CHAPTER I

INTRODUCTION

1
 INTRODUCTION
Ratio analysis is a powerful toll of financial analysis. A ratio in defined as the
indicated quotient of two mathematical expressions. In financial analysis, a ratio Is
used as a bench mark for evaluating the financial position and performance of the
firms. The absolute accounting figures reported in the financial statements do
not provide a meaningful understanding of the performance and financial position
of the firms. An accounting figure conveys meaningful when it is related to some
other relevant information. The relation between 2 accounting figures, expressed
mathematically is known as a financial ratio, ratios helps to summaries the large
quantities of financial data and to make qualitative judgment about the firm’s
financial performance.

Ratio analysis is a widely used tool of financial analysis. A ratio is

defined as the “indicated quotient of two mathematical expressions” and “a
relationship between two or more things.” It is the process of identifying the
financial strengths and weaknesses of the firm by properly establishing
relationship between the items of the balance sheet and the profit and loss
account.

The importance of accounting ratio i.e., relationship between worked out

among various accounting data, which are mutually interdependent and which
influence each other in a significant manner, arises from the fact that often
absolute figures standing alone convey no meaning.

Ratio analysis is therefore an attempt to present the information in the

financial statement in a simplified I systematized form.

2
 OBJECTIVES OF THE STUDY

The main objectives of the present study are as follows:-

 To study the change in the assets and liabilities position of the ULTRATECH
CEMENTS. during the period of the study.
 To study the financial performance of the company by using various financial
ratios.
 To suggest necessary measures for improving the performance of
ULTRATECH CEMENTS.
 To review the growth and working of ULTRATECH CEMENTS. during the
last five years.

3
NEED FOR THE STUDY:

THE MAIN NEED OF the study is to analyze the financial information of

the ULTRATECH CEMENTS

 To compare the current year to year financial information with

previous year financial information to evaluate the performance of
ULTRATECH CEMENTS company.
 To measure the management ability to keep the operating expenses
properly control for level sales Achieved.
 To find out of the liquidity or short term solvency of the
ULTRATECH CEMENTS.
 To know the different types of ratio analysis and how it shows impact
on different organizations.
 To know the short term surviving ability of the company.

4
SCOPE OF THE STUDY

 Cover profitability ratios to study profitability position, turnover ratios to

study trade performance, solvency ratios to study long term financial position
and liquidity ratios for studying short term financial performance.
 It is concerned towards a development of finance.
 The study is limited toward the balance sheets of Ultratech Cements Ltd.

5
 RESEARCH METHODOLOGY

The study has been conducted in the organization to examine working capital
management in order to enquire into the issues like liquidity, and material management.
The study has been undertaken in the accounting is finance department of the
organization.

Primary Source:
Primary source data is the data which has been collected directly from the people
of the organization it is also called as first hand data. The primary data is collected by
discussion with the functional managers, officers, staff and other member of the
organization.

6
Secondary Source:
Secondary data is those which have been already collected by some agency and
which have been processed. The secondary data is obtained from annual report and
financial statement that is balance sheet and profit and loss account, annual reports,
journals, and other informational publications of the organization and from the text books
of the financial management.
Tools of analysis:

The tools like mathematical average, percentages, bar charts etc., are used
to analyze the data.

LIMITATIONS OF THE STUDY

 The study is limited to a particular period i.e., F.Y 2016-2017 to F.Y 2020-21, a
period of 5 financial year.
 Most of the date collected from secondary date and there may be a chance for
bias.
 The study about the company is useful only where it is compared with standards
of the industry.

7
 CHAPTER - II
REVIEW OF LITERATURE

8
 REVIEW OF LITERATURE

RATIO ANALYSIS

Ratio analysis is a powerful toll of financial analysis. A ratio in defined as

the indicated quotient of two mathematical expressions. In financial analysis, a
ratio Is used as a bench mark for evaluating the financial position and
performance of the firms. The absolute accounting figures reported in the
financial statements do not provide a meaningful understanding of the performance
and financial position of the firms. An accounting figure conveys meaningful when
it is related to some other relevant information. The relation between 2 accounting
figures, expressed mathematically is known as a financial ratio, ratios helps to
summaries the large quantities of financial data and to make qualitative judgment
about the firm’s financial performance.

Ratio analysis is a widely used tool of financial analysis. A ratio is defined as

the “indicated quotient of two mathematical expressions” and “a relationship
between two or more things.” It is the process of identifying the financial
strengths and weaknesses of the firm by properly establishing relationship
between the items of the balance sheet and the profit and loss account.

The importance of accounting ratio i.e., relationship between worked out among
various accounting data, which are mutually interdependent and which influence
each other in a significant manner, arises from the fact that often absolute figures
standing alone convey no meaning.

Ratio analysis is therefore an attempt to present the information in the financial

statement in a simplified I systematized form.

Ratios are expressed in various forms stated below:

9
  Percentage method
 Rate method
 Simple ratio method
Percentage method: In this method the relation between two items is expressed .n a
hundredth proportion.
Example: Gross Profit is 25% on sale
Rate method: Here the ratio between two numerical facts is expressed over a period of
time say, stack turnover ratio is 4.2 tons a year (or) fixed asset turnover shows that the
sales during the period are 3.5 times more than the fixed assets.
Pure or simple ratio: Here the numerical are expressed as quotient. E.g., the current ratio
could be current assets/ current liabilities i.e., 5,00,000 / 2,00,000 is equal to 2.5.

Standards of Comparison:
The ratio involves comparison for a useful interpretation of the financial statements. A
single ratio in credit does not indicate favorable an unfavorable condition. It shod be
compared with same standard.

Standard of comparison may consist of:

 Project ratios – Ratios developed using the projected or perform, financial
statements of the same firm.
 Competitor’s ratios – ratios of same selected firms especially the most progressive
and successful competitions at the same permit of time.
 Industry ratios – ratios of the industry to which the firm belongs.

1. Time Series Analysis:

The easiest way to evaluate the performance of the firm is to compare its current ratios
aim the past ratios. When financial ratios over a period of time are compared it is known
as the time series analysis. It gives an indication the direction of change and
Reflects where the firm’s financial performance has improved deteriorated or remained
constant over time.

10
 The analyst should not simply determine the change, but more importantly, he should
understand why ratios have changes. The change, for example, may be effected by
changes in the accounting policies without a material change in the firm’s performance.

2. Performa analysis:
Sometimes – future ratios are used as the standards of comparison. Future ratios
can be developed from the projected (or) proforma financial statements. The comparison
of current (or) past ratios with future ratios shows the firm’s relative strengths and
weaknesses in the past and in the future. If we future ratios indicate weak financial
position, corrective action should be initiated.

3. Cross sectional analysis:

Another way of comparison is to compare ratios of one firm with same
selected firms in the same industry at the same point of time. This comparison is known
as cross – sectional analysis. In most cases, it is more useful to compare the firm’s ratios
with ratios of a few carefully selected competitors, who have similar operations. This
kind of a can easily resort to such a comparison, as it is not difficult to get the published
financial statements of similar firms.

4. Industry analysis:
To determine the financial condition and performance of a firm, its ratios may
be compared with average ratios may be compared with average ratios of the industry of
which the firm is a member. This sort of analysis, known as the industry analysis, helps to
ascertain the financial standing of the firm vis-à-vis other firms in the industry. Industry
ratios are important standards in view of the fact that each industry has it characteristics,
which influence the financial and operating relationship
Importance of ratio analysis:

11
 The importance of ratio analysis lies in the fact that it presents facts on a
comparative basis and enables the drawing of inferences the performance of the firm.

1. Liquidity position:

With the help of ratio analysis, conclusion can be drawn regarding the liquidity of a
firm. The liquidity position of a firm would be satisfactory if tit is able to meet its current
obligation, when they become due. A form can be said to have the ability to meet its
short-term liabilities if it has sufficient liquid funds to pay the interest on its short
maturity debt usually within a year ad well as the prinicipal. This ability is reflected in
the liquidity ratios of a firm. The liquidity ratios are particularly useful in credit analysis
by banks and suppliers of short term loans.

