Tanga Cement Company Ltd Has Been Doing Well Finance Essay - Free Essay Example

In this century the uses of financial analytical tools such ratio analysis, trend analysis and common sized analysis is inevitable in any organization or company operations. So in order for the company to succeed it must effectively use financial analysis tool. This is because financial analytical tools help to know the health of the business, how to plan for future, if the business have inventories to support production target, or if the firm have ability to pay creditors and also to provide indicators of how well the firm and its business units are performing. The financial analysis is also undertaken by shareholders, investors, suppliers of funds and suppliers of inventories and so on (Arora 2012). This report is about the interpretation of financial statements at Tanga Cement Company by using financial analysis tools. This report is divided into four parts. Part one is about background of the case study (Tanga Cement), part two is concerned with financial analysis and tools used in analyzing the financial performance of Tanga Cement, part three is about limitation on analytical tools used and part four comprises of conclusion. The study revealed that Tanga Cement Company Ltd has been doing well in production and it is making reasonable profit year after year. This revelation has been resulted from the Company financial Statements and Financial Analytical tools (Ratio Analysis, Common sized analysis and Trend Analysis). LIST OF TABLES Table 1 Tanga cement balance sheetÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦.ÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦.3 Table 2 Tanga cement income statementÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦.ÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦4 Table3: Summary of return on sales ratios ÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦6 Table 4: Summary of return on Assets ratiosÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦.6 Table 5: Summary of current ratiosÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡  ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦..7 Table 6: Summary of quick ratiosÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ ÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦.ÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦.8 Table 7: Summary of inventory turnover ratiosÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦.8 LIST OF ABBREVIATIONS IT: Information Technology FIFO: First in First out LIFO: Last in First out ROS: Return on Sales TABLE OF CONTENTS EXECUTIVE SUMMARY ii LIST OF TABLES i LIST OF ABBREVIATIONS ii 1.0: BACK GROUND OF TANGA CEMENT COMPANY iv 2.0:FINANCIAL STATEMENTS, ANALYTICAL TOOLS AND ITS INTERPRETATIONS. v 2.1 Financial statements v 2.2 Financial Analysis v Table 1. TANGA CEMENT BALANCE SHEET vii Table 2. TANGA CEMENT INCOME STATEMENT viii 2.2.1 Trend analysis viii 2.2.2 Ratio analysis viii 3: LIMITATIONS ON FINANCIAL ANALYTICAL TOOLS USED xiii 4: CONCLUSION xiv REFERENCES xvi 1.0: BACK GROUND OF TANGA CEMENT COMPANY According to Tanga Cement Website (2011), Tanga Cement is a cement company based in Tanzania. The company was founded in 1980 in alliance with the government of Denmark in 1989, as a state company of the Tanzanian government, entered into a management contract with Holcim Cement of Switzerland. In 1996 the government began to privatize the company and as of 2007 it is owned by public and by Holcim Mauritius. Currently company ownership is as follows: 62.5% Afrisam Mauritius 36.25% Tanzania General Public Institutions 0.75% Employees Share Trust Moreover company production capacity is more than 1,250,000 tones/year where it targets the market demand of Tanzania. With 15000 Tanzanians being the shareholders, Tanga cement shares trade under its brand name Simba, at Dar es Salaam Stock Exchange. The Company produces its financial report in annual bases where those financial reports are uploaded to the website so that every shareholder can check the company financial position online. In our analysis we have taken the yearly financial reports from 2006 up to 2008 as a company financial reports study analysis. 2.0:FINANCIAL STATEMENTS, ANALYTICAL TOOLS AND ITS INTERPRETATIONS. 2.1 Financial statements Financial statements are the summary report that shows how a firm has used the funds entrusted to it by its shareholders and lenders, and what is current financial position (businessdictionary.com 2012). There are three (3) financial statements such as balance sheet, income statement and cash flow. Balance sheet is the financial statement which contains information about resources and the obligations of the entity and about its owners interests in the business at a particular point of time i.e. assets, liabilities and owners equity. Income statement (profit and loss account) is the financial statement which shows the summary of revenues, expenses and net income/loss of a firm during the accounting period. It serves as a measure of the firms profitability. Cash flow statement is the financial statement which shows inflows and outflows of cash during the specific period. 