Financial Management Term Report Pak Suzuki Ltd Indus Motors Ltd

Presented to : Sir Amyn Wahid

Presented by: Sana Taqi 9843 Asadullah-9897 Babar Ansari-10055 Shafiq-10713

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Acknowledgement:
We are thankful to Allah, the gracious, the merciful for Helping us at every step and giving us the strength to complete this report on time. We are really grateful to our course facilitator Sir Amyn Wahid who guided us and provided with all his possible assistance during the obstacles faced in the creation of this report, which would not have been possible without his guidance and support. We would like to thank our family who supported us and gave us time to complete our report.

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Table of Contents

INTRODUCTION OF COMPANIES ...................................................................4 PAK SUZUKI MOTOR COMPANY LIMITED ..............................................4 INDUS MOTORS ................................................................................................6 LIQUIDITY RATIO: ..............................................................................................8 FINANCIAL LEVERAGE RATIOS ...................................................................12 EFFICIENCY RATIOS ........................................................................................17 PROFITABILITY RATIOS .................................................................................25 COMMON SIZE ANALYSIS...............................................................................34 INDEXED ANALYSIS ..........................................................................................42 REFERENCES: .....................................................................................................52 APPENDICES ........................................................................................................53

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INTRODUCTION OF COMPANIES
Pak Suzuki Motor Company Limited

Pak Suzuki Motor Company was formed in August 1983 as a joint venture between Pakistan Automobile Corporation Limited (representing government of Pakistan) and Suzuki Motors Corporation Japan for the manufacturing, assembling and marketing of Suzuki vehicles in Pakistan.

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PSMCL started production in 1984. In 1989 the foundation stone of the new Bin Qasim plant was laid. Over the years PSMCL has expanded its capacity to 150,000 vehicles per annum. On 25th April 2007 the board of directors of Pak Suzuki Motor Corporation Limited and Suzuki Motorcycles Pakistan (SMPL) Limited decided to amalgamate SMPL into PSMCL.

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It has the largest dealership network in Pakistan. PSMCL also has the highest market share and has become a household name in Pakistan. It is manufacturing eight car models; this is the highest number of models manufactured by any automobile manufacturer in Pakistan.

OUR VISION
To be Excellent All Around.

OUR MISSION
 To provide vehicles of international quality at competitive price.

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  

To iprove skills of employees by imparting training and inculcating in them sense of participation. To achieve maximum indigenization and promote the automobile vending industry. To contribute to Pakistani society through development of industry in general and automobile industry in particular.

Product range
Automobile Motorcycles

Cultus:

Swift:

GS 150

Alto

Jimmy

Sprinter

Liana

Cargo van

Sprinter Eco

Mehran

Ravi pickup

Shogun

Bolan van

APV and Jimny

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   The most respected. delighting customers with a wide range of products and solutions in the automobile industry with the best people and the best technology".INTRODUCTION OF INDUS MOTORS   Indus Motor Company Limited is an assembler. Toyota Motor Corporation Japan (TMC).22% in YEAR 2009 to 12. Vision IMC’s Vision is to be the most respected and successful enterprise. The best technology. IMC is a joint venture between the House of Habib. It has a market share of 41%. Dewan Motor's market share also decreased from 0. slightly behind Pak Suzuki Motors (market share: 46%). Honda Atlas' market share increased from 12.The market share of Indus Motors surged from 39% in YEAR 2009 to 41% in YEAR 2010. The best people. However. The most successful. Thus Indus Motor Company is one of the two leading car manufacturers in Pakistan. 1990. The company is engaged in sole distributorship of Toyota and Daihatsu Motor Company Ltd. vehicles in Pakistan through its dealership network. and Toyota       Tsusho Corporation Japan (TTC). Indus Motor and Honda Atlas gained in terms of market share. Delighting customers. Indus Motor Company performed better than the other companies in the auto sector during YEAR 2010. Indus Motor Company was incorporated in 1989 and is listed on all the three stock exchanges of Pakistan.38% in YEAR 2009 to 0% in YEAR 2010. The market share of Pak Suzuki declined to 46% in YEAR 2010 from 48% in YEAR 2009.49% in YEAR 2010.    Wide range of products. manufacturer and marketer of Toyota vehicles in Pakistan since July 01. 6 .

Automobiles Camry Hilux Corolla Imported vehicles Cuore 7 .Mission Mission of Toyota is to provide safe & sound journey.

5 2 1.866.224.850.427.319.69 1.499.132.00/ 9.67 3.5 1 0.01 1.325.000 Current Ratio 2009 2010 Indus Motors Ltd 1.791.Liquidity Ratio: a.67 2009 Indus Motors Ltd 2010 Pak Suzuki Co Ltd 8 .313.67 1.74 3.000/ 3.74 3.000/ 4.5 0 3.253.00 Indus Motors Ltd 2010 23.01 4 3.74 3.00 /14.633.752.69 1.00 Pak Suzuki Co Ltd 2009 12.69 1.134.5 3 2.884.715. Current Ratio = Current Assets Current Liabilities Rs Indus Motors Ltd 2009 16.000 Pak Suzuki Co Ltd 2010 14.01 Pak Suzuki Co Ltd 3.

Internal analysis of Pak Suzuki Current ratio shows firm`s ability to cover its current liabilities over its current assets.therefore our current ratio has increased because current assets grew less in comparison to current liabilities. and our liabilities has increased by 4340016.Internal analysis of Indus Motors Since the company has increased its current assets has increased by 7075934. The ratio is mainly used to give an idea of the company to pay back its short tern liabilities with its short term assets. 9 . Pak Suzuki both current assets and current liabilities are much higher than Indus motors. As the current ratio decreased by 0. which causes decrease in the liquidity position of Pak Suzuki in 2010 in comparison of 2009 CR. However both firms have shown improvement in 2010 in terms of current ratio.73 in 2010 due to increase in current liabilities by 1427365000. External Analysis Paki Suzuki is in a better position than Indus motors to pay off its current liabilities with its current assets.

