1

Financial Statements Analysis Of

Maruti Suzuki India Ltd.

A Dissertation Submitted in Partial Fulfillment of the

Requirements for the Degree of Bachelor of Business
Administration
Submitted By

SAIKAT PAUL
BBA Sixth Semester, 2018
Registration No. AU/2015/01/0021 of 2015-18
Roll No. BBA/2015/01010021

Under the Supervision of

Prof. K.C Paul

Department of Commerce and Management
Adamas University

DEPARTMENT OF COMMERCE AND MANAGEMENT

ADAMAS UNIVERSITY
BARASAT, KOLKATA-700126
WEST BENGAL
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DECLARATION

Dissertation Title: Financial Statements Analysis Of

Maruti Suzuki India Ltd.

Degree for which the Dissertation is submitted: Bachelor

of Business Administration

I, Sri Saikat Paul, a student of BBA Sixth Semester,

Adamas University do hereby declare that the presented
dissertation represents largely my own ideas and work in
my own words. Where othersideas or words have been
included, I have adequately cited and listed in the
reference materials.The thesis has been prepared without
resorting to plagiarism. I have adhered to all principles
of academic honesty and integrity. No falsified or
fabricated data have been presented in the thesis. I
understand that any violation of the above will cause for
disciplinary action by the Institute,including revoking the
conferred degree, if conferred, and can also evoke penal
action from thesources which have not been properly
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cited or from whom proper permission has not been

taken.

……………………………

SAIKAT PAUL
Registration No. 0021 of
2015-18
BBA Sixth Semester, 2018
Roll No. 0021

ACKNOWLEDGEMENT

I wish to express my warm gratification and indebtedness to

my supervisor, Prof. K.C Paul, Department of Commerce and
Management, Adamas University, for his invaluable guidance, co-
operative attitude and dynamic efforts during the course of the
project. He provided me assistance; suggestionand instruction
whenever needed that has been instrumental in successful completion
of this project.

I am grateful and wish to express my sincere thanks to

Prof.Nilanjan Roy, H.O.D., Department of Commerce and
Management; Prof Sujit Mondal ,Department of Commerce and
Management, Adamas University for their valuable comments,
suggestion, instruction,and constant encouragement about the
preparation of project.
The generosity of Librarian, Adamas University, deserves a
special mention for the substantial help they render during the course
of the project.
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I wish to express my gratitude to Adamas University for

giving me an opportunity to be
a part of it, to enhance my knowledge and also for the facilities provid
ed for the successfulcompletion of the project.

Finally, I must thankful to my family, friends and my well-

wishers for their constantsupport and best wishes for the successful
completion of the project work.

SAIKAT PAUL
Student of BBA
Department of Commerce and
Management
Adamas University
Barasat, West Bengal
ABSTRACT

The purpose of this bachelor dissertatiom is to investigate the

financial condition of Maruti Suzuki India Limited. The period
investigated was from 2013 to 2017 and audited financial statements
of the company were used. These included Balance Sheets and Profit
and Loss Statements from the mentioned period. The thesis was
written in two parts. The first was theoretical which discussed
financial analysis and the methods used to perform this. The second
part was concerned with the practical use of the methods of financial
analysis, employing data from the audited financial statements. This
was used to find out the financial condition of the company and the
factors that led to it. The results were then analysed into detail to find
the problem areas of the company and then recommendations were
made based on the findings on how to improve the situation in the
company for the future.
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Contents

1. INTRODUCTION
Introduction

Overview of automobile industry

Profile of Maruti Suzuki Ltd.

Statements of the Problem

Research Question

2. LITERATURE REVIEW

3. RESEARCH METHODOLOGY
Objectives of the Study

Scope of the study

Methodology and Data

Hypothesis

Limitations of the Study

Plan of the study

4. THEORITICAL BACKGROUND
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5. LIQUIDITY RATIO
Current ratio

Quick ratio

6. MANAGERIAL EFFICIENCY
Inventory turnover Ratio

Fixed assets Turnover Ratio

Debtors Turnover Ratio

7. LONG TERM SOLVENCY POSITION

Debt equity Ratio

Interest Coverage Ratio

8.PROFITABILITY RATIO
Gross Profit Ratio

Net Profit ratio

Return on Capital employed Ratio

Operating profit Ratio

Return on Equity ratio

9. CONCLUSION

10. BIBILOIGRAPHY
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Introduction To Financial Statements

Financial statements are records that provide an indication of the organization’s
financial status. Itquantitatively describes the financial health of the company. It
helps in the evaluation of Company’s prospects and risks for the purpose of
making business decisions. The objective of financial statements analysis is to
provide information about the financial position, performanceand changes in
financial position of an enterprise that is useful to a wide range of users in
makingeconomic decisions. Financial statements should be understandable,
relevant, reliable and comparable. They give an accurate picture of a company’s
condition and operating results in acondensed form. Reported assets, liabilities
and equity are directly related to an organization'sfinancial position whereas
reported income and expenses are directly related to an organization'sfinancial
performance. Analysis and interpretation of financial statements helps in
determining theliquidity position, long term solvency, financial viability,
profitability and soundness of a firm.There are four basic types of financial
statements: balance sheet, income statements, cash flowstatements, and
statements of retained earnings.

Overview of Automobile Industry:

The automotive industry in India is one of the largest in the world with an
annual production of 23.96 million vehicles in FY (fiscal year) 2015–16,
following a growth of 2.57 per cent over the last year. The automobile industry
accounts for 7.1 per cent of the country's gross domestic product (GDP). The
Two Wheelers segment, with 81 per cent market share, is the leader of the
Indian Automobile market, owing to a growing middle class and a young
population. Moreover, the growing interest of companies in exploring the rural
markets further aided the growth of the sector. The overall Passenger Vehicle
(PV) segment has 13 per cent market share.
India is also a prominent auto exporter and has strong export growth
expectations for the near future. In FY 2014–15, automobile exports grew by 15
per cent over the last year. In addition, several initiatives by the Government of
India and the major automobile players in the Indian market are expected to
make India a leader in the Two Wheeler (2W) and Four Wheeler (4W) market
in the world by 2020.
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About Maruti Suzuki

Maruti Suzuki India Limited (MSIL), formerly known as Maruti Udyog
Limited, a subsidiary of Suzuki Motor Corporation of Japan, is India's largest
passenger car company, accounting for over 50 per cent of the domestic car
market. Maruti Udyog Limited was incorporated in 1981 under the provisions
of Indian Companies Act 1956 and the government of India selected Suzuki
Motor Corporation as the joint venture partner for the company. In 1982 a JV
was signed between Government of India and Suzuki Motor Corporation.

It was in 1983 that the India?s first affordable car, Maruti 800, a 796 cc hatch
back was launched as the company went into production in a record time of 13
month.

More than half the number of cars sold in India wear a Maruti Suzuki badge.
They are a subsidiary of Suzuki Motor Corporation Japan. The company offer
full range of cars– from entry level Maruti 800 & Alto to stylish hatchback Ritz,
A star, Swift, Wagon R, Estillo and sedans DZire, SX4 and Sports Utility
vehicle Grand Vitara.

Since inception, the company has produced and sold over 7.5 million vehicles in
India and exported over 500,000 units to Europe and other countries.

Milestones :
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2014: Maruti Suzuki announces global debut of ?Celerio? with revolutionary

Auto Gear Shift
2013: Maruti Suzuki introduces stylish Stingray
2012 :India's favourite car Maruti Suzuki Alto crosses the 20 Lakh sales mark
2011: Maruti Suzuki India unveiled its much awaited sportier and stylish car,
the all new 'Swift'.
2011: On march 15, Maruti Suzuki India rolled out its 1 Crore (ten millionth)
car.The historic 1 Crore car, a Metallic Breeze Blue coloured WagonR VXi
(Chassis No 243899) rolled out from the Company's Gurgaon plant.
2010: Maruti Suzuki has been ranked India's most Trusted Brand in Automobile
Sector by India's leading Business newspaper The Economic Times.
2009 – MSIL adopts voluntary fuel disclosure.First shipment of A–star leaves
Mundra Port–jan 10.A–star bags,Zigwheels?car of the year award?A–star rated
best small car of the year–autocar–UTVi.
2008 – World Premiere of concept A–star at 9th Auto Expo, New Delhi.
2007 – Swift diesel launched.New car plant and the diesel engine facility
commences operations during 2006–07 at manesar,Haryana.SX4–Luxury Sedan
Launched with the tag line ?Men are black?.Maruti launches Grand Vitara.
2006–J.D.Power Survey award for the sixth year.MSIL has changed its EMS
from ISO 14001:1996 version to ISO 14001:2004 version w.e.f.1st july
2005– MSIL was re–certified in 2005 as per ISO 14001:2004 standards.
2004 – A new esteem launched ?second successful facelift by maruti engineers.
2003 – Maruti gets listed on BSE and NSE.IPO(issue oversubscribed 11.2
times)New zen launched–first facelift by maruti engineers.
2002 – Divestment ?Suzuki Motor Corporation(SMC)acquires majority stake in
MUL.Maruti Finance & Insurance launched.
2001 – Turn around with profits Rs104.5 crore.Four new business–True
value,Insurance,Finance.Maruti Versa launched.Maruti True Value launched.
2000 – Maruti alto launched.First car company in India to launch call
centre.IDTR launched jointly with the Delhi government to promote safe
driving habits.

