PROJECT REPORT

ON

RATIO ANALYSIS

PROJECT UNDER TAKEN AT PRISM CEMENT

PRISM CEMENT LTD. SATNA (M.P.)

2013-2014

SUBMITTED BY UNDERGUIDANCE OF SUBMITTED

Mohit Sachdeva Mr. Sumit Shukla Sir Prism Cement

( M.B.A 2nd SEM ) VIMR SATNA

M.B.A. PROGRAMME
VINDHYA INSTITUTE OF MANAGEMENT & RESEARCH
SATNA

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 DECLARATION

I, Mohit sachdeva here by solely declare that the project report

entitled as a study on the Ratio Analysis. Submitted by me is a
work done and it is not submitted to any other university or
published anytime before. This project work is in partial
fulfillment of the requirements for the award of the Master of
Business Administration from VIMR SATNA.

MOHIT SACHDEVA

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 ACKNOWLEDGEMENT

The satisfaction that accompanies the successful

completion of any task would be incomplete with out
mentioning people who made it possible and whose
encouragement and constant guidance crowned my effort with
success.

I am grateful to external project guide Mr. Amit Gupta and

I am also thankful to Mr. Sumit Shukla ( Accs. Dept prism
Cement) for his co-operation and in providing the information
of the company required by me.

I especially thank all those who have helped me directly

or indirectly. I express my profound thanks to my affectionate
parents for their constant encouragement throughout my
educational career.

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 Mohit Sachdeva

GUIDE’S CERTIFICATE

This is to certify that Mr. Mohit Sachdeva has satisfactorily

completed the project work on “RATIO ANALYSIS

PROJECT UNDER TAKEN AT PRISM CEMENT “ under

my guidance for the partial fulfillment

of MBA Degree course submitted to AWADHESH

PRATAP SINGH UNIVERSITY. REWA, during the

academic year 2013-2014.

To best of my knowledge and belief the matter

presented by him is original work and not copied from any

source.

Amit Gupta

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 CONTENTS
CHAPTER TOPICS COVERERD PAGE NO.

CHAPTER 1. INTRODUCTION 6

COMPANY PROFILE AND ABOUT THE

CHAPTER 2. 8
PROJECT

CHAPTER 3. OBJECTIVES 29

CHAPTER 4. RESEARCH METHODOLOGY 50

CHAPTER 5. DATA ANALYSIS 52

CHAPTER 6. CONCLUSION 65

CHAPTER 7. LIMITATION OF THE PROJECT 66

CHAPTER 8. RECOMMENDATION 67

CHAPTER 9. BIBLIOGRAPHY 68

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 INTRODUCTION
Financial Ratio Analysis is the calculation and comparison of main indicators -
ratios which are derived from the information given in a company's financial
statements (which must be from similar points in time and preferably audited
financial statements and developed in the same manner). It involves methods of
calculating and interpreting financial ratios in order to assess a firm's performance
and status. This Analysis is primarily designed to meet informational needs of
investors, creditors and management. The objective of ratio analysis is the
comparative measurement of financial data to facilitate wise investment, credit and
managerial decisions. Some examples of analysis, according to the needs to be
satisfied, are:
 Horizontal Analysis - the analysis is based on a year-to-year comparison of
a firm's ratios,
 Vertical Analysis - the comparison of Balance Sheet accounts either using
ratios or not, to get useful information and draw useful conclusions, and
 Cross-sectional Analysis - ratios are used and compared between several
firms of the same industry in order to draw conclusions about an entity's
profitability and financial performance. Inter-firm Analysis can be
categorized under Cross-sectional, as the analysis is done by using some
basic ratios of the Industry in which the firm under analysis belongs to (and
specifically, the average of all the firms of the industry) as benchmarks or
the basis for our firm's overall performance evaluation.

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The informational needs and appropriate analytical techniques needed for specific
investment and credit decisions are a function of the decision maker’s time horizon
(short versus long term investors and creditors). A pervasive problem when
comparing a firm’s performance over time (trend or time series analysis) or with
other firms (cross sectional or common size analysis) is changes in the firm’s size
over time and the different sizes of firms which are being compared. However, one
approach to this problem is to use common size statements in which the various
components of the

Financial statements are standardized by expressing them as a percentage of some

bases.

In general, a process of standardization is being achieved by the use of ratios.

They can be used to standardize financial statements allowing for comparisons
over time, industry, sector and cross-sectionally between firms and further
facilitate the evaluation of the efficiency of operations and/or the risk of the firm’s
operations regarding the scope and purpose of evaluation. Ratios measure a firm’s
crucial relationships by relating inputs (costs) with output(benefits) and facilitate
comparisons of these relationships over time and across firms.

Many attractive categories of financial ratios and numerous individual ratios have
been proposed in the literature. The most prominent literature on financial analysis
- though non-exhaustive - indicates the following categories of ratios:

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COMPANY PROFILE

Introduction:

Prism Cement Limited is an ISO 9001:2000 certified professionally managed

company promoted by the Rajan Raheja Group. The company operates one of the
largest single kiln cement plants in the country at Satna, Madhya Pradesh. The
company also has a packing unit at Allahabad, Uttar Pradesh. Equipped with
machinery and technical support from world leaders, F. L. Smith & Co. A/S,
Denmark, Prism has created a niche for itself in the cement industry.

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The company primarily caters to the demand in the Northern Region, mainly in the
States of Uttar Pradesh, Bihar and Madhya Pradesh. The Company’s plan for a
five-fold increase in cement capacity from 2 MTPA to 10.0 MTPA by 2011
through Brownfield and Greenfield expansion is making steady headway. These
expansions will establish the company’s brand in the new markets and a larger
customer base. A team of experienced engineers and dedicated workforce
combined with a high level of automation and sophisticated control systems have
placed the Company’s products in the premium segments.

PRISM has successfully established a high brand performance among its

customers through its excellent quality products and transparent policies. PRISM
has truly taken cement production to global standards. PRISM is one of the most
advanced concerns in the world indulged in manufacturing ordinary Portland
cement of every grade e.g.53, 43 and 33 and pozzolana Portland cement.

