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A comparative analysis of prism cement ltd with jk cement
 

A comparative analysis of prism cement ltd with jk cement

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A comparative analysis of prism cement ltd with jk cement

A comparative analysis of prism cement ltd with jk cement

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    A comparative analysis of prism cement ltd with jk cement A comparative analysis of prism cement ltd with jk cement Document Transcript

    • Projectsformba.blogspot.com Chapter 1 Introduction 1.1 Overview- Ratios 1.2 Companies for Analysis 1.3 Objective & Scope of Research Study 1.4 Limitation of Study 1.5 Research MethodologyProjectsformba.blogspot.com
    • Projectsformba.blogspot.comC omparative analysis is an important tool of analyzing and evaluating the performance and prospects of a firm. The analysis and interpretation of financial statements is used todetermine the financial position and results of operations a well. Financial statements areprepared primarily for decision-making. They play a dominant role in setting the framework ofmanagerial decisions. But the information provided in the financial statements is not an end initself as no meaningful conclusions can be drawn from these statements alone.However, the information provided in the financial statements is of immense use in makingdecisions through analysis and interpretation of financial statements. Financial analysis is ‘theprocess of identifying the financial strengths and weaknesses of the firm by properlyestablishing relationship between the items of the balance sheet and the profit and lossaccount.’1.1 RatiosThe most prevalent method of comparative analysis is through ratio analysis. The ratio analysiscan be for a single year or it may extend to more than one year. The ratios can also becompared with similar ratios of others concerns to make a comparative study. • First, all ratios will be worked out for each year and each set of comparable items. • The ratios worked out will be put in the context of a trend over several years. • They will be compared with similar companies/ standard ratios. i. For the year concerned, and ii. Over a period of time. 2
    • Projectsformba.blogspot.comTypes of Ratio Figure 1 Functional Classification1. Liquidity Ratioi). Current RatioThe ratio is worked out by dividing the current assets of the concern by its current liabilities.Current ratios indicate the relation between current assets and current liabilities. Currentliabilities represent the immediate financial obligations of the company. Current assets are thesources of repayment of current liabilities. Therefore, the ratio measures the capacity of thecompany to meet financial obligation as and when they arise. Textbooks claim a ratio of 1.5 to 2is ideal; bit in practice this is rarely achieved. This ratio is also known as working capital ratio.ii). Acid Test RatioQuick assets represent current assets excluding stock and prepaid expenses. Stock is excludedbecause it is not immediately realizable in cash. Prepaid expenses are excluded because they 3
    • Projectsformba.blogspot.comcannot be realized in cash. A minimum of 1: 1 is expected which indicates that the concern canfully meet its financial obligations. This also called as Liquid ratio or Quick ratio.2. Activity Ratiosi). Debtors Turnover RatioThe ratio obtained should be compared with that of other similar units. If the ratio of thecompany being studied is greater (say, 10 weeks as against 6 weeks for the industry), itindicates that the company is allowing longer than the usual credit periods. This may bejustified in the case of new companies or existing companies entering into new venturesii). Creditors Turnover RatioThis ratio shows how frequently company is paying to its creditor. Usually, higher the ratio-betters the performance of company.iii). Inventory Turnover RatioThe ratio is usually expressed as number of times the stock has turned over. Inventorymanagement forms the crucial part of working capital management. As a major portion of thebank advance is for the holding of inventory, a study of the adequacy of abundance of thestocks held by the company in relation to its production needs requires to be made carefully bythe bank.iv). Fixed Assets Turnover RatioThe ratio shows the efficiency of the concern in using its fixed assets. Higher ratios indicatehigher efficiency because every rupee invested in fixed assets generates higher sales. A lowerratio may indicate inefficiency of assets. It may also be indicative of under utilizations or non-utilization of certain assets. Thus with the help of this ratio, it is possible to identify suchunderlined or unutilized assets and arrange for their disposal. 4
    • Projectsformba.blogspot.com3. Leverage Ratioi). Debt-Equity RatioAlso known as external - Internal equity ratio is calculated to measure the relative claims ofoutsiders against the firm’s assets. This ratio indicates the relationship between the externalequities or the equities or the outsider’s funds and the internal equities or the shareholder’sfunds.ii). Interest Coverage RatioHigher the ratio better is the coverage. The firm may not fail on its commitments to pay interesteven if profits fall substantially.4. Profitability Ratiosi). Gross Profit RatioA comparison with the standard ratio for the industry will reveal a picture of the profitability ofthe concern. Also the ratio may be worked out for a few years and compared to verify if asteady ratio is maintained.ii). Net Profit RatioThis ratio serves a similar purpose as, and is used in conjunction with, the gross profit ratio.iii). Return on AssetsThis ratio measures the profits of the concern as a percentage of the total assets. For thepurpose of this ratio, the operating profit is calculated by adding back to net profit: (1) Interestpaid on the long term borrowings and debentures; (2) Abnormal and non-recurring losses; (3)Intangible assets written off. Similarly, from the net profit abnormal and non-recurring gainsare deducted. The idea is to get profit generated out of total investments made. 5
