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Chapter 1.

0: Introduction and Overview

1.1 Company Profile

Ashok Leyland is a commercial vehicle manufacturing company based in Chennai India. Founded in 1948, the company is one of India's leading manufacturers of commercial vehicles, such as trucks and buses, as well as emergency and military vehicles. Operating six plants, Ashok Leyland also makes spare parts and engines for industrial and marine applications. It sells about 60,000 vehicles and about 7,000 engines annually. It is the second largest commercial vehicle company in India in the medium and heavy commercial vehicle (M&HCV) segment with a market share of 28%. With passenger transportation options ranging from 19 seaters to 80 seaters, Ashok Leyland is a market leader in the bus segment. The company claims to carry over 60 million passengers a day, more people than the entire Indian rail network. In the trucks segment Ashok Leyland primarily concentrates on the 16 ton to 25 ton range of trucks. However Ashok Leyland has presence in the entire truck range starting from 7.5 tons to 49 tons. The joint venture announced with of Japan would Nissan motors prove its presence in the Light Commercial Vehicle (LCV) segment (<7.5 tons). An Ashok Leyland bus run by the Chennai Metropolitan Transport Corporation Following the independence of India, Pandit Jawaharlal Nehru, Indias first Prime Minister, persuaded Mr Raghunandan Saran, an industrialist, to enter automotive manufacture. The company began in 1948 as Ashok Motors, to assemble Austin cars. The company was renamed and started manufacturing commercial vehicles in 1955 with equity participation by British Leyland. Today the company is the flagship Financial Analysis of Ashok Leyland
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of the Hinduja Group, a British-based and Indian originated transnational conglomerate.

Early products included the Leyland Comet bus which was a passenger body built on a truck chassis, sold in large numbers to many operators, including Hyderabad Road Transport, Ahmadabad Municipality, Travancore State Transport, Bombay State Transport and Delhi Road Transport Authority. By 1963, the Comet was operated by every State Transport Undertaking in India, and over 8,000 were in service. The Comet was soon joined in production by a version of the Leyland Tiger.

In 1968, production of the Leyland Titan ceased in Britain, but was restarted by Ashok Leyland in India. The Titan PD3 chassis was modified, and a five speed heavy duty constant-mesh gearbox utilized, together with the Ashok Leyland version of the O.680 engine. The Ashok Leyland Titan was very successful, and continued in production for many years.

Over the years, Ashok Leyland vehicles have built a reputation for reliability and ruggedness. This was mainly due to the product design legacy carried over from British Leyland.

Ashok Leyland had collaboration with the Japanese company Hino Motors from whom the technology for the H-series engines was bought. Many indigenous versions of H-series engine were developed with 4 and 6 cylinder and also conforming to BS2 and BS3 emission norms in India. These engines proved to be extremely popular with the customers primarily for their excellent fuel efficiency. Most current models of Ashok Leyland come with H-series engines.

An Ashok Leyland bus run by the Chennai Metropolitan Transport Corporation

In 1987, the overseas holding by Land Rover Leyland International Holdings Limited (LRLIH) was taken over by a joint venture between the Hinduja Group, the NonFinancial Analysis of Ashok Leyland
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Resident Indian transnational group and IVECO Fiat SpA, part of the Fiat Group and Europe's leading truck manufacturer. Ashok Leylands long-term plan to become a global player by benchmarking global standards of technology and quality was soon firmed up. Access to international technology and a US$200 million investment programme created a state-of-the-art manufacturing base to roll out international class products. This resulted in Ashok Leyland launching the 'Cargo' range of trucks based on European Ford Cargo trucks. These vehicles used Iveco engines and for the first time had factory-fitted cabs. Though the Cargo trucks are no longer in production and the use of Iveco engine was discontinued, the cab continues to be used on the 'ecomet' range of trucks.

In the journey towards global standards of quality, Ashok Leyland reached a major milestone in 1993 when it became the first in India's automobile history to win the ISO 9002 certification. The more comprehensive ISO 9001 certification came in 1994, QS 9000 in 1998 and ISO 14001 certification for all vehicle manufacturing units in 2002. In 2006, Ashok Leyland became the first automobile company in India to receive the TS16949 Corporate Certification. Editors note: This is part of a series of articles peeking into clean car industries and car manufacturers of China, India, South Korea and Germany. Among many other goals, Ashok Leyland aims to expand its operations to penetrate into overseas markets. Included in the companys plans is to acquire smaller car manufacturers in China and in other developing countries. In October 2006, Ashok Leyland bought a majority stake in the Czech based- Avia. Called Avia Ashok Leyland Motors s.r.o., this will give Ashok Leyland a channel into the competitive European market. According to the company, in 2008 the joint venture sold 518 LCVs in Europe despite tough economic conditions. Furthermore, the company will expand its product offers into construction equipment, following a joint venture with John Deere. Newly formed in June 2009, the John Deere partnership is a 50/50 split between the companies. The company says negotiation is progressing on land acquisition, and the production plans are in place. The venture is scheduled to start rolling out wheel loaders and backhoe loaders in October 2010. Aside from the full expansion planned for the company, Ashok Leyland is also paying close attention to the environment. In fact, Financial Analysis of Ashok Leyland
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they are one of the companies showing the strongest commitment to environmental protection, utilizing eco-friendly processes in their various plants. Even as they thrust into different directions, Ashok Leyland maintains an R&D group that aims to uncover ways to make their vehicles more fuel efficient and reduce emissions.

1.2 Current status

Ashok Leyland is the second technology leader in the commercial vehicles sector of India. The history of the company has been punctuated by a number of technological innovations, which have since become industry norms. It was the first to introduce multi-axled trucks, full air brakes and a host of innovations like the rear engine and articulated buses in India. In 1997, the company launched the countrys first CNG bus and in 2002, developed the first Hybrid Electric Vehicle.

The company has also maintained its profitable track record for 60 years. The company has increased its rated capacity to 105,000 vehicles per annum. Also further investment plans including putting up two new plants - one in uttrakhand in North India and a bus body building unit in middle-east Asia are fast afoot. It already has a sizable presence in African countries like Nigeria, Ghana, Egypt and South Africa.

