I here declare that the project report entitled “FIXED ASSET MANAGEMENT” has been prepared by me in partial fulfillment of the requirements for the award of the degree of “MASTER OF BUSINESS ADMINISTRATION”I also declare that this project work is a result of my effort and it has not been submitted to any other university for the award of any degree or diploma. DATE: PLACE: ________________________ H.T NO: 112G1E0022


With a profound sense of thankfulness, I acknowledge my indebtedness to my company guide Mr.PIYUSH MODI (RELATIONSHIP MANAGER) Faculty guide Mr.RAGHAVENDRA M.B.A., for their valuable guidance, timely suggestions and constant encouragement. Their insightful criticisms and patience throughout the duration of this project have been instrumental in allowing this project to be completed. My sincere thanks are to the name of Director, Mr. RAMESH NAIDU (M.A) (P.hd)., name of HOD NAGA PRABHAKAR (M.com, M.B.A) and all the staff members of Department of management studies, _________________ ,For their consistent guidance in my project work. Their continual support and careful attention to the details involved in producing a document of this nature are very much appreciated.

___________________ H.T NO:







9-28 29-43 44-59




such as by using fixed scanners to read bar codes on railway freight cars or by attaching a radio-frequency identification (RFID) tag to anasset. and theft deterrence. it is required. Different authorities have interpreted the term ‘finance differently. preventive maintenance. and maintenance and depreciation status of their fixed assets. Periodically. 6 . the owner of the assets can take inventory with a mobile barcode reader and then produce a report. Many organizations face a significant challenge to track the location. Some tracking methods automate the process. However there are three main approaches to finance. Off-the-shelf software packages for fixed asset management are marketed to businesses small and large. Finance refers to the management of flews of money through an organization it concerns with the application of skills in the manipulation. often with bar codes for easy and accurate reading. A popular approach to tracking fixed assets utilizes serial numbered Asset Tags. condition.INTRODUCTION FIXED ASSETS MANAGEMENT: Fixed assets management is an accounting process that seeks to track fixed assets for the purposes of financial accounting. Some Enterprise Resource Planning systems are available with fixed assets modules. Finance may be defined as the provision of money at the time where. use and control of money. quantity.

IMPORTANCE OF STUDY Fixed Assets are the assets. 7 . Firm has evaluate the performance of fixed assets with proportion of capital employed on net assets turnover and other parameters which is helpful for evaluating the performance of fixed assets. A portion of fixed assets reduced by use is converted into cash though charging depreciation for correct measurement of income proper measurement of depreciation is essential. Fixed assets are meant for use for many years the value of these assets decreases with their use or with time or for other reasons.NEED &IMPORTANT FOR THE STUDY Valuation of fixed assets is important in order to have fair measure of profit or loss and financial position of the concern. as depreciation constitutes a part of the total cost of production. which cannot be liquidates into cash within one year. The large amount of funds of the company is invested in these assets. Every year the company investments an additional fund in these assets directly or indirectly the survival and other objectives of the company purely depends on operating performance of management in effective utilization of their assets.

8 .. The study is conducted to evaluate the fixed assets turnover of ZUARI 2. The study is conducted to known the amount of finance made by long-term liabilities and owner funds towards fixed assets. 1. The study is made to known the amount of capital expenditure made by the company during study period.OBJECTIVES OF THE STUDY: The study is conducted to evaluate fixed assets performance of ZUARI Through Analysing the Data. 3. 4. The study is evaluate is giving adequate returns to the company.

The fixed assets considered in the project are which cannot be converted into cash with one year.SCOPE OF THE STUDY The project is covered of fixed assets of ZUARI drawn from annual reports of the company. The subject matter is limited to fixed assets it analysis and its performance but not any other areas of accounting corporate. 9 . marketing and financial matters.

Ratio analysis is used for calculation on purpose.METHODOLOGY The data used for analysis and interpretation form annual reports of the company that is secondary forms of data. The project is presented by using table’s graphs and with their interpretations. No survey is undertaken or observation study is conducted in evaluating ‘Fixed assets’ performance of ZUARI ANALYSIS TYPE: • PRIMARY DATA • SECONDARY DATA 10 .

This report is not helpful in investing in ZUARI either through disinvestments or capital market. it may vary from time to time and situation to situation. 11 .LIMITATIONS 1 2 3 4 5 The study period of 45 days as prescribed by university The study is limited unto the date and information provided by ZUARI and its annual reports The report will not provide exact fixed assets status and position in ZUARI. The accounting procedure and other accounting principles are limited by the company changes in them may vary the fixed assets performance.


If materials are not according to the purchase order made then amount is deducted and then payment is made. Accounts payable management  Invoice Verification  Payment scheduling  Disclosure  Bank reconciliation  Vendor reconciliation  Budget 2. The quantity and quality of the materials received as per the purchase order or not is seen. If the material sent 13 . Cash Management  Cash reconciliation  IOU reconciliation  Fund Management  Statutory Payment Accounts Payable Management Invoice verification Invoices are verified against the purchase orders made. Invoices are also verified for the duties charged or whether CENVAT credit is received or not or whether that material is excise able or not.LITERATURE REVIEW FUNCTIONS 1. Payment is only made after the detail verification of invoice.

Accounts department verify about the payment made whether it is received by the vendors or not through this acknowledgement.is rejected then quantity rejected is deducted from the actual quantity and payment is made for the approved material. Payment Scheduling & preparation of Cheque Payment is made to the vendors as per the auto scheduling of overdue invoices. Acknowledgement from the vendors is received by the accounts Department. the estimation of these expenses is sent by various plants to the accounts department. Difference in bank charges is reconciled by the accounts Budget The expenses which are incurred for production. Cash management A certain level of cash is maintained for working capital requirement. The amount of cash maintained in the company should be neither too high nor too low. Vendor Reconciliation If any payment is due even after the due date then the ledger balances is reconciled if money is not received by the vendors. 2. 14 . After getting estimation from the entire plants budget is prepared by the accounts department and sent to the head office for approval. If it’s too low then day to day activities can be hampered and if it’s too high there is a risk. Bank Reconciliation Bank book and pass book is maintained is by the accounts department.

water bills also included in these. That employee submits a voucher for the amount spent and left money is returned. water bills.Cash reconciliation Cash balance is matched daily against the amount disbursed. Audit for that is conducted on any day in a month. Person to whom amount is disbursed submits a voucher as a proof of the expenses made IOU reconciliation Any employee takes IOU for the office use or personal use. At the end of every month stock shown in SAP should be matched with the physical stock. Some statutory payments like electricity bills. 15 . Fund Management Every department estimates the expense to be incurred in the coming month and gives this estimate to the accounts department. and ETP bills are also made by the accounts department. Statutory Payments Statutory payments like GEB bills. Accounts department intimate this to head office and ask for funds for these expenses. This amount is also reconciled against the voucher received.

a baking firm's current assets would be its inventory (in this case. These are items of value which the organization has bought and will use for an extended period of time. Moreover. • The second approach relates finance to cash. computers. flour. fixtures and fittings. only tangible assets are referred to as fixed.). and equipment (PP&E). etc. Fixed assets. also known as a non-current asset or as property. office equipment. This can be compared with current assets such as cash or bank accounts. the value of sales owed to the firm via credit (i. furniture. motor vehicles used to transport deliveries. • The third approach views finance is being concerned with rising of funds& their effective utilization. Its non-current assets would be the oven used to bake bread. motor vehicles. In most cases. cash registers used to handle cash payments. etc. As an example. yeast. plant. a fixed/non-current asset can also be defined as an asset not directly sold to a firm's consumers/end-users. Each aforementioned non-current asset is not sold directly to consumers.e. According to International 16 . cash held in the bank. These often receive favourable tax treatment (depreciation allowance) over short-term assets. and plant and machinery. is a term used in accounting for assets and property which cannot easily be converted into cash.• The first approach views finance as to providing of funds needed by a business on most suitable terms this approach confines finance to the raising of funds and to the study of financial institutions & instruments from where funds can be procured. which are described as liquid assets. fixed assets normally include items such as land and buildings. debtors or accounts receivable). etc.

quantity. including import duties and other deductible trade discounts and rebates. and theft deterrence. cost attributable to bringing and installing the asset in its needed location and the initial estimate of dismantling and removing the item if they are eventually no longer needed on the location.Accounting Standard (IAS) 16. maintenance and depreciation status of their fixed assets. Some tracking methods automate the process. condition. preventive maintenance. Fixed Assets are assets whose future economic benefit is probable to flow into the entity. the owner of the assets can take inventory with a mobile barcode reader and then produce a report. Off-the-shelf software packages for fixed asset management are marketed to businesses small and large. In addition. often with bar codes for easy and accurate reading. Some Enterprise Resource Planning systems are available with fixed assets modules. Fixed assets management is an accounting process that seeks to track fixed assets for the purposes of financial accounting. Many organizations face a significant challenge to track the location. such as by using fixed scanners to read bar codes on railway freight cars or by attaching a radio-frequency identification (RFID) tag to an asset. It is pertinent to note that the cost of a fixed asset is its purchase price. whose cost can be measured reliably. A popular approach to tracking fixed assets utilizes serial numbered Asset Tags. Periodically. 17 .

