Maharashtra Cosmopolitan Education Society’s PAI International Centre for Management Excellence


This is to certify that FURKAN Y.KAMDAR student of PAI INTERNATIONAL CENTRE FOR MANAGEMENT EXCELLENCE, Maharashtra Cosmopolitan Education Society, Pune has completed his field work at ULTRA TECH CEMENT LTD on the topic of ―FINANCIAL STATEMENT ANALYSIS BY USING THE TECHNIQUE OF RATIO ANALYSIS”FOR ULTRA TECH CEMENT LTD and has submitted the field work report in partial fulfilment of 2 years full time course MASTER IN BUSINESS ADMINISTRATION of college for the academic year 2008-2009 He has worked under our guidance and direction. The said report is based on bonafide information.

Project Guide Name

Prof. R Ganesan



Pai International Centre for Management Excellence Date: Place: Pune




I hereby declare that the project titled ―FINANCIAL STATEMENT ANALYSIS OF ULTRATECH CEMENT LTD.‖ is an original piece of research work carried out by me under the guidance and supervision of Prof.R.GANESAN. The information has been collected from genuine & authentic sources. The work has been submitted in partial fulfillment of the requirement of MASTER OF BUSINESS ADMINISTRATION (MBA).

Place: Pune Date: 26/02/2009



Nidhi Dua (HRD). However. PUNE) for guiding me throughout the. However. I accept the sole responsibility for any possible errors of omission and would be extremely grateful to the readers of this project report if they bring such mistakes to my notice.ACKNOWLEDGEMENT ―The satisfaction Euphoria that accompanies the successful completion of any work would be incomplete unless we mention the name of the person. whose constant guidance and encouragement served as a beckon of light and crowned our efforts with success. Ankur Trivedi (Accounting Dept. a few words of gratitude and respect to those who guided and inspired in the completion of this project. my grateful appreciation is also extended to Mrs.). They constantly encouraged me and showed the right path from day first till the completion of my project. Mr. who made it possible.‖ I consider it a privilege to express through the pages of this report.Sikha (Administrative Head) Madam and our administration officer Mr. I accept the sole responsibility for any possible errors of omission and would be extremely grateful to the readers of this project report if they bring such mistakes to my notice. Bhavesh PathK (HOS-HRD) for giving me the opportunity to undergo my project in their esteemed organization and their timely suggestions & Valuable guidance. My sincere thanks to saumiya madam and all the other faculty members. Dharmendra Bhatt (HRD) and all the staff members of HR and accounts dept. Last but not the least.‖ I am deeply indebted to Mr. Atik sir and my cordial thanks to my Parents and friends. FURKAN Y. project. I also want to give thanks to Ms. KAMDAR 4 . Mr. (Internal guide-PICME.

Company Profile Theoretical Background Financial Statements Financial statement analysis 10 23 32 34 41 43 66 67 68 69 70 71 72 6. 3. 6 7 8 4. 8. 14. Financial Ratio analysis Financial Overview of UltraTech Cement Ltd. 10. 13. 15. Ratios of UltraTech Cement Ltd. 12. 5. 1. 7. Contents Executive Summary Objectives of study Research Methodology Research framework Type of data How data was collected Page No. 11.No. 9. Summary of Ratios Observation and Findings Importance Advantages Limitations conclusion bibliography 5 .CONTENTS Sr. 2.

These financial reports are made with using the information taken from financial statements of the company and it is based on the significant tool of Ratio Analysis. So. These reports are usually presented to top management as one of their basis in making crucial business decisions. This project helped me to get the deeper understanding of the process of Financial Statement Analysis and how decisions are taken to strengthen the financial position. During the summer training period at UltraTech Cement Limited. This experience was an emphasis on the importance of these Ratios which could be the roots of decisions made by management that can make or break the company. I had close connection with preparation of financial statements and also their analysis which was made by professionals in the accounting team of the company.EXECUTIVE SUMMARY Project Title: Financial Statement Analysis Company Name: UltraTech Cement Limited The training at UltraTech Cement Limited involved the day to day working at corporate accounts departments with the senior & junior managers and research department in the company. 6 . Financial analysis which is the topic of this project refers to an assessment of the viability. I was influenced to allocate the aim of this project to study the details about these ratios and their possible effects on the decisions made by not only people inside the company but also the outsiders such as investors. stability and profitability of a business. This important analysis is performed usually by finance professionals in order to prepare financial or annual reports. Main objective in undertaking this project is to supplement academic knowledge with absolute practical exposure to day to day functions of the sector. For this study five years‘ comparative Income Statement & Balance Sheet have been taken for calculating ratio analysis.

however the most important one or in other word the principle aim of this project is the understanding and assessment of financial ratios based on the statements of the company. the first of which is a detailed analysis of the financial statements that is the balance sheet and the income statement of UltraTech Cement Ltd.OBJECTIVE OF THE STUDY There have been various objectives for this study. This recognition is a leading factor in changes of each and every company and the base and root of lots of management decisions. The next aim of the project is to recognize the position of the company through those ratios and data available. 7 . The second objective.

RESEARCH METHODOLOGY Research framework: This study is based on the data about ULTRATECH CEMENT LTD for a detailed study of its financial statements. Different questions and information I could collect during these two methods are: 8 . B) Personal Interview: Personal Interview method requires a person known as the interviewer asking questions generally in a face to face contact to the other person or persons. 9 For the purpose of fulfilling different parts of my project. These questionnaires were e-mailed to the related persons in the company. How the data was collected: The sources of collecting the primary data was through interviews. These data has been collected from the financial reports of the company. however the secondary one was collected from the financial statements already available to the employees of the company and some of which was published. I had the chance to ask my questions personally from the Head of Accounts department and Head of HR Department regarding the information I needed. In some cases. The secondary data which was already prepared so these data was only used to reach the aims and objectives of this project. 2. First type is the primary data which was collected personally to be used and studied to prepare and reach the objectives already mentioned. A) Questionnaire: This method of data collection is quite popular. Types of data which helped to prepare this report: 1. In this method a questionnaire – which consists a set of questions in a definite form -is send to the person concerned with a request to answer the questions and return the questionnaire. observation and questionnaire. I prepared a limited number of questionnaires. The respondents have to answer the questions on their own. documents and system ratios and finally to recognize and determine the position of the company.

Financial balance sheets 3. 4.1. Other company related information. 2. Financial reports 5. Income statements 4. Numbers of staff working for different departments. Different reports prepared by Finance Department 9 . The beginning and history of the UltraTech Cement Ltd. The mission & vision of the company. I had chosen these files because of the reliability and suitability of these information which I was also sure about the accuracy of them. These files consist of: 1. 3. Annual report of the company 2. C) Printed and Digital Sources: The secondary data I collected was through the study of the financial statements already existed in the company in form of printed files or digital files reserved in the company for further references. Areas of operations 5.

It is one of the 3 biggest producers of primary aluminium in Asia.COMPANY PROFILE ADITYA BIRLA GROUP: BUSINESS OVERVIEW & BENCHMARKS: A US $28 billion premium conglomerate.  No. Dubai. Malasia and Korea. Laos. Hindalco-Novelis is the largest aluminium rolling company. with the largest single location copper smelter. Over 50 percent of its revenues flow from its overseas operations. Hungary. Philippines. China. USA. Egypt. Bangladesh. among the world‘s most cost-efficient aluminium and copper producers.  A leading player in Life Insurance and Asset Management. Vietnam. It is anchored by an extraordinary force of 100.  The 4th largest producer of carbon black. France.000 employees. Brazil. Indonesia.  The 4th largest producer of insulators.  Among the top 3 super-market chains in the Retail Business. Canada.  Among the top 5 mobile telephony companies. In India  A premier branded garment player. In India.  The 2nd largest player in viscose filament yarn. Myanmar. belonging to 25 different nationalities. UK. the Group has been adjudged ―The Best Employer in India and among the top 20 in Asia‖ by the Hewitt Economic Times and Wall Street Journal Study 2007.  Among the best energy efficient fertilizer plants. Italy. Luxemburg. Singapore. 1 in Viscose staple fibre. Australia. The group operates in 25 countries – India.  The 2nd largest in the Chlor-alkali sector. 10 . the Aditya Birla Group is in the league of Fortune 500.  The 11th largest cement producer. Germany. Switzerland.  Among the world‘s top BPO companies and among India‘s top 4. Thailand. Globally the Aditya Birla Group is:  A metals powerhouse.

infrastructure and espousing social causes. Rajshree Birla. spearheaded by Mrs.  Focusing on: health care. The Aditya Birla Group nurtures a culture where success does not come in the way of the need to keep learning afresh to keep experimenting.  Running 41 Schools and 18 Hospitals. shareholders. Beyond Business – The Aditya Birla Group is:  Working in 3700 villages.Rock solid in fundamentals. sustainable livelihood. MISSION: To deliver superior value to our customers.  Reaching out to 7 million people annually through the Aditya Birla Centre for Community Initiatives and Rural Development. employees and society at large. VALUES: Integrity Commitment Passion Seamlessness Speed 11 . education. VISION: To be a premium global conglomerate with a clear focus on each business.


