Profitability Analisys-DM Repaired

FINANCIAL PERFORMANCE ANALYSIS OF
SELECTED COMPANIES IN CEMENT
INDUSTRY: A STUDY
U.G.C MINOR RESEARCH PROJECT
SUBMITTED
BY
Durga Pada Mal
Associate Professor of Commerce

Deshabandhu Mahavidyalaya
Chittaranjan, Burdwan
West Bengal
2016
1
U.G.C MINOR RESEARCH PROJECT
Submitted
By
Durga Pada Mal
Associate Professor of Commerce

DeshabandhuMahavidyalaya
Chittaranjan,Burdwan
West Bengal
2016
2
CONTENTS
PAGE
PREFACE 4-5
LIST OF TABLES 6
CHAPTER 1:
 Introduction 7-9
 Indian Cement Industry: An Overview
CHAPTER 2:
 Review of Existing Literature 10-12
 Objectives and Scope of the Study 13
 Research Methodology of the Study 13-15
 Organization of the Study 15
CHAPTER 3:
 Measurement of Liquidity of the Selected 16-26
Companies
CHAPTER 4:
 Measurement of Efficiency of Managing 35-42
Different Assets of the Selected Companies
CHAPTER 5:
 Assessment of Profitability of the Selected 49-58
Companies
CHAPTER 6:
 Measurement of Overall Financial 66
Performance of the Selected Companies
 Summary and Conclusions 66
BIBLIOGRAPHY 68-71
3
Preface
The ultimate test of the efficiency of any enterprise is its financial performance, in terms of
turnover and profits. Both should increase years by year. On the long run income should
always exceed total expenditure. The difference is profit, which can be increased in two
ways: by increasing turnover or total income, or by reducing total costs, or total expenditure.
In practice, both methods be used to the maximum extent possible. But this is not the only
factor of testing financial efficiency of a company. Many companies which appear to be
operating satisfactory come to grief because they neglect cash flow, the day to day
expenditure needed to keep them afloat. It is therefore vital that managers, including those
concerned with performance, should acquaint themselves with modern practice in this
respect, should understand the language and become familiar with the latest ideas on the
subject.
Cement is one of the important products among construction materials. It is an essential
commodity required for all modern constructions. All building activities and in a way
building of modern civilization itself depends upon the growth of cement industry. Cement
industry is considered as one of the basic infrastructure industries for development. It
constitutes an important segment for modern industrial economy of India. It is an indigenous
industry in which the country is well-endowed with all necessary raw materials, skilled
manpower, machinery, equipment, technology and know-how.
The demand for cement in the country is fast growing. This has to be met by installing of
additional capacity, technological up-gradation of existing plants, and conversion of wet
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process into dry process and by increasing the capacity utilization of the existing plants by
bringing about operation improvements and efficiency. All this require a huge outlay of
financial resources. Therefore good financial management is necessary not only to overcome
the various internal and external constraints but also for the efficient functioning of the
cement units in the country.
Words cannot adequately express my gratitude to my friend Dr Debasish Sur, Professor,
Department of commerce , Burdwan University ,who has been the guiding spirit behind this
study. His timely advice, scholarly guidance, constructive suggestions, wise counseling have
enabled me to bring this to fruition.
I would like to extend my gratitude to Dr Asish Kumar Dey, Principal, Deshbandhu
Mahavidyalaya, Chittaranjan, for his suggestions and valuable support during the course of
this study. My sincere and heartfelt thanks go to Prof. Susanta Mitra, associate prof. of Kazi
Nazrul University, Department of Commerce, for his invaluable help rendered to me.
I am also thankful to the non-teaching staffs of Deshbandhu Mahavidyalaya, Chittaranjan,
who have provided technical support for completion this dissertation. I also convey my
gratitude to Professor Sagar Chandra Bandyopadhyay, Associate professor of Bengali and
also Teacher –in –charge of Deshabandhu Mahavidyalaya, for his inspiration to complete
the dissertation.
Last but not the least, I express my sincere thanks and gratitude to The University Grants
Commission, India,who has provided financial support for this research project. I am
grateful to the officials of the University Grants Commission for their kind cooperation.
5
List of Tables
PAGE NO.
3.1 Analysis of Current Ratio 27
3.2 Analysis of Quick Ratio 28
3.3 Analysis of Stock to Current Asset Ratio 29
3.4 Analysis of Debtors to Current Asset Ratio 30
3.5 Analysis of Cash & Bank to Current Asset Ratio 31
3.6 Computation of Ultimate Liquidity Rank Based on the 32
Average Values of the Selected Liquidity Measures
3.7 Computation of Ultimate Rank Based on the 33
Consistency of the Selected Liquidity Measure
3.8 Computation of Final Liquidity Rank Considering 34

Both the Average and Consistency Parameters of
the Selected Liquidity Measures
4.1 Analysis of Fixed Asset Turnover Ratio 43

4.2 Analysis of Inventory Turnover Ratio 44
4.3 Analysis of Debtors Turnover Ratio 45
Average Values of the Selected Efficiency Measures
Consistency of the Selected Efficiency Measures
4.6 Computation of Final Efficiency Rank Considering 48
Both the Average and Consistency Parameters of the
Selected Efficiency Measure
5.1 Analysis of Gross Profit Ratio 59

5.2 Analysis of Net Profit Ratio 60
5.3 Analysis of ROCE 61
5.4 Analysis of RONW 62
Average Values of the Selected Profitability Measures
Consistency of the Selected Profitability Measures
5.7 Computation of Final Profitability Rank Considering 65
Both the Average and Consistency Parameters of the
Selected Profitability Measures
6. Statement of Ranking of Different Measures of Overall 67

Financial Performance
6
Introduction
Indian Cement Industry: An Overview
In India, the foundation of a stable cement industry was laid in 1914 when the Indian Cement
Company Ltd. manufactured cement at Porbundar in Gujarat. In the initial stages,
particularly during the period before Independence, the growth of the sector had been very
slow. The indigenous production of cement was not sufficient to meet the entire domestic
demand and accordingly, the Government had to control its price and distribution statutorily.
Also, the large quantities of cement had to be imported for meeting the deficit in the country.
However, with liberalisation and introduction of several policy reforms, the cement industry
has been decontrolled which gave impetus to its pace of growth. It has made rapid strides
both in capacity/ production and process technology terms. Today, it is one of the most
advanced and pioneering sectors in the country. Cement is a basic material input which
facilitates the promotional fast pace, in the areas of infrastructural set up and other
construction related works. Since it is a decontrolled commodity, its production and prices
are largely governed by economic factors, like, demand and supply, cost of raw materials
and other inputs, production as well as distribution costs and developmental efforts.
Cement is an essential component of infrastructure development and most important input of

construction industry, particularly in the government’s infrastructure and housing programs,
which are necessary for the country’s socioeconomic growth and development. It is also the
second most consumed material on the planet (WBCSD 2002). The Indian cement industry is
the second largest producer of cement in the world just behind China, but ahead of the
United States and Japan. Also the industry is a significant contributor to the revenue
collected by both the central and state governments through excise and sale. The industry
occupies an important place in the national economy because of its strong linkages to other
sectors such as construction, transportation, coal and power. Cement is a highly freight-
sensitive product, given that it is a high-bulk, low-value commodity, The Indian cement
market therefore is largely a regional one, which also means that the demand-supply
dynamics may be different for the various regions and the country as a whole.
In the most general sense of the word, cement is a binder, a substance which sets and
hardens independently, and can bind other materials together. Cement used in construction
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is characterized as hydraulic or non-hydraulic. Hydraulic cements (e.g. Portland cement)
harden even underwater or when constantly exposed to wet weather while non-hydraulic
cements (e.g. lime and gypsum plaster) must be kept dry in order to gain strength.
The most important use of cement is the production of mortar and concrete used by the
construction and real estate sectors. The world production of hydraulic cement is dominated
by China (1.2 billion MT), followed important use of cement is the production of mortar and
concrete used by the construction and real estate sectors. The world production of hydraulic
cement is dominated by China (1.2 billion by India and Brazil, with these 3 countries
contributing to over half of global production. There are a number of employment
opportunities within the sector such as site engineer, packaging engineer, surveyor,
geologist, contractor, and supervisor amongst others.
Typically the industry is characterized by few large players due to the high entry barriers
such as economies of scale, high capital requirements, long gestational period of over 3
years and the need for capacity augmentation in large increments. These producers tend to
have high bargaining power due to their limited numbers and the lack of any substitutes for
their product, which is quintessential for secondary industries. The largest global players are
Lafarge (France), Holcim (Switzerland) and Cemex (USA).
The industry consists of both the organized sector and the unorganized sector. The largest
organized sector companies include Ambuja Cements Ltd, J.K Cement Ltd, Grasim
Industries Ltd, Associated Cement Company Ltd (ACC) and Madras Cement Ltd. while the
main players of the unorganized sector are the regional and local cement producing units
across various states. Some of the states where the cement industry is booming are Gujarat,
Madhya Pradesh, and Rajasthan.
The significant growth trajectory of the industry has attracted a lot of foreign interest in the
recent few years, with Holcim increasing its stake in Ambuja Cement from 22% to 56% and
leading foreign funds investing in a 7.5% stake in India’s 3d largest cement company, India
Cements (ICL) valued at US$125 million.
Prospects for the industry remain bright over the coming years, given India’s dominance of
global markets and relatively low cost of production. Also, the overall economic prosperity
of the country, with a burgeoning middle class, growing infrastructure demand, significant
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technological change and increasing government spending all bode well for the future. On
the flip side, some caution has to be maintained due to the current demand- supply gap
leading to over capacity and falling margins and prices. Also, given the close linkages
between them, the effect of a slowdown in global real estate and infrastructure demand or
hike in interest rates should also be evaluated.
According to the recent surveys, one metric ton of cement generates job opportunities for
around 1.4 million people. In most cases, one needs to have some type of expertise in
architecture in order to get a good job in this sector. Given that most of the jobs for qualified
graduates have a good pay package with other benefits and perks coupled with positive
growth prospects, working in the cement industry is considered a lucrative career option for
new graduates, especially for those with an interest in architecture. It is believed that in the
coming years, more than 2.5 million people will be directly employed by cement companies.
To cater to this growing demand, a number of colleges and educational institutes have
introduced various courses and study programs related to the cement industry such as a
‘Post Graduate Diploma in Cement Technology’.
Growth in domestic cement demand is expected to remain strong, given the revival in the
housing markets, continued Government spending on the rural sector, and the gradual
increase in the number of infrastructure projects being executed by the private sector. Thus,
the trend in demand growth seen during the last five years is expected to continue over the
medium term. Also, with Government targeting an over 8% GDP growth rate, cement
demand should grow at 8-10% over the next few years. The industry may be expected to add
another 130-135 million tonnes of cement capacity in phases over the next four years, that is,
during the period 2009-10 to 2012-13.
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Chapter 2
 Review of Existing Literature

 Objectives and Scope of the Study
 Research Methodology of the Study
 Organization of the Study
The present chapter deals with the review of existing literature,the objectives and scope of
the study, the research methodology adopted in this study and the organization of the study.
Review of Existing Literature
Several studies have been carried out on various aspect of financial performance of
corporate sector both in India and abroad. Some of them which are notable ones are
reviewed for the purpose of identifying the research gaps.
Banerjee. (1982) opined in a research work that corporate profitability is influenced by its
liquidity in three different manners. Upto a certain level increase in liquidity leads to an
increase in profitability, beyond that profitability remains constant with the increase in
liquidity upto a certain point and thereafter increase in liquidity leads to decline in
profitability.
Banerjee.(1982) in his study on cash management observed that liquidity of a firm was
largely affected by the composition of its working capital. The study conformed to the
theoretical argument that the higher the proportion of current assets to total assets the higher
is the liquidity.
An econometric analysis regarding price cost margin in Indian manufacturing industries was
made by Jain (1981) who observed that cost factors were considered as the most significant
determinant of profitability.
10
Mallick and Sur (1998)examined the impact of working capital management on profitability
in Indian Tea industry with the help of some statistical tools and techniques. The study
revealed that, out of the nine ratios relating to working capital management five ratios
registered positive association and the remaining four ratios showed negative correlation
with the profitability indicator.
Singh. (2003) conducted a research study to appraise the financial performance of IDBI
using capital adequacy ratio, non performing assets, priority sector advances, statutory
liquidity ratio and cash reserve ratio as performance indicators and found that the bank was
sound in terms of liquidity, profitability, capital adequacy and well geared.
Sur. and Rakhit. (2005) in their research study examined the relationship between assets
management and profitability taking into account 25 selected enterprises in Indian corporate
sector. The study revealed that receivable turnover ratio was positively associated with
profitability in 14 companies, inventory turnover ratio was positively associated with
profitability in 10 companies and operating long term asset turnover ratio was positively
associated with profitability in 19 out of 25 selected companies. So all the companies did not
conform to the traditional view that higher the asset turnover the higher is profitability.
Taking all the selected companies as a whole, a positive association between receivable
turnover ratio and profitability and between operating long term asset turnover ratio and
profitability was found. However a negative relationship between inventory turnover ratio
and profitability was noticed.
Chakraborty (2008) evaluated the relationship between working capital and profitability of
25 selected companies in the Indian pharmaceutical industry during the period 1996-97 to
2007-08. The study revealed that the liquidity management, inventory management and credit
management made positive contribution towards improvement of the corporate profitability.
Venkataramana and Ramakrishnaiah (2011) conducted a study to analyse the financial

performance and financial position of ten selected cement companies for the period 2001-
2010.One of significant outcomes of the study was that the profitability of the selected
companies followed upward trend during the period of under study.
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Basu. (2011) examined in his research study the relationship between debtors management
and profitability taking eleven selected companies in Indian cement Industry for the period
2000-2009. The study revealed that current ratio was positively associated with return on
capital employed in 7 companies, inventory turnover ratio was positively associated with
return on capital employed in 9 companies and debtor turnover ratio was positively
associated with return on capital employed in 9 companies.
Sathya. (2012) conducted a study on analysis of composite profitability index of 30cement

