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Acknowledgement:
We are thankful to Allah, the gracious, the merciful for Helping us at every step and giving us the strength to complete this report on time. We are really grateful to our course facilitator Sir Amyn Wahid who guided us and provided with all his possible assistance during the obstacles faced in the creation of this report, which would not have been possible without his guidance and support. We would like to thank our family who supported us and gave us time to complete our report.
Table of Contents
INTRODUCTION OF COMPANIES ...................................................................4 PAK SUZUKI MOTOR COMPANY LIMITED ..............................................4 INDUS MOTORS ................................................................................................6 LIQUIDITY RATIO: ..............................................................................................8 FINANCIAL LEVERAGE RATIOS ...................................................................12 EFFICIENCY RATIOS ........................................................................................17 PROFITABILITY RATIOS .................................................................................25 COMMON SIZE ANALYSIS...............................................................................34 INDEXED ANALYSIS ..........................................................................................42 REFERENCES: .....................................................................................................52 APPENDICES ........................................................................................................53
INTRODUCTION OF COMPANIES
Pak Suzuki Motor Company Limited
Pak Suzuki Motor Company was formed in August 1983 as a joint venture between Pakistan Automobile Corporation Limited (representing government of Pakistan) and Suzuki Motors Corporation Japan for the manufacturing, assembling and marketing of Suzuki vehicles in Pakistan.
PSMCL started production in 1984. In 1989 the foundation stone of the new Bin Qasim plant was laid. Over the years PSMCL has expanded its capacity to 150,000 vehicles per annum. On 25th April 2007 the board of directors of Pak Suzuki Motor Corporation Limited and Suzuki Motorcycles Pakistan (SMPL) Limited decided to amalgamate SMPL into PSMCL.
It has the largest dealership network in Pakistan. PSMCL also has the highest market share and has become a household name in Pakistan. It is manufacturing eight car models; this is the highest number of models manufactured by any automobile manufacturer in Pakistan.
OUR VISION
To be Excellent All Around.
OUR MISSION
To provide vehicles of international quality at competitive price.
To iprove skills of employees by imparting training and inculcating in them sense of participation. To achieve maximum indigenization and promote the automobile vending industry. To contribute to Pakistani society through development of industry in general and automobile industry in particular.
Product range
Automobile Motorcycles
Cultus:
Swift:
GS 150
Alto
Jimmy
Sprinter
Liana
Cargo van
Sprinter Eco
Mehran
Ravi pickup
Shogun
Bolan van
Vision
IMCs Vision is to be the most respected and successful enterprise, delighting customers with a wide range of products and solutions in the automobile industry with the best people and the best technology". The most respected. The most successful. Delighting customers. Wide range of products. The best people. The best technology.
Mission
Mission of Toyota is to provide safe & sound journey.
Corolla
Imported vehicles
Cuore
Liquidity Ratio:
a. Current Ratio = Current Assets Current Liabilities
Rs Indus Motors Ltd 2009 16,715,319.00/ 9,884,850.00 Indus Motors Ltd 2010 23,791,253.00 /14,224,866.00 Pak Suzuki Co Ltd 2009 12,427,633,000/ 3,325,134,000 Pak Suzuki Co Ltd 2010 14,313,132,000/ 4,752,499,000 Current Ratio 2009 2010 Indus Motors Ltd
1.69 1.67
1.69
1.67
3.74
3.01
3.74 3.01
1.69
1.67
External Analysis
Paki Suzuki is in a better position than Indus motors to pay off its current liabilities with its current assets. Pak Suzuki both current assets and current liabilities are much higher than Indus motors. However both firms have shown improvement in 2010 in terms of current ratio.
b. Quick Ratio =
2009 2010
1.67 1.14
10
External Analysis
Indus motors are not having any inventory issues, which is evident by quick ratio which is increasing in 2010. But Pak Suzuki quick ratio declined which means that its not managing its inventory well in 2010.
11
50.22%
53.62%
25% 19%
12
External Analysis
Both the companies has shown that total debt to total assets ratio have increased in 2010.however Indus motors finance almost half of its assets by debt financing, which is very risky, while Pak Suzuki is financing very less with debt and more with equity financing, which makes the company less risky and leading to less interest expense.
