History of the Company:

Pak Suzuki Motor Company Limited (PSMC) is a public limited company with its shares
quoted on Stock Exchanges in Pakistan. The Company was formed in August 1983 in
accordance with the terms of a joint venture agreement concluded between Pakistan
Automobile Corporation Limited (representing Government of Pakistan) and Suzuki
Motor Corporation (SMC) - Japan. The Company started commercial production in
January 1984 with the primary objective of progressive manufacturing, assembling and
marketing of Cars, Pickups, Vans and 4 x 4 vehicles in Pakistan.

The foundation stone laying ceremony of the company's existing plant located at Bin
Qasim was performed in early 1989 by the Prime Minister then in office. By early 1990,
on completion of first phase of this plant, in-house assembly of all the Suzuki engines
started. In 1992, the plant was completed and production of the Margalla Car
commenced. Presently the entire range of Suzuki products currently marketed in Pakistan
are being produced at this Plant.

Under the Government's privatization policy, the Company was privatized and placed
directly under the Japanese management in September 1992. At the time of privatization,
SMC increased its equity from 25% to 40%. Subsequently, SMC progressively increased
its equity to 72.8% by purchasing remaining shares from PACO. The total foreign
investment brought in by SMC- Japan since inception stands at Rs. 1026.36 million. The
Suzuki Management immediately after privatization started expansion of the Bin Qasim
Plant to increase its installed capacity to 50,000 vehicles per year. The expansion was
completed in July 1994. Keeping this in view, the company's long term plans inter-alia
includes tapping of export markets. The company has acquired additional land measuring
about 30 acres from Pakistan Steel Mills Corporation in proximity to its Bin Qasim Plant
to set up production facilities for manufacture of some local components.

The Company continues to be in the fore-front of automobile industry of Pakistan. Over a

period of time, the company has developed an effective and comprehensive network of
sales, service and spares parts dealers who cater to the needs of customers and render
effective after sale service country wide. PSMC is serviced by over 180 active vendors
who are engaged in the local manufacture and supply of automotive parts to the company.

1
 COMPANY INFORMATION

BOARD OF DIRECTORS

• Yasuo Suzuki Chairman & Chief Executive.

• Capt. (Retd) Bashir Ahmed Deputy Managing Director
• Katsuichiro Ota Director
• Sokichi Nakano Director
• Yoshio Saito Director
• Tariq Iqbal Khan Director
• Koki Imamura Director

COMPANY SECRETARY

• Abdul Harold Bhombal

AUDITORS

• Sidat Hyder Qamar & Co.

• Chartered Accountants

COMPANY KEY”S OBJECTIVE:

• To provide automobiles of international quality at reasonable prices.

• To provide automobiles of international quality at reasonable prices.

• To improve skills of employees by imparting training and by inculcating in them a

sense of participation.

• To abide by the deletion policy of the Government, achieve maximum

indigenization and promote the automobile vending industry.

2
 Pak Suzuki Motor Company Ltd
Balance Sheet
AS AT JUNE 30, 2000, 2001, 2002

Rupees in Thousands 2000 2001 2002

SHARE CAPITAL AND RESERVES
Authorized share capital
150,000,000 (2000: 150,000,000) ordinary
shares of Rs.10/- each 1,500,000 1,500,000 1,500,000
========= =========
= = ========
Issued, subscribed and paid-up share capital 491,312 491,312 491,312
Reserves 1,316,528 1,268,820 1,285,840
---------- ---------- -------------
LIABILITIES 1,807,840 1,760,132 1,777,152
Deferred taxation 99,000 97,000 97,000
Current liabilities
Bills payable 926,032 644,480 725,690
Short term running finances ………. 1,290,619 --
Security deposits 60,316 61,703 65,240
Creditors, accrued and other liabilities 393,545 316,666 326,265
Advances from customers 515,122 241,325 495,321
Provision for customs duties and sales tax 152,770 155,770 156,960
Proposed dividend 39,305 -- 45,320
---------- ---------- ----------
2,087,090 2,710,563 1,814,796
COMMITMENTS
---------- ---------- -------------
Total share holders' equity and liabilities 3,993,930 4,567,695 3,688,948
========= =========
= =
ASSETS
Tangible fixed assets 1,185,857 1,353,158 1,411,123
4Long-term investments 30,075 35,675 42,260
Long-term loans, deposits and prepayments 9,292 10,226 10,450
Deferred costs -- 15,797 16,240

