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INTRODUCTION: Finance is regarded as the life blood of a business enterprise. In the modern oriented economy, finance is one of the basic foundations of all kinds of economics activities. Finance statements are prepared primarily for decision-making. They play a dominant role in setting the frame work and managerial conclusion and can be drawn from these statements. However, the information provided in the financial statement is of immense use in decision-making through analysis and interpretation of financial statements. As said earlier finance is said to be life blood of any business. Every business under taking needs finance for its smooth working. It has to raise funds from the cheapest and risky source to utilize this in most effective manner. So every company will be interested in knowing its financial performance. The project entitled “Financial performance Analysis of Ashok Leyland Industry Ltd” throw light on over all financial performance of the company.
OBJECTIVES OF STUDY:
To know the Financial position of the Ashok Leyland.
To know the Liquidity and Profitability position of the company.
To know the Financial strength and weakness of the company.
SCOPE OF THE STUDY
The study covers the Financial performance of the Ashok Leyland.
The study is made by making comparison of five year of it operation. The study aims to reveal where the stands in respect to liquidity and an effective use of asset. PERIOD OF THE STUDY The study covered a period of five years from 2005-06 to 2009-10 accounting year ends 31st march every year.
RESEARCH METHODOLOGY: The study is based on secondary data. Data pertaining behavior of liquidity solvency and profitability position were collection from the Balance Sheet and Profit & Loss account of ashokLeyland. The necessary data were obtained from published annual report.
TOOLS AND TECHNIQUE:
• Liquid ratio • Solvency ratio • Profitability ratio
LIMITATION OF THE STUDY: The study is based on secondary data The time span was limited only a period of five years.
The study suffers all the limitation of ratio analysis, such as lack of
adequate change, income, price level change etc.
000 vehicles and about 7. research methodology. Finally conclusion are given in the fifth chapter AboutA s h o k L e y l a n d is a commercial vehicle manufacturingcompany base d i n Chennai. A s h o k L e y l a n d a l s om a k e s s p a r e p a rt s a n d e n g in e s f o r in d u s tr ia l a n d m ar i n e applications. such as trucks and buses. limitation of the study. T he c o m p a n y c l a i m s t o c a r r y o v e r 6 0 m i l l i o n passengers a day.India. It sells about 60. In the trucks segmen t A s h o k L e y l a n d p r i m a r i l y concentrates on the 16 ton to 25 ton range of trucks. I t i s t h e s e c o n d l a r g e s t c o m m e r c i a l v e h i c l e company in India in the medium and heavy commercial vehicle(M&HCV) segment with a market share of 28% (2007–08). scope of the study.CHAPTER SCHEME: The study is divided into five chapters. F o u n d e d i n 1 9 4 8 . The first chapter deals with introduction objective of study. The third chapter deals with analysis & interpretation of the ratios. HoweverAshok Leyland has presence in the entire truck . Withpassenger transportation options ranging from 19 seaters to 80s e a t e r s . O p e r a t i n g s i x p l a n t s . more people tha n the entire Indian railnetwo rk. The second chapter deals with profile of the company. as well as emergency andm i l i t a r y v e h i c l e s . The fourth chapter deals with findings & suggestions. A s h o k L e y l a n d i s a m a r k e t l e a d e r i n t h e b u s s e g m e n t .000engin e s a n n u a l l y . t h e company is one of India's leading manufacturers of commercialvehicles. period of the study.
excelling int e c h n o l o g y . 5 t o n s t o 4 9 t o n s . Vision Be among the top Indian corporations acknowledged nationallyand internationally for: • Excellence in quality of its products • Excellence in customer focus and service Mission Be a leader in the business of commercial vehicals. T h e j o i n t v e n t u r e a n n o u n c e d w i t h Nissan Motorsof Japan would improve its presence in the LightCommercial Vehicle (LCV) segment (<7.5 tons). . q u a l i t y a n d v a l u e t o c u s t o m e r f u l l y s u p p o r t e d b y customer service of the highest order and meeting national andinternational safety environments and safety standards.range startingf r o m 7 .