Achievements/ recognition:
 The company takes great pride in sharing that customers have rated Maruti
Suzuki first once again in Customer Satisfaction Survey conducted by
independent body, J.D.Power Asia Pacific. It is 9th time in a row.
 Maruti Suzuki wins 'Golden Peacock Eco–Innovation Award'
 Maruti Suzuki Ranks Highest in Automotive Customer Satisfaction in India
For Ninth Consecutive Year.
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 Maruti Suzuki becomes the first Indian car company to export half a million
cars

Management - Maruti Suzuki India

Designation
Name
R C Bhargava Chairman
T Hasuike Director
K Saito Director
O Suzuki Director
R P Singh Independent Director
D S Brar Independent Director
K Ayukawa Managing Director & CEO
T Suzuki Director
Shigetoshi Torii Non Executive Director
K Ayabe Director
P Shroff Independent Director
R S Karnad Independent Director

Statement of the Problem

India is growing at a rapid speed only China and Indonesia are growing faster
thanIndia. And if India grows at its same rate than it will go to the top and it can
be possible only when the entire sector works at their level best. During the last
four decades the automobile sector has contributed a lots in overall
development of thecountry, anyone can easily understand that by looking at the
growth and expansion of this sector.

In the post independent period only one and two companies were there
for productionof automobiles in the country but during the last two or three
decades number of companies has increased at a rapidly. And they are now on a
race and are competingwith each other to go first and increase the market share.
We can easily understand this by looking at the national and international
statistics published by recognized institution and market share of Indian
automobile industry in the international market.
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In India we have various companies who were producing and marketing, and
due tothe increasing competition between different automobile companies and
also due tothe effect of globalization they are conducting Research &
Development (R&D) inorder to keep pace with the competitive market by
providing the product at lower and affordable price.

Despite the economic slowdown, Indian automobile sector has shown high
growth.The economic sustainability and increasing living standard and
purchasing power of the Indian customer’s has a bright coming future. The
industry is recording increasinggrowth rate in sale, but still there are some loop
holes in the automobile industry and these needs to be considered by the
industry to overcome.
Research questions
a. How the company is performing in the industry in comparison to other
competitive companies?
b. What is the profitability situation of the company because of increasing
competition?
c. What is the liquidity and solvency position of the company because of
continuous changing business environment?
d. What is the efficiency position of management, because of continuous
external pressure?

Research Methodology and Research Design

The word “Research” is the combination of two words – first is ‘Re’ which
means ‘a new return to
previous stage’ and the second is ‘Search’ means ‘to find’. So in simple word it
is defined as the process of gaining new knowledge from previous/old work in
a systematic manner. In other words,Research is a scientific and systematic
search for pertinent information on specific topic. The term methodology
means it is a way to scientifically solve the research problem. It may be
understood as ascience of studying how research is done scientifically. In it we
study the various steps that aregenerally adopted by a researcher in studying his
research problem along with the logic behind them.The chapter
research methodology describes the methods which will be used for
the present study.
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Objectives of the study:

The following are the main objectives of the study is ;

To know the Liquidity position of Maruti Suzuki Ltd and compare the last 5
years financial data;

To know the profitability of the company;

To know the long-term solvency of the company; and

To know about the Management efficiency

Scope of the study

The study has covered the period of five (5) years starting from March, 2013 to
March, 2017. In the present study only one Automobile company have been
selected out of many companies are presents in the industry. Maruti Suzuki Ltd
have been taken in the study to give an overall picture the industry.

The automobile sector has revolutionized the life of common people. The
automobiles are now the part and parcel of our lives without which it is nearly
impossible to survive. This sector has contributed to the national exchequer as
well asincreased the economic activities as well in the form of providing jobs to
the people. Financial Statements Analysis of such industry will help the society
how this industry is utilizing their funds for economic benefits as well as for
improving the living standard of the society.

Methodology and Data

The study is an exploratory one and is mainly based on secondary data. For
secondary data theresearcher relied primarily on the published financial
statements of respective companies.To know the liquidity position of the firm’s
Current Ratio and Liquidity Ratio has been used.To gain the knowledge about
profitability position Gross profit Ratio, Net profit Ratio,Operating profit Ratio,
Return on equity Ratio, and Return on Capital employed Ratio has been
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Calculated.To know about solvency position Debt-Equity Ratio and

Interest coverage Ratio has been used. Finally, for management efficiency,
Inventory turnover Ratio, Fixed Asset turnover Ratio and Debtors turnover
Ratio has been calculated.

Limitations of the study

Despite of knowing as onward profit –making company, the study is not free
from certain limitations:

An analysis and interpretation have been done on the basis of data collected
from secondary sources. The data was collected from published financial
statements available on the internet fromtheir website.

Analysis has been done depending upon the data for a particular time period of
five (5) years i.e. from Mar, 2013 to Mar, 2017. The result may be different if
the same study is based on ten/fifteenyears.

For analyzing the Financial Statements only “Ratio Analysis” technique has
been used. But,there are so many statistical techniques are ignored in this study.

Nonfinancial information and inflation factor has not been considered for anal
ysis, but there are numerous non-financial factors (e.g. management efficiency)
are there which greatlyinfluence the company’s profitability.Therefore, It is
suggested for further research in this domain in future may take care of
theaforesaid problems along with suitable justification.

Plan of the study:

The study has been written and organized according to the following chapter
scheme

1:Introduction of Automobile companies in India.

2: Review of literature which provides review of various past work related to

this study.
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3: Research Methodology and Research Design- which specifies the objectives,

scope of the study, limitations of the study and specific methodology adopted
for conducting the work.

4: Theoretical background

5: Data analysis through liquidity ratios to measure the liquidity position of

Maruti SuzukiLtd .

6: Data analysis through Managerial Efficiency ratios to measure managerial

efficiency position of Maruti Suzuki Ltd.

7: Data analysis through solvency ratios to measure the long-term solvency

position of Maruti Suzuki Ltd .

8: Data analysis through profitability ratios to measure the profit earning

capacity of Maruti Suzuki Ltd..

9: Conclusion consisting of findings and suggestions.

10: Annexure

THEORITICAL BACKGROUND

Definition of 'Financial Statement Analysis:

The process of reviewing and evaluating a company's financial statements (such

as the balance sheet or profit and loss statement, and Cash Flow statement),
thereby gaining anunderstanding of the financial health of the company and
enabling more effectivedecision making. Financial statements record financial
data; however, this informationmust be evaluated through financial statement
analysis to become more useful toinvestors, shareholders, managers and other
interested parties.Financial statement analysis is an evaluative method of
determining the past, current and projected performance
of a company. Several techniques are commonly used as part of financial
statement analysis including horizontal analysis, which compares two or
moreyears of financial data in both dollar and percentage form; vertical
analysis, where eachcategory of accounts on the balance sheet is shown as a
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percentage of the total account;and ratio analysis, which calculates statistical

relationships between data.

Significance and purpose of Financial Statement Analysis:

Financial Statement Analysis performs the essential function of converting mass
datainto useful information. Such analysis serves many and varied purpose as
described below:

1. Judging profitability:
Profitability is a measure of efficiency and success of businessenterprises. The
potential investors analyze the Financial Statement to judge the profitability
and earning capacity of a company so as to decide whether to in a companyor
not.

2. Judging liquidity:
Liquidity of business refers to its ability to pay its short-termliabilities when
they became due. Short term creditors like trade creditors and bankersmake an
assessment of liquidity before granting credit to the company.

