General Tyres and Rubber Company

History and Balance Sheet Analysis

Submitted By Shazil Ahmad M .Naqeeb Arshad

Submitted to Sir Asim Khan

General Tyres and Rubber Company

ACKNOWLEDGEMENTS We would like to express the deepest appreciation for my teacher and mentor, Sir Asim Khan, who has shown the attitude and the substance of a genius: he continually and convincingly conveyed a spirit of adventure with regard to analysis, and an excitement with reference to teaching. He has been the motivation behind my extensive analysis and without his guidance and persistent help this project would not have been possible.

General Tyres and Rubber Company

EXECUTIVE SUMMARY The company that we have chosen to do the analysis belongs to the Automobile Parts and Accessories Sector and its name is The General Tyre and Rubber Company. We have collected complete financial reports from the stock exchange to analyse the performance of the company thoroughly. We have made 20 CCs to asses and measure the performance of the selected company with more precision and accuracy. Each CC includes various ratios and accounts to help an investor find out the over-all trend and performance of the company with a glimpse of an eye. We have analysed that the over-all performance of the company has gone worse from FY 06 to FY 10. One could easily tell that the company isnt performing well just by looking at its net income, sales, equity, and cash flows from operating activities and net profit margin. Although, this company is one of the largest companies of Pakistan which manufactures tyres but by looking at the financial data we could conclude that even large corporations like this could incur losses. The net income of the company for the 2008 and 2009 are negative which means the company has been incurring losses for two years. The sales of the company have increased but it isnt in proportion to the debt that it has been taking to run the business. The equity has decreased which shows that lesser no. of investors are interested in investing the company as opposed to the previous years. Over-all the companys performance is good than other companies in the same sector but its performance is not as good as an ideal companys performance is supposed to be.

General Tyres and Rubber Company

HISTORY General Tire, Inc., is a world leader in the manufacture and marketing of tires of all kinds and is a major exporter of tires around the world. A subsidiary of Continental Aktiengesellschaft (A.G.), Europe's second-largest tire and rubber manufacturer--and the fourth-largest in the world, General Tire constitutes the biggest and most important component of this German tire holding company. On the eve of the twenty-first century, the worldwide tire and rubber industry was in the hands of five major producers. In the nineteenth century, long before the invention of synthetic rubber and only a few decades after the discovery of vulcanization, hundreds of rubber and tire companies vied with one another. A very unlikely city, Akron, Ohio, was dubbed the "rubber capital of the world" in the late nineteenth century, and it was in Akron that the General Tire and Rubber Company was established in 1915. It is one of the few original American tire companies to have survived to the present day. The founder of the company, William F. O'Neil, was a native of the city, although he and his partner, Winfred E. Fouse, had first entered the rubber tire business in Kansas City, Missouri. In early 1909 O'Neil and Fouse pooled their capital and established the Western Rubber & Supply Company (renamed the Western Tire & Rubber Company in 1911), which only sold already made tires. Both partners, however, had bigger dreams; they were natives of Akron, where O'Neil's father, a wealthy merchant, agreed to give the two young entrepreneurs a loan in order to open a tire manufacturing business. In 1915 The General Tire & Rubber Company was launched. While O'Neil's father was president of the new company, William O'Neil, in the role of general manager, wielded most of the authority, and delegated little of it until his death in 1960.

General Tyres and Rubber Company

INTRODUCTION The General Tyre and Rubber Company of Pakistan Limited (Gentipak) is Pakistans premier industry. It was established in 1963 by General Tire USA and has been in production since 1964.

Gentipak has a Technical Services Agreement (TSA) with CONTINENTAL AG (Germanys largest tyre manufacturer) which enables it to produce tyres of GENERAL brand and provides the latest technology for production of tyres based on Continentals, R&D. The Plant and the Offices are located in suburb of Karachi. Initial production capacity was only 120,000 tyres per annum but is now around 2,000,000 tyres per annum. The plant is constantly upgraded and is equipped with the most modern technology in tyre manufacturing.

General Tyres and Rubber Company

VISION To be the leader in tyre technology by building the Companys image through quality improvement, competitive prices, customers satisfaction and meeting social obligations.

