Study of Financial Performance of the Cement Industry by using Du-Pont Analysis

Abstract

This study attempts basically to measure the financial performance of the cement Industry taking ten major companies listed in BSE like ACC Ltd, Ambuja Cement Ltd, Birla Corporation Ltd, Damila Bharat Ltd, JK Cement Ltd, Jk Laxmi Cement Ltd, Prism Cement Ltd, Ramco Cement Ltd, Star Cement Ltd, Ultratech Cement Ltd for the period 2011-2021. In order to achieve our goals in this paper we have measured the ratios of ROE, ROA by applying the DuPont analyses, which have been demonstrated with the aim of tables to show the change periodically. DuPont analysis (ROI and ROE)) is an important tool for judging the operating financial performance. It is an indication of the earning power of the firm.
DuPont Model is based on analysis of return on equity (ROE) and return on investment (ROI). The return on equity disaggregates performance into three components: net profit margin, total asset turnover, and equity multiplier. ROI consists of assets turnover and profit margin. The return on investment consists of assets turnover (Operating Income X Total Assets) and profit margin (EBIT X Operating Income). In conclusion, ROE & ROI is a firm’s most comprehensive measure of profitability. It considers the operating and investing decisions made as well as the financing.