MBA Programme

Company Report
Semester I
Student Batch: 2018-20

COMPANY REPORT SUBMITTED IN

PARTIAL FULFILMENT OF THE REQUIREMENT
FOR THE DEGREE OF
MASTERS OF BUSINESS ADMINISTRATION

SUBMITTED BY

Name of Student: Rishab

Enrolment No: A40101918095

AT AMITY UNIVERSITY DUBAI

Under the guidance of

CA Mukund Jakhiya

1
 ABSTRACT

As the world is growing rapidly, the businesses are also moving to become the huge one. And by
that result, more and more people want to become a master in these businesses. The main purpose
in the finance field is to know how the financial analysis is done. The financial statements need
to be analysed to measure a company’s performance and to compare it with other firms in the
same industry. The resulting information is intended to be useful to owners, potential investors,
creditors, analysts, and others as the analysis evaluates the past performance, future potential and
financial position of the firm.

This report is an analysis of financial performance of Ashok Leyland Limited. This report has
been prepared with an objective to develop analytical skills required to interpret the information
(explicit as well as implicit) provided by the financial statements and to measure the company’s
performance during the past few years. The financial statements are analysed using traditional
evaluation techniques. Ratios are an important tool in analysing the financial statements and are
analysed to measure the company’s profitability, solvency & liquidity. Data collection has been
attempted from secondary sources thus utilising printed media and data available on websites.

2
 DECLARATION

Title of Project Report

“Financial Performance Analysis of Ashok Leyland Limited”

I declare,

 That the work presented for assessment in this report is my own and has not been previously
presented for any other assessment.

 That the Project work conforms to the guidelines for presentation and style set out in the relevant
documentation.

Date:

Rishab Kulshreshtha
AUD 9799
MBA General

3
 CERTIFICATE

I CA Mukund Jakhiya hereby certify that Rishab Kulshreshtha student of Master in Business
Administration at Amity University Dubai has completed the Project Report on Ration Analysis
and Financial Statements of Ashok Leyland under my guidance.

CA Mukund Jakhiya
Programme Faculty
Amity University Dubai

4
 ACKNOWLEDGEMENT

I would like to thanks CA Mukund Jakhiya for his continuous guidance and support throughout
the project report. I’m deeply indebted to all people who have guided, inspired and helped me in
the successful completion of this project. I owe a debt of gratitude to all of them, who were so
generous with their time and expertise.

Last but not the least, I thank everybody, who helped directly or indirectly in completing the
project that will go a long way in my career, the project is really knowledgeable & memorable
one.

5
 TABLE OF CONTENTS

S.No. Chapters Page

No.

Executive Summary 9
1.
 Need of the study
 Scope of the study
 Objectives of the study
 Period of the study

2. Introduction 10

 Company Profile
 Vision
 Mission
 History
 Presence in Global Markets
 Innovations and Partnerships
 Associated Companies
 Joint Ventures
 Company Policies and Objectives
 Milestones
 Awards and Achievements

3. Research Methodolgy 14

 Research Design
 Sources of Data
 Collection of Data
 Tools and Techniques
 Assumptions
 Limitations of the study

6
4. Performance Evaluation Techniques 16

 Horizontal Analysis
 Ratio Analysis
 Short Term Solvency Ratios
 Activity Ratios
 Long Term Solvency Ratios
 Profitability Ratios

5. Data Analysis and Interpretation 23

 Comparative Analysis
 Ratio Analysis

6. Cash Flow Statement Analysis 33

7. Findings 35

8. Recommendations 35

9. Conclusion 36

10. Bibliography 36

7
 LIST OF TABLES

S.No Title Page

No.
1. Table 1 24
2. Table 2 25
3. Table 3 27
4. Table 4 27
5. Table 5 28
6. Table 6 29
7. Table 7 30
8. Table 8 31
9. Table 9 32

LIST OF FIGURES

S.No Title Page

No.
1. Figure 1 24
2. Figure 2 26
3. Figure 3 27
4. Figure 4 28
5. Figure 5 29
6. Figure 6 30
7. Figure 7 31
8. Figure 8 32
9. Figure 9 33

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 CHAPTER 1: EXECUTIVE SUMMARY

A well-developed transport network indicates a well-developed economy. For rapid development

a well-developed and well-knit transportation system is essential. As India’s transport network is
developing at a fast pace, Indian automobile industry is growing too. Also, the automobile industry
has strong backward and forward linkages and hence provides employment to a large section of
the population. Thus the role of automobile industry cannot be overlooked in the Indian economy.

The Automotive industry in India is one of the largest in the world and one of the fastest growing
globally. The project entitled “Financial Performance Analysis of Ashok Leyland” was undertaken
with the objective of financial performance and to examine profitability performance of the
company. The study at Ashok Leyland provided an insight into the workings of the company and
how a firm manages its cash inflow and outflow.

