Ratio Analysis.

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1. INTRODUCTION
1.1 Introduction to the study
Finance is an important function of any business, as money required to meet the

various activities of it. It has given birth to “Financial Management” as a separate
subject. The subject is of recent origin. It draws heavily on “Economics” for its
theoretical concepts. In the early half of the 20th century the job of financial
management was largely confined to the acquisition of funds. But as business firms
continued to expand their market and became larger and more diversified, greater
control of financial operation became highly essential. Thus the scope of financial
management is very wide and it is not merely restricted to rising of capital. It also
covers other aspects of financing such as assessing the needs of capital, rising
sufficient amount of funds, cost of financing, budgeting, maintaining liquidity,
lending and borrowing policies, dividend policy, and so on.
Financial management occupies a significant place because it has an impact on all

the activities of a firm. Its primary responsibility is to discharge the finance function
successfully. Thus financial management is an appendage of the finance function. No
one can think of any business activity in isolation from its financial implications. The
management may accept or reject a business proposition on the basis of financial
viabilities. In other words, the live executives who are directly involved in the
decision making process should give supreme importance for financial considerations.
In the perfect world, there would be no necessary for current assets and current
liabilities because there would be no uncertainty, no transaction costs, information
search costs, scheduling costs, or production and technology constraints. The unit cost
production would not vary with the quantity produced. Borrowing and lending rate
shall be same. Capital, labour, and products markets shall be perfectly competitive
and would reflect on all available information. Thus in such an environment, there
would be no advantage for investing in short term assets.
Cost Volume Profit Analysis.
Cost volume profit analysis is an important tool of profit planning. Profit is the
most important measure of a firm’s performance in the market and company. Profit is
a guide of allocating resource efficiently. The analytical technique used to study the
behaviour of in response to the changes in volume, cost, and prices is called Cost
Volume Profit (CVP) analysis.
It is a device used to determine the usefulness of profit planning. CVP Analysis

helps to determine the minimum sales volumes at which the profit goal of a firm will
be achieved. CVP Analysis helps to determine the minimum sales volumes at which
the profit goal of a firm will be achieved. It is an ultimate objective; it helps
management in seeking the most profitable contribution of cost and volume. CVP
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Analysis is a management tool showing the relationship between various ingredient of

profit planning via cost (both fixed and variable) selling price and volume of activity.
Profit in simple terms is the difference between selling price and cost of
manufacturing product or offering service. Cost can be minimized in two ways by
cutting down the unwanted activities and requirements and improving process.
Capacity utilization is a concept in economics which refers to the extent to which and
enterprise or a nation actually uses its installed productive capacity. Capacity
utilization is a percentage number that represents how much of the economies
productive ability is in use. The capacity utilization is an important, tool, which helps
to predict the productivity of a concern. The study has been conducted for analysing
and interpreting the performance of TCL based on which it can be understand the
profitability of the firm.
Cost volume profit (CVP) analysis is an analytical tool for studying the relationship
between volume, cost, and profits. It shows the relationship among three various
ingredients of profit planning namely, unit sale price, variable cost sales volume, sales
mix and fixed cost. It is an integral part of the profit planning process of a firm.
However, formal profit planning and control involves the use of the budget and other
forecasts, and the CVP analysis provides only an overview of the profit planning
process. Besides it helps to evaluate the purpose and reasonableness of such budgets
and forecasts. Cost volume profit (CVP) analysis expands the use of the information
provided by break-even analysis. A critical part of CVP analysis is the point where
total revenues equal total costs (both fixed and variable costs). At this break-even
point (BEP), a company will experience no income or no loss. This BEP can be an
initial examination that precedes more detailed CVP analysis.
The foundation of a price-volume study is fact that price and demand have a direct
relationship. An increase in price-volume study is to attempt to forecast the elasticity
of demands for each of the main products of a company so as to determine the
optimum size. A break-even analysis is basically an analytical test for the study of
relationship between operating leverage and profits. It is a formal profit planning
approach based upon an established relationship between cost and revenues. It is a
device for determining the point at which sales will cover the total costs. Every
business has a “break-even point “, that is a volume of sales which will produce
neither a net income nor a loss. Because of fixed charges, a company should have
some minimum volume of output before its total costs are covered by total costs
revenue and it can break-even point, the rate of loss declines: beyond
The break-even point the rate of profit on sales accelerates. The profit-volume ratio
is the relationship of contribution to the net sales expressed as a percentage. A ratio
which includes profit should necessarily be related to the level of activity, for profit is
volume sensitive. The margin of profit on sales does not remain constant over a wide
range of operation but varies with the volume of sales. A small change in sales brings
about a big change in profits. This variation takes place because some costs do not
change in proportion to the changes in the level of production.
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Importance of CVP analysis
The CVP analysis is very much useful to management as it provides an insight into
the effects and inter-relationship of factors, which influence the profits of the firm.
The relationship between cost, volume, and profit makes up the profit structure of an
enterprise. Hence the CVP relationship becomes essential for budgeting and profit
planning. As a starting in profit planning, it helps to determine the maximum sales
volume to avoid losses, and the sales volume at which the profit goal of the firm will
be achieved. As an ultimate objective it help management, therefore, uses CVP
analysis to predict and evaluate the implications of its short run decision about fixed
costs, marginal costs, sales volume and selling price for its profit plans on continuous
basis. There exists a close relationship between the cost volume profits. If volume is
increased, the cost per unit will decrease and profit per unit will increase. Thus there
is a direct relationship between volume and cost. This analysis may be applied for
planning, cost control, evaluation of performance and decision making.
The CVP Analysis answers to questions such as,
 What minimum level of sales need to be achieved to avoid losses?

 What should be then sales level to earn a target profit?
 What will be the effect of changes in process, cost and volume on profit?
 What will be the new Break-Even point under changes in price, costs and
volume on sales etc?
 What will the impact of plan expansion on cost volume profit analysis
relationship?
 Which product is the most profitable and which one is the least profit?
Cost volume profit analysis
Cost volume profit (CVP), in managerial economics is a form of cost accounting. It

is a simplified model, useful for elementary instruction and for short-run
decisions.CVP analysis expands the use of information provided by breakeven
analysis. A critical part of CVP analysis is the point where total revenues equal total
costs (both fixed and variable costs). At this break-even point, a company will
experience no income or loss. This break-even point can be an initial examination that
precedes more detailed CVP analysis.CVP analysis employs the same basic
assumptions as in breakeven analysis.
The assumptions underlying CVP analysis are:
 The behaviour of both costs and revenues is linear throughout the relevant
range of activity. (This assumption precludes the concept of volume discounts
on either purchased materials or sales.)
 Costs can be classified accurately as either fixed or variable.
 Changes in activity are the only factors that affect costs.
 All units produced are sold (there is no ending finished goods inventory).
 When a company sells more than one type of product, the sales mix (the ratio
of each product to total sales) will remain constant.
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The components of CVP analysis are:
 Level or volume of activity

 Unit selling prices
 Variable cost per unit
 Total fixed costs
 Sales mix
Assumptions of CVP
CVP assumes the following:
 Constant sales price;

 Constant variable cost per unit;
 Constant total fixed cost;
 Constant sales mix;
 Units sold equal units produced.
These are simplifying, largely linear zing assumptions, which are often implicitly
assumed in elementary discussions of costs and profits. In more advanced treatments
and practice, costs and revenue are non linear and the analysis is more complicated,
but the intuition afforded by linear CVP remains basic and useful.
Concept of Break-even analysis
The break-even analysis is the most widely from of the CVP relationship is
frequently referred to as break-even analysis. The point of activity where the total
revenue equals to the total costs, the study can be called as break-even analysis and
beyond that point, it is the application of CVP relationship. Thus a narrow
interpretation of break-even analysis refers to a system of determining that level of
activity where total revenue equal to the total costs that is the point of zero profit or
zero loss. The broader interpretation denotes a system of analysis that can be used to
determine the probable profit at any level of activity.
Computation of Break-Even Point (BEP)
BEP refers to that volume of sales where the profit or loss is zero or the total sales
is equal to total costs (fixed as well as marginal costs), or the total contribution is
equal to the fixed cost. It is calculated as follows;
Fixed cost
Operating cost ratio = X 100
P V Ratio
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Fixed cost
BEP (in units) = 
Contribution per unit
Angle of Incidence
This is the angle formed at break-even point at which the sales line cuts the total
cost line. This angle indicates rate at which profit are being made. Large angle of
incidence is an indication that profit are being made at a higher rate. On the other
hand small angle indicates a low rate of profit and suggests that variable costs from
the major part of production. A large angle of incidence with high margin safety
indicates the most favourable position of a business and even in the existence of
monopoly conditions.
Assumptions of Break-even Analysis
Break-even analysis can be carried out in two ways:
 Algebraic method
 Graphical method
Both the methods are based on certain assumptions, which are rarely found in
practice. Some of the assumptions are as follows:
 All costs can be classified into fixed and variable costs.

