CHAPTER-1

INTRODUCTION TO TOPIC

INTRODUCTION

Meaning of Financial Analysis

The first task of financial analysis is to select the information relevant to the decision under

consideration to the total information contained in the financial statement. The second step is to

arrange the information in a way to highlight significant relationship. The final step is

interpretation and drawing of inference and conclusions. Financial statement is the process of

selection, relation and evaluation.

Features of Financial Analysis

To present a complex data contained in the financial statement in simple and

understandable form.

To classify the items contained in the financial statement inconvenient and rational

groups.

To make comparison between various groups to draw various

conclusions.

Purpose of Analysis of financial statements

To know the earning capacity or profitability.

To know the solvency.

To know the financial strengths.

To know the capability of payment of interest & dividends.

To make comparative study with other firms.

To know the trend of business.

To know the efficiency of mgt.

To provide useful information to mgt

Procedure of Financial Statement Analysis

The following procedure is adopted for the analysis and interpretation of financial

statements:-

The analyst should acquaint himself with principles and postulated of accounting. He

should know the plans and policies of the managements that he may be able to find out

whether these plans are properly executed or not.

The extent of analysis should be determined so that the sphere of work may be decided.

If the aim is find out. Earning capacity of the enterprise then analysis of income statement

will be undertaken. On the other hand, if financial position is to be studied then balance

sheet analysis will be necessary.

The financial data be given in statement should be recognized and rearranged. It will

involve the grouping similar data under same heads. Breaking down of individual

components of statement according to nature. The data is reduced to a standard form. A

relationship is established among financial statements with the help of tools & techniques

of analysis such as ratios, trends, common size, fund flow etc.

The information is interpreted in a simple and understandable way. The significance and

utility of financial data is explained for help indecision making.

The conclusions drawn from interpretation are presented to the management in the form

of reports.

Analyzing financial statements involves evaluating three characteristics of a company: its

liquidity, its profitability, and its insolvency. A short-term creditor, such as a bank, is primarily

interested in the ability of the borrower to pay obligations when they come due. The liquidity of

the borrower is extremely important in evaluating the safety of a loan. A long-term creditor, such

as a bondholder, however, looks to profitability and solvency measures that indicate the

company’s ability to survive over a long period of time. Long-term creditors consider such

measures as the amount of debt in the company’s capital structure and its ability to meet interest

payments. Similarly, stockholders are interested in the profitability and solvency of the company.

They want to assess the likelihood of dividends and the growth potential of the stock.

Comparison can be made on a number of different bases.

Following are the three illustrations:

1. Intra-company basis.

This basis compares an item or financial relationship within a company in the current year with

the same item or relationship in one or more prior years. For example, Sears, Roebuck and Co.

can compare its cash balance at the end of the current year with last year’s balance to find the

amount of the increase or decrease. Likewise, Sears can compare the percentage of cash to

current assets at the end of the current year with the percentage in one or more prior years. Intra-

company comparisons are useful in detecting changes in financial relationships and significant

trends.

2. Industry averages.

This basis compares an item or financial relationship of a company with industry averages (or

norms) published by financial ratings organizations such as Dun & Bradstreet, Moody’s and

Standard & Poor’s. For example, Sears’s net income can be compared with the average net

income of all companies in the retail chain-store industry. Comparisons with industry averages

provide information as to a company’s relative performance within the industry.

3. Intercompany basis.

This basis compares an item or financial relationship of one company with the same item or

relationship in one or more competing companies. The comparisons are made on the basis of the

published financial statements of the individual companies. For example, Sears’s total sales for

the year can be compared with the total sales of its major competitors such as Kmart and Wal-

Mart. Intercompany comparisons are useful in determining a company’s competitive position.

Tools of Financial Statement Analysis

Various tools are used to evaluate the significance of financial statement data. Three commonly

used tools are these:

Ratio Analysis

Funds Flow Analysis

Cash Flow Analysis

Ratio Analysis:

Fundamental Analysis has a very broad scope. One aspect looks at the general (qualitative)

factors of a company. The other side considers tangible and measurable factors (quantitative).

This means crunching and analyzing numbers from the financial statements. If used in

conjunction with other methods, quantitative analysis can produce excellent results.

Ratio analysis isn't just comparing different numbers from the balance sheet, income statement,

and cash flow statement. It's comparing the number against previous years, other companies, the

industry, or even the economy in general. Ratios look at the relationships between individual

values and relate them to how a company has performed in the past, and might perform in the

future.

Meaning of Ratio:

A ratio is one figure express in terms of another figure. It is a mathematical yardstick that

measures the relationship two figures, which are related to each other and mutually

interdependent. Ratio is express by dividing one figure by the other related figure. Thus a ratio is

an expression relating one number to another. It is simply the quotient of two numbers. It can be

expressed as a fraction or as a decimal or as a pure ratio or in absolute figures as “so many

times”. As accounting ratio is an expression relating two figures or accounts or two sets of

account heads or group contain in the financial statements.

Meaning of Ratio Analysis:

Ratio analysis is the method or process by which the relationship of items or group of items in

the financial statement are computed, determined and presented.Ratio analysis is an attempt to

derive quantitative measure or guides concerning the financial health and profitability of

business enterprises. Ratio analysis can be used both in trend and static analysis. There are

several ratios at the disposal of an analyst but their group of ratio he would prefer depends on the

purpose and the objective of analysis.

While a detailed explanation of ratio analysis is beyond the scope of this section, we will focus

on a technique, which is easy to use. It can provide you with a valuable investment analysis tool.

This technique is called cross-sectional analysis. Cross-sectional analysis compares financial

ratios of several companies from the same industry. Ratio analysis can provide valuable

information about a company's financial health. A financial ratio measures a company's

performance in a specific area. For example, you could use a ratio of a company's debt to its

equity to measure a company's leverage. By comparing the leverage ratios of two companies,

you can determine which company uses greater debt in the conduct of its business. A company

whose leverage ratio is higher than a competitor's has more debt per equity. You can use this

information to make a judgment as to which company is a better investment risk.

However, you must be careful not to place too much importance on one ratio. You obtain a better

indication of the direction in which a company is moving when several ratios are taken as a

group.

Objective of Ratios:

Ratios are worked out to analyze the following aspects of business organization-

A) Solvency-

1) Long term

2) Short term

3) Immediate

B) Stability

C) Profitability

D) Operational efficiency

E) Credit standing

F) Structural analysis

G) Effective utilization of resources

H) Leverage or external financing

Forms of Ratio:

Since a ratio is a mathematical relationship between two or more variables / accounting figures,

such relationship can be expressed in different ways as follows –

A] As a pure ratio:

For example the equity share capital of a company is Rs. 20, 00,000 & the preference share

capital is Rs. 5,00,000, the ratio of equity share capital to preference share capital is

20,00,000: 5,00,000 = 4:1.

B] As a rate of times:

In the above case the equity share capital may also be described as 4 times that of preference

share capital. Similarly, the cash sales of a firm are Rs. 12,00,000 & credit sales are Rs.

30,00,000. So the ratio of credit sales to cash sales can be described as

2.5 [30,00,000/12,00,000] = 2.5 times are the credit sales that of cash sales.

C] As a percentage:

In such a case, one item may be expressed as a percentage of some other items. For example, net

sales of the firm are Rs.50,00,000 & the amount of the gross profit is Rs. 10,00,000, then the

gross profit may be described as

20% of sales [ 10,00,000/50,00,000]

Steps in Ratio Analysis

The ratio analysis requires two steps as follows:

1] Calculation of ratio

2] Comparing the ratio with some predetermined standards. The standard ratio may be the past

ratio of the same firm or industry’s average ratio or a projected ratio or the ratio of the most

successful firm in the industry. In interpreting the ratio of a particular firm, the analyst cannot

reach any fruitful conclusion unless the calculated ratio is compared with some predetermined

standard. The importance of a correct standard is oblivious as the conclusion is going to be based

on the standard itself.

Types of comparisons

The ratio can be compared in three different ways –

1] Cross section analysis:

One of the way of comparing the ratio or ratios of the firm is to compare them with the ratio or

ratios of some other selected firm in the same industry at the same point of time. So it involves

the comparison of two or more firm’s financial ratio at the same point of time. The cross section

analysis helps the analyst to find out as to how a particular firm has performed in relation to its

competitors. The firm’s performance may be compared with the performance of the leader in the

industry in order to uncover the major operational inefficiencies. The cross section analysis is

easy to be undertaken as most of the data required for this may be available in financial

statement of the firm.

2] Time series analysis:

The analysis is called Time series analysis when the performance of a firm is evaluated over a

period of time. By comparing the present performance of a firm with the performance of the

same firm over the last few years, an assessment can be made about the trend in progress of the

firm, about the direction of progress of the firm. Time series analysis helps to the firm to assess

whether the firm is approaching the long-term goals or not. The Time series analysis looks for

(1) Important trends in financial performance

(2) Shift in trend over the years

(3) Significant deviation if any from the other set of data\

3] Combined analysis:

If the cross section & time analysis, both are combined together to study the behavior & pattern

of ratio, then meaningful & comprehensive evaluation of the performance of the firm can

definitely be made. A trend of ratio of a firm compared with the trend of the ratio of the standard

firm can give good results. For example, the ratio of operating expenses to net sales for firm may

be higher than the industry average however, over the years it has been declining for the firm,

whereas the industry average has not shown any significant changes.

The combined analysis as depicted in the above diagram, which clearly shows that the ratio of

the firm is above the industry average, but it is decreasing over the years & is approaching the

industry average.

Pre-Requisites to Ratio Analysis:

In order to use the ratio analysis as device to make purposeful conclusions, there are certain pre-

requisites, which must be taken care of. It may be noted that these prerequisites are not

conditions for calculations for meaningful conclusions. The accounting figures are inactive in

them & can be used for any ratio but meaningful & correct interpretation & conclusion can be

arrived at only if the following points are well considered.

1) The dates of different financial statements from where data is taken must be same.

2) If possible, only audited financial statements should be considered, otherwise there must

be sufficient evidence that the data is correct.

3) Accounting policies followed by different firms must be same in case of cross section

analysis otherwise the results of the ratio analysis would be distorted.

4) One ratio may not throw light on any performance of the firm. Therefore, a group of

ratios must be preferred. This will be conductive to counter checks.

5) Last but not least, the analyst must find out that the two figures being used to calculate a

ratio must be related to each other, otherwise there is no purpose of calculating a ratio.

Classification of Ratio:

CLASSIFICATION OF RATIO

BASED ON FINANCIAL BASED ON FUNCTION BASED ON USER

STATEMENT

1] BALANCE SHEET 1] LIQUIDITY RATIO 1] RATIOS FOR

RATIO 2] LEVERAGE RATIO SHORT TERM

2] REVENUE 3] ACTIVITY RATIO CREDITORS

STATEMENT 4] PROFITABILITY 2] RATIO FOR

RATIO RATIO SHAREHOLDER

3] COMPOSITE 5] COVERAGE 3] RATIOS FOR

RATIO RATIO MANAGEMENT

4] RATIO FOR LONG TERMCREDITORS

Based on Financial Statement

Accounting ratios express the relationship between figures taken from financial statements.

Figures may be taken from Balance Sheet, P& P A/C, or both. One-way of classification of ratios

is based upon the sources from which are taken.

1] Balance sheet ratio:

If the ratios are based on the figures of balance sheet, they are called Balance Sheet Ratios.

E.g.Ratio of current assets to current liabilities or Debt to equity ratio. While calculating these

ratios, there is no need to refer to the Revenue statement. These ratios study the relationship

between the assets & the liabilities, of the concern. These ratios help to judge the liquidity,

solvency & capital structure of the concern. Balance sheet ratios are Current ratio, Liquid ratio,

and Proprietary ratio, Capital gearing ratio, Debt equity ratio, and Stock working capital ratio.

2] Revenue ratio:

Ratio based on the figures from the revenue statement is called revenue statement ratios. These

ratios study the relationship between the profitability & the sales of the concern. Revenue ratios

are Gross profit ratio, Operating ratio, Expense ratio, Net profit ratio, Net operating profit ratio,

Stock turnover ratio.

3] Composite ratio:

These ratios indicate the relationship between two items, of which one is found in the balance

sheet & other in revenue statement.

There are two types of composite ratios-

a) Some composite ratios study the relationship between the profits & the investments of the

concern. E.g. return on capital employed, return on proprietors fund, return on equity

capital etc.

b) Other composite ratios e.g. debtors turnover ratios, creditors turnover ratios, dividend

payout ratios, & debt service ratios

Based on Function:

Accounting ratios can also be classified according to their functions in to liquidity ratios,

leverage ratios, activity ratios, profitability ratios & turnover ratios.

1] Liquidity ratios:

It shows the relationship between the current assets & current liabilities of the concern e.g. liquid

ratios & current ratios.

2] Leverage ratios:

It shows the relationship between proprietors funds & debts used in financing the assets of the

concern e.g. capital gearing ratios, debt equity ratios, & Proprietary ratios.

3] Activity ratios:

It shows relationship between the sales & the assets. It is also known as Turnover ratios &

productivity ratios e.g. stock turnover ratios, debtors’ turnover ratios.

4] Profitability ratios:

a) It shows the relationship between profits & sales e.g. operating ratios, gross profit ratios,

operating net profit ratios, expenses ratios

b) It shows the relationship between profit & investment e.g. return on investment, return on

equity capital.

