CHAPTER-1

INTRODUCTION OF THE STUDY:

1
 INTRODUCTION OF THE STUDY:

Finance is one of the most primary requisites of a business and the modern
management obviously depends largely on the efficient management of the finance.
Financials are prepared primarily for decision making. They play a dominant role in setting
the frame work of managerial decisions. At the right time to preserve solvency from the right
sources and at the right cost of capital.

The term financial analysis is also known as ‘analysis and interpretation of financial s’
refers to the process of determining financial strength and weakness of the firm by
establishing strategic relationship between the items of the Balance Sheet, Profit and Loss
account and other operative data. The purpose of financial analysis is to diagnose the
information contained in financials so as to judge the profitability and financial soundness of
the firm.

Also, financial management is that managerial activity which is concerned with planning and
controlling of firms financial resources. Financial management is concerned with rising of
CASH and their effective utilization keeping in view the overall objective of the firm.

2
 NEED OF THE STUDY:

 We know that the analysis of financial statement helps the analyst to know the
financial information from the financial data contained in the financial statements and to
assess the financial health (i.e. strength or weakness) of an enterprise.

 It is also helps to make a forecast for the future which helps us to prepare budgets and
estimates.

 Considering above parameters it therefore felt necessary to analysis to the

performance of financial analysis funds for a period of 5 years (that is between 2013 to 2107).

3
 STATEMENT OF THE PROBLEM:
While financial statement analysis is an excellent tool, there are several issues to
be aware of that can interfere with your interpretation of the analysis results.
These issues are:
 Comparability between periods,
 Comparability between companies and
 Operational information.

4
 OBJECTIVES OF THE STUDY:
1) To provide financial information that assists in estimating the earning potentials of
business.
2) Understanding the role of affix in promoting financial analysis fund business.
3) Analyzing the performance of financial analysis funds at ASHOKLEYLAND.

5
 SCOPE OF THE STUDY:
This project will have limited scope of analyzing the performance financial analysis funds at
a signals asset management company.
However it will have wide scope in terms of technical soundness.
Trend analysis of Business and sectorial development of funds etc.

6
 HYPOTHESIS:
Researchers are formulated two types of hypothesis i.e. NULL hypothesis and
ALTERNATIVE hypothesis for the present study.
Both the hypothesis will be tested with the help of statistical tools.
NULL HYPOTHESIS (H0):
There will be no significant difference in Profitability and Efficiency Ratio of the selected
Automobile industry during the period of study.
ALTERNATIVE HYPOTHESIS (H1):
There will be significant difference in Overall Activity Ratio of the selected Automobile
industry during the period of study.

7
 METHODOLOGY AND DATABASE:
Methodology is a way to systematically solve the research problem. It may be
understood as a science of studying how research is done scientifically. So, the research
methodology not only talks about the research methods but also considers the logic behind
the method used in the context of the study.

Primary Data:

 The primary data will be collected mainly through interactions and discussions with
the company’s executives.

Secondary Data:

Secondary data is cheaper and more quickly available than primary data, but likely to need
processing before it is useful.

 The secondary data will be collected from the website and employee of the company
about the company and its products. The data will be collected to know about the Capital
Investment banking equities in India. This data will be collected to know about the Capital
Investment Decisions in India and its origin, growth, function, role.

8
 PERIOD OF THE STUDY :
Generally researcher wants to collect all required data, particulars and information for the
research. He also takes interest to select a short period of the study because of convenience
for properly data collection, and analysis of the same for come to the conclusion. Hence, the
researcher undertakes research for the period of 5 years on the Financial Performance of
selected companies of Automobile Industry of India.

The sources of data are from the annual reports of the company from the year 2013 to 2017.

9
 CHAPTERIZATION:

The entire research work will run into six chapters.

CHAPTER-1: INTRODUCTION.
CHAPTER II: REVIEW OF STUDY.
CHAPTER III: COMPANY PROFILE.
CHAPTER-IV: ANALYSIS AND DESCRIPTION.
CHAPTER-V : FINDINGS.
CHAPTER-VI : CONCLUSION AND SUGGESTIONS.

10
 CHAPTER-3
REVEW OF LETERATURE

11
 REVEW OF LETERATURE
MEANING OF FINANCIAL STATEMENTS
According to Himpton John, “A financial statement is an organized collection of data according to
logical & consistent accounting procedures. Its purpose is to convey an understanding of some
financial aspects of a business firm. It may show a position at a moment of time as in the case of
balance sheet, or may reveal a series of activities over a given period of time, as in the case of an
income statement”.

On the basis of the information provided in the financial statements, management makes review of the
progress of the company and decides the future course of action. The term financial statements refer to
two basic statements:

The income statement and (ii) the Balance Sheet. Of course, a business may also prepare (iii)
Statement of Retained earnings, and (iv) a statement of change in financial Position.

3.1 DIFFERENT TYPES OF FINANCIAL STATEMENTS

Income Statement: The income statement or profit & loss account is considered as a very useful
statement of all financial statements. It depicts the expanses incurred on production, sales and
distribution and sales revenue and the net profit or loss for particular period. It shows whether the
operations of the firm resulted in profit or loss at the end of a particular period.

Balance Sheet: Accounting Standards Board, India has defined balance sheets as, “ a statement of
financial position of an enterprise as at a given date which exhibits its assets, liabilities, capital
reserves and other account balances at their respective book values”. Balance sheet is a statement,
which shows the financial position of a business as on a particular date. It represents the assets owned
by the business and the claims of the owners and creditors against the assets in the form of liabilities
as on the date of statement. According to Harry G. Guthmann, “ the balance sheets might be described
as financial cross section taken at certain intervals and earning statements as condensed history of the
growth and decay between the cross sections”.

Statement of Retained Earnings: The statement of retained earnings is also called profit & loss
appropriation account. It is a link between income statement & balance sheet. Retained earnings are
the accumulated excess of earnings over losses and dividends. The balance shown by the income
statements is transferred to the balance sheet through this statement after making the necessary
appropriations.

Fund Flow Statement: According to Anthony,” The funds Flow Statement described the sources from
which the additional funds were derived and the use to which these funds were put”. Funds flow
statements help the financial analyst in having amore detailed analysis and understanding the changes

12
in the distribution of resources between two balance sheet periods. The statement reveals the sources
of funds and their application for different purposes.

Cash Flow Statements: A cash flow statement depicts the changes in cash position from one period to
another. It shows the inflow and outflow of cash and helps the management in making plans for
immediate future. An estimated cash flow statement enables the management to ascertain the
availability of cash to meet business obligations. This statement is useful for short term planning by
management.

Schedules & Note to Financial Statements: Schedules are the statements, which explain the items
given in the income statement and balance sheet. Schedules are a part of financial statement, which
give detailed information about the financial position of a business organization. Certain notes are
often used to supplement the information comprised in basic financial statements. These are virtually
a part of financial statements.

Annual Reports / Corporate reports: Apart from the financial statements annual report contains other
relevant information such as Management discussion & analysis, Reports on corporate Governance,
Director’s report, details of the subsidiary companies. These reports play as important role as financial
statements of the company in understanding of the complete financial position.

NATURE OF FINANCIAL STATEMENTS

\According to the American Institute of Certified Public Accountants, financial statements reflect “ a
combination of recorded facts, accounting conventions and personal judgments and conventions
applied affect them materially”. It means that data presented in financial statements is affected by
recorded facts, accounting concepts & conventions and personal judgments.

a) Recorded facts: The term-recorded facts refer to the figures, which are shown in the book of
accounts. The figures, which are not recorded in the books, are not depicted in financial
statements, no matter how important or unimportant those facts are.
b) Accounting policies, Assumptions, concepts & conventions:
Accounting policies encompasses the principles, bases, conventions, rules and procedures adopted
by in preparing and presenting financial statements. Accounting policies of the organisation are
consistently followed over along period of time and are reported as schedule to financial
statements or as notes to financial statements in the annual report.

As per accounting standards Board, India, fundamental accounting assumptions mean “basic
accounting assumptions which underline the preparation & presentation of financial statements.
Usually, they are not specifically stated because their acceptance and use are assumed. Disclosure
is necessary if they are not followed”. Some fundamental accounting assumptions are going
concern concept, consistency, accrual etc.

13
 Accounting concepts are basic framework on the basis of which accounting work is carried out.
Some accounting concepts are Business entity concept, Money measurement concept, going
concern concept, cost concept, matching concept, Dual aspect concept etc.

Accounting conventions are the principles, which enjoy the sanctity of application on account of
long usage, are termed as accounting conventions. E.g. consistency, conservatism, materiality, full
disclosure.

c) Personal Judgments: Personal judgments of the accountant are of importance despite of properly
laid down concepts, conventions, policies and assumptions. The judgment needs to be exercised
in proper classification of assets, classification of expenditure into capital & revenue, creation of
provisions and reserves.

VARIOUS TECHNIQUES OF FINANCIAL ANALYSIS

Comparative Financial Statements: Comparative financial statements are statements of financial

position of a business designed to provide time perspective to the to the consideration of various
elements of financial position embodied in such statements. Comparative statements reveal the
following:

(i) Absolute data (Money value or rupee amounts)

(ii) Increase or reduction in absolute data (in terms of money values)
(iii) Increase or reduction in absolute data (in terms of percentage)

Comparative balance sheets, comparative income statements and comparativstatements of changes in

financial position can be prepared. American Institute of Certified Public accountants have
explained the utility of preparing the comparative statements, thus:

“ The presentation of comparative statements is annual and other reports enhance the usefulness of
such reports and brings out more clearly the nature and trend of current changes affecting the
enterprise. Such presentation emphasis the fact that statements for a series of period are far more
significant that those of a single period and that the accounts of one period are but an installment of
what is essentially a continuous history. In any one year, it is ordinarily desired that the balance sheet,
the Income statement and the surplus statement be given for one or more preceding years as well as
for the current years”.