Founded in 1948. its also makes spare parts and engines for industrial and marine applications.000 vehicles and about 7. The company concentrates on the 16 ton to 25 ton range of trucks. . With passenger transportation options ranging from 19 seaters to 80 seaters. the company is based in Chennai. it is an automobile industry and the company is one of India's leading manufacturers of commercial vehicles. The company claims to carry over 60 million passengers a day.. such as trucks and buses.000 engines annually. India. Ashok Leyland is a market leader in the bus segment.5 tons to 49 tons. Entire truck range starting from 7. more people than the entire Indian rail network. as well as emergency and military vehicles. it sells about 60. It is the second largest commercial vehicle company in India in the medium and heavy commercial vehicle segment with a market share of 28%.CHAPTER II COMPANY PROFILE INTRODUCTION The Ashok Leyland is a Public Limited Company. 11500 employees are working in this company.
000 vehicle they have put on the road have considerably eased the additional pressure placed on the road transportation in independent India. Pandit Jawaharlal Nehru.HISTORY The origin of Ashok Leyland can be traced to the urge for selfreliance felt by independence of India. This resulted in Ashok Leyland launching the 'Cargo' range of trucks based on European Ford Cargo trucks. The company was renamed and started manufacturing commercial vehicles in 1955 with equity participation by British Leyland. to enter automotive manufacture. Access to international technology and a US$200 million investment programmed created a state-of-the-art manufacturing base to roll out international class products. sold in large numbers to many operators. Early products included the Leyland Comet bus which was a passenger body built on a truck chassis. 00. persuaded Mr. This was mainly due to the product design legacy carried over from British Leyland. Raghunandan Saran. India’s first Prime Minister. The 5. The company long term plan to become a global player by benchmarking global standards of technology and quality was soon firmed up. . to assemble Austin cars. it built a reputation for reliability and ruggedness. an industrialist. The company began in 1948 as Ashok Motors.
Called Avia Ashok Leyland Motors s. the company will expand its product offers into construction equipment.. The company says negotiation is progressing on land acquisition.GOALS: The company’s plans is to acquire smaller car manufacturers in China and in other developing countries. Ashok Leyland maintains an R&D group that aims to uncover ways to make their vehicles more fuel efficient and reduce emissions . the joint venture sold 518 LCVs in Europe despite tough economic conditions. Ashok Leyland bought a majority stake in the Czech based. Even as they thrust into different directions. and the production plans are in place.Avia.o.r. Aside from the full expansion planned for the company. According to the company. utilizing eco-friendly processes in their various plants. this will give Ashok Leyland a channel into the competitive European market. Ashok Leyland is also paying close attention to the environment. they are one of the companies showing the strongest commitment to environmental protection.
Ashok Leyland is India's largest exporter of medium and heavy duty trucks. with Alteams in Finland for high pressure die casting and recently. seizing growth opportunities offered by diversification and globalization – with Continental Corporation for automotive infotronics.4 billion in 2008-09. PARENT Hinduja group Ennore Foundaries Limited Automotive Coaches and Components Limited Gulf-Aashly Motors Limited Ashley Holdings Limited . The annual turnover of the company was USD 1.431 medium and heavy vehicles in 2008-09.CURRENT STATUS The company has also maintained its profitable track record for 60 years. Selling 54. with John Deere for construction equipment. Ashok Leyland has also entered into some significant partnerships.
1200 crores. Tamilnadu ( Hosur – 1.SUBSIDIARIES Ashley Investments Limited Ashley Design and Engineering services (ADES) Avia Ashok Leyland Ashok Leyland Project Services Limited Lanka Ashok Leyland FACILITIES The company has six manufacturing location in India: Ennore and Hosur. CPPS) Alwar. Maharastra The company has an Engine Research and Development facility in Hosur The company is setting up a new Plant in the North Indian state of Uttarakhand at pant Nagar at an investment outlay of Rs. . Rajasthan Bhandara. Hosur – 2. This plant is expected to go on stream in the year 2010.
making it the first Indian commercial vehicle manufacture to do so. all the vehicle-manufacturing units of Ashok Leyland were ISO 14001 certified for their Environmental Management System. more people than the entire Indian rail network • Ashok Leyland has a near 85% market share in the Marine Diesel engines markets in India • In 2002. received the BS7799 Certification for its Information Security Management System (ISMS). making it the first auto manufacturer in India to do so. • In 2006. making it the first auto manufacturer in India to do so. ACHIEVEMENTS • Ashok Leyland buses carry 60 million passengers a day. . • In 2005. • It is one of the leading suppliers of defense vehicles in the world and also the leading supplier of logistics vehicles to the Indian Army. received the ISO/TS 16949 Corporate Certification.The Plant will have a capacity to produce around 40.000 commercial vehicles and is expected to cater mainly to the North Indian market taking advantage of the excise duty and other tax concessions.
city bus Viking BS-II .PRODUCTS Luxura Viking BS-I .city bus Viking BS-III -city bus Cheetah BS-I Cheetah BS-II Panther 12M bus Stag Mini Stag CNG .