    • Projectsformba.blogspot.comiv). Earning PowerEarning power is a measure of business performance which is not affected by interest chargesand tax burden. It abstracts away the effect of capital structure and tax factor and focuses onoperating performance. Hence it is eminently suited for inter-firm comparison. Further, it isinternally consistent. The numerator represents a measure of pre-tax earnings belonging to allsources of finance and the denominator represents total financing.v). Return on Capital EmployedROCE is the post-tax version of earning power. It considers the effect of taxation, but not thecapital structure. It is internally consistent. Its merit is that it is defined in such a way that it canbe compared directly with the post-tax weighted average cost of capital of the firm.vi). Return on EquityThe return on equity measures the profitability of equity funds invested in the firm. It isregarded as a very important measure because it reflects the productivity of the ownershipcapital employed in the firm.5. Valuation RatiosValuation ratios indicate how the equity stock of the company is assessed in the capital market.Since the market value of equity reflects the combined influence of risk and return, valuationratios are the most comprehensive measures of a firm’s performance.i). Price Earnings RatioThe PE Ratio is a summary measure which primarily reflects the following factors: growth,prospects, risk-characteristics, shareholder orientation, corporate image, and degree ofliquidity.ii). EV-EBIDTA Ratio 6
    • Projectsformba.blogspot.comEV is the sum of the market value of equity and the market value of debt. The market value ofequity is simply the number of outstanding equity shares times the price per share. As far asdebt is concerned, if it is in the form of loans, its market value has to be imputed. Generally, arupee of loan is deemed to have a rupee of market value.EV-EBIDTA is supposed to reflect profitability, growth, risk, liquidity and corporate image.1.2 Companies for Comparative AnalysisBeing a management trainee of Prism Cement Ltd, it is a comparative analysis of Prism CementLtd with JK Cement Ltd. Before going on deep, here is company profile in brief.1.2.i. Prism Cement LtdPrism Cement Ltd. Is an ISO 9001:2000 certified professionally managed company promoted bythe Rajan Raheja Group. The company operates one of the largest single kiln cement plants inthe country at Satna, Madhya Pradesh. The company has also a packing unit at Allahabad, UttarPradesh equipped with machinery and technical support from world leaders, F.L. Smidth & CO.A/S, Denmark, Prism has created a niche for itself in the cement industry.The company primarily caters to the demand in the Northern Region mainly in the state ofUttar Pradesh, Bihar & Madhya Pradesh. The company plan for a five-fold increase in cementcapacity from 2 MTPA to 10.0 MTPA by 2011 through Brownfield and Greenfield expansion ismaking steady headway. These expansions will establish the company brand in new marketsand a larger customer base.A team of experienced engineers and a dedicated workforce combined with the high level ofautomation and sophisticated control system have placed the company product in the premiumsegment. 7
    • Projectsformba.blogspot.comPrism has successfully established a high brand preference amongst its customer through itsexcellent quality products and transparent policy. Prism has truly taken cement production toglobal standards.Review of operation and future outlook • Production of clinker and cement registered a growth of 5.45% and 9.20%, respectively. • Sales of cement and clinker increased from 26.93 Lakh tones during the year 2006-07 to 30.64 lakh tones during the year 2007-08, an increase of 13.78%. • Revenues increased by 15.42% to Rs. 1019.75 Crores during the year under review from Rs. 883.48 Crores during the previous year. • PAT for the year ended June 30, 2008 at Rs. 241.63 Crores, was higher by Rs. 48.86 Crores, registering a increase of 25% • Power consumption down by 5.75% to 68.08 unit’s ksh per ton cement.1.2.ii. JK Cement LtdJ.K. Cement is an affiliate of the J.K. Organization, which was founded by Lala KamlapatSinghania. The J.K. Organization is an association of industrial and commercial companies andhas operations in a broad number of industries.JK cement operations commenced commercial production in May 1975 at its first plant atNimbahera in the state of Rajasthan. At Nimbahera, it started with a single kiln with aproduction capacity of 0.3 million tons. JK Cement Ltd added a second kiln in 1979 withproduction capacity of 0.42 million tons, and a third kiln in 1982 with a production capacity of0.42 million tons. They added a precalciner with a capacity of 0.4 million tons in 1988, whichincreased their capacity at Nimbahera to 1.54 million tons. During the years 1998 through 2003,it continued to implement modifications to each of their kilns, which increased their aggregatecapacity at Nimbahera to 2.8 million tons as of September 30, 2005. 8
    • Projectsformba.blogspot.comJK commissioned a second grey cement plant at Mangrol plant in 2001, with a productioncapacity of 0.75 million tons. As of September 30, 2005, it had an aggregate production capacityof 3.55 million tons per annum of grey cement. JK white cement plant was completed in 1984with a capacity of 50,000 tons. Their continuing modifications to the plant have increased itsproduction capacity to 300,000 tons as of September 30, 2005.Today, J. K. Cement Ltd. is one of the largest cement manufacturers in Northern India. They arealso the second largest white cement manufacturer in India by production capacity. While thegrey cement is primarily sold in the northern India market, the white cement enjoys demand inthe export market including countries like South Africa, Nigeria, Singapore, Bahrain,Bangladesh, Sri Lanka, Kenya, Tanzania, UAE and Nepal.Their access to high quality limestone reserves that are suitable for production of white cementprovides them with a competitive advantage. Based on geological surveys conducted byindependent agencies on their mines between 1996 and 2001, their limestone reserves forboth grey and white cement are expected to meet their existing and planned limestonerequirements of 4.0 MnTPA of grey cement and 0.4 MnTPA of white cement, for approximately40 years.Backed by state-of-the-art technology and highly skilled manpower against the backdrop ofIndia’s infrastructural growth in an overdrive, they are upbeat about the future. They areconfident of contributing heavily in India’s journey of development. They see a world ofconcrete ideas on the horizon. 1.3. Objective & Scope of StudyThe study deals in brief to evaluate and analyze various aspects of company’s financial position,liquidity position, and long term solvency position, so as to present a clear picture ofperformance. This study is only based on Annual reports of company, by comparing the ratiosof last 5 years. A study like this will help the organization to make decisions based on thecurrent performance. This study also groomed me as I interacted with more industry peopleand also gave me a good industry exposure. The study will also help Prism Cement Ltd to 9
