Professional Documents
Culture Documents
Mansoor Humayun
Student No. 623/ BBA-Hons 8th Semester (Evening) 2006-2010
Submitted to the
Department Of Management Sciences
UNIVERSITY OF EDUCATION, LAHORE
OKARA CAMPUS
Indus Motor Company Ltd (Financial Analysis)
02/03/2010
In the Name of Allah the Most Gracious, the
Most Beneficent and the Most Merciful
I would not have the goals, I have to strive and be the best to reach my
dreams!
iii
ACKNOWLEDGEMENT
to the Almighty ALLAH, the most Gracious, the most Merciful and the
to reach this stage. At this occasion I can’t forget my parents for their
Next I owe my bottomless thanks to our esteemed resource person Mr. Rai
Imtiaz Hussain who directed me well and was always available to clear
Mansoor Humayun
iv
FORWARDING SHEET
Supervisor
v
DISCLAIMER
Project does not assume any liability for any financial or other loss
the information does not bind “PROJECT MAKER” in any legal or other
form.
Project does not also assume any rectifications, errors, omission and
Financial Analysis of IMC doest not accept any responsibility for the
vi
Table of Contents
Page No
EXECUTIVE SUMMARY 1
CHAPTER NO 1 INTRODUCTION 4
1.1 REASON FOR CHOOSING THE ORGANIZATION 5
1.2 AIMS AND OBJECTIVES OF THE PROJECT 5
1.3 AUTOMOBILE INDUSTRY IN PAKISTAN 6
1.4 CURRENT SITUTATION OF CAR INDUSTRY 7
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Page No
viii
Page No
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Page No
CONCLUSION 81
REFRENCES 83
ANNEXURES 85
x
Table of Annexure
Page No
xi
INDUS MOTOR COMPANY LIMITED PROFESSIONAL PROJECT
Executive Summary
with the help of house of Habib, Toyota Motor Corporation, Toyota Tsusho
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
Opinion it is the best move made by IMC to survive the financial holocaust.
Operating Highlights:
5) Investor’s Analysis
a) Earning Per Share Rs 18.89 33.70 34.93 29.15 17.62
b) Price Earning Ratio Times 4.76 5.67 8.75 6.86 6.11
c) Dividend Payout Ratio % 52.94 35.61 37.22 36.02 56.75
d) Dividend Yield Ratio % 11.11 6.28 4.26 5.25 9.28
When I was informed that I would have to do the financial analysis of last five years of any
listed company than the primary challenge for me was to choose the organization on which I
can start my working. It was bit difficult and confusing for me to select the organization. I
started brainstorming and came up with many well known organizations having large
operations, both in Pakistan and Worldwide. After gathering data and relevant information I
ended with three business sectors, Automobile industry, Textile industry and Tobacco
industry. I choose best companies in their respective class, but after applying hindsight I
decided to go with Automobile industry and the organization I selected was “Indus Motor
Company Limited”.
The main objectives and aims of this project are to analyze and evaluate the overall
performance of the company by applying different conceptual models and discuss the
liquidity, cash flow situation and produce informative report usable by the users of the
statements assessing the financial position, performance and adaptability of the organization.
The performance evaluation is based on historic and current available data about the
operations of the company. Under the constantly increasing competition in the business
market, these analyses portray a very clear and informative picture to the investors,
Finally the project draws conclusions based on my analysis about the current situation and the
Auto market is one of the largest segments in world trade. Changing models, improving fuel
efficiency, cutting costs and enhancing user comfort without compromising quality are the
The automotive assembling in Pakistan started in 1950 when National Motors Limited, a
public limited company and the pioneer in the industry, came into existence, established by
General Motors of USA. National Motors assembled passenger cars as well as commercial
vehicles which carried “General Motors” brands such as Bedford, Vauxhall, Chevrolet.
The indigenized parts in these vehicles did not exceed 20% with only exception of Bed Ford
trucks with a deletion level of 80%. By the end of 70s practically all automobile assembling
in Pakistan ceased.
A regular car industry started in the country in 1983, when Suzuki commenced production
eyeing the small and LCV car segment of 800cc-1000cc range, and introduced Suzuki car
which targeted the middle-income group (constituting the larger segment of the market) by
Then there was a long gap until the early 90’s when Indus Motor Company was established to
manufacture Toyota vehicles in Pakistan. Soon after Honda Atlas came with the Civic and
In the late 90,s Dewan Farooque Motors set up a plant to manufacture Hyundai and Kia
vehicles in Pakistan. Since then the market has changed all together. After struggling through
nineties, a decade full of uncertainties and frequent policy the Pakistani Auto Industry has
been able to achieve double digit growth consistently since the last 4 years. The industry
operates under franchise and technical cooperation agreements with Japanese, European and
Korean manufacturers.
Lately Few new market players entered the market such as Gandhara Nissan again with now
the imported Nissan range of vehicles, Dewan Mushtaq Motors with imported Mitsubishi
range of vehicles, Nexus Automotive with Chevrolet imported vehicles and others imported
Chinese vehicles such as Karakoram Motors, Roma Automobiles and Foton by Dewan
Innovations Limited along with Pak Cherry Automobiles. Sigma Motors made its mark with
Rover recently.
Apart from these the big brands of the auto industry also entered the Pakistani market such
as BMW , Mini & Rolls Royce by Dewan Motors, Porsche, Mercedes and Audi have also
Locally produced cars have taken an unexpected drastic downturn to the extent of frustrating
all future growth prospects and projections. According to the current figures, in due
comparison with the figures of year 2007 for September to December period, the sales of cars
has gone down by 15 percent. As a result the production has also gone down culminating
with its impact on supply schedule; both import and local. This downturn has come at a
crucial time as most of the manufacturing had just increased their investment in the expansion
projects and vending industry had made equally huge investment to complement the capacity
expansion exercise. The local vendors have now to face the curtailed orders, which may most
hit the smaller ones with closures. All this obviously has also adversely impacted the
government revenues in substantial terms. The government has suffered a revenue loss of Rs.