Long term solvency ratio: 3.7Average collection period 3. 3.CHAPTER –III RATIO ANALYSIS MEANING: Ratios are relationship expressed in mathematical items between figures which are connected with each other in some manner.4 Inventory turnover ratio 3.9 Deb Equity ratio 3.10 Proprietary ratio 3.14 Fixed asset turn over ratio. 3.1 Current ratio.5 Inventory conversion period 3. 3.11 Fixed asset to net worth ratio 3. Activity ratio 3.6 Debtor turnover ratio 3. CLASSIFICATION: Short term solvency ratio: I. II. .8 Working capital turnover ratio.2 Liquid ratio.12 fixed asset ratio. Liquidity ratio 3.3 Absolute liquidity ratio.13 Current asset to proprietary fund 3.
In this chapter I have applied various ratios for analyzing financial position of the company. A ratio is a simple artificial expression of the relationship between two mathematical variables. .17 Operating profit ratio 3.18 Selling & administration expenses ANALYSIS AND INTERPRETATION: The financial performed of a firm can be evaluated by constructing ratio for the various items appearing in the financial statement. The result and interpretation are given below. Ratio analysis is a technique of analysis and interpretation of financial statement by establishing and interpreting various ratios useful for decision making.16 Net profit ratio 3.15 Gross profit ratio 3. Profitability ratio 3.
The rule of the thumb is 2:1 Current ratio= Current Asset ______________ Current Liability Current asset= Inventories + Sundry debtors+ Cash & Bank balance.SHORT-TERM SOLVENCY RATIO I. CURRENT RATIO Current ratio may be defined as the relationship between current asset and current liabilities. The current ratio is the index of the concern financial stability since it shows extent of the working capital.1. which is the amount by which the current asset exceeds the current liabilities.LIQUIDITY RATIO: 3. . Current liabilities= Bills payable + Bank O/D.
in .30 2374.90 0.74 1. In 2008-2009 the ratio was decreased to 1.91 2849.74 in 2006-2007 and 2007-2008.94.22 Current liabilities* 1344.97 2196.11 0. So it was not satisfactory.TABLE: I CURRENT RATIO * Rs .29 3002.90 to 0. Current Asset* 1492.19 1865.75 1644.88 1681.68 Ratio 1.94 .07 0. In the year 2005-2006 the ratio was 1.40 2207.07 and 2009-2010 the ratio was again decreased to 0.11 and it was decreased from 0. Cr Year 2005-06 2006-07 2007-08 2008-09 2009-10 INTERPRETATION: The rule of thumb of current ratio is 2:1 the ratio shows a fluctuating trend.
74 1.CHART : 1 Current ratio 1.94 0 200506 200607 2007.8 0.9 0.6 1.07 0.11 Ratio 0.200808 09 years 200910 .
It is the test of liquidity to the ability of the current ratio .the term “liquidity” refers to the ability of a firm to pay its short term obligation. Liquid Asset _______________ Current Liability Liquid ratio = Liquid Asset = Current Asset – Inventories.3.2. This is ascertaining by comparing the liquid asset and current liability. . LIQUID RATIO: This ratio also termed as acid test or quick ratio. The rule of thumb is 1:1.
The liquid ratio was not satisfactory of the company .68 Ratio 0.47 0.44 0.19 0.49 2207.98 Current liabilities* 1334.32 to 0. Cr Year 2005-06 2006-07 2007-08 2008-09 2009-10 Liquid asset* 590.47 in 2008-2009 and 2009-2010.97 2196. The liquid ratio in the year 2005-2006 and it was decreased from 0. The ratio was again increased to 0. The ratio was again decreased to 0.43 420.29 3002.91 1210.39 1044.TABLE: I LIQUID RATIO *Rs .32 0.40 INTERPRETATION: The rule of thumb of liquid ratio is 1:1.40 in the year 2005-2006 to 2009-2010.32 611.in.19 in 2006-2007 and 20072008.19 1865.
