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Study of Financial Performance-Shiva Sai
Study of Financial Performance-Shiva Sai
“A STUDY ON FINANCIAL
PERFORMANCE ANANLYSIS”
(WITH REFERENCE TO KESORAM CEMENT)
BACHELORE OF BUSINESS ADMINISTRATION
AVINASH DEGREE COLLEGE
By
Firstly I would like to express our immense gratitude towards our institution
AVINASH DEGREE COLLEGE, which created a great platform to attain profound
technical skills in the field of BBA, thereby fulfilling our most cherished goal.
I would thank all the finance department of Kesoram specially Mr. MURTHY ASST
Manager Finance for guiding me and helping me in successful completion of the project
(208513684013)
Chapter-1 1-8
Introduction Need
of the Study
INTRODUCTION
The term ‘financial performance analysis also known as analysis and interpretation
of financial statements’ , refers to the process of determining financial strength and
weaknesses of the firm by establishing strategic relationship between the items of the
balance sheet , profit and loss account and other operative data.
The analysis and interpretation of financial statements is essential to bring out the
mystery behind the figures in financial statements. Financial statements analysis is an
attempt to determine the significance and meaning of the financial statement data so that
forecast may be made of the future earnings, ability to pay interest and debt maturities
(both current and long term) and profitability of a sound divided policy.
Financial performance refers to the act of performing financial activity. In broader sense,
financial performance refers to the degree to which financial objectives being or has been
accomplished. It is the process of measuring the results of a firm's policies and operations
in monetary terms. It is used to measure firm's overall financial health over a given period
of time and can also be used to compare similar firms across the same industry or to
compare industries or sectors in aggregation.
In short, the firm itself as well as various interested groups such as managers,
shareholders, creditors, tax authorities, and others seeks answers to the
Following important questions:
The balance sheet shows the financial position (condition) of the firm at a given point of
time. It provides a snapshot and may be regarded as a static picture.
“Balance sheet is a summary of a firm’s financial position on a given date
that Shows total assets = total liabilities + owner’s equity.”
The income statement (referred to in India as the profit and loss statement) reflects the
performance of the firm over a period of time.
“Income statement is a summary of a firm’s revenues and expenses over a specified
period, ending with net income or loss for the period.”
However, financial statements do not reveal all the information related to the financial
operations of a firm, but they furnish some extremely useful information, which highlights
two important factors profitability and financial soundness. Thus analysis of financial
statements is an important aid to financial performance analysis. Financial performance
analysis includes analysis and interpretation of financial statements in such a way that it
Undertakes full diagnosis of the profitability and financial soundness of the business.
Firm.
Trade creditors: interested in the liquidity of the firm (appraisal of firm’s liquidity)
Bond holders: interested in the cash-flow ability of the firm (appraisal of firm’s capital
structure, the major sources and uses of funds, profitability over time, and projection of
future profitability).
Investors: interested in present and expected future earnings as well as stability of these
earnings (appraisal of firm’s profitability and financial condition).
Management: interested in internal control, better financial condition and better
performance (appraisal of firm’s present financial condition, evaluation of opportunities in
relation to this current position, return on investment provided by various assets of the
company, etc)
Research Methodology
Research Design
Primary Data
The Primary Data Are Those Information’s, which are Collected afresh and for the
First Time, And Thus Happen to Be Original in Character.
Secondary Data:
The secondary data are those which have already been collected by some other agency
and which have already been processed. The sources of secondary data are annual reports,
browsing internet, through magazines.
Methodology Used:
Each Project Gives Rise to Its Own Unique Risks And Hence Possess Its Own Unique
Challenges.
Only interim statements don’t give a final picture of the concern. The data given in
these statements is only approximate. The actual position can only be determined when
the business is sold or liquidated.
3. Historical Costs:
There are certain factors which have a bearing on the financial position and
operating results of the business but they don’t become a part of these statements because
they can’t be measured in monetary terms. Such factors may include in the reputation of
the management.
No Precision:
The precision of financial statement data is not possible because the statements deal with
matters which can’t be precisely stated. The data are recorded by conventional procedures
followed over the years. Various conventions, postulates, personal judgments etc.
INDUSTRY PROFILE
&
COMPANY PROFILE
Modern cement
Modern hydraulic cements began to be developed from the start of the Industrial
Revolution (around 1800), driven by three main needs:
Hydraulic renders for finishing brick buildings in wet climates
Hydraulic mortars for masonry construction of harbor works etc, in contact with sea
water. Development of strong concretes.