    • Projectsformba.blogspot.comincrease its efficiency by finding out its Strongest & Weakest points. This study focus oncomparative analysis & ratio analysis of Prism cement Ltd with JK Cement Ltd. Main objective ofthis research are as follows- • To find out the company solvency position in long term that which company is more solvent and able to pay its long term liabilities in time. • To find out debt-equity mix in capital structure of company, its financial leverage, its external and internal liability, etc. This will help to find out that which company is opting optimum capital structure as per nature of its business. • To find out the profitability position of the company, their GP Margin, NP margin, Earning Power, etc. • To find out the short term solvency position of company i.e. Liquidity, current ratio, working capital ratio, etc. This will help to find out the ability of firm to meet its current liabilities, and perform day to day operation. • To find out the benefits provided by company to its shareholders, Earning per share, Dividend Declared, corporate social responsibilities, etc. 1.4. Limitation of the Study: Limitations are difficulty faced or can be face while doing study. These can be normal limitation like- budget constraints, time constraint which are common for every project. Because time and money are always limited and we cannot spend in huge amount. So this is first constraint to finish study in time and within budget. Apart from these limitations other are- Technical Limitation. These limitations are related with constraint of tool or method used for analysis. As this is project is totally based on secondary data. So the main limitation which can be faced are: 10
    • Projectsformba.blogspot.com • Study is only based on annual report of company, which is not sufficient to compare performance & efficiency of company. • Information available in annual report is also altered, which is not so accurate. 1.5. Research MethodologyType of Data: - There are two types of data: Primary Data and Secondary Data. Primary data arethose data which are collected first time, to meet the objective of research only. Secondarydata is data which has been already used for any other purpose and can be used for thisresearch. As this study is based on financial statements of companies, means Secondary Data.Method of Data collection: - For collecting secondary data, Annual report of company will useas well as financial reports available on various stock market websites.Data Analysis & Interpretation: - Collected data will we present with the help of- o Table- To represent data in tabular form. It is easy to analyse data and make some conclusion o Bar graph- Use to present data in chart or graph form. It is best way to present data. o Ratios- A tool for analysis. This is normally used by manager to make interpretation. 11
    • Projectsformba.blogspot.com Chapter 2 Prism Cement Ltd & JK Cement Ltd 2.1.0 Prism Cement Ltd 2.1.1 Company Vision & Mission 2.1.2 Features 2.1.3 Corporate Social Responsibility 2.1.4 Current Performance 2.2.0 JK Cement Ltd 2.2.1 Plants 2.2.2 Corporate Social Responsibility 12
    • Projectsformba.blogspot.comP rism Cement Ltd and JK Cement Ltd, both are player of cement industry. Both the companies are targeting Northern region of our country. Although JK cement is majorplayer as compare to Prism Cement Ltd because it is operating from last 34 years, on the otherhand Prism Cement Ltd is operating from only 15 years. But Prism has performed very well andachieved milestones in very less time. For this research study we are considering theperformance of last four financial years of both the company. Before analyzing theirperformance let’s see the company important aspects in deep.2.1.0 Prism Cement LtdPrism Cement Ltd. Is an ISO 9001:2000 certified professionally managed company promoted bythe Rajan Raheja Group. The company operates one of the largest single kiln cement plants inthe country at Satna, Madhya Pradesh. The company has also a packing unit at Allahabad, UttarPradesh equipped with machinery and technical support from world leaders, F.L. Smidth & CO.A/S, Denmark, Prism has created a niche for itself in the cement industry.The company primarily caters to the demand in the Northern Region mainly in the state ofUttar Pradesh, Bihar & Madhya Pradesh. The company plan for a five-fold increase in cementcapacity from 2 MTPA to 10.0 MTPA by 2011 through Brownfield and Greenfield expansion ismaking steady headway. These expansions will establish the company brand in new marketsand a larger customer base.2.1.1 Vision & MissionVision“To be acknowledged as a leading player in the industry with the highest level of integrity.”Mission:- 13
    • Projectsformba.blogspot.com • State of the art cement plants • Transparent dealings with all stakeholders • Committed to the principles of good corporate governance2.1.2. Features  The entire cement manufacturing process at all prism cement plant represents the latest relevant state-of-the-art technology.  Our all plant equipment are supplied by M/S F.L. Smidth & Co., Denmark and its subsidiaries, Ventomatic; Krupp Industries Ltd., ABB, Seimens and Crompton Greaves.  Computerized mining activities using three dimensional imaging for optimum blending of raw material.  The vertical roller press mill for efficient grinding of raw meal.  Six stage low pressure drop pre-heater for lower power consumption.  Online computerized quality control by x-ray spectrometer to ensure raw meal control and consistency from raw meal to final product cement.  Fuzzy logic control for kiln and cement mill to ensure instantaneous corrective response through computer based control system.  A Combination of roller press and ball mill for improved finish grinding of cement  Quality grinding through closed circuit grinding system  Pollution control system e.g. ESP and bag filters for all plant building to meet stringent pollution control requirement.  All electronic packers each capable of packing accurately 120 MT of finished cement per hour. 14
