Professional Documents
Culture Documents
CHAPTER 1
INTRODUCTION
1.1 Company Profile
Ashok Leyland, the Hinduja Group flagship company in India, is a leading
manufacturer of commercial vehicles with a product range of 7.5 tonne to
49 tonne in haulage vehicles, from numerous special application vehicles
to diesel engines for industrial, marine and genset applications, Ashok
Leyland offers a wide range of products goods vehicles and 18 seaters to
82 seaters in passenger models. The Company’s annual turnover exceeds
US $ 2 billion. It has a production capacity of 84,000 vehicles which is
being enhanced to 100,000 in the current year and 87,000 engines per
annum. The Company has associate companies in the Czech Republic and
the UAE and joint ventures in Sri Lanka and Bangladesh, and also exports
to over 20 countries worldwide.
For over three decades, Ashok Leyland has been a pioneer in the design
and development of special vehicles for the armed forces. The Company
has been supporting the modernization of the Indian Army by developing
a host of modern special application vehicles that include Light Recovery
Vehicles, High Mobility Vehicles, Fire Fighting Trucks and Field Artillery
Tractors.
The Company employs 12,000 people and has six manufacturing units
with an annual capacity of 112500 vehicles.
In the populous Indian metros, four out of the five State Transport
Undertaking (STU) buses come from Ashok Leyland. Some of them like
the double-decker and vestibule buses are unique models from Ashok
Leyland, tailor-made for high-density routes.
In 1987, the overseas holding by Land Rover Leyland International
Holdings Limited (LRLIH) was taken over by a joint venture between the
Hinduja Group, the Non-Resident Indian transnational group and IVECO.
(Since July 2006, the Hinduja Group is 100% holder of LRLIH).
The blueprint prepared for the future reflected the global ambitions of the
company, captured in four words: Global Standards, Global Markets. This
was at a time when liberalization and globalization were not yet in the air.
Ashok Leyland embarked on a major product and process up gradation to
match world-class standards of technology.
HSBC Limited
8 Registrar & Transfer From April 1,2003, the
Agents company has appointed
M/s Integrated Enterprises
(India) Ltd,
2nd Floor, Kences Tower,
1 Ramakrishna Street,
North Usman Road,
T. Nagar,
Chennai – 600017.
Tel: 91-44-28140801/03
Fax: 91-44-28142479
E-mail:
yesbalu@iepindia.com
9 Listing On Stock
Exchange
Listing of Equity shares Madras Stock
Exchange Ltd.
Bombay Stock
Exchange Ltd.
National Stock
Exchange of
India Ltd.
Listing of Global Depository At London Stock
Receipts (GDRs) Exchange
Listing of Foreign Currency At London Stock
Convertible Notes (FCCNs) Exchange
Particular 2006- 2005- 2004- 2003- 2002- 2001- 2000- 1999- 1998- 1997-
2007 2006 2005 2004 2003 2002 2001 2000 1999 1998
Sales Volume
Vehicles (nos.) 83094 61655 54740 48654 36444 29673 32475 37859 29741 31547
Engines (nos.) 8202 7171 6254 5085 5924 5298 6311 6004 7185 7611
Spare parts & Others 5468 7838 5460 4468 4771 5492 5139 2145 2145 2520
Sales Values 83047 60531 48113 39273 30740 26304 26067 25987 20451 20143
Profit Before Tax 6045 4523 3550 2865 1701 1322 1019 933 233 207
Profit After Tax 4413 3273 2714 1936 1202 923 917 785 204 184
Assets
Fixed Assets 15445 10847 9790 9211 9398 10098 9613 9458 9547 9026
Investments 2211 3682 2292 1466 1576 1173 1179 1204 625 485
Net Current Assets 9419 8239 9916 6310 7481 9825 10223 10329 10491 13914
27075 22768 21998 16987 18455 21096 21015 20991 20663 23425
Financed By
Shareholder’s fund
- Capital 1324 1222 1189 1189 1189 1189 1189 1189 1189 1189
- Reserve 17378 12830 10296 9006 8406 9131 10496 10145 9852 9763
Loan funds 6404 6919 8804 4990 7175 8884 9330 9657 9622 12473
Deferred Tax Liability
- Net 1969 1797 1709 1803 1685 1892 - - - -
27075 22768 21998 16987 18455 21096 21015 20991 20663 23425
Employee (Nos.) 12125 11845 12178 12007 11860 13218 13489 14056 14254 14635
1. Encore
2. Hosur unit-1
3. Hosur unit-2
4. Hosur unit-2a
5. Alwar
6. Bhandara
Ashok Leyland has a tie-up with BITS, Pilani for a custom-designed, off-
campus 2-year MS course in Engineering Management. Aimed at making
Managers out of Engineers, assignments and projects are central to the
learning process thus bridging the classroom with the engineers'
workplace. From 2000, a BS programme in Industrial Engineering and
Technology, is offered for diploma holders, again in collaboration with
BITS. Apart from updating their knowledge base, the programme
empowers engineers to acquire multiple skills.
Ashok Leyland is one of the moving forces behind a Mitch course in
Automobile Engine Technology jointly managed by the automobile
industry (Indian Society for Automotive Technology, made up of auto
manufacturers), IIT, Madras and Institute Francais du Petrole, the French
institute for IC engines.
Over the decades, Ashok Leyland's R&D engineers have been addressing
the twin concerns of fuel-efficiency and emissions. Not surprisingly, when
the legislation came in 1987, limiting vehicular emission, Ashok Leyland
vehicles were already meeting them. In 1992, came the more stringent
norms for gaseous emissions. By then, Ashok Leyland, through timely
technology tie-ups - and ahead of competition - had absorbed and was
offering eco-friendly engine technology. In 1996, when the permissible
levels of gaseous exhaust emissions were further tightened, Ashok
Leyland again met the norms with ease.
1.11.2 TRUCK
Tractors E comet
1.11.3 ENGINE
Range: 39 - 200 PS
Front End Loaders
Excavators
Compactors
Pavers
Road Sweepers
Harvester Combines
Compressors
Cranes
Pumps
Marine Diesel Engines
Range: 42 - 193 PS
Ideal Choice for
Trawlers, Pure -Seiners, Gill-netters
Sailing Vessels
Marine generating sets
Pavers
Auxiliary drive in Vessels
Ashok Leyland has long been in the manufacture of Defence and speciality
vehicles. Each as rugged as and performance intensive as any comparable
vehicle in the world
CHAPTER 2
HORIZONTAL ANALYSIS
Financial statements present comparative uniformities for the current year
and the previous year. A simple approach to financial statement analysis,
known as horizontal analysis is to calculate amount changes & percentage
changes from the previous year to the current year.
EXHIBIT 2.1
EXHIBIT 2.1.1
Particulars 2003-04
INCOME 26.59
EXPENDITURE 23.82
PROFIT\(LOSS) FOR THE YEAR (PBT) 68.40
PROVISION FOR TAXATION 86.17
PROFIT\(LOSS) FOR THE YEAR (PAT) 61.03
Chart 2.1.1
Growth in percentage of the year 2003-04
2003-04
100
90 86.17
GROWTH IN %
80
68.4
70 61.03
60
50
40
26.59 23.82
30
20
10
0
INC OME EXPENDITURE PROFIT\(LOSS) PROVISION FOR PROFIT\(LOSS)
FOR THE YEAR TAXATION FOR THE YEAR
(PBT) (PAT)
PARTICULARS
EXHIBIT 2.2
INCOME
SALES 41818.97 33938.84 7880.13 23.22
OTHER 537.55 186.20 351.35 188.69
42356.52 34125.04 8231.48 24.12
EXPENDITURE
MANUFACTURING &
OTHER EXPENSES 37590.47 29992.80 7597.67 25.33
DEPRECIATION 1092.14 964.54 127.60 13.23
FINANCIAL EXPENSES 27.98 207.91 (179.93) (86.54)
38710.59 31165.25 7545.34 24.21
PROFIT BEFORE EXTRA
ORDINARY EXPENSES 3645.93 2959.79 686.14 23.18
EXTRA ORDINARY
EXPENSE 95.83 95.19 0.64 0.67
PROFIT\(LOSS) FOR THE
YEAR (PBT) 3550.10 2864.60 685.50 23.93
PROVISION FOR
TAXATION 836.00 928.80 (92.80) (9.99)
PROFIT\(LOSS) FOR
THE YEAR (PAT) 2714.10 1935.80 778.30 40.21
EXHIBIT 2.2.1
Particulars 2004-05
INCOME 24.12
EXPENDITURE 24.21
PROFIT\(LOSS) FOR THE YEAR (PBT) 23.93
PROVISION FOR TAXATION (9.99)
PROFIT\(LOSS) FOR THE YEAR (PAT) 40.21
Chart 2.2.1
Growth in percentage of the year 2004-05
2004-05
50
40.21
40
GROWTH IN %
10
0
INCOME EXPENDITURE PROFIT\(LOSS) PROVISION FOR PROFIT\(LOSS)
-10 FOR THE YEAR TAXATION FOR THE YEAR
(PBT) -9.99 (PAT)
-20
PARTICULARS
EXHIBIT 2.3
INCOME
SALES 52476.57 41818.97 10657.60 25.49
OTHER 329.74 537.55 (207.81) (38.66)
52806.31 42356.52 10449.79 24.67
EXPENDITURE
MANUFACTURING &
OTHER EXPENSES 47075.87 37590.47 9485.40 25.23
DEPRECIATION 1260.06 1092.14 167.92 15.38
FINANCIAL EXPENSES 164.53 27.98 136.55 488.03
48500.46 38710.59 9789.87 25.29
PROFIT BEFORE EXTRA
ORDINARY EXPENSES 4305.85 3645.93 659.92 18.10
EXTRA ORDINARY
EXPENSE (217.15) 95.83 (312.98) (326.60)
PROFIT\(LOSS) FOR THE
YEAR (PBT) 4523.00 3550.10 972.90 27.40
PROVISION FOR 413.80 49.50
TAXATION 1249.80 836.00
PROFIT\(LOSS) FOR
THE YEAR (PAT) 3273.20 2714.10 559.10 20.60
EXHIBIT 2.3.1
Particulars 2005-06
INCOME 24.67
EXPENDITURE 25.29
PROFIT\(LOSS) FOR THE YEAR (PBT) 27.40
PROVISION FOR TAXATION 49.50
PROFIT\(LOSS) FOR THE YEAR (PAT) 20.60
Chart 2.3.1
Growth in percentage of the year 2005-06
2005-06
60
49.5
50
GROWTH IN %
40
24.67 25.29
30 27.4
20.6
20
10
0
