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RATIO ANALYSIS IN TAMILNADU CEMENT


CORPORATION LTD, ARIYALUR

SUMMER PROJECT REPORT

Submitted by

D.VASANTHA KUMAR
REGISTER NO: 27348353

Under the Guidance of


Mr D. SARAVANAN, MBA, M.Phil, M.F.C, M.H.R.M, (Ph.D)
Faculty, Department of Management Studies
in partial fullfilment for the award of the degree
of
MASTER OF BUSINESS ADMINISTRATION

DEPARTMENT OF MANAGEMENT STUDIES


SRI MANAKULA VINAYAGAR ENGINEERING COLLEGE
PONDICHERRY UNIVERSITY
PUDUCHERRY
SEPTEMBER- 2007
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SRI MANAKULA VINAYAGAR ENGINEERING COLLEGE


MADAGADIPET, PUDUCHERRY

DEPARTMENT OF MANAGEMENT STUDIES

BONAFIDE CERTIFICATE

This to certify that the project work entitled “RATIO ANALYSIS OF TAMILNADU
CEMENT CORPORATIONS LTD, ARIYALUR” is a bonafide work done by
D. VASANTHA KUMAR [ REGISTER NO: 27348353 ] in partial fulfillment of the
requirement for the award of Master of Business Administration by Pondicherry University during the
academic year 2007 – 2008.

GUIDE HEAD OF DEPARTMENT

Submitted by Viva-Voce Examination held on


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EXTERNAL EXAMINER

ACKNOWLEDGEMENT
First and foremost we tank god for his blessings showered on us for completing the
project successfully.

I take this opportunity to express my deep senses of gratitude to Mr.N.KESAVAN,


chairman and Mr.M.DHANASEKARAN, Managing director & S.V. SUGUMARAN,
vice chairman, Sri Manakula vinayagar engineering college, Madagadipet.

We gratefully acknowledge the kindness of Dr.V.S.K. Venkatachalapathy principal Sri


Manakula Vinayagar Engineering College, Madagadipet, for giving me an opportunity to
do the project work.

It is also our privilege to express our


sincere thanks to Mr.Mohan Administrative officer for having given us an
opportunity to do this project work in their esteemed organization.

We are also bound to give our sincere thanks to our Mr.M. Jayakumar Head of
Department, Department of Management studies. Sri Manakula Vinayagar Engineering
College, Madagadipet for his benevolent and noble assistance in doing the project.

We profoundly express our indelible indebtedness to Mrs.D.Saravanan lecture Sri


Manakula Vinayagar Engineering College, Madagadipet, who through her immense
knowledge greatly helped & guided us in this endeavour, she who was very generous in
suggesting improvements and supervising this work all through & her constant interest and
guidance helped us to complete this projects.

It is also our privilege to record our deep sense of gratitude to extend our grate fullness to
Mr.Gunasekaran for his relentless & valuable guidance & suggestions to complete this
project.
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Finally, we would like to thank our dear parents & family member’s and also wish to
thank each & every one of our faculties and our friends whose efforts and support made this
project success.
ABSTRACT

In this project title a study on Ratio Analysis at TANCEM this aim is to analysis the
Ratio Analysis position of the company using the financial tools.

This study based on financial statement such as Ratio analysis and financial
performance. By using this tools combined it enables to determine in an effective manner.

This project helps to identify and give suggestion the area of weaker position of
business transaction in TANCEM.

This study is made to evaluate the Ratio analysis as per trend analysis. It is in upward
trend.
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CONTENTS
CHAPTER TITLE PAGE NO

LIST OF TABLES
LIST OF CHARTS

1.1 INTRODUCTION 1
I 1.2 PROFILE OF COMPANY 2
1.3 NEED FOR STUDY 9

II REVIEW OF LITERATURE 10

III OBJECTIVES OF THE STUDY 17

IV RESEARCH METHODOLOGY 18

V DATA ANALYSIS AND INTERPRETATION 20

VI FINDINGS OF THE STUDY 38


SUGGESTIONS & RECOMMENDATIONS 40

VII CONCLUSIONS 41

LIMITATIONS OF THE STUDY 42


VIII
SCOPE FOR FURTHER STUDY 43
44
ANNEXURE
58
Bibliography
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LIST OF TABLES

TABLE NO. PAGE NO.


NAME OF THE TABLE

5.1.1 CURRENT RATIO 20

5.1.2 QUICK RATIO 22

5.2.1 DEBT-EQUITY RATIO 24

5.2.2 INTEREST-COVERAGE RATIO 25

5.2.3 PROPRIETORY RATIO 27

5.3.1 NET PROFIT RATIO 29

5.3.2 RETURN ON ASSESTS 31

5.3.3 RETURN ON CAPITAL EMPLOYED 33

5.3.4 DEBTORS TURNOVER RATIO 35

5.4.1 FIXED ASSEST RATIO 37


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LIST OF CHARTS

CHART NO. NAME OF THE CHARTS PAGE NO.

5.1.1 CURRENT RATIO 21

5.1.2 QUICK RATIO 23

5.2.1 DEBT-EQUITY RATIO 24

5.2.2 INTEREST-COVERAGE RATIO 26

5.2.3 PROPRIETORY RATIO 28

5.3.1 NET PROFIT RATIO 30

5.3.2 RETURN ON ASSESTS 32

5.3.3 RETURN ON CAPITAL EMPLOYED 34

5.3.4 DEBTORS TUNOVER RATIO 36


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CHAPTER - I
INTRODUCTION

In our present day economy finance is defined as the provision of money at the time
when it is required. Every enterprise whether. Medium or small needs finance to carry on its
target. In fact finance is so indispensable today. It can be rightly said that it is the lifeblood of
an enterprise. Without adequate finance no enterprise can possible accomplish its objectives.

In the early years of its evolution it was treated synonymously with the rising of funds.
In the current literature pertaining to financial management a broader scope so as to include in
addition to procurement of funds efficient use of resources is universally recognized.

