A

PROJECT REPORT ON
ANALYSIS OF FINANCIAL STATEMENT BY USING
THE TECHNIQUE OF RATIO ANALYSIS
FOR AMBUJA CEMENT LTD.

SUBMITTED TO AURO UNIVERSITY

IN PARTIAL FULFILLMENT OF 2 YEARS FULL TIME COURSE
MASTER OF BUISNESS ADMINISTRATION
(MBA)
SUBMITTED BY
CHARU.PRATAP.JAGWANI
(2014-2016)

ACKNOWLEDGEMENT
I express my gratitude to Prof. Meghna Dangi, for her expert guidance, encouragement and
suggestion throughout the preparation of this work. She has been a pillar of support and
inspired me throughout this study, without her this would not have been possible.
I am grateful to the teaching faculties of The School of Management & Entrepreneurship for
their valuable suggestions and instruction regarding my work. I has also received tremendous
amount of help from my friends insight and outside the institute.

TABLE OF CONTENT

Cover Page

Title Page
Acknowledgements

Table of Contents

Business Overview And its Bench Marks

Company Profile........

Board of directors.......................................

Organisation of chart

Code of conduct......................

Research methodology ...

10

Financial statements...

11

Balance sheet ..

13

Financial ratio analysis .

14

Classification of ratios..

16

Summarised table of ratios..

34

Conclusion .

35

References .

36

BUSINESS OVERVIEW AND ITS BENCHMARKS.

Formerly known as Gujarat Ambuja Cements Limited, this Company has been a story of
pioneering entrepreneurship.
A cotton trader from Mumbai and a reputed trading family from Kolkata came together to
float a cement company. They knew very little about cement manufacturing. Both, however,
recognised the inherent strengths of the business: cement was a core industry and would play
a crucial role in a developing country like India. Moreover, there was little technological
obsolescence and the product would never go out of fashion.
Founded in 1983 by Narotam Sekhsaria in partnership with Suresh Neotia, Ambuja Cements
rich legacy is a testimony to the development of the nation and its belief in sustainability and
concern for both the environment as well as people. Today, it is a part of the global
conglomerate Holcim, one of the worlds leading suppliers of cement and aggregates.
Ambuja has always met tough challenges and seized opportunities that have come its way. It
has nurtured a spirit of enterprise and sought cutting-edge technology in its operations. With
its innovative and dynamic approach it has emerged as a benchmark for the cement industry
in India.
This Spirit makes Ambuja Cement a product that embodies Giant Strength.

VISION

To be the most sustainable and competitive company in our industr

Mission - Create Value for all

o
o
o
o
o
o

Delighted Customers
Inspired Employees
Enlightened Partners
Energized Society
Loyal Shareholders
Healthy Environment
4

COMPANY PROFILE
Ambuja Cements Ltd, a part of a global conglomerate Holcim, is one of Indias leading
cement manufacturers and has completed over 25 years of operations.
The cement industry is literally the building block of a nation. In that context Ambuja plays a
key role in Indias development and its blueprint for the future. It has always stayed on the
fast track to growth and has gone on to become a major player in the countrys cement sector.
The company, initially called Gujarat Ambuja Cements Ltd, was founded by Narotam
Sekhsaria in 1983 in partnership with Suresh Neotia. Global cement major Holcim acquired
management control of Ambuja in 2006. The Company has also made strategic investments
in ACC Limited.
Ambuja Cement is an established brand in India for Ordinary Portland Cement (OPC) and
Pozzolana Portland Cement (PPC), with significant footprints across western, eastern and
northern markets of India. Our customers range from individuals house builders (IHB) to
governments to global construction firms.
Ambuja has grown dynamically over the past decade. Its current cement capacity is 27.25
million tons. The Company has five integrated cement manufacturing plants and eight cement
grinding units across the country. It is the first Indian cement manufacturer to build a captive
port with three terminals along the countrys western coastline to facilitate timely, cost
effective and environmentally cleaner shipments of bulk cement to its customers. The
Company has its own fleet of ships.
Today, the Company has established itself as one of the most efficient cement manufacturers
in the world. Its environment protection measures are on par with the finest in the country. It
is one of the most profitable and innovative cement companies in India. The Company has
also pioneered the development of multiple bio-mass co-fired technologies for generating
greener power in its captive plants.
The Companys most distinctive attribute is its approach to business. Ambuja follows a
unique home grown philosophy called I CAN, that gives people the authority to set their own
targets and the freedom to achieve their goals. Its focus has been consistent on two major
building blocks that are resonated through its daily operations Quality (of the product) and
Safety (of the human resources involved in the creation of the product).
5

