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A CRITICAL ANALYSIS OF FUNDS
MANAGEMENT IN SELECTED CEMENT
INDUSTRIES IN TAMILNADU 1 INTRODUCTION
Cement industry is a basic industry which plays an important role in the process of
economic development of the country. The Indian cement industry is the second largest
producer of quality cement that meets global standard. The cement industry has come to
occupy a major place among India’s organized large scale industries. It is an essential
material for building infrastructure like dams, bridges, hospitals, school and plants. The
manufacture of cement requires several inputs like limestone, gypsum, coal, power,
sophisticated plant and machinery and transport services especially of wagons.
Consequently, the cement industry has manifold accelerating effect on activities in many
sectors of the economy. Thus, the extent of forward and backward linkages of cement
industry highlights its prominence in inter industry growth. This industry is also
significant from the point of view of direct and indirect employment. It generates revenue
contribution by way of taxes and duties to government and caters to basic of living,
namely housing. Finance is the life blood of business. It flows in mostly from sale of
goods and services. It flows out for meeting various types of expenditure. The activating
element in any business, which may be an industrial or commercial undertaking, is the
finance. Finance plays a very important role in the day-to-day lives of each individual or
corporation. It is a very wide term and it can be said to be the study of the science of
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managing funds. Usually, finance includes the areas of public, personal and business
finance. It includes things related to lending, spending and saving money. An important
aspect of finance is that individuals and corporations deposit money in a financial
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2 institution, especially banks, which in turn lend out money and charge an interest for
their services. ORIGIN AND MEANING OF FINANCE The word finance is
originally, a French word. In the 18
th
century, it was adapted by English speaking
committees to mean “the management of money”. Finance is now organized as a branch
of Economic. Furthermore, the one word which can easily replace finance is
“EXCHANGE”. It is nothing but an exchange of available resources. It is not restricted
only to the exchange and or management of money. DEFINITION OF FINANCE In
General sense: Finance is the management of money and other valuables, which can be
easily converted into cash. According to Experts – Finance is a simple task of providing
the necessary funds required by the business of entities like companies, firms, individuals
and other on terms that are most favourable to achieve their economic objectives.
According to entrepreneur - Finance is concerned with cash and every business
transaction involves cash directly or indirectly. According to Academicians – Finance
is the procurement of funds and effective utilization of funds. It also deals with profit that
adequately compensates for the cost and risks borne by the business.
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3 NEED FOR FINANCE Business requires finance for many purposes.
1
First, a large sum ofmoney has to be spent on investigating the soundness of a business scheme before it is taken upfor implementation. If the scheme is large and is organized as a joint stock company, draftingand printing of necessary documents, registration of the company etc. involve expenses. Allthese have to be done before the commencement of business. Secondly, in the case of amanufacturing organization a factory building has to be erected and machinery installed beforeproduction can be undertaken. Thirdly, money is needed to purchase raw materials, semi-finished parts and miscellaneous stores and to pay the workers. Finally, the procurement ofmoney itself involves some expense. It is incurred on advertising, preparation of documents,maintenance of books, payment of interest, and creation of funds for repayment and so on.MEANING OF FINANCIAL PERFORMANCE The word ‘Performance is derived from theword ‘parfourmen’, which means ‘to do’, ‘to carry out’ or ‘to render’. It refers the act ofperforming, execution, accomplishment, fulfillment, etc. In border sense, performance refers tothe accomplishment of a given task measured against preset standards of accuracy, completeness,cost, and speed. In other words, it refers to the degree to which an achievement is being or hasbeen accomplished. In the words of Frich Kohlar “The performance is a general term applied to apart or to all the conducts of activities of an organization over a period of time often withreference to past or projected cost efficiency, management responsibility or accountability or thelike. Thus, not just the
1
M.Baneerjee, Business Organisation-An Introductory analysis, Asia Publishing House, Bombay, 1964, p.59
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4 presentation, but the quality of results which is achieved refers to the performance.
Performance is used to indicate firm’s success, conditions, and compliance. Financial
performance refers to the act of performing financial activity. In broader sense, financial
performance refers to the degree to which financial objectives being or has been
accomplished. It is the process of measuring the results of a firm's policies and operations
in monetary terms. It is used to measure firm's overall financial health over a given
period of time and can also be used to compare similar firms across the same industry or
to compare industries or sectors in aggregation. FINANCIAL PERFORMANCE
ANALYSIS In short, the firm itself as well as various interested groups such as
managers, shareholders, creditors, tax authorities and others seeks answers to the
following important questions: What is the financial position of the firm at a given
point of time? How is the financial performance of the firm over a given period of
time? These questions can be answered with the help of financial analysis of a firm.
Financial analysis involves the use of financial statements. A financial statement is an
organized collection of data according to logical and conceptual framework of some
consistent accounting procedures. Its purpose is to convey an understanding of some
financial aspects of a business firm. It may show a position at a moment of time as in the
case of a balance sheet, or may reveal a series of activities over a given period of time, as
in the case of an income statement. Thus, the term ‘financial statements’ generally refers
to two basic statements: namely, the balance sheet and the income statement.