One billion (9%) when September to December data is compared with last year.
which was reduced to 2.5 percent and imposed from 1st September 2007. The intension was
obviously to enhance government revenue. The current situation however, has proved a
Last year, the ECC approved the five years policy (AIDP) for auto sector prior to
announcement of budget. Levy of such tax is a deviation from the spirit of preannounced
The uplift in the car market is also suffering due to stringent regulations announced by State
Bank of Pakistan recently for car financing. Moreover, the cost of financing has also
With low custom duty rates for CBUs and unprecedented import of used cars, the local
industry is putting utmost effort to survive and looking at the government not to deviate from
the pre-announced policy and ensure strict compliance of rules on import of used from cars
2.1 HISTORY:
Indus Motor Company (IMC) is a joint venture between the House of Habib, Toyota Motor
Corporation Japan (TMC) and Toyota Tsusho Corporation Japan (TTC) for assembling,
progressive manufacturing and marketing of Toyota vehicles in Pakistan since July 01, 1990.
IMC is engaged in sole distributorship of Toyota and Daihatsu Motor Company Ltd. vehicles
in Pakistan through its dealership network. It manufactures and Imports Cars and enjoys a
The company was incorporated in Pakistan as a public limited company in December 1989
and started commercial production in May 1993. The shares of company are quoted on the
stock exchanges of Pakistan. Toyota Motor Corporation and Toyota Tsusho Corporation have
25 % stake in the company equity. The majority shareholder is the House of Habib.
IMC 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
Indus Motor is the country's second largest auto manufacturer, after the Pak Suzuki Motors.
IMC's production facilities are located at Port Bin Qasim Industrial Zone near Karachi in an
area measuring over 105 acres, having an assembling capacity of 55,000 units per annum.
Indus Motor Company’s plant is the only manufacturing site in the world where both Toyota
and Daihatsu brands are being manufactured. Its core business is to manufacture and market
cars. In addition, the company also sells auto parts and accessories. Heavy investment was
made to build its production facilities based on state of art technologies. To ensure highest
Its product line includes 6 variants of newly introduced Toyota Corolla, Toyota Hilux and 3
variants of Daihatsu Cuore. The company also offers six different imported vehicles namely
Toyota Camry, Prado, Land Cruiser, RAV, Hilux and Hiace. Major contributor to the revenue
2.2.1 COROLLA:
1) XLi
2) GLi
5) 2.0D
6) 2.0D Saloon
2.2.2 CUORE:
1) CX
2) CX CNG
3) CX A/T
2.2.3 HILUX:
1) 4 x 2 S/Cab
a) House of Habib.
2.3.4 SLOGAN:
2.3.5 VISION:
2.3.6 MISSION:
ACT#1
Action, Commitment and Teamwork to
become #1 in Pakistan.
Customer Satisfaction.
Team Work.
providing high quality vehicles and services that meet the needs of
Pakistani customers.
care.
engineering.
Vendors.
c) Raising the bar in all support functions to meet Toyota Global Standards.
a) Fostering a Kaizen culture and mindset at IMC, its Dealers and Vendors.
c) Removing waste in all areas and operating in the lowest cost quartile of the
industry.
resource.
without discrimination.
both societal and business needs e.g. Road Safety, Technical Education,
c) Enhancing corporate value and respect while achieving a stable and long-
Citibank N.A.
2.4.3 AUDITORS:
Chartered Accountants,
2.4.5 REGISTRAR:
UNIVERSITY OF EDUCATION OKARA CAMPUS 17
INDUS MOTOR COMPANY LIMITED PROFESSIONAL PROJECT
www.toyota-indus.com
Muhammad Faisal
Farhad Zulficar
Yutaka Arae
Mitsuhiro Sonoda
In formulating sound strategic plans, an organization must assess its internal strengths
the same time it minimizes or overcomes weaknesses and threats. Regular assessment
3.1.1 STRENGTHS:
Strengths are the core competencies of any organization & as far as Indus Motor
Whenever the company launches the new car in the market it has
always the great support of the already market orientation so the car
of trust for their name and this is why Toyota is the leader in
automobile industry.
Toyota has a great strength for its 2.OD car, Toyota is the hot selling
diesel engine car in Pakistan and is the only company offering the
The important edge over the company editors are the ample
availability of the spare parts in the markets. The price of spare parts
is comparatively low and availability all over the country has proved
Toyota vehicles have got a much stronger resale value than other car
doubt the other cars are available but Toyota has an edge because it
perform outstandingly.
are twenty five dealers in Pakistan where sales, service and spare parts
3.1.2 WEAKNESSES:
Weaknesses are the lacking points which every organization must avoid in order to
corolla as well. The power steering is not speed sensitive and the air
are less and heavy body and small engine sometimes create problems
in hilly areas.
delivery of cars is done after 4-6 months. This is because CKD kits are
ordered four months before and once they arrive from Japan, assembly
The company feels that one weakness is the changing policies of the
government and also the 30% cash L/C margin. This has lead to an
adverse environment.
3.1.3 OPPORTUNITIES:
In fact, when we study all our weaknesses critically & deeply than we come to know
that we can convert our weaknesses into strengths. So basically these are our
markets.
Toyota should also try to lower its price of Corolla in the segment
for Toyota to excel further careful planning and the right time to
3.1.4 THREATS:
Though Indus Motor Company Limited has a strong footing and maintain a good
number of loyal customer, still bank has threats in various sectors. When we see the
possible threats for IMC, the threats are prevailing such as:
Even though Toyota enjoys the position of being the no.1 automobile
Even though Toyota keeps a careful eye on the changing trends, still
company.
PEST analysis is the analysis which we tend to perform in order to analyze the external as
well as the internal environment in which organization is currently working. PEST analysis
duty tariff and smuggling are main reasons of unstable market conduction. Like other
motor companies Toyota is also affected by the current changing policies of the
government.
Previously the automobile industry had to cope with more than 77000 yellow cabs
that were imported during the yellow cabs scheme and was later turned lose to the
In 1995, all the previous taxes and duties were rolled into one import duty of 30
percent on CKD kits as well as CBU vehicles. In 1996 the sales tax on CBU was
recommended that duty on CKD be reduced form 40 percent to 35 percent while the
car sales should be exempted from CVT and the deletion program should be
accelerated.
