Financial Statements Analysis Techniques

CHAPTER-I
INTRODUCTION
INTRODUCTION:
Financial statements are prepared primarily for decision making. They play a
dominant role in setting the framework of managerial decisions. But the information
provided in the financial statements is not an end in itself as no meaningful conclusions
can be drawn from these statements alone. However, the information provided in the
financial statements is of immense use in making decisions through analysis and
interpretation of financial statements. Financial analysis the process of identifying the
financial strengths and weaknesses of the firm by properly establishing relationship
between the items of the balance sheet and the profit and loss account There are various
methods or techniques used in analyzing financial statements financial statements are an
important source of information for evaluating the performance and prospects of firm, if
properly analyzed and interpreted these statements can provide valuable insights into
firms performance. Analysis of financial statements is if interest to lenders, investors,
security analyst, manager and others.
Financial statements analysis may be done for a variety of purposes, which may
range from simple
analysis of short term liquidity position of the form to a
comprehensive assessment of the strengths and weakness of the firm in various areas, it is
helpful in assessing corporate excellence, judging credit worthiness forecasting bond
rating, evaluating intrinsic value of equity shares predicting bankruptcy and assessing
market risk.
Financial statements:
Managers, shareholders, creditors and other interested groups seek answer to the
following question about firm:
What is the financial position of the firm at a given point of time?
How has the firm performed financially over a given period of time?
What have been the sources an d uses of cash over a given period?
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To answer these questions, accountant prepares two principle statements, the

Balance sheet and the profit and loss account, ancillary statement, the Cash Flow
statement.
Analysis of financial statement

Analysis refers to the process of critical examination of the financial information
contained in the financial statement in order to understand and make decisions regarding
the operations of the firm. The analysis is basically study of the relationship among
various financial facts and figure as given in a set of financial statements. Complex figure
as given in this statements are dissected\broken up into simple and variable element and
significant relationship are established between the elements of the same statements are
different financial statements.
This process of dis section, establishing and identifying the financial weaknesses
and strengths of the firm. It is indicative of two aspects of a firm i.e. the profitability and
the financial position and it are what are known as the objectives of the analysis.
Procedure of Financial Statements Analysis

Broadly speaking there are three steps involved in the analysis of financial statements.
There are:
Selection,
Classification,
Interpretation.
The first step involves selection of information (data). The second step involved is the
methodical classification of the data and the third step includes drawing of internees and
conclusions.
The following procedure is adopted for the analysis and Interpretation of financial
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statements:
The analyst should acquaint himself with the principles and postulates of
accounting.
The extent of analysis should be determined so that the sphere of work may be
decided.
The financial data given in the statements should be re-organized and re-arranged.
A relationship is established among financial statements with the help of tools and
techniques of analysis such as ratios, trends, common size, funds flow etc.
The information is interpreted in a simple and understandable way.
The
significance and utility of financial data is explained for helping decision-taking.
The conclusions drawn from interpretation are presented to the management in

the form of reports.
Objectives of the study:
To analysis the financial statements and present its financial positions.
To assess and evaluate the performance of the company.
To determine the efficiency of operations as reflected in the financial statements.
To offer appropriate suggestions for better performance of the company.
Need and importance of the study:
Financial analyst analyses the financial statements with various tools of analysis
before commanding upon the financial health of the firm.
Essential to bring out the history of Hero Moto Corp Ltd. (Formerly Hero Honda
Motors Ltd.).
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Significance and meaning of the financial statements.
Scope of the study:

Analysis of financial statement can be undertaken by different persons and for different
purposes, therefore, the scope of the AFS may be varying from one situation to another.
However, the following are some the techniques of the AFS:
Comparative financial statements.
Common-size financial statements.
Trend percentage analysis.
Statement of changes in financial position.
Cost-volume-profit relations, and
Ratio analysis and others.
Research methodology:
Research design
This is a systematic way to solve the research problem and it is important component for
the study without which researches may not be able to obtain the format. A research
design is the arrangement of conditions for collection and analysis of data in a manager
that aims to combine for collection and analysis of data relevance to the research purpose
with economy in procedure.
Meaning of research design
The formidable problem that follows the task of defining the research problem is
the preparation of design of the research project, popularly known as the research design,
decision regarding what, where, when, how much, by what means concerning an inquiry
of a research study constitute a research design. A research design is the arrangement of
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conditions for collection and analysis of data in a manager that aims to combine for
collection and analysis of data relevance to the research purpose with economy in
procedure.
Sources of data
The process of research work done the present project work is financial statement
analysis in this project the methodology adopted is the two steps.
Data collection
Data analysis
Data collection:-
Data means the information regarding the topic so researched this can be done
using two sources.
Primary data
Secondary data
Primary data:
The Primary data are those informations, which are collected afresh and for the first
time, and thus happen to be original in character.
Secondary Data:
The Secondary data are those which have already been collected by some other
agency and which have already been processed. The sources of Secondary data are
Annual Reports, browsing Internet, through magazines.
It includes data gathered from the annual reports of Hero Moto Corp Ltd
Articles are collected from official website of Hero Moto Corp Ltd.
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Data analysis:-
Data analysis is the time series analysis where tables and graphs have been used
to analysis the data the following tools has been applied.
Comparative financial statements.
Common-size financial statements.
Trend percentage analysis.
Statement of changes in financial position.
Cost-volume-profit relations, and
Ratio analysis and others.
Limitation of the study:
It is only a study of interim reports.
Financial analysis is based upon only monetary information and non monetary
factors are ignored.
Different people may interpret the same analysis in different ways.
It does not consider the changes in prices level.
Changes in accounting procedure by firm may often make financial analysis

misleading.
CHAPTER-II
REVIEW OF LITERATURE
Financial Statement Analysis

Introduction:
The term financial analysis also known as analysis and interpretation of financial
statements , refers to the process of determining financial strength and weaknesses of the
firm by establishing strategic relationship between the items of the balance sheet , profit
and loss account and other operative data.
Analyzing financial statements by Metcalf and Titard
Financial analysis is a process of evaluating the relationship between
component parts of a financial statement to obtain a better understanding of a firms
position and performance by Myers
The purpose of financial analysis is to diagnose the information contained in
financial statements so as to Jude the profitability and financial soundness of the firm.
Just like a doctor examines his patient by recording his body temperature, blood pressure,
etc. Before making his conclusion regarding the illness and before giving his treatment, a
financial analyst analysis the financial statements with various tools of analysis before
commenting upon the financial health or weaknesses of an enterprise.
The analysis and interpretation of financial statements is essential to bring out the
mystery behind the figures in financial statements. Financial statements analysis is an
attempt to determine the significance and meaning of the financial statement data so that
forecast may be made of the future earnings, ability to pay interest and debt maturities
(both current and long term) and profitability of a sound divided policy.
OBJECTIVES OF FINANCIAL STATEMENT

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Broadly the objective of the Analysis of Financial statement is to understand

the information contained in the financial statement with a view to the weakness and
strengths of the
firm and to make forecast about the future prospects of the firm and their by enabling the
financial analyst to take different decision regarding the operation of the firm. The
objectives of the analysis can be identified as:
To assess the present profitability and operating efficiency of the firm as a whole
as well as for its different departments.
To find out the relative importance of different components of the financial

position of the firm.
To identify the reasons for change in the profitability\financial position of the

firm.
To assess the short-term as well as the long-term liquidity position of the firm.
To examine the solvency of the firm.
To find out the ability of the firm to meet its current obligations.
Significance of financial analysis

Analysis of financial statement is carried out to measure the enterprises liquidity,
profitability, solvency and other indicators to assess its operating efficiency, financial
position and performance. Financial Analysis serves the following purpose.
To know the operational efficiency of the business: The financial analysis enables
the management to find out the overall efficiency of the firm. Department-wise
efficiency can also be judged from the available data. This will enable the
management to locate weak spots of the business and take necessary remedial
action.
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Helpful in measuring the solvency of the firm: The firm must know its financial
soundness. It should satisfy itself that its current resources are sufficient to meet
its current liabilities. This is possible through the calculations of liquid ratios. On
the other hand, the long term financial position can be measured by calculated
debt equity, proprietary and fixed assets ratios. Thus, the financial analysis helps
the decision makers in taking appropriate decisions for strengthening the shortterm as well as long-term solvency of the firm.
Comparison of past and present results: Financial statement of the previous years
can be compared and the trend regarding various expenses, purchases, sales gross
profit can be ascertained. The cost of goods sold, values of assets and liabilities
can be compared and the future prospects of the business can be indicated.
Help in measuring the profitability: Financial statements show the gross profit, net
profit, and other expenses. The relationship of these items can be established with
sales by calculating operating ratios. This type of analysis helps the managers in
taking certain decisions for improving the profitability or reducing the losses of
the firm.
Inter-firm comparison: The financial analysis makes easy to inter-firm

comparison. Various financial characteristics like profitability, liquidity, solvency
of different firms can be compared. This comparison can also be made for various
time periods.
Helps in judging the solvency of the undertaking: creditors are always interested
in knowing the solvency i.e, the capacity of the business to repay their loans.
Through
Financial statement it is possible to known:
Whether current assets are sufficient to meet current liabilities.
Proportion of liquid assets to current assets.
Futures prospects of the business.

