FINANCIAL MANAGEMENT

FINANSIAL STATEMENT ANALYSIS

GROUP MEMBERS

HAMMAD KHANEMRAN ULLAH NIAZI

JAVED Ali KHANDATE: 14TH MAY 2014INTRODUCTION: FINANCIAL ANALYSIS: It is the process through which me analyze and assess the financial condition and performance of the firm using different tools and ratios.1. LIQUIDITY RATIO

Liquidity ratio measures that how quickly companys assets can be converted into cash.

It includes current ratio and quick ratio

CURRENT RATIO

It gives us the company short-term obligation with respect to short term assets.

QUICK RATIO

Is the ability of the firm to meet its short-term obligations with short term assets after least liquid assets are being removed.RATIOSFORMULA200720082009201020112012

CURRENT RATIOCurrent assets/current liabilities1.872.5571.6911.6731.8422.317

QUICK RATIONCurrent assets inventories/current liabilities1.7962.4961.6781.6651.8272.300

INTERPRETATION:

For every Rs. 1 of current liability, the company has Rs. 2.377 of current assets.

For every Rs. 1 of current liability, the company has Rs. 2.300 of highly liquid current assets.

GRAPH

INDUSTRY COMPARISON

CURRENT RATIO

YEARINDUS MOTORSSUZUKI MOTORSINDUSTRY EVERAGE

20082.557--

20091.6913.712.705

20101.6733.052.34

20111.8422.322.08

20122.3173.012.68

It shows that the company can meet its short term obligations with short term assets in slower proportion than the industry and competitors QUICK RATIO

YEARINDUS MOTORSSuzuki motorsINDUSTRY AVERAGE

20082.496--

20091.6781.671.67

20101.6651.171.421

20111.8270.7111.269

20122.300 1.171 1.73

It shows that the company can meet its short term obligations with short term assets in higher proportion than the industry and competitors after inventory is being removed.2. ACTIVITY RATIOIt measure that how efficiently the firm is managing its assets. It includes receivable turnover ratio, average payment period, total assets turnover ratio, inventory turnover ratio. RECIEVABLE TURNOVER RATIO: This provides us the insight of the quality of firms receivables and how successful the firm is in its collection.

AVERAGE PAYMENT PERIOD: It tells us the promptness of firm is in its payment.

TOTAL ASSETS TURNOVER RATIO: It tells that how efficiently the firms assets are being managed to generate sales.

INVENTORY TURNOVER RATIO: It tells us how many times inventory is turned over into receivables through sales during the year.

RATIOSFORMULA20082009201020112012

AVERAGE COLLECTION PERIODCredit sales/account receivable3122684552 times

AVERAGE

COLLECTION

IN DAYS365/

RECIEVABLE IN DAYS1 2DAYS16 DAYS5 DAYS8 DAYS7 DAYS

INVENTORY TURNR OVERC.G.S/inventory161.86276.72496.40303.62395.09 times

INVENTORY TURNOVER IN DAYS365/inventory turnover ratio2.251.320.741.200.92 days

TOTAL ASSETS TURNOVERSales/total assets3.011.832.212.302.79 times

In the year of 2012 52 times the companys account receivables converted into cash.

In the year of 2012 395.09 times the companys inventory turned into cash.

In the year of 2012 2.79 time the companys total assets converted into cash.

INDUSTRY COMPARISONAVERAGE COLLECTION PERIODYear INDUS Suzuki motorsINDUSTRY AVERAGE

2008 --

2009 2269.6745.83

2010 6817.7142.85

2011 45163.61104.305

2012 5299.575.52

It shows that the company is slower in its collections than industry and competitors except in 2009.INVENTORY TURNOVER

YEAR INDUSSuzuki motorsINDUSTRY AVERAGE

2008 161.86 --

2009 276.723.73140.225

2010 496.404.76250.52

2011 303.623.93250.165

2012 395.095.31 200.2

It means that the companys inventory has been converted into sales more times than the competitors and industry.TOTAL ASSET TURNOVER

YEAR INDUSSuzuki motorsINDUSTRY AVERAGE

2008 3.01---

2009 1.831.491.66

2010 2.210.2211.21

2011 2.302.2622.281

2012 2.792.742.76

It means that the companys assets are converted into sales in higher pace than the competitors and industry.GRAPH

3. LEVERAGE / DEBT RATIO

It tells us the extent to which the firm is using borrowed money. It includes debt-to-equity ratio, debt-to-total assets-ratio and capitalization ratio.

DEBT-TO-EQUITY RATIO: It tells us that how much of equity is raised by debt.

DEBT-TO-TOTAL ASSETS RATIO: It tells us that how much of assets of firm are financed by debt.

CAPITALIZATION RATIO: It tells us about the firm that how much of capital structure is raised by debt.

COVERAGE RATIO: It tells the ability of the firm to meet its interest expense and thus avoid bankruptcy.FORMULA20082009201020112012

DEBT TO EQUITYTOTAL DEBT/TOTAL EQUITY0.4571.0091.1560.9010.621

DEBT TO ASSETTOTAL DEBT/TOTAL ASSETS0.31360.50220.53620.47380.3830

TOTAL CAPITALIZATIONLONG TERM DEBT/TOTAL CAPITALIZATION0.05340.04660.02520.03120.0097

For every Rs 1 of equity, the company has acquired 0.621 of debt.