000 (14.729.14 Pak Suzuki Co Ltd 2010 Internal analysis of Indus Motors The company is able to pay off its short term obligations with its current assets other than inventories.000) /3.00-4.866. Quick Ratio = Current Assets – Inventories Current Liabilities Rs Indus Motors Ltd Indus Motors Ltd 2009 2010 (16.26 1.791.000 – 6.879. which denotes that company is managing its inventories efficiently inventories.00 (12.031.934.3 1.000 – 8.26 1.884.00 -5.00)/9.147 Pak Suzuki Co Ltd 2009 Pak Suzuki Co Ltd 2010 Quick Ratio 2009 2010 Indus Motors Ltd 1.67 1.26 1.748.00 (23.427.000) /4.309.253.134.132.341.30 Pak Suzuki Co Ltd 1.00)/14.752.633.217.5 1 0.224.313.5 0 Indus Motors Ltd 2009 1.67 1.319.67 1.b.850.30 1.14 2 1.325.000 1.499.715. 10 .

Internal analysis of Pak Suzuki Quick ratio of Pak Suzuki decreased by 0. which is evident by quick ratio which is increasing in 2010. This decrease in Quick ratio shows increase in obsolete inventory which shows inefficient inventory management and have got less liquidate items to pay off its debts External Analysis Indus motors are not having any inventory issues. 11 . But Pak Suzuki quick ratio declined which means that its not managing its inventory well in 2010.523 which show Pak Suzuki is in not position to cover its current liabilities with most liquidating of its assets.

000 4. Debt to Asset ratio: Total Debt Total Assets Rs Indus Motors Ltd Indus Motors Ltd Pak Suzuki Co Ltd Pak Suzuki Co Ltd 2009 2010 2009 2010 10.278.388.22% 53.655.00/ 27.000 50.62% 25% 19% Indus Motors Ltd 2009 Pak Suzuki Co Ltd 2010 12 .663.000/ 20.752.138.00% 0.00% 10.000 / 19.62% 19% 25% Indus Motors Ltd 2009 2010 50.523.22% 53.550.62% Pak Suzuki Co Ltd 19% 25% 60.00% 50.330.449.00% 30.685.364.250.00 3.134.734.00% 40.00% 20.000 / 17.00 14.00% 50.22% 53.550.Financial Leverage Ratios a.

330.550.62 and equity financing is 46.000 / 14.00/10. our debt financing was increased to 53.22% and equity financing was 49. which makes the company less risky and leading to less interest expense.Internal analysis of Indus Motors This ratio indicates that the proportion of total debt relative to its total assets.973.2% of the assets are being financed by liabilities and rest 76.325. while Pak Suzuki is financing very less with debt and more with equity financing.000 1.38%. however in 2010. This shows that 23.00 3. Internal analysis of Pak Suzuki Debt to total assets shows the percentage of the firm`s assets supported by the debt financing. As in 2009 23. External Analysis Both the companies has shown that total debt to total assets ratio have increased in 2010.915. This shows in year 2009 we had debt financing of 50. which is very risky.296.8% are being financed by equity.01 1.00/12.587.2% debts were of assets to 2010 33% of the total assets. This variation of 9.663.449. b.however Indus motors finance almost half of its assets by debt financing.23 0.134.615.8% occurs because of increase in total debts by 1422315 and also increases in total assets by 172315.600.33 13 .752.388.000 4.16 0. Debt to Equity Ratio = Total Debt Shareholder’s Equity Rs Indus Motors Ltd Indus Motors Ltd Pak Suzuki Co Ltd Pak Suzuki Co Ltd 2009 2010 2009 2010 10.497.78%.550.00 14.000 / 14.

therefore its prone to risk as its doing more of debt financing in both years as compares to equity financing.33 1.19 times the equity of the company and in 2010 liability of Pak Suzuki was 0. As the ratio is more than 1 in both years.6 shows increase in debt finance.25 times the company`s equity.4 0.6 0.01 1.16 Pak Suzuki Co Ltd 0.2 0 Indus Motors Ltd 2009 Pak Suzuki Co Ltd 2010 0.01 Internal analysis of Indus Motors This ratio indicates the proportion of liquidity and debt the company uses to finance its assets.2 1 0. As increase by 0.33 1. In 2009 company`s liability were 0. As the company increases its debt finance which causes more risk to them. This has happened because debt has increased four times in year from 2009 to 2010. 14 . while equity rose only twice the time.16 1. Internal analysis of Pak Suzuki Debt to equity ratio shows the extent by which the firm is financed by its debt.Debt to Equity Ratio 2009 2010 Indus Motors Ltd 1.8 0.23 0.23 0.

607 668.External Analysis As mentioned earlier in the above ratio.942 Interest Coverage Ratio 2009 2010 Indus Motors Ltd 22.33 which is less than 1 .38 20.762 32.62 2.278 22.942 15 .843/ 20. Interest Coverage Ratio = ___EBIT_______ Interest Charges Rs Pak Suzuki Co Ltd Indus Motors Ltd Indus Motors Ltd Pak Suzuki Co Ltd 2009 2010 2009 2010 14.02500/62.762 32.000 36.33900 427. c. which is indicated through ratio 0f 0.38 Pak Suzuki Co Ltd 20. Pak Suzuki is using more of equity financing to play on the safe side.015/ 20.62 2.47600/15.23 and 0. means more equity financing. while Indus motor is using more of debt financing.

38 22. External Analysis In 2010. Hence its proved through that increased debt financing in 2010 lead to increased interest expense. due to decreased expenses.32. As there is increase in ICR by 12. Internal analysis of Pak Suzuki Interest coverage ratio of Pak Suzuki shows its ability to cover its interest charges from its profits. because our interest expense has increased with a huge amount.762 Internal analysis of Indus Motors There is a massive decline in interest coverage ratio in 2010.Indus motors interest charges increased drastically more than double.942 35 30 25 20 15 10 5 0 Indus Motors Ltd 2009 2010 2010 2. interest charges had decreased almost same for two years but its EBIT has increased .62 20. 16 . while for Pak Suzuki. which lead to decreased coverage ratio. Therefore Pak Suzuki is in a better position to cover its interest charges with its EBIT.18% which shows that firm`s ability has increased to covers its interest charges because they have increased their profitability in 2010 by 240172 and there is less increase in interest charges in 2010 as comparison of 2009.