1.1 NEED FOR THE STUDY

 The annual report of the company constitutes the most important source of data for judging
the liquidity position.
 Analyzing the financial statements is a process of evaluating the competent part of
financial statement to obtain a better understanding of firm’s position and performance.

1.2: SCOPE OF THE STUDY

 The study covers the financial performance of the Ashok Leyland Limited.

 The study is made by making comparison of two years of its operational data.

 The study aims to reveal where the company stands in respect to liquidity and an effective
use of its assets.

1.3: OBJECTIVES OF THE STUDY

 To understand and analyze the financial statements of Ashok Leyland.

 To evaluate the liquidity, solvency and profitability position of Ashok Leyland Limited.
 To assess financial strengths, weaknesses, threats and areas of financial opportunity.

1.4: PERIOD OF THE STUDY

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The study covered a period of two years from 2015-16 to 2016-17 with the accounting year ending
31st march every year.

CHAPTER 2: INTRODUCTION:

2.1: COMPANY PROFILE

Ashok Leyland is a commercial vehicle manufacturing company based in Chennai, India. It is the
second largest commercial vehicle company in India in the medium and heavy commercial vehicle
segment with a market share of 38% (2016). Ashok Leyland is a market leader in the bus segment.

The company was established in 1948 as Ashok Motors, with an aim to assemble Austin cars.
Manufacturing of commercial vehicles was started in 1955 with equity contribution from the
British company, Leyland Motors. Today the Company is the flagship of the Hinduja Group, a
British-based and Indian originated transnational conglomerate.

Ashok Leyland is a technology leader in the commercial vehicles sector of India. Its annual
turnover exceeded USD 2 billion in 2015-16. Selling close to around 83,000 medium and heavy
vehicles in 2007-08, Ashok Leyland is India's largest exporter of medium and heavy duty trucks
out of India. It is also one of the largest Private Sector Employers in India - with about 12,000
employees working in 6 factories and offices spread over the length and breadth of India. Over the
years, Ashok Leyland vehicles have built a reputation for reliability and ruggedness. This was
mainly due to the product design legacy carried over from British Leyland.

Since then Ashok Leyland has been a major presence in India's commercial vehicle industry. These
years have been punctuated by a number of technological innovations which went on to become
industry standards. This tradition of technological leadership was achieved through tie-ups with
international technology leaders and through vigorous in-house R&D.

Ashok Leyland vehicles have built a reputation for reliability and ruggedness. Ashok Leyland
buses carry more people than the entire Indian rail network. In the populous Indian metros, four
out of the five State Transport Undertaking (STU) buses come from Ashok Leyland. Some of them
like double decker and vestibule buses are unique models from Ashok Leyland, tailor-made for
high density routes.

2.2: VISION

 Achieving leadership in the medium/heavy duty segments of the domestic/international

commercial vehicle market.
 Significant presence in the world market through transport solution that best anticipate
customer needs, with the highest value-to-cost ratio.

2.3: MISSION

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  Identifying with the customer needs
 Being the lowest cost manufacturer in automotive industry
 Global benchmark of products, processes and people

2.4: HISTORY

The origin of Ashok Leyland can be traced to the urge for self-reliance, felt by independent
India. In 1948, Ashok Motors was set up in what was then Madras, for the assembly of Austin
Cars. The Company's destiny and name changed soon with equity participation by British
Leyland and Ashok Leyland commenced manufacture of commercial vehicles in 1955. Since
then Ashok Leyland has been a major presence in India's commercial vehicle industry with a
tradition of technological leadership, achieved through tie-ups with international technology
leaders and through vigorous in-house R&D.

Access to international technology enabled the Company to set a tradition to be first with
technology. Be it full air brakes, power steering or rear engine busses, Ashok Leyland pioneered
all these concepts. Responding to the operating conditions and practices in the country, the
Company made its vehicles strong, over-engineering them with extra metallic muscles.
"Designing durable products that make economic sense to the consumer, using appropriate
technology”, became the design philosophy of the Company, which in turn has moulded
consumer attitudes and the brand personality.

2.5: PRESENCE IN GLOBAL MARKETS

In the journey towards global standards of quality, Ashok Leyland reached a milestone in 1993
when it became the first in India's automobile industry to win the ISO 9002 certification. The more
comprehensive ISO 9001 certification came in 1994. 1994 was also the year, when international
technology changed the way India perceived trucks. The year when a new breed of world class
trucks- technologically superior and eco-friendly - rolled out on Indian roads. Cargo brought with
it, a new set of values and an unmatched basket of benefits, ushering in a change.

2.6: INNOVATIONS AND PARTNERSHIPS

Ashok Leyland product development successes have come from a keen sense of anticipation and
attentiveness. The company initiated research into alternative fuels well before legislative debate
had even begun in the country. The result was the implementation of CNG technology ahead of
the rest promising a breath of fresh air for polluted cities.

Ashok Leyland has also entered into some significant partnerships, seizing growth opportunities
offered by diversification and globalization – with Continental Corporation for automotive
infotronics; with Alteams in Finland for high pressure die casting and recently, with John Deere
for construction equipment.