2. Long term solvency:

Ratio analysis is equally useful for assessing the long term financial
viability of a firm. This aspect of the financial position of a borrower is of concern to the
long-term creditors, security analysis and the present and potential owners of a business.

The long term solvency is measured by the leverage/ capital structure and
profitability ratios which focus on the earning power and operating efficiency. Ratio
analysis reveals the strengths and weakness of a firm in this respect. The leverage ratios,
for instance, will indicate whether a firm has a reasonable proportion of various sources
of finances or whether loaded with debt in which case in solvency is exposed to serious
strain. Similarly, the various profitability ratios would reveal whether or not the firm is
able to often adequate return to its owners consistent with the risk involved.
3. Operating Efficiency:
Yet another dimension of the utility of ratios analysis, relevant from
the view point of mgt, is that it throws light on the degree of efficiency in
the mgt and utilization of its assets. It would be recalled that the various

12
 activity ratios measure this kind of operational efficiency. In fact, the solvency
of affirm is, in the ultimate analysis, dependent upon the sales revenue
generated by the use of its assets total as well as its components.

4. overall profitability :
unlike the outside parties, which are interested is one aspect of the
financial position of the firm; the mgt is constantly concerned about the overall
profitability of the enterprise. That is, they are concerned about the ability of the
firm to meet its short terms as well as long term obligations to its creditors, to
ensure reasonable returns to its owners and secure an optimum utilization of the
assets of the firm.

5. Interfirm comparison :

Ratio analysis not only throws light on the financial position of a firm
but also serves as a stepping stone to remedial measures. This is made possible
by comparison with industry average / inters firm comparison . A single ratio is a
meaningless unless it is related to same standard or normal one of the popular
techniques is to compare the ratios of a firm with the industry average. It should
be reasonably expected that the performance of firms should in board conformity
with the industry it belongs. An interface would demonstrate the comparative
performance of a firm vis-a-vis it competitors. In case of any variance, remedial
measures should be taken .

6. Trend Analysis :
Finally, ratio analysis enables a firm to take the time dimension into
account . In other words, whether the financial position of improving deteriorate years .
This is made possible by the use of trend analysis . The significance of trend

13
Analysis lies in the fact that the analysis can know the direction of movement i.e.
favorable (or) unfavorable.

Limitation of ratio analysis :

Some of the limitations that characteristics ratio analysis are :

1. Difficulty in comparison : are serious limitation of ratio analysis arises out

of the difficulty associated with their comparison to draw inferences. One
technique that is employed is inter-firm comparison.

Secondly, apart from different accounting procedures, companies may have

different accounting periods , implying difference in the composition of the assets,
particularly current assets.
Another basis of comparison is the industry average. This pre supposes
the availability on a comprehensive scale of various ratios for each industry group
over a period of time.

2. Impact of inflation :
The second major limitation of the ratio analysis as a tool of financial
analysis is associated with price level changes. This is infact, is a weekness of the
traditional financial statements which are based on historical costs.
The one implication of this feature of the financial statements as regards ratio
analysis is that assets acquired for different periods are, in effect, shown at different
prices in the balance sheet, as they are not adjusted for changes in the price level.
As a result, ratio analysis will not yield strictly comparable and therefore, dependable
results.
3. Conceptual diversity :

Yet another faced affecting the utility of ratios is that there is a

difference of opinion regarding the various concepts used to compute the ratios.
Different firms may use these terms in different serves or the same firm may use
14
them to mean difficult things at different times. Finally, ratios are the position in
the interim period in not revealed by ratio analysis. It also gives no due to the future.

Types of ratios:

Several ratios, calculated from the accounting data, can be grouped into various
classes according to financial activity or function to be evaluated. As stated earlier, the
parties interested in financial analysis are short and long term credit, owners &mgt. short-
term creditors main interest is in liquidity position (or) the short term solvency of the
firm. Long term solvency and profitability of the firm. Similarly owners concentrate on
the firm’s profitability and financial condition. Mgt. is interested in evaluating every
aspect of the firm’s performance. They have to protect the interested of all parties and see
that the firm grows profitability.’

In view of requirements of the various users of ratios we may classify

them into the following.
Four important categories.
 Liquidity ratios
 Leverage ratios
 Activity ratios
 Profitability ratios

I. LIQUIDITY RATIO :
It is extremely for a firm to be able to meet its obligation as they became due.
Liquidity ratios measure the ability of the firm to meet it current obligations. Liquidity
ratios, by establishing a relationship between cash and other assets to current obligations,
provide a quick measure of liquidity. A firm should ensure that it doesn’t suffer from lack
of liquidity and also that it does not have excess liquidity. The failure of a company to its
obligations due to lack of sufficient liquidity, will result in poor credit worthiness, loss of
creditor’s confidence, or even in legal tangles resulting in the closure of the company. A

15
very high degree of liquidity in also bad. Idle assets earn nothing. The firm’s funds – will
be unnecessarily tied up in current assets. Therefore, it is necessary to strike a proper
balance between high liquidity and lack of liquidity.

The most common ratios which indicates the extent of liquidity or lock of it are

1. Current ratios
2. Quick ratios
3. Cash ratios
4. Net working capital ratio.

Current Ratio:

The current ratio is calculated by dividing current assets by current liabilities. Current
assets include cash and those which can be converted into cash with in a year. Such as
marketable securities, debtors and inventories, prepaid expenses. Current liabilities and
long – term debt maturing in the current year. It indicates the avaibility of current assets
in rupees for everyone rupee of current liability. As a conventional rule, a current ratio of
2 to 1 or more is considered satisfactory.
The current ratio is the ratio of total assets to total liabilities. It indicated the
degree to which the enterprise will be in a position between current assets and current
liabilities. It

The current ratio can be expressed as under

Current Assets

Current Ratio = ---------------------------

Current Liabilities
16
Generally a current ratio of 2:1 or more considered satisfactory. It implies that Rs.2 assets
are available to every Rs.1 of liability.

Quick Ratio :

Quick ratio establishes a relationship between quick & liquid assets and
current liabilities. An asset is liquid if it can be converted into cash immediately or
reasonably soon without a loss of value. Cash is most liquid asset. Other assets which are
consider to be relatively liquid and included in quick assets are debtors and bills
receivable and marketable securities. Inventories to be less liquid. The quick ratio is
found out by dividing quick assets by current liabilities. Generally a quick ratio of 1 to 1
is considered to represent a satisfactory current financial position. Although quick ratio is
a more penetrating test of liquidity than the current ratio.

The quick ratio is usually expressed as a relation between the

Quick Assets = current assets – inventories.

Quick Assets
Quick
Quick Ratio : -------------------------

Current Liabilities

In general a quick ratio 1:1 is considered to represent a satisfactory current

financial position.

17
Net Working Capital Ratio:

Net working is sometimes used as a measure of a firm’s liquidity. Net

working capital ratio found out by dividing net assets. Here net working capital in
difference between current assets and current liabilities.

Net Working Capital Ratio = Net working capital

Net Assets

Cash Ratio :

Cash ratio = Cash & Bank balances+Current investment

Current Liabilities

II. LEVERAGE RATIO :

To judge the long –term financial position of the firm. Financial leverage
ratios are calculated. These ratios indicate mix of funds provided by owners and
lenders. As a general rule there should be an appropriate mix of debt and owners
equity in financing the firm’s assets.
Several debt ratios may be used to analyze long term solvency of a firm to
compute. Debt ratio by dividing total debt by capital employed. Total debt includes
long-term and short term borrowings from financial instructions, differed payments

18
arrangement for buying capital equipments, bank borrowings and any other interest
bearing loan. Capital employed includes total debt and net worth.
Debt equity ratio directly computed by dividing total debt by net worth.
There is yet another alternative way to expressing the basic relationship between
debt and equity, i.e., capital employed to net worth ratio. It indicates how fund, are
being contributed together by lenders and owners for each rupee of the owners
contributions.
There are different types of leverage ratios:

Debt – Equity Ratio:

The debt-equity ratios are the measure of the relative claims of creditors and
owners against in financing the assets of the firm.
One approach is to express the debt – equity in terms of the relative proportion of
long-term shareholders equity I.e.,

Long term debt

Debt –Equity Ratio= ---------------------------
Share holders equity

Proprietary Ratio:-

A variant to the debt –equity ratio is the proprietary ratio which is also
known as Equity Ratio or shareholder to Total Equities Ratio or Net Worth to Total
Assets Ratio. This ratio establishes the relationship between shareholders funds to total
assets of the firm.