Finance was studied as a part of Economics before the turn of the present century. It
was only in early part of the present century when massive consideration movement took
place that finance came to be studied as a corporate discipline. Formation of large size
undertaking by consolidation the smaller one brought before the management is the problem
of financing these giant enterprises. Emphasis was also placed on the study of source and
forms of financing the new industrial giants.
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PROFILE OF TANCEM AND ARIYALUR CEMENT PLANT


PROFILE OF TANCEM

1.1 INTRODUCTION

Tamilnadu Cements Corporation (TANCEM), a wholly owned Government


of Tamilnadu undertaking started business from 1st April 1976 with and authorized
share capital of Rs.10 crores taking over cement plant at Alangulam and setting up
another at Ariyalur in the year 1979.

TANCEM as its expansion and on version activities set up Asbestos Sheet unit
at Alangulam during 1981 and an Asbestos pressure pipe plant at Mayanur during
1983. TANCEM also took over during 1989, a stoneware pipe plant from TACEL
with a view to provide employment to the retrenched employess.
TANEM has thus become a multi-plants. Multi-locations and multi products
company with annual turnover of around Rs.200 crores and the authorized capital as of
now if Rs.18 crores.
The company has its main objective in production of cement and cement based
and primarily caters to the needs of Government departments. Limestone being the
main raw material the company acquired and reserved enough limestone bearing lands
in and around Alangulam and Ariyalur which are sufficient to run the cement plants
for decades to came. Hence the role of TANCEM in the development of state is
immense.
The company is engaged in the manufacture and selling of cement. Asbestors
sheets. Asbestos Pressure Pipes and Stoneware Pipes. TANCEM factories are situated
in various districts of Tamilnadu as under.
• Alangulam Cement Works, Alangulam, Virudhunagar district.
• Ariyalur Cement Works, Ariyalur, Perumbalur district.
• Tamilnadu Asbestos sheet unit, Alangulam, Virudhunagar district.
• Tamilnadu Asbestos Pipe Unit, Mayanur, Karur district and
• Stoneware Pipe Factory, Virudhachalam, and cuddalore district.
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1.2 ARIYALLUR CEMENT WORKS


Commercial production in the unit was commenced during October 1979. Set
up with a capital outlay of Rs.29 crore and a rated capacity of 5 lakh tones per annum
of cement, this unit provides direct employment for nearly 1000 people.

With the best limestone deposit available it is able to produce the high quality
cement of various grades and supplies to Government Departments and Public. Wide
appreciations have been received from various quarters for its ARASU brand cement
being marketed in Tamilnadu and kerala. Capacity enhancement at Ariyallur factory is
also proposed. Of late it operated exceedingly well producing more than its capacity.
1.2.1 Classification of Cement products by type In Ariyalur Cement.
• 1.O.P.C
• 2. P.P.C

1.2.2 Classification of Cement Products by grade In Ariyalur Cement.


• 1.O.P.C 43.53
• 2. P.P.C Arasu Super Star.
1.3 Process of manufacture of cement in Ariyalur
The principal raw material is limestone which is quarried from opencast mines
operated by the company. The limestone is transported to the crushers at the factory
site by the company,s own vehicles. The limestone along with sand or clay is feed into
Raw mill in a dry condition. The raw mill is a high capacity compartment mill of the
closed circuit and material ground by this capacity compartment mill of the closed
circuit and material ground by this mill is then transported by pneumatic pumps to the
homogenous blending and storage silos where the material is thoroughly blended with
the aid of compressed air. In this, the necessary correction to get the desired chemical
composition is accomplished in the silos. The homogenous materials is then
transported in to storage silos the mixture is feed to feeder in the pulverized conditions
through preheater cyclones to enable rapid transfer of heat from the flue gases to the
materials. As the material flows down by gravity in kilns further chemical transferred
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into clinker takes place the clinker duly cooled is transferred to the clinker storage yard
by means of drag chain and deep bucket conveyors. The clinker is along with the
required quality of gypsum which is used as a retarder. The required quantity of fly
ash is added for producing Portland Pozzolana cement at the cement grinding stage.
The ground cement viz OPC&PPC thus obtained is stored in separate silos for further
drawn in to the packing unit.

Cement is packed in bags of 50kg each in the rotary packing machine and
thereafter conveyed to Wagons/Lorries for onward dispatch to the destination.

TANCEM’s cement plants are equipped with most modern equipments and
with high degree of professionalism have become market leader in the manufacture of
ORDINARY PORTLAND CEMENT (OPC) and SUPER STAR CEMENT surpassing
the requirements prescribed under the Indian Standards.

SUPER STAR CEMENT is a hydraulic cement manufactured by intergrading


of well burnt OPC clinker with 10 to 25% for good quality fly ash generated in the
thermal plants along with required quantity of gypsum to the fineness of not less than
300 m2/kg.

THE SUPER STAR CEMENT manufactured by TANCEM is not only of a


superior quality but also very consistent due to use of higher grade clinker produced at
its both units as well as finer variety of fly ash with particles of higher reactivity as
well as better particle size distribution along with higher purity gypsum.
The controlled state of process operations and narrow particle size distribution
ensure compressive strength similar to 53 Grade cement on a consistent basis. Fly ash
used by TANCEM if of low carbon content with hollow spherical and uniform shape
with size below 45 microns. These particles are advantageous as they reduce water
requirement improve structures due to denser concrete and less permeability to water
and other aggressive agents. This cement gains strength with age.
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1.4 Special Characteristics of Arasu Super Star Cement:


• Better workability & increased durability.
• Lower heat of hydration and reduced cracking.
• No alkali aggregate reaction.

1.5 IDEAL APPLICATIONS


• Mass plain cement works like Dams. Canals. Spill ways etc.
• Reinforced cement concrete work in building construction.
• Grouts and mortars.
• Asbestos Cement products.
• Culverts.drains.
• Effluent and sewage treatment plants.
• Marine Works.
• Coastal areas where sulphates. Chloride or other harmful chemical are present
in soils/ ground water/sea water.
• Solid and hollow concrete blocks.
• Ready mix concrete plants.
• Hot climates.
• Best for construction of all types of residential and commercial buildings
including RCC structural work in foundation, Columns beams and slabs etc.
• Concrete Roads.