companies in India. While making this study the researcher used secondary data and
analyzed these data by using various statistical tools and techniques. The study showed that
in order to rank the selected companies in terms composite profitability, ratio-wise scores
were aggregated and the firm securing the highest total score captured the highest rank and
the firm securing the lowest total score occupied the last rank.
Bag chi and Khamrui. (2012) conducted a study to examine the financial performance of two
leading FMCG companies in India – Britannia IndustriesLtd. and Dabur India Ltd., over a
period of ten years (2000-01 to 2009-10).The researcher used secondary data and analyzed
these data by using various accounting ratios and statistical tools like linear regression
analysis and multiple correlation analysis. The study revealed that whole Britannia
Industries Ltd. was passing through hard times in terms of profitability, Dabur India Ltd.
was enjoying its enhanced performance and continuous growth.
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Objectives and Scope of the Study:
Objectives of the Study:
The study has the following objectives:
i. To judge the liquidity of the selected companies in the Indian cement industry during the period
under study.
ii. To assess the profitability of the selected companies during the same period.
iii. To measure the efficiency in managing assets of the selected companies during the period under
study.
iv. To evaluate the overall financial performance of the companies under study by taking into
consideration three important aspects of financial performance namely, liquidity, profitability
and efficiency in asset management.
Scope of the Study:
In the present study twelve companies in Indian cement industry were covered. It was an
attempt to analyze the complete financial performance of the selected companies in the
Indian cement industry during the period under study, i.e. from 2001 to 2010.
Research Methodology of the Study:
(i) Sample design:
The study was based on twelve selected companies in Indian cement industry. In this study
purposive sampling procedure was followed. The selected twelve companies were:
1. ACC
2. Ambuja
3. Birla
4. Century
5. Chettiland
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6. Grasim
7. India
8. Madras
9. OCL
10. Shree
11. Sanghi
12. Prism
(ii) Collection of data:
The data of the selected twelve companies in Indian cement industry for the period 2001 to
2010 used in this study were collected from secondary sources i.e. Capitaline Corporate
Database of Capital Market Publishers (I) Ltd. Mumbai. The data used in this study pertains
to the financial year figures of each year under study. Other secondary sources used in this
study were CMIE reports, Books, magazines, journals, newspapers, published annual reports
of the selected companies, research reports and internet sites.
(iii) Analysis of data:
For analyzing the data in this study, simple mathematical tools like percentages, averages,
ratios were used. The ratios relating to the liquidity management which were used in this
study are: (a) Current ratio (CR), (b) Quick ratio (QR), (c) Stock to current assets ratio
(SCAR), (d) Debtors to current assets ratio (DCAR) and (e) Cash and bank to current assets
ratio (CBCA). The ratios relating to the measurement of profitability which were used in this
study are: (a) Gross profit ratio (GPR), (b) Net profit ratio (NPR), (c) Return on capital
employed (ROCE) and (e) Return on net worth (RONW). In order to assess the efficiency of
managing different assets of the selected companies ratios like (a) Fixed assets turnover ratio
(FATR), (c) Inventory turnover ratio (ITR) and (d) Debtors turnover ratio (DTR) were used.
In order to measure the performance in respect of liquidity, profitability and efficiency more
precisely a comprehensive rank test considering both average and consistency aspects the
above mentioned indicators of the financial performance was made. Kendall’s coefficient of
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concordance (W) was used to examine whether there was any association among the final
ranks of the liquidity, profitability and efficiency of the selected companies under study. In
order to test the significance of the value of W, Chi-square (χ2) test wasapplied.
Organization of the Study:
The study is organized into eight chapters. Chapter 1 is an introduction to the study. It
presents an overview of the Indian cement industry and also makes a brief discussion on
selected companies in Indian cement Industry. Chapter 2 deals with a review of existing
literature, identifies the research gap and develops the objectives of the study. This Chapter
also narrates the scope of the study and research methodology adopted in the study. Further,
this Chapter designs the organization of the study. Chapter 3 analyses the liquidity position
of the selected cement companies. Chapter 4 measures efficiency of the assets management of
the selected companies. In Chapter 5 an analysis of profitability of the selected companies is
made.Chapter 6 engages itself in measuring overall financial performance of the selected
companies’.Finally Chapter7 makes a summary of the findings of the study and also draws
conclusions derived from such findings.
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Chapter 3
Measurement of Liquidity of the Selected Companies

