CHAPTER I

INTRODUCTION OF THE STUDY

1. INTRODUCTION:

In the past four decades, the automobile industry emerged as a shining light to catalyse
India’s Gross Domestic Product (GDP) and the whole economy.

The global management consulting firm McKinsey, termed the automobile industry as
one of India’s core sectors, estimating the manufacture of transport equipment to be worth up
to 12 percent of the Gross Value Added (GVA) in the manufacturing sector.

As one of the leading driving forces of the economy, the auto industry contributes to
about 49 percent to India’s manufacturing GDP and 7.5 percent to the GDP at large. The auto
realm’s value chain is responsible for 32 million jobs. Interestingly, the Indian automobile
market overtook Germany, Europe’s largest economy and export powerhouse, to emerge as the
world’s fourth largest in 2018, valued at nearly $100 billion.

The industry, estimated to account for 65 million jobs by 2026, has gone through many
disruptions that began around the outbreak of the Coronavirus pandemic. Chip shortage,
multiple and duplicate bookings, rural distress, fuel price-led inflation, a steep hike in
commodity prices, container shortage, and surging logistics costs, are some of the challenges
disrupting the Indian automobile industry.

1.1.WORKING CAPITAL MANAGEMENT:

Working capital management requires monitoring a company's assets and liabilities to

maintain sufficient cash flow to meet its short-term operating costs and short-term debt
obligations. Managing working capital primarily revolves around managing accounts
receivable, accounts payable, inventory, and cash. Working capital management involves
tracking various ratios, including the working capital ratio, the collection ratio, and the
inventory ratio.

Working capital management can improve a company's cash flow management and
earnings quality by using its resources efficiently. The efficiency of working capital
management can be quantified using ratio analysis. Working capital management monitors

1
cash flow, current assets, and current liabilities using ratio analysis, such as working capital
ratio, collection ratio, and inventory turnover ratio.

1.2. COMPONENTS OF WORKING CAPITAL MANAGEMENT:

1.2.1. CASH:
The core of working capital management is tracking cash and cash needs. This
involves managing the company's cash flow by forecasting needs, monitoring cash balances,
and optimizing cash inflows and outflows to ensure that the company has enough cash to meet
its obligations. Because cash is always considered a current asset, all accounts should be
considered.

1.2.2. RECEIVABLES:
To manage capital, companies must be mindful of their receivables. This is especially
important in the short-term as they wait for credit sales to be completed. This involves
managing the company's credit policies, monitoring customer payments, and improving
collection practices. At the end of the day, having completed a sale does not matter if the
company is unable to collect payment on the sale.

1.2.3. PAYABLES:
Payables in one aspect of working capital management that companies can take
advantage of that they often have greater control over. While other aspects of working capital
management may be out of the company's hands (i.e. selling goods or collecting receivables),
companies often have a say in how they pay suppliers, what the credit terms are, and when
cash outlays are made.

1.2.4. INVENTORY:
Companies primary consider inventory during working capital management as it may
be most risky aspect of managing capital. When inventory is sold, a company must go to the
market and rely on consumer preferences to convert inventory to cash. If this cannot be
completed in a timely manner, the company may be forced to have short-term resource stuck
in an illiquid position. Alternatively, the company may be able to quickly sell the inventory
but only with a steep price discount.

2
1.3. TYPES OF WORKING CAPITAL:
In its simplest form, working capital is just the difference between current assets and
current liabilities. However, there are many different types of working capital that each may
be important to a company to best understand its short-term needs.

1. Permanent Working Capital:

Permanent working capital is the amount of resources the company will always
need to operate its business without interruption. This is the minimum amount of short-
term resources vital to operations.

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 2. Regular Working Capital:
Regular working capital is a component of permanent working capital. It is the
part of the permanent working capital that is actually required for day-to-
day operations and makes up the "most important" part of permanent working capital.
3. Reserve Working Capital:
Reserve working capital is the other component of permanent working capital.
Companies may require an additional amount of working capital on hand for
emergencies, seasonality, or unpredictable events.
4. Fluctuating Working Capital:
Companies may be interested in only knowing what their variable working
capital is. For example, companies may opt into paying for inventory as it is a variable
cost. However, the company may have a monthly liability relating to insurance it does
not have the option to decline. Fluctuating working capital only considers the variable
liabilities the company has complete control over.
5. Gross Working Capital:
Gross working capital is simply the total amount of current assets of a business
before considering any short-term liabilities.
6. Net Working Capital:
Net working capital is the difference between current assets and current
liabilities.

1.4. NEED FOR THE STUDY:

Working capital management can improve a company's cash flow management and
earnings quality through the efficient use of its resources. Management of working capital
includes inventory management as well as management of accounts receivable and accounts
payable.

Working capital management also involves the timing of accounts payable (i.e., paying
suppliers). A company can conserve cash by choosing to stretch the payment of suppliers and
to make the most of available credit or may spend cash by purchasing using cash—these
choices also affect working capital management. The objectives of working capital
management, in addition to ensuring that the company has enough cash to cover its expenses

4
and debt, are minimizing the cost of money spent on working capital, and maximizing the
return on asset investments.

1.5. OBJECTIVES OF THE STUDY:

1. To know the profile of selected companies in automobile industry.

2. To examine how working capital management influence the financial growth of the
selected companies.
3. To evaluate the inventory, receivable and cash management performance.
4. To suggest on the basis of conclusions, innovation in the management of working
capital in Auto component Industry.

1.6. RESEARCH METHODOLOGY:

1.6.1. DATA COLLECTION:

The present study is of analytical nature and makes use of secondary data. Five
automobile industries have been selected on the basis of India’s top companies which
contribute major part towards Indian economy. The data used for the study is from 2017-2018
to 2021-2022 were collected from secondary data source.

1.6.2. SAMPLE SIZE:

Collected five years data of the following four automobile industries are used for the
study.

• Maruti Suzuki India limited

• Honda motor company limited
• Mahindra & Mahindra limited
• Eicher motors limited

1.6.3. TOOLS USED FOR THE STUDY:

The study makes use of techniques like

• Liquidity ratio
• Profitability ratio
• Activity ratio

5
Simple mathematical tools like

• Averages
• Percentages

Accounting tools like

• Ratios were used for this analysis.

1.7. LIMITATIONS OF THE STUDY:

1. With strong working capital management, a company should be able to ensure it has
enough capital on hands to operate and grow. However, there are downsides to the
approach.
2. Working capital management only focuses on short-term assets and liabilities. It does
not address the long-term financial health of the company and may sacrifice the best
long-term solution in favour for short-term benefits.
3. It has been conducted using secondary data. So, the accuracy of the results depends on
the accuracy of the data.
4. It considered only monetary factors, non-monetary factors are not considered.

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 CHAPTER II

REVIEW OF LITERATURE

2. REVIEW OF LITERATURE:

2.1. INTRODUCTION:

The theoretical literature implies that profit earned by a particular concern indicates its
strength in yielding benefits from all sorts of its efforts injected in earning the same. Working
capital management involves determining company’s cashflow management and earning
quality through the efficient use of its resources. Over the period, there are various working
capital management-based studies conducted in the area of automobile industry and some of
them have been reviewed as follows:

Mohammed Rafiqul Islam (2000) studied the profitability of Fertilizer Industry in

Bangladesh for the period of 1985-86 to 1994-95. For the purpose of analysis, he has selected
five fertilizer enterprises of the seven fertilizer enterprises in Bangladesh under the control of
Bangladesh Chemical Industries Corporation (BCIC). In this study he has indicate that none of
the selected units were consistent and all the units were plagued with declining profits. On the
basis of comparative analysis, he has concluded with suggestions for enhancement of the
profitability of fertilizer industry in Bangladesh.

Sur, Biswas & Ganguly (2001) have studied about the Liquidity Management in Indian
Private Sector Enterprises - A case study of Indian Primary Aluminium industry. From the
analysis, they had summarized that the overall performance regarding liquidity management at
INDAL was better in terms of efficient utilization of short-term funds, whereas HINDALCO
was unable to do so. They found that a very high degree of positive correlation between
liquidity and profitability in case of both the companies was a notable feature, reflecting the
favourable effect of liquidity on profitability.

Sur (2001) studied in his paper about the Liquidity Management: An overview of four
companies in Indian Power Sector using the data for the period of 1987-1988 to 1996-1997.
He had applied accounting techniques of comparative analysis regarding the liquidity
management in electricity generation and distribution industry. He revealed that the overall
liquidity should be managed in such a way that not only it should not hamper profitability but
also its contribution towards increase in profitability should be positive.

7
Vijayakumar (2002) has discussed on ‘Financial appraisal of Salem Cooperative Sugar Mills
Ltd, Mohanur, and he analysed the various aspects of the working of Salem Co-operative Sugar
Mills Ltd, Mohanur. In this study, he has been with respect to profitability, capital structure,
fixed assets and working capital for measuring the financial performance selected sugar mills.
He gave main finding about the Mill’s over dependence on external funds which results in
interest burden and it may create difficulty for Mills. On the basis of findings, he has given
suggestion like, it is sure that the Mill will have better scope to function in an efficient manner
if the owner's funds are increased and the borrowings can be reduced.