5 The balance sheet shows the financial position of the firm at a given point of
time. It provides a snapshot and may be regarded as a static picture. “Balance sheet is a
summary of a firm’s financial position on a given date that shows Total assets = Total
liabilities + Owner’s equity.” The income statement (referred to in India as the profit
and loss statement) reflects the performance of the firm over a period of time. “Income
statement is a summary of a firm’s revenues and expenses over a specified period, ending
with net income or loss for the period.” However, financial statements do not reveal all
the information related to the financial operations of a firm, but they furnish some
extremely useful information, which highlights two important factors profitability and
financial soundness. Thus, analysis of financial statements is an important aid to financial
performance analysis. Financial performance analysis includes analysis and interpretation
of financial statements in such a way that it undertakes full diagnosis of the profitability
and financial soundness of the business. “The analysis of financial statements is a process
of evaluating the relationship between component parts of financial statements to obtain a
better understanding of the firm’s position and performance.” FINANCIAL
STATEMENT A financial statement is an organized collection of data according to
logical and consistent accounting procedures. It includes balance sheet and profit and loss
account. They do not give all the information regarding the financial operations of a firm.
Nevertheless, they provide some extremely useful information. For instance, the balance
sheet is a mirror of the financial position of a firm. It reveals the assets the firm owns, the

6 liabilities that are payable to outsiders and the amount of internal liabilities in terms of
the capital supplied by the owners of business at a particular point of time. The profit
and loss account shows the results of trading and non-trading operations during a
certain period of the time, usually a year. It presents the summary of the income
obtained and the costs incurred by the firm during a one-year period. Thus, the
financial statements provide a summarized view of the operations of a firm.
Therefore, much can be learnt about a firm from a careful examination of its financial
statements. In fact, “financial statements themselves are organized summaries of
detailed information and are, thus, a form of analysis. The types of statements
accounts prepare, the way they arrange items on these statements, and their standards
of disclosures are all influenced by a desire to provide information in a convenient
form.” FINANCIAL STATEMENT ANALYSIS Financial statement analysis
means the process of evaluating relationship between component parts of financial
statements to obtain a better understanding of firms’ position and performance. The
type of relationship to be investigated depends upon the objectives and purpose of
evaluation. The purpose of evaluation of financial statements differs among various
groups interested in the business and relationships reported in the financial
statements. ANALYSIS AND INTERPRETATION OF FINANCIAL
STATEMENTS Financial statements are the indicators of the two significant
factors: Profitability and Financial soundness

7 Analysis and interpretation of financial statements, therefore, refer to such a treatment of theinformation contained in the income statement and the balance sheet so as to afford fulldiagnosis of the profitability and financial soundness of the business. A distinction is madebetween the two terms….“Analysis” and “Interpretation”. The term analysis means methodicalclassification of the data given in the financial statements. The figures given in the financialstatements will not help on unless they are put in simplified form. The term interpretation meansexplaining the meaning and significance of the data so simplified. However both “Analysis andInterpretation” are complementary to each other. Interpretation requires analysis, while analysisis useless without interpretation. According to Kennedy and Muller, “Analysis and Interpretationof financial statements are an attempt to determine the significance and meaning of the financialstatement data so that the forecast may be made of the prospects for future earnings, ability topay interest and debt maturities (both current and long term) and profitability of a sounddividend policy.”
2
Financial Statement analysis is largely a study of the relationship among thevarious financial factors in a business as disclosed by a single set of statement. TYPES OFANALYSIS The process of analysis may be taking the various types and, normally, it isclassified in to different categories on the basis of information used and on the basis of modusoperandi of analysis. The classification is as under. ANALYSIS On the basis of informationused a. External Analysis
2
Gupta, S.P., Management Accounting, SahityaBhawan Publications, New Delhi, 1977, p.43.

8 Internal Analysis On the basis of modus operandi used Horizontal Analysis
Vertical Analysis External Analysis This is an analysis based on information easily
available to outsiders for the business. Outsiders include creditors, suppliers, investors,
government agencies etc. These parties do not have access to the internal records of the
concern and generally obtain data for analysis from the published financial statements.
Thus, an analysis done by outsiders is known as external analysis. Such an analysis
serves a very limited purpose. Internal Analysis This is an analysis, based on
information obtained from the internal and unpublished records and books. Naturally, it is
being conducted by internal analysts such as executives, employees, government officials
etc. Such an analysis is useful for internal government and employees. Horizontal
Analysis Trend analysis or Dynamic analysis is made by analyzing the financial
statements over a period of years. This indicates the trend of such variables, as sales, cost
of production, profits, assets and liabilities. For this purpose, comparative financial
statements are prepared horizontally.

9 Vertical Analysis It is called structural analysis because it shows the relationship
between different accounting variables. For this purpose, comparative financial
statements are prepared vertically. LIMITATIONS OF FINANCIAL
STATEMENT ANALYSIS The nature of figures which are reported and the
way in which they are reported tend to give the impression of the reader that
financial statements are precise, exact and final. But these statements have certain
limitations. The information furnished by the financial statements is not precise.
Since the construction of these statements is based on practical methods and rules,
the information emanating from them cannot be precisely measured. Financial
statements do not disclose the correct financial position of the business firm. The
financial position of a business firm is affected by several factors like economic,
social and financial but only financial factors are being recorded in these financial
statements. Balance sheet is considered to be a static document and it reflects the
position of the firm at a moment of time. The real position of the firm may change
day by day. As a result of this limitation, there is possibility of window dressing
in the balance sheet. Balance sheet is not a valuation statement. In other words,
the values shown in it are not real values of assets of which these can be sold. It is
thus clear that exact position of the business cannot be gauged from the balance
sheet.