2.2 Financial Analysis Financial Analysis is an assessment of the effectiveness with which funds (investment and dept) are employed in a firm, efficiency and profitability of its operations, and value and safety of debtors claims against the firms assets (businessdictionary.com 2012).There are three (3) techniques and tools that were used in the analysis of financial statements of Tanga cement, such tools includes Trend analysis, Common sized and ratio analysis. SIMBA CEMENT INCOME STATEMENT  YEARS  2008 2007 2006  Tzs000 Tzs000 Tzs000 Revenue sale of goods 121,349,244 93,784,426 77,626,645 Cost of sales 68,871,990 51,057,886 -45,952,752 Gross profit 52,477,254 42,726,540 31,673,893     Other operating income 999,277 1,267,303 396,414 Other operating expense -146,016 Selling expenses 0 Administrative expenses -7,327,710 -7,590,738 -7,148,240 Depreciation and amortization -2,207,366 -2,024,505 -1,895,277 Profit from operations 42,799,272 34,378,600 23,026,790     Share of profit of associates 987,282 431,432 90,000 Finance cost -312,057 -122,720 -137,377 Finance revenue 31,382  1,553 Foreign exchange gains /(losses) -286,853 -265,467 84,457 Impairemnt of an associate Profit before tax 43,219,026 34,421,845 23,065,423 Income tax expense -12,965,708 -10,831,187 -7,067,479 Profit for the year 30,253,318 23,590,658 15,997,944     Gaining in fair value    Total comprehensive for year 30,253,318 23,590,658 15,997,944 Basic earnings per share (Tzs) 475 371 251 Diluted earnings per share (Tzs 475 185 251 Table 1. TANGA CEMENT BALANCE SHEET COMPREHENSIVE BALANCE SHEET FOR TANGA CEMENT AS AT 31 DECEMBER  YEARS 2008 2007 2006 Tzs000 Tzs000 Tzs 000 ASSETS    Non-current assets    Property, plant and equipment 58,776,827 40,811,579 25,226,657 Intangible asset 39,836 79,674 119,512 Due from Employees share trust 133,009 Investment in associates 468,959 435,677 418,246  59,285,622 41,326,930 25,897,424 Current assets    Inventories 21,138,953 17,688,472 9,113,426 Accounts receivable third party and other 4,600,852 3,219,070 3,906,770 Cash and bank 3,804,282 6,552,597 10,112,629  29,544,087 27,460,139 23,132,825 TOTAL ASSETS 88,829,709 68,787,069 49,030,249     EQUITY AND LIABILITIES    Capital and Reserves    Issued share capital 1,273,421 1,273,421 1,273,421 Re-valuation surplus 2,795,906 2,933,351 3,081,673 Retained earnings 57,337,761 46,307,762 31,100,806  61,407,088 50,514,534 35,455,900     Non-current Liabilities    Provision for site restoration 53,444 49,443 45,442 Deferred tax provision 6,340,887 3,795,940 4,467,136  6,394,331 3,845,383 4,512,578     Current liabilities    Interest bearing borrowing 6,078,136 1,027,386 419,554 Trade and other payables 14,422,864 11,547,684 8,627,451 Income tax payable 527,290 1,852,082 14,766  21,028,290 14,427,152 9,061,771 TOTAL EQUITY AND LIABILITIES 88,829,709 68,787,069 49,030,249 Table 2. TANGA CEMENT INCOME STATEMENT 2.2.1 Trend analysis This is the financial analytical tool which compares two or more years financial data to study the trends. According to a lecture delivered as part of module ARUM58EKM, It involves the calculation of percentage relationship that each statement item bears to the same item in the BASE YEAR (Arora 2012). 2.2.1.1The trend Analysis for Tanga cement The analysis and interpretation of the financial statements of Tanga cement made with calculation of trend percentages comes out with the following: Sales and cost of goods sold have shown a positive increase throughout the three years. This situation is viewed as favorable because it enhances the increase the in gross profit. So Tanga cement should try to maintain the strategy is using in increasing its sales. Net profit was tremendously increasing from year to year accompanied with the increase of fixed assets and capital and reserves. The analysis shows that the situation is favorable and the company has a good policy of manufacturing and trading. 2.2.2 Ratio analysis Ratio analysis is the financial analytical tool which is used to explain the important association between figures shown on a balance sheet, in income statement, cash flow statement or in any other part of accounting organisation. Ratios show how one number is related to another. It may be expressed in the form of co-efficient, percentage, proportion, or rate (accountingformanagement.com 2011) 2.2.2.1 Ratio analysis and valuation for Tanga Cement Company a. Profitability Ratio According to Atrill P and McLaney E (2008) is the ratio that provides an insight to the degree of success of the business in making the good profit to their owner. Return on Sales This ratio is used to evaluate companys operational efficiency. It is also known as operating profit margin. It shows how much profit is produced per Shs of Sales. Increase in ROS it shows the company is growing more efficient while a decreasing in ROS could signal looming financial troubles. Return on Sales = Net Income (before tax and interest changes) Sales Year 2010 2009 2008 Tanga Cement 0.305 0.376 0.353 Standard 1.91 1.91 1.91 Table3: Summary of return on sales ratios In our analysis we found the average ROS for Tanga Cement is 0.23 while the industry average ratio is 1.91 so this implies that the company is not operating efficiently because its ROS value is low from the industry average. The management of Tanga cement should try to come up with a good strategy that will help them to boost profit and sales. Return on Assets This ratio is used for measuring the return of total investment in the firm. Return on Assets = Net Income after Tax x100 Total Asset Year 2008 2007 2006 Tanga Cement 34.05% 34.29% 32.6% Standard 1.81% 1.81% 1.81% Table4: Summary of return on Assets ratios For Tanga Cement we found that, the average return on asset is 33.64 while industrial average ratio is 1.81%.This shows that Tanga Cement is significantly above the industry