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BBA Internship/Project Report

Topic: COMPARISION of RATIO

ANALYSIS OF JAY BHARAT
MARUTI WITH MARUTI SUZUKI LTD

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 SUMMER TRAINING REPORT

ON
COMPARISION of RATIO ANALYSIS OF JAY BHARAT
MARUTI WITH MARUTI SUZUKI LTD

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SUBMITTED IN PARTIAL FULFILMENT FOR THE REQUIREMENT OF

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THE DEGREE OF BACHULAR OF BUSINESS ADMINISTRATION

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 INTRODUCTION

RATIO ANALYSIS

Defined

MYERS:

“Ratio analysis of financial statements is a study of relationship among various factors in a

business as disclosed by single set of statements and a study of trend of those factors as
shown in the series of statements.”

It is a tool of financial analysis.

Acc to Finney & miller:

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. them in a convenient and
“Financial Analysis consists in separating facts acc. to some definite plan, arranging them in

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groups according to certain circumstances and then presenting
easily read and understandable form.”
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Financial ratio analysis is the selection, evaluation and interpretation of financial data in

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easier to understand ratios, which have been identified as critical indicators of financial

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t used to compare a firm‟s financial performance over a period of time
performance of the business and can be used for strategy and decision-making. Financial ratio

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analysis is popularly
(trend analysis) or to assess performance in comparison to other businesses.
Meaning:

Ratio Analysis is a widely used tool for financial analysis. It can be used to compare the risk
and return relationships of firms of different sizes. It can be defined as the systematic use of
ratio to interpret the financial statements so that the strength and weaknesses of a firm as well
as its historical performance and current financial condition can be determined.
The term RATIO refers to the numerical or quantitative relationship between two variables.
This relationship can be expressed as:
1. Percentages ,
2. Fractions, and
3. Proportion of numbers

The rationale of ratio analysis lies in the fact that it makes related information comparable. A
single figure by itself has no meaning but when expressed in terms of a related figure, it
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yields significant inferences.

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Ratio Analysis of a company helps in estimating the true burden of the debt and the
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company‟s ability to repay it. Ratios provide very useful tools for the manager to assess the
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organization by making two basic types of comparisons. First, the analyst can compare a

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present ratio with past (or expected) ratios for the organization to determine if there has been

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an improvement or deterioration or no change over time. Second, the ratios of one

same point in time.t

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organization may be compared with similar organizations or with industry averages at the

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 OBJECTIVE OF STUDY

To analyze the position of company in compare to Maruti:-

 To analyze which company is in Better Position

 To calculate ratios to analyze the liquidity position of company.
 To know the rapidity of the resources available
 To know the efficiency of the company
 To know the long term financial position of the company
 To locate the weak spot of the business.
 To know the profitability of the business

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 SIGNIFICANCE OF STUDY

1. Present study will help to the further researcher in related researches by providing them
literature.
2. Present study is conducted to enhance the personal knowledge.
3. Present study will help to company to present the data to their stockholders.

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 FOCUS OF SYUDY

The project entitled comparison of RATIO ANALYSIS of JAY BHARAT MARUTI AND
MARUTI UDYOG LTD. It analyzes the financial condition of the two firms. Problem of my
study is to study the factor that which firm is in a better position.

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 CONCEPTULISATION

Decision-making requires critical analysis and careful interpretation of the published

financial statements. In general, the common tools used by the management to facilitate Ratio
Analysis, Fund Flow Statement, Cash flow Statement, analysis of income statement and
balance sheet.

“Financial Analysis is done for the purpose of presenting a periodical review or report on
progress by management and deal with the status of investment in the business and the results
achieved during the period under review. They reflect a combination of recorded facts,
accounting conventions and personal judgments and convention applied after them
materially. The soundness of the judgment necessarily depends on the competence and
integrity of those who make them on their adherence to the Generally Accepted Accounting
Principles and Conventions.”
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Definition
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“A written report which quantitatively describes the financial health of a company This
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includes an income statement and a balance sheet, and often also includes a cash flow

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statement. Financial statements are usually compiled on a quarterly and annual basis.”

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RATIO ANALYSIS

Financial ratio analysis is the calculation and comparison of ratios which are derived from the
information in a company's financial statements. The level and historical trends of these
ratios can be used to make inferences about a company's financial condition, its operations
and attractiveness as an investment.

Financial ratios are calculated from one or more pieces of information from a company's
financial statements. For example, the "gross margin" is the gross profit from operations
divided by the total sales or revenues of a company, expressed in percentage terms. In
isolation, a financial ratio is a useless piece of information. In context, however, a financial
ratio can give a financial analyst an excellent picture of a company's situation and the trends
that are developing.

A ratio gains utility by comparison to other data and standards. Taking our example, a gross
profit margin for a company of 25% is meaningless by itself. If we know that this company's
competitors have profit margins of 10%, we know that it is more profitable than its industry
peers which are quite favorable. If we also know that the historical trend is upwards, for
example has been increasing steadily for the last few years, this would also be a favorable
sign that management is implementing effective business policies and strategies.

Financial ratio analysis groups the ratios into categories which tell us about different facets of
a company's finances and operations. An overview of some of the categories of ratios is given
below.

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 Leverage Ratios which show the extent that debt is used in a

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. a picture of a company's short
company's capital structure.

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 Liquidity Ratios which give

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term financial situation or solvency.
 OperationalaRatios which use turnover measures to show how
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efficient
dProfitability Ratios which use margin analysis and show the


tu return on sales and capital employed.

S  Solvency Ratios which give a picture of a company's ability to
generate cash flow and pay it financial obligations.

It is imperative to note the importance of the proper context for ratio analysis. Like computer
programming, financial ratio is governed by the GIGO law of "Garbage In...Garbage Out!"
A cross industry comparison of the leverage of stable utility companies and cyclical mining
companies would be worse than useless. Examining a cyclical company's profitability ratios
over less than a full commodity or business cycle would fail to give an accurate long-term
measure of profitability. Using historical data independent of fundamental changes in a
company's situation or prospects would predict very little about future trends. For example,
the historical ratios of a company that has undergone a merger or had a substantive change in
its technology or market position would tell very little about the prospects for this company.
Credit analysts, those interpreting the financial ratios from the prospects of a lender, focus on
the "downside" risk since they gain none of the upside from an improvement in operations.
They pay great attention to liquidity and leverage ratios to ascertain a company's financial
risk. Equity analysts look more to the operational and profitability ratios, to determine the
future profits that will accrue to the shareholder.

Although financial ratio analysis is well-developed and the actual ratios are well-known,
practicing financial analysts often develop their own measures for particular industries and
even individual companies. The Balance Sheet and the Statement of Income are essential,
but they are only the starting point for successful financial management. Apply Ratio
Analysis to Financial Statements to analyze the success, failure, and progress of your
business.

Ratio Analysis enables the business owner/manager to spot trends in a business and to

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compare its performance and condition with the average performance of similar businesses in

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the same industry. To do this compare your ratios with the average of businesses similar to
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yours and compare your own ratios for several successive years, watching especially for any
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unfavorable trends that may be starting. Ratio analysis may provide the all-important early
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warning indications that allow you to solve your business problems before your business is

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destroyed by them.

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PURPOSE OF RATIOS FOR DIFFERENT

Investors To help them determine whether they should buy shares in the
business, hold on to the shares they already own or sell the shares
they already own. They also want to assess the ability of the
 business to pay dividends.

