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SAURABH JAIN
FMS, GOVT. ENGINEERING
COLLEGE, AJMER
To analyse the financial performance of
Shree Cement Ltd. through ratio
analysis and its comparison with the other
key cement players
Ticker : SHR
Country : INDIA
Employees: : 1,982
Current ratio
3 2.71
2.5 2.28
2
ratio
1.5 years
0.88
1
0.5
0
1 2 3
years
Inventory turnover raio
1.135443159
1.2
1 0.794174001
0.8 0.518410616
ratio 0.6
0.4
0.2
0
1
years
40
35
OPR ( In % )
30
25
Operating Profit
20
34.14 Ratio
15 26.87 28.69
10
5
0
2005-2006 2006-2007 2007-2008
Years
R e t u r n o n N e t W o r t h ( in % ) N e t P ro fit R a t io ( In % )
40 3 6 .5 2 1 3 .4 3
35 14
30 12 9
2 4 .0 8
25 10
R e t u rn o n N e t W o rt h ( in
RONW ( In % )
20 8
% )
15 R a ti o i n %
9 .6 5 6
10
4
5
2
0
0
2 0 0 5 - 2 0 02 60 0 5 - 2 0 02 70 0 5 - 2 0 0 8 2007 2008
Year Ye a r
An increase in EPS is pointing towards favourable conditions to invest in
this company.
A decrease in the dividend pay out ratio suggests that the company is
distributing a lower portion of its earnings in the form of dividends and so
will be financially stronger and is likely to expand and grow at a faster rate.
A high current ratio in 2008 (2.28) is good from the creditor’s point of view
but extremely high current ratio is not good from the management point of view.
In such a case (1) more funds of the firm would be employed in unproductive uses
which don not fetch any return (2) it is an indicator of a firm’s poor investment
policy
A high return on equity indicates that the Shree is spending wisely and is
likely profitable.High returns on equity lead to higher stock prices.
The Net Profit ratio has increased in magnitude by 4.43 from 2007 to 2008.
This ratio not only reveals the recovery of the cost and expenses from the
revenue of the period but also leave a margin of reasonable compensation to the
owners for providing capital at their risk.
Book value per share has increased from 130.48 in 2007 to 193.13 in 2008
which is indicative of higher resources of the company. This company is a
potential bonus candidate in the long run