10 Profit disclosed by the profit and loss account is also not a real profit. The
profit and loss account for a particular year exhibits a profit, which is never accurate and
correct mathematically or from economic point of view, because a number of items
shown in the profit and loss account are just estimates. Information conveyed by these
statements may not be comparable on account of difference between dates of preparation
of these statements. At the same time, the difference in methods of accounting followed
by different business outlets and in nature of business of different firms may render the
financial statements of two concerns impossible or difficult for the purpose of
comparison. Financial statements fail to depict the value of human resource. The success
of a business firm depends, to a greater extent, upon the energy ability and efficiency of
the management and but badly, this is not shown in the statements. IMPORTANCE OF
THE STUDY Financial statement analysis is a valuable tool of fund management to
measure the liquidity, profitability, activity and leverage of the firms. Dalmia Cements
(Bharat) Limited and The India Cements Limited have been taken for financial statement
analysis as they have made tremendous growth within a longer period of more than a
number of decades from its inception. This study brings to light the strengths and
weaknesses of these industries. STATEMENT OF THE PROBLEM The financial
performance is an important factor which indicates the growth of the company. It is
influenced by several factors like cost, revenue and the resultant margin of the
companies. Financial performance may be exhibited with the help of many

11 aspects namely financial facts, financial ratios, financial health, strength, funds
position, utilization of assets etc. The financial performance may be influenced
by the operational and financial efficiency of the company which is related to
many cost aspects and the revenue. One of the best indicators to the financial
performance is return either on assets, sales, equity or others. Thus, the
problem related to the financial performance of the company is interlinked to
many aspects namely cost, revenue, capital assets and other related variables. If
the analysis made on all the aspects of the company gives a clear cut picture
about the financial performance of the companies, it can be used for some policy
implications for future development of the company. So the statement of the
problem reveals the relationship between variousaspectsof
financial performance of select cement companies. The cause
and effect relationship, growth on performance of the companies the nature of
utilizations are the real problems focused in the present study. It analyzes the
financial performance of selected companies under the study. OBJECTIVES
OF THE STUDY The objectives of the study are stated as follows: To know the
profile and functions of selected cement industries in Tamil Nadu To examine
short-term and long-term solvency status of selected cement industries during the
study period with the help of annual reports. To understand the performance
efficiency and managerial ability of selected cement industries. To analyze the
profitability and fund performance of selected cement industries with the help of
important ratios. To offer suggestions for the better performance of selected
cement industries.

12 SCOPE OF THE STUDY The main scope of the study is to evaluate,
analyze and understand the financial statements and to know the influence of
the financial position on reputation in the years 2003 to 2011.
METHODOLOGY For effective prosecution of the study, secondary
sources of data are used. Annual reports of companies are the major sources of
data. Standard text books on Financial Management and Management
Accounting are referred to. To supplement it primary data are collected
through unstructured interviews with the financial managers of these
companies. The study covers a period of 8 years from 2003 to 2011. The
researcher has used statistical and non-statistical tools for analysis of data.
Fixed base indices for various components of assets and liabilities have been
computed to ascertain the percentage change in the components of assets and
liabilities. To assess the efficiency of financial analysis conventional tools of
financial analysis such as comparative statements analysis and ratio analysis
have been used. To pinpoint results, statistical tools like standard deviation
and mean have been used. PERIOD OF THE STUDY The study of
Financial Performance of selected cement industries covers a period of eight
years from 2003-04 to 2010-11. TOOLS FOR DATA COLLECTION
Primary Data: The primary data are collected by an unstructured interview
schedule by the researcher regarding the functioning of the industries from
2003-2011.

13 Secondary Data: The secondary data are collected from the annual reports,
magazines, websites and the internal auditing books of selected cement industries.
TOOLS OF FINANCIAL ANALYSIS The financial statements must be made simpler
for any reader to understand the operating results and the financial health of the business.
This is done with the help of the following tools of the financial analysis. These are also
termed as methods of Financial Analysis. Comparative financial statements Common-
size statements Trend Analysis Ratio Analysis Of the above methods of financial
statement analysis, this thesis is concerned with a detailed account of comparative
financial statement analysis and ratio analysis as tool. LIMITATIONS OF THE
STUDY The study is mainly based on secondary data and the inadequacy of secondary
data is reflected in the analysis. More meaningful and reliable conclusion could have
been drawn if sufficient primary data had been made available. Since the method of
calculation in various items for accounting may differ from year to year, the financial
interpretation cannot be precisely perforated. Also, since only eight accounting years
have been chosen for analysis, the project cannot be had as a thorough knowledge of
selected cement industries itself.

14 The present study is largely based on ratio analysis which has inherent limitations. The
analysis of financial statement of business enterprises gives diagnostic indicators. Researcher
being (outside) external analyst obviously has no access to internal data. Therefore, inside view
of the organization could not be picturized in the study. Only two cement companies have been
considered in the study such as India Cements and Dalmia Cements (Bharat) in Tamilnadu.
CHAPTERISATION This study has been divided into six chapters. Chapter I Introduction
Chapter II Concepts and Review of Literature Chapter III Profile of the selected Cement
Industries Chapter IV Fund Management Analysis of Dalmia Cement (Bharat) Limited Chapter
V Fund Management Analysis of India Cements Limited Chapter VI Summary and
Conclusion In this chapter, the researcher discusses the term of finance, financial performance
and financial statement analysis. The researcher has designed the chapter related to importance,
objectives, research problem, methodology, statistical tools, limitations and chapter schemes.