BOARD OF DIRECTORS

Mr. N. S. Sekhsaria
Non-Executive Independent (CHAIRMAN)

Mr. Bernard Fontana

(Non-Executive Promoter Director representing
Holcim Ltd., Non Independent w.e.f. 10.02.2012)

Mr. Bernard Terver

(Non-Executive Promoter Director representing
Holcim Ltd., Non Independent w.e.f. 04.12.2013)

Mr. Nasser Munjee

(Non-Executive, Independent Director)

Mr. Rajendra Chitale

(Non-Executive, Independent Director)

Mr. Shailesh Haribhakti

(Non-Executive, Independent Director)

Dr. Omkar Goswami

(Non-Executive, Independent Director)

Mr. Haigreve Khaitan

(Non-Executive, Independent Director)

Ms.Usha Sangwan
Non Independent Director

Mr. B.L. Taparia

(Non-Executive, Non Independent Director)

Mr. Ajay Kapur

Executive Non- Independent (Managing Director &
CEO)

ORGANISATION OF CHART

CODE OF CONDUCT

RESEARCH METHODOLOGY
Research design:
A research design is the way or the methods or the procedure followed to conduct a scientific
research. Some of the types of research design are exploratory research design, descriptive
research design and causal research
Design. Each has its own meaning. Causal research design helps us to know and effect
relation between two variables, whereas exploratory research design is used to find new ideas
and insight. Descriptive research design is a type of research method that is used when one
wants to get information on the current status of a person or an object.
Time period:Data from 2009 to 2013 are Collected to analyses the performance of the WIPRO.
Objective of the study:
Objective means the main purpose of the report i.e. stating why this report is prepared and
what it wants to say. The only objective of this study is to know AMBUJAS current
financial position with the use of various financial ratios.
Data collection method:
There are two ways one can collect data i.e. through primary source (which means generating
ones own information by surveys or interviews etc.) or
Through secondary source (which are readily available like information in newspaper,
magazines, websites etc.). For this report only secondary data are used as the basic objective
is to study AMBUJAS financial position, there is no need to conduct a survey or interviews,
which are sources of primary data. Type of data:
-Data included in the balance sheet, profit and loss account and cash flow statement of the
company are used.
Method of analysis:
-Various financial ratios are used to evaluate the corporate financial positions along with
various graphs and charts.
Limitations of the study:
-No study can have zero limitations. So this report is no exception either.
1) Secondary data is never cent percent correct. So if the data used in the report for evaluation
are incorrect or incomplete the results would be misleading.
2) Alteration of data at source of origin can alter the results.
3) Time constraints.

10

FINANCIAL STATEMENTS
Financial statement analysis (or financial analysis) is the process of reviewing and analyzing
a company's financial statements ,these statements include the Income Statement, Balance
Sheet, and Statement of Cash Flows. Financial statement analysis is a valuable tool for
gauging the financial stability and health of a company. Financial statement analysis is a
popular tool for investors, stakeholders and the key decision makers within the organization.
Two very popular methods of financial statement analysis are:horizontal and vertical analysis
and the use of financial ratios.
Financial statements:
1. Balance sheet
2. Income statement
3. Cash flow statement

1. Balance sheet
Balance sheet is a summary of the financial balances of a sole proprietorship, a business
partnership, a corporation or other business organization, such as an LLC or
an LLP. Assets, liabilities and ownership equity are listed as of a specific date, such as the
end of its financial year. A standard balance has 3 parts assets, liabilities and owners equity.
Balance sheets helps an investor to find out the financial stability of a company.
2. Income Statement
An income statement is a summary of the revenues and expenses of a business over a period
of time, usually one month, three months, or one year. This statement is also referred to as the
profit and loss statement. It shows the results of the firms operating and financing decisions
during that time. The operating decisions of the companythose that apply to production
and marketinggenerate sales or revenues and incur the cost of goods sold (also referred to
as the cost of sales or the cost of products sold). The difference between sales and cost of
goods sold is gross profit. Operating decisions 31also result in administrative and general
expenses, such as advertising fees and office salaries. Deducting these expenses from gross
profit leaves operating profit, which is also referred to as earnings before interest and taxes

