Financial Statement

Analysis
Company: Ultratech and India Cement

Group No: 6
Aniket Bose RMM 03
Akashdeep Singh Godara RMM 18
Pruthiraj Pradhan RMM 22
Harkiran Baweja RMM 28
Deepti Manohar RMM 31
Puja Pabari RMM 54
 Cement Industry Overview

India, being the second largest cement producer in the world after China with a total capacity of
151.2 Million Tones (MT), has got a huge cement industry. With the government of India giving
boost to various infrastructure projects, housing facilities and road networks, the cement industry
in India is currently growing at an enviable pace. More growth in the Indian cement industry is
expected in the coming years. It is also predicted that the cement production in India would rise
to 236.16 MT in FY11. It's also expected to rise to 262.61 MT in FY12.

The cement industry in India is dominated by around 20 companies, which account for almost
70% of the total cement production in India. In the present year, the Indian cement companies
have produced 11 MT cement during April-September 2009. It took the total cement production
in FY09 to 231 MT.

ECONOMIC OVERVIEW

The performance of the Indian Economy in 2007-08 continued to be good with GDP growth at
9% despite rise in crude oil prices and financial turbulence. The reasons are the flow of
substantial capital investment, the fairly satisfactory performance of the industrial sector which
recorded a growth of 8.5% and the rapid development of the services sector which grew at 10.8%
during the year. The manufacturing and services sector together account for 85% of the Nation’s
economy. Further, the adverse impact of the rising rupee has so far been marginal on exports
which touched USD 155.5 billion in 2007-08 recording a healthy growth of 23% over the
previous fiscal. Imports grew by 27% year on year to USD 235.9 billion during 2007-08 – the
trade deficit widening to USD 80.4 billion. On the agricultural front, the total food grain
production in 2007-08, however, has been commendable and is estimated at 227.32 million
tonnes. This is 10 million tonnes more than the production achieved in 2006-07, representing an
increase of 4.6%. 

The main economic concerns have been the rising rate of inflation and the slowdown in the
growth of infrastructure industries. The rate of inflation moved past the critical 6% to a 14 month
high of 7.4% in April 2008 driven by rise in food prices, basic metals and fuel. The growth of
infrastructure industries during the period April 2007 to January 2008 was 5.5% as against 8.9%
in the corresponding period in 2006-07. 

In order to sustain GDP growth of around 8.5 - 9% in the years ahead, the core areas that warrant
priority attention are immediate anti-inflationary measures, sustaining agricultural growth at 4%
plus, accelerating infrastructure development particularly power, fiscal consolidation and
investment in Primary Education and Health Care. 

The Union Budget 2008-09 has addressed most of these concerns, through its focus on
infrastructure, agriculture, healthcare, education and rural development. Agriculture, rural
development and social sector account for over 37% of the total central plan outlay for 2008-09.
The Government and the Reserve Bank of India are also seized off the problem of inflation and
have come out with fiscal and monetary measures to curb its rising graph. 

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OUTLOOK FOR 2008-09 

Fiscal 2008-09 began with industrial growth dipping to 7% in April 2008 compared to 11.3% in
the same month in the last fiscal reflecting the impact of higher interest rates and escalating input
costs. 

The performance in April 2008 was, however, much better than the 3% growth registered in
March 2008 testifying to the fact that economic slowdown is not as severe as was being
envisaged. Economists now predict that the average industrial growth during 2008-09 is likely to
be around 7%. 

If the inflation rate does not abate, the tempo of development is bound to suffer. In order to
maintain GDP growth at 8% in 2008-09, it will be necessary for industrial output to grow by
10% and food grain production to rise to 240 million tonnes. Given the present conditions, this
would be extremely difficult even taking into account the resilience of the Indian economy. The
World Bank in its report on global development finance released recently, has projected GDP
growth to slow further to 7% in 2008-09, on account of monetary tightening leading to softening
in domestic demand. 

The estimated GDP growth in 2008-09 is also closely intertwined with the vagaries of the
international economic situation. If recessionary trends engulf the developed industrial nations,
India will definitely be adversely impacted. However, if the winds of recession are mild and
there is an easing of the tight monetary policy, then the country is likely to be on course to clock
a GDP growth exceeding 7%. 

INDUSTRY SCENARIO 

The cement industry in India has been enjoying its best period with a healthy growth in demand
in the past two years. The industry has been operating at its near full capacity during this period.
The cement prices have been steady throughout the year with this firm demand position. 

The all India clinker production picked up further by 6.5% to 129.70 million tonnes as compared
to 121.75 million tonnes during the previous year. The overall production of cement in the
country for the year ended March 2008 was up at 168.31 million tonnes as against 155.66 million
tonnes in the previous year registering a growth of 8.1%. The domestic consumption of cement
grew further by 9.8% over and above the double digit growth recorded in the previous two
financial years and was at 164.02 million tonnes as compared to 149.40 million tonnes in the
previous financial year. The cement export was; however, lower at 3.65 million tonnes as against
5.89 million tonnes in the previous year due to a buoyant domestic market. The clinker exports
were also lower at 2.37 million tonnes as compared to 3.10 million tonnes in the previous year. 

3
A review of regional pattern of growth in cement demand reveals the following:- 

  2007-08 2006-07
North 12.17% 10.44%
East 5.65% 5.87%
South 9.71% 12.90%
West 14.00% 9.10%
Central 6.05% 8.90%
Overall 9.80% 9.90%

It can be observed that south in which the company’s main markets are situated has registered a
growth of 9.71% over and above 12.9% growth achieved in the previous year. This has clearly
paved way for more remunerative prices in the market. 

Taking into account a dormant capacity of 5 to 6 million tonnes, the industry has been operating
to its full capacity for the past two years resulting in more pockets of shortages in the far flung
areas of the country. The real unsatisfied demand in the country is yet to be established as the
industry has been measuring the demand based on the dispatches made. Given the thrust by the
Government for the infrastructure development including roads, ports, air-ports, power plants
and special economic zones and also for housing, satellite township and irrigation projects, it is
believed that the cement demand will grow over 10% in the future. This implies that significant
capacity would be required to catch up with this growth in demand and the new capacities have
also been announced and are under creation towards this end. However, given the delays that are
occurring in the execution of new projects on account of bottlenecks in the supply side of major
equipments and availability of erection contractors, delays in commissioning of new capacities
cannot be ruled out and hence the present buoyant situation is likely to continue till new capacity
actually materializes to satisfy the growth in demand. 