Share holder’s funds

19
Proprietary Ratio = -------------------------------------

Total assets
Total debt Ratio:

The firm may be interested in knowing the proportion of the interest bearing
debt in the structure. It may therefore compute debt ratio by diving total debt by capital
employed.

Total Debt

Total debt Ratio = -------------------------

Capital Employed

Ratio of current assets to proprietor’s funds:

This ratio indicates the extent to which proprietor’s funds are invested in current
assets by the amount of shareholders funds.

Current Assets

Ratio = -------------------------

Shareholder’s funds

20
III. ACTIVITY RATIO :

Activity ratios are employed to evaluate the efficiency with which the firm
manages and utilizes its assets. These ratios are also called turnover ratios because
they indicate the speed with which assets are being converted or turned over into
sales, activity ratios, thus , involve a relation between sales and assets. A people
balance between sales and assets generally reflects that assets are managed well.
Several activity ratios can be calculated to judge the effectiveness of asset utilization.

Inventory turnover ratio indicates the efficiency of firm producing and selling
its products. It calculated by dividing cost of goods sold by the average inventor)’.
And we have to calculate, Days of inventory holding by 360dividing by inventory
turnover.

Debtor’s turnover in found out by dividing credit sales by average debtors.

To computer average collection period by 360 divided by debtor’s turnover it
indicates firms credit policies stringent or liberal.

Assets are used to generate sales therefore, a firms should manage it assets
effectively to maximize sales. The relation between sales and assets is called assets
turnover.
A firm may also like to relate net working capital (current assets – current
liabilities) sales. it may thus computer net working capital turnover by dividing sales
by working capital.

Activity turnover ratios:

Activity ratios are concerned with measuring the efficiency in asset

management and also called efficiency ratios are acid utilization. Asset utilization
ratios turn over is the primary mode for measuring the extent of efficiency

21
employment of assets by relating assets to sales. An activity ratio may therefore have
defined as a test of the relationship between sales and various assets of the firm.

Inventory turnover ratio:

The inventory, or stock, indicates the efficiency of the firm’s inventory
management.

Cost of goods sold

Inventory Turnover Ratio = -------------------------
Average inventory

Here average inventory implies opening inventory plus closing inventory divided
by two.
Debtors Turnover ratio:

Debtors Turnover ratio indicates the velocity of debt collection of firm. In simple
terms it indicates the number of times average debtors (receivables) are turned over
during a year.

Total (gross) sales

Debtors Turnover Ratio= -----------------------
Debtors

Fixed assets turnover ratio:

The fixed assets turnover ratio measure the efficiency with which is utilizing its
investment is fixed assets. It also indicated in adequacy of sales in relation to be the
investment in fixed assets.

22
 Sales
Fixed assets Turnover Ratio = --------------------------
Fixed assets

Current Assets turnover Ratio:

This ratio attempts to measure the utilization and effectiveness of the use of
Current assets. It is ratio between cost of sales and current assets. The formula is:

Sales
Current assets Turnover Ratio= ------------------
Current assets

Total As

sets Turnover Ratio:

This ratio is also called the investment turnover ratio as the investment of
the firm lay in its procurement of assets. The firm must manage its total assets efficiency
and should generate maximum sales through their proper utilization. The total assets
turnover is calculated by dividing sales by total assets of the firm.

Net sales
Total Assets Turnover Ratio = ----------------
Total assets

Working Capital Turnover Ratio:

Working capital Turnover Ratio indicates the velocity of the utilization of net
working capital.

23
 Cost of Goods Sold or Sales
Working Capital Turnover Ratio = -------------------------------------------
(Average) Working Capital

This working capital turnover ratio can further be segregated into inventory
turnover ratio, debtor’s turnover ratio and creditors turnover ratio.

Fixed assets to Current assets Ratio:

The ratio shows the relation between the fixed assets and the current assets,
the formula is:

Fixed assets
Fixed assets to Current assets Ratio= -----------------------
Current assets

PROFITABILITY RATIO:

24
 The profitability ratios are calculated to measure the operating efficiency of
company in terms of profit. Besides management of the company, creditors and owners
are also interested in the profitability of the firm creditors want to get interest and
repayment of principle regularly. Owners want to get acquired rate of return on their
investment this is possible only company earns enough profits.
Generally two major types of profitability ratios are calculated. Profitability in
relation to sales Profitability in relation to investment.

The first profitability ratio in relation to sales is the gross profit margin. It is
calculated by dividing gross profit by sales here gross profit it sales cost of goods sold
gross profit margin reflects the efficiency-with which management produces each unit of
product. The ratio indicates the average spread between the cost of goods sold and the
sales revenue.

Net profit margin is obtained by dividing profit after tax by sales. Net profit
margin ratio establishes relationship between net profit and sales indicates management’s
efficiency in manufacturing, administrating and selling the products. This ratio the
overall measure of the firm’s ability to turn each rupee sales into net profit. If the net
margin inordinate, the firm will fail to achieve satisfactory return on shareholder’s funds.

Profitability is a measure of efficiency and the search for it provides an incentive

to achieve efficiency. The operating efficiency of a firm and its ability to ensure adequate
return to its shareholders depends ultimately on the profits earned by it.

It is the difference between total revenues and total expenses over a period of
time. Generally, two major types of profitability ratios are calculated.

 Profitability in relation to sales.

 Profitability in relation to investment.

25
1. PROFITABILITY IN RELATION TO SALES:

These ratios are based on the premise that a firm should earn sufficient profit
on each rupee of sales. In this the ratios consists of

Profit Margin: This profit margin measures the relationship between profit and sales.
There are two types of profit margins.

(a) Gross Profit ratio:

This is also known as gross margin. It is calculated by dividing gross profit by sales.

Gross Profit
Gross Profit= -------------------------X100
Net sales

(b)Net Profit Ratio:

This ratio is also known as net margin. This measures the relationship between net
profits and sales of f firm.

Net profit after Tax

Net profit Ratio = ------------------------------- X100

Net sales

26
2. PROFITABILITY IN RELATION TO INVESTIMENT

The profitability ratios can also be computed by relating the profit of a firm to
investment.

(a) Return on Investment:

It is also known as “overall profitability ratio”, it indicates earning gained from

investment. It shows relationship between earning before interest and taxes to capital
employed
.

EBIT
Return on Investment = ----------------------------- X100

Capital employed

(b) Return on capital employed:

It shows relationship between profits after taxes before interest to capital
employed. Capital employed refers to long –term funds provided by owners.

profile after tax + interest

Return on capital employed = --------------------------
Capital employed

27
(c) Earnings per share:

This ratio helps in assessment of the profitability of the firm from the standpoints
of equity shareholders. It calculates the earning per each equity share.

Profit after tax

Earnings per share = ------------------------
No. of shares

MANAGERIRAL USES OF RATIO ANALYSIS:

 Helps in decision – making:

 Helps in financial forecasting and Planning:
 Helps in communicating:
 Helps in co-ordination:
 Other uses;
 Utility to shareholders / investors:
 Utility to employees:
 Utility to government:

28
IMPORTANCE OF RATIO ANALYSIS :
The importance of ratio analysis lies is the present facts on a comparative
basis and enables the drawing of inferences regarding the performance of the firm.
Ratio analysis is relevant in assessing the performance of a firm in the respect of the
following points.