General Tyres and Rubber Company

MISSION
y y

To offer quality products at competitive prices to our customers. To endeavor to be the market leader by enhancing market share, consistently improving efficiency and the quality of our products.

To improve performance in all operating areas, so that profitability increases thereby ensuring growth for the company and increasing return to the stakeholders.

To create a conducive working environment leading to enhanced productivity, job satisfaction and personal development of our employees.

To discharge its obligation to society and environment by contributing to social welfare and adopting environmental friendly practices and processes.

General Tyres and Rubber Company

ANALYSIS

General Tyres and Rubber Company

CC#2: Income Statement (Profit and Loss Account)

General Tyres and Rubber Company

CC#2: Analysis of Income Statement (Profit and Loss Account) CC.2 shows the income statement of The General Tyre and Rubber Company from year 2006 to 2010. It shows that the sales of the company have increased over the years in FY 2006 to FY 2010.The Sales have been increased by the 58 percent if we compare it to FY 2006. The distribution cost the company has been increasing over the years. However, the Administrative expense has shown fluctuations and it is showing a decreasing trend from FY 06 to FY 10. The Finance Cost of the company has increased drastically from a very small value in FY 06 to a relatively very high value in FY 09and this drastic increase tells us that the company has started to rely heavily on debts and it is giving out huge amount of interests on these loans. The taxes of the company are showing a declining trend and taxation value for FY 09 is negative because of the fact that the EBT of the company for this year is negative but in the FY 10 the company EBT is positive and company gave tax, the positive trend in the FY 2010 is due the new contracts with the Toyota and Altas Honda. The Net income of the company is showing a declining trend and it has incurred huge amount of losses in FY 08 and FY 09. The increasing amount of interest expenses has played a huge role in the decline and eventual loss of the company. Overall, the net income of the General Tyre and Rubber Company shows that the performance of the company over the years is getting poorer and poorer but in FY 2010 the company made a record increase in the net income because in the FY 2010 the after myth of recession are decreased and on the same time the company got the two major contracts and they have increased the prices of their tyre as compare to the other brands and in the year FY 09 two long liabilities have come to end so the FY 10 starts with the lesser obligation so at that year company have given lesser interest so thats why the net income of the company at that time period is positive.

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CC#3: Balance Sheet

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General Tyres and Rubber Company

CC#3: Analysis of Balance Sheet CC.3 includes the balance sheet of The General Tyre and Rubber Company from FY 2006 to FY 2010. The total no. of share outstanding from FY 06 to FY 10 is same. This shows that the company hasnt been increasing its no. of shareholders. However, the total amount of equity has shown a slight decrease and it is because of the decrease in the value of reserves that the company has been holding from the FY 06 to FY 09 but in the FY 2010 the equity portion is increased as compare to the previous years this is because the unappropriated profit is increased because in the FY 10 company reinvested its profit to expand the business rather than giving dividends to its shareholders. Total long-term liabilities of the company have increased from FY 06 to FY 07 but then it decreased from the FY 08 to FY 10. It seems like a good strategy on the part of the company because the company has decreased its liabilities due to adverse political and economic conditions in Pakistan. The Current liabilities of the company show an upward trend from FY 06 to FY 10. The total sum of Liabilities and Equity shows an uptrend because of the drastic increase in current liabilities from FY 05 to FY 09. Fixed Assets of the company do not show a drastic change they are rather same over the years. However, the current assets have increased from FY 06 to FY 10. This could be the counter effect of the increase in the current liabilities. Total Assets of the company also show an uptrend due to the increase in current assets.

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CC#4: Cash Flows Statement

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General Tyres and Rubber Company

CC#4: Analysis of Cash Flows Statement CC.4 includes the Cash Flow Statement of General Tyre and Rubber Company for year 2006 through 2010. The cash flows from Operating Activities show that the company has more no. of outflows than the no. of inflows. However, the values of outflows are quite small that the net effect of outflows and inflows are positive although it shows a negative value for the FY 08 and FY 2010 ,because at the FY 2010 the company have paid too much of tax as compare to the prior years. The net cash flows from operating activities show fluctuations throughout the years with highest value in FY 09, lowest in FY 08 and again negative in FY 2010.The net cash flow from investing activities is negative throughout the five years. The net cash flow from financing activities shows a drastic change over the years and it also shows fluctuations over the years. The net value declined from FY 06 to FY 07, it went up in FY 08 and became negative in FY 09. The dividends paid show high fluctuations and it tells that the company paid huge amount of dividends in FY 06 and FY 07 but from FY 08 to FY 10 the company have paid very less amount of dividends as compare to the previous years, it is because after the year FY 07 due to the Global recession many of the contracts of the General tyre are decreased. The values Cash and Cash equivalents at the end of the years are negative and it shows an overall downtrend. It shows that company has more cash outflows than cash inflows.

