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CHAPTER – 1
INTRODUCTION
INTRODUCTION
Financial Statement Analysis is the process of reviewing and analysing a company's

financial statements to make better economic decisions. These statements include
the income statement, balance sheet, statement of cash flows, and a statement of
changes in equity. Financial statement analysis is a method or process involving
specific techniques for evaluating risks, performance, financial health, and future
prospects of an organization.
It is used by a variety of stakeholders, such as credit and equity investors, the

government, the public, and decision-makers within the organization. These
stakeholders have different interests and apply a variety of different techniques to
meet their needs. For example, equity investors are interested in the long-term
earnings power of the organization and perhaps the sustainability and growth of
dividend payments. Creditors want to ensure the interest and principal is paid on the
organizations debt securities (e.g., bonds) when due.
Common methods of financial statement analysis include fundamental

analysis, DuPont analysis, horizontal and vertical analysis and the use of financial
ratios.
DuPont analysis uses several financial ratios that multiplied together equal return on
equity, a measure of how much income the firm earns divided by the amount of funds
invested (equity)
Ratio analysis is the most common form of financial analysis. It provides relative
measures of the firm’s conditions and performance.
Horizontal analysis is used to evaluate the trend in the accounts over the years, while
vertical analysis also called a common size financial statement discloses the internal
structure of the firm. It indicates the existing relationship between sales and each
income statement account. It indicates the mix of assets that produce income and the
mix of sources of capital, whether by current or long term debt or by equity funding.
When using the financial ratios, a financial analysis makes two types of comparison.
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1.1 PROJECT/RESEARCH OBJECTIVES
 The main objective of the study is to evaluate the financial position &
financial performance of the company, with the help of financial statements
 To assess the earning capacity or profitability of the Kesoram Cement
 To assess the operational efficiency and managerial effectiveness
 To identify the reasons for change in profitability and financial position of the
firm
 To determine the short term & long term liquidity of the funds as well as
solvency position of the firm
 To identify every source of income and understand the expenditure pattern of
Kesoram Cement
 To understand the elements of balance sheets contributing to the financial
soundness of the company
1.2 SCOPE OF THE STUDY
The study mainly attempts to analyze the financial performance of Kesoram Cement.
The financial authorities can use this for evaluating their performance in future, which
will help to analyze financial statements and help to apply the resources of the
company properly for the development of the company and to bring overall growth.
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1.3 NEED & IMPORTANCE OF THE STUDY
 It helps in evaluating the operational efficiency of the company and the present
profit-earning capacity of the firm as a whole
 It helps us to know the reasons for relative changes in the financial position as a
whole
 It helps in calculating the profitability changes and the effect of various non-
economic and economic factors of the firm
 It helps to know both the short-term liquidity position vis-a-vis working capital
position, and the long-term liquidity and solvency position of a firm
 It also highlights the operating efficiency and the present profit-earning capacity
of the firm as a whole
 It indicates the trend of achievements and the working capital position of the firm
 It helps in forecasting, budgeting of the firm and helps in deciding future line of
action
 It provides the intra-firm comparison among of the various components of the
firm
 It helps in assessing the performance of the firm by the application of various
ratios
 It guides or determine the dividend action & helps in decision making and control
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1.4 RESEARCH METHODOLOGY
Research Design:
The Research Design that will be use is Descriptive and Exploratory Research.
Primary data: Data observed or collected directly from first-hand experience.

Secondary data: Published data and the data collected in the past or other parties are
called secondary data.
 Books
 Internet
 Journals
 Company Records
Data Collection:
Secondary data (financial statements from the year 2013-2017)
Data Analysis:
 Comparative Income statement & Balance sheet
 Common size income statement & Balance sheet
 Trend analysis is used for analysis
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1.5 LIMITATIONS OF THE STUDY
Through an attempt has been made to study the Financial Statement Analysis. Study
may suffer from the following limitations.
 The study is conducted for the purpose of fulfillment of the condition

stipulated for Completion of course, so the study may not fulfill the
requirements of a detailed investigation
 The study is conducted with the data available for the past years only from
2013-2017
 It does not consider the changes in prices level
 Quantity aspect is ignored in the financial analysis
 It may not give the accurate results in the absence of the absolute data
 The sample size is limited to 100 employees only, due to busy schedule of the
employees
 The Duration of project is limited to 30-45 days
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CHAPTER – 2
REVIEW OF LITERATURE
REVIEW OF LITERATURE
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2.1 Meaning of financial statement
Financial statements at least refer to the two statements which are prepared by a
business concern at the end of the year. They are:
 Income statement or trading and profit and loss account which is prepared by a
business concern in order to know the profit earned and loss sustained during a
specific period.
 Position statement or balance sheet which is prepared by a business concern
on a particular date in order to know its financial position.
2.2 Nature of Financial Statement
Financial statements are prepared for the purpose of presenting a periodical

review or report by the management and deal with the state of investments in business
and result achieved during the period under review. They reflect a combination or
recorded facts accounting conventions and personal judgments and conventions
applied affect them materially. Form this it is clear that financial statements are
affected by three things i.e., recorded facts, Accounting conventions and personal
judgments. Only those facts which are recorded in business books will be reflected in
the financial statements.
The following points reflect truly the nature of financial statements of business
entities.
 This are reports are summarized reviews about the performance, achievements
and weakness of the business.
 These are prepared at the end of the accounting period so that various parties
can take decision of their future actions in respect of the relationship with the
business.
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 The reliability of financial statements depends on the reliability of accounting
data. These statements cannot be said to be true and fare representatives of the
strength of profitability of the concern if there are numerous frauds and
defalcations in the accounts.
 The figures in the financial statements are a combination of records facts.

There may be certain developments and factors which may be very important
for the business are not taken in to account as these are not recorded in the
routine of accounting. More over fixed assets are recorded at a historical value
without taking in to consideration the changes in their values due to price level
fluctuations.
 These statements are prepared as per accounting concepts and conventions

 These financial statements are influence by the judgment of the accountant
though he is expected to be more objective in his approach. These judgments
may be related to valuation of inventory, depreciation of fixed assets and
while making the distinction between capital and revenue.
Importance of Financial Statements
The information given in the financial statements is very useful to a number of parties
these are the following
 Owners: - The Owners provide funds for the operations of a business and they
want to know whether their funds are being properly utilized or not. The financial
statements prepared from time to time satisfy their curiosity.
 Creditors: -Creditors (i.e.., suppliers of goods and services on credit, banker’s

another lender of money) want to know the financial position of a concern before
giving loans or granting credit. The financial statements help them in judging such
position.
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 Inventors: - Perspective inventors, who want to invest money in a firm would like
to make an analysis of financial statements of that firm to know how safe the
reposed investment will be.
 Employees: - Employees are interested in the financial position of a concern they

serve, particularly when payment of bonus depends upon the size of the profits
earned, they would like to know that the bonus being paid to them is correct; so
they become interested in the preparation of correct profit and loss account.
 Government: - Central and State Governments are interested in the financial

statements because they reflect the earnings for a particular period for taxation.
Moreover, these financial statements are used for compiling statistics concerning
business which, in turn help on compiling national accounts
 Research Scholars: -The financial statements, being a mirror of the financial

position on a firm, are of immense value to the research scholar who wants to
make a study into financial operations of a particular firm.
 Consumers: -Consumers are interested in the establishment of good accounting

control so that cost of production may be reduced with the resultant reduction of
the prices of good they buy.
 Managers: - Management is the area of getting things done through others. This
requires that the subordinates are doing work properly. Financial statements are an
aid in this respect because they serve the manager in appraising the performance
of the subordinates. Actual results achieved by the employees can be measured
against the budgeted performance they were expected to achieve and remedial
action can be taken if the performance is not up to the mark.
 Limitations of Financial Statements
The following are the main limitations of the financial statements

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 Interim and not final Reports: - Financial statements do not depict the exact
position and are essentially interim reports. The exact position can be only
knowing if the business in closed.
 Lack of Precision and Definiteness: - Financial statements may not be realistic

because these are prepared by the following certain basic concepts and
conventions, For example, going concern gives us an idea that business will
continue and assets are to be recorded at cost but the book value at which the
assets is shown may not be actually realizable.
 Lack of Objective Judgment: - Financial statements are influenced by the

personal judgment of the accountant; He may select any method for depreciation,
Valuation of stock, amortization of fixed assets and treatment of deferred revenue
expenditure. Such judgment if based on integrity and competency of the
accountant will definitely affect the preparation of the financial statements.
 Records Only Monetary Facts - Financial statements disclose only monetary