Indus Motors Ltd Indus Motors Ltd Pak Suzuki Co Ltd Pak Suzuki Co Ltd
13
1.16 1.2 1 0.8 0.6 0.4 0.2 0 Indus Motors Ltd 2009 Pak Suzuki Co Ltd 2010 0.23 0.33 1.01
14
External Analysis
As mentioned earlier in the above ratio. Pak Suzuki is using more of equity financing to play on the safe side, which is indicated through ratio 0f 0.23 and 0.33 which is less than 1 , means more equity financing, while Indus motor is using more of debt financing.
c. Interest Coverage Ratio = ___EBIT_______ Interest Charges Rs Pak Suzuki Co Ltd Indus Motors Ltd Indus Motors Ltd Pak Suzuki Co Ltd 2009 2010 2009 2010 14,02500/62,000 36,47600/15,33900 427,843/ 20,607 668,015/ 20,278 22.62 2.38 20.762 32.942
15
32.942 35 30 25 20 15 10 5 0 Indus Motors Ltd 2009 2010 2010 2.38 22.62 20.762
External Analysis
In 2010,Indus motors interest charges increased drastically more than double, which lead to decreased coverage ratio, while for Pak Suzuki, interest charges had decreased almost same for two years but its EBIT has increased , due to decreased expenses. Therefore Pak Suzuki is in a better position to cover its interest charges with its EBIT.
16
Efficiency Ratios
a. Receivable Turnover = _Annual Credit Sales_ Receivables Rs Indus Motors Ltd Indus Motors Ltd Pak Suzuki Co Ltd Pak Suzuki Co Ltd 2009 2010 2009 2010 37,864,604/1,845,900 60,093,139.00/1,737,600.00 26,234,061,000/376,508,000 42,642,762,000/240,719,000 20.51 34.58 69.68 177.15
200 150 100 50 0 Indus Motors Ltd 2009 20.51 34.58 69.68
177.15
17
External Analysis
Both the companies are doing well in collection of its receivables and are managing its receivables well. However in 2010, receivables for Pak Suzuki declined by 56%, while its sales have almost doubled, means that more sales were made on cars and company was providing some incentive to creditors that they were paying quickly so less receivables.
Indus Motors Ltd Indus Motors Ltd Pak Suzuki Co Ltd Pak Suzuki Co Ltd
18
20 15 10 5 0
17.55
19
External Analysis
As evident from average collection ratio for Pak Suzuki, it has decreased the days that it was taking to convert account receivables to cash to only 2 days. While Indus motor is taking 10 days in 2010, therefore Pak Suzuki is doing well in 2010 as compared to Indus motors.
c. Inventory Turnover
Indus Motors Ltd Indus Motors Ltd Pak Suzuki Co Ltd Pak Suzuki Co Ltd
20
12 10 8 6 4 2 0 8.43
10.43
3.73
4.46
External Analysis
Indus motors are taking around 10 times to covert its inventory to sale, while Pak Suzuki is taking 4 times in 2010 to convert inventory to cash. This may be due to the fact that Indus motor produce cars that are luxurious and expensive, so upper class buys it and few units are sold but which give increase amount of revenue but Pak Suzuki cater to masses and produce comparatively low price cars, which are purchased regularly by masses.
21
Indus Motors Ltd Indus Motors Ltd Pak Suzuki Co Ltd Pak Suzuki Co Ltd
120 100 80 60 42.72 40 20 0 Indus Motors Ltd 2009 2010 Pak Suzuki Co Ltd 34.52 96.5 75.63
External Analysis
Inventory turnover in days have decreased for both companies in 2010, which shows that both companies are selling cars fast in 2010, as compared to 2009, this may be due to increased car financing and increased disposable income of consumers.
Indus Motors Ltd Indus Motors Ltd Pak Suzuki Co Ltd Pak Suzuki Co Ltd
23
2.22
External Analysis
Indus motors and Pak Suzuki total asset turnover is almost the same in 2010, which indicates both companies are using its assets well to generate sales. Total assets and sales have increased for both the companies in 2009 and 2010.