Just a half year back the general sales tax has been increased to 16 percent
promoting more price like. So there is going to be a Rs. 80,000 to Rs. 1,00,000
increase in vehicles.
Government economic policies at the federal level clearly influence the ability of the
industries to survive and progress. Inflation is a major economic factor which has
affected the Pakistan’s Automobile industry including Toyota. The current inflation
rate is 21% to 23% annually prices in the auto market were deregulated in 2000 and
grew almost 20 percent to 30 percent per annum to allow Toyota to bring their prices
to profitable levels. After three years of “Still Market”, the market picked up.
The recent increase of 16 percent sale tax is however, going to result in a price
increase.
Society holds a global or summary belief that an organization is proper and worthy of
support. Toyota takes pride in being the most trusted name all over Pakistan. Its
vehicles are regarded as a status symbol. It is the guiding principles of Toyota which
Toyota respects the culture and customs of every nation and community and
contributes to the economic and social development through corporate activities in the
communities. Toyota believes in honoring the language and spirit of the law of every
nation and undertakes open and fair corporate activities to be a good corporate citizen
of the world. This is the reason that Toyota is proud of the fact that Pakistani society
be trusted.
motivate people and the variety of incentives that have been offered to stimulated
production, the resulting increase has been negligible when compared to that of
created by technology.
The locally produced Toyota Corolla introduced in May 1993 is now in its 17 th
year. Its excellent quality, low maintenance cost and high resale value has won it
the support and loyalty of its customers. Product diversification and a wide range
of colors has allowed customers to exercise greater options and has sustained this
threat. The total company’s product range comprises of 8 variants of Corolla and
5 variants of Hilux. As a result of the “Safety First” commitment; for the first
introduced in the GLI Automatic and GLI manual models, side impact bars
which protect vehicles for side collisions have however been routinely fitted in
all Corolla variants since inception. The process of making a car more durable
primer, which assures long term anti corrosion and an extra thick color coat that
is better than all others, ensuring that “New Car” look “New” for years to come.
The BCG matrix measures market attractiveness by market growth rate and it assesses the
firm’s ability to compete by its relative market share. The BCG matrix assumes the causal
relationship between market share and profitability. BCG matrix consists of four factors
which are:
Stars.
Question mark.
Cash cows.
Dogs.
3.3.1 STARS:
Toyota Corolla of IMC falls into the category of Stars. It generates large amount of
cash because of its strong relative market share, but also consume large amounts of
cash because of its high growth rate; therefore the cash in each direction
approximately nets out. However companies usually invest in star units as they are
feeling that the future of their company depends on the success or failure of that
If IMC’s Toyota Corolla could maintain its large market share, it will become a Cash
Cow when the market growth rate would decline. The portfolio of a diversified
company always should have stars that will become the next cash cows and ensure
future cash generation. Typically needs this cash to support its rapid and significant
growth. It generates large amounts of cash for the organization and usually segments
in which management can make additional investments and earn attractive returns. In
UNIVERSITY OF EDUCATION OKARA CAMPUS 28
INDUS MOTOR COMPANY LIMITED PROFESSIONAL PROJECT
case of Indus Motor Company Limited, the Hilux is a cash cow for the company
which earns a lot of cash for the company and company utilize this cash to run its
According to Boston consulting group matrix, a question mark is such a business unit
about which you are not about the success or failure. The unit can be very successful
in the market or it can be simply being ruined of. In case of IMC the question mark is
actually the Cuore. It is due to the large competition of in this category of cars. As the
Suzuki Aulto, Mehran, Santro and some imported vehicles like Vitz are already
3.3.4 DOGS:
This category of BCG matrix includes the product that has no market share as well as
consuming the large amount of cash instead of generating the cash. The company
If we analyze the position of Toyota Corolla by using the Boston consulting group matrix in a
It is clearly seen that net sales of the company is showing an increasing trend in all the years
except that of FY 2009 which was caused due to the low productions of cars. The reason
The gross profit is also showing the same trend up to FY 2007 but there is a massive decrease
in gross profit in FY 2008 which was due to the increase in cost of goods sold. Than gross
profit again decrease in FY 2009. It is due to the low sales of the company.
The details and trends are all discussed below in the item wise analysis of summarized
income statement of the company and the annexed notes form an integral part of this income
statement.
Comparative
Chain Base 7,635,501 3,824,691 2,362,617 (3,559,239)
Percentage Comparative
Chain Base 27.66% 10.85% 6.05% -8.59%
Percentage Comparative
2005 Base 127.66% 141.52% 150.08% 137.19%
In comparison with FY 2005, sales of FY 2006 have been increased by 7.63 billions.
Similarly in FY 2007 and FY 2008 there is an increasing trend by 3.82 billions and 2.36
billions while there is decrease in sales of 3.55 billions in FY 2009 with respect to the
preceding years.
2005. In FY 2007, as compared to FY 2006, sales increased by 10.85% whereas the increase
was 6.05% in FY 2008, as compared to FY 2007, while there is a decrease of 8.59% in sales
in FY 2009 as compared to the FY 2008. The sales have increased 41.52%, 50.08% and
Comparative
Chain Base 6,194,050 3,531,726 2,954,724 (2,034,938)
Percentage Comparative
Chain Base 24.88% 11.36% 8.53% -5.42%
Percentage Comparative
2005 Base 124.88% 139.07% 150.94% 142.76%
In FY 2006, FY 2007 and FY 2008 increase in C.G.S has been recorded with 6.19 billions,
3.53 billions and 2.95 billions with respect to the preceding year. In FY 2009 C.G.S has been
An increasing trend was recorded by 24.88%, 11.36% and 8.53% in FY 2006, FY 2007 and
FY 2008 respectively as compare to the preceding years. While C.G.S decreased by 5.42% in
There is a deceasing trend in C.G.S as a part of sales. C.G.S has decreased by 9.80%,
11.77%, 11.37%, 9.29% and 6.14% in FY 2005, FY 2006, FY 2007, FY 2008 and FY 2009
respectively.
