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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
CHAPTER 1 INTRODUCTION 1.1 Company Profile Ashok Leyland, the Hinduja Group flagship company in India, is a leading manufacturer of commercial vehicles with a product range of 7.5 tonne to 49 tonne in haulage vehicles, from numerous special application vehicles to diesel engines for industrial, marine and genset applications, Ashok Leyland offers a wide range of products goods vehicles and 18 seaters to 82 seaters in passenger models. The Company’s annual turnover exceeds US $ 2 billion. It has a production capacity of 84,000 vehicles which is being enhanced to 100,000 in the current year and 87,000 engines per annum. The Company has associate companies in the Czech Republic and the UAE and joint ventures in Sri Lanka and Bangladesh, and also exports to over 20 countries worldwide. Founded in 1948 and head quartered in Chennai, Ashok Leyland started manufacturing commercial vehicles in 1955, with technology from and equity participation by Leyland Motors Ltd, UK. In 1987, Hinduja Group jointly with IVECO, the commercial vehicle arm of Fiat, Italy, gained a controlling interest in Ashok Leyland and its associate companies when it acquired the UK-based Land Rover Leyland International Holdings Ltd (LRLIH). With its own comprehensive R&D base, strengthened by collaborations with global technology leaders, Ashok Leyland has established a tradition of technological leadership and a strong reputation for product reliability. The history of Company has been punctuated by a number of technological innovations, which have since become industry norms. For over three decades, Ashok Leyland has been a pioneer in the design and development of special vehicles for the armed forces. The Company has been supporting the modernization of the Indian Army by developing a host of modern special application vehicles that include Light Recovery Vehicles, High Mobility Vehicles, Fire Fighting Trucks and Field Artillery Tractors. The Company’s all-India customer-base is served through an all-India sales, service and parts network. In 1995, Ashok Leyland set up a driver-training center in Namakkal, the first of its kind in India – offering a comprehensive training package that prepares a driver for life on and off the road. Over 100,000 drivers have already been trained. Close on the lines of Namakkal, a Driver Training S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
Institute has been recently established at Burari near Delhi as a joint venture with the Government of NCT of Delhi. Ashok Leyland was the first automotive manufacturer in India to receive ISO 9002 certification in 1993. While the ISO 9001 certification came in 1994, the QS 9000 certification came in 1998. All the manufacturing Units of Ashok Leyland are ISO 14001 certified for their Environment Management System (EMS). In addition, the Company has taken up a ‘Greening the supply chain’ initiative so as to extend its commitment of a green environment to its suppliers. In its effort to convert its technological leadership into market leadership through improved customer satisfaction, the Company has been enhancing its product range by positioning customized models to suit geographical and application segments. The Company employs 12,000 people and has six manufacturing units with an annual capacity of 112500 vehicles.
1.2 Company History The origin of Ashok Leyland can be traced to the urge for self-reliance, felt by independent India. Pandit Jawaharlal Nehru, India's first Prime Minister persuaded Mr. Raghunandan Saran, an industrialist, to enter automotive manufacture. In 1948, Ashok Motors was set up in what was then Madras, for the assembly of Austin Cars. The Company's destiny and name changed soon with equity participation by British Leyland and Ashok Leyland commenced manufacture of commercial vehicles in 1955.
Since then Ashok Leyland has been a major presence in India's commercial vehicle industry with a tradition of technological leadership, achieved through tie-ups with international technology leaders and through vigorous in-house R&D. Access to international technology enabled the Company to set a tradition to be first with technology. Be it full air brakes, power steering or rear engine busses, Ashok Leyland pioneered all these concepts. Responding S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
to the operating conditions and practices in the country, the Company made its vehicles strong, over-engineering them with extra metallic muscles. "Designing durable products that make economic sense to the consumer, using appropriate technology", became the design philosophy of the Company, which in turn has moulded consumer attitudes and the brand personality. Ashok Leyland vehicles have built a reputation for reliability and ruggedness. The 500000 vehicles we have put on the roads have considerably eased the additional pressure placed on road transportation in independent India. In the populous Indian metros, four out of the five State Transport Undertaking (STU) buses come from Ashok Leyland. Some of them like the double-decker and vestibule buses are unique models from Ashok Leyland, tailor-made for high-density routes. In 1987, the overseas holding by Land Rover Leyland International Holdings Limited (LRLIH) was taken over by a joint venture between the Hinduja Group, the Non-Resident Indian transnational group and IVECO. (Since July 2006, the Hinduja Group is 100% holder of LRLIH). The blueprint prepared for the future reflected the global ambitions of the company, captured in four words: Global Standards, Global Markets. This was at a time when liberalization and globalization were not yet in the air. Ashok Leyland embarked on a major product and process up gradation to match world-class standards of technology. In the journey towards global standards of quality, Ashok Leyland reached a major milestone in 1993 when it became the first in India's automobile history to win the ISO 9002 certification. The more comprehensive ISO 9001 certification came in 1994, QS 9000 in 1998 and ISO 14001 certification for all vehicle manufacturing units in 2002. It has also become the first Indian auto company to receive the latest ISO/TS 16949 Corporate Certification (in July 2006) which is specific to the auto industry.
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
1.3 General Information 1. 2.
Name of unit Registered office
3.
Plants locations
4. 5.
Form of organization Types of industry
6. 7.
Book closure date Stock code a. Trading symbol at
EXHIBIT 1.3 : Ashok Leyland Limited. : 19, Rajaji Salai, Chennai – 600001. : • Ennor & Ambattar at Chennai. • Hosur – I, II, IIA units at Tamilnadu. • Bhandra at Maharastra. • Alwar at Rajasthan. : Public Limited Company. : Heavy Automobiles Industries. : :
From July 18, 2007 to July 20, 2007 Madras Stock Exchange – All Mumbai Stock Exchange (Physical) – 477 (Demat) - 500477 National Stock Exchange – AshokLey
b. Demat ISIN no. in NSDL & CDSL 8. Accounting year 9. Incorporated year 10. Face value
: : :
11. Subsidiary company
:
Equity shares – INE208A1029. 1 April to 31st March. 1948 Re.1 (for year 2005), Re, 10 (for year 2004 & past years). Ashley Holdings Limited Ashley Investments Limited Ashley Transport Services Limited Ashok Leyland Project Services Limited Ashok Leyland (UAE) LLC, Ras Al Khaimah, UAE Automotive Coaches and Components Limited Avia Ashok Leyland Motors s.r.o, Czech Republic Gulf Ashley Motor Limited Irizar TVS Limited Lanka Ashok Leyland Limited, Sri Lanka Ashok Leyland Finance Limited. st
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
1.4 Corporate Information EXHIBIT 1.4 1 Board Of Directors
R J Shahaney D G Hinduja D J Balaji Rao A K Das Chatterjee P N Ghatalia S R Krishnaswamy S Raha F Sahami S Shroff A Spare R Seshasayee
Chairman Vice Chairman Alternate : P Banerjee) Representing LIC
Managing Director
2 Chief Operating Officer Vinod K Dasari 3 Executive Directors J N Amrolia S Balasubramanian N Basavanahalli A Bhat A R Chandrasekharan A K Jain R Malhan N Mohanakrishnan S Nagarajan M Natraj B M Udayashankar 4 Company Secretary 5 Auditors 6 Cost Auditors 7 Bankers
N Sundararajan M S Krishnaswami & Rajan Deloitte Haskins & Sells Geeyes & Co. Bank Of America Bank Of Baroda Canara Bank Central Bank Of India Citibank N.A. HDFC Bank Limited ICICI Bank Limited IDBI Bank Limited Punjab National Bank Standard Chartered Bank State Bank Of India S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
8 Registrar & Transfer Agents
HSBC Limited From April 1,2003, the company has appointed M/s Integrated Enterprises (India) Ltd, 2nd Floor, Kences Tower, 1 Ramakrishna Street, North Usman Road, T. Nagar, Chennai – 600017. Tel: 91-44-28140801/03 Fax: 91-44-28142479 E-mail:
[email protected]
9 Listing On Stock Exchange Listing of Equity shares
Listing of Global Depository Receipts (GDRs) Listing of Foreign Currency Convertible Notes (FCCNs)
Madras Stock Exchange Ltd. Bombay Stock Exchange Ltd. National Stock Exchange of India Ltd. At London Stock Exchange At London Stock Exchange
1.5 Finance Function OF Company Finance function is the life board of any company so the management puts special attention towards it. A firm performs finance function efficiently so that the business goes on smoothly and interruption and the company remains not only able to grow on its own resources generated through surpluses. Finance function call for skill planning control and execution of s firm’s activities. Following are the three major decisions as function of finance 1. The Investment decision. 2. The Financing decision. 3. The Dividend policy decision.
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
1.5.1 The Investment Decision: The investment decision relates to the selection of assets in which funds will be invested by a firm > the assets that can be acquired fall into two broad groups I. Long term or Fixed assets II. Short term or Current assets The financial manager has to carefully allocate the available funds to recover not only the cost of the fund but also must earned sufficient return on the investment. Two important aspects of the investment decision are: a) The evolution of the prospective return of new investment b) The measurement of cut off rate against that prospective return of new investment could be compared. Investment proposal should be evaluated in term of both expected and risk. In brief the main element in the financial decision is The long & short-term assets and their computation The business risk complexion of the firm Concept and measurement of the cost of capital Efficient management of asset
1.5.2 Financing Decision: Financing decision is the second important function to be performed by the financial manager. Broadly, he or she must decide when, where & how to acquire funds to meet the firm’s investment needs. In practice, a firm considers many other factors such as control, flexibility, loan covenants, legal aspects etc. in deciding its capital structure. EXHIBIT 1.5.2 (Rs in Millions) SOURCE OF FUNDS Share capital Reserve & surplus Secured loans Unsecured loans Deferred tax liability TOTAL: -
2003
2004
2005
2006
2007
1189.29
1189.29
1189.29
1221.59
1323.87
8405.57 5045.62 2129.60
9328.68 3103.56 1885.52
10489.36 12902.94 17621.81 2634.96 1846.91 3602.16 6169.10 5072.37 2801.82
1684.99 1802.86 1708.48 1796.89 1969.29 18455.07 17309.91 22191.19 22840.70 27318.95 S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
1.5.3 Dividend Decision: Dividend decision is the third major financial decision. The financial manager must decide whether the firm should distribute all profits, or retain them, or distribute a portion & retain the balance. The optimum dividend policy is one that maximizes the market value of the firm’s shares. The director’s receded dividend of 150% (Rs. 1 per Equity share of Rs. 1.5) for the year ended March 31st 2007.
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
1.6 Highlights of Performance Particular
20062007
20052006
20042005
20032004
20022003
20012002
20002001
19992000
19981999
19971998
Sales Volume Vehicles (nos.) Engines (nos.) Spare parts & Others
83094 8202 5468
61655 7171 7838
54740 6254 5460
48654 5085 4468
36444 5924 4771
29673 5298 5492
32475 6311 5139
37859 6004 2145
29741 7185 2145
31547 7611 2520
Sales Values Profit Before Tax Profit After Tax
83047 6045 4413
60531 4523 3273
48113 3550 2714
39273 2865 1936
30740 1701 1202
26304 1322 923
26067 1019 917
25987 933 785
20451 233 204
20143 207 184
15445 2211 9419 27075
10847 3682 8239 22768
9790 2292 9916 21998
9211 1466 6310 16987
9398 1576 7481 18455
10098 1173 9825 21096
9613 1179 10223 21015
9458 1204 10329 20991
9547 625 10491 20663
9026 485 13914 23425
1324 17378 6404
1222 12830 6919
1189 10296 8804
1189 9006 4990
1189 8406 7175
1189 9131 8884
1189 10496 9330
1189 10145 9657
1189 9852 9622
1189 9763 12473
1969
1797
1709
1803
1685
1892
-
-
-
-
27075
22768
21998
16987
18455
21096
21015
20991
20663
23425
228
163
101
78
77
66
17
15
Assets Fixed Assets Investments Net Current Assets
Financed By Shareholder’s fund - Capital - Reserve Loan funds Deferred Tax Liability - Net
Basic Earning Per Share (Paise) (Face Value Re.1 Each)
338
Dividend (%)
150
120
100
75
50
45
40
35
10
10
12125
11845
12178
12007
11860
13218
13489
14056
14254
14635
Employee (Nos.)
274
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
1.7 Production Plant Ashok Leyland has six manufacturing plants - the mother plant at Ennore near Chennai, two plants at Hosur (called Hosur I and Hosur II, along with a Press shop), the assembly plants at Alwar, Bhandara and the castings plant at Hyderabad. The total covered space at these six plants exceeds 450,000 sq m and together employs over 11,500 personnel.
1. 2. 3. 4. 5. 6.
Encore Hosur unit-1 Hosur unit-2 Hosur unit-2a Alwar Bhandara
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
1.8 Functional Distribution of Employees
Ashok Leyland limited committed to maintaining their technological leadership. Ashok Leyland limited manages this through continuous learning. So that they can master ever-evolving technologies and meet changing customer needs. Understandably, a career with Ashok Leyland offers a lifetime of learning. Structured training programmers address the needs of workmen, apprentices, graduate engineering trainees, executives in the managerial levels for knowledge and skills up gradation, computerization, attitudinal changes, self-development, and supervisory and managerial skills orientation to new technologies as also requirements specific to various requirements specific to various functional areas. This breadth is reflected in the comprehensive annual training calendar.
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
1.9 Qualification Analysis - Executives
Ashok Leyland has a tie-up with BITS, Pilani for a custom-designed, offcampus 2-year MS course in Engineering Management. Aimed at making Managers out of Engineers, assignments and projects are central to the learning process thus bridging the classroom with the engineers' workplace. From 2000, a BS programme in Industrial Engineering and Technology, is offered for diploma holders, again in collaboration with BITS. Apart from updating their knowledge base, the programme empowers engineers to acquire multiple skills. Ashok Leyland is one of the moving forces behind a Mitch course in Automobile Engine Technology jointly managed by the automobile industry (Indian Society for Automotive Technology, made up of auto manufacturers), IIT, Madras and Institute Francais du Petrole, the French institute for IC engines.
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
1.10 Environment Friendliness We are concerned about the earth our children will inherit. That's why we make sure our vehicles consume less, pollute less. This concern is reflected in the manufacturing systems, the various processes, energy conservation measures and conscious greening initiatives of the Company.” In 2002, all the vehicle-manufacturing units of Ashok Leyland were ISO 14001 certified with Environmental Management System.
Over the decades, Ashok Leyland's R&D engineers have been addressing the twin concerns of fuel-efficiency and emissions. Not surprisingly, when the legislation came in 1987, limiting vehicular emission, Ashok Leyland vehicles were already meeting them. In 1992, came the more stringent norms for gaseous emissions. By then, Ashok Leyland, through timely technology tie-ups - and ahead of competition - had absorbed and was offering eco-friendly engine technology. In 1996, when the permissible levels of gaseous exhaust emissions were further tightened, Ashok Leyland again met the norms with ease.
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
1.11 PRODUCT PROFILE 1.11.1 BUSES Ashok Leyland. Over five decades in the transport solutions industry. Offering a world-class range of trucks buses special application vehicles and engines touching millions across 40 countries worldwide
Viking BS - I
Viking BS - II
12 M Bus
Cheetah BS - I
Panther Luxury
Cheetah BS - II
Stag BS - II
Vestibule Bus
Airport Tarmac coach
222 CNG Bus
Lynx
Double Decker
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
1.11.2 TRUCK Ashok Leyland manufactures trucks of various capacities that take on any task with ease.
4 X 2 Haulage Models
4 X 2 and Multi axle Tippers
Tractors
Multi axle Vehicles
E comet
1.11.3 ENGINE Ashok Leyland manufacturer’s diesel engines in collaboration with world leaders for industrial, genset and marine applications These are mostly manufactured at Hosur with the traditional engines being manufactured at the Ennore plant. Click on the links below for details. Engines for Generating Set Application
Range: 30 - 125 KVA (Conforms to CPCB emission norms) Industrial Segment Hospitals / Clinics Commercial / Residential Complexes Hotels / Restaurants Theatres Shopping mall / Offices Rice Mills
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
Engines for Special Applications
Range: 39 - 200 PS Front End Loaders Excavators Compactors Pavers Road Sweepers Harvester Combines Compressors Cranes Pumps Marine Diesel Engines
Range: 42 - 193 PS Ideal Choice for Trawlers, Pure -Seiners, Gill-netters Sailing Vessels Marine generating sets Pavers Auxiliary drive in Vessels
1.11.4 DEFENCE AND SPECIAL VEHICLES Ashok Leyland has long been in the manufacture of Defence and speciality vehicles. Each as rugged as and performance intensive as any comparable vehicle in the world
Special Vehicles
Defence Vehicles
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
CHAPTER 2 HORIZONTAL ANALYSIS Financial statements present comparative uniformities for the current year and the previous year. A simple approach to financial statement analysis, known as horizontal analysis is to calculate amount changes & percentage changes from the previous year to the current year. Relative = Current year amount – previous year amount Absolute (%) = ((Current year – Previous Year) \ Previous Year) x 100
EXHIBIT 2.1 2.1 COMPARATIVE PROFIT & LOSS ACCOUNT OF ASHOK LEYLAND LTD FOR THE YEAR ENDED 31st March 2003-04 Particulars INCOME SALES OTHER EXPENDITURE MANUFACTURING & OTHER EXPENSES DEPRECIATION FINANCIAL EXPENSES PROFIT BEFORE EXTRA ORDINARY EXPENSES EXTRA ORDINARY EXPENSE PROFIT\(LOSS) FOR THE YEAR (PBT) PROVISION FOR TAXATION PROFIT\(LOSS) FOR THE YEAR (PAT)
Rs. In Millions Increase/(Decrease) 2003-04 2002-03 Amount Percentage 33938.84 26803.75 7135.09 186.20 152.93 33.27 34125.04 26956.68 7168.36
26.62 21.76 26.59
29992.80 23554.18 6438.62 964.54 1029.69 (65.15) 207.91 585.10 (377.19) 31165.25 25168.97 5996.28
27.34 (6.33) (64.47) 23.82
2959.79
1787.71
1172.08
65.56
95.19
86.69
8.50
9.81
2864.60
1701.02
1163.58
68.40
928.80
498.90
429.90
86.17
1935.80
1202.12
733.68
61.03
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
In 2003-04, the sales increased by 26.62% over 2002-03 & profit is also increased by 61.03%. Increase in expenditure by 23.82% that is less then the increase in income by 26.59%. Other income increased by 21.76% but depreciation & financial expenditure decreased by 6.33% & 64.47% respectively. Extra ordinary expense increased by 9.81%. This year sales, expenditure & profit increase compare to the last year because of company introducing some engines. So that increases in sales, expenditure and profit.