3. Judging solvency:
: Solvency refers to the ability of company to meet its long term debts. Long
term creditors like debenture holders and financial institutions judge
thesolvency of a company before any lending decisions. They analyze
company's profitability over a number of years and its ability to generate
sufficient cash to be able torepay their claims at the due time.

4. Judging the efficiency of the management:

Performance and efficiency of Management of company can be easily judge by
analyzing Financial Statements.Profitability of the company is not the only
measure of company's managerial efficiency.There are number of other ways to
judge the operational efficiency of Management.Financial analysis tells whether
the resource of the business is being used in mosteffective and efficient way.

5. Inter-Firm comparison:
A comparative study of financial and operating efficiency of different firms is
possible only after proper analysis of Financial Statements. For this purpose it
is also necessary that the Financial Statements are kept on a uniform basis
sothat financial data of various firm are comparable.
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6. Forecasting and budgeting:

Financial analysis is the starting point for making plans by forecasting and
preparing budgets. Analysis of a Financial Statements of the past yearshelps a
great deal in forecasting for the future.

Limitations of Financial Statements:

It is a general impression that Financial Statements are precise, exact and final
product of accounting. But sometimes these statements conceal some very
important information.AS such they suffer from certain limitations. These are
discussed below:

1. Effect on accounting concepts and conventions:

Various concepts and conventionsof accounting affect the values of assets and
liabilities as shown in the balance sheet.Similarly profit or loss disclosed by
Profit and loss account is also affected by theseconcepts and conventions. For
example, on account of going concern concept and convention of conservatism,
the balance sheet does not show current economic values of assets and
liabilities.

2. Effect of personal judgement:

The Financial Statements are influenced to certain extent, by the personal

judgement of accountant. For example, amount of provision
for bad and doubtful debts depends entirely on the judgement of past experienc
e of theaccountant. Similarly, an accountant has also to make judgement about
the method and rate of depreciation of fixed assets. The quality of Financial
Statements thus dependsupon the competence and integrity of those who are
responsible for preparing thesestatements.

3. Recording only monetary transaction:

Financial Statements records only thosetransactions which can be express in

terms of money. But there are many factors whichare qualitative in nature and
cannot be express in monetary terms. These non-monetaryfactors do not find
any place in the Financial Statements. For example, efficiency and loyalty of
workers, personal reputation and integrity of managing director of the
companyetc. are not capable of being express in monetary terms and thus find
no place in FinancialStatements even though they materially affect
the profitability of business.
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4. Historical in nature:
Financial Statements disclose data which is basically historicalin nature i.e. it
tells what happened in the past. These statements do not give future projection.

5. Ignores human resources:

No business can prosper without an efficient work force.But Financial
Statements do not include human resources which is a very important assetfor a
business.

6. Ignores social costs:

Apart from earning a fair return on investments, a business hascertain social
responsibilities. Financial Statements do not make any attempt to show
thesocial cost of its activities. Examples of social cost of manufacturing
company are air pollution, water pollution, occupational diseases of employees,
work injuries etc.

Interested Parties Involve in Financial

Statements Analysis
The analysis of financial figures contained in the company's profit and loss
account and balance sheet by employing appropriate technique is known a
financial statementanalysis. Financial statement analysis is useful to different
parties to obtain the required information about the organization. Following are
the parties interested in financialstatement analysis.

1. Shareholders:

Shareholders are interested in financial statement analysis to know

the profitability of the organization. Profitability shows the growth potentiality
of anorganization and safety of investment of shareholders.

2. Employees:

Employees also need these reports in making collective bargainingagreements

with the management, in the case of labour unions or for individuals
indiscussing their compensation, promotion and rankings.

3. Management:
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Management is interested to analyze the financial statement for measuring the

effectiveness of its policies and decisions. It analyze the financialstatements
to know short term and long term solvency position, profitability,
liquidity position and return on investment from the business.

4. Investors and Lenders:

Investors and lenders are interested to know the solvency position of an

organization. They analyze the financial statement position to know aboutthe
safety of their investment and ability to pay interest and repayment of
principleamount on due date.

5. Creditors:

Creditors are interested in analyzing the financial statements in order toknow

the short term liquidity position of an organization. Creditors analyse the
financialstatement to know either the organization is enable to pay the amount
of short termliabilities on due date.

6. Government:

Government is interested to analyze the financial position indetermining the

amount of tax liability. It also helps for formulating effective plans and policies
for economic growth.

FINANCIAL STATEMENTS
Financial statements (or financial reports) are formal records of the financial
activities of a business, person, or other entity. Financial statements provide an
overview of a businessor person's financial condition in both short and long
term. All the relevant financialinformation of a business enterprise, presented in
a structured manner and in a form easyto understand is called the financial
statements. There are four basic financial statements:

1. Balance sheet: It is also referred to as statement of financial position or

condition,reports on a company's assets, liabilities, and Ownership equity as of a
given point intime.
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2. Income statement: It is also referred to as Profit and Loss statement (or

"P&L"),reports on a company's income, expenses, and profits over a period of
time. Profit & Lossaccount provide information on the operation of the
enterprise. These include sale and thevarious expenses incurred during the
processing state.

3. Cash Flow Statement: It reports on a company's cash flow activities,

particularly itsoperating, investing and financing activities.

BALANCE SHEET
In financial accounting, a balance sheet or statement of financial position is a
summary of a person's or organization's balances of assets and liabilities at the
end of financial year.
A balance sheet is often described as a snapshot of a company's financial conditi
on. Itsummarizes a company's assets, liabilities and shareholders' equity at a
specific point intime. These three balance sheet segments give investors an idea
as to what the company owns and owes, as well as the amount invested by the
shareholders Out of these
three basic financial statements, the balance sheet is the only statement which ap
plies to asingle point in time. A company balance sheet has three parts: assets,
liabilities and ownership equity. The main categories of assets are usually listed
first and are followed by the liabilities. The difference between the assets
and the liabilities is known as equityor the net assets or the net worth or capital
of the company. It's called a balance sheet because the two sides balance out.
A typical format of the balance sheet has been given below:
Assets = Liabilities + Shareholders’ Equity
CONTENTS OF BALANCE SHEET
(A) Assets
In business and accounting, assets are economic resources owned by business
or company. Any property or object of value that one possesses, usually
considered asapplicable to the payment of one's debts is considered an asset.
Simplistically stated,assets are things of value that can be readily converted
into cash.The balance sheet of a firm records the monetary value of the assets
owned by thefirm. It is money and other valuables belonging to an individual or
business.
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Types of Assets
Two major types:

Tangible assets

Intangible assets

Tangible Assets

Tangible assets are those have a physical substance, such as equipment and
realestate.

Intangible Assets

Intangible assets lack physical substance and usually are very hard to
evaluate.Assets which do not possess any material value. They include patents,
copyrights,franchises, goodwill, trademarks, trade names, etc.

Types of Tangible Assets

Fixed assets.

Current assets.

Fixed Assets

This group includes land, buildings, machinery, vehicles, furniture, tools, and
certainwasting resources e.g., timberland and minerals. It is also referred to as
PPE
(property, plant, and equipment), these are purchased for continued and long-
term use in earning profit in a business.

Current Assets

Current assets are cash and other assets expected to be converted to cash, sold,
or consumed either in a year or in the operating cycle. These assets are
continually turned over in the course of a business during normal business
activity. There are 5 major itemsincluded into current assets:
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Cash and Cash Equivalents

It is the most liquid asset, which includes currency, deposit accounts, and
negotiableinstruments (e.g., money orders, cheque, bank drafts).

Short-term Investments

It includes securities bought and held for sale in the near future to generate
income onshort term price differences (trading securities).

Receivables

It is usually reported as net of allowance for uncollectable accounts.

Inventory

The raw materials, work-in-process goods and completely finished goods that
areconsidered to be the portion of a business's assets that are ready or will be
ready for sale.

Prepaid Expenses

These are expenses paid in cash and recorded as assets before they are used or
consumed (a common example is insurance). The phrase net current assets (also
called workingcapital) is often used and refers to the total of current assets less
the total of currentliabilities.

I. Gross Block
Gross block is the sum total of all assets of the company valued at their cost
of acquisition. This is inclusive of the depreciation that is to be charged on each
asset.
Net block is the gross block less accumulated depreciation on assets. Net block i
s actuallywhat the asset are worth to the company.

II. Capital Work in Progress

Work that has not been completed but has already incurred a capital investment
from the company. This is usually recorded as an asset on the balance sheet.
Work in progressindicates any good that is not considered to be a final product,
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but must still be accounted for because funds have been invested toward its
production.