Comparative
Chain Base 1,441,451 292,965 (592,107) (1,524,301)
Percentage Comparative
Chain Base 53.27% 7.06% -13.33% -39.61%
Percentage Comparative
2005 Base 153.27% 164.09% 142.21% 85.88%
G.P of FY 2006 and FY 2007 increased by 1.44 billions and 292 millions as compared to the
FY 2005 and FY 2006 respectively. In FY 2008 and FY 2009 there was a decrease of 592
millions and 1.52 billions in G.P as compared to FY 2007 and FY 2008 respectively.
G.P has been increased by 53.27% and 7.06% in FY 2006 and FY 2007 as compared to the
13.33% and 39.61% with respect to preceding years respectively. As compared to FY 2005
G.P has been increased by 64.09% and 42.21%, in FY 2007 and FY 2008 respectively while
As compared to sales, G.P has been decreased by 90.02%, 88.23%, 88.63%, 90.71% and
Comparative
Chain Base 75,416 127,915 9,369 37,577
Percentage Comparative
Chain Base 13.19% 19.76% 1.21% 4.79%
Percentage Comparative
2005 Base 113.19% 135.55% 137.19% 143.76%
Operating expenses have been increased by 75.1 millions, 127 millions, 9.3 millions and 37.5
millions in FY 2006, FY 2007, FY 2008 and FY 2009 respectively in comparison with the
preceding years.
In terms of percentage, operating expenses have been increased by 13.19%, 19.76%, 1.21%
and 4.79% in FY 2006, FY 2007, FY 2008 and FY 2009 respectively in comparison with the
preceding years. As compared to FY 2005 increase of 35.55%, 37.19%, 43.76% was recorded
98.16%, 98.02%, 98.11% and 97.83% in FY 2005, FY 2006, FY2007, FY 2008 and FY 2009
respectively.
Comparative
Chain Base 1,366,035 165,050 (601,476) (1,561,878)
Percentage Comparative
Chain Base 64.01% 4.72% -16.41% -50.98%
Percentage Comparative
2005 Base 164.01% 171.74% 143.56% 70.37%
Operating profit is increasing from FY 2006 to FY 2007 by 1.36 billions and 165 millions in
comparison with the FY 2005 and FY 2006 respectively. While it decreased in FY 2008 and
FY 2009 by 601 millions and 1.56 billions respectively with respect to the previous years.
In FY 2006 and FY 2007 operating profit increased by 64.01% and 4.72 % respectively as
compared to FY 2005 and FY 2006. Then it decreased by 16.41% and 50.98% in FY 2008
and FY 2009 respectively as compared to FY 2007 and FY 2008. In FY 2007 and FY 2008
increase of 71.74% and 43.56 was recorded as compared to the FY 2005, while the decrease
Operating profit is 7.73% and 9.93 % of sales in FY 2005 and FY 2006 then it decreased to
Other Operating
Expenses 186,614 321,746 348,430 306,193 156,479
Comparative
Chain Base 135,132 26,684 (42,237) (149,714)
Percentage Comparative
Chain Base 72.41% 8.29% -12.12% -48.90%
Percentage Comparative
2005 Base 172.41% 186.71% 164.08% 83.85%
In FY 2006 and FY 2007 other operating expenses increased by 135 millions and 26 millions
respectively as compared to the preceding years. While the decrease of 42 millions and 149
millions was recorded in FY 2008 and FY 2009 respectively as compared to preceding years.
In terms of percentage as compared to the preceding years, in FY 2006 and FY 2007 other
operating expenses increased by 72.41% and 8.89% respectively while decreased by 12.12%
and 48.90% in FY 2008 and FY 2009 respectively. As compared to FY 2005 the other
operating expenses increased by 86.71% and 64.08% in FY 2007 and FY 2008 respectively,
Other operating expenses are recorded as less than 1% of the sales in all the years.
Other Operating
Income 449,443 1,021,212 935,290 786,834 727,080
Comparative
Chain Base 571,769 (85,922) (148,456) (59,754)
Percentage Comparative
Chain Base 127.22% -8.41% -15.87% -7.59%
Percentage Comparative
2005 Base 227.22% 208.10% 175.07% 161.77%
In FY 2006 increase of 571 millions was recorded in other operating income as compared to
the FY 2005 while the decrease by 85 millions, 148 millions and 59 millions was recorded in
and FY 2007, FY 2008 and FY2009 respectively with respect to the preceding years.
compared to the FY 2005, while the massive decrease of 8.41%, 15.87 % and 7.59% was
recorded in FY 2007, FY 2008 and FY 2009 respectively with respect to the preceding years.
As compared to FY 2005 the other operating income increased by 108.10%, 75.07% and
Other operating income as compared to sales was 1.63% in FY 2005 than it increased to
2.90% in FY 2006 than it decreased to 2.39% and 1.90% in FY 2007 and FY 2008
Profit before
Interest and Tax 2,397,050 4,199,722 4,252,166 3,544,471 2,072,553
Comparative
Chain Base 1,802,672 52,444 (707,695) (1,471,918)
Percentage Comparative
Chain Base 75.20% 1.25% -16.64% -41.53%
Percentage Comparative
2005 Base 175.20% 177.39% 147.87% 86.46%
In chain base comparison, EBIT was increased by 1.80 billions and 52 millions in FY 2006
and FY 2007 as compared to preceding years. It decreased by 707 millions and 1.47 billions
In terms of percentage, the profit increased by 75.20% and 1.25% in FY 2006 and FY 2007
respectively with respect to the preceding years. But massive decrease of 16.64% and 41.53%
was recorded in FY 2008 and FY 2009 respectively as compared to the preceding years. As
compared to FY 2005 the profit increased by 77.39% and 47.87% in FY 2007 and FY 2008
Comparative
Chain Base 32,852 (104,260) (19,925) 23,780
Percentage Comparative
Chain Base 34.91% -82.13% -87.83% 861.59%
Percentage Comparative
2005 Base 134.91% 24.11% 2.93% 28.21%
Finance cost has increased by 32 millions in FY 2006 as compared to the FY 2005 while it
decreased by 104 millions and 19 millions in FY 2007 and FY 2008 respectively as compared
2008.
