ACKNOWLEDGEMENT

We thank Al mighty Allah who has bestowed in us the capacity to

complete this report. The most Beneficial, and the most Merciful, He has
given us the power to learn and attain success.

We would like to thank Sir Mirza Imtiaz Askari, as our guide and
teacher, for assigning us this report for the better understanding and
gaining of knowledge of this course, and of the real financial environment.
This analysis has given us the ability to interpret financial scenarios of
industries which might not be as they may seem to public.

We are also grateful to the executive record officer at the Karachi

Stock Exchange for helping us by providing the annual reports of the
companies which were hard to find anywhere else and without which the
project would not have been possible.

We would also like to thank our patients for their unlimited love and
support for us while we have been working on this report.
ANALYSIS OF FINANCIAL
STATEMENTS

Financial Statements represents the financial position of any

organization & facilitate the management of an organization in taking
future financial decisions. Financial statements are the best
approximations of economic reality because of the selective reporting of
the economic events by the accounting system, compounded by
alternative accounting methods & estimates. Analysis of financial
statements helps investors & creditors in making better economic
decisions. The analysis & use of financial statements is not restricted to
analysts, however, managers, auditors, regulators & educators also
benefited from the insights of analytical techniques.

SELECTED COMPANIES (2005-2009)

1. Honda Pakistan

2. Deewan Farooq Motor

3. Indus Motor Company

4. Pak Suzuki Motor Company Limited

THE AUTOMOBILE INDUSTRY

The Automobile Industry is one of the largest sectors of an economy which
can change the shape of the economic picture of any country and also the
civilization of the world by introducing new ways of transportation. It gives
the most employment to the population and largest sector of getting
revenue to the world.
It gives the facility of relaxation to the people through the system of
transportation and has become a source of business to transfer the goods
and has opened the door for doing business and commerce.

Globalization supported this sector to boost up and through this new

changing is occurring in this sector. The auto industry is trying to reduce
their cost of transportation through mass marketing, mass production and
fulfilling the demand of the world.

Auto mobile industry (four Wheels) plays a major role in the Pakistan
automobile industry. It has largest share in overall Pakistan automobile.
Those products which are included in automobile industry (four Wheels)
are as under.

Passenger Car

Tractor

van

Size of Automobile (four Wheel) industry of Pakistan

There are presently 82 vehicles assemblers in the industry producing

passenger cars, light commercial vehicles, truck, buses, tractors and 2
and 3 wheelers. Beside these there are over 600 players in the vendor
industry. The total direct employment in this sector is over 192000 with a
total investment of over Rs. 98 billion. The auto industry has played a
significant role in the large scale manufacturing industry as it contributes
$ 3.6 billion to the economy besides import substitution resulting in
annual foreign exchange savings of over $ 1 billion.
PAK SUZUKI MOTOR CO. LTD
Pak Suzuki motor company ltd is a public limited company with its shares
quoted on stock exchanges in Pakistan. The Suzuki management
immediately after privatization started expansion of the Bin Qasim Plant
to increased its capacity to 50,000 vehicles per year. The company
continues to be in the forefront of automobile industry of Pakistan.

SHORT TERM SOLVENCY – LIQUIDITY

RATI0

CURRENT RATIO
Current ratio = current assets / current liabilities

Year C.A (Rs) C.L (Rs) current ratio

15,127, 10,7
2005 089,000 70,697,000 1.40
18,982, 12,0
2006 670,000 25,474,000 1.58
16,215, 7,1
2007 508,000 25,302,000 2.28
11,807, 2,6
2008 612,000 57,462,000 4.44
12,427, 3,3
2009 633,000 25,134,000 3.74
The trend shows that company has improved its liquidity since 2005 till 2008 but
which came slightly down in 2009. The trend shows that the company’s ability to
pay its short term debt obligations has increased since 2005 which came to its
highest in 2008.

QUICK RATIO
Quick ratio = quick assets/ current liabilities

quick
Year C.A (Rs) quick assets (Rs) C.L (Rs) ratio
15,127, 9,693,627 10,770,
2005 089,000 ,300.00 697,000 0.9
18,982, 8,214,337 12,025,
2006 670,000 ,000.00 474,000 0.68
16,215, 5,484,052 7,125,
2007 508,000 ,000.00 302,000 0.77
11,807, 2,499,142 2,657,
2008 612,000 ,000.00 462,000 0.94
12,427, 3,545,621 3,325,
2009 633,000 ,000.00 134,000 1.07

A company’s quick ratio or acid test ratio shows that whether a firm has enough
short-term assets to cover its immediate liabilities without selling inventory. The
company has been fluctuating in its ability to cover short term liabilities which
was better in 2005, decreased in 2006 and 2007, and increased from 2008. This
shows that the company has made improvements in terms of paying its short
term debts. But only in 2009 has it reached a commendable ratio else
performance is below good.

WORKING CAPITAL
Working capital = Current assets – Current liabilities

Working Capital
year C.A (Rs) C.L (Rs) (Rs)
15,127, 10,770,6 4,356,
2005 089,000 97,000 392,000
18,982, 12,025,4 6,957,
2006 670,000 74,000 196,000
16,215, 7,125,3 9,090,
2007 508,000 02,000 206,000
11,807, 2,657,4 9,150,
2008 612,000 62,000 150,000
12,427, 3,325,1 9,102,
2009 633,000 34,000 499,000

It is a measure of both a company's efficiency and its short-term financial health.

Positive working capital means that the company is able to pay off its short-term
liabilities. For PSMCL the working capital has been growing since 2005 till
present. There has been a decrease in short- term debts.

This means that the firm is solvent.

ACTIVITY RATIOS
INVENTORY TURNOVER
Inventory turnover = CGS / inventory

Inventory turnover in days = 365 / inventory turnover

ye stock in trade inventory turnover Inventory

ar CGS (Rs) (inventory) (Rs) ratio (times) Turnover in days
20
05
20 42,50 9,613,938,0
06 9,374,000 00 4.4 83
20 46,08 9,182,019,0
07 4,400,000 00 5.0 73
20 39,08 7,732,518,0
08 1,677,000 00 5.1 72
20 25,66 6,879,729,0
09 4,762,000 00 3.7 98

A ratio showing how many times a company's inventory is sold and replaced over
a period. The sales of inventory actually improved from 2006 to 2008 but
decreased sharply in 2009. This is owing to the fact the inventory and cgs both
have been decreasing by a larger ratio.

ACCOUNTS RECIEVABLE TURNOVER

A/R turnover = Net Sales / A/R

A/R turnover in days = 365 / A/R turnover

Trade Debt Trade Debt Trade debt turnover

Sales (Rs) (Rs) turnover ratio in days
20
05
20 48,203, 152,8 315 1.2
 06 084,000 57,000
20 50,844, 185,7
07 632,000 39,000 274 1.3
20 39,669, 286,6
08 730,000 97,000 138 2.6
20 26,234, 376,5
09 061,000 08,000 70 5.2

An accounting measure used to quantify a firm's effectiveness in extending

credit as well as collecting debts. The receivables turnover ratio is an activity
ratio, measuring how efficiently a firm uses its assets. PSMCL has seen a
downward trend in collecting its receivables. The sales have decreased while the
sale made on credit is increasing.