Common size Statements: The figures shown in financial statements viz. Profit & loss account and
balance sheet are converted to percentages so as to establish each element to the total figure of the
statement and theses statement are called common size statements. These statements are useful in
analysis of the performance of the company by analyzing each individual element to the total figure of

14
the statement. Theses statements will also assist in analyzing the performance over years and also with
the figures of the competitive firm in the industry for making analysis of relative efficiency.

Trend Analysis: In trend analysis ratios different items are calculated for various periods for
comparison purposes. Trend analysis can be done by trend percentages, trend ratios and graphic and
diagrammatic representation. The trend analysis is a simple technique and does not involve tedious
calculations. However, comparisons would be meaningful only when accounting policies are uniform
and price level changes do not present a distorted picture of phenomenon. The trend analysis conveys
a better understanding of management’s philosophies, policies and motivations, which have
boughabout the changes revealed over the years. Thus method is a useful analytical device for the
management since by substitution of percentages for large amounts, the brevity and readability are
achieved. However trend percentages are not calculated only for major items since the purpose is to
highlight important changes.

Fund flow analysis: Fund Flow Statement: Fund flow analysis reveals the changes in working capital
position. Working capital is of paramount importance in any business so this kind of a analysis proves
to be very useful. According to Anthony,” The funds Flow Statement described the sources from
which the additional funds were derived and the use to which these funds were put”. Funds flow
statements help the financial analyst in having amore detailed analysis and understanding the changes
in the distribution of resources between two balance sheet periods. The statement reveals the sources
of funds and their application for different purposes. Fund flow analysis has become an important tool
for any financial analyst; credit granting institutions and financial managers.

Cash Flow Analysis: A cash flow statement depicts the changes in cash position from one period to
another. It shows the inflow and outflow of cash and helps the management in making plans for
immediate future. An estimated cash flow statement enables the management to ascertain the
availability of cash to meet business obligations. This statement is useful for short term planning by
management.

Ratio Analysis: Ratio analysis is very important analytical tool to measure performance of an
organization .The ratio analysis concentrates on the interrelationship among the figures appearing in
the financial statements. The ratio analysis helps the management to analyze the past performance of
the firm and to make further projections. Ratio analysis allows interested parties like shareholders,
investors, creditors, government and analysts to make an evaluation of certain aspects of firm’s
performance. It is a process of comparison of one figure against another, which make a ratio, and the
appraisal of the ratios to make proper analysis about the strength and weakness of firm’s operations.
This tool of financial has been discussed in detail in next chapter.

15
Value Added Analysis: ‘Value Added’ is a basic and important measurement to judge the
performance of an enterprise. It indicates the net value or wealth created by the manufacturer during a
specified period. No enterprise can survive or grow if it fails to generate wealth. An enterprise can
survive without making profits but cannot survive without adding value.

‘Value added’ is described as “ the wealth created by the reporting entity by its own and its
employees’ efforts and comprises salary, wages, fringe benefits, interest, dividend, tax, depreciation
and net profit (Retained).

Value added is the increase in the market value brought by an alteration in the form, location or
availability of a product or service excluding the cost of bought in material or services used in that
product or service. To carry out the Value added analysis, a typical statement of added value is
prepared as routine part of management information system. The value added statement is basically
rearrangement of information given in income statement.

Types of Financial Analysis

(i) On the basis of Material Used: The analysis can be of following types:
Internal Analysis: It indicates the analysis carried out by those parties who have the access to the
book and records of the company. Naturally, it indicates basically the analysis carried out by
management of the company to enable the decision making process. This may also indicate the
analysis carried out in legal or statutory matters where the parties which are not a part of
management of the company may have the access to the books and records of the company.

External Analysis: It indicates the analysis carried out by those parties who do not have the access the
books an\d records of the company. This may involve the analysis carried out by creditors,
prospective investors, and other outsiders. Naturally, those outsiders are required to depend upon the
published financial statements. As such, the depth & correctness of the external analysis is restricted,
though some of the recent amendments of the statutes like Companies Act, 1956 hamait mandatory for
the companies to reveal maximum information relating to the operations & financial position, in
order to facilitate the

Horizontal Analysis: The horizontal analysis consists of the study of the behavior of each of
the item in the financial statement- that is, its increase & decrease with the passage if time. It
is also known as dynamic type of analysis since it shows the changes, which have taken
palace. The comparison of the items is made across the year, , the eyes look at the
comparative analysis is at the horizontal level , hence the analysis id termed as horizontal
analysis.

Vertical Analysis: In vertical analysis a study is made of the quantitative relationship

between he various items in the financial statements on a particular date. It’s a static type of
16
 analysis or study of position. Such an analysis is useful in comparing the performance of
several companies in the same group or divisions or department in the same company. Since
this analysis depends on the data for one period, this is not very conducive to a proper
analysis of the company’s financial position. It is also called ‘Static’ analysis as it is
frequently used for referring to ratio developed on the date or for one accounting period.

Analysis can be done both horizontally and vertically. As a matter of fact one type of analysis
is incomplete in itself. Both are complementary to each other. Both these analysis form the
backbone of the technique of financial statement analysis.

FINANCIAL STATEMENTS ANALYSIS

The financial statements are indicators of the two significant factors:

1. Profitability and

2. Financial soundness

Analysis and interpretation of financial statement therefore, refers to such a treatment of the information

contained in the Income Statement and Balance Sheet so as to afford full diagnosis of the profitability and

financial soundness of the business.

17
BALANCE SHEET:-

A balance sheet is the basic financial statement. It presents data on a company’s financial conditions on

a particular date, based on conventions and generally accepted principles of accounting. The amount

shown in the statements on the balances, at the time it was prepared in the various accounts listed in the

company’s accounting records, is considered to be a fundamental accounting statements. The income

statement summarizes the business operations during the specific period and shows the results of such

operations in the form of net income or net loss. By comparing the income statements of successive

periods, it is possible to determine the progress of a business. A statement is supplemented by a

comparative statement of the cost of goods manufactured and sold. It is prepared at regular intervals

and shows what a business enterprise owns and what it owes. It provides information which helps in

the assessment of the three main aspects of an enterprises position – its profitability, liquidity and

solvency. Of these, the later two are concerned with an enterprises ability to meet its liabilities, while

profitability is most useful overall measure of its financial conditions, the balance sheet is a statements

of assets, liabilities capital on specified date. It is therefore a static statement, indicating resources and

the allocation of these resources to various categories of asset. It is so to say financial photography

finance. Liabilities show the claims against its assets.

The shareholders equity comprises the total owner ship claims in a firm. This claim includes net worth of

shareholders equity and preferred stock. The traditional company balance sheet statement of assets valued on the

basis of their original cost and the means by which they have been financed by its shareholders, lenders,

suppliers and by the retention of income.

This tool suffers from the following limitations:

1. A balance sheet gives only a limited picture of state of affairs of a company, because it

Includes only those items which can be expressed in monetary terms.

2. The values shown on the balance sheet for some of the assets are never accurate

18
3. A balance sheet assumes that the real value of money remain constant.

4. On the basis of balance sheet, it is not possible to arrive at any conclusion about the success of an enterprise in

the future.

5. It is a detailed statement of the financial structure of a business.

INCOME STATEMENT

The results of operations of a business for a period of time are presented in the income statement.

From the accounting point of view, an income statement is subordinate to the balance sheet because the former

simply presents the details of the changes in the retained earnings in balance sheet accounts. However, if vital

source of financial information an income statement summarizes the results of business operations during

specific period and shows in the form of net income or net loss by comparing income statements for successive

periods, it is possible to observe the progress of the business the statement is supplemented by a comparative

statement of cost of goods manufactured and sold. It summarizes firms operating results for the past period.

Comparative balance sheet

Financial statements are sometimes recast for facility of scrutiny. The effects of the conductor

Businesses are reflected in its balance sheet by changes in assets and liabilities and in its net worth.

The comparative income statement presents a review of operating activities in business. A comparative balance

sheet shows effect of the operations on the assets and liabilities. The practice of presenting comparative

statement in the annual report is now becoming wide spread because it is a connection between balance sheet

and income statement. Considerations like price levels and accounting methods are given due weight at the time

of comparison.

Common-size statements

The percentage balance sheet is often known as the common size balance sheet. Such balance

sheet are, in a broad sense ratio analysis general items in the profit and loss accounts and in the

19
balance sheet are expressed in analytical percentages when expressed in the form, the balance

sheet and profit and loss account are referred to as a common size statement. Such statements

are useful in comparative analysis of the financial position in operating results of the business.

Cash flow statement

A cash flow statement is the financial analysis of the net income or profit after including book expense items

which currently do not use cash; for example, depreciation, depletion and amortization. Revenue items, which

do not currently provide funds, are to be deducted. A gross cash flow is net profit after tax plus provision for

depreciation. A net cash flow is arrived after deducting dividends from the gross cash flow. The cash flow is

very significant because it represents the actual amount of cash available to the business.

Ratio Analysis

Financial ratio analysis is the calculation and comparison of ratios which are derived from the

information in a company's financial statements. The level and historical trends of these ratios can be

used to make inferences about a company’s financial condition, its operations and attractiveness as an

investment.

Financial ratios are calculated from one or more pieces of information from company’s financial

statements. For example, the "gross margin" is the gross profit from operations divided by the total sales

or revenues of a company, expressed in percentage terms. In isolation, a financial ratio is a useless piece

of information. In context, however, a financial ratio can give a financial analyst an excellent picture of a

company's situation band the trends that are developing.