III. Investments

• Shares and Securities, such as bonds, common stock, or long-term notes

• Associate Companies
• Fixed deposits with banks/finance companies
• Investments in special funds (e.g., sinking funds or pension funds).
• Investments in fixed assets not used in operations (e.g., land held for sale).

Remark:

While fixed deposits with banks are considered as fixed assets, the
investmentsin associate concerns are treated as non-current assets.

IV. Loans and Advances include

House building advance

Car, scooter, computer etc. advance

Multi purpose advance

Transfer travelling allowance advance

Tour travelling allowance advance

V. Reserves

Subsidy Received From the Govt.

Issue of Shares at Premium

General Reserves
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(B) Liability
A liability is a debt assumed by a business entity as a result of its borrowing
activities or other fiscal obligations (such as funding pension plans for its
employees). Liabilities aredebts and obligations of the business they represent
creditors claim on business assets.

Types of LiabilitiesCurrent Liabilities

Current liabilities are short-term financial obligations that are paid off within
one year or one current operating cycle. These liabilities are reasonably
expected to be liquidated within a year.It includes:

Accrued expenses as wages, taxes, and interest payments not yet paid

Accounts payable

Short-term notes

Cash dividends and

Revenues collected in advance of actual delivery of goods or services

Long-Term Liabilities

Liabilities that are not paid off within a year, or within a business's operating
cycle, areknown as long-term or non-current liabilities. Such liabilities often
involve large sums of money necessary to undertake opening of a business,
major expansion of a business,replace assets, or make a purchase of significant
assets. These liabilities are reasonablyexpected not to be liquidated within a
year. It includes:

Notes payable- debt issued to a single investor.

Bonds payable – debt issued to general public or group of investors.

Mortgages payable.

Capital lease obligations – contract to pay rent for the use of plant, property
or equipments.
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deferred income
taxes payable, and

pensions and other post

-retirement benefits.

Contingent Liabilities

A third kind of liability accrued by companies is known as a contingent liability.

The termrefers to instances in which a company reports that there is a possible
liability for anevent, transaction, or incident that has already taken place; the
company, however, doesnot yet know whether a financial drain on its resources
will result. It also is oftenuncertain of the size of the financial obligation or the
exact time that the obligation mighthave to be paid.

Fixed Liability

The liability which is to be paid off at the time of dissolution of firm is called
fixed liability. Examples are Capital, Reserve and Surplus.

Secured Loans
A secured loan is a loan in which the borrower pledges some asset (e.g. a car or
property)as collateral for the loan, which then becomes a secured debt owed to
the creditor whogives the loan.
Unsecured Loans

An unsecured loan is a loan that is not backed by collateral. Also known as

signatureloan or personal loan. Unsecured loans are based solely upon the
borrower's credit rating.

An unsecured loan is considered much cheaper and carries less risk to the
borrower.However, when an unsecured loan is granted, it does not necessarily
have to be based ona credit score.

PROFIT & LOSS STATEMENT

Income statement, also called profit and loss statement (P&L) and Statement
of Operations is financial statement that summarizes the revenues, costs and
expensesincurred during a specific period of time - usually a fiscal quarter or
year. These records provide information that shows the ability of a company
 26

to generate profit by increasingrevenue and reducing costs. The purpose of the

income statement is to show managersand investors whether the company made
or lost money during the period being reported.The important thing to
remember about an income statement is that it represents a period of time. This
contrasts with the balance sheet, which represents a single moment in time.

CASH FLOW STATEMENT:

It is a statement, which measures inflows and outflows of cash on account of

any type
of business activity. The cash flow statement also explains reasons for such infl
ows and outflows of cash so it is a report on a company's cash flow activities,
particularly itsoperating, investing and financing activities.

FINANCIAL RATIOS

The method for analyzing financial statements is the use of many kinds of
ratios. We use ratios to calculate the relative size of one number inrelation to
another. After you calculate a ratio, you can then compare it to the same
ratiocalculated for a prior period, or that is based on an industry average, to see
if the companyis performing in accordance with expectations. In a typical
financial statement analysis,most ratios will be within expectations, while a
small number will flag potential problems that will attract the attention of the
reviewer.
The importance of ratio analysis lies in the fact that it presents data on a
comparative basis and enables the drawing of inferences regarding
the performance of the firm. Ratioanalysis helps in concluding the following
aspects:
 27

Liquidity Position:

Ratio analysis helps in determining the liquidity position of the firm. A firm can
be said tohave the ability to meet its current obligations when they become due.
It is measured withthe help of liquidity ratios.

Long- Term Solvency:

Ratio analysis helps in assessing the long term financial viability of a firm.
Long- termsolvency measured by leverage/capital structure and profitability
ratios.

Operating Efficiency:

Ratio analysis determines the degree of efficiency of management and

utilization of assets. It is measured by the activity ratios.

Over-All Profitability:

The management of the firm is concerned about the overall profitability of the
firm whichensures a reasonable return to its owners and optimum utilization of
its assets. This is possible if an integrated view is taken and all the ratios are
considered together.

Inter- firm Comparison:

Ratio analysis helps in comparing the various aspects of one firm with the other.

ADVANTAGES OF RATIO ANALYSIS:

Ratio analysis is an important and age-old technique of financial analysis. The
followingare some of the advantages of ratio analysis:

1.Simplifies financial statements: It simplifies the comprehension of

financialstatements. Ratios tell the whole story of changes in the financial
condition of the business.
 28

2.Facilitates inter-firm comparison: It provides data for inter-firm

comparison. Ratioshighlight the factors associated with successful and
unsuccessful firm. They also revealstrong firms and weak firms, overvalued and
undervalued firms.

3.Helps in planning: It helps in planning and forecasting. Ratios can assist

management,in its basic functions of forecasting. Planning, co-ordination,
control and communications.

4.Makes inter-firm comparison possible: Ratios analysis also makes

possiblecomparison of the performance of different divisions of the firm. The
ratios are helpful indeciding about their efficiency or otherwise in the past and
likely performance in thefuture.

5.Help in investment decisions: It helps in investment decisions in the case of

investorsand lending decisions in the case of bankers etc.

LIMITATIONS OF RATIO ANALYSIS:

The ratios analysis is one of the most powerful tools of financial management.
Though ratios are simple to calculate and easy to understand, they suffer
from serious limitations.

1.Limitations of financial statements: Ratios are based only on the

information whichhas been recorded in the financial statements. Financial
statements themselves are subjectto several limitations. Thus ratios derived,
there from, are also subject to those limitations.For example, non-financial
changes though important for the business are not relevant bythe financial
statements. Financial statements are affected to a very great extent byaccounting
conventions and concepts. Personal judgment plays a great part in
determiningthe figures for financial statements.

2.Comparative study required: Ratios are useful in judging the efficiency

of the business only when they are compared with past results of the business.
However, such acomparison only provide glimpse of the past performance and
forecasts for future maynot prove correct since several other factors like market
conditions, management policies,etc. may affect the future operations.
 29

3.Problems of price level changes: A change in price level can affect the
validity of ratios calculated for different time periods. In such a case the ratio
analysis may notclearly indicate the trend in solvency and profitability of the
company. The financialstatements, therefore, be adjusted keeping in view the
price level changes if a meaningfulcomparison is to be made through accounting
ratios.

4.Lack of adequate standard: No fixed standard can be laid down for ideal
ratios. There are no well accepted standards or rule of thumb for all ratios which
can be accepted asnorm. It renders interpretation of the ratios difficult.

5.Limited use of single ratios: A single ratio, usually, does not convey
much of a sense.To make a better interpretation, a number of ratios have to be
calculated which is likely toconfuse the analyst than help him in making any
good decision.

6.Personal bias: Ratios are only means of financial analysis and not an end in
itself.Ratios have to interpret and different people may interpret the same ratio
in different way.

7.Incomparable: Not only industries differ in their nature, but also the firms
of thesimilar business widely differ in their size and accounting procedures etc.
It makescomparison of ratios difficult and misleading.

Functional Classification of Ratio:

According to needs of users of Financial Statements, the ratio are classified as :

1. Liquidity ratios:
Liquidity ratios ate those which measure the short-term liquidity and solvency
position of a firm. In short, it measures the relationship between short-
termliabilities and current assets i.e. firm are short-term capacity to meet its
short-termobligations when they became due. Some of the important liquidity
ratios are : currentratio, quick ratio, and inventory turnover ratio etc.

