Submitting To

Mr.Naveed Ahmad Mughal

Class

M.com & MSC (A&F)

Submission Date:

June 3, 2014


Group Member Names

Razia Batool 12124010
Tayyaba Ahsan 12124003
Mobeen Ashraf 12124002
Anam Sajjad 12109009

Honda Atlas Pakistan


Executive Summary:

In this report we have given a brief introduction of Honda Atlas Company and its Product. Then
we will analyze its three years financial statement by Operating and non Operating Assets,
Margin of its profits, Turnover ratios and analysis, Return on Investment of company, RI, EVA,
Analysis on Problems and its performance in last three years, Solution of its Problems,
Evaluation Charts and analysis report to companys CEO.

For this purpose we took financial statements of Honda Atlas Company through Internet
medium. Then we gave brief introduction of company and its products. Description about
operating and non operating assets by analyzing financial statements of company
After taking data we find Margins, RI, ROI, EVA. Then we analyze the performance problems of
company.
We were able to perform these tasks by applying Performance Evaluation techniques.


Introduction

Project Title:
Performance Analysis of Honda Company.

Company Name:
Honda atlas Company Ltd. Pakistan













HONDA ATLAS COMPANY PAKISTAN

Vision Statement

Striving to be a company that society wants to exist by sharing joys with people throughout the
world creating products that maximize the joy of customers, with speed, affordability and low
CO2

COMPANY INTRODUCTION:
Atlas Honda Limited (AHL) is a joint venture between the Atlas Group and Honda Motor Co.
Ltd., Japan. The company was created by the merger of Panjdarya Limited and Atlas Autos Ltd.
in 1988. Both these motorcycle manufacturing concerns were established by the Atlas Group. In
addition, a third concern, Atlas Pak Ltd. was taken over by the Government of Bangladesh in
1971 after the fall of Dhaka. AHL manufactures and markets Honda motorcycles in collaboration
with Honda Motor Company. The Company also manufactures various hi-tech components in-
house in collaboration with leading parts manufacturers like Showa Atsumitech, Nippon Denso
and Toyo Denso. Honda motorcycles are by far the largest selling motorcycles in the country
with an unmatched reputation for high quality, reliability and after-sales-service.
AHL has undertaken to develop local manufacturing capabilities to the highest, economically
feasible level. While a major role in localization has been assigned to vendor industries, Atlas
has the countrys largest in-house manufacturing capability at its Karachi and Sheikhupura
plants. To support the production facilities, the company has established an R&D wing and tool
making facilities through CAD/CAM which are growing rapidly in size and function as the
company expands. Atlas has managed to execute 12 Joint Venture/Technical Assistance ween
local vendors and foreign manufacturers for transfer of technology. Besides, Atlas has directly
executed 9 Joint Venture/Technical Assistance Agreements other than Honda.
AHL management is striving to modernize company operations by adapting applicable aspects of
research and theory and more specifically, Hondas unique philosophy of hard/soft technologies
to the realities of Pakistani conditions. Company management structure, systems and processes
are changed according to the demands of the customer, growth and new technology. Efforts are
being made to develop participation at all levels of personnel in decision-making and a
substantial and effective delegation has been established at levels where applicable. Various
participation programs such as Ala Mayar Quality Circles movement, launched in 1985, are
strongly encouraged to allow constructive self-expression and teamwork. The Company training
and development programs encourage all members to develop themselves and contribute to their
full potential.
AHL is playing a pioneering role in creating conditions for easy and confident use of
motorcycles all over the country. A vast and growing network of over 1600 sales service and
spare parts dealers has been established. In order to back up this system, Atlas has set up
Warranty & Training Centers (WTC) in Karachi and Lahore which provide several courses of
varying duration and complexity for motorcycle mechanics and users each year. Mobile training
facilities take the latest know-how, technology and maintenance of motorcycles to major rural
and urban centers around the country.


Annual Production Capacity
750,000
Authorized Capital
1.5 Billion (rupees)
Paid Up Capital
Rs. 1,034.066 Million
Export
Bangladesh

Membership of Industry & Associations
Pakistan Automotive Manufacturers Association.
Marketing Association of Pakistan.
Management Association of Pakistan.
Lahore Chamber of Commerce & Industry.
Sheikhupura Chamber of Commerce & Industry.
Overseas Chamber of Commerce & Industry.
Karachi Chamber of Commerce & Industry.
Product Introduction:
Brands
In Pakistani motorcycle industry Honda is a leader. Although there are 50 brands of bike are
available yet many of them have not got recognition among the people.
All these exist in different segments of markets.
Yamaha
It is a basically two stroke 100 CC motorcycle. It is very popular in villages because people consider
it more durable and a smooth driving bike on rough roads. It is second largest selling brand of
Pakistan.
Sohrab
It is first Pakistani brand that was introduced. First time it introduced heavy bike look in a four stroke
and 70 CC motorcycle. Its price is low as compare to Honda but. It is not direct threat for Honda. But
to some extent people like it because it is rapidly increasing its quality, after sales services and resale
value. It is getting popularity in villages.
Suzuki
It is third selling brand in Pakistan and it also targets the villagers. Its image is also approximately
same as Yamaha in the mind of people and it also targets the village are