A ratio gains utility by comparison to other data and standards. Taking our example, a gross profit

margin for a company of 25% is meaningless by itself. If we know that this company's competitors have

profit margins of 10%, we know that it is more profitable than its industry peers which are quite

favorable. If we also know that the historical trend is upwards, for example has been increasing steadily

for the last few years, this would also be a favorable sign that management is implementing effective

Business, policies and strategies.

20
Classification of Ratios

Financial ratio analysis involves the calculation and comparison of ratios which are derived from the

information given in the company's financial statements. The historical trends of these ratios can be used

to make inferences about a company’s financial condition, its operations and its investment

attractiveness.

Financial ratio analysis groups the ratios into categories that tell us about the different facets of a

company's financial state of affairs. Some of the categories of ratios are described below:

 Liquidity Ratios give a picture of a company's short term financial situation or

solvency

 Turnover Ratios show how efficient a company's operations and how well it is using

its assets.

 Solvency Ratios show the long term profitability of the company.

Liquidity Ratios

Liquidity Ratios are ratios that come off the Balance Sheet and hence measure the Liquidity of the

company as on a particular day i.e. the day that the Balance Sheet was prepared. These ratios are

important in measuring the ability of a company to meet both its short term and long term obligations.

1. Current Ratio

2. Liquid Ratio

3. Net working capital ratio

1. Current Ratio:

An indication of a company's ability to meet short-term debt obligations; the higher the ratio, the more

liquid the company is. Current ratio is equal to current assets divided by current liabilities. If the

21
current assets of a company are more than twice the current liabilities, then that company is generally

considered to have good short-term financial strength. If current liabilities exceed current assets, then

the company may have problems meeting its short-term obligations.

Current Ratio = Current assets / Current liability

2. Quick Ratio:

Liquid ratio is also known as ‘quick’ or ‘Acid test ‘ratio. Liquid assets refer to assets which are

quickly convertible into cash. Current Assets other stock and prepaid expenses are considered as quick

assets. The ideal liquid ratio accepted ‘norm’ for liquid ratio ‘1’.

Quick Ratio = Total Quick Assets/ Total Current Liabilities

Quick Assets = Total Current Assets (minus) Inventory

3. Net Working Capital Ratio

Working Capital is more a measure of cash flow than a ratio. The result of this calculation must be a

positive number. Companies look at Net Working Capital over time to determine a company's ability

to weather financial crises. Loans are often tied to minimum working capital requirements.

22
Net working capital ratio = Net Working Capital / Capital Employed

Turnover Ratios

The turnover ratio is also known as activity or efficiency ratios. They indicates the efficiency with

which the capital employed is rotated in the business (i.e.) the speed at which capital employed in the

business rotates. Higher the rate of rotation, the greater will be the profitability. Turnover ratios

indicate the number of times the capital has been rotated in the process of doing business.

1. Fixed Asset Turnover Ratio

2. Working Capital Turnover Ratio

3. Debtor Turnover Ratio

4 Stock Turnover Ratio

1. Fixed Assets Turnover Ratio

Fixed asset turnover is the ratio of sales (on your Profit and loss account) to the value of your fixed

assets (on your balance sheet). It indicates how well your business is using its fixed assets to generate

sales.

Generally speaking, the higher the ratio, the better, because a high ratio indicates the business has less

money tied up in fixed assets for each dollar of sales revenue. A declining ratio may indicate that

you've over-invested in plant, equipment, or other fixed assets.

Fixed Assets Turnover Ratio = Gross Sales / Net Fixed Assets

2. Working Capital Turnover Ratio

Working capital refers to investment in current assets. This is also known as gross concept of

working capital. There is another concept of working capital known as net working capital.

Net working capital is the difference between current assets and current liabilities. Analysts

intend to establish a relationship between working capital and salsas the two are closely
23
related. Through this ratio we are attempting to see that one rupee blocked by the

organization in net working capital is generating how much sales. Higher the ratio better it

is.So, the working capital can be defined either as a gross working capital, which include

funds invested in all current assets, or as net working capital, which denotes the difference

between the current assets current liabilities of an organization.

Working Capital Turnover Ratio = Net Sales / Net Working Capital

Debtors Turnover Ratio

Debtor’s turnover ratio measures the efficiency with which the debtors are converted into

cash. This ratio indicates both the quality of debtors and the collection efforts of the business

enterprise. This ratio is calculated as follows:

I. Debtors’ turnover ratio

II. Debt collection period.

The numerator of this ratio should preferably be credit sales. This is so because the

denominator is logically related to credit sales as it arises from credit sales only. Cash sales

do not generate debtors. However, as the information related to credit sales is not separately

available in corporate accounts, so total sales could be taken in the numerator. Average

debtors are calculated by dividing the sum of beginning-of-year and end-of-year balance of

debtors by 2.

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Debtor’s Turnover Ratio = Credit sales / Average accounts receivables

Debt collection period:

The ratio indicates the extent to which the debt has been collected in time. It gives the average debt

collection period. The ratio is very helpful to lenders because it explains to them whether their

borrowers are collecting money within a reasonable time. An increase in the period will result in

greater blockage of funds in debtors.

Debt collection period = Months/Days in a year/ Debtor’s turnover ratio

4. Stock Turnover Ratio:

This ratio indicates whether investment in inventory is efficiently used or not. It is therefore explains

whether investment in inventories is within proper limits or not. The Inventory turnover ratio signifies

the liquidity of the Inventory. A high inventory turnover ratio indicates brisk sales. The ratio is,

therefore a measure to discover the possible trouble in the form of over stocking or over valuation.

It is difficult to establish a standard ratio of inventory because it will differ from industry to industry.

Stock Turnover Ratio = Sales / Average Inventory

Profitability Ratios

Profitability is an indication of the efficiency with which the operation of the business is carried on.

Poor operational performance may indicate poor sales and hence poor profits. A lower profitability

may arise due to lack of control over the expenses. Bankers, financial institutions and other creditors

look at the profitability ratios as an indicator whether or not the firm earns substantially more than it

pays interest for the use of borrowed funds.

1. Return on Investment

2. Return on Shareholders’ fund

3. Return on total asset

25
 4. Earnings per Share

5. Net profit Ratio

6. Operating ratio

7. Payout ratio

8. Dividend yield ratio

1. Return on Investment:

It is also called as “Return on Capital Employed”. It indicates the percentage of return on the total

capital employed in the business.

The term ‘operating profit ‘ means ‘profit before interest and tax’ and the term ‘capital employed ‘

means sum-total of long term funds employed in the business. i.e. Share capital + Reserve and surplus

+ long term loans – [non business assets +fictitious assets]

Return on investment = Operating profit/ Capital employed *100

2. Return on Shareholder’s Fund:

In case it is desired to work out the productivity of the company from the shareholder’s point of view,

it should be computed as follows:

Return on shareholder’s fund = Net profit after Interest and Tax/Shareholders’ fund*100

The term profit here means ‘Net Income after the deduction of interest and tax’. It is different from the

“Net operating profit” which is used for computing the ‘Return on total capital employed’ in the

business. This is because the shareholders are interested in Total Income after tax including Net non-

operating Income (i.e. Non- Operating Income -Non-Operating expenses).

3. Return on Total Assets:

26
This ratio is computed to know the productivity of the total assets.The term ‘Total Assets’ includes the

fixed asset, current asset and capital work in progress of the company. The above table clearly reveals

the relationship between the net profit and Total Assets employed in the business.

Return on Total Assets = Net profit after Tax/Total Assets* 100

4. Earnings per Share:

In order to avoid confusion on account of the varied meanings of the term capital employed, the

overall profitability can also be judged by calculating earnings per share with the help of the following

formula:

Earning Per Equity Share = Net Profit after Tax / Number of Equity Shares X 100

The earnings per share of the company helps in determining the market price of the equity shares of

the company. A comparison of earning per share of the company with another will also help in

deciding whether the equity share capital is being effectively used or not. It also helps in estimating

the company’s capacity to pay dividend to its equity shareholders.

Earning Per Equity Share = Net Profit after Tax / Number of Equity Shares X 100

5. Net Profit Ratio:

This ratio indicates the Net margin on a sale of Rs.100.This ratio helps in determining the efficiency

with which affairs of the business are being managed. An increase in the ratio over the previous period

indicates improvement in the operational efficiency of the business. The ratio is thus on effective

measure to check the profitability of business. However, constant increase in the above ratio after year

is a definite indication of improving conditions of the business.

Net Profit Ratio =Net Operating Profit/Net Sales*100

6. Operating Ratio:

This ratio is a complementary of Net Profit ratio. In case the net profit ratio is20%. It means that the

operating profit ratio is 80%.It is calculated as follows:

27
Operating Ratio =Operating Cost/Net Sales*100

The operating cost include the cost of direct materials, direct labor and other overheads, viz., factory,

office or selling.

Direct Material cost to sales =Direct Material/Net Sales*100

This ratio is the test of the operational efficiency with which the business is being carried. The

operating ratio should be low enough to leave a portion of sales to give a fair to the investors.

Payout Ratio:

This ratio indicates what proportion of earning per share has been used for paying dividend. The

payout ratio is the indicator of the amount of earnings that have been ploughed back in the business.

The lower the payout ratio, the higher will be the amount of earnings ploughed back in the business

and vice versa.

Payout Ratio =Dividend per equity share/Earning per equity share*100

7. Dividend Yield Ratio

28
This ratio is particularly useful for those investors who are interested only in dividend
income. The ratio is calculated by comparing the ratio of dividend per share with its market
value.

Dividend yield =Dividend per Share/Market price per share*100

And Dividend per share = Dividend paid/ Number of shares.