11

(EBIT), operating income, or operating earnings. Operating decisions take the firm from sales
to EBIT on the income statement.
The results of financing decisions are reflected in the remainder of the income statement.
When interest expenses and taxes, which are both influenced by financing decisions, are
subtracted from EBIT, the result is net income. Net income is, in a sense, the amount
available to owners of the firm. If the firm has preferred stock, the preferred stock dividends
are deducted from net income to arrive at earnings available to common shareholders. If the
firm does not have preferred stock (as is the case with Fictitious and most nonfictitious
corporations), net income is equivalent to earnings available for common shareholders. The
board of directors may then distribute all or part of this as common stock dividends, retaining
the remainder to help finance the firm.
3.Cash flow statement:
It is a statement, which measures inflows and outflows of cash on account of any type of
business activity. The cash flow statement also explains reasons for such inflows and
outflows of cash so it is a report on a company's cash flow activities, particularly its
operating, investing and financing activities

12

BALANCE SHEET OF AMBUJA CEMENT

13

FINANCIAL RATIO ANALYSIS

Ratio analysis is a significant techniques for analyzing financial statements. It indicates
relation between two mathematical expression and relationship of two or more things.

Financial ratio is a ratio on selected values on a enterprise financial statement.

There are many standard ratios used to evaluate financial condition and position of a
corporate or an organization. Financial ratios are used by managers within the firm, by
current and potential stakeholders of a firm, and by firms creditors. Financial analysts use
ratios to compare firms strength and weakness of the firm.

Values used in calculating financial ratios are taken from balance sheet, income statement
and cash flow statement of a company. Ratios are expressed in decimal or in percentage.

To evaluate the performance of one firm, its current ratios will be compared with its past
ratios. When financial ratios over a period of time are compared, it is called time series or
trend analysis. It gives an indication of changes and reflects whether the firms financial
performance has improved or deteriorated or remained the same over that period of time. It is
not the simply changes that has to be determined, but more importantly it must be recognized
that why those ratios have changed. Because those changes might be result of changes in the
accounting polices without material change in the firms performances.

Another method is to compare ratios of one firm with another firm in the same industry at the
same point in time. This comparison is known as the cross sectional analysis. It might be
more useful to select some competitors which have similar operations and compare their
ratios with the firms. This comparison shows the relative financial position and performance
of the firm. Since it is so easy to find the financial statements of similar firms through
publications or Medias this type of analysis can be performed so easily.

To determine financial position and performance of a firm the ratio may be compared with
average ratio of the industry to which the firm belongs. This method is known as industry

14

analysis that helps to ascertain the capability and standing of the firm in the industry to which
it belongs.

Advantages of financial ratio analysis

1.
2.
3.
4.

It simplifies the financial statements.

It helps in comparing companies of different size with each other.
It helps in trend analysis which involves comparing a single company over a period.
It highlights important information in simple form quickly. A user can judge a
company by just looking at few numbers instead of reading the whole financial
statements.

Limitations
Despite usefulness, financial ratio analysis has some disadvantages. Some key demerits of
financial ratio analysis are:
1. Different companies operate in different industries each having different
environmental conditions such as regulation, market structure, etc. Such factors are so
significant that a comparison of two companies from different industries might be
misleading.
2. Financial accounting information is affected by estimates and assumptions.
Accounting standards allow different accounting policies, which impairs
comparability and hence ratio analysis is less useful in such situations.
3. Ratio analysis explains relationships between past information while users are more
concerned about current and future information.

15

CLASSIFICATION OF RATIOS
In isolation, a financial ratio is a useless piece of information. In context, however, a financial
ratio can give a financial analyst an excellent picture of a company's situation and the trends
that are developing. A ratio gains utility by comparison to other data and standards.
Financial ratios quantify many aspects of a business and are an integral part of financial
statement analysis. Financial ratios are categorized according to the financial aspect of the
business which the ratio measures. Although these categories are not fixed in all over the
world however there are almost the same, just with different names:

1. Profitability ratios which use margin analysis and show the return on sales and capital
employed.

2. Rate of Return Ratio (ROR) or Overall Profitability Ratio: The rate of return ratios are
thought to be the most important ratios by some accountants and analysts. One reason why
the rate of return ratios is so important is that they are the ratios that we use to tell if the
managing director is doing their job properly.
3. Liquidity ratios measure the availability of cash to pay debt, which give a picture of a
company's short term financial situation.

4. Solvency or Gearing ratios measures the percentage of capital employed that is financed by
debt and long term finance. The higher the gearing, the higher the dependence on borrowing
and long term financing. The lower the gearing ratio, the higher the dependence on equity
financing. Traditionally, the higher the level of gearing, the higher the level of financial risk
due to the increase volatility of profits. It should be noted that the term Leverage is used in
some texts.