Initially, this company was incorporated under the name of RASI cement by
DR.B.V. RAI, then it was took by RAJAN RAHEJA and the name of the
company was changed to karan cement ,afterwards the name was again changed to
prism cement ltd. Presently, the company is jointly promoted by Rajan Raheja
group of Mumbai, f. l .smith &company A/S, Denmark (FLS and industrilization
fund for developing countries, Denmark (IFU).

This plant is started its production from june1,1997 in village Mankahari, near
Satna in M.P. with 2million tons per year , which can be translated in term s of 50
million bags of ordinary / pozolana Portland cement. Raw material assessment and
finalization of the plant technical design has been carried out with the support of

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FLS and also the main equipment from the lime stone crusher to the electronic
packers were supplied by FLS. With an objective of being an active participant in
the dynamics of the nation march towards total industrialization prism cement
limited has set up a state-the-art cement plant near satna in Madhya Pradesh.

The 2.51 million ton capacity ultra modern cement plant of prism is one of the
most advanced cement producers in the world with machinery and technology
imported from the world leaders, and state of art processes that lend it a futurist
environment. The company has set up a packing unit at Allahabad to cater to the
requirement of customer in eastern/central U.P.

The company is jointly promoted by RAJAN RAHEJA GROUP of Mumbai

F.L.SMITH and CO. A/S Denmark (FLS), world leaders in cement technology and
industrization fund for developing countries DENMARK (IFU). A team of
experienced engineers and a dedicated workforce, rich deposited of high quality
limestone, a high level of automation and sophisticated quality control system with
unbeatable facilities prism cement production to global standards. Prism
achievements have been made possible by our people – people with vision, united
by shared values and there commitment to excellence in the world of contraction.
No wonder, on quality, strength and consistency, Prism cement is a world part.

GLOBAL SCENARIO:-

Cement is one of the key infrastructure industries. Price and distribution controls
were lifted on the 1st march 1989 and licensing was dispensed with since 25th July
1991. However, the performance of the industry and prices of cement are

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monitored on a regular basis. The industry is subject to quality control order issued
on 17.02.2003 to ensure quality standards.

OVERVIEW OF THE PERFORMANCE OF THE CEMENT SECTOR:

The Indian cement industry not only ranks second in the production of cement in
the world but also produces quality cement, which meets global standards.
However, the industry faces a number of constraints in terms of high cost of
power, high railway tariff, high incidence of state and central levies and duties,
lack of private and public investment in infrastructure project, poor quality coal
and inadequate growth of related infrastructure like sea and rail transport , ports
and bulk terminals .In order to utilize excess capacity available with the cement
industry , the government has identified the following thrust areas for increasing
demand for cement :

(i) Housing development programmers;

(ii) Promotion of concrete highways and roads;
(iii) Use of ready-mix concrete in large infrastructure projects
(iv) Construction of roads in rural areas under prism ministers Gram Sadak
Yojana.

INDIAN SCENARIO OF CEMENT INDUSTRY:

Indian cement industry is modern and uses latest technology. Only a small
segment of industry is using old technology based on wet and semi–dry process.

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Efforts are being made to recover waste heat and success in this area has been
significant.

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WHAT IS CEMENT AND HOW IS IT MADE?
Cement is a soft powdery-type substance. It is made from a mixture of element found
in nature material such a limestone, clay and/or shale when cement mix with water it
can bind sand and gravel into a hard solid mass called concrete.
Four essential elements are needed to make cement they are silicon, aluminum, iron,
and calcium (which is the main ingredient) can be obtained from limestone, sand/clay.
For making cement mainly four Raw materials are required:-
1) Limestone
2) Gypsum
3) Laterite / Blue Dust
4) Fly Ash
Limestone is obtained by blasting in mines. In mines there are several layers of soil,
hard rocks, etc. After 5-6 Layers Company gets limestone in the form of big rocks. By
blasting these big rocks of limestone be get limestone in smaller form which are easier
to transport. Now through conveyer belt these limestone are moved to plant. These
limestone breaks up into smallest part by grinder. Now

This grinded lime stone transfer to kiln. The temperature of kiln approximately
1400C. In kiln limestone and other raw materials like Gypsum, Laterite and Fly Ash
were mixed with each other. The high temperature of kiln melts all the raw materials.
After kiln all these materials take a round shape which is generally known as
“Clinker”. Clinker is a semi-finished product of company. After grinding these
clinkers we get final cement which is used for domestic as well as construction
purpose.

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Cement product is very fine one kilo (2.2ibs) contains over 300 billion gram we haven’t
actually counted them to see if that is completely accurate the powder will pass through a
slave capable of holding water.

Applications:-
 Suitable for all types of construction like building, roads, bridges, culverts and
cement base products.
 Mass concrete work like dam, machine foundation work.
 Concrete works in environment involving chemicals in soil and water.
 Sewage and effluent treatment plant.
 All kinds of marine works, like jetty etc.
 Suitable for all construction ensuring higher durability.

TYPES OF CEMENT:-
Prism cement ltd manufactured two types of cement-
1. PPC
2. OPC
PPC (Portland Pozzolona Cement) with the brand name ‘Champion’ is general-
purpose cement popular for all applications during house construction by individuals. It
is finely ground blend of high quality clinker and carefully selected high quality
Pozzolona material (Fly Ash) with high fineness an optimum range of chemical
composition.
OPC (Ordinary Portland cement) is made in three grades i.e. 33 Grade, 43 Grade,
and 53 Grade cement. Prism Cement’s OPC is in demand for specialized cement
concrete applications like high-rise buildings, bridges, manufacturing AC sheets, pipes,
poles etc.

