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THE FINANCIAL ANALYSIS OF AMBUJA CEMENT LIMITED

INTRODUCTION TO THE TOPIC

Financial analysis refers to an assessment of the viability, stability and


profitability of a business, sub-business or project.

It is performed by professionals who prepare reports using ratios that make


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

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OBJECTIVES OF STUDY

1) The main objective of study is to forecast and/or determine the actual


financial status and performance of Ambuja Cement Company.

2) This Financial analysis study will helps in accessing the viability,


stability and profitability of Ambuja Cement Company.

3) The other objective of the study is to measure the operational


performance and achievement of financial objectives.

4) Financial analysis helps in making effective business decisions.

RESEARCH METHODOLOGY
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Research is a process of systematic and in-depth study of research of any


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

A)

Selection of subject:

Selection of subject or topic for dissertation work is a very important


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

B) Title of dissertation:
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In view of the object behind the selection of subject researcher has


chosen the topic entitled Study of Financial Analysis of Ambuja Cement
Ltd., Company.

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

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

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

DMTR N.M.D.COLLEGE GONNDIA

THE FINANCIAL ANALYSIS OF AMBUJA CEMENT LIMITED

HYPOTHESIS

The term hypothesis has several meanings. It may be taken to mean a


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

1. That the financial structure of the company is appropriate.


2. That the profitability of the company is satisfactory.
3. That company uses the fixed assets efficiently.
4. That the liquidity position of the concern is satisfactory

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INTRODUCTION

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

However, a decade later, it became one of worlds most efficient cement


companies producing the finest cement in the world at the lowest cost. While
adhering to the most stringent international pollution-control norms.

Today, Ambuja is the 3 rd largest cement company in India, with an


annual plant capacity of 16 million tonnes including Ambuja Cement Eastern
Ltd. and revenue in excess of Rs.3298 crores.

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More importantly, its plants are some of the most efficient in the world.
With environment protection measures that are on par with the finest in the
developed world.
But the companys most distinctive attribute is its approach to the
business. Ambuja believes its most valuable assets arent cement plants. They
are the people who run the plants.
This unique vision is encapsulated in the companys homegrown
philosophy of giving people the authority to set their own targets, and the
freedom to achieve their goals.
Its called I can
This simple vision has created an environment where there are no limits
to excellence, no limits to efficiency. And has proved to be a powerful engine
of growth for the company.

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

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HISTORY OF AMBUJA CEMENT:


Ambuja Cements Limited was earlier known as Gujarat Ambuja
Cements Limited (GACL). The company was set up in 1986. In this short
span Ambuja Cements has achieved massive growth and presently, the total
cement capacity of the company is 16 million tonnes. The company has three
subsidiaries, viz, Ambuja Cement Rajasthan Limited (ACRL), Ambuja
Cement Eastern Limited (ACEL) and Ambuja Cement India Limited (ACIL).
Ambuja also has a strategic investment in ACC through its subsidiary (ACIL).
Ambuja Cements is the most profitable cement company in India, and
the lowest cost producer of cement in the world. One of the major reasons that
Ambuja Cements is the lowest cost producer of cement in the world is its
emphasis on efficiency. Power consists over 40% of the production cost of
cement. The company improved efficiency of its kilns to get more output for
less power. Thereafter Ambuja Cements set up a captive power plant at a
substantially lower cost than the national grid. The company sourced a
cheaper and higher quality coal from South Africa, and a better furnace oil
from the Middle East. As a result, today, the company is in a position to sell
its excess power to the local state government.
Ambuja cement is the first company to introduce the concept of bulk
cement movement by sea in India. This resulted in speedier transportation and
brought many coastal markets within easy reach. Ambuja Cements has a port
terminal at Muldwarka, Gujarat. It is an all weather port that handles ships
with 40,000 DWT. The port has a fleet of seven ships with a capacity of 20500
DWT to ferry bulk cement to the packaging units. The company has bulk
cement terminals at Surat, Panvel, and Galle. The Surat terminal has a storage
capacity of 15,000 tonnes and Panvel terminal has a storage capacity of
17,500 tonnes. Both the terminals have bulk cement unloading facility. The
port at Galle, 120 km from Colombo, Sri Lanka, handles million tonnes of
cement annually.
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First plant set up in record time


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

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

In 1993, Ambuja Cement set up a complete system of transporting bulk


cement via the sea route. Making it the first company in India to introduce
bulk cement movement by sea. Others followed and today, about 10% cement
travels by this new route.

The facility comprises: A dedicated port at the Gujarat plants, capable of


berthing 40,000 DWT vessels, three bagging terminals at Mumbai, Surat and
Sri Lanka, and seven special bulk cement vessels.
This capability has enabled us to supply fresh cement to many coastal
markets domestic and international.

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

Ambuja Cement exports almost 17% of its production in a very


competitive international environment. For the last ten years, Ambuja Cement
remains Indias highest exporter of cement.
This has been possible for two reasons
One, the quality of cement matches the best in the world.
Two, the dedicated bulk cement transportation capability at our Gujarat
plant.