5. Turn over Ratios or activity group ratios indicate efficiency of organization to various
kinds of assets by converting them to the form of sales.

16

6. Investors ratios usually interested by investors.

LIQUIDITY RATIOS
The two liquidity ratio, the current ratio and quick or acid test ratio, are the two most
important in whole ratio analysis and they are the most simplest to use. Liquidity ratio
provides information about firms ability to meet short term financial obligations.
While liquidity ratio are most helpful to short-term suppliers, creditors and bankers, they are
also important to financial managers to meet obligations of suppliers and other various
government agencies. A companys ability to turn short asset into cash to cover debts is
utmost importance when creditors are seeking payments. Generally higher the ratio, the larger
margin of safety that the company possesses to cover short term debentures.

CURRENT RATIO
It is the ratio that measures a companys ability to meet its debts over the period of next 12
months, by comparing the companys current assets and current liabilities.
1. CURRENT RATIOS = CURRENT ASSETS/CURRENT LIABLITIES
YEAR

2009

2010

2011

2012

2013

CURRENT ASSET

952.08

1228.44 3234.90 3451.02 3506.54

CURRENT LIABLITIES 1582.32 1893.98 2238.35 2143.57 2348.81

CURRENT RATIO

0.6016

0.6486

1.4452

1.6099

1.4929

Current Ratio
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
1

17

INTERPRETATION
With the average of 1.5, the current ratio of ambuja cement cement ltd.is normal, as in not
that high not that low. As this is belongs to the ideal current ratio of the company. A low
figure in Current ratio does not necessarily mean that the company is underperforming,
though it may raise some financial concerns for the stakeholders of the company and may
make the company less attractive for the investors. However, a strong operating cash flow
and the slow cash conversion cycle of the company provide a reasonable explanation for its
Current Ratio being low. The aforementioned graph depicts that the Current Ratio of ambuja
cement saw a quantum jump in 2010-2011

from 0.64 to 1.44. However, since then it has

been moving at an even pace of 1.5 until the last financial year.

2. ACID TEST RATIO / QUICK RATIO

It is the ratio that indicates the companys ability to cover all its current liabilities using its
current or short term assets, without selling its inventory. Ideally, the Quick Ratio should be
1:1, however, it differs from sector to sector. Quick ratio specifies whether the assets that can
be quickly converted into cash are sufficient to cover current liabilities.
QUICK RATIO = LIQUID ASSETS / LIQUID LIABILITIES

TURNOVER RATIOS
Turnover ratios are also acknowledged as activity or efficiency ratios. It often refers to the
companys ability to translate different accounts within their balance sheets into cash or sales.
Companies will normally try to turn their manufacture into cash or sales as fast as possible
because this will, in general, lead to greater revenues. Such ratios are frequently used when
performing fundamental analysis of the company.
There are various types of Turnover Ratios, namely:1. Inventory turnover ratio
18

2. Debtors turnover ratio

3. Average collection period
4. Total assets turnover ratio
5. Fixed assets turnover ratio
6. Capital employed turnover ratio
3. FIXED ASSET TURNOVER RATIO
Fixed assets turnover ratio is also called as the ratio of sales to fixed assets. It indicates how
efficiently the fixed assets are being used by the company. It measures the efficiency with
which the company has been using its fixed assets to generate sales.
FIXED ASSET TURNOVER RATIO = NET SALES / FIXED ASSETS
2009

2010

2011

2012

2013

NET SALES

7083.21 7371.52 8554.26 9730.30 9160.35

FIXED ASSETS

3440.04 5627.75 6186.46 5862.37 6062.53

FIXED ASSET TURNOVER RATIO 2.06

1.31

1.38

1.65

1.52

Fixed Asset Turnover Ratio

2.5
2
1.5
1
0.5
0
1

INTERPRETATION
Since there are no standard guidelines about the best level of Fixed Asset Turnover Ratio, it
must be compared over the years for the same company. The company has not shown a
symmetrical performance in accordance to the industrial performance, with an average fixed
asset turnover ratio of 1.584. However, a low figure of fixed asset turnover ratio can be traced
19

down to the fact that either the sales of the company are fairly low or the company has made
a huge investment recently.
CURRENT ASSET TURNOVER RATIO
It is the ratio that determines the efficiency of a firm in using its current assets to generate
sale.
CURRENT ASSET TURNOVER RATIO : NET SALES / CURRENT ASSETS
2009