5] Coverage ratios:

It shows the relationship between the profit on the one hand & the claims of the outsiders to be

paid out of such profit e.g. dividend payout ratios & debt service ratios.

Based on User:

1] Ratios for short-term creditors:

Current ratios, liquid ratios, stock working capital ratios

2] Ratios for the shareholders:

Return on proprietors fund, return on equity capital

3] Ratios for management:

Return on capital employed, turnover ratios, operating ratios, expenses ratios

4] Ratios for long-term creditors:

Debt equity ratios, return on capital employed, proprietor ratios.

Liquidity Ratio: -

Liquidity refers to the ability of a firm to meet its short-term (usually up to 1 year) obligations.

The ratios, which indicate the liquidity of a company, are Current ratio, Quick/Acid-Test ratio,

and Cash ratio. These ratios are discussed below

Current Ratio

Meaning:

This ratio compares the current assets with the current liabilities. It is also known as ‘working

capital ratio’ or ‘solvency ratio’. It is expressed in the form of pure ratio.

E.g. 2:1

Formula:

Current assets

Current ratio =

Current liabilities

The current assets of a firm represents those assets which can be, in the ordinary course of

business, converted into cash within a short period time, normally not exceeding one year. The

current liabilities defined as liabilities which are short term maturing obligations to be met, as

originally contemplated, with in a year.

Current ratio (CR) is the ratio of total current assets (CA) to total current liabilities (CL). Current

assets include cash and bank balances; inventory of raw materials, semi-finished and finished

goods; marketable securities; debtors (net of provision for bad and doubtful debts); bills

receivable; and prepaid expenses. Current liabilities consist of trade creditors, bills payable, bank

credit, and provision for taxation, dividends payable and outstanding expenses. This ratio

measures the liquidity of the current assets and the ability of a company to meet its short-term

debt obligation.

CR measures the ability of the company to meet its CL, i.e., CA gets converted into cash in the

operating cycle of the firm and provides the funds needed to pay for CL. The higher the current

ratio, the greater the short-term solvency. This compares assets, which will become liquid within

approximately twelve months with liabilities, which will be due for payment in the same period

and is intended to indicate whether there are sufficient short-term assets to meet the short- term

liabilities. Recommended current ratio is 2: 1. Any ratio below indicates that the entity may face

liquidity problem but also Ratio over 2: 1 as above indicates over trading, that is the entity is

under utilizing its current assets.

Liquid Ratio:

Meaning:

Liquid ratio is also known as acid test ratio or quick ratio. Liquid ratio compares the quick assets

with the quick liabilities. It is expressed in the form of pure ratio. E.g. 1:1.

The term quick assets refer to current assets, which can be converted into, cash immediately or at

a short notice without diminution of value.

Formula:

Quick assets

Liquid ratio = Quick liabilities

Quick Ratio (QR) is the ratio between quick current assets (QA) and CL. QA refers to those

current assets that can be converted into cash immediately without any value strength. QA

includes cash and bank balances, short-term marketable securities, and sundry debtors. Inventory

and prepaid expenses are excluded since these cannot be turned into cash as and when required.

QR indicates the extent to which a company can pay its current liabilities without relying on the

sale of inventory. This is a fairly stringent measure of liquidity because it is based on those

current assets, which are highly liquid. Inventories are excluded from the numerator of this ratio

because they are deemed the least liquid component of current assets. Generally, a quick ratio of

1:1 is considered good. One drawback of the quick ratio is that it ignores the timing of receipts

and payments.

Cash Ratio:

Meaning:

This is also called as super quick ratio. This ratio considers only the absolute liquidity available

with the firm.

Formula:

Cash + Bank + Marketable securities

Cash ratio =

Total current liabilities

Since cash and bank balances and short term marketable securities are the most liquid assets of a

firm, financial analysts look at the cash ratio. If the super liquid assets are too much in relation to

the current liabilities then it may affect the profitability of the firm.

Investment/ Shareholder

EARNING PER SHARE:-

Meaning:

Earnings per Share are calculated to find out overall profitability of the organization. Earnings

per Share represent earning of the company whether or not dividends are declared. If there is

only one class of shares, the earning per share are determined by dividing net profit by the

number of equity shares.

EPS measures the profits available to the equity shareholders on each share held.

Formula:

Net Profit after Tax

Earnings per share =

Number of equity share

The higher EPS will attract more investors to acquire shares in the company as it indicates that

the business is more profitable enough to pay the dividends in time. But remember not all profit

earned is going to be distributed as dividends the company also retains some profits for the

business

Dividend Per Share:-

Meaning:

DPS shows how much is paid as dividend to the shareholders on each share held.

Formula:

Dividend Paid to Ordinary Shareholders

Dividend per Share =

Number of Ordinary Shares

Dividend Payout Ratio:-

Meaning:

Dividend Pay-out Ratio shows the relationship between the dividends paid to equity shareholders

out of the profit available to the equity shareholders.

Formula:

Dividend per share

Dividend Payout ratio = *100Earning per share

D/P ratio shows the percentage share of net profits after taxes and after preference dividend has

been paid to the preference equity holders.

Gearing

CAPITAL GEARING RATIO:-

Meaning:

Gearing means the process of increasing the equity shareholders return through the use of debt.

Equity shareholders earn more when the rate of the return on total capital is more than the rate of

interest on debts. This is also known as leverage or trading on equity. The Capital-gearing ratio

shows the relationship between two types of capital viz: - equity capital & preference capital &

long term borrowings. It is expressed as a pure ratio.

Formula:

Preference capital+ secured loan

Capital gearing ratio =

Equity capital & reserve & surplus

Capital gearing ratio indicates the proportion of debt & equity in the financing of assets of a

concern.

Profitability

These ratios help measure the profitability of a firm. A firm, which generates a substantial

amount of profits per rupee of sales, can comfortably meet its operating expenses and provide

more returns to its shareholders. The relationship between profit and sales is measured by

profitability ratios. There are two types of profitability ratios: Gross Profit Margin and Net Profit

Margin.

GROSS PROFIT RATIO:-

Meaning:

This ratio measures the relationship between gross profit and sales. It is defined as the excess of

the net sales over cost of goods sold or excess of revenue over cost. This ratio shows the profit

that remains after the manufacturing costs have been met. It measures the efficiency of

production as well as pricing. This ratio helps to judge how efficient the concern is I managing

its production, purchase, selling & inventory, how good its control is over the direct cost, how

productive the concern , how much amount is left to meet other expenses & earn net profit.

Gross profit

Gross profit ratio = * 100

Net sales

Net Profit Ratio:-

Meaning:

Net Profit ratio indicates the relationship between the net profit & the sales it is usually

expressed in the form of a percentage.

Formula:

NPAT

Net profit ratio = * 100

Net salesThis ratio shows the net earnings (to be distributed to both equity and preference shareholders) as

a percentage of net sales. It measures the overall efficiency of production, administration, selling,

financing, pricing and tax management. Jointly considered, the gross and net profit margin ratios

provide an understanding of the cost and profit structure of a firm.

Return on Capital Employed:-

Meaning:

The profitability of the firm can also be analyzed from the point of view of the total funds

employed in the firm. The term fund employed or the capital employed refers to the total

long-term source of funds. It means that the capital employed comprises of shareholder

funds plus long-term debts. Alternatively it can also be defined as fixed assets plus net

working capital.

Capital employed refers to the long-term funds invested by the creditors and the owners of a

firm. It is the sum of long-term liabilities and owner's equity. ROCE indicates the efficiency with

which the long-term funds of a firm are utilized.

Formula:

NPAT

Return on capital employed = *100

Capital employed

Financial

These ratios determine how quickly certain current assets can be converted into cash. They are

also called efficiency ratios or asset utilization ratios as they measure the efficiency of a firm in

managing assets. These ratios are based on the relationship between the level of activity

represented by sales or cost of goods sold and levels of investment in various assets. The

important turnover ratios are debtors turnover ratio, average collection period, inventory/stock

turnover ratio, fixed assets turnover ratio, and total assets turnover ratio. These are described

below:

DEBTORS TURNOVER RATIO (DTO)

Meaning:

DTO is calculated by dividing the net credit sales by average debtors outstanding during the

year. It measures the liquidity of a firm's debts. Net credit sales are the gross credit sales minus

returns, if any, from customers. Average debtors are the average of debtors at the beginning and

at the end of the year. This ratio shows how rapidly debts are collected.

The higher the DTO,the better it is for the organization.

Formula:

Credit sales

Debtors turnover ratio =

Average debtors

Inventory or Stock Turnover Ratio (ITR)

Meaning:

ITR refers to the number of times the inventory is sold and replaced during the accounting

period.

Formula:

Cost of Goods Sold

Stock Turnover Ratio =

Average stock

ITR reflects the efficiency of inventory management. The higher the ratio, the more efficient is

the management of inventories, and vice versa. However, a high inventory turnover may also

result from a low level of inventory, which may lead to frequent stock outs and loss of sales and

customer goodwill. For calculating ITR, the average of inventories at the beginning and the end

of the year is taken. In general, averages may be used when a flow figure (in this case, cost of

goods sold) is related to a stock figure (inventories).

Fixed AssetsTurnover (FAT)

The FAT ratio measures the net sales per rupee of investment in fixed assets.

Formula:

Net sales

Fixed assets turnover =

Net fixed assets

This ratio measures the efficiency with which fixed assets are employed. A high ratio indicates a

high degree of efficiency in asset utilization while a low ratio reflects an inefficient use of assets.

However, this ratio should be used with caution because when the fixed assets of a firm are old

and substantially depreciated, the fixed assets turnover ratio tends to be high (because the

denominator of the ratio is very low).

Proprietors Ratio:

Meaning:

Proprietary ratio is a test of financial & credit strength of the business. It relates shareholders

fund to total assets. This ratio determines the long term or ultimate solvency of the company.

In other words, Proprietary ratio determines as to what extent the owner’s interest & expectations

are fulfilled from the total investment made in the business operation.

Proprietary ratio compares the proprietor fund with total liabilities. It is usually expressed in the

form of percentage. Total assets also know it as net worth.

Formula:

Proprietary fund

Proprietary ratio = OR

Total fund

Shareholders fund

Proprietary ratio = Fixed assets + current liabilities

Stock Working Capital Ratio:

Meaning:

This ratio shows the relationship between the closing stock & the working capital. It helps to

judge the quantum of inventories in relation to the working capital of the business. The purpose

of this ratio is to show the extent to which working capital is blocked in inventories. The ratio

highlights the predominance of stocks in the current financial position of the company. It is

expressed as a percentage.

Formula:

Stock

Stock working capital ratio =

Working Capital

Stock working capital ratio is a liquidity ratio. It indicates the composition & quality of the

working capital. This ratio also helps to study the solvency of a concern. It is a qualitative test of

solvency. It shows the extent of funds blocked in stock. If investment in stock is higher it means

that the amount of liquid assets is lower.

Debt Equity Ratio:

Mening:

This ratio compares the long-term debts with shareholders fund. The relationship between

borrowed funds & owners capital is a popular measure of the long term financial solvency of a

firm. This relationship is shown by debt equity ratio. Alternatively, this ratio indicates the

relative proportion of debt & equity in financing the assets of the firm. It is usually expressed as

a pure ratio. E.g. 2:1

Formula:

Total long-term debt

Debt equity ratio = Total shareholders fund

Debt equity ratio is also called as leverage ratio. Leverage means the process of the increasing

the equity shareholders return through the use of debt. Leverage is also known as ‘gearing’ or

‘trading on equity’. Debt equity ratio shows the margin of safety for long-term creditors & the

balance between debt & equity.

Return on Proprietor Fund:

Meaning:

Return on proprietors fund is also known as ‘return on proprietor’s equity’ or ‘return on

shareholders’ investment’ or ‘investment ratio’. This ratio indicates the relationship between net

profits earned & total proprietor’s funds. Return on proprietors fund is a profitability ratio, which

the relationship between profit & investment by the proprietors in the concern. Its purpose is to

measure the rate of return on the total fund made available by the owners. This ratio helps to

judge how efficient the concern is in managing the owner’s fund at disposal. This ratio is of

practical importance to prospective investors & shareholders.

Formula:

NPAT

Return on proprietors fund = * 100

Proprietor’s fund

Creditors Turnover Ratio:

It is same as debtors turnover ratio. It shows the speed at which payments are made to the

supplier for purchase made from them. It is a relation between net credit purchase and average

creditors

Net credit purchase

Credit turnover ratio =

Average creditors

Months in a year

Average age of accounts payable =

Credit turnover ratio

Both the ratios indicate promptness in payment of creditor purchases. Higher creditors turnover

ratio or a lower credit period enjoyed signifies that the creditors are being paid promptly. It

enhances credit worthiness of the company. A very low ratio indicates that the company is not

taking full benefit of the credit period allowed by the creditors.

Importance of Ratio Analysis:

As a tool of financial management, ratios are of crucial significance. The importance of

ratio analysis lies in the fact that it presents facts on a comparative basis & enables the

drawing of interference regarding the performance of a firm. Ratio analysis is relevant in

assessing the performance of a firm in respect of the following aspects:

1] Liquidity position

2] Long-term solvency

3] Operating efficiency

4] Overall profitability

5] Inter firm comparison

6] Trend analysis.