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The Environment

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

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

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

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

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Major Achievements of Ambuja Cement

Most profitable cement company in India.


Lowest cost producer of cement in the world.
Its environment protection measures are at par with the best in the world.
The pollution levels at all its cement plants are lower than the rigorous
Swiss standards of 100 mg/NM3.
The only cement company to be awarded with the National Quality
Award.
First cement company to first to receive the ISO 9002 quality
certification.
Received ISO 14000 Certification for environmental systems.
India's largest exporter of cement.
Received Best Award for highest exports by CAPEXIL.

First company to introduce the concept of bulk cement movement by sea in


India

Milestones
Building of a cement plant in record 13 months:2.8 kilometer conveyor belt running through three hills was constructed in just
9 months.
Introduced a completely new system of transporting cement in India the
bulk cement transportation by sea.
Introduced complete blast free limestone mining by using the surface miner in
limestone mining for the first time in India.
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Created water reservoirs in used up mines and raised the water table in arid
areas.
Our plants have achieved the lowest pollution levels comparable with the
most strongest Swiss standards.

Recognition:

National Award for commitment to quality by the Prime Minister of


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

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

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TYPES OF FINANCIAL ANALYSIS

TYPES OF FINANCIAL ANALYSIS

ON THE BASIS OF
MATERIAL USED

EXTERNAL
ANALYSIS

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ON THE BASIS OF
MODUS
OPERANDI

INTERNAL
ANALYSIS

HORIZONTAL
ANALYSIS

VERTICAL
ANALYSIS

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ON THE BASIS OF MATERIAL USED

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

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

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

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ON THE BASIS OF MODUS OPERANDI

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

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

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

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METHODS OF FINANCIAL ANALYSIS

The analysis and interpretation of the financial statement is used to


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


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

(D) FUND FLOW ANALYSIS:


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

Ratio analysis is a technique of analysis and interpretation of financial


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

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

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(1)

LIQUIDITY RATIOS:

The Liquidity refers to the maintenance of cash, bank balance and


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

(2)

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

Structural ratio
Coverage ratio

Structural ratio are based on proportions of debt and equity in


the financial structure of firm.
Coverage ratio shows the relationship between debt servicing
commitements and the sources for meeting these burdens.

(3)

ACTIVITY RATIOS:

The activity ratios measure the efficiency and effectiveness with


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

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(4)

PROFITABILITY RATIOS:

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

Profit Margin Ratio


Rate of Return Ratio

A Profit Margin Ratio shows the relationship between profit and


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

COST-VOLUME-PROFIT ANALYSIS:

Cost volume profit analysis is a technique for analysis of the


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

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PROFIT & LOSS ACCOUNT:

Rs. in Cr.
INCOME :
Sales Turnover
Other Income
Stock Adjustments
Total Income
EXPENDITURE :
Raw Materials
Excise Duty
Power & Fuel Cost
Other Manufacturing
Expenses
Employee Cost
Selling and Administration
Expenses
Miscellaneous Expenses
Less: Preoperative
Expenditure Capitalised
Profit before Interest,
Depreciation & Tax
Interest & Financial
Charges
Profit before Depreciation
& Tax
Depreciation
Minority Interest before
PAT
Profit Before Tax
Tax
Profit After Tax
Minority Interest after PAT
Profit/Loss of Associate
Company
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Dec 2009

Dec 2008

7,721.42
255.81
-49.47
7,927.76

7,102.65
514.39
65.24
7,682.28

945.10
680.72
1,422.75
776.63

572.22
907.80
1,325.77
763.37

272.84
1,452.62

266.82
1,329.20

255.62
0.00

266.76
0.00

2,121.48

2,250.34

22.43

32.60

2,099.05

2,217.74

297.28
0.00

260.10
0.00

1,801.77
584.93
1,216.84
0.00
0.00

1,957.64
567.93
1,389.71
0.00
0.00

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THE FINANCIAL ANALYSIS OF AMBUJA CEMENT LIMITED

Profit after Minority


Interest & P/L of Assoc.
Co.

1,216.84

1,389.71

Adjustment below Net


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

0.00

0.00

675.84

683.74

1,227.72
664.96

1,397.61
675.84

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

365.59
0.00
62.13
120.00

334.97
0.00
56.92
110.00

Earning Per Share (Rs.)


Book Value

7.58
42.45

8.75
37.25

1.51

223.89

Extraordinary Items

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BALANCE SHEET:

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

Dec 2008

304.74
6,163.31
6,468.05

304.52
5,367.03
5,671.55

100.00
65.70
165.70
0.00

100.00
188.67
288.67
0.00

6,633.75

5,960.22

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

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

722.44

327.82

683.24
152.20
880.90
292.42

938.74
224.60
852.13
352.67

1,584.80
674.04

1,413.93
470.56

-250.08

483.65

2.71

4.28

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

WORKING CAPITAL TURNOVER RATIO:


Working capital turnover ratio indicates the velocity of the utilization
of the net working capital. This ratio indicates that number of times the
working capital is turnover in the course of time that is in one accounting year
and measure the efficiency with which the working capital is being used by
firm. This ratio should be always higher. This is calculated by the following
formula
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Working Capital Turnover Ratio =