 While variable costs are proportionately with volume, the fixed costs remain
constant.
 Selling price remains constant even through there may be competition or
change in volume of production.
 The number of units produced and sold will be the same so that there is no
operating or losing stock.
 There will be no operating efficiency.
 There is only one product or in the case of many products, product mix
remains unchanged.
Margin of safety
Margin of safety is the difference between the actual sales and the sales at break-
even point. Margin of safety is the excess production over the break-even points
output.
Margin of safety = present sales – break-even sales
If the margin of safety is large, it is an indicator of the strength of a business

because with a substantial reduction in sales or production, profit shall be made. On
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the other hand, if the margin is small, a small reduction in sales or production will be
a serious matter and lead to loss. The margin of safety in the break-even point is nil
because actual sales volume is just equal to the break-even sales.
This margin of safety can be increased by taking the following steps;
 Increase the level of production

 Increase the sale of production
 Reduce the fixed or variable costs or both
 Substitute the existing products by more profitable products
Profit Volume Ratio (PV Ratio)
The ratio shows the relationship between the value of sales and contribution is called
as PV Ratio. A more appropriate term might be the Contribution/Sales ratio. This is
often expressed as a percentage and calculated as follows:
Contribution
Profit Volume Ratio = X 100
Sales
Ratio Analysis
The ratio analysis is one of the most powerful tool in financial analysis. It is the
process of establishing and interpreting various ratios. It is with the help of ratios the
financial statements can be analyzed more clearly and decisions made from such
analysis. A ratio is a simple arithmetical expression of the relationship of one number
to another. According to Account’s Handbook by Wixon, Kell and Bedford, a ratio “is
an expression of the quantitative relationship between two numbers “. Some analysts
also express ratio as a ”rate” or “time”. A financial ratio is the relationship between
two accounting figures expressed mathematically. Ratios provide clues to the
financial position of a concern. These are the pointers or indicators of financial
strength, soundness, poison or weakness of an enterprise. One can draw conclusions
about the exact financial position of a concern with the help of ratios.
Nature of Ratio Analysis
Ratio analysis is a technique of analysis and interpretation of financial statements.

It is the process of establishing and interpreting various ratios in making certain
decisions. The ratios may be used as a symptom like blood pressure, the pulse rate or
the body temperature and their interpretation depends upon the calibre and the
competence of analysts. The following are the four steps involved in the ratio
analysis:
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 Selection of relevant data from the financial statement depending upon the
objective of the analysis.
 Calculation of appropriate data from the above data.
 Comparison of the calculated ratios with the ratios of the same firm in the past.
 Interpretation of the ratios.
Use and significance of Ratio Analysis
The ratios have wide applications mid are of immense use today.
 Managerial uses of ratio analysis

 Utility to shareholders/investors
 Utility to creditors
 Utility to employees
 Utility to Government
 Tax audit requirements
Limitations of Ratio Analysis
 Limited use of a single ratio.

 Lack of adequate standards.
 Inherent limitations of accounting.
 Change of accounting procedure.
 Personal bias.
 Incomparable.
 Absolute figures distortive.
 Price level changes.
 Ratios no substitutes.
Classification of Ratios
1. Statement wise classifications.

2. Classifications according to the nature.
3. Classifications according to importance.
Classifications according to the nature
Liquidity Ratios
These are the ratios which measure the short-term solvency or financial position of
a firm. These ratios are calculated to comment upon the short-term paying capacity of
a concern or the firm’s ability to meet current obligations.
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Leverage Ratios
Leverage ratios show the proportions of debt and equity in financing the firm.
These ratios measure the contribution of financing by owners as compared to
financing by outsiders. The ratios can be further classified as
1. Financial leverage
2. Operating leverage
3. Composite
Leverage Profitability Ratios
The primary objective of the business undertaking is to earn profits. Profit earning
is considered as essential for the survival of business. In the words of Lord Keynes,
“profit is the engine that drives the business enterprise”. Profit is a useful measure of
overall efficiency of a business. Profits to the management are the test of efficiency
and a measurement of control; to owners, a measure of worth of their investment; to
the creditors a margin of safety; to employees a source of fringe benefits; to
government, a measure of tax-paying capacity and the basis of legislative action; to
customers, a hint to demand for a better quality and price cuts and finally to the
country, profits are an index of economic progress. Generally profitability ratios are
calculated either in relation to sales or in relation to investment. The various
profitability ratios are
 Gross profit ratio

 Net profit ratio
 Operating ratio, Expenses ratio, Operating profit ratio, cash profit ratio
Trend Analysis
The financial statements may be analyzed by computing trends of series of

information. This method determines the direction upwards or downwards and
involves the computation of the percentage relationship that each statement item bears
to the same item in base year. Trend signifies tendency, therefore review and appraisal
of tendency in accounting variables is simply called as trend analysis. Trend ratios are
also an important tool of horizontal financial analysis, the ratios of different for
various periods are calculated and then comparison is made. An analysis of the ratios
over the past few years may well suggest the trend direction in which the concern
going upward or downward. The method of trend percentage is a useful analytical
device for the management since by substituting percentage for large amounts; the
brevity and readability are achieved.
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Uses of Trend Analysis
 It helps in easily knowing the direction of movement of activity of the

business, that is whether upward or downward.
 Trend analysis helpful in forecasting and budgeting.
 It helps in comparing one period with one another.
 It makes data brief and easily understandable.
Procedure for Calculating Trend
1. One year is taken as the base year. Generally, the first or the last is taken as
base year.
2. The figures of base year are taken as 100.
3. Trend percentage is calculated in relation to base year. If a figure in other year
is less than the figure in base year, the trend percentage will be less than 100
and it will be more than 100 if figure is more than base year figure. Each
year’s figure is divided by the base year’s figure.
4. The interpretation of trend analysis involves a cautious study. An increase of
20% in current assets may be trend favourable. If this increasing current asset
is accompanied by an equivalent in current liabilities then this increase will be
unsatisfactory.
5. The base period should be carefully selected the base period should be a
normal period. The price level changes in subsequent years may reduce the
utility of trend ratios. If the figure of the base period is very small, then the
ratios calculated on the basis may not give a true idea about the financial data.
Limitations
 Trend analysis becomes on comparable if the same accounting practices are

not practiced.
 Trend analysis does not take into considerations the price level changes.
 Trend analysis always is read with absolute data on which they are based,
otherwise the conclusions may be misleading.
Capacity Utilization
Capacity utilization is a concept in economics which refers to the extent to which

an enterprise or a nation actually uses its installed productive capacity. Thus, it refers
to the relationship between actual output that is produced with the installed equipment
and the potential output which could be produced with it, if capacity was fully used.
Capacity utilization is a percentage number that represents how much of the

economies productive ability is in use. It is released in a total and manufacturing
series. Thus number is truly important for several reasons. First, it is taken as a rule of
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thumb that a capacity utilization number above 82% is beginning to become

inflationary. A second reason and the key usage of this little tool are help to predict
productivity. One important key to economic Indicator is timeliness. Because some
numbers like productivity are released quarterly it is effective for policy makers to
look to accurate predictors. It is then important to keep an eye toward capacity
utilization, for when looked at in conjunction with industrial production; it is possible
to derive a relatively accurate estimate of what the next quarter’s productivity number
will be. This makes sense, because it is seen that industrial production increase
without an increase in the percentage of the economy employed, there will have to be
gains in productivity.
The capacity utilization can be calculated by the equation,
Actual Production
Capacity Utilization =X 100
Installed Capacity
Through this equation we can calculate the capacity utilization percentage and we
got an idea about how much effectively an organization utilizes its capacity. The
organization utilizes its capacity. The organization has to utilize its maximum
capacity in order to minimize its operating cost and to earn more profit.The capacity
utilization of TCL focuses on the capacity utilization of the ultimate products such as
white cement and cement paint.
Need of the problem
The CVP analysis is very much useful to management as it provides an insight into
the effects and inter-relationship of factors, which influence the profits of the firm.
The relationship between cost, volume and profit makes up the profit structure of an
enterprise. Hence, the CVP relationship becomes essential for budgeting and profit
planning. As a starting in profit planning, it helps to determine the maximum sales
volume to avoid losses, and the sales volume at which the profit goal of the firm will
achieved. As an ultimate objectives it helps management, therefore, uses CVP
analysis to predict and evaluate the implications of its short run decisions about fixed
cost, marginal cost, sales volume and selling price for its profit plans on a continuous
basis. There exists a close relationship between cost volume profits. If volume is
increased, the cost per unit will decrease and profit per unit increase. Thus there is a
direct relationship between volume and profit but inverse relation between the volume
and profit but inverse relation between the volume and cost. This analysis may be
applied for profit planning, cost control, evaluation of performance and decision
making.
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Background of the problem
The study was done at TCL Kottayam which is the most profitable public sector
company in Kerala. The study is concentrating on the Cost Volume Profit Analysis
and Capacity Utilization of TCL, which provides an insight into the air rent aspects of
the costs, volume and profit and the capacity utilization of TCL. Cost is the most
crucial elements of a concern. The management has to make adequate measures in
order to control the cost. Profit is the driving force of a concern. Profit is yard stick to
measure the performance of the company. In theoretical view the cost and profit
shows an indirect relationship. That is when cost increases profit decreases and when
cost decreases profit increases. In the case of TCL the cost and profit shows a direct
relationship. The cost shows an increasing trend from the past and profit also shows
an increasing trend. The study concentrates on the reason behind the cost profit direct
relationship. The capacity utilization is an important aspect of a concern. In order to
meet the increase in demand of a concern the company has to utilize its capacity
effectively. The study concentrates on whether there is any increase or decrease on the
capacity utilization of a concern.
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1.2 INDUSTRY PROFILE
History of Cement
Cement and concrete might be synonymous as household terms but are by nature
different. Cement and ultra fine gray powder binds sand and rocks into a mass or
matrix of concrete. Indeed cement is the key ingredient of concrete. Semantics aside,
concrete is the signature material in driveways, patios, basements and a host of other
household items. It is also the world’s most widely used building material. Concrete’s
annual global production hovers around 5 billion cubic yards which is a volume
approximated by yearly cement production levels of about 1.25 billion tons.
The Indian cement industry is the second largest in the world after China’s. In
terms of quality, productivity and efficiency, it compares with the best anywhere. It is
almost entirely home growth, built indigenously and using locally sourced inputs.
Barring one or two exceptional years, the performance in the last two decades has
been quite consistent and commendable in terms of modernization, expansion, growth
in production, and improvements in productivity and cost efficiency.
The first cement industry was setup in 1904 at Coriander in Gujarat. In 1925, two
factories were again established in Kaini in Madhya Pradesh and Lahars in Rajasthan.
The cement Manufactures Association of India came in to being in 1927. At present,
the industry has an installed capacity of over 137 million tons from 124 plants. Most
of this capacity is modern and based on the energy efficient dry process technology.
There are as many as 64 plants of a million tons or more capacity.
The Indian cement industry plays a key role in the national economy, generating
substantial revenue for state and central governments. It is the third highest
contributor in terms of excise duty of over Rs.3500 cores a year. Sales tax had yield
around Rs.3200 cores to state governments. The industry employs a workforce of over
1.5 lakhs persons and supports a further compliment of 12 lakhs people engaged
indirectly. As far as the structure of industry is concerned nearly 94% of the capacity
is in the large-scale sector while mini cement plants constitute only 6% of the
capacity. The cement production and dispatches grew by almost 10% in 2002-2003
when few sectors of the economy could avoid stagnation. The industry crossed the
100 million-tone. Mark for the first time last year with production of 102.4 million
tonnes. The outlook for the current year is also favourable. In fact, the industry can
expect to see good years ahead in the longer term. Although the industry is capable of
meeting its own challenges, it still needs assistance from the government to overcome
some of its external constraints.
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1.3 COMPANY PROFILE
Nestling amidst the lush green paddy fields, under a canopy of majestic coconut
trees, beside the intricate patterns woven by canals, is Travancore Cements Ltd, - the
house of White Cement. Bustling with activity against the sylvan landscape, it is a
place where Art and Nature merge and mingle.
HISTORY OF THE COMPANY
The Travancore Cements Limited was incorporated in the year 1946. The year of
commencement of business was also 1946. The company started manufacture of Grey
Cement in the year 1949. The licensed capacity of the plant was 50,800 tons of
Cement per annum.
The master mind behind setting up of this factory was that of late Sir.C.P
Ramaswamy Iyer, then Dewan of Travancore, who had realized the vital role of
cement in the industrial development of Kerala. The company was promoted by
M/s.Essal Ltd, Bombay and the Technology tie up was with M/s, F.L. Smidth&Co,
Denmark. During 1959, the company diversified into the production of white Portland
cement. The installed capacity for the production of White Cement is 30000 tonnes
per annum. Till 1974, the Company was manufacturing both White Cement and Grey
Cement in the same plant, distributing the production of the two, over certain periods
in a year. Since 1974, the company manufactured White Cement alone, as the demand
for White Cement went up.During the last 60 years of its existence, TCL has
diversified its activities to related areas by adding ''Vembanad' brand ordinary
portland cement, 'Super Shelcem' brand Cement Paint and 'Shelprime' dry Cement
Primer besides 'Sheltex' Acrylic Emulsion Paint for interiors and exteriors to its
products range.
The Travancore Cements Limited is the only manufacturer, perhaps in the whole
world, producing White Cement from a raw material other than conventional
limestone. The main raw material of TCL is lime shell, which is dredged out of
Vembanad Lake, one of the backwaters of Kerala. TCL is having two cutter suction
dredgers for dredging lime shell from Vembanad Lake. Lime shell is the one of the
purest sources of calcium carbonate available for cement manufacturer. As it does not
contain any magnesium oxide, the white cement made out of lime shell is highly
durable. The Company has taken the ISO 9002 Certification during the year 2000.
During the year 2003 it switched over to ISO 9001:2000 certification.
Following are the milestones in the history of TCL.
 Started production of Grey Cement in August 1949.