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General Tyres and Rubber Company

CC#5: Five Year Growth Rate: Sales Net income 11.45% Dividends Equity 82.73% 0.540% 11.23%

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General Tyres and Rubber Company

CC#5: Analysis of Five Year Growth Rate: CC.5 simply shows us the growth rate of The General Tyre and Rubber Company for FY 05 to FY 10. It shows the growth rates of the important factors of the company like Sales, Dividends, Net Income and Equity. It simply tells us that the sales of the company have increased by the 11.23% .It also tells us that the net income of the company is increased by the 11.45% from the FY 2006 to FY 2010. There is a Net loss from the FY 07 to FY 2008.The ratio of the Dividends are decreased to 82.73%, this is due to in the years 2008 to 2009 the net income is negative but in the FY 2010 the company have increased its equity and the unappropriated profit is increased means that the company reinvest its profit for the further operations or to avoid the double taxation.The equity is somewhat same but there is a slight increase in the equity portion as compare to the prior years.

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General Tyres and Rubber Company

CC#6: Common Size Income Statement: 2010 Net Sales Cost of Sales Gross Profit Administrative Expenses Distribution Cost Operating Profit Other operating expenses other operating income Finance Cost (loss)/profit before taxation Taxation (loss)/profit after taxation 100.00% 84.81% 15.19% 1.38% 3.25% 10.55% 0.81% 0.78% 4.09% 6.44% 3.00% 3.44% 2009 2008 2007 2006

100.00% 100.00% 100.00% 100.00% 88.75% 11.25% 1.49% 4.38% 5.38% 3.24% 0.83% 5.62% -2.66% -0.61% -2.05% 88.94% 11.06% 1.60% 4.45% 5.01% 2.22% 1.34% 3.97% 0.16% 0.52% -0.36% 88.16% 11.84% 2.32% 4.13% 5.40% 0.33% 0.79% 3.17% 2.68% 1.09% 1.59% 86.03% 13.97% 2.03% 4.19% 7.75% 0.57% 0.78% 2.33% 5.63% 2.23% 3.40%

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General Tyres and Rubber Company

CC#6: Analysis of Common Size Income Statement: CC.6 shows us the Common size Income Statement for the FY 2005 to FY 2009. It is calculated by dividing each component of income statement with sales of that year. This common size income statement shows us that COGS has the highest percentage of sales and it has increased over the years. The cost of goods sold ratio decreased in FY 2010 it is good for the company because gross profit ratio have increased. In the FY 2010 General tyre import all the nylon, filler and bead from the Bangladesh which was cheap from the previous imports so in that why they reduced the CoGS by 3.94%. The gross profit in the income statement has the second highest percentage in the income statement and shows a downward trend from the FY 2006 to FY 2009 but there is an increase of 3.94 % in the FY 2010. Other operating income has the lowest percentage in the table although it shows an increasing trend over the 5 fiscal years. The net income of the company is continuously decreasing from the FY 2006 to FY 2009 but there is an increase in FY 2010 due to decrease in the CoGS.The company needs to generate more sales to survive in the market because there Net income is not enough as compare to their capital.