facts, i.e.., and those transactions are recorded in the books of accounts which can
be measured in monetary terms. Those transactions which cannot be measured in
monetary terms such as, conflict between production manager and marketing
manager may be very important for a business concern bur not recorded in the
business books.
 Historical in Nature: - These statements are drawn after the actual happening of
the events they attempt to present a view of the past performance and have
nothing to do with the accounting for the future. Modern management is forward
looking bur these statements do not directly help them in making future estimates
and taking decisions for the future.
 Artificial View: - These statements do not give a real and correct report about the
worth of the assets and their loss of value as these are shown on historical cost
basis. Thus, these statements provide artificial view as market or replacement
value and the effect of the changes in the price level are completely ignored.
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 Scope of Manipulation: - These statements are sometimes prepared according to
the need of the whims of the management. A highly efficient concern may conceal
its real profitability by disclosing loss or minimum profit whereas an inefficient
concern may declare dividend by wrongly showing profit in the profit and loss
account. For this under or over valuation of inventory, over or under charge of
depreciation, excessive or inadequate provision for anticipated losses and other
such manipulation may be resorted to. Window dressing may also be resorted to in
order to show better financial position of a concern than its real position.
 Inadequate Information: - there are many parties who are interested in the
information given in the financial statements but their objectives and requirements
differ. The financial statements as prepared under the provision of companies’ act,
1956, fail to meet the need of all. These are mainly prepared to safeguard the
interest of shareholders.
Profit and Loss Account
This account is prepared to calculator the net profit of the business. There are
certain items of incomes and expenses of the business which must be taken into
consideration for calculating net profit of the business. These are of indirect nature,
i.e.., co concerning the whole business and relating to various activities which are
done by the business for the purpose of making the goods available to the consumers.
Indirect expenses may be selling and distribution expenses, management expenses,
financial expenses, extraordinary losses and expenses to maintain the assets into
working order. This account is prepared form nominal account and its balance is
transferred to capital account as the whole profit or loss will be that of the owner and
it wok increase or decrease his capital, the specimen proforma of this account is given
as under.
Importance of Profit and Loss Account
 Information of Net Profile or Net Loss: One of the important objectives of

maintaining accounts is to see whether the business has earned profit or suffered
loss during the accounting period. Profit and Loss Account provides information
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regarding this important objective because it gives information about the
profitability or otherwise of the business.
 Comparison of current Profit with Past profit: Profit and Loss Account affords
comparison of the current year’s net profit with those of the past years. With this
comparison it can be ascertained whether net profit of the business is showing a
rising trend or downward trend.
 Comparison of Expenses: Comparison of the various expenses include in the

Profit and Loss Account with the expenses of the previous period helps in taking
effective steps for control of unnecessary expenses.
 Helpful in Preparation of Balance Sheet: Net profit or net loss disclosed by the
Profit and Loss Account is transferred to Capital Account and Capital Account
appears on the liabilities side of the Balance Sheet, without taking net profit net
loss. The Balance Sheet cannot be completed, thus, profit and Loss Account helps
in the preparation of the Balance Sheet.
 Helpful in Future Growth of the Business: On the basis of profit figures of the
current and the previous period, estimates about the profit in the year to come can
be made and projection about the expansion of the business can be made.
Indirect expenses to be shown on the debit side of profit and loss account can also
be divided into two categories i.e.
(i) Operating expenses are those expenses which are incurred in a
concern to run the business efficiently and smoothly, Expenses
incurred on administration, selling and distribution come under this
category.
(ii) Non-Operating expensesare those expenses which are not required to

be incurred for efficient and smooth operation of the business but still
shown on the debit side of profit and loss account. These include loss
on the sale of fixed assets, writing off tangible assets and intangible
assets, financial expense etc.
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Balance Sheet
A balance sheet is a statement prepared with a view to measure the financial

position of a business on a certain fixed date. The financial position of a concern is
indicated by its assets on a given date and its assets on a given data and its liabilities
on that date. Excess of assets over liabilities represent the capital and is indicative of
the financial soundness of a company. A Balance Sheet is also described as a
‘statement showing the source and application of capital’. It is a statement and not an
account and prepared from real and personal accounts. The left hand side of the
balance sheet may be viewed as a description of the sources from which the business
has obtained the capital with which that capital is invested on a specified date.
On the left hand side of the balance sheet, the several liability items describe
how much capital was obtained from trade creditors, form banks, from bill holders
and other outside parties; The Owner’s equity section shows the capital supplied by
the owner.
Capital obtained from various sources has been invested according to

management’s best judgment of the optimum mix or combination of assets for the
business. A certain fraction is invested in buildings; another fraction in stock, another
fraction is retained as cash for current needs of the business and so on. The assets side
of the balance sheet, therefore, shows the result of these management judgments’ as
on the date of the balance sheet.
A properly drawn up balance sheet gives information relating to
1. The nature and value of assets.

2. The nature and extent of liabilities.
3. Whether the firm is solvent.
4. Whether the firm is overtrading.
If assets exceed the liabilities, the firm is solvent i.e.., able to pay its debts in
full. A business is, therefore, solvent by the amount of ownership capital in it, as it is
the excess of assets over liabilities, the last point i.e..; (IV) concerns the stability of
the business. It the total of the debts due to creditors (including bank overdraft) is
greater than the liquid assets (i.e.., cash, investments, bills etc.) the position of the
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firm may be financially unsound. Whether the debts are being incurred without
sufficient means of payment, the firm is said to be overtrading, For the position to be
quite sound, there should be some working capital i.e.., some spare liquid assets
available for current expenditure. It is not a wise policy to lock up the entire in fixed
assets. The concern may be solvent without being sound.
Characteristics of Balance Sheet
The following are the main Characteristics:
 It is prepared on a particular date and not for a particular period.

 It is prepared after the preparation of Trading and Profit & Loss Account.
 As assets must be equal to total liabilities, the two sides of the balance must have
the same total.
 It shows the financial position of a business as a going concern.
 It is a statement of assets (debit balances) and liability (credit balances) and no an
account.
Information that Balance Sheet Convey to Outsiders
The following are the main items of information that the balance sheet convey to an
outsider
 The nature and the value of assets.

 It shows the nature and extends of liabilities.
 It shows the owner’s equity (i.e.., assets – liabilities =capital)
 It tells about credit worthiness and solvency of the firm.
 It reflects the liquidity of a firm.
 It reveals other information required to change in economic reserves and
obligations.
Classification of Assets and liabilities
Assets:Assets are property and possession of a business. Stock, land, buildings,

books debts, cash, bills receivable are some examples of assets. The classification of
assets depends on their nature. The various types of assets are
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 Fixed Assets: Those assets which are acquired and held permanently in this
business and are used for the purpose of earning profits are called fixed assets.
Land and building, machinery, furniture and fixtures are some examples of these
assets.
 Current Assets: Those assets such as cash, debtors and stock that can be realized
and readily available to discharge liabilities within an operating cycle of one year
are called current assets.
 Tangible Assets; these are definite assets which can be seen, touched and have
volume such as machinery, cash, Stock, etc
 Fictitious Assets: These assets are fictitious in nature i.e... They are virtually not
assets. These are either the past accumulated losses or expenses which are
incurred once in the life of a business and are capitalized for the time being. Profit
and loss account (debit balance), organization expenses, discount on the issues of
shares and advertisement expenses capitalized for the times being are example of
such assets.
 Intangible Assets: Those assets which cannot be seen touched and have no
volume but have are called intangible assets. Goodwill, patents, licenses and
trademarks are example of such assets but quite valuable to the undertaking, an
intangible asset may not be fictitious. If on account of the past goodwill purchased
along with an existing concern, sales are readily affected and profit is readily
earned, the assets is certainly not fictitious though it is intangible, However, if the
amount of goodwill was paid in respect of a losing concern, the assets would be
factious.
 Wasting Assets: Those assets such as mines, quarries etc. that become exhausted
be converted into cash quickly.
 Contingent Assets: It is an asset the existence, value and ownership of which is

dependent on the occurrence of a specified act. Suppose a firm has filed a suit for
some specified property now in possession of someone else. If the suit is decided
in firm’s favors, the firm will get the property. At the moment it is a contingent
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asset. Similar would be the position of a patent applied for arising of a firm’s own
research effort. Contingent liability in respect of a contract for capital expenditure
already entered into will give rise to an asset on payment, at present it is only a
contingent asset.
Liabilities: A liability is an amount which a business is legally bound to pay. It is a

claim by an outsider on the asset of a business. Liabilities may be classified into four
categories:
 Fixed liabilities: These are those liabilities which are payable on the termination
of the business such as capital which is a liability to the owner.
 Long term liabilities: those liabilities which are not payable within the next
accounting period but will be payable within next five to ten years are called long
term liabilities such as debentures.
 Current liabilities: those liabilities which are payable out of current assets within
the next accounting period usually year or already due or called current liabilities
such as debentures.
 Contingent liabilities: A contingent liability is one which is not an actual liability

but which will become an actual one on the happening of some event which is
uncertain. Thus such liabilities have 2 characteristics:
 Uncertainty as to whether the amount will be payable to all, and