On the fiscal side, the Government has taken a lot of measures in the previous year including
removal of import duty and CVD on cement and has also introduced slab rates of excise duty of
cement linked to Maximum Retail Price which has been further modified during the year with
increase in tariff rate from Rs.600 to Rs.900 per MT. However, given the buoyant demand, the
industry was able to pass on this impact to the consumer. During the year there was a steep hike
in the delivered prices of imported coal caused by the increase in freight and increased demand
for coal from developed countries. The CIF prices of imported coal which was around 55 – 60
US dollars in March 2007 rose to a level of 110 – 120 US dollars towards the end of March 2008
causing a huge adverse impact on the cost of production of cement for many of the units relying
on imported coal. 

Major Players in Indian Cement Industry

4
There are a number of players prevailing in the cement industry in India. However, there are
around 20 big names that account for more than 70% of the total cement production in India. The
total installed capacity is distributed over around 129 plants, owned by 54 major companies
across the nation.

Following are some of the major names in the Indian cement industry:

Company Production Installed Capacity

ACC 17,902 18,640
Gujarat Ambuja 15,094 14,860
Ultratech 13,707 17,000
Grasim 14,649 14,115
India Cements 8,434 8,810
JK Group 6,174 6,680
Jaypee Group 6,316 6,531
Century 6,636 6,300
Madras Cements 4,550 5,470
Birla Corp. 5,150 5,113

*The two companies we have selected for comparative analysis of financial statements are
Ultratech Cements Ltd and India Cements ltd.

5
 Ultratech Ltd.
UltraTech Cement Limited has an annual capacity of 18.2 million tonnes. It manufactures and
markets Ordinary Portland Cement, Portland Blast Furnace Slag Cement and Portland Pozzalana
Cement. It also manufactures ready mix concrete (RMC).

UltraTech Cement Limited has five integrated plants, six grinding units and three terminals —
two in India and one in Sri Lanka.

UltraTech Cement is the country’s largest exporter of cement clinker. The export markets span
countries around the Indian Ocean, Africa, Europe and the Middle East. UltraTech’s
subsidiaries are Dakshin Cement Limited and UltraTech Ceylinco (P) Limited.

UltraTech is India's largest exporter of cement clinker. The company's production facilities are
spread across five integrated plants, five grinding units, and three terminals — two in India and
one in Sri Lanka. All the plants have ISO 9001 certification, and all but one have ISO 14001
certification. While two of the plants have already received OHSAS 18001 certification, the
process is underway for the remaining three. The company exports over 2.5 million tonnes per
annum, which is about 30 per cent of the country's total exports. The export market comprises of
countries around the Indian Ocean, Africa, Europe and the Middle East. Export is a thrust area in
the company's strategy for growth.

UltraTech's products include Ordinary Portland cement, Portland Pozzolana cement and Portland
blast furnace slag cement.

 Ordinary Portland cement

 Portland blast furnace slag cement
 Portland Pozzolana cement
 Cement to European and Sri Lankan norms

Ordinary Portland cement

Ordinary Portland cement is the most commonly used cement for a wide range of applications.
These applications cover dry-lean mixes, general-purpose ready-mixes, and even high strength
pre-cast and pre-stressed concrete.

Portland blast furnace slag cement

Portland blast-furnace slag cement contains up to 70 per cent of finely ground, granulated blast-
furnace slag, a nonmetallic product consisting essentially of silicates and alumino-silicates of
calcium. Slag brings with it the advantage of the energy invested in the slag making. Grinding
slag for cement replacement takes only 25 per cent of the energy needed to manufacture Portland
cement. Using slag cement to replace a portion of Portland cement in a concrete mixture is a
useful method to make concrete better and more consistent. Portland blast-furnace slag cement
has a lighter color, better concrete workability, easier finishability, higher compressive and
flexural strength, lower permeability, improved resistance to aggressive chemicals and more
consistent plastic and hardened consistency.
Portland Pozzolana Cement

6
Portland pozzolana cement is ordinary portland cement blended with pozzolanic materials
(power-station fly ash, burnt clays, ash from burnt plant material or silicious earths), either
together or separately. Portland clinker is ground with gypsum and pozzolanic materials which,
though they do not have cementing properties in themselves, combine chemically with portland
cement in the presence of water to form extra strong cementing material which resists wet
cracking, thermal cracking and has a high degree of cohesion and workability in concrete and
mortar.

India Cements ltd.

The India Cements Ltd was established in 1946 and the first plant was setup at Sankarnagar in
Tamilnadu in 1949. Since then it has grown in stature to seven plants spread over Tamilnadu and
Andhra Pradesh. The capacities as on March 2002 have increased multifold to 9 million tons per
annum.

Company Highlights

 The Company is the largest producer of cement in South India.

 The Company's plants are well spread with three in Tamilnadu and four in Andhra
Pradesh which cater to all major markets in South India and Maharashtra.
 The Company is the market leader with a market share of 28% in the South. It aims to
achieve a 35% market share in the near future. The Company has access to huge
limestone resources and plans to expand capacity by de-bottlenecking and optimisation of
existing plants as well as by acquisitions.
 The Company has a strong distribution network with over 10,000 stockists of whom 25%
are dedicated.
 The Company has well established brands- Sankar Super Power, Coromandel Super
Power and Raasi Super Power.
 Regional offices in all southern states and Maharasthra offices/representative in every
district.

Financial Highlights of India Cements Ltd. & Ultratech Ltd.

1. Net Sales

Net Sales In Crores

7
   2008-09 2007-08
Ultratech 6383 5509.22
India Cement 3954.49 3601.61

Sales (In Crores)

7000
6000
5000 India Cement
Ultratech
4000
3000
2000
1000
0
2008-09 2007-08

Interpretation:

Net Sales shows Total turnover of the firm. Generally there is a notion that more the sales would
result into more profit. It is not necessarily true but in most of the cases it holds to be true.

 In the case of both the companies Ultratech and India Cements Ltd. The sales is
increasing as compared to last financial year2007-08, though it is observed that Ultratech
has increase of around 16% whereas India cements have increase of around 10%, Which
means they are both expanding sales in order to gain market share as well as fulfill
market demand and enhance their productivity. A significant gain is seen in net sales
which has effect on profit as well.

8
 2. PBDIT
PBDIT 2008- 2007-08
09
Ultratech 1810
India Cement   1043.2 1120.43

PBDIT (In Crores)

2000
1800
1600
1400 Ultratech
1200 India Cement
1000
800
600
400
200
0
2008-09 2007-08

Interpretation:

Profit before Depreciation Interest and Taxes (PBDIT) is revenue minus all operating expenses
except depreciation, interest and taxes. Some companies call PBDIT the gross profit.

 In PBDIT shows steady growth and 30.26% growth in the year 2006.
 Sales of Ultratech have increased so the expenses are also increased but India cement also
doing the same. So in comparison of both there is hard to differentiate between the both.