L & T was acknowledged as a reliable fabricator with high standards. Third and largest plant was established in 1996 at Kovaya. L & T has entered in Cement business in 1980. 13 . later attended the same engineering college in Denmark. a civil engineer and Henning Holck Larsen. They started a partnership concern on 1st May 1938 and started undertaking repair jobs on the imported machinery like pasteurizes. Maharashtra in 1983. Second plant was established in 1991 at Hirmi. a chemical engineer. creams separators since supply of these machines were stopped due to world war II. the firm named ‗F. After becoming engineers both joined. and decided to start their own business here. both visited India. Very soon.HISTORY Soren Kristian Toubro. A. L. GCW‘s operations started from 2 April 1996. the founder of Larsen & Toubro (L&T) Company were schoolmates. in 1998. which was Cement machine manufacturing Company. These groups later merged into the Associated Cement Companies. observed Indian people.2 million-tone per annum. The fourth plant was established at Tadipatri. they searched for proper places for F.P. Smidth & Company M/S Copenhagen. After completing this task. they began to develop and manufacture several of these and other types of dairy equipments. Gradually. L & T established its first plant at Awarpur. It became Asia‘s largest cement producing unit with the capacity of 4.P. In the course of their work. M.L. Smidth‘s local offices in India. Gujarat. L. Smidth & Company‘. butter Chuns. Then both came to India in 1935 to assess the value of various cement-manufacturing groups on behalf of F.

the technological sophistication that characterizes its products. These include an integrated plant and two grinding units of the erstwhile Narmada Cement Company Limited. This company‘s reputation is based on a strong customer orientation. Recognizing the opportunities that this business will offer. a subsidiary. Ultra Tech Cement has strong brand equity and commands a price premium in most markets. Europe and the Middle East. Ultra Tech Cement Limited (Formerly known as L & T Cement Ltd. GCW at Kovaya is the largest cement plant in Asia. The company exports over 2. which is about 30 per cent of the country's total exports. The export markets span countries around the Indian Ocean. Besides the long term strategic value in the wake of rising demand for cement. Ready Mix Concrete is likely to see substantial growth in the coming years.PROFILE UltraTech Cement Limited. five grinding units and three terminals — two in India and one in Sri Lanka. Ultra Tech has initiated a transformation process to ensure that it emerges as a knowledge-based premium conglomerate in the shortest possible time. It manufactures and markets Ordinary Portland Cement. UltraTech has commenced setting up of Ready Mix Concrete plants at various places in the country. and an impressive record of achievements. a Grasim subsidiary has an annual capacity of 18. which are almost identical in layout and production capacity. The reason for laying such a big plant near a small village like Kovaya can be justified by the fact that this region is very rich of 14 .5 million tonnes per annum. Out of six cement plants of Ultra Tech. gaining control over the new company. Portland Blast Furnace Slag Cement and Portland Pozzolana Cement. Each of its plants incorporated state-of-art technology. which has been amalgamated with the company in May 2006. the acquisition brings significant synergy gains to the parent company.2 million tonnes. Ultra Tech is committed to a high growth trajectory that will deliver significant value to its customer and shareholders. There are two phases in the plant. The cement division of L&T was demerged in 2004 after Grasim made the 30 per cent open offer for equity shares. with the growth of housing and infrastructure sectors in the country. The registered office and head office of the company is at Mumbai. UltraTech has five integrated plants.) is a very well known name in the field of cement. Africa. UltraTech is the country's largest exporter of cement clinker. christened UltraTech.

 Cement in bulk is sourced from Ultra Tech‘s Gujarat Cement works and transported by carriers to Colombo. Clinker is shipped by sea from Jafrabad to the grinding units.) LIMITED.  Ceylinco is one of the most respected business groups in Sri Lanka with activities in the field of banking. The estimated resources of limestone mines are enough to supply raw material for next 40 years to GCW. 15 . NARMADA CEMENT COMPANY LIMITED. offices and sales centers. At Jafrabad (Gujarat) and two grinding units at Magdalla (Gujarat) & Ratnagiri (Maharashtra) all are port-based plants.5 MT. is located directly or indirectly in every district of the country.  A bulk Cement terminal has been established near Colombo with annual output of 0. ULTRA TECH CEYLINCO (PVT. Authorized stockiest dealing in the company‘s product line. including cement.  Ceylinco insurance company limited and UltraTech have incorporated this subsidiary in Sri Lanka. which is the chief raw material for cement production. Ultra Tech is India‘s largest manufacturer of premium quality cement.limestone resources. Ultra Tech has nationwide network of factories. The Narmada Cement Company Ltd. UltraTech's subsidiaries are: Dakshin Cements Limited and UltraTech Ceylinco (Private) Limited. insurance and finance.

Rajgopal  Mr. S. Puranmalka  Company Secretary : Mr. Rajashree Birla  Mr. S. S. O. C. Chairman  Mrs. V. S. K. N. P. B. Kumar Mangalam Birla. D. Additional Director (Independent)  Mr. Bhargava  Mr. K. Deosthalee  Mr. Dave  Mr. Independent Director  Mr. P. Nayak  Mr. R. Rathi  Mr. S. Managing Director  Executive President &Chief Financial Officer : Mr. Misra. M. D. J. Birla  Chief Manufacturing Officer :  Chief Marketing Officer : Mr. J.LEGENDARY LEADER GHANSHYAMDAS BIRLA ADITYA VIKRAM BIRLA AT THE HELM Board of Directors  Mr. Y. M. Chatterjee 16 . G. Moorthy. C. K. Maheshwari Mr. Jhaveri  Mr. T. Mathur.

five grinding units as well as three terminals of its own (one overseas.3 per cent by October 2002 Durgapur grinding unit 17 .A NATIONAL PRESENCE As part of the eighth biggest cement manufacturer in the world. These facilities gradually came up over the years.15 per cent Arakkonam grinding unit 2001 Grasim acquires 10 per cent stake in L&T. 2002 The Grasim Board approves an open offer for purchase of up to 20 per cent of the equity shares of Larsen & Toubro Ltd (L&T). Sri Lanka). to acquire management control of the company. Grasim decides to acquire an 8. with the latter acquiring controlling stake in the newly formed company UltraTech 2003: The board of Larsen & Toubro Ltd (L&T) decides to demerge its cement business into a separate cement company (CemCo). in Colombo. 1997.5 per cent equity stake from L&T and then make an open offer for 30 per cent of the equity of CemCo. as indicated below: 2006: Narmada Cement Company Limited amalgamated with UltraTech pursuant to a Scheme of Amalgamation being approved by the Board for Industrial & Financial Reconstruction (BIFR) in terms of the provision of Sick Industrial Companies Act (Special Provisions) 2004: Completion of the implementation process to demerge the cement business of L&T and completion of open offer by Grasim. Grasim increases its stake in L&T to 14. Subsequently increases stake to 15. UltraTech Cement has five integrated plants. in accordance with the provisions and guidelines issued by the Securities & Exchange Board of India (SEBI) Regulations.

1998-2000 Bulk cement terminals at Mangalore. The company's production facilities are spread across five integrated plants. and all but one have ISO 14001 certification.5 million tonnes per annum. which is about 30 per cent of the country's total 18 . While two of the plants have already received OSHAS 18001 certification. the process is underway for the remaining three. five grinding units. and three terminals — two in India and one in Sri Lanka. All the plants have ISO 9001 certification. Navi Mumbai and Colombo 1999 Narmada Cement Company Limited acquired Ratnagiri Cement Works 1998 Gujarat Cement Works Plant II Andhra Pradesh Cement Works 1996 Gujarat Cement Works Plant I 1994 Hirmi Cement Works 1993 Jharsuguda grinding unit 1987 Awarpur Cement Works Plant II 1983 Awarpur Cement Works Plant I UNIQUE PRODUCT MIX UltraTech is India's largest exporter of cement clinker. The company exports over 2.

granulated blast-furnace slag. Portland blast furnace slag cement Portland blast-furnace slag cement contains up to 70 per cent of finely ground. lower permeability. UltraTech's products include Ordinary Portland cement. either together or separately. Africa.  Ordinary Portland cement  Portland blast furnace slag cement  Portland Pozzolana cement  Cement to European and Sri Lankan norms Ordinary Portland cement Ordinary Portland cement is the most commonly used cement for a wide range of applications. Export is a thrust area in the company's strategy for growth. ash from burnt plant material or silicious earths). thermal cracking and has a high degree of cohesion and workability in concrete and mortar. Portland Pozzolana cement and Portland blast furnace slag cement. The export market comprises of countries around the Indian Ocean. burnt clays. easier finishability. general-purpose ready-mixes. higher compressive and flexural strength. combine chemically with Portland cement in the presence of water to form extra strong cementing material which resists wet cracking. Europe and the Middle East. though they do not have cementing properties in themselves. a non-metallic product consisting essentially of silicates and alumino-silicates of calcium.exports. Grinding slag for cement replacement takes only 25 per cent of the energy needed to manufacture Portland cement. 19 . Portland clinker is ground with gypsum and pozzolanic materials which. Slag brings with it the advantage of the energy invested in the slag making. Using slag cement to replace a portion of Portland cement in a concrete mixture is a useful method to make concrete better and more consistent. Portland Pozzolana cement Portland Pozzolana cement is ordinary Portland cement blended with pozzolanic materials (power-station fly ash. better concrete workability. and even high strength pre-cast and prestressed concrete. These applications cover dry-lean mixes. Portland blast-furnace slag cement has a lighter colour. improved resistance to aggressive chemicals and more consistent plastic and hardened consistency.

