Budget Control in Maruti

AMITY SCHOOL OF BUSINESS
A SUMMER TRAINING REPORT

ON
REVIEWING
THE WHOLE PROCESS OF BUDGET
PREPARATION AND BUDGETARY
CONTROL
(In partial fulfillment of Bachelor of Business Administration)
SUBMITTED TO: SUBMITTED BY:

MRS PRIYA SOLOMEN GAURAV MAHESHWARI
BBA(GEN) E-46
(2008-2011)
Amity School of Business
Amity University, Uttar Pradesh
1
DECLARATION
I hereby declare that the present study entitled Reviewing the whole process of Budget
Preparation and Budgetary Control at MARUTI SUZUKI INDIA LTD. Is based on my
original research work for the fulfilment of the continuous evaluation of the assessment of
two months summer internship program, BACHELOR OF BUSINESS ADMINISTRATION-Class
of 2008-2011.The report has been done by me under the guidance of Mr Narayan
Murthy(Industry guide).And Mrs Priya Solomen (Faculty Guide).the research presented in
this study has not been submitted in full or part in this or any other university of the award
of any degree or diploma.
GAURAV MAHESHWARI Place: Noida
BBA(GEN)2008- 2011 Date:
A3906408154
2
CERTIFICATE
This is to certify that Mr. GAURAV MAHESHWARI (A3906408154), a student of Bachelor Of

Business Administration (BBA GENERAL),class of 2008-2011 Amity School Of Business, Amity
University has undertaken the summer internship training at Maruti Suzuki India Ltd during
May 2010 to June 2010. He has worked under the guidance for the project title BUDGET
PREPARATION AND BUDGETARY CONTROL at Maruti Suzuki India Ltd.
This project report in partial fulfilment of Bachelor Of Business Administration (BBA

GENERAL) to be awarded by Amity University, Uttar Pradesh.
To the best of my knowledge, this price of work is original and no part of this report has
been submitted to any other Institute/University earlier.
Mrs Priya Solomen Date:
Faculty Guide
3
ACKNOWLEDGEMENT
I express my sincere& deep sense of gratitude to my industry guide for their constant
support which made me work in right direction and their encouraging attitude at every
stage of preparation of this project.
I am also thankful to my faculty guide , Mrs Priya Solomen for her help in the completion of
this project.
I would also like to thank the whole Finance Department , Maruti Suzuki India Ltd, for
making me familiar with the intricacies of project development and ensuring that work in a
systematic way.
Also, I would like to extend my gratitude to my institute Amity School Of Business (Noida)
for giving me an opportunity to have a practical experience of job.
It is a great pleasure for me to acknowledge the assistance of these people who have taken
keen interest in m y work and extended their help.
It was a great experience knowing the attitude of different people towards the system.
I owe my sincere thanks to all of them.
Gaurav Maheshwari
BBA(GEN)2008-2011
4
ABSTRACT
The first project - REVIEWING THE WHOLE PROCESS OF BUDGET
PREPARATION AND BUDGETARY CONTROL FOLLOWED IN MARUTI SUZUKI INDIA LIMITED
involves the reviewing the whole process of budget preparation and budgetary control
followed in Maruti Suzuki India limited. The budgetary system followed in Maruti Suzuki
India limited is very unique and is based upon a similar system followed in its parent
company from Suzuki Motor Corporation Japan. Annual budgeting exercise for Maruti
Suzuki India limited starts in December every year for next accounting year and gets
finalized by February end. This budgetary process followed by Maruti ensures proper
utilizations of funds by different departments of the company. There are over 350 +
departments in the company. So without effective budgetary control system in place, it
would be impossible for the company to ensure proper utilization of the funds in the
company.
The first step of this project is to understand and review how the different departments
prepare their budgets and how the budgeted balance sheet and budgeted profit and loss
account for the whole company is prepared. Every year each department prepares a budget
for their department on the basis of their projected expenses. These budgets are sent to the
budgeting and costing department of the company, which on the basis of these budgets
prepares budgeted balance sheet and budgeted profit and loss account. After preparing
budgeted balance sheet and budgeted profit and loss account, budgeting department
presents these accounts in front of board of directors for their approval.
The second step of this project is to understand and review the process of budgetary control
followed in Maruti Suzuki India limited. In Maruti Suzuki budgetary control and budget
monitoring is a continuous process, which involves monitoring of the budgets of different
departments by comparing the actual expenses of the respective departments with their
projected expenses and finding out reasons for any deviations if any.
The final step of this project is to suggest measures to make this whole process more
effective, less time consuming and error proof.
5
6
TABLE OF CONTENTS
1. INTRODUCTION………..………………….………………….……......……….… 8
2. REVIEW OF LITERATURE………………………..………..…………………….. 13
3. COMPANY PROFILE……............................................................. 15
4. SWOT ANALYSIS....................................................................... 20
5. RESEARCH METHOLODOGY……………………................................ 24
6. OBJECTIVES…........................................................................ 29
7. BUDGETS PREPARATION PROCESS FOLLOWED IN MARUTI SUZUKI 33
8. BUDGETARY CONTROL PROCESS IN MARUTI SUZUKI……………. 37
9. RATIO ANALYSIS…………………………………………………………… 42
10. CONCLUSION........................................................................................... 45
11. RECOMMENDATIONS.......................................................................... 46
12. BIBLIOGRAPHY....................................................................................... 47
7
MARUTI SUZUKI INDIA LTD
INTRODUCTION –
Maruti Suzuki is one of India's leading automobile manufacturers
and the market leader in the passenger car segment, both in terms of volume of vehicles
sold and revenue earned. It is largely credited for bringing an automobile revolution to
India. Maruti Udyog Limited was established in Feb 1981 through an Act of Parliament, as a
Government company with Suzuki Motor Corporation of Japan holding 26 per cent stake.
The Joint Venture agreement was signed between Government of India and Suzuki Motor
Company (now Suzuki Motor Corporation of Japan) on Oct 1982. Suzuki Motor Company
was chosen from seven prospective partners worldwide. This was because of their
undisputed leadership in small cars and also because of their commitment to actively bring
to MUL contemporary technology and Japanese management practices (which had
catapulted Japan over USA to the status of the top auto manufacturing country in the
world).
Maruti Udyog limited was renamed to Maruti Suzuki India Limited (MSIL) on 17
September, 2007.
Until recently, 18.28% share of Maruti Suzuki, a subsidiary of Suzuki Motor