OPERATING CYCLE
Operating cycle = inv t.o in days + a/r t.o in days

Operating Cycle
year (days)
2005
2006 95.5
2007 97.0
2008 190.5
2009 512.5

The company in 2006 could faster convert resource inputs into cash flows but till
2009 the trend shows poor performance, and now due to fewer sales and more
delay on part of creditors, it takes more days to sell the inventory and collect
receivables.

LONG TERM SOLVENCY RATIOS

ASSET TURNOVER RATIO
Sales/ Total Assets

Total Assets
year Sales (Rs) (Rs) Asset Turnover Ratio
 35,374, 18,747,84
2005 556,000 1,000 1.9
48,203, 23,274,08
2006 084,000 9,000 2.1
50,844, 21,201,33
2007 632,000 7,000 2.4
39,669, 16,956,14
2008 730,000 3,000 2.3
26,234, 17,655,73
2009 061,000 4,000 1.5

The company has been less efficient in generating sales from its assets but has
done well in 2007 and 2008. This may be due to the increase in sales in 2007
being the highest.

DEBT TO ASSET RATIO

Total debts/ total assets

yea Total Assets Debt to Asset

r Total Liabilities (Rs) (Rs) Ratio
200
5
200 12,083,4 23,274,089,
6 13,000 000 0.5
200 7,224,3 21,201,337,
7 02,000 000 0.3
200 2,803,4 16,956,143,
8 62,000 000 0.2
200 3,330,1 17,655,734,
9 34,000 000 0.2

A metric used to measure a company's financial risk by determining how much

of the company's assets have been financed by debt. The ratio has been
improving since less assets have been financed by debt in 2009.

DEBT TO EQUITY RATIO

Total debts / shareholder’equity

yea Shareholder's Debt to Equity

r Total Liabilities (Rs) Equity (Rs) Ratio
200
5 7,826,144,000
200 12,083,4
6 13,000 11,190,676,000 1.1
 200 7,224,3
7 02,000 13,977,035,000 0.5
200 2,803,4
8 62,000 14,152,681,000 0.2
200 3,330,1
9 34,000 14,325,600,000 0.2

Indicates the relative portion of debt and equity used to finance assets. Less
debt is used to finance assets and more equity since 2005 to 2009.

TIMES INTEREST EARNED

Operating income / int. exp

Interest Times
Operating Expense Interest
YEAR Income (Rs) (Rs) Earned
2005
2006 5817174000 282605000 20.6
2007 4743147000 143786000 33.0
2008 1045646000 53470000 19.6
2009 440407000 12564000 35.1

A metric used to measure a company's ability to meet its debt obligations. TIE
declined in 2008 but increased again. This means that the company can meet its
debt obligations well.

DEBT TO TANGIBLE NET WORTH

Total Debt / equity – intangible assets

Total Intangilble Debt to Tangible

Liabilities Equity Assets Net worth Net worth (%)
20 7,826,
05 144,000
20 12,0 11,190,6 2 10,957,
06 83,413,000 76,000 32,985,000 691,000 110%
20 7,2 13,977,0 3 13,590,
07 24,302,000 35,000 86,779,000 256,000 53%
20 2,8 14,152,6 3 13,768,
08 03,462,000 81,000 83,808,000 873,000 20%
20 3,3 14,325,6 3 13,977,
09 30,134,000 00,000 47,732,000 868,000 24%

A measure of the physical worth of a company, which does not include any value
derived from intangible assets such as copyrights, patents and intellectual
property. It shows us the real picture in place of an inflated on of equity. In
comparison the company has more assets still financed from debt but the ratio
has a declining trend over the years.

PROFITABILITY RATIOS
2005 2006 2007 2008 2009
35,3 48,2 50,8 39,6 26,2
74,556,00 03,084,00 44,632,00 69,730,00 34,061,00
Net Sales 0 0 0 0 0
3,5 5,6 4,7 5 5
72,956,00 93,710,00 60,232,00 88,053,00 69,299,00
Gross Profit 0 0 0 0 0
Gross Profit
margin 10.1% 11.8% 9.4% 1.5% 2.2%

2,2 3,3 2,7 6 2

36,880,00 53,851,00 74,532,00 24,785,00 55,219,00
Net Income 0 0 0 0 0
Net Income
Margin 6.3% 7.0% 5.5% 1.6% 1.0%

Number of
shares
Outstanding 54044400 79943300 82300000 82300000 82300000
Earnings per
share 41.4 41.95 33.7 7.6 3.1
The ratios show that the company experienced a growth in terms of profit in
2005-2006 which was the highest. In 2009 the gross margin is more but net
income is much lesser than in 2008. This might be due to an increase in fixed
costs.

FIXED ASSETS
AGE OF ASSETS
Buildings on leasehold lands - factory, office, test tracks and other
buildings
remaining life of age of asset Life of asset
YEAR asset (yrs) (yrs) (yrs)

2005

2006 7.5 7.8 15.3

2007 8.1 8.7 16.8

 2008 7.9 9.8 17.7

2009 7.9 11.7 19.7

Plant and machinery

remaining life of age of asset Life of asset
asset (yrs) (yrs) (yrs)

2005

2006 3.6 4.7 8.3

2007 3.3 4.9 8.2

2008 3.1 6.5 9.5

2009 3.1 8.4 11.5

Welding Guns
remaining life of age of asset Life of asset
asset (yrs) (yrs) (yrs)

2005

2006 2.2 3.2 5.4

2007 4.0 3.4 7.4

2008 1.9 3.4 5.3

2009 2.0 5.4 7.4

Waste water treatment

Plant
remaining life of age of asset Life of asset
asset (yrs) (yrs) (yrs)

2005

2006 3.0 75.3 78.3

2007 5.0 4.4 9.4

2008 3.2 4.0 7.2

2009 3.0 6.0 9.0

Permanent and special

tools
remaining life of age of asset Life of asset
asset (yrs) (yrs) (yrs)

2005
 2006 2.9 5.8 8.6

2007 3.0 5.0 8.0

2008 2.2 5.1 7.2

2009 1.9 7.4 9.4

Dies
remaining life of age of asset Life of asset
asset (yrs) (yrs) (yrs)

2005

2006 2.4 5.1 7.5

2007 2.3 5.7 8.0

2008 1.9 7.8 9.7

2009 2.4 12.3 14.7

Jigs, fixtures, electrical installations, furniture and
fittings
remaining life of age of asset Life of asset
asset (yrs) (yrs) (yrs)

2005

2006 3.6 6.4 10.0

2007 3.2 7.2 10.4

2008 2.7 8.9 11.6

2009 2.9 12.8 15.7

Vehicl
es
remaining life of age of asset Life of asset
asset (yrs) (yrs) (yrs)

2005

2006 5.1 3.0 8.1

2007 7.4 4.1 11.5

2008 8.0 5.8 13.8

2009 9.5 4.5 14.0

air conditioners, refrigerators, office equipment and computers

remaining life of age of asset Life of asset
asset (yrs) (yrs) (yrs)

2005
 2006 3.5 4.2 7.6

2007 2.5 3.5 6.0

2008 2.3 5.0 7.3

2009 2.6 7.8 10.4

By calculating the age of fixed assets we can come to know of how much assets
are more useful for the company and how much service have the assets already
provided. This gives us an estimate of the quality of the assets utilized in the
company. Plant and machinery and buildings have served terms up to 8 years
and have still a good remaining life which means that they can be very useful for
the company for the next 3 years or so. Vehicles have a similar trend while other
assets have a life ranging on from 2 to 10 years. This means that the need for
financing new assets is relatively less.