9
 3. PBDT

PBDT 2008-09 2007-08

Ultratech 1684 1745
India Cement 931.05 1010.14

PBDT(In Crores)

1800
1600
1400
Ultratech
1200
India Cement
1000
800
600
400
200
0
2008-09 2007-08

Interpretation:

Profit before Depreciation can be found out by deducting Interests from PBDIT or by adding
Depreciation in PBT.

PBDT of both the companies is healthy though Ultratech is way ahead of India cements in both
the years but interest paid by Ultra cements is also high. India cements and Ultratech has seen a
decline in PBDT which should not happen as it is not a good sign for the companies. Though the
sole reason can be the recession that hit the country.

10
 4. Profit after Taxation

PAT 2008-09 2007-08

Ultratech 977 1008
India Cement 432.18 637.54

PAT (In Crores)

1200

1000
Ultratech
800
India Cement
600

400

200

0
2008-09 2007-08

Interpretation:

PAT is also called Net Profit. PAT is the difference between profit before tax and Taxes.
(NP / PAT = PBT – Tax)

 As the Figures shows PAT has been high of Ultratech in both financial years the reason
being they are able to optimize on their costs and enhance productivity as compared to
India cements though India Cements is not performing badly but it is low in industry.

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 5. Dividend Pay Out
 Dividend Payout 2008-09 2007-08
Ultratech 0.06  0.06
India Cement 0.13  0.083

Dividend Payout Ratio(in Rs.)

0.14

0.12

0.1
Ultratech
0.08 India Cement

0.06

0.04

0.02

0
2008-09 2007-08

Interpretation:
Dividend Pay Out is dividend paid to the shareholders in terms of percentage.

 It is clearly visible from both the years that India Cement’s Payout ratio is higher
compared to Ultratech but the consistency would be there in Ultra tech. Here steep
decline is observed in the dividend payout in India Cement

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  6. Dividend Per Share

Dividend Per 2008-09 2007-08

Share
Ultratech 5 5
India Cement 2 2

Dividend Per Share(In Rs.)

5
4.5
4
3.5 Ultratech
3 India Cement
2.5
2
1.5
1
0.5
0
2008-09 2007-08

Interpretation:
Dividend per share is dividend paid on the face value of a share. It can be calculated by dividing
earnings per shareholders’ by number of ordinary shares outstanding.

We can see that in both the companies it has remained constant of Rs. 5 and Rs. 2 in both the
years of Ultratech and India cements respectively. Ultratech is paying higher dividend than India
Cements.

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 7. Earnings Per Share

Earnings Per Share 2008-09 2007-08

Ultratech 78.48 80.94
India Cement 15.32 23.97

Earning Per Share(In Rs.)

90
80
70
Ultratech
60
India Cement
50
40
30
20
10
0
2008-09 2007-08

Interpretation:

The profitability of the common shareholder’s investment can also be measured by calculating
earnings per share (EPS). It is calculated by dividing the Profit After Tax by the total number of
common shares outstanding.

 It is also calculated for earning on face value of share.

 From the above graph it is seen that the earnings of Ultratech are almost four times that
of India Cements. Ultratech is earning higher profits so the earning per share is higher.

14
 9. Net Worth:

Net Worth 2008-09 2007-08

Ultratech 3602 2697
India Cement 3631.3 3321.11
9

Net Worth( In crores)

4000
3500
3000
Ultratech
2500 India Cement
2000
1500
1000
500
0
2008-09 2007-08

Interpretation:

For a company, total assets minus total liabilities. Net worth is an important determinant of the
value of a company, considering it is composed primarily of all the money that has been invested
since its inception, as well as the retained earnings for the duration of its operation. Net worth
can be used to determine creditworthiness because it gives a snapshot of the company's
investment history. Also called owner's equity, shareholders' equity, or net assets.

 Both the company’s net worth is almost same in year 2008-09 though there was change
initially where Ultra tech’s net worth was low as compared to India cements as Ultratech
was taking benefit of trading on equity hence debt was high as compared to India
cements.

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  10. Total Assets
TOTAL ASSETS (in Crores)

Total Assets 2008-09 2007-08

Ultratech 7710 6259
India Cement 6496.6 6046.62
5

Total Assets (In Crores)

8000
7000
6000
Ultratech
5000 India Cement
4000
3000
2000
1000
0
2008-09 2007-08

Interpretation:

Total Assets are the sum of current and long-term assets owned by a person, company, or other
entity.

 Total Assets of both the companies is almost similar but in Ultratech the assets are
increasing in the year 2008-09.

RATIO ANALYSIS

16
Ratio analysis is a process of comparison of one figure against another and the interpretation of
the ratios to know the strengths and weaknesses of the firm’s operations and of its financial
position.

Ratio analysis helps various interested parties like prospective investors, creditors, banks,
employees, etc. to draw useful conclusions to serve their purpose.

Ratio analysis is powerful tool of financial analysis. It is defined as the systematic use of ratio to
interpret the financial statement so that the strength and weakness of a firm as well as its
historical performance and current financial condition can be determined. The term ratio refers to
the numerical or quantitative relationship between two items or variables.

The relationship can be expressed as percentage, fraction and proportion of numbers. The
rationale of ratio analysis lies in the fact that it makes related information comparable.

The purpose of ratio analysis is to assess a company’s financial health and performance. It also
enables investors and creditors to evaluate past performance and financial position, and to predict
future performance.

 Importance:
 Useful to compare company’s performance with industry’s performance
 Useful to compare company’s performance with Ideal performance
 Useful to compare company’s performance with competitors’ performance
 Useful to compare company’s performance with its past performance

 Types of Ratio:

 Liquidity ratios
 Leverage ratios
 Profitability ratios
 Turnover ratios
 Valuation ratios

17
 Liquidity ratios

This ratio provides quick measure of liquidity by establishing a relationship between cash and
fund flow statements.

The short term creditors of the firm are interested in the short term solvency or liquidity of a
firm. But liquidity implies, from the viewpoint of utilization of the funds are idle or they earn
very little.

A proper balance between the two contradictory requirements, that is, liquidity and profitability,
is a required for efficient financial management.

 Liquidity Ratios includes:

1. Current Ratio
2. Quick Ratio or Acid Test Ratio

18
1) CURRENT RATIO

 Meaning:

This most widely used ratio shows the proportion of current assets & current liabilities. The
objective of this ratio is to measure the ability of a firm to meet its short term obligations and
to reflect the short term financial solvency of a firm. In other words it is used to measure the
margin of safety for short term creditors.

Generally it is believed that 2:1 ratio show a comfortable working capital position. The
higher the current ratio, the larger is the amount of rupees available per rupee of current
liability, the more is the firm’s ability to meet current obligations and the greater is the safety
of funds of short term creditors. Thus, current ratio, in a way, is a measure of margin of
safety to the creditors.