Current assets
Stores, spares and loose tools 29,279 41,122 46,332
Stocks 1,535,836 1,913,050 1,965,120
Trade debts 44,456 577,264 587,966
Loans, advances and prepayments 47,217 57,591 59,756
Advance income tax - net 325,351 305,250 350,420
Sales tax adjustable 32,165 6,635 36,821
Accrued income and other receivables 25,159 19,974 26,468
Cash and bank balances 729,243 231,953 988,250
---------- ---------- ---------
2,768,706 3,152,839 4,061,133
---------- ----------
Total assets 3,993,930 4,567,695 5,541,206

3
 Pak Suzuki Company Ltd
Income Statement
FOR THE YEAR ENDED JUNE 30, 2000 2001, 2003

Rupees In Thousands 2000 2001 2002

Net sales 7,976,122 6,889,145 8,213,245
Cost of sales 7,599,439 6,578,898 7,853,909
---------- ---------- -----------
Gross profit 376,683 310,247 359,336
Selling and administration expenses 201,729 234,790 210,540
---------- ---------- ----------
Operating profit 174,954 75,457 148,796
Other income 27,688 74,180 56,570
---------- ---------- -----------
202,642 149,645 205,366
Financial and other charges 72,480 221,971 85,921
Reversal of provision for diminution in market value
of WAPDA Bonds -- -74250 --
Provision for diminution in the value of investments 5,600 -- --
---------- ---------- --------
Profit before taxation 78,080 147,721 85,921
124,562 1,924 119,445

Taxation 37,549 28,524 28,985

---------- ---------- ----------
Profit/(loss) after taxation 87,013 -26600 90,460

Unappropriated profit brought forward -- 1,418 --

---------- ---------- -------
Profit/(Loss) available for appropriation 87,013 -25182 90,460

Appropriations
Transfer to/(from) general reserve 47,000 -25182 49,000
Proposed cash dividend @ 8% (2005: Nil) 39,305 -- 41,455
---------- ---------- ---------
86,305 -25182 90,455
---------- ---------- --------
Unappropriated profit carried forward 708 -- 918
========== ========== =========

4
 Pak Suzuki Company Ltd
Cash Flow Statement
FOR THE YEAR ENDED JUNE 30, 2000, 2001, 2002

Rupees In Thousands 2000 2001 2002

Cash flow from operating activities
Cash generated from operations 1,672,861 1,406,705 1,782,254
Financial charges paid -88213 -241507 -75981
Taxes paid -55651 -197003 -60875
Long-term loans (net) -299 541 -345
Long-term deposits and prepayments - net 1,233 -1780 2,120
---------- ---------- ---------
Net cash inflow from operating activities 1,529,931 966,956 1,647,173

Cash flow from investing activities

Fixed capital expenditure -35645 -262651 -36456
Investment in shares -- -29175 --
Sale proceeds on disposal of fixed assets 4,148 8,500 4,680
Sale proceeds of WAPDA Bearer Bonds -- 450,000 --
Sale proceeds of investment -- 2,923 --
Mark-up on cash deposits, advances to
suppliers and income from investment 15,757 68,692 25,689
---------- ---------- ---------
Net cash (outflow)/inflow from investing activities (15,740) 238,289 (6,087)

Cash flow from financing activities

Advances from customers - net 273,797 73,873 275,854
Dividends paid -79 -181997 -82
---------- ---------- ---------
Net cash inflow/(outflow) from financing activities 273,718 -108124 275,772
---------- ---------- ----------
Net increase in cash and cash equivalents 1,787,909 1,097,121 1,789,963
Cash and cash equivalents at beginning of the year -1058666 -2155787 -1010720
---------- ---------- ----------
Cash and cash equivalents at end of the year 729,243 -1058666 779,243
========== ========== ========

5
6
 Common Size Analysis of Pak-Suzuki Motor Company Ltd.

Balance Sheet:

Vertical Analysis for the years 2000, 2001 and 2002:

While doing the vertical analysis of Pak-Suzuki Motor co. we have taken the total assets
as a base.

 Share Capital and reserves share:

If we look at the analysis we come to know that percentage of share capital in

total assets has constant over the years. So the vertical analysis of 2000, 2001 and 2003
has different percentages which shows that in year 2001 it has decreased by 5% while the
next year mean 2002 jump or increased 40.66% as compared to the last year of the firm.
This suggests that the firm suffered from losses during 2001 years which reduced its total
assets.
In the case of reserves the reserves for the firm are classified as capital and
revenue. The reserves amount of three years are the same as Rs. 491,312 respectively in
thousands. While calculating the vertical percentage of the reserves we have gradual
increase in the percentage of vertical.