In comparison with the previous years it increased by 34.91% in FY 2006, while it decreased
by 82.13% and 87.83% in FY 2007 and FY 2008 respectively. Than massive increase of
861.59% was recorded in FY 2009. As compared to the FY 2005 finance cost decreased by
Finance cost is recorded as less than 1% of the sales in all the years.
Profit before
Taxation 2,302,957 4,072,777 4,229,481 3,541,711 2,046,013
Comparative
Chain Base 1,769,820 156,704 (687,770) (1,495,698)
Percentage Comparative
Chain Base 76.85% 3.85% -16.26% -42.23%
Percentage Comparative
2005 Base 176.85% 183.65% 153.79% 88.84%
In FY 2006 and FY 2007 profit before taxation increased by 1.76 billions and 156 millions as
compared to FY 2005 and FY 2006. Then it decreased by 687 millions and 1.49 billions in
Profit before tax has increased by 76.85% and 3.85% in FY 2006 and FY 2007 in comparison
with the preceding years while it decreased by 16.26% and 42.23% in FY 2008 and FY 2009
as compared to the preceding years. It increased by 83.65% and 53.79% in FY 2007 and FY
2008 respectively while it decreased by 11.16% in FY 2009 in comparison with the FY 2005.
Profit before taxation is 8.34% of sales in FY 2005. It increased to 11.56% in FY 2006, and
then it decreased to 10.83%, 8.55% and 5.40% in FY 2007, FY 2008 and FY 2009
respectively.
4.12 TAXATION:
Comparative
Chain Base 606,002 59,467 (232,914) (589,955)
Percentage Comparative
Chain Base 74.06% 4.18% -15.70% -47.16%
Percentage Comparative
2005 Base 174.06% 181.32% 152.86% 80.77%
Tax revenues have increased by 606 millions 59 millions in FY 2006 and FY 2007
respectively in comparison with the previous years. While it decreased by 232 millions and
589 millions in FY 2008 and FY 2009 respectively as compared to the preceding years.
comparison with the preceding years, while it decreased by 15.70% and 47.16% in FY 2008
revenues increased by 81.32% and 52.86% in FY 2007 and FY 2008 respectively, while it
Taxation is 2.96% in FY 2005, 4.04% in FY 2006, 3.80% in FY 2007, 3.02% in FY 2008 and
Profit After
Taxation 1,484,646 2,648,464 2,745,701 2,290,845 1,385,102
Comparative
Chain Base 1,163,818 97,237 (454,856) (905,743)
Percentage Comparative
Chain Base 78.39% 3.67% -16.57% -39.54%
Percentage Comparative
2005 Base 178.39% 184.94% 154.30% 93.30%
As compared to the previous years, net income of the company increased by 1.16 billions and
97 millions in FY 2006 and FY 2007 respectively, while it increased by 454 millions and 905
In terms of percentage, in comparison with the preceding years the income of company
increased by 78.39% and 3.67% in FY 2006 and FY 2007 respectively, but it decreased
massively by 16.57 and 39.54% in FY 2008 and FY 2009 respectively. As compared to the
FY 2005 the increased of 84.94% and 54.30% was recorded in net income in FY 2007 and
As a part of sales, profit was 5.38%, 7.52%, 7.03% 5.53% and 3.66% in FY2005, FY 2006,
The condensed balance sheet of FY 2005, FY 2006, FY 2007, FY 2008 and FY 2009 is
giving a clear look at the company’s resources and claims of outsiders.
Net assets of the company are showing an increasing trend from FY 2005 to FY 2009.
The long term debt position of the company is obvious and seems that company has a real
The detail of trends of balance sheet is discussed below item wise and the annexed notes are
also at the end of the report which forms an integral part of the above sheet.
In comparison to the preceding years, the current assets increased in FY 2006 by 2.91 billions
and than decreased by 535 millions and 3.89 billions in FY 2007 and FY 2008 respectively,
In terms of percentage, with respect to the preceding years the increase of 26.10% was
recorded in FY 2006, while current assets decreased by 3.80% and 28.73% in FY 2007 and
increase of 21.31% was recorded in FY 2007, than it decreased by 13.54% in FY 2008 and
Current assets were 91.66% of total assets in FY 2005, 89.09% in FY 2006, 86.56% in FY
As compared to the previous years, the current liabilities increased in FY 2006 by 1.78
billions and than decreased by 2.03 billions and 3.63 billions in FY 2007 and FY 2008
The percentage change was increase of 23.23% in FY 2006 than decrease of 21.53% and
compared to the preceding years. In comparison with FY 2005 the decrease of 3.30% and
50.68% was recorded in FY 2007 and FY 2008 respectively, while it increased by 28.98% in
FY 2009.
As a part of total liabilities and shareholder’s equity, total currents liabilities were 62.85%,
59.69%, 47.31%, 27.49% and 47.79% in FY2005, FY2006, FY 2007, FY 2008 and FY 2009
respectively.
Total fixed assets were increased by 717 millions, 377 millions and 1.93 billions in FY 2006,
FY 2007 and FY 2008 as compared with FY 2005, FY 2006 and FY 2007 respectively, while
There was increase of 71.85%, 21.98% and 92.65% in FY 2006, FY 2007 and FY 2008
respectively as compared to the previous years, while the decrease of 2.46% was recorded in
2008 and 293.89% in FY 2009 was observed in total fixed assets as compare to the FY 2005.
In terms of total assets, total fixed assets were 8.19% in FY 2005, 10.85%in FY 2006,
Total assets were increased by 3.62 billions in FY 2006 as compared to the FY 2005, while
decreasing trend of 157 millions and 1.91 billions was observed in FY 2007 and FY 2008
previous year, while it decreased by 0.99% and 12.24% in FY 2007 and FY 2008 respectively
with FY 2008. As compared to the FY 2005 total assets increased by 28.46%, 12.74% and
There is no long term debt of the company so there is no change in percentage also.