INCOME EXPENDITURE PROFIT\(LOSS) PROVISION FOR PROFIT\(LOSS)
FOR THE YEAR TAXATION FOR THE YEAR
(PBT) (PAT)
PARTICULARS
EXHIBIT 2.4
INCOME
SALES 71681.76 52476.57 19205.19 36.60
OTHER 708.03 329.74 378.29 114.72
72389.79 52806.31 19583.48 37.09
EXPENDITURE
MANUFACTURING &
OTHER EXPENSES 64654.91 47075.87 17579.04 37.34
DEPRECIATION 1505.74 1260.06 245.68 19.50
FINANCIAL EXPENSES 53.32 164.53 (111.21) (67.59)
66213.97 48500.46 17713.51 36.52
PROFIT BEFORE EXTRA
ORDINARY EXPENSES 6175.82 4305.85 1869.97 43.43
EXTRA ORDINARY
EXPENSE 130.76 (217.15) 347.91 160.22
PROFIT\(LOSS) FOR THE
YEAR (PBT) 6045.06 4523.00 1522.06 33.65
PROVISION FOR
TAXATION 1632.20 1249.80 382.40 30.60
PROFIT\(LOSS) FOR
THE YEAR (PAT) 4412.86 3273.20 1139.66 34.82
EXHIBIT 2.4.1
Particulars 2006-07
INCOME 37.09
EXPENDITURE 36.52
PROFIT\(LOSS) FOR THE YEAR (PBT) 33.65
PROVISION FOR TAXATION 30.60
PROFIT\(LOSS) FOR THE YEAR (PAT) 34.82
Chart 2.4.1
Growth in percentage of the year 2006-07
2006-07
30
25
20
15
10
5
0
INCOME EXPENDITURE PROFIT\(LOSS) PROVISION FOR PROFIT\(LOSS)
FOR THE YEAR TAXATION FOR THE YEAR
(PBT) (PAT)
PARTICULARS
EXHIBIT 2.5
Chart 2.5
100
86.17
80
68.4
61.03
GROWTH IN %
60
49.5
40.21 34.82
40 37.09 36.52
26.59 24.67 24.21 33.65 30.6
25.29 27.4
24.12 23.82 23.93
20.6
20
0
INCOME EXPENDITURE PROFIT\(LOSS) FOR PROVISION FOR PROFIT\(LOSS) FOR
THE YEAR (PBT) TAXATION
-9.99 THE YEAR (PAT)
-20
YEARS
2003-04 2004-05 2005-06 2006-07
EXHIBIT 2.6
60000
52806.31
48500.46
RS In Millions
50000
42356.52
38710.59
40000
34125.04
31165.25
30000 26956.68
25168.97
20000
10000
3273.2 4412.86
1202.12 1935.8 2714.1
0
2003 2004 2005 2006 2007
YEARS
Chart 2.6.2
80000
72389.79
70000 66213.97
60000
52806.31
Rs. In Millions
48500.46
50000
42356.52
38710.59
40000
34125.04
31165.25
30000 26956.68
25168.97
20000
10000 1935.8
3273.2 4412.86
1202.12
2714.1
0
INC OME EXPENDITURE PROFIT\(LOSS) FOR THE YEAR (PAT)
PARTICULARS
2003 2004 2005 2006 2007
From the above two graph, we can see that the income,
expenditure & profit of the Ashok Leyland Ltd are increasing every
year. It shows very progressive status of the company.
The profit of Ashok Leyland is very Low in every year in compare to
sales or revenue low in every high level of expenditure.
EXHIBIT 2.7
(Rs. In Millions)
Chart 2.7
SALES
80000
70000 71681.76
Rs In Millions
60000
52476.57
50000
41818.97
40000
33938.84
30000
26803.75
20000
10000
0
2003 2004 2005 2006 2007
YEARS
From the above graph, it clear that the sales of the Ashok Leyland
Ltd are increasing every year. This is favorable sign for the Co.
In the year 2002-03 Turnover for the year at Rs.26803.75 million
has increased by 16.9% as compared to previous year, mainly due
to increase in sale of commercial vehicles by 22.8% and engines by
12.7%. However the sale of castings and spare parts and others
were lower by 31.0% and 13.1% respectively mainly due to lower
off take of castings by tractor industry and lower orders from
Defence.
In the year the 2003- 04 Net Sales for the year at Rs.33939 Million
has increased by 26.62% as compared to previous year, contributed
mainly by the volume increases in commercial vehicles by 33.5%
and 65.1% increase in castings.
In the year 2004-05 Net sales for the year, at Rs. 41,818 Million has
grown by 23.22% as compared to previous year, contributed mainly
by volume increases in vehicles by 13%, engines by 23% and 52%
increase in castings. Spare parts sales were up 22%.
In the year 2005-06 Net sales for the year, at Rs. 52477 million has
increased by 25.49% as compared to previous year, contributed
mainly by volume increases in vehicles by 13%, engines by 15%
and a 44% increase in sales revenue from Spare Parts.
In the year 2006-07 Net sales for the year, at Rs 71,682 million, has
increased by 37% as compared to previous year, contributed mainly
by volume increases in vehicles by 35% and engines (including
traded) by 23%. The reduction in spare parts revenue by 30% is
mainly due to lower off take by Vehicle Factory, Jabalpur, compared
to the previous year.
50
40.21
40 36.6 34.82
26.62 25.49
30 23.22 20.6
20
10
0
2003-04 2004-05 2005-06 2006-07
YEARS
EXHIBIT 2.9
EXHIBIT 2.10
The Reserve & Surplus is increased by 12.44%. This year also the
company has transferred all the profit to the reserve & surplus and
out of that company makes provision for taxation.
The Loan Fund of the company increased by 76.47%. Secured
Loans decreased by 15.11% because of debentures is less than last
year.
The total fund of Ashok Leyland Ltd has been increased by 28.20%
that is very good compare to last two years & also which shows the
efficient use of capital.
During the year, the Company incurred Capital expenditure of Rs.
1,797 Million towards investments in capacity expansion/up
gradation and R& D. The capacity increased from 50,000 vehicles in
March’04 to 67,000 vehicles by October’04. Nearly 70 acres of land
was acquired for putting up state-of-art R&D facilities at the
Technical Centre.
This year the Fixed assets increased at a lower than the sales
growth rate. This indicates the efficient assets utilization.
Net Current Assets (excluding cash/ bank balances) as on March 31,
2005 stood at Rs. 1,949 Million, as against the previous year level
of Rs. 3,060 Million
Inventories have gone up to Rs. 5,681 Million, as on March 31, 2005
compared to Rs. 5,069 Million, as at March 31, 2004.
Debtors have increased to Rs. 4,588 Million, from Rs. 4,056 Million.
The increase in Debtors and Inventory is less than proportionate to
the activity increase.
The high level of cash and bank balance is around 145.15% of
which 80% of the funds raised through foreign currency convertible
notes (FCCN) issue kept in bank deposits to be utilized in the
capital expenditure programmes during 2005-06.
Miscellaneous expenses this year also get decreased by 40.19%
that is good control over expenses.
EXHIBIT 2.11
The Reserve & Surplus is increased by 23.01%. This year also the
company has transferred all the profit to the reserve & surplus and
out of that company makes provision for taxation.
The Loan Fund of the company decreased by 21.41%. Secured
Loans decreased by 29.91% because of debentures is less than last
year.
During the year, the Company incurred capital expenditure of Rs.
2,434 million towards investments in capacity expansion / up
gradation and R & D. Capacity increased from 67,500 vehicles to
77,200 vehicles by August 2005.
Net Current Assets (excluding cash / bank balances) as on 31st
March 2006 stood at Rs. 2,210 million as against the previous year
level of Rs. 1,949 million
Inventories have gone up to Rs. 9,026 million as on 31st March
2006 compared to Rs. 5,681 million as at 31st March 2005 due to
increase in finished inventory levels to meet sudden increase in
market demand.
Debtor’s level decreased to Rs. 4,243 million from Rs. 4,588 million
i.e. by 7.5% compare to last years
The high level of cash and bank balance includes funds raised
through the FCCN issue kept in bank deposits pending utilization in
capital Expenditure programmes. As of 31st March 2006, this
amounted to Rs. 855 million.
Miscellaneous expenses this year also get decreased by 62.20%
that is good control over expenses.
EXHIBIT 2.12
Rs. In Millions
Increase/(Decrease)
Particular 2006 2007
Amount Percentage
SOURCE OF FUNDS
SHAREHOLDER’S FUND
SHARE CAPITAL 1221.59 1323.87 102.28 8.37
RESERVE & SURPLUS 12902.94 17621.81 4718.87 36.57
14124.53 18945.68 4821.15 34.13
LOAN FUNDS
SECURED LOANS 1846.91 3602.16 1755.25 95.04
UNSECURED LOANS 5072.37 2801.82 (2270.55) (44.76)
6919.28 6403.98 (515.30) (7.45)
DEFERRED TAX LIABILITY 1796.89 1969.29 172.40 9.59
8716.17 8373.27 (342.90) (3.93)
TOTAL: - 22840.70 27318.95 4478.25 19.61
APPLICATION OF FUND
FIXED ASSETS
GROSS BLOCK 21384.99 26201.97 4816.98 22.53
LESS: DEPRECIATION 11952.28 13131.64 1179.36 9.87
NET BLOCK 9432.71 13070.33 3637.62 38.56
CAPITAL WORK IN PROGRESS 1414.17 2374.91 960.74 67.94
A 10846.88 15445.24 4598.36 42.39
INVESTMENTS B 3681.78 2210.94 (1470.84) (39.95)
CURRENT ASSETS, LOANS &
ADVANCES
INVERTORIES 9025.61 10703.21 1677.60 18.59
SUNDRY DEBTORS 4243.37 5228.75 985.38 23.22
CASH & BANK BALANCE 6028.76 4349.39 (1679.37) (27.86)
LOANS & ADVANCES 3026.39 6695.79 3669.40 121.25
22324.13 26977.14 4653.01 20.84
LESS: CURENT LIAB & PROVI
LIABILITIES 11468.95 16516.25 5047.30 44.01
PROVISIONS 2616.21 1042.30 (1573.91) (60.16)
14085.16 17558.55 3473.39 24.66
NET CURRENT ASSETS C 8238.97 9418.59 1179.62 14.32
MISCELLANEOUS EXPENSES D 73.07 244.18 171.11 234.17
The Reserve & Surplus is increased by 36.57%. This year also the
company has transferred all the profit to the reserve & surplus and
out of that company makes provision for taxation.