EXHIBIT 2.1.1 Growth in year 2003 – 2004 Figures in % Particulars INCOME EXPENDITURE PROFIT\(LOSS) FOR THE YEAR (PBT) PROVISION FOR TAXATION PROFIT\(LOSS) FOR THE YEAR (PAT)
2003-04 26.59 23.82 68.40 86.17 61.03
Chart 2.1.1 Growth in percentage of the year 2003-04 2003-04 GROWTH IN %
100 90 80 70 60 50 40 30 20 10 0
86.17 68.4
61.03
23.82
26.59
INC OME
EXPENDITURE
PROFIT\(LOSS) FOR THE YEAR (PBT)
PROVISION FOR TAXATION
PROFIT\(LOSS) FOR THE YEAR (PAT)
PARTICULARS
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
EXHIBIT 2.2 2.2 COMPARATIVE PROFIT & LOSS ACCOUNT OF ASHOK LEYLAND LTD FOR THE YEAR ENDED MARCH 31 2004-05 Particulars INCOME SALES OTHER
EXPENDITURE MANUFACTURING & OTHER EXPENSES DEPRECIATION FINANCIAL EXPENSES PROFIT BEFORE EXTRA ORDINARY EXPENSES EXTRA ORDINARY EXPENSE PROFIT\(LOSS) FOR THE YEAR (PBT) PROVISION FOR TAXATION PROFIT\(LOSS) FOR THE YEAR (PAT)
Rs. In Millions Increase/(Decrease) 2004-05 2003-04 Amount Percentage
41818.97 33938.84 7880.13 537.55 186.20 351.35 42356.52 34125.04 8231.48
23.22 188.69 24.12
37590.47 29992.80 7597.67 1092.14 964.54 127.60 27.98 207.91 (179.93) 38710.59 31165.25 7545.34
25.33 13.23 (86.54) 24.21
3645.93
2959.79
686.14
23.18
95.83
95.19
0.64
0.67
3550.10
2864.60
685.50
23.93
836.00
928.80
(92.80)
(9.99)
2714.10
1935.80
778.30
40.21
In 2004-05, the sales registered a growth of only 23.22% over 2003-04. Profit of year (2004-05) increase by 40.21%, which is more than the last year. Increase in profit is more than increase in sales for every year. Expenditure increased by 24.21%, which is, more than increase in sales by 23.22%. In 2004-05 provision for tax decreased by 9.99% so that profit of the company has increased to 40.21% from 23.93%. Extra ordinary expenses increased by 0.67% compare to last year.
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
EXHIBIT 2.2.1 Growth in year 2004- 2005 Figures in % Particulars INCOME EXPENDITURE PROFIT\(LOSS) FOR THE YEAR (PBT) PROVISION FOR TAXATION PROFIT\(LOSS) FOR THE YEAR (PAT)
2004-05 24.12 24.21 23.93 (9.99) 40.21
Chart 2.2.1 Growth in percentage of the year 2004-05 2004-05 50 40.21
GROWTH IN %
40 30
24.12
24.21
23.93
INCOME
EXPENDITURE
PROFIT\(LOSS) FOR THE YEAR (PBT)
20 10 0 -10 -20
PROVISION FOR TAXATION -9.99
PROFIT\(LOSS) FOR THE YEAR (PAT)
PARTICULARS
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
EXHIBIT 2.3 COMPARATIVE PROFIT & LOSS ACCOUNT OF ASHOK LEYLAND LTD FOR THE YEAR ENDED MARCH 31 2005-06 Particulars INCOME SALES OTHER
EXPENDITURE MANUFACTURING & OTHER EXPENSES DEPRECIATION FINANCIAL EXPENSES PROFIT BEFORE EXTRA ORDINARY EXPENSES EXTRA ORDINARY EXPENSE PROFIT\(LOSS) FOR THE YEAR (PBT) PROVISION FOR TAXATION PROFIT\(LOSS) FOR THE YEAR (PAT)
2005-06 2004-05
Rs. In Millions Increase/(Decrease) Amount Percentage
52476.57 41818.97 10657.60 329.74 537.55 (207.81) 52806.31 42356.52 10449.79
25.49 (38.66) 24.67
47075.87 37590.47 1260.06 1092.14 164.53 27.98 48500.46 38710.59
9485.40 167.92 136.55 9789.87
25.23 15.38 488.03 25.29
659.92
18.10
4305.85 (217.15)
3645.93 95.83
4523.00
3550.10
1249.80
836.00
3273.20
2714.10
(312.98)
(326.60)
972.90 413.80
27.40 49.50
559.10
20.60
In 2005-06, the sales registered a growth of 25.49% over 2004-05 Profit of year (2005-06) increase by 20.60%, which is less than the last year. Increase in profit is less than increase in sales for the year because of this year provision for taxation is increased by 49.50% and in the last year it was decreased by 9.99% Decrease in the other income by 38.66% is due to one-time gain earned from sale of shares of Indus Ind Bank during 2004-05. Expenditure increased by 25.23%, which is, less than increase in sales by 25.49%. Because of steel price has been softened this year. Reason for Increase in expenditure is increase in man power expenditure by 14%. Extra ordinary expenses has been decreased by 326.60%
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
EXHIBIT 2.3.1 Growth in year 2005-06 Figures in % Particulars INCOME EXPENDITURE PROFIT\(LOSS) FOR THE YEAR (PBT) PROVISION FOR TAXATION PROFIT\(LOSS) FOR THE YEAR (PAT)
2005-06 24.67 25.29 27.40 49.50 20.60
Chart 2.3.1 Growth in percentage of the year 2005-06 2005-06
GROWTH IN %
60 49.5
50 40 30
24.67
25.29
27.4 20.6
20 10 0 INCOME
EXPENDITURE
PROFIT\(LOSS) FOR THE YEAR (PBT)
PROVISION FOR TAXATION
PROFIT\(LOSS) FOR THE YEAR (PAT)
PARTICULARS
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
EXHIBIT 2.4 COMPARATIVE PROFIT & LOSS ACCOUNT OF ASHOK LEYLAND LTD FOR THE YEAR ENDED MARCH 31 06-07 Particulars INCOME SALES OTHER
EXPENDITURE MANUFACTURING & OTHER EXPENSES DEPRECIATION FINANCIAL EXPENSES PROFIT BEFORE EXTRA ORDINARY EXPENSES EXTRA ORDINARY EXPENSE PROFIT\(LOSS) FOR THE YEAR (PBT) PROVISION FOR TAXATION PROFIT\(LOSS) FOR THE YEAR (PAT)
2006-07 2005-06
Rs. In Millions Increase/(Decrease) Amount Percentage
71681.76 52476.57 19205.19 708.03 329.74 378.29 72389.79 52806.31 19583.48
36.60 114.72 37.09
64654.91 47075.87 17579.04 1505.74 1260.06 245.68 53.32 164.53 (111.21) 66213.97 48500.46 17713.51
37.34 19.50 (67.59) 36.52
6175.82 130.76
4305.85 (217.15)
1869.97 347.91
43.43 160.22
6045.06
4523.00
1522.06
33.65
1632.20
1249.80
382.40
30.60
4412.86
3273.20
1139.66
34.82
In 2006-07, the sales registered a growth of 36.60% over 200506.the reason for increase in the sale by this much is due to company’s export grew by 23% and launch of new product. Profit of year 2006-07 increase by 34.82%, which is more than the last year because of increase in sale. Expenditure increased by 36.52%, while last year it was increased by 25.29%. the reason for increase in expenditure is due to increase in R&D expense. In 2006-07 other income has been increased by 114.72% which is mainly on account of income from investments, profit on sale of Investments and profit on disposal of fixed assets. Extra ordinary expenses has been increased in this year is by 160.22%.
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
23
FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
EXHIBIT 2.4.1 Growth in year 2006-2007 Figures in % Particulars INCOME EXPENDITURE PROFIT\(LOSS) FOR THE YEAR (PBT) PROVISION FOR TAXATION PROFIT\(LOSS) FOR THE YEAR (PAT)
2006-07 37.09 36.52 33.65 30.60 34.82
Chart 2.4.1 Growth in percentage of the year 2006-07 2006-07 40
37.09
36.52
GROWTH IN %
35
34.82
33.65 30.6
30 25 20 15 10 5 0 INCOME
EXPENDITURE
PROFIT\(LOSS) FOR THE YEAR (PBT)
PROVISION FOR TAXATION
PROFIT\(LOSS) FOR THE YEAR (PAT)
PARTICULARS
EXHIBIT 2.5 COMPARATIVE GROWTH OF LAST FOUR YEARS Growth in percent (%) Particulars INCOME EXPENDITURE PROFIT\(LOSS) FOR THE YEAR (PBT) PROVISION FOR TAXATION PROFIT\(LOSS) FOR THE YEAR (PAT)
2003-04 26.59 23.82
2004-05 24.12 24.21
2005-06 24.67 25.29
2006-07 37.09 36.52
68.40 86.17
23.93 (9.99)
27.40 49.50
33.65 30.60
61.03
40.21
20.60
34.82
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
24
FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
Chart 2.5 COMPARATIVE GROWTH OF LAST FOUR YEARS
100 86.17 80
GROWTH IN %
68.4 61.03 60
40
49.5 37.09 24.67
26.59
36.52 24.21 25.29 23.82
24.12
40.21 27.4 23.93
33.65
34.82
30.6 20.6
20
0 INCOME
EXPENDITURE
PROFIT\(LOSS) FOR THE YEAR (PBT)
-20
PROVISION FOR TAXATION -9.99
PROFIT\(LOSS) FOR THE YEAR (PAT)
YEARS 2003-04
2004-05
2005-06
2006-07
The difference in the growth of Ashok Leyland is very large in the year 2003-04. In the year 2003-04 high growths is registered. In year 2005-06 sales & profit was 24.67% & 20.6% respectively but in the current year 2006-07 sales & profit is increased by 37.09% and 34.82% respectively. Reason for this large difference in growth are: 1. The company has renovated its production plant. 2. Introducing some engines. Here tax is decreased so that profit is increased
EXHIBIT 2.6 2.6 STATUS OF INCOME, EXPENDETURE AND PROFIT IN FIVE YEARS
Rs. In Millions
Particulars INCOME EXPENDITURE PROFIT\(LOSS)(PAT )
2003 2004 2005 2006 2007 26956.6 34125.0 42356.5 52806.3 72389.7 8 4 2 1 9 25168.9 31165.2 38710.5 48500.4 66213.9 7 5 9 6 7 3273.20 4412.86 1202.12 1935.80 2714.10
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
25
FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
STATUS OF INCOME, EXPENDETURE AND PROFIT IN FIVE YEARS Chart 2.6.1 80000 72389.79 70000
66213.97
RS In Millions
60000
52806.31 48500.46
50000 42356.52 38710.59
40000 30000
34125.04 31165.25 26956.68 25168.97
20000 10000
4412.86
3273.2
2714.1
1935.8
1202.12 0 2003
2004
2005
2006
2007
YEARS INCOME
EXPENDITURE
PROFIT\(LOSS) FOR THE YEAR (PAT)
Chart 2.6.2 80000
72389.79
70000
66213.97
Rs. In Millions
60000
52806.31
50000 40000 30000
48500.46
42356.52
38710.59
34125.04 26956.68
31165.25 25168.97
20000 10000
1202.12
0 INC OME
EXPENDITURE
2003
PARTICULARS 2004 2005 2006
1935.8
3273.2 4412.86 2714.1
PROFIT\(LOSS) FOR THE YEAR (PAT)
2007
From the above two graph, we can see that the income, expenditure & profit of the Ashok Leyland Ltd are increasing every year. It shows very progressive status of the company. The profit of Ashok Leyland is very Low in every year in compare to sales or revenue low in every high level of expenditure. S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
26
FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
The reason for that is the company is developing presently. Ashok Leyland doing lots of expenditure for their product, quality standards & expansion of its production and distribution.
2.7 SALES OF LAST FIVE YEARS EXHIBIT 2.7 (Rs. In Millions) Particulars SALES
2003 2004 2005 2006 2007 26803.75 33938.84 41818.97 52476.57 71681.76
Chart 2.7 SALES 80000 71681.76
Rs In Millions
70000 60000 52476.57
50000 41818.97
40000 30000
33938.84 26803.75
20000 10000 0 2003
2004
2005
2006
2007
YEARS
From the above graph, it clear that the sales of the Ashok Leyland Ltd are increasing every year. This is favorable sign for the Co. In the year 2002-03 Turnover for the year at Rs.26803.75 million has increased by 16.9% as compared to previous year, mainly due to increase in sale of commercial vehicles by 22.8% and engines by 12.7%. However the sale of castings and spare parts and others were lower by 31.0% and 13.1% respectively mainly due to lower off take of castings by tractor industry and lower orders from Defence. In the year the 2003- 04 Net Sales for the year at Rs.33939 Million has increased by 26.62% as compared to previous year, contributed mainly by the volume increases in commercial vehicles by 33.5% and 65.1% increase in castings. In the year 2004-05 Net sales for the year, at Rs. 41,818 Million has grown by 23.22% as compared to previous year, contributed mainly by volume increases in vehicles by 13%, engines by 23% and 52% increase in castings. Spare parts sales were up 22%.
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
27
FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
In the year 2005-06 Net sales for the year, at Rs. 52477 million has increased by 25.49% as compared to previous year, contributed mainly by volume increases in vehicles by 13%, engines by 15% and a 44% increase in sales revenue from Spare Parts. In the year 2006-07 Net sales for the year, at Rs 71,682 million, has increased by 37% as compared to previous year, contributed mainly by volume increases in vehicles by 35% and engines (including traded) by 23%. The reduction in spare parts revenue by 30% is mainly due to lower off take by Vehicle Factory, Jabalpur, compared to the previous year.
2.8 COMPARISION OF SALES & PROFIT PERCENTAGE EXHIBIT 2.8 Figures in % Particulars SALES (%) PROFIT\ (LOSS) FOR THE YEAR (PAT) (%)
2003-04 26.62
2004-05 23.22
61.03
40.21
2005-06 25.49 20.60
2006-07 36.60 34.82
Chart 2.8
GROWTH IN %
70
61.03
60 50 40 30
40.21
36.6 34.82
26.62
25.49 23.22
20.6
20 10 0 2003-04
2004-05
2005-06
2006-07
YEARS SALES
PROFIT\(LOSS) FOR THE YEAR (PAT)
In year 2003-04 the sales is increased in large percentage i.e. 61.30% that is good sign for company. In year 2003-04 sales & profit percentages ware maximum. Now in this year 2004-05 sales have little decrement that is 23.22% because of expenses are more so that profit is decreased by 40.21%. In the year the 2005-06 the sales was increased to 25.49% compare to last year i.e. 2004-05 but the profit has decreased to 20.6% compare to 2004-05. Reason for such decrement is due to increase of research & development expenses in the year 2005-06. S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
28
FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
In 2006-07, the Company’s exports grew by 23% with the sale of 6,025 vehicles. This improvement was derived from demand in the export markets and the launch of new products. This is the reason the sale & profit has increased compare to last years i.e. 2005-06
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
29
FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
EXHIBIT 2.9 2.9 COMPARATIVE BALANCESHEET OF ASHOK LEYLAND LTD AS ON MARCH 31 2003-04 Rs. In Millions Particular SOURCE OF FUNDS SHAREHOLDER’S FUND SHARE CAPITAL RESERVE & SURPLUS LOAN FUNDS SECURED LOANS UNSECURED LOANS
2003
2004
1189.29 8405.57 9594.86
1189.29 9328.68 10517.97
Increase/(Decrease) Amount Percentage
0.00 923.11 923.11
0.00 10.98 9.62
5045.62 3103.56 2129.60 1885.52 7175.22 4989.08 1684.99 1802.86 8860.21 6791.94 18455.07 17309.91
(1942.06) (244.08) (2186.14) 117.87 (2068.27) (1145.16)
(38.49) (11.46) (30.47) 7.00 (23.34) (6.21)
18120.69 18756.42 9095.50 10008.13 9025.19 8748.29 373.19 462.71 9398.38 9211.00 1575.76 1466.02
635.73 912.63 (276.90) 89.52 (187.38) (109.74)
3.51 10.03 (3.07) 23.99 (1.99) (6.96)
4104.56 5069.41 5181.50 4056.19 2219.23 3249.74 1899.41 2261.33 13404.70 14636.67
964.85 (1125.31) 1030.51 361.92 1231.97
23.51 (21.72) 46.44 19.05 9.19
NET CURRENT ASSETS C MISCELLANEOUS EXPENSES D
4928.65 995.12 5923.77 7480.93 0.00
1928.06 475.19 2403.25 (1171.28) 323.24
39.12 47.75 40.57 (15.66) 0.00
TOTAL (A+B+C+D)
18455.07 17309.91
(1145.16)
(6.21)
DEFERRED TAX LIABILITY TOTAL: APPLICATION OF FUND FIXED ASSETS GROSS BLOCK LESS: DEPRECIATION NET BLOCK CAPITAL WORK IN PROGRESS A INVESTMENTS B CURRENT ASSETS, LOANS & ADVANCES INVERTORIES SUNDRY DEBTORS CASH & BANK BALANCE LOANS & ADVANCES LESS: CURRENT LIAB & PROVI LIABILITIES PROVISIONS
6856.71 1470.31 8327.02 6309.65 323.24
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
30
FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
The Reserve & Surplus has been increased by 10.98% of 923.11, which is 47.68% of profit of the year 2003 – 04. The Loan Fund of the company has been decreased by 30.47%. Secured Loans & Unsecured Loans have been decreased by 38.49% & 11.46% respectively. The deferred tax liability – net is increased by 6.99%. The total fund of Ashok Leyland Ltd has been decreased by 6.20%. The Fixed assets decreased by 1.99% because of the addition in fixed assets this year is very less & depreciation provided for year 2003 – 04 are more compare to last year. Net Current Assets as on 31.3.2004 stood at Rs. 6311 Million as against the previous year level of Rs. 7481 Million. Inventories have gone up to Rs. 5069 Million compared to Rs. 4105 Million as at March 2003. The increase is in line with the activity increase. Debtors have come down to Rs. 4056 Million from Rs. 5182 Million mainly due to repayment of deferred receivables by Ashok Leyland Finance Ltd. The high level of cash and bank balance is due to substantial collections from Debtors / Bill Discounting during the last few days of the financial year. Last year (2002 –03) miscellaneous expenses were zero but this year (2003-04) is 323.24 reasons for that is renovation in production plant.
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
31
FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
EXHIBIT 2.10 2.10 COMPARATIVE BALANCESHEET OF ASHOK LEYLAND LTD AS ON MARCH 31 2004-05 Rs. In Millions Particular
2004
SOURCE OF FUNDS SHAREHOLDER’S FUND SHARE CAPITAL RESERVE & SURPLUS LOAN FUNDS SECURED LOANS UNSECURED LOANS DEFERRED TAX LIABILITY TOTAL: APPLICATION OF FUND FIXED ASSETS GROSS BLOCK LESS: DEPRECIATION NET BLOCK CAPITAL WORK IN PROGRESS INVESTMENTS CURRENT ASSETS, LOANS & ADVANCES INVERTORIES SUNDRY DEBTORS CASH & BANK BALANCE LOANS & ADVANCES
A B
LESS: CURRENT LIAB & PROVI LIABILITIES PROVISIONS NET CURRENT ASSETS MISCELLANEOUS EXPENSES TOTAL (A+B+C+D)
C D
2005
Increase/(Decrease) Amount Percentage
1189.29 1189.29 9328.68 10489.36 10517.97 11678.65
0.00 1160.68 1160.68
0.00 12.44 11.04
3103.56 2634.96 1885.52 6169.10 4989.08 8804.06 1802.86 1708.48 6791.94 10512.54 17309.91 22191.19
(468.60) 4283.58 3814.98 (94.38) 3720.60 4881.28
(15.10) 227.18 76.47 (5.24) 54.78 28.20
18756.42 20022.50 10008.13 11084.04 8748.29 8938.46 462.71 851.55 9211.00 9790.01 1466.02 2291.90
1266.08 1075.91 190.17 388.84 579.01 825.88
6.75 10.75 2.17 84.04 6.29 56.33
5069.41 5680.81 4056.19 4587.66 3249.74 7966.82 2261.33 3337.34 14636.67 21572.63
611.40 531.47 4717.08 1076.01 6935.96
12.06 13.10 145.15 47.58 47.39
6856.71 1470.31 8327.02 6309.65 323.24
9611.87 2044.80 11656.67 9915.96 193.32
2755.16 574.49 3329.65 3606.31 (129.92)
40.18 39.07 39.99 57.16 (40.19)
17309.91 22191.19
4881.28
28.20
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
32
FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
The Reserve & Surplus is increased by 12.44%. This year also the company has transferred all the profit to the reserve & surplus and out of that company makes provision for taxation. The Loan Fund of the company increased by 76.47%. Secured Loans decreased by 15.11% because of debentures is less than last year. The total fund of Ashok Leyland Ltd has been increased by 28.20% that is very good compare to last two years & also which shows the efficient use of capital. During the year, the Company incurred Capital expenditure of Rs. 1,797 Million towards investments in capacity expansion/up gradation and R& D. The capacity increased from 50,000 vehicles in March’04 to 67,000 vehicles by October’04. Nearly 70 acres of land was acquired for putting up state-of-art R&D facilities at the Technical Centre. This year the Fixed assets increased at a lower than the sales growth rate. This indicates the efficient assets utilization. Net Current Assets (excluding cash/ bank balances) as on March 31, 2005 stood at Rs. 1,949 Million, as against the previous year level of Rs. 3,060 Million Inventories have gone up to Rs. 5,681 Million, as on March 31, 2005 compared to Rs. 5,069 Million, as at March 31, 2004. Debtors have increased to Rs. 4,588 Million, from Rs. 4,056 Million. The increase in Debtors and Inventory is less than proportionate to the activity increase. The high level of cash and bank balance is around 145.15% of which 80% of the funds raised through foreign currency convertible notes (FCCN) issue kept in bank deposits to be utilized in the capital expenditure programmes during 2005-06. Miscellaneous expenses this year also get decreased by 40.19% that is good control over expenses.