 Formula:
CURRENT ASSETS
CURRENT RATIO =
CURRENT LIABILITIES

 Current Ratio of the Company:

CURRENT RATIOS 2008-09 2007-08

PARTICULARS Ultratech India Cement Ultratech India Cements
Current Assets 1362 83010 1304 108735
Current Liability 1243 131343 1279 106206
Current Ratio 1.10 0.63 1.020 1.024

 Interpretation:

In a case of the year 2007-08, the current ratio computed above is 1.02:1 for both the
companies. It implies that for every one rupee of current liabilities, current assets of 1.02
rupees are available to meet them. The current ratio of for the year 2008-09 signifies that
current assets are 0.63 times to its current liabilities in India cements though Ultratech has
increased its current ratio to 1.10:1 to maintain adequate liquidity.

As compared to the ideal ratio (2:1), both the companies is having poor liquidity position in
both the years. The current ratios computed above are lower than the ideal ratio. It shows that
the company is not sufficient to meet its short term obligations / creditors. It shows that the
firm is very risky for the creditors. One reason for lower ratio method of accounting
inventories, but they are using average costing method which give higher value of inventory
than LIFO. So they are really poor at their current ratio. Though it may be because the
industry average is such due to government interference in this industry.

19
2) QUICK RATIO (ACID TEST RATIO)

 Meaning:
To remove the defect of current ratio acid test ratio is used. It is a variant of current ratio
which is designed to show the amount of funds available to meet immediate payments. It is
often referred to as quick ratio because it is a measurement of a firm’s ability into cash in
order to meet its current liabilities. Thus, it is a measure of quick or acid liquidity.

The quick ratio (Acid Test ratio) is the ratio between current assets (excluding inventory) and
current liabilities. It is calculated by dividing current assets by the current liabilities.

The ideal quick ratio is 1:1. Also it is used to analyze the liquidity position of a company into
detail.

 Formula:

CURRENT ASSETS –
QUICK RATIO INVENTORY
= CURRENT LIABILITIES

 Quick Ratio of the Company:

QUICK RATIOS 2008-09 2007-08

PARTICULARS Ultratech India Cement Ultratech India Cements
CA-INVENT. 1362 83010 1304 108735
Current Liability 1243 131343 1279 106206
Quick Ratio 1.10 0.63 1.020 1.024

 Interpretation:

The quick ratio computed above for the year 2007-08 and 2008-09 is same as current
ratio which means there is no inventory stocked by both the companies it may be because
of excess demand. It is a very good sign to have liquid ratio near to one in case of any
emergency the company will have liquid funds to finance the expenses. Though in 2008-
09 India cements have quick ratio of 0.63:1 which is less than ideal ratio which proves
Ultratech is in better position to fund any contingency expense as they have enough
liquidity.

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 B) LEVERAGE RATIOS

 Another ratio which indicates the proportion of owner’s capital to outside debts or the
proportion of fixed income bearing securities to equity capital are known as leverage
ratios.

 The long term lenders or creditors would judge the soundness of a firm on the basis of the
long term financial strength measured in terms of its ability to pay the interest regularly
as well as repay the installment of the principal on due dates or in one lump sum at the
time of maturity. The long term solvency of a firm can be examined by using leverage
ratios.

 There are two types of leverage ratios.

1) Ratios which show whether the firm will be able to repay the amount borrowed when
they are due for repayment

2) The second group of ratios consists of coverage ratios, which shows the capacity of
the firm to pay the interest or dividend regularly.

Leverage Ratios includes:

1) Debt-Equity Ratio
2) Capital Employed to Net Worth Ratio
3) Fixed Interest Coverage Ratio

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1) DEBT- EQUITY RATIO

 Meaning:

The relationship between outside long-term liabilities and owner’s funds is a popular
measure of the long term financial solvency of a firm. This relationship is shown by the debt-
equity ratio. It shows the proportion of long-term external equities and internal equities.

The ratio reflects the relative contribution of creditors and owners of business of its
financing. Higher ratio means that outside creditors have a larger claim than the owners of
the business. The firm will have to bear a heavy burden of interest payments. If this ratio is
lower, it is not profitable from the view point of equity shareholders.

 Formula:
TOTAL DEBT
DEBT- EQUITY RATIO
= NET WORTH (EXCL. PREF. SHARE
CAPITAL)

 Debt Equity Ratio of the company:

DEBT-EQUITY RATIOS 2008-09 2007-08

PARTICULARS Ultratech India Cement Ultratech India Cements
TOTAL DEBT 2142 198802.96 1741 181150.58
NET WORTH 3602 363138.98 2697 332110.82
RATIO 0.59 0.55 0.65 0.55

 Interpretation:

The debt-equity ratio computed above reflects the relative contribution of creditors and
owners of the firm. The ratio computed above for the year 2007-08 is 0.55 for India Cements
and it is the same 0.59 in 2008-09 that means the firm’s total debt has not changed at all and
there is 0 Rs. against each rupee of net worth it also suggests that the outside creditors have
small amount of claim in the firm. The ratio for the year 2007-08 of Ultratech is 0.65 and it
has declined to 0.59 which means the loans or debt is reduced and they are trading more on
equity. Both the companies on a whole have sound debt equity ratio but this shows both
companies are moving at moderate risk and are not aggressive in raising capital.

Reason behind low debt-equity ratio might be very small amount of long term loans taken by
firm from outside sources. Because of lower rational, benefit of trading on equity is not
availed of and the rate of equity dividend might be comparatively lower in the future.

22
2) CAPITAL EMPLOYED TO NET WORTH RATIO

 Meaning:

There is yet another alternative way of expressing the basic relationship between debt and
equity. One may want to know: How much funds are being contributed together by lenders
and owners for each rupee of the owners’ contribution? This can be found out by calculating
the ratio of capital employed or net assets to net worth:

 Formula:
CAPITAL
CAPITAL EMPLOYED TO NET WORTH RATIO EMPLOYED
=
NET WORTH
 Capital Employed To Net Worth Ratio of the Company:

CE TO NW RATIOS 2008-09 2007-08

Ultratec
PARTICULARS Ultratech India Cement h India Cements
CAPITAL EMPLOYED 6467 382391.12 4980 414974.07
NET WORTH 3602 363138.98 2697 332110.82
RATIO 1.80 1.05 1.85 1.25

 Interpretation:
The capital employed to net worth ratio computed above for the year 2007-08 and 2008-09
for both the companies Ultratech and India Cements Ltd. It is seen in Ultratech the ratio is
reduced by 0.05 Crores which means the owner’s funds has reduced in total capital of the
company a similar trend is observed in India cements and the reason behind this may be they
are trying to take advantage of trading on equity so that profits are increased.

23
3) FIXED INTEREST COVERAGE RATIO

 MEANING:

This ratio indicates as to how many times the profit covers the payment of interest on
debentures and other long-term loans. Hence, it also known as “times-interest earned ratio.
This ratio measured the debt serving capacity of a firm insofar as fixed interest on long-term
loan is concerned. It is determined by dividing the operating profits or earnings before
interest and taxes (EBIT) by the fixed interest charges on loans.