18 . and they can more accurately calculate taxes based on depreciation schedules.2 billion and was expected to grow at about 5. tools. Fixed assets are defined as any 'permanent' object that a business uses internally including but not limited to computers. And therefore without an accurate method of keeping track of these assets it would be very easy for a company to lose control of them. Asset tracking software allows companies to track what assets it owns. net book value of assets. the asset ultimately belongs to the company and must be returned.0 percent per year reaching $2. They reduce new and unnecessary equipment purchases. asset tracking software is now available that will help any size business track valuable assets such as equipment and supplies. and the cost and depreciation of each asset. As a result. the worldwide market for Enterprise Asset Management (EAM) was then at an estimated $2. including assets by category and department.Tracking assets is an important concern of every company.8 billion in 2010. where each is located. software. 2005 by the ARC Advisory Group. assets past due. companies reduce expenses through loss prevention and improved equipment maintenance. when it was checked out. The reporting option that is built into most asset tracking solutions provides prebuilt reports. With advancements in technology. While employees may utilize a specific tool or tools. regardless of size. According to a study issued in December. when it is due for return. when it is scheduled for maintenance. All of this information is captured in one program and can be used on PCs as well as mobile devices. audit history. or office equipment. who has it. check-in/check-out. and transactions.

it is apparent that in order to report a true and fair position of the financial jurisprudence of an entity it is relatable to record and report the value of fixed assets at its net book value.that is long term. it is the best way of consciously presenting the value of assets to the owners of the business and potential investor. This is essential in the prudent reporting of the net revenue for the entity in the period. Apart from the fact that it is enshrined in Standard Accounting Statement (SAS) 3 and IAS 16 that value of asset should be carried at the net book value.The most commonly tracked assets are: • • • • • Plant and equipment Buildings Fixtures and fittings He primary objective of a business entity is to make profit and increase the wealth of its owners. It is therefore obligatory that in order to accurately determine the net income or profit for a period depreciation is charged on the total value of asset that contributed to the revenue for the period in consideration and charge against the same revenue of the same period. In the attainment of this objective it is required that the management will exercise due care and diligence in applying the basic accounting concept of “Matching Concept”. From the foregoing. 19 . Matching concept is simply matching the expenses of a period against the revenues of the same period. • The use of assets in the generation of revenue is usually more than a year. • Net book value of an asset is basically the difference between the historical cost of that asset and it associated depreciation.

a revaluation of fixed assets is a technique that may be required to accurately describe the true value of the capital goods a business owns. patents or licenses can be fixed assets of a business. it is revalued in preparation for sales negotiations. also forms a part of financial management. The purpose of a revaluation is to bring into the books the fair market value of fixed assets. This may be helpful in order to decide whether to invest in another business. as opposed to being held for resale in the normal course of business. 20 It deals with finding out various The sources must be suitable & economical for the needs of the business the most appropriate use of such funds . OBJECTIVES OF FINANCIAL MANAGEMENT: Financial management is concerned with procurement and use of funds. where the recorded decline in value of an asset is tied to its age. buildings. sources for raising funds for the firm. Fixed assets are held by an enterprise for the purpose of producing goods or rendering services. DEFINITION OF FINANCIAL MANAGEMENT: Financial management as practice by corporate firms can be called corporation finance or business finance. If a company wants to sell one of its assets. machines. For example. Its main aim is to use business funds in such a way that the firm’s valve/earnings are maximized there are various alternatives available for using business funds. financial management refers to that part of the management activity which is concerned with the planning & controlling of firms financial resources. This should be distinguished from planned depreciation.In finance.

A fixed asset register is that list of assets. Wealth maximization A fixed asset register (FAR) is an accounting method used for major resources of a business. Fixed assets are those such as land. Financial management provides a frame work for selecting a proper cause of action and deciding a viable commercial strategy. MANAGEMENT OF FIXED ASSETS The selection of various Fixed Assets required creating the desired production facilities and the decision as regards determination of the level of 21 . it has become imperative to invest heavily in furnishing. copyrights. so it is important for a business entity to have a list of its fixed assets. office equipments. machines. banks. The main objective of a business is to maximize the owner economic welfare. patents. insurers. Fixed assets constitute a major chunk of the total assets in the case of all manufacturing entities. held for the purpose of production of goods or rendering of services and are not held for the purpose of sale in the ordinary course of business. financial institutions. and retain customers. mobile / telephone service providers etc. equipment. Profit maximization 2. trademarks. and technology to attract. buildings. Even in the case of service entities such as hotels. etc. These objectives can be achieved by 1. Just as it is important for a person investing on the NASDAQ to know those investments.The pros & cons of various decisions have to look into before making a final selection.

Arranging the requisite funds/capital for the same The first important consideration to be acquire only that much amount of fixed assets which will be just sufficient to ensure smooth and efficient running of the business. Efforts should also be made to minimize the level of buffer stock of fixed assets be encouraging their maximum utilization during learn period. Hence a firm should have that much amount of fixed assets. In some cases it may be economical to buy certain assets in a lot size. transferring a part of peak period and living additional capacity. The decision relating to fixed assets involve huge funds for a long period of time and are generally of irreversible nature affecting the long term profitability of a concern an unsound invest decision may prove to be total to the very existence of the organization Thus. management of fixed asset is of vital importance to any organization. FIXED ASSETS: 22 . But at the same time the cost of carrying such buffer stock should also be evaluated. The process of fixed asset management involves: 1.fixed assets is primarily the task at their production/technical people. which could adjust to increase demand. Selection of most worthy projects or alternatives of fixed assets 2. Another important consideration to be kept in mind is possible increase in demand of the firm’s product necessarily expansion of its activities. The third aspect of fixed assets management is that a firm must ensure buffer stocks of certain essential equipments/services to ensure uninterrupted production in these events of emergencies. Sometime there may be a breakdown in some equipment or services affecting the entire production it is always better to have some alternative arrangements to deal with such situations.

e. it is the cost of the asset less any salvage value over its estimated useful life. the expense generated by the uses of an asset. cost and depreciating them in a systematic manner without reference to their current realizable value. so they are also known as capital assets. The method of depreciation to be adopted is best left for the 23 . It is the wear and tear of an asset or diminution in the historical value owing to usage. so they are shown at their book values (i. cost less depreciation provided) and not at their current realizable values. Fixed resale. It is useless to show fixed assets in the balance sheet at their estimated realizable values if there is no immediate expectation of selling them.Fixed assets are those assets which are required and held permanently for a pretty long-time in the business and are used for the purpose for earning profits The successful continuance of the business depends upon the maintenance of such assets. They are not meant for resale in the ordinary course of business and the utility of these assets remains so long as they are in work order. Invariably the depreciation expense is charged against the revenue generated through the use of the asset. simply put. This assumption provides much of the justification for recording fixed assets at original. Depreciation is usually spread over the economic useful life of an asset because it is regarded as the cost of an asset absorbed over its useful life. It is an expense because it is matched against the revenue generated through the use of the same asset. Land and buildings. It will continue to operate in the future. Financial transactions are recorded in the books keeping in view the going concern aspect of the business unit. furniture and fixtures are some examples of these assets. It is assumed the business unit has a reasonable expectation of continuing business at a profit for an indefinite period of time. Depreciation is. plant and machinery. motor vans. Further to this.

for example. Fixed assets are sometimes collectively referred to as "plant The market value of a fixed asset may change with the passage of time. can be grouped into various classes according to financial activity or function to be evaluated. which if distributed in full. the cost at which it was purchased minus depreciation provided up to date. owners and management.[1] A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be consumed or converted into cash any sooner than at least one year's time. calculated from the accounting data. Types of Ratios Several ratios. The parties interested in financial analysis are short-term and long term creditors. Land and buildings..e. owners concentrate on the firm’s profitability and financial condition. i. prevailing economic condition of the assets and existing accounting guideline and principles as implied in the organizational policies. but for accounting purpose it continues to be shown in the books at its bulk value. This result in more profits on paper.management to decide in consideration to the peculiarity of the business. The cost concept of accounting depreciation calculated on the basis of historical costs of old assets is usually lower than that of those calculated at current value or replacement value. Similarly. will lead to reduction of capital. It is worth noting that not all fixed assets depreciate in value year-over-year. Management is 24 . Short term creditors’ main interest is in the liquidity position or the short term solvency and profitability of a firm. may often increase in value depending on local real-estate conditions.