Long Term Financial Position or Solvency Ratios

The term ‘solvency’ refers to the ability of a concern to meet its long term obligations. The
long term indebtedness of a firm includes debenture holders, financial institutions providing
medium and long term loans and other creditors selling goods on installment basis. So, the
long term Solvency ratios indicate a firm’s ability to meet the fixed interest and costs and
repayment schedules associated with its long term borrowings. Two types of ratios are there:

1. Capital structure ratios-ex. Debt equity ratio

2. Coverage ratios-ex. Debt service ratio or Interest coverage ratio

1. Debt-Equity Ratio

Debt –Equity ratio also known as External- Internal Equity Ratio is calculated to measure the
relative claims of outsiders and the owners against the firm’s assets.

The ratio is calculated as:

Debt equity ratio = Outsider’s funds / Shareholder’s funds

Outsiders fund includes all debts/liabilities to outsiders, whether long term or short term or
whatever in the form of debentures bonds, mortgages or bills. The shareholders fund consist
of equity share capital, preference share capital , capital reserves, revenue reserves, and
reserves representing accumulated profits and surpluses.

2. Interest Coverage Ratio

This ratio is used to test the debt servicing capacity of a firm. The ratio is calculated as:

Interest coverage ratio = EBIT/Fixed interest charge

29
a financial statement (or financial report) is a formal record of the financial activities of
a business, person, or other entity. in british english—including united kingdom
company law—a financial statement is often referred to as an account, although the
term financial statement is also used, particularly by accountants.
for a business enterprise, all the relevant financial information, presented in a
structured manner and in a form easy to understand, are called the financial statements.
they typically include four basic financial statements, accompanied by a management
discussion and analysis:[1]
statement of financial position: also referred to as a balance sheet, reports on a
company's assets, liabilities, and ownership equity at a given point in time.
statement of comprehensive income: also referred to as profit and loss statement (or a
"p&l"), reports on a company's income, expenses, and profits over a period of time. a
profit & loss statement provides information on the operation of the enterprise. these
include sale and the various expenses incurred during the processing state.
statement of changes in equity: explains the changes of the company's equity throughout
the reporting period
statement of cash flows: reports on a company's cash flow activities, particularly its
operating, investing and financing activities.
for large corporations, these statements are often complex and may include an extensive set of
notes to the financial statements[2] and explanation of financial policies and management
discussion and analysis. the notes typically describe each item on the balance sheet, income
statement and cash flow statement in further detail. notes to financial statements are
considered an integral part of the financial statementsfinancial statement analysis (or financial
analysis) the process of understanding the risk and profitability of a firm (business, sub-
business or project) through analysis of reported financial information, particularly annual
and quarterly reports.
financial statement analysis consists of 1) reformulating reported financial statements, 2)
analysis and adjustments of measurement errors, and 3) financial ratio analysis on the basis of
reformulated and adjusted financial statements. the two first steps are often dropped in
practice, meaning that financial ratios are just calculated on the basis of the reported numbers,
perhaps with some adjustments. financial statement analysis is the foundation for evaluating
and pricing credit risk and for doing fundamental company valuation.

30
1) financial statement analysis typically starts with reformulating the reported financial
information. in relation to the income statement, one common reformulation is to divide
reported items into recurring or normal items and non-recurring or special items. in this way,
earnings could be separated in to normal or core earnings and transitory earnings. the idea is
that normal earnings are more permanent and hence more relevant for prediction and
valuation. normal earnings are also separated into net operational profit after taxes (nopat)
and net financial costs. the balance sheet is grouped, for example, in net operating assets
(noa), net financial debt and equity.
2) analysis and adjustment of measurement errors question the quality of the reported
accounting numbers. The reported numbers can for example be a bad or noisy representation
of invested capital, for example in terms of noa, which means that the return on net operating
assets (rnoa) will be a noisy measure of the underlying profitability (the internal rate of
return, irr). Expensing of r&d is an example when such investment expenditures are expected
to yield future economic benefits, suggesting that r&d creates assets which should have been
capitalized in the balance sheet. An example of an adjustment for measurement errors is when
the analyst removes the r&d expenses from the income statement and put them in the balance
sheet. The r&d expenditures are then replaced by amortization of the r&d capital in the
balance sheet. Another example is to adjust the reported numbers when the analyst suspects
earnings management.
3) financial ratio analysis should be based on regrouped and adjusted financial statements.
Two types of ratio analysis are performed: 3.1) analysis of risk and 3.2) analysis of
profitability:
Analysis of risk typically aims at detecting the underlying credit risk of the firm. Risk
analysis consists of liquidity and solvency analysis. Liquidity analysis aims at analyzing
whether the firm has enough liquidity to meet its obligations when they should be paid. A
usual technique to analyze illiquidity risk is to focus on ratios such as the current ratio and
interest coverage. Cash flow analysis is also useful. Solvency analysis aims at analyzing
whether the firm is financed so that it is able to recover from a losses or a period of losses. A
usual technique to analyze insolvency risk is to focus on ratios such as the equity in
percentage of total capital and other ratios of capital structure. Based on the risk analysis the
analyzed firm could be rated, i.e. Given a grade on the riskiness, a process called synthetic
rating.

31
Ratios of risk such as the current ratio, the interest coverage and the equity percentage have
no theoretical benchmarks. It is therefore common to compare them with the industry average
over time. If a firm has a higher equity ratio than the industry, this is considered less risky
than if it is above the average. Similarly, if the equity ratio increases over time, it is a good
sign in relation to insolvency risk.
analysis of profitability refers to the analysis of return on capital, for example return on
equity, roe, defined as earnings divided by average equity. Return on equity, roe, could be
decomposed: roe = rnoa + (rnoa - nfir) * nfd/e, where rnoa is return on net operating assets,
nfir is the net financial interest rate, nfd is net financial debt and e is equity. In this way, the
sources of roe could be clarified.
Unlike other ratios, return on capital has a theoretical benchmark, the cost of capital -
also called the required return on capital. For example, the return on equity, roe, could be
compared with the required return on equity, ke, as estimated, for example, by the capital
asset pricing model. If roe < ke (or rnoa > wacc, where wacc is the weighted average cost of
capital), then the firm is economically profitable at any given time over the period of ratio
analysis. The firm creates values for its owners.
Insights from financial statement analysis could be used to make forecasts and to evaluate
credit risk and value the firm's equity. For example, if financial statement analysis detects
increasing superior performance roe - ke > 0 over the period of financial statement analysis,
then this trend could be extrapolated into the future. But as economic theory suggests, sooner
or later the competitive forces will work - and roe will be driven toward ke. Only if the firm
has a sustainable competitive advantage, roe - ke > 0 in "steady state"purpose of financial
statements by business entities"the objective of financial statements is to provide information
about the financial position, performance and changes in financial position of an enterprise
that is useful to a wide range of users in making economic decisions."[3] financial statements
should be understandable, relevant, reliable and comparable. Reported assets, liabilities,
equity, income and expenses are directly related to an organization's financial
position.financial statements are intended to be understandable by readers who have "a
reasonable knowledge of business and economic activities and accounting and who are
willing to study the information diligently."[3] financial statements may be used by users for
different purposes:

32
Owners and managers require financial statements to make important business decisions that
affect its continued operations. Financial analysis is then performed on these statements to
provide management with a more detailed understanding of the figures. These statements are
also used as part of management's annual report to the stockholders.
Employees also need these reports in making collective bargaining agreements (cba) with the
management, in the case of labor unions or for individuals in discussing their compensation,
promotion and rankings.
Prospective investors make use of financial statements to assess the viability of investing in a
business. Financial analyses are often used by investors and are prepared by professionals
(financial analysts), thus providing them with the basis for making investment decisions.
Financial institutions (banks and other lending companies) use them to decide whether to
grant a company with fresh working capital or extend debt securities (such as a long-term
bank loan or debentures) to finance expansion and other significant expenditures.
Government entities (tax authorities) need financial statements to ascertain the propriety and
accuracy of taxes and other duties declared and paid by a company.
Vendors who extend credit to a business require financial statements to assess the
creditworthiness of the business.
Media and the general public are also interested in financial statements for a variety of
reasons.
Government financial statements
The rules for the recording, measurement and presentation of government financial
statements may be different from those required for business and even for non-profit
organizations. They may use either of two accounting methods: accrual accounting, or cash
accounting, or a combination of the two (ocboa). A complete set of chart of accounts is also
used that is substantially different from the chart of a profit-oriented business.
The financial statements that not-for-profit organizations such as charitable organizations and
large voluntary associations publish, tend to be simpler than those of for-profit corporations.
Often they consist of just a balance sheet and a "statement of activities" (listing income and
expenses) similar to the "profit and loss statement" of a for-profit. Charitable organizations in
the united states are required to show their income and net assets (equity) in three categories:
unrestricted (available for general use), temporarily restricted (to be released after the donor's
time or purpose restrictions have been met), and permanently restricted (to be held
perpetually, e.g., in an endowment).
33
Personal financial statements

Personal financial statements may be required from persons applying for a personal loan or
financial aid. Typically, a personal financial statement consists of a single form for reporting
personally held assets and liabilities (debts), or personal sources of income and expenses, or
both. The form to be filled out is determined by the organization supplying the loan or aid.
Although laws differ from country to country, an audit of the financial statements of a public
company is usually required for investment, financing, and tax purposes. These are usually
performed by independent accountants or auditing firms. Results of the audit are summarized
in an audit report that either provide an unqualified opinion on the financial statements or
qualifications as to its fairness and accuracy. The audit opinion on the financial statements is
usually included in the annual report.
There has been much legal debate over who an auditor is liable to. Since audit reports
tend to be addressed to the current shareholders, it is commonly thought that they owe a legal
duty of care to them. But this may not be the case as determined by common law precedent.
In canada, auditors are liable only to investors using a prospectus to buy shares in the primary
market. In the united kingdom, they have been held liable to potential investors when the
auditor was aware of the potential investor and how they would use the information in the
financial statements. Nowadays auditors tend to include in their report liability restricting
language, discouraging anyone other than the addressees of their report from relying on it.
Liability is an important issue: in the uk, for example, auditors have unlimited liability.
In the united states, especially in the post-enron era there has been substantial concern
about the accuracy of financial statements. Corporate officers (the chief executive officer
(ceo) and chief financial officer (cfo)) are personally liable for attesting that financial
statements "do not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by th[e] report."
making or certifying misleading financial statements exposes the people involved to
substantial civil and criminal liability. For example bernie ebbers (former ceo of worldcom)
was sentenced to 25 years in federal prison for allowing worldcom's revenues to be overstated
by billion over five years.