KOVAYA (UNIT OF ULTRATECH CEMENT LTD) Introduction: The Gujarat Cement Works (GCW) unit was commissioned in 1996 on 2nd April at Kovaya village. reason for laying such a big plant near a small village like Kovaya can be justified by the fact that this region is very rich in limestone resources. Out of six cement plants of UltraTech.ULTRATECH CEMENT GUJARAT CEMENT WORK. which is the chief raw material for cement production. so that the site could be used for shipping cement to the user points in the country & also in neighbouring countries like Sri Lanka. It is running by Aditya Birla Group after undertaking L&T. Also. The estimated resources of limestone mines are enough to supply raw material for next 40 years to GCW. 20 . in Gujarat. it helps in transportation cost reduction. which are almost identical in layout and production capacity. the other criteria for site selection was its proximity to the sea. GCW at Kovaya is the largest cement plant in Asia. Thus. There are two phases in the plant. It is totally automatic & dry plant.

bulk cement has been exported from GCW to UltraTech Ceylinco Pvt. The nearest railway station is Rajula station and the nearest airport is Bhavnagar. Location The site is located near Rajula (25 km from Rajula) in Gujarat. AWARDS Awards won by Gujarat Cement Works UltraTech Cement Year Award Bhartiya Udyog Ratan Award presented to Sh. India. This unit has made record in production and quality of cement. Ltd. Vadodara 2001-2002 Greentech Environment Excellence Award By Greentech Foundation. It has received ISO 9002 certificate in October 1997 for its better quality system in manufacturing and dispatching of clinker and cement. New Delhi 2002 Gujarat State Safety Award By Gujarat Safety Council (GSC). This unit is largest and high production unit of UltraTech. the group‘s joint venture (JV) in Sri Lanka. for the past five years. Saudi Arabia and a few European countries. It is 150 kms from Bhavnagar & 75 kms from Diu. New Delhi 2002-2003 Greentech Gold Safety Award By Greentech Foundation. Clinker and cement are exported to Sri Lanka.KYP Kulkarni By Indian Economic 2004 Development & Research Association (IEDRA). Accordingly. The plant is located at south-eastern coast of Saurashtra in Gujarat. 2001 Vadodara 21 .Gujarat Cement Works (GCW) has a captive jetty engineered for exports. (UCPL). New Delhi Awards for Excellence in "Industrial Relations" By Federation of Gujarat Industries (FGI).

22 .



Financial statements are summaries of the operating, financing, and investment activities of a business. Financial statements should provide information useful to both investors and creditors in making credit, investment, and other business decisions. And this usefulness means that investors and creditors can use these statements to predict, compare, and evaluate the amount, timing, and uncertainty of potential cash flows. In other words, financial statements provide the information needed to assess a company‘s future earnings and therefore the cash flows expected to result from those earnings. In this chapter, we discuss the four basic financial statements: the balance sheet, the income statement, the statement of cash flows, and the statement of shareholders‘ equity. The analysis of financial statements is provided in Part Six of this book.

The accounting data in financial statements are prepared by the firm‘s management according to a set of standards, referred to as generally accepted accounting principles (GAAP). The financial statements of a company whose stock is publicly traded must, by law, be audited at least annually by independent public accountants (i.e., accountants who are not employees of the firm). In such an audit, the accountants examine the financial statements and the data from which these statements are prepared and attest—through the published auditor‘s opinion—that these statements have been prepared according to GAAP. The auditor‘s opinion focuses on whether the statements conform to GAAP and that there is adequate disclosure of any material change in accounting principles.

The financial statements are created using several assumptions that affect how we use and interpret the financial data:


 Transactions are recorded at historical cost. Therefore, the values shown in the statements are not market or replacement values, but rather reflect the original cost (adjusted for depreciation, in the case of depreciable assets).  The appropriate unit of measurement is the dollar. While this seems logical, the effects of inflation, combined with the practice of recording values at historical cost, may cause problems in using and interpreting these values.  The statements are recorded for predefined periods of time. Generally, statements are produced to cover a chosen fiscal year or quarter, with the income statement and the statement of cash flows spanning a period‘s time and the balance sheet and statement of shareholders‘ equity as of the end of the specified period. But because the end of the fiscal year is generally chosen to coincide with the low point of activity in the firm‘s operating cycle, the annual balance sheet and statement of shareholders‘ equity may not be representative of values for the year.  Statements are prepared using accrual accounting and the matching principle. Most businesses use accrual accounting, where income and revenues are matched in timing such that income is recorded in the period in which it is earned and expenses are reported in the period in which they are incurred to generate revenues. The result of the use of accrual accounting is that reported income does not necessarily coincide with cash flows. Because the financial analyst is concerned ultimately with cash flows, he or she often must understand how reported income relates to a company‘s cash flows.  It is assumed that the business will continue as a going concern. The assumption that the business enterprise will continue indefinitely justifies the appropriateness of using historical costs instead of current market values because these assets are expected to be used up over time instead of sold.  Full disclosure requires providing information beyond the financial statements. The requirement that there be full disclosure means that, in addition to the accounting numbers for such accounting items as revenues, expenses, and assets, narrative and additional numerical disclosures are provided in notes accompanying the financial statements. An analysis of financial statements is therefore not complete without this additional information.  Statements are prepared assuming conservatism. In cases in which more than one interpretation of an event is possible, statements are prepared using the most conservative interpretation. The financial statements and the auditors‘ findings are published in the firm‘s annual and quarterly reports sent to shareholders and the 10K and 10Q filings with the Securities and Exchange Commission (SEC).Also included in the reports, among other items, is a discussion by management, providing an overview of company events. The annual reports are much more detailed and disclose more financial information than the quarterly reports.


There are three basic financial statements:
 Balance sheet

 Income statement  Cash Flow statement

THE BALANCE SHEET The balance sheet is a summary of the assets, liabilities, and equity of a business at a particular point in time—usually the end of the firm‘s fiscal year. The balance sheet is also known as the statement of financial condition or the statement of financial position. The values shown for the different accounts on the balance sheet are not purported to reflect current market values; rather, they reflect historical costs. Assets are the resources of the business enterprise, such as plant and equipment that are used to generate future benefits. If a company owns plant and equipment that will be used to produce goods for sale in the future, the company can expect these assets (the plant and equipment) to generate cash inflows in the future. Liabilities are obligations of the business. They represent commitments to creditors in the form of future cash outflows. When a firm borrows, say, by issuing a long-term bond, it becomes obligated to pay interest and principal on this bond as promised. Equity, also called shareholders‘ equity or stockholders‘ equity, reflects ownership. The equity of a firm represents the part of its value that is not owed to creditors and therefore is left over for the owners. In the most basic accounting terms, equity is the difference between what the firm owns—its assets—and what it owes its creditors—its liabilities. ASSETS There are two major categories of assets: current assets and noncurrent assets, where noncurrent assets include plant assets, intangibles, and investments. Assets that do not fit neatly into these categories may be recorded as either other assets, deferred charges, or other noncurrent assets. CURRENT ASSETS Current assets (also referred to as circulating capital and working assets) are assets that could reasonably be converted into cash within one operating cycle or one year, whichever takes longer. An operating cycle begins when the firm invests cash in the raw materials used to produce its goods or services and ends with

Inventories represent the total value of the firm‘s raw materials. including: ■ FIFO (first in. and finished goods consisting of trucks packaged and ready for shipping. as well as tax payments and cash flows. Because not all accounts are ultimately collected. and ■ Average cost. Because the operating cycle of most businesses is less than one year.. Prepaid expenses may be reported as part of other current liabilities. accounts receivable. first out). work-in-process. its operating cycle begins when it purchases the raw materials for the products (e. which assumes that the first items purchased are the first items sold.g. 26 . and inventories. resulting in a net accounts receivable figure. first out).‖ perhaps at the end of the month or within 30 days of the sale. marketable securities. Another current asset account that a company may have is prepaid expenses. Marketable securities are securities that can be readily sold when cash is needed. is the average of the cost of all items purchased. Some financial reports combine cash and marketable securities into one account referred to as cash and cash equivalents or cash and marketable securities. ■ LIFO (last in. the allowance for doubtful accounts. the remaining insurance that is prepaid as of the end of the year is considered an asset. Accounts receivable therefore represents money that the firm expects to collect soon. A common example is the case of a company paying insurance premiums for an extended period of time (say. which assumes that the cost of items sold. sugar) and ends when it receives cash for selling the candy to retailers. Accounts receivable are amounts due from customers who have purchased the firm‘s goods or services but haven‘t yet paid for them. For example. if Fictitious manufactures and sells candy products.the collection of cash for the sale of those same goods or services. which assumes that the last items purchased are the first items sold. three months) is applicable to the insurance coverage for the current fiscal year. and finished (but as yet unsold) goods. but for which only a portion (say. the gross amount of accounts receivable is adjusted by an estimate of the uncollectible accounts. many firms allow their customers to ―buy now and pay later. Current assets consist of cash. There are three basic methods of accounting for inventory. and any cash in excess of immediate needs is usually invested temporarily in marketable securities. Every company needs to have a certain amount of cash to fulfil immediate needs. work-in-process consisting of truck parts and partly completed trucks. Investments in marketable securities are simply viewed as a short term place to store funds. such as deposits in bank accounts. marketable securities do not include those investments in other companies‘ stock that are intended to be long term. The choice of inventory accounting method is significant because it affects values recorded on the balance sheet and the income statement. Prepaid expenses are amounts that have been paid but not as yet consumed. a year). To encourage sales. Cash comprises both currency—bills and coins—and assets that are immediately transformable into cash. we tend to think of current assets as those assets that can be converted into cash in one year. A manufacturer of toy trucks would likely have plastic and steel on hand as raw materials.