The term “liquidity” implies a firm’s ability to meet its short-term obligations. It has two
dimensions viz., the time required to convert an asset into cash and degree of certainty
associated with the conversion ratio or price realized from the asset. The maintenance of
adequate liquidity in the sense of the ability of an enterprise to meet its current obligations
when they fall due for payment cannot be overlooked. In fact, liquidity is a pre-requisite for
the very survival of an enterprise (Jain, 1988). A sound liquidity position creates the market
image of a prompt pay-mastership for the firm, vendors of raw materials, stores and services
can be assured of prompt payments and this leads to reasonable price quotations from them
as they do not have to do the effect of cost of locked money due to uncertain delays in receipt
of payments from the enterprise (Murao, 1982). So, firms should have adequate degree of
liquidity for their efficient running. In other words, a firm should have neither excessive nor
inadequate liquidity. Excessive liquidity means accumulation of idle funds which earn no
profits for the firm and inadequate liquidity hurts the firm’s earning capacity and also causes
interruption in business operation. A sound liquidity management can only do much to ensure
the success of the firm, whereas inefficiency can lead not only to loss of profits but also to the
ultimate downfall of what otherwise might be considered as promising concern. The need for
efficient liquidity management in corporate sector has thus become greater in recent years.
While assessing liquidity of the selected companies the following ratios used:
Current Ratio (CR):
This is a basic measure of judging the ability of a company to pay off its current obligations
out of its short-term resources. The higher the CR, the larger is the amount available per
rupee of short-term obligations and accordingly, the greater is the feeling of security.
Keeping in view the possibility of fifty per cent shrinkage in the value of current assets, the
rule of thumb about the CR has been set at 2:1. This rule, however, cannot by any means be
taken as a general guide to the desirableness or otherwise of the CR of all types of
businesses. Each firm has to develop its own standard or ideal ratio from past experience and
this only can be taken as a norm (Sur, 1997). Table 3.1 depicts that the CR in ACC Ltd
registered a fluctuating trend during the period under study. It ranged between 0.72 in the
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year 2003 and 0.97 in the year 2007. On an average, the CR in ACC Ltd was 0.852 and its
C.V. was 24.17 per cent during the period under study. The CR in Ambuja Cement Ltd also
registered a fluctuating trend during the first four years under study, while it recorded an
increasing trend in the next four years of the study period. The minimum CR was 0.63 in the
year 2005 and it was maximum (1.34) in the year 2002. The mean and C.V. of the CR in
Ambuja Cement Ltd were 0.986and 20.89 per cent respectively during the study period. The
CR in Birla Corporation Ltd recorded a fluctuating trend during the study period. It ranged
between0.81 in the year 2007 and 1.23 in the year 2001The mean and C.V. of this ratio in
Birla Corporation Ltdwere 1.001 and 14.84 per cent during the period under study. The CR
in Century textile &Industries Ltd decreased in the first three years and in the next two years
it increased and again it came down and again showed an upward trend from 0.84 in the
year 2006 to 1.03 in the year 2009. In the very next year (2010) it stepped down to 0.92. On
an average, in Century textile &Industries Ltd, the CR was 0.936 and its C.V. was 9.76 per
cent during the study period. The CR in Chettiland Cement Corporation Ltd showed a
decreasing trend in the six years of study period and in the next four years it registered an
increasing trend. It ranged between 0.41 in the year of2006and 1.13 in the year of 2001. The
mean and C.V. of the CR in Chettiland Cement Corporation Ltd were 1.318 and 17.20 per
cent respectively during the study period. The CR in Grasim Industries Ltd depicted a
decreasing trend during the first four years of the study period then showed an increasing
trend in the next three years and again showed a decreasing trend in the following years of
the study period. It ranged between 0.82 in the year 2004 and 1.59 in the year 2001. On an
average, this ratio was 0.974and the C.V. of this ratio was 24 per cent during the period
under study.The CR in India Cement Ltd registered a decreasing trend during the first four
years of the study period. In the next three years it registered an increasing trendand again it
showed a decreasing trend in the last three years but the final year of the study period. It
fluctuated between 1.42 in the year 2009 and 2.2 in the year 2007. On an average, the ratio
was 1.73 and the C.V. of this ratio was 17.40 per cent during the study period. In Madras
Cement Ltd, the CR reflected a fluctuating trend during the period under study. It ranged
between .53 in the year 2006 and 1.25in the year 2001. The mean and C.V. of this ratio were
0.699 and 30.05 per cent respectively. The same ratio in OCL recorded a decreasing trend
during the 1sthalf of the study period and in the 2nd half it showed a fluctuating trend .It
varied between 0.96 in the year 2005 and 1.73 in the year 2001. The average of this ratio was
1.157 and its C.V. was 20.33 per cent during the study period.In Shree Cement ltd, a
fluctuating trend was noticed during the study period. It ranged between 0.92 in the year of
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2003 and 2.02in the year 2009.On an average ,this ratio was 1.349 and CV of this ratio was
30.5 per cent . Sanghi Industries Ltd registered a decreasing trend in the first four years of
the study period and again it showed an increasing trend for the next four years and then
decreased for the last two years.The minimum and maximum value of this ratio were found in
the year 2002 and 2008 respectively.The average of this ratio was 1.377 and CV of this ratio
was 65.52 per cent.The CR of Prism Cement Ltd registered an increasing trend in the first
three years of the study period then it decreased in the next five years and then it increased.It
ranged between 0.69in2008 and1.13 in2003. On an average this ratio was 0.951 and CV of
this ratio was16.76 per cent.
The average CR of the select companies in Indian cement industries for the period 2001 to
2010 was 1.11 and its average C.V. for the same period was 24.28 per cent. The study of CR
of the selected companies reveals that five companies namely Chettiland cement corporation
Ltd, India cement Ltd, Shree cement Ltd, OCL and Sanghi Industries Ltd maintained their CR
at a level above the industry average (1.11) during the period under study whereas the
consistency in respect of liquidity was considerably higher in nine companies as compared to
the industry practice during the same period. So, considering both the average and
consistency aspects, it can be inferred that only Chettiland cement corporation Ltd and India
cement Ltd and OCL had cared or been able to manage their ability to pay off their current
obligations out of their short-term resources very impressively.
Quick Ratio (QR):
This ratio is a refinement of CR and it indicates the quality of current assets. As this ratio
excludes inventory which may be slow moving, it can measure more effectively the short term
debt paying capability of the concern. Rule of thumb, for the QR is 1:1. It is evident from
Table 3.2 that there was a fluctuating trend of QR in ACC Ltd during the study period. It
ranged between 0.47 in the year 2009 and 1.01 in the year 2001. On an average, the QR in
ACC Ltd was 0.74 and its C.V. was 11.50 per cent during the study period. The QR of
Ambuja Cement Ltd also showed a fluctuating trendduring the study period. It varied
between 0.67 in the year 2005 and 2.21 in the year 2003. During the study period the mean
and C.V. of the QR were 1.11 and 47.39 per cent respectively. In BirlaCorporation Ltdthe QR
registered a fluctuating trend during the period under study. This ratio ranged between 0.64
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in the year 2002 and 1.29 in the year 2010. On an average, the QR of the company was 0.88
and its C.V. was 31.44 per cent during the study period. QR in Century Textile & Industry
Ltd ranged between 0.77 in the year2010 and 1.50 in the year2001.and the conventional
standard of 1:1 was noticed in almost all the years of the study period. The mean and C.V. of
the QR were 1.05 and 19.99per cent respectively during the study period. The QR in
Chettiland Cement Corporation Ltd showed a fluctuating trend during the study period. It
ranged between 0.66 in the year 2008 and 1.44 in the year 2010. The average QR of the
company was 0.94 and its C.V. was 26.01per cent during the study period. The QR of Grasim
Industries Ltd showed a down ward trend during the study period and it ranged
between0.75in the year 2009 and 1.29 in 2001. The mean and CV of the QR were1.03 and
15.48 respectively and the conventional standard of 1:1 was noticed in all the years of the
study period. In India Cement Ltd. the minimum and maximum QR were noticed 1.51 in the
year 2009 and4.73 in 2004.The mean and CV of this ratio were 3.03 and 33.26 respectively.
Madras cement Ltd also registered the conventional standard of 1:1 throughout the study
period.The minimum QR was 0.98 in the year 2006 and the maximum QR was 1.49 in the
year 2001.The mean and its C.V. were 1.27 and 10.76per cent respectively during the study
period .OCL India Ltd registered their QR above the conventional standard of 1:1
throughout the study period. It ranged between1.16 in the year 2008 and 2.22 in the year
2006. The mean and CV were1.71 and 20.73 respectively.Shree cement Ltd and Sanghi
Industry Ltd maintained the conventional ratio 1:1 in almost all the years.QR in Shree
cement Ltd ranged between 0.77 in the year of 2006and 2.08 in the year of 2001with mean
and CV of this ratio were 1.59 and 26.65 respectively.The min and max QR of Sanghi
Industries Ltd were 0.28 in the year of 2003and 2.49 in the year of 2008.Prism cement Ltd
showed a decreasing trend during the first five years of the study period and a fluctuating
trend was found in the remaining years. The QR ranged between 0.01 in the year2005 and
1.12 in the of 2001with the mean and CV of this ratio were 0.52 and63.73respectively.
The average QR of the select companies in Indian cement industries for the period 2001 to
2010 was 1.27 and its average C.V. for the same period was 36.58 per cent. The study of QR
of the selected companies shows that four companies, namely India cement Ltd, Ocl India
Ltd, Shree cement Ltd and Sanghi Industries Ltd maintained their immediate debt paying
capability at a level above the industry average (1.27) during the study period whereas the
consistency in respect of immediate debt paying capability was higher in ACC, Birla,
Century, Chettiland, Grasim, India, Madras, OCL and Shree as compared to the industry
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average (36.58 per cent) during the same period. Thus, considering both the average and
consistency, it can be concluded that India,OCLand Shree cement Ltd had been able to
maintain their immediate debt paying capability very efficiently.
Stock to Current Assets Ratio (SCAR):
This ratio throws light on the inventory policy pursued by a company. As stock is the slowest
moving component of the current assets, a low value of SCAR indicates favorable liquidity of
the company. In ACC the SCAR recorded a fluctuating trend during the first four years of the
study period and then increased then it showed a down ward trend during the following
years. It varied between 0.244 in the year 2010 and 0.556 in the year 2005. On an average,
the SCAR of the company was 0.40 and its C.V. was 29 per cent during the study period. In
Ambuja, the SCAR decreased in the first three years and reached 0.28 in the year 2003. But
again this ratio improved in the next two years and it was 0.542 in the year 2005and then
registered a fluctuating trend during the following years during the study period. The mean
and its C.V. of the company, during the period under study were 0.38and 23.59 per cent
respectively. The SCAR in Birla witnessed a downward trend from 2002 to 2007and then
registered a fluctuating trend during last three years of the study period. The minimum SCAR
was 0.28 in the year 2007while it was at its maximum when it was 0.534 in the year 2002.
The average and C.V. of the SCAR of the company were 0.39 and 23.54 per cent respectively
during the study period. In Century this ratio improved slightly in the first half of the study
period while an overall downward trend was noticed in the second half of the period under
study. The minimum value of SCAR in the company was 0.42 in the years 2007 and the
maximum SCAR was 0.539 in the year 2004. The mean and C.V. of this ratio were 0.469 and
8.61 per cent respectively during the same period. This ratio in Chettiland registered an
upward trend during the first half of the study period and then showed a declining trend
during the second half of the study period. It ranged between 0.60 in the year 2005 and 0.343
in the year 2009. On an average, it was 0.453 and its C.V. was 22.17 per cent during the
period under study. Grasim maintained a fluctuating trend throughout the period under
study. It varied between 0.307 in the year 2004 and 0.445 in the year 2009. The mean value
of the ratio was 0.36 and its C.V. was 9.95 per cent during the study period. In India cement
the SCAR registered a decreasing trend in the first three of the study period and then showed
an increasing trend in the rest of the years under study period. It ranged between 0.12 in
20
2003 and 0.182 in the year of 2009. The mean and C.V. of the ratio were 0.147 and 14.62 per
cent respectively during the study period. In Madras, SCAR showed a fluctuating trend
during the both halves of the study period. The minimum value of the ratio was 0.21 in the
years 2007and the maximum value was .416 in the year of2005. On an average, it was 0.304
and the CVwas 21.18 percent . In OCL, the same ratio was, on an average 0.38 with
minimum 0.276 in the year 2010 and maximum 0.457 in the year 2002 and its C.V. was 14.70
per cent during the period under study. The SCAR of Shree cement also registered a mixed
trend during the study period with the min value of 0.105 in 2009 and the max value 0.414 in
the year of 2005. The average and the CV of this ratio was 0.266and 43.18 percent . Sanghi
recorded a down ward trend during the six years from 2003to 2008 in its SCAR. It ranged
between 0.092 in the year 2002and 0.49 in2003. The average and CV of this ratio were 0.289
and44.63.In Prism,this ratio showed an increasing trend during the first half of the study
period and showed a mixed trend during the last half of the study period. It ranged between
0.401 in the year of 2010 and0.6 in the year of 2007. The average and CV of this ratio were
0.486 and 12.71 percent.
The average SCAR of the select companies in Indian cement industry for the period 2001 to
2010 was 0.36 and its average C.V. for the same period was 22.33 per cent. The study of
SCAR of the selected companies reveals that only four companies namely India, Shree and
Sanghi maintained their SCAR at a level less than the industry average (0.36) during the
study period whereas the consistency in respect of SCAR was better in Century, Chettiland,
Grasim, India, Madras, Ocl and Prism as compared to the industry average (22.33 per cent)
during the study period. It reflects that the inventory policy pursued by only India in respect
of liquidity was encouraging.
Debtors to Current Assets Ratio (DCAR):
It is also a tool used in the analysis of liquidity of a company. The higher the DCAR, the
greater is the liquidity of the company. The DCAR of ACCshowed a downward trend during
the study period. It ranged between 0.065 in the year 2010 and 0.273in the year 2001. On an
average, the ratio was 0.158 and its C.V. was 41.11 per cent during the study period. In
Ambuja this ratio registered a fluctuating trend during the years of the study period. It
ranged between 0.041in the ultimate year and0.096 in the year2008.The mean and C.V. of
21
the DCAR of Ambuja were 0.074 and 23.29per cent respectively during the study period. The
DCAR in Birla recorded an increasing trend during the first five years of the study period
then it registered a declining trend in the second half of the study period. The minimum value
of the DCAR of the company was 0.026 in the year and 2010, and the maximum DCAR was
0.195 in the year 2005. On an average, the ratio of the company was 0.106 and its C.V. was
59.13 per cent during the period under study. The DCAR in Century was minimum (0.095) in
the year 2009 and it was maximum (0.334) in the year 2001. The average and C.V. of the
DCAR of the company were 0.202 and 38.74 per cent respectively during the study period. In
Chettiland DCAR was improved during the first three years of the study period but from the
year 2004 it showed a downward trend during the following five years of the study period
then it recorded an upward trend. The DCAR was the least at 0.037in the year 2008 and it
was the highest at0.21 in the year 2003. On an average, the ratio was 0.116 and its C.V. was
46.46 per cent during the period under study. The mean value of this ratio in Grasim was
0.269 which occupied the second position in terms of average among all the companies under
study. The C.V. of DCAR was 18.61 per cent under the study period. It ranged between 0.181
in the year 2009 and 0.324 in the year 2004. The DCAR in India registered a fluctuating
trend during the study period. On an average, this ratio of the company was 0.134 with
minimum value of 0.09 in the year 2003 and maximum of 0.169 in the year 2002. The C.V. of
the DCAR was 20.50 per cent during the period under study. The DCAR in Madras also
recorded a fluctuating trend during the years of the study period. It ranged between 0.079 in
the years 2008and 0.213 both in the years 2001&2002. The mean and C.V. of the DCAR in
Madras were 0.155 and 34.71 per cent respectively during the period under study. In OCL
this ratio showed a downward trend during the first seven years of the study period then it
recorded an upward trend and again declined in the ultimate year. The DCAR was the lowest
(0.142) in the ultimate year of the study and it was the maximum (0.421) in the year 2001. On
an average, the DCAR in OCL was 0.294 and its C.V. was 31.64 per cent during the period
under study. The same ratio in Shree witnessed an overall fluctuating trend during the study
period. It ranged between 0.03 in the year 2007 and 0.256 in the year 2001. The mean and
C.V. of the DCAR of the company were 0.118 and 71.97 per cent respectively. In Sanghi this
ratio also showed an overall fluctuating trend during the period under study. It ranged
between 0.01 in the year 2008 and 0.253 in the year2004. The mean and CV of this in Sanghi
were0.103 and 95.09 respectively.The DCAR in Prism also recorded a downward trend
during the first half of study period and in the second half it recorded a mixed trend. It
22
ranged between 00 in the years 2009and 0.341 in the year2002. The mean and C.V. of the
DCAR in Prism were 0.171 and 77.39 per cent respectively during the period under study.
The average DCAR of the selected companies in Indian cement industry for the period 2001
to 2010 was 0.158 and its average C.V. for the same period was 46.55 per cent. The study of
DCAR of the selected companies in Indian cement industry discloses that five companies,
namely, ACC, Century, Grasim, OCL and Prism maintained their DCAR at a level above the
industry average (0.158) during the study period whereas the consistency in respect of DCAR
was considerably higher in ACC, Ambuja, Century, Chettiland, Grasim, India, Madras and
OCL as compared to the industry average (46.55 per cent) during the same period. It implies
that the level of debtors maintained by ACC, Century,Grasim and OCL was encouraging in
respect of their liquidity during the study period.
Cash & Bank to Current Assets Ratio (CBCA):
This ratio reflects the cash position of a company. The higher the ratio, the better is the cash
position of the company. It shows the proportion of the most liquid part of current assets to
total current assets. The CBCA ofACC Ltd ranged between 0.04 in the year 2003 and 0.392
in the year 2010. On an average, the ratio was 0.195 during the period under study. The C.V.
of CBCA was 83.34 per cent during the period under study. In Ambuja Cement Ltd the CBCA
ranged between 0.04 in the year 2003 and 0.558 in the year 2010. On an average, the CBCA
was0.256 which was the highest among the average values of CBCA of all the companies
under study. The C.V. of CBCA was 71.56 per cent during the study period. The CBCA in
Birla Corporation Ltd recorded a fluctuating trend during the period under study. It ranged
between 0.07in the year 2007 and 0.468 in the year 2009. On an average, this ratio was
0.193 and its C.V. was 73.92 per cent during the study period. In Century textile &Industries
also this ratio showed a fluctuating trend during the same period. The minimum CBCA was
0.03 in the year 2010 and the maximum was 0.12 in the year 2007. The mean CBCA was
0.056which was the last but one among the mean values of CBCA of all companies under
study.Its C.V. was 53.41 per cent during the study period. The CBCA of Chettiland Cement
Corporation Ltd registered a fluctuating trend which ranged between 0.064in the year 2008
and 0.13 in the year 2007. The mean and C.V. of the CBCA were 0.101 and 21.37 per cent
respectively during the period under study. In Grasim Industries Ltd this ratio registered a
23
mixed trend during the study period. On an average,it was 0.066 and its C.V. was 57.78 per
cent during the study period. In India Cement Ltd, the mean&CVofCBCA were0.043
and153.17 which were the lowest among the mean values and CV of CBCA of all companies
under study.The mean and C.V. of the CBCA in Madras Cement Ltd were 0.116 and 54.98
per cent respectively during the study period. In OCL India Ltd this ratio showed a
fluctuating trend with minimum 0.037 in the year 2002 and maximum 0.482 in the year 2010.
On an average, this ratio was 0.158and its C.V. was 88.19per cent during the period under
study. In Shree Cement Ltd, the CBCA fluctuated throughout the study period. The mean and
C.V. of the ratio were 0.255 and 66.75per cent respectively during the study period. Sanghi
Industries Ltd registered an increasing trend in the beginning of the study period and then it
showed a steady decreasing trend.The mean and CV of this ratio was found 0.138 and 94.84
per cent respectively.In Prism Cement Ltd,a fluctuating trend was noticed during the entire
study period with mean and CV of this ratio was 0.108 and 34.98 per cent respectively.
The average CBCA of the selected companies in Indian cement industry for the period 2001
CBCA of the select companies reveals that only six companies, such as, ACC Ltd, Ambuja
Cement Ltd, Birla Corporation Ltd ,OCL India Ltd and Shree cement Ltd maintained their
cash position at a level better than the industry average (0.140) during the study period
whereas the consistency in respect of cash position was higher in, Century textile &
Industries Ltd, Chettiland cement corporation Ltd, Grasim Industries Ltd, Madras Cement
Ltd, Shree Cement Ltd and Prism Cement Ltd as compared to the industry average (71.19 per
cent) during the same period. It reveals that Chettiland, and Shree maintained better position
in respect of liquidity as compared to other selected companies during the period under
study.
For measuring the liquidity status of the selected companies more precisely a comprehensive
rank test considering both average and consistency aspects was applied. While making such
analysis three steps were undertaken. In the first step a comprehensive rank test considering
the average values of all the selected liquidity measures was made. In this test, a process of
ranking was used to arrive at a more comprehensive measure of liquidity in which average
values of the selected five ratios, namely, CR, QR, SCAR, DCAR and CBCA were combined
in a points score. A low value of SCAR implies a more favorable liquidity position and thus
ranking was done in that order whereas in other cases a high value indicates greater
24
liquidity and ranking was done in that order. Ultimate ranking was done on the basis of the
principle that the lower the aggregate of individual ranks the more favorable is the liquidity
position and vice versa.
Table 3.6 depicts that Shree which ranked third according to the averageCR and average
QR, second according to the average SCAR andCBCA, eighth according to the mean DCAR
had a combined score of 18 in the composite ranking. Similarly OCL had a combined score
of 19, India22, Sanghi26, both Grasim and Ambuja33, Madras 34, Birla38, ACC39, both
Century & Chettiland 41and Prism46. According to the combined score based on the mean
values of the selected liquidity measures Shree captured the highest rank and was followed by
OCL, India, Sanghi, both Grasim and Ambuja ,Madras, Birla, ACC, both Century &
Chettilandand Prism respectively in that order.
In the second step the consistency in respect of overall liquidity of the selected companies
was assessed by using the comprehensive rank test considering C.V. of all the selected
liquidity ratios of each company during the study period. A low value of C.V. of each selected
liquidity measure implies a more consistency as well as favorable position in terms of
liquidity and thus ranking was done in that order. Ultimate ranking was done on the principle
that the lower the aggregate of individual ranks the more favorable is the liquidity position
and vice versa.
Table 3.7 reveals that Century (which ranked first according to the C.V. of CR and
SCAR,third according to the C.V. of CBCR, fourth according to the C.V. of QR, sixth
according to the C.V. of DCAR) had a combined score 15. Similarly Grasim had a combined
score of 19,both Chettiland & Madras26, OCL 30,Prism 31,India 32,Birla 35,Ambuja
36,ACC 37Shree 45 and Sanghi 58. According to the composite score based on the
consistency in respect of liquidity measured by the C.V. of the selected liquidity
indicators,Century captured the top most position and was followed by Grasim, both
Chettiland & Madras, OCL, Prism, India, Birla, Ambuja, ACC Shree and Sanghi
respectively in that order.
In the third step, ‘rank based on average’ and ‘rank based on consistency’ for each of the
selected companieswere added to arrive at its sum of ranks which was ultimately used to
ascertain its final liquidity rank. Final liquidity ranking was done on the principle that the
25
lower the aggregate of ‘rank based on average’ and ‘rank based on consistency’, the more
favorable is the liquidity position and vice versa.
Table 3.8 discloses that OCL which ranked fifth according to ‘consistency’ and second
according to ‘average’ had a combined score of 7 in the sum of rank. Similarly Grasim had a
combined score of 7.5, India10, Madras 10.5,Century 11.5,Shree 12,Chettiland 14, Ambuja
14.5, both Birla and Sanghi 16,Prism 18 and ACC19. Based on the combined score
considering both the average and consistency parameters, OCL captured the top most
position and was followed by Grasim, India, Madras, Century, Shree, Chettiland, Ambuja,
both Birla and Sanghi, Prism and ACC respectively in that order.
26
Table 3.1
Analysis of Current Asset Ratio of the Selected Companies
Year Average Average DCAR C.V. Average C.V. of

of the selected (%) DCAR of the
companies selected
(2001-2010) companies
(2001-2010) (%)
Company
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Acc .86 .80 0.72 0.78 0.9 0.91 0.97 0.93 0.88 0.77 0.852 24.175
Ambuja .85 1.34 1.12 0.76 0.63 0.91 1.05 1.15 1.06 0.99 0.986 20.890
Birla 1.23 1.18 1.00 0.93 0.98 0.87 0.81 0.83 1.02 1.16 1.001 14.835
Century 1.12 0.96 0.84 0.86 0.89 0.84 0.90 1.00 1.03 0.92 0.936 9.768
27
Chettiland 1.13 0.84 0.74 0.57 0.44 0.41 0.47 0.55 0.60 0.84 1.318 17.206
1.1109 24.287
Grasim 1.59 1.13 0.84 0.82 0.86 0.93 0.94 0.91 0.86 0.86 0.974 23.996
India 2.18 1.87 1.45 1.47 1.61 1.8 2.2 1.88 1.42 1.43 1.731 17.404
Madras 1.25 0.76 0.55 0.59 0.56 0.53 0.67 0.67 0.65 0.76 0.699 30.050
OCL 1.73 1.35 1.12 0.98 0.96 1.01 1.06 1.07 1.04 1.25 1.157 20.331
Shree 1.63 1.15 0.92 0.95 0.98 0.94 1.56 2.02 1.84 1.5 1.349 30.503
Sanghi 1.58 0 0.95 0.47 0.57 1.42 2.53 2.79 2.01 1.45 1.377 65.526
Prism 0.94 1.11 1.13 1.11 1.07 1.00 0.77 0.69 0.79 0.9 0.951 16.761
Source: Compiled and computed from Capitaline Corporate Database, Capital Market Publishers (India) Ltd. Mumbai.
Table 3.2
Analysis of Quick Ratio of the Selected Companies
Year Average Average QR of C.V. Average C.V. of