Corporation Japan, was owned by the Indian Government, and 54.2% by Suzuki of Japan. On
May 10, 2007 Govt. of India sold its complete share to Indian financial institutions. With this,
Govt. of India no longer has stake in Maruti Suzuki India limited.
The company went into production in a record time of 13 months and the first car was
rolled out from Maruti Suzuki India Limited Gurgaon in December, 1983.
In 2001, Maruti Suzuki India Ltd became one of the first automobile companies
anywhere in the world to get an ISO 9001:2000 certification. A V Belgium has rated the
8
company’s quality systems and practices as a “BENCHMARK FOR THE AUTOMOTIVE

INDUSTRY WORLD-WIDE”, global auditors for International Organization for
Standardization.
Since inception, Maruti Suzuki produced and sold over 7.5 million vehicles, including
almost 500,000 units in Europe and other export markets. In fact, every 22 seconds a car is
rolled out of Maruti Suzuki. It is Suzuki’s largest manufacturing facility, outside Japan
offering 11 models in over 100 variants.
9
MANUFACTURING FACILITIES - Maruti Suzuki have two manufacturing facilities

in India, one in Gurgaon and the other in Manesar, North India.
Gurgaon plant - Maruti Suzuki`s Gurgaon plant houses three fully integrated plants.
While the three plants have a total installed capacity of 350,000 cars per year, several
productivity improvements or shop floor Kaizens over the years have enabled the company
to manufacture nearly 650,000 cars per year at the Gurgaon facilities.
The entire facility is equipped with more than 150 robots, out of which 71 have been
developed in-house. More than 50 per cent of shop floor employees have been trained in
Japan.
Manesar plant - Maruti Suzuki`s Manesar plant has been made to suit Suzuki Motor
Corporation (SMC) and Maruti Suzuki India Limited's (MSIL) global ambitions. It is rated high
among Suzuki's best plants worldwide the plant was inaugurated in February 2007.
.
The plant has several in-built systems and mechanisms to ensure that cars being
manufactured here are of good quality. There is a high degree of automation and robotic
control in the press shop, weld shop and paint shop to carry on manufacturing work with
acute precision and high quality. In particular, areas where manual operations are
hazardous or unsafe have been equipped with robots.
The plant is designed to be flexible: diverse car models can be made here conveniently
owing to automatic tool changers, centralized weld control system and numerical control
machines that ensure high quality. .
The plant at Manesar is the company's fourth car assembly plant and has started with
an initial capacity of 100,000 cars per year. This will be scaled up to 300,000 cars per year. A
total investment of Rs 2,500 crore will be made in this car plant by 2010
Diesel engine plant - Suzuki Powertrain India Limited the diesel engine plant at
Manesar is Suzuki & Maruti's first and perhaps the only plant designed to produce world
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class diesel engine and transmissions for cars. .

This plant is under a joint venture company, called Suzuki Powertrain India Limited
(SPIL) in which SMC holds 70 per cent equity with the rest held by Maruti Suzuki.
This facility has an initial capacity to manufacture 100,000 diesel engines a year. This
will be scaled up to 300,000 engines per year by 2010. .
The diesel engines manufactured at this plant will also be exported to SMC companies
across the world. .
This facility, too, has a high level of automation. Final inspection of components is done
through automatic measuring and marking machines, which leads to a uniform and error
free production.
Maruti Suzuki’s contribution as the engine of

growth of the Indian auto industry, indeed its Impact
on the lifestyle and psyche of an entire generation of
Indian middle class, is widely acknowledged.
11
REVIEW OF LITERATURE
12
BUDGET: A budget is a detailed plan expressed in quantitative terms that specifies
how an organization will acquire and use resources during a particular period of time.
In other words a budget is a systematic plan for the efficient utilization of resources.
Budget serves as a benchmark against which actual results can be compared.
What are the Key Purposes of Budget?
 Planning: Preparing budgets forces organization to plan ahead.