In the year of 2012 38% of companys assets are financed by debt.

In the year of 2012 0.97% of total capital is raised by debt.GRAPH:

INDUSTRY COMPARISONDEBT TO EQUITY RATIO

YEAR INDUS Suzuki motorsINDUSTRY AVERAGE

2008 0.457---

2009 1.0090.230.619

2010 1.1560.230.693

2011 0.9010.5230.712

2012 0.6210.351 0.486

The firm has raised more of its equity from debt than competitors and industry average.DEBT TO ASSETS:YEAR INDUSSuzuki motorsINDUSTRIAL AVERAGE

2008 0.313--

2009 0.50220.1880.345

2010 0.5360.2460.391

2011 0.4730.3430.408

2012 0.38300.2590.315

It shows that the company has financed more of its assets from debt as compared to competitors and industry.TOTAL CAPITALIZATION RATIO

YEAR INDUSSuzuki motorsINDUSTRY AVERAGE

2008 0.0534--

2009 0.04660.0030.038

2010 0.025200.0125

2011 0.31200.156

2012 0.000970 0.00048

This comparison shows that the firm has raised more of its capital structure from debt4. PROFITABILITY RATIOProfitability ratios are used to measure the ability of the firm to generate profits. It includes gross profit margin, net profit margin, return on investment and return on equity.

GROSS PROFIT MARGIN: It tells us the profit of the firm after the cost of producing goods is being deducted.

NET POFIT MARGIN: It tells us the profit of the firm after taking account of all expenses and income taxes.

RETURN OF INVESTMENT: It is used to measure the efficiency of firms investment.

RETURN ON EQUITY: It is used to measure the overall performance of the firm.FORMULA20082009201020112012

GROSS PROFIT MARGINGross profit/net sales9.296.14 7.84 6.638.53

NET PROFIT MARGINNet profit/net sales5.533.665.734.455.59

RETURN ON INVESTMENTNet profit/total assets16.666.7012.6910.22150.6

RETURN ON EQUITYNet profit/shareholders equity24.2813.4527.3619.4325.29

For every Rs.1 of sales, company has 0.83 of gross profit.

For ever Rs. 1 of sales, company earns net profit of 0.59For every Rs. 100 of assets, company GENERATE Rs. 1.56 OF PROFITThe capital we raised from common stock generated 25.29% of earnings.

INDUSTRY COMPARISONGROSS PROFIT MARGIN

YEARINDUS MOTORSSUZUKI MOTORSINDUSTRY AVERAGE

20089.29--

20096.140.0213.08

20107.840.0233.93

20116.630.03543.33

20128.530.044.28

The company is performing better and is earning more profit than the industry average and from the competitors.

NET PROFIT MARGIN

YEARINDUS MOTORSSUZUKI MOTORSINDUSTRY AVERAGE

20085.53--

20093.660.00971.87

20105.730.00492.86

20114.450.0152.23

20125.590.0172.8

The company is performing better and is earning more profit than the industry average and from the competitors.

RETURN ON INVESTMENT

YEARINDUS MOTORSSUZUKI MOTORSINDUSTRY AVERAGE

20080.16--

20090.060.0140.037

20100.120.010960.065

20110.100.030.06

20120.150.0460.091

The company is performing better and is earning more profit than the industry average and from the competitors.

RETURN ON EQUITY

YEAR INDUS MOTORSSUZUKI MOTORSINDUSTRY AVERAGE

20080.24--

20090.130.0170.07

20100.270.01460.14

20110.190.05190.12

20120.250.062

0.156

The company is performing better and is earning more profit than the industry average and from the competitors.5. MARKET POSITION

This ratio tells us that how the company is perceived by the investors. It includes market price/share to earnings per share and market value to book value.

MARKET PRICE PER SHARE TO EARNINGS PER SHARE: It is a valuation ratio in which the current price of the share is compared to the earnings per share.

MARKET VALUE TO BOOK VALUE: In this ratio, market price per share is compared to book value per share to find the value of the company.

FORMULA2008 2009 2010201120122013

PRICE TO EARNINGSMARKET PRICE PER SHARE/EPS6.876.115.996.304.48

MARKET TO BOOK VALUEMARKET PRICE PER

SHARE/ BOOK VALUE200.1107.1262.2220245.1

For every Rs.1 of the companys earnings, the investor is willing to pay Rs 4.48 for incomeIf the book value of share is Rs.1, the investor is willing to pay Rs. 4.48GRAPH

INDUSTRY COMPARISON

PRICE TO EARNINGS RATIO

YEARIndus motorsSUZUKI MOTORSINDUSTRY AVERAGE

20086.87--

20096.1134.9120.51

20105.9940.1123.05

20116.307.967.13

20124.489.747.11

The company is performing below than the competitors as well as industry average.

MARKET TO BOOK VALUE RATIO

YEARIndus motorsSUZUKI MOT0RSINDUSTRY AVERAGE

20081.67--

20090.820.620.72

20101.750.581.16

20111.300.410.855

20121.130.610.87

The company is performing relatively better than competitors as well as from the industry average so the investor is willing to pay more.