51 34. Receivable Turnover = _Annual Credit Sales_ Receivables Rs Indus Motors Ltd Indus Motors Ltd Pak Suzuki Co Ltd Pak Suzuki Co Ltd 2009 2010 2009 2010 37.139.15 Pak Suzuki Co Ltd 2010 17 .000 20.642.061.00 26.58 69.000 42.604/1.00/1.719.000/240.864.68 177.15 200 150 100 50 0 Indus Motors Ltd 2009 20.845.15 Receivable Turnover 2009 2010 Indus Motors Ltd 20.68 177.900 60.093.762.58 69.58 Pak Suzuki Co Ltd 69.Efficiency Ratios a.600.737.000/376.234.51 34.68 177.508.51 34.

15 17.55 days 10.03 days 18 .40 days 5. receivables for Pak Suzuki declined by 56%.68 360/177.51 360/34. while its sales have almost doubled. means that more sales were made on cars and company was providing some incentive to creditors that they were paying quickly so less receivables.58 360/69.Internal analysis of Indus Motors This ratio indicates the quality of receivables and how successful the firm is in its collection Receivable turnover has increased in year 2010 to 34.447 in 2010 which shows credit sales have been increased by 16408701 and also shows a decrease in account receivable of 56% External Analysis Both the companies are doing well in collection of its receivables and are managing its receivables well. b. Internal analysis of Pak Suzuki Receivable turnover ratio shows the quality of receivables and how Pak Suzuki efficiently collects its receivables.58 from 20 because receivables have declined in 2010 by 6% while have sales Increased drastically. As the ratio increased by 107. This means that the company is much more effective in collection of its receivables.17 days 2. However in 2010. Average Collection Period = Days in the Year Receivable Turnover Indus Motors Ltd Indus Motors Ltd Pak Suzuki Co Ltd Pak Suzuki Co Ltd 2009 2010 2009 2010 360/20.

Average collection period for Indus motors in 2010 have decreased to 10 days from 17 days.Average Collection Period 2009 2010 Indus Motors Ltd 17.4 5. It takes 3 less days for collecting receivables in 2010 in comparison of 2009.03 Indus Motors Ltd 2009 Pak Suzuki Co Ltd 2010 Internal analysis of Indus Motors This indicates that in how many days the firm collects its receivables.17 days 2. Internal analysis of Pak Suzuki As the Average collection period ratio shows a drastic decrease in average collection period which shows very weaker receivable turnover. As the receivable turnover ratio has increased for Indus motor for 2010.03 days 20 15 10 5 0 17.17 2.55 10. As in 2009 Pak Suzuki takes 6 days in collecting receivables where as in 2010 it takes 2 days. which means that the company is giving some kind of discounts to creditors.55Days 10. so that they are paying early.40 days Pak Suzuki Co Ltd 5. Average collection period has decreased in 2010. 19 .

c. While Indus motor is taking 10 days in 2010.External Analysis As evident from average collection ratio for Pak Suzuki.031.00/4.934.309.729.341.00 55.748.00/5. Inventory Turnover = Cost Of Goods Sold or Net Sales Inventory Rs Indus Motors Ltd Indus Motors Ltd Pak Suzuki Co Ltd Pak Suzuki Co Ltd 2009 2010 2009 2010 35.73 4.43 3.46 20 .43 10.975. therefore Pak Suzuki is doing well in 2010 as compared to Indus motors.664.43 Pak Suzuki Co Ltd 3.000/ 8.306.638.382. it has decreased the days that it was taking to convert account receivables to cash to only 2 days.762.418.540.73 4.000/ 6.217.00 25.46 Inventory Turnover 2009 2010 Indus Motors Ltd 8.000 41.43 10.000 8.879.

21 . This shows Pak Suzuki efficiently converts cash better than previous year.73 4.43. This may be due to the fact that Indus motor produce cars that are luxurious and expensive. External Analysis Indus motors are taking around 10 times to covert its inventory to sale. Internal analysis of Pak Suzuki Inventory turnover ratio indicates the effectiveness of the inventory management practice of the company.46 Indus Motors Ltd 2009 Pak Suzuki Co Ltd 2010 Internal analysis of Indus Motors This ratio indicates how effective is the company in converting its inventory to cash and generate sales. this shows that inventory are now pulled out two times faster and Indus motor inventory is improving. The inventory turnover ratio of Pak Suzuki has increased by 0. while Pak Suzuki is taking 4 times in 2010 to convert inventory to cash. or some relaxation in credit policies of the company.43 to 10. And the cost of goods sold also increased in 2010. so upper class buys it and few units are sold but which give increase amount of revenue but Pak Suzuki cater to masses and produce comparatively low price cars.43 10.73. As the ratio of inventory turnover has increased from 8. which are purchased regularly by masses.12 10 8 6 4 2 0 8.43 3. This may be due increased quality good products.

72 40 20 0 Indus Motors Ltd 2009 2010 Pak Suzuki Co Ltd 34.52 96.43 360/10/43 360/3.63 Internal analysis of Indus Motors This ratio indicates the days taken by the company to convert its inventory to account receivables.72 days 34.72 days 34.52 days Pak Suzuki Co Ltd 96. 22 .50 days 75.63 days Inventory Turnover in Days 2009 2010 Indus Motors Ltd 42.46 42.63 days 120 100 80 60 42.52 days 96. or some relaxation in credit policies of the company. Indus motors have decreased its inventory turnover days by 8 days in 2010. Inventory Turnover in Days = Days in the Year Inventory Turnover Indus Motors Ltd Indus Motors Ltd Pak Suzuki Co Ltd Pak Suzuki Co Ltd 2009 2010 2009 2010 360/8.5 75.73 360/4.50 days 75.d. This may be due increased quality good products.

00/27.000 1.22 23 . this may be due to increased car financing and increased disposable income of consumers.523. This shows company is taking 15 days more in 2010 than in 2009 for inventory conversion which shows a weaker inventory management system than as was in 2009.734. External Analysis Inventory turnover in days have decreased for both companies in 2010.250.138.061.000/ 19. as compared to 2009.00 60.864.83 2.00 26.093. Total Asset Turnover = Net Sales Total Assets Rs Indus Motors Ltd Indus Motors Ltd Pak Suzuki Co Ltd Pak Suzuki Co Ltd 2009 2010 2009 2010 37.83 2.49 2. which shows that both companies are selling cars fast in 2010.21 Pak Suzuki Co Ltd 1.278.Internal analysis of Pak Suzuki From this analysis.139.762.22 Total Asset Turnover 2009 2010 Indus Motors Ltd 1.000 42.49 2. we came to know that Pak Suzuki is taking more time in converting its inventory.685.364.000/ 17.604.655.21 1.642.00/20.234. e.