32 0.64 0.4 Ratio 0.19 0 200506 200607 2007.44 0.CHART :2 Liquid ratio 0.47 0.32 0.200808 09 years 200910 .
5:1. Absolute Liquid Asset Absolute ratio= ___________________ Current Liability Absolute liquid asset = Cash & Bank balance .3.3. The rule of thumb is 0. The inventory and debtor are excluded from current asset to calculate this ratio. ABSOLUTE LIQUID RATIO OR CASH RATIO: The ratio measures the relationship between cash and near cash item on the hand and immediately maturing obligation on the other.
Cr Year 2005-06 2006-07 2007-08 2008-09 2009-10 Absolute liquid asset* 165.19 1865.10 and next year onwards it was decreasing trend.49 22. So it was not satisfactory in 2005-2006 to 2009-2010.02 0.06.02.5 44.55 86.29 3002. In.06 INTERPRETATION: The rule of thumb of absoluter liquid ratio is 0.04 to 0.5:1.98 88. the ratio was decreased from 0. .03 0. In the year 2006-2007 to 2008-2009.97 2196.TABLE: 3 ABSOLUTE LIQUID RATIO * Rs. In the year 20052006 the ratio was 0.68 Ratio 0.92 Current liabilities* 1334.7.93 188. In 2009-2010 the ratio was decreased to 0.04 0.12 0.
03 0 200506 200607 2007.04 0.08 0.04 0.12 Ratio 0.02 0.12 0.06 0.200808 09 years 200910 .16 0.CHART :3 Absolute liquid ratio 0.
It was able to meet the requirements of the business. . INVENTORY TURNOVER RATIO: Every firm has to maintain a certain level of inventory to finished goods. Inventory turnover ratio= Net Sales ____________ Inventory Net sales = Sales – Excise duty.4. inventory turnover indicates the number of times stock has been turned during the period and evaluate the efficiency with which a firm is able to manage.II.ACTIVITY RATIO 3.
53.24 Ratio 5.32 1223.87 in 2006-2007.51 to 4.95 but it was increased to 6.18 Inventory* 902.88 7972. in .01 1638.56 1070. .94 7358.51 4.53 INTERPRETATION: The inventory turnover ratio in the year 2005-2006 was 5. Cr Year 2005-06 2006-07 2007-08 2008-09 2009-10 Net sales* 5359.93 6.91 1330.87 6.52 6168.63 4.99 7436.TABLE: 4 INVENTORY TURNOVER RATIO * Rs. In 2007-2008 to 2009-2010 the ratio was decreased from 6. This stock turnover ratio implies over investment in stock.
CHART :4 inventory turnover ratio 8 6.51 4.53 0 200506 200607 2007.87 5.93 4.63 Ratio 4 6.200808 09 years 200910 .
This can be possible by calculating inventory conversion period. Inventory conversion period= No. of days in a year ________________________ Inventory turnover ratio .3. INVENTORY CONVERSION PERIOD: It may be of interest to see average time taken for clearing the stock. This period is calculated by dividing the number of days by inventory turnover ratio.5.
In 2008-09 and 2009-10 the days was increased from 78 to 80 days. It indicates more days to clear stock compared to previous year. In.63 Ratio 61 53 56 78 80 . Days in a year* 365 365 365 365 365 Stock turn over ratio* 5.63 4.93 6.51 4. Cr Year 2005-06 2006-07 2007-08 2008-09 2009-10 INTERPRETATION: In the year 2005-2006 the conversion period was 61 days and it was decreased to 56 days in 2006-2007.TABLE: 5 INVENTORY CONVERSION PERIOD * Rs. In 2007-2008 the days slightly increased to 56 days.87 6.
CHART :5 Inventory conversion period 90 80 78 80 Ratio 70 61 60 53 50 200506 200607 2007.200808 09 years 200910 56 .
The higher the ratio is better result with ratio is better result with efficient management. It indicates the number of times the collection debtor has turnover during the year.6. DEBTOR TURNOVER RATIO: It established the relationship between the net credit sales and average debtor. .3. Net credit sales Debtor turnover ratio= ______________ Average debtor Average debtor= Opening debtor + Closing debtor+ Opening bills receivable + Closing bills receivable.
