CONTENTS

CHAPTERS

TITLE

PAGE NUMBER

INTRODUCTION

II

REVIEW OF LITERATURE

III

PROFILE OF THE COMPANY

14

IV V VI

RESEARCH METHODOLOGY ANALYSIS AND INTERPRETATION FINDINGS, SUGGESTIONS AND CONCLUSIONS BIBLIOGRAPHY ANNEXURE

27 31 91

LIST OF TABLES
PAGE NUMBER 32 35 38 41

TABLE.NO.

TITLE

5.1 5.2 5.3 5.4

TABLE SHOWING CURRENT RATIO TABLE SHOWING LIQUID RATIO TABLE SHOWING GROSS PROFIT RATIO TABLE SHOWING NET PROFIT RATIO TABLE SHOWING FIXED ASSETS TURNOVER RATIO TABLE SHOWING PROPRIETARY RATIO

5.5

44

5.6 5.7

47 50

TABLE SHOWING SOLVENCY RATIO TABLE SHOWING INVENTORY TURNOVER RATIO TABLE SHOWING DEBTORS TURNOVER RATIO

5.8

53

5.9

56

5.10

TABLE SHOWING RETURN ON SHAREHOLDERS FUNDS

59

5.11

TABLE SHOWING WORKING CAPIATL TURNOVER RATIO TABLE SHOWING CASH SALES TURNOVER RATIO TABLE SHOWING CAPITAL TURNOVER RATIO

62

5.12

65

5.13

68

TABLE.NO

TITLE

PAGE NO.

5.14

COMPARATIVE INCOME STATEMENT FOR THE YEAR 2011-2012 COMPARATIVE BALANCE SHEET FOR THE YEAR 2011-2012 COMMON SIZE INCOME STATEMENT FOR THE YEAR 2011-2012 TABLE SHOWING TREND PERCENATAGE OF NET SALES TABLE SHOWING TREND PERCENATAGE OF OPERATING PROFIT TABLE SHOWING TREND PERCENATAGE OF CURRENT ASSETS TABLE SHOWING TREND PERCENATAGE
3

71

5.15

73

5.16

76

5.17

79

5.18

81

5.19

83

5.20

85

OF CURRENT LIABILITES TABLE SHOWING TREND PERCENATAGE OF INVENTORIES TABLE SHOWING TREND PERCENATAGE OF SUNDRY DEBTORS

5.21

87

5.22

89

LIST OF CHARTS
TABLE.NO

TITLE
CHART SHOWING CURRENT RATIO CHART SHOWING LIQUID RATIO CHART SHOWING GROSS PROFIT RATIO CHART SHOWING NET PROFIT RATIO CHART SHOWING FIXED ASSETS TURNOVER RATIO CHART SHOWING PROPREITARY RATIO

PAGE N0 33 36 39 42

1 2 3 4

45

6 7

48 51

CHART SHOWING SOLVENCY RATIO CHART SHOWING INVENTORY TURNOVER RATIO CHART SHOWING DEBTORS TURNOVER RATIO CHART SHOWING RETURN ON SHAREHOLDERS FUNDS CHART SHOWING WORKING CAPITAL

54

57

10

60

11

63

TURNOVER RATIO CHART SHOWING CASH SALES TURNOVER RATIO CHART SHOWING CAPIATL TURNOVER RATIO CHART SHOWIBG TREND PERCENTAGE OF NET SALES CHART SHOWIBG TREND PERCENTAGE OF OPERATING PROFIT CHART SHOWIBG TREND PERCENTAGE OF CURRENT ASSETS CHART SHOWIBG TREND PERCENTAGE OF CURRENT LIABILITIES CHART SHOWIBG TREND PERCENTAGE OF INVENTORIES CHART SHOWIBG TREND PERCENTAGE OF SUNDRY DEBTORS

12

66

13

69

17

80

18

82

19

84

20

86

21

88

22

90

CHAPTER-I

INTRODUCTION
INTRODUCTION
Every business concern wants to know the various financial aspects for effective decision making. The main aim of preparing a financial statement is to achieve the objectives of the firm as a whole. The term financial statement refers to an organized collection of data on the basis of accounting principles and conventions to disclose its financial information.

DEFINITION
According to John N. Myer (1985), the financial statements provide a summary of the accounts of a business enterprise, the balance sheet reflecting the assets, liabilities and capital as on a certain date and the income statement showing the results of operations during a certain period. According to Anthony (1976), financial statements, essentially, are interim reports, presented annually and reflect a division of the life of an enterprise into more or less arbitrary Accounting period more frequently in a year. Financial statements are broadly grouped into two groups. 1. Income Statements (Trading, Profit and loss Account) 2. Balance Sheets

NATURE OF FINANCIAL STATEMENTS

Financial statements are prepared on the basis of business transactions recorded in the books of Original Entry or Subsidiary books, Ledger and Trial
8

balance. Recording the transactions in the books of primary entry is supported by document proofs such as vouchers, invoice notes etc. According to the American institute of certified Public Accountants, Financial statement reflects a combination of recorded facts, accounting conventions and personal judgments; and conventions applied affect them materially. It is, therefore concluded that the nature and accuracy of the data included in the financial statements are in the financial statements are influenced by the following factors: 1. Recorded facts concerning the business transactions. 2. Generally accepted accounting principles. 3. Personal judgments. 4. Accounting conventions adopted to facilitate the accounting technique.

CONCEPT OF FINACIAL STATEMENT

Financial statement also called financial report, refers to such statements as it contains financial information of the enterprise. They are over all general purpose entity statement as the report financial position and operation results of an enterprise business at end of account period. As a matter of fact, these statements reflect the total of the summary of the books of account.

FINANCIAL PERFORMANCE ANALYSIS

Financial performance analysis is the process of identifying the financial strengths and weaknesses of the firm by properly establishing the relationship between the items of balance sheet and profit and loss account. It also helps in
9

short term and long term forecasting and growth can be identified with the help of financial performance analysis. The dictionary meaning of analysis is to resolve or separate a thing in to its element or components parts for tracing their relation to the things as whole and to each other. The analysis of financial statement is a process of evaluating the relationship between the component parts of financial statement to obtain a better understanding of the firms position and performance. This analysis can be undertaken by management of the firm or by parties outside the namely, owners, creditors, investors and others.

MEANING OF FINANCIAL STATEMENT

A financial statement is a collection of data organized according to logical and consistent Accounting procedures. Its purpose is to convey an understanding of some financial aspects of a business firm. It may show a position at a moment in time as in the case of a balance sheet, or it may reveal series of activities over a given period of time, as in the case of an income statement. The statement disclosing status of investments is known as balance sheet and the statement showing the result is known as profit and loss account. Thus, the term financial statement has been widely used to represent two statements prepared by accountants at the end of specific period. They are: (i) profit and loss account or income statement; and (ii) Balance sheet or statement of financial position. Financial statements are prepared as an end result of financial accounting and are the major sources of financial information of an enterprise. Financial statements are also called as financial reports.
10

The financial statements are prepared on the basis of recorded facts. The recorded facts are those which can be expressed in monetary terms. The statements are prepared for a particular period, generally for one year.

TYPES OF FINANCIAL STATEMENTS

Financial statements include A Balance Sheet An Income Statement A Statement of Changes A Statement of Changes in financial position: It is fund flow and cash flow statement. The financial statement is prepared with a view to depict financial position of the concern. A proper analysis and interpretation of this statement enables a person to judge the profitability and financial strength of the business.

IMPORTANCE OF FINANCIAL STATEMENTS

(a) For management: Till recently, the feeling was that financial statements are meant only for owners of the concern and to satisfy legal requirements. Now it is realized that financial statements are of utmost help to the management of a concern. Management will be able to take effective decisions only when correct

11

and reliable information is at its disposal. If information is not available, management can neither plan nor fulfill the functions of operation and control. (b) For the Financiers: Besides managements, financial statements are also of great importance to the financiers and lenders. Lenders need information regarding customers financial position, solvency, credit standing, profitability, etc. Financial statements help the bankers and lenders to decide whether to extend loans to the customers. (c) For the Creditors: A Trade creditor is another class for whom financial statements are important. Trade credit implies extending facilities of deferred payment for credit purchases by seller buyer. All these facts are revealed by financial statements with the help of solvency ratios, cash and fund flow analysis, etc. (d) For Investors: Present and prospective investors are interested in studying financial statements to assess earning capacity, growth potential and efficiency of management. Financial statements provide such information readily to shareholders and debenture.

