Accepted Project Vu

Virtu al University of Pakistan
Evaluation Sheet for Project

Spring 2010
Name of Student: Rauf Bilal

Evaluation Status
scheme
Student’s ID: MC08406088
Proposal Writing Valid
Supervisor:
Report writing Pass
Written Work Pass
Status
Presentation &
Viva voce
Total Result
Mistakes have been highlighted
Final Project
Financial statement Analysis of

Honda Cars
&
Pak Suzuki Motors
A REPORT
SUBMITTED TO DEPARTMENT OF MANAGEMENT SCIENCES,
VIRTUAL UNIVERSITY OF PAKISTAN
IN PARTIAL FULLFILLMENT OF THE REQUIREMENT
FOR THE DEGREE OFMASTER IN BUSINESS ADMINISTRATION.
Submitted By:
MC08406088
Rauf Bilal
Department of Management sciences,

Virtual \University of Pakistan
s
DEDICATION
This project is dedicated to all of my Teachers, seniors and my followers who join MBA and Friends
ACKNOWLEDGMENT
I thanks to Almighty Allah who give me strength and understand to learn about the project and make able to me work on this
project
I am also thankful to my respected all those who encourage me and provide guidance to work on this project.
I am also thankful to my Seniors Mr. Zahid Chaudary, Mr. Imran Bashir, Mr. Shazad Ahmad who provide me help in this
regard and the way to work on this project.
Executive Summary
In this project I try to make analysis of two companies of same nature of business and try to predict the reason of difference in the
operations of the companies which shows the effect of management that who they manage their operational activities and handle other
business matter. For this I used ratios analysis technique to measure the different activities of companies which give a clear picture
about company’s position and strength and how these companies are performing. The overall status of both the companies are not
good the reason for this may be due to management deficiency or may be other economic condition arises in the country which have a
negative effect on the activities of the companies. Both these companies position are not good may survival due to joint venture which
give push them to run.
If the economic condition of the country goes towards betterment then these companies have more chance to grow because convance
is needed to every class of member who can afford.
My Analysis which is on the basis of financial statement of both the companies can help to stake holder to know about the companies
position and creditors, other interested people and investor to access the present position and predict about the future of these
companies and can take decision about to deal with these companies or not.
Table of Contents
1.1 Background....................................................................8
1.2 Introduction................................................................... 8
Introductory Paragraph..........................................9
Honda Cars...............................................................9
Pak Suzuki Motors...................................................10
1.3 Objective.........................................................................11
1.4 Significance.....................................................................11
Chapter No 2: Project proceedings....................................12
2.1 Liquidity Ratio................................................................12

a) Current Ratio…………………………………………………12
b) Quick Ratio…………………………………………………..14
c) Sale To Working Capital Ratio………………………………14
2.2 Leverage Ratio................................................................16

a) Time Interest Earned……………………………………………16
b) Fixed Charges Coverage………………………………………..18
c) Debt Ratio………………………………………………………20
d) Debt to Equity ………………………………………………….22
e) Debt to Tangible Net worth…………………………………….23
f) Current Worth / Net worth……………………………………..25
g) Total Capitalization Ratio……………………………………...27
h) Fixed Asset to Equity ………………………………………….29
i) Long term Assets to Long term Debt…………………………..30
2.3 Profitability Ratio…………………………………………......32
a) Gross profit ………………………………………………....…32
b) Return on Assets……………………………………………….33
c) DuPont Return on Assets…………………………………...….35
d) Operating Income………………………………………………37
e) Operating Assets Turn Over……………………………….......38
f) Return on Operating Assets……………………………………40
g) Sale to Fixed Assets……………………………………………41
h) Return on Investment ………………………………………….42
i) Return on Total Equity………………………………………....44
j) Gross Profit Margi……………………………………………..45
2.4 Activity Ratio

a) Accounts Receivable Turnover……………………………….46
b) Average Collection Period……………………………….……48
c) Account Payable Turnover…………………………………....50
d) Average Payment Period………………………………….…..52
e) Inventory Turnover……………………………………….…..53
f) Age of Inventor…………………………………………….…55
g) Operating Cycle………………………………………..……..56
2.5 Market Ratio…………………………………………………58

a) Dividend per share…………………………………………..58
b) Earning per share……………………………………………59
2.6 Cash Flow Ratio……………………………….…….61
a) Operating Cash flow/ Total Debt ……………………….…..61
b) Operating cash flow/current portion L.T debt Payables….…62
2.7 Common size Analysis…………………………….….……64
Horizontal Analysis…………………………………....64
a) Pak Suzuki…………………………………………………..64
b) Honda………………………………………………….….…66
2.8 Veridical Analysis ………………………………..…69
a) Pak Suzuki……………………………………………..……69
b) Honda……………………………………………………......71
2.9 Review of Descriptive Information...........................74