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General Tyres and Rubber Company

CC#7: Common Size Balance Sheet: 2010 PROPERTY, PLANT AND EQUIPMENT INTANGIBLE ASSETS INVESTMENTS LONG-TERM LOANS AND ADVANCES DEFERRED TAXATION LONG-TERM PREPAYMENTS CURRENT ASSETS Stores and spares Stocks Trade debts Loans and advances Deposits and prepayments Other receivables Taxation Cash and back balances Total Assets SHARE CAPITAL AND RESERVE Issued, subscribed and paid-up Reserve LONG TERM MURABAHA FINANCING LONG TERM LOANS LIABILITIES AGAINST ASSETS 0 2.95% 0.00% 3.38% FROM 0.18% 0.25% 0.24% 0.27% 0.28% 0 3.45% 0.00% 0.23% 0.38% 3.26% 0.00% 1.11% 1.22% 3.54% 0.01% 1.25% 1.97% 3.52% 0.01% 0.98% 12.42% 15.23% 0.00% 3.60% 15.07% 12.98% 0.00% 8.10% 14.91% 15.58% 0.00% 8.42% 17.00% 18.23% 0.00% 10.13% 17.61% 20.56% 0.00% 5.89% 7.40% 28.51% 17.80% 0.43% 0.70% 0.53% 3.30% 2.07% 9.34% 18.30% 17.15% 0.54% 0.77% 0.74% 1.48% 3.69% 9.47% 26.24% 15.96% 0.39% 1.91% 0.65% 0.00% 2.51% 10.18% 25.80% 13.29% 0.43% 0.74% 0.88% 0.00% 2.23% 8.88% 29.84% 12.07% 0.45% 1.02% 0.94% 1.18% 2.33% DEPOSITS AND 0.15% 0.18% 0.18% 0.20% 0.22% 39.00% 0.00% 0 0.12% 0 2009 47.76% 0.00% 0 0.06% 0 2008 42.60% 0.00% 0 0.09% 0 2007 46.13% 0.01% 0 0.11% 0 2006 42.92% 0.01% 0 0.12% 0

100.00% 100.00%

100.00% 100.00% 100.00%

SUBJECT TO FINANCE LEASES STAFF BENEFITS DEFERRED CREDIT DEFERRED TAXATION LONG-TERM DEALERS DEPOSITS

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General Tyres and Rubber Company

CURRENT PROVISIONS

LIABILITIES

AND

Current maturity of long-term murabaha financing long-term loans liabilities against assets subject to finance leases Short-term finances Running arrangements Trade and other payables Accrued mark-up Taxation Provisions Total Equity and Liability finances under mark-up 24.53% 21.21% 1.72% 0.00% 1.12% 22.82% 18.86% 1.85% 0.00% 1.67% 5.62% 17.49% 0.51% 0.02% 1.35% 6.60% 16.14% 0.40% 0.02% 3.68% 2.88% 20.75% 0.23% 0.00% 3.69% 0.00% 9.41% 0.38% 8.28% 0.69% 24.97% 0.70% 11.76% 0.68% 12.10% 0.00% 4.27% 0.00% 6.07% 2.49% 2.96% 2.84% 3.38% 2.95% 0.00%

100.00% 100.00%

100.00% 100.00% 100.00%

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General Tyres and Rubber Company

CC#7: Analysis of Common Size Balance Sheet. CC.7 shows the Common Size Balance of General Tyre and Rubber Company for Fiscal Years 2006 to 2010. This is calculated by dividing each component of asset side with total assets and also by dividing each component of liability and equity side with total liabilities and equity. The Plant, Property and Equipment account makes the largest part of the total assets and it has an increasing trend over the years.In the FY 09 General Tyre purchased rubber and tyre recycling plant so thats why in the FY 09 the plant asset and machinery acquires more percentage. In current assets stocks make has the highest proportion of total assets. However, it shows a decline as a percentage of total assets over the 4 years but it increased by 10 percent in the FY 10 this was because General Tyre got 2 contracts for that reason they needed for stock to fulfill their targets. The whole table also shows us that that the total current assets make up a larger part of the total assets as opposed to the non-current assets. In the liabilities and equity side, Accounts payable has the highest percentage to the total liabilities and assets. Running finances under markup arrangements of FY 10 has the highest percentage in the whole table. This was due to the purchase of plant, equipments and stocks. The second highest percentage of liability component to total liability and equity is of issued, subscribed and paid-up capital. However, it has a downtrend over the five fiscal years.

