Liquidity and Profitability

LIQUIDITY AND PROFITABILITY ANALYSIS
1.1 INTRODUCTION
Liquidity:
The concern of business owners and managers all over the world is to devise a strategy
of managing their day to day operations in order to meet their obligations as they fall
due and increase profitability and shareholders wealth. Liquidity management, in most
cases, are considered from the perspective of working capital management as most of
the indices used for measuring corporate liquidity are a function of the components of
working capital. The importance of liquidity management as it affects corporate
profitability in todays business cannot be over emphasis. The crucial part in managing
working capital is required in maintaining its liquidity in day-to-day operation to ensure
its smooth running and meets its obligation. A firm should ensure that it does not suffer
from lack-of or excess liquidity to meet its short-term compulsions. A study of liquidity
is of major importance to both the internal and the external analysts because of its close
relationship with day-to-day operations of a business. Liquidity requirement of a firm
depends on the peculiar nature of the firm and there is no specific rule on determining
the optimal level of liquidity that a firm can maintain in order to ensure positive impact
on its profitability. Liquidity and its management determines to a great extent the
growth and profitability of a firm. This is because either inadequate liquidity or excess
liquidity may be injurious to the smooth operations of the organization. This seeming
controversy has attracted a lot of interest in the subject of liquidity management. WCM
technique appears with the philosophy of using long term source should be used for the
entire investment in the current assets and short term should be used only for urgent
situations. Distinct features of conservative WCM are increased liquidity and less risk
but more interest has to be paid on the seasonal requirement for the entire period. Larger
firm focus on higher sales with fewer on cash basis which leads to greater cash flow
problems and seasonality while smaller firms major focus is stock management and
credit management policies with low profitability.
Liquidity is the availability of funds or assurance that funds will be available, to honor
all cash outflow commitments (both on and off-balance sheet) as they fall due. These
commitments are generally met through cash inflows, supplemented by assets the
institutions capacity to borrow. The risk of illiquidity may increase if principal and
interest cash flows related to assets, liabilities and off- balance sheet items or
mismatched.
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Liquidity ratios are a set of ratios or figures that measure a companys ability to pay off
its short-term debt obligations. This is done by measuring a companys liquid assets
(including those that might easily be converted into cash) against its short-term
liabilities. There are a number of different liquidity ratios, which each measure slightly
different types of assets when calculating the ratio. More conservative measures will
exclude assets that need to be converted into cash.
In general, the greater the coverage of liquid assets to short-term liabilities, the more
likely it is that a business will be able to pay debts as they become due while still
funding ongoing operations. On the other hand, a company with a low liquidity ratio
might have difficulty meeting obligations while funding vital ongoing business
operations. Liquidity ratios are sometimes requested by banks when they are evaluating
a loan application. If you take out a loan, the lender may require you to maintain a
certain minimum liquidity ratio, as part of the loan agreement. For that reason, steps to
improve your liquidity ratios are sometimes necessary.
Liquidity ratios are used to determine a companys status to meet its short-term debt
obligations. Investors often take a close look at liquidity ratios when performing
fundamental analysis on a rm. Since a company that is consistently having trouble
meeting its short-term debt is at a higher risk of bankruptcy, liquidity ratios are a good
measure of whether a company will be able to comfort- ably continues as a going
concern.
Liquidity is the availability of funds or assurance that funds will be available, to honor
all cash outflow commitments (both on and off-balance sheet) as they fall due.
Managing assets and liabilities both as to cash flow and concentration, to ensure that
cash inflows have an appropriate relationship to approaching cash out flows.
Profitability:
Every business is most concerned with its profitability. Profitability is the ability to
make profit from all the business activities of an organization, company, firm, or an
enterprise. It shows how efficiently the management can make profit by using all the
resources available in the market. One of the most frequently used tools of financial
ratio analysis is profitability ratios, which are used to determine the company's bottom
line. Profitability ratios show a company's overall efficiency and performance.
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Profitability and management efficiency are usually taken to be positively associated:

poor current profitability may threaten current management efficiency and vice versa;
poor management efficiency may threaten profitability. It is related to the goal of
shareholders wealth maximization, and investment in current assets is made only if an
acceptable return is obtained. While liquidity is needed for a company to continue
business, a company may choose to hold more cash than needed for operational or
transactional needs i.e. for precautionary or speculative reasons. It can also be termed as
the rate of return on investment. If there will be an unjustifiable over investment in
current assets then this would negatively affect the rate of return on investment
(vishnani& shah, 2007). The basic purpose of managing working capital is controlling
of current financial resources of a firm in such a way that a balance is created between
profitability of the firm and risk associated with that profitability (ricci&vito, 2000).
Profitability is a widely used financial measure of performance. The concept of
profitability may be used in two senses: commercial/private profitability and public
profitability. Although the use of public profitability which is based on economist s
notion of cost and benefits, i.e., the true opportunity cost and the benefits for the society
as a whole, appears to be a more appropriate measure of performance of public
enterprises, the measure of commercial profitability has been used in this study. This is
because of the fact that commercial profitability is widely used to measure the
performance of public enterprises in Bangladesh and even in other countries of the
world like India, the UK, and France etc. And also for its general acceptance and ready
understandability. Two major types of profitability ratios are computed: (i) profitability
in relation to sales and (ii) profitability in relation to investment. Gross profit margins
(gpm), net operating margin (nom), return on total assets (Rota), return on equity (roe),
and return on investment (roi) are the main measures of profitability.
Rationale of the study:

The purpose of the study is to analyze the working capital management in terms of
profitability and liquidity. In business cash is important thing, without cash company
cannot survive and to take advantage of business opportunities, its necessary to
maintain liquidity position to overcome the difficulties. The working capital
management plays an important role for success or failure of firm because of its effect
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on firms profitability as well on liquidity. This study is going to find out the impact of
Liquidity, Profitability and Working capital on the firms financial aspects.
Definitions:
Amongst many criteria of business success, there are two which are expressed in
financial terms, namely profitability and liquidity.
Profit:
Is the excess of resources earned over resources expended or income less costs. Various
profit figures (gross, net, pre-tax etc.) for the period can be read from the profit and loss
account (US term income statement).
Profitability:
Is the relationship between profits and capital (the static resources set aside to earn
those profits). Measuring profitability means that you have to relate a profit figure
(from the profit and loss account) to a resources figure (from the balance sheet).
In short, profit is the measure of gain, and profitability businesses give up their
resources to more profitable, because the total profit earned will rise, other things being
equal. For this to hold true private and public profit must be equivalent; this is not the
case where, for example, profit earners cause there to be social costs, such as
atmospheric pollution or noise.
Liquidity:
May be defined as the ability of a firm to meet its financial obligations as they fall due.
The balance sheet (defined as a structures statement of assets and liabilities) measures
these resources and claims, and describes the liquidity of the firm i.e., the relationship
between assets and liabilities see also LD10, accounting theory and the purpose of
accounting.
Measuring profitability and liquidity:
Whereas definition and discussion of the concepts are activities beloved by academics,
their practical day to day expression and measurement is a matter for business personnel
and accountants. Large organizations may employ accountants or, like smaller firms,
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hire the services from independent professionals. There is an associated profession

whose skills overlap, namely of auditing, whose function is to validate the work of the
accountant through an independent evaluation of the accounts.
Such expressions and such measurements require care, routine and administration as
well as an understanding of the principles involved. All the levels of profit (gross,
operating, net and retained) are expressed in the various sections of the profit and loss
account my definition being a structured statement of income and expenses). The
measurement of profit is, in fact, very difficult and it is to cut through the problems of
principle that accountants adopt a number of rules of thumb, such as deprecation in
equal installments over the estimated useful life of the project.
Achieving adequate profitability and liquidity:

The achievement of adequate profitability is specific to each situation and outside the
scope of this digest. The problem of liquidity is less dependent on particular
circumstance and it is easier to make useful generalizations. In my opinion there are two
distinct requirements for liquidity, firstly, profitability and secondly, care and
thoroughness in administration.
It is only if a form is profitable that in the long run it will receive in cash more than it
pays out. This is most clearly imaginable in the case of a trading business which buys
and sells exclusively on a cash basis. If such a firm makes losses it is paying out in cash
more than it coming in from sales. It can only sustain its cash balances by injections of
capital or by selling off its assets, processes which cannot be continued indefinitely.
Profitability may be necessary but it is not sufficient. A firm must be careful to ensure
that it does not commit itself to payments that it cannot cover. thus detailed records
require to be kept, ideally on a real time basis, of case in hand and expected and cash
to be paid. The accounting statement shoeing this detail is the cash budget every item
will be tracked in terms of the time of flow, and the whole managed so that there is
never a time when payments cannot be made when due. This requires the study exercise
of the bureaucratic virtues of thoroughness, reliability and accuracy, together with
contingency planning to cope with uncertainties:
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Whatever the immediate situation, profitability and liquidity also to be seen in their
strategic context i.e. In the light of market growth, market share and progress through
the product and industry life cycles.
Liquidity
Liquidity management is very important for every organization that means to pay
current obligations on business, the payment obligations include operating and financial
expenses that are short term but maturing long term debt. According to Shim and Siegel
(2000) accounting liquidity is the companys capacity to liquidate maturing shortterm
debt (within one year). Maintaining adequate liquidity is much more than a corporate
goal and is a condition without which it could not reach the continuity of a business.
Functions leading to liquidity In seeking sufficient liquidity to carry out the firms
activities, following functions have to be carried out:
1) Forecasting cash flows: Successful day-to-day operations require the firm to be able
to pay its bills promptly. This is largely a matter of matching cash inflows against
outflows. The firm must be able to forecast the sources and timing of inflows from
customers and use them to pay creditors and suppliers.
2) Raising funds: The firm receives financing from a variety of sources. At different
times some sources will be more desirable than others. A possible source may not; at a
given point of time have sufficient funds available to meet the firms needs. So the
financial manager must identify the amount of funds available from each source and the
periods when they will be needed.
3) Managing the flow of internal funds: A large firm has a number of different bank
accounts for various operating divisions or for special purposes. The money that flows
among these internal accounts should be carefully monitored.
2.2.Profitability Profitability can be defined as the final measure of economic success
achieved by a company in relation to the capital invested in it. This economic success is
determined by the magnitude of the net profit accounting (Pimentel et al, 2005).
Profitability may be measured in many different ways Lazaridis and Tryfonidis (2006)
found statistically significant relationship between profitability, measured through gross
operating profit, and the cash conversion cycle and its components (accounts
receivables, accounts payables, and inventory). Functions leading to Profitability In
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seeking profits for firm, the financial manager can be a full member of the corporate
management structure. In this role the manager provides specific input into decision
making process, based on financial training and actions.
With respect to profitability, some of his specific functions are as:
1) Cost control: Most large corporations have detailed cost accounting systems to
monitor expenditures in the operational areas of the firm. Because of supervising the
accounting and reporting functions, the financial manager is in a position to monitor
and measure the amounts of money spent or committed be the company.
2) Pricing: Some of the most important decisions made by a firm involve the prices
established for products, product lines, and services. The philosophy and approach to
pricing policy are critical elements in the companys marketing effort, image, and sales
level. Determination of the appropriate price is the joint decision of marketing and
finance.
3) Forecasting profits: The financial manager is usually responsible for gathering and
analyzing the relevant data and making forecasts of profit levels.
4) Measuring required return: Every time a firm invests its capital, it must make the
risk-return decision. The required return is the rate of return that must be expect from a
proposal before it can be accepted.
2.3. Need for the study
Liquidity and profitability play a significant role in any organization that means to meet
current obligations and maintain a healthy profitability from business operations. The
purpose of this study is to measure the liquidity and profitability performance of the
selected pharmaceutical companies. Every stakeholder has interest in the liquidity
position of a company. Suppliers of goods will check the liquidity of the company
before selling goods on credit. Employees should also be concerned about the
companys liquidity to know whether the company can meet its employee related
obligationssalary, pension, provident fund, etc. Thus, a company needs to maintain
adequate liquidity so that liquidity greatly affects profits of which some portion that will
be divided to shareholders. Analysis of profit is of vital concern to stockholders since
they derive revenue in the form of dividends. Profits are also important to creditors
because profits are one source of funds for debt coverage. Furthermore, Management
uses profit as a performance measure. Liquidity ratios measure the ability of a firm to
meet its short-term obligations. The ability to pay short-term debt is of concern to
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anyone who interacts with the company. If a company cannot maintain a short-term
debt-paying ability, it will not be able to maintain a long-term debt-paying ability, nor
will it be able to satisfy its stockholders. The liquidity ratios look at aspects of the
company's assets and their relationship to current liabilities.
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1.2 INDUSTRY PROFILE
Cement is a generic term and used for all powers material, which, when mixed with
water has a plastic form, but becomes a solid structure within a few hours, the structure
gaining strength and bonding properties with age. Thus defined, cement is an ancient
building material. Lime and volcanic ash cement used for the pyramids of Egypt.
Evidence exists of its use age in the Indus Valley civilization of Mohenjo-Daro.
Credit for the invention of cement goes to an English man by the name of Joseph
Aspasia of Leeds. England. In 1824 Aspasia manufactured cement in a rudimentary
form, by burning mixture of limestone and clay. It was termed Portland cement as it
resembled the Portland Stone a popular lime stone used for building construction in
England. Another quarter of centaury passed before a slightly better quality of cement
was produced in 1850 by yet another English-man Isaac Charles Johnson. In 1857, an
American named David Saylor improved the mix design of limestone and clay resulting
in a much more superior quality of cement. He also called his cement by the same
name Portland cement.
Origin of the industry in India
In India Portland cement was first manufactured in 1904 near madras, by the south
India industrial ltd., is a 30 tons per day plant. However, this venture failed. In October,
1914 another enterprise, Indian company limited commissioned 100 tons per day
Rotary Kiln at Porbander, Gujarat. The next couple of years saw the emergence of two
new factories at Katni-Madhya Pradesh and Laksher-Rajasthan were commissioned.
The First World War gave a fillip to the cement industry and by 1918. The three
together were able to produce about 85,000 tons per year. Starting with less than a1000
tones per annum in 1914, cement product is expected to reach capacity of over 60
Million tones per annum by the end of the Seventh Five Year Plan
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Milestones
The following milestones achieved by the Indian cement industry will give an idea of
growth pattern.
Year capacity crossed (MIL. tons) no of years taken.
1914 commissioning of first successful plans