LIMITATIONS OF FINANCIAL STATEMENTS

Financial statements are normally prepared on the basis of accounting principles, conventions and past experiences. Therefore, they op not communicate much about the profitability, solvency, stability, liquidity etc. of the undertakers to the users of the statements. Financial statement emphasis to disclose only monetary facts, i.e., quantitative information, but qualitative information is ignored.

12

 Financial statements disclose only the historical information. It does not consider changes in money value, fluctuations of price level, etc. Thus, correct forecasting for future is not possible. Influences of personal judgments leads to opportunities for manipulation while preparing financial statements. Information disclosed by financial statements is based on accounting concepts and conventions. It is unrealistic because of the difference in terms and conditions, and changes in economic situations.

Usefulness of financial performance to various stakeholders

The analysis of financial performance is used by most of the business communities. 1. Trade Creditors The creditors provide goods / services on credit to the firm. They always face concern about recovery of their money. The creditors are always keen to know about the liquidity position of the firm. Thus, the financial performance parameters for them evolve around short term liquidity condition of the firm. 2. Suppliers of long term debt The suppliers of long term debt provide finance for the on-going
13

expansion projects of the firm. The long term debt providers will always focus upon the solvency condition and survival of the business. Their confidence in the firm is of utmost importance as they are providing finance for a longer period of time. 3. Investors Investors are the persons who have invested their money in the equity share capital of the firm. They are the most concerned community as they have also taken risk of investments expecting a better financial performance of the firm. The investors community always put more confidence in firms steady growth in earnings. They judge the performance of the company by analyzing firms present and future profitability, revenue stream and risk position. 4. Management Management for a firm is always keen on financial analysis. It is ultimately the responsibility of the management to look at the most effective utilization of the resources. Management always tries to match effective balance between the asset liability management, effective risk management and short-term and long-term solvency condition.

14

CHAPTER-II

15

REVIEW OF LITERATURE
REVIEW OF LITERATURE Dr. Kamm:Financial Analysis is designed for finance majors in order to improve
their skills at analyzing companies and to advance their knowledge of finance theory and application. The overall financial analysis includes: bond valuation, financial statement analysis, financial ratios, financial forecasting, beta and the CAPM, the weighted average cost of capital, the Gordon Growth model, discounted cash flow analysis and multiples. Students are expected to integrate skills of finance, economics, and accounting in the course. The course is quantitative and analytical in nature; we made use of the trading center throughout most of the term. Students calculate and interpret financial data, build spreadsheet models, and make general conclusions about the financial health of a company and its intrinsic value.

Dr. Laurence M. Crane:Financial statements help assess the financial wellbeing of the overall operation. Information about the financial results of each
16

enterprise and physical asset is important for management decisions, but by themselves are inadequate for some decisions because they do not describe the whole business. An understanding of the overall financial situation requires three key financial documents: the balance sheet, the income statement and the cash flow statement.

FINANCIAL PERFORMANCE MEASURES

The recommended measures for financial analysis are grouped into five broad categories: liquidity, solvency, profitability, repayment capacity and financial efficiency. Financial measures are intended to help operations analyze their activities from a financial standpoint and provide useful information needed to make good management decisions. By themselves, the financial measures discussed dont provide answersthey need to be reviewed in relation to each other and to other non-operation activities. It is not possible to control or predict all of the factors that influence the final outcome of any operational decision. Nor is it possible to have available all of the information that would be ideal. But decision making can be improved through using available information and through effective financial planning and analysis.

David Harper:Financial statements paint a picture of the transactions that flow

through a business. Each transaction or exchange - for example, the sale of a product or the use of a rented a building block - contributes to the whole picture. Let's approach the financial statements by following a flow of cash-based transactions. In the illustration below, we have numbered four major steps: 1. Shareholders and lenders supply capital (cash) to the company. 2. The capital suppliers have claims on the company. The balance sheet is an updated record of the capital invested in the business. On the right-hand side of the balance sheet, lenders hold liabilities and shareholders hold equity. The equity
17

claim is "residual", which means shareholders own whatever assets remain after deducting liabilities. The capital is used to buy assets, which are itemized on the left-hand side of the balance sheet. The assets are current, such as inventory, or long-term, such as a manufacturing plant. 3. The assets are deployed to create cash flow in the current year (cash inflows are shown in green, outflows shown in red). Selling equity and issuing debt start the process by raising cash. The company then "puts the cash to use" by purchasing assets in order to create (build or buy) inventory. The inventory helps the company make sales (generate revenue), and most of the revenue is used to pay operating costs, which include salaries. 4. After paying costs (and taxes), the company can do three things with its cash profits. One, it can (or probably must) pay interest on its debt. Two, it can pay dividends to shareholders at its discretion. And three, it can retain or re-invest the remaining profits. The retained profits increase the shareholders' equity account (retained earnings). In theory, these reinvested funds are held for the shareholders' benefit and reflected in a higher share price.

John Irron (Jun 15, 2007)Financial statements are a formal record of the
financial activities of a business, person, or other thing. Financial statements like a written statement which quantitatively describes the financial strength of a company. This includes an income statement and a balance sheet, and regularly also includes a cash flow statement. Financial statements are regularly compiled on a quarterly and yearly basis. Financial statements are important futures for each and every business. For a business venture, all the appropriate financial information, offered in a structured way and in a form simple to understand, are called the financial statements. The purpose of financial statements is to give information regarding the financial situation, performance and changes in financial situation of a venture that is helpful to a wide range of users in making financial
18

decisions. Financial statements should be comprehensible, appropriate, reliable and comparable. Reported property, liabilities and equity are directly connected to an organization's financial situation. Reported income and operating cost are directly connected to an organizations financial performance.

Abdullah Mohammad Khan Wahid(October 4, 2007):A financial

analysis is responsible for a wide range of functions such as account processing payable and receivable operations, taking into account the transfer of assets and the closing of the books as soon as possible. Properly fulfill these functions is essential for a company, on the basis of precise handling operations and accurate financial statements. These activities are clearly on the basis of any successful career in financial analysis. However, the organizer has exceptional skills in analyzing appropriate funding for success. This article was calculated to facilitate analysis financial support for a breadth and depth of the largest financial analysis. Traditionally the main objective of the accounting department has been processing transactions, customer billing, payments to suppliers, etc. These are routine activities that are invisible, but vital. Most employees of the company, but it is always necessary for the success of an organization. However, the role of accounting staff that has been changed companies facing increasing competition from organizations around the world. Now, managing a business needs advice and transaction flow smoothly. Accordingly, the financial analyst is not only to fill the role of traditional transaction processing, but also to continue to review company operations, evaluating investments, relationship problems and recommendations for management, and respond to requests by the management team of Special Investigations. All these new tasks

19

can be considered as financial analysis, because require the application of review procedures for operational activities and financial investment in a company.

Rashid Javed (Jan 19, 2009):All financial statements are essentially

historically historical documents. They tell what has happened during a particular period of time. However most users of financial statements are concerned about what will happen in the future. Stockholders are concerned with future earnings and dividends. Creditors are concerned with the company's future ability to repay its debts. Managers are concerned with the company's ability to finance future expansion. Despite the fact that financial statements are historical documents, they can still provide valuable information bearing on all of these concerns. Financial statement analysis involves careful selection of data from financial statements for the primary purpose of forecasting the financial health of the company. This is accomplished by examining trends in key financial data, comparing financial data across companies, and analyzing key financial ratios.

MC Donald& Morris(1984,1985):Present the first extensive empirical

studies of the statistical validity of the financial ratio method. The authors use 3 models with 2 samples, one with single industry the other with one randomly selected from each industry branch to investigate the implications of homogeneity on proportionality.

Dr. P. l. Bhashyam (2003):The financial statement analysis is largely a study

of relationship among various financial factors. The analysis and interpretations of financial statement, so that forecasting may be made of the future earnings ability to pay interest & debt maturities& profitability.

VV Reddy& S.B Patkar:(The management a/c, May 2004) has conducted

the study working capital& liquidity management is factoring a comparative study of SBI and bank factors. For this study he makes ratio analysis percentage method,
20

spearmans rank correlation, and test was used to check the significances of correlation.