 Uncertainty about the amount involved. It is sufficient if the amount of such
liability is stated on the face of the balance sheet by way of a note unless there
is a probability that a loss will materialize. In that event it is no more a
contingent liability and a specific provision should be made therefore.
Examples of such liabilities are
I) Claims against the companies not acknowledge as debts.
II) Uncalled liabilities on partly paid up shares.
III) Arrears of fixed cumulative dividend.
Introduction
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Methods used by interested parties such as investors, creditors, and
management to evaluate the past, current, and projected conditions and performance
of the firm. Ratio analysis is the most common form of financial analysis. It provides
relative measure of the firm conditions and performance. Horizontal analysis and
vertical analysis are also popular firms. Horizontal analysis is use to evaluate the trend
in the accounts over the years, while vertical analysis, also called a common size
financial statement discloses the internal structure of the firm. It indicates the existing
relationship between sales and each Unicom statement account. It indicates the mix of
assets that produce income and the mix of sources o f capital, whether by a current or
long term debt or by equity funding. When using the financial ratios, a financial
analysis makes 2 types of comparisons.
Meaning of Analysis of Financial Statement
Analysis is the process of critically examining in details accounting

information given in the financial statement. For the purpose of analysis, individual
items are studied, there interrelationships with other related figures established, the
data is sometimes rearranged to have better understanding of the information with the
help of different techniques or relationship between component parts of financial
statements to obtain a better understanding firms position and performance. In the
words of Myer, “Financial statement analysis is largely a study of relationship among
the various financial factors in a business as disclosed by a single set of statement and
a study of the trend of these factors as shown in a series of statements”. The analysis
of financial statements thus refers to the treatment of the information contained in the
financial statements in a way so as to afford a full diagnosis of the profitability and
financial position of the firm concerned. For this purpose, financial statements are
classified methodically, analyzed and compared with the figures of previous years or
other similar firms.
Meaning of Interpretation
Analysis and interpretation are closely related. Interpretation is not possible

without analysis and without interpretation analysis has no value. Various account
balances appear in the financial statements. These account balances do not represent
homogeneous data so it is difficult to interpret them and draw some conclusions. This
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requires an analysis of the data in the financial statements so as to bring some
homogeneity to figures shown in the financial statements. Interpretation is thus
drawing of inference and stating what the figures in the financial statements really
mean. Interpretation is dependent on interpreter himself. Interpreter must have
experience, understanding and intelligence to draw correct conclusions from the
analyzed data.
In other words of Kennedy and Memullar, “The analysis and interpretation of

financial statements are an attempt to determine the significance and meaning of the
financial statements data so that a forecast may be made of the prospects for future
earnings, ability to pay interest and get maturities (both current and long-term), and
probability of a sound dividend policy “.
The most important objective of the analysis and interpretation of financial

statements are to understand the significance and meaning of financial statements data
to know the strength and weakness of a business undertaking so that a forecast may be
made of the future prospects of the business undertaking.
Objectives of Financial Analysis
Financial analysis is helpful in assessing the position and profitability of a

concern. This is done through comparison by ratios for the same concern over a
period of years, or for one concern against another, or for one concern against the
industry as a whole (inter-firm comparison), or for one concern against the
predetermined standards, or for one departments of the same concern (intra-firm
comparison). Accounting ratios calculated for a number of years show the trend of the
change of position, that is weather the trend is upward or downward or static, the
ascertainment of trend helps us in making estimates for the future. For examples, ratio
of gross profit to sales for the last five years indicates a rising trend; we can safely
estimate that ratios of gross profit to sales for the next year will also arise. Keeping In
view the importance of accounting ratios the accountant should calculate the ratios in
appropriate form, as early as possible, for presentation to the management for
managerial control.
In short, the main objectives of analysis of financial statements or to assess:
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 The present and future earning capacity or profitability of the concern.
 The operational efficiency of the concern as a whole and of its various parts of
departments.
 The short term and long term solvency of the concern for the benefit of the
debenture holders and trade creditors.
 The comparative study in regarding to one firm with another firm or one
department with another department.
 The possibility of developments in the future by making forecast and preparing
budgets.
 The financial stability of a business concern.
 The real meaning and significance of financial data, and
 The long term liquidity of its funds.
Types of Financial Statement Analysis

Different types of financial statement analysis can be made on the basis of
1) The nature of the analyst and the material used by him.

2) The objectives of the analyst.
3) The modus operandi of the analysis.
Above three points is discussed one by one.
1) According to the nature of the analyst and the used by him:

On the basis, the financial analysis can be internal and external analysis:
a) Internal Analysis: It is made by those persons who have access to the books of
accounts. They are members of the organization. Analysis of financial statements
or financial data for managerial purpose is the internal type of analysis. The
internal analyst can give more reliable result than the external analyst because
every type of information is at his disposal.
b) External analysis: It is made by those persons who are not connected with the
enterprise. They do not have access to the enterprise they do not have access to
detailed record of the company and have to depend mostly on published
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statements. Such type of analysis made by investors, credit agencies, government
agencies and research scholars.
2) According to the objectives of the analyst: - on the basis of, the

analysis can be long term and short term analysis.
a) Long term analysis: -This analysis is made in order to study the long term
financial stability, solvency and liquidity as well as profitability and earning
capacity of a business concern. The purpose of making such type of analysis is
to know weather in a long run the concern will be able to earn a minimum
amount which will be sufficient to maintain a reasonable rate of return on the
investment so as to provide the funds required for modernization, growth and
development of the business and to meet its costs of capital. This type of
analysis helps the long term financial planning which is essential for the
continued success of a business.
b) Short-term analysis: -this is made to determine the short-term solvency,

stability and liquidity as well as earning capacity of the business. The purpose
of this analysis is to know weather in the short run a business concern will
have adequate funds readily available to meet its short-terms requirements and
sufficient borrowing capacity to meet contingencies in the near future. This
analysis is made with reference to items of current assets and current liability
(working capital analysis) to have fairly sufficient knowledge about the
company’s current position which may be help full for short term financial
planning and long-term planning.
3) According to the modus operandi of the analysis: -on this basis,

the analysis may be horizontal analysis and vertical analysis.
a) Horizontal (or dynamic) Analysis: - This analysis is made toreview and

analyze financial statements of a number of years and therefore based on
financial data taken from several years. This is very useful for long term trend
analysis and planning. Comparative financial statement is an example of this
type of analysis.
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b) Vertical (or Static) analysis: - this analysis is made to review and analyze the
financial statements of one particular year only. Ratio analysis of the financial
year relating to a particular accounting year is an example of this type of
analysis.
Techniques (Tools or Methods) of Analysis and Interpretation
The following techniques can be used in connection with analysis and interpretation
of financial statements:
1. Comparative Financial Statements (or Analysis)
2. Common Measurement Statements (or Analysis)
3. Trends Percentages Analysis
4. Funds Flow Statement
5. Net Working Capital Analysis
6. Cash Flow Statement

7. Ratio analysis
1) Comparative Financial Statements:
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These statements are prepared in a way so as to provide time perspective to the
consideration of various elements of financial position embodied in such
statements. This is done to make the financial data more meaningful. The
statements of two or more years are prepared to show absolute data of two or
more years, increases or decreases in absolute data in value and in terms of
percentages. Comparative statements can be prepared for income statement as
well as position statement or balance sheet.
i) Comparative Income Statement: -This statement discloses the net

profit or net loss resulting from the operations of business. Such statement
shows the operating results for a number of accounting periods so that changes
in absolute data from one period to another period may be stated in terms of
absolute change or in terms of percentage. This statement helps in deriving
meaningful conclusions as it is very easy to ascertain the changes in sales
volume, administrative expenses, selling and distribution expenses, cost of
sales etc.
It is calculated as: -
Absolute change
------------------------ * 100
Base year
ii) Comparative Balance Sheet: -This statement prepared on two or more

different dates can be used for comparing assets and liabilities and to find out
may increase or decrease in these items. This facilitates the comparison of
figures of two or more periods and provides necessary information which may
be useful in forming an opinion regarding the financial condition as well as
progressive outlook of the concern.
It is calculated as: -
Absolute change
------------------------ * 100
Base year
2) Common Measurement or Size Statement:
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This statement indicates the relationship of various items (expressed as percentage of
the common item).
In the income statement the sale figure is taken as base and all other figures are
expressed as percentage of sales. Similarly, in the balance sheet the total of assets and
liabilities is taken as base and all other figures are expressed as a percentage of this
total. The percentages so calculated can be easily compared with the corresponding
percentages in other periods and meaningful conclusions can be drawn.
It is calculated as:-
Individual money amount

---------------------------------------- * 100
Total amount in statement
3) Trend Percentage Analysis: -
This analysis is an important tool of horizontal financial analysis. This method is

immensely helpful in making a comparative study of the financial statements of
several years. Under this method trend percentage are calculated for each item of the
financial statements taking the figure of base year as 100. The starting year is usually
taken as the base year. The trend percentages show the relationship of each item with
its proceeding year’s percentages. These percentages can also be presented in the
form of index numbers direction. These trend ratios may be compared with industry in
order to know the strong or weak points of a concern. These are calculated only for
major items instead of calculating for all items in the financial statement.
While calculating trend percentage, the following precautions may be taken:
(i) The accounting principles and practices must be followed

constantly over the period for which the analysis is made. This is
necessary to maintain consistency and comparability.
(ii) The base year selected should be normal and representative year.
23
(iii) Trend percentage should be calculated only for those items which
have logical relationship with one another.
(iv) Trend percentage should also be carefully studied after considering
the absolute figures on which these are based. Otherwise, they may
give misleading conclusions.
(v) To make the comparison meaningful, trend percentage of the

current year should be adjusted in the light of price level changes
as compared to the base year.
4) Funds Flow Statement: -This statement is prepared in order to know clearly

the various sources where from the funds are procured to finance the activities of a
business concern during the accounting period and also brings to highlight the uses to
which these funds are put during the staid period.
5) Cash Flow Statement: - This statement is prepared to know clearly the