interested in evaluating every aspect of the firm’s performance. They have to protect the interest of all parties and see that the firm grows profitably. In view of the requirements of the various users of ratios, we may classify them into the following four categories: 1. Liquidity ratios 2. Leverage ratios 3. Activity ratios 4. Profitability ratios. 1. Liquidity ratios It is extremely essential for a firm to be able to meet its obligations as they become due. Liquidity ratios measure the ability of the firm to meet its current obligations. In fact, analysis of liquidity needs the presentation of cash budgets and cash and fund flow statements; but liquidity ratios, but establishing a relationship between cash and other current assets to current liabilities provide a quick measure of liquidity. A firm should ensure that it does not suffer from lack of liquidity, and also that it does not have excess liquidity. The failure of a company to meet its obligations due to lack of sufficient liquidity, will result in a poor credit worthiness, loss of creditors’ confidence, or even in legal tangles resulting in the closure of the company. A very high degree of liquidity is also bad; idle assets earn nothing. The firm’s funds will be unnecessarily tied up in current assets. Therefore, it is necessary to strike a proper balance between high liquidity and lack of liquidity. The most common ratios, which indicate the extent of liquidity or lack of it, are (i) Current ratio (ii) Quick ratio


Current Ratio Current ratio is calculated by dividing current assets by current liabilities; Current ratio= Current assets Current liability Current assets include cash and those assets that can be converted in to cash within a year, such as marketable securities, debtors and inventories. Prepaid expenses are also included in current assets as they represent the payments that will not be made by the firm in the future. All obligations maturing within a year are included in current liabilities. Current liabilities include creditors, bills payable, accrued expenses, short-term bank loan, income-tax liability and long-term debt maturing in the current year. The current ratio is a measure of the firm’s short-term solvency. It indicates the availability of current assets in rupees for every one rupee of current liability. A ratio of greater than one means that the firm has more current assets than current claims against them. Quick Ratio Quick ratio, also called acid test ratio, establishes a relationship between quick, orliquid,assets and current liabilities. An assets is liquid if it can be converted into cash immediately or reasonably soon without a loss of value. Cash is the most liquid asset. Other assets are considered to be relatively liquid and included in quick assets are debtors and bills receivables and marketable securities. Inventories are considered to be less liquid. Inventories normally require some time for realizing into cash; their value also has a tendency to fluctuate. The quick ratio is found out by dividing quick assets by current liabilities. DEPRECIATION

Refers to two very different but related concepts:
1. the decrease in value of assets (fair value depreciation), and 2. the allocation of the cost of assets to periods in which the assets are used

(depreciation with the matching principle). The former affects values of businesses and entities. The latter affects net income. Generally the cost is allocated, as depreciation expense, among the periods in which the asset is expected to be used. Such expense is recognized by businesses for financial reporting and tax purposes. Methods of computing depreciation may vary by asset for the same business. Methods and lives may be specified in accounting and/or tax rules in a country. Several standard methods of computing depreciation expense may be used, including fixed percentage, straight line, and declining balance methods. Depreciation expense generally begins when the asset is placed in service. Example: a depreciation expense of 100 per year for 5 years may be recognized for an asset costing 500. ACCOUNTING CONCEPT In determining the profits (net income) from an activity, the receipts from the activity must be reduced by appropriate costs. One such cost is the cost of assets used but not currently consumed in the activity.[1] Such costs must be allocated to the period of use. The cost of an asset so allocated is the difference between the amount paid for the asset and the amount expected to be received upon its disposition. Depreciation is any method of allocating such net cost to those periods expected to benefit from use of the asset. The asset is referred to as a depreciable asset. Depreciation is a method of allocation, not valuation.[2]


Any business or income producing activity[3] using tangible assets may incur costs related to those assets. Where the assets produce benefit in future periods, the costs must be deferred rather than treated as a current expense. The business then records depreciation expense as an allocation of such costs for financial reporting. The costs are allocated in a rational and systematic manner as depreciation expense to each period in which the asset is used, beginning when the asset is placed in service. Generally this involves four criteria:
• • • •

cost of the asset, expected salvage value, also known as residual value of the asset, estimated useful life of the asset, and a method of apportioning the cost over such life.[4]


but cost of acquiring assets does. respectively. Effect on cash Depreciation expense does not require current outlay of cash.Depreciable basis Cost generally is the amount paid for the asset. the business recognizes gain or loss based on net basis of the asset. This net basis is cost less depreciation. [6] Such charges are usually nonrecurring. the cost of acquiring depreciable assets may require such outlay. Net basis When a depreciable asset is sold. However. The rules of some countries specify lives and methods to be used for particular types of assets. Depletion and amortization Depletion and amortization are similar concepts for minerals (including oil) and intangible assets. in most countries the life is based on business experience.[5] In some countries or for some purposes. including all costs related to acquisition. Thus. and may relate to any type of asset. 29 . depreciation does not affect a statement of cash flows. Impairment Accounting rules also require that an impairment charge or expense be recognized if the value of assets declines unexpectedly. However. salvage value may be ignored. and the method may be chosen from one of several acceptable methods.

Otherwise. Accumulated depreciation While depreciation expense is recorded on the income statement of a business. depreciation expense is charged against accumulated depreciation. The values of the fixed assets stated on the balance sheet will decline. depreciation expense is usually charged against the relevant asset directly. under fixed assets.Historical cost Depreciation is generally recognized under historical cost systems of accounting. its impact is generally recorded in a separate account and disclosed on the balance sheet as accumulated depreciation. Some proposals for fair value accounting have no provision for depreciation expense. even if the business has not invested in or disposed of any assets. then the values of the assets will be the same on the balance sheet for the current and prior year. Without an accumulated depreciation account on the balance sheet. because it separately shows a negative amount that is directly associated with another account. If there have been no investments or dispositions in fixed assets for the year. The amounts will roughly approximate fair value. Accumulated depreciation is known as a contra account. Quick ratio= Current assets – Inventories Current liabilities 30 . according to most accounting principles. Showing accumulated depreciation separately on the balance sheet has the effect of preserving the historical cost of assets on the balance sheet.

NWC is sometimes used as a measure of a firm’s liquidity. In fact. the one having the larger NWC has the greater ability to meet its current obligations. financial institutions etc. they can take legal action against it to get payments and in extreme cases. NWC. irrespective of the profit made or losses incurred by the firm. however. are more concerned with the firm’s current debt-paying ability. are more concerned with the firm’s long-term financial strength. between debt and equity. can force the 31 . It is considered that. This is not necessarily so. First. measures the firm’s potential reservoir of funds. a firm should have a strong short-as well as long-term financial position. financial leverage. long-term creditors. These ratios indicate mix of funds provided by owners and lenders. As a general rule. like debenture holders. like bankers and suppliers of raw material. It can be related to net assets: NWC ratio = Net working capital (NWC) Net assets (NA) 2. The firm has a legal obligation to pay interest to debt holders.Net Working Capital Ratio The difference between current assets and current liabilities excluding short-term bank borrowing is called net working capital (NWC) or net current assets (NCA). Leverage Ratios The short-term creditors. there should be an appropriate mix of debt and owners’ equity in financing the firm’s assets. rather than the difference between current assets and liabilities. To judge the long-term financial position of a firm. If the firm fails to pay to debt holders in time. debt is more risky from the firm’s point of view. or capital structure ratios are calculated. the measure of liquidity is a relationship. On the other hand. The manner in which assets are financed has a number of implications. between two firms.

If the firm is actually liquidated for non payment of debt-holders’ dues. Leverage ratios may be calculated from the balance sheet items to determine the proportion of the debt in total financing. Leverage ratios are also computed from the profit and loss items by determining the extent to which operating profits are sufficient to cover the fixed charges. Activity ratios are employed to evaluate the efficiency with which the firm 32 . 3. the earning of shareholders will be reduced. Third. If the cost of debt is higher than the firm’s overall rate of return. leverage ratios are calculated to measure the financial risk and the firm’s ability of using debt to shareholders’ advantage. Activity Ratios Funds of creditors and owners are invested in various assets to generate sales and profits. the worst suffers will be shareholders.” However. use of debt magnifies the shareholders’ earnings as well as increases their risk. when the firm earns a rate of return on the total capital employed higher than the interest rate on the borrowed funds. if the equity base is thin. The better the management of assets. Thus. the creditors risk will be high. there is threat of insolvency. but all these ratios indicate the same thing-the extent to which the firm has relied on debt in financing assets. Many variations of these ratios exist.firm into liquidation. Second. In addition. Creditors treat the owners’ equity as a margin of safety. use of debt is advantageous for share holders in two ways: (a) They can retain control of the firm with a limited stake and (b) Their earning will be magnified.the residual owners. a highly debt-burdened firm will find difficulty in raising funds from creditors and owners in future. the larger the amount of sales. leverage can work in opposite direction as well. Thus. The process of magnifying the shareholders’ return through the use of debt is called “financial leverage” or “financial gearing” or “trading on equity.

Several activity ratios can be calculated to judge the effectiveness of asset utilization. in which the company estimates the salvage value of the asset at the end of the period during which it will be used to generate revenues (useful life) and will expense a portion of original cost in equal increments over that period. These ratios are also called turnover ratios because they indicate the speed with which assets are being converted or turned over into sales. involve a relationship between sales and assets. Activity ratios. 33 . Salvage value is also known as scrap value or residual value. thus. generally based on either the passage of time or the level of activity (or use) of the asset. The salvage value is an estimate of the value of the asset at the time it will be sold or disposed of. Net assets turnover Methods of depreciation There are several methods for calculating depreciation. A proper balance between sales and assets generally reflects that are managed well.manages and utilizes its assets. it may be zero or even negative. (ii) Total assets turnover (iii) Fixed and current assets turnover and (iv) Working capital turnover. Straight-line depreciation Straight-line depreciation is the simplest and most-often-used technique. Here we will take different activity ratio: (i) Net assets turnover.