UTILIZATION OF ASSETS – DUPONT ANALYSIS

Net Margin Asset Turnover Financial Leverage

(%) (times) (times) ROE (%)
200
5 6.3% 1.89 2.40 28.6%
200
6 7.0% 2.07 2.08 30.0%
200
7 5.5% 2.40 1.52 19.9%
200
8 1.6% 2.34 1.20 4.4%
200
9 1.0% 1.49 1.23 1.8%

CAPITAL WORK IN PROGRESS

Asset Turnover Financial Leverage ROE
Net Margin (%) (times) (times) (%)
2005 6.3%
2006 7.0% 2.13 2.02 30.0%
2007 5.5% 2.42 1.51 19.9%
2008 1.6% 2.42 1.16 4.4%
2009 1.0% 1.56 1.17 1.8%

With this method, assets are measured at their gross book value rather than at
net book value in order to produce a higher return on equity (ROE). It is also
known as "DuPont identity".

DuPont analysis tells us that ROE is affected by three things:

- Operating efficiency, which is measured by profit margin
- Asset use efficiency, which is measured by total asset turnover
- Financial leverage, which is measured by the equity multiplier

Profit margin tells us how much earning on sales has been there which as clearly
seen has been declining in the years. Asset turnover tells us how much utilization
of assets has been there in generating sales which has also declined till 2009.
Leverage helps us identify how much riskier the firm has become by borrowing
which has increased from 2008 but generally decreased. Removing the false
assumption by taking the capital work in process even, ROE has declined at a
huge rate which shows that the company’s efficiency has gone down a lot. It is
not generating enough sales on assets.

LEVERAGE RATIOS – OPERATING

RISK
BREAK EVEN AND DOL

2009 2008 2007 2006

Total Fixed 5,32 2,9 3,25 2,90
Cost(Rs) 6,436,000 88,903,000 1,919,000 7,004,000
25,324 37,49 44,405 43,671,
Total Cost (Rs) ,294,000 2,389,000 ,377,000 793,000
Total Variable 19,997 34,50 41,153 40,764,
Expense (Rs) ,858,000 3,486,000 ,458,000 789,000
26,234 39,66 50,844 48,203,
Sales ,061,000 9,730,000 ,632,000 084,000
Contribution 6,236 5,16 9,691 7,438,
Margin (Rs) ,203,000 6,244,000 ,174,000 295,000
Contribution
Margin % 23.8% 13.0% 19.1% 15.4%
Break Even 22,406,9 22,950,7 17,061,1 18,838,53
point (rs) 11,214 11,388 55,320 1,949
operating income 44 1,04 4,743 5,817,
(rs) 0,407,000 5,646,000 ,147,000 174,000
DOL (times) 14.16 4.94 2.04 1.28

ROA is used to calculate the stability of the operating income of the firm in the
coming years. Operating leverage involves using a large proportion of fixed costs
to variable costs in the operations of the firm. The higher the degree of operating
leverage, the more volatile the EBIT figure will be relative to a given change in
sales, all other things remaining the same. Thus through break even we see how
far is the company doing well from its costs being made and how much stable is
going to be the operating income relative to the change in sales. DOL as can be
seen has increased from 2006 to 2009 for PSMCL which means that the
operating income is quite unstable with relation to change in sales. From 2006 to
2009 the difference between the sales and breakeven point has reduced.

SALES AND GROSS PROFIT

ANALYSIS
2009 2008 2007 2006
Production Volume 1 1
(No.s) 65,562 117,113 51,144 34,529
Cost of Goods Sold 25,664,76 39,081,67 46,084,40 42,509,37
(Rs) 2,000 7,000 0,000 4,000
Cost of Goods Sold 3 3
per unit (Rs) 391,458 333,709 04,904 15,987
1 1
Sales Volume (No.s) 66,670 120,146 54,488 32,374
26,234,06 39,669,73 50,844,63 48,203,08
Sales (Rs) 1,000 0,000 2,000 4,000
Sale price per unit 3 3
(Rs) 393,491 330,179 29,117 64,143

Sale price per unit 3 3

(Rs) 393,491 330,179 29,117 64,143
Cost of Goods Sold 3 3
per unit (Rs) 391,458 333,709 04,904 15,987
Gross Profit per unit
(Rs) 2,033 (3,530) 24,213 48,156
Gross Profit Margin
(per unit) % 0.5% -1.1% 7.4% 13.2%

Upon calculation it has been deduced that changes in CGS are mostly due to
price of raw materials. In sales and CGS it is a fluctuating trend. From 2006 the
sales price decreased till 2007 when it took the higher turn. The same has been
for CGS but the production volume has declined from 2006 consistently. This
means that the increase in sales price is due to the decrease in volume and of
course cost. Gross profit has decreased.

CASH FLOW STATEMENT

(Rs) Cash from Cash from Cash from
operations investing financing
2006 (915,245,000) (316,830,000) (269,749,000)
2007 (1,727,673,000) (1,002,562,000) (50,000)
2008 (2,151,360,000) (423,418,000) (410,132,000)
2009 1,969,420,000 (841,184,000) (81,757,000)

From the above table, it can be deduced that PSMCL can be said to be a growing
firm only in 2009 since from 2006 till 2008 its case from operation is negative
which means that operating activities aren’t generating profit.

Automobile Industry in Pakistan

The automotive assembling in Pakistan started in 1950 when National
Motors Limited, a public limited company and the pioneer in the industry,
came into existence, established by General Motors of USA National
Motors assembled passenger cars as well as commercial vehicles which
carried “General Motors” brands such as Bedford, Vauxhall, Chevrolet. A
regular car industry started in the country in 1983, when Suzuki
commenced production eyeing the small and LCV car segment of 800cc-
1000cc range, and introduced Suzuki car which targeted the middle-
income group (constituting the larger segment of the market) by
providing an affordable car. Then there was a long gap until the early 90’s
when Indus Motor Company was established to manufacture Toyota
vehicles in Pakistan. Soon after Honda Atlas came with the Civic and
Gandhara Nissan entered the market with Sunny. In the late 90,s Dewan
Farooque Motors set up a plant to manufacture Hyundai and Kia vehicles
in Pakistan. Since then the market has changed all together. After
struggling through nineties, a decade full of uncertainties and frequent
policy the Pakistani Auto Industry has been able to achieve double digit
growth consistently since the last 4 years. The industry operates under
franchise and technical cooperation agreements with Japanese,
European and Korean manufacturers. Lately Few new market players
entered the market such as Gandhara Nissan again with now the imported
Nissan range of vehicles, Dewan Mushtaq Motors with imported Mitsubishi
range of vehicles, Nexus Automotive with Chevrolet imported vehicles and
others imported Chinese vehicles such as Karakoram Motors, Roma
Automobiles and Foton by Dewan Innovations Limited along with Pak
Cherry Automobiles. Sigma Motors made its mark with Rover recently.
Apart from these the big brands of the auto industry also entered the
Pakistani market such as BMW , Mini & Rolls Royce by Dewan Motors,
Porsche, Mercedes and Audi have also launched their brands in Pakistan
catering to the very upper niche.