average ratio. For this case the company is in a good position on the return of total investment, hence the company has high ability of growing. b. Liquidity Ratio According to Atrill P and McLaney E (2008) It is the vital to the survival of the business that there is sufficient liquid resource available to meet maturing obligation (that is amount owing that must be paid in the near future). Mostly it is measured by Current Ratio and the Quick Ratio. Current Ratio This ratio falls under category of liquidity ratio it measures companys ability to meet its maturing short term obligation Current Ratio = Current Asset x100 Current Liabilities Year 2008 2007 2006 Tanga Cement 1.4 1.9 2.55 Standard 1.83 1.83 1.83 Table5: Summary of current ratios Current ratio for Tanga Cement is 1.94 times while industrial ratio is 1.83 times. Hence this indicates that Tanga Cement is in a good position to meet its both long term and short liabilities which is good because, in situation like this the company can grow. Quick Ratio The ratio measures the companys ability to meet its short term obligation with its most liquid assets. Quick Ratio = Current Asset -Inventories Current Liabilities Year 2008 2007 2006 Tanga Cement 0.4 0.68 1.55 Standard 1.09 1.09 1.09 Table6: Summary of quick ratios Quick ratio for Tanga Cement is 0.87 times while industrial average ratio is 1.09 times, this indicates that Tanga Cement is below industrial average by 0.14 times. Hence this is not favorable financial position. The difference is not big but, the difference indicates the company cannot meet its entire obligation; it has to make sure it has enough cash to meet its obligation. c. Activity Ratios Inventory Turnover Ideally the ratio show how many times the companys inventory is sold and replaced over the period of time. Inventory Turnover = Cost of Sales Average Inventory Year 2008 2007 2006 Tanga Cement 3.26 2.89 5 Standard 10.46 10.46 10.46 Table7: Summary of inventory turnover ratios Inventory turnover in Tanga Cement is 3.71 times while the industry average is 10.46 times. This shows Tanga Cement is not in favorable financial position since its turnover is 3.67 times compared to 10.46 times of industrial average ratio, hence the degree at which the inventory will be sold and replaced in Tanga cement is 3.67 times, this is the low turnover. The company is doing worse on this part because its turnover is almost two times less from industry average.it shows that the companys resources have not been properly utilized. Analysis and interpretation of balance sheet and income statement for Tanga cement. 1. Capital and reserves at first increased by 1.12% from 2006 to 2007, in the year 2008 it declined by 4.31%. This means that the company in 2008 was generating much loss that caused its reserve to decrease as well as capital which resulted to decrease in company wealth. 2. Investment in non current assets increased from 52.18% to 66.74 from 2006 to 2008. The investment done in the preceding years was beneficial to the company thats why the investment in 2008 declined because there was no need of investing much. 3. Current assets generally have been decreasing from 47.18% to 33.29% from 2006 to 2008. Cash and bank was decreasing from year to year this is a good sign since short term obligations such as current liabilities have been resolved by cash and bank. The company has no need of holding cash and bank while it needs to make profit using that money 3: LIMITATIONS ON FINANCIAL ANALYTICAL TOOLS USED When calculating the financial ratios, may find getting two types of answers. Some ratios might be good and some might be bad ratios compared to industry standard, which will make it difficult to judge if the company is I a good position or not. Financial ratios are giving the actual financial picture of the company whether the company is going at the right or wrong direction. These ratios do not give a solution of what to do if things go wrong. In analytical tools, the data which is used is only accounting data instead of economic data. In doing financial ratios analysis, data that is used are obtained from bank statement, balance sheet and cash flows of previous years. This shows that they are using historical data which is bad because they do not reflect the actual economic situation. In financial analysis ,data obtained cannot be used alone, the data obtained must be compared with other data so as to get actual interpretation Different accounting practices can di stort comparison even within the same company. A good example is one can use LIFO and one use FIFO; the answers will definitely be different. The set standard industry financial ratios are not authentic because the levels of business differ from place to place. A good example is on IT industry. The level of technology in third world countries is very low, so logically third world countries wont be able to meet the set standard due to our level of technology. 4: CONCLUSION Tanga Cement Company Limited has been doing well in production and making sound profit year after year. Tanga Cement is also the second largest cement producer in Tanzania with a production of 1.25 million tpa capacity. Tanzania Portland Cement in Dar es Salaam is the major (largest) producer with a production capacity totaling 1.4 million tpa. This revelation has been resulted from the Company financial Statements and Financial Analytical tools (Ratio Analysis, Common sized analysis and Trend Analysis). Generally the performance of Tanga Cement Co. LTD is good.