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General Tyres and Rubber Company

Total Assets

plants,equipments Stocks Receivables others

Liabilities + Equity

Equity Finance markup Trade and other payables

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General Tyres and Rubber Company

CC#8: Trend Index of Selected Accounts

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General Tyres and Rubber Company

CC#8: Analysis of Trend Index of Selected Accounts CC.8 includes the trend index of the selected accounts of The General Tyre and Rubber Company from FY 2006 to 2010. The value of each account is the percentage of the base year value of the same account. The base year which has been used in this CC is FY 06. The trend index is used to analyze the performance and behavior of the company. The cash and cash equivalence shows us that the companys cash in hand has increased drastically over the years with highest percentage in FY 10 i.e. 5733.56 per cent, this was because that the company has expand its business form the FY 06 to FY 10.The Account Receivables of the company has increased over the years, which means it is becoming less concerned about the collection of the receivables. The working capital of the Company is showing a downtrend and it becomes negative in the FY 09 and FY 10. This shows that the liquidity of the company has been decreasing over the years and also in year FY 09 and FY 10 companys current liabilities has exceeded current assets and it has no liquidity at all. The Finance cost the company has increased drastically with highest percentage in the FY 09, this was because the creditor gave the loan to the company at very high rate as compare to the previous bad performance of the company and In the Pakistan the interest rate has increased from 7 % to 18%.This tells us that company has been taking huge loans and it is paying high interests on that loan. One can easily figure out that the companys performance is getting worse and worse just by looking at the net income figure in the table. It shows a downward trend and it eventually becomes negative in the FY 08 and FY 09 but in the FY 09 the company net income is positive.

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General Tyres and Rubber Company

CC#9: Per Share Result.

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General Tyres and Rubber Company

CC#9: Analysis Of Per Share Result. CC.9 Includes the Per Share Result of The General Tyre and Rubber Company for fiscal year 2006 to year 2010. It is calculated by dividing the particular accounts with total no. of shares outstanding. The average no. of shares outstanding is the same as shares outstanding in each year, for the fact the company has same no. of shares outstanding in each of the years. The sales to no. of shares outstanding ratio has increased over the years as sales have increased over the years. Earnings per share show a downward trend as the net income has been decreasing and eventually becoming negative over the years but in the year 2010 the EPS shows a dramatic increase due to the increase in the net income. The dividend paid to total no. of shares outstanding ratio for the is negative which depicts the outflow and is zero for the FY 06, FY06 and FY 09 because of the fact that dividends paid these years are so small relative to the no. of shares outstanding. The book value shows a downtrend depicting the fact the equity of the company is rather decreasing over the years. But there was an increase in the book value because the equity is increased at that period due to the increase in the unappropriated profit.

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General Tyres and Rubber Company

CC#10 Short Term Liquidity:

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General Tyres and Rubber Company

CC#10 Short Term Liquidity Analysis: CC.10 includes the short term liquidity analysis of The General Tyre and Rubber Company for fiscal year 2006 to fiscal year 2010. The table includes various accounts like Current Ratio, Acid-test Ratio, Days sales to receivables, liquidity index, working capital etc, which could be used to analyze the short term liquidity of the company. The current Ratio of the company has decreased to 1.31 to 0.98 which means that the company has not enough current assets to fulfill its obligations of the current liabilities. . Industry current ratio is 1.21 but the latest current ratio is even less than the industry average it implies that the company is performing poorer than the other companies in the same sector. So the creditors do not give credit to the company if they so than it will be at very high interest rate because the company has lost its rating from AA to B. A stringent test that indicates if a firm has enough short-term assets (without selling inventory) to cover its immediate liabilities. It is similar but a more strenuous version of the "working capital" ratio, indicating whether liabilities could be paid without selling inventory. The Acid test ratio of the company is decreased from 0.60 to 0.51 this means that the company have about not enough cash and cash equivalent to fulfill the current liabilities this shows that the company have only .51 Rs to fulfill the obligation of 1 Rs. The industry averages of the automobile sector are not good because in the automobile sector the inventory is very expensive and it is very hard for the company without selling its inventory to fulfill its obligations. The industrial average of the automobile sector is 0.57.The Acid test ratio of the company shows that form the FY 2006 to FY10, General Tyre has a too much amount of inventory. The account receivables turnover ratio is decreased over the years from 10.20 to 8.27 which is not a good sign for the company. A low ratio implies the company should re-assess its credit policies in order to ensure the timely collection of imparted credit that is not earning interest for the firm and the Turnover ratio for the industrial average is 11.27 which shows that General tyre converts 1.07 times less its receivables into a sales in the year which is not a good sign for the company. The inventory Turnover ratio is increased from 3.94 to 6.06 which is a good sign for the company because the industrial average is 3.71 and general tyre converted its inventory into sales more than 2.71 times than the industrial average. Increasing inventory turns reduces
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General Tyres and Rubber Company