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
33
FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
EXHIBIT 2.11 2.11 COMPARATIVE BALANCESHEET OF ASHOK LEYLAND LTD AS ON MARCH 31 2005-06 Rs. In Millions Particular SOURCE OF FUNDS SHAREHOLDER’S FUND SHARE CAPITAL RESERVE & SURPLUS
2005
2006
Increase/(Decrease) Amount Percentage
1189.29 1221.59 10489.36 12902.94 11678.65 14124.53
32.30 2413.58 2445.88
2.72 23.01 20.94
2634.96 1846.91 6169.10 5072.37 8804.06 6919.28 1708.48 1796.89 10512.54 8716.17 22191.19 22840.70
(788.05) (1096.73) (1884.78) 88.41 (1796.37) 649.51
(29.91) (17.78) (21.41) 5.17 (17.09) 2.93
20022.50 21384.99 11084.04 11952.28 8938.46 9432.71 851.55 1414.17 9790.01 10846.88 2291.90 3681.78
1362.49 868.24 494.25 562.62 1056.87 1389.88
6.80 7.83 5.53 66.07 10.80 60.64
5680.81 9025.61 4587.66 4243.37 7966.82 6028.76 3337.34 3026.39 21572.63 22324.13
3344.80 (344.29) (1938.06) (310.95) 751.50
58.88 (7.50) (24.33) (9.32) 3.48
NET CURRENT ASSETS C MISCELLANEOUS EXPENSES D
9611.87 11468.95 2044.80 2616.21 11656.67 14085.16 9915.96 8238.97 193.32 73.07
1857.08 571.41 2428.49 (1676.99) (120.25)
19.32 27.94 20.83 (16.91) (62.20)
TOTAL (A+B+C+D)
22191.19 22840.70
LOAN FUNDS SECURED LOANS UNSECURED LOANS DEFERRED TAX LIABILITY TOTAL: APPLICATION OF FUND FIXED ASSETS GROSS BLOCK LESS: DEPRECIATION NET BLOCK CAPITAL WORK IN PROGRESS A INVESTMENTS B CURRENT ASSETS, LOANS & ADVANCES INVERTORIES SUNDRY DEBTORS CASH & BANK BALANCE LOANS & ADVANCES LESS: CURRENT LIAB & PROVI LIABILITIES PROVISIONS
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
649.51
2.93
34
FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
The Reserve & Surplus is increased by 23.01%. This year also the company has transferred all the profit to the reserve & surplus and out of that company makes provision for taxation. The Loan Fund of the company decreased by 21.41%. Secured Loans decreased by 29.91% because of debentures is less than last year. During the year, the Company incurred capital expenditure of Rs. 2,434 million towards investments in capacity expansion / up gradation and R & D. Capacity increased from 67,500 vehicles to 77,200 vehicles by August 2005. Net Current Assets (excluding cash / bank balances) as on 31st March 2006 stood at Rs. 2,210 million as against the previous year level of Rs. 1,949 million Inventories have gone up to Rs. 9,026 million as on 31st March 2006 compared to Rs. 5,681 million as at 31st March 2005 due to increase in finished inventory levels to meet sudden increase in market demand. Debtor’s level decreased to Rs. 4,243 million from Rs. 4,588 million i.e. by 7.5% compare to last years The high level of cash and bank balance includes funds raised through the FCCN issue kept in bank deposits pending utilization in capital Expenditure programmes. As of 31st March 2006, this amounted to Rs. 855 million. Miscellaneous expenses this year also get decreased by 62.20% that is good control over expenses.
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
35
FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
EXHIBIT 2.12 2.12 COMPARATIVE BALANCESHEET OF ASHOK LEYLAND LTD AS ON MARCH 31 2006-07 Rs. In Millions Particular
Increase/(Decrease) Amount Percentage
2006
2007
1221.59 12902.94 14124.53
1323.87 17621.81 18945.68
102.28 4718.87 4821.15
8.37 36.57 34.13
1846.91 5072.37 6919.28 1796.89 8716.17 22840.70
3602.16 2801.82 6403.98 1969.29 8373.27 27318.95
1755.25 (2270.55) (515.30) 172.40 (342.90) 4478.25
95.04 (44.76) (7.45) 9.59 (3.93) 19.61
21384.99 11952.28 9432.71 1414.17 10846.88 3681.78
26201.97 13131.64 13070.33 2374.91 15445.24 2210.94
4816.98 1179.36 3637.62 960.74 4598.36 (1470.84)
22.53 9.87 38.56 67.94 42.39 (39.95)
9025.61 4243.37 6028.76 3026.39 22324.13
10703.21 5228.75 4349.39 6695.79 26977.14
1677.60 985.38 (1679.37) 3669.40 4653.01
18.59 23.22 (27.86) 121.25 20.84
NET CURRENT ASSETS C MISCELLANEOUS EXPENSES D
11468.95 2616.21 14085.16 8238.97 73.07
16516.25 1042.30 17558.55 9418.59 244.18
5047.30 (1573.91) 3473.39 1179.62 171.11
44.01 (60.16) 24.66 14.32 234.17
TOTAL (A+B+C+D)
22840.70
27318.95
4478.25
19.61
SOURCE OF FUNDS SHAREHOLDER’S FUND SHARE CAPITAL RESERVE & SURPLUS LOAN FUNDS SECURED LOANS UNSECURED LOANS DEFERRED TAX LIABILITY TOTAL: APPLICATION OF FUND FIXED ASSETS GROSS BLOCK LESS: DEPRECIATION NET BLOCK CAPITAL WORK IN PROGRESS A INVESTMENTS B CURRENT ASSETS, LOANS & ADVANCES INVERTORIES SUNDRY DEBTORS CASH & BANK BALANCE LOANS & ADVANCES LESS: CURENT LIAB & PROVI LIABILITIES PROVISIONS
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
36
FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
The Reserve & Surplus is increased by 36.57%. This year also the company has transferred all the profit to the reserve & surplus and out of that company makes provision for taxation. The Loan Fund of the company decreased by 7.5%. Secured Loans increased by 95.04% because of Debentures and term loans are secured by certain immovable properties and movable assets of the Company. Cash credit facility is secured by certain movable assets and goods-in-transit and book debts and also by a charge on the immovable properties subordinate to the existing charge created in favor of the lenders. During the year, the Company incurred capital expenditure of Rs. 6135 million. This expenditure covers investments in capacity expansion / up gradation and R&D. During the year, the capacity increased from 77,200 vehicles to 84,000 vehicles. Net Current Assets (excluding cash / bank balances) stood at Rs. 5,069 million as against the previous year level of Rs.2, 210 million. FCCN funds parked in deposits in previous year were utilized for capital expenditure in the current year. Inventories have gone up to Rs.10703 million as on 31st March 2007 compared to Rs.9026 million as on 31st March 2006. The increase is due to increased activity levels. Debtor level increased to Rs.5229 million from Rs.4243 million due to higher level of fully built vehicles supplied to Defence.
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
37
FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
CHAPTER 3 VERTICAL ANALYSIS Vertical analysis is the proportional expression of each item on financial statement to the statement total. The results of vertical analysis are presented in the form of common number & always add up to 100. The items in Profit & Loss a/c are usually expressed as % of sales, while the balance sheet items are given as percentage of total shareholder’s fund & Liabilities or of total assets. Vertical analyses help in making comparisons of companies that differ in size since the financial statement is expressed in comparable common – size format. Further a comparison of common – size statements for several years may reveal important changes in the components from one year to the next.
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
38
FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
EXHIBIT 3.1 3.1 COMMON – SIZE PROFIT & LOSS ACCOUNT OF ASHOK LEYLAND LTD FOR THE YEAR ENDED MARCH 31. PARTICULARS INCOME SALES OTHER
2003
2004
Figure in Percent (%) 2005 2006 2007
99.43 99.45 98.73 99.38 99.02 0.57 0.55 1.27 0.62 0.98 100.00 100.00 100.00 100.00 100.00
EXPENDITURE MANUFACTURING & OTHER EXPENSES DEPRECIATION FINANCIAL EXPENSES PROFIT BEFORE EXTRAORDINARY EXPENSES EXTRA ORDINARY EXPENSE PROFIT\(LOSS) FOR THE YEAR (PBT) PROVISION FOR TAXATION PROFIT\(LOSS) FOR THE YEAR (PAT)
87.38 3.82 2.17 93.37
87.89 2.83 0.61 91.33
88.75 2.58 0.07 91.39
89.15 2.39 0.31 91.85
89.31 2.08 0.07 91.47
6.63 0.32
8.67 0.28
8.61 0.23
8.15 (0.41)
8.53 0.18
6.31 1.85
8.39 2.72
8.38 1.97
8.57 2.37
8.35 2.25
4.46
5.67
6.41
6.20
6.10
Comment on Profit & Loss Account: 1. Sales: the common size statement shows that the main source of income for the company is sales. In year 2003 sales in were 99.43% but in year 2004 it was highest up to 99.45%. Now in year 2005 it was decreased up to 98.73% and then it has been decreased to 99.38% and 99.02% in the year 2006 & 2007 respectively. 2. Total Expenditure: The total expenditure of the company has been found continuously increase up to year 2006-07. It has been increased due to increase in the total amount of sales. Financial expense is also decreased it is favorable sign for the company. 3. Profit before Tax: PBT in year 2003 is 6.31%. It was in year 2004, 2005, 2006 & 2007 it is little 8.39%, 8.38, 8.57 & 8.35 respectively. 4. Profit after Tax: According to common size statement PAT of the company for the year 2003 is 4.46% & than it has been increased to 6.41% in 2005 and than it has been reduced to 6.10%in the year 2007.
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
39
FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
EXHIBIT 3.2 COMMON – SIZE BALANCE SHEETS OF ASHOK LEYLAND LTD AS ON MARCH 31 Particular SOURCE OF FUNDS
2003
2004
Figure in Percent (%) 2005 2006 2007
SHARE CAPITAL RESERVE & SURPLUS SECURED LOANS UNSECURED LOANS DEFERRED TAX LIABILITY LIABILITIES PROVISIONS
4.88 34.48 20.70 8.74 6.91 20.22 4.08 100.0 0
4.64 36.39 12.11 7.35 7.03 26.75 5.74 100.0 0
3.51 30.99 7.78 18.23 5.05 28.40 6.04 100.0 0
3.31 2.95 34.94 39.27 5.00 8.03 13.74 6.24 4.87 4.39 31.06 36.80 7.09 2.32 100.0 0 100.00
37.02 1.53 6.46 16.84 21.25 9.10 7.79 0.00 100.0 0
34.12 1.80 5.72 19.77 15.82 12.68 8.82 1.26 100.0 0
26.41 2.52 6.77 16.78 13.55 23.54 9.86 0.57 100.0 0
25.54 29.12 3.83 5.29 9.97 4.93 24.44 23.85 11.49 11.65 16.33 9.69 8.20 14.92 0.20 0.54 100.0 0 100.00
TOTAL APPLICATION OF FUND FIXED ASSETS CAPITAL WIP INVESTMENTS INVERTORIES SUNDRY DEBTORS CASH & BANK BALANCEEE LOANS & ADVANCES MISC. EXP. TOTAL
1. Sources of Fund: the common size statement shows that the shareholder’s fund of the company in year 2002-03 was 39.36% & in year 2003-04 it was also increased up to 41.03% but in year 2004-05 was decreased up to 34.5% & in the year 2005-06 it increase to 48.25% & in the year 2006-07 it was highest increase i.e. by 42.22% the borrowed fund of the company goes on increasing in this year. It indicates that the company is less dependent on borrowed funds than shareholder’s fund. 2. Fixed Assets: According to common size statement, fixed assets of the company in years 2002-03, 2003-04, 2004-05, 2005-06 it were 37.02%, 34.12%, 26.41% , 25.54% respectively. It is happening due to sales has decreasing trend in this year. But in the year 2006-07 it increase to 29.12% 3. Investments: The investments of the company in year 2002-03 was 6.46% but it was decreased by 5.72% in year 2003-04 but it has S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
increased by 6.77% in year 2004-05. In the year 2006-07 it was highest increase of investment i.e. by 9.97%. But in the year 2006-07 it was decrease to 4.93%. It indicates that investments are stated at cost. If investment is more then company get more return. 4. Current Liabilities & Current Assets: the current liabilities of the company go on increasing every year. It means that there was decrease in working capital that affect the liquidity position of the company. The current assets has also increased every year that is 54.99%, 57.09%, 63.73% for the year 2002-03, 2003-04, 2004-05 accordingly. The analysis of various figures shows that the company has satisfactory long term & short-term financial position. It shows financial position of company is sound.
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
3.3 COMPOSITION OF SHAREHOLDER’S FUNDS & LIABILITIES IN DIFFERENT YEARS EXHIBIT 3.3 SHAREHOLDER’S FUND & LIABILITIES SHARE CAPITAL RESERVE & SURPLUS SECURED LOANS UNSECURED LOANS DEFERRED TAX LIABILITY CURRENT LIABILITIES PROVISIONS TOTAL
2003 4.88 34.48 20.70 8.74 6.91 20.22 4.08 100.00
2004 4.64 36.39 12.11 7.35 7.03 26.75 5.74 100.00
2005 3.51 30.99 7.78 18.23 5.05 28.40 6.04 100.00
2006 3.31 34.94 5.00 13.74 4.87 31.06 7.09 100.00
2007 2.95 39.27 8.03 6.24 4.39 36.80 2.32 100.00
Chart -3.3 SHAREHOLDER’S FUND & LIABILITIES
FIGURES IN %
45 40 35 30 25 20 15 10 5 0 SHARE CAPITAL
RESERVE & SURPLUS
SECURED LOANS
UNSECURED LOANS
DEFERRED TAX CURRENT LIABILITY LIABILITIES
PROVISIONS
PARTICULARS
2003
2004
2005
2006
2007
Share Capital & Secured Loan decreasing in total funds. Reserve & surplus increases up to 36.39% in year 2003-04 but in year 2004-05 it is decreased to 30.99%. Again it shows increase in the year 2005-06 as well as in year 2006 i.e. 34.94% & 39.27 respectively. Unsecured Loan is increased up to year 2004-05 by 18.22% but it decreased to 6.24% in 2006-07 Proportion of C.L has increasing every year from 20.22% to 36.8%. Deferred tax liabilities decreased up to 2004-05 & than it remains stable than after.
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
3.4 COMPOSITION OF ASSETS IN DIFFERENT YEARS EXHIBIT 3.4 APPLICATION OF FUND FIXED ASSETS CAPITAL WIP INVESTMENTS INVERTORIES SUNDRY DEBTORS CASH & BANK BALANCE LOANS & ADVANCES MISCELLANEOUS EXP TOTAL ASSETS
2003 37.02 1.53 6.46 16.84 21.26 9.11 7.79 0.00 100.00
2004 34.13 1.80 5.72 19.78 15.82 12.67 8.82 1.26 100.00
2005 26.41 2.52 6.77 16.78 13.55 23.54 9.86 0.57 100.00
2006 25.55 3.83 9.97 24.44 11.49 16.32 8.20 0.20 100.00
2007 29.12 5.29 4.93 23.85 11.65 9.69 14.92 0.54 100.00
Chart 3.4 COMPOSITION OF ASSETS 40
FIGURES IN %
35 30 25 20 15 10 5 0 FIX ED A SSETS
C A PITA L WIP
INV ESTM ENTS
INV ER TOR IES
SUNDR Y DEB TOR S
C A SH & B A NK B A LANC E
LOA NS & A DV A NC ES
M ISC ELLANEOUS EX P
PARTICULARS 2003
2004
2005
2006
2007
Here % of Fixed Assets decreasing every year from 37.02% to 25.55% up to year 2005-06& than it increases to 29.12% Capital Work In Progress increases every year & Investment decreased up to 5.72% in 2003-04 but it is increased to 9.97% in 2005-06. But it again decreases to 4.93% in the year 2006-07. Inventories have variation effects i.e. the values are fluctuating every year. Debtors decreasing every year Cash & Bank balance increasing up to 2004-05 but decrease thereafter up to 2006-07. Loan & Advances increases from 7.80% to 9.86% than decrease to 8.20% & it was highest in the year 2006-07 i.e. to 14.92% Misc. Exp. was zero in 2002-03 but it were increases up to 1.27% in 2003-04 again it is decreased to 0.20% in 2005-06 & again increase to 0.54% in 2006-07.
