Raju Project

Chapter – I

INTRODUCTION

1

INTRODUCTION:

Finance may be defined as the provision of money at the time where, It is

required. Finance refers to the management, flews of money through an

organization. It concerns with the application of skills in the manipulation, use and

control of money. Different authorities have interpreted the term “finance”

differently. 1-Lowever there is three main approaches to finance.

1. The first approach views finance as to providing of funds needed by a

business on most suitable terms this approach confines finances to raising of

funds and to the study financial institutions & instruments from where funds

can be procured.

2. The second approach relates finance to cash.

3. The third approach views finance is being concerned with rising of funds

&their effective utilization.

Every enterprise needs fixed assets for smooth running of its activities. It

serves as a link between production and distribution process. There is, generally, a

time lag between the recognition of a need and its fulfillment. The greater the time

lag, the higher requirements for inventory. It also provides a cushion for future

price fluctuations.

In a complex industry like Kesoram Industries Limited it studied clearly of

how the thing are being performed and what is the real impact of these on industry

and how effectively the inventory is utilized is interested to be known by researcher

because of its great significance in the research.

2

Definition of financial management:

Financial management as practice by corporate firms can be called

corporation finance or business finance, financial management refers to that part of

the management activity which is concerned with the planning & controlling of

firms financial resources, it deals with finding out various sources for raising funds

for the firm. The sours must be suitable & economical for the needs of the business.

The most appropriate use of such funds also forms a part of financial management.

Objects of financial management:

Financial management is concerned with procurement and use of funds. Its

main aim is to use business funds in such a way that the firm's value/earning are

maximized there are various alternatives available for using business funds. The

pros & cons of various decisions have to look in to before making a final selection.

Financial, management provides a framework for selecting a proper cause if action

and deciding a viable commercial strategy. The main objective of a business is to

maximize the owner economic welfare. These objectives can be achieved by

1. Profit maximization and

2. Wealth maximization.

Management of Fixed Assets:

The selection of various fixed assets required creating the desired production

facilities and the decision as regards determination of the level of fixed assets is

primarily the task at the production / technical people. The decision relating to fixed

assets involve huge funds for a long period of time and are generally of irreversible

nature affecting the long term profitability of a concern, an unsound invest decision

may prove p be total to the very existence of the organization. Thus, management of

fixed asset is of vital importance to any organization.

3

The process of fixed asset management involves:- .

(I) Selection of most worthy projects or alternatives of fixed assets

(II) Arranging the requisite funds /capital for the same.

The first important consideration to be acquire only that much amount of

fixed assets which will be just sufficient to ensure smooth and efficient running of

the business. In some cases it may be economical to buy certain assets in a lot size.

Another important consideration to be kept in mind is possible increase in demand

of the firm's product necessarily expansion of its activities. Hence a firm should

have that much amount of fixed assets which could adjust to increase demand.

The third aspect of fixed assets management is that must ensure buffer stocks

of certain essential equipments/services to ensure uninterrupted production in this

events of emergencies. Sometime, there may be a is always better to have some

alternative arrangements to deal with such situations. But at the same time the cost

of carrying such buffer stock should also be evaluated. Efforts should also be made

to minimize the level of buffer stock of fixed assets be encouraging their maximum

utilization during learn period learn period, transferring a part of peak period and

living additional capacity.

Fixed Assets:

Fixed assets are those assets which are required and held permanently for a

pretty long time in the business and are used for the purpose of earning profits. The

successful continuance of the business depends upon the maintenance of such

assets. They are not meant for resale in the ordinary course or business and the

utility of these remains so long as they are in working order, so they are also known

as capital assets. Land and building, plant and machinery, motor vans, furniture and

fixture are some examples of these assets.

4

Financial transactions are recorded in the books keeping in view the going

concern aspect of the business unit. It is assumed the business unit has a reasonable

expectation of continuing business at a profit for an indefinite period of time. It will

continue to operate in the future. This assumption provides much of the justification

for recording fixed assets at original cost and depreciating them in a systematic

manner without reference to their current realizable values. It is useless to show

fixed assets in the balance sheet at their estimated realizable values if there is no

immediate (I.e., cost less depreciation provided) and not at their current realizable

values. The market value of a fixed asset may change may with the passage of time,

but for accounting purpose it continues to be shown in the books at its book value,

I.e., the cost at which it was purchased minus depreciation proved up to date.

The Cost concept of accounting, deprecation calculated on the basis of

historical costs of old assets is usually lower than of those calculated at current

value. These results in more in more profits on paper which, if distributed in full

lead to reduction of capital.

Need for Valuation of Fixed Assets:

Valuation of fixed assets is important-in order to have fair measure of loss

and financial position of the concern.

Fixed assets are meant for use for many years. The value of these assets

decreases with their use or with time or for other reasons. A portion of fixed

reduced by use is converted in to cash though charging depreciation is essential, as

depreciation constitutes a part of the total cost of production.

5

Chapter-II

RESEARCH

METHODOLOGY

6

RESEARCH METHODOLOGY:

Need for study:

Fixed assets plays very important role in relating company's objectives the

firms to which capital investments vested on fixed assets. This fixed asset are not

convertible or not liquid able over a period of time the owner funds and long term

liabilities are invested in fixed assets. Since fixed assets playing dominant role in

total business the firms has realized the effective utilization of fixed assets. So

ration contributes very much in analyzing and utilized properly it effects long term

sustainability of the firms which may affect liquidity and solvency and profitability

positions of the company. The idle of fixed assets lead a tremendous in financial

cost and intangible cost associate to it. So there is need for the companies to

evaluate fixed assets performance analysis time to time by comparing with pervious

performance. Comparison with similar company and comparison with industry

standards. So chose a study to conduct on the fixed assets analysis of KESORAM

CEMENT using ratio in comparison with previous year performance. The title of

the project is analysis on fixed assets management.