Vijayakumar (2002) has studied on “Determinants of Profitability-A firm level study of the
Sugar Industry of Tamil Nadu”, in this study he has investigated the various determinants of
profitability viz., growth rate of sales, vertical integration and leverage. For the purpose of
analysis, he had selected three variables like, current ratio, operating expenses to sales ratio
and inventory turnover ratio and also econometric models were used to test the various
hypotheses relating to profitability with other variables. In this study, he has concluded that the
efficient inventory management and current assets management should make carefully because
it is affect the profitability.

Kakani, Saha & Reddy (2003) have studied about an empirical validation of the widely held
existing theories on the determinants of firm performance in the Indian context. In their study
they have used financial statements and capital market data of 566 large Indian firms over a
time frame of eight years divided into two sub-periods (1992-96 and 1996-2000) and to analyse
Indian firm’s financial performance across various dimensions viz., shareholder value,
accounting profitability and its components, growth, and risk of the sample firms. They have
found that size, marketing expenditure and international diversification had a positive relation
with a firm’s market evaluation. They have also concluded that a firm’s ownership
compositions, particularly the level of equity ownership by domestic financial institution and
dispersed public shareholders, and the leverage of the firm were important factors affecting its
financial performance.

Patra (2005) has studied about the impact of liquidity on profitability by using current ratio,
acid test ratio. Current assets to total assets ratio, inventory turnover ratio, working capital ratio,
receivable turnover ratio, cash turnover ratio of selected two company’s viz., Tata Iron & Steel
Company Limited for the period 1999 to 2005. Using mean, standard deviation, co-efficient
variation, correlation and co-efficient of relation. He has concluded that out of seven liquidity

8
ratios selected for this study, four ratios namely current ratio, acid test ratio, current assets to
total assets ratio and inventory turnover ratio showed negative correlation with profitability
ratio. Whereas the remaining three ratios namely working capital turnover ratio, receivable
turnover ratio and cash turnover ratio have shown positive association with the profitability
ratio, all of which are statistically significant at 5% level of significance. He found that the
impact of liquidity ratios on profitability showed both negative and positive association.
However, these correlation co-efficient were not statistically significant. The result showed that
all the correlation co-efficient is as desirable except correlation co-efficient between inventory
turnover ratio and ROI while undesirable sign between ITR and ROI was not supported by the
multiple regression analysis, which indicated the positive association between these two
variables. He mentioned that growing of profitability which was depends upon many factors
including liquidity.

Gaabalwe (2007) has done descriptive studies on “financial performance measurement of

South Africa’s top companies: an exploratory investigation” he has made study on the base of
empirical, he applied accounting tools like ratio and applied statistical tools like mean, standard
deviation, and z test. For the purpose of analysis, he has facilitated the analysis and
interpretation; the ZScores of the sampled companies were expediently used to classify the
companies into three categories like high, medium and low. Results also implied significant
differences for the current ratio, liquidity ratio, return on capital employed ratio, debts-equity
ratio, whereas insignificant differences for inventory ratio, debtors ratio, total assets turnover
ratio, current assets turnover ratio, gross profit margin ratio, net profit ratio. For the practice of
analysis and interpretation he has included a critical look at the financial performance measures
highlighted by the Top Companies in their accounting data.

Jhala (2007) discussed in her Ph. D thesis about “An Analytical Study of Financial
Performance of Refinery Industry of India” and for the purpose of analysis, seven units have
taken for the period 1998-2003 for the analytical study of performance of the selected units. In
this research, she has covered the financial aspects of these 7 units and has been analyzed by
performance analysis. She had tried to get most significant and viscous finance related data of
the selected units and Z-score, Anova test, various ratio analysis, correlation matrix trend
analysis, as well as multivariable analysis method have been used to analyse the data of the
units. She has concluded from the liquidity test, it can be said that CPCL has average liquidity
position, it has better liquidity position but however it was also below standard level. BPCL,
IOC, MRP has very poor liquidity position and seeing to working level efficiency, KRL has

9
very good inventory turnover performance but it was poor in debtors’ turnover performance as
well as BPCL was good to debtors’ turnover but not in inventory turnover efficiency. On the
basis of analysis, she recommended that, company should to make efficient use of net fixed
assets as well as current assets, try to maintain liquidity level, decrease the external funds,
change the policy of credit and reduce the cost.

Anand & Malhotra (2007) have discussed in his study about Working Capital performance
of corporate in India: by selecting the develop quantitative benchmarks at the firm and the
industry level, so they was able to evaluate the working capital management performance of
corporate India from time to time. They analysed that Corporate India has achieved a
compound Annual growth Rate (CAGR) of 26.30% in net sales and 1.60 % in the three- year
average cash operating margins during the period of study. They also observed that the length
of the operating cycle and cash conversion cycle has reduced by 10. 2% and 12.7% respectively
on compounded annual basis. They found in their paper, a very little evidence on the positive
relationship between working capital management and firm profitability. They also concluded
that the dynamics of risk-return trade off, which will help the performance evaluation of
working capital management of corporate India.

Pandey & Singh (2008) in their research, they have studied about working capital management
by analysing current assets and current liabilities. They have concluded, by maintaining high
inventory levels reduce the cost of possible interruption in the production process or of loss of
business due to the scarcity of products, reduces supply costs and protects against price
fluctuations. They mentioned in their study, granting trade credit favours the firm’s sales in
various ways and also trade credit can act as an effective price cut and incentives to customers
to acquire merchandise at times of low demands. Thus, they found that greater the investment
in current assets, lower is the risk, and profitability obtained and equally trade credit was a
Spontaneous source of financing that reduces that amount required to finance the sums tied up
in the inventory and account receivables. They have concluded that the profitability and
liquidity comprises the salient and all too often conflicting goals of working capital
management. They also revealed that the conflicts arise because the maximum of firm’s returns
could seriously threaten liquidity and on the other hand, the pursuit of liquidity has a tendency
to dilute returns.
Karaduman, Akbas & Caliskan (2011) they have discussed about empirical relationship
between efficiency of working capital management and corporate profitability of selected
companies in the Istanbul Stock Exchange for the period of 2005-2009. In this study, they

10
concluded that the companies should focus on working capital management in order to increase
their profitability by seriously and efficiently considering the issues on their cash renovation
cycle which was derived from the number of day’s accounts payable, the number of day’s
accounts receivable and the number of days of inventories. On the basis of findings, they
suggested that it may be possible to increase profitability by improving efficiency of working
capital.

Pandya (2011) has done his Ph.D. on “A comparative analysis of liquidity and profitability of
Indian car industry”. In this research he has selected four units of auto sector and for analysing
the performance of selected units, he has been made Inter-firm comparison by using ratios,
trend analysis, ANOVA test and for the better understanding of some important matter was to
be presented by graph. On the basis findings, he has given some suggestion for improvement
of performance like company should try to increase the profitability by control operating
expenses, other steps and company should also try to introduce small car for common man etc..

Sharma (2012) studied in his research concerning “Comparing and Analyzing Financial
Statements to Make an Investment Decision: Case Study of Automotive Industry. In this
research study, he has selected four automotive companies like Toyota, Nissan, Ford and
General Motors for comparative study for the period of 2008 to 2011. For the purpose of
analysis, he used qualitative and quantitative techniques and the other major outcome of this
research has been the assessment of risk and gain of an investment. They have also concluded
that the Indian automotive industry’s performance has significant difference in terms of their
profit levels using ANOVA. It has also been depicted from the analysis about existence of some
relationship between Ford & General Motors in terms of profitability. Toyota and Nissan has
performed very well with the use of new technology and skilled manpower. General Motors
has been poor performer due to increased manufacturing overheads and cut throat competition.

Sorin Anton, Anca Afloarei Nucu (2020) The purpose of this study is to investigate the
relationship between working capital and firm profitability for a sample of 719 Polish listed
firms over the period of 2007–2016. The scarcity of empirical evidence for emerging
economies and the importance of working capital efficiency motivates the research on the
working capital–financial performance relationship. The paper adopts a quantitative approach
using different panel data techniques (ordinary least squares, fixed effects, and panel-corrected
standard errors models). The empirical results report an inverted U-shape relationship between
working capital level and firm profitability, meaning that working capital has a positive effect

11
on the profitability of Polish firms to a break-even point (optimum level). After the break-even
point, working capital starts to negatively affect firm profitability. The study brings theoretical
and practical contributions. It extends and complements the literature on the field by
highlighting new evidence on the non-linear interrelation between working capital
management (WCM) and corporate performance in Poland. From the practitioners’
perspective, the results highlight the importance of WCM for firm profitability.

Ahsan Akbar, Minhas Akbar, et al (2021) Extant empirical studies have predominantly
focused on the nexus between working capital management (WCM) and corporate profitability.
While there is a dearth of literature on the nexus between WCM and a firm’s risk, the present
study examines Pakistani-listed firms coming from 12 diverse industrial segments to observe
this association for a time span of ten years (2005–2014). To ensure robustness, they employed
a System Generalized Method of Moments (SGMM) regression estimation to investigate the
influence of WCM on the operational and market risk for firms. Empirical testing revealed that
higher working capital levels were associated with lower volatility in firms’ stock price, which
shows that shareholders prefer a conservative working capital policy. Moreover, firms with
better cash positions were subject to lesser stock market volatility. In contrast, excess working
capital and a larger net trade cycle were associated with increased volatility in the operating
income. Besides, firms with lower working capital levels relative to their respective industry
experienced fewer fluctuations in their operating profits. Our findings assert that short-term
financial management has important ramifications for firms’ operating and market
fundamentals. Practical implications are discussed for corporate managers and relevant
stakeholders.