holding cost. The organization spends less money on rent, utilities, insurance, theft and other costs of maintaining a stock of good to be sold and Reducing holding cost increases net income and profitability as long as the revenue from selling the item remains constant. The day sales receivables are increased from 35.31 days to 43.53 days if we compare it to the company previous performance. And the industrial average of the automobile sector is only 25 days in the year 2010. So company needs to tighten its policy to regarding to decrease its receivable. The days sales inventory has decrease to the 91 days to 59 which is good for the health of the company because it takes lesser time to convert it into sales. The average conversion period has decreased due to the decrease in the day sale inventory and if we compare it to the industrial average which is approximately 68 days in FY 2010 but the company period are 102 so the company needs to strength its policy regarding collection. The cash to Current liabilities ratio has decreased from the 4.10 percent to 3.40 percent it was 7.10 percent in the FY 2009.That shows that the company have only 3.40 percent in the FY 2010 to get rid of from the current obligations. This was due to company has purchase many inventory and plant asset at that year if we compare it to the market that was also not so good it was also only 7 percent that shows that the automobile industries have only 7 percent of the cash to rid of from the current obligations. Ratio measuring the extent that accounts payable represents current rather than overdue obligations. A comparison should be made to the terms of purchase the days purchase in payables is decreased from 109 to 83 days. If we compare it to the industrial average which is 74 only. Which shows that the reputation of the company gets worse because its creditors wants their credit back earlier as compare to the previous years. The working capital which shows the excessive no. of current assets to current liabilities shows a downtrend and it has become negative in FY 09and FY 10. This negativity doesnt show an alarming sign since the industry average is also negative. But the company should be concerned about this ratio because its working capital is far less than the industry average. The liquidity index shows a downward trend which is good because it shows the time period in which assets are removed from the cash.

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General Tyres and Rubber Company

CC#11Common Size Current Assets and Current Liabilities:

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General Tyres and Rubber Company

CC#11 Common Size Analyses of Current Assets and Current Liabilities: CC.11 shows the common size analysis of current assets to current liabilities of The General Tyre and Rubber Company for the years 2006 to 2010. This is calculated by dividing each component of current assets with total current assets and also by dividing each component of current liabilities with total current liability. The Stocks (inventory) of the company contributes the largest in the current assets. However, it shows a declining trend over the years. Loans and Advances make up the smallest part of the total current assets. Al though, it shows an upward trend over the years. The cash in hand of the company has been increasing from FY 06 to FY 09.but it decrease in the FY 10 which is mentioned already in the previous CC.Similarly, Accounts Payables (trade and other payables) make up the largest portion of the total current liability but this account shows a downtrend over the years. The taxation of the company makes up the lowest part of the total current liabilities and it is zero in the Fiscal years 06, 07, 09 and 10.

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General Tyres and Rubber Company

CC#15 Common Size Statement of Cash Flow

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General Tyres and Rubber Company

CC#15 Common Size Analysis of Statement of Cash Flow CC.15 shows the common size statement of cash flows of The General Tyre and Rubber Company for the Years 2006 to 2010. It is calculated by dividing each component of the cash flow statement with the inflow of the operating activities. The cash generated from the operations has the highest or say the only way of earning or inflow for the company .The net cash outlay for the operations shows an abnormal behavior in the year 2008 this was because at that year company have paid much of the finance cost because at that the recession hits the economy and the percentage of interest is increased by 8 percent. In the section of the investing the FY 2008 shows an abnormal behavior because in that year company purchase plant asset as the balance sheet reflects that they gave the payments for the plants asset in the FY 2008 and they are installed in the FY 2009 so due to that reason the fixed capital expenditure is increased by the 382 Percent. So for that reason there is an abnormal behavior are shown in the FY 2008. In the section of financing activities FY 2010 shows the abnormal behavior because at that time the company has paid too much of the long term loans so thats why the financing activities was in negative.

