FINANCIAL STATEMENT ANALYSIS- hero moto comp.doc

A PROJECT REPORT

CHAPTER-I

INTRODUCTIONINTRODUCTION:

Financial statements are prepared primarily for decision making. They play a dominant role in setting the framework of managerial decisions. But the information provided in the financial statements is not an end in itself as no meaningful conclusions can be drawn from these statements alone. However, the information provided in the financial statements is of immense use in making decisions through analysis and interpretation of financial statements. Financial analysis the process of identifying the financial strengths and weaknesses of the firm by properly establishing relationship between the items of the balance sheet and the profit and loss account There are various methods or techniques used in analyzing financial statements financial statements are an important source of information for evaluating the performance and prospects of firm, if properly analyzed and interpreted these statements can provide valuable insights into firms performance. Analysis of financial statements is if interest to lenders, investors, security analyst, manager and others.

Financial statements analysis may be done for a variety of purposes, which may range from simple analysis of short term liquidity position of the form to a comprehensive assessment of the strengths and weakness of the firm in various areas, it is helpful in assessing corporate excellence, judging credit worthiness forecasting bond rating, evaluating intrinsic value of equity shares predicting bankruptcy and assessing market risk.

Financial statements:

Managers, shareholders, creditors and other interested groups seek answer to the following question about firm:

What is the financial position of the firm at a given point of time?

How has the firm performed financially over a given period of time?

What have been the sources an d uses of cash over a given period?

To answer these questions, accountant prepares two principle statements, the Balance sheet and the profit and loss account, ancillary statement, the Cash Flow statement.

Analysis of financial statementAnalysis refers to the process of critical examination of the financial information contained in the financial statement in order to understand and make decisions regarding the operations of the firm. The analysis is basically study of the relationship among various financial facts and figure as given in a set of financial statements. Complex figure as given in this statements are dissected\broken up into simple and variable element and significant relationship are established between the elements of the same statements are different financial statements. This process of dis section, establishing and identifying the financial weaknesses and strengths of the firm. It is indicative of two aspects of a firm i.e. the profitability and the financial position and it are what are known as the objectives of the analysis.

Procedure of Financial Statements Analysis

Broadly speaking there are three steps involved in the analysis of financial statements. There are:

Selection,

Classification,

Interpretation.

The first step involves selection of information (data). The second step involved is the methodical classification of the data and the third step includes drawing of internees and conclusions.

The following procedure is adopted for the analysis and Interpretation of financial statements:

The analyst should acquaint himself with the principles and postulates of accounting.

The extent of analysis should be determined so that the sphere of work may be decided.

The financial data given in the statements should be re-organized and re-arranged.

A relationship is established among financial statements with the help of tools and techniques of analysis such as ratios, trends, common size, funds flow etc.

The information is interpreted in a simple and understandable way. The significance and utility of financial data is explained for helping decision-taking.

The conclusions drawn from interpretation are presented to the management in the form of reports.Objectives of the study:

To analysis the financial statements and present its financial positions.

To assess and evaluate the performance of the company.

To determine the efficiency of operations as reflected in the financial statements.

To offer appropriate suggestions for better performance of the company.

Need and importance of the study:

Financial analyst analyses the financial statements with various tools of analysis before commanding upon the financial health of the firm. Essential to bring out the history of Hero Moto Corp Ltd. (Formerly Hero Honda Motors Ltd.). Significance and meaning of the financial statements.

Scope of the study:

Analysis of financial statement can be undertaken by different persons and for different purposes, therefore, the scope of the AFS may be varying from one situation to another.

However, the following are some the techniques of the AFS:

Comparative financial statements.

Common-size financial statements.

Trend percentage analysis.

Statement of changes in financial position.

Cost-volume-profit relations, and

Ratio analysis and others.

Research methodology:

Research design

This is a systematic way to solve the research problem and it is important component for the study without which researches may not be able to obtain the format. A research design is the arrangement of conditions for collection and analysis of data in a manager that aims to combine for collection and analysis of data relevance to the research purpose with economy in procedure.Meaning of research design

The formidable problem that follows the task of defining the research problem is the preparation of design of the research project, popularly known as the research design, decision regarding what, where, when, how much, by what means concerning an inquiry of a research study constitute a research design. A research design is the arrangement of conditions for collection and analysis of data in a manager that aims to combine for collection and analysis of data relevance to the research purpose with economy in procedure.

Sources of data

The process of research work done the present project work is financial statement analysis in this project the methodology adopted is the two steps. Data collection

Data analysis

Data collection:-

Data means the information regarding the topic so researched this can be done using two sources.

Primary data

Secondary data

Primary data:

The Primary data are those informations, which are collected afresh and for the first time, and thus happen to be original in character. Secondary Data:

The Secondary data are those which have already been collected by some other agency and which have already been processed. The sources of Secondary data are Annual Reports, browsing Internet, through magazines. It includes data gathered from the annual reports of Hero Moto Corp Ltd Articles are collected from official website of Hero Moto Corp Ltd.

Data analysis:-

Data analysis is the time series analysis where tables and graphs have been used to analysis the data the following tools has been applied.

Comparative financial statements.

Common-size financial statements.

Trend percentage analysis.

Statement of changes in financial position.

Cost-volume-profit relations, and

Ratio analysis and others.

Limitation of the study:

It is only a study of interim reports.

Financial analysis is based upon only monetary information and non monetary factors are ignored.

Different people may interpret the same analysis in different ways.

It does not consider the changes in prices level.

Changes in accounting procedure by firm may often make financial analysis misleading.

CHAPTER-II

REVIEW OF LITERATURE

Financial Statement Analysis

Introduction:

The term financial analysis also known as analysis and interpretation of financial statements , refers to the process of determining financial strength and weaknesses of the firm by establishing strategic relationship between the items of the balance sheet , profit and loss account and other operative data. Analyzing financial statements by Metcalf and Titard

Financial analysis is a process of evaluating the relationship between component parts of a financial statement to obtain a better understanding of a firms position and performance by Myers

The purpose of financial analysis is to diagnose the information contained in financial statements so as to Jude the profitability and financial soundness of the firm. Just like a doctor examines his patient by recording his body temperature, blood pressure, etc. Before making his conclusion regarding the illness and before giving his treatment, a financial analyst analysis the financial statements with various tools of analysis before commenting upon the financial health or weaknesses of an enterprise. The analysis and interpretation of financial statements is essential to bring out the mystery behind the figures in financial statements. Financial statements analysis is an attempt to determine the significance and meaning of the financial statement data so that forecast may be made of the future earnings, ability to pay interest and debt maturities (both current and long term) and profitability of a sound divided policy.

OBJECTIVES OF FINANCIAL STATEMENT Broadly the objective of the Analysis of Financial statement is to understand the information contained in the financial statement with a view to the weakness and strengths of thefirm and to make forecast about the future prospects of the firm and their by enabling the financial analyst to take different decision regarding the operation of the firm. The objectives of the analysis can be identified as:

To assess the present profitability and operating efficiency of the firm as a whole as well as for its different departments.

To find out the relative importance of different components of the financial position of the firm.

To identify the reasons for change in the profitability\financial position of the firm.

To assess the short-term as well as the long-term liquidity position of the firm.

To examine the solvency of the firm.

To find out the ability of the firm to meet its current obligations.

Significance of financial analysis

Analysis of financial statement is carried out to measure the enterprises liquidity, profitability, solvency and other indicators to assess its operating efficiency, financial position and performance. Financial Analysis serves the following purpose.

To know the operational efficiency of the business: The financial analysis enables the management to find out the overall efficiency of the firm. Department-wise efficiency can also be judged from the available data. This will enable the management to locate weak spots of the business and take necessary remedial action.

Helpful in measuring the solvency of the firm: The firm must know its financial soundness. It should satisfy itself that its current resources are sufficient to meet its current liabilities. This is possible through the calculations of liquid ratios. On the other hand, the long term financial position can be measured by calculated debt equity, proprietary and fixed assets ratios. Thus, the financial analysis helps the decision makers in taking appropriate decisions for strengthening the short-term as well as long-term solvency of the firm.

Comparison of past and present results: Financial statement of the previous years can be compared and the trend regarding various expenses, purchases, sales gross profit can be ascertained. The cost of goods sold, values of assets and liabilities can be compared and the future prospects of the business can be indicated.

Help in measuring the profitability: Financial statements show the gross profit, net profit, and other expenses. The relationship of these items can be established with sales by calculating operating ratios. This type of analysis helps the managers in taking certain decisions for improving the profitability or reducing the losses of the firm.

Inter-firm comparison: The financial analysis makes easy to inter-firm comparison. Various financial characteristics like profitability, liquidity, solvency of different firms can be compared. This comparison can also be made for various time periods.

Helps in judging the solvency of the undertaking: creditors are always interested in knowing the solvency i.e, the capacity of the business to repay their loans. Through

Financial statement it is possible to known:

Whether current assets are sufficient to meet current liabilities.

Proportion of liquid assets to current assets.

Futures prospects of the business.