21 and it was decreased to 6.43 7.07 21.60 times and it decreased to 14.27 .18 Average debtor* 424.06 times 12. In 2007-2008 the ratio again increased to 21.60 14.34 522. In 2009-2010 it was slightly increased to 7. It implies in efficient management of debtor or sales.88 375.TABLE: 6 DEBTOR TURNOVER RATIO *Rs. In.21 6.99 7436.27.84 957. Net credit sales* 5359. Cr Year 2005-06 2006-07 2007-08 2008-09 2009-10 INTERPRETATION: In this year 2005-2006 the ratio was 12.07 in 2006-2007.88 7972.43 in 2008-2009.97 1022.52 6168.94 7358.
CHART :6 Debtor turnover ratio 24 21.27 0 200506 200607 2007.43 6 7.21 18 14.200808 09 years 200910 .07 12.6 Ratio 12 6.
43 56 7.07 25 21. Average collection period = No. AVERAGE COLLECTION PERIOD: The number of days taken by a firm for collecting of its receivable or debtors during the year.7.21 17 6.3. It indicates the debt was collected in 50 days. In 2008-2009 it was increased to 56 days and it was decreased to 50 days in 2009-2010.in cores Debtor turnover Days ratio 12.27 50 INTERPRETATION: The collection period in the year 2005-2006 the days was 28. In 200607 and 2007-2008 it was reduced from 25 days to 17 days. . of days in a year _____________________ Debtor turnover ratio TABLE: 7 AVERAGE COLLECTION PERIOD Year 2005-06 2006-07 2007-08 2008-09 2009-10 Days in a year 365 365 365 365 365 Rs . It indicates the relationship between average debtor and net credit sales.60 28 14.
CHART :7 Average collection period 60 56 50 45 Ratio 30 28 25 17 15 200506 200607 2007.200808 09 years 200910 .
WORKING CAPITAL TURNOVER RATIO: This ratio indicates the number of time the working capital is turned over in the course of a year. The higher ratio indicates efficient utilization of working capital.3. .8. . The higher may be the result of high turnover of inventories of receivable Net sales ____________________ Net working capital Working capital turnover ratio= Net working capital = Current Assets – Current Liabilities.
18 Working capital* 587.72 217.10.17 *Rs.32 736.10 .62 in 2007-2008.56 10.62 8.56 in 2008-09and in the year 20092010 it was again slightly increased to 10.80 to 36. in.32 574. But it was decreased to 8.52 6168.12 12.99 7436. The ratio was 9.TABLE-8 WORKING CAPITAL TURNOVER RATIO Year 2005-06 2006-07 2007-08 2008-09 2009-10 INTERPRETATION: The ratio shows fluctuating trend from 2005-2006 to 2009-2010.80 36.12 in 2005-2006 and it was increased from 12.66 720. Net sales* 5359.88 7972.94 7358. Cr Ratio 9.
8 9.1 0 200506 200607 2007.12 8.62 Ratio 19 12.CHART :8 working capital turnover ratio 38 36.56 10.200808 09 years 200910 .
DEBT EQUITY RATIO This ratio is also known as internal and external equality ratio .LONG TERM SOLVENCY RATIO 3. Reserve & Surplus. .9.it is mainly calculated to assess the soundness of long term financial policies and to determine the relative’s stakes of outsiders and owners. Shareholder fund= Share capital. It indicates the relationship between debt and equity. Debt equity ratio= Long term fund _________________________ Shareholders fund Long term debt = Secure loan + Un secured loan.
TABLE: 9 DEBT EQUITY RATIO * Rs.48 0.98 3478. The debt equity in the year 2005-06 was 0.33 0.98 2280.33 and next three year it was slightly increased from 0.50 1961.62 The rule of thumb is 2:1. and it was satisfactory.45 Shareholders fund* 1412. In.41 to 0.30 Ratio 0.62 in the year 2007-2008 to 2009-2010. Cr Year 2005-06 2006-07 2007-08 2008-09 2009-10 INTERPRETATION: Long term debt* 691. .89 3656.48 but and 2006-2007 it was decreased to 0.40 887. The ratio shows that the long term debt is very low.41 0. so the company can make use of the law cost of fund.56 0.46 1894.58 2148.93 640.
33 0.2 0.48 0.7 0.CHART : 9 Debt equity ratio 0.1 0 200506 200607 2007.200808 09 years 200910 0.6 0.56 0.3 0.5 0.4 0.62 .41 Ratio 0.