    • Projectsformba.blogspot.com  Automatic truck loader each capable of loading 15 MT of cement in 10 minutes.  Wagon loaders each capable of loading one full rake in 5 hours.  Total self reliance in power requirement through DG sets2.1.3 Corporate Social ResponsibilityFor prism, corporate social responsibility is not just a program but it is the way business is doneevery day. The company has always been conscious of its social obligation and has initiatedwelfare programmes for the benefit of its employees and villagers living near the plant byproviding the basic facilities and a better way of living, right from its inception.Besides providing emergency and basic medical facilities to its employees and contractors andtheir families at the plan, a mobile medical van provides free medical aid to the villagers andtheir families.Operations of a cement plant have inherent potential to emit dust and gases that may affect airquality negatively. At prism, the installation of pollution control equipment of internationalstandard are in place to improve air quality at and around the operations.Water management and water quality remain the key focus areas of the management. Thequality of both surface and ground ware is monitored regularly to ensure that the mining andplant operations do not pollutes the water resources of the communities living around themining and plant area.In recognition of the above, the company was awarded the energy conservation award by thegovernment of India, ministry of power for the year 2006. The company was also awarded the1st prize for environment management by the government of Madhya Pradesh, ministry ofenvironment announced in 2007.2.1.4 Current Performance 15
    • Projectsformba.blogspot.comPrism cement posted a profit after tax (PAT) of Rs. 2.42 billion for the year ended June 30, 2008as against Rs. 1.93 billion for the previous year ended June 30, 2007 registering a growth of25%.Sales grew 15% from Rs. 8.83 billion to Rs. 10.2 billion in the same period crossing the Rs. 10billion mark for the first time. The company is debt-free and has liquid investment of over Rs.2.51 billion as on June 30, 2008.The significant growth in net profits is driven by increase in sales volume. Improve realizationsand reduced finance charges, despite increase in input costs. Blended cement contributed to87% of sales, the company said in a release.The company caters mainly to markets of eastern UP, North Eastern MP and western Biharwhich are within the radius of 360 km of its plant at Satna, MP.The company has the highest quality standards due to modern plant with automated controls.The strength and other characteristics of its cement are much higher than the BIS requirement.2.2.0 JK Cement LtdJK Cement Limited engages in the manufacture and trade of cement and related productsprimarily in India. It produces grey and white cement, as well as white cement based Wall Puttyand JK Water Proof cement. The company’s grey cement consists of ordinary Portland cement(OPC) and Portland pozzolana cement (PPC). It markets OPC products under the brand namesJ.K. Cement and Sarvashaktiman; PPC products under J.K. Super; and white cement productsunder J.K. White and Camel. The company also involves in the generation of electricity throughits waste heat recovery plant. JK Cement Limited exports white cement to South Africa, Nigeria,Singapore, Bahrain, Bangladesh, Sri Lanka, Kenya, Tanzania, the United Arab Emirates, andNepal. The company was founded in 1975 and is based in Kanpur, India.2.2.1 Plants 16
    • Projectsformba.blogspot.comJK Cement manufactures grey cement in two facilities located at Nimbahera and Mangrol in thestate of Rajasthan in Northern India. White cement is produced at our facility at Gotan in thestate of Rajasthan. Our plants have obtained many accolades and recognition, the mostnoteworthy being : ISO-9001:2000 QMS and ISO-14001:2004 EMS for the grey cement facility atNimbahera and ISO-9001:2000 QMS, ISO-14001:1998 EMS & OHSAS-18001:2005 OccupationalHealth and Safety for the white cement facility at Gotan. The construction of our first mostmodern dry cement plant began in 1970 in Nimbahera in Rajasthan.The following table shows a breakdown of production of the Nimbahera, Mangrol and Gotancement facilities for the periods indicated2.2.2 Corporate Social ResponsibilityJK Cements has performed various activities to build its image as well as fulfill its corporatesocial responsibility. Some important ones are as follows. • Concrete Road with proper drainage system at Gotan village • Sponsorship of annual Eye camps at Gotan • Street Light for Gotan village • Tree plantation along the road leading to Gotan • Organizing Social event for residents of Local area • Funding & Technical support for Infrastructure projects of Local Community • Tube Well – to provide drinking water for villagers • Temple (Renovation of two old temples) • Dharamshala (Inn) at Gotan Village • Free education to the wards of Kargil war heroes • Free bus service for students of nearby villages • Building for girls school at Gotan village 17
    • Projectsformba.blogspot.com Chapter 3 Performance Analysis of Prism Cement Ltd with JK Cement Ld 3.1 Balance Sheet of Companies 3.2 P&L of Companies 3.3 Ratio Analysis & Interpretation 18
    • Projectsformba.blogspot.comF inancial statements are an important source of information for evaluating the performance and prospects of a firm. If properly analyzed and interpreted, financialstatements can provide valuable insights into a firm’s performance. Financial statementanalysis may be done for a variety of purposes, which may range from a simple analysis of theshort-term liquidity position of the firm to a comprehensive assessment of the strengths andweaknesses of the firm in various areas.3.1 Balance Sheet of CompaniesThe balance sheet shows the financial condition of a business at a given point of time. As perthe Companies Act, the balance sheet of a company shall be in either the account form or thereport form. Table 3.1 shows balance sheet of Prism Cement Ltd & Table 3.2 shows balancesheet of JK Cement Ltd.3.2 P&L of CompaniesProfit & Loss account also known as income statement of a company, depicts all theinformation regarding Income and expenditure of company. Table 3.3 shows P&L of PrismCement Ltd and Table 3.4 shows P&L of JK Cement Ltd. 19