2010

2011

2012

2013

8554.26

9730.30

9160.35

NET SALES

7083.21 7371.52

CURRENT ASSETS

2008.77 3,200.82 4,004.25 4,386.35 4,418.73

CURRENT ASSET TURNOVER

3.52

2.30

2.13

2.21

2.07

RATIO

4
3.5
3
2.5
2
1.5
1
0.5
0
2009

2010

2011

2012

INTERPRETATION:

20

4. WORKING CAPITAL TURNOVER RATIO

It is a metric equating the reduction of working capital to generate of sales over a given
period. This provides some useful information as to how effectively a company is using its
working capital to generate sales. A company utilizes its working capital to fund operations
and acquire inventory. These operations and inventory are then converted into sales revenue
for the company. The working capital turnover ratio is used to analyze the relationship
between the money used to fund operations and the sales generated from these operations.
WORKING CAPITAL TURNOVER RATIO= NET SALES / WORKING CAPITAL
YEAR

2009

2010

2011

2012

2013

NET SALES

7083.21 7371.52 8554.26 9730.30 9160.35

WORKING CAPITAL

-630.24

-665.54

996.55

1307.45 1157.73

WORKING CAPITAL TURNOVER

-11.24

-11.08

8.58

7.44

7.91

RATIO

10
5
0
-5
-10
-15
Series1

INTERPRETATION:
The aforementioned graph shows an uneven working capital turnover ratio as recorded by the
company.The primary reason for this is the insufficiency of working capital with the
company. Their current liabilities account for almost double of their current assets. Also the
accounts Receivables of the company is very high in comparison to its competitors. Since
2012, the numbers took a nosedive, proving the in-efficiency of the management in utilizing
its working capital to generate sales and poor operational activities of the company.

21

5. CAPITAL EMPLOYED TURNOVER RATIO:

The capital employed turnover ratio reveals the association between the shareholders'
investment in the business and the turnover that the management has been able to generate
from it. A high capital turnover ratio designates the ability of the organization to achieve
supreme sales with least amount of capital employed. Higher the capital turnover ratio better
it is.
2009
Net Sales

7083.21

Capital Employed
Capital Employed Turnover
Ratio

5,054.28
1.4014281

2010

2011

7371.52

8554.26

5,501.15

5,873.89

2012
9730.3
6,696.12

2013
9160.35
7,165.88

1.33999618 1.45631941 1.45312509 1.27832869

Capital Employed Turnover Ratio

1.5
1.45
1.4
1.35
1.3
1.25
1.2
1.15
Series1

INTERPRETATION
The aforementioned graph shows a steady performance of the company in terms of Capital
Employed Turnover Ratio.The net sales of the company was excessively high . Owing to
this, AMBUJA CEMENT was able to record a peak in its Capital Employed Turnover Ratio.

22

6. PROPRIETORY RATIO:
Also known as Equity Ratio or the Net Worth to Total Assets Ratio, it is the ratio of
shareholders' funds to total assets. A high ratio indicates that the firm has adequate amount of
equity to upkeep the functions of the business.
2009

2010

2011

2012

2013

Equity

304.74

305.97

306.87

308.44

309.17

Total Assets

6636.6

7395.13

8112.24

8839.69

9514.69

Shareholder's

Propreitory Ratio

0.04591809 0.041375 0.037828 0.034893 0.032494

Propreitory Ratio
0.05
0.045
0.04
0.035
0.03
0.025
0.02
0.015
0.01
0.005
0
Series1

INTERPRETATION:
The Proprietary Ratio for AMBUJA CEMENT is very low which indicates that the business
may be making use of too much debt or trade payables, rather than equity, to support
operations.

23

7. RETURN ON ASSETS
It is the ratio of annual net income to total assets of a business during a financial year.
It processes efficiency of the business in using its assets to produce net income. It is
an indicator of how profitable a company is relative to its total assets. ROA gives an
idea as to how efficient management is at using its assets to generate earnings.
Return on Assets = Net Income / Total Assets
YEAR

2009

2010

2011

2012

2013

NET PROFIT AFTER TAX

1218.37

1263.61

1228.86

1297.06

1294.57

TOTAL ASSETS

6636.6

7395.13

8112.24

8839.69

9514.69

RETURN ON ASSETS

0.1835

0.1708

0.1514

01467

0.1360

24

Return On Assets
0.2
0.18
0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0
Series1

INTERPRETATION:
The aforementioned graph shows that the Return on Assets has constantly gown down since
2009-2014. It was mainly because of the fact that the net income of the company fell due to
the poor performance of the automotive sector, drop in the sales and increase in the excise
duty.