 Formula:

EARNING BEFORE INTEREST &

FIXED INTEREST COVERAGE RATIO TAXES
= INTEREST

 Fixed Interest Coverage Ratio of the Company:

FIXED INTEREST COVERAGE
RATIOS 2008-09 2007-08
PARTICULARS Ultratech India Cement Ultratech India Cements
EARNING BEFORE INTERST
& TAXES 1487 760.45 1589 992.51
INTEREST 126 112.15 82 109.86
RATIO 11.80 6.78 19.38 9.03

 Interpretation:

The fixed interest coverage ratio of Ultratech for the year 2007-08 is 19.38, which suggests
that the ability of the firm is 19.38 times more to pay the interest when there is a decline in
the EBIT of the firm which is further reduced to 11.80 which has significantly declined
which is good as the company has learned to make effective use of debt. But interest rate is
increasing as company is trading more on loans though the ratio is still high. In comparison
India cements Ltd. Fixed interest coverage ratio is very low as 9.03% in 2007-08 and further
reduced to 6.78 which means company is taking benefit of trading on equity and also taking
little risks in order to increase profits.

24
 C) PROFITABILITY RATIOS

 Profit is the main objective of any business enterprise. Besides, profitability is the
measure of efficiency. The owners invest their funds in the expectation of receiving of
reasonable return and so profitability is important from their point of view.

 The profitability ratios are calculated to measure the operating efficiency of the company.
 The management of the firm is naturally eager to measure its operating efficiency.
Similarly the owners invest their funds in the expectation of reasonable returns. The
operating efficiency of a firm and its ability to ensure adequate returns to its shareholders
or owners depends ultimately on the profits earned by the firm.

 The profitability of a firm can be measured by its profitability ratios. Profitability ratios
can be determined on the basis of either sales or investments.

 The profitability ratios in relation to sales are

1. Profit margin ( gross and net )
2. Expenses ratio

 Profitability in relation to investments is measured by

1. Return on assets
2. Return on capital employed
3. Return on shareholders’ equity

25
1) Gross PROFIT RATIO

 Meaning:

It is the basic measure of profitability of business. It expresses relationship between gross profits
earned to net sale. It is also known as ‘gross margin’. The gross profit shows the difference
between sales and cost of sales. A high ratio implies that the cost of production is relatively low
or that purchases are made at low prices. A low ratio suggests that the firm is not able to buy at
reasonable prices or that the cost of production is not under control.

 Formula:
(SALES- COST OF GOODS
GROSS PROFIT RATIO SOLD) X 100
= NET SALES

 Gross Profit Ratio of the Company:

GROSS PROFIT RATIOS 2008-09 2007-08

PARTICULARS Ultratech India Cements Ultratech India Cements
Gross Profit (sales-Cogs) 2934.68 1636.8 2893.86 1678.63
COGS 3448.32 1722.69 2615.14 1368.49
NET SALES 6383 3359.49 5509 3047.12
RATIO (%) 45.98 48.72 52.53 55.09

 Interpretation:

Gross profit is the result of the relationship between prices, volumes, and costs. A change can be
bought about by changes in many factors like purchase, turnover, stock etc. The gross profit ratio
for Ultratech in 2007-08 is 52% whereas India cements is 55% which means there is lot of
productivity and procurement costs are laid in organized manner though we observe a decline for
both the companies in 2008-09 this is mostly due to recession that had hit increasing the costs
both have dropped by around 12% which is common so it also may be due to change in
government policy as the effect on both firms is same

26
2) NET PROFIT RATIO

 Meaning:

Net Profit margin shows how much net profit is derived from every rupee of total sales. It
indicates how well the business has managed its operating expenses. It also can indicate whether
the business is generating enough sales volume to cover minimum fixed costs and still leave an
acceptable profit.

 Formula:
PROFIT AFTER
NET PROFIT RATIO TAXES X 100
= NET SALES

 Net Profit Ratio of the Company:

NET PROFIT RATIOS 2008-09 2007-08

PARTICULARS Ultratech India Cement Ultratech India Cements
PAT 977 432.18 1008 637.54
NET SALES 6383 3359.49 5509 3047.12
RATIO (%) 15.31 12.86 18.30 20.92

 Interpretation:

The net profit ratio calculated above of Ultratech Ltd. for the year 2007-08 is 18.30%, which
shows that on the sale of Rs.100 there is the net profit of Rs.18.3 which is reduced to 15.31% in
2008-09. Similarly in India Cements the net profit in 2007-08 was 20.92 which have reduced to
12.86 which shows a steep decline in net profits and high increase in administration and selling
expenses which should be reduced in order to gain efficiency. Generally net profit ratio higher
than interest rate prevailing in bank is said to be comfortable ratio. Current bank interest rate is
around 9-10%. So both the firm is attaining comfortable net profit ratio.

27
3) OPERATING PROFIT RATIO

 Meaning:

The operating profit ratio is another measurement of management’s efficiency. It compares the
quality of a company’s operations to its competitors. A business that has a higher operating
margin than its industry’s average tends to have lower fixed costs and a better gross margin,
which gives management more flexibility in determining prices. This pricing flexibility provides
an added measure of safety during tough economic times.

 Formula:

EARNING BEFORE INTEREST & TAXES – OTHER

OPERATING PROFIT RATIO INCOME
= NET SALES

 Operating Profit Ratio of the Company:

OPERATING PROFIT RATIOS 2008-09 2007-08

PARTICULARS Ultratech India Cement Ultratech India Cements
EBIT – Other Income 1383 645.04 1488 951.5
NET SALES 6383 3359.49 5509 3047.12
RATIO 0.22 0.19 0.27 0.31

 Interpretation:

The operating profit ratios computed above show that the operating profit of Ultratech cement
has remained quite constant with 27% in the year 2007-08 and 22% in the year 2008-09 with a
minute decrease in the operating profit ratio of about 0.05% .However looking at the figures of
India Cement one can notice a fall from 31% to just 19 %. The fall is quite steeper as compared
to the Ultratech cement

28
4) OPERATING RATIO

 Meaning:

This ratio indicates the relationship between Total Operating cost and sales. Lower the ratio
better is the efficiency of the firm. The ratio is usually expressed in terms of percentage.

 Formula:

OPERATING RATIO =
1 – OPERATING PROFIT RATIO

 Operating Ratio of the Company:

OPERATING RATIOS 2008-09 2007-08

PARTICULARS Ultratech India Cement Ultratech India Cements
Operating Profit Ratio 0.22 0.16 0.27 0.31
OPERATING RATIO (%) 0.78 0.84 0.73 0.69

 Interpretation:

The operating ratio is the test of profitability as well as the operational efficiency with which the
business is carried on. A comparison of the operating ratios will indicate whether the cost
component is high or low in the figure of sales. This ratio should be low enough to leave a
portion of profit to give fair returns to the investors.

