A

DESK RESERCH REPORT ON

ANALYSIS OF LIQUIDITY POSITION OF

LEAR CORPORATION

SUBMITTED TO

BALAJI INSTITUTE OF INTERNATIONAL

BUSINESS (BIIB), PUNE

BY

KRISHNA PRAJAPAT
IB1614317 I FINANCE

SRI BALAJI SOCIETY’S

BALAJI INSTITUTE OF INTERNATIONAL BUSINESS (BIIB)
S No – 5/2-7, TATHAWADE, WAKAD, PUNE - 411033

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ANALYSIS OF LIQUIDITY
POSITION OF LEAR
CORPORATION
(NYSE: LEA)

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 ANALYSIS OF LIQUIDITY POSITION OF
LEAR CORPORATION

A DESK RESERCH REPORT

Submitted By

KRISHNA PRAJAPAT

ROLL NO: IB1614317

in partial fulfillment of the requirement for the award of the Post

Graduate Diploma in Management

PGDM (FINANCE)

IN

Balaji Institute of International Business (BIIB)

S. No 55/2-7, Tathawade, Wakad, Pune - 411033

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 FORMAT OF CERTIFICATE FROM COMPANY / ORGANISATION

This is to certify that Mr. Krishna Prajapat, student of Two Year Full Time
Post Graduate Programme in Management – PGDM (FINANCE) of Balaji
Institute of International Business (BIIB), Pune – 411033 has completed
Summer Project Report titled ______________________________ with us
from 3rd May 2017 to 2nd July 2017.

He has completed the Project work to our satisfaction.

Place: Signature of Official Seal of the Company

Date: Name & Designation of Official

(Note: This certificate is to be obtained on original letter head of the company

and should clearly mention the dates of Project Duration and must be attached
to the Project Report)

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 ACKNOWLEDGEMENT

The satisfaction and joy that accompanies the successful completion of a

task is incomplete without mentioning the name of the person who
extended their help and support in making it a success. The making of any
project requires contribution from many people, right from inception until
the completion of my project.

First of all, I express my deep sense of gratitude, obligation and sincere

thanks to Mr. Yogesh Mase, (General Manager Finance & Company
Secretary, Finance Lear Automotive India Pvt. Ltd. Pune) who gave
me the opportunity to work on such an interesting subject.

I am auxiliary indebted to my guide Mr. Chandrashekhar Singh

choudhary, (Finance Manager, Lear Automotive India Pvt. Ltd. Pune)
for his insightful and helping approaches throughout this particular study.
I express my sincere thanks towards the management and employees of
Lear Automotive Pvt. Ltd. for their cooperation in successful completion
of my project.

I would also like to thank all faculty members of Balaji Institute of

International business, Pune for their excellent guidance and dedicated
involvement.

I express my sincere thanks to Dr. Suresh Chandra Padhy, Director,

BIIB, Pune for providing me an opportunity to undergo summer training
with Lear Automotive India Pvt. Ltd. Pune.

Krishna Prajapat
IB1614317

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 TABLE OF CONTENTS

Sr.no. PARTICULARS Pg.no.

1 BACKGROUND 7

2 OBJECTIVES 7

3 INDUSTRY ANALYSIS 8

4 SPECIFIC COMPANY ANALYSIS 10

5 SWOT ANALYSIS 19

6 COMPETITOR ANALYSIS 19

7 WORKING OF RATIOS 22

8 FINDINGS 23

9 CONCLUSION 24

10 FORMULAE AND DEFINATIONS 25

11 BIBLIOGRAPHY 26

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1. BACKGROUND

1.1. This project was undertaken at “Finance Department” of “Lear Corporation,

Pune”.
1.2. Lear Corporation is ranked #154 on the Fortune 500 with world-class products
designed, engineered and manufactured by a diverse team of talented
employees. As a leading supplier of automotive seating and electrical, Lear
serves its customers with global capabilities while maintaining individua l
commitment. With headquarters in Southfield, Michigan, Lear maintains 243
locations in 37 countries around the globe and employs approximately 150,000
employees. Lear is traded under the symbol [LEA] on the New York Stock
Exchange. In india Lear corporation have its operations in 5 locations viz. pune,
halol, Gujrat, haridwar and Chennai engaged in automotive seating and
vertically integrated products like recliners, adjusters and metal frames for
seats. Mahindra, Nissan, Ford, General Motors, Daimler, Suzuki, Renault
Volkswagen, TATA are some of key clients of Lear corporation in india.
1.3. The analysis of liquidity focuses on the measure in which the companies have
the ability to honor their obligations having an eligibility term less than a year,
current debts that must be covered from the assets with a similar term of
transformation in liquidity. Among the factors that influence the liquidity are
the domain of the activity, the degree of maturity of the company and its size,
the season of the business, the economic circumstances, the structure of the
assets, the structure of the current assets, the rotation speed of the current assets,
the financial structure.