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Whether debentures and other loans are secured or not.
Managerial efficiency of the company.
Bankruptcy and failure: Financial statement analysis is a significant tool in

predicting the bankruptcy and failure of the business enterprises. Financial
statement analysis accomplishes this through the evaluation of solvency position.
Helps in forecasting: The financial analysis will help in assessing future

development by making forecasts and preparing budgets. Capital budgets are
prepared after taking into account the profitability of various alternative
proposals. The trend shown by financial analysis will pave way for the future.
Types of financial analysis:Financial analysis into different categories depending upon
The material used and
The method of operation followed in the analysis or the modus operandi of

analysis
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Types of financial analysis
On the basis of material used
on the basis of modus operandi
External
Internal
Horizontal
Vertical
Analysis
Analysis
Analysis
Analysis
On the basis of material used:

According to material used, financial analysis can be of two types
External analysis
Internal analysis
External analysis:This analysis is done by outsiders who do not have access to the detailed
internal outsiders include investors, potential investors , Creditors, Potential
Creditors, Government Agencies , Credit agencies and General Public for financial
analysis, these external parties to the firm depend almost entirely on the published
financial statements.
Internal analysis:The analysis conducted by persons who have access to the internal
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accounting records of a business firm is known as internal analysis.
On the basis of modus operandi:

According to the modus operandi financial analysis can also be of two types
Horizontal analysis
Vertical analysis
Horizontal analysis:Horizontal analysis refers to the comparison of financial data of a

company for several years. The figures for this type of analysis are presented
horizontally over a number of columns. The figures of the various years are compared
with standard or base year a base year is year chosen as beginning point. This type of
analysis is also called dynamic analysis as it is based on the data from year to year
rather than on data of any one year. The horizontal analysis makes it possible to focus
attention on items that have changed significantly during the period under view
Vertical analysis:Vertical analysis refers to the study of relationship of the various items in the
financial statements of one accounting period in this types of analysis the figures from
financial statement of a year are compared with a base selected from the same years
statement.
Parties interested in financial analysis:
Financial Executives:14
The first party interested in the financial analysis in the financial department of the
business concern who have a deep insight into the financial condition of the enterprise
and view of the past performance, which help in future decisions making.
Management:-
The management of the concern is also interested in the analysis of the statements
because it helps them in reaching conclusion regarding the overall operation of the
business. The management is interested in every aspects of the financial analysis it is
there overall responsibility to see that the resources of the firm are used effectively and
efficiently and the firms financial position is sound. As such, return on analysis is very
important for them.
Creditors:-
Creditors also evaluate the financial statements and on the basis of these financial
statements they come about the credit worthiness of the business enterprise and chosen to
extend, maintain of restrict credit. Creditors will be interested to give credit for those
business enterprises having sound financial position and having capable of being
repayments of their credit. Some of the aspects of enterprise operations that are of
interested of the creditors are liquidity of funds, soundness of the financial structure,
profitability of the operations, effectiveness of working capital management etc. The
bankers and trade creditors of a business enterprise are interested in its cash generation
and credit worthiness. They want to assess whether the enterprise will be as interested
payments due as per agreed schedules. The get all this information from the analysis of
balance sheet and income statement of the company.
Investors:-
Investors present as well as prospective, are interested in the business in the

measurements of earning capital of securities. Every investor has the tendency to get fair
return on his or her investment. Investors have been increased concerned with the cash
generation capability of an enterprise primarily in terms of the flexibility availability to
such enterprises to acquire other business and new assets on an advantageous basis. For
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this purpose each cash flow analysis and funds flow analysis are very useful.
Government:-
The financial statements are used to assess the tax liability of the business enterprise. The
government studies economic situation of the country from these statements enable the
government to find out whether business is following various rules and regulations or not.
Bankers:-
The banker is interested to see that the loan amount is secure and the customer is also
able to take the interest regularly. The bankers will analysis the balance sheet to
determine financial strength of the concern and profit and loss account will also be
studied to find out earning position.
The information provided by the analysis and interpretation of various financial
statements is important and useful to those groups also that are interested in working of
the business due to one or other motive.
Procedures for financial analysis:

The following is the procedure to be followed by the interested parties in analyzing the
financial statements.
Determination of nature and extent of analysis: First of all, the depth, object
and extent of analysis is to be determined by the financial analyst. The nature of
analysis will differ depending on the purpose of the analysis. For example, trade
creditors and bankers are interested in knowing whether the firm can pay back their
debt in short period. Their analyses will, therefore, confidence to the evaluation of the
firms liquidity position. The suppliers of interested in knowing its ability to generate
cash to be able to pay interest and return their claims. Similarly, investors, who have
invested their money in long-term debt, on the other hand, are interested in the firms
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profitability over time. They are the firms shares, are most concerned about the firms
earnings. As such, they concentrate on the analysis of the firms financial position to
the extent it influences the firms earnings ability. Finally, management of the firm
would be interest red in every aspect of the financial analysis.
Vertical of the financial statements: Before analyzing and preparing any

statement or composing financial ratios, it is necessary for the analyst to go through
the various financial statements of the firm.
Collection of necessary statements: The analyst should collect other useful

information from the management useful for analysis. This includes any other
information not being revealed from the published financial statements.
Rearrangement of financial data: Before making actual analysis and

interpretation, the analyst must rearrange the data provided by these statements in
useful manner. The approximation of figures, re-classification of consolidation of
items etc., is done in this step.
Methods of analysis: Now the financial analyst may use one or multiple methods
of financial analysis. The methods of financial analysis are: comparative statements,
common size statements, trend analysis, ratio analysis, funds flow statements, cash
flow statements and cost volume profit analysis (CVP analysis).
Interpretation
and
presentation: After
analyzing
the
statements
the
interpretation is to be made. The interference drawn from the analysis are presented in
the scope of reports to the management.
Limitations of financial analysis :
Historical data: Analysis of the financial statements indicates about the

performance of the business in the processing period or periods. It does not
indicate the present position of the business. Financial statements are prepared on
historical facts and do not throw light on the current and present position of the
business.
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Lack of standard terminology: Accounting is not an exact science. It does not

universally accepted terminology. Different meanings are given to a particular
term. There are different methods of providing depreciation. Interest may be
charged on different rates. In this way, there is sufficient possibility of
manipulation and the financial statements have to suffer. As a consequence
financial analysis also proves to be defective. However, in the recent past the
international accounting board is taking interest and taking measures for
standardizing the accounting terminology as well as bringing standards for being
uniformity in accounting system.
Affects of prices level changes: The results shown by financial statements may
be misleading, if price level changes have not been accounted for. The ratio may
improve with the increase in price, where as actual efficiency may not improve.
Ratios of the two years will not be meaningful for comparison, if the prices of
commodities are different. Change in price affects cost of production, sales and
value of assets and as a consequent comparability of ratios also suffers.
Non-consideration qualitative aspect: financial analysis does not measure the

qualitative aspects of the business it does not show the skill, technical know how
and the efficiency of its employees and managers. It is the quantitative
measurement of the performance. It means that analysis of financial statements
measures only one sided performance of the business. It completely ignores
human resources.
Misleading results: Results shown by financial analysis may be misleading in the

absence of absolute date. For example, the analysis of one firm reveals that the
increase in profits from Rs.20,000 to Rs.80,000 shows that the profit has
increased by four times. In case of another firm the analysis reveals that the profit
of this firm als increased from Rs.100 crores toRs.400 crores, showing four fold
increases. But this analysis ignored the size of the firms. As such, the results may
mislead.
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Methods of financial analysis:The following methods of analysis are generally used:
Comparative Statements.
Trend Analysis.
Common-Size Statements.
Funds flow Analysis.
Cash Analysis
Ratio Analysis
Cost-volume-Profit Analysis
COMPARATIVE STATEMENTS:The comparative financial statements are statements of the financial position at
different periods of time .the elements of financial position are show in a comparative
Statement provides an idea of financial position at two or more periods. Generally two
financial statements (balance sheet and income statement) are prepared in comparative
form for financial analysis.
THE COMPARATIVE STATEMENT MAY SHOW: Absolute figures (rupee amounts)

Changes in absolute figures i.e. increase or decrease in absolute figures.
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Absolute data in terms of percentages.

Increase or decrease in terms of percentages.
THE TWO COMPARATIVE STATEMENTS ARE:
Comparative balance sheet, and
Income statement.
COMPARATIVE BALANCE SHEET:Comparative balance sheet as on two or more different dates can be used for comparing
assets and liabilities and finding out any increase or decrease on those items. Thus, while
in a single balance sheet the emphasis is on present position, it is on change in the
comparative balance sheet. Such a balance sheet is very useful in studying the trends in
an enterprise.
Comparative financial statements can be prepared for more than 2 periods or on more
than two dates. However, it becomes very cumbersome to study the trend with more than
2 periods data. Trend percentages are more useful in such cases.
Acc to American institute of certified public accountant the presentation of comparative
financial statements in annual and other reports enhances the usefulness of such reports
and brings out more clearly the nature and trend of current changes affecting the
enterprise. Such presentation emphasis the fact that statements for series of periods are
far more significant than those of a single period and that the accounts of 1 period are but
an installment of what is essentially a continuous history. In any one year, it is ordinary
desired that the balance sheet, the income statement and surplus statement be give for 1
or more proceeding year as well as for the current year.
The comparative balance sheet analysis is the study of the trend of the same items,
group of items and computed items in two or more balance sheets of the same business
enterprise on different dates. The change in periodic balance sheet items reflect the
conduct of a business the change can be observed by comparison of the balance sheet at
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the beginning and at the end of a period and these changes can help in forming an opinion
about the progress of an enterprise.
Guide lines for interpretation of comparative balance sheet:While interpreting comparative balance sheet the interpreter is expected to study the
following aspects:
Current financial position and liquidity position
Long-term financial position
Profitability of the concern.
COMMON SIZE STATEMENT:The common-size statements, balance sheet and income statement are show in analytical
percentages. The figures are shown as percentages of total assets, total liabilities and total
sales. The total assets are taken as 100 and different assets are expressed as a percentage
of the total similarly, various liabilities are taken as a part of total liabilities.
COMMON SIZE BALANCE SHEET:A statement in which balance sheet items are expressed as the ratio of each asset
to total assets and the ratio of each liability is expressed as a ratio of total liabilities is
called common size balance. The common size balance sheet can be used to compare
companies of differing size. The comparison of figures in different periods is not useful
because total figures may be affected by a number of factors. It is not possible to establish
standard norms for various assets. The trends of figures from year to year may not be
studied and even they may not give proper results.
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Common size balance sheet is prepared by stating the total assets as 100 and
reducing individual assets into % of the total. Likewise, individual liability items are
expressed as percentage of the total liabilities. Thus, the common size balance sheet
percentage shows the relation the of each asset item to total assets and of each liability
and owners equity. A closer scrutiny of the common size balance sheet discloses that this
statement focuses on two important aspects.
Distribution pattern of liabilities as between current liabilities, long-term

liabilities and equity capital.
Distribution pattern of assets as between current assets, fixed assets and others.
The common size balance sheet analysis can, of course, be carried further and extended
to the study of what portion of a sub-group, rather than the total, an item is. Thus, in
assessing the liquidity of current assets, it may be of interest to know not only what
proportion of total assets are inventories, but also what proportion of current assets is
represented by this asset. A study of common size statement of the company with that of
a competitive company or the industry would show whether or not the company is the
managing assets efficiently. An analysis of the pattern of distribution of liability reveals
the debt--equity position of the company too large a % of liabilities. And a relatively low
margin of safety for creditors.
While common size statements do not focus light on the relative sizes of individual
companies which are compared, the problem of actual comparability between them is a
matter to be resolved by the analyst judgment. Comparison of common size statement of
single enterprise over the years valuable in that reveals the changing proportions of
components within groups of assets and liabilities. However, care must exercise in
interpreting such changes and the trend which discloses.
Trend analysis :
Trend analysis depicts behavior of the ratios over a period of time and the trends in the
operation of the enterprise. The trend figure are index figures giving a birds eye view of
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the comparative data by presenting its over a period of time. Thus is horizontal analysis
of financial statement, often called as pyramid method of ratio analysis- a guide to yearly
changes. Under this form of analysis, generally financial ratios are studied for a specified
number if years. It is a dynamic analysis depicting the changes over a stated period. Their
method of analysis is one of direction.
TREND ANALYSIS OF BALANCE SHEET:Trend analysis is Very important tool of horizontal financial analysis.
This analysis enables to known the change in the financial function and operating
efficiency in between the time period chosen.
By studding the trend analysis of each item we can known the direction of changes and
based upon the direction of changes, the options can be changed.
Trend = Absolute Value of item in the statement understudy *100