In Britain particularly, good quality building stone became ever more expensive during a
period of rapid growth, and it became a common practice to construct prestige buildings
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All the above products could not compete with lime/pozzolan concretes because of fast-setting
(giving insufficient time for placement) and low early strengths (requiring a delay of many
weeks before formwork could be removed). Hydraulic limes, "natural" cements and "artificial"
cements all rely upon their belite content for strength development. Belite develops strength
slowly. Because they were burned at temperatures below 1250 °C, they contained no alite,
which is responsible for early strength in modern cements. The first cement to consistently
contain alite was made by Joseph Aspdin's son William in the early 1840s. This was what we
call today "modern" Portland cement. Because of the air of mystery with which William
Aspdin surrounded his product, others (e.g. Vicat and I C Johnson) have claimed precedence
in this invention, but recent analysis of both his concrete
Portland blast furnace cement contains up to 70% ground granulated blast furnace slag,
with the rest Portland clinker and a little gypsum. All compositions produce high ultimate
(AlO2)6SO4 or C4A3 in Cement chemist's notation) as a primary phase. They are used in
expansive cements, in ultra-high early strength cements, and in "low-energy" cements.
Hydration produces ettringite, and specialized physical properties (such as expansion or rapid
reaction) are obtained by adjustment of the availability of calcium and sulfate ions. Their use
as a low-energy alternative to Portland cement has been pioneered in China, where several
million tonnes per year are produced. Energy requirements are lower because of the lower kiln
temperatures required for reaction and the lower amount of limestone (which must be
endothermically decarbonated) in the mix. In addition, the lower limestone
process cement Plant. The plant capacity is 8.26 lakh tones per annum It is located at
the Ramagundam Railway station, linking Madras to New Delhi. The Chairman of the
Company is B.K.Birla,
History:
The first unit at Basanthnagar with a capacity of 2.1 lakh tones per annum
incorporating humble suspension preheated system was commissioner during the year 1969.
The second unit was setup in year 1971 with a capacity of 2.1 lakh tones per annum went on
stream in the year 1978. The coal for this company is being supplied from Singgareni
Collieries and the power is obtained from APSEB. The power demand for the factory is about
21 MW. Kesoram has got 2 DG sets of 4 MW each installed in the year 1987.
The First Plant for manufacturing of rayon yarn was established at Tribeni, District
Hooghly, West Bengal and the same was commissioned in December, 1959 and the
second plant was commissioned in the year 1962 enabling it to manufacture 4,635 metric
tons per annum (mtpa) of rayon yarn. This Unit has 6,500 metric tons per annum (mtpa)
capacity as on 31.3.2009.
The plant for manufacturing of transparent paper was also set up at the same location at
Tribeni, District Hooghly, West Bengal, in June, 1961. It has the annual capacity to
manufacture 3,600 metric tons per annum (mtpa) of transparent Paper.
Gulbarga (Karnataka). The cement manufacturing capacities at both the plants were
augmented from time to time according to the market conditions and as on 31.3.2009
Kesoram Cement and Vasavadatta Cement have annual cement manufacturing capacities
of 1.5 million metric tons and 4.1 million metric tons respectively.
The Company in March 1992, commissioned a plant at Balasore known as Birla Tyres in
Orissa, for manufacturing of 10 lakh mtp.a. automotive tyres and tubes in the first phase in
collaboration with Pirelli Ltd., U.K., a subsidiary company of the world famous Pirelli Group
of Italy - a pioneer in production and development of automotive tyres in the world.
The capacity at the said plant was further augmented during the year by 19 MT per day
aggregating to 271 MT per day production facility. The Greenfield Project of 257 MT per
day capacity in the State of Uttarakhand with a capex of about Rs.760 crores commenced
the commercial production in phases during the financial year 2008-09.The Company as
on 31.3.2009 had the manufacturing capacities of 3.71 million tyres, 2.95 million tubes
and 1.53 million flaps per annum in the Plants including at Uttarakhand Plant. It has small
manufacturing capacities of various Chemicals at Kharda in the State of West Bengal also.
