Escolar Documentos
Profissional Documentos
Cultura Documentos
(2007 2009)
SUBMITTED BY
CHANDAN MISHRA
(LECTURER RBMI)
ROLL NO-0721170015
MBA IV SEM
SUBMITTED TO
TABLE OF CONTENTS
1. Preface..
2. Introduction
2.1CompanyProfile..
2.2 Company History...
2.3Hierarchal Structure...
2.4 Truly Yamaha.
2.5 Departmental Set of Divisions...
2.6 YMC Products
3. Ratio Analysis
11. Annexure
ACKNOWLEDGEMENT
Preparing a report is always a team effort and its takes some people collaborating behind
to preparing this project. This is my chance to say thanks to all of them.
I am thankful to Dr. Saurav Gupta (Director of R.B.M.I. Greater noida) and Mr. Vijaykant
Bhardwaj (Guide, Lecturer, R.B.M.I. Institute of management) for his valuable guidance
and support in completing my research.
Last but not least I am thankful to all those who have directly or indirectly lent me a
helping hand at the hour of need in completing this project successfully.
DECLARATION
Hereby declare that the project report entitled A COMPREHENSIVE ANALYSIS OF
FINANCIAL RATIOS OF YAMAHA MOTOR INDIA PRIVATE LIMITED submitted
for the degree of Master of Business Administration, is my original work and the
Research report has not formed the basis for the award of any diploma, degree, associate
ship, fellowship or similar other titles. It has not been submitted to any other university or
institution for the award of any degree or diploma.
Place:
Date:
MBA-IV SEM
certificate
Preface
The research of analysis of financial ratios is totally based on the secondary data. All the
information regarding the research are collected from the internet and the research
journals of the company and various websites.
The study was undertaken in different areas like- introduction of the ratios analysis,
importance and objective of the ratio analysis, type of ratio analysis, and calculation of
the financial ratios, working capital, calculation of the conversion periods, and
calculation of the operating cycle.
The new philosophy also presents a futuristic face of the new Yamaha and will manifest
itself in all customer and employee interfaces. In fact, the company has already
introduced this philosophy in their new website www.yamaha-motor-india.com.
Yamaha Motor made its initial foray into Indian in 1985. Subsequently in 1996, it
entered into a 50:50 joint venture with the Escorts Group. However, by mutual
consent, Yamaha acquired stake in the remaining half as well three years ago,
bringing the Indian operation sunder its complete control as a 100% subsidiary of
Yamaha Motor Co., Ltd., Japan. The company pioneered the performance bike
segment with the launch of its 100cc 2-stroke motorcycle RX 100. Since then, it has
introduced an entire range of 2-stroke and 4-stroke bikes in India. Today, its
product kitty includes CRUX in the Basic segment, Libero & RX 135 in the
Standard segment and Enticer in the pleasure segment. With the launch of various
4-stroke motorcycles, which give true value for money in terms of superior mileage,
performance & durability, the company has gained the reputation of a reliable 4stroke Motorcycle manufacturer.Holding aloft the spirit of commitment to customer
satisfaction - Yamaha Motor India is enriching lives of people with the same
ingenuity and enthusiasm as its parent company - Yamaha Motor Corporation,
Japan. Having operated in India as technology provider for almost two decades,
YMI was incorporated in August 2001 as 100'% subsidiary of YMC, Japan. Since
then we have been in the process of redefining our business processes and extending
the awe and power associated with the legacy of the Yamaha Group.
Logo
The original logo was submitted to the Government of India by Escorts Ltd. due to its
graphical resemblance of Ashoka Chakra. Next logo was the result of conceptualized
planning and graphic designing which remained in the use for 20 years.
At the time of 50:50 joint venture of Escorts Limited with YMC, Japan a new company
Escorts Yamaha Motor Limited was formed which came up with a new logo representing
both the companies. Again in the year 2000, equity of the company has changed resulting
Yamaha74% and Escorts26%, thus changing the logo and the companys name to YMEL.
10
Now, the company being 100% subsidiary holder is known as the Yamaha Motor India
(Pvt.) Limited. The logo of YMC has been adopted by YMI.
Our corporate mission is same as the mission of Yamaha Motor Company, Japan.
We Create KANDO Touching Peoples Hearts.
KANDO is Japanese word for expressing feelings of excitement and deep satisfaction.
HISTORY
11
Ever since its founding as a motorcycle manufactures on July 1, 1955. Yamaha Motor
Company has worked to build products which stand among the very best in the world
through its constant pursuit of quality; and at the same time, through these products, it
has sought to contribute to the quality of life of people all over the world. Following on
the success of motorcycles, Yamaha began manufacturing powerboats and outboard
motors in 1960. Since then we have used our engine and FRP technology as a base to
actively expand and diversify our areas of business. Today our fields of influence extend
from the land to the sea and even into the skies as our business divisions have grown
beyond our motorcycles operations to include Marine operations, Power Product
operations, Automotive Engine operations, Intelligent Machinery Operations, Sky
operations and our PAS operations.