Total Liabilities
and Equity 12,194,517 15,822,468 15,665,050 13,748,109 20,685,523
Total liabilities and share holder’s equity were increased by 3.62 billions in FY 2006 as
compared to the FY 2005, while decreasing trend of 157 millions and 1.91 billions was
observed in FY 2007 and FY 2008 respectively as compared to the preceding years. It again
In percentage change an increase of 29.75% was recorded in total liabilities and share
holder’s equity in FY 2006 as compared with previous year, while it decreased by 0.99% and
12.24% in FY 2007 and FY 2008 respectively as compared to the previous years. It gain
2005 total liabilities and share holder’s equity increased by 28.46%, 12.74% and 69.63% in
liquidity available to a business. Along with fixed assets such as plant and equipment,
formula:
Interpretation:
Working capital of the company has always been maintained very high up to
capital but in FY 2009 it again increased which shows company has sufficient
The current ratio is a financial ratio that measures whether or not a firm has enough
resources to pay its debts over the next 12 months. It compares a firm's current
Current Assets
Current Liabilities
Interpretation:
Current Ratio of the company has a increasing trend up to FY 2008. It was minimum
in FY 2005. As the graph shows that current ratio remains positive in last five years
so the company has the ability to pay its current liabilities with its current assets.
Current ratio was maximum in FY 2008 than once again it decreased in FY 2009 due
to increase in liabilities
A stringent test that indicates whether a firm has enough short-term assets to cover its
immediate liabilities without selling inventory. The acid-test ratio is far more
strenuous than the working capital ratio, primarily because the working capital ratio
Interpretation:
Quick ratio of the company has an increasing trend up to FY 2008 showing the
adequacy in paying off the current liabilities. Then it decreased slightly in FY 2009.
But as a whole the graph shows that company has a tendency that the most liquid
The cash ratio is a formula for measuring the liquidity of the company by calculating
the ratio between all cash and cash equivalent assets and all the current liabilities. The
Interpretation:
Cash ratio of the company was quite good in FY 2005 and FY 2006, than it increased
in FY 2007 and FY 2008 showing that company in not using cash to its best
advantage. In FY 2009 the decrease in cash ratio shows that company has now started
Cash flow from operations or operating cash flow ratio measure of how well current
liabilities are covered by the cash flow generated from a company's operations. The
Interpretation:
Cash flow from operations ratio of the company was low in FY 2005 showing that the
operating profit of the company was not meeting the need of short term liabilities
well. Ratio increased in FY 2006 and FY 2007. But the company was facing the
problems in FY 2008 of meeting the need of current liabilities from its operating
profit due to the negative cash flow. In FY 2009 the ratio again increased and now the
company is in a position to meet its short term cash needs well in time.
The times interest earned ratio is an Indicator of a company’s ability to meet the
interest payments on its debt. The times interest earned calculation is a corporation’s
income before interest and income tax expense, divided by interest expense. The
Interpretation:
The times interest earned ratio of the company was very low in FY 2005 and FY
2006. This is due to the high interest expense of the company. In FY 2007 and FY
2008 a increasing trend is shown in the ratio which shows that company has reduced
its interest expenses. But in FY 2009, after a massive decrease, company is still able
A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as
interest and leases. A ratio calculated by dividing profits before payment of interest
and income taxes by interest paid on bonds and other long-term debt. It is calculated
as the following:
Interpretation:
Fixed charged coverage ratio of the company is mostly same as time interest earned
ratio. It shows that company has no long term finances on which company has to pay
interest. Company has the liability against leased assets in FY 2005 and FY 2006.
Figure shows the increasing trend from FY 2005 to FY 2008 which means that
company has better position to pay its debt expenses. Than it decreased in FY 2009
The ratio gives an idea to the leverage of the company along with the potential risks
the company faces in terms of its debt-load. A low percentage means that the
company is less dependent on leverage. The lower the percentage, the less leverage a
company is using and the stronger its equity position. In general, the higher the ratio,
the more risk that company is considered to have taken on. The formula for
Total Liabilities
( Total Assets
)100
Interpretation:
Debt ratio of the company is significantly decreasing from FY 2005 to FY 2008. It
reached to its lowest of 31.36% in FY 2008 but than there was increase in FY 2009.
The decreasing trend of the debt ratio is due to the decrease in total liabilities. That is
beneficial for company. But in FY 2009 the liabilities of the company increased but
This ratio indicates how much the company is in debt by comparing what is owed to
what is owned. A high debt to equity ratio could indicate that the company may be
Interpretation:
The figure shows that company had enough equity to serve over period of time. The
graph shows the strategy of the company that company is totally based on equity.
Debt to tangible net worth ratio measures the degree of protection that exists for
creditors. The lower the ratio the better is for company. The value is computed by
dividing total liabilities by total equity minus intangible assets. The formula is:
Total Liabilities
( Owner's Equity - Intangible Assets
)100
Interpretation:
Debt to tangible net worth ratios shows the decreasing trend from FY 2005 to FY
2008 which is very good for the company. The decrease in the ratio is due to the
decrease in the intangible assets of the company. The ratios increased once again FY
The ratios measure of the average number of days that a company takes to collect
revenue after a sale has been made. The formula of the ratio is:
Gross A/R
Net Sales / 365 days
Interpretation:
Accounts receivable turnover in days is 13 days in FY 2005 and then it increased in
of the company is not improving as compared to the previous years and 7 days have
Measures the number of times accounts receivable are collected during the year. This
ratio measures the efficiency of credit and collection policies and the quality of
Net Sales
Gross A/R
Interpretation:
Accounts receivable turnover of the company was maximum in FY 2005 i.e. 27.89
times. Than it decreased to 14.66 times in FY 2006. Once again increase was recorded
in FY 2007 of 23.01 times. Than decreasing trend was recorded in FY 2008 and FY
2009. This shows that company in not managing its receivable in better ways as
compared to the previous years. Company is collecting receivable only 14.03 times in
FY 2009 in comparison with the previous years. This is all due to the decrease in the
long it takes a company to turn its inventory into sales. Generally, the lower (shorter)
the day’s sale in inventory is the better. It can be calculated by following formula:
Ending Inventory
Cost of Goods Sold / 365 days
Interpretation:
Day’s sales in inventory shows and increasing trend of 4 day in FY 2007 as compared
to the previous year. Than it decreased to 5.57 days in FY 2007. After this increase is
recorded in FY 2007 and FY 2008. Company is taking 14.20 days to convert its
inventory into sales in FY 2009, while company was taking 10.92 days in FY 2008.