Dr. B. Ramachandra Reddy& Dr. Yuvaraja Reddy :(the banking

finance, 2005) conducted analysis of financial performance of SBI for period of 1991 to2003. The study focus the key responsibility area of banking such as deposit mobilization, deployment, non-performing assets, profitability& productivity the ratio analysis has been used as a tool.

P.V. Vasudevan:In the researchers main objectives is to analyses the financial

performance of the company to judge the solvency of the company and to study the trends in working capital management of the company. The researcher adopted financial statement analysis funds flow and cash flow analysis, ratio analysis and working capital analysis.

K. Srinivas:The researchers main objectives are to critically examine and high

lights the financial performance of the company to study the liquidity and profitability of the company.

Mr. Wasswa Hannington:On of the main objectives of this project study to

conduct risk return analysis or working capital position to assess the financial liquidity position of the company to determine the structure and utilization of working capital and its various components. And to assess the implementation of the tendon committee norms with regard to working capital and also by doing analysis working capital and cash management schedules of charges in working capital include funds flow statements and funds flow cycle and working capital advances by commercial bank, short term financial institutions.

21

CHAPTER-III

22

PROFILE OF THE COMPANY

COMPANY PROFILE
COMPANY TYPE FOUNDED COUNTRY CORPORATE OFFICE MAJOR INDUSTRY SUBSIDIARIES : : : : : : : ASHOK LEYLAND LIMITED PUBLIC 1948 INDIA CHENNAI AUTOMOTIVE ENNOREFOUNDERIES LTD ASHELY HOLDING LTD ASHELY INVESMENT LTD

23

ASHELY LEYLAND PROJECT SERVICE LTD REVENUE GROUP WEBSITE : : : USN 2.1 BILLION HINDUJA GROUP WWW.ASHOKLEYLAND.COM

Indias first Prime Minister Nehru, persuaded Raghunandan Saran, an industrialist, to enter automotive manufacture. The company began in 1948 as Ashok Motors, to assemble Austin cars. The company was renamed and started manufacturing commercial vehicles in 1955 with equity participation by Leyland Motors. Today the company is the flagship of the Hinduja Group, a British-based and Indian originated transnational conglomerate. Early products included the Leyland Comet bus which was a passenger body built on a truck chassis, sold in large numbers to many operators, including Hyderabad Road Transport, Ahmedabad Municipality, Travancore State Transport, Maharashtra State Transport and Delhi Road Transport Authority. By 1963, the Comet was operated by every State Transport Undertaking in India, and over 8,000 were in service. The Comet was soon joined in production by a version of the Leyland Tiger. In 1968, production of the Leyland Titan ceased in Britain, but was restarted by Ashok Leyland in India. The Titan PD3 chassis was modified, and a five speed heavy duty constant-mesh gearbox utilized, together with the Ashok Leyland
24

version of the O.680 engine. The Ashok Leyland Titan was very successful, and continued in production for many years. 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. Ashok Leyland had collaboration with the Japanese company Hino Motors from whom the technology for the H-series engines was bought. Many indigenous versions of H-series engine were developed with 4 and 6 cylinder and also conforming to BS2 and BS3 emission norms in India. These engines proved to be extremely popular with the customers primarily for their excellent fuel efficiency. Most current models of Ashok Leyland come with H-series engines. In 1987, the overseas holding by Land Rover Leyland International Holdings Limited (LRLIH) was taken over by a joint venture between the Hinduja Group, the Non-Resident Indian transnational group and IVECO Fiat SpA, part of the Fiat Group and Europe's leading truck manufacturer. Ashok Leylands long-term plan to become a global player by benchmarking global standards of technology and quality was soon firmed up. Access to international technology and a US$200 million investment programme created a state-of-the-art manufacturing base to roll out international class products. This resulted in Ashok Leyland launching the 'Cargo' range of trucks based on European Ford Cargo trucks. These vehicles used IVECO engines and for the first time had factory-fitted cabs. Though the Cargo trucks are no longer in production and the use of IVECO engine was discontinued, the cab continues to be used on the 'Ecomet' range of trucks.

25

Ashok Leyland Modern Truck

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. In 2006, Ashok Leyland became the first automobile company in India to receive the TS16949 Corporate Certification. Editors note: This is part of a series of articles peeking into clean car industries and car manufacturers of China, India, South Korea and Germany. Among many other goals, Ashok Leyland aims to expand its operations to penetrate into overseas markets. Included in the companys plans is to acquire smaller car manufacturers in China and in other developing countries. In October 2006, Ashok Leyland bought a majority stake in the Czech based- Avia. Called Avia Ashok Leyland Motors s.r.o., this will give Ashok Leyland a channel into the competitive European market. According to the company, in 2008 the joint venture sold 518 LCVs in Europe despite tough economic conditions. Furthermore, the company will expand its product offers into construction equipment, following a
26

joint venture with John Deere. Newly formed in June 2009, the John Deere partnership is a 50/50 split between the companies. The company says negotiation is progressing on land acquisition, and the production plans are in place. The venture is scheduled to start rolling out wheel loaders and backhoe loaders in October 2010. Aside from the full expansion planned for the company, Ashok Leyland is also paying close attention to the environment. In fact, they are one of the companies showing the strongest commitment to environmental protection, utilizing eco-friendly processes in their various plants. Even as they thrust into different directions, Ashok Leyland maintains an R&D group that aims to uncover ways to make their vehicles more fuel efficient and reduce emissions. In fact, even before laws were placed on car emissions, Ashok Leyland was already producing low-emission vehicles. Back in 1997, they have already released buses with quiet engines and low pollutant emission based on the CNG technology. In 2002 it developed the first hybrid electric vehicle. Ashok Leyland has also launched a mobile emission clinic that operates on highways and at entry points to New Delhi. The clinic checks vehicles for emission levels, recommends remedies and offers tips on maintenance and care. This work will help generate valuable data and garner insight that will guide further development. When it comes to the development of environmentally friendly technologies, Ashok Leyland has developed Hythane engines. In association with the Australian company Eden Energy, Ashok Leyland successfully developed a 6-cylinder, 6-liter 92 kW BS-4 engine which uses Hythane (H-CNG,) which is a blend of natural gas and around 20% of hydrogen. Hydrogen helps improve the efficiency of the engine but the CNG aspect makes sure that emissions are at a controlled level. A 4cylinder 4-litre 63 KW engine is also being developed for H-CNG blend in a joint
27

R&D program with MNRE (Ministry of New and Renewable Energy) and Indian Oil Corporation. The H-CNG concept is now in full swing, with more than 5,500 of the technologys vehicles running around Delhi. The company is also already discussing the wide-scale use of Hythane engines with the Indian government. Hythane engines may be expected in the near future, but these may not be brought to the United States as yet. Ashok Leylands partnership with Nissan is also focusing on vehicle, powertrain, and technology development listed under three joint ventures. With impressive investment, the joint ventures will focus on producing trucks with diesel engines that meet Euro 3 and Euro 4 emission standards. In the coming years, Ashok Leyland also has some hybrid trucks and buses in store for its market. The buses and trucks are set to feature a new electronic shift-by-wire transmission technology as well as electronic-controlled engine management for greater fuel efficiency. Ashok Leyland focuses on improving fuel efficiency without affecting automotive power, and the vehicles will have a 5% improvement on fuel efficiency. Ashok Leyland is also developing electric batteries and bio-fuel modes. Ashok Leyland Ltd.s March quarter results were expected to be impressive, as its monthly vehicle output reports had indicated a 138% jump in volumes. But what impressed was its net profit growth of 317%, to Rs223 crore, over the yearago period, even as sales rose by 139%. Ashok Leylands operating profit margin rose to 13% compared with 10.5%. Higher volume growth, a better product mix due to higher sales of multi-axle vehicles and tractor trailers, and cost reduction

28

were key reasons for margin expansion. Its estimate for volume growth in 2011 is conservative, at 15% compared with over 30% in FY2010. Around 1,200 buses under the Jawaharlal Nehru National Urban Renewal Mission scheme are yet to be delivered of the 5,098 ordered. Besides, it has orders on hand from state transport undertakings for another 2,000 buses. The firm is investing to increase its capacity, with Rs1,200Crore proposed for expansion plans over the next two years; mainly to increase output of engines and new generation cabs. Besides, it plans to invest Rs800crore in joint ventures. Analysts believe that its Uttarakhand plant is expected to deliver 22,000-25,000 vehicles in fiscal 2011, in its first full year of operation. The company has also steadily gained market share, from 21-22% in the first quarter of 2010 to 28-29% in the fourth quarter. One concern is that it is not yet a strong player in the eastern market. Besides, the southern market, traditionally its stronghold, has grown by only 15% in volume terms in 2010. The rest of India (mainly north and west) grew by 40% during the year. An Ashok Leyland-Nissan joint venture produced light commercial vehicles (LCVs) from the former's Hosur facility near Bangalore as well as from RenaultNissan's car plant near Chennai. On 11 June 2012, Ashok Leyland supplied 100 Falcon buses to Ghana for $7.6 million.