 Started production White Cement in 1959
 Grey Cement production stopped in 1976.
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 Diversified into Cement Paint production in 1977.

 Celebrated Silver Jubilee in 1972.
 Became a Government Company in April 1989.
 Celebrated Golden Jubilee in 1997.
 Dry Cement Primer 'Shelprime' production started in January 2000.
 Acrylic Emulsion Paint for exterior & Interior. Sheltex launched in April
2000.
 Divercified into grey cement production from bought out clinker in 2000.
 ISO 9001:2000 certification received for the Company during December
2003.
TCL had history of continuous profits.The profit before tax(PBT) during 1999-
2000 was rupees 1.95 crores.The company hadpaid a dividend of 50% to its
shareholders during the subsequent years continuously .The Cement Plant of TCL is
situated on the bank of Kodoor River and on the side of the State Highway. M.C.
Road, 4 Km away from the town of Kottayam in Kerala.The typical location of the
plant makes its accessible by road as well by road.
Objective of the company
The main objective of the company is engaged in the production of Vembanad

White Portland cement. It is the first and the foremost product of TCL, which is the
best white cement available in the country in its quality. Now the company is also
engaged in the production of cement paint known as ‘Super Shelcem’, which is
available in a wide range of colour of 24 shades.
Vision of TCL
The vision of Travancore cement LTD,
“To be a leader in the Indian cement industry and providing customer delight and
enhancing shareholders values”
Mission of Travancore cement LTD
Having a unique role in the heavy industry sector of the country,Travancore cement
LTD is committed for catering the society towards the specific need expected by
producing quality product at a customer frontally price while keeping sustained
growth of the organization and total growth of the society.
 To enhance the shareholders value.

 Employee satisfaction
 Revenue growth.
 Strength supply chain management.
 High volume, high market share.
 Cost effectiveness in all segments.
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 High quality technology.

 Superior products.
 Consistent production through harmonious industrial relation.
 Competitive advantage.
 To widen the distribution network.
 Strengthen the field service organisation.
Promoters of TCL
The company was run under the private management until 1974. Subsequently the
government of Kerala took over the management. Now the government is holding
50.13% of the equity share capital. The Pyramid group of company is holding 25% of
shares and the remaining shares are held by general public.
Departments in TCL
The first task in designing an organisational structure is the identification of

activities and to group them properly. The processes of grouping the activities
commonly known as departmentation. In order to achieve co-ordination in the
company matters, departmentation is essential. Departmentation is the process by
which activities of function of the enterprise are grouped homogenously into different
group. A department is controlled by a manager for the performance of the activities.
The departments show the horizontal difference of an organization. The main
departments are,
 Personnel department.
 Finance department.
 Purchase department.
 Production department.
 Marketing & Sales department.
 General store department.
 Electrical department.
 Quality control department.
 Packing department.
 Security department.
 Cement paint department.
 Time office department.
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2. REVIEW OF LITERATURE.
1. Adar, Z., A Barnea and B. Lev. 1977. Cost-volume profit analysis. The
Accounting & Review (January): 137-149.
Cost-Volume-Profit (CV P) analysis is a managerial accounting technique that
is concerned with the effect of sales volume and product costs on operating profit
of a business. It deals with how operating profit is affected by changes in variable
costs, fixed costs, selling price per unit and the sales mix of two or more different
products.
2. Anderson, L. K. 1975.Contribution margin. Management Accounting (July):

30-32.
Contribution Margin (CM) is equal to the difference between total sales (S) and
total variable cost or, in other words, it is the amount by which sales exceed total
variable cost (TVC). In order to make the profit the contribution margin of a
business must exceed its total fixed costs.
3. Barber, R. J. Jr. 1951.cost volume profit N.A.C.A. Bulletin (May): 1040-47.

Managers need to estimate future revenue, costs, and profits to help them plan
and monitor operations. They use cost-volume-profit (CVP) analysis to identify
the levels of operating activity needed to avoid losses, achieve targeted profits,
plan future operations, and monitor organizational performance. Managers also
analyze operational risk as they choose an appropriate cost structure.
4. Brannon. L and A. McCahe, “Time-Restricted Sales Appeals,” Cornell Hote

land Restaurant Administration Quarterly, August/September 2001, pp. 47-
53; and K. Fitzgerald, “Toys Face Scrooge-Like Christmas,” Advertising
Age, September 19, 1988,pp. 30-32.
Cost-volume-profit (CVP) analysis
Cost-volume-profit (CVP) analysis is a technique that examines changes in

profits in response to changes in sales volumes, costs, and prices.
17
Contribution margin
The Contribution margin is total revenue minus total variable costs. Similarly,
the contribution margin per unit is the selling price per unit minus the variable
cost per unit. Both contribution margin and contribution margin per unit are
valuable tools when considering the effects of volume on profit. Contribution
margin per unit tells us how much revenue from each unit sold can be applied
toward fixed costs, then the contribution margin per unit from all remaining sales
becomes profit.
CVP for Multiple product analysis
Many organizations sell a combination of different products or services. The

sales mix is the proportion of different products or services that an organization
sells. For example, we learned in the opening vignette that Cole co sold both
Adam computers and Cabbage patch dolls. To use CVP in the case of multiple
products or services, we assume a constant sales mix in addition to the other CVP
assumptions. Assuming a constant sales mix allows CVP computations to be
performed using combined unit or revenue data for an organization as a whole.
Later in the chapter we will learn how to perform detailed computations for the
sales mix.
Break-even point
Managers often want to know the level of activity required to breakeven. A

