Project Report

(Submitted for the partial fulfilment of the Degree of B.Com. Honours in Accounting
& Finance under the University of Calcutta)

Title of the Project

A Comparative Study of Financial Performance between Shree
Cement and Ambuja Cement: A Ratio Analysis Approach

Submitted by
Name of the Candidate: Sayan Majumder
Registration No: 126-1111-0312-21
Calcutta University Roll No: 211126-21-0297
Name of the College: Umeschandra College
College Roll No: 480

Supervised by
Name of the Supervisor: Dr. Sanjoy Ghosh
Name of the College: Umeschandra College

Month & Year of Submission

May 2024
Annexure 1A

Supervisor's Certificate

This is to certify that Sayan Majumder a student of B.Com. Honours in Accounting & Finance in Business
of Umeschandra College under the University of Calcutta has worked under my supervision and guidance
for his Project Work and prepared a Project Report with the title ‘A Comparative Study of Financial
Performance between Shree Cement and Ambuja Cement: A Ratio Analysis Approach’ which he is
submitting, is his genuine and original work to the best of my knowledge.

Place: Kolkata
Date:

Signature

Name of Supervisor: Dr. Sanjoy Ghosh

Designation: Associate Professor in Commerce
Name of the College: Umeschandra College

(i)
Annexure 1B
Student's Declaration

I hereby declare that the Project Work with the title ‘A Comparative Study of Financial Performance

between Shree Cement and Ambuja Cement: A Ratio Analysis Approach ’submitted by me for the partial

fulfilment of the degree of B.Com. Honours in Accounting & Finance in Business under the University

of Calcutta is my original work and has not been submitted earlier to any other University /Institution

for the fulfilment of the requirement for any course of study. I also declare that no chapter of this

manuscript in whole or in part has been incorporated in this report from any earlier work done by others

or by me. However, extracts of any literature which has been used for this report has been duly

acknowledged providing details of such literature in the references.

Place: Kolkata
Date: Signature

Name: Sayan Majumder

Registration No.: 126-1111-0312-21

CU Roll No: 211126-21-0297

(ii)
 Acknowledgement
I would like to express my extreme gratitude to our principal DR. Md Tofazzal Haque for providing

his valuable time and inputs without which the completion of this project would not have been possible. I

am extremely thankful to him not only for his valuable assistance but also for his moral support which

motivated me from time to time to complete this project.

I would like to thank my supervisor Sanjay Ghosh for their help and support during the making of this
project. Their inputs added many colours and variety to my project.
I would like to thank my friends for having faith in me and providing me with sufficient resources which
were needed for the successful completion of this project.
Lastly, I would like to thank The Almighty for giving me strength and knowledge to successfully carry out
the steps required for the completion of this project.

(iii)
 Table of Content
Page No
Chapter 1 Introduction
1.1Background of the Study 1
1.2 Need of the Study 1-2
1.3 Literature Review 2-3
1.4 Objectives of the Study 3
1.5 Research Methodology 3-4
1.6 Limitations of the Study 4
1.7 Organisation of the Study 4
Chapter2 Conceptual Framework
2.1 Introduction 5
2.2 Meaning of Financial Statement and Financial Statement Analysis 5
2.3 Objectives of Financial Statement Analysis 5-6
2.4 Traditional and Modern Approaches to Financial Statement Analysis 6-7
2.5 Need of Financial Statement Analysis 7-9
2.6 Advantages and Limitations of Financial Statement Analysis 9-11
Chapter 3 Data Presentation, Analysis and Findings
3.1 Profile of the Companies 12
3.2 Data Presentation and Analysis 13-19
3.3 Findings 19-20
Chapter 4 Recommendations and Conclusion
4.1Recommendations 21
4.2 Conclusion 21
Bibliography 22
Appendix 23-26

(iv)
 Chapter 1
Introduction

1.1 Background of the Study

The basic objective of preparing Corporate Financial Statements is to communicate entity specific

information to stakeholders that are useful in their decision-making process. But the detailed information

reflected in such statements alone is not sufficient to meaningful decision. As a result, it is necessary to

reiterate the financial statement through financial analysis to reach in a meaningful conclusion for the

decision of the stakeholders.

Financial Analysis focuses by pin-pointing on the strength and weaknesses of the financial

position of a company. It is the most effective tool for estimating the current position of a Company and

for predicting future risks and trends. It also helps the management of a company to know the upcoming

prospects, and risks and make recommendations about how it can improve going forward. Besides, for

the stakeholders in general this analysis is of immense helpful to decide about their resource allocation

and other decision. For example, investors can decide upon whether to sift or retain the investment, so is

the case for lenders who will take decision about lending, employees may take the decision to stay or

switch to other companies and so on. Therefore, comparative analysis helps to understand the financial

relationships between variables over two or more financial periods and relationships between other

industry. Ratio analysis is one of the most powerful tools of financial analysis of which helps in analysing

and interpreting the health of the firm which helps stakeholders to arrive at meaningful decision. However,

application of ratio analysis should be made cautiously as it is a measure of quantity and not of quality.