Sales
Working Capital

Working Capital = Current Assets-Current Liabilities

Year

Sales

Working Capital

Ratio

2008

7102.65

5960.22

1.192

2009

7721.42

6633.75

1.164

INTERPRETATION:
This ratio shows the velocity of the utilization of working capital. The
ratio measures the efficiency of the company with which the working
capital is used by the company. Hence higher the ratio better it is. From the
above analysis it is clear that the company utilizes its working capital
properly and effectively.
CURRENT RATIO:
Current ratio measures the relationship between current asset and
current liabilities. This ratio highlights the firms ability to meet its short
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term liabilities from its short term assets. The standard for the ratio is 2:1.
However one should not rely on it blindly. The current ratio should be
subject to qualitative test. It should be remembered that this ratio is subject
to the influence of many financial forces, which may depress or retrive it
dramatically overnight. It is represented as follows.
Current Ratio = Current Assets
Current Liabilities

Year

Current assets

Current liabilities

Ratio

2008

2368.14

1884.49

1.257

2009

2008.76

2258.84

0.889

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

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

Year

Quick Assets

Quick Liabilities

Ratio

2008

483.65

1884.49

0.257

2009

250.08

2258.84

0.110

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

FUND DEBT TO NET WORTH RATIO:


This ratio shows that the extent to which a firm should employ one
debt showed to be viewed in term of the size of the shareholders fund. If the
ratio reveals a high portion of debt finance in the capital structure, this may
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THE FINANCIAL ANALYSIS OF AMBUJA CEMENT LIMITED

indicate on over dependence on external finance. So financial risk may be


high. High debt usually means high financial risk. This ratio is important
indication of a firms longer term solvency and key measure of its financial
risk. It is written as
Funded Debt
Fund Debt to Net Worth =

Net Worth

Funded Debt =

Loan Fund

Loan Fund

Secured Loan + Unsecured Loan

Year

Funded Debt

Net Worth

Ratio

2008

288.67

5671.55

0.05

2009

165.70

6468.05

0.03

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

NET PROFIT RATIO:


The net profit ratio establishes the relationship between net profit
(after tax) and the sales in same year. It indicates the efficiency of the
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management in manufacturing, selling, administrative and self-financing. This


ratio shows the earning left for shareholders as a percentage of net sales this
ratio is the overall measures of firms profitability. It is written as
Net Profit (after tax)
Net Profit Ratio =

Year

Net Profit

100

Sales

Sales

Ratio

2008

1389.71

7102.65

19.57%

2009

1216.84

7721.42

15.76%

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

PROPRIETARY RATIO OR EQUITY RATIO:


This ratio shows the relationship between shareholders fund and the
total asset. Any rise in this ratio indicates the necessity of borrowings and
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reduction in the amount of current asset. These ratio measures the extent to
which the companys invested capital or net worth in tied-up in non-liquid,
permanent, depreciable assets. This is shown as
Shareholders Fund
Proprietary Ratio =

Year

Total Assets

Shareholders Fund

Total Asset

Ratio

2008

5671.55

16063.41

0.35

2009

6468.05

17900.24

0.36

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

ASSET TURNOVER RATIO:


Asset turnover ratio measures the efficiency of the firm in using
its total assets to generate sales. A business organization invests in assets to
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generate sales and profit. To calculate this ratio the following formula is
used
Sales
Asset Turnover Ratio =

Year

Sales

Total Assets

Total Assets

Ratio

2008

7102.65

16063.41

0.44

2009

7721.42

17900.24

0.43

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

FIXED ASSETS TO NET WORTH RATIO:

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

Net Worth

Net worth =reserve & surplus + shareholder fund


preliminary expenses
Year

Fixed Asset

Net Worth

Ratio

2008

13695.27

5671.55

2.41

2009

15891.48

6468.05

2.46

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

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FIXED ASSETS TURNOVER RATIO:


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

Year

Sales

Fixed Assets

Fixed Assets

Ratio

2008

7102.65

13695.27

0.52

2009

7721.42

15891.48

0.49

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

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CONCLUSIONS & SUGGESTIONS

CONCLUSION:

After examining the analysis of Ambuja Cement Co. it has been


seen that liquidity position of company needs to be improved. The
company is progressing with a normal speed. There is also need to increase
the profitability of the company.

SUGGESTIONS:
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1. Liquidity is required to be improved.


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

LIMITATIONS
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In spite of precautions taken to make the study objective, it can not be


denied that there are certain procedural and technical limitations. It is not
possible to judge all the parameter to evaluate the efficiency in a wide and
dynamic area like financial analysis. Some of the limitations of this study
are as under:

(a)

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

(b)

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


secondary data are the limitations of the study.

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BIBLIOGRAPHY:

With the help of various books and articles, I have benefited to


complete my project study. I have given here a list of books.

(1). I. M. Pandey

--- Financial Management

(2). R. K. Sharma &

---

Management Accounting

---

Management Accounting

Shashi K. Gupta

(3). Prof. Nirmal Jain

www.ambujacement.com

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