Importance:

Fixed assets are the asset which cannot be liquidates in to cash within one

year. The large amount of the company is invested in these assets. Every year the

company investment a additional fund in these assets directly or indirectly the

survival and other objectives of the company purely depends on operating

performance of management in effective utilization of their assets. Firm has

evaluate the performance of fixed assets with proportion of employee on net assets

turnover and other parameters which is helpful for evaluating the performance of

fixed assets.

7

Scope:

The project is covered of fixed assets of KESORAM CEMENT drawn

from annual report of the company.

The fixed assets considered in the cannot be converted in to cash with

one year.

Ratio analysis is used for evaluating fixed assets performance of

"KESORAM CEMENT INDUSTRIES".

The subject matter is limited to fixed assets it analysis and its

performance but not any other areas of accounting, corporate,

marketing and financial matters.

Methodology:

The data used for analysis and interpretation fore annual reports of the

company that is secondary forms of data. Ratio analysis is used for calculation on

purpose.

The project is presented by using tables, graphs and with their interpretations.

No survey is undertaken or observation study is conducted in evaluating "fixed

assets" performance of "KESORAM CEMENT INDUSTRIES".

Objectives of the Study:

The study is conducted to evaluate Fixed assets performance of KESORAM

CEMENT.

The study is conducted to evaluate the fixed assets turnover of KESORAM

CEMENT INDUSTRIES.

8

The study is made to know the amount of capital expenditure made by the

company during study period.

The study is conducted to evaluate depreciation and method of depreciation

adopted by KESORAM CEMENT INDUSTRIES.

The study is conducted to known the amount of finance made by long term

liabilities and owner funds towards fixed assets.

Study is conducted to evaluate that if fixed assets are liquidated. What is the

proportion of fixed assets amount will contribute for payment of owner funds

and long term liabilities.

The study is evaluate is giving adequate return to the company.

Limitation:

The study period of 45 days.

The study is limited up to the date and information provided by kesoram

cement and is annual reports.

The report will not provide exact fixed assets status and position in Kesoram

cement. It may varying from time to time and situation to situation.

This report is not helpful in investing in kesoram cement industries either

though disinvestments or capital market.

The accounting procedure and other accounting principles are limited by the

company changes fixed assets performance.

9

Sources of data :-

Sources of data is divided into two types

1. PRIMARY DATA:

The primary data has been collected through structured

questionnaire reflecting fixed assets management practices of

Kesoram Cements. The collected data is tabulated and suitable

interpretation had been made by considering the data collecting

through

2. SECONDARY DATA:

The secondary data like annual reports purchase registers,

storage records of the organization. And internet , refered books

10

Chapter-III

COMPANY PROFILE

11

INDUSTRY PROFILE:

The 85 year old Indian cement industry is one of the cardinal and basic

infrastructure industries, which enjoys core sector status and play a crucial role in

the economic development and growth of a country. Being a core sector is industry

was subject to price and or distribution controls almost uninterruptedly from world

war -II to 1982. When the government of India announced the partial decontrol

manufacturing cement became increasingly attractive industry and the industry

experienced substantial expansion.

As the supply in response to the 1982 partial decontrol was significant in

march, 1989. Price and distribution control were finally dispensed with. It was one

of the first major industries in the country to be so deregulated.

DEFINITION OF CEMENT:

Cement may be defined as it is a mixture of calcium silicate and aluminates

which have the property of setting and hardening under water. The amount of silica,

alumna who is present in each crust is sufficient to combine with calcium oxide

[cao] to from the corresponding calcium silicate and aluminates.

CLASSIFICATION OF CEMENT:

Cement is 3 types

i. Puzzolantic cement

ii. Natural cement

iii. Portland cement

1. Puzzolantic cement:

It consists of silicates calcium and aluminum. It shows the hydraulic,

properties when it is in the form of powder and being mixed with suitable

12

proportion of lime. The rate of hardening is much slower and the comprehensive

strength developed is about a half of Portland cement. It us found more resistant to

the chemical action that others.

2. Natural cement:

This is natural occurring material. It is obtained form cement rocks. The

cement rocks are claying lime stones containing silicates aluminates of calcium.

The selling property of this cement is more than the Portland cement but is

comprehensive strength is half of its.

3. Portland cement:

a) Ordinary Portland cement

b) Rapid hardening Portland cement

c) Low heat cement

d) White or colored cement

e) Water proof Portland cement

f) Portland slag cement

g) Portland puzzo

h) Sulphate resisting cement

i) Oil well cement

INDIAN CEMENT 1NDUSTERY - PRESENT STATUS

After the deli censing of the industry in July, 1991 it reacted positively to the

policy changes. New capacities created and the volume of the production increased.

From a situation of importing cement, the country started exporting due to high

quality and cost effectiveness. After liberalization the black market in cement also

disappeared

13

Currently INDIA stands second largest in the cement production world wide

after china after India, japans and USA stands. On the other hand India's per capital

consumption is only 100kgs. As compared to the world average of 260kgs. The

industry has 59 companies owing 115 plants.

In the mailer of exports, the government considers cement as extreme focuses

are& However Indian cement in the global market is not very competitive due to

high power and full costs. In order to improve its position in the international

market. Technological up gradation is essential in terms of process up process up

gradation product diversification costs reduction quality control and energy savings

PROFILE OF THE INDUSTRY:

The 85-year -old Indian cement industry is one the cardinal and basic

infrastructure industries which enjoys core sector status and playa crucial role in the

economic development and growth of a country. Being a core sector this industry

was subject to price and distribution controls almost uninterruptedly from world

war-II. When government of India announced the partial decontrol manufacturing

cement became increasingly attractive and the industry experienced substantial

expansion.

As the supply in response to the 1982 partial decontrol was significant in

March I989,price and distribution control were finally dispensed with .It was one of

the first Major industries in the country to be so deregulated.

OVERVIEW OF THE INDUSTRY:

The word cement means any substance applied for sticking things .But

cement is most vital and important material for modem construction as a binding

agent .In the ancient times ,clay ,bricks and stones have been used for construction

Work.

14

The Romans were using a binding or a cementing material that would harden

Under water. The first systematic effort was made by SMEATION who Under took

the erection of a new lighthouse in 1756.he observed that the production Obtained

by burning limestone was the best cementing material for work under water.