1.2 Need for the Study

India is the world’s second largest Cement producer Country. India’s cement market accounts for

7% of the global installed capacity. Cement Production (2020-21 up to January 2021) 232.57. (Million

tons) and Cement Export (2021-22) 82.98 (US$ million). Union Budget 2021-22 allocated Rs. 13,750

and Rs. 12,294 crores for Urban Rejuvenation Mission: AMRUT and Smart Cities Mission and Swachh

1
Bharat Mission. The cement is a recurring commodity has a higher correlation with GDP. The cement is

required in building infrastructure, dams, roads, bridges, asbestos roofs, and sanitary wares to build

everywhere cement is need to use for development of country. It is providing employment in the different

construction sector operating in the country both in the public as well as private sector. At present the top

five cement companies based on their market capitalisation are-

i. Ultratech Cement: ii. Shree Cement: iii. Ambuja Cement: iv. ACC v. Ramco Cement

The table -1 shows the top 5 companies listed in the Indian cement company’s market share as on 06-
08-2019.
Table -1
Sl.No Name of the Company Market Capitalisation (₹ in Crore)
1 Ultratech Cement 1,19,637.62
2 Shree Cement 70,524.12
3 Ambuja Cement 40,070.32
4 ACC 29,009.38
5 Ramco Cement 17,385.98
Source: https://www.moneycontrol.com/stocks/marketinfo/marketcap/bse/cement-major.html

Thus, the present study seeks to examine about the financial performance of the two major market players
in this industry to address how, based on the performance analysis of the companies, the stakeholders
could make their informed judgement.

1.3 Literature Review

Literature Review focuses on the trends in research in a particular area of study. Since the objective

of our study is to make an analysis of financial statements of cement companies hence our review of

literature contains only those studies which are most relevant for our study

Dr. A I. Kamalavalli & S. Hemalatha (2018) analysed the profitability of selected cement

companies. By using multiple regression analysis found that all the three variables found to be significant

associated with the level of return on equity and correlation analysis reveals that positive relationship

between FPR, NPR with ROA.

Mrs. J. Dhivya, Mrs. P. Shobanapriya, Mrs. P. Devika, Mrs. P. Karthika, Mr. K. Bakiyaraj (2017)

studied the performance of cement companies with reference to ACC Limited. The study shows

2
performance of ACC in relation to liquidity is satisfactory and the solvency ratio shows that the company

was strong in long term liabilities.

Dr. A.Y. Kettiramalingam, K.Sowmiya and P.Sangeetha (2017) conducted a survey on

performance of selected cement companies using financial ratio and trend analysis , and conducted a test

correlation and ANOVA the relationship between the companies and variance. They found the

performance of Shree as satisfactory.

Dr. R.Venkatacham &V.Kasthuri (2016) conducted a study on financial performance of cement

industry through financial ratios, statistical tools and techniques used to know the overall position of the

companies.

Dr. P.Raja and S.Jagadeesan (2016) analysed financial performance of Indian cements companies

based on profitability, liquidity and credit performance. For analysing the performance ratio analysis

method was used.

1.4 Objectives of the Study

The study has the following objectives-

1. To measure and analyse the profitability, liquidity and solvency position of the selected

companies.

2. To measure and analyse the managerial efficiencies of the selected sample companies.

3. To evaluate the overall performance of the sample companies.

4. To offer some suggestions for improvement in case of poor performance.

1.5 Research Methodology

Sample Size: Our study is based on two companies i.e., Shree Cement Ltd. and Ambuja Cement Ltd. We

use purposive sampling for selecting the companies for our study.

Sources of Data: The present study is based on secondary data which is collected from the published

annual reports in the website of the selected companies.

Period of Study: 2020-21 to 2023-24

3
Analytical Tools used: The present study used ratio analysis technique for the purpose of evaluating the

financial performance of the sample companies.

1.6 Limitations of the Study

The present study has the following limitations

(1) The present study is largely based on Financial Ratios analysis which has its inherent limitations. The

different views have been applied in the calculation of different ratios.

(2) The sample size is only two selected companies. The financial data taken has been taken for a duration

of 4 years. A large sample say companies in the entire industry and a longitudinal analysis for ten or more

years could give a better result. But due to shortage of time both the sample size and period of study have

been restricted

(3) The present study has analysed the performance on some selected ratios out of the wide range of

financial ratios.

1.7 Organisation of the Study

The study has been organised as below-

Chapter 1 Introduction

Chapter 2 Conceptual Framework

Chapter 3 Data Presentation, Analysis and Findings

Chapter 4 Conclusion and Suggestions

4
 Chapter 2
Conceptual Framework
2.1 Introduction
A conceptual framework provides the foundation of various theoretical concepts based on which

empirical research is carried out. This chapter deals conceptual aspects of financial analysis that are most

important for conducting our study.

