectations and enhancing shareholder value. But ACC has undertaken social

volunteering practices almost from its inception, – long before the term corporate

social responsibility was coined. The company’s earliest initiatives in community

development date back to the 1940's in a village on the outskirts of Mumbai while the

first formal Village Welfare Scheme was launched in 1952. The community living

around many of our factories comprises the weakest sections of rural and tribal India

with no access to basic amenities.

ACC’s Corporate Social Responsibility Policy “The Company shall continue

to have among its objectives the promotion and growth of the national economy

through increased productivity, effective utilization of material and manpower

resources and continued application of modern scientific and managerial techniques,in keeping with the national aspiration; and the Company shall continue to be mindful

of its social and moral responsibilities to consumers, employees, shareholders, society

and the local community.

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1.10.10 Community & rural welfare

ACC’s community development activities revolve around the under-privileged

community that lives in the immediate vicinity of our cement plants and is thus more

dependent on us. The range of activities begins with extending educational andmedical facilities and goes on to cover vocational guidance and supporting

employment-oriented and income-generation projects like agriculture, animal

husbandry, cottage industries by developing local skills, using local raw materials and

helping create marketing outlets. At all cement factories ACC shares their amenities

and facilities with members of the local community. This includes sharing education

and medical facilities, sports and recreation. Wherever possible they share access to

Bore Wells, drinking water and the usage of colony roads.

1.10.11 Education

Education is imparted not only to children of ACC employees but also more

importantly to children from rural areas who do not have access to any medium of

information or education. ACC schools maintain high standards and are open to other

children of the vicinity. Often these schools are the most preferred centers of learning

in the district and adjoining areas. Wherever possible, ACC provides funds and

infrastructure to help set up local schools, colleges and centers for learning and

education.

1.10.12 Healthcare

ACC takes pride in providing various forms of medical assistance to the

families of our employees and also to all those living in surrounding villages. Each

factory has a medical centre with full-fledged doctors and the latest of basic

equipment. Mobile medical services are provided in the vicinity and regular medical

camps are held to eradicate diseases, offer medical help, treatment and preventive

care. ACC has come out to provide support to state and national health initiatives such

as the eradication of malaria, dengue fever and the dreaded HIV.

1.10.13 Central procurement

ACC has a countrywide spread of 14 modern cement plants and a string of 13

Ready mix concrete plants. This large network of manufacturing units consumes a

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wide spectrum of inputs – about 60,000 different items ranging from Coal, Gypsum,

Slag, Packaging material (bags), Refractories, Steel, Grinding Media, Electrodes,

Cables, Bearings, Conveyor Belts, Spares of various mechanical, electrical and

instrumentation equipment, Mining Equipment and their spares and explosives. ACC

has a vendor base of more than 6000 suppliers spread across the country.A team of

144 professionals at Corporate, Region and Plant Level manages the procurement

function at ACC. The function is organized so as to derive maximum value for the

company through economies of scale from central pooling and procurement of some

inputs at the corporate level while meeting individual operational requirements at

plant level.

1.10.14 Occupational health & safety

Occupational Health & Safety (OHS) is a vital part of ACC’s journey towards

Sustainable development. Safety Audits are being carried out in ACC since 1995 by

National Safety Council based on the 5 Star Auditing System of British Safety

Council. There is a continuous effort to measure and improve Safety Management

Systems to avoid accidents. The following are some OH & S initiatives at ACC:

OH & S brochures, signage’s, posters and mailers used extensively

Monthly Safety Gate Meetings held at all our plants.

Safety Audit and TPM Audits carried out annually

Safety Professionals meets twice a year to discuss and share knowledge on

Safety Statistics and implementation of safety measures at each unit.

Safety Observation Tours (SOT) conducted weekly by all line managers

Behavioural Safety Training programmes for workers at all plants

Incident investigations for all incidents including near misses (with potential

for injuries). The findings and recommendation are shared across the

company

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1.10.15 Five cardinal rules for safety

Do not override or interfere with any safety provision nor allow anyone else to

override or interfere with them.

Personal Protection Equipment (PPE) rules, applicable to a

given task, must be adhered to at all times.

Isolation and Lock Out procedures must always be followed.

No person may work if under the influence of alcohol or drugs.

All the injuries and incidents must be reported.

1.10.16 Products - consultancy services

Project Engineering

ACC is the pioneer of the Indian cement industry with over 66 years of rich

experience in prospecting for raw materials, setting up and managing cement plants of

different sizes, technologies and processes. This experience is shared by the team of

talented Scientists, Engineers and Technocrats in meeting the needs of the cement

industry in India and in many other countries. ACC has a successful track record in

modernizing old technology based cement plants to improve their operational

economy and also in the design & engineering of new technology based cement

plants. Our project engineering consultancy and project management expertise has

been tested against the best in the world.

Services under one roof

Raw material evaluations and optimization

Feasibility Studies

Engineering Consultancy Services for green field / brown field cement plants

Upgradation & capacity enhancement of existing cement plants

Management and operation of cement plants

Technical training & skills development

1.10.17 Products - customer services

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ACC’s Regional Offices have Customer Services Cells are manned by

qualified Civil Engineers. These engineers interact with consumers and customers to

assess their requirements and complaints and provide pre-sales, after-sales services

and techno-promotion services including educating them on usage of cement and

concrete and correct construction practices. They also provide expert advice on

getting the best value from cement and offer assistance on related issues in civil

construction projects.

Some specific customer-focused initiatives year include the following:

ACC Help Centers at several locations to help home builders

Mobile touring vans to visit construction sites to educate users and masons at

site and provide certain specialized services like supervision during slab

casting on demand.

Ask ACC – a Website for home-builders and small customers

Customer friendly booklets on all aspects of construction and home-building

Films and educational literature designed for masons and students

Besides this, technical books/booklets on cement, concrete and buildingconstruction and maintenance are regularly made available for the benefit of

our customers.

1.10.18 Milestones

1936 - Incorporation of the Associated Cement Companies Limited on August

1, 1936.

1936 - First Board Meeting of the Associated Cement Companies Limited held atEsplanade House, Mumbai on November 10, 1936.

1937 - With the transfer of the 10th company to ACC, viz. Dewarkhand Cement

Company, the formation of ACC is complete on October 23, 1937.

1944 - ACC’s first community development venture near Bombay

1947 - India’s first entirely indigenous cement plant established at Chaibasa in Bihar

1952 - Village Welfare Scheme launched

1955 - Sindri cement works used the waste product calcium carbonate sludge from

fertilizer factory at Sindri.

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1956 - Bulk Cement Depot established at Okhla, Delhi

1957 - Technical training institute established at Kymore, Madhya Pradesh.

1957 - Katni Refractories

1961 - Blast furnace slag from TISCO used at the Chaibasa Unit to manufacture

Portland Slag Cement for the first time in India.

1961 - Manufacture of Accocid Cement, which resists the corrosive action of acids

and chemicals.

1961 - Oilwell Cement manufactured at ACC Shahabad Cement Works in

Karnataka for cementation of oilwells upto a depth of 6,000 feet.

1961 - Manufacture of Hydrophobic (waterproof) cement at ACC Khalari Cement

Works in Bihar.

1962 - Manufacture of Accoproof, a waterproofing additive.

1965 - ACC’s Central Research Station (CRS) established at Thane

1965 - Manufacture of Portland Pozzolana Cement.

1965 - Manufacture of Calundum, a High Alumina Binder; Firecrete, Low Density

Alumina Castables and High Alumina Refractory Cement.

1968 - Advent of computers in ACC for data processing and designing

management information and control systems.

1968 - ACC supplied and commissioned one-million-tonne iron ore pelletising

plant ordered by TISCO

1971 - Manufacture of Whytheat Castables A, K, C and Cal-Al-75

1973 - Take-over of the Cement Marketing Company of India (CMI)

1977 - ACC receives ASSOCHAM first national award for the year 1976 instituted

for outstanding performance in promoting rural and agricultural development

activities.

1978 - Introduction of the energy efficient precalcinator technology for the first

time in India. Full scale commercial production based on MFC technology

at Wadi in 1979.

1979 - ACC wins international contract for operation and management of a new one

million tonne cement plant at Yanbu-Ras Biridi in Saudi Arabia.

1982 - Commissioning of the first 1 MTPA plant in the country at Wadi,

Karnataka.

1984 - ACC achieves a breakthrough in import substitution by developing and

Supplying a special G type of oil well cement to ONGC.

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1987 - ACC develops a new binder for use at sub-zero temperatures, which is

Successfully used in the Indian expedition to Antarctica.

1992 - Incorporation of Bulk Cement Corporation of India, a joint venture with the

Government of India.

1993 - ACC starts the commercial manufacture of Ready Mixed Concrete at Mumbai.

1998 - Commissioning of the 0.6 MTPA cement grinding unit at Tikaria, Uttar

Pradesh.

1999 - Commissioning of captive power plants at the Jamul and Kymore plants in

Madhya Pradesh.

1999 - Tata group sells 7.2% of its stake in ACC to Ambuja Cement Holdings Ltd, a

subsidiary of Gujarat Ambuja Cements Ltd. (GACL)

2000 - Tata Group sells their remaining stake in ACC to the GACL group, who

with 14.45% now emerge as the single largest shareholder of ACC.

2001 - Commissioning of the new plant of 2.6 MTPA capacity at Wadi, Karnataka

plant, the largest in the country, and among the largest sized kilns in the world.

2002 - ACC wins PHDCCI Good Corporate Citizen Award

2003 - IDCOL Cement Ltd becomes a subsidiary of ACC

2004 - IDCOL Cement Limited is renamed as Bargarh Cement Limited (BCL).

2004 - ACC raises US $ 100 million abroad through Foreign Currency Convertible

Bonds (FCCB’s) for US$ 60 million and Global Depository Shares (GDS’s) for US $

40 million. Both offerings are listed on the London Stock Exchange.

2004 - ACC named as a Consumer Superbrand by the Superbrands Council of India,

becoming the only cement company to get this status.

2004 - GreenTech Safety Gold and Silver Awards awarded to Madukkarai Cement

Works and Katni Refractory Works by Greentech Foundation for outstanding

performance in Safety Management System.

2005 - ACC receives the CFBP Jamnalal Bajaj Uchit Vyavahar Puraskar Certificate

of Merit – 2004 from Council for Fair Business Practices.

2005 - Holcim group of Switzerland enters strategic alliance with Ambuja Group by

acquiring a majority stake in Ambuja Cements India Ltd. (ACIL) which at the time

held 13.8 % of the total equity shares in ACC. Holcim

simultaneously makes an open offer to ACC shareholders, through Holdcem Cement

Pvt. Limited and ACIL, to acquire a majority shareholding in ACC. Pursuant to the

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open offer, ACIL’s shareholding in ACC increases to 34.69 % of the Equity share

capital of ACC.