After eighty years brunch chemist produced hydraulic cement by

burning finely ground delay used in the form of paste .cement invented by.

JOSEPH ASPDIN in 1824. Since hardened Cement paste resembled Portland

stone found in England be named it a s Portland cement A name that has ensured

even Portland cement was list manufactured in USA in 1975 In Portland cement

was produced for the rust lime in 1940. by south India industries limited Madras.

This unit had capacity of 30 tones per day

By 1913 however three units started their operations with a combined

installed capacity of 75000 tons per annum. In 1914 indigenous production fees

for short of domestic demand necessitating an import of 1, 65,723 tones.

Shipment difficulties and foreign Trade during the first world war acted as

a catalyst for the . Development of indigenous Industry, and by 1924 the total

installed capacity grew to 5,59,800 tones per annum.

In 1963 all the cement companies with the exception of SONE VALLEY

PORTLAND CEMENT COMPANY LIMITED merged to form the ASSOCIATED

CEMENT COMPANIES LIMITED. This has more facilitated a cost reduction

as well as uniformly in quality. By 1947 the installed capacity of the industry

raiscdto2.2miIlion tones per annum. After partition 5 of the cement producing

units in the country went to Pakistan and total installed capacity of 18

units that remained in India was 1.5 million tons per Annum. This is increased to

3.8million tones by 1950-51.

15

In the three decades between 1950-1980 the capacity expansion was

between 7-8 million tones pe/ decade the target set in respect of additional

capacity generation was released with impetus given by the partial decontrol

announced in 1982. Several units locked up project for expansion of capacity

and modernization which contributed towards increased production.

INDIAN CEMENT INDUSTRY PRESENT STATUS:

After the dealing of the industry in July 1991 it reacted positively to the

policy changes new capacities created and the volume of production increased

from a situation of importing cement the. country started exploring due to high

quality and cost effectiveness after liberalization the black market in cement also

disappeared currently India stands second largest in the cement production

worldwide after china on the other hand per capita consumption in India is only

books as compared To the world average of 260kgs the industry has S9

companies owning 1 is plants in the matters of exports. The government

considers cement as a extreme Focus area .however Indian cement in the

global market is not very competitive Due to high power and full costs. In

order to improve its position in the international market technological up

gradation is essential in terms of process Product diversification cost

reduction quality control and energy saying.

ABOUT THE INDUSTRY:

These chapter examiners a profile of cement industries ltd. i.e. .its history

location organization structures etc.

LOCATION:

Kesoram cement industry is one of the leading manufacturer of cement in

India it is a day process cement plant the plant capacity is 8.25 lakh tones per

16

annum .it is located at basanthnagar in Karimnagar district of Andhra pradesh

Basanth nagar is 8km away from the ramagundam railway station linking madras

to newdelhi the chairman of the company is syt.B.K.Birla

HISTORY:

The first unit at Basanthnagar with a capacity or 2,1 lakh tons per annum

incoresponding suspension-preheated system was commissioned during the year of

1969 the second unit Was setup in year 1971 with a capacity of 2.1 tens per annum

and the third unit with a capacity of 2.5lakh tons per annum went on stream in the

year 1978 the coal for this company is being supplied iron singareni collories and

the power is obtained from APSEB the power demand for the factory is about

21MW kesoram has got 2DG sets of 4M"W each Installed in the year 1987.

Kesoram Cement as set up a 15kw capacity power*plant to facilitate for

unintellpted power supply for manufacturing of cement starts at 24 august 2007 per

hour 12 mw, actual power is 15mw. Birla supreme in popular brand of kesoram

cement from its prestigious plant of Basanthnagar in A.P which has outstanding

track record in performance and productivity serving the nation for the last two and

had decades It distinction by Bagging several national awards .It also has the

distinction optimum capacity utilization. Kesoram offers a choice of top quality

portioned cement for light heavy constructions and allied applications quality is

built every fact of the operations.

The plant layout is rational to begin with the limestone is rich in calcium

carbonate a key factor that influence the quality of final product the day process

technology used in the latest computerized monitoring overseas the manufacturing

process samples are sent regularly to the burenu of Indian standards national council

of constructions and Building material for certification of derived quality norms

17

The company has vigorously undertaking different promotional measures

their product through different media which includes the use of newspapers,

magazines hoardings etc

Kesoram cement industry distinguished itself among all the cement factories

in India by bagging the national productivity award consecutively.For two veat but

the year 1985 -1987.(he federation of Andhra Pradesh chamber of commerce and

industries also conferred an kesoram cement an award for.the best Industrial

promotion expansion efforts in the year 1981.kesoram also bagged FAPCCl

Awarded for "best family planning effort in the state " for the year 1987-1988.

One among the industrial giants in the country today serving the nation on the

industrial front kesoram industrials Ltd has a cheque red and eventful history dating

Back to the twenties when only a textile mill under its banner 1924 it grew from

Strength to spread and activities 10 newer fields like Rayan pulp Transport paper

spun pipes Refractivity tires and other products

Looking to the wide gap between the demand and supply of a vital commonly

cement Which plays Ul important role in national building activity the government

of India had de-licensed the cement industry in the year 1966 with a view to attract

private entrepreneurs to augment the cement industry production kesoram rose to

the occasion And divided to setup a few cement plants in the country Kesoram

cement undertaking marketing activities extensively in the states of Andhra Pradesh

Karnataka Tamilnadu, kerala maharastraha and gujrat in AP sales depots are located

in different areas like karimnagar warangal nizambad vijayawada and nellore In

other states it has opened around 10 depots.

18

THE AWARD WON ARE:

Kesoram cement bagged prestigious awards like national awards for

productivity and technology and conservation and several state awards for year

1984 kesoram cement is best family planning effort in the federation of Andhra

Pradesh chamber of commerce And industry and also national award for two

successive years 1985-86& 1986-87.lt has also bagged the national award for

energy efficiency for the year 1989-90 for the performance among all cement plants

in India .thus award stall-by national council For cement and building material in

association with the government of India .