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As part of this global strategy, the company acquired Czech Republic-based Avia truck business.
The newly acquired company has been named Avia Ashok Leyland Motors. This gives Ashok
Leyland a foothold in the highly competitive European truck market.

2.7: ASSOCIATED COMPANIES

 Automotive Coaches & Components Ltd (ACCL)

 Lanka Ashok Leyland
 Hinduja Foundries
 IRIZAR-TVS
 Ashok Leyland Project Services Limited
 Albonair GmbH

2.8: JOINT VENTURE

 Nissan Motor Company

 John Deere & Company
 Automotive Infotronics
 Ashley Alteams India Pvt Ltd
 Optare

2.9: COMPANY POLICIES AND OBJECTIVES

2.9.1: QUALITY POLICY

Ashok Leyland is committed to achieve customer satisfaction, by anticipating and delivering

superior value to the customers in relation to their own business, through the product and services
offered by the company and comply with statutory requirement. Towards this, the quality policy
of Ashok Leyland is to make continual improvement in the process that constitutes the quality
management system, to make them more robust and to enhance their effectiveness and efficiency
in achieving stated objectives leading to:

 Superior product manufactured as also service offered by the company.

 Max use of employee potential to contribute to quality and environment by progressive up
gradation of their knowledge and skills as appropriate to their functions.
 Seamless involvement from vendors and dealers in the mission of the company to address
customers changing needs and protection of the environment.

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2.9.2: ENVIRONMENT POLICY

Ashok Leyland committed towards personal environment measures thus following all legal
reasons.

 Adopt pollution preventive technology in design and manufacturing projects.

 Conserve all resources such as power, water, oil, gas, compressed air etc. and optimize
their usage through scientific methods.
 Provide clean working environment to employees.
 Set and review objectives and targets for continually improving environment.

2.10: MILESTONES

 1966 - Introduced full air brakes

 1967 - Launched double-decker bus
 1968 - Offered power steering in commercial vehicles
 1979 - Introduced multi-axle trucks
 1980 - Introduced the international concept of integral bus with air suspension
 1982 - Introduced vestibule bus
 1992 - Won self-certification status for defence supplies
 1993 - Received ISO 9002 Certification
 2003 - India's first CNG powered bus joined the BEST fleet
 2004 - Received ISO 14001 certification for all manufacturing units
 2008 - Launched hybrid electric vehicles

2.11: AWARDS/ACHIEVEMENTS

 In the journey towards global standards of quality, Ashok Leyland reached a major
milestone in 1993 when it became the first in India's automobile history to win the ISO
9002 certification.
 The more comprehensive ISO 9001 certification came in 1994, QS 9000 in 1998 and ISO
14001 certification for all vehicle manufacturing units in 2002.
 It has also become the first Indian auto company to receive the latest ISO/TS 16949
Corporate Certification (in July 2006) which is specific to the auto industry.
 Ashok Leyland buses carry 60 million passengers a day, more people than the entire Indian
rail network
 Ashok Leyland has a near 85% market share in the Marine Diesel engines markets in India
 In 2002, all the vehicle-manufacturing units of Ashok Leyland were ISO 14001 certified
for their Environmental Management System, making it the first Indian commercial
13
  vehicle manufacture to do so.
 In 2005, received the BS7799 Certification for its Information Security Management
System (ISMS), making it the first auto manufacturer in India to do so.
 In 2006, received the ISO/TS 16949 Corporate Certification, making it the first auto
manufacturer in India to do so.
 It is one of the leading suppliers of defence vehicles in the world and also the leading
supplier of logistics vehicles to the Indian Army.
 It is the largest manufacturer of CNG buses in the world.

CHAPTER 3: RESEARCH METHODOLOGY

Research Methodology is a way to systematically solve the research problem. It may be
understood as a science of study how research is done systematically. This research on working
capital will be referred to as exploratory research in which problems and findings are generated
from the calculations.

3.1: RESEARCH DESIGN

Research design provides the give that holds the research project together. A research design is
used to structure the research to slow how all of the major parts of the research project research
design is some statement or specification of procedure for collecting and analysing the information
required for the solution of some specific problem. It provides a scientific frame work for
conducting some research investigation.

3.2: SOURCES OF DATA

 PRIMARY DATA- The primary data refers to the data which is collected directly. It is
collected by observations, interviews etc. it is generally more accurate. Resources based
on primary data have not been used in this report.

 SECONDARY DATA - Secondary data refers to the data which is already available on
various information platforms whether company websites or contents over internet. It is
generally collected from websites, magazines, journals etc. Here data is collected from
annual report of company for financial analysis of company’s annual productivity and
solvency position.

3.3: COLLECTION OF DATA

The study is based on secondary data. Data pertaining behaviour of liquidity solvency and
profitability position were collected from the Balance Sheet and Profit & Loss account of Ashok
Leyland available over internet. For collecting secondary data, annual reports of companies were

14
used as well as financial reports available on various stock market websites were also used. No
field work has been done in order to collect primary data for the study and the study is entirely
descriptive and analytical.