000 $5.000 $5.STRAIGHT-LINE METHOD: For example. and will have a salvage value of US$2000. book value = original cost − accumulated depreciation Book value at the end of year becomes book value at the beginning of next year.000 $3. it is the depreciable cost of the asset divided by the number of years of its useful life.000 $8.000 (original cost) $14. is purchased at a cost of US$17. Book value at beginning of year $17.000 $3.000 $3.000 $3.000 $14. a vehicle that depreciates over 5 years.000 $3.000.000 $9.000 (scrap value Depreciation Accumulated Book value at 34 . In other words.000 per year: ($17.000 $11. At any time book value equals original cost minus accumulated depreciation. will depreciate at US$3.000)/ 5 years = $3.000 $12.000 $3. This table illustrates the straight-line method of depreciation.000 − $2.000 $6.000 $15. The asset is depreciated until the book value equals scrap value. Book value at the beginning of the first year of depreciation is the original cost of the asset.000 $2.000 $8.000 annual straightline depreciation expense.000 $11.

then the gain above the original book value is recognized as a capital gain. this gain above the depreciated value would be recognized as ordinary income by the tax office. This may be a more realistic reflection of an asset's actual expected benefit from the use of the asset: many assets are most useful when they are new. Under this method the book value is multiplied by a fixed rate. If a company chooses to depreciate an asset at a different rate from that used by the tax office then this generates a timing difference in the income statement due to the difference (at a point in time) between the taxation departments and company's view of the profit. If the sale price were ever more than the original book value. In addition. Annual Depreciation = Depreciation Rate * Book Value at Beginning of Year 35 .If the vehicle were to be sold and the sales price exceeded the depreciated value (net book value) then the excess would be considered a gain and subject to depreciation recapture. the resulting capital loss is tax deductible. Declining-balance method (or Reducing balance method) Depreciation methods that provide for a higher depreciation charge in the first year of an asset's life and gradually decreasing charges in subsequent years are called accelerated depreciation methods. If the sales price is ever less than the book value. One popular accelerated method is the declining-balance method.

calculate straight-line depreciation rate. but the book value of the asset being depreciated is never brought below its salvage value. First.000 (original cost) $600 $360 $216 $129.60 $100 (scrap value) When using the double-declining-balance method.40 $29. is reached. With double-declining-balance method. The process continues until the salvage value or the end of the asset's useful life. For this reason. $100 salvage value. double that rate. this technique is referred to as the double-declining-balance method.60 Depreciation Depreciation Accumulate d Book value at 40% 40% 40% 40% $129. the straight-line depreciation rate equals (100% / 5) 20% per year. suppose a business has an asset with $1. regardless of the method used. or 40% depreciation rate is used. the salvage value is not considered in determining the annual depreciation.60 $400 $640 $784 $870.60 $100 $400 $240 $144 $86.000 original cost. Book value at beginning of year rate expense depreciation end of year $1. The table below illustrates the double-declining-balance method of depreciation. In the last year of depreciation a subtraction might 36 . Since the asset has 5 years useful life. as the name suggests.40 $900 $600 $360 $216 $129.The most common rate used is double the straight-line rate. To illustrate. and 5 years useful life.

where N is the estimated life of the asset (for example.000 miles = $0. Each year. but on a level of activity. its life is estimated in terms of this level of activity. Sum-of-years' digits method Sum-of-years' digits is a depreciation method that results in a more accelerated write-off than straight line.000 miles in its lifetime.000 cost . This could be miles driven for a vehicle. ACTIVITY DEPRECIATION Activity depreciation methods are not based on time. When the asset is acquired. It is possible to find a rate that would allow for full depreciation by its end of life with the formula: .$2. in years). but less than declining-balance method. Under this 37 . the depreciation expense is then calculated by multiplying the rate by the actual activity level. Assume the vehicle above is estimated to go 50. or a cycle count for a machine.be needed in order to prevent book value from falling below estimated Scrap Value.30 per mile. Since double-declining-balance depreciation does not always depreciate an asset fully by its end of life. The per-mile depreciation rate is calculated as: ($17.000 salvage) / 50. some methods also compute a straight-line depreciation each year. and apply the greater of the two. This has the effect of converting from declining-balance depreciation to straight-line depreciation at a midpoint in the asset's life.

The example would be shown as (52+5)/2=15 Depreciation rates are as follows: The firm can compute net assets turnover simply by dividing sales by net assets.method annual depreciation is determined by multiplying the Depreciable Cost by a schedule of fractions. Since net assets equal capital employed. The net assets turnover should be interpreted cautiously. Unutilized or under-utilised assets increase the firm’s need for costly financing as well as expenses for maintenance and upkeep. net assets turnover may also be called capital employed turnover. A firm’s ability to produce a large volume of sales for a given amount of net assets is the most important aspect of its operating performance. a useful life of 5 years and a salvage value of $100. compute its depreciation schedule. 3. 5+4+3+2+1=15 The sum of the digits can also be determined by using the formula (n2+n)/2 where n is equal to the useful life of the asset. Net assets turnover= Sales Net assets It may be recalled that net assets include net fixed assets and net current assets. 2. Since the asset has useful life of 5 years. First. and 1. current assets minus current liabilities. calculate the sum of the digits. determine years' digits. 4. Next. Depreciable cost = original cost − salvage value book value = original cost − accumulated depreciation Example: If an asset has original cost of $1000. the years' digits are: 5. The net assets in the denominator of the ratio include 38 . that is.

Total assets turnover Some analysts like to compute the total assets turnover in addition to or instead of the net assets turnover. so (TA=NFA+CA) Fixed and Current assets turnover The firm may wish to know its efficiency of utilizing fixed assets and current assets separately. patents etc.. Total assets turnover= Sales Total assets Total assets (TA) include net fixed assets (NFA) and current assets (CA). Net current assets turnover= Sales 39 .fixed assets net of depreciation. fictitious assets. It may thus compute net working capital turnover by dividing sales by net working capital. Thus old assets with lower book values may create a misleading impression of high turnover without any improvement in sales. Similarly. Fixed assets turnover= Sales Net fixed assets Sales The current assets turnover is: Current assets turnover= Working capital turnover A firm may also like to relate net current assets to sales. While computing the net assets turnover. Some analysts exclude intangible assets like goodwill. accumulated losses or deferred expenditures may also be excluded for calculating the net assets turnover ratio. This ratio shows the firm’s ability in generating sales from all financial resources committed to total assets.

This is possible only when the company earns enough profits. It is unfortunate that the word ‘profit’ is looked upon as a term of abuse since some firms always want to maximize profits at the cost of employees. customers and society. creditors and owners are also interested in the profitability of the firm. Therefore.Net current assets 4. Generally. Profit is the difference between revenue and expenses over a period of time (usually one year). Owners want to get a required rate of return on their investment. Creditors want to get interest and repayment of principal regularly. Besides management of the company. suppliers or social consequences. Profit is the ultimate ‘output’ of a company and it will have no future if it fails to make sufficient profits. Profits are essential. but it would be wrong to assume that every action initiated by management of a company should be aimed at maximizing profits. it is a fact that sufficient profits must be earned to sustain the operations of the business to be able to obtain funds from investors for expansion and growth and to contribute towards the social overheads for the welfare of the society. 40 . Profitability Ratios A company should earn profits to survive and grow over a long period of time. two major types of profitability ratios are calculated: • Profitability in relation to sales • Profitability in relation to investment. The profitability ratios are calculated to measure the operating efficiency of the company. irrespective of concerns for customers. the financial manager should continuously evaluate the efficiency of the company in term of profits. employees. Except such infrequent cases.

capital employed is equal to net worth plus total debt. as discussed earlier. PAT is affected by capital structure. Also. Alternatively. therefore more appropriate to use one of the following measures of ROI for comparing the operating efficiency of firms: Return on Investment= Or Return on Investment= EBIT(1-T) Net assets EBIT(1-T) Total assets Where above formula is for return on total assets and second formula is for return on net assets. the earnings may be distributed to shareholders or 41 . It is. Net assets equal net fixed assets plus current assets minus current liabilities excluding bank loans. The conventional approach of calculating return on investment (ROI) is to divide PAT by investment. it is conceptually unsound to use PAT in the calculation of ROI.Here we will consider two profitability ratio: (i) Return on investment and (ii) Return on equity Return on Investment The term investment may refer to total assets or net assets. Return on Equity Common or ordinary shareholders are entitled to the residual profits. while PAT represent residue income of shareholders. Investment represents pool of funds supplied by shareholders and lenders. therefore. Return on net assets is equivalent of return on capital employed. The rate of dividend is not fixed. The funds employed in net assets are known as capital employed.