2.2. Meaning of Financial Statements and Concept of Financial Statement Analysis

Financial Statements are end products of Financial Reporting System. Financial statements are reports

meant for unknown but specific group of users. Such reports lose their significance if the users do not

analyse and interpret them in their own perspectives for decision-making. Needs and situations of users

vary. Hence the statements describing facts need to be analysed and interpreted in the light of the needs

of the specific users. Thus, financial statements and FSA are the two parts of a continuous process. Their

relation needs clarification.

On the other hand, financial statement analysis is the process of identifying the strength and the

weaknesses of the firm by properly establishing relationships between the items of financial statements.

It helps analysts make an understanding of past performance of the firm based on which they make

prediction about future performance and risk of the firm.

2.3 Objectives of Financial Statement Analysis

The main objectives of financial statement analysis are as follows:

1. To judge the existing earning capacity of the business and to provide the basis for making prediction
about future earning prospect.

2. To evaluate the financial health of the business.

3. To assess the financial risk and business risk associated with the business.

4. To evaluate the solvency position of the firm and thereby its long-term debt paying capacity.

5. To judge the liquidity position of the firm and thereby its ability to meet short term debt.

6. To assess the extent of efficiency with which various resources of the firm are being utilised.

5
7. To compare the financial performance of the firm with that of similar other firms.

8. To assess the impact of different economic and non-financial events on the performance of the firm.

2 .4 Traditional and Modern Approach to Financial Statement Analysis

Financial Statement Analysis has two approaches – Traditional and Modern.

2.4.1 Traditional Approach to Financial Statement Analysis

The practice of financial statement analysis began towards the end of the nineteenth century.

Mainly credit evaluation and investment analysis were done based on the information of financial

statements. Traditionally, financial ratios were used as basic tools of financial statement analysis.

The scope of financial statement analysis was further extended in the 1920s by starting inter firm

comparison of ratios and the acceptance of industry average as the standard for ratio evaluation. In fact,

the development of financial statement analysis until 1930s was characterised only by the extensive use

of accounting ratios. The analysts then began to common-size the financial statement to study their

composition. Common sizing is done by expressing each balance sheet item as a percentage of firm's total

assets and each income statement number as a percentage of total sales. Common sizing of financial

statement has also become useful for inter firm comparison.

Another milestone of traditional financial statement analysis was the development of index-

number trend analysis. It is used to study the company accounts over a series of years. From this study

the trend of individual items in the financial statement can be understood. Truely speaking, the practice

of financial statement analysis based on these age-old tools is still going on today.

2.4.2 Modern Approach to Financial Statement Analysis

The modern financial statement analysis is not restricted to only traditional financial statements.

Rather, it is an integrated approach. It presupposes the study of the environment both internal and external

in which the company has to function. External environment represents factors like threat of new entrants,

bargaining power of suppliers, bargaining power of customers, threat from other products, Government

policy, etc. Internal environment represents factors like employee morale, organisation structure,

6
management philosophy, etc. All these internal and external factors significantly influence the

profitability and future prospect of the firm. Modern financial statement analysis takes care of all these

factors before examining the financial statements of the firm.

Thus, modern financial statement analysis encompasses both financial and non-financial measures

for making better prediction of future earnings and cash flow to the firm. In fact, financial statement

analysis has attained a new dimension with the development of a number of business reporting models

over the last ten years or so, which emphasize on non-financial measures.

It should also be noted that at present more advanced statistical techniques such as regression

analysis, multiple discriminant analysis etc. are used in the financial statement analysis. These newly

developed techniques of financial statement analysis are now providing data for decision-making models

such as portfolio selection model, bank-lending decision model and corporate financial model in a more

efficient way.

2.5 Need for Financial Statement Analysis

The objective of financial statements is to provide information about the financial position, and

financial performance of the firm to its different stakeholders. Based on these information, the

stakeholders take various decisions concerning the firm. But the data contained in the financial statements

are not directly usable in decision making. They are to be analysed and interpreted in proper perspective

to make them useful in decision making. The necessity of financial statement analysis can be discussed

as follows:

1. Investment decision of owners and lenders: There are two types of investors in a firm namely equity

investors and long-term loan providers. However, they make investment with different objectives. The

former make investment with the desire of its steady growth and getting reasonable return more or less

regularly. The loan providers make investment for getting interest and repayment of loan when due. Here

lies the need of financial statement analysis. It helps to assess the risk of return on equity investment, its

7
growth potentiality and risk involved with the loan to firm i.e., the solvency of the firm. Accordingly,

they can take appropriate investment decisions.