Sector Overview
There are presently 82 vehicle assemblers in the industry producing
passenger cars, light commercial vehicles, trucks, buses, tractors and 2/3
wheelers. Besides these there are over 400 players in the vendor industry.
The total direct employment in the sector is around 500,000. The auto
industry has played a significant role in the large scale manufacturing
industry as it contributes Contribution to GDP Rs. 153 billion to the
economy besides import substitution resulting in annual foreign exchange
savings of over $ 1 billion. An investment of over Rs. 100 billion as been
done in the automobile sector giving Revenues of above Rs. 50 billion that
accounts for 8% of the total. There is still potential in the auto industry
for more investment. During the period July-April 2006-07 automobile
industries recorded some what subdued growth in
assembling/manufacturing business.

DEWAN FAROOQUE MOTOR COMPANY

Introduction
It was five years ago that Dewan Mushtaq Group diversified its business
activities by entering into the automobile industry. Dewan Farooque
Motors Limited signed Technical License Agreements with Hyundai Motor
Company and Kia Motors Corporation in December 1998, as the
progressive manufacturer and distributor of Hyundai and Kia vehicles in
Pakistan. Dewan Farooque Motors Limited acquired franchises of Hyundai
Motor Company and Kia Motors Corporation to bring in Korean technology
to the country to produce vehicles of high quality at reasonable prices,
offering the highest value for money.Over the past five years, Dewan
Farooque Motors Limited (DFML) has earned national recognition in
producing a diversified range of vehicles for people from different walks of
life. The plant has state-of-the-art production facilities located at Sujawal,
around 145 km from Karachi in southern Pakistan

Mission Statement
The mission of Dewan Mushtaq Group is to be the finest organization, and
to conduct business responsibly and in a straightforward way.Our basic
aim is to benefit the customers, employees and shareholders, and to fulfill
our commitment to the society.Our hallmark is honesty, initiative and
teamwork of our people, and our ability to respond effectively to change
in all aspects of life including technology, culture and environment.We will
create a work environment, which motivates, recognizes, and rewards
achievements at all levels of the organization, because in God we trust
and in people we believe.We will always conduct ourselves with integrity
and strive to be the best.

Corporate Philosophy
The Group’s corporate philosophy is based on following principles laid
down by its founders and predecessors:- Credibility, integrity and honesty
- Straight forward business dealings- Work as a worship - Spirit of social
service and human respectBy following the above philosophy, the Group
enjoys an excellent corporate image amongst business community, banks,
financial institutions, and governmental circles. The market price of Group
companies’ shares is the most prominent reflection of this confidence.

Financial Analysis
SHORT-TERM SOLVENCY
Table 1.1 and 1.2 give the liquidity ratios of Dewan motors Limited respectively
and are followed by the analysis of these ratios.

Table 1.1: Liquidity Ratio

Ratios 2005 2006 2007 2008 2009

Current 1.04 1.05 1.03 0.95 0.58

ratio

Quick 0.45 0.90 0.19 0.30 0.17

ratio

Working 168828000 264589000 139747000 (18605800 (18054290

capital 0) 00)

Interpretation
The current ratio of the company is been progressing from 2005 to 2007
but I think the company is facing a lots of problems facing related to
liquidity this could be the reason behind is the inventory problems or a
company might be facing problems in receiving their credits.2005 to 2007
shows increased in current ratio but there is suddenly drop in 2008 from
1.03 to 0.95 that shows the company fail to solve it inventory of
receivables problem. So it is been observed that company might have
highlighted their problems and trying to resolve them The past five year
performance of the company related to the quick ratio is telling us that
the company is highly involved in inventory problems and the reason
behind this that they are taking to much time in converting their inventory
into sales thus in such a way the company liquidity is below 1.0 this could
be a most dangerous sign for the company .this problems may lead
company towards liquidity crunch. Another reason could be that company
is taking too much time in receiving their credits.
Table 1.2: Efficiency Ratio

Ratios 2005 2006 2007 2008 2009

Inventory 4.10 3.13 3.89 3.89 2.87

turnover

Account 10.00 30 14.5 9.65 3.28

receivabl
e
turnover

Interpretation

The inventory turnover of the company is been observed that it is

fluctuating since past five years. as I said above that the company is
facing liquidity crisis thus these problems are leading towards liquidity
problems in such a way we can say that since past five year the company
can convert maximum 4 times in last year of 2005 and then its keep on
fluctuating although it has touched lowest figure in 200 to 2 times, so thus
the sales of the company are sounds like changing at a higher rate and
keep on fluctuating.

As we can see that the company is taking too much time in receiving their
credits and we can see that by this trend since past 5 year in 2005 and
2007 the company was quite efficient in collecting their receivables but
after year 2008 the company is facing hell lot of collection problems this
problem could lead the company towards inappropriate growth rate a
company should have a nominal collection period in order to get their
payments back and reinvest those amount.
LONG TERM SOLVENCY

Ratios 2005 2006 2007 2008 2009

Time 0.20 0.88 1.27 (0.83) (11.75)

Interest
earn
Debt ratio 0.79 0.78 0.75 0.82 1.10

Debt/equi 3.85 3.71 3.08 4.51 (10.54)

ty ratio

Interpretation

The company debt ratio is been quite consistent from 2005 to 2007, it was
increased from 2008 that is quit positive sign because company improving
it debt.

The company debt/equity ratio from 2005 to 2007 is improving but after it
shows negative effect because company equity portion has fall down and
2009 it goes to negative figure, As it shows company has poor
performance in 2008 and 2009, may be many investors withdraw their
money or because of some other factor company equity has been down in
2008 and 2009

Time interest earn shows that company was capable enough with
covering their finance cost till 2005 but after this the company profitability
starts declining thus in such a way company was unable to cope with their
interest expenses and in such a ways the efficiency of recovering loans
has been decreased
PROFITABILITY RATIO

Ratio 2005 2006 2007 2008 2009

Gross profit 0.12 0.12 0.12 0.03 (0.53)

rate

Operating 0.04 0.06 0.06 0.08 0.28

expense ratio

Net income as 0.03 0.02 0.01 (0.08) (0.80)

a % of net
sales(Profit
margin)
Return on (0.28) (0.04) 0.07 0.01 0.11
Assets(ROA)

Return on (1.95) (0.38) 0.04 0.02 0.24

equity(ROE)

Interpretation

The company return in the beginning was quite nominal and going very
good in fact till 2005 it was progressing and increasing smoothly but after
2005 the company’s return on asset and on equity suddenly decreased
drastically and in such a ways the company start loosing their investor the
main reason could be high financing cost, and the problems in inventories
the company should utilize their assets and work on sales

The company gross profitability is been quite consistent and from 2005 to
2007 its been stable only slight changes have been occurred but we have
seen a decreased in Np margin in last 2 years it seems that the company
is highly debt finance and the interest expense of the company is hurting
company’s profitability the main reason could be that company is taking
high loans thus leads to high interest expenses
PRICE OR QUANTITY

2005 2007 2008 2009

Quantity 15010 units 10334 8,854 units 2323 units

produced units

Cost of 6,981,066,0 501749000 4,777,317,0 2380760000

goods 00 0 00
manufactur
ed
Per unit 465,094.34 485,532.22 539,565.96 1,024,864.4
cost 0

Quantity 15,919.61 12,055.28 9,071 units 2,265 units

sold

Sale Price 551,889.02 600,190.29 582,390.04 687,354.48

Cost 465,094.34 485,532.22 539,565.96 1,024,864.4

0

Interpretation
The Company production capacity is 10,000 units per year. From 2005 to 2007
company have good production they achieved target and they have good sales
about 8.5 billion and 7.2 billion, afterward the production has down, sales reached to
5.2billion and 1.5 billion in 2008 and 2009. In 2009 company has serious problem,
they produced 23 % of the production capacity, and because they produced very low
quantity, having low sales. 5 year data shows that sales price is not the factor to
increase or decrease the sales; I think quantity is the factor that affects the sales.