    • Projectsformba.blogspot.com Prism Cement Ltd (Balance Sheet) Accounting Period (Rs. In Lacs) 2005-06 2006-07 2007-08 2008-09Sources of FundShareholder’s Fund Capital 298.25 298.25 298.25 298.25 Reserve & Surplus -44.90 112.97 319.52 363.40 253.35 411.22 617.77 661.65Loan Fund Secured Loan 100.27 0.00 0.00 0.00 Unsecured Loan 7.66 0.00 0.00 0.00 107.93 0.00 0.00 0.00Deferred Tax Liability -2.30 64.57 58.77 52.77Total 358.98 475.79 676.54 714.42Application Of FundFixed Assets Gross Block 602.86 647.05 702.95 733.39 Less: Depreciation 254.38 286.11 317.43 340.69 Net Block 348.48 360.94 385.52 392.70 Capital Work in Progress 7.96 2.00 17.96 109.16 356.44 362.94 403.48 501.86Projectsformba.blogspot.com
    • Projectsformba.blogspot.comInvestment 0.00 141.87 258.76 203.81Current Assets, Loan & Advances Inventories 61.78 85.22 90.35 76.90 Sundry Debtors 14.55 3.57 3.38 0.00 Cash & Bank Balance 16.91 11.04 12.97 25.87 Other Current Assets 0.00 0.00 0.00 0.00 Loan & Advances 29.43 44.63 55.82 65.89 122.67 144.46 162.52 168.66Less: Current Liabilities & Provision Liabilities 116.57 132.95 124.67 109.82 Provision 5.43 40.53 23.55 50.09 122.00 173.48 148.22 159.91Net Current Assets 0.67 -29.02 14.30 8.75Miscellaneous Expenditure Preliminary Expenses 0.00 0.00 0.00 0.00 Deferred Revenue Expenditure 1.87 1.87 0.00 0.00 0.00 0.00 0.00 0.00Total 358.98 475.79 676.54 714.42 Table 3.1 Balance Sheet of Prism Cement Ltd 21
    • Projectsformba.blogspot.com JK Cement Ltd (Balance Sheet) Accounting Period (Rs. In Lacs) 2005-06 2006-07 2007-08 2008-09Sources of FundShareholder’s Fund Capital 69.93 69.93 69.93 69.93 Reserve & Surplus 604.35 750.18 983.41 1,116.13 674.27 820.11 1,053.34 1,186.06Loan Fund Secured Loan 443.14 429.94 382.79 436.86 Unsecured Loan 139.02 127.77 127.74 127.54 582.16 557.71 510.53 564.40Deferred Tax Liability 17.40 43.19 50.99 100.60Total 1,273.83 1,421.01 1,614.86 1,851.06Application Of FundFixed Assets Gross Block 959.20 1,029.42 1,249.77 1,441.15 Less: Depreciation 61.21 106.98 160.63 225.40 Net Block 897.99 922.44 1,089.13 1,215.75 Capital Work in Progress 56.90 164.39 133.84 35.06 954.89 1,086.83 1,222.97 1,250.81 22
    • Projectsformba.blogspot.comInvestment 0.00 15.91 9.50 10.74Current Assets, Loan & Advances Inventories 83.98 110.01 114.53 136.13 Sundry Debtors 46.13 62.16 57.26 53.04 Cash & Bank Balance 285.42 192.54 145.44 125.20 Other Current Assets 1.20 1.29 1.33 1.32 Loan & Advances 92.67 165.10 352.50 581.49 509.39 531.09 671.06 897.17Less: Current Liabilities & Provision Liabilities 179.70 172.85 238.63 266.37 Provision 12.65 41.72 52.01 43.74 192.35 214.57 290.64 310.11Net Current Assets 317.04 316.52 380.42 587.07Miscellaneous Expenditure Preliminary Expenses 0.13 0.08 0.04 0.00 Deferred Revenue Expenditure 1.78 1.90 1.66 1.74 1.92 1.96 2.44 2.44Total 1,273.83 1,421.01 1,614.86 1,851.06 Table 3.2 Balance Sheet of JK Cement Ltd 23
    • Projectsformba.blogspot.com Prism Cement P&L 24
    • Projectsformba.blogspot.com 2005-06 2006-07 2007-08 2008-09Income Gross Sales 678.18 883.48 1,019.75 721.41 Less: Excise Duty 106.44 116.68 143.30 94.17 Net Sales 571.74 766.80 876.45 627.24 Other Income -1.87 4.62 15.92 9.93 Total 569.87 771.42 892.37 637.17Expenditure Manufacturing Expenses 301.54 313.96 382.95 327.57 Personal Expense 19.40 23.88 35.43 27.42 Selling, Administration and other expenses 99.90 420.84 98.91 436.75 121.50 539.88 102.35 457.34 Profit before finance charge & Depreciation 149.03 334.67 352.49 179.83 Interest & Other Charges 18.84 5.80 3.21 3.25 Lease Rental 6.50 25.34 0.81 6.61 0.62 3.83 0.29 3.54Profit Before Depreciation 123.69 328.06 348.66 176.29 Depreciation 30.73 31.87 31.93 24.31 Amortization of deferred expenses 2.31 33.04 2.13 34.00 0.00 31.93 0.00 24.31 25
    • Projectsformba.blogspot.comProfit Before Tax 90.65 294.06 316.73 151.98 Provision for Tax Current Tax 9.06 34.13 80.41 61.24 Fringe Benefit Tax 0.33 0.29 0.40 0.51 Deferred Tax 19.18 28.57 66.87 101.29 -5.71 75.10 -6.00 55.75Profit After Tax 62.08 192.77 241.63 96.23 Surplus/Deficit Brought Forward -106.98 -44.90 112.97 319.52 Less: Transitional adjustment for AS-15 0.00 0.00 0.18 0.00Amount Available for appropriation -44.90 147.87 354.42 415.75 Appropriations Proposed Dividend 0.00 29.83 0.00 14.92 General Reserve 0.00 0.00 0.00 5.00 Tax on Proposed Dividend 0.00 5.07 0.00 2.53 Interim Dividend 0.00 0.00 29.83 29.83 Tax on Interim Dividend 0.00 0.00 0.00 34.90 5.07 34.90 5.07 57.35Balance Carried To Balance Sheet -44.90 112.97 319.52 358.40No. Of Equity Share 29.83 29.83 29.83 29.83Earning Per Share 2.08 6.46 8.10 3.23 Table 3.3 P&L of Prism Cement Ltd 26
    • Projectsformba.blogspot.com JK Cement P&L 2005-06 2006-07 2007-08 2008-09Income Gross Sales 1,108.68 1,529.67 1,812.85 1,876.45 Less: Excise Duty 167.51 184.96 218.34 210.95 Sales Tax 67.47 234.98 111.37 296.33 136.26 354.59 168.67 379.62 Net Sales 873.70 1,233.33 1,458.25 1,496.84 Other Income 9.38 10.69 7.86 7.91 Total 883.08 1,244.03 1,466.11 1,504.75Expenditure Manufacturing Expenses 455.17 535.85 604.16 659.32 Provision for Employee 41.20 48.84 67.64 83.78 Selling, Administration and other expenses 245.31 319.48 370.80 429.73 Interest 58.17 34.72 35.88 45.53 Total 799.85 938.89 1,078.47 1,218.36 27
    • Projectsformba.blogspot.comProfit Before Depreciation 83.23 305.14 387.64 286.38 Depreciation 43.41 45.95 53.81 65.10 Less: Transfer for Revaluation Reserve 12.39 31.02 12.79 33.16 12.74 41.07 12.68 52.42Profit Before Tax 52.21 271.98 346.57 233.96 Provision for Tax Fringe Benefit Tax 1.50 2.00 2.10 1.97 Current Tax 4.34 69.84 71.50 55.68 Deferred Tax 13.80 19.64 21.52 93.37 7.80 81.40 33.97 91.62Profit After Tax 32.57 178.62 265.17 142.34 Balance From Previous year 6.33 6.94 56.92 31.18Amount Available for appropriation 38.90 185.56 322.09 173.53 Appropriations General Reserve 20.00 100.00 150.00 100.00 Proposed Dividend 10.49 24.47 34.96 24.47 Corporate Dividend Tax 1.47 31.96 4.16 128.64 5.94 190.91 4.16 128.63 28
    • Projectsformba.blogspot.comBalance Carried To Balance Sheet 6.94 56.92 131.18 44.89No. Of Equity Share 5.12 6.99 6.99 6.99Earning Per Share 6.36 25.54 37.92 20.36 Table 3.4 P&L of JK Cements Ltd 29
    • 3.3 Ratio Analysis & InterpretationLiquidity Ratio 1. Current Ratio: Current AssetsCurrent Ratio=Current Liabilities 2005-06 2006-07 2007-08 2008-09 JK Cement 2.65 2.48 2.31 2.89 Prism Cement 1.01 0.83 1.10 1.05Interpretation: Here JK Cement Ltd current ratio is more than 2 in all cases. As standard forcurrent ratio is 2:1, so JK Cement is performing well by maintaining proper current assets tomeet its current liability. But on the other hand this also shows that company has lot of blockedfund, which is not properly utilized, this is not a good sign for company. On contrary PrismCement Ltd has its current ratio is similar to 1 in all 4 years. This is also not good for companyhealth, because, company’s current liabilities are equal to current assets. So, company shouldinvest more on current assets, for paying all its current liabilities in time, without fail. 2. Acid Test Ratio: Quick Assets . Current LiabilitiesProjectsformba.blogspot.com