 Liabilities:

The firm has different liabilities in three years. However the firm relied heavily on
loans to fulfill its financing needs. The year 2000 has a heavy bills payable but this
decrease year by year. The over all liabilities of the firm is increasing constantly with the
percentage of 52.26%, 59.34% but last year has a low liability as compared to other years
with 49.20.
The firm’s long term liabilities increased due to the following effect on the ratio.
• The denominator total assets decreased due to losses suffered by the firm in these
years, which increased the ratio.

• The increase in the amount of loan i-e increase in the numerator of the ratio,
which also increased the ratio.

ASSETS:
 Fixed Assets:

The fixed assets of the firm show a gradual decrease year by year from 200, 2001
to 2002. This slight decrease may be due to the decrease in the net assets of the firm due
to the losses rather than due to any capital expenditure done on the fixed assets. The long

7
term investment show a slight increase in the percentage but long term loans, deposits
and repayments of the firm is decreasing with a slight percentage. This mainly show to
improve the cash flow situation of the firm. This also suggests that the firm is facing cash
shortage problems.

 Current Assets:

In current assets the firm stores, spares and loose tools are increasing slightly with
the percentage of 0.73, 0.90 and 0.84 respectively but in the year 2002 it decreases.
Stocks increased in 2000 and 2001 but it decrease in year 2002 with the percentage of
38.45%, 41.88% and 35.46 respectively of total assets., showing great increase and
causing severe cash shortage problem to the firm in that year. Short term investments of
the firm are also showing a continuous decrease both in monetary terms and as
percentage to total assets. They also reflect the losses and the cash shortage problems
faced by the firm in these years. The trade debts show a mixed picture during the years in
the year 2000 it has less amount with less percentage as compare to other years. In year
2001 it has an increased in the trade debts but also decrease in 2002. The over all current
assets of 2000 and 2001 are the same percentage but it is slightly high in 2002 as
compare to other years of 2000 and 2001.

Horizontal Analysis for the years 2000, 2001 and 2002:

In the analysis year 2000 as the base year and horizontal analysis is done taking the
values of 1996 as a base.

 Share Capital and reserves:

The share capital of the firm remains constant in the three years of analysis. They
remain at 100% in the years that is the share capital neither decreased nor increased
during these years.
The capital reserves show a slight increase in the year 2001 by only 96.38 and in
2001 it is 97.67 which is slightly high as compare to the previous data. This shows the

8
commitment of the organization to expand in the future as the firm constantly maintains
this reserves and even increased it a little even though that the firm suffered heavy losses
in these years.

 Liabilities:

In liabilities side the bills payable is increased from 96.60% to 78.37%. There
were no debentures in the years 1997 and 1998. The long term loans show a great
increase in the years of analysis. This show a great increase in the long term debt of the
firm. It also reflects that the firm is relying on debt to fulfill its capital requirements
rather than any other source of finance.
The tax provision was also increase in the year 2002 than 2001 and 1998.

 Fixed Assets:

They show a constant increase over the years, it shows that capital investment is
done in fixed assets, it also shows that the long term investment was increased year by
year with new capital of the firm. The firm long term loans, deposits and repayments
slightly increase with the percentage of 110.05% to 112.46% it means that the firm makes
further investment in their operations.

 Current Assets:

Same situation with the current assets it shows an increasing trend in the year
2001 with 140.45% and 158.24% in 2002. Trade debts and stocks also increase slightly,
it means the over all current assets of the firm is slightly increasing year by year. The
main considering issue of the business is the cash and bank balances but it shows a
different percentage as we compare to the year. In year 2001 it was 31.81% which is not
enough as compare to the 2002 where it is 135.52% which is a huge difference and in
year 2001 the firms also get loss.

9
 Common Size Analysis with Horizontal Analysis

Income Statement

The net sales of income statement of 2004 analysis of horizontal is same because we over
all divide the each amount with each other the result would be the same. So analyzing the
income statement the net sales increases from 86.37% to 102.97% in 2001 and 2002, it
shows an increase in volume of sales.
Same situation the gross profit margin increased which represented managerial and
production efficiency in this year. But in 2001 the gross profit decrease again due to high
cost of production in this year as compare to 2000 year and 2001.
The selling and administration expenses decrease slightly in 2001 and 2002 from
116.39% to 104.37%, less expenses shows high operating profit.
The other income also decrease in 2001 and 2002 from 267.91% to 204.31%. The
increase in the year shows more efficient production as compare to 2002.
Financial charges also decreases in 2002 but high in 2001 which reflects the long term
debts. And taxation increased 2002 with 77.19% as we compare with the previous record
that is 75.96%.