2. OBJECTIVES
 To understand what Liquidity ratio means and why they would be useful in
comparing financial data.
 To be familiar with the areas that are covered by the use of liquidity ratio
analysis.
 To be familiar with the methods of liquidity ratio analysis, and the limitations
of using these ratios.
 To measure the liquidity position of Lear corporation

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3. INDUSTRY ANALYSIS

3.1. Automotive seating industry, seemingly without technological barriers, is a

capital-intensive business that does with high-tech expertise. First, automotive
seating plants are usually adjacent to car factories, for the products are too large
to be transported easily. Therefore, as carmakers add a new production base,
automotive seating manufacturers need to follow up. In this case, substantial
funds become a must. Second, safety, comfort, and light weight- three
requirements on automotive seating- need rich technological accumulation and
present high technological threshold. Moreover, a huge number of employees
in automotive seating industry pose great challenges to managerial
competencies.

3.2. The global automotive seat industry is expected to reach an estimated US $76.4
billion in 2019 with a CAGR of 4.3% over the forecast period. Growth in BRIC
nations is anticipated to drive the industry during the forecast period 2014-
2019. The major drivers of automotive seat industry are recovery in vehicle
production, demand for vehicle safety features, and growth of small and
medium vehicle segments in the emerging markets. Changes in Environmenta l
Protection Agency and National Traffic Safety Administration regulations
regarding greenhouse gas emissions and improvement in the fuel efficiency
will result in increasing demand for lighter weight seats during 2014-2019.
Current initiatives include weight saving technologies, operator safety, and
comfort features which will boost the industry.

3.3. Global automotive seating market has grown steadily on account of the two
aspects. First, higher barriers in automotive seating industry lead to high market
concentration and little competition. Automotive seating manufacturers have a
greater say which enables them to raise prices constantly. Second, consumption
is upgraded, a phenomenon starkly seen in China where consumers have higher
requirements on automotive seating. Automotive seating saw an ASP of
USD723 in 2010 with a market size of USD54 billion. The figures for 2015
were USD790 and USD70.1 billion. It is expected the market size will be

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 valued at USD72.9 billion in 2016, and USD84.3 billion in 2020 when ASP
arrives at USD865.

3.4. Global Automotive Seat Industry 2014-2019

3.4.1. The global automotive seat industry is expected to reach an estimated

US $76.4 billion in 2019 with a CAGR of 4.3% over the forecast period.
Growth in BRIC nations is anticipated to drive the industry during the
forecast period 2014-2019. The major drivers of automotive seat industry
are recovery in vehicle production, demand for vehicle safety features, and
growth of small and medium vehicle segments in the emerging markets.
Changes in Environmental Protection Agency and National Traffic Safety
Administration regulations regarding greenhouse gas emissions and
improvement in the fuel efficiency will result in increasing demand for
lighter weight seats during 2014-2019. Current initiatives include weight
saving technologies, operator safety, and comfort features which will
boost the industry.

3.4.2. Global automotive seat industry trends and forecasts through 2019,
segmented by regions as follows:
Global Automotive Seat Industry by Regions:
- North America
- Europe
- Asia Pacific
- Rest of World

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4. SPECIFIC COMPANY ANALYSIS

4.1. Leading Global Tier 1.

Lear Corporation is ranked #154 on the Fortune 500 with world-class products
designed, engineered and manufactured by a diverse team of talented
employees. As a leading supplier of automotive seating and electrical, Lear
serves its customers with global capabilities while maintaining individua l
commitment. With headquarters in Southfield, Michigan, Lear maintains 243
locations in 37 countries around the globe and employs approximately 150,000
employees. Lear is traded under the symbol [LEA] on the New York Stock
Exchange.