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 43 Grades:-
Features:-
 Achieve more than the specified strength as per the relevant IS code
through proper adjustment in the chemical composition.
 High quality limestone deposit result in:
 Higher strength of cement.
 Moderate sulphate resisting properties.
 Lower level of chloride concentration
 Efficient quality control and high level of process parameter results in reduced
free lime, low insoluble residue and loss on ignition

Applications:-
Optimally higher strength of cement makes it suitable for:
 All General and semi specialized construction works like plain and
reinforced cement concrete works, brick and stone masonry, plastering and
flooring.
 Manufacturing of concrete pipes, blocks, tiles and poles.
 Suitable for applications like pre-cast, pre stressed and slip form
construction work.
 Also suitable for all types of specialized concrete repair works like gunniting
etc.

Grade 53:-
Features:-

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 Higher strength than 43 Grade is achieved through further improvement in
the raw meal chemical composition and also grinding finer than 43 Grade cement.
 High quality limestone deposit result in
- Higher strength of cement.
- Moderate sulphate resisting properties.
- Lower level of chloride concentration.
 Efficient quality control and high level of process parameter results in
reduced free lime, low insoluble residue and loss on ignition.
 Optimally higher fineness results in early strength improvement.
 Closed circuit cement grinding system using high efficiency separator
controls the particle size distribution resulting proper hydration character.
Applications:-
 High strength of cement makes it suitable for:
 Making high grade concrete with proper mix design.
 Early form works removal due to high early strength development result in
quicker construction.
 Optimally higher fineness gives better cohesiveness, improved workability
resulting denser concrete and superior surface finish.
 Economical usage of cement due to high strength through proper concrete
mix design.
 All type of plain and R.C.C., semi and specialized construction work, like
bridges, culverts, slip form work, pre-stressed pipe / poles etc.
 Also suitable for all types of specialized concrete repair work like gunniting
etc.

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 REVIEW OF LITERATURE

Financial ratios are important to analysts due to conquer the little meaning of
typically numbers. Thus, ratios are intended to provide meaningful relationship
between individual values in the financial statement (Reilly, Brown, 2006).
Because the major financial statement report numerous individual items, it is
possible to produce a vast number of potential ratios, many which will have little
value.
A single number from a financial statement is of little use, an individual
financial ratio has a little value except in relation to comparable ratios for other
entities. That is, only relative financial ratios are relevant. A firm’s performance
relative can be compared by the aggregate economy; or by its industries; or by its
past performance (Reilly, Brown, 2006).

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COMPANY VISION & MISSION

VISION:- To be acknowledged as a leading player in the industry with the highest

level of integrity.

MISSION:-

 State of the art cement plants

 Transparent dealings with all stakeholders.
 Committed to the principles of good corporate governance.

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LIST OF BOARD OF DIRECTORS:-

Chairman Mr. Rajesh Kapadia

Non-executive Directors   Mr. V.M Panicker

Mr. Shubham M. Thakore

Mr. S. Ramanath

Mr. James Arthur Brooks

Ms. Ameeta A. Parpia

Managing Directors Mr. Manoj Chhabra

Mr. Vijay Aggarwal

Executive Director Mr. Ganesh Kaskar

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PRISM CHAMPION CEMENT is a finally ground blend of high quality clinker
and carefully selected high quality pozzolonic material (Fly ash) with high fineness
and optimum range of chemical composition.

Carefully selection of pozzolona is one of the crucial factor for the superiority of
PRISM CHAMPION CEMENT.

The other crucial factors are:-

 Optimum dosage of pozzolona to ensure high level of 28 days strength.

 Balancing the fineness and the reactivity of pozzolona to ensure proper
hydration character, thus ensuring sustained strength gain over long period
without sacrificing on the early age strength.
 Low heat of hydration helps in prevention of cracks ensuring durability of
structure.
 Also ensure durability of structure even in adverse environment condition.

QUALITY POLICY & CERTIFICATION

Quality Policy:-

National Accreditation Board for testing and Celebration Laboratories has

granted accreditation to our laboratory in accordance with ISO/IES 17025:2005 for
the chemical & mechanical testing.

We are committed to strive foe customer satisfaction by supplying consistent

quality cement and clinker as per mutually agreed product specifications.
This shall achieve by:

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  Continual improvement in productivity levels and quality management
system
 Enhancing employee’s skills.
 Focusing on customer’s needs and creating awareness regarding proper use
of cement.

ENVIRONMENT CONSIDERATIONS

The Company is committed to mitigate potential environmental impacts associated

with cement plants. The Pyro processing and pollution control systems for Raw
Mills and all kiln, Cooler, Cement Mills and all Transfer points are designed to
meet the stringent requirements for Dust and NO Emission. Green belt
development through large scale plantation of trees in and around the plant and
residential areas.

Social Welfare:-
A well established township provides facilities like School, Hospital,
Banks, Post and Telegraph office and Recreational facilities for employees and
their families.

Human Welfare:-
Company considers its human resources as one of its most
important assets. At every stage, concept of ‘ownership’ is instilled in them to
ensure full commitment and dedications. Training of personnel is an integral part
of the Company’s operation. Right from level of worker’

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Health & Safety Policy:-

The Health & safety of our people is the prime concern of the Company. Our
commitment to create & maintain safe & healthy work environment against
hazards and risks shall be achieved by:

 Continuously developing & maintaining safe work practices

 Focusing on operational & occupational hazards & risks

Creating awareness about preventive health……………

OBJECTIVES OF PRISM CEMENT LTD.:-

The main objective of Prism Cement is to continuously improve the quality

of its products and services in order to meet the customer satisfaction.

COMPETITORS OF PRISM CEMENT LTD:-

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  In intensive competition Prism Cement Ltd. has many competitors as
JP CEMENT, BIRLA CEMENT SAMRAT (Satna), BIRLA GOLD
(Maihar) CEMENT and ACC CEMENT.

 The most competitor of Prism Champion is JPCement.in this

competition scenario Prism Champion is facing competition.

 Increase discount structure provided by JP Cement there market

share.

 JP Cement Ltd. is increasingly more wide open in the area of

advertisement comparing to Prism Cement.