1] Liquidity position: -

With the help of Ratio analysis conclusion can be drawn regarding the liquidity position of a

firm. The liquidity position of a firm would be satisfactory if it is able to meet its current

obligation when they become due. A firm can be said to have the ability to meet its short-term

liabilities if it has sufficient liquid funds to pay the interest on its short maturing debt usually

within a year as well as to repay the principal. This ability is reflected in the liquidity ratio of a

firm. The liquidity ratio is particularly useful in credit analysis by bank & other suppliers of short

term loans.

2] Long-term solvency: -

Ratio analysis is equally useful for assessing the long-term financial viability of a firm. This

respect of the financial position of a borrower is of concern to the long-term creditors, security

analyst & the present & potential owners of a business. The long-term solvency is measured by

the leverage/ capital structure & profitability ratio Ratio analysis s that focus on earning power &

operating efficiency.

Ratio analysis reveals the strength & weaknesses of a firm in this respect. The leverage ratios, for

instance, will indicate whether a firm has a reasonable proportion of various sources of finance

or if it is heavily loaded with debt in which case its solvency is exposed to serious strain.

Similarly the various profitability ratios would reveal whether or not the firm is able to offer

adequate return to its owners consistent with the risk involved.

3] Operating efficiency:

Yet another dimension of the useful of the ratio analysis, relevant from the viewpoint of

management, is that it throws light on the degree of efficiency in management & utilization of its

assets. The various activity ratios measure this kind of operational efficiency. In fact, the

solvency of a firm is, in the ultimate analysis, dependent upon the sales revenues generated by

the use of its assets- total as well as its components.

4] Overall profitability:

Unlike the outsides parties, which are interested in one aspect of the financial position of a firm,

the management is constantly concerned about overall profitability of the enterprise. That is, they

are concerned about the ability of the firm to meets its short term as well as long term obligations

to its creditors, to ensure a reasonable return to its owners & secure optimum utilization of the

assets of the firm. This is possible if an integrated view is taken & all the ratios are considered

together.

5] Inter firm comparison:

Ratio analysis not only throws light on the financial position of firm but also serves as a

stepping-stone to remedial measures. This is made possible due to inter firm comparison &

comparison with the industry averages. A single figure of a particular ratio is meaningless unless

it is related to some standard or norm. One of the popular techniques is to compare the ratios of a

firm with the industry average. It should be reasonably expected that the performance of a firm

should be in broad conformity with that of the industry to which it belongs. An inter firm

comparison would demonstrate the firms position vice-versa its competitors. If the results are at

variance either with the industry average or with those of the competitors, the firm can seek to

identify the probable reasons & in light, take remedial measures.

6] Trend analysis:

Finally, ratio analysis enables a firm to take the time dimension into account. In other words,

whether the financial position of a firm is improving or deteriorating over the years. This is

made possible by the use of trend analysis. The significance of the trend analysis of ratio lies in

the fact that the analysts can know the direction of movement, that is, whether the movement is

favourable or unfavourable. For example, the ratio may be low as compared to the norm but the

trend may be upward. On the other hand, though the present level may be satisfactory but the

trend may be a declining one.

Advantages of Ratio Analysis

Financial ratios are essentially concerned with the identification of significant accounting data

relationships, which give the decision-maker insights into the financial performance of a

company. The advantages of ratio analysis can be summarized as follows:

Ratios facilitate conducting trend analysis, which is important for decision making

and forecasting.

Ratio analysis helps in the assessment of the liquidity, operating efficiency,

profitability and solvency of a firm.

Ratio analysis provides a basis for both intra-firm as well as inter-firm comparisons.

The comparison of actual ratios with base year ratios or standard ratios helps the

management analyze the financial performance of the firm.

Limitations of Ratio Analysis

Ratio analysis has its limitations. These limitations are described below:

1] Information problems

Ratios require quantitative information for analysis but it is not decisive about analytical

output.

The figures in a set of accounts are likely to be at least several months out of date, and so

might not give a proper indication of the company’s current financial position.

Where historical cost convention is used, asset valuations in the balance sheet could be

misleading. Ratios based on this information will not be very useful for decision-making.

2] Comparison of performance over time

When comparing performance over time, there is need to consider the changes in price.

The movement in performance should be in line with the changes in price.

When comparing performance over time, there is need to consider the changes in

technology. The movement in performance should be in line with the changes in

technology.

Changes in accounting policy may affect the comparison of results between different

accounting years as misleading.

3] Inter-firm comparison

Companies may have different capital structures and to make comparison of performance

when one is all equity financed and another is a geared company it may not be a good

analysis.

Selective application of government incentives to various companies may also distort

intercompany comparison. Comparing the performance of two enterprises may be

misleading.

Inter-firm comparison may not be useful unless the firms compared are of the same size

and age, and employ similar production methods and accounting practices.

Even within a company, comparisons can be distorted by changes in the price level.

Ratios provide only quantitative information, not qualitative information.

Ratios are calculated on the basis of past financial statements. They do not indicate future

trends and they do not consider economic conditions.

Purpose of Ratio Analysis:

1] To identify aspects of a business’s performance to aid decision making

2] Quantitative process – may need to be supplemented by qualitative factors to get a complete

picture.

3] 5 main areas-

Liquidity – the ability of the firm to pay its way

Investment/shareholders – information to enable decisions to be made on the extent of

the risk and the earning potential of a business investment

Gearing – information on the relationship between the exposure of the business to loans

as opposed to share capital

Profitability – how effective the firm is at generating profits given sales and or its capital

assets

Financial – the rate at which the company sells its stock and the efficiency with which it

uses its assets

Role of Ratio Analysis:

It is true that the technique of ratio analysis is not a creative technique in the sense that it uses the

same figure & information, which is already appearing in the financial statement. At the same

time, it is true that what can be achieved by the technique of ratio analysis cannot be achieved by

the mere preparation of financial statement.

Ratio analysis helps to appraise the firm in terms of their profitability & efficiency of

performance, either individually or in relation to those of other firms in the same industry. The

process of this appraisal is not complete until the ratio so computed can be compared with

something, as the ratio all by them do not mean anything. This comparison may be in the form of

intra firm comparison, inter firm comparison or comparison with standard ratios. Thus proper

comparison of ratios may reveal where a firm is placed as compared with earlier period or in

comparison with the other firms in the same industry.

Ratio analysis is one of the best possible techniques available to the management to impart the

basic functions like planning & control. As the future is closely related to the immediate past,

ratio calculated on the basis of historical financial statements may be of good assistance to

predict the future. Ratio analysis also helps to locate & point out the various areas, which need

the management attention in order to improve the situation.

As the ratio analysis is concerned with all the aspect of a firms financial analysis i.e. liquidity,

solvency, activity, profitability & overall performance, it enables the interested persons to know

the financial & operational characteristics of an organisation & take the suitable decision.

Fund Flow Analysis

Fund may be interpreted in various ways as

(a) Cash,

(b) Total current assets,

(c) Net working capital,

(d) Net current assets.

For the purpose of fund flow statement the term means net working capital. The flow of fund

will occur in a business, when a transaction results in a change i.e., increase or decrease in the

amount of fund.

According to Robert Anthony the funds flow statement describes the sources from which

additional funds were derived and the uses to which these funds were put.

In short, it is a technical device designed to highlight the changes in the financial condition of a

business enterprise between two balance sheets.

Different names of Fund-Flow Statement

A Funds Statement

A statement of sources and uses of fund

A statement of sources and application of fund

Where got and where gone statement

Inflow and outflow of fund statement

Objectives of Fund Flow Statement

The main purposes of FFS are:]

To help to understand the changes in assets and asset sources which are not readily evident in

the income statement or financial statement.

To inform as to how the loans to the business have been used.

To point out the financial strengths and weaknesses of the business.

Format of Fund Flow Statement

Sources Applications

Fund from operation Fund lost in operations

Non-trading incomes Non-operating expenses

Issue of shares Redemption of redeemable preference share

Issue of debentures Redemption of debentures

Borrowing of loans Repayment of loans

Acceptance of deposits Repayment of deposits

Sale of fixed assets Purchase of fixed assets

Sale of investments (Long Term) Purchase of long term investments

Decrease in working capital Increase in working capital

Steps in Preparation of Fund Flow Statement.

1. Preparation of schedule changes in working capital (taking current items only).

2. Preparation of adjusted profit and loss account (to know fund from or fund lost in

operations).

3. Preparation of accounts for non-current items (Ascertain the hidden information).

Preparation of the fund flow statement.

Cash Flow Analysis

Cash is a life blood of business. It is an important tool of cash planning and control. A firm

receives cash from various sources like sales, debtors, sale of assets investments etc. Likewise,

the firm needs cash to make payment to salaries, rent dividend, interest etc.

Cash flow statement reveals that inflow and outflow of cash during a particular period. It is

prepared on the basis of historical data showing the inflow and outflow of cash.

Objectives of CFS

1. To show the causes of changes in cash balance between the balance sheet dates.

2. To show the actors contributing to the reduction of cash balance inspire of increasing of

profit or decreasing profit.

Uses of CFS

1. It explaining the reasons for low cash balance.

2. It shows the major sources and uses of cash.

3. It helps in short term financial decisions relating to liquidity.

4. From the past year statements projections can be made for the future.

5. It helps the management in planning the repayment of loans, credit arrangements etc.

Steps in Preparing CFS

1. Opening of accounts for non-current items (to find out the hidden information).

2. Preparation of adjusted P&L account (to find out cash from operation or profit, and cash

lot in operation or loss).

3. Comparison of current items (to find out inflow or outflow of cash).

4. Preparation of Cash Flow Statement.

To preparing Account for all non-current items is easier for preparing Cash Flow Statement.

Cash from operation can be prepared by this formula also.

Net Profit + Decrease in Current Assets - Increase in Current Assets

OR OR

Increase in Current Liabilities Decrease in Current Liabilities.

Usefulness of the Statement of Cash Flows

The information in a statement of cash flows should help investors, creditors, and others assess

the following aspects of the firm’s financial position.

The entity’s ability to generate future cash flows.

By examining relationships between items in the statement of cash flows, investors and

others can make predictions of the amounts, timing, and uncertainty of future cash flows

better than they can from accrual basis data.

The entity’s ability to pay dividends and meet obligations.

If a company does not have adequate cash, employees cannot be paid, debts settled, or

dividends paid. Employees, creditors, and stockholders should be particularly interested

in this statement, because it alone shows the flows of cash in a business.

The cash investing and financing transactions during the period.

By examining a company’s investing and financing transactions, a financial statement

reader can better understand why assets and liabilities changed during the period.

1. The reasons for the difference between net income and net cash

Net income provides information on the success or failure of a business enterprise. However,

some are critical of accrual basis net income because it requires many estimates. As a result, the

reliability of the number is often challenged. Such is not the case with cash. Many readers of the

statement of cash flows want to know the reasons for the difference between net income and net

cash provided by operating activities. Then they can assess for themselves the reliability of the

income number.

In summary, the information in the statement of cash flows is useful in answering the following

questions.

How did cash increase when there was a net loss for the period?

How were the proceeds of the bond issue used?

How were the expansions in the plant and equipment financed?

Why were dividends not increased?

How was the retirement of debt accomplished?

How much money was borrowed during the year?

Is cash flow greater or less than net income?

Cash Flow Statement

Inflow of Cash Amount Outflow of cash Amount

Opening cash balance *** Redemption of preference shares ***

Cash from operation *** Redemption of debentures ***

Sales of assets *** Repayment of loans ***

Issue of debentures *** Payment of dividends ***

Raising of loans *** Pay of tax ***

Collection from debentures *** Cash lost in debentures ***

Refund of tax *** Closing cash balance ***

Cash from operation can be calculated in two ways:

Cash Sales Method

Cash Sales – (Cash Purchase + Cash Operation Expenses)

Net Profit Method

It can be prepared in statement form or by Adjusted Profit and Loss Account.

CHAPTER-2

LITERATURE REVIEW

LITERATURE REVIEW

1. Pandey, I.M. “Financial Management”, 3rd edition, New Delhi, Vikas Publication House

Pvt. Ltd. P-73to97(long term financial position or solvency in this I studied about debt

ratio, fund debt to total capitalization ratio, equity ratio etc.)

2. Maheshwari, “S.N, Advanced Accounting”,4th edition Sultan Chand & Sons Publication,

New Delhi, 2004, P.No. (b40-b48)(tools of financial analysis)

3. Gupta Shashi.k,,”Managemenet Accounting”, 5th ed,ition,Kalyani Publishers,New Delhi,

P.No 23.1-23.9(working capital management and finance)

4. Goel D.K, “Analysis of financial statement”, 10th edition,Avichal Publishing Company

P.No 2.1-2.38(ratio analysis)

5. Donald R. Cooper and Pamela S. Schindler, “Business Research Methodology” Eighth

Edition’ Tata McGraw Hill Publishing Company Limited, New Delhi. Chapter 3, Page

82, 86, 87. Chapter 4, Page 101,102 (helped in research design)

6. Kothari C.R., “Research Methodology Methods and Techniques” (Second Edition) New

Age International Publishers, Ansari Road, Daryaganj, New Delhi-110002. Chapter 4,

Page 55-58. Chapter 6, Page 95,100,111. (Methods of data collection, collection of data,

and collection of secondary data” are referred before the data collection”.)

7. Jain, ,T.R., and Aggarwal, Dr. S.C., “Statistics For M.B.A”,VK publication, PP1-3 Part b,

, 2nd Edition ,PP 131-134 Part (“Correlation” is studied to use these test in study.)

