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Submitted by: Anushree Srivastava(032) Ankit Kesarwani(019) Amit Srivastava(015) Aprajita Saxena(034) Ankita Singh(026) Anshul Agrawal(029)
ACKNOWLEDGEMENT
We express our deep gratitude to C.A. RASHMI CHAUDHARY for her constant support, guidance and motivation that helped us immensely in completing this project. The project provided us with an opportunity to understand the accounting concepts in respect to the market scenario. We sincerely thank our parents and family members whose constant support and guidance has been a motivating and inspiring source. In addition, we thank each and every individual who was directly or indirectly associated with the successful completion of this project.
The Bajaj Group is amongst the top 10 business houses in India. Its footprint stretches over a wide range of industries, spanning automobiles (two-wheelers and three-wheelers), home appliances, lighting, iron and steel, insurance, travel and finance. The group's flagship company, Bajaj Auto , is ranked as the world's fourth largest two- and three- wheeler manufacturer and the Bajaj brand is well-known in over a dozen countries in Europe, Latin America, the US and Asia. Bajaj Auto Ltd. is the largest exporter of two and three wheelers. With Kawasaki Heavy Industries of Japan, Bajaj manufactures state-of-the-art range of two-wheelers. The brand, Pulsar is continually dominating the Indian motorcycle market in the premium segment. Its Discover DTSi is also a successful bike on Indian roads. Since 1986, there is a technical tie-up of Bajaj Auto Ltd. with Kawasaki Heavy Industries of Japan to manufacture state-of-art range of latest two-wheelers in India. The JV has already given the Indian market the KB series, 4S and 4S Champion, Boxer, the Caliber series, and Wind125. Bajaj Auto Ltd. has registered a 4 per cent drop in net profit at Rs 308.3 crores in Q4 of 2006-07 (Rs 321.8 crores). The company's turnover for the quarter grew 9 per cent to Rs 2,471.3 crores (Rs 2,269 crores). For the fiscal year March 31, 2007, the company posted a 10 per cent rise in net profit at Rs 1,237.1 crores (Rs 1,123.3 crores). The turnover was at Rs 10,076 crores (Rs 8,106.4 crores) a rise of 24 per cent.
FINANCIAL RATIOS
A financial ratio is a relationship that indicates something about a company's activities, such as the ratio between the company's current assets and its current liabilities or between its debtors and its turnover. The basic source of these ratios is the company's profit & loss account and balance sheet that contain all kinds of important information about that company. The ratios really help to bring those details to light and identify the financial strengths and weaknesses of the company. When assessing ratios, it is important that the results are compared with other companies in the same industry and not to be taken in isolation. What may seem like a poor ratio at first glance may well be normal for that industry and, of course, the reverse applies, in that what may seem a good ratio on its own, could be below average for that industry. The following information will outline important ratios
1. 2. Liquidity Ratios a. Current Ratio b. Quick Asset Profitability Ratios a. Gross Profit Ratio b. Net Profit Ratio c. Operating Ratio d. Earnings per ratio Activity Ratios a. Inventory Turnover Ratio b. Inventory Holding Period c. Debtor turnover Ratio d. Average Collection Period e. Fixed Asset Turnover Ratio f. Working Capital Turnover Ratio Leverage Ratio a. Debt Equity Ratio b. Total Debt Ratio c. Interest Coverage Ratio d. Return on Equity e. Proprietary Ratio
3.
4.
Liquidity Ratios
1. Current Ratio
Current Assets Current Liabilities One of the most universally known ratios, which reflect the Working Capital situation, indicates the ability of a company to pay its short-term creditors from the realisation of its current assets and without having to resort to selling its fixed assets to do so. Ideally the figure should always be greater than 1, which would indicate that there are sufficient assets available to pay liabilities, should the need arise. The higher the figure the better it is. Current ratio has increased in the current year but it is below one. Since the ideal ratio should be 2:1, short-term financial position of the organization is not good. Company needs to improve its Current Ratio that is the ability of company to pay its debt in the short term.
2. Quick Asset
Current Assets Stock Current Liabilities
This ratio indicates the ability of a company to pay its debts as they fall due. It is generally considered to be a more accurate assessment of a company's financial health than the current ratio as it excludes stock, thus Figures of this ratio are lower than the current ratio which is reducing the risk of relying on a ratio that may include slow moving or redundant stock.
Current Liabilities
An ideal quick ratio is 1:1. The idea is that for every rupee of current liabilities there should be at least one rupee of liquid assets. Here in both the years ratio is below the desired one but it is still showing a increasing trend as compared to previous year ratio, which shows that short term financial position of the company has improved.