LIQUIDITY POSITION:

The liquidity position of a firm would be satisfactory if it is able to meet its

current obligations when they are due. A firm can be said to have the ability to meet
its short-term liabilities if it has sufficient liquid funds to pay the interest on its short
maturing debt usually within a year as well as the principal. With the help of ratio
analysis conclusions can be drawn regarding the liquidity position of the company.

OPERATING EFFICIENCY:

It is relevant from the view point of management and it throws light on the
degree of efficiency in the management and utilization of its assets. The ultimate
analysis depends upon the sales revenue generated by the use of its asset total as well
as its components.

LONG TERM SOLVENCY:

The long-term solvency is measured by the leverage/capital structure and
profitability ratios which focus on earning power and operating efficiency. Ratio
analysis reveals the strength and weaknesses of a firm in this respect. The leverage
ratio for instance, will indicate whether a firm has a reasonable proportion of various
sources of finances or whether heavily loaded with debt in which case its solvency is

29
exposed to serious strain. Similarly, the various profitability ratios would reveal
whether or not the firm is able to offer adequate return to its owner consistent with
risk involved.

OVER-ALL PROFITABILITY:

Overall profitability is possible if an integrated view is taken and ratios are

considered to ensure a reasonable to the owners and secure optimum utilsation of the
assets the firm.
SIGNIFICATION OF RATIO ANALYSIS:

Ratio is significant in both vertical and horizontal analysis. In vertical analysis

ratios help the analyst to term a judgment whether the performance of the firm at a
given point of time is in good position or not use of ratio in horizontal analysis
indicates whether the financial condition of the firm is improving or deteriorating and
whether the cost profitability of efficiency is showing an upward profitability or
downward trend.

LIMITATION OF RATIO ANALYSIS:

The ratio analysis is one of the most powerful tools of financial management.
Through ratios are simple to calculate and easy to understand, they suffer from some
serious limitations.

 Limited Use of a Single Ratio

 Lack of Adequate Standards
 Inherent Limitations of Accounting
 Change of Accounting Procedure
 Window Dressing
 Personal bias

30
 Incomparable

31
 CHAPTER-III
INDUSTRY PROFILE
&
COMPANY PROFILE

32
 COMPANY PROFILE
ULTRATECH CEMENT:

UltraTech Cement Limited has an annual capacity of 18.2 million tonnes. It manufactures
and markets Ordinary Portland Cement, Portland Blast Furnace Slag Cement and
Portland Pozzalana Cement. It also manufactures ready mix concrete (RMC).

UltraTech Cement Limited has five integrated plants, six grinding units and three
terminals — two in India and one in Sri Lanka.

UltraTech Cement is the country’s largest exporter of cement clinker. The export markets
span countries around the Indian Ocean, Africa, Europe and the Middle East.
UltraTech’s subsidiaries are Dakshin Cement Limited and UltraTech Ceylinco (P)
Limited.

The roots of the Aditya Birla Group date back to the 19th century in the picturesque town
of Pilani, set amidst the Rajasthan desert. It was here that Seth Shiv Narayan Birla started
trading in cotton, laying the foundation for the House of Birlas.

Through India's arduous times of the 1850s, the Birla business expanded rapidly. In the
early part of the 20th century, our Group's founding father, Ghanshyamdas Birla, set up
industries in critical sectors such as textiles and fibre, aluminium, cement and chemicals.
As a close confidante of Mahatma Gandhi, he played an active role in the Indian freedom
struggle. He represented India at the first and second round-table conference in London,
along with Gandhiji. It was at "Birla House" in Delhi that the luminaries of the Indian
freedom struggle often met to plot the downfall of the British Raj.

Ghanshyamdas Birla found no contradiction in pursuing business goals with the

dedication of a saint, emerging as one of the foremost industrialists of pre-independence
India. The principles by which he lived were soaked up by his grandson, Aditya Vikram
Birla, our Group's legendary leader.

33
Aditya Vikram Birla: putting India on the world map

A formidable force in Indian industry, Mr. Aditya Birla dared to dream of setting up a
global business empire at the age of 24. He was the first to put Indian business on the
world map, as far back as 1969, long before globalisation became a buzzword in India.

In the then vibrant and free market South East Asian countries, he ventured to set up
world-class production bases. He had foreseen the winds of change and staked the future
of his business on a competitive, free market driven economy order. He put Indian
business on the globe, 22 years before economic liberalisation was formally introduced
by the former Prime Minister, Mr. Narasimha Rao and the former Union Finance
Minister, Dr. Manmohan Singh. He set up 19 companies outside India, in Thailand,
Malaysia, Indonesia, the Philippines and Egypt.

Interestingly, for Mr. Aditya Birla, globalisation meant more than just geographic reach.
He believed that a business could be global even whilst being based in India. Therefore,
back in his home-territory, he drove single-mindedly to put together the building blocks
to make our Indian business a global force.
Under his stewardship, his companies rose to be the world's largest producer of viscose
staple fibre, the largest refiner of palm oil, the third largest producer of insulators and the
sixth largest producer of carbon black. In India, they attained the status of the largest
single producer of viscose filament yarn, apart from being a producer of cement, grey
cement and rayon grade pulp. The Group is also the largest producer of aluminium in the
private sector, the lowest first cost producers in the world and the only producer of linen
in the textile industry in India.

At the time of his untimely demise, the Group's revenues crossed Rs.8,000 crore globally,
with assets of over Rs.9,000 crore, comprising of 55 benchmark quality plants, an
employee strength of 75,000 and a shareholder community of 600,000.

Most importantly, his companies earned respect and admiration of the people, as one of
India's finest business houses, and the first Indian International Group globally. Through
this outstanding record of enterprise, he helped create enormous wealth for the nation,

34
and respect for Indian entrepreneurship in South East Asia. In his time, his success was
unmatched by any other industrialist in India.

That India attains respectable rank among the developed nations, was a dream he forever
cherished. He was proud of India and took equal pride in being an Indian.

Under the leadership of our Chairman, Mr. Kumar Mangalam Birla, the Group has
sustained and established a leadership position in its key businesses through continuous
value-creation. Spearheaded by Grasim, Hindalco, Aditya Birla Nuvo, Indo Gulf
Fertilisers and companies in Thailand, Malaysia, Indonesia, the Philippines and Egypt,
the Aditya Birla Group is a leader in a swathe of products — viscose staple fibre,
aluminium, cement, copper, carbon black, palm oil, insulators, garments. And with
successful forays into financial services, telecom, software and BPO, the Group is today
one of Asia's most diversified business groups.

Board of Directors
:: Mr. Kumar Mangalam Birla, Chairman
:: Mrs. Rajashree Birla
:: Mr. R. C. Bhargava
:: Mr. G. M. Dave
:: Mr. N. J. Jhaveri
:: Mr. S. B. Mathur
:: Mr. V. T. Moorthy
:: Mr. O. P. Puranmalka
:: Mr. S. Rajgopal
:: Mr. D. D. Rathi
:: Mr. S. Misra, Managing Director
Executive President & Chief Financial Officer
:: Mr. K. C. Birla

35
Chief Manufacturing Officer
:: R.K. Shah

Chief Marketing Officer

:: Mr. O. P. Puranmalka

Company Secretary
:: Mr. S. K. Chatterjee

Our vision

"To actively contribute to the social and economic development of the communities
in which we operate. In so doing, build a better, sustainable way of life for the
weaker sections of society and raise the country's human development index."