PROFITABILITY RATIOS
It is a measure of profitability, which measures a company's performance. Profitability is
the ability to make a profit, and a profit is what is left over from income earned after the
company has deducted all costs and expenses related to earning the income
Types of Profitability Ratios:Common profitability ratios used in analyzing a company's performance include gross profit
margin (GPM), operating margin (OM), return on assets (ROA), return on equity
(ROE), return on sales (ROS), and return on investment (ROI).
8. GROSS PROFIT RATIO
25

It shows the proportion of profits spawned by the sale of products or services, before selling
and administrative expenses. In addition, it reveals the capability of a business to create
sellable products in a cost-effective way. The ratio is of great significance, especially when
traced on a trend line, to see if a business can continue to provide products to the marketplace
for which customers are willing to pay.
YEAR

2009

GROSS PROFIT

1923.97 1860.12 1977.03 2472.97 1650.83

NET SALES

7083.21 7371.52 8554.26 9730

GROSS PROFIT RATIO 0.2716

2010

0.2523

2011

0.2311

2012

0.2541

2013

9160.35
0.1802

GROSS PROFIT RATIO

0.3
0.25
0.2
0.15
0.1
0.05
0
Series1

INTERPRETATION
9. Net profit ratio:

This shows portion of sales available to owners after all expense. A higher ratio indicates
higher profitability of firm. The ratio shows earning left for shareholder as percentage of
sales.

Net profit ratio

OVERALL PROFITABILITY / ROI RATIOS
This ratio is also named as Return on Investments (ROI) or Return on Capital Employed
(ROCE). It shows the percentage of return on the total capital employed in the business. This
26

ratio processes the relationship between net profit before interest and tax and capital
employed.
The objective of calculating this ratio is to find out how efficiently the long term funds
supplied by the creditors and the shareholders have been used.
YEAR

2009

NET PROFIT

1218.37 1263.61 1228.86 1297.06 1294.57

NET SALES

7083.21 7371.52 8554.26 9730.3

NET PROFIT RATIO 0.172

2010

0.171

2011

0.143

2012

0.133

2013

9160.35
0.141

Net Profit Ratio

0.2
0.18
0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0
Series1

INTERPRETATION:
Owing to the poor performance of the automotive sector in India, the Net Profit Ratio has
taken a nosedive for AMBUJA CEMENT. The paramount reason was the decrease in the
sales by 24% due to a hike in excise duty. Since 2009, the post-recession era, the economy is
in a downturn causing it to take a plunge which further led to reduction of sale and increase in
the Input costs. Thus, the profit margin of the company took a great hit.

10. RETURN ON CAPITAL EMPLOYED

Return on capital employed or ROCE is a profitability ratio that processes how efficiently a
company can spawn profits from its capital employed by equating net operating profit to
capital employed.
ROEC = EBIT / Capital Employed
27

YEAR

2009

2010

2011

NET PROFIT BEFORE INTEREST

2104.38 2074.7

2012

2013

2200.65 2542.71 2069.27

AND TAX
CAPITAL EMPLOYED

9491.4

8805.06 8069.43 7328.76 6570.66

RETURN ON CAPITAL EMPLOYED

0.221

0.235

0.272

0.315

0.314

WORKING NOTE :
CAPITAL EMPLOYED
YEAR

2009

EQUITY SHARE CAPITAL

2010

2011

2012

2013

309.17

308.44

306.87

305.97

304.74

PREFERENCE SHARE CAPITAL

0.00

0.00

0.00

0.00

0.00

LONG TERM DEBT

5.86

0.00

0.00

0.00

100.00

RESERVES

9,176.37 8,496.62 7,762.56 7,022.79 6,165.92

CAPITAL EMPLOYED

9491.4

8805.06 8069.43 7328.76 6570.66

CAPITAL EMPLOYED = EQUITY SHARE CAPITAL + PREFERENCE SHARE

CAPITAL + RESERVES + LONG TERM DEBTS FICTIOUS ASSETS

Return on Capital Employed

0.05
0.05
0.04
0.04
0.03
0.03
0.02
0.02
0.01
0.01
0.00
Series1

INTERPRETATION
In the wake of demand slump due to prolonged slowdown in the economy, the company has
not been able to make adequate profits. Weak consumer sentiment, subdued infrastructure
28

activity, tight financing environment with high interest rate continued to impact the
performance of the automobile industry and the company. Though the profits have been
dropping, the capital employed has held its position firmly. This shows that the investors and
other financial institutions that have pooled in money, have positive sentiments regarding the
company, which again reflects the strong goodwill and strong fundamentals of the company.
ROEC has come down from 13% to almost 1% within a span of five years. Similar is the
situation with the other automobile giants in the Indian automotive sector since no player is
immune from such macroeconomic factors affecting their business.

