P. 1
pak suzuki co.taimoor tk

pak suzuki co.taimoor tk

4.75

|Views: 938|Likes:
Published by muhammadtaimoorkhan

see my profile to get copy
assignments, projects, business

see my profile to get copy
assignments, projects, business

More info:

Published by: muhammadtaimoorkhan on Jul 27, 2009
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as DOC or read online from Scribd
See more
See less

05/11/2014

History of the Company

:
Pak Suzuki Motor Company Limited (PSMC) is a public limited company with its shares quoted on Stock Exchanges in Pakistan. The Company was formed in August 1983 in accordance with the terms of a joint venture agreement concluded between Pakistan Automobile Corporation Limited (representing Government of Pakistan) and Suzuki Motor Corporation (SMC) - Japan. The Company started commercial production in January 1984 with the primary objective of progressive manufacturing, assembling and marketing of Cars, Pickups, Vans and 4 x 4 vehicles in Pakistan. The foundation stone laying ceremony of the company's existing plant located at Bin Qasim was performed in early 1989 by the Prime Minister then in office. By early 1990, on completion of first phase of this plant, in-house assembly of all the Suzuki engines started. In 1992, the plant was completed and production of the Margalla Car commenced. Presently the entire range of Suzuki products currently marketed in Pakistan are being produced at this Plant. Under the Government's privatization policy, the Company was privatized and placed directly under the Japanese management in September 1992. At the time of privatization, SMC increased its equity from 25% to 40%. Subsequently, SMC progressively increased its equity to 72.8% by purchasing remaining shares from PACO. The total foreign investment brought in by SMC- Japan since inception stands at Rs. 1026.36 million. The Suzuki Management immediately after privatization started expansion of the Bin Qasim Plant to increase its installed capacity to 50,000 vehicles per year. The expansion was completed in July 1994. Keeping this in view, the company's long term plans inter-alia includes tapping of export markets. The company has acquired additional land measuring about 30 acres from Pakistan Steel Mills Corporation in proximity to its Bin Qasim Plant to set up production facilities for manufacture of some local components. The Company continues to be in the fore-front of automobile industry of Pakistan. Over a period of time, the company has developed an effective and comprehensive network of sales, service and spares parts dealers who cater to the needs of customers and render effective after sale service country wide. PSMC is serviced by over 180 active vendors who are engaged in the local manufacture and supply of automotive parts to the company.

1

COMPANY INFORMATION BOARD OF DIRECTORS • • • • • • • Yasuo Suzuki Capt. (Retd) Bashir Ahmed Katsuichiro Ota Sokichi Nakano Yoshio Saito Tariq Iqbal Khan Koki Imamura Chairman & Chief Executive. Deputy Managing Director Director Director Director Director Director

COMPANY SECRETARY • Abdul Harold Bhombal

AUDITORS • • Sidat Hyder Qamar & Co. Chartered Accountants COMPANY KEY”S OBJECTIVE: • • • • To provide automobiles of international quality at reasonable prices. To provide automobiles of international quality at reasonable prices.

To improve skills of employees by imparting training and by inculcating in them a sense of participation. To abide by the deletion policy of the Government, achieve maximum indigenization and promote the automobile vending industry.

2

Pak Suzuki Motor Company Ltd
Balance Sheet
AS AT JUNE 30, 2000, 2001, 2002
Rupees in Thousands SHARE CAPITAL AND RESERVES Authorized share capital 150,000,000 (2000: 150,000,000) ordinary shares of Rs.10/- each Issued, subscribed and paid-up share capital Reserves LIABILITIES Deferred taxation Current liabilities Bills payable Short term running finances Security deposits Creditors, accrued and other liabilities Advances from customers Provision for customs duties and sales tax Proposed dividend 2000 2001 2002

1,500,000 ========= = 491,312 1,316,528 ---------1,807,840 99,000 926,032 ………. 60,316 393,545 515,122 152,770 39,305 ---------2,087,090 ---------3,993,930 ========= = 1,185,857 30,075 9,292 --

1,500,000 ========= = 491,312 1,268,820 ---------1,760,132 97,000 644,480 1,290,619 61,703 316,666 241,325 155,770 ----------2,710,563 ---------4,567,695 ========= = 1,353,158 35,675 10,226 15,797

1,500,000 ======== 491,312 1,285,840 ------------1,777,152 97,000 725,690 -65,240 326,265 495,321 156,960 45,320 ---------1,814,796 ------------3,688,948