Ashok Leyland has also entered into some significant partnerships, seizing growth opportunities offered by diversification and globalization with Continental Corporation for automotive infotronics; with Alteams in Finland for high pressure die casting and recently, with John Deere for construction equipment. In 2010 Ashok Leyland acquired a 26% stake in the British bus manufacturer Optare, a company based on the premises of a former British Leyland subsidiary C.H.Roe. In December 2011 Ashok Leyland increased its stake in Optare to 75.1%.

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1.3 Facilities

The company has seven manufacturing locations in India:

o o o o

Ennore and Hosur, Tamil nadu (Hosur - 1, Hosur - 2, CPPS) Alwar, Rajasthan Bhandara, Maharashtra Pantnagar, Uttarakhand

Ashok Leyland's Technical Centre, at Vellivoyalchavadi (VVC) in the outskirts of Chennai, is a state-of-the-art product development facility, that apart from modern test tracks and component test labs, also houses India's one and only Six Poster testing equipment

The company had an Engine Research and Development facility in Hosur, which was shifted to VVC, Chennai

The company has signed an agreement with Ras Al Khaimah Investment Authority (RAKIA) in UAE for setting up a bus body building unit in the Middle East

1.4 Achievements

Ashok Leyland buses carry 60 million passengers a day, more people than the entire Indian rail network

Ashok Leyland has a near 85% market share in the Marine Diesel engines markets in India

In 2002, all the vehicle-manufacturing units of Ashok Leyland were ISO 14001 certified for their Environmental Management System, making it the first Indian commercial vehicle manufacture to do so

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In 2005, received the BS7799 Certification for its Information Security Management System (ISMS), making it the first auto manufacturer in India to do so

In 2006, received the ISO/TS 16949 Corporate Certification, making it the first auto manufacturer in India to do so

It is one of the leading suppliers of defence vehicles in the world and also the leading supplier of logistics vehicles to the Indian Army

It is the largest manufacturer of CNG buses in the world

1.5 Purpose and Principles

Always working with integrity Conducting our operations with integrity and with respect for the many people, organisations and environments our business touches has always been at the heart of our corporate responsibility.

Positive impact We aim to make a positive impact in many ways: through our brands, our commercial operations and relationships, through voluntary contributions, and through the various other ways in which we engage with society.

Continuous commitment We're also committed to continuously improving the way we manage our environmental impacts and are working towards our longer-term goal of developing a sustainable business.

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Setting out our aspirations Our corporate purpose sets out our aspirations in running our business. It's underpinned by our code of business Principles which describes the operational standards that everyone at Unilever follows, wherever they are in the world. The code also supports our approach to governance and corporate responsibility.

Working with others We want to work with suppliers who have values similar to our own and work to the same standards we do. Our Business partner code, aligned to our own Code of business principles, comprises ten principles covering business integrity and responsibilities relating to employees, consumers and the environment.

1.6 Products of Ashok Leyland The products of Ashok Leyland have been divided as per the following segments: Buses Trucks Light Vehicles Defense Vehicles Power Solution


People move to keep their lives ticking and the buses move some 70 million people every day. From 18 seaters to 80 seaters, Ashok Leyland has an extensive range of

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buses that fits almost every requirement. Following are the categories in the bus segment: City Bus Sub-Urban Bus Inter-City Bus School and Staff Bus Special Bus

Models: o ULE CNG BS4 o ULE Diesel BS4 o Lynx BS3 o Stag BS3 o Vestibule Bus BS3 o Titan Double Decker BS3 o RE SLF BS4 o FE SLF CNG BS4 o FE SLF BS4 o Cheetah BS3 (IL MECH) o Cheetah BS3 (EDC) o Viking BS4 o Viking BS3 (EDC) o Viking BS3 (IL MECH) o AVION ULF

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Trucks have been the wheels of our countrys economy for decades with their highly comprehensive range of trucks for a variety of applications: long-hauls, distribution, construction or mining. Available in a wide array of configurations and driveline options, chances are high that whatever be your need to move goods, Ashok Leyland will have a truck to meet it. Following are the categories in the truck segment in accordance to their application: Long Haul Mining and Construction Distribution Truck

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Models: o Multi Axle Vehicles o Tractors o 4x2 Trucks o Multi Axel Tripper Trucks o 4x2 Haulage o ICV o U Truck o AVIA Truck

Light Vehicles The Light Vehicles segment has come to the fore with fractional, last mile deliveries of consumables becoming critical. Our DOST, a vehicle with a rated payload of 1.25 tonnes, is positioned to meet an evolving market need for slightly heavier tonnage vehicles due to higher aggregation of small loads.

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The Dost Story Ever since the beginning of human civilization, men have felt the need for a trustworthy companion for their journeys and to take care of their transportation requirements. This need led to the growth, spread and prosperity of civilization. For years, men experimented with various means to transport their goods and travel. Each time they came up with better and innovative results. From first cart on wheels to bullock carts and horse carriages, to bicycles and rickshaws, men have come a long way in making both transportation and life easier. In India, new entrepreneurs are setting out to build their businesses. Their search for independence, their quest for economic growth demands a trusted and reliable partner who will bravely travel the distance with them. Presenting Ashok Leylands DOST : DOST is a brand new offering which in comparison to the products presently available in the SCV (Small Commercial Vehicle) segment, promises a new experience and technology at an increased payload of 1.25 Tons. It is equipped with a state-of-the-art 55 hp, 3 cylinder, 1.5 litre TDCR engine that is tuned for fuel economy as well as the driveability and gradeability required for Indian roads thanks to the Common Rail technology and a substantial torque of 150Nm. Completing the powertrain package is a five-speed manual gear box. DOSTs practicality is further increased by its tight turning circle radius of just 4.8 m, designed to easily negotiate both congested city roads and narrow rural lanes. The Euro-look cab is roomy, comfortable with superior ergonomics and an in-built safety structure. The unique Front Transverse leaf suspension matches ride quality with high durability. The Load Sensing Proportioning Valve (LSPV) technology measures the weight on the load body and applies the brake force accordingly to ensure stable braking irrespective of whether the vehicle is fully loaded or empty. DOST will be available in three versions with the top-end version featuring air-conditioning, power steering and fabric seats. The customer will also have a palette of three colours to choose from: white, beige and blue. Dost is envisaged as the next-generation product in the Indian LCV industry, rapidly evolving on the lines of the passenger car segment. It is meant for discerning customers who want to exert their economic and social status. It is a Financial Analysis of Ashok Leyland
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contemporary, powerful and highly efficient product, bringing forth to its users, Japanese Quality at Indian Cost. Defence Vehicles Ashok Leyland Defence Systems (ALDS) offers logistical, tactical and special purpose defence solutions on its Fox, Stallion and Rhino vehicle platforms.