8. Gupta S.P. and Gupta M.P., “Business Statistics”, Twelth Edition, Sultan Chand and

Sons Publications. PP 237-241,628-629 (test hypotheses testing).

9. Murray R. Spiegel, “Theory and Problem of Statistics”, Third edition, Tata Mc Graw Hill

Publication, Chapter 12, Pg No.45-48 (correlation and regression)

10.ANNUAL REPORT (ACC LTD.) 2004-05 Page65-86 (balance sheet and P&L

account)

11.ANNUAL REPORT (ACC LTD.) 2005-06 Page25-34( balance sheet and P&L

account)

12.ANNUAL REPORT (BILT LTD.) 2006-07 Page20-55 (balance sheet and P&L

account)

CHAPTER-4

COMPANY PROFILE

COMPANY PROFILE

BALLARPUR INDUSTRIES LIMITED, popularly known as BILT is 'efficiently managed',

'financially sound', and 'self sufficient' and 'self made ' company is under the flagship of the

coveted THAP AR GROUPS.

Ballarpur Industries Limited (BIL T) is known as the backbone of the Thapar group. The

founder of the Thapar group was Late Lala Karam Chand Thapar (19001962). One of themost

illustrious industrial chains in India, Thapar group consists of many major industries such as

paper, chemicals, glass, pulp, china clay, electronics etc. There are 54 companies and 84 plants

under this group. Some of the main companies under this group are Crompton Greaves, K.C.L,

Bros JCT Limited, BIL T.

BILT, which is originally incorporated in 1945 as Ballarpur Straw Board Mills, has changed its

name in March 1946 to Ballarpur paper and straw board mills and again it was changed to the

present name in October 1975. Since then the company has grown to be a leader in paper

industry by continuous expansion and modernization of its capacity and plant and strategic

acquisitions.

BIL T is the undisputed leader in the Indian paper industry. It is also India's largest manufacturer

and exporter of paper, with a strong presence in all segments of the usage spectrum that includes

Writing & Printing Paper, Industrial Paper and Specialty Paper. Complementing this is a

diversified production infrastructure with six manufacturing units spread across the country.

In recent years, BIL T has evolved as a more dynamic, knowledge driven organization focused

towards creation of stakeholder value. In the process, it has also transformed the paper industry

from its traditional 'commodity market' mindset to a branded one. A concerted program of

innovation and technological excellence helps it pro actively respond to the needs of each

individual segment. Today, BILT not only has the range, but also a well entrenched distribution

network that enables it to reach customers, any time, any place.

As the industry leader, BIL T is committed to developing its business towards ecological, social

and economic sustainability. Community development and upliftment of the marginalized class

have been identified as focus areas. BIL T has joined hands with Pratham, an NOO that runs

primary education programs all over the country. A key initiative in environmental

accountability is the BIL T Farm forestry program that has covered more than 7500 farmers

since 2001.

BIL T is the largest and most respected paper company in India and a leader in the segments of

writing and printing paper. It also enjoys a sustainable presence in the key global markets. In

recent years, BIL T has evolved as a knowledge driven and customer centric organization

LOCATIONS

The group is headquartered in Gurgaon. They have factories in the following locations:-

Unit Ballarpur or Ballarshah (Maharashtra)-factory started in 1956

Unit Shree gopal (Yamunanagar, Haryana)-factory started in 1936

Unit Sewa (Orissa)

Unit Bhigwan (Pune)

Unit Kamalapuram (Andhra Pradesh)

Unit Asthi

IndependentExecutive

Mr. R.K. Ahuja

Board of Directors

VISION

Our aspiration is to become a leading creator of Shareholder Value in the Paper Industry.

To achieve this, we will use the ENERGY of our people, develop and implement leading edge

technologies and draw on both to deliver effective world-class solutions to our customers.

MISSION

To achieve this, we will ENERGISE our people, with a positive culture that rewards

INNOVATION, breeds INITIATIVES and encourages INTELLIGENT risk taking.

To consistently outperform expectations and deliver superior value to both our Customers and

Stakeholders

CORE VALVES

Honesty: To be principled, straight-forward and fair in all dealings.

Integrity: Maintaining the highest standards of professionalism.

Flexibility: Adapting ourselves to always stay a step ahead of change.

Respect for Individual: Giving each person room to contribute and grow.

Respect for Knowledge: To acquire and apply leading edge expertise in all aspects of our

business.

Team Performance: The team comes first; none of us is as good as all of us!

ENVIRONMENTAL POLICY

BIL T believes in synergizing business interests with environmental accountability. We the

Shree Gopal Unit follow stringent environment management systems and are moving towards

ISO 14001 certification. Furthering its drive towards protecting the environment and reducing

Mr. R.K. Ahuja

pollution, the Unit has in place the following guidelines:-

Set and periodically review sound environmental objectives and targets.

Install, maintain and operate facilities to comply with all applicable environmental laws

and other regulations.

Conserve natural resources and energy by through consistently reducing consumption

and wastage.

Promote farm forestry for sustainable availability of fibrous raw material.

Introduced cleaner and energy efficient processes in a phased manner.

Develop an "environmental conscious approach" amongst all employees

QUALITY POLICY

We are the manufactures and supplies of various grades of paper and coated paper and board. It

will be our endeavour to continuously improve the quality and service of our products for better

customer satisfaction.

Every individual in the unit shall stand committed and focused to this stage objective by

adopting total quality management (TQM) metrology aimed at continuous improving our system,

practice’s and preference. Thus constantly reducing cost through minimizing wastage. We shall

be committed to comply with the requirements if international standards on quality management

system and continually improve its effectiveness in its true sprite through involvement of

employees and training.

TQM

Dr. N. Edwards denings 14 points

1) Create constancy of purpose toward improvement

2) Adopt the new philosophy.

3) Cease dependence on inspection to achieve quality.

4) Minimize total cost.

5) Improve constantly,

6) Institute training.

7) Institute leadership.

8) Drive out fear.

9) Break down barriers b/w department.

10) Eliminate slogan, target and exhortation for the workforce.

11) i. Eliminate works standard.

ii. Eliminate management by objective

12. Right to pride of workmanship.

13. Program of education and self-improvement

14. Put everybody in company to work.

CORPORATE SOCIAL RESPONSIBILITY POLICY:

BIL T is responsible to continuously enhance shareholders wealth; it is also committed to its

stakeholders to conduct its business in a responsible manner that creates a sustained positive

impact For BILT being a responsible Corporate will mean:-

Using environment friendly and safe process in production.

Making sustained effort in preserving the environment

Promoting the well being and development of employees and their families through an

inspiring corporate culture that engenders good values.

Building active and long term partnership with communities in which we operate to

significantly irt,1_prove condition of the most disadvantaged amongst them

Observe good business -practice with other stakeholders i.e. business partners: customers,

distributors, suppliers and contractors.

STRATEGIC INTENT

BILT, in the recent years has evolved as a more dynamic, knowledge-driven organization with a

singular focus on creating stakeholder value. Aimed at making the organization more market-

oriented and customer-centric, the following initiatives are to drive BIL T forward in the rapidly

changing business environment:

Consolidation: A Continuous streamlining of capacities and products in their core

business area.

Brand Building: Increasing brand involvement for the products amongst customers to

reduce market fragmentation and attain "generic brand" status via strategic building.

De-Commodisation and Service Orientation: Redefining the paper industry with

customer at the centre stage.

Wider Product Range: Adding high value-added products to BIL T's portfolio expanding

it to cover the widest range of basic to high-end usage paper products.

Prnc1nct-mix Rationalization: Maintaining an intelligent product-mix based

value and demand curves to maximize returns.

Exploring Global Markets: Reaching out to international markets with 'world-class

products while maintaining leadership in India.

Operational Improvements & Cost-competitiveness: To attain higher efficiency levels

and world-class quality in production processes.

Increasing Capacities: Expansion of manufacturing and processing capabilities across

product range, in line with market dynamics.

Sound Investments: Accelerate growth by way of investments into focused, synergetic

acquisitions.

Captive Market Share: Sustaining and strengthening BIL T's leadership position in its

market segments way ahead of competitors.

Extending 'Touch-Points': Building a wider and 'intelligent' distribution network that

enables BILT to serve its markets in a customized and localized manner and attain higher

penetration, without losing the economies of scale.

MARKET SCENARIO

The global paper market is dominated by North America, Europe and Asia. Broadly, the

industry is classified into two segments paper and paperboard (writing, printing,

packaging, tissues and newsprint)

The writing and printing paper market is further divided into coated and uncoated

segment, each with their own market characteristics.

BILT operates predominately in the writing and printing paper space and has also made

an initial foray into tissues.

BILT continue to be a leading player in the writing and printing paper industry in India

with a paper sale of~ 1053567 crore in 2008-09.

Its business can broadly be divided into six segments

1) Coated wood free

2) Uncoated wood free

3) Copier

4) Cremwove

5) Business Stationary

6) Tissue

BUSINESS SEGMENTS

BIL T services its customers' needs for quality Paper - both in India as well as overseas. Their

paper touches the customers' lives every day. In more ways than they even know. Stationery,

playing cards, high quality coated paper for brochures and magazines, currency notes, copier

paper ... They service these everyday instances across the length and breadth of the nation with

their wide product portfolio ranging from basic to high-end specialty paper.

• Coated Wood Free Paper • Uncoated Hi Bright Paper

• Business Stationary

• Copy Paper

• Specialty & Fine Paper

While these indicate their broad product segments, BIL T also continuously focuses on serving

customers with customized, value-added products to suit specific applications.

PRODUCTS AND BRANDS

Segments BILT Brands

BIL T Emperor Art Paper CIS

Chromo

Sunshine Art Paper CIS

Easy Print

Cream wove Sunshine Maplitho NSS

BIL T Royal Art Paper CIS

BIL T Copy Power

Copiers BILT Image Copier

Royal Executive Bond,

Bonds Sunlit Bond

Royal Executive Bond (Co loured Bonds

in laid finish) -Moonbeam, Aquas,

Camelle BIL T Emperor Art Board

Art Board BILT Royal Art Board

DISTRIBUTION NETWORK

Over the decades, BIL T has transitioned from the 'metro' concept to cross country distribution.

While their five manufacturing facilities for paper and pulp are strategically spread across the

country, we have assiduously brought their products within physical proximity of the customers.

Their network of 126 dealers - the largest within the industry in India - is present across the

principal consuming centres of the country. Strategically implemented Enterprise Resource

Planning (ERP) System, real-time logistics and Just-in-Time (DT) inventory solutions enable

highly effective and efficient distribution of localized BIL T products across urban, semi-urban

and rural consumption centres nation-wide. A direct marketing initiative by the company to

establish a two away interaction with customers is another help forward in this direction.

AWARDS AND RECOGNITION

Dun & Bradstreet - Rolta Corporate Awards 2009 Recognises BILT

Business world FICCI award: Bilt received a citation award for its CSR projects and was

one of the six companies selected.

Business for social responsibility award: Bilt's CSR projects were one of the five

companies selected for this award,

SWOT Analysis

Strengths:

Goodwill of the company 'as it is India's largest paper manufacturer

Maximum variety of paper

High quality of paper

New pulp mill

Good employer - employee relationship

Efficient management.

Earn building.

Fulfilling social responsibility by keeping environment clean

Adoption of TQM metrology helps in reducing cost through minimizing cost.

Opportunities:

Widespread of print and media industry provided a major boost to paper industry.

BIL T have technology tie - up with world class popular companies.

BIL T has 25% share in paper in India.

BIL T has reached the Growth Stage.

Weaknesses:

Shortage of funds.

Unnecessary blockage of funds.

Flow of funds controlled by head office of any unit.

Concentration of mill in one particular area.

Threats:

Increase in prices of raw material.

Imported paper.

Non -availability and high cost of fibre.

Government policies.

Increase in competition.

High cost of power

UNIT SHREE GOP AL, Y AMUNANAGAR

Unit Profile

Year of Inception: 1936

Location: Yamunanagar, Haryana

Area: 217 acres

Nearest Railhead: Jagadhri

Local Language: Punjabi, Hindi

Installed Capacity: 75,000 tonnes per annum

Product Range: Royal Executive Bond and BCB

Infrastructure: Integrated operations with captive pulp, power and chemical recovery plants

Certification: Award certification by Ministry of Power, Govt. of India and ISO 9001 :2000

certified for Quality Management System

Unit Shree Gopal is situated at Yamunanagar in Haryana. It contributes about 20% towards

total production of paper manufactured by BIL T. This mill was taken by Thapar in 1937. It took

over years in the process of rebuilding, expansion and diversification. BILT- Unit Shree Gopal,

Yamunanagar is producing paper at 129% of its capacity utilization. BIL T -SGU like any other

paper industry is highly energy intensive.

Today Unit Shree Gopal is one of the largest unit of BIL T. This unit is made for achieving

much in terms of increased output, greater efficiency in input consumption and rendering a

better and prompt services to the customers. The unit produces 721 different brands of paper

only in the form of rolls and reams. The unit employs 3300 people and manufactures quality

writing, printing and coated paper. The unit has six large and high- speed machines that takes in

all kinds of raw materials like grasses, bagasse, cotton waste to turnout special paper with an

exquisite finish.