 Facilitate Co-ordination: To be effective, each department throughout the
organization must be aware of plans made by other departments.
 Allocating Resources: As resources are limited, budget provides one means of
allocating resources among competing uses. So, that resources can be used in a best
possible manner.
 Exercising control: Budgets helps in managing financial and operational performance,
by comparing actual performance against the planned performance.
In a business organization, a budget represents an estimate of future costs and

revenues. Budgets may be divided into two basic categories:
1) Capital Budgets
2) Revenue Budgets.
13
Capital budgets are directed towards proposed expenditures for new projects and often
require special financing. For example – installing a new plant or expanding the production
capacity.
Revenue budgets are directed towards achieving short-term operational goals of the
organization, for instance, production or profit goals in a business firm. Operating budgets
may be sub-divided into various departmental of functional budgets.
Budgetary control: No system of planning can be successful without having an effective

and efficient system of control. Budgeting is closely connected with control. The exercise of
control in the organization with the help of budgets is known as budgetary control. The
process of budgetary control includes:
1. Preparation of various budgets. .

2. Continuous comparison of actual performance with budgetary performance. .
3. Revision of budgets in the light of changed circumstances.
14
COMPANY
PROFILE
15
Maruti Udyog Limited, a subsidiary of Suzuki Motor Corporation of Japan, has been
the leader of the Indian car market for about two decades. Its manufacturing plant, located
some 25 km south of New Delhi in Gurgaon, has an installed capacity of 3,50,000 units per
annum, with a capability to produce about half a million vehicles.
The company has a portfolio of 11 brands, including Maruti 800, Omni, premium
small car Zen, international brands Alto and WagonR, off-roader Gypsy, mid size Esteem,
luxury car Baleno, the MPV, Versa, Swift and Luxury SUV Grand Vitara XL7.
In recent years, Maruti has made major strides towards its goal of becoming Suzuki
Motor Corporation's R and D hub for Asia. It has introduced upgraded versions of Wagon-R
Zen and Esteem, completely designed and styled in-house.
Maruti's contribution as the engine of growth of the Indian auto industry, indeed its impact
on the lifestyle and psyche of an entire generation of Indian middle class, is widely
acknowledged. Its emotional connect with the customer continues
Maruti tops customer satisfaction again for sixth year in a row according to the J.D.
Power Asia Pacific 2005 India Customer Satisfaction Index (CSI) Study.
The company has also ranked highest in India Sales Satisfaction Study.
The company's quality systems and practices have been rated as a "benchmark for
the automotive industry world-wide" by A V Belgium, global auditors for International
Organisation for Standardisation.
In keeping with its leadership position, Maruti supports safe driving and traffic
management through mass media messages and a state-of-the art driving training and
research institute that it manages for the Delhi Government.
The company's service businesses including sale and purchase of pre owned cars
(TrueValue), lease and fleet management service for corporates (N2N), Maruti Insurance
and Maruti Finance are now fully operational.. These initiatives, besides providing total
mobility solutions to customers in a convenient and transparent manner, have helped
improve economic viability of The company's dealerships.
The company is listed on Bombay Stock Exchange and National Stock Exchange.
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OBJECTIVES –
 Modernization of the Indian Automobile Industry.
 Production of fuel-efficient vehicles to conserve scarce resources.
 Production of large number of motor vehicles which was necessary for economic
growth.
17
BOARD OF DIRECTORS:
 Mr Shinzo Nakanishi, Chairman