2. Liquidity assessment: Liquidity means the short-term debt paying capacity of the firm and its ability

to meet day to day operating expenses. So, the liquidity of the firm gets special significance both from

the view point of suppliers and management. By conducting proper analysis of financial statements, it has

to be assessed whether liquidity of the firm is being maintained at optimum level. So, by conducting

regular liquidity analysis, the management endeavours to obviate liquidity crisis. The suppliers can take

credit decision most rationally and judiciously.

3. Assessment of profitability: The survival and growth of the firm ultimately depend upon its

profitability. The firm is required to monitor its profitability continuously so that it can satisfy its owners

i.e. shareholders and can ensure its steady growth in this competitive world by reinvesting the balance

earning left after satisfying the shareholders. The absolute profit figure in the income statement cannot

directly indicate profitability of the firm. The financial statement analysis helps in this regard.

4. Performance evaluation: The globalisation and deregulation of the economy have brought a new

challenge before the business. Unless it becomes able to produce quality goods or render quality service

at competitive price, it is unlikely to survive in the changing scenario. Financial statement analysis

ascertains the competitiveness of the firm by regrouping and analysing the figures contained in financial

statements. It pinpoints the strength and weakness of the business as compared with its competitors and

suggest measures for its sustainable development.

5. Forecasting: Financial statements become relevant only when they can be used for prediction of the

future prospect and growth potential of the business. It is the financial statement analysis which make the

accounting data amenable to forecasting of future profitability and cashflow. It searches leading indicators

in the historical data that provide insight into the future. This is done by various techniques such as trend

analysis, regression analysis etc.

8
6. Managerial decisions: In order to run the business successfully, the management very often has to

take various strategic and tactical decisions such as long-term investment decisions, make or buy, pricing

of the product, balancing of the capital structure to reduce financial risk, closing down of an unviable

unit, credit decision etc. Financial statement analysis has a significant role in this regard. By analysing

and interpreting various financial and non-financial data and information suitably, the financial analysts

help the management to take those decisions most rationally and judiciously.

7. Resources allocation: The firm is required to allocate its limited resources optimally among various

competing investment opportunities. Similarly, the scarce resources of the country should be used in

different sectors and industries in the best possible way for upliftment of the society and rapid economic

development. The financial statement analysis can be used as an effective means of generating data for

developing corporate investment model, bank lending decision model, economic development model of

the country etc.

8. Signalling of corporate sickness: Corporate sickness may be attributed to several factors. Some

factors are controllable while others are uncontrollable. Apart from having social and economic impact,

corporate sickness may cause loss of capital both of owners, i.e. shareholders and lenders. So, every effort

should be made to prevent corporate sickness. The role of financial statement analysis in this regard is

very significant. By analysing various financial and non-financial data, the financial analysts can develop

model for signalling impending sickness of the firms.

2.6 Advantages and Limitations of Financial Statement Analysis

Users of a financial statement should be aware of the advantages and disadvantages for financial statement
analysis which are discussed as below -
2.6.1 Advantages of Financial Statement Analysis

(i) Through analysing these statements, an idea about the existing economic position of the enterprise can

be derived.

(ii) These statements present facts in numbers. Persons observing the events directly may be aware of 'on

the spot situation', but they may comprehend neither the background, nor the sequences and implications
9
of the fact. At the time of analysing as analysts, they have the scope of examining sequences of the events,

contemporary economic and other related facts.

(iii) It is difficult for individual households to examine the financial statements of individual enterprises.

Expert analysts give their opinions after considering various facts and statements. This is why such

analysis system helps various parties for their decision-making.

(iv) Meaning underlying the figures can be derived through analysis. Through analysis it is established

that numbers in the statements are not mere figures, they strongly establish the picture of specific

situations.

(v) Analysis is made with the aim to find the future on the basis of the past.

(vi) Financial statements relate to individual enterprises. But analysts consider simultaneously financial

statements of a number of firms over a number of space and time, opinions of various parties, socio-

economic positions of the industry and the economy and give their considered judgment about the

prospect of an enterprise. Thus, through analysis, prospect of a firm can be predicted after considering

the positions of various firms, industry over different space and time, and the contemporary socio-

economic position in which the firm operates.

2.6.2 Limitations of Financial Statement Analysis

Financial statement analysis is not immune from shortcomings. A few of them are discussed below:
(i) Financial statements are not free from the influence of the personal judgements of the reporters. As

they are guided by their self-interests, it may not be possible for them to report neutrally. Hence the picture

expressed through their eyes may fail to indicate neutral picture of the business.

(ii) Figures develope out of accounting numbers. Such data are usually based on historical costs. Again,

in accounting historical costs are matched with current revenues. That is why it is very difficult to

establish a direct relation between short-term cash flow and accounting profit.

(iii) Financial statements may be window-dressed. For instance, current ratio can be increased for the time

being by means of increasing cash holding through accepting long-term loan just before the year-end and
10
repaying the loan after the beginning of the next year. Thus, by means of window-dressing real picture

can be suppressed.