As it can be seen from the figures and the ratio being related to the operating profit ratio
inversely, it can be inferred that Ultratech is again quite stable but there has been a sharp increase
in the operating costs of India Cement with the ratio shooting up to 84% from 69%.

29
5) EXPENSES RATIO

 Meaning:

Another profitability ratio related to sales is the expenses ratio. It is computed by dividing total
expenses by net sales. The term expenses includes cost of goods sold, administrative expenses,
selling and distribution expenses, financial expenses but it includes taxes, divided and extra
ordinary losses due to theft of goods, goods destroyed by fire and so on. The expenses ratio is
very important for analyze the profitability of the firm.

 Formula:
TOTAL
EXPENSES RATIO EXPENSES X
= 100
NET SALES

 Expenses Ratio of the Company:

EXPENSES RATIOS 2008-09 2007-08

PARTICULARS Ultratech India Cement Ultratech India Cements
TOTAL EXP. 4677 2431.7 3783 1967.7
NET SALES 6383 3359.49 5509 3047.12
RATIO (%) 73.27 72.38 68.67 64.58

 Interpretation:
Though the Ultratech numbers are high for both the years with their expense ratios of 68.67% in
2007-08 and 73.27% in 2008-09, India cement expenses are rising at a higher rate with 64.58%
in 2007-08 but 72.38% in 2008-09

30
6) RETURN ON SHAREHOLDERS’ FUNDS

 Meaning:

This ratio establishes the relationship between equity shareholders and equity shareholders’
funds. The objective is to determine the efficiency with which funds supplied by shareholders are
being utilized. The return on shareholders’ funds ratio shows the overall efficiency of the
company in employing ordinary shareholders resources. Variations of the ratio may exclude
exceptional gains and losses or depreciation and amortization from the profit figure.

This is the most important ratio to judge whether the firm had earned a satisfactory return on per
rupee invested by shareholders or not. This ratio is used to evaluate the investment decision in a
company. The ratio indicates how profitability the funds provided by the owners have been used
in business.

 Formula:

PROFIT AFTER TAX – PREF.

RETURN ON SHAREHOLDERS’ FUNDS DIVIDEND X 100
= NET WORTH(excl. pref. shares)
 Return on Shareholders’ Fund of the Company:
RETURN ON
SHAREHOLDERS' FUNDS 2008-09 2007-08
PARTICULARS Ultratech India Cement Ultratech India Cements
PAT-PREF.DIV. 977 43218 1008 63754
NET WORTH 3602 363138.98 2697 332110.82
RATIO (%) 27.12 11.90 37.37 19.20

 Interpretation:
Given the above data one can infer that Ultratech is faring better with respect to return on
shareholders’ funds with 37.37% in the year 2007-08 and 27.12 % in the year 2008-09. However
there is a fall in the return on shareholders for both the companies in the year 2008-09 but again
the rate of falling is better or lower for Ultratech as compared to India Cement.

31
6) RETURN ON TOTAL ASSETS:

 Meaning:

The return on total assets implies how the funds supplied by both owners and creditors are
utilized in business. It measures overall profitability. This ratio is measured in terms of the
relationship between profit after tax and total assets. This ratio may hold be called profit-to-
assets ratio. An indicator of how profitable a company is relative to its total assets. ROTA gives
an idea as to how efficient management is at using its assets to generate earnings. 

 Formula:

PROFIT AFTER TAX

RETURN ON TOTAL ASSETS X 100
= FIXED ASSETS + INVESTMENT + CURRENT
ASSETS
 Return On Total Assets of the Company:

RETURN ON TOTAL
ASSESTS 2008-09 2007-08
PARTICULARS Ultratech India Cement Ultratech India Cements
PAT 977 43218 1008 63754
ASSETS 7710 649665 6259 604662
RATIO (%) 12.67 6.65 0.16 0.11

 Interpretation:

As it can be seen from the figures there has been a sharp increase in the return on assets for both
the Companies. However Ultratech is faring better with a greater rate of return on the assets of
the firm.

7) RETURN ON CAPITAL EMPLOYED

32
 Meaning:

Return on Capital Employed (ROCE) is used in finance as a measure of the returns that a
company is realizing from its capital employed. The ratio can also be seen as representing the
efficiency with which capital is being utilized to generate revenue. It is commonly used as a
measure for comparing the performance between businesses and for assessing whether a business
generates enough returns to pay for its cost of capital. The higher the ratio the more efficient is
the use of capital employed.

 Formula:

PROFIT AFTER TAX

RETURN ON CAPITAL EMPLOYED = TOTAL CAPITAL EMPLOYED
X 100

 Return On Capital Employed of the Company:

RETURN ON CAPITAL
EMPLOYED 2008-09 2007-08
PARTICULARS Ultratech India Cement Ultratech India Cements
PAT 977 43218 1008 63754
Capital Employed 6467 382391.12 4980 414974.07
RATIO (%) 15.11 11.30 20.24 15.36

 Interpretation:

As it can be seen from the other profitability ratios also Ultratech is better even in the Return on
Capital employed ratio with lower rate of decrease in the year 2008-09 as compared with the
figures of India Cements. Thus Ultratech is better in the profitability.

33
 TURNOVER RATIOS

 Turnover Ratios measured the effectiveness of a firm with which a firm uses its available
resources. These ratios are also known as activity ratios. They indicate the speed of a firm or
they determine how quickly certain resources are converted into cash or into sales.

 Turnover ratio is a test of relationship between sales and the various assets of the firm like
stock, debtors, current assets, fixed assets or total assets.

 Therefore, the liquidity ratios should be examined in conjunction with relevant turnover
ratios affecting liquidity. Those are:
1) Fixed assets Turnover Ratios
2) Working capital Turnover Ratios
3) Total assets Turnover Ratios
4) Net worth Turnover Ratios
5) Debtors Turnover Ratios

34
1) INVENTORY TURNOVER RATIO

 Meaning:

The ratio signifying the efficiency of sales is the stock turnover. It shows the number of times the
average stock is turned over during the year.

 Formula:
COST OF GOODS
INVENTORY TURNOVER RATIO SOLD
= AVERAGE
INVENTORY

 Inventory Turnover Ratio of the Company:

INVENTORY TURNOVER
RATIO 2008-09 2007-08
PARTICULARS Ultratech India Cements Ultratech India Cements
COGS 6383 3359.49 5509 3047.12

AVG INVENTORY 345.985 1021.23 304.88 1021.23

RATIO 18.45 3.29 18.07 2.98

 Interpretation:

Both the Companies are showing more or less stable performance in both the years with almost a
negligible change in the figures. But the turnover ratio of Ultratech is almost 6 times that of India
Cements in both the years making it a better performer.