 A FORTUNE #154 company which focuses on automotive interiors and

electronics and is the world’s 5th largest automotive supplier.
 Founded in 1917 as American Metal Products.
 Headquarters is in Southfield, Michigan.
 Leading Tier 1 global automotive supplier with 2016 sales of
$18.6 billion
 A leader in product technology and innovation for Automotive Seating &
Electrical Power Management System.
 150,000 employees at 243 locations in 37 countries
 Strong Engineering Centers in China, India, Philippines, Germany & USA.

4.2 The history of Lear Corporation.

4.2.1 Lear was founded in 1917 in Detroit, Michigan as American Metal Products, a
manufacturer of tubular, welded and stamped assemblies for the automotive and
aircraft industries. Since then, we have grown to meet the changing needs of the
industry with 18 major acquisitions since Lear went public in 1994. Today, we
provide complete seating and electrical systems worldwide.

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4.3 VISION STATEMENT

To be consistently recognized as:

 A supplier of choice
 An Employer of choice
 The investment of choice; and
 A company that supports the communities where we do business.

4.4 MISSION STATEMENT

 Exceed our customers’ needs and expectations by:

• delivering the highest quality products and services

• providing low-cost and high-value added solutions

• continually improving our operating efficiency

• conducting our business with integrity

 Provide our employees, our most valuable resource, with an environment

that:
• values each employee’s unique experience, diversity and contribution

• treats all individuals with dignity and respect

• allows everyone to reach their full potential

• encourages inclusion and active participation

• nurtures the ‘can-do’ spirit of the Lear team

 Maximize value for our shareholders

 Treat our suppliers with respect and foster mutually beneficial
relationships
 Support the communities where we do business and protect the
environment

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4.5 CORE VALUES

 Customer Focus – Committed to their success

 Operational Excellence – Own it!
 Teamwork – Working together, Winning Together
 Integrity – Doing the right thing when no one is looking
 Diversity – Embracing our differences.
 Community Service – Care and concern for our community
4.6 Strategy

 Deliver profitable growth, balancing risk and returns

 Continue to expand component capability in emerging and low-cost markets
 Pursue complementary acquisitions to strengthen and grow both of our business
segments
 Maintain a strong balance sheet with investment grade credit metrics
 Consistently return cash to shareholders

4.7 QUALITY POLICY

“Through a strategy of continuous improvement and teamwork, Lear

Corporation is dedicated to establishing the highest industry standards for
quality, value, service and technology”

4.8 ENVIRONMENTAL, HEALTH ANDF SAFTY POLICY

“Lear corporation is dedicated to environmental protection, employee health

and safety, regulatory compliance and pollution prevention through a strategy
of continual improvement and teamwork”

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4.9 PRODUCTS

From Components to Complete Systems.

The continuing story of innovation at Lear begins with the discipline of design
focused on delivering products that drive solutions for the increasing
expectations of the end-consumer. We invite you to discover some recent
successes making an impact in the automotive industry.

4.10 Seating

4.10.1 Seat Systems- As one of the world’s only fully

integrated manufacturers of the entire seat, we have a
proven track record in delivering quality seating
systems to the auto industry at competitive prices. At
Lear, we work with every major automaker the world
over, supplying completed seats for programs ranging
from the highest volume platforms to specialty
applications covering every segment from small car to
full-size sport utilities.

4.10.2 Performance Seating-Lear's performance seating solves problems posed by the

most prestigious manufacturers and exceeding the expectations of the most
discerning drivers. Our stylish designs, superb craftsmanship and excellence in
execution deliver for high profile and well-regarded models around the world
as the challenges of increased functionality and performance. From our

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 components contributing to weight savings, to a complete seat finished in
luxurious leather or our advanced fabrics, Lear accomplished an industry-first
with an integrated approach that includes special surface material applications
such as laser etching and proprietary processes and products. Above any other
supplier, Lear’s global seating professionals collaborate with our electrical team
to serve our customers as a single source for advanced solutions.

4.11 E-SYSTEMS

4.11.1 Lear is a global leader in the development and

manufacture of complete electrical systems,
connection systems, and integrated electronics.
Our expertise with the total vehicle electrical
architecture and our recognized capability in
systems integration provides our customers
with uniquely optimized automotive electrical
and electronics solutions globally.