3. . PROPRIETARY RATIO: This ratio is also called as equity ratio or owner’s fund ratio. This ratio points out relationship between the shareholders fund and total asset of the company. Proprietary ratio= Shareholders fund _________________ Total asset.10. Total asset= Current asset +Fixed asset. It indicates the proportion of total asset financed by shareholders.
89 3656.98 3473.97 3036. Cr Year 2005-06 2006-07 2007-08 2008-09 2009-10 Shareholders fund total asset* 1412. in. It shows the shareholders are financed to total asset so it was satisfactory.TABLE: 10 PROPRIETARY RATIO *Rs.40 2534.87 5936.48 5435.67 and it was increased to 0.67 0.74 0. In 2008-2009 the ratio was decreased to 0.74 0.30 Total asset* 2104.58 2148.61 in 2009-2010. The ratio shows in the year 2005-2006 was 0.46 1894.61 INTERPRETATION: The rule of thumb is above 50% of the ratio is satisfactory. .63 0.63 and again decreased to 0.74 in 20062007 and 2007-2008.76 Ratio 0.
6 0.63 0.2 0 200506 200607 2007.CHART :10 proprietory ratio 0.74 Ratio 0.8 0.74 0.4 0.61 0.200808 09 years 200910 .67 0.
Fixed asset Fixed asset to net worth ratio= _______________ Shareholders fund . If the ratio is high. FIXED ASSET TO NET WORTH RATIO: This ratio indicates as to what extends the shareholders fund have been invested in fixed assets. it implied that much of shareholders are invested in fixed asset. But too high indicates what the high amount is tied up in fixed capital.3.11.
97 1. In.46 1894.30 Ratio 0.68 but in 2007-2008 it was increased to 0.56 Shareholders fund* 1412.63 in 2008-2009 the ratio was increased to 0.97 and 2009-2010 again the ratio was increased to 1.68 0.11 4249. Fixed asset* 943.65 is said to be satisfactory.16 .58 2148.04 1525.66 in the year 2005-2006.66 0.63 0.98 3473.16. The ratio was 0. In 2006-2007 it was increased to 0. Cr Year 2005-06 2006-07 2007-08 2008-09 2009-10 INTERPRETATION: There is no rule of thumb but 60 plus 0. The shareholders fund is properly utilized.TABLE: 11 FIXED ASSET TO NETWORTH RATIO * Rs.55 3399.89 3656.27 1307.
200808 09 years 200910 0.63 .CHART :11 fixed asset to networth ratio 1.97 1.66 0.8 0.4 1.4 0.2 0 200506 200607 2007.68 0.2 1 0.16 Ratio 0.6 0.
which not good the financial policy. FIXED ASSET RATIO: The ratio indicates the extend to which the total of fixed asset are financed by long term fund of the firm. But if fixed assets exceeds. Fixed asset ratio= Fixed asset before depreciation ______________________________ Total long term Fixed assets = Long term investment. Reserve & Surplus . it implies that firm has financial asset.3.12. Fixed term funds = Share capital. Generally the total fixed asset should be equal to the total long term fund.
Cr Year 2005-06 2006-07 2007-08 2008-09 2009-10 INTERPRETATION: In the year 2005-2006 the fixed asset ratio was 1.46 1894.64 in 2008-2009 and 20092010.42 1.38 to 1.63 Long term funds* 1412.58 2148.30 Ratio 1. In.27 6018.36 1.51 and it was decreased from 1. It implies the company has financed a part of fixed out of current asset. Fixed asset* 2138.89 3656. In 2008-2009 the ratio was slightly increased from 1.38 1.98 3473.50 2620.44 4953.42 to 1.51 1.20 2942.TABLE: 12 FIXED ASSET RATIO *Rs.36 in 2006-2007 and 2007-2008.64 .
fixed asset ratio
1.51 1.38 1.36 1.42
Ratio 0.8 0 200506 200607 2007- 200808 09 years 200910
3.13. CURRENT ASSET TO PROPRIETOR’S FUND: The ratio is calculated by dividing the total of current asset by the amount of shareholder’s fund. The ratio indicates the extent to which proprietors fund are invested in current assets.