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
3.5 ANALYSIS OF SOURCES OF FUNDS & APPLICATION OF FUND Particular SOURCE OF FUNDS SHARE CAPITAL RESERVE & SURPLUS SECURED LOANS UNSECURED LOANS DEFERRED TAX LIABILITY TOTAL
2002-03
2003-04
2004-05
2005-06
2006-07
6.44 45.55 27.34 11.54
6.87 53.89 17.93 10.89
5.36 47.27 11.87 27.80
5.35 56.49 8.09 22.21
4.85 64.50 13.19 10.26
9.13 100.00
10.42 100.00
7.70 100.00
7.87 100.00
7.21 100.00
50.93 8.54 40.54
53.21 8.47 36.45
44.12 10.33 44.68
47.49 16.12 36.07
56.54 8.09 34.48
0.00 100.00
1.87 100.00
0.87 100.00
0.32 100.00
0.89 100.00
APPLICATION OF FUND FIXED ASSETS INVESTMENTS NET CURRENT ASSETS MISCELLANEOUS EXPENSES TOTAL
For the year 2002-2003 Source of Fund: Chart 3.5.1 Sources of Fund For 2003 DEFERRED TAX LIABILITY, 9.13
SHARE C APITAL, 6.44
UNSEC URED LOANS, 11.54
RESERVE & SURPLUS, 45.55
SEC URED LOANS, 27.34
SHARE CAPITAL UNSECURED LOANS
RESERVE & SURPLUS DEFERRED TAX LIABILITY
SECURED LOANS
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
Application of Fund:
Chart 3.5.2 APPLICATION OF FUND FOR 2003
NET CURRENT ASSETS 40.54
MISCELLANEOUS EXPENSES , 0.00 ,
FIXED ASSETS, 50.93 INVESTMENTS , 8.54
FIXED ASSETS
INVESTMENTS
NET CURRENT ASSETS
MISCELLANEOUS EXPENSES
For the year 2003-04: Source of Fund: Chart 3.5.3 SOURCE OF FUNDS FOR 2004 DEFERRED TAX LIABILITY, 10.42 UNSECURED LOANS, 10.89
SHARE CAPITAL, 6.87
SECURED LOANS, 17.93
RESERVE & SURPLUS, 53.89
SHARE CAPITAL UNSECURED LOANS
RESERVE & SURPLUS DEFERRED TAX LIABILITY
SECURED LOANS
Application of Fund: Chart 3.5.4 APPLICATION OF FUND FOR 2004
NET CURRENT ASSETS 36.45
MISCELLANEOUS EXPENSES , 1.87 ,
FIXED ASSETS, 53.21 INVESTMENTS , 8.47
FIXED ASSETS
INVESTMENTS
NET CURRENT ASSETS
MISCELLANEOUS EXPENSES
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
For the year 2004-05 Source of Fund: Chart 3.5.5 SOURCES OF FUNDS 2004-05 DEFERRED TAX LIABILITY, 7.70
SHARE CAPITAL, 5.36
UNSECURED LOANS, 27.80
RESERVE & SURPLUS, 47.27
SECURED LOANS, 11.87
SHARE CAPITAL
RESERVE & SURPLUS
UNSECURED LOANS
DEFERRED TAX LIABILITY
SECURED LOANS
Application of Fund: Chart 3.5.6 APPLICATION OF FUND FOR 2004-05 MISCELLANEOUS EXPENSES , 0.87 NET CURRENT ASSETS 44.68
FIXED ASSETS, 44.12
,
INVESTMENTS , 10.33
FIXED ASSETS
INVESTMENTS
NET CURRENT ASSETS
MISCELLANEOUS EXPENSES
For the year 2005-06 Source of Fund: Chart 3.5.7 SOURCE OF FUNDS FOR 2005-06 DEFERRED TAX LIABILITY, 7.87
SHARE CAPITAL, 5.35
UNSECURED LOANS, 22.21
SECURED LOANS, 8.09
RESERVE & SURPLUS, 56.49
SHARE CAPITAL
RESERVE & SURPLUS
UNSECURED LOANS
DEFERRED TAX LIABILITY
SECURED LOANS
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
Application of Fund: Chart 3.5.8 APPLICATION OF FUND FOR 2005-06 MISCELLANEOUS EXPENSES 0.32
NET CURRENT ASSETS 36.07
FIXED ASSETS 47.49 INVESTMENTS 16.12
FIXED ASSETS
INVESTMENTS
NET CURRENT ASSETS
MISCELLANEOUS EXPENSES
For the year 2006-07 Source of Fund: Chart 3.5.9 SOURCE OF FUNDS FOR 2006-07 DEFERRED TAX LIABILITY, 7.21
SHARE CAPITAL, 4.85
UNSECURED LOANS, 10.26 SECURED LOANS, 13.19
RESERVE & SURPLUS, 64.50
SHARE CAPITAL
RESERVE & SURPLUS
UNSECURED LOANS
DEFERRED TAX LIABILITY
SECURED LOANS
Application of Fund: Chart 3.5.10 APPLICATION OF FUND FOR 2006-07 NET CURRENT ASSETS 34.48
MISCELLANEOUS EXPENSES 0.89
INVESTMENTS 8.09
FIXED ASSETS 56.54
FIXED ASSETS
INVESTMENTS
NET CURRENT ASSETS
MISCELLANEOUS EXPENSES
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
From the above pie graphs we can see that the portion of secured loan is decreasing every year but it has increased in 2007 compared to 2006 & unsecured loan is decreased up to 2004 but this is increased to 27.80% in year 2005 and again decreased to 10.26% in 2007. The portion of share capital which is 1189.29 has been same up to 2004-05 and increase to Rs. 1221.59 in 2005-06 & Rs. 1323.87 in 2006-07 but it shows decreasing trend in % due to increase in other fund. Reserve & Surplus has been increase every year but in the year 2004-05 it is decreased but it again shows increasing trend. Deferred tax liability has fluctuation trend in all the years. Fixed assets increasing every year but it are decreased to 44% in year 2004 – 05 but again it shows increasing trends up to current year i.e. 2006-07. Net current assets in this year is 45% that means the working capital of Ashok Leyland has efficient useful. Miscellaneous expenses are Nil in year 2003 but it has increased by 1.87% in year 2004 and shows decreasing trend till 2005-06 but again it increases in the current year to 0.89% i.e. in 2006-07.
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
CHAPTER 4 TREND ANALYSIS For studying the trend of various items of financial statements, figures of a single year are not enough. Comparative figures of some more years are significant. Such comparative figures may be either absolute figure or may be presented in % form. If the item of one year, which called base year, is compared with similar items of one year in the form of Percentage This method is known as trend percentage method or trend ratio method.
4.1 TREND OF PROFIT & LOSS ACCOUNT EXHIBIT 4.1 Particulars INCOME SALES OTHER
2003
2004
2005
100.00 126.62 156.02 100.00 121.76 351.50 100.00 126.59 157.13
EXPENDITURE MANUFACTUREING & OTHER EXPENSES 100.00 DEPRECIATION 100.00 FINANCIAL EXPENSES 100.00 100.00 PROFIT BEFORE EXTRAORDINARY EXPENSES 100.00 EXTRA ORDINARY EXPENSE 100.00 PROFIT\(LOSS) FOR THE YEAR (PBT) 100.00 PROVISION FOR TAXATION 100.00 PROFIT\(LOSS) FOR THE YEAR (PAT) 100.00
127.34 159.59 93.67 106.06 35.53 4.78 123.82 153.80
Figure in (%) 2006 2007
195.78 215.61 195.89
267.43 462.98 268.54
199.86 122.37 28.12 192.70
274.49 146.23 9.11 263.08
165.56 203.94 240.86 345.46 109.81 110.54 (250.49) 150.84 168.40 208.70 186.17 167.57
265.90 250.51
355.38 327.16
161.03 225.78
272.29
367.09
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
Trend analysis of profit & loss account 4.1.1 Trend Analysis of Sales (Base Year: 2003)
EXHIBIT 4.1.1 Particulars SALES
2003 100.00
2004 126.62
2005 156.02
2006 195.78
2007 267.43
Chart 4.1.1 SALES
PERCENTAGE (%)
300 250
267.43
200 195.78
150 100 50
156.02 100.00
126.62
0 2003
2004
2005
2006
2007
YEARS
SALES
The above graph of sales shows continuously increase in the sales compared to the base year 2002-03. In the year 2002-03 it was 100% it has been continuously increase to 267.14% in the year 2006-07. It means it has been increased 167.14% in this period. In real it was 26803.75 (Rs In millions) in the year 2002-03 and increased to 71681.76 (Rs In millions). So it is favorable for the company & increases the reputation of the company. 4.1.2 Trend Analysis of Expenditure (Base Year: 2003)
EXHIBIT 4.1.2 Particulars EXPENDITURE
2003 100.00
2004 123.82
2005 153.80
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
2006 192.70
2007 263.08
50
FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
Chart 4.1.2 EXPENDITURE PERCENTAGE (%)
300 250
263.08
200 192.70
150 100 50
153.80
123.82
100.00
0 2003
2004
2005
2006
YEARS
2007 EXPENDITURE
The above graph of expenditure shows continuously increase in the expense compared to the base year 2002-03. In the year 2002-03 it was 100% it has been continuously increase to 263.08% in the year 2006-07. It means it has been increased 163.08% in this period. It has increased only because of sales has increased and only manufacturing expense has increased in total expense. In real it was 25168.97 (Rs In millions) in the year 2002-03 and increased to 66213.97 (Rs In millions). It has been increased only due to increases in sales, so it is good for the company. 4.1.3 Trend Analysis of PAT (Base Year: 2003)
EXHIBIT 4.1.3 Particulars PROFIT\(LOSS) FOR THE YEAR (PAT)
2003
2004
2005
2006
2007
100.00 161.03 225.78 272.29 367.09
EXHIBIT 4.1.3 PERCENTAGE (%)
PROFIT\(LOSS) AFTER TAX (PAT) 400 350 300 250 200 150 100 50 0
367.09 272.29 225.78 161.03 100.00 2003
2004
2005 YEARS
2006
2007
PROFIT\(LOSS) AFTER TAX (PAT)
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
51
FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
The above graph of PAT shows continuously increase in PAT compared to the base year 2002-03. In the year 2002-03 it was 100% it has been continuously increase to 367.09% in the year 2006-07. It means it has been increased 267.09% in this period. It is very favorable for the company. It has increased due to increase in sales over the years. In real it was 1202.12 (Rs In millions) in the year 2002-03 and increased to 4412.86 (Rs In millions). It has been increased continuously, so by seeing the increase in trend of PAT investors will increase. So it is favorable for the company.
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
EXHIBIT 4.2 4.2 TREND OF BALANCE SHEET Particular SOURCE OF FUNDS SHARE CAPITAL RESERVE & SURPLUS SECURED LOANS UNSECURED LOANS DEFERRED TAX LIAB. LIABILITIES PROVISIONS TOTAL FUNDS
2003
2004
2005
2006
2007
100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
100.00 110.98 61.51 88.54 107.00 139.12 147.75 105.16
100.00 124.79 52.22 289.68 101.39 195.02 205.48 138.84
102.72 153.50 36.60 238.18 106.64 232.70 262.90 151.47
111.32 209.64 71.39 131.57 116.87 335.11 104.74 184.08
FIXED ASSETS CAPITAL WIP INVESTMENTS INVERTORIES SUNDRY DEBTORS CASH & BANK BAL. LOANS & ADVANCES MISC. EXP
100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
96.93 123.99 93.04 123.51 78.28 146.44 119.05 0.00
99.04 228.18 145.45 138.40 88.54 358.99 175.70 0.00
104.52 378.94 233.65 219.89 81.89 271.66 159.33 0.00
144.82 636.38 140.31 260.76 100.91 195.99 352.52 0.00
TOTAL ASSETS
100.00
105.16
138.84
151.47
184.08
APPLICATION OF FUND
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
Trend analysis of Balance Sheet:4.2.1 APPLICATION OF FUND 4.2.1.1 Trend Analysis of Net Fixed Assets (Base Year: 2003)
EXHIBIT 4.2.1.1 Particular GROSS ASSETS LESS: DEPRECIATION NET FIXED ASSETS
2003 100.00 100.00 100.00
2004 103.51 110.03 96.93
2005 110.50 121.86 99.04
2006 118.01 131.41 104.52
2007 144.60 144.38 144.82
160 140 120 100 80
PERCENTAGE (%)
Chart 4.2.1.1
NET FIXED ASSETS 144.82 100.00
96.93
2003
2004
104.52
99.04
60 40 20 0 2005
2006
YEARS
2007 NET FIXED ASSETS
The above graph of net fixed assets shows little fluctuation but net fixed assets have been increased compared to the base year 200203. In the year 2002-03 it was 100% it increases to 144.82 in the year 2006-07. It means it has been increased 44.82% in this period. In real it was 9025.19 (Rs In millions) in the year 2002-03 and increased to 13070.33 (Rs In millions). Actually, gross fixed assets has been increased continuously but in the year 2003-04 & 2004-05 it shows downward trend only due to depreciation. 4.2.1.2 Trend Analysis of Investments (Base Year: 2003)
EXHIBIT 4.2.1.2 Particular INVESTMENTS
2003 100.00
2004 93.04
2005 145.45
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
2006 233.65
2007 140.31
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
Chart 4.2.1.2 INVESTMENTS PERCENTAGE (%)
250 200
233.65
150 100
140.31
145.45 100.00
50
93.04
0 2003
2004
2005
2006
2007
YEARS
INVESTMENTS
The above graph of trend of investments shows fluctuation but investments have been increased compared to the base year 200203. In the year 2002-03 it was 100% but in the year 2003-04 it has been reduced to 93.04% but then it has been increased to 145.45% & 233.65% in the year 2004-05 & 2005-06 respectively but than it reduced to 140.31% in the year 2006-07 than to it has been increased 40.31% in this period. In real it was 1575.76 (Rs In millions) in the year 2002-03 and increased to 2210.94 (Rs In millions). It has reduced in the year 2006-07 because of sale of investments in this year. 4.2.1.3 Trend Analysis of Inventories (Base Year: 2003)
EXHIBIT 4.2.1.3 Particular INVENTORIES
2003 100.00
2004 123.51
2005 138.40
2006 219.89
2007 260.76
Chart 4.2.1.3 INVENTORIES PERCENTAGE (%)
300 250
260.76
200
219.89
150 100 50
100.00
123.51
138.40
0 2003
2004
2005
2006
YEARS
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
2007 INVENTORIES
55
FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
The above graph of trend of inventories shows continuously increase in the inventories compared to the base year 2002-03. In the year 2002-03 it was 100% it has been continuously increase to 260.76% in the year 2006-07. It means it has been increased 160.76% in this period. In real it was 4104.56 (Rs In millions) in the year 2002-03 and increased to 10703.21 (Rs In millions). 4.2.1.4 Trend Analysis of Sundry Debtors (Base Year: 2003)
EXHIBIT 4.2.1.4 Particular SUNDRY DEBTORS
2003 100.00
2004 78.28
2005 88.54
2006 81.89
2007 100.91
PERCENTAGE (%)
Chart 4.2.1.4 SUNDRY DEBTORS
120 100 100.00
80
78.28
60
100.91
88.54
81.89
2005
2006
40 20 0 2003
2004
YEARS
2007 SUNDRY DEBTORS
The above graph of trend of sundry debtor’s shows huge fluctuation over the years but sundry debtors has been increased compared to the base year 2002-03. In the year 2002-03 it was 100% but in the year 2003-04 it has been reduced to 78.28% but then it has been increased to 88.54 in the year 2004-05 & again it reduced to 81.89% in the year 2005-06 but than it increased to 100.91% in the year 2006-07. It has been increased only by 0.91% in this period. In real it was 5181.50 (Rs In millions) in the year 2002-03 and increased to 5228.75 (Rs In millions). We can say that there is good control over the debtors, so it is favorable for the company. 4.2.1.5. Trend Analysis of Cash & Bank Balance (Base Year: 2003)
EXHIBIT 4.2.1.5 Particular
2003
2004
2005
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2006
2007 56
FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
CASH & BANK BALANCE
100.00
146.44
358.99
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
271.66
195.99
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
EXHIBIT 4.2.1.5 CASH & BANK BALANCE PERCENTAGE (%)
400 350 300
358.99
250
271.66
200 195.99
150 100 50
146.44 100.00
0 2003
2004
2005
2006
YEARS
2007
CASH & BANK BALANCE
The above graph of trend of cash & bank balance shows huge fluctuation over the years but cash & bank balance has been increased compared to the base year 2002-03. In the year 2002-03 it was 100% but it has been increased to 146.44% & 358.99% in the year 2003-04 & 2004-05 respectively. But then it has been reduced to 271.66% & 195.99% in the year 2005-06 & 2006-07 respectively. It means it has been increased 95.99% in this period. In real it was 2219.23 (Rs In millions) in the year 2002-03 and increased to 4349.39 (Rs In millions). 4.2.1.6 Trend Analysis of Loans & Advances (Base Year: 2003)
EXHIBIT 4.2.1.6 Particular LOANS & ADVANCES
2003 100.00
2004 119.05
2005 175.70
2006 159.33
2007 352.52
Chart 4.2.1.6 LOANS & ADVANCES PERCENTAGE (%)
400 350 352.52
300 250 200 150 100 50
175.70 100.00
119.05
159.33
0 2003
2004
2005
2006
YEARS
2007 LOANS & ADVANCES
The above graph of trend of loans & advances shows increase in the loans & advances compared to the base year 2002-03. S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
58
FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
In the year 2002-03 it was 100% it has been increased to 119.05% & 175.70% in the year 2003-04 & 2004-05 respectively but than it has been decreased to 159.33% in the year 2008-06 & than it has increased to 352.52% in the year 2006-07. It means it has been increased 252.52% in this period. In real it was 1899.41 (Rs In millions) in the year 2002-03 and increased to 6695.79 (Rs In millions).
4.2.2 SOURCES OF FUND:4.2.2.1 Trend Analysis of Share Capital (Base Year: 2003)
EXHIBIT 4.2.2.1 Particular SHARE CAPITAL
2003 100.00
2004 100.00
2005 100.00
2006 102.72
2007 111.32
PERCENTAGE (%)
Chart 4.2.2.1 114 112 110 108 106 104 102 100 98 96 94
SHARE CAPITAL 111.32
102.72 100.00
100.00
2003
2004
100.00 2005
2006
YEARS
2007 SHARE CAPITAL
The above graph of trend of share capital shows stability & then increase in the share capital. In the year 2002-03 it was 100% and than it has increased to 111.32% in the year 2006-07. It means it has been increased by 11.32% in this period. It has been increased due to further issue of share, it has lead to increase the share capital. In real it was 1189.29 (Rs In millions) in the year 2002-03 and increased to 1323.87 (Rs In millions). They have issued the share capital to meet the further requirement of capital. 4.2.2.2Trend Analysis of Reserve & Surplus (Base Year: 2003)
EXHIBIT 4.2.2.2 Particular RESERVE & SURPLUS
2003 100.00
2004 110.98
2005 124.79
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
2006 153.50
2007 209.64 59
FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
Chart 4.2.2.2 PERCENTAGE (%)
RESERVE & SURPLUS 250 200 209.64
150 153.50
100 50
100.00
110.98
2003
2004
124.79
0 2005
2006
2007
YEARS
RESERVE & SURPLUS
The above graph of trend of reserve & surplus shows continuously increase in reserve & surplus compared to the base year 2002-03. In the year 2002-03 it was 100% it has been continuously increase to 209.64% in the year 2006-07. It means it has been increased 109.64% in this period. It is very favorable for the company. It has increased due to increase in PAT over the years. In real it was 8405.57 (Rs In millions) in the year 2002-03 and increased to 17621.81 (Rs In millions). It is favorable for the company. 4.2.2.3 Trend Analysis of Shareholder’s Fund (Base Year: 2003)
EXHIBIT 4.2.2.3 Particular SHAREHOLDER’S FUND
2003 100.00
2004 109.62
2005 121.72
2006 147.21
2007 197.46
PERCENTAGE (%)
Chart 4.2.2.3 SHAREHOLDER’S FUND
250 200
197.46
150 100 50
100.00
109.62
2003
2004
121.72
147.21
0 2005
2006
YEARS
2007 SHAREHOLDER’S FUND
The above graph of trend of share holder’s fund shows continuously increase in the share holder’s fund compared to the base year 2002-03.
