Indus Motor Company Ltd (Financial analysis

)
Presented By:
Muhammad Tahir Khan Reg # 2908

Presented to : Sir Iqbal Lalani

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I N T HE N AME O F A LLAH W HO I S M OST B ENEFICIAL & M ERCIFUL

³R

i the name of thy Lord, Who created.

He created man from a clot. Read and thy Lord is most Honorable. Who tough man what he knew not´ (Al-Quran 96:1-5)

Indus Motors Company Ltd | Iqra Univ rsity

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PR E F A C E
Every praise is due to Allah Alone, the merciful and His Prophet (P.B.U.H), who is forever a torch of guidance and knowledge for humanity as a whole. The purpose of this research report is to compare the Present Micro Financing Structure with Debt Efficiency Management Model (DEM) as modified micro financing structure. As per the requirement of this research report, researcher has selected two micro financing banks i.e. Tameer Bank and Rozgar Bank. So researcher will first compare both models and then decide which one is efficient and researcher hope that his report may reflect a part of it. There has been a great deal of time and effort incurred in the preparation of this research report and the work will be considered justified if the knowledge gained is used to understand the main purpose of researcher report. Muhammad Tahir khan MBA 2908

Indus Motors Company Ltd | Iqra Univ rsity

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Table of Contents
Introduction ................................ ................................ ................................ .......................... 5 Company Profile: ................................ ................................ ................................ .................. 5 Core Value:................................ ................................ ................................ ........................... 6 Bankers:................................ ................................ ................................ ................................ 6 Auditors ................................ ................................ ................................ ................................ 7 Legal Advisor ................................ ................................ ................................ ....................... 7 FINANCIAL ANALYSIS: ................................ ................................ ................................ ... 8 1. Current Ratio................................ ................................ ................................ .............. 8 2. Quick Ratio ................................ ................................ ................................ ................ 8 3. Average Collection Period ................................ ................................ .......................... 8 4. Fixed Assets Turnover ................................ ................................ ................................ 8 5. Debt Ratio ................................ ................................ ................................ .................. 8 6. Debt-to-Equity Ratio ................................ ................................ ................................ .. 9 7. Gross Profit Ratio................................ ................................ ................................ ....... 9 8. Net Profit Margin ................................ ................................ ................................ ....... 9 9. Return on Assets (ROA) ................................ ................................ ............................. 9 10. Return on Equity (ROE) ................................ ................................ ......................... 9 Cross Sectional Analysis ................................ ................................ ................................ ......10

Indus Motors Company Ltd | Iqra Univ rsity

Indus Motor Company Ltd (Financial analysis)

Toyota Indus Motor Company
Driving forward with trust

Introduction
Indu Motor Company i one of the Automobile Companie which formed with the help if hou e of Habib, Toyota Motor Corporation, Toyota T u ho Corporation. It manufacture and Imports Cars and enjoys a healthy share in the market. It is competing with the Honda, Nissan, Suzuki and Mitsubishi. To sustain its lead IMC must maintain Strategic Competitive Advantage which is its Production Strength, Ability to produce Quality cars with respect to low cost and Research and Development in Hybrid and Bio Fuel Cars. But recently Company is in Stabilization mode trying to improve its functional area, consolidation of resources and maintaining SCA. In our pinion it is the best move made by IMC to Survive the Financial Holocaust. Indus Motors is the country's second largest auto manufacturer, after the Pak Suzuki Motors, located near Bin Qasim Karachi, having an assembling capacity of 55,000 units per annum. Its core business is to manufacture and market cars. In addition, the company also sells auto parts and accessories. Its product line includes 9 variants of Toyota Corolla, 8 variants of Daihatsu Cuore and 2 variants of Toyota Hilu . The company also offers si different imported vehicles namely Toyota Camry, Prado, Land Cruiser, RAV, Hilu and Hiace. Major contributor to the revenue is Corolla, having a contribution of 66.5% in company's sales.

