Example Financial Statement Analysis

8/16/2019 Example Financial Statement Analysis

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EXECUTIVE SUMMARY

The Company has set itself the task of consolidating and enhancing its position in the

Indian commercial vehicle market, both in terms of volumes as well as in customer

satisfaction, in the medium term. The Company is executing various initiatives in

terms of process and product improvements to achieve this goal.

After six straight years of positive growth rate, domestic demand for M!C"s

showed a decline during #$%& and stood lower by '( $o$. Ashok )eyland also

suffered a similar decline in its M!C" portfolio.

All segments and geographies combined, and then volumes for the full year remained

flat. !ere, apart from passenger M!C"s, sales of )C" and exports also helped prop

up volumes. In value terms, growth stood at &( $o$ for the full year, thanks mainly

to improved product mix and a series of price hikes that the company undertook during the fiscal.

Income from vehicles was *s +&,&- mn. .( over the previous year level of *s

++,%-' mn.

In addition the Company made investments in a vehicle manufacturing / assembly

plant at *as Al 0haimah, 1esign 2ngineering services business vi3., 1efiance Testing

and 2ngineering 4ervices Inc. 54A and Albonair 6mb!, 6ermany which is engaged

in the development of fuel emission treatment / control systems.

(Rs m) 4QFY07 4QFY08 Change FY07 FY08 Change

7et sales '',-% '8,+'% .&( 9,+&' 99,'- 9.&(

2xpenditure '%,'+ '',++: .-( +,+88 +-,'8 9.(

;perating profit

',+- ',-89 .+( 9,%'9 &,%% .(2=1ITA margin .+( .8( -.&( %.(

;ther income +- + ?:.:( 9%& 9% .8(

Interest - - :&.&( 8: -9 &:'.-(

1epreciation & &+ .%( ,8%+ ,99 9.&(

@rofit before tax ',:& ',-+ 9.9( +,9+ +,8%- 8.(

2xtraordinary

income/

Tax 89: ++- +.9( ,+:' ,9:' +.(

@rofit after tax/ ,98 ,&%+ 8.:( ,: ,+-: +.(

7et profit margin

9.8( 9.%( +.'( +.(

7o. of shares ,:':.- ,::%.: ,:':.- ,::%.:

1iluted earnings per

share :.: :.8

@rice to earnings

ratio .8


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TABLE OF COTETS

TO!IC !A"E O#

@reface ii

Acknowledgment iii

2xecutive 4ummary iv

Chapter B Company @rofile

About Ashok )eyland

@roduct *ange :

Chapter B ' Concept of #inancial 4tatement Analysis

Chapter B : Traditional @erformance 2valuation Techniues :. !ori3ontal Analysis &

:.' "ertical Analysis '

:.: Trend Analysis '

Chapter B Analysis of @rofitability '+

. 6ross @rofit *atio

.' 7et @rofit *atio

.: Asset Turnover

. *eturn on Asset

.8 *eturn on 2uity

Chapter B 8 Analysis of 4olvency '-

8. 1ebt to 2uity

8.' Interest Coverage *atio

Chapter B + Analysis of )iuidity :

+. Current *atio

+.' Duick *atio

+.: 1ebtor Turnover *atio

+. Average Collection @eriod

+.8 Inventory Turnover

Chapter B 9 Cash flow statement analysis :

Chapter B & *ecommendations 4uggestion %

ii


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C$A!TER%&

COM!AY !ROFILE

About Ashok )eyland

Ashok )eyland is a commercial vehicle manufacturing company based in Chennai, India. It is

the second largest commercial vehicle company in India in the medium and heavy

commercial vehicle


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• In '%%', all the vehicle?manufacturing units of Ashok )eyland were I4; %%

certified with 2nvironmental Management 4ystem.

• In the '%%+?%9 financial year, the company sold a record &:,% vehicles which is an

all time high for Ashok )eyland.

• It is one of the leading suppliers of defense vehicles in the world and also the leading

supplier of logistics vehicles to the Indian Army.