Lenders To determine whether their loans and interest will be paid when due

Managers Might need segmental and total information to see how they fit into
the overall picture

Employees Information about the stability and profitability of their employers to

assess the ability of the business to provide remuneration, retirement
benefits and employment opportunities

Suppliers and other Businesses supplying goods and materials to other businesses will
trade creditors 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 their
bills!

Customers
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The continuance of a business, especially when they have a long

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term involvement with, or are dependent on, the business

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Governments and The allocation of resources and, therefore, the activities of business.
their agencies
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To regulate the activities of business, determine taxation policies
a income and similar statistics
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and as the basis for national

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Local community Financial statements may assist the public by providing information

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tbusinesstheandtrends
about and recent developments in the prosperity of the

S the range of its activities as they affect their area

Financial analysts They need to know, for example, the accounting concepts employed
for inventories, depreciation, bad debts and so on

Environmental Many organizations now publish reports specifically aimed at

groups informing us about how they are working to keep their environment
clean.

Researchers Researchers' demands cover a very wide range of lines of enquiry

ranging from detailed statistical analysis of the income statement
and balance sheet data extending over many years to the qualitative
analysis of the wording of the statements
Which ratios will each of these groups be interested in?

Interest Group Ratios to watch

Investors Return on Capital Employed

Lenders Financial leverage ratios

Managers Profitability ratios

Employees Return on Capital Employed

Suppliers and other trade creditors Liquidity

Customers Profitability

Governments and their agencies Profitability m

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Local Community
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This could be a long and interesting list
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Financial analysts
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Possibly all ratios

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Environmental groups
y nExpenditure on anti-pollution measures

Researchers
d Depends on the nature of their study

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S INTERPRETATION OF THE RATIOS

The interpretation of ratios is an important factor. Though calculation of ratios is also

important but it is only a clerical task whereas interpretation needs skill, intelligence and
foresightedness. The inherent limitations of ratio analysis should be kept in mind while
interpreting them. The impact of factors such as price level changes, change in accounting
policies, window dressing etc., should be kept in mind when attempting to interpret ratios.

The importance of interpretation of ratios if they are to prove a useful tool to the
financial analyst .The interpretation of the ratios can be made in the following ways:
1. Single Absolute Ratio

Generally speaking one cannot draw any meaningful conclusion when a single ratio
is considered in isolation. But single ratios may be studied in relation to certain rules of
thumb which are based on well proven conventions as for example 2:1 is considered to be a
good ratio for current assets to current liabilities.

2. Group of Ratios

Ratios may be interpreted by calculating a group of related ratios. A single ratio

supported by other related additional ratios becomes more understandable and meaningful.
For example, the ratio of current assets to current liabilities is supported by the ratio of liquid
assets to liquid liabilities to draw more dependable conclusions.

3. Historical Comparisons
One of the easiest and most popular ways of evaluating the performance of the firm
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is to compare its present ratios to the past ratios called comparison overtime. When financial

whether the firm‟s performance and financial position has .

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ratios are compared over a period of time, it gives an indication of the direction and reflects

a improved, deteriorated or remained

has to be careful about changes, if any, ina

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constant over a period of time. But while interpreting ratios from comparison over time, on
the firm‟s policies and accounting procedures.

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4. Projected Ratio
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Ratios can also be calculated for future standards based upon the projected or
Performa financial statements can be compared with the standard ratios to find out variances,
if any. Such variances help in interpreting and taking corrective action for improvement in
future.

5. Inter-firm comparison
Ratios can also be compared with the ratios of some other selected firm in the same
industry at the same point of time. This kind of comparison helps in evaluating relative
financial position and performance of the firm. But while making use of such comparisons
one has to be very careful regarding the different accounting methods, policies, and
procedures adopted by different firms.
 Research Methodology

MEANING:

A research cannot be conducted abruptly. Researcher has to proceed systematically in

the already planned direction with the help of a number of steps in sequence. To make the
research systemized the researcher has to adopt certain methods. The methods adopted by the
researcher for completing the study are called research methodology. In other words
Research Methodology is simply the plan of action for a research which explains in detail
how data is to be collected, analyzed and interpreted. Data becomes information only when a
proper methodology is adopted. Thus we can say Methodology is a tool which processes the
data in to reliable information. The present chapter attempt to highlight the research adopted
in this project.

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COMPONENTS OF RESEARCH METHODOLOGY:
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 Research design
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 Type of data
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 Data collection
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 Sampling plan d
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RESEARCH DESIGN:

According to Gohada, Deutish and Cook, “A research Design is the arrangement of

conditions for collection and analysis of data in a manner that aims to combine relevance to
the research purpose with economy in procedure”. The research design adopted in the study
is exploratory & descriptive.
TYPE OF DATA:

1. Primary data:

It means collection of information for the first time. In order to collect such type of
information questioner i.e., to be constructed and information is collected from the
respondent. In my project report Analysis in JBML, the primary data collection is not used
since it is based on secondary data which is already available

2. Secondary data

Secondary data are information, which has already been collected by others. In order
to carry out my project successful I have relied on the secondary data already available which
is Annual report and Website.

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DATA COLLECTION:
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Sources of data collection:-
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 ANNUAL REPORTS

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WEBSITE

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 LITERATURE REVIEW

FINACIAL STATEMENT:

Sophal Sok
Page 9
(Financial statement a nalysis: How effective a local bank uses its financial statement? A
case study of
Acleda Bank Plc. (Cambodia) from 2006 to 2008
Management section describing the evaluation of the operations of the company (Temte,
2005)
To begin with, Balance sheets form a key part of the financial statements. Its basic usage is to
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indicate the liquidity level of the organization. It basically is the comparison of the assets of

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the company with the liabilities on the other hand. It also includes the capability of the firm to

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pay off the dividends of the firm and interest payments on the borrowed capital. The

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statement of stockholders equity reflects the equity transactions of the concerned
abetter when related to an income statement which
n the assets and liabilities in the balance sheet. Like
organization. Also, a balance sheet works

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shows the activity levels which justifies
everything has got its ownd
tu costs of assets and liabilities, as their costs changes with respect
drawbacks, balance sheet has got its own. The issues to be dealt
with are usage of historical
Sissue to be dealt with is usage of estimates for bad debts and inventory
to time. Another
obsolescence. Another primary concern is that there is no inclusion of intangible assets on the
balance sheet which does not give the correct figure of the organization. (Bragg, 2005)

Another indicator of financial health is a profit and loss statement or more so known as Profit
and loss statement. It shows the business financial activity over a time frame, generally tax
year. It is an appropriate tool to take a pick on weaknesses and thus helps in increasing the
profit levels. It shows the proper inflow of money and its outflow. The inflow or income
includes customer sales and rent or investment income received. While, the outflow or
expenses included cost of wages, materials and over heads used up during the year in
consideration on the services given to the customers (or goods sold). Expenditure also includes
purchasing cost of assets, like, buildings, vehicles and equipment‟s which last a number of
years. (Mott, 2005)
The third key indicator of the financial health of the company is Cash flow statement, which
briefly describes where the cash is coming from and where is it going. Cash being the lifeline
of any business, thus this analysis holds a special position for financial statement analysis. It
describes the effect of operating, investment and financial transactions on the organizations
cash status. The important sources of cash generation and expenditure are profitable
operations, working capital, acquisitions, fixed assets, liquid resources, borrowings,
government and share-holders. For any business to be healthy, its cash flow should be
satisfactory. Thus, a projected cash flow is an important concept that helps a business to easily
tackle the anticipated problems. It draws a fine line of difference between cash flows from
trading activities and those from financing activities. (Kind, 1999)

Apart from all these aspects of financial statements, they can be used to determine certain

