A Study on Financial Performance Analysis

Of Ashok leyland Ltd, Chennai

By

T.MU

THU

SAM

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Reg

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1106

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1

Hal

lmar

k Bus

ines

s Sch

ool

Mrs.P.PREMAKUMARI

MBA.,

Assistant Professor

Hallmark B-School

Mr.Balamurugan

Accounting officer

Ashok Leyland Ltd

Chennai

Inte

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Gui

de C

omp

any G

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e

Financial Management is that part of management which is concerned mainly with raising funds in the most economic and suitable manner; using these funds and profitability as possible; planning future operations; and controlling current performances and future developments through financial accounting, cost accounting, budgeting, statistics and other means.

Introduction

MEANING OF FINANCIAL MANAGEMENT

Financial performance is an important aspect which influences the long term stability, profitability and liquidity of an organization. Usually, financial ratios are said to be the parameters of the financial performance

“Financial Management is the operation activity of a business that is responsible for obtaining and effectively utilizing the funds necessary for efficient operations”. - Joseph and Massie

DEFINITION

To study and analysis about the financial performance of the company for the past five years from 2007 to 2011.

To study and analyze the profitability, solvency and turnover ratios position of the company.

Analyzing the comparative statement of the company. To assess the factors influencing the financial performance of the organization. To understand the overall financial position of the company.

Secondary Objective:

OBJECTIVES

Primary Objective:

RESEARCH METHODOLOGY 

Secondary data are those data which have already been collected by someone and else and which have been passed through the statistical process.

As secondary data is used the main sources of the data is company’s annual report for the period from 2007 to 2011. It is collected from the company textbooks and the data are also collected from the estimated statement prepared by the Blueberry software solutions limited.  

Sources of Secondary Data:

The study is confined to analyze the financial performance analysis for five years only.

All the aspects involved for study of financial performance could not be analyzed in detail due to limitation of time.

As the company involved in busy in closing of accounts for the current year 2011-2012.

Limitations of the Study

Achieving leadership in medium or heavy duty segments of the domestic commercial vehicle market and significant presence in the world market through transport solutions that best anticipate customer needs, with highest value to cost ratio.Be among the top Indian corporations acknowledged nationally and internationally for,

Excellence in quality of its products Excellence in customer focus and service

Be leader in the business of commercial vehicles, excelling in technology, quality and value to customer fully supported by customer service of the highest order and meeting national and international environmental and safety standards.

Identifying with the customer being the lowest cost manufacturer Global Benchmarking our products, process, people against the best in the industry.

COMPANY PROFILE

COMPANY MISSION

COMPANY VISION

Ashok Leyland has seven manufacturing plants - The mother plant at Ennore near Chennai, three plants at Hosur (called Hosur I and Hosur II, along with a Press shop), the assembly plants at Alwar, and Bhandara and state-of-the-art facility at Pantnagar.

The total covered space at these seven plants exceeds 650,000 sq. m and together employs over 11,500 personnel.

Ashok Leyland plants:

Analysis and Interpretation

Profitability Ratios:

Table showing Return on Investment.

Operating Profit = * 100

Capital Employed

YearsOperating

ProfitCapital

EmployedPERCENTAGE

2007 43058.50 479584.50 8.98%2008 61758.20 539785.90 11.44%2009 65088.74 581900.86 11.19%2010 22193.50 1136532.66 1.95%2011 54804.63 1244976.22 4.4%

Rs. Lakhs

In this table profit in relation to capital employed is high 11.44% and 11.19% in 2008 and 2009, in 2007 it as 8.98% but in 2010 compare to all other years it is low only 1.95% .

Chart showing Return on Investment

INTERPRETATION:

2007 2008 2009 2010 20110

2

4

6

8

10

12

14

Table showing Inventory Turnover ratio

Turnover Ratios:

Cost of goods sold

=

Average Inventory

Rs Lakhs

Years Cost of goods sold Average Inventory TIMES

2007 470758.70 73532.10 6.40

2008 646549.10 98644.10 6.55

2009 692219.66 114711.77 6.03

2010 551163.86 127696.44 4.31

2011 648187.13 148412.72 4.36

The table indicates that inventory is turned over during a particular accounting periods is not much difference between the years i.e. from 2007 to 2009 the values is lies between 6 and in 2010 & 2011 it is 4.