The Loan Fund of the company decreased by 7.5%. Secured Loans
increased by 95.04% because of Debentures and term loans are
secured by certain immovable properties and movable assets of the
Company. Cash credit facility is secured by certain movable assets
and goods-in-transit and book debts and also by a charge on the
immovable properties subordinate to the existing charge created in
favor of the lenders.
During the year, the Company incurred capital expenditure of Rs.
6135 million. This expenditure covers investments in capacity
expansion / up gradation and R&D. During the year, the capacity
increased from 77,200 vehicles to 84,000 vehicles.
Net Current Assets (excluding cash / bank balances) stood at Rs.
5,069 million as against the previous year level of Rs.2, 210 million.
FCCN funds parked in deposits in previous year were utilized for
capital expenditure in the current year.
Inventories have gone up to Rs.10703 million as on 31st March
2007 compared to Rs.9026 million as on 31st March 2006. The
increase is due to increased activity levels.
Debtor level increased to Rs.5229 million from Rs.4243 million due
to higher level of fully built vehicles supplied to Defence.
CHAPTER 3
VERTICAL ANALYSIS
Vertical analysis is the proportional expression of each item on financial
statement to the statement total. The results of vertical analysis are
presented in the form of common number & always add up to 100. The
items in Profit & Loss a/c are usually expressed as % of sales, while the
balance sheet items are given as percentage of total shareholder’s fund &
Liabilities or of total assets. Vertical analyses help in making comparisons
of companies that differ in size since the financial statement is expressed
in comparable common – size format. Further a comparison of common –
size statements for several years may reveal important changes in the
components from one year to the next.
EXHIBIT 3.1
3.1 COMMON – SIZE PROFIT & LOSS ACCOUNT OF
ASHOK LEYLAND LTD FOR THE YEAR ENDED MARCH 31.
Figure in Percent (%)
PARTICULARS 2003 2004 2005 2006 2007
INCOME
SALES 99.43 99.45 98.73 99.38 99.02
OTHER 0.57 0.55 1.27 0.62 0.98
100.00 100.00 100.00 100.00 100.00
EXPENDITURE
MANUFACTURING & OTHER
EXPENSES 87.38 87.89 88.75 89.15 89.31
DEPRECIATION 3.82 2.83 2.58 2.39 2.08
FINANCIAL EXPENSES 2.17 0.61 0.07 0.31 0.07
93.37 91.33 91.39 91.85 91.47
PROFIT BEFORE
EXTRAORDINARY EXPENSES 6.63 8.67 8.61 8.15 8.53
EXTRA ORDINARY EXPENSE 0.32 0.28 0.23 (0.41) 0.18
PROFIT\(LOSS) FOR THE
YEAR (PBT) 6.31 8.39 8.38 8.57 8.35
PROVISION FOR TAXATION 1.85 2.72 1.97 2.37 2.25
PROFIT\(LOSS) FOR THE
YEAR (PAT) 4.46 5.67 6.41 6.20 6.10
Comment on Profit & Loss Account:
1. Sales: the common size statement shows that the main source of
income for the company is sales. In year 2003 sales in were
99.43% but in year 2004 it was highest up to 99.45%. Now in year
2005 it was decreased up to 98.73% and then it has been
decreased to 99.38% and 99.02% in the year 2006 & 2007
respectively.
2. Total Expenditure: The total expenditure of the company has
been found continuously increase up to year 2006-07. It has been
increased due to increase in the total amount of sales. Financial
expense is also decreased it is favorable sign for the company.
3. Profit before Tax: PBT in year 2003 is 6.31%. It was in year 2004,
2005, 2006 & 2007 it is little 8.39%, 8.38, 8.57 & 8.35 respectively.
4. Profit after Tax: According to common size statement PAT of the
company for the year 2003 is 4.46% & than it has been increased
to 6.41% in 2005 and than it has been reduced to 6.10%in the year
2007.
EXHIBIT 3.2
COMMON – SIZE BALANCE SHEETS OF ASHOK LEYLAND
LTD AS ON MARCH 31
Figure in Percent (%)
Particular 2003 2004 2005 2006 2007
SOURCE OF FUNDS
APPLICATION OF FUND
The analysis of various figures shows that the company has satisfactory
long term & short-term financial position. It shows financial position of
company is sound.
Chart -3.3
45
40
35
FIGURES IN %
30
25
20
15
10
5
0
SHARE RESERVE & SECURED UNSECURED DEFERRED TAX CURRENT PROVISIONS
CAPITAL SURPLUS LOANS LOANS LIABILITY LIABILITIES
PARTICULARS
EXHIBIT 3.4
COMPOSITION OF ASSETS
40
35
FIGURES IN %
30
25
20
15
10
0
FIX ED A SSETS C A PITA L WIP INV ESTM ENTS INV ER TOR IES SUNDR Y C A SH & B A NK LOA NS & M ISC ELLANEOUS
DEB TOR S B A LANC E A DV A NC ES EX P
PARTICULARS
APPLICATION OF
FUND
FIXED ASSETS 50.93 53.21 44.12 47.49 56.54
INVESTMENTS 8.54 8.47 10.33 16.12 8.09
NET CURRENT ASSETS 40.54 36.45 44.68 36.07 34.48
MISCELLANEOUS
EXPENSES 0.00 1.87 0.87 0.32 0.89
TOTAL 100.00 100.00 100.00 100.00 100.00
Source of Fund:
Chart 3.5.1
Sources of Fund For 2003
DEFERRED TAX
LIABILITY, 9.13 SHARE C APITAL, 6.44
Application of Fund:
Chart 3.5.2
APPLICATION OF FUND FOR 2003
MISCELLANEOUS
EXPENSES , 0.00
NET CURRENT
ASSETS ,
40.54
INVESTMENTS
, 8.54
DEFERRED TAX
LIABILITY, 10.42 SHARE CAPITAL,
6.87
UNSECURED LOANS,
10.89
SECURED LOANS,
17.93 RESERVE & SURPLUS,
53.89
Application of Fund:
Chart 3.5.4
APPLICATION OF FUND FOR 2004
MISCELLANEOUS
EXPENSES , 1.87
NET CURRENT
ASSETS ,
36.45
UNSECURED LOANS,
27.80
Application of Fund:
Chart 3.5.6
APPLICATION OF FUND FOR 2004-05
MISCELLANEOUS
EXPENSES , 0.87
NET CURRENT
ASSETS , FIXED ASSETS,
44.68 44.12
INVESTMENTS
, 10.33
UNSECURED LOANS,
22.21
Application of Fund:
Chart 3.5.8
APPLICATION OF FUND FOR 2005-06
MISCELLANEOUS
EXPENSES
0.32
NET CURRENT
ASSETS
36.07
FIXED ASSETS
47.49
INVESTMENTS
16.12
DEFERRED TAX
LIABILITY, 7.21 SHARE CAPITAL,
4.85
UNSECURED LOANS,
10.26
SECURED LOANS,
13.19 RESERVE &
SURPLUS, 64.50
Application of Fund:
Chart 3.5.10
APPLICATION OF FUND FOR 2006-07
MISCELLANEOUS
NET CURRENT EXPENSES
ASSETS 0.89
34.48
From the above pie graphs we can see that the portion of secured
loan is decreasing every year but it has increased in 2007 compared
to 2006 & unsecured loan is decreased up to 2004 but this is
increased to 27.80% in year 2005 and again decreased to 10.26%
in 2007.
The portion of share capital which is 1189.29 has been same up to
2004-05 and increase to Rs. 1221.59 in 2005-06 & Rs. 1323.87 in
2006-07 but it shows decreasing trend in % due to increase in
other fund.
Reserve & Surplus has been increase every year but in the year
2004-05 it is decreased but it again shows increasing trend.
Deferred tax liability has fluctuation trend in all the years.
Fixed assets increasing every year but it are decreased to 44% in
year 2004 – 05 but again it shows increasing trends up to current
year i.e. 2006-07.
Net current assets in this year is 45% that means the working
capital of Ashok Leyland has efficient useful.
Miscellaneous expenses are Nil in year 2003 but it has increased by
1.87% in year 2004 and shows decreasing trend till 2005-06 but
again it increases in the current year to 0.89% i.e. in 2006-07.
CHAPTER 4
TREND ANALYSIS
For studying the trend of various items of financial statements, figures of
a single year are not enough. Comparative figures of some more years
are significant. Such comparative figures may be either absolute figure or
may be presented in % form. If the item of one year, which called base
year, is compared with similar items of one year in the form of Percentage
This method is known as trend percentage method or trend ratio method.