HEAD OFFICES OF THE COMPANY:-

Allahabad: 16/1/6-A Tagore Town,

Jawaharlal Nehru Road.
Allahabad -211002 (UP)
Ph. (0532) 2465228, 2467288.
REGIONAL OFFICE:-

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Varanasi: Unit -1, C 19/40, VIP,
Fatiman Road Sigra
Behind the Kashi Gramin Bank
Varanasi – 221002
Ph. (0542) 2227427, 2227428.
Kanpur: X-1/170- Krishna puram
Ph. (0512) 2404123, 2400932.

Lucknow : 3/113-Vivek khand

Gomati nagar Lucknow -2260110
Ph. (0552) 2396847, 2397589.

Bareli: C-77/3 – in front of Tagore Park

Rajendra Nagar Bareli.
Ph. (0581) 2530089, 2530091.

Satna: Rajdeep Hotal, Near Rewa Road

Satna - 485002
Ph. (07672) 404400, 404403
Jabalpur: 4 – HIG –Residency Road
South civil line Jabalpur, 482001
Ph. (0761) 26200256, 2326907.

Patna : 302 C- Abhishek Plaza

Exhibition Road Patna, 800001
Ph. (0612) 2238744, 2224017.

OBJECTIVES OF THE STUDY:

The main objective of the study is to apply theoretical concepts to the

practical situations of PRISM CEMENT so as to compare and correlate the actual
achievements with a theoretical conclusion.
The main objectives of the study are:

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  To know the extent to which PRISM CEMENT is efficiently utilizing its
sources to its operations.

 To study the efficiency of overall operations.

 To analyze the financial position of the PRISM CEMENT.

 To understand the capital structure of the PRISM CEMENT through

calculating of leverage ratios.

 To know the profitability of the PRISM CEMENT through calculation of

profitability ratios.

 To give appropriate suggestions to the best performance of the organization.

Ratio Analysis
Introduction:-
The financial position of an organization is contained in its profit
and loss account and balance sheet. The figure contained in these statements are
absolute. The profit and loss account presents the summery of items relating to the
revenue and expenses of a firm during a particular period of time. A balance sheet

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reports the firm’s assets and liabilities at a point of time. They do not show the
nature of transactions entered into during the period to finance the firm’s
operations. Financial statements are prepared primarily for decision-making. They
play an important role in setting the framework of managerial decisions. But the
information provided in the financial statements are not an end in itself as no
meaningful conclusion can be drawn from these statements alone. However, the
information provided in the financial statements are of immense use in making
decisions through analysis and interpretations of financial statements.
There are various methods of financial statement analysis of
these, Ratio Analysis is the most widely used method. It is the process of
establishing and interpreting quantitative relationship between figures and groups
of figures. With the help of ratios, the financial statements can be analyzed more
clearly and decisions can be made more logically.

Meaning of Ratio:-
A ratio is a simple arithmetic expression of the relationship of
one number to another. In other words, it is only a comparison of the numerator
with the denominator. Ratios are designed to show how one number is related to
another.
Ratio makes the relating information comparable. A single
figure by itself has no meaning, but when expressed in terms of a related figure. It
yields significant inferences. Thus, ratios are relative figures reflecting the
relationship between variables.

Definition:-

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 1. “A ratio is an expression of the quantitative relationship between two
numbers.”
-
2. ”Ratio analysis of financial statement is a study of relationship among
various financial factors in a business, as disclosed by a single set of
statements and study of the trend of these factors as shown in series of
statements”

Modes of expression:-
There are various modes of expression of ratios, which are as follows:
i. Rate- It is the ratio between two numerical facts over a period of time. For
example, stock turnover is 4 times in a year.

ii. Proportion or pure ratio- It is calculated by simple division of one number

by another. For example, current assets are Rs.20000 and current liabilities
are Rs.10000, we can say that current assets to current liabilities are 2:1.

iii. Percentage- It is special type of rate expressing the relationship in hundred.

It is calculated by multiplying the quotient by 100. For example, gross profit
is Rs.25000 and net sales are Rs.100000 we can say that gross profit is 25%.
Steps in Ratio Analysis:-
Following are the steps involved in the ratio analysis:
i. Selection of relevant data from the financial statements depending upon the
objective of the analysis.
ii. Calculation of appropriate ratios from the above data.

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iii. Comparison of the calculated ratios with the ratios of the same firm or the
ratio of some other firms or the comparison with ratios of the industry to
which the firm belongs.
iv. Analysis and interpretation of the ratios.

Objectives and significance of Ratio Analysis:-

The importance of the ratio analysis can be summarized in the following points:
 Helps in decision-making
 Helps in financial forecasting and planning
 Evaluation of efficiency
 Helps in co-ordination
 Helps in control
 Intra-firm comparison

 Measures financial solvency

 Utility to employees
 Utility to Government

Limitations of Ratio Analysis:-

These are following:

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 Lack of proper standards
 Limited use of single ratio
 Limitations of accounting records
 Qualitative factors are ignored
 Window dressing

Types of ratios
Financial classification of Ratios

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CLASSIFICATION OF RATIO 

Ratio may be classified into the four categories as follows:

A.    Liquidity Ratio

a.      Current Ratio

b.     Quick Ratio or Acid Test Ratio

B.    Leverage or Capital Structure Ratio

a.      Debt Equity Ratio

b.     Debt to Total Fund Ratio

c.     Proprietary Ratio

d.     Fixed Assets to Proprietor’s Fund Ratio

e.      Capital Gearing Ratio

f.       Interest Coverage Ratio

C.    Activity Ratio or Turnover Ratio

a.      Stock Turnover Ratio

b.     Debtors or Receivables Turnover Ratio

c.     Average Collection Period

d.     Creditors or Payables Turnover Ratio

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 e.      Average Payment Period

f.       Fixed Assets Turnover Ratio

g.     Working Capital Turnover Ratio

D.    Profitability Ratio or Income Ratio

 (A) Profitability Ratio based on Sales :

 a. Gross Profit Ratio

 b. Net Profit Ratio

 c. Operating Ratio

 d. Expenses Ratio

 (B) Profitability Ratio Based on Investment :

          I.       Return on Capital Employed

      II.      Return on Shareholder’s Funds :

a.      Return on Total Shareholder’s Funds

b.     Return on Equity Shareholder’s Funds

c.     Earning Per Share

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 d.     Dividend Per Share

e.      Dividend Payout Ratio

f.       Earning and Dividend Yield

g.     Price Earning Ratio

Ratios are also classified differently on different bases. The mostly used one is the
financial classification under which the ratios are broadly divided into the
following five classes:-
 Liquidity Ratios concerned with the short term solvency of the concern or
its ability to meet financial obligation on their due dates.
 Activity Ratios concerning efficiency of management of various assets by
the concern.
 Leverage Ratios concerning stake of the owners in the business in relation
to outside borrowing or long term solvency.
 Coverage Ratios concerned with the ability of the company to meet fixed
commitments such as interest on term loans and divided on preference
shares.
 Profitability Ratios concerned with the profitability of the concern.