Kesoram bagged the prestigious Andhra Pradesh state productivity award in

1987-1989 also Annexed state award for industrial management in 1988-1989.and

also "Best Industrial promotion expansion efforts " in the state and yajamanya ratna

and best efforts an industrial unit in the state to develop rural economy was bagged

for its contribution towards the year 1991.it also bagged the "may day award" of the

government of India For the best management and the pandit jawaharlal Nehru

silver rolling trophy for the industrial productivity effort in the state of andhra

Pradesh by FAPCCI and also the Indira Gandhi memorial national award of the

government of Andhra Pradesh for the year 1993.

During the last 3 years the government of Andhra Pradesh has given the

following awards Best awards for the year 1994.Best industrial relation award for

1994.TO keep the ecological balance they have also undertaken massive tree

plantation in The economy and government of India has nominated township areas

and them for VRIKSHMITHRA award Best effort of an industrial unit in March

1996In the year March 2007 "Best management award 2007" for the best

management practices In kesoram cement presented by chief minister.

19

CEMENT PRODUCTION WORLDWIDE

Country 1981 1983 1986 1989 1990 World ranking

CHINA 83 108 106 210 210 1

JAPAN 88 85 73 82 87 2

USA 65 61 71 70 72 3

INDIA 21 25 36 45 48 4

ITALY 43 40 36 4 41 5

GERMANY 30 28 24 27 40 ' 6

Today in the cement industry is producing 58.3 million tones per annum

indication surplus conditions while its demand is 56.7 million tones lies per annum

Now The cement market has become 'buyer market' which was a selling market till

1970'sAnd so the quality &brand taken an upper edge for cement marketing.

Today installed at the India cement industry is 771 lakh tones but in India

106 Major plants are producing 583lakh tones leaving the balance for exports.

20

KESORAM GROUP OF INDUSTRIES:

a) Textiles Kesoram Industries Ltd, 42, Garden Reach Road. Calcutta - 700024.

b) Rayon Kesoram rayon triennia (po),

Dist Hoogly, West Bengal.

c) Spun pipes Kesoram Spun pipes &

Fonndries,

Bansberia (po) Dist Hoogly,

West Bengal.

d) Cement Kesoram cement,

Basanth nagar -505187,

Dist karimnagar —Andhra Pradesh.

c) Cement Vasavadatta cement,

Sedam- 585222,

Dist guibaragh — Karnataka.

1) Tyres Burka Tyres, Shivam chambers, 53,

Syed Amir Au Avenue,

Calcutta - 700019.

ABOUT THE KESORAM:

Kesoram cement industry is one of the leading manufactures cement in India,

incorporated by the promoters of Birla group company is a dry process cement

plant. The plant capacity is 8.26 lakh tone per annum, it is located at

Basanthnanagar in karimnagar dist. Of Andhra Pradesh which is 8km away from

the Ramagundam Railway station, linking madras to New Delhi.

21

The company's first; unit at Basantnagar with a capacity of 2.1 lakh tones per

annum. Humbolds suspension preheater system was commissioned during the year

1969. The second unit was set up in the year 1971 with a capacity 2.1 lakh tones per

annum and the third unit with a capacity of 2.5 lakh tones per annum went on

stream in the year 1978. the coal for this company is being supplied by singareni

colonies and the power is obtained form apsed. The power demand for the factory is

about installed' in the year 1987.

Kesorarn cement has set up a 15 MW captive power plant to facilitate for

uninterrupted power supply for manufacturing of cement, which starts on august

1997.

Kesoram cement industry distinguished itself among all the cement Factories

in India by bagging the national productivity a ward consecutively for years i,e., for

the year 1985-86 and 1986-87. The federation of Andhra Pradesh chambers of

commerce and industries FAPCCIO also conferred on Kesoram cement. An award

for best industrial promotion /expansion efforts in the state for the year 1984.

Kesoram also bagged FAPCCI award for "best family planning efforts in the

state" for the year 1987-88.

One among the industrial giants in the country to day, serving the nation On

industrial front, Kesoram industries ltd. has a chequred and eventful history dating

back to the twenties when the industrial house of Birla acquired it. With only a

textile mill under is banner in 1924, it grew from Strength and spread and its

activities to newer fields like rayon, spun pipes, transparent paper, pulp, tyres, ref

rectories and other products.

Cement which plays an important role in nation building activity, the

Government of India had de-kucensed (he cement industry in the year 1966 with a

22

view to attract private entrepreneurs to augment the cement production. Then

Kesoram decided to set up a few cement plants in the country.

Birla supreme is popular brand of Kesoram cement from its prestigious plant

of Basantnagar, in A,P which has outstanding track record in performance and

productivity, serving the nation for the last two and half decades. It has proved it s

distinction by bagging several national awards and state awards it also has the

distinction of achieving optimum capacity utilization.

Kesoram offers a choice of top quality Portland cement for light, heavy

constructions and allied application. Quality is built to every fact of the operations.

As is the preference for uality, so is the demand for the product.

The limestone is rich in calcium carbonate, a key factor that influences the

quality of the final product . The dry process technology used in the late

computerized monitoring oversees the manufacturing process. Samples are sent

regularly tot the brreau of Indian standars, national council construction and

building material for certification of derived quality norms The company has

actively undertaken promotional measures for promoting their product though

different media, which includes the off hoardings compliments, newspapers, etc.

Kesoram cement is undertaking the marketing activities extensively in the

states of Andhra Pradesh, Karnataka, Tamilnadu, Kerala, Maharashtra and Gujarath.

In A.P. sales deposts are located in different areas like Karimnagar, Warangal,

Nizamabad, Vijayavvada and Nellore. In other states it has opened around 10

depots.

The market share of Kesoram cement in the all India cement is 1.19%. In

A.P. it is a 7.05%.

23

CEMENT INDUSTRY PROFILE:

Cement is the basic construction material used extensively all over the

World. The per capita consumption of cement universal acknowledged one of the

measure of the country. The per capita consumption of cement in India is estimated

at approximately 57 ke and India is the third lowest consumer in the world. Thus

there is a excellent potential growth of cement industry in India.