Current status

An Ashok Leyland bus run by the Chennai Metropolitan Transport Corporation

29

Ashok Leyland city buses in Andhra Pradesh belonging to APSTRC

Ashok Leyland is the second technology leader in the commercial vehicles sector of India. The history of the company has been punctuated by a number of technological innovations, which have since become industry norms. It was the first to introduce multi-axled trucks, full air brakes and a host of innovations like the rear engine and articulated buses in India. In 1997, the company launched the countrys first CNG bus and in 2002, developed the first Hybrid Electric Vehicle. The company has also maintained its profitable track record for 60 years. The annual turnover of the company was USD 1.4 billion in 2008-09. Selling 54,431 medium and heavy vehicles in 2008-09, Ashok Leyland is India's largest exporter of medium and heavy duty trucks. 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. The company has increased its rated capacity to 105,000 vehicles per annum. Also further investment plans including putting up two new plants - one in Uttarakhand in North India and a bus body building unit in middle-east Asia are fast afoot. It already has a sizable presence in African countries like Nigeria, Ghana, Egypt and South Africa.

30

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.[5] As part of this global strategy, the company acquired Czech Republic-based Avia's truck business. The newly acquired company has been named Avia Ashok Leyland Motors s.r.o. This gives Ashok Leyland a foothold in the highly competitive European truck market. In 2010 Ashok Leyland acquired a 26% stake in the British bus manufacturer Optare, a company based on the premises of a former British Leyland subsidiary C.H.Roe. In December 2011 Ashok Leyland increased its stake in Optare to 75.1%. The Hinduja Group also bought out IVECO's indirect stake in Ashok Leyland in 2007. The promoter shareholding now stands at 51%. Leyland has a state of the art research and development center at Vellivoyal Chavadi which is located near Chennai. Hinduja Group flagship company Ashok Leyland has been awarded the first overseas order worth $6 million for its vestibule buses from Bangladesh Road Transport Corporation (BRTC).[6]

Nissan Ashok Leyland

In 2007, the company announced a joint venture with Japanese auto giant Nissan (Renault Nissan Group) which will share a common manufacturing facility in Chennai, India. The shareholding structures of the three joint venture companies are:
31

Ashok Leyland Nissan Vehicles Pvt. Ltd., the vehicle manufacturing company will be owned 51% by Ashok Leyland and 49% by Nissan

Nissan Ashok Leyland Powertrain Pvt. Ltd., the powertrain manufacturing company will be owned 51% by Nissan and 49% by Ashok Leyland

Nissan Ashok Leyland Technologies Pvt. Ltd., the technology development company will be owned 50:50 by the two partners.

Dr. V. Sumantran, Executive Vice Chairman of Hinduja Automotive Limited and a Director on the Board of Ashok Leyland is the Chairman of the Powertrain Company and he is on the Boards of the other two JV companies. The venture, once it takes off, will be one of the largest investments made in automotive field in the country

iBUS
Ashok Leyland announced iBUS in the beginning of 2008, as part of the future for the country's increasingly traffic-clogged major cities. Its Rs60-lakh, iBus, a feature-filled, low-floor concept bus for the metros revealed during the Auto Expo 2008 in India, a vehicle for a first production run of pilot models should be ready by the end of this[?] year. The start of full production is scheduled for 2009. Developed by a team of young engineers, the low-floored iBus will have the first of its kind features, including anti-lock braking system, electronic engine management and passenger infotainment. The executive class has an airline like ambience with wide LCD screens, reading lights, audio speakers and, for the first time, Internet on the move. A GPS system enables vehicle tracking and display of dynamic route information on LCD screens, which can also support infotainment packages including live data and news. The bus will probably be equipped with an
32

engine from the new Neptune family, which Ashok Leyland also introduced at this exhibition, which are ready for the BS4/Euro 4 emission regulations and can be upgraded to Euro 5.

U-Truck
Ashok Leyland, announced sale of vehicles on the new U-Truck platform from November, 2010 with the rolling out of the first set of 10 models of tippers and tractor trailers in the 16 49-tonne segment. Further, another 15 models are set to enter the market in the next 12 months.

Dost
DOST is a 1.25 ton light commercial vehicle (LCV) that is the first product to be launched by the Indian-Japanese commercial vehicle joint venture Ashok Leyland Nissan Vehicles. Dost is powered by a 55hp high-torque, 3-cylinder, turbo-charged Common Rail Diesel engine and has a payload capacity of 1.25Tonnes. It is available in both BS3 and BS4 versions. The LCV is being produced in Ashok Leyland's plant in Tamil Nadu's Hosur. The LCV is available in three versions with the top-end version featuring air-conditioning, power steering, dual-colour of a beige-gray trim and fabric seats. With the launch of Dost Ashok Leyland has now entered the Light Commercial Vehicle segment in India.

Ashok Leyland Defence Systems

An Indian road-mobile launcher with a ballistic missile

33

Ashok Leyland Defence Systems (ALDS) is a newly floated company by the Hinduja Group. Ashok Leyland, the flagship company of Hinduja group, holds 26 percent in the newly formed Ashok Leyland Defence Systems (ALDS). The newly floated company has a mandate to design and develop defence logistics and tactical vehicles, defence communication and other systems. Ashok Leyland is the largest supplier of logistics vehicles to the Indian Army. It has supplied over 60,000 of its Stallion vehicles which form the Army's logistics backbone.

Facilities
The company has five manufacturing locations in India: Ennore and Hosur, Tamilnadu (Hosur-1, Hosur-2, CPPS) Factory at Alwar, Rajasthan Nissan Factory at Neemrana, Alwar, Rajasthan Bhandara, Maharasthra Pantnagar, Uttarakhand Ashok Leylands Technical Centre, at Vellivoyalchavadi (VVC) in the outskirts of Chennai, is a state-of-the-art product development facility,

34

that apart from modern test tracks and components test labs, also houses Indias one and only Six Poster testing equipment. The company had an Engine Research and Development Facility in Hosur, which was shifted to VVC, Chennai. The company has signed an agreement with Ras Al Khaimah Investment Authority (RAKIA) in UAE for setting up a bus body building unit in the Middle East.

Products
(Not exhaustive)

Luxury Viking BS-I - city bus Viking BS-II - city bus Viking BS-III -city bus Cheetah BS-I Cheetah BS-II Panther 12M bus Stag Mini Stag CNG 222 CNG

35

Lynx Double Decker Vestibule bus Airport Tarmac Coach Gensets

CHAPTER-IV
36

RESEARCH METHODOLOGY
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
37

scientifically. In this study the various steps that are generally adopted by the researcher in studying his research problem along with the logic behind them.

RESEARCH DESIGN
The proposed study is of descriptive in nature. Research design is needed because it facilitates the smooth sailing of the various research operations, thereby making research as efficient as possible.

SOURCE OF INFORMATION
Basically there are two sources of information. The researcher has collected secondary data for his study.

DATA COLLECTION METHODS; PRIMARY DATA COLLECTION METHOD

Primary data is the secondary the data which the researcher collects through various methods like interviews, surveys and questionnaires etc, to support data.

SECONDARY DATA COLLECTION METHOD

(i) Company balance sheet (ii) Profit and loss account (iii) Annual report

PERIOD OF STUDY:
Study cover the time period of 5 years from the financial years 2007-2008 to 2011-2012.
38

OBJECTIVES OF THE STUDY: Primary objectives:

To study the financial performance of the last five years.