2.10 Comparison………………………………………..………..74
a) Trend Analysis…………………………………………..…..75
b) Industry Analysis………………………………………..…..81
2.11 Interpretation/Summary…………………………..……82
3 Conclusion…………………………………………..…...83
4 Recommendation…………………………………..…..83
5 Methodology.........................................................84
Data collection sources………………………………..……84
Data Collection Tools…………………………………..…..84
Data Processing Method………………………………..…..84
Introduction to Student…………………………..…….84
Bibliography………………………………………….....….84
Scanned Copies……………………………………..…...85
Introduction
This project is a financial statement analysis of two companies that is Honda car and Suzuki cars. This project is about the comparison
of performance and financial statement of company and show s the comparison between company Al the information include in it is
gathered from various sources. The project is about the analysis of annual reports /financial statement .such as income statement,
balance sheets of two listed companies.
The reasons choose to this research to make the project for financial statement analysis of companies the need of this project is to
provide complete information to investor about the past performance and current situation of the companies. After the analysis the
investor, creditors are able to understand the performance and projected conditions of the companies because with this an assistance
is provide to the investor and other stake holder by showing the performance of two companies underplaying the same function. This
project can provide aid to the investor and other stake holder to take decision about the investment opportunities in the companies.
Background
Fundamental analysis is a method is used by the interested parties such as investor creditors and management to evaluate the past
and current condition and performance of the companies. Ratio analysis is most common form of financial analysis. It provide relative
measure of the companies condition and performance .Other type of analysis such as Horizontal analysis and vertical analysis are the
main form of analysis .Horizontal analysis is used to evaluate the trend in the accounts over years .The purpose of the financial
statement analysis of the companies to see the impact according to the economy of the country and economics environment of
country., that from where these companies take a start and now these are on what point and what role in country development.
Financial statement discloses the internal structure of the companies, it indicate existing relationship of sales and each income and mix
sources of capital, where by current and long term debts or by equity funding . when using financial ratio the analysis make different
comparison. It is important and mostly covered in many books. Now a day’s modern technology world the financial data is available via
internet.
The student and stake holder now have easy access to online data base. The assignment on financial statement ratio analysis can be
modified according to enhance learning. However through financial statement analysis I shell be able to work in an organized manner
and present them in suitable form which will be easy understand able for the management and the investor. To make the project I have
get all the financial statement from company web site and other related web site and all the necessary information related to it is
collected. The main purpose of is the financial statement of analysis of financial sector.
Over View of the company(Honda)
Company limited Japan and the Atlas Group of companies, Pakistan the Company was incorporated on November, 1992 and Joint
venture agreement was signed on August, 1993.The Ground breaking ceremony was held on April, 17 1993.and with in record time of
11months, construction and creation of machinery was completed. The first car rolled on assembly line on May 26, 1994.Official
inauguration was done by the president of Pakistan, Farooq Ahmad Khan Leghari. Mr. Kawamoto, president of Honda Motors
Company Limited Japan was also present to grace the occasion. he company is listed on Karachi, Lahore and Islamabad stock
exchange. On July 14 1994, car booking started at six dealership in Karachi, Lahore and Islamabad. Since then the Dealership Honda
Atlas Car Pakistan Limited is a Joint venture Between Honda Motors Network has expanded and now the company has sixteen 3S
(Sales and Spare Parts) and 32 (Service and Spare Parts pit stop network in all major cities of Pakistan.
Over view of the company. (Pak Suzuki)
Pak Suzuki Motors Company Limited is a Pakistan automobile manufacturing company. The company is Joint venture between
Pakistan Automobile Corporation Limited and Suzuki Motors Corporation of Japan. The company export Suzuki Ravi Pickup to
Bangladesh and exports sheets metal parts of Suzuki Cultus to Europe. During the year ended December 31, 2008 the company export
312 units of Suzuki Ravi Pickup. The company Product Included Liana, Cultus, Alto, Mehran, Bolan and Ravi.Pak Suzuki Built on the
idea of responsible corporate citizen ship thereby managing environmental, safety and occupational health matters as an integral part
of their business. Company is committed to provide top quality products to the satisfaction and requirement of customers. The company
also facilitates and recognized the interrelationship between energy and the environment, promote of efficient use of energy throughout
the system.
Objective
The purpose of this project is to provide complete knowledge and general idea about the financial system of companies. In this project
I have provide the information about analysis of financial statement for recent three years which will be useful for the stake holder and
for management to understand the performance of companies with respect to past and current performance.
The objective of this project is to provide insight into how the companies work and what are their strength and weakness. The main
objective is to provide complete information to stake holders which will be helpful to make decision and for investor to make correct
assessment for investment.
Significance
Financial statement provide and over view of business financial condition in short term and long term, all the related information about
companies is presented in well structure form in financial statement analysis and provide insight view of companies. In accessing the
importance of various financial statement data we engage in ratio analysis which is the process of determining and evaluating the
financial ratio and meaning full when compare with other data. These ratios helpful in understand the company’s performance relative
to their competitors. In this project of financial statement analysis I will use the toll of ratio analysis to measure the performance of both
the companies which will be helpful for stake holders and for management. The project define the main aspect of performance of
companies usually compete in the industry.
The goal of the project is to analyzing Financial statement to access past performance and current financial position and make
prediction about future performance of companies and this analysis serve as useful information used by investor and other interested
persons for decision making for investment .the purpose of this project to summarized the data into a form which is easily
understandable for the stakeholder. The need of this project is to provide the complete information to the stake holder about companies
performance. After completion of this project it would be helpful and provide aiding to understand the performance of companies,
because it provides assistance to the investor by showing the performance of companies.
Project proceeding
In the project the following calculations will be made with the interpretation of the values calculated and analysis would be made.
Ratio Analysis
2 Liquidity Ratios
a) Current ratio
b) Liquidity ratio
c) Quick Ratio/Acid test ratio
Processing and Analysis
Liquidity Ratios
It is a ratio which measure the ability of the firm to meet its current obligation
Current Ratio
It shows a firms ability to cover its Current Liability with its current Assets
Higher the current ratio, higher the ability to meet its Current Obligation
Formula
Current Asset
Current Liability
Pak Suzuki Honda
Particulars 2007 2008 2009 2007 2008 2009
16,215,50 11,807,61 12,427,63
Current Assets 8 2 3 3,681,213 2,435,529 3,929,738
Current Liabilities 7,125,302 2,657,462 3,325,134 3,906,115 3,087,066 5,614,243
Current Ratio 2.3 4.4 3.7 0.94 0.79 0.70
Graphic Representation:
Current Ratio
3
Ratios Pak Suzuki
2 Honda
0
2007 2008 2009
Analysis
According to above current ratio analysis the current ratio position of pak Suzuki is better as compared to Honda
company. In F.Y 2007 the pak Suzuki company have standard ratio as compared to Honda company have more
current assets to meet their current liabilities while Honda company have less current Assets and more current
liabilities which shows less liquidity of company in F.Y 2007 and less current Assets to meet their current liabilities .
In F.Y 2008 pak Suzuki company have ratio of 4.4 which indicate that more current assets as per standard which is
also not favorable for company because it means it has more Assets than their need so not utilizing their current
assets for productive purpose so it should reduce the amount of current Assets and keep it up to pay off their current
liability. In F.Y 2008 the Honda company is in weak position because the ratio shows that the current liabilities are
more than their current Assets and not sufficient liquidity to pay off their liabilities. In F.Y 2009 the pak Suzuki
company have current assets but less than F.Y 2008 which is good for company indicate that company utilize their
assets in productive purpose instead to hold them in excess amount to meet their current liabilities.
In F.Y 2009 Honda company is facing similar problem of excess of current liabilities over Current assets and showing
less liquidity to pay off their current liabilities. The company should invest in current Assets to meet their current
liabilities which will be good for company to meet their current liabilities and also to obtain short term loan for the
investment in current Assets.
Quick Ratio /Acid Test Ratio:

In this ratio, inventory and prepaid expense are excluding from the current Asset.
This ratio measure quickly liquidity of asset against the Current Liability and ability of company to meet its obligation
with out delay
Formula
Current Asset – (Inventory + prepaid Expense)
Current Liability
Pak Suzuki Honda
Particulars 2007 2008 2009 2007 2008 2009
(PKR) (PKR) (PKR) (PKR) (PKR) (PKR)
Current Assets 16,215,508 11,807,612 12,427,633 3,681,213 2,435,529 3,929,738
Less inventory (9,256,573) (7,827,004) (6,921,478) (2,755,262) (1,695,797) (3,056,033)
Quick Assets 6,958,935 3,980,608 5,506,155 925,951 739,732 873,705
Current Liabilities 7,125,302 2,657,462 3,325,134 3,906,115 3,087,066 5,614,243
Quick Ratio 0.98 1.50 1.66 0.2 0.2 0.2
Quick Ratio
1.5
Ratios 1 Pak Suzuki

Honda
0.5
0
2007 2008 2009
Analysis
According to calculated ratio of quick assets of Pak Suzuki company in F.Y 2007 have less quick assets to meet their current
liabilities because the standard is 1:1 so if we compare it with standard it less then standard but have good position as compared to
Honda company which have less liquid assets to meet quickly to their current obligation so it is going in bad position because the short
term creditors interested to see the quick ratio if company does not meet the standard they avoid to invest or make payment to
company on short term basis in F.Y 2007 both the companies have less quick assets to meet their current liabilities .
In F.Y 2008 the pak Suzuki company ratio is 1.5 which is according to standard shows that company remove their deficiency in year
2008 and maintain their position which is attractive for short term creditors and banks to get short tem loan on the other side Honda
company is going in same crises and does not maintain their quick ratio to meet their current liabilities indicate that company is not
sufficient quick assets to meet current liabilities which is not good for company .
In F.Y 2009 the pak Suzuki company is also in good position to meet their current liabilities and on the other side Honda company is
not in good position to meet their current liabilities .
Sales to Working Capital