BUSINESS:
Manufacturing and sales of motorcycles, scooters, electro-hybrid bicycles, boats, sail
boats, water vehicles, pools, utility boats, fishing boats, outboard motors, diesel engines,
four wheel ATVs, side-by-side vehicles, racing karts, golf cars, multi-purpose engines,
generators, water pumps, snowmobiles, small-sized snow throwers, automotive engines,
intelligent machinery, industrial-use remote control helicopters, electrical power units for
wheelchairs, helmets.
Import and sales of various types of products, development of tourist businesses and
management of leisure, recreational facilities and related services.
12
HIERARCHIAL STRUCTURE
Managing Director & CEO
Executive Committee
TOP MANAGEMENT
SENIOR
MANAGEMENT
General Manager
Deputy General Manager
MIDDLE
MANAGEMENT
Manager (M3-M5)
Assistant Manager (M2)
Senior Superintendent (JM IV)
JUNIOR MANAGEMENT
OPERATIVE STAFF
(Unionised Cadre)
13
Manufacturing
Plant Engineering & maintenance
Product Planning &Control
Stores & Inventory control
Quality Assurance
Quality Control
Inspection
14
Marketing
Industrial Relations
Administration
Security
Human Resource
Project Planning
Finance
Corporate Planning
Business Planning
Corporate Finance
Accounts
Company Secretariat
Materials
Purchase
Materials Development
15
YMC PRODUCTS
LAND
MARINE
16
17
RATIO ANALYSIS
INTRODUCTION
In valuing and assessing the financial health of any company, various types of analyses
are necessary to develop a competent report and conclusion, whether it is digging into the
qualitative aspects of a company, or the quantitative. With the quantitative, it considers
examining the measurable dynamics of a company. How we pull out the quantitative
aspect will come largely from calculations using the items on a companys financial
statements (i.e. income statement, balance sheet, statement of cash flows). As we
probably know, the majority of the ratios calculated in this report will be looking at items
from a financial statement and understanding the relationship between them. Like any
research, quantitative analysis will produce excellent results when combined with other
methods and techniques in studying a company.
A ratio is a simple arithmetical expression of the relationship of one number to another
and is obtained by dividing the former by the later. In other words, ratios are simply a
means of highlighting, in arithmetical terms, the relationship between figure drawn from
financial statements; whereas ratio analysis is the process of determining and presenting
the relationship of item or group of items in the financial statements. The relationship
may be of two types
(i) Associate relationship; and
(ii) Cause / effect relationship.
Both the relationships are expressed in terms of ratios.
Steps in Ratio Analysis:- The Ration Analysis requires two steps as follows:
I. Calculation of a ratio, and
II. Comparing the ratio with some predetermined standard- The standard
ratio may be the past ratio of the same firm or industrys average ratio or a projected ratio
or the ratio of the most successful firm in the industry. In interpreting the ratio of a
particular firm, the analyst can not reach any fruitful conclusion unless the calculated
18
1.As Ratio or Proportion: In this form, the relationship between two figures is
expressed in a common denominator. It is obtained by the simple division of one number
by another so that the proportionate relationship becomes clear. For example, if current
assets are Rs. 16,000 and current liabilities are Rs. 4,000, the ratio between current assets
and current liabilities i.e. current ratio will be 4:1 (16000/4000).
2.As Ratio or Turnover: In this form, a ratio is calculated between two numerical
facts for which one item is divided by another and the quotient so obtained is taken as
unit of expression. When ratio is expressed in this form, it is called turnover and is
written in times. For example, sales for the year are Rs. 80.000 and fixed assets are Rs.
20,000; it indicates that sales are 4 times of fixed assets.
3.As Percentage: In this form, the relationship between two items is expressed in
percentage for which one item is divided by another and the quotient is multiplied by one
hundred. For example, if sales are Rs. 80.000 and gross profit is Rs. 20.000, then
percentage of gross profit to sales i.e. gross profit ratio will be (20.000/80.000 x 100)
25%.
In financial analysis, these ratios highlight the financial position of the business and
hence known as financial ratios. These are also called accounting ratios, because they are
based on the data taken from financial accounts. Similarly, they measure the relative
importance of the items expressed in financial statements, hence called structural ratios.
Types of Comparisons: This is the second step of ratio analysis i.e. the comparison
with some standard. The ratio can be compared in three different ways.
the same point of time. So, it involves the comparison of two or more firms financial
ratios at the same point of time. The Cross-Section Analysis helps the analyst to find out
as to how a particular firm has performed in relation to its competitors. The firms
performance may be compared with the performance of the leader in the industry in order
to uncover the major operational inefficiencies. In this type of an analysis, the
comparison with a standard helps to find out the quantum as well as direction of
deviation from the standard. It is necessary to look for the large deviations on either side
of the standard because excessive deviations below or above the standard could mean a
major concern for attention. The Cross-Section Analysis is easy to be undertaken as most
of the data required for this may be available in financial statements of the firm.