The inventory management was best in FY 2007 in which company was taking 5.57
days.
The inventory turnover is an equation that measures the number of times inventory is
sold or used over in a period such as a year. The formula is expressed as follow:
Interpretation:
In FY 2005, inventory turnover was 42.20 times but then it decreased in FY 2006. In
turnover and it reached to 28.36 times. The reason behind a low turnover is the
increase in cost of sales. The cost of sales showed a massive increase because of
how much out of every dollar of sales a company actually keeps in earnings. The
Net Income
( Net Sales
)100
Interpretation:
Net profit of the company shows an increasing trend in up to FY 2006. Than from FY
2007 to FY 2009 it shows the decrease in the net profit. Net profit is minimum in FY
A financial ratio that indicates the effectiveness with which a firm's management uses
its assets to generate sales. A relatively high ratio tends to reflect intensive use of
Net Sales
Total Assets
Interpretation:
The ratio has decreased to 2.23 in FY 2006 from 2.26 in FY 2005. Then it showed a
very good increase in FY 2007 and FY 2008 and reached to 2.49 and 3.01
respectively. But once again ratio decreased to 1.83 in FY 2009. The reason behind
An indicator of how profitable a company is relative to its total assets. ROA gives an
idea as to how efficient management is at using its assets to generate earnings. The
Net Income
( Total Assets
)100
Interpretation:
The ratio has a increasing trend up to FY 2007. This increase is due to the increase in
total assets. And then it showed the decreasing trend in FY 2008 and FY 2009. The
decrease in the ratio is FY 2007 was due to the decrease in total assets as compared to
the previous years while the reason of decrease in the FY 2009 is the decrease in the
over after paying for variable costs of production such as wages, raw materials, etc.
Operating Income
( Net Sales
)100
Interpretation:
The operating income margin of the company has an increasing trend up to FY 2006. But
then it decreased slightly in FY 2007 to 9.38% from 9.93% in FY 2006. The trend remains
decreasing in FY 2008 and FY 2009. The decrease in last two years is due to the decrease in
A financial ratio that indicates the effectiveness with which a firm's management uses
its operating assets to generate sales. The calculation technique for the ratio is:
Net Sales
Operating Assets
Interpretation:
The turnover is showing a decreasing trend up to FY 2009. The reason behind the
operating assets gives an idea as to how efficient management is at using its operating
Net Income
( Operating Assets
)100
Interpretation:
The ratio has a increasing trend up to FY 2006. This increase is due to the increase in
operating assets. And then it showed the decreasing trend in FY 2007, FY 2008 and
FY 2009. The reason behind the decrease in the ratio is decrease in the net income of
the company.
Sales to fixed assets ratio measures a company's ability to generate net sales from
fixed asset investments specifically property, plant and equipment. A higher the ratio
shows that the company has been more effective in using the investment in fixed
Net Sales
Fixed Assets
Interpretation:
The ratio has shown a decreasing trend from FY 2005 to FY 2009. The ratio was
highest in FY 2005 i.e. 27.63 and lowest in FY 2009 i.e. 9.62. It is all because of the
greater increase in fixed assets as compared to the increase in sales volume of the
company. This all shows that company is not making productive use of its fixed assets
generates with the money shareholders have invested. The formula for the ratio is:
Net Income
( Total Equity
)100
Interpretation:
Return on equity of the company shows an increasing trend in FY 2006 as compared
to the FY 2005. The increase was due to the increase in total equity of the company.
Than it shows a decreasing trend from FY 2007 to FY 2009. Here total equity is still
increasing but the decreasing trend is due to the decrease in net income of the
company.
A financial metric used to assess a firm's financial health by revealing the proportion
of money left over from revenues after accounting for the cost of goods sold. Gross
profit margin serves as the source for paying additional expenses and future savings.
Gross Profit
( Net Sales
)100
Interpretation:
The gross shows an increasing trend up to FY 2006. Than there is a decrease in gross
profit in FY 2007 and trend remains same in FY 2008 and FY 2009. The decrease in
FY 2008 was due to the increase in cost of goods sold. While the decrease in FY 2009
calculated as follow:
Net Income
No. of Equity Shares
Interpretation:
EPS of the company has increasing trend from FY 2005 to FY 2007. It is due to the
high income earned by the company. Than suddenly EPS decreased in FY2008 and
FY 2009 rapidly. This decrease in EPS shows that company has low earnings in last
The price earning ratio is a way to show how a company’s earning relate to a stock
price. The higher the price earning the more earnings growth investors are expecting
and the higher premium they are willing to pay for that anticipated growth. The
Interpretation:
The price earning ratios shows an increasing trend from FY 2005 to FY 2009. This
increase is due to the increase in EPS. Than ratio decreased in FY 2008 and FY 2009.
The decrease in the price earning ratio is due to decrease in EPS. But the decrease in
The dividend payout ratio measures what a company’s payout to investors in the form
Interpretation:
The dividend payout ratio of the company is high in the FY 2005 due to the low EPS.
Than it remains stable in FY 2006, FY 2007 and FY 2008 because of almost same
dividend per share of the company in these years. In FY 2009 the ratio decrease due
The dividend yield ratio allows investors to compare the latest dividend they received
with the current market value of the share as an indictor of the return they are earning
Interpretation:
The trend is negative in this ratio up to FY 2007 because of the increase in the prices
of the shares up to FY 2007. In FY 2008 and FY 2009 ratio shows increasing trend.
This increase is due to the decrease in the market price of share in those years.
CONCLUSION
Indus Motor Company, with support from Toyota Motor Corporation has worked closely
with its 62 local vendors for increased localization and technology transfer. The company has
expanded its dealership network across Pakistan to 29 dealerships and this will increase
IMC’s products, renowned for their quality, durability, safety, fuel economy and resale value,
are appreciated by customers in Pakistan. There has been high demand for the Corolla which
is the market leader in this segment. Pakistan is the highest producer of Corolla in Asia.