Whether debentures and other loans are secured or not.

Managerial efficiency of the company.

Bankruptcy and failure: Financial statement analysis is a significant tool in predicting the bankruptcy and failure of the business enterprises. Financial statement analysis accomplishes this through the evaluation of solvency position.

Helps in forecasting: The financial analysis will help in assessing future development by making forecasts and preparing budgets. Capital budgets are prepared after taking into account the profitability of various alternative proposals. The trend shown by financial analysis will pave way for the future.

Types of financial analysis:-

Financial analysis into different categories depending upon

The material used and

The method of operation followed in the analysis or the modus operandi of analysis

Types of financial analysis

On the basis of material used on the basis of modus operandi

External Internal Horizontal Vertical

Analysis Analysis Analysis Analysis

On the basis of material used:

According to material used, financial analysis can be of two types

External analysis

Internal analysis

External analysis:-

This analysis is done by outsiders who do not have access to the detailed internal outsiders include investors, potential investors , Creditors, Potential Creditors, Government Agencies , Credit agencies and General Public for financial analysis, these external parties to the firm depend almost entirely on the published financial statements.

Internal analysis:-

The analysis conducted by persons who have access to the internal accounting records of a business firm is known as internal analysis.

On the basis of modus operandi:

According to the modus operandi financial analysis can also be of two types

Horizontal analysis

Vertical analysis

Horizontal analysis:-

Horizontal analysis refers to the comparison of financial data of a company for several years. The figures for this type of analysis are presented horizontally over a number of columns. The figures of the various years are compared with standard or base year a base year is year chosen as beginning point. This type of analysis is also called dynamic analysis as it is based on the data from year to year rather than on data of any one year. The horizontal analysis makes it possible to focus attention on items that have changed significantly during the period under view

Vertical analysis:- Vertical analysis refers to the study of relationship of the various items in the financial statements of one accounting period in this types of analysis the figures from financial statement of a year are compared with a base selected from the same years statement.

Parties interested in financial analysis:

Financial Executives:-

The first party interested in the financial analysis in the financial department of the business concern who have a deep insight into the financial condition of the enterprise and view of the past performance, which help in future decisions making.

Management:-

The management of the concern is also interested in the analysis of the statements because it helps them in reaching conclusion regarding the overall operation of the business. The management is interested in every aspects of the financial analysis it is there overall responsibility to see that the resources of the firm are used effectively and efficiently and the firms financial position is sound. As such, return on analysis is very important for them.

Creditors:-

Creditors also evaluate the financial statements and on the basis of these financial statements they come about the credit worthiness of the business enterprise and chosen to extend, maintain of restrict credit. Creditors will be interested to give credit for those business enterprises having sound financial position and having capable of being repayments of their credit. Some of the aspects of enterprise operations that are of interested of the creditors are liquidity of funds, soundness of the financial structure, profitability of the operations, effectiveness of working capital management etc. The bankers and trade creditors of a business enterprise are interested in its cash generation and credit worthiness. They want to assess whether the enterprise will be as interested payments due as per agreed schedules. The get all this information from the analysis of balance sheet and income statement of the company.

Investors:-

Investors present as well as prospective, are interested in the business in the measurements of earning capital of securities. Every investor has the tendency to get fair return on his or her investment. Investors have been increased concerned with the cash generation capability of an enterprise primarily in terms of the flexibility availability to such enterprises to acquire other business and new assets on an advantageous basis. For this purpose each cash flow analysis and funds flow analysis are very useful.

Government:-

The financial statements are used to assess the tax liability of the business enterprise. The government studies economic situation of the country from these statements enable the government to find out whether business is following various rules and regulations or not.

Bankers:-

The banker is interested to see that the loan amount is secure and the customer is also able to take the interest regularly. The bankers will analysis the balance sheet to determine financial strength of the concern and profit and loss account will also be studied to find out earning position.

The information provided by the analysis and interpretation of various financial statements is important and useful to those groups also that are interested in working of the business due to one or other motive.

Procedures for financial analysis:

The following is the procedure to be followed by the interested parties in analyzing the financial statements.

Determination of nature and extent of analysis: First of all, the depth, object and extent of analysis is to be determined by the financial analyst. The nature of analysis will differ depending on the purpose of the analysis. For example, trade creditors and bankers are interested in knowing whether the firm can pay back their debt in short period. Their analyses will, therefore, confidence to the evaluation of the firms liquidity position. The suppliers of interested in knowing its ability to generate cash to be able to pay interest and return their claims. Similarly, investors, who have invested their money in long-term debt, on the other hand, are interested in the firms profitability over time. They are the firms shares, are most concerned about the firms earnings. As such, they concentrate on the analysis of the firms financial position to the extent it influences the firms earnings ability. Finally, management of the firm would be interest red in every aspect of the financial analysis.

Vertical of the financial statements: Before analyzing and preparing any statement or composing financial ratios, it is necessary for the analyst to go through the various financial statements of the firm.

Collection of necessary statements: The analyst should collect other useful information from the management useful for analysis. This includes any other information not being revealed from the published financial statements.

Rearrangement of financial data: Before making actual analysis and interpretation, the analyst must rearrange the data provided by these statements in useful manner. The approximation of figures, re-classification of consolidation of items etc., is done in this step.

Methods of analysis: Now the financial analyst may use one or multiple methods of financial analysis. The methods of financial analysis are: comparative statements, common size statements, trend analysis, ratio analysis, funds flow statements, cash flow statements and cost volume profit analysis (CVP analysis).

Interpretation and presentation: After analyzing the statements the interpretation is to be made. The interference drawn from the analysis are presented in the scope of reports to the management.

Limitations of financial analysis :

Historical data: Analysis of the financial statements indicates about the performance of the business in the processing period or periods. It does not indicate the present position of the business. Financial statements are prepared on historical facts and do not throw light on the current and present position of the business.

Lack of standard terminology: Accounting is not an exact science. It does not universally accepted terminology. Different meanings are given to a particular term. There are different methods of providing depreciation. Interest may be charged on different rates. In this way, there is sufficient possibility of manipulation and the financial statements have to suffer. As a consequence financial analysis also proves to be defective. However, in the recent past the international accounting board is taking interest and taking measures for standardizing the accounting terminology as well as bringing standards for being uniformity in accounting system.

Affects of prices level changes: The results shown by financial statements may be misleading, if price level changes have not been accounted for. The ratio may improve with the increase in price, where as actual efficiency may not improve. Ratios of the two years will not be meaningful for comparison, if the prices of commodities are different. Change in price affects cost of production, sales and value of assets and as a consequent comparability of ratios also suffers.

Non-consideration qualitative aspect: financial analysis does not measure the qualitative aspects of the business it does not show the skill, technical know how and the efficiency of its employees and managers. It is the quantitative measurement of the performance. It means that analysis of financial statements measures only one sided performance of the business. It completely ignores human resources.

Misleading results: Results shown by financial analysis may be misleading in the absence of absolute date. For example, the analysis of one firm reveals that the increase in profits from Rs.20,000 to Rs.80,000 shows that the profit has increased by four times. In case of another firm the analysis reveals that the profit of this firm als increased from Rs.100 crores toRs.400 crores, showing four fold increases. But this analysis ignored the size of the firms. As such, the results may mislead.

Methods of financial analysis:-

The following methods of analysis are generally used:-

Comparative Statements.

Trend Analysis.

Common-Size Statements.

Funds flow Analysis.

Cash Analysis

Ratio Analysis

Cost-volume-Profit Analysis

COMPARATIVE STATEMENTS:-

The comparative financial statements are statements of the financial position at different periods of time .the elements of financial position are show in a comparative Statement provides an idea of financial position at two or more periods. Generally two financial statements (balance sheet and income statement) are prepared in comparative form for financial analysis.

THE COMPARATIVE STATEMENT MAY SHOW:-

Absolute figures (rupee amounts)

Changes in absolute figures i.e. increase or decrease in absolute figures.

Absolute data in terms of percentages.

Increase or decrease in terms of percentages.

THE TWO COMPARATIVE STATEMENTS ARE:-

Comparative balance sheet, and

Income statement.

COMPARATIVE BALANCE SHEET:-

Comparative balance sheet as on two or more different dates can be used for comparing assets and liabilities and finding out any increase or decrease on those items. Thus, while in a single balance sheet the emphasis is on present position, it is on change in the comparative balance sheet. Such a balance sheet is very useful in studying the trends in an enterprise.

Comparative financial statements can be prepared for more than 2 periods or on more than two dates. However, it becomes very cumbersome to study the trend with more than 2 periods data. Trend percentages are more useful in such cases.

Acc to American institute of certified public accountant the presentation of comparative financial statements in annual and other reports enhances the usefulness of such reports and brings out more clearly the nature and trend of current changes affecting the enterprise. Such presentation emphasis the fact that statements for series of periods are far more significant than those of a single period and that the accounts of 1 period are but an installment of what is essentially a continuous history. In any one year, it is ordinary desired that the balance sheet, the income statement and surplus statement be give for 1 or more proceeding year as well as for the current year.