leading to increased sales. This all is evident in the profit and loss account and by inventory turnover ratio.22 Indus Motors Ltd 2009 Pak Suzuki Co Ltd 2010 Internal analysis of Indus Motors This ratio indicates how effective the firm is utilizing it total assets to generate sales.49 2.5 0 2. while sales have increased by 58%. that inventory is selling fast.52%. Total assets have increased by 31% in 2010.2. Internal analysis of Pak Suzuki Total assets turnover of any company shows how a firm is performing in terms of economic utilization of its assets.83 1. And it has doubled its sales over time. This shows that Indus motors have utilized its total assets very effectively to generate sales. from the use of these assets they generate revenues. This shows Pak Suzuki is efficiently using its assets for revenue generation. Total assets and sales have increased for both the companies in 2009 and 2010.5 2 1. 24 .21 1. Total sales and assets both decreased in 2010. which indicates both companies are using its assets well to generate sales. External Analysis Indus motors and Pak Suzuki total asset turnover is almost the same in 2010. As the ratio shows that Pak Suzuki is efficiently utilizing its assets as there is increase in net sales by 61.5 1 0.

833.000/26.000 1.84% 25 .00 569.84% Pak Suzuki Co Ltd 2.14 7.000 6.093.Profitability Ratios : a) Gross Profit Margin = Gross profit Sales Rs Indus Motors Ltd Indus Motors Ltd Pak Suzuki Co Ltd Pak Suzuki Co Ltd 2009 2010 2009 2010 2.139.234.00% 5.17% 2.14% 7.00/60.14% 7.787.35% 9.762.00% 2.642.00% 6.00% 7.710.000/42.00 4.00% 8.864.00% 2009 Indus Motors Ltd Pak Suzuki Co Ltd 2010 2.324.35% Gross Profit Margin 2009 2010 Indus Motors Ltd 6.35% 6.00% 4.17% 2.003.061.84 2.00/37.00% 3.00% 1.604.186.299.00% 0.17% 2.

604.50% Net Profit Margin 2009 2010 Indus Motors Ltd 3. b.219.Internal analysis of Indus Motors The gross ratio for Indus has increased in 2010 from 2009 as Sales have increased by 59% and Cost of goods sold by 55% in 2010 from 2009 year.093.00/37.73% Pak Suzuki Co Ltd 0. Net Profit Margin = Net Profit After Taxes Net Sales Rs Indus Motors Ltd Indus Motors Ltd Pak Suzuki Co Ltd Pak Suzuki Co Ltd 2009 2010 2009 2010 1.71% which shows an efficient profitability of Pak Suzuki in 2010.385. External Analysis Indus motors have much better gross margins than Pak Suzuki.73 0.in 2010 gross profit of the company has increased due to increased sales in 2010 and reduction in cost of goods sold cost.000 211.00 3.642.66 5.762.66% 5.000/42.403.00/60.864.97% 0. which means that its operations are much better than Pak Suzuki and is producing goods in cost efficient manner.443.143.102.97% 0.000 3.00 255. Internal analysis of Pak Suzuki After analyzing the income statement we got increase in sales by 56.50% 26 .234.139.061.000/26.

50% 3. NOPAT increased by 148% in 2010. while Pak Suzuki profitability declined in 2010. Therefore an Indus motor was in a better position in 2010. External Analysis Net profit for Indus motors have decreased in 2010 due to increased expenses due to which its Net profit margin ratio declined.00% 0. and of other expenses also.00% 1.66% Internal analysis of Indus Motors From 2009.2% because of higher operating cost.5.00% Indus Motors Ltd 2009 Pak Suzuki Co Ltd 2010 0. Financing cost has also decreased from 26450 to 23576. as the operating income tremendously increased from 727080 to 1801459. 27 .00% 4.73% 6.00% 5. Internal analysis of Pak Suzuki Net profit margin of Pak Suzuki has declined drastically in 2010 by 47. Indus motor had better profitability in 2010.97% 0.00% 3.00% 2.

00% 4.000 211.00% Indus Motors Ltd 2009 2010 Pak Suzuki Co Ltd 1.443.403.143. Return on assets: Net Profit After Taxes Total Assets Rs Indus Motors Ltd Indus Motors Ltd Pak Suzuki Co Ltd Pak Suzuki Co Ltd 2009 2010 2009 2010 1.70% 12.00 255. 28 .000/17.70% 12.734.685.364.655.70% Internal analysis of Indus Motors Return on assets form Indus motors have doubled in 2010 over 2009.523.45% 1.00% 2.69% 14.69% Pak Suzuki Co Ltd 1.000/19.00% 10.10% Return on assets: 2009 2010 Indus Motors Ltd 6.278.10% 12.10% 6.45% 1.00 3. as our total assets have increased by31.102.69% 1.219.00/20.385.00% 0.138.c.000 6.250.00% 8.00% 6.00% 12.19%.45% 1.00/27.

000/14.219.385.00 3.34% 1.46% 29 .78% 1.32% 25.78% 1.32% 25.443. External Analysis Indus motors have increased ROI as compared to Pak Suzuki declining ROI in 2010. While Indus motors had increased net income and increased assets in 201.396.00/13.403.000/14.143.587.Internal analysis of Pak Suzuki The ROI ratio has declined in 2010 by 35%.46% Return on Equity 2009 2010 Indus Motors Ltd 13.915. Return on Equity= Net Profit After Taxes Shareholder’s Equity Rs Indus Motors Ltd Indus Motors Ltd Pak Suzuki Co Ltd Pak Suzuki Co Ltd 2009 2010 2009 2010 1.973. it was obvious that its ROI willed cline too.325.000 211.102.076 and also investments in total assets also increased which causes a gap in ROI.000 13.615.00 255. as the sales decreased in 2010 as compared to 2009 by 44.497.00/10. d.34% Pak Suzuki Co Ltd 1.600. As evident from Pak Suzuki declining net income in 2010. making the company better off.