11. RETURN ON EQUITY

This ratio determines the amount of net income reverted as a percentage of shareholders
equity. Return on equity processes a corporation's profitability by enlightening how much
profit a company creates with the money shareholders have invested.
ROE = (NPAT Preference Dividend) / Equity Shareholders Fund
YEAR

2009

NPAT Equity Dividend 852.78

Equity shareholders fund
Return on Equity

2010

2011

866.39 738.17

2012

2013

742.26

738.23

6775.64 7330.1 8069.44 8805.06 9485.54

0.13

0.12

0.09

0.08

0.08

Working note :
Shareholders fund ( share capital + reserves)
YEAR

2009

2010

2011

2012

2013

SHARE CAPITAL

304.74

305.97

306.87

308.44

309.17

RESERVES

6470.9

7330.1

8069.44 8805.06 9485.54

SHAREHOLDERS FUND 6775.64 7636.07 8376.31 9113.5

9794.71

29

Return on Equity
0.14
0.12
0.10
0.08
0.06
0.04
0.02
0.00
Series1

INTERPRETATION
The aforementioned graph depicts that the ROE of the company has come down
substantially, showing no signs of taking off again in the near future. The predominant reason
behind this is the dropping profits of the company, spearheaded by the prolonged economic
depression and setback of the Indian stock markets. The company has a beta of 1.61 which
makes it very vulnerable under adverse market conditions. To revive from this position, the
company needs to increase their sales turnover, widen their margins on sales, avail cheaper
leverage and cut back on their taxes.

12. EARNING PER SHARE

EPS (Earning per Share) measures the profit earned per share by the shareholders. It is the
portion of a company's profit allotted to each outstanding share of common stock. Earnings
per share serves as a pointer of a company's profitability. Higher the value of EPS, higher is
the attractiveness of the stock to the investors.
EPS = (NPAT Preference Dividend) / Total No. of Equity Shares Outstanding
YEAR

2009

2010

2011

2012

2013

NPAT Preference dividend

1218.37

1263.61

1228.86

1297.06

1294.57

30

Total

no.

of

Equity

shares 15237.11 15298.59 15343.69 15421.84 15458.60

outstanding
EPS

0.08

0.08

0.08

0.08

0.08

EPS
0.09
0.08
0.08
0.08
0.08
0.08
0.08
0.08
0.08
Series1

INTERPRETATION :
From the aforementioned graph, it can be concluded that the EPS has remained same from
2009 to 2014. There could be two possible reasons for decrease in the EPS of a company,
namely, drop in the profit levels or increase in the average number of equity shares
outstanding. The average number of equity shares outstanding have increases six folds since
then. This is what has pushed down the levels foe EPS of the company. However, it does not
prove that the company has been performing badly, since EPS is an arbitrary figure which
needs to be compared both within the company and with the competitors, taking into
consideration the factors affecting the companys performance.

13. DIVIDEND PAYOUT RATIO

It is the ratio that depicts the percentage of earnings paid back to the shareholders in the form
of dividend. The amount that is held back by the company is called retained earnings, which
is used for further development of the company.
DPR = Dividend per Share / EPS
YEAR

2009 2010 2011 2012 2013

Dividend Per Share 0

EPS

0.08

0.08

0.08

0.08

0.08

31

DPR

INTERPRETATION:
As there is no preference dividend in AMBUJA CEMENT LTD. So there is no dividend
payout ratio.

SOLVENCY RATIOS
They measure the capacity of a company to compensate its long term debt and the interest on
it. Solvency ratios, help the business owner conclude the chances of the firm's long-term
survival. These ratios are of interest to long-term creditors and shareholders. These groups
are concerned with the long-term health and survival of business firms. Solvency ratios have
to attest that business can service their debt or pay the interest on their debt as well as pay the
principal when the debt matures.