COMMITMENTS Total share holders' equity and liabilities

ASSETS Tangible fixed assets 4Long-term investments Long-term loans, deposits and prepayments Deferred costs Current assets Stores, spares and loose tools Stocks Trade debts Loans, advances and prepayments Advance income tax - net Sales tax adjustable Accrued income and other receivables Cash and bank balances

1,411,123 42,260 10,450 16,240

Total assets

29,279 1,535,836 44,456 47,217 325,351 32,165 25,159 729,243 ---------2,768,706 ---------3,993,930

41,122 1,913,050 577,264 57,591 305,250 6,635 19,974 231,953 ---------3,152,839 ---------4,567,695

46,332 1,965,120 587,966 59,756 350,420 36,821 26,468 988,250 --------4,061,133 5,541,206

3

Pak Suzuki Company Ltd
Income Statement
FOR THE YEAR ENDED JUNE 30, 2000 2001, 2003
Rupees In Thousands Net sales Cost of sales Gross profit Selling and administration expenses Operating profit Other income 2000 7,976,122 7,599,439 ---------376,683 201,729 ---------174,954 27,688 ---------202,642 Financial and other charges Reversal of provision for diminution in market value of WAPDA Bonds Provision for diminution in the value of investments Profit before taxation -5,600 ---------78,080 124,562 Taxation Profit/(loss) after taxation Unappropriated profit brought forward Profit/(Loss) available for appropriation Appropriations Transfer to/(from) general reserve Proposed cash dividend @ 8% (2005: Nil) 47,000 39,305 ---------86,305 ---------Unappropriated profit carried forward 708 ========== -25182 -----------25182 ----------========== 49,000 41,455 --------90,455 -------918 ========= 37,549 ---------87,013 ----------87,013 -74250 ----------147,721 1,924 28,524 ----------26600 1,418 ----------25182 ---------85,921 119,445 28,985 ---------90,460 -------90,460 72,480 2001 6,889,145 6,578,898 ---------310,247 234,790 ---------75,457 74,180 ---------149,645 221,971 2002 8,213,245 7,853,909 ----------359,336 210,540 ---------148,796 56,570 ----------205,366 85,921

4

Pak Suzuki Company Ltd Cash Flow Statement
FOR THE YEAR ENDED JUNE 30, 2000, 2001, 2002
Rupees In Thousands Cash flow from operating activities Cash generated from operations Financial charges paid Taxes paid Long-term loans (net) Long-term deposits and prepayments - net 1,672,861 -88213 -55651 -299 1,233 ---------Net cash inflow from operating activities Cash flow from investing activities Fixed capital expenditure Investment in shares Sale proceeds on disposal of fixed assets Sale proceeds of WAPDA Bearer Bonds Sale proceeds of investment Mark-up on cash deposits, advances to suppliers and income from investment 15,757 ---------Net cash (outflow)/inflow from investing activities Cash flow from financing activities Advances from customers - net Dividends paid Net cash inflow/(outflow) from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year 273,797 -79 ---------273,718 ---------1,787,909 -1058666 ---------729,243 ========== 73,873 -181997 ----------108124 ---------1,097,121 -2155787 ----------1058666 ========== 275,854 -82 --------275,772 ---------1,789,963 -1010720 ---------779,243 ======== (15,740) 68,692 ---------238,289 25,689 --------(6,087) -35645 -4,148 ---262651 -29175 8,500 450,000 2,923 -36456 -4,680 --1,529,931 1,406,705 -241507 -197003 541 -1780 ---------966,956 1,782,254 -75981 -60875 -345 2,120 --------1,647,173 2000 2001 2002