is a charge that accounts for the using up of an asset over the length of an accounting period. less whatever has been amortized.according to the accounting books and is therefore often referred to as the book value of the assets. buildings. Noncurrent Assets Noncurrent assets are assets that are not current assets. For example. Gross plant and equipment. a copyright is the exclusive right to publish and sell a literary. in large part. a patent is the exclusive right to produce and sell a particular. though the useful life of a patent—the period in which it adds value to the company-may be much less than 17 years. uniquely defined good and has a legal life of 17 years. accumulated depreciation. on the industry in which they operate. or gross plant assets. The number of years over which an intangible asset is amortized depends on the particular asset and its perceived useful life. Therefore the company may choose to amortize a patent‘s cost over a period less than 17 years. such as the equipment. 27 . The cost of some intangible assets is amortized (―spread out‖) over the life of the asset. or net plant assets. it is not expected that noncurrent assets can be converted into cash within an operating cycle. artistic. and nonphysical assets. Amortization is akin to depreciation: The asset‘s cost is allocated over the life of the asset. Intangible assets are the current value of nonphysical assets that represent long-term investments of the company. though its useful life in terms of generating income for the company may be much less than 50 years. is the sum of the original costs of all equipment. machinery. or musical composition. Plant assets are the physical assets. Goodwill was created when one company buys another company at a price that exceeds the acquired company‘s fair market value of its assets. and goodwill. The net plant and equipment amount is hence the value of the assets—historical cost less any depreciation. Accumulated depreciation is the sum of all the depreciation charges taken so far for all the company‘s assets. and is granted for 50 years beyond the author‘s life. and net plant assets. that is. Depreciation. which are used in the operation of the business. and buildings. More challenging is determining the appropriate amortization period for goodwill. the reported value is the original cost of the asset. copyrights. Such intangible assets include patents. Noncurrent assets include physical assets. it is a means for allocating the asset‘s cost over its useful life. is the difference between gross plant assets and accumulated depreciation. Net plant and equipment. such as plant and equipment.Companies‘ investment in current assets depends. As another example. as you will see in the next chapter. such as intangibles. We describe a firm‘s current investment in plant assets by using three values: gross plant assets. and machinery the firm uses to produce its goods and services.

rent. Whether the unrealized gains or losses affect earnings on the income statement depend on whether the securities are deemed trading securities or available for sale. Current liabilities include:  Accounts payable. a firm‘s obligations to its creditors. depending on their particular circumstances. Examples of investments include equity securities of another company and real estate that is held for speculative purposes. and insurance. in part. LIABILITIES Liabilities.A company may have additional noncurrent assets. arising from prepayment for which a benefit is received over an extended period of time. arising from timing differences between reported income and tax income. but which do not generate revenue or are not used to manufacture a product. The reliance on short-term liabilities and the type of current liabilities depends. Other noncurrent assets include long term prepaid expenses. which are obligations such as wages and salaries payable to the employees of the business. depending on the type of investment.  Short-term loans from a bank or notes payable within a year.  Current portion of long-term debt or the current portion of capital leases. which are assets that are purchased with the intention of holding them for a long term. and deferred taxes. are made up of current liabilities. Any portion of longterm indebtedness—obligations extending beyond one year—due within the year. whereas investments held as trading securities or available for sale are recorded at market value. on the industry in which the firm operates. whereby reported income exceeds taxable income. LONG TERM LIABILITIES 28 . A company may have a noncurrent asset referred to as investments. Current Liabilities Current liabilities are obligations that must be paid within one operating cycle or one year. long-term liabilities. and deferred tax assets. which are obligations to pay suppliers. investments held to maturity are recorded at cost.  Accrued expenses. Long-term investment in securities of other companies may be recorded at cost or market value. whichever is longer. They arise from goods and services that have been purchased but not yet paid.

if you own a share of preferred stock that has a $100 par value and a 9% dividend rate. Preferred shareholders‘ equity is the product of the number of preferred shares outstanding and the par value of the stock. Shareholders‘ equity is also referred to as the book value of equity. your ownership share of the company is $100. The value of the ownership interest of preferred stock is represented in financial statements as its par value. For example. the plan‘s assets are less than the projected benefit obligation. such as health care. the difference is recorded as a long-term liability. the company may have an asset or a liability corresponding to postretirement benefits. if the fair value of the pension plan‘s assets exceeds the projected benefit obligation (the estimated present value of projected pension costs). ownership is represented by common stock and preferred stock. which is also the dollar value on which dividends are figured. the analyst may encounter another account. For a corporation. bonds. DEFFERED TAXES Along with long-term liabilities. A lease obligates the lessee—the one leasing and using the leased asset—to pay specified rental payments for a period of time. the difference is recorded as a long-term asset. In a similar manner. whereas the deferred tax asset. capital lease obligations. whereas post-retirement benefits include any other retirement benefit besides pensions. They include notes. you receive $9 in dividends each year. but are not due yet. Deferred taxes are taxes that will have to be paid to the federal and state governments based on accounting income. These differences are temporary and are the result of different timing of revenue or expense recognition for financial statement reporting and tax purposes. The remainder of the equity belongs 29 . If. deferred taxes. The pension benefits are commitments by the company to pay specific retirement benefits. and pension obligations. since this is the value of equity according to the records in the accounting books. Notes and bonds both represent loans on which the borrower promises to pay interest periodically and to repay the principal amount of the loan. Deferred taxes arise when different methods of accounting are used for financial statements and for tax purposes. The deferred tax liability arises when the actual tax liability is less than the tax liability shown for financial reporting purposes (meaning that the firm will be paying the difference in the future). A company‘s pension and post-retirement benefit obligations may give rise to long-term liabilities. mentioned earlier. on the other hand.Long-term liabilities are obligations that must be paid over a period beyond one year. Whether the lease obligation is recorded as a liability or is expensed as lease payments made depends on whether the lease is a capital lease or an operating lease. Further. it is shown that way on the balance sheet. Basically. EQUITY Equity is the owner‘s interest in the company. arises when the actual tax liability is greater than the tax liability shown for reporting purposes.

inventories.‖ Then.000 Additional paid-in capital $390. the total par value or stated value of all outstanding common shares is usually entitled ―capital stock‖ or ―common stock. but may have an arbitrary value. which can be less than the number of shares issued if the corporation has bought back (repurchased) some of its issued stock. It shows the results of the firm‘s operating and financing decisions during that time. The operating decisions of the company—those that apply to production and marketing— generate sales or revenues and incur the cost of goods sold (also referred to as the cost of sales or the cost of products sold).  The number of shares issued and sold by the corporation.  The number of shares currently outstanding. which is stock that the company has repurchased. Any cash generated by the firm that has not been paid out in dividends has been reinvested in the firm‘s assets—to finance accounts receivable. and retained earnings.000 There are actually four different labels that can be applied to the number of shares of a corporation on a balance sheet:  The number of shares authorized by the shareholders. additional paid-in capital. an entry called additional paid-in capital is added. and adjustments must be made for any treasury stock. If a firm sold 10. The outstanding stock is reported in the stock accounts. or stated value. per share. Nonetheless. usually one month. it has no relation to market value or to dividends paid on common stock. A retained. which can be less than the number of shares authorized. this is the amount received by the corporation for its common stock in excess of the par or stated value. It consists of three parts: common stock outstanding (listed at par or at stated value). $1 par value $10. over the life of the corporation.  The number of shares of treasury stock. Retained earnings are not strictly cash and any correspondence to cash is coincidental. This statement is also referred to as the profit and loss statement. to inject reality into the equity part of the balance sheet. its equity accounts would show: Common stock.to the common shareholders. Some stock has no par value. Operating decisions 30 .000 shares of $1 par value common stock at $40 a share. The bulk of the equity interest in a company is in its retained earnings. and so forth. three months. THE INCOME STATEMENT An income statement is a summary of the revenues and expenses of a business over a period of time. less any dividends that have not been paid.earnings is the accumulated net income of the company. The par value of common stock is an arbitrary figure. or one year. The difference between sales and cost of goods sold is gross profit. equipment.

The results of financing decisions are reflected in the remainder of the income statement. are subtracted from EBIT. and losses items and is based on the idea that all results of the firm—whether operating or nonoperating should be reflected in the earnings of the company. the amount available to owners of the firm. 31 . or operating earnings. expenses. in a sense. operating income.also result in administrative and general expenses. Net income is. net income is equivalent to earnings available for common shareholders. which measures inflows and outflows of cash on account of any type of business activity. CASH FLOW STATEMENT: It is a statement. such as advertising fees and office salaries. The board of directors may then distribute all or part of this as common stock dividends. the result is net income. Companies must report comprehensive income prominently within their financial statements. particularly its operating. retaining the remainder to help finance the firm. Rather. Comprehensive income is a net income amount that includes all revenues. net income may or may not correspond to cash flow. gains. Deducting these expenses from gross profit leaves operating profit. Depending on these accounting procedures. This is referred to as the all-inclusive income concept. The all-inclusive income concept requires that these items be recognized in the financial statements as part of comprehensive income. Operating decisions take the firm from sales to EBIT on the income statement. the preferred stock dividends are deducted from net income to arrive at earnings available to common shareholders. When interest expenses and taxes. which are both influenced by financing decisions. it is a summary of operating performance measured over a given time period. It is important to note that net income does not represent the actual cash flow from operations and financing. If the firm does not have preferred stock (as is the case with Fictitious and most nonfictitious corporations). which is also referred to as earnings before interest and taxes (EBIT). If the firm has preferred stock. using specific accounting procedures. The cash flow statement also explains reasons for such inflows and outflows of cash so it is a report on a company's cash flow activities. investing and financing activities.