Calculations:
2009
Production Cost Per unit cost
Cost of
production 2323 2380760000 1,024,864.40
Opening
inventory 69,330,000.00
Total 2,450,090,000.0
available 2390.647974 0 1,024,864.40
Ending
inventory 125.42 128535000 1,024,864.40
Cost of good 2,321,555,000.0
sold 2,265.23 0

sale price sale /sold production

sale 1557016000

sold production 2,265.23

687,
sale price 354.48

2008
Production Cost Per unit cost
Cost of 4,777,317,000.0
production 8,854.00 0 539,565.96
Opening
inventory 186,450,000.00
Total 4,963,767,000.0
available 9,199.56 0 539,565.96
Ending
inventory 128.49 69,330,000.00 539,565.96
Cost of good 4,894,437,000.0
sold 9,071.06 0

sale price sale /sold production

5,282,895,00
sale 0.00
9,
sold production 071.06
582,3
sale price 90.04
2007
 Per unit
Production Cost cost
Cost of
production 10334 5017490000 485,532.22
Opening
inventory 1,022,189,000.00
Total available 12439.296 6,039,679,000.00 485,532.22
Ending
inventory 384.01 186,450,000.00 485,532.22
Cost of good
sold 12,055.28 5,853,229,000.00

sale price sale /sold production

sale 7235462000
12
sold production ,055.28
600,
sale price 190.29

2005
Per unit
Production Cost cost
Cost of 6,981,066,000.0
production 15010 0 465,094.34
Opening
inventory 546,670,000.00
Total 7,527,736,000.0
available 16185.39595 0 465,094.34
Ending
inventory 265.79 123,617,000.00 465,094.34
Cost of good 7,404,119,000.0
sold 15,919.61 0

sale price sale /sold production

sale 8785858000
sold
production 15,919.61

55
sale price 1,889.02

ASSET VALUATION
Asset: Building

2009 2008 2007 2005

Cost 1120983000 1120983000 1115837000 855645000

Accumulate 293778000 250256000 204691000 121660000

d
Depreciatio
n Building

Depreciatio 43522000 45565000 42991000 35118000

n Expense

Book Value 827205000 870727000 911146000 733985000

2009 2008 2007 2005

Age of 6.750103396 5.49228574 4.761252355 3.46432029

Building 6 2
Remaining 19.00659437 19.1095577 21.19387779 20.9005353
age of 7 4
Building
Interpretation

Dewan motors’ building approximately consumed company need to focus

on it.

Asset: Plant & Machinery

2009 2008 2007 2005

Cost 1517244000 1517244000 1516875000 1376270000

Accumulate 784576000 703135000 612663000 498427000

d
Depreciatio
n plant &
machinery

Depreciatio 81441000 90472000 84085000 96115000

n Expense

Book Value 732668000 814109000 904212000 877843000

2009 2008 2007 2005

Age: 9.6 7.7 7.2 5.1

plant & 3 7 9 9
machinery

Remainin 9.0 9.0 10.7 9.1

g age: 0 0 5 3
plant &
machinery

Interpretation

Dewan motors’ plant and machinery are in acceptable position life is half
consumed which means company need to focus these asset to earn profit.

Asset: Furniture & fixture

2009 2008 2007 2005

Cost 165150000 165150000 162007000 69775000

Accumulate 62927000 51568000 39179000 21682000

d
Depreciatio
n furniture
& fixtures

Depreciatio 11358000 12392000 13087000 4931000

n Expense

Book Value 102223000 113582000 112831000 48039000

2009 2008 2007 2005

Age: 5.54 4.16 2.99 4.40
furniture
& fixtures
Remainin 9.00 9.17 8.62 9.74
g age:
furniture
& fixtures
Interpretation

Dewan’s fixture and furniture have in acceptable position

Asset: Vehicles

2009 2008 2007 2005

Cost 256404000 256404000 242480000 166572000

Accumulate 146477000 129271000 104630000 54842000

d
Depreciatio
n vehicles

Depreciatio 25812000 29058000 31870000 21016000

n Expense

Book Value 103918000 127133000 137850000 111730000

2009 2008 2007 2005

Age 5.67 4.45 3.28 2.61

vehicles
Remainin 4.03 4.38 4.33 5.32
g vehicles

Asset: Office equipment

2009 2008 2007 2005

Cost 86410000 86410000 83591000 43427000

Acc: Dep 34301000 28504000 22169000 7980000

Office
equipment

Depreciatio 5797000 6335000 6324000 2548000

n Expense

Book Value 52182000 57909000 61422000 35447000

2009 2008 2007 2005

Age Office 5.9 4.5 3.5 3.1

equipmen 2 0 1 3
t
Remainin 9.0 9.1 9.7 13.9
g Office 0 4 1 1
equipmen
t
Interpretation

Dewan’s motor office equipment and motors are also having good position
 Overall interpretation

Dewan motor’s asset have in stable position most of assets having

enough life only the building have almost consumed.

CASH FLOW ANALYSIS

Cash flow
activities 2009 2008 2007 2005
Investing (298,272,00 (67,266,000
activities 70,007,000 0) ) 1,089,373,000
Operation (227,747,000 623,830,00 368,111,00 (1,368,301,00
activities ) 0 0 0)
Financing (456,657,00 (149,227,00
Activities 181,126,000 0) 0) 136,667,000

Interpretation

In 2009 company have negative operating activities which is poor

performance because of negative sale and inefficiency of collecting
receivable, that clearly which shows in account receivable turnover .They
have positive investing activities which means no such investing has
occurred in 2009. Financing activities are positive because of debt no such
financing came from internal cash flow and equity. In short 2009 company
has not grown it assets, show poor performance. In 2008 and 2007 having
positive operating activities and negative investing activities which is
good, in particular year they investing in capital expenditures, which
mean company has grown it assets

DEGREE OF OPERATING LEVERAGE (RISK OF THE

ORGANIZATION)

2009 2008 2007 2005

Variable 472108000 505580000

cost

Fixed cost 432508000 461513000

Operating 1.66 1.11

leverage

Interpretation

Honda Pakistan
Financial Analysis
Short-term solvency

Table 1.1 and 1.2 give the liquidity ratios of Honda Pakistan Limited respectively and are followed by
the analysis of these ratios.

Table 2.1: Liquidity Ratio

2009 2008 2007 2006 2005

Current Current
ratio Assets/
Current
Liabilities 0.69 0.78 0.45 0.35 0.53
Quick Quick Assets/
Ratio Current
Liabilities
0.17 3.75 1.41 0.71 1.1
Working Current
Capital Assets
(‘000) -Current
Liabilities (1684505) (6515377) (2236512) (3235481) (1893546)
ANALYSIS:

The current ratio of the company showed varied trends and it kept on shifting while touching the
lowest in year 2006 and the highest in 2008. The main reason behind this can be the company
liquidity problems and the high inventory turnover rates. The liquidity problems are quite evident in
the quick ratio which became least in the year 2009. The working capital of the company is in the
negative throughout the five year period. This shows that Honda Pakistan relies heavily on the
creditors and borrowings for their operation. This also indicates that there is a marked difference in
the assets and the liabilities under operations.