various items of inflow and outflow of cash. It is an essential tool for short term
financial analysis and is very helpful in the evaluation of current liquidity of a
business concern. It helps the business executives of a business in the efficient cash
management and internal financial management.
6) Net Working Capital: -This statement is prepared to know the net change in
working capital of the business between two specified dates. It is prepared from
current asserts ant current liabilities of the said dates to show the net increase or
decrease in working capital.
7) Ratio Analysis: -It is done to develop meaningful relationship between

individual items or group of items usually shown in the periodical financial statements
published by the concern. An accounting ratio shows the relationship between the two
inter-related accounting figures as gross profit to sales, current assert to current
liabilities, loaned capital to owned capital etc. ratio should not be calculated between
the two unrelated figures as sales and discount on issue of shares, operating costs and
equity capital etc., as it will not serve any useful purpose,
24
Limitations of Financial Statement Analysis
Analysis of financial statements is a very important device but the person using this
device must keep in mind its limitations. The following are the main limitations of
analysis:
1) Historical Nature of Financial Statement: The basic nature of these

statements is historical, i.e., relating to the past period. Past can never be a
precise and infallible index of the future and can never be hundred percent
helpful for the future forecast and planning.
2) No Substitute for Judgment: -Analysis of financial statement is a tool

which can be used profitably by an expert analyst but may lead to faulty
conclusions if used by unskilled analyst. The result of analyst, thus, should not
be taken as judgments or conclusions.
3) Reliability of Figure: -The reliability of analysis depends on reliability of

the figures of the financial statements under the security. The entire working
of analysis will be vitiated by manipulations in the income statement, window
dressing in the balance sheet. Questionable procedure adopted by the
accountant for the valuation of fixed assets and such other factors.
4) Single Year Analysis is Not Much Valuable and Useful: The

analysis of these statements relating to a single year only will have limited use
and value. It will not be advisable to depend fully on such analysis. Analysis
should be extended over a number of years so that the results may be
compared to draw meaningful conclusions.
5) Results May Have Different Interpretation: The results or

indications derived from the analysis of these statements may be differently by
different users. For example, a high current ratio may suit banker, a supplier of
25
goods or short -term lenders but it may be index puff inefficiency of the
management due to non-utilizations of funds.
6) Change in Accounting Methods: Analysis will be effective if the

figure derived from the financial statements are comparable. Due to change in
accounting methods (i.e., depreciation method, or method of valuation stock),
the figures of the current period may be no comparable base, and then the
whole exercise of analysis will become futile and will be little value.
7) Pitfalls in Inter-Firm Comparison:When different firms are adopting

different procedures, records, objectives, policies and different items under
similar headings, comparison will become more difficult. If done, it will not
provide reliable basis to assess the performance, efficiency, profitability and
financial condition of the compared to industry as a whole.
8) Price Level Change Reduce the Validity of the Analysis: The

continuous and rapid changes in the value of money, in the present day
economy, also reduce the validity of analysis. Acquisition of assets at different
levels of prices make comparison useless as on meaningful conclusions can be
drawn from a comparative analysis of such items relating to several
accounting periods.
Shortcoming of the Tool of Analysis: There are different tools of analysis (already
discussed) available to the analyst. Which tools are to be used in a particular situation
depends on the skills, training, intelligence and expertise of the analyst. If wrong tool
is used, it may give misleading results and may lead to wrong conclusions or
inferences which may be harmful to the interest of business
26
CHAPTER – 3
INDUSTRY & COMPANY
PROFILE
27
INDUSTRY PROFILE
By stating production in 1914 the story of Indian cement is a stage of continuous

growth. Cement is derived from the Latin word “cementam”.
Egyptians and Romans found the process of manufacturing cement. In England during
the first century the hydraulic cement has become more versatile building material.
Later on, Portland cement was invented and the invention was usually attributed to
Joseph ASP din of England.
India is the world’s 4th largest cement produced after china, Japan and U.S.A the south
industries have produced cement for the first time in 1904. The company was setup in
Chennai with the installed capacity of 30 tonnes per day. Since then the cement
industry has progressing leaps and bounds and evolved into the most basic and
progressive leaps and 1950-51. The capacity of production was only 3.3 million
tonnes. So far annual production and demand have been growing a pace at roughly 78
million tonnes with an installed capacity of 87 million tonnes.
In the remaining two year of 8 th plan an additional capacity of 23 million tonnes will
actually come up.
India is will endowed with cement grade limestone (90 billion tonnes) and coal (190
billion tonnes). During the nineties it had a particularly impressive expansion with
growth rate of 10%
The strength and vitality of Indian cement industry can be gauged by the interest
shown and supports given by World Bank. Considering the excellent performance of
the industry in utilizing the loans, achieving the objectives and targets. The World
Bank examining the feasibility of providing a third line of credit for further upgrading
the industry in varying areas, which will help the organization to get into the global
market. With liberalization policies of Indian government, the industry is posed for a
28
high growth rates in nineties and the installed capacity is expected to cross 100
million tonnes and production 90 million tonnes by 2020
The industry has fabulous scope for exporting its product to countries like the U.S.A.,
U.K., Bangladesh Nepal and other several countries. But there are not enough wagons
to transport cement for shipmen
Cement – the product:

The natural cement is obtained by burning and crushing the stones containing clayey,
carbonate of time and some amount of carbonate of magnesia. The natural cement is
brown in colour and its best variety is known as “ROMAN CEMENT”. It sets very
quickly after addition of water.
It was in the 18thcentury that the most important advances in the development of
cement were which finally led to the invention of Portland cement.
In 1756, John Smeation showed that hydraulic lime which can resist the action of
water can be obtained not only from hard lime stone but from a limestone which
contain substantial proportion of clayey.
In 1796, Joseph Parker found that module of argillaceous limestone made excellent
hydraulic cement when burned in the usual manner. After burning the product was
reduced to a powder. This started the natural cement industry.
The common verity of artificial cement is known as normal setting cement or ordinary
cement. A mason Joseph Aspdn of Leeds of England invented this cement in 1824.
He took out a patent for this cement called it “PORTLAND CEMENT” because it had
resemblance in its colour after setting to a variety of sandstone, which is found
abundance in Portland England.
The manufacture of Portland cement was started in England around 1825. Belgium
and Germany started the same 1855. America started the same in 1872 and India
started in 1904. The first cement factory installed in Tamil nadu in 1904 by South
29
India limited and then onwards a number of factories manufacturing cement were
started.
Composition of Cement:
The ordinary cement contains two basic ingredients, namely, argillaceous and
calcareous. In argillaceous materials the clayey predominates and in calcareous
materials the calcium carbonate predominates.
A good chemical analysis of ordinary cement along with desired range of

ingredients:
Table 3.1
Ingredients Percent Range
Lime (Cao) 62 62-67
Silica (sio2) 22 17-25
Alumina (Al2o3) 5 3-8
Calcium sulphate(CaSo4) 4 3-4
Iron Oxide (Fe2O3) 3 3-4
Magnesia(MgO) 2 1-3
Sulphur(S) 1 1-3
Alkalies 1 0.2-1
Industry Structure and Development:

With a capacity of 115 million tons of large cement plant, Indian cement industry is
the fourth largest in the world. However per capita consumption in our country is still
at only 100Kgs against 300Kgs of developed countries and offers significant potential
for growth of cement consumption as well as addition to cement capacity. The recent
economic policy announcement by the government in respect of housing, roads,
power etc., will increase cement consumption.
Opportunities and Threats

In view of low per capita consumption in India, there is a considerable scope for
growth in cement consumption and creation of new capacities in coming years.The
30
cement industry does not appear to have adequately exploited cement consumption in
rural segment where damaged where damaged growth is possible.Landed cost of
cement (with import duty) continues to be higher than home market prices but with
reduced import duty, increasing imports, may pose a serious threat to the domestic
cement industry.
Outlook:
India has a lot of potential for development in the infrastructure and construction
sector and the cement sector is expected to largely benefit from it. Some of the recent
major government initiatives such as development of 98 smart cities are expected to
provide a major boost to the sector. A large number of foreign players are also
expected to enter the cement sector, owing to the profit margins and steady demand.
In future, domestic cement companies could go for global listings either through the
FCCB route or the GDR route. With help from the government in terms of friendlier
laws, lower taxation, and increased infrastructure spending, the sector will grow and
take India’s economy forward along with it
Fig 3.1 Fig 3.2
31
Statistics-
 India is the second largest producer of cement in the world trailing to China.
 ICRA projects demand growth for 2018-19 to marginally increase to four-five
per cent.
 The housing sector is the biggest demand driver of cement, accounting for
about 67 per cent of the total consumption in India. The other major
consumers of cement include infrastructure at 13 per cent, commercial
construction at 11 per cent and industrial construction at 9 per cent.
 The total capacity of the cement industry in India is 435 million tonnes (MT)
and the growth of cement industry is expected to be 6-7 per cent in 2017
because of the government’s focus on infrastructural development.
Risk and Concerns:

Slowdown of Indian economy or drop in growth rate of agriculture may adversely
affect the consumption. The recent increase in railway freight coupled with diesel /
petrol price like will increase the cost of production and distribution, as being bulky,
cement is freight intensive increase in Limestone royalty also adds to the cost of
Production, which is considerably higher than corresponding costs of many other
developing countries.In our country there is a need to undertake a massive
Programme of house construction activity into the rural and urban areas. It is
impossible to construct a house without cement and steel, in other words, cement is
one of the basic construction materials and therefore it is one of the vital elements for
the economic development of the nation. India in spite of being the 4 th biggest
producer of cement in the world has still a very low per capital consumption of
cement.
Kesoram is also conscious of its social responsibilities. Its rural and community
development programmes include adoption of two nearby villages, running an
Agricultural Demonstration Farm, a Model Dairy Farm etc., impressed by these
activities, FAPCCI chose Kesoram to confer the Award for “Best efforts of an
industrial unit in the state to develop rural economy” twice, in the year 1994 as well
32
as in 1998. Kesoram also has to its credit the National Award (Shri S.R Rangta Award
for Social Awareness) for the year 1995-96, for the Best Rural Development Efforts
made by the company. In the same year Kesoram also got the FAPCCI Award for
“Best Workers Welfare” Kesoram got the first Prize for Mine Environment and
Pollution Control for year 1999 too, for the 3 rd year in succession in July, 2001
Kesoram annexed the “Vana Mithra” Award from the Government of Andhra
Pradesh.
33
COMPANY PROFILE
Kesoram was founded in 1919 under the name of Kesoram Cotton Mills Ltd. From its
humble beginnings as a cotton textile mill in Calcutta, Kesoram expanded into the
production of rayon. Its first rayon plant was built in 1959, with a production capacity
of 4,635 metric tons of rayon yarn per year.
The spirit of entrepreneurship did not end there. Kesoram soon entered the tyres and
cement industries. A change of name was needed to reflect the company increasing
portfolio of businesses. So in 1986, it changed its name to Kesoram Industries
Limited. Since then, Kesoramoperations have grown from strength to strength. Its
reputation is recognised today by its listings on four global stock exchanges National
Stock Exchange of India, Bombay Stock Exchange, Calcutta Stock Exchange
Association, and the Societe de la Bourse de Luxembourg.
KESORAM CEMENT is an OHSAS 08001 company and also joined the select
brand of ISO 9001-2000 companies. Itisone among the industrial giants in the country
today, serving the nation on the industrial front Kesoram Industries Limited has a
chequered and eventful history is dating back to the Twenties when the Industrial
House and Birla’s acquired it. with only a Textile Mill under it banner in 1924, it
grew from strength to strength and spread is its activities to never fields like Rayon,
Pulp, transparent paper, Spun pipes and Refractory, types, Oil mill and Refinery
Extraction.
Looking to the wide gap between demand and supply, of a vital commodity, cement,
which plays an important role in nation building the Government of India de-licensed
the Cement Industry in the year 1966 with a view to attract private entrepreneurs to
augment the cement product Kesoram rose to the occasion and decided to set up a few
cement plants in the country.
34
The first cement plant of Kesoram with a capacity of 2.5 lack tonnes per annum based
on dry process, was established in1969 at Basanth Nagar a back ward area in
Karimnagar District, Telangana, and christened it Kesoram Cement
The second unit followed suit with added a capacity of 2 lack TPA in 1971. The plant
was further expanded to 9 lack by adding 205 lack tones in August, 1978, 1.13 lack
tones in January, 1987 and 0.87 lack tones in September, 1981.
4.1 Performance:
The Performance of Kesoram Cement industry had been outstanding achieving over
cent per cent capacity utilization although despite many odds like power cuts and
which most 40% was waste due to wagon shortage etc.
The company being a continuous process industry progress with industrial

Performance. The company had a glorious track record for the last 27 years in the
industry.
4.2 Technology:
Kesoram Cement uses most modern technology and computerized control in the plant.
A team of dedicated and well-experienced exports manages the plant. The quality is
maintained much above the bureau of Indian Standards.
The raw materials used for manufacturing cement are:

• Lime stone
• Bauxite
• Hematite
• Gypsum
4.3 Environmental and social obligations

For environmental promotion and to keep-up the ecological balance, this section has
undertaken various social welfare programs by adopting ten nearly villages,
organizing family welfare camps, surgical camps, children immunization camps,
35
animal health camps, blood donation camps, distribution of fruit bearing trees and
seeds, training for farmers etc., were arranged.
Welfare and Recreation Facilities

• For the purpose of recreation facility 2 auditoriums were provided for plying
in door games, cultural function and activities like drama, music and dance
etc.
• The industry has provided libraries and reading rooms. About 1000 books are
available in the library. All kinds of newspaper, magazines are made available.
• Canteen is provided to cater to the needs to the employees for supply snacks,
tea, coffee and meals etc.
• One English medium and one Telugu medium school are provided to meet the
educational requirements.
• The company has provided a dispensary with a qualified medical office and
paramedical staff for the benefit of the employees. The employees covered
under ESI hospital.
• Competitions in sports and games are conducted every year for August 15,
Independence Day and January 26, Republic day among the employees.
Electricity:
The power consumption per ton for cement has come down to 108 units against 113
units last year, due to implementation of various energy saving measures. The
performance of captive power plant of this section continues to be satisfactory. Total
power generation during the years was 84 million units last year. This captive power
plant is playing a major role in keeping power costs with in economic levels.
The management has introduced various HRD programs for training and development
and has taken various other measures for the betterment of employee’s efficiency /
performance.
The section has installed adequate air pollution control system and equipment and is
ISO 14001 such as Environment Management System is under implementation.
36
Awards
Kesoram Cement bagged many prestigious awards including national awards for
productivity, technology, conservation and several state awards since 1984. The
following are the important awards.
Awards of Kesoram
Table 4.1
No Year Awards National state
1 1984 Best family planning in the state State
2 1985-86 National productivity award National
3 1986-87 Mines safety National
4 1987-88 Best industrial promotion / expansion State
5 1987-89 Productivity award State
6 1988-89 Best industrial promoter State
7 1988-89 Expansion effort in the state State

Award for contribution given for rural
8 1988-89 State
economy
9 1989 Best family planning effort State
10 1989 YajmanyaRatna& Best Management award State
11 1988-90 Community development programs State
12 1988-90 Energy conservation National
May day award of the government of Andhra

13 1991 State
Pradesh for beat management
Pundit Jawaharlal Nehru rolling trophy for
14 1991 State
best national productivity effort
India Gandhi memorial national award for
15 1993 excellence in industry(best management State
award)
16 1994 Best industrial rebellion award State
17 1994-95 Rural development chief minister State

37
environment and mineral conservation
award
18 1995 Best industrial rebellion award State
Best effort of an industrial unit to develop

19 1995-96 National
rural economy
Shri S.R Rungta award for social awareness

20 1996 State
for best rural development effort
21 1996 Best workers welfare State
22 1996-97 Best family welfare award State

First prize for mine environment and
23 1999 pollution control for the 3rd year in State
succession
Vanamithra award from Andhra Pradesh
24 2001 State
Government
Best management Award from Andhra
25 2007 State
Pradesh Government
"Excellence in rural development" from
26 2008 the Federation of Andhra Pradesh Chambers State
of Commerce, Andhra Pradesh
“Excellence in workers' welfare" from the
27 2010 Federation of Andhra Pradesh Chambers of State
Commerce, Andhra Pradesh
In the mines safety week celebrations, under the auspices of the Director General of
Mines Safety, KesoramBasanth Nagar limestone mines won 2 first prizes
environment and pollution control and safe drilling and blasting and 14 2 nd prizes for
overall performance, productivity, operation and maintenance of machines publicity /
propaganda etc.
38
Production
Last 20 years production of Kesoram Cements industry at Basanth Nagar,
Table 4.2
Year Production in tonnes
1992-93 749797
1993-94 761581
1994-95 805921
1995-96 760708
1996-97 550254
1997-1998 601453
1998-99 643307
1999-00 643663
2000-01 748258
2001-02 685596
2002-03 731177
2003-04 784555
2004-2005 782383
2005-2006 731049
2006-07 746474
2007-08 688305
2008-09 777092
2009-10 692424
2010-11 727447
2011-12 735012
2012-13 1046166
2013-14 1167576
2014-15 1007734
39
2015-16 1080028
Note :production including internal consumption also cement and clinker