 Mr Jagdish Khattar, Managing Director
 Mr Hirofumi Nagao, Joint Managing Director
 Mr Shinichi Takeuchi, Joint Managing Director
 Mr Osamu Suzuki, Director
 Mr R C Bhargava, Director
 Dr. Surajit Mitra, Director
 Mr Kumar Mangalam Birla, Director
 Mr. Amal Ganguli, Director
 Ms Pallavi Shroff, Director
 Mr Manvinder Singh Banga, Director
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Profile of Products
19
20
EXPORTS OF MARUTI SUZUKI INDIA LIMITED
In March 2007 Maruti Suzuki India limited crossed cumulative export figure of
450,000 vehicles since its first export in 1986. It is India’s largest passenger car manufacturer
and has a global presence with a well established network in several countries across Asia,
Europe, Africa, South and Latin America. Europe has been the largest market with exports of
over 280000 units. Even in the highly developed markets of Netherlands, UK, Germany,
France & Italy, Maruti vehicle have made a mark. The top ten destinations of the cumulative
exports have been Netherlands, Italy, U.K., Germany, Algeria, Chile, Hungary, Sri Lanka,
Nepal and Denmark in that order.
Maruti has also entered some unconventional markets like Angola, Benin, Djibouti,
Ethiopia, Morocco, Uganda, Algeria, Egypt, Chile, Costa Rica and El Salvador and witnessed
sizeable growth. The Middle-East region has also opened up and is showing good potential
for growth. Some markets in this region where Maruti has a good presence are Saudi Arabia,
Jordan, Kuwait, Bahrain, Qatar and UAE. In Europe the number of units sold is 280000 in 34
countries, in Africa it is 45000units, in Latin America it is 29000units and Oceania the
number of units sold is 6300units.
21
2%
9%
10% EUROPE
ASIA
AFRICA
15% AMERICA
64% OCEANIA
CONTINENT WISE EXPORTS OF MARUTI SUZUKI SINCE

ITS INCEPTION
PRODUCT PORTFOLIO –
The company has a product portfolio of 11 brands with
over 100 variants, including - Maruti 800, Omni, Alto, WagonR, Swift, Zen Estilo, Gypsy,
DZire ,Versa, SX4, Ritz, A-Star and Grand Vitara.
Three Maruti Suzuki`s cars namely Maruti Zen Estilo, Maruti Swift and Maruti SX4
walked away with 2007- India Automotive Performance, Execution and Layout Study
(APEAL) Award in their respective categories. .
In 2007 Initial Quality Study also, Maruti Swift walked away with the highest IQS in the
Premium Compact car segment.
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ACCOLADES 2008-2009
 Maruti Suzuki was ranked first in customer satisfaction in an annual survey conducted by
JD Power for the seventh time in a row.
 The company was ranked first in India for sales satisfaction for the third time in a row by
JD Power Asia Pacific.
 The company won the Avaya Global Connect Customer Responsiveness award 2006.
 The company was ranked 91among world`s most reputed companies reported by Forbes
magazine. Among automobile players, it ranked 5th in the world, ahead of many global
giants.
 Business World ranked Maruti as India’s most respected automobile company.
 Business today listed the company among India’s 10 best marketers.
 Maruti Suzuki won the Asia Pacific PLM excellence award for 2006 from UGC Corp,
leading global provider of product life cycle management (PLM) software and services.
 TNS Automotive ranked Maruti Suzuki first for Corporate Social Responsibility.
 Manesar car assembly plant is ranked amongst the top two Japanese subsidiaries
overseas, by Nikkei (Nihon Keizai Shimbun), for the year 2007. .
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SWOT ANALYSIS OF MARUTI SUZUKI
MAJOR STRENGHTS OF MARUTI SUZUKI INDIA LIMITED –
1) LOW LABOR COST - Maruti Suzuki India limited is operating in a country in which cost of
labor is very low as compared to other developing and developed countries. This is a
major strength for Maruti Suzuki.
2) STRONG DISTRIBUTION AND SERVICE NETWORK - Maruti Suzuki has the largest
Distribution and Service Network in India
 600 showrooms covering 393 cities
 150 rural format sales outlets in 143 cities
 620 dealer service stations &1900 Maruti Authorized Service Stations
 Over 1190 cities covered by Service Network
3) STRONG PRODUCT PORTFOLIO - Maruti Suzuki has a large and strong product portfolio -
 Maruti Suzuki’s overall portfolio consists of 11 basic models & over 150 variants
spanning across all segments of the industry.
 It has widest product range in India
 Majority of new showrooms & workshops coming from existing dealers
 Maruti Suzuki is Present in Gasoline, Diesel and LPG
 6 models launched in last 30 months including Swift Diesel & Wagon R Duo.
24
4) EXCLUSIVE TIE UPS WITH AUTO FINANCE COMPANIES - In India, a large proportion of cars
– about 75% are sold via finance. Company`s exclusive tie ups with financers helps the
customers to get their vehicles financed easily.
MAJOR WEAKNESSES FOR MARUTI SUZUKI INDIA LIMITED -
Diesel Segment
A3
Perceived as entry level car only…
MAJOR OPPURTINITIES FOR MARUTI SUZUKI INDIA LIMITED -
1) India is among the few countries that are showing a growth rate of 30% in demand for
passenger cars as domestic automobile market is growing at a high rate. Automobile
industry expert predicts that by 2050 every sixth car in the world will be for Indians
2) There are about 700 million vehicles on road in the world today. It is estimated that this
vehicle population would grow to about 1.3 billion in the year 2030. Most of this
increase of 600 million will come from developing countries. These markets will
look for low-cost automobiles. India has the opportunity to meet this need.
And, in the process create a huge export market. This presents a major opportunity for
Maruti Suzuki as it is a major player in Indian automobile sector.
3) By 2010, India is expected to witness over Rs 30,000 crore of investment.
25
4) According to estimation the compound annual growth rate (CAGR) of Indian automobile
sales will grow at 9.5% and will touch a mark of 13,008 million by 2010.
5) About 77 % of the Indian automobile sector is still owned by 2 wheeler manufacturers,