!'*+,s

• )uxura

• i?=us

• "iking =4?I ? city bus

• "iking =4?II ? city bus

• "iking =4?III ?city bus

• Cheetah =4?I

• Cheetah =4?II

• @anther

• ' M

• 4tag Mini

• 4tag C76

• ''' C76

• )ynx

• 1ouble 1ecker • "estibule

• Airport Tarmac Coach

• ;lympian

• 6ensets

"s segmen,

• =ison !aulage

• Tusker 4uper ++

• Comet C; +

• +: !

• Comet 6old +:

• Comet Tipper

• Taurus '8+ ? +J

• '8+ !


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• %& Tractor

• Artik :%. Tractor

• Tusker Turbo Tractor :8+

• ecomet -'

• ecomet i

• -'

C$A!TER%-

COCE!TS

#inancial 4tatement Analysis

;bEectives

Assessment of the firmKs past, present and future financial conditions

1one to find firmKs financial strengths and weaknesses

@rimary Tools

• #inancial 4tatements

• Comparison of financial ratios to past, industry, sector and all firms

#inancial 4tatements

=alance 4heet

Income 4tatement

Cash flow 4tatement

4tatement of *etained

4ources of 1ata

Annual reports

"ia mail, 42C or company websites

@ublished collections of data

Investment sites on the web

Techniues of #inancial 4tatement Analysis

!ori3ontal Analysis

"ertical Analysis

Trend Analysis

*atio Analysis


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A firm has resources

It converts resources into profits through

• production of goods and service

• sales of goods and services

*atios

• Measure relationships between resources and financial flows

• 4how ways in which firmKs situation deviates from

Its own past

;ther firms

The industry

All firms

*atios can be classified into the following categories

• @rofitability *atio

• )iuidity *atio

• 4olvency *atio

@rofitability *atio

@rofitability ratios measure the overall performance of the firm by determining the

effectiveness of the firm in generating profit, and are calculated by establishing

relationship between profit figures on the one hand, and sales and assets on the other.

Re,*'n n T,a2 Asse,s

+


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This is measure of profitability from a given level of investments. It is an excellent indicator

of overall performance of a company. It is also called return on capital employed or return on

investment. It measures how efficiently the capital is employed.

*eturn on Total Assets L 7et Income after Tax / Average Total Assets %%

Re,*'n n E5*,3

It measures the profitability of euity funds invested in firm. It is regarded as a very

important measure because it reflect the productivity of the ownership capital employed in

the firm

*eturn on 2uity L 7et Income after Tax ? 1ividend on @reference 4hare / Average

4hareholders 2uity %%

4olvency *atio

The capacity of a company to discharge its obligations towards long?term lender indicates the

financial strength and ensures its long?term survival. It is important for an analyst to study the

solvency of a company.

6e., C1e'age Ra,

The ratio measures the capacity of a company to pay the installment of the principal due and

the interest liability it has incurred on its long?term borrowing, out of its cash profits. It is

also known as Times?debt service Covered.

1ebt Coverage *atio L Internally 6enerated #unds / Average 1ebt

In,e'es, C1e' Ra,

The ratio measures the capacity of a company to pay the interest liability it has incurred on its

long?term borrowing, out of its cash profits. It is also known as Times?interest Covered.

Interest Cover *atio L 2arning =efore Interest Tax / Interest 2xpenses

)iuidity *atio

)iuidity is the ability of a company to meet its short?term obligations when fall due. A

company should have enough cash ( other current assets, which can be converted in to cash

so that it can pay its suppliers lenders on time.

C*''en, Ra,

9


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:. !ori3ontal Analysis

:.. !ori3ontal Analysis of =alance 4heet

for the year '%%&?%9

Ta.2e & $'9n,a2 Ana23ss : Ba2an+e Shee,

F' ,he 3ea' -008%07

!a',+*2a's Ma'; 08 Ma'; 07 Change Change

S*'+es : :*ns

A> 4hare Capital ::%.: :':.&9 +.9 %.-(=> *eserves and 4urplus '%8-.& 9+'.& '8:9.+9 .%(