The comparative balance sheet analysis is the study of the trend of the same items, group of items and computed items in two or more balance sheets of the same business enterprise on different dates. The change in periodic balance sheet items reflect the conduct of a business the change can be observed by comparison of the balance sheet at the beginning and at the end of a period and these changes can help in forming an opinion about the progress of an enterprise.

Guide lines for interpretation of comparative balance sheet:-

While interpreting comparative balance sheet the interpreter is expected to study the following aspects:-

Current financial position and liquidity position

Long-term financial position

Profitability of the concern.

COMMON SIZE STATEMENT:-

The common-size statements, balance sheet and income statement are show in analytical percentages. The figures are shown as percentages of total assets, total liabilities and total sales. The total assets are taken as 100 and different assets are expressed as a percentage of the total similarly, various liabilities are taken as a part of total liabilities.

COMMON SIZE BALANCE SHEET:-

A statement in which balance sheet items are expressed as the ratio of each asset to total assets and the ratio of each liability is expressed as a ratio of total liabilities is called common size balance. The common size balance sheet can be used to compare companies of differing size. The comparison of figures in different periods is not useful because total figures may be affected by a number of factors. It is not possible to establish standard norms for various assets. The trends of figures from year to year may not be studied and even they may not give proper results.

Common size balance sheet is prepared by stating the total assets as 100 and reducing individual assets into % of the total. Likewise, individual liability items are expressed as percentage of the total liabilities. Thus, the common size balance sheet percentage shows the relation the of each asset item to total assets and of each liability and owners equity. A closer scrutiny of the common size balance sheet discloses that this statement focuses on two important aspects.

Distribution pattern of liabilities as between current liabilities, long-term liabilities and equity capital.

Distribution pattern of assets as between current assets, fixed assets and others.

The common size balance sheet analysis can, of course, be carried further and extended to the study of what portion of a sub-group, rather than the total, an item is. Thus, in assessing the liquidity of current assets, it may be of interest to know not only what proportion of total assets are inventories, but also what proportion of current assets is represented by this asset. A study of common size statement of the company with that of a competitive company or the industry would show whether or not the company is the managing assets efficiently. An analysis of the pattern of distribution of liability reveals the debt--equity position of the company too large a % of liabilities. And a relatively low margin of safety for creditors.

While common size statements do not focus light on the relative sizes of individual companies which are compared, the problem of actual comparability between them is a matter to be resolved by the analyst judgment. Comparison of common size statement of single enterprise over the years valuable in that reveals the changing proportions of components within groups of assets and liabilities. However, care must exercise in interpreting such changes and the trend which discloses.

Trend analysis :Trend analysis depicts behavior of the ratios over a period of time and the trends in the operation of the enterprise. The trend figure are index figures giving a birds eye view of the comparative data by presenting its over a period of time. Thus is horizontal analysis of financial statement, often called as pyramid method of ratio analysis- a guide to yearly changes. Under this form of analysis, generally financial ratios are studied for a specified number if years. It is a dynamic analysis depicting the changes over a stated period. Their method of analysis is one of direction.

Trend Analysis of BALANCE SHEET:-

Trend analysis is Very important tool of horizontal financial analysis.

This analysis enables to known the change in the financial function and operating efficiency in between the time period chosen.

By studding the trend analysis of each item we can known the direction of changes and based upon the direction of changes, the options can be changed.

Trend = Absolute Value of item in the statement understudy *100

Absolute Value of same item in the base statement

Fund flow statements

Cash flow analysis is a valuable aid to the financial executive and creditors for evaluating the uses of funds by the firm and in determining how these uses were financed. A cash flow statement indicates where funds came from and where it was used during the period under review. They are important tools for communication and very helpful for financial executives in planning the intermediate and long-term financing of the firm. RATIO ANALYSISINTRODUCTION:Ratio analysis is one of the techniques of financial analysis where ratios are used as a yardstick for evaluating the financial condition and performance of a firm. Analysis and interpretation of various accounting ratios gives skilled and experienced analysis, a better understanding of the financial condition and performance of the firm than what he could have obtained only through a perusal of financial statements.

MEANING OF RATIOS:

Ratios are relationships expressed in mathematical terms between figures which are connected with each other in some manner. Obviously, no purpose will be served by comparing two sets of figures which are not at all connected with each other. Moreover, absolute figures are also unfit for comparison.

There are various techniques or models for analyzing information contained in the financial statements viz. Comparative statements, common size statements, trend percentages, funds flow analysis, cash flow analysis and ratio analysis. Financial analysis is undertaken by the management of the firm or by parties outside to it viz. owners, creditors, investors, etc.

Ratio analysis is most widely used and powerful tool or technique of financial analysis. The term ratio refers to the numerical quantitative relationship between two variables. It shows arithmetical relationship between two figures, which can be expressed in three ways.

Percentage

Fraction

Proportion

A study of the trend of strategic ratios helps the management in planning, forecasting and decision making. It helps in identifying specific work areas. In short, though the technique of ratio analysis, the firms solvency, efficiency and profitability can be assessed.

IMPORTANCE OF RATIO ANALYSIS

Ratio analysis helps in simplifying the financial statement for easy understanding.

It helps in drawing out meaningful conclusion from the information provided in the financial statements which is useful for decision making and framing sound policies for business in future.

It helps in assessing the financial strength and weakness of the firm and this enhances the value of the financial statements.

Comparative study of the ratios between the competing firms helps to know the efficiency of the firm.

It helps the investor to assess the financial position of the concern in which he is going to invest.

Ratio analysis helps the employees interested in wage increase and fringe benefits that are related the volume of profits earned by the concern.

Ratio analysis provides data for inter-firm comparison. Ratios highlight the factors associated with successful and unsuccessful firms. They also reveal strong firms and weak firms, over valued and under valued firms.

Ratio analysis helps in planning and forecasting. Over a period of time a firm or industry develops certain norms that may include future success or failure. If relationship changes in firms data over different time periods, the ratios may provide clues on trends and future problems.

Ratio analysis also makes possible comparison of the performance of the different divisions of the firm. The ratios are helpful in deciding about their efficiency or otherwise in the past and likely performance in the future.

Thus, ratios can assist management in its basic function of forecasting, planning, coordination, control and communication.

LIMITATIONS OF RATIO ANALYSIS

Ratios are of limited use and thus single ratio may not be useful. Better interpretation is possible with the calculation of number of ratios, which may lead to confusion to the analyst in making any meaningful conclusion.

Ratios are calculated on the basis of past results, which may not necessarily true indicators of the future, if the business policies are constantly changing.

Change in accounting procedure may be misleading for ratio analysis. For example, change in inventory valuation methods from LIFO to FIFO may also influence in the analysis.

Ratio analysis considers only quantitative aspects, but not qualitative factors.

Ratio analysis may give misleading results If the effects of price level changes are not considered.

Ratio analysis when interpreted by different people in different way may encounter with the personal bias or prejudice of the analyst.

Ratios are classified as:

liquidity ratios

leverage ratios

coverage ratios

activity ratios (or) turnover ratios

profitability ratios

LIQUIDITY RATIOS:

A liquidity ratio is also known as short-term solvency. These ratios are used to measure the firms ability to meet short term obligations. They compare short-term obligation to short term (or current) resources available to meet these obligations. From these ratios, much insight can be obtained into the present cash solvency of the firm and firms ability to remain solvent in the event of adversity. The creditors of the firm are primarily interested in the short term solvency of the firm. A firms liquidity should be neither too high nor too low but adequate. Low liquidity implies the firms inability to meet its maturing obligations. This will result in bad credit rating, loss of creditors confidence or even technical insolvency, ultimately leading to the closure of the firm.

A very high liquidity position is also bad. It means that the firms current assets are too high in proportion to maturing obligations. Idle assets earn nothing to the firm. The firms funds will be unnecessarily locked up in current assets, which if, released can be used to generate profits to the firm.

The ratios, which measure, and indicate the extent of a firms liquidity, are known as liquidity ratios or short-term solvency ratios. Commonly used liquidity ratios include.

current ratio (or) working capital ratio

quick ratio (or) acid test ratio

cash position ratio (or) super stock quick ratio

LEVERAGE RATIO:

These ratios are also known as capital structure ratios or solvency ratios or capital gearing ratios. The long-term creditors are more concerned with the firms long-term financial position. They judge the financial soundness of the firm in the firm in term of the ability to pay interest promptly as well as making repayment of the principal. The long-term solvency of the firm can be examined with the help of leverage ratios. They measure the funds supplied by owners as compared with the financial provided only a small proportion of total financing, the risks of the business are borne mainly by the creditors. Firm with low leverage have less risk of loss, but they also have lower expected returns. Conversely, firm with high leverage ratios have the risk of large losses but also have a chance of earning huge profits. Therefore, before deciding whether a firm should have debt, it must balance higher expected returns against increased risks. The most commonly examined leverage: ratios are

debt equity ratio

proprietor ratio

debt to capital ratio

gross fixed assets to shareholders funds

fixed assets ratio

COVERAGE RATIOS:

These ratios indicate the extent to which the interest of the persons entitled to get a fixed return (i.e. interest or dividend) or a scheduled repayment as per agreed terms is safe. The higher the cover the better it is. Under this category the following ratios are calculated. fixed interest coverage ratio

fixed dividend coverage ratio

debt service coverage ratio

ACTIVITY RATIO (OR) TURNOVER RATIO:The finances obtained by the firm from its owners and creditors will be inverted in assets, which the firm uses to generate sales and profits. The amount of sales generated and the profit earned depend on the effective and efficient management of these assets by the firm. Activity ratios measure the efficiency with which the firm manages and uses its assets. That is why activity ratios are known as efficiency ratios, because these ratios are converted or turned over in to sales.