INCOME
SALES 100.00 126.62 156.02 195.78 267.43
OTHER 100.00 121.76 351.50 215.61 462.98
100.00 126.59 157.13 195.89 268.54
EXPENDITURE
MANUFACTUREING & OTHER
EXPENSES 100.00 127.34 159.59 199.86 274.49
DEPRECIATION 100.00 93.67 106.06 122.37 146.23
FINANCIAL EXPENSES 100.00 35.53 4.78 28.12 9.11
100.00 123.82 153.80 192.70 263.08
PROFIT BEFORE
EXTRAORDINARY EXPENSES 100.00 165.56 203.94 240.86 345.46
EXTRA ORDINARY EXPENSE 100.00 109.81 110.54 (250.49) 150.84
PROFIT\(LOSS) FOR THE
YEAR (PBT) 100.00 168.40 208.70 265.90 355.38
PROVISION FOR TAXATION 100.00 186.17 167.57 250.51 327.16
PROFIT\(LOSS) FOR THE
YEAR (PAT) 100.00 161.03 225.78 272.29 367.09
EXHIBIT 4.1.1
Particulars 2003 2004 2005 2006 2007
SALES 100.00 126.62 156.02 195.78 267.43
Chart 4.1.1
SALES
300
PERCENTAGE (%)
250
267.43
200
195.78
150
156.02
100 126.62
100.00
50
0
2003 2004 2005 2006 2007
YEARS SALES
EXHIBIT 4.1.2
Chart 4.1.2
EXPENDITURE
300
PERCENTAGE (%)
250
263.08
200
192.70
150
153.80
100 123.82
100.00
50
0
2003 2004 2005 2006 2007
YEARS EXPENDITURE
EXHIBIT 4.1.3
PROFIT\(LOSS) AFTER TAX (PAT)
400
PERCENTAGE (%)
350
367.09
300
250
272.29
200
225.78
150
100 161.03
100.00
50
0
2003 2004 2005 2006 2007
YEARS PROFIT\(LOSS) AFTER TAX (PAT)
EXHIBIT 4.2
4.2 TREND OF BALANCE SHEET
APPLICATION OF
FUND
EXHIBIT 4.2.1.1
Chart 4.2.1.1
PERCENTAGE (%)
160
NET FIXED ASSETS
140
120 144.82
100
80 100.00 96.93 99.04 104.52
60
40
20
0
2003 2004 2005 2006 2007
YEARS NET FIXED ASSETS
The above graph of net fixed assets shows little fluctuation but net
fixed assets have been increased compared to the base year 2002-
03.
In the year 2002-03 it was 100% it increases to 144.82 in the year
2006-07. It means it has been increased 44.82% in this period.
In real it was 9025.19 (Rs In millions) in the year 2002-03 and
increased to 13070.33 (Rs In millions).
Actually, gross fixed assets has been increased continuously but in
the year 2003-04 & 2004-05 it shows downward trend only due to
depreciation.
EXHIBIT 4.2.1.2
Particular 2003 2004 2005 2006 2007
INVESTMENTS 100.00 93.04 145.45 233.65 140.31
Chart 4.2.1.2
INVESTMENTS
250
PERCENTAGE (%)
200 233.65
150
145.45 140.31
100
100.00
93.04
50
0
2003 2004 2005 2006 2007
YEARS INVESTMENTS
250
260.76
200
219.89
150
100 138.40
123.51
100.00
50
0
2003 2004 2005 2006 2007
YEARS INVENTORIES
EXHIBIT 4.2.1.4
Chart 4.2.1.4
SUNDRY DEBTORS
120
PERCENTAGE (%)
100
80 100.00 100.91
88.54 81.89
60 78.28
40
20
0
2003 2004 2005 2006 2007
YEARS SUNDRY DEBTORS
EXHIBIT 4.2.1.5
CASH & BANK BALANCE
400
350
PERCENTAGE (%)
300 358.99
250 271.66
200
150 195.99
100 146.44
50 100.00
0
2003 2004 2005 2006 2007
YEARS CASH & BANK BALANCE
The above graph of trend of cash & bank balance shows huge
fluctuation over the years but cash & bank balance has been
increased compared to the base year 2002-03.
In the year 2002-03 it was 100% but it has been increased to
146.44% & 358.99% in the year 2003-04 & 2004-05 respectively.
But then it has been reduced to 271.66% & 195.99% in the year
2005-06 & 2006-07 respectively. It means it has been increased
95.99% in this period.
In real it was 2219.23 (Rs In millions) in the year 2002-03 and
increased to 4349.39 (Rs In millions).
EXHIBIT 4.2.1.6
Particular 2003 2004 2005 2006 2007
LOANS & ADVANCES 100.00 119.05 175.70 159.33 352.52
Chart 4.2.1.6
LOANS & ADVANCES
400
PERCENTAGE (%)
350
300 352.52
250
200
150
175.70 159.33
100
119.05
50 100.00
0
2003 2004 2005 2006 2007
YEARS LOANS & ADVANCES
The above graph of trend of loans & advances shows increase in the
loans & advances compared to the base year 2002-03.
EXHIBIT 4.2.2.1
Particular 2003 2004 2005 2006 2007
SHARE CAPITAL 100.00 100.00 100.00 102.72 111.32
Chart 4.2.2.1
SHARE CAPITAL
114
112
PERCENTAGE (%)
110
108 111.32
106
104
102
100 102.72
98 100.00 100.00 100.00
96
94
2003 2004 2005 2006 2007
YEARS SHARE CAPITAL
The above graph of trend of share capital shows stability & then
increase in the share capital.
In the year 2002-03 it was 100% and than it has increased to
111.32% in the year 2006-07. It means it has been increased by
11.32% in this period.
It has been increased due to further issue of share, it has lead to
increase the share capital.
In real it was 1189.29 (Rs In millions) in the year 2002-03 and
increased to 1323.87 (Rs In millions).
They have issued the share capital to meet the further requirement
of capital.
Chart 4.2.2.2
RESERVE & SURPLUS
250
PERCENTAGE (%)
200
209.64
150
100 153.50
124.79
100.00 110.98
50
0
2003 2004 2005 2006 2007
YEARS RESERVE & SURPLUS
EXHIBIT 4.2.2.3
Particular 2003 2004 2005 2006 2007
SHAREHOLDER’S FUND 100.00 109.62 121.72 147.21 197.46
Chart 4.2.2.3
SHAREHOLDER’S FUND
250
PERCENTAGE (%)
200
197.46
150
147.21
100 121.72
100.00 109.62
50
0
2003 2004 2005 2006 2007
YEARS SHAREHOLDER’S FUND
EXHIBIT 4.2.2.4
Particular 2003 2004 2005 2006 2007
LOAN FUNDS 100.00 69.53 122.70 96.43 89.25
Chart 4.2.2.4
LOAN FUNDS
140
PERCENTAGE (%)
120
100 122.70
80 100.00 96.43 89.25
60
69.53
40
20
0
2003 2004 2005 2006 2007
YEARS LOAN FUNDS
The above graph of trend of loan funds shows huge fluctuation over
the years.
In the year 2002-03 it was 100% but it has been reduced to
69.53% in the year 2003-04 & than increased to 122.70% in the
year 2004-05. But then it has been again reduced to 96.43% &
89.25% in the year 2005-06 & 2006-07 respectively. It means it
has been reduced 10.75% in this period.
In real it was 7175.22 (Rs In millions) in the year 2002-03 and
increased to 6403.98 (Rs In millions).
EXHIBIT 4.2.2.5
Particular 2003 2004 2005 2006 2007
DEFERRED TAX LIABILITY 100.00 107.00 101.39 106.64 116.87
Chart 4.2.2.5
DEFERRED TAX LIABILITY
120
PERCENTAGE (%)
115
116.87
110
105
107.00 106.64
100
100.00 101.39
95
90
2003 2004 2005 2006 2007
YEARS DEFERRED TAX LIABILITY
EXHIBIT 4.2.2.6
Particular 2003 2004 2005 2006 2007
CURRENT LIABILITIES &
PROVISIONS 100.00 140.57 196.78 237.77 296.41
Chart 4.2.2.6
CURRENT LIABILITIES & PROVISIONS
350
PERCENTAGE (%)
300
250 296.41
200 237.77
150 196.78
100 140.57
50 100.00
0
2003 2004 2005 2006 2007
YEARS CURRENT LIABILITIES & PROVISIONS
CHAPTER 5
CASH FLOW ANALYSIS
Usefulness:
EXHIBIT 5.1
PARTICULARS 2002-03
Interpretation:
• Operating activities:
The Ashok Leyland Ltd’s net cash flow from operations of 3612.70 (Rs In
Millions) is more than the sum of accrual based profit & depreciation that
equals Rs. 2231.81, showing that the profit has been fully realized in
cash. From the cash flow statements, the main positive item is the
depreciation charge of Rs. 1029.69. Thus the company’s earning can be
said to be of high quality. Increase in Inventories was 1848.84 and
increase in debtors is Rs. 254.16 resulted in strain on the cash generated
from generation.
• Investing Activities:
From the Investing Activities section; Ashok Leyland Ltd has incurred
capital expenditures of Rs. 1243.20. The expenditure has been financed
partly by:
a) Realizing Rs. 11.61 from the Sales of Plant.
b) Realizing Rs. 622.96 from the Sale Of Investments, Net OF
Purchase.
c) Interest Revenue Rs. 42.46. This has left a gap of Rs. 1435.96
to be financed from other sources.
• Financing Activities:
It is seen from the Financing Activities section that the Ashok Leyland Ltd
raised long-term borrowing Rs. 2321.17 & repaid long term borrowing Rs.
3155.91. Further, the company paid dividend Rs. 535.18 and interest of
Rs. 449.81 has been left, with net cash of Rs. 2757.99 from financing
activities.
It is clear that the expansion in the plant & machinery during the period
was major drain on cash. The net cash out flow from investing activities of
Rs. 1435.96 was met from three sources:
1. Cash Flow from Operations, Rs. 3612.70.
2. Proceeds from Issuance of Share Capital, Rs. 2757.99 (after
repaying loans & disturbing interest and dividend).
3. Withdrawal from Cash Balance, Rs. 581.25.
That is Cash in Flow, which is good sign for company.
EXHIBIT 5.2
PARTICULARS 2003-04
Interpretation:
• Operating activities:
Profit before tax was of Rs. 2846.60. The net cash flow from Operating
Activities Rs. 2900.34 that includes the depreciation, other amortizations,
and interest expenses were 964.54, 106.07, and 553.83 respectively.