Total '&-.&' &-8.+& '8. :.:(

)oan #unds

A> 4ecured )oans -%'. :+%'.+ ?+--.9+ ?9.-(

=> 5nsecured )oans +-9'.+ '&%.&' 9%.9- &.&+(

Total &&98.% +%:.-& '9.%: :&.8-(

1eferred Tax )iability '8:&.' -+-.'- 8+&.- '&.&-(

TOTAL - 7et =lock 8'88.8 :%9%.:: '&8.9 +.9'(

2> Capital work?in progress 8'-'.8 ':9.- '-9.8 ''.&8(

Investments +%-- ''%.- :&&&.%+ 98.&+(

C*''en, asse,s; 2ans an a1an+es

A> Inventories '':-. %9%:.' 8:8.-: .:8(

=> 4undry debtors :98&.:8 8''&.98 ?9%. ?'&.'(

C> Cash bank balances 8:.9 :-.:- +.: :.9&(

1> )oans advances &'.:9 ++-8.9- 88.8& ':.%&(

Total '&98'.8+ '+-99. ,998.' +.8&(

Less C*''en, 2a.2,es an

>'1sns ?A> )iabilities -'+9.%- +8+.'8 ',98%.& +.++(

-


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=> @rovisions :8'.: %'.: ',%.% ':.''(

Total ''9-. 988&.88 8,+%.&8 '-.:-(

7et current assets +%::.+ -&.8- ?:8.-(

?

Misc. 2xpenses '''.-' '.&

?&.9(

?

TOTAL -


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.

#-# $'9n,a2 Ana23ss : Ba2an+e Shee,

F' ,he 3ea' -007%0?

Ta.2e - $'9n,a2 Ana23ss : Ba2an+e Shee,

F' ,he 3ea' -007%0?

!a',+*2a's Ma'; 07 Ma'; 0? Change Change


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?

Misc. 2xpenses '.& 9:.%9 9. ':.9(

?

TOTAL -7&8# 4hare Capital ''.8- &-.'- :'.: '.9'(

:


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=> *eserves and 4urplus '-%'.- %&-.:+ ':.8& ':.%(

Total '.8: +9&.+8 '8.&& '%.-(

)oan #unds

A> 4ecured )oans &+.- '+:.-+ ?9&&.%8 ?'-.-(=> 5nsecured )oans 8%9'.:9 ++-. ?%-+.9: ?9.9&(

Total +--.'& &&%.%+ ?&&.9& ?'.(

1eferred Tax )iability 9-+.&- 9%&.& &&. 8.9(

TOTAL --840#7 --& )ess 1epreciation -8'.'& %&.% &+&.' 9.&:(

C> 7et =lock -:'.9 &-:&.+ -.'8 8.8:(

2> Capital work?in progress .9 &8.88 8+'.+' ++.%9(

Investments :+&.9& ''-.- :&-.&& +%.+(

Current assets, loans and advances

A> Inventories -%'8.+ 8+&%.& ::.& 8&.&&(

=> 4undry debtors ':.:9 8&9.++ ?:.'- ?9.8%(

C> Cash bank balances +%'&.9+ 9-++.&' ?-:&.%+ ?'.::(

1> )oans advances :%'+.:- :::9.: ?:%.-8 ?-.:'(

Total '':'.: '89'.+: 98.8% :.&(

)ess Current liabilities and provisions ?

A> )iabilities +&.-8 -+.&9 ,&89.%& -.:'(=> @rovisions '++.' '%.& 89. '9.-(

Total %&8.+ +8+.+9 ','&.- '%.&:(

7et current assets &':&.-9 --8.-+ ?+.-(

?

Misc. 2xpenses 9:.%9 -:.:' ?+'.'%(

?

TOTAL --840#7 --&


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Cha', $'9n,a2 Ana23ss : Ba2an+e Shee,

F' ,he Yea' -00?%0=

# $'9n,a2 Ana23ss : In+me S,a,emen,

F' ,he 3ea' -008%07

Ta.2e 4 $'9n,a2 Ana23ss : In+me S,a,emen,

F' ,he 3ea' -008%07

!a',+*2a's Ma'; 08 Ma'; 07 Change Change

In+me

4ales less returns 99,'-.': 9,+&.9+ 8,+%-.9 9.&:(

;ther Income 9:-.-- 9%&.%: :.-+ .8(

T,a2 In+me 9&,%:.'' 9',:&-.9- 8,+.: 9.9-(

E@>en,*'e

Cost of material 89,++.: 8,+:.- :,%.: 8.8'(

2mployee 2xpenses +,+'.%% ,&%9.%% ,:88.%% '&.-(

;ther 2xpenses 8,:.%% 8,'+.%% ''9.%% .:8(

#inancial expenses -9. 8:.:' .%& &:'.&+(

1epreciation 99:.+ 8%8.9 '+9.&9 9.9-(

8


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Total 2xpenditure 9,8''.:8 ++,':.-9 8,:%&.:& &.%'(