1.6 Ariyalur Cement Works Mission:


To produce and sell cement in the public sector so as to have a moderating
influence on the market for making available cement at reasonable prices and to
develop the backward areas in the state by creating direct and indirect employment
opportunities.
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1.7 Ariyalur Cement Works Vision


• To encourage the use of environment and friendly practices.
• To attain leadership in cement technology.
• In cement production.
• To make available cement at affordable prices to the common consumers and
Govt. departments.

1.8 Ariyalur Cement Works Commitments:


 On achieving excellence in production:
o They are committed to maintaining highest quality standards by
o ensuring compliance with all laid down skpecifications.
o They achieve the highest capacity utilization of plant machinery.
o Thus ensuring maximum operational efficiency.
o They involve and motivate all our employees in the process of
o Production thus ensuring the highest productivity.
o They adopt the latest technologies by modernizing plant and plant.
o Practices besides bringing about continuous process improvements.

 On achieving excellence in supply & distribution:


o They make cement to the common consumers at affordable prices by
only providing for a reasonable margin of profit.
o They supply to all Government Departments/Agencies engaged in public
works activities at price cheaper than in the market.
o They develop products available all over Tamilnadu and in neighboring
states.
o They adopt a transparent and healthy approach to marketing cement and
cement products there by setting and example in the industry.
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 On Environment:
o Produce eco-friendly quality sheets and asbestos pressure pipes and
stoneware pipes adopting innovative technologies.
o Comply with all relevant environment legislation and regulation and
regulation.
o Conserve and optimize the usage of resources namely Power. Coal and
other raw materials like Limenstone. Fly Ash and other permissible
additives fixed by Bureau of Indian Standards (BIS).
o
1.9 Human Resource Development:
o They periodically impart training to their employees so as to inculcate in
them a sense of national priority. Industrial excellence and consumer
friendliness.
o They maintain harmonious Industrial Relations and enhance the quality
of life of their employees.
They improve the conditions of the people living in the neighborhood of their
factories by participating in community development projects in these areas.
They imbibe the latest development in cement technology in the world through
purposeful interaction with the cement and cement products adopting eco-friendly
resulting the least social and economical costs.

 BUSINESS
Cement is supplied directly to the Government Department and stockiest
appointed in various places in Tamilnadu and Kerala. Sheets are supplied directly to
the stockiest and through their depots situated in Pondicherry, Kerala and Karnataka.

Quality complaints on cement / sheets supplied by TANCEM are received at


the respective factories and out quality personnel attend warrants. The quality
complaints are attended within a week’s time.
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The company periodically conducts the stockiest meeting at various important


cities in Tamilnaud and redressing the stockiest / customer’s grievances.

 General
Continuous committed efforts are being taken by TANCEM to use the state of
the art technology machinery wherever required in the manufacturing system to
achieve quality and reduce the cost of production and reduce the cost of production at
all possible levels.
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CHAPTER - II
REVIEW OF THE LITERATURE

2.1 RATIO ANALYSIS


Ration analysis is one of the techniques of financial analysis where ratios are
used as a yardstick for evaluating the relationship between component parts of
financial statements to obtain a better understanding of the firm’s position and
performance.

Meaning
Ratio is relationships expressed in mathematical terms between figures. Which
are connected with each other in some manner.
It is defined as the systematic use of ratio to interpret the financial statements so
that the strengths and weaknesses of a firm as well as its historical performance and
current financial condition can be determined.
The importance of ration analysis lies in the fact that it presents facts on a
comparative basis
Conclusions can be drawn regarding the liquidity position of a firm. It is useful
for assessing the long-term financial viability of a firm. It throws light on the degree of
efficiency in the management and utilization of its assets.
It helps in inter-firm comparison and comparison with industry averages.
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2.2 Liquidity Ratios


2.2.1 Current Ratio
It is a quantitative relationship between current assets and current liabilities and
indicates and enterprises ability to meet the current obligation. Current assets refer to
liquid resources and must be sufficient enough to pay current liabilities when they
mature. This ratio is calculated as.
Current assets
Current Ratio = ............................
Current liabilities

A relatively high current ration is an Indication that the firm has ability to pay
its current obligations in time as and on the other hand a relatively low current ratio
represents that the firm shall not be able to pay its current liabilities in time without
facing difficulties. An increase in the current ratio represents improvement in the
liquidity position of a firm while a decrease in the current ratio indicates that there has
been deterioration in the liquid assets of the firm. The ration equal to the rule of thumb
is 2:1.
2.2.2 Quick/Acid Test Ratio:
The ratio is ascertained by company’s liquid assets and current liabilities. Here
liquid assets are those assets which are immediately convertible in to cash without
much loss. It is also known as liquidity ratio. It shows the ability of the enterprise to
meet its short term obligation without sale and collection of inventories.
Liquid assets
Liquid ratio=…………………………
Current liabilities
(OR)

Current assets-Stock
Quite ratio=………………………..
Current liabilities
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2.3 Leverage Ratios:


Debt-equity Ratio
This ratio indicates the relative proportions of debt and equity in financing the
assets of a firm. One approach is to express the debt-equity ratio in terms of the
relative proportion of long-term debt and shareholders equity. Thus.
Long-term funds
Debt-equity ratio=……………………………..
Shareholders funds
The debt considered here is exclusive of current liabilities. It is an important tool of
financial analysis to appraise the financial structure of a firm. A high ratio shows a
large share of financing by the creditors of the firm, a low ratio implies a smaller claim
of creditors.