2005 - Commissioning of Modernisation and Expansion project at Chaibasa in

Jharkhand, replacing old wet process technology with a new 1.2 MTPA

clinkering unit, together with a captive power plant of 15 MW.

2005 - Financial accounting year of the company changed to calendar year January-

December

2006 - Subsidiary companies Damodhar Cement & Slag Limited, Bargarh Cement

Limited and Tarmac (India) Limited merged with ACC

2006 - ACC announces new Workplace policy for HIV/AIDS

2006 - Change of name to ACC Limited with effect from September 1, 2006 from

The Associated Cement Companies Limited.

2006 - ACC receives Good Corporate Citizen Award 2005-06 from Bombay Chamber

of Commerce and Industry

2006 - New corporate brand identity and logo adopted from October 15, 2006

2006 - ACC establishes Anti Retroviral Treatment Centre for HIV/AIDS patients at

Wadi in Karnataka– the first ever such project by a private sector company in India.

2007 - ACC partners with Christian Medical College for treatment of HIV/AIDS in

Tamil Nadu

2007 - Sumant Moolgaokar Technical Institute completes 50 years and reopens with

new curriculum

2007 - ACC commissions Wind energy farm in Tamilnadu.

1.10.19 Awards & accolades

National Award for outstanding performance in promoting rural and

agricultural development – by ASSOCHAM

Sword of Honour - by British Safety Council, United Kingdom for excellence

in safety performance.

Indira Priyadarshini Vrikshamitra Award --- by The Ministry of Environment

and Forests for "extraordinary work" carried out in the area of afforestation.

FICCI Award --- for innovative measures for control of pollution, waste

management & conservation of mineral resources in mines and plant.

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Subh Karan Sarawagi Environment Award - by The Federation of Indian

Mineral Industries for environment protection measures.

Drona Trophy - By Indian Bureau of Mines for extra ordinary efforts in

protection of Environment and mineral conservation in the large mechanizedmines sector.

Indo German Greentech Environment Excellence Award

Golden Peacock Environment Management Special Award - for outstanding

efforts in Environment Management in the large manufacturing sector.

Indira Gandhi Memorial National Award - for excellent performance in

prevention of pollution and ecological development

Excellence in Management of Health, Safety and Environment : Certificate of Merit by Indian Chemical Manufacturers Association

Vishwakarma Rashtriya Puraskar trophy for outstanding performance in safety

and mine working

Good Corporate Citizen Award - by PHD Chamber of Commerce and Industry

Jamnalal Bajaj Uchit Vyavahar Puraskar - Certificate of Merit by Council for

Fair Business Practices

Greentech Safety Gold and Silver Awards - for outstanding performance in

Safety management systems by Greentech Foundation

FIMI National Award - for valuable contribution in Mining activities from the

Federation of Indian Mineral Industry under the Ministry of Coal.

Rajya Sthariya Paryavaran Puraskar - for outstanding work in Environmental

Protection and Environment Performance by the Madhya Pradesh Pollution.

Control Board.

National Award for Fly Ash Utilisation - by Ministry of Power, Ministry of Environment & Forests and Dept of Science & Technology, Govt of India -

for manufacture of Portland Pozzolana Cement.

Good Corporate Citizen Award - by Bombay Chamber of Commerce and

Industry for working towards an environmentally sustainable industry while

pursuing the objective of creation of a better society.

National Award for Excellence in Water Management - by the Confederation

of Indian Industry (CII)

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CHAPTER II

RESEARCH METHODOLOGY

2.1 Introduction

Finance is the life blood of the business and profit is the engine that drives the

business. Therefore I have selected my project in finance field and analysing the

financial performance of the particular period (i.e.) 5 years.

The entrepreneurial capability and investment decisions, of course, determine

the destiny of large business to a great extent but there are a good member of external

as well as uncontrollable factors that expert a great degree of influence upon their

functioning these days.

2.2 Objective of the study

• To analyse and to evaluate the financial performance of ACC Ltd.

• To determine the liquidity position of the company.

• To study the impact of financial performance on profitability of the company.

• To comment from the finding and to suggest some improvement measure to

overcome the present status of the company.

2.3 Methodology of the study

This project work is totally based on the audited annual report of the ACC

limited. Apart from the annual reports other information’s been collected from the

records and book of ACC limited. Thus the entire study is carried out with the help of

secondary data collected. Hence a descriptive research is undertaken by theresearcher.

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Period of the study

The study of financial performance in ACC limited is confined to a period of

five years audited reports, which commerce’s from the year 2005 – 2009.

Area of the study

The study has been carried out at ACC limited in madukkarai.

Tools and techniques

The entire study undertaken used the ratio analysis, comparative balance sheet

and common-size balance sheet to analyse the data. Ratio analysis is further supported

by graphical representation. This gives a pictorial presentation of the company’s

entire performance. Tools used includes,

1. Ratio analysis

2. Comparative balance sheet

3. Common-size balance sheet

2.4 Scope of the study

This study will help the ACC Ltd to compare the percentage changes in the

expenditure and income over the five years period for making appropriate decisions

regarding increasing/ decreasing expenditure. They could also compare the calculate

ratios with the ideal ratios and decide on the changes to be made. It also represents a

clear picture to bank to decide on making changes such as lowering the rate of interest

etc.

21




2.5 Limitation

•The period of study is limited to five years with which the firm’s financial

performance cannot be fully analysed.

• The entire study is based on the secondary data like audited annual report,

records and other books of ACC limited, hence may not be applicable to

another firm.

• The study mainly involved the quantitative data whose analysis is done

without considering the time value of money.

•The ACC ltd has many other factors affecting performance, which are nottaken into consideration for analysis.

22




CHAPTER III

REVIEW OF LITERATURE

It is mandatory to review the literature available with respect to the area of the

search study. Measuring the performance of the corporate sector has always been an

area of controversies from the point of view of the government, shareholders,

prospective investors, creditors, employees and any other stake holder. Several studies

have been undertaken to analyse profitability in the corporate sector. This chapter

presents some of the excerpts of various studies conducted by financial analyst in the

past.

Charles Merwin (1942)1 has found out that the ratios are successful predictors

of failure, five years prior to discontinuance. The ratios namely net working capital to

total assets current ratio and networth to total debt were found to be extremely

sensitive and the most significant predictors among them.

Bain (1956)2 in “Barriers to New Competition” examined whether profitability

is determined by elements of Industry structure which affects into the industry. He

studied this with respect to 3 types of barriers in 20 U.S manufacturing industries for

the period 1936 – 1940 and 1947 – 1951. He analysed industries according to

qualitative classification – HIGH, SUBSTANTIAL and MODERATE TO LOW.

Barriers to entry were found to be the main determinant of returns. High barriers to

entry lead to high profit rates, though the differences between SUBSTANTIAL and

MODERATE TO LOW was not so clear. Seller concentration was not a good

predictor of profitability. Bain identified product diversification and advertising as the

main causes of high barriers.

O’Donnell and Goldberg (1964)3 have identified that the survival or demise of

an enterprise is determined by the adequacy of cash and other assets along with their

efficient handling. They also have revealed that business failure takes place due to the

lack of working capital.

Kamerschen (1968)4, obtained data for 200 largest non –financing

corporations, primarily in manufacturing, moving, merchandising, transportation,

electric gas and pipe line utilities for the year 1963 to determine whether the extent of

23




management control exerted an important influence on the rates of return in these

firms. In addition, the variables that were important in ‘explaining’ inter firm profit

rates had demonstrated that empirically profits were not affected by the control type.

Smaller forms were more likely to grow faster only up to a certain critical size level.

After that critical level he larger firms were having less difficulty enjoying higher

profit rates. Beyond that level, the relationship between profit rates and size was

found to be positive. The other determinants of rates of return were total assets,

barriers to entry, sales revenue and the industry growth rate.

Samuels and Smith (1968)5 in their study on “profits, variability of profits and

firm size” have studied the relationship between profitability (profit after tax on net

assets) and size of the firm (net assets) and have found that they were inversely related

to each other for the years 1954-63.

Subramaniyam and Papola (1971)6 in “Profitability and Growth of Firms: The

Case of Indian Chemical Industries”, expressed that there are a number of

determinants of profitability in India. He studied the relationship between profitability

and growth of firms in the Indian chemical industry during the period 1962 – 1969

with data of 27 companies quoted in the stock exchange. They found that most of the

firms want to grow in an expanding market with differing intensities and that those

who have ability aided by profit continued to grow faster.

Hurdle (1974)7 in “Leverage, Risk, Market Structure and Profitability”,

developed a theoretical model relating to leverage, market structure, risk and

profitability and tested the model using cross sectional data on 220 U.S.

manufacturing firms and 85 industries covering the 1960’s .He used the three

simultaneous equations to test the hypothesis of his study. He found that while firms

with market - power firms. The higher profit firms earned this because of market

structure and not through capital structure.

Smith (1974)8 has made a study to identify the dual goals of working capital

management namely profitability and liquidity. He has suggested that the role of

financial managers lies in achieving a trade off between the two. He has used rate of

return on equity investment as a measure of profitability and net working capital and

current ratio as measures of liquidity for his study. Based on a set of simulation

24




equations his study has indicated the future financial statement of firm. H has used the

model in which current assets and current liability are directly related to the sales of

the firm.

Barthwal (1976)9 in his study on “The Determinants of Profitability in Indian

Textile Industry” has identified the factors which cause variation in the profitability.

The explanatory variables used by him are past profitability, size of the firm, age of

the firm, past growth, capital-output ratio and changes in average cost of production.

Among them, past profitability and changes in the average cost of production over the

previous years had been found to be significant determinants of profitability for the

firms in the industry in different regions of the country. The other factors like capital-

output ratio, size and age of the firm and past growth had explained less than 25% of

the variation in the profitability and were considered as insignificant.

Ramamoorthy (1978)10 has found profitability and solvency as the twin goals

of working capital management. According to him, a firm’s survival and growth

depend on its ability to achieve these goals. If liquid assets can pay off current

liabilities, financial strength can be created and the firm can sustain its reputation.

Agarwal (1978)11 in his study entitled “Size, Profitability and Growth of Some

Manufacturing Industries” highlighted relationship between profitability measured as

profit/net worth and profit/net assets and size expressed as total sales of 7 Indian

manufacturing industries viz cotton, spinning and weaving, cotton ginning, jute

textiles, paper and pulp, sugar and aluminium for the period 1962-1972. The

relationship between size and profitability was observed in cotton spinning industry,

jute textile industry, sugar and brewing industry and aluminium industry, while in

case of cement and cotton spinning and ginning industry no such relationship was

observed.

Neumann, Bobel and Haid (1979)12 in their study entitled “Profitability, Risk

and Market Structure in West German Industries” explained mean rates of return of

the period from 1965 to 1973 of 334 West German joint stock companies by risk and

market structure. The results suggested that investors were risk averters and that risk

bearing was accordingly compensated by a higher rate of return. Degree of

concentration and product differentiation were positively related to profitability, while

25




export and import ratio exerted an adverse impact on profitability. As regards size and

profitability, smaller firms tended to be more flexible, tended to take chances of

growth more easily that the bigger ones. So there was an inverse relationship between

growth and profitability.