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
In the year 2002-03 it was 100% it has been continuously increase to 197.46% in the year 2006-07. It means it has been increased 97.46% in this period. Share holder’s fund constitutes of share capital & reserves & surplus. The one of the reason for increase in the share holder’s fund is issue of new shares. In real it was 26803.75 (Rs In millions) in the year 2002-03 and increased to 71681.76 (Rs In millions). So it is favorable for the company & increases the reputation of the company. 4.2.2.4 Trend Analysis of Loan Funds (Base Year: 2003)
EXHIBIT 4.2.2.4 Particular LOAN FUNDS
2003 100.00
2004 69.53
2005 122.70
2006 96.43
2007 89.25
Chart 4.2.2.4 PERCENTAGE (%)
LOAN FUNDS 140 120 100 80
122.70 100.00
60
96.43
89.25
69.53
40 20 0 2003
2004
2005
2006
2007 LOAN FUNDS
YEARS
The above graph of trend of loan funds shows huge fluctuation over the years. In the year 2002-03 it was 100% but it has been reduced to 69.53% in the year 2003-04 & than increased to 122.70% in the year 2004-05. But then it has been again reduced to 96.43% & 89.25% in the year 2005-06 & 2006-07 respectively. It means it has been reduced 10.75% in this period. In real it was 7175.22 (Rs In millions) in the year 2002-03 and increased to 6403.98 (Rs In millions). 4.2.2.5 Trend Analysis of Deferred Tax Liability (Base Year: 2003)
EXHIBIT 4.2.2.5 Particular DEFERRED TAX LIABILITY
2003 100.00
2004 107.00
2005 101.39
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
2006 106.64
2007 116.87 61
FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
PERCENTAGE (%)
Chart 4.2.2.5 DEFERRED TAX LIABILITY
120 115
116.87
110 105 100 95
107.00
106.64 101.39
100.00
90 2003
2004
2005
2006
YEARS
2007
DEFERRED TAX LIABILITY
The above graph of deferred tax liability shows fluctuation but deferred tax liability has been increased compared to the base year 2002-03. In the year 2002-03 it was 100% but in the year 2003-04 it has been increased to 107.00% but then it has been reduced to 101.39% in the year 2004-05 & than it has increased to 106.64% & 116.87% in the year 2005-06 & 2006-07 respectively. That means it has been increased 16.87% in this period. In real it was 1684.99 (Rs In millions) in the year 2002-03 and increased to 1969.29 (Rs In millions). 4.2.2.6 Trend Analysis of Current Liabilities & Provisions (Base Year: 2003)
EXHIBIT 4.2.2.6 Particular CURRENT LIABILITIES & PROVISIONS
2003
2004
2005
2006
2007
100.00 140.57 196.78 237.77 296.41
PERCENTAGE (%)
Chart 4.2.2.6 CURRENT LIABILITIES & PROVISIONS
350 300 250
296.41
200 150 100 50 0
196.78 100.00 2003
237.77
140.57
2004
2005 YEARS
2006
2007
CURRENT LIABILITIES & PROVISIONS
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
The above graph of trend of current liabilities & provisions shows continuously increase in the current liabilities & provisions compared to the base year 2002-03. In the year 2002-03 it was 100% it has been continuously increase to 296.41% in the year 2006-07. It means it has been increased 196.41% in this period. Current liabilities & provisions constitutes of liabilities & provisions. In real it was 5923.77 (Rs In millions) in the year 2002-03 and increased to 17558.55 (Rs In millions).
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
CHAPTER 5 CASH FLOW ANALYSIS The statement of Cash Flow respects an enterprise’s major sources of cash receipts and cash payments. It reports the cash effects during a period of an enterprise’s operation, its investing transactions, and its financing transactions. The statement provides information to understand the movements over the period in cash and cash equivalents.
Purpose and uses of the statement of Cash Flow: The main purpose of the statement of cash flow is to provide relevant information about the cash receipt and cash payments of an enterprise during a period. The information will help users of financial statements to assess the amounts, timing and uncertainty of prospective cash flow to the enterprise.
Usefulness: 1. Predict Future cash flows. 2. Determine the ability to pay dividends & other commitments. 3. Show the relationship of net income to changes in the business cash. 4. Efficiency in Cash Management. 5. Discloses the movement cash. 6. Discloses success or failure of Cash Planning. 7. Evaluate management decisions.
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
EXHIBIT 5.1 5.1 CASH FLOW STATEMENT FOR THE YEAR 2002 – 2003 PARTICULARS
2002-03
Profit before Tax ADJUSTMENTS FOR: Depreciation Other Amortizations Unrealized foreign exchange gains / losses Interest expense Interest income Income from Investments Provision for diminution in value of Investments / Advances (Profit)/Loss on disposal of Fixed Assets / Long Term Investments Transfer from General Reserve - Employee benefits Profit on sale of undertaking OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES ADJUSTMENTS FOR CHANGES IN: Inventories Debtors Advances Current Liabilities and Provisions CASH GENERATED FROM OPERATIONS Income Tax (Paid) / Refund NET CASH FLOW FROM OPERATING ACTIVITIES BEFORE EXTRAORDINARY ITEM Payments under Voluntary Retirement Scheme NET CASH FLOW FROM OPERATING ACTIVITIES AFTER EXTRAORDINARY ITEM (A)
1701.02
CASH FLOWS FROM INVESTING ACTIVITIES Payments for assets acquisition Proceeds on sale of Fixed Assets Proceeds on sale of undertaking Purchase of Long Term Investments Sale/Redemption of Long Term Investments Income from Investments - Interest - Dividend Changes in Advances NET CASH FLOW FROM INVESTING ACTIVITIES (B)
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
1029.69 100.25 (2.24) 810.42 (360.02) (92.11) 20.72 (13.00) 0.00 0.00 3194.73
1848.84 (254.16) (125.20) 135.13 4799.34 (558.78) 4240.56 (627.86) 3612.70
(1243.20) 11.61 0.00 (671.00) 48.04 42.46 92.06 284.07 (1435.96)
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
CASH FLOWS FROM FINANCING ACTIVITIES Long term Borrowings - Raised - Repaid Changes in Short term borrowings Debenture issue and Loan raising expenses paid Premium paid on Prepayment of Loan Interest paid - net Dividend Paid and tax thereon Interim dividend and tax thereon NET CASH FLOW FROM FINANCING ACTIVITIES (C) NET CASH INFLOW / (OUTFLOW) (A+B+C) OPENING CASH AND CASH EQUIVALENTS (D) CLOSING CASH AND CASH EQUIVALENTS (E) NET INCREASE IN CASH AND CASH EQUIVALENTS (E-D)
2321.17 (3155.91) (871.42) (1.66) (65.18) (449.81) (535.18) 0.00 (2757.99) (581.25) 2842.98 2261.73 (581.25)
Interpretation: • Operating activities: The Ashok Leyland Ltd’s net cash flow from operations of 3612.70 (Rs In Millions) is more than the sum of accrual based profit & depreciation that equals Rs. 2231.81, showing that the profit has been fully realized in cash. From the cash flow statements, the main positive item is the depreciation charge of Rs. 1029.69. Thus the company’s earning can be said to be of high quality. Increase in Inventories was 1848.84 and increase in debtors is Rs. 254.16 resulted in strain on the cash generated from generation.
• Investing Activities: From the Investing Activities section; Ashok Leyland Ltd has incurred capital expenditures of Rs. 1243.20. The expenditure has been financed partly by: a) Realizing Rs. 11.61 from the Sales of Plant. b) Realizing Rs. 622.96 from the Sale Of Investments, Net OF Purchase. c) Interest Revenue Rs. 42.46. This has left a gap of Rs. 1435.96 to be financed from other sources.
• Financing Activities: It is seen from the Financing Activities section that the Ashok Leyland Ltd raised long-term borrowing Rs. 2321.17 & repaid long term borrowing Rs. S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
3155.91. Further, the company paid dividend Rs. 535.18 and interest of Rs. 449.81 has been left, with net cash of Rs. 2757.99 from financing activities.
• Net Cash Flow: It is clear that the expansion in the plant & machinery during the period was major drain on cash. The net cash out flow from investing activities of Rs. 1435.96 was met from three sources: 1. Cash Flow from Operations, Rs. 3612.70. 2. Proceeds from Issuance of Share Capital, Rs. 2757.99 (after repaying loans & disturbing interest and dividend). 3. Withdrawal from Cash Balance, Rs. 581.25. That is Cash in Flow, which is good sign for company.
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
EXHIBIT 5.2 5.2 CASH FLOW STATEMENT FOR THE YEAR 2003 – 2004 PARTICULARS
2003-04
Profit before Tax ADJUSTMENTS FOR: Depreciation Other Amortizations Unrealized foreign exchange gains / losses Interest expense Interest income Income from Investments Provision for diminution in value of Investments / Advances (Profit)/Loss on disposal of Fixed Assets / Long Term Investments Transfer from General Reserve - Employee benefits Profit on sale of undertaking OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES ADJUSTMENTS FOR CHANGES IN: Inventories Debtors Advances Current Liabilities and Provisions CASH GENERATED FROM OPERATIONS Income Tax (Paid) / Refund NET CASH FLOW FROM OPERATING ACTIVITIES BEFORE EXTRAORDINARY ITEM Payments under Voluntary Retirement Scheme NET CASH FLOW FROM OPERATING ACTIVITIES AFTER EXTRAORDINARY ITEM (A) CASH FLOWS FROM INVESTING ACTIVITIES Payments for assets acquisition Proceeds on sale of Fixed Assets Proceeds on sale of undertaking Purchase of Long Term Investments Sale/Redemption of Long Term Investments Income from Investments - Interest - Dividend Changes in Advances NET CASH FLOW FROM INVESTING ACTIVITIES (B)
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
2864.60 964.54 106.07 (0.26) 553.83 (377.43) (103.48) 0.00 (28.96) 0.00 0.00 3978.91
(964.85) 1121.67 (104.38) 2174.29 6205.64 (520.37) 5685.27 (278.44) 5406.83
(986.79) 26.26 0.00 (202.84) 508.39 0.59 103.48 (285.92) (836.83)
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
CASH FLOWS FROM FINANCING ACTIVITIES Long term Borrowings - Raised - Repaid Changes in Short term borrowings Debenture issue and Loan raising expenses paid Premium paid on Prepayment of Loan Interest paid - net Dividend Paid and tax thereon Interim dividend and tax thereon NET CASH FLOW FROM FINANCING ACTIVITIES (C) NET CASH INFLOW / (OUTFLOW) (A+B+C) OPENING CASH AND CASH EQUIVALENTS (D) CLOSING CASH AND CASH EQUIVALENTS (E) NET INCREASE IN CASH AND CASH EQUIVALENTS (E-D)
1279.14 (3392.37) (71.26) (5.08) (142.75) (346.68) (670.83) 0.00 (3349.83) 1220.17 2261.73 3481.90 1220.17
Interpretation: • Operating activities: Profit before tax was of Rs. 2846.60. The net cash flow from Operating Activities Rs. 2900.34 that includes the depreciation, other amortizations, and interest expenses were 964.54, 106.07, and 553.83 respectively. Increase in inventories, advances & current liabilities by 964.85, 104.38, 2174.29 respectively & decreases in debtors by 1121.67
• Investing Activities: From the Investing Activities section; Ashok Leyland Ltd has incurred capital expenditures of Rs. 836.83. The expenditure has been financed partly by: a) Realizing Rs. 26.26 from the Sales of Plant. b) Realizing Rs. 509.39 from the Sale Of Investments, Net OF Purchase. c) Income from investments (including interest & dividend) Rs 104.08. This has left a gap of Rs. 836.83 to be financed from other sources.
• Financing Activities: Long-term borrowing raised was Rs. 1279.14 that was repaid Rs. 3392.37. Interest paid and dividend paid 346.68 & 670.83 that carried out finance activities Rs. 3349.83.
• Net Cash Flow:
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
In year 2003 – 2004 Net Cash in Flow is the summation of Operating, Investing & Financing that was [5406.83 + (836.83) + (3349.83)] 1220.17.
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
EXHIBIT 5.3 5.3 CASH FLOW STATEMENT FOR THE YEAR 2004 - 2005 PARTICULARS
2004-05
Profit before Tax ADJUSTMENTS FOR: Depreciation Other Amortizations Unrealized foreign exchange gains / losses Interest expense Interest income Income from Investments Provision for diminution in value of Investments / Advances (Profit)/Loss on disposal of Fixed Assets / Long Term Investments Transfer from General Reserve - Employee benefits Profit on sale of undertaking OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES ADJUSTMENTS FOR CHANGES IN: Inventories Debtors Advances Current Liabilities and Provisions CASH GENERATED FROM OPERATIONS Income Tax (Paid) / Refund NET CASH FLOW FROM OPERATING ACTIVITIES BEFORE EXTRAORDINARY ITEM Payments under Voluntary Retirement Scheme NET CASH FLOW FROM OPERATING ACTIVITIES AFTER EXTRAORDINARY ITEM (A) CASH FLOWS FROM INVESTING ACTIVITIES Payments for assets acquisition Proceeds on sale of Fixed Assets Proceeds on sale of undertaking Purchase of Long Term Investments Sale/Redemption of Long Term Investments Income from Investments - Interest - Dividend Changes in Advances NET CASH FLOW FROM INVESTING ACTIVITIES (B)
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
3550.10 1092.14 152.81 (61.34) 236.94 (258.39) (106.78) 0.00 (351.35) 0.00 0.00 4254.13 (611.40) (120.32) (1013.00) 2675.05 5184.46 (693.29) 4491.17 (17.71) 4473.46
(1824.56) 48.56 0.00 (92.60) 154.16 42.70 106.78 10.49 (1554.47)
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
CASH FLOWS FROM FINANCING ACTIVITIES Long term Borrowings - Raised - Repaid Changes in Short term borrowings Debenture issue and Loan raising expenses paid Premium paid on Prepayment of Loan Interest paid - net Dividend Paid and tax thereon Interim dividend and tax thereon NET CASH FLOW FROM FINANCING ACTIVITIES (C) NET CASH INFLOW / (OUTFLOW) (A+B+C) OPENING CASH AND CASH EQUIVALENTS (D) CLOSING CASH AND CASH EQUIVALENTS (E) NET INCREASE IN CASH AND CASH EQUIVALENTS (E-D)
4975.34 (1131.07) 76.79 (112.86) 0.00 4.16 (1008.54) 0.00 2803.82 5722.81 3481.90 9204.71 5722.81
Interpretation: • Operating activities: The Ashok Leyland Ltd’s net cash flow from operations of 4473.46 (Rs in Millions) is more than the sum of accrual based profit & depreciation that equals Rs. 3806.24, showing that the profit has been fully realized in cash. From the cash flow statements, the main positive item is the depreciation charge of Rs. 1092.14. Thus the company’s earning can be said to be of low quality. Increase in Inventories was Rs. 611.40 and increase in debtors is Rs.120.32 resulted in strain on the cash generated from generation.
• Investing Activities: Form the Investing Activities section; Ashok Leyland Ltd has payments for assets acquisition of Rs. 1824.56. The expenditure financed partly by: a) Realizing Rs. 48.56 from the Sales of Plant. b) Realizing Rs. [154.16+ (92.60)] 61.56 from the Sale Of Investments, Net of Purchase. c) Interest Revenue Rs. 42.70 & dividend 106.78. This has left a gap of Rs. 1554.47 to be financed from other sources.
• Financing Activities: It is seen from the Financing Activities section that the Ashok Leyland Ltd raised long-term borrowing Rs. 4975.34 & repaid long term borrowing Rs. 1131.07. Further, the company paid dividend Rs. 1008.54 and interest of Rs. 4.16 has been left, with net cash of Rs. 2803.82 from financing activities.
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
• Net Cash Flow: It is clear that the expansion in the plant & machinery during the period was major drain on cash. The net cash out flow from investing activities of Rs. 5722.81 was met from three sources: I. Cash Flow from Operations, Rs. 4473.46 II. Proceeds from Issuance of Share Capital, Rs. 1554.47 (after repaying loans & disturbing interest and dividend). III. Withdrawal from Cash Balance, Rs. 5772.81. That is Cash in Flow, which is good sign for company.
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
EXHIBIT 5.4 5.4 CASH FLOW STATEMENT FOR THE YEAR 2005 - 2006 PARTICULARS
2005-06
Profit before Tax ADJUSTMENTS FOR: Depreciation Other Amortizations Unrealized foreign exchange gains / losses Interest expense Interest income Income from Investments Provision for diminution in value of Investments /Advances (Profit)/Loss on disposal of Fixed Assets / Long Term Investments Transfer from General Reserve - Employee benefits Profit on sale of undertaking OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES ADJUSTMENTS FOR CHANGES IN: Inventories Debtors Advances Current Liabilities and Provisions CASH GENERATED FROM OPERATIONS Income Tax (Paid) / Refund NET CASH FLOW FROM OPERATING ACTIVITIES BEFORE EXTRAORDINARY ITEM Payments under Voluntary Retirement Scheme NET CASH FLOW FROM OPERATING ACTIVITIES AFTER EXTRAORDINARY ITEM (A) CASH FLOWS FROM INVESTING ACTIVITIES Payments for assets acquisition Proceeds on sale of Fixed Assets Proceeds on sale of undertaking Purchase of Long Term Investments Sale/Redemption of Long Term Investments Income from Investments - Interest - Dividend Changes in Advances NET CASH FLOW FROM INVESTING ACTIVITIES (B)
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
4523.00 1260.06 132.84 102.05 288.33 (193.87) (87.47) 0.00 (66.61) 0.00 (301.66) 5656.67
(3477.99) (179.55) 314.73 2051.52 4365.38 (1135.68) 3229.70 (9.53) 3220.17
(2646.86) 54.34 620.00 (138.66) 479.68 48.95 56.93 189.77 (1335.85)
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
CASH FLOWS FROM FINANCING ACTIVITIES Long term Borrowings - Raised - Repaid Changes in Short term borrowings Debenture issue and Loan raising expenses paid Premium paid on Prepayment of Loan Interest paid - net Dividend Paid and tax thereon Interim dividend and tax thereon NET CASH FLOW FROM FINANCING ACTIVITIES (C) NET CASH INFLOW / (OUTFLOW) (A+B+C) OPENING CASH AND CASH EQUIVALENTS (D) CLOSING CASH AND CASH EQUIVALENTS (E) NET INCREASE IN CASH AND CASH EQUIVALENTS (E-D)
186.69 (1162.88) (76.79) 0.00 0.00 (166.96) (1356.10) 0.00 (2576.04) (691.72) 9194.94 8503.22 (691.72)
Interpretation: • Operating activities: The Ashok Leyland Ltd’s net cash flow from operations of 3220.17 (Rs in Millions) is less than the sum of accrual based profit & depreciation that equals Rs. 4533.26, showing that the profit has not been fully realized in cash. From the cash flow statements, the main positive item is the depreciation charge of Rs. 1260.06. Thus the company’s earning cannot be said to be of high quality. Increase in Inventories was Rs. 3477.99 and increase in debtors is Rs.179.55 resulted in strain on the cash generated from generation.
• Investing Activities: Form the Investing Activities section; Ashok Leyland Ltd has payments for assets acquisition of Rs. 2646.86. The expenditure financed partly by: a) Realizing Rs. 54.34 from the Sales of Plant. b) Realizing Rs. [479.68 + (138.66)] 341.02 from the Sale Of Investments, Net OF Purchase. c) Interest Revenue Rs. 48.95 & dividend 56.93. This has left a gap of Rs. 1335.85 to be financed from other sources.
• Financing Activities: It is seen from the Financing Activities section that the Ashok Leyland Ltd raised long-term borrowing Rs. 186.69 & repaid long term borrowing Rs.
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
1162.88. Interest paid and dividend paid 166.96 & 1356.10 that carried out finance activities Rs. 2576.04.
• Net Cash Flow: It is clear that the expansion in the plant & machinery during the period was major drain on cash. The net cash out flow from investing activities of Rs. 691.72 was met from three sources: 1. Cash Flow from Operations, Rs. 3220.17 2. Proceeds from Issuance of Share Capital, Rs. 1335.85 (after repaying loans & disturbing interest and dividend). 3. Withdrawal from Cash Balance, Rs. 691.72. That is Cash in Flow, which is good sign for company.