SUMMARY AND CONCLUSION INTRODUCTION
Based on the data analysis of the selected cement industries, using financial
tools as well as statistical tools and the theoretical concepts, the researcher
has come out with the following inferences. FINDINGS DALMIA CEMENTS
(BHARAT) LIMITED The current ratio of the company is very normal in 2004-
2005 and very abnormal in 2010-2011 as compared to the ideal ratio of 2:1.
The same has got down below the ideal ratio in the middle of the study period.
It shows the haphazard status of current assets and current liabilities in the
company during the study period. In 2010-2011, there is a higher lock of
current assets might prevent the working capital position of the company. The
liquid ratio condition has been kept by the company in both trends from
2003- 2004 to 2009-2010. But the liquid ratio has suited up to 4.68 in 2010-
2011. This shows the poor liquidity and short-term solvency status prevailing
in the firm due to the inefficiency of operations. The cash position ratio of the
company is found unsatisfactory during the study period. This is due to the
short-term operational inefficiency, so that the company could not make up
with the cash and securities positions to meet the operational liabilities
during the study period. The proprietary ratio is found around 0.45 in the
start of the study period 2003-2004 and there is a gradual decrease and
increase happened in the study period. But there is a sudden hike of the
proprietary ratio of 0.94 in 2010-2011, which is very high during the study
period. The ratio of debt to equity is found to be normal in the beginning and
good in the recent years. The ratio has gone to 2.07 times up in the year 2009-
2010 with 100 per cent down to 1 time in 2010-2011. This is due to the
increase in internal funds and decrease in external funds. The interest
coverage is found satisfactory during 2003-2004 and 2004-2005. But the
same is very high due to the higher interest payment in 2006-2007 and 2010-
2011. This shows the interest payment is found very high during the last year
of the study period and decreased the earnings before interest tax. There has
been a continuous decrease in the fixed assets ratio from 1.32 of 2006- 2007
to 0.37 of 2010-2011. This shows the poor utilization of long-term funds for
the proper acquisition of fixed assets in the company. . The maximum gross
profit is found in 2006-07 as 30.04 per cent and a very minimum profit is
found in 2004-05 as 6.89 per cent. The net profit ratio has got a heavy record
as 23.45 per cent in 2007-08 and a very low rate of 5.84 per cent in 2003-04.
This shows the profit decline is due to the payment of interest and tax heavily
in many of the periods of study. It is also found unsatisfactory during the later
years. The ratio of return on capital employed is found good and very high in
2009-2010 as 58.55 per cent over the previous years. But the same has come

down to 15.22 per cent in 2010-2011. This shows the poor return on capital
employed in 2010-2011. The ratio of return on shareholder’s funds is found
very better and increasing up to 2009-2010 with a heavy decline to 15.22 per
cent in 2010-2011. The debtor’s turnover ratio of the company is found very
much satisfactory in 2003- 2004 and very much non-satisfactory in 2008-
2009. During the latter years of the study, it has again come down, that shows
the collection of the credit and receivables are very speedy. The creditors’
turnover ratio is found very high during 2006-207 and found a little in 2003-
2004. It also shows the inability of the company in the repayment and
settlement of the dues to the creditors in time, for which the company has
taken much of time. It is also concluded that the short-term operational
efficiency of the company is very dissatisfactory. The fixed assets turnover
ratio has been recorded maximum in 2003-2004 as 1.19 times and a very
minimum showed in 2008-2009 as 0.66. This exhibits the operational The
earnings per share trend of the company are better at the beginning up to
2007- 2008. It is not satisfactory during the years 2008-2009 and 2009-2010.
It is found not better during 2010-2011. The payout ratio is very high during
2010-2011 as 144.53 per cent, which is found two and half times more than
the beginning of the study period. It shows the company’s interest on the
investors to pay more out of the profit for their investments. The retained
profit ratio is found maximum record as 56.08 per cent in 2010-11 and a
minimum of 19.46 per cent in 2004-05. Also, there has been a continuous
increase in the probability and it shows the better performance of the
company. The profit before tax ratio is high in 2006-2007 and low ratio of
profit before tax in 2004-2005. It is concluded that the status profit before tax
is found increasing during 2010- 2011 as 21.25 per cent compared to the
previous years. Hence the company’s profit before tax is not satisfactory in the
beginning of the study period. The profit after tax ratio is not satisfactory
during the first two years and also in the last year 2010-2011. Hence the
company must concentrate on the earnings even after the tax payment. It is
found satisfactory only during the study period and it is high as 46.96 per cent
in 2007-2008. The return on net worth ratio is found increasing with a high
record of 27.5 per cent in 2009-2010 and a low record of 8.7 per cent in 2003-
2004. This shows the better financial performance of the company in the later
years of the study period. In total assets turnover ratio, assets have got a
heavy rise over the first year, whereas the turnover has got a little hike over
the year 2003-2004.
The ratio of earnings margin has been recorded highly as 56.08 per cent in
2010- 2011 and a very low as 20.31 per cent in 2004-2005. This shows the