Cement was first patented in 1824 in England. In India, first cement plant

was established by Indian cement industrial growth was continuously sufficiency

and import of cement was stopped. In august, 1965 the Government accepted the

principle to decontrol the prices and distribution of Cement. A scheme of decontrol

drawn and brought in to effect from January, a cement allocation and coordination

organization (CACO) was Formed. As the decontrol scheme did not prove to the

satisfaction of the government, CACO was abolished and its functions over by the

cement, controller attached by the government corporation of India limited. Prices

of cement are revised by the government from time to time based on studies and

reports of bureau 'of industrial cost and prices.

24

AWARDS:

Kesoram cement bagged many prestigious awards including national awards

for productivity, technology, conservation and several state awards since 1984. The

following are the some of important awards.

Awards of Kesoram :

No Year Awards National/State1. 1984 Best family planning effort in the

stateState

2. 1985-86 National productivity award National3. 1985-86-87 Mines safety National4. 1987-88 Best industrial promotion / expansion

effortState

5. 1987-89 Productivity award State6. 1988-89 Best industrial promoter State7. 1988-89 Expansion effort in the state State8. 1988-89 Award for contribution given for rural

economyState

9. 1989 Best family planning effort State10. 1989 Yajmanya Ratna & Best Management

AwardState

25

14. 2001 Vana Mithra award from Andhra

Pradesh Government

State

15. 2005 Best workers welfare State

16. 2007 Best family welfare award State

17. 2008 FAPCCI Award for Excellence in

Industrial Productivity form Andhra

Pradesh Govt.

State

18. 2009 Best workers welfare State

.

26

During the last 3 years the Govt. of A. P. has given the following awards

Best management award tor the year 1993. best industrial retain award for the

year 1994. best industrial retain award for the year 1995. Environment and mineral

conversation, award for the year 1995, to keep the ecological balance, they have

been nominated by government of India for" VRIKSHAMITRA AWARD" best

effort of an industrial unit in the state for rural development for the year 1994-95,

presented by chief minister in march, 1996 and best family welfare award for the

year 1996-97.

27

Chapter-IV

DATA ANALYSIS

&

INTERPRETATION

28

Trend Analysis:

In financial analysis the direction of changes over a period of years is of

initial importance. Time series or trend analysis of ratios indicators the direction of

changer. This kind of analysis is particularly applicable to the items of profit and

loss account. It is advisable that trends of sales and net income may be studies in the

lightly of two factors. The rate of fixed expansion for secular trend in the growth of

the business and the general price level . It might be found in practice that a number

of firm would be shown a persistent growth over period of years. But to get a true

trend of growth, thd sales figure should e adjusted by a suitable index of general

prices In other words, sales figures should be defaulted for rising price level.

Another method of securing trend of growth and be which can be used instead of

the adjusted sales figure or as check n them is to tabulate and plot the output or

physical volume of the sales expressed in suitable, units of measure . If the general

price level is not considered while analyzing trend of growth, it can be mislead

management they may become unduly optimistic in period of property and

pessimistic in duel periods

For trend analysis, the use of index numbers is generally advocated the

procedure follow is to assign the numbers 100 to items of the base year and at

calculate percentage change in each items of other years in relation to base year.

The procedure may be called as Mixed percentage method V.

This margin determines the direction of upward or downward and involves

the implementation of the percentage relationship of the each statement item meant

to the same in the base year. Generally the first year is taken as the base year. The

figure of the base year are taken as 100 and trend ratio be other year or calculated

on the basis of one year. Here and attempt is made to known the growth total

investment and fixed assets of Kesoram cement industries for seven years that is

2003-2004 to 2009-2010.

29

TREND ANALYSIS

Table 1:

YEAR INVESTMENT TREND

PERCENTAGE

2003-2004 41,28,06,232 100

2004-2005 44,85,21,386 108.65

2005-2006 39,68,35,265 96.13

2006-2007 24,99,02,930 60.54

2007-2008 28,19,24,444 68.29

2008-2009 29,09,50,811 70.48

2009-2010 28,87,27,907 69.94

30

Interpretation:

From the analysis of the above table it can be' observed that the growth rate

of total investment of Kesoram cement industries is in downward trend which

shows table of the Kesoram cement industries investment is decreasing from time to

time. During the year 2003-2004 it was recorded 100%. But it is decreasing in the

year 2009-2010 which shows that there is a net decrease by 69.94 %. The average

investment In total assets was found to be Rs.33,85,23,710.7 during the review

period . During the period of 2003-2004 it is a Rs.41,28,06,232 and it was

decreased in the year 2009-2010 Rs 28,87,27,907

31

GROWTH IN FIXED ASSETS

Table 2:

YEAR INVESTMENT TREND PERCENTAGE

2003-2004 6,07,94,08,271 100

2004-2005 6,25,64,02,879 102.91

2005-2006 5,89,55,39,377 96.97

2006-2007 5,69,93,08,565 93.74

2007-2008 5,71,48,37,436 94.00

2008-2009 7,43,21,97,039 122.25

2009-2010 11,05,19,01,277 181.79

32

Interpretation:

Growth rate in fixed assets, the examination of the above tabic reveals analysis and

interpretation.

1. During the year 2003-2004 the assets investment was recorded at

6,07,94,08,27 1 and it increased to Rs. 11,05,19,01,277 in 2009-2010 The

fixed assets investment is quite satisfactory.

2. The trend percentage in the year 2003-2004 is taken as the base year as 100%

and it was increased to 181.79% in the year 2009-2010.

3. the average growth rate in fixed assets Rs.6,87,56,56,406 in 7 years

33

RATIO ANALYSIS:

Ratio analysis is a powerful is a powerful tool of financial analysis. A ratio is

defined as "The indicated quotient of two mathematical expression" and as "The

relationship between for evaluating the financial position and performance of a

firm. The absolute accounting figure reported in financial statement do not private a

meaning full understanding of the performance and financial position of a firm. An

accounting figure conveys meaning when it is related to some other relevant

information.