Increase in inventories, advances & current liabilities by 964.85, 104.38,
2174.29 respectively & decreases in debtors by 1121.67
• Investing Activities:
From the Investing Activities section; Ashok Leyland Ltd has incurred
capital expenditures of Rs. 836.83. The expenditure has been financed
partly by:
a) Realizing Rs. 26.26 from the Sales of Plant.
b) Realizing Rs. 509.39 from the Sale Of Investments, Net OF
Purchase.
c) Income from investments (including interest & dividend) Rs
104.08. This has left a gap of Rs. 836.83 to be financed from
other sources.
• Financing Activities:
Long-term borrowing raised was Rs. 1279.14 that was repaid Rs.
3392.37. Interest paid and dividend paid 346.68 & 670.83 that carried
out finance activities Rs. 3349.83.
• Net Cash Flow:
EXHIBIT 5.3
PARTICULARS 2004-05
Interpretation:
• Operating activities:
The Ashok Leyland Ltd’s net cash flow from operations of 4473.46 (Rs in
Millions) is more than the sum of accrual based profit & depreciation that
equals Rs. 3806.24, showing that the profit has been fully realized in
cash. From the cash flow statements, the main positive item is the
depreciation charge of Rs. 1092.14. Thus the company’s earning can be
said to be of low quality. Increase in Inventories was Rs. 611.40 and
increase in debtors is Rs.120.32 resulted in strain on the cash generated
from generation.
• Investing Activities:
Form the Investing Activities section; Ashok Leyland Ltd has payments for
assets acquisition of Rs. 1824.56. The expenditure financed partly by:
a) Realizing Rs. 48.56 from the Sales of Plant.
b) Realizing Rs. [154.16+ (92.60)] 61.56 from the Sale Of
Investments, Net of Purchase.
c) Interest Revenue Rs. 42.70 & dividend 106.78. This has left a
gap of Rs. 1554.47 to be financed from other sources.
• Financing Activities:
It is seen from the Financing Activities section that the Ashok Leyland Ltd
raised long-term borrowing Rs. 4975.34 & repaid long term borrowing Rs.
1131.07. Further, the company paid dividend Rs. 1008.54 and interest of
Rs. 4.16 has been left, with net cash of Rs. 2803.82 from financing
activities.
It is clear that the expansion in the plant & machinery during the period
was major drain on cash. The net cash out flow from investing activities of
Rs. 5722.81 was met from three sources:
I. Cash Flow from Operations, Rs. 4473.46
II. Proceeds from Issuance of Share Capital, Rs. 1554.47 (after
repaying loans & disturbing interest and dividend).
III. Withdrawal from Cash Balance, Rs. 5772.81.
That is Cash in Flow, which is good sign for company.
EXHIBIT 5.4
PARTICULARS 2005-06
Interpretation:
• Operating activities:
The Ashok Leyland Ltd’s net cash flow from operations of 3220.17 (Rs in
Millions) is less than the sum of accrual based profit & depreciation that
equals Rs. 4533.26, showing that the profit has not been fully realized in
cash. From the cash flow statements, the main positive item is the
depreciation charge of Rs. 1260.06. Thus the company’s earning cannot
be said to be of high quality. Increase in Inventories was Rs. 3477.99 and
increase in debtors is Rs.179.55 resulted in strain on the cash generated
from generation.
• Investing Activities:
Form the Investing Activities section; Ashok Leyland Ltd has payments for
assets acquisition of Rs. 2646.86. The expenditure financed partly by:
a) Realizing Rs. 54.34 from the Sales of Plant.
b) Realizing Rs. [479.68 + (138.66)] 341.02 from the Sale Of
Investments, Net OF Purchase.
c) Interest Revenue Rs. 48.95 & dividend 56.93. This has left a
gap of Rs. 1335.85 to be financed from other sources.
• Financing Activities:
It is seen from the Financing Activities section that the Ashok Leyland Ltd
raised long-term borrowing Rs. 186.69 & repaid long term borrowing Rs.
1162.88. Interest paid and dividend paid 166.96 & 1356.10 that carried
out finance activities Rs. 2576.04.
It is clear that the expansion in the plant & machinery during the period
was major drain on cash. The net cash out flow from investing activities of
Rs. 691.72 was met from three sources:
1. Cash Flow from Operations, Rs. 3220.17
2. Proceeds from Issuance of Share Capital, Rs. 1335.85 (after
repaying loans & disturbing interest and dividend).
3. Withdrawal from Cash Balance, Rs. 691.72.
That is Cash in Flow, which is good sign for company.
EXHIBIT 5.5
PARTICULARS 2006-07
Interpretation:
• Operating activities:
The Ashok Leyland Ltd’s net cash flow from operations of 4999.51 (Rs in
Millions) is less than the sum of accrual based profit & depreciation that
equals Rs. 5918.60, showing that the profit has not been fully realized in
cash. From the cash flow statements, the main positive item is the
depreciation charge of Rs. 1505.74 Thus the company’s earning cannot be
said to be of high quality. Increase in Inventories was Rs. 1677.60 and
increase in debtors is Rs. 1005.76 resulted in strain on the cash
generated from generation.
• Investing Activities:
Form the Investing Activities section; Ashok Leyland Ltd has payments for
assets acquisition of Rs. 1824.56. The expenditure financed partly by:
a) Realizing Rs. 48.56 from the Sales of Plant.
b) Realizing Rs. 61.56 from the Sale Of Investments, Net OF
Purchase.
c) Interest Revenue Rs. 42.70. This has left a gap of Rs. 1554.47
to be financed from other sources.
• Financing Activities:
It is seen from the Financing Activities section that the Ashok Leyland Ltd
raised long-term borrowing Rs. 6812.87& repaid long term borrowing Rs.
829.95. In effect, the net realization from long-term sources was Rs. 507.
Further, the company paid dividend Rs. 1792.34and interest of Rs. 167.02
has been left, with net cash of Rs. 2893.75 from financing activities.
It is clear that the expansion in the plant & machinery during the period
was major drain on cash. The net cash out flow from investing activities of
Rs. 5391.15 was met from three sources:
I. Cash Flow from Operations, Rs. 4999.51
II. Proceeds from Issuance of Share Capital, Rs. 7496.91 (after
repaying loans & disturbing interest and dividend).
III. Withdrawal from Cash Balance, Rs. 5391.15
That is Cash in Flow, which is good sign for company.
CHAPTER 6
RATIO ANALYSIS
1. Probability.
2. Liquidity.
3. Efficiency.
4. Inter – Firm Comparison.
5. Indicates Trend.
6. Useful of Budgetary Controls.
7. Useful for Decision Making.
2. Profitability Ratios.
3. Liquidity Ratios.
4. Assets Turnover Ratios.
5. Finance Structure Ratios.
6. Valuation Ratios.
A profit margin ratio shows the relationship between profit & sales. Three
popular profits margin ratios are:
EXHIBIT 6.1.1
(Rs in Millions)
Particular 2002 2003 2004 2005 2006
2003 2004 2005 2006 2007
Net Sales 26803.75 33938.84 41818.97 52476.57 71681.76
Cost of Goods 47075.87 64654.91
Sold 23554.18 29992.80 37590.47
Gross Profit. 3249.57 3946.04 4228.50 5400.70 7026.85
Gross Profit 12.12% 11.63% 10.11% 10.29% 9.80%
Ratios.
Chart 6.1.1
GROSS PROFIT RATIO
14.00
PERCENTAGE (%)
12.12 11.63
12.00
10.11 10.29 9.80
10.00
8.00
6.00
4.00
2.00
0.00
2002 - 2003 2003 - 2004 2004 - 2005 2005-2006 2006-2007
YEARS
Gross Profit Ratios.
The table shows that gross profit has been increased continuously
increased over the years.
The reason for increase in the gross profit is due to increase in sale.
Sale has been continuously increased over the years
Although the gross profit has been increased over the years it has
been found that gross profit ratio has been decreased continuously.
In year 2002 – 2003 the GPR was at highest 12.12% but it was
again decrease up to 9.80% in year 2006 – 2007.
It has been reduced continuously over the years
This ratio shows the better profitability for company but gross profit
ratio has been decreased continuously over the year. So company
should take certain steps to increase it.
EXHIBIT 6.1.2
(Rs in Millions)
Particular 2002 2003 2004 2005 2006
2003 2004 2005 2006 2007
Net Profit. 1202.12 1935.80 2714.10 3273.20 4412.86
Sales. 26803.75 33938.84 41818.97 52476.57 71681.76
Net Profit 4.48% 5.70% 6.49% 6.24% 6.16%
Ratio.
Chart 6.1.2
7.00
PERCENTAGE (%)
6.00
5.00
4.00
5.70 6.49 6.24 6.16
3.00
4.48
2.00
1.00
0.00
2002 - 2003 2003 - 2004 2004 - 2005 2005 - 2006 2006 - 2007
YEARS
This ratio indicate the portion that the cost of sales bears to sales cost of
sales includes direct cost of good sold as well as operating expenses,
administrative, selling & distribution expenses which, have matching
relationship with sales. It is calculated as:
EXHIBIT 6.1.3
(Rs. In Million)
Particular 2002 2003 2004 2005 2006
2003 2004 2005 2006 2007
Operating Profit. 1701.02 2864.60 3550.10 4523.00 6045.06
Sales. 26803.75 33938.84 41818.97 52476.57 71681.76
Operating 6.35% 8.44% 8.49% 8.62% 8.43%
Profit Ratio.
Chart 6.1.3
8.00
7.00
6.00
5.00 8.43
8.49 8.62
4.00 8.44
6.35
3.00
2.00
1.00
0.00
2002 - 2003 2003 - 2004 2004 - 2005 2005 - 2006 2006 - 2007
YEARS
Chart 6.1.4
18.00
16.00
14.00
12.00
10.00
8.00 14.54 17.60
13.74
6.00 10.83
4.00 6.07
2.00
0.00
2002 - 2003 2003 - 2004 2004 - 2005 2005 - 2006 2006 - 2007
YEARS
Return on Assets Ratio.
• Return On Equity:
It measures the profitability of equity funds invested in firm.