(iv) Financial statements are stated in terms of money. But purchasing power of money changes. During

inflation, financial statement of the firms holding huge fixed assets and inventories cannot depict true

pictures, as the value of monetary assets decrease. In such cases meaningful comparison among

performances of different years becomes difficult.

(v) In support of financial statement analysis, it is often suggested to compare firm performances with

industry averages. But information on industry averages, is not easily available. That apart, most of the

firms aspire to be the best in the industry. Hence it is very difficult to derive an ideal standard in industry

with which performances of an individual firm can be compared.

11
 Chapter 3
Data Presentation, Analysis and Findings
3.1 Profile of the Companies – Our sample companies selected for conducting the study are Shree
Cement Ltd and Ambuja Cement Ltd because of their identical pattern of functioning and growth.
. the profile of the companies is given here-

3.1.1 Shree Cement Ltd

Shree Cement Ltd is one of India's premier cement makers. Currently its manufacturing

operations are spread over North and East India across six states. Its current installed capacity stands at

34.9 million tonnes. The company is an energy conscious & environment friendly business organization.

They have three brands under their portfolio namely Shree Ultra Jung Rodhak Cement Bangur Cement

and Rockstrong Cement. Their manufacturing units are located at Beawar Ras, Khushkhera Suratgarh

and Jobner (Jaipur) in Rajasthan Laksar (Roorkee) in Uttarakhand Aurangabad in Bihar Panipat in

Haryana Baloda Bazar in Chhattisgarh and Bulandshahr in Uttar Pradesh. The company is headquartered

in Kolkata India. Shree Cement Ltd was incorporated in the year 1979. The company was promoted by

Calcutta-based industrialists P D Bangur and B G Bangur. The company is one of the largest cement

producers in Rajasthan (Beawar) and is the largest single location manufacturer in Northern India.

3.1.2 Ambuja Cement Ltd.

Ambuja Cements Limited, formerly known as Gujarat Ambuja Cement Limited, is an Indian major

cement producing company. The Group's market cement and clinker for both domestic and export

markets. Ambuja Cements Limited is an India-based holding company, which is engaged in the

manufacture of clinkers and cement. The company operates through cement and cement related products

segment. The company has a range of products for the business to business and retail markets. The

company's product, Ambuja Plus Roof Special, is suited for constructing roofs and slabs. The company

also co-owns two brands in micro materials category. These include Alccofine, which includes a range

of micro slag materials, and Dirk Pozzocrete, which includes superfine fly ash. Alccofine Micro

Materials are used in construction projects, such as metro rail, dams, roads, flyovers, bridges and tunnels.

12
3.2 Data Presentation and Analysis

3.2.1 Liquidity and Long-term Solvency Ratios - Liquidity and long-term solvency ratios are used to
measure the ability of a company to meet its short- and long-term debts. Moreover, the ratio quantifies
the size of a company’s after-tax income, not counting non-cash depreciation expenses, as contrasted to
the total debt obligations of the firm. Also, it provides an assessment of the likelihood of a company to
continue congregating its debt obligations. Certain ratios used under liquidity or solvency ratio for
explaining the financial position of the firm are:
• Current Ratio
• Quick Ratio
• Debt-Equity Ratio

Current Ratio
Current Ratio indicates a company's ability to meet short-term debt obligations. The current ratio
measures whether or not a firm has enough liquid resources to pay its debts over the next 12 months. The
higher the ratio, the more liquid the company is. Commonly acceptable current ratio is 2; it's a comfortable
financial position for most enterprises.
Current Ratio is measured as –
Current Assets
Current Ratio =
Current Liabilities

Where;

Current Asset = Stock + Debtors + Bills Receivables + Cash + Bank + Marketable Securities

+ Prepaid Expense + Accrued Interest + Advance (short term).

Current Liabilities = Creditors + Bills Payable + Bank Overdraft + Outstanding Expenses + Income
Received in Advance + Short term obligations.
The comparative Current Ratio of both the companies are presented in Table-1.

Table-1
Current Ratio
Sample Companies 2020-21 2021-22 2022-23 2023-24

Shree Cement Ltd 1.22 1.12 1.37 0.94

Ambuja Cement Ltd 1.32 1.44 1.72 1.74

Source: Annual Reports of the Companies

13
The data has been also represented through Column Diagram

Current Ratio of 2020-21 to 2023-24

2
1.72 1.74
1.8
1.6 1.44
1.37 1.32
1.4 1.22
1.2 1.12
0.94
1
0.8
0.6
0.4
0.2
0
Shree Cement Ltd Ambuja Cement Ltd

2020-21 2021-22 2022-13 2023-24

Interpretation - By computing the current ratio of both the companies we can clearly observe that none
of the company met their standard norm that’s 2:1. We can even see that SHREE CEMENT is having a
average current ratio of 1.16 which shows that they may have difficulty meeting their current obligations
as compared to AMBUJA CEMENT which is at a better position in meeting their current obligations with
an average current ratio of 1.56. Moreover, the current ratio shows a decreasing trend in case of Shree
Cement Ltd. while the trend is increasing one in case of Ambuja Cement Ltd.