It has the annual manufacturing capacities of 12,410 mtpa of Caustic Soda Lye, 5,045
mtpa of Liquid Chlorine, 6,205 mtpa of Sodium Hypochlorite, 8,200 mtpa of
Hydrochloric Acid, 3,200 mtpa of Ferric Alum, 18,700 mtpa of Sulphuric Acid and
1,620,000 m3pa of purified Hydrogen Gas.
The Company is a well-diversified entity in the fields of Cement, Tyre, Rayon Yarn,
Transparent Paper, Spun Pipes and Heavy Chemicals with two core business segments i.e.
Cement and Tyres.
The commercial production of cement in the aforesaid unit IV has commenced in June
2009. The work for the further expansion in the Tyres Section at Uttarakhand for radial
tyres with 100 MT per day capacity and bias tyres with 125 MT per day capacity
involving an estimated aggregate capital outlay of about Rs. 840 crores is under progress.
The Board has further approved a Motor Cycle Tyre Project of 70 MT per day capacity at
the same site involving a capital outlay of Rs.190 crore. The civil construction of both the
Projects is in full swing. The commercial production in both the Projects is likely to start
by December 2009/ January 2010.
Birla Supreme in popular brand of Kesoram cement from its prestigious plant of
Basantnagar in AP which has outstanding track record. In performance and productivity
serving the nation for the last two and half decades. It has proved its distinction by
bagging several national awards. It also has the distinction of achieving optimum capacity
utilization.
Kesoram offers a choice of top quality portioned cement for light, heavy
constructions and allied applications. Quality is built every fact of the operations.
The plant lay out is rational to begin with. The limestone is rich in calcium
carbonate a key factor that influences the quality of final product. The day process
technology uses in the latest computerized monitoring overseas the manufacturing
process. Samples are sent regularly to the bureau of Indian standards. National council of
construction and building material for certification of derived quality norms.
One among the industrial giants in the country today, serving the nation on the
industrial front. Kesoram industry ltd. has a checked and eventful history dating back to
the twenties when the Industrial House of Birla’s acquired it. With only a textile mill
under its banner 1924, it grew from strength to strength and spread its activities to newer
fields like Rayon, Transparent paper, pipes, Refractors, tyres and other products.
Looking to the wide gap between the demand and supply of vital commodity
cement, which play in important role in National building activity the Government of
India, had de-licensed the cement industry in the year 1966 with a review to attract private
entrepreneur to augment the cement production. Kesoram rose to the occasions and
divided to set up a few cement plants in the country.
Kesoram cement undertaking marketing activities extensively in the state of
Andhra Pradesh, Karnataka, Tamilnadu, Kerala, Maharashtra and Gujarat. In A.P. sales
Depts., are located in different areas like Karimnagar, Warangal, Nizamabad, Vijayawada
and Nellore. In other states it has opened around 10 depots.
The market share of Kesoram Cement in AP is 7.05%. The market share of the
company in various states is shown as under.
STATES MARKET SHARE
Karnataka 4.09% 0.94%
Tamilnadu 0.29% 2.81%
Kerala
Maharashtra
X-ray analysis:
Fully computerized XRF and XRD X-RAY Analyzers keep a constant round the
clock vigil on quality.
Supreme performance:
One of the largest Cement Plants in Andhra Pradesh, the plant incorporate the
latest technology in Cement - making.
It is professionally managed and well established Cement Manufacturing Company
enjoying the confidence of the consumers. Kesoram has outstanding track record in
performance and productivity with quite a few national and state awards to its credit.
BIRLA SUPREME, the 43 Grade Cement, is a widely accepted and popular brand
in the market, commanding a premium.
However to meet the specific demands of the consumer, Kesoram bought out the
53 grade BIRLA SUPREME – GOLD, which has special qualities like higher fineness,
quick-setting, high compressive strength and durability.
Supreme Strength:
Kesoram Cement has huge captive Limestone Deposits, which make it possible to
feed high- grade limestone consistently, its natural Grey colour is anion- born ingredient
and gives good shade.
Both the products offered by Kesoram, i.e. BIRLA SUPREME-43 Grade and
BIRLA SUPREME-GOLD-53 Grade cement are outstanding with much higher
compressive strength and durability.
The following characteristics show their distinctive qualities.