the selected (%) QR of the selected
companies companies
(2001-2010) (2001-2010) (%)
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Company
ACC 1.01 0.96 0.76 0.77 0.70 0.84 0.66 0.73 0.47 0.49 0.74 11.50
Ambuja .787 1.88 2.21 0.68 0.67 1.09 0.86 0.95 0.77 0.93 1.11 47.39
Birla 1.26 0.64 0.65 0.68 0.84 0.68 0.84 0.65 1.23 1.29 0.88 31.44
Century 1.50 1.19 1.07 1.05 1.12 1.05 1.12 0.77 0.91 0.77 1.05 19.99
28
Chettiland 1.07 1.21 0.82 0.78 0.82 0.74 0.80 0.66 1.05 1.44 0.94 26.01
1.27 36.58
Grasim 1.29 1.21 1.08 1.09 1.06 1.00 1.04 0.92 0.75 0.84 1.03 15.48
India 3.36 3.90 2.57 4.73 3.63 3.35 3.38 1.82 1.51 2.08 3.03 33.26
Madras 1.49 1.31 1.29 1.29 1.10 0.98 1.23 1.33 1.32 1.32 1.27 10.76
OCL 1.76 1.53 1.76 1.45 2.09 2.22 2.13 1.16 1.31 1.73 1.71 20.73
Shree 2.08 1.94 1.76 1.72 1.05 0.77 1.61 1.88 1.81 1.26 1.59 26.65
Sanghi 1.05 2.05 0.28 0.31 0.56 2.20 2.39 2.49 1.17 1.05 1.35 63.22
Prism 1.12 0.77 0.61 0.63 0.01 0.49 0.32 0.49 0.05 0.73 0.52 63.73
Year
Average QR of
the selected C.V.
Average
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Company companies (%)
(2001-2010)
ACC .273 .236 .20 .175 .155 0.14 0.13 .112 .090 .065 0.158 41.11
Ambuja .083 .059 .06 .087 .078 0.08 0.09 .096 .077 .041 0.074 23.29
Birla .16 .165 .17 .119 .195 0.07 005 .075 .029 .026 0.106 59.13
Century .334 .273 0.27 .240 .235 0.17 0.17 .129 .095 .117 0.202 38.74
29
Chettiland .148 .190 0.21 .132 .116 0.10 0.08 .037 .062 .096 0.116 46.46
0.158 46.55
Grasim .323 .314 0.29 .324 .282 0.20 0.25 .238 .181 .296 0.269 18.61
India .123 .169 0.09 .111 .134 0.16 0.15 .145 .165 .096 0.134 20.50
Madras .213 .213 0.24 .175 .144 0.15 0.11 .079 .098 .137 0.155 34.71
OCL .421 .397 0.38 .351 .317 0.26 0.21 .224 .236 .142 0.294 31.64
Shree .256 .213 0.22 .135 .136 0.07 0.03 .044 .04 .052 0.118 71.97
Sanghi .233 .127 0.17 .253 .176 0.02 0.03 .01 .012 .007 0.103 95.09
Prism .282 .341 0.30 .198 .113 0.12 0.03 .021 0.00 .309 0.171 77.39
Corporate Database, Capital Market Publishers (India) Ltd. Mumbai.

table 3.4
Analysis of Stock to Current Asset Ratio of the Selected Companies
Average SCAR of C.V. Average C.V. of

the selected (%) SCAR of the
companies selected
(2001-2010) (%)
Average
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
.533 .484 0.48 .444 .556 0.41 0.33 .287 .250 .244 0.401 29.03
23.59
.403 .315 0.28 .518 .542 0.35 0.37 .401 .345 .288 0.380
.381 .534 0.50 .454 .331 0.34 0.28 .472 .282 .337 0.390 23.54
.424 .475 0.50 .539 .50 0.48 0.42 .478 .421 .450 0.469 8.61
30
.464 .447 0.53 .527 .602 0.56 0.36 .411 .343 .298 0.453 22.17
.380 .352 0.36 .307 .366 0.37 0.35 ..328 .445 .358 0.361 0.360 9.95 22.33
.140 .137 0.12 .122 .147 0.14 0.14 .163 .182 .177 0.147 14.62
.273 .288 0.30 .216 .416 0.31 0.21 .311 .360 .363 0.304 21.18
.431 .457 0.41 .437 .371 0.35 0.35 .334 .354 .276 0.376 14.70
.218 .291 0.41 .268 .414 0.41 0.15 .159 .105 .234 0.266 43.18
.260 .092 0.49 .438 .375 0.22 0.19 .153 .348 .330 0.289 44.63
.424 .438 0.47 .480 .538 0.50 0.60 .550 .456 .401 0.486 12.71
Table 3.5
Analysis of Cash & Bank to Current Asset Ratio of the Selected Companies
Year
Average Average CBCA C.V. Average C.V. of
of the selected (%) CBCA of the
companies selected
(2001-2010) (%) Company
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
.031 .031 0.04 .062 .047 0.32 0.34 .357 .331 .392 0.195 83.34 ACC
.071 .077 0.04 .14 .148 0.32 0.40 .364 .445 .558 0.256 71.56 Ambuja
.263 .088 0.09 .197 .094 0.19 0.07 .074 .468 .403 0.193 73.92 Birla
.070 .093 0.05 .043 .035 0.04 0.12 .037 .042 .03 0.056 53.41 Century
31
.096 .099 0.11 .122 .104 0.12 0.13 .064 .069 .097 0.101 21.37 Chettiland
0.140 71.19
.083 .095 0.07 .152 .047 0.08 0.05 .043 .037 .014 0.066 57.78 Grasim
.007 .002 00 .003 .002 0.03 0.13 .198 .04 .02 0.043 153.17
India
.157 .164 0.15 .215 .138 0.15 0.09 .029 .042 .031 0.116 54.98
Madras
.058 .037 0.09 .060 .054 0.10 0.23 .232 .242 .482 0.158 88.19
OCL
.119 .039 0.05 .229 .210 0.27 0.59 .435 .347 .263 0.255 66.75
Shree
.021 .245 0.11 .051 .051 0.36 0.29 .24 .013 .007 0.138 94.84
Sanghi
.168 .095 0.07 .141 .083 0.14 0.08 .079 .153 .077 0.108 34.98
Prism
Table 3.6
Computation of Ultimate Rank Based on the Average Values of the Selected Liquidity Measures of the Selected Companies
Year
Rank
Rank
Rank
Rank
Rank
Ratio
Ratio
Ratio
Ratio
Company
Asset Ratio
Current Asset
Sum of Ranks
Ultimate Rank
Average Quick
Bank to Current
to Current Asset
Average Current
Average Cash &
Average Debtors
Average Stock to
0.852 11 0.74 11 0.401 9 0.16 5 0.195 3 39 9
ACC
0.986 7 1.12 6 0.38 7 0.07 12 0.256 1 33 5.5
Ambuja
1.001 6 0.88 10 0.39 8 0.11 10 0.193 4 38 8
Birla
0.936 9 1.06 7 0.469 11 0.20 3 0.056 11 41 10.5
century
32
1.318 4 0.94 9 0.453 10 0.12 9 0.101 9 41 10.5
Chettiland
0.974 8 1.03 8 0.361 5 0.27 2 0.66 10 33 5.5
Grasim
1.731 1 3.04 1 0.147 1 0.13 7 0.043 12 22 3
India
0.669 12 1.27 5 0.304 4 0.16 6 0.116 7 34 7
Madras
1.157 5 1.72 2 0.376 6 0.29 1 0.158 5 19 2
OCL
1.349 3 1.59 3 0.266 2 0.12 8 0.255 2 18 1

Shree
1.377 2 1.36 4 0.289 3 0.10 11 0.138 6 26 4

Sanghi
0.951 10 0.53 12 0486 12 0.17 4 0.108 8 46 12 Prism
Source: Compiled and computed from Capitaline Corporate Database, Capital Market Publishers (India) Ltd.
Mumbai.
ShreeTable 3.7
Computation of Ultimate Rank Based on the Consistency of the Selected Liquidity Measures of the Selected
Companies
Rank
Rank
Rank
Rank
Rank
Ratio
Ratio
Sum of Ranks
Ultimate Rank
Current Asset Ratio

to Current Asset Ratio
ACc
Bank to Current Asset Ratio
Consistency (C.V.) in Quick

Consistency (C.V.) in Cash &
Consistency (C.V.) in Current

Consistency (C.V.) in Debtors
Consistency (C.V.) in Stock to

24.18 9 11.5 2 29.03 10 41.1 7 83.34 9 37 10 Ambuja
20.89 7 47.4 10 23.6 9 23.3 3 71.56 7 36 9

Birla
14.48 2 31.4 8 23.54 8 59.1 9 73.92 8 35 8
Century
9.76 1 20 4 8.61 1 38.7 6 53.41 3 15 1
33
Chettiland
17.21 4 26 6 22.18 7 46.5 8 21.37 1 26 3.5
24 8 15.5 3 9.95 2 18.6 1 57.78 5 19 2 Grasim
17.4 5 33.3 9 14.62 4 20.5 2 153.2 12 32 7 India
30.05 10 10.8 1 21.19 6 34.7 5 54.98 4 26 3.5

Madras
20.33 6 20.7 5 14.71 5 31.6 4 88.19 10 30 5

OCL
30.5 11 26.7 7 43.18 11 72 10 66.76 6 45 11
Shree
65.53 12 63.2 11 44.63 12 95.1 12 94.84 11 58 12
Sanghi
16.76 3 63.7 12 12.71 3 77.4 11 34.98 2 31 6
Prism
ACC
Ambuja
Birla
Century
34
Chettiland
Grasim
India
Madras
OCL
Shree
Sanghi
Prism
Table 3.8
Computation of Final Liquidity Rank Considering Both the Average and

Consistency Parameters of the Selected Liquidity Measures of the Selected
Companies
Company Ultimate Rank Ultimate Rank Sum of Ranks Final
based on based on liquidity
Average Consistency Rank
9 10 19 12
ACC
5.5 9 14.5 8
Ambuja
8 8 16 9.5
Birla
10.5 1 11.5 5
Century
10.5 3.5 14 7
Chettiland
5.5 2 7.5 2
Grasim
3 7 10 3
India
7 3.5 10.5 4
Madras
2 5 7 1
OCL
1 11 12 6
Shree
4 12 16 9.5
Sanghi
12 6 18 11
Prism
Source: Compiled and computed from Capitaline Corporate Database, Capital Market
Publishers (India) Ltd. Mumbai.
35
Chapter 4
Measurement of Efficiency of Managing Different
Assets of the Selected Companies
Efficient assets management is an integral part of the overall corporate strategy to create
shareholder value. Assets management implies the effective and efficient acquisition,
allocation and utilization of assets. The efficiency with which assets are managed is gleaned
from turnover ratios. Turnover ratios measure how rapidly the assets are being turned over
into sales. In other words, they indicate how well the company manages its assets and show
how many rupees of sales are supported by one rupee of asset. The way in which assets are
managed can have a significant impact on the profitability of the company. It is an empirical
question whether a high value of turnover ratio has a positive influence on the company’s
earning capability. A company can have larger sales with a very liberal credit policy, which
shrinks the debtors turnover ratio. In this case, the lower debtors turnover ratio may result in
higher profitability. However, as per the traditional view, a low value of turnover ratio hurts
the company’s profitability. The present chapter analyses the efficiency of managing different
assets of the selected companies using the following efficiency indicators.
Fixed Asset Turnover Ratio (FATR):
It is a ratio of net sales to the value of fixed assets. It measures the efficiency of the fixed
assets management of the company. It indicates how well the business is using its fixed assets
to generate sales. Generally speaking, the higher the ratio, the greater is the efficiency of the
asset management. It is evident from Table 4.1 that there was an overall fluctuating trend in
the FATR of ACC during the study period. It ranged between 0.96 in the year 2003 and 1.53
in the year 2007. On an average, the FATR ofACC was 1.217 and its C.V. was 16.37 per cent
during the study period. In Ambuja the FATR recorded an upward trend during the period
under study. The FATR of the company varied between 0.63 in the year 2002 and 1.31 in the
year 2007. During the study period the mean and C.V. of the FATR in Ambuja were 0.967
and 29.24 per cent respectively. The FATR of Birla recorded an overall upward trend.It
ranged between 1.26 in the year2001 and 1.72 in the ultimate year. The mean and C.V. of
the FATR in Birla were 1.49 and 11.66 per cent respectively during the study period. The
36
FATR of Century also recorded an overall upward trend during the period under study. It
ranged between 0.85 in the year 2001 and 1.09 in the year 2008. On an average, the FATR of
the company was 0.976and its C.V. was 9.28 per cent during the study period. The FATR in
Chettiland declined in the second year then it recorded an overall increasing trend during the
study period. In Chettiland the minimum FATR was 0.47 in the year 2002 and the maximum
FATR was 1.27 in the year 2008. The mean and C.V. of the FATR in Century were 0.784 and
34.02percent respectively during the study period. The FATR in Grasim showed an
increasing trend upto 2008of the study period while a downward trend in the FATR of
Grasim was noticed in the rest of the study period. It ranged between 0.97 in the year 2002
and 1.62 in the year 2008. The mean and C.V. of the FATR in Grasim were 1.225and 17.43
per cent respectively during the study period. The FATR of India recorded a declined trend in
the first three years of the study period then it registered an upward trend upto the year 2008
and again it showed a declining trend upto the ultimate year. It ranged between 0.6 in the
year 2003 and 1.01 in the year 2008. The mean and C.V. of the FATR in India were 0.815
and 17.24 per cent respectively during the study period. During the same period the FATR in
Madras recorded a fluctuating trend. The minimum FATR in Madras was 0.53 in the year
2003 and the maximum was 1.05 in the year 2007. On an average, the ratio was 0.726 and its
C.V. was 26.76 per cent during the study period. The FATR in OCL showed an overall
upward trend during the study period. The mean FATR of the company was 1.16. The
minimum and maximum values of FATR of the company were 0.92 in the year 2002 and 1.38
in the year 2009 respectively and its C.V. during the same period was 14.07 per cent. The
FATR in Shree recorded a declining trend during the first three years of the study period then
it registered an upward trend up to the ultimate year. It ranged between 0.74 in the year 2004
and 1.55 in the ultimate year of the study period. During the period, the mean and C.V. of the
FATR of the company were 1.023 and 29.08 per cent respectively. During the same period
the FATR in Sanghi recorded a fluctuating trend. The minimum FATR in Sanghi was 0.45 in
the year 2010 and the maximum was 1.81 in the year 2001. On an average, the ratio was
0.725 and its C.V. was 62.82 per cent during the study period.The FATR in Prism showed an
overall upward trend during the study period. The mean FATR of the company was 1.164.
The minimum and maximum values of FATR of the company were 0.69 in the year 2001 and
2.38 in the year 2010 respectively and its C.V. during the same period was 45.54 per cent.
The average FATR of the selected companies in Indian cement industry for the period 2001
to 2010 was 1.022 and its average C.V. for the same period was 26.42per cent. The study of
37
FATR of the selected companies reflects that the efficiency of its fixed assets management
was maintained in ACC, Birla, Grasim, OCL, Shree and Prism at a level higher than the
industry average (1.022) during the period under study whereas the consistency in respect of
efficiency of fixed assets management was higher in ACC, Birla, Grasim, Century, India and
OCL as compared to the industry average (26.13 per cent) during the period under study.
This conforms that as a whole ACC,Birla, Grasim and OCL had been able to manage its
fixed assets very efficiently.
Inventory Turnover Ratio (ITR):
It measures the efficiency of inventory management. A high inventory turnover is indicative of