Operating & Non Operating Assets:
Operating Assets:
Operating assets are longlived assets that are used in normal business operations. They are not
held for resale to customers. Investments in operating assets are essential to the success of most
businesses. There are three major categories of operating assets: property, plant, and equipment,
sometimes referred to as plant assets or fixed assets; natural resources; and intangible assets.
Property, plant, and equipment includes land; land improvements, such as driveways, parking
lots, fences, and similar items that require periodic repair and replacement; buildings; equipment;
vehicles; and furniture. Natural resources, such as timber, fossil fuels, and mineral deposits, are
created by natural processes that may take thousands or even millions of years to complete.
Companies use up natural resources by cutting or extracting them, so natural resources are
sometimes called wasting assets. Intangible assets, which lack physical substance, may
nevertheless provide substantial value to a company. Patents, copyrights, and trademarks are
examples of intangible assets.











Calculations of operating assets

2014



2013



2012
Cash and bank 2354150
Stock in trade 3852540
Property plant and equipment 0
Trade debt 2873067
Stores and spare 116205
TOTAL 919596
Cash and bank 3534967
Stock in trade 4311552
Property plant and equipment
Trade debt 3355778
Stores and spare 115646
TOTAL 11317943






NON OPERATING ASSETS

2014





Cash and bank 82477
Stock in trade 2853523
Property plant and equipment
Trade debt 3255755
Stores and spare 112139
TOTAL 6303894
Short term investments
0
Loans, advances, prepayments
and other receivables
0
Deferred taxation
393238
Long term deposits
4042
Long term loans and advances
52772
Capital work-in-progress
81293
Intangible assets
86431
Total non operating assets
617776
2013



2012





Short term investments
491680
Loans, advances, prepayments
and other receivables
0
Deferred taxation
1029553
Long term deposits
4042
Long term loans and advances
37189
Capital work-in-progress
7857
Intangible assets
139556
Total non operating assets
1709877
Short term investments
0
Loans, advances, prepayments
and other receivables
0
Deferred taxation
1144790
Long term deposits
4042
Long term loans and advances
33855
Capital work-in-progress
355812
Intangible assets
56366
Total non operating assets
1594805
Performance Measures
Performance measures are used to determine the profitability of a particular company and
compare the results for the different years with the overall industry.
Kinds of Performance Measures
There are three kinds/types of measures used to analyze the profitability of the company.
Residual Income
Economic Margin
Turnover
Return on Investment
Value Added

Operating Profit / Loss:
The amount of profit realized from a business's operations after taking out operating expenses -
such as cost of goods sold (COGS) or wages - and depreciation. Operating income takes the
gross income (revenue minus COGS) and subtracts other operating expenses and then removes
depreciation. These operating expenses are costs which are incurred from operating activities and
include things such as office supplies and heat and power. Operating Income is typically a
synonym for earnings before interest and taxes (EBIT) and is also commonly referred to as
"operating profit" or "recurring profit."

Calculated as:

Operating Income = Gross Income - Operating Expenses - Depreciation & Amortization







Margin:
Margin = Net operating income / Loss Sales
2014

2013

2012

Net operating Income/Loss

2,135,321

715,784

(346,878)

Sale

39,153,254

30,274,604

16,599,608

Margin

5.45%

2.37%

2.08% (loss)



Turnover
Turnover = Sales Average operating assets
2014

2013

2012

Sale

39,153,254


30,274,604

16,599,608


Net operating Assets

9195962

11317943

6303894
Turnover 4.257

2.62

2.63



Return on Investment:
ROI = Net operating income Net operating Assets*100

2014

2013

2012


Net operating Income/Loss


2,135,321


715,784




(346,878)



Net operating Assets

9195962


11317943

6303894
Return on investment

23.22% 6.32%

5.50%


Residual Income:
RI = Net operating income (Net operating Assets * minimum rate of return)

2014

2013

2012

Net operating Income/Loss


2,135,321



715,784



(346,878)


Net operating Assets


9195962


11317943


6303894
Rate of return(KIBOR rate)

11.04% 12.06% 13.5%
Residual Income

1120086 (649154) (1197903.69)






Economic Value Added
EAV= After tax net profit - (WACC*(total assets-current liabilities)

Wacc
Wacc = wdrd (1-tax ) + wers

2012 2013 2014
13.5% 11% 11%



Economic Value Added
A measure of a company's financial performance based on the residual wealth calculated by
deducting cost of capital from its operating profit (adjusted for taxes on a cash basis). ( Also
referred to as "economic profit".)
The formula for EVA is:
EVA = Net Operating Profit After Tax - (Capital Invested x WACC)



Calculation of EVA
After tax net profit - (WACC*(total assets-current liabilities)
2012 2013 2014
EBAIT
(532,213) 244,287 1,073,670
Less Capital
invested *wacc
(132417.85) (154803) (269208.94)
EVA
Nothing
89484 804461.06

In 2012 there is no economic value added because in this year company was going in loss there
net profit after interest and tax is negative so we can say no value added in year 2012 because of
negative net profit.
In year 2013 company has earned net profit of $244287 and its total capital cost * wacc is =
$154803 after deducting this value from net profit after interest and tax remaining value =
$89484 which is economic value added. Same way in year 2014 economic value added is
$804461.06.we can say year 2014 is best for the view point of economic value addition.