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KIYANI
(SP-08-CE-125)
[FINANCIAL RATIO ANALYSIS
SULEMAN AHMAD
OF
AWANINDUS MOTOR COMPANY
(SP-09-CE-118)
LTD]
CENTER FOR ADVANCE STUDIES IN ENGINEERING
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
ACKNOWLEDGEMENT
CASE 2
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
CASE 3
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
ACT # 1
Action, Commitment and Teamwork to become #1 in Pakistan.
The Indus team is committed to ACT so that it achieves #1
position in the auto industry in
Respect & Corporate Image
Quality & Safety
Customer Satisfaction
Production & Sales
Profitability
Best Employer
CASE 4
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
COMPANY PROFILE
INDUS MOTOR COMPANY LTD has been selected for financial analysis as project. Financial
report of yr 2007-2008 has been picked for analysis purpose. A brief history of the company is
stated below.
Indus Motor Company (IMC) is a joint venture between the House of Habib, Toyota Motor
Corporation Japan (TMC) , and Toyota Tsusho Corporation Japan (TTC) for assembling,
progressive manufacturing and marketing of Toyota vehicles in Pakistan since July 01, 1990.
IMC is engaged in sole distributorship of Toyota and Daihatsu Motor Company Ltd vehicles in
Pakistan through its dealership network.
The company was incorporated in Pakistan as a public limited company in December 1989 and
started commercial production in May 1993. The shares of company are quoted on the stock
exchanges of Pakistan i.e. Karachi, Lahore and Islamabad stock exchanges. The stock code for
dealer in equity shares of Indus Motor Company Limited at KSE, LSE and ISE is INDU. Toyota
Motor Corporation and Toyota Tsusho Corporation have 25 % stake in the company equity. The
majority shareholder is the House of Habib.
IMC's production facilities are located at Port Bin Qasim Industrial Zone near Karachi in an area
measuring over 105 acres.
Indus Motor Company’s plant is the only manufacturing site in the world where both Toyota
and Daihatsu brands are being manufactured.
Heavy investment was made to build its production facilities based on state of art technologies.
To ensure highest level of productivity world-renowned Toyota Production Systems are
implemented.
IMC's Product line includes 6 variants of the newly introduced Toyota Corolla, Toyota Hilux
Single Cabin 4x2 and 4 versions of Daihatsu Cuore.
CASE 5
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
RATIO ANALYSIS
A statistic has little value in isolation. Hence, a profit figure of Rs.100 million is meaningless
unless it is related to either the firm’s turnover (sales revenue) or the value of its assets.
Accounting ratios attempt to highlight the relationships between significant items in the
accounts of a firm. Financial ratios are the analyst’s microscope; they allow them to get a better
view of the firm’s financial health than just looking at the raw financial statements.
Internal uses
Planning
Evaluation of management
External uses
Credit granting
Performance monitoring
Investment decisions
Making of policies
CASE 6
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
1. Liquidity Ratios shows the extent to which the firm can meet its financial obligations.
2. Asset Management Ratios shows that how effectively the firm is managing its assets.
3. Debt Management Ratios shows the extent to which a firm uses debt financing or
financial leverages.
4. Profitability Ratios relates profits to sales and assets.
5. Market Value Ratios are a measure of the return on investment.
CASE 7
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
CASE 8
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
Analysis:
There is an increase in the net working capital in 2008 as compared to in 2007. The company
can easily utilize the amount for other profit related activities after paying off its debts. Also we
can see that it is due to decrease in total assets in 2008, thus meaning that company is
effectively utilizing its inventories.
CASE 9
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
WORKING CAPITAL
Analysis:
There is a decrease in the working capital in 2008 as compared to in 2007. The company current
assets have decreased in 2008 as well as its current liabilities. Although company still has
enough working capital after paying off its debts in 2008, it also means that company is
effectively utilizing its inventory.
CASE 10
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
CURRENT RATIO
Analysis:
There is an increase in the current ratio in 2008 as compared to in 2007. The company can
easily pay off its debts. Moreover company current liabilities have also decreased from 2007.