2. Profitability ratios:
These ratios measure the relationship between operating profit tosales and
operating profit to investments. They measure also the rate of earnings or rate
of return on capital employed for the various users of Financial Statements.
These ratioshelp the users to know the rate of return and reason of such
 30

occurrences.
Some profitability ratios in relating to sales are: Gross Profit ratio, Net profit rat
io, and Operating profit ratio etc. Whereas, in relation to investment: Rate of
return on capitalemployed and Earning Per Share (EPS) etc.

3. Activity ratios: These ratios are also known as turnover ratios as they
measure theefficiency by which the resources of the firm are utilised, i.e.,
whether the assets have properly been used or not. They inform us the speed at
which the assets have been turned-over into sales. Some of the important
activity ratios are: Debtors 'turnover ratio, Creditors' turnover ratio etc.

4. Leverage ratios: Leverage ratio or Long-term solvency ratio measure the

ability of the firm to meet the cost of interest and re-payment capacity of its
long-term loans, e.g.Debt-Equity ratios, Interest coverage ratios etc. In short,
these ratios measure therelationship between debt financing and equity
financing or contribution made byoutsiders and equity share holders. Leverage
ratios further classified as: Financialleverage, Operating leverage, and
Composite leverage. The leverage ratios help thefinancial analyst to obtain
some important information about the financial health of anenterprise.

Which Ratio for whom:

As before mentioned there are varieties of people interested to know and read
theseinformation and analyses, however different people for different needs.
And it is becauseeach of these groups have different type of questions that could
be answered by a specificnumber and ratio. Therefore we can say there are
different ratios for different groups,these groups with the ratio that suits them is
listed below:

1. Investors: These are people who already have shares in the business or
they arewilling to be part of it. So they need to determine whether they should
buy shares in the business, hold on to the shares they already have or sell the
shares they already own. Theyalso want to assess the ability of the business to
pay dividends. As a result the Return onCapital Employed Ratio (ROCE)
is the one for this group.

2.Lenders: This group consists of people who have given loans to the
company so theywant to be sure that their loans and also the interests will be
paid and on the due time.Gearing Ratios will suit this group.
 31

3.Managers: Managers might need segmental and total information to see how
they fitinto the overall picture of the company which they are ruling. And
Profitability Ratios canshow them what they need to know.

4.Employees: The employees are always concerned about the ability of the
businessto provide remuneration, retirement benefits and employment opportuni
ties for them,therefore these information must be find out from the stability and
profitability of their employers who are responsible to provide the employees
their need. Return on CapitalEmployed Ratio is the measurement that can help
them..

5.Suppliers and other trade creditors: Businesses supplying goods and

materials toother businesses will definitely read their accounts to see that they
don't have problems,after all, any supplier wants to know if his customers are
going to pay them back and theywill study the Liquidity Ratio of the companies.

6. Customers: are interested to know the Profitability Ratio of the business

with whichthey are going to have a long term involvement and are dependent on
the continuance of presence of that.

7.Governments and their agencies: are concerned with the allocation of

resources and,the activities of businesses. To regulate the activities of them,
determine taxation policiesand as the basis for national income and similar
statistics, they calculate the ProfitabilityRatio of businesses.

8.Local community: Financial statements may assist the public by

providinginformation about the trends and recent developments in the
prosperity of the businessand the range of its activities as they affect their area
so they are interested in lots of ratios.

9.Financial analysts: they need to know various matters, for example, the
accountingconcepts employed for inventories, depreciation, bad debts and so
on. Therefore they areinterested in possibly all the ratios.

10.Researchers: researchers' demands cover a very wide range of lines of

enquiryranging from detailed statistical analysis of the income statement and
balance sheet dataextending over many years to the qualitative analysis of the
wording of the statementsdepending on their nature of research.
 32

LIQUIDITY POSITION

Liquidity ratios:
Liquidity ratios ate those which measure the short-term liquidity and solvency
position of a firm. In short, it measures the relationship between short-term
liabilitiesand a current asset i.e. firm’s capacity to meet its short-term
obligations when they becamedue. Some of the important liquidity ratios are:

Current Ratio:

Current ratio is used to evaluate the short term solvency of a firm i.e.its ability
to discharge the short term obligations. The higher the current ratio, larger is
theamount of current assets available for current liabilities. Generally, standard
current ratio is taken as 2:1.
But in case of finance from banking institution current ratio may be taken
as1.33:1, though there is no hard and fast rule to maintain this ratio. However, a
very highcurrent ratio is also not desirable for the firms because high investment
in current assets resultsin reduction in overall profitability of the firm.

Current Ratio= Current Assets/Current Liabilities

Current Ratio
1.2

1 1.04

0.8 0.77
0.68
0.6 0.63
0.55
Current Ratio
0.4

0.2

0
Dec-13

Dec-14

Dec-15

Dec-16
Mar-13

Mar-14

Mar-15

Mar-16

Mar-17
Sep-13

Sep-14

Sep-15

Sep-16
Jun-13

Jun-14

Jun-15

Jun-16
 33

Comments:
From the above chart it is clear that Current Ratio of Maruti Suzuki Ltd over the
five (5) years indicates a decreasing trend. In 2013 current ratio is 1.04 and the
same in 2017 was decreased consistently to 0.55. It implies that, for every rupee
of Current liabilities, available Current asset is only Rs. 0.55. Therefore the
company’s Current ratio is too much low than the standard.

So short term solvencyof the company is not sound and therefore, may face the
problems in discharging their short-term obligations.

Quick Ratio:
Acid-test ratio is the rigorous measure of firm's ability to dischargevery short
term obligations. In addition to Current ratio acid-test ratio is most
necessary because, in Current ratio a rupee of cash is considered as equivalent
to a rupee of inventory or receivables. But in reality it is not so. A rupee of cash
is more readily available to meet currentobligations than a rupee of inventory or
receivables. Generally speaking quick ratio of 1:1 isconsidered as satisfactory as
firm can easily meet its short term liabilities.

Quick Ratio= Quick Assets/ Quick Liabilitiies

Quick Assets= Current assets- pre paid expenses and inventory
Quick liabilities= Current liabilities- creditors
 34

Quick Ratio
1
0.9 0.9
0.8
0.7
0.67
0.6
0.5
0.4 0.41 Quick Ratio
0.37 0.35
0.3
0.2
0.1
0 0
Dec-13

Dec-14

Dec-15

Dec-16
Mar-13

Mar-14

Mar-15

Mar-16

Mar-17
Sep-13

Sep-14

Sep-15

Sep-16
Jun-13

Jun-14

Jun-15

Comments: Jun-16

From the above chart it is visible that quick ratio is consistently falling from
2013 to 2017. Companies quick ratio is lower than their Current ratio. The
interpretation is that a large part of Current assets of these firms are tied up in
slow moving and unsalable inventories and/or slow paying debtors.

Moreover in the year 2017 quick ratio is 0.35 which is too much below the
standard level. Therefore the company is unable to pay off its short term
liabilities.

MANAGERIAL EFFICIENCY
Management Efficiency Ratio: These ratios are also known as Activity
ratios as theymeasure the efficiency by which the resources of the firm are
utilise, i.e., whether the assetshave properly been used or not. They inform us
the speed at which the assets have beenturned-over into sales. Some of the
important activity ratios are:

Inventory turnover Ratio:

 35

Inventory (stock) turnover ratio indicates the number of times inventory is

replaced i.e. how quickly the inventory is sold. It is a test of efficientinventory
management. It measures the relationship between costs of goods sold and
inventorylevel. In general, a high inventory turnover ratio is better than a low
ratio. A high ratio impliesgood inventory Management. Yet, a very high ratio
may be indicative of underinvestment inor very low level of inventory. A very
low level of inventory will adversely affect the abilityto meet customers'
demand resulting a high stock out cost. Similarly, a very low inventoryturnover
ratio signifies excessive inventory or over investment in inventory which
eventuallyresults in unexpected carrying/holding cost.

Inventory turnover ratio= Cost of Goods Sold/ Average Inventory

Cost of goods sold =opening stocks + purchases - closing stocks

Average inventory= (opening stocks + closing stocks) /2

Inventory turnover ratio

35

30
28.65
26.67
25
23.69
21.08 20.84
20

Inventory turnover ratio

15

10

0
2013 2014 2015 2016 2017

Comments:
The inventory turnover ratio in 2017 is 23.69. From the above chart it is visible
that Inventory Turnover ratio in case of Maruti Suzuki Ltd has a fluctuating
 36

trend from the year 2013 to 2017. The inventory turn over ratio of the company
is quite high which is good.