2.3.1 Interest Coverage Ratio :


These ratios are computed from information available in the profit and loss account. It
is also known as time-interest earned ratio. This ratio measures the debt servicing capacity of
a firm insofar as fixed interest on long-term loan is concerned. It is determined by dividing
the operating profits or earnings before interest and taxes (EBIT) by the fixed interest charges
on loans.

Net profit/loss before interest & tax


Interest= …………………………….
Interest charges
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2.3.2 Proprietary Ratio:


This ratio indicates whether the firm is employing a reasonable proportion of
debt or if heavily loaded with debt in which case its solvency is exposed to serious
strain. This ratio relates the owner’s/proprietor’s funds with total assets. The ratio
indicates the proportion of total assets financed by owners. The ratio is computed by
Proprietary funds
Proprietary=………………………………
Total assets

2.4 PROFITABILITY RATIOS

2.4.1 Net profit Ratio :

This measures the relationship between net profits and sales of a firm. Depending on
the concept of net profit employed the ration can be computed as
Net profit/loss after interest and tax
Net profit ratio =………………………………………x100
Sales
A high net profit margin would ensure adequate return as well as enable a firm to with
stand adverse economic conditions when selling price is declining cost of production is rising
and demand for the product is failing. A low net profit merging would have the opposite
implications.
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2.4.2 Return on Assets:


Thus profitability ratio is measured in terms of this relationship between net
profit and assets. This may also be called profit-to-asset ratio.
The concept of net profit may be net profits after taxes net profits after taxes
plus interest and net profits after taxes plus interest minus tax savings. Assets may be
defined as total assets fixed assets and tangible assets. The ratio can be computed by
the formula.
Net profit/loss after taxes+interest
Return on assets=………………………………
Average Total assets

2.4.3 Return on capital Employed :

The term capital employed refers to long-term funds supplied by the creditors and
owners of the firm. Here the profits are related to the total capital employed. It can be
computed as
Net profit/loss after tax + interest
Return on Capital =…………………………………………x100
Average capital Employed

The capital employed basis provide a test of profitability related to the sources of long-term
funds. The higher the ratio the more efficient is the use of capital employed. A comparison of
this ratio with similar firms with the industry average and over time would provide sufficient
insight into how efficiently the long-term funds of owners and creditors are being used.
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2.4.4 Debtors turnover ratio:


Debtors turnover ration indicates the number of times the debtors are turned over
during the year. Generally the higher value of debtors turnover the more efficient in
the management of debtors or sales or more liquid debtors. Similarly low debtors or
sales or more liquid debtors.

Net credit sales


Debtors Turnover Ratio = ……………..……………x (times)
Average detbors

2.5 OTHER RATIOS

2.5.1 Fixed Assets Ratio


This ratio relates the net assets and the long-term funds. Here the ratio should
be high. That is the handling of fixed asset should be grater than the long-term funds at
an appropriate level. This ratio can be computed as given under.
Fixed assets
Fixed Assets ratio = ……………..……………
Long – term funds
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2.6 IMPORTANCE OF THIS STUDY


The subject matter of financial management is of immense interest for
every financial analyzer. It needs special attention because of the complexities involve
in managing cash in present day industrial function.

 The important aspect is the estimation of how much of finance.


 The business organization requires and for what purpose.
 The most important area of financial management is the working capital
management.
 Here the study tries to reveal the company’s position and performance
by evaluating the relationship between various components parts of
financial statements.

Ration analysis has been taken as a tool in assessing the performance of the
company in respect of the following aspects.
• Liquidity Position.
• Long-term solvency.
• Profitability.
• Activity.
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CHAPTER – III

OBJECTIVES OF THE STUDY

 To analyze and evaluate the financial performance using of TANCEM


 To examine tbe short-term financial solvency of the TANCEM
 To study the growth of TANCEM in terms of comparative analysis and trend
analysis of financial statements for the past five years, from 2001 to 2006.
 to make suggestions & recommendations for improving the financial position of
TANCEM.
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CHAPTER - IV
RESEARCH METHODOLOGY
4.1 RESEARCH
Research is a process in which the researcher wish to find out the end result for
a given problem and thus the solution helps in future course of action. The research
has been defined as “A careful investigation or enquiry especially through search for
new facts in branch of knowledge”

4.2 RESEARCH DESIGN


The research design used in this project is Analytical in nature the procedure
using, which researcher has to use facts or information already available, and analyze
these to make a critical evaluation of the performance.

This is the case of Tamilnadu Cements Corporation (TANCEM) Limited. With


particular reference to working capital management, for the prosecution of the study,
both the primary and secondary data.

4.3 DATA COLLECTION

Primary Sources

1. Data are collected through personal interviews and discussion with Finance-
Executive.
Secondary Sources

1. From the annual reports maintained by the company.


2. Data are collected from the company’s website.
3. Books and journals pertaining to the topic.
25

4.4 TOOLS USED IN THE ANALYSIS


1. Ratio Analysis.
2. Comparative Balance Sheet.
3. Trend Analysis.
4.5 PERIOD OF STUDY
The period of the study was two months from June to July 2006. The data were
collected for five years from 2002 to 2006.
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CHAPTER – V
DATA ANALYSIS & INTERPRETATION

2.5 Liquidity Ratios


2.5.1 Current Ratio

TABLE NO. 5.1.1


(Amount in Rs)

Current
Current Assets In
Year Liabilities In Ratio
Rs.
Rs.
2002 602970653.98 251966953.85 2.39
2003 587446227.38 216854344.96 2.71
2004 467823175.04 19862056.73 2.36
2005 503546364.17 407569342.24 1.24
2006 645608601.08 179227649.24 3.60
Sources : Secondary data

INFERENCE :
On seeing the analysis table it is evident that the current ratio is well-
maintained except in the year 2005. This happens due to the increase of current
liabilities. But sudden step had been taken and now the company is in a position to
meet its current liabilities efficiently.
27

CHART – 5.1.1

Current Ratio

4
3.6
3
2.71
2.39 2.36
ratio

2
1.24
1
0
2002 2003 2004 2005 2006
year
28

2.5.2 Quick/Acid Test Ratio:

TABLE NO. 5.1.2

(Amount in Rs)

Current
Current Assets In
Year Liabilities In Ratio
Rs.
Rs.
2002 484703565.40 251966953.85 1.93
2003 469734941.00 216854344.96 2.17
2004 351962443.60 198620656.73 1.77
2005 355077392.40 407569342.93 0.87
2006 550795311.90 179227649.24 3.07

Sources : Secondary data.