EXHIBIT 6.1.5
(Rs. in Millions)
Particular 2002 2003 2004 2005 2006
2003 2004 2005 2006 2007
PAT or Equity 3273.20 4412.86
Earning. 1202.12 1935.80 2714.10
P Y Shareholder’s
Equity 10369.53 9594.86 10517.97 11678.65 14124.53
CY Shareholder’s
Equity 9594.86 10517.97 11678.65 14124.53 18945.68
Average 9982.20 10056.42 11098.31 12901.59 16535.11
Shareholder’s
Equity
Return on 12.04% 19.25% 24.46% 25.37% 26.69%
Equity Ratio
Chart 6.1.5
30.00%
PERCENTAGE (%)
25.37% 26.69%
24.46%
25.00%
19.25%
20.00%
15.00% 12.04%
10.00%
5.00%
0.00%
2002 - 2003 2003 - 2004 2004 - 2005 2005 - 2006 2006 - 2007
YEARS
• Earning Power:
The earning power is a measure of business performance, which is not
affected by Interest & Tax. It is measure of operating profitability.
Earning Power = Earning before Profit & Tax / Average Total Assets x 100.
EXHIBIT 6.1.6
(Rs. in millions)
Particular 2002 2003 2004 2005 2006
2003 2004 2005 2006 2007
Profit Before Tax. 1701.02 2864.6 3550.1 4523 6045.06
P Y Total Assets 21140.87 18455.07 17309.91 22191.19 22840.70
CY Total Assets 18455.07 17309.91 22191.19 22840.70 27318.95
Average Total 19797.97 17882.49 19750.55 22515.95 25079.83
Assets.
Earning Power 8.59% 16.02% 17.97% 20.09% 24.10%
Ratio.
Chart 6.1.6
30.00%
PERCENTAGE (%)
24.10%
25.00%
17.97% 20.09%
20.00%
16.02%
15.00%
10.00% 8.59%
5.00%
0.00%
2002 - 2003 2003 - 2004 2004 - 2005 2005 - 2006 2006 - 2007
YEARS
2.50
2.00
IN TIMES
1.50
2.26
1.00 1.76 1.85
1.58 1.54
0.50
0.00
2002 - 2003 2003 - 2004 2004 - 2005 2005 - 2006 2006 - 2007
YEARS
Current Ratio.
The Quick Ratio is a more absolute test of a firm’s ability to meet its
immediate liabilities. It base on those current assets, which are highly
liquid inventories, is excluded from the numerators of this ratio because
inventories are deemed to be the least liquid component of current
assets.
Quick Ratio = Quick Assets / Liquid Liability.
EXHIBIT 6.2.2
(Rs. In Millions)
Particular 2002 2003 2004 2005 2006
2003 2004 2005 2006 2007
Current Assets.
(A) 13404.7 14636.67 21572.63 22324.13 26977.14
Inventories (B) 4104.56 5069.41 5680.81 9025.61 10703.21
Quick Assets (A-B) 9300.14 9567.26 15891.82 13298.52 16273.93
Liquid Liabilities. 5923.77 8327.02 11656.67 14085.16 17558.55
Quick Assets 1.57 1.15 1.36 0.94 0.93
Ratio.
Chart 6.2.2
QUICK ASSET RATIO
1.80
1.57
1.60
1.36
1.40
1.15
1.20
IN TIMES
0.94 0.93
1.00
0.80
0.60
0.40
0.20
0.00
2002 - 2003 2003 - 2004 2004 – 2005 2005 - 2006 2006 - 2007
YEARS
EXHIBIT 6.2.3
(Rs. In Million)
Particular 2002 2003 2004 2005 2006
2003 2004 2005 2006 2007
Current Assets. 13404.7 14636.67 21572.63 22324.13 26977.14
Current Liabilities. 5923.77 8327.02 11656.67 14085.16 17558.55
Net Working 7480.93 6309.65 9915.96 8238.97 9418.59
Capital
Chart 6.2.3
12000
9915.96
RS. IN MILLION
10000 9418.59
8238.97
7480.93
8000
6309.65
6000
4000
2000
0
2002 2003 2003 2004 2004 2005 2005 2006 2006 2007
YEARS
Net working capital has been found very fluctuating every year.
Net Working Capital in this year (2004 – 2005) is very useful for
other purpose because it is highest i.e. 9915.96.
This ratio shows that percentage (or Paisa per rupees) of sales which is
available in cash form
EXHIBIT 6.2.4
(Rs. In Million)
Particular 2002 - 2003 - 2004 - 2005 2006
2003 2004 2005 2006 2007
PAT 1202.12 1935.80 2714.10 3273.20 4412.86
Depreciation 1029.69 964.54 1092.14 1260.06 1505.74
Non Cash Items 671.79 303.10 123.81 (52.62) 184.08
PAT + Dep. +
Non Cash Exp 2903.60 3203.44 3930.05 4480.64 6102.68
Sales. 26803.75 33938.84 41818.97 52476.57 71681.76
Cash Generated 10.83% 9.44% 9.40% 8.54% 8.51%
Per Rupee Of
Sales Ratio
Chart 6.2.4
9.44% 9.40%
10.00%
8.54% 8.51%
8.00%
6.00%
4.00%
2.00%
0.00%
2002 - 2003 2003 - 2004 2004 - 2005 2005 2006 2006 2007
YEARS
Bank Finance Gap Ratio = Total Current Assets – MPBF under Tandon
Committee
MPBF indicates maximum permissible bank finance under tandon
committee recommendations of 1975. The maximum permissible bank
finance was restricted to 75% of the working capital gap under three
successive methods of bank leading.
Method 1:
75% (Current Assets – Current Liabilities)
EXHIBIT 6.2.5.1
Particular 2002 2003 2004 2005 2006
2003 2004 2005 2006 2007
Current Assets. 13404.70 14636.67 21572.63 22324.13 26977.14
Current
Liabilities. 5923.77 8327.02 11656.67 14085.16 17558.55
CA- CL 7480.93 6309.65 9915.96 8238.97 9418.59
75%(CA-CL) 5610.70 4732.24 7436.97 6179.23 7063.94
Method 2:
75% (Current Assets) – Current Liabilities
EXHIBIT 6.2.5.2
Particular 2002 2003 2004 2005 2006
2003 2004 2005 2006 2007
Current Assets. 13404.70 14636.67 21572.63 22324.13 26977.14
75% Current
Assets 10053.53 10977.50 16179.47 16743.10 20232.86
Current
Liabilities. 5923.77 8327.02 11656.67 14085.16 17558.55
75%(CA)-CL 4129.76 2650.48 4522.80 2657.94 2674.31
Method 3:
75% (Current Assets – Core Current Assets*) – Current Liabilities.
EXHIBIT 6.2.5.3
Particular 2002 2003 2004 2005 2006
2003 2004 2005 2006 2007
Current Assets. 13404.70 14636.67 21572.63 22324.13 26977.14
Core Current
Assets 9300.14 9567.26 15891.82 13298.52 16273.93
(Quick Assets)
CA -CCA 4104.56 5069.41 5680.81 9025.61 10703.21
75% (CA- CCA) 3078.42 3802.06 4260.61 6769.21 8027.41
Current
Liabilities. 5923.77 8327.02 11656.67 14085.16 17558.55
75%(CA)-CL (2845.35) (4524.96) (7396.06) (7315.95) (9531.14)
It shows the relationship between total assets to sales. The sales are
affected through investment in fixed assets to earn profit. The higher ratio
show that with less amount of investment in total assets, the business
has capacity to sell more as such its probability is also more.
Where Total Assets = Fixed Assets + Investments + Net Current Assets + Misc.
Expenses.
EXHIBIT 6.3.1
(Rs. In Millions)
Particular 2002 2003 2004 2005 2006
2003 2004 2005 2006 2007
Sales. 26803.75 33938.84 41818.97 52476.57 71681.76
Total Assets. 18455.07 17309.91 22191.19 22840.70 27318.95
Total Assets 1.45 1.96 1.88 2.30 2.62
Turnover Ratio. times times times times times
Chart 6.3.1
3.00 2.62
2.50 2.30
1.96
IN TIMES
1.88
2.00
1.45
1.50
1.00
0.50
0.00
2002 - 2003 2003 - 2004 2004 – 2005 2005 2006 2006 2007
YEARS
EXHIBIT 6.3.2
(Rs. In Million)
Particular 2002 2003 2004 2005 2006
2003 2004 2005 2006 2007
Sales. 26803.75 33938.84 41818.97 52476.57 71681.76
Net fixed assets 9398.38 9211 9790.01 10846.88 15445.24
Fixed assets 2.85 3.68 4.27 4.84 4.64
turnover Ratio times times times times times
Chart 6.3.2
6
4.84 4.64
5
3.68 4.27
IN TIMES
4
2.85
3
2
1
0
2002 - 2003 2003 - 2004 2004 – 2005 2005 2006 2006 2007
YEARS
In 2006-07, the net fixed assets increased by 38.56% and the net
sales increased by 36.60%. Net fixed asset has been increased
more than increase in sales. So the net fixed assets turnover ratio
decreased to 4.64 times from 4.84 times.
EXHIBIT 6.3.3
(Rs in Millions)
Particular 2002 2003 2004 2005 2006
2003 2004 2005 2006 2007
Sales. 26803.75 33938.84 41818.97 52476.57 71681.76
Current Assets. 13404.7 14636.67 21572.63 22324.13 26977.14
Current
Liabilities. 5923.77 8327.02 11656.67 14085.16 17558.55
Net Working 7480.93 6309.65 9915.96 8238.97 9418.59
Capital
Fixed Working 3.58 5.38 4.22 6.37 7.61
Capital times times times times times
Turnover Ratio
Chart 6.3.3
FIXED WORKING CAPITAL TURNOVER RATIO
8 7.61
6.37
7
5.38
6
IN TIMES
4.22
5
3.58
4
3
2
1
0
2002-2003 2003-2004 2004-2005 2005-2006 2006-2007
YEARS
Fixed Working Capital Turnover Ratio
In 2002-03 the ratio was 3.58 times but in year 2003-04 it was
increased to 5.38 times but in the year 2004-05 it has been reduced
to 4.22 times but than it has increased to 6.37times & 7.61times in
the year 2005-06 & 2006-07 respectively. It indicates there is
proper utilization of working capital to increase sales.