Physical Characteristics:
Ope 43 Birla Ope 53 gr Birla Supreme
Is 8 112-89 Supreme Is 12269-87 Gold 53 gr
43 grade
Setting time Min30 120-180 Min 30 130-170
a. Initial (mats) Max 600 180-240 Max 600 170-220
b. final (mats) Min 225 270-280 . Min 225 300-320
Fincncssm 2/Kg Max 10 1.0-2.0 Max 10 0.5-1.0
Soundness Max 0.8 0.04-0.08 Max 0.080. 0.04-0.2
a. le-chart (mm)
b. autoclave (%)
Supreme Expertise:
The Best Technical Team, exclusive to Kesoram, mans the Plant and monitors the
process, to blend the cement in just the required proportions, to make BIRLA
SUPREME/GOLD OF Rock Strength.
Due to its fine quality, super fine construction can be achieved.. Its gives maximum
strength at Minimum use of cement with water in the water cement ratio, especially the 53
grade Birlas supreme-gold.
Feathers in Kesoram's cap:
Kesoram has outstanding track record, achieving over 100% capacity utilization I
productivity and energy conservation. It has proved its distinction by bagging several
national and state awards, noteworthy being.
NATIONAL:
1. National productivity award for 1985-86
2. National productivity award for 1986-87
3. National award for mines safety for 1985-86
4. National award for mines safety for 1986-87
5. National award for energy conservation 1989-90
Awards:
Kesoram cement bagged many prestigious awards including national awards for
productivity, technology, conservation and several state awards since 1984. The following
are the some of important awards.
LITERATURE REVIEW
The term ‘financial performance analysis also known as analysis and interpretation of
financial statements’ , refers to the process of determining financial strength and
weaknesses of the firm by establishing strategic relationship between the items of the
balance sheet , profit and loss account and other operative data.
“Analyzing financial statements” by Metcalf and Titard
“Financial analysis is a process of evaluating the relationship between component
parts of a financial statement to obtain a better understanding of a firms position and
performance” by Myers
Financial Performance:
The word ‘Performance is derived from the word ‘parfourmen’, which means ‘to do’, ‘to
carry out’ or ‘to render’. It refers the act of performing, execution, accomplishment,
fulfillment etc. In border sense, performance refers to the accomplishment of a given task
measured against preset standards of accuracy, completeness, cost, and speed. In other
words, it refers to the degree to which an achievement is being or has been accomplished.
In the Words of Frich Kohlar “The performance is a general term applied to a part or to all
the conducts of activities of an organization over a period of time often with reference to
past or projected cost efficiency, management responsibility or accountability or the like.
Thus, not just the presentation, but the quality of results achieved refers to the
performance. Performance is used to indicate firm’s success, conditions, and compliance.
1. On the basis of material used: - According to material used, financial analysis can
be of two types
External analysis
Internal analysis
External analysis:-
This analysis is done by outsiders who do not have access to the detailed
internal outsiders include investors, potential investors, Creditors, Potential Creditors,
Government Agencies, Credit Agencies and General Public. For financial analysis, these
external parties to the firm depend almost entirely on the published financial statements.
Internal analysis:-
This analysis is undertaken by the persons namely executives and employees of the
organization or by the officers appointed by government or court who have access to the
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According to the modus operandi financial analysis can also be of two types
a. Horizontal analysis
b.Vertical analysis
Horizontal analysis:-
Horizontal analysis refers to the comparison of financial data of a company for several
years. The figures for this type of analysis are presented horizontally over a number of
columns. The figures of the various years are compared with standard or base year. a base
year is year chosen as beginning point. This type of analysis is also called ‘dynamic
analysis’ as it is based on the data from year to year rather than on data of any one year.
The horizontal analysis makes it possible to focus attention on items that have changed
significantly during the period under view.
b. Vertical analysis:-
Vertical analysis refers to the study of relationship of the various items in the financial
statements of one accounting period. In this types of analysis the figures from financial
statement of a year are compared with a base selected from the same year’s statement
The comparative balance sheet analysis is the study of the trend of the same items, group
of items and computed items in two or more balance sheets of the same business
enterprise on different dates. The change in periodic balance sheet items reflect the
conduct of a business the change can be observed by comparison of the balance sheet at
the beginning and at the end of a period and these changes can help in forming an opinion
about the progress of an enterprise.
The most common ratios which indicate the extent of liquidity or lack of it
are Current ratio
Quick ratio
Other ratios include Cash ratio, Interval Measure and Net working capital ratio.
Current Ratio:
The current ratio is calculated by dividing current assets by current liabilities.