C. Combined Analysis: If the Cross-Section and Time Series Analyses, both are
combined together to study the behavior and pattern of ratios, then meaningful and
comprehensive evaluation of the performance of the firm can definitely be made. A trend
of ratios of a firm compared with the trend of the ratios of the standard firm can give
good results. For example, the ratio of Operating expenses to Net Sales for a firm may be
higher than the industry average however, over the years it has been declining for the
firm, whereas the industry average has not shown any significant changes.
20
To Measures Profitability
22
Ratio analysis is an important tool of financial analysis. The inter relationship that exists
among different items in the financial statements is revealed by accounting ratios. In
accounting and financial management, ratios are regarded as the real test of earning
capacity, financial soundness and operating efficiency of a business concern. That is why,
a number of parties such as shareholders, creditors, financial executives are interested in
ratio analysis with a view to take judicious decisions.
(2) Measures Liquidity Position: Ratio analysis helps in measuring the liquidity
position of the firm. Liquidity position of a firm is said to be satisfactory if it is able to
meet its current obligations as and when they mature. A firm is said to be capable of
meeting its current obligations only, if it has sufficient liquid funds to pay its short-term
obligations with interest within a period of year. Hence, these ratios are used for the
purpose of credit analysis by banks and other short-term lenders.
(4) Measures Operational Efficiency: Ratios are useful tools in the hands of
management to evaluate the firms performance over a period of time by comparing the
present ratios with the past ratios. Various activity or turnover ratios measure the
operational efficiency of the firm. These ratios are used, in general, by bankers, investors
and other suppliers of credit.
23
(7)Trend Analysis: Ratio analysis enables a firm to take the time dimension into
account. Trend analysis of ratios reveals whether financial position of the firm is
improving or deteriorating over years. With the help of such analysis, one can ascertain
whether the trend is favorable or adverse. For example, any particular ratio may be less
than general ratio but the trend may be increasing. On the contrary, present level may be
satisfactory but trend may be declining.
Types of Ratios
Liquidity
Liquidity
Ratios
Ratios
Leverage
Leverage
ratios
ratios
Profitability
Profitability
Ratios
Ratios
Efficiency
Leverage
ratios
Efficiency
Market
Market
Value
Value
ratios
ratios
24
The leverage ratio, or gearing level, effectively measures the fixed debt payment
commitment. Too high a gearing level can imply a high risk to the cash flow of a
company and its ability to pay dividends to shareholders.
There are two aspects of the long-term solvency of a firm:
(i)
(ii)
Capital structure or leverage ratios throw light on the long-term solvency of a firm.
Accordingly, there are three different types of leverage ratios.
Benchmark: 1; A ratio greater than 1 indicates the companys assets are mainly
financed with debt, while a ratio less than 1 indicates the companys assets are
primarily supplied with equity.
25
If the D/E ratio is high, the owners are putting up relatively less money of their own. It is
danger signal for the lenders and creditors. If the project should fail financially, the
creditors would lose heavily.
A low D/E ratio has just the opposite implications. To the creditors, a relatively high stake
of the owners implies sufficient safety margin and substantial protection against
shrinkage in assets.
(b)Debt to total assets ratio- this ratio is not much different from the Total Debt to
Equity ratio. Essentially, it tells us what portion of the companys assets is financed
through debt.
26
Benchmark: 1. The lower the ratio, the more of a burden the companys interest
debt is on the company. If a company does not have any long-term debt, this ratio does
not apply, because there is no item that will incur interest.
Liquidity Ratios
Liquidity ratios measure the ability of a firm to meet its short-term obligations and help a
good financial modeler assess this aspect of a companys performance from the results of
a financial model or financial statements.
There are 2 common liquidity ratios that a financial modeler is likely to come across.
a) Current ratio
b) Quick ratio
(a) Current Ratio
The current ratio gives an indication of whether the business will be able to pay its
debts in the short term (i.e. the next 12 months). Clearly, this ratio should be as high as
possible, and a prudent ratio is 2 : 1
27
of the fact that the company cannot pay off its short-term debt if necessary. If a company
has a ratio of 2.5, one can say the company can pay off its liabilities more than two
times over.
Profitability Ratios
The objective of profitability relates to a companys ability to earn a satisfactory income
so that investors and stockholders will continue to provide capital. It is also closely linked
to its liquidity because earnings ultimately produce cash flow.
Return on shareholders equity measures the return on the owners (both preference and
equity shareholders) investment in the firm.
X 100
Total assets
X 100
Net sales
Benchmark: The industry average is generally used to gauge whether the companys
profit margin is adequate or not. A low profit margin may not necessarily reflect that the
company itself is doing poorly in either business or too many expenses, but rather a
29
possible pricing strategy with their product/service or the impact competition is having on
them.