Singh (1981)13 has found out that the size of the units has a significant role in

the capital structure of the cement industry. His study has revealed that the returns and

profitability can be increased by increasing the size from small to big.

Asha Jain (1981)14 in “Price – Cost Margin in Indian Manufacturing

Industries: An Econometric Analysis” analysed the price cost margin over time in the

2 digit Indian Industries Price - Cost margin was used as a measure of profitability.

Cost factors emerged as significant determinants of profitability while the structural

variables like concentration ratio, capacity utilization, growth and capital intensity

showed mixed patterns. Results varied among industries.

Harley and Watt (1981)15 in their Article entitled “Profits Regulation and The

U.K. Aerospace Industry”, tried to explain the influence of industry and government

procurement policy on profitability in the U.K. aerospace industry, which is a

government regulated industry. The aerospace industry consisted of air firms, engine

electronics and equipment, development and production of military and civil aircraft,

helicopters and missiles. Under private ownership government affected profitability

directly through the profit rule for pricing, state contracts and individually through the

profit rule for pricing, state contracts and individually through the positive influence

on market demand. As monopolists UK government used procurement policy to

determine projects and hence technical progress as well as the size and structure of the

industry, entry and exist, together with prices and profits, technical efficiency and

total export performance. Average profit rates in aerospace were lower than in the rest

of British industry-variation in profitability also existed between specialist and

diversified companies.

Bothwell Cooley and Hall (1982)16 in their research “A New View of Market

Structure – Performance Debate” used a sample of 156 large U.S manufacturing firms

over a period 1960 – 67 for determining the relationship between profit rate and other

26




variables like seller concentration, advertising intensity, economics of scale, absolute

capital requirements, leverage, profit variability, firm growth, firm size and market

share etc. Positive correlation between seller concentration, market stock, and growth

of demand, business risk, advertisement expenses and profit rate was found profit

rates were negatively related with the extent of economics and capital requirements.

Dr.D.Banerjee (1982)17 in his study on the corporate liquidity and profitability

in India related to the period 1970-71 to 1977-78 has analysed the trend of liquidity

position and its relationship with the profitability in the medium and large public

limited companies in the corporate sector in India. The study concludes that in India

there are some industries/ industry groups where a risk in liquidity will lead to rise in

profitability and vice-versa, there are others where increase in liquidity will be

associated with a decline in profitability.

Gangadhar (1982)18 in “Cement Industry – Some Aspects of Profitability”

examined and made comment on the profitability of large public limited cement

companies in India in order to bring out fluctuations if any, and to offer possible

causes for such fluctuations. Secondly to study the profitability of cement industry vis

a vis the profitability of chemical and engineering industries with a view to pointing

out lower/higher rate of profitability in the former and to analyse the reasons for such

rate. Thirdly to discuss the cost structure of cement industry that aim to notify the

major/minor expenditure component as well as the impact of cost on profitability. The

study revealed the following that the profitability in cement industry has fluctuated

very widely with low rate during the period under review. The profit margin in the

cement industry has shown declining trend whereas the asset turnover showed an

increasing trend. The profit margin accounted to a great extent for lower rate of ROI

in the industry as compared to asset turnover.

Sharma and Reddy (1985)19 have identified the factor influencing liquidity, by

conducting a study on the liquidity position of Nigam Sagar Fertilizers Ltd., during

the period 1974-75 to 1981-82. They have concluded that government policy with

respect to input and output has significantly affected the liquidity.

27




Kumar (1985)20 in his study on “Corporate growth and profitability in the

large Indian companies” has examined the relationship between profitability and

growth in 83 large companies in India’s corporate sector during 1969-79. The study

reveals a significant inter-industry difference in the growth process of firms under

study. The very low value of R² in all the cases shows that only a small fraction of the

growth of firms in Indian Corporate sector has been explained by profitability.

Agarwal (1987)21 in “Corporate Investment and Finance Behaviour in

Automobile industry” notices the behaviour and determinants of profit in particular to

examine the impact of price control on the profitability of firms in the Automobile

sector. The study was based on the data for the period 1959 – 1960 to 1978 – 1979.

He found that profits in the car sector depended on sales, capacity utilization, product

prices and factor prices. Market share and the lagged investment appeared to be

significant at the firm level but not at the sector level. However, both market share

and lagged investment were significant for the non-car sector. He also concluded that

price control had adversely affected profit in the car sector.

Chandrasekaran (1989)22 has made a study on the performance of cement

companies measuring the profitability efficiency and growth. He has also identified

that the cash flow and external funds are the key determining factors of investment in

cement industry.

Sinha (1993)23 conducted a study to investigate debt – equity ratio in the

private sector in India. His study showed that there was a negative correlation

between debt-equity ratio and profitability only in the case of public limited

companies, the margin on sales had a negative correlation with debt – equity ratio.

Chandrasekaran (1993)24 in “Determinants of Profitability in Cement Industry”

has studied the determinants of profitability in cement industry. The objective of this

study was to examine determinants of profitability in cement industry. The study aims

at drawing inference on impact of policy measures which led to change in price and

distribution policies relevant for cement industry. Determinants of profitability are

analysed using the technique of ordinary least squares. Based on existing theories and

relevant econometric empirical works, variables are selected to find out whether the

profitability function has shifted after the introduction of partial de-control, dummy

28




variable is introduced for estimating the function and the ‘chow test’ is also done to

ascertain the inference. The study concluded that efficiency in inventory management

and efficient management of current assets was important to improve profitability.

Cleveland and Frederick (1993)25 in their study “Profitability, Uncertainty and

Firm Size” examines the connections between variations in profit and loss rates

among firms in small firm and large firm size classes as reflections of uncertainty.

They found that within industries such variations are particularly great for firms in

small firm size classes, leading to operating policies for small firms best characterized

as entrepreneurial large firms in contrast faced with less uncertainty in earning profit

appear to adopt policies that manifest an emphasis on strategic planning.

Dhanalakshmi (1994)26 “A study on the Productive Profitability of Cement

Industry in India” in her study focused to analyse the financial structure of cement

industry in India and also to see the productivity of cement industry during the study

period and to find out profitability of cement industry. It was found that current ratio

of cement industry was confirming to the standard ratio 1:1. The cement companies

were found to be financially sound. It was found that net sale to interest ratio was

declining during the period of study. Hence the capital productivity was high in the

cement industry. Profit distributed was low and profit returned was more than 70% of

net profit.

Sukamal Datta (1995)27 in his study on working capital of paper industry in

West Bengal, has analysed the size and causes of changes in working capital. He has

also found out that the concerns which run with high profits had adequate working

capital and those concerns with low profit found then working capital position to be

inadequate.

Viajayakumar (1996)28 in his study on “Determinants of Profitability” has

examined the determinants of profitability in sugar industry of Tamil Nadu for the

period 1982-1994. He has identified that growth rate of sales, vertical integration,

leverage, current ratio and operating expenses to sales are the important variables

which determine the profitability of firms in the industry. He has revealed that

29




efficiency in inventory management and current assets are important to improve

profitability.

The study developed by Prater, Marvin Eugene (1997)29 formulated predictive

models of long term profitability for grain dependent short line rail road in Mid

Western States. The purpose of these models is to aid state policymakers in allocating

financial assistance among potential short line rail roads. Key factors influencing

profitability are identified by empirical estimation and a quantitative profile is

developed of a grain dependent short line rail road that is likely to be profitable in the

long term. Key factors influencing profitability of short line rail roads are lagged

density, lagged real other expenses per mile, gross miles of main line truck, lagged

percentage of the total traffic which is grain. This analysis indicates that the

profitability of short line rail roads in the sample is not very high. The study also

indicates that the profitability of short line rail roads in the sample is not very high.

This study also indicates that about 25 percent of the sample short lines have high

profitability of requiring governmental financial assistance in order to continue

operating.

Das (1998)30 in the paper entitled “Determinants of Return on Equity of Indian

Public Sector Banks: Some Empirical Results based on Cross – sectional Data”

attempted to estimate the influences of various factors, indigenous to banks, on ROE

of the Indian public sector banks for which, the return on equity has emerged as a

significant performance indicator in the post-reform era. The paper uses posted data

for this purpose, and divides the 26 public sector banks into two groups, viz., “larger

banks” and “smaller banks” on the basis of their assets. The empirical results through

interesting findings of the dichotomy in the financials of the “larger” and “smaller”

banks underline the need for differential policy measures for the two sets of banks,

instead of the usual strait jacket approach.

Vijayakumar (1998)31 has in his “Determinants of corporate size, growth and

profitability” identified that growth is significantly associated with profitability,

returns on networth has been used as a measure of profitability, annual average

growth rate has been taken for measuring the growth. The period covered by the study

is 1980-81 to 1995-96. The statistical technique like average, correlation and linear

30




and multiple regression analysis have been used. His study has revealed that

profitability has explained a considerable part of the growth of the firms in the Indian

public sector industry.

Hyun-Han Shin and Luc Soenen (1998)32 in their study on “Efficiency of

working capital management and corporate profitability”, 985 firm years covering the

period of 1975-1994 on a compustal sample have identified that there is a strong

negative relationship between the length of the firms Net trade cycle (NTC) and its

profitability. In addition shorter Net-Trade Cycles are associated with higher risk

adjusted stock returns. They also have found that the NTC is measuring liquidity

differently from the more conventional current ratio which is positively related to

profitability.

Govinda Rao and Mohana Rao (1999)33 in “impact of working capital on

profitability in cement industry- A correlation analysis” analyse the impact of

profitability on working capital in cement industrial unit in India. Ten variables on

working capital ratios have a close interaction with profitability measures viz., current

ratio, debt-equity ratio, cash position ratio, working capital turnover ratio, inventory

turnover ratio and average collection period are selected for analysis. The inter-

relationship are to be studied with the help of Karl Pearson’s co-efficient of

correlation technique by arranging the correlation of one variable with each other

variable in the form of matrices which are a triangular and symmetric about the

principal diagonal. On overall basis out of 10 variables with PBDIT 3 variables

showed significant co-efficient and 7 exhibited negative relationships. Out of the 10, 5

showed negative association while the others showed positive relationships.

Rameezabanu (1999)34 in her study focused to study the market

position of ACC cement and to analyse of the ACC cement and to analyse the

financial performance of ACC. The study revealed that there was a fluctuation in the

sales during the period of the study. It was stated that the solvency position of the

company which has been seen with the help of the current ratio and test ratio and the

debt-equity ratio. The current ratio is said to be an ideal if it is 2. The current ratio of

the company did not reach the required ideal ratio in the study period which means

31




that the company had inadequate short term funds. The increase in the current assets

indicates the availability of adequate short term funds.