5

6

Common Size Analysis of Pak-Suzuki Motor Company Ltd.
Balance Sheet: Vertical Analysis for the years 2000, 2001 and 2002: While doing the vertical analysis of Pak-Suzuki Motor co. we have taken the total assets as a base.  Share Capital and reserves share: If we look at the analysis we come to know that percentage of share capital in total assets has constant over the years. So the vertical analysis of 2000, 2001 and 2003 has different percentages which shows that in year 2001 it has decreased by 5% while the next year mean 2002 jump or increased 40.66% as compared to the last year of the firm. This suggests that the firm suffered from losses during 2001 years which reduced its total assets. In the case of reserves the reserves for the firm are classified as capital and revenue. The reserves amount of three years are the same as Rs. 491,312 respectively in thousands. While calculating the vertical percentage of the reserves we have gradual increase in the percentage of vertical.  Liabilities: The firm has different liabilities in three years. However the firm relied heavily on loans to fulfill its financing needs. The year 2000 has a heavy bills payable but this decrease year by year. The over all liabilities of the firm is increasing constantly with the percentage of 52.26%, 59.34% but last year has a low liability as compared to other years with 49.20. The firm’s long term liabilities increased due to the following effect on the ratio. • The denominator total assets decreased due to losses suffered by the firm in these years, which increased the ratio. • The increase in the amount of loan i-e increase in the numerator of the ratio, which also increased the ratio.

ASSETS:  Fixed Assets: The fixed assets of the firm show a gradual decrease year by year from 200, 2001 to 2002. This slight decrease may be due to the decrease in the net assets of the firm due to the losses rather than due to any capital expenditure done on the fixed assets. The long 7

term investment show a slight increase in the percentage but long term loans, deposits and repayments of the firm is decreasing with a slight percentage. This mainly show to improve the cash flow situation of the firm. This also suggests that the firm is facing cash shortage problems.  Current Assets: In current assets the firm stores, spares and loose tools are increasing slightly with the percentage of 0.73, 0.90 and 0.84 respectively but in the year 2002 it decreases. Stocks increased in 2000 and 2001 but it decrease in year 2002 with the percentage of 38.45%, 41.88% and 35.46 respectively of total assets., showing great increase and causing severe cash shortage problem to the firm in that year. Short term investments of the firm are also showing a continuous decrease both in monetary terms and as percentage to total assets. They also reflect the losses and the cash shortage problems faced by the firm in these years. The trade debts show a mixed picture during the years in the year 2000 it has less amount with less percentage as compare to other years. In year 2001 it has an increased in the trade debts but also decrease in 2002. The over all current assets of 2000 and 2001 are the same percentage but it is slightly high in 2002 as compare to other years of 2000 and 2001. Horizontal Analysis for the years 2000, 2001 and 2002: In the analysis year 2000 as the base year and horizontal analysis is done taking the values of 1996 as a base.  Share Capital and reserves: The share capital of the firm remains constant in the three years of analysis. They remain at 100% in the years that is the share capital neither decreased nor increased during these years. The capital reserves show a slight increase in the year 2001 by only 96.38 and in 2001 it is 97.67 which is slightly high as compare to the previous data. This shows the 8

commitment of the organization to expand in the future as the firm constantly maintains this reserves and even increased it a little even though that the firm suffered heavy losses in these years.  Liabilities: In liabilities side the bills payable is increased from 96.60% to 78.37%. There were no debentures in the years 1997 and 1998. The long term loans show a great increase in the years of analysis. This show a great increase in the long term debt of the firm. It also reflects that the firm is relying on debt to fulfill its capital requirements rather than any other source of finance. The tax provision was also increase in the year 2002 than 2001 and 1998.  Fixed Assets: They show a constant increase over the years, it shows that capital investment is done in fixed assets, it also shows that the long term investment was increased year by year with new capital of the firm. The firm long term loans, deposits and repayments slightly increase with the percentage of 110.05% to 112.46% it means that the firm makes further investment in their operations.  Current Assets: Same situation with the current assets it shows an increasing trend in the year 2001 with 140.45% and 158.24% in 2002. Trade debts and stocks also increase slightly, it means the over all current assets of the firm is slightly increasing year by year. The main considering issue of the business is the cash and bank balances but it shows a different percentage as we compare to the year. In year 2001 it was 31.81% which is not enough as compare to the 2002 where it is 135.52% which is a huge difference and in year 2001 the firms also get loss.