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trends, thus giving rise to trend analysis. It shows the way company has been reacting in

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particular seasons and particular attitudes of the market, thus helping in altering the decisions
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in similar situations. In this case, each base year is marked as 100 and any upward and
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downward trend is indicated by % increase or decrease in relation to 100. It is helpful in
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indicating the financial health of the company in respect to past, it also shows the change in

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magnitude which is far more effective than regular data. But, it has its own drawback which
states that the trend of the past y
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may not be the best picture to work out the future. This trend

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can all of a sudden be of no use if the accounting practices of the organization changes.
(Dyson, 2007)
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7.2. Ratio analysis:

A key feature for judging the health of the company over all is ratio analysis. It is a
methodical process of ratios by analysis of both internal and external financial reports to set
some key relationships. Ratio analysis stresses on certain factors of any organization which
includes financial performance (i.e. liquidity, return on capital employed and profitability
ratios), examination of organizations solvency (i.e. ratios involving assets & liabilities and
their effects on cash flows, inventory and debtors & creditors), and the judgment of
company‟s performance in respect to its value for their shareholders or investors (i.e. PE
ratio, dividend yields, etc.). The effect of ratio analysis improves when the ratios derived are
compared to the historical years and certain pattern is observed according to the operations in
the financial year. The main ratio dealing with the short term time frame solvency is a current
ratio and quick ratio (or acid test). While, when dealing with the larger picture, ratios of
greater concern are gearing ratio, shareholders equity to assets ratio, non-equity claims to
assets ratio and interest coverage ratio. Ratios are basically used to simplify the accounting
information available to be used so as to analyze whether the company is heading in
coherence with its aims or objectives. It is also sometimes helpful to forecast the trend of the
business by reviewing the pattern of the ratios (Lucey, 2003)

Du-Pont identity is referred to as the relationship between the Return on Investment

and Return on equity. Where return on investment is termed as the ratio of net income and
total assets. This is further divided into two features: Asset turnover and profit margin which
shows both the profitability of operations (profit margin) and proper use of assets (turnover).
While, Return on Equity is defined as the key aspect of profitability on assets provided by the

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owners of the organization, thus the profitability has got three parts to deal with it: operating

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efficiency, Asset use efficiency and financial leverage. Thus, to successfully deal with the
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situations, a financial manager should keep in mind all the factors. The firm should be able to
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efficiently use revenues to make more profits, and utilize the investments in assets so as to be
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able to generate revenues to profit. But, if the firm manages to produce greater return on

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assets than the money it had borrowed from the market, then it is in a better situation to make

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profits for their investors by financial leverage. (Ross, 1999)

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7.2.2. Classificationtof ratios:
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Liquidity ratios: the ratios refer to the ability of the firm to meet its current liabilities.
They also are called as µshort term solvency ratios. They indicate the firm‟s ability to
Meet its current obligations out of current resources (Glautier and Underdown, 2001)

Leverage ratios: These ratios analyses the long- term solvency of a firm. The term solvency
implies the ability of the enterprise to meet its obligations on the due date. Long- term lenders
are primarily interested in this type of analysis (Marriott et al, 2004). A long- term lender of
funds is basically interested in two things. The safety of principal which is to be given by way
of a loan, and regular servicing of the loan, in the form of payment of interest commitments
and repayment of installment of loan. To capture these two aspects of long-term liquidity
these ratios are calculated (Gallagher and Andrew, 2003).

Activity or turnover : These ratios help in commenting on the efficiency of the firm in
managing its assets (Shim and Siegel, 1999). The speed with that assets are converted into
sales is captured by turnover ratios. The activity of any business enterprise is reflected by the
volume of sales it is able to generate. All assets are used by the business in the quest of
generating sales (Collier, 2003). So, one can comment on the efficiency of different assets in
relation to sales generated during a defined period

Acc to Aca Demon:

This paper explains that Ratio Analysis is an early warning indicator that enables the business
owner and manager to spot trends in a business and to compare its performance and condition
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with the average performance of similar businesses in the same industry. The author relates

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. for several successive years,
that Ratio Analysis is done by comparing the specific company's ratios with the average of

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similar businesses and comparing the business's own ratios

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watching especially for any unfavorable trends that may be starting. The paper states that the

ato pay is current bills, while still allowing for a

current ratio measures the ability of the firm
safety margin above the requiredn
Contents Liquidity Ratios d
y amount needed to pay current obligations. Table of
Current Ratio Quick Ratio Net Working Capital Activity Ratios

tu Average Payment Period Fixed Assets Turnover Total Asset

Days Sales Outstanding
S Turnover Debt Ratios Debt Ratio Debt to Equity Ratio Times Interest
Turnover Inventory
Earned Fixed Payment Coverage Ratio Profitability Ratios Gross Profit Margin Operating
Profit Margin Net Profit Margin Return on Investment Return on Equity Earnings per Share.
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 AUTOMOBILE INDUSTRY

The Automobile Manufacturers have put up a robust manufacturing capacity of 95 lacks plus
vehicles per annum since 1993. Today India is the world's second largest manufacturer of two
wheelers and fifth largest manufacturer of commercial vehicles. The country offers fourth
largest passenger car market in Asia today. A supplier driven market, having no more than a
handful of vehicular models two decades ago, now offers more than 150 models and variants
by way of customer options.

The first motor car on the streets of India was seen in 1898. Mumbai had its first taxicabs in
the early 1900. Then for the next fifty years, cars were imported to satisfy domestic demand.
In the early 80's, a series of liberal policy changes were announced marking another turning
point for the automobile industry. The Government of India (GOI) entered the car business,
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with a 74% stake in Maruti Udyog Ltd (MUL), the joint venture with Suzuki Motors Ltd
of Japan.
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In 1985, the GOI announced its famous broad banding policy which gave new licenses to

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broad groups of automotive products like two and four-wheeled vehicles. Though a liberal
move, the licensing system was stilln
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very much intact.

din 1983 providing a complete facelift to the Indian car industry.

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t as a "people‟s car" with a price tag of Rs40, 000. This changed the
MUL introduced 'Maruti 800'

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The car was launched
industry's profile dramatically. Maruti 800 was well accepted by middle income families in
the country and its sales increased from 1,200 units in FY84 to more than 2, 00,000 units in
FY99. However in FY2000, this figure came down to 1, 89,184 units, due to rising
competition from Hyundai's 'Santro', Telco's Indica and Daewoo's 'Matiz'. MUL extended its
product range to include vans, multi-utility vehicles (MUVs) and mid-sized cars. The
company has single handedly driven the sales of cars in the country from 45,000 in FY84 to
409,951 cars by FY2000, cornering around 79.6% market share. With increasing competition
from new entrants, this market share has plummeted to almost 62% in FY2000.

The de-licensing of auto industry in 1993 opened the gates to a virtual flood of international
auto makers into the country with an idea to tap the large population base of 950mn people.
Also the lifting of quantitative restrictions on imports by the recent policy is expected to add
up to the flurry of foreign cars in to the country. Many companies have entered the car
manufacturing sector, to tap the middle and premium end of car industry. The new entrants
are Daewoo (Matiz), Telco (Indica) and Hyundai (Santro) in upper end of economy car
market. GM, Ford, Peugeot, Mitsubishi, Honda and Fiat have entered the mid-sized car
segment and Mercedes-Benz is in the premium end of market. Car manufacturers like
Malaysia based Proton are also in line to hit the Indian ramp.