Sahu (2000)35 in his study “Analysis of Corporate Profitability – A

Multivariate Approach” has made an empirical study based on the secondary data

from a sample of 100 non-financial non government public limited companies in

eastern India for a period of 10 years from 1984-85 to 1993-94. He has chosen

profitability ratios and interest coverage ratio for the analysis. Cross sectional

Spearman’s rank correlation of the companies have been calculated and applied for

selecting the ratio for analysis. He has arrived at a single index to measure the

composite profitability of a firm and ranked the companies based on the overall score.

Prasad (2001)36 conducted a research study on the working capital

management in paper industry. His sample consisted of 21 paper mills from large,

medium and small scale for a period of 10 years. He reported that the chief executives

properly recognized the role of efficient use of working capital in liquidity and

profitability, but in practice they could not achieve it. The study also revealed that

fifty percent of the executives followed budgetary method in planning working capital

and working capital management was inefficient due to sub-optimum utilisation of

working capital.

Ganesan (2001)37 has selected State Bank Group (8 units) and 19 nationalised

banks as sample to identify the determinants of profits and profitability. The empirical

examination of profit function shows that interest cost, interest income, other income,

deposits per branch, credit to total assts, proportion of priority sector advances and

interest income loss are the significant determinants of profits and profitability of

Indian public sector bank. The study has also identified the fact that banking sector

reforms and individual bank’s policies towards directed investments and direct credit

programmes have played a significant role in improving the profits and profitability of

banking sector.

Vijaykumar (2002)38 in “Determinants of profitability – A Firm level study of

the sugar industry of Tamil Nadu” defined into the various determinants of

profitability viz, growth rate of sales, vertical integration and leverage. Apart from

32




these three variables he has selected current ratio, operating expenses to sales ratio

and inventory turnover ratio. Econometric models were used to test the various

hypotheses relating profitability with other variables. The researcher noted in his

conclusion that efficiency in inventory management and current assets are important

to improve profitability.

Padmaja Manoharan (2002)39 through her study on “Profitability of Cement

industry in India” has revealed that the profitability of firms depend on age, size and

region. She has identified that quality of earnings depends on cost management, asset

management and leverage management. Further she has also proved that the liquidity

influences the profitability and quality of earnings.

REFERENCES

1. Merwin, C.L., “Financing Small Corporation in Five Manufacturing Industries

1926 – 1936”, New York: National Bureau of Economic Research, 1942.

2. Bain, J.S., “Barriers to New Competition”, Cambridge Mass: Harvard University

Press (1956).

3. O’Donnell and Goldberg ., op.cit ., P. 55, 1964.

4. Kamerschen, D.R. “The Influence of Ownership and Control on Profit Rates”,

American Economic Review, Vol.58, Pp.432 – 447.

5. Samuels, J. and Smith, D., “Profits, Variability of Profits and Firm Size”,

Economica, Vol. 35, Pp.127-139, 1968.

6. Subramaniyam, K.K and Papola, T.S., “Profitability and Growth of Firms : The

Case of Indian Chemical Industries”, Anvesak. 1971.

7. Hurdle, G.J., “Leverage, Risk. Market Structure and Profitability”, Review of

Economics and Statistics, P.56

8. Smith, K.V., “An Overview of Working Capital Management”, Management of

Working Capital: A Reader, New York: West Publishing Company, Pp. 3-20, 1974.

9. Barthwal, R.R., “The Determinants of Profitability in Indian Textile Industry”,

Economica, Vol.43, Pp. 267-274, 1976.

10. Ramamoorthy, V.E., “Working Capital Management”, Institute of Financial

Management Research, Madras, 1978.

33




11. Agarwal, V.K., “Size, Profitability and Growth of Some Manufacturing

Industries,” unpublished thesis, IIM Ahemadabad, 1978.

12. Neumann, Bobel and Haid, “Profitability, Risk and Market Structure in West

German Industries”, The Journal of Industrial Economics, Vol.27, Pp. 227 – 242.

13. Singh, K.P., “Capital Structure and Returns”, the Management Accountant,

Pp.375-376, August, 1981.

14. Asha Jain, “Price – Cost Margin in Indian Manufacturing Industries: An

Econometric Analysis” Ph.D thesis, IIT, Kanpur. 1981.

15. Hartley Keith and Pater.A.Watt., “Profits Regulation and The U.K. Aerospace

Industry”, Journal of Industrial of Industrial Economics , Vol.29, Pp.413 - 449.

16. Bothwell, J.L et al., “A New View of Market Structure – Performance Debate”,

the Journal of Industrial Economics and Statistics, Vol.64, Pp. 635 – 645. 1982.

17. Banerjee, B., “Corporate Liquidity and Profitability in India”, Research Bulletin,

Institute of Cost and Works Accountants of India, July 1982, Pp. 225-234.

18. Gangadhar, V., “Cement Industry – Some Aspects of Profitability”, The

Management Accountant, P. 477. Oct, 1982,

19. Sharma, S.N. and Reddy,A.V., “Corporate Liqudity – A Case Study”. The

Management Accountant, Pp. 415-419, August, 1985.

20. Kumar, P., “Corporate Growth and Profitability in the Large Indian Companies”,

Margin, Vol.17, No.4, July, 1985.

21. Agarwal, R.N., “Corporate Investment and Finance Behaviour in Automobile

Industry”, Common Wealth Publishing, Delhi, 1987.

22. Chandrasekaran, N., “Market Structure and Financial Performance”. Unpublished

doctoral dissertation, University of Madras, 1989.

23. Sinha Sidharth., “Inter Industry Variations in Capital Structure,” Economic and

Political Weekly, August 1993.

24. Chandrasekaran, N., “Determinants of Profitability in Cement Industry”,

Decision, Vol.20, No.4, Pp 235-244, Oct-Dec., 1993.

25. Cleveland and Frederick, W., “Profitability, Uncertainty and Firm Size”, Small

Business Economics, Vol.5, Pp.87-100, Oct, 1982.

26. Dhanalakshmi.R., “A Study on the Productivity Profitability of Cement Industry

in India.” 1994.

34




27. Dr.Sukamal Datta., “Working Capital Management through Financial Statements:

Analysis of Paper Industry in west Bengal,” The Management Accountant, Pp. 826 –

832 & 849, Nov.1995.

28. Vijayakumar, A., “Determinants of Profitability.” Finance India, Vol. 32, No.4,

Dec. Pp.925-932, 1996.

29. Prater, Marvin Eugene., “Long Term Profitability for Grain Dependent Short Line

Railroads in the MidWest”, DAI – A 58/06, P.23, Dec 1997.

30. Das, M.R., “Determinants of Return on Equity of Indian Public Sector Banks:

Some Empirical Results Based on Cross-sectional Data”, Vinimaya, Vol.19, Pp.5-12,

April-June, 1998.

31. Dr.A.Vijayakumar., “Determinants of Corporate Size, Growth and Profitability –

The Indian Experience”, The Management Accountant, Vol.33, No.5, Pp.327-329,

May 1998.

32. Hyun-Han Shin and Luc Soenen., “Efficiency of Working Capital Management

and Coroporate Profitability”, Financial Practice and Education, fall, winter 1998,

Pp.68-79, 1998.

33. Govindan Rao, D. and Mohana Rao, P., “Imapct of Working Capital on

Profitability in Cement Industry – A Correlation Analysis”, New Delhi: Deep and

Deep Publishers, 1999.

34. Rameezabanu “A Study on the Financial Performance of ACC Ltd., with special

reference to ACC Ltd – Madukkarai”, 1999.

35. Dr.R.K.Sahu, “Analysis of Corporate Profitability – A Multivariate Approach”,

The Management Accountant, Pp.571-577, August, 2000.

36. Prasad, R.5., “Working Capital Management in Paper Industry”, Finance India,

Vol.15, No.1, Pp.185 – 188. March 2001

37. P.Ganesan, Ph.D., “Determinants of Profits and Profitability of Public Sector

Banks in India: A Profit Function Approach”, Journal of Financial Management and

Analysis, 14(1): Jan-Jun, 2001, Pp.27-37, 2001.

38. Vijayakumar.A., “Determinants of Profitability – A Firm Level Study of the Sugar

Industry of Tamil Nadu”. Research Studies in Commerce and Management, Delhi:

Classical Publishing Company, Pp. 66-74, 2002.

39. Padmaja Manoharan., “An Analytical Study on Profitability of Cement Industry in

India”, 2002.

35




CHAPTER IV

ASPECTS OF FINANCIAL PERFORMANCES

The researcher has now chosen scrupulously for this studies the following

aspects of the financial performance of ACC Ltd..,

1. Short-term financial position

2. Long-term financial position

3. Profitability

4. Trend analysis

5. Comparative statement

6. Common size statement

4.1 Analysis of short-term financial position

A business house can meet is short-term obligation only when it has adequate

liquid assets: its reputation will be injured if it fails to meet such obligations due to

lack of good liquidity position.

Even a high degree of liquidity is not fair for a firm because such a situation

may excessive funds being locked up in its current assets.

The following two heads of ratios may indicate the short-term financial

position of a business.

1. Liquidity Ratios and

2. Activity Ratios

Liquidity Ratios

Liquidity refers to the ability if a concern to meet its current obligation as and

when they became due. The sufficiency of current assets should be assessed by

comparing them with short-term current liabilities. To measure the liquidity of a firm

the following ratios can be calculated.

36




These include the following elements:

1. Current ratio

2. Liquid ratio

3. Absolute liquid ratio

1. Current Ratio

Current ratio may be defined as the relationship between current assets

and current liabilities. The acceptable norms or rules or thump is 2:1 this ratio

is also knows as working capital ratio and it is calculated by dividing the total

of the current assets by total of the current liabilities.

Current assets

Current ratio = ---------------------------

Current liabilities

The general standard for this ratio is 2 but it very from firm to firm

depending on the business. The ratio measures only the quantity of the current

assets and their quality.

2. Liquid Ratio

Quick ratio is knows as acid test ratio, it is a more rigorous test of that

the current ratio. Quick ratio may also be defined as relation between quick

liquidity assets and current liquid liabilities. The quick liquidity can be

calculated by dividing the total of the quick assets by the current liquid

liabilities the acceptable norms of rules of thump is 1:1.

Quick or liquid assets

Quick ratio = ----------------------------------

Current liabilities

The general standard for this ratio is but it may also vary from business

to business depending on the nature, type, size etc of the firm.

37




3. Absolute Liquid Ratio

The absoluate liquidity ratio can be calculated using the formula.

Absolute liquid assets include cash in hand, cash at bank, short-term

investment and marketable securities or temporary investments. The

acceptable norm or rules of thumb is 0.5:1.

