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- A Hinduja Group flagship company in India.
- Leading manufacturer of commercial vehicles. - Annual turnover exceeds 7244.71 cr. - Founded in 1948 and head quartered in Chennai - First automotive manufacturer in India to receive ISO 9002 certification in 1993. - The first Indian auto company to receive the latest ISO/TS 16949 Corporate Certification (in July 2006
R J Shahaney, Chairman D G Hinduja, Vice Chairman (Alternate : Y M Kale) D J Balaji Rao A K Das (Alternate : P Banerjee) P N Ghatalia S R Krishnaswamy S Raha F Sahami S Shroff A Spare R Seshasayee, Managing Director
- Interim dividend(paid for year 2006-07). - The dividend paid in between accounting year - Declared by the company in anticipation of good profits before the finalisation of accounts . - Given with the approval of the board of directors. It favourably affects the share holders in two ways. 1. The share holders get cash before the end of the year 2. share price of the company increases due to improved sentiment
Shareholding Pattern When the promoters have a high stake that does not necessarily mean that the company is better. companies with very large promoter holdings can easily manipulate the market price. A mixture of different organisation puts a check on the promoters. Company shareholding patter shows a healthy mix of - FII -Mutual funds -State/ Government companies
Economy and market trends -India’s economy in 2006-07 recorded a significant growth -During the Tenth Plan period – GDP grew 8.5%. -Due to booming manufacturing and service sectors -This GDP growth triggered an increase in the country’s per capita income. -while low interest rates fuelled increased demand
internal control system has been designed to provide for:
- Accurate recording of transactions. - internal checks and prompt reporting - Adherence to applicable Accounting standards and policies - Review of capital investments and long term business plans - Effective use of resources and safeguarding of assets
-Capacity build-up plans are periodically re-assessed,
-Market conditions and demand forecast are taken into account . - The Company is pursuing plans to increase the share of non- cyclical business -Sale to Defence sector to mitigate the impact of cyclicality. - Exports of non-auto engines.
-Uncertainty over fuel prices in the international market.
-Competitive pressures to contain freight rates.
-Increasing cost of production( raw material, labour, taxes) -Increasing interest rates. -Threat from local manufacturer.
1.Auditor has presented unqualified opinion
a. financial statement prepared using GAAP concept
b. statutory requirements and regulations have been met. c. Adequate disclosure of all material matters relevant to the presentation of the financial information.
2. Financial statements are in agreement with the books of account.
3. GAAP principals have been applied for these books as at March 31, 2007;
in the case of the Balance Sheet.
(ii) in the case of the Profit and Loss Account. (#)for the cash flow for the year ending 2006-07
4 .fixed asset and inventory:
a. fixed asset and the inventory have been physically verified
b. process are reasonable and adequate
5. there is an adequate internal control procedure with regard to
a. purchase of inventory b. purchase and sale of fixed asset.
6. Internal audit system revalues book over half yearly and yearly basis. 7. the Company has not defaulted in repayment of dues . 8. during the year, maintained good reputation and creditability.
9.The Company is regular in depositing undisputed statutory dues for: provident fund, investor education and protection fund, Income, sales wealth, service tax
The three major decisions as function of finance: 1.The Investment decision. a. long term fixed asset b. short term current asset
2.The Financing decision. .change in debt structure.
3.The Dividend policy decision .paid interim dividend
-In 2006-07, the sales registered a growth of 36.60%. -company’s export grew by 23%. -Profit of year 2006-07 increase by 34.82%, due to increase in sale. - The reason for increase in expenditure is due to increase in R&D expense( director report). - Income coming from investments, profit on sale of Investments. - Interest has come down as company is preferring secured loans over unsecured loan.
- In the year 2006-07 Net sales for the year, at Rs 71,682 million, has increased by 37% as compared to previous year.
-Primarily due to boost in sale of commercial vehicle and spare parts.
-The Reserve & Surplus is increased by 36.57%. -Company transferring major portion of p&l to reserve and surplus. -Company has paid bonus share -Shows good sign of health of company
-Secured fund has increased.
- The capacity increased from 77,200 vehicles to 84,000 vehicles -Share capital increase is due to conversion of debentures into equity. - Inventories have gone up to Rs.10703. The increase is due to increased activity levels. - Debtor level increased to Rs.5229 million from Rs.4243 million due to higher level of fully built commercial vehicles.