9

Common Size Analysis with Horizontal Analysis Income Statement The net sales of income statement of 2004 analysis of horizontal is same because we over all divide the each amount with each other the result would be the same. So analyzing the income statement the net sales increases from 86.37% to 102.97% in 2001 and 2002, it shows an increase in volume of sales. Same situation the gross profit margin increased which represented managerial and production efficiency in this year. But in 2001 the gross profit decrease again due to high cost of production in this year as compare to 2000 year and 2001. The selling and administration expenses decrease slightly in 2001 and 2002 from 116.39% to 104.37%, less expenses shows high operating profit. The other income also decrease in 2001 and 2002 from 267.91% to 204.31%. The increase in the year shows more efficient production as compare to 2002. Financial charges also decreases in 2002 but high in 2001 which reflects the long term debts. And taxation increased 2002 with 77.19% as we compare with the previous record that is 75.96%. Vertical Analysis. Vertical analysis gives a more insight of the cost and revenue structure of the firm during the years The gross profits of the firm decreases from 4.72% to 4.50% in 2000 and 2001 and in 2002 it also decreases with 4.38%. This represents production efficiency or reduced cost of inputs in the year. The decrease also shows high percentage of cost of sales in the year. The selling and administration expenses it increases in 2001 with 3.41% but low in 2000 and 2001 with 2.53% to 2.56%, but it does not create severe effect on the operating profit of the firm and a similar trend of operating profits was observed in years as that gross profit. Operating profit of the firm slightly decreases in 2001 and 2002 from 1.10% to 1.81% because in these tow years we have higher expenses as compare to the 2000, that is why it show less operating profit in these two years. Other income of the firm increases in 2001 with 1.08% and in 2002 it is 0.69 is higher than year 2000.

10

Financial charges only highly increase in year 2001 as compare to the 2000 and 2002 that may be the high debts of the firm for expending their operation. Taxation decreases in 2002 with the percentage of 0.35 and in 2001 it is 0.41 as compare to its previous year

11

FINANCIAL RATIO ANALYSIS
We will analyze the firms performance by calculating and interpreting 4 basic types of Financial Ratios but here we calculate according to the chapter topic. Usually we have these four basic types of fianancial ratios 1. 2. 3. 4. Activity Ratios Debt Ratios Profitability Ratios Market Ratios

According to the Book chapter we have different ratios in different according to the topic, so each ratio is calculated to the chapter ratios, here we have four different chapter of the book. 1. 2. 3. 4. Chapter 7: Chapter 8: Chapter 9: Chapter 10: (Liquidity Of Shot Term Assets; Related Debt Paying Ability) (Long Term Debt Paying Ability) (Analysis of Profitability) (Analysis For Investor)

According to this chapter we calculate each ratios of Pak Suzuki Motor Company limited for year 2004, 2005 and 2006.

12

13

All ratio formulae regarding this chapter And Solution
• Gross Receivables Days Sales In Receivables = ----------------------------------------------Net Sales / 365 2000 44,456 =--------------------7,976,122 / 365 = 2.03

2001

577,264 =------------------------- = 30.58 6,889,145 / 365 587,966 =---------------------------- = 26.13 8,213,245 / 365

2002

Net Sales Accounts Receivables Turnover =---------------------------------------Average Gross Receivables 7,976,122 =--------------------------310,860 6,889,145 =---------------------------582,615

2000

=

25.66

2001

= 11.82

Average Gross Receivables Accounts Receivables Turnover in Days =-----------------------------------------Net Sales / 365

14

2000

310,860 =-------------------------------- = 14.23 7,976,122 / 365

2001

582,615 =-----------------------------6,889,145 / 365

= 30.86

Ending Inventory Day’s Sales In Inventory =---------------------------------------Cost of Goods Sold / 365 1,535,836 =--------------------------------- = 73.76 7,599,439 / 365 1,913,050 =-----------------------------6,578,898 / 365 1,965,120 =---------------------------7,853,909 / 365

2000

2001

= 106.14

2002

= 82.03

Cost of Goods Sold Inventory Turnover =-----------------------------------Average Inventory

2000

7,599,439 =----------------------------1,724,443

= 4.41

15

2001

6,578,898 =-------------------------- = 3.39 1,939,085

Average Inventory Inventory Turnover in Days =----------------------------------------Cost of Goods Sold / 365

2000

1,724,443 =-----------------------------7,599,439 / 365 1,939,085 =---------------------------6,578,898 / 365

= 82.82

2001

= 107.58

Operating Cycle = Accounts Receivables Turnover + In Days

Inventory Turnover in Days

2000

= 14.23 + 107.58

= 109.05

2001

= 30.86 * 107.58

= 138.44

Current Assets Current Ratio =------------------------------------Current Liabilities 2,768,706 =--------------------------- = 1.33 2,087,090