3.4: TOOLS AND TECHNIQUE:

 Horizontal Analysis

 This technique is also known as comparative analysis.

 It is to calculate absolute changes & percentage changes from the previous years to current
years.

 Ratio Analysis

Ratios can be classified into the following categories:

 Liquid ratio
 Solvency ratio
 Profitability ratio

 Analysis of Cash Flow Statement

3.5: ASSUMPTIONS

 Number of days in a year is 365 days.

 All purchases have been taken as credit purchases.
 All sales have been taken as credit sales.
 In the absence of relevant data the data from internet site is taken as the relevant
information.

3.6: LIMITATION OF THE STUDY

 The study is based on secondary data

 The time span was limited only to a period of two financial years.
 The study suffers all the limitation of ratio analysis, such as lack of adequate change,
income, price level change etc.
 Data has been recalculated & regrouped wherever necessary
15
 CHAPTER 4: PERFORMANCE EVALUATION TECHNIQUES:

4.1: HORIZONTAL ANALYSIS

Horizontal analysis (also known as trend analysis) is a financial statement analysis technique
that shows changes in the amounts of corresponding financial statement items over a period of
time. It is a useful tool to evaluate the trend situations.

The statements for two or more periods are used in horizontal analysis. The earliest period is
usually used as the base period and the items on the statements for all later periods are compared
with items on the statements of the base period.

4.2: RATIO ANALYSIS

It refers to the systematic use of ratios to interpret the financial statements in terms of the operating
performance and financial position of a firm. It involves comparison for a meaningful
interpretation of the financial statements.

In view of the needs of various uses of ratios the ratios, which can be calculated from the
accounting data are classified into the following broad categories.

4.3: CLASSIFICATION

Short term solvency ratio:

 Liquidity ratio

 Current ratio.
 Liquid ratio.
 Absolute liquidity ratio.

 Activity ratio

 Inventory turnover ratio

 Inventory conversion period
 Debtor turnover ratio
 Average collection period
 Working capital turnover ratio.

 Long term solvency ratio:

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  Debt Equity ratio
 Proprietary ratio
 Fixed asset to net worth ratio
 Fixed asset ratio.
 Current asset to proprietary fund
 Fixed asset turnover ratio.

 Profitability ratio

 Gross profit ratio

 Net profit ratio
 Operating profit ratio
 ROI Ratio

4.3.1: SHORT TERM SOLVENCY RATIO

Current Ratio:

Current ratio may be defined as the relationship between current asset and current liabilities. The
current ratio is the index of the concern financial stability since it shows extent of the working
capital, which is the amount by which the current asset exceeds the current liabilities. The rule of
the thumb is 2:1

Current Ratio = Current Assets

Current Liabilities

Current asset= Inventories + Sundry debtors+ Cash & Bank balance.

Current liabilities= Bills payable + Bank O/D.

Liquid Ratio:

This ratio also termed as acid test or quick ratio. This is ascertaining by comparing the liquid asset
and current
liability. It is the test of liquidity to the ability of the current ratio .the term “liquidity” refers to the
ability of a firm to pay its short term obligation. The rule of thumb is 1:1.

Liquid Ratio = Liquid Assets

Current Liabilities

17
Liquid Asset = Current Asset – Inventories.

Absolute Liquid Ratio:

The ratio measures the relationship between cash and near cash item on the hand and immediately
maturing obligation on the other. The inventory and debtor are excluded from current asset to
calculate this ratio.

Absolute Ratio = Absolute Liquid Asset

Current Liability

Absolute liquid asset = Cash & Bank balance

4.3.2: ACTIVITY RATIO

Inventory Turnover Ratio:

Every firm has to maintain a certain level of inventory to finished goods. It was able to meet the
requirements of the business, inventory turnover indicates the number of times stock has been
turned during the period and evaluate the efficiency with which a firm is able to manage.

Inventory Turnover Ratio = Net Sales

Inventory

Net sales = Sales – Excise duty.

Inventory Conversion Period:

It may be of interest to see average time taken for clearing the stock. This can be possible by
calculating inventory conversion period. This period is calculated by dividing the number of days
by inventory turnover ratio.

Inventory Conversion Period = No. of days in a year

Inventory Turnover Ratio
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Debtor Turnover Ratio:

It established the relationship between the net credit sales and average debtor. It indicates the
number of times the collection debtor has turnover during the year. The higher the ratio is better
result with ratio is better result with efficient management.

Debt Turnover Ratio = Net Credit Sales

Avg. Debtor

Average debtor= Opening debtor + Closing debtor+ Opening bills receivable + Closing bills
receivable.

Average Collection Period:

The number of days taken by a firm for collecting of its receivable or debtors during the year. It
indicates the relationship between average debtor and net credit sales.