Current status of Indian Automotive Industry

On the canvas of the Indian Economy, Auto Industry occupies a prominent place. Due to its
deep forward and backward linkages with several key segments of the economy, automotive
industry has a strong multiplier effect and is capable of being the driver of economic growth.

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A sound transportation system plays a pivotal role in the country's rapid economic and

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industrial development. The well-developed Indian automotive industry ably fulfills this
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catalytic role by producing a wide variety of vehicles: passenger cars, light, medium and
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heavy commercial vehicles, multi-utility vehicles such as jeeps, scooters, motorcycles,
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mopeds, three wheelers, tractors etc.

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Although the automotive industry in India is nearly six decades old, until 1982, only three
d Motors, M/s. Premier Automobiles & M/s. Standard Motors
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manufacturers - M/s. Hindustan
tenanted the motorcar sector. Owing to low volumes, it perpetuated obsolete technologies and
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was out of sync with the world industry. In 1982, Maruti Udyog Limited (MUL) came up as a
Government initiative in collaboration with Suzuki of Japan to establish volume production
of contemporary models. After the lifting of licensing in 1993, 17 new ventures have come
up, of which 16 are for manufacture of cars. There are at present 12 manufacturers of
passenger cars, 5

manufacturers of MUVs, 9 manufacturers of Commercial Vehicles, 12 of two wheelers, 4 of

three wheelers and 14 of tractors besides 5 manufacturers of engine.

The Automobile industry in India is the seventh largest in the world with an
annual production of over 2.6 million units in 2009.[1] In 2009, India emerged as Asia's
fourth largest exporter of automobiles, behind Japan, South Korea and Thailand.[2] By 2050,
the country is expected to top the world in car volumes with approximately 611 million
vehicles on the nation's roads.[3]

Following economic liberalization in India in 1991, the Indian automotive industry has
demonstrated sustained growth as a result of increased competitiveness and relaxed
restrictions. Several Indian automobile manufacturers such as Tata Motors, Maruti Suzuki
and Mahindra and Mahindra, expanded their domestic and international operations. India's
robust economic growth led to the further expansion of its domestic automobile market which
attracted significant India-specific investment by multinational automobile manufacturers.[4]
In February 2009, monthly sales of passenger cars in India exceeded 100,000 units.[5]

Embryonic automotive industry emerged in India in the 1940s. Following the independence,
in 1947, the Government of India and the private sector launched efforts to create an
automotive component manufacturing industry to supply to the automobile industry.

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However, the growth was relatively slow in the 1950s and 1960s due to nationalization and

o
the license raj which hampered the Indian private sector. After 1970, the automotive industry
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started to grow, but the growth was mainly driven by tractors, commercial vehicles and
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scooters. Cars were still a major luxury. Japanese manufacturers entered the Indian market
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ultimately leading to the establishment of Maruti Udyog. A number of foreign firms initiated

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joint ventures with Indian companies.
y
d a number of Japanese manufacturers launched joint-ventures
tuand light commercial-vehicles. It was at this time that the Indian
In the 1980s,
for building motorcycles
S Suzuki for its joint-venture to manufacture small cars. Following the
government chooses
economic liberalization in 1991 and the gradual weakening of the license raj, a number of
Indian and multi-national car companies launched operations. Since then, [[automotive
component and automobile manufacturing growth has accelerated to meet domestic and
export demands.[6]

One of the major industrial sectors in India is the automobile sector. Subsequent to the
liberalization, the automobile sector has been aptly described as the sunrise sector of the
Indian economy as this sector has witnessed tremendous growth.

Automobile Industry was delicensed in July 1991 with the announcement of the New
Industrial Policy. The passenger car industry was, however, delicensed in 1993. No industrial
license is required for setting up of any unit for manufacture of automobiles except
in some special cases. The norms for Foreign Investment and import of technology have also
been progressively liberalized over the years for manufacture of vehicles including passenger
cars in order to make this sector globally competitive. At present 100% Foreign Direct
Investment (FDI) is permissible under automatic route in this sector including passenger car
segment. The import of technology/technological up gradation on the royalty payment of 5%
without any duration limit and lump sum payment of USD 2 million is also allowed under
automatic route in this sector. With the gradual liberalization of the automobile sector since
1991, the number of manufacturing facilities in India has grown progressively.

The cumulative production data for April-January 2010 shows production growth of 23.07
percent over same period last year.

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Other global players in component manufacturing

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 Japanese and British component manufacturers are already operating JVs in India.
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American companies, which have or are planning to set up plants in India, include
Delphi (an automotivey
d
components division of General Motors, USA), Delco

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Electronics, Textron and Magna International of Canada.


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Auto majors such as DaimlerChrysler, Volvo, Renault, Toyota and Honda are
planning to outsource their requirements from India.

 Automotive components manufactured in India are of top quality and used as original
components for vehicles made by top international companies such as General
Motors, Mercedes and IVECO among others.

The automobile industry in India offers significant employment opportunities. The

automobile industry including component industry employs 0.45 million people directly and
around 10 million people indirectly.
The auto industry recorded a turnover of US$ 10 billion while the auto-component industry
recorded a turnover of US$ 3.11 billion in 2008-2009

 Many international auto majors entered the country post liberalization in 1991.

 India‟s largest car-maker Maruti Udyog Ltd (MUL) was recently privatized with
Suzuki Motor Corporation moving into the driving seat after acquiring a majority
stake and management control in the Maruti Suzuki joint venture in early 2002.

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 MARUTI UDYOG LTD.

MSAIL to merge into MUL

Maruti Udyog Limited (MUL) today announced on April 13, 2006 that its subsidiary,
Maruti Suzuki Automobile India Limited (MSAIL), will merge into MUL.MUL holds 70 per
cent stake in MSAIL while Suzuki Motor Corporation (SMC), Japan, holds the remaining 30
per cent. MUL will buy out the entire 30 per cent stake held by SMC in MSAIL. This merger
will add value for shareholders and eliminate all potential issues relating to inter-company
transactions.

Demand Drivers

The key factors that determine demand for cars are: -

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 Household Income Levels
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 Product Availability and Access a
 Product Affordability m
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 Availability of Finance
 Infrastructure (Road) Development
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Maruti Suzuki is one of India's leading automobile manufacturers and the market leader in
S
the car segment, both in terms of volume of vehicles sold and revenue earned. Until recently,
18.28% of the company was owned by the Indian government, and 54.2% by Suzuki of
Japan. The Indian government held an initial public offering of 25% of the company in June
2003. As of 10 May 2007, Govt. of India sold its complete share to Indian financial
institutions. With this, Govt. of India no longer has stake in Maruti Udyog.

Maruti Udyog Limited (MUL) was established in February 1981, though the actual
production commenced in 1983 with the Maruti 800, based on the Suzuki Alto key car which
at the time was the only modern car available in India, its only competitors- the Hindustan
Ambassador and Premier Padmini were both around 25 years out of date at that point.
Through 2004, Maruti Suzuki has produced over 5 Million vehicles. Models similar to Maruti
Suzuki (but not manufactured by Maruti Udyog) are sold by Suzuki Motor Corporation and
manufactured in Pakistan and other South Asian countries.

The company annually exports more than 50,000 cars and has an extremely large domestic
market in India selling over 730,000 cars annually. Maruti 800, till 2004, was the India's
largest selling compact car ever since it was launched in 1983. More than a million units of
this car have been sold worldwide so far. Currently, Maruti Suzuki Alto tops the sales charts
and Maruti Suzuki Swift is the largest selling in A2 segment.