35
2) FIXED ASSETS TURNOVER RATIO

 Meaning:

This ratio establishes the relationship between net sales and net fixed assets. It indicates the
efficiency with which the firm uses all its assets to generate sales. The Fixed Asset Turnover is
similar to Total Asset Turnover, which both measure a company's effectiveness in generating
Net Sales revenue from investments back into the company. 

 If the ratio is low, it indicates that investments in fixed assets are more than what is
necessary and it must be reduced. If the ratio is higher, it means the fixed assets are being
used efficiency to earn profits in the business.

 Formula:
NET SALES
FIXED ASSETS TURNOVER RATIO
= NET FIXED
ASSETS

 Fixed Assets Turnover Ratio of the Company:

FIXED ASSETS TURNOVER

RATIO 2008-09 2007-08
PARTICULARS Ultratech India Cement Ultratech India Cement
NET SALES 6383 3359.49 5509 3047.12
NET F. A. 5313 4712.29 4784 4039.37
RATIO 1.20 0.71 1.15 0.75

 Interpretation:

The Fixed Asset Turnover ratio of both the companies is low with both the companies having
very low figures showing that the investments in fixed assets is more than that is actually
required. However the performance for both is quite constant with a marginal difference in the
numbers.

36
3) WORKING CAPITAL TURNOVER RATIO

 Meaning:

What this ratio tries to highlight is how effectively working capital is being used. This ratio
establishes the relationship between net sales and net working capital. It indicates the firm’s
ability of using its resources. The net working capital referred to the deference between current
assets and current liabilities. Net sales include sales excluding excise duty and other income.

 Formula:
NET SALES
WORKING CAPITAL TURNOVER RATIO
= NET WORKING
CAPITAL

 Working Capital Turnover Ratio of the Company:

WORKING CAPITAL TURNOVER

RATIO 2008-09 2007-08
PARTICULARS Ultratech India Cements Ultratech India Cements
NET SALES 6383 3359.49 5509 3047.12
1638.47 989.58
NET WC 721.13 1164.93
3.90 3.39
RATIO 7.6 2.62

 Interpretation:
The ratio for India cement has remained quite constant for both the year showing a stable
growth. However there is a steep fall in the ratio for Ultratech and the company really needs
to repair the same. Though it has been a better performer in both the years.

37
4) TOTAL ASSETS TURNOVER RATIO

 Meaning:

The asset turnover ratio simply compares the turnover with the assets that the business has used
to generate that turnover. This ratio measures the relationship between net sales and total assets.
It measures the capacity utilization of assets to generate sales. It also refers to the amount
invested in all the assets jointly and the sales are affected through them to earn profits . The
higher ratio indicates the overtrading of total assets while a low ratio indicates the ideal capacity
of the firm.

 Formula:
NET SALES
TOTAL ASSETS TURNOVER RATIO = TOTAL ASSETS

 Total Assets Turnover Ratio of the Company:

TOTAL ASSETS TURNOVER

RATIO 2008-09 2007-08
PARTICULARS Ultratech India Cement Ultratech India Cement
NET SALES 6383 335949 5509 304712
TOTAL ASSETS 7710 649665 6259 604662
RATIO 0.83 0.52 0.88 0.50

 Interpretation:

The ratio computed above of Ultratech cement in 2007-08 is 0.88 which implies sale of Rs.0.88
for one rupee this shows firm is using assets in good manner though it should be increased and in
2008-09 it is reduced to 0.83 which shows efficiency is reduced. India cements ltd, on the other
hand has low assets turnover of 0.5 times which is really low and they need to boost up their
efficiency though we observe an increase in 2008-09 it has reached 0.52 which is good but
though it is still low and should be increased. Ultratech is faring really well as compared to india
cements.

38
5) NET WORTH TURNOVER RATIO

 Meaning:

This ratio establishes the relationship between net sales and net worth. It includes net worth
excluding preference share capital because this is the ratio which shows the contribution of net
sales in the owners’ equity. So as the equity shareholders are the real owners of the firm.

 Formula:
NET SALES
NET WORTH TURNOVER RATIO = NET
WORTH

 Net Company: Worth Turnover Ratio of the

NET WORTH TURNOVER

RATIO 2008-09 2007-08
PARTICULARS Ultratech India Cement Ultratech India Cement
NET SALES 6383 3359.49 5509 3047.12
NET WORTH 3602 3631.3898 2697 3321.1082
RATIO 1.77 0.93 2.04 0.92

 Interpretation:

The ratio computed above of Ultratech and India cements both are lower though Ultratech is in
better position as compared to India Cements as this ratio shows contribution of net sales in
owner’s equity and it is as low as 1..77 of Ultratech in 2008-09 and 0.93 of India cements.
Both the firms need to improve their performance.

39
6) DEBTORS TURNOVER RATIO

 Meaning:

This ratio establishes the relationship between net credit sales and debtors. The objective is to
determine the efficiency with which the debtors are managed. This ratio indicates the speed at
which the debtor’s turnover takes place.

 Formula:
NET SALES
DEBTORS TURNOVER RATIO
= DEBTORS + BILLS
RECEIVABLES

Debtors Turnover Ratio of the Company:

DEBTORS TURNOVER RATIO 2008-09 2007-08

PARTICULARS Ultratech India Cements Ultratech India Cements
NET SALES 6383 3359.49 5509 3047.12
Drs.+B/R 186.18 353.97 216.61 311.07
RATIO 34.28 9.49 25.43 9.80

 Interpretation:

The above ratios are desirable by any firm. Higher values of debtor’s turnover indicate more
efficient management of credit. But sometimes higher ratio would result into higher working
capital requirement and also high risk of bad debts. In this ratio clearly India cements has
amazing debtors turnover but they may be lagging behind in building strong customer relations
as they offer less credit period and hence inventory cycle is very quick. Ultratech has Debtors
turnover of 34.28 days in 2008-09 which is not at all bad sign.

40
 VALUATION RATIOS

Valuation ratios are considered as the investor’s ratio. It is very helpful to the investors in taking
the investment decision appropriately. This ratio also helps in determining the level of
investment. This are the ratios regarding the return earned from the investments.

The valuation ratios consist following different ratios:

1) Dividend Yield Ratio

2) Dividend Payout Ratio
3) Price-Earnings Ratio

41
1) DIVIDEND YIELD RATIO

 Meaning:
The dividend yield ratio allows investors to compare the latest dividend they received with the
current market value of the share as an indicator of the return they are earning on their shares.
This ratio indicates the amount of dividend earned for every one rupee of share. This ratio is
closely related to the EPS (Earning per Share) and DPS (Dividend per Share). This ratio
evaluates the shareholders’ return in relation to the market value of the share.