CVP analysis can be used to determine the breakeven point, or level of operating
activity at which revenues cover all fixed and variable costs, resulting in zero
profit. We can calculate the breakeven point from any of the preceding CVP
formulas, setting profit to zero. Depending on which formula we use, we calculate
the breakeven point in either number of units or in total revenues.
Cost-volume-profit graph
A cost-volume-profit graph (CVP graph) shows the relationship between total

revenues and total costs; it illustrates how an organization’s profits are expected to
change under different volumes of activity planning, monitoring, and motivating
with CVP.
CVP
CVP analyses are useful for planning and monitoring operations and for
motivating employee performance. If the owner of the Spotted Cow Creamery
obtains similar information for the other outlets, results can be compared to
identify differences in revenue levels and cost functions.
18
Quality of CVP Technique
To help managers make better decisions, accountants evaluate the quality of the techniques
they use, given the organizational setting and decisions to be made. This evaluation helps
determine when techniques such as CVP analysis are likely to be an appropriate tool and how
much reliance to place on the results. The quality of information generated from an analysis
technique is higher if the economic setting is consistent with the technique’s underlying
assumptions.
Margin of safety
The margin of safety is the excess of an organization’s expected future sales (in either
revenue or units) above the breakeven point. The margin of safety indicates the amount by
which sales could drop before profits reach the breakeven point.
Degree of operating leverage
The degree of operating leverage is the extent to which the cost function is made up of
fixed costs. Organizations with high operating leverage incur more risk of loss when sales
decline. Conversely, when operating leverage is high an increase in sales (once fixed costs re
covered) contributes quickly to profit.
5. Balakoteswara Rao (1997) cost accounting.
Cost volume profit analysis defined is a technique of study of the relation between
cost and profit under conditions of changing volume. It is a technique of analysis
which relates cost, volume and profit under conditions of change.
Margin of safety
This is defined as, the excess of capacity over and above the level at which a
business break-even.
Break-even point
This is defined as, that level of output at which neither profit nor is loss made. This
is the point at which the contribution is just sufficient to meet the fixed costs. So, at
the break-even point, of the business exactly equal its expenses.
Contribution
This is defined as, the difference between the sales and marginal cost of sales.
Marginal cost of sales means the variable costs of goods sold. So, the contribution is
the difference between sales and variable costs of goods sold.
6. Dasgupta . D (1977), Studies In Cost Accounting Cost Estimation.
Cost estimation defines the process of pre-determining the cost product or services.
These costs are prepared in advance of production and precede the operation.
19
Estimated costs are definitely future costs and are based on the average of the past
actual figures adjusted for anticipated changes in future.
Manufacturing overhead
It defines, all the indirect expenses incurred in connection with manufacturing

operations. In other words, it is the indirect cost incurred for operating the production
division of a concern. It consists of indirect material, indirect labour and indirect
expenses incurred in production article.
Administration overhead
It is defined, the indirect expenditure incurred in formulation policies, planning and

controlling the functions, directing and motivating the personnel of an organisation in
the attainment of its objectives. It includes all the expenses incurred by the
administrative office.
Cost volume profit Relation.
It defined, profit of an under taking depends upon a large number of factors, the
most important of which are cost of manufacture, volume of sales and selling prices of
products sold. The three factors of cost, volume, and profit are interconnected and
dependent on one another.
Break-even profit
It defines the point where total cost is equal to revenue. It is a point of no profits no
loss.
The point is also known as the volume of operations where profit begins. This is also
the minimum point of production when total costs are recover.
Margin of safety
Margin of safety is the difference between actual sales and the sales at the break-even
point.
 Cost estimation.
Cost estimation defines the process of pre-determining the cost product or services.
These costs are prepared in advance of production and precede the operation.
Estimated costs are definitely future costs and are based on the average of the past
actual figures adjusted for anticipated changes in future.
Manufacturing Overhead
It defines all the indirect in connection with manufacturing operations. In other

words, it is the indirect cost incurred for operating the production division of a
20
concern. It consists of indirect material, indirect labour and indirect expenses incurred
in production article.
Administration Overhead
It is defined, the indirect expenditure incurred in formulation policies, planning and

controlling the functions, directing and motivating the personnel of an organisation in
the attainment of its objectives. It includes all the expenses incurred by the
administrative office.
Cost volume profit Relation.
It defined. Profit of an under taking depends upon a large number of factors, the
most important of which are cost of manufacture, volume of sales and selling prices of
products sold. The three factors of cost, volume, and profit are interconnected and
dependent on one another.
Break-even profit
It defines the point where total cost is equal to revenue. It is a point of no profits no
loss. The point is also known as the volume of operations where profit begins. This is
also the minimum point of production when total costs are recovered.
Margin of safety
Margin of safety is the difference between actual sales and the sales at the break-
even point.
7. Horngren Al., 1994.
Cost volume profit analysis is one of the most hallowed, and yet one of the
simplest, analytical tool in management accounting. In a general sense, it provides as
weeping financial overview of the planning process.
That overview allows managers to examine the possible impacts of wide range of
strategic decisions. These decisions can include such crucial areas as pricing policies,
product mixes, market expansion or contractions, outsourcing contracts, idle plant
usage, discretionary expenses planning and a variety of other important considerations
in the planning process. Given the board range of context in which cost volume profit
can bemuse.
The basic simplicity of cost volume profit is quite remarkable. Armed with just
three inputs of data – sales price, variable cost per unit, and fixed cost – a managerial
analyst can evaluate the effect of decision that potentially alter the basic nature of a
firm.
21
8. Prof. Haridas P, Dr. Johnson, Dr. K G C Nair (2005) Costing Methods and
Technique.
Cost-volume –profit (CVP) relationship is an important tools used for profit

planning of an organisation. It is an immense utility to management as it assists in
profit planning, cost control and decision making.
Break-even Analysis
Break-even analysis is a method of cost-volume-profit analysis widely used in

practice.
Break-even analysis is used in two senses – in narrow sense and in broad sense. In
narrow sense, it refers to a technique of determining that level of operation where
total revenues equal to the total expenses i.e., the point of no profit no loss. In its
broad sense, break-even analysis refers to the study of relationship of cost-volume
and profit at different levels of activities.
Margin of safety
Margin of safety defined as the excess of sales over break-even sales. It is the
margin or range at which the concern is safe in the point of view of profit. The
length or range of margin of safety measures the degree of profitability of an
organisation. The higher is the margin of safety; the most is the profitability of the
concern. A low margin indicates low profitability.
9. Dr. Nair. K G C, Dr. Jayan. (2006) Higher Accounting.
It defines a ratio as” simply on number expressed in terms of another “. Ratio

analysis is the most important method of financial analysis and useful technique to
heck upon the efficiency with which working capital is being used in the
enterprises.
10. Potti L.R (2006) Statistics Correlation.
Correlation is defined as “the tendency of two or more groups or series of items

to vary Together directly or inversely”.
Two variables are said to be correlated if the change in one variable results in a
corresponding change in other variable. That is, when two variables move
together, we say they are correlated.
22
11. Tuttle. A.M defines correlation.
Tuttle A M defines correlation” is an analysis of the association between two or

more variables “.
Correlation can be either positive or negative. When the values of two variables
move in the same direction, correlation is said to be positive. If on the other hand,
the value of two variables move in opposite directions so that an increase in the
value of one variable, results into a decrease in the value of other variable the
correlation said to be negative.
23
3. RESEARCH METHODOLOGY
3.1 Significance of the study

The study focuses on to find out the profitability of the business by considering the
cost and volume of production. It provides a chance to understand the practical
constraints faced by the manager while putting the theory in practice. It also focuses
on the capacity utilization of company in the production of white cement and cement
paint because these are the important products of company and it provides a picture
about the performance of the company.
3.2 Aim and Objectives of the study

Primary objective
 The primary objective of the study is to co-relate the cost, volume, profit and
sales of TCL.
Secondary objectives
 To find out the volume of sales and profit of TCL.

 To find out how much sales is required to reach BEP.
 To find out the cost of production.
 To study the capacity utilization of TCL.
 To know the relation between cost, profit, and sales of TCL.
3.3 Research design

The study is basically empirical in nature. The study was undertaken for a period of
two months from 12th April to the 12th June. The aim is to study the cost volume
profile analysis of Travancore cements LTD. The study is conducting on the basis of 5
year balance sheet, annual report and journals of TCL.
3.4 Methodology of the study

Research comprise defining and re-defining problems , formulating hypothesis or
suggesting solution, collection, organising and evaluating data at last careful testing
the conclusion determine whether fit the formulated hypothesis.
24
Primary Data
The primary data needed for the study is obtained by discussions with managers
and employees in the finance department.
Secondary Data
The secondary data is obtained through annual report, company journals and
website.
Tools for data collection
 Contribution margin concept.

 Breakeven analysis.
 Profit volume analysis.
 Margin of safety.
 Trend analysis.
 Ratio analysis.
 Correlation.
Cost of goods sold + operating expenses

 Operating Cost Ratio =  X 100
Net sales
Operating expenses
 Operating Expenses Ratio =  X 100
Net sales
Manufacturing Cost
 Manufacturing Cost Ratio =  X 100
Sales
Employee Cost
 Employee Cost Ratio =  X 100
Sales
Administration Cost
 Administration Cost Ratio =  X100
Sales
Depreciation
 Depreciation cost ratio =  X 100
Sales
25
Cash Profit
 Cash Profit Ratio =  X 100
Sales
Net Profit
 Net Profit Ratio =  X 100
Net Sales
Gross Profit
 Gross Profit Ratio =  X 100
Sales
 Contribution = Sales – Variable Cost
Contribution
 P V Ratio =  X 100
Sales
Total fixed cost

 BEP = 
PV Ratio
Total fixed cost

BEP =  X 100
Sales - Variable cost
Total fixed cost

BEP = 
Contribution Sales
Margin of Safety
 Margin of safety ratio =  X 100
Sales
Contribution
 Degree of Operating Leverage =  X 100
EBIT
𝐍 ∑ 𝐱𝐲−∑ 𝐱 ∑ 𝐲
 Correlation ( 𝐫) =
√𝐍 ∑ 𝐱𝟐 −(∑ 𝐱)𝟐 √𝐍 ∑ 𝐲𝟐 −(∑ 𝐲)𝟐
Actual production
26
 Capacity utilization =  X 100

Installed capacity
3.5 Scope of the study

The scope of the study are listed below,
 The study is based on the white cement and cement paint of Travancore
cements LTD.
 The study focuses on the variations in cost, volume, and profit of Travancore
cements LTD.
 The result of the study based on the last five year balance sheet, annual report
and journals of Travancore cements LTD.
 The study provides a picture about the performance of the Travancore cements
LTD.
3.6 Limitations of the study

 The financial data required for the study has been obtained from the secondary
data or sources only via annual reports and the study is limited to available
accounts and the books of account which were produced on demand.
 Ratios are marked out on the basis of money value only. They may be or may
not be the real value.
 The study is limited to an analysis of 5 years only.
 The limitation of ratio analysis and break even analysis are also applicable to
this study.
 Technical aspect of the production process is not considered for the analysis.
 Study period is limited to 60 days.
27
2. DATA ANALYSIS AND INTERPRETATION
Table 2.1 Analysis on Operating Cost Ratio 2006-11
Year Cost of goods Operating Net sales Operating

sold Expenses Cost Ratio
2006-07 3125.043 723.75 2374.09 162.12
2007-08 2805.09 766.66 2684.55 133.04
2008-09 3035.66 967.40 3275.85 122.20
2009-10 3198.37 938.56 3441.67 120.20
2010-11 3448.38 993.97 3783.86 117.40
Sources: secondary data
Interpretation
The table shows the operating expenses cost of goods operating sales, sales an
operation ratio of the past five years.
 The maximum cost of goods sold was present during 2010-11(3448.38).