The Fox provides armed forces, an all-wheel drive (4X4), multi-purpose, all-terrain vehicle that is a versatile performer, even in inhospitable terrain. The Fox, with a military payload of 1.5 tonnes, lends itself to multiple applications or roles and is available in both armoured and non-armoured body options.

The Stallion, which is designed for reliability, high mobility, off-road tactical capabilities and protection, provides an end-to-end logistical defence solution to global armed forces. The Stallion 4x4 and Stallion 6x6, with military payloads from 2.5 tonnes to 7.5 tonnes, are available as a complete package to customers along with modular solutions such as Fleet Management System, maintenance kits, training packages, and electronic publications, along with Global Warehouse Support.

The Rhino provides armed forces a logistical and tactical option in the heavy duty defence vehicle category with military payloads from 8 tonnes to 10 tonnes. ALDS vehicles range includes Light Specialty Vehicles (LSV), Mine Protected Vehicles (MPV), General Services Role, Light Recovery Vehicles, High Mobility Vehicles, Fire Fighting Trucks, Field Artillery Tractors and other special applications. Products have been classified as follows: Logistical Vehicles Tactical Vehicles Special Purpose Vehicles

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Logistical Vehicles

Missions for armed forces today range from humanitarian relief and reconstruction, peace enforcement, counter terrorism or counter insurgency operations to major combat. These varied missions call for logistical vehicles that offer maximum operational flexibility and robust capabilities at lower costs.

Ashok Leyland Defences family of multi-purpose logistical support vehicles provides proven, reliable vehicle platforms viz. Stallion, Rhino and Fox. The three vehicle platforms offer operational flexibility with high levels of reliability at lower costs.

Fox An all-wheel drive (4X4), multi-purpose, all-terrain vehicle with payload of 1.5 tonnes.

Stallion A medium duty defence vehicle with military payloads from 2.5 tonnes to 7.5 tonnes and logistical, tactical and special purpose applications.

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Rhino A logistical and tactical option in the heavy duty defence vehicle category with military payloads from 8 tonnes to 10 tonnes.

Tactical Vehicles There has been a fundamental change in military operations, which has meant that armed forces missions have gone beyond direct-fire battles to contemporary conflict scenarios which include counter insurgency and peace enforcement.

The change in conflict scenarios has in turn changed the mission scope and threat levels faced by the armed forces tactical vehicles. The focus has shifted from vehicle performance and payload to crew protection, high mobility, improved reliability and lower operational costs. Ashok Leyland Defence Systems tactical vehicles on the Stallion and Fox platforms are suited for different kinds of missions across varied terrains, with superior reliability and off-road mobility.

MPV An all-wheel drive (4x4), multi-purpose, all-terrain vehicle with high mobility, high protection and multi-mission capabilities.

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Special Purpose Vehicles Armed forces require a range of special purpose vehicles for roles as varied as armoured transport to fire-fighting roles. Special purpose vehicles gain significance in todays scenario of counter-terrorist operations and urban conflict areas.

Ashok Leyland Defence Systems designs special purpose vehicles including armoured, non-armoured buses and crash fire tenders. Ashok Leyland Defence Systems special purpose vehicles are designed with high-mobility and provide reliability in logistical and special application roles.

The buses are designed to provide both mobility and protection to the crews and personnel being transported. The crash fire tenders are designed as fire-fighting vehicles and are equipped with modern fire-fighting equipment with superior performance in terms of speed, acceleration, carrying capacity and on-road and offroad capability.

Buses Buses provide mobility and protection to the crews and personnel being transported in hostile environments.

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Power Solution

LEYPOWER Power Solutions is the fastest growing genset provider in India. With state-of-the-art technology in engine, alternator and controllers, LEYPOWER provides a fully integrated power system at par with global standards at a very competitive overall cost of ownership.

LEYPOWER ready-to-use diesel generating sets meet with the latest CPCB norms in India and built to comfortably meeting international norms. These sets are powered by the compact 4, 6 and 8 cylinder series of diesel engines. Aesthetically designed, these DG sets are silent, environment-friendly require minimum maintenance and are low on operating costs.

Leypower diesel generating sets are manufactured in the state-of-the-art plants located across 6 units in the country using the latest machinery and skill sets to roll out well engineered DG sets.

The present range extends from 10-2000 kVA with generating sets manufactured to operate under arduous conditions.