Absolute liquid assets

Absolute liquid ratio = ----------------------------------

Current liabilities

Activity ratios

Activity ratio measures the efficiency or effectiveness with which the

company manager its resources or assets. These ratios are also called as “turnover

ratio” because they indicate the speed with which the assets are converted or turned

over into sales. It is important to calculate the following turnover ratio of efficiency

ratio to command upon the liquidity or efficiency with the company is using the liquid

resources.

The following are the prominent under this heads.

1. Inventory turnover

2. Debtors turnover

3. Creditors turnover

4. working capital turnover

1. Inventory Turnover

This ratio indicates whether the investment has been efficiently used or

not. It shows the speed with which the stock is converted into sales. Its

purpose is to find out whether only the required minimum funds have been

locked up in the inventory

The inventory/stock turnover ratio indicates the number of times stock has

been turned over during the period and evaluates the efficiency with which the

38




company is able to manage its inventor. Inventory/ stock turnover ratio is also

known as stock velocity is normally calculated.

Net sales

Inventory/stock turnover ratio = ------------------

Inventory

There is no general standard for this ratio as the norms may be different

for different firms depending on the nature of industry and business

conditions.

2. Debtors Turnover

Debtors turnover ratio indicates the velocity of debt collection of the

company. If indicates the numbers of times debtors are turnover during the

year.

Total sales

Debtors turnover ratio = ------------------

Debtors

There is no general standard for this ratio. A high ratio represents

efficient management of debtors by the firm.


This indicates the velocity with which the creditors are turned over in

relation to purchases. The following is the formula for computing it.

Total purchases

Creditor turnover ratio = --------------------------

Creditor

A high ratio denotes fast settlement of dues to the creditors by thr firm,

and also ratio, the firm’s enjoyments of a longer credit repayment period.

4. Working capital turnover

This ratio expresses the efficiency with which the working capital is

being used by a firm. It is derived by the following formula.

39




Net sales

Working capital turnover = ----------------------

Working capital

There is no general standard for this ratio. A high stands for efficient

utilization of the working capital but too high a ratio is not favourable too.

Analysis of long-term financial position

‘Solvency’ refers to the ability of a business to meet its long-term obligations.

The firm should be able to pay regularly the interest on long-term borrowing repay the principle amount at the maturity ant thus, ensure their creditors security of their loans

to the firm.

The following are the significant ratios measuring the long-term financial

position of a business.

1. Debt-equity ratios

2. Proprietary ratios

3. fixed assets to net worth ratios

4. Ratio of current assets of proprietors funds.

1. Debt-equity Ratios

This is also known as the external internal equity ratio. It measures the

relative claims of outsiders and the owners against the assets the assets of

the business. It is found out as under.

Long-term debt

Debt-equity ratio = -----------------------------

Shareholders funds

The general standard is 2/3 or 0.67 for this ratio.

From the shareholders view-point, a high ratio indicates that the firm has

been able to use the low-cost outsider’s funds to magnet their earnings.

40




2. Proprietary Ratios

This ratio is also known in the following shares. It is derived as below

Shareholder’s funds

Proprietary ratio = ---------------------------------

Total tangible assets

This ratio indicates the extent to which the assets of the firm can be

cost with out affecting the interest of the creditors. A high ratio

represents a lower risk on the past of the creditors. A high ratio

represents a lower risk on the past of the creditors and vice-versa.

3. Fixed Assets to Net Worth Ratio

This ratio establishes the relationship between the fixed assets and the

share holders funds and it is computed as follows.

Net fixed assets

Fixed assets net worth ratio = --------------------------

Shareholders funds

It indicates the extent to which the shareholders funs are fund into the

fixed assets with, of the firm; the general idea is that the fixed assets should be

financed more by the shareholders funds.

4. Ratio of Current Assets to Proprietors Funds

This ratio indicates the extent to which the proprietors funds are

invested in the current assets. It is calculates as under.

Current assets

Current assets to Proprietors funds = --------------------------

Shareholders funds

41




Analysis of profitability

Profit making is the main objective of any business. Every business needs

profits not only its existences but also for expansion diversification. It can discharge

its social responsibilities only with its profits.

The following are the main ratios that the profitability of a business.

1. Gross profit ratio

2. Net profit ratio and

3. Expenses ratio

1. Gross profit Ratio

Gross profit ratio measures the relationship of gross ratio to net sales

and is usually represented as a percentage. Thus it is calculated by

dividing the gross profit by sales.

Gross profit

Gross profit ratio = -------------------- x 100

Net sales

Though there is no general standard for ratio get the gross profit should

be adequate to cover the direct and indirect expenses.

2. Net Profit Ratio

Net profit ratio indicates the efficiency of the management in

manufacturing, administrative selling and other activities of the

company. This ratio is the over measures of the companies profitability

and is calculated by,

Net Profit

Net profit ratio = --------------------- x 100

Net sales

42




3. Expenses Ratio

The operating ratio reveals the average tool variations in expenses but

some expenses may keep on increasing while some others, decreasing.

So expenses ratios are calculated by dividing each items of expenses (or)

group of expenses with the net sales to analysis the cause of variations

of the operating ratio.

• Manufacturing expenses Ratio

Manufacturing Expenses

Particular Expenses = -------------------------------------- x 100

Net sales

43




CHAPTER V

DATA ANALYSIS AND INTERPRETATION

Have determined the parameters of the financial analysis had been analysed to

measure the financial performance of the company.

RATIO ANALYSIS

This section analyses the following aspects of the company.

1. Short-term financial position

2. Long-term financial position

3. Profitability

5.1 ANALYSIS OF SHORT-TREM FINANCIAL POSITION

Short-term financial position of ACC Ltd.., can be analysed through Current

Ratio, Liquid ratio, Inventory Turnover Ratio Etc….,

44




1. Current Ratio

It is the ratio of current assets to liability for the company for the year (2005 –

2009)

TABLE 5.1

TABLE SHOWING CURRENT RATIO OF THE COMPANY

FOR THE YEAR (2005 – 2009)

Year Current assets Current liabilities Ratio

2005 890.87 715.63 1.242006 1040.12 851.17 1.22

2007 1213.71 974.80 1.25

2008 1921.24 1527.01 1.26

2009 2203.04 2058.50 1.07

Interpretation

During the year 2005, the current ratio was 1.24 which was then decreased to

1.22 and then it slightly increased to 1.25 in the year 2007 and then increased in the

year 2008 was 1.26 and finally the current ratio was 1.07 and the current assets has

constantly raised in the 5 years, the current liabilities has also shown a constant

increase corresponding to the current assets. The company has maintained the

favourable ratio through the year.

45




CHART 4.1

CURRENT RATIO OF THE COMPANY FOR THE YEARS (2005 – 2009)

46

Current Ratio

0.95

1

1.05

1.1

1.15

1.2

1.25

1.3

2005 2006 2007 2008 2009

years

r a

t i o

Ratio




2. Quick Ratio

Quick Ratio of the chosen company for the period of study.

TABLE 5.2

TABLE SHOWING LIQUID RATIO OF COMPANY

FOR THE YEARS (2005 – 2009)

Year Liquid assets Current liabilities Ratio

2005 545.48 715.63 0.762

2006 662.11 851.17 0.777

2007 671.33 974.80 0.688

2008 1297.11 1527.01 0.849

2009 1472.18 2058.50 0.715

Interpretation

Quick ratio of ACC during 2005, was 0.762 and during 2006. The quick ratio

was 0.777 and it was decreased to 0.688. During the year 2007 and again it increased

slightly in the next year to 0.849 and then it decreased slightly to 0.715.

47




CHART 5.2

QUICK RATIO OF THE COMPANY FOR THE YEARS (2005 – 2009)

48

Quick Ratio

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

2005 2006 2007 2008 2009

years

r a

t i o




Absolute liquid Ratio

The absolute ratio of the chosen company for the period of study.

TABLE 5.3

TABLE SHOWING ABSOLUATE LIQUID RATIO OF THE COMPANY


YearAbsolute Liquid

Assets

Current

LiabilitiesRatio

2005 34.82 715.63 0.048

2006 64.97 851.17 0.076

2007 57.32 974.80 0.058

2008 620.17 1527.01 0.406

2009 743.48 2058.50 0.361

Interpretation

Absolute liquid ratio include receivables, debtors and bills receivable. The

acceptable norm was 0.5:1. The absolute liquid ratio for the year 2005 was 0.048 and

gradually increased to 0.076 and finally the ratio has been reduced in the year 2009 as

0.361.

49




CHART 5.3

ABSOLUTE LIQUID RATIO OF THE COMPANY


50

Absolute liquid Ratio

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

2005 2006 2007 2008 2009

years

r a

t i o




Activity ratios

The company’s efficiency or activeness is measured through the following

ratios.

1. Inventory turnover

2. Debtors turnover


4. Working capital turnover

Inventory turnover

It is an activity ratio which measure company activeness or efficiency. It is the

ratio of involve to net sales.

TABLE 5.4

TABLE SHOWING INVENTORY / STOCK TURNOVER RATIO


Year Net sales Inventory Ratio

2005 3489.89 345.39 10.104

2006 3889.65 378.01 10.289

2007 4539.35 542.38 8.369

2008 6453.07 624.13 10.339

2009 7548.32 730.86 10.327

Interpretation

From the above table it can be inferred that the company had a gradual

increase inventory turnover ratio from the year 2005. In 2006, it increased to 10.289

and then a decrease to 8.369 in 2007 and in 2009 the ratio remained at 10.327.

51




CHART 5.4

INVENTORY TURNOVER RATIO OF THE COMPANY


52

Inventory turnover Ratio

0

2

4

6

8

10

12

2005 2006 2007 2008 2009

years

r a

t i o




Net working capital ratio

Net working capital ratio of the chosen company for the period of study.

TABLE 5.5

TABLE SHOWING NET WORKING CAPITAL RATIO OF THE COMPANY


YearNet working

capitalNet asset Ratio

2005 175.24 2810.64 0.06

2006 188.95 3071.63 0.06

2007 238.91 3402.21 0.07

2008 394.23 4379.62 0.09

2009 810.81 4953.26 0.16

Interpretation

Net working capital generally is not a ratio. The company shows constant

during first two years then it increased and finally it has been increased during the

year 2009.

53




CHART 5.5

NET WORKING CAPITAL RATIO OF THE COMPANY


54

Net working capital Ratio

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

2005 2006 2007 2008 2009

years

r a

t i o




Debtor turnover ratio

It is activity ratio which shows how many times accounts receivable turnover

firm the year.

TABLE 5.6

TABLE SHOWING DEBTORS TURNOVER RATIO OF THE COMPANY


Year Debtors Total sales Ratio

2005 182.09 3489.89 5.21

2006 182.37 3284.48 5.55

2007 190.54 3902.06 4.88

2008 213.96 5803.48 3.68

2009 289.29 7007.17 4.12

Interpretation

The company has a gradual increase of debtors turnover ratio from the year.