Secondary objectives:
To analysis and ascertain the liquidity of the company using financial ratio. To know present profitability and operating efficiency of the firm. To recommended for the improvement of the company.

SCOPE OF THE STUDY:

This study helps to understand structure of the industry and financial performance of the company. For the purpose of the financial analysis and interpretation of the ratios for the period of from 2007-2008 to 2011-2012 were taken for the study. By financial analysis of the Ashok Leyland would be able to get a fair picture of the financial position of Ashok Leyland. It showing the financial performance to various creditors and outsider with the help of financial analysis, the company able to get easy credit terms. Financial performance is systematic record business transaction, protecting the property of the business and compliance with legal requirements.

TOOLS USED
The tool used for the study is
39

 Ratio analysis Current ratio Liquid ratio Gross Profit ratio Net Profit ratio Fixed Assets Turnover ratio Proprietary ratio Solvency ratio Inventory Turnover ratio Debtors Turnover ratio Return on Shareholders Funds ratio Working Capital Turnover ratio Cash Sales Turnover ratio Capital Turnover ratio Comparative Income Statement Comparative Balance Sheet Common Size Income Statement Trend Percentage Analysis
40

LIMITATIONS OF THE STUDY:

Due to time constraint this study has been contained to only Ashok Leyland. The entire study is based purely on the observation of the secondary data. (i.e.) with reference to annual reports, journals, office reports and interviews with employees. The study undertaken is limited to 5 years from 2007-2012 for a short period to evaluate the efficiency of the performance of the organization. The project is only confined to limited data.

41

CHAPTER-V

42

ANALYSIS AND INTERPRETATION

1.

CURRENT RATIO
The ratio of current assets to current liabilities is called current ratio in order to measure the short-term liquidity or solvency of a concern, comparison of current assets and current liabilities is inevitable current ratio indicates the ability of a concern to meet its current obligations as and when they are due for payment formula for

Current assets Current ratio =

--------------------------------

Current liabilities

43

TABLE NO.5.1 CURRENT RATIO

YEAR CURRENT ASSETS
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 28752.56 316561.57 413968.43 436724.53 430388.63

CURRENT LIABILITIES
22719.40 213694.58 296075.72 352827.40 484370.23

CURRENT RATIO
1.265 1.481 1.398 1.237 0.888

Source: Secondary Data INTERPRETATION:

From the above table it is found that the current ratio is 1.26 times in the year 2007-2008. It has been found that the current ratio is 1.48 times in the year 2008-2009. The current ratio is 1.39 times in the year 20092010, 1.23 times in the year 2010-2011 and 0.88 times in the year 20112012. The current ratio is maximum in the year 2008-2009.

44

CHART NO.1

45

2.

LIQUID RATIO (OR) QUICK RATIO:

This ratio is also called quick or Acid test Ratio. Quick assets refer to assets which are quickly convertible into cash. Current assets other than stock and prepaid expensed are considered as quick assets. The ideal liquid ratio or the generally accepted norm for liquid ratio is 1 comparison of quick rate with current ratio indicates the inventory hold ups.

Liquid assets

Liquidity ratio = --------------------------Liquid liabilities

46

TABLE NO.5.2 QUICK RATIO

YEAR QUICK ASSETS
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 16513.42 183560.13 250144.43 215834.19 297326.11

CURRENT

QUICK

LIABILITIES RATIO
22719.40 213694.58 296075.72 352827.40 484370.23 0.726 0.858 0.844 0.611 0.613

Source: Secondary Data

INTERPRETATION:

From the above table it is found that the quick ratio is 0.72 times in the year 2007-2008. It has been found that the quick ratio is 0.85 times in the year 20082009. The quick ratio is 0.84 times in the year 2009-2010, 0.62 times in the year 2010-2011 and 0.613 times in the year 2011-2012. The quick ratio is maximum in the year 2008-2009.

47

CHART NO.2

48

3.

GROSS PROFIT RATIO:

This ratio is also known as Gross margins or Trading Margin ratio Gross Profits indicates the efficiency of production or trading operation. A gross profit ratio the different between sales and direct costs. Gross profit ratio explains the relationship between gross profit and net sales.

Gross profit Gross profit Ratio = ----------------------------*100 Sales

49

TABLE NO.5.3 GROSS PROFIT RATIO

YEAR GROSS PROFIT
2007-2008 2008-2009 2009-2010 2010-2011 65088.74 22193.50 54804.63 80179.93 774258.01 598107.37 724471.05 1111770.9 0 2011-2012 68837.88 1288234.3 5 5.34 8.4 3.7 7.5 7.2

SALES

RATIO

Source: Secondary Data INTERPRETATION:

From the above table it is found that the gross profit ratio is 8.4 times in the year 2007-2008. It has been found that the gross profit ratio is 3.7 times in the year 2008-2009. The gross profit ratio is 7.5 times in the year 2009-2010, 7.2 times in the year 2010-2011 and 5.34 times in the year 2011-2012. The gross profit ratio is maximum in the year 2007-2008.

50

CHART NO.3

51

4.

NET PROFIT RATIO

Net profit refers to the profit after taxes which are available shareholders. The net profit ratio brings out the relationship between the net profit and sales. That is net profit generated for every hundred rupees of sales revenue is expressed by the ratio, The ratio is very important in financial analysis as is clearly puts forth how much of profit is made available to shareholders for every hundred rupees of sales Net Profit NET PROFIT RATIO = -----------------------------------*100 Sales

52

TABLE NO.5.4 NET PROFIT RATIO

YEAR NET PROFIT
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 50227.38 48230.19 57744.98 75118.52 56597.66 774258.01 598107.37 724471.05 1111770.90 1288234.35

SALES

NET PROFIT RATIO

6.4 8.0 7.9 6.7 4.3

Source: Secondary Data INTERPRETATION:

From the above table it is found that the net profit ratio is 6.4 times in the year 2007-2008. It has been found that the net profit ratio is 8.0 times in the year 2008-2009. The net profit ratio is 7.9 times in the year 2009-2010, 6.7 times in the year 2010-2011 and 4.3 times in the year 20112012. The net profit ratio is maximum in the year 2008-2009.

53

CHART NO.4

54

5.

FIXED ASSETS TURNOVER RATIO

This ratio determines efficiency of utilization of fixed assets and profit ability of a business concern. Higher the ratio more is the efficiency in utilization of fixed assets. A lower ratio is the indication of underutilization of fixed assets turnover ratio shows the sales revenue generated for every one rupee of investment in fixed assets. SALES

FIXED ASSETS TURNOVER RATIO = -----------------------FIXED ASSETS

55

TABLE NO.5.5 FIXED ASSETS TURNOVER RATIO

YEAR SALES FIXED ASSETS
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 774258.01 598107.37 724471.05 1111770.90 1288234.35 294243.80 495327.22 601863.37 669188.87 456571.25

FIXED ASSETS TURNOVER RATIO

2.63 1.20 1.20 1.66 2.82

Source: Secondary Data INTERPRETATION:

From the above table it is found that the fixed assets turnover ratio is 2.63 times in the year 2007-2008. It has been found that the fixed assets turnover ratio is 1.20 times in the year 2008-2009. The fixed assets turnover ratio is 1.20 times in the year 2009-2010, 1.66 times in the year 2010-2011 and 2.82 times in the year 2011-2012. The fixed assets turnover ratio is maximum in the year 2011-2012.

56

CHART NO.5

57

6.

PROPREITARY RATIO
Proprietary ratio is the relationship between the shareholders fund and tangible assets. Proprietary ratio indicates the proportion of shareholders funds in the total assets. A high ratio indicates less danger and risk to creditors in the event of winding up. Share Holders Funds PROPREITARY RATIO = -------------------------------------Total Assets

58

TABLE NO.5.6 PROPREITARY RATIO

YEAR SHARE FUND
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 214898.25 347389.90 366875.81 396296.21 420817.35 287525.81 316561.57 413968.43 436724.53 761186.08 0.74 1.09 0.88 0.90 0.55

TOTAL

PROPREITARY RATIO

HOLDERS ASSETS

Source: Secondary Data INTERPRETATION:

From the above table it is found that the Proprietary ratio 0.74

times in the year 2007-2008. It has been found that the Proprietary ratio is 1.09 times in the year 2008-2009. The Proprietary ratio is 0.88 times in the year 2009-2010, 0.90 times in the year 2010-2011 and 0.55 times in the year 2011-2012. The Proprietary ratio is maximum in the year 2007-2008.