!':, .e:'e ,a@ +:&.8 +%8.%+ ::+. 8.89(

provision for taxation ? current tax % :8%.8 ?::+.8% ?'.-'(

? 1eferred tax +%. ':%.' :9.'% +'.88( ? #ringe benefit

tax

9% 8.8 &.8% :8.-'(

!':, a:,e' ,a@ +-:. '.&+ '&%.' +.:8(

Ba2an+e >':,s +a''e , .a2an+e

shee,

=0--#74 ?&?#8? ,%8.&& :&.&9(

Cha', 4 $'9n,a2 Ana23ss : In+me S,a,emen,

F' ,he Yea' -007%0?

+


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#= $'9n,a2 Ana23ss : In+me S,a,emen,

F' ,he Yea' -007%0?

9


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Ta.2e = $'9n,a2 Ana23ss : In+me S,a,emen,

F' ,he Yea' -007%0?

!a',+*2a's Ma'; 07 Ma'; 0? Change Change

In+me

4ales less returns 9,+&.9+ 8',9+.89 -,'%8.- :+.+%(

;ther Income 9%&.%: :'-.9 :9&.'- .9'(

T,a2 In+me 9',:&-.9- 8',&%+.: -,8&:.& :9.%-(

E@>en,*'e

Cost of material 8,+:.- :9,+-%.&9 +,-.% .-8(

2mployee 2xpenses ,&%9.%% ,%:&.%% 9+-.%% -.%( ;ther 2xpenses 8,'+.%% 8,:9.%% ?:.%% ?'.8(

#inancial expenses 8:.:' +.8: ?.' ?+9.8-(

1epreciation 8%8.9 '+%.%+ '8.+& -.8%(

Total 2xpenditure ++,':.-9 &,8%%.+ 9,9:.8 :+.8'(

!':, .e:'e ,a@ +%8.%+ 8': ,8''.%+ ::.+8(

provision for taxation ? current tax :8%.8 :%.8 ''%.%% -.+(

? 1eferred tax ':%.' 9'.: 89.-% '&.%(

? #ringe benefit tax 8.8 9 .8% -.89(

!':, a:,e' ,a@ '.&+ :'9:.' ,:-.++ :.&'(


shee,

?&?#8? -0#7 ,::.+ 89.%%(

Cha', = $'9n,a2 Ana23ss : In+me S,a,emen,

F' ,he Yea' -007%0?

&


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#? $'9n,a2 Ana23ss : In+me S,a,emen,

F' ,he Yea' -00?%0=

Ta.2e ? $'9n,a2 Ana23ss : In+me S,a,emen,

F' ,he Yea' -00?%0=

-


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!a',+*2a's Ma'; 0? Ma'; 0= Change Change

In+me

4ales less returns 8',9+.89 ,&&.-9 %,+89.+% '8.-( ;ther Income :'-.9 8:9.88 ?'%9.& ?:&.++(

T,a2 In+me 8',&%+.: ',:8+.8' %,-.9- '.+9(

E@>en,*'e

Cost of material :9,+-%.&9 '-,9'&.9 9,-+'.% '+.9&(

2mployee 2xpenses ,%:&.%% :,8.%% -9.%% .%(

;ther 2xpenses 8,:9.%% ,:'.%% ,%'+.%% ':.9(

#inancial expenses +.8: '9.-& :+.88 &&.%:(

1epreciation '+%.%+ %-'. +9.-' 8.:&(

Total 2xpenditure &,8%%.+ :&,9%.8- -,9&-.&9 '8.'-(

!':, .e:'e ,a@ 8': :88%. -9'.-% '9.%(

provision for taxation ? current tax :%.8 &-8 ':8.8% '+.:(

? 1eferred tax 9'.: ?8- :.:% ?'''.8(

? #ringe benefit tax 9 % 9.%%

!':, a:,e' ,a@ :'9:.' '9. 88-.% '%.+%(


shee,

-0#7 &784#& 8-.89 '-.'(

Cha', ? $'9n,a2 Ana23ss : In+me S,a,emen,

F' ,he Yea' -00?%0=

'%


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#- Ve',+a2 Ana23ss

:.'. "ertical Analysis of =alance 4heet

'