4.11.2 Lear is one of four suppliers with global capability in providing complete
automotive electrical distribution systems for traditional electrical architectures
as well as emerging high-power and hybrid systems.

4.12 LEAR INDIA BUSINESS UNITS

 Gonde (Nasik), India
 Chennai Tamilnadu, India
 Chakan-1, Pune, India
 Oragadam JIT (Chennai) India
 Chakan Metals, Pune, India
 Haridwar
 Ambad (Nasik), India
 Oragadam VI (Chennai), India
 Halol, India

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4.13 CLIENTS AND BUSINESS UNITS

4.14 FIRST QUARTER 2017 RESULTS

•Sales of $5.0 billion, up 7% from a year ago; up 9% excluding the impact of

foreign exchange

•Net income of $305.8 million, up 23% from $248.4 million in the prior year

•Core operating earnings of $431.5 million with a margin of 8.6%, up from

8.3% a year ago

•Earnings per share of $4.35 and adjusted earnings per share of $4.27, up 26%
from the prior year

•Net cash provided by operating activities and free cash flow of $278.9 million
and $158.1 million, respectively

•Increased quarterly cash dividend from $0.30 to $0.50 per share and increased
share repurchase authorization to $1 billion

•Signed a definitive agreement to acquire Grupo Antolin's seating business

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4.15 FULL YEAR 2016 RESULTS

•Record sales of $18.6 billion, up 2% from a year ago; up 5% excluding the

impact of foreign exchange and commodity prices

•Net income of $975 million and adjusted net income of $1.026 billion,
compared to $746 million and $844 million, respectively, in the prior year

•Record core operating earnings of $1.535 billion, an increase of 17% from the
prior year, with a record margin of 8.3%, up from 7.2% a year ago

•Record earnings per share of $13.33 and adjusted earnings per share of $14.03,
up 39% and 29%, respectively, from the prior year

•Record net cash provided by operating activities and free cash flow of $1.6
billion and $1.1 billion, respectively

•Entered into a strategic partnership with Tempronics for seat heating and
cooling

•Repurchased 5.8 million shares, or approximately 8% of the shares outstanding

at the beginning of the year

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4.16 BALANCE SHEET (In $$$ millions, except share and per share data) (fy is Jan to Dec)
2016 2015 2014
SHARES OUTSTANDING 70.21 75.3 79.26
CASH 1271.6 1196.6 1094.1
MARKETABLE SECURITIES - - -
RECEIVABLES 2746.5 2590 2471.7
INVENTORY 1020.6 947.6 853.7
RAW MATERIALS 746.3 706.8 668.3
WORK IN PROGRESS 106.4 90.2 45.6
FINISHED GOODS 167.9 150.6 139.8
NOTES RECEIVABLE - - -
OTHER CURRENT ASSETS 610.6 552.4 960.1
TOTAL CURRENT ASSETS 5649.3 5286.6 5379.6
PROPERTY PLANT AND EQUIPMENT 3505.8 3059 2662.6
ACCUMULATED DEPRECIATION 1486.5 1232.5 1037.9
NET PROPERTY PLANT AND EQUIPMENT 2019.3 1826.5 1624.7
INVESTMENT AND ADVANCES - - -
OTHER NON CURRENT ASSETS - - -
DEFERRED CHARGES - - -
INTANGIBLES 1121.3 1053.8 726.2
DEPOSITS AND OTHER ASSETS 1110.7 1238.9 1419.7
TOTAL ASSETS 9900.6 9405.8 9150.2
NOTES PAYABLE 8.6 - -
ACCOUNTS PAYABLE 2640.5 2504.4 2525.3
CURRENT PORTION OF LONG TERM DEBT 35.6 23.1 243.7
CURRENT PORTION OF CAPITAL LEASES - - -
ACCRUED EXPENSES 1497.6 1312.1 1188.8
INCOME TAXES PAYABLE - - -
OTHER CURRENT LIABILITIES - - -
TOTAL CURRENT LIABILITIES 4182.3 3839.6 3957.8
MORTGAGES - - -
DEFERRED CHARGES TAXES INCOME - - -
CONVERTIBLE DEBT - - -
LONG TERM DEBT 1898 1931.7 1475
NON CURRENT CAPITAL LEASES - - -
OTHER LONG TERM LIABILITIES 627.4 616.8 688.1
TOTAL LIABILITIES 6707.7 6388.1 6120.9
MINORITY INTEREST - - -
PREFERRED STOCK - - -
COMMON STOCK NET 0.8 0.8 0.8
CAPITAL SURPLUS 1385.3 1451.9 1475.2
RETAINED EARNINGS 3706.9 2827.8 2161.7
TREASURY STOCK 1200.2 623 176.9
OTHER LIABILITIES -699.9 -639.8 -431.5
SHAREHOLDERS EQUITY 3192.9 3017.7 3029.3
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 9900.6 9405.8 9150.2