59

CHART NO.6

60

7.

SOLVENCY RATIO
It is a ratio which relates the total liabilities to outsiders with the total assets. In this ratio includes both short term and long- term borrowings. A higher ratio also makes the firm vulnerable to business cycles and its solvency becomes suspect. Further borrowing becomes difficult for firms with a high total solvency ratio Total Liabilities SOLVENCY RATIO = ---------------------------------Total Assets

61

TABLE NO.5.7 SOLVENCY RATIO

YEAR TOTAL TOTAL SOLVENCY RATIO
0.79 0.67 0.71 0.80 1.01

LIABILTIES ASSETS
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 227193.83 213694.58 296075.72 352827.40 770757.36 287525.81 316561.57 413968.43 436724.53 761186.08

Source: Secondary Data INTERPRETATION:

From the above table it is found that the Solvency ratio is 0.79 times in the year 2007-2008. It has been found that the Solvency ratio is 0.67 times in the year 2008-2009. The Solvency ratio is 0.71 times in the year 2009-2010, 0.80 times in the year 2010-2011 and 1.01 times in the year 2011-2012. The Solvency ratio is maximum in the year 2011-2012.

62

CHART NO.7

63

8.

INVENTORY TURNOVER RATIO

This ratio is also called velocity ratio. It is calculated to ascertain the efficiency of inventory management in terms of capital investment. It shows the relationship between the cost of goods sold and amount of average inventory. Stock turnover ratio is obtained by dividing the cost of sales by average stock this ratio is helpful in evaluating and review of inventory policy.

Cost of Goods Sold

INVENTORY TURNOVER RATIO = ---------------------------------------

Average Inventory

64

TABLE NO.5.8 INVENTORY TURNOVER RATIO

YEAR COST OF GOODS SOLD
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 894714.72 666664.01 787259.74 1209360.68 1365847.17

AVERAGE INVENTORY
122391.44 133001.44 163824 220890.34 223062.52

INVENTORY TURNOVER RATIO

7.31 5.01 4.80 5.47 6.12

Source: Secondary Data INTERPRETATION:

From the above table it is found that the Inventory Turnover ratio is 7.31 times in the year 2007-2008. It has been found that the Inventory Turnover ratio is 5.01 times in the year 2008-2009. The Inventory Turnover ratio is 4.80 times in the year 2009-2010, 5.47 times in the year 2010-2011 and 6.12 times in the year 2011-2012. The Inventory Turnover ratio is maximum in the year 20072008.

65

CHART NO.8

66

9.

DEBTORS TURNOVER RATIO

Debtors turnover ratio is also called as receivable turnover ratio or debtors velocity. A business concern generally adopts different methods of sales. One of them is selling on credit. Goods are sold on credit based on credit policy adopted by the firm. The customers who purchase on credit are called trade debtors or book debt. Debtors and bills receivable together are called Accounts receivable some of the customers may be prepared to accept bills for goods purchased on credit. Bills or handiest are termed as bills receivables. Net Sales DEBTORS TURNOVER RATIO =---------------------------Sundry Debtors

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TABLE NO.5.9 DEBTORS TURNOVER RATIO

YEAR NET SALES
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 774258.01 598107.37 724471.05 1111770.90 1288234.35

SUNDRY DEBTORS
37583.51 95797.42 102206.15 118521.33 123024.79

DEBTORS TURNOVER RATIO

20.6 6.24 7.08 9.38 10.47

Source: Secondary Data INTERPRETATION:

From the above table it is found that the Debtors Turnover ratio is 20.6 times in the year 2007-2008. It has been found that the Debtors Turnover ratio is 6.24 times in the year 2008-2009. The Debtors Turnover ratio is 7.08 times in the year 2009-2010, 9.38 times in the year 2010-2011 and 10.47 times in the year 2011-2012. The Debtors Turnover ratio is maximum in the year 2011-2012. .

68

CHART NO.9

69

10.

RETURN ON SHARE HOLDERS FUNDS

In this ratio is also called Net worth ratio. And this ratio determines the profitability from the shareholders point of view. In indicates the net profit here in net income after payment of interest and tax and it includes net non-operating income also. The term shareholders funds include equity share capital preference share capital and all reserves and profits belonging to shareholders.

Net Profit RETURN ON SHARE HOLDERS =--------------------------------*100 Share Holders Funds

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TABLE NO.5.10 RETURN ON SHARE HOLDERS FUNDS Source: Secondary Data

YEAR NET PROFIT SHARE HOLDERS FUNDS
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 50227.38 48230.19 57744.98 75118.52 56597.66 214898.25 347389.90 366875.81 396296.21 420817.35 0.23 0.13 0.15 0.18 0.13

NET WORTH RATIO

INTERPRETATION:
From the above table it is found that the Return on Shareholders Funds ratio is 0.23 times in the year 2007-2008. It has been found that the Return on Shareholders Funds ratio is 0.13 times in the year 2008-2009. The Return on Shareholders Funds ratio is 0.15 times in the year 2009-2010, 0.18 times in the year 2010-2011 and 0.13 times in the year 2011-2012. The Return on Shareholders Funds ratio is maximum in the year 2007-2008.

71

CHART NO.10

72

11. WORKING

CAPITAL TURNOVER RATIO

Working capital ratio measures the effective utilization on working capital. It also measures the smooth running of business or otherwise. The ratio establishes relationship between cost of sales and networking capital

Cost of Goods Sold WORKING CAPITAL TURNOVER RATIO = ---------------------------------Net Working Capital

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TABLE NO.5.11 WORKING CAPITAL TURNOVER RATIO

YEAR COST OF GOODS SOLD NET WORKING CAPITAL
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 894714.72 666664.01 787259.74 1209360.68 1365847.17 214898.25 347389.90 366875.81 396296.21 420817.35

WORKING CAPITAL TURNOVER RATIO

4.16 1.91 2.14 3.05 3.24

Source: Secondary Data INTERPRETATION:

From the above table it is found that the working capital turnover ratio is 4.16 times in the year 2007-2008. It has been found that the working capital turnover ratio is 1.91 times in the year 2008-2009. The working capital turnover ratio is 2.14 times in the year 2009-2010, 3.05 times in the year 2010-2011 and 3.24 times in the year 2011-2012. The working capital turnover ratio is maximum in the year 2007-2008.

74

CHART NO.11

75

12.

CASH SALES TURNOVER RATIO

In this ratio indicates the total cash and the net sales of the concern. Higher sales of this ratio indicate the credit sales. Low sales in comparison to this ratio cover the more profits. It is avoid the danger and risk to creditors. CASH

CASH SALES TURNOVER RATIO = -----------------------NET SALES

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TABLE NO.5.12 CASH SALES TURNOVER RATIO

YEAR CASH NET SALES CASH SALES TURNOVER RATIO
20072008 20082009 20092010 20102011 20112012 51892.0 5 17952.7 2 3255.58 1288234.35 0.002 1111770.90 0.01 724471.05 0.07 45137.0 1 8808.36 598107.37 0.01 774258.01 0.05

Source: Secondary Data INTERPRETATION:

From the above table it is found that the cash sales turnover ratio 0.05 times in the year 2007-2008. It has been found that the cash sales turnover ratio is 0.01 times in the year 2008-2009. The cash sales turnover ratio is 0.07 times in the year 2009-2010, 0.01 times in the year 2010-2011 and 0.002 times in the year 2011-2012. The cash sales turnover ratio is maximum in the year 2009-2010.

77

CHART NO.12

78

13.

CAPITAL TURNOVER RATIO

Managerial efficiency is establishing the relationship between cost of sales with the amount of capital invested in the business.