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CC#18: Capital Structure

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General Tyres and Rubber Company

CC#18: Analysis of Capital Structure CC18 give us view of the solvency condition of the general tyre and Rubber Company. As this CC depicts only the one side of the balance in which all the capital structure of the company is base. The equity shows the increasing trend for the FY 2010 because due to the increase in the unappropriated profit

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General Tyres and Rubber Company

CC#19: Common size Capital Structure:

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General Tyres and Rubber Company

CC#19: Common size analysis of Capital Structure: CC 19 shows the each component of the capital structure which is divided by the total equity and liabilities (or Capital Structure). The equity is increased as we mentioned in the previous CC18 but its effect is negative or decreasing because at the same time the company has also increased its liabilities portion so the portion of the equity on the overall capital structure thereby decreased from the fiscal year 2006 to 2010 which means that the company is heavily dependent upon the liabilities portion. This CC depicts that the current liabilities have the highest share as compare to the equity and long-term liabilities in the CC 20 we can tell about the solvency position of the company.

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CC#20: Capital Structure and Solvency Ratio:

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CC#20: Analysis of Capital Structure and Solvency Ratio: CC.20 shows the Capital Structure and Solvency ratios of The General Tyre and Rubber Company for the fiscal years 2006 to 2010. The Solvency ratio is a way investors can measure the companys ability to meet its long term obligations. Obviously if the company is going to go bankrupt you do not want to invest in it. The debt to equity ratio has increased for the FY 06 to FY 09 but there is slight decrease in that in the year 2010. This means the company becomes riskier as the creditor point of view but if we compare it to the industrial average which shows that the debt to equity ratios in the automobile sector are too much because most of the companies relies on the debt and through that debt they can easily bear the burden of interest. The total debt ratio has increased .62 to .72 this means that the company is heavily depending on the debt side and as it increasing there is gradually also increase the chances of the bankruptcy but one thing is positive that whole automobile market is dependent on the debt side because the market average is .68 . As the percentage of the debt is increasing at the same time the percentage of the long-term debt is decreasing this shows that company is heavily dependent on the current or short term debt. The fixed assets to equity ratio of the company show an upward trend over the years and it shows that the company has been financing its assets more with debts than with equity. And also our companys fixed assets to equity ratio are well above the industry average which means our company is using more debt than other companies. Earnings to fixed charges ratio have decreased drastically over the years and it shows that the total interest expense of the company has increased significantly over the years. Also the industry average of the sector is far below and is negative which means that our company is doing well as compared to other industries in the same sector.

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CC#21 Return on Invested Capital Ratio:

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CC#21 Analysis of Return on Invested Capital Ratio: CC.21 includes the return on invested capital ratio of The General Tyre and Rubber Company for the fiscal years 2006 to 2010. There is an increase in the ROA from the FY 06 to FY 10 this shows that the return on asset is increasing which is a positive sign. ROA gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a percentage. In the FY 2010 there is an abnormal increase in the ROA this shows that in the FY 2010 the company uses its total asset more efficiently and at the same time in the fiscal year 2010 the net income is also increased because due to decrease in the CoGS.This also shows that over company is perform good in the FY 2010 as compare to the industrial average. ROE (return of equity) measures how much the company is making profits using the investments made by investors. The ROE for our company has been decreasing massively over the years and it has become negative in the FY 08 and FY09. It tells us that our company hasnt been utilizing the investments efficiently and it really needs to work on that area. But on contrary the ROCE is increased in the FY 2010 this was also due to the increase Net income. The equity growth model shows us the growth of the company using the dividend payout ratio and ROE. Unfortunately, the growth of the company has been decreasing drastically over the years and it has become negative in the FY 07,08and09. The industry average of the companies is very high than our company growth and it tells that company needs to work really hard to improve its performance. As the ROE exceeds the ROA this means that the company is using the debt profitability, same is applied here because in the year 2006 and 2010 the ROE is greater than the return on ROA this means that the company is on the debt profitability. The asset turnover ratio shows us the total no. of sales in each year with respect to total no. of assets in that particular year. Asset turnover ratio shows fluctuated trend over the years and its highest value is in the FY 09. And our companys value is almost the same as the industry average.