Thus the turnover or activity ratios measure the relationship between sales on one side and various assets on the other side. Higher the turnover ratio, the better the profitability and use of capital.

Many activity ratios can be calculated to measure the efficiency of assets utilization. Following are some of the important activity ratios.

total assets turnover ratio

capital employed turnover ratio

fixed assets turnover ratio

current assets turnover ratio

working capital turnover ratio

stock turnover ratio

debtors turnover ratio

creditors turnover ratio

PROFITABILITY RATIOS:

Profitability is the ability to make profits. Every firm should earn adequate profits in order to survive in the immediate present and grow in future. In fact, profit is what makes the business run. Profitability is the net results of large number of policies and decisions. Profitability ratios give final answers about how efficiency the firm is managed. The profitability ratio relates profits earned by a firm by its parameters like sales, capital employed and net worth. But while making ratio analysis relating to profits, it should be remembered that there are different concepts of profit such as concepts of profit such as contribution, gross profits, net profits, EBIT, operating profits, profits before depreciation and before tax etc. Profitability ratios are important for a concern. These ratios are calculated to enlighten the end results of business activities, which is the sole criterion of the overall efficiency of a business concern. The following are the important profitability ratio, which are based on.

Sales

Investment

gross profit ratio

operating ratio

operating profit ratio

net profit ratio

return on capital employed

return on shareholders equity

return on total assets

earnings per share

dividend payout ratio

CHAPTER-III

INDUSTRY PROFILE

Automobile industry in India

The automobile industry in India is the ninth largest in the world with an annual production of over 2.3 million units in 2008 In 2009, India emerged as Asia's fourth largest exporter of automobiles, behind Japan, South Korea and Thailand.

Following economic liberalization in India in 1991, the Indian automotive industry has demonstrated sustained growth as a result of increased competitiveness and relaxed restrictions. Several Indian automobile manufacturers such as Tata Motors, Maruti Suzuki and Mahindra and Mahindra, expanded their domestic and international operations. India's robust economic growth led to the further expansion of its domestic automobile market which attracted significant India-specific investment by multinational automobile manufacturers. In February 2009, monthly sales of passenger cars in India exceeded 100,000 units. Bryonic automotive industry emerged in India in the 1940s. Following the independence, in 1947, the Government of India and the private sector launched efforts to create an automotive component manufacturing industry to supply to the automobile industry. However, the growth was relatively slow in the 1950s and 1960s due to nationalization and the license raj which hampered the Indian private sector. After 1970, the automotive industry started to grow, but the growth was mainly driven by tractors, commercial vehicles and scooters. Cars were still a major luxury. Japanese manufacturers entered the Indian market ultimately leading to the establishment of Maruti Udyog. A number of foreign firms initiated joint ventures with Indian companies.

In the 1980s, a number of Japanese manufacturers launched joint-ventures for building motorcycles and light commercial-vehicles. It was at this time that the Indian government chose Suzuki for its joint-venture to manufacture small cars. Following the economic liberalization in 1991 and the gradual weakening of the license raj, a number of Indian and multi-national car companies launched operations. Since then, automotive component and automobile manufacturing growth has accelerated to meet domestic and export demands.

History of the two wheelers:

The Britannica Encyclopedia a motorcycle as a bike or tricycle propelled by an internal combustion engine (or, less often by an electric engine). The automobile was the reply to the 19th century reams of self-propelling the horse-drawn bikeriage. Similarly, the invention of the motorcycle created the self propelling bicycle. The first commercial design was three-wheeler built by Edward Butler in Great Britain in 1884. This employed a horizontal single-cylinder gasoline engine mounted between two steer able front wheels and connected by a drive chain to the rear wheel. The 1900s saw the conversion of many bicycles or pedal cycles by adding small, centrally mounted spark ignition engine engines. There was then felt the need for reliable constructions. This led to road trial tests and competition between manufacturers. Tourist Trophy (TT) races were held on the Isle of main in 1907 as reliability or endurance races. Such were the proving ground for many new ideas from early two-stroke-cycle designs to supercharged multivalent engines mounted on aerodynamic, bike bon fiber reinforced bodywork.

Invention of two wheelers:

The invention of two wheelers is a much-debated issue. Who invented the first motorcycle? May seem like a simple question, safety, bicycle, i.e., bicycle with front and rear wheels of the same size, with a pedal crank mechanism to drive the rear wheel. Those bicycles in turn described from high-wheel bicycles. The high wheelers descended from an early type of pushbike, without pedals, propelled by the riders feet pushing against the ground. These appeared around 1800, used iron banded wagon wheels, and were called bone-crushers, both for their jarring ride, and their tendency to toss their riders. Gottiieb Daimler (who credited with the building the first motorcycle in 1885, one wheel in the front and one in the back, although it had a smaller spring-loaded outrigger wheel on each side. It was constructed mostly of wood, the wheels were of the iron-banded wooden-spooked wagon-type and it definitely had a bone-crusher chassis!

Further developments:

Most of the developments during the early phase concentrated on three and four-wheeled design since it was complex enough to get the machines running with out having to worry about them falling over. The next notable two-wheeler though was the Hildebrand & Wolf Mueller, patented in Munich in 1894. In 1895, the French firm of DeDion-button built and engine that was to make the mass production and common use of motorcycle possible. The first motorcycle with electric start and a fully modem electrical system; the Hence special from the Indian Motorcycle Company astounded the industry in 1931. Before World War 1, IMC was the largest motorcycle manufacturer in the world producing over 20000 bikes per year.

Increasing popularity:

The popularity of the vehicle grew especially after 1910, in 1916; the Indian motorcycle company introduced the model H racer, and placed it on sale. During World War 1, all branches of the armed forces in Europe used motorcycles principally for dispatching. After the war, it enjoyed a sport vogue until the Great Depression began in motorcycles lasted into the late 20th century; weight the vehicle being used for high-speed touring and sport competitions. The more sophisticated of a 125cc model. Since then, an increasing number of powerful bikes have blazed the roads.Historical industry developments:

Indian is the second largest manufacturer and producer to two wheelers in the World. It stands next only to Japan and China in terms of the number of V produced and domestic sales respectively. This destination was achieved due to variety of reason like restrictive policy followed by the government of India towards the passenger bike industry, rising demand for personal transport, inefficiency in the public transportation system etc. The Indian two-wheelers industry made a small beginning in the early 50s when Automobile products of India (API) started manufacturing scooters in the country. Until 1958, API and Enfield were the sole producers.

The two wheelers market was opened were opened to foreign competition in the mid-80s. And the then market leaders-Escorts and Enfield were caught unaware by the onslaught of the 100cc bikes of the four Indo- Japanese joint ventures. With the availability of fuel-efficiency low power bikes, demand swelled, resulting in Hero Honda then the only producer of four stroke bikes (100cc category), gaining a top slot.

The first Japanese motorcycles were introduced in the early eighties. TVS Suzuki and Hero Honda brought in the first two-stroke and four-stroke engine motorcycles respectively. These two players initially started with assembly of CKD Kits, and later on progressed to indigenous manufacturing.

The industry had a smooth ride in the 50s, 60s and 70s when government prohibited new entries and strictly controlled capacity expansion. The industry saw a sudden growth in the 80s. The industry witnessed a steady of 14% leading to a peak volume of 1.9 mn vehicles in 1990.

In 1990 the entire automobile industry saw a drastic fall in demand. This resulted in a decline of 15% in 1991 and 8% in 1992, resulting in a production loss of 0.4mn vehicles. Barring Hero Honda, all the major producers suffered from recession in FY93 and FY94. Hero Honda showed a marginal decline in 1992.

The reason for recession in the sector were the incessant rise in fuel prices, high input costs and reduced purchasing power due to significant like increased production in 1992, due to new entrants coupled with recession in the industry resulted in companies either reporting losses or a fall in profits.

CONCLUSION:

The two-wheelers market has had a perceptible shift from a buyers market to a sellers market with a variety of choice, players will have compete on various fronts viz. pricing, technology product design, productivity after sale service, marketing and distribution. In the short term, market shares of individual manufacturers are going to be sensitive to capacity, product acceptance, pricing and competitive pressures from other manufacturers.

As incomes grow and people grow and people feel the need to own a private means of transport, sales of two-wheelers will rise. Penetration is expected to increase to approximately to more than 25% by 2005.