Cost of Goods Sold CAPITAL TURNOVER RATIO =----------------------------------Capital Employed

79

TABLE NO.5.13 CAPITAL TURNOVER RATIO

YEAR COST OF GOODS SOLD
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 894714.72 666664.01 787259.74 1209360.68 1365847.17

CAPITAL EMPLOYED
166862.05 213694.58 296075.72 352827.4 330797.45

CAPITAL TURNOVER RATIO

5.36 3.11 0.26 3.42 4.12

Source: Secondary Data INTERPRETATION:

From the above table it is found that the capital turnover ratio 5.36 times in the year 2007-2008. It has been found that the capital turnover ratio is 3.11 times in the year 2008-2009. The capital turnover ratio is 0.26 times in the year 2009-2010, 3.42 times in the year 2010-2011 and 4.12 times in the year 20112012. The capital turnover ratio is maximum in the year 2007-2008.

80

CHART NO.13

COMPARATIVE INCOME STATEMENTS An income statement shows the operating results (net profit or
81

loss) of a business for a designated period of time. A comparative income statement shows the operating results for a number of accounting periods so as to facilitate comparison. It gives an idea of the progress of a business over a period of time. It gives an idea about the improvement (or otherwise) in sales, profits and other expenses over the previous year(s). A comparative income statement has two columns for the figures of the current year and the previous year. A third column is used to show the increase or decrease in figures. A fourth column may be added for giving percentage of increase or decrease.

COMPARARTIVE INCOME STATEMENT(20112012) (Rs.in.lakhs)

82

PARTICULARS

2010-2011

2011-2012

INCREASE / DECREASE

INCREASE / DECREASE (%)

Net sales 11407.45 Less : Cost of 9246.55 Goods Sold Gross Profit 2160.60 Operating Expenses Manufacturing 86.04 Expenses Selling and 857.00 Administration Expenses Total Operating 943.04 Expenses Operating Profit 1217.56

13309.59 10952.30 2357.29 99.67 1001.27 1100.94 1256.35

+1902.44 +1705.75 +196.69 +13.63 +144.27 +157.90 +38.79

16.678 18.447 9.103 15.841 16.834 16.74 3.186

Source: Secondary Data INTREPRETATION:

The Net Sales has been increased by 16.67%, Cost of Goods Sold has been increased by 18.447%, Gross Profit has been increased by 9.103%, Manufacturing Expenses has been increased by 15.841%, Selling and Administration Expenses has been increased by 16.834%, Operating Expenses has been increased by 16.74%, and Operating Profit has been increased by 3.18%.

COMPARATIVE BALANCE SHEET

The Single balance sheet shows assets and liabilities as on a
83

particular date. The comparative balance sheet shows the value of assets and liabilities on two different dates. It helps in comparison. A comparative balance sheet has two columns to record the figures of the current year, and the previous year. A third column is used to show the increase or decrease in figures. A fourth column may be added for giving percentage of increase or decrease. Thus while in the balance sheet the emphases is on status in the comparative balance sheet it is on change. Comparative balance sheet indicates whether the business is moving the favorable direction. It is very useful for studying the trend in an enterprise.

COMPARATIVE BALANCE SHEET(2011-2012)(Rs.in.lakhs)

PARTICULARS 2010-2011 20112012
84

INCREASE / DECREASE

INCREASE/ DECREASE %

Assets: Current Assets: Inventories Trade Receivables Cash and Cash Equivalents Short-term Loans and Advances Other Current Assets Fixed Assets Investments Loans and Advances Other non-current Assets Liabilities: Share Capital Reserves and Surplus Non-current Liabilities Current Liabilities: Short-term Borrowings Trade Payables Other Current Liabilities Short-term Provisions

220890.34 116449.82 17952.72 33439.42 9644.87 499175.78 122999.68 38463.03 315.79 13308.42 382992.79 375987.37 230850.67 103442.24 41694.46 375987.37

223062.52 123024.79 3255.58 72709.06 8336.68 546171.50 153447.89 60828.95 742.74 26606.80 394210.55 484370.23 10175.00 277246.10 154911.69 42037.44 484370.23

+2172.18 +6574.97 -14697.14 +39269.64 -1308.19 +46995.72 +30448.21 +22360.92 +426.95 +13303.38 +11217.76 +108382.86 46395.43 +51469.45 +342.98 +342.98

0.983 5.646 81.866 117.435 13.564 9.415 24.755 58.136 135.201 99.100 2.929 28.826 20.098 49.757 0.823 28.826

INTERPRETATION:
The Inventories has been increased by 0.98%, Trade Receivables has been increased by 5.64%, Cash and Cash Equivalents has been increased by 81.86%, Short-term Loans and Advances has been increased by
85

117.43%, Other Current Assets has been increased by 13.56%, Fixed Assets has been increased by 9.41%, Investments has been increased by 24.75%, Loans and Advances has been increased by 58.13%, Other Non-current Assets has been increased by 135.20%, Share Capita has been increased by 99.10%, Reserves and Surplus has been increased by 2.92%, Non-current Liabilities has been increased by 28.82%, Short-term Borrowings has been increased by 0%, Trade Payables has been increased by 20.0%, Other Current Liabilities has been increased by 49.75%, Short-term Provisions has been increased by 0.82%.

THE COMMON SIZE INCOME STATEMENT

The goal of the income statement is to determine revenue for the period that

86

It covers and then matches the corresponding expenses to the revenue. The Income statement, sometimes referred to as the statement of earnings or Statement of operations, presents a picture of a companys profitability over the entire period of time covered. This is in contrast to the balance sheet, which presents a snapshot of a companys financial condition at a specific point in time. The income statement cumulates revenues and expenses and presents the results in a statement that is designed to be read from top to bottom. Like the balance sheet, the income statement reflects managements decisions, estimates, and accounting choices. Just looking at the bottom-line profits may mislead investors. A careful, step-by-step review of the income statement is useful in order to judge the quality and content of the bottom-line earnings figure.

87

Common Size Income Statement (2011-2012)

Particulars Net Sales Less : Cost of Goods Sold Gross Profit Operating Expenses Manufacturing Expenses Selling and Administration Expenses Total Operating Expenses Operating Profit 2010-2011 11407.15 9246.55 2160.60 86.04 857.00 943.04 1217.56 2010-2011 % 100 81.06 18.94 0.75 7.51 8.27 10.67 2011-2012 13309.59 10952.30 2357.29 99.67 1001.27 1100.94 1256.35 2011-2012 % 100 82.29 17.71 0.75 7.52 8.27 9.44

(Rs.in.lakhs)

88

INTREPRETATION:
The above table shows that the Net Sales was 100% for both the year 20102011 and 2011-2012. The Cost of Goods Sold was 81.06% in the year of 20102011 and it was 82.29% in the year 2011-2012. The Gross Profit was 18.94% in the year of 2010-2011 and it was 17.71% in the year of 2011-2012. The Manufacturing Expenses was 0.75% in the year 2010-2011 and it was 0.75% in the year of 2011-2012. The Selling and Administration Expenses was 7.51% in the year 2010-2011 and it was 7.52% in the year 2011-2012. The Operating Expenses was 8.27% for the year 2010-2011 and it was 8.27% in the year 20112012. The Operating Profit was 10.67% for the year 2010-2011 and it was 9.44% for the year of 2011-2012.

89

TREND PERCENTAGE ANALYSIS

The next important tools of analysis are trend percentage which plays significant role in analyzing the financial stature of the enterprise through base years performance ratio computation. This not only reveals the trend movement of the financial performance of the enterprise but also highlights the strengths and weaknesses of the enterprise The following ratio is being used to compute the trend percentage.

Current year = ------------------- X 100 Base year This trend ratio is being computed for every component for many numbers of years which not only facilitates comparison but also guides the firm to understand the trend path of the firm.

90

TABLE NO.5.17 Trend Percentage of Net Sales

YEAR 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 NET SALES 7972.52 6168.99 7436.18 11407.15 13309.59 TREND % 100.0 77.37 93.26 143.06 166.91

Source: Secondary Data INTERPRETATION:

The above table shows the trend percentage for Net Sales. It has been 100% for the year 2007-2008, 77.37% for the year 2008-2009, it was 93.26% for the year 2009-2010, 143.06% for the year 2010-2011 and it was 166.91% for the year 2011-2012.

91

CHART NO.17

TABLE NO.5.18
92

Trend Percentage of Operating Profit

YEAR 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 OPERATING PROFIT 804.49 473.09 761.40 1217.56 1256.35 TREND % 100.0 58.80 94.63 151.32 156.14

Source: Secondary Data INTERPRETATION:

The above table shows the trend percentage for Operating Profit. It has been 100% for the year 2007-2008, 58.80% for the year of 2008-2009, it was 94.63% for the year 2009-2010, 151.32% for the year 2010-2011 and it was 156.14% for the year 2011-2012.