Average Collection Period = No. of days in a year

Debtor Turnover Ratio

Working Capital Turnover Ratio:

This ratio indicates the number of time the working capital is turned over in the course of a year.
.The higher ratio indicates efficient utilization of working capital. The higher may be the result of
high turnover of inventories of receivable

Working Capital Turnover Ratio = Net Sales

Net Working Capital

Net working capital = Current Assets – Current Liabilities.

4.3.3: LONG TERM SOLVENCY RATIO

Debt Equity Ratio:

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This ratio is also known as internal and external equality ratio .it is mainly calculated to assess the
soundness of long term financial policies and to determine the relative’s stakes of outsiders and
owners. It indicates the relationship between debt and equity.

Debt Equity Ratio = Long Term Fraud

Shareholders Fund

Long term debt = Secure loan + Unsecured loan.

Shareholder fund= Share capital, Reserve & Surplus.

Proprietary Ratio:

This ratio is also called as equity ratio or owner’s fund ratio. This ratio points out relationship
between the shareholders fund and total asset of the company. It indicates the proportion of total
asset financed by shareholders.

Proprietary Ratio = Shareholders Fund

Total Asset

Total asset= Current asset +Fixed asset.

Fixed Asset to Net Worth Ratio:

This ratio indicates as to what extends the shareholders fund have been invested in fixed assets. If
the ratio is high, it implied that much of shareholders are invested in fixed asset. But too high
indicates what the high amount is tied up in fixed capital.

Fixed Asset to Net Worth Ratio = Fixed Asset

Shareholders Fund

Fixed Asset Ratio:

The ratio indicates the extent to which the total of fixed asset are financed by long term fund of
the firm. Generally the total fixed asset should be equal to the total long term fund. But if fixed
assets exceeds, it implies that firm has financial asset, which not good the financial policy.

20
 Fixed Asset Ratio = Fixed Asset before Depreciation
Total Long Term

Fixed assets = Long term investment.

Fixed term funds = Share capital, Reserve & Surplus

Current Asset to Proprietary Fund:

The ratio is calculated by dividing the total of current asset by the amount of shareholder’s fund.
The ratio indicates the extent to which proprietors fund are invested in current assets.

Current Asset to Proprietary Fund = Current Asset

Shareholders Fund

Fixed Asset Turnover Ratio:

This ratio measures the efficiency in utilization of fixed asset. A high ratio reflects overtrading on
the other hand a lower ratio indicates idle capacity and excessive investment in fixed asset.

Fixed Asset Turnover Ratio = Net Sales

Net Fixed Asset

4.3.4: PROFITABILITY RATIO

Goss Profit Ratio:

It indicates the margin of profit on sale. It measures the relationship of gross profit to net sales and
it is represented in percentage. The high gross profit ratio is sign of good management. The
relatively low profit ratio is not good for the company. There are no standard norms.

Gross Profit Ratio = Gross Profit *100

Net Profit

Gross profit = Sales- Cost of goods sold

Net Profit Ratio:

Net profit ratio indicate the relationship between net profit and sales the efficiency of the
manufacturing, welling and other activities of the firm
21
 Net Profit Ratio= Net Profit (after tax) * 100
Net Sales

Operating Profit Ratio:

Operating profit ratio is calculated for analysing profitability of a concern. Increase in operate
profit indicates improvement of firm working by cost reduction or increase sales.

Operating Profit Ratio = Operating Profit * 100

Net Sales

ROI Ratio:

It measures the gain or loss generated on an investment relative to the amount

of money invested. ROI is usually expressed as a percentage and is typically used for personal
financial decisions, to compare a company's profitability or to compare the efficiency of
different investments.

ROI = Net Profit * 100

Cost of Investment

CHAPTER 5: DATA ANALYSIS AND INTERPRETATION

Collected data is analysed and interpreted with the help of accounting and statistical tools and
techniques which are as follows:

 Comparative and Common-size income statement and balance sheet.

 Ratio Analysis

The financial ratio analysis has been done using the financial data of Ashok Leyland for the
financial years i.e March 2015 – March 2016.

5.1: COMPARATIVE ANALYSIS

Horizontal Analysis of Balance Sheet

for the year 2015-16
22
 (Rs in millions)
Particulars Mar 15 Mar 16 Absolute %
Change Change
(Rs) (Rs) (%)

Sources of funds

A) Share Capital 1330.34 1323.87 6.47 0.49%

B) Reserves and Surplus 20159.48 17621.81 2537.67 14.40%
Total 21489.82 18945.68 2544.14 13.43%

Loan Funds:
A) Secured Loans 1902.4 3602.16 -1699.76 -47.19%
B) Unsecured Loans 6972.61 2801.82 4170.79 148.86%
Total 8875.01 6403.98 2471.03 38.59%