34
Different countries have developed their own accounting principles over time, making
international comparisons of companies difficult. To ensure uniformity and comparability
between financial statements prepared by different companies, a set of guidelines and rules
are used. Commonly referred to as generally accepted accounting principles (gaap), these set
of guidelines provide the basis in the preparation of financial statements, although many
companies voluntarily disclose information beyond the scope of such requirements.
Recently there has been a push towards standardizing accounting rules made by the
international accounting standards board ("iasb"). Iasb develops international financial
reporting standards that have been adopted by australia, canada and the european union (for
publicly quoted companies only), are under consideration in south africa and other countries.
The united states financial accounting standards board has made a commitment to converge
the u.s. gaap and ifrs over time.
Inclusion in annual reports
To entice new investors, most public companies assemble their financial statements on fine
paper with pleasing graphics and photos in an annual report to shareholders, attempting to
capture the excitement and culture of the organization in a "marketing brochure" of sorts.
Usually the company's chief executive will write a letter to shareholders, describing
management's performance and the company's financial highlights.
In the united states, prior to the advent of the internet, the annual report was considered the
most effective way for corporations to communicate with individual shareholders. Blue chip
companies went to great expense to produce and mail out attractive annual reports to every
shareholder. The annual report was often prepared in the style of a coffee table book.
Moving to electronic financial statements
Financial statements have been created on paper for hundreds of years. The growth of the
web has seen more and more financial statements created in an electronic form which is
exchangeable over the web. Common forms of electronic financial statements are pdf and
html. These types of electronic financial statements have their drawbacks in that it still takes a
human to read the information in order to reuse the information contained in a financial
statement.

35
36
 CHAPTER-3
COMPANY PROFILE
INDUSTRY PROFILE

37
 COMPANY PROFILE
In 1948, when independent India was one year old, Ashok Leyland was born. We were Ashok
Motors then, assembling Austin cars at the first plant, at Ennore near Chennai. In 1950 started
assembly of Leyland commercial vehicles and soon local manufacturing under license from British
Leyland. With British Leyland participation in the equity capital, in 1954, the Company was
rechristened Ashok Leyland.

Since then Ashok Leyland has been a major presence in India's commercial vehicle industry.
These years have been punctuated by a number of technological innovations which went on
to become industry standards. This tradition of technological leadership was achieved through
tie-ups with international technology leaders and through vigorous in-house R&D.

Ashok Leyland vehicles have built a reputation for reliability and ruggedness. The 375,000
vehicles we have put on the roads have shared the additional pressure placed on road
transportation in independent India.

The share of goods movement by road rose from 12% in 1950 to 60% in 1995. In passenger
transportation, the jump is equally dramatic: from 25% to 80%. At 60 million passengers a
day, Ashok Leyland buses carry more people than the entire Indian rail network. In the
populous Indian metros, four out of the five State Transport Undertaking (STU) buses come
from Ashok Leyland. Some of them like double decker and vestibuled buses are unique
models from Ashok Leyland, tailor-made for high density routes.

In 1987, the overseas holding by LRLIH (Land Rover Leyland International Holdings
Limited) was taken over by a joint venture between the Hinduja Group, the Non-Resident
Indian transnational group and IVECO Fiat SPA, part of the Fiat Group and Europe's leading
truck manufacturer.

Global Standards, Global Markets The blue-print prepared for the future reflected the
global ambitions of the Company, captured in four words: Global Standards, Global Markets
(Liberalisation and globalisation were not yet in the air). Buoyed by the backing of the two
international giants, Ashok Leyland embarked on a major product and process technology

Up gradation to world-class standards of technology. In the journey towards global standards

of quality, Ashok Leyland reached a milestone in 1993 when it became the first in India's
automobile industry to win the ISO 9002 certification. The more comprehensive ISO 9001

38
 certification came in 1994. 1994 was also the year, when international technology changed
the way India perceived trucks. The year when a new breed of world class trucks-
technologically superior and eco-friendly - rolled out on Indian roads. From our state-of the-
art manufacturing Plant at Hosur, near Bangalore. They carried the name Cargo. Cargo
brought with it, a new set of values and an unmatched basket of benefits, ushering in a
change.

2.2 VISION:

Achieving leadership in the medium/heavy duty segments of the domestic commercial

vehicle market and a significant presence in the world market through transport solution that
best anticipate customer needs, with the highest value-to-cost ratio

2.3 MISSION:

 Identifying with the customer

 Being the lowest cost manufacturer
 Global benchmarking our
 products, processes and people

2.4 HISTORY:

The origin of Ashok Leyland can be traced to the urge for self-reliance, felt by independent
India. Pandit Jawaharlal Nehru, India's first Prime Minister persuaded Mr. Raghunandan Saran, an
industrialist, to enter automotive manufacture. In 1948, Ashok Motors was set up in what was then
Madras, for the assembly of Austin Cars. The Company's destiny and name changed soon with equity
participation by British Leyland and Ashok Leyland commenced manufacture of commercial vehicles
in 1955.

39
 Since then Ashok Leyland has been a major presence in India's commercial vehicle
industry with a tradition of technological leadership, achieved through tie-ups with
international technology leaders and through vigorous in-house R&D.

Access to international technology enabled the Company to set a tradition to be first with
technology. Be it full air brakes, power steering or rear engine busses, Ashok Leyland
pioneered all these concepts. Responding to the operating conditions and practices in the
country, the Company made its vehicles strong, over-engineering them with extra metallic
muscles. "Designing durable products that make economic sense to the consumer, using
appropriate technology”, became the design philosophy of the Company, which in turn has
moulded consumer attitudes and the brand personality.
Ashok Leyland vehicles have built a reputation for reliability and ruggedness. The
5, 00,000 vehicles we have put on the roads have considerably eased the additional pressure
placed on road transportation in independent India.
In the populous Indian metros, four out of the five State Transport Undertaking (STU) buses
come from Ashok Leyland. Some of them like the double-decker and vestibule buses are
unique models from Ashok Leyland, tailor-made for high-density routes

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 Non-Resident
Indian transnational group and IVECO. (Since July 2006, the Hinduja Group is 100% holder
ofLRLIH).
The blueprint prepared for the future reflected the global ambitions of the company, captured
in four words: Global Standards, Global Markets. This was at a time when liberalisation and
40
globalisation were not yet in the air. Ashok Leyland embarked on a major product and
process up gradation to match world-class standards of technology.

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. It has also
become the first Indian auto company to receive the latest ISO/TS 16949 Corporate
Certification (in July 2006) which is specific to the auto industry.

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 company’s 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, 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.

In fact, even before laws were placed on car emissions, Ashok Leyland was already
producing low-emission vehicles. Back in 1997, they have already released buses with quiet
engines and low pollutant emission based on the CNG technology. In 2002 it developed the
first hybrid electric vehicle. Ashok Leyland has also launched a mobile emission clinic that
operates on highways and at entry points to New Delhi. The clinic checks vehicles for

41
emission levels, recommends remedies and offers tips on maintenance and care. This work
will help generate valuable data and garner insight that will guide further development.

When it comes to the development of environmentally friendly technologies, Ashok

Leyland has developed Hythane engines. In association with the Australian company EDEN
ENERGY, Ashok Leyland successfully developed a 6-cylinder, 6-liter 92 kW BS-4 engine
which uses Hythane (H-CNG,) which is a blend of natural gas and around 20% of hydrogen.
Hydrogen helps improve the efficiency of the engine but the CNG aspect makes sure that
emissions are at a controlled level. A 4-cylinder 4-litre 63 KW engine is also being developed
for H-CNG blend in a joint R&D program with MNRE (Ministry of New and Renewable
Energy) and Indian Oil Corporation.

The H-CNG concept is now in full swing, with more than 5,500 of the technology’s
vehicles running around Delhi. The company is also already discussing the wide-scale use of
Hythane engines with the Indian government. Hythane engines may be expected in the near
future, but these may not be brought to the United States as yet. Ashok Leyland’s partnership
with Nissan is also focusing on vehicle, power train, and technology development listed under
three joint ventures. With impressive investment, the joint ventures will focus on producing
trucks with diesel engines that meet Euro 3 and Euro 4 emission standards.

In the coming years, Ashok Leyland also has some hybrid trucks and buses in store
for its market. The buses and trucks are set to feature a new electronic shift-by-wire
transmission technology as well as electronic-controlled engine management for greater fuel
efficiency. Ashok Leyland focuses on improving fuel efficiency without affecting automotive
power, and the vehicles will have a 5% improvement on fuel efficiency. Ashok Leyland is
also developing electric batteries and bio-fuel modes.

Ashok Leyland Ltd’s March quarter results were expected to be impressive, as its
monthly vehicle output reports had indicated a 138% jump in volumes. But what impressed
was its net profit growth of 317%, to Rs223 crore, over the year-ago period, even as sales
rose by 139%. Ashok Leyland’s operating profit margin rose to 13% compared with 10.5%.
Higher volume growth, a better product mix due to higher sales of multi-axle vehicles and
tractor trailers, and cost reduction were key reasons for margin expansion. its estimate for
volume growth in 2011 is conservative, at 15% compared with over 30% in FY2010.