EXHIBIT 6.3.4
(Rs. In Millions)
Particular 2002 2003 2004 2005 2006
2003 2004 2005 2006 2007
Cost of Goods
23554.18 29992.80 37590.47 47075.87 64654.91
Sold.
Opening Stock
5953.40 4104.56 5069.41 5680.81 9025.61
(A)
Closing Stock(B) 4104.56 5069.41 5680.81 9025.61 10703.21
Average Stock
5028.98 4586.985 5375.11 7353.21 9864.41
(A+B)/2
Inventory 4.68 6.54 6.99 6.40 6.55
Turnover Ratio times times times times times
Chart 6.3.4
8.00
7.00 6.54 6.99 6.40 6.55
6.00
4.68
IN TIMES
5.00
4.00
3.00
2.00
1.00
0.00
2002 - 2003 2003 - 2004 2004 - 2005 2005 2006 2006 2007
YEARS
This ratio indicates how many times in a year the stock’s turnover.
Higher the ratio better it is situation.
The graph shows that the inventory turnover ratio of the company.
In year 2002 – 2003 the inventory turnover ratio was 4.68 times,
which was lowest. But in year 2003–2004 & 2004-2005 inventory
turnover ratios was increased to 6.54 times & 6.99 times
respectively. But then it reduced to 6.40 times in 2005-2006 & then
it was increased to 6.55 times in 2006-07
It indicates the company has good inventory management &
favorable trading situation.
In the year 2004 – 2005 it is increased to 6.99 times that indicates
good control over inventory.
• Average Age of Inventories:
This ratio indicates the waiting period of the investment in inventories &
is measured in days, weeks or months. Inventory turnover & average age
of inventories are inversely related. High Inventory Turnover Ratio is
goods but longer age of inventory is bad as it indicates idle blocking of
money in inventories.
Average Age of Inventories = 360 days / Inventory Turnover.
[
EXHIBIT 6.3.5
(Rs. In Millions)
Particular 2002 2003 2004 2005 2006
2003 2004 2005 2006 2007
Days 360 360 360 360 360
Inventory turnover 4.68 6.54 6.99 6.40 6.55
Avg. Age of Inventory’s 76.92 55.05 51.50 56.25 54.96
Ratio Days Days Days Days Days
Chart 6.3.5
50
40
30
20
10
0
2002 – 2003 2003 - 2004 2004 – 2005 2005-2006 2006-2007
YEARS
Avg. Age of Inventory’s Ratio
• Debtor’s Ratio:
It indicates the effective of credit and the speed at which the debtors
are converted in to cash. It shows the equality of debtor’s also. I.e.
good, doubtful or bad etc
EXHIBIT 6.3.6
(Rs. In Millions)
Particular 2002 2003 2004 2005 2006
2003 2004 2005 2006 2007
Debtors 5181.5 4056.19 4587.66 4243.37 5228.75
Bills Receivable 0 0 0 0 0
Total 5181.5 4056.19 4587.66 4243.37 5228.75
Credit Sales/ Net 52476.57 71681.76
Sales 26803.75 33938.84 41818.97
Debtor’s Ratio 70.56 43.62 40.04 29.51 26.62
Days Days Days Days Days
Chart 6.3.6
DEBTOR'S RATIO
80
70.56
70
60
43.62
IN DAYS
50
40.04
40
29.51 26.62
30
20
10
0
2002 - 2003 2003 - 2004 2004 – 2005 2005-2006 2006-2007
YEARS
Debtor’s Ratio
The above table shows that every year debtor’s ratio has been
decreased continuously.
The higher the ratio, the more unsatisfactory position it shows. It
suggests that the credit and collection policy is weak. This would
result into unsatisfactory state of working capital and weak liquid
position, but it has been reduced continuously here so it is a
favorable situation for the company.
It indicates good collection from debtors.
The ratio is decrease from 70.56 days to 26.62 days in 2006-2007.
• Debtor’s Turnover:
The debtor’s turnovers suggests the number of times the amount of credit
sales is collected during the year, while debtors ratio indicates the no. of
days during which the dues for credit sales are collected.
Debtor’s Turnover = Credit Sales / Average Debtors.
EXHIBIT 6.3.7
(Rs. In Million)
Particular 2002 2003 2004 2005 2006
2003 2004 2005 2006 2007
Credit Sales/ Net 26803.7 33938.8 41818.9 52476.5 71681.7
Sales 5 4 7 7 6
Previous Years
Debtors 4928.46 5181.50 4056.19 4587.66 4243.37
Current Years
Debtors 5181.50 4056.19 4587.66 4243.37 5228.75
Average Debtors 5054.98 4618.85 4321.93 4415.52 4736.06
Debtor’s 5.30 7.35 9.68 11.88 15.14
Turnover Days Days Days Days Days
Chart 6.3.7
DEBTOR'S TURNOVER
16
14
12
IN DAYS
10
8
9.68 11.88 15.14
6
7.35
4
5.30
2
0
2002 - 2003 2003 - 2004 2004 – 2005 2005-2006 2006-2007
YEARS
Debtor’s Turnover
EXHIBIT 6.3.8
(Rs in Millions)
Particular 2002 2003 2004 2005 2006
2003 2004 2005 2006 2007
Days 360 360 360 360 360
Debtors turnover 5.3 7.35 9.68 11.88 15.14
Avg. Age of Debtor’s Ratio 67.92 48.98 37.19 30.30 23.78
Days Days Days Days Days
Chart 6.3.8
50
37.19
40
30.30 23.78
30
20
10
0
2002 – 2003 2003 - 2004 2004 – 2005 2005-2006 2006-2007
YEARS
Avg. Age of Debtor’s Ratio
Chart 6.4.1
EQUITY RATIO
0.80
0.70
0.60
IN TIMES
0.50
0.40 0.57 0.67 0.57 0.67 0.74
0.30
0.20
0.10
0.00
2002 – 2003 2003 - 2004 2004 – 2005 2005-2006 2006-2007
YEARS
Equity Ratio
The higher the ratio, the stronger the financial position of the
company, as it signifies that the proprietors have provided larger
funds to purchase the assets.
This ratio cannot exceed 100%. If it is 100%, it means that the
business does not use any outside funds or outsider’s liabilities.
Here, the ratio has been found fluctuating every year.
In the year 2002-03 it was 0.57 but then in the year 2003-04it was
increased to 0.67 and again it has reduced to 0.57 in 2004-05 and
then it increased to 0.67 & 0.74 in 2005-06 & 2006-07 respectively.
This ratio indicates the relationship between borrowed funds and owner’s
capital. It shows the proportion of long-term external equities and internal
equities. i.e. proportion of funds provided by long-term creditors and that
provided by shareholders or proprietors.
EXHIBIT 6.4.2
(Rs in Millions)
Particular 2002 2003 2004 2005 2006
2003 2004 2005 2006 2007
Debt 7175.22 4989.08 8804.06 6919.28 6403.98
Net worth 9594.86 10517.97 11678.65 14124.53 18945.68
Debt Equity 74.78% 47.43% 75.39% 48.99% 33.80%
Ratio
Chart 6.4.2
70%
75.39%
60%
47.43% 48.99%
50%
74.78% 33.80%
40%
30%
20%
10%
0%
2002 – 2003 2003 - 2004 2004 – 2005 2005-2006 2006-2007
YEARS
Debt Equity Ratio
The higher the ratio means that outside creditors have a larger
claim than the owners of the business. The pressure from creditors
would increase and their interference will also increase.
The company with high-debt position will have to accept stricter
conditions from lenders, while borrowing the money.
• Debt ratio:
It shows the relationship between long-term debt and total capital
employed. Equity ratio and debt ratio summation is always 1.
EXHIBIT 6.4.3
(Rs. In Millions)
Particular 2002 2003 2004 2005 2006
2003 2004 2005 2006 2007
Long term debt 7175.22 4989.08 8804.06 6919.28 6403.98
Total capital
employed 16770.08 15507.05 20482.71 21043.81 25349.66
Debt ratio 0.43 0.32 0.43 0.33 0.25
Chart 6.4.3
DEBT RATIO
0.50
0.45 0.43 0.43
0.40
0.32 0.33
IN TIMES
0.35
0.30
0.25
0.25
0.20
0.15
0.10
0.05
0.00
2002 - 2003 2003 – 2004 2004 – 2005 2005-2006 2006-2007
YEARS
Debt ratio
This ratio indicates the use of interest bearing debt funds in generating
higher operating profit. Higher is the ratio better is the utilization of dept
fund. Higher interest cover ratio, enhance the equity earning is passed
over to the equity finance portion of the capitalization.
EXHIBIT 6.4.4
(Rs. In Millions)
Particular 2002 2003 2004 2005 2006
2003 2004 2005 2006 2007
EBIT. 2286.12 3072.51 3578.08 4687.53 6098.38
Interest 585.10 207.91 27.98 164.53 53.32
Interest 3.91 14.78 127.88 28.49 114.37
Coverage Ratio
Chart 6.4.4
100
IN TIMES
80
60
28.49
40
20 14.78
3.91
0
2002-2003 2003-2004 2004-2005 2005-2006 2006-2007
YEARS
Interest Coverage Ratio
The Interest Coverage Ratio is the better utilization of debt fund i.e.
debenture.
The Interest Coverage Ratio is goes increasing every year but then
fluctuation has been found in it.
The Interest Coverage Ratio is highest in year 2004 – 2005 & that is
127.88.
Valuation Ratios:
Valuation ratios are the results of the management valuation ratio are
generally presented on a per share basis and that are more useful to the
equity invertors. The per share valuation are popular presented as
EXHIBIT 6.5.1
(Rs in Millions)
Particular 2002 2003 2004 2005 2006
2003 2004 2005 2006 2007
Profit After Tax. 1202.12 1935.80 2714.10 3273.20 4412.86
No. Of Equity Shares. 1189.29 1189.29 1189.29 1221.59 1323.87
Earning Per Share. 1.01 1.63 2.28 2.68 3.33
Chart 6.5.1
3.00
2.50
IN RS.