— Mrs. Rajashree Birla, Chairperson,

The Aditya Birla Centre for Community Initiatives and Rural Development

36
Awards won
Year Award
Asociated with Govrmnent projects & Business World FICCI-SEDF
2013-2014
CSR Award
ASSOCHAM CSR Excellence Award for its "truly outstanding" CSR
2012-2013
activities
2011-2012 Subh Karan Sarawagi Environment Award
2010-2011 Business World FICCI-SEDF CSR Award
2010-2011 Greentech Environment Excellence Gold Award
2010 IMC Ramkrishna Bajaj National Quality Award
2010 Asian CSR Award
2010 National Award for Prevention of Pollution
2009-2010 Rajiv Gandhi Environment Award for Clean Technology
2009-2010 State Level Environment Award (Plant)

Making a difference
Before Corporate Social Responsibility found a place in corporate lexion, it was
already textured into our Group's value systems. As early as the 1940s, our founding
father Shri G.D Birla espoused the trusteeship concept of management. Simply stated,
this entails that the wealth that one generates and holds is to be held as in a trust for our
multiple stakeholders. With regard to CSR, this means investing part of our profits
beyond business, for the larger good of society.

While carrying forward this philosophy, his grandson, Aditya Birla weaved in the
concept of 'sustainable livelihood', which transcended cheque book philanthropy. In his
view, it was unwise to keep on giving endlessly. Instead, he felt that channelising
resources to ensure that people have the wherewithal to make both ends meet would be
more productive. He would say, "Give a hungry man fish for a day, he will eat it and the
next day, he would be hungry again. Instead if you taught him how to fish, he would be
able to feed himself and his family for a lifetime."
37
Taking these practices forward, our chairman

Mr. Kumar Mangalam Birla institutionalised the concept of triple bottom line
accountability represented by economic success, environmental responsibility and social
commitment. In a holistic way thus, the interests of all the stakeholders have been
textured into our Group's fabric.

The footprint of our social work today straddles over 3,700 villages, reaching out
to more than 7 million people annually. Our community work is a way of telling the
people among whom we operate that We Care.

Our strategy
Our projects are carried out under the aegis of the "Aditya Birla Centre for
Community Initiatives and Rural Development", led by Mrs. Rajashree Birla. The Centre
provides the strategic direction, and the thrust areas for our work ensuring performance
management as well.

Our focus is on the all-round development of the communities around our plants
located mostly in distant rural areas and tribal belts. All our Group companies —-
Grasim, Hindalco, Aditya Birla Nuvo, Indo Gulf and UltraTech have Rural
Development Cells which are the implementation bodies.

Projects are planned after a participatory need assessment of the communities

around the plants. Each project has a one-year and a three-year rolling plan, with
milestones and measurable targets. The objective is to phase out our presence over a
period of time and hand over the reins of further development to the people. This also
enables us to widen our reach. Along with internal performance assessment mechanisms,
our projects are audited by reputed external agencies, who measure it on qualitative and
quantitative parameters, helping us gauge the effectiveness and providing excellent
inputs.

Our partners in development are government bodies, district authorities, village

panchayats and the end beneficiaries -- the villagers. The Government has, in their 5-year

38
plans, special funds earmarked for human development and we recourse to many of
these. At the same time, we network and collaborate with like-minded bilateral and
unilateral agencies to share ideas, draw from each other's experiences, and ensure that
efforts are not duplicated. At another level, this provides a platform for advocacy. Some
of the agencies we have collaborated with are UNFPA, SIFSA, CARE India, Habitat for
Humanity International, Unicef and the World Bank.

Our focus areas

Our rural development activities span five key areas and our single-minded goal here is to
help build model villages that can stand on their own feet. Our focus areas are healthcare,
education, sustainable livelihood, infrastructure and espousing social causes.

The name “Aditya Birla” evokes all that is positive in business and in life. It exemplifies
integrity, quality, performance, perfection and above all
character.

Our logo is the symbolic reflection of these traits. It is the

cornerstone of our corporate identity. It helps us leverage the
unique Aditya Birla brand and endows us with a distinctive
visual image.

Depicted in vibrant, earthy colours, it is very arresting and shows the sun rising over two
circles. An inner circle symbolising the internal universe of the Aditya Birla Group, an
outer circle symbolising the external universe, and a dynamic meeting of rays converging
and diverging between the two.

Through its wide usage, we create a consistent, impact-oriented Group image. This
undoubtedly enhances our profile among our internal and external stakeholders.

Our corporate logo thus serves as an umbrella for our Group. It signals the common
values and beliefs that guide our behaviour in all our entrepreneurial activities. It embeds

39
a sense of pride, unity and belonging in all of our 130,000 colleagues spanning 25
countries and 30 nationalities across the globe. Our logo is our best calling card that
opens the gateway to the world.

Group companies
:: Grasim Industries Ltd.
:: Hindalco Industries Ltd.
:: Aditya Birla Nuvo Ltd.
:: UltraTech Cement Ltd.

Indian companies
:: Aditya Birla Minacs IT Services Ltd.
:: Aditya Birla Minacs Worldwide Limited
:: Essel Mining & Industries Ltd
:: Idea Cellular Ltd.
:: Aditya Birla Insulators
:: Aditya Birla Retail Limited
:: Aditya Birla Chemicals (India) Limited

International companies
Thailand
:: Thai Rayon
:: Indo Thai Synthetics
:: Thai Acrylic Fibre
:: Thai Carbon Black
:: Aditya Birla Chemicals (Thailand) Ltd.
:: Thai Peroxide

40
Philippines
:: Indo Phil Group of companies
:: Pan Century Surfactants Inc.
Indonesia
:: PT Indo Bharat Rayon
:: PT Elegant Textile Industry
:: PT Sunrise Bumi Textiles
:: PT Indo Liberty Textiles
:: PT Indo Raya Kimia
Egypt
:: Alexandria Carbon Black Company S.A.E
:: Alexandria Fiber Company S.A.E
China
:: Liaoning Birla Carbon
:: Birla Jingwei Fibres Company Limited
:: Aditya Birla Grasun Chemicals (Fangchenggang) Ltd.
Canada
:: A.V. Group
Australia
:: Aditya Birla Minerals Ltd.
Laos
:: Birla Laos Pulp & Plantations Company Limited
North and South America, Europe and Asia
:: Novelis Inc.
Singapore
:: Swiss Singapore Overseas Enterprises Pte Ltd. (SSOE)
Joint ventures

41
:: Birla Sun Life Insurance Company
:: Birla Sun Life Asset Management Company
:: Aditya Birla Money Mart Limited
:: Tanfac Industries Limited

UltraTech is India's largest exporter of cement clinker. The company's production

facilities are spread across eleven integrated plants, one white cement plant, one
clinkerisation plant in UAE, fifteen grinding units, and five terminals — four in India and
one in Sri Lanka. Most of the plants have ISO 9001, ISO 14001 and OHSAS 18001
certification. In addition, two plants have received ISO 27001 certification and four have
received SA 8000 certification. The process is currently underway for the remaining
plants. The company exports over 2.5 million tonnes per annum, which is about 30 per
cent of the country's total exports. The export market comprises of countries around the
Indian Ocean, Africa, Europe and the Middle East. Export is a thrust area in the
company's strategy for growth.

UltraTech's products include Ordinary Portland cement, Portland Pozzolana cement and
Portland blast furnace slag cement.

 Ordinary Portland cement

 Portland blast furnace slag cement
 Portland Pozzolana cement
 Cement to European and Sri Lankan norms

Ordinary Portland cement

Ordinary portland cement is the most commonly used cement for a wide range of
applications. These applications cover dry-lean mixes, general-purpose ready-mixes, and
even high strength pre-cast and pre-stressed concrete.

Portland blast furnace slag cement

42
Portland blast-furnace slag cement contains up to 70 per cent of finely ground, granulated
blast-furnace slag, a nonmetallic product consisting essentially of silicates and alumino-
silicates of calcium. Slag brings with it the advantage of the energy invested in the slag
making. Grinding slag for cement replacement takes only 25 per cent of the energy
needed to manufacture portland cement. Using slag cement to replace a portion of
portland cement in a concrete mixture is a useful method to make concrete better and
more consistent. Portland blast-furnace slag cement has a lighter colour, better concrete
workability, easier finishability, higher compressive and flexural strength, lower
permeability, improved resistance to aggressive chemicals and more consistent plastic
and hardened consistency.