Efficiency Ratios
Activity ratios measure the speed with which various accounts/assets are converted into
sales or cash.
There are 2 common liquidity ratios that a financial modeler is likely to come across.
30
31
Benchmark: The industry average is generally used to gauge whether the companys
profit margin is adequate or not. Generally, the market value (stock price) of the company
is probably going to be significantly higher than the book value, particularly in a bull
(strong) market. In a bear (weak) market, the market and book value will probably be
close to equal. If the market value is below the book value, this may be a potential sign of
undervalue.
32
1. Current Ratio:
It is the most common and popular measure of studying the liquidity of a firm. It is
calculated as follows:
Current Assets
Current Liabilities
CURRENT
2008
LIABILITIES
C/L
164.11
Provisions
38.05
2007
CURREN
2008
2007
114.07
16.11
T ASSETS
Inventory
Sundry
118.88
52.04
146.36
114.71
Debtors
33
Cash
TOTAL
202.16
130.18
and 8.42
5.63
Bank Bal.
Other C/A
11.32
Loan
& 34.43
21.66
44.39
Advances
TOTAL
332.75
225.09
The current ratio throws light on the firms ability to pay its current liabilities out of
its current assets.
34
INTERPRETATION
2008: The Current Ratio of 2008 is 1.11. It implies that for every Rupee 1 worth of
current liability, there are current assets worth Rupees 1.11 i.e. Current Assets are 1.11
times of current liabilities. This also implies that the firm will be able to pay off its
current liabilities in full, even if it realizes its current assets at 90% of their book value.
2007: The Current Ratio of 2007 is 2.55. It implies that for every Rupee 1 worth of
current liability, there are current assets worth Rupees 2.55 i.e. Current Assets are 2.55
times of current liabilities. This also implies that the firm will be able to pay off its
current liabilities in full, even if it realizes its current assets at 40% of their book value.
Therefore, the higher the current ratio, the larger the amount of rupees available per rupee
of current liabilities, the more the firms ability to meet current obligations and the
greater the safety of funds to short-term creditors. By analyzing above ratio, we can say
that the firm was in better position in the year 2007 as compared to 2008.
2. Quick Ratio:
It is also called the Acid Test Ratio or Liquidity Ratio. This ratio establishes the
relationship between quick/liquid current assets and the current liabilities. A current
asset is considered to be liquid if it is convertible into cash without loss of time and
35
value, on the basis of this definition of liquid assets, the inventory is singled out of
total current assets as the inventory is considered to be potentially illiquid. The reason
for keeping inventory out is that it may become obsolete, unsaleable or out of fashion
and always requires time for realizing into cash. Another item which is generally kept
out is the prepaid expenses because by nature these prepaid expenses are not
realizable in cash. So, the quick ratio looks for the ready availability or convertibility
into cash. It may be calculated as follows:
Quick Assets
Current Liabilities
36
CURRENT
LIABILITIES
C/L
Provisions
2008
164.11
38.05
2007
QUICK
2008
2007
114.07
ASSETS
Sundry
52.04
114.71
16.11
Debtors
Loan & 34.43
44.39
Advances
Cash and 8.42
5.63
Bank
Bal.
Other
11.32
21.66
106.21
186.39
C/A
TOTAL
202.16
130.18
TOTAL
The Quick Ratio is considered to be a better test of liquidity than the Current Ratio.
INTERPRETATION
37
2008: In the year 2008, quick assets are 0.52 times of total current liabilities. It implies
that if inventory is not taken into consideration, the firm will not be able to pay its current
liabilities in full.
2007: In the year 2007, quick assets are 1.43 times of total current liabilities. It implies
that the firm will be able to pay its current liabilities in full even if the inventory will not
realize any cash.
By analyzing the above data we can say that the firm was in better condition in 2007 as
compared to 2008.
3.
38
This ratio is also known as Super Quick Ratio or Cash Ratio or Cash Reservoir Ratio.
This ratio considers only the absolute liquidity available with the firm. The cash and bank
are no doubt, the most liquid assets and the marketable securities are also considered as
highly liquid asset. In order to have an idea of immediate liquidity, therefore, the cash and
bank balance and marketable securities are compared with the total current liabilities. It is
calculated as follows:
Total
2008
202.16
2007
130.18
Cash
Current
Bank
Liabilities
Balance
2008
& 8.42
2007
5.63
39
The Current Ratio, Liquidity Ratio and Absolute Liquidity Ratio, generally indicate the
adequacy of Current Assets for meeting current liabilities. This is one dimension of
liquidity analysis. The other dimension of liquidity is the determination of the rate at
which various assets are converted into cash. This is measure by Inventory Turnover
Ratio and many other ratios.