Products in the segment Leypower Leymarine Special Engines Leygas Leyfire

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Financial Analysis of Ashok Leyland

Chapter 2.0: Financial Analysis

Board of directors: The following are the other functional heads at Ashok Leyland:

1. Mr. Vinod Dasari - Managing Director 2. Mr. K.Sridharan- Chief Financial Officer 3. Mr. J.N.Amrolia, Executive Director - Construction and Allied Businesses 4. Mr. Anup Bhat, Executive Director - Strategic Sourcing 5. Mr. S.Balasubramanian, Executive Director - Projects 6. Mr. A.K.Jain, Executive Director - Project Planning 7. Mr. R.R.G.Menon, Executive Director - Product Development 8. Mr. N.Mohanakrishnan, Executive Director - Internal Audit 9. Mr. M.Nataraj, Executive Director - Global Bus Strategy 10. Mr. Rajindar Malhan, Executive Director - International Operations 11. Mr. Rajive Saharia, Executive Director - Marketing 12. Mr. B.M.Udayashankar, Executive Director - Manufacturing 13. Mr. Shekar Arora, Executive Director - Human Resources 14. Mr. A.R.Chandrasekaran, Executive Director - Secretarial and Company Secretary

Objectives There are different objectives for which the study has been completed. They are as follows: 1) To understand the importance of financial statement analysis, calculate the ratios, and also analyze them 2) To study the Ashoka Leyland financial position and market standing 3) To study the Ashoka Leylands financial programme 4) To find out profitability, liquidity of Ashoka Leyland (hinduja group)

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The main objective of the study is to determine and analyze the financial position of the Ashoka Leyland Ltd. For this purpose, the information was collected by two ways:

1. Primary Data: Primary data is that which is not published but it is very useful data. So the information was collected by discussion held with the executives of accounts and finance department.

2. Secondary Data: Secondary data consist of the information that already exists or someone has collected it for specific purpose. This data was collected by:

The company profile was collected from website of Ashoka Leyland


The other analytical information was collected from annual report and books and discussion with finance manager.

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Financial Statement Analysis

The term financial statements are used in business refers to two statement the balance sheet or statement of financial position reflecting the assets, liabilities, capital and reserve as on a particular date and income statement or profit and loss statement showing the results achieved during a certain period which are prepared at the end of accounting period for a business enterprises. Financial statement also called, as financial reports are account balances arranged in effective and meaningful order so that the facts and concepts they portray may be readily interpreted and used as bases for decision by all who are interested in the affairs of business. The purpose of preparing financial statement is to convey to owners, creditors and the general public about the financial position of the enterprises. Financial statement used by the management as the basis for decision making, planning operations like procurement of adequate financial and as a means exercising control over financial position of the business and efficient and profitable use of assets. According to American institute of certified public Accounts the financial statement have been declared to process the following nature: the financial statements are prepared for the purpose of presenting a periodical reviews or report on the progress by the managements and deal with the status of investment in the business and results achieved during the period under review. They reflect a combination of recorded facts; accounting conventions applied affect them materially.

The Usefulness of Financial Statement

The usefulness statement is the business mirror, which reflects the financial position and operating strength and weakness of the concern. These statements are useful to management, investors, bankers, workers, and government and public at large.

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The major uses of financial statements are: As a report of stewardship. As a basis of fiscal policies. As a basis of granting credit.


Financial Statement Analysis seeks to spotlight the significant facts and relationship concerning managerial performance, corporate efficiency, financial strength & weakness and credit worthiness of the company. With the help of the financial analysis the manager can rationalize his decision and reach the business goal easily. The financial statement such as income statement, balance sheet. The income statement, the statement of retained and the statement of changes in financial position report what has actually happened to earnings during a specified period. The balance sheet presents a summary of financial position of the company at a given point of time. The statement of retained earnings reconciles income earned during the year and any dividends distributed with the change in retained earnings between the start and end of the financial year under study. The statement of changes in financial position provides a summary of funds flow during the period of financial statement.

2.4 Significant Accounting Policies

A. Basis of preparation

The financial statements have been prepared to comply with the mandatory Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI) and the relevant provisions of the Companies Act, 1956 (the Act). The financial statements have been prepared under the historical cost convention on Financial Analysis of Ashok Leyland
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accrual basis. The accounting policies have been consistently applied by the Company unless otherwise stated.

B. Fixed assets

Fixed assets are stated at cost less accumulated depreciation and impairment losses. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Borrowing costs directly attributable to acquisition or construction of fixed assets which necessarily take a substantial period of time to get ready for their intended use are capitalized.

C. Intangibles

Patents, Trademarks, Designs and Licenses Costs relating to patents, trademarks, designs and licenses which are acquired, are capitalized and amortized on a straight-line basis over a period of 5 years.

Computer software Software which is not an integral part of the related hardware, is classified as an intangible asset and is being amortized over a period of 6 years, being the estimated useful life.

Non-compete Non-compete compensation is capitalized and amortized on a straight-line basis over the life of the non-compete agreement.

Product Development Cost incurred for acquiring rights for product under development are recognized as intangible assets and amortized on a straight-line basis over a period of 5 years from the date of regulatory approval. Subsequent expenditures on development of such products are also added to the cost of intangibles.

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D. Depreciation

Depreciation on fixed assets is provided on straight-line method at the rates and in the manner prescribed in Schedule XIV of the Act. Premium paid on perpetual leasehold land is charged to revenue on termination / renewal of lease agreements.

E. Leases

Operating lease payments are recognised as an expense in the Profit and Loss account on a straight-line basis over the lease term.

F. Investments

Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognise a decline other than temporary in the value of the investments. Profit / loss on sale of investments is computed with reference to their average cost.

G. Inventories

Inventories are valued as follows: Raw materials, stores and spares and packaging materials Lower of cost and net realisable value. However, materials and other items held for use in the production of finished goods are not written down below cost if the products in which they will be incorporated are expected to be sold at or above cost. Cost is determined on a weighted average basis.

Finished goods

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Lower of cost and net realisable value. Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. Cost of finished goods includes excise duty.

Work-in-process At cost up to estimated stage of process. Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Where duty paid / indigenous materials are consumed, in manufacture of products exported prior to duty-free import of materials under the Advance License Scheme, the estimated excess cost of such materials over that of duty free materials is carried forward in the carrying cost of raw materials and charged to revenue on consumption of such duty-free materials.

H. Revenue recognition

Revenue is recognised to the extent that it can be reliably measured and is probable that the economic benefits will flow to the Company.

Sale of Goods: Revenue from sale of goods is recognised when the significant risks and rewards of ownership of the goods are transferred to the customer and is stated net of trade discounts, excise duty, sales returns and sales tax.