good inventory management. A low inventory turnover indicates excessive inventory levels
than warranted by production and sales activities. Generally speaking, the higher the ITR,
the shorter is the average time between investment in inventory and its conversion into sales
and thus, greater is the efficiency of inventory management. Table 4.2 shows that the ITRin
ACC recorded an upward trend during the first four years under study then it declined and
again it recorded a mixed trend up to the ultimate year of the study period. The ITR in ACC
varied between 8.67 in the year 2005 and 11.6 in the year 2007. On an average, the ITR of
the company was 10.43 and its C.V. was 7.64 per cent during the study period. In Ambuja,
the ITR declined in the second year of the study period then it recorded an upward trend up
to the year 2007then it registered a mixed trend up to the ultimate year of the study period. It
fluctuated between 8.56 in the year 2002 and 12.9 both in the year 2006& 2007. The mean
and C.V. of the ITR of the company, during the period under study were 10.28 and 14.51 per
cent respectively. In Birla this ratio showed an upward trend up to the year 2007 of the study
period then it registered a declining trend. It ranged between 9.04 in the year 2001 and 17.2
in the year 2007. On an average, the ratio was 11.40 and its C.V. was 15.63 per cent during
the period under study. The ITR in Century witnessed a mixed trend during the study period.
The minimum ITR of the company was 6.09 in the year 2004 and it was maximum at 7.35 in
the year 2007. The average and C.V. of this ratio in Century were 6.70 and 6.70 per cent
respectively during the study period. In Chettiland this ratio recorded a fluctuating trend.
The minimum ITR of the company was 5.25 in the year 2002, and the maximum ITR
was9.42in the year 2007. The mean and C.V. of this ratio were 6.94 and 19.60 per cent
respectively during the same period. The ITR of Grasim also registered an overall improving
38
trend up to the year 2008 of the study period then it recorded a declining trend. The minimum
ITR of the company was 7.57 in the year 2001 and the maximum was 12.9 in the year 2008.
On an average, the ITR of the company was 10.63 and its C.V. was 17.77 per cent during the
period under study. In India this ratio declined sharply in the second & third year then it
witnessed an increasing trend in the next five years of the study period while a declining
trend in it in the last two years of the study period was noticed. The minimum value of ITR in
India was5.91 in the year 2003 and the maximum value was 11.87 in the year 2008. The
mean ITR in India was 8.69 and its C.V. was 23.63 per cent during the study period. In
Madras, the ITR registered a fluctuating trend during the period under study. It ranged
between 8.38 in the ultimate year and 15.8 in the year2007.The mean and C.V. of the ratio in
Madras were11.26 and 20.68 per cent respectively during the study period. The same ratio of
OCL recorded an overall upward trend during the study period. In OCL the minimum value
of the ratio was 4.26 in the year 2002. The highest ITR in OCL was 8.15 in the year 2009. On
an average, the ratio was 6.07 and its C.V. was 22.69 per cent during the study period. In
Shree the same ratio was, on an average, 12.72 with minimum 8.88 in the year 2006 and
maximum 18.71 in the year 2009. The C.V. of ITR in Shree was 23.57 per cent during the
period under study. The ITR in Sanghi registered a clear declining trend in the first three
years of the study period then it registered an upward trend in the next four years of the study
period and again it recorded a declining trend for the rest. It varied between 1.68 in the
year2003 and 17.9 in the year 2007. The mean and CV of ITR in this company were 10.28
and 53.25 respectively. The same ratio in Prism showed a fluctuating trend during the period
under study with minimum value 9.87 in the year 2001 and maximum value 17.02 in the year
2010. The mean and CV of ITR in this company were 11.46 and 18.35 respectively.
The average ITR of the selected companies in Indian cement Industry for the period 2001 to
2010 was 9.74 and its average C.V. for the same period was 20.34 per cent. The study of ITR
of the selected companies shows that eight companies, such as, ACC, Ambuja, Birla, Grasim,
Madras, Shree, Sanghi and Prism maintained their efficiency in inventory management at a
level above the industry average (9.74) during the period under study whereas the
consistency in respect of efficiency in inventory management was higher in ACC,Ambuja,
Birla, Century, Chettiland, Grasim and Prism as compared to the industry average (20.34
per cent) during the study period.So, as a whole, ACC, Ambuja, Birla,Grasim and Prism had
cared or been able to manage their inventory very impressively.
39
Debtors Turnover Ratio (DTR):
It indicates the number of times debtors turnover each year. It throws light on the efficiency
in credit management. This ratio shows the efficiency achieved in using the funds invested in
debtors. DTR shows the efficiency of the credit and collection policies of a firm. A higher
DTR implies quicker collection or receivables and also enables the firm to transact a larger
volume of business without corresponding increase in the investment in receivables.
Generally speaking, the higher the value of debtors turnover, the more efficient is the
management of credit and vice-versa. According to Table 4.3, the DTR of ACC showed an
overall upward trend during the study period. It ranged between 11.72 in the year 2001 and
44.84 in the year 2010. On an average, this ratio in ACC was 25.84and its C.V. was 39.10
per cent during the study period. In Ambuja also this ratio recorded an upward trend in the
first six years of the study period then it declined sharply in the next two years and finally
recorded an upward trend in the ultimate years of the study period. It ranged between 38.22
in the year 2008 and 68.9 in the year 2006. The mean and C.V. of DTR in Ambuja were 51.56
and 21.33 per cent respectively during the study period. The DTR in Birla recorded an
upward trend in the first four years of the study period then it declined in the fifth year and
again it recorded an upward trend during the rest of the study period. It ranged between
20.72 in the year 2001 and 113.2 in the year 2010. On an average, the ratio of the company
was 51.52 and its C.V. was 58.00 per cent during the period under study. In Century the DTR
recorded an overall upward trend during the study period. The minimum DTR of the
company was 8.9 in the year 2001 and maximum 26.95 in the year 2009. The average and
C.V. of DTR of the company were 16.75 and 38.20 per cent respectively during the study
period. The DTR in Chettiland, also showed an upward trend during the first eight years of
the study period then it registered a declining trend in the last two years of the study period.
In Chettiland the minimum DTR was 13.9 in the year 2002 and the maximum DTR was 69.5
in the year 2008. On an average, the ratio was 33.09 and its C.V. was 53.29 per cent. In case
of Grasim, the ratio recorded an upward trend during the study period with the mean value
of this ratio was 14.93 and its C.V. was 28.31per cent. It ranged between 8.37 in the year
2001 and 19.56 in the year 2010. In India the ratio recorded a fluctuating trend during the
study period with minimum DTR was5.65 in the year 2003 and the highest DTR which was
13.5 recorded in the year 2010. On an average, this ratio was 9.44and its C.V. was 27.53 per
40
cent during the period under study. The DTR in Madras exhibited a fluctuating during the
first three years of the study period then it registered an upward trend in the next six years
and in the ultimate year it declined. It ranged between 14.2 in the year 2003 and 37.17 in the
year 2009. The mean and C.V. of the DTR in Madras were 23.75 and 37.74per cent
respectively during the study period. In OCL this ratio showed an overall upward trend
during the same period. The minimum DTR of OCL was 4.63in the year 2002 and the
maximum was 13.8 in the year 2010. On an average, the DTR in OCL was 8.26 and its C.V.
was 39.32 per cent during the period under study. The same ratio in Shree recorded an
overall improving trend during the first seven years of the study period then it registered a
declining trend in the three years of study period. It ranged between 11.27in the year 2001
and 72.5 in the year 2007. The mean and C.V. of DTR in Shree were 38.18 and 60.04 per
cent respectively. The DTR, in Sanghi & Prism recorded a declining trend in the first three
years of the study period then it registered an upward trend in the next six years of the study
period and again it declined . It varied in Sanghi between 2.7 in the year 2003 and 227.2 in
the year 2009. The mean and C.V. of DTR in Sanghi were 76.44 and 102.16 per cent
respectively.The minimum value of Prism was14.2 in the year2003 and the maximum value
was 585 in the year 2009. The mean and C.V. of DTR in Prism were 115.16 and 161.33 per
cent respectively.
The average DTR of the selected companies in Indian cementindustry for the period 2001 to
2010 was 38.74and its average C.V. for the same period was 55.53 per cent. The study of
DTR of the selected companies discloses that only four companies, namely, Ambuja, Birla,
Sanghi and Prism maintained their efficiency in credit management at a level above the
industry average (38.74) during the study period whereas the consistency in respect of
efficiency in credit management was higher in ACC, Ambuja, Century, Chettiland, Grasim,
India, Madras and OCL as compared to the industry average (55.53 per cent) during the
study period. This confirms that the performance of the credit management of Ambuja as a
whole was encouraging.
For measuring the overall efficiency of asset management of the selected companies more
precisely a comprehensive rank test considering both average and consistency aspects was
made. While making such analysis three steps were followed. In the first step a
comprehensive rank test considering the average values of all the selected measures of
efficiency in asset management was made. In this test, a process of ranking was used to
41
arrive at a more comprehensive measure of efficiency in asset management in which the
average values of the selected three ratios, namely, FATR, ITR and DTRwere combined in a
points score. A high average value of each of the selected efficiency measures indicates
greater efficiency in asset management and ranking was done in that order. Ultimate ranking
was done on the basis of the principle that the lower the aggregate of individual ranks the
higher is the efficiency of asset management and vice versa.
Table 4.4 depicts that ACC which ranked seventh according to the average values of DTR,
third according to the mean FATR and sixth according to the average ITR had a combined
score of 16 in the composite ranking. Similarly, Ambuja had a combined score of 19, Birla
8,Century 26, Chettiland25, Grasim17,India 31,Madras 22,OCL 27,Shree 12,Sanghi21 and
Prism7.According to the composite score ascertained on the basis of the mean values of the
selected efficiency ratios, Prism captured the top most position and was followed by Birla,
Shree, ACC, Grasim, Ambuja, Sanghi, Madras, Chettiland ,Century ,OCL and India
In the second step the consistencyin respect of overall efficiency in asset management of each
of the selected companies was assessed by using the comprehensive rank test considering
C.V. of all the selected ratios indicating efficiency of asset management. A low value of C.V.
of each selected efficiency measure implies higher consistency as well as more favourable
position in terms of efficiency of asset management and thus ranking was done in that order.
Ultimate ranking was done on the basis of the principle that the lower the aggregate of
individual ranks the better is the position in respect of the efficiency of asset management and
vice versa.
Table 4.5 reveals that Ambuja ranked first according to the consistency in DTR, ninth
according to the consistency in FATR, third according to the consistency in ITR had a
combined score of 13 in the composite ranking. Similarly, ACC ranked second according to
the consistency in ITR, fourth according to the consistency in FATR, sixth according to the
consistency in DTR had a combined score of 12 in the composite ranking. In the same
manner, Birla had a combined score of 15, Century 7, Chettiland 25,Grasim 14,India
18,Madras and OCL 19,Shree 28, Prism 29 and Sanghi 35.According to the composite score
based on the consistency associated with the efficiency of assets management measured by
using the C.V. of the selected efficiency indicators, Century captured the top most position
42
and was followed by ACC, Ambuja, Grasim, Birla, India, Madras & OCL, Chettiland ,Shree
and Prism and Sanghi respectively in that order.
selected companies were added to arrive at its sum of ranks which was ultimately used in
ascertaining its final efficiency rank. This final efficiency ranking was done on the principle
that the lower the aggregate of ‘rank based on average’ and ‘rank based on consistency’ the
higher is the efficiency of asset management and vice versa.
Table 4.6 discloses that ACC which scored 4 in respect of ranking based on ‘average’ and 2
in respect of ‘consistency’ had a combined score of 6 in the sum of ranks. Similarly, Ambuja
had a combined score of 9, Birla 7, Century 11, Chettiland 18, Grasim9,India 18, Madras
15.5, OCL18.5, Shree13,Sanghi19 and Prism 12. Based on the combined score ascertained
by considering both the average and consistency parameters, ACC proved itself the most
efficient performer in respect of asset management by securing the highest rank and it was
followed by Birla,Grasim and Ambuja, Century, Prism, Shree, Madras, Chettiland & India
,OCL and Sanghi respectively in that order.
43
Analysis of Fixed Asset Turnover Ratio of the Selected Companies Table:4.1
Year Average Average C.V. Average C.V.

FATR of (%) of FATR of
selected selected
companies companies
(2001- (2001-2010)
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2010) (%)
Company
ACC 1.07 1.06 0.96 1.05 1.14 1.37 1.53 1.46 1.38 1.15 1.217 1.022 16.37 26.42
Ambuja 0.7 0.63 0.70 0.70 0.82 1.13 1.31 1.29 1.29 1.10 0.967 29.24
Birla 1.26 1.35 1.31 1.33 1.52 1.46 1.60 1.73 1.62 1.72 1.49 11.66
Century 0.85 0.88 0.9 0.89 0.97 1.00 1.08 1.09 1.04 1.06 0.976 9.28
Chettiland 0.51 0.47 0.52 0.63 0.78 0.80 1.06 1.27 1.03 0.77 0.784 34.02
44
Grasim 1.02 0.97 1.0 1.09 1.24 1.27 1.49 1.62 1.30 1.25 1.225 17.43
India 0.87 0.70 0.6 0.68 0.69 087 1.00 1.01 0.89 0.84 0.815 17.24
Madras 0.55 0.62 0.53 0.58 0.59 0.74 1.05 1.04 0.85 0.71 0.726 26.76
OCL 1.0 0.92 0.98 1.08 1.21 1.24 1.36 1.30 1.38 1.13 1.16 14.07
Shree 0.97 0.81 0.80 0.74 0.79 0.76 1.13 1.29 1.39 1.55 1.023 29.08
Sanghi 1.81 1.26 0.68 0.35 0.45 0.51 0.58 0.60 0.56 0.45 0.725 62.82
Prism 0.69 0.75 0.69 0.80 0.90 1.13 1.41 1.51 1.38 2.38 1.164 45.54
Analysis of Inventory Turnover Ratio of the Selected Companies Table:4.2
Year Average Average ITR C.V. Average C.V.

of selected (%) of ITR of
compani-es selected
(2001-2010)
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Company (%)
ACC 9.75 10.63 10.4 10.75 8.67 10.5 11.6 10.8 11.1 10.11 10.43 9.74 7.64
Ambuja 9.37 8.56 9.63 9.62 10.59 12.9 12.9 9.31 9.52 10.42 10.28 14.51
Birla 9.04 10.02 10.4 11.39 12.97 13.7 17.2 11.62 10.35 10.01 11.40 15.63
Century 7.01 6.91 7.03 6.09 6.18 6.37 7.35 7.20 6.63 6.32 6.70 6.70
Chettiland 5.68 5.25 6.50 7.24 6.54 5.87 9.42 9.06 6.94 6.94 6.94 19.60
45
Grasim 7.57 7.95 9.94 12.27 12.66 10.7 12.2 12.9 10.3 9.86 10.63 17.77 20.34
India 7.50 6.08 5.91 7.89 7.68 8.81 11.3 11.87 10.35 9.55 8.69 23.63
Madras 8.98 12.36 11.00 13.74 9.64 10.3 15.8 12.62 9.85 8.38 11.26 20.68
OCL 4.89 4.26 4.78 5.11 5.64 6.38 7.14 6.34 8.15 8.08 6.07 22.69
Shree 10.93 13.98 11.3 10.03 11.01 8.88 12.0 14.67 18.71 15.71 12.72 23.57
Sanghi 8.19 5.75 1.68 5.85 14.62 16.3 17.9 15.51 10.29 6.83 10.28 53.25
Prism 9.87 10.76 10.00 10.60 9.91 11.00 12.0 11.62 11.82 17.02 11.46 18.35
Source: Compiled and computed from CapitalineCorporateDatabase, Capital Market Publishers (India) Ltd. Mumbai.
Analysis of Debtors Turnover Ratio of the Selected Companies Table:4.3
Year Average Average DTR C.V. Average C.V.