Around 1,200 buses under the Jawaharlal Nehru National Urban Renewal Mission
scheme are yet to be delivered of the 5,098 ordered. Besides, it has orders on hand from state

42
transport undertakings for another 2,000 buses. The firm is investing to increase its capacity,
with Rs1,200 crore proposed for expansion plans over the next two years; mainly to increase
output of engines and new generation cabs. Besides, it plans to invest Rs800 crore in joint
ventures. Analysts believe that its Uttarakhand plant is expected to deliver 22,000-25,000
vehicles in fiscal 2011, in its first full year of operation. The company has also steadily
gained market share, from 21-22% in the first quarter of 2010 to 28-29% in the fourth quarter.
One concern is that it is not yet a strong player in the eastern market. Besides, the southern
market, traditionally its stronghold, has grown by only 15% in volume terms in 2010. The rest
of India (mainly north and west) grew by 40% during the year.

MANUFACTURING PLANTS
Ashok Leyland has seven manufacturing plants - the mother plant at Ennore near
Chennai, three plants at Hosur (called Hosur I and Hosur II, along with a Press shop), the
assembly plants at Alwar, Bhandara and state-of-the-art facility at Pantnagar. The total
covered space at these seven plants exceeds 650,000 sq m and together employs over 11,500
personnel.

ENNORE

Spread over 135 acres, Ashok Leyland Ennore is a highly integrated Mother Plant accounting
for over 40% ALL production. The plant manufactures a wide range of vehicles and house
production facilities for important aggregates such as Engines, Gear Box, Axles and other key
in-house components.

HOSUR: UNIT 1

Established in 1980, Hosur-I is the engine-manufacturing center within the Ashok Leyland
production system. Apart from producing various types of diesel engines (including the
engines manufactured under license from Hino of Japan) and CNG engines, the plant also
manufactures and assembles heavy duty and special vehicles, Axles, AGBs, Marine Gear
Box,etc. The facility is spread over 103 acres and is innovatively laid out, optimising the use
of all resources.

ALWAR:

Established in 1982, the Alwar Unit in Rajasthan is an assembly plant for a wide range of
vehicles with an emphasis on passenger chassis, including CNG buses, situated close to the
northern market.
43
PANTNAGAR:

Set over 190 scenic acres, the Pantnagar plant of Ashok Leyland is also its largest and one of
the most integrated manufacturing facilities in Indian commercial vehicle industry. On
200,000 sq.ms of built up area, it houses best in class industrial architecture combined with
the latest manufacturing technologies that is also ecology sensitive as reflected in the
selection of machinery and processes. Highly energy efficient, the plant is designed to be
remarkably operator friendly. The shop floors receive the maximum natural light and
ventilation while the insulated high roof reduces the inside temperature by up to 8oC in the
summer months

BHANDARA:

Ashok Leyland's Bhandara Unit houses manufacturing and assembly facilities for
sophisticated synchromesh transmission and also has facilities for assembly of vehicles.

Designed on lean manufacture principles, process control for high quality of output and
flexibility to manage variety with quick changeovers are built into the machine and process
selection. The factory boasts of latest generation equipment sourced from global leaders in
Japan, USA, Europe and India.

44
 INDUSTRY PROFILE
Production
The cumulative production data for April-March 2013 shows production growth of only 1.20 percent
over the same period last year. The industry produced 1,685,355 vehicles in March 2013 as against
1,845,868 in March 2012, which declined by (-) 8.70 percent.
Domestic Sales
The overall growth in domestic sales during April-March 2013 was 2.61 percent over the same period
last year. While in March 2013 overall sales fell by (-) 7.76 percent over March 2012.
Passenger Vehicles segment grew at 2.15 percent during April-March 2013 over same period last
year. Passenger Cars declined by (-) 6.69 percent, Utility Vehicles grew by 52.20 percent and Vans
grew only by 1.08 percent during April-March 2013 as compared to the same period last year.
However, in March 2013 passenger car sales further declined by (-) 22.51 percent over March 2012.
Total passenger vehicles sales also declined by (-) 13.01 percent in March 2013 over same month last
year.
The overall Commercial Vehicles segment registered de-growth of (-) -2.02 percent in April-March
2013 as compared to the same period last year. While Medium & Heavy Commercial Vehicles
(M&HCVs) declined by (-) 23.18 percent, Light Commercial Vehicles grew at 14.04 percent. In
March 2013, M&HCVs sales further declined by (-) 26.16 percent over March 2012.

Three Wheelers sales grew by 4.87 percent in April-March 2013. Passenger Carriers grew by 8.58
percent during April-March 2013 and Goods Carriers registered de-growth at (-) 9.20 percent during
this period.

Two Wheelers registered growth of only 2.90 percent during April-March 2013. Scooters, mopeds and
motorcycles grew by 14.24 percent, 1.53 percent and 0.12 percent respectively over same period last
year. However, in March 2013 all sub-segments of two wheelers, scooters, motorcycles and mopeds
registered de-growth at (-) 3.18 percent, (-) 8.32 percent and (-) 4.54 percent respectively.
Exports
During April-March 2013, overall automobile exports registered de-growth of (-) 1.34 percent
compared to the same period last year. Passenger Vehicles grew by 9.02 percent, while the other
segments like Commercial Vehicles, Three Wheelers and Two Wheelers fell by (-)13.35 percent, (-)
16.22 percent and (-) 0.72 percent respectively. In March 2013, Passenger Vehicles, Two & Three
Wheelers grew by 3.07 percent, 3.51 percent and 7.50 percent respectively. While Commercial
Vehicles declined by (-) 28.33 percent.WORLD-CLASSTECHNOLOGY  
To offer world-class technology that is relevant and affordable to the Indian customer is the

45
philosophy that drives R&D at Ashok Leyland. Over the years, this philosophy has been translated
time and again into products that seamlessly integrate international technology with local needs. "The
role of R&D is central in fulfilling the company-wide commitment to total customer satisfaction"
states Mr. R. Seshasayee, Managing Director, and adds that the increased infrastructural and financial
support expresses the company's determination to become self-reliant in R&D.
VALUETOTHECUSTOMER
The immediate R&D priorities are to pro-actively address safety and environmental issues,
harness and adopt technologies that provide value to the customer in an atmosphere enabling
creativity and innovation. Powering those who "engineer tomorrows" with an enabling infrastructure
has been top priority for the company.

TESTTRACKS:
: Our R&D is not confined within walls. It extends to the test tracks as well.
Rigorous tests are carried out under stringent simulated conditions that replicate the
mosttreacherouslandscapes.
Vehicle ruggedness and longevity are a prime customer concern, as they
directly impact earnings. Ever conscious of this, Ashok Leyland makes extensive use
of a modern CAD set-up, a comprehensive test track facility (where cobble-stones are
calibrated and reset periodically), accelerated fatigue testing rigs and rigorous
durability testing facilities. Together they ensure that there is a constant improvement
in the life and on-road performance of every make of Ashok Leyland vehicle to hit the
roads. Safety, durability, through our R&D efforts.

46
INNOVATIONS:

Ashok Leyland product development successes have come from a keen sense of
anticipation and attentiveness. The company initiated research into alternative fuels well
before legislative debate had even begun in the country. The result was the implementation of
CNG technology ahead of the rest promising a breath of fresh air for polluted cities.
ASSOCIATES COMPANIES:

 Automotive Coaches & Components Ltd  (ACCL)

 Lanka Ashok Leyland
 Hinduja Foundries
 IRIZAR-TVS
 Ashok Leyland Project Services Limited
 Albonair GmbH

JOINT VENTURE:

 Nissan Motor Company

 John Deere & Company
 Automotive Infotronics
 Ashley Alteams India Pvt Ltd
 Optare

47
 CHAPTER-4
DATA ANALYSIS
&
INTERPRETATION

48
 TABLE-1

CURRENT RATIO:-CURRENT ASSETS/CURRENT LIABILITIES

Current Asset
Liability Ratio      
year current assets current liability Ratios
2012 276062 208869 1.32
2013 310002 243220 1.27
2014 453597 376332 1.2
2015 580804 397574 1.46
2016 771519 502024 1.54

2016; 771519

2015; 580804
2016; 502024
2014; 453597
2014; 376332 2015; 397574
2013; 310002
2012; 276062
2013; 243220
2012; 208869

2012; 20122012;2013;
1.32 20132013;2014;
1.27 2014 2014;2015;
1.2 20152015;2016;
1.46 20162016; 1.54

2012 2013 2014 2015 2016

Current Asset Liability Ratio year current assets

current liability Ratios

Interpretation –The ideal ratio for the concern is 2:1 i.e. current assets doubled
for the current liabilities considered to be satisfactory. The current ratio of
ASHOKLEYLAND is less than ! .Thus it has to maintain its efficient current
assets.

49
 TABLE-2

ACID TEST RATIO:LIQUID ASSETS /LIQUID LIABILITIES

Acid Test
Ratio      
Year Liquid assets Liquid liabilities Ratio
2012 12 208869 0.00005
2013 14 243220 0.00003
2014 15 376332 0.00003986
2015 1475 397574 0.00371
2016 1415 502024 0.002818

2016; 502024

2015; 397574
2014; 376332

2013; 243220
2012; 208869

2012;2012;
2012122012;
2013; 2013142013;
0 2013; 2014; 2014152014;
0 2014; 2015; 2015
0 2015; 1475 2016;
2015; 2016
0 2016; 1415
2016; 0

2012 2013 2014 2015 2016

Acid Test Ratio Year Liquid assets

Liquid liabilities Ratio

The ideal quick ratio is 1:1 which is considered satisfactory for the concern. The company is
maintaining the ratio above the standard norm, thus the management of ASHOKLEYLAND
is label to meet its current obligations.