Deferred Tax Liability 2538.2 1969.29 568.91 28.89%

TOTAL 32903.03 27318.95 5584.08 20.44%

Application of Funds

Fixed Assets:
A) Gross Block 29424.38 26201.97 3222.41 12.30%
B) Less: Depreciation 14168.88 13131.64 1037.24 7.90%
C) Net Block 15255.5 13070.33 2185.17 16.72%
E) Capital work-in progress 5292.45 2374.91 2917.54 122.85%

Investments 6099 2210.94 3888.06 175.86%

Current assets, loans and advances
A) Inventories 12239.14 10703.21 1535.93 14.35%
B) Sundry debtors 3758.35 5228.75 -1470.4 -28.12%
C) Cash & bank balances 4513.7 4349.39 164.31 3.78%
D) Loans & advances 8241.37 6695.79 1545.58 23.08%
Total 28752.56 26977.14 1,775.42 6.58%

Less: Current liabilities and -

provisions
A) Liabilities 19267.09 16516.25 2,750.84 16.66%
B) Provisions 3452.31 1042.3 2,410.01 231.22%
Total 22719.4 17558.55 5,160.85 29.39%
Net current assets 6033.16 9418.59 (3,385.43) -35.94%
-

23
 Misc. Expenses 222.92 244.18 -8.71%
(21.26)
-
TOTAL 32903.03 27318.95 5,584.08 20.44%

Table 1

Graphical Analysis of Balance Sheet for 2015-16

Graphical Analysis of Balance Sheet

35000

30000

25000
RS (MILLION)

20000

15000
Mar-15
10000
Mar-16
5000

Fig 1

Interpretation:

As it can be seen from the Horizontal as well as Graphical analysis of Comparative

Statements of the company for the financial years of 2015-16, there has been an increase in Total
Shareholder Capital as well as an inclination in Fixed and Current Assets thus depicting a
profitable position for the company.

Horizontal Analysis of Income Statement

for the year 2015-16

(Rs in millions)
Particulars Mar 15 Mar 16 Absolute %
Change Change
(Rs) (Rs) (Rs) (in %)
Income

24
Sales less returns 77,291.23 71,681.76 5,609.47 7.83%
Other Income 739.99 708.03 31.96 4.51%
Total Income 78,031.22 72,389.79 5,641.43 7.79%

Expenditure
Cost of material 57,646.34 54,631.91 3,014.43 5.52%
Employee Expenses 6,162.00 4,807.00 1,355.00 28.19%
Other Expenses 5,443.00 5,216.00 227.00 4.35%
Financial expenses 497.4 53.32 444.08 832.86%
Depreciation 1773.61 1505.74 267.87 17.79%
Total Expenditure 71,522.35 66,213.97 5,308.38 8.02%

Profit before tax 6381.5 6045.06 336.44 5.57%

provision for taxation - current tax 1014 1350.5 -336.50 -24.92%
- Deferred tax 604.4 230.2 374.20 162.55%
- Fringe benefit 70 51.5 18.50 35.92%
tax
Profit after tax 4693.1 4412.86 280.24 6.35%

Balance profits carried to balance 5022.74 3616.86 1,405.88 38.87%

sheet

Table 2

Graphical Analysis of Income Statement

for the Year 2015-16

Graphical Analysis of Income Statement

80000
RS (MILLION)

60000
40000
20000 Mar-15

Mar-15 Mar-16
0

Fig 2

25
Interpretation:

The Comparative Analysis of Income Statement of the company for the years 2015-16 concludes
that there has been a gradual increase in the total income of the company with an increase in direct
as well as other indirect expenses. However the overall Net Profit in 2016 shows a positive trend
when compared to previous year that is 2015.

5.2: RATIO ANALYSIS

On the basis of data collected from secondary sources, the following results have been computed
thus utilising the given ratios for analysing the financial position of the company for the financial
years of 2015-16.

Objectives to Ratio Analysis:

 Standardize financial information for comparisons

 Compare performances of the company with the past as well as present periods
 Compare performance against other firms or industry standards
 Study the efficiency of operations

 Gross Profit Ratio:

2015-16 2016-17
GROSS PROFIT 17,049.85 19,644.89
NET SALES 71681.76 77291.23
2015-16 2016-17
GROSS PROFIT RATIO (%) 23.79 25.42

Table 3

26
 Graphical Analysis

25.5
2015-16
25
2016-17
% Change

24.5
2016-17
24
23.5
23 2015-16
22.5
Gross Profit Ratio

Fig 3

Interpretation:

The GP ratio is showing continuously increasing trend, starting from 2015-16 in 23.79% to
25.42% in the financial year 2016-17. This shows that a company is gaining its productivity in
maintaining its gross profit margin.

 Net Profit Ratio:

2015-16 2016-17
PROFIT AFTER TAX 4412.86 4693.1
NET SALES 71681.76 77291.23
2015-16 2016-17
NET PROFIT (%) 6.16 6.07

Table 4

27
 Graphical Analysis

6.16
2015-16
6.14
2016-17
6.12
% Change

6.1 2016-17
6.08
6.06
2015-16
6.04
6.02
Net Profit

Fig 4

Interpretation:

The NP ratio is showing declining trend from 6.16% in the year 2015-16 to 6.07% in the year
2016-17 which shows that there is increased amount of expenses in the form that increasing in the
prices of raw material.