production were lower than the previous year mainly because of lower
dispatches of cement due to recession prevailing in cement industry with
slowdown in demand during the year under review. This section had to
curtail production due to accumulation of large stocks of clinker.
However, sales realization during the second half of the year has
improved and it is hoped that prices will stabilize at some reasonable
levels.
DIRECTORS OF KESORAM INDUSTRIES LIMITED
CHAIRMAN
Smt. Basant Kumar Birla
BOARD OF DIRECTORS
1) Smt. Manjushree Khaitan, Executive Vice Chairperson
2) Shri.AmitabhaGhosh
3) Shri.VinaySah
4) Shri. Lee SeowChuan
5) Shri.Kamal Chand Jain
6) Shri.Sudip Banerjee
7) Shri.Steven John Derkey
8) Shri.GautamGanguli (Company Secretary)
9) Shri.PesiKushruChoksey
Auditors
Messrs Price Wasterhouse
40
Subsidiary Companies of Kesoram Industries
1) Bharat General & Textile Industries Limited
2) KICM Investment Limited
3) Assam Cotton Mills Limited
4) Softshree Estates Limited
The investment inventory constitutes the most significant part of current assets /
working capital in most of the undertakings. Thus, it is very essential to have proper
control and management inventories.The purpose of inventory management is to
ensure availability of materials in sufficient quantity as and when required and also to
minimize investment in inventories.
41
CHAPTER – 4
DATA ANALYSIS AND
INTERPRETATION
TABLE 5.1
Comparative Income Statement of KESORAM CEMENT For the year
Ending 1-4-2019 to 31-3-2020. RS.000
42
Absolute
Particulars 2019 2020 % Change
Change
A) Income
Sales 789.2 1723.1 933.9 1.2
(_) Excise Duty 0.0 886.9 886.9
Net Sales 789.2 836.2 47.0 0.1
other income 32.4 18.5 -13.9 -0.4
Stock adjustments 2.0 9.1 7.2 3.7
Total Income A 823.6 863.8 40.2 0.0
B) Expenditure
Material Consumed 390.3 411.7 21.4 0.1
Power and fuel cost 5.7 5.8 0.1 0.0
Employee expenses 69.9 77.1 7.2 0.1
Total Operating Expenses 465.9 494.6 28.6 6.1
Other manufacturing exp 0.0 0.0
Selling and distribution exp 0.0 0.0
Financial Expenses 107.1 108.6 1.5 0.0
Miscexp written off 0.0 0.0 0.0
Total Expenditure B 573.0 603.2 30.1 0.1
Surplus/Deficit(A-B) 218.1 242.1 24.0 0.1
INTERPRETATION:
 Sales volume is increased by 1.2% during the year 2020.
 Other income is decreased by 0.4%.
 Increases in sales are highlighting increase in Material consumption, selling
cost, miscexp written off.
 Financial expenses increased by 0.013%.
 Surplus is decreased by 0.1%
TABLE 5.2
Ending 1-4-2018 to 31-3-2019. RS.000
Particulars 2018 2019 Absolute % Change
43
Change
A) Income
Sales 668.7 789.2 120.5 0.2
(_) Excise Duty 0.0 0.0 0.0
Net Sales 668.7 789.2 120.5 0.2
other income 26.3 32.4 6.2 0.2
Stock adjustments 3.6 2.0 -1.7 -0.5
Total Income A 698.5 823.6 125.0 0.2
B) Expenditure
INTERPRETATION:
 Other income is increased by 0.2%
 Increases in sales are highlighting increase in Material consumption, employee
cost, while financial expenses, misc. exp written off.
 Surplus has increased to some extent which adds to financial stability.
TABLE 5.3
Ending 1-4-2017 to 31-3-2018. RS.000
Particulars 2017 2018 Absolute % Change
44
Change
A) Income
Sales 684.4 668.7 -15.8 0.0
(_) Excise Duty 0.0 0.0 0.0
Net Sales 684.4 668.7 -15.8 0.0
other income 25.7 26.3 0.5 0.0
Stock adjustments -3.4 3.6 7.1 -2.0
Total Income A 706.7 698.5 -8.2 0.0
B) Expenditure
Financial Expenses 97.7 95.3 -2.4 0.0
Surplus/Deficit(A-B) 209.8 180.3 -29.5 -0.1
INTERPRETATION:
 Sales volume is decreased by 0.023% during the year 2018.
 Other income is increased by 0.02%.
 Decrease in sales are highlighting decline in some of the associated
expenditure compare to last year.
 Surplus is decreased by 0.1%.
TABLE 5.4
Ending 1-4-2016 to 31-3-2017. RS.000
45
Absolute %
Particulars 2016 2017
Change Change
A) Income
Sales 581.5 684.4 102.9 0.2
(_) Excise Duty 0.0 0.0 0.0
Net Sales 581.5 684.4 102.9 0.2
other income 17.1 25.7 8.6 0.5
Stock adjustments 4.9 -3.4 -8.3 -1.7
Total Income A 603.6 706.7 103.2 0.2
B) Expenditure
INTERPRETATION:
 Other income is increased by 0.5%.
 Increases in sales are highlighting increase in Material consumption, employee
cost, while other manufacturing expenses, selling expenses, misc.exp written
off.
 Surplus is increased by 0.5%.
46
COMPARATIVE BALANCE SHEET OF KESORAM CEMENT FOR THE
YEAR ENDING 31st MARCH 2019 to 2020, RS.000
INCREASE % of
/ INCREASE
PARTICULARS 31/03/2019 31/03/2020
DECREAS /DECREAS
E E
SOURCES OF FUNDS
SHARE HOLDERS FUNDS
Share Capital 34500000 34500000 0 0
Reserves & Surplus 768783995 826961437 58177442 7.6
LOAN FUNDS
Secured Loans 609933051 555991459 -53941592 -8.8
Unsecured Loans 47324672 123979573 76654901 162.0
TOTAL 1460541718 1541432469 80890751 5.5
APPLICATION OF FUNDS
FIXED ASSETS
Gross Block 541650837 624427126 82776289 15.3
Less: Depreciation 73006804 99440569 26433765 36.2
Net Block 468644033 524986557 56342524 12.0
INVESTMENTS 54988654 168101191 113112537 205.7
CURRENT ASSETS LOANS &

ADVANCES
Inventories 508179559 578425269 70245710 13.8
Sundry Debtors 766647618 648167571 -118480047 -15.5
Cash & Bank Balances 21728135 19515628 -2212507 -10.2
Loans & Advances 79937438 118081570 38144132 47.7
Less: 1376492750 1364190038 -12302712 -0.9
CURRENT LIABILITIES &

PROVISIONS
Current Liabilities 410623831 391151250 -19472581 -4.7
Provisions 29000000 27005656 -1994344 -6.9
NET CURRENT ASSETS 936868919 946033132 9164213 1.0
DEFERRED TAX LIABILITY
NIL -97712415
(Net)
MISCELLANEOUS
40112 24004 -16108 -40.2
EXPENDITURE
TOTAL 1460541718 154432469 -1306109249 -89.4
47
INTERPRETATION:
 The comparative Balance Sheet of the company reveals that during the year 2019
there has been a decrease in current assets of Rs. 9164213i.e., 0.89%. While current
liabilities have decreased by Rs. 19472581 i.e., 4.74%. This fact depicts that the
company is suffering with inadequate working capital to meet its short-term
obligations.
 While there is increase in fixed assets value to the extent of Rs. 82776289 to that of
current liabilities. This fact depicts that the company has diverted its loans in the form
of working capital to meet its short-term obligations.
 On the whole the overall financial position of the company is satisfactory.
48
YEAR ENDING 31st MARCH 2018 to 2019, RS.000
INCREAS
% of
E/
PARTICULARS 31/03/2018 31/03/2019 INCREASE/
DECREAS
DECREASE
E
SOURCES OF FUNDS
SHARE HOLDERS FUNDS
Share Capital 34500000 71000000 36500000 105.8
LOAN FUNDS
Secured Loans 555991459 868106038 312114579 56.1
Unsecured Loans 123979573 51584509 -72395064 -58.4
DEFFERED TAX LIABILITY 97712415 122772126 25059711 25.6
TOTAL 1639144884 2149671445 510526561 31.1
FIXED ASSETS
Gross Block 624427126 797011304 172584178 27.6
Net Block 524986557 666610644 141624087 27.0
INVESTMENTS 168101191 52497262 -115603929 -68.8
CURRENT ASSETS LOANS

& ADVANCES
Inventories 578425269 714978242 136552973 23.6
Sundry Debtors 648167571 1024629827 376462256 58.1
Loans & Advances 118081570 189341570 71260000 60.3
Less: 1364190038 1943446238 579256200 42.5

PROVISIONS
Current Liabilities 391151250 601369325 210218075 53.7
Provisions 27005656 71521570 44515914 164.8
MISCELLANEOUS
24004 7896 -16108 -67.1
EXPENDITURE
TOTAL 1639144884 2149671445 510526561 31.1
49
INTERPRETATION:
there has been an increase in current assets of Rs. 324522211i.e., 34.3%. While
current liabilities also increased by Rs.210218075 i.e., 53.74%. This fact depicts that
the company is having adequate working capital to meet its short-term obligations.
current liabilities. This fact depicts that the company has diverted its cash & bank
balances to acquire these fixed assets.
 On the whole the overall financial position of the com
50
YEAR ENDING 31st MARCH 2017 to 2018, Rs.000
% of
INCREASE/
DECREASE
DECREASE
SOURCES OF FUNDS
SHARE HOLDERS FUNDS
Share Capital 71000000 34500000 -36500000 -51.4
LOAN FUNDS
Secured Loans 868106038 1280091497 411985459 47.5
Unsecured Loans 51584509 48119721 -3464788 -6.7
TOTAL 2149671445 2936157785 786486340 36.6
FIXED ASSETS
Gross Block 797011304 1252543214 455531910 57.2
Net Block 666610644 1056517020 389906376 58.5
INVESTMENT 52497262 171566882 119069620 226.8

ADVANCES
Inventories 714978242 944109125 229130883 32.0
Sundry Debtors 1024629827 1074534824 49904997 4.9
Cash & Bank Balances 14496599 97153728 82657129 570.2
Loans & Advances 189341570 350191763 160850193 85.0
Less: 1943446238 2465989440 522543202 26.9

PROVISIONS
Provisions 71521570 110080953 38559383 53.9
MISCELLANEOUS
7896 256563 248667 3149.3
EXPENDITURE
TOTAL 2149671445 2936157785 786486340 36.58
51
INTERPRETATION:
there has been an increase in current assets of Rs. 437261977i.e., 34.4%. While
current liabilities also increased by Rs.46721842 i.e., 7.74%. This fact depicts that the
company is having adequate working capital to meet its short-term obligations.
52