which can be a potential market for small car manufacturers.
6) Maruti Suzuki believes that there are millions of Indians who can afford a car but for
various reasons are not buying one. With focused marketing efforts, many of these
people can be persuaded to buy a car. This is a major opportunity for the company. The
company also took several initiatives like Special Schemes for certain sections of society
like government employees etc., Employee referral scheme where each employee was
veiled as sales man. Dealer and vendor scheme are some other examples of these
initiatives.
26
7)
The above graph shows the positive correlation between GDP and the no. of cars per 1000
people. GDP of India is growing at a very healthy rate and is expected to grow between 6 to
8 %. India’s fast paced GDP growth and pent up demand are expected to fuel growth in
automotive sales. This presents a great opportunity for automobile manufacturers .
8) Low car penetration, about 8 cars per 1000 Population in India.
27
9) By 2020 more than half of India’s population is expected to live in urban areas this will
bring about a dramatic growth in demand of passenger cars.
10) Indian rural market is on the verge of opening up, this will present a huge growth
opportunity for automobiles manufacturers.
MAJOR THREATS FOR MARUTI SUZUKI INDIA LIMITED -
1) TATA`S one lakh car – NANO is a big threat to Maruti Suzuki as Maruti Suzuki is a small
car manufacturing company and its smallest and cheapest car Maruti 800 is of approx 2
lakhs . Maruti 800 is also the smallest and cheapest car in India right now. After the final
launch of TATA`S NANO it will become the cheapest car in the Indian automobile sector
2) Wage rates in India are increasing at a very fast pace, this can be a potential threat to the
company.
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RESEARCH METHODOLOGY
RESEARCH DESIGN
The research method selected for the study is a combination of a survey and an industrial
study. The survey research method is described here under that:
(i) It is a design in which primary data is gathered from members of the sample that represents
a specific population
(ii) It is a design in which a structure and systematic research instrument like a questionnaire or
an interview schedule is utilized together with the primary data
(ii) It is a method in which the researcher manipulates no explanatory variables because they
have already occurred and so they cannot be manipulated
(iii) Data are got directly from the subjects .The subjects give the data in the natural settings of
their workplaces
Interview
The method of communication of the research instrument is by means of the personal

interview. The method has the merit that it produces a better sample of the population than
either mail or the telephone methods. It also has the merit that it gives a very high
completion and response rates. It has the merit that the interview has a bigger sensitively
misunderstandings by the respondents and gives a chance for clarification of misunderstood
questions. It has the merit that it is a very feasible method . The personal interview method
has the demerit that it is more costly than the mail or the telephone methods of
communication of a questionnaire.
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Observations
In addition to questionnaire and face-to face interviews, observation was also carried out.
This was to enable the researcher to witness by the officers of this firm and to interact with
these people.
Secondary data:
(1) Annual reports
(2) Company databases
(3) Auto journals
(4) Industry analysis reports
(5) Company websites
limit
ation of The Study
Research work is subject to one form of limitation or the other, mine is not an exemption.
It was the initial thought that the exercise was easy but the contrary was the case. As a
student, several academic demands compete with the limited but precious time available.
This implies that none of the competing exercise could be effectively handled without the
others being worse off.
This was my situation. Although the time expended was too small to do justice to the study.
The opportunity cost in terms of other equally important activities forgone or cursorily
attended to, was made.
The researcher faces some embarrassment arising from low-level educated staff who could
not understand the essence of the research work as this.
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Current budget of the company could not be studied due to the confidential nature of the
data.
31
OB JECTIVES
1) Maruti is a multinational company & is globally known for its automobiles & due to its
well known reputation in the market I a finance student has chosen to study the “BUDGET
PREPARATION & BUDGETARY CONTROL” of the company.
2) To gain experience & knowledge that how a company prepares budget & control it.
3) The budget forms a base for a company’s operations & working.
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Budget preparation process followed in MARUTI

SUZUKI INDIA LIMITED
Production / sales target finalized

by top management
Detailed
production plan
Sales budget Manpower Revenue Capital Indigenization

From M&S budget expenditure investment plan
 Domestic budget from plan
sales departments
 Export sales
 Spare parts Material cost budget
sales  Imported
components
 Indigenous
Consolidation of components
divisional budget  Raw materials
 Paints and direct
consumables
Discussion between finance Preparation of model wise