If a company has both preference and ordinary share capital. Nevertheless. Return on Equity= Profit after taxes Net worth (Equity) Return on Equity indicates how well the firm has used the resources of owners. equity of the company should compare with the ratios for other similar companies and the industry average. of great interest to the present as well as the prospective shareholders and also of great concern to management. this ratio is one of the most important relationships in financial analysis. Net worth can also be found by subtracting total liabilities from total assets. In fact. ROE should be calculated after deducting preference dividend from PAT. The ratio of net profit to owners’ equity reflects the extent to which this objective has been accomplished. The return on equity is net profit after taxes divided by shareholders’ equity which is given by net worth. The earning of a satisfactory return is the most desirable objective of a business. The shareholders’ equity or net worth will include paid-up share capital. Here certain ratios are calculated according to the data of balance sheet of last five years of 42 . The returns on owners. and using only the ordinary shareholders’ capital. which has the responsibility of maximizing the owners’ welfare. This will reveal the relative performance and strength of the company in attracting future investments. the net profits after taxes represent their return. A return on shareholders’ equity is calculated to see the profitability of owners’ investment. share premium and reserves and surplus less accumulated losses. This ratio is. thus.retained in the business.


• 147 aggregate quarries. Basically this is belongs to DR. Original plant capacity was 5 lakh tones per annum at first. Texaco is started production at clinker by March 1985. Under working agreement on 7-2-95.300 employees’ worldwide. this cement unit of Texaco being handed over to Zuari agro chemical industry.K. The Zuari cement is strategically located at HYD The plant location existence of 6km from HYDIt is connected to the railway station on by a railway track of 7 km length and is having on exchange plant inside the factory. Constructing activity is started and the cement plant is completed in March 1985. Company entered in agreement with joint venture partner with Italy cement with 50% of partnership and working agreement. • 575 concrete batching units.COMPANY PROFILE This cement division project in 1978 and according to the Texaco it has taken the steps for acquiring the land at HYDERABAD in 1982. In 1994 January 1. • 4 stand alone terminals. • 14 Grinding Units. 44 .K. Birla. plant is connected to the nearest highway by 0.2 km land private load. The Group has strength of 22. This unit is sold by Texaco to Zuari in 1997 company has conceives expansion project investing 370 crores and making increasing rated capacity from 5 lakh to 7 lakh. • 62 cement plants. This project was completed by formally 1999 and in fact from1-4-2000.

strategic location is just factor contributing to Zuari success. 500 concrete batching units 150 quarries. Italy. Zuari industries ltd has entered into 50:50 joint venture with Ital cement group. Ital cementi operates in 19 countries including Canada. • • • Superior work force. Cement that has won the confidence and trust of millions in the country. Renewed for rich Narji limestone deposits. USA and Bulgaria. World Wife excellence with ital cement. It has done so by making top quality cement. France. situated at yerraguntla. Yet. Italic cements global industrial network includes more than 50 cement plants.Part of the prestigious Dr. and worthy of bearing the zuari label. Zuari joint with Ital cement gives Sri Vishnu cement a global technological advantage which reflects in finesses of every grain of Sri Vishnu cement. Cutting-edge technology. Consistently. There are other equal important reasons.Birla Group a Rs 4000 crores conglomerate Zuari cement as within a short time span made its presence felt in the cement industry. Zuaries quality drive originates in its state of the are cement plant. That leaves the plants is of consistent quality.K. 45 . This commitment to quality has being it grow from a modest 0. All this combine seamlessly to ensure that every bag of cement. Decentralized quality assurance teams. this plant is cement manufacturers envy.5 million ton capacity in 1995 to 2 million tons today. the largest producer and distributor of cement in Europe and one of the leaders in cement production in the world.K. Morocco.

ULTRATECH CEMENT 6. Ital cement group the second largest producer and distributor of cement in Europe and fifth largest cement producer in the world enter into a joint venture with Zuari cement and Zuari cement Limited was formed. LANCO CEMENT 5. 2. Texaco’s cement business was taken over by the company in 1995. In 2000. COMPETITORS: 1. Zuari cement was started in 1994 to operate the cement plant of Texaco Ltd. 3.History of Zuari cements: 1. etc. MAHA CEMENT 3. Zuari cements manufacturing facility at yerraguntla in Andhra Pradesh is one of the largest in south India and places Zuari cement among the top 5 manufacturers in the south. Subsequently. PENNA CEMENT. 46 . CORAMANDAL CEMENT 2. NAGARJUNA CEMENT 4.

Given this. Location of the plant: Cement and its raw materials namely coal and lime stone. consisting of the cement plant of yerraguntla.. Maharashtra and Gujarat. in Yerraguntla. Andhra Pradesh. in Andhra Pradesh. There is a trade-off between proximity to markets and proximity to raw materials due to which some cement plants have been setup near big markets despite lack of raw materials. Low magnesia content to ensure reduced tensile cracks. Ital cements group CCB’s mother company ( Companies des cements ). Zuari cement industries ltd. Specially designed setting time to suit Indian working conditions. • • • • • Present of best suited limestone proved scientifically for cement. is located at Krishna Nagar. cement plants are located close to both sources of raw materials and markets. Now company is under joint venture having rated capacity of 17 lakhs per annum. It was nearest to the railway station and also nearest to the road. are all bulky that make transportation difficult and uneconomical.Joint venture with Ital cementi: The scenario of mergers and acquisitions is still vast in the cement industry. Kadapa district. Low free limestone to ensure reduce surface cracks. 47 . Location in industrial belt of Rayalaseema with sophisticated facilities like water. Most of lime stone deposits in India are located in Madhya Pradesh. Rajasthan. The other MNC’s planning to enter the Indian market and consolidation of the companies in India has been forcing mergers in the cement industry. The entry of many multinationals. and the Zuari Industries Ltd (ZIL) of India have reached an agreement to create a 50:50 joint venture which will assume the cement activities of ZIL. Low heat of hydration from better soundness. It was 6 km distance to HYDLocation of the plant at this place is having the following advantages.

G sets with an aggregate general capacity of 12. the plant presents has D. 2. WATER: Water is required for seeds of consumption make for plant and machinery for general need in plant. Gypsum is procured from fertilizer factories at Madras and Cochin.V.V demands APSEB. 1. 20000 tons of Iron ore per annum.6 M.5 million tons of limestone per annum.V. 2. Karnataka and Maharashtra. 3. 4. POWER: Maximum estimated power demand is 45 M. 39000 tons of Bauxite per annum. The limestone is major component required for the plant is net from the mines located adjacent to the proposed site.23 Million tons about 90 million tons in 2005-2006 excluding the contribution of mini cement plants. Company has a pumping station and underground bore wells near Hanuman Gutta village at Penna River to tap the undergrounds water in riverbed. 1. 4. TRANSPORT: The factory is when connected to different part of the country through rail and road facilities is near to Yerraguntla railway station and has a railway lint to the factory 48 . 70000 tons of Gypsum per annum. RAW MATERIALS: The actual requirements of raw material at 100% capacity utilization would be. Bauxite is procured from Goa.PRODUCTION: Cement production during the period has also increased from about 72. Iron is soured partly from mini steel plants located at Tirupathi and partially from Bellary. 3. The company has an existing contract 50 M. 12.

kms). MANPOWER: Existing plant has a total of 500 employees. a major industrial town of Rajasthan state in India.. CFCL’s plant is a state-of-the-are-high-tech complex built at a cost of Rs. Spread over an area of 1105 acres (or 447 hectares 4. After and addition of employees may be required.894 118.67 billions. The plant is connected to the nearest state highway to Bangalore. has set up a large gas based area manufacturing plant at Gadapan about 35 km from Keta. S.07 3 7354 86. QUARRY: It is situated adjacent to the factory. It constituted limestone.with an extern point within the factory premises 605 of the cement is dispatched by rail gal is received through rail. containing the manufacturing units offsite facilities including captive power plant.No Description Massive (MT) Flagged Total (MT) grade limestonestone(MT) 1 Total reserves of limestone 108442 36 blocks Un workable limestone due 29530 to mining obstacles Workable reserves 79912 9.12. The quarry has a mining base area of 1027. railways siding and 49 . one of the major materials for cement industry.266 Chambal fertilizers and chemicals ltd (CFCL) promoted by Zuari industries ltd.56 acres. Hyderabad and Chennai.36 2 2540 32.47 sq.

50 . Low heat of hydration. With a superior and wide range of cement catering to very conceivable building need. The enterprise value of the unit has been pegged at Rs. Zuari cement is a formidable player in the cement market. Here are just a few reasons why Zuari cement is chosen by millions in India. In combination with a very important partner says a release issued by laggard who advised ital cement on the deal. 5. 1. High compressive strengths. school. 3. Better soundness. It is a new opportunity for the group. Lesser consumption of cement for M-20 concrete grade and above. to further increase its presence in the emerging countries by entering the promising Indian market. 740 crores. multistoried buildings and complex. The creation of this joint venture company is a new step in the international of the Ital cement group in Asia. Here are 6 of the many reasons why Zuari 53 grade and 43 grades cement edges out its competitors. club. Faster de-shuttering of formed work. the third largest in the world. 4.amenities like residential complex. • • • • • • Ideal raw materials Low time and magnesia content and high proportion of silicates Greater fineness Slow initial and fast final setting Wide range of applications Quality customer service A wide range to address every need: • Residential. etc in a pleasant and green surroundings snamprogetti of Italy and Haldor topsoe of Denmark provided the technical know-how and Engineering and other services for Ammonia and urea plant while off-site facilities were built mainly by Tokyo engineering India ltd. 6. commercial. Reduced construction time. 2.