Portland Pozzolana cement

Portland pozzolana cement is ordinary portland cement blended with pozzolanic

materials (power-station fly ash, burnt clays, ash from burnt plant material or silicious
earths), either together or separately. Portland clinker is ground with gypsum and
pozzolanic materials which, though they do not have cementing properties in themselves,
combine chemically with portland cement in the presence of water to form extra strong
cementing material which resists wet cracking, thermal cracking and has a high degree of
cohesion and workability in concrete and mortar.

"As a Group we have always operated and continue to operate our businesses as
Trustees with a deep rooted obligation to synergise growth with responsibility."

— Mr Kumar Mangalam Birla, Chairman, Aditya Birla Group

The cement industry relies heavily on natural resources to fuel its operations. As these
dwindle, the imperative is clear — alternative sources of energy have to be sought out
and the use of existing resources has to be reduced, or eliminated altogether. Only then
can sustainable business be carried out, and a corporate can truly say it is contributing to
the preservation of the environment. UltraTech takes its responsibility to conserve the
environment very seriously, and its eco-friendly approach is evident across all spheres of

43
its operations. Its major thrust has been to identify alternatives to achieve set objectives
and thereby reduce its carbon footprint. These are done through:

:: Waste management
:: Energy management
:: Water conservation
:: Biodiversity management
:: Afforestation
:: Reduction in emissions

Importantly, UltraTech has set a target of 2.96 per cent reduction in CO2 emission
intensity, at a rate of 0.5 per cent annually, up to 2015-16, with 2009-10 as the baseline
year. This will also include CO2 emissions from the recently acquired ETA Star Cement
and upcoming projects.

Our strategy

Our projects are carried out under the aegis of the "Aditya Birla Centre for Community
Initiatives and Rural Development", led by Mrs. Rajashree Birla. The Centre provides the
strategic direction, and the thrust areas for our work ensuring performance management
as well.

Our focus is on the all-round development of the communities around our plants located
mostly in distant rural areas and tribal belts. All our Group companies —- Grasim,
Hindalco, Aditya Birla Nuvo and UltraTech have Rural Development Cells which are the
implementation bodies.

Projects are planned after a participatory need assessment of the communities around the
plants. Each project has a one-year and a three-year rolling plan, with milestones and
measurable targets. The objective is to phase out our presence over a period of time and
hand over the reins of further development to the people. This also enables us to widen
our reach. Along with internal performance assessment mechanisms, our projects are

44
audited by reputed external agencies, who measure it on qualitative and quantitative
parameters, helping us gauge the effectiveness and providing excellent inputs.

Our partners in development are government bodies, district authorities, village

panchayats and the end beneficiaries — the villagers. The Government has, in their 5-
year plans, special funds earmarked for human development and we recourse to many of
these. At the same time, we network and collaborate with like-minded bilateral and
unilateral agencies to share ideas, draw from each other's experiences, and ensure that
efforts are not duplicated. At another level, this provides a platform for advocacy. Some
of the agencies we have collaborated with are UNFPA, SIFSA, CARE India, Habitat for
Humanity International, Unicef and the World Bank.

Our vision

"To actively contribute to the social and economic development of the communities in
which we operate. In so doing, build a better, sustainable way of life for the weaker
sections of society and raise the country's human development index."

— Mrs. Rajashree Birla, Chairperson,

The Aditya Birla Centre for Community Initiatives and Rural Development

Making a difference
Before Corporate Social Responsibility found a place in corporate lexicon, it was already
textured into our Group's value systems. As early as the 1940s, our founding father Shri
G.D Birla espoused the trusteeship concept of management. Simply stated, this entails
that the wealth that one generates and holds is to be held as in a trust for our multiple
stakeholders. With regard to CSR, this means investing part of our profits beyond
business, for the larger good of society.
While carrying forward this philosophy, our legendary leader, Mr. Aditya Birla, weaved
in the concept of 'sustainable livelihood', which transcended cheque book philanthropy.
In his view, it was unwise to keep on giving endlessly. Instead, he felt that channelising
resources to ensure that people have the wherewithal to make both ends meet would be

45
more productive. He would say, "Give a hungry man fish for a day, he will eat it and the
next day, he would be hungry again. Instead if you taught him how to fish, he would be
able to feed himself and his family for a lifetime."

Taking these practices forward, our chairman

Mr. Kumar Mangalam Birla institutionalised the concept of triple bottom line
accountability represented by economic success, environmental responsibility and social
commitment. In a holistic way thus, the interests of all the stakeholders have been
textured into our Group's fabric.

The footprint of our social work today spans 2,500 villages in India, reaching out to
seven million people annually. Our community work is a way of telling the people among
whom we operate that We Care.

46
PRODUCT PROFILE

ULTRA TECH CEMENTS manufactures and distributes its own main product lines
of cement .We aim to optimize production across all of our markets, providing a
complete solution for customer's needs at the lowest possible cost, an approach we call
strategic integration of activities.

Cement is made from a mixture of 80 percent limestone and 20 percent clay. These
are crushed and ground to provide the "raw meal”, a pale, flour-like powder. Heated to
around 1450° C (2642° F) in rotating kilns, the “meal” undergoes complex chemical
changes and is transformed into clinker. Fine-grinding the clinker together with a small
quantity of gypsum produces cement. Adding other constituents at this stage produces
cements for specialized uses.

QUALITY

Six strong benefits that make 43, 53 Grade, Super fine, Premium and Shakti
the ideal cement

 Higher compressive strength.

 Better soundness.
 Lesser consumption of cement for M-20 Concrete Grade and above.
 Faster de shuttering of formwork.
 Reduced construction time with a superior and wide range of cement catering to
every conceivable building need, ULTRA TECH CEMENTS is a formidable
player in the cement market.

Here just a few reasons why ULTRA TECH CEMENTS chosen by millions of India.

 Ideal raw material

 Low lime and magnesia content and high proportion of silicates.
 Greater fineness.

47
 CHAPTER-IV
DATA ANALYSIS
&
INTERPRETATION

48
 DATA ANALYSIS AND INTERPRETATION

LIQUIDITY RATIOS

(a) Current Ratio = Current Assets

Current Liabilities
TABLE – 1
(Millions of yen)
Current assets Current liabilities Ratio
2016-2017 2232152 983165 2.27
2017-2018 2458569 1138628 2.28
2018-2019 2789349 1163313 2.39
2019-2020 2614787 1256705 2.14
2020-2021 2128787 944000 2.19
Graph - 1

INTERPRETATION:
The current ratio represents the liquidity position of the firm as a conventional rule
a current ratio of 2 to 1 or more considered satisfactory.
The cannon company has a current ratio in the year 2016-2017 is 1.52:1 therefore
interpretend to the satisfactory. Where as in 2017-2018 year the ratio is increased 1.57:1

49
compared to past year. In the year 2018-2019 the ratio is increased 1.66:1 compared to
before two years. In all years the ratio is satisfied.

Absolute liquid ratio = Absolute Quick Assets

Quick liabilities

Absolute quick assets = current assets – (cash+ bank)

(b) Quick ratio = Quick assets

Current liabilities

Quick assets = current assets – stock + prepaid Expenses.

50
 TABLE – 2
(Millions of yen)
Year Quick Current liabilities Ratio
2016-2017 14924117 983165 1.52
2017-2018 1694552 1138268 1.57
2018-2019 1928018 1163313 1.66
2019-2020 1759202 1256713 1.4
2020-2021 1282269 944000 1.36

GRAPH – 2

INTERPRETATION:
The Quick ratio established a relation between Quick or liquid assets and
current liabilities. An asset is liquid if it can be converted into cash immediately. General
a quick ratio of 1 to 1 is considered to represent a satisfactory current financial position.
The cannon company quick ratio in the year 2014 -15 is 1.52:1 therefore
interpreted to the satisfactory. Where as in 2015 – 16 year the ratio is increased 1.57:1

51
compared to past year. In the year 2016 – 17 the ratio is increased 1.66:1 compared to
before two years. In the ratio is satisfied.