 Current Ratio:

2015-16 2016-17
CURRENT ASSETS 26977.14 28752.56
CURRENT LIABILITIES 17558.55 22719.4
2015-16 2016-17
CURRENT RATIO (%) 1.54 1.27

Table 5

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 Graphical Analysis

1.5 2016-17
% Change

0.5 2015-16

0
Current Ratio

2015-16 2016-17

Fig 5

Interpretation:

This ratio is used to measure a company’s ability to pay current liabilities with current assets. This
ratio helps creditors to determine if a company can meet its short- term obligations. The gradual
decrease from 1.54 to 1.27 shows that company’s liquidity has worsened. The company should
rethink over its credit policy.

 Quick Ratio:

2015-16 2016-17
CURRENT LIABILITIES 17558.55 22719.4
QUICK ASSETS 16273.93 16513.42
2015-16 2016-17
QUICK RATIO (%) 0.93 0.73

Table 6

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 GRAPHICAL ANALYSIS
2015-16 2016-17

0.93

0.73
% CHANGE

QUICK RATIO

Fig 6

Interpretation:

This ratio is used to measure a company’s ability to meet its short-term obligations. This ratio is
similar to the current ratio. However by limiting the numerator to very liquid current assets, it is a
stricter test. It is often called as the acid test ratio. Graduate decline in the Quick Ratio shows that
the liquid asset other than inventory of the company needs considerable attention.

 Debtor Turnover Ratio:

2015-16 2016-17
SALES 71681.76 77291.23
AVG. DEBTOR 4736.06 4493.55
2015-16 2016-17
DEBTORS TURNOVER RATIO (%) 15.14 17.20

Table 7

30
 Graphical Analysis
17.5

17

16.5
% CHANGE

16

15.5

15

14.5

14
Debt Turnover Ratio

2015-16 2016-17

Fig 7

Interpretation:

This ratio indicates the number of times each year the debtors turn into cash. It shows the
effectiveness of the firm’s collection and credit policy. The high ratio indicates the ability of firm’s
collection of cash from the debtors. The positive trend indicates that the firm has managed to
improve its credit policy.

 Inventory Turnover Ratio:

2015-16 2016-17
COGS 54,631.91 57,646.34
AVG. INVENTORY 9864.41 11471.17
2015-16 2016-17
INVENTORY TURNOVER (%) 5.54 5.03

Table 8

31
 GRAPHICAL ANALYSIS

5.03
% CHANGE

5.54

INVENTORY TURNOVER RATIO

2015-16 2016-17

Fig 8

Interpretation:

This ratio is used to measure how quickly a company is selling its inventory. This ratio tells how
many times each year a firm’s inventory is turned over. The inventory turnover of the company
over the period of two years has remained stable more or less.

 Return on Investment Ratio:

2015-16 2016-17
NET PROFIT 6045 6381
INVESTMENT 18945.68 21489.82

2015-16 2016-17
RETURN ON INVESTMENT (%) 31.90 29.69

Table 9

32
 Graphical Analysis

32
31.5
31
% Change

30.5
30
29.5
29
28.5
ROI

2015-16 2016-17

Fig 9

Interpretation:

ROI is a performance measure used to evaluate or compare the efficiency of investments into a
company for two or more consecutive financial years. As it can be seen from the results, there has
been a slight decrease in the ratio from 31.90 to 29.69 thus the businesses haven’t been profitable
in an ideal situation for the financial period of 2015-16.

CHAPTER 6: CASH FLOW STATEMENT ANALYSIS

Cash Flow Statement for the year ended March 31, 2015-2016

(Rs.
Millions)
2015 2016
Cash low from operating activities
Profit before tax 6,381.5 6,045.06
Adjustments for:
Depreciation, amortisation and impairment 1,773.61 1,505.74
Other amortisations 143.49 164.76
Foreign exchange (gains)/losses (63.60) (65.30)
Interest expense net of interest capitalisation 615.01 196.46
Interest income (214.67) (160.94)
Income from investments (22.85) (98.85)
(Profit)/Loss on disposal of fixed assets/long term investments (375.86) (323.15)
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 Diminution in value of investments written back – net (168.13)
Transfer from General Reserve – Employee benefits (781.54)
Operating profit before working capital changes 8,236.63 6,314.11
Adjustments for changes in :