The unit also has three-pulp machine to convert raw material into pulp for paper, capacity of

seven-paper machine is 70000 tonnes of paper, along with that unit also has got two paper

coating machines with a capacity of production 17000 tonnes of coated paper.

Products Manufactured:

High quality wood free BIL T Classic Royal Paper

Coloured Royal Executive Bond for envelopes

BIL T Matrix Premium Multi Purpose Paper

Unit Shree Gopal has improved its product mix and is going up the value chain. The new

products manufactured are:

Plain paper (REB Coral Pink Laid)

Plain paper (REB Meadow Green Laid)

Sunshine Account Book (Natural shade)

Various Departments At Shree Gopal

(I) Administrative Department:

1) PDC - Personnel development and communication i.e. Human Resource Department

2) Accounts department

3) Material department:- This department is concerned with procurement and storage of

process material,

4) Sales department:-Sale ofthe finished paper is their main activity.

5) Raw material department:-Each and every product required for paper making is arranged/

purchased by this department.

6) Traffic department:- This department includes wing section, raw material section,

transport section etc.

Human Resource Department:

In unit Shree Gopal Personnel Department is known as the Human Resources Department. It is

one of the administrative departments existing in the company.

This department is mainly concerned with human resource of the company and issues related to

its effective maintenance and effective utilization, as human capital is one of the most valuable

asset of the organization from human force engaged in paper production to its administration, it

is the human capital which actually help the organization to attain its ultimate goals .

In the present scenario and trend of knowledge management it is the tacit knowledge, which

brings success stories for the organizations. So like any other the organizations BIL T is also

trying to utilize its manpower as best as possible. So, the HRD (PDC) department is one of the

most important departments of the unit SHREE GOP AL, which is working parallel to all other

departments and coordinating with them. This department looks after all issues regarding -

IR, Recruitment, Selection and Training, Promotions and Up gradations, Transfers,

Retirement, Labour Welfare, Establishment, Estate (securities), Time office (attendance),

Performance appraisal, Maintenance of records, pay roll, wages and salary administration, etc

all concerned with Human Resource. Here is the function of HRD are coordinated with Head

office's corporate policies.

1. Industrial Relations:

It is mainly related to the issues relating to relations exists between the workers / union and

management, how to regulate these relations to maintain industrial peace and democracy with in

the industry/unit

Various machineries are there to regulate the relations like:

Grievance Procedure: Stepladder procedure is defined by the company to redress the grievances

of the workers from the immediate superior to higher authority, there is also a grievance

committee is this context

Collective Bargaining: Wages agreements between union and management are done through

collective bargaining process, beside this other issues are also settled by collective bargaining

where equal number of representative of both management and union negotiate on concerned

issues

Workers Participation in Management: Through suggestion schemes and quality circles.

Disciplinary Procedures: There are also defined procedure for any misconduct or any

indiscipline, domestic enquires are been conducted against any charge and then necessary steps

are taken.

2. Time Office: Its main function is concern with:

To maintain attendance, leave, overtime duty, records of all employees, consolidating the

working days at the end of the month and advice accounts department for payment of

salary.

Deployment of casual labor.

Comply with statutory requirement under the Act.

Attendance Rule - 9 min grace period is allowed to both clerical and management staff at the

start of the shift and also during shift breaks. If a person is late by more than 9 min, he has to

submit a short leave.

Three Shifts are there

12 a.m. to 8 a.m.

4 p.m. to 12 a.m.

General - 730 a.m. to 4;30 pm

Lunch break - 12 noon to 1 pm

Overtime - Double the actual amount paid after 8hrs of work to worker and clerical

staffs.

• Overtime is allowed against Absentee

• Vacancies

• Shut

• Casual

• New job

• Paid holiday

Leave rules: For clerical staffs - Leave year 1st January to 31st December.

For management staffs -Leave year 1st April to 31'st March.

3. Wages And Salary Administration:

Wages of the workers are determined by the agreement between management and union, so

different slabs are defined for skilled, unskilled and clerical workers, which are revised from

time to time.

Salaries of management staffs are determined according to prevailing industry rate, job

responsibility, position in the hierarchy, knowledge, experience, qualifications, and fixed

during the appointment of the concerned person with pre determined fixed allowances, which

include basic and perks.

4. Establishment:

This department basically deals with employee personal records, saving schemes, insurance

schemes, and social security schemes and after retirement schemes and etc.

5. Estate and Securities:

It includes

Housekeeping: Which is broadly categorized into two namely Housekeeping of plant and

Housekeeping of colony.

Plant: It includes looking after nomad's land, roads, up keeping of the premises in the work

areas. Dustbins are maintained at suitable locations both in plant and colony.

Colony: Maintenance jobs are carried out in the houses of the workers. Also the responsibility of

the guesthouses, staff houses, cleaning and general maintenance.

Security Setup: The security setup is looked after by the security DGM, who is assisted by three

security officers. Around 15 guards/shift are posted around various locations in the mill. The

security looks after the fire safety along with the usual responsibilities.

6. Labour Welfare: The welfare officer is looking after labour welfare. Various activities

include:

Canteen: A canteen is being run in the unit as per statutory requirements, where the employees

are being provided facilities of food and snacks at subsidized rates. A 6member committee is

running its operation; with 3 members of each union, which is being chaired by DGM-

PDC .Approximately, it serves 300 lunches and 150 dinners per day. Employees are being

charged at a very nominal rate of RS I.SO/meal. Administration of quality control and rate is

under the welfare sections.

7. Performance Appraisal System:

Performance of the employees is appraised twice in a year. This system has been totally

computerized recently. Company has designed a website in the local area network of the

company and both the appraiser and appraise can access that through login and passwords.

8. Training and Development:

One of the important function of PDC is designing and conducting various training and

development activities for their workers and management staffs at all levels with the motives

to increase their effectiveness and efficiency. So various in house, sponsored, technical

training programs are conducted at plant level at regular basis. •

ACCOUNTS DEPARTMENT

1) Finance department No share capital in BIL T in yamunanagar actual funding is done in

gurgaon for the actual procurement of funds budget is prepared and is sent to head office

for approval and after approval the procurement of funds to be done

2. Stores department

Material purchased on behalf on agency they use NQC(New Quest Agency)

3. Creditor sector

4) Contractor payments all the payment done on the basis of. contract and the payment is

made at the end of 10th every month. Main contractor chirag

5. Establishment

6. Costing ----product based costing profit is determined on the basis of costing department it

is determined weekly and it is also helpful in controlling wastage

7. Sales tax sector--direct and indirect tax HDFC bank mainly financing

(II) Process Department:

1. Pulp mill:-Its function includes manufacturing of pulp and stock preparation.

2. Machine house:-It controls the working of various paper machines and

prepares the paper of required quantity.

3. Coating plant-Primary function of this department concern with coating of

paper as per requirements.

4. Soda recovery plant-Function of this department is to look after the process

of recovery of useful chemical from waste liquor.

5. Caustic soda chlorine plant (CSCP):- This department supervises the

production ofHcl and NaOH.

Main sources of pulp raw material are wood, bamboo and waste from wood products

manufacturing companies.

Waste from wood products manufacturing companies is the cheapest i.e.

Veneer Waste (plywood) and popular is most expensive wood.

Around 600-700 tonnes of wood is required by the Pulper daily depending upon the

moisture conditions and the product mix.

Approx. annual consumption is around 2,74,000 tonnes

Chipper Department

This department checks the quality and moisture in wood and informs the raw material

department.

The capacity of the chipper is 25 tonnes per hour.

Sorting out of Veneer and chips is done in the stock yard to check any foreign particles

like plastic wires.

Water is first put on material and then on conveyers to make the dust settle.

Almost whole of the process is automatic except only for putting the material on the

conveyers.

Daily around 600-700 tonnes is chipped depending upon the weather conditions.

Ideal size of wood is 8 inch diameter and 7 to 10 feet length.

Silo Department

It's the storage tank for the chipped wood and veneer. Its main function is to store the

unused chipped wood.

It has 8 tanks of 50 tonnes capacity each so total capacity is 400 tonnes.

It has automatic system at the top which itself selects the tank in which the chipped wood

is to be stored depending upon quantity already present.

Then when the felt from the digester starts the felts on the bottom of this tank also start

and the material starts getting pored on the belt and starts moving towards the digester.

The residual wood which is not cooked by the digester for the first time is added to the

felt at the bottom so as to reuse it.

Such residual wood is first checked for foreign particles before being put on the felt

again.

Pulp Department

The process starts when chipped wood stored in the SILO comes to this department where it's

filled" in the digesters for cooking then screened and washed to remove unwanted particles, such

particles are again refined and reused so there is minimum wastage, after which the pulp is

bleached to improve brightness and in the end its finally centric cleaned to remove minutes

possible foreign particles. Then it's stored in tanks before being taken from there for preparation.

The whole procedure is almost automatic only manual loading is done that to with help of

machines and just few operators are there to keep a check and make small adjustments.

After taking material from the blow tank for cooking it's passed through Junk Trap to remove

waste then it's screened to remove the uncooked material.

As there is formation of foam in the slurry of pulp chemical is added to remove foam. Then the

slurry is washed by passing it through 4 washers that use water for washing it and in the last

washer the color gets changed from black to brown. The hot water is added for washing in the 4 th

washer and it moves in the opposite direction from washer No.4 to No.1 and becomes

completely black in color which is then send to recovery department. Water is recycled and used

again and again. Talcum powder is added to the pulp in the 4 th washer after mixing it with water

so as to improve quality and bulk of the pulp.

SILO

Cooking

Screening

Bleaching

Centric cleaning

Bleach HD Towers

Pulp Department Process

This brown pulp is bleached in bleaching section to make the pulp white and by treatment of

chlorine gas at Chlorine gas tower. Again pulp is washed by Hypo treatment at Hypo plant so

that to remove residual chemical Fibre pulps are used to give strength in paper & these are fed

into stock preparation plant. Here colours are also added to make coloured paper. This ready

stuff is now fed in paper machine. The stuff is feeded at wire through head box so pulp is formed

into sheet and at wire section water in pulp is removed by gravity & by suction boxes.

The formed sheet is then fed into press part and the sheet is pressed in between rolls to remove

water. Then the paper is rotated in dryers section in dryers section. To remover further moisture

in web/paper and then fed into calendar part to get smoothness. Finally sheet is reminded on an

iron sheet roll (Rewinder)

These paper rolls are fed into finishing & converting house where paper sheet is converted into

sheet size (At cutter) & in reels. As per market demand, these bundles and reels are packed in

wrappers & with Hessian cloth. These bundles & reels are properly marked in excise & dispatch

godown.

Paper manufactured is used for mainly printing, copy manufacturing, computer stationary,

photocopy, typing, book printing, cover paper etc.

Paper is basically measure in G.S.M-Higher the G.S.M. Higher the ualityo

(III) Engineering Department:

1) Electrical engineering:- This department attaches itself with the maintenance of

installation of electrical machine, distribution and generation of electrical energy and

various other electrical installations at the unit.

2) Machine engineering:- This department is concerned with the maintenance of various

machine, boiler operations etc

3) Civil engine:-All the construction work like - building of roads, sanitary, waste disposal,

water supply is under their control.

4) Instrumentation engineering:-Maintenance of all the electrical controls of the machines is

carried out under the expert guidance.

Accounts & Costing Department

This department handles all the accounts of the units and prepares the weekly, monthly and

annual reports to check the performance of the unit and also to find out the reason behind

variances. This department has been further subdivided into nine functional departments that are:

1) Sales Tax: It handles all the sales tax work. As they are some goods which are sold

directly from the unit to the parties and others which are sold through the Head Office so

it's this department's job to see that payment of sales tax has to be made on which

transaction and has to keep proper records regarding such transactions.

2) AP: This department handles all the creditors. As there are lot of queries and

explanations have to be given, so this work is handled by a separate department. After

the goods are received it's their job to make the payments sanctioned and if there is any

problem then they handles the queries of the creditors regarding any deductions made by

the company.

3) Costing: Their job is to collect data from the different departments and to calculate the

costs incurred in the functioning of the unit. They prepare the reports and check the

variations from the budget if any. It helps in keeping a control over the various functions

being performed in the unit.

4) Establishment: It deals with labour payments. Its job is to keep a record of all the people

working in the organization, to get info. About their attendance from time office, keep

other records related to the payments due to the employees and to finally make such

payments through salary accounts.

5) Audit: This department basically handles the internal audit amongst the departments in the

organization and also between the various branches, offices and cutting centers.

6) AR: They handle the receivables. It's their duty to check the amount to be collected from a

debtor and to set credit limits for such debtors and to actually collect money from them.

7) Stores Accounting: Their duty is to help in procurement of the goods required by the

store. They are middlemen between the purchase department and the store. The store will

inform them about the goods required and they will prepare a purchase order to be

submitted to the purchase department. They will tell the purchase department about the

specification of the items to be purchased and also suggest the best supplier.

8) Bill Matching: Their job is to check whether the goods received are that which were

required, to check the quantity and other specifications only after their checking the

goods will be issued to the concerned department.

ORGANIZATIONAL STRUCTURE15

It is a line organization having a full-fledged department to manage the finance budget, costing

and other matter of this department. The BILT works president has to manage two departments

mainly i.e. works and finance.

President

General Manager

Assistant Manager

Senior Officer(Cash)

Senior Officer

ClerksFixed Asset CostEmployee SalaryTransportation

Cash

Senior Officer(Costs)

CHAPTER-5

OBJECTIVES & RESEARCH METHODOLOGY

PROBLEM STATEMENT: To know the financial analysis of BILT.