Dun & Bradstreet. financial analysis may be used not only to evaluate the performance of the firm. but also as an aid in implementing personnel policies and rewards systems. markets. Standard & Poor‘s. It consists of the evaluation of the financial condition and operating performance of a business firm. Outside the firm. Data for financial analysis may come from other areas within the firm. or the resources to perform financial analysis on their own may purchase analyses from companies that specialize in providing this service. As an example. much of which is now also available on the Internet. to evaluate the ability of a supplier to hold to the conditions of a long-term contract. a means for examining risk and expected return. or from financial information vendors such as Bloomberg Financial Markets. Analyses may be performed both periodically and as needed. Moody‘s Investors Service. Fitch Ratings. in other words. Such companies can provide reports ranging from detailed written analyses to simple creditworthiness ratings for businesses. and to evaluate the market performance of competitors. Within the firm. such as marketing and production departments. as well as from government publications. the time. an industry. and economies). and the forecasting of its future condition and performance. Firms and investors that do not have the expertise. and Value Line. Forbes. Fortune. financial analysis may be used to determine the creditworthiness of a new customer. It is. Standard & Poor‘s Corporation. from small local businesses to major corporations. such as the Federal Reserve Bulletin. 32 .FINANCIAL ANALYSIS Financial analysis is a tool of financial management. but also its divisions or departments and its product lines. As another example. a financial services firm. from the firm‘s own accounting data. and the Wall Street Journal also publish financial data (concerning individual firms) and economic data (concerning industries. Financial publications such as Business Week. or even the economy. evaluates the creditworthiness of many firms. not only to ensure informed investing and financing decisions. and Fitch—evaluate the credit quality of debt obligations issued by corporations and express these views in the form of a rating that is published in the reports available from these three organizations. three companies— Moody‘s Investors Service.

Generally.term bank loan ). employees and other parties who are directly connected with a company: 1. government agencies and other parties who are outside the business but need financial information about the business for numbers of reasons. 33 . 2. managers. B. 2. 1. Owners and managers require financial statements to make important business decisions that affect its continued operations. 3. External Users: are potential investors. thus providing them with the basis in making investment decisions. Financial analyses are often used by investors and is prepared by professionals (financial analysts). Financial institutions (banks and other lending companies) use them to decide whether to give a company with fresh loans or extend debt securities (such as a long. these groups consists of people both inside and outside a business. Employees also need these reports in making collective bargaining agreements with the management. these users are: A. 4. in the case of labour unions or for individuals in discussing their compensation. Financial analysis is then performed on these statements to provide management with more detailed information. Media and the general public are also interested in financial statements of some companies for a variety of reasons. Internal Users: are owners. and it form part of the Annual Report of the company. These statements are also used as part of management's report to its stockholders. Prospective investors make use of financial statements to assess the viability of investing in a business. banks. Government entities (tax authorities) need financial statements to ascertain the propriety and accuracy of taxes and duties paid by a company. promotion and rankings. Who uses these analyses? Financial statements are used and analyzed by a different group of parties.

10. between different time periods for one company 4. and by a firm‘s creditor. It indicates relation of two mathematical expressions and the relationship between two or more things. income statement and the cash flow of company. It gives an indication of changes and reflects whether the firm‘s financial performance has improved or deteriorated or 34 . Essence of ratio analysis: Financial ratio analysis helps us to understand how profitable a business is. its current ratios will be compared with its past ratios. between companies 2. by current and potential stockholders of a firm. Financial ratios are used by managers within a firm. it is called time series or trend analysis. Financial ratio is a ratio of selected values on an enterprise's financial statement. There are many standard ratios used to evaluate the overall financial condition of a corporation or other organization. Financial ratios allow for comparisons: 1. When financial ratios over a period of time are compared. such as 10%. if it has enough money to pay debts and we can even tell whether its shareholders could be happy or not. besides Ratios are always expressed as a decimal values. Financial analysts use financial ratios to compare the strengths and weaknesses in various companies. between a single company and its industry average To evaluate the performance of one firm. or the equivalent percent value. such as 0.FINANCIAL RATIO ANALYSIS Ratio analysis is such a significant technique for financial analysis. between industries 3. Values used in calculating financial ratios are taken from balance sheet.

the average may be meaningless and the comparison not possible if the firms with in the same industry widely differ in their accounting policies and practices. It might be more useful to select some competitors which have similar operations and compare their ratios with the firm‘s. Another method is to compare ratios of one firm with another firm in the same industry at the same point in time. Third. which influence the financial and operating relationships. First finding average ratios for the industries is such a headache and difficult. However if it can be standardized and extremely strong and extremely weak firms be eliminated then the industry ratios will be very useful. Since it is so easy to find the financial statements of similar firms through publications or Medias this type of analysis can be performed so easily. Second. Industry ratios are important standards in view of the fact that each industry has its own characteristics. This comparison is known as the cross sectional analysis. 35 . Because those changes might be result of changes in the accounting polices without material change in the firm‘s performances. industries include companies of weak and strong so the averages include them also.remained the same over that period of time. its ratios may be compared with average ratios of the industry to which the firm belongs. This comparison shows the relative financial position and performance of the firm. but more importantly it must be recognized that why those ratios have changed. Sometimes spread may be so wide that the average may be little utility. To determine the financial condition and performance of a firm. It is not the simply changes that has to be determined. But there are certain practical difficulties for this method. This method is known as the industry analysis that helps to ascertain the financial standing and capability of the firm in the industry to which it belongs.

So for using them first we have to decide what we want to know. What are the points that those ratios put light on them? And how can these numbers help us in performing the task of management? The answer to these questions is: We can use ratio analysis to tell us whether the business 1. has a gearing problem or everything is fine 7. then we can decide which ratios we need and then we must begin to calculate them. it is logical to express that how come these calculations are of so importance. is able to pay its taxes 5.What does ratio analysis tell us? After such a discussion and mentioning that these ratios are one of the most important tools that is used in finance and that almost every business does and calculate these ratios. 36 . is profitable 2. is a candidate for being bought by another company or investor But as it is obvious there are many different aspects that these ratios can demonstrate. is using its assets efficiently or not 6. has enough money to pay its bills and debts 3. remuneration or so on 4. could be paying its employees higher wages.

Which Ratio for whom: As before mentioned there are varieties of people interested to know and read these information and analyses. 3. As a result the Return on Capital Employed Ratio is the one for this group. Gearing Ratios will suit this group. 37 . So they need to determine whether they should buy shares in the business. Therefore we can say there are different ratios for different groups. Return on Capital Employed Ratio is the measurement that can help them. Employees: The employees are always concerned about the ability of the business to provide remuneration. retirement benefits and employment opportunities for them. Managers: Managers might need segmental and total information to see how they fit into the overall picture of the company which they are ruling. And it is because each of these groups have different type of questions that could be answered by a specific number and ratio. hold on to the shares they already have or sell the shares they already own. They also want to assess the ability of the business to pay dividends. And Profitability Ratios can show them what they need to know. these groups with the ratio that suits them is listed below: 1. 4. Investors: These are people who already have shares in the business or they are willing to be part of it. Lenders: This group consists of people who have given loans to the company so they want to be sure that their loans and also the interests will be paid and on the due time. therefore these information must be find out from the stability and profitability of their employers who are responsible to provide the employees their need. 2. however different people for different needs.

Customers: are interested to know the Profitability Ratio of the business with which they are going to have a long term involvement and are dependent on the continuance of presence of that. Financial analysts: they need to know various matters. Governments and their agencies: are concerned with the allocation of resources and. 6. Suppliers and other trade creditors: Businesses supplying goods and materials to other businesses will definitely read their accounts to see that they don't have problems. 9. therefore they are interested in possibly all the ratios. depreciation. Researchers: researchers' demands cover a very wide range of lines of enquiry ranging from detailed statistical analysis of the income statement and balance sheet data extending over many years to the qualitative analysis of the wording of the statements depending on their nature of research. Local community: Financial statements may assist the public by providing information about the trends and recent developments in the prosperity of the business and the range of its activities as they affect their area so they are interested in lots of ratios. 7.5. after all. the activities of businesses. any supplier wants to know if his customers are going to pay them back and they will study the Liquidity Ratio of the companies. for example. determine taxation policies and as the basis for national income and similar statistics. To regulate the activities of them. 8. they calculate the Profitability Ratio of businesses. 10. 38 . bad debts and so on. the accounting concepts employed for inventories.

Financial ratios quantify many aspects of a business and are an integral part of financial statement analysis. Solvency or Gearing ratios measures the percentage of capital employed that is financed by debt and long term finance. Rate of Return Ratio (ROR) or Overall Profitability Ratio: The rate of return ratios are thought to be the most important ratios by some accountants and analysts. however. Profitability ratios which use margin analysis and show the return on sales and capital employed. 39 . 2. The lower the gearing ratio. the higher the dependence on borrowing and long term financing. 3. 5. Investors ratios usually interested by investors. the higher the dependence on equity financing. Although these categories are not fixed in all over the world however there are almost the same. In context. One reason why the rate of return ratios is so important is that they are the ratios that we use to tell if the managing director is doing their job properly.CLASSIFICATION OF RATIOS In isolation. The higher the gearing. the higher the level of financial risk due to the increase volatility of profits. Traditionally. a financial ratio is a useless piece of information. 6. a financial ratio can give a financial analyst an excellent picture of a company's situation and the trends that are developing. It should be noted that the term ―Leverage‖ is used in some texts. which give a picture of a company's short term financial situation. Turn over Ratios or activity group ratios indicate efficiency of organization to various kinds of assets by converting them to the form of sales. the higher the level of gearing. 4. just with different names: 1. A ratio gains utility by comparison to other data and standards. Financial ratios are categorized according to the financial aspect of the business which the ratio measures. Liquidity ratios measure the availability of cash to pay debt.