& other departments and month wise unit standard
statement and consolidation
Consolidation of divisional
budget to company budget
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Preparation of draft cash

budget and profit & loss a/c
Budget presentation by divisional

heads to MD & directors.
Budgetary targets for each
division set by directors.
Whether budget target

acceptable?
NO
REVIEW
YES
Preparation of cash
budget, projected profit &
loss a/c and balance sheet
This chart shows the unique process of budget preparation followed in Maruti Suzuki,
which is based upon a similar process followed in its parent company Suzuki Motor
Corporation Japan.
Annual Budgeting exercise in Maruti Suzuki starts from December and gets finalized
during February. Every year top management decides the total number of cars to be sold or
34
produced on the basis of past trends, industry growth rate, feedback from marketing and
selling department and various other factors which effect the demand of cars. On the basis
of the number of cars to be produced, a detailed production plan is prepared. This
production plan indicates the resources required to produce the desired number of cars. On
the basis this production plan every department plans their expected requirements of funds
for the next financial year. These departments enter their respective requirements of funds
in an online form sent by finance department, on a monthly basis along with the purpose for
which funds are required. When the save button on this form is clicked this data gets stored
in a central database. Similar expenses of all the departments are stored in one place for
example training expenses of all the departments are stored in one and stationary expenses
of all the departments are saved in one database. Budgeting department prepares a master
budget on the basis of these databases, which represents an overall plan of the
organization. Annual Budget is divided into quarterly budgets i.e. Q1, Q2, Q3 and Q4.
Budget for Q3 and Q4 is revised based on actual expenditure up to July and expected
trends for the remaining year. This exercise starts on July and revised budget is finalized by
August.
Budgeting department also prepares projected profit & loss account and balance
sheet of the company. This projected profit & loss account and balance sheet is presented
before board of directors for their approval. If the Board of directors are satisfied with the
expected profit and sales, then the budget is approved if not then the respective
departments are told to reduce their budget and the whole process is repeated .
Zero-based budgeting – In Maruti Suzuki, a zero based budgeting (ZBB) system is

followed. ZBB is a top-down budgeting system where resource allocation decisions are
made through a function-by-function assessment. No function is assumed to be necessary.
The criteria for evaluation are passed down from higher levels, enhanced and made more
appropriate for each area as the criteria are passed down to office and department heads.
Department and office heads develop justifications within these evaluation guidelines for
35
each function and justifications for increased resources. These pass back up through the
organization with each level setting priorities for resource allocations to individual functions
from the levels below.
36
Budgetary control process followed in MARUTI SUZUKI INDIA

LIMITED
Maruti Suzuki follows a unique process of budgetary control, which ensures proper
utilizations of funds by different departments of the company. There are over 350 +
departments in the company. So without effective budgetary control system in place, it
would be impossible for the company to ensure proper utilization of the funds in the
company.
Monitoring of the budget is done on the monthly basis by budgeting department, in which
it compares the actual expenses of the respective departments with the projected expenses
and finds out reasons for any deviations if any and presents the report to the board of the
directors at the beginning of each month.
Budget controlling is done on a quarterly basis at Maruti Suzuki India limited. For effective
control of the funds all the expenses are divided into 3 categories, according to their relative
importance.
A category expenses are very tightly controlled and monitored because of their relative
high degree of controllability. For example- Consultancy fees, Gifts, Seminar / Conference
Exp, etc.
B category expenses are less closely monitored and controlled, because of their low degree
of controllability B category expenses can be controlled to a extent only. For example Travel,
Journals, Stationary, Phone, Conveyance, etc. and no control is exercised over C i.e. Their
payment is not stopped even they shoot over their budget but for A and B category
expenses payment is allowed to the level of budget approved.
37
A’ Category – Items of similar nature are grouped together (have same first 5 digit a/c
code), and control is exercised over the group budget. Budget control exists at a parent level
or 5 digit account code level.
For example-
A-P2110701-COMPUTER CONSUMABLES
A-P2110702- SOFTWARE PURCHASE EXPENSES
A-P2110703- SOFTWARE DEVELOPMENT EXPENSES
A-P21107- SOFTWARE RELATED EXPENSES
Account Budget Actual Balance

A-P21229 01 500,000 500,000
A-P2122902 100,000 400,000 (300,000)
A-P2122903 200,000 (200,000)
Total 600,000 600,000 Nil
These A category expenses are monitored or controlled at 5 digit code (A-P21229) and not
at individual 7 digit item code level ie 2122901, which basically means that respective
department cannot spend more on SOFTWARE RELATED EXPENSES then the budgeted
amount but it can spend the whole amount on any of its components.
38
B category expenses are general expenses and are monitored at cost center level i.e.
expenses related to a particular department.
For example –
B-P2111501- SNACKS EXPENSES
B-P2111501-LUNCH EXPENSES
B-P21115- SNACKS EXPENSES
B-P2113201-POSTAL STAMPS
B-P2113202-POSTAL EXPENSES
B-P2113203-COURIER CHARGES
B-P21132-POSTAL EXPENSES
Account Budget Actual Balance
B-P2123401 50,000 5,000 45,000