of selected (%) of DTR of
companies selected
(2001-2010)
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Company (%)
Acc 11.72 14.2 17.1 21.34 25.44 31.2 31.2 27.47 33.96 44.84 25.84 38.74 39.10
Ambuja 42.68 43.7 47.7 51.92 68.3 68.9 54.3 38.22 40.98 58.98 51.56 21.33
Birla 20.72 27.55 32.3 38.01 30.49 34.5 72.1 67.64 78.76 113.2 51.52 58.00
Century 8.90 10.12 12.7 12.62 13.5 15.8 19.4 21.63 26.95 25.87 16.75 38.20
Chettiland 20.43 13.9 16.00 23.07 30.47 32.0 48.8 69.5 49.34 27.38 33.09 53.29
46
55.53
Grasim 8.37 9.10 11.70 13.41 14.31 16.3 19.4 18.05 19.09 19.56 14.93 28.31
India 8.86 5.78 5.65 9.14 8.43 8.63 10.4 12.44 11.56 13.5 9.44 27.53
Madras 13.75 16.29 14.2 16.99 20.16 25.2 31.6 36.89 37.17 25.32 23.75 37.74
OCL 5.17 4.63 5.28 5.93 6.8 7.97 10.8 10.1 12.18 13.8 8.26 39.32
Shree 11.27 14.95 18.6 19.43 26.94 39.1 72.5 64.51 57.51 57.21 38.18 60.04
Sanghi 12.79 5.04 2.70 12.78 28.03 65.3 133 145.3 227.2 132.5 76.44 102.16
Prism 15.08 14.95 14.2 20.33 33.38 49.4 97.5 293.5 585 28.32 115.16 161.33
Table 4.4
Computation of Ultimate Rank Based on the Average Values of the Selected Efficiency Measures of the Selected Companies
Rank
Rank
Rank
Sum of Ranks
Ultimate Rank
Turnover Ratio
Turnover Ratio
Turnover Ratio
Average Debtors
Average Inventory
Average Fixed Asset

Acc 1.22 3 10.43 6 25.85 7 16 4
Ambuja 0.97 8 10.28 8 51.57 3 19 6
Birla 1.49 1 11.4 3 51.52 4 8 2
Century 0.98 7 6.70 10 16.75 9 26 10
47
Chettiland 0.78 10 6.94 9 33.09 6 25 9
Grasim 1.23 2 10.63 5 14.93 10 17 5
India 0.82 9 8.69 11 9.44 11 31 12
Madras 0.73 11 11.27 4 23.75 7 22 8
OCL 1.16 5 6.07 12 8.26 12 27 11
Shree 1.02 6 12.72 1 38.19 5 12 3
Sanghi 0.73 12 10.29 7 76.45 2 21 7
Prism 1.16 4 11.47 2 115.2 1 7 1
Table 4.5
Computation of Ultimate Rank Based on the Consistency of the Selected Efficiency Measures
of the Selected Companies
Rank
Rank
Rank
Ratio
Ratio
Ratio
Sum of Ranks
Ultimate Rank
Debtors Turnover
Inventory Turnover
Fixed Asset Turnover

Consistency (C.V.) in
ACC 16.4 4 7.64 2 39.11 6 12 2

Ambuja 29.2 9 14.52 3 21.33 1 13 3
Birla 11.7 2 15.63 4 58 9 15 5
Century 9.28 1 6.70 1 38.2 5 7 1
48
Chettiland 34 10 19.6 7 53.29 8 25 9
Grasim 17.4 6 17.78 5 28.31 3 14 4
India 17.2 5 23.64 11 27.53 2 18 6
Madras 26.8 7 20.68 8 37.74 4 19 7.5
OCL 14.1 3 22.69 9 39.32 7 19 7.5
Shree 29.1 8 23.57 10 60.04 10 28 10
Sanghi 62.8 12 53.26 12 102.2 11 35 12
Prism 45.5 11 18.36 6 161 12 29 11
Source: Compiled and computed from Capitaline Corporate Database, Capital Market Publishers
(India) Ltd. Mumbai.
Table 4.6
Computation of Final Efficiency Rank Considering Both the Average and Consistency
Parameters of the Selected Efficiency Measures of the Selected Companies
Company Ultimate Rank Ultimate Rank Sum of Final Rank of
based on based on Ranks Overall efficiency
Average Consistency of Asset
Management
4 2 6 1
ACC
6 3 9 3.5
Ambuja
2 5 7 2
Birla
10 1 11 5
Century
9 9 18 9.5
Chettiland
5 4 9 3.5
Grasim
12 6 18 9.5
India
8 7.5 15.5 8
Madras
11 7.5 18.5 11
OCL
3 10 13 7
Shree
7 12 19 12
Sanghi
1 11 12 6
Prism
Source: Compiled and computed from Capitaline Corporate Database, Capital Market Publishers (India)
Ltd. Mumbai.
49
Chapter 5
Assessment of Profitability of the Selected Companies
Profitability means the earning capability of a business firm. There are two types of
profitability ratios: profit margin ratios and rate of return ratio. Profit margin ratios show
the relationship between profit and sales. Since profit can be measured at different stages,
there are different types of profit margin ratio. The most popular profit margin ratios are
gross profit ratio, net profit ratio, operating profit ratio. Rate of return ratios represent the
relationship between profit and investment. The most popular rate of return measures are
return on capital employed, return on net worth etc. This chapter presents the analysis of the
profitability of the selected companies using the following profitability measures.
Gross Profit Ratio (GPR):
This ratio shows the margin left after meeting manufacturing costs. It measures the efficiency
of production as well as pricing. A high GPR is a sign of good management. Table 5.1
depicts that the GPR in ACC registered an upward trend during the first two years then
decreased again showed an increasing trend from 2003 to2006 of the study period then
showed a fluctuating trend during the rest of the years under study. In the year 2001, GPR
was the lowest among all the years under study which was 7.46 per cent and in the year 2009
it was the highest which was 32.84 per cent. On an average, this ratio in ACCwas21.89 per
cent and its C.V. was 47.24 per cent during the study period. Ambuja registered a fluctuating
trend in the GPR during the period of study. It ranged between 24.5 per cent in the year 2003
and 52.7 per cent in the year 2007. The mean and C.V. of this ratio in Ambuja were 31.39 per
cent and 26.61 per cent respectively. The GPR in Birla showed a overall upward trend
during the study period. But during the last four years under study it was considerably
higher than the mean GPR for the study period which shows of the increasing effectiveness of
the management of Birla in terms of efficiency of production as well as pricing. In the year
2002 the GPR was the lowest among all the years under study which was 3.58 per cent and in
the year 2010 it was the highest which was 37.88 per cent. The C.V. of Birla was 46.84 per
cent. In Century, the GPR registered an upward trend during the period under study. It
ranged between 6.78 per cent in the year 2001 and 16.89 per cent in the year 2010. On an
50
average, it was 12.08 per cent and its C.V. was 30.06 per cent respectively. The GPR in
Chettiland recorded a decreasing trend during the first three years then it showed an
increasing trend during rest of the period under study except ultimate year. The least GPR
was1.51 per cent in the year 2003 and the highest GPR was 36.91 per cent in the year2009 of
the study period. The mean and C.V. of the ratio were 21.41 per cent and 55.68 per cent
respectively during the study period. The GPR in Grasim recorded a fluctuating trend with
the minimum GRP of 13.6 per cent in the year 2002 and maximum GPR of 38.95 per cent in
the year 2010. The mean and C.V. of this ratio of the company were 24.71 per cent and
33.32per cent respectively during the same study period. The GPR in India decreased
drastically in the year2002 then showed a upward trend during next five years of the period
under study and then it showed a downward trend. This ratio was the highest in the year
2007 which was 32.00 per cent and the least GPR was in the year 2002 when it was -29.5 per
cent. The mean and C.V. of this ratio were 10.45 per cent and 174.67 per cent respectively.
The Madras recorded a mixed trend in GPR during the period of study. It ranged between
13.9 per cent in the years 2003and 35.35 per cent in the year 2008. The mean and C.V. of this
ratio in Madras were 22.07 per cent and 36.81 per cent respectively. The GPR in OCL
registered a consistently upward trend during the study period. It ranged between 6.82 per
cent in the year 2001and 26.86 per cent in the ultimate year. On an average, the GPR in OCL
was 16.09 per cent and its C.V. was 43.37 per cent. The GPR in Shree witnessed a upward
trend during the first seven years of the period under study then it showed a mixed trend with
least value of11.09 in the year2001 and the highest value 44.3 in the year 2007. The mean
and C.V. of the ratio in Shree were 27.15 per cent and 44.00 per cent respectively during the
period of study. The GPR in Sanghi registered a mixed trend during the period under study. It
ranged between 2.98 in the year 2001 and54.8 in the year 2003.The mean and CV in Sanghi
were 19.25percent and 79.76 percent respectively. The GPR in Prism registered a
decreasing trend in the first three years and reached its lowest value in the year2003 which
was -2 then it showed an increasing trend and reached its maximum value in the year2007
which was42.5then it decreased gradually. The average and CV were 17.94 percent and83.20
percent respectively.
51
The average GPR of the select companies in Indian cement Industry for the period 2001 to
GPR of the selected companies reveals that six companies, namely, ACC, Ambuja,
Chettiland, Madras, Grasim, and Shree maintained their efficiency in production as well as
pricing at a level above the industry average (20.19) during the period under study whereas
the consistency in respect of efficiency in production as well as pricing was considerably
higher in all companies except India, Sanghi and Prism as compared to the industry average
(58.46 per cent) during the same period. So, as a whole ACC, Ambuja, Chettiland, Grasim,
Madras and Shree had cared or been able to manage their efficiency of production as well as
pricing very impressively.
Net Profit Ratio (NPR):

It shows the earnings left for shareholders (both equity and preference) as a percentage of
net sales. It measures the overall efficiency of production, administration, selling, financing,
pricing and tax management. The NPR in ACC registered a fluctuating trend during the study
period. The NPR ranged between 2.09 per cent in the year 2003 and 18.42 per cent in the
year 2009. On an average, the NPR was 10.32 per cent and its C.V. was 61.76 per cent. In
Ambuja also the NPR showed a fluctuating trend during the six years study period and in the
next four years it showed a declining trend. The least NPR was 11 per cent in the year 2003
and the highest NPR was 21.4 per cent in the year 2006. The mean and C.V. of the NPR of
the company were 15.33 per cent and 20.27 per cent respectively during the period under
study. In Birla the NPR showed a upward trend during the period under study. It ranged
between -1.29 per cent in the year 2001 and 23.36 per cent in the ultimate year. On an
average, it was 9.36 per cent and its C.V. was 99.07 per cent. The NPR in Century registered
a fluctuating trend during the period under study. It ranged between 1.09 per cent in the year
2002 and 10.6 per cent in the year 2007. The mean and C.V of the NPR in Century were 4.95
per cent and 66.24 per cent respectively during the period under study. In Chettiland, the
NPR declined sharply in the second year then an upward trend was observed during the next
six years of the study period and again declined and in the ultimate year it increased. The
minimum NPR was -4.9 per cent in the year 2002 and the maximum NPR was 14.79 per cent
in the year 2008. On an average, the NPR of the company was 5.05 per cent and its C.V. was
125.65 per cent. In case of Grasim the NPR recorded consistently a good trend. The
minimum NPR in Grasim was7.29per cent in the year 2001 and the maximum NPR was 19.86
52
per cent in the year 2010. On an average, the NPR in Grasim was 12.74 per cent and its C.V.
was 31.96 per cent during the study period. The NPR in India registered a fluctuating trend
during the study period. It ranged between -20.0 per cent in the year 2003and 18.3 per cent
in the year 2007. The mean and C.V. of the NPR of the company were 1.92 per cent and
663.50 per cent respectively. In Madras NPR registered a declining trend during the first
three years of the study period then it showed a upward trend in the next five years and
again it declined. It ranged between 1.73 in the year 2003and 17.44 in the year 2008.On an
average, the NPR of the company was 8.77 per cent during the study period. Its C.V. was
64.14 per cent. In OCL the NPR showed a fluctuating trend during the study period. The NPR
was minimum 1.86per cent in the years 2001 and it was maximum13.01 per cent in the year
2008. The mean and C.V. of the NPR in OCL were 6.63 per cent and 54.32 per cent
respectively. The NPR in Shree showed an overall fluctuating trend during the study period.
It ranged between 1.15per cent in the year 2003 and 18.66 per cent in the year 2009. On an
average, the NPR in Shree was 7.61 per cent during the study period and its C.V. was 81.71
per cent. The NPR in Sanghi recorded a downward trend in the first four years of the study
period then it showed an increasing trend for the next three years of the study period and for
the rest it registered a mixed trend. It ranged between -4.23per cent in the year 2004 and
16.6 per cent in the year 2007. On an average, the NPR in Sanghi was 6.06 per cent during
the study period and its C.V. was 115.08 per cent. The NPR in Prism recorded a fluctuating
trend during the first four years of the study period then it registered an increasing trend for
the next four years of the study period and for the rest it registered a declining trend. It
ranged between -7.5 per cent in the year 2003 and 23.7 per cent in the year 2008. On an
average, the NPR in Prism was 6.62 per cent during the study period and its C.V. was 161.27
per cent.
The average NPR of the selected companies in Indian cement industry for the period 2001 to
NPR of the selected companies discloses that five companies, namely, ACC, Ambuja, Birla,
Grasim, and Madras maintained their overall efficiency in production, administration,
selling, financing, pricing and tax management at a level above the industry average (7.94)
during the period under study whereas the consistency in respect of efficiency in production,
administration, selling, financing, pricing and tax management was considerably higher in
ACC, Amnuja, Birla, Century, Chettiland, Grasim, Madras, OCL, Shree and Sanghi as
compared to the industry average (128.75 per cent) during the same period. This conforms
53
that the performance of overall efficiency of production, administration, selling, financing,
pricing and tax management of ACC, Ambuja, Birla, Grasim and Madras were encouraging.
Return on Capital Employed (ROCE):