YEAR ENDING 31st MARCH 2016 to 2017, Rs.000
% of
INCREASE/
DECREASE
DECREASE
SOURCES OF FUNDS
SHARE HOLDERS FUNDS
Share Capital 34500000 34500000 0 0
LOAN FUNDS
Secured Loans 1280091497 1792249027 512157530 40.0
Unsecured Loans 48119721 44588001 -3531720 -7.3
TOTAL 2936157785 4312622821 1376465036 46.9
FIXED ASSETS
Gross Block 1252543214 1785079415 532536201 42.5
Net Block 1056517020 1528841742 472324722 44.7
INVESTMENTS 171566882 239339398 67772516 39.5
ADVANCES
Inventories 944109125 1199191291 255082166 27.0
Sundry Debtors 1074534824 2231501170 1156966346 107.7
Loans & Advances 350191763 574515948 224324185 64.1
Less: 2465989440 4077769905 1611780465 65.4
PROVISIONS
Provisions 110080953 127080953 17000000 15.4
MISCELLANEOUS
256563 13148859 12892296 5025.0
EXPENDITURE
TOTAL 2936157785 4312622821 1376465036 46.9
53
INTERPRETATION:
there has been an increase in current assets of Rs.823475502i.e., 48.2%. While
current liabilities also increased by Rs.1611780465i.e., 65.4%. This fact depicts that
the company is having adequate working capital to meet its short-term obligations.
 While there is increase in fixed assets value to the extent of Rs.472324722to that of
 On the whole the overall financial position of the company is satisfactory.
54
Common Size Income Statement of KESORAM CEMENT For the year
Ending 1-4-2019 to 31-3-2020.
RS.000
Particulars 2019 % 2020 %
A) Income
Sales 789.2 95.8 1723.1 199.5
(_) Excise Duty 0.0 0.0 886.9 102.7
Net Sales 789.2 95.8 836.2 96.8
other income 32.4 3.9 18.5 2.1
Total Income A 823.6 863.8
B) Expenditure
Other manufacturing exp 0.0 0.0 0.0 0.0
Selling and distribution exp 0.0 0.0 0.0 0.0
Miscexp written off 0.0 0.0 0.0 0.0
Total Expenditure B 573.0 603.2
Surplus/Deficit(A-B) 218.1 242.1
INTERPRETATION:
 Sales volume has increases from 2019-2020, giving its effects on the company
revenues.
 Other income has decreased by 13.91.
 Total operating expenses has increases by 28.7 in the year 2020
 Financial expenses have been increased by 1.48.
55
Ending 1-4-2018 to 31-3-2019.
RS.000
A) Income
Sales 668.7 95.7 789.2 95.8
(_) Excise Duty 0.0 0.0 0.0 0.0
Net Sales 668.7 95.7 789.2 95.8
other income 26.3 3.8 32.4 3.9
B) Expenditure
INTERPRETATION:
 Sales volume has increases from 2018-2019, giving its effects on the company
revenues.
 Other income also increases by 6.19.
 Total operating expenses has increases by 69.2 in the year 2019.
 Financial expenses have been increased by 11.8.

Ended 1-4-2017 to 31-3-2018
56
RS.000
A) Income
Sales 684.4 96.8 668.7 95.7
(_) Excise Duty 0.0 0.0 0.0 0.0
Net Sales 684.4 96.8 668.7 95.7
other income 25.7 3.6 26.3 3.8
Stock adjustments -3.4 -0.5 3.6 0.5


B) Expenditure
INTERPRETATION:
 Sales volume has decreased from 2017-2018, giving its effects on the
company revenues.
 Other income also decreased by 0.53.
 Total operating expenses has increases by 1.36 in the year 2018.
 Financial expenses have been decreased by 2.37.

Ended 1-4-2016 to 31-3-2017
57
RS.000
A) Income
Sales 581.5 96.4 684.4 96.8
(_) Excise Duty 0.0 0.0 0.0 0.0
Net Sales 581.5 96.4 684.4 96.8
other income 17.1 2.8 25.7 3.6
Stock adjustments 4.9 0.8 -3.4 -0.5


B) Expenditure
INTERPRETATION:
Sales volume has increases from 2016-2017, giving its effects on the company
revenues.
 Other income also increases by 0.3%.
 Total operating expenses has increases by 1.09% in the year 2017.
 Financial expenses have been decreased by 2.37%
58
COMMONSIZE BALANCE SHEET
KESORAM CEMENT FOR THE YEAR ENDING 31st MARCH 2015 to 2016, Rs.000
% OF % OF
PARTICULARS 31/03/2015 31/03/2016
CHANGE CHANGE
SOURCES OF FUNDS
SHARE HOLDERS FUNDS
Share Capital 34500000 2.36 34500000 2.1
Reserves & Surplus 768783995 52.63 826961437 50.45
LOAN FUNDS
Secured Loans 609933051 41.76 555991459 33.92
Unsecured Loans 47324672 3.24 123979573 7.56
TOTAL 1460541718 100 1639144884 100
FIXED ASSETS
Gross Block 541650837 37.09 624427126 38.09
Net Block 468644033 32.09 524986557 32.03
INVESTMENTS 54988654 3.76 168101191 10.26

ADVANCES
Inventories 508179559 34.79 578425269 35.29
Sundry Debtors 766647618 52.49 648167571 39.54
Cash & Bank Balances 21728135 1.49 19515628 1.19
Loans & Advances 79937438 5.47 118081570 7.2
Less: 1376492750 94.25 1364190038 83.23

PROVISIONS
Current Liabilities 410623831 28.11 391151250 23.86
Provisions 29000000 1.99 27005656 1.65
NET CURRENT ASSETS 936868919 64.15 946033132 57.72
MISCELLANEOUS EXPENDITURE 40112 0 24004 0
TOTAL 1460541718 100 1639144884 100
INTERPRETATION:
 An analysis of current assets of both the years shows that the percentage of Current
Assets to that of Total Assets is 94% in the year 2016 and reduced to 83% in the year
2015 and in the both the years the company is having adequate working capital. The
percentages of Current Liabilities are less than that of Current Assets of both the
years, the Inventories share greater value in Current Assets.An analysis of Current
Liabilities to that of Shareholders Funds shows that the percentage of debt is less than
the equity that is a good sign i.e., the company’s solvency is sound.
 To run the company, it has to depend on working capital. That is the most of working
capital procurement has been done from the profit earned and Reserves maintained by
the Company. Company’s reserve capacity is very good. All the fixed assets are well
utilized and investments are made regularly.
COMMONSIZE BALANCE SHEET
59
KESORAM CEMENT FOR THE YEAR ENDING 31st MARCH 2015 to
2016, Rs.000
% OF % OF
PARTICULARS 31/03/2014 31/03/2015
CHANGE CHANGE
SOURCES OF FUNDS
SHARE HOLDERS FUNDS
Share Capital 34500000 2.10 71000000 3.30
Reserves & Surplus 826961437 50.45 1036208772 48.20
LOAN FUNDS
Secured Loans 555991459 33.92 868106038 40.38
Unsecured Loans 123979573 7.56 51584509 2.40
DEFFERED TAX LIABILITY 97712415 5.96 122772126 5.71
TOTAL 1639144884 100.00 2149671445 100.00
FIXED ASSETS
Gross Block 624427126 38.09 797011304 37.08
Less: Depreciation 99440569 6.07 130400660 6.07
Net Block 524986557 32.03 666610644 31.01
INVESTMENTS 168101191 10.26 52497262 2.44
ADVANCES
Inventories 578425269 35.29 714978242 33.26
Sundry Debtors 648167571 39.54 1024629827 47.66
Cash & Bank Balances 19515628 1.19 14496599 0.67
Loans & Advances 118081570 7.20 189341570 8.81
Less: 1364190038 83.23 1943446238 90.41
PROVISIONS
Current Liabilities 391151250 23.86 601369325 27.97
Provisions 27005656 1.65 71521570 3.33
NET CURRENT ASSETS 946033132 57.72 1270555343 59.10
MISCELLANEOUS
24004 0.00 7896 0.00
EXPENDITURE
TOTAL 1639144884 100.00 2149671445 100
INTERPRETATION:
 An analysis of current assets of both the years shows that the percentage of Current
Assets to that of Total Assets is 83% in the year 2015 and reduced to 90% in the year
2014 and in the both the years the company is having adequate working capital. The
percentages of Current Liabilities are less than that of Current Assets of both the
years, the Inventories share greater value in Current Assets.An analysis of Current
Liabilities to that of Shareholders Funds shows that the percentage of debt is less than
the equity that is a good sign i.e., the company’s solvency is sound. To run the
company, it has to depend on working capital. That is the most of working capital
procurement has been done from the profit earned and Reserves maintained by the
Company.Company’s reserve capacity is very good. All the fixed assets are well
utilized and investments are made regularly.
60
TREND ANALYSIS:
BALANCE SHEET SHOWING TRENDS IN PERCENTAGES OF KESORAM