Current assets Current
ratio = --------------------------
Current liabilities
Current ratio is a measure of the firm’s short term solvency. It indicates the availability of
current assets in rupees for every one rupee of current liability. A ratio of greater than one
means that the firm has more current assets than current claims against the, Current ratio
of 2 to 1 or more is considered satisfactory. Current ratio represents a margin of safety for
creditors.
Quick Ratio:
Quick ratio also known as acid-test ratio establishes a relationship between quick assets
and the current liabilities. Cash is the most liquid asset. It is calculated by dividing quick
assets by current liabilities.
Quick ratio = Quick Assets / Current Liabilities
Leverage Ratios:
Leverage ratios identify the source of a firm’s capital –owners or outside creditors. Financial
leverage refers to the use of debt in financing non-current assets. If the return on assets
exceeds the cost of debt, the leverage is successful – i.e., it improves return on equity.
Debt –Equity Ratio:
The Debt – Equity is determined to analyze the soundness of the long term financial
policies of the organization. It is also known as “Internal External Equity Ratio”.
It is calculated as follows:
Debt – Equity Ratio = Total long term debt / Share holders funds.
Equity Ratio:
This ratio is also called as proprietary ratio establishes a relationship between share
holder’s funds to total assets of company. Equity Ratio is calculated by dividing share
holders fund by total assets.
Fixed Asset Ratio:
This ratio indicates the extent to which the assets of the company’s can be lost without
affecting the interest of the creditors of the company. Higher the ratios better the long-
term position of the company.
Activity Ratios:
They are primarily used for studying a firm’s working capital situation. A well managed
firm should have good activity ratios.
Profitability Ratios:
Profitability ratios are the ratios which measure a firm’s overall effectiveness as revealed
by the returns generated on sales and investment.
General Profitability Ratios:
1. Gross Profit Ratio
2. Net profit Ratio
3. Operating or Expenses Ratio.
Years Changes
Particulars 2008 2009 In Rupees In Percentage
Liabilities
\Share Capital 45.74 45.74 0.00 0.00
Reserves & Surplus 930.85 1280.24 349.39
Revaluation Reserves 5.33 4.12 -1.21 -22.70
Loans
Secured Loans 971.06 1536.27 565.21 58.21
Un Secured Loans 121.29 434.16 312.87 257.95
Deferred Tax Liabilities 0.00 0.00 0.00 0.00
Current Liabilities
Provisions 330.39 345.29 14.90 4.51
Current Liabilities 570.67 665.87 95.20 16.68
Reserves & Surplus were increased to 37.53 % (percent) i.e., in Rupees 349.39
crores.
Secured Loans are increased to 58.21 % i.e., in Rupees 565.21 crores. And UN
secured loans highly Increased to 257.95 %.
Current liabilities and Provisions are increased to 16.68 and 4.51 respectively i.e.,
in Rupees 95.20 & 14.90 crores.
Fixed assets were highly increased to 66.42 % i.e., in Rupees 720.11 crores.
Current assets increased 35.76 % i.e., in Rupees 270.20 crores. And Loans &
Advances increased to 22.46 % respectively.
(Rupees in crores)
Years Changes
Particulars 2009 2010 In Rupees In Percentage
Liabilities
Share Capital 45.74 45.74 0.00 0.00
Reserves & Surplus 1280.24 1491.11 210.87 16.47
Revaluation Reserves 4.12 3.39 -0.73 -17.72
Loans
Secured Loans 1536.27 1863.72 327.45 21.31
Un Secured Loans 434.16 1262.50 828.34 190.79
Deferred Tax Liabilities 0.00 0.00 0.00
Current Liabilities
Provisions 345.29 357.34 12.05 3.49
Current Liabilities 665.87 1076.88 411.01 61.73
Current Liabilities were increased to 61.73 % i.e., in Rupees 411.01 crores, and
Provisions 3.49 % i.e., in Rupees 12.05 crores.