Shows a high in 2005 and 2006, then slight decrease in ratio in recoded in the year

2007 at 4.88. The table shows unsatisfactory position due to the decreasing trend in

the ratio.

55




CHART 5.6

DEBTOR TURNOVER RATIO OF THE COMPANY


56

Debtor turnover Ratio

0

1

2

3

4

5

6

2005 2006 2007 2008 2009

years

r a

t i o




Capital turnover ratio

It is ratio which compares the sales turnover with the capital turnover of the

firm in analysis for the firm in analysis for the period of study.

TABLE 5.7

TABLE SHOWING CAPITAL TURNOVER RATIO OF THE COMPANY


Year Net sales Capital Employed Ratio

2005 3489.89 3010.92 1.159

2006 3889.65 3036.38 1.281

2007 4539.35 3606.89 1.258

2008 6453.07 4378.68 1.473

2009 7548.32 4953.26 1.523

Interpretation

Capital turnover ratio has shown a increasing trend in the 5 years compared.

The ratio reveals that the firm has good turnover and shows the high profit 1.523 in

the year 2009.

57




CHART 5.7

CAPITAL TURNOVER RATIO OF THE COMPANY


58

Capital turnover Ratio

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

2005 2006 2007 2008 2009

years

r a

t i o




5.2 Analysis of long-term financial position

The long-term financial position of the company under examination is

analyzed through the following ratios.

1. Debt-equity ratio

2. Proprietary ratio

3. Fixed assets to net worth ratio

4. ratio of current assets to proprietary fund

Debt-equity ratio

Debt-equity ratio of ACC Ltd for the period of study.

TABLE 5.8

TABLE SHOWING DEBT-EQUITY OF THE COMPANYFOR THE YEARS (2005 – 2009)

Year Shareholder funds Total assets Ratio

2005 1024.2 2810.64 0.364

2006 1318.4 3071.68 0.429

2007 1577 3402.21 0.463

2008 3141.98 4379.62 0.717

2009 4152.71 4953.26 0.838

Interpretation

During the year 2005, the ratio was 0.364 and the ratio has been gradually

increased to the year. The debt equity ratio reveals the good signal to the company.

59




CHART 5.8

DEBT-EQUITY RATIO OF THE COMPANY


60

Debt-Equity Ratio

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

2005 2006 2007 2008 2009

years

r a

t i o




Proprietary ratio

Table 5.9 throws light on the proprietary ratio of the firm in analysis for period

of study. It is a ratio of shareholder find to Total assets.

TABLE 5.9

TABLE SHOWING PROPRIETARY RATIO OF THE COMPANY


YearShareholders

fundsTotal assets Ratio

2005 1024.2 3346.35 0.306

2006 1318.4 3512.19 0.375

2007 1577 4085.46 0.386

2008 3141.98 5402.15 0.5812009 4152.71 6166.95 0.673

Interpretation

The above ratio shows that the firm faces high proprietary ratio in the year

2009 i.e. 0.673. The ratio was 0.306 in the year 2005 and there after increased

gradually over the years which indicate that the proportion of total assets of the

company showed a decrease in relation to shareholders funds.

61




CHART 5.9

PROPRIETARY RATIO OF THE COMPANY


62

Proprietary Ratio

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

2005 2006 2007 2008 2009

years

r a

t i o




Fixed assets ratio

Explains the fixed assets ratio of ACC Ltd for the period of study

TABLE 5.10

TABLE SHOWING FIXED ASSETS RATIO OF THE COMPANY


Year Shareholders fund Fixed assets Ratio

2005 1024.2 2455.48 0.417

2006 1318.4 2472.07 0.533

2007 1577 2871.75 0.549

2008 3141.98 3480.91 0.902

2009 4152.71 3963.91 1.047

Interpretation

The above ratio shows that the firm had a low fixed ratio in the year 2005 i.e.

0.417 and the fixed ratio continuously started to increase finally in the year 2009 the

fixed ratio is 1.047. It indicates that the proportion of fixed assets increased in

comparison with decrease in shareholders funds.

63




CHART 5.10

FIXED ASSETS RATIO OF THE COMPANY


64

Fixed Assets Ratio

0

0.2

0.4

0.6

0.8

1

1.2

2005 2006 2007 2008 2009

years

r a

t i o




Fixed assets to net worth ratio

Explains the fixed to net worth ratio of ACC Ltd for the period of study.

TABLE 5.11

TABLE SHOWING FIXED ASSETS TO NET WORTH RATIO OF THE

COMPANY


Year Fixed asset Shareholder funds Ratio

2005 2455.48 1024.2 2.397

2006 2472.07 1318.4 1.875

2007 2871.75 1577 1.821

2008 3480.91 3141.98 1.107

2009 3963.91 4152.71 0.955

Interpretation

During the year 2005, the ratio was 2.397 and the ratio has been slightly

decreased to 1.875 in the 2006 and finally the fixed asset to net worth ratio was

suddenly decreased to 0.955 in the year 2009. This ratio is to shareholders fund to

purchase the fixed assets. Sufficient fund to purchase the assets.

65






Fixed asset turnover ratio

Fixed Assets turnover ratio of the ACC Ltd for the period of study.

TABLE 5.12

TABLE SHOWING FIXED ASSET TURNOVER RATIO OF THE COMPANY


Year Sales Fixed Assets Ratio

2005 3489.89 2455.48 1.42

2006 3889.65 2472.07 1.52

2007 4539.35 2871.75 1.58

2008 6453.07 3480.91 1.85

2009 7548.32 3963.91 1.90

Interpretation

During 2005 the fixed asset turnover over ratio was 1.42 which was increased

to 1.57 in the year 2006 and finally increased to 1.904 in the year 2009. This verifying

trend was due to the variance in fixed assets of the company.

67




CHART 5.12

FIXED ASSETS TURNOVER RATIO OF THE COMPANY


68

Fixed Assets turnover Ratio

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

2005 2006 2007 2008 2009

years

r a

t i o




Return on assets

Return on assets of the ACC Ltd for the period of the study.

TABLE 5.13

TABLE SHOWING RETURN ON ASSETS RATIO OF THE COMPANY


Year Net profit Total Asset Ratio

2005 118.18 2810.64 4.20

2006 264.16 3071.63 8.59

2007 444.62 3402.21 13.07

2008 1458.59 4379.62 33.30

2009 1717.18 4953.26 34.66

Interpretation

The return on assets during the year 2005 was 4.20% which has increased to

34.66 % in the year 2009. This indicates the overall profitability of the firm had

shown the increasing trend.

69




CHART 5.13

RETURN ON ASSETS OF THE COMPANY


70

Return on Assets Ratio

0

5

10

15

20

25

30

35

40

2005 2006 2007 2008 2009

years

r a

t i o




Return on investment

Return on investment of the company for the period of study.

TABLE 5.14

TABLE SHOWING RETURN ON INVESTMENT OF THE COMPANY


Year Net Profit Shareholders Ratio

2005 118.18 1024.2 11.542006 264.16 1318.4 20.04

2007 444.62 1577 28.19

2008 1458.59 3141.98 46.42

2009 1717.18 4152.71 41.35

Interpretation

The return on investment of ACC Ltd constant increase except in the year

2005. It shows the huge increase in return on investment in all the 3 years due to

increase in capital employed.

71




CHART 5.14

RETURN ON INVESTMENT OF THE COMPANY


72

Return on Investment Ratio

0

5

10

15

20

25

30

35

40

45

50

2005 2006 2007 2008 2009

years

r a

t i o




Fixed assets to current assets ratio

Table 5.14 depends the ratio of fixed to current assets of the organization

under examination for the period of study.

TABLE 5.15

TABLE SHOWING FIXED ASSET TO CURRENT ASSET RATIO OF

COMPANY


Year Fixed Asset Current Asset Ratio

2005 2455.48 890.87 2.756

2006 2472.07 1040.12 2.376

2007 2871.75 1213.71 2.366

2008 3480.91 1921.24 1.81

2009 3963.91 2203.04 1.79

Interpretation

During 2005 the fixed asset to current asset ratio was 2.756 which were then

decreased to 1.79 in the year 2009. There was slightly decreased in the year 2009. A

decline in this ratio indicates that the debtors and stocks are increased too much and

the fixed assets are more intensively used.

73




CHART 5.15

FIXED TO CURRENT ASSETS RATIO OF THE COMPANY


74

Fixed to Current Assets Ratio

0

0.5

1

1.5

2

2.5

3

2005 2006 2007 2008 2009

years

r a

t i o




Interest coverage ratio

Interest coverage ratio of the company for the period of study.

TABLE 5.16

TABLE SHOWING INTEREST COVERAGE RATIO OF THE COMPANY


Year EBIT Interest Ratio

2005 403.6 103.91 3.88

2006 533.9 92.91 5.746

2007 720 88.19 8.16

2008 175.611 52.03 3.37

2009 204.612 23.94 8.54

Interpretation

During the year 2005, the interest coverage ratio was 3.88 which were then

slightly increased to 5.746 and then it decreased to 3.3 in the year 2008 and finally the

ratio was increased to 8.5. This interest coverage ratio has shown an increasing trend

in all the five year compared. Increasing trend shows the changes of signal of the firm

using excessive debt.

75




CHART 5.16

INTEREST COVERAGE RATIO OF THE COMPANY


76

Interest Coverage Ratio

0

1

2

3

4

5

6

7

8

9

2005 2006 2007 2008 2009

years

r a

t i o




Return on capital employed

Return on capital employed of the company for the period of study.

TABLE 5.17

TABLE SHOWING RETURN ON CAPITAL EMPLOYED RATIO OF THE

COMPANY

FOR THE (2005 – 2009)

Year Net profit Capital employed Ratio

2005 3354.75 3010.92 111.41

2006 3168.85 3036.38 104.362007 3558.56 3606.89 98.66

2008 1458.59 4378.68 33.349

2009 1717.18 4953.26 34.667

Interpretation

During the year 2005, the return on capital employed ratio was 111.41 and

then finally it was decreased to 34.66 in the year 2009. return on capital employed is

the relationship between net profit and shareholders funds. The profit has been finally

decreased to 34.667.

77




CHART 5.17

RETURN ON CAPITAL EMPLOYED OF THE COMPANY


78

Return on Capital Employed Ratio

0

20

40

60

80

100

120

2005 2006 2007 2008 2009

years

r a

t i o




5.3 Analysis of profitability

The following ratios have been employed to test the profitability of ACC Ltd

for the period of study.

1. Gross profit ratio

2. Net profit ratio and

3. Expenses ratio

Gross profit ratio

Table 5.17 bring to light the gross profit of the company for the period of

study.

TABLE 5.18

TABLE SHOWING GROSS PROFIT RATIO OF THE COMPANY


Year Gross profit Net sales Ratio

2005 3465 3489.89 99.28

2006 4038 3889.65 103.81

2007 3815 4539.35 84.04

2008 6594.72 6453.07 102.19

2009 7977.12 7548.26 105.68

Interpretation

The gross profit of ACC, during 2005 was 99.28% then it has been gradually

increased during the years and finally the gross profit has increased in the years. This

shows the profitability of the firm.