This ratio measures the overall profitability of a firm. The higher the ratio, the higher is the
overall earning capability of the firm. The ROCE in ACC recorded a fluctuating trend during
the first three years of study period then it showed an upward trend in the following four
years and then it recorded a fluctuating trend. It ranged between 8.46 per cent in the year
2003 and 42.1 per cent in the year 2007. On an average, the ROCE in ACC was 24.51 per
cent and its C.V. was 56.39per cent during the study period. In Ambuja the ROCE registered
an upward trend during the first six years of study period then it registered a declined trend
in the following years. The ROCE of the company was the least in the year 2002when it was
10.64 per cent and it was the maximum in the year 2006 when it was 34.1 per cent. The mean
and C.V. of ROCE of the company were 22.78 per cent and 48.57 per cent respectively. In
case of Birla also the ROCE recorded a fluctuating trend. It fluctuated between 6 per cent in
the year 2003 and 60.7 per cent in the year 2007. On an average, it was 26.57 per cent
during the study period. The C.V. of ROCE in Birla was 73.49 per cent. In Century also the
ROCE recorded a mixed trend during the study period but in the last five years the ROCE of
the company was comparatively higher. The mean and C.V. of the ROCE of the company
were 14.75 per cent and 48.75 per cent respectively. In Chettiland the ROCE recorded an
increasing trend during the first eight years of the study period. It ranged between 3.95 per
cent in the year 2009 and 40.27 per cent in the year 2008. On an average, the ROCE of the
company were 16.51 per cent and its C.V. was 77.20 per cent during the study period. In case
of Grasim also the ROCE showed an overall upward trend during the study period. It
fluctuated between 13.3 per cent in the year 2001 and 29.03 per cent in the year 2008. On an
average, it was 21.46 per cent during the study period. The C.V. of ROCE in Grasim was
25.79 per cent during the period under study. In India the ROCE declined sharply in the first
four years then it registered an upward trend in the following four years and again it
declined. It ranged between 0 per cent in the year 2004 and 2005 and 24.36 per cent in the
year 2008. The mean and C.V. of ROCE in India were 9.91 per cent and 89.43 per cent
respectively during the period under study. In Madras the ROCE was fluctuated during the
study period. It ranged between 9.25 per cent in the year 2003 and 42.2 per cent in the year
54
2007. The mean and CV were18.35 per cent and 60.89 per cent respectively during the study
period. The ROCE in OCL also showed a mixed trend during the study period. It varied
between 7.85 per cent in the year 2002 and 21.76 per cent in the year 2008. The mean and
C.V. of ROCE in OCL were 15.26 per cent and 33.57 per cent respectively. In Shree also the
ROCE recorded a fluctuating trend during the study period. The minimum ROCE was 6.57
per cent in the year 2006 and the maximum ROCE was 33.98 per cent in the year 2009. The
mean and C.V. of ROCE in Shree were 17.01 per cent and 56.39 per cent respectively during
the period under study. The ROCE in Sanghi recorded a downward trend in the first four
years of the study period then it registered an upward trend in the following three years and
again it declined. It varied between 0 per cent in the year 2004 and 15.7 per cent in the year
2007. The mean and C.V. of ROCE in Sanghi were 5.69 per cent and 100.39 per cent
respectively. The ROCE in Prism showed 0 per cent in the first four years then it recorded an
upward trend in the following three years and again it registered a declining trend in the
following years. It varied between 0 per cent in the first four years of the study period and
73.5 per cent in the year 2007. The mean and C.V. of ROCE in Prism were 23.54 per cent
and 113.84 per cent respectively
The average ROCE of the selected companies in Indian cement industry for the period 2001
ROCE of the selected companies reveals that only six companies, namely, ACC, Ambuja,
Birla, Grasim, Madras and Prism maintained their overall profitability at a level above the
industry average (18.03) during the period under study whereas the consistency in respect of
overall profitability was considerably higher in ACC, Ambuja, Century, Grasim, Madras,
OCL and Shree as compared to the industry average (63.24 per cent) during the same period.
So, as a whole ACC, Ambuja, Grasim and Madras had cared or been able to manage their
overall profitability very well.
Return on Net Worth (RONW):
It measures the earning capability of the company from the view point of its equity
shareholders. This ratio expresses the relation of the amount of net profit after tax to the
amount of funds invested by the owners. In other words, it indicates how profitably the
shareholders’ funds have been utilized by the enterprise. The RONW in ACC showed a
55
fluctuating trend during the study period except three years between2003 to2006. On an
average, it was 21.69 per cent and its C.V. was 53.16 per cent during the study period. In
Ambuja also the RONW exhibited a mixed trend during the first six years of the study period
then it recorded a downward trend . It fluctuated between 2.31 per cent in the year 2005 and
35.4 per cent in the year 2006. The mean and C.V. of RONW in Ambuja were 19.52 per cent
and 42.45 per cent respectively. The RONW in Birla registered an upward trend the first
seven years of the study period then it showed a downward trend. The least RONW was -
6.48per cent in the year 2001 and the highest RONW was 63.2 per cent in the year 2007. On
an average, it was 24.98per cent and its C.V. was 92.71 per cent during the period under
study. The RONW of Century exhibited an upward trend throughout the study period.
However, in the last four years of the study period it was remarkably higher as compared to
other years of the study period. It ranged between 3.35 per cent in the year 2002 and 29.9 per
cent in the year 2007. On an average, it was 16.58 per cent during the study period. The C.V.
of the RONW in Century was 70.50 per cent during the period under study. The RONW in
Chettiland recorded an upward trend during the year 2002to 2007 of the study period then it
registered a fluctuating trend. It ranged between -8.83 per cent in the year 2002 and 52.4 per
cent in the year 2007. On an average, the RONW of the company was 16.91 per cent and its
C.V. was 124.93 per cent during the study period. The RONW in Grasim recorded an upward
trend throughout the period under study. The least value was 12.92 per cent in the year 2001
and the highest value was 27.92 per cent in the year 2008. The mean and C.V. of RONW of
the company were 20.42 per cent and 24.90 per cent respectively during the period under
study. In India also the RONW registered a fluctuating trend. It ranged between -17.4 per
cent both in the year 2002and 36.6per cent in the year 2007. On an average, the RONW in
India was7.69 per cent and its C.V. was 225.54 per cent during the same period. In Madras
the RONW showed a downward trend in the very first three years of the study period then it
registered an upward trend in the following four years and again it recorded a downward
trend. It ranged between 4.85 per cent in the year 2003 and 58.1 per cent in the year 2007.
On an average, it was 24.18 per cent and its C.V. was 74.51 per cent during the period under
study. In OCL the RONW registered an upward trend during first seven years of the period
under study then it recorded a mixed trend. It fluctuated between 4.3 per cent in the year
2001 and 26.5 per cent in the year 2007. On an average, it was 17.25per cent and its C.V.
was 43.78 per cent during the study period. In Shree the RONW declined sharply in the
year2003 as compared to the first two years of the study period then it showed an upward
trend and it declined sharply in the ultimate year. It ranged between 3.17 per cent in the year
56
2003 and 61.39 per cent in the year 2009. The mean and C.V. of the RONW in Shree were
24.55 per cent and 88.57 per cent respectively during the period under study. In Sanghi the
RONW registered a downward trend during the first four years of the study period then it
recorded an upward trend in the following three years and again it registered a mixed trend
in the next three years of the study period. It ranged between 0 per cent in the year 2004 and
34.4per cent in the year 2007. The mean and C.V. of the RONW in Sanghi were 11.14 per
cent and 118.87 per cent respectively during the period under study. In Prism the RONW
registered 0 percent during the first four years of the study period then it recorded an upward
trend in the following three years and again it registered a downward trend in the next three
years of the study period. It ranged between 0 per cent both in the years2001-2004 and
54.3per cent in the year 2007. The mean and C.V. of the RONW in Prism were 18.07 per cent
and 110.71 per cent respectively during the period under study.
The average RONW of the selected companies in Indian cement industry for the period 2001
to 2010 was 18.58 percent and its average C.V. for the same period was 89.22 per cent. The
study of RONW of the selected companies reveals that only six companies, namely, ACC,
Ambuja, Birla, Grasim, Madras and Shree achieved the earning capability from the view
point of their owners at a level above the industry average (18.58) during the period under
study whereas the consistency in respect of it was considerably higher in ACC, Ambuja,
Century, Grasim, Madras and Shree as compared to the industry average (89.22 per cent)
during the same period. This confirms that the earning capability of ACC, Ambuja,
Grasim,Madras and Shree from the view point of their equity shareholders as a whole was
encouraging.
For measuring the profitability status of the selected companies more precisely a
comprehensive rank test considering both average and consistency aspects was made. While
making such analysis, three steps were undertaken. In the first step comprehensive ranks
were ascertained on the basis of the average values of all the selected profitability measures.
In this test, a process of ranking was applied to arrive at a more comprehensive measure of
profitability in which average values of the selected four ratios, namely, GPR, NPR, ROCE
and RONW were combined in a points score. A high average value of any profitability ratio
indicates greater profitability and ranking was done in that order. Ultimate ranking was done
on the basis of the principle that the lower the aggregate of individual ranks the better is the
profitability status and vice versa.
57
Table 5.5 shows that Ambuja which ranked first according to the average values of GP,NP,
fourth according to the average ROCE and sixth according to the averageRONW, had a
combined score of 12 in the composite ranking. Similarly, ACC had a combined score of 14,
Birla and Grasim15, Shree 17, Madras 18, Prism 26, Chettiland and OCL 34, Sanghi 39,
Century 41, and India 47. So, according to the composite score based on the average values
of the selected profitability ratios, Ambuja captured the top most position and was followed
by ACC, Birla &Grasim, Shree, Madras, Prism ,Chettiland & OCL, Sanghi, Century and
India respectively in that order.
In the second step the consistency in respect of overall profitability of the selected companies
was assessed by using the comprehensive rank test considering C.V. of all the selected
profitability ratios of each company during the study period. A low value of C.V. of each
selected profitability measure implies a more consistency as well as favourable position in
terms of profitability and thus ranking was done in that order. Ultimate ranking was done
based on the principle that the lower the aggregate of individual ranks the better is the
profitability position and vice versa.
Table5.6 reveals that Ambuja which ranked first according to the values of C.V. of GPR &
NPR, third according to the C.V. of ROCE and second according to the C.V. of RONW had a
combined score of 7 in the composite ranking. Grasim which ranked first according to the
values of CV of ROCE and RONW, second according to the CV of NPR and third according
to the CV of GPR had a combined score of 7.SimilarlyOCL 13, Century 17, ACC 21.5,
Madras 22, Shree 25.5, Birla 31, Chettiland 39,Sanghi 40,Prism 43 and India. According to
the combined score based on the consistency measured by the C.V. of the selected
profitability ratios, Ambuja and Grasim both captured the top most position and was
followed by OCL, Century, ACC, Madras, Shree, Birla, Chettiland, Sanghi, Prism and India
selected companies were added to arrive at its sum of ranks which was ultimately used to
ascertain its final profitability rank. Final profitability ranking was done on the principle that
the lower the aggregate of ‘rank based on average’ and ‘rank based on consistency’, the
better is the profitability position and vice versa.
58
Table 5.7 shows that Ambuja, which ranked first according to ‘average’ and jointly first with
Grasim according to ‘consistency’, had a combined score of 2.5 in the sum of ranks.
Similarly Grasim had a combined score of 5, ACC 7, both Birla and OCL 11.5, both Shree
and Madras 12, Century 15,Chettiland 17.5, Prism 18,Sanghi 20and India 24. Based on the
combined score considering both the average and consistency parameters, Ambuja captured
the top most position in respect of earning capability and was followed by Grasim, ACC, both
Birla and OCL, both Shree and Madras, Century, Chettiland, Prism, Sanghi and India
59
Table 5.1
Analysis of Gross Profit Ratio of the Selected Companies
Year Average Average GPR of C.V. Average C.V. of

selected (%) GPR of selected
companies companies
(2001-2010) (2001-2010) (%)
Company
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
ACC 7.46 11.16 9.9 13.2 26.7 32.8 32.5 28.34 32.84 24.02 21.89 47.24
Ambuja 26.02 26.68 24.5 28.19 27.48 34.8 52.7 36.15 29.68 27.73 31.39 26.61
Birla 6.17 3.58 4.11 7.73 10.92 14.7 32.00 34.42 26.83 37.88 17.83 46.84
Century 6.78 7.20 10.1 10.39 10.47 13.0 15.6 16.12 14.29 16.89 12.08 30.06
0
60
Chettiland 15.26 8.49 1.51 16.04 17.26 20.6 30.6 35.3 36.91 32.09 21.41 55.68
20.19 58.46
Grasim 15.6 13.6 16.5 25.86 25.59 22.4 29.6 34.51 24.88 38.95 24.71 33.32
India 4.85 -29.5 -3.1 7.05 8.11 30.6 32.00 24.86 20.25 9.34 10.45 174.67
Madras 17.58 14.39 13.9 16.88 16.61 17.9 34.3 35.35 27.81 25.94 22.07 36.81
OCL 6.82 8.55 12.3 14.25 12.09 13.9 18.6 26.64 20.91 26.86 16.09 43.37
Shree 11.09 14.94 15.00 19.25 25.59 27.5 44.3 40.18 34.19 39.49 27.15 44.00
Sanghi 2.98 3.06 54.8 7.68 13.54 25.6 28.8 23.5 17.73 14.96 19.25 79.76
Prism 4.17 4.62 -2.00 9.58 15.99 21.2 42.5 39.78 27.22 15.79 17.94 83.20
Table 5.2
Analysis of Net Profit Ratio of the Selected Companies
Year Average Average NPR of C.V. Average C.V. of

selected (%) NPR of selected
companies companies
(2001-2010) (2001-2010) (%)
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Company
Acc 2.8 4.59 2.09 5.15 8.31 17.0 16.3 14.73 18.42 13.8 10.32 61.76
Ambuja 12.88 11.79 11.0 14.63 15.48 21.4 18.5 16.59 15.78 15.3 15.33 20.27
Birla -1.29 -0.45 -0.3 3.14 6.51 8.78 18.2 19.74 15.89 23.36 9.36 99.07
Century 2.06 1.09 2.78 3.04 3.89 2.8 10.6 8.95 6.22 8.07 4.95 66.24
61
Chettiland 7.45 -4.9 -2.2 3.47 5.38 6.86 13.7 14.79 -0.32 6.35 5.05 125.65
7.94 128.75
Grasim 7.29 7.96 9.22 12.71 12.3 11.3 16.0 17.24 13.57 19.86 12.74 31.96
India 3.34 -10.1 -20.0 -9.41 -4.56 1.98 18.3 17.94 12.66 8.64 1.92 663.50
Madras 7.17 3.14 1.73 3.96 6.31 6.63 17 17.44 12.92 11.39 8.77 64.14
OCL 1.86 2.18 5.0 5.8 4.96 5.39 8.34 13.01 9.07 10.76 6.63 54.32
Shree 4.71 5.56 1.15 2.15 4.02 2.23 10.2 10.67 18.66 16.79 7.61 81.71
Sanghi 1.29 1.17 1.1 -4.23 1.19 13.5 16.6 11.43 6.05 12.56 6.06 115.08
Prism -3.47 -2.09 -7.5 -1.28 4.88 9.15 21.8 23.7 12.98 8.4 6.62 161.27
Table 5.3
Analysis of ROCE of the Selected Companies

Year Avera-ge Average OPR C.V. Average C.V.
of selected (%) of OPR of
companies selected
(2001-2010)
(%)
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Company
Acc 9.73 12.56 8.46 13.86 19.08 41.3 42.1 36.00 39.67 22.37 24.51 18.03 56.39
48.57
Ambuja 11.68 10.64 11.3 14.99 18.55 34.1 42.5 30.75 29.00 24.39 22.78
73.49
Birla 6.01 6.28 6.00 13.38 23.44 26.7 60.7 51.89 32.46 38.91 26.57
48.75
Century 10.4 8.16 9.91 8.73 9.93 11.7 28.9 24.01 16.26 19.57 14.75
62
77.20
Chettiland 11.42 7.92 5.01 12.58 14.26 17.5 38.4 40.27 3.95 13.79 16.51
25.79
Grasim 13.3 13.94 18.00 22.97 24.04 19.7 29.00 29.03 19.72 24.91 21.46
89.43 63.24
India 9.78 3.18 00 00 2.79 7.19 21.1 24.36 18.02 12.72 9.91
60.89
Madras 12.02 11.27 9.25 11.26 10.1 15.1 42.2 34.07 20.85 17.46 18.35
OCL 7.98 7.85 12.8 16.89 12.26 13.8 21.1 21.76 17.77 20.37 15.26 33.57
Shree 13.29 16.2 8.5 10.32 8.84 6.57 17.4 25.01 33.98 30.0 17.01 56.39
Sanghi 0.36 0.27 0.22 00 4.07 9.4 15.7 12.83 8.24 5.86 5.69 100.39
Prism 00 00 00 00 12.64 23.5 73.5 62.18 32.34 31.23 23.54 113.84
Analysis of RONW of the Selected Companies Table:5.4
Year Avera-ge Average C.V. Average C.V.