OBJECTIVES: The objectives aim to highlight the reasons how important is the financial system

and financial statement for an organization or company. There are various objectives of the study

are as follows:

To find ratio of the firm for the year 2009-10.

To study short term financial position.

To study long term financial position.

To study earning per share of the firm.

To find correlation between turnover and profits of the firm.

To study the trend of the gross revenue and profits of the firm.

The project include both primary & secondary source of data. The data collected through these

sources has organized, analyzed & interpret so as to draw conclusion &to arrive at appropriate

recommendations.

1. A primary source of data includes the personal interview from various accounts officers in the

enterprise.

2. The secondary sources of data include annual report, website of BILT Ltd. Company which

contains the details which is helpful for making my project report.

STEPS IN RESEARCH METHODOLOGY:-

2. COLLECTION OR DATA

3. ORGANISATION F DATA

4. PRESENTATION OF DATA

5. ANALYSIS OF DATA

6. INTERPRETATION OF DATA

1 . COLLECTION OF DATA :-

Both the primary & secondary data has been collected from the market & company. The

company provided the secondary data & primary data is collected through the medium of face-

to-face interaction & interview from various persons in the enterprise.

2. ORGANISATION OF DATA :

Data once collected the further processing is done, the data collected by me are carefully done

through in a useful & relevant manner &properly organized.

3. PRESENTATION OF DATA :-

The data collection is of no use unless & until it is given in the presentable form. Thus after

proper organization the data is given in presentable form with the complete details, with the help

of bar diagram, pie carts etc.

4. ANALYSIS OF DATA :-

The data is carefully analyzed keeping in the consideration both the pros & cons for the purpose

of arriving at concrete conclusion.

5 . INTERPRETATION OF DATA :-

After carefully analyzed the data, it has been aptly interpreted in order to give concrete

conclusion & proper recommendation.

ANALYTICAL TOOLS

RATIO ANALYSIS

MEANING OF RATIO:-

Ratio analysis is one of the most powerful tools of financial analysis. It is the process of

establishing and interpreting various ratios. It is the help of ratios that the financials statements

can be analyzed more clearly and decisions made from such analysis.

USE OF RATIOS:-

The use of ratio analysis is not confined to financial manager only. There are different parties

interested in the ratio analysis for knowing the financial position of firm for different purposes.

In view of various users of ratios, there are many types of ratios which can be calculated from

the information given in the financial statements. The particular purpose of user determines the

particular ratios that might be used for financial analysis.

STATISTICAL TOOLS

CORRELATION

REGRESSION

TREND ANALYSIS

RATIO ANALYSIS OF BILT LTD

ANALYSIS OF SHORT TERM FINANCIAL POSITION OR TEST OF

LIQUIDITY2

The short term creditors of company like suppliers of goods of credit and commercial banks

providing short term loans are primarily interested to knowing the company’s ability to meet its

current or short term obligations as and when these become due. The short term obligation of a

firm can be met only when there are sufficient liquid assets. Therefore, a firm must ensure that it

does not suffer from lack of liquidity or there capacity to pay its current obligations. If a firm

fails to meet such current obligations due to lack of good liquidity position, its goodwill in the

market is likely to be affected beyond repair. It will result in a loss of creditor’s confidence in a

firm may causes even closure of the firm. Even a very high degree of liquidity is not good for a

firm because such a situation represents unnecessarily excessive funds of the firm being tied-up

in current assets. Therefore, it is a very important to have proper balance in regards to the

liquidity of the firm.

1. CURRENT RATO:

CURRENT RATIO = CURRENT ASSETS/CURRENT LIABILITIES

CURRENT ASSETS = 2006.24

CURRENT LIABILITIES = 1527.01

CURRENT RATIO = 1.31:1

INTERPRETATION OF CURRENT RATIO:

Current ration is an indicator of the firms liquidity and it ability to pay its current obligations in

time when they become due. As a convention the minimum of two to one ratio is referred to as a

banker’s rule of thumb. Current ratio of BILT Ltd. is 1.31:1, it is matter of concern. As a

manufacturing concern there is m ore investment in the capital goods but current assets also to be

increased accordingly to improve the current ratio. A business with heavy investment in fixed

assets may be successful even ration is low.

2. ABSOLUTE QUICK RATIO:= CASH & BANK+ SHORT TERM

SEC./CURRENT LIABILITIES

LIQUID ASSETS = 620.17

CURRENT LIABILITIES =1527.01

QUICK RATIO = .406

INTERPRETATION OF ABSOLUTE QUICK RATIO:

Absolute quick ratio is also important tool. It shows the relation of absolute liquid assets with

current liabilities. Rule of thumb for this ration is 1:2. In regards of BILT Ltd. this ration is quite

low high. Management should give attention in this context.

3. QUICK RATIO:

QUICK RATIO =QUICK ASSETS/CURRENT LIABLITIES

QUICK ASSETS= CURRENT ASSETS-SHORT TERM INVESTMENT-PREPAIED EXP.

QUICK ASSETS = 1085.46 CRORE.

CURRENT LIABILITIES = 1527.01 CRORE.

QUICK RATIO = 0.71:1

INTERPRETATION OF QUICK RATIO:

Usually, a high acid test ratio is an indication that the firm is liquid and has the ability to meet its

current or liquid liabilities in time and on the other hand a low quick ration represents that the

firm’s liquidity position is not good. As a rule of thumb quick ratio of 1:1 is considered

satisfactory. But quick ratio of BILT Ltd. is 0.71:1 it is low, company should take necessary

steps to improve this.

4. INVENTORY TURNOVER RATIO:

INVENTORY TURNOVER RATIO = COGS OR NET SALES/AVG. STOCK AT

COST

NET SALES = 5746.84 CRORE

AVG. STOCK = 612.54 CRORE

INVENTORY TURNOVER RATIO = 9.4 TIMES

INTERPRETATION OF INVENTORY TURNOVER RATIO:

Inventory turnover ration is concerned with the maintenance of level of inventory of finished

goods so as to be able to mee3t the requirements of the business. Level of inventory should

neither be too high nor too low. Inventory turnover ration indicates the number of time the stock

has been turned over during the period. In the context of BILT Ltd. is manufacturing company

the inventory turnover ration is good and shows their good efficiency to manage their inventory.

5. INVENTORY CONVERSION PERIOD = Days in year/Inventory Turnover

Ratio

= 365/9.4

= 38.82 Days or 39 days.

INTERPRETATION OF INVENTORY CONVERSION PERIOD:

This shows the time taken to clear the stock. Stock of the company cleared more than five times

in the year. It shows their good management of the stores. This is good as a manufacturing

concern.

6. DEBTORS TURNOVER RATIO:

DEBTORS TURNOVER RATION= NET CREDIT ANNUAL SALES OR ANNUAL TOTAL

SALES/AVG. TRADE DEBTORS

TOTAL SALES =5746.86 CRORE

AVG. DEBTORS =221.09 CRORE

DEBTOR TURNOVER RATIO = 25.99 TIMES

INTERPRETATION OF DEBTOR TURNOVER RATIO:

Debtor turnover ration indicates the number of times the debtors are turned over during a year.

Debtor’s turnover ratio of BILT LTD. is higher. It shows more efficient management of debtors.

7. AVERAGE COLLECTION PERIOD = NO. OF WORKING DAYS/DEBTORS

TURNOVER

=365/25.9

=14.04 DAYS (approx.)

INTERPRETATION OF AVERAGE COLLECTION PERIOD RATIO:

The average collection period ration represent s the average number of days for which a firm has

to wait before its receivables are converted into cash. Average collection period of the BILT

Ltd. shows their efficiency for debt collection and shows their credits terms & policy towards

debtors.

8. CREDITORS TURNOVER RATIO:

Creditors turnover ratio =net credit annual purchase/Avg. trade creditors

Net credit annual purchases: = 1473.37 cr

Average trade creditors = 111.915 cr

Creditors turnover ratio =13.165 times

INTERPRETATION OF CREDITORS TURNOVER RATIO:

Creditor’s turnover ratio shows the relation between credits purchases and average trade

creditors. It indicates the number of times; creditors are turned over during higher. In context of

BILT creditor turnover ratio shows good management of creditors.

9. AVERAGE PAYMENT PERIOD RATIO: = No. of days/ creditors turnover

ratio

= 365/13.165

=27.72 days

INTERPRETATION OF AVERAGE PAYMENT PERIOD RATIO:

The average payment period ratio represents the average number of days taken by the firm to pay

it creditors. t he payment period of the company is less it shows that company enjoys the benefit

of the discount facilities.

ANALYSIS OF LONG TERM FINANCIAL POSITION OR

SOLVENCY 1

The term solvency refers ton the ability of a concern to meet its long term obligation. The long

term indebtedness of a firm includes debentures holders. Financial institution providing medium

and long term loans and other creditors selling goods on instalment basis .long terms solvency

ratios indicate a firm ability to meet the fixed interest and costs and repayment schedules

associated with its long term borrowings.

1. DEBT EQUITY RATIO

Debt equity ratio = outsiders funds/shareholders funds

Outsiders funds= 915.98cr

Shareholders funds= 3142.92cr

THEREFORE DEBT EQUITY RATIO= 0.29:1

INTERPRETATION OF DEBT EQUITY RATIO:

This ratio calculated to measure the extent to which debt financing has been used in business.

Being a manufacturing concern there is more investment in the capital gods. Lower of ratio gives

the higher margin of safety. There is no standard norm or rule of thumb regarding this ratio. It

depends upon the policy of the company. Their no mach more risk in the companies operation

therefore they were rely on the shareholders funds

2. FUNDED DEBT TO TOTAL CAPITALIZATION RATIO

Funded debt to total capitalization ratio x 100 = 785.98/3142.92

=25%

INTERPRETATION OF FUNDED DEBT TO TOTAL CAPITALIZATION

RATIO:

This ratio calculated to measure the extent to which debt financing has been used in business.

Being a manufacturing concern there is more investment in the capital goods .lower of ratio

gives the higher margin of safety .Their is no standard norm or rule of thumb regarding this ratio.

It depends on the policy of the company. Their no much more risk in the companies therefore

they were rely on the shareholders funds.

3. PROPRIETARY OR EQUITY RATIO:

=SHARE HOLDERS FUNDS/TOTAL ASSETS X 100

Share holder funds =3142.92 Crores

Total Assets = 4379.62 Crores

PROPEITORY OR EQUITY RATIO= 71.76%

STATISTICAL TOOLS

CORRELATION7

According to Croxton and Cowen, “when the relationship is of a quantitative nature, the

appropriate statistical tool for discovering and measuring the relationship and expressing it in a

brief formula is known as correlation

CORRELATION BETWEEN PROFIT AND TURNOVER

PARTICULARS

GROSS REVENUE (G.R)

PROFIT AFTER TAX (PAT)

2000 3031.76 47.842001 333.77 130.432002 3465.35 103.892003 4038.83 200.242004 4640.47 378.392005 3815.1 544.182006 6586 1231.84

PAT (x) G.R (y) X=x-a X^2 Y=y-b Y^2 X.Y

47.84 3031.76 -328.86 108148.90 -669.84 448685.62 220283.58

130.43 333.77 -246.27 60648.9 -3367.85 11342413.62 829400.41

103.89 3465.35 -272.81 74425.29 -236.27 55823.51 64456.81

200.24 4038.83 -176.46 31138.13 337.21 113710.58 -59504.07

378.39 4640.47 1.69 2.85 938.85 881439.32 1586.65

544.18 3815.1 167.48 28049.55 113.48 12877.71 19005.63

1231.84 6586 855.14 731264.42 2884.38 8319647.98 2466548.71

Σx/7=

376.7

Σy/7=

3701.62

ΣX^2=

1033678.03

ΣY^2=

21174598.34

ΣX.Y=

3541777.72

COEFFICIENTOF CORRELATION IS GIVEN BY:

ΣX.Y

R =

√ΣX^2.ΣY^2

R = 3541777.72/4678426.386

= +0.7570

IT IS A SITUATION OF HIGH POSITIVE CORRELATION

Scattergram of the data

0

200

400

600

800

1000

1200

1400

0 1000 2000 3000 4000 5000 6000 7000

GROSS REVENUE

PEARSON'S CORRELATION COEFFICIENT TEST (PARAMETRIC TEST):

Observed value 0.757

Two-tailed p-value 0.049

Alpha 0.05

Decision:At the level of significance Alpha=0.050 the decision is to reject the null hypothesis of absence of correlation.

In other words, the correlation is significant.

LINEAR REGRESSION LINE 9

GOODNESS OF FIT COEFFICIENTS:

R (coefficient of correlation) 0.757R² (coefficient of determination) 0.573R²adj. (adjusted coefficient of determination) 0.488SSR 9039090.316

GOODNESS OF FIT COEFFICIENTS:

The coefficient of correlation (R), which is the square-root of the coefficient of

determination;

The coefficient of determination (R-square or R² ), allows to evaluate the proportion of

the variability of the dependent variable that is explained by the selected explanatory

variables. This coefficient ranges between 0 to 1. The closer the model to 1, the better the

model. Since the value lies very close to 1, therefore, the model is quite befitting.