Fixed Assets Turnover Ratio:

This ratio measures the degree of efficiency inutilising the Fixed Assets. Higher
the ratio better is the utilization of Fixed Assets. In other words, it indicates how
much money is investment in Fixed Assets to generate sales. A Highfixed asset
turnover ratio indicates the capability of the firm to earn maximum sales with
theminimum investing in fixed assets. So it shows the company’s efficiency in
utilising its fixed assets to generate sales revenue. Therefore, higher the ratio
better is the company’s fixed assets utilization efficiency and vice-versa.

Fixed Assets Turnover Ratio: Sales/ Fixed Assets

Fixed Assets Turnover Ratio
4
3.77
3.5

2.5
2.25
2 1.96 1.94 2.02 Fixed Assets Turnover
Ratio
1.5

0.5

0
2013 2014 2015 2016 2017

Comments:
 37

Fixed assets turnover ratio of the company in 2017 is 3.77. It indicates that for
each rupee of Fixed assets there is a sale revenue of Rs. 3.77 in Maruti Suzuki
Ltd which is quite higher than the previous years.

By comparing the last 5 years ratio it is found that Maruti Suzuki is in a better
position now as compared to last 4 years.

Debtors turnover Ratio:

This ratio shows how quickly debtors are converted into cash. In other words,
we can say that it is test of liquidity of the debtors of the firm. Thus it isan
indicative of the efficiency of trade credit management. The higher the debtors
turnover ratio and shorter the average collection period, better is the trade credit
management and better is the liquidity of the debtors. On the other hand, low
turnover ratio and long collection period reflect delayed payment by debtors.
Therefore, in general, higher turnover ratio (short collection period) is
preferable than the low turnover ratio.
Debtors Turnover Ratio= Credit sales/ Average Debtors

Debtors Turnover Ratio

60
54.48
50 48.76

40 40.24
36.21
30 30.31
Debtors Turnover Ratio

20

10

0
2013 2014 2015 2016 2017

Comments:
 38

Debtors turnover ratio in Maruti Suzuki Ltd is 54.48 which signifies that
debtors of thiscompany are get converted into cash approximately 55 times in a
year. Therefore, collection period will be Nine (7) days [360 days/55times].
Therefore requirement of investment in debtors is less in the company.

LONG-TERM SOLVENCY POSITION

Long-term solvency ratio:

Long-term solvency ratios measure the long-term that is, firm’scapability to
meet the long-term obligation according to their due date. For
instance,redemption of debenture, redemption of redeemable preference share
and the ability of thefirm to meet the cost of interest etc.

Debt-Equity Ratio:
This ratio reflects the relative claims of creditors and shareholders against the
assets of the firm, debt equity ratios establish relationship between borrowed
funds and owner capital to measure the long term financial solvency of the firm.
Theratio indicates the relative proportions of debt and equity in financing the
assets of the firm. A D/E ratio of 2 indicates that the company derives two-
thirds of its capital financing from debt and one-third from shareholder equity,
so it borrows twice as much funding as it owns. The D/E ratio is a financial
leverage ratio that compares a company's total liabilities to its
shareholder equity.

Debt-Equity Ratio=Long Term Debt/ Share holders

Equity
 39

Debt-Equity Ratio
0.09

0.08 0.08

0.07 0.07

0.06

0.05

0.04 Debt-Equity Ratio

0.03

0.02

0.01 0.01 0.01

0 0
2013 2014 2015 2016 2017

Comments:
Debt Equity ratio in 2017 of Maruti Suzuki is 0.07. Therefore, incase of Maruti
Suzuki Ltd the ratio is too much low compared to general norms though
thereare no hard and first rules for debt-equity ratio. As a result of this low debt
in capital structurereturn to Equity share holders will low because company is
taking no risk and will not be ableto avail the benefits of trading on equity.

Interest Coverage Ratio:

The interest coverage ratio (ICR) is a measure of a company's ability
to meet its interest payments. Interest coverage ratio is equal to
earnings before interest and taxes (EBIT) for a time period, often one
year, divided by interest expenses for the same time period.
The interest coverage ratio is a measurement of a company's ability to
handle its outstanding debt. ... A company that has very large current
earnings beyond the amount required to make interest payments on its
debt has a larger financial cushion against a temporary downturn in
revenues.
 40

Interest Coverage Ratio= EBIT/ Interest

Where, EBIT stands for Earnings Before Interest and Taxes

Interest Coverage Ratio

120
112.2
100

80 81.18

60
Interest Coverage Ratio

40

21.8 24.63
20
16.76

0
2013 2014 2015 2016 2017

Comments:
Interest coverage Ratio of Maruti Suzuki in 2017 is 112.2. The chart
shows a continous increase in the ratio from 2013 to 2017 which is
16.76 to 112.2 in 5 years. Upto 2015 Interest coverage Ratio remains
very low and in 2016 rise upto 81.18 which is very good for the
company. As because if there is ahigher the Interest coverage Ratio
the higher will be the EPS of the company.
 41

PROFITABILITY RATIOS
Profitability ratios:This ratio measures the profit earnings
capacity of the firms on their turnover and investments etc.

Gross Profit Ratio:

This ratio measures the relationship between net sales and

gross profit. Since gross profit is the difference between selling price
and cost of goods sold the higher be the profit, better will be the
financial performance. This ratio indicates the
relation between production cost and sales and the efficiency with whi
ch goods are produced or purchased. It is highly significant and
important since the earning capacity of business can be ascertain by
taking the margin between the sales and cost of goods sold. If it has a
very high gross profit ratio it may indicate that the organization is
able to produce or purchase at a relatively lower cost.

Gross Profit Ratio= Gross Profit * 100/ Net sales

Gross Profit Ratio

12
11.39
10.65
10

8.49
8
6.89
6
5.43 Gross Profit Ratio

0
2013 2014 2015 2016 2017
 42

Comments:
From the above chart we can see that the Gross Profit ratio was
constantly increasing from 2013 to 2017 i.e from 5.43 to 11.39.
Which means that the company was focusing on reducing its
production cost every year. Therefore the company is getting a high
gross profit proportion comparing to previous years.

Net Profit Ratio:

This ratio reflects the net profit margin on the sales after deducting all expenses
but before deducting interest and taxes. This ratio measures the efficiency
of operation of the organization. This ratio is very significant as if it is found be
very low, many problems may arise such as dividend may not be paid and on
the other hand high ratio ensureadequate return to the owners as well as enable
firm to withstand adverse economic conditionselling price is declining and cost
of production is increasing.
Moreover, Gross profit margin and Net profit margin should be jointly
evaluated. Theneed for joint analysis arises because the two ratios may show
different trends.
For example,the gross margin may show a substantial increase over a
period of time but Net profit margin may remain constant or may actually have
decline or may not have increase as fast as grossmargin. It may be due to the
fact that the increase in the operating expense individually
may behave abnormally. On the other hand, if either as a whole or individual ite
ms of operatingexpenses decline subsequently, a decrease in gross margin may
be associated with an improvement in the net profit margin.

Net Profit Ratio= Earnings before Interest and Taxes(EBIT)*

100/ Net Sales
 43

Net Profit Ratio

12
10.78
10

8 7.91
7.42
6.36
6
5.48 Net Profit Ratio

0
2013 2014 2015 2016 2017

Comments:
From the above chart it’s visible that the company was managing to ioncrease
its Net Profit ratio from 2013 to 2017 i.e from 5.48 to 10.78. Which means apart
from gross profit company was able to increase the proportion of net profit also.

In 2017 NPR is 10.78 which implies that Maruti Suzuki will remain with quite
enough amount of money as EBIT after adjusting all expenses other than
interest on long-term loan and taxes.

Return on Capital Employed Ratio:

Return on Capital Employed (ROCE) ratioindicates the relationship between

profit before interest and taxes and long-term funds invested in the business.
This ratio is also called Return on Investment (ROI). It reflects the
overallefficiency with which capital is used. A measure of the return that a
company is realizing fromits capital employed. The ratio can also be seen as
representing the efficiency with whichcapital is being utilized to generate
revenue. It is commonly used as a measure for comparingthe performance
 44

between businesses and for assessing whether a business generates

enoughreturns to pay for its cost of capital.