INFERENCE:
A maximum decline happens in maintaining the Quick ration in the year
2005. This happens due to the increase of current liabilities in that year. But it has been
reduced in the year 2006 and the company is in a position to meet its current
obligations in time without meet struggle.
29

CHART – 5.1.2

Ratio

5
4
3 3.07
ratio

2 1.93 2.17
1.77
1 0.87
0
2002 2003 2004 2005 2006
year
30

2.6 Leverage Ratios:


Debt-equity Ratio

TABLE NO.5.2.1

(Amount in Rs)

Current
Current Assets In
Year Liabilities In Ratio
Rs.
Rs.
2002 71517981.79 490856229.6 0.15
2003 132439731.40 574886183.6 0.23
2004 98353145.53 513133008.1 0.19
2005 86662292.00 354368204.9 0.24
2006 478281951.5 316133967.0 1.51
Sources : Secondary data

INFERENCE :
The above computation shows that Debt-Equity Ratio is low in the first four years and
it gives quite satisfactory but it is too high in the year 2006. The management has to
reduce the ratio because the ideal ratio is 0.67.
31

CHART – 5.2.1

Ratio

5
4
3
ratio

Ratio
2
1.51
1
0 0.15 0.23 0.19 0.24
2002 2003 2004 2005 2006
year
32

2.6.1 Interest Coverage Ratio :

TABLE NO.5.2.2
(Amount in Rs)

Net profit/loss
Interest
Year before interest Ratio
charges In Rs.
and tax In Rs.
2002 228199732 40416108 5.65
2003 116089380 86400449 1.34
2004 (-)6673811 87577401 (-)0.08
2005 12068511 109706287 0.11
2006 73403167 65127527 1.13

Sources : Secondary data.

INFERENCE :
While analyzing the interest coverage ratio a rapid decrease happens till the year 2004
and slight increase appears. This shows that the company has failed to minimize the interest in
the first three years. But at present it has shown their attention over paying interest on long-
term loan.
33

CHART – 5.2.2

Ratio

20
15
10
ratio

Ratio
5 5.65
0 1.34 -0.08 0.11 1.13

-5 2002 2003 2004 2005 2006

year
34

2.6.2 Proprietary Ratio:

TABLE NO.5.2.3
(Amount in Rs)

Current
Current Assets In
Year Liabilities In Ratio
Rs.
Rs.
2002 491110664.6 814595600.1 0.60
2003 574397070.6 923691146.8 0.62
2004 514113998.3 811087799.7 0.63
2005 355300751.7 849532386.6 0.41
2006 316849141.6 974358742.3 0.33
Sources : Secondary data.

INFERENCE :
The company has maintained the proprietary ratio around 0.6 for the first three
years was good but in the next two years it continuously falls. This should be stopped
by the company and has to maintain the level of ratio. Keeping moderately an
optimum level ratio is to maintaining between total assets and proprietary funds.
35

CHART – 5.2.3

Ratio

5
4
3
ratio

Ratio
2
1
0.6 0.62 0.63 0.41 0.33
0
2002 2003 2004 2005 2006
year
36

2.7 PROFITABILITY RATIOS

5.3.1 Net profit Ratio :

TABLE NO.5.3.1

(Amount in Rs)

Average
Net profit/loss
capital
Year after tax +interst Ratio
employed In
In Rs.
Rs.
2002 187783624 1145881816 16
2003 29688931 959750279 3
2004 (-)94251312 803244151 (-)12
2005 (-)97637775 833808706 (-)12
2006 8275640 838237987 1

Sources : Secondary data.


37

INFERENCE :
While analyzing the above ratio it is evident that the net profit ratio is not stable.
Net profit ratio of the company is positive in the first two years and in the last year. In the
year 2004 and 2005 the company has attained loss. Therefore the company has to take
necessary steps to increase sales and to reduce the cost of sale. So that in future the loss can
be prevented.

CHART – 5.3.1

Ratio
16
13
8
3 3
ratio

1 Ratio
-2
2002 2003 2004 2005 2006
-7
-12 -12 -12
year
38

5.3.2 Return on Assets:

TABLE NO. 5.3.2


(Amount in Rs)

Net profit/loss after Average Total


Year Ratio
Tax x Interest Rs. Assets Rs.
2002 228199732.5 714978981.13 32
2003 116089380.6 869143373.5 13
2004 (-)6673911.55 867389473.3 (-)0.76
2005 12068511.51 830310093.2 1.45
2006 73403167.32 911945564.5 8

SOURCES : Secondary data.


39

INFERENCE :
Form the above table it is evident that the return on assets is low in the year
2004 and 2005. In the year 2006 it has been raised. The sales of the company are at the
low level. Utilization of the resources has to be done in proper way. The management
should keep overall target on reducing inventory and in increasing sales.

CHART – 5.3.2

Ratio

29.3
24.3
19.3
14.3 Ratio
9.3
4.3
-0.7
2002 2003 2004 2005 2006
40

5.3.3 Return on capital Employed :

TABLE NO.5.3.3
(Amount in Rs)

Net profit/loss
Average Total
Year after Tax Interest Ratio
Assets Rs.
Rs.
2002 228199732 375099995 61
2003 116089380 634732724 18
2004 (-)6673911 659651972 (-)1
2005 12068511 527215093 2.3
2006 734031673 618547068 12

Sources : Secondary data.


41

INFERENCE :

The above computation clearly shows the declining of the return


on capital employed. The ratio will in the poor in the other years. This happens
due to the increase and decrease of the profit of the company. It is the time the
company has to take step over the increase of sales.