Current assets increased to 50.05 % i.e., in Rupees 513.42 crores. And loans and
(Rupees in crores)
Years Changes
Particulars 2010 2011 In Rupees In Percentage
Liabilities
Share Capital 45.74 45.74 0.00 0.00
Reserves & Surplus 1491.11 1251.62 -239.49 -16.06
Revaluation Reserves 3.39 2.89 -0.50 -14.75
Loans
Secured Loans 1863.72 2371.83 508.11 27.26
Un Secured Loans 1262.50 1627.44 364.94 28.91
Deferred Tax Liabilities 0.00 0.00 0.00
Current Liabilities
Provisions 357.34 14.94 -342.40 -95.82
Current Liabilities 1076.88 1139.02 62.14 5.77
Current assets increased to 18.36 % i.e., in Rupees 282.55 crores. And loans and
Current assets decreased to 4.58 % i.e., in Rupees 83.44 crores. And loans and
(Rupees in crores)
Share capital was recorded 1.54 percent in the total liabilities in the year 2008 it is
decreased to 1.06 % in the year 2009.
Reserves & surplus contributed to 31.29 % in the total liabilities in the year 2008 it is
decreased to 29.69 % in the year 2009.
Secured loans were 32.64 % in the total liabilities in the year 2008 it is increased to
35.63 % in the year 2009.
Current Liabilities shown to 19.18 % in the total liabilities in the year 2008 it is
decreased to 15.44 % in the year 2009.
Provisions 11.10 in the total liabilities in the year 2008 it is decreased to 8.01 % in
Fixed Assets were 36.44 in the total liabilities in the year 2008 i.e., decreased to
41.85 % in the year 2009.
Investments were 1.61 in the total liabilities in the year 2008 it is decreased to 1.43
% in the year 2009.
Sundry debtors were 9.18 in the total liabilities in the year 2008 it is decreased to
8.82 % in the year 2009.
(Rs in crores)
Change
Particulars 2009 Change Percentage 2010 Percentage
Liabilities
Share Capital 45.74 1.06 45.74 0.75
Reserves & Surplus 1280.24 29.69 1491.11 24.44
Revaluation Reserves 4.12 0.10 3.39 0.06
Loans
Secured Loans 1536.27 35.63 1863.72 30.55
Un Secured Loans 434.16 10.07 1262.50 20.69
Deferred Tax Liabilities 0.00 0.00 0.00 0.00
Current Liabilities
Provisions 345.29 8.01 357.34 5.86
Current Liabilities 665.87 15.44 1076.88 17.65
Share capital was recorded 1.06 percent in the total liabilities in the
year 2009 it is decreased to 0.75 % in the year 2010.
Secured loans were 35.63 % in the total liabilities in the year 2009 it
is increased to 30.55 % in the year 2010.
Fixed Assets were 41.85 in the total liabilities in the year 2009 i.e.,
increased to 56.25 % in the year 2010.
Sundry debtors were 8.82 in the total liabilities in the year 2009 it is
increased to 8.90 % in the year 2010.
(Rupees in crores)
Change
Particulars 2010 Change Percentage 2011 Percentage
Liabilities
Share Capital 45.74 0.75 45.74 0.71
Reserves & Surplus 1491.11 24.44 1251.62 19.39
Revaluation Reserves 3.39 0.06 2.89 0.04
Loans
Secured Loans 1863.72 30.55 2371.83 36.75
Un Secured Loans 1262.50 20.69 1627.44 25.22
Deferred Tax Liabilities 0.00 0.00 0.00 0.00
Current Liabilities
Provisions 357.34 5.86 14.94 0.23
Current Liabilities 1076.88 17.65 1139.02 17.65
Share capital was recorded 0.75 percent in the total liabilities in the year 2010 it is
decreased to 0.71 % in the year 2011.
Reserves & surplus contributed to 24.44 % in the total liabilities in the year 2010 it is
decreased to19.39 % in the year 2011.
Secured loans were 30.55 % in the total liabilities in the year 2010 it is increased to
36.75 % in the year 2011.
Current Liabilities shown to 17.65 % in the total liabilities in the year 2010 it is
also17.65 % in the year 2011.
Provisions 5.86 in the total liabilities in the year 2010 it is decreased to 0.23 %in the
year 2011.
Fixed Assets were 56.25 in the total liabilities in the year 2010 i.e., increased to
57.21 % in the year 2011.
Investments were 0.84 in the total liabilities in the year 2010 it increased to 1.02 %
in the year 2011.
Sundry debtors were 8.90 in the total liabilities in the year 2010 it is increased to
9.78 % in the year 2011.