2000

16

2001

3,152,839 =---------------------------2,710,563

= 1.16

2002

4,061,133 =---------------------------1,814,796

= 2.24

Cash Equivalents + Marketable Securities + Net Receivables Acid Test Ratio =---------------------------------------------------------------------Current Liabilities

Cash Equivalents + Marketable Securities Cash Ratio =-------------------------------------------------------------Current Liabilities Sales Sales To Working Capital =----------------------------------------------------Average Working Capital

2001

7,976,122 =-----------------------561,946

= 14.19

2001

6,889,145 =-------------------------1,344,307

= 5.12

17

Solved Calculation of All above Ratio formulae
Ratios
Day's Sales In Receivables Account Receivables Turnover Account Receivables Turnover in Days Day's Sales in Inventory Inventory Turnover Inventory Turnover in Days Operating Cycle Current Ratio Acid-Test Ratio Cash Ratio Sales to Working Capital 14.19 5.12

2000
2.03 25.66 14.23 73.76 4.41 82.82 109.05 1.33

2001
30.58 11.82 30.86 106.14 3.39 107.58 138.44 1.16

2002
26.13

82.03

2.24

Interpretation And Analysis of Each Ratio
 Day's Sales In Receivables: This shows that how firm is efficient in collection of receivables. While looking the ration of this it shows with huge difference in three years. In 2000 it is 2.03% which shows efficiency of the management that how they manage their receivable. In 2001 it is 30.58% it may shows a high volume of sales on account and same situation in year 2002 it is 26.13%. It means the over receivable in days are quite in year 2000 as compare to 2001 and 2002.  Account Receivables Turnover: Computation at the end of 2000 and 2001. The turnover of receivables slightly decreases between 2000 and 2001 form 25.66% per year to 11.82% times per year. Which indicates the liquidity of the receivables. In this situation the firm tends to overstate it account receivable turnover, thus overstating its liquidity.  Account Receivables Turnover in Days: It expressed in terms of days instead of times per year. The computation of this ratio shows an increase as compare to the previous data like in 2000 it is 14.23% and 30.86% in 2001, basically it shows range of net sales in a days, which is obviously fine as compare to the previous year.  Day's Sales in Inventory: The days sales in inventory estimates the number of days that it will take to sell the current inventory. While analyzing the ratio it shows slightly increase in the year 18

2000 and 2002 but there is an high increase in 2001 with 106.14% it means in this year the inventory is not controlled properly as compare to other years.  Inventory Turnover: It indicates the liquidity of the inventory. The calculation shows a slight decrease in 2000 and 2001 from 4.41% to 3.39%. In this situation the firm tends to overstate inventory turnover due to liquidity of its inventory.  Inventory Turnover in Days: It shows the number of days instead of times per year. The computation of this ratio shows an increase in inventory turnover. In 2000 its ratio is 82.82% and 107.58% in 2001.  Operating Cycle: This computation consists of combination of days sales in ending receivables and the number of days in sales in ending of inventory. The calculation of this ratio shows that an increase in 2001 with 138.44% as compare to the previous data of 2000 it is 109.05% this indicates moderate liquidity at the end of the year.  Current Ratio: It determines the short term debt paying ability. It increase slightly in 2000 and 2001 from 1.33% to 1.16% and in 2002 it shows 2.24%.  Acid-Test Ratio:

 Cash Ratio:

 Sales to Working Capital:

19

20

All ratio formulae regarding this chapter and solution
• Operating Income Times Interest Earned =-----------------------------------------------------Interest Expense + Capitalized Interest 174,952 =---------------------72,480 75’457 =-------------------221,971 148,796 =---------------------85,921

2000

= 2.41

2001

= 0.34

2002

= 1.73

Operating Income Fixed Charge Coverage =-----------------------------------------------------Interest Expense + Capitalized interest + Interest Portion of Rentals

Its calculation is same because we have not any interest portion of rentals in our financial report of the company so, that is why calculating without rental our result would be the same as above. Total Liabilities Debt Ratio =----------------------------------------Total Assets 99,000+2,087,090 =--------------------------------3,993,930 97,000+2,710,563 =----------------------------------

2000

= 0.55

2001

= 0.61 21

2002

4,567,695 97,000+1,814,796 =---------------------------------5,541,206

= 0.35

Total Liabilities Debt / Equity Ratio =-----------------------------------------Shareholder’s Equity 99,000+2,087,090 =-----------------------------------1,807,840 97,000+2,710,563 =----------------------------------1,760,132 97,000+1,814,796 =----------------------------------1,777,152

2000

= 1.21

2001

= 1.61

2002 `

= 1.08

Total Liabilities Debt To Tangible Net Worth =---------------------------------------------------------Shareholder’s Equity – Intangible Assets

Debt to tangible net worth also show same result while calculating the ratio because, the firm has not any intangible assets in its financial report that is why its results same as the debt / equity ratio shows.