30.46% Indus Motors Ltd 2009 Pak Suzuki Co Ltd 2010 Internal analysis of Indus Motors Return on equity for Indus motors have increased in 2010 .00% 20.00% 25. Internal analysis of Pak Suzuki RoE indicates the profitability to the shareholders of the firm.00% 5.32% 25.4% in 2010 from 2009. As RoE has also decreased by 32%. which causes decrease in RoE.00% 0.00% 15. as our reserves have increased by 22.78% 1. this cause because of decrease in net income as well as increase in shareholder’s equity External Analysis Indus motors look more interesting to investors in 2010 because its ROE has increased to 25% which is beneficial for shareholders while Pak Suzuki ROE declined.00% 10.34% 1. Which is obviously due to decreased net income in 2010? 30 .00% 13.

57 Indus Motors Ltd 2009 Pak Suzuki Co Ltd 2010 Internal analysis of Indus Motors Earning per share has increased to 43rs from 17 rs.00 2009 255.e.62 43.57 50 40 30 20 10 0 17.219.00 2010 3.62 43. and the number of shares had remained to 78600 in 2010 and 2009. 31 .385.329.000 2010 211.600.00/78. however the company has not issued extra shares in 2010.00/78.157.62 43.81 Pak Suzuki Co Ltd 3.143.81 3. as described above.000/82.102.403.81 3. This means more wealth maximization for share holder has increased.443.1 2.600. because our net income has increased for 2010.10 2.000/82. Earning per share= Net income Number of shares Rs/ No of Shares Indus Motors Ltd Indus Motors Ltd Pak Suzuki Co Ltd Pak Suzuki Co Ltd 2009 1.10 2.57 Earning per share 2009 2010 Indus Motors Ltd 17.000 17.

9 31.42/43. while Pak Suzuki ratio has declined leading to decreased shareholder value and which is a cause of decreased net income in 2010.81 in 2010 from 17 in 2009.7 32 .Internal analysis of Pak Suzuki Earnings per share of Pak Suzuki has also fallen because of decrease in profit as the number of share as same in both years but the profit earned has difference of 44076.11 5.81 NA NA 6.62 262. f.99 23.535.9 31.11 5. which making the firm more desirable to investors as they would earn more wealth.7 Price to Earnings Ratio 2009 2010 Indus Motors Ltd 6.65/17. External Analysis Indus motors earning per share ratio has increased drastically to 43. that causes decrease in earning per share by 0.99 Pak Suzuki Co Ltd 23. Price to Earnings Ratio = Price (Market Price) Earnings per Share Rs Indus Motors Ltd Indus Motors Ltd Pak Suzuki Co Ltd Pak Suzuki Co Ltd 2009 2010 2009 2010 107.

99 23.9 31. External Analysis As price to earning ratio was Pak Suzuki is not avail 33 .11 5.35 30 25 20 15 10 5 0 Indus Motors Ltd 2009 Pak Suzuki Co Ltd 2010 6. which have also increased in 2010. because earning per share have increased much more heavily in 2010 than the market price of shares.7 Internal analysis of Indus Motors Its a valuation ratio of a company's current share price compared to its per-share earnings Price to earning ratio has decreased in 2010. Internal analysis of Pak Suzuki Pak Suzuki P/E ratio has increased in 2010.

01% 8.459 5246115 Finance costs Profit before taxation Taxation Profit after taxation (Rupees) Earnings per share 3.801.762 37.046.106 3.080 2.604 35.42% 0.93% 2.418 2.306 4.66% Other operating expenses 416.73% 93.072.093.40% 1.47% 0.136 3.186 469.63% 1.860.86% 6.234 1.799.Common size analysis Profit and Loss account for Indus motors Profit an Loss account Regular Common size As at June 30.72% 2.73% 0.78% 0.385.84% 0.41% 6.242.576 5.41% 3.24% 0.14% 1.97% 0.656 Other operating income 1.911 1.553 26.443.00% 8.444.985 352.75% 3.496 381.540.00% 100.55% 1.013 660.833 468.07% 5.73% 3.952 156.92% 5.403 44 17.710.539 1.479 1.249 822. 2010 2010 (Rupees in '000) 2009 2010 2009 Net sales Cost of sales Gross profit Distribution expenses Administrative expenses 60.864.102 100.324.540 2.139 55.99% 5.382.62 34 .345.501.473 727.17% 3.16% 7.575 850071 3.00% 92.69% 5.

333 15.222 3.367 1. 2010 Regular 2010 (Rupees in '000) ASSETS Non-current assets Fixed Assets Long-term loans and advances Long-term deposits Total Non current Assets 3. which shows that company has good income available with itself to distribute to shareholders in 2010.088.33% 2009 Common size 2010 2009 Current assets Stores and spares Stock-in-trade Trade debts Loans and advances Short-term prepayments 111.14% 0.876 0.03% 12.483 4.40% 4.198.09% 0.347.77% 8.778 128.509 7.69% as a percentage of sales.78% in 2010 along with administrative expenses while other operating expenses have increased to 0.819 18.32% 0.25% 0.94% 3.Analysis: In this common size analysis of profit and loss account we have seen that cost of goods sold have decreased in 2010 as a percentage of sales.19% 12. while gross profit has also increased in 2010 to 7.570 7.16% 5.73% as a percentage of sales.03% 19.025 3.858 1.122 3.736.08% 0.934.459 16.613.02% 0.06% 0.84% as a percentage of sales.324.567 5.631 894.62% 19.970.net income of Indus motors have increased to 5. Balance sheet for Indus motors Balance Sheet As at June 30.247 839.473 28.204 19.41% 19. however distribution expenses have declined to 0.07% 35 .

278 20.797 503.615 10. subscribed and paid-up capital Reserves Total Equity 1.731.076.253 16.00% 21.42% 3.944 67.81% 0.68% 2.587.25% 0.988 5.685.905.49% 46.06% 28.281 944 14.000) Ordinary shares of Rs 10 each Issued.062 8.866 5.319 100.660 9.926.000.04% 80.90% 43.00% 36 .296.241 15.06% 87.72% 58.980 50.579 14. other payables and provisions Advances from customers and dealers Accrued mark-up Short-term running finance Taxation – net 242.44% 2.000 (2009: 100.07% 47.76% 0.000.20% Current liabilities Trade.000.33% 47.715.Accrued return on bank deposits Other receivables Cash and bank balances Total Current Assets 57.850 0.98% 49.529 673 19.79% 0.000.797 325.80% 45.791.700 2.224.884.21% 0.65% 0.67% 23.00 TOTAL ASSETS 27.000 11.973 4.00 % EQUITY Share capital Authorized capital 100.615 1.700 503.801.20% 1.755.38% 12.000 9.510.973 LIABILITIES Non-current liabilities Deferred taxation Total non current liabilties 325.254 196.942.000 786.83% 3.89% 52.44% 1.902 9.78% 3.76% 29.138.000 786.166 0.523 % 100.