CHART – 5.3.3

Ratio

59
49
39
ratio

29 Ratio
19
9
-1
2002 2003 2004 2005 2006
year
42

5.3.4 Debtors turnover ratio:

TABLE NO.5.3.4

(Amount in Rs)

Average Collection
Nets credit Sales
Year Debtors in Ratio In days
in Rs.P
Rs.Ps
2002 1145881816.30 258806764.7 4.43 82
2003 656750279.98 33507195 1.96 186
2004 803244151.17 293844324.1 2.73 133
2005 833808706.19 230590010.5 3.61 101
2006 838237987.24 322130167.1 2.60 140
Sources :Secondary data
Collection period = [365/Ratio] in days.
43

INFERENCE :
The Debtors Turnover ratio is at low level in all year. This is due to the less
collection from debtors. The sales are at the low level and the management should take
necessary steps to tighten the collection of debts and can fix a credit limit to overcome
the barrier.

CHART -5.3.4

0
2002 2003 2004 2005 2006
44

5.4 OTHER RATIOS

5.4.1 Fixed Assets Ratio

TABLE NO.5.4.1

(Amount in Rs)
Long-term
Year Fixed Assets Rs Ratio
funds Rs
2002 211370511.20 71517981.79 2.96
2003 336194032.59 132439731.40 2.54
2004 342683634.55 98353145.53 3.48
2005 34503475.63 86662292.00 3.98
2006 328034966.69 478281951.5 0.69
SOURCES :Secondary data.
45

INFERENCE :
Expect the final year all other years the company had effectively
managed the fixed assets ratio in a manner. Thus the management can take step on
keeping the ratio good.

CHAPTER - VI
FINDINGS

 The short-term solvency of the company as disclosed by the liquidity


ratios is at satisfactory level.
 The current ratio which is considered as ideal at 2 was 1.24 in 2005. it
increased to 3.60 in 2006.
 Similarly the quick ratio which is considered ideal at I has improved
from 0.65 in 2005 to 2.60 in 2006.
 Thus both the ratios indicate that the company has sufficient liquid
funds.
 It appears from the above analyis that a major expansion programme
was undertaken in the year 2006 by rising long-term funds.
 The ideal debt equity ratio is 0.67. The actual ratio is much more than
this norm in the year 2006.
 The ideal interest converge ratio is 5 to 6 times. Here interest coverage
ratio has jumped from 0.11 in 2005 to 1.13 in 2006. Even though the
coverage is increased. It is not at satisfactory level.
46

 Even though the sale of 2006 is less compared to sales of 2002 the sale
has been more than the year 2005. Therefore there is a minimum
percentage of net profit is earned. There is a negligible increase in
return on capital employed and return on shareholders equity ratio.

 Debtor’s turnover ratio has been decreased from 3.61 in 2005 to 2.60
in 2006. This decrease will make the collection period as very long
period. Which could shows that the company is not able to collect its
debtors on time.
 All the activity turnover ratios were declines in the year 2006.
 The trend of sales during the five years is not uniform. Because for the
first three year it decreases and increases in the next two year.
 Working capital turn over ratio decreases from 2005 to 2006. It
happens due to Sudden increase of current liabilities in 2005.
 Interest charges were very high in the year 2005. On comparing the
inventory to sales. It is noted that inventories are more than the level to
be so the company has to increase the sales and proportionaltly it has to
decrease the inventory.
47

CHAPTER - VII

SUGGESTIONS & RECOMMENDATION

 In general the working capital management fo TANCEM is at satisfactory


level. By improving the inventory turnover ratio the overall liquidity position of
the concern can further definitely be improved. Better management of current
assets namely raw materials. Spares and stores can be done.

 Working capital management is an integral part of the overall corporate


management. So it has to be efficiently maintained. The company’s actions
were right in asset maintaining but have to concentrate over sales. The debtor’s
collection is not in effective way. So step to be taken in collecting this.

 The high current ratio shows that the company is following a very conservative
policy regarding financing of its working capital requirements. As a matter of
fact a part of working capital may be diverted for meeting long-term
requirements of the company.
48

 The company can improve its position either by reducing its operating costs or
pushing up its turnover with least increase in operating expenses.

 Since the debtor’s collection period found to be too long the management can
try to collect the bills receivables actively. Then the company can fix the credit
limit over sales for recover the outstanding dues at the earliest.

 Assets turn over ratio found to be low can be increased by an effective


utilization of available resources.

CHAPTER - VIII

CONCLUSION

On the basis of the above study it can be said that the company’s financial
position at the end of the year 2006 was at satisfactory level. The company’s declining
profit levels needs to be worked at. The company has gone for some capital projects
and in the process incurred loans which is why projects have come down. TANCEM
cement has an enormous potential for growth in the future and there fore if the
company’s resources are focused in the right area.
49

CHAPTER – IX

LIMITATIONS OF THE STUDY

Due to confidential nature of information and non availability some data the
detailed study in cash management has not been carried out.

Since the position and performance of the company is done with the help of
ration analysis the statement of changes in financial position is omitted. All efforts
were taken to collect the data for analysis in the stipulated time.

Ratio analysis suffers from certain limitations. They are discussed below.
• Inadequacy of standards.
• Ratios alone are not adequate.
• Difficulty in Comparison.
• Problems of price level changes.
• Window dressing.
50

CHAPTER - X

SCOPE OF THE STUDY

1. To analyze and interpret the relevant data of the company in a balanced way by ratio
analysis.
2. To do the study in a logical and systematic way.
3. To make the study as reliable in nature.
4. To provide a valuable suggestions and recommendations.
5 .To the company on the basis of analysis & interpretation
51

CHAPTER - XI

ANNEXURE

TAMIL NADU CEMENTS CORPORTATION LIMITED ARIYALUR PROFIT AND LOSS


ACCONUT FOR THE YEAR ENDING MARCH 2002 - 2006.