Kamlesh Kumar, N. Sivasankaran, et al (2022) This article aims to empirically examine the
influence of working capital management (WCM) efficiency on the fundamentals of Indian
listed firms. The fixed-effects logit regression model is employed to explore the impact of
WCM efficiency on the fundamental strength of the sample firms. The fixed-effects regression
model is used to investigate the influence of WCM efficiency on the select individual
fundamental measures. They have extracted data from 538 Indian listed firms from the Centre
for Monitoring Indian Economy (CMIE) database from 2012 to 2020. They find that WCM
efficiency positively influences the fundamental strength of the sample firms. They have also
validated our results with respect to individual fundamental measures. We observe that an
efficient WCM enhances the overall profitability, operational effectiveness, asset utilization
efficiency and the ability to generate cash from operations, while inefficient management of

12
working capital (WC) pushes firms towards a more long-term debt financing in the Indian
context.
Jacek Jaworski, Leszek Czerwonka (2022) The main purpose of the paper is to identify firm,
industry, and country-specific determinants of working capital management (WCM) in energy
industry. The empirical research is based on 6122 EU companies operating in the years 2011–
2018. The influence of internal factors on variables describing WCM (cash conversion cycle—
CCC, financial liquidity—LIQ and level of working capital—WC) were identified. The factors
included: size of the company (positive effect), its growth, tangibility, and indebtedness
(negative effect). Cash flow had a positive effect on CCC and a negative effect on LIQ and
WC. The influence of industry-specific factors were also found. Companies applied similar
strategies in CCC and LIQ management, following their industry averages. Measures of WCM
decreased under the influence of an increase in average trade payables in the industry.
Following country-specific factors were found to be significant: (i) growth of GDP and strength
of legal rights had negative influence on all measures of WCM, (ii) unemployment positively
affects LIQ and WC and negatively CCC, (iii) an increase in the share of renewable energy
sources caused a decrease in all WCM measures, while (iv) with an increase in energy
consumption, CCC and WC increased.

Emmanuel Asare, David John Edwards, et al (2022) The concept of working capital
management (WCM) has been a fundamental financial accounting term that has evolved in
financial theory for centuries. Given that the construction industry (CI) is financially dynamic,
there is an imperative need to understand its WCM practices. The call for the industry players
to adhere to efficient financial management practices as a result of a huge financing gap
requires consented effort. This study aims to explore the trend of practices of WCM in the CI
and elicit a broader polemic dialogue about this crucial theme.

Kumar Sanjay Sawarni, Sivasankaran Narayanasamy, et al (2023) investigates the impact

of earnings management (EM) on the efficiency of Working Capital Management (WCM) and
its components. The study uses M-Score, based on the Beneish Model, as a proxy for EM and
applies generalized method of moments and panel quantile regression methods to a sample of
461 Indian-listed firms. We find that EM may inversely influence the WCM efficiency of
Indian firms. Managers who engage in EM tend to operate on longer cash conversion cycle and
manage inventory sub-optimally. These findings have been further confirmed by using an
alternative EM proxy based on the Modified Jones Model.

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 CHAPTER III

COMPANY PROFILE

3. COMPANY PROFILE:

3.1. MARUTI SUZUKI INDIA LIMITED

Maruti Suzuki India Limited, formerly known as Maruti Udyog Limited, is an Indian
automobile manufacturer headquartered in New Delhi. It is a subsidiary of the Japanese
automotive manufacturer Suzuki Motor Corporation. Maruti Suzuki India Limited is a holding
company. The Company is engaged in the manufacture, purchase and sale of motor vehicles,
components and spare parts (automobiles). The other activities of the Company comprise
facilitation of pre-owned car sales, fleet management and car financing. The Company's
product portfolio includes Alto 800, Alto K10, Wagon R, Celerio, Ritz, Swift, DZire, Ertiga,
Omni, Eeco, Gypsy, Ciaz, etc.

Its service offerings include Maruti Finance, True Value, Maruti Genuine Parts, Maruti
Genuine Accessories, Maruti Suzuki Auto Card and Maruti Driving School. It has
approximately five plants, located in Palam Gurgaon Road, Gurgaon, Haryana, and at Manesar
Industrial Town, Gurgaon, Haryana, with an installed capacity of over 1.5 million vehicles per
year.

3.1.1. MARUTI SUZUKI- FOUNDER AND HISTORY:

Maruti Udyog Limited was founded by the government of India on 24 February 1981,
only to merge with the Japanese automobile company Suzuki in October 1982. The first
manufacturing factory of Maruti was established in Gurugram, Haryana, in the same year. The

14
company was formed as a government company with Suzuki as a minor partner to make a
people's car for middle class India. Over the years the company's product range has widened
ownership has changed hands and the customer has evolved.

On October 2, 1982 the company signed the licence and joint venture agreement with
Suzuki Motor Corporation Japan. In the year 1983 the company started their productions and
launched Maruti 800. In the year 1984 they introduced Maruti Omni and during the next year
they launched Maruti Gypsy in the market. In the year 1987 the company forayed into the
foreign market by exporting first lot of 500 cars to Hungary.

In the year 1990 the company launched India's first three-box car Sedan. In the year
1992 Suzuki Motor Corporation Japan increased their stake in the company to 50%. In the year
1993 they introduced the Maruti Zen and in the next year they launched Maruti Esteem in the
market. In the year 1995 the company commenced their second plant. In the year 1997 they
started Maruti Service Master as a model workshop in India to look after sales services. In the
year 1999 the third plant with new press paint and assembly shops became operational. In the
year 2000 the company launched Maruti Alto in the market. In the year 2002 Suzuki Motor
Corporation increased their stake in the company to 54.2%.

3.1.2. MARUTI SUZUKI – MISSION:

Maruti Suzuki's mission statement says, "To be The Leader in the Indian Automobile
Industry, Creating Customer Delight and Shareholder's Wealth; A pride of India."

3.1.3. MARUTI SUZUKI - JOINT VENTURES:

Relationship between the Government of India, under the United Front (India) coalition
and Suzuki Motor Corporation over the joint venture was a point of heated debate in the Indian
media until Suzuki Motor Corporation gained the controlling stake. This highly profitable joint
venture that had a near monopolistic trade in the Indian automobile market and the nature of
the partnership built up till then was the underlying reason for most issues.

The success of the joint venture led Suzuki to increase its equity from 26% to 40% in
1987, and to 50% in 1992, and further to 56.21% as of 2013. In 1982, both the venture partners
entered into an agreement to nominate their candidate for the post of Managing Director and
every Managing Director would have a tenure of five years.

15
3.1.4. MARUTI SUZUKI - BUSINESS MODEL:

Maruti Suzuki's product range extends from entry level small cars like Alto 800, Alto
K10 to the luxury sedan Ciaz. Other activities include facilitation of pre-owned car sales fleet
management, car financing. Its Business Segments are divided into: Operating Income from
sales of cars and Interests from Investments.

• Maruti Suzuki offers 17 models of cars

• Company focuses on catering to the needs of almost all the segments from the middle
class to high class through wide range of products.

3.1.5. MARUTI SUZUKI- PRODUCTS:

16
3.1.6. MARUTI SUZUKI – COMPETITORS:

TATA MOTORS HONDA MOTORS

HYUNDAI MOTORS MAHINDRA & MAHINDRA

TOYOTA MOTORS

17
 3.1.7. MARUTI SUZUKI- AWARDS AND ACHIEVEMENTS:

ALTO 800
• Viewer’s choice award, overdrive award 2013
• Maruti Suzuki alto emerged as “world’s best-selling
small car” for 2014.

SWIFT
• Indian car of the year, 2012 and 2006.
• BBC top gear magazine, small car of the year 2011.

DZIRE
• NDTV cars and bike award for sub-compact sedan
of the year 2013.
• The fastest 1-lakh sales mark in Indian automobile
history.

18
 CIAZ
• Best of 2014 from Auto x Magazine.
• Compact sedan of the year 2015- NDTV car and
bike award.

ERTIGA
• Family car of the year 2012- TopGear.
• MUV of the year 2013- NDTV car and bike
award.

VITARA BREZZA
• Viewer’s choice car of the year-2017
• Indian car of the year 2017 award.

19
3.2. HONDA MOTOR COMPANY LIMITED

Honda Motor Company, Ltd. is a Japanese public multinational conglomerate

corporation primarily known as a manufacturer of automobiles, motorcycles, and power
equipment. Honda Motor Co., Ltd. operates under the basic principles of “Respect for the
Individual” and “The Three Joys” commonly expressed as The Joy of Buying, The Joy of
Selling and The Joy of Creating.

Honda has been the world's largest motorcycle manufacturer since 1959, reaching a
production of 400 million by the end of 2019, as well as the world's largest manufacturer of
internal combustion engines measured by volume, producing more than 14 million internal
combustion engines each year. Honda became the second-largest Japanese automobile
manufacturer in 2001. Honda was the eighth largest automobile manufacturer in the world in
2015.

3.2.1. HONDA - FOUNDER AND HISTORY:

The engineer Honda

Soichiro founded the Honda
Technical Research Institute near
Hamamatsu in 1946 to develop
small, efficient internal-
combustion engines. It was
incorporated as Honda Motor
Company in 1948 and began
producing motorcycles in 1949.
The Honda C-100, a small-engine
motorcycle, was introduced in
1953 and by 1959 was the largest-selling motorcycle in the world. In 1959 the company also

20
established a U.S. subsidiary, the American Honda Motor Company, which began producing
motorcycles in the United States in 1979 and automobiles in 1982.