Analysis:
There is an increase in the quick ratio/ acid test in 2008 as compared to in 2007. The company
can easily meet its current liabilities with its most liquid current assets.
QUICK ASSETS
CASE 12
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
Analysis:
There is a decrease in the quick assets in 2008 as compared to in 2007. This is due to decrease
in the current assets from 2007 to 2008.
CASE 13
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
CASE 14
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
Analysis:
There is an increase in the inventory turnover ratio in 2008 as compared to in 2007. It means
that company changed inventory 30.18 times during the year which is a very good sign and sold
more cars as compared to in 2007.
CASE 15
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
Analysis:
There is an increase in the asset turnover ratio in 2008 as compared to in 2007. The company
has increased sales as compared to in 2007 thus it has sold more services to customer and in
this case it is the company product cars.
CASE 16
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
Analysis:
There is an increase in the account receivable turnover ratio in 2008 as compared to in 2007.
The company has less account receivables as compared to in 2007 and is getting more cash.
CASE 17
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
PROFITIABILITY RATIOS
CASE 18
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
RETURN ON ASSETS
Analysis:
There is a decrease in the return on asset in 2008 as compared to in 2007. The company total
assets have decreased in 2008 as compared to in 2007 and are due to fewer inventories.
RETURN ON EQUITY
CASE 19
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
Analysis:
There is a decrease in the return on equity in 2008 as compared to in 2007. The company
average total equity has increased from 2007 and has resulted in decrease.
CASE 20
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
Analysis:
There is a decrease in the return on common equity in 2008 as compared to in 2007. The
company net income has increased from 2007 and has resulted in decrease.
CASE 21
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
Analysis:
There is a decrease in the earnings per share in 2008 as compared to in 2007. The company
earning per share is Rs 29.14 as compared to Rs 34.93 and is due to fall of stock market.
PROFIT MARGIN
CASE 22
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
Analysis:
There is a decrease in the profit margin in 2008 as compared to in 2007. This is due to increase
in net income and sales of the company in 2008 and giving fewer margins for profit.
CASE 23
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
CASE 24
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
Analysis:
There is a decrease in the price earning ratio in 2008 as compared to in 2007. The company
market price of common stock has decreased considerably in 2008 and resulting in decrease of
earning per share.
CASE 25
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
Analysis:
There is a decrease in the market to book ratio in 2008 as compared to in 2007. Due to
decrease in market price of share, the market to book ratio has decreased.
CASE 26
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
Analysis:
There is an increase in the book value of equity per common stock in 2008 as compared to in
2007. This is due to increase in equity in 2008.
CASE 27
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
Analysis:
There is an increase in the dividend yield ratio in 2008 as compared to in 2007. The company
paid fewer dividends in 2008 of Rs 10.5 per share only.
CASE 28
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
Analysis:
There is an increase in the dividend payout ratio in 2008 as compared to in 2007. The company
paid more cash dividends in 2008 as evident from the calculations.
CASE 29
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
CASE 30
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
Analysis:
There is a decrease in the debt to equity ratio in 2008 as compared to in 2007. This is due to
considerable decrease in the total liabilities of the company in 2008.
CASE 31
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
DEBT RATIO
Analysis:
There is an increase in the debt ratio in 2008 as compared to in 2007. The company long term
debts have increased from 2007.
CASE 32
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
Analysis:
There is an increase in the interest coverage ratio in 2008 as compared to in 2007. The
company paid more interest expense in 2007 as compared to in 2008.
Analysis:
There is a decrease in the income before interest and income tax expenses in 2008 as
compared to in 2007. This is due to less debt by the company in 2008 as compared to in 2007.
ROA
CASE 34
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
Analysis:
There is a decrease in the ROA ratio in 2008 as compared to in 2007. This is due to fewer profit
margins in 2008.
CASE 35
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
CASE 36
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
CASE 37
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
CASE 38
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
CASE 39
FINANCIAL RATIO ANALYSIS OF INDUS MOTOR COMPANY LTD
REFERENCES
1. www.toyota-indus.com
CASE 40