equities margin has been increasing continuously in the recent past of the
study period. The return on equity is found satisfactory up to 2009-2010 and
is found very poor in 2010-2011. This shows the organizational inefficiency in
the profit earning and the reason is found due to a higher tax and dividend
payment. The dividend cover ratio is found satisfactory during the first four
years and is very poor during the last four year of the study period. It shows
the poor dividend policy of the organization in the recent part. The
comparative income statements reveal the following; the sales of the year
2006- 07 have got a good rise of 51.58 per cent over the previous year 2005-
06. The other incomes are found very high in 2009-10 as by 606.07 per cent of
2008-09. The total incomes are high during 2006-07 as by 62.95 per cent. The
raw materials and other expenses are found very higher as 142.04 per cent in
2009-10. The profit before tax is very high in 2005-06 as 204.89 per cent of
the year 2004- 05. The profit after tax is good too in the same year with an
increase of 174.86 per cent. The surplus and others are found higher in 2007-
08 as 95.74 per cent. There is a hike of the appropriations available as
compared with other periods 98.16 per cent in 2006-07. The surplus carried
to balance sheet is better in 2005-06 as compared with other periods, i.e.,
98.33 per cent of increase over the previous year. It is concluded that the
performance of the company is found very best during 2006-07. The share
capital is remained same up to 2005-06. There is a change in 2006-07 with a
differential hike in 2007-08 and remained the same up to 2010-11.
The reserves and surplus are found as very high in 2010-11. The total
current liabilities have a significant higher change during the year 2010-11
with a rate of 67.13 per cent. The fixed assets have gone up by very high
during 2004-05 with a rate of 68.86 per cent. The long-term investments
made by the company are found good during the year 2006- 07 with a rate of
increased change of 115.97 per cent. The current assets, loans and advances
have been locked heavily during the year 2007-08 with a rate of change of
71.16 per cent the networking capital significantly better during the middle of
the study period. Regarding the analysis of statement of changes in working
capital of Dalmia Cements Ltd. for the study period indicates that there is an
increasing pattern of working capital except in the year 2006-07. We are able
to conclude that the Dalmia Cements Ltd. each and every year has been
increasing its working capital and operations. The financial operations are so
good in the beginning and the performance of the company regarding finance
is fluctuating during the study period. INDIA CEMENTS LIMITED The current
ratio of the company is very normal during 2008-09 and very abnormal
during 2003-04, that shows the operational instability of the company in lieu

of the current assets and current liabilities. The condition of liquid ratio is
very normal and similar to ideal ratio as 1.54 in 2008- 09. The same is very
abnormal in 2003-04 as 5.94. This shows the operational inefficiency of the
organization towards the current fund. The cash position ratio of the company
is found high in 2006-07 as 0.66 and very poor in 2004-05 as 0.12. This is due
to the fluctuations in the cash and securities and the continuous increase in
the current liabilities except the decrease in 2010-11. The proprietary ratio is
found around 0.52 to 0.55 in 5 years of the study period. It shows the better
performance of the funds in the recent past from 2007-08 to 2010-11. The
ratio is high in 2005-06 and low in 2004-05 respectively as 0.55 and 0.44. The
ratio of debt to equity is found to be good in the beginning and very poor in
the recent years. But, there is a slight increase found in the ratio in 2010-112
as 0.60 times might go up ever in the subsequent years. This is due to the
increase in internal funds and decrease in external funds. There is a high
interest coverage ratio as 7.69 per cent in 2007-08 and low as 0.03 per cent in
2004-05 due to higher interest payment and lower interest payment
respectively. These are happened only on the changes in the earnings, but the
interest amount is more or less similar in all the years of study. The fixed
assets ratio is very high as 2.37 in 2008-09 and very low as 1.11 in 2004- 05.
Both the years, there are high differences found with long-term funds. These
are all due to the lack of funds mobilizing capacity of the company. The
maximum gross profit is found in 2007-08 as 28.82 per cent and a minimum
gross profit is found in 2010-11 as 2.18 per cent. This is due to the amount of
cash, where the trend of ups and downs found during the study period. The
net profit ratio of the company is better during the middle of the study period
from 2006-07 to 2008-09. But, during the last two years i.e., 2009-10 and
2010-11 there is a declining trend found with the net profit of the company
that might be due to the operating. The ratio of return on capital employed is
found very better in 2006-07 as 35.63 per cent and very poor in 2004-05 as
1.61 per cent. During the last year of the study the ratio of return on capital
employed is 1.94 per cent. This might be due to the decline in the return after
the payment of interest and taxes with the increase in the capital employed.
The return has been very haphazard in all the years found. The ratio of return
on shareholders funds has been concluded that it is found better as 21.68 per
cent in 2006-07 and very poor in 2004-05 as 0.29 per cent. This is due to the
retained profit after the expenses allowed and the increase in shareholders
funds. It is also concluded that the return is very little as 1.67 per cent in
2010-11. The debtor’s turnover ratio is very high during 2005-06 which is
against the receivables as 47.81 days, while the same is very low during 2010-