Ratios help to summarize large quantities of financial data and to make

qualitative judgment about the firms financial performance.

1. Fixed Assets to Net worth Ratio:

This ratio establishes the relationship between Fixed Assets and Net Worth.

Net Worth = share capital + Reserves& surplus + Retained earnings.

Fixed AssetsFixed Assets to Net Worth Ratio = ------------------------------ X 100

Net Worth

This ratio of "Fixed Assets'"' to "Net Worth" indicates the extent to which

shareholder be financed by shareholders, equity including reserves surpluses and

retained earnings. If the ratio is less than 100% it implies that owners funds are

more than total Fixed Assets and a part of the working capital is provided by the

share holders. When the ratio is more than 100% it implies that owner’s funds are

not sufficient to finance the fixed assets and the finance ahs to depend up on

outsiders to finance the fixed assets. There is no "Rule of Thumb" to interpret this

ratio but 60%to65%is considered to be ratio in ease of industrial undertaking.

34

2. Fixed Assets Ratio:-This ratio explained whether the firm has raised adequate long term funds to

meet its fixed assets requirements and is calculated as under

Fixed Assets (After Depreciation)

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

Capital Employed

This ratio gives an idea as to what part of the capital employed has been used

in purchasing the fixed assets for the concern. If the ratio is less than one it is good

for the concern. 1

3. Fixed Assets as a Percentage to Current Liabilities:

The ratio measures the relationship between fixed assets and the funded debt

and is a very useful so the long term erection. The ratio can be calculated as below.

Fixed assets

Fixed assets as a percentage to current liabilities = --------------------------

Current Liabilities

4. Total Investment Turnover Ratio:

This ratio is calculated by dividing the net sales by the value of total assets

i.e., (Net sales/Total Investment) or (Sales /Total Investment). A high ratio is an

indicator of over trading of total assets while a low ratio reveals idle capacity. The

traditional standard for the ratio in two times.

5. Fixed Assets Turnover Ratio:

This Ratio expresses the number of times fixed assets are being turned -over is a

state period. It is calculated ass under:

35

Sales---------------------------------

Net Fixed Assets (After depreciation)

This ratio shows low well the fixed assets are being used in the business . The

ratio is important in ease of manufacturing concern because sales are. produced not

only by use of Current Assets but also by amount invested in Fixed Assets the

higher ratio , the better is the performance, on the other hand a low ratio indicated

that fixed assets are not being efficiently utilized

6. Gross Capital Employed:

The term "Gross Capital Employed" usually comprises the total assets , fixed

as well as current assets used in a business.

Gross Capital Employed - Fixed Assets + Current Assets

7. Return on Fixed Assets:

Profit after Tax

------------------------ x 100

Fixed Assets

This ratio is calculated to measure the profit after tax against the amount

invested in total assets to ascertain whether assets are being utilized properly or not,

the higher the ratio the better it is for the concern.

36

Fixed Assets to Net worth:

The ratio indicates the extent to where shareholders are funds are struck in the fixed

assets. The formula to compute fixed assets to net worth is calculated as follows.

Fixed Assets (after depreciation) /Net Worth.

NET WORTH = Share Capital + Reserves &surplus +Retained earning

If the ratio is less than 100% it implies that owner funds are more than the

fixed assets and apart of working capital is provided by the share holder and vice-

versa.

Fixed AssetsFixed Assets to Worth Ratio = ------------------ x 100

Net worth

FIXED ASSETS TO NET WORTH

Table 3:

YEAR NET WORTH GROSS FIXED

ASSETS

RATIO IN %

2003-2004 3,64,91,77,075 6,07,94,08,271 166.59

2004-2005 3,38,82,85,855 6,25,64,02,879 184.65

2005-2006 3,38,78,40,215 5,89,55,39,377 174.02

2006-2007 3,48,48,27,422 5,69,93,08,565 163.54

2007-2008 3,77,14,58,784 5,71,48,37,436 151.52

2008-2009 4,16,05,00,140 7,43,21,47,039 178.63

2009-2010 6,54,43,44,641 11,05,19,01,277 168.88

37

Interpretation

1. The gross fixed to Net worth ratio is furcating from year to year. In the year

2003-2004 the gross fixed assets to net worth to acquire the ratio is 166.59%,

in the year 2009-2010 the fixed assets to net worth to acquire the ratio is

168.88%.

2. The average net worth to fixed ratio is Rs.37,07,76,93,567 or fixed assets

average Rs.6,87,56,56,406.

3. The highest ratio recorded in 2004-2005 at 184.65 the lowest ratio is recorded

at 151.52 in the year 2007-2008 and it was increased during the year 2009-

2010 at 168.88.

38

Fixed Assets as a percentage to Long Term Liabilities

Fixed Assets Ratio a Various ratio of fixed assets to net worth is a ratio of fixed

assets to long term funds which is calculated as:

Fixed assets (After depreciation)...................................................... X 100 Capital Employed

FIXED ASSETS AS A PERCENTAGE TO LONG TERM LIABILITIES

TABLE:4

YEAR FIXED ASSETS LONG TERM FUNDS

PERCENTAGE

2004-05 6,25,64,02,879 3,38,81,85,855 184.60%

2005-06 5,89,55,39,377 3,38,78,40,215 174.00%

2006-07 5,69,93,08,565 3,48,48,27,422 163.50%

2007-08 5,71,48,37,436 3,77,14,58,784 152.70%

2008-09 74,32,197 41,60,503 178.63%

2009-10 1,10,51,901 65,44,344 168.87%

39

FIXED ASSETS AS A PRERCENTAGE TO LONG TERM LIABILITIES:

GRAPH – 4

Interpretation:

a) The fixed assets as a percentage of long term liabilities the ratio is functioning

from the to year. The fixed assets as a percentage of long term liabilities is

recorded at 184.6% in the year 2004and it is recorded at 152.7% in the year

2007-08.

b) The highest ratio is recorded at 184.6% in the 2004-05 the lowest ratio is 152.7%

in the year 2007-08.