Heated to around 1450° C (2642° F) in rotating kilns. Cement is made from a mixture of 80 percent limestone and 20 percent clay. Spun pipes and poles manufacturing Cold weather concreting Pre-fabricated elements such a pipes. Technical experts provide the assistance according to the individual requirements.We aim to optimize production across all of our markets. providing a complete solution for customer's needs at the lowest possible cost. So that customers get the best value for the investment they have made. architecture. Zuari cement as set up a technical cell named Zuari home partner. the “meal” undergoes complex chemical changes and is transformed into clinker. canals. roads. Technology. windows. an approach we call strategic integration of activities. flyovers and runways.• • • • • Mass concreting-dams. Zuari Cements range of cement 51 . Quality customer service: In an effort to reach out to customers better. a pale. flour-like powder. door frames etc. sleepers. These are crushed and ground to provide the "raw meal”. Adding other constituents at this stage produces cements for specialized uses. housing finance and economical usage of the high quality. Fine-grinding the clinker together with a small quantity of gypsum produces cement. Products Zuari Cement manufactures and distributes its own main product lines of cement . spillways Construction and repair of pavements. This cell gives guidance in the field of building.

the Solid Foundation 52 .Process Technology.

BOARD OF DIRECTORS DIRECTORS : Saroj Kumar Poddar. these high standards are constantly improved upon by an experienced and dedicated R&D team to attain performance oriented cement The process Technology Advantages • Complete homogenization of limestone is achieved by stacking the limestone in stockplies with the use of stackers and reclaiming it through reclaimers. Suresh 53 .The culture of quality that has always prevailed in Zuari Cement's manufacturing facilities is best exemplified in the process technology employed. Chairman Rodolfo Danielle Yves Rene Nanot Goran Siefert Maurizio Caneppele. Yet. Advanced technology methods are used to ensure that a high level of quality is attained and sustained right through the manufacturing process. K. Srivasthava : P. Managing director Raghunathan Vishwanathan EXECUTIVES : Director-Marketing Director-Technical Vice President . The optimum ratio of raw mix is attained by the use of X-ray analyzer and automatic weigh feeder which are linked to the centralized computers control room. Sheoran : S.

COMPANY SECRETARY BANKERS : : L.R Neelakanta State Bank of India. BNP Paribas. Chartered accountants Bangalore Krishna Nagar. Yerraguntla.. 54 . State Bank of Hyderabad. Standard chartered Bank. AUDITORS FACTORY : : BSR & Co. Andhra bank.

airports. However. hydroelectric power projects. CAPACITY AND PRODUCTION: 55 . the performance of the industry and prices of cement are monitored regularly. the material is subjected to a temperature is about 1500c. skilled manpower and equipment & machinery technology. seaports. Tri calcium alumina (about 7 to 10%) and aluminum ferrate (about 10 to 12%). The raw materials consist of limestone. RAW MATERIALS: The basic raw material for manufacturing cement is limestone. Cement industry is one of the major and oldest established manufacturing industries in the modern sector of Indian economy.INDUSTRY PROFILE Cement is a key infrastructure industry. roads. iron ore & bauxite. Cement is required by firms. Limestone is excavated for mines by mechanical equipment with the help of stocker & reclaimed the correct. It has been decontrolled from price and distribution on 1st March 1989 and deli censed on 25th July 1991. It is an indigenous industry in which the company is well endowed with the necessary raw materials. water supply projects. The constraints faced by the industry are reviewed in the infrastructure coordination committee meetings held in the cabinet secretariat under the chairmanship of secretary (coordination). chemical reaction takes place between the various materials resulting in the formation of cement compound like Tricalcium silicate (about 24%). bridges. and irrigation schemes. It is thus a vital industry which assumes a crucial part in the economic development of the country. dams. die calcium silicate (about 20%). The cabinet committee on infrastructure also reviews its performance. The correct proportions are fed into a grinding mill where they are reduced to a very fine of compressed air. buildings. This is available in plenty in the form of limestone deposits in the nature. The power from the storage ribs is fed into rotator kiln.

has 10 units.28 million tones and more than 300 mini cement plants with and estimated capacity of 11. which is a central public sector undertaking.10 million tones per annum. There are ten large cement plants owed by various State governments. a production (provisional) was 31.84%. RECOMMENDATIONS ON CEMENT INDUSTRY: For the development of cement industry “Working Group of cement industry” was constituted by the planning commission for the formulation of X five year plan. 56 . a production target of 126 million tones has been fixed for the year 2003-04. The export cement during 2001-02 and 2003-04 was 5.41 million tones and 6. Export during April-may. The working group has projected creation of additional capacity of 40-62 million tones mainly through expansion of existing plants. The industry has achieved a growth rate of 4.90 million tones in 2001-02. and L&T ltd. 03 was 1.38 million tones. Actual cement production in 2002-03 was 116. and Use of ready-mix concrete in large infrastructure projects.The cement industry comprises of 125 large cement plants with an installed capacity of 148. EXPORTS: A Part from meeting the entire domestic demand.35 million tones as against a production of 106. the industry is also exporting cement and clinker.35 million tones. The working group has identified following thrust areas for improving demand for cement. The total installed capacity in the country as a whole is 159. • • • Further push to housing development programmers Promotion of concrete Highways and roads. Keeping in view the trend of growth of the industry in previous years.86% during the year.30 tones. regarding a growth rate of 8. During the period April-June 2003. Major exporters were Gujarat Ambuja Cement ltd. The cement corporation of India.92 million tones respectively.

Portland Blast Furnace Slag Cement (PBFS). There is tremendous scope for waste heat recovery in cement plants and there by reduction in emission level. The report submitted by the organization has made several recommendations for making the Indian cement Industry more competitive in the international market. Production of these varieties of cement conforms to the BIS Specifications. Oil Well Cement. the dept. Sulphate resisting Portland cement. At present 93% of the total capacity in the industry is based in modern and environment-friendly dry process technology. Rapid Hardening Portland cement.Further. The induction of advanced technology as helped the industry immensely to conserve energy and fuel and to save materials substantially. One project for cogeneration of power utilizing waste heat in an Indian cement plant is being implemented with Japanese assistance under green Aid plan. we think glow Cement aggregates and ready mixed concrete manure and distribution are local business. in order to improve global competitiveness of the Indian cement industry. Portland Pozzolana cement (PPC). It is worth mentioning that some cement plants have set up dedicated jetties for promoting bulk transportation and export. Around the world we serve local customers in local market with local needs. of industrial policy & promotion commissioned a study on the global competitiveness of the Indian cement industry. Ital Cementi Group: OUR MISSION:“Our shared ambition: Effective and Efficient” To become the most effective and most efficient cement manufacturer and distributor in the world. OUR APPROACH: We are local. OUR WAY OF WORKING: Technological leadership is our goal. TECHNOLOGY CHANGE: Cement industry has made tremendous strides in technological up gradation and assimilation of latest technology. While cement etc. 57 . India is also production different varieties of cement like ordinary Portland cement (OPC). The recommendations are under consideration.

ground in a crusher and fed into the additive silos. which resembles pellets about the size of marbles. 58 . Invention of cement of JOSEPH ASPARIN. the power is heated to 1500degrees Celsius. We are proud of our cultural diversity and our distinctions character. called clinker. the powder is heated to 1500 degrees Celsius. This creates a new product. 1824 patented as Portland cement. which resembles pellets about the size of marbles. the capabilities of our employees OUR SPIRIT: One team worldwide. 2. the fine power is heated as it passes through the pre-Heater tower into a large kiln. our companies. 4. Next the fine powder is heated as its passes through the pre-header tower into a large kiln.Our technology plays the key role in realizing our ambition we are committed to and the ecological standards by which we operate. called clinker. increasing the value of our group. The cement manufacturing process beings when limestone. Sand. The limestone is combined with clay. 1912 Indian cement company limited established factory at Portlander. iron and bottom ash are then combined with the limestone and clay in a carefully controlled mixture with which is ground into a fine power in a 200hp roller mill. Next. 3. HISTORY OF CEMENTS: 1. CEMENT MANUFACTURING PROCESS: 1. This creates a new product. the basic raw material used to make cement.2 meters in diameters. 1904 it’s and American standards of Portland cement. 2. our products and services. In the kiln. is transported by rail to the plant from the limestone quarry. We operate worldwide in many diverse markets. 5. 21st October. 4. culture and continents. 1951 Indian standards. 3. Leeds builder in bricklayer. which is over half of the length of a football field and 4.