Royalties, Technical know-how and licensing income: Revenue is recognised on accrual basis in accordance with the terms of the relevant agreement.


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Revenue is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

Dividends: Revenue is recognised when the right to receive is established.

I. Research and development costs

Revenue expenditure incurred on research and development is charged to profit and loss account in the year it is incurred. Capital expenditure is included in the respective heads under fixed assets.

J. Expenditure on regulatory approvals

Expenditure incurred for obtaining regulatory approvals and registration of products for overseas markets and product acquisitions is charged to revenue.

K. Employee stock option plan

The accounting value of stock options representing the excess of the market price over the exercise price of the shares granted under "Employees Stock Option Scheme" of the Company, is amortised as "Deferred employees compensation" on a straight-line basis over the vesting period in accordance with the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.

L. Foreign currency translation

Investments in foreign entities are recorded at the exchange rates prevailing on the date of making the investments. Transactions in foreign currencies are recorded at the rates prevailing on the date of the transaction. Monetary items denominated in foreign currency are restated at the rate prevailing on balance sheet date. Exchange differences arising on the settlement of monetary items or on reporting Financial Analysis of Ashok Leyland
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companys monetary items at rates different from those at which they were initially recorded during the year, or reported in the previous financial statements, are recognised as income or expenses in the year in which they arise, except for exchange differences arising on loans denominated in foreign currencies utilised for acquisition of fixed assets from outside India, where the exchange gains/losses are adjusted to the cost of such assets.

M. Retirement benefits

Provisions for liabilities in respect of gratuity, pension and leave encashment benefits are made based on actuarial valuation made by an independent actuary as at the balance sheet date. Contributions in respect of provident fund, superannuation and gratuity are made to Trust set up by the Company for the Purpose and charged to profit and loss account.

N. Taxes on income

Tax expenses comprise current tax, deferred tax and fringe benefit tax. The provision for current income-tax is the aggregate of the balance provision for tax for three months ended March 31, 2005 and the estimated provision based on the taxable profit of remaining nine months up to December 31, 2005, the actual tax liability, for which, will be determined on the basis of the results for the period April 1, 2005 to March 31, 2006. Deferred income tax reflects the impact of current year timing differences between taxable income/ losses and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. In respect of carry forward losses, deferred tax assets are recognised only to the extent there is virtual certainty that sufficient future taxable income will be available against which such losses can be set off. Consequent to the introduction of Fringe Benefit Tax (FBT) effective April 1, Financial Analysis of Ashok Leyland
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2005, the Company has made provision for FBT in accordance with applicable Income-tax laws.

O. Export benefits / incentives

Export entitlements under the Duty Entitlement Pass Book ("DEPB") Scheme are recognised in the profit and loss account when the right to receive credit as per the terms of the scheme is established in respect of the exports made. Obligation / entitlements on account of Advance Licence Scheme for import of raw materials are accounted for on purchase of raw materials and / or export sales.

P. Contingent liabilities

Depending on the facts of each case and after due evaluation of relevant legal aspects, the Company makes a provision when there is a present obligation as a result of a past event where the outflow of economic resources is probable and a reliable estimate of the amount of obligation can be made. The disclosure is made for all possible or present obligations that may but probably will not require outflow of resources as contingent liability in the financial statement.

Q. Use of estimates In preparing Companys financial statements in conformity with accounting principles generally accepted in India, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period; actual results could differ from those estimates.

R. Earnings per share

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Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period is adjusted for events of bonus issue and share split. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

S. Impairment of assets

The Company on an annual basis makes an assessment of any indicator that may lead to impairment of assets. If any such indication exists, the Company estimates the recoverable amount of the assets. If such recoverable amount is less than the carrying amount, then the carrying amount is reduced to its recoverable amount by treating the difference between them as impairment loss and is charged to the profit and loss account.

TOOLS AND TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS The analysis of financial statement consists of a study of relationship and trends to determine whether or not the financial position and results of operating as well as the financial progress of the company are satisfactory or unsatisfactory. The analysis of facts and related data was important and a number of techniques of analysis are:

1) balance sheet 2) profit & loss accounts 3) cash flow statement 4) fund flow statement 5) ratio analysis

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2.2 BALANCE SHEET A financial statement that summarizes a company's assets, liabilities

and shareholders' equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders. It's called a balance sheet because the two sides balance out. This makes sense: a company has to pay for all the things it has (assets) by either borrowing money (liabilities) or getting it from shareholders (shareholders' equity). Each of the three segments of the balance sheet will have many accounts within it that document the value of each. Accounts such as cash, inventory and property are on the asset side of the balance sheet, while on the liability side there are accounts such as accounts payable or long-term debt. The exact accounts on a balance sheet will differ by company and by industry, as there is no one set template that accurately accommodates for the differences between different types of businesses.

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Balance sheet
Mar ' 11 Sources of funds Owner's fund Equity share capital Share application money Preference share capital Reserves & surplus Loan funds Secured loans Unsecured loans Total Uses of funds Fixed assets Gross block Less : revaluation reserve Less : accumulated depreciation Net block Capital work-in-progress Investments Net current assets Current assets, loans & advances Less : current liabilities & provisions Total net current assets Miscellaneous expenses not written Total Notes: Book value of unquoted investments Market value of quoted investments Contingent liabilities Number of equity shares outstanding (Lacs) 1,117.49 524.13 881.77 13303.4 244.01 328.36 445.03 13303.4 101.69 193.98 754.37 13303.4 365.07 391.84 1,783.97 13303.4 43.22 281.39 1,129.49 13238.7 4,360.81 3,995.59 365.23 4.31 5,314.88 4,107.53 3,371.37 736.15 5.17 4,603.57 3,195.70 2,475.37 720.33 9.69 4,071.02 2,759.38 2,541.72 217.66 22.29 3,014.11 2,544.92 1,970.20 574.72 24.42 2,512.01 6,691.89 1,306.28 2,058.10 3,327.52 387.82 1,230.00 6,018.63 1,333.17 1,769.07 2,916.39 619.71 326.15 4,953.27 1,364.86 1,554.16 2,034.25 1,043.19 263.56 2,942.44 22.38 1,416.89 1,503.17 661.08 609.9 2,620.20 22.96 1,313.16 1,284.08 407.7 221.09 1,272.22 1,385.97 5,314.88 788.12 1,492.33 4,603.57 304.41 1,657.57 4,071.02 190.24 697.26 3,014.11 360.22 280.18 2,512.01 133.03 2,523.65 133.03 2,190.10 133.03 1,976.00 133.03 1,993.57 132.39 1,739.23 Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07