The adjusted coefficient of determination (or adjusted R²) which writes

R^2 = [(n-1) R2-1]/(n-p-1)

Where ‘n‘is the number of observations and ‘p’ the number of explanatory

The sum of squares of residuals (SSR ), also named sum of squares of errors (SSE)

which writes

Where yi is the observed value and ÿi is the predicted value.

EVALUATING THE INFORMATION BROUGHT BY THE VARIABLES (H0 = Y=MOY(Y)):

Source DF Sum of squares Mean squareFisher's

F Pr > F

Model 1 12135534.840 12135534.840 6.713 0.049

Residuals 5 9039090.316 1807818.063

Total 6 21174625.156      

This table is also known as the analysis of variance table. It allows evaluating if the selected

variables bring a significant amount of information to explain the variability of the dependent

variable compared with a constant model (the constant being the mean of the dependent

variable). The lower the probability associated with the Fisher's F, the more the explanatory

variables are useful.

THIS CHART SHOWS THE REGRESSION LINE, WITH THE INPUT DATA, AND

THE CONFIDENCE INTERVALS.

Data and regression line

-2000

0

2000

4000

6000

8000

10000

12000

0 200 400 600 800 1000 1200 1400

PROFIT AFTER TAX

Observations P redictions Conf. on pred (95.00%) Conf. on mean (95.00%)

This chart shows the standardized residuals (ordinates) given the explanatory variable

(abscissa). This chart is useful to detect regions where the model is more or less well fitted,

or correlations between residuals

PROFIT AFTER TAX / Standardized residuals

-2

-1.5

-1

-0.5

0

0.5

1

0 200 400 600 800 1000 1200 1400

PROFIT AFTER TAX

A chart with standardized residuals as ordinates, and the input data for the variable to model (abscissa):

GROSS REVENUE / Standardized residuals

-2

-1.5

-1

-0.5

0

0.5

1

0 1000 2000 3000 4000 5000 6000 7000

GROSS REVENUE

A histogram of the standardized residuals. The histogram is useful to detect outliers or a

misfit of the model: Given the normality assumptions, there shouldn't be more than 95% of the

standardized residuals out of the [-1.96, 1.96] interval. Here, there are no outliers in the model

and hence no misfit of the model.

Standardized residuals

-2.5 -1.5 -0.5 0.5 1.5 2.5

Obs1

Obs2

Obs3

Obs4

Obs5

Obs6

Obs7

Standardized residuals

TREND OF PROFIT (PAT) AND GROSS REVENUE IN PAST YEARS

TREND ANALYSIS

DEVIATION (X) PAT (Y) X.Y X2

-3 47.48 -142.44 9

-2 130.43 -260.86 4

-1 103.81 -103.81 1

0 200.24 0 0

1 378.39 378.39 1

2 544.18 1088.36 4

3 1231.84 3695.52 9

N = 7 ΣY = 2636.33 ΣX.Y = 4655.16 ΣX2 = 28

The

equation of the straight line trend is

Y= a + bX

Since X=0, a = Y/ N, b = XY/ x2

Substituting values, we get

a = 2636.33/5 =376.62; b = 4655.16/28 = 166.25

Thus the straight line trend is

Y= 376.62 + 166.25(X), Origin = 2003, X unit = 1 Year,

OUTCOMES ARE:

20002001

20022003

20042005

20060

100020003000400050006000700080009000

PROIT AFTER TAX

GROSS REVENUE

YEARS

CR

OR

ES

Rs

YEARSEXPECTED PROFIT

PROFIT AFTER TAX (OBSERVED VALUE)

2000 -122.13 47.84

2001 44.12 130.43

2002 210.37 103.89

2003 376.62 200.24

2004 542.87 378.39

2005 709.12 544.18

2006 875.37 1231.84

2007 1041.62 -------

2008 1207.87 -------2009 1374.12 -------

-500

0

500

1000

1500

2000

2500

1 2 3 4 5 6 7 8 9 10

YEARS

PROF

IT

0

200

400

600

800

1000

1200

1400

YEARS

EXPECTED PROFIT

PROFIT AFTER TAX(ACTUAL OUTCOMES)

HYPOTHESIS TESTING 8

t-test:

t-test is a small sample test. It was developed by William Gosset in 1908. He published this test

under the pen name of “Student”. Therefore, it is known as Student’s t-test.

Applications of t-test:

Test of hypothesis about the population mean.

Test of hypothesis about the difference between the two means in case of

independent samples.

Test of hypothesis about the difference between the two means in case of dependent

samples.

Test of hypothesis about an observed coefficient of correlation.

TEST OF HYPOTHESIS ABOUT THE POPULATION MEAN

We use t-test and the appropriate test statistic t to used is :

The null and alternative hypothesis to be tested is as follows:

Null Hypothesis Ho: mean profit in 7 years (2002-2009) is 200.24 i.e. µ = 200.24

Alternative Hypothesis H1: µ ≠ 200.24

YEARS PROFIT (X) X-a (X-a)2

200247.84

-328.91 108181.78

2003130.43

-246.32 60673.54

2004103.89

-272.86 74452.57

2005200.24

-176.51 31155.78

2006378.39

2.14 4.57

2007544.18

167.43 28032.8

20091231.84

855.09 731178.9

Σx/7=376.75(a) Σ(X-a)2 = 1033679.9

ΣX/n = 2637.31/7 = 376.75 where n = 7

S = √Σ(X-a)2/n-I = 172279.98

APPLYING t-test:

t = [(376.75-200.24) .√6]/172279.92 = .00245

Degree of freedom = v = n-1 = 7-1 = 6

For v = 6, t at 0.05 significant level for two tail test = 2.447

INTERPRETATION

Since the calculated value of t is less then tabulated value, we accepted the hypothesis and

therefore we accept the null hypothesis and conclude that mean profit in years (2009-2010)

is 200.24

XLSTAT 7.1 - One-Sample t-Test and Z-Test - 9/28/2007 at 8:35:11 PMSample: workbook = Book1.xls / sheet = Sheet1 / range = $C$3:$C$9 / 7 rows and 1 columnSignificance level: 0.050No missing values

One-Sample Student's t Test / two-tailed test:

Confidence interval at 95.00% of the mean:

-7.29

1 #

t (observed value)1.12

5

t (critical value)2.44

8

DF 6

Two-tailed p-value0.30

4

Alpha 0.05

Decision:At the level of significance Alpha=0.050 the decision is to not reject the null hypothesis that the mean is equal to 200.240.In other words, the difference between the mean and 200.240 is not significant.

LIMITATIONS OF THE STUDY

Except the supreme power, the Almighty, no one is impeccable and prowess enough to

accomplish anything without any faults and limitations. A research is no exception. No study is

devoid of certain shortcomings. Some problems encountered in this study are under mentioned:

Some officers were too busy to give a sincere response to investigators & hence their

response may not relate to real picture.

Manager some time denied disclosing some important financial matters, which can be helpful in this study.

The time period given to me for the completion of the project was short in such a short span of time it is difficult to complete any project in detail.

Some information related to the study, which had been collected from the company was rounded off because of some influence.

FINDINGS

SHORT TERM FINANCIAL POSITION:

The short term financial position of the company is not good enough. Current Assets of

the company in the year 2009 is 2009.24 crore where as the Current Liabilities is 1527.01

Crores

Current Ratio is 1.31:1. Company needs bit improvement in it so that to make it 2:1.

Short term liquidity position is also good as the acid test ratio is 0.71:1. Company needs

bit improvement to make it 1:1.

Turnover Ratio of the company reflects their good and sound position. Stock turnover

over ratio is 9.4 times. It is good that they clear their stock more than 5 times in the year.

Debtors and creditors turnover ratio also show positive results in their efficiency.

LONG TERM FINANCIAL POSTION

Long term financial policy is not as good as it should be. No doubt company adopted

very nice policy of financing fixed assets from the long term fixed assets and the long

term liabilities. Rest payment is made in cash, thereby leading to reduction of the amount

of cash.

Debt – equity ratio also gives the same picture. It should be near to one as possible. But it

is not than one in every year. Not only but also showing the increasing trends. This is not

a good sign.

Proprietary ratio is 71.76%, it is good, and it is 50% or more than it.

Earning per share is the one of most important factor.

Shareholders are the main stakeholders of the company they judge the companies

performance on the basis of earning per share & dividend declared.

In the accounting year 2008 companies earning per share is Rs.66.02. Dividend paid for

the current year is Rs.15 per share.

RECOMMENDATIONS\SUGGESTIONS

Company is not utilizing its resources up to the maximum

Customer base remains the same

SAP is not implemented properly as the employees are not trained to use the same

Company is not looking for increase in the plant capacity.

Implementation of new policies by Holcim is disturbing the workforce in adapting to the

new work-culture.

The company is more dependent on outsider’s fund.

Current Ratio is 1.31:1. Company needs bit improvement in it so that to make it 2:1.

Long term financial policy is not as good as it should be. No doubt company adopted

very nice policy of financing fixed assets from the long term fixed assets and the long

term liabilities. Rest payment is made in cash, thereby leading to reduction of the amount

of cash.

The short term financial position of the company is not good enough. Current Assets of

the company in the year 2009 is 2009.24 Crores where as the Current Liabilities is

1527.01 Crores

Low Investment in innovative R&D. Company should invest more in R&D.

High employee turnover rate. The other cement industries are paying good salaries to

employees as compare to BILT LIMITED that is why employees are leaving the

company.

POLICY IMPLICATIONS

Some suggestions that I have given to the company and following are the result of those

suggestions are as follows;

I suggest them to increase the promotion of Health and Safety at Work, including the

prevention of occupational risks and it is in the process.

I suggest them to increase the capacity of plant as it a long term process so company

officials said they put that point in the annual board meeting so it is in the process.

Current Ratio of the company is 1.31:1.so I suggest them to increase that to 2:1 and they

are working upon it.

Company is not spending so much on the R& D so I suggest them to increase the same

and the company said that they will think to allocate more finance in the budget of the

company.

BIBLIOGRAPHY

1. Pandey, I.M. “Financial Management”, 3rd edition, New Delhi, Vikas Publication

House Pvt. Ltd. P-143to145(Approaches of working capital)

2. Maheshwari, “S.N, Advanced Accounting”, 4th edition Sultan Chand & Sons

Publication, New Delhi, 2004, P.No. (b40-b48)(tools of financial analysis)

3. Gupta Shashi.k,,”Managemenet Accounting”, 5th ed,ition,Kalyani Publishers,New

Delhi, P.No 23.1-23.9(working capital management and finance)

4. Goel D.K, “Analysis of financial statement”, 10th edition,Avichal Publishing

Company P.No 2.1-2.38(ratio analysis)

5. Donald R. Cooper and Pamela S. Schindler, “Business Research Methodology”

Eighth Edition’ Tata McGraw Hill Publishing Company Limited, New Delhi. Chapter

3, Page 82, 86, 87. Chapter 4, Page 101,102 (helped in research design)

6. Kothari C.R., “Research Methodology Methods and Techniques” (Second Edition)

New Age International Publishers, Ansari Road, Daryaganj, New Delhi-110002.

Chapter 4, Page 55-58. Chapter 6, Page 95,100,111. (Methods of data collection,

collection of data, and collection of secondary data” are referred before the data

collection”.)

7. Jain, ,T.R., and Aggarwal, Dr. S.C., “Statistics For M.B.A”,VK publication, PP1-3

Part b, , 2nd Edition ,PP 131-134 Part (“Correlation” is studied to use these test in

study.)

8. Gupta S.P. and Gupta M.P., “Business Statistics”, Twelfth Edition, Sultan Chand and

Sons Publications. PP 237-241,628-629 (test hypotheses testing)

9. Murray R. Spiegel, “Theory and Problem of Statistics”, Third edition, Tata Mc Graw

Hill Publication, Chapter 12, Pg No.45-48 (correlation and regression)

10. ANNUAL REPORT (BILT LTD.) 2004-05 (balance sheet and P&L account)

11. ANNUAL REPORT (BILT LTD.) 2005-06 ( balance sheet and P&L account)

12. ANNUAL REPORT (BILT LTD.) 2006-07 (balance sheet and P&L account)

ANNEXURES

ANNEXURE-1

CORRELATION TESTS7

XLSTAT 7.1 - Correlation Tests - 9/24/2007 at 12:32:18 AMVariable 1: workbook = Book1 / sheet = Sheet1 / range = $B$3:$B$9 / 7 rows and 1 columnVariable 2: workbook = Book1 / sheet = Sheet1 / range = $C$3:$C$9 / 7 rows and 1 columnSignificance level: 0.05

Pearson's correlation coefficient test (parametric test):

Observed value 0.757Two-tailed p-value 0.049

Alpha 0.05

Decision:At the level of significance Alpha=0.050 the decision is to reject the null hypothesis of absence of correlation.In other words, the correlation is significant.