A Turnover Ratio or an Activity Ratio is a measure of movement and thus indicates as to
how frequently an account has moved/turned over during a period. It shows as to how
efficiently and effectively the assets of the firm are being utilized. The Activity Ratios
therefore, measure the effectiveness with which the firm uses its resources. These ratios
are usually calculated with reference to sales / cost of goods sold and is expressed in
terms of rate or times. The Activity Ratios may be calculated for all the specific assets;
however, some of the important activity ratios are as follows:
40
2008
146.36
118.88
479.56
2007
93.87
114.71
575.61
41
Inventory Turnover Ratio is a test of efficient inventory management, the higher the
Inventory Turnover Ratio, the better it is. The Inventory turnover Ratio indicates the
stock velocity with which stock moves through the business using the following formula:
Stock velocity =
42
INTERPRETATION
This ratio reveals the number of times finished goods is turned over during a given
accounting period in relation to sales. It also indicates whether investment in
inventory is within proper limit or not. Therefore, a high inventory turnover ratio is
better than a low ratio. A high ratio reflects efficient business activities and is an
indication of under-investment in inventory. The quantum of inventory remains low
due to high Inventory Turnover and it adversely affects the ability of the firm to meet
customers demand. On the contrary, a low ratio reflects dull business, over
investment in inventory wrong valuation of stock and stock of unsaleable and
obsolete goods. The Inventory Turnover Ratio is also an index of profitability as a
high ratio indicates more profits.
In the year 2008, the ratio is 3.82 and stock velocity is 94 days, which indicates that
the finished goods are converted into sales in every 94 days. Whereas, in the year
2007, the ratio is 4.13 and stock velocity is 87 days, which indicates that the finished
goods are converted into sales in every 87 days. So we can say that the company was
in better position in 2007 as compared to 2008.
43
Credit Sales
Average Debtors
PARTICULARS
Opening Debtors
Closing Debtors
Credit Sales
2008
114.71
52.04
622.76
2007
123.22
114.71
696.01
INTERPRETATION
44
2008: In the year 2008, the ratio is 7.46, which indicates that debtors get converted into
cash 7 times in a year.
2007: In the year 2007, the ratio is 6.02, which indicates that debtors get converted into
cash 6 times in a year.
A higher debtors turnover ratio shows the efficiency in collection from debtors i.e.
debtors are being collected more promptly. On the other hand, lower ratio indicates
inefficiency of management in collection of payment against credit sales in time or
payments by debtors are delayed.
Evaluation of the Receivables Turnover Ratio can be made better and meaningful in
terms of Average Collection Period, which is calculated as follows:
095
360
RT Ratio
Average Collection Period means the number of days over which debtors and bills
receivable remain uncollected.
45
INTERPRETATION
2008: In 2007, the Average Collection Period is 49 days, which indicates that on an
average the firm has collected it debtors in a period of 49 days.
2007: In 2007, the Average Collection Period is 60 days, which indicates that on an
average the firm has collected it debtors in a period of 60 days.
Yamaha is having a credit policy of allowing credit only for 30 days, and some
analysts suggest that debtors collection period should not be greater than 1.33 times
the firms normal credit period. It means that in the case of Yamaha Motors it should
not exceed 40 days in the year. But in the year 2007, it is 60 days, which is just
double of normal credit period, and in the year 2008, it is 49 days. By analyzing
above data we can say that the company has improved by reducing the Average
Collection Period by 11 days, but still it is not satisfactory. So, in order to bring it to
the 40 days, they should strict their credit policy.
Credit Purchase
Average Creditors
PARTICULARS
Opening Stock
2008
Of 100.10
2007
125.30
Creditors
Closing
of 154.26
100.10
Stock
46
Creditors
Net Credit Purchases
479.56
575.61
INTERPRETATION
47
It means that the payable of the firms have been turned over 3.77 times during 2008 and
5.52 times during 2007. A higher turnover ratios shows the availability of less credit or
early payments. This boosts up the credit worthiness of the firm. On the other hand, a
very low turnover ratio implies availability of more credit or delayed payments.
Thus, the lower the ratio, the better is the liquidity position of the firm, and the higher the
ratio, the lesser is the liquidity position of the firm.
So, by analyzing above data, we can say that the firm was in better position in the year
2008 as compared to the year 2007.
Evaluation of the payables turnover ratio can be made better and meaningful in terms of
average payment period, which is calculated as follows:
360
PT Ratio
INTERPRETATION
48
2008: In the year 2008, the Average Payment Period is 96 days, which indicates that
on an average, the firm made payments to its creditors in a period of 96 days.
2007: In the year 2007, the Average Payment Period is 65 days, which indicates that
on an average, the firm made payments to its creditors in a period of 65 days.
INTERPRETATION
49
In the year 2008, the firm is having working capital turnover ratio of 6.50, whereas, in
the year 2007, it is having working capital turnover ratio of 4.14, which states that the
firm is in better position in the year 2008 as compared to the year 2007.