- Share capital increase is due to conversion of debentures into equity. - Inventories have gone up to Rs.10703. The increase is due to increased activity levels. - Debtor level increased to Rs.5229 million from Rs.4243 million due to higher level of fully built commercial vehicles. - The capacity increased 84,000 vehicles, company in expansion mode. - Share capital increase is due to conversion of debentures into equity.
- From the above pie graphs we can see that the portion of secured loan has increased in 2007 compared to 2006 -The portion of share capital is Rs. 1323.87 in2006-07 but it shows decreasing trend in % due to increase in other fund. - Reserve & Surplus has shown increase as profit is increasing.
- Net current assets in this year is 45% that means the working capital of Ashok Leyland is efficiently managed.
Usefulness: 1.Predict Future cash flows.
2.Determine the ability to pay dividends & other commitments.
3.Show the relationship of net income to changes in the business cash.
4.Efficiency in Cash Management.
5.Discloses the movement cash. 6.Discloses success or failure of Cash Planning.
•Operating activities: -The main positive item is the depreciation charge of Rs. 1505.74 -Thus the company’s earning cannot be said to be of high quality. -Net cash flow from operations< (profits + depreciation) -Increase in Inventories & debtors resulted in strain on the cash.
-profit has not been fully realized in cash.
- Form the Investing Activities section; Ashok Leyland Ltd has payments for assets acquisition. The expenditure financed partly by:
a) Realization from the Sales of Plant.
b) Realization from the Sale Of Investments c) Interest Revenue Rs. 42.70. d)The remaining amount financed from cash flow from operating activity and drawing upon cash equivalents.
- Raised long-term borrowing - Repaid long term borrowing - Net realization from long-term sources dividend Rs. 1792.34. interest of Rs. 167.02
- It is left with net cash of Rs. 2893.75 from financing activities.
- expansion in the plant & machinery during the period was major drain on cash. - loosened control on inventory and debtors further squeeze on cash
- The net cash out flow from investing activities was met from three sources:
I. Cash Flow from Operations, Rs. 4999.51 II. Issue of long term loans. III. Withdrawal from Cash Balance, Rs. 5391.15
a. can sell some investment to raise cash.
b. can issue additional debt/ equity as company enjoy healthy debt equity ratio.
C. can avail additional credit from suppliers.
d. Given its strong financial position, it can -bank line of credit -from other source. likely tap
gross profit margin ratio decreased from 10.29% to 9.80% net profit margin show change from 6.24% to 6.16% The ratio shows healthy financial position of firm. operating profit ratio decreased from 8.62% to 8.43% suppliers have increased the commodity prices.
ROI has increased from 14% to 17% Shows greater assets realization. ROE has gone up from 25.37% to 26.69%
Current ratio has come down from 1.58% to 1.54 As liability increased more rapidly than the cash. Quick ratio almost same, changed from .94% to .93% Decreased over the year because of increase in liquid liability Net working capital increased from rs 8238 to 9418 million.
Asset turnover ratio
Asset turnover ratio gone up from 2.3 to 2.62 times. Good sign for company as it increasing its use of fixed asset over sale.
Net fixed asset has come down from 4.84 to 4.64 times.
Asset turnover ratio
Fixed working capital ratio has gone up from 6.37 to 7.61 times.
Average inventory turnover ratio has gone up from 6.40 to 6.55 times.
Average age of inventory has come down from 56 to 54 days.
FINANCE STRUCTURE RATIOS
Equity ratio has gone up from 0.67 to 0.74. Signifies strong financial interdependence. Debt equity has come down from 48.99% to 33.80% Debt ratio has come down from 0.33 to 0.25. Interest coverage ratio for year 2006-07 is 114.37 ratio indicates better utilization of interest bearing debt funds in generating higher operating profit.
EPS has increased from 2.68 to 3.33. DPS remains same 0.45
As Ashok Leyland has profitable business it reinvest money in business
Low p/e ratio of 12.55, good sign as profit earning per share is high.
- Ashok Leyland Ltd has made good growth over the years in sales as well as profit.
- In 2006-07, the Company’s exports grew by 23% with the sale of 6,025 vehicles. - This improvement was derived from demand in the export markets and the launch of new products. This is the reason the sale & profit has increased compare to last years i.e. 2005-06
- It shows that the expenditure of the company is accounting for higher percentage of sales around 99% every year & because of the every year profit has increased but a decreasing rate.
- In Cash Flow Analysis all the activities i.e. operating, investing, financing maintain this year (2006 – 2007).
- We are discussing about mainly 5 kinds of ratio. Shows better performance over the year.
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