Profitability Ratios
This ratio has decreased in 2011 in comparison to 2010. This may be due to the price of materials purchased may have gone up or wages & other direct charges may have increased but the sales prices may not have increased in the same proportion.
3. Operating Ratios:
Operating Profit x100 Sales It is arrived at by deducting all the expenses from GP such as office and administrative expenses, selling and distribution expenses, interest, bad debts etc. Non operating expenses are not deducted from GP.
This ratio indicates the extent of sale that is absorbed by the cost of goods sold & operating expenses, lower than operating ratio, the better it is, because it will leave higher margin of profit on sales which is in year 2010 is 78%.
118.3055556
115.4018659
This ratio is helpful in estimating the capacity of the company to declare dividends on equity shares. And here we can see that position of company to declare dividends has came down , not with a greater percentage but still is lower as compared to previous year.
Activity ratios
2009-10 (338+8070446)/Average(338,446)
2010-11
20.31122449
(446+11798-547)/ ((446+547)/2)
23.55891239
The ratio has increased over the year which shows that the sales of the company have increased and company has good management of the inventory.
2009-10
2010-11
365/20.31122449
17.97035921
365/23.55891239
15.49307515
The inventory of the current year has not been used efficiently as compared to previous year. The ratio has declined over the year. The low stock turnover indicates that stock does not sell quickly and remains lying in the go down for quite a long time.
2009-10
2010-11
11508/Average(23 9,358)
38.55276 382
15998/ ((239+362)/2)
53.23793677
This ratio indicates the speed with which the amount is collected from debtors. The higher the ratio the better it is because it indicates that amount is being collected quickly and less is the risk from bad debts. In this case ratio indicates that position of company has improved as compared to last year. Lower ratio tells about the inefficient credit sales policy.
________365________ Debtor Turnover Ratio Measures the length of time a company takes to collect its debts and is measured in days. In general terms the figure indicates the effectiveness of the company's credit control department in collecting monies outstanding.
2009-10 365/38.55
2010-11 365/53.23793677
9.468223087
6.856013252
Increase in this ratio indicates the excessive blockage of funds with debtors which increase the chances of bad debts. Here the position of industry has improved from previous year.
3.610308357
5.002511449
This ratio reveals how efficiently the fixed assets are being utilized. Here it is showing an increase in the ratio which tells that there is better utilization of fixed assets.
This ratio tells how efficiently working capital has been utilized in making sales. It shows the number of times working capital has been rotated in producing sales
2009-10
(338+8070-446)/ (926-2026) -7.238181818
2010-11
(446+11798-547)/ (1683-2426) -15.74293405
Due to net current assets being negative in value, working capital has also come out to be negative, which shows a relatively bad position of the firm in terms of under utilization of working capital.
Leverage/Solvency Ratios
This ratio expresses the relationship between long term debts and share holders fund. It indicates the proportion of funds which are acquired by long term borrowings in comparison to share holders fund.
2009-10 1338/2928
2010-11 325/4910
0.456967213
0.066191446
2:1 ratio is considered to be safe here. A higher ratio is a risky one and lower this ratio is better for long term lenders because they are more secure in that case. In this case the ratio is less than 1 which provides sufficient protection to long term lenders.
This ratio indicates the financial position of the company and total assets in comparison to the debts. This ratio tells the sources or funds of the company held with respect to the total debts of the concern.
2009-10 2447/1338
2010-11 3231/325
1.828849028
9.941538462
The financial position of the company has improved as compared to the previous year because the funds have increased to the total debts.
This ratio is also termed as Debt service ratio. This indicates how many times the interest charges are covered by the profits available to pay interest charges.
2009-10 (2411+5.98)/5.9 8
2010-11 4352.44/1.69
404.1772575
2575.408284
In this case the interest charges are very low due to which interest coverage
4. Return on Equity:
Net Income Shareholder's Equity
The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested.
2009-10 12043/2928
2010-11 16974/4910
4.113046448
3.457026477
The above ratio shows a decline in ROE which is due to the increase in the Equity of the company. It also show shows a decrease in the Net income of the company.
5. Proprietary Ratio:
Equity Total Assets
2009-10 2928/2447
2010-11 4910/3231
1.196567225
1.519653358
This ratio should be more than 33%. This ratio is generally treated an indicator of sound financial position from long term point of view, because it means that the firm is less dependent on external sources of finance. The lower the ratio , the less secured are the long term loans and they face the risk of losing their money.