Vertical Analysis.

Vertical analysis gives a more insight of the cost and revenue structure of the firm during
the years

The gross profits of the firm decreases from 4.72% to 4.50% in 2000 and 2001 and in
2002 it also decreases with 4.38%. This represents production efficiency or reduced cost
of inputs in the year. The decrease also shows high percentage of cost of sales in the year.

The selling and administration expenses it increases in 2001 with 3.41% but low in 2000
and 2001 with 2.53% to 2.56%, but it does not create severe effect on the operating profit
of the firm and a similar trend of operating profits was observed in years as that gross
profit.

Operating profit of the firm slightly decreases in 2001 and 2002 from 1.10% to 1.81%
because in these tow years we have higher expenses as compare to the 2000, that is why
it show less operating profit in these two years.

Other income of the firm increases in 2001 with 1.08% and in 2002 it is 0.69 is higher
than year 2000.

10
Financial charges only highly increase in year 2001 as compare to the 2000 and
2002 that may be the high debts of the firm for expending their operation.
Taxation decreases in 2002 with the percentage of 0.35 and in 2001 it is 0.41 as
compare to its previous year

11
 FINANCIAL RATIO ANALYSIS

We will analyze the firms performance by calculating and interpreting 4 basic types of
Financial Ratios but here we calculate according to the chapter topic. Usually we have
these four basic types of fianancial ratios

1. Activity Ratios
2. Debt Ratios
3. Profitability Ratios
4. Market Ratios

According to the Book chapter we have different ratios in different according to the topic,
so each ratio is calculated to the chapter ratios, here we have four different chapter of the
book.

1. Chapter 7: (Liquidity Of Shot Term Assets; Related Debt Paying Ability)

2. Chapter 8: (Long Term Debt Paying Ability)
3. Chapter 9: (Analysis of Profitability)
4. Chapter 10: (Analysis For Investor)

According to this chapter we calculate each ratios of Pak Suzuki Motor Company limited
for year 2004, 2005 and 2006.

12
13
 All ratio formulae regarding this chapter And
Solution

Gross Receivables
• Days Sales In Receivables = -----------------------------------------------
Net Sales / 365

44,456
2000 =--------------------- = 2.03
7,976,122 / 365

577,264
2001 =------------------------- = 30.58
6,889,145 / 365

587,966
2002 =---------------------------- = 26.13
8,213,245 / 365

Net Sales
• Accounts Receivables Turnover =----------------------------------------
Average Gross Receivables

7,976,122
2000 =--------------------------- = 25.66
310,860

6,889,145
2001 =---------------------------- = 11.82
582,615

Average Gross Receivables

• Accounts Receivables Turnover in Days =------------------------------------------
Net Sales / 365

14
 310,860
2000 =-------------------------------- = 14.23
7,976,122 / 365

582,615
2001 =------------------------------ = 30.86
6,889,145 / 365

Ending Inventory
• Day’s Sales In Inventory =----------------------------------------
Cost of Goods Sold / 365

1,535,836
2000 =--------------------------------- = 73.76
7,599,439 / 365

1,913,050
2001 =------------------------------ = 106.14
6,578,898 / 365

1,965,120
2002 =---------------------------- = 82.03
7,853,909 / 365

Cost of Goods Sold

• Inventory Turnover =------------------------------------
Average Inventory

7,599,439
2000 =----------------------------- = 4.41
1,724,443

15
 6,578,898
2001 =-------------------------- = 3.39
1,939,085

Average Inventory
• Inventory Turnover in Days =-----------------------------------------
Cost of Goods Sold / 365

1,724,443
2000 =------------------------------ = 82.82
7,599,439 / 365

1,939,085
2001 =---------------------------- = 107.58
6,578,898 / 365

• Operating Cycle = Accounts Receivables Turnover + Inventory Turnover

In Days in Days

2000 = 14.23 + 107.58 = 109.05

2001 = 30.86 * 107.58 = 138.44

Current Assets
• Current Ratio =-------------------------------------
Current Liabilities

2,768,706
2000 =--------------------------- = 1.33
2,087,090

16
 3,152,839
2001 =---------------------------- = 1.16
2,710,563

4,061,133
2002 =---------------------------- = 2.24
1,814,796

Cash Equivalents + Marketable Securities +

Net Receivables
• Acid Test Ratio =----------------------------------------------------------------------
Current Liabilities