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2.3 PROFIT & LOSS ACCOUNT A financial statement that summarizes the revenues, costs and expenses

incurred during a specific period of time - usually a fiscal quarter or year. These records provide information that shows the ability of a company to generate profit by increasing revenue and reducing costs. The P&L statement is also known as a "statement of profit and loss", an "income statement" or an "income and expense statement".The statement of profit and loss follows a general form as seen in this example. It begins with an entry for revenue and subtracts from revenue the costs of running the business, including cost of goods sold, operating expenses, tax expense and interest expense. The bottom line (literally and figuratively) is net income (profit). Many templates can be found online for free, that can be used in creating your profit and loss, or income statement. The balance sheet, income statement and statement of cash flows are the most important financial statements produced by a company. While each is important in its own right, they are meant to be analyzed together

Profit loss account (Amount in Crores)

Mar ' 11 Income Operating income Expenses Material consumed Manufacturing expenses Personnel expenses Selling expenses Administrative expenses Expenses capitalised Cost of sales Operating profit Other recurring income Adjusted PBDIT 8,230.64 151.22 974.6 761.38 95.81 -24.06 10,189.60 1,217.56 38.7 1,256.25 5,282.39 89.98 671.61 571.69 74.36 -15.25 6,674.79 761.4 36.39 797.79 4,553.31 88.72 566.26 430.77 65.04 -8.2 5,695.90 473.08 62.8 535.88 5,855.39 102.76 616.17 194.63 399.76 -0.67 7,168.04 804.48 70.3 874.78 5,521.20 87.13 480.7 170.7 413.1 -0.13 6,672.71 686.18 63.19 749.37 11,407.15 7,436.18 6,168.99 7,972.52 7,358.88 Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07

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Financial expenses Depreciation Other write offs Adjusted PBT Tax charges Adjusted PAT Non recurring items Other non cash adjustments Reported net profit Earnings before appropriation Equity dividend Preference dividend Dividend tax Retained earnings

188.92 267.43 799.9 170.5 629.4 1.9 631.3 1,208.75 266.07 43.16 899.52

101.85 204.11 491.83 121.1 370.73 52.95 423.67 905.98 199.55 33.14 673.28

157.3 178.41 200.17 18.45 181.72 8.27 0.26 190.25 692.53 133.03 22.61 536.89

83.63 177.36 0.49 613.3 168.84 444.46 24.85 469.31 831 199.77 33.95 597.27

31.82 150.57 0.3 566.67 163.22 403.45 37.83 2.96 444.25 674.62 198.58 27.85 448.19

2.4 CASH FLOW STATEMENT 3 Complementing the balance sheet and income statement, the cash flow statement (CFS), a mandatory part of a company's financial reports since 1987, records the amounts of cash and cash equivalents entering and leaving a company. The CFS allows investors to understand how a company's operations are running, where its money is coming from, and how it is being spent. Here you will learn how the CFS is structured and how to use it as part of your analysis of a company.

1. It is a statement that depicts change in cash position from one period to another 2. A revenue or expense stream that changes a cash account over a given period. Cash inflows usually arise from one of three activities - financing, operations or investing - although this also occurs as a result of donations or gifts in the case of personal finance. Cash outflows result from

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expenses or investments. This holds true for both business and personal finance. 3. An accounting statement called the "statement of cash flows", which shows the amount of cash generated and used by a company in a given period. It is calculated by adding noncash charges (such as depreciation) to net income after taxes. Cash flow can be attributed to a specific project, or to a business as a whole. Cash flow can be used as an indication of a company's financial strength

Cash flow

Mar ' 11 Profit before tax Net cash flow-operating activity Net cash used in investing activity Net cash used in fin. activity Net inc/dec in cash and equivlnt Cash and equivalnt begin of year Cash and equivalnt end of year 801.8 591.38 -917.73 -13.64 -339.98 515.36 175.37

Mar ' 10 544.77 1,090.17 -783.17 123.31 430.32 85.15 515.46

Mar ' 09 208.45 -525.58 -664.18 459.18 -730.58 815.73 85.15

Mar ' 08 638.15 1,065.69 -809.68 364.52 620.53 195.2 815.73

Mar ' 07 604.51 499.95 -749.69 -289.38 -539.12 850.32 311.21

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2.5 DIVIDEND 1. A distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders. The dividend is most often quoted in terms of the dollar amount each share receives (dividends per share). It can also be quoted in terms of a percent of the current market price, referred to as dividend yield.Also referred to as "Dividend per Share (DPS)." 2. Mandatory distributions of income and realized capital gains made to mutual fund investors. 3. Dividends may be in the form of cash, stock or property. Most secure and stable companies offer dividends to their stockholders. Their share prices might not move much, but the dividend attempts to make up for this. Highgrowth companies rarely offer dividends because all of their profits are reinvested to help sustain higher-than-average growth. 4. Mutual funds pay out interest and dividend income received from their portfolio holdings as dividends to fund shareholders. In addition, realized capital gains from the portfolio's trading activities are generally paid out (capital gains distribution) as a year-end dividend.

Dividend Summary For the year ending March 2011, Ashok Leyland has declared an equity dividend of 200.00% amounting to Rs 2 per share. At the current share price of Rs 27.40 these results in a dividend yield of 7.3%.

The company has a good dividend track report and has consistently declared dividends for the last 5 years.