Inventories (1,677.60)
(1,535.93)
Debtors 1,426.87 (1,005.76)
Advances 261.52 (1,047.41)
Current liabilities and provisions 3,596.82 4,102.54
Cash generated from operations 11,985.91 6,685.88
Income tax including Fringe benefit tax paid (1,356.00)
(1,280.65)
Net cash low from operating activities before extraordinary 10,705.26 5,329.88
expenditure
Compensation under Voluntary retirement scheme (48.41) (330.37)
Net cash low from operating activities after extraordinary 10,656.85 4,999.51
expenditure
Cash low from investing activities
Payments for assets acquisition (6,812.87)
(6,209.04)
Proceeds on sale of fixed assets 113.65 108.49
Purchase of Investments (373.82) (50.64)
Sale/redemption of investments 474.95 817.93
Income from investments – Interest 106.61 59.43
– Dividend 22.85 129.39
Changes in advances (1,473.70)
(2,231.98)

Net cash low used in investing activities (7,221.97)

(8,096.78)

Cash low from financing activities

Long term borrowings – Raised 3,672.1 2,162.35
– Repaid (404.71) (829.95)
Changes in short term borrowings 993.32
Debenture/Loan raising expenses paid (68.94) (2.47)
Interest paid – net (546.59) (181.67)
Dividend paid and tax thereon (1,792.34)
Interim dividend and tax thereon (2,264.32)
Net cash low from financing activities 3,645.18 (2,908.40)
Net cash inflow/(outflow) 6,205.25 (5,130.86)
Opening cash and cash equivalents 1,952.02 7,082.88
Closing cash and cash equivalents 8,157.27 1,952.02
Net increase/(decrease) in cash and cash equivalents 6,205.25 (5,130.86)

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Interpretation:

Figures in the brackets represent outflow. The statement of cash flow reveals a net cash outflow
from operations of Rs. 10705.26 million whereas the company shows a net profit of Rs 6381.50
million. There is a sharp decrease in the inventories of the company i.e. Rs 1535.93 million and
debtors have increased Rs 1426.87 million. The company has used more cash in operations than
all of the cash it received from its investing and financing activities resulting into a net increase in
cash.

CHAPTER 7: FINDINGS

The Reserve & Surplus is increased by 36.57%. This year also the company has transferred all the
profit to the reserve & surplus and out of that company makes provision for taxation.

The Loan Fund of the company decreased by 7.5%. Secured Loans increased by 95.04% because
of Debentures and term loans are secured by certain immovable properties and movable assets of
the Company. Cash credit facility is secured by certain movable assets and goods-in-transit and
book debts and also by a charge on the immovable properties subordinate to the existing charge
created in favour of the lenders.

During the year, the Company incurred capital expenditure of Rs.6135 million. This expenditure
covers investments in capacity expansion / up gradation and R&D. During the year, the capacity
increased from 77,200 vehicles to 84,000 vehicles.

Inventories have gone up to Rs.10703 million as on 31st March 2016 compared to Rs.9026 million
as on 31st March 2015. The increase is due to increased activity levels.

Debtor level increased to Rs.5229 million from Rs.4243 million due to higher level of fully built
vehicles supplied to Defense.

CHAPTER 8: RECOMMENDATIONS

Recommendations can be used by the firm for the betterment increased of the firm after study and
analysis of project report on study and analysis of working capital. On the basis of the tools and
techniques utilised for comparison purposes, the following recommendations are proposed:

 Company should raise funds through short term sources for short term requirement of
funds, which comparatively economical as compare to long term funds.
 Company should take control on debtors collection period which is major part of current
assets.
 Company has to take control on cash balance because cash is non earning assets and
increasing cost of funds.
 Company should make a policy in respect of investment of excess cash, if any; in
35
  marketable securities and overall cash policy should be introduced.
 Management should develop a credit policy and proper self realization system from
customers so that efficient and effective management of accounts receivable can be
ensured. This will significantly improve the profitability and liquidity of the company.
 Over all company has good liquidity position and sufficient funds to repayment of
liabilities. Company is increasing sales volume per year thus impacting the market share
of the company year by year.

CHAPTER 9: CONCLUSION

The project entitled “Financial Performance Analysis of Ashok Leyland Limited” was undertaken
with the objective of determining the profitability performance of the company. The study at
Ashok Leyland provided an insight into the workings of the company and how a firm manages its
cash inflow and outflow. The Company has set itself the task of consolidating and enhancing its
position in the Indian commercial vehicle market, both in terms of volumes as well as in customer
satisfaction, in the medium term. The Company is executing various initiatives in terms of process
and product improvements to achieve this goal. On the review of the performance of company
ratio and other financial statements for the financial years 2007-08 reveals that the company
maintained a good solvency position. To conclude company has sound and effective management
of working capital, which helps them to control the cost and increase the profit.

CHAPTER 10: BIBLIOGRAPHY

Books:

Narayanaswamy R 2014, Finanacial Accounting –A Managerial Perspective, 5th Ed, Prentice Hall
Pandey.M (2012): Financial Management (Vikas Publishing House Pvt. Ltd.)

Websites:

http://www.ashokleyland.com
http://www.moneycontrol.com/competition/ashokleyland
http://www.scribd.com
http://en.wikipedia.org/wiki/Ashok_Leyland
http://www.oppapers.com
http://www.allbusiness.com

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