Absolute Value of same item in the base statement
Fund flow statements

Cash flow analysis is a valuable aid to the financial executive and creditors for evaluating
the uses of funds by the firm and in determining how these uses were financed. A cash
flow statement indicates where funds came from and where it was used during the period
under review. They are important tools for communication and very helpful for financial
executives in planning the intermediate and long-term financing of the firm.
RATIO ANALYSIS
INTRODUCTION:
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Ratio analysis is one of the techniques of financial analysis where ratios are used as a
yardstick for evaluating the financial condition and performance of a firm. Analysis and
interpretation of various accounting ratios gives skilled and experienced analysis, a better
understanding of the financial condition and performance of the firm than what he could
have obtained only through a perusal of financial statements.
MEANING OF RATIOS:
Ratios are relationships expressed in mathematical terms between figures which are
connected with each other in some manner. Obviously, no purpose will be served by
comparing two sets of figures which are not at all connected with each other. Moreover,
absolute figures are also unfit for comparison.
There are various techniques or models for analyzing information contained in the
financial statements viz. Comparative statements, common size statements, trend
percentages, funds flow analysis, cash flow analysis and ratio analysis.
Financial
analysis is undertaken by the management of the firm or by parties outside to it viz.

owners, creditors, investors, etc.
Ratio analysis is most widely used and powerful tool or technique of financial
analysis. The term ratio refers to the numerical quantitative relationship between two
variables.
It shows arithmetical relationship between two figures, which can be
expressed in three ways.
Percentage
Fraction
Proportion
A study of the trend of strategic ratios helps the management in planning, forecasting and
decision making. It helps in identifying specific work areas. In short, though the
technique of ratio analysis, the firms solvency, efficiency and profitability can be
assessed.
IMPORTANCE OF RATIO ANALYSIS
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Ratio analysis helps in simplifying the financial statement for easy understanding.
It helps in drawing out meaningful conclusion from the information provided in

the financial statements which is useful for decision making and framing sound
policies for business in future.
It helps in assessing the financial strength and weakness of the firm and this
enhances the value of the financial statements.
Comparative study of the ratios between the competing firms helps to know the
efficiency of the firm.
It helps the investor to assess the financial position of the concern in which he is
going to invest.
Ratio analysis helps the employees interested in wage increase and fringe benefits
that are related the volume of profits earned by the concern.
Ratio analysis provides data for inter-firm comparison. Ratios highlight the
factors associated with successful and unsuccessful firms. They also reveal strong
firms and weak firms, over valued and under valued firms.
Ratio analysis helps in planning and forecasting. Over a period of time a firm or
industry develops certain norms that may include future success or failure. If
relationship changes in firms data over different time periods, the ratios may
provide clues on trends and future problems.
Ratio analysis also makes possible comparison of the performance of the different
divisions of the firm. The ratios are helpful in deciding about their efficiency or
otherwise in the past and likely performance in the future.
Thus, ratios can assist management in its basic function of forecasting, planning,
coordination, control and communication.
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LIMITATIONS OF RATIO ANALYSIS
Ratios are of limited use and thus single ratio may not be useful.
Better
interpretation is possible with the calculation of number of ratios, which may lead
to confusion to the analyst in making any meaningful conclusion.
Ratios are calculated on the basis of past results, which may not necessarily true
indicators of the future, if the business policies are constantly changing.
Change in accounting procedure may be misleading for ratio analysis.
For
example, change in inventory valuation methods from LIFO to FIFO may also
influence in the analysis.
Ratio analysis considers only quantitative aspects, but not qualitative factors.
Ratio analysis may give misleading results If the effects of price level changes are
not considered.
Ratio analysis when interpreted by different people in different way may

encounter with the personal bias or prejudice of the analyst.
Ratios are classified as:
liquidity ratios
leverage ratios
coverage ratios
activity ratios (or) turnover ratios
profitability ratios
LIQUIDITY RATIOS:
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A liquidity ratio is also known as short-term solvency. These ratios are used to measure
the firms ability to meet short term obligations. They compare short-term obligation to
short term (or current) resources available to meet these obligations. From these ratios,
much insight can be obtained into the present cash solvency of the firm and firms ability
to remain solvent in the event of adversity. The creditors of the firm are primarily
interested in the short term solvency of the firm. A firms liquidity should be neither too
high nor too low but adequate.
Low liquidity implies the firms inability to meet its maturing obligations. This
will result in bad credit rating, loss of creditors confidence or even technical insolvency,
ultimately leading to the closure of the firm.
A very high liquidity position is also bad. It means that the firms current assets
are too high in proportion to maturing obligations. Idle assets earn nothing to the firm.
The firms funds will be unnecessarily locked up in current assets, which if, released can
be used to generate profits to the firm.
The ratios, which measure, and indicate the extent of a firms liquidity, are
known as liquidity ratios or short-term solvency ratios. Commonly used liquidity ratios
include.
current ratio (or) working capital ratio
quick ratio (or) acid test ratio
cash position ratio (or) super stock quick ratio
LEVERAGE RATIO:
These ratios are also known as capital structure ratios or solvency ratios or capital gearing
ratios. The long-term creditors are more concerned with the firms long-term financial
position. They judge the financial soundness of the firm in the firm in term of the ability
to pay interest promptly as well as making repayment of the principal. The long-term
solvency of the firm can be examined with the help of leverage ratios. They measure the
funds supplied by owners as compared with the financial provided only a small
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proportion of total financing, the risks of the business are borne mainly by the creditors.
Firm with low leverage have less risk of loss, but they also have lower
expected returns. Conversely, firm with high leverage ratios have the risk of large losses
but also have a chance of earning huge profits. Therefore, before deciding whether a firm
should have debt, it must balance higher expected returns against increased risks. The
most commonly examined leverage: ratios are
debt equity ratio
proprietor ratio
debt to capital ratio
gross fixed assets to shareholders funds
fixed assets ratio
COVERAGE RATIOS:
These ratios indicate the extent to which the interest of the persons entitled to get a fixed
return (i.e. interest or dividend) or a scheduled repayment as per agreed terms is safe. The
higher the cover the better it is. Under this category the following ratios are calculated.
fixed interest coverage ratio
fixed dividend coverage ratio
debt service coverage ratio
ACTIVITY RATIO (OR) TURNOVER RATIO:

The finances obtained by the firm from its owners and creditors will be inverted in assets,
28
which the firm uses to generate sales and profits. The amount of sales generated and the
profit earned depend on the effective and efficient management of these assets by the
firm. Activity ratios measure the efficiency with which the firm manages and uses its
assets. That is why activity ratios are known as efficiency ratios, because these ratios are
converted or turned over in to sales.
Thus the turnover or activity ratios measure the relationship between sales on one
side and various assets on the other side. Higher the turnover ratio, the better the
profitability and use of capital.
Many activity ratios can be calculated to measure the efficiency of assets utilization.
Following are some of the important activity ratios.
total assets turnover ratio
capital employed turnover ratio
fixed assets turnover ratio
current assets turnover ratio
working capital turnover ratio
stock turnover ratio
debtors turnover ratio
creditors turnover ratio
PROFITABILITY RATIOS:
Profitability is the ability to make profits. Every firm should earn adequate profits in
order to survive in the immediate present and grow in future. In fact, profit is what makes
the business run. Profitability is the net results of large number of policies and decisions.
Profitability ratios give final answers about how efficiency the firm is managed. The
29
profitability ratio relates profits earned by a firm by its parameters like sales, capital
employed and net worth. But while making ratio analysis relating to profits, it should be
remembered that there are different concepts of profit such as concepts of profit such as
contribution, gross profits, net profits, EBIT, operating profits, profits before depreciation
and before tax etc. Profitability ratios are important for a concern. These ratios are
calculated to enlighten the end results of business activities, which is the sole criterion of
the overall efficiency of a business concern. The following are the important profitability
ratio, which are based on.
Sales
Investment
gross profit ratio
operating ratio
operating profit ratio
net profit ratio
return on capital employed
return on shareholders equity
return on total assets
earnings per share
dividend payout ratio
30
CHAPTER-III
INDUSTRY PROFILE
31
Automobile industry in India

The automobile industry in India is the ninth largest in the world with an annual
production of over 2.3 million units in 2008 In 2009, India emerged as Asia's fourth
largest exporter of automobiles, behind Japan, South Korea and Thailand.
Following economic liberalization in India in 1991, the Indian automotive industry has
demonstrated sustained growth as a result of increased competitiveness and relaxed
restrictions. Several Indian automobile manufacturers such as Tata Motors, Maruti Suzuki
and Mahindra and Mahindra, expanded their domestic and international operations.
India's robust economic growth led to the further expansion of its domestic automobile
market which attracted significant India-specific investment by multinational automobile
manufacturers. In February 2009, monthly sales of passenger cars in India exceeded
100,000 units. Bryonic automotive industry emerged in India in the 1940s. Following the
independence, in 1947, the Government of India and the private sector launched efforts to
create an automotive component manufacturing industry to supply to the automobile
industry. However, the growth was relatively slow in the 1950s and 1960s due to
nationalization and the license raj which hampered the Indian private sector. After 1970,
the automotive industry started to grow, but the growth was mainly driven by tractors,
commercial vehicles and scooters. Cars were still a major luxury. Japanese manufacturers
entered the Indian market ultimately leading to the establishment of Maruti Udyog. A
number of foreign firms initiated joint ventures with Indian companies.
In the 1980s, a number of Japanese manufacturers launched joint-ventures for
building motorcycles and light commercial-vehicles. It was at this time that the Indian
government chose Suzuki for its joint-venture to manufacture small cars. Following the
economic liberalization in 1991 and the gradual weakening of the license raj, a number of
32
Indian and multi-national car companies launched operations. Since then, automotive
component and automobile manufacturing growth has accelerated to meet domestic and
export demands.
History of the two wheelers:

The Britannica Encyclopedia a motorcycle as a bike or tricycle propelled by an internal
combustion engine (or, less often by an electric engine). The automobile was the reply to
the 19th century reams of self-propelling the horse-drawn bikeriage. Similarly, the
invention of the motorcycle created the self propelling bicycle. The first commercial
design was three-wheeler built by Edward Butler in Great Britain in 1884.
This
employed a horizontal single-cylinder gasoline engine mounted between two steer able
front wheels and connected by a drive chain to the rear wheel. The 1900s saw the
conversion of many bicycles or pedal cycles by adding small, centrally mounted spark
ignition engine engines. There was then felt the need for reliable constructions. This led
to road trial tests and competition between manufacturers. Tourist Trophy (TT) races
were held on the Isle of main in 1907 as reliability or endurance races. Such were the
proving ground for many new ideas from early two-stroke-cycle designs to supercharged
multivalent engines mounted on aerodynamic, bike bon fiber reinforced bodywork.
Invention of two wheelers:

The invention of two wheelers is a much-debated issue. Who invented the first
motorcycle? May seem like a simple question, safety, bicycle, i.e., bicycle with front
and rear wheels of the same size, with a pedal crank mechanism to drive the rear wheel.
Those bicycles in turn described from high-wheel bicycles.
The high wheelers
descended from an early type of pushbike, without pedals, propelled by the riders feet
pushing against the ground. These appeared around 1800, used iron banded wagon
wheels, and were called bone-crushers, both for their jarring ride, and their tendency to
toss their riders. Gottiieb Daimler (who credited with the building the first motorcycle in
1885, one wheel in the front and one in the back, although it had a smaller spring-loaded
outrigger wheel on each side. It was constructed mostly of wood, the wheels were of the
33
iron-banded wooden-spooked wagon-type and it definitely had a bone-crusher chassis!
Further developments:
Most of the developments during the early phase concentrated on three and fourwheeled design since it was complex enough to get the machines running with out having
to worry about them falling over.
The next notable two-wheeler though was the
Hildebrand & Wolf Mueller, patented in Munich in 1894. In 1895, the French firm of
DeDion-button built and engine that was to make the mass production and common use
of motorcycle possible. The first motorcycle with electric start and a fully modem
electrical system; the Hence special from the Indian Motorcycle Company astounded the
industry in 1931. Before World War 1, IMC was the largest motorcycle manufacturer in
the world producing over 20000 bikes per year.
Increasing popularity:
The popularity of the vehicle grew especially after 1910, in 1916; the Indian
motorcycle company introduced the model H racer, and placed it on sale. During World
War 1, all branches of the armed forces in Europe used motorcycles principally for
dispatching. After the war, it enjoyed a sport vogue until the Great Depression began in
motorcycles lasted into the late 20th century; weight the vehicle being used for high-speed
touring and sport competitions. The more sophisticated of a 125cc model. Since then, an
increasing number of powerful bikes have blazed the roads.
Historical industry developments:

Indian is the second largest manufacturer and producer to two wheelers in the
World. It stands next only to Japan and China in terms of the number of V produced and
domestic sales respectively. This destination was achieved due to variety of reason like
restrictive policy followed by the government of India towards the passenger bike
industry, rising demand for personal transport, inefficiency in the public transportation
34
system etc. The Indian two-wheelers industry made a small beginning in the early 50s
when Automobile products of India (API) started manufacturing scooters in the country.
Until 1958, API and Enfield were the sole producers.
The two wheelers market was opened were opened to foreign competition in the
mid-80s. And the then market leaders-Escorts and Enfield were caught unaware by the
onslaught of the 100cc bikes of the four Indo- Japanese joint ventures.
With the
availability of fuel-efficiency low power bikes, demand swelled, resulting in Hero Honda
then the only producer of four stroke bikes (100cc category), gaining a top slot.
The first Japanese motorcycles were introduced in the early eighties. TVS Suzuki
and Hero Honda brought in the first two-stroke and four-stroke engine motorcycles
respectively. These two players initially started with assembly of CKD Kits, and later on
progressed to indigenous manufacturing.
The industry had a smooth ride in the 50s, 60s and 70s when government
prohibited new entries and strictly controlled capacity expansion. The industry saw a
sudden growth in the 80s. The industry witnessed a steady of 14% leading to a peak
volume of 1.9 mn vehicles in 1990.
In 1990 the entire automobile industry saw a drastic fall in demand. This resulted
in a decline of 15% in 1991 and 8% in 1992, resulting in a production loss of 0.4mn
vehicles. Barring Hero Honda, all the major producers suffered from recession in FY93
and FY94. Hero Honda showed a marginal decline in 1992.
The reason for recession in the sector were the incessant rise in fuel prices, high
input costs and reduced purchasing power due to significant like increased production in
1992, due to new entrants coupled with recession in the industry resulted in companies
either reporting losses or a fall in profits.
CONCLUSION:
The two-wheelers market has had a perceptible shift from a buyers market to a
35
sellers market with a variety of choice, players will have compete on various fronts viz.
pricing, technology product design, productivity after sale service, marketing and
distribution. In the short term, market shares of individual manufacturers are going to be
sensitive to capacity, product acceptance, pricing and competitive pressures from other
manufacturers.
As incomes grow and people grow and people feel the need to own a private means
of transport, sales of two-wheelers will rise. Penetration is expected to increase to
approximately to more than 25% by 2005.
The motorcycle segment will continue to lead the demand for two-wheelers in the
coming years. Motorcycle sale is expected to increase by 20% yoy as compared to 1%
growth in the scooter market and 3% by moped sales respectively for the next two years.
The four-stroke scooters will add new dimension to the two-wheeler segment in the
coming future.
The Asian continent is that largest user of the two-wheelers in the world. This is due to
poor road infrastructure and low per capita income, restrictive policy on bike industry.
This is due to oligopoly between top five players in the segment, compared to thirsty
manufacturers in the bike industry.
Hero Honda motors LTd., is one of the leading companies in the two-wheeler
industry. At present it is the market leader in the motorcycle segment with around 47%
the market share during FY 2000 01. During the year, company posted a 41.15% yoy
rise in turnover to Rs.31, 686.5mn in motorcycles which driven by a 35.17% yoy rise in
Motorcycle sales volumes. The company has emerged as one of the most successful
players, much ahead of its competitions an account of its superior and reliable product
quality complemented with excellent marketing techniques. The company has been
consistently addressing the growing demand for motorcycles and has been cumulative
customer base of over 4 million customers, which is expected to reach 5min mark with
rural and semi-urban segment being the new class of consumers.
36
CHAPTER-IV
COMPANY PROFILE
37
CORPORATE PROFILE
About Company
Hero Motocorp Ltd. (BSE: 500182, NSE: HEROMOTOCO) formerly Hero Honda is
an Indian motorcycle and scooter manufacturer based in New Delhi, India. Hero Honda
started in 1984 as a joint venture between Hero Cycles of India and Honda of Japan.[4]
The company is the largest two wheeler manufacturer in India. [5] The 2006 Forbes 200
Most Respected companies list has Hero Honda Motors ranked at 108.[6]
In 2010, When Honda decided to move out of the joint venture,[7] Hero Group bought the
shares held by Honda.[8] Subsequently, in August 2011 the company was renamed Hero
MotoCorp with a new corporate identity.[9] On 4th June 2012,Hero Motocorp approved a
proposal to merge the investment arm of its parent-Hero Investment Pvt. Ltd. into the
automaker.The decision comes after 18 months of its split from Honda Motor. [10]
Company profile
Hero is the brand name used by the Munjal brothers for their flagship company Hero
Cycles Ltd. A joint venture between the Hero Group and Honda Motor Company was
established in 1984 as the Hero Honda Motors Limited At Dharuhera India. Munjal
family and Honda group both own 26% stake in the Company. In 2010, it was reported
that Honda planned to sell its stake in the venture to the Munjal family.
During the 1980s, the company introduced motorcycles that were popular in India for
their fuel economy and low cost. A popular advertising campaign based on the slogan
'Fill it - Shut it - Forget it' that emphasised the motorcycle's fuel efficiency helped the
38
company grow at a double-digit pace since inception. The technology in the bikes of
Hero Honda for almost 26 years (19842010) has come from the Japanese counterpart
Honda [11]
Hero MotoCorp has three manufacturing facilities based at Dharuhera, Gurgaon in
Haryana and at Haridwar in Uttarakhand. These plants together are capable of churning
out 3 million bikes per year.[12] Hero MotoCorp has a large sales and service network with
over 3,000 dealerships and service points across India. Hero Honda has a customer
loyalty program since 2000,[13] called the Hero Honda Passport Program.
The company has a stated aim of achieving revenues of $10 billion and volumes of 10
million two-wheelers by 2016-17. This in conjunction with new countries where they can
now market their two-wheelers following the disengagement from Honda, Hero
MotoCorp hopes to achieve 10 per cent of their revenues from international markets, and
they expected to launch sales in Nigeria by end-2011 or early-2012. In addition, to cope
with the new demand over the coming half decade, the company was going to build their
fourth factory in South India and their fifth factory in Western India. There is no
confirmation where the factories would be built.[14]
HISTORY
Hero MotoCorp was started in 1984 as Hero Honda Motors Ltd.[4]
1956Formation of Hero Cycles in Ludhiana(majestic auto limited)
1975Hero Cycles becomes largest bicycle manufacturer in India.
1983Joint Collaboration Agreement with Honda Motor Co. Ltd. Japan signed
Shareholders Agreement signed
1984Hero Honda Motors Ltd. incorporated
1985Hero Honda motorcycle CD 100 launched.
1989Hero Honda motorcycle Sleek launched.
1991Hero Honda motorcycle CD 100 SS launched.
1994 -- Hero Honda motorcycle Splendor launched.
1997Hero Honda motorcycle Street launched.