The motorcycle segment will continue to lead the demand for two-wheelers in the coming years. Motorcycle sale is expected to increase by 20% yoy as compared to 1% growth in the scooter market and 3% by moped sales respectively for the next two years.

The four-stroke scooters will add new dimension to the two-wheeler segment in the coming future.

The Asian continent is that largest user of the two-wheelers in the world. This is due to poor road infrastructure and low per capita income, restrictive policy on bike industry. This is due to oligopoly between top five players in the segment, compared to thirsty manufacturers in the bike industry.

Hero Honda motors LTd., is one of the leading companies in the two-wheeler industry. At present it is the market leader in the motorcycle segment with around 47% the market share during FY 2000 01. During the year, company posted a 41.15% yoy rise in turnover to Rs.31, 686.5mn in motorcycles which driven by a 35.17% yoy rise in Motorcycle sales volumes. The company has emerged as one of the most successful players, much ahead of its competitions an account of its superior and reliable product quality complemented with excellent marketing techniques. The company has been consistently addressing the growing demand for motorcycles and has been cumulative customer base of over 4 million customers, which is expected to reach 5min mark with rural and semi-urban segment being the new class of consumers.

CHAPTER-IV

COMPANY PROFILE

CORPORATE PROFILEAbout Company

Hero Motocorp Ltd. (BSE:500182, NSE:HEROMOTOCO) formerly Hero Honda is an Indian motorcycle and scooter manufacturer based in New Delhi, India. Hero Honda started in 1984 as a joint venture between Hero Cycles of India and Honda of Japan.[4] The company is the largest two wheeler manufacturer in India.[5] The 2006 Forbes 200 Most Respected companies list has Hero Honda Motors ranked at 108.[6]In 2010, When Honda decided to move out of the joint venture,[7] Hero Group bought the shares held by Honda.[8] Subsequently, in August 2011 the company was renamed Hero MotoCorp with a new corporate identity.[9] On 4th June 2012,Hero Motocorp approved a proposal to merge the investment arm of its parent-Hero Investment Pvt. Ltd. into the automaker.The decision comes after 18 months of its split from Honda Motor. [10]Company profile

Hero is the brand name used by the Munjal brothers for their flagship company Hero Cycles Ltd. A joint venture between the Hero Group and Honda Motor Company was established in 1984 as the Hero Honda Motors Limited At Dharuhera India. Munjal family and Honda group both own 26% stake in the Company. In 2010, it was reported that Honda planned to sell its stake in the venture to the Munjal family.

During the 1980s, the company introduced motorcycles that were popular in India for their fuel economy and low cost. A popular advertising campaign based on the slogan 'Fill it - Shut it - Forget it' that emphasised the motorcycle's fuel efficiency helped the company grow at a double-digit pace since inception. The technology in the bikes of Hero Honda for almost 26 years (19842010) has come from the Japanese counterpart Honda [11]Hero MotoCorp has three manufacturing facilities based at Dharuhera, Gurgaon in Haryana and at Haridwar in Uttarakhand. These plants together are capable of churning out 3 million bikes per year.[12] Hero MotoCorp has a large sales and service network with over 3,000 dealerships and service points across India. Hero Honda has a customer loyalty program since 2000,[13] called the Hero Honda Passport Program.

The company has a stated aim of achieving revenues of $10 billion and volumes of 10 million two-wheelers by 2016-17. This in conjunction with new countries where they can now market their two-wheelers following the disengagement from Honda, Hero MotoCorp hopes to achieve 10 per cent of their revenues from international markets, and they expected to launch sales in Nigeria by end-2011 or early-2012. In addition, to cope with the new demand over the coming half decade, the company was going to build their fourth factory in South India and their fifth factory in Western India. There is no confirmation where the factories would be built.[14]HISTORY

Hero MotoCorp was started in 1984 as Hero Honda Motors Ltd.[4] 1956Formation of Hero Cycles in Ludhiana(majestic auto limited)

1975Hero Cycles becomes largest bicycle manufacturer in India.

1983Joint Collaboration Agreement with Honda Motor Co. Ltd. Japan signed Shareholders Agreement signed

1984Hero Honda Motors Ltd. incorporated

1985Hero Honda motorcycle CD 100 launched.

1989Hero Honda motorcycle Sleek launched.

1991Hero Honda motorcycle CD 100 SS launched.

1994 -- Hero Honda motorcycle Splendor launched.

1997Hero Honda motorcycle Street launched.

1999 -- Hero Honda motorcycle CBZ launched.

2001 -- Hero Honda motorcycle Passion and Hero Honda Joy launched.

2002Hero Honda motorcycle Dawn and Hero Honda motorcycle Ambition launched.

2003Hero Honda motorcycle CD Dawn, Hero Honda motorcycle Splendor, Hero Honda motorcycle Passion Plus and Hero Honda motorcycle Karizma launched.

2004Hero Honda motorcycle Ambition 135 and Hero Honda motorcycle CBZ* launched.

2005Hero Honda motorcycle Super Splendor, Hero Honda motorcycle CD Deluxe, Hero Honda motorcycle Glamour, Hero Honda motorcycle Achiever and Hero Honda Scooter Pleasure.

2007New Models of Hero Honda motorcycle Splendor NXG, New Models of Hero Honda motorcycle CD Deluxe, New Models of Hero Honda motorcycle Passion Plus and Hero Honda motorcycle Hunk launched.

2008New Models of Hero Honda motorcycles Pleasure, CBZ Xtreme, Glamour, Glamour Fi and Hero Honda motorcycle Passion Pro launched.

2009New Models of Hero Honda motorcycle Karizma:Karizma - ZMR and limited edition of Hero Honda motorcycle Hunk launched

2010New Models of Hero Honda motorcycle Splendor Pro and New Hero Honda motorcycle Hunk and New Hero Honda Motorcycle Super Splendor launched.

2011New Models of Hero Honda motorcycles Glamour, Glamour FI, CBZ Xtreme, Karizma launched. New licensing arrangement signed between Hero and Honda. In August Hero and Honda parted company, thus forming Hero MotoCorp and Honda moving out of the Hero Honda joint venture. In November, Hero launched its first ever Off Road Bike Named Hero "Impulse".

2012-New Models of Hero Motocorp Maestro the Musculine scooter and Ignitor the young generation bike are launched.

Termination of Honda joint venture

Main article: Hero Honda splitIn December 2010, the Board of Directors of the Hero Honda Group have decided to terminate the joint venture between Hero Group of India and Honda of Japan in a phased manner. The Hero Group would buy out the 26% stake of the Honda in JV Hero Honda.[15] Under the joint venture Hero Group could not export to international markets (except Sri Lanka) and the termination would mean that Hero Group can now export. Since the beginning, the Hero Group relied on their Japanese partner Honda for the technology in their bikes. So there are concerns that the Hero Group might not be able to sustain the performance of the Joint Venture alone.[16]Hero MotoCorp

The new brand identity and logo, Hero MotoCorp, was developed by the London firm Wolff Olins.[17] The logo was revealed on 9 August 2011 in London, the day before the third test match between England and India.[17]Hero MotoCorp can now export to Latin America, Africa and West Asia.[17] Hero is free to use any vendors for its components instead of just Honda-approved vendors.[17]Company performance

During the fiscal year 2008-09, the company sold 3.7 million bikes, a growth of 12% over last year. In the same year, the company had a market share of 57% in the Indian market.[18] Hero Honda sells more two wheelers than the second, third and fourth placed two-wheeler companies put together.[11] Hero Honda's bike Hero Honda Splendor sells more than one million units per year.[19] On 1st June 2012, Hero MotoCorp reported its highest ever monthly sales at 5,56,644 units in May, registering a growth of 11.28%.[20]RECOGNITION

Logo of Hero Honda, as the company was known till Aug. 2011

The Brand Trust Report [21] published by Trust Research Advisory has ranked Hero Honda in the 13th position among the brands in India.

Motorcycle models

See also: Category:Hero Honda motorcycles Sleek

Street

Ambition 133, Ambition 135

CBZ, CBZ Star, CBZ Xtreme CD 100, CD 100 SS, Hero Honda Joy, CD Dawn, CD Deluxe, CD Deluxe (Self Start)

Glamour, Glamour F.I

Hunk Karizma, Karizma R, Karizma ZMR FI

Passion, Passion Plus, Passion Pro

Splendor, Splendor+, Splendor+ (Limited Edition), Super Splendor, Splendor NXG,Splendor PRO

Hero Impulse launched in 2011 after the separation of hero and Honda. Its India's first off-road and on road Bike.