It describes how much a company is generating revenue from its running capital indicates the firm's ability to finance
additional sales without incurring additional debt.
Formula
Sales
Working Capital
Pak Suzuki Honda
Particulars 2007 2008 2009 2007 2008 2009
Sales 50,844,632 39,669,730 26,234,061 17,055,115 14,715,495 14,149,646
Working 9,090,206 9,150,150 9,102,499 (224902) (651537) (1684505)
Capital
Ratio 5.6 4.3 2.9 (75.83) (22.6) (8.4)
Sales to working capital
20
-20
Ratios Pak Suzuki
-40 Honda
-60
-80
2007 2008 2009
Analysis
The above calculated ratio of sale to working capital in F.Y 2007 of pak Suzuki company indicate that company have less ratio
of working capital to perform their operating activities but if we see the ratio of Honda company it is in negative indicating that
company is not generating enough corking capital to full fill their operating activities and must financed through debts which
increase the interest cost of the company and a burden of regular liability on company.
In F.Y 2008 pak Suzuki company ratio is less than previous F.Y it means company generate working capital less and to cover
their working capital requirement may meet from debt financing and Honda company is improving as compared to previous year
means that have less negativity as compared to previous year but still in negative which shows that to meet their working capital
requirement they must based on loan which create extra liability to pay of interest.
In F.Y 2009 the pak Suzuki company the pak Suzuki company working capital ratio is decreasing it means that they are not
performing operation well to manage it may be due to economic condition rises in the country or reducing in sale as compared to
previous years and reducing with the sale their working capital ratio is also reducing. While Honda company is coming out from the
shortage of working capital to perform their operational activities in F.Y 2009 but the ratio is negative which indicate that ato
perform their operation they must emphasize on other funding.
Calculation of Working Capital

Formula
Working Capital = Current Assets – Current Liability
Pak Suzuki Honda
2007 2008 2009 2007 2008 2009
Current Assets 16,215,508 11,807,612 12,427,633 3,681,213 2,435,529 3,929,738
Current
Liabilities 7,125,302 2,657,462 3,325,134 3,906,115 3,087,066 5,614,243
Working
capital 9,090,206 9,150,150 9,102,499 (224902) (651537) (1684505)
Leverage ratio
It is a ratio which is used to calculate the financial leverage of a company to get an idea of the Company’s methods of
financing or to measure its ability to meet financial obligations.
Time Interest Earn

It is also known as interest coverage Ratio, it indicate how well a company have the ability to cover its interest
payment. The larger the time interest earn have the more capability to pay its Interest on Debts
Formula:
EBIT (Earning before interest and Tax)
Interest
Pak Suzuki Honda
Particulars 2007 2008 2009 2007 2008 2009
EBIT 4,425,049 1,045,646 440,407 (176,158) 297,268 (399,516)
Interest Expenses 143,786 53,470 12,654 305,491 233,651 222,769
Time Interest 30. 19. 34.
earned 78 56 80 (0.58) 1.27 (1.79)
Time Interest earned
40
30
20
Pak Suzuki
10 Honda
-10
2007 2008 2009
Analysis
According to ratio indication in F.Y 2007 pak Suzuki have ratio based on its EBIT(Earning before interest and Tax) as compare
to its interest and have more as compared to Honda company. While Honda company have negative ratio and showing
loss so the company cannot meet their interest expense. In F.Y 2008 the time interest earned is less as compare to F.Y
2007 of pak Suzuki company this is due to decrease in EBIT in F.Y 2008 and if we compare from Honda company its
Time interest earned ratio slightly increase but not provide the requirement to pay interest with positive EBIT but not full fill
the company requirement to pay interest.
In F.Y 2009 the pak Suzuki company have high interest ratio with increase in EBIT that company can manage efficiently to
pay their short term and long term interest payment on the other hand Honda company is going in negative trend with loss
showing not in position to pay their interest liability which discourage the investor and creditors to provide debts to firm
showing bad position of company.
Working for EBIT

Working for calculation of
EBIT For Year 2008 RS
G.Profit 590606
Less Distribution cost (309,458)
Less Administrative Cost (504,617)
Balance (223469)
Add other operating Income 1342913
Balance 1119444
Worker profit participation fund 53298

Worker welfare fund 20500
Less other operating exp 73798
EBIT 1045646
Fixed Charge Coverage

A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. Since a failure to
meet interest payments would mean a default under the terms of a bond indenture, this ratio indicates the available
margin of safety. However, too high a ratio (too much safety) indicates an undesirably low level of leverage
Formula:
Profit before Interest and Tax + lease Payments
Total Interest + lease payments
Pak Suzuki Honda

Particulars 2007 2008 2009 2007 2008 2009
Profit before Tax 4,425,049 1,045,646 440,407 (176158) 297,268 (399,516)
Total Interest 143,786 53,470 12,564 305,491 233,651 222,769
30 19 3
Fixed coverage Ratio .8 .6 5.1 -0.58 1.27 (1.79)
40
35
30
25
20 Pak Suzuki
15 Honda
10
5
0
-5
2007 2008 2009
Analysis
According to ratio indication in F.Y 2007 pak Suzuki have ratio based on its EBIT(Earning before interest and Tax) and lease
payments as compare to its fixed interest and have more as compared to Honda company. While Honda company have
negative ratio and showing loss so the company cannot meet their interest expense and obligation . In F.Y 2007 the time
interest earned is less as compare to F.Y 2008 of pak Suzuki company this is due to decrease in EBIT in F.Y 2007 and if
we compare from Honda company its Time interest earned ratio slightly increase but not provide the requirement to pay
interest with positive EBIT but not full fill the company requirement to cover fixed charges interest.
In F.Y 2009 the pak Suzuki company have high interest ratio with increase in EBIT and that company can manage
efficiently to pay their short term and long term interest payment and charges on the other hand Honda company is going
in negative trend with loss showing not in position to pay their interest liability which discourage the investor and creditors
to provide debts to firm showing bad position of company.
Debt Ratio
The debt ratio compares a company's total debt to its total assets, which is used to gain a general idea as to the
amount of leverage being used by a company. A low percentage means is better that the company is less dependent
on leverage, i.e., money borrowed from and/or owed to others. The lower the percentage, the less leverage a
company is using and the stronger its equity position. In general, the higher the ratio, the more risk that company is
considered to have taken on and bearing charges of long term interest payments.
Formula:
Debt Ratio
Liabilities
Assets
Pak Suzuki Honda
Particulars 2007 2008 2009 2007 2008 2009
Liabilities 7,224,302 5,803,462 3,330,134 5,864,449 3,587,066 7,114,243
Assets 21,201,337 16,956,143 17,655,734 8,305,117 6,816,744 9,942,088
Debt Ratio 0.3 0.3 0.2 0.71 0.53 0.72
Debt Ratio
0.8
0.6
Ratios 0.4 Pak Suzuki