(Rupees in crores)
Change
Particulars 2011 Change Percentage 2012 Percentage
Liabilities
Share Capital 45.74 0.71 45.74 0.63
Reserves & Surplus 1251.62 19.39 866.57 11.99
Revaluation Reserves 2.89 0.04 2.70 0.04
Loans
Secured Loans 2371.83 36.75 3177.92 43.97
Un Secured Loans 1627.44 25.22 927.42 12.83
Deferred Tax Liabilities 0.00 0.00 0.00 0.00
Current Liabilities
Provisions 14.94 0.23 407.26 5.63
Current Liabilities 1139.02 17.65 1800.10 24.91
Share capital was recorded 0.71 percent in the total liabilities in the year 2011 it is
decreased to 0.63% in the year 2012.
Reserves & surplus contributed to 19.39 % in the total liabilities in the year 2011 it
is decreased to 11.99 % in the year 2012.
Secured loans were 36.75 % in the total liabilities in the year 2011 it is increased to
Current Liabilities shown to 17.65 % in the total liabilities in the year 2011 it is
increased to 24.91 % in the year 2012.
Provisions 0.23 in the total liabilities in the year 2011 it is increased to 5.63 %in
the year 2012.
Fixed Assets were 57.21 in the total liabilities in the year 2011 i.e., decreased to
Investments were 1.02 in the total liabilities in the year 2011 it increased to 0.92 %
in the year 2012.
Sundry debtors were 9.78 in the total liabilities in the year 2011 it is decreased to
Share Capital:-
Amount Increase/Decrease
Year (In Crores) Trend % Base Year Previous Year
2008 45.74 100.00 0.00 0.00
2009 45.74 100.00 0.00 0.00
2010 45.74 100.00 0.00 0.00
2011 45.74 100.00 0.00 0.00
2012 45.74 100.00 0.00 0.00
Share capital shown a constant trend in the period 2008 and 2012.
Share capital is 45.74 crores all the years from 2008-2012.
Amount Increase/Decrease
Year (In Crores) Trend % Base Year Previous Year
2008 930.85 100.00 0.00 0.00
2009 1280.24 137.53 37.53 37.53
2010 1491.11 160.19 60.19 22.66
2011 1251.62 134.46 34.46 -25.73
2012 866.57 93.09 -6.91 -41.37
Reserves & surplus shown an increasing trend in the period between 2008 and
2010. The average trend was 132.77 % till 2010.
The Reserves & surplus was showing decreasing trend in the period 2011-2012
(i.e. from 160.19 % in 2010 to 93.09 % in 2012).
The decreasing trend in Reserves & surplus indicates the decrease in profits of the
firm.
Amount Increase/Decrease
Year (In Crores) Trend % Base Year Previous Year
2008 47.83 100.00 0.00 0.00
2009 61.78 129.17 29.17 29.17
2010 51.43 107.53 7.53 -21.64
2011 65.82 137.61 37.61 30.09
2012 66.36 138.74 38.74 1.13
The investments are shown an increasing trend in the period between 2008 – 2009
and it is decreasing in the year 2010.
The average trend was 114.58. % till 2009.
The investments increased in the periods 2011-2012 (i.e. from 107.53 % in 2010 to
138.74 % in 2012).
The overall trend in investments shown is satisfactory.
Amount Increase/Decrease
Year (In Crores) Trend % Base Year Previous Year
2008 307.61 100.00 0.00 0.00
2009 569.54 185.15 85.15 85.15
2010 770.37 250.44 150.44 65.29
2011 1104.17 358.95 258.95 108.51
2012 686.13 223.05 123.05 -135.90
Current Ratio:-
Current assets are cash in hand, Cash at bank, Marketable Securities(short term) short
term Investment, Bills receivables, sundry debtors, Inventories, (stock) Work in progress,
prepaid expenses. Current Liabilities are outstanding expenses, Bills payable, sundry
Creditors, short-term advances, income tax payable and Dividend payable.
(Rupees in crores)
Interpretation:-
As per the standard rule of current ratio i.e., 2:1 where current assets double the current
liabilities is considered satisfactory.
In the present analysis the current ratio of the Kesoram is not satisfactory
from the above table. It was assessed that the current ratio for all the five year is lower
(less) than the standard rule i.e., 2:1. And it is 0.97 in the year 2011-2012 (current year).
This is highly UN satisfactory.
Interpretation:-
Usually a high Quick ratio is an indication that the company is liquid and has the ability to
meet its current or liquid liabilities in time on the other hand a low Quick Ratio represents
Leverage Ratios:-
Debt-Equity Ratio:-
Debt-Equity Ratio = Total Long Term Debt/ Equity Share Holders Fund
Total Long term Debt= Debenture Capital + Long term loans from banks and financial
institutions + Public deposits.