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4.17 INCOME STATEMENT (In $$$ millions, except share and per share data) (fy is Jan to
Dec)

2016 2015 2014

SHARES OUTSTANDING 70.21 75.3 79.26
NET SALES OR REVENUES 18557.6 18211.4 17727.3
COST OF GOODS SOLD 16455.5 16391.6 16234.5
GROSS PROFIT 2102.1 1819.8 1492.8
RESEARCH AND DEVELOPMENT EXPENSE - - -
SELLING GENERAL AND ADMIN EXPENSE 621.9 580.5 529.9
INCOME BEFORE DEPRECIATION DEPLETION 1480.2 1239.3 962.9
AMORTIZATION
DEPRECIATION DEPLETION AMORTIZATION 53 52.5 33.7
NON OPERATING INCOME -6.4 -68.6 -74.3
INTEREST EXPENSE 82.5 86.7 67.5
PRETAX INCOME 1338.3 1031.5 787.4
PROVISIONFOR INCOME TAXES 370.2 285.5 121.4
MINORITY INTEREST 65.4 50.3 29.9
INVESTMENT GAINS LOSSES 72.4 49.8 36.3
OTHER INCOME - - -
INCOME BEFORE EXTRAORDINARIES AND DISC 1040.5 795.8 702.3
OPERATIONS
EXTRAORDINARY ITEMS AND DISCONTINUED - - -
OPERATIONS
NET INCOME 975.1 745.5 672.4
AVERAGE SHARES USED TO COMPUTE DILUTED E P S 73.1 77.8 81.7
AVERAGE SHARES USED TO COMPUTE BASIC E P S 73.1 77.8 81.7
INCOME BEFORE NON RECURRING ITEMS 1026.3 843.9 665.9
INCOME FROM NON RECURRING ITEMS -51.2 -98.4 6.5
E P S BASIC NET 13.33 9.59 8.23
E P S DILUTED NET 13.33 9.59 8.23
E P S DILUTED BEFORE NON RECURRING ITEMS 14.03 10.85 8.15
PREFERRED DIVIDENDS ACC PD - - -
DIVIDENDS COMMON - - -
DIVIDEND PER SHARE COMMON 1.2 1 0.8

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5.1 SWOT ANALYSIS

Strengths:
 Effective Demand Execution Process
 Operational Reach is worldwide 35+ countries
 Diversified Brand Portfolio
 Focus on the Enhancement of R&D
 Over 100,000 people are employed with the company
 It is listed as a Fortune 500 company
Weaknesses:
 High competition means limited market share
 2.Overdependance on few companies can be a business risk
Opportunities
 Mergers & Strategic Acquisitions
 Targeting low Cost Countries
 Focus on Green Energy Options
Threats:
 Neglecting Emission Norms
 Intense and Tough Completion
 Uneven Price War

6.1 COMPETITOR ANALYSIS

6.1.1 Global Automotive Seating Market: Key players

a) Johnson Controls Inc

b) Toyota Boshoku Corporation
c) TS Tech Co., Ltd
d) Faurecia SA
e) Lear Corporation
f) IFB Automotive

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6.1.2 In automotive seating industry, Adient (a spin-off of Johnson Controls) and Lear
are in the first camp, together holding about 48% of passenger car market.
Adient has a broad customer base with almost all carmakers being its customers,
while Lear provides products mainly for Ford, GM, BMW, and FCA and
operates chiefly in North America and Europe but gets far less involved in the
Asian-Pacific region. Adient seizes a dominant position in China with a market
share of 40%.