While still Honda is a world leader in producing motorcycles, the bulk of the company’s
annual sales comes from automobiles, which the company began manufacturing long ago.
Among its lightweight, fuel-efficient passenger cars have been the popular Civic and Accord
models. The company’s other major product areas include farm machinery and small engines.
Honda is a major Japanese exporter to the United States and to other parts of the world. It also
has assembly plants in a number of other countries and is engaged in joint ventures and
technology-licensing agreements with several foreign companies.

3.2.2. HONDA – MISSION:

Honda's mission statement says, "Maintaining a global viewpoint, we are dedicated to

supplying products of the highest quality, yet at a reasonable price for worldwide customer
satisfaction."

3.2.3. HONDA – COMPETITORS:

NISSAN TOYOTA

FORD MOTORS VOLSWAGEN MOTORS

MAHINDRA & MAHINDRA

21
3.2.4. HONDA- BUSINESS OPERATIONS:

Honda Motor Co., Ltd. engages in the manufacture and sale of automobiles,
motorcycles, and power products. It operates through the following segments: Automobile,
Motorcycle, Financial Services, and Power Product and Other Businesses.

The Automobile segment manufactures and sells automobiles and related accessories.
The Motorcycle segment handles all-terrain vehicles, motorcycle business, and related parts.
The Financial Services segment provides financial and insurance services. The Power Product
and Other Businesses segment offers power products and relevant parts. The company was
founded by Soichiro Honda on September 24, 1948 and is headquartered in Tokyo, Japan.

Honda was the first Japanese automobile manufacturer to release a dedicated luxury
brand, Acura, in 1986. Aside from their core automobile and motorcycle businesses, Honda
also manufactures garden equipment, marine engines, personal watercraft and power
generators, and other products.

Since 1986, Honda has been involved with artificial intelligence/robotics research and
released their ASIMO robot in 2000. They have also ventured into aerospace with the
establishment of GE Honda Aero Engines in 2004 and the Honda HA-420 HondaJet, which
began production in 2012. Honda has three joint-ventures in China: Honda China, Dongfeng
Honda, and Guangqi Honda.

3.2.5. HONDA - BUSINESS MODEL:

Automotive (~71%)

Honda derives a majority of its revenue from the sales of its automotive units around
the world. Per Bloomberg intelligence, 75% of the vehicles Honda sells in the US market are
manufactured in the country itself. Additionally, the company does not expect a significant
revenue impact from recently imposed tariffs in the US as it manufactures a notable quantity
of its US volumes in the domestic market itself. We expect automotive sales of 5.35 million
worldwide, translating into $104.7 billion in revenues from this division.

Motorcycle (~14%)

Honda derives $18.4 billion in revenues from the sales of its motorcycle units. This
segment includes motorcycles, all-terrain vehicles (ATVs) and Personal watercraft (PWC). We

22
expect higher sales volume of its motorcycle business to drive its top-line growth in 2019. The
increased volume sales are expected in its key markets of Asia, including Indonesia, India, and
Vietnam. Honda’s Activa and X-blade models continue to be the bestsellers in these markets
in 1Q’19.

Financial Services (~13%)

Honda provides a variety of financial services – retail lending, leasing to customers and
wholesale financing to its customers and dealers through its finance subsidiaries. Within the
financial services segment, North America contributes about 90% of the segment’s revenue.
We expect the segment to generate $19 billion in revenue in 2019.

Power and Other business (~2%)

HMC manufactures and markets a complete range of power equipment products for
commercial, rental, and residential applications. Its comprehensive product line, which
includes tillers, portable generators, outboard engines, water pumps, lawn mowers, snow
throwers, general purpose engines, electric four-wheel scooters, is powered exclusively by
advanced 4-stroke engines. These products are sold by the company in its markets, mainly in
Japan, and are also sold to Original Equipment Manufacturers (OEM).

23
3.2.6. HONDA MOTORS- PRODUCTS:

24
3.2.7. HONDA- AWARDS AND ACHIEVEMENTS:

ACTIVA
• Best innovation and integrated campaign- two
wheeler (car and bike awards 2021)
• Scooter of the year (Jagran Hi-tech award) 2020.

AFRICA TWIN

• Adventure motor cycle of the year (Motoring

Award 2018)
• Premium bike of the year (Autocar Award 2018)

GRAZIA
• Scooter of the year (Motoring Awards 2018).
• Scooter of the year (Autocars Awards 2018).

25
HORNET 2.0
• Bike of the year (upto 200cc) (Bike India Awards 2021)
CB HORNET 160R
• Bike of the year under 300cc (Droom Pre-Owned Auto
awards)

CB SHINE
• Most Appealing Executive Motorcycle - JD Power
Customer Satisfaction Survey (2016)
• Most Popular Pre-Owned 2Wheeler (Droom Pre-Owned
Auto awards)

CB300R
• Best of 2019 (AuoX)
• 2020 Affordable Enthusiast (MotorOctane
Award)

26
3.3. MAHINDRA & MAHINDRA LIMITED

Mahindra & Mahindra Limited is an Indian multinational vehicle manufacturing

company. Its headquarter in Mumbai, Maharashtra, India. The company operate in 21 key
industries, providing insightful and ingenious solutions to customers. The company have an
operational presence in over 100 countries and employ more than 200,000 people and operate
across vast geographies, governing spirit of “Rise” binds as one Mahindra, dictating that
empower people everywhere to not only chart new frontiers, but to conquer them too. It is one
of the largest vehicle manufacturers by production in India and the largest manufacturer of
tractors in the world. Mahindra & Mahindra is a part of Mahindra Group.

3.3.1. MAHINDRA & MAHINDRA-FOUNDER & HISTORY:

Founded in 1945 as a steel trading company, we entered automotive manufacturing in

1947 to bring the iconic Willys Jeep onto Indian roads. Over the years, we’ve diversified into

27
many new businesses in order to better meet the needs of our customers. We follow a unique
business model of creating empowered companies that enjoy the best of entrepreneurial
independence and Group-wide synergies. This principle has led our growth into a US $16.5
billion multinational group with more than 180,000 employees in over 100 countries across the
globe.

Today, our operations span 18 key industries that form the foundation of every modern
economy: aerospace, aftermarket, agribusiness, automotive, components, construction
equipment, consulting services, defence, energy, farm equipment, finance and insurance,
industrial equipment, information technology, leisure and hospitality, logistics, real estate,
retail, and two wheelers.

Our federated structure enables each business to chart its own future and simultaneously
leverage synergies across the entire Group’s competencies. In this way, the diversity of our
expertise allows us to bring our customers the best in many fields.”

3.3.2. MAHINDRA & MAHINDRA - MISSION:

"Enable people everywhere to rise. We will challenge conventional thinking and

innovatively use all our resources to drive positive change in the lives of our stakeholders and
communities across the world, to enable them to Rise.

3.3.3. MAHINDRA & MAHINDRA - JOINT VENTURES:

Mahindra Ford India Limited (MFIL):

A joint venture between Mahindra & Mahindra and Ford Motor Company to develop,
market and distribute Ford-branded vehicles in India. Mahindra and Ford will form a joint
venture, with Mahindra owning a 51 percent controlling stake and Ford owning a 49 percent
stake. Ford will transfer its India operations to the joint venture, including its personnel and
assembly plants in Chennai and Sanand. Ford will retain the Ford engine plant operations in
Sanand as well as the Global Business Services unit, Ford Credit and Ford Smart Mobility.

28
Mahindra-Gromax:

A decade ago, Mahindra took acquisitions in 43.3% of the stakes in Punjab Tractors
Ltd too. Gromax is an auxiliary company of Mahindra and Mahindra but hasn’t done any
mergers and acquisitions other than itself with Gujarat and M&M.

Mahindra Sanyo Special Steel Pvt. Ltd:

A joint venture between Mahindra & Mahindra, Sanyo Special Steel Co. Ltd. (Japan)
and Mitsui & Co. Ltd. (Japan) to manufacture high-grade specialty steel products in India.

Mahindra Renault Limited (MRL):

A joint venture between Mahindra & Mahindra and Renault S.A. (France) to produce
and sell passenger cars in India.

Mahindra Emirates Vehicle Armouring:

A joint venture between Mahindra & Mahindra and Emirates Defense Industries
Company (EDIC) to design, develop and manufacture armoured vehicles in the UAE.

Mahindra Navistar Automotives Ltd. (MNAL):

A joint venture between Mahindra & Mahindra and Navistar International

Corporation (USA) to manufacture commercial trucks and buses in India.

Mahindra Aerospace Pvt. Ltd.:

A joint venture between Mahindra & Mahindra and Gipps Aero (Australia) to
manufacture utility aircraft in India.

29
3.3.4. MAHINDRA & MAHINDRA- COMPETITORS:

EICHER MOTORS
TATA MOTORS

HONDA TOYOTA

HYUNDAI

30
3.3.5. MAHINDRA & MAHINDRA- PRODUCTS:

31
3.3.6. MAHINDRA & MAHINDRA- AWARDS & ACHIEVEMENTS:

MARKETERS EXCELLENCE AWARDS 2022

This year, Mahindra Truck and Bus won 2 Gold Awards and a Silver Award at
the Marketers Excellence Awards.