Liquidity Ratios:-
 Current Ratio:- It is calculated by dividing the total of current assets by
total current liabilities. Thus,
Current Ratio= Current Assets
Current Liability

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Current assets include cash and those assets which can be easily converted into
cash within a short period of time, generally one year. Inventories, debtors, bills
receivable, marketable securities, prepaid expenses etc. are include in current
assets. Current liabilities are those obligations which are payable within a short
period of time, generally one year. It includes outstanding expenses, creditors,
bill payable, bank overdraft, short term advances etc.
 Quick /Acid Test /Liquid Ratio /Near Money Ratio:-
Quick Ratio= Quick or Liquid Assets
Current Liabilities
It establishes a relationship between liquid assets and current liabilities. An
asset is liquid, if it can be converted into cash immediately without a loss of
value. Cash is the most liquid assets.
Liquid Assets=Current Assets - (Stock and Prepaid expenses)
Liquid Liabilities=Current Liabilities – Bank Overdraft

 Absolute Liquidity Ratio / Super Quick Ratio:-

Absolute Liquidity Ratio = Cash + Bank + Short Term Securities
Current Liabilities
The ideal absolute liquidity ratio is taken as 1: 2 or 0.5:1
 Cash Ratio:-
Cash Ratio = Cash + Bank
Current Liabilities
Activity Ratios:-
 Debtor’s velocity:-
Average balance of debtors
Debtor’s velocity = x 365

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 Credit sale during the year
It is expressed in number of days;
(Or)
Average balance of debtors
Debtor’s velocity= x 12*
Credit sale during the year
(*52 if result require in number of weeks)
The ratio obtained should be compared with that of other similar units. If the
ratio of the company being studied is greater (say, 10 weeks as against 6 weeks
for the industry), it indicates that the company is allowing longer than the usual
credit period. This may be justified in the case of new companied or existing
companies entering into new ventures because initially they may have to extend
longer credits to capture the market. In other cases, the position needs a deeper
study; it is possible that many unrealizable and long pending items are include
in debtors. The companies connection machineries may need gearing up. The
chances of larger bad debts are imminent.
 Creditors velocity:-
Average Creditors
Creditors velocity= x 365 [or 52 or
12]
Credit Purchases
When the opening balance of creditors and the figure of credit purchases are not
available, the ratio can be computed as follows:
Creditors
Creditors velocity= x 365 [or 52 or 12]
Purchases

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A high ratio as compared to that obtaining in the industry (e.g., 12 weeks as
compared to 8 weeks for the industry) may mean that;
 The company is unable to pay its debts and is therefore taking longer than
usual time to pay its creditors; or
 The company is enjoying good reputation in the market and therefore the
supplier are extending more credit; or
 The company may be a near monopoly consumer and the supplier is
agreeable to the credit terms dedicated by the company.
Reversely, a lower ratio would mean any of the following:
 The company has a comfortable financial position and its paying off the
creditors promptly; or
 The creditors may offer discount on early payments to avail of which the
company is paying early. The company may do so provided the cost of
borrowing is less than the discount offered; or
 The company does not enjoy good reputation in the market and its creditors
have restricted credits; or
 The supplier may be monopolists dictating terms to the company.
The real reason should be found by going into the facts of individual cases.
This ratio should be studied along with debtors velocity and current ratio to
judge the real situation.
 Inventory velocity:-
Cost of good sold
Inventory Turnover= or
Average Inventory
Net Sales
Inventory Turnover =
Average Inventory

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 Cost of good sold= net Sales – Gross Profit
Or
Opening Stock + Purchases + Direct Expenses – Closing Stock
Opening Stock + Closing Stock
Average Inventory=
2
The ratio is usually expressed as number of times the stock has turned over.
Inventory management forms the crucial part of working capital management.
As a major portion of the bank advance is for the holding of inventory, a study
of the adequacy of abundance of the stock held by the company in relation to its
production needs requires to be made carefully by the bank.
A higher ratio may mean (higher turnover or loss holding periods):
 The stocks are moving well and there is efficient inventory
management; or
 The stocks are purchased in small quantities. This may be harmful if
sufficient quantities are not available for production needs; secondly,
buying in small quantities may increase the cost.
Contrarily, a lower ratio (i.e., lower turnover of longer holding period may be an
index of (1) Accumulation of large stocks not commensurate with production
requirements, (2) A reflection of inefficient inventory management or over-
valuation of stocks for balance sheet purposes; or stagnation in sales, if stocks
comprise mostly finished goods.
 Working Capital Turnover:-
Net Sales
Working Capital Turnover =
Net Working Capital

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 The use of this ratio is two fold. First, it can be used to measure the efficiency
of the use of working capital in the unit. Secondly, it can be used as a base for
measuring the requirements of working capital for an expected increase in sales.
 Current Assets Turnover Ratio:-
Net Sales
Current Assets Turnover Ratio =
Current Assets
The ratio is calculated to ascertain the efficiency of use of current assets of the
concerns. With an increase in sales, current assets are expected to increase.
However, an increase in the ratio shows that current assets turned over faster
resulting in higher sales for a given investments in current assets. Higher ratio is
generally an index of better efficiency and profitability of the concern. This
ratio gives a general impression about the adequacy of working capital in
reaction to sales.
 Fixed Assets Turnover Ratio:-
Net Sales
Fixed Assets Turnover Ratio =
Fixed Assets
The ratio shows the efficiency of the concern in using its fixed assets. Higher ratio
indicate higher efficiency because every rupee invested in fixed assets generates
higher sales. A lower ratio may indicate efficiency of assets. It may also be
indicative of under utilizations or non-utilization of certain assets. Thus with the
help of this ratio, it is possible to identify such underlined or unutilized assets and
arrange for their disposal.
Leverage Ratio:-