Table 1.2: Efficiency Ratio

Ratios 2005 2006 2007 2008 2009

Receivable Av.sales/A
Turnover rate C.Rec
17% 29% 20% 23% 15%
Inventory COGS /
Turnover Ratio Avg.
Inventory
4.7 8.73 5.39 4.69 7.3

Inventory Analysis

The inventory turnover of the past 5 years shows a variable trend in the performance. The
company is facing liquidity crisis due to which inventory ratios keep fluctuating. In 2006, the
inventory turnover rate reached 8.73 which shows that the sales in that year did not perform
well.

Receivable Analysis

In 2005, the receivable rate was low which shows that company was getting its receivables on
time. While from 2006-20087, the company faced problems in this regard. However in 2009,
this ratio seems to have stabilized with a receivable of 17%.

LONG TERM SOLVENCY

Ratios 2005 2006 2007 2008 2009

Debt ratio 2.0 1.3 1.5 1.1 2.51
Debt/equity 0.56 0.4 1.23 0.52 0.71
ratio

Debt ratio:

The company debt ratio is been quite consistent from 2006 to 2008. In 2005 and in 2009, the
company borrowed capital which increased its debt ratio. This increase in borrowings made
the company more risky. The debt equity ratio, on the other hand shows that in 2007, the
company heavily relied on the stockholders finance but in the rest of the years, the
debt/equity ratio was quite stable.
 Ratio Formula 2009 2008 2007 2006 2005
Gross profit rate Gross profit/net sales 1.2% 4.2% 3.2% 2.2% 1.5%
Operating expense Operating 4.0% 2.2% 3.5% 2.1% 3.4%
ratio expenses/net sales
Net income as a % Net income/net sales (2.82)% (2.0)% (2.5)% (2.6)% 2.1%
of net sales(Profit
margin)
Earning per share Net income/average 2.79 2.08 2.4 2.3 2.7
number of shares
outstanding
Return on Operating income/ 1.0% 1.2% 1.3% 2.1% 1.2%
Assets(ROA) average total assets
Return on Net income/ average 1.4% 1.7% 1.3% 1.4% 1.8%
equity(ROE) total equity

PRICE OR QUANTITY

2009 2008 2007 2006 2005

Quantity 18240
produced
12,780 15080 31476 20040
Cost of goods
manufactured 400,312,00 17,954
14373456000 0 ,027,000 24,535,584,000 16377238000
Per unit cost 93,42 485,532.22
5,93,360.25 1.75 77,745.5 81358.19
Quantity sold 92,555 2399.
11658.38 2267.31 .92 0 79676.75
Sale Price 6,49,0 32 10,
1213688.86 28.80 95,777.62 68,724.3 2,08,181.39
Cost 14,088,001
13,973,144,000 ,000 16,882,200,000 24,471,184,000 16304182000

The increase in sales over the past 5 years indicates that these increased sales are due to the
increase in the sale price of the cars. Moreover, there is a marked increase in the price in the
year 2007, due to increased number of production and the highest level of sold quantities in
the current trend.

Calculation

2009

production cost per unit cost

cost of production 12,780 13,973,144,000 5,93,360.25
opening inventory 674.65 400,312,000 5,93,360.25
total available 13454.65 14373456000 5,93,360.25
ending inventory 1796.27 1,065,836,000 5,93,360.25
2,321,555,000.
cost of good sold 11658.38 00 5,93,360.25

sale price sale /sold production

sale 14,149,646,000
sold production 11658.38

sale price 1213688.86

2008

production cost per unit cost

14,088,001,00
cost of production 15080 0 93,421.75
opening inventory 7197.12 672368,000 93,421.75
4284. 93,421.
total available 99 400,312,000 75
93,421.
ending inventory 2017.68 188,496,000 75
cost of good sold 2267.31 4775271000 93,421.75

sale price sale /sold production

sale 14715495,000
2267.
sold production 31
6,49,028
sale price .80

2007

production cost per unit cost

92,555.
cost of production 18240 16,882,200,000 92

opening inventory 11,580.31 1,071,827,000 92,555.92

17,954,027,00 92,555.
total available 12439.296 0 92
92,555.
ending inventory 7264.45 672,368,000 92
 5,
cost of good sold 174.84 18,626,395,000 92,555.92

sale price sale /sold production

sale 17,055,115,000
sold production 5,174.84
3,29577
sale price 7.62

2006

production cost per unit cost

cost of production 31476 24,471,184,000 77,745.5

opening inventory 879.79 68,400,000 77,745.5

total available 16185.39595 24,535,584,000 77,745.5
ending inventory 13786.35 1,071,827,000 77,745.5
cost of good sold 2399.0 23,463,757,000 77,745.5

sale price sale /sold production

sale 25638698000

sold production 2399.0

10,68,7
sale price 24.3

2005

production cost per unit cost

cost of production 20040 16304182000 81358.19

opening inventory 879.79 73056000 81358.19

total available 81358.19 16377238000 81358.19
8440.
ending inventory 72 68400000 81358.19
cost of good sold 79676.75 16308838000 81358.19

sale price sale /sold production

sale 16587217000
sold production 79676.75
sale price 2,08,181.39
DEGREE OF OPERATING LEVERAGE (RISK OF THE
ORGANIZATION)

ASSET VALUATION

2009 2008 2007 2006 2005

Cost 1,951,128 1951128 1949026 417388 411888
Accumulated Depreciation 486,368 409275 328152 253061 235150
building
Depreciation Expense 77,093 81123 97358 17911 16596

Book Value 1,464,760 1541853 1620874 164327 149364

2009 2008 2007 2006 2005

Age building 6.30 5.04 3.37 14.12 14.16
Remaining plant & machinery 18.99 19.06 16.64 9.17 9.0

2009 2008 2007 2006 2005

Cost 4,636,793 2991883 2784048 1090362 992132

Accumulated Depreciation plant 1,522,643 1259343 919777 744281 653794
and machinery

Depreciation Expense 402,893 339886 323504 97055 97799

Book Value 3,114,150 1732540 1864271 346081 226188

2009 2008 2007 2006 2005

Age building 3.79 3.70 3.0 5.0 5.6
Remaining plant & machinery 7.72 5.09 9.5 10.3 13.5
Year 2009 2008 2007 2006 2005
Cost 98,454 90640 8404 45801 35026
Accumulated 50,155 39564 27309 19040 13633
Depreciation
furniture and
equipment

Depreciation 10,700 12336 8331 5442 2730

Expense

Book Value 48,299 51076 57095 26761 10920

2009 2008 2007 2006 2005

Age building 3.5 4.0 5.5 5.1 6.2
Remaining plant & machinery 11.2 12.5 13.7 13.9 14.5

2009 2008 2007 2006 2005

Cost 150,627 118166 116876 95020 69362
Accumulated 50,459 45284 44366 33058 32448
Depreciation
vehicles

Depreciation 18,561 16471 15188 13265 8072

Expense

Book Value 100,168 72882 72501 61962 32287

2009 2008 2007 2006 2005

Age building 5.0 4.88 4.97 5.96 6.04
Remaining plant & machinery 14.32 13.5 13.86 15.28 15.74