Particulars 31.03.02 31.03.03 31.03.04 31.03.05 31.03.06


Income Rs Rs Rs Rs Rs
Sale of products 1145881816 959750279 803244151 833808706 838237987
Other income 4059696 8616279 4013651 3413315 3189303
0.00 0 0 0 0
0 0 0 0
Adjustment for
unrealized profit
increase/decrease in -987228.32 11329530 1198873 2485754110 39722352
finished and
process stock
Total 1148954224 979696090 806058929 862076132 801704937
52

Expenditure
Raw Materials 132432486 88753956 94817492 108662896 103739357
Purchase of Cement 0.00 0 0 0 0
Salaries. Wages &
89410328 101190909 109112963 112364023 111872115
related costs
Stores. Spares &
30809655 37406590 36570187 29225606 33970877
consumables
Power and Fuel 502911521 514771975 431594732 466460424 358859835
Repairs and
10681403 13913862 11855382 8853074 6323939
maintenance
Other
manufacturing 0.00 0 0 0 0
expense
Packing charges 47497411 37942553 48838725 47045248 40062514
Selling expense 8271943 4896101 24283168 21311296 11631100
Other expenses 57190734 52184859 39272618 38408458 43681078
Interest & Financial
40416108 86400449 87577401 109706284 65127527
charges
Depreciation 10292280 12314283 16101528 13706809 17339943
Deferred Revenue
0 236117 286040 369781 821007
expenses written off
Provision for Bad
0 0 0 0 0
and doubtful debts

Provision of
0 0 0 0 0
doubtful advance

Bad debts written


28731612 0 0 0 0
off
Extra-ordinary item
2525174 0 0 0 0
salary arrears
Total 9611706559 950007159 90031024 959713907 793429297
Minimum Alternate
0 0 0 0 0
Tax
Net Profit / Loss (-) 187783624 29688931 -94251312 -97637775 8275640
Less : Prior year -3821523 -2233740 -24901319 54936 804224
53

adjustment (Net
Profit / Loss (-) for -
183962100 27454990 -97582838 9079865
the year 1191152631
ADD:Transfer from
Investment all 0 0 700005 0 0
reserve
Total 183962100 27454990 -118452626 -97582838 9079865
Less: Proposed
0 0 0 0 0
Dividend
Add/Less Profit /
Loss brought from 519682514 721008039 7484463030 658478175 560895336
last year
Balance carried
over to Reserve & 73644615 748463030 630010403 560895336 569975201
Surplus
54

TAMIL NADU CEMENTS CORPORATION LIMITED ARIYALUR.


BALANCE SHEET AS AT 31ST MARCH 2002 TO MARCH 2006.

IOG -259065152 -203233736 -144364177 -205594584 -253126060

Sources of funds
1. Share holders
funds
a)Share capital 0 0 0 0 0
b)Share deposit 0 0 0 0 0
c) Reserves & 750175816 777630807 658478175 560895336 569975201
Surplus
2. Loan Funds
a) Secured 71517981 132439731 98353145 86662292 79484502
b)Unsecured 398797448

Total 562628646 706836802 612467143 441963043 795131093

Application of
Funds
1. Fixed Assets
Gross Block 499272773 600242403 618362155 677188286 681990180
Less:
Depreciation 312883865 323197536 340100912 360832061 381595464

Net Block 186386908 277044866 278262243 316356225 300394715


55

Capital Work in 24983603 59149163 64421391 28697250 27640251


progress
211370511 336194032 342683634 345053475 328034966
2.Ivestment

3. Net current
Assets, current
assets, loan &
advances.
a)Inventor 118267088 117711286 115860731 148568971 94813289
b)Sundry debtors 32029892 346113697 241574950 219605070 424655263
c)Cash & Bank
Balance 70361499 28945339 20973205 45340548 41680219
d)Other current
assets 1561589 2361723 6092946 3803270 4328242
e)Loans &
Advances 88750583 92614180 83321341 86258502 80131585

602970653 587446227 467823175 506546364 645608601

Less: Current
Liabilities and
provision. 251966953 16854344 198620656 407569342 179227649
4.Miscellaneous
Expenditures
(To the extent
not written 254435 50887 580990 932546 715174
off/adjusted)
5.Profit & Loss
Account
Less: General
reserve per
56

contra.

Total 562628646
706836802
441963043
612467143 795131093
57

TAMIL NADU CEMENTS CORPORATION LIMITED ARIYALUR WORKS


CONSOLIDATION COST STATEMENT (ACTUALS 2001-2002)

Rs. CPT
Limestone -65292747 125
Gypsum 13437289 24
Fly Ash/Slag 15504064 1
Purchased Clinker 38194362 93
Sub Total 132428462 245
Factory Supplies
Spares 20959034 39
Oil and Lubricants 0 0
Iron and Steel 0 0
General Stores 0 0
Steel Castings 0 0
Grinding Media 0 0
Fire Bricks 0 0
Sub Total 20959034 39
Coal 251327149 470
Electricity 251584371 467
Repairs &Maintenance 8653983 16
Packing charges 5499099 99
Sub Total 56596404 1053
Total Variable cost 719352101 1338
Fixed Expenses
Wages and Salaries 59038464 115
Depreciation 10292280 19
Interest 40416108 75
Factory Overheads 13096286 24
Administration Overheads 37382403 69
Selling Overheads 50024668 92
Sub Total 210250211 396
Total 929602313 1734
Adjustment for OB & DB 1298787 5
Cost for Clinker sold 0 0
58

Total Cost of Sales 930901101 1729


Sales Realisation 1145881816 2129
Other Income 4059696 7
Profit 219040411 406
Less : Extra Item 31256786 58
Net Profit 187783624 348
Add:Appy 0 0
Profit 187783624 0

TAMIL NADU CEMENTS CORPORATION LIMITED ARIYALUR WORKS


CONSOLIDATION COST STATEMENT (ACTUALS 2002-2003)