Quick Ratio - is a measure of a company's ability to meet its short-term obligations using its most liquid
assets (near cash or quick assets). Quick assets include those current assets that presumably can be
quickly converted to cash at close to their book values. The commonly acceptable current ratio is 1. A
company with a quick ratio of less than 1 cannot currently pay back its current liabilities; it is the bad
sign for investors and lenders. It is measured by –
Quick Ratio = Quick Assets / Quick Liabilities, Where,
Quick Assets = Current Assets – Stock-in-Trade – Prepaid Expenses
Quick Liabilities = Current Liabilities – Bank Overdraft
Bank Overdraft is deducted from Current Liabilities provided it is in the nature of term loan. The Quick
Ratio of the sample companies are depicted in Table-2

14
 Table -2
Quick Ratio
Sample Companies 2020-21 2021-22 2022-23 2023-24

Shree Cement Ltd 0.92 0.92 1.05 0.73

Ambuja Cement Ltd 1.32 1.44 1.72 1.74

Source: Annual Reports of the Companies

The data has been also represented through Column Diagram

Q u i ck Rati os 2020 -21 To 2023 -24

Shree Cement Ltd Ambuja Cement Ltd

1.74
1.72
1.44
Quick Ratios

1.32

1.05
0.92

0.92

0.73

2020-21 2021-22 2022-13 2023-24

Interpretation - By observing the quick ratio as computed above we see that the quick ratio of Ambuja
Cement Ltd. is at a better than that of Shree Cement Ltd. It indicates that the ability of Ambuja Cement
Ltd. to pay its current liabilities on maturity is far satisfactory than that of Shree Cement Ltd. Moreover,
quick ratios of Shree cement Ltd is below 1 for the years 2020-21, 2021-22 and 2023-24 with slight
increase to just over 1 in 2022-23. This shows that the ability of Shree Cement Ltd so far its current
obligations are concerned is not satisfactory. This gives a good an alarmin sign to the management as
well as stakeholders. However, the situation is reverse in case of Ambuja Cement Ltd.

Debt-Equity Ratio- Debt Equity ratio measures the relationship between long-term debts and equity. If
debts component of the total funds employed is small, outsiders feel more secure. From security point of
view, capital structure with less debt and more equity is considered favourable as it reduces the chance of
bankruptcy. Debt-Equity ratio is measured by
Debt-Equity Ratio = Long-term debt / Shareholders’ Fund, Where
Long term debts = Debentures + Long-term loans.
15
Shareholders’ Fund = Equity Share Capital + Preference Share Capital+ Reserves and Surplus –
Fictitious Assets. However, Debt-Equity ratio may also be measured by Total Debt/ Equity. The Debt-
Equity ratio of our sample companies are presented in Table-3 below –
Table-3
Debt-Equity Ratio
Sample Companies 2020-21 2021-22 2022-23 2023-24

Shree Cement Ltd 0.18 0.29 0.38 0.17

Ambuja Cement Ltd 0.23 0.15 0.22 0.16

Source: Annual Reports of the Companies

The data has been also represented through Column Diagram

Debt-Equity Ratio 2020-21 to 2023-24

0.4 0.38

0.35
0.29
0.3
Debt-Equity Ratio

0.25 0.23 0.22

0.2 0.18 0.17 0.16
0.15
0.15
0.1
0.05
0
2020-21 2021-22 2022-13 2023-24

Shree Cement Ltd Ambuja Cement Ltd

Interpretation - Lower the ratio better for the Company. We observe that the curve for debt-equity
ratio of Ambuja Cement Ltd. shows an ups and down shape. In 2021-22 it has decreased and after
increasing in 2022-23 it again falls in 2023-24. The low debt-equity ratio of Ambuja Cement Ltd shows
a good sign for the lenders and it also indicates a strong long-term solvency position of the company
Hence, higher degree of protection enjoyed by the lenders. On the other hand, Shree Cement Ltd has a
high debt equity ratio till 2022-23 but it fell down to less than 50% in 2023-24. Thus, risks associated
with the company was quite high till 2022-23 but the decrease of the ratio in 2023-24 in an encouraging
one as the company might have sold its fixed assets to reduce risks as is depicted from the figures of
Balance Sheet. The same picture can be observed in case of Ambuja Cement Ltd. from its Balance Sheet
with respect to decrease in debt. This is also confirmed when we see the balance of equity which remains
same more or less same over the four years. One reason might be the low capacity utilisation due to low
demand during Covid period.
16
3.2.2 Profitability Ratio
Profitability ratios are the ratios which are linked to the profitability of a business with respect to its
sales or investments. This ratio measures the efficiency of operations of a business. They are quite useful
tools to understand the efficiencies / inefficiencies of a business and its management. It
also assists management of the company to take corrective actions.
Profitability ratios are the tools for financial analysis which communicate about the final goal of a
business. For all the profit oriented businesses, the final goal is none other than the profits. Profits
are the life blood of any business without which a business cannot remain a going concern. Since, the
profitability ratios deal with the profits, they are as important as the profits. There are different measures
of profitability of which the following two are important-
(i) Gross Profit Ratio
(ii) Net Profit Ratio
Gross Profit Ratio
Gross profit margin (gross margin) is the ratio of gross profit (gross sales less cost of sales) to sales
revenue. It is the percentage by which gross profits exceed production costs. Gross margins reveal how
much a company earns taking into consideration the costs that it incurs for producing its products or
services. A company that boasts a higher gross margin than its competitors and industry is more efficient.
It is measured by –
Gross profit
Gross Profit Ratio = x 100
Net sales
The gross profit ratio of our sample companies is presented in Table-4 below
Table-4
Gross Profit Ratio
Sample Companies 2020-21 2021-22 2022-23 2023-24