Due to the large number of Maruti 800 sold in the Indian market, the term "Maruti" is
commonly used to refer to this compact car model. Till recently the term "Maruti", in popular
Indian culture, in India Hindu's lord Hanuman is known as "Maruti", was associated to the
Maruti 800 model.

Maruti Suzuki has been the leader of the Indian car market for over two decades.
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Its manufacturing facilities are located at two facilities Gurgaon and Manesar south of Delhi.
Maruti Suzuki‟s Gurgaon facility has an installed capacity.of 350,000 units per annum. The
a a vehicle assembly plant with a
mEngine plant with an annual capacity of
Manesar facilities, launched in February 2007 comprise

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capacity of 100,000 units per year and a Diesel
100,000 engines and transmissions. n
yunits annually.
Manesar and Gurgaon facilities have a combined

d
capability to produce over 700,000

More than half the t

u
S cars sold in India are Maruti Suzuki cars. The company is a subsidiary of
Suzuki Motor Corporation, Japan, which owns 54.2 per cent of Maruti Suzuki. The rest is
owned by the public and financial institutions. It is listed on the Bombay Stock Exchange and
National Stock Exchange in India.

During 2007-08, Maruti Suzuki sold 764,842 cars, of which 53,024 were exported. In all,
over six million Maruti Suzuki cars are on Indian roads since the first car was rolled out on
14 December 1983.

Maruti Suzuki offers 15 models, Maruti 800, Alto, Wagoner, Estilo, A-star, Ritz, Swift, Swift
DZire, SX4, Omni, Eeco, Gypsy, Grand Vitara. Swift, Swift DZire, A-star and SX4 are
manufactured in Manesar, Grand Vitara is imported from Japan as a completely built unit
(CBU), remaining all models are manufactured in Maruti Suzuki's Gurgaon Plant.
Suzuki Motor Corporation, the parent company, is a global leader in mini and compact cars
for three decades. Suzuki‟s technical superiority lies in its ability to pack power and
performance into a compact, lightweight engine that is clean and fuel efficient.

Nearly 75,000 people are employed directly by Maruti Suzuki and its partners. It has been
rated first in customer satisfaction among all car makers in India from 1999 to 2009 by J D
Power Asia Pacific

The Market Leader

MUL will be the only pure passenger car company to be listed on the Indian Stock
Exchanges. Being the dominant player in the industry, MUL‟s market share was bound to
decline post entry of new players in the late „90s. The ongoing imbroglio between Suzuki and

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the Government, during the same period, further impacted MUL adversely as new launches

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got delayed. As a result MUL saw its market share dwindle sharply between FY98 to FY00.
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However, MUL still remains the leader in the Indian car market with a market share of 57%.
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 HISTORY OF THE COMPANY

Jay Bharat Maruti Limited set up in 1987 is one of the largest joint ventures of Maruti Udyog
Limited. This is a unique combination of modern Press Shop and Weld Shop capable of
supplying components in Just in Sequence (JIS) meeting customer‟s quality and quantity
requirements. Manufacturing facilities at JBML also include die maintenance, dedicated
facilities for manufacturing exhaust systems and in house modern tool room. JBML is rising
to meet new challenges with modern equipment and higher goals of manufacturing and
quality control.

JBM group began its engineering activity in 1983 with the establishment of Guerra gas
cylinder limited and entered the auto component industries in 1985 with the inception of
SUZUKI AUTO INDIA. JBML is a multi- unit, multi-product group with extensive and

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diversified interest in engineering and precision tooling, dies and facilities spread over

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different parts of the country. The JBML engineering groups deals in brand range of sheet

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metal assemblies, die casting components and forging for the domestic and export markets.

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The period from 1988 to 1995 was a steep rise in the demand of passenger car in India. To

a
meet this rising demand, JBML had to continually expand its manufacturing facilities.
Because of space constraints a new n
y like fully automatic tandem line from Rovetta of Italy, 5-
plant (Plant-2) was set us for the manufacturing of sheet

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Metal parts with latest technologies

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axis laser cutting machine from Prima of Italy. This new plant is located approximately 14

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kms from Plant-1. Space crated extra because of this new plant was being utilized by
additional business of weld assemblies like front under body, rear under body for car &
exhaust systems for various models of Maruti. In the year-2006, company started a new plant,
plant-3 to meet increasing market demand.

Driven by a commitment to customer satisfaction and international standards of quality,

JBML has not only won customer confidence but also industry recognition through several
awards and accolades viz. “National Productivity Award”‟ “Best Performing Vendor
Award”, “Quality Trophy” etc.
GUIDING PRINCIPLES AT JBML

MISSION
To make JBML a synonym for world class organization excelling in sheet metal
technologies.

VISION
Expanding leadership in our business through people, keeping pace with market trends and
technology

HR POLICY
JBML will always keep on striving for the deployment of competent and efficient employees
at all levels to create inculcate and foster excellent. Working and learning environment;

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because it believes in nurturing strength of individuals for developing mutual trust, support

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and positive attitude for achieving organization goals to create a world class manufacturing
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organization and to remain the market leader in sheet metal components not only today but
for all the tomorrows to come. a
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QUALITY POLICY a
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The policy of JBML is to achieve total customer satisfaction by delivering products and

so on time and att

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providing services that meet or exceed their exacting requirements and expectations and to do

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product range.
most competitive prices in domestic and export market for our entire

More than anything else, the driving force at JBML is “Quality”. Stringent quality control
maintained at every stage of the designing and manufacturing processes translates into zero-
defects, international standard products. Rooted on the policy to achieve total customer
satisfaction by delivering products and services that meet and exceed their expectations, on
time and at competitive cost, JBML has developed a tradition of quality. Every personnel is
positively attuned and committed to excellence. It is a corporate motto at JBM to accomplish
tasks right the first time, every time. And ongoing improvement on manufacturing processes
and advanced quality planning play a critical role in ensuring high standards.
Customer Management

Customer focus is one of the basic values adopted by the company. Quality policy revolves
around the customer satisfaction. There is emphasis on understanding the unspoken and
meeting the implied needs expectations of the customer also. Customer satisfaction has been
identified as one of the CSF. It is one of the business performance measures of long term plan
and its improvement. Over the years based on periodic reviews various forms have been
established for regular interaction with customer. Top management apart from personal
meetings of middle managers regularly visits customers. The process of satisfaction surveys
also provides the voice of customer for policy and strategy making. All customer complaints,
customer ends non-conformances, performance of delivery, result of customer satisfaction
surveys and any other need and expectation of customer is reviewed on weekly basis. Major
customers are Maruti Udyog Limited, Eicher Motors Ltd. M&M Ltd., and HMSI.

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Finance Management:

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Financial management system and policies are directed.towards optimum utilization of
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financial resources. The approach has been to use the financial resources for minimizing
returns to the company, and in return toa
n and inflows and outflows of funds. There is
the stakeholder. There is clear-cut laid down rules

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and regulation for its transparent monitoring
transparent pricing systemd

tuand rationalized in view of any KAIZEN/Cost reduction/VA-VE

between the company and all major customers, so that prices are
continuously reviewed
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exercise as the case may be. It is all that because of this transparent price reviewing system in
existence we have passed on around 20% discounts to MUL since last five years. The other
important stakeholders are banks and Finance Institutions. The financial policies are in line
with the expectations and high level of commitment to them. The company ensures the timely
payment to entire supply chain partners in time.
JBM‟S PRODUCT RANGE

JBM nicely diversified their business by starting manufacturing not only sheet
metal components but also started manufacturing other automobile components and tools.