WORKING CAPITAL
Gross Working Capital: The gross working capital refers to the firms investment in
current assets. Current assets are the assets which, in the ordinary course of business can
be converted into cash during an accounting year. These include cash and bank balance,
short-term investments, debtors, bills receivable, loans and advances, inventory (raw
materials, spare parts, work-in-progress, finished gods) etc. According to this concept, all
the current assets of the business, whether they have been financed either from long-term
funds or from short-term funds, form the working capital of the firm.
2008= 225.09
50
2007 = 332.75
It means that the total of all the current assets in the year 2008 is 225.09 crores, whereas,
the total of all the current assets in the year 2007 is 332.75 crores. It also states that the
company has Rs. 225.09in the year 2008 and Rs.332.75crores in the year 2007 for its
operations.
Net Working Capital: Net working capital is the difference between current assets
and current liabilities or the excess of total current assets over total current liabilities. It
may be noted that current liabilities refer to the claims of outsiders which are payable
within a short period of normally one accounting year out of current assets or income of
the business. These include creditors, bills payable, bank overdraft, outstanding expenses,
etc. The extent, to which the payments to these current liabilities are delayed, the firm
gets the availability of funds for that period. So, a part of funds required to maintain
current assets is provided by the current liabilities and the balance is provided from longterm sources. There, net working capital may also be defined as, that part of a firms
current assets which is financed with long-term funds. The net working capital may
either be positive or negative. When the current assets exceed the current liabilities, the
working capital is positive. The negative working capital results when the current
liabilities are more than the current assets.
51
2008 = 22.93
2007 = 202.57
It means that in the year 2008 the company has the excess of Current assets over current
liabilities by Rs. 22.93 crores, whereas, in the year the excess was Rs. 202.57 crores. It
also states that the company can pay its current liabilities in full. It also states that in the
year 2008 the company used Rs. 22.93 crores of its long term funds for financing its
current assets.
= 27.16 or 27 days.
360
RT Ratio
53
Average Collection Period means the number of days over which debtors and bills
receivable remain uncollected.
360
PT Ratio
54
55
= 28 + 2 + 25 + 49 = 104.
TOCP FOR THE YEAR 2007
= 27 + 2 + 25 + 60 = 114.
NOC FOR THE YEAR 2008
= 104 96 = 8 days.
NOC FOR THE YEAR 2007
= 114 65 = 49 days.
RESEARCH METHODOLOGY
When we talk of Research Methodology, we not only talk of the research methods but
also consider the logic behind the methods we use in the context of our research study
and explain why we are using a particular method or technique and why we are not using
s that research results are capable of being evaluated either by research himself or by
others.
As the title of the project suggests the project is about the study of the working capital
management in the company. So my objective is that to know that how the working
capital should be maintained in the company & which method is used in this.
56
Secondary data are those, which have already been collected by someone else and have
already been passed through the statistical process.
Magazines
Books
Websites
Reports
Files
SWOT ANALYSIS
STRENGTHS
Has a highly dedicated team of executives and staff backed by skill workers
The distribution network of Yamaha Motors is very wide and spread across the
country.
57
WEAKNESS
Growth of auto-industry getting hampered due to lack of capacity and high fuel cost.
OPPORTUNITIES
The motorcycle market has been growing at a phenomenal rate and there has been a
shift in consumer preferences from 2 stroke mobikes to 4 stroke mobikes This can be
beneficial for Yamaha Motors.
THREATS
58
Entry of Bajaj auto ltd. into the motor cycle segment has already signaled a fall in the
market share of Yamaha Motors.
Growing competition in the industry, both in terms of new models and price undercutting,
too is a matter of concern as both sales realizations and operating margins may come
under pressure.
RESULTS OR FINDINGS
Yamaha Motor India (Pvt.) Ltd., is a wholly owned subsidiary of Yamaha Motor
Company, Japan and is engaged in manufacturing and sale of motorcycles and spares.
The company undertakes its operations from two manufacturing locations.
Different ratios related to the Yamaha Motor Company in brief:
RATIOS
Current Ratio
Quick Ratio
Absolute Liquid Ratio
Inventory Turnover Ratio
Debtors Turnover Ratio
Creditors Turnover Ratio
Gross Working Capital
2008
1.11
0.64
.041
3.82
7.46
3.77
225.09
59
2007
2.55
1.63
.043
4.13
6.02
5.52
332.75
202.57
4.14
Ratio
Stock Velocity
Average Collection Period
Average Payment Period
87days
60days
65days
94days
49days
96days
The current ratio and the quick ratio of the company are decreasing. Its not a
good indicator for the firm. It states that the firms liabilities are increasing in
respect to the firms current assets.
The Inventory Turnover Ratio of the firm is decreasing, which states that the
firm increased the period in which its raw materials are converted into
finished goods.
The Debtors Turnover ratio of the firm is in increasing trend, which states that
the firm is able to collect its debtors more promptly as compared to the
previous year.