1920 00.10 06
1920 01.00 23
1937 05.00 42
1964 10.00 50
1975 20.00 61
1982 30.00 68
1984 40.00 70
1989 60.00 75 (Est.)
Capacity and production

The cement industry comprises of 52 companies and 132 plants with an installed
capacity of 177.83 Million tones as per the statistics of cement manufacturers
Association 2007. The man power employed in cement sector is around 1,35,000
people approximately, Actual cement production in 2006-2007, 161.66 Millions tones
as against the previous years production of 147.81 Millions tones thus registering a
growth rate of 9%. The sector wise capacity as on 31-03-07 was private sector
160.96 Million tones and public sector 5.77 Million tones. As far as state wise and
region wise capacities are concerned, Andhra Pradesh stood first among the states with
a capacity of 25.14 Million tones. Region wise, South stood first both in production
and consumption with 32.22% of total production and 30% of total consumption. India
ranks second in the world cement production 142.67 Million tones after china as of
31.3.07.
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Exports
Apart from meeting the entire domestic demand, the industry is also exported and
cement, the details are as follows
Year Clinker in Mill, Tons Cement in mil Tons

2002-03 3.45 3.47
2003-04 5.64 3.36
2004-05 5.99 4.07
2005-06 3.18 6.01
2006-07 3.10 5.80
Major Exports were M/s Gujarat Ambuja Cement and Larsen & Turbo Ltd.
Technology Change
Cement industry has made tremendous strides in Technological Up-gradation and
assimilation of latest Technology. The industry switched over from wet process to dry
process technology. At present ninety three percent of the total capacity in the industry
is based on modern and environment friendly dry process technology. There is
tremendous scope for waste recovery in cement plants, there by reduction in emission
level. Recently one of the cement plants in Andhra Pradesh has installed waste Heat
Recovery system in Nalgonda District with Japanese Technology, under World Bank
Aid.
Historical Development
The Historical Development of the cement industry in India can broadly classify into
the following areas.
Era of Dominant Imports 1914 - 1924
Era of Struggle and survival 1924 - 1941
Era of Price controls pre plan 1942 - 1951
Era of planning & control 1951 - 1982
Era of partial document 1982 - 1988
Era of Total Decontrol from 1989
Challenges Facing The Industry
Freeing Markets forces by the Government has not only given boost to the production
but also allowed entry of competent entrepreneurs into the Market setting up a spirit of
competition to capture an increasing share of the domestic market export market in
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some cases. Exports have helped in improving capacity utilization and profitability of
these firms besides earning.
List of Top 10 Cement Companies in India
Name ACC Limited

Production 17,902
Installed Capacity 18,640
Net Profit (Quarter ended Sep 30, 2009) 41,550.89 lakhs
Name Gujarat Abuja Cements Limited
Production 15,094
Net Profit (Quarter ended on Sep 30, 2009) 31,848 lakhs
Name Ultratech
Production 13,707
Net Profit (in 2008-09) 97,700 lakhs
Name Grasim
Production 14,649
Net Profit (in 2008-09) 1,64,800 lakhs
Name India Cements
Production 8,434
Name JK Cement Ltd
Production 6,174
Net Profit (in 2008-09) 14,234.40 lakhs
Name Jaypee Group
Production 6,316
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Name Century Cement
Production 6,636
Name Madras Cement
Production 4,550
Name Birla Corp.
Production 5,150
1.3 COMPANPROFILE
Since the performance of the Company was not encouraging and started making losses
from 1985-86 onwards due to sluggish market of cement and also severe competition in
Engineering products. In 1988 PANYAM was became sick and the management of the
company was taken over by late M.V. SubbaRao and Associates. M.V. SubbaRao and
Associates have taken various steps to improve the profitability of the company which
has yielded results wiping out the accumulated losses and the company reported
excellent performance in the years 1996-97 and 1997-98.
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However, the Cement Industry went through severe crisis in 1999 consequent to the
liberalization policy announced by the Government of India. In addition, due to paucity
of working capital finance, the Cement Unit could not run continuously to its capacity
due to various reasons.
Considering the worst situation prevailing in Panyam Cements as the workmen

were striving hard for their livelihood, Sri S.P.Y. Reddy, B.E.(Mech)& Member of
Parliament, who is a seasoned and successful technocrat having proven track record of
more than 30 years as Chairman of Nandi Group of Companies has taken over the
management of the company during September 2004 being assisted by Sri S. Sreedhar
Reddy, an Engineering Graduate in Electronics and Telecommunications as Managing
Director & CEO of the Company. The present management has invested amount for
restarting the operations of the company. Immediately after take over the unit, the new
management has settled the dues of Financial Institutions/Banks and also settled the
dues of the workmen by implementing VRS. The present management has put in best
efforts to revive the unit and put the same back on rails.
As stated above has 20.8 acres of prime land at Bommanahalli, Bangalore on

Bangalore to Hosur National Highway adjoining the main road. The said land is
situated at prime location and it is useful for residential flats on the rear side. Further,
the operations at the Engineering Division was suspended from September 2005 due to
spiralling increase in the cost of raw materials and other inputs and also due to cheaper
imports of finished products and to relieve the workmen under VRS..
The built up area comes to 2.87 million sft. The company has entered into an
agreement with M/s. Salarpuria Developers (P) Limited for developing the land under
joint development considering the boom in the real estate. The company has received
advances from the prospective buyers against the companys proportionate share under
joint development and the same was utilized for settlement of dues of banks/ secured
creditors, payment of VRS dues etc.
The company has taken up modernization of Kiln No.1 by enhancing the capacity
of the said kiln to 2000 M. Tonnes. After trial runs and initial teething problems, the
output has started from the kiln. The project has started the commercial production from
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10th August, 2011. After completion of the Modernisation Scheme, . The present
capacity of the cement plant is 3000 M.Tonnes per day. The project was financed by
Indian Overseas Bank, Adarshnagar, Hyderabad and State Bank of Hyderabad,
Overseas Branch, Somajiguda, Hyderabad.
State Of The Art Plant
Initially one kiln with a capacity of 200 TPD was installed and later on the
capacities were augmented by addition of two more kilns with a capacity of 300 TPD
and 600 TPD respectively. Over the years, the wet process kilns were converted into dry
process and the capacities were increased to a level of 2200 TPD by 1997 running three
kilns.
The company has diversified its activities in 1980 by amalgamating Deccan Wires
Limited (a unit of the then promoters group) which was incorporated in 1976 at
Bangalore for manufacture of 10000 tonnes of high carbon and alloy steel wires. The
said Engineering Division was having about 20.80 acres of prime land at
Bommanahalli, Bangalore
PRODUCTS
OPC 53 Grade Cement
PANYAM 53 Grade Cement is a prime brand cement with remarkably high