Shree Cement Ltd 15.10 16 10.75 16.59

Ambuja Cement Ltd 9.17 13.07 11.82 13.75

Source: Annual Reports of the Companies

The data has been also represented through Column Diagram

17
 Gross Prof i t Rati o 2020 -21 To 2023 -24
Shree Cement Ltd Ambuja Cement Ltd

16.59
15.1

16

13.75
13.07
Gross Profit Ratio

11.82
10.75
9.17

2020-21 2021-22 2022-23 2023-24

Interpretation - It is quite obvious from the comparative graph that both the company is showing
growth in its profit margin but at a very slow rate. AMBUJA CEMENT need to take necessary steps to
grow in the market as its profit margin is declining at some years on the other hand we can see that
SHREE CEMENT has started to grow but still in order to remain in the competitive market, it needs to
take measures to improve its growth rate as soon as possible.
Net Profit Ratio - Net profit margin (or profit margin, net margin, return on revenue) is a
ratio of profitability calculated as after-tax net income (net profits) divided by sales (revenue). Net
profit margin is displayed as a percentage. A higher net profit margin means that a company is more
efficient at converting sales into actual profit.
It is measured by –
Net profit
Net Profit Ratio = x 100
Net sales

The net profit ratio of our sample companies is presented in Table-5 below
Table-5
Net Profit Ratio
Sample Companies 2020-21 2021-22 2022-23 2023-24

Shree Cement Ltd 15.58 14.07 8.11 13.19

Ambuja Cement Ltd 13.10 13.09 11.94 10.13

Source: Annual Reports of the Companies

The data has been also represented through Column Diagram

18
 Net Prof i t Rati o 2020 -21 To 2023 -2 4
Shree Cement Ltd Ambuja Cement Ltd

15.58

14.07

13.19
13.09
13.1

11.94

10.13
Net Profit Ratio

8.11
2020-21 2021-22 2022-23 2023-24

Interpretation - From the graph extracted for the net profit margin we can see that AMBUJA

CEMENT is declining from the last 4 years and there is no sign of improvement. On the other

hand SHREE CEMENT is at a flourishing position with constant profit from 4 years .It should

carry on its business but should take necessary measures to increase its profit .

3.3 Findings

The purpose of the study is to investigate the impact of comparative ratio analysis of Shree Cement Ltd

and Ambuja Cement Ltd over a period of four consecutive years. The study aims to examine the

statistical significance by way of computing accounting ratios. The accounting ratios show both

increase and decrease in trend but still manages to show a stable economic position.

• The statement of current ratio shows that both the companies have not manged to cover up and

reach its ideal ratio at 2:1 in any of the years. Shree Cement Ltd will be having difficulty

in meeting their Ltd current obligations as its average current ratio is just 1 as compared to Ambuja

Cement which is at a better position in meeting their current obligations.

• The quick ratio of Shree Cement Ltd is less than 1 from the consecutive 4 years on an average

basis thus limiting themselves from a quick payment to its creditors. Ambuja Cement Ltd.

is trying to achieve its ideal position and can pay off its short term liabilities quite easily.

19
• In the debt equity ratio we can observe that Ambuja Cement Ltd. is moving towards it ideal

position from 2020-21 till 2023-24 on the other hand Shree Cement Ltd is constantly moving

away from its ideal position hence increasing the risk in investing the company.

• Gross profit margin of Ambuja Cement Ltd is not growing at constant rate. it is declining

in alternative years. Shree Cement Ltd is having a good share of profit and can grow further with

proper measure.