Honda
0.2
0
2007 2008 2009
Analysis
According to above ratio and chart represent in F.Y 2007 the debt ratio of pak Suzuki company is .3 which means
that the total assets of company is financed by 30% of debt. The company is in better position because their assets
are financed mostly on equity and not on debt. If we see the situation of Honda company its ratio is .71 which means
that the company total assets is financed by 71% of debt and a high ratio is not consider better the investor will have
not interest to invest because already going under debt and have more risk.
In F.Y 2008 the ratio of debt of pak Suzuki company is same as compared to previous year and did not increase their
debt ratio and operating well to show stability on the other hand Honda company have less debt ratio as compared
top pak Suzuki it means if we compare it in this year Honda company is better in debt ratio due to low ratio from pak
Suzuki.
In F.Y 2009 pak Suzuki company is in more better condition in debt ratio because in this year their ratio is less as
compared to their previous year (.2) which shows that company reduce the debt ratio and increase equity on the
other hand Honda company did not improve and have a ratio of 72% as compared to previous year more in this year
and trapping in outsider loan which increase the risk of the company may not pay their outsider liabilities which is not
a good signal for company and indicate that more financed by outsiders which is not good for company.
Debt/Equity Ratio
This ratio measure of a company financial leverage. Debt/equity ratio is equal to long-term debt divided by common
shareholders' equity. It measure how ratio of debt against equity.
Formula:
Total Debt
Share holder Equity
Pak Suzuki Honda
Particulars 2007 2008 2009 2007 2008 2009
Debt (Calculated
Below) 7,224,302 2,803,462 3,330,134 5864449 3,587,066 7,114,243
Share Holder Equity 13,977,035 14,152,681 14,325,600 2,440,668 3,229,678 2,827,845
0. 0. 0.
Debt/ Equity Ratio 52 20 23 2.40 1.11 2.52
Debt to equity Ratio
3
2.5
2
Honda
1
0.5
0
2007 2008 2009
Analysis
According to above calculated ratio and graph represent the postion of in F.Y 2007 the pak Suzuki company debt to equity
ratio .52 which means total ratio of debt against equity low ratio considerable to better that company debt ratio is 52
% of equity means more relay upon equity which is good for company as compared to Honda company showing
higher ratio of debt against equity which means that ratio of debt is more and financing from outside borrower which
is not good for company and have extra liability on company and also for dissatisfaction for the equity holder in order
to reduce their profit.
In F.Y 2008 the ratio of debt to equity of pak Suzuki company is less as compared to previous year which means that
not only pay their debt also increase equity which is good sign for company to grow and investor have interest to
invest which will increase opportunity for companies to invest in new projects. In F.Y 2008 Honda company have low
ratio of debt as compared to previous year 2007 but showing that company is more relaying of debts and which
create dissatisfaction for new investor to invest and for money market to provide low due to high ratio of debt already
seen. In F.Y 2008 pak Suzuki company have lower ratio as compare to previous year showing that the company not
only pay their long term liabilities but also increase the equity
In F.Y 2009 the pak Suzuki company debt ratio is increase from previous year may need finance from outside to full fill
their requirement but having low ratio of debt as compared to Honda company and Honda company debt ratio is high
due to meet their business activities and under heavy burden of debt which is not good for company.
Calculation of Debt
Pak Suzuki Honda
Particulars 2007 2008 2009 2007 2008 2009
Short Term
Debt 99,000 146,000 5,000 3,906,115 3,087,066 5,614,243
Long Term
Debt 7,125,302 2,657,462 3,325,134 1,958,334 500,000 1,500,000
Total Debt 7,224,302 2,803,462 3,330,134 5,864,449 3,587,066 7,114,243
Debt to Tangible Net worth Ratio

Debt to equity is also called debt to net worth. It quantifies the relationship between the capital invested by owners
and investors and the funds provided by creditors
Formula:
Total Debt
(Owner’s Equity – intangible Assets)
Pak Suzuki Honda
Particulars 2007 2008 2009 2007 2008 2009
Debt 7,224,302 2,803,462 3,330,134 5864449 3,587,066 7,114,243
Tangible Net worth
ratio 13,590,256 13,768,873 13,977,868 2374765 3,165,042 2,632,015
Debt to Tangible Net 0. 0. 0.

worth Ratio 53 20 24 2.47 1.13 2.70
Bebt to tangibleNet worth
3
2.5
2
Honda
1
0.5
0
2007 2008 2009
Analysis
According to above ratio indicate the position of pak Suzuki company in F.Y 2007 have a ratio of .53 % means that
debt ratio is less and more fund are financed from equity which showing good position of company as compare to Honda company
which indicate ratio of 2.47 which means that debt ratio is higher and equity funding or net worth funding is low more depend upon debt
which a have a burden on company to pay heavy interest which effect the company operation because it already bearing loss and also
fear of default to pay their liabilities and showing weak position of company.
In financial year 2009 pak Suzuki company improve their neat worth and the ratio of debt is decreasing which shows that company
performing well and paying out their liabilities and depend upon their own resources o mange business instead of depending debt
which increase their operating return and having a good position . While Honda company also shows low ratio of debt as compared to
previous year if we see in F.Y 2008 both the company have low ratio of debt which means that both the company perform well in this
year but the pak Suzuki company is in better position as compared to Honda company .
In F.Y 2009 pak Suzuki company have increase in ratio as compared to previous year but with controlled ratio as compared to Honda
company in F.Y 2009 Honda company again have high ratio of debt against net worth because it is not enough to meet the
requirement of the company and have heavy ratio of debt .
Tangible Net Worth ratio = (Owner's Equity - Intangible Assets)

Pak Suzuki Honda
Particulars 2007 2008 2009 2007 2008 2009
Owner Equity 13,977,035 14,152,681 14,325,600 2,440,668 3,229,678 2,827,845
Intangible Assets 386,779 383,808 347,732 65,903 64636 195830
Tangible Net
Worth 13,590,256 13,768,873 13,977,868 2,374,765 3,165,042 2,632,015
Current worth / Net worth Ratio