Fixed Assets as a Percentage Current Liabilities:-

40

Fixed assets Fixed Assets as a Percentage to Current Liabilities=.................................

Current liabilities

FIXED ASSETS AS A PERCENTAGE CURRENT LIABILITIES

Table: 5

YEAR FIXED ASSETS CURRENT LIABILITES

RATIO IN %

2003-2004 6,07,94,08,271 2,05,36,47,518 2.96

2004-2005 6,25,64,02,879 2,03,50,59,123 3.07

2005-2006 5,89,55,39,377 2,40,99,51,568 2.44

2006-2007 5,69,93,08,565 2,14,80,89,665 2.65

2007-2008 5,71,48,37,436 2,30,72,27,432 2.47

2008-2009 7,43,21,47,039 3,72,38,07,994 1.99

2009-2010 11,05,19,01,277 5,05,58,08,066 2.18

Interpretation

41

1. The ratio was fluctuating trend percentage in review period.

2. From the above table it is observed that the ratio was recorded at 2.96in the

2003-2004 and is gradually changing to 2.47 in 2007-2008 which indicates

that the current funds are used in the fixed assets which is quite satisfactory.

3. The average ratio was recorded at 2.59 during the review period of time

4. The highest ratio was recorded at 3.07 which is higher than the average ratio.

During the year 2004-2005.

5. The lowest ratio was recorded at 1.99 which is less than the average ratio.

During the year 2008-2009.

42

Total Investment Turnover Ratio

The total investment turnover ratio can b calculated by the formula as given under :

SalesTotal investment turnover ratio= --------------------

Total investment

TOTAL INVESTMENT TURNOVER RATIO

Table: 6

YEAR SALES TOTAL

INVESTMENT

RATIO IN %

2003-2004 1,34,54,328 4,12,806 32.5

2004-2005 1,40,11,622 4,44,821 31.2

2005-2006 1,35,37,524 3,36,835 34.1

2006-2007 1,29,55,362 3,49,902 51.84

2007-2008 1,42,19,578 2,81,924 50.43

2008-2009 1,61,31,775 2,90,124 55.29

2009-2010 22,08,96,60,339 28,87,27,907 76.56

43

Interpretation

1. The ratio was in increasing trend.

2. During the year 2003-2004 the ratio was recorded at 32.5 and in the 2009-

2010 the ratio was increased to 76.56

3. The highest ratio was recorded at 76.56 in the year 2009-2010 which is more

than the average ratio.

4. The ratio was 32.5 which is lesser than the average ratio.

44

Fixed Assets Turnover Ratio

The fixed assets ratio is the relationship between the sales of cost of

goods/capital assets employed in a business.

SalesFixed Assets Turnover Ratio ----------------------

Total Fixed Asset

FIXED ASSETS TURNOVER RATIOTable: 7

YEAR SALES

(IN LAKHS)

TOTAL FIXED

ASSETS

PERCENTAGE

2003-2004 1,34,54,328 60,79,408 2.21

2004-2005 1,40,11,622 62,56,402 2.23

2005-2006 1,35,37,524 58,95,539 2.29

2006-2007 1,29,55,362 56,99,308 2.27

2007-2008 1,42,19,578 57,14,837 2.40

2008-2009 1,61,31,775 74,32,197 2.17

2009-2010 2,20,89,339 1,10,51,901 1.99

45

Interpretation:

1. The fixed assets turnover ratio is fluctuating trend during the review period of

time. During the year 2003-2004 the ratio was recorded as 2.2 1% and in the

year 2009-2010 the ratio was decreased to 1.99

2. Average ratio was observed 2 .22% during the review period of time

3. The highest ratio was recorded at 2.40% during the year 2007-2008 which is

more than average.

4. The lowest ratio was 1.99% in the 2009-2010 which is less than the average.

46

Fixed Assets as a Percentage to Total Assets:-

Fixed AssetsFixed Assets as a percentage to Total Assets-----------------X 100

Total Assets

FIXED ASSETS AS A PERCENTAGE TO TOTAL ASSETS

Table: 8

YEAR FIXED ASSETS

(IN LAKHS)

TOTAL ASSETS PERCENTAGE

2003-2004 60,79,408 1,17,98,589 51.5

2004-2005 62,56,402 1,12,64,726 55.5

2005-2006 58,95,539 1,12,63,707 52.3

2006-2007 56,99,308 1,13,44,360 50.0

2007-2008 57,14,837 1,23,03,114 46.0

2008-2009 74,32,197 1,38,20,481 53.77

2009-2010 1,10,51,901 1,63,96,436 67.40

47

Interpretation:1. Fixed assets to total assets ratio is fluctuating trend during the review period

of time

2. During the year 2003-2004 the ratio was recorded at 51.5% and the year

2007-2008 the ratio was decreased to 46%.

3. Average ratio was observed at 53.78% during the review period of time.

4. The highest ratio was observed at 67.40% during the year 2009-2010 which

is more then the average. The lowest ratio was recorded at 46% in the year

2007-2008 which is less then average ratio.

48

Gross capital Employed:

Gross capital Employed = Fixed Assets + current Assets.

GROSS CAPITAL EMPLOYED

Table: 9

YEAR FIXED ASSETS

(IN LAKHS)

CURRENT

ASSETS

(IN LAKHS)

GROSS CAPITAL

EMPLOYED

(IN LAKHS)

2003-2004 60,79,408 53,06,374 1,13,85,782

2004-2005 62,56,402 45,58,902 1,08,16,205

2005-2006 58,95,539 49,71,332 1,08,66,871

2006-2007 56,99,308 53,95,148 1,10,94,456

2007-2008 57,14,837 63,06,352 1,20,21,189

2008-2009 74,32,197 60,98,133 1,35,30,333

2009-2010 1,10,51,901 86,81,149 1,97,33,050

Profit After Tax:-

YEAR PROFIT AFTER

TAX (IN LAKHS)

2003-2004 4,64,497

2004-2005 4,13,714

2005-2006 2,81,467

2006-2007 6,29,957

2007-2008 3,35,128

2008-2009 4,57,092

2009-2010 26,56,832

49

Interpretation:

From the above the profits of Kesoram Cement Industries is in increasing

which is good for the company. Lakhs and it is increased during the year 2009-2010

the PAT is 26,56,832

In the year 2005-2006 the PAT is the lowest and in 2009-2010 it is observed

that the highest PAT is 26,56,832 over the years.