50
 TABLE-3

NET WORKING CAPITAL = NET WORKING CAPITAL / CAPITAL EMPLOYED

Net working
capital      
year Net working capital Capital employed Ratios
2012 67193 79459 0.84
2013 96410 107986 0.89
2014 77265 96894 0.797
2015 183230 207051 0.884
2016 269495 305907 0.881

Net working capital year

Net working capital
Capital employed
Ratios

2012 2013 2014 2015 2016

A higher networking capital ratio indicates efficient utilization of working capital . Therefore
the company should concentrate more on working capital management

51
 TABLE -4

DEBT EQUITY RATIO:-TOTAL DEBT/EQUITY

Debt equity ratio      

year Total debt Equity Ratios
2012 1053 3252 0.32
2013 607 3252 0.18
2014 587 3252 0.18
2015 2566 3252 0.789
2016 2034 3252 0.62

2012; 3252 2013; 3252 2014; 3252 2015; 3252 2016; 3252

2015; 2566

2012; 2012 2013; 2013 2014; 2014 2015; 2015 2016;

2016; 2034
2016

2012; 1053
2013; 607 2014; 587

2012; 0.32 2013; 0.18 2014; 0.18 2015; 0.79 2016; 0.62

2012 2013 2014 2015 2016

Debt equity ratio year Total debt

Equity Ratios

Debt Equity Ratio :

The debt equity ratio has been increasing over the years and it has been maintained at a level
of .62 for the financial year 2015

TABLE -5

52
FIXED ASSETS RATIO:- FIXED ASSETS/CAPITAL EMPLOYED

Fixed assets ratio      

year Fixed Assets Capital employed Ratios
2012 12347 79459 0.15
2013 9909 107986 0.09
2014 17699 96894 0.18
2015 22595 207051 0.11
2016 31830 305907 0.1

Fixed assets ratio year

Fixed Assets
Capital employed
Ratios

2012 2013 2014 2015 2016

Generally financially well managed company will have its fixed assets financed by long
term funds. Therefore, the fixed assets ratio should never be more than !.A ratio of .67 is
considered ideal. The results for ASHOKLEYLAND is much less at 0.11

53
 TABLE -6

GROSS PROFIT RATIO:-GROSS PROFIT /NET SALES

Gross profit      

year Gross profit Net sales Ratios

2012 63290 289241 0.218

2013 68916 310235 0.2224

2014 68478 414816 0.165

2015 86483 500342 0.172

2016 130330 665323 0.196

Gross profit year

Gross profit
Net sales
Ratios

2012 2013 2014 2015 2016

54
 KEY FINANCIAL RATIOS OF ASHOK LEYLAND

------------------- in Rs. Cr. -------------------

 
16-Mar 15-Mar 14-Mar 13-Mar 12-Mar
Per Share Ratios          
Basic EPS (Rs.) 12.98 17.55 156.76 210.06 184.31
Diluted Eps (Rs.) 12.98 17.55 156.76 210.06 184.31
Cash EPS (Rs.) 15.01 19.04 163.75 222.86 189.47
Book Value [Excl. Reval
Reserve]/Share (Rs.) 185.85 172.04 1,584.34 1,445.60 1,251.05
Book Value [Incl. Reval
Reserve]/Share (Rs.) 185.85 172.04 1,584.34 1,445.60 1,251.05
Dividend/Share (Rs.) 2.6 3.5 30 41.5 35
Operating Revenue / Share
(Rs.) 210.86 204.13 1,826.36 1,749.29 1,587.40
Net Profit/Share (Rs.) 12.82 17.55 145.88 206.2 174.46
Per Employee Ratios          
Interest Income/ Employee 7,879,372 7,146,806 6,141,015 5,241,313 4,943,426
(Rs.) .97 .39 .07 .86 .72
478,997.8 614,410.6 490,520.3 617,837.5 543,309.5
Net Profit/ Employee (Rs.) 6 6 3 8 5
153,770,9 134,911,2 117,290,5 98,484,25 88,695,81
Business/ Employee (Rs.) 74.81 08.60 48.25 4.10 3.20
Per Branch Ratios          
Interest Income/ Branch 97,524,61 92,227,71 84,906,15 79,760,76 74,647,12
(Rs.) 0.40 1.21 8.54 4.56 9.22
5,928,654 7,928,812 6,781,972 9,402,069 8,204,126
Net Profit/ Branches (Rs.) .49 .64 .73 .66 .56
1,903,254 1,740,994 1,621,668 1,498,704 1,339,331
Business/ Branches (Rs.) ,798.38 ,692.57 ,366.65 ,257.70 ,641.49
Key Performance Ratios          
Net Profit Margin (%) 6.07 8.59 7.98 11.78 10.99
Operating Profit Margin
(%) -11.12 -6.21 -5.61 -1.61 -2.48
Return on Assets (%) 0.44 0.63 0.6 0.9 0.87
Return on Equity /
Networth (%) 6.89 10.2 9.2 14.26 13.94
Net Interest Margin (X) 0.03 0.03 0.03 0.03 0.03
Cost to Income (%) 39.14 36.85 36.76 34.09 38
Interest Income/Total
Assets (%) 7.24 7.44 7.6 7.63 7.97
Non-Interest Income/Total
Assets (%) 1.24 1.1 1.03 1.02 1.07
Operating Profit/Total
Assets (%) -0.8 -0.46 -0.42 -0.12 -0.19
Operating Expenses/Total
Assets (%) 1.84 1.88 1.99 1.86 1.95

55
Interest Expenses/Total
Assets (%) 4.72 4.75 4.85 4.8 4.73
Valuation Ratios          
1,976,114. 1,865,393. 1,635,798. 1,447,875. 1,257,160.
Enterprise Value (Rs. Cr) 45 88 25 02 88
EV Per Net Sales (X) 12.07 12.24 12 12.1 11.8
Price To Book Value (X) 1.05 1.55 1.21 1.43 1.67
Price To Sales (X) 0.92 1.31 1.05 1.18 1.32
Retention Ratios (%) 79.71 80.48 79.43 79.87 79.93
Earnings Yield (X) 0.07 0.07 0.08 0.1 0.08

56
 BALANCE SHEET OF ASHOKLEYLAND
 
in Rs. Cr. --          
  16-Mar 15-Mar 14-Mar 13-Mar 12-Mar
Capital and Liabilities:          
Total Share Capital 776.28 746.57 746.57 684.03 671.04
Equity Share Capital 776.28 746.57 746.57 684.03 671.04
127,691.6 117,535.6 98,199.6
Reserves 143,498.16 5 8 5 83,280.16
128,438.2 118,282.2 98,883.6
Net Worth 144,274.44 2 5 8 83,951.20
1,576,793 1,394,408 1,202,73 1,043,647.3
Deposits 1,730,722.44 .24 .51 9.57 6
205,150.2 183,130.8 169,182.
Borrowings 224,190.59 9 8 71 127,005.57
1,781,943 1,577,539 1,371,92 1,170,652.9
Total Debt 1,954,913.03 .53 .39 2.28 3
Other Liabilities & 137,698.0 95,455.0
Provisions 159,875.57 5 96,412.96 7 80,915.09
2,048,079 1,792,234 1,566,26 1,335,519.2
Total Liabilities 2,259,063.04 .80 .60 1.03 2
Assets          
Cash & Balances with 115,883.8 65,830.4
RBI 129,629.33 4 84,955.66 1 54,075.94
Balance with Banks, 48,989.7
Money at Call 37,838.33 58,977.46 47,593.97 5 43,087.23
1,300,026 1,209,828 1,045,61
Advances 1,463,700.42 .39 .72 6.55 867,578.89
495,027.4 398,308.1 350,927.
Investments 477,097.28 0 9 27 312,197.61
Gross Block 9,819.16 9,329.16 8,002.16 6,595.71 5,133.87
Net Block 9,819.16 9,329.16 8,002.16 6,595.71 5,133.87
Capital Work In
Progress 570.12 0 0 409.31 332.68
47,892.0
Other Assets 140,408.41 68,835.55 43,545.90 3 53,113.02
2,048,079 1,792,234 1,566,26 1,335,519.2
Total Assets 2,259,063.05 .80 .60 1.03 4
1,093,422 1,091,358 993,018.
Contingent Liabilities 1,064,167.65 .51 .37 45 899,565.18
Book Value (Rs) 185.85 172.04 1,584.34 1,445.60 1,251.05

57
 COMPARATIVE INCOME STATEMENT 2012-2013
ASHOKLEYLAND

DESCRIPTION        
increase/decrease
2012 2013 increase/decrease  
   
TURNOVER-
ASHOKLEYLAND 1106 400 -706 -63.83%
- NON-
ASHOKLEYLAND 499236 664923 165687 33.19%
TOTAL TURNOVER 500342 665323 164981 32.97%
-
CHANGES IN WIP 49447 -25439 -74886 151.45%
CHANGES IN FG -9622   -9622  
EXPORT INCENTIVES 690 669 -422 -21.00%
GROSS TURNOVER 540857 640553 99696 18.43%
EXCISE DUTY 16859 33288 16429 97.44%
GTO LESS ED 523998 607265 83267 15.89%
DIRECT MATERIALS 340315 342167 1852 0.54%
SUB-CONTRACT PAYMENT 1356 1682 378 24.04%
POWER AND FUEL 1746 1693 -53 -3.04%
TRANSFER IN SERVICE 806 681 -125 -15.51%
TOTAL OF `C' 344223 346223 2000 0.58%
VALUE ADDED 179775 261042 81267 42.20%
PERSONNEL PAYMENTS 62236 69941 7795 12.38%
INDIRECT MATERIALS 3902 5861 2059 52.76%
OTHER EXPENSES
-ASHOKLEYLAND 7101 8583 1482 20.87%
OTHER EXPENSES - NON
ASHOKLEYLAND 26301 27410 1109 4.22%
PROVISIONS -226 38565   %
PROV.EXCH.VAR. 894 -1523   %
LESS:MISC.INCOME 11522 23356 11834 102.71%
TOTAL OF `E' 88686 125481 36795 41.49%
GROSS MARGIN (PBIDT) 91089 135561 44472 48.82%
DEPRECIATION 4606 5231 625 13.57%
DRE ON VRS 0  
GROSS PROFIT (PBIT) 86483 130330 43847 50.70%
-
INTEREST -7101 -2905 -10006 140.91%
PROFIT BEFORE TAX 93584 133235 39651 42.37%
GTO LESS ED 523998 607265 83267 15.90%
OPERATING COST 404647 524531 119884  