The clinker is combined with small amounts of gypsum and limestone and finely ground in a finishing mill. 7. It has lower heat of hydration. flooring etc. Portland Blast furnace slag cement. Over 5000 sensors and 50. and specialized cement. Pozzolona has siliceous and aluminous materials that do not possess cementing properties in the presence of water. PORTLAND POZZOLONA CEMENT (PPC): PPC has 80% clinker. The cement manufacturing process consists of many simulations and continuous operations using some of the largest moving machinery in manufacturing. PORTLAND BLAST FURNACE SLAG CEMENT (PBSFC): 59 . which helps in preventing cracks where large volumes are being cast. The basic difference lies in the percentage of linker used. Contains a very low proportion of oxide. ORDINARY PORTLAND CEMENT (OPC): OPC.5.e. driven by a 4000ph motor. 6. popularly know as grey cement has 95% clinker and 5% of gypsum and other materials. White cement is a variation of OPC and is used for decorative purposes like rendering of walls. The finished cement is ground so fine that it can pass through a sieve that will hold water. Computers allow the entire operations to be controlled by a single operator from a central control room. It is cheaply manufactured because it uses fly ash / burnt clay/ coal waste as the ingredient. It contains for 56% of the total consumption. DIFFERENT TYPES OF CEMENT: There are varieties of cement based on different compositions according to specific end uses namely Ordinary Portland Cement. 15%pozzolona and 5% gypsum and accounts for 18% of the total cement consumption. Portland Pozolona cement. The mill is large revolving cylinder containing 250 tones of steel balls i.

the compressible strength increases rapidly. Current per capita consumption-85 pages. 5. It has a heat of hydration even lower than PPC and is generally used in construction of dams and similar massive constructions. RAPID HARDENING PORTLAND CEMENT: It is similar to OPC. 60 . 50% blast furnace slag and 5% gypsum and accounts for 10% of the total cement consumed. Against world standard of 256 kgs. Currently India is ranked second in the world with an installed capacity of 114. with small portion of calcium separate or non. 55-60% of the cost of production is govt control. CEMENT INDUSTRY IN INDIA OVERVIEW 1. so that casting. that it is ground much finer.PBSFC consist of 45% clinker. WATER PROOF CEMENT: OPC. except. SPECIALIZED CEMENT: Oil Well Cement: Is made from clinker with special additives to prevent any porosity.2 million tones. 3. Cement grade limestone in the country reported to be 89 bit. 4. Indian cement industry data back to 1914-first unit was setup at Proddatur with a capacity of 1000 tones. A large proportion however is unexplainable.specifiable of to impart waterproofing properties. 2.

Production around 87. Major cement plants Companies:59 Plant: 116 Typical installed capacity for plant: Above 1. cement consumption per capita in our country at about 99-kg/ capita is one of the Lowest. Cement sales primarily through a distribution channel. tie ups with customers.2 mn tones Excise : Rs 250/ tone Mini plants were meant to tap scattered limestone reserves. Tones Production around : 6. Ready mix concrete a relatively nascent market in India.400 Infrastructural facilities not to the best However.05 mntpa Production 98-99:81. 7. While that of china is 450 kg / capita. Bulk sales account for < 1% of the total cement produced. MP. Excise: Rs 408 tones All India reach through multiple plants Export to Bangladesh. UAE and Mauritius Strong marketing network.6. Rajasthan. contractors Wide spread distribution network Sales primarily through the Consumer channel Mini cement plants Nearly 300 plants Located in Gujarat. Srilanka. CEMENT INDUSTRY: STRUCTURE Installed capacity 114.6 mntpa. Total installed capacity: 1.8 mn tones.P. Nepal. Production: 61 .5 mntpa.000 to 1.2 mn tones per annum. The world average is about 267 kg/ capita. Similar in Japan its 631 kg/ capita while in France it is 447 kg / capita. Most use vertical Kiln technology Production cost/ tone. However most set up in A.Rs 1.AP Typical capacity < 200 tpd installed capacity around gmm.

Prices a. Excess capacity exists.) 137 137 136 136 128 120 Rs. c. 2. 7.1. 3. Price fluctuations. Exports around 2 mn tones.) 170 161 161 140 136 1. However. Dry process replacing the wet process as it is space saving energy efficient and economical. Over 370 companies in the organized sector.better control over mixing of raw materials. 1999-2000 production expended to reach 95 mn tones 3. 4. semi-dry or process. 6. through some units are sick.) 175 175 175 172 160 136 Rs. Essentially determined by demand. Cement manufactured through the wet. industry dominated by 20 companies who account for ever 70% of the market. Individually no company accounts for over of the market 62 . Wet process popular in the past. Dry process accounts for 90% of the installed capacity. 5. Prices also vary with grades AVERAGE MAXIMUM RETAIL PRICE Delhi Amount ( Calcutta Amount ( Chennai Amount ( Bangalore Amount ( Aug 1999 Sep 1999 Oct 1999 Nov 1999 Dec1999 Jan 2000 Rs. 2.) 146 139 125 125 117 140 Rs. b.

63 . The plant locations are primarily determined based on the proximity of ‘cement grade’ limestone deposits. However. Capacity Distribution and Consumption Norms Process Dry Semi-Dry Wet Total Capacity (TPD) 282486 13910 5260 301656 % of total 93 5 2 100 Power KHz/MT 120-125 115-120 110-115 Fuel Kcal/kg 750-800 900-1000 1300-1600 GEOGRAPHICAL DISPERSION Limestone is the most important material input into cement manufacture. some of which overlap two states. These limestone deposits have been classified as “cluster”. The wet process was popular in the past as it provided better control over materials mixing process. semi dry and processes. energy efficient and economical. the dry process has now gained popularity globally because it is space saving.Manufacturing Process: Cement is manufactured by using the wet.

45 5.85 5.16 7.75 (47.37 (52.Cluster Wise Installed Capacity (Large Plants) Capacity Cluster Satna Ballarpur Gulbarga Chandrapur Chanderia Yerraguntla Sub total Non cluster Total State MP MP Karnataka/AP Maharashtra/AP Rajasthan/MP Nalgonda AP AP No of plants (mn tpa) 8 7 7 7 8 4 50 63 120 12.18 11.82 7.5%) 110.49 7.10 64 .40 57.5%) 52.

Launched first in Mumbai a few years ago is gaining in other metros in India.6 to 1. Currently RMC is at a very nascent stage. while for large cement it is about Rs 3500 per ton. 2. Gestation period is around 3-4 months 4. sand and aggregate and water mixed in convenient proportion. 7. Most of the new cement plants being set up have a capacity of 1 mntpa or more. accounts for 0. 3. The average cost of setting up a mini cement plant is about Rs 1400 per ton. Typical cost of a plant.3 mntpa are classified as mini cement plants and are eligible for concessional excise duty. Company ACC RMC Ready mix L&T Fletcher Challenge HCC Unitech Jog Construction Starmnac Madras Cement Birla Cement No of plants 13 4 5 3 2 2 1 1 1 1 Capacity ( cu m/hr) 712 440 330 320 240 150 120 120 56 30 Three units of ACC to be commissioned 65 . there are over 300 white and mini cement plants in India a collective capacity of only 9 mntpa (8% of the total domestic installed capacity). Ready mix concrete: Industry 1. RMC-ready to use concrete.8 mn) to set up a 100 cubic meter (cum) plant with 4-5 transit mixers.8 crs (US $ 1. Though the minimum economic size of a cement plant is 1 mntpa.Rs.PRODUCTION CAPACITY Cement plant with a capacity of up to 0. a blend of cement.5% of the demand.

Capacity additions: 1. Concerns: Cement industry going through a consolidation phase in the last few years. 6. 2. 2. Priyadharshini Cements in Hyderabad.Companies planning to enter this Market: 1. ACC plans to treble its capacities. 7. However. Transportation: 1. Regional imbalance resulting in cross regional movement-limestone availability in Pockets has led to uneven capacity additions. 66 . Transportation costs high-freight accounts for 17% of the selling and distribution cost. Acquisitions have been the mainstay of the business. Capacity additions expected in the next few years 5. Road preferred for transportation for distances less than 250 kms. Saurashtra Cements in Navy Mumbai. Grasim is setting up four more plants. L & T plans to add another eight more. 2. 3. industry is heavily dependent on roads are the railway infrastructure is not adequate shortage of wagons. Pioneer a world leader entering the market 4.

3. 67 . Capacity additions have slow down.