Cash Equivalents + Marketable Securities

• Cash Ratio =--------------------------------------------------------------
Current Liabilities

Sales
• Sales To Working Capital =-----------------------------------------------------
Average Working Capital

7,976,122
2001 =------------------------ = 14.19
561,946

6,889,145
2001 =-------------------------- = 5.12
1,344,307

17
 Solved Calculation of All above Ratio formulae

Ratios 2000 2001 2002

Day's Sales In Receivables 2.03 30.58 26.13
Account Receivables Turnover 25.66 11.82
Account Receivables Turnover in Days 14.23 30.86
Day's Sales in Inventory 73.76 106.14 82.03
Inventory Turnover 4.41 3.39
Inventory Turnover in Days 82.82 107.58
Operating Cycle 109.05 138.44
Current Ratio 1.33 1.16 2.24
Acid-Test Ratio
Cash Ratio
Sales to Working Capital 14.19 5.12

Interpretation And Analysis of Each Ratio

 Day's Sales In Receivables:
This shows that how firm is efficient in collection of receivables. While looking the
ration of this it shows with huge difference in three years. In 2000 it is 2.03% which
shows efficiency of the management that how they manage their receivable. In 2001
it is 30.58% it may shows a high volume of sales on account and same situation in
year 2002 it is 26.13%. It means the over receivable in days are quite in year 2000 as
compare to 2001 and 2002.

 Account Receivables Turnover:

Computation at the end of 2000 and 2001. The turnover of receivables slightly
decreases between 2000 and 2001 form 25.66% per year to 11.82% times per year.
Which indicates the liquidity of the receivables. In this situation the firm tends to
overstate it account receivable turnover, thus overstating its liquidity.

 Account Receivables Turnover in Days:

It expressed in terms of days instead of times per year. The computation of this ratio
shows an increase as compare to the previous data like in 2000 it is 14.23% and
30.86% in 2001, basically it shows range of net sales in a days, which is obviously
fine as compare to the previous year.

 Day's Sales in Inventory:

The days sales in inventory estimates the number of days that it will take to sell the
current inventory. While analyzing the ratio it shows slightly increase in the year

18
 2000 and 2002 but there is an high increase in 2001 with 106.14% it means in this
year the inventory is not controlled properly as compare to other years.

 Inventory Turnover:
It indicates the liquidity of the inventory. The calculation shows a slight decrease in
2000 and 2001 from 4.41% to 3.39%. In this situation the firm tends to overstate
inventory turnover due to liquidity of its inventory.

 Inventory Turnover in Days:

It shows the number of days instead of times per year. The computation of this ratio
shows an increase in inventory turnover. In 2000 its ratio is 82.82% and 107.58% in
2001.

 Operating Cycle:
This computation consists of combination of days sales in ending receivables and the
number of days in sales in ending of inventory. The calculation of this ratio shows
that an increase in 2001 with 138.44% as compare to the previous data of 2000 it is
109.05% this indicates moderate liquidity at the end of the year.

 Current Ratio:
It determines the short term debt paying ability. It increase slightly in 2000 and 2001
from 1.33% to 1.16% and in 2002 it shows 2.24%.

 Acid-Test Ratio:

 Cash Ratio:

 Sales to Working Capital:

19
20
 All ratio formulae regarding this chapter and solution

Operating Income
• Times Interest Earned =------------------------------------------------------
Interest Expense + Capitalized Interest

174,952
2000 =---------------------- = 2.41
72,480

75’457
2001 =-------------------- = 0.34
221,971

148,796
2002 =---------------------- = 1.73
85,921

Operating Income
• Fixed Charge Coverage =------------------------------------------------------
Interest Expense + Capitalized interest +
Interest Portion of Rentals

Its calculation is same because we have not any interest portion of rentals in our
financial report of the company so, that is why calculating without rental our result
would be the same as above.

Total Liabilities
• Debt Ratio =-----------------------------------------
Total Assets

99,000+2,087,090
2000 =--------------------------------- = 0.55
3,993,930

97,000+2,710,563
2001 =---------------------------------- = 0.61
21
 4,567,695
97,000+1,814,796
2002 =---------------------------------- = 0.35
5,541,206

Total Liabilities
• Debt / Equity Ratio =------------------------------------------
Shareholder’s Equity

99,000+2,087,090
2000 =------------------------------------ = 1.21
1,807,840

97,000+2,710,563
2001 =----------------------------------- = 1.61
1,760,132

97,000+1,814,796
2002 =----------------------------------- = 1.08
` 1,777,152

Total Liabilities
• Debt To Tangible Net Worth =----------------------------------------------------------
Shareholder’s Equity – Intangible Assets

Debt to tangible net worth also show same result while calculating the ratio because,
the firm has not any intangible assets in its financial report that is why its results
same as the debt / equity ratio shows.