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  Debt-Equity Ratio:-
Long term Liabilities
Debt-Equity Ratio =
Equity (or networth)
This is a measure of owner’s stake in the business. The proprietors may desire
more of funds to be from borrowings because it carries two main advantages.
First, their stake in the venture is reduced and correspondingly their risk also.
Secondly, interest on borrowing is allowed as expenditure in computing taxable
profits but not dividend shares. The tax is computed on the profits before any
dividend is declared. But considerable contribution from the proprietors is
necessary from the creditors point of view to sustain the interest of the
proprietors in the venture and also as a margin of safety of the creditors.
Besides, excessive liabilities tend to cause insolvency.
Generally a ratio 2: 1 (i.e., 2 units of debt for 1 unit of equity) is
considered normal, but in certain cases relaxations are allowed.

 Total-Indebtedness Ratio:-
Long term Liabilities + Current
Liabilities
Total-Indebted Ratio = Equity
This ratio should be watched for a period of 3 to 5 years to see its trend, if
declining or decreasing. A declining trend in the ratio is a welcome sign as it
shows that the company is augmenting its own sources of funds by plaguing back
profit or by reducing its dependence on outside borrowing by repaying them. On
the other hand, an increasing trend in the ratio should be carefully looked into by
the banker. Similar to the debt-equity ratio, there is no standard single ratio of total
indebtedness that can be applied to all industries. But a ratio of 4:1 is considered

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normal. This ratio supplements the information supplied by the debt-equity ratio. A
company may have declining debt-equity ratio but total outside liabilities may not
decrease because of increased borrowing on short term. This will be revealed by
the present ratio.
 Proprietary Ratio:-
Total Assets
Proprietary Ratio = x 100
Total Tangible Assets
This ratio indicates the general financial strength of the concern. It is a test of the
soundness of the financial structure of the concern. The ratio is of great
significance to creditors since it enables them to find out the proportion of
shareholders funds in the total investment in the business. In case of companies
which depend entirely on owned funds and have no outside liabilities, the ratio will
be 100%. A high ratio is welcome to the creditors because it secures their position
by providing a high margin of safety. A ratio above 50% is generally considered
safe for creditors.
Coverage Ratio:-
 Interest Coverage Ratio:-
EBIT
Interest Coverage Ratio =
Interest
Since, EBIT calculated after depreciation, it can be added back to arrive at the total
funds available for payment of interest. The formula can be modified as follows:-

EBIT + Depreciation
Interest Coverage Ratio =
Interest

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Higher the ratio better is the coverage. The firm may not fail on its commitments to
pay interest even if profits fail substantially.
 Preference Dividend Coverage Ratio:-
PAT
Preference Dividend Coverage Ratio =
Preference Dividend (1 + Dividend
Rate of Tax)
Profitability Ratio:-
 Gross Profit Ratio:-
Gross Profit
Gross Profit Ratio = x 100
Net Sales
Gross Profit = Net Sales - Cost of good sold
Cost of good sold = Opening Stock + purchases + Direct Expenses – Closing
Stock
Net Sales = Total Sales – Sales Return
A comparison with the standard ratio for the industry will reveal a picture of the
profitability of the concern. Also the ratio may be worked out for a few years and
compared to verify if a steady ratio is maintained.
 Net profit Ratio:-
Net Profit After Tax
Net profit Ratio = x 100
(or)
Net Sales
Net Operating Profit
= x 100
Net Sales

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The net profit is calculated after deducting income tax.
 Return on Investments:-
This ratio measures the profits of the concern as percentage of the total
investment made. However, both the important terms involved, viz., profit and
investment, have been interpreted in various ways and hence the formula used for
this ratio varies widely. We shall adopt the formula
Operating Profits
Return on Investments = x 100
Total Tangible Assets
For the purpose of this ratio, the operating profit is calculated by adding back to
net profit: (1) interest paid on the long term borrowings and debentures; (2)
Abnormal and non-recurring losses; (3) Intangible assets written off. Similarly,
from the net profit abnormal and non-recurring gains are deducted. The idea is to
get profit generated out of total investments made.
The ratio of return on investments is an important ratio in computing the
profitability of the concern. It computes the profitability as against profits. A
company may maintain the profits at absolute value every year but its efficiency
lies in maintaining the same percentage of profits as compared to the total
investment made. When one wants to analyze an increase or decrease in the rate of
return, it can be done by further analysis of the ratio. Profit is decided by the
rapidity with which sales are made (turnover) and the margin of the profit on sales.
Therefore, the ratio can be calculated also as:
Profits Sales
Return on Investments = x 100 x
Sales Total
Assets

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 (Margin)
(Turnover)
Profit can be increased by increasing the margin or increasing the turnover. A
further analysis of the different components that enter into the above will pinpoint
the factors that contributed to the increase or decrease in profits.
Return on investment is also known as Return on Capital Employed. Capital
Employed is used to mean the total investment in the unit, i.e., total assets.
 Return on Proprietors funds:-
Net Profit
Return on Proprietors funds = x 100
Net Worth
This ratio serves the requirements of the shareholders specially to know the return
on their investments in the business.
 Earnings / Share:-
Profit After Tax and Preference
Dividend
Earning Per Share =
No. of equity shares
The numerator indicates the funds available for distribution as dividend to equity
shareholders. As the name indicates the ratio indicates the earning made by the
company per equity share. A comparison with the ratio for similar companies will
indicate whether the company is using its capital effectively or not.
 Dividend / Share:-
Dividend paid to equity
shareholders
Dividend Per Share =
No. of equity shares