14. DEBT-EQUITY RATIO

It is the ratio of total liabilities of a business to its shareholders' equity. It is a leverage ratio
and measures the degree to which the assets of the business are financed by the debts and the
shareholders' equity of a business.
Debt-Equity Ratio = Total Debts / Shareholders Fund

YEAR

2009

2010

2011

2012

2013

DEBT

165.70

65.03

42.8

34.63

29.15

SHAREHOLDERS FUND 6775.64 7636.07 8376.31 9113.5 9794.71

DEBT EQUITY RATIO

0.0244

0.0085

0.0051

0.0037 0.0029

Working note:
Shareholders fund ( share capital + reserves)
YEAR

2009

2010

2011

2012

2013

SHARE CAPITAL

304.74

305.97

306.87

308.44

309.17

RESERVES

6470.9

7330.1

8069.44 8805.06 9485.54

SHAREHOLDERS FUND 6775.64 7636.07 8376.31 9113.5

9794.71

32

Debt Equity Ratio

0.3
0.25
0.2
0.15
0.1
0.05
0
Series1

INTERPRETATION
The lower the value of debt equity ratio, the better it is since it a figure highlighting the
amount of assets provided by the shareholders and creditors. Thus it indicates the soundness
of long-term financial policies of the company. In comparison to an industrial average of , the
Debt-Equity ratio of AMBUJA CEMENT.

33

SUMMARISED TABLE OF RATIOS:

YEAR

2013

2012

2011

2010

2009

CURRENT RATIO

0.6016

0.6486

1.4452

1.6099

1.4929

QUICK RATIO

2.06

1.31

1.38

1.65

1.52

CUREENT ASSET TURNOVER 3.52

RATIO
WORKING CAPITAL TURNOVER -11.24
RATIO
CAPITAL EMPLOYED TURNOVER 1.40
RATIO
DEBT EQUITY RATIO
0.0244

2.30

2.13

2.21

2.07

-11.08

8.58

7.44

7.91

1.33

1.45

1.45

1.27

0.0085

0.0051

0.0037

0.0029

PROPRIETARY RATIO

0.045

0.041

0.037

0.034

0.032

GROSS PROFIT RATIO

0.2716

0.2523

0.2311

0.2541

0.1802

NET PROFIT RATIO

0.172

0.171

0.143

0.133

0.141

RETURN ON ASSETS

0.1835

0.1708

0.1514

0.1467

0.1360

0.235

0.272

0.315

0.314

0.13

0.12

0.09

0.08

0.08

EARNING PER SHARE

0.08

0.08

0.08

0.08

0.08

DIVIDEND PAYOUT RATIO

FIXED ASSET TURNOVER RATIO

RETURN
ON
EMPLOYED
RETURN ON EQUITY

CAPITAL 0.221

34

Conclusions:

In todays era, AMBUJA CEMENT LTD. growing very fast.AMBUJA CEMENT LTD. has
presence around the world. AMBUJA CEMENT LTD. is a company that keeps growing, and
expanding around the world. And, thus one of the key factors that plays important in
managing its success is EFFICIENT FINANCIAL STATEMENTS, which can be said from
the study of ratio analysis, made of last five years.
From the analysis of the profitability ratio, GP ratio and NP ratio has both shown an
increasing trend, which suggests that the company AMBUJA CEMENT has been able to
increase its profitability ever year. These are promising signs for the future. Operating profits
of the company were good too. As discussed earlier, liquidity ratio companys ability to meet
its short term liabilities. Both the tests i.e. current asset ratio and quick ratio gives an idea that
the company has enough current assets to repay its short term obligation. This companys
liquidity position is quite strong in all the last five years. The turnover ratio. Looking to the
tables of these two ratios fixed assets turnover ratio and current assets turnover ratio; one can
get idea about the policies of the company. AMBUJA CEMENT LTD. has invested more in
its current asset making it more liquid and less in fixed asset so that they are not over
investing in those long term assets. The company may believe to invest in those assets that
can be converted into cash more easily.
Working capital turnover ratio and capital employed ratio gives an idea about how effectively
the working capital and the owners funds are used. Both showing an upward trend
suggesting the companys efficiency in managing its assets and liabilities to generate sales is
improving. Debt equity ratio and proprietary ratio gives an idea about the ownership structure
of the company. Both are indicating that the company are relying heavily more on debt i.e.
outside funds rather than its own.
Thus, we can conclude that AMBUJA CEMENT LTD. is working pretty well and is running
excellent.

35

REFERENCES

http://www.ambujacement.com/documents/investors/pdf-files/ambujacement-annualreport-2013-14.pdf
http://www.ambujacement.com/investors/annual-reports.aspx
http://www.ambujacement.com/investors/
http://en.wikipedia.org/wiki/ambujacement
http://www.marsdd.com/mars-library/financial-statements-the-four-components/
Cost Accounting And Financial Accounting (ICAI)

36