79




CHART 5.18

GROSS PROFIT RATIO OF THE COMPANY


80

Gross Profit Ratio

0

20

40

60

80

100

120

2005 2006 2007 2008 2009

years

r a

t i o




Net profit ratio

Table exhibits the net profit ratio of the selected company for the period of

study.

TABLE 5.19

TABLE SHOWING NET PROFIT RATIO OF THE ACC COMPANY


Year Net profit Net sales Ratio

2005 118.18 3489.89 3.39

2006 264.16 3889.65 6.792007 444.62 4539.35 9.79

2008 1458.59 6453.07 22.60

2009 1717.18 7548.32 22.75

Interpretation

The net profit ratio of ACC was about 3.39% in the year 2005. It has been

increased during the year 2009. The company has faced a high increase in the net

profit ratio as of increase in net profit.

81




CHART 5.19

NET PROFIT RATIO OF THE COMPANY


82

Net Profit Ratio

0

5

10

15

20

25

2005 2006 2007 2008 2009

years

r a

t i o




Cash profit ratio

Table exhibits the net profit ratio of the selected company for the period of

study.

TABLE 5.20

TABLE SHOWING CASH PROFIT RATIO OF THE COMPANY


Year Cash profit Net sales Ratio

2005 283.18 3489.89 8.11

2006 442.11 3889.65 11.36

2007 633.44 4539.35 13.95

2008 1712.84 6453.07 26.54

2009 2022.25 7548.32 26.79

Interpretation

This ratio measures the relationship between cash generated from operations

and net sales during first 2 years then it increased during the year 2009.

83




CHART 5.20

CASH PROFIT RATIO OF THE COMPANY


84

Cash Profit Ratio

0

5

10

15

20

25

30

2005 2006 2007 2008 2009

years

r a

t i o




Manufacturing and other expenses ratio

Table 5.20 exhibits the manufacturing and other expenses ratio of the ACC

Ltd.., for the period of study.

TABLE 5.21

TABLE SHOWING MANUFACTURING AND OTHER EXPENSES OF THE

COMPANY


YearManufacturing

exp.Net sales Ratio

2005 2874 3489.89 82.35

2006 3301 3889.65 84.86

2007 3704 4539.35 81.59

2008 4512 6453.07 69.922009 5578 7548.32 73.89

Interpretation

During the year 2005, the ratio was 82.35 and then slightly decreased to 73.89

in the year 2009. The expenses ratio to other expenses reveals the expenses to the cost

of goods sold. It has been gradually decline in the expenses.

85




CHART 5.21

MANUFACTURING AND OTHER EXPENSES RATIO OF THE COMPANY


86

Manufacturing and Expenses Ratio

0

10

20

30

40

50

60

70

80

90

2005 2006 2007 2008 2009

years

r a

t i o




TABLE 1

COMPARATIVE BALANCE SHEET 31ST DEC 2005 & 2006

PARTICULARS 2005 2006

INCREASE

(OR)

DECREASE

PERCENTAGE

ASSETS

Current assets:

Inventories

Sundry debtors

Cash and bank balance

Other current assets

Loans & advance

Miscellaneous exp.

Total current assets

Fixed assets:

Net block

Capital work in progress

InvestmentsTotal fixed assets

Total assets

LIABILITIES:

Current liabilities:

Sundry liabilities

Provisions

Total current liabilities

Shareholder fundsLoan funds

Stockist deposits

Deferred tax liability

Total

Total liabilities

345.39

182.09

34.82

3.14

325.43

52.15

943.02

2368.56

86.92

127.772583.25

3526.27

598.09

117.54

715.63

1076.741404.75

91.45

237.70

2810.64

3526.27

378.01

182.37

64.97

3.45

411.34

34.92

1075.04

2375.61

96.46

375.742847.81

3922.86

681.06

170.11

851.17

1353.731352.70

90.02

275.33

3071.78

3922.95

32.62

0.28

30.15

0.29

85.91

(17.23)

132.02

7.05

9.54

247.97264.56

396.59

(82.97)

(52.57)

135.54

(276.99)50.05

1.43

(37.53)

261.14

396.68

9.44

0.15

86.59

9.24

26.39

(30)

13.99

0.29

10.98

194.0810.24

11.25

(13.87)

(44.73)

0.189

(25.72)3.56

1.56

(15.78)

0.09

11.25

87




Interpretation

1. The comparative balance sheet of the company reveals during the year

2006, there is an increase in fixed assets (264.56) at 10.24% while long

term liabilities is to increase 50.05 at 3.56%

2. The current have increase by 13.99% and current liabilities have increase

by 135.54 at 0.18%

3. Reserves and surplus decrease by 276.99 at 25.72%

4. The over all financial position of the company is satisfactory.

88




TABLE 2



INCREASE

(OR)

DECREASE

PERCENTAGE

ASSETS

Current assets:

Inventories

Sundry debtors



Loans & advance

Miscellaneous exp.


Fixed assets:

Net block


Investments

Total fixed assets

Total assets

LIABILITIES:


Sundry liabilities

Provisions


Shareholder funds

Loan fundsStockist deposits


Total

Total liabilities

378.01

182.37

64.97

3.45

411.34

34.92

1075.04

2375.61

96.46

375.74

2847.81

3922.86

681.06

170.11

851.17

1353.73

1352.7090.02

275.33

3071.78

3922.95

542.08

190.54

57.32

4.39

419.08

12.41

1225.82

2517.47

354.28

279.14

3150.89

4376.71

773.89

200.91

974.8

1597.68

1407.73101.34

295.46

3402.21

4377.01

164.07

8.17

(7.65)

0.96

7.74

(22.51)

150.78

141.86

257.82

(96.6)

303.08

453.86

(92.83)

(30.8)

123.63

(243.95)

(55.03)(11.32)

(20.23)

330.53

453.86

43.40

4.48

(11.77)

27.98

1.88

(64.46)

14.03

5.97

267.28

(25.71)

10.64

11.57

(13.63)

(18.11)

14.52

(18.02)

(4.07)(12.57)

7.35

10.76

11.57

89




Interpretation

1. The comparative balance sheet of the company reveals during the year

2006 and 2007, there is a increase in fixed assets (303.08) at 10.64%.

2. The current assets have increase (150.78) at 14.03%

3. The current liabilities have increase (123.63) at 14.52

4. Reserve and surplus decrease (243.95) at 18.02%

5. The over all financial position of the company is satisfactory

90




TABLE 3



INCREASE

(OR)

DECREASE

PERCENTAGE

ASSETS

Current assets:

InventoriesSundry debtors



Loans & advance

Miscellaneous exp.


Fixed assets:

Net block


Investments

Total fixed assets

Total assets

LIABILITIES:


Sundry liabilities

Provisions


Shareholder funds

Loan funds

Stockist deposits


Total

Total liabilities

542.08190.54

57.32

4.39

419.08

12.41

1225.82

2517.47

354.28

279.14

3150.89

4376.71

773.89

200.91

974.8

1597.68

1407.73

101.34

295.46

3402.21

4377.01

624.13213.96

620.17

16.13

446.85

0.94

1922.18

2922.49

558.42

503.54

3984.45

5906.45

1024.73

502.28

1527.01

3142.92

771.16

144.82

320.72

4379.63

5906.63

82.0523.42

562.85

11.74

27.77

(11.47)

696.36

405.02

204.14

224.4

833.56

1529.92

(250.84)

(301.37)

552.21

(1545.24)

636.57

(43.48)

(25.26)

977.41

1529.92

15.1312.29

981.94

267.43

6.63

92.43

56.81

16.08

57.62

81.26

26.45

34.96

32.41

150

56.65

96.72

590.89

42.91

8.55

28.72

34.96

91




Interpretation

1. The comparative balance sheet of the company reveals during the years

2007 and 2008, there is a increase in fixed assets of 833.56 at 26.45%

2. The current assets have increase 696.36 at 56.80%

3. The current liabilities have increase by 552.21 at 56.65%

4. Reserves and Surplus decrease 1545.24 at 96.72%

5. The over all financial position of the company is satisfactory

92




TABLE 4



INCREASE

(OR)

DECREASE

PERCENTAGE

ASSETS

Current assets:

Inventories

Sundry debtors



Loans & advance

Miscellaneous exp.


Fixed assets:

Net block


Investments

Total fixed assets

Total assets

LIABILITIES:


Sundry liabilities

Provisions


Shareholder funds

Loan fundsStockist deposits


Total

Total liabilities

624.13

213.96

620.17

16.13

446.85

0.94

1922.18

2922.49

558.42

503.54

3984.45

5906.45

1024.73

502.28

1527.01

3142.92

771.16144.82

320.72

4379.63

5906.63

730.86

289.29

743.48

18.87

420.54

0.0

2203.04

3314.73

649.17

844.81

4808.7

7011.74

1392.23

666.27

2058.5

4152.71

306.41162.69

331.45

4953.26

7011.74

106.73

75.33

123.31

2.74

(26.31)

(0.94)

280.86

392.23

90.75

341.27

824.25

1105.11

(367.5)

(163.99)

531.49

(1009.79)

464.7517.89

10.73

573.64

1105.11

17.10

35.21

19.88

16.39

(5.89)

100

14.61

13.42

16.25

67.77

20.69

18.71

(35.86)

(32.65)

34.81

32.13

60.2712.35

3.35

13.09

18.71

Interpretation

93




1. The comparative balance sheet of the company reveals during the years

2008 and 2009, there is a increase in fixed assets of 824.25 at 20.69%

2. The current asset have increase 280.86 at 14.61%

3. The current liabilities have increase 531.49 at 34.81%

4. Reserves and surplus decease 1009.79 at 32.13%


94




TABLE 1

COMMON SIZE BALANCE SHEET 31ST DEC 2005 & 2006

PARTICULARS 2005 PERCENTAGE 2006 PERCENTAGEASSETS

Current assets:

Inventories

Sundry debtors



Loans & advance

Miscellaneous exp.


Fixed assets:

Net block


Investments

Total fixed assets

Total assets

LIABILITIES:


Sundry liabilities

Provisions


Shareholder funds

Loan funds

Stockist deposits


TotalTotal liabilities

345.39

182.09

34.82

3.14

325.43

52.15

943.02

2368.56

86.92

127.77

2583.25

3526.27

598.09

117.54

715.63

1076.74

1404.75

91.45

237.70

2810.64

3526.27

9.79

5.16

0.99

0.09

9.23

1.48

26.69

67.17

2.46

3.62

73.31

100

16.96

3.33

20.29

30.54

39.84

2.59

6.74

79.71

100

378.01

182.37

64.97

3.45

411.34

34.92

1075.04

2375.61

96.46

375.74

2847.81

3922.86

681.06

170.11

851.17

1353.73

1352.70

90.02

275.33

3071.78

3922.95

9.64

4.65

1.66

0.09

10.49

0.89

27.42

60.56

2.46

9.58

72.58

100

17.36

4.34

21.69

34.51

34.48

2.29

7.01

78.30

100

Interpretation

95




1. The common-size balance sheet of the reveals during the years 2005 and

2006, there is a increase in current assets 27.42%.