11 as 23.15 days in favour of the receivables. Hence the better performance
has taken place regarding the receivables during 2010-11 as 23.15 days. The
ratio of creditors to turnover is very high in 2007-08 as 3335.27 days in
favour of the company in payables procrastination; while the same is very low
in 2003-04 as 98.53 days against the company in payables and therefore, the
operational performance is very poor in later years. The fixed assets turnover
ratio is very best in 2003-04 and very poor in 2010-11 due to the cyclical
operations of assets and their relationship with the turnover as results. The
inventory turnover ratio is found to be concluded poor in 2007-08 as 3.24
times; and very better in 2003-04 as 5.43 times. But, during the first four
years, the ratio is better that helps to circulate the funds frequently and the
same has come down less than 4 times in the last four years of the study
period.
There has been a good performance in the recent past from 2007-08 to 2009-
10 with a dividend per share of Rs.2.00. But there is a little decrease to Rs.1.50
per share in 2010-11, shows the performance of the company declines. The
heavy fall found with the earnings per share of the company in the last year
2010-11 of the study period due to the lack of operational efficiency and the
market conditions of cement industries. The pay out ratio of the company is
better increasing from 2006-07 to 2010-11. It shows the interest of the
company to retain the investors towards the further investments for the funds
rising additionally. There is a poor profit conditions realized by the company
from 2003-04 to 2006-07 in relation with retained earnings ratio. But there is
an increase ratio from 2007-08 to 2009- 10. The retained earnings ratio of the
company is good in 2010-11 as 23.79 per cent. This is due to the hike in the
operating and non operating expenses along with the payment of dividend.
The ratio of profit before tax is found better from 2006-07 to 2009-10. The
ratio is found very better as 27.26 per cent in 2007-08 and very poor in 2004-
05 as 0.33 per cent. The profit before tax ratio is very little in the recent past
as 2.24 per cent in 2010-11. This is due to the payment and in commence of
expenses heavily found in the beginning of the years. The profit after tax ratio
is found well from 2006-07 to 2008-09. The profit before tax ratio is very little
as 1.70 per cent in 2010-11. This is due to the heavy tax payment and other
expenses in the beginning and end of the study period.
There has been an increasing results found in the net worth per share of the
company with a high of Rs. 114 in 2010-11 and a return on net worth of 62.10
per cent in the same year. The assets turnover ratio is high as 0.55 times in
2006-07 and is very low as 0.l33 times in 2003-04. This is due to the
fluctuations in the turnover and the increase in the total assets. The earnings

margin is very high as 27.57 per cent in 2007-08 and very low as 2.66 per cent
in 2010-11 due to the operational inability and the loss of control of the
company. The ratio of return on equity is found very high as 21.68 per cent in
2006-07 and very low as 1.67 per cent in 2010-11. This shows a comparative
decrease over the period of the study. The same is found very poor in 2010-11
as 1.67 per cent, which might cause the decline in the capital funds of the
company. The dividend cover on earnings per share is found high as 19.65
times in 2006-07 and very poor as 1.48 times in 2010-11. This might cause
the redemption of funds in the company by all means. The comparative
income statement analysis reveals the following; the sales and other incomes
have achieved a lot in the year 2006-07 with an increase of 42.69 per cent
over 2005-06. The manufacturing and other expenses are found maximum in
the year 2009-10 with an increase of 21.32 per cent over the previous year.
The depreciation charges are highly during the year 2008-09 with an increase
of 58.94 per cent. The total expenditures have been found higher in 2008-09
with a proportion of 24.56 per cent over the previous year 2007-08.
The profit before tax is found high during the year 2005-06 and the profit
after tax is too higher in 2005-06 with a rate of 8 times more than the
previous year. The balance taken to balance sheet is higher in 2008-09 with a
rate of 56.14 per cent over the previous years. The dividends and reserves are
found very much in 2009-10 as 40.82 per cent over the previous year 2008-
09. On the whole, the performance of the company is fluctuating and the
operational ability is very poor in the beginning. The financial performance of
the company is very normal during the study period. The share capital of the
company is increasingly constant from 2004-05 to 2009-10. It has started
from Rs.16359 lakhs to Rs.39717 lakhs during the period of 2004-05 to 2009-
10. The surplus and reserves have been constantly increasing from 2004 to
2011. The long-term funds have been found with very many fluctuations
during the study period. The total liabilities are increasingly fluctuated during
the study period. The higher amount of changes in fixed assets is found in
2006-07 as 38.94 per cent. The inventories have no decline during the study
period which might proportionate and contribute to working capital. The total
current assets have been locked huge during the period 2009-10 as 34.19 per
cent of the previous year. The deferred revenue expenditure is found with
many fluctuations during the study period. Regarding the analysis of
statement of changes in working capital of India Cements Ltd., for the study
period, indicates that there is an increasing pattern of working capital except
in the year 2004-05, 2007-08 and 2008-09. We are able to conclude that the
overall performance of India Cements Ltd. is in increasing its working capital