 The minimum cost of goods sold was present during 2007-08(2805.09), and
average was 3122.7.
 The maximum operating expenses was present during 2010-11(993.97).
 The minimum operating expenses was present during 2006-07(723.75), and
average was 878.07.
 The maximum net sale was present during 2010-11(3783.86).
 The minimum net sale was present during 2006-07(2374.09), and average was
3111.95.
 The maximum operating cost ratio was present during 2006-07(162.12).
 The minimum operating cost ratio was present during 2010-11(117.40), and
average was 130.99.
The table shows a decreasing trend of operating cost ratio during the last five years.
Because the effect of an increase in the net sales. During the period the net sales and
28
operating expenses shows an increasing trend but the operating cost ratio showing a
decreasing trend.
Graph 2.1 Analyses on Operating Cost Ratio 2006-11
Operating Cost Ratio

180
162.12
160
140 133.04
122.2 120.2 117.4
120
100
operating cost ratio
80
60
40
20
0
2006-07 2007-08 2008-09 2009-10 2010-11
29
Table 2.2 Analysis on Operating Expenses Ratio 2006-11
Year Operating Net Sales Operating

Expenses Expenses
Ratio
2006-07 723.75 2374.09 30.49
2007-08 766.66 2684.55 28.56

2008-09 967.40 3275.85 29.53
2009-10 938.56 3441.67 27.27

2010-11 993.97 3783.86 26.27
Interpretation
The table shows the operating expenses, sales and operating expenses ratio over
period of five years.
 The maximum operating expenses was present during 2010-11(993.97).

 The minimum operating expenses was present during 2006-07(723.75), and
average was 878.7.
 The minimum net sale was present during 2006-08(2374.09), and average was
3111.95.
 The maximum operating expenses ratio was present during 2006-07(30.49).
 The minimum operating expenses ratio was present during 2010-11(26.27),
and average was 28.42.
The table shows a decreasing trend during the last five years. Because the effect of
an increase in the net sales. During the period the net sales and operating expenses
shows an increasing trend but the operating expenses ratio showing a decreasing
trend.
30
Graph 2.2 Analyses on Operating Expenses Ratio 2006-11
Operating Expenses Ratio

31
30.49
30
29.53
29 28.56
28
27.27
operating expenses ratio
27
26.27
26
25
24
2006-07 2007-08 2008-09 2009-10 2010-11
31
Table 2.3 Analysis on Manufacturing Cost Ratio 2006-11
Year Manufacturing Sales Manufacturing

Cost Cost
Ratio
2006-07 1786.46 2374.09 75.25
2007-08 1935.67 2684.55 72.10
2008-09 2339.09 3275.85 71.40
2009-10 2284.57 3441.67 66.38
2010-11 2502.97 3783.86 66.15
Interpretation
The table shows the manufacturing cost, sales and manufacturing cost ratio over
period of five years.
 The maximum manufacturing cost was present during 2010-11(2502.97).

 The minimum manufacturing cost was present during 2006-07(1786.46), and
average was 2169.8.
 The maximum sale was present during 2010-11(3783.86).
 The minimum sale was present during 2006-07(2374.09), and average was
3111.95.
 The maximum manufacturing cost ratio was present during 2006-07(30.49).
 The minimum manufacturing cost ratio was present during 2010-11(26.27),
The table shows a decreasing trend during the last five years. Because the effect of
an increase in the net sales. During the period the sales and manufacturing cost shows
an increasing trend but the manufacturing cost ratio showing a decreasing trend.
32
Graph 2.3 Analyses on Manufacturing Cost Ratio 2006-11
Manufacturing Cost Ratio

76 75.25
74
72.1
72 71.4
70
68
manufacturing cost ratio
66.38 66.15
66
64
62
60
2006-07 2007-08 2008-09 2009-10 2010-11
33
Table 2.4 Analysis on Employees Cost Ratio 2006-11
Year Employees Sales Employees

Cost Cost Ratio
2006-07 575.05 2374.09 24.22
2007-08 567.13 2684.55 21.13
2008-09 617.84 3275.85 18.86
2009-10 604.31 3441.67 17.56
2010-11 611.77 3783.86 16.17
Interpretation
The table shows the employees cost, sales, and employee cost ratio over the past
five years. It shows the employees cost will be decreasing in the every year.
 The maximum employees cost was present during 2010-11(611.77).

 The minimum employee cost was present during 2006-07(575.05), and
average was 595.22.
3111.95.
 The maximum employees cost ratio was present during 2006-07(24.22).
 The minimum employees cost ratio was present during 2010-11(16.17), and
average was 19.6.
The table shows a decreasing trend of employee cost ratio during the last five years.
During this period the sales and employee cost shows an increasing trend but the
employee cost ratio showing a decreasing trend because of the effect of increasing the
sales.
34
Graph 2.4 Analyses on Employees Cost Ratio 2006-11
Employees Cost Ratio

30
25 24.22
21.13
20 18.86
17.56
16.17
15
employees cost ratio
10
0
2006-07 2007-08 2008-09 2009-10 2010-11
35
Table 2.5 Analysis on Administration Cost Ratio 2006-11
Year Administration Sales Administration

Cost Cost Ratio
2006-07 616.89 2374.09 25.98
2007-08 645.49 2684.55 24.05
2008-09 782.94 3275.85 23.90
2009-10 768.57 3441.67 22.33
2010-11 808.61 3783.86 21.73
Interpretation
The table shows the administration cost, sales, and administration cost ratio over
the past five years. It shows the administration cost ratio will be decreasing in the
every year.
 The maximum administration cost was present during 2010-11(808.61).

 The minimum administration cost was present during 2006-07(618.89), and
average was 724.5.
3111.95.
 The maximum administration cost ratio was present during 2006-07(25.98).
 The minimum administration cost ratio was present during 2010-111(21.73),
The table shows a decreasing trend of administration cost ratio during the last five
years. During this period the sales and administration cost shows an increasing trend
but the administration cost ratio showing a decreasing trend because of the effect of
increasing the sales.
36
Graph 2.5 Analyses on Administration Cost 2006-11
Administration Cost
27
25.98
26
25
24.05 23.9
24
23
22.33 administration cost
22 21.73
21
20
19
2006-07 2007-08 2008-09 2009-10 2010-11
37
Table 2.6 Analysis on Depreciation Cost Ratio 2006-11
Year Depreciation Sales Depreciation

Cost Ratio
2006-07 11.28 2374.09 0.48
2007-08 10.63 2684.55 0.40

2008-09 10.42 3275.85 0.38
2009-10 8.48 3441.67 0.25
2010-11 7.2 3783.86 0.19
Interpretation
The table shows the depreciation, sales, and depreciation cost ratio over the past
five years. It shows the depreciation and depreciation cost ratio will be decreasing in
this period.
 The maximum depreciation was present during 2006-07(11.28).

 The minimum depreciation was present during 2010-11(7.2),and average was
9.6.
 The minimum sale was present during 2006-07(2374.09), and average sale
was 3111.95.
 The maximum depreciation cost ratio was present during 2006-07(0.48).
 The minimum depreciation cost ratio was present during 2010-11(0.19), and
average was 0.34.
The table shows a decreasing trend of depreciation and depreciation cost ratio
during the last five years. During this period the sales shows an increasing trend.
38
Graph 2.6 Analyses on Depreciation Cost Ratio 2006-11
depreciation cost ratio

0.6
0.5 0.48
0.4
0.4 0.38
0.3
0.25 depreciation cost ratio
0.19
0.2
0.1
0
2006-07 2007-08 2008-09 2009-10 2010-11
39
Table 2.7 Analyses on Cash Profit Ratio 2006-11
Year Net Net Depreciatio Cash Cash

Sales Profit n Profit Profit
Ratio
2006-07 2374.09 -84.28 11.28 -73 -3.07
2007-08 2684.55 10.13 10.64 20.77 0.77
2008-09 3275.85 142.96 10.43 153.39 4.68

2009-10 3441.67 253.87 8.48 262.35 7.62
2010-11 3783.86 379.76 7.26 387.02 10.22
Interpretation
The table shows the net sales, net profit, and depreciation, cash profit and cash
profit ratio over a period of five years. The cash profit ratio increasing is good sign for
the company.