(c) Absolute liquid ratio = Absolute quick assets

Quick liabilities

Absolute quick assets = current assets – (cash + bank)

Quick liabilities = current liabilities – bank over draft

TABLE – 3
(Millions of yen)
Year Absolute quick Quick liabilities Ratio
assets
2016-2017 1344378 9831655 1.37
2017-2018 1453616 1138628 1.35
2018-2019 1626724 1163313 1.40
2019-2020 1664324 1256713 1.32
2020-2021 1385652 944000 1.47

GRAPH – 3

52
INTERPRETATION:
Absolute liquid ratio establishes the relation between absolute liquid
assets and quick liabilities. The ratio 0.521 is considered to represent a satisfactory. In the
year 2015 – 16 the ratio is decreased 1.35:1 to compare the past year. In the year 2018 –
19 ratio is increased 1.47:1 compared to before all years the firm in very good position.

LEVERAGE RATIOS:
(a) Debt equity ratio = Debt
Equity
TABLE – 4 (Millions of yen)
Years Debt Equity Ratio
2016-2017 25681 2209896 0.013
2017-2018 27142 2611282 0.011
2018-2019 15789 2986612 0.005
2019-2020 8680 2922336 0.003
2020-2021 8423 2659792 0.003

GRAPH – 4

53
INTERPRETATION:

The relationship describing the lenders contribution for each rupee of the owners
contribution is called debt equity ratio.
The ULTRATECH CEMENTS company debt equity ratio in the year 2016-2017 is
0.013. next year ratio is decreased 0.05.the ratio is showing continuous decrease from
year to year.

(b)Total Debt Ratio = Total Debt

Total net assets

TABLE – 5 (Millions of yen)

Years Total debt Net assets Ratios
2016-2017 25681 3587021 0.01
2017-2018 27142 4103553 0.01
2018-2019 15789 4521915 0.003
2019-2020 8680 4512625 0.001
2020-2021 8423 3969934 0.002

54
 GRAPH – 5

INTERPRETATION:

Debt ratio establishes the relation between total debt and net assets. Debt
ratio indicates the proportion interest bearing debt in the capital structure.
The ULTRATECH CEMENTS company debt ratio is 0.01 in the year2016-2017.
And it has no changes in the next year 2017-2018. It indicates that the shares have
financed more than owners. Next year 2018-2019 ratio is decreased from 0.003to0.001 in
the next year.

(c) Proprictary ratio = Shareholders Fund

Total assets
TABLE – 6 (Millions of yen)
Year Shareholders Fund Total assets Ratio
2016-2017 2209896 3587021 0.62
2017-2018 2611286 4103553 0.64
2018-2019 2986612 4521915 0.66
2019-2020 2922336 4512625 0.65
2020-2021 2659792 3969934 0.67

55
 GRAPH – 6
PROPRIETORY RATIO

INTERPRETATION:
Proprietary ratio is called as net worth to total assets ratio. Because
proprietary fund is also known as net worth. This ratio is used in the study of
capitalization of a business concern.The ULTRATECH CEMENTS company proprietary
ratio is 0.62 in the year 2016-2017. The ratio is showing continuous increases from 2016-
2017 to 2018-2019 and it has decreased 0.65 in the year 2019-2020. Then again increase
from 0.65to0.67 in the year 2020-2021. A high proprietary ratio is indicative sound
financial position.

(d)Solvency ratio = Total assets / Total liabilities

TABLE – 7
(Millions of yen)
Year Total assets Total liabilities Ratio
2016-2017 3587021 1190331 3.01
2017-2018 4103553 1238535 3.26
2018-2019 4521915 1318514 3.43
2019-2020 4512625 1367419 3.3

56
2020-2021 3969934 1118952 3.54

GRAPH – 7
Solvency Ratio

INTERPRETATION:
The solvency ratio shows the relationship between total assets and total
liabilities of the business. No standard ratio is fixed in this regard. It may be compared

57
with similar, such organization to evaluate the solvency position. Higher the solvency
ratio is the stronger is its financial position and vice-versa. In the year 2020-2021
solvency ratio is 3.54 is higher stronger in its financial position.

(e) Financial leverage ratio = Earning before interest and tax

Earning before interest tax – interest
TABLE – 8 (Millions of yen)
Year EBIT EBIT-interest Financial leverage
2016-2017 552116 537358 1.03
2017-2018 612010 596881 1.02
2018-2019 719143 703558 1.02
2019-2020 768388 752590 1.01
2020-2021 481147 469936 1.02

GRAPH – 8

INTERPRETATION:-
Financial leverage refers to the use of long-term interest bearing debt and preference
share capital along with equity share capital. The ULTRATECH CEMENTS could the
financial leverage is 1.03 in the year 2016-2017 the next two years financial leverage are

58
remains constant. In the year 2019-2020 is decreased 1.01 compared to before three
years. In the year 2020-2021 increases to 1.02.

ACTIVITY RATIOS
(a) Total assets turnover ratio = Net sales
Total assets
TABLE – 9 (Million of yen)
Year Net sales Total assets Ratio
2016-2017 3467853 3587021 0.97
2017-2018 3574191 4103553 0.93
2018-2019 4156759 4521915 0.92
2019-2020 4481346 4512625 0.99
2020-2021 4094161 3969934 1.03
GRAPH – 9
Total assets turnover Ratio

INTERPRETATION:-
Total assets turnover ratio shows the relation between total assets and net
sales. The total assets turnover ratio of ULTRATECH CEMENTS co ltd is 0.97 in the
year 2016-2017 and it has also decreases from 2016-2017 to 2018-2019 in the year 2020-
59
2021 the ratio is decreased 1.03 compared to remaining all years. Since it shows the firm
ability to generate sales from all the financial resources committed to the firm.

(b)Working Capital Turnover Ratio = Net Sales

Working capital
TABLE – 10 (Millions of yen)
Year Net sales Working capital Ratio
2016-2017 3467853 1248987 2.78
2017-2018 3754191 1379941 2.72
2018-2019 4156759 1626102 2.56
2019-2020 4481346 1352142 3.31
2020-2021 4094161 1121448 3.65

GRAPH – 10

INTERPRETATION:-
The Term Working Capital refers to the excess of current assets over current
liabilities. The ratio enables to know efficient utilization of working capital of an
organization. The cannon co Itd working capital turnover ratio is 2.78 in the year 2010 –

60
11 and it has decreased 2.72 &2.56 in the year 2011 – 12 & 2012 -13 in the year 2013 –
14&15 the ratio is increased to 3.31 &3.65 compared to previous years.

(c) Fixed assets turnover = Net sales

Fixed assets
TABLES – 11
Year Net sales Fixed assets Ratio
2016-2017 3467853 1354869 2.56
2017-2018 3754191 1584989 2.37
2018-2019 4156759 1739566 2.39
2019-2020 4481346 1909838 2.35
2020-2021 4094161 1905146 2.15

GRAPH – 11

INTERPRETATION:-
The firms fixed assets turnover ratios should be compared with past and future
ratio and also with the ratios of similar firm and the industry average. Generally the fixed
assets turnover ratio indicates efficient utilization of fixed assets. So the cannon company

61
high ratio is 2.56 in the year 2010 – 11.in generating sales while a low ratio indicates
inefficient utilization of all fixed assets. So the ratio is 2.15 in the year 2014 – 15.