JBM‟S MAIN PRODUCTS:

 Sheet Metal Stamping.
 Welded Sub Assemblies.
 Chassis and Suspension System.
 Jigs and Fixtures.
 Exhaust System.
JBM manufactures a range of specialized components for front ranking OEMs. Flawless on
quality and reliability these products have won the confidence of industry leaders.

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TODAY, JBM ENJOYS A COMPETITIVE EDGE IN .
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THE MARKET. SOME OF

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THE REASONS FOR THIS ARE:

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 A unique combination of modern press shop and weld shop.

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 The capacity of supplying components on a just in time (JIT) basis.

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 Indigenization and system engineering to manufacture complex automobile exhaust
systems.
 Flexible manufacturing systems.
 Support of modern tool room facilities available within the group.
JBML`s GROUP COMPANIES

 JAI BHARAT MARUTI LTD-PLANT -2

 JBM AUTO COMPONENT LTD
 NEEL METAL PRODUCT LIMITED
 JBM INDUSTRIES LIMITED
 JAI BHARAT BREEDS LIMITED
 NEEL INDUTRIES PRIVATE LIMITED
 JAY BHARAT EXHAUST SYSTEM LTD
 THYSSENKRUPP JBM PRIVATE LTD
 NEEL ENGINEERING SOLUTIONS
 JAICO STEEL FASTENERS LTD

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JBM‟S MAJOR CUSTOMERS:
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 MARUTI UDYOG LIMITED.

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 ASHOKA LEYLAND.

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 DEFENCE.

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 DELPHI.

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 EICHER.
 ESCORTS.
 HINDUSTAN MOTORS.
 HONDA SCOOTERS.
 MAHINDRA & MAHINDRA.
 YAMAHA MOTORS INDIA L.T.D.
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 LIQUIDITY RATIOS

The business should not only provide information on its profitability, but also to provide
information that indicates whether or not the business will be able to pay its creditors,
expenses, loans falling due at correct times. A company may be profitable but if it fails to
generate enough cash to settle its liability is said to be insolvent.

Suppliers and providers of short-term finance are interested in these ratios as are used in
assessing the ability of the business to settle its current liabilities.

 Liquidity refers to the ability of a firm to meet its short-term financial obligations
when and as they fall due.

 The main concern of liquidity ratio is to measure the ability of the firms to meet their

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short-term maturing obligations. Failure to do this will result in the total failure of the
business, as it would be forced into liquidation.
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CURRENT RATIO

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The Current Ratio expresses the relationship between the firm‟s current assets and its current
liabilities.

Current assets normally include: cash, marketable securities, accounts receivable and
inventories. Current liabilities consist of accounts payable, short term notes payable, short-
term loans, current maturities of long-term debt, accrued income taxes and other accrued
expenses (wages).
CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITIES

(RS IN MILLIONS)

PARTICULARS JBM MARUTI

Current Assets 9472.28 54911

Current Liabilities 12197.35 33976

Current Ratio 0.77 1.61

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CURRENT RATIO
1.8
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1.6
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1.4

1.2
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1

0.8 1.61

0.6

0.4 0.77
0.2

0
JBM MARUTI
INTERPRETATION

This ratio is used to assess the firm‟s ability to meet its short-term liabilities
on time. Though standard current ratio is 2:1, But Jbml‟s current assets are not even equal to
current liabilities. So its short term financial position is not much sound.

QUICK RATIO

Measures assets that are quickly converted into cash and they are compared with current
liabilities. This ratio realizes that some of current assets are not easily convertible to cash e.g.
inventories. m
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. the ability of the business to
The quick ratio, also referred to as acid test ratio, examines
cover its gt8short-term obligations from its “quick”a assets only (i.e. it ignores stock). The
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quick ratio is calculated as follows:
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QUICK RATIO = (CURRENT
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yASSETS-INVENTORIES)/CURRENT LIABILITIES
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PARTICULARS JBM MARUTI

Liquid assets 6771.67 54911-9023=45888

Current Liabilities 12197.35 33976

Quick Ratio 0.55 1.35

 QUICK RATIO
1.6

1.4

1.2

0.8
QUICK RATIO
1.35
0.6

0.4
0.55
0.2

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JBM MARUTI

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INTERPRETATION
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An ideal quick ratio is said to be 1:1. But company‟s liquid assets are not equal to current
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liability. It shows that company‟s liquidity position is not so much strong.

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 ASSET MANAGEMENT/ACTIVITY RATIOS

If a business does not use its assets effectively, investors in the business would rather take
their money and place it somewhere else. In order for the assets to be used effectively, the
business needs a high turnover.

Unless the business continues to generate high turnover, assets will be idle as it is impossible
to buy and sell fixed assets continuously as turnover changes. Activity ratios are therefore
used to assess how active various assets are in the business.

Note: Increased turnover can be just as dangerous as reduced turnover if the business does
not have the working capital to support the turnover increase. As turnover increases more
working capital and cash is required and if not, overtrading occurs.

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DEBTOR‟S TURNOVER RATIO
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Debtor‟s turnover ratio indicates the velocity of debt collection of a firm. In other words , it
indicates the number of times the average debtors are turned over during a period.
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PARAMETER OF RATIO

The higher the value of debtor‟s turnover ratio, the more efficient the management of debtors
or more liquid are the debtors. It indicates the relationship between the credit sales and
average debtors.

The higher the ratio, the better it is, since it indicates that amount from debtors is being
collected more quickly.
Debtors Turnover Ratio = Net Credit Sales/ Net Closing Debtors

(RS IN MILLIONS)

PARTICULARS JBM MARUTI

Net sales 69172.64 203583

Closing debtors 4204.02 9189

Debtor turnover ratio 16.45 22.15

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Debtor turnover
25
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16.45

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JBM MARUTI

INTERPRETATION

This ratio indicates the speed with which the amount is collected from debtors.
 AVERAGE COLLECTION PERIOD

This ratio indicates the speed with which debtors are being collected. Higher the turnover
ratio and shorter the average collection period, better is the trade credit management and
better is the liquidity of debtors.

A very long collection period would imply either poor credit selection or inadequate
collection efforts. Delay in the collection of receivable of receivable means that liquidity
position of the firm would be adversely.

Too short period of average collection or too high a turnover ratio is not necessary good. It
avoids the risk of receivable being bad debts as well as the burden of high interest on
outstanding debtors it may have adverse effect on the volume of sales of the firm. First the
collection period of a firm can be compared with the industry practices of trade credit. Any
deviation may result from:-

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(i) A more or less liberal policy of extending trade credit.
(ii)
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Better/poor quality of receivables liberal trade credit policy may be aimed
at augmenting sales.
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PARAMETER OF RATIO
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A firm should have neitherd
a very low nor a very high receivables turnover ratio, it should
maintain a reasonableu
t level.
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ACP = 12months or 365days / DTR

(RS IN MILLIONS)

PARTICULARS JBM MARUTI

Debtor Turnover ratio (DTR) 16.45 22.15

Average collection (IN DAYS) 22 16

 Average collection period
25

20

15

22 Average collection period

10
16

0
JBM MARUTI

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INTERPRETATION

tu This ratio indicates the time within which the amount is

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collected from debtors as the ratio is high in compare to Maruti which is not good.
 CREDITOR TURNOVER RATIO

This ratio indicates relationship between credit purchases and avg. creditors during the year.