This Ratio define the relationship of Current worth and net worth, Current worth Shows the Current position of the
Business and it can be calculate as Current Assets minus Current Liability. And Net worth Calculated as Owners
Equity minus intangible assets.
Formula:
Current worth (Current Assets – Current Liabilities)
Net worth (Owner’s Equity – intangible Assets)
Pak Suzuki Honda
Particulars 2007 2008 2009 2007 2008 2009
Current worth
(Calculated below) 9090206 9,150,145 9,102,499 (224902) (651,537) (1,684,505)
Net worth
(Calculated above) 13590256 13,768,873 13,977,868 2,374,765 3,165,042 2,632,015
0. 0. 0.
Current Worth /Net 67 66 65 (0.09) (0.21) (0.64)
Cuurent worth to net worth
0.8
0.6
0.4
0.2
Ratios 0 Pak Suzuki
-0.2 Honda
-0.4
-0.6
-0.8
2007 2008 2009
Analysis
According to above calculation and graph presentation show that in F.Y 2007 pak Suzuki company have .67 of net
worth ratio to current worth showing the current position of the company have good position to indicate that company
is managing from their resources well fully and having good ratio as compared to Honda company while Honda
company in F.Y 2007 showing a ratio of -.9 which means that their current position is not good and working capital is
negative to meet their working capital activities they need to more current worth to meet their requirement of activities
to perform which generate positive working capital and increase the current worth which may stable the company
position .
In F.Y 2008 pak Suzuki company shows a little change in ratio showing that company performing their operation with
routine circle and have good position as compared to Honda company and Honda company in F.Y 2008 facing the
same situation of negative net worth ratio with increasing negative ratio that could not support to run the company in
a stability position. In F.Y 2009 the pak Suzuki company with same stability is running their business but the Honda
company consistently going down the ratio of Net worth and facing difficulty to give push to wards betterment.
Calculation of Current worth

Formula:
Current worth = Current Assets-Current Liabilities
Pak Suzuki Honda

Particulars 2007 2008 2009 2007 2008 2009
Current Assets 16,215,508 11,807,612 12,427,633 3681213 2,435,529 3,929,738
Current
Liabilities 7,125,302 2,657,467 3,325,134 3906115 3,087,066 5,614,243
Current Worth 9,090,206 9,150,145 9,102,499 (224902) (651537) (1684505)
Total Capitalization Ratio

This Ratio also include in financial leverage Ratio. It compares the Debt to total capitalization and thus reflect the
extant to which a corporation trading on it equity
Formula:
Long term Debt
Long term Debt + Owner’s Equity
Pak Suzuki Honda

Particulars 2007 2008 2009 2007 2008 2009
Long Term Debt 99,000 146,000 5,000 1,958,334 500,000 1,500,000
Long Term Debt 99,000 146,000 5,000 1,958,334 500,000 1,500,000
Owner's Equity 13,977,035 14,152,681 14,325,600 2,440,668 3,229,678 2,827,845
(Long Term Debts + Owner’s
Equity) 14,076,035 14,298,681 14,330,600 4399002 3729678 4327845
Total Capitalization Ratio 0.007 0.0102 0.0003 0.45 0.13 0.35
Total Capitalization Ratio
0.5
0.4
0.3
Ratios Pak Suzuki
0.2 Honda
0.1
0
2007 2008 2009
Analysis
This ratio describe the financial health of the company, because the total capitalization ratio depends on Debt and
owners equity, In F.Y 2007 Pak Suzuki company shows very low ratio of debt against Total capitalization which
means that company have good position and operate their activities from capital and not depend on heavy loan from
financial institution and away from heavy interest payment and secure in long run. On the other hand Honda company
have a high ratio of long term debts ratio which is .45 means that out of total capitalization 45% is financing from long
term loan due to which company bear interest expense to pay off their liabilities to creditors and increasing operating
cost and financing cost.
According to financial year 2008 the pak Suzuki Company is in better position because its use its own fund more
than its debt and it spend less profit in the form of Debt as compare to Honda company it is more depend on debt
but in F.Y 2008 Honda company have less ratio of long term debt showing improvement if we compare it with pak
Suzuki in this year Honda company shows improvement as compared to pak Suzuki. In F.Y 2009 pak Suzuki
company is in better position due to lower ratio as compared to Honda company.
In F.Y 2009 Honda company again with high ratio of debt against Total capital financed this increase is due to take
long term loan to perform the activities of company which is not showing good position of company and not favorable
for long term investor.
Fixed Asset / Equity Ratio

This ratio describe the relationship between the Owners equity and Fixed Asset, this ratio Shows the financial
position of a company, and describe that the company How much efficiently utilized its owner’s equity to Finance its
Fixed assets.
It is calculated as:
Formula:
Fixed Assets
Equity ratio
Pak Suzuki Honda
Particulars 2007 2008 2009 2007 2008 2009
Fixed Assets 4358151 4,578,436 4,684,671 4082955 3,864,527 5,190,535
Equity 13,977,035 14,152,681 14,325,600 2,440,668 3,229,678 2,827,845
Fixed
Assets/Equity 0. 0. 0.
Ratio 31 32 33 1.67 1.20 1.84
Fixed Assets to Equity Ratio
1.5
Ratios 1 Pak Suzuki

Honda
0.5
0
2007 2008 2009
Analysis
This ratio describe that the company how much Owner’s equity utilize or invest in Fixed Assets. It is relation ship
between the owner’s equity and fixed Asset
In the above calculation the pak Suzuki Company in F.Y 2008 Showing a ratio lower as compared to Honda company
that is 1.67 Shows that company utilized better in Fixed assets but this ratio does not bringing inflow for company
which means that company is not utilizing their fixed assets properly instead of high ratio they should mange that to
reduce their fixed assets and this amount may utilize to pay off heavy liabilities this is due to company is not taking
benefit from these fixed assets. If we see the pak Suzuki company have lower ratio which means that their fixed
assets finance through equity have less ratio but generating profit the company better utilizing their assets to create
future inflow which show the stable position of company. In F.Y Honda company have high ratio as compared to pak
Suzuki company but pak Suzuki company is better utilize their fixed assets to generate revenue as compared to
Honda company. In F.Y 2009 pak Suzuki Company have little change in ratio but Honda company ratio showing
more financing in fixed assts.
Long term Asset versus Long term Debts

This ratio indicate that the firms long term Assets are how much time to its long term debts, this ratio indicate that the
how much portion of its Fixed Assets generate from Long term debt and owners equity, More Ratio Mean that
Company Debts are less then its long term assets and it Involves Owners Equity
It is calculated as,
Formula:
Long term Assets
Long term Debts
Pak Suzuki Honda
Particulars 2007 2008 2009 2007 2008 2009
Long term Assets 4,985,829 5,148,531 5,228,101 4,623,904 4,381,215 6,012,350
Long term Debts 99000 146,000 5,000 1958334 500,000 1,500,000
Long term Assets

versus Long term 50. 35. 1,045.6
Debts 36 26 2 2.4 8.8 4.0
Long term Assets to long term debt
1200
1000
800
Ratios 600 Pak Suzuki
400 Honda
200
0
2007 2008 2009
Analysis
According to above calculation ratio in F.Y 2007 the pak Suzuki company have higher ratio of Fixed Assets
proportional to liability, Assets are more of Its Debt it mean that the Company take More finance from Owner’s Equity
and this company is better as Compare of its competitor. In F.Y 2008 Honda company have low ratio to fixed assets
and depending upon loan and not generating enough ratio to fixed assets. In F.Y 2008 pak Suzuki company have low
ratio as compared to previous year but if we compare with company pak Suzuki is again in better position In F.Y 2008
Honda company have high ratio as compared to its previous year but in this year company have high debt and
finance fixed assets at low ratio which shows company is in bad position.
In F.Y year 2009 the pak Suzuki company have very high ratio and low amount of liability which indicate the better
position of company. While in F.Y 2009 Honda company have low ratio as compared to pak Suzuki company.
1 Profitability Ratios
This ratio measure how much a company earn from its sales, it is very useful ratio for comparing of firm
profitability, it is important for the firm survival and stake holder to know the profitability and useful measure
for overall efficiency of business.
Formula:
Net Profit
Net Sales
Pak Suzuki Honda
Particulars 2007 2008 2009 2007 2008 2009
Net Profit 2774532 624,785 255,219 (264540) 75,010 (401,833)
Net Sales 50844632 39,669,730 26,234,061 17055115 14,715,495 14,149,646
Net Profit Margin 5.46% 1.57% 0.97% -1.55% 0.51% -2.84%
Net Profit Ratio
6.00%
4.00%
Ratios 2.00% Pak Suzuki