    • Projectsformba.blogspot.comAcid Test Ratio= 2005-06 2006-07 2007-08 2008-09JK Cement 2.21 1.96 1.91 2.45Prism Cement 0.50 0.34 0.49 0.57Interpretation: Here again JK Cement Ltd. is showing more liquidity because its cash position isvery high. This shows more blocked fund of JK Cement Ltd. On the contrary Prism CementLiquidity position is not good, because Prism has maintained very low cash balance and itsmajor part of current assets is of Inventory. 3. Working Capital to total Assets Ratio Working CapitalWorking Capital to Total Assets Ratio= Total Assets 2005-06 2006-07 2007-08 2008-09 JK Cement 0.24 0.20 0.21 0.29 Prism Cement 0.00 -0.05 0.02 0.01 2
    • Projectsformba.blogspot.comInterpretation: Working Capital to Total Assets ratio for JK Cement Ltd is consistent for everyyear but for Prism Cement Ltd. it is very fluctuating. Because in 2005-06 it Working Capital wasvery low that’s why its WCTA Ratio is 0.002 in 2005-06. In 2006-07 its working capital came tonegative and in 2007-08 and 2008-09 it is near to 0.02 and 0.01 respectively. 4. Retained Earnings to Total Assets Ratio Retained EarningsRetained Earnings to Total Assets Ratio = Total Assets 2005-06 2006-07 2007-08 2008-09 JK Cement 0.46 0.48 0.56 0.55 Prism Cement -0.19 0.20 0.43 0.43 3
    • Projectsformba.blogspot.comInterpretation: Retained Earnings to Total Assets is a measure of reinvestment of earning. JKCement Ltd is maintaining ratio of 0.46 to 0.56 in respective years. But for Prism Cement Ltd. itis in negative in 2005-06 but become positive in 2006-07, 2007-08 and 2008-09 respectively.Leverage Ratio 1. Debt-Equity Ratio: DebtDebt-Equity Ratio= Equity 2005-06 2006-07 2007-08 2008-09 JK Cement 0.86 0.68 0.48 0.48 Prism Cement 0.43 0.00 0.00 0.00Interpretation: Here both companies are in good position because their debt-equity ratio is lessthan 1. In 2005-06 JK Cement Ltd ratios was 0.86 which is now decrease to 0.48. it meanscompany has redeemed its debt and enjoying its reserves & Surplus for further financing. Onthe contrary Prism Cement Ltd. has redeemed all its debt in 2006-07 and using its equity &reserves for further investment. 4
    • Projectsformba.blogspot.com 2. Interest Coverage Ratio Earnings Before Interest & TaxInterest Coverage Ratio= Interest 2005-06 2006-07 2007-08 2008-09 JK Cement 1.90 8.83 10.66 6.14 Prism Cement 5.81 51.70 99.67 47.76Interpretation: Here in 2005-06 interest coverage Ratio of was very low for JK Cement as wellas Prism Cement Ltd because they have to pay more interest due to more debt in capitalstructure. From next years, their interest coverage ratio is increased because of lesser debtfund. For Prism it is almost 100 times in 2007-08 because its debt is totally near to zero so theirinterest amount is very less. That is good for company because their fixed liabilities can easilymet by its earning. 3. Market Value of Equity / Total Debt Market Value of EquityMarket Value of Equity to Total Debt= Total Debt 2005-06 2006-07 2007-08 2008-09 JK Cement 1.53 1.81 2.23 0.49 Prism Cement 7.72 0.00 0.00 0.00 5
    • Projectsformba.blogspot.comInterpretation: Market Value of Equity to Total Debt ratio is measure of Leverage of company.For JK Cement Ltd it is constant i.e. 1.53 in 2005-06, 1.81 in 2006-07, 2.23 in 2007-08 and 0.49in 2008-09. For Prism Cement Ltd. it is very high because Prism finance mainly from equityfinancing. In 2006-07 it has redeemed all its debt so debt portion become Zero. That’s why in2005-06 it is 7.72 but from 2006-07 to 2008-09 it came to infinite because denominatorbecomes zero.Turnover Ratio 1. Inventory Turnover Ratio: Cost of goods soldInventory Turnover Ratios= Average Inventory 2005-06 2006-07 2007-08 2008-09 JK Cement 14.73 15.77 16.15 14.97 Prism Cement 21.95 12.02 11.62 8.63 Average InventoryInventory Turnover Period (In days) = X 365 Cost of Goods Sold 2005-06 2006-07 2007-08 2008-09 JK Cement 24.78 23.14 22.60 24.38 Prism Cement 16.63 30.37 31.42 31.88 6
    • Projectsformba.blogspot.comInterpretation: Inventory Turnover Ratio is good for both companies. For JK Cement Ltd. it isconsistent and almost same for all 4 financial year. But for Prism Cement Ltd. it is decreasing inconsequent years. Although, higher the ratio, the more efficient management of inventoriesand vice versa. However, this may not always true. A high inventory turnover may be caused bya low level of inventory which may result in frequent stock outs and loss of sales and customergoodwill. 2. Debtor Turnover Ratio Credit sales during YearDebtor Turnover Ratio= Average Balance of Debtors 7
    • Projectsformba.blogspot.com 2005-06 2006-07 2007-08 2008-09 JK Cement 25.08 28.25 30.36 34.03 Prism Cement 78.59 84.64 252.22 371.15Interpretation: Here again both companies are showing good performance because higher thedebtor turnover ratio is good for company. For JK Cement Ltd it has ranges from 25 to 34 timesin all four years. It means JK Cement ltd. has adopted consistent credit policy for its debtor. Onthe contrary for Prism cement Ltd. it is very rigid policy. They do not provide credit facility forits customers. Their most of sale is cash sale. That’s why its debtor turnover ratio iscontinuously raising. 4. Fixed Assets Turnover Ratio Net SalesFixed Assets Turnover Ratio= Fixed Assets 2005-06 2006-07 2007-08 2008-09 JK Cement 0.97 1.35 1.45 1.30 Prism Cement 3.28 2.16 2.35 1.61 8
    • Projectsformba.blogspot.comInterpretation: Here Fixed Assets Turnover Ratio is Higher for Prism Cement Ltd. this indicates ahigh degree of efficiency in asset utilization. On the other hand it is very low for JK Cement Ltd.in 2005-06, but increases in successive years. 5. Total Assets Turnover Ratio Net SalesTotal Assets Turnover Ratio= Total Assets 2005-06 2006-07 2007-08 2008-09 JK Cement 0.66 0.80 0.82 0.74 Prism Cement 2.38 1.36 1.19 0.74Interpretation: Total assets Turnover Ratio is same as Fixed Assets Turnover ratio. Onlydifference is that it considers the total asset instead of fixed assets. Here again total Assets 9