2009 2008 2007 2006 2005

Cost 72,026 68159 62384 45175 43228
Accumulated 39,429 32182 24167 23123 25858
Depreciation
tools and
equip

Depreciation 7,412 8297 7620 23123 3282

Expense
Book Value 32,597 35977 38217 24052 6095

2009 2008 2007 2006 2005

Age building 10.36 9.58 6.87 7.89 6.6
Remaining plant & machinery 14.58 16.58 14.25 13.85 11.35

INDUS MOTOR COMPANY

The Indus Motor Company Limited (IMC) is a joint venture between the House
of Habib , Toyota Motor Corporation, Japan (TMC), and Toyota Tsusho
Corporation, Japan (TTC) for assembling, progressive manufacturing and
marketing of Toyota vehicles in Pakistan since July 1, 1990. Indus Motor
Company is engaged in sole distributorship of Toyota and Daihatsu Motor
Company Limited vehicles in Pakistan through its dealership network.
The company was incorporated in Pakistan as a public limited company in
December 1989 and started commercial production in May 1993. The shares of
company are quoted on the stock exchanges of Pakistan. Toyota Motor
Corporation and Toyota Tsusho Corporation have 25 % stake in the company
equity. The majority shareholder is the House of Habib.
IMC's production facilities are located at Port Bin Qasim Industrial Zone near
Karachi in an area measuring over 105 acres.
Indus Motor company's plant is the only manufacturing site in the world where
both Toyota and Daihatsu brands are being manufactured.
Heavy investment was made to build its production facilities based on state of
art technologies. To ensure highest level of productivity world-renowned Toyota
Production Systems are implemented.
IMC's Product line includes 6 variants of the newly introduced Toyota Corolla,
Toyota Hilux Single Cabin 4x2 and 4 versions of Daihatsu Cuore. We also have a
wide range of imported vehicles.

Short term solvency liquidity ratio

Current
ratio
year Current assets Current liabilities Ratio
2009 16,715,319,000 9,884,850,000 1.7
2008 9,664,784,000 3,779,631,000 2.6
2007 13,560,329,000 7,410,926,000 1.8
2006 14,095,657,000 9,444,554,000 1.5
2005 12,016,361,000 8,502,483,000 1.4

In 2009 the current ratio is low as compare to 2008 which is 2.6. As we

see the compartion over the 5 years the current ratio is increasing but it is
still decreasing in 2009. It is above 1 which is good.

Working capital
Current assets Current liabilities working capital
2009 16,715,319,000 9,884,850,000 6,830,469,000
2008 9,664,784,000 3,779,631,000 5,885,153,000
2007 13,560,329,000 7,410,926,000 6,149,403,000
2006 14,095,657,000 9,444,554,000 4,651,103,000
 2005 12,016,361,000 8,502,483,000 3,513,878,000

Positive working capital means that the company is able to pay off its
short-term liabilities. Negative working capital means that a company
currently is unable to meet its short-term liabilities with its current assets
(cash, accounts receivable and inventory). The working capital is
increasing over the years as we can see in the table which means the
company can pay off its short term obligations.

Activity Ratios
Trade debt turnover ratio

trade trade debt trade debt turnover

sales debt turnover ratio in days
200 37,864,6 1,736,6
9 04 31 21.8 16.7
200 41,423,8 1,332,8
8 43 32 31.1 11.7
200 39,061,2
7 26 665,647 58.7 6.2
200 35,236,5
6 35 738,281 47.7 7.6
200 27,601,0
5 34 384,511 71.8 5.1

Trade debt are the A/R. An accounting measure used to quantify a firm's
effectiveness in extending credit as well as collecting debts. The receivables
turnover ratio is an activity ratio, measuring how efficiently a firm uses its
assets. The ratio here has been decreasing from 2005 to 2009 which shows that
the company’s performance is poor in collecting it’s credit from sales on credit
which is also due to the fact that more sales on credit is done.

Inventory turnover ratio

Inventory
Year CGS Avg inventory turnover Ratio

2009 35,540,418 4,088,858 8.7

 2008 37,575,356 2,637,629 14.2
2007 34,620,632 2,859,951 12.1
2006 31,088,906 3,959,316 7.9
2005 24,975,614 3,168,855 7.9

A ratio showing how many times a company's inventory is sold and replaced over
a period. The performance of the company in selling its inventory became better
till 2008 but in 2009 they took a swift turn and decreased performance by half.
Now it takes more days to sell the inventory which is not a good sign.

Long term solvency ratios

Asset turnover ratio
TOTAL ASSET
SALES ASSETS TURNOVER ratio
200 37,864,6
9 04 20,685,523 1.8
200 41,423,8
8 43 13,748,109 3.0
200 39,061,2
7 26 15,665,050 2.5
200 35,236,5
6 35 15,822,468 2.2
200 27,601,0
5 34 13,032,938 2.1

The company has been less efficient in generating sales from its assets but has
done well in 2008. This may be due to the increase in sales in 2008 being the
highest.

Debt to equity ratio

total liabilities & total shareholder Debt to equity
equity equity total liabilities ratio
200
9 20,685,523 10,296,973 10,388,550 1.009
200
8 13,748,109 9,436,340 4,311,769 0.457
200
7 15,665,050 8,043,975 7,621,075 0.947
200 15,822,468 6,257,879 9,564,589 1.528
 6
200
5 13,032,938 4,475,805 8,557,133 1.912

Indicates the relative portion of debt and equity used to finance assets. Less
debt is used to finance assets and more equity since 2005 to 2008 but the ratio
turned up in 2009.

Debt to Asset ratio

total TOTAL Debt to
laibilities ASSETS assets ratio
200
9 10,388,550 20,685,523 0.5
200
8 4,311,769 13,748,109 0.3
200
7 7,621,075 15,665,050 0.5
200
6 9,564,589 15,822,468 0.6
200
5 8,557,133 13,032,938 0.7

A metric used to measure a company's financial risk by determining how much

of the company's assets have been financed by debt. The ratio has been
improving since less assets have been financed by debt in 2009.

Times interest earned

Times Interest
operating Income (Rs) Interest expense Earned
2009 2,072,553 26,540 78
2008 3,544,471 2,760 1,284
2007 4,252,166 22,685 187
2006 4,199,722 126,945 33
2005 2,397,050 94,093 25

A metric used to measure a company's ability to meet its debt obligations. The
company could meet its obligations in 2008 the best but declined due to more
borrowing.
Profitability ratios
2009 2008 2007 2006 2005
37,864,604, 41,423,843, 39,061,226, 35,236,535,0 27,601,034,0
net sales 000 000 000 00 00
2,324,186,0 3,848,487,0 4,440,594,0 4,147,629,00 2,706,178,00
gross profit 00 00 00 0 0
gross profit
margin 6.1% 9.3% 11.4% 11.8% 9.8%

1,385,102,0 2,290,845,0 2,745,701,0 2,648,464,00 1,484,646,00

net income 00 00 00 0 0
net income
margin 3.7% 5.5% 7.0% 7.5% 5.4%

number of
shares
outstanding 78,600,000 78,600,000 78,600,000 78,600,000 78,600,000
earnings per
share 17.62 29.15 34.93 33.70 18.89

The ratios show that the company experienced a growth in terms of profit in
2006-2007 which was the highest. In 2009 the ratios are the lowest generating
the least marginal profit for the firm.