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
EXHIBIT 5.5 CASH FLOW STATEMENT FOR THE YEAR 2006 - 2007 PARTICULARS
2006-07
Profit before Tax ADJUSTMENTS FOR: Depreciation Other Amortizations Unrealized foreign exchange gains / losses Interest expense Interest income Income from Investments Provision for diminution in value of Investments / Advances (Profit)/Loss on disposal of Fixed Assets / Long Term Investments Transfer from General Reserve - Employee benefits Profit on sale of undertaking OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES ADJUSTMENTS FOR CHANGES IN: Inventories Debtors Advances Current Liabilities and Provisions CASH GENERATED FROM OPERATIONS Income Tax (Paid) / Refund NET CASH FLOW FROM OPERATING ACTIVITIES BEFORE EXTRAORDINARY ITEM Payments under Voluntary Retirement Scheme NET CASH FLOW FROM OPERATING ACTIVITIES AFTER EXTRAORDINARY ITEM (A) CASH FLOWS FROM INVESTING ACTIVITIES Payments for assets acquisition Proceeds on sale of Fixed Assets Proceeds on sale of undertaking Purchase of Long Term Investments Sale/Redemption of Long Term Investments Income from Investments - Interest - Dividend Changes in Advances NET CASH FLOW FROM INVESTING ACTIVITIES (B)
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
6045.06 1505.74 164.76 (65.30) 196.46 (160.94) (98.85) (168.13) (323.15) (781.54) 0.00 6314.11
(1677.60) (1005.76) (1047.41) 4102.54 6685.88 (1356.00) 5329.88 (330.37) 4999.51
(6812.87) 108.49 0.00 (50.64) 557.64 44.78 129.39 (1473.70) (7496.91)
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
CASH FLOWS FROM FINANCING ACTIVITIES Long term Borrowings - Raised - Repaid Changes in Short term borrowings Debenture issue and Loan raising expenses paid Premium paid on Prepayment of Loan Interest paid - net Dividend Paid and tax thereon Interim dividend and tax thereon NET CASH FLOW FROM FINANCING ACTIVITIES (C) NET CASH INFLOW / (OUTFLOW) (A+B+C) OPENING CASH AND CASH EQUIVALENTS (D) CLOSING CASH AND CASH EQUIVALENTS (E) NET INCREASE IN CASH AND CASH EQUIVALENTS (E-D)
2162.35 (829.95) 0.00 (2.47) 0.00 (167.02) (1792.34) (2264.32) (2893.75) (5391.15) 8503.22 3112.07 (5391.15)
Interpretation: • Operating activities: The Ashok Leyland Ltd’s net cash flow from operations of 4999.51 (Rs in Millions) is less than the sum of accrual based profit & depreciation that equals Rs. 5918.60, showing that the profit has not been fully realized in cash. From the cash flow statements, the main positive item is the depreciation charge of Rs. 1505.74 Thus the company’s earning cannot be said to be of high quality. Increase in Inventories was Rs. 1677.60 and increase in debtors is Rs. 1005.76 resulted in strain on the cash generated from generation.
• Investing Activities: Form the Investing Activities section; Ashok Leyland Ltd has payments for assets acquisition of Rs. 1824.56. The expenditure financed partly by: a) Realizing Rs. 48.56 from the Sales of Plant. b) Realizing Rs. 61.56 from the Sale Of Investments, Net OF Purchase. c) Interest Revenue Rs. 42.70. This has left a gap of Rs. 1554.47 to be financed from other sources.
• Financing Activities: It is seen from the Financing Activities section that the Ashok Leyland Ltd raised long-term borrowing Rs. 6812.87& repaid long term borrowing Rs. S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
829.95. In effect, the net realization from long-term sources was Rs. 507. Further, the company paid dividend Rs. 1792.34and interest of Rs. 167.02 has been left, with net cash of Rs. 2893.75 from financing activities.
• Net Cash Flow: It is clear that the expansion in the plant & machinery during the period was major drain on cash. The net cash out flow from investing activities of Rs. 5391.15 was met from three sources: I. Cash Flow from Operations, Rs. 4999.51 II. Proceeds from Issuance of Share Capital, Rs. 7496.91 (after repaying loans & disturbing interest and dividend). III. Withdrawal from Cash Balance, Rs. 5391.15 That is Cash in Flow, which is good sign for company.
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
CHAPTER 6 RATIO ANALYSIS The relationship of one item to another expressed in a simple mathematical form is known as the “RATIO”. A ratio is a quotient to two numbers. It must be interpreted against some standard. In assessing the financial stability of a firm, a management should, part form profitability, be interested in relative figures. A ratio is of major importance for financial analysis; it engages qualitative measurement & shows precisely how adequate is one key item in relation to another. To evaluate the financial condition & the purpose of the firm the financial analyst needs certain yardsticks. The yardsticks frequently used in ratio or an index relating two pieces of financial data to each other’s. UTILITY OF RATIO ANALYSIS: 1. 2. 3. 4. 5. 6. 7.
Probability. Liquidity. Efficiency. Inter – Firm Comparison. Indicates Trend. Useful of Budgetary Controls. Useful for Decision Making.
This ratio analysis contains five types of ratio as below: 2. 3. 4. 5. 6.
Profitability Ratios. Liquidity Ratios. Assets Turnover Ratios. Finance Structure Ratios. Valuation Ratios.
6.1 Profitability Ratios: Profitability ratio measures the degree of operating success of a company in an accounting period. Two types of profitability ratios are there. 1. Profit Margin Ratios. 2. Rate of Return Ratios. A profit margin ratio shows the relationship between profit & sales. Three popular profits margin ratios are: S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
• • •
Gross Profit Margin Ratios. Net Profit Margin Ratios. Operating Profit Ratios.
• Gross Profit Margin Ratio: It shows the margin left after meeting manufacturing costs. It measures the efficiency of production as well as pricing. Gross Profit Margin Ratio = Gross Profit/ Sales X 100.
EXHIBIT 6.1.1 (Rs in Millions) 2002 2003 2004 2005 2006 2003 2004 2005 2006 2007 26803.75 33938.84 41818.97 52476.57 71681.76 47075.87 64654.91 23554.18 29992.80 37590.47 3249.57 3946.04 4228.50 5400.70 7026.85 12.12% 11.63% 10.11% 10.29% 9.80%
Particular Net Sales Cost of Goods Sold Gross Profit. Gross Profit Ratios.
Chart 6.1.1
PERCENTAGE (%)
GROSS PROFIT RATIO 14.00 12.00
12.12
11.63 10.11
10.00
10.29
9.80
8.00 6.00 4.00 2.00 0.00 2002 - 2003
2003 - 2004
2004 - 2005
2005-2006
2006-2007
YEARS Gross Profit Ratios.
The table shows that gross profit has been increased continuously increased over the years. The reason for increase in the gross profit is due to increase in sale. Sale has been continuously increased over the years Although the gross profit has been increased over the years it has been found that gross profit ratio has been decreased continuously. S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
In year 2002 – 2003 the GPR was at highest 12.12% but it was again decrease up to 9.80% in year 2006 – 2007. It has been reduced continuously over the years This ratio shows the better profitability for company but gross profit ratio has been decreased continuously over the year. So company should take certain steps to increase it.
• Net Profit Margin Ratios: It is most significant of all revenue ratios as it indicates the ultimate profitability of the firm. This ratio is useful to the shareholders for knowing the EPS and to investors in judging the prospects of return on their investments higher ratio indicated higher profitability. Net Profit Margin Ratio = Net Profit / Sales x 100.
EXHIBIT 6.1.2
Particular Net Profit. Sales. Net Profit Ratio.
(Rs in Millions) 2002 2003 2004 2005 2006 2003 2004 2005 2006 2007 1202.12 1935.80 2714.10 3273.20 4412.86 26803.75 33938.84 41818.97 52476.57 71681.76 4.48% 5.70% 6.49% 6.24% 6.16%
Chart 6.1.2
PERCENTAGE (%)
NET PROFIT RATIO 7.00 6.00 5.00 4.00 3.00 2.00
5.70
6.49
6.24
6.16
2003 - 2004
2004 - 2005
2005 - 2006
2006 - 2007
4.48
1.00 0.00 2002 - 2003
YEARS Net Profit Ratio.
The table shows that there is fluctuation in Net Profit Ratio. In year 2002 – 2003, the NPR was at lowest 4.48% but it was again increased up to 6.49% which is highest in the year 2004-2005. but again it reduced to 6.16% in 2006-2007. S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
This ratio shows a better profitability of the firm, which suggests a satisfactory position.
Operating Profit Ratio: This ratio indicate the portion that the cost of sales bears to sales cost of sales includes direct cost of good sold as well as operating expenses, administrative, selling & distribution expenses which, have matching relationship with sales. It is calculated as: Operating Profit ratio = Operating Profit / Sales X 100.
EXHIBIT 6.1.3
(Rs. In Million) 2002 2003 2004 2005 2006 2003 2004 2005 2006 2007 1701.02 2864.60 3550.10 4523.00 6045.06 26803.75 33938.84 41818.97 52476.57 71681.76 6.35% 8.44% 8.49% 8.62% 8.43%
Particular Operating Profit. Sales. Operating Profit Ratio.
Chart 6.1.3 OPERATING PROFIT RATIO
PERCENTAGE(%)
10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00
6.35
2002 - 2003
8.44
2003 - 2004
8.49
8.62
8.43
2004 - 2005
2005 - 2006
2006 - 2007
YEARS Operating Profit Ratio.
The Operating Profit is equal to Sales minus Expenditure of the company. The operating profit ratio goes increasing every year. In year 2002 – 2003, the OPR was at lowest 6.35% but it was again increased up to 8.44% in year 2003 – 2004. In 2004 – 2005 OPR IS 8.49%, which is highest. From the year 2005-06 it started reducing & in the year 2006-07 it reduced to 8.43% because the current year witnessed increase in commodity prices and consequent price increase claims by S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
suppliers. In addition, there were cost increases on account of compliance with statutory regulations, which has not been fully passed on to the customers. The margin also suffered due to full impact of previous year’s input cost increases. However the introduction of VAT in Tamil Nadu effective January’07 will improve future margins. Rate of return ratios reflects the relationship between Investments. Important rate of return ratios measures are: • Return on assets or Return on investments. • Return on equity. • Earning power.
Profit
&
• Return on assets or Return on investments: This is measure of profitability from a given level of investments. It is an excellent indicator of overall performance of a company. It is also called return on capital employed or return on investment. It measures how efficiently the capital is employed. Return on Assets = Net Profit / Average Total Assets X 100
EXHIBIT 6.1.4 Particular Profit After Tax. P Y Total Assets CY Total Assets Average Total Assets. Return on Assets Ratio
2002 2003 2004 2003 2004 2005 1202.12 1935.80 2714.10 21140.87 18455.07 17309.91 18455.07 17309.91 22191.19 19797.97 17882.49 19750.55 6.07%
10.83%
13.74%
(Rs 2005 2006 3273.20 22191.19 22840.70 22515.95
in Millions) 2006 2007 4412.86 22840.70 27318.95 25079.83
14.54%
17.60%
Chart 6.1.4
PERCENTAGE(%)
RETURN ON ASSETS RATIO 20.00 18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00
10.83
13.74
14.54
17.60
2005 - 2006
2006 - 2007
6.07 2002 - 2003
2003 - 2004
2004 - 2005
YEARS Return on Assets Ratio.
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
Average Total Assets = C. Y. Assets + P. Y. Assets / 2 2002 2003 2004 2005 2006
– 2003 = – 2004 = - 2005 = - 2006 = - 2007 =
21140.87 18455.07 17309.91 22191.19 22840.70
+ + + + +
18455.07 17309.91 22191.19 22840.70 27318.95
/ / / / /
2 2 2 2 2
= = = = =
19797.97. 17882.49. 19750.55. 22515.95. 25079.83.
The ROA goes increasing every year i.e. 6.07% to 17.60%. This is showing the efficiency in the use of capital. The company can earn more profit by optimizing the use of assets. The ROA has increased every year because of increase in profit every year. The ratio in year 2003 – 2004 is more than the year 2002 – 2003 because there is reduction in average total assets.
• Return On Equity: It measures the profitability of equity funds invested in firm. Return on Equity = Profit after Tax / Average Shareholder’s Equity x 100
EXHIBIT 6.1.5 Particular PAT or Equity Earning. P Y Shareholder’s Equity CY Shareholder’s Equity Average Shareholder’s Equity Return on Equity Ratio
2002 2003 1202.12 10369.53
2003 2004 1935.80
(Rs. in Millions) 2005 2006 2006 2007 3273.20 4412.86
2004 2005 2714.10
9594.86 10517.97 11678.65 14124.53
9594.86 10517.97 11678.65 14124.53 18945.68 9982.20 10056.42 11098.31 12901.59 16535.11 12.04%
Average Shareholder’s 2002 – 2003 2003 – 2004 2004 – 2005 2005 – 2006 2006 – 2007
19.25%
24.46%
25.37%
26.69%
Equity = C. Y Equity + P. Y Equity / 2. = 10369.53 + 9594.80 / 2 = 9982.19. = 9594.86 + 10517.97/ 2 = 10056.41. = 10517.97 + 11678.65 / 2 = 11098.31. = 11678.65 + 14124.53/2 = 12901.59 = 14124.53 + 18945.68/2 = 16535.11
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
Chart 6.1.5
PERCENTAGE (%)
RETURN ON EQUITY RATIO 30.00% 25.00%
25.37%
26.69%
2004 - 2005
2005 - 2006
2006 - 2007
19.25%
20.00% 15.00%
24.46%
12.04%
10.00% 5.00% 0.00% 2002 - 2003
2003 - 2004
YEARS Return on Equity Ratio.
Return on Equity is continuously increasing i.e. from 12.04% in the year 2002-03 to 26.69% in 2006-07 that mean the equity funds invested in the company/ firm is good which shows that the profitability of the business is increasing year by year. Return of the equity of the company has been increased in 2004 – 2005 to 24.55% from 12.04% in 2002 – 2003. This means that per Re.1. Of shareholder’s equity, company earning 12 paisa. In 2003 – 2004, Average shareholder’s equity (Owner’s Capital + Reserve & Surplus) has been increased by 0.74% while the PAT has been increased by 61.03% & in year 2004 – 2005 increase in average shareholder’s equity is 10.36% & increase in PAT is 40.20%. So the return on equity has increased.
• Earning Power: The earning power is a measure of business performance, which is not affected by Interest & Tax. It is measure of operating profitability. Earning Power = Earning before Profit & Tax / Average Total Assets x 100.
EXHIBIT 6.1.6 Particular Profit Before Tax. P Y Total Assets CY Total Assets Average Total Assets. Earning Power Ratio.
2002 2003 2004 2003 2004 2005 1701.02 2864.6 3550.1 21140.87 18455.07 17309.91 18455.07 17309.91 22191.19 19797.97 17882.49 19750.55 8.59%
16.02%
17.97%
(Rs. in millions) 2005 2006 2006 2007 4523 6045.06 22191.19 22840.70 22840.70 27318.95 22515.95 25079.83 20.09%
24.10%
Chart 6.1.6 S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
PERCENTAGE (%)
EARNING POWER RATIO 30.00% 24.10%
25.00% 20.00%
17.97%
20.09%
2004 - 2005
2005 - 2006
16.02%
15.00% 10.00%
8.59%
5.00% 0.00% 2002 - 2003
2003 - 2004
2006 - 2007
YEARS Earning Power Ratio.
The Earning Power of the company has been increased to 24.10% in year 2006 – 2007 from 8.59% in year 2002 – 2003. This is because the increase in earning before interest & tax (EBIT) is more than increase in average total assets. In 2003 – 2004 the EBIT is increased by 16.02% while PAT is increased by 61.03% because interest & tax is less. In year 2004 – 2005 EBIT increased by 17.97% while PAT is increased by 40.20% because interest & tax is only by 19%. In year 2005 – 2006 EBIT increased by 20.09% while PAT is increased by 20.60% because interest & tax is less compares to last year. In year 2006 – 2007 EBIT increased by 24.10% while PAT is increased by 34.82% because interest & tax is less compares to last year.
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
6.2 Liquidity Ratios: Liquidity is the ability of a company to meet its short-term obligations when fall due. A company should have enough cash % other current assets, which can be converted in to cash so that it can pay its suppliers & lenders on time. In evaluating Ashok Leyland Ltd’s liquidity five ratios are presented. • Current Ratio. • Quick Ratio or Acid-test Ratio. • Net Working Capital. • Cash Generated Per Rupee of Sales. • Bank Finance Gap Ratio.
• Current Ratio: Current ratio indicates the firm’s ability to pay its current liabilities, i.e. day-to-day financial obligations. It shows the strength of credit, strength of working capital & capacity to carry on effective operations. Higher ratio i.e. more than 2:1 indicates sound solvency position. Current Ratio = Current Assets/ Current Liabilities. Where, Current Assets = Inventories + Debtors + Cash & Bank Balance + Loan & Advances. Current Liabilities = Liabilities + Provision
EXHIBIT 6.2.1
(Rs. In Millions) 2002 2003 2004 2005 2006 2003 2004 2005 2006 2007 13404.70 14636.67 21572.63 22324.13 26977.14
Particular Current Assets. Current Liabilities. Current Ratio
5923.77 2.26
8327.02 11656.67 14085.16 17558.55 1.76 1.85 1.58 1.54
Chart 6.2.1 CURRENT RATIO
IN TIMES
2.50 2.00 1.50 1.00
2.26
1.76
1.85
2003 - 2004
2004 - 2005
0.50
1.58
1.54
2005 - 2006
2006 - 2007
0.00 2002 - 2003
YEARS Current Ratio.
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
Composition of current ratio is very important at the time of interpretation. Current ratio indicates the sound short term finance from the creditor’s point of view. But on the other hand the higher ratio indicates blocking of funds in current assets. As a conventional rule, current ratio of 2:1 or more is considered satisfactory. To through more light on the quality of current assets the percentage of the current assets is to be calculated. However, an arbitrary standard of 2:1 should not be blindly followed. Firm’s wit less then 2:1 current ratios may be doing well, while firms with 2:1 or even higher may be finding great difficulties in paying their bills. This is because the current ratio is a test of quantity not quality. Current Ratio is 2.26 in 2002 – 2003 & decreased up to 1.54 in 2006 – 2007 because current liabilities increased rapid than the increase in current assets. In the Current ratio it has been found decreasing than the base year, so it is not a favorable sign for the company, it should take certain measure to increase it.
• Quick Ratio or Acid Test Ratio: The Quick Ratio is a more absolute test of a firm’s ability to meet its immediate liabilities. It base on those current assets, which are highly liquid inventories, is excluded from the numerators of this ratio because inventories are deemed to be the least liquid component of current assets. Quick Ratio = Quick Assets / Liquid Liability.
EXHIBIT 6.2.2 Particular
2002 2003
Current Assets. (A) Inventories (B) Quick Assets (A-B) Liquid Liabilities. Quick Assets Ratio.
2003 2004
2004 2005
(Rs. In Millions) 2005 2006 2006 2007
13404.7 14636.67 21572.63 22324.13 4104.56 5069.41 5680.81 9025.61 9300.14 9567.26 15891.82 13298.52 5923.77 8327.02 11656.67 14085.16 1.57 1.15 1.36 0.94
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
26977.14 10703.21 16273.93 17558.55 0.93
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
Chart 6.2.2
IN TIMES
QUICK ASSET RATIO 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00
1.57 1.36 1.15
2002 - 2003
2003 - 2004
2004 – 2005
0.94
0.93
2005 - 2006
2006 - 2007
YEARS
Quick Assets Ratio.
Generally a quick ratio of 1:1 is considered to represent a satisfactory current financial condition. A quick ratio of 1:1 or more does not necessarily imply sound liquidity position. A company with a high value of quick ratio can flounder if it has slow-paying, doubtful and stretched out-in-age receivables. On the other hand, a company with a low value of quick ratio may be prospering and paying its current obligation in time, if it has been managing its inventories very efficiently wit a continuous stability. It has same effect as Current Ratio. In year 2002–2003 the ratio was 1.57, which was highest & also satisfactory level. But then in year 2006–2007, it was decreased to 0.93. Because of rapid increase in liquid liabilities.