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Ta.2e 7 Ve',+a2 Ana23ss : Ba2an+e Shee,

!a',+*2a's Ma'; 08 Ma'; 07 Ma';0? Ma';0=

S*'+es : :*ns

4hareholdersK funds '&-.&' &-8.+& '.8: +9&.+8

+8.:( +-.:8( +.&( 8'.+:(

)oan #unds &&98.% +%:.-& +--.'& &&%.%+

'+.-9( ':.( :%.'-( :-.+9(

TOTAL :'-%:.%: '9:&.-8 ''&%.9 ''-.-

%%( %%( %%( %%(

A>>2+a,n : F*ns

#ixed Assets 8'88.8 :%9%.:: -:'.9 &-:&.+ +.:9( 9.&( .:%( %.'&(

Current assets, loans and advances '&98'.8+ '+-99. '':'.: '89'.+:

&9.:-( -&.98( -9.9( -9.'(

)ess Current liabilities and

provisions ''9-. 988&.88 %&8.+ +8+.+9

+-.%8( +.'9( +.+9( 8'.8:(

TOTAL :'-%:.%: '9:&.-8 ''&%.9 ''-.-

%%( %%( %%( %%(

Cha', 7 Ve',+a2 Ana23ss : Ba2an+e Shee,

F' ,he Yea' -008

''


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Cha', &0 Ve',+a2 Ana23ss : Ba2an+e Shee,

F' ,he Yea' -00=

# T'en Ana23ss

Ta.2e < T'en Ana23ss : Ba2an+e Shee,

'


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!a',+*2a's Ma';0= Ma';0? Ma'; 07 Ma'; 08

S*'+es : :*ns

4hareholdersK funds +9&.+8 '.8: &-8.+& '&-.&'

8'.+:( +.&( +-.:8( +8.:()oan #unds &&%.%+ +--.'& +%:.-& &&98.%

:-.+9( :%.'-( ':.( '+.-9(

TOTAL ''-.- ''&%.9 '9:&.-8 :'-%:.%:

%%( %%( %%( %%(

A>>2+a,n : F*ns

#ixed Assets &-:&.+ -:'.9 :%9%.:: 8'88.8

%.'&( .:%( 9.&( +.:9(

Current assets, loans and advances '89'.+: '':'.: '+-99. '&98'.8+

-9.'( -9.9( -&.98( &9.:-(

)ess Current liabilities and

provisions +8+.+9 %&8.+ 988&.88 ''9-.

8'.8:( +.+9( +.'9( +-.%8(

TOTAL ''-.- ''&%.9 '9:&.-8 :'-%:.%:

%%( %%( %%( %%(

Cha', && T'en Ana23ss : Ba2an+e Shee,

S*'+es : F*ns

'8


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Cha', &- T'en Ana23ss : Ba2an+e Shee,

A>>2+a,n : :*ns

4# AALYSIS OF !ROFITABILITY

!':,a.2,3 Ra,s

'+


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6*;44 @*;#IT *ATI; '&.- '&.& ':.9- '8.'

Ana23ss

The 6@ ratio is showing continuously decreasing trend, starting from '%%/%8 in '&.-( to

':.9-( in the financial year '%%+/%9. This shows that a company is loosing its productivity

in maintaining its gross profit margin. In '%%9?%& the ratio again slightly been increased from

':.9- to '8.'.

4#-# e, !':, !AT &00

Sa2es

-004%0= -00=%0? -00?%07 -007%08

@AT '9. :'9:.' '.&+ +-:.

