Ratio Analysis of

Atlas Honda

Presented By:
 Syed Muhammad Zargham Ali
 Shoaib Tariq
 Muhammad Awon
 Anas Tanveer
Table Of Contents

Introduction

Definition of Ratio Analysis

Liquidity Ratio

Solvency

Profitability

Market Prospect

Conclusion
Introduction
• Atlas Honda Limited is a public listed company
which was incorporated on October 16, 1962. It is
a joint collaboration between Honda Motor
Company Limited Japan, the largest and most
reputed motorcycle brand in the world, and Atlas
Group, one of Pakistan’s most renowned business
conglomerates. The Company is principally
engaged in progressive manufacturing and
marketing of motorcycles and spare parts
What is Ratio
Analysis?
• Ratio analysis is the process of examining and
comparing financial information by calculating
the meaningful financial statement figure
percentages instead of comparing line item from
each financial statement.
 Liquidity ratio:
Shows the extent to which the firm can meet its financial obligations.

 Current Ratio
 Acid test ratio
 Account receivable turnover
 Inventory turnover
 Days’ sales uncollected
 Total assets turnover
Current Ratio:
The current ratio is a liquidity ratio that measures whether a firm has enough resources to meet its
short-term obligations
Current Ratio = Current assets/ Current liabilities

In 2018 = 1.6 times

Acid test ratio:

The acid-test ratio is a type of liquidity ratio, which measures the ability of a company to use its
near cash or quick assets to extinguish or retire its current liabilities immediately
Quick ratio = Current assets – inventories / current liabilities

In 2018 = 1.3 times

Account Receivable Turn-over:
Receivable Turnover Ratio is an accounting measure used to measure how effective a company is in
extending credit as well as collecting debts. The receivables turnover ratio is an activity ratio,
measuring how efficiently a firm uses its assets.
Account receivable turn-over = Net sales / Average account receivable, net

In 2018 = 101.1 times

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 calculated to see if a business has an excessive inventory in comparison
to its sales level.
Inventory turn-over = Cash of goods sold / Average inventory

In 2018 = 30.38
Days’ Sales Uncollected:
he days' sales uncollected ratio is a liquidity ratio used by creditors and investors to estimate how
many days before the company will collect their accounts receivable. In other words, the days' sales
uncollected ratio measures how long it will take for the customers to pay their credit card balances.
Days’ sales uncollected = Account receivable, net / net sales *365

In 2018 = 4.05 days

Total Assets Turn-over:

The asset turnover ratio measures the value of a company's sales or revenues relative to the value of
its assets The asset turnover ratio can be used as an indicator of the efficiency with which a
company is using its assets to generate revenue
Total assets turn-over = Net sales / Average total assets

In 2018 = 2.6 times

 Solvency:
Solvency directly relates to the ability of an individual or business to pay their long-term
debts including any associated interest.

 Debt Ratio
 Debt to Equity ratio:
 Time interest ratio
Debt to equity ratio:
The debt-to-equity ratio shows the proportions of equity and debt a company is using to finance its
assets and it signals the extent to which shareholder equity can fulfill obligations to creditors.
Debt to equity ratio = Total liabilities / Total equity

In 2018 = 0.98

Times Interest Earned:

The times interest earned ratio is an indicator of a corporation's ability to meet the interest payments
on its debt.
Time Interest = income before interest & income taxes / interest expense

In 2018 = 298 times

 Profitability
Profitability ratio is used to evaluate the company’s ability to generate income as compared
to its expenses and other cost associated with the generation of income during a particular
period.

 Gross Profit margin ratio

 Net Profit Ratio
 Return on Total Assets
 Return on common stockholder Equity
Gross Profit margin ratio:
Gross profit ratio measures the relationship of gross profit to net sales and is usually represented as a
percentage. This ratio indicates the profit earned directly from manufacturing process, without any
further indirect expenditure.
Profit margin ratio = Gross profit / Net sales*100

In 2018 = 10.7%

Net Profit Ratio:

Net profit establishes a relationship between net profit and sales, and indicates the efficiency of the
management in manufacturing, selling, administration and other activities of the firm.
Net profit ratio = Net profit after tax / Net sales *10011

In 2018 6.01%
Return on Total Assets:
Return on assets is a profitability ratio that provides how much profit a company is able to generate
from its assets. In other words, return on assets (ROA) measures how efficient a company's
management is in generating earnings from their economic resources or assets on their balance sheet.
Return on assets = Net income / Average total assets

In 2018 = 6.66%

Return on common stockholder Equity:

Return on equity (ROE) is a measure of financial performance calculated by dividing net income by
shareholders' equity.
ROE = Net income – preferred dividends / Average common stockholder equity

In 2018 = 32.09%
 Market prospect:
Market Prospect ratios are used to compare publicly traded companies’ stock prices with
other financial measures like earnings and dividend rates. Investors use market prospect
ratios to analyze stock price trends and help figure out a stock’s current and future market
value.

 Price Earning ratio

 Dividend yield
Price Earning Ratio:
Price earnings ratio is the ratio between market price per share and earning per share. The ratio is
calculated to make an estimate of appreciation in the value of shares of a company.
Price earning ratio = Market price per common share / earnings per share

In 2018 = 11.6 times

Dividend Yield:
This ratio shows what percentage of the market price of a share a company annually pays to its
stockholders in the form of dividends. It is calculated by dividing the annual dividend per share by market
value per share.
Dividend yield = Dividend per share / Market price per share

In 2018 = 5.1%
Conclusion:
Asset Management Ratios Atlas Honda have a very good credit and collection
policies. Asset Management Ratios Atlas Honda company higher fixed-asset
turnover ratio shows that the company has been more effective in using the
investment in fixed assets to generate revenues. Looking at the Turnover ratios’
investors are more likely to invest in this company. because of large generation
of revenue from these assets. Higher Total Asset turnover of Atlas Honda shows
that company can operate with fewer assets than other less efficient competitors
can, and so requires less debt and equity to operate. The result is of this high
ratio is comparatively greater return to its shareholders.