C3S(Tri Calcium Silicate) providing long lasting durability to concrete structures.
Advantages
Gives more flexibility to architects and engineers to design sleeker and

economical sections.
Develops high early strength so that form work of slabs and beams can be
removed much earlier resulting in faster speed of construction and saving in
centering cost.
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Produces highly durable and sound concrete due to very low percentage of
alkalis, chlorides, magnesia and free lime in its composition.
Almost negligible chloride content results in restraining corrosion of concrete

structure in hostile environment
Significant saving in cement consumption while making concrete of grades

M15, M20 & M25 and pre-cast segments due to high early strength.
OPC 43 Grade Cement
43 Grade Cement is the popular brand cement with low heat of hydration and long
life of Concrete Structures.
Advantages
Develop early strength at 3 and 7 days with exceptionally high 28 days

strength. Form work of slabs and beams can be removed much earlier which
results in increased speed of construction.
Unbeatable consistency in quality gives better accountability for mix design.
The higher characteristics strength of concrete leads to higher bond strength

minimizing the possibility of slippage of reinforcements.
Its high fineness offers better workability for a given water cement ratio
ensuring very dense, compact and durable concrete.
Being the low alkali cement it provides insurance against alkali-aggregate

reaction, this results in durable structures.
Nandi Group of Companies
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Nandi Group is a leading business group led by Founder and Chairman Mr S.P.Y.Reddy.
The Group is leading player in PVC, HDPE, CPVC,uPVC pipes. The group was started
as a small unit of manufacturing of Plastic containers in 1978. It was later expanded to
manufacturing of PVC and allied pipes under the brand "Nandi".
The group is a major player is Agricultural Pipes, Casing Pipes, Submersible Pipes,
Ring Fit Pipes, Plumbing Pipes, Electrical Pipes, Sewer Pipes. It also major player in
Water Storage Tanks and Solvent Cements. Over the last decades the group has
diversified into different businesses and has presence in Cement ,Infrastructure , Tmt
Bars, Agro products and Dairy Industry.
Concrete roads and Ferro-cement concrete elements
Test Report
FACTORY TEST Requirements as per IS :
Description
RESULTS 8112-89
CHEMICAL PROPERTIES
1. Loss on Ignition % 1.46 5.0 max
2. MgO % 0.91 6.0 max
3. SO3 % 2.04 3.0 max
4. Insoluble Residue % 1.52 3.0 max
5. Alumina Modulus 1.47 0.66 min
6. Lime Saturation Factor 0.88 0.66 - 1.02
7. Chloride Content % 0.06 0.1 max
PHYSICAL PROPERTIES
1. Fineness( m/Kg ) 2.76 225 min
2. Setting Time( minutes )
Initial: 105 30 min
Final: 160 600 max
3. Compressive
Strength( Mpa )
3days 28 23 min
7days 38 33 min
28days 53 43 min
4. Soundness
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LechatelierExpansion( mm ) 1 10 max
Autoclave Expansion( % ) 0.06 0.8 max
Room Temperature( C ) 28 272C
PPC Cement is the popular brand cement with low heat of hydration and long life of
Concrete Structures.
Advantages
Develop early strength at 3 and 7 days with exceptionally high 28 days

strength. Form work of slabs and beams can be removed much earlier which
results in increased speed of construction.
Unbeatable consistency in quality gives better accountability for mix design.
The higher characteristics strength of concrete leads to higher bond strength

minimizing the possibility of slippage of reinforcements.
Its high fineness offers better workability for a given water cement ratio
ensuring very dense, compact and durable concrete.
Being the low alkali cement it provides insurance against alkali-aggregate

reaction, this results in durable structures.
Concrete roads and Ferro-cement concrete elements.
Test Report
FACTORY TEST Requirements as per IS :
Description
RESULTS 1489(Pt-1)-91
CHEMICAL PROPERTIES
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1. Loss on Ignition % 1.36 5.0 max

2. MgO % 0.91 6.0 max
3. SO3 % 2.04 3.0 max
4. Insoluble Residue % 17.96 -
5. Chloride Content % 0.06 0.1 max
PHYSICAL PROPERTIES
1. Fineness Specific
314 300 min
Surface( m/Kg )
2. Setting Time( minutes )
Initial: 110 30 min
Final: 160 600 max
3. Compressive
Strength( Mpa )
3days 23 16 min
7days 30 22 min
28days 48 33 min
4. Soundness
LechatelierExpansion( mm ) 1 10 max
Autoclave Expansion( % ) 0.06 0.8 max
5. Drying Shrinkage( % ) yet to come 0.15 max
Room Temperature( C ) 28 272C
Promotors
Sri.S.P.Y.REDDY (B.E.(Mech)
Founder and chairman Nandi Group
Sri S.P.Y.Reddy is the Chairman of Panyam Cements & Mineral Industries Limited. He
is Engineering Graduate in Mechanical from Regional Engineering College,
Warangal.On completion of graduation, he has worked for a shorter period of three
years in Bhaba Atomic Research Centre, Mumbai. He started his own business in the
year 1977 and has essential role in establishment of NANDI GROUP He has served as
Chairman of Nandyal Municipality for a brief period. Sri S.P.Y.Reddy is a sitting
Member of Parliament from Nandyal Parliamentary Constituency.
Several innovations to his credit like
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PVC Pipes on Hire Basis to farmers at nominal rent
Introduction of Co-operative farming
Bore - Well Schemes
Additional Subsidy to Drip / Sprinkler Irrigation
Permanent Sprinkler System with PVC Pipes
PRODCUT PRODUCING:
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2. RESEARCH METHODOLOGY
The study is descriptive in nature and reveals an existing fact. The Population of the
study is all the companies listed in the NSE. The data is used on the basis of
profitability random sampling. Secondary data is used from the books, journals and
internet. The data is analyzed through the regression analysis to find out the impact of
liquidity on profitability, Correlation analysis is used to find out the relationship
between liquidity with profitability. The following liquidity and profitability ratios are
used for analysis:
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NEED FOR THE STUDY:

The Liquidity and Profitability analysis is an important tool to analyze the impact of
alternative financial plans on the inventory and sales are the major factor to determine
the investment in inventory.
Current assets when shoeing good performance in the study period every year it was
increased other hand when it is bad performance it will decreased.
Net working capital of the company is having more current assets in the company it is
not good in position as well as when current liabilities is more it is in good. For the
calculation of net working capital.
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OBJECTIVES OF THE STUDY:

1. To measure the closeness of association between liquidity and profitability
2. To find out the relationship between liquidity and profitability ratio
3. To find out the impact of liquidity on profitability.
SCOPE OF THE STUDY:

The study is based upon the data collected and complied from the annual
reports of PANYAM CEMENTS PRIVATE LIMITED,. The period of the study is
seven years 2009-16
Page25
SOURCE OF DATA:
Annual financial reports of the company
Liquidity Ratios:
1. Current ratio
2. Quick ratio
3. Cash ratio
4. Inventory turnover ratio
5. Current asset total asset ratio
6. Current liabilities total asset ratio
7. Debtors turnover ratio
8.Net working capital to current assets ratio
9 .Liquid asset to current assets ratio
10. Loans and advances to current assets ratio
11. Return on capital employed
Page26
1. CURRENT RATIO:
The ratio of current assets to current liabilities is called current ratio. The term current
assets includes debtors, stock, bills receivables, bank and cash balance, repaid expenses,
income due to short term investments. The term current liabilities include creditors,
bank overdraft, bills payable, outstanding expenses, income received in advance etc.
standard current ratio is 2:1 i.e. current assets shall be two times to current liabilities.
Current Assets
Current Ratio=
Current Liabilities
Page27
2. QUICK RATIO (QR):

This ratio is called LIQUID or ACID TEST RATION. It is calculated by comparing
the quick assets with current liabilities. Quick or liquid assets refer to assets which are
quickly convertible into cash. Current assets other than stock and prepaid expenses are
considered as quick assets.
The ideal ratio or the generally accepted norm for liquid or quickratio is1:1
Quick Assets
Quick Ratio=
Current Liabilities
Page28
3. CASH RATIO (CR):

This ration is also known as super quick ration. This is still a more rigorous test of
liquidity position of a concern. Absolute liquid assets (cash in hand, cash at bank and
marketable securities) are divided by current liabilities for computation of this ration.
The CR is interpreted in respected of current obligations. A high CR is good from the
management point of view it indicates poor investment policy.
CashBank balances+ Marketable securities

Cash Ratio=
Current Liabilities
Page29
4. CURRENT ASSET TO TOTAL ASSETS RATIO:

This ratio indicates the extent of total funds invested for working capital purpose. This
ratio shows the relationship between the current asset and total assets.
Current Assets
C . T . T . R=
Total Assets
Page30
5. DEBTORS TURNOVER RATIO (DTOR):

Debtor turnover ratio is also called Receivables turnover ratio. A business concern
generally adoptsdifferent method of sales. One of them is selling on credit. Goods are
sold on credit policy adopted bythe firm. Debtors turnover ratio measures the number
of times the receivables are rotated in terms of sales. This ratio also indicates the
efficiency of credit collection and efficiency of a credit policy.
Net Credit sales

Debtors Turnover Ratio=
Average Debtors
Page31
6. INVENTORY TURNOVER RATIO:

The inventory turnover ratio focuses light on the inventory control policy adopted by a
concern. These ratios show the relationship between the cost of goods sold during a
particular tear and inventories kept by a concern during that year. Higher ITR show
higher efficiency of the management and vice versa.
Net Sales
Inventory Turnover Rati o=
Average Inventory
Page32
7. NET WORKING CAPITAL TO CURRENT ASSETS RATIO:

This ratio focuses light on the networking capital. This ratio shows the relationship the
networking capital to assets.
Net Working Capital

Ne t Working Capital current Assets Ratio=
Current Assets
Page33
8. INVENTORY TO CURRENT ASSETS RATIO (ITCAR):

This ratio focuses light on the inventory control policy adopted by a concern. This ratio
shows the relationship between the inventories to current assets.
Inventory
Inventory Current assets Ratio=
Current Assets
Page34
9. LIQUID ASSETS TO CURRENT ASSETS RATIO (L.A.T.C.A.R):

Liquidity refers to the shot-term financial strength of company. This ratio shows the
relationship between the liquid assets to current assets ratio.
Liquid assets
Liquid Assets Current Assets Ratio=
current Assets
Page35
10. LOANS AND ADVANCES TO CURRENT ASSETS RATIO (L&A to C.A.R):

This ratio shows the relationship between the liquid assets to current ratio.
LoansAdvances
Loans Advances Current Assets Ratio=
Current Assets
Page36
11. RETURN ON CAPITAL EMPLOYED:

This ratio show the relationship between the profit after tax and capital employed. Hear
the capital employed consists of share capital plus reserves and surplus.
Profit After tax
Rerurn on Capital Employed=
Capital Employed
Metals comprehensive test:

To evaluate the overall liquidity position of a company during the period under the
study more precisely by applying Motaals comprehensive test. In this test, a method of
ranking has been applied to reach at a more comprehensive assessment of liquidity in
which four different ratios viz. net working capital to current assets ratio, inventory to
current assets ratio, liquid assets to current assets ratio and loans & advances to current
assets ratio have been computed and combined in a points score. A high value of net
working capital to current asset ratio or liquid assets to current assets ratio shows
greater liquidity and accordingly ranking has been done in that order. On the other hand,
a low inventory to current assets ratio indicates more favorable liquidity position and
therefore, ranking has been done accordingly in that order. Ultimate ranking has further
been done on the basis that the total of individual ranks, the more favorable is the
liquidity position of the concern and vice versa.
Co-efficient of rank correlation and testing the significance:
Page37
Tomeasure the extent of relationship between liquidity and profitability spearmans rank
correlation co-efficient is computed. An attempt has also been made to test whether the
computed value of such correlation co-efficient is significant or not, students test has
further been applied. For this purpose, the ratio of current asset to total assets (CTTR)
has been used as the liquidity indicator and the ratio of return on capital employed
(ROCE) has been taken as the profitability parameter.
DATA ANALYSIS AND INTERPRETATION
1. CURRENT RATIO:
Current assets
Current Ratio = -------------------------------
Current liabilities
Table no 1: Calculation of Current Ratio during 2009-16 (in rupees)
Year Current assets Current liabilities Ratio
2009 58,20,38,074 17,15,59,967 3.39:1

2010 60,10,25,120 24,70,69,961 2.43:1
2011 63,60,23,267 27,98,81,991 2.27:1
2012 86,23,39,059 38,46,01,629 2.24:1
2013 97,75,57,069 42,75,61,666 2.29:1
2014 1,41,99,81,105 69,14,27,998 2.05:1
2015 1,94,05,74,287 1,26,33,10,763 1.54:1
2016 2,28,01,29,178 1,63,17,48,874 1.40:1
SOURCE: compiled from the annual reports of PANYAM CEMENTS PRIVATE

LIMITED
Page38
current ratio
3.39
3.5
3 2.43 2.54 2.4
2.27 2.24 2.29
2.5 2.05
2
RATIO 1.5
1
0.5
0
2009 2010 2011 2012 2013 2014 2015 2016
YEARS
INTERPRETATION:
The ideal norm of current ratio is 2:1. In the above analysis the current ratio is more
than the standard norm which indicates the meaning of company having current assets
more from the year 2013-14. In the years 2015 and 2016 it is less than the standard
norm indicating insufficient current assets.
Page39
2. QUICK RATIO (QR):
Quick assets
Quick Ratio = ----------------------------------------
Current liabilities
Table no 2: Calculation of QR during 2009-16 (in Rupees)
Years Quick assets Current liabilities RATIO