The Average Collection Period of the firm is reduced by 11 days from 60 days
in the year 2006 to 49 days in the year 2007, which is a good indicator for the
firm. It states that the firm has reduced the period in which debtors get
converted into cash.
The Creditors Turnover Ratio of the firm is decreasing, which is a better
indication for the firm.
60
RECOMMENDATIONS / SUGGESTIONS
The ratio analysis is very important for measuring the liquidity position, long term
solvency, operational efficiency; profitability of the company. The short-term
management of funds also plays an important role in managing the business profitably.
All the decisions regarding credit policy, collection policy, inventory, debtors
management, and cash planning come under the scope of working capital management.
Some of the recommendations that can be drawn from the study done to improve the
working capital position of Yamaha Motors are
Yamaha Motors should increase the short-term investment. The composition of
marketable securities in total current assets is almost negligent which could be
increased by financing them, which in turn will increase the working capital
substantially and the liquidity position will be much higher than it is now as they
can be converted into cash as and when required.
61
Their Net Working Capital in the year 2008 is very less as compared to the year
2007. In order to bring it to the satisfactory level, the company should decrease
their liabilities and should increase their current assets.
The composition of current assets in total assets of Yamaha Motors is not much,
as in 2008 current assets are 33% of the total assets. So in order to increase the
composition of current assets, the company should finance its current assets from
its long-term sources.
In order to decrease the current liability company needs to improve their cash
Management, Inventory Management, Receivables Management etc.
BIBLIOGRAPHY
I have referred various sources to collect the data relating to my project. I have also
searched various websites to gather information about my project. Like I have referred
BOOKS
(1)Financial Management
By I M Pandey
(2)Management Accounting
By Sharma & S .N. Gupta
(3)Financial Management
By M. Y. Khan & P. V. Jain
(4)Financial Management
By S. P. Rastogi
(5)Financial Management
By Ravi M. Kishor
(6)Financial Management
By M.D. Aggarwal
62
WEBSITES
www.YAMAHA-Motors.Com
www.yamaha-motor-india.com
www.iif.edu.com
www.quickmba.com
www.google.com
www.altavista.com
ANNEXURE
COST SHEET OF YAMAHA MOTORS INDIA (PVT.)
LTD. AS AT 31ST MAR. 2008, AND 31ST MAR. 2007
1.
PARTICULARS
2008
2007
43.69
43.23
Add: Purchases
479.56
575.61
523.25
618.84
32.72
43.69
490.53
575.15
4.92
4.66
Manufacturing Expenses
34.61
37.04
Salaries / Wages
64.96
70.55
Depreciation
46.02
38.29
647.48
725.69
3.22
4.92
63
COST OF PRODUCTION
644.26
720.77
81.48
50.95
Excise Duty
105.63
109.87
90.85
54.92
Administration Expenses
70.06
69.25
Financial Charges
19.06
30.57
1146.81
1036.33
67.74
81.48
COST OF SALES
1079.07
954.85
PROFIT
(233.67)
(32.97)
SALES
845.40
921.88
64
31st Dec.2008
PARTICULARS
Current Assets, Loans and Advances
Inventories
Stores, tool & Machinery spares
R/M, Packing Material and components
Work In Progress
Finished Goods
15.20
32.72
3.22
67.74
Sundry Debtors
Cash and Bank Balance
Other Current Assets
Loans and Advances
A
Current Liabilities & Provisions
118.88
52.04
8.42
11.32
34.43
256.09
Current Liabilities
Acceptances
Sundry Creditors
Int. accrued but not due on loans
Deposits from dealers
Provisions
Gratuity
Leave Cost
Superannuation
Pension
After Sales Service
Warranties
Other Provisions
B
0.85
154.26
------9.00
11.17
4.69
5.00
2.58
3.53
1.58
9.50
164.11
38.05
202.16
22.93
65
31st Dec.2007
PARTICULARS
Current Assets, Loans and Advances
Inventories
Stores, tool & Machinery spares
R/M, Packing Material and components
Work In Progress
Finished Goods
Sundry Debtors
Cash and Bank Balance
Other Current Assets
Loans and Advances
A
Current Liabilities & Provisions
Current Liabilities
Acceptances
Sundry Creditors
Int. accrued but not due on loans
Deposits from dealers
Provisions
Gratuity
Leave Cost
Superannuation