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CC#22: Asset utilization Ratios

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General Tyres and Rubber Company

CC#22: Analysis of Asset utilization Ratios CC.22 shows the asset utilization ratios of The General Tyre and Rubber Company for the fiscal years 2006 to 2010. Cash and cash equivalents shows the current assets of the company which are readily convertible into assets and the sales to cash and cash equivalents. The sales to cash ratio indicates the number of times that cash turns over per year. A high sales to cash ratio may indicate inadequate cash on hand. This may lead to financial problems if further financing is not available at reasonable prices. This ratio has shown a fluctuated trend over the years and its value rose up-till FY 07 and then it started to decline and then there is an increase in FY 2010.The sales to cash and cash equivalent of our company is well above the industry average showing that it has less amount of immediate cash available as compared to other companies in the sector. Sales to receivables ratio tells us how much of the amount has been received from the customers out of total assets and in the case of our company this ratio has a declining trend over the 5 years. Also our latest ratio is far less than the industry average ratio. This shows that we collect more percentage of receivables as compare to other industries. Sales to working capital show how much sales have been generated relative to the excess current assets over current liabilities. This ratio shows an uptrend indicating that our excess current assets have been decreasing over time. The negative value indicates that our current assets are no longer greater than current liabilities it is rather less than current liabilities. Further, this ratio is far less than the industry average indicating that The General Tyre has high current liability as opposed to other companies. Sales to short-term liability means that how much of short-term liability has been used to generate the given amount of sales. This ratio shows a fluctuated trend over the years with highest value in the FY 06. General Tyres latest sales to short-term liabilities ratio is greater than the industry average indicating that it uses lesser amount of short-term liability as opposed to other companies.

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General Tyres and Rubber Company

CC#23 Profit Margin Ratio:

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General Tyres and Rubber Company

CC#23 Analysis of Profit Margin Ratio: These ratios simply show us the strength or potential of the company to generate profits over the years. Gross profit margin ratio which is a ratio of gross profit to sales gives us the idea how much income remains relative to sales once we subtract cost of goods sold from the sales. This ratio has a downtrend from FY 06 to FY 09. But there is an increase in the gross profit as compare to the previous this was due to the decrease in the CoGS. The operating profit margin increase which means that company has enough money to give up its interests on loan and other obligations due.

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General Tyres and Rubber Company

CC#26: Market Measures: CC26 General Tyre and Rubber Company Market Measures For the year 2006 through 2010

price of 30th july, 2006 Price of 30th june,2010 Average Share Price 2010 Price to Earning(range) Price to Book(range) Earnings Yield Dividend Yield Dividend Payout Ratio 70.633 11.589 0.014 0.000 0.000 Industry Average Price to Earning(range) Price to Book(range) Earnings Yield Dividend Yield Dividend Payout Ratio 30.75 21.65 -0.22 317.7 -317.83

28.2 23.4 25.8 2009 -140.416 13.864 -0.007 0.000 0.000 2008 -934.323 12.618 -0.001 0.000 0.006 2007 245.093 12.450 0.004 -0.008 -1.886 2006 121.427 11.905 0.008 -0.007 -0.819

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General Tyres and Rubber Company

CC#26: Analysis of Market Measures: CC.26 includes the market measures of The General Tyre and Rubber Company for the fiscal years 2006 to 2010. To calculate the market measures we have first calculated the average price by adding up the 1st July, 2006 and 30th July, 2010 and dividing the both prices with 2. The price to earnings ratio has been increasing from FY 05 to 07 and then it becomes negative in the FY 08 and FY 09 but it shows a dramatic increase in the year 2010 which is 70.33. The high P/E ratio is good for the investor because he is willing to earn more on it. A ratio used to compare a stock's market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter's book value per share. There is a decrease in the ratio in the FY 201o as compare to FY 2009. Similarly, the price to book ratio is showing an uptrend over the years which implies that the companys share price has been increasing relative to its worth, but this value is also well below the industry average.

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General Tyres and Rubber Company

CONCLUSION

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