72T 4A)24 &&.-9 8'9+.89 9+&.9+ 99'-.':

-004%0= -00=%0? -00?%07 -007%08

72T@*;#IT +.- +.' +.+ +.%9

Ana23ss

The 7@ ratio is showing declining trend from +.-( in the year '%%/%8 to +.%9( in the year

'%%9/%& which shows that there is increased amount of expenses in the form that increasingin the prices of row material.

4## Asse,s T*'n1e' Ra, e, Sa2es

A1g# T,a2 Asse,s

-004%0= -00=%0? -00?%07 -007%08

A"6. T;TA) A442T4 -99+.+ :8'8:.++ %9:.%8 8%%+.

72T 4A)24 &&.-9 8'9+.89 9+&.9+ 99'-.':

-004%0= -00=%0? -00?%07 -007%08

A442T T5*7 ;"2* '. .- .9+ .88

Ana23ss

This ratio measures how efficiently a company uses its assets. The asset turnover ratio is

decreasing. Although the return on asset for the year '%%& is highest but the asset turnover

ratio is least for this year. The company is not using its assets optimally.

'&


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4#4# Re,*'n : Asse,s !':, a:,e' ,a@ &00

A1e'age T,a2 Asse,s

-004%0= -00=%0? -00?%07 -007%08

@AT '9. :'9:.' '.&+ +-:.

A"6. T;TA) A442T4 -99+.+ :8'8:.++ %9:.%8 8%%+.

Ana23ss

This ratio is used to measure a companyKs success in using its assets to earn income for

owners and creditors, those who are financing the business. There is a steep fall in the year

'%%+, after that there is a satisfactory utili3ation of the assets as the graph shows.

4#=# Re,*'n n E5*,3 !AT &00

A1g# Cmmn Sha'eh2e's e5*,3

-004%0= -00=%0? -00?%07 -007%08

@AT '9. :'9:.' '.&+ +-:.

A"6. 2D5IT$ 4!A*2 !;)12*F4

#571 %-&.: ''88.- '8%9-.&' '%'9.98

-004%0= -00=%0? -00?%07 -007%08

*2T5*7 ;7 2D5IT$ '.+ .8 9.+% ':.'

Ana23ss

The *;2 of the company is '.+( in the '%%/%8 which has been decreased to 9.+%( in

the '%%+/%9 and then slightly increased to ':.'( in the '%%&/%9.Also one point here to be

noted is that *;2 of the company is higher than the *;A, which may be due to the concept

called trading on euity.

=# AALYSIS OF SOLVECY

-004%0= -00=%0? -00?%07 -007%08

*2T5*7 ;7 A442T4 :.9' -.'& %.&: -.:&

@A*TIC5)A*4 -004%0= -00=%0? -00?%07 -007%08

42C5*215742C5*21 );A74 &&%.%+ +--.'& +%:.-& &&98.%

2D5IT$ 4!A*2 !;)12*F4 #571 +9&.+8 '.8: &-8.+& '&-.&'@=IT :&&'.&9 8-.& +%'. 9-9.%+

I7T2*24T ;7 );76 T2*M 12=T ':+.- '&&.:: ''+.'- +&&.-

'-


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Cha', &4 S21en+3 Ra, Ana23ss

=# 6e., % E5*,3 Ra, Lan :*ns

T,a2 sha'eh2e's

Ana23ss

This ratio is used to compare the amount of debt a company has with the amount the owners

have invested in the company. It compares the amount of creditorsK claims to the ownersK

claims to the assets of the firm. Trend shows that in '%%8 the company was highly leverage

but after it has managed to control this ratio in the year '%%+ and '%%9.

=#-# In,e'es, +1e'age 'a, !':, .e:'e n,e'es, D ,a@

In,e'es, e@>ense

Ana23ss

This ratio suggests that whether company manages to earn sufficient income to cover its

expenses. The ratio of the company indicates that company depends much on borrowed

funds. The high interest ratio means that company depends more on debt funds.

-004%0= -00=%0? -00?%07

-007%

08

12=T T; 2D5IT$ *ATI; %.98 %.- %.: %.