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Not all the earning available for distribution are declared as dividend of the
company. This ratio indicates the actual amount declared as dividend by the
company.
 Dividend Payout Ratio:-
Dividend Per Share
Dividend Payout Ratio =
Earning Per Share
This ratio indicates the actual dividend paid to the shareholders. It throws light on
the dividend policies of the company.
 Price Earning Ratio:-
Market Price Per Share
Price Earning Ratio =
Earning Per Share
Net Income – Preference
Dividend
Earning Per Share =
No. of equity shares
A higher price earning ratio as compared to that of other companies shows higher
confidence the company enjoys with the public. This ratio is also used by the
investors to know whether the shares of the company are undervalued or
overvalued. Based on this fact they would decide to purchase the shares at the
particular price or not. For instance, suppose the market price of the shares of the
company A is Rs.80 when it earnings per share is Rs.10. (The price earnings ratio
of the company is 8.) the price earning ratio of the other companies is 9. based on
the general price earnings ratio, the market price of the shares of company A
should be (Rs.10x9) Rs.90. the shares of company A are undervalued since they
are quoted at Rs.80.

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  Dividend Yield Ratio:-
Dividend Per Share
Dividend Yield Ratio =
Market Price of Share
Yield is the actual return for the shareholders on the investment. The dividend is
declared on the face value of shares. Thus 20% dividend declared on a share of the
face value of Rs.10 would fetch Rs.2 as dividend but, if the shareholders has
acquired the share from the market for Rs.40, actual yield will be
2
= x 100 = 5%
40
 Earning Yield Ratio:-
Earning Per Share
Earning Yield Ratio =
Market Price of Share
This ratio measures the yield earned by the company per share.

Note :- Here Maihar Cement,acc,ambuja & altratech shown annual report in

corore’s. But here it is shown his report in lakh’s.

RESEARCH METHODOLOGY

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 Introduction
Research is a systematized effort to gain new knowledge. For carrying out a
research or study different methodologies are applied which have their own pros
and cons. Methodology is the systematic procedure to reach to the conclusion part
of the study. In the present study the steps involved are:
FLOW CHART OF THE RESEARCH MATHEDOLOGY

Steps in Research Process

Research method

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Collection of data
The dealing with the real life problem it is often found that data
collected at the end are inadequate, and hence, it become necessary to collect the
appropriate data, which differ considerably in context of money cost, time and
other resources of disposal of other research.

Primary data
The data that are the current nature of and are collected from the
Dealers and Employees at the time of survey are called as primary data. These data
are very important part of data analysis and interpretation.

Secondary data
Data that are already available i.e. they refer to the data which he/she
already being collected and analyzed by someone else. It may either be published
data or unpublished data.

Method of data presentation

pie diagram are used for data presentation.

Method of sample analysis

Percentage analysis is used for sample analysis.

DATA ANALYSIA & INTERPRETATION

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 Ratio analysis in MAIHAR CEMENT
Liquidity ratios:
Current assets
Current ratio= -------------------------------------------
Current liabilities

TABLE SHOWS YEAR WISE CURRENT RATIO

(Rs. In Crores)
Particulars 2008-09 2009-10 2010-11 2011-12 2012-
13
Inventory 1216.45 1203.24 1761.15 3215.28 2451.52
Sundry debtors 165.65 216.80 93.41 191.27 181.18
Cash & bank 5621.70 7194.68 7699.11 6624.17 5415.54
Other Assets 184.36 314.48 292.43 258.91 137.40
Loans & advances 1063.84 1518.90 1958.49 1569.69 1365.02
Current assets 8252.00 10448.10 11804.60 11859.32 9550.66
Current liabilities 1587.86 2104.30 3191.62 4181.32 4307.84
Current ratios 5.20 4.97 3.70 2.84 2.21

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INTEPRETATION:

 The current ratio during the study period that is from 2 to 2012-2013, it
has been observe that ,in the year 2008 to 2009 it is very high that is 5.20.

 The current ratio has been decreasing, but the company is able to
maintain higher current ratio than that of ideal ratio.

 As the current ratio is higher than the ideal current ratio, the liquidity
position is said to be good.

ABSOLUTE LIQUID/ CASH RATIO:

ABSOLUTE ASSETS
Absolute liquid/ cash ratio: --------------------------------------
CURRENT LIABILITIES

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TABLE SHOWING YEAR WISE ABSOLUTE LIQUID RATIO
(Rs. in crores)
Particulars 2008-09 2009-10 2010-11 2011-12 2012-
13
Cash & bank 5621.70 7194.68 7699.11 6624.17 5415.54
Absolute Assets 5621.70 7194.68 7699.11 6624.17 5415.54
Current liabilities 1587.86 2104.30 3191.62 4181.32 4307.84
ABSOLUTE 3.5 3.42 2.41 1.58 1.26
LIQUID RATIO

INTERPRETATION: Ideal Ratio 0:5:1

The absolute liquid/ cash ratio of PRISM CEMENT is more than the ideal
ratio. It means the company is enjoying high liquidity and secured position.

LEVERAGE RATIO:

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 Outsider’s funds
Debt Equity Ratio =----------------------------------------
Shareholders’ funds

TABLE SHOWING YEAR WISE DEBT EQUITY RATIO

(Rs. in crores)
particulars 2008- 2009- 2010- 2011- 2012-
09 10 11 12 13
Secured 173.87 604.45 332.78 907.72 407.28
loans
Unsecured 369.44 312.51 107.95 100.04 825.27
loans
Outsiders 543.31 916.96 440.73 1007.7 1233.5
funds 6 5
Shareholders 8173.7 9538.2 11481. 12419. 12885.
funds 04 91 00
Debt equity 0.13 0.19 0.08 0.16 0.19
ratio

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 INTERPRETATION:
 Company is less dependent on outsiders funds.

 Its capital base is high and strong.

 It can be concluded that the company is maintaining less percent of debt in

its capital structure.