Pension
After Sales Service
Warranties
Other Provisions
B
16.27
43.69
4.92
81.48
----------100.10
0.94
13.03
5.42
4.47
1.05
0.50
3.72
0.95
-----------
146.36
114.71
5.63
21.66
44.39
363.75
114.07
16.11
130.18
202.57
08
07
66
06
05
Inventory
118.88
146.36
93.87
138.75
Sundry Debtors
52.04
114.71123.22
08.42
05.63
11.32
21.66
20.14
13.35
34.43
44.39
47.06
52.45
225.09
332.75
294.93
276.04
Current Liabilities
164.11
114.07
137.02
180.81
Provisions
38.05
16.11
15.73
4.06
202.16
130.18
152.75
22.93
202.57
142.18
91.17
732.04
794.05
1003.35
529.98
51.32
10.64
20.17
Current Liabilities
Sales
67
184.84
Credit Sales
622.76
696.01
507.04
547.85
479.56
575.61
Creditors
154.26
100.10
Total Assets
676.06
----------
----------
---------
---------
----------
----------
760.57
68
125.30
--------
130.93
---------
Particulars
(5.44)
(10.29)
(44.16)
(Nil)
(44.16)
(156.80)
(Nil)
(156.80)
(324.23)
(368.39)
(167.43)
(324.23)
Proposed Dividend
Nil
Nil
General Reserve
Nil
(368.39)
Nil
(324.23)
Sales
Other income
TOTAL
Profit / (Loss) before Extra-Ordinary items,
Interest and Depreciation
Less /(Add): Prior period adjustment and
Extra-Ordinary items
Less / (Add): Interest /Financial Charges
Depreciation
APPROPRIATIONS:
FINANCIAL RESULTS
FINANCIAL RESULTS
69
Particulars
Sales
Other income
Increase/(Decrease) in Stock
TOTAL
Profit / (Loss) before Extra-Ordinary items,
Interest and Depreciation
Less /(Add): Prior period adjustment and
Extra-Ordinary items
Less / (Add): Interest /Financial Charges
Depreciation
732.04
16.09
(15.44)
732.69
(198.00)
794.05
34.09
49.03
877.17
(48.07)
(2.27)
(19.05)
(45.87)
Nil
(30.07)
(38.24)
(265.19)
(Nil)
(265.19)
(116.88)
(Nil)
(116.88)
(185.27)
200.00
(368.39)
300.00
(250.46)
(187.25)
Nil
Nil
Nil
(250.46)
Nil
(185.27)
APPROPRIATIONS:
Proposed Dividend
General Reserve
PARTICULER
Year ended 31
March, 2008 Rs.
In crores
Year ended 31
March, 2007
Rs. In crores
845.40
(105.63)
(7.73)
732.04
16.09
(15.44)
921.88
(109.87)
(17.96)
794.05
34.09
49.03
TOTAL
Expenditure
Raw material, packing material & components
consumed
Purchase of spares for sale
Personal expenses
Operating and other expenses
Depreciation / amortization
Financial charges
Increase(decrease) in excise duty on stock
Miscellaneous expenditure written off
Provision for other contingencies
732. 96
(877.17)
TOTAL
Loss from continuing operations before prior period
Adjustment
Advertisement expenses relating to earlier years
Net loss
995.61
(262.92)
(185.27)
200.00
(250.46)
(98.22)
Income
Turnover (gross)
Less: excise duty
Less: Discount & rebates
Turnover(net)
Other income
Increase(decrease) in stock
71
490.53
45.11
103.72
241.52
45.87
19.05
(2.59)
45.90
6.50
(2.27)
(265.19)
72
738.73
87.33
166.27
30.01
26.72
130.87
18.33
1,198.26
526.15
70.36
150.36
29.93
55.68
101.14
19.87
953.49
(146.51)
(38.72)
(5.14)
(0.30)
(44.16)
(324.23)
(2.15)
(6.64)
(1.50)
(156.80)
(167.43)
(368.39)
(324.23)
Year ended 31
March, 2008 Rs.
In crores
Year ended 31
March, 2007
Re. In crores
845.40
105.63
7.73
732.04
16.09
15.44
921.88
109,87
----794.05
34.09
49.03
TOTAL
Expenditure
Raw material, packing material & components
consumed
Purchase of spares for sale
Personal expenses
Operating and other expenses
Depreciation / amortization
Financial charges
Increase (decrease) in excise duty on stock
Miscellaneous expenditure written off
Provision for other contingencies
732.69
877.17
490.53
517.15
45.11
103.72
241.52
45.87
19.05
(2.59)
45.90
6.50
46.08
104.59
172.48
38.24
30.57
10.53
16.41
--
TOTAL
Loss from continuing operations before prior period
Adjustment
Advertisement expenses relating to earlier years
Net loss
995.61
(262.92)
994.05
(116.88)
(2.27)
(265.19)
(116.88)
(185.27)
200.00
(368.39)
300.00
(250.46)
(98.22)
185.27
43.29
Income
Turnover (gross)
Less: excise duty
Less: Discount & rebates
Turnover (net)
Other income
Increase (decrease) in stock
73
WORD OF THANKS
In the end I would like to thanks to all those who directly or indirectly
help me to complete this project successfully. I also would
like to thanks to all those readers who study this project
report in future. I welcome any type of comments or
suggestions from the readers.
Thanking You.
74