SuppliersIt is reported Hero Honda has five joint ventures or associate companies, Munjal Showa, AG Industries, Sunbeam Auto, Rockman Industries and Satyam Auto Components, that supply a majority of its components.[22

TypePublic company

Traded asBSE:500182NSE:HEROMOTOCOBSE SENSEX Constituent

IndustryAutomotive

Founded19 January 1984 (Gurgaon)

Founder(s)Brijmohan Lall Munjal

HeadquartersNew Delhi, India

Key peopleBrijmohan Lall Munjal (Chairman)Pawan Munjal (MD & CEO)[1]

ProductsMotorcycles, scooters, three-wheeler vehicles and spare parts

Revenue23,579.03 crore (US$4.27 billion)[2]

Operating income2,597.07 crore (US$470.07 million) (FY 2010-2011)

Net income2,378.13 crore (US$430.44 million) (2011)[3]

ParentHero Cycles

Websitewww.heromotocorp.com

SUPPLY CHAIN

(An Initiative of Hero MotoCorp for protecting and preservation of Environment)

Rapid industrialization and advanced technological changes have put Indian economy on fast growth. But such developments pose, unprecedented challenges to human society in term of climatic and environmental degradation. Therefore the people and governments have come forward to dealt with environmental threats and also to explore many opportunities so as to address the environmental issues and also to create a sustainable environmental future for all.

We at Hero MotoCorp are continuously striving for synergy between technology, system and human resources, to provide products and services, to meet the aspiration of our valued customers that too, demonstrating our "WE CARE" philosophy. While doing so, we maintain the highest standards of ethics and societal responsibility, constantly innovate the products and process and work in partnership with our supply vendors to take the organization to new excellences. We believe that our vendors and dealers are key stakeholders and partners to work towards the goal of sustainable development.

Green Vendor Development Programme refers to the way in which organizational innovations in industrial supply chain management may be considered in the context of the environment. Organizations which act proactively not only to identified but also to implement actions in process / operation so as to address environmental issues.

Green Vendor Development Programme (GVDP) encourages a collaborative effort between Hero MotoCorp and its suppliers to achieve Hero MotoCorp's overall corporate environmental goal. GVDP calls for partner companies to demonstrate their commitment towards improved environmental performance and striving for continual improvement.

Six pillars have been assigned to GVDP model which are Energy management, Water management, Waste minimization, Prevention of Pollution, Substitution of hazardous chemical and Environmental compliance management. Partner vendors are given specific training on all six pillars of GVDP and mapping of processes/equipments is carried out based on logical analysis so as to identify the gaps or significant environmental aspect and accordingly improvements projects are undertaken for implementation. The programme works on PDCA approach.

HMCL also endeavors to provide a platform on which the vendors can share their environment achievements and problems encountered during implementation of the green vendor program. The objective of this meet is to share success stories on environmental improvements that can be replicated at other vendor facilities. This platform lays the foundation for a mutually beneficial eco-future.We understand that environmental protection is our responsibility towards our future generations and thus while providing our customers with supreme quality of products and services it is important for us to ensure that environmental considerations are given utmost importance. We will continue taking initiatives towards environmental protection and base all our business decisions on environmental considerations.

NEW PRODUCTS

Hero MotoCorp Splendor NXG

Hero MotoCorp Splendor Plus

Hero MotoCorp Passion Plus

Hero Motorcorp Karizma R

Hero MotoCorp Glamour

Hero MotoCorp CD Delux

Hero Honda Hunk

Hero Moto Corp Impulse

Hero Honda Karizma ZMR

Contract us:

Registered Address34, Community Centre, Basant Lok,,Vasant Vihar New Delhi Delhi 110057Tel: 011-46044100 011-26142451Fax: 011-26143321/26143198 Email: [email protected]: http://www.heromotocorp.comGroup: Hero Group

RegistrarsKarvy Computershare Private Ltd. Plot No. 17-24, Vittal Rao Nagar, Madhapur, Email: [email protected]: http://www.karvy.comManagement - Hero Motocorp

NameDesignation

Brijmohan Lall MunjalChairman / Chair Person

Anand C BurmanNon.Exe.Independent Director

Analjit SinghNon.Exe.Independent Director

Sunil Kant MunjalJoint Managing Director

Pradeep DinodiaNon.Exe.Independent Director

Ravi NathNon.Exe.Independent Director

NameDesignation

Pawan MunjalManaging Director & CEO

Pritam SinghNon.Exe.Independent Director

Suman Kant MunjalNon Executive Director

V P MalikNon.Exe.Independent Director

Meleveetil DamodaranNon.Exe.Independent Director

Paul EdgerleyNon Executive Director

FINANCIAL POSITION

Balance Sheet of Hero Motocorp------------------- in Rs. Cr. -------------------

Mar '12Mar '11Mar '10Mar '09Mar '08

12 mths12 mths12 mths12 mths12 mths

Sources Of Funds

Total Share Capital39.9439.9439.9439.9439.94

Equity Share Capital39.9439.9439.9439.9439.94

Share Application Money0.000.000.000.000.00

Preference Share Capital0.000.000.000.000.00

Reserves4,249.892,916.123,425.083,760.812,946.30

Revaluation Reserves0.000.000.000.000.00

Networth4,289.832,956.063,465.023,800.752,986.24

Secured Loans994.851,458.450.000.000.00

Unsecured Loans0.0032.7166.0378.49132.00

Total Debt994.851,491.1666.0378.49132.00

Total Liabilities5,284.684,447.223,531.053,879.243,118.24

Mar '12Mar '11Mar '10Mar '09Mar '08

12 mths12 mths12 mths12 mths12 mths

Application Of Funds

Gross Block6,308.265,538.462,750.982,516.271,938.78

Less: Accum. Depreciation2,522.751,458.181,092.20942.56782.52

Net Block3,785.514,080.281,658.781,573.711,156.26

Capital Work in Progress193.95125.1448.14120.54408.49

Investments3,964.265,128.753,925.713,368.752,566.82

Inventories675.57524.93436.40326.83317.10

Sundry Debtors272.31130.59108.39149.94297.44

Cash and Bank Balance56.1047.751,863.48217.49130.58

Total Current Assets1,003.98703.272,408.27694.26745.12

Loans and Advances926.99783.48438.46325.80196.37

Fixed Deposits20.7223.7743.732.080.51

Total CA, Loans & Advances1,951.691,510.522,890.461,022.14942.00

Deffered Credit0.000.000.000.000.00

Current Liabilities3,520.665,316.403,965.691,678.931,455.57

Provisions1,090.071,081.071,026.35526.97499.76

Total CL & Provisions4,610.736,397.474,992.042,205.901,955.33

Net Current Assets-2,659.04-4,886.95-2,101.58-1,183.76-1,013.33

Miscellaneous Expenses0.000.000.000.000.00

Total Assets5,284.684,447.223,531.053,879.243,118.24

Contingent Liabilities252.62131.9073.04100.5456.37

Book Value (Rs)214.83148.03173.52190.33149.55

Source : Dion Global Solutions Limited

CHAPTER-V

DATA ANALYSISAND

INTERPRETATION

COMPARATIVE STATEMENT ANALYSIS 2012 OF HERO MOTO CORP. LTDBalance Sheet of Hero Motocorp

Mar '12Mar '11ABSOLUTE INCREASE/ DECREAESCHANGE IN %

Rs. Cr12 mths12 mths

Sources Of Funds

Total Share Capital39.9439.9400

Equity Share Capital39.9439.9400

Share Application Money0000

Preference Share Capital0000

Reserves4,249.892,916.121333.7745.74

Revaluation Reserves0000.00

Networth4,289.832,956.061333.7745.12

Secured Loans994.851,458.45-463.6-31.79

Unsecured Loans032.71-32.71-100.00

Total Debt994.851,491.16-496.31-33.28

Total Liabilities5,284.684,447.22837.4618.83

Mar '12Mar '11

12 mths12 mths


Gross Block6,308.265,538.46769.813.90

Less: Accum. Depreciation2,522.751,458.181064.5773.01

Net Block3,785.514,080.28-294.77-7.22

Capital Work in Progress193.95125.1468.8154.99

Investments3,964.265,128.75-1164.49-22.71

Inventories675.57524.93150.6428.70

Sundry Debtors272.31130.59141.72108.52

Cash and Bank Balance56.147.758.3517.49

Total Current Assets1,003.98703.27300.7142.76

Loans and Advances926.99783.48143.5118.32

Fixed Deposits20.7223.77-3.05-12.83

Total CA, Loans & Advances1,951.691,510.52441.1729.21

Deffered Credit0000

Current Liabilities3,520.665,316.40-1795.74-33.78

Provisions1,090.071,081.0790.83

Total CL & Provisions4,610.736,397.47-1786.74-27.93

Net Current Assets-2,659.04-4,886.952227.91-45.59

Miscellaneous Expenses0000.00

5,284.684,447.22837.4618.83

Interpretation:-1. Total share holders fund are decreased by 18.83% in 2011 to 2012.

2. Reserves & surplus are decreased by 45.12 % in 2011 to 2012. It shows that company must concentrate on profitability to increase reserves.