INTEREST COVERAGE RATIO:

EBIT
Interest coverage ratio=---------------------------------------
FIXED INTEREST

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TABLE SHOWING YEAR WISE INTEREST COVERAGE RATIO
(Rs. in crores)

PARTICULARS 2008-09 2009-10 2010-11 2011- 2012-

12 13
1920.57 2270.76 3026.93 2114.0 1325.2
EBIT
6 0
Fixed interest 31.06 48.42 31.57 88.14 19.76
Interest Coverage 61.83 46.90 95.88 23.99 67.06
Ratio

INTERPRETATION:

 Company’s Interest Coverage Ratio is very high and extraordinarily

satisfactory.
 It indicates that greater ability of the firm to handle fixed charges.
 High interest coverage ratio does not indicate unutilized debt capacity in
case of

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 Birla gold, since the company is having its own funds.

PROPRIETARY RATIO:

Share holders funds

Proprietary ratio=-----------------------------------------
Total assets

TABLE SHOWING THAT YEAR WISE PROPRIETARY RATIO

(Rs.in Crores)

PARTICULARS 2008-09 2009-10 2010-11 2011-12 2012-

13
Share holders funds 7827.31 7827.31 7827.32 7827.32 7827.31
Total assets 1051.99 12835.8 15276.51 17733.43 18523.21
Proprietary Ratio 78% 74% 75% 79% 42%

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INTERPRETATION:
 Proprietary ratio is a test of long term financial position.
 Except for the year2012-13, all other years showing higher ratio, this
indicates sound long term financial position.
 It is also indicating the sufficient use is being made of equity to finance the
business.

SOLVENCY RATIO:
Total Liabilities of outsiders
Solvency ratio =-------------------------------------------
Total assets

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TABLE SHOWING YEAR WISE SOLVENCY RATIO:
(Rs. In Crores)

PARTICULARS 2008-09 2009-10 2010-11 2011-12 2012-

13
Secured loans 173.87 604.45 332.08 907.72 407.28
Unsecured loans 369.44 312.51 107.95 100.04 825.27
Total liabilities 543.31 916.96 440.73 1007.76 650.58
to outsiders
Total assets 10511.00 12835.8 15276.51 17733.43 18522.96
Solvency ratio 5.1% 7.1% 2.8% 5.68% 3.51%

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INTERPRETATION:

 Solvency ratio of PRISM CEMENT ltd during the year 2008-09 is high as
compared to other years.
 It solvency ratio is stable for last three years. It indicates the the solvency
position of PRISM CEMENT ltd is more satisfactory.

FUNDED DEBT TO TOTAL CAPITALIZATION:

FUNDED DEBT
Funded Debt To Total Capitalization =--------------------------------------
TOTAL CAPITALIZATION

TABLE SHOWING YEAR-WISE FUNDED DEBT TO TOTAL

CAPITALIZATION RATIO (Rs. in crores)

Particulars 2008- 2009-10 2010-11 2011-12 2012-

09 13
Secured loans 173.87 604.45 332.78 907.72 407.28
Unsecured loans 369.44 321.51 107.95 100.04 825.27
Funded debt(A) 543.31 916.96 440.73 1007.76 1232.55
Total Funds (B) 8173.7 9538.20 11481.04 12419.91 12885
0
Total 6.60% 9.60% 3.80% 8% 9.50%
capitalization

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INTERPRETATION:

 During the year2012-13, the funded debt to total capitalization is

9%.It is high as compared to other periods but in the real sense it is
quite low.
 There is enough scope for the company to raise long term loans from
outsiders

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 SUMMARY:

prism Cement was founded on 20th Jan ’71 but became fully operational on
1st Aug ’92. PRISM CEMENT is the first shore based integrated steel plant with
new technology, large scale computerization and automation. The organizational
manpower has been rationalized to operate it at international levels of efficiency
and to attain international labor productivity.

The production, commercial and financial performance has been improving

with the passage of years. The financial analysis of PRISM CEMENT by the use of
various techniques i.e. Ratio, Cash flow analysis shows that:

1) The liquidity position of the company is excellent.

2) The company is zero debt/low debit company.
3) The net worth of PRISM CEMENT is satisfactory
4) It is noted that the inventory level is increasing.
5) The profitability ratio is in decline state
6) Liquidity position of PRISM CEMENT is very good.
7) The company has accumulated funds which are available for
expanding business operations and expansion works.
8) Security to share holders is evisaged

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 MARKETING

1) Continuously monitoring the indigenous sale, export sale ratio to

capture the best of markets.
2) Increasing the net realization by selling in the most profitable region.
3) Identifying new markets and new application of the company’s
product.
4) Improving realization by identifying value added products and
providing feedback to production department.
5) Value added products (high value items) are to be produced instead of
selling semi-finished products in order to increase profit margin.

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 CONCLUSION

It is the process of establishing and interpreting quantitative relationship between

figures and groups of figures. With the help of ratios, the financial statements can
be analyzed more clearly and decisions can be made more logically.

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 LIMITATION

As an outsider, getting confidential data is not possible, so the data which has been
used here for research has taken either from web resources or the approximate
figures has been used.

Company does not show their data because many things were confidential and
can’t be shown to everyone.

- 66 -
 SUGGESTIONS

The following suggestions will improve the financial position of the PRISM
CEMENT.

PRODUCTION

1) Need for continuous up gradation of technology for improving the

processes.
2) Effort should be made at cost savings particularly in spares and
energy consumption.

FINANCE
1) Improving financial leverage ratio for better returns.

PERSONNEL:

1) Rationalization of existing man-power with effective training for

future expansion of the plant.
2) Providing better motivation.

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 BIBLIOGRAPHY

BOOKS:

1. Financial Management: Theory & Practice (4th Edition)

Eugene F. Brigham and Michael C. Gerhardt

2. Elements of Management Accounting Leslie Chadwick

3. Principles of Corporate Finance (7th Edition)

Richard Berkley Stewart Myers

4. Accounting & Finance for Managers

Barry J. Cooper

WEBSITE:
Www.Prismcement.com
www.google.com/prismcementimages
www.bing.com ( Analysis and formulas )

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