39
1999 -- Hero Honda motorcycle CBZ launched.
2001 -- Hero Honda motorcycle Passion and Hero Honda Joy launched.
2002Hero Honda motorcycle Dawn and Hero Honda motorcycle Ambition

launched.
2003Hero Honda motorcycle CD Dawn, Hero Honda motorcycle Splendor,

Hero Honda motorcycle Passion Plus and Hero Honda motorcycle Karizma
launched.
2004Hero Honda motorcycle Ambition 135 and Hero Honda motorcycle CBZ*
launched.
2005Hero Honda motorcycle Super Splendor, Hero Honda motorcycle CD

Deluxe, Hero Honda motorcycle Glamour, Hero Honda motorcycle Achiever and
Hero Honda Scooter Pleasure.
2007New Models of Hero Honda motorcycle Splendor NXG, New Models of

Hero Honda motorcycle CD Deluxe, New Models of Hero Honda motorcycle
Passion Plus and Hero Honda motorcycle Hunk launched.
2008New Models of Hero Honda motorcycles Pleasure, CBZ Xtreme,

Glamour, Glamour Fi and Hero Honda motorcycle Passion Pro launched.
2009New Models of Hero Honda motorcycle Karizma:Karizma - ZMR and

limited edition of Hero Honda motorcycle Hunk launched
2010New Models of Hero Honda motorcycle Splendor Pro and New Hero
Honda motorcycle Hunk and New Hero Honda Motorcycle Super Splendor
launched.
2011New Models of Hero Honda motorcycles Glamour, Glamour FI, CBZ

Xtreme, Karizma launched. New licensing arrangement signed between Hero and
Honda. In August Hero and Honda parted company, thus forming Hero MotoCorp
and Honda moving out of the Hero Honda joint venture. In November, Hero
launched its first ever Off Road Bike Named Hero "Impulse".
2012-New Models of Hero Motocorp Maestro the Musculine scooter and Ignitor
the young generation bike are launched.
40
Termination of Honda joint venture

Main article: Hero Honda split
In December 2010, the Board of Directors of the Hero Honda Group have decided to
terminate the joint venture between Hero Group of India and Honda of Japan in a phased
manner. The Hero Group would buy out the 26% stake of the Honda in JV Hero Honda.
[15]
Under the joint venture Hero Group could not export to international markets (except
Sri Lanka) and the termination would mean that Hero Group can now export. Since the
beginning, the Hero Group relied on their Japanese partner Honda for the technology in
their bikes. So there are concerns that the Hero Group might not be able to sustain the
performance of the Joint Venture alone.[16]
Hero MotoCorp
The new brand identity and logo, Hero MotoCorp, was developed by the London firm
Wolff Olins.[17] The logo was revealed on 9 August 2011 in London, the day before the
third test match between England and India.[17]
Hero MotoCorp can now export to Latin America, Africa and West Asia.[17] Hero is free to
use any vendors for its components instead of just Honda-approved vendors.[17]
Company performance
During the fiscal year 2008-09, the company sold 3.7 million bikes, a growth of 12%
over last year. In the same year, the company had a market share of 57% in the Indian
market.[18] Hero Honda sells more two wheelers than the second, third and fourth placed
two-wheeler companies put together.[11] Hero Honda's bike Hero Honda Splendor sells
41
more than one million units per year.[19] On 1st June 2012, Hero MotoCorp reported its
highest ever monthly sales at 5,56,644 units in May, registering a growth of 11.28%.[20]
RECOGNITION
Logo of Hero Honda, as the company was known till Aug. 2011
The Brand Trust Report [21] published by Trust Research Advisory has ranked Hero Honda
in the 13th position among the brands in India.
Motorcycle models
See also: Category:Hero Honda motorcycles
Sleek
Street
Ambition 133, Ambition 135
CBZ, CBZ Star, CBZ Xtreme
CD 100, CD 100 SS, Hero Honda Joy, CD Dawn, CD Deluxe, CD Deluxe (Self
Start)
Glamour, Glamour F.I
Hunk
Karizma, Karizma R, Karizma ZMR FI
Passion, Passion Plus, Passion Pro
Splendor, Splendor+, Splendor+ (Limited Edition), Super Splendor, Splendor

NXG,Splendor PRO
Hero Impulse launched in 2011 after the separation of hero and Honda. Its India's
first off-road and on road Bike.
42
Suppliers
It is reported Hero Honda has five joint ventures or associate companies, Munjal Showa,
AG Industries, Sunbeam Auto, Rockman Industries and Satyam Auto Components, that
supply a majority of its components.[22
Type
Traded as
Industry
Founded
Founder(s)
Headquarters
Key people
Products
Revenue
Operating
income
Net income
Parent
Website
Public company
BSE: 500182
NSE: HEROMOTOCO
BSE SENSEX Constituent
Automotive
19 January 1984 (Gurgaon)
Brijmohan Lall Munjal
New Delhi, India
Brijmohan Lall Munjal (Chairman)
Pawan Munjal (MD & CEO)[1]
Motorcycles, scooters, three-wheeler
vehicles and spare parts
23,579.03 crore (US$4.27 billion)
[2]
2,597.07
crore
(US$470.07
million) (FY 2010-2011)
2,378.13
crore
(US$430.44
[3]
million) (2011)
Hero Cycles
www.heromotocorp.com
SUPPLY CHAIN
43
(An Initiative of Hero MotoCorp for protecting and preservation of Environment)

Rapid industrialization and advanced technological changes have put Indian economy on
fast growth. But such developments pose, unprecedented challenges to human society in
term of climatic and environmental degradation. Therefore the people and governments
have come forward to dealt with environmental threats and also to explore many
opportunities so as to address the environmental issues and also to create a sustainable
environmental
future
for
all.
We at Hero MotoCorp are continuously striving for synergy between technology, system
and human resources, to provide products and services, to meet the aspiration of our
valued customers that too, demonstrating our "WE CARE" philosophy. While doing so,
we maintain the highest standards of ethics and societal responsibility, constantly
innovate the products and process and work in partnership with our supply vendors to
take the organization to new excellences. We believe that our vendors and dealers are key
stakeholders and partners to work towards the goal of sustainable development.
Green Vendor Development Programme refers to the
way in which organizational innovations in
industrial supply chain management may be
considered in the context of the environment.
Organizations which act proactively not only to
identified but also to implement actions in process /
operation so as to address environmental issues.
Green Vendor Development Programme (GVDP)
encourages a collaborative effort between Hero
MotoCorp and its suppliers to achieve Hero MotoCorp's overall corporate environmental
goal. GVDP calls for partner companies to demonstrate their commitment towards
improved environmental performance and striving for continual improvement.
Six pillars have been assigned to GVDP model which are Energy management, Water
management, Waste minimization, Prevention of Pollution, Substitution of hazardous
chemical and Environmental compliance management. Partner vendors are given specific
training on all six pillars of GVDP and mapping of processes/equipments is carried out
based on logical analysis so as to identify the gaps or significant environmental aspect
and accordingly improvements projects are undertaken for implementation. The
programme works on PDCA approach.
HMCL also endeavors to provide a platform on which the vendors can share their
environment achievements and problems encountered during implementation of the green
vendor program. The objective of this meet is to share success stories on environmental
improvements that can be replicated at other vendor facilities. This platform lays the
foundation for a mutually beneficial eco-future.
We understand that environmental protection is our responsibility towards our future
generations and thus while providing our customers with supreme quality of products and
services it is important for us to ensure that environmental considerations are given
44
utmost importance. We will continue taking initiatives towards environmental protection

and base all our business decisions on environmental considerations.
NEW PRODUCTS
Hero
NXG
MotoCorp
Splendor Hero
Plus
MotoCorp
Splendor Hero
Plus
MotoCorp
Passion
Hero Motorcorp Karizma R
Hero MotoCorp Glamour
Hero MotoCorp CD Delux
Hero Honda Hunk
Hero Moto Corp Impulse
Hero Honda Karizma ZMR
Contract us:
Registered Address
45
34, Community Centre,

Basant Lok,,Vasant Vihar
New Delhi
Delhi
110057
Tel: 011-46044100 011-26142451
Fax: 011-26143321/26143198
Email: ilam.kamboj@heromotocorp.com
Website: http://www.heromotocorp.com
Group: Hero Group
Registrars
Karvy Computershare Private Ltd. Plot No. 17-24,
Vittal Rao Nagar,
Madhapur,
Email: einward.ris@karvy.com
Website: http://www.karvy.com
Management - Hero Motocorp