1. Best Product Launch – Furio 7

2. Best Use of Viral Marketing – Furio 7 Double Guarantee
3. Best Service Launch Campaign – Mileage Campaign

APOLLO CV AWARDS 2020

Mahindra Truck And Bus was bestowed with 5 awards at the Apollo-CV awards
2020, including the biggest ‘CV of the year award’.
1. CV OF THE YEAR - MAHINDRA FURIO
3. HCV Tipper of the Year - Mahindra BLAZO X 28
4. HCV Prime Mover of the Year - Mahindra BLAZO X 55

WHITE PAGE INDIA AWARDS 2019

Mahindra BLAZO was recognized as 'India's most admired truck

brand' for innovation, sustainability, growth, and trust.

32
IAMAI 2019
Mahindra’s Truck and Bus Division won at the have won Bronze
awards for Most Consistent Excellence in Digital Publishing -
Truck Driver Driven Festival Campaign.

APOLLO CV AWARDS 2019

Mahindra BLAZO X 37 Pusher Axle was voted ‘'HCV Rigid Cargo
Carrier of the Year” . This award was received by our CEO Mr. Vinod
Sahay along with Dr. Venkat Srinivas.

APOLLO CV AWARDS 2019

Mahindra Tourister COMFIO wins the 'People Mover of the Year
Award.

33
3.4. EICHER MOTORS LIMITED

Eicher Motors Limited is an Indian multinational automotive company that

manufactures motorcycles and commercial vehicles, headquartered in New Delhi. Eicher is
the parent company of Royal Enfield, a manufacturer of middleweight motorcycles. The
company is engaged in the manufacturing and selling motorcycles, spare parts and related
services. It manufactures the iconic Royal Enfield.

3.4.1. EICHER- FOUNDER & HISTORY:

Eicher Motors is a
commercial vehicle
manufacturer in India. The
company's origins date back
to 1948, when Goodearth
Company was established for
the distribution and service of
imported tractors. In 1959 the
Eicher Tractor Corporation of
India Private Ltd was
established, jointly with the Eicher tractor company, a German tractor manufacturer. Since
1965, Eicher in India has been completely owned by Indian shareholders. The German Eicher
tractor was partly owned by Massey Ferguson from 1970, when they bought 30%. Massey
Ferguson bought out the German company in 1973.

In 2005, Eicher Motors Ltd sold their tractors and engines business to TAFE
Tractors (Tractors and Farm Equipment Ltd) of Chennai, the Indian licensee of Massey
Ferguson tractors.

34
 In October 1982, a collaboration agreement with Mitsubishi for the manufacture of
light commercial vehicles (LCVs) was signed in Tokyo and in the same period the
incorporation of Eicher Motors Limited also took place. LCVs were sold under the "Eicher

Mitsubishi" brand. In February 1990, Eicher Goodearth bought 26% stake in Enfield India Ltd
and by 1993 Eicher acquired a majority stake (60% equity shareholding) in Royal Enfield India.

In July 2008, Eicher Motors Limited (EML) and Volvo Group's formed a 50:50 joint
venture called VE Commercial Vehicles (VECV) which designs, manufactures and markets
commercial vehicles, engineering components and provides engineering design.

At present, Volvo Group owns 45.6% of VECV,[2] while Eicher Motors holds the remaining
54.4%.[3] In 2020, VECV bought Volvo Buses India operations for ₹100 crore.[4]

In 2012, Eicher Motors started a joint venture with American company Polaris
Industries called Eicher Polaris to make personal utility vehicles, starting with Eicher Polaris
Multix in 2015. This joint venture company ceased operations in 2018.[5]

3.4.2. EICHER MISSION:

Mission Statement
Focussed on bringing back simple, yet engaging and accessible motorcycling, Royal Enfield
operates in India, and over 50 countries around the world.

3.4.3. GROUP STRUCTURE:

The Eicher Group has diversified business interests in design and development,
manufacturing, and local and international marketing of trucks, buses, motorcycles, automotive
gears, and components. Eicher has invested in the potential growth areas of management
consultancy services, customised engineering, and maps and travel guides.

VE Commercial Vehicles (VECV) Limited is a joint venture between Volvo Group and Eicher
Motors Limited. VECV is divided into five business units:[6]

• Eicher Trucks and Buses

• Volvo Trucks India
• Eicher Engineering Components
• VE Powertrain

Royal Enfield Motors, the motorcycle manufacturing subsidiary, is a part of Eicher Motors.

35
3.4.4. EICHER MOTORS COMPETITORS:

TATA MOTORS BOBCAT COMPANY

MAHINDRA & MAHINDRA BAJAJ AUTO LTD

ASHOK LEYLAND LTD FORCE MOTORS LTD

36
3.4.5. EICHER MOTORS- PRODUCTS:

1. 2.

3. 4.

37
3.4.6. EICHER- AWARDS AND ACHIEVEMENTS:

38
 CHAPTER IV
ANALYSIS AND INTERPRETATION
4. ANALYSIS AND INTERPRETATION:
4.1. LIQUIDITY RATIOS:
Liquidity means capability of being converted into cash with ease. Liquidity ratios help
to assess the ability of a business concern to meet its short-term financial obligations. Short
term assets (current assets) are more liquid as compared to long term assets (fixed assets).
Liquidity ratios are also called as short-term solvency ratios.

1. Current Ratio
2. Quick Ratio

4.1.1. CURRENT RATIO:

Current ratio gives the proportion of current assets to current liabilities of a business
concern. It is computed by dividing current assets by current liabilities. Current ratio indicates
the ability of an entity to meet its current liabilities as and when they are due for payment. It is
calculated as follows:

FORMULA:

Current ratio = current assets / current liabilities.

Current assets: Inventories + Trade receivables + Cash and bank balances + Short term
loans and advances + Other current assets.

Current liabilities: Short-term borrowings + Trade payables + Other current liabilities +

Short term provisions.

39
 TABLE 4.1: CURRENT RATIO

CURRENT RATIO

YEAR→
2017-2018 2018-2019 2019-2020 2020-2021 2021-2022
INDUSTRY↓
CA 7921.4 12361.6 8427.4 18526.7 16781.2
MARUTI
SUZUKI CL 15442.1 14150.3 11294.8 16106.7 17013.7

CR 0.51 0.87 0.75 1.15 0.99

CA 423.53 492.66 556.35 598.94 623.82

HONDA CL 120.6 137.86 144.13 183.41 189.71

CR 3.51 3.57 3.86 3.27 3.29

CA 16474.47 18071.06 15141.49 20312.3 25917.7

M&M CL 13323.21 14334.07 10972.82 15133.17 18820.29

CR 1.24 1.26 1.38 1.34 1.38

CA 2524.42 4384.43 6336.6 8747.69 5497.8

EICHER CL 2194.63 1978.24 1861.12 2428.71 2878.87

CR 1.15 2.22 3.40 3.60 1.91

INTERPRETATION:

From the above table it is understood that Honda has the highest current ratio of 3.86
in the year 2019-20, which indicates that the Honda company has maintaining its liquidity
position properly by owning current assets over its current liabilities. Maruti Suzuki has the
lowest current ratio of 0.51in the year 2017-18. Maruti Suzuki has an fluctuating current ratio
which indicates the improper management of liquidity position.

40
 CHART 4.1: CURRENT RATIO

CURRENT RATIO

1.91
1.38
2021-2022
3.29
0.99

3.6
1.34
2020-2021
3.27
1.15

3.4
1.38
2019-2020
3.86
0.75

2.22
1.26
2018-2019
3.57
0.87

1.15
1.24
2017-2018
3.51
0.51

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5

Eicher M&M Honda Maruti suzuki

41
4.1.2. QUICK RATIO:
Quick ratio measures a company’s capacity to pay its current liabilities without needing
to sell its inventory or obtain additional financing. The quick ratio is considered a more
conservative measure than the current ratio, which includes all current assets as coverage for
current liabilities. It is also known as acid test ratio.

FORMULA:

Quick ratio = Quick assets /current liabilities.

Quick assets: Current assets – Inventories

Current liabilities: Short-term borrowings + Trade payables + Other current liabilities +

Short term provisions.

TABLE 4.2: QUICK RATIO

QUICK RATIO

YEAR→
2017-2018 2018-2019 2019-2020 2020-2021 2021-2022
INDUSTRY↓
QA 4760.6 9035.9 5212.5 15476.7 13248.1
MARUTI
SUZUKI CL 15442.1 14150.3 11294.8 16106.7 17013.7

QR 0.31 0.64 0.46 0.96 0.78

QA 332.77 380.98 345.3 438.45 447.43

HONDA CL 120.6 137.86 144.13 183.41 189.71

QR 2.76 2.76 2.40 2.39 2.36

QA 13772.78 14231.79 11740.58 16356.83 20034.85

M&M CL 13323.21 14334.07 10972.82 15133.17 18820.29

QR 1.03 0.99 1.07 1.08 1.06

QA 2145.19 3779.09 5818.55 7978.56 4599.43

EICHER CL 2194.63 1978.24 1861.12 2428.71 2878.87

QR 0.98 1.91 3.13 3.29 1.60

42
INTERPRETATION:

From the above table it is noted that Eicher has the highest quick ratio of 3.29 in the
year 2020-21, whereas Maruti Suzuki has the lowest quick ratio of 0.31 in the year 2017-18.
Honda has a regression in quick ratio.