Return on Capital Employed=EBIT* 100/ Capital Employed

Capital Employed= Equity Capital + Preference Capital + Reserves
and Surplus + Long Term Debt- Fictitious Assets

Return on Capital Employed

30
27.36
25 24.42
21.24
20
16.91
15.92
15 Return on Capital
Employed
10

0
2013 2014 2015 2016 2017

Comments:
From the above chart we can see that there is a consistent increment in ROCE
of Maruti Suzuki Ltd. Since ROCE ratio is the indicator of overall profitability
of firm,higher the ratio, better the firm producing the return from efficient
utilisation of long-termfunds. Therefore, the company was maintaining to earn
more profitability and generating return from long-termfunds in last 3 years.
 45

Operating Profit Ratio:

This ratio establishes the relation between the net sales and the operating net
profit. The concept of operating net profit is different from the concept
of net profits; operating net profit is the profit arising out of business operations
only. This iscalculated as follows:

Operating Profit Ratio= Operating profit* 100/ Net sales

Operating profit= Net Profit + Non-operating expenses – non

operating income.

Alternatively, this profit can also be calculated by deducting only operating

expenses from thegross profit.This ratio reveals the margin remains after
adjusting the cost of goods sold plus operatingexpenses with the sales. Higher
the ratio higher is the profitability and better is the efficiencyof management.

Operating Profit Ratio

18

16
15.54 15.21
14
13.43
12 11.66
10 9.7
8 Operating Profit Ratio

0
2013 2014 2015 2016 2017

Comments:
From the above chart the OPR shows a increasing ratio from 2013 to 2016 and
in 2017 it had been declined a bit to 15.21. Which means the proportion of
 46

operating profit was declined in 2017 as compared to 2016. Therefore the

company need to improve their management capability.

Return on Equity Ratio:

This ratio measures the return on the total equity funds of ordinary share
holdersi.e. it indicates the productivity of the owned funds employed in thefirm.
Probably, it is the single most important ratio to judge whether the firm has
earned asatisfactory returns for its real owners who bear all the risk and
uncertainty involve in the business. Its adequacy can be judge by comparing
it with the past record of the same firm or inter-firm comparison or comparison
with the overall industry average. This ratio plays animportant role in making
decision by equity share holder whether to continue with their investment in the
company or not.

Return on Equity=(Profit after Tax – Preference

Divident)* 100/ Net worth
Net Worth = Equity capital + Reserve and surplus – Accumulated
loss

Return on Equity Ratio

25

20 20.28

16.92
15 15.65

12.87 13.26
Return on Equity Ratio
10

0
2013 2014 2015 2016 2017
 47

Comments:

5 Years Profit And Loss A/c Of

Maruti Suzuki
Profit & Loss account ------------------- in Rs. Cr. -------------------
Mar 17 Mar 16 Mar 15 Mar 14 Mar 13

12 mths 12 mths 12 mths 12 mths 12 mths

INCOME
Revenue From Operations
76,140.80 63,866.90 53,768.50 47,822.80 48,114.70
[Gross]
Less: Excise/Sevice Tax/Other
9,231.40 7,516.50 5,163.00 5,178.00 5,502.10
Levies
Revenue From Operations [Net] 66,909.40 56,350.40 48,605.50 42,644.80 42,612.60
Other Operating Revenues 1,125.40 1,395.90 1,365.10 1,055.80 975.30
Total Operating Revenues 68,034.80 57,746.30 49,970.60 43,700.60 43,587.90
Other Income 2,279.80 461.90 831.60 822.90 812.40
Total Revenue 70,314.60 58,208.20 50,802.20 44,523.50 44,400.30
EXPENSES
Cost Of Materials Consumed 42,629.60 35,706.90 32,867.80 28,898.90 30,349.20
Purchase Of Stock-In Trade 4,482.10 3,126.40 2,665.20 2,431.40 2,186.40
Changes In Inventories Of
-380.10 6.90 -455.90 18.50 23.40
FG,WIP And Stock-In Trade
Employee Benefit Expenses 2,331.00 1,988.70 1,606.60 1,368.10 1,069.60
Finance Costs 89.40 81.50 206.00 175.90 189.80
Depreciation And Amortisation
2,602.10 2,823.90 2,470.30 2,084.40 1,861.20
Expenses
Other Expenses 8,722.80 7,999.10 6,643.10 5,922.10 5,773.50
Less: Inter Unit / Segment /
103.60 60.20 69.10 34.30 43.80
Division Transfer
Total Expenses 60,373.30 51,673.20 45,934.00 40,865.00 41,409.30
Mar 17 Mar 16 Mar 15 Mar 14 Mar 13
 48

12 mths 12 mths 12 mths 12 mths 12 mths

Profit/Loss Before Exceptional,

9,941.30 6,535.00 4,868.20 3,658.50 2,991.00
ExtraOrdinary Items And Tax
Profit/Loss Before Tax 9,941.30 6,535.00 4,868.20 3,658.50 2,991.00
Tax Expenses-Continued Operations
Current Tax 2,331.70 2,041.40 1,302.60 747.90 722.80
Less: MAT Credit Entitlement 0.00 0.00 70.40 0.00 90.40
Deferred Tax 271.90 -77.80 -75.20 127.60 -33.50
Total Tax Expenses 2,603.60 1,963.60 1,157.00 875.50 598.90
Profit/Loss After Tax And
7,337.70 4,571.40 3,711.20 2,783.00 2,392.10
Before ExtraOrdinary Items
Profit/Loss From Continuing
7,337.70 4,571.40 3,711.20 2,783.00 2,392.10
Operations
Profit/Loss For The Period 7,337.70 4,571.40 3,711.20 2,783.00 2,392.10
Mar 17 Mar 16 Mar 15 Mar 14 Mar 13

12 mths 12 mths 12 mths 12 mths 12 mths

OTHER ADDITIONAL INFORMATION

EARNINGS PER SHARE
Basic EPS (Rs.) 242.91 151.33 123.00 92.13 79.19
Diluted EPS (Rs.) 242.91 151.33 123.00 92.13 79.19
VALUE OF IMPORTED AND INDIGENIOUS
RAW MATERIALS
Imported Raw Materials 3,322.10 2,615.80 2,395.30 2,657.10 3,677.60
Indigenous Raw Materials 39,307.50 33,091.10 30,472.50 26,241.80 26,671.60
STORES, SPARES AND LOOSE TOOLS
Imported Stores And Spares 67.20 58.50 51.90 46.50 70.70
Indigenous Stores And Spares 425.60 400.00 306.60 247.50 287.00
DIVIDEND AND DIVIDEND PERCENTAGE
Equity Share Dividend 1,057.30 1,057.30 755.20 362.50 241.70
Tax On Dividend 215.20 215.20 153.80 61.60 41.10
Equity Dividend Rate (%) 1,500.00 700.00 500.00 240.00 160.00
 49