Name
Brijmohan Lall Munjal
Designation
Chairman / Chair Person
46
Anand C Burman
Analjit Singh
Sunil Kant Munjal
Pradeep Dinodia
Ravi Nath
Name
Pawan Munjal
Pritam Singh
Suman Kant Munjal
V P Malik
Meleveetil Damodaran
Paul Edgerley
Non.Exe.Independent Director
Joint Managing Director
Designation
Managing Director & CEO
Non Executive Director
Non Executive Director
FINANCIAL POSITION
Balance Sheet of Hero Motocorp
------------------- in Rs. Cr. ------------------Mar '12 Mar '11
Mar '10
Mar '09
Sources Of Funds
Total Share Capital
Equity Share Capital
Share Application Money
Preference Share Capital
Mar '08
12 mths 12 mths
12 mths
12 mths
12 mths
39.94
39.94
0.00
0.00
39.94
39.94
0.00
0.00
39.94
39.94
0.00
0.00
39.94
39.94
0.00
0.00
39.94
39.94
0.00
0.00
47
Reserves
Revaluation Reserves
Networth
Secured Loans
Unsecured Loans
Total Debt
Total Liabilities
4,249.89
0.00
4,289.83
994.85
0.00
994.85
5,284.68
Mar '12
2,916.12
0.00
2,956.06
1,458.45
32.71
1,491.16
4,447.22
Mar '11
3,425.08
0.00
3,465.02
0.00
66.03
66.03
3,531.05
Mar '10
3,760.81
0.00
3,800.75
0.00
78.49
78.49
3,879.24
Mar '09
2,946.30
0.00
2,986.24
0.00
132.00
132.00
3,118.24
Mar '08
12 mths 12 mths
12 mths
12 mths
12 mths
Application Of Funds
Gross Block
Less: Accum. Depreciation
Net Block
Capital Work in Progress
Investments
Inventories
Sundry Debtors
Cash and Bank Balance
Total Current Assets
Loans and Advances
Fixed Deposits
Total CA, Loans & Advances
Deffered Credit
Current Liabilities
Provisions
Total CL & Provisions
Net Current Assets
Miscellaneous Expenses
Total Assets
6,308.26
2,522.75
3,785.51
193.95
3,964.26
675.57
272.31
56.10
1,003.98
926.99
20.72
1,951.69
0.00
3,520.66
1,090.07
4,610.73
-2,659.04
0.00
5,284.68
5,538.46
1,458.18
4,080.28
125.14
5,128.75
524.93
130.59
47.75
703.27
783.48
23.77
1,510.52
0.00
5,316.40
1,081.07
6,397.47
-4,886.95
0.00
4,447.22
2,750.98
1,092.20
1,658.78
48.14
3,925.71
436.40
108.39
1,863.48
2,408.27
438.46
43.73
2,890.46
0.00
3,965.69
1,026.35
4,992.04
-2,101.58
0.00
3,531.05
2,516.27
942.56
1,573.71
120.54
3,368.75
326.83
149.94
217.49
694.26
325.80
2.08
1,022.14
0.00
1,678.93
526.97
2,205.90
-1,183.76
0.00
3,879.24
1,938.78
782.52
1,156.26
408.49
2,566.82
317.10
297.44
130.58
745.12
196.37
0.51
942.00
0.00
1,455.57
499.76
1,955.33
-1,013.33
0.00
3,118.24
Contingent Liabilities
Book Value (Rs)
252.62
214.83
131.90
148.03
73.04
173.52
100.54
190.33
56.37
149.55
Source : Dion Global Solutions Limited
48
CHAPTER-V
DATA ANALYSIS
AND
49
INTERPRETATION
COMPARATIVE STATEMENT ANALYSIS 2012 OF HERO MOTO CORP. LTD

Rs. Cr
Sources Of Funds
Total Share Capital
Reserves
Networth
Secured Loans
Unsecured Loans
Total Debt
Total Liabilities
Mar '12
Mar '11
12 mths
12 mths
39.94
39.94
0
0
4,249.89
0
4,289.83
994.85
0
994.85
5,284.68
Mar '12
39.94
39.94
0
0
2,916.12
0
2,956.06
1,458.45
32.71
1,491.16
4,447.22
Mar '11
12 mths
12 mths
50
ABSOLUTE
INCREASE/
DECREAES
0
0
0
0
1333.77
0
1333.77
-463.6
-32.71
-496.31
837.46
CHANGE
IN %
0
0
0
0
45.74
0.00
45.12
-31.79
-100.00
-33.28
18.83
Gross Block
Net Block
Investments
Inventories
Sundry Debtors
Loans and Advances
Fixed Deposits
Deffered Credit
Current Liabilities
Provisions
Net Current Assets
6,308.26
2,522.75
3,785.51
193.95
3,964.26
675.57
272.31
56.1
1,003.98
926.99
20.72
1,951.69
0
3,520.66
1,090.07
4,610.73
-2,659.04
0
5,538.46
1,458.18
4,080.28
125.14
5,128.75
524.93
130.59
47.75
703.27
783.48
23.77
1,510.52
0
5,316.40
1,081.07
6,397.47
-4,886.95
0
769.8
1064.57
-294.77
68.81
-1164.49
150.64
141.72
8.35
300.71
143.51
-3.05
441.17
0
-1795.74
9
-1786.74
2227.91
0
13.90
73.01
-7.22
54.99
-22.71
28.70
108.52
17.49
42.76
18.32
-12.83
29.21
0
-33.78
0.83
-27.93
-45.59
0.00
5,284.68
4,447.22
837.46
18.83
Interpretation:1. Total share holders fund are decreased by 18.83% in 2011 to 2012.
2. Reserves & surplus are decreased by 45.12 % in 2011 to 2012. It shows that company
must concentrate on profitability to increase reserves.
3. Fixed assets are Decreased by -12.83 % in 2011 to 2012. It points towards expanding
business operations.
4. Debtors are increased by 108.52 % and loans & advances are also increased by
18.32% in 2011 to 2012.
5. Net current assets are Decreased by -45.59% from 2011 to 2012.
6. Total application fund are increased by change in percentage of 18.83%.
51
March 31,
2011
SOURCES OF FUNDS
Shareholders' funds
share capital
reserves and surplus
Loan funds
unsecured
deferred payment credits
deferred tax liabilities
TOTAL
APPLICATION OF FUNDS
Fixed assets
gross block
less: depreciation
net block
capital work in progress
March 31,
2010
ABSOLUTE
INCREASE/
DECREAES
CHANGE IN %
39.94
2.916.12
2,956.06
39.94
3,425.08
3,465.02
0
-508.96
-508.96
0
-14.86
-14.69
32.71
1,458.45
252.72
4,699.94
66.03
-50.46
160.63
3,691.68
-33.32
1458.45
92.09
1008.26
5,538.46
1,458.18
4,699.94
125.14
2,750.98
1,092.20
1,658.78
48.14
2787.48
365.98
3041.16
77
101.33
33.51
183.34
159.95
52
57.33
27.31
Investments
deferred tax assets
Current assets, loans and advances
inventories
sundry debtors
cash and bank balances
other current assets
loans and advances
less: current liabilities and provisions
current liabilities
provisions
Net current assets
TOTAL
4,205.42
5,128.75
5.95
1,706.92
3,925.71
7.88
2498.5
-3874.42
-1.93
146.38
-98.70
-24.50
524.93
130.59
71.52
48.87
728.66
1,504.57
436.40
108.39
1,907.21
24.82
405.76
2,882.58
88.53
22.2
-1835.7
24.05
322.9
-2876.53
20.29
20.48
-96.25
96.90
79.58
-99.48
5,063.68
1,505
6,144.75
4,640.18
4,699.94
3,805.06
2,882.58
4,831.41
1,948.83
1,948.83
1258.62
-1377.6
1313.34
2691.35
2751.11
33.08
-47.79
27.18
138.10
141.17
TOTAL SOURCES OF FUND

5000
amount
4000
2956.06
3465.02
3000
2000
1000
0
2010
year
53
2011
TOTAL APPLICATION FUND

5000
4699.94
4000
amount
3000
2000
1948.83
1000
0
2010
year
2011
RESERVES AND SURPLUS

3500
3425.08
2916.12
3000
amount
2500
2000
1500
1000
500
0
2010
year
54
2011
8. Reserves & surplus are decreased by 14.86% in 2010 to 2011. It shows that company
9. Fixed assets are increased by 146.37% in 2010 to 2011. It points towards expanding
business operations.
10. Debtors are increased by 20.48% and loans & advances are also increased by 79.57%
in 2010 to 2011.
11. Net current assets are increased by 138.101% from 2010 to 2011.
12. Total application fund are increased by change in percentage of 141.67%.
March 31,
2010
March 31,
2009
ABSOLUTE
INCREASE/
DECREAES
CHANGE IN
%
SOURCES OF FUNDS
Shareholders' funds
share capital
39.94
39.94
3,425.08
3,760.81
3,465.02
3,800.75
66.3
78.49
160.63
153.08
3,691.68
4,032.32
-335.73
-8.93
-335.73
-8.83
-12.19
-15.53
7.55
4.93
-340.64
-8.45
Loan funds
unsecured
TOTAL
55
Fixed assets
gross block
2,750.98
2,516.27
less: depreciation
1,092.20
942.56
net block
1,658.78
1,573.71
48.14
120.54
1,706.92
1,694.25
3,925.71
3,368.75
7.88
8.65
inventories
436.40
326.83
sundry debtors
108.39
149.94
1,907.21
219.57
24.82
5.89
loans and advances
405.76
311.26
1,504.57
2,882.58
current liabilities
3,805.06
1,525.85
provisions
1,026.35
526.97
4,831.41
2,052.82
Net current assets
1,948.83
1,039.33
TOTAL
3.691.68
4,032.32

Investments
deferred tax assets
234.71
9.33
149.64
15.88
85.07
5.41
-72.4
-60.06
12.67
0.75
556.96
16.53
-0.77
-8.90
109.57
33.53
-41.55
-27.71
1687.64
768.61
18.93
321.39
94.5
30.36
-286753.43
-99.48
2279.21
149.37
499.38
94.76
2778.59
135.35
909.5
87.51
-340.64
-8.48
less: current liabilities and provisions
56
TOTAL SOURCES OF FUND

4000
4032.32
3691.68
3500
3000
amount
2500
2000
1500
1000
500
0
2009
2010
year
NET CURRENT ASSETS