CHART 4.2: QUICK RATIO

QUICK RATIO

1.6
1.06
2021-2022
2.36
0.78

3.29
1.08
2020-2021
2.39
0.96

3.13
1.07
2019-2020
2.4
0.46

1.91
0.99
2018-2019
2.76
0.64

0.98
1.03
2017-2018
2.76
0.31

0 0.5 1 1.5 2 2.5 3 3.5

Eicher M&M Honda Maruti suzuki

43
4.2. PROFITABILITY RATIOS:
Profitability ratios are referred to as analysis of business profits in relation to the
revenue generated from the business operations (or funds) or assets used in the business and
the ratios calculated to meet its objectives are termed as profitability ratios. The most common
types of profitability ratios that are used to analyse the profitability of the business are:

1. Return on Investment (ROI) or Return on Capital Employed (ROCE)

2. Gross Profit Ratio

3. Operating Profit Ratio

4. Net Profit Ratio

4.2.1. RETURN ON INVESTMENT:

Return on capital employed (ROCE) or Return on Investment is a profitability ratio

that measures how well a company can generate profits from its capital. It is an important ratio
that is mostly used by investors while screening for companies to invest.

FORMULA:

ROCE or ROI = operating profit ÷ Capital Employed × 100

Operating profit: Net profit + non-operating expenses - non-operating incomes.

Capital Employed: Shareholder’s funds + Long term loans

44
 TABLE 4.3: RETURN ON INVESTMENT

RETURN ON INVESTMENT

YEAR→
2017-2018 2018-2019 2019-2020 2020-2021 2021-2022
INDUSTRY↓
OP 15667.8 16573.6 14119 11673.2 14652.2
MARUTI
SUZUKI CE 41757.3 46141.5 48437 51366.8 54086

ROI 37.52 35.92 29.15 22.73 27.09

OP 170.27 162.87 190.05 185.52 262.39

HONDA CE 474.45 517.1 569.61 605.51 669.88

ROI 35.89 31.50 33.36 30.64 39.17

OP 8934.1 8974.3 5497.33 3224.33 7761.46

M&M CE 32489.94 36241.01 36499.87 41571.95 44638.97

ROI 27.50 24.76 15.06 7.76 17.39

OP 2297.83 2654.21 2411.28 1803.86 3311.11

EICHER CE 5372.23 7126.45 8275.34 9705 10794.57

ROI 42.77 37.24 29.14 18.59 30.67

INTERPRETATION:

From the above table it is understood that Eicher has the highest Return on Investment
of 42.77 in the year 2017-18. It indicates that Eicher has better ability to generate more profits
from its capital. Mahindra & Mahindra has the lowest Return on Investment of 7.76 in the year
2020-21. It is noted that Honda has a fluctuating return on investment.

45
 CHART 4.3: RETURN ON INVESTMENT

RETURN ON INVESTMENT

30.67

17.39
2021-2022
39.17

27.09

18.59

7.76
2020-2021
30.64

22.73

29.14

15.06
2019-2020
33.36

29.15

37.24

24.76
2018-2019
31.5

35.92

42.77

27.5
2017-2018
35.89

37.52

0 5 10 15 20 25 30 35 40 45

Eicher M&M Honda Maruti suzuki

46
4.2.2. GROSS PROFIT RATIO

Gross Profit Ratio is a profitability ratio that measures the relationship between the
gross profit and net sales revenue. When it is expressed as a percentage, it is also known as the
Gross Profit Margin. The higher the gross profit ratio, the higher the profitability. The lower
the gross profit ratio, the lower the profitability. A fluctuating gross profit ratio is indicative of
inferior product or management practices.

FORMULA:

Gross Profit Ratio = Gross Profit/Net Revenue of Operations × 100

Gross profit: Operating profit – Operating expenses.

Revenue of operations: Revenue – Excise duty and sales tax.

TABLE 4.4: GROSS PROFIT RATIO

GROSS PROFIT RATIO

YEAR→
2017-2018 2018-2019 2019-2020 2020-2021 2021-2022
INDUSTRY↓
GP 15667.8 16573.6 14119 11673.2 14652.2
MARUTI
SUZUKI NS 78104.8 83026.5 71690.4 66562.1 83798.1

GPR 20.06 19.96 19.69 17.54 17.49

GP 170.27 162.87 190.05 185.52 262.39

HONDA NS 749.23 805.72 832.04 922.67 1136.38

GPR 22.73 20.21 22.84 20.11 23.09

GP 8934.1 8974.3 5497.33 3224.33 7761.46

M&M NS 48112.3 52960.8 44897.9 44297 56336.4

GPR 18.57 16.95 12.24 7.28 13.78

GP 2297.83 2654.21 2411.28 1803.86 3311.11

EICHER NS 8913.43 9715.16 9008.69 8571.64 9983.1

GPR 25.78 27.32 26.77 21.04 33.17

47
INTERPRETATION:

From the above table it is understood that Eicher has the highest gross profit ratio of
33.17 in the year 2021-22. The higher Gross profit ratio is preferable and indicates higher
profitability. Mahindra & Mahindra has the lowest gross profit ratio of 7.28 in the year 2019-
20. Maruti Suzuki has regression in gross profit ratio. Honda has fluctuating gross profit which
is an indicator of inferior product or management practices.

48
 CHART 4.4: GROSS PROFIT RATIO

GROSS PROFIT RATIO

33.17

13.78
2021-2022
23.09

17.49

21.04

7.28
2020-2021
20.11

17.54

26.77

12.24
2019-2020
22.84

19.69

27.32

16.95
2018-2019
20.21

19.96

25.78

18.57
2017-2018
22.73

20.06

0 5 10 15 20 25 30 35

Eicher M&M Honda Maruti suzuki

49
4.2.3. OPERATING PROFIT RATIO:

Operating profit ratio is a type of profitability ratio that is used for determining the
operating profit and net revenue generated from the operations. Operating profit ratio gives the
proportion of operating profit to revenue from operations. Operating profit ratio is an indicator
of operational efficiency of an organisation. A higher ratio indicates better profitability. Greater
the operating ratio, higher is the margin available for paying non-operating expenses. It is
expressed as a percentage.

FORMULA:

Operating Profit Ratio = Operating Profit/ Revenue from Operations × 100

Or

Operating Profit Ratio = 100 – Operating ratio

Operating profit: Net profit + non-operating expenses + Non-operating incomes.

Revenue from operations: Revenue – Excise duty and sales tax.

50
 TABLE 4.5: OPERATING PROFIT RATIO

OPERATING PROFIT RATIO

YEAR→
2017-2018 2018-2019 2019-2020 2020-2021 2021-2022
INDUSTRY↓
OP 15667.8 16573.6 14119 11673.2 14652.2
MARUTI
SUZUKI NS 78104.8 83026.5 71690.4 66562.1 83798.1

OPR 20.06 19.96 19.69 17.54 17.49

OP 170.27 162.87 190.05 185.52 262.39

HONDA NS 749.23 805.72 832.04 922.67 1136.38

OPR 22.73 20.21 22.84 20.11 23.09

OP 8934.1 8974.3 5497.33 3224.33 7761.46

M&M NS 48112.3 52960.8 44897.9 44297 56336.4

OPR 18.57 16.95 12.24 7.28 13.78

OP 2297.83 2654.21 2411.28 1803.86 3311.11

EICHER NS 8913.43 9715.16 9008.69 8571.64 9983.1

OPR 25.78 27.32 26.77 21.04 33.17

INTERPRETATION:

From the above table, it is noted that Eicher has the highest operating profit ratio of
33.17 in the year 2021-22. Greater the operating ratio, higher is the margin available for paying
non-operating expenses. Mahindra & Mahindra has the lowest operating profit ratio of 7.28 in
the year 2020-21. Maruti Suzuki has a regression in operating profit which is an unfavourable
position to increase its profitability in the upcoming years.

51
 CHART 4.5: OPERATING PROFIT RATIO

OPERATING PROFIT RATIO

33.17
13.78
2021-2022
23.09
17.49

21.04
7.28
2020-2021
20.11
17.54

26.77
12.24
2019-2020
22.84
19.69

27.32
16.95
2018-2019
20.21
19.96

25.78
18.57
2017-2018
22.73
20.06

0 5 10 15 20 25 30 35

Eicher M&M Honda Maruti suzuki

52
4.2.4. NET PROFIT RATIO:

Net profit ratio is an important profitability ratio that shows the relationship between
net sales and net profit after tax. When expressed as percentage, it is known as net profit margin.
It helps investors in determining whether the company’s management is able to generate profit
from the sales and how well the operating costs and costs related to overhead are contained.

FORMULA:

Net Profit Ratio = Net profit/Revenue from Operations × 100

Net profit: Net profit after payment of tax.

Revenue from operations: Revenue – Excise duty and sales tax.