CEMENT FOR THE YEAR ENDING 31st MARCH 2015 TO 2020, Rs.000
31/03/20 31/03/20 31/03/20 31/03/20 31/03/20
PARTICULARS
16 17 18 19 20
SOURCES OF FUNDS
SHARE HOLDERS
FUNDS
Share Capital 100 100 205.79 100 100
Reserves & Surplus 100 107.56 134.78 182.2 291.12
LOAN FUNDS
Secured Loans 100 91.16 142.32 209.87 293.84
Unsecured Loans 100 261.98 109 101.68 94.21
DEFFERED TAX
0 0 0 0 0
LIABILITY
TOTAL 100 112.23 147.18 201.03 295.27
APPLICATION OF
FUNDS
FIXED ASSETS
Net Block 100 112.02 142.24 225.44 326.22
INVESTMENTS 100 305.7 95.46 312 435.25
CURRENT ASSETS
LOANS & ADVANCES
Inventories 100 113.82 140.69 185.78 235.98
Sundry Debtors 100 84.55 133.65 140.16 291.07
Cash & Bank Balances 100 89.81 66.72 447.13 333.95
Loans & Advances 100 147.72 236.86 438.08 718.71
Less: 100 99.1 141.19 179.15 296.24
CURRENT LIABILITIES
& PROVISIONS
Current Liabilities 100 95.25 146.45 157.83 345.67
Provisions 100 93.12 246.63 379.59 438.21
NET CURRENT ASSETS 100 100.99 131.62 182.29 270.18
MISCELLANEOUS
100 59.84 19.68 639.62 32780.36
EXPENDITURE
TOTAL 100 112.23 147.18 201.03 295.27
Note*: Assuming the values of base year i.e., 2020 as 100%.
61
INTERPRETATION:
 As per the above table of Trend Percentages of Balance Sheet of Kesoram
Cements Ltd. the position of Current Assets is improved year after year.
During the year 2013 the Current Assets were at 99.1%, but it gradually
increased and in the year 2016 it is 296%. This increasing trend is due to
increase in the value of Cash & Bank Balances and Loans & Advances
FIXED ASSETS:
 s per the above table of Trend Percentages of Balance Sheet of Kesoram
Cement there is a continuous increase in the value of Fixed Assets. During the
year 2015 it is at 326% which is a positive sign.
INVESTMENTS:
Cement there is a Continuous trend. But during the year 2010 its value
reduced insignificantly. However Company was able to cope this situation and
the Fixed Assets showed an increasing trend thereafter and during the year
2015 it is at 435%.
CURRENT LIABILITIES:
Cement there is a Continuous trend. From the year 2011 to 2015 there is
increase in Current Liabilities that indicates the Companies Credit Worthiness,
its reputation in the credit market.
Conclusion:
Thus, the overall position, working capital utilization etc., indicates that the firm is in a
satisfactory level.
62
CHAPTER – 5
FINDINGS,
SUGGESTIONS,
CONCLUSIONS
&
BIBLIOGRAPHY
63
FINDINGS
2016-17
 The comparative Balance Sheet of the company reveals that during the year
2012 there has been a decrease in current assets of Rs.12302712 i.e.0.89%.
While current liabilities have decreased by Rs.19472581 i.e.4.74%. This fact
depicts that the company is suffering with inadequate working capital to meet
its short-term obligations.
 While there is increase in fixed assets value to the extent of Rs.82776289 to
that of current liabilities. This fact depicts that the company has diverted its
loans in the form of working capital to meet its short-term obligations.
 On the whole the overall financial position of the company is satisfactory.
2015-16
2013 there has been an increase in current assets of Rs.579256200 i.e., 42%.
While current liabilities also increased by Rs.210218075 i.e., 53.74%. This
fact depicts that the company is having adequate working capital to meet its
short-term obligations.
cash & bank balances to acquire these fixed assets.
2014-15
2014 there has been an increase in current assets of Rs.522543202 i.e., 26%.
While current liabilities also increased by Rs.46721842 i.e., 7.74%. This fact
depicts that the company is having adequate working capital to meet its short-
term obligations.While there is increase in fixed assets value to the extent of
Rs.389906376 to that of current liabilities. This fact depicts that the company
has diverted its cash & bank balances to acquire these fixed assets.
64
2013-2014
2015 there has been an increase in current assets of Rs. 1611780465 i.e., 65%.
While current liabilities also increased by Rs.771304963 i.e.119%. This fact
depicts that the company is having adequate working capital to meet its short-
term obligations.

cash & bank balances to acquire these fixed assets.
On the whole the overall financial position of the company is satisfactory
65
SUGGESTIONS
The study is to offer some suitable suggestions on the basis of studying and analysing
the financial statements to improve the financial performance of “Kesoram Industries
pvt.ltd
 The Cement industry is huge and has huge potential for growth; the company
should try and revamp its operations.
 The management needs to increase the stock.It can be done by increasing
production, achieve economies of scale and hence increase market penetration.
 It is suggested for the company to control over the current liabilities.
 The product is doing reasonably well in most of the market so they should
promote the product accordingly. Eg: free sampling, discounts etc.
66
CONCLUSION
This project of Financial Statement analysis in the production concern is not merely a
work of the project. Brief knowledge and experience of that how to analyse the
financial performance of the firm. The study undertaken has brought in to the light of
the following conclusions.
 According to this project I came to know that from the analysis of financial
statements it is clear that Kesoram Cement Ltd isa satisfactory levelof profits
during the period of study.
 The firm should focus on maximizing the profits in the coming years by taking
care of internal as well as external factors.
 And with regard to resources, the firm is taking utilization of the assets
properly.
 The fact depicts that the company has diverted its cash & bank balances to
acquire the fixed assets.
 The overall financial position of the company is satisfactory.
67
BIBLIOGRAPHY
68
BIBLIOGRAPHY
BOOKS
M.Y KHAN : FINANCIAL MANAGEMENT
JAIN AND NARANG : FINANCIAL CCOUNTING&ANALYSIS
S N MAHESHWARI : FINANCIAL ACCOUNTING & ANALYSIS
PRASHANTHA ATHMA : FINANCIAL ACCOUNTING & ANALYSIS
WEBSITES
 www.google.com
 www.kesoramcement.com
 www.wikipedia.com
69

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CHAPTER – 1

Financial Statement Analysis is the process of reviewing and analysing a company's

It is used by a variety of stakeholders, such as credit and equity investors, the

Common methods of financial statement analysis include fundamental

1.2 SCOPE OF THE STUDY

Primary data: Data observed or collected directly from first-hand experience.

 The study is conducted for the purpose of fulfillment of the condition

2.2 Nature of Financial Statement

Financial statements are prepared for the purpose of presenting a periodical

 The figures in the financial statements are a combination of records facts.

 These statements are prepared as per accounting concepts and conventions

Importance of Financial Statements

 Creditors: -Creditors (i.e.., suppliers of goods and services on credit, banker’s

 Employees: - Employees are interested in the financial position of a concern they

 Government: - Central and State Governments are interested in the financial

 Research Scholars: -The financial statements, being a mirror of the financial

 Consumers: -Consumers are interested in the establishment of good accounting

 Limitations of Financial Statements

The following are the main limitations of the financial statements

 Lack of Precision and Definiteness: - Financial statements may not be realistic

 Lack of Objective Judgment: - Financial statements are influenced by the

 Records Only Monetary Facts - Financial statements disclose only monetary

Profit and Loss Account

Importance of Profit and Loss Account

 Information of Net Profile or Net Loss: One of the important objectives of

 Comparison of Expenses: Comparison of the various expenses include in the

(ii) Non-Operating expensesare those expenses which are not required to

A balance sheet is a statement prepared with a view to measure the financial

Capital obtained from various sources has been invested according to

A properly drawn up balance sheet gives information relating to

1. The nature and value of assets.

Characteristics of Balance Sheet

The following are the main Characteristics:

 It is prepared on a particular date and not for a particular period.

Information that Balance Sheet Convey to Outsiders

 The nature and the value of assets.

Classification of Assets and liabilities

Assets:Assets are property and possession of a business. Stock, land, buildings,

 Contingent Assets: It is an asset the existence, value and ownership of which is

Liabilities: A liability is an amount which a business is legally bound to pay. It is a

 Contingent liabilities: A contingent liability is one which is not an actual liability

 Uncertainty as to whether the amount will be payable to all, and

Meaning of Analysis of Financial Statement

Analysis is the process of critically examining in details accounting

Analysis and interpretation are closely related. Interpretation is not possible

In other words of Kennedy and Memullar, “The analysis and interpretation of

The most important objective of the analysis and interpretation of financial

Objectives of Financial Analysis

Financial analysis is helpful in assessing the position and profitability of a

In short, the main objectives of analysis of financial statements or to assess:

Types of Financial Statement Analysis

1) The nature of the analyst and the material used by him.

1) According to the nature of the analyst and the used by him:

2) According to the objectives of the analyst: - on the basis of, the

b) Short-term analysis: -this is made to determine the short-term solvency,

3) According to the modus operandi of the analysis: -on this basis,

a) Horizontal (or dynamic) Analysis: - This analysis is made toreview and

Techniques (Tools or Methods) of Analysis and Interpretation

1. Comparative Financial Statements (or Analysis)

2. Common Measurement Statements (or Analysis)

3. Trends Percentages Analysis

4. Funds Flow Statement

5. Net Working Capital Analysis