24
Profitability Ratios
: a) Gross Profit Margin = Gross profit Sales Rs Indus Motors Ltd Indus Motors Ltd Pak Suzuki Co Ltd Pak Suzuki Co Ltd 2009 2010 2009 2010 2,324,186.00/37,864,604.00 4,710,833.00/60,093,139.00 569,299,000/26,234,061,000 1,003,787,000/42,642,762,000 6.14 7.84 2.17% 2.35%
9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% 2009 Indus Motors Ltd Pak Suzuki Co Ltd 2010 2.17% 2.35% 6.14% 7.84%
25
External Analysis
Indus motors have much better gross margins than Pak Suzuki, which means that its operations are much better than Pak Suzuki and is producing goods in cost efficient manner.
Indus Motors Ltd Indus Motors Ltd Pak Suzuki Co Ltd Pak Suzuki Co Ltd
26
5.73% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% Indus Motors Ltd 2009 Pak Suzuki Co Ltd 2010 0.97% 0.50% 3.66%
External Analysis
Net profit for Indus motors have decreased in 2010 due to increased expenses due to which its Net profit margin ratio declined. Indus motor had better profitability in 2010, while Pak Suzuki profitability declined in 2010. Therefore an Indus motor was in a better position in 2010.
27
c. Return on assets: Net Profit After Taxes Total Assets Rs Indus Motors Ltd Indus Motors Ltd Pak Suzuki Co Ltd Pak Suzuki Co Ltd 2009 2010 2009 2010 1,385,102.00/20,685,523.00 3,443,403.00/27,138,278.00 255,219,000/17,655,734,000 211,143,000/19,250,364,000 6.70% 12.69% 1.45% 1.10%
12.69% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% Indus Motors Ltd 2009 2010 Pak Suzuki Co Ltd 1.45% 1.10% 6.70%
28
External Analysis
Indus motors have increased ROI as compared to Pak Suzuki declining ROI in 2010. As evident from Pak Suzuki declining net income in 2010, it was obvious that its ROI willed cline too, While Indus motors had increased net income and increased assets in 201, making the company better off.
d. Return on Equity= Net Profit After Taxes Shareholders Equity Rs Indus Motors Ltd Indus Motors Ltd Pak Suzuki Co Ltd Pak Suzuki Co Ltd 2009 2010 2009 2010 1,385,102.00/10,396,973.00 3,443,403.00/13,587,615.00 255,219,000/14,325,600,000 211,143,000/14,497,915,000 13.32% 25.34% 1.78% 1.46%
29
25.34%
1.78%
1.46%
External Analysis
Indus motors look more interesting to investors in 2010 because its ROE has increased to 25% which is beneficial for shareholders while Pak Suzuki ROE declined, which causes decrease in RoE, Which is obviously due to decreased net income in 2010?
30
Net income
Number of shares Rs/ No of Shares Indus Motors Ltd Indus Motors Ltd Pak Suzuki Co Ltd Pak Suzuki Co Ltd 2009 1,385,102.00/78,600.00 2010 3,443,403.00/78,600.00 2009 255,219,000/82,329,000 2010 211,143,000/82,157,000 17.62 43.81 3.10 2.57
50 40 30 20 10 0 17.62
43.81
3.1
2.57
External Analysis
Indus motors earning per share ratio has increased drastically to 43.81 in 2010 from 17 in 2009, which making the firm more desirable to investors as they would earn more wealth, while Pak Suzuki ratio has declined leading to decreased shareholder value and which is a cause of decreased net income in 2010.