Maruti Suzuki's 5 Years Financial

Summary

Balance Sheet
Parameters ------------------- in Rs. Cr. -------------------

Mar 17 Mar 16 Mar 15 Mar 14 Mar 13

12 mths 12 mths 12 mths 12 mths 12 mths

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS

Equity Share Capital 151.00 151.00 151.00 151.00 151.00

Total Share Capital 151.00 151.00 151.00 151.00 151.00

Reserves and Surplus 36,020.10 26,856.10 23,553.20 20,827.00 18,427.90

Total Reserves and Surplus 36,020.10 26,856.10 23,553.20 20,827.00 18,427.90

Total Shareholders Funds 36,171.10 27,007.10 23,704.20 20,978.00 18,578.90

NON-CURRENT LIABILITIES

Long Term Borrowings 0.00 0.00 144.80 460.40 542.90

Deferred Tax Liabilities [Net] 464.00 474.10 481.00 586.60 408.70

Other Long Term Liabilities 1,105.00 122.40 105.40 238.60 250.30

Long Term Provisions 21.90 302.00 292.60 198.00 225.90

Total Non-Current Liabilities 1,590.90 898.50 1,023.80 1,483.60 1,427.80

CURRENT LIABILITIES
 50

Short Term Borrowings 483.60 77.40 35.40 1,224.70 846.30

Trade Payables 8,367.30 7,013.30 5,561.40 4,897.50 4,157.90

Other Current Liabilities 3,931.40 2,364.80 1,865.80 1,274.20 1,075.10

Short Term Provisions 449.00 1,834.50 1,360.40 677.70 648.20

Total Current Liabilities 13,231.30 11,290.00 8,823.00 8,074.10 6,727.50

Total Capital And Liabilities 50,993.30 39,195.60 33,551.00 30,535.70 26,734.20

ASSETS

NON-CURRENT ASSETS

Tangible Assets 12,916.20 12,420.90 11,967.00 10,607.70 9,576.50

Intangible Assets 373.00 346.90 292.30 182.70 222.70

Capital Work-In-Progress 1,252.30 1,006.90 1,882.80 2,621.40 1,940.90

Fixed Assets 14,541.50 13,774.70 14,142.10 13,411.80 11,740.10

Non-Current Investments 26,214.70 16,912.70 9,817.60 1,304.80 1,873.50

Long Term Loans And

0.30 1,349.70 1,349.30 1,638.40 1,280.00
Advances

Other Non-Current Assets 1,626.90 9.00 44.10 9.00 894.60

Total Non-Current Assets 42,383.40 32,046.10 25,353.10 16,364.00 15,788.20

CURRENT ASSETS

Current Investments 2,013.70 873.00 2,996.40 8,813.10 5,204.80

Inventories 3,262.20 3,132.10 2,615.00 1,705.90 1,840.70

Trade Receivables 1,199.20 1,298.60 1,069.80 1,413.70 1,469.90

Cash And Cash Equivalents 13.10 39.10 18.30 629.70 775.00

Short Term Loans And

2.50 1,556.50 1,172.80 1,251.10 1,115.30
Advances
 51

OtherCurrentAssets 2,119.20 250.20 325.60 358.20 540.30

Total Current Assets 8,609.90 7,149.50 8,197.90 14,171.70 10,946.00

Total Assets 50,993.30 39,195.60 33,551.00 30,535.70 26,734.20

OTHER ADDITIONAL INFORMATION

CONTINGENT LIABILITIES,
COMMITMENTS

Contingent Liabilities 9,640.50 10,496.90 9,228.60 7,210.20 8,193.30

CIF VALUE OF IMPORTS

Raw Materials 3,725.40 3,363.20 3,181.80 3,095.50 4,234.40

Stores, Spares And Loose

115.50 100.00 75.80 68.30 66.30
Tools

Trade/Other Goods 20.10 62.90 23.10 41.60 12.80

Capital Goods 1,481.80 738.30 1,011.20 1,731.20 1,476.20

EXPENDITURE IN FOREIGN EXCHANGE

Expenditure In Foreign
4,110.40 3,792.60 3,300.30 3,087.40 3,102.00
Currency

REMITTANCES IN FOREIGN
CURRENCIES FOR DIVIDENDS

Dividend Remittance In
594.30 424.50 203.70 135.80 117.50
Foreign Currency

EARNINGS IN FOREIGN EXCHANGE

FOB Value Of Goods 5,629.10 4,792.30 4,633.20 4,141.70 4,560.10

Other Earnings - - - - -

BONUS DETAILS

Bonus Equity Share Capital - - - - -

 52

NON-CURRENT INVESTMENTS

Non-Current Investments
- 583.90 560.50 237.70 147.40
Quoted Market Value

Non-Current Investments
- 16,886.10 9,791.10 1,278.30 1,867.40
Unquoted Book Value

CURRENT INVESTMENTS

Current Investments Quoted

- - - - -
Market Value

Current Investments Unquoted

- 873.00 2,996.40 8,813.10 5,229.80
Book Value

Cash Flow
Parametres ------------------- in Rs. Cr. -------------------

Mar 17 Mar 16 Mar 15 Mar 14 Mar 13

12 mths 12 mths 12 mths 12 mths 12 mths

Net Profit/Loss Before Extraordinary

9,941.30 6,535.00 4,868.20 3,658.50 2,991.00
Items And Tax

Net CashFlow From Operating

10,284.70 8,433.10 6,410.60 4,903.50 4,301.10
Activities

Net Cash Used In Investing Activities -9,181.50 -7,175.90 -4,499.90 -4,892.90 -3,491.00

Net Cash Used From Financing

-1,129.30 -1,236.40 -1,962.10 -65.90 -966.30
Activities

Adjustments on Amalgamation / Merger

0.00 0.00 0.00 0.00 105.10
/ Demerger / Others
 53

Net Inc/Dec In Cash And Cash

-26.10 20.80 -51.40 -55.30 -51.10
Equivalents

Cash And Cash Equivalents Begin of

38.40 18.30 69.70 125.00 176.10
Year

Cash And Cash Equivalents End Of

12.30 39.10 18.30 69.70 125.00
Year

Ratios
Key Financial Ratios Mar '17 Mar '16 Mar '15 Mar '14 Mar '13

Investment Valuation Ratios

Face Value 5.00 5.00 5.00 5.00 5.00
Dividend Per Share 75.00 35.00 25.00 12.00 8.00
Operating Profit Per Share (Rs) 342.72 297.22 222.22 168.69 140.02
Net Operating Profit Per Share
2,252.21 1,911.62 1,654.22 1,446.66 1,442.93
(Rs)
Free Reserves Per Share (Rs) -- -- -- -- --
Bonus in Equity Capital -- -- -- -- --

Profitability Ratios
Operating Profit Margin(%) 15.21 15.54 13.43 11.66 9.70
Profit Before Interest And Tax
11.02 10.57 8.35 6.76 5.33
Margin(%)
Gross Profit Margin(%) 11.39 10.65 8.49 6.89 5.43
Cash Profit Margin(%) 14.13 12.70 12.16 10.93 9.57
Adjusted Cash Margin(%) 14.13 12.70 12.16 10.93 9.57
Net Profit Margin(%) 10.78 7.91 7.42 6.36 5.48
Adjusted Net Profit Margin(%) 10.43 7.85 7.30 6.25 5.38
Return On Capital Employed(%) 27.36 24.42 21.24 16.91 15.92
Return On Net Worth/ Equity(%) 20.28 16.92 15.65 13.26 12.87
Adjusted Return on Net Worth(%) 20.28 16.92 15.65 13.26 12.87
Return on Assets Excluding
1,197.40 894.04 784.70 694.45 615.03
Revaluations
Return on Assets Including 1,197.40 894.04 784.70 694.45 615.03
 54

Revaluations
Return on Long Term Funds(%) 27.73 24.49 21.27 17.88 16.63

Liquidity And Solvency Ratios

Current Ratio 0.55 0.63 0.68 0.77 1.04
Quick Ratio 0.35 0.37 0.41 0.67 0.90
Debt Equity Ratio 0.01 -- 0.01 0.08 0.07
Long Term Debt Equity Ratio -- -- 0.01 0.02 0.03

Debt Coverage Ratios

Interest Cover 112.20 81.18 24.63 21.80 16.76
Total Debt to Owners Fund 0.01 0.00 0.01 0.08 0.07
Financial Charges Coverage
141.31 115.83 36.62 33.65 26.56
Ratio
Financial Charges Coverage
112.18 91.74 31.01 28.67 23.41
Ratio Post Tax

Management Efficiency Ratios

Inventory Turnover Ratio 23.69 20.84 21.08 28.65 26.67
Debtors Turnover Ratio 54.48 48.76 40.24 30.31 36.21
Investments Turnover Ratio 23.69 20.84 21.08 28.65 26.67
Fixed Assets Turnover Ratio 3.77 2.02 1.94 1.96 2.25
Total Assets Turnover Ratio 1.94 2.24 2.12 1.94 2.21
Asset Turnover Ratio 2.21 2.31 2.15 2.05 2.41

Average Raw Material Holding -- -- -- -- --

Average Finished Goods Held -- -- -- -- --
Number of Days In Working
-50.41 -26.90 -21.61 -5.40 1.02
Capital

Profit & Loss Account Ratios

Material Cost Composition 69.57 67.61 71.46 72.06 75.07
Imported Composition of Raw
7.79 7.32 7.28 9.19 12.11
Materials Consumed
Selling Distribution Cost
1.22 1.25 -- -- --
Composition
Expenses as Composition of
8.27 8.29 9.27 9.47 10.46
Total Sales

Cash Flow Indicator Ratios

Dividend Payout Ratio Net Profit 14.40 23.12 20.34 13.02 10.10
Dividend Payout Ratio Cash
10.63 14.29 12.21 7.44 5.68
Profit
Earning Retention Ratio 85.60 76.88 79.66 86.98 89.90
 55

Cash Earning Retention Ratio 89.37 85.71 87.79 92.56 94.32

AdjustedCash Flow Times 0.05 0.01 0.03 0.35 0.33

Mar '17 Mar '16 Mar '15 Mar '14 Mar '13

Earnings Per Share 242.91 151.33 122.85 92.13 79.19

Book Value 1,197.40 894.04 784.70 694.45 615.03