• Net Working Capital: This ratio represents that part of the long-term fund represented by the net worth & long-term dept, which are permanently blocked in current assets. Certain minimum level of safety stock, permanent customers unpaid bills, compensatory minimum bank balance & minimum cash balance are the example of permanent working capital. Net Working Capital = Total Current Assets – Total Current Liabilities.
EXHIBIT 6.2.3
(Rs. 2002 2003 2004 2005 2003 2004 2005 2006 Current Assets. 13404.7 14636.67 21572.63 22324.13 Current Liabilities. 5923.77 8327.02 11656.67 14085.16 Net Working 7480.93 6309.65 9915.96 8238.97 Capital Particular
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
In Million) 2006 2007 26977.14 17558.55 9418.59
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
Chart 6.2.3
RS. IN MILLION
NET WORKING CAPITAL 12000
9915.96
10000 7480.93
8000
8238.97
9418.59
6309.65
6000 4000 2000 0 2002 2003
2003 2004
2004 2005
2005 2006
2006 2007
YEARS Net Working Capital
Net working capital has been found very fluctuating every year. Net Working Capital in this year (2004 – 2005) is very useful for other purpose because it is highest i.e. 9915.96.
• Cash Generated Per Rupee of Sales: This ratio shows that percentage (or Paisa per rupees) of sales which is available in cash form Cash Generated Per Rupee of Sales = PAT + Depreciation + Non Cash Exp. / Sales X 100
EXHIBIT 6.2.4 Particular PAT Depreciation Non Cash Items PAT + Dep. + Non Cash Exp Sales. Cash Generated Per Rupee Of Sales Ratio
2002 2003 1202.12 1029.69 671.79
2003 2004 1935.80 964.54 303.10
2004 2005 2714.10 1092.14 123.81
(Rs. In Million) 2005 2006 2006 2007 3273.20 4412.86 1260.06 1505.74 (52.62) 184.08
2903.60 3203.44 3930.05 4480.64 6102.68 26803.75 33938.84 41818.97 52476.57 71681.76 10.83% 9.44% 9.40% 8.54% 8.51%
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
Chart 6.2.4
PERCENTAGE (%)
CASH GENERATED PER RUPEES OF SALES RATIO 10.83%
12.00%
9.44%
10.00%
9.40% 8.54%
8.51%
2005 2006
2006 2007
8.00% 6.00% 4.00% 2.00% 0.00% 2002 - 2003
2003 - 2004
2004 - 2005
YEARS Cash Generated Per Rupee Of Sales Ratio
The Cash Generated per Rupee of Sales Ratio includes PAT, depreciation & non-cash expenses (interest). In the year 2002-2003 cash generated per rupee of sale was highest i.e. 10.83% but it has been than continuously reduced to 8.51% in the year 2006-2007.
• Bank Finance Gap Ratio. Bank Finance Gap Ratio = Total Current Assets – MPBF under Tandon Committee MPBF indicates maximum permissible bank finance under tandon committee recommendations of 1975. The maximum permissible bank finance was restricted to 75% of the working capital gap under three successive methods of bank leading.
Method 1: 75% (Current Assets – Current Liabilities)
EXHIBIT 6.2.5.1 Particular Current Assets. Current Liabilities. CA- CL 75%(CA-CL)
2002 2003 2004 2005 2006 2003 2004 2005 2006 2007 13404.70 14636.67 21572.63 22324.13 26977.14 5923.77 8327.02 11656.67 14085.16 17558.55 7480.93 6309.65 9915.96 8238.97 9418.59 5610.70 4732.24 7436.97 6179.23 7063.94
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
Method 2: 75% (Current Assets) – Current Liabilities
EXHIBIT 6.2.5.2 Particular Current Assets. 75% Current Assets Current Liabilities. 75%(CA)-CL
2002 2003 2004 2005 2006 2003 2004 2005 2006 2007 13404.70 14636.67 21572.63 22324.13 26977.14 10053.53 10977.50 16179.47 16743.10 20232.86 5923.77 8327.02 11656.67 14085.16 17558.55 4129.76 2650.48 4522.80 2657.94 2674.31
Method 3: 75% (Current Assets – Core Current Assets*) – Current Liabilities.
EXHIBIT 6.2.5.3 Particular Current Assets. Core Current Assets (Quick Assets) CA -CCA 75% (CA- CCA) Current Liabilities. 75%(CA)-CL
2002 2003 13404.70
2003 2004 14636.67
2004 2005 21572.63
2005 2006 22324.13
2006 2007 26977.14
9300.14
9567.26
15891.82
13298.52
16273.93
4104.56 3078.42
5069.41 3802.06
5680.81 4260.61
9025.61 6769.21
10703.21 8027.41
5923.77 8327.02 11656.67 14085.16 (2845.35) (4524.96) (7396.06) (7315.95)
17558.55 (9531.14)
Assets Turnover Ratios Assets Turnover Ratios are basically Production ratios which measures the output produced from the given input deployed. The relationship of productivity is equal to output divided by input & assets turnover is equal to sales divided by Assets. • • • • • •
Assets Turnover Ratios are as follows: Total Assets Turnover. Net Fixed Assets Turnover. Net Working Capital Turnover. Inventory Turnover. Debtor’s Ratio.
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
• Total Assets Turnover: It shows the relationship between total assets to sales. The sales are affected through investment in fixed assets to earn profit. The higher ratio show that with less amount of investment in total assets, the business has capacity to sell more as such its probability is also more. Total Assets Turnover = Sales / Total Assets Where Total Assets = Fixed Assets + Investments + Net Current Assets + Misc. Expenses.
EXHIBIT 6.3.1
(Rs. In Millions) 2002 2003 2004 2005 2006 2003 2004 2005 2006 2007 26803.75 33938.84 41818.97 52476.57 71681.76 18455.07 17309.91 22191.19 22840.70 27318.95 1.45 1.96 1.88 2.30 2.62 times times times times times
Particular Sales. Total Assets. Total Assets Turnover Ratio.
Chart 6.3.1 TOTAL ASSETS TURNOVER RATIO
IN TIMES
3.00
2.62 2.30
2.50 2.00 1.50
1.96
1.88
2003 - 2004
2004 – 2005
1.45
1.00 0.50 0.00 2002 - 2003
2005 2006
2006 2007
YEARS Total Assets Turnover Ratio.
Total assets turnover ratio has increased in 2003–2004 that shows the efficient utilization of total assets of the company. But in year 2004–2005 ratios is decreased to 1.88 times which shows companies has not utilized efficiently it’s total fixed assets in sales as compared to 2002-2003. But after that it has been increased to 2.30 in 2005-2006 and 2.62 in the year 2006-2007. It is very good sign for the company that it is increasing its use of fixed assets over sales. S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
•
Net Fixed Assets Turnover Ratio:
The Fixed Assets Turnover shows the efficiency & profitability of business by comparing the fixed assets with sales. The higher ratio shows that the fixed assets are using efficient manner to increase the sales. Fixed Assets Turnover Ratio = Sales / Net Fixed Assets.
EXHIBIT 6.3.2
Particular Sales. Net fixed assets Fixed assets turnover Ratio
(Rs. In Million) 2002 2003 2004 2005 2006 2003 2004 2005 2006 2007 26803.75 33938.84 41818.97 52476.57 71681.76 9398.38 9211 9790.01 10846.88 15445.24 2.85 3.68 4.27 4.84 4.64 times times times times times
Chart 6.3.2 FIXED ASSETS TURNOVER RATIO
IN TIMES
6 5 4 3
3.68
4.27
2003 - 2004
2004 – 2005
4.84
4.64
2005 2006
2006 2007
2.85
2 1 0 2002 - 2003
YEARS Fixed assets turnover Ratio
A fixed assets turnover ratio has been increased. It indicates that fixed assets utilized more efficient in business. In year 2003-04 the net fixed assets have been decreased by 3.07% and the net sales are increased by 26.62%. So the fixed assets turnover ratio has increased by from 2.85 to 3.68 times. In 2004-05, the net fixed assets increased by 2.17% and the net sales increased by 23.22%. so the net fixed assets turnover ratio increased to 4.27 time In 2005-06, the net fixed assets increased by 5.53% and the net sales increased by 25.49%. So the net fixed assets turnover ratio increased to 4.84 times which is highest over the period. S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
In 2006-07, the net fixed assets increased by 38.56% and the net sales increased by 36.60%. Net fixed asset has been increased more than increase in sales. So the net fixed assets turnover ratio decreased to 4.64 times from 4.84 times.
• Fixed Working capital turnover Ratio: It shows the relationship between sales and working capital. It indicates the liquidity strength of the company higher ratio high liquidity; it means company has enough working capital due effective management. Fixed working capital Turnover Ratio = Sales / Net working Capital.
EXHIBIT 6.3.3
(Rs in Millions) 2002 2003 2004 2005 2006 2003 2004 2005 2006 2007 26803.75 33938.84 41818.97 52476.57 71681.76 13404.7 14636.67 21572.63 22324.13 26977.14
Particular Sales. Current Assets. Current Liabilities. Net Working Capital Fixed Working Capital Turnover Ratio
5923.77 7480.93
8327.02 11656.67 14085.16 17558.55 6309.65 9915.96 8238.97 9418.59
3.58 times
5.38 times
4.22 times
6.37 times
7.61 times
Chart 6.3.3 FIXED WORKING CAPITAL TURNOVER RATIO 7.61
8
6.37
IN TIMES
7
5.38
6 5 4
4.22 3.58
3 2 1 0 2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
YEARS Fixed Working Capital Turnover Ratio
In the fixed working capital turnover ratio too much of fluctuation has been found but then it has increased. S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
In 2002-03 the ratio was 3.58 times but in year 2003-04 it was increased to 5.38 times but in the year 2004-05 it has been reduced to 4.22 times but than it has increased to 6.37times & 7.61times in the year 2005-06 & 2006-07 respectively. It indicates there is proper utilization of working capital to increase sales. In 2004-05 net working capital increased by 57.16% but sales has also increased by 23.22% but it is less than the percentage increase in working capital. So Ratio bas been decreased.
• Inventory turnover Ratio: It is also known as Stock Turnover Ratio. It is the number of times. Its average inventories sold during the year. A high inventory turnover is an indication good inventory management & favorable trading situation. Inventory Turnover Ratio = Cost of Goods Sold / Average Stock.
EXHIBIT 6.3.4 Particular Cost of Goods Sold. Opening Stock (A) Closing Stock(B) Average Stock (A+B)/2 Inventory Turnover Ratio
2002 2003
2003 2004
2004 2005
(Rs. In Millions) 2005 2006 2006 2007
23554.18 29992.80 37590.47 47075.87 64654.91 5953.40
4104.56
5069.41
5680.81
5069.41
5680.81
9025.61 10703.21
5028.98 4586.985
5375.11
7353.21
9864.41
4.68 times
6.99 times
6.40 times
6.55 times
4104.56
6.54 times
9025.61
Chart 6.3.4
S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
97
FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
INVENTORY TURNOVER RATIO 8.00 6.54
6.99
6.40
6.55
2003 - 2004
2004 - 2005
2005 2006
2006 2007
7.00 IN TIMES
6.00 5.00
4.68
4.00 3.00 2.00 1.00 0.00 2002 - 2003
YEARS Inventory Turnover Ratio
This ratio indicates how many times in a year the stock’s turnover. Higher the ratio better it is situation. The graph shows that the inventory turnover ratio of the company. In year 2002 – 2003 the inventory turnover ratio was 4.68 times, which was lowest. But in year 2003–2004 & 2004-2005 inventory turnover ratios was increased to 6.54 times & 6.99 times respectively. But then it reduced to 6.40 times in 2005-2006 & then it was increased to 6.55 times in 2006-07 It indicates the company has good inventory management & favorable trading situation. In the year 2004 – 2005 it is increased to 6.99 times that indicates good control over inventory.
• Average Age of Inventories: This ratio indicates the waiting period of the investment in inventories & is measured in days, weeks or months. Inventory turnover & average age of inventories are inversely related. High Inventory Turnover Ratio is goods but longer age of inventory is bad as it indicates idle blocking of money in inventories. Average Age of Inventories = 360 days / Inventory Turnover. [
EXHIBIT 6.3.5 Particular Days Inventory turnover Avg. Age of Inventory’s Ratio
2002 2003 360 4.68 76.92 Days
2003 2004 360 6.54 55.05 Days
2004 2005 360 6.99 51.50 Days
(Rs. In Millions) 2005 2006 2006 2007 360 360 6.40 6.55 56.25 54.96 Days Days
Chart 6.3.5 S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
AVERAGE AGE OF INVENTORY'S RATIO 90
DAYS
80 70
76.92 55.05
60 50
56.25
54.96
2005-2006
2006-2007
51.50
40 30 20 10 0 2002 – 2003
2003 - 2004
2004 – 2005
YEARS Avg. Age of Inventory’s Ratio
This graph shows the very good situation for company. In Average Age of Inventories lower the ratio better the situation. In year 2002–2003 the average age for inventory was 76.92 days & it has been reduced to 54.96 days in year 2006–2007. In year 2004 – 2005 Average Age of Inventories ratio was minimum. It shows favorable situation of company as it has decreased.
• Debtor’s Ratio: It indicates the effective of credit and the speed at which the debtors are converted in to cash. It shows the equality of debtor’s also. I.e. good, doubtful or bad etc Debtor’s Ratio = (Debtors + Bills Receivable/Credit Sales*) x 365.
EXHIBIT 6.3.6 Particular Debtors Bills Receivable Total Credit Sales/ Net Sales Debtor’s Ratio
2002 2003 5181.5 0 5181.5
2003 2004 4056.19 0 4056.19
26803.75 33938.84 70.56 43.62 Days Days
(Rs. In Millions) 2004 2005 2006 2005 2006 2007 4587.66 4243.37 5228.75 0 0 0 4587.66 4243.37 5228.75 52476.57 71681.76 41818.97 40.04 29.51 26.62 Days Days Days
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Chart 6.3.6 DEBTOR'S RATIO 80 70
70.56
IN DAYS
60
43.62
50
40.04
40 30
29.51
26.62
2005-2006
2006-2007
20 10 0 2002 - 2003
2003 - 2004
2004 – 2005
YEARS Debtor’s Ratio
The above table shows that every year debtor’s ratio has been decreased continuously. The higher the ratio, the more unsatisfactory position it shows. It suggests that the credit and collection policy is weak. This would result into unsatisfactory state of working capital and weak liquid position, but it has been reduced continuously here so it is a favorable situation for the company. It indicates good collection from debtors. The ratio is decrease from 70.56 days to 26.62 days in 2006-2007.
• Debtor’s Turnover: The debtor’s turnovers suggests the number of times the amount of credit sales is collected during the year, while debtors ratio indicates the no. of days during which the dues for credit sales are collected. Debtor’s Turnover = Credit Sales / Average Debtors.
EXHIBIT 6.3.7 Particular Credit Sales/ Net Sales Previous Years Debtors Current Years Debtors Average Debtors Debtor’s Turnover
2002 2003 26803.7 5
2003 2004 33938.8 4
2004 2005 41818.9 7
(Rs. In Million) 2005 2006 2006 2007 52476.5 71681.7 7 6
4928.46
5181.50
4056.19
4587.66
4243.37
5181.50 5054.98 5.30 Days
4056.19 4618.85 7.35 Days
4587.66 4321.93 9.68 Days
4243.37 4415.52 11.88 Days
5228.75 4736.06 15.14 Days
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Chart 6.3.7 DEBTOR'S TURNOVER 16 14
IN DAYS
12 10 8 6 4 2
9.68
11.88
15.14
2004 – 2005
2005-2006
2006-2007
7.35 5.30
0 2002 - 2003
2003 - 2004
YEARS Debtor’s Turnover
Debtors constitute an important constituent of current assets and therefore the quality of debtors to a great extent determines a firm’s liquidity. The higher the ratio the better it is, since it would indicate that debts are being collected more promptly. Debtor’s Turnover ratio has been increased here continuously, so t is a favorable situation for the company. In year 2002-03 shows that debtor’s turnover ratio was 5.30 days, which was lowest, and it has continuously increased to 15.14 days, so it good for the company
• Average Age of Debtors: The average age of debtors is compared with “the credit period allowed to the customers” Avg. Age of Debtor’s Ratio = 360 Days / Debtors Turnover.
EXHIBIT 6.3.8 Particular Days Debtors turnover Avg. Age of Debtor’s Ratio
2002 2003 360 5.3 67.92 Days
2003 2004 360 7.35 48.98 Days
2004 2005 360 9.68 37.19 Days
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(Rs in Millions) 2005 2006 2006 2007 360 360 11.88 15.14 30.30 23.78 Days Days
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
Chart 6.3.8 AVERAGE AGE OF DEBTOR'S 80
IN DAYS
70
67.92
60
48.98
50
37.19
40 30
30.30
23.78
2005-2006
2006-2007
20 10 0 2002 – 2003
2003 - 2004
2004 – 2005
YEARS Avg. Age of Debtor’s Ratio
This ratio goes to decrease every year. In year 2002-03 Avg. Age of debtors was 67.92 days than it was continuously reduced to 23.78 days in 2006-07. Here we can see that debtor’s turnover and avg. Age of debtors are inversely related.
FINANCE STRUCTURE RATIOS: It indicates the relative mix or blending of owner’s funds and outsider’s debt funds in the total capital employed in the business. Financial leverage refers to the use of debt finance. While debt capital is a cheater source of finance, it is also a riskier source of finance. Two types of ratio are commonly used to analyze financial leverage 1. Structural Ratios. 2. Converge Structure ratio is base on the proportion of debt and equity in the financial structure of the firm. Important structural ratios are: • • •
Equity Ratio or proprietary Ratio Debt equity Ratio Debt Ratio
• Equity Ratio or Proprietary Ratio: This ratio can be finding out by dividing net worth to total capital employed. This ratio focuses the attention on the general financial strength of the business enterprise. Equity Ratio = Net Worth \ Total Capital Employed Where, S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
Net Worth = Equity Capital + Reserves – Misc. Expenses Total Capital Employed = Net Worth + Long Term Debt
Exhibit 6.4.1 (Rs in Millions) 2002 2003 2004 2005 2006 2003 2004 2005 2006 2007 1189.29 1189.29 1189.29 1221.59 1323.87 8405.57 9328.68 10489.36 12902.94 17621.81 0.00 323.24 193.32 73.07 244.18 9594.86 10194.73 11485.33 14051.46 18701.5
Particular
Equity Capital (a) Reserves (b) Misc. Expenses (c) Net Worth (a+b-c) A Secured loans(d) 5045.62 3103.56 2634.96 1846.91 3602.16 Unsecured loans (e) 2129.6 1885.52 6169.1 5072.37 2801.82 Long Term Debt 7175.22 4989.08 8804.06 6919.28 6403.98 (d+e) B Total Capital 16770.08 15183.81 20289.39 20970.74 25105.48 Employed (A+B) = C Equity Ratio 0.57 0.67 0.57 0.67 0.74 (A/C)
Chart 6.4.1 EQUITY RATIO
0.80
IN TIMES
0.70 0.60 0.50 0.40
0.57
0.67
0.57
0.67
2002 – 2003
2003 - 2004
2004 – 2005
2005-2006
0.74
0.30 0.20 0.10 0.00 2006-2007
YEARS Equity Ratio
The higher the ratio, the stronger the financial position of the company, as it signifies that the proprietors have provided larger funds to purchase the assets. This ratio cannot exceed 100%. If it is 100%, it means that the business does not use any outside funds or outsider’s liabilities. Here, the ratio has been found fluctuating every year.