1948.83
2000
amount
1500
1000
1039.33
500
0
2009
year
57
2010
SUNDRY DEBTORS
160
149.94
140
120
108.39
amount
100
80
60
40
20
0
2009
year
2010
2. Reserves & surplus are increased by 8.92% in 2009 to 2010. It shows that company
3. There is a slight increase of 0.74% in fixed assets from 2009 to 2010. It shows that
company trying to expand business operations.
4. Debtors are decreased by 27.71% and loans & advances are increased by 30.36% in
2009 to 2010.
5. Net current assets are increased by 87.50% in 2009 to 2010.
6. Total application fund increased by 8.44% in 2009 to 2010.
COMPARATIVE STATEMENT ANALYSIS 2008 OF HERO MOTO CORP LTD
58
March 31,
2009
March 31,
2008
ABSOLUTE
INCREASE/
DECREAES
CHANGE
IN %
SOURCES OF FUNDS
SHAREHOLDERS' FUNDS
share capital
39.94
39.94
3,760.81
2,946.30
814.51
27.65
3,.800.75
2,986.24
814.51
27.28
78.49
132.00
-53.51
-40.54
153.08
130.59
22.49
17.22
4,032.32
3,248.83
783.49
24.12
2,516.27
1,938.78
577.49
29.79
942.56
782.52
160.04
20.45
1,573.71
1,156.26
417.45
36.10
120.54
392.44
-271.9
-69.28
1,694.25
1,548.70
145.55
9.40
16.05
-100
loan funds
unsecured
TOTAL
FIXED ASSETS
gross block
less: depreciation
net block
pre operative expenses
(pending allocation)
16.05
3,368.75
2,566.82
801.93
31.24
8.65
5.22
3.43
65.71
inventories
326.83
317.10
9.73
3.07
sundry debtors
149.94
297.44
-147.5
-49.59
219.57
131.09
88.48
67.50
5.89
5.69
0.2
3.51
loans and advances
311.26
185.46
125.8
67.83
1,013.49
913.27
76.71
8.19
1,525.85
1,324.98
200.87
15.16
526.97
499.76
27.21
5.44
2,052.82
1,824.74
228.08
12.50
Net current assets
1,039.33
887.96
151.37
17.05
TOTAL
4,032.32
3,248.83
783.49
24.17
investments
deferred tax assets
current assets, loans and
advances
less: current liabilities and

provisions
CURRENT LIABILITIES
provisions
59
TOTAL SHARE HOLDER'S FUND

4000
3800.75
3500
3000
2986.24
amount
2500
2000
1500
1000
500
0
2008
2009
year
TOTAL INVESTMENTS
3500
3368.75
3000
amount
2500
2566.82
2000
1500
1000
500
0
2008
year
60
2009
Interpretation:1. Total share holders fund are increased by 27.27% in 2008 to 2009.
2. Reserves & surplus are increased by 27.64% in 2008 to 2009. It shows company
efficiency in maintaining the share profits.
3. Fixed assets are increased by 9.39% in 2008 to 2009. It shows that company trying to
expand business operations.
4. Debtors are decreased by 49.58% and loan & advances are increased by 67.83% in
2008 to 2009.
5. There is a slight increase in net current assets by 17.04% from 2008 to 2009.
6. Total application fund are increased by 24.11%in 2008 to 2009.
61
March31
,
2007
ABSOLUTE
INCREASE/
DECREAES
39.94
39.94
2,946.30
2,430.12
516.18
21.24
516.18
20.90
2,986.24
2,470.06
132
165.17
-33.17
-20.08
130.59
129.58
1.01
0.78
3,248.83
2,764.81
484.02
17.51
1,938.78
1,800.63
138.15
7.67
782.52
635.1
147.42
23.21
1,156.26
1,165.53
-9.27
-0.80
392.44
189.92
202.52
106.63
1,548.70
1,355.45
193.25
14.26
March 31,
2008
CHANGE IN
%
Sources Of Funds
Shareholders' Funds
Share Capital
Reserves And Surplus
Loan Funds
Unsecured
Deferred Tax Liabilities
Total
Fixed Assets
Gross Block
Less: Depreciation
Net Block
Capital Work In Progress
Pre Operative Expenses (Pending
Allocation)
16.05
16.05
2,566.82
1,973.87
592.95
30.03
5.22
1.38
3.84
278.26
317.1
275.58
41.52
15.07
Sundry Debtors
297.44
335.25
-37.81
-11.28
Cash And Bank Balances
131.09
35.78
95.31
266.38
Other Current Assets
5.69
3.6
2.09
58.06
Loans And Advances
185.46
263.06
-77.6
-29.50
936.78
913.27
23.51
2.57
1,324.98
1,041.92
283.06
27.18
499.76
1,479.16
-979.4
-66.21
1,824.74
1,479.16
345.58
23.36
887.96
585.89
302.07
51.56
3,248.83
2,764.81
484.02
17.51
Investments
Deferred Tax Assets
Current Assets, Loans And Advances
Inventories
Less: Current Liabilities And Provisions

Current Liabilities
Provisions
Net Current Assets
Total
62
SUNDRY DEBTORS
350
335.25
297.44
300
amount
250
200
150
100
50
0
2007
year
2008
TOTAL APPLICATION FUND

3500
3000
3248.83
2764.81
amount
2500
2000
1500
1000
500
0
2007
year
63
2008
Interpretation:1. Total share holder fund are increased by 20.89% in2007 to 2008.
2. Reserves & surplus are increased by 21.24% in 2007 to 2008. It shows that company
efficiency in maintaining the share profits.
3. Fixed assets are increased by 14.25%. It shows that company expanding business
operations.
4. Debtors are increased by 11.27% and loan & advances are increased by 29.47% in
2007 to 2008.
5. Net current assets are increased are increased by 51.55% in 2007 to 2008.
6. Total application fund are increased by 17.50% in 2007 to 2008.
COMMON SIZE STATEMENT ANALYSIS 2012 OF HERO MOTO CORP. LTD

Mar '12
Rs CR
Sources Of Funds
Change
in %
12 mths
Total Share Capital

39.94
39.94
0
0
64
Mar '11
Change
in %
12 mths
0.76
0.76
39.94
39.94
0
0
0.90
0.90
Reserves
Networth
Secured Loans
Unsecured Loans
Total Debt
Total Liabilities
4,249.89
0
4,289.83
994.85
0
994.85
5,284.68
12 mths
Gross Block
Net Block
Investments
Inventories
Sundry Debtors
Loans and Advances
Fixed Deposits
Deffered Credit
Current Liabilities
Provisions
6,308.26
2,522.75
3,785.51
193.95
3,964.26
675.57
272.31
56.1
1,003.98
926.99
20.72
1,951.69
0
3,520.66
1,090.07
4,610.73
2,659.04
0
5,284.68
Net Current Assets

Total Assets
80.42
81.17
18.83
18.83
100.00
119.37
47.74
71.63
3.67
75.01
12.78
5.15
1.06
19.00
17.54
0.39
36.93
66.62
20.63
87.25
-50.32
0.00
100.00
2,916.12
0
2,956.06
1,458.45
32.71
1,491.16
4,447.22
12 mths
5,538.46
1,458.18
4,080.28
125.14
5,128.75
524.93
130.59
47.75
703.27
783.48
23.77
1,510.52
0
5,316.40
1,081.07
6,397.47
4,886.95
0
4,447.22
Interpretation:1.
2.
3.
4.
5.
6.
There is no change in share capital

In 2011 reserves & surplus was 65.57% but in 2012 it was decreased to 80.42%.
Unsecured loan are increased from 0% to 0.74% 2011 to 2012.
In 2011 inventories was 12.78% and it has increased to 11.80% in 2012.
Sundry debtors in 2011 were 2.94% and it decreased to 5.15% in 2012.
Loans & advances in 2011 was 14.83% but in 2012 it was increased to 17.54%.
65
65.57
66.47
32.79
0.74
33.53
100.00
124.54
32.79
91.75
2.81
115.32
11.80
2.94
1.07
15.81
14.83
0.45
28.58
100.60
20.46
121.06
-92.47
0.00
100.00
March 31, 2011
66
Change in %
March 31,
2010
Change in %
SOURCES OF FUNDS
Shareholders' funds
39.94
0.85
39.94
1.082
2,916.12
2,956.06
62.05
92.78
62.90
3,425.08
3,465.02
32.71
0.70
66.03
1.79
1,458.45
31.03
252.72
5.38
160.63
4.35
4,699.94
100
3,691.68
100.00
gross block
5,538.46
117.84
2,750.98
74.52
less: depreciation
1,458.18
31.06
1,092.20
29.59
net block
4,699.94
100
1,658.78
44.93
125.14
2.66
48.14
1.30
4,205.42
89.48
1,706.92
46.23
5,128.75
109.12
3,925.71
106.34
5.95
0.13
7.88
0.21
inventories
524.93
11.17
436.40
11.82
sundry debtors
130.59
2.78
108.39
2.94
71.52
1.52
1,907.21
51.66
48.87
1.04
24.82
0.67
loans and advances
728.66
15.50
405.76
10.99
1,504.57
32.01
2,882.58
78.08
5,063.68
107.74
3,805.06
103.07
1,505
32.02
2,882.58
78.08
6,144.75
130.74
4,831.41
130.87
4,640.18
4,699.94
98.73
1,948.83
3691.68
52.79
share capital
93.86
Loan funds
unsecured
deferred payment credits
TOTAL
Fixed assets

Investments
deferred tax assets
Less: current liabilities and provisions

current liabilities
provisions
Net current assets
TOTAL
67
100
100

100
92.77
80
62.04
amount
60
40
20
0
2010
year
2011
UNSECURED LOANS
1.8
1.79
1.6
1.4
amount
1.2
1.0
0.8
0.69
0.6
0.4
0.2
0.0
2010
year
Interpretation:68
2011
7. There is slight increase in share capital

8. In 2010 reserves & surplus was 92.77% but in 2011 it was decreased to 62.04%.
9. Unsecured loan are decreased from 1.78% to 0.69% 2010 to 2011.
10. In 2010 inventories was 11.82% and it has decreased to 11.16% in 2011.
11. Sundry debtors in 2010 were 2.93% and it decreased to 2.77% in 2011.
12. Loans & advances in 2010 was 10.99% but in 2011 it was increased to 15.50%.
69
March 31,
2010
Change in
%
March 31,
2009
Change in
%
SOURCES OF FUNDS
Shareholders' funds
share capital
1.08
39.94
39.94
0.99
3,425.08
92.78
3,760.81
93.27
3,465.02
93.86
3,800.75
94.26
66.3
1.80
78.49
1.95
160.63
3,691.68
4.35
153.08
4,032.32
3.80
100
gross block
2,750.98
74.52
2,516.27
62.40
less: depreciation
1,092.20
29.59
942.56
23.36
net block
1,658.78
44.93
1,573.71
39.03
48.14
1.30
120.54
2.10
1,706.92
46.24
1,694.25
42.02
3,925.71
106.34
3,368.75
83.54
7.88
0.21
8.65
0.21
inventories
436.40
11.82
326.83
8.11
sundry debtors
108.39
2.94
149.94
3.72
1,907.21
51.66
219.57
5.45
24.82
0.67
5.89
0.15
405.76
10.99
311.26
7.72
1,504.57
40.76
2,882.58
71.48
current liabilities
3,805.06
103.07
1,525.85
37.84
provisions
1,026.35
27.80
526.97
13.07
4,831.41
130.87
2052.82
50.91
Net current assets
1,948.83
52.79
1,039.33
25.77
TOTAL
3.691.68
100
4,032.32
100
Loan funds
unsecured
TOTAL
100
Fixed assets