40 .

57 172.79 501.95 381. Cr.21 141. 4784. Cr.40 7709.60 2500. 4304.40 124.92 463. Rs.034.78 1451.99 291.46 7709.28 1. Cr.18 483. 7.45 31-03-2008 Rs. Shareholders’ Funds Equity Share Capital Share Capital Suspense Employees Stock Option Outstanding Reserves and Surplus Loan Funds Deferred Tax Liabilities 942.28 696.09 124.35 124.49 1.49 0.58 183.15 170.11 4657.9 48. Cr.18 184.61 477.11 433.63 560.401. Cr. Cr.7 2517.83 576.40 691.77 723. Rs.63 Balance Sheet Total 3619.40 0.09 4657. Cr.38 581.38 2537.FINANCIAL OVERVIEW OF ULTRATECH CEMENT LIMITED BALANCE SHEET As On Fixed Assets Gross Block Net Block Capital WIP Investment Current Assets Inventories Debtors Other Current Assets Balance Sheet Total 283.635.52 6258.50 343. Cr.26 124.49 124.38 31-03-2005 Rs.69 677.29 2548.02 4.85 6258.85 609.29 1578. Rs.13 237.96 1639. 4605.93 2141.38 41 .55 220.39 31-032007 Rs.68 3475. Cr.63 722.63 318.95 483.71 171.71 913.09 519.52 379.80 Liabilities Rs.73 1531.90 31-03-2009 Rs.46 2283.50 542.67 214.52 3623.4 3623. 224.97 186.19 776.77 2571.99 3619.76 216.73 1740. 4972.79 31-03-2006 Rs. Rs.03 172./Prov.93 Current Liabilities Creditors Other Current Liab. Cr.

23 501.007.03 188.24 - 42 .24 2.85 31-Mar-06 3.24 31-Mar-09 62.83 1744.01 1.24 1507.61 31-Mar-09 6.83 1.910.79 31-Mar-08 62.06 1482.509.59 229.22 1.56 1392.18 43.05 272.681.44 1166.760.08 1.SUMMARISED P&L ACCOUNT As On Net Sales Operating profit (PBIDT) PBIT Gross profit (PBDT) PBT PAT( net profit) 31-Mar-05 2.29 1437.26 338.29 1684.46 1361.45 554.81 1191.81 51.79 31-Mar-07 49.28 31-Mar-08 5.383.46 977.62 285.33 31-Mar-06 21.23 226.03 221.00 237.78 DIVIDEND As On Equity dividend Preference dividend 31-Mar-05 9.417.02 323.25 216.720.299.19 782.76 31-Mar-07 4.

They are of particular interest to those extending short term credit to the firm. Liquidity ratios provide information about a firm‘s ability to meet its short.30 1.91 2006 772.72 1.17 755.10 43 . CURRENT RATIO: Current Asset Current Ratio = Current Liabilities 2005 Current Asset Current Liabilities Current Ratio 837. Generally.term financial obligations. A company's ability to turn short-term assets into cash to cover debts is of the utmost importance when creditors are seeking payment.89 1278. A complete liquidity ratio analysis can help uncover weaknesses in the financial position of the business.18 1.52 556. the higher the value of the ratio.27 2008 1303. Bankruptcy analysts and mortgage originators frequently use the liquidity ratios to determine whether a company will be able to continue as a going concern.02 2009 1361.39 2007 960. Two frequently-used liquidity ratios are current and quick ratio. While liquidity ratios are most helpful for short-term creditors/suppliers and bankers. the larger the margin of safety that the company possesses to cover short-term debts. the current ratio and the acid test ratio.05 1. they are also important to financial managers who must meet obligations to suppliers of credit and various government agencies.RATIO OF ULTRATECH CEMENT LIMITED LIQUIDITY RATIOS: The two liquidity ratios.56 1. are the most important ratios in almost the whole of ratio analysis and they are also the simplest to use.65 439. 1.61 1242.

term liabilities (debt and payables) with its short-term assets (cash. the more capable the company is of paying its obligations. The higher the current ratio. inventory. but the company has shown constant decreasing trend in its financial health in subsequent years.Comments: The ratio is mainly used to give an idea of the company‘s ability to pay back its short. A ratio in each year suggests that the company would be able to pay off its obligations if they came due at that point. because prepaid expenses cannot be converted to cash. Liquid asset is all current assets except the inventories and prepaid expenses. There are two terms of liquid asset and liquid liabilities in this formula. The liquid liabilities include all current liabilities except bank overdraft and cash credit since they are not required to be paid off immediately. Quick or Acid-Test Ratio The essence of this ratio is a test that indicates whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory. Since low current ratio does not necessarily mean that the firm will go bankrupt. receivables). Short term creditors prefer a high current ratio since it reduce their risk. 2. So it is the backing available to liabilities that must be paid almost immediately. but it is definitely is not a good sign. 44 .

56 0. 45 . primarily because the current ratio includes inventory assets which might not be able to turn to cash immediately.64 1242.13 1278.30 1.95 556.Liquid Asset Quick Ratio= Liquid Liabilities Liquid Asset Liquid Liabilities Quick Ratio 2005 553.70 2007 526. if the acid-test ratio is much lower than the current ratio. it means current assets are highly dependent on inventory.18 0.94 439. Companies with ratios of less than 1 cannot pay their current liabilities and should be looked at with extreme caution.70 2008 694.72 0. Furthermore.59 755.26 2006 392.54 Comments: The acid-test ratio is far more forceful than the current ratio.54 2009 669.05 0.

Such ratios are frequently used when performing fundamental analysis on different companies.23 1.TURN OVER RATIOS Accounting ratios that measure a firm's ability to convert different accounts within their balance sheets into cash or sales. Companies will typically try to turn their production into cash or sales as fast as possible because this will generally lead to higher revenues.78 2009 6. FIXED ASSETS TURN OVER RATIO: It shows how the company uses its fixed assets to achieve sales.06 2006 3299.83 2008 5508. 1. The formula is as follows: Net Sales Fixed Asset Turn Over Ratio= Fixed Assets 2005 NET SALES 2681.97 FIXED ASSETS TURN OVER RATIO: 1.15 1.24 3214.20 46 .032 1.23 4783.45 2007 4910.53 1.61 5312.383.08 FIXED ASSETS 2597.08 2678.

CURRENT ASSETS TURN OVER RATIO: It is almost like the fixed asset turnover ratio. So it shows that the company is using its assets more efficiently. it calculates the capability of organization to earn sales with usage of current assets.Comments: A High fixed asset turnover ratio indicates the capability of the firm to earn maximum sales with the minimum investing in fixed assets. As it is shown in above the Company is using its assets specially fixed assets more efficiently each year although it had a light decrease in efficiency in 2008 and 2009 compared to 2007. So it indicates with what ratio current assets are turned over in the form of sales. 2. This ratio is calculated as: Net Sales Current Asset Turn Over Ratio= Current Assets 47 .

89 1361.20 4. 2006.17 1303. 2007.69 Comments: In this formula current assets are balance sheet accounts that represent the value of all assets that are reasonably expected to be converted into cash within one year in the normal course of business.65 772. It means the company is using its current assets more efficiently.45 4910. never mind the slight decrease in 2008. also shows that company has used its current assets better than its fixed assets 48 .08 2681.27 5.78 CURRENT ASSETS 837.61 CURRENT ASSETS TURN OVER RATIO: 3.52 960.22 4.06 3299. The comparison between two ratios over the same period of time.2005 NET SALES 2006 2007 2008 2009 6.383. A higher current assets turnover ratio is more desirable since it shows the better financial position of company and better usage of these current assets.11 4.83 5508. It can be seen from above figure that the company has shown high ratio in 2005. and 2009.

89 6.47 204. These operations and inventory are then converted into sales revenue for the company.69 49 .35 216. The working capital turnover ratio is used to analyze the relationship between the money used to fund operations and the sales generated from these operations.24 23. WORKING CAPITAL TURN OVER RATIO: As its name suggests it is the relationship between turnover and working capital. This provides some useful information as to how effectively a company is using its working capital to generate sales.33 118.06 3299.3.78 WORKING CAPITAL WORKING CAPITAL TURN OVER RATIO 398.99 25. It is a measurement comparing the depletion of working capital to the generation of sales over a given period.83 5508. The formula related is: Net Sales Working Capital Turn Over Ratio = Working Capital 2005 NET SALES 2006 2007 2008 2009 6.48 53.73 15.383.96 217.08 2681. A company uses working capital to fund operations and purchase inventory.45 4910.

4. In a general sense. Negative working capital means that a company currently is unable to meet its short-term liabilities with its current assets. the better because it means that the company is generating a lot of sales compared to the money it uses to fund the sales.Comments: The term working capital is a measure of both a company's efficiency and its short-term financial health. The working capital ratio is calculated as: Working Capital = Current Asset – Current Liabilities Positive working capital means that the company is able to pay off its short-term liabilities.. Capital Employed Turnover Ratio The capital employed turnover ratio tells us the state of the relationship between the shareholders' investment in the business and the sales that the management of the business has been able to generate from it. 50 . the higher the working capital turnover.

capital employed indicated the long term funds supplied by creditors and owners of the firms. A high ratio is a sign of capability of firm to earn maximum sales with minimum amount of capital employed and this firm is constantly improving its ratio from 2005 to 2007 except for 2008 and 2009 it is due to current economic slowdown prevailing in the country as well as in the world 51 .47 2008 5508.24 2009 6.Net Sales Capital Employed Turn Over Ratio= Capital Employed Net Sales Capital Employed Capital Employed Turnover Ratio 2005 2681.06 2598.84 1.72 1.05 1. By "employing capital" you are making an investment.41 1.01 1.032 2006 3299.33 2007 4910. So it can be computed as: Capital Employed = share capital + Long term liabilities + reserve and surpluses This ratio shows the efficiency of the firm with which the capital employed is being utilized.45 2490.08 5742.383. all generally refer to the investment required for a business to function.78 4436.83 3342. So.11 Comments: Capital employed can be expressed in different terms.