93

CHART NO.18

TABLE NO.5.19
94

Trend Percentage of Current Assets

YEAR 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 CURRENT ASSETS 538.31 365.22 736.17 720.32 217.66 TREND % 100.0 67.84 136.74 133.79 40.42

Source: Secondary Data INTERPRETATION:

The above table shows the trend percentage for Current Assets. It has been 100% for the year 2007-2008, 67.84% for the year 2008-2009, it was 136.74 for the year 2009-2010, 133.79 for the year of 2010-2011 and it was 40.42 for the year of 2011-2012.

95

CHART NO.19

TABLE NO.5.20 Trend Percentage of Current Liabilities

96

YEAR 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

CURRENT LIABILITIES 2196.49 2207.29 3002.68 3505.26 4837.41

TREND % 100.00 100.49 136.70 159.58 220.22

Source: Secondary Data INTERPRETATION:

The above table shows the trend percentage of Current Liabilities. It was 100% for the year 2007-2008, 100.49 for the year of 2008-2009, it was 136.70 for the year 2009-2010, 159.58 for the year 2010-2011 and it was 220.22 for the year 2011-2012.

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CHART NO.20

TABLE NO.5.21 Trend Percentage of Inventories

YEAR 2007-2008 2008-2009 INVENTORIES 1223.91 1330.01
98

TREND % 100.00 108.66

2009-2010 2010-2011 2011-2012

1638.24 2208.90 2230.63

133.84 180.46 182.23

Source: Secondary Data INTREPRETATION:

The above table shows the trend percentage of Inventories. It was 100% for the year 2007-2008, 108.66 for the year 2008-2009, it was 133.84 for the year 2009-2010, 180.46 for the year 2010-2011 and it was 182.23 for the 2011-2012.

99

CHART NO.21

TABLE NO.5.22 Trend Percentage of Sundry Debtors

YEAR 2007-2008 2008-2009 SUNDRY DEBTORS 375.84 957.97
100

TREND % 100.00 254.88

2009-2010 2010-2011 2011-2012

1022.06 1185.21 1230.37

271.93 315.33 327.34

Source: Secondary Data INTERPRETATION:

The above table shows the trend percentage for Sundry Debtors. It has 100% for the year 2007-2008, 254.88 for the year 2008-2009, it was 271.93 for the year 2009-2010, 315.33 for the year 2010-2011 and it was 327.34 for the year 2011-2012.

CHART NO.22

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CHAPTER-VI

102

FINDINGS, SUGGESTIONS AND CONCLUSIONS

FINDINGS:
The current ratio of the Ashok Leyland has reached the maximum of 1.48 times in the year 2008-2009. The liquid ratio of the Ashok Leyland has reached the maximum of 0.85 times in the year 2008-2009.
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 The Gross profit ratio is higher that is 8.4 percentage for the year 2007-2008 The Net profit ratio is maximum that is 8.0 percentage in the year 2008-2009. The Fixed asset turnover ratio is maximum that is 2.82 percentage in the year 2011-2012. The Proprietary ratio is higher that is 1.09 percentage in the year 2008-2009. The Solvency ratio is maximum that is 1.01 times in the year 2011-2012. The Inventory turnover ratio is higher that is 7.31days in the year 2007-2008. The Debtors turnover ratio is higher that is 20.6 days in the year 2007-2008. The Return on shareholder fund is maximum that is 0.23percentage in the year 2007-2008. The Working capital turnover ratio is maximum that is 4.16 percentage in the year 2007-2008. The Cash sales turnover ratio is maximum that is 0.07 percentage in the year 2009-2010. The Capital turnover ratio is maximum that is 5.36 percentage in the year 2007-2008.

SUGGESTIONS:
Based on the inference made out of the analysis of the secondary data, the suggestions are made:

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 Despite many financial control measures being adopted in the company, it becomes necessary to devise innovative many for increasing the performance of the current assets empirically the inventories. The company shall take necessary measures to bring the expenditure under control. Complete monitoring over credit sales and fast recovery of credits is very much required. Cost control shall be seriously reviewed and stringent measures shall be taken for cost control.

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CONCLUSION:
Finance is the life blood of every business. Without effective financial management a company cannot survive in this competitive world. A sound financial management should be able to monitor and manage the financial position of the company. After an in depth analysis of financial performance of Ashok Leyland Ltd., Chennai is found that the ratios are at satisfactory level. The gross profit margin is also increasing, thus it can be concluded that the financial Management in the company is efficient.

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BIBLIOGRAPHY

107

BIBLIOGRAPHY
1. M.Y.Khan P. K. Jain, financial management, third edition, Tata McGraw- Hill Publishing Company Limited, New Delhi, 2001. 2. P.V.Kuldarni, and B.G.Sathyaprasad, Financial management Ninth edition, Himalaya publishing House, New Delhi, 2000. 3. Dr. S.N.Maheshwari, Principles of Management accounting, Thirteenth edition, Sultan Chand & Sons, New Delhi, 2002. 4. Dr. S. N.Maheshwari, Financial management, sixth edition, Sultan Chand & Sons New Delhi, 2000. 5. I.M.Pandey, Financial management, eighth edition, Vikas Publishing House Pvt, Ltd., New Delhi, 2003. 6. Prasanna Chandra, Financial management, fourth edition, Tata McGraw-Hill publishing Company Limited, New Delhi, 1999. 7. Annual reports of Ashok Leyland Website:

www.ashokleyland.com www.google.com www.yahoo.com

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ANNEXURE

STATEMENT OF PROFIT AND LOSS

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PARTICULARS Income Revenue from Operations Less: Excise duty Revenue from operations(Net) Other income Total Revenue Expenses Cost of materials consumed Purchases of stock-in-trade Traded goods Changes in inventories of finished goods, work-in-progress and stock-in-trade Employee benefits expenses Finance Costs Depreciation and Amortization expenses Other expenses Total Expenses Profit before exceptional items and tax Exceptional items Profit on disposal of non-current investments (Net) Profit before tax Tax expense Current tax Deferred tax Profit for the year continuing operations Earnings per equity share (Face value Re 1) Basic and Diluted (in Rs)

2011-2012 Rs in Lakhs 1365847.17 81647.85 1284199.32 4035.03 1288234.35

2010-2011 Rs in Lakhs 1215300.39 97589.78 1117710.61 4445.14 1122155.75

912148.33 50737.37 (16701.30) 946184.40 102039.42 25525.32 35281.32 110366.01 1219396.47 68837.88

806450.03 27336.97 (16522.40) 817264.60 95971.63 18892.34 26743.10 83104.15 1041975.82 80179.93

159.78 68997.66 7752.00 4648.00 12400.00 56597.66 2.13

80179.93 11115.00 5935.00 17050.00 63129.93 2.37

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BALANCE SHEET
PARTICULARS EQUITY AND LIABILITIES Shareholders Funds Share Capital Reserves and Surplus Non-current Liabilities Long-term Borrowings Deferred tax liabilities (Net) Other long term liabilities Long-term provisions Current Liabilities Short-term borrowings Trade payables Other current liabilities Short-term provisions TOTAL ASSETS Non-current Assets Fixed Assets Tangible Assets Intangible Assets Capital work-in-progress Intangible asset under development Non-current investments Long-term loans and advances Other non-current assets Current Assets Inventories Trade receivables Cash and cash equivalents Short-term loans and advances Other current assets TOTAL 26606.80 394210.55 229335.11 49036.69 359.03 7656.30 10175.00 277246.10 154911.69 42037.44 1191574.71 13303.42 382992.79 234812.83 44388.69 7846.35 230850.67 103442.24 41694.46 1059331.45 2011-2012 Rs in Lakhs 2010-2011 Rs in Lakhs

456571.25 34778.16 43519.06 11303.03 153447.89 60823.95 742.74 223062.52 123024.79 3255.58 72709.06 8336.68 1191574.71 111

434438.04 28941.13 20070.09 15726.52 122999.68 38463.03 315.79 220890.34 116449.82 17952.72 33439.42 9644.87 1059331.45

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