278 20. due to decline in receivables and cash Total equity also increased to 48% in 2010 from 46% in 2009 due to increased reserves in the company which improved the equity percentage increased. However total current assets declined in 2010 to 80% from 87% in 2009.00 TOTAL EQUITY AND LIABILITIES 27.685.00 % Analysis: For Indus motors the total current assets have increased to 19 % in 2010 as a percentage of total assets. Total current liabilities decreased to 47% in 2010 from 52% in 2009.138.100. due to decreases in payables in 2010. 37 .523 % 100.

61 % 2009 (Rs.03 0.232 Current assets Stores.Balance sheet (common) for Pak Suzuki Pak Suzuki Motor Company Limited Common Size Balance Sheet As at December 31.738 7.23 0.963 43.04 0.684.031 240.879.719 0.65 4.31 0.28 0.87 29.162 34.16 1.652 107.96 2.729 376. plant & equipment Intangible leases 4.45 63.226.582 505.478 5.837 76.032.732.680 226.609 1.449 3.44 1.13 21.228.88 25.58 0.70 0.01 0. 000) % 38 .24 38.779 389. 000) ASSETS Non-current assets Fixed Assets Property.56 2.33 45.53 1. spares and loose tools Stock-in-trade Trade debts Current portion of long-term installments Sales receivables Loans.466 8.916 8.760 4.508 0.499 169.20 0.25 41.609 153.748.937.18 0.97 28.114 28.15 0.02 205.02 0.388 31.685 255.342 Long-term investments Long-term loans Long-term deposits & prepayments Long-term installment sales receivables 5.03 0.254 134. advances and advances Trade deposits & short-term prepayments Accrued markup income Other receivables Sales tax & excise duty adjustable 251.864 4.97 2.63 24.413 1.101 26.671 347.453 1.04 0.43 1.50 0. 20__ 2010 (Rs.749 6.403 4.732 5.

655.000 822.00 0.28 71.781 1.500.034 441.186 14.917.00 39 . other payables Advances from customers Accrued mark-up Short-term borrowing Deposits against display of vehicles Security deposits Provision for custom duties and sales tax 3.net Cash and bank balances 1.45 4.752.734 4.853.325.00 780.03 Current liabilities Trade.753 138.26 5.313.500.134 17.15 74.66 76.915 4.545.633 17.734 10.70 0.31 822.351 327.01 0.35 100.50 2.04 75.50 0.000 (2009: 150.31 15.325.475 3.000 1.48 81.713 2.621 12.601 14.031 0 50.14 Non-current liabilities Deferred taxation 0 0.00 1.46 0.72 24.69 100.080.999 13.089 3.49 0.000.39 100.600 4.427.655.778 138.250.42 20.78 18.502.497. subscribed and paid-up capital Reserves 1.83 100.000) Ordinary shares of Rs 10 each Issued.916 14.674.000.00 TOTAL ASSETS 19.067.000 0.00 5.00 1.08 70.475 4.55 0.407.449 TOTAL EQUITY AND LIABILITIES 19.Income tax refundable .839 88.999 13.364 16.10 0.000 1.000 723.554 86.132 7.250.364 EQUITY & LIABILITIES Authorised share capital 150.512 80.

35% of current assets and 25.299 (214.65% of noncurrent assets as compared to 70.82 1. The decrease in non-current assets was a result of decrease in fixed assets by 4.550) (495.200) 619.003.642.078 100. total assets of Pak Suzuki consists of 74.00 97.65 2.47%.49 1.57%.net Cost of sales Gross profit Distribution costs Administrative expenses Other operating income 42.975) 1.13%. The increase in current assets was because of increase in stores. trade deposits & short-term prepayments by 5%.234.89 2.361) (636.00 97.332) 575.31% however the liabilities side of the balance sheet shows an increase from 18. spares & loose tools by 0.69% Income statement (common) for Pak Suzuki Pak Suzuki Motor Company Limited Common Size Profit & Loss Account For the year ended December 31. stock-in-trade by 6.762 (41.14% to 75.36 40 .61% respectively in 2009. 000) % 2009 (Rs.Analysis: In year 2010. The equity side of the balance sheet indicates the decline from 81.638.664.17 0.572 100. other receivables by 0.061 (25.46 1.787 (197.09%. 20__ 2010 (Rs. 000) % Turnover .35 0.39% and 29.83% to 24.83 2.762) 569.35 26.

564) (38.559 (456.05 Profit before taxation Taxation Profit after taxation 1.14 1.66% to 1.07 2.13 0.687 Analysis: In the year 2010 the cost of goods sold was decrease which resulted in increase in gross profit from 2.66 2. the overall cost structure was decreasing i.624) 538.456) 710.15 0. the administration cost & distribution cost by 0.714) (141.71 0.17% to 2.772) 0.05 0.54 2.the overall tax or the company increased from 0.755 (172.131 0.872) 882.36% respectively .Finance costs Other operating expenses (21.05 0.339.e.37%.40% & 0.349) (55.07 (12.07% but still the company profit after taxation 41 .79 3.808) (335.

540 2.952 156.539 1.444.985 352.83% 100% 202.072.080 2.575 850071 3.249 822.306 4.60% 44 17.459 5246115 Finance costs Profit before taxation Taxation Profit after taxation (Rupees) Earnings per share 3.62 100% 248.013 660.05% 100% 265.186 469.106 3.68% 100% 108.71% 100% 155.911 1.102 100% 158.576 5.324.92% 100% 256.418 2.799.39% 100% 257.540.864.860.833 468.345.801.12% 100% 13.501.403 100% 256.23% 100% 272.046.64% 42 .02% 100% 247.69% 100% 99.656 Other operating income 1.496 381.77% 100% 253.136 3.553 26.22% 100% 248.479 1.139 55. 2010 2010 Regular 2009 Indexed 2009 2010 (Rupees in '000) Net sales Cost of sales Gross profit Distribution expenses Administrative expenses 60.093.710.385.473 727.382.604 35.234 1.762 37.Indexed Analysis Profit and Loss account for Indus motors Profit an Loss account As at June 30.443.242.33% 100% 103.47% Other operating expenses 416.