    • Projectsformba.blogspot.comTurnover Ratio is good for Prism Cement Ltd. in Initial Year but it is showing a decreasing trend.On the other hand it is very low for JK Cement Ltd. showing inefficient employment of assets.Profitability Ratio 1. Gross Profit MarginGross Profit Margin= Gross Profit X 100 Net Sales 2005-06 2006-07 2007-08 2008-09 JK Cement 43% 53% 54% 50% Prism Cement 44% 56% 52% 43%Interpretation: Both the companies are maintaining consistent Gross Profit Margin. JK CementLtd and Prism Cement Ltd both are maintaining almost 50 % Gross Profit in its total sales. Innutshell we can say that Prism cement Ltd is getting more margin of GP as compare to JKCement Ltd. But from 2007-08 onward JK Cement is more efficient in its manufacturingexpenses and start getting more GP Margin as compare to Prism Cement Ltd. 2. Net Profit MarginNet Profit Margin= Net Profit X 100 Net Sales 10
    • Projectsformba.blogspot.com 2005-06 2006-07 2007-08 2008-09 JK Cement 4% 14% 18% 10% Prism Cement 11% 25% 28% 15%Interpretation: Here both companies are getting lesser Net Profit Margin as compare to GPMargin. It shows that Cement Industries have lot of administrative expenses because of whichits net profit margin is decreases. In 2005-06 JK Cement Ltd was getting only 4% of sales as NetProfit. Its net profit increases to 14%, 18% and 10% in successive financial year. For Prismcement Ltd. it is 14% in 2005-06 and increases to 25%, 28% and 15% respectively in successiveyears. Here again Prism Cement Ltd. is performing better than JK Cement Ltd. 3. Return on AssetsReturn on Assets= Profit after Tax X 100 Average Total Assets 2005-06 2006-07 2007-08 2008-09 JK Cement 2% 12% 15% 7% Prism Cement 13% 34% 33% 11% 11
    • Projectsformba.blogspot.comInterpretation: Return on assets means return on total investment made in current assets aswell as fixed assets. For JK Cement it is very low in 2005-06 i.e. 2%. It increases to 12%, 15% andthen 7% in respective years. For Prism cement Ltd. it is 13% in 2005-06 and increases to 34%,33% and 11% in respective years. 4. Earning PowerEarning Power= Profit before interest & Tax X 100 Average Total Assets 2005-06 2006-07 2007-08 2008-09 JK Cement 8% 20% 22% 14% Prism Cement 23% 53% 43% 18%Interpretation: Again in Earning Power also Prism Cement Ltd is performing better then JKCement Ltd. Earning Power Ratio is showing increasing trend in 2006-07 and 2007-08 but in2008-09 again it decreases for both company. 5. Return on Capital EmployedReturn on Capital Employed= Profit before interest after Tax X 100 Average Total Assets 12
    • Projectsformba.blogspot.com 2005-06 2006-07 2007-08 2008-09 JK Cement 7% 14% 17% 9% Prism Cement 34% 35% 33% 12%Interpretation: For JK Cement Ltd. in 2005-06 Return on capital Employed is 7% and increasesto 14%, 17% and 9% respectively. For Prism Cement Ltd. it is 34%, 35%, 33% and 12% inrespective Year. 6. Return on EquityReturn on Equity= Equity Earnings X 100 Average Equity 2005-06 2006-07 2007-08 2008-09 JK Cement 6% 24% 28% 13% Prism Cement 25% 58% 47% 15% 13
    • Projectsformba.blogspot.comInterpretation: Again, in Return for equity share holder, Prism Cement Ltd is giving good returnto its shareholder i.e. 25% in 2005-06, 58% in 2006-07, 47% in 2007-08 and 15% in 2008-09. ForJK Cement Ltd. it is 6% in 2005-06, 24% in 2006-07, 28% in 2007-08 and 13% in 2008-09respectively.Earnings Per ShareEPS= Earning Available for Equity Shareholder Number of Outstanding Share 2005-06 2006-07 2007-08 2008-09 JK Cement 6.36 25.54 37.92 20.36 Prism Cement 2.08 6.46 8.10 3.23 14
    • Projectsformba.blogspot.comInterpretation: In case of EPS JK Cement is giving good return as compare to Prism Cement Ltd.In 2005-06, JK Cement’s EPS is 6.36, 25.54 in 2006-07, 37.92 in 2007-08 and 20.36 in 2008-09.For Prism Cement Ltd. it is 2.08 in 2005-07, 6.46 in 2006-07, 8.10 in 2007-08 and 3.23 in2008-09 respectively.Valuation Ratio 1. Price Earnings Ratio Market Price per sharePrice Earnings Ratio= Earnings per Share 2005-06 2006-07 2007-08 2008-09 JK Cement 27.35 5.66 4.30 1.95 Prism Cement 13.43 6.67 4.15 7.05Interpretation: High Price-Earnings Ratio show good market return for equity shareholder. In2005-06 PE Ratio for JK Cement is 27.35 times. It shows that investor see good growth prospectin future. But from next year onward its PE Ratio is decreased sharply. It is 5.66 in 2006-07, 4.30 15
    • Projectsformba.blogspot.comin 2007-08 and 1.95 in 2008-09. For Prism Cement Ltd. it is 13.43 in 2005-06, 6.67 in 2006-07,4.15 in 2007-08 and 7.05 in 2008-09, respectively. 2. EV-EBIDTA Ratio Enterprise Value .EV-EBIDTA Ratio= Earnings before interest, taxes, depreciation and amortization 2005-06 2006-07 2007-08 2008-09 JK Cement 9.58 4.45 3.78 2.44 Prism Cement 6.71 3.88 2.85 3.78Interpretation: EV-EBIDTA is also a tool to reflect profitability. In 2005-06 JK Cement Ltd wasshowing EV-EBIDTA ratio of 9.58 times, which was good indicator for company. But for nextyear’s this ratio decreases to 4.45 in 2006-07, 3.78 in 2007-08 and 2.44 in 2008-09. For PrismCement Ltd it is 6.71 times in 2005-06, 3.88 in 2006-07, 2.85 in 2007-08 and 3.78 in 2008-09.Bankruptcy ForecastingAltman Z-ScoreZ = 1.2 X1 + 1.4 X2 + 3.3 X3 + 0.6 X4 + 1.0 X5Where X1 = Working Capital to Total Assets Ratio X2 = Retained Earnings to Total Assets X3 = EBIT to Total Assets 16
    • Projectsformba.blogspot.com X4 = Market Value of Equity to Book Value of Debt X5 = Sales to Total Assets 2005-06 2006-07 2007-08 2008-09 JK Cement 2.77 3.46 3.91 2.60 Prism Cement 7.50 3.33 3.25 1.95Interpretation: Here JK Cement Ltd is showing very healthy firm because its ratio is more than2.99 in all years. For Prism Cement Ltd it is more than JK Cement Ltd but in graph it is showingdecreasing trend because its debt is zero, so, its market value of equity to book value of debtbecome zero. Otherwise Prism is very sound company and it doesn’t show any bankruptcy 17
    • Projectsformba.blogspot.com Chapter 4 Finding, Suggestion and Conclusion 1.1 Finding 1.2 Conclusion 1.3 Suggestion 18
    • Projectsformba.blogspot.com4.1 FindingRatio Company 2005-06 2006-07 2007-08 2008-0 9Net Sales JK Cement Ltd 873.70 1233.33 1458.25 1796.84 Prism Cement Ltd. 571.74 766.80 876.45 627.24Predictor RatioAltman Z-Score JK Cement Ltd 2.77 3.46 3.91 2.60 Prism Cement Ltd. 7.50 3.33 3.25 1.95Profitability RatioGross Profit Margin JK Cement Ltd 43% 53% 54% 50% Prism Cement Ltd. 44% 56% 52% 43%Net Profit Margin JK Cement Ltd 4% 14% 18% 10% Prism Cement Ltd. 11% 25% 28% 15%Return on Assets JK Cement Ltd 2% 12% 15% 7% Prism Cement Ltd. 13% 34% 33% 11%Earning Power JK Cement Ltd 8% 20% 22% 14% Prism Cement Ltd. 23% 53% 43% 18%Return on Capital JK Cement Ltd 7% 14% 17% 9% Prism Cement Ltd. 34% 35% 33% 12%Return on Equity JK Cement Ltd 6% 24% 28% 13% Prism Cement Ltd. 25% 58% 47% 15%Asset Management RatioInventory Turnover JK Cement Ltd 14.73 15.77 16.15 14.97 Prism Cement Ltd. 21.95 12.02 11.62 8.63Debtors Turnover JK Cement Ltd 25.08 28.25 30.36 34.03 Prism Cement Ltd. 78.59 84.64 252.22 371.15Fixed Assets turnover JK Cement Ltd 0.97 1.35 1.45 1.30 Prism Cement Ltd. 3.28 2.16 2.35 1.61Total Assets Turnover JK Cement Ltd 0.66 0.80 0.82 0.74 19