(Rupees in crores)
The Debt-Equity Ratio accepted standard is 0.5. This ratio reflects the relative contribution of
creditors and owners of business in its financing. From the above it is clear that the long term
debt is more than that of the share holders’ fund. So we can interpret that the firm’s assets are
financed more by the external funds rather than by the internal funds.
(Rupees in crores)
Interpretation:
This ratio indicates the extent to which the assets of the company’s can be lost without
affecting the interest of the creditors of the company. Higher the ratios better the long-
term position of the company.
The above table shows fixed assets ratio in increasing trend. Which is good for the
company?
Interpretation:
It establishes a relationship between net profits after tax and net sales, and
indicates the efficiency of the management in manufacturing, selling, administrative and
other activities of the company.
The higher the ratio the better is the profitability or performance of the business.
The above table depicts the net profit Ratio of Kesoram has decreased every year from
2007-2008 to 2011-2012.It further decreased to negative in the year 2010-11 to -5.22 and -
6.44 in the year 2011-2012. This shows constant decrease in the profits of the company.
Net Profit
Return on Investment = ………………………………. X 100
Share Holders Fund
Interpretation:-
The above table reveals how well the resources of the firm are being used.
Higher the ratio, better the result. The above ratio implies how well the firm is growing in
terms of profitability and efficiency. From the above table we can concern that the return
on investment is in decreasing trend. ROI is highest in the year 2007-2008 as 38.62 %.
But there after it’s decreased every year.
The ROI is negative in the years 2010-2011 & 2011-2012 as -21.67 & -41.65 respectively.
Which is not a good sign for the firm?
Interpretation:-
The above table depicts return on Equity Capital Employed Ratio of Kesoram has
decreased every year from 2007-2008 to 2010-2011.It further decreased to negative in the
year 2011-12 to -32.80.which shows constant decrease in the returns of the company.
Reserves & surplus were recorded an increasing trend in the period between 2008
and 2010.It is showing decreasing trend in the period 2011-2012 (i.e. from 160.19
Provisions increased to 2625.97 % i.e., in Rupees 392.32 crores in the current year.
The current ratio for all the five year is lower (less) than the standard rule i.e., 2:1.
And it is 0.97 in the year 2011-2012 (current year).
The Debt-Equity Ratio was shown under the standard ratio. It is clear that the long
term debt is more than that of the share holders’ fund. It indicates that the firm
The operating and net profit of Kesoram is in decreasing trend due to heavy
increase of manufacturing & administrative expenses.
ROI is highest in the year 2007-2008 as 38.62 %. The ROI is negative in the years
2010-2011 & 2011-2012 as -21.67 & -41.65 respectively.
Return on Equity Capital Employed Ratio of Kesoram has decreased every year
to -32.80.
EPS of Kesoram has decreased every year from 2008-12.It is negative in the year
The company’s debt-equity ratio is recorded more or less as 1.11 in the year 2008
and it is increased to 4.49 in the year 2012 (current year).The company should
adopt a better debt equity mix in the future to control the fluctuations in returns.
The company should control fluctuations in cash and bank balances as it impacts
the current ratio of the company.
The provisions are showing increasing trend which indicates risk of debtors. The
firm should implement an effective credit management policy. It should utilize its
Years
Particulars 2008 2009 2010 2011 2012
Liabilities
Share Capital 45.74 45.74 45.74 45.74 45.74
Reserves & Surplus 930.85 1280.24 1491.11 1251.62 866.57
Revaluation Reserves 5.33 4.12 3.39 2.89 2.7
Loans
Secured Loans 971.06 1536.27 1863.72 2371.83 3177.92
Un Secured Loans 121.29 434.16 1262.5 1627.44 927.42
Deferred Tax Liabilities 0 0 0 0 0
Current Liabilities
Provisions 330.39 345.29 357.34 14.94 407.26
Current Liabilities 570.67 665.87 1076.88 1139.02 1800.1
Equity Dividend
(%) 9.99 55 55 55 55
Shares in Issue
(Lakhs) 457.43 457.43 457.43 457.43 457.43
EPS - Annualised
(Rs) -83.02 -45.95 51.88 82.8 83.8