Investments
deferred tax assets
Current assets, loans and
advances

loans and advances
provisions
70
CURRENT LIABILITIES
103.07
100
amount
80
60
40
37.84
20
0
2009
2010
year
DUNDRY DEBTORS
4.0
3.71
3.5
2.93
3.0
amount
2.5
2.0
1.5
1.0
0.5
0.0
2009
year
71
2010
Interpretations:1.
2.
3.
4.
5.
6.
In 2009 share capital was 0.99% and in 2010 it was increased to 1.08%.
Reserves & surplus in 2009 was 93.26% but in 2010 it was decreased to 92.77%.
Unsecured loan are decreased from 1.94% in 2009 to 1.79% in 2011.
In 2009 inventories was 8.10% and in 2010 it was increased to 11.82%.
Sundry debtors in 2009 were 3.71% and it is decreased to 2.93% in 2010.
Loans & advances in 2009 was 7.71% and in 2010 it is increased to 10.99%
72
Change in %
March 31,2009
SOURCES OF FUNDS
Shareholders' funds
share capital
Loan funds
unsecured
TOTAL
fixed assets
gross block
less: depreciation
net block
Investments
deferred tax assets
advances
inventories
sundry debtors
loans and advances
provisions
current liabilities
provisions
Net current assets
TOTAL
March 31,
2008
Change in %
39.94
3,760.81
3,800.75
0.99
93.27
94.26
39.94
2,946.30
2,986.24
1.23
90.69
91.92
78.49
153.08
4,032.32
1.95
3.80
100
132.00
130.59
3,248.83
4.06
4.02
100
2,516.27
942.56
1,573.71
120.54
1,694.25
62.40
23.38
39.03
2.99
42.02
1,938.78
782.52
1,156.26
392.44
1548.70
59.68
24.09
35.59
12.08
47.67
0.49
3,368.75
8.65
83.54
2.00
16.05
2,566.82
5.22
79.00
0.16
326.83
149.94
219.57
5.89
311.26
1,013.49
8.12
3.72
5.45
0.15
7.72
25.13
317.10
297.44
131.09
5.69
185.46
936.78
9.76
9.16
4.03
0.18
5.71
28.83
1,525.85
526.97
2,052.82
1,039.33
4,032.32
37.84
13.07
50.91
25.77
100
1,324.98
499.76
1,824.74
887.96
3,248.83
40.78
15.38
56.17
27.33
100
73
INVENTORIES
10
9.76
8.11
amount
0
2008
year
2009
LOANS AND ADVANCES

8
7.72
7
6
5.71
amount
5
4
3
2
1
0
2008
2009
year
74
Interpretation:1.
2.
3.
4.
5.
6.
In 2008 share capital was 1.22% and in 2009 it is decreased to 0.99%

Reserves & surplus was 90.68% in 2008 but in 2009 it was increased to 93.26%.
Unsecured loans are decreased from 4.06% in 2008 to 1.94% in 2009.
In 2008 inventories was 9.76% and in 2009 it was decreased to 8.10%.
Sundry debtors in 2008 were 9.15% and it is decreased to 3.71% in 2009.
Loans & advances in 2008 was 5.70% and in 2008 it increases to 7.71%.

75
March 31,
2008
Change in
%
March 31,
2007
Change in
%
SOURCES OF FUNDS
Shareholders' funds
39.94
1.23
39.94
1.44
2,946.30
90.69
2,430.12
87.89
2,9862.4
91.92
2,470.06
89.34
unsecured
132.00
4.06
165.17
5.97
130.59
4.02
129.58
4.69
3,248.83
100
2,764.81
100
1,938.78
59.68
1,800.63
65.13
782.52
24.09
635.10
22.97
1,156.26
35.59
1,165.53
42.16
392.44
12.08
189.92
6.87
1,548.70
47.67
1,355.45
49.03
share capital
Loan funds
TOTAL
Fixed assets
gross block
less: depreciation
net block
0.49
16.05
2,566.82
79.00
1,973.87
71.39
5.22
0.16
1.38
0.05
inventories
317.10
9.76
275.58
9.98
sundry debtors
297.44
9.16
335.25
12.13
131.09
4.03
35.78
1.29
5.69
0.18
3.60
0.13
loans and advances
185.46
5.71
263.06
9.51
936.78
28.83
913.27
33.03
1,324.98
40.78
1,041.92
37.69
499.76
15.38
1,479.16
53.50
1,824.74
56.17
1,479.16
53.50
887.96
27.33
585.89
21.19
3,248.83
100
2,764.81
100
Investments
deferred tax assets
advances

provisions
current liabilities
provisions
Net current assets
TOTAL
76

90.69
87.89
80
amount
60
40
20
0
2007
year
2008
OTHER CURRENT ASSETS

0.16
0.16
0.14
0.13
0.12
amount
0.10
0.08
0.06
0.04
0.02
0.00
2007
year
77
2008
Interpretation:1.
2.
3.
4.
5.
6.
In 2007 share capital was 1.44% and in 2008 it decreases to 1.22%.

In 2007 reserves & surplus was 87.89% but in 2008 it was increased to 90.68%.
Unsecured loans are decreased from 5.97% in 2007 to 4.06% in 2008.
In 2007 inventories was 9.96% and in 2008 it was slightly decreased to 9.76%.
Sundry debtors on 2007 were 12.12% but in 2008 it decreased to 9.15%.
Loans & advances in 2007 was 9.51% and it decreases to 5.70% in 2008.
78
CHAPTER-VI
FINDINGS
SUGGESTIONS
CONCLUSION
FINDINGS
1. Net working capital and negative for all the three years. So company should
thoroughly look into increase the current assets and decreases the current
liabilities.
2. Gross profit 63.33% in 2007-08, 86.26% in 2008-09, 88.79% in 2009-10 and
98.79% in 2010-11& 82.32 in 2011-12. So gross profit is showing an increasing
trend.
3. The current liabilities more than current assets the working capital is negative
4. The company has turned up with a minimum profit in the years 2006-2010 and
within the remaining financial years over all financial Position is satisfactory.
79
5. The comparative balance sheet of the reveals that during the year 2008, fixed
assets increased by RS. 2589.36crores.While long term liability from outsides

(loans) has increased by 5663.68crores and there is neither increase nor decrease
in share capital. The pattern of investment towards Fixed Assets reveals that long
term sources of funds are utilized for fixed assets.
6. The percentage of current assets to total assets was increased in 2012. The
percentage of current liabilities to total liabilities has also decreased in 2008.Thus
the proportion of current assets has decreased by 27.82 %, where as decrease in
the current liabilities is 30.54 % in the years the company liquidity position is
satisfactory
80
CONCLUSION
Even though company is utilizing its own funds there is very need that company
should improve its liquidity position, debtors collection period and proper management of
its current assets and current liabilities.
The external debt of the company decreased gradually. This is mainly due to repayment
of a portion of term loans. Another reason for decrease in external debt is due to increase
in reserves and surplus.
The year was 356.24crores this indicates there is possible growth of the company in the
market during 2011-2012.
Hero Moto Corp ltd. has under taken research program, modernization and technology
up gradation, for the above said expansion programs it has made use of surplus funds
only and did not go for outsiders debts, which is one of the good long-term financial
policy of Hero Moto Corp ltd.
81
SUGGESTIONS
1. Company may look into increasing various forms of currents assets and
decreasing current liabilities to effective manage working capital requirement.
2. Company may maintain current gross profit in the coming financial years.
3. To meet the short term requirements the company has to raise short term as well
as long term loans.
4. To attract to the new customers the company has to adapt new products and new
technology.
BIBLIOGRAPHY
82
Khan, M Y and P K Jain, Financial Management, Tata McGraw-Hill

Publishing Co., New Delhi, 2007.
I M Pandey, Essentials of Financial Management, Vikas Publishing House Pvt.
Ltd,
New Delhi, 1995.
Jain.S.P & Narang.K.L financial accounting and analysis(2001), 2nd revised.
Edition, kalyani publishers.
WEBSITES:
www.herohonda.com
www.heromot corp.com
83

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CHAPTER-I

analysis of short term liquidity position of the form to a

What is the financial position of the firm at a given point of time?

To answer these questions, accountant prepares two principle statements, the

Analysis of financial statement

Procedure of Financial Statements Analysis

The information is interpreted in a simple and understandable way.

significance and utility of financial data is explained for helping decision-taking.

The conclusions drawn from interpretation are presented to the management in

Objectives of the study:

To analysis the financial statements and present its financial positions.

To assess and evaluate the performance of the company.

To determine the efficiency of operations as reflected in the financial statements.

To offer appropriate suggestions for better performance of the company.

Need and importance of the study:

Significance and meaning of the financial statements.

Scope of the study:

Comparative financial statements.

Common-size financial statements.

Trend percentage analysis.

Statement of changes in financial position.

Cost-volume-profit relations, and

Ratio analysis and others.

Comparative financial statements.

Common-size financial statements.

Trend percentage analysis.

Statement of changes in financial position.

Cost-volume-profit relations, and

Ratio analysis and others.

Limitation of the study:

It is only a study of interim reports.

Different people may interpret the same analysis in different ways.

It does not consider the changes in prices level.

Changes in accounting procedure by firm may often make financial analysis

Financial Statement Analysis

OBJECTIVES OF FINANCIAL STATEMENT

Broadly the objective of the Analysis of Financial statement is to understand

To find out the relative importance of different components of the financial

To identify the reasons for change in the profitability\financial position of the

To examine the solvency of the firm.

Significance of financial analysis

Inter-firm comparison: The financial analysis makes easy to inter-firm

Financial statement it is possible to known:

Whether current assets are sufficient to meet current liabilities.

Proportion of liquid assets to current assets.

Futures prospects of the business.

Whether debentures and other loans are secured or not.

Managerial efficiency of the company.

Bankruptcy and failure: Financial statement analysis is a significant tool in

Helps in forecasting: The financial analysis will help in assessing future

Types of financial analysis:Financial analysis into different categories depending upon

The material used and

The method of operation followed in the analysis or the modus operandi of

Types of financial analysis

On the basis of material used

on the basis of modus operandi

On the basis of material used:

accounting records of a business firm is known as internal analysis.

On the basis of modus operandi:

Horizontal analysis:Horizontal analysis refers to the comparison of financial data of a

Parties interested in financial analysis:

Investors present as well as prospective, are interested in the business in the