    • Projectsformba.blogspot.com Prism Cement Ltd. 2.38 1.36 1.19 0.74WC To Total Assets JK Cement Ltd 0.24 0.20 0.21 0.29 Prism Cement Ltd. 0.00 -0.05 0.02 0.01RE to Total Assets JK Cement Ltd 0.46 0.48 0.56 0.55 Prism Cement Ltd. -0.19 0.20 0.43 0.43Liquidity RatioCurrent Ratio JK Cement Ltd 2.65 2.48 2.31 2.89 Prism Cement Ltd. 1.01 0.83 1.10 1.05Acid Test Ratio JK Cement Ltd 2.21 1.96 1.91 2.45 Prism Cement Ltd. 0.50 0.34 0.49 0.57Debt Management RatioDebt-Equity Ratio JK Cement Ltd 0.86 0.68 0.48 0.48 Prism Cement Ltd. 0.43 0.00 0.00 0.00Interest Coverage ratio JK Cement Ltd 1.90 8.83 10.66 6.14 Prism Cement Ltd. 5.81 51.70 99.67 47.76Valuation RatioPE Ratio JK Cement Ltd 27.35 5.66 4.30 1.95 Prism Cement Ltd. 13.43 6.67 4.15 7.05EV-EBIDTA Ratio JK Cement Ltd 9.58 4.45 3.78 2.44 Prism Cement Ltd. 6.71 3.88 2.85 3.78Earnings Per Share JK Cement Ltd 6.36 25.54 37.92 20.36 Prism Cement Ltd. 2.08 6.46 8.10 3.23 20
    • Projectsformba.blogspot.com 1. Both the companies use equity as source of finance. JK Cement Ltd is using approximately 40% debt in its capital structure but Prism Cement Ltd is not using any debt in last three year. In 2005-06 it was using some part of debt but after this year they redeemed all debt and relay on equity financing only. 2. Although Cement Industry is manly based on Land and Machinery. It means its major application of fund in on long term basis. That’s why investment on current assets on prism cement ltd is very low because their policy is to maintain low cash balance. On the other hand JK Cement ltd is maintaining large cash balance. This is good because they can meet their current liabilities very easily but this is also leading to idle fund which in unproductive. 3. In 2005-06 JK Cement ltd interest coverage ratio was very low but after this management has performed very well and able to maintain good return. So, that they can easily cover its interest. On the other hand Prism is performing very well and they are able to cover their interest more than 50 times. This is because they are not using debt financing, so their interest liability is very low and they can cover this very easily. 4. Prism Cement Ltd has maintained very rigid debtor or Receivable Policy. They do not make any sales on credit. That’s why their debtor turnover ratio is very high. On the other hand JK Cement ltd is using liberal policy and providing credit period of 12 – 15 days. 5. Both the companies are maintaining good GP Margin but if we see Net Profit then they are getting very less net profit. This shows that the cement industry have lot of administrative, selling & Distribution expenses. This lead to very less net profit for both companies. If we compare both companies then Prism performance is better than JK Cement Ltd. 6. PE Ratio of both companies are very fluctuating due to fluctuation in Market. In 2005-06 MPS of both companies was very high but after that there is slowdown in cement 21
    • Projectsformba.blogspot.com industry which leads to less MPS for both companies. This lead to low PE Ratio for both firms. 7. JK Cement is also ahead on working capital management. Because they are maintaining sufficient amount of current assets to make its WC positive. But for Prism cement Ltd WC was in negative in 2006-07 this show poor management of working capital. 8. If we see bankruptcy prediction then both companies are performing very well. There is no sign of bankruptcy for both companies. Atman Z-score shows that both the companies are very healthy in its operation. 22
    • Projectsformba.blogspot.com4.2 ConclusionAlthough Production capacity of Prism Cement Ltd. is less then JK Cement Ltd, but stillperformance of Prism Cement is very good. Performance of prism Cement Ltd. is easilyanalyzed by the ratio mentioned follows. 1. Working capital positions of both the companies are not good. One is maintaining over current assets and other one is under current assets. Both the condition are not good for company. So, in current assets both company fail to manage it. 2. As cement industry require more investment on fixed assets, that’s why they rely more on equity financing. Although JK Cement Ltd. is using 40:60 debt equity mix but prism is debt free. There is scope of using debt as source of finance to increase the leverage of company. 3. Prism is maintaining very rigid debtor policy because of which its debtor turnover ratio is very high. On the other hand JK cement Ltd. is opting liberal policy to increase its sales. 4. JK Cement Ltd has issued lower equity as compare to Prism Cement Ltd. that’s why its Earnings Per Share is very high as compare to Prism Cement Ltd. 5. PE Ratio of JK Cement Ltd. is high as compare to Prism Cement Ltd. which shows good future prospects, good return for investors. But from 2006-07 its MPS start falling due to certain news in market about cement industry. This also affects the market price of Prism Cement Ltd. 6. Prism cement Ltd is also providing good return to equity share holder as compare to JK Cement Ltd. 23
    • Projectsformba.blogspot.com4.3 Suggestion & Recommendation 1. Prism cement Ltd should manage its working capital properly to maintain its liquidity position. Since its current assets is very low against current liability which lead to lower or negative working capital as well as current ratio. Similarly JK Cement Ltd is maintaining huge cash balance which is symptom of idle/unproductive fund. 2. For Prism Cement Ltd, there is scope of raising fund from debt financing. This will increase financial leverage for a company. It will also reduce tax burden and increase EPS for shareholder. 3. Prism Cement Ltd also liberalized its debtor policy to increase its sales. If credit period for customer will increase then ultimately sales will increase. 4. Both company have huge administrative and other expenses, this reduces its net profit. So, company try to minimize its administrative expenses to enhance its sales. 24
    • Projectsformba.blogspot.com Bibliography 1. Annual Report of Prism Cement Ltd.& JK Cement Ltd. 2. www.jkcement.com 3. www.money.rediff.com 4. www.5paisa.com 5. www.wikipedia.com 6. Sharma & Gupta, Management Accounting, 25