Solved Calculation of All above Ratio formulae
Ratios
Times Interest Earned Fixed Charge Coverage Debt Ratio Debt / Equity Ratio Debt to Tangible Net Worth

2000
2.41 2.41 0.55 1.21 1.21

2001
0.34 0.34 0.61 1.61 1.61

2002
1.73 1.73 0.35 1.08 1.08

Interpretation And Analysis of Each Ratio
22

 Times Interest Earned: Time earned ratio indicates a Suzuki long term paying ability from the income statement. Suzuki have very low time interest earned ratio. In 2001 time interest ratio is high as compare to 2002 because in 2001 company is in profit and have a fund to meet the debt obligation. But in 2002 Suzuki’s time interest earned ratio is low because in 2002 Suzuki was in loss.  Fixed Charge Coverage: Suzuki has no fixed asset on lease so they haven’t any interest portion of rentals. So ratio of time interest earned and fixed charge coverage will be the same.

 Debt Ratio: Debt ratio indicate the Suzuki long term debt ability from it balance sheet. In 2000 and in 2001 debt financing is more then 50%. It shows that financial institution have confidence on Suzuki. Because of lose in 2001 debt ratio is decline. Company have borrow to fulfill the gap of lose in 2001. so ratio is higher as compare to previous year.

 Debt / Equity Ratio: Debt equity ratio is very high in all three years. But it is more high in 2001. its indicates that out side financing is higher then share holder equity provide.

 Debt to Tangible Net Worth: It is more conservative approach to analyses the outsider financing and shareholder equity. But Suzuki has no intangible asset so this ratio is same to debt equity ratio.

23

24

All ratio formula regarding this chapter
Net Income before Minority Share Of Earnings and Nonrecurring items Net Profit Margin =----------------------------------------------------------------Net sales 87,013 =-------------------------------------7,976,122 (26,600) =--------------------------------------6,889,145 90,460 =---------------------------------------8,213,245

2000

= 0.01

2001

= -0.004

2002

= 0.011

Net sales Total Asset Turnover =-----------------------------------------Average Total Assets 7,976,122 25

2000

=-------------------------------------4,280,812.5 6,889,145 =-------------------------------------5,054,450.5

= 1.86

2001

= 1.36

Net Income before Minority share of earnings and non recurring items • Return on Assets =------------------------------------------------------------Average Total Assets 2000 87,013 =-------------------------------------4,280,812 (26,600) =-------------------------------------5054450.5 = 0.02

2001

= -0.0052

Du Pont Return on Assets = Net Profit Margin * Total Asset Turnover 2000 2001 = (0.01)(1.86) = (-0.004) (1.36) = 0.0186 = -0.00544

Operating Income Operating Income Margin =------------------------------------------Net Sales 174,954 =---------------------------------7,976,122

2000

= 0.0219

26

2001

75,457 =---------------------------------6,889,145 148,796 =----------------------------------8,213,245

= 0.0109

2002

= 0.0181

Net Sales Operating Asset Turnover =-------------------------------------------Average Operating Assets 7,976,122 =--------------------------------2,450,667.5 6,889,145 =-----------------------------------5,015,483

2000

= 3.25

2001

= 1.37

Operating Income Return on Operating Assets =------------------------------------Average Operating Assets 174,954 =-----------------------------------2,450,667.5 75,457 =-----------------------------------5,015,483

2000

= 0.071

2001

= 0.015

Du Pont Return On = Operating Income * Operating Asset Operating Assets Margin Turnover 2000 = (0.0219)(3.25) = 0.071 27

2001

= (0.0109)(1.37)

= 0.015

Net Sales Sales to Fixed Assets =--------------------------------------------------Average Net Fixed Assets (Exclude Construction in Progress) 7,976,122 =---------------------------------------1,269,507.5 6,889,145 =-------------------------------------1,382,140.5

2000

= 6.28

2001

= 4.98

Net Income before Minority Share Of earnings and non recurring items + [(Interest Expense) * (1—Tax Rate)] Return on Investment =-------------------------------------------------------------Average (Long-Term Liabilities + Equity)