20
 Chapter 4
Recommendations and Conclusion

4.1 Recommendations
Efforts have been made in this project to fulfill the purpose of knowing the trend of both the companies

in the market. The analysis made for the present financial position of SHREE CEMENT AND

AMBUJA CEMENT by means of comparison of accounting ratios for the fiscal years 2020-21, 2021-22,

2022-23 and 2023-24 showing us a slow increasing trend in the financial position of the SHREE

CEMENT and a steady growth over the years for the AMBUJA CEMENT. Though for

improvement of SHREE CEMEMTS’S profitability, much emphasis should be given on decreasing

current liabilities through reducing the unplanned overhead expenses. A stable current assets position

can be ensured by recovery of all the debts on due time. The companies must give importance

to unplanned and unproductive expenses and must adopt a strict credit policy. Further, the

accounting ratios computed though provide us with a continuous and stable overview on the

financial position of the AMBUJA CEMENT, still in certain cases it has decreased than the previous

years. Thus the company must make some extra effort to retain its increasing trend of profitability

in the future years. The sales policy and procedure also must be subject to continuous change to

retain the interest of consumers. The following recommendations are on the basis of the accounting

ratios computed in this case study. Thus the result may or may not be accurate on which the above

recommendations are made.

4.2 Conclusion

The contribution of Indian cement industry to Indian economy is significant The financial

performance of two major selected cements companies namely Shree Cement Limited and Ambuja

Cement Limited has been assessed and it is observed that the financial position of Ambuja Cement

Limited is quite satisfactory than that of Shree cement Limited.

21
 Bibliography

Literature

Dr.A.I. Kamalavalli & S. Hemalatha (2018), Profitability Analysis of Cement Companies in India”
IJCRME, Impact Factor: 6.925, ISSN (Online): 2455 – 5428, Volume 3, page no 303 – 308, Issue
1, 2018
Mrs.J.Dhivya, Mrs.P.Shobanapriya, Mrs.P.Devika, Mrs.P.Karthika, Mr.K.Bakiyaraj (2017),“A
study on financial performance of cement industry with special reference to ACC Limited”,
International Journal of Creative Research Thoughts, Volume 5, Issue 4, November 2017,ISSN:
2320-2882, 1627-1636.
Dr. A.Y.Kettiramalingam , K.Sowmiya and P.Sangeetha (2017), a study on Financial Performance
Analysis Of Select Cement Companies , Intercontinental Journal Of Finance Research Review,
ISSN:2321-0354 - Online Issn:2347-1654 - Print - Impact Factor:4.236 Volume 5, Issue 4, April,
2017.
Dr. R Venkatacham and V Kasthuri (2016) “A study on financial performance of cement industry
in India” International Journal of Applied Research 2016; 2(9): ISSN Print: 2394-7500, ISSN
Online: 2394- 5869. Impact Factor: 5.2 , pp: 778-780
Dr. P.Raja and S.Jagadeesan (2016), Financial Performance Analysis of the India Cements
Limited,International Journal of Advanced Scientific Research & Development, Vol. 03, Iss. 03,
Ver. I, Jul – Sep’ 2016, pp. 18 – 23.
Books
• Financial Accounting – Prof. Amitabha Basu

• Financial Management - I. M. Pandey

• Management Accountancy - Pillai & Bagavati

• Management Accounting – Sharma & Gupta

Internet Sources

https://www.moneycontrol.com/financials/ambujacements/ratios/ac18
https://www.moneycontrol.com/financials/shreecements/ratios/sc12/1#sc12

22
 Appendix

INVESTMENTS 8,915.43 4,443.88 5,434.33 4,042.60

1,427.85 1,589.05 1,569.02 1,314.50

Inventories

Sundry Debtors 828.45 732.40 459.25 335.12

Cash and Bank Balance 108.16 307.78 120.90 111.00

Total Current Assets 2,364.46 2,629.23 2,149.17 1,760.62

Loans and Advances 2,776.95 2,523.36 2,542.00 2,053.33

Total CA, Loans & 5,141.41 5,152.59 4,691.17 3,813.95

Advances

Current Liabilities 4,043.72 2,809.60 2,842.46 2,167.36

Provisions 10.29 9.27 8.55 8.13

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INVESTMENTS 8,915.43 4,443.88 5,434.33 4,042.60

1,427.85 1,589.05 1,569.02 1,314.50

Inventories

Sundry Debtors 828.45 732.40 459.25 335.12

Cash and Bank Balance 108.16 307.78 120.90 111.00

Total Current Assets 2,364.46 2,629.23 2,149.17 1,760.62

Loans and Advances 2,776.95 2,523.36 2,542.00 2,053.33

Total CA, Loans & 5,141.41 5,152.59 4,691.17 3,813.95

Advances

Current Liabilities 4,043.72 2,809.60 2,842.46 2,167.36

Provisions 10.29 9.27 8.55 8.13

Total CL & Provisions 4,054.01 2,818.87 2,851.01 2,175.49

NET CURRENT 1,087.40 2,333.72 1,840.16 1,638.46

ASSETS

TOTAL ASSETS 15,283.86 12,374.38 12,290.82 8,990.62

Contingent Liabilities 0.00 1,105.30 1,505.35 1,833.18

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