6.1.3 Toyota Boshoku (a member of Toyota Group) and Faurecia (a subsidiary of

PSA) fall into the second camp. Toyota Boshoku has been actively developing
new customers outside Toyota in recent years. Faurecia serves mainly VW,
PSA, and Renault-Nissan with its operations concentrated in Europe.

6.1.4 In the Chinese automotive seating market, almost all American cars and German
cars are equipped with automotive seats from Adient and Lear, and among
Japanese cars, all Honda cars carry automotive seats from TS, most Toyota cars
with automotive seats from Toyota Boshoku, and Nissan cars with automotive
seats from several suppliers. Most of Chinese car brands use seats from joint
ventures. Great Wall, BYD, Chery, and Geely adopt the model of partial own
production and partial purchase from joint ventures. The joint ventures deliver
cost-competitive products with better performance by relying on economy of
scale and complete supply chain, while local brands retain their seating
businesses just for enough say in negotiation with JVs and greater resilience in
supply chain.

6.1.5 Most of Great Wall car seats come from its own seating business division and a
few are provided by the joint venture between Great Wall and Yanfeng Johnson
Controls. BYD's car seats are largely supplied by its No. 16 business division
and partly by Tachi-S, a three-party joint venture. Chery has low-end seats
furnished by Wuhu Ruitai Auto Parts (a subsidiary of Chery) and high-end seats
by Lear, making less and less purchase from Johnson Controls and GSK. Major
suppliers of seats for Geely are Johnson Controls, Zhejiang Xindaimei

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 Automotive Seating, and Zhejiang Jujin Automobile & Motor-cycle
Accessories. Cooperation with South Korean Das provides solid support for
Zhejiang Xindaimei Automotive Seating to gain a foothold in Geely. Zhejiang
Jujin Automobile & Motor-cycle Accessories has investment from Geely and is

also backed by Tachi-S.

7 Fig 1.1: Major automotive seating manufacturers globally in 2016, based on

revenue

7.1 Growth Opportunities in the Global Automotive Seat Market

7.1.1 The future of the global automotive seat market looks promising with
opportunities in the mid-size and large car segment. The global automotive seat
market is expected to reach an estimated $78.7 billion by 2022 and it is forecast
to grow at a CAGR of 3.0% from 2017 to 2022. The major drivers of growth
for this market are increasing vehicle production, the rising trend of high value
seat with integrated smart technology for advanced vehicle comfort and safety.

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 7.1. WORKING OF RATIOS

2016 2015 2014

CURRENT RATIO 1.350764 1.376862 1.35924

QUICK RATIO 1.106736 1.130066 1.089469

CASH RATIO 0.304043 0.311647 0.276441

INTEREST COVERAGE RATIO 17.22182 12.89735 12.66519

DAYS IN INVENTORY 19.79868 18.732 17.33665

DAYS IN PAYABLE 51.22322 49.50657 51.28294

DAYS IN RECIEVABLE 53.27952 51.1987 50.19445

DAYS IN CASH 24.66784 23.65419 22.21861

Liquidity Ratios
20 60

18
50
16

14
40
12
times

days

10 30

8
20
6

4
10
2

0 0
2016 2015 2014
years

Current Ratio Quick Ratio Cash Ratio

interest coverage ratio days in inventory days in payable
days in recievable days in cash

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8.1. FINDINGS

 The company has maintained a fair level of current ratio throughout the
previous 3 years, which shows that company has 1.35 times more current
assets than current liabilities. (2016)
 Quick ratio is just above 1 which is ok, company has 1.10 times assets
(2016) to pay off its short term debt, anything less than 1 and company
may have to consider having to sell long-term assets.
 The cash ratio is maintained around 0.30 (2016), means company can pay
off 30 percent of its current liabilities.
 Company made 17.2 times more earnings than its current interest
payments. (2016)
 The company requires 19.79 days (2016) to sell off its inventory, which is
quite stable in previous years.
 The company requires 51.22 days (2016) to pay off its current suppliers
and vendors.
 The company requires 53.27 days (2016) to collect cash from its credit
sales.
 The company has cash which can last 24.66 days of operations (2016).