39% 43 .970.198.876 50.62% 84.819 18.347.483 4.47%.00% 100. leading to almost double increase of 248% in net income in 2010.858 1.222 3.Analysis: In indexed analysis for profit and loss account for Indus motors.00% 86.631 894.27% 112.122 3.088.49% 54.00% 100.61% 98.00% 100.00% 100.934. showing effectiveness of companies operations and how desirable the company for investors.00% 100.13% 92.89% 111.367 1.00% 100. However distribution expenses have declined and other expenses increased in 2010.30% 2009 Indexed 2009 2010 Current assets Stores and spares Stock-in-trade Trade debts Loans and advances Short-term prepayments Accrued return on bank deposits 111. One thing is to be notices that our finance cost has decreased to 13.204 100.570 7. Balance sheet for Indus motors Balance Sheet As at June 30.613.00% 84.00% 100.83% 127.509 7.00% 100.254 128. we have seen that all items have increased drastically over the next year of 2010 from 2009.90% 93.944 100.025 3.473 28.778 57. 2010 Regular 2010 (Rupees in '000) ASSETS Non-current assets Fixed Assets Long-term loans and advances Long-term deposits Total Non current Assets 3. Net sales increased by 158% .567 5.736.247 839. with COGS being increased in the same proportion and gross profit getting doubled with 200% increase.324.459 16.333 15.

973 100.942.797 503.76% 136.973 10.988 5.68% Current liabilities Trade.791.000.801.91% 3.278 20.980 23.00% 100.523 100.700 503.net 242.68% 64.685.33% TOTAL ASSETS 27.510.00% 100.615 1.00% 289.076.685.27% 140.00% 100.660 9.19% EQUITY Share capital Authorized capital 100.615 12.062 8.00% 149.000 11.00% 100.000.000 786.000. subscribed and paid-up capital Reserves Total Equity 1.25% LIABILITIES Non-current liabilities Deferred taxation Total non current liabilities 325.797 325.529 673 100.00% 100.253 67.884.715.00% 100.00% 100.91% 142.755.70% 100.01% 161.00% 100.00% 1654.08% 122.281 944 14.000 9.166 16.Other receivables Cash and bank balances Total Current Assets 196.00% 124.19% 44 .241 15.866 5.926.700 100.00% 131.278 20.00% 131.000 786.138.905.000 (2009: 100.850 100.296.000) Ordinary shares of Rs 10 each Issued.902 9.000.587.00% 64.138.523 100.00% 100.579 14.00% 100. other payables and provisions Advances from customers and dealers Accrued mark-up Short-term running finance Taxation .27% TOTAL EQUITY AND LIABILITIES 27.731.319 100.00% 143.224.

with decreased in total non current liabilities of 64% in 2010.however our total liabilities have increased to 143% in 2010. Total equity and liabilities have increased by 131% making the company in a good financial position. as our reserves increased to 124% in 2010.Analysis In balance sheet for indexed analysis. its observed that current assets have decreased to 84% in 2010 while current assets have increased to 142% in 2010. Total equity increased to 122% in 2010. 45 . however trade debt and inventory decreased in 2010.

35 110. spares and loose tools Stock-in-trade Trade debts Current portion of long-term installments Sales receivables Loans.879.62 136.16 59.937.453 1.748.23 82.net Cash and bank balances 251.00 % 2009 (Rs.403 4. plant & equipment Intangible leases 4.36 180.68 94.00 100.466 8.680 226.28 205.732 5.732.101 100.40 140.00 100.00 100.031 240.545.719 153.00 100.388 31.609 153.00 100.413 1.864 4.738 7.226.Pak Suzuki Ltd Balance sheet Indexed Pak Suzuki Motor Company Limited Indexed Balance Sheet As at December 31.00 100.749 6.478 5.00 90.00 100.228.671 347.621 100.00 100.684.254 134.67 35.032.499 169.22 145.00 100.00 46 63.837 76.089 3.10 127.917.44 4.00 100.00 100.779 389. 20__ 2010 (Rs.114 28.582 505.342 Long-term investments Long-term loans Long-term deposits & prepayments Long-term installment sales receivables 5. 000) % .162 34. 000) ASSETS Non-current assets Fixed Assets Property.407.963 43.00 100.652 107. advances and advances Trade deposits & short-term prepayments Accrued markup income Other receivables Sales tax & excise duty adjustable Income tax refundable .713 2.00 100.00 100.55 152.729 376.232 Current assets Stores.760 4.916 8.45 94.685 255.95 110.00 100.449 3.93 41.508 100.16 63.00 100.186 122.609 780.04 121.46 82.

475 3.93 109.427.916 14.00 100.00 100.325.250. other payables Advances from customers Accrued mark-up Short-term borrowing Deposits against display of vehicles Security deposits Provision for custom duties and sales tax 3.00 101.03 0.000 100.449 TOTAL EQUITY AND LIABILITIES 19.500.00 822.633 17.00 EQUITY & LIABILITIES Authorized share capital 150.655.999 13.28 100.50 147.00 5.000 100.674.00 100.781 1.00 100.134 17.497.00 100.132 TOTAL ASSETS 19.00 62.034 441.000.734 100.475 4.313.554 86.00 47 .00 Non-current liabilities Deferred taxation 0 0.778 138.00 100.00 Current liabilities Trade.853.601 14.752.364 115.000 100.000) Ordinary shares of Rs 10 each Issued.00 100.734 100.00 1.000 (2009: 150.000 1. subscribed and paid-up capital Reserves 1.502.512 80.031 0 50.23 74.753 138.00 100.067.17 109.03 12.325.500.000 723.00 100.03 1.00 142.600 100.250.364 166.14.00 100.20 822.655.000.080.58 102.351 327.839 88.915 100.00 100.28 101.999 13.