Creditors turnover ratio = net credit purchases/avg. creditors

(RS IN MILLIONS)

PARTICULARS JBM MARUTI

Net credit purchases 56014.82 150598

Closing creditors 10331.99 25696

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Creditor turnover ratio 5.42 5.86

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Creditor
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5.9

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5.8

5.7

5.6
5.86
5.5 Creditor turnover ratio

5.4

5.3 5.42

5.2
JBM MARUTI
INTERPRETATION

This ratio indicate the speed with which the amount is being paid to creditors

AVERAGE PAYMENT PERIOD

This ratio indicates the period which is normally taken by the firm to make payment to its
creditors.

Avg. payment period =365days/C.T.R

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PARTICULARS
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JBM MARUTI

d 5.42
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Creditor Turnover ratio (CTR) 5.86

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Average payment (IN DAYS) 67 62
 Average payment period
68

67

66

65

64

63 67 Average payment period

62

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62
60

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JBM MARUTI

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INTERPRETATION
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Normally lower the ratio the better it is because company‟s avg. payment period is

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increasing compare to Maruti. So JBM position is not good.

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dTOTAL ASSETS TURNOVER
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Asset turnover is the relationship between sales and assets

 The firm should manage its assets efficiently to maximize sales.

 The total asset turnover indicates the efficiency with which the firm uses all its assets
to generate sales.

 It is calculated by dividing the firm‟s sales by its total assets.

 Total assets include current assets, fixed assets and investments.

TOTAL ASSET TURNOVER = SALES / TOTAL ASSETS

(RS IN MILLIONS)

PARTICULARS JBM MARUTI

Sales 69172.64 203583

Total assets 28893 135965

Total Assets Turnover 2.4 1.5

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yasset
Total
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2.5
S
2

1.5
Total asset turnover ratio
2.4
1
1.5
0.5

0
JBM MARUTI
 INTERPRETATION

Generally, the higher the firm‟s total asset turnover, the more efficiently its assets have been
utilized. It appears that the activity of the business is relatively constant as it is higher than
the Maruti.

INVENTORY TURNOVER

This ratio measures the stock in relation to turnover in order to determine how often the stock
turns over in the business. It indicates the efficiency of the firm in selling its product.

INVENTORY TURNOVER =COST OF GOODS SOLD / AVERAGE INVENTORY

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PARTICULARS JBM MARUTI

COGS 67548.16
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186825
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Average Inventory 2700.61
m 9023

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Inventory Turnover 25.01 20.70

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INVENTORY TURNOVER RATIO
30

25

20

15
INVENTORY TURNOVER RATIO
25.01
10 20.7

0
JBM MARUTI
INTERPRETATION

It indicates that how frequently stock is selling from the godown.

FIXED ASSETS TURNOVER

The fixed assets turnover ratio measures the efficiency with which the firm has been using its
fixed assets to generate sales.

FIXED ASSETS TURNOVER = SALES / NET FIXED ASSETS

(RS IN MILLIONS)
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Particular JBM MARUTI

Sales 69172.64 a 203583

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Net fixed Assets
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19182.32 49321

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Fixed Assets Turnover 3.60 4.12

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FIXED ASSET TURNOVER RATIO
4.2

4.1

3.9

3.8

3.7 4.12 FIXED ASSET TURNOVER RATIO

3.6

3.5
3.6
3.4

3.3
JBM MARUTI
 FINANCIAL LEVERAGE (GEARING) RATIOS

 The ratios indicate the degree to which the activities of a firm are supported by
creditors‟ funds as opposed to owners.
 The relationship of owner‟s equity to borrowed funds is an important indicator of
financial strength.
 The debt requires fixed interest payments and repayment of the loan and legal
action can be taken if any amounts due are not paid at the appointed time. A
relatively high proportion of funds contributed by the owners indicates a cushion
(surplus) which shields creditors against possible losses from default in payment.
Note: The greater the proportion of equity funds, the greater the degree of financial strength.
Financial leverage will be to the advantage of the ordinary shareholders as long as the rate of
earnings on capital employed is greater than the rate payable on borrowed funds.
The following ratios can be used to identify the financial strength and risk of the business.

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DEBT RATIO .
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This is the measure of financial strength that reflects the proportion of capital which has been
funded by debt, including preference shares. This ratio is calculated as follows:

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t DEBT / TOTAL ASSETS
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DEBT RATIO = TOTAL

Where, Total Debt = Secured Loans + Current Liabilities

(RS IN MILLIONS)

PARTICULARS JBM MARUTI

Total Debt 18338.36 30170

Total Assets 28893.16 135965

Debt Ratio 0.63 0.22

 DEBT RATIO
0.7

0.6

0.5

0.4

0.63 DEBT RATIO

0.3

0.2

0.1 0.22

0
JBM MARUTI

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INTERPRETATION a
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A lower debt ratio is generally treated as an indicator of sound financial position
from long term point of view. JBM position is not satisfactory.

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 DEBT TO EQUITY RATIO

This ratio indicates the extent to which debt is covered by shareholders‟ funds. It reflects the
relative position of the equity holders and the lenders and indicates the company‟s policy on
the mix of capital funds. The debt to equity ratio is calculated as follows:

DEBT TO EQUITY RATIO = TOTAL DEBT / TOTAL EQUITY

(RS IN MILLIONS)

PARTICULARS JBM MARUTI

Total Debt 18338.36 30170

Total Equity 7487.41 93449

Debt to Equity Ratio 2.44 0.32

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DEBT TO EQUITY RATIO
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2.5
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2

1.5 DEBT TO EQUITY RATIO

2.44
1

0.5

0.32
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JBM MARUTI
INTERPRETATION

The lower the ratio ,the better it is for long term lenders because they
are more secure in that case and shows firm is able to meet its long term liabilities.

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 PROFITABILITY RATIOS

Profitability is the ability of a business to earn profit over a period of time. Although the
profit figure is the starting point for any calculation of cash flow, as already pointed out,
profitable companies can still fail for a lack of cash.

Note: Without profit, there is no cash and therefore profitability must be seen as a critical
success factors.

 A company should earn profits to survive and grow over a long period of time.
 Profits are essential, but it would be wrong to assume that every action initiated by
management of a company should be aimed at maximizing profits, irrespective of
social consequence

Profitability is a result of a larger number of policies and decisions.

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The profitability ratios show the combined effects of liquidity, asset management

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(activity) and debt management (gearing) on operating results. The overall measure of
success of a business is the profitability which results from the effective use of its
resources. .
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GROSS PROFIT MARGIN
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Normally the gross profit has to rise proportionately with sales.

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 It can also be useful to compare the gross profit margin across similar businesses
although there will often be good reasons for any disparity.

GROSS PROFIT MARGIN = GROSS PROFIT / NET SALES * 100

Here, Net sales = Sales – Excise Duty

And Gross Profit = Sales – COGS

 (RS IN MILLIONS)

PARTICULARS JBM MARUTI

Gross Profit 1624.48 16758

Net Sales 69172.64 203583

Gross Profit Margin 2.34 8.23

GROSS PROFIT MARGIN m

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d GROSS PROFIT MARGIN

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1 2.34

0
JBM MARUTI
 NET PROFIT MARGIN

This is a widely used measure of performance and is comparable across companies in similar
industries. The fact that a business works on a very low margin need not cause alarm because
there are some sectors in the industry that work on a basis of high turnover and low margins,
for examples supermarkets and motorcar dealers.