0.00% Honda
-2.00%
-4.00%
2007 2008 2009
Analysis
According to calculated ratio and graph representation In F.Y 2007 shows that ratio of pak Suzuki is normal and generating
profit up to satisfactory level as compared to Honda company . Honda company shows a negative trend indicate company is
not generating profit and by compare with the pak Suzuki company have better position
In F.Y 2008 the pak Suzuki company showing higher ratio of net profit as compare to Honda company if we compare Honda
company with previous year in this year company is enerating
profit but the position of pak Suzuki company is better positing due to high ratio of profit as compare to Honda company
In F.Y 2009 the pak Suzuki company ratio is positive but decreasing rate as compared to previous year if we compare it with
Honda company it is in better position because earn profit the decreasing ratio of pak Suzuki company is due to not operating
well its operating activities while Honda company is in loss because there operating expenses is more then their revenue so
going in bad condition .
Return on Assets
This ratio describe the company earning from its assets, this ratio gives the idea how much the company
management efficiently use its assets for its profitability
Formula:
Net Income
Average Total Assets
Pak Suzuki Honda

Particulars 2007 2008 2009 2007 2008 2009
Net Income 2774532 624,785 255,219 (264540) 75,010 (401,833)
Average Total Assets (Calculated
below) 22237713 19,078,740 17,305,939 8739696 7560930.5 8379416
Return on Assets 12.48% 3.27% 1.47% -3.03% 0.99% -4.80%
Return on Assets
15.00%
10.00%

Honda
0.00%
-5.00%
2007 2008 2009
Analysis
Above ratio and graph represent the ratio of return on assets In F.Y 2007 the pak Suzuki company generating income against
assets good and if we compare it with Honda company in the same F.Y 2007showing negative ratio means not earning
profit and reduce the equity and not utilizing their assets to produce revenue.
In F.Y 2008 the pak Suzuki company showing low profit ratio its in this year return on Assets is low due to low sale and if
we see Honda company in F.Y 2008 it generate profit but at very low level which can not cover the return which should
be on utilization of resources.
In Year 2009 the ratio of pak Suzuki company is low as compare to its previous year this is due to decrease in sale and not
giving required return on Assets. On the other hand Honda company ratio has negative trend showing loss and no return
on Assets employed .
Calculation of Average Assets

Pak Suzuki Honda
Particulars 2007 2008 2009 2007 2008 2009
Opening Assets
(Previous Year) 23274089 21201337 16,956,143 9174275 8,305,117 6,816,744
Closing Assets
(Current Year) 21201337 16,956,143 17,655,734 8305117 6,816,744 9,942,088
Average Total
Assets 22237713 19078740 17305938.5 8739696 7560930.5 8379416
DuPont Return on Assets

It is a financial ratio which Show how the return on Assets depend on both Assets turnover and net profit margin.
The DuPont method breaks out these two components from return on Assets ratio to determine the impact on
profitability of the company
This ratio helps to highlight the impact of changes in asset turnover and profit margin
Formula
Net Income X Sales
Sales Assets
Pak Suzuki Honda

Particulars 2007 2008 2009 2007 2008 2009
Net Income / Net Sales 0 0. 0. 0. (0. (0.

(Calculated Below) .05 02 01 01 03) 05)
Net Sales / Assets 2 2. 1. 2. 2. 1.

(Calculated Below) .40 34 49 05 16 42
DuPont Return on 0 0. 0. 0. (0. (0.
Assets .13 04 01 01 06) 08)
DuPont
0.15
0.1
0.05
Ratios Pak Suzuki
0 Honda
-0.05
-0.1
2007 2008 2009
Analysis
The ratio is kind of profitability ratio, as compare of above ratio when we see the Pak Suzuki company in FY 2007.
Its net profit margin is great as compare to Honda company and his return on Assets was more then from Honda
company that is why the pak Suzuki company was and better condition as compare to Honda company.
In FY 2008 the pak Suzuki company reduce its profit but he return on Assets is more as compare to Honda company
while Honda company have negative trend in profit but have return on Assets but this return on Assets is less than
pak Suzuki company due to this its position is better from Honda company.
In F.Y 2009 Pak Suzuki company also reducing it profitability and return on Assets also reduce but more than Honda
company so in this year pak Suzuki company is in better position.
Calculation of Net Income to sale

Pak Suzuki Honda
Particulars 2007 2008 2009 2007 2008 2009
Net Profit 2774532 624,785 255,219 (264540) 75,010 (401,833)
Net Sales 50844632 39,669,730 26,234,061 17055115 14,715,495 14,149,646
Net Profit 0. 0. 0. (0. 0. (0.0
Margin 05 02 01 02) 01 3)
Calculation of Net Sales / Assets
Pak Suzuki Honda

Particulars 2007 2008 2009 2007 2008 2009
Net Sales 50844632 39,669,730 26,234,061 17055115 14,715,495 14,149,646
Assets 21201337 16,956,143 17,655,734 8305117 6,816,744 9,942,088
Net Sales / 2. 2. 1.
Assets 40 34 49 2.05 2.16 1.42
Operating Income Margin

This ratio is also measure the efficiency of management. It compares the quality of a company’s operations to its
competitors, any company that has greater the operating income margin through out the industry have the low fixed
cost and more margin with its sales price to compete its competitor
Formula:
Net operating Profit
Net Sales
Pak Suzuki Honda

Particulars 2007 2008 2009 2007 2008 2009
Net Operating
Profit 461884 1,045,646 440,407 (176158) 297,268 (399,516)
Net Sales 50844632 39,669,730 26,234,061 17055115 14,715,495 14,149,646
Operating
Income Margin 0.91% 2.64% 1.68% -1.03% 2.02% -2.82%
Operating ncome Margin
3.00%
2.00%
1.00%
-1.00% Honda
-2.00%
-3.00%
2007 2008 2009
Analysis
According to Calculation and Graph in FY 2007the pak Suzuki company generated .91% Operating profit with respect
to Sales while while the Honda company generated no profit and going in loss as compare to sales Revenue.
In FY 2008 both companies increase its operating profit but pak Suzuki company is in better position as compared
to Honda company if we compare it from previous it is in better because this year generate profit instead of loss. The
pak Suzuki company is better in this year.
In FY 2009 Pak Suzuki company generate profit with low ratio as compared to its previous year but have better
position as compared to Honda company which did not generate profit and going in loss.
Operating Assets turnover