The lower the debt equity ratio the higher the degree of protection enjoyed by the creditors. 52 . It is a general term describing a financial ratio that compares some form of owner's equity (or capital) to borrowed funds. The idea is that this relationship ought to be in balance. The debt equity ratio defined by the controller of capital issue. The ratio indicates the relative proportions of debt and equity in financing the assets of the firm. Debt Equity ratio: This ratio reflects the relative claims of creditors and share holders against the assets of the firm. 39 It is calculated as debt debt equity ratio= shareholder‘s fund The debts side consist of all long term liabilities of the firm. The shareholders‘ fund is the share capital plus reserve and surpluses. debt is defined as long term debt plus preference capital which is redeemable before 12 years and shareholders‘ fund is defined as paid up equity capital plus preference capital which is redeemable after 12 years plus reserves & surpluses. The shareholders and lenders of long term loans may be interested in this ratio.SOLVENCY OR GEARING RATIOS: Gearing is concerned with the relationship between the long terms liabilities that a business has and its capital employed. 1. The general norm for this ratio is 2:1. debt equity ratios establishment relationship between borrowed funds and owner capital to measure the long term financial solvency of the firm. on case of capital intensive industries as norms of 4:1 is used for fertilizer and cement industry and a norms of 6:1 is used for shipping units.

53 .63 3602.43 2006 1451.90 2008 1740.27 1.13 1.40 2007 1578.2005 DEBT SHAREHOLDERS‘ FUND DEBT EQUITY RATIO 1531. is trying to lower its debt equity ratio by lowering its liabilities and increasing its equity.59 Comments: In this ratio shareholders‘ fund is the share capital plus reserve and surpluses.78 0.63 1763. So it wants to improve its position since.83 1038.38 1067.1 0.50 2696.99 0. In case of high debt equity it would be obvious that the investment of creditors is more than owners. And if it is so high then it brings the firm in a risky position.65 2009 2141. Or if it is too low it might indicate that the organization has not utilized its capacity of borrowing which must be utilized and that is because the borrowing from outsiders is a good source of fund for business with lower returns in compare to equity. a relatively lower ratio is favorable. The UltraTech Cement Ltd.

Proprietors Funds proprietary Ratio= Total Assets NOTE: Owner‘s funds is equal to Shareholders Funds 2005 Owner‘s fund Total Asset Proprietary Ratio 1067.14 54 . Proprietary ratio: It is primarily the ratio between the proprietor‘s funds and total assets.13 3619.52 3.64 2008 2696.40 2.38 2.32 2009 3602.49 2007 1763.2.99 6258.27 3623.78 4657.85 2.39 2006 1038. It indicates the relationship between owners fund and total assets. And shows the extent to which the owner s‘ fund are sunk in assets or different kinds of it.1 7709.11 3.

PROFITABILITY RATIO As the name itself suggests. 55 . So we should have a much higher gross profit margin than net profit margin. It is a very simple idea and it tells us how much gross profit our business is earning. creditors want higher security for interest and loan and the list could continue. it is suggested that 2/3rd to 3/4th of the total assets should be financed through borrowings. It is a class of financial metrics that are used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. A business needs profits not only for its existence but also for its expansion and diversification. The basic objective of almost every business is to earn profit which is essential for survival of the business. GROSS PROFIT RATIO: The gross profit margin ratio tells us the profit a business makes on its cost of sales. selling costs and so on. 1. having a higher value relative to a competitor's ratio or the same ratio from a previous period is indicative that the company is doing well. As a very rough measure. High ratios are favorable in this. workers want higher wages. The investors want an adequate return on their investments.Comments: This ratio indicates the proportion of proprietor‘s funds used for financing the total assets. A high ratio will indicate high financial strength but a very high ratio will indicate that the firm is not using external funds adequately. Gross profit is the profit we earn before we take off any administration costs. since it indicates the business is earning a good return on the sale of its merchandise. this ratio is calculated to determine profitability of the firm. For most of these ratios.

06 2006 3299.44 28.02 9. If it has a very high gross profit ratio it may indicate that the organization is able to produce or purchase at a relatively lower cost. Gross profit is the profit we earn before we take off any administration costs.01 27.46 26.35 1507.36 1684.40 Comments: This ratio indicates the relation between production cost and sales and the efficiency with which goods are produced or purchased.83 2008 5508.383. Here company has achieved very good efficiency in 2007 compared to other financial years.20 1392.Gross Profit Gross Profit Ratio = Net Sales X 100 2005 NET SALES 2681. selling costs and so on.08 GROSS PROFIT GROSS PROFIT RATIO 265.45 2007 4910.62 15.88 501.78 2009 6. 56 .

pricing and Taste Management.85 0. Administration selling.11 229. A high profit ratio is higher profitability of the firm.83 2008 5508. NET PROFIT RATIO: This shows the portion of sales available to owners after all expenses.08 NET PROFIT NET PROFIT RATIO 2.2.61 18.28 15.93 1007. Net Margin Ratio measures the overall efficiency of production.02 15.45 2007 4910.76 6.78 2009 6.29 977. financing.06 2006 3299.96 782. This ratio shows the earning left for shareholder as percentage of Net sales. Net Profit After Tax Net Profit Ratio = Net Sales X 100 2005 NET SALES 2681.383.30 57 .

78 2009 6.26 1.Comments: It is depicted from the above diagram that company has been trying to improve its profitability year by year except for 2009 because of environmental instability which includes the economic meltdown in the country and whole world. Operating Net Profit operating n.22 27.720. this profit can also be calculated by deducting only operating expenses from the gross profit. This is calculated as follows: Operating net profit = Net Profit + Non operating expenses – non operating income.87 31. OPERATING NET PROFIT RATIO: This ratio establishes the relation between the net sales and the operating net profit.29 10.08 X 100 OPERATING NET PROFIT OPERATING NET PROFIT RATIO 272.81 1.57 58 .06 1.06 2006 3299.p.760.417. ratio = Net sales 2005 NET SALES 2681.383.18 16.83 2008 5508. 3.81 554. The concept of operating net profit is different from the concept of net profit operating net profit is the profit arising out of business operations only.80 28.45 2007 4910. Alternatively. This ratio is calculated with help of the following formula.

Profitability. and Management Ratios allow the business owner to identify trends in a business and to compare its progress with the performance of others through data published by various sources. and avoid the daily struggles of small business management. this ratio tells the owner whether or not all the effort put into the business has been worthwhile. the owner may be wiser to sell the company. Leverage.OVERALL PROFITABILITY OR ROR RATIOS: The ROI is perhaps the most important ratio of all. 59 . It is the percentage of return on funds invested in the business by its owners. The owner may thus determine the business's relative strengths and weaknesses. These Liquidity. put the money in risk-free investment such as a bank savings account. In short. . If the ROI is less than the rate of return on an alternative.

76 3623.07 2006 229.85 16.79 2008 1007.61 6258.38 12.11 6.10 2009 977. And the related formula is: Net Profit After Tax Return on Asset Ratio = Asset 2005 2.67 X 100 NPAT TOTAL ASSET RETURN ON ASSET RATIO Comments: Because this ratio shows the profitability of investment in the firm so higher the ratio.52 0.28 4657. the better is the return to the owners of the company. 60 .1. RETURN ON ASSETS: This ratio actually measures the profitability of the investments in the firm.34 2007 782.02 7709.40 16.85 3619.

96 2006 338. It reflects the overall efficiency with which capital is used.23 2490. It indicates the percentage of net profits before interest and tax to total capital employed.56 3342.49 33. RETURN ON CAPITAL EMPLOYED: This Ratio is considered to be very important.I.58 2007 1191.02 C. It is calculated as Net profit before interest and tax ROCE Ratio = Capital Employed X 100 Note: Capital Employed = Equity Capital + Preference Capital + Reserves and Surplus + Long Term DebtFictitious Assets 2005 N.83 4437.2.65 2008 1482.B.T 51.E.29 5743. The ratio of a particular business should be compared with other business firms in the same industry to find out the exact position of the business.51 1.42 2009 1437.P.10 13. ROCE RATIO 61 .03 2598.73 25.41 35.

Of course the higher the ratio.P.T. The ratio can also be seen as representing the efficiency with which capital is being utilized to generate revenue. indicates the percentage of net profit available for equity shareholders to equity shareholders‘ funds and not on total capital employed. It is calculated as: N.Preference Dividend ROE Ratio = Equity Share Holders Fund X 100 62 .A. . 3. the better will be the profitability of the company. It is commonly used as a measure for comparing the performance between businesses and for assessing whether a business generates enough returns to pay for its cost of capital. RETURN ON EQUITY: This ratio also known as return on shareholders‘ funds or return on proprietors‘ funds or return on net worth.Comments: A measure of the return that a company is realizing from its capital employed.

13 1763.35 2696.1 27.12 Comments: This ratio indicates the productivity of the owned funds employed in the firm.99 37.27 22.85 2006 229.78 44.DIVIDEND 2.76 2007 782.61 2009 977.A.02 Equity Share Holders Fund ROE RATIO 1067.P. 63 . it should not be overlooked that during inflationary periods.Note: Here Equity Share Holders Fund = Equity Capital + Reserves and Surplus 2005 N. However.13 0.28 2008 1007.36 3602.26 1038. in judging the profitability of a firm.T – PREF. the ratio may show an upward trend because the numerator of the ratio represents current values whereas denominator represents historical values.