3. Fixed assets are Decreased by -12.83 % in 2011 to 2012. It points towards expanding business operations.

4. Debtors are increased by 108.52 % and loans & advances are also increased by 18.32% in 2011 to 2012.

5. Net current assets are Decreased by -45.59% from 2011 to 2012.

6. Total application fund are increased by change in percentage of 18.83%.

COMPARATIVE STATEMENT ANALYSIS 2011 OF HERO MOTO CORP. LTD

March 31,

2011March 31,

2010ABSOLUTE INCREASE/ DECREAESCHANGE IN %

SOURCES OF FUNDS

Shareholders' funds

share capital39.9439.9400

reserves and surplus2.916.123,425.08-508.96-14.86

2,956.063,465.02-508.96-14.69

Loan funds

unsecured32.7166.03-33.32-50.46

deferred payment credits1,458.451458.45

deferred tax liabilities252.72160.6392.0957.33

TOTAL4,699.943,691.681008.2627.31

APPLICATION OF FUNDS

Fixed assets

gross block5,538.462,750.982787.48101.33

less: depreciation1,458.181,092.20365.9833.51

net block4,699.941,658.783041.16183.34

capital work in progress125.1448.1477159.95

4,205.421,706.922498.5146.38

Investments5,128.753,925.71-3874.42-98.70

deferred tax assets5.957.88-1.93-24.50

Current assets, loans and advances

inventories524.93436.4088.5320.29

sundry debtors130.59108.3922.220.48

cash and bank balances71.521,907.21-1835.7-96.25

other current assets48.8724.8224.0596.90

loans and advances728.66405.76322.979.58

1,504.572,882.58-2876.53-99.48

less: current liabilities and provisions

current liabilities5,063.683,805.061258.6233.08

provisions1,5052,882.58-1377.6-47.79

6,144.754,831.411313.3427.18

Net current assets4,640.181,948.832691.35138.10

TOTAL4,699.941,948.832751.11141.17

Interpretation:-7. Total share holders fund are decreased by 14.68% in 2010 to 2011.

8. Reserves & surplus are decreased by 14.86% in 2010 to 2011. It shows that company must concentrate on profitability to increase reserves.

9. Fixed assets are increased by 146.37% in 2010 to 2011. It points towards expanding business operations.

10. Debtors are increased by 20.48% and loans & advances are also increased by 79.57% in 2010 to 2011.

11. Net current assets are increased by 138.101% from 2010 to 2011.

12. Total application fund are increased by change in percentage of 141.67%.

COMPARATIVE STATEMENT ANALYSIS 2010 OF HERO MOTO CORP. LTDMarch 31,2010March 31, 2009ABSOLUTE INCREASE/ DECREAESCHANGE IN%

SOURCES OF FUNDS

Shareholders' funds


reserves and surplus3,425.083,760.81-335.73-8.93

3,465.023,800.75-335.73-8.83

Loan funds

unsecured66.378.49-12.19-15.53


TOTAL3,691.684,032.32-340.64-8.45


Fixed assets

gross block2,750.982,516.27234.719.33

less: depreciation1,092.20942.56149.6415.88

net block1,658.781,573.7185.075.41

capital work in progress48.14120.54-72.4-60.06

1,706.921,694.2512.670.75

Investments3,925.713,368.75556.9616.53

deferred tax assets7.888.65-0.77-8.90


inventories436.40326.83109.5733.53

sundry debtors108.39149.94-41.55-27.71

cash and bank balances1,907.21219.571687.64768.61



1,504.572,882.58-286753.43-99.48


current liabilities3,805.061,525.852279.21149.37

provisions1,026.35526.97499.3894.76

4,831.412,052.822778.59135.35

Net current assets1,948.831,039.33909.587.51

TOTAL3.691.684,032.32-340.64-8.48

Interpretation:-1. Total share holders fund are decreased by 8.83% in 2009 to 2010.2. Reserves & surplus are increased by 8.92% in 2009 to 2010. It shows that company must concentrate on profitability to increase reserves.3. There is a slight increase of 0.74% in fixed assets from 2009 to 2010. It shows that company trying to expand business operations.4. Debtors are decreased by 27.71% and loans & advances are increased by 30.36% in 2009 to 2010.5. Net current assets are increased by 87.50% in 2009 to 2010.6. Total application fund increased by 8.44% in 2009 to 2010.

COMPARATIVE STATEMENT ANALYSIS 2008 OF HERO MOTO CORP LTDMarch 31,

2009March 31,2008ABSOLUTE INCREASE/ DECREAESCHANGE IN %

SOURCES OF FUNDS

SHAREHOLDERS' FUNDS


reserves and surplus3,760.812,946.30814.5127.65

3,.800.752,986.24814.5127.28

loan funds

unsecured78.49132.00-53.51-40.54

deferred tax liabilities 153.08130.5922.4917.22

TOTAL4,032.323,248.83783.4924.12


FIXED ASSETS

gross block2,516.271,938.78577.4929.79

less: depreciation942.56782.52160.0420.45

net block1,573.711,156.26417.45 36.10

capital work in progress120.54392.44-271.9-69.28

1,694.251,548.70145.559.40

pre operative expenses (pending allocation)16.0516.05-100

investments3,368.752,566.82801.9331.24

deferred tax assets 8.655.223.4365.71

current assets, loans and advances

inventories 326.83317.109.733.07

sundry debtors149.94297.44-147.5-49.59

cash and bank balances219.57131.0988.4867.50

other current assets5.895.690.2 3.51


1,013.49913.27 76.718.19


CURRENT LIABILITIES 1,525.851,324.98200.8715.16

provisions526.97499.7627.21 5.44

2,052.821,824.74228.0812.50

Net current assets 1,039.33887.96151.37 17.05

TOTAL4,032.323,248.83783.4924.17

Interpretation:-1. Total share holders fund are increased by 27.27% in 2008 to 2009.

2. Reserves & surplus are increased by 27.64% in 2008 to 2009. It shows company efficiency in maintaining the share profits.

3. Fixed assets are increased by 9.39% in 2008 to 2009. It shows that company trying to expand business operations.

4. Debtors are decreased by 49.58% and loan & advances are increased by 67.83% in 2008 to 2009.

5. There is a slight increase in net current assets by 17.04% from 2008 to 2009.6. Total application fund are increased by 24.11%in 2008 to 2009.

COMPARATIVE STATEMENT ANALYSIS 2008 OF HERO MOTO CORP. LTDMarch 31,2008March31,

2007ABSOLUTE INCREASE/ DECREAESCHANGE IN %

Sources Of Funds

Shareholders' Funds

Share Capital39.9439.9400

Reserves And Surplus2,946.302,430.12516.1821.24

2,986.242,470.06516.1820.90

Loan Funds

Unsecured132165.17-33.17-20.08

Deferred Tax Liabilities130.59129.581.010.78

Total3,248.832,764.81484.0217.51


Fixed Assets

Gross Block1,938.781,800.63138.157.67

Less: Depreciation782.52635.1147.4223.21

Net Block1,156.261,165.53-9.27-0.80

Capital Work In Progress392.44189.92202.52106.63

1,548.701,355.45193.2514.26

Pre Operative Expenses (Pending Allocation)16.0516.05

Investments2,566.821,973.87592.9530.03

Deferred Tax Assets5.221.383.84278.26

Current Assets, Loans And Advances

Inventories317.1275.5841.5215.07

Sundry Debtors297.44335.25-37.81-11.28

Cash And Bank Balances131.0935.7895.31266.38

Other Current Assets5.693.62.0958.06

Loans And Advances185.46263.06-77.6-29.50

936.78913.2723.512.57

Less: Current Liabilities And Provisions

Current Liabilities1,324.981,041.92283.0627.18

Provisions499.761,479.16-979.4-66.21

1,824.741,479.16345.5823.36

Net Current Assets887.96585.89302.0751.56

Total3,248.832,764.81484.0217.51

Interpretation:-1. Total share holder fund are increased by 20.89% in2007 to 2008.

2. Reserves & surplus are increased by 21.24% in 2007 to 2008. It shows that company efficiency in maintaining the share profits.3. Fixed assets are increased by 14.25%. It shows that company expanding business operations.

4. Debtors are increased by 11.27% and loan & advances are increased by 29.47% in 2007 to 2008.5. Net current assets are increased are increased by 51.55% in 2007 to 2008.