2. The fixed assets have decrease 72.58%

3. The current liabilities have increase by 21.69%

4. The Reserves and surplus increase by 34.51%


TABLE 2

96





PARTICULARS 2006 PERCENTAGE 2007 PERCENTAGEASSETS

Current assets:

Inventories

Sundry debtors



Loans & advance

Miscellaneous exp.


Fixed assets:

Net block


Investments

Total fixed assets

Total assets

LIABILITIES:


Sundry liabilities

Provisions


Shareholder funds

Loan funds

Stockist deposits


Total

Total liabilities

378.01

182.37

64.97

3.45

411.34

34.92

1075.04

2375.61

96.46

375.74

2847.81

3922.86

681.06170.11

851.17

1353.73

1352.70

90.02

275.33

3071.78

3922.95

9.64

4.65

1.66

0.09

10.49

0.89

27.42

60.56

2.46

9.58

72.58

100

17.36

4.34

21.69

34.51

34.48

2.29

7.01

78.30

100

542.08

190.54

57.32

4.39

419.08

12.41

1225.82

2517.47

354.28

279.14

3150.89

4376.71

773.89200.91

974.8

1597.68

1407.73

101.34

295.46

3402.21

4377.01

12.39

4.35

1.31

0.36

33.94

0.28

28.00

57.52

8.09

6.38

72

100

17.684.59

22.27

36.50

32.16

2.32

6.75

77.73

100

Interpretation

97




1. The common-size balance sheet of the reveals during 2006 and 2007, there

is a increase in current assets 28%

2. The fixed assets have decrease by 72%

3. The current liabilities have increase at 22.27%

4. Reserves and surplus increase at 36.50%


TABLE 3

98





PARTICULARS 2007 PERCENTAGE 2008 PERCENTAGE

ASSETS

Current assets:

Inventories

Sundry debtors



Loans & advance

Miscellaneous exp.


Fixed assets:

Net block


Investments

Total fixed assets

Total assets

LIABILITIES:

Current liabilities:Sundry liabilities

Provisions


Shareholder funds

Loan funds

Stockist deposits


Total

Total liabilities

542.08

190.54

57.32

4.39

419.08

12.41

1225.82

2517.47

354.28

279.14

3150.89

4376.71

773.89

200.91

974.8

1597.68

1407.73

101.34

295.46

3402.21

4377.01

12.39

4.35

1.31

0.36

33.94

0.28

28.00

57.52

8.09

6.38

72

100

17.68

4.59

22.27

36.50

32.16

2.32

6.75

77.73

100

624.13

213.96

620.17

16.13

446.85

0.94

1922.18

2922.49

558.42

503.54

3984.45

5906.63

1024.73

502.28

1527.01

3142.92

771.16

144.82

320.72

4379.62

5906.63

10.57

3.62

10.49

0.27

7.57

0.16

32.54

49.48

9.45

8.52

67.46

100

17.35

8.50

25.85

53.21

13.06

2.45

5.43

74.15

100

Interpretation

99




1. The common-size balance sheet of the reveals during the years 2007 and

2008, there is a increase in current assets at 32.54%

2. The fixed assets have decrease at 67.46%


4. Reserves and surplus increase by 53.21%


TABLE 4

COMMON SIZE BALANCE SHEET 31ST

DEC 2008 & 2009

100




PARTICULARS 2008 PERCENTAGE 2009 PERCENTAGE

ASSETS

Current assets:

Inventories

Sundry debtors



Loans & advance

Miscellaneous exp.


Fixed assets:

Net block


Investments

Total fixed assets

Total assets

LIABILITIES:


Sundry liabilities

Provisions


Shareholder funds

Loan funds

Stockist deposits


Total

Total liabilities

624.13

213.96

620.17

16.13

446.85

0.94

1922.18

2922.49

558.42

503.54

3984.45

5906.63

1024.73

502.28

1527.01

3142.92

771.16

144.82

320.72

4379.62

5906.63

10.57

3.62

10.49

0.27

7.57

0.16

32.54

49.48

9.45

8.52

67.46

100

17.35

8.50

25.85

53.21

13.06

2.45

5.43

74.15

100

730.86

289.29

743.48

18.87

420.54

0.0

2203.04

3314.73

649.17

844.81

4808.7

7011.74

1392.23

666.27

2058.5

4152.71

306.41

162.69

331.45

4953.26

7011.74

10.42

4.13

10.60

0.27

5.99

0.0

31.42

47.27

9.26

12.05

68.58

100

19.86

9.50

29.36

59.22

4.37

2.32

4.73

70.64

100

Interpretation

1. The common-size balance sheet of the reveals during the years 2008 and2009, there is a decrease in current assets at 31.42%

101




2. The fixed assets have increase at 68.58%


4. Reserves and surplus increase at 59.22%


CHAPTER VI

FINDINGS, SUGGESTIONS & CONCLUSION

102




ACC has made a commendable advancement in the industrial front in recent

years. The Indian corporate sector has paved a way for an effective growth of the

economy. One industry which holds its high is cement industry.

Cement industry in India has developed tremendously since its beginning in the

early 20th century. During late 80’s the government fully decontrolled the industry and

since then it has been on its own. The focus of this study is to analyse the financial

performance of ACC ltd during the period 2005 – 2009.

6.1 Findings

Ratio analysis

1. The current ratio was 1.24 which was then decreased to 1.22 and then it

slightly increased to 1.25 in the year 2007 and then increased in the year 2008

was 1.26 and finally the current ratio was 1.07 and the current assets has

constantly raised in the 5 years, the current liabilities has also shown a

constant increase corresponding to the current assets. The company hasmaintained the favourable ratio through the year.

2. Quick ratio of ACC during 2005, was 0.762 and during 2006. The quick ratio

was 0.777 and it was decreased to 0.688. During the year 2007 and again it

increased slightly in the next year to 0.849 and then it decreased slightly to

0.715.

3. Absolute liquid ratio includes receivables, debtors and bills receivable. The

acceptable norm was 0.5:1. The absolute liquid ratio for the year 2005 was

0.048 and gradually increased to 0.076 and finally the ratio has been reduced

in the year 2009 as 0.361.

4. The company had a gradual increase inventory turnover ratio from the year

2005. In 2006, it increased to 10.289 and then a decrease to 8.369 in 2007 and

in 2009 the ratio remained at 10.327.

103




5. Net working capital generally is not a ratio. The company shows constant

during first two years then it increased and finally it has been increased during

the year 2009.

6. The company has a gradual increase of debtors turnover ratio from the year.

Shows a high in 2005 and 2006, then slight decrease in ratio in recoded in the

year 2007 at 4.88. The table shows unsatisfactory position due to the

decreasing trend in the ratio.

7. Capital turnover ratio has shown a increasing trend in the 5 years compared.

The ratio reveals that the firm has good turnover and shows the high profit

1.523 in the year 2009.

8. During the year 2005, the ratio was 0.364 and the ratio has been gradually

increased to the year. The debt equity ratio reveals the good signal to the

company.

9. The firm faces high proprietary ratio in the year 2009 i.e. 0.673. The ratio was

0.306 in the year 2005 and there after increased gradually over the years which

indicate that the proportion of total assets of the company showed a decrease

in relation to shareholders funds.

10. The firm had a low fixed ratio in the year 2005 i.e. 0.417 and the fixed ratio

continuously started to increase finally in the year 2009 the fixed ratio is

1.047. it indicates that the proportion of fixed assets increased in comparison

with decrease in shareholders funds.

11. During the year 2005, the ratio was 2.397 and the ratio has been slightly

decreased to 1.875 in the 2006 and finally the fixed asset to net worth ratio

was suddenly decreased to 0.955 in the year 2009. This ratio is to shareholders

fund to purchase the fixed assets. Sufficient fund to purchase the assets.

104




12. During 2005 the fixed asset turnover over ratio was 1.42 which was increased

to 1.57 in the year 2006 and finally increased to 1.904 in the year 2009. This

verifying trend was due to the variance in fixed assets of the company.

13. The return on assets during the year 2005 was 4.20% which has increased to

34.66 % in the year 2009. This indicates the overall profitability of the firm

had shown the increasing trend.

14. The return on investment of ACC Ltd constant increase except in the year

2005. It shows the huge increase in return on investment in all the 3 years due

to increase in capital employed.

15. During 2005 the fixed asset to current asset ratio was 2.756 which were then

decreased to 1.79 in the year 2009. There was slightly decreased in the year

2009. A decline in this ratio indicates that the debtors and stocks are increased

too much and the fixed assets are more intensively used.

16. During the year 2005, the interest coverage ratio was 3.88 which were then

slightly increased to 5.746 and then it decreased to 3.3 in the year 2008 and

finally the ratio was increased to 8.5. This interest coverage ratio has shown an

increasing trend in all the five year compared. Increasing trend shows the

changes of signal of the firm using excessive debt.

17. During the year 2005, the return on capital employed ratio was 111.41 and

then finally it was decreased to 34.66 in the year 2009. return on capital

employed is the relationship between net profit and shareholders funds. The

profit has been finally decreased to 34.667.

18. The gross profit of ACC, during 2005 was 99.28% then it has been gradually

increased during the years and finally the gross profit has increased in the

years. This shows the profitability of the firm.

105




19. The net profit ratio of ACC was about 3.39% in the year 2005. It has been

increased during the year 2009. The company has faced a high increase in the

net profit ratio as of increase in net profit.

20. Cash profit ratio measures the relationship between cash generated from

operations and net sales during first 2 years then it increased during the year

2009.

21. The expenses ratio to other expenses reveals the expenses to the cost of goods

sold. It has been gradually decline in the expenses.

Comparative financial statement

The comparative balance sheet has a slight increase in the profitability

position.

Common size financial statement

The common size balance sheet is satisfactory.

6.2 Suggestions

106




According to my study some ratios show non satisfactory position.

Management may concentrate on such areas and act according to the

situations. Some alternative techniques may be used to verify such

unfavourable situation.

It is advisable to the management to keep optimum level of inventory in the

company. So that the funds can be trading used their some other purpose.

Steps should be taken to improve return on investment position of the

company.

Steps should taken to reduce the operating and non operating expenses.

The company must take possible steps to increase the profit of the company.

107




6.3 Conclusion

Result of the study show that the performance of the ACC Ltd.., madukkarai is

satisfactory.

The study also reveals that the company should adopt necessary policies in

order to increase its profits. This will help the company in stabilizing a good stand in

market.

Chapter 1.New[1]

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