B-P2123402 40,000 40,000
B-P2145665 40,000 (40,000)
B-P2645872 45,000 (45,000)
Total 90,000 90,000 Nil
39
These B category expenses are monitored and controlled at a cost center or departmental
level which means that expenses are not monitored on B-P21234-POSTAL EXPENSES or B-
P21115- SNACKS EXPENSES level but on total of all these expenses of that particular
department. For example in the above table expenses will not be monitored at individual
account code level but at a departmental level.
Maruti Suzuki India limited is using a financial module of Oracle for its financial function.
Special codes are assigned to all the entries that come in profit & loss account and balance
sheet (7 digit code), cost centers (every department is a cost center) – 4 digit code and
companies (2 digit code). Booking of expenses can only be done by entering specific codes.
My project in maruti Suzuki India limited involves understanding and analyzing this whole
process and to suggest ways to make this unique process more effective and free from any
faults.
Appendix – 1
40
RATIO CALCULATION OF MARUTI SUZUKI

RS. IN MILLIONS
2008-2009 2007-2008 2006-2007
PARTICULARS
LIQUIDITY RATIOS
Current assets 38,459 37,496 29,720
Current liabilities 25,015 19,771 16,080
CURRENT RATIO = Current assets / Current liabilities 1.54 (times) 1.90 (times) 1.85 (times)
Current assets 38,459 37,496 29,720
Less inventories 7,132 8,812 6,666
Liquid assets 31,327 28,684 23,054
Current liabilities 25,015 19,771 16,080
ACID TEST RATIO = 1.25 1.45 1.43

LIQUID ASSETS
CURRENT LIABILITIES
ACTIVITY RATIOS
Average assets = 88,665 69,962 60,031.5
Op. balance + Cl.. Balance
2
Gross sales 171,442 147,043 132,914
ASSET TURNOVER RATIO = 1.93 2.10 2.21

SALES
AVERAGE ASSETS
Cost of goods sold 12,9349 107110 99966
Average inventory 7972 7739 5532
INVENTORY TURNOVER RATIO 16.22 13.84 18.07
41
LEVERAGE RATIOS
Total debt 32998 21354 20256
Equity 68539 54526 43788
DEBT EQUITY RATIO 0.48 0.39 0.46
Total debt 32998 21267 20256
Total assets 101537 75793 64044
DEBT-ASSET RATIO 0.32 0.28 0.32
Earnings before interest and taxes 23174 17704 13409
PROFITABILITY RATIOS
Gross profit 32913 22404 19585
Net sales 145,922 120,034 109108
GROSS PROFIT MARGIN RATIO 22.55 % 18.66 % 17.95 %
Net profit 15,620 11,891 8,536
Net sales 145,922 120,034 109108
NET PROFIT MARGIN RATIO 10.70 % 9.90 % 7.82 %
Net income (profit after tax) 15,620 11,891 8,536

Number of outstanding shares 288.910000 288.910000 288.910000
EARNING PER SHARE = 54.065 41.16 29.54

NET NCOME (PROFIT AFTER TAX)
NUMBER OF OUTSTANDING SHARES
42
Net income 15,620 11,891 8,536
Equity Capital 68539 54526 43788
RETURN ON EQUITY = 22.79 % 21.81 % 19.49 %

NET INCOME
AVERAGE EQUITY
DIVIDEND PER SHARE 4.5 3.5 2
EARNING PER SHARE 54.065 41.16 29.54
DIVIDEND PAY OUT RATIO = 8.32 % 8.50 % 6.77 %

DIVIDEND PER SHARE
EARNING PER SHARE
DIVIDEND PER SHARE 4.5 3.5 2
MARKET PRICE PER SHARE 865.40 577.22 426.32
DIVIDEND YIELD = 0.52 % 0.61 % 0.47%

DIVIDEND PER SHARE
MARKET PRICE PER SHARE
EXPENSES TO NET SALES RATIOS

Consumption of raw material 108630 94247 86502
Net sales 145,922 120,034 109108
CONSUMPTION OF RAW MATERIAL TO NET SALES 74.44% 78.52% 79.28%
Employees remuneration and benefits 2,884 2,287 1,960
Net sales 145,922 120,034 109108
EMPLOYEER REMUNERATION AND BENEFITS TO NET 1.98 % 1.91 % 1.80 %

SALES
Selling and distribution expenses 4,999 3,560 3,699
Net sales 145,922 120,034 109108
43
SELLING AND DISTIBUTION EXPENSES TO NET SALES 3.42 % 2.97 % 3.39 %