6. Total application fund are increased by 17.50% in 2007 to 2008.COMMON SIZE STATEMENT ANALYSIS 2012 OF HERO MOTO CORP. LTD

Balance Sheet of Hero Motocorp

Mar '12Change in %Mar '11Change in %

Rs CR12 mths12 mths

Sources Of Funds

Total Share Capital39.940.7639.940.90

Equity Share Capital39.940.7639.940.90

Share Application Money00

Preference Share Capital00

Reserves4,249.8980.422,916.1265.57

Revaluation Reserves00

Networth4,289.8381.172,956.0666.47

Secured Loans994.8518.831,458.4532.79

Unsecured Loans032.710.74

Total Debt994.8518.831,491.1633.53

Total Liabilities5,284.68100.004,447.22100.00

12 mths12 mths


Gross Block6,308.26119.375,538.46124.54

Less: Accum. Depreciation2,522.7547.741,458.1832.79

Net Block3,785.5171.634,080.2891.75

Capital Work in Progress193.953.67125.142.81

Investments3,964.2675.015,128.75115.32

Inventories675.5712.78524.9311.80

Sundry Debtors272.315.15130.592.94

Cash and Bank Balance56.11.0647.751.07

Total Current Assets1,003.9819.00703.2715.81

Loans and Advances926.9917.54783.4814.83

Fixed Deposits20.720.3923.770.45

Total CA, Loans & Advances1,951.6936.931,510.5228.58

Deffered Credit00

Current Liabilities3,520.6666.625,316.40100.60

Provisions1,090.0720.631,081.0720.46

Total CL & Provisions4,610.7387.256,397.47121.06

Net Current Assets-2,659.04-50.32-4,886.95-92.47

Miscellaneous Expenses00.0000.00

Total Assets5,284.68100.004,447.22100.00

Interpretation:-

1. There is no change in share capital2. In 2011 reserves & surplus was 65.57% but in 2012 it was decreased to 80.42%.

3. Unsecured loan are increased from 0% to 0.74% 2011 to 2012.

4. In 2011 inventories was 12.78% and it has increased to 11.80% in 2012.

5. Sundry debtors in 2011 were 2.94% and it decreased to 5.15% in 2012.6. Loans & advances in 2011 was 14.83% but in 2012 it was increased to 17.54%.

COMMON SIZE STATEMENT ANALYSIS 2011 OF HERO MOTO CORP. LTD

March 31, 2011Change in %March 31,

2010Change in %

SOURCES OF FUNDS

Shareholders' funds

share capital39.940.8539.941.082

reserves and surplus2,916.1262.053,425.0892.78

2,956.0662.903,465.0293.86

Loan funds

unsecured32.710.7066.031.79

deferred payment credits 1,458.4531.03


TOTAL4,699.941003,691.68100.00


Fixed assets

gross block5,538.46117.842,750.9874.52

less: depreciation1,458.1831.061,092.2029.59

net block4,699.941001,658.7844.93

capital work in progress125.142.6648.141.30

4,205.4289.481,706.9246.23

Investments5,128.75109.123,925.71106.34

deferred tax assets5.950.137.880.21


inventories524.9311.17436.4011.82

sundry debtors130.592.78108.392.94

cash and bank balances71.521.521,907.2151.66



1,504.5732.012,882.5878.08

Less: current liabilities and provisions

current liabilities5,063.68107.743,805.06103.07

provisions1,50532.022,882.5878.08

6,144.75130.744,831.41130.87

Net current assets4,640.1898.731,948.8352.79

TOTAL4,699.941003691.68100

Interpretation:-

7. There is slight increase in share capital8. In 2010 reserves & surplus was 92.77% but in 2011 it was decreased to 62.04%.

9. Unsecured loan are decreased from 1.78% to 0.69% 2010 to 2011.

10. In 2010 inventories was 11.82% and it has decreased to 11.16% in 2011.

11. Sundry debtors in 2010 were 2.93% and it decreased to 2.77% in 2011.12. Loans & advances in 2010 was 10.99% but in 2011 it was increased to 15.50%.

COMMON SIZE STATEMENT ANALYSIS 2010 OF HERO MOTO CORP. LTDMarch 31,2010Change in %March 31, 2009Change in %

SOURCES OF FUNDS

Shareholders' funds

share capital39.941.0839.940.99


3,465.0293.863,800.7594.26

Loan funds

unsecured66.31.8078.491.95


TOTAL3,691.681004,032.32100


Fixed assets

gross block2,750.9874.522,516.2762.40

less: depreciation1,092.2029.59942.5623.36

net block1,658.7844.931,573.7139.03


1,706.9246.241,694.2542.02

Investments3,925.71106.343,368.7583.54

deferred tax assets7.880.218.650.21


inventories436.4011.82326.838.11

sundry debtors108.392.94149.943.72

cash and bank balances1,907.2151.66219.575.45



1,504.5740.762,882.5871.48


current liabilities3,805.06103.071,525.8537.84

provisions1,026.3527.80526.9713.07

4,831.41130.872052.8250.91

Net current assets1,948.8352.791,039.3325.77

TOTAL3.691.681004,032.32100

Interpretations:-1. In 2009 share capital was 0.99% and in 2010 it was increased to 1.08%.2. Reserves & surplus in 2009 was 93.26% but in 2010 it was decreased to 92.77%.3. Unsecured loan are decreased from 1.94% in 2009 to 1.79% in 2011.4. In 2009 inventories was 8.10% and in 2010 it was increased to 11.82%.5. Sundry debtors in 2009 were 3.71% and it is decreased to 2.93% in 2010.6. Loans & advances in 2009 was 7.71% and in 2010 it is increased to 10.99%COMMON SIZE STATEMENT ANALYSIS 2009 OF HERO MOTO CORP. LTDMarch 31,2009Change in %March 31, 2008Change in %

SOURCES OF FUNDS

Shareholders' funds

share capital39.940.9939.941.23


3,800.7594.262,986.2491.92

Loan funds

unsecured78.491.95132.004.06


TOTAL4,032.321003,248.83100


fixed assets

gross block2,516.2762.401,938.7859.68


net block1,573.7139.031,156.2635.59


1,694.2542.021548.7047.67

pre operative expenses (pending allocation)16.050.49

Investments3,368.7583.542,566.8279.00



inventories 326.838.12317.109.76

sundry debtors149.943.72297.449.16




1,013.4925.13936.7828.83


current liabilities 1,525.8537.841,324.9840.78

provisions526.9713.07499.7615.38

2,052.8250.911,824.7456.17

Net current assets 1,039.3325.77887.9627.33

TOTAL4,032.321003,248.83100

Interpretation:-1. In 2008 share capital was 1.22% and in 2009 it is decreased to 0.99%2. Reserves & surplus was 90.68% in 2008 but in 2009 it was increased to 93.26%.3. Unsecured loans are decreased from 4.06% in 2008 to 1.94% in 2009.4. In 2008 inventories was 9.76% and in 2009 it was decreased to 8.10%.5. Sundry debtors in 2008 were 9.15% and it is decreased to 3.71% in 2009.6. Loans & advances in 2008 was 5.70% and in 2008 it increases to 7.71%.COMMON SIZE STATEMENT ANALYSIS 2008 OF HERO MOTO CORP. LTDMarch 31,2008Change in %March 31,2007Change in %

SOURCES OF FUNDS

Shareholders' funds

share capital39.941.2339.941.44


2,9862.491.922,470.0689.34

Loan funds

unsecured132.004.06165.175.97


TOTAL3,248.831002,764.81100


Fixed assets

gross block1,938.7859.681,800.6365.13


net block1,156.2635.591,165.5342.16


1,548.7047.671,355.4549.03

pre operative expenses (pending allocation)16.050.49

Investments2,566.8279.001,973.8771.39



inventories 317.109.76275.589.98

sundry debtors297.449.16335.2512.13




936.7828.83913.2733.03


current liabilities 1,324.9840.781,041.9237.69

provisions499.7615.381,479.1653.50

1,824.7456.171,479.1653.50

Net current assets 887.9627.33585.8921.19

TOTAL3,248.831002,764.81100

Interpretation:-1. In 2007 share capital was 1.44% and in 2008 it decreases to 1.22%.2. In 2007 reserves & surplus was 87.89% but in 2008 it was increased to 90.68%.3. Unsecured loans are decreased from 5.97% in 2007 to 4.06% in 2008.4. In 2007 inventories was 9.96% and in 2008 it was slightly decreased to 9.76%.5. Sundry debtors on 2007 were 12.12% but in 2008 it decreased to 9.15%.6. Loans & advances in 2007 was 9.51% and it decreases to 5.70% in 2008.CHAPTER-VIFINDINGSSUGGESTIONSCONCLUSION

FINDINGS

1. Net working capital and negative for all the three years. So company should thoroughly look into increase the current assets and decreases the current liabilities.

2. Gross profit 63.33% in 2007-08, 86.26% in 2008-09, 88.79% in 2009-10 and 98.79% in 2010-11& 82.32 in 2011-12. So gross profit is showing an increasing trend.

3. The current liabilities more than current assets the working capital is negative4. The company has turned up with a minimum profit in the years 2006-2010 and within the remaining financial years over all financial Position is satisfactory.

5. The comparative balance sheet of the reveals that during the year 2008, fixed assets increased by RS. 2589.36crores.While long term liability from outsides (loans) has increased by 5663.68crores and there is neither increase nor decrease in share capital. The pattern of investment towards Fixed Assets reveals that long term sources of funds are utilized for fixed assets.

6. The percentage of current assets to total assets was increased in 2012. The percentage of current liabilities to total liabilities has also decreased in 2008.Thus the proportion of current assets has decreased by 27.82 %, where as decrease in the current liabilities is 30.54 % in the years the company liquidity position is satisfactory

CONCLUSION

Even though company is utilizing its own funds there is very need that company should improve its liquidity position, debtors collection period and proper management of its current assets and current liabilities.

The external debt of the company decreased gradually. This is mainly due to repayment of a portion of term loans. Another reason for d

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