Solved Calculation of All above Ratio formulae

Ratios 2000 2001 2002

Times Interest Earned 2.41 0.34 1.73
Fixed Charge Coverage 2.41 0.34 1.73
Debt Ratio 0.55 0.61 0.35
Debt / Equity Ratio 1.21 1.61 1.08
Debt to Tangible Net Worth 1.21 1.61 1.08
Interpretation And Analysis of Each Ratio

22
 Times Interest Earned:
Time earned ratio indicates a Suzuki long term paying
ability from the income statement. Suzuki have very low time interest earned
ratio. In 2001 time interest ratio is high as compare to 2002 because in 2001
company is in profit and have a fund to meet the debt obligation. But in 2002
Suzuki’s time interest earned ratio is low because in 2002 Suzuki was in loss.

 Fixed Charge Coverage:

Suzuki has no fixed asset on lease so they haven’t
any interest portion of rentals. So ratio of time interest earned and fixed
charge coverage will be the same.

 Debt Ratio:
Debt ratio indicate the Suzuki long term debt ability from it
balance sheet. In 2000 and in 2001 debt financing is more then 50%. It shows
that financial institution have confidence on Suzuki. Because of lose in 2001 debt
ratio is decline. Company have borrow to fulfill the gap of lose in 2001. so ratio is
higher as compare to previous year.

 Debt / Equity Ratio:

Debt equity ratio is very high in all three years. But it is
more high in 2001. its indicates that out side financing is higher then share
holder equity provide.

 Debt to Tangible Net Worth:

It is more conservative approach to analyses the
outsider financing and shareholder equity. But
Suzuki has no intangible asset so this ratio is
same to debt equity ratio.

23
24
 All ratio formula regarding this chapter

Net Income before Minority Share

Of Earnings and Nonrecurring items
• Net Profit Margin =-----------------------------------------------------------------
Net sales

87,013
2000 =-------------------------------------- = 0.01

7,976,122

(26,600)
2001 =--------------------------------------- = -0.004
6,889,145

90,460
2002 =---------------------------------------- = 0.011
8,213,245

Net sales
• Total Asset Turnover =------------------------------------------
Average Total Assets

7,976,122

25
 2000 =-------------------------------------- = 1.86
4,280,812.5

6,889,145
2001 =-------------------------------------- = 1.36
5,054,450.5

Net Income before Minority share

of earnings and non recurring items

• Return on Assets =-------------------------------------------------------------

Average Total Assets

87,013
2000 =-------------------------------------- = 0.02
4,280,812

(26,600)
2001 =-------------------------------------- = -0.0052
5054450.5

• Du Pont Return on Assets = Net Profit Margin * Total Asset Turnover

2000 = (0.01)(1.86) = 0.0186

2001 = (-0.004) (1.36) = -0.00544

Operating Income
• Operating Income Margin =-------------------------------------------
Net Sales

174,954
2000 =---------------------------------- = 0.0219
7,976,122

26
 75,457
2001 =---------------------------------- = 0.0109
6,889,145

148,796
2002 =----------------------------------- = 0.0181
8,213,245

Net Sales
• Operating Asset Turnover =--------------------------------------------
Average Operating Assets

7,976,122
2000 =--------------------------------- = 3.25
2,450,667.5

6,889,145
2001 =------------------------------------ = 1.37
5,015,483

Operating Income
• Return on Operating Assets =-------------------------------------
Average Operating Assets

174,954
2000 =------------------------------------ = 0.071
2,450,667.5

75,457
2001 =------------------------------------ = 0.015
5,015,483

• Du Pont Return On = Operating Income * Operating Asset

Operating Assets Margin Turnover

2000 = (0.0219)(3.25) = 0.071

27
 2001 = (0.0109)(1.37) = 0.015

Net Sales
• Sales to Fixed Assets =---------------------------------------------------
Average Net Fixed Assets
(Exclude Construction in Progress)

7,976,122
2000 =---------------------------------------- = 6.28
1,269,507.5

6,889,145
2001 =-------------------------------------- = 4.98
1,382,140.5

Net Income before Minority Share

Of earnings and non recurring items +
[(Interest Expense) * (1—Tax Rate)]
• Return on Investment =--------------------------------------------------------------
Average (Long-Term Liabilities + Equity)