Chart showing Inventory Turnover ratio

INTERPRETATION:

2006 2007 2008 2009 201001234567 Times

Times

PARTICULARS 2010-2011 2009-2010 INC/DEC In %

SOURCES OF FUNDS      

SHAREHOLDER'S FUNDS 3668.76 3473.9 5.6

LOAN FUNDS 2203.89 1958.14 12.6

DEFFERED TAX LIABILITY 76.5 - 100

DEFFERED TAX LIABILITY NET 384.54 263.44 46.0

FOREIGN CURRENCY

MONETARY ITEM

TRASACATION DIFF-NET

(12.45) 3.84 (424.1)

TOTAL 6321.29 5699.32 10.9

APPLICATION OF FUNDS      

FIXED ASSETS 4811.03 4397.40 9.4

INVESTMENTS 326.16 263.56 23.8

NET CURRENT ASSETS 1178.93 1028.67 14.6

MISCELLANEOUS EXP. 5.17 9.69 (46.6)

TOTAL 6321.29 5699.32 10.9

COMPARATIVE BALANCE SHEET FOR 2010-2011

Rs. in Crores

PARTICULARS 2010-2011 2009-2010 INC/DEC in %

INCOME      

Sales 7244.71 5981.07 7.8

Other income 70.45 49.63 4.5

Total 7315.16 6030.70 7.8

EXPENDITURE      

Manufacturing Exp 5217.52 4452.25 5.5

Employee Exp 665.93 566.18 28.2

Other Exp 598.42 493.21 4.4

Depreciation 204.11 178.41 17.8

Financial Exp 81.13 118.71 838.5

Total 6767.11 5808.76 8.0

Profit Before Exceptional Item 548.05 221.94 5.4

Exceptional Item-VRS Expenses

Amortization3.27 13.49 (75.7)

PBT 544.78 208.45 161.4

TAX-Current - - -

-Deferred 121.10 12.45 872.7

-FBT - 6 (100)

PAT 423.68 189.99 123

BASIC EPS 3.18 1.43 123

DLIUTED EPS 3.53 5981.07 5.1

COMPARATIVE INCOME STATEMENT FOR 2010-2011 Rs. in Crores

Findings of the study

Findings :

1. In 2010 operational process and managerial efficiency is low compare to past and

future years.

2. In 2010 operations of the firm is decreased compare to past years.

3. In 2010 net profit is low but the firm increased is operational efficiency in 2011.

So that net profit is increased.

4. In 2011 Gross profit has increased little bit compare to previous years.

5. In 2010 and 2011 inventory is reduced to 2times compared to previous years.

6. The stock is sold or used more in the years 2007 and 2009 compare to 2010 and

2011.

7. In debtors turnover differences between the years are more especially between

2009 and 2010 it differs more.

Suggestions The company's profit over the year 2010 has been decreasing when compared to

previous year i.e. less profit. The company must increase the profit in future. The company must take steps to increase the profit level.

The sales of the organization can be further increased by improving the quality through optimum utilization of company's resources (i.e. assets, raw materials, credit system, etc.) and that in turn will increase the overall profits of the organization.

The Management must find out the reasons for the decrease in sales in the year 2010 and must take appropriate measures.

The Management must also study the market position and it also find the demand prevailing in the market for the products and thus this will guide them to enhance their sales volume.

On studying the financial performance of Ashok Leyland for a period of five years from 2007 to 2011, the study reveals that the financial performance is better. Ashok Leyland has been able to maintain optimal cost positioning. Despite price drops in various products, the company has been able to maintain and grow its market share to make strong margins in market, contributing to the strong financial position of the company.

Overall for the past five year’s company’s financial performance better because in 2007 and 2008 annual report tell that the company’s financial performance was good. In 2009 it was excellent but in 2010 it was average in 2011 financial performance was improved compared to 2010. So the company has every opportunity to get its growth to a good extent in future.

Conclusion

IBLIOGRAPHYBooks referred: T.S. Reddy & Y. Hari Prasad Reddy - Financial and Management Accounting.I.M. Pandey – Financial Management.Ambrish Gupta – Financial Accounting for Management. Websites:www.ashokleyland.comwww.managementparadise.comwww.indiainfoline.comwww.allbusiness.comAnnual Reports:2007-2008 to 2010-2011

Reference