Introduction

The capital structure of a company is the combination

of debt, equity and other sources of finance that it uses to fund its long-term asset. The key division in capital structure is between debt and equity. The present study aims to analyze the determinants of capital structure in the chettinad cement corporation ltd, karur.

Determinants of capital structure:

Cost of fixed assets Size of the business enterprise

Retaining control of the business enterprise

Nature of the business organization Legal requirements

Period of finance
The purpose of financing Requirements of the potential investors

PROFILE OF CHETTINAD CEMENT CORPORATION LIMITED

Chettinad Cement Corporation Limited was started in the year 1967.

Initially the Cement was manufactured in the wet process technology

The company continues to uphold and illustrates today under

the dynamic leadership of Dr.M.A.M.Ramaswamy, Chairman and M.A.M.R.Muthiah, Managing Director.

Due to hike in the fuel prices the company went for expansion in the

year 1989 to produce cement with the latest dry process technology.

OBJECTIVES OF THE STUDY

Primary Objective: To determine the capital structure of Chettinad Cement

Corporation Ltd
Secondary Objectives: To determine the optimal Debt-Equity mix of the company. To analyze the impact of leverage in capital structure

decisions. To apply the related ratios in order to analyze the capital structure of the company.

 RESEARCH METHODOLOGY
RESEARCH DESIGN This study aims to analyse the capital structure of company. The

methodology adopted for the study was descriptive in nature. NATURE OF DATA: The data used for the study is secondary data, as the data was collected from the annual reports of Chettinad Cement Corporation Ltd.
PERIOD OF THE STUDY : The period takes into consideration for the study is from (2001-02 to

2010-11)

TOOLS USED: Leverage ratio Ratio analysis Correlation Trend analysis

OPERATING LEVERAGE RATIO OBJECTIVE

To analyze the impact of leverage in capital structure decisions.

Year
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

%Changes In PBDIT
-6.01 -7.15 31.95 12.69 25.07 119.88 107.70 124.16 41.09 9.30

% Changes In Sales
17.50 63.91 59.72 93.15 58.47 239.87 206.44 205.08 230.28 176.84 Average Correlation

Operating Leverage Ratio

-0.34 -0.11 0.53 0.14 0.43 0.50 0.52 0.61 0.18 0.05 0.25 0.75

From the Operating Leverage Ratio the way given change in volume or value of sales, affects profits degree of operating leverage.

Financial leverage =PBDIT/PBIT

Financial leverage
1.14 1.18 1.12 2001-02 2.95

1.06
1.08

2002-03 2003-04 2004-05 2005-06

1.19

2006-07 2007-08

1.29

2008-09 2009-10 1.59 12.21 2010-11

From the financial leverage ratio, low rate of financial leverage indicates the company using more debt funds with optimum rate of interest.

DEBT-EQUITY RATIO OBJECTIVE To determine the optimal Debt-Equity mix of the company
Year 2001-02 Outsiders fund 362.03 Shareholders fund 102.33 Debt Equity Ratio 3.54

2002-03
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

316.68
289.05 326.68 304.91 231.36 436.19 997.03 758.87 896.06

125.67
132.95 147.46 174.42 263.34 392.49 355.02 855.02 925.71

2.52
2.17 2.22 1.75 0.88 1.11 2.81 0.89 0.97

Average
Correlation

1.88
0.75

From the Debt-equity ratio, the company maintains debt-equity ratio as 1.88 times an average. It shows the relationship between the outsider fund and shareholder fund are positively correlated.

PROPRIETARY RATIO
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Shareholders fund 102.33 125.67 132.95 147.46 174.42 263.34 392.49 355.02 855.02 925.71 Average Correlation Total Assets 464.36 442.35 422.05 474.14 479.33 494.6 828.68 1352.18 1622.59 1821.77 Proprietary Ratio 0.22 0.28 0.32 0.31 0.36 0.53 0.47 0.26 0.53 0.51 0.38 0.94

From the Proprietary ratio at the beginning of the study period 2001-02 it has showed a value of 0.22 times at the end of the period 2010-11 as 0.51 times . It indicates the investment of shareholders fund in term of assets is in meaning

TREND ANALYSIS
Trend analysis Financial leverage Operating leverage Combined leverage Debt equity Ratio Interest coverage Ratio Fixed assets net worth Ratio Capital gearing Ratio Proprietary Ratio Return on shareholders fund Ratio Capital Employed Ratio Total assets capital Employed Ratio Current assets capital Employed Ratio Long term debt capital Employed Ratio 2013 -1.32 0.53 0.94 0.48 14 2.64 1.17 0.56 0.97 3.05 0.54 0.3 0.22 2014 -1.91 0.58 1.07 0.27 15.07 2.38 1.25 0.59 1.01 2.83 0.52 0.31 0.19 2015 -2.49 0.62 1.19 0.05 16.14 2.12 1.33 0.62 1.05 2.61 0.5 0.31 0.16 2016 -3.08 0.66 1.32 -0.16 17.2 1.86 1.42 0.65 1.09 2.39 0.49 0.32 0.13 2017 -3.66 0.71 1.45 -0.38 18.27 1.59 1.5 0.68 1.13 2.17 0.47 0.33 0.1

Above the table showing the trend value of the all the ratios. The debt-equity ratio was in decreasing trend The capital gearing ratio also in the stable level. The proprietary ratio the value increase in the future. The return on shareholders fund value increase. Based on the above results of the trend analysis the future growth of the study unit will be very bright.

SUGGESTIONS
The management should reduce the debt and the it has to

take step to increase the ownership share capital. The management takes steps to maintain the same level of returns. As the company was facing some cost of financial risk during the beginning of the study period later on recover on stable therefore researcher to suggest the management to maintain the current financial position in the fourth coming years

CONCLUSION
The study on the determinants of capital structure in

Chetinad Cement Corporation Limited, karur, reveals that the overall financial position was satisfactory during the study period. The company has to maintain the debtequity mix in its capital structure, if its continuous in future, the bottom level, growth and value of the company may be in good condition. Overall, the companys capital structure is optimum. The study suggests that the company can maintain the same level of capital structure decisions to maximize its earnings for the fourth coming years.