Company Profile:
y y y

Name of the Company: Indus Motor Company Limited. Industry Type: Automobile Industry(Cyclical Major In estors:
1. House of Habib. 2. Toyota Motor Corporation Japan (TMC). 3. Toyota Tsusho Corporation Japan.

Indus Motors Company Ltd | Iqra Uni ersity

Indus Motor Company Ltd (Financial analysis)
Achieving market Leadership by Delivering Value to Customers by: 1. Following our ³Customer first philosophy in manufacturing and providing high quality vehicles and services that meet the needs of Pakistani customers. 2. Enhancing the quality an reach of our 3S Dealership Network 3. Employing customer insight and feedback for continuous corporate renewal, including producer development, improving service and customer care. Bringing Toyota quality to Pakistan 1. Ma imizing QRD (Quality, Reliability and Durability) by built-inengineering, 2. Transferring Technology and promoting Indigenization at IMC and Vendor. 3. Raising the bar I all corporate functions to meet Toyota Global Standards. ptimizing Cost by Kaizen 1. Fostering a Kaizen culture and mindset at IMC, its Dealers an Vendors. 2. Implementing Toyota Production System. 3. Removing waste in all areas and operating in the lowest cost quartile of the industry.
  ¡ ¢

Vision:
To be the most respected and successful enterprise, delighting customers with a wide range of products and solutions in the automobile industry with the best people and the best technology

Core Value:
y y y Customer satisfaction Team Work Ethics & Practices

Bankers:
1. ABN Amro Bank 2. Askari commercial Bank Limited 3. Bank Alfalah Limited 4. Bank Al Habib limited 5. The Bank of Tokyo-Mitsubishi UFJ, limited 6. Citibank N.A. 7. Habib Bank AG Zurich 8. Habib Bank Limited 9. Hong Kong & Shanghai Banking Corporation 10. Metropolitan Bank Limited 11. MCB Bank Limited 12. National Bank Limited 13. Soneri Bank Limited 14. Standard Chartered Bank 15. Union Bank Limited 16. United Bank Limited

Indus Motors Company Ltd | Iqra Uni ersity

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Auditors
M/s A.F. Ferguson & Co.

L gal Advisor
M/s A.K. Brohi & Company M/s Mansoor Ahmed Khan & Co. M/s Mahmud & Co. M/s Sayeed & Sayeed Co.

Indus Motors Company Ltd | Iqra Univ rsity

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FINANCIAL ANALYSIS:
All the value from balance sheet and profit & lost account are in Rupees and in billions. 1. C e t R ti = Current Assets Current Labilités
§ ¦ 

= 2.56

EXPLANATION: IMC has comfortable current ratio, thanks to its large cash balance. Company is in position to meet its current obligations. 2. Quick R ti = Current Assets ± Inventories Current Liabilities EXPLANATION: IMC acid test ratio showed that it has not sufficient liquid asset to meet is current obligations. 3. Ave ge C llecti Pe i 
 © ¨

EXPLANATION: Average collection period is satisfactory; it recovers its receivables in 5 Days 4. Fixe Assets Turnover = Total Sales Total fixed Assets EXPLANATION: Asset turnover ratio shows the level of sales generated with respect to productive capacity. The level and trend of sales is growing with respect to its investment in assets 

5. Debt R tio = 

Total Debt Total Assets 

¥ ¤¤£ 

=1.86

=

Accounts Receivable Annual Credit Sales / 365

=18 days

=10.27

=27.5%

Indus Motors Company Ltd | Iqra Univ rsity

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EXPLANATION:

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Indus Motor Company has sufficient assets to cover its debts. 6. Debt-to-Equit R tio = Total Debt Total Equity EXPLANATION: IMC is less leverage compare to other companies to finance there assets. The risk born by IMC is lower as compared to other companies 7. Gross Profit R tio = Gross Profit Sales EXPLANATION: 
 

= 0.4005

= 9.29%

Gross profit ratio of IMC shows that the firm¶s production and procurement efficiency is better than the industry Competitors.