Earnings per Share Rs Indus Motors Ltd Indus Motors Ltd Pak Suzuki Co Ltd Pak Suzuki Co Ltd 2009 2010 2009 2010 107.65/17.62 262.42/43.81 NA NA 6.11 5.99 23.9 31.7
32
35 30 25 20 15 10 5 0 Indus Motors Ltd 2009 Pak Suzuki Co Ltd 2010 6.11 5.99 23.9
31.7
External Analysis
As price to earning ratio was Pak Suzuki is not avail
33
Net sales Cost of sales Gross profit Distribution expenses Administrative expenses
37,864,604 35,540,418 2,324,186 469,985 352,249 822,234 1,501,952 156,479 1,345,473 727,080 2,072,553 26,540 2,046,013 660,911 1,385,102
100.00% 100.00% 92.16% 7.84% 0.78% 0.63% 1.41% 6.42% 0.69% 5.73% 3.00% 8.73% 0.01% 8.72% 2.99% 5.73% 93.86% 6.14% 1.24% 0.93% 2.17% 3.97% 0.41% 3.55% 1.92% 5.47% 0.07% 5.40% 1.75% 3.66%
416,106 3,444,656
1,801,459 5246115
Finance costs Profit before taxation Taxation Profit after taxation (Rupees) Earnings per share
44
17.62
34
Analysis:
In this common size analysis of profit and loss account we have seen that cost of goods sold have decreased in 2010 as a percentage of sales, while gross profit has also increased in 2010 to 7.84% as a percentage of sales, however distribution expenses have declined to 0.78% in 2010 along with administrative expenses while other operating expenses have increased to 0.69% as a percentage of sales.net income of Indus motors have increased to 5.73% as a percentage of sales, which shows that company has good income available with itself to distribute to shareholders in 2010.
Current assets Stores and spares Stock-in-trade Trade debts Loans and advances Short-term prepayments 111,567 5,198,367 1,613,247 839,819 18,778 128,483 4,088,858 1,736,631 894,459 16,876 0.62% 19.77% 8.40% 4.32% 0.08% 0.41% 19.16% 5.94% 3.09% 0.07% 35
Accrued return on bank deposits Other receivables Cash and bank balances Total Current Assets
23,791,253 16,715,319
100.00 %
EQUITY Share capital Authorized capital 100,000,000 (2009: 100,000,000) Ordinary shares of Rs 10 each Issued, subscribed and paid-up capital Reserves Total Equity 1,000,000 786,000 11,801,615 1,000,000 786,000 9,510,973 4.83% 3.80% 45.98% 49.78% 3.68% 2.90% 43.49% 46.38%
12,587,615 10,296,973
LIABILITIES Non-current liabilities Deferred taxation Total non current liabilties 325,797 325,797 503,700 503,700 2.44% 2.44% 1.20% 1.20%
Current liabilities Trade, other payables and provisions Advances from customers and dealers Accrued mark-up Short-term running finance Taxation net 242,579 14,224,866 5,905,062 8,076,281 944 14,660 9,884,850 0.07% 47.79% 0.89% 52.42% 3,942,988 5,926,529 673 19.06% 28.65% 0.00% 21.76% 29.76% 0.00%
36
100.00 %
Analysis:
For Indus motors the total current assets have increased to 19 % in 2010 as a percentage of total assets. However total current assets declined in 2010 to 80% from 87% in 2009, due to decline in receivables and cash Total equity also increased to 48% in 2010 from 46% in 2009 due to increased reserves in the company which improved the equity percentage increased. Total current liabilities decreased to 47% in 2010 from 52% in 2009, due to decreases in payables in 2010.