Rs. CPT
Limestone 65556176 132
Gypsum 1334224 27
Fly Ash/Slag 8828550 3
Purchased Clinker 1885975 18
Sub Total 89612927 181
Factory Supplies
59

Spares 37406390 76
Oil and Lubricants 0 0
Iron and Steel 0 0
General Stores 0 0
Steel Castings 0 0
Grinding Media 0 0
Fire Bricks 0 0
Sub Total 37406390 76
Coal 250371371 513
Electricity 252345982 516
Repairs &Maintenance 13751377 27
Packing charges 44259203 89
Sub Total 560727934 1147
Total Variable cost 687747252 1405
Fixed Expenses
Wages and Salaries 64486693 136
Depreciation 12314283 25
Interest 86399929 178
Factory Overheads 25745752 53
Administration Overheads 37565423 77
Selling Overheads 35576796 73
Sub Total 262088878 544
Total 949836131 1949
Adjustment for OB & DB -11159023 -3
Cost for Clinker sold 0 0
Total Cost of Sales 938677107
Sales Realisation 962613627 1996
Other Income 5752411 11
Profit 2968893 61
Less : Extra Item 0 0
Net Profit 29688931
Add:Appy
Profit
60

TAMIL NADU CEMENTS CORPORATION LIMITED ARIYALUR WORKS


CONSOLIDATION COST STATEMENT (ACTUALS 2003-2004)

Rs. CPT
Limestone
Gypsum 62397921 131
Fly Ash/Slag 12394550 27
Purchased Clinker 20025021 44
Sub Total 94817492 204
Factory Supplies
Spares 33999467 75
Oil and Lubricants 0 0
Iron and Steel 0 0
General Stores 0 0
Steel Castings 0 0
Grinding Media 0 0
Fire Bricks 0 0
Sub Total 33999467 75
Coal 189420454 418
Electricity 224364995 493
Repairs &Maintenance 16056425 35
Packing charges 48838725 106
Sub Total 478680601 1054
Total Variable cost 607497561 1334
Fixed Expenses
Wages and Salaries 64426813 142
Depreciation 16101528 36
61

Interest 87577401 194


Factory Overheads 23377764 51
Administration Overheads 48208733 107
Selling Overheads 54568103 121
Sub Total 294260345 653
Total 901757907 1987
Adjustment for OB & DB 1198873 5
Total Cost of Sales 901675229
Sales Realisation 803244151 1775
Net Profit -98431188 -208
Add: Other Income 4013651
Profit On Cement / Others -94417536
Cost for Clinker Sold 1281441
Sales Realization on Clinker 1447665
Profit on Sales Clinker 166224
Profit -94251312 0

TAMIL NADU CEMENTS CORPORATION LIMITED ARIYALUR WORKS


CONSOLIDATION COST STATEMENT (ACTUALS 2004-2005)
62

Rs. CPT
Limestone
Gypsum 68787653 145
Fly Ash/Slag 13115762 28
Purchased Clinker 26759480 58
Sub Total 108662896 232
Factory Supplies
Spares 3898035 8
Oil and Lubricants 1655800 3
Iron and Steel 1059129 2
General Stores 11586100 24
Steel Castings 1241306 2
Grinding Media 4190116 8
Fire Bricks 2345274 4
Sub Total 25975762 54
Coal 204371628 421
Electricity 247120649 518
Repairs &Maintenance 15746541 32
Packing charges 54644944 118
Sub Total 521883764 1090
Total Variable cost 656522423 1377
Fixed Expenses
Wages and Salaries 75921036 160
Depreciation 16725171 36
Interest 109706287 241
Factory Overheads 19265300 42
Administration Overheads 39066451 86
Selling Overheads 39832052 87
Sub Total 300526304 654
Total 957048728 2032
Adjustment for OB & DB -24854110 -3.57
Total Cost of Sales 917659304 2028
Sales Realisation 819772685 1812
Net Profit -97886618 -208
Add: Other Income 3401459 7
Profit On Cement / Others -94485159
Cost for Clinker Sold 14535313
Sales Realization on Clinker 14036020
Profit on Sales Clinker -499293
Profit -94984452 0
63

TAMIL NADU CEMENTS CORPORATION LIMITED ARIYALUR WORKS


CONSOLIDATION COST STATEMENT (ACTUALS 2005-2006)

Rs. CPT
Limestone 63238194 159
Gypsum 9342602 22
Fly Ash/Slag 31158560 75
Purchased Clinker 0 0
Sub Total 103739357 257
Factory Supplies
Spares 15939244 38
Oil and Lubricants 3507225 8
Iron and Steel 1023670 2
General Stores 3648035 8
Steel Castings 0 0
Grinding Media
6602386 16
Fire Bricks 895325 2
Sub Total 31615887 76
Coal 145981571 356
Electricity 198806221 484
Repairs &Maintenance 15860370 38
Packing charges 47293322 110
64

Sub Total 407941485 990


Total Variable cost 543296730 1325
Fixed Expenses
Wages and Salaries 67436176 164
Depreciation 16795286 40
Interest 65127527 154
Factory Overheads 15764956 37
Administration Overheads 46995625 111
Selling Overheads 38012995 90
Sub Total 25013256 598
Total 793429297 1923
Adjustment for OB & DB 39722352 2
Total Cost of Sales 815556066 1925
Sales Realisation 821066784 1938
Net Profit 5510717 20
Add: Other Income 3189803
Profit On Cement / Others 8700020
Cost for Clinker Sold 17595584
Sales Realization on Clinker -17171203
Profit on Sales Clinker 379844 0
Profit 9079864 0
65

BIBILIOGRAPHY

BOOKS:

1. M.Y.KHAN & P.K.JAIN. Financial Management.4th editionTataMCGrawHill.New


Delhi.
2. RAMACHANDRAN & SRINIVASAN Management Accounting.S.CHAND &
COMPANY LTD. 1st edition 2004 New Delhi.
3. www.tancem.com
REPORTS
4. AUDITED REPORTS OF TANCEM.
.

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