This ratio is a rough measure of the productivity of a company's fixed assets (property, Plant and equipment with
respect to generating sales. For most companies, their investment in fixed assets represents the single largest
component of their total assets. This annual turnover ratio is designed to reflect a company's efficiency in managing
these significant assets. Simply put, the higher the yearly turnover rate, the better.
Formula:
Net Sales
Operating Assets
Pak Suzuki Honda

Particulars 2007 2008 2009 2007 2008 2009
Net Sales 50844632 39,669,730 26,234,061 17055115 14,715,495 14,149,646
Operating Assets 4744930 4962244 5032403 4340700 4009909 5405591
Operating Assets
Turnover 10.71% 7.99% 5.21 % 3.92 % 3.67 % 2.61 %
Operating Assets Turn over
12.00%
10.00%
8.00%
4.00% Honda
2.00%
0.00%
2007 2008 2009
Analysis
According to above ratio and graph it shows that in F.Y 2008 the pak Suzuki company is higher ratio of return on Assets as
compared to Honda company and its position is better as compared to Honda company.
In F.Y 2008 the pak Suzuki company have higher ratio as compared to Honda company but less from previous year and also
reduce sale it means in this year the company operate lower rate but the position is better as compare to Honda company.
In F.Y 2009 pak Suzuki company have low ratio as compared to previous year but have more ratio as compared to Honda
company so in better position showing that the company utilized well its Assets to produce as compared to Honda company.
Return on operating Assets

This measure varies somewhat from the preceding return on assets employed, because only those assets actively
used to create revenue are used in the denominator. This focuses management attention on the amount of assets
actually required to run the business, so that it has a theoretical targeted asset level to achieve. A typical result of
this measurement is an ongoing campaign to eliminate unnecessary assets.
Formula:
Net Income
Operating Assets
Pak Suzuki Honda
Particulars 2007 2008 2009 2007 2008 2009
Net Income 2,7 624,78 255,21 (264,540) 75,010 (401,833)
74,532 5 9
Operating Assets 4744930 4962244 5032403 4340700 4009909 5405591
Return on Operating
Assets 0.58% 0.12% 0.05% 0.06% 0.018% 0.074%
Return on Operating Assets
0.60%
0.50%
0.40%
0.20% Honda
0.10%
0.00%
2007 2008 2009
Analysis
According to graphic presentation and ratio calculation shows in financial year 2007 pak Suzuki company have high
ratio of .58% as compared to Honda company which has a ratio of .06% and in better position they perform well
to operate their assets In F.Y 2008 the pak Suzuki company have higher ratio as compared to Honda company but
the percentage is lees as compared to previous year and may not mange due to their internal weakness or may be
economic condition facing the industry but have better position as compared to Honda company. In F.Y 2008 Honda
Company percentage is looking better as compared to their previous year but the pak Suzuki Company is in better
position.
In F.Y 2009 pak Suzuki company have low ratio as compared to Honda company in this year comparative the Honda
company is in better position.
Sales to Fixed Assets

This ratio also measure how well Fixed Asset use to generate Revenue/Sales.
It is calculate as net sales divided by Fixed Asset.
Formula:
Sales
Fixed Assets
Pak Suzuki Honda

Particulars 2007 2008 2009 2007 2008 2009
Net Sales 50,844,632 39,669,730 26,234,061 17,055,115 14,715,495 14,149,646
Fixed Assets 4,358,151 4,578,436 4,684,671 4,082,955 3,864,532 5,190,535
Sales to Fixed 11. 8. 5.
Assets 67 % 66 % 60 % 4.2% 3.8% 2.7%
Sale to Fixed Assets
12.00%
10.00%
8.00%
4.00% Honda
2.00%
0.00%
2007 2008 2009
Analysis
According to calculated ratio and graphic representation shows in F.Y 2007 Pak Suzuki company have high ratio 11.67% as compared
to Honda company because its sale is more then Honda company and in better position.
In F.Y 2008 the pak Suzuki company is higher ratio 8.66 as compare to Honda company and have high sale means that better utilize
their Assets and high percentage of sale as compared to Honda company.
In F.Y 2009 pak Suzuki company is in better position due to higher ratio as compared to Honda but if you see carefully the with higher
ratio the it has decreasing trend of sale and ratio but if we compare with Honda its position is better.
Return on Investment (ROI)

It is also known as Rate of Return / Rate of profit from its investment, it measures of return (Gain / Loss) against the
company’s investment. This Gain or Loss refer to the companies profit or loss . Management is seeking for this kind
of Ratio.
It measure as Profit before Tax divided by Share holders Funds as below,
Formula:
Operating Income
Shareholder funds+ Long term Liabilities
Pak Suzuki Honda

Particulars 2007 2008 2009 2007 2008 2009
4,425
Operating Income ,049 1,045,646 440,407 (176,158) 297,268 (399,516)
Shareholder Fund+ Long term
Liabilities 14,076,035 14,298,681 14,330,600 4399002 3,729,678 4,327,845
Return on Investment 31.44% 7.31% 3.07% -4.00% 7.97% -9.23%
Return on Investment
40.00%
30.00%
20.00%
Ratios Pak Suzuki
10.00% Honda
0.00%
-10.00%
2007 2008 2009
Analysis
According to ratio in F.Y 2007 the ratio of return on investment is higher which is 31.4 % as compared to Honda company showing
-4% loss .so the pak Suzuki company is in better position because receiving return on their investment on the other hand Honda
company gain nothing and bearing loss of 4%.
In F.Y 2008 the pak Suzuki company ratio is 7.31% having low ratio as compared to Honda company ratio 7.97% this means that the
pak Suzuki company get low return as compared to previous year and also have low ratio as compared to Honda company while
Honda company is better with slight difference of return on Assets and both the company have same position in this year.
In F.Y 2009 pak Suzuki company have low ratio but positive as compared to Honda company while Honda company suffer loss and
have negative % of return management suffer loss instead of getting return .
Return on Total Equity

One of the most important profitability Ratio is return on equity (ROE) Return on equity discloses how much profit a
company earned in comparison to the total amount of shareholder equity found on the balance sheet. Shareholder
equity is equal to total assets minus total liabilities. It’s what the shareholders “own”.
Formula:
Net profit * 100
Total Equity
Pak Suzuki Honda

Particulars 2007 2008 2009 2007 2008 2009
2,774, 624,7 255,2
Net Profit 532 85 19 (264540) 75,010 (401,833)
Total Equity 13977035 14,152,681 14,325,600 2440668 3,229,678 2,827,845
Return on Total
Equity 19.85% 4.41% 1.78% -10.84% 2.32% -14.21%
Return on Equity
20.00%
15.00%
10.00%
5.00% Pak Suzuki
Ratios
0.00%
Honda
-5.00%
-10.00%
-15.00%
2007 2008 2009
Analysis
In F.Y 2007 the pak Suzuki company have 19.85% high ratio as compared to Honda company, while Honda company consistently
going in loss, so the pak Suzuki company is in better position.
In F.Y 2008 the pak Suzuki Company is high return comparatively Honda company but in this year Honda Company get some return as
compared to previous year. But the position of pak Suzuki Company is better.
In F.Y 2009 the pak Suzuki Company have a ratio of 1.78% which is less as compare to previous year but have positive trend as
compare to Honda Company.
Gross profit Margin