ANNEXURE-2

LINEAR REGRESSION8

XLSTAT 7.1 - Linear Regression - 9/24/2007 at 12:33:37 AM

Dependent variable(s) workbook = Book1 / sheet = Sheet1 / range = $B$3:$B$9 / 7 rows and 1 columnUniform weighting (default)Quantitative variables: workbook = Book1 / sheet = Sheet1 / range = $C$3:$C$9 / 7 rows and 1 columnNo missing valuesConfidence interval (%): 95.00

Modeling variable GROSS REVENUE:

Summary for the dependent variable:

VariableTotal no. of values

No. of values used

No. of values

ignored

Sum of

weights Mean

Standard

deviation

GROSS REVENUE 7 7 0 7

3701.611

1878.591

Summary for the quantitative variables:

Variable MeanStandard deviation

PROFIT AFTER TAX 376.687 415.066

Goodness of fit coefficients:

R (coefficient of correlation) 0.757R² (coefficient

of determination) 0.573

R²adj. (adjusted

coefficient of determination) 0.488

SSR9039090.316

Evaluating the information brought by the variables (H0 = Y=Moy(Y)):

Source DFSum of squares

Mean square

Fisher's F Pr > F

Model 112135534.840

12135534.840 6.713 0.049

Residuals 59039090.316

1807818.063

Total 621174625.156      

Model parameters:

Parameter Value

Standard

deviation

Student's t

Pr > t

Lower bound 95 %

Upper bound 95 %

Intercept2410.93

4 711.631 3.3880.02

0 581.4764240.39

3PROFIT AFTER 3.426 1.322 2.591 0.04 0.027 6.826

TAX 9The equation of the model writes: GROSS REVENUE = 2410.93431999628 + 3.42639013050847*PROFIT AFTER TAX

Predictions, residuals, and confidence intervals:

Data and regression line

-2000

0

2000

4000

6000

8000

10000

12000

0 500 1000 1500

PROFIT AFTER TAX

Observations

P redictions

Conf. on pred (95.00%)

Conf. on mean (95.00%)

PROFIT AFTER TAX / Standardized residuals

-2

-1.5

-1

-0.5

0

0.5

1

0 500 1000 1500

PROFIT AFTER TAX

GROSS REVENUE / Standardized residuals

-2

-1.5

-1

-0.5

0

0.5

1

0 5000 10000

GROSS REVENUE

Standardized residuals

-2.5 -0.5 1.5

Obs1

Obs2

Obs3

Obs4

Obs5

Obs6

Obs7

Standardized residuals

ANNEXURE-3

FINANCIAL HIGHLIGHTS13

Company’s

finan. yr

2006 2005(9m) 2004-05 2003-04 2002-03 2001-02 2000-01

Gross

revenue

(Rs.)

6586 3815.10 4640.47 4038.83 3465.35 333.77 3031.76

Profit after

tax (Rs.)

1231.84 544.18 378.39 200.24 103.89 130.43 47.48

Dividend

(Rs.)

322.04 168.53 142.95 79.96 48.21 51.24 37.62

Net worth

(Rs.)

3142 2130 1577 1318.43 1024.21 945.9 1076.34

Capital

employed

(Rs.)

4378.70 3607 3382 3010.92 2758.11 2769.02 2794.82

Borrowings

(Rs.)

915.98 1176.17 1509 1327.24 1404.75 1510.27 1657.17

Debt-equity

ratio%

0.29 0.55 0.96 1.07 1.46 1.68 1.6

Book value

per share

(Rs.)

168 115 88 74.45 59.92 55.38 63.04

Earning per

share (Rs.)

66.02 30.02 21.23 11.685 6.08 7.64 3.35

Dividend

per share

15 8 7 4 2.50 3 2

(Rs.)

Employees

(no.)

9231 9170 8995 9115 9216 9345 9991

Share

holders NO

110455 97219 105165 120803 142202 147591 148584

Earning –pr.

ratio%

16.44 17.74 17.25 21.62 23.60 20.15 40.22

Sales per

share-gross

(Rs.)

360.73 222.59 259.92 227.93 202.74 195.20 177.63

Yield% 1.38 1.50 1.91 1.58 1.74 1.95 1.48

Current ratio 1.31 1.16 1.25 1.22 1.24 1.44 1.55

Market price

of share

(Rs.)

High a):

Low b):

1192

501

569

318

385

218

283

127

170

127

180

91

200

83

ANNEXURE-4

BALANCE SHEET AS AT DECEMBER 31ST, 2006 11

2006 2005 (9

Months )

Rs.

Crore

Rs. Crore Rs. Crore

I. LIABILITIES

1. SHARE HOLDER’S FUNDS:

Share Capital 187.76 185.54

Reserves and Surplus 2955.16 1951.21

3142.92 2136.75

2. LOAN FUNDS:

Secured Loans 720.96 950.12

Unsecured Loans 50.20 121.30

771.16 1071.42

3. STOCKIST’S DEPOSIT

(UNSECURED)

144.82 104.75

4. DEFERRED TAX LIABILITY

(NET)

320.72 300.38

5. TOTAL FUNDS 4379.62 3613.30

II. ASSETS

1. FIXED ASSETS:

Gross Block 4816.25 4628.64

Less : Depreciation 1893.76 1722.29

Net Block 2922.49 2906.35

Capital work-in-progress 473.42 215.68

3395.91 3122.03

2. INVESTMENTS: 503.54 293.75

3. CURRENT ASSETS, LOANS &

ADVANCES:

ANNEXURE-5

COMPARISON OF 2006 AND 200510

2006 2005 (9

Months )

Rs.

Crore

Rs. Crore Rs. Crore

I. LIABILITIES

1. SHARE HOLDER’S FUNDS:

Share Capital 187.76 185.54

Reserves and Surplus 2955.16 1951.21

3142.92 2136.75

2. LOAN FUNDS:

Secured Loans 720.96 950.12

Unsecured Loans 50.20 121.30

771.16 1071.42

3. STOCKIST’S DEPOSIT

(UNSECURED)

144.82 104.75

4. DEFERRED TAX LIABILITY

(NET)

320.72 300.38

5. TOTAL FUNDS 4379.62 3613.30

II. ASSETS

1. FIXED ASSETS:

Gross Block 4816.25 4628.64

Less : Depreciation 1893.76 1722.29

Net Block 2922.49 2906.35

Capital work-in-progress 473.42 215.68

3395.91 3122.03

2. INVESTMENTS: 503.54 293.75

3. CURRENT ASSETS, LOANS &

ADVANCES:

ANNEXURE-6

P&L ACCOUNT OF YEAR 2006-07 11

2006 2005(9

Months

)

Rs.

Crore

Rs.

Crore

Rs .

Crore

Rs.

Crore

INCOME:

1. SALE OF PRODUCTS AND SERVICES (Gross)………….. 6453.07 3717.18

LESS-EXCISE DUTY RECOVERED………. 649.59 496.48

SALES OF PRODUCT AND SERVICES (NET)…… 5803.4

8

3220.70

2. OTHER INCOME…………………………………………… 132.88 97.92

5936.3

6

3318.62

EXPENDITURE:

3. MFG. AND OTHER EXPENSES……………………… 4180.26 2685.03

4. DEPRECIATION …………………………………………. 254.61 164.64

LESS TRANSFER FROM CAPITAL RESERVE……… 0.36 0.27

254.25 164.37

5. INTEREST…………………………………………………… 52.03 63.76

4486.5

4

2913.16

PROFIT/(LOSS) BEFORE TAXATION AND EXCEPTIONAL

ITEMS

1449.8

2

405.46

6 PROFIT AND LOSS INVESTMENT IN ERSTWHILE

SUBSIDIARY………………………………..

8.27 110.26

7 PROFIT ON SALE UNDERTAKING……………… 16.31 174.05

8WRITE BACK OF PROVISION FOR

CONTINGENCIES………………………………………………

.

0.50 7.50

9 PROVISION FOR EMPLOYEE BENEFITS………….. 13.15

10 PROFIT ON SALE OF LAND…………………………… 144.60

PROFIT/(LOSS)AFTER EXCEPTIONAL ITEMS BEFORE

TAX

1619.5

0

684.12

11 PROFIT FROM CONTINUING OPERATIONS BEFORE

TAXATION………………………………………

1619.5

0

661.37

12PROVISION FORTAXATION……………………………

(I)CURRENT TAX………………………….

(II)DEFFERED TAX………………………..

(III)PRIOR PERIOD TAX EXPENSE………….

(IV)FRINGE BENIFITTAX……………….

368.12

5.17

18.86

5.85

51.95

74.33

6.00

387.66 132.28

PROFIT/(LOSS)AFTER TAXATION FROM CONTINUING

OPERTIONS

1231.8

4

529.09

13 PROFIT FROM DISCONTINUED OPERATION BEFORE

TAXATION……………………………………

22.75

14 PROVISION FOR TAXATION…………………………

CURRENT TAX…………………….

DEFFERED TAX………………………….

11.99

4.33

7.66

PROFIT/(LOSS)AFTER TAXATION FROM

DISCONTINUED OPERTIONS

15.09

PROFIT/(LOSS)AFTER TAXATION ANDEXCEPSATIONAL

ITEMS

1231.8

4

544.18

15 BALANCE BROUGHT FORWARD FROM PREVIOUS

PERIOD…………………………………..

462.72 134.90

16 CREDIT BALANCE OF PROFIT AND LOSS ACOUNT OF

ERSTWHILE DAMODHAR CEMENT &SLAG LIMITED AS

ON APRIL 1,2005………………..

6.92

17 DEBIT BALANCE OF PROFIT AND LOSS ACCOUNT OF

ERSTWHILE BARGARH CEMENT LIMITED AS ON APRIL

1,2005

TARAMAC INDIA LIMITED AS ON JANUARY

1,2006…………………………………………………………

4.25

165.48

18 LESS: ADJUSTED FROM GENERAL RESERVE 4.25 165.78

462.72 141.82

AMOUNT AVAILABLE FOR APPROPRIATION 1694.5

6

686.00

APPROPRIATION:

19 PREVIOUS YEAR DIVIDEND………………………….. 1.72 0.32

20GENERAL RESERVE…………………….. 123.18 54.42

21 AMORTISATION RESERVE…………………………... 0.40 0.23

22 PROPOSED DIVIDEND……………………………… 280.92 147.61

23 TAX ON DISTRIBUTED PROFITS …………………… 39.40 20.70

445.62 223.28

BALANCE CARRIED TO BALANCE SHEET 1248.9

4

462.72

24 NOTES TO ACCOUNT…………………………………..

ANNEXURE-7

EARNINGS PER SHARE 12

Previous

Year (Rs.

Crore)

Current

Year (Rs.

Crore)

1 (A

)

Profit computation for basic earnings per share of Rs. 10

each net profit as per profit and loss account

Available for equity

shareholders…………………………….

544.18 1231.84

Adjustment for the purpose of diluted EPS 0.96 0.15

Interest on Foreign Currency convertible

Bond………………

0.2 -0.04

0.76 0.11

(B

)

Profit for diluted earning per share of Rs. 10 each………… 544.94 1231.95

2 Weighted average no. of equity share for earning per share

computation

(A

)

For basic Earning per

share………………………………………………………

…….

18124314

0

18659284

3

(B

)

For diluted earning per share:

No. of share for basic EPS as per (ii)

A…………………………………….

18124314

0

18659284

3

Add. Weighted Average out standings option/share

Deemed to issued for no consideration………………… 5997660 1440810

No. of share for diluted earnings per share……………… 18724080

0

18803365

3

3 Earnings per share ( weighted Average)

Basic………………………………………… 30.02* 66.02

Diluted……………………………………. 29.10* 65.52

ANNEXURE-8

COMPARISON OF GROSS REVENUE19

YearGross Revenue (in

Rs. million)

1999-2000 27604

2000-01 30318

2001-02 33338

2002-03 34654

2003-04 40388

2004-05 46405

2005 (9M) 38151

2006 65860

ANNEXURE-9

COMPARISON OF NET WORTH19

Year

Net Worth

(in Rs.

million)

Return on

Net Worth

(%)

1999-

200010398 -6

2000-01 10759 4

2001-02 9459 14

2002-03 10242 10

2003-04 13184 15

2004-05 15770 24

2005

(9M)21300 33

2006 31420 39

ANNEXURE-10

COMPARISON OF PROFIT AFTER TAX19

PAT

Year PAT(in Rs. million)

1999-2000 -589

2000-01 475

2001-02 1304

2002-03 1039

2003-04 2002

2004-05 3784

2005 (9M) 5442

2006 12318

ANNEXURE-11

COMPARISON OF DIVIDEND PAID BY ACC19

Dividends

Year Dividends (%)

1999-2000 10

2000-01 20

2001-02 30

2002-03 25

2003-04 40

2004-05 70

2005 (9M) 80

2006 150

ANNEXURE-12

INVESTMENT OF EARNED MONEY20

ANNEXURES-13

OTHER COMPARISON19

ANNEXURE-14

Trend analysis:

-500

0

500

1000

1500

2000

2500

1 2 3 4 5 6 7 8 9 10

YEARS

PR

OF

IT

0

200

400

600

800

1000

1200

1400

YEARS

EXPECTED PROFIT

PROFIT AFTER TAX(ACTUAL OUTCOMES)

ANNEXURE-15

t-test8:

XLSTAT 7.1 - One-Sample t-Test and Z-Test - 9/28/2007 at 8:35:11 PMSample: workbook = Book1.xls / sheet = Sheet1 / range = $C$3:$C$9 / 7 rows and 1 columnSignificance level: 0.050No missing values

One-Sample Student's t Test / two-tailed test:

Confidence interval at 95.00% of the mean:

-7.29

1 #

t (observed 1.12

value) 5

t (critical value)2.44

8

DF 6Two-tailed p-value

0.304

Alpha 0.05

Decision:At the level of significance Alpha=0.050 the decision is to not reject the null hypothesis that the mean is equal to 200.240.In other words, the difference between the mean and 200.240 is not significant.