2009 52,70,83,310 17,15,59,967 3.07:1
2010 55,43,19,055 24,70,69,661 2.24:1
2011 61,83,13,617 27,98,81,991 2.21:1
2012 83,95,37,989 38,46,01,629 2.18:1
2013 95,18,83,319 42,75,61,666 2.23:1
2014 134,08,98,832 69,14,27,998 1.94:1
2015 183,08,98,304 126,33,10,763 1.45:1
2016 215,15,33,481 163,17,48,874 1.32:1
SOURCE: Compiled from the annual report of PANYAM CEMENTS PRIVATE

LIMITED
Page40
quick ratio
3.5 3.07
3
2.24 2.21 2.18 2.23
2.5 1.94
2 1.45 1.32
RATIO
1.5
1
0.5
0
2009 2010 2011 2012 2013 2014 2015 2016
YEARS
INTERPRETATION:
The standard norm of quick ratio is 1:1.The above analysis showing fluctuations in the
result, the ratio is more than the standard norm. It means that the company having
sufficient quick assets to meet its short term obligations
Page41
3. CASH RATIO (CR):
Cash& bank balance +Marketable securities
Cash position Ratio =--------------------------------------------

Current liabilities
Table3: Calculation of C.R during 2009-16 ( (in Rupees)
Years Cash & Bank balances Current liabilities Ratio

Marketable+securities
2009 30,86,56,544 17,15,59,967 1.80

2010 36,69,36,548 24,70,69,661 1.49
2011 33,28,17,536 27,98,81,991 1.19
2012 53,38,17,374 38,46,01,629 1.40
2013 66,84,29,709 42,75,61,666 1.56
2014 74,16,54,712 69,14,27,998 1.07
2015 99,87,69,985 126,33,10,763 0.79
2016 117,97,56,874 163,17,48,874 0.72

LIMITED
Page42
Graph: 3
CASH POSITION RATIO

1.8
2
1.49 1.56
1.4
1.5 1.19
1.07
0.79 0.72
RATIO 1
0.5
0
2009 2010 2011 2012 2013 2014 2015 2016
YEARS
INTERPRETATION:
From the above table it is observed that cash ratio decreased from 2009-16 In the year
2013 it was somewhat increased to compare to the above years why because the
company caries a small amount of cash. As company having decreasing cash from last
three years, it is in need of raising liquid funds from resources.
Page43
4. CURRENT ASSET TO TOTAL ASSETS RATIO:
Current assets
C.T.T.R = -------------------------------------
Total assets
Table 4: Calculation of C.T.T.R during 2009-16 ((in Rupees)
Year Current assets Total assets Ratio

2009 58,20,38,074 69,58,58,492 0.84
2010 60,10,25,120 76,07,77,877 0.79
2011 63,60,23,267 77,08,06,717 0.83
2012 86,23,39,059 101,25,91,945 0.85
2013 97,75,57,069 113,89,06,075 0.86
2014 141,99,81,105 113,89,06,075 0.93
2015 194,05,74,287 151,98,66,349 0.81
2016 228,01,29,178 239,90,55,273 0.82

LIMITED
Page44
CA TO TA RATIO
0.95 0.93
0.9
0.86
0.85
0.84
0.85 0.83
0.82
0.81
RATIO 0.79
0.8
0.75
0.7
2009 2010 2011 2012 2013 2014 2015 2016
YEARS
Gr
aph
INTERPRETATION:
From the above table it is observed that the current assets to total assets ratio is
fluctuating from 2009-16 because total assets increased more than the current assets and
from year 2014-15 increasing because current assets increase more than the total assets
and from year 2015-16 again its decreasing because total assets increasing more than
the current assets.
Page45
5. DEBTORS TURNOVER RATIO (DTOR):
Net credit sales

DEBTORS TURN OVER RATIO = -------------------------------------------
Average debtor
Table 5: Calculation of D.T.O.R during 2009-16 (in rupees)
Years Net sales Avg .Debtors TIMES Period(days)

2009 37,75,63,318 1,40,52,986 26.87 13.58
2010 36,34,69,752 2,68,99,453 13.51 27.01
2011 41,46,76,692 8,33,55,585 4.97 73.44
2012 59,73,61,057 9,77,08,557 6.11 59.77
2013 58,34,94,873 6,59,10,691 8.85 41.24
2014 89,45,74,408 8,30,33,282 10.77 33.89
2015 85,70,48,864 6,36,52,687 13.46 27.17
2016 142,20,43,657 9,20,07,254 15.46 23.60
LIMITED
DEBTORS TURN OVER RATIO
Page46
Debtors turn over ratio
30 26.87
25
20
15.46
13.51 13.46
RATIO 15 10.77
8.85
10 6.11
4.97
5
0
2009 2010 2011 2012 2013 2014 2015 2016
YEARS
INTERPRETATION:
From the above table it reveals that debtor turn ratio decreasing form 2009-16 and
having continuous increase from the year 2015-16, because sales are continuously
increasing but debtors are not increasing as extent to the proportion of sales.
6. INVENTORY TURNOVER RATIO:
Page47
Net sales
INVENTORY TURN OVER RATIO = ------------------------------------------
Average inventory cost
Table 6: Calculation of I.T.R during 2009-16 ( ( in rupees)

Year Net sales Avg. inventory Times Period(days)
cost
2009 37,75,63,318 5,49,54,764 6.87 53.12
2010 36,34,69,752 4,67,06,065 7.78 46.91
2011 41,46,76,692 1,77,09,650 23.41 15.59
2012 59,73,61,057 2,28,01,070 26.19 13.93
2013 58,34,94,873 2,56,73,750 22.72 16.06
2014 89,45,74,408 7,90,82,273 10.16 35.92
2015 85,70,48,864 10,96,75,983 7.81 46.73
2016 142,20,43,657 12,85,95,697 11.06 33.00
LIMITED
inventory turn over ratio
30 26.19
23.41 22.72
25
20
RATIO 15 11.06
10.16
6.87 7.78 7.81
10
0
2009 2010 2011 2012 2013 2014 2015 2016
YEARS
INTERPRETATION:
Page48
From the above table it is observed that inventory turnover ratio is increasing form
2009-16 because the sales are increasing. It started its decrease from the year 2013-14
with the increment there in sales and less proportionate increase in inventory cost. It
again started its growth in the year 2016, because there is sudden and more increment in
sales in that year.
7. NET WORKING CAPITAL RATIO:

Net working capital
NETWORKING CAPITAL RATIO = -------------------------------
Net assets
Table 7.calculation of N.W.C during 2009-16 ( (in Rupees)
Years Net working capital net assets Ratio