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
In the year 2002-03 it was 0.57 but then in the year 2003-04it was increased to 0.67 and again it has reduced to 0.57 in 2004-05 and then it increased to 0.67 & 0.74 in 2005-06 & 2006-07 respectively.
• Debt equity ratio: This ratio indicates the relationship between borrowed funds and owner’s capital. It shows the proportion of long-term external equities and internal equities. i.e. proportion of funds provided by long-term creditors and that provided by shareholders or proprietors. Debt Equity Ratio = (Total long term debt/Net worth) x 100.
EXHIBIT 6.4.2 Particular Debt Net worth Debt Equity Ratio
(Rs in Millions) 2002 2003 2004 2005 2006 2003 2004 2005 2006 2007 7175.22 4989.08 8804.06 6919.28 6403.98 9594.86 10517.97 11678.65 14124.53 18945.68 74.78% 47.43% 75.39% 48.99% 33.80%
Chart 6.4.2 DEBT EQUITY RATIO PERCENTAGE (%)
80% 70%
75.39%
60% 50% 40%
48.99%
47.43% 74.78%
33.80%
30% 20% 10% 0% 2002 – 2003
2003 - 2004
2004 – 2005
2005-2006
2006-2007
YEARS Debt Equity Ratio
The higher the ratio means that outside creditors have a larger claim than the owners of the business. The pressure from creditors would increase and their interference will also increase. The company with high-debt position will have to accept stricter conditions from lenders, while borrowing the money.
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
In the year 2002-03 it was 74.78%andthen it reduced to 47.43% in 2003-04 and then again increased to 75.39% but then it decreased to 48.99% & 33.80% in the year 2005-06 & 2006-07 respectively. In the year 2006-07 it is minimum that is favorable for the company. •
Debt ratio:
It shows the relationship between long-term debt and total capital employed. Equity ratio and debt ratio summation is always 1. Debt ratio = long-term debt / total capital employed.
EXHIBIT 6.4.3 Particular Long term debt Total capital employed Debt ratio
2002 2003 7175.22
2003 2004 4989.08
2004 2005 8804.06
(Rs. In Millions) 2005 2006 2006 2007 6919.28 6403.98
16770.08 15507.05 20482.71 21043.81 25349.66 0.43 0.32 0.43 0.33 0.25
Chart 6.4.3
IN TIMES
DEBT RATIO 0.50 0.45 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00
0.43
0.43 0.32
0.33 0.25
2002 - 2003
2003 – 2004
2004 – 2005
2005-2006
2006-2007
YEARS Debt ratio
Debt ratio has been found very fluctuating In year 2002–2003 and in year 2004-2005 ratio is 0.44 that is highest means more loan funds taken by company. It has been reduced to 0.25 in the year 2006-2007.
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
Coverage ratio show the relationship between debt servicing commitments and the sources for meeting these burdens important coverage ratio is: Interest coverage ratio.
Interest coverage Ratio: This ratio indicates the use of interest bearing debt funds in generating higher operating profit. Higher is the ratio better is the utilization of dept fund. Higher interest cover ratio, enhance the equity earning is passed over to the equity finance portion of the capitalization. Interest Coverage Ratio = EBIT / Interest.
EXHIBIT 6.4.4 Particular
2002 2003 2286.12 585.10 3.91
EBIT. Interest Interest Coverage Ratio
2003 2004 3072.51 207.91 14.78
2004 2005 3578.08 27.98 127.88
(Rs. In Millions) 2005 2006 2006 2007 4687.53 6098.38 164.53 53.32 28.49 114.37
Chart 6.4.4 INTEREST COVERAGE RATIO
140
127.88
114.37
IN TIMES
120 100 80 60 28.49
40 20
14.78
3.91
0 2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
YEARS Interest Coverage Ratio
The Interest Coverage Ratio is the better utilization of debt fund i.e. debenture. The Interest Coverage Ratio is goes increasing every year but then fluctuation has been found in it. The Interest Coverage Ratio is highest in year 2004 – 2005 & that is 127.88. S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
Valuation Ratios: Valuation ratios are the results of the management valuation ratio are generally presented on a per share basis and that are more useful to the equity invertors. The per share valuation are popular presented as • • • •
Earning per share (EPS). Dividend pay out Ratio (DPS) Divided yield P/E Ratio.
• Earning per share (EPS). Earning per Share is an important major of corporate performance for shareholders & potential investor. EPS figures are commonly presented in prospectus & other material send to investor, press reports & reports of equity analyst. AS 20 sets out the requirements for computation of EPS* EPS is reported only foe equity share capital. Earning Per Share = Profit after Tax / No. Of Equity Shares
EXHIBIT 6.5.1 Particular Profit After Tax. No. Of Equity Shares. Earning Per Share.
2002 2003 1202.12 1189.29 1.01
2003 2004 1935.80 1189.29 1.63
2004 2005 2714.10 1189.29 2.28
(Rs in 2005 2006 3273.20 1221.59 2.68
Millions) 2006 2007 4412.86 1323.87 3.33
Chart 6.5.1 EARNING PER SHARE 3.50 3.00
IN RS.
2.50 2.00 1.50 1.00 0.50
1.63
2.28
2.68
3.33
1.01
0.00 2002 - 2003
2003 - 2004
2004 - 2005
2005 - 2006
2006 - 2007
YEARS Earning Per Share.
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
The Earning per Share indicates the liquidity situation for company that we can see in graph. The Earning per Share has been found continuously increasing every year because of its profit has been increased continuously over the years, so it is very good sign for the company. In year 2002–2003 the EPS was 1.01 but in year 2003–2004 it is increased up to 1.63 & in 2004–2005 EPS achieves the 2.28 and it has been increased to 2.68 & 3.33 per share in the year 2005-2006 & 2006-2007 respectively.
• Dividend pay out Ratio (DPS): This ratio indicates the spilt of EPS between cash dividend & reinvestment of profits. Ashok Leyland Ltd has profitable projects; show it is prefer to D/P ratio lower, i.e. it will reinvest higher proportional profits in the business. Dividend pay out Ratio = Dividend per Share / Earning per Share.
EXHIBIT 6.5.2 Particular
2002 2003 0.50 1.01 0.49
Dividend Per Share. Earning Per Share. Dividend pay out Ratio
2003 2004 0.75 1.63 0.46
2004 2005 1.00 2.28 0.44
(Rs. In Millions) 2005 2006 2006 2007 1.20 1.50 2.68 3.33 0.45 0.45
Chart 6.5.2 0.50
IN TIMES
0.49
DIVIDEND PAY OUT RATIO 0.49
0.48 0.47
0.46
0.46 0.45
0.45
0.45
2005 - 2006
2006 - 2007
0.44
0.44 0.43 0.42 0.41 2002 - 2003
2003 - 2004
2004 - 2005
YEARS Dividend pay out Ratio
In the DPS Ratio only minor fluctuation is found In the year 2002-2003 it was highest to 0.49 per share than it goes decreasing every year from 2003–2004 i.e. 0.46 to 2004–2005 i.e. 0.44 and then it became stable to 0.45 for 2005-2006 & 20062007.
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
• Dividend Yield: The Dividend Yield represents the current cash return to share holders. It is computed by dividing the dividend per share by the average market price of share. Dividend Yield = Dividend per Share / Average Market Price of Share X 100.
EXHIBIT 6.5.3 Particular Dividend Per Share. Avg. Market Price. Dividend Yield Ratio.
2002 2003 0.50 98.20
2003 2004 0.75 187.00
2004 2005 1.00 21.92
0.51
0.40
4.56
(Rs. In 20052006 1.20 29.18 4.11
Millions) 20062007 1.50 41.82 3.59
Chart 6.5.3
PERCENTAGE (%)
DIVIDEND YEILD RATIO 5.0 4.5
4.56 4.11
4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0
3.59
0.51
0.40
2002 - 2003
2003 - 2004
2004 - 2005
2005-2006
2006-2007
YEARS Dividend Yield Ratio.
The dividend yield ratio is highest in year 2004 – 2005 i.e. 4.56% but this year is goes down to 3.59% that indicates less payment of dividend to the shareholders. In the year 2002-2003 it was 0.51% & in the year 2003-2004 it has reduced to 0.40% but in the next year it has been increased to 4.56% which is highest over the period. In the dividend yield ratio too much fluctuation has been found during the period 2002 to 2007.
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
• P/E Ratio: This is popular measure extensively used in investment analysis. In a recent served, 40% of well-known institutional portfolio managers and analysts in the U.S ranked P/E ratio as the key factor in picking stocks. P/E ratio = current market price of share/Earning per share
EXHIBIT 6.5.4 Particular Current market price Earning Per Share. P/E Ratio
2002 2003 105.00 1.01 103.96
2003 2004 267.90 1.63 164.36
2004 2005 25.10 2.28 11.01
(Rs. In 2005 2006 43.00 2.68 16.04
Millions) 2006 2007 41.80 3.33 12.55
Chart 6.5.4 P/E RATIO
180
164.36
160
IN TIMES
140 120 100
103.96
80 60 40 20
11.01
16.04
12.55
2004 - 2005
2005-2006
2006-2007
0 2002 - 2003
2003 - 2004
YEARS P/E Ratio
It is the ratio to know the profit earning per share. As p/e ratio is low so it is good profit earning per share is high It has been reduced compared to the past years. so, it is favorable situation for the shareholders and the company.
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
6.6 Comparison of Ratio of five Years Ratio Gross Profit margin Ratio (%) Net Profit Margin Ratio (%) Operating Profit Ratio (%) Return on assets (%) Return on Equity (%)
Earning power (%) Current Ratio Quick ratio Net working capital
Cash Generated Per Rupee Of Sales Total
Formula
2002 2003
2003 2004
2004 2005
2005 2006
Gross Profit / Sales X 12.12% 11.63% 10.11% 10.29% 100 Net Profit / Sales X 100
4.48%
5.70%
6.49%
6.24%
2006 2007 9.80%
6.16%
Operating Profit / Sales 6.35% 8.44% 8.49% 8.62% 8.43% X 100 Net Profit / Average 6.07% 10.83% 13.74% 14.54% 17.60% Total Assets X 100 PAT / Average shareholder’ 12.04% 19.25% 24.46% 25.37% 26.69% s equity X 100 EBIT / Average 8.59% 16.02% 17.97% 20.09% 24.10% total Assets X 100 Current Assets / 2.26 1.76 1.85 1.58 1.54 Current times times times times times Liabilities Quick Assets 1.57 1.15 1.36 0.94 0.93 / Current times times times times times Liability Total Current Assets – 7480.9 6309.6 9915.9 8238.9 9418.5 Total 3 5 6 7 9 Current Liabilities PAT+ Depreciation +Non Cash 10.83% 9.44% 9.40% 8.54% 8.51% Expenses / Sales X 100 Sales / Total 1.45 1.96 1.88 2.30 2.62 S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
Assets Turnover ratio Net fixed Assets Turnover Ratio Fixed working capital turnover ratio Inventory Turnover Ratio Average Age of Inventorie s Debtor’s ratio (Days) Debtors turnover ratio
Assets Sales / Net fixed Assets Sales / Net working Capital COGS / Avg. Inventories 360 days / Inventory Turnover (Debtors + Bills receivable / Credit Sales) x365 Credit Sales / Avg. Debtors
times
times
times
times
times
2.85 times
3.68 times
4.27 times
4.84 times
4.64 times
3.58 times
5.38 times
4.22 times
6.37 times
7.61 times
4.68 times
6.54 times
6.99 times
6.40 times
6.55 times
76.92 Days
55.05 Days
51.50 Days
56.25 Days
54.96 Days
70.56 Days
43.62 Days
40.04 Days
29.51 Days
26.62 Days
5.30 Days
7.35 Days
9.68 Days
11.88 Days
15.14 Days
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
CHAPTER 7 DU PONT CHART Profit margin & assets turnover are the two drivers of return on assets. The Du Pont System of financial analysis clearly brings out the effects of these two drivers on return on assets. A system is useful for analysis, which considers important inter relationship based on information found in financial statements.
Importance Of Du Pont Chart: Any decision affecting the product price per unit costs, volume or efficiency has an impact on the profit margin or turnover ratios. Similarly any decision affecting the amount & ratio of debt or equity used will affect the financial structure & the overall cost of capital of a company. Therefore, these financial concepts are very important to evaluate as every business is competing for Limited Capital Resources. Understanding the inter relationship among the various ratios such as turnover ratio, average & probability ratios helps companies to put their money areas where the risk adjusted return is the maximum. The chart used by “Du Pont Company” of U.S.A is known as Du Pont Chart. This is the Du Pont Chart applied to Ashok Leyland Ltd. At the left of the Du Pont Chart is the return on the assets defined as the product of the Net Profit Margin & the Total Assets Turnover Ratio. Net Profit Total Assets = Net Profit / Sales X Net Sales / Avg. Total Assets. Such decomposition helps in understanding how the Net Profit Margin & Total Assets Turnover Ratio influences the Return on Total Assets.
Chart 7.1 S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
DU PONT CHART FOR THE YEAR 2002 – 2003
Return on Assets 6.07%
Total Assets Turnover 1.35 %
Net Sales 26803.75
Average fixed Assets 9446.03
+
/
Average total Assets 19797.97
Average Investment 1674.57
Net Profit Margin 4.48 %
X
+
Average net current assets 8652.84
Net Profit 1202.12
+
Avg. Misc. Exp. 24.53
/
Net sales +/ NonOperating Surplus / Deficit 26956.68
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Net Sales 26803.75
-
Total Cost 25754.56
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
Chart 7.2 DU PONT CHART FOR THE YEAR 2003 – 2004
Return on Assets 10.83 %
Total Assets Turnover 1.90 %
Net Sales 33938.84
Average fixed Assets 9304.69
+
/
Average total Assets 17882.49
Average Investment 1520.89
Net Profit Margin 5.70 %
X
+
Average net current assets 6895.29
Net Profit 1935.80
+
Avg. Misc. Exp. 161.62
/
Net sales +/ NonOperating Surplus / Deficit 34125.04
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Net Sales 33938.84
-
Total Cost 32189.20
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
Chart 7.3 DU PONT CHART FOR THE YEAR 2004 – 2005
Return on Assets 13.74%
Total Assets Turnover 2.12 %
Net Sales 41818.97
Average fixed Assets 9500.51
+
/
Average total Assets 19750.55
Average Investment 1878.96
Net Profit Margin 6.49 %
X
+
Average net current assets 8112.81
Net Profit 2714.10
+
Avg. Misc. Exp. 258.28
/
Net sales +/ NonOperating Surplus / Deficit 42356.52
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Net Sales 41818.97
-
Total Cost 39642.40
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
Chart 7.4 DU PONT CHART FOR THE YEAR 2005 – 2006
Return on Assets 14.54%
Total Assets Turnover 2.33 %
Net Sales 52476.57
Average fixed Assets 10318.40
+
/
Average total Assets 22515.95
Average Investment 2986.84
Net Profit Margin 6.24 %
X
+
Average net current assets 9077.47
Net Profit 3273.20
+
Avg. Misc. Exp. 133.20
/
Net sales +/ NonOperating Surplus / Deficit 52806.31
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Net Sales 52476.57
-
Total Cost 49533.10
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
Chart 7.5 DU PONT CHART FOR THE YEAR 2006 – 2007
Return on Assets 17.60%
Total Assets Turnover 2.86 %
Net Sales 71681.76
Average fixed Assets 13146.10
+
/
Average total Assets 25079.83
Average Investment 2946.36
Net Profit Margin 6.16 %
X
+
Average net current assets 8828.78
Net Profit 4412.86
+
Avg. Misc. Exp. 158.63
/
Net sales +/ NonOperating Surplus / Deficit 72389.79
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Net Sales 71681.76
-
Total Cost 67976.90
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FINANCIAL ANALYSIS OF ASHOK LEYLAND LIMITED
CHAPTER 8 Suggestions & Recommendations 1. The balance sheet figures are showing the declining trend since last few years. It should be the reason for higher inventory level which unnecessary blocked the money. For higher the profitability ratio of the firm, it is required to increase the sales along with: New advertising techniques through latest media which are more effective and prestigious. To increase the work efficiency of the workers as well as of the staff members, arrangement of different training programmes like meetings, seminars, conferences, coaching classes etc. is required. For the innovation of new market, select capable market representatives who are more efficient to recover the more market share. Try to maintain the quality level as per the market demand which satisfies the customers more. 2. In order to increase the profit the firm should keep proper control over the expenses retaliating to the purchase of goods, manufacturing and lab ours for that, proper supervision and timely comparison of actual with budgeted overheads should be taken. This will help the management to know the causes and taking competitive actions to reduce the expenses. In order to reduce the expenses relating to payment of interest, the firm should rely more on its share capital rather than borrowing loans and funds. Firm should also try to maintain proper balance between debt and equity. 3. To improve the liquidity position of the firm, proper working capital is necessary to recover the daily cash requirement. For that, the firm should: Try to reduce the debt collection period which should be main sources for working capital. Use more credit facility which is given by the creditors. Firm should also use more short term loans to recover the working capital requirement because the interest rate for short term loans is less and it should be flexible to use. 4. In order to maximize wealth under uncertainty, the firm must pay enough dividends to satisfy investors. It should help to increase the moral of the investors and side by side also helps in long term financial strength of the firm. So, by increasing profits, the firm should pay dividends regularly.
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CHAPTER 9 CONCLUSION We are making the financial analysis from its techniques that we are concluding as follows: Horizontal Analysis: Ashok Leyland Ltd has made good growth in last five years in sales as well as profit. Here growth in sales is increasing every year against that expenditure has also increased but lower than sales. In 2006-07, the Company’s exports grew by 23% with the sale of 6,025 vehicles. This improvement was derived from demand in the export markets and the launch of new products. This is the reason the sale & profit has increased compare to last years i.e. 2005-06 Vertical Analysis: It shows that the expenditure of the company is accounting for higher percentage of sales around 99% every year & because of the every year profit has increased but a decreasing rate. So for the increment of profit in future, the company is requiring to optimize its expenditure on the side of operating as well as administrative. Trend Analysis: It shows good trend in sales & profit but as above said, expenditure also rising that depends the profit of the company. Reserve & Surplus also shows good trend. Cash Flow In Cash Flow Analysis all the activities i.e. operating, investing, financing maintain this year (2006 – 2007). Ratio Analysis: We are discussing about mainly 5 kinds of ratio. All the ratios performs very well in last five years that gives better profitability & liquidity position to the company. Ashok Leyland Limited is confident that it can meet the challenges passed by the deregulation scenario with its strength in refining. Its strategic scenario with its strength in refining its strategic alliance with Ashok Leyland Limited marketing and in house productivity improvement, profitability maximization and cost reduction exercises, which have already been launched in right earnest. These measures would place the company in a position of comfort to meet the real challenges of the future and we also wish them “Best of Luck” for their bright future. So that Ashok Leyland Limited will be a world clean Automotive Company. Now a day, key customer rates company among the top 5 companies. At last, company is financial healthy. S V INSTITUTE OF MANAGEMENT, KADI BATCH 2007-09
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BIBLIOGRAPHY 1. Narayanaswamy R.: “Financial Accounting “, 2nd Edition, Prentice Hall Publication (India), 2005. pg no 2. Shah Sudhir B.: “Advance Accounting & Auditing – 4”, 16th Edition, Sudhir Publication, 2006. pg no 142 – 337. 3. Mathur Satish B.: “Understanding Balance sheets”, 3rd Edition, Macmillan India Limited Publication, 2007. Pg NO 113 - 194 WEB LINKS •
http://www.ashokleyland.com/performance report.jsp
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http://www.ashokleyland.com/products.jsp
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http://www.ashokleyland.com/mediakit.jsp
DATABASE •
Prowess Database
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