-004%0= -00=%0? -00?%07

-007%

08

I7T2*24T C;"2*A62 *ATI; +.:- 8.-: '&.'- %.+

:%


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?# AALYSIS OF LIQUI6ITY

L5*,3 Ra,s

LIQUI6ITY RATIO

*s in

millions

@A*TIC5)A*4 -004%0= -00=%0? -00?%07 -007%08

C5**27T A442T4 '89'.+: '':'.: '+-99. '&98'.8+

C5**27T )IA=I)ITI24 +8+.+9 %&8.+ 988&.88 ''9-.

D5IC0 A442T4 8&-.&' :'-&.8' +'9:.-: +8:.'

4A)24 4&8&8#


34/44

?#& C*''en, Ra, C*''en, Asse,s

C*''en, La.2,es

-004%0= -00=%0? -00?%07 -007%08

C5**27T A442T4 '89'.+: '':'.: '+-99. '&98'.8+

C5**27T )IA=I)ITI24 +8+.+9 %&8.+ 988&.88 ''9-.

C5**27T *ATI; .&8 .8& .8 .'9

Ana23ss

This ratio is used to measure a companyKs ability to pay current liabilities with current assets.

This ratio helps creditors to determine if a company can meet its short? term obligations. The

gradual decrease shows that companyKs liuidity has worsened. The company should rethink

over its credit policy.

?#-# Q*+ Ra, L C*''en, Asse,s In1en,'es

C*''en, La.2,es

-004%0= -00=%0? -00?%07 -007%08

C5**27T )IA=I)ITI24 +8+.+9 %&8.+ 988&.88 ''9-.

D5IC0 A442T4 8&-.&' :'-&.8' +'9:.-: +8:.'

-004%0= -00=%0? -00?%07 -007%08D5IC0 *ATI; .:+ %.- %.-: %.9:

:'


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-004%0= -00=%0? -00?%07 -007%08

C;64 '-,9'&.9 :9,+-%.&9 8,+:.- 89,++.:

A"6. I7"27T;*$ 8:98. 9:8:.' -&+. 9.9

-004%0= -00=%0? -00?%07 -007%08

I7"27T;*$ T5*7;"2* 8.8: 8.: 8.8 8.%:

Ana23ss

This ratio is used to measure how uickly a company is selling its inventory. This ratio tells

how many times each year a firmKs inventory is turned over. The inventory turnover of the

company over the period of four years has remained stable more or less.

7# CAS$ FLO STATEMET AALYSIS

Cash F2J S,a,emen, :' ,he 3ea' ene Ma'+h &; -008%-007

(Rs.

Millions)

-008 -007

Cash 2J :'m >e'a,ng a+,1,es

!':, .e:'e ,a@ +,:&.8 +,%8.%+

AdEustments for

1epreciation, amortisation and impairment ,99:.+ ,8%8.9

;ther amortisations :.- +.9+

#oreign exchange /losses

Interest expense net of interest capitalisation +8.% -+.+

Interest income

1iminution in value of investments written back B net

Transfer from 6eneral *eserve B 2mployee benefits

O>e'a,ng >':, .e:'e J'ng +a>,a2 +hanges 8;-?#? ?;&4#&&

AdEustments for changes in

Inventories


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>

1ebtors ,'+.&9

Advances '+.8'

Current liabilities and provisions :,8-+.&' ,%'.8

Cash gene'a,e :'m >e'a,ns &&;e'a,ng a+,1,es .e:'e e@,'a'na'3

e@>en,*'e &0;70=#-? =;-


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decrease in the inventories of the company. I.e. *s 8:8.-: million and debtors have

increased *s '+.&9 million.

#urther compensation under voluntary retirement scheme is *s &. million. And a net

profit on the sale of investment is *s 9.-8 million. @rofit on disposal of fixed assets would

be *s :98.&+ million for the year '%%&.

The conversion of #oreign Currency Convertible 7otes into euity shares has not been

considered in the above statement.

Cash flows from Investing activities includes acuisition of %%( shares in Albonair 6mb!

and 1efiance Testing 2ngineering 4ervices and disposal of +%( and 8( shares

respectively therein.

The company has used more cash in operations than all of the cash it received from its

investing and financing activities resulting into a net increase in cash.

Cash F2J S,a,emen, :' ,he 3ea' ene Ma'+h &; -007%-00?

(Rs.

Millions)

-007 -00?