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* As per the Profit & Loss account Dividend Declared

Announcement Date 19/05/2011 29/04/2010 15/05/2009 08/05/2008 14/03/2007 03/05/2006

Effective Date 29/06/2011 16/07/2010 14/07/2009 16/07/2008 28/03/2007 12/07/2006

Dividend Type Final Final Final Final Interim Final

Dividend (%) 200 150 100 150 150 120

Remarks AGM

2.6 RATIOS The ratio analyses concentrates on inter-relationship among the figures appearing in the aforementioned four financial statements. The ratio analysis helps the management to analyses the past performance of the firm and to make further projection. Ratio analysis allows interested parties like shareholder, investors, creditors, Government and analysts to make an evaluation of certain aspects of a firm performance. Ratio analysis is a process of comparison of one figure against another, which makes a ratio and the appraisal of the ratios to make proper analyses about the strength and weakness of the firms operations. The calculation of ratios is a relatively easy and simple task but the proper analyses and interpretation of the ratios can be made only by the skilled analyst. While interpreting the financial information, the analyst has to be careful in limitations imposed by the accounting concepts and methods of valuation. Information of non-financial nature will also be taken into consideration before a meaningful analyses is made. Ratio analysis is extremely helpful in providing valuable insight into a company s financial picture. Ratios normally pinpoint a business strength and weakness in two ways Ratios provide an easy way to compare today performance with past Ratios depict the areas in which a particular business is competitively advantaged or disadvantages through comparing ratios to those of other business of the same size within the same industry. Financial Analysis of Ashok Leyland
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Classification of Ratio Ratio may be classified in a number of ways keeping in view the particular purpose. Ratio indicating profitability is calculated on the basis of the profit and loss A/ C; those indicating financial are computed on the basis of balance sheet. To achieve analysis effective understanding of the profitability and financial position of business, ratio may be classified as:

A. LIQUIDITY RATIO: The short-term liquidity ratio, which measures the liquidity of the firm and its ability to meet it maturing short term obligations. Liquidity is defined as the ability to realize value in money, the most liquid of assets. It refers to the ability to pay n cash, the obligations that are due. Following are the main types of the liquidity ratio. o Current Ratio o Quick Ratio` o Net-Working Capital Ratio

B. LEVERAGE RATIO: The long-term financial stability of the firm may be consider upon its ability to meet all its liabilities, including those not currently payable. The ratios which are important in measuring the long term solvency ratio are as follows:o Total Debt to Equity Ratio o Debt to total Capital Ratio o Interest Coverage Ratio

C. PROFITABILITY RATIO: The purpose of study and analysis of profitability ratios are to help assess the adequacy of profits earned by the company and also to discover whether the Profitability is increasing or declining. The profitability of the firm is the net result of a large number of the policies and decisions. The profitability ratios show the combined effects of liquidity, asset management and debt management on operating results. Profitability ratios are measured with reference to sales, capital Financial Analysis of Ashok Leyland
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employed, total assets employed, shareholders fund etc. The major profitability rates are as follows:o EBIT to Sales Ratio o EAT To Sales o Working Capital to Net Assets o Return on Capital

D. TURNOVER RATIO: Activity ratio or turnover ratio measure how effectively the firm employs its resources. These ratios are called turnover ratios which involve comparison between the level of sales and investment in various accounts inventories, debtors, fixed assets, etc, activity ratios are used to measure the speed with which various accounts are converted into sales or cash. The following activity ratios are calculated for analysis. o Inventory Ratio o Fixed Assets Turnover Ratio o Fixed Assets Turnover Ratio o Debtors Turnover Ratio o Debtor Collection Period

Profitability ratios Profitability ratios measure the company's use of its assets and control of its expenses to generate an acceptable rate of return Gross margin, Gross profit margin or Gross Profit Ratio


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Operating margin, Operating Income Margin, Operating profit margin or Return on sales (ROS)

Note: Operating income is the difference between operating revenues and operating expenses, but it is also sometimes used as a synonym for EBIT and operating profit. This is true if the firm has no non-operating income. (Earnings before interest and taxes / Sales)

Profit margin, net margin or net profit margin

Return on equity (ROE)

Return on investment (ROI ratio or Du Pont Ratio)

Liquidity ratios Liquidity ratios measure the availability of cash to pay debt. Current ratio (Working Capital Ratio)

Acid-test ratio (Quick ratio)

Cash ratio

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Financial Leverage Ratio Total Debts to Assets Provides information about the company's ability to absorb asset reductions arising from losses without jeopardizing the interest of creditors. Total Liabilities Total Assets Capitalization Ratio Indicates long-term debt usage.

Long-Term Debt Long-Term Debt + Owners' Equity Debt to Equity Indicates how well creditors are protected in case of the company's insolvency. Total Debt Total Equity Interest Coverage Ratio (Times Interest Earned) Indicates a company's capacity to meet interest payments. Uses EBIT (Earnings Before Interest and Taxes)

EBIT Interest Expense Long-term Debt to Net Working Capital Provides insight into the ability to pay long term debt from current assets after paying current liabilities. Long-term Debt Current Assets - Current Liabilities

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Key Financial Ratios of Ashok Leyland