2.00
1.50
1.63 2.28 2.68 3.33
1.00
1.01
0.50
0.00
2002 - 2003 2003 - 2004 2004 - 2005 2005 - 2006 2006 - 2007
YEARS
Earning Per Share.
The Earning per Share indicates the liquidity situation for company
that we can see in graph.
The Earning per Share has been found continuously increasing
every year because of its profit has been increased continuously
over the years, so it is very good sign for the company.
In year 2002–2003 the EPS was 1.01 but in year 2003–2004 it is
increased up to 1.63 & in 2004–2005 EPS achieves the 2.28 and it
has been increased to 2.68 & 3.33 per share in the year 2005-2006
& 2006-2007 respectively.
• Dividend pay out Ratio (DPS):
This ratio indicates the spilt of EPS between cash dividend & reinvestment
of profits. Ashok Leyland Ltd has profitable projects; show it is prefer to
D/P ratio lower, i.e. it will reinvest higher proportional profits in the
business.
Dividend pay out Ratio = Dividend per Share / Earning per Share.
EXHIBIT 6.5.2
(Rs. In Millions)
Particular 2002 2003 2004 2005 2006
2003 2004 2005 2006 2007
Dividend Per Share. 0.50 0.75 1.00 1.20 1.50
Earning Per Share. 1.01 1.63 2.28 2.68 3.33
Dividend pay out Ratio 0.49 0.46 0.44 0.45 0.45
Chart 6.5.2
0.47
0.46
0.46
0.45 0.45
0.45
0.44
0.44
0.43
0.42
0.41
2002 - 2003 2003 - 2004 2004 - 2005 2005 - 2006 2006 - 2007
YEARS
Dividend pay out Ratio
• Dividend Yield:
The Dividend Yield represents the current cash return to share holders. It
is computed by dividing the dividend per share by the average market
price of share.
Dividend Yield = Dividend per Share / Average Market Price of Share X
100.
EXHIBIT 6.5.3
(Rs. In Millions)
Particular 2002 - 2003 - 2004 - 2005- 2006-
2003 2004 2005 2006 2007
Dividend Per Share. 0.50 0.75 1.00 1.20 1.50
Avg. Market Price. 98.20 187.00 21.92 29.18 41.82
Dividend Yield Ratio. 0.51 0.40 4.56 4.11 3.59
Chart 6.5.3
4.5
4.11
4.0
3.59
3.5
3.0
2.5
2.0
1.5
1.0
0.51 0.40
0.5
0.0
2002 - 2003 2003 - 2004 2004 - 2005 2005-2006 2006-2007
YEARS
Dividend Yield Ratio.
The dividend yield ratio is highest in year 2004 – 2005 i.e. 4.56%
but this year is goes down to 3.59% that indicates less payment of
dividend to the shareholders.
In the year 2002-2003 it was 0.51% & in the year 2003-2004 it has
reduced to 0.40% but in the next year it has been increased to
4.56% which is highest over the period.
In the dividend yield ratio too much fluctuation has been found
during the period 2002 to 2007.
• P/E Ratio:
EXHIBIT 6.5.4
(Rs. In Millions)
Particular 2002 2003 2004 2005 2006
2003 2004 2005 2006 2007
Current market price 105.00 267.90 25.10 43.00 41.80
Earning Per Share. 1.01 1.63 2.28 2.68 3.33
P/E Ratio 103.96 164.36 11.01 16.04 12.55
Chart 6.5.4
P/E RATIO
180
164.36
160
140
IN TIMES
120
103.96
100
80
60
40
11.01 16.04 12.55
20
0
2002 - 2003 2003 - 2004 2004 - 2005 2005-2006 2006-2007
YEARS
P/E Ratio
Assets Assets
Turnover times times times times times
ratio
Net fixed Sales / Net
Assets fixed Assets 2.85 3.68 4.27 4.84 4.64
Turnover times times times times times
Ratio
Fixed Sales / Net
working working
3.58 5.38 4.22 6.37 7.61
capital Capital
times times times times times
turnover
ratio
Inventory COGS / Avg.
4.68 6.54 6.99 6.40 6.55
Turnover Inventories
times times times times times
Ratio
Average 360 days /
Age of Inventory 76.92 55.05 51.50 56.25 54.96
Inventorie Turnover Days Days Days Days Days
s
Debtor’s (Debtors +
ratio Bills
70.56 43.62 40.04 29.51 26.62
(Days) receivable /
Days Days Days Days Days
Credit Sales)
x365
Debtors Credit Sales
5.30 7.35 9.68 11.88 15.14
turnover / Avg.
Days Days Days Days Days
ratio Debtors
CHAPTER 7
DU PONT CHART
Profit margin & assets turnover are the two drivers of return on assets.
The Du Pont System of financial analysis clearly brings out the effects of
these two drivers on return on assets. A system is useful for analysis,
which considers important inter relationship based on information found in
financial statements.
Any decision affecting the product price per unit costs, volume or
efficiency has an impact on the profit margin or turnover ratios. Similarly
any decision affecting the amount & ratio of debt or equity used will affect
the financial structure & the overall cost of capital of a company.
Therefore, these financial concepts are very important to evaluate as
every business is competing for Limited Capital Resources. Understanding
the inter relationship among the various ratios such as turnover ratio,
average & probability ratios helps companies to put their money areas
where the risk adjusted return is the maximum.
This is the Du Pont Chart applied to Ashok Leyland Ltd. At the left of the
Du Pont Chart is the return on the assets defined as the product of the
Net Profit Margin & the Total Assets Turnover Ratio.
Net Profit Total Assets = Net Profit / Sales X Net Sales / Avg. Total Assets.
Such decomposition helps in understanding how the Net Profit Margin &
Total Assets Turnover Ratio influences the Return on Total Assets.
Chart 7.1
Return on
Assets 6.07%
Chart 7.2
Return on
Assets 10.83 %
Chart 7.3
Return on
Assets 13.74%
Chart 7.4
Return on
Assets 14.54%
Chart 7.5
Return on
Assets 17.60%
CHAPTER 8
Suggestions & Recommendations
1. The balance sheet figures are showing the declining trend since last
few years. It should be the reason for higher inventory level which
unnecessary blocked the money. For higher the profitability ratio of the
firm, it is required to increase the sales along with:
New advertising techniques through latest media which are more
effective and prestigious.
To increase the work efficiency of the workers as well as of the
staff members, arrangement of different training programmes
like meetings, seminars, conferences, coaching classes etc. is
required.
For the innovation of new market, select capable market
representatives who are more efficient to recover the more
market share.
Try to maintain the quality level as per the market demand which
satisfies the customers more.
2. In order to increase the profit the firm should keep proper control over
the expenses retaliating to the purchase of goods, manufacturing and
lab ours for that, proper supervision and timely comparison of actual
with budgeted overheads should be taken. This will help the
management to know the causes and taking competitive actions to
reduce the expenses.
In order to reduce the expenses relating to payment of interest, the
firm should rely more on its share capital rather than borrowing
loans and funds. Firm should also try to maintain proper balance
between debt and equity.
3. To improve the liquidity position of the firm, proper working capital is
necessary to recover the daily cash requirement. For that, the firm
should:
Try to reduce the debt collection period which should be main
sources for working capital.
Use more credit facility which is given by the creditors.
Firm should also use more short term loans to recover the
working capital requirement because the interest rate for short
term loans is less and it should be flexible to use.
4. In order to maximize wealth under uncertainty, the firm must pay
enough dividends to satisfy investors. It should help to increase the
moral of the investors and side by side also helps in long term financial
strength of the firm. So, by increasing profits, the firm should pay
dividends regularly.
CHAPTER 9
CONCLUSION
We are making the financial analysis from its techniques that we are
concluding as follows:
Horizontal Analysis:
Ashok Leyland Ltd has made good growth in last five years in sales as
well as profit. Here growth in sales is increasing every year against that
expenditure has also increased but lower than sales. In 2006-07, the
Company’s exports grew by 23% with the sale of 6,025 vehicles. This
improvement was derived from demand in the export markets and the
launch of new products. This is the reason the sale & profit has increased
compare to last years i.e. 2005-06
Vertical Analysis:
It shows that the expenditure of the company is accounting for higher
percentage of sales around 99% every year & because of the every year
profit has increased but a decreasing rate. So for the increment of profit
in future, the company is requiring to optimize its expenditure on the side
of operating as well as administrative.
Trend Analysis:
It shows good trend in sales & profit but as above said, expenditure also
rising that depends the profit of the company. Reserve & Surplus also
shows good trend.
Cash Flow
In Cash Flow Analysis all the activities i.e. operating, investing, financing
maintain this year (2006 – 2007).
Ratio Analysis:
We are discussing about mainly 5 kinds of ratio. All the ratios performs
very well in last five years that gives better profitability & liquidity position
to the company.
Ashok Leyland Limited is confident that it can meet the challenges
passed by the deregulation scenario with its strength in refining. Its
strategic scenario with its strength in refining its strategic alliance with
Ashok Leyland Limited marketing and in house productivity
improvement, profitability maximization and cost reduction exercises,
which have already been launched in right earnest. These measures
would place the company in a position of comfort to meet the real
challenges of the future and we also wish them “Best of Luck” for their
bright future. So that Ashok Leyland Limited will be a world clean
Automotive Company. Now a day, key customer rates company among
the top 5 companies. At last, company is financial healthy.
BIBLIOGRAPHY
1. Narayanaswamy R.: “Financial Accounting “, 2nd Edition, Prentice
Hall Publication (India), 2005. pg no
2. Shah Sudhir B.: “Advance Accounting & Auditing – 4”, 16th
Edition, Sudhir Publication, 2006. pg no 142 – 337.
3. Mathur Satish B.: “Understanding Balance sheets”, 3rd Edition,
Macmillan India Limited Publication, 2007. Pg NO 113 - 194
WEB LINKS
• http://www.ashokleyland.com/performance report.jsp
• http://www.ashokleyland.com/products.jsp
• http://www.ashokleyland.com/mediakit.jsp
DATABASE
• Prowess Database