current asset Current asset to proprietor’s fund= __________________ Shares holders fund
TABLE: 13 CURRENT ASSET TO PROPRIETORY FUND *Rs. in. Cr Year 2005-06 2006-07 2007-08 2008-09 2009-10 INTERPRETATION: The ratio shows fluctuating trend. In the year 2005-2006 the ratio was 1.05 and it was reduced from 0.88 to 0.68 in 2006-2007 to 2008-2009. But it was slightly increased to 0.77. This shows more than 50% of share holders are invested in current asset. Current asset* 1492.88 1681.75 1644.30 2374.91 2849.22 Share holders fund* 1412.46 1894.58 2148.98 3478.89 3656.30 Ratio 1.05 0.88 0.76 0.68 0.77
68 0.24 0 200506 200607 2007.88 0.79 0.77 0.2 1.72 Ratio 0.CHART :13 Current asset to proprietory fund 1.200808 09 years 200910 .96 0.48 0.05 0.
FIXED ASSET TURNOVER RATIO: This ratio measures the efficiency in utilization of fixed asset. A high ratio reflects overtrading on the other hand a lower ratio indicates idle capacity and excessive investment in fixed asset. .3. Fixed asset turnover ratio= Net sales ________________ Net fixed asset.14.
22 in 2006. The ratio implies the company utilizes the fixed asset to achieve the highest sales.52 6168.56 Ratio 5. In 2008-2009 and 2009-2010 the ratio was again decreased from 1. Cr Year 2005-06 2006-07 2007-08 2008-09 2009-10 Net sales* 5359.81 1.27 1307.75.63 to 5. And it easy slightly reduced from 5.68 5. In.TABLE: 14 FIXED ASSET TURNOVER RATIO *Rs.88 7972.68 in the year 2005-2006.94 7358.04 1525.63 5.11 4249.22 1.5 3399. .81 to 1.75 INTERPRETATION: The fixed asset turnover ratio. The ratio was decreasing trend was 5.2007 and 2007-2008.18 Net fixed asset* 943.99 7436.
81 1.75 0 200506 200607 2007.CHART : 14 fixed asset turnover ratio 6 5.68 5.200808 09 years 200910 .63 5.22 4 Ratio 2 1.
The relatively low profit ratio is not good for the company.PROFITABILITY RATIO 3. The high gross profit ratio is sign of good management.15. It measures the relationship of gross profit to net sales and it is represented in percentage.Cost of goods sold . Gross profit ratio= Gross profit ________________ Net profit X 100 Gross profit = Sales. There are no standard norms. GROSS PROFIT RATIO: It indicates the margin of profit on sale.
16 828.18 Ratio 10 10 10 6 10 INTERPRETATION: This ratio represent in percentage.59 768.25 400. 2006-2007and 2007-2008 was 10 % and the ratio was decreased to 6% in the year 2008-2009. In 2009-2010 the ratio again increased to 10%. The Gross profit ratio was increasing trend.16 Net sales* 5359.TABLE: 15 GROSS PROFIT RATIO *Rs.88 7972.99 7436. The ratio shows in the year 20052006.52 6168.35 752. In.94 7358. Cr Year 2005-06 2006-07 2007-08 2008-09 2009-10 Gross profit* 556. . so overall ratio was satisfactory.
CHART :15 gross profit ratio 12 10 10 10 10 8 Ratio 6 4 0 200506 200607 2007.200808 09 years 200910 .
3. NET PROFIT RATIO: Net profit ratio indicate the relationship between net profit and sales the efficiency of the manufacturing.16. welling and other activities of the firm Net profit (after tax) Net profit ratio= _______________________ X 100 Net sales .
TABLE: 16 NET PROFIT RATIO *Rs.99 7436. Cr Year 2005-06 2006-07 2007-08 2008-09 2009-10 INTERPRETATION: The ratio shows in the year 2005-2006 was 6% and the ratio was decreased to 5% in 2006-2007 and 2007-2008.31 190. In.52 6168.94 7358.00 423.18 Ratio in % 6 5 5 3 5 .88 7972. Again the ratio was decreased to 3% in 2008-2009 and it was increased again 5% in 2009-2010.67 Net sales* 5359. Net profit (after tax)* 327.29 469. Because the company has been increased the net sales and overall net profit was increased trend.32 441.
CHART :16 Net profit ratio 9 6 Ratio 6 5 5 5 3 3 0 200506 200607 2007.200808 09 years 200910 .
17.3. Increase in operate profit indicates improvement of firm working by cost reduction or increase sales. OPERATING PROFIT RATIO: Operating profit ratio is calculated for analyzing profitability of a concern. Operating profit Operating profit ratio = _______________ Net sales X 100 .