37
38
TOTAL ASSETS
19,250,364
Authorised share capital 150,000,000 (2009: 150,000,000) Ordinary shares of Rs 10 each Issued, subscribed and paid-up capital Reserves
1,500,000
1,500,000
Current liabilities Trade, other payables Advances from customers Accrued mark-up Short-term borrowing Deposits against display of vehicles Security deposits Provision for custom duties and sales tax 3,080,351 327,031 0 50,000 1,067,839 88,753 138,475 4,752,449 TOTAL EQUITY AND LIABILITIES 19,250,364 16.00 1.70 0.00 0.26 5.55 0.46 0.72 24.69 100.00 1,853,034 441,781 1,512 80,000 723,554 86,778 138,475 3,325,134 17,655,734 10.50 2.50 0.01 0.45 4.10 0.49 0.78 18.83 100.00
39
Analysis:
In year 2010, total assets of Pak Suzuki consists of 74.35% of current assets and 25.65% of noncurrent assets as compared to 70.39% and 29.61% respectively in 2009. The increase in current assets was because of increase in stores, spares & loose tools by 0.09%, stock-in-trade by 6.47%, trade deposits & short-term prepayments by 5%, other receivables by 0.13%. The decrease in non-current assets was a result of decrease in fixed assets by 4.57%. The equity side of the balance sheet indicates the decline from 81.14% to 75.31% however the liabilities side of the balance sheet shows an increase from 18.83% to 24.69%
Turnover - net Cost of sales Gross profit Distribution costs Administrative expenses Other operating income
40
Analysis:
In the year 2010 the cost of goods sold was decrease which resulted in increase in gross profit from 2.17% to 2.37%. the overall cost structure was decreasing i.e. the administration cost & distribution cost by 0.40% & 0.36% respectively .the overall tax or the company increased from 0.66% to 1.07% but still the company profit after taxation
41
Indexed Analysis
Profit and Loss account for Indus motors
Profit an Loss account As at June 30, 2010 2010 Regular 2009 Indexed 2009 2010
(Rupees in '000)
Net sales Cost of sales Gross profit Distribution expenses Administrative expenses
37,864,604 35,540,418 2,324,186 469,985 352,249 822,234 1,501,952 156,479 1,345,473 727,080 2,072,553 26,540 2,046,013 660,911 1,385,102
100% 108.33% 100% 103.39% 100% 257.05% 100% 265.92% 100% 256.02% 100% 247.77% 100% 253.12% 100% 13.47%
416,106 3,444,656
1,801,459 5246115
Finance costs Profit before taxation Taxation Profit after taxation (Rupees) Earnings per share
44
17.62
100% 248.64%
42
Analysis:
In indexed analysis for profit and loss account for Indus motors, we have seen that all items have increased drastically over the next year of 2010 from 2009. Net sales increased by 158% , with COGS being increased in the same proportion and gross profit getting doubled with 200% increase. However distribution expenses have declined and other expenses increased in 2010. One thing is to be notices that our finance cost has decreased to 13.47%, leading to almost double increase of 248% in net income in 2010, showing effectiveness of companies operations and how desirable the company for investors.
Current assets Stores and spares Stock-in-trade Trade debts Loans and advances Short-term prepayments Accrued return on bank deposits 111,567 5,198,367 1,613,247 839,819 18,778 57,254 128,483 4,088,858 1,736,631 894,459 16,876 50,944 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 86.83% 127.13% 92.90% 93.89% 111.27% 112.39%
43
TOTAL ASSETS
27,138,278
20,685,523
100.00%
131.19%
EQUITY Share capital Authorized capital 100,000,000 (2009: 100,000,000) Ordinary shares of Rs 10 each Issued, subscribed and paid-up capital Reserves Total Equity 1,000,000 786,000 11,801,615 12,587,615 1,000,000 786,000 9,510,973 10,296,973 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 124.08% 122.25%
LIABILITIES Non-current liabilities Deferred taxation Total non current liabilities 325,797 325,797 503,700 503,700 100.00% 100.00% 64.68% 64.68%
Current liabilities Trade, other payables and provisions Advances from customers and dealers Accrued mark-up Short-term running finance Taxation - net 242,579 14,224,866 5,905,062 8,076,281 944 14,660 9,884,850 100.00% 1654.70% 100.00% 143.91% 3,942,988 5,926,529 673 100.00% 100.00% 100.00% 149.76% 136.27% 140.27%
27,138,278
20,685,523
100.00%
131.19%
44
Analysis
In balance sheet for indexed analysis, its observed that current assets have decreased to 84% in 2010 while current assets have increased to 142% in 2010, however trade debt and inventory decreased in 2010. Total equity increased to 122% in 2010, as our reserves increased to 124% in 2010.however our total liabilities have increased to 143% in 2010, with decreased in total non current liabilities of 64% in 2010. Total equity and liabilities have increased by 131% making the company in a good financial position.