 The minimum net ale was present during 2006-07(2374.09), and average was
3111.95.
 The maximum cash profit was present during 2010-11(387.02).
 The minimum cash profit was present during 2006-07(-73), and average was
150.1.
 The maximum cash profit ratio was present during 2010-11(10.22).
 The minimum cash profit ratio was present during 2006-07(-3.07), and
average was 4.04.
The table shows the increase in net sales, net profit, cash profit and cash profit ratio
over a period of five years, and the depreciation was decreasing year by year so this is
favourable condition to the company.
40
Graph 2.7 Analyses on Cash Profit Ratio 2006-11
Cash Profit Ratio

12
10.22
10
8 7.62
6
4.68
4 cash profit ratio
2
0.77
0
2006-07 2007-08 2008-09 2009-10 2010-11
-2
-4 -3.07
41
Table 2.8 Analyses on Net Profit Ratio 2006-11
Year Net Profit Net Sales Net Profit

Ratio
2006-07 -84.28 2374.09 -3.55
2007-08 10.13 2684.55 0.38
2008-09 142.96 3275.85 4.36
2009-10 253.87 3441.67 7.38
2010-11 379.75 3783.856 10.03
Interpretation
The table shows net profit, net sales, and net profit ratio over the last five year.
 The maximum net profit was present during 2010-11(379.86).

 The minimum net profit was present during 2006-07(-84.28), and average was
140.5.
3111.95.
 The maximum net profit ratio was present during 2010-11(10.03).
 The minimum net profit ratio was present during 2006-07(-3.55), and average
was 3.72.
The table shows the increasing trend in the net profit ratio in the last four year, in
2006-07 period it shows a negative sign after the period the net profit ratio
continuously increasing.
42
Graph 2.8 Analyses on Net Profit Ratio 2006-11
Net Profit Ratio

12
10.03
10
8 7.38
6
4.36
4
net profit ratio
2
0.38
0
2006-07 2007-08 2008-09 2009-10 2010-11
-2
-4 -3.55
-6
43
Table 2.9 Analysis on Gross Profit Ratio 2006-11
Year Gross Profit Net Sales Gross Profit Ratio
2006-07 585.23 2374.09 24.65

2007-08 646.12 2684.55 24.06
2008-09 1150.07 3275.85 35.11
2009-10 922.20 3441.67 26.79
2010-11 1144.08 3783.856 30.23
Interpretation
The table shows the net sales, gross profit, and gross profit ratio over a period of
five years 2007-11. In this period the gross profit ratio having lack of stability in
growth it represents increase in some years and also showing decrease in some years.
 The maximum gross profit was present during 2008-09(1150.07).

 The minimum gross profit was present during 2006-07(585.23), and average
was889.5.
3111.95.
 The maximum gross profit ratio was present during 2008-09(35.11).
 The minimum gross profit ratio was present during 2007-08(24.06), and
average was 28.17.
The gross profit ratio having lack of continuous improvement sometimes it shows
increase sometimes shows decrease. The highest rate of gross profit shows in 2008-
09.
44
Graph 2.9 Analyses on Gross Profit Ratio 2006-11
Gross Profit Ratio

40
35.11
35
30.23
30
26.79
24.65 24.06
25
20
gross profit ratio
15
10
0
2006-07 2007-08 2008-09 2009-10 2010-11
45
Table 2.10 Analysis on Contribution 2006-11
Year Sales Variable Contribution

Cost
2006-07 2374.09 166.99 2207.1
2007-08 2684.55 181.8 2502.75
2008-09 3275.85 257.6 3018.26
2009-10 3441.67 239.39 3202.28
2010-11 3783.86 257.01 3526.84
Interpretation
The table shows the net sales, variable cost, and contribution over a period of five
years 2007-11. In this period the sales, variable cost and contribution are showing
continuous increase.

 The minimum sale was present during 2006-07(2374.09), and average sale
was 3111.95.
 The maximum variable cost was present during 2008-09(257.6).
 The minimum variable cost was present during 2006-07(166.99), and average
was 220.56.
 The maximum contribution was present during 2010-11(3526.84).
 The minimum contribution was present during 2006-07(2207.1), and average
was 2891.45.
The table shows the net sales, variable cost, and contribution over a period of five
years 2007-11. In this period contribution showing continuous increase. The highest
contribution rate was in 2010-11(3526.84).
46
Graph 2.10 Analyses on Contribution 2006-11
Contribution
4000
3526.84
3500
3202.28
3018.26
3000
2502.75
2500
2207.1
2000
contribution
1500
1000
500
0
2006-07 2007-08 2008-09 2009-10 2010-11
47
Table 2.11 Analysis on PV Ratio 2006-11
Year Contribution Sales Profit Volume

Ratio
2006-07 2207.1 2374.09 0.93
2007-08 2502.75 2684.55 0.932
2008-09 3018.26 3275.85 0.921
2009-10 3203.28 3441.67 0.931
2010-11 3526.84 3783.86 0.932
Interpretation
The table shows the contribution, sales and the PV ratio of the company during the
2010-11 periods. In the rate of PV ratio was not stable in this time period it was
changed year by year, because of the effect of increase in the sales and contribution.

3111.95.
was 2891.45.
 The maximum profit volume ratio was present during 2007-08, 2010-
11(0.932).
 The minimum profit volume ratio was present during 2008-09(0.921), and
average was 0.929.
The table shows the rate of PV ratio was not stable in this time period 2007-11.
Because, the effect of increases in sale and contribution during the period.
48
Graph 2.11 Analyses on PV Ratio 2006-11
PV Ratio
0.934
0.932 0.932
0.932 0.931
0.93
0.93
0.928
0.926
0.924
pv ratio
0.922 0.921
0.92
0.918
0.916
0.914
2006-07 2007-08 2008-09 2009-10 2010-11
49
Table 2.12 Analysis on Break-even Point 2006-11
Year Fixed Cost Sales Variable Contribution BEP

Cost
2006-07 2128.34 2374.09 166.99 2207.1 2289.37
2007-08 2218.93 2684.55 181.8 2502.75 2380.11
2008-09 2699.31 3275.85 257.6 3018.26 2929.68
2009-10 2811.31 3441.67 239.39 3202.28 3021.47
2010-11 3056.65 3783.86 257.01 3526.84 3279.40
Interpretation
The above table shows the sales, contribution, costs (fixed and variable) and also
the break-even point. The BEP shows increases in the last five years.
 The maximum variable cost was present during 2008-09(257.6).

 The minimum variable cost was present during 2008-07(166.99), and average
was 220.56.
 The maximum fixed cost was present during 2007-08, 2010-11(0.932).
 The minimum fixed cost was present during 2008-09(0.921), and average was
2582.91.
 The maximum breakeven point was present during 2010-11(3279.40).
 The minimum breakeven point was present during 2006-07(2289.37), and
average was 2780.
The table shows the continuous increment in break-even point in the last five years
2007-11.
50
Graph 2.12 Analyses on Break-even Point 2006-11
Break-Even Point
3500 3279.4
3021.47
2929.68
3000
2500 2380.11
2289.37
2000
break-even point
1500
1000
500
0
2006-07 2007-08 2008-09 2009-10 2010-11
51
Table 2.13 Analysis on Margin of Safety 2006-11
Year Sales Breakeve Net PV Margin Margin of

n Point Profit Ratio of Safety Safety
Ratio
2006-07 2374.09 2289.37 -84.28 0.929 84.72 3.57
2007-08 2684.55 2380.11 10.13 0.932 304.44 11.34
2008-09 3275.85 2929.68 142.96 0.921 346.17 10.57
2009-10 3441.67 3021.47 254.87 0.930 420.20 12.20
2010-11 3783.86 3279.40 379.76 0.932 504.46 13.33
Interpretation
The above table shows the sales, BEP, net profit, PV ratio, margins of safety and
margin of safety ratio.

3111.95.
 The maximum margin of safety was present during 2010-11(504.46).
 The minimum margin of safety was present during 2006-07(84.72), and
average was 331.99.
 The maximum margin of safety ratio was present during 2010-11 (13.33).
 The minimum margin of safety ratio was present during 2006-07(3.57), and
average was 10.2.
The table shows the increase in margin of safety ratio in the last five years 2007-11.
The highest rate shows in the 2010-11(13.33).
52
Graph 2.13 Analyses on Margin of Safety 2006-11
Margin of Safety
14 13.33
12.2
12 11.34
10.57
10
margin of safety
6
4 3.57
0
2006-07 2007-08 2008-09 2009-10 2010-11
53
Table 2.14 Analysis on Degree of Operating Leverage Ratio 2006-11
Year Contribution EBIT Degree

of Operating
Leverage Ratio
2006-07 2207.1 -59.42 -3714.40
2007-08 2502.75 64.95 3853.06
2008-09 3018.26 200.48 1505.51
2009-10 3202.28 329.87 970.76
2010-11 3526.84 471.19 748.49
Interpretation
The above table was about the degree of operating leverage ratio.

was 2891.45.
 The maximum EBIT was present during 2010-11(471.19).
 The minimum EBIT was present during 2006-07(-59.42), and average was
201.41.
 The maximum degree of operating leverage ratio was present during 2007-
08(3853.40).
 The minimum degree of operating leverage ratio was present during 2006-07(-
3714.40), and average was 672.7.
The highest rate of degree of operating leverage was in 2007-08(3853.40).

54
Graph 2.14 Analyses Degree of Operating Leverage 2006-11
degree of operating leverage

5000
3853.06
4000
3000
2000 1505.51
970.76
1000 748.49
0 degree of operating leverage

2006-07 2007-08 2008-09 2009-10 2010-11
-1000
-2000
-3000
-4000 -3714.4
-5000
55
Table 2.15 Analysis on percentage of Cost, Sales, and Profit 2006-2011
Year Cost (%) Sales (%) Profit (%)
2006-07 2626.91 100 2374.09 100 -84.28 100
2007-08 2762.42 105.16 2684.55 113.08 10.13 112.02
2008-09 3230.27 122.97 3275.85 137.98 142.96 169.63
2009-10 4022.79 153.14 3441.67 144.97 253.87 301.2
2010-11 4302.39 163.78 3783.86 159.38 379.76 450.6
Interpretation
The table shows the trend percentage of cost, sales, and profit during the last five
years 2006-11.
 The maximum percentage of cost was present during 2010-11(163.78).