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9.1. CONCLUSION

 The company is doing well in terms of its liquidity as current ratio is

good in previous years.
 Quick ratio can be improved as it is just above 1, along with this
company is having cash and equivalents to the extent of 30 percent of
its current liabilities, this no. is fair considering a manufacturing firm.
 The company is in good position to pay its interest obligations from its
earning.
 Company is clearing its inventory as early as in 19 days. it shows how
fast the company is moving its inventory. In other words, it shows how
fresh the inventory is.
 company takes close to 2 months to collect cash from its customers, and
it is fairly good given the manufacturing industry, the sooner cash can be
collected, the sooner this cash can be used for other operations.
 Company pays its vendors and suppliers in close to 2 months of time
which is as good as collection period.
 Company should work on improving the no. of days of cash as its less
than 1 month and company realizes cash from its customers in close to
2 months, so there is a month of delay before company can use collected
cash in its operation.
 All over the liquidity position of the company is in good condition, but
there are areas to improve.

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10.1. FORMULAE AND DEFINATIONS

𝑡𝑜𝑡𝑎𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠

Current ratio
𝑡𝑜𝑡𝑎𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝑎𝑐𝑐𝑜𝑢𝑛𝑡 𝑟𝑒𝑐𝑖𝑒𝑣𝑎𝑏𝑙𝑒𝑠 + 𝑐𝑎𝑠ℎ + 𝑜𝑡ℎ𝑒𝑟 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠
Quick ratio
𝑡𝑜𝑡𝑎𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝑐𝑎𝑠ℎ 𝑎𝑛𝑑 𝑐𝑎𝑠ℎ 𝑒𝑞𝑢𝑖𝑣𝑎𝑙𝑒𝑛𝑡𝑠
Cash ratio
𝑡𝑜𝑡𝑎𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝐸𝐵𝐼𝑇
Interest coverage ratio
𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑒𝑥𝑝𝑒𝑛𝑠𝑒𝑠
𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
∗ 360
Days in inventory 𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠

𝑎𝑐𝑜𝑐𝑢𝑛𝑡 𝑝𝑎𝑦𝑎𝑏𝑙𝑒
Days in payable ∗ 360
𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
𝑎𝑐𝑐𝑜𝑢𝑛𝑡 𝑟𝑒𝑐𝑖𝑒𝑣𝑎𝑏𝑙𝑒𝑠
Days in receivables ∗ 360
𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
𝑐𝑎𝑠ℎ 𝑎𝑛𝑑 𝑐𝑎𝑠ℎ 𝑒𝑞𝑢𝑖𝑣𝑎𝑙𝑒𝑛𝑡𝑠
Days in cash holding ∗ 360
𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠

– Current ratio measures a firm's ability to pay off its short-term liabilities with
its current assets.
– Quick ratio measures the ability of a company to pay its current liabilities when
they come due with only quick assets. Quick assets are current assets that can
be converted to cash within 90 days or in the short-term.
– Cash ratio or cash coverage ratio is a liquidity ratio that measures a firm's ability
to pay off its current liabilities with only cash and cash equivalents.
– The interest coverage ratio measures a company’s ability to make interest
payments on its debt in a timely manner.
– Days in inventory, measures the number of days it will take a company to sell
all of its inventory
– The average collection period or days' sales in receivables, measures the number
of days it takes a company to collect cash from its credit sales.
– The days in payable, measures the number of days it takes a company to pay off
its current suppliers and vendors.
– The days in cash holding, measures the no. of days a company can support its
operations with cash balance.

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11.1. BIBLIOGRAPHY

– http://www.prnewswire.com/news-releases/global-automotive-seat-industry-2014-
2019-trend-profit-and-forecast-analysis-300088289.html
– https://www.giiresearch.com/report/rinc203465-global-china-automotive-seating-
system-industry.html
– https://www.statista.com/statistics/598360/major-automotive-seating-
manufacturers-worldwide-based-on-revenue/
– http://lear.com/Site/Company/
– http://lear.com/user_area/content_media/raw/HISTORYOFLEAR.pdf
– http://lear.com/Site/Company/Vision.aspx#sthash.2Eg6wLSW.dpuf
– http://www.lear.com/Site/Products/#sthash.E0cyrCFl.dpuf
– http://www.lear.com/Site/Products/E-Systems/#sthash.Oc8AjxOT.dpuf
– http://www.lear.com/Site/Products/Seating/#sthash.u0ttxWeo.dpuf
– http://ir.lear.com/financials.cfm
– http://www.mbaskool.com/brandguide/automobiles/13525-lear-corporation.html

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