The overall demand growth is expected to about 7-8 per cent. the sector looks favorably poised. An 8-10 per cent growth is projected in the coming years. 5. survival difficult. Mini plants realization of the revenue lower large plants. Retail housing segment is expected to show significant demand growth over the next two year. which will take the demand to 200 million tones in 10 years. the total cement demand in India is lower than the total capacity. Coal availability the quality affecting production. 2. A focus on more value added products likely Ready Mix Concrete (RMC) is emerging. Currently. the supply demand position is expected to the better balanced. housing construction showing a sign so revival and the government gearing up to spend more on infrastructure. 4. Nearly 55-60% of the inputs controlled by the controlled. However seven million tones of Cement Corporation of India and two million tones of UP cement are lying ideal. 3. Highly capacity intensive industry. The cement manufacturers association of India projects a demand of 101 mn tap in 2000-01 as against 93 mn yap last year. Withdrawal of sales tax benefits for the new units will give an added push to consolidation via acquisitions. with companies seeking to gain dominance in their chosen regions. Against this.Industry inputs: 1. With the industrial production showing an upward trend. With no significant addition expected. RMC is a compound in which sand. Facing problems due to power shortage. Future out look Most economic forecasts for the Indian cement industry indicate a favorable outlook for the Indian cement sector. Consolidations will be more regional. the total installed capacity is 109 mn tap. India’s per capital cement consumption is less than 100 kg compared to the world average of 250 kg. gravel additives and water are added to cement and 68 .

in action. Holders Bank are waiting in the wings. This method is cement transpiration is preferred by cement manufacturers as it results in lower packaging costs. So far.sold as readymade concrete. With these measures. Most of the cement sold in bulk is currently used by the ready mix concrete plants. the market has seen only two major international players. The industry will see more action on the mergers and acquisition front. The cost of setting up a 100 metric cube per hour plant is in the range of Rs 70 to 90 mn. offering a higher acquisition price than the international standards. Cement packaging costs accounts for nearly 4 per cent of total costs for a cement manufacturer. While the central government has declare a zero excise duty on RMC. RMC consumption is expected to touch 6 per cent of total cement capacity in next four year. cement is predominantly sold in 50 kg bags. the Maharashtra government has made it mandatory to use RMC in construction of all the flyovers. But the pattern appears to the changing as cement manufacturers have increasingly started selling cement in bulk.50 per 50 kg bag) compared to the use of conventional bags. only about 1%of total cement is transported in this form. both Indian and foreign. But in India. This is because of the attendant problems like inadequate infrastructure in the form of port facilities and lack of timely availability of wagons from the railways. Cement consumed in bulk could help save about Rs 110 per tone (Rs 5. Around the world. At present. such as CEMEX and the big daddy. Lafarge and Cement Francais. Next cost cutting measure appears to be transporting bulk cement. especially in cities where construction activity as it is peak. Cement products benefit from RMC production as it involves low capital expenditure. To tap is existing potential. the total. hence lower demurrage costs. almost 80% of the cement transportation is carried out in bulk form. leading cement manufacturers in the country like L & T and ACC have already announced their plans to expand their RMC capacities is coming years. But others. Within the next three to five years the industry is expected to be dominated by five six big players and less than ten companies in all. 69 . looking towards getting a foothold in the Indian market. These global players are.


07.05.377 5.93.97 93.89.74 94 6.48.436 7.79 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 71 .039 5.25 181.71.TABLE -1 GROWTH IN FIXED ASSETS YEAR INVESTMENT 6.277 TREND PERCENTAGE 100 96. 5.79% in the year 2009-2010.74 94 93.43.TABLE 2 YEAR INVESTMENT 6.277 in 2009-2010 The fixed assets investment is quite satisfactory.89.08. 72 .27 1 and it increased to Rs.277 TREND PERCENTAGE 100 102.565 5.25 181.21.879 5.039 7. 2. 11. During the year 2003-2004 the assets investment was recorded at the examination of the above tabic reveals analysis and interpretation.94. 1.08. The trend percentage in the year 2003-2004 is taken as the base year as 100% and it was increased to 181.271 6.07.79 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 Interpretation: Growth rate in fixed assets.64.01. the average growth rate in fixed assets Rs.6.406 in 7 years 73 . 5.42 2 3.48.02 163.879 5.38.54 0 6.85 5 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 Interpretation in the year 2004-2005 and it is recorded at 164.38. The fixed assets as a percentage of long term liabilities is recorded at 42.43.78 4 4.78.52 178.69.TABLE 3 NETWORTH TO FIXED ASSETS: NETWORTH TO FIXED ASSET YEAR NET WORTH 3.21 5 7.77.07 5 3.8% in the year 2005-2006 74 .85.65 174.64 1 GROSS FIXED ASSETS 6.77.377 5. The fixed assets as a % of long term liabilities the ratio is fluctuating from year to year.14.59 184.27.277 RATIO IN % 166. The highest ratio is recorded at 7.07.879 5.665 2.01.568 5.44 CURRENT LIABILITES 2.123 5.18 Interpretation 75 .053.47 1.377 5.518 2.432 3.2% in 2005-2006 and it is increased during the year 2009-2010 at 119.71.271 2.8% in the year 2004-2005 the low ratio is 42.05.7% TABLE-4 YEAR 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 FIXED ASSETS 6.99 2.07 2.2.066 RATIO IN % 11.94.27.

76 . From the above table it is observed that the ratio was recorded at 2. During the year 2008-2009.99 which is less than the average ratio.07 which is higher than the average ratio. 5. The lowest ratio was recorded at 1. During the year 2004-2005. 3. The highest ratio was recorded at 3.96in the 20032004 and is gradually changing to 2. The ratio was fluctuating trend percentage in review period.1. 2.47 in 2007-2008 which indicates that the current funds are used in the fixed assets which is quite satisfactory.59 during the review period of time 4. The average ratio was recorded at 2.

128.24 1.907 RATIO IN % 32.448.96.35 3.339 CURRENT LIABILITES 4.75 22.35.368.08.195.84 50.2 34.60.62 1.5 31.553.56 77 .375.34.29 76.TABLE-5 YEAR 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 FIXED ASSETS 1.22 1.24 2.43 55.06 51.02 2.499.24 28.317.28 1.78 1.27.21 3.40.543.42.61.

46 2009-10 134540.85 4164.56 2010-11 170064.3 62587.85 4164.5 94041.2 2008-09 123003.51 1358.TABLE-6 FIXED ASSETS 2011-12 gross block Less: depreciation net block capital work in progress Investment 171339.8 68907 15604.1 70159.5 2007-08 136672.28 88859.51 98447.36 104730.81 73660.8 67765.28 89178.4 77297.64 8568.5 55397.28 78 .76 71952.84 67605.58 94041.

79 .

In lacs) 80 .ANALYSIS OF THE STUDY ZUARI CMENT Balance sheet As on 31st March (Rs.

73 57518.28 31904.1 4 5311.28 89178. 5 55397.5 28366. 2 2009-10 6138.4 6 34040.0 3 7553. loans & advances Inventories Debtors Cash Others Loans less: current liabilities and provisions current liabilities Provision net assets total = 6138.8 1 47621.28 6402. 9 56686.73 202185.42 57282.28 88859.8 4 67605.1 136672. 4 2008-09 6138.3 6 30447.2 252129.49 23361. 4 134540.5 6 2182. 1 70159.8 5 2837.06 14442.0 5 22074.6 3 30367.58 235559.4 2969.5 94041.6 4 8568.6 1 4679.34 6770.3 6 26877. 4 77297.8 5 4164.03 244667 171339.08 133690.17 3315.08 112856.94 5066.62 57154.8 68907 15604.3 8 29694.6 1 43575.2 1 5967.84 44013.1 6 37472.66 45343.56 22120. 3 86884.8 5 4164.08 129477.2 4 2105.73 219964. 2 32974.3 27827. 7 26227.06 29083.9 6 5587.3 5 2656.8 67765.1 8 28988.36 104730.0 7 2561.8 6 2007-08 6138.4 8 252129.08 106560.5 54667.34 23931.9 21715.2011-12 sources of fund share holders' fund shar capital reserve & surplus Loan Funds secured loans unsecured loans deffered tax liability total = Application Fixed Assets gross block Less: depreciation net block capital work in progress Investment current assets.01 202185. 7 123003.1 .3 8 28210.2 3 5966.08 111153 75695.5 1 1358.51 98447.5 6 28450.3 3 235559.2 6 244667 81 2010-11 6138.7 6 71952.5 8 94041.16 24846. 4 50204.81 73660.0 3 219964.9 8063.3 3 35044.74 2503. 2 170064. 3 62587.48 5775.16 4332.

CHAPTER-5 82 .

6 . . 4 The ratio of return on fixed assets is poor. 8 ZUARI research must be expanded with profit making units with low cost. The finance department (The manager of ZUARI should take remedial steps to improve the position. 5 The PAT ratio must be improved.The ZUARI h as to increase its consultancy services to other power project in India and abroad. 83 .SUGGESTIONS 1 Suggestions for efficient management of fixed assets of ZUARI 3 The ZUARI should analyze and measure a list of projects for evaluation.ICICI DIRECTS must concentrate on other diversification and takeover. 5.

trend analysis and ratio analysis.CONCLUSIONS After analyzing the financial position of (ZUARI CEMENT) and evaluating its fixed assets Management or capital budgeting techniques in respect of components analysis. • It’s adopted all financial tools for the knows positions fixed assets. The following conclusions are drawn from the project preparation. • The project is describing the financial analysis of fixed asset through ZUARI. • It indicates the equity research for position of the company • ZUARI followed all company financial data 84 .

• This study interpret how the fixed assets are indicates to find the assets performance of the company. • Fixed asset management refers to know the analysing data through icici direct. 85 .FINDINGS • I tried to find to know the financial positions for the study through fixed assts • I find current ratios of the financial position to understand the company obligation the particular data.


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