 The minimum percentage of cost was present during 2006-07(100), and
average was 129.01.
 The maximum percentage of sale was present during 2010-11(159.38).
 The minimum percentage of sale was present during 2006-07(100), and
average was 131.08.
 The maximum percentage of profit was present during 2010-11(450.6).
 The minimum percentage of profit was present during 2006-07(100), and
average was 226.7.
The table shows increase in sales, cost and profit during the last five years.
56
Graph 2.15 Analyses on percentage on Cost, Sales, and Profit during 2006-11
500
450
400
350
300
cost
250
sales
200 profit
150
100
50
0
2006-07 2007-08 2008-09 2009-10 2010-11
57
Correlation between Cost, Sales, and Profit
 Correlation between sales and profit
Sales = X (independent variables)
Profit = Y (dependent variables)
Table 2.16 Analysis of Sales and Profit during 2006-11
Year Sales X Sales Y
2006-07 2374.09 -84.28
2007-08 2684.55 10.13
2008-09 3275.85 142.96
2009-10 3441.67 253.87
2010-11 3783.86 379.76
Table 2.16.1 Analyses on Correlation between Sales and Profit during 2006-11
X Y X2 Y2 XY
2374.09 -84.28 5636303.33 7103.12 -200088.31

2684.55 10.13 7206808.7 102.62 27194.49
3275.85 142.96 10371193.22 20437.56 468315.52
3441.67 253.87 11845092.39 64449.98 873736.76
3783.86 379.76 14317596.5 144217.66 1436958.67
15560.02 702.44 49376994.14 1436958.67 2606117.13

58
Correlation:
𝐍 ∑ 𝐱𝐲−∑ 𝐱 ∑ 𝐲
r=
√𝐍 ∑ 𝐱 𝟐 −(∑ 𝐱)𝟐 √𝐍 ∑ 𝐲 𝟐 −(∑ 𝐲)𝟐
𝟓 ×𝟐𝟔𝟎𝟔𝟏𝟏𝟕.𝟏𝟑−(𝟏𝟓𝟓𝟔𝟎.𝟎𝟐 ×𝟕𝟎𝟐.𝟒𝟒
=
√𝟓×𝟒𝟗𝟑𝟕𝟔𝟗𝟗.𝟏𝟒−(𝟏𝟓𝟓𝟔𝟎.𝟎𝟐)𝟐 √𝟓×𝟐𝟑𝟔𝟑𝟏𝟎.𝟗𝟒−(𝟕𝟎𝟐.𝟒𝟒)𝟐
𝟐𝟏𝟎𝟎𝟔𝟎𝟓.𝟐
=
𝟐𝟏𝟖𝟒.𝟐𝟎 ×𝟖𝟐𝟗.𝟓𝟒
𝟐𝟏𝟎𝟎𝟔𝟎𝟓.𝟐
=
𝟏𝟖𝟏𝟏𝟖𝟖𝟏.𝟐𝟕
= 0.99
Interpretation
The correlation between sales and profit shows a positive sign that means there is a
direct relationship between cost and sales. That is when the sale is increases that time
the profit is also increases. There for the total sales affect the total profit.
 Correlation between cost and sales
Sales = Y
Cost = X
59
Table 2.17 Analysis of Cost and sales during 2006-11
Year Cost X Sales Y
2006-07 2626.91 2374.09

2007-08 2762.42 2684.55
2008-09 3230.27 3275.85

2009-10 4022.79 3446.37
2010-11 4302.39 3783.86
Table 2.17.1 Analyses on Correlation between Cost and Sales during 2006-11
X Y X2 Y2 XY
2626.91 2374.09 6900656.15 5636303.33 6236520.76
2762.42 2684.55 7630964.26 7206808.7 7415854.61
3230.27 3275.85 10434644.27 10371193.22 10434644.27
4022.79 3446.37 16182839.38 11845092.39 13864022.77
4302.39 3783.86 18510559.71 14317596.5 16279641.43
16944.78 15564.72 59659663.77 49376994.14 54230683.84
𝑵 ∑ 𝒙𝒚−∑ 𝒙 ∑ 𝒚
Correlation: r =
√𝑵 ∑ 𝒙𝟐 −(∑ 𝒙)𝟐 √𝑵 ∑ 𝒚𝟐 −(∑ 𝒚)𝟐
𝟓 × 𝟓𝟒𝟐𝟑𝟎𝟔𝟖𝟑.𝟖𝟒−(𝟏𝟔𝟗𝟒𝟒.𝟕𝟖 × 𝟏𝟓𝟓𝟔𝟒.𝟕𝟐)
=
√𝟓×𝟓𝟗𝟔𝟓𝟗𝟔𝟔𝟑.𝟕𝟕−(𝟏𝟔𝟗𝟒𝟒.𝟕𝟖)𝟐 √𝟓×𝟒𝟗𝟑𝟕𝟔𝟗𝟗𝟒.𝟏𝟒−(𝟏𝟓𝟓𝟔𝟒.𝟕𝟐)𝟐
𝟕𝟒𝟏𝟐𝟔𝟔𝟑.𝟎𝟒
=
𝟑𝟑𝟒𝟐.𝟓𝟕 ×𝟐𝟏𝟓𝟎.𝟒𝟔
60
𝟕𝟒𝟏𝟐𝟔𝟔𝟑.𝟎𝟒
=
𝟕𝟏𝟖𝟖𝟎𝟔𝟑.𝟎𝟖
= 0.95
Interpretation
The correlation between cost and sales shows a positive sign that means there is a
direct relationship between cost and sales. When the cost increases that time the sale
is also increases. There for the total cost affect the total sales.
 Correlation between cost and profit
Cost = X
Profit = Y
Table 2.18 Analysis of Cost and Profit during 2006-11
Year Cost X Profit Y
2006-07 2626.91 -84.28

2007-08 2762.42 10.13
2008-09 3230.27 142.96
2009-10 4022.79 253.87
2010-11 4302.39 379.76

61
Table 2.18.1 Analyses on Correlation between Cost and Profit during 2006-11
X Y X2 Y2 XY
2626.91 -84.28 6900656.15 7103.12 -221395.98

2762.42 10.13 7630964.26 102.62 27955.69
3230.27 142.96 10434644.27 20437.56 461799.40
4022.79 253.87 16182839.38 64449.96 1021265.7
4302.39 379.76 18510559.7 144217.66 1633875.63
16944.78 702.44 59659633.76 236310.92 2923500.44
𝐍 ∑ 𝐱𝐲−∑ 𝐱 ∑ 𝐲
Correlation: 𝐫 =
√𝐍 ∑ 𝐱 𝟐 −(∑ 𝐱)𝟐 √𝐍 ∑ 𝐲 𝟐 −(∑ 𝐲)𝟐
𝟓×𝟐𝟗𝟐𝟑𝟓𝟎𝟎.𝟒𝟒−(𝟏𝟔𝟗𝟒𝟒.𝟕𝟖 ×𝟕𝟎𝟐.𝟒𝟒)𝟐
=
√𝟓×𝟓𝟗𝟔𝟓𝟗𝟔𝟑𝟑.𝟕𝟔−(𝟏𝟔𝟗𝟒𝟒.𝟕𝟖)𝟐 √𝟓×𝟐𝟑𝟔𝟑𝟏𝟎.𝟗𝟐−(𝟕𝟎𝟐.𝟒𝟒)𝟐
𝟐𝟕𝟏𝟒𝟖𝟏𝟎.𝟗𝟒
=
𝟑𝟑𝟑𝟒𝟐.𝟓𝟕 ×𝟖𝟐𝟗.𝟓𝟒
𝟐𝟕𝟏𝟒𝟖𝟏𝟎.𝟗𝟒
=
𝟐𝟕𝟕𝟐𝟕𝟗𝟓.𝟐𝟐
= 0.98
Interpretation
The correlation between cost and profit shows a positive sign that means there is a
direct relationship between cost and sales. When the cost is increases that time the
profit is also increases. There for the total cost affect the total profit.
62
Table 2.19 Analysis on capacity utilization of white cement during 2006-11
Year Actual Installer Capacity

Production Capacity Utilization
2006-07 21782 30000 72.61
2007-08 22831 30000 76.10
2008-09 23881 30000 79.60

2009-10 24931 30000 83.10
2010-11 25981 30000 86.60
Interpretation
The table shows the capacity utilization during the last five years in Travancore
cements limited.
 The maximum production was present during 2010-11(25981).

 The minimum production was present during 2006-07(21782), and average
was 23881.2.
 The maximum capacity utilization was present during 2010-11(86.60).
 The minimum capacity utilization was present during 2006-07(72.61), and
average was 79.6.
The table represents that the installer capacity of white cement is 30000 tons during
a year. In the last five year the company trying to utilize the resources for maximum
production, so the actual production was increasing year by year. And also increasing
the utilization of capacity of plant.
63
Graph 2.19 Analyses on Capacity Utilization of white cement during 2006-11
capacity utilization
90
86.6
85
83.1
79.6
80
76.1 capacity utilizationm

75
72.61
70
65
2006-07 2007-08 2008-09 2009-10 2010-11
64
Table 2.20 Analysis on Capacity Utilization of cement paints during 2006-11
Year Actual Installer capacity Capacity

production utilization
2006-07 904 1050 86.09
2007-08 749 1050 71.83
2008-09 595 1050 56.67
2009-10 441 1050 42
2010-11 286 1050 27.24
Interpretation
The above table represents the capacity utilization of cement paints in TCL during
the last five years.
 The maximum production was present during 2006-07(904).