2000

87,013+ (72,480) (0.65) =------------------------------------------1,890,496

= 0.071

2001

-26600+ (221,971) (0.65) =----------------------------------------1865642

= 0.063

Net Income before Non recurring items -Dividends on Redeemable Preferred Stock Return on Total Equity =----------------------------------------------------------Average Total Equity

28

2000

870,013 =-----------------------------------------1,783,986 (26,600) =-----------------------------------------1,768,642

= 0.048

2001

= -0.015

Net Income before Non recurring items -Preferred Dividends Return on Common Equity =----------------------------------------------------Average Common Equity

2000

87,013 + 72,480 =-------------------------------------------4,280,812.5 (26,600) + 221,971 =------------------------------------------5,054,450.5

= 0.003

2001

= 0.038

Gross Profit Gross Profit Margin =--------------------------------Net Sales

2000

376,683 =---------------------------------------7,976,122 310,247 =--------------------------------------6,889,145

= 0.047

2001

= 0.045

29

2002

359,336 =---------------------------------------8,213,245

= 0.043

Solved Calculation of All above Ratio formulae
Ratios
Net Profit Margin Total Asset Turnover Return on Assets Du Pont Return on Assets Operating Income Margin Operating Asset Turnover Return on Operating Assets Du Pont Return on Operating Assets Sales to Fixed Assets Return on Investment Return on Total Equity Return on Common Equity Gross Profit Margin

2000 0.01 1.86
0.002 0.0186

2001 -0.004 1.36
0.0052

2002 0.011

0.0219 3.25 0.071 0.071 6.28 0.071 0.048 0.003 0.047

-0.00544 0.0109
1.37 0.015 0.015 4.98 0.063 0.015 0.038 0.045

0.0181

0.043

Interpretation And Analysis of Each Ratio
 Net Profit Margin: This ratio gives the measure of net income dollars generated by each dollars of sales. Every firm try to increase it net profit margin ratio. This ratio show that in 2000 Suzuki’s net profit margin is very low; in 2001 it

30

is also shows that its profit margin is in negative. And next year is in positive that shows that company is gradually increasing its profits.

 Total Asset Turnover: This ratio shows how Suzuki have ability to generate sale through its assets. This is indicating that total asset turnover is decreasing. It is decreasing because in 2001 company was in lose.  Return on Assets: This ratio shows that how much Suzuki asset is producing profits. Suzuki return on assets ratio shows that company is not using its asset properly because it is not is producing much profit.  Operating Income Margin: Operating income margin of Suzuki shows the significant decrease in 2001. and small increase in 2002. operating income has less portion in its sale. Its shows that Suzuki cost of goods sold is very high.  Operating Asset Turnover: In 2000 company OAS was 3.25 time per year but is decrease in 2001. this ratio shows that company operating asset is generating a 3.25 time per year profits.

 Return on Operating Assets: Return on operating asset is decreasing in 2001.this show Suzuki operating asset is not generating enough operating income.

 Sales to Fixed Assets: This ratio shows that how Suzuki fixed asset is producing its sale. Suzuki is fixed asset incentive firm. So this ratio is show that Suzuki fixed asset is producing 6.28 and in next year it is gradually decrease. 31

 Return on Investment: It ratio shows earning performance of the Suzuki without regard to the way the investment is financed. It shows how Suzuki utilize its asset. This ratio is decrease substiantly. Because company has faced the lose in 2001.  Return on Total Equity: This ratio shows that how Suzuki is utilizing its total equity. Suzuki is ROE is 4.8 that is decreasing in next year.

 Return on Common Equity: This ratio shows that how Suzuki is utilizing its total equity. Suzuki’s return on common equity is increasing gradually.  Gross Profit Margin: Gross profit of Suzuki is gradually declining. That shows that Suzuki gross profit has less part in its sales. Company cost of buying is increasing. And Suzuki selling price is decreasing due to great competition with imported car.