P.5 EPS Comments: As mentioned above. It is calculated as: N.22 2006 18. EPS is one of the important criteria for measuring the performance of a company.47 2007 62. the possibility of a higher dividend per share also increases.INVESTORS RATIOS 1. it should be remembered that EPS of different companies 64 . However.Preference Dividend EPS = Number of equity shares Outstanding 2005 0. Market price of shares of a company may also show an upward trend if the EPS is showing a rising trend. However. EARNINGS PER SHARE: EPS measures the profit earned per share. The higher EPS will attract more investors to acquire shares in the company as it indicates that the business is more profitable enough to pay the dividends in time.84 2008 80. If EPS increases. the dividend payment depends on the policy of the company.94 2009 78.A.T. So it is of utmost importance to investors in order to decide the prospects. .

47 9.5 6. tax-planning measures etc.75 18.36 2008 5.00 78.84 6.37 X 100 DPS EPS DPR Comments: This ratio indicates the policy of management to pay cash dividend.47 2007 4.18 2009 5. 65 . Dividend Payout Ratio indicates the percentage of profit distributed as dividends to the shareholders.9 6.may vary from company to company due to the following different practices by different companies regarding stock in trade. It measures the relationship between the earning belonging to the equity shareholders and the amount finally paid to them: It is calculated as: Dividend Per Share DPR Ratio = EPS 2005 0. DIVIDEND PAYOUT RATIO EPS described above indicates the amount of profit available for equity share shareholders. A higher ratio indicates that the organization is following the liberal dividend policy regarding the dividend while a lower ratio indicates a conservative approach of the management towards the dividend. depreciation.22 341 2006 1.00 62. source of raising finance.00 80.75 0.

84 6.P.49 15. Ratio Return on Asset Ratio ROCE Ratio ROE Ratio EPS Dividend Payout Ratio 0.70 1.69 53.33 1.53 5.47 9.36 18.5 6.24 1.30 27.96 2008 1.18 0.40 N.40 0.24 2007 1.15 4.79 35.39 0.35 62.02 27.18 15.P.32 27.59 Proprietary Ratio G.032 3. Ratio Operating N.80 6.032 1.67 25.14 26. for last Five Years 2005 Current Ratio Quick Ratio Fixed Asset Turn Over Ratio Current Asset Turn Over Ratio Working Capital Turnover Ratio 1.65 0.34 13.93 28.42 37.90 0.11 Debt Equity ratio 1.91 1.22 341 6.02 0. Ratio 3.88 3.48 2009 1.P.70 1.96 16.27 15.47 1.94 6.65 44.43 1.23 4.87 16.36 2.69 Capital Employed Turnover Ratio 1.35 2.20 2.10 0.29 31.SUMMARY OF RATIOS Table of Financial Ratios of ULTRATECH CEMENT LTD.11 23.22 217.47 15.27 0.58 22.13 18.54 1.20 6.37 66 .11 10.64 28.07 1.57 12.54 1.12 78.36 80.39 9.22 16.26 1.96 0.20 4.73 2006 1.26 0.10 33.

for which we can blame the environmental conditions of the country. but it is trying to improve the situation. as follows:  The year 2007 could be called the peak on the business during last five year which almost divides the ratios into two parts.S. The overall efficiency of the company to use its assets. However in the later years.  Liquidity ratios shows that the firm has been facing some problems regarding paying short term liabilities for 3 years.V. it is declining and falling to a lower level of efficiency.Observation and Findings Based on the ratios and calculations made on my project I can analyze S. though it should be mentioned that we see a noticeable net profit point in the 2008.  The usage ratio of the company had followed a comparable pattern. capital or the working capital had increased from 2005 to 2007. and that involves the economical and political challenges of India and the world.  The Company fails to increase its profitability in the last year. before 2004 and after that. It also fails to give satisfactory rate of return in the two years compared to 2007 67 .

sumarise. etc.IMPORTANCE Ratio analysis is an important technique of financial analysis. and systemise the accounting figures presented in financial statements. It determines and interprets the liquidity. solvency view point.  Ratio analysis discloses the position of business with different viewpoint.  Financial ratios. profitability viewpoint.  If accounting ratios are calculated for a number of years. Similarly comparision of current year figures can also be made with those of previous years with the help of ratio analysis and if some weak points are located. of a business enterprise. It is a means for judging the financial health of a business enterprise. we can draw conclusion regardings the financial health of business enterprise.profitability. comparision of profitability and financial soundness can be made between one industry and another. It discloses the position of business with liquidity viewpoint.  It becomes simple to understand various figures in the financial statements through the use of different ratios. remidial masures are taken to correct them. if owners of a business aim at earning profit @ 25% on the capital which is the prevailing rate of return in the industry then this rate of 25% becomes the standard. can be set as standards for judging actual performance of a business. The rate of profit of each year is compared with this standard and the actual performance of the business can be judged easily. For example. they will reveal the trend of costs. profits and other important facts.solvency. based on a desired level of activities. 68 . sales. with the help of such a study.etc.  With the help of raito analysis. Financial ratios simplify. Such trends are useful for planning.

ADVANTAGES Ratio analysis is an important and age-old technique of financial analysis. Simplifies financial statements: It simplifies the comprehension of financial statements. in its basic functions of forecasting. Facilitates inter-firm comparison: It provides data for inter-firm comparison. Ratios highlight the factors associated with successful and unsuccessful firm. co-ordination. Makes inter-firm comparison possible: Ratios analysis also makes possible comparison of the performance of different divisions of the firm. Help in investment decisions: It helps in investment decisions in the case of investors and lending decisions in the case of bankers etc. 3. control and communications. 5. 2. overvalued and undervalued firms. Helps in planning: It helps in planning and forecasting. They also reveal strong firms and weak firms. The following are some of the advantages of ratio analysis: 1. 4. Ratios tell the whole story of changes in the financial condition of the business. The ratios are helpful in deciding about their efficiency or otherwise in the past and likely performance in the future. Planning. Ratios can assist management. 69 .

Ratios have to interpret and different people may interpret the same ratio in different way. 2. 7. It makes comparison of ratios difficult and misleading. they suffer from serious limitations. Financial statements are affected to a very great extent by accounting conventions and concepts. 5. Problems of price level changes: A change in price level can affect the validity of ratios calculated for different time periods. Financial statements themselves are subject to several limitations. 1. However. Lack of adequate standard: No fixed standard can be laid down for ideal ratios. In such a case the ratio analysis may not clearly indicate the trend in solvency and profitability of the company. does not convey much of a sense. usually. 3. Personal judgment plays a great part in determining the figures for financial statements. 4. therefore. may affect the future operations. Personal bias: Ratios are only means of financial analysis and not an end in itself. 70 . Comparative study required: Ratios are useful in judging the efficiency of the business only when they are compared with past results of the business. It renders interpretation of the ratios difficult. such a comparison only provide glimpse of the past performance and forecasts for future may not prove correct since several other factors like market conditions. etc. To make a better interpretation. nonfinancial changes though important for the business are not relevant by the financial statements. 6. but also the firms of the similar business widely differ in their size and accounting procedures etc. Limited use of single ratios: A single ratio. Incomparable: Not only industries differ in their nature. there from. Limitations of financial statements: Ratios are based only on the information which has been recorded in the financial statements. The financial statements. are also subject to those limitations. Thus ratios derived.LIMITATIONS The ratios analysis is one of the most powerful tools of financial management. Though ratios are simple to calculate and easy to understand. For example. There are no well accepted standards or rule of thumb for all ratios which can be accepted as norm. be adjusted keeping in view the price level changes if a meaningful comparison is to be made through accounting ratios. a number of ratios have to be calculated which is likely to confuse the analyst than help him in making any good decision. management policies.

Their use as tools of financial analysis involves their comparison as single ratios. which give the decision-maker insights into the financial performance of a company. ratios are relative figures reflecting the relationship between related variables. They are as good or as bad as the data itself. A single figure by itself has no meaning. it yields significant interferences. volume or efficiency have an impact on the profit margin or turnover ratios of a company.  The analysis of financial statements is a process of evaluating the relationship between component parts of financial statements to obtain a better understanding of the firm‘s position and performance. The final step is interpretation and drawing of inferences and conclusions.  The first task of financial analyst is to select the information relevant to the decision under consideration from the total information contained in the financial statements. but when expressed in terms of a related figure. The second step is to arrange the information in a way to highlight significant relationships. are not of much use. they are an important tool of financial analysis. per unit costs. like absolute figures. The reliability and significance attached to ratios will largely hinge upon the quality of data on which they are based.  Ratio analysis in view of its several limitations should be considered only as a tool for analysis rather than as an end in itself. Nevertheless. In brief.CONCLUSION  Ratios make the related information comparable. relation and evaluation. financial analysis is the process of selection. 71 . Decisions affecting product prices.  Ratio analysis has a major significance in analysing the financial performance of a company over a period of time. Thus.  Financial ratios are essentially concerned with the identification of significant accounting data relationships.

COM  Books Referred:   ―Basic Financial Management‖.ULTRATECH CEMENT LIMITED.ADITYABIRLA.M Y Khan P K Jain ―Financial Management‖.COM  WWW.BIBLIOGRAPHY  Web Sites:  WWW.Prasanna Chandra  Annual Reports 72 .

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