975) 1.00 100.808) (335.82 169.56%.299 (214. 000) % Turnover .361) (636.50 92.00 100.349) (55.234.564) (38. The equity of the company increased by 1.332) 575.net Cost of sales Gross profit Distribution costs Administrative expenses Other operating income Finance costs Other operating expenses 42.00 100.00 100.061 100.02% however noncurrent liabilities increased by 42.00 (25.456) 427.872) 211.00 100.Analysis: In the year 2010 the companies current assets increased by 15.32 91.00 100.58% Pak Suzuki Income statement (indexed) Pak Suzuki Motor Company Limited Indexed Profit & Loss Account For the year ended December 31.00 100.143 48 .93% which resulted in 9.03% increased the overall assets and liabilities and equity in the balance sheet.642.55 162. 000) % 2009 (Rs.37 156.078 (21.762) 100. Major increase was indicated in the deposits against displaying vehicles which was 47.762 (41.015 (456.200) 619.219 100.92 144.787 (197. 20__ 2010 (Rs.00 100.00 100.66 82.714) (141.550) (495.24 176.572 (12.664.73 26.003.638.00 569.99 128.843 (172.14 264.00 Profit before taxation Taxation Profit after taxation 668.17% however non current assets decreased by 5.624) 255.15 237.772) 162.

administrative expenses increased by 28.66% causing a declining net profit margin. 49 .32%.92% and other operating expenses increased by 44.15% in year 2010 resulting in an enormous increase in profit before taxation by 137.01%.37%.27% in year 2010 was because of increase in taxation by 164. finance costs increased by 69.24% respectively in year 2010 resulting in an increase in gross profit by 76.55% and 62. The decrease in net profit after taxation by 17.18%.50%. other operating income decreased by 7. Distribution costs decreased by 8.Analysis: Net turnover and cost of sales both increased by 62.

however Indus motors had huge amount of interest charges to incur in 2010. that why its interest charges declined. This is because of a substantial increase in assets for Indus motors.where Indus motors having improving inventory management. Indus motor is providing good shareholder wealth for its shareholders in 2010 as compared to Pak Suzuki.Conclusion and Recommendations. Both the companies are using their assets well to produce sales. Pak Suzuki is in a good position in 2010 to cover its interest charges with its profit. as Pak Suzuki enjoy higher liquidity and ability to meet its short term obligation with its current assets. Pak Suzuki is doing in terms of converting its receivables to cash with comparatively less days in 2010. but net profit margin decreased for Pak Suzuki in 2010 as compared to Indus motors. Earning per share has improved for Indus motors as compared to Pak Suzuki in year 2010. In terms of liquidity Pak Suzuki is doing better in comparison to Indus motors . Pak Suzuki is managing its inventory well as told above and its taking less days to convert its inventory to cash than Indus motors. due to increased expenses of Pak Suzuki. especially the stockin-trade and cash balance. 50 . however Pak Suzuki is having inventory issues and its inventory is stuck up in 2010. where as Indus motors has increased the number of days in 2010. Gross profit margin has increased for both the companies in 2010. When it comes tor receivables. However in terms of profitability.

From the analysis. 51 . we have concluded that Indus motor is doing well in terms of profitability and efficiently therefore it looks more desirable to investors. However Pak Suzuki should reduce its expenses. so that its net income can be increased and can provide to wealth to shareholders.

References:   Annual report of Pak Suzuki Ltd for Year 2010-2009 Annual report of Pak Suzuki Ltd for Year 2010-2009 52 .

533.50 1.647. Total Other Unusual Items 2.60 NET INTEREST EXPENSE Currency Exchange Gains (Loss) Other Non-Operating Income (Expenses) 620 8.70 1.00 660.3 97. TOTAL OPERATING INCOME Interest Expense Interest and Investment Income 37.50 -8.8 10.266.566.298.00 915.046.1 TOTAL REVENUES Cost of Goods Sold GROSS PROFIT Selling General & Admin Expenses.9 5.116.093.40 3.5 -20.Appendices Detailed Financial statement of Indus motors Ltd 2009 Profit and Loss account 2010 60.826. EXCLUDING UNUSUAL ITEMS Gain (Loss) on Sale of Investments Gain (Loss) on Sale of Assets Other Unusual Items. INCLUDING UNUSUAL ITEMS Income Tax Expense Earnings from Continuing Operations 2.1 -22.10 3.016. Total Other Operating Expenses OTHER OPERATING EXPENSES.385.40 53 .90 3.10 5.1 -14 1.799.90 -42.90 25.864.10 1.242.60 -77.385.40 NET INCOME NET INCOME TO COMMON INCLUDING 1.4 1.60 35.8 628.402.2 97.2 3.9 1.60 4.60 2.214.7 1.443.178.10 3.3 EBT.9 0 55.20 -35.1 895.9 16.443.5 EBT.611.5 1.443.50 1.385.7 16.

20 --- 2010 15.90 5.90 4.30 7.385.845.513.731.10 3. Long Term 3.1 1.320.20 8.10 23.731.2 99.EXTRA ITEMS NET INCOME TO COMMON EXCLUDING EXTRA ITEMS 1.9 904.834.791.443.930.50 -4.40 Balance sheet for Indus motors Ltd 2010 Assets Cash and Equivalents Short-Term Investments Trading Asset Securities --9.00 TOTAL CASH AND SHORT TERM INVESTMENTS Accounts Receivable Notes Receivable Other Receivables 9.2 54 .8 968.90 18.4 116.60 NET PROPERTY PLANT AND EQUIPMENT Loans Receivable.736.1 15.1 TOTAL RECEIVABLES Inventory Prepaid Expenses Other Current Assets 1.756.629.20 1.309.60 -3.30 16.60 10.217.9 TOTAL CURRENT ASSETS Gross Property Plant and Equipment Accumulated Depreciation 16.715.756.737.3 3.699.60 5.50 9.30 7.00 1.613.

388.076.60 786 196.550. Total Unearned Revenue.926.384.5 TOTAL ASSETS LIABILITIES & EQUITY Accounts Payable Accrued Expenses Current Income Taxes Payable Other Current Liabilities.40 6.297.20 8. Current TOTAL CURRENT LIABILITIES Deferred Tax Liability Non-Current 20.50 12.206.Other Intangibles Other Long-Term Assets 4 26.8 TOTAL LIABILITIES Common Stock Additional Paid in Capital Retained Earnings Comprehensive Income and Other 10.1 14.60 12.30 55 .6 2.587.7 1.5 9.315.884.50 5.685.00 10.30 635.50 27.4 3.308.90 503.019.5 17.60 27.20 2.90 325.50 9.587.572.60 242.288.70 786 196.138.685.30 14.4 TOTAL COMMON EQUITY TOTAL EQUITY TOTAL LIABILITIES AND EQUITY 10.60 14.224.7 1.5 11.297.138.80 32.00 20.5 2.

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