Mar '11 Investment Valuation Ratios Face Value Dividend Per Share Operating Profit Per Share (Rs) Net Operating Profit Per Share (Rs) Free Reserves Per Share (Rs) Bonus in Equity Capital Profitability Ratios Operating Profit Margin(%) Profit Before Interest And Tax Margin(%) Gross Profit Margin(%) Cash Profit Margin(%) Adjusted Cash Margin(%) Net Profit Margin(%) Adjusted Net Profit Margin(%) Return On Capital Employed(%) Return On Net Worth(%) Adjusted Return on Net Worth(%) Return on Assets Excluding Revaluations Return on Assets Including Revaluations Return on Long Term Funds(%) Liquidity And Solvency Ratios Current Ratio Quick Ratio Debt Equity Ratio Long Term Debt Equity Ratio Debt Coverage Ratios Interest Cover 5.23 5.83 2.27 8.33 18.81 1.09 0.53 1 1 1.22 0.72 0.98 0.98 1.29 0.72 0.93 0.93 1.08 0.6 0.42 0.42 1.12 0.74 0.34 0.25 10.67 8.3 8.32 7.83 7.83 5.51 5.51 18.6 23.8 23.72 19.94 29.76 18.6 10.23 7.45 7.49 7.69 7.69 5.66 5.66 12.89 18.27 15.99 17.42 27.45 12.89 7.66 4.72 4.77 5.77 5.77 3.04 3.04 8.78 9.05 8.65 15.78 26.04 8.78 10.09 7.79 7.86 7.73 7.73 5.83 5.83 23.12 22.3 21.12 15.82 15.99 23.15 9.32 7.21 9.66 7.97 7.46 5.94 5.43 23.82 23.58 21.84 13.95 14.13 25.51 1 2 9.15 85.75 18.25 4.68 1 1.5 5.72 55.9 16.1 4.68 1 1 3.56 46.37 14.43 4.68 1 1.5 6.05 59.93 14.69 4.68 1 1.5 5.18 55.59 12.79 4.7 Mar '10 Mar '09 Mar '08 Mar '07

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Total Debt to Owners Fund Financial Charges Coverage Ratio Financial Charges Coverage Ratio Post Tax Management Efficiency Ratios Inventory Turnover Ratio Debtors Turnover Ratio Investments Turnover Ratio Fixed Assets Turnover Ratio Total Assets Turnover Ratio Asset Turnover Ratio Average Raw Material Holding Average Finished Goods Held Number of Days In Working Capital Profit & Loss Account Ratios Material Cost Composition Imported Composition of Raw Materials Consumed Selling Distribution Cost Composition Expenses as Composition of Total Sales Cash Flow Indicator Ratios Dividend Payout Ratio Net Profit Dividend Payout Ratio Cash Profit Earning Retention Ratio Cash Earning Retention Ratio Adjusted Cash Flow Times Earnings Per Share Book Value

1 6.65 5.76

0.98 7.83 7.16

0.93 3.41 3.34

0.42 10.46 8.74

0.34 23.55 19.61

5.86 10.34 5.86 1.73 2.19 1.73 42.33 32.96 11.53

5.11 7.51 5.11 1.25 1.65 1.25 40.15 36.3 35.64

5.36 9.25 5.36 1.26 1.54 1.26 44.36 41.55 42.04

7.9 17.74 7.9 2.77 2.7 2.77 26.49 31.11 9.83

6.93 15.54 8.29 5.43 2.99 2.86 25.65 28.68 28.12

73.69 7.04 6.67 10.31

74.42 7.65 7.68 8.66

73.82 5.37 6.98 15.93

74.66 3.7 2.44 10.19

75.69 3.35 2.31 8.94

48.98 34.4 50.87 65.52 2.96 4.75 19.97

54.92 37.06 37.24 59.53 3.97 3.18 17.46

81.91 42.24 14.36 56.79 5.45 1.43 15.85

49.8 36.11 47.42 62.45 1.43 3.53 15.99

51.31 38.23 43.88 59.16 1.16 3.33 14.14

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2.7 Shareholders Shareholders are the owners of a company. They have the potential to profit if the company does well, but that comes with the potential to lose if the company does poorly.

Shareholding belonging to the category: "Public and holding more than 1% of the Total No. of Shares"

No. 1 2

Name of the Shareholder Life Insurance Corporation of India PCA India Equity Open Ltd The Master Trust Bank of Japan Ltd as

Total Shares held 269,273,442 50,294,128

Shares as % of Total No. of Shares 10.12 1.89

Trustee of PCA Asia Oceania High Dividend Equity Mother Fund



4 5 6 7 8

Matthews India Fund Reliance Capital Trustee Co Ltd A/c Reliance Equity Opportunities Fund Bajaj Allianz Life Insurance Co Ltd General Insurance Corporation of India Birla Sun Life Insurance Company Ltd Total

38,022,554 34,855,102 30,407,983 30,150,000 26,811,162 536,581,288

1.43 1.31 1.14 1.13 1.01 20.17

REPORT: - This is the yearly report of Ashok Leyland for last five years Yearly Report (Amount in Rs. Cr.)

Mar '11 Sales Turnover Other Income Total Income Total Expenses Operating Profit 11,117.71 15.33 11,133.04 9,900.15 1,217.56

Mar '10 7,244.71 70.45 7,315.16 6,481.87 762.84

Mar '09 5,981.07 49.62 6,030.70 5,511.64 469.43

Mar '08 7,729.12 74 7,803.12 6,925.13 803.99

Mar '07 7,168.18 70.8 7,238.98 6,465.49 702.69 Page 41

Financial Analysis of Ashok Leyland

Profit On Sale Of Assets Profit On Sale Of Investments Gain/Loss On Foreign Exchange VRS Adjustment Other Extraordinary Income/Expenses Total Extraordinary Income/Expenses Tax On Extraordinary Items Net Extra Ordinary Income/Expenses Gross Profit Interest PBDT Depreciation Depreciation On Revaluation Of Assets PBT Tax Net Profit Prior Years Income/Expenses Depreciation for Previous Years Written Back/ Provided Dividend Dividend Tax Dividend (%) Earnings Per Share Book Value Equity Reserves Face Value

--------1,232.89 163.66 1,069.23 267.43 -801.8 170.5 631.3 -----4.75 -133.03 2,523.65 1.00

------3.27 --833.29 81.13 748.89 204.11 -544.78 121.1 423.68 -----3.18 -133.03 2,202.55 1.00

------13.49 --519.05 118.71 386.86 178.41 -208.45 18.45 190 -----1.43 -133.03 1,976.00 1.00

------8.41 --877.99 49.74 819.84 177.36 -642.48 173.17 469.31 -----3.53 -133.03 1,993.57 1.00

------13.08 --773.49 5.33 755.08 150.57 -604.51 163.22 441.29 -----3.33 -132.39 1,739.23 1.00

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Goel D. K. (2007), Accounting for Management. (Financial Ratio) (Financial Analysis)

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