TABLE 4.6: NET PROFIT RATIO

NET PROFIT RATIO

YEAR→
2017-2018 2018-2019 2019-2020 2020-2021 2021-2022
INDUSTRY↓
NP 7721.8 7500.6 5650.6 4229.7 3766.3
MARUTI
SUZUKI NS 78104.8 83026.5 71690.4 66562.1 83798.1

NPR 9.89 9.03 7.88 6.35 4.49

NP 61.41 54.15 66.52 48.67 74.53

HONDA NS 749.23 805.72 832.04 922.67 1136.38

NPR 8.20 6.72 7.99 5.27 6.56

NP 4356.01 4796.04 1330.55 268.66 4935.22

M&M NS 48112.3 52960.8 44897.9 44297 56336.4

NPR 9.05 9.06 2.96 0.61 8.76

NP 1712.91 2054.44 1903.82 1329.7 1586.22

EICHER NS 8913.43 9715.16 9008.69 8571.64 9983.1

NPR 19.22 21.15 21.13 15.51 15.89

INTERPRETATION:
From the above table, it is understood that Eicher has the highest net profit ratio of
21.15 in the year 2018-19. Net profit ratio is an indicator of the overall profitability of the
business. A higher net profit ratio indicates high profitability. Mahindra & Mahindra has the
lowest net profit ratio of 0.61 in the year 2019-20. Maruti Suzuki has a regression in net profit.

53
 CHART 4.6: NET PROFIT RATIO

NET PROFIT RATIO

15.89

8.76
2021-2022
6.56

4.49

15.51

0.61
2020-2021
5.27

6.35

21.13

2.96
2019-2020
7.99

7.88

21.15

9.06
2018-2019
6.72

9.03

19.22

9.05
2017-2018
8.2

9.89

0 5 10 15 20 25

Eicher M&M Honda Maruti suzuki

54
4.3. ACTIVITY RATIO:
These ratios are also called performance ratios. Activity ratios highlight the
operational efficiency of the business concern. In order to examine the judicious
utilization of resources as well as the wisdom and farsightedness in observing the
financial policies laid down in this regard, certain ratios are computed and they
are collectively called turnover or activity ratios. Some of it are:
1. Inventory turnover ratio
2. Debtors turnover ratio
3. Working capital turnover ratio
4. Fixed asset turnover ratio

4.3.1. INVENTORY TURNOVER RATIO:

The inventory turnover is a measure of the number of times inventory is sold or used in
a time period such as a year. It is also known as stock turnover ratio. It is calculated to see if a
business has an excessive inventory in comparison to its sales level. A higher ratio is more
desirable than a low one as a high ratio tends to point to strong sales.

FORMULA:
Inventory turnover ratio= cost of goods sold / Average inventory
Cost of goods sold: Opening Inventory + Purchase – Purchase return – Closing Inventory
Average inventory: Opening inventory + Closing inventory / 2

55
 TABLE 4.7: INVENTORY TURNOVER RATIO

INVENTORY TURNOVER RATIO

YEAR→ 2017- 2018- 2019- 2020- 2021-

2018 2019 2020 2021 2022
INDUSTRY↓
NS 78104.8 83026.5 71690.4 66562.1 83798.1
MARUTI AVG
SUZUKI INV 4791.9 4906.1 4877.75 4657.45 5058.1

ITR 16.30 16.92 14.70 14.29 16.57

NS 749.23 805.72 832.04 922.67 1136.38

AVG
HONDA
INV 151.18 157.06 266.89 266.02 256.64

ITR 4.96 5.13 3.12 3.47 4.43

NS 48112.3 52960.8 44897.9 44297 56336.4

AVG
M&M
INV 4080.7 5190.16 5320.55 5655.93 7860.59

ITR 11.79 10.20 8.44 7.83 7.17

NS 8913.43 9715.16 9008.69 8571.64 9983.1

AVG
EICHER
INV 512.07 681.9 864.37 643.59 833.75

ITR 17.41 14.25 10.42 13.32 11.97

INTERPRETATION:
From the above table it is understood that Eicher has the highest inventory turnover
ratio of 17.41 in the year 2017-18. It indicates that Eicher is managing its inventory efficiently.
Honda has the lowest inventory turnover ratio of 3.12 in the year 2019-20. Mahindra has a
regression in inventory turnover.

56
 CHART 4.7: INVENTORY TURNOVER RATIO

INVENTORY TURNOVER RATIO

11.97

7.17
2021-2022
4.43

16.57

13.32

7.83
2020-2021
3.47

14.29

10.42

8.44
2019-2020
3.12

14.7

14.25

10.2
2018-2019
5.13

16.92

17.41

11.79
2017-2018
4.96

16.3

0 2 4 6 8 10 12 14 16 18 20

Eicher M&M Honda Maruti suzuki

57
4.3.2. DEBTORS TURNOVER RATIO:

It is also known as accounts receivable ratio. It indicates the number of times average
debtors have been converted into cash during a year. It is also referred as the efficiency ratio
that measures the company’s ability to collect revenue.

FORMULA:
Debtors turnover ratio= Net credit sales / Average accounts receivables

TABLE 4.8: DEBTORS TURNOVER RATIO

DEBTORS TURNOVER RATIO

YEAR→ 2017- 2018- 2019- 2020- 2021-

2018 2019 2020 2021 2022
INDUSTRY↓
NS 78104.8 83026.5 71690.4 66562.1 83798.1
MARUTI AVG
SUZUKI REC 1330.5 1886.1 2142.65 1625.75 1653.35

DTR 58.70 44.02 33.46 40.94 50.68

NS 749.23 805.72 832.04 922.67 1136.38

AVG
HONDA
REC 58.18 63.65 56.61 52.83 84.71

DTR 12.88 12.66 14.70 17.46 13.41

NS 48112.3 52960.8 44897.9 44297 56336.4

AVG
M&M
REC 3055.91 3559.64 3472.64 2670.92 2688.98

DTR 15.74 14.88 12.93 16.58 20.95

NS 8913.43 9715.16 9008.69 8571.64 9983.1

AVG
EICHER
REC 63.48 92.32 120.29 195.08 712.59

DTR 140.41 105.23 74.89 43.94 14.01

INTERPRETATION:
From the above table it is understood that Eicher has the highest debtors turnover ratio
of 140.41 in the year 2017-18. A high ratio indicates that the company follows a conservative
credit policy. Honda has the lowest debtors turnover ratio of 11.77 in the year 2017-18. The
lower ratio suggest that the company’s collection process is poor.

58
 CHART 4.8: DEBTORS TURNOVER RATIO

DEBTORS TURNOVER RATIO

14.01

20.95
2021-2022
13.41

50.68

43.94

16.58
2020-2021
17.46

40.94

74.89

12.93
2019-2020
14.7

33.46

105.23

14.88
2018-2019
12.66

44.02

140.41

15.74
2017-2018
12.88

58.7

0 20 40 60 80 100 120 140 160

Eicher M&M Honda Maruti suzuki

59
4.3.3. WORKING CAPITAL TURNOVER RATIO:
Working capital turnover ratio is the ratio between the net revenue or turnover of a
business and its working capital. A high working capital turnover ratio indicates that a business
is running smoothly and requires little further funding. The working capital turnover ratio
determines how effectively a business utilizes its working capital to generate revenue.

FORMULA:
Working capital turnover ratio= Revenue from operations / Net working
capital.
Revenue from operations: Revenue – Excise duty and sales tax
Net working capital: Current assets – current liabilities

TABLE 4.9: WORKING CAPITAL TURNOVER RATIO

WORKING CAPITAL TURNOVER RATIO

YEAR→ 2017- 2018- 2019- 2020- 2021-

2018 2019 2020 2021 2022
INDUSTRY↓
NS 78104.8 83026.5 71690.4 66562.1 83798.1
MARUTI
SUZUKI NWC -7520.7 -1788.7 -2867.4 2420 -232.5

WCTR -10.39 -46.42 -25.00 27.51 -360.42

NS 749.23 805.72 832.04 922.67 1136.38

HONDA NWC 302.93 354.8 412.22 415.53 434.11

WCTR 2.47 2.27 2.02 2.22 2.62

NS 48112.3 52960.8 44897.9 44297 56336

M&M NWC 3151.26 3736.99 4168.67 5179.13 7097.41

WCTR 15.27 14.17 10.77 8.55 7.94

NS 8913.43 9715.16 9008.69 8571.64 9983.1

EICHER NWC 329.79 2406.19 4475.48 6318.98 2618.93

WCTR 27.03 4.04 2.01 1.36 3.81

INTERPRETATION:
From the above table it is understood that Maruti Suzuki has the highest as well as
lowest working capital turnover ratio of 27.51 and -360.42 in the year 2020-21 and 2021-22
respectively. A high working capital turnover ratio indicates that a business is running
smoothly and requires little further funding.

60
 CHART 4.9: WORKING CAPITAL TURNOVER RATIO

WORKING CAPITAL TURNOVER RATIO

3.81

7.94
2021-2022
2.62

-360.42

1.36

8.55
2020-2021
2.22

27.15

2.01

10.77
2019-2020
2.02

-25

4.04

14.17
2018-2019
2.27

-46.42

27.03

15.27
2017-2018
2.47

-10.39

-400 -350 -300 -250 -200 -150 -100 -50 0 50

Eicher M&M Honda Maruti suzuki

61
4.3.4. FIXED ASSET TURNOVER RATIO:
The fixed asset turnover ratio (FAT) is, in general, used by analysts to measure
operating performance. This efficiency ratio compares net sales (income statement) to fixed
assets (balance sheet) and measures a company’s ability to generate net sales from its fixed-
asset investments, namely property, plant, and equipment (PP&E).This ratio determines
efficiency of utilisation of fixed assets to profitability of a business concern. Higher the ratio,
more is the efficiency utilisation of fixed assets. A lower ratio is the indication of
underutilisation of fixed assets.