87,013+ (72,480) (0.65)

2000 =------------------------------------------- = 0.071
1,890,496

-26600+ (221,971) (0.65)

2001 =----------------------------------------- = 0.063
1865642

Net Income before Non recurring items --

Dividends on Redeemable Preferred Stock
• Return on Total Equity =-----------------------------------------------------------
Average Total Equity

28
 870,013
2000 =------------------------------------------ = 0.048
1,783,986

(26,600)
2001 =------------------------------------------ = -0.015
1,768,642

Net Income before Non recurring items --

Preferred Dividends
• Return on Common Equity =-----------------------------------------------------
Average Common Equity

87,013 + 72,480
2000 =-------------------------------------------- = 0.003
4,280,812.5

(26,600) + 221,971
2001 =------------------------------------------- = 0.038
5,054,450.5

Gross Profit
• Gross Profit Margin =---------------------------------
Net Sales

376,683
2000 =---------------------------------------- = 0.047
7,976,122

310,247
2001 =--------------------------------------- = 0.045
6,889,145

29
 359,336
2002 =---------------------------------------- = 0.043
8,213,245

Solved Calculation of All above Ratio formulae

Ratios 2000 2001 2002

Net Profit Margin 0.01 -0.004 0.011
Total Asset Turnover 1.86 1.36
Return on Assets 0.002 0.0052
Du Pont Return on Assets 0.0186 -0.00544
Operating Income Margin 0.0219 0.0109 0.0181
Operating Asset Turnover 3.25 1.37
Return on Operating Assets 0.071 0.015
Du Pont Return on Operating Assets 0.071 0.015
Sales to Fixed Assets 6.28 4.98
Return on Investment 0.071 0.063
Return on Total Equity 0.048 0.015
Return on Common Equity 0.003 0.038
Gross Profit Margin 0.047 0.045 0.043

Interpretation And Analysis of Each Ratio

 Net Profit Margin:
This ratio gives the measure of net income dollars
generated by each dollars of sales. Every firm try to increase it net profit margin
ratio. This ratio show that in 2000 Suzuki’s net profit margin is very low; in 2001 it

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is also shows that its profit margin is in negative. And next year is in positive that
shows that company is gradually increasing its profits.

 Total Asset Turnover:

This ratio shows how Suzuki have ability to generate sale through its
assets. This is indicating that total asset turnover is decreasing. It is decreasing
because in 2001 company was in lose.

 Return on Assets:

This ratio shows that how much Suzuki asset is producing profits. Suzuki
return on assets ratio shows that company is not using its asset properly because it is
not is producing much profit.

 Operating Income Margin:

Operating income margin of Suzuki shows the significant decrease in

2001. and small increase in 2002. operating income has less portion in its sale. Its
shows that Suzuki cost of goods sold is very high.

 Operating Asset Turnover:

In 2000 company OAS was 3.25 time per year but is decrease in 2001. this
ratio shows that company operating asset is generating a 3.25 time per year profits.

 Return on Operating Assets:

Return on operating asset is decreasing in 2001.this show Suzuki operating

asset is not generating enough operating income.

 Sales to Fixed Assets:

This ratio shows that how Suzuki fixed asset is producing its sale. Suzuki is fixed
asset incentive firm. So this ratio is show that Suzuki fixed asset is producing 6.28
and in next year it is gradually decrease.

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 Return on Investment:

It ratio shows earning performance of the Suzuki without regard to the way
the investment is financed. It shows how Suzuki utilize its asset. This ratio is
decrease substiantly. Because company has faced the lose in 2001.

 Return on Total Equity:

This ratio shows that how Suzuki is utilizing its total equity. Suzuki is ROE is
4.8 that is decreasing in next year.

 Return on Common Equity:

This ratio shows that how Suzuki is utilizing its total equity. Suzuki’s return
on common equity is increasing gradually.

 Gross Profit Margin:

Gross profit of Suzuki is gradually declining. That shows that Suzuki gross
profit has less part in its sales. Company cost of buying is increasing. And
Suzuki selling price is decreasing due to great competition with imported car.