Cash :2J :'m >e'a,ng a+,1,es

!':, .e:'e ,a@ +,%8.%+ ,8':.

AdEustments for

1epreciation, amortisation and impairment ,8%8.9 ,'+%.%+

;ther amortisations +.9+ :'.&

5nreali3ed foreign exchange gains / ?+8.: %'.%8

Interest expense net of interest capitalisation -+.+ '&&.::

Interest income ?+%.- ?-:.&9

Income from investments ?-&.&8 ?&9.9

/)oss on disposal of fixed assets / long term investments ?:':.8 ?++.+

1iminution in value of investments written back ? net ?+&.: B

Transfer from 6eneral *eserve ? 2mployee benefits ?9&.8 B

@rofit on sale of undertaking B ?:%.++

O>e'a,ng >':, .e:'e J'ng +a>,a2 +hanges ?;&4#&& =;?=?#?7

:+


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AdEustments for changes in

Inventories ?,+99.+ ?:,99.--

1ebtors ?,%%8.9+ ?9-.88

Advances ?,%9. :.9:

Current liabilities and provisions ,%'.8 ',%8.8'

Cash gene'a,e :'m >e'a,ns ?;?8=#88 4;?=#8

Income tax including #ringe benefit tax paid ?,:8+. ?,:8.+&

e, +ash :2J :'m >e'a,ng a+,1,es .e:'e e@,'a'na'3

e@>en,*'e =;-


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decrease in the inventories of the company. I.e. *s +99.+% million and debtors have

decreased *s %%8.9+ million.

#urther compensation under voluntary retirement scheme is *s ::%.:9 million. )oss on

disposal of fixed assets would be *s :':.8 million for the year '%%&.



Cash flows from Investing activities includes acuisition of %%( ownership interest in Avia

Ashok )eyland Motors s.r.o. of *s. %.:& million and disposal of +%( interest

therein of *s. %.': million.

The borrowing of the company has been increased because of that company is not able to

repay net amount efficiently. It results into decrease in cash.

Cash F2J S,a,emen, :' ,he 3ea' ene Ma'+h &; -00?%-00=

-00? -00=

Rs#

M22ns

Rs#

M22ns

Cash :2J :'m >e'a,ng a+,1,es

!':, .e:'e ,a@ 4;=-# ;==0#&AdEustments for

1epreciation &;-?0#0? &;0,a2 +hanges =;?=?#?7 4;-=4#&AdEustments for changes in

:&


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Inventories %;477#e'a,ng a+,1,es .e:'e e@,'a'na'3

e@>en,*'e ;--


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The borrowing of the company has been increased because of that company is not able to

repay net amount efficiently. It results into decrease in cash.

RECOMME6ATIOS D SU""ESTIOS

Ashok )eyland is the second largest manufacturer of medium and heavy commercial vehicles

segment in #$%9 and a marginal presence in the )C" segment . Ashok )eyland is also a key player in the passenger bus segment with almost -(

share in #$%9. C"s contributed to -'( of revenues in #$%9 while engines and spare parts

contributed to the balance.

T'ans>',a,n% A s,'*+,*'a2 +hange The C" segment in India is going through a

structural shift. Nith the governmentFs thrust on road development proEects, road sector has

gained significant advantage over railways that has been a mainstay for transportation of coal,

food grain and cement till now. If one considers the trends of the developed nations, almost

two?third of the non?bulk goods are

transported through roads. The completion of the 6olden Duadrilateral and 2ast?Nest?7orth?4outh corridor will result in availability of a network

of 8,%%% kms of connectivity. This will give a maEor fillip to road transport.

B*s segmen, s a g'J,h s,'3 The bus segment has the potential to witness the exponentialgrowth witnessed in the goods commercial vehicles during last three years. Ne agree with the

%


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Va2*a,ns

Ashok )eyland is currently trading at *s : implying a @/2 multiple of .% times. =ased on

valuation criteria, the sell limit for the stock as per #$% cash flow comes to around *s 8%

per share. This implies a point?to?point upside of :( or alternatively, a CA6* of &( fromthe prevailing share price. Thus, at the current Euncture, investors could do well to =5$ the

stock from a March '%% perspective.

Example Financial Statement Analysis

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