IMC expect 2009/10 to be a better year but a critical one for sustainable growth and
Profit margins are still under pressure due to foreign currency fluctuations.
IMC is working on definitive plans to expand dealer network and launch new
CKD/CBU products.
IMC will do utmost to optimize costs without compromising on quality and delivery.
IMC has improved its market share in a declining market but will continue to remain
dealership improvements.
It is essential for the government to effectively address the following challenges concerning
and exports.
UNIVERSITY OF EDUCATION OKARA CAMPUS 81
INDUS MOTOR COMPANY LIMITED PROFESSIONAL PROJECT
Implementing tax policy and administration reforms and managing the security issues
Make a concrete plan to revisit the AIDP and achieve implementation recognizing the
Association.
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7. http://www.accaglobal.com
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Review/37451/
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Annexure I
Annexure I.I
Indus Motor Company Limited
Comparative Chain Base Income Statement
For The Year Ended June 30,
Annexure I.II
Indus Motor Company Limited
Percentage Comparative Chain Base Income Statement
For The Year Ended June 30,
Annexure I.III
Indus Motor Company Limited
Percentage Comparative 2005 Base Income Statement
For The Year Ended June 30,
Annexure
I.IV
Indus Motor Company Limited
Comparative Vertical Common Size Income Statement
For The Year Ended June 30,
Annexure II
Non-Current Assets
Fixed Assets
TOTAL CURRENT
LIABILITIES 7,664,062 9,444,554 7,410,926 3,779,631 9,884,850
Non-current Liabilities
Shareholder's Equity
Annexure II.I
Indus Motor Company Limited
Comparative Chain Base Balance Sheet
As on June 30,
Non-Current Assets
Long-term loans 631 3,221 38,101 (13,832)
Long-term deposits 32 1,448 593 -
Finance under musharika
arrangements (8,132) (4,021) - -
TOTAL NON-CURRENT ASSETS (7,469) 648 38,694 (13,832)
Fixed Assets
Property, plant and equipment 507,279 494,598 1,689,359 308,706
Non-current Liabilities
TOTAL NON-CURRENT
LIABILITIES 65,385 90,114 321,989 (28,438)
Shareholder's Equity
Paid up capital - - - -
Reserves 1,782,074 1,786,096 1,392,365 860,633
TOTAL EQUITY 1,782,074 1,786,096 1,392,365 860,633
Annexure II.II
Indus Motor Company Limited
Percentage Comparative Chain Base Balance Sheet
As on June 30,
Non-Current Assets
Long-term loans 162.63% 316.09% 898.61% -32.67%
Long-term deposits 0.62% 27.95% 8.95% 0.00%
Finance under musharika arrangements -66.91% -100.00% #DIV/0! #DIV/0!
TOTAL NON-CURRENT ASSETS -42.22% 6.34% 356.00% -27.91%
Fixed Assets
Property, plant and equipment 56.30% 35.12% 88.78% 8.59%
Capital work-in-progress 246.08% -37.99% 134.13% -93.27%
Non-current Liabilities
Liabilities against assets subject to -67.63% -100.00% #DIV/0! #DIV/0!
finance lease
Deferred taxation 172.09% 80.91% 153.22% -5.34%
TOTAL NON-CURRENT LIABILITIES 119.64% 75.07% 153.22% -5.34%
Shareholder's Equity
Paid up capital 0.00% 0.00% 0.00% 0.00%
Reserves 48.30% 32.64% 19.18% 9.95%
TOTAL EQUITY 39.82% 28.54% 17.31% 9.12%
Annexure II.III
Indus Motor Company Limited
Percentage Comparative 2005 Base Balance Sheet
As on June 30,
Non-Current Assets
Long-term loans 262.63% 1092.78% 10912.63% 7347.68%
Long-term deposits 100.62% 128.74% 140.26% 140.26%
Finance under musharika arrangements 33.09% 0.00% 0.00% 0.00%
TOTAL NON-CURRENT ASSETS 57.78% 61.44% 280.18% 201.98%
Fixed Assets
Property, plant and equipment 156.30% 211.19% 398.68% 432.94%
Capital work-in-progress 346.08% 214.61% 502.48% 33.82%
Non-current Liabilities
Liabilities against assets subject to 32.37% 0.00% 0.00% 0.00%
finance lease
Deferred taxation 272.09% 492.23% 1246.43% 1179.82%
TOTAL NON-CURRENT LIABILITIES 219.64% 384.54% 973.72% 921.68%
Shareholder's Equity
Paid up capital 100.00% 100.00% 100.00% 100.00%
Reserves 148.30% 196.70% 234.44% 257.76%
TOTAL EQUITY 139.82% 179.72% 210.83% 230.06%
Annexure
II.IV
Indus Motor Company Limited
Comparative Vertical Common size Balance Sheet
As on June 30,
Non-Current Assets
Long-term loans 0.00% 0.01% 0.03% 0.31% 0.14%
Long-term deposits 0.04% 0.03% 0.04% 0.05% 0.03%
Finance under musharika
arrangements 0.10% 0.03% 0.00% 0.00% 0.00%
TOTAL NON-CURRENT ASSETS 0.15% 0.06% 0.07% 0.36% 0.17%
Fixed Assets
Non-current Liabilities
Liabilities against assets subject to 0.10% 0.02% 0.00% 0.00% 0.00%
finance lease
Deferred taxation 0.35% 0.73% 1.34% 3.87% 2.44%
TOTAL NON-CURRENT
LIABILITIES 0.45% 0.76% 1.34% 3.87% 2.44%
Shareholder's Equity
Paid up capital 6.45% 4.97% 5.02% 5.72% 3.80%
Reserves 30.26% 34.58% 46.33% 62.92% 45.98%
TOTAL EQUITY 36.70% 39.55% 51.35% 68.64% 49.78%
Annexure III
Current Assets
2. Current Ratio
Current Liabilities
Annexure IV
Total Liabilities
3. Debt Ratio ( Total Assets
)100
7,718,712 9,564,589 7,621,075 4,311,769 10,388,550
12,194,517 15,822,468 15,665,050 13,748,109 20,685,523
Annexure V
Annexure VI
Annexure VII