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33
 All ratio formulae regarding this chapter

Earnings before Interest and Tax

• Degree of Financial leverage =----------------------------------------------------
Earnings before Tax

Earnings before interest, tax, Minority

Share of Earnings, Equity Income,
And Nonrecurring items
• All-Inclusive Degree of =-------------------------------------------------------------
Financial Leverage Earnings before Tax, Minority Share of
Share of Earnings, Equity Income, and
Nonrecurring items

Net Income – Preferred Dividends

• Basic Earnings =-----------------------------------------------------------
Per Common Share Weighted Average Number of Common
Share Outstanding

Market Price per Share

• Price / Earnings Ration =-------------------------------------------
Diluted Earnings per Share

Net income – all dividend

• Percentage of Earnings Retained =----------------------------------------------------
Net Income

87,013-39,305

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 2000 =----------------------------- = 0.55
87,013

-26,600-0
2001 =---------------------------- =1
-26,600

90,460-41,455
2002 =---------------------------- = 0.54
90,460

Dividend per Common Share

• Dividend Payout =--------------------------------------------------
Diluted Earnings per Share

Dividend per Common Share

• Dividend Yield =-----------------------------------------------------
Market Price per Common Share

Total Stockholder’s Equity – Preferred Stock Equity

• Book Value per Share =-----------------------------------------------------------------
Number of Common Shares Outstanding

1,807,840
2000 = ----------------------------- = 0.012
150,000,000

1,760,132
2001 = ------------------------------ = 0.011
150,000,000

1,777,152
2002 = ----------------------------- = 0.011
150,000,000

Stock Options Outstanding

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 • Materiality of Options =---------------------------------------------------
Number of Shares of Common Stock
Outstanding

Solved Calculation of All above Ratio formulae

Ratios 2000 2001 2002

Degree of Financial Leverage
All-Inclusive Degree of Financial leverage
Basic Earnings per Common Share
Price / Earnings Ratio
Percentage of Earnings Retained
Dividend Payout
Dividend Yield
Book Value per Share
Materiality of Options

Interpretation And Analysis of Each Ratio

 Degree of Financial Leverage:

 All-Inclusive Degree of Financial leverage:

 Basic Earnings per Common Share:

 Price / Earnings Ratio:

 Percentage of Earnings Retained:

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This ratio indicates that how much cash company retained for the future
investment. In year 2000 company retained more then 50% of the amount. But in
next year Suzuki can’t retained because in 2001 company was in lose. And in 2002
company retained more then 54% of its profits. And 46% distribute in share holder.

 Dividend Payout:

 Dividend Yield:

 Book Value per Share:

This ratio indicates the amount of stockholder equity that relate to each
share of outstanding common stock. This ratio shows that Suzuki book value
is same in all years.

 Materiality of Options:

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• Operating cash flow / current Operating cash flow
Maturities of long term debt and =-----------------------------------------
Current notes payable . current maturities of long term
Debt and current notes payable

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Note: The ration can not be solved because there is no portion of long term debts in
our current notes payables.

Operating cash flow

• Operating cash flow/ total debt =----------------------------------------
Total debt

1,529,931
2000 =----------------------------- = 0.73
2,087,090

966,956
2001 =---------------------------- = 0.36
2,710,563

1,647,173
2002 =--------------------------- = 0.91
1,814,796

operating cash flow – preferred dividends

• Operating cash flow per share =------------------------------------------------------------
Common shares outstanding

1,529,931 - 0
2000 =----------------------------- = 10.19
150,000

966,956
2001 =------------------------- = 6.44
150,000

1,647,173
2002 =------------------------ = 10.98
150,000

operating cash flow

• Operating cash flow / cash dividends =------------------------------------
Cash dividends

1,529,931
2000 =------------------------ = 19366.22

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 79

966,956
2001 =---------------------- = 5.31
181,997

1,647,173
2002 =----------------------- = 20,087.47
82

Solved Calculation of All above Ratio formulae

Ratios 2000 2001 2002

Operating cash flow / total debt 0.73 0.36 0.91
Operating cash flow per shares 10.19 6.44 10.98
Operating cash flow / cash dividend 19,336.22 5.31 20,087.47

Operating cash flow / total debt:

This ratio indicates that how much the firm ability to pay debt in a year. The 2001 is low
as compare to 2000 and 2002 from 73% to 93% which is a very good paying ability of
debt in these two years.

Operating cash flow per shares:

This ratio tells us about the share that in one share how much cash receive against the
share. The computation of this ratio indicates low ratio in year 2001 but high in 2000 and
2002 from 10.19 to 10.98 which show positive cash against the share.

Operating cash flow / cash dividend:

This ratio tell us that how much cash dividend pay on cash flow, in 2000 it has very good
paying ability of dividend with a very good amount as compare to year 2001. And same
situation of paying dividend in year 2002 was also good paying ability of dividend.

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