and operations.
It is also found that the non-current items are fluctuating during the study.
The company has earned profits during the beginning and lost in the recent
past. The overall performance of finance is found very normal during the
study period. SUGGESTIONS Dalmia Cements (Bharat) Limited On the basis of
the findings, the following measures are suggested for the improvement in the
financial performance of the Dalmia Cements (Bharat) Limited is further. • As
the current ratio is less than the ideal ratio of 2:1, the company may take
necessary action to improve the current ratio by increase the liquidity
position and to retain the inventories and other receivables accounts for an
extended time.
• The cash and bank balances are very much higher among the components of
current assets. Hence it may be used for operational purposes in future.
• The net fixed assets are very lower than the gross fixed assets during the
study period. It is due to the amount of depreciation provided in all the years.
The management of the company may follow various methods to provide for
the lesser depreciation to increase the value of the fixed assets.
• As the investments are very lower, the management of the company may
concentrate on further investments utilizing the reserves and surplus for the
mobilization, so that it will increase the value of the firms and wealth of the
company.
• The further shares are to be issued to increase the share capital and also to
hike the leverage position of the company. It is also to be equivalent to the
loan funds to maintain the proper debt equity ratio.
• As the reserves and surplus are higher, it may be utilized for the purpose of
either the issuance of bonus shares or the declaration of interim dividend.
• The management of the company may try to decrease the amount of
provision for tax so as to keep the amount of wealth of the real owners of the
company, i.e., the shareholders.
• The rate of interest and the amount of interest of payment are higher during
the study period. Hence it is advisable to consider and reduce interest so that
the contributions will become higher towards the profitability.
• The miscellaneous expenditure may be written off to the maximum, so that
the exact profitability can be obtained.
• As the operating expenses are more than doubled during the study period,
the management of the company may try to curtail the operating costs by all
means.
• As the profit margin and the retained profits are increasingly constant, the
management of the company may make use of the effective cost control

methods for further growth for the benefit of the real owners.
• The management of the company may further make attempts to increase
the sales and other training activities to improve the profitability position.
• Very effective management of inventory has to be planned and implemented
along with the little changes in the credit policy for the benefit of the debtors.
• Steps are to be taken to increase the networking capital for the operational
purposes in future.
• The management of the company may try to utilize the shareholders’ funds
effectively to generate the net profits, so that the shareholders may get
benefited of the higher value of the firm in future.
• The earning capacity of the assets of the company is very meager, which
shows that the management of the company has not used the assets
effectively in generating the revenue. Hence, it should be an extension of plant
to improve the operating performance of the company through a productive
use of the total assets.
• The earning capacity of the company regarding the net profit is very normal
due to the higher expenditures and so the profitability of the company has
been normally increasing though there is an increase in the total income from
year to year. So the company may take necessary steps to earn regular income
and thus maintain consistent profitability performance. • As the net profits to
sales are only a small portion, the company may try to improve its
performance in the subsequent years.
SUGGESTIONS India Cements Limited On the basis of the findings, the
following measures are suggested for the improvements in the financial
performance of the India Cements Limited in future.
• As the current ratio is more or less than the ideal ratio, the effective
measures are to be taken to retain the inventories and other receivables
accounts for an extended time along with the cash and bank balances.
• The cash and bank balances are very much lower among the components of
current assets. Hence, it may not be used for operational purposes in future.
• The net fixed assets are very poor than the gross fixed assets during the
study period. It is due to the amount of depreciation provided in all the years.
The management of the company may take necessary steps to provide for the
proper depreciation to increase the value of the fixed assets.
• As the investments are very higher, the management of the company must
concentrate on further investments utilizing the reserves and surplus for the
mobilization, so that it will increase the value of the firms and wealth of the
company. In this context, the company may obtain additional funds.
• The further shares are to be issued to increase the share capital and also to

increase the leverage position of the company. It is also to be equivalent to the
loan funds to maintain the proper debt equity ratio.
• The rate of interest and the amount of interest of payment are higher during
the study period. Hence, it is advisable to get decreased of the amount of
interest so that the contributions will become higher towards the profitability.
• The management of the company may try to reduce the corporate dividend
tax, so that the benefit will go to the shareholders who seek the higher value
of the firm. • The miscellaneous expenditure may be shown to the level, so
that the exact profitability can be seen.
• As the operating expenses are more than the existed during the study
period, the management of the company may try to curtail the operating costs
by all means.
• As the profit margin and the retained profits are increasingly fluctuating,
the management of the company may make use of the effective cost control
methods for further growth and for the benefit of the real owners.
• The management of the company may further attempt to increase the sales
and other training activities to improve the profitability position.
• Very effective management of inventory has to be planned and
implemented along with the little changes in the credit policy and the
receivables principles for the benefit of the debtors.
• There may be the effective utilization of the fixed assets to get decreased of
the stages for which the management may take necessary steps.
• Steps are to be taken to increase the networking capital for the operational
purposes in future. • In the subsequent years, the company may use new
techniques in financial improvements and also may adopt new trends in cost
controlling methods. It is also advisable to use effective requirements.
• The management of the company may try to use the shareholders’ funds
effectively to generate the net profits, so that the shareholders may get
benefited of the higher value of the firm in future.
• The earning capacity of the assets of the company is very meager, which
shows that the management of the company has not used the assets
effectively in generating the revenue. Hence, it may take necessary steps to
improve the operating performance of the company through a productive use
of the total assets.
• The earning capacity of the company regarding the net profit is very normal
due to the higher expenditures and so the profitability of the company has
been normally increasing though there is an increase in the total income from
year to year. So the company should take necessary steps to earn regular
income and thus maintain consistent profitability performance.