2009 41,04,78,107 69,58,58,492 0.59
2010 353955159 76,07,77,877 0.47
2011 35,61,41,276 77,08,06,717 0.46
2012 41,77,37,430 101,25,91,945 0.47
2013 54,99,95,403 113,89,06,075 0.48
2014 72,85,53,107 151,98,66,349 0.48
2015 67,72,63,524 239,90,55,273 0.28
2016 64,83,80,304 277,03,95,023 0.23
Page49

LIMITED
Graph 7:
net working capital ratio

0.59
0.6
0.47 0.46 0.47 0.48 0.48
0.5
0.4
0.28
0.3 0.23
RATIO
0.2
0.1
0
2009 2010 2011 2012 2013 2014 2015 2016
YEARS
INTERPRETATION:
From the above table it reveals that net working capital ratio is having decreasing trend
except in the years 2013-14 where it is having stability in the growth with equal
proportionate change in the net working capital and net assets.
Page50
8. NET WORKING CAPITAL TO CURRENT ASSETS RATIO:
Net working capital

NETWORKING CAPITAL TO CURRENT ASSET RATIO = -------------------
Current assets
Table 8. Calculation of N.W.C to C.A.R during 2009-16 ( (in Rupees)
Years Net working capital Current assets Ratio

2009 41,04,78,107 58,20,38,074 0.71
2010 35,39,55,159 60,10,25,120 0.59
2011 35,61,41,276 63,60,23,267 0.56
2012 41,77,37,430 86,23,39,059 0.44
2013 54,99,95,403 97,75,57,069 0.56
2014 72,85,53,107 1,41,99,81,105 0.51
2015 67,72,63,524 1,94,05,74,287 0.35
2016 64,83,80,304 2,28,01,29,178 0.28
LIMITED
Page51
Graph 7:
NC TO CA
0.8 0.71
0.7 0.59 0.56 0.56
0.6 0.51
0.44
0.5
0.35
RATIO 0.4 0.28
0.3
0.2
0.1
0
2009 2010 2011 2012 2013 2014 2015 2016
YEARS
INTERPRETATION:
From the above table it is observed that net working capital to current assets ratio is
decreasing from 2009-12 because the current assets are sufficiently maintained and the
working capital based uponneeds can be utilized.
Page52
LIQUID ASSETS TO CURRENT ASSETS RATIO (L.A.T.C.A.R):
Liquid assets
Liquid Assets To current Assets ratio = ---------------------------------
Current assets
Table 9: Calculation of L.A.T.C.R during 2009-16 ( (inRupees)
Years Liquid assets Current assets Ratio

2009 52,70,83,310 58,20,38,074 0.91
2010 55,43,19,055 60,10,25,120 0.92
2011 61,83,13,617 63,60,23,267 0.97
2012 83,95,37,989 86,23,39,059 0.97
2013 95,18,83,319 97,75,57,069 0.97
2014 134,08,98,832 141,99,81,105 0.94
2015 183,08,98,304 194,05,74,287 0.94
2016 215,15,33,481 228,01,29,178 0.94
SOURCE: Compiled from the annual reports of PANYAM CEMENTS PRIVATE
LIMITED
Page53
Graph9:
0.97 0.97 0.97

0.97
0.96
0.95 0.94 0.94 0.94
0.94
0.93 0.92
RATIO 0.92 0.91
0.91
0.9
0.89
0.88
0.87
2009 2010 2011 2012 2013 2014 2015 2016
YEARS
INTERPRETATION:
From the above table it is revel that the liquid assets to current asset ratio are constant
mostly because the company is capable enough to maintain constant ratio of assets as
per its requirement. And we can also observe nearly the constant changes in the quick
and current assets.
Page54
10. LOANS AND ADVANCES TO CURRENT ASSETS RATIO:
Loans&advance
LOANS ANDADVANCES TO CURRENT ASSETS RATIO =
---------------------------
Current assets
Table 10. Calculation of L&A to C.A.R during 2009-16 ( (in Rupees)
Years Loans & advances Current assets Ratio

2009 19,02,96,992 58,20,38,074 0.33
2010 12,99,32,408 60,10,25,120 0.22
2011 14,40,69,089 63,60,23,267 0.23
2012 21,80,07,303 86,23,39,059 0.25
2013 21,55,33,498 97,75,57,069 0.22
2014 44,14,07,167 141,99,81,105 0.31
2015 75,85,98,636 194,05,74,287 0.39
2016 85,96,23,432 228,01,29,178 0.38
SOURCE: Compiled from the annual reports of PANYAM CEMENTS PRIVATE

LIMITED
Page55
0.39 0.38
0.4
0.33
0.35 0.31
0.3 0.25
0.22 0.23 0.22
0.25
RATIO 0.2
0.15
0.1
0.05
0
2009 2010 2011 2012 2013 2014 2015 2016
YEARS
INTERPRETATION:
From the above table it is observed that the loans & advances to current assets ratio
fluctuating in this period, because fluctuating in the loans and advances. Current assets
are continuously increasing.
Page56
RATIOS RELATING LIQUIDITY MANAGEMENT:-

YEAR CPR QR CR CTTR ITR DTR
2009 1.80 3.02 3.34 0.84 6.87 26.87
2010 1.49 2.24 2.43 0.79 7.78 13.51
2011 1.19 2.21 2.27 0.83 23.14 4.97
2012 1.40 2.18 2.24 0.85 26.19 6.11
2013 1.56 2.23 2.29 0.86 22.72 8.85
2014 1.07 1.94 2.05 0.93 10.16 10.77
2015 0.79 1.45 1.54 0.81 7.81 13.46
2016 0.72 1.32 1.40 0.82 11.00 15.46
Average 1.25 2.07 2.20 0.84 14.49 12.50
S.D 0.76 1.51 1.54 1.12 4.40 9.41
C.V 0.13 0.14 0.14 0.10 0.12 0.19
9.41
10
9
8
7
6
4.4
RATIO 5
4
3 1.54
1.51
2 1.12
0.76
1 0.13 0.14 0.14 0.1 0.12 0.19
0
CPR QR CR CTTR ITR DTR
YEARS
INTERPRETATION:
The above table it reveals that the average current ratio during the study period was
2.20:1 with a S.D of 1.54 and covariance is 0.14. And cash position ratio was 1.25 with
S.D of 0.76 the covariance is 0.13 the average inventory ratio was 14.49 with a S.D
4.40 the covariance is 0.12. average debtors ratio was 12.50 with S.D is 9.41 and
covariance is 0.19 with this we clearly state that the variation in debtor turn over ratio
was more than current ratio and debtors turn over ratio followed by quick ratio, cash
position ratio, and inventory turn over ratio respectively.
Page57
RANK CORRELATION BETWEEN LIQUIDITY AND PROFITABILITY:

Year CT to C.A ratio ROCE D=(R1-R2) D2
% Rank(R1) % Rank(R2)
2009 83.64 4 27.58 6 -2 4
2010 79.00 8 8.94 7 1 1
2011 82.51 5 8.14 8 -3 9
2012 85.17 3 39.70 4 -1 1
2013 83.83 2 32.73 5 -3 9
2014 93.43 1 50.12 1 0 0
2015 80.89 7 41.81 3 4 16
2016 82.30 6 43.18 2 4 16
r = 1- 6D2
n (n2-1)
r = 0.33
t= r * n-2
1-r2
t=0.86
INTERPRETATION:
It has been made to measure the extent of relationship between liquidity and
profitability of PANYAM CEMENTS PRIVATE LIMITED by computing spearmans
rank correlation co-efficient. For this purpose, the ratio of current assets to total assets
has been used the liquidity indicator and the ratio of return on capital has taken as the
profitability parameter. In that the rank correlation co efficient between CTTR and
ROCE of PANYAM CEMENTS PRIVATE LIMITED was 0.33.
FINDINGS:
Page58
The current ratio of the company is higher than the standard norm
2:1 during the study period 2009.so the current assets converted into
cash and investing short term investments.
The quick ratio of the company was also more than the standard
norm 1:1 during the study period 2009-16. so immediately need to
pay operating expenses.
Cash position ratio of the company is decreasing entire study period

expect in the year 2013. Because in the year cash & bank balances is
increases more than the current liabilities.
The portion of current assets is less when compared with total assets.
This indicates that fixed assets are not utilized properly.
Inventory turnover ratio is fluctuating during the study period. It is

very low in the year 2008. This indicates the outstanding stock is
more in this year.
Debtors turnover ratio of the company decreasing from 2009-16

because the debtors increasing more than the net credit sales and
then remaining all the years will increase.
Net working capital turnover ratio is showing positive during the

study period. Because of current assets are more than the current
liabilities.
Inventory to current assets ratio is decreasing from 2009-16 because

current assets is more than the inventory. 2013-14 is the ratio is same
Page59
because current assets and inventory increasing same.The in the

years from 2015-16 is some increase and constant.
Liquid assets to current assets ratio is decreasing in the 2009-10

current assets increase quick assets and from 2012-13increasing
constant and next again its decreasing up to 2016 because current
assets and quick assets increasing will be same.
Loans & advances to current assets ratio fluctuating this period and
their firm fully utilized current assets and to have credit limit
sanctioned from samely, so the loans and advances increased.
Return on capital employed was fluctuated during the study period

this is because capital employed increase more than the PBIT.
Page60
SUGGESTIONS:
The current ratio and quick ratio both are more than standard norm (2:1) that
means additional blockage of short term funds in the business so, try to release
the blocked funds and invests in short term securities to get same return on idle
funds.
The debtors turnover ratio was increasing during the study period. Try to reduce
the debtors.
The ROCE was fluctuating so, try to increase the sales revenue for maximizing
profits. So that the return on capital employed may increase.
CONCLUSION:
Page61
This study on liquidity and profitability of PANYAM CEMENTS PRIVATE

LIMITED refers that the company is not maintained sufficient liquid assets and not
controlling the overhead expenses effectively. In many cases company is not
maintaining the standard norms, because cost of goods sold is high. So company need
to control direct and indirect cost. Cement demand is expected to grow at a healthy pace
over the next 5 years, primarily led by demand from the infrastructure segment.
However, over the next2 years, capacity additions are expected to significantly outpace
consumption, resulting in a dip in the cement industry's operating rates.ii. We have
studied 34 cement companies. Out of 15 top cement companies, we havestudied 12 of
them.
BOOKS
Page62
Financial Management : I.M PANDAY
Financial Management : M.Y.KHAN & P.K.JAIN
Financial Management : PRASANNA CHANDRA
Financial Management : SHARMA &SASHI K. GUPTA
WEBSITES:
www.Google.com
MONEYCONTROL.COM
WWW. PANYAM CEMENTS PRIVATE LIMITED.COM
Page63

Liquidity and Profitability

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Liquidity and Profitability

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LIQUIDITY AND PROFITABILITY ANALYSIS

Profitability and management efficiency are usually taken to be positively associated:

Rationale of the study:

hire the services from independent professionals. There is an associated profession

Achieving adequate profitability and liquidity:

1.2 INDUSTRY PROFILE

Year capacity crossed (MIL. tons) no of years taken.

1914 commissioning of first successful plans

Capacity and production

Year Clinker in Mill, Tons Cement in mil Tons

List of Top 10 Cement Companies in India

Name ACC Limited

Installed Capacity 6,531

Considering the worst situation prevailing in Panyam Cements as the workmen

As stated above has 20.8 acres of prime land at Bommanahalli, Bangalore on

OPC 53 Grade Cement

PANYAM 53 Grade Cement is a prime brand cement with remarkably high

Gives more flexibility to architects and engineers to design sleeker and

Almost negligible chloride content results in restraining corrosion of concrete

Significant saving in cement consumption while making concrete of grades

OPC 43 Grade Cement

Develop early strength at 3 and 7 days with exceptionally high 28 days

Unbeatable consistency in quality gives better accountability for mix design.

The higher characteristics strength of concrete leads to higher bond strength

Being the low alkali cement it provides insurance against alkali-aggregate

Nandi Group of Companies

Concrete roads and Ferro-cement concrete elements

Develop early strength at 3 and 7 days with exceptionally high 28 days

Unbeatable consistency in quality gives better accountability for mix design.

The higher characteristics strength of concrete leads to higher bond strength

Being the low alkali cement it provides insurance against alkali-aggregate

Concrete roads and Ferro-cement concrete elements.

1. Loss on Ignition % 1.36 5.0 max

Founder and chairman Nandi Group

Several innovations to his credit like

PVC Pipes on Hire Basis to farmers at nominal rent

Introduction of Co-operative farming

Bore - Well Schemes

Additional Subsidy to Drip / Sprinkler Irrigation

Permanent Sprinkler System with PVC Pipes

NEED FOR THE STUDY:

OBJECTIVES OF THE STUDY:

SCOPE OF THE STUDY:

2. QUICK RATIO (QR):

3. CASH RATIO (CR):

CashBank balances+ Marketable securities

4. CURRENT ASSET TO TOTAL ASSETS RATIO:

5. DEBTORS TURNOVER RATIO (DTOR):

Net Credit sales

6. INVENTORY TURNOVER RATIO:

7. NET WORKING CAPITAL TO CURRENT ASSETS RATIO:

Net Working Capital

8. INVENTORY TO CURRENT ASSETS RATIO (ITCAR):

9. LIQUID ASSETS TO CURRENT ASSETS RATIO (L.A.T.C.A.R):

10. LOANS AND ADVANCES TO CURRENT ASSETS RATIO (L&A to C.A.R):

11. RETURN ON CAPITAL EMPLOYED:

Metals comprehensive test:

Co-efficient of rank correlation and testing the significance:

DATA ANALYSIS AND INTERPRETATION

Table no 1: Calculation of Current Ratio during 2009-16 (in rupees)

Year Current assets Current liabilities Ratio

2009 58,20,38,074 17,15,59,967 3.39:1

SOURCE: compiled from the annual reports of PANYAM CEMENTS PRIVATE

2. QUICK RATIO (QR):