RATIO
Interest expenses 376 204 360
Net sales 145,922 120,034 109108

INTEREST EXPENSES TO NET SALES RATIO 0.26 % 0.17 % 0.33 %
Depreciation 2,714 2,854 4,568
Net sales 145,922 120,034 109108
DEPRECIATION TO NET SALES 1.86 % 2.38 % 4.19 %
44
CONCLUSION
When summarizing the financial results of “MARUTI UDYOG LIMITED”. I have observed that
their working is quite reasonable financial. It is very good company. There are no any debts
of long term liabilities of the company. To conclude, from of the overall analysis of financial
management of the company, I can say that it is financial sound and well managed three
consecutive year’s shows and applauding position. I was also able to well understand my
financial concepts.
The formal budgeting system has the following major benefits.
1. Budgeting due to its formal time table or schedule compels managers to think ahead
apart from taking care of their current activities.
2. Budgeting, due to its approval and authorization by the superiors, provides definite
expectations that are the best framework for judging subsequent performance.
3. Budgeting helps in coordinating the various departments of the organization. The budget
harmonizes the goals (objectives) of the individual departments into the organization wide
goals (objectives).
45
RECOMMENDATION
We need to know that many financial reporting frauds have their genesis in overly optimistic
budgets that subsequently lead to an environment of "cooking the books" to reach
unrealistic goals. These events usually start small, with the expectation that time will make
up for a temporary problem. To maintain organizational integrity, senior-level managers
need to be careful to provide realistic budget directives. Lower-level managers need to be
truthful in reporting "bad news" relative to performance against a budget, even if they find
fault with the budget guidelines.
46
BIBLIOGRAPHY
(1) Annual reports
(2) Company databases
(3) Auto journals
(4) Industry analysis reports
(5) Company websites
(6) Articles published by Society of Indian Automobile Manufacturers
(7) www.siam.in
(8) www.ibef.org
47

Budget Control in Maruti

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AMITY SCHOOL OF BUSINESS

A SUMMER TRAINING REPORT

SUBMITTED TO: SUBMITTED BY:

Amity School of Business

Amity University, Uttar Pradesh

GAURAV MAHESHWARI Place: Noida

BBA(GEN)2008- 2011 Date:

This is to certify that Mr. GAURAV MAHESHWARI (A3906408154), a student of Bachelor Of

This project report in partial fulfilment of Bachelor Of Business Administration (BBA

Mrs Priya Solomen Date:

I owe my sincere thanks to all of them.

7. BUDGETS PREPARATION PROCESS FOLLOWED IN MARUTI SUZUKI 33

8. BUDGETARY CONTROL PROCESS IN MARUTI SUZUKI……………. 37

MARUTI SUZUKI INDIA LTD

Until recently, 18.28% share of Maruti Suzuki, a subsidiary of Suzuki Motor

company’s quality systems and practices as a “BENCHMARK FOR THE AUTOMOTIVE

MANUFACTURING FACILITIES - Maruti Suzuki have two manufacturing facilities

class diesel engine and transmissions for cars. .

Maruti Suzuki’s contribution as the engine of

BUDGET: A budget is a detailed plan expressed in quantitative terms that specifies

What are the Key Purposes of Budget?

 Planning: Preparing budgets forces organization to plan ahead.

In a business organization, a budget represents an estimate of future costs and

Budgetary control: No system of planning can be successful without having an effective

1. Preparation of various budgets. .

 Mr Shinzo Nakanishi, Chairman

EXPORTS OF MARUTI SUZUKI INDIA LIMITED

CONTINENT WISE EXPORTS OF MARUTI SUZUKI SINCE

SWOT ANALYSIS OF MARUTI SUZUKI

MAJOR STRENGHTS OF MARUTI SUZUKI INDIA LIMITED –

 600 showrooms covering 393 cities

 150 rural format sales outlets in 143 cities

 620 dealer service stations &1900 Maruti Authorized Service Stations

 Over 1190 cities covered by Service Network

 It has widest product range in India

 Majority of new showrooms & workshops coming from existing dealers

 Maruti Suzuki is Present in Gasoline, Diesel and LPG

MAJOR WEAKNESSES FOR MARUTI SUZUKI INDIA LIMITED -

MAJOR OPPURTINITIES FOR MARUTI SUZUKI INDIA LIMITED -

3) By 2010, India is expected to witness over Rs 30,000 crore of investment.

5) About 77 % of the Indian automobile sector is still owned by 2 wheeler manufacturers,

automotive sales. This presents a great opportunity for automobile manufacturers .

8) Low car penetration, about 8 cars per 1000 Population in India.

MAJOR THREATS FOR MARUTI SUZUKI INDIA LIMITED -

The method of communication of the research instrument is by means of the personal

(1) Annual reports

(2) Company databases

(3) Auto journals

(4) Industry analysis reports

(5) Company websites

3) The budget forms a base for a company’s operations & working.

Budget preparation process followed in MARUTI

Production / sales target finalized

Sales budget Manpower Revenue Capital Indigenization

Discussion between finance Preparation of model wise

Preparation of draft cash

Budget presentation by divisional

Whether budget target

Zero-based budgeting – In Maruti Suzuki, a zero based budgeting (ZBB) system is

Budgetary control process followed in MARUTI SUZUKI INDIA

A-P2110702- SOFTWARE PURCHASE EXPENSES

A-P2110703- SOFTWARE DEVELOPMENT EXPENSES

A-P21107- SOFTWARE RELATED EXPENSES