(d)Debtors turnover ratio = Credit scales

Average debtors
TABLE – 13 (Millions of yen)
Year Credit sales Average debtors Ratio
2016-2017 1754510 602790 2.91
2017-2018 1935148 646114 2.99
2018-2019 2096279 725687 2.89
2019-2020 2234365 778093 2.87
2020-2021 2156153 694831 3.1

GRAPH – 13

INTERPRETATION:-
The purchase of this ratio is the measure the liquidity of the receivable or to find
the receivable or to find out the period over which receivable remain UN collected i.e.
ageing of receivables. Generally the higher value of debtor’s turnover more is the

62
efficiency in management of assets. So the ULTRATECH CEMENTS co ltd debtor’s
turnover ratio is 2.91 in the year 2016-2017. next year 2017-2018 the ratio is small
change will be increased i.e. 2.99 in the year 2018-2019 the ratio is decreased 2.89 the
ratio is increase to 3.1 it is the highest ratio compared with past years.
(e) Current assets turnover ratio = Net sales
Current assets
TABLE -14 (Millions of year)
Year Net sales Currents assets Ratio
2016-2017 3467853 2232152 1.55
2017-2018 3754191 2458169 1.53
2018-2019 4156759 2782349 1.49
2019-2020 4481346 2614787 1.72
2020-2021 4094161 2124848 1.98

Graph -14

INTERPRETRATION:-
Current assets turnover ratio establishes the relationship between the current
assets and sales. The ULTRATECH CEMENTS co ltd. The current assets turnover ratio
is 1.55 in the year 2009-10. the ratio is decreased 1.53 in the 2011 -12 next year also

63
decreased from 1.53 to 1.49 in the 2018-2019 next 2019-2020 increased the ratio is 1.72
in the year 2020-2021 the ratio increased to 1.98 it is highest ratio compared with past
years.

(f) Average collection period = No of days in a year

Debtors turnover ratio
TABLE -15
Year Days Debtors turnover Days
Ratio
2016-2017 365 2.91 125
2017-2018 365 2.99 122
2018-2019 365 2.89 126
2019-2020 365 2.87 127
2020-2021 365 3.1 117

GRAPH -15

INTERPRETATION:-

64
 Average collection period is the relationship between sales and no of days in a
year. The collections are paid to ULTRATECH CEMENTS co ltd in the year 2016-2017
the payment is made in 125 days. The next year 2017-2018 the payments are made in 122
decreases to compare the past year. In the years 2018-2019, 2019-2020 and 2020-2021
are payments respectively 126,127 and 117 days the payments are made.
PROFIT ABILITY RATIOS

(a) Cross profit ratio = Gross profit x 100

Net sales
TABLE-16
Year Gross profit Net sales Ratio
2016-2017 1713343 3467853 49
2017-2018 1819103 3754191 48
2018-2019 2121140 4156759 50
2019-2020 2246981 4481346 50
2020-2021 1938014 4094161 47.33
Graph - 16

INTERPRETATION:-

65
 Gross profit ratio is a measure of general profitability of the business and a tool
that indicates the degree to which selling price of goods per unit by decline without
resulting in losses on operations of the firms. ULTRATECH CEMENTS co ltd gross
profit ratio is 49% in the year 2016-2017 and it has decreased 48% in the year 2017-2018
next teo years the ratio is 50% same in the 2018-2019 and 2019-2020 and also increased
compared to last two years. In the year 2020-2021 decrease to 47.33

(b)Net profit ratio = Net profit x 100

Sales
TABLES -17
Year Net profit Sales Ratio
2016-2017 343344 3467853 10
2017-2018 384096 3754191 9.3
2018-2019 455325 4156759 11.5
2019-2020 488332 4481346 10.9
2020-2021 309148 4094161 7.5

GRAPH-17

66
INTERPRETATION:-
Net profit ratio is widely used as a measure of over – all profitability and is very
useful to properties, as it gives an idea of the efficiency as well as profitability of the
business to a limited extent. The ULTRATECH CEMENTS co Itd net profit ratio is 10%
in the year 2010 – 11 and it has decreased the ratio is 9.3% in the year 2011 – 12 the next
year the ratio is increased 11.5% in the 2012 – 13 in the year 2013 – 14 ratio is
10.9% .Compared all years the ratio decrease to 7.5 in the year 2014 – 15.

(c) Operating profit ratio = Operating profit  100

Net sales

Tables – 18
Year Operating profit Net sales Ratio
2016-2017 543793 3467853 16
2017-2018 583103 3754191 15.5
2018-2019 713033 4156759 17
2019-2020 756673 4481346 16.9
2020-2021 496134 4094161 12.1
GRAPH – 18

67
INTERPRETATION:
Operating profit ratio is calculated non – operating expenses and non
operating incomes ignores. This ratio indicates the portion of remaining out of every
rupees worth of sales after all operating costs and expenses have been met
ULTRATECH CEMENTS co ltd the operating profit nation is 16% in the year 2016-
2017 and it has decreases the ratio is 15.5% in the year 2017-2018 the next ratio
increased 17%in the year 2018-2019. The next Decrease from 16.9% to 12.1%.
(d)Operating ratio = Cost of goods sold + Operation expenses
--------------------------------------------------------- * 100
Net sales

TABLE -19
Year cost of goods sold Net sales Ratio
+operating
expenses
2016-2017 2924120 3467853 84
2017-2018 3171148 3754191 85
2018-2019 3141419 4156759 76
2019-2020 3724673 4481346 83
2020-2021 3598147 4094161 88

68
 GRAPH-19

INTERPREATION:-
The operating ratio is used to partial index of overall profitability but can not
be used as a test of financial condition .the higher operating ratio is 0.88 in the year 2020-
2021 it indicates less favorable it is because it would leave a smaller margin to meet
interest and divided and other corporate needs .

69
 CHAPTER-V
FINDINGS, SUGGESTIONS
&
CONCLUSIONS

70
 FINDINGS

Liquidity Ratios:

 According liquidity ratios. I found that the firm is ability to meet its short-term
obligations in time.

Leverage ratios:

 In one side decreasing debt compare to equity is benefit to the organization good
will but in other side it will effect on EPS.
 The solvency position of the company is increasing year by year rapidly.
 Compare to last five years in the 5th more equity shares has issued..
 Because of having less fixed cost bearing securities the financial leverages
coming down. It will effect adversely on EPS

Activity Ratios.

 The investment in debtors the current year has increased to 117 days.
 In the organization total assets, current assets and fixed assets are converted into
sales. 1.03 times, 2.15 times and 1.98 times respectively.
 Compare to the previous year the investment in inventory and working capital
has increased slightly.

Profitability Ratios:

 Due to recession the gross profit ratio and net profit ratio has been declining
copare to the previous years.

71
 Because of increasing in operating expenses the operating ratio and operating
profit also has been decline it is unfavorable to the business.

SUGGESTIONS

 In order to increasing EPS it is advised to have fixed interest bearing securities in

their capital structure.
 Due to decrease in sales it is advised decrease in investment in working capital
and inventory.
 It is advised there should be a proper control on operating expenses.

 Due to decreasing in sales revenue it is not advised have high debtors turnover
ratio.
 The conversion of assets into sale monitored.
 To control over the company it is advised call of equity shares.
 It is advice to have both preference shares and debentures and other long-term
loans to the existing equity shares.
 The short-term solvency of the organization is stronger than the long-term

72
 CONCLUSION
The company overall performance is good. But it is having some of the
problems in ratio position. After analyzing the all the ratios, ULTRATECH
CEMENTS pvt ltd is having sufficient resources to manage the working capital in
order to maintain the day to day transactions. Gross profit ratio and net profit ratio has
been declining. So company has to take more care on the sales. And company’s long
term funds and solvency is in fluctuation so better to plan for new strategies which
helps to achieve long term goals and objective of the company. Operating expenses
are more than the other expenses. So to gain the maximum profits reduce the
operating expenditure as much as possible. So finally ULTRATECH CEMENTS
India Pvt Ltd is maintaining a sustainable position for a long time in industry.

73
 BIBLIOGRAPHY

REFFERED BOOKS

Sl.No Title of the book Publisher Author

FINANCIAL Vikas Publishing

1 MANAGEMENT House Ltd. I.M.PANDEY

FINANCIAL Vikas Publishing

2 MANAGEMENT Chand Publishers House Ltd.

Websites:
 www.ultrstech.com
 www.banking.co.in

74