 The minimum production was present during 2010-11(286), and average was
595.
 The maximum capacity utilization was present during 2006-07(86.09).
 The minimum capacity utilization was present during 2010-11(27.24), and
average was 56.77.
The table represents that the installer capacity of white cement is 1050 tons during
a year. In the last five year the company utilizes the minimum resources for
production, so the actual production was decreasing year by year. And also decreasing
the utilization of capacity of plant.
65
Graph 2.17 Analyses on Capacity Utilization of cement paints during 2006-11
capacity utilization
100
90 86.09
80
71.83
70
60 56.67
50
42 capacity utilization
40
30 27.24
20
10
0
2006-07 2007-08 2008-09 2009-10 2010-11
66
3. SUMMARY OF FINDINGS, SUGGESTION, AND

CONCLUSION
3.1 FINDINGS
 The cost and profit of the company shows an increasing trend, but the
increasing amount does not affect the profitability of the concern, this is
because of the increasing amount of the increasing amount of sales.
 The company effectively utilizes its fixed assets.
 The maximum operating cost ratio was present during 2006-07(162.12),the
minimum was during 2010-11(117.40), and the average operating cost ratio
was
 The operating ratio shows a decreasing trend from the year 2006-08 to 2010-
11. It is good sign for the company.
 The maximum operating expenses was present during 2010-11(993.97),the
minimum was during 2006-07(723.75), and the average operating expenses
was
 Operating expenses shows a high amount in 2006-07 and 2008-09. After the
year decreasing in the operating expenses. It is good sign for the company.
 The maximum manufacturing cost was present during 2010-11(2502.97),the
minimum was during 2006-07(1786.46), and the average operating
manufacturing cost was
 There is a decreasing in the manufacturing cost ratio because of the increasing
in sales.
 The maximum employees cost was present during 2010-11(611.77),the
minimum was during 2006-07(575.05), the average employees cost was
 The employees cost ratio had been decreasing the period of 2006-07 to 2010-
11.
 The maximum administration cost was present during 2010-11(808.61), the
minimum was during 2006-07(618.89), and the average administration cost
was
 The administration cost ratio shows, the cost decreasing in the period of years.
 The maximum depreciation was present during 2006-07(11.28), the minimum
was during 2010-11(7.2), and the average depreciation was
67
 The depreciation cost ratio shows the decreasing the depreciation at the year of
2007-08 to 2010-11.
 The maximum cash profit ratio was present during 2010-11(10.22), the
minimum cash profit ratio was present during 2006-07(-3.07), and the average
cash profit ratio was
 The cash profit ratio shows in the 2007-08 the company is loss making. After
the year 2008-09 to 2010-11 the company profit increased.
 The maximum net profit ratio was present during 2010-11(10.03), the
minimum net profit ratio was present during 2006-07(-3.55), and the average
net profit ratio was
 From before 2006-07 the company is loss making. After the years there is a
tremendous increasing in the net profit.
 The maximum gross profit ratio was present during 2008-09(35.11), the
minimum gross profit ratio was present during 2007-08(24.06), and the
average gross profit ratio was
 From the gross profit ratio shows a profit ratio trend fluctuating every year.
 The maximum contribution was present during 2010-11(3526.84), the
minimum contribution was present during 2006-07(2207.1), and the average
contribution was
 The contribution trend shows in the period of years contribution cost increased
because the sales will increased the period of years.
 The maximum profit volume ratio was present during 2007-08, 2010-
11(0.932), the minimum profit volume ratio was present during 2008-
09(0.921), and the average profit volume ratio was
 The profit volume ratio during the period fluctuating the ratio.
 The maximum breakeven point was present during 2010-11(3279.40), the
minimum breakeven point was present during 2006-07(2289.37), and the
average breakeven point was
 The break-even analysis shows an increasing trend.
 The maximum margin of safety ratio was present during 2010-11 (13.33), the
minimum margin of safety ratio was present during 2006-07(3.57), and the
average margin of safety ratio was
68
 The margin of safety of the company witness a huge increase in 2010-11 and it
provides more safety to the company.
 The maximum degree of operating leverage ratio was present during 2007-
08(3853.40), the minimum degree of operating leverage ratio was present
during 2006-07(-3714.40), and the average degree of operating leverage ratio
was
 There is a decreasing trend in the operating leverage in the last three years
under study.
 The trends in cost of the product will high rate increased. The trend in sales is
high due to good increase in the sales and increasing the number of customers.
The trend in the net profit was very high during the last three years. And it is a
good sign for the company.
 The correlation between sales and profit is positive sign that means there is a
direct relationship between sales and profit. Therefore the total sales affect the
total profit.
 The correlation between sales and cost is positive sign that means there is a
direct relationship between cost and sales. Therefore the total cost affects the
total sales.
 The correlation between cost and profit is positive sign that means there is a
direct relationship between cost and profit. Therefore the total cost affects the
total profit.
 The maximum capacity utilization was present during 2010-11(86.60), the
minimum capacity utilization was present during 2006-07(72.61), and the
average capacity utilization was
 The capacity utilization of white cement increasing throughout the period of
study that means there is a good demand for this white cement.
 The maximum capacity utilization was present during 2006-07(86.09),the
minimum capacity utilization was present during 2010-11(27.24), the average
capacity utilization was
 The capacity utilization of cement paint decreasing throughout the period.
69
3.2 SUGGESTIONS
 Reduce the operating cost as much as possible by implementing cost reduction

programs otherwise for a manufacturing company like TCL cannot go for a
log.
 Lower level of BEP helps the firm to achieve more profit easily. So in order to
reduce the BEP, the company has to take necessary steps to reduce the fixed
costs and variable cost.
 Reduce manufacturing cost as much as possible in order to earn more profit.
 The company has to utilise its capacity as much as possible in order to meet
the increasing demand.
 There should have a strict check on the indirect cost increasing because it
forms part of major variable costs.
 The company should new technological equipments install in your factory that
time the manufacturing cost decreasing.
 The company wants to prepare suitable budget for every year.
 To provide more safety and welfare measures to the labours for avoiding
strikes that provide stability in production and also provide stability in the
profit.
70
3.3 CONCLUSION
Cost Volume Profit analysis is an important tool for profit planning. Profit is most
important measure for a firm’s performance in the market and economy. Profit is a
guide for allocating resources efficiently. Profit in simple terms means the difference
in selling price and cost of manufacturing product or offering the service. Cost can be
divided into two, fixed cost and variable cost. Fixed cost means, it is fixed in nature
and the variable costs are changeable costs. Cost can be minimized in two ways by
cutting down the unwanted activities and requirements and improving process.
The study have been conducted for analysing and interpreting the performance of
TCL based on which it can be understand the profitability of the company has to be
increased. Also the study is converting the capacity utilization of the company. From
the study it is clear that the cost of the company shows and increasing trend. But it
does not affect profitability of the company the profit also shows an increasing trend.
This is because of the increasing trend in sales. The sales of the company are
increasing year by year. And also it is clear that the company increasing its capacity
every year because of the increasing in sales and demand for the product. In order to
cope up with the increasing demand, the company can achieve its maximising
productivity and profitability.
71
BIBILIOGRAPHY
 Financial management, Dr. S.N Maheswari, 9th edition.

 Business research methodology, Veera Karoli and Supriya Singh.
 Cost management, Sharma and Sasi Gupta, 8th editon.
 Financial management, I.M Pandey, 10th edition.
 Research methodology, Deepak Chawla and Neena Sondhi.
WEBSITE
 www.finance.com
 www.netmba.com
 www.a2zmba.com
 www.travcement.com

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1

1.1 Introduction to the study

Finance is an important function of any business, as money required to meet the

Financial management occupies a significant place because it has an impact on all

Cost Volume Profit Analysis.

It is a device used to determine the usefulness of profit planning. CVP Analysis

Analysis is a management tool showing the relationship between various ingredient of

Importance of CVP analysis

The CVP Analysis answers to questions such as,

 What minimum level of sales need to be achieved to avoid losses?

Cost volume profit analysis

Cost volume profit (CVP), in managerial economics is a form of cost accounting. It

The assumptions underlying CVP analysis are:

The components of CVP analysis are:

 Level or volume of activity

CVP assumes the following:

 Constant sales price;

Concept of Break-even analysis

Computation of Break-Even Point (BEP)

Operating cost ratio = X 100

BEP (in units) = 

Contribution per unit

Assumptions of Break-even Analysis

Break-even analysis can be carried out in two ways:

 All costs can be classified into fixed and variable costs.

Margin of safety = present sales – break-even sales

If the margin of safety is large, it is an indicator of the strength of a business

This margin of safety can be increased by taking the following steps;

 Increase the level of production

Profit Volume Ratio (PV Ratio)

Profit Volume Ratio = X 100

Nature of Ratio Analysis

Ratio analysis is a technique of analysis and interpretation of financial statements.

Use and significance of Ratio Analysis

 Managerial uses of ratio analysis

Limitations of Ratio Analysis

 Limited use of a single ratio.

1. Statement wise classifications.

Classifications according to the nature

Leverage Profitability Ratios

 Gross profit ratio

The financial statements may be analyzed by computing trends of series of

Uses of Trend Analysis

 It helps in easily knowing the direction of movement of activity of the

 It makes data brief and easily understandable.

Procedure for Calculating Trend

 Trend analysis becomes on comparable if the same accounting practices are

Capacity utilization is a concept in economics which refers to the extent to which

Capacity utilization is a percentage number that represents how much of the

thumb that a capacity utilization number above 82% is beginning to become

The capacity utilization can be calculated by the equation,

Capacity Utilization =X 100

Need of the problem

Background of the problem

1.2 INDUSTRY PROFILE

1.3 COMPANY PROFILE

HISTORY OF THE COMPANY

Following are the milestones in the history of TCL.

 Started production of Grey Cement in August 1949.

 Diversified into Cement Paint production in 1977.

Objective of the company

The main objective of the company is engaged in the production of Vembanad

The vision of Travancore cement LTD,

Mission of Travancore cement LTD