• As the net profits to sales are only a small portion, the company may try to
improve its performance in the subsequent years. Because the company has
suffered a loss of funds in the beginning of the study period. Hence, it is
advised to take necessary steps to earn more profits in further. SUGESTIONS-
COMMON FOR CEMENT INDUSTRIES
• The need for cement is consistently increasing and the cement companies
have to increase their supply so that the demand is properly met in time.
• More than 95 per cent of take off is seen every month and, hence, the need
for warehousing by cement companies seems to be minimum. Bulk supply
without packing in bags may be resorted to decrease the level of stock of
cement in the companies.
Transportation methods are to be modernized so that the transportation of
cement from one place to another is done quickly and the cost of retention of
cement is least for the companies.
• Installed capacity has increased significantly and the utilization capacity
should also increase in an accelerated manner in all the cement companies to
increase the production of better quality of cement.
• Change in share capital is a sign of changes in the firm’s capital structure.
Additional capital may be invested by the firms, whenever needed, for
expansion purposes and for increasing the capacity utilization.
• Huge amount of reserves and surplus is noticed in the firms. This may lead
to over capitalization to certain extent in some stages. Hence, a prudent
dividend policy may be maintained in the firms to adjust the reserves and
surplus to the extent of maximizing profit in the firms.
• Banks have come forward to provide liberal loan assistance to the cement
firms. The firms should utilize this opportunity to get loans and advances at a
lesser rate of interest and for minimizing the financial charges in the firm.
• Significant increase in need for fixed assets is noted and, hence, steps are to
be taken to modernize the plant and machinery in phased stages whenever
outside funds are available at a cheaper rate of interest.
• Dependency on other income should be dispensed with. Decline in earnings
per share is an indication of decline in performance. Hence, the firms should
strive hard to maintain earnings per share above the market levels by
minimizing the expenses and by effective expenditure control measures.
Increase in debt equity ratio means the volume of debt increases significantly
than owned funds. This is not beneficial in the long run. The change in interest
rates may affect the ratio and own funds may have to be either retained or
distributed as dividend. Prudent capital structure is to be analyzed and
implemented in the firms.

• Corrective measures are to be taken to control the current liability in the
firms. • Fluctuations in the profit after tax show the type of competition
existing in the industry. Government is come forward to control unnecessary
competition so that the ‘intermediary expenses’ are minimized and the ideal
profitability is maintained.
• Coal shortage affects production of cement industry resulting in idle capacity
and under utilization of capacity. Cent per cent capacity could not be achieved
due to the shortage of coal and the poor quality of coal. Steps may be taken to
provide quality coal for the industry for achieving cent per cent capacity
utilization.
• Consistent increase in material expenses is noted. Steps may be taken to
minimize the prices of raw materials to the maximum possible, so that the
profitability is not affected.
• The problem of higher wages and lower labour productivity may be due to
various economical, social and environmental factors. If technology is
improved, the expenses can be automatically controlled.
• Loan component is higher in this industry. If the interest rates are higher,
the profitability of the firms will decrease. Hence, steps may be taken to
provide consistent and fixed interest loans to this industry.
• Net profit margin is not satisfactory in this industry especially with
reference to the select firms. These firms have to take steps to control the
financial charges, operating expenses etc. to have higher net operating profit.
• Operating profit is reasonably good, but there are high fluctuations. Price
control by the units themselves may control these fluctuations to a maximum
extent.
• Cement industry is also power intensive, frequent power cut affects the
production. Though many units try to tide over the power crisis by installing
their own generators, they seem to suffer loss due to high cost of such effort.
Steps may be taken to provide uninterrupted power supply to this industry as
economical rates for better growth. (Solar Power and wind Projects)
• Price increase in critical energy inputs such as coal, power, lignite etc. are
some reasons for higher cost of production. Steps may be taken to provide
subsidized coal, power etc. for the growth of the industry.
• Tax rates in India and other countries are comparatively higher and this has
led to fall in profit after tax. Tax concessions to this industry may help the
society to provide better housing facilities.
• Technological obsolescence is also a problem in this industry. The industry
is in need of change in the production process. There is a need for conversion

from wet process to dry process. If the industry does not earn reasonable
profit, institutional finance will also become difficult. Hence steps may be
taken to improve the advanced technologies for efficient and low production
cost.
• The cement industry is the capital - intensive in nature. On account of its
record of declining profitability, it is unable to raise the required finance from
the capital
market. Hence, special steps may be taken by the governments to provide
finance to this industry at concessional rate of interest.
• There is excess production in the southern and western regions while there
is excess demand from northern and eastern regions. These factors lead to
heavy transport cost. Hence, suitable railway transport facilities and wagon
availability may be provided for better transportation.
• Transportation is one of the major problems in this industry. Non-
availability of railway wagons leads to considerable delay in bringing in the
raw materials and in dispatching the cement to various potential markets.
Producers may acquire required wagons for quick and better transport of
cement to various places. CONCLUSION Finance is regarded as the nerve
system of any business. Each and every finance function calls for skillful
planning, control and execution of the firm’s activities. Thus the finance is
regarded as the eminent part of the business, most especially in the corporate
sectors. A study on Financial Performance of the selected cement industries
viz., Dalmia Cements (bharat) Limited and India Cements Limited reveals the
satisfactory level as a whole. Though there are fluctuations in profit, the
companies are running with a normal profit margin. The dividend paid to the
shareholders is not bad but there is a need for improvement. The net worth
and capital employed have been rise carefully by the management of the
companies. The debt to equity ratio has been ordinarily performed. The
companies may take necessary steps to maintain and reduce the operating
costs effectively.
It is concluded that the above mentioned suggestions may be considered for
the effective and efficient financial management and performance of the
selected cement industries. The long duration of existence has made the
companies to establish their brand names of cements internationally. With the
rich industrial experience of the management, it is obvious that the companies
would turn around in a big way by increasing their market share and their
profitability as a whole.

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