32

33

All ratio formulae regarding this chapter
Earnings before Interest and Tax Degree of Financial leverage =---------------------------------------------------Earnings before Tax

Earnings before interest, tax, Minority Share of Earnings, Equity Income, And Nonrecurring items All-Inclusive Degree of =------------------------------------------------------------Financial Leverage Earnings before Tax, Minority Share of Share of Earnings, Equity Income, and Nonrecurring items

Net Income – Preferred Dividends Basic Earnings =----------------------------------------------------------Per Common Share Weighted Average Number of Common Share Outstanding

Market Price per Share Price / Earnings Ration =------------------------------------------Diluted Earnings per Share

Net income – all dividend Percentage of Earnings Retained =---------------------------------------------------Net Income 87,013-39,305 34

2000

=----------------------------87,013 -26,600-0 =----------------------------26,600 90,460-41,455 =---------------------------90,460

= 0.55

2001

=1

2002

= 0.54

Dividend per Common Share Dividend Payout =-------------------------------------------------Diluted Earnings per Share

Dividend per Common Share Dividend Yield =----------------------------------------------------Market Price per Common Share

Total Stockholder’s Equity – Preferred Stock Equity Book Value per Share =----------------------------------------------------------------Number of Common Shares Outstanding 1,807,840 = ----------------------------150,000,000 1,760,132 = -----------------------------150,000,000 1,777,152 = ----------------------------150,000,000 Stock Options Outstanding 35

2000

= 0.012

2001

= 0.011

2002

= 0.011

Materiality of Options =--------------------------------------------------Number of Shares of Common Stock Outstanding

Solved Calculation of All above Ratio formulae
Ratios
Degree of Financial Leverage All-Inclusive Degree of Financial leverage Basic Earnings per Common Share Price / Earnings Ratio Percentage of Earnings Retained Dividend Payout Dividend Yield Book Value per Share Materiality of Options

2000

2001

2002

Interpretation And Analysis of Each Ratio
 Degree of Financial Leverage:

 All-Inclusive Degree of Financial leverage:

 Basic Earnings per Common Share:

 Price / Earnings Ratio:

 Percentage of Earnings Retained: 36

This ratio indicates that how much cash company retained for the future investment. In year 2000 company retained more then 50% of the amount. But in next year Suzuki can’t retained because in 2001 company was in lose. And in 2002 company retained more then 54% of its profits. And 46% distribute in share holder.  Dividend Payout:

 Dividend Yield:

 Book Value per Share: This ratio indicates the amount of stockholder equity that relate to each share of outstanding common stock. This ratio shows that Suzuki book value is same in all years.  Materiality of Options:

37

Operating cash flow / current Operating cash flow Maturities of long term debt and =----------------------------------------Current notes payable . current maturities of long term Debt and current notes payable

38

Note: The ration can not be solved because there is no portion of long term debts in our current notes payables. • Operating cash flow Operating cash flow/ total debt =---------------------------------------Total debt 1,529,931 =----------------------------2,087,090 966,956 =---------------------------2,710,563 1,647,173 =--------------------------1,814,796

2000

= 0.73

2001

= 0.36

2002

= 0.91

operating cash flow – preferred dividends Operating cash flow per share =-----------------------------------------------------------Common shares outstanding 1,529,931 - 0 =----------------------------150,000 966,956 =------------------------150,000 1,647,173 =-----------------------150,000

2000

= 10.19

2001

= 6.44

2002

= 10.98

operating cash flow Operating cash flow / cash dividends =-----------------------------------Cash dividends 1,529,931 =------------------------

2000

= 19366.22 39

79 2001 966,956 =---------------------181,997 1,647,173 =----------------------82 = 5.31

2002

= 20,087.47

Solved Calculation of All above Ratio formulae
Ratios Operating cash flow / total debt Operating cash flow per shares Operating cash flow / cash dividend 2000 0.73 10.19 19,336.22 2001 0.36 6.44 5.31 2002 0.91 10.98 20,087.47

Operating cash flow / total debt: This ratio indicates that how much the firm ability to pay debt in a year. The 2001 is low as compare to 2000 and 2002 from 73% to 93% which is a very good paying ability of debt in these two years. Operating cash flow per shares: This ratio tells us about the share that in one share how much cash receive against the share. The computation of this ratio indicates low ratio in year 2001 but high in 2000 and 2002 from 10.19 to 10.98 which show positive cash against the share. Operating cash flow / cash dividend: This ratio tell us that how much cash dividend pay on cash flow, in 2000 it has very good paying ability of dividend with a very good amount as compare to year 2001. And same situation of paying dividend in year 2002 was also good paying ability of dividend.

40

You're Reading a Free Preview

Download
scribd
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->