 Formula:
DIVIDEND PER SHARE
DIVIDEND YIELD RATIO
= AVERAGE MARKET VALUE PER
SHARE

 Dividend Yield Ratio of the Company:

DIVIDEND YIELD RATIO 2008-09 2007-08

Ultratec
PARTICULARS Ultratech India Cements h India Cements
DPS 5 2 5 2
AVG. MPS 1090.35 125.45 978.63 110.23
RATIO 0.46 1.594 0.51 1.81

 Interpretation:

This ratio shows the dividend earned every Re. of share .India cements have better dividend
yield per share with 1.59 as compared to Ultratech which is 0.46 in 2008-09 It shows the ratio is
decreasing year by year and thus the dividend per share is also decreases. Decreasing ratio might
repel the investors from investing in these firms.

42
2) DIVIDEND PAYOUT RATIO

 Meaning:

This ratio measures the relationship between the earnings belonging to the ordinary shareholders
and the dividend paid to them. It is also known as payout ratio. In other words, the dividend
payout ratio shows the percentage share of the net profit after tax and preference dividend is paid
out as dividend to the equity share holders. The payout ratio provides an idea of how well
earnings support the dividend payments. More mature companies tend to have a higher payout
ratio.

 Formula:
DIVIDEND PER
DIVIDEND PAYOUT RATIO SHARE
= EARNING PER SHARE

 Dividend Payout Ratio of the Company:

DIVIDEND PAYOUT RATIO 2008-09 2007-08

PARTICULARS Ultratech India Cement Ultratech India Cements
DPS 5 2 5 2
EPS 78.48 15.32 80.94 23.97
RATIO 0.06 0.13 0.062 0.083

 Interpretation:

The dividend payout ratio computed above of both the companies indicates the dividend paid to
the equity shareholders from the net profit after tax and preference dividend. The ratio for in both
the companies is improving or increasing as they must have realized to release dividend in order
to keep their share holders contended. Though Ultratech due to its strong brand presence has
made hardly any change

43
3) PRICE – EARNINGS RATIO

 Meaning:

The Profit-Earning is the most popular ratio among investors. This ratio establishes the
relationship between avg. MPS and EPS. It measures how frequently the earning per share of the
company is covered by the market price of the share of the company. It shows company’s
efficiency to earn profit.

 Formula:
AVERAGE MARKET VALUE PER
PRICE - EARNING RATIO SHARE
= EARNING PER SHARE

 Price-Earnings Ratio of the Company:

PRICE EARNINGS RATIO 2008-09 2007-08

PARTICULARS Ultratech India Cements Ultratech India cements
AVG. MPS 1090.35 125.45 978.63 110.23
EPS 78.48 15.32 80.94 23.97
RATIO 13.9 8.2 12.1 4.6

 Interpretation:

The ratio computed above of Ultratech and India cements Ltd for the year 2007-08 is 12.1and 4.6
respectively, which shows that the EPS of the company is covered 12.1 and 4.6 times
respectively times by the market price of the share of the company. The ratio is increases in
2008-09 by both the companies which shows efficient work and good performance of the
company to generate profit. Investors look at the P/E ratio as future market expectations of a
company’s growth prospects in terms of profitability. If the P/E of a company is on the higher
side when compared to its industry averages, it means the market is expecting some positive
events from the company as far as earnings are concerned. In both companies case is the same; it
is attracting more investors by increasing their P/E ratio.

44
 Cash Flow Statement
A cash flow statement is a financial statement that shows a company's incoming and
outgoing money (sources and uses of cash) during a time period (often monthly or quarterly).

The statement shows how changes in balance sheet and income accounts affected cash and
cash equivalents, and breaks the analysis down according to operating, investing, and
financing activities. As an analytical tool the statement of cash flows is useful in determining
the short-term viability of a company, particularly its ability to pay bills.

Cash Flow Statement

(Rs. In Lakhs)
Activity Ultratech India Cements
  2008-09 2007-08 2008-09 2007-08
Net Cash From Operating
Activities 145757 138183 70613.33 101686.5
         
Net Cash used in Investing
Activities -164543 -144179 -94182.09 -101731
         
Net Cash used in Financing
Activities 19166 7106 -10475.54 19589.73

Interpretation:
The above statement shows us the total cash flow in the business for the years 2008-09 and
2007-08 of both the companies Ultratech and India Cements. This statement shows cash flow
from operating activities, cash flow from investing activities and cash flow from financial
activities.

We can see that in Ultra tech the cash flow is increasing while in India cements it is decreasing
in year 2008-09, and the reason for same is increasing depreciation and interest expenses. While
in Ultra tech, the debtors have decreased so there is increase in cash flow.

The cash flow in investing activities shows increase in Ultratech and has turned in further
negative balance from -144179 lakhs Rs. to -164543 lakhs Rs. in the year 2008-09 as there is
increase in Investments. While in India Cements it has reduced to -94182 lakhs Rs. As there is
sale of investments and purchases on other hand is reduced.

45
 Limitations

 The study is based on analyzing the annual reports for 2 years so certain strategic
decisions involved cannot be understood.
 At many places in annual reports there are different figures for one particular item and
hence it becomes ambiguous to choose amongst the two
 A detailed bifurcation is not given in many instances for us to get the accurate data
 BVPS was not readily available for both the companies
 Market Price of share is taken as average of one month
 As annual reports are audited so exact position of the company cannot be found out.
 In Ultratech cements the bifurcation of inventory is not given it is added to current assets
so it is studied from the management report in order to calculate Debtors turnover Ratio

46
 Conclusion
On studying the financial statement of Both Ultratech and India cements for financial years 200-
08 and 2008-09 following conclusions can be drawn:

 Ultratech Cements holds a larger market value in terms of sales, PBDIT, PAT and is
clearly way ahead of India cements.
 India cements is not performing badly though it needs to improve on its efficiency and
Profitability
 The liquidity of both the companies is considerably good and Ultratech’s Liquidity is
more or less the same whereas India Cements liquidity has seen a fall which is not a very
favorable situation and India cements is not matching up with ideal ratio as well.
 Both companies do not have very good debt equity ratio which proves that these
companies as are not using the ability to trade on debt
 The overall financial position of Ultratech is very good and prospects are seen for it to be
improved
 The overall financial position of India cements is average not very competitive and needs
to worked upon.

Bibliography
47
 Financial Management, By I. M. Pandey
-Vikas Publishing House

 Financial Management- Theory and Practice, By M.Y.Khan & P.K.Jain

- Tata McGraw Hill Publishing Co.Ltd.

Sources of Information

 www.moneypore.com

 www.moneycontrol.com

 wwwUltratech.com

 www.indiacements.com

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