What is more important in any trend is the margin and whether it compares well with similar
businesses. It is calculated as follows:

NET PROFIT MARGIN = NET PROFIT / NET SALES * 100

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(RS IN MILLIONS)

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PARTICULARS JBM
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Net Profit 1036.08 12187

y69172.64
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Net Sales 203583

Net Profit Margin

tu 1.5 6.0

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 NET PROFIT MARGIN
7

NET PROFIT MARGIN

3 6

1
1.5

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JBM MARUTI

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 FINDINGS OF STUDY

 Current ratio of company is 0.77:1, which is less than the ideal ratio which indicates
that the short term financial position is not satisfactory.
 Quick ratio of company is 0.55:1, which is also less than the ideal ratio which
indicates that the company is not in a position to pay its current liabilities instantly.
 Debtor turnover ratio of company is 16 times which is lesser than the Maruti, it shows
that with which speed amount is collected from debtors. JBM position is not
satisfactory.
 Creditor turnover ratio of company is 5.42, it indicates that creditors are paid more
quickly; it is not good as compare to Maruti.
 Total asset turnover ratio of JBM is 2.4, and of Maruti is 1.5, higher this ratio means
more efficiently its asset have been utilized.
 Inventory turnover ratio of company is 25.01, which is more than the Maruti it

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indicates that stock is selling quickly, and will be treated as more efficient.
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Debt ratio of JBM is 0.63, which is more than the Maruti it is an indicator of risky
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financial position from long term point of view.
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Debt to equity ratio of company is 2.44, which is more than the Maruti it indicates the

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risky financial position of company.

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 LIMITATIONS OF THE STUDY

At the time of the study on financial analysis the researcher faces so many problems and
limitations which make difficulty for the researcher. So some are the limitations of the study
are:

 The secondary resources available proved inadequate as this is not very widely
researched subject.

 The time available for the study was limited considering the comprehensive nature of
study.

 The non-availability and the restricted access to the important confidential

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organization records related to the study have also served as a limitation.

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 CONCLUSIONS

To sum up, it can be said that the present study of ratio analysis of JBM ltd. has thrown light
on the various aspects of the company. The company is following the best practices in the
market and adopting the latest technology available in the market.

The study has its own importance in its own way. With the help of this study one can know
about the struggle and success of JBM LTD‟s Efforts, which is due to its efficient
management. This study will definitely increase the morale of each employee and by
studying this, managers come to know that what effective measures can be taken to maintain
the effective use of working capital in the organization and thus to achieve goals of the
organization.

It was a great opportunity for me to work as a management trainee with „JBM LTD‟. Though
I was here only for eight weeks but still each day‟s activity has enhanced my experience in

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one or other way. The objective of the project was to analyze the financial position of the

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firm. After attaining the objective of the project, it can be said Both of these companies are
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not peer group company, Maruti is customer to JBM , main motive behind this analysis
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is to get information about Maruti‟s financial condition. I prepared a comparative
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analysis report of JBM with Maruti and concluded that Maruti is financially sound

yisnnot using appropriate proportion of debt as well as the

company, JBM is a growing company, its financial condition is average not at par. The

issuing of equity shares. Ad

reason behind that is the company

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tthe increasing expenses of the company in the various department. Only
major point which must be consider by the company is to make

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proper controlled on
the single department can‟t do that thing individually but also each and every department
must have to contribute in that particular area.
 SUGGESTION

 Debt Equity ratio of the company is unsatisfactory; the company can repay its debt by
issuing equity capital which will help to lessen the fixed burden of interest.
 Company should take measure to tackle the problem of less than Ideal Current ratio &
Quick ratio.
 Inventory management ratio is good, company‟s debtor collection period is 22 days &
Creditor payment period is 67 days. Despite of the fact Current ratio & Quick ratio is
less than ideal, which shows mismanagement of funds. Company should take
corrective action for this.
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 Company‟s funds are blocked in Assets that is raised from Debt which is indicating an

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alarming situation. Company should offload the Debt burden immediately.
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Profitability Ratios indicate company‟s gross profit & net profit margin is very less

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comparatively to maruti, Company can change / mold its pricing strategy or look at
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the scope of cost cutting.

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 BIBLIOGRAPHY

1. Annual report- JBML-2008-2009

2. Annual report- MARUTI-2008-2009

3. Financial management: M.Y.KHAN, D.K. GOEL and I.M PANDEY

4. Websites visited
 www.jbmindia.com
 www.jbm-group.com
 www.google.com
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 Balance Sheet As At 31st March 2009

Particulars 31-03-09 31-03-08

Sources Of Funds
Shareholders‟ funds
Share Capital 1082.5 1082.5
Reserve and Surplus 6404.91 5622.12
7487.41 6704.62
Loan Funds
Secured loans 6404.62 4487.19
Deferred payments 1540.63 3050.52
Deferred tax liability 1263.15 1162.15
16695.81 15404.48
Application Of Funds
Fixed assets
Gross Block
Fixed assets 38626.18 31944.72
Lease assets
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2532.53 2532.53

c o41158.71 34477.25
Less:Depriciation
. 22851.99 19496.68
Net block
a 18306.72 14980.57

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Capital work in progress including advances 875.6 622.92

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19182.32 15603.49

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Investments 238.56 232.56
Current Assets, Loan and Advances
Inventories
d 2700.61 1883.55

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Sundry Debtors 4204.02 3726.34
Cash and Bank Balances 51.7 136.68
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Loans and Advances 2515.95
9472.28
1090.81
6837.38
Less: Current Liabilities And Provisions 12197.35 7268.95
Net Current Assets -2725.07 -431.57
Profit and Loss Account for the year ended 31st March 2009

Particulars 31-03-09 31-03-08

Income
Sales 79675.58 78780.4
Less: Excise Duty 10502.94 13076.37
Net Sales 69172.64 65704.03
Other Income 286.32 398.22
Income/(Decrease)in stock 338.73 80.55
69797.69 66182.8
Expenditure
Raw Material Consumed 56014.82 53592.68
Employee Remuneration & Benefits 3503.6 2922.58
Manufacturing & Other Expenses 4253.49 4306.98
Lease Rent 1.27
Financial Charges 965.26 813.77
Depreciation 3436.04 2025.75
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68173.21 63663.03

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Profit before tax 1624.48 2519.77
Less: Provision for income tax
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Earlier Year
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(14.94)

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Current Year

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465.00
Deferred tax 100.99 551.05 907.06
Fringe Benefit tax
d 37.35 29.5

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Profit after tax 1036.08 1583.21
Balance brought forward from previous year 4808.37 3714.62
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Less: Impact of transaction adjustment for 27.16
employee Benefits

Profit Available for Appropriations 5844.45 5324.99

Appropriations
Proposed Dividend 216.5 270.63
Dividend Tax 36.79 45.99
Transfer to General Reserve 175 200
Balance Carried To Balance Sheet 5416.16 4808.37
5844.45 5324.99
 Maruti udyog ltd.

Balance Sheet As At 31st March 2009

Particulars 31-03-09 31-03-08

Sources of funds
Shareholder's funds
Capital 1445 1445
Reserve and Surplus 92004 93449 82709 84154
Loan Funds
Secured Loans 1 1
Unsecured Loans 6988 6989 9001 9002
Deferred Tax

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Deferred Tax liabilities 2340 2697
Deferred Tax assets -789 1551

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-996

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Total 101989 94857

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Application Of Funds
Fixed Assets
Gross Block
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87206 72853
a -

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Less: Depriciation 46498 -39888
40708 32965
Capital work in progress d 8613 49321 7363 40328
Investment
tu 31733 51807

Inventories S
Current Assets loan and advances
9023 10380
Sundry debtors 9189 6555
Cash and Bank Balances 19390 3305
Other current assets 981 331
Loan and advances 16328 10408
54911 30979
Less: Current liabilities and provision
Current liabilities 30169 24562
Provision 3807 3695
33976 28257
Net Current Assets 20935 2722
Total 101989 94857