58
 COMPARATIVE INCOME STATEMENT 2013-2014

DESCRIPTION
2013 2014 increase/decrease increase/decrease

TURNOVER-
ASHOKLEYLAND 400 779 379 194.75%
- NON-
ASHOKLEYLAND 664923 414037 -250886 62.27%
TOTAL TURNOVER 665323 414816 -250507 62.35%
CHANGES IN WIP -25439 10637 36076 -41.81%
CHANGES IN FG 4938  
EXPORT INCENTIVES 669 1112 443 166.22%
GROSS TURNOVER 640553 431503 -209050 67.36%
EXCISE DUTY 33288 24537 -8751 73.71%
GTO LESS ED 607265 406966 -200299 67.02%
DIRECT MATERIALS 342167 259592 -82575 75.87%
SUB-CONTRACT
PAYMENT 1682 978 -704 58.15%
POWER AND FUEL 1693 1925 232 113.70%
TRANSFER IN SERVICE 681 1347 666 197.80%
TOTAL OF `C' 346223 263842 -82381 76.21%
VALUE ADDED 261042 143124 -117918 54.83%
PERSONNEL PAYMENTS 69941 58365 -11576 83.45%
INDIRECT MATERIALS 5861 4560 -1301 77.80%
OTHER EXPENSES
-ASHOKLEYLAND 8583 6436 -2147 74.99%
OTHER EXPENSES -
NON ASHOKLEYLAND 27410 15402 -12008 56.19%
PROVISIONS 38565 142 -38423 0.37%
PROV.EXCH.VAR. -1523 -324 1199 21.27%
LESS:MISC.INCOME 23356 13913 -9443 59.57%
TOTAL OF `E' 125481 70668 -54813 56.32%
GROSS MARGIN (PBIDT) 135561 72456 -63105 53.45%
DEPRECIATION 5231 3978 -1253 76.05%
DRE ON VRS  
GROSS PROFIT (PBIT) 130330 68478 -61852 52.54%
INTEREST -2905 -6826 -3921 234.97%
PROFIT BEFORE TAX 133235 75304 -57931 56.52%
GTO LESS ED 607265 406966 -200299 67.02%
0  
OPERATING COST 524531 338382 119884 64.51%

59
 COMPARATIVE INCOME STATEMENT 2014-2015

DESCRIPTION
2014 2015 increase/decrease increase/decrease RATIO
TURNOVER-
779 1106 -327 -29.57%
ASHOKLEYLAND
- NON-
414037 499236 -85199 -17.07%
ASHOKLEYLAND
TOTAL TURNOVER 414816 500342 -85526 -17.09%
CHANGES IN WIP 10637 49447 -38810 -78.49%
-
CHANGES IN FG 4938 -9622 14560 151.32
%
EXPORT INCENTIVES 1112 690 422 61.16%
GROSS TURNOVER 431503 540857 -109354 -20.22%
EXCISE DUTY 24537 16859 7678 45.54%
GTO LESS ED 406966 523998 -117032 -22.33%
DIRECT MATERIALS 259592 340315 -80723 -23.72%
SUB-CONTRACT
978 1356 -378 -27.88%
PAYMENT
POWER AND FUEL 1925 1746 179 10.25%
TRANSFER IN SERVICE 1347 806 541 67.12%
TOTAL OF `C' 263842 344223 -80381 -23.35%
VALUE ADDED 143124 179775 -36651 -20.39%
PERSONNEL PAYMENTS 58365 62236 -3871 -6.22%
INDIRECT MATERIALS 4560 3902 658 16.86%
OTHER EXPENSES
6436 7101 -665 -9.36%
-ASHOKLEYLAND
OTHER EXPENSES -
15402 26301 -10899 -41.44%
NON ASHOKLEYLAND
-
PROVISIONS 142 -226 368 162.83
%
-
PROV.EXCH.VAR. -324 894 -1218 136.24
%
LESS:MISC.INCOME 13913 11522 2391 20.75%
TOTAL OF `E' 70668 88686 -18018 -20.32%
GROSS MARGIN (PBIDT) 72456 91089 -18633 -20.46%
DEPRECIATION 3978 4606 -628 -13.63%
DRE ON VRS
GROSS PROFIT (PBIT) 68478 86483 -18005 -20.82%
INTEREST -6826 -7101 275 -3.87%
PROFIT BEFORE TAX 75304 93584 -18280 -19.53%
GTO LESS ED 406966 523998 -117032 -22.33%

60
 OPERATING COST 338382 404647 -66265 -16.38%
COMPARATIVE INCOME STATEMENT 2015-2016

DESCRIPTION
increase/decrease
2015 2016
increase/decrease
1106
TURNOVER-
499236 667 112 85.62%
ASHOKLEYLAND
- NON-
500342 309568 104469 74.77%
ASHOKLEYLAND
TOTAL TURNOVER 49447 310235 104581 74.79%
167.16
CHANGES IN WIP -9622 17781 -7144
%
CHANGES IN FG 690 4591 347 92.97%
205.31
EXPORT INCENTIVES 540857 2283 -1171
%
GROSS TURNOVER 16859 334890 96613 77.61%
111.00
EXCISE DUTY 523998 27236 -2699
%
GTO LESS ED 340315 307654 99312 75.60%
DIRECT MATERIALS 1356 183845 75747 70.82%
SUB-CONTRACT
1746 790 188 80.78%
PAYMENT
POWER AND FUEL 806 1840 85 95.58%
TRANSFER IN 103.49
344223 1394 -47
SERVICE %
TOTAL OF `C' 179775 187869 75973 71.21%
VALUE ADDED 62236 119785 23339 83.69%
PERSONNEL
3902 36001 22364 61.68%
PAYMENTS
INDIRECT
7101 4039 521 88.57%
MATERIALS
OTHER EXPENSES
26301 6125 311 95.17%
-ASHOKLEYLAND
OTHER EXPENSES -
NON -226 12848 2554 83.42%
ASHOKLEYLAND
1271.13
PROVISIONS 894 1805 -1663
%
470.37
PROV.EXCH.VAR. 11522 -1524 1200
%
LESS:MISC.INCOME 88686 11746 2167 84.42%
TOTAL OF `E' 91089 47548 23120 67.28%
GROSS MARGIN
4606 72237 219 99.70%
(PBIDT)
DEPRECIATION 3321 657 83.48%
61
 DRE ON VRS 86483
100.64
GROSS PROFIT (PBIT) -7101 68916 -438
%
INTEREST 93584 -5870 -956 85.99%
PROFIT BEFORE TAX 523998 74786 518 99.31%
GTO LESS ED 307654 99312 75.60%
OPERATING COST 404647 234677 103705 69.35%

CHAPTER-5

FINDINGS, SUGGESTIONS,
CONCLUSIONS

62
 FINDINGS
1. The current ratio of ASHOKLEYLAND was 1.32 in the year 2011 There was
decrease in the ratio up to the year 2015 The ratio is decreasing year by year. But the
ASHOKLEYLAND is maintaining current ratio more than the standard norms of 2.

2. The organization is able to maintain both current ratio and quick ratio above the
standard norms. i.e. the ideal current ratio for the concern is 2:1 and the quick ratio is
1:1 but the cash ratio is fluctuating.

3. The quick ratio of the organization is in decreasing trend year by year.

4. Investment in current assets has been increasing.

5. The inventory turnover ratio of ASHOKLEYLAND is fluctuating i.e., showing

decreasing trend during the years 2011 to 2015 But there onwards it has slowly
increased till the financial year.

63
 CONCLUSIONS

The current ratio of ASHOKLEYLAND is decreasing year by year . In the year

2011 it was1.32 and during the year 2013 it has gone down to 1.2 later in the
next financial year 2014 it has gone up to 1.46, so the company should
concentrate effectively on the management of Current Assets and Current
Liabilities.

1. The Net Working Capital of ASHOKLEYLAND is good for almost in

range for each and every year. It is always in the ideal ratio for every
organization.

2. The ASHOKLEYLAND is using the moving average method in valuation

of stock.

3. The debtors constitute nearly 50% of the Total Current Assets. For the
Company it is difficult to manage the accounts receivables. The company
should collect debts as quickly as possible.

64
 SUGGESTIONS:

 The company has to exercise cost of control and cost of reduction

techniques to increase its profitability.

 The DEBT EQUITY RATIO in 2012 is 0.8. the ratio has decreased
than previous years except for 2011, which had 0.32. the decreasing ratio
shows the inefficient management. They should concentrate more on the
collection of the debts.

 The investment in loans and advances should be minimized to possible

extent.

 Effective internal control system should be established. So that it can

have control over all aspects of the company.

65
BIBILOGRAPHY:
 http://www.asianpaints.com/financial_information/index.php

 http://www.studyfinance.com/lessons/workcap

 www.bizsearchpapers.com

 http://www.antiessays.com/free-essays/9076.html

 http://www.ASHOKLEYLANDhyderabad.com/ASHOKLEYLAN
D_hyderabad_unit.htm

 http://en.wikipedia.org/wiki/Bharat_Heavy_Electricals_Limited

 Financial Management –I M Pandey.

 Accounting for Managers-Jelsy Joseph Kuppapally.

 Financial statement analysis - Gokul Sinha.

66