8. Net Profit M rgin = Net Income Sales EXPLANATION:

=5.53%

The Profit Margin Ratio is used as a Measure of Profitability. Ratio shows that company earned 2.25 % on its sales. 9. Return on Assets (ROA) = EBIT Total Assets = 25.76%

EXPLANATION:

10. Return on Equit (ROE) = Net Income Stockholders Equity EXPLANATION:

The Return On Equity measures the profits after taxes, IMC ROE ratio shows that it has sufficient assets relative to shareholders investment.

!

= 6.12%

Indus Motors Company Ltd | Iqra University

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Cross Sectional Analysis
RATIOS
Current Ratio Quick Ratio Average Collection Period Fixed Assets Turnover Ratio Debt Ratio Debt-to-Equity Ratio Gross Profit Ratio Net Profit Margin Return on Assets (ROA) Return on Equity (ROE)

TOYOTA
2.56 1.86 18 20.28 27.5% 0.4005 9.29% 5.53% 25.76% 6.12%

HONDA
1.21 0.93 8 0.81 55.0 0.80 5.21 2.21 5.2 26.0

PAK-SUZUKI
0.95 0.63 9 1.23 44.0 0.75 4.24 2.22 2.3 28.2

Return on Equity (ROE)
30 20 10 0 TOYOTA HONDA MITSUBISHI

26 6.12

28.2

IMC ratio shows that it has more returns on equity as compared to Toyota and also very closes to Mitsubishi. means it has sufficient assets relative to shareholders investment

Indus Motors Company Ltd | Iqra University

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Return on Assets (ROA)
30 20 10 0 TOYOTA HONDA MITSUBISHI

25.76 5.2 2.3

Cross sectional analysis of ROA shows that toyota generates 6.30% on its investment in assets as compared to competitors

Net Profit Margin

5.53
6 4 2 0 TOYOTA HONDA MITSUBISHI

2.21

2.22

This analysis shows that company earned 2.25 % on its sales. Honda and Mitsubishi¶s earnings are also very close to each other.

Gross Profit Ratio

9.29
10 5 0 TOYOTA HONDA MITSUBISHI

5.21

4.24

Indus Motors Company Ltd | Iqra University

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Firm¶s production and procurement efficiency is better than the industry Competitors.

Debt-to-Equity Ratio
1

0.8 0.4005

0.75

0.5 0 TOYOTA HONDA MITSUBISHI

Toyota is highly leverage and risk born by the company is higher as compared to other companies

Debt Ratio

55
60 40 20 0 TOYOTA HONDA

27.5

44

MITSUBISHI

Company can easily cover its debts as compared to its competitors.

Assets Turnover Ratio

2.81
3 2 1 0 TOYOTA HONDA MITSUBISHI

0.81

1.23

Indus Motors Company Ltd | Iqra University

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Asset turnover ratio shows the level of sales generated with respect to productive capacity. The level and trend of sales is growing with respect to its investment in assets

Quick Ratio

1.86
2 1 0 TOYOTA HONDA MITSUBISHI

0.93

0.63

Quick ratio analysis shows that it has sufficient liquid asset to meet are current obligations.

Average Collection Period

18
20

8
10 0 TOYOTA HONDA

9
MITSUBISHI

Average collection period is satisfactory; it recovers its receivables in 18 Days

Current Ratio
3 2 1 0 Toyota Honda Pak-Suzuki

2.55 1.21 0.95

Company is in position to meet its current obligations as compared to its competitors. Indus Motors Company Ltd | Iqra University

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EXPLAINATION:
IMC financial analysis reflects that sufficient financial resources to meet its obligations. The financial managers of the company are doing a prudent and efficient job. The Asset management activities, investing activities, Financing activities and cash flows are well managed. Despite electricity shortage and liquidity crunch are on the reasons which affects the industry of Pakistan but IMC has managed this problem with surprising efficiency.

Indus Motors Company Ltd | Iqra University

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