45
115.17 109.03
12,427,633 17,655,734
100.00 100.00
Authorized share capital 150,000,000 (2009: 150,000,000) Ordinary shares of Rs 10 each Issued, subscribed and paid-up capital Reserves
1,500,000
100.00
1,500,000
100.00
Current liabilities Trade, other payables Advances from customers Accrued mark-up Short-term borrowing Deposits against display of vehicles Security deposits Provision for custom duties and sales tax 3,080,351 327,031 0 50,000 1,067,839 88,753 138,475 4,752,449 TOTAL EQUITY AND LIABILITIES 19,250,364 166.23 74.03 0.00 62.50 147.58 102.28 100.00 142.93 109.03 1,853,034 441,781 1,512 80,000 723,554 86,778 138,475 3,325,134 17,655,734 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
47
Analysis:
In the year 2010 the companies current assets increased by 15.17% however non current assets decreased by 5.56%. The equity of the company increased by 1.02% however noncurrent liabilities increased by 42.93% which resulted in 9.03% increased the overall assets and liabilities and equity in the balance sheet. Major increase was indicated in the deposits against displaying vehicles which was 47.58%
Turnover - net Cost of sales Gross profit Distribution costs Administrative expenses Other operating income Finance costs Other operating expenses
162.55 162.24 176.32 91.99 128.50 92.82 169.92 144.15 237.37 156.14 264.66 82.73
26,234,061
100.00
(25,664,762) 100.00 569,299 (214,550) (495,200) 619,572 (12,564) (38,714) (141,456) 427,843 (172,624) 255,219 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
48
Analysis:
Net turnover and cost of sales both increased by 62.55% and 62.24% respectively in year 2010 resulting in an increase in gross profit by 76.32%. Distribution costs decreased by 8.01%, administrative expenses increased by 28.50%, other operating income decreased by 7.18%, finance costs increased by 69.92% and other operating expenses increased by 44.15% in year 2010 resulting in an enormous increase in profit before taxation by 137.37%. The decrease in net profit after taxation by 17.27% in year 2010 was because of increase in taxation by 164.66% causing a declining net profit margin.
49
50
From the analysis, we have concluded that Indus motor is doing well in terms of profitability and efficiently therefore it looks more desirable to investors. However Pak Suzuki should reduce its expenses, so that its net income can be increased and can provide to wealth to shareholders.
51
References:
Annual report of Pak Suzuki Ltd for Year 2010-2009 Annual report of Pak Suzuki Ltd for Year 2010-2009
52
Appendices
Detailed Financial statement of Indus motors Ltd
2009 Profit and Loss account 2010
37,864.60
35,566.60 2,298.00 915.5 -20.1 895.5 1,402.50 -8.8 628.9
0
55,266.60 4,826.50 1,214.20 -35.4 1,178.90 3,647.60 -77.7 1,611.60
620
8.1 -14
1,533.90
-42.1 -22.5
2,016.70
1.8 10.7 16.9 16.9
5,116.90
25.2 3.2 97.3 97.3
2,046.00
660.9 1,385.10
5,242.50
1,799.10 3,443.40
1,385.10 1,385.10
3,443.40 3,443.40
53
EXTRA ITEMS NET INCOME TO COMMON EXCLUDING EXTRA ITEMS 1,385.10 3,443.40
2010 Assets Cash and Equivalents Short-Term Investments Trading Asset Securities --9,731.20 ---
2010
15,756.00
9,731.20
1,736.60 10.2 99.1
15,756.00
1,613.20 8.4 116.1
TOTAL RECEIVABLES
Inventory Prepaid Expenses Other Current Assets
1,845.90
4,217.30 16.9 904.1
1,737.60
5,309.90 18.8 968.9
16,715.30
7,629.60 -3,699.10
23,791.30
7,834.50 -4,513.60
3,930.50
9.3
3,320.90
5.2
54
4 26.4
3.5 17.5
20,685.50
27,138.30
TOTAL LIABILITIES
Common Stock Additional Paid in Capital Retained Earnings Comprehensive Income and Other
10,388.60
786 196.5 9,308.40 6.1
14,550.70
786 196.5 11,572.80 32.4
10,297.00 10,297.00
20,685.50
12,587.60 12,587.60
27,138.30
55