FORMULA:

Fixed assets turnover ratio = Revenue from operations / Net fixed assets
Revenue from operations: Revenue – Excise duty and sales tax
Net fixed assets: Fixed assets – Depreciation

TABLE 4.10: FIXED ASSET TURNOVER RATIO

FIXED ASSET TURNOVER RATIO

YEAR→
2017-2018 2018-2019 2019-2020 2020-2021 2021-2022
INDUSTRY↓
NS 78104.8 83026.5 71690.4 66562.1 83798.1
MARUTI
SUZUKI NFA 15484.9 17007.9 17118.6 16446.8 16646.7

FATR 5.04 4.88 4.19 4.05 5.03

NS 749.23 805.72 832.04 922.67 1136.38

HONDA NFA 101.67 97.99 99.5 93.76 99.35

FATR 7.37 8.22 8.36 9.84 11.44

NS 48112.32 52960.8 44897.93 44296.95 56336.39

M&M NFA 10988.12 12501.54 14404.05 15011.51 19566.79

FATR 4.38 4.24 3.12 2.95 2.88

NS 8913.43 9715.16 9008.69 8571.64 9983.1

EICHER NFA 1830.49 2320.55 2680.92 2733.52 2904.81

FATR 4.87 4.19 3.36 3.14 3.44

62
 INTERPRETATION:
From the above table it is noted that Honda has the highest fixed asset turnover ratio of
11.44 in the year 2021-22 whereas Mahindra & Mahindra has the lowest fixed asset turnover
ratio of 2.88 in the year 2021-22. Honda has a progression in fixed asset turnover ratio.

CHART 4.10: FIXED ASSET TURNOVER RATIO

FIXED ASSET TURNOVER RATIO

3.44
2.88
2021-2022
11.44
5.03

3.14
2.95
2020-2021
9.84
4.05

3.36
3.12
2019-2020
8.36
4.19

4.19
4.24
2018-2019
8.22
4.88

4.87
4.38
2017-2018
7.37
5.04

0 2 4 6 8 10 12 14

Eicher M&M Honda Maruti suzuki

63
 CHAPTER V
FINDINGS, SUGGESTIONS & CONCLUSIONS

FINDINGS:
➢ Honda has the highest current ratio of 3.86 in the year 2019-20, which indicates that
the Honda company has maintaining its liquidity position properly by owning current
assets over its current liabilities. Maruti Suzuki has the lowest current ratio of 0.51in
the year 2017-18. Maruti Suzuki has an fluctuating current ratio which indicates the
improper management of liquidity position.
➢ Eicher has the highest quick ratio of 3.29 in the year 2020-21, whereas Maruti Suzuki
has the lowest quick ratio of 0.31 in the year 2017-18. Honda has a regression in quick
ratio.

➢ Eicher has the highest Return on Investment of 42.77 in the year 2017-18. It indicates
that Eicher has better ability to generate more profits from its capital. Mahindra &
Mahindra has the lowest Return on Investment of 7.76 in the year 2020-21. It is noted
that Honda has a fluctuating return on investment.

➢ Eicher has the highest gross profit ratio of 33.17 in the year 2021-22. The higher Gross
profit ratio is preferable and indicates higher profitability. Mahindra & Mahindra has
the lowest gross profit ratio of 7.28 in the year 2019-20. Maruti Suzuki has regression
in gross profit ratio. Honda has fluctuating gross profit which is an indicator of inferior
product or management practices.

➢ Eicher has the highest operating profit ratio of 33.17 in the year 2021-22. Greater the
operating ratio, higher is the margin available for paying non-operating expenses.
Mahindra & Mahindra has the lowest operating profit ratio of 7.28 in the year 2020-21.
Maruti Suzuki has a regression in operating profit which is an unfavourable position to
increase its profitability in the upcoming years.
➢ Eicher has the highest net profit ratio of 21.15 in the year 2018-19. Net profit ratio is
an indicator of the overall profitability of the business. A higher net profit ratio indicates
high profitability. Mahindra & Mahindra has the lowest net profit ratio of 0.61 in the
year 2019-20. Maruti Suzuki has a regression in net profit.
➢ Eicher has the highest inventory turnover ratio of 17.41 in the year 2017-18. It indicates
that Eicher is managing its inventory efficiently. Honda has the lowest inventory

64
 turnover ratio of 3.12 in the year 2019-20. Mahindra has a regression in inventory
turnover.
➢ Eicher has the highest debtors turnover ratio of 140.41 in the year 2017-18. A high ratio
indicates that the company follows a conservative credit policy. Honda has the lowest
debtors turnover ratio of 11.77 in the year 2017-18. The lower ratio suggest that the
company’s collection process is poor.
➢ Maruti Suzuki has the highest as well as lowest working capital turnover ratio of 27.51
and -360.42 in the year 2020-21 and 2021-22 respectively. A high working capital
turnover ratio indicates that a business is running smoothly and requires little further
funding.
➢ Honda has the highest fixed asset turnover ratio of 11.44 in the year 2021-22 whereas
Mahindra & Mahindra has the lowest fixed asset turnover ratio of 2.88 in the year 2021-
22. Honda has a progression in fixed asset turnover ratio.

65
SUGGESTIONS:

MARUTI SUZUKI INDIA LIMITED:

• Maruti Suzuki has the highest as well as lowest working capital turnover ratio in the
subsequent years. It is considered as unfavourable position which should be corrected
by utilizing its working capital in the business operations at the maximum.

• Although the short-term liquidity position is quite satisfactory as the current ratio &
quick ratio is below the idle ratio of 2:1 and 1:1 respectively. So the company should
make efforts to increase its current assets to maintain a safety margin and to maintain a
better liquidity position.

• The profitability of the company for the period under study is not satisfactory. Profits
are decreasing due to higher operating expenses. In order to improve profitability, the
company should concentrate on management practices of controlling its operating and
non-operating expenses which is directly proportional to the profitability of the
company.

• Maruti Suzuki has fluctuation in inventory turnover ratio which is not desirable. So, the
company should maintain a optimum level of inventory in comparison to its sales level.

HONDA MOTOR COMPANY LIMITED:

• Honda has a consistency in maintaining its working capital turnover ratio with respect
to its revenue from operation. So, the company requires little further funding to
increase the utilization of working capital to generate revenue.

• The short-term liquidity position is quite unsatisfactory as the current ratio and quick
ratio is above the idle ratio of 2:1 and 1:1 respectively. So, the company should
maintain its liquidity at an optimum level.

• Honda has a fluctuation in profitability ratio, which is an indicator of inferior product

or management practices in maintaining its profit margin. It should be improved
controlling its costs.

• Honda has a fluctuating return on investment which should be corrected by

maximizing the utilization of capital to generate profit.

• The inventory turnover ratio of Honda is unsatisfactory. It can be improved by

maintaining an excessive inventory in comparison to its sales level.

• The Debtors turnover ratio of Honda is not preferable because of the collection process
is poor. It should be improved by following a conservative credit policy.

• Honda has a progression in Fixed assets turnover ratio which indicates the efficient
utilization of fixed assets.

66
MAHINDRA & MAHINDRA LIMITED:

• Mahindra & Mahindra has as regression in Working capital turnover ratio which is not
preferable. So, the management should concentrate on utilization of working capital to
generate revenue.

• Although the short-term liquidity position is quite satisfactory as per revealed by quick
ratio but the current ratio is below the idle ratio of 2:1. So the company should make
efforts to increase its current assets to maintain a better liquidity position.

• The profitability of the company for the period under study is satisfactory except the
year 2020-21. In order to improve profitability, the company should curtail the non-
productive expenses.

• Mahindra & Mahindra has a regression in Inventory turnover ratio which should be
improved by efficient management of inventory with respect to revenue generation.

• Mahindra & Mahindra has a fluctuation in Debtors turnover ratio which indicates the
company’s inability to collect revenues. In order to improve its Debtors turnover, the
collection process should be changed.

• Mahindra & Mahindra has a regression in Fixed asset turnover ratio due to inefficient
utilization of fixed assets with respect to profitability.

EICHER MOTORS LIMITED:

• Working capital management of Eicher motors is not satisfactory which should be

improved by effective utilization of working capital to generate revenue. In order to
enhance the working capital turnover ratio, the company should avoid financing fixed
assets with working capital.

• The short-term liquidity position of the company is quite unsatisfactory as the current
ratio and quick ratio is above the idle ratio of 2:1 and 1:1. To control its liquidity, the
company should keep some more cash in hand instead of giving more and more
advances and to maintain a safety margin.

• The profitability of the company under the period of study is preferable which indicates
higher profitability. In order to maintain higher profitability the company should control
operational cost.

• Eicher should concentrate in maintaining fixed assets turnover ratio by increasing

revenue, inventory management, selling assets and computerising inventories and order
system.

67
CONCLUSION:
In the Automobile market in India, Two-wheelers and passenger cars accounted for
76% and 17.4% market share, respectively. Passenger car sales are dominated by small and
midsized cars. Export of total number of automobiles increased from 4,134,047 in 2020-21 to
5,617,246 in 2021-22, registering a positive growth of 35.9%. Therefore, the automobile
industry contributes a major role in Indian economy.
A business uses working capital in its daily operations; Working capital serves as a
metric for how efficiently a company is operating and how financially stable it is in the short-
term. It is a reflection of the results of various company activities, including revenue collection,
debt management, inventory management and payments to suppliers. This is because it
includes inventory, accounts payable and receivable, cash, and portions of debt due within the
period of a year and other short-term accounts. Managing working capital means managing
inventories, cash, accounts payable and accounts receivable.

68