Fixed assets – Age and Quality

Fact accumulate book remaining life age of
ory Cost d dep dep value of asset asset
914,680, 348,118,00 79,662, 566,562,
2009 000 0 000 000 7.1 4.4
871,725, 268,456,00 46,155, 603,269,
2008 000 0 000 000 13.1 5.8
549,778, 222,301,00 31,436, 327,477,
2007 000 0 000 000 10.4 7.1
3906390 190,865,00 23,405, 199,774,
2006 00 0 000 000 8.5 8.2
 317,915, 167,460,00 16,502, 150,455,
2005 000 0 000 000 9.1 10.1
Plant and
machinery
accumulate book remaining life age of
Cost d dep dep value of asset asset
4,347,07 2,074,133,0 416,336 2,272,94
2009 3,000 00 ,000 0,000 5.5 5.0
3,886,91 1,665,115,0 213,801 2,221,80
2008 7,000 00 ,000 2,000 10.4 7.8
2,537,88 1,462,138,0 208,219 1,075,74
2007 0,000 00 ,000 2,000 5.2 7.0
1,983,20 1,238,937,0 172,378 744,264,
2006 1,000 00 ,000 000 4.3 7.2
1,427,22 1,069,552,0 131,438 357,677,
2005 9,000 00 ,000 000 2.7 8.1

Motor vehicles
accumulate book remaining life age of
Cost d dep dep value of asset asset
174,095, 29,944, 108,331,
2009 000 65,764,000 000 000 3.6 2.2
175,899, 25,408, 115,725,
2008 000 60,174,000 000 000 4.6 2.4
114,270, 17,520, 79,555,0
2007 000 34,715,000 000 00 4.5 2.0
119,039, 16,701, 82,222,0
2006 000 36,817,000 000 00 4.9 2.2
52,476,0 11,782, 21,297,0
2005 00 31,179,000 000 00 1.8 2.6

By calculating the age of fixed assets we can come to know of how much assets
are more useful for the company and how much service have the assets already
provided. This gives us an estimate of the quality of the assets utilized in the
company. Plant and machinery and factory have served terms up to 8 years and
have still a good remaining life which means that they can be very useful for the
company for the next 3 years or so. Vehicles have served a life up to 4 years and
3 years more of quality remain. This means that the need for financing new
assets is relatively less.

Fixed asset – utilization

Dupont Analysis

financial
year net margin assets turnover leverage ROE
2009 3.7% 1.8 2.0 13.5%
2008 5.5% 3.0 1.5 24.3%
2007 7.0% 2.5 1.9 34.1%
2006 7.5% 2.2 2.5 42.3%
2005 5.4% 2.1 2.9 33.2%
capital work in assets- capital net assets financial RO
progress work in progress margin turnover leverage E
20 13.
09 1,006,646,000 19,678,877,000 3.7% 1.9 1.9 6%
20 24.
08 2,017,940,000 11,730,169,000 5.5% 3.5 1.2 1%
20 34.
07 599,761,000 15,065,289,000 7.0% 2.6 1.9 0%
20 42.
06 787,940,000 15,034,528,000 7.5% 2.3 2.4 2%
20 33.
05 278,590,000 12,754,348,000 5.4% 2.2 2.8 3%
With this method, assets are measured at their gross book value rather than at
net book value in order to produce a higher return on equity (ROE). It is also
known as "DuPont identity".

DuPont analysis tells us that ROE is affected by three things:

- Operating efficiency, which is measured by profit margin
- Asset use efficiency, which is measured by total asset turnover
- Financial leverage, which is measured by the equity multiplier

Profit margin tells us how much earning on sales has been there which as clearly
seen has been declining in the years. Asset turnover tells us how much utilization
of assets has been there in generating sales which has also declined till 2009.
Leverage helps us identify how much riskier the firm has become by borrowing
which has increased from 2008 but generally decreased. Removing the false
assumption by taking the capital work in process even, ROE has declined at a
considerable rate which shows that the company’s efficiency has gone down a
lot. It is not generating enough sales on assets. As regards to leverage after
decreasing indicating a good performance the firm grew slightly more riskier in
2009 but less as compared to 2005.

Operating risk
Break even and DOL

2009 2008 2007 2006 2005

 2,640,928,0 2,147,380,0 1,965,198,0 1,865,647,0 1,554,598,0
total f.c 00 00 00 00 00
330463460 32,421,586, 263743300 290626210 2343579000
total cost 00 000 0 00 0
30,405,418, 30,274,206, 672,235,00 27,196,974, 21,881,192,
variable cost 000 000 0 000 000
37,864,604, 414238430 390612260 352365350 2760103400
sales 000 00 00 00 0
7,459,186,0 11,149,637, 38,388,991, 8,039,561,0 5,719,842,0
C.M (in Rs) 00 000 000 00 00
C.M (in %) 20% 27% 98% 23% 21%
134059792 797808323 199961085 817693103
Break even 73 1 8 1 7501695371
Operating 207255300 354447100 425216600 419972200
Income 0 0 0 0 2397050000
DOL 3.6 3.1 9.0 1.9 2.39

This ratio is useful as it helps the user in determining the effects that a given
level of operating leverage has on the earnings potential of the firm. This ratio
can also be used to help the firm determine the most appropriate level of
operating leverage in order to maximize the company's EBIT.

ROA is used to calculate the stability of the operating income of the firm in the
coming years. Thus through break even we see how far is the company doing
well from its costs being made and how much stable is going to be the operating
income relative to the change in sales. DOL as can be seen has increased from
2006 to 2009 after a decline in 2005, which means that the operating income is
quite unstable with relation to change in sales. The company has remained well
above its break even point.

Gross profit and sales

2009 2008 2007 2006 2005
Production
Volume (No.s) 34,298 48,222 47,821 41,552 34,928
Cost of Goods 35,540,418,0 37,575,356,0 34,620,632, 31,088,906 24,975,614,0
Sold (Rs) 00 00 000 ,000 00
Cost of Goods
Sold per unit
(Rs) 1036224.2 779216.0 723962.9 748192.8 715060.0
Sales Volume
(No.s) 35,276 50,802 50,557 42,406 35,874
37,864,604,0 41,423,843,0 39,061,226, 35,236,535 27,601,034,0
Sales (Rs) 00 00 000 ,000 00
Sale price per
unit (Rs) 1073381.4 815397.9 772617.6 830932.8 769388.2

Sale price per

unit (Rs) 1073381.4 815397.9 772617.6 830932.8 769388.2
Cost of Goods
Sold per unit
(Rs) 1036224.2 779216.0 723962.9 748192.8 715060.0
Gross Profit
per unit (Rs) 37157.2 36181.8 48654.6 82740.0 54328.3
Gross Profit
Margin (per
unit) % 3.5% 4.4% 6.3% 10.0% 7.1%

Upon calculation it has been deduced that changes in CGS are mostly due to
price of raw materials. In sales and CGS it is a fluctuating trend. From 2005 the
sales price increased till 2006 when it took the lower turn. Then again decreased
in 2007 but increased in 2008 and 09. The same has been for CGS but the
production volume has increased from 2005 when it decreased in 2009. This
means that the increase in sales price is due to the decrease in volume and of
course cost. Gross profit increased from 2005 to 06 but then again kept on
decreasing. This low profit margin in 2009 is due to the increase in costs and
decrease in volume.