In 2009-2010 the ratio was increased to 10%.TABLE: 17 OPERATING PROFIT RATIO *Rs.94 7358.88 7972.52 6168. in.49 473.18 Ratio 10 9 10 7 10 INTERPRETATION: The ratio was 10% in the year 2005-2006 and slightly decreased to 9% in 2006-2007. Cr Year 2005-06 2006-07 2007-08 2008-09 2009-10 Operating profit* 540. The overall operating profit and sales are increased and reduce the expenses. .36 686.09 761.99 7436.40 Net sales* 5359.16 804. In 2007-2008 again reached 10% and it was decreased to 7% in 2008-2009.
200808 09 years 200910 .CHART :17 Operating profit ratio 15 10 Ratio 10 9 10 10 7 5 0 200506 200607 2007.
18. SELLING AND ADMINISTRATION EXPENSES: Selling and administrative ratio indicates the relationship between the expenses and sales .the changes in the selling and administrative expenses will be impact on sales.3. Selling & Administration expenses Selling and administration expenses= ___________________________ X100 Net sales .
50 263.5 495.52 6168.18 Ratio 3 3 3 8 5 INTERPRETATION: The expenses ratio was 3% in three year that is 2005-2006. Cr Year 2005-06 2006-07 2007-08 2008-09 2009-10 Selling &Administration expenses* 199. in. 2006-2007 and 2007-2008.TABLE: 18 SELLING AND ADMINISTRATION EXPENSES *Rs. Because the expenses are slightly decreased compared to previous year.36 259. It decreased to 5%.99 7436.89 Net sales* 5359.88 7972. In the year 2008-2009 it was increased to 8% but in the year 2009-2010.68 445. .94 7358.
200808 09 years 200910 .CHART : 18 Selling and administration expences 10 8 Ratio 5 5 3 3 3 0 200506 200607 2007.
The fixed asset ratio are measure the utilization of fixed asset. The ratio is very low expected last year. The absolute liquid ratio implies in last year was slightly increased because the company should keep cash to meet day to day expenses. This two year the working capital implies less utilization. Because increase the debtor and cash & bank balances in last year. The working capital was increased trend 2008-2009 and 2009-2010.94. So the company was making high sales. The proprietary ratio was fluctuating trend. the company can make use low cost fund in future. Because increase the value of asset in future. The fixed asset is increasing trend. It indicates the shareholders are more than 50% are investment in total asset. and high investment in stocks. Because the company marked inefficient management of debtor or sales and debts was collected in 50 days in last years. The debtor’s turnover ratio indicates the last two year decreased. Inventor’s turnover ratio implies the company has made low sales because more days are taken to clear the stock. The liquid ratio was declining trend in 2009-2010. . So it was satisfactory. In last year the ratio was decreased 0. Debt equity ratio helps to measure the extend to which debt financing to the business.CHAPTER-V FINDINGS: The current ratio was a fluctuating trend from 2005-2006 to 2009- 2010. Because this is due to increased in debtor and cash & bank balances.
Operating profit ratio also implies the profit has been increased compared to previous year. the company has making the sales in proportionally. The gross profit ratio was 10% in four year. The exp4ences ratio of the company was decreasing. Because the company was make low amount of cost of goods sold. because to make the high sales. . Because the cost of goods sold is slightly variation. The net profit ratio implies the profitability position of the company has increased in 2009-2010 and sales are growing up.
The company should increase the long term debt. To reduce the investor cost of the company must follow average inventory system.SUGGESTION The current ratio and absolute ratio was maintained lower cash than ideal ratio. The debt collection period can be reduced with in 30days. . Otherwise. So. the company cab take step to increase the cash position to meet its expenses. The company is allowed credit period for 50 days. the company was making investment in current asset and reducing cost of sales at the same time increasing sales and profit was good in earlier days.
. Long term solvency position of company was satisfactory. The liquidity position should be increase the company.CONCLUSION: The project entitled “A STUDY OF FINANCIAL PERFORMANCE ANALYSIS OF ASHOK LEYLAND COMPANY LIMITED “was undertaken with the objective of financial performance and to examine profitability performance of the company. In over all performance of “ASHOK LEYLAND LIMITED” was good. From the study gross profit and net profit position was good.
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