50

Return on Gross Capital Employed:-

The profit for the purpose of calculation on capital employed should be

computed according to the concept of capital employed used. The profits taken

must be the profit earned on the capital employed in the business

Profit After TaxReturn on Gross Employed ---------------------------------= XI 00 Gross Capital Employed

RETURN ON GROSS CAPITAL EMPLOYED

Table: 10

YEAR PROFIT AFTER

IN LAKHS

CROSS CAPITAL PERCENTAGE

2003-2004 4,64,497 1,13,85,782 4.0

2004-2005 4,13,714 1,08,16,205 3.8

2005-2006 2,81,467 1,08,66,871 2.5

2006-2007 6,29,957 1,10,94,456 5.7

2007-2008 3,35,128 1,20,21,189 2.8

2008-2009 4,57,092 1,35,30,333 3.4

2009-2010 26,56,832 1,97,33,050 13.46

51

Interpretation:

1. Return on Gross Capital Employed ratio is fluctuating trend during the

review period of time

2. During the year 2003-2004 the ratio was recorded at 4.0% and in the year

2009-2010 the ratio was increased to 13.46% and the average ratio is 5.09

3. The highest ratio was recorded at 13.46% in the year 2009-2010 which is

more than average ratio.

4. The lowest ratio was recorded at 2.5% during the year 2005-2006 which is

less than the average ratio.

52

Return on Fixed Assets:-

The return on fixed assets can be calculated as under:

Profit After TaxReturn on Fixed Assets =................................X 100 Fixed Assets

RETURN ON FIXED ASSETS

Table: 11

YEAR PROFIT AFTER

IN LAKHS

FIXED ASSETS PERCENTAGE

2003-2004 4,64,497 60,79,408 7.6

2004-2005 4,13,714 62,56,402 6.6

2005-2006 2,81,467 58,95,539 4.7

2006-2007 6,29,957 56,99,308 11.05

2007-2008 3,35,128 57,14,837 5.86

2008-2009 4,57,092 75,32,197 6.15

2009-2010 26,56,832 11,10,519 24.03

53

Interpretation:

1. Return on fixed assets ratio is increasing

2. During the year 2003-2004 the ratio recorded as 7.6% in the year 2009-2010

the ratio was increased to 24.03%

3. The average ratio is 9.42%

4. The highest ratio is recorded at 24.03% in the year 2009-2010, the lowest

ratio is 4.7% in the year 2005-2006.

54

Chapter-V

CONCLUSION

&

SUGGESTIONS

55

CONCLUSION

The debt service coverage ratio, which is increasing from 2003-2007 is a

good sign to the company which indicates that taking loans is decreasing so that

more amount of profits are available to internal shareholders.

The return on capital employed which is increasing from 2003-2007 which is

a very good sign.

Total assets turnover ratio and fixed assets turnover ratio, which has been

increasing after a decrease in 2003 is good sign from increasing as a time of

dissolution. The inventory turnover ratio is some what low in 2000 but it increased

a lot in 2004 and decreased in next year but the gradual growth in the inventory

turnover shows that the company is in a good position to do more amounts of sales.

The debtors turnover ratio is very low in 2000 where it has increased a lot in 9.03.

Which is a bad sign for the company. The creditor turnover ratio when compared

2003 with 2004 it has some what increased which shows good sign for the

company, because company is getting lot of time to pay off it debts.

The net profit ratio is fluctuating because of increase in operating profit ratio.

Even though decreasing trend is observed in current ratio during the period 2002-

2006. company was still able to maintain good current ratio above 1.28, which

indicates that the company had effectively utilized the blocked funds in the initial

years. Similar trend was observed in case of quick ratio also.

The debt equity ratio is decreasing in 2003 have been increased in 2004 now

it. Decreasing gradually. It shows company raising funds slowly. The amount of

total assets which is high in 2004 is decreased lot on 2006 which shows a bad sign

for the company.

56

By seeing the above points we can say the company's position is growing

steadily and the company is having potentially in improving the financial position

future which is a good sign.

SUGGESTIONS

After, analyzing the financial position of Kesoram cement industries and evaluating

its fixed assets management or capital budgeting techniques in respect of

components analysis. Trend analysis and ratio analysis. The following conclusions

are drawn from the project preparation.

The financial position of Kesoram cement regarding investment it has been

increased.

Regarding the fixed assets to net worth it has observed that it has been

increased.

Regarding the fixed assets it has been observed that the fixed asset has

increased.

Regarding the long term funds to fixed assets it is increased over the years.

Regarding the fixed assets as a percentage of current liabilities it is observed

it is decreased.

Regarding the total investment turnover ratio it is observed that it has been

increased over the years considerably I, e 32.5% to50.43%.

Regarding the fixed assets turn over ratio it has been observed that it is

satisfactory at it were increasing from 108% Regarding the fixed assets to

total assets it's been observed that there was decreased from 51.5% to 67.4%.

As a result it is said to be that the ratio is quite satisfactory.

Regarding the profit and gross capital employed ratio it can be observed that

it has been increasing over the year i.e. from 113857.82 to 197330.5 As a

result of the above it can be said that ratio is steadily increasing.

57

BIBLIOGRAPHY

58

BIBLIOGRAPHY

Title of the Book, Publisher & Edition Authors Name

Financial management, Vikas publisher, Pandey I.M.

8th Edition.

Financial management, Tata McGraw-Hill Prasanna Chandra

5lh Edition.

Financial Accounting, Kalyani publishers R. K. Sharma & Shashi

8th Edition. K. Gupta

Financial Accounting & Analysis, S.P. Jain & K.L. Narang

Kalyani publisher, 3rd Edition.

.

Company Annual Reports

Websites:

www.kesoramcement.com

www.adityabirla.com

www.google.com

59