RONW of (%) of RONW of
selected selected
companie-s compani-es
(2001-2010) (2001-2010)
(%)
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Company
Acc 7.26 13.77 6.67 16.48 22.08 41.6 35.1 26.71 29.36 17.94 21.69 18.58 53.16
Ambuja 12.00 12.51 11.9 13.79 2.31 35.4 29.0 22.72 20.07 18.31 19.52 42.45
Birla -6.48 -2.34 -1.4 15.63 31.65 37.1 63.2 47.6 28.43 36.38 24.98 92.71
Century 5.17 3.35 9.41 9.94 14.3 10.5 40.0 29.9 19.15 24.24 16.58 70.50
63
Chettiland 11.5 -8.83 -6.3 10.8 19.94 24.9 52.4 49.95 -1.13 15.97 16.91 124.93
Grasim 12.92 13.95 17.6 23.7 22.34 18.6 27.4 27.92 18.71 21.16 20.42 24.90
89.22
India 5.75 -17.4 00 00 -12.6 4.1 36.6 32.02 17.48 10.91 7.69 225.54
Madras 11.45 7.66 4.85 11.88 17.82 21.7 58.1 50.4 32.84 25.1 24.18 74.51
OCL 4.3 5.07 14..1 18.52 17.83 19.3 26.5 25.33 19.09 22.49 17.25 43.78
Shree 10.91 13.04 3.17 5.5 10.75 6.28 43.9 46.19 61.39 44.43 24.55 88.57
Sanghi 0.97 0.41 0.20 00 2.96 31.9 34.4 19.45 8.39 12.77 11.14 118.87
Prism 00 00 00 00 11.14 20.8 54.3 46.96 20.06 27.41 18.07 110.71
Computation of Ultimate Rank Based on the Average Values of the Selected Profitability Measures of the Selected Companies
Table:5.5
(%)
(%)
Rank
Rank
Rank
Rank
Worth (%)
Sum of Ranks
Employed (%)
Ultimate Rank
Average Return on Net
Average Net Profit Ratio

Average Return on Capital
Average Gross Profit Ratio

Acc 21.89 5 10.32 3 24.51 2 21.69 4 14 2
Ambuja 31.39 1 15.33 1 22.78 4 19.52 6 12 1
Birla 17.83 9 9.36 4 26.57 1 24.98 1 15 3.5
Century 12.08 11 4.95 11 14.75 10 16.58 9 41 11
64
Chettiland 21.41 6 5.05 10 16.51 8 16.91 10 34 8.5
Grasim 24.71 3 12.74 2 21.46 5 20.42 5 15 3.5
India 10.45 12 1.92 12 9.91 11 7.69 12 47 12
Madras 22.07 4 8.77 5 18.35 6 24.18 3 18 6
OCL 16.09 10 6.63 7 15.26 9 17.25 8 34 8.5
Shree 27.15 2 7.61 6 17.01 7 24.55 2 17 5
Sanghi 19.25 7 6.06 9 5.69 12 11.14 11 39 10
Prism 17.94 8 6.62 8 23.54 3 18.07 7 26 7
Table 5.6
Computation of Ultimate Rank Based on the Consistency of the Selected Profitability Measures of the Selected Companies
Rank
Rank
Rank
Rank
Sum of Ranks
Ultimate Rank
Profit Ratio (%)

Profit Ratio (%)
on Net Worth (%)
on Capital Employed (%)
Consistency (C.V.) in Net
Consistency (C.V.) in Gross

Consistency (C.V.) in Return
Consistency (C.V.) in Return
Acc 47.24 8 61.76 4 56.39 5.5 53.16 4 21.5 5
Ambuja 26.61 1 20.27 1 48.57 3 42.45 2 7 1.5
Birla 46.84 7 99.07 8 73.49 8 92.71 8 31 8
Century 30.06 2 66.24 6 48.75 4 70.50 5 17 4
65
Chettiland 55.68 9 125.65 10 77.20 9 124.93 11 39 9
Grasim 33.32 3 31.96 2 25.79 1 24.90 1 7 1.5
India 174.67 12 663.50 12 89.43 10 225.54 12 46 12
Madras 36.81 4 64.14 5 60.89 7 74.51 6 22 6
OCL 43.37 5 54.32 3 33.57 2 43.78 3 13 3
Shree 44.00 6 81.71 7 56.39 5.5 88.57 7 25.5 7
Sanghi 79.76 10 115.08 9 100.39 11 118.87 10 40 10
Prism 83.20 11 161.27 11 113.84 12 110.71 9 43 11
Table 5.7
Computation of Final Profitability Rank Considering Both the Average and Consistency
Parameters of the Selected Profitability Measures of the Selected Companies
Company Ultimate Rank Ultimate Rank Sum of Ranks Final Profitability
based on based on Rank
Average Consistency
ACC 2 5 7 3
Ambuja 1 1.5 2.5 1
Birla 3.5 8 11.5 4.5
Century 11 4 15 8
Chettiland 8.5 9 17.5 9
Grasim 3.5 1.5 5 2
India 12 12 24 12
Madras 6 6 12 6.5
OCL 8.5 3 11.5 4.5
Shree 5 7 12 6.5
Sanghi 10 10 20 11
Prism 7 11 18 10
66
Chapter 6
Measurement of Overall Financial Performance of the Selected Companies
Considering the final liquidity rank (ascertained in Table 3.8), final efficiency rank
(determined in Table 4.6), final profitability rank (measured in Table 5.7) , a composite score
for each of the selected companies was ascertained in Table 6 and on the basis of such
composite scores assigned to the selected companies, their overall financial status was
assessed more precisely. While ascertaining such composite scores a comprehensive test
based on the sum of scores of separate individual ranking under the above mentioned three
criteria was undertaken. Ultimate ranking was done on the principle that the lower the
aggregate of final liquidity rank (FLR), final profitability rank (FPR) and final efficiency
rank (FER), the better is the financial performance. In this Table, it was also attempted to
examine whether there was any association among the final ranks of liquidity, profitability
and efficiency of the selected companies. This examination was carried out by using
Kendall’s coefficient of concordance (W). In order to test the significance of the value of W,
Chi-squre (χ2) test was applied.
Table 6 depicts that ACC (which ranked Twelfth according to FLR, third according to FPR
and first according to FER and had a combined score 16 similarly Ambuja (which ranked
eighth according to FLR, first according to FPR and three and half according to FER) had a
combined score 12.5,Birla 16,century 18, Chettiland 25.5,Grasim 7.5,india 24.5,Madras
18.5, Ocl 16.5,Shree 19.5,Sanghi 32.5and Prism 27. Based on the combined score
considering both the average and consistency parameters of the selected financial
performance indicators, Grasim captured the top most position while Ambuja was placed in
the second position,ACC and Birla jointly captured third position and was followed by OCl,
Century, Madras, Shree, India, Chettiland, Prism and Sanghi in that order. Table 6 also
exhibits that the computed value of W was 0.940 which was found to be statistically
significant as the computed Chi-square (χ2) value of W was 25.40.It shows that there was a
close as well as significant association among the different aspects of financial performance
of selected companies of Indian cement Industry during the study period. In other words, a
notable degree of uniformity between selected financial criteria of the selected companies
during the period under study was observed.
67
Table 6
Statement of Ranking of Different Measures of Overall Financial Performance of the
Companies under Study
Company Measures of overall financial performance Sum Ultimate
Final liquidity Final Final efficiency of Ranks
rank (FLR) on profitability rank (FER)on Ranks
the basis of rank (FPR) on the basis of both
both averages the basis of both averages and
and averages and consistencies
consistencies consistencies
ACC 12 3 1 16 3.5
Ambuja 8 1 3.5 12.5 2
Birla 9.5 4.5 2 16 3.5
Century 5 8 5 18 6
Chettiland 7 9 9.5 25.5 10
Grasim 2 2 3.5 7.5 1
India 3 12 9.5 24.5 9
Madras 4 6.5 8 18.5 7
OCL 1 4.5 11 16.5 5
Shree 6 6.5 7 19.5 8
Sanghi 9.5 11 12 32.5 12
Prism 11 10 6 27 11
Kendall’s coefficient of concordance among three sets of measures of financial performance
on the basis of their averages (W) is 0.940 and Chi-square (χ2) value of W is 25.40 being
statistically significant.
68
References:
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 Mallik, A.K. & Sur, D. (1999): “Working Capital Management: A Case Study of Hindustan Lever Ltd.”,
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 Mallik, A.K., Sur, D. &Rakshit, D. (2005): “Working Capital and Profitability: A Study on their
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of Management, July-December, Vol. 3, No. 2, pp. 51-62.
69
 Bardia, S.C. (2004): “Liquidity Management: A Case Study of Steel Authority of India Ltd”, The
Management Accountant, ICWAI, Kolkata, June, pp. 463-467.
 Banerjee, B. (1982): “Corporate Liquidity and Profitability in India”, Research Bulletin, ICWAI, Kolkata,
July. Pp. 225-234.
 Chakraborty, S.K. (1976): “Funds Flow and Liquidity Management” in Topics in Accounting and
Finance, Chakraborty, S.K., Bhattacharya, K.K., Ghosh, S.K. &Rao, N.K. (ed), Oxford University Press,
Kolkata, pp. 81-91.
 Dutta, J. S. (2000): “Working Capital Management of Horticulture Industry in H.P. – A Case Study of
HPMC”, Unpublished thesis, Himachal Pradesh University.
 Ghosh, S.K. & Maji, S.G. (2003): “Utilization of Current Assets and Operating Profitability: An
Empirical Study on Cement and Tea Industries in India”, Indian Journal of Accounting, IAA, Ujjain,
December, pp. 52-55.
 Janakiramudu, P & Rao, S.D. (2008): “Working Capital Management- A Review of Research”, Finance
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 Mallik, A.K. & Sur, D. (1999): “Working Capital Management: A Case Study of Hindustan Lever Ltd.”,
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70
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Journals:
 Finance India
 Decision
 GITAM Journal of Management
 Indian Journal of Accounting
 ICFAI Reader
 Portfolio Organiser
 Growth
71
 Indian Journal of Commerce
 Management Researcher
 Research Bulletin
 The Chartered Accountant
 The Indian Journal of Public Enterprise
 The Icfain Journal of Behavioral Finance
 The Icfain Journal of Applied Finance
 The Indian Journal of Commerce
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 Published Annual report of the companies under study
 CMIE reports
72

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FINANCIAL PERFORMANCE ANALYSIS OF

SELECTED COMPANIES IN CEMENT

U.G.C MINOR RESEARCH PROJECT

Durga Pada Mal

Associate Professor of Commerce

Durga Pada Mal

Associate Professor of Commerce

 Summary and Conclusions 66

factor of testing financial efficiency of a company. Many companies which appear to be

Cement is one of the important products among construction materials. It is an essential

industry is considered as one of the basic infrastructure industries for development. It

constitutes an important segment for modern industrial economy of India. It is an indigenous

manpower, machinery, equipment, technology and know-how.

additional capacity, technological up-gradation of existing plants, and conversion of wet

cement units in the country.

Words cannot adequately express my gratitude to my friend Dr Debasish Sur, Professor,

enabled me to bring this to fruition.

I would like to extend my gratitude to Dr Asish Kumar Dey, Principal, Deshbandhu

I am also thankful to the non-teaching staffs of Deshbandhu Mahavidyalaya, Chittaranjan,

gratitude to Professor Sagar Chandra Bandyopadhyay, Associate professor of Bengali and

3.8 Computation of Final Liquidity Rank Considering 34

4.1 Analysis of Fixed Asset Turnover Ratio 43

5.1 Analysis of Gross Profit Ratio 59

6. Statement of Ranking of Different Measures of Overall 67

Indian Cement Industry: An Overview

Cement is an essential component of infrastructure development and most important input of

 Review of Existing Literature

Review of Existing Literature

Venkataramana and Ramakrishnaiah (2011) conducted a study to analyse the financial

Sathya. (2012) conducted a study on analysis of composite profitability index of 30cement

Objectives of the Study:

The study has the following objectives:

consideration three important aspects of financial performance namely, liquidity, profitability

and efficiency in asset management.

Scope of the Study:

Research Methodology of the Study:

(i) Sample design:

(ii) Collection of data:

(iii) Analysis of data:

Organization of the Study:

Measurement of Liquidity of the Selected Companies

Current Ratio (CR):

Quick Ratio (QR):

Stock to Current Assets Ratio (SCAR):

Debtors to Current Assets Ratio (DCAR):

Cash & Bank to Current Assets Ratio (CBCA):

Analysis of Current Asset Ratio of the Selected Companies

Year Average Average DCAR C.V. Average C.V. of

Analysis of Quick Ratio of the Selected Companies

Year Average Average QR of C.V. Average C.V. of

Corporate Database, Capital Market Publishers (India) Ltd. Mumbai.

Analysis of Stock to Current Asset Ratio of the Selected Companies

Average SCAR of C.V. Average C.V. of

1.349 3 1.59 3 0.266 2 0.12 8 0.255 2 18 1

1.377 2 1.36 4 0.289 3 0.10 11 0.138 6 26 4

0.951 10 0.53 12 0486 12 0.17 4 0.108 8 46 12 Prism

Current Asset Ratio

Bank to Current Asset Ratio

Consistency (C.V.) in Quick

Consistency (C.V.) in Current

Consistency (C.V.) in Stock to

20.89 7 47.4 10 23.6 9 23.3 3 71.56 7 36 9

24 8 15.5 3 9.95 2 18.6 1 57.78 5 19 2 Grasim

17.4 5 33.3 9 14.62 4 20.5 2 153.2 12 32 7 India