What remains from sales after a company pays out the cost of goods sold. To obtain gross profit margin, divide gross
profit by sales. Gross profit margin is expressed as a percentage. Higher the ratio is better but no standard of the
ratio.
Formula:
Gross Profit
Net Sales
Pak Suzuki Honda

Particulars 2007 2008 2009 2007 2008 2009
4,760,
Gross Profit 232 590,606 569,299 99934 627,494 176,502
Net Sales 50,844,632 39,669,730 26,234,061 17,055,115 14,715,495 14,149,646
Gross Profit
Margin 9.36% 1.49% 2.17% 0.59% 4.26% 1.25%
Gross Pofit Ratio
10.00%
8.00%
6.00%
Ratios Pak Suzuki
4.00% Honda
2.00%
0.00%
2007 2008 2009
Analysis
According to F.Y 2007 the Pak Suzuki Company have a 9.36% ratio to its sale as compared to Honda company and in better position
as compared to Honda Company.
In F.Y 2008 Honda company ratio is 4.26 % of sale and in better position as compared to pak Suzuki company sale may be material
available cheaper rate or control other overheads which bring change while pak Suzuki Company have low ratio so Honda Company is
in better position in this year.
In F.Y 2009 pak Suzuki company is better as compared to Honda company if we see with the change in sale the gross profit of pak
Suzuki is change their sale have decreasing trend as compared to their previous year.
Activity Ratio
An indicator of how rapidly a firm converts various accounts into cash or sales. In general
Account Receivable Turnover

This ratio shows the number of times accounts receivable are received and reestablished during the accounting
period. The higher the turnover, the faster the business is collecting its receivables and the more cash the client
generally has on hand.
Formula:
Total Net Sales
Average Account Receivable
Pak Suzuki Honda

Particulars 2007 2008 2009 2007 2008 2009
Net Sales 50,844,632 39,669,730 26,234,061 17,055,115 14,715,495 14,149,646
Average Account
Receivable (Calculated
Below) 206791 274421 231204 890846 606,972 680,535
Account Receivable 245. 144. 113.
Ratio 87 56 47 19.14 24.24 20.79
Accunt Receivable Turn over
250
200
150
Ratio Pak Suzuki
100 Honda
50
0
2007 2008 2009
Analysis
According to above ratio in F.Y 2007 the pa Suzuki company have high ratio as compared to Honda company, pak
Suzuki company company collect 245 from its due to large volume in sale while Honda company have 19 time against its
sale. Collection rate of pak Suzuki Company is more is more.
In F.Y 2008 pak Suzuki Company have a ratio of 144 times against its sale while Honda company collects 24 time
against its sale pak Suzuki company have large volume of sale as compared to Honda company. so its rate is better. While
Honda company company with decrease in sale have more rate of receivable.
Calculation of Average Account Receivable

opening account receivable (previous year) + closing account receivable (Current year)
2
Pak Suzuki Honda

Particulars 2007 2008 2009 2007 2008 2009
Opening
Account 190,
Receivable 823 222759 326,083 1,075,600 706,092 507,852
Closing
Account 222,
Receivable 759 326,083 136,325 706,092 507,852 853,218
Average
Account 890,8 606,9 680,53
Receivable 206791 274421 231204 46 72 5
Average Collection Period

This ratio reveals how much time a company takes to collect its account Receivable
Formula;
Days in Years
Account Receivable Turnover Ratio
Pak Suzuki Honda

Particulars 2007 2008 2009 2007 2008 2009
Days in Years 365 365 365 365 365 365
Account Receivable 245.87 144.56 113.47 19.14 24.24 20.29

Turnover Ratio
(Calculated Above)
Account Receivable
Ratio 1 3 3 19 15 18
Avg Collection Period
20
15

Honda
5
0
2007 2008 2009
Analysis
The above diagram and ratio show the collection time period for both the companies In financial year 2007 pak
Suzuki company have approximately 1 day to recover its receivable to mange their activity which needed cash While
Honda company collect from debtors 19 days the period of collection of pak Suzuki company is shorter then Honda
company.
In F.Y 2008 pak Suzuki company collection period is 3 days to recover their receivable the time is limited and
company can manage their activities of business effectively because in next few days the company has cash to
perform their activities. On the other hand Honda company have more time to take receivable during that time it
create difficulty for company to pay off other liabilities of the company and manage fund for business activities.
In F.Y 2009 pak Suzuki company keep maintain their collection period early from its debtors while Honda company
takes 18 day to collect the amount so pak Suzuki have shorter period to collect and availability of cash soon as
compared to Honda company and shorter time is better to pay off and manage activities.
Account Payable Turnover

A short-term liquidity measure used to quantify the rate at which a company pays off its suppliers. Accounts payable
turnover ratio is calculated by taking the total purchases made from suppliers and dividing it by the average accounts
payable amount during the same period.
Formula:
Net Credit Purchases
Average Account Payable
Pak Suzuki Honda

Particulars 2007 2008 2009 2007 2008 2009
Net Credit Purchase (Calculation 45,660
below) ,305 37,647,171 24,759,254 15511587 13,028,536 15,333,380
Average Account Payable (Calculated 3,288
below) ,030 2,244,569 1,584,309 3638101 3,169,096 3,221,316
1 1 15 4
Account Payable Turnover 3.89 6.77 .63 4.26 4.11 .76
Accounts Payable Turn over
20
15

Honda
5
0
2007 2008 2009
Analysis
According to the above time and ratio formula which is depend on credit purchases and average account payable,
this ratio mean that a company paid its account payable. In F.Y 2007 pak Suzuki company have pay to their
creditors near about 13 time depend upon their credit purchase. On the other hand Honda Company pay to their
creditors 4 day time. Pak Suzuki company have more ratio as compared to Honda company.
In F.Y 2008 pak Suzuki company ratio of credit purchase is high. Its mean that company turn over is more and paying
with in time to its creditors while Honda company have 4 time with less amount of credit purchase it means that at
less credit purchase their time should be less but showing the same sequence of purchase.
In F.Y 2009 pak Suzuki company make credit purchase 15 its mean that the high ratio of turn over indicate that
company paying with in time to its creditors while Honda company have same ratio as compared to its previous year
but the position of pak Suzuki company is better.
Calculation of Net Credit Purchase
Pak Suzuki Honda

Particulars 2007 2008 2009 2007 2008 2009
Opening Inventory 9680668 9,258,939 7,826,986 4198856 2755262 1695797
Add: Net Credit 45,660,30 37,647,17 24,759,25

Purchase 5 1 4 15,511,587 13,028,536 15,333,380
55,340, 46,906, 32,586,2 19,710,4 15,783,7 17,029,1
Material Available 973 110 40 43 98 77
Less Closing Inventory 9256573 7826986 6921478 2755262 1,695,797 3,056,033
CGS (Given) 46,084,400 39,079,124 25,664,762 16,955,181 14,088,001 13,973,144
Calculation of Average Account Payable
Pak Suzuki Honda

Particulars 2007 2008 2009 2007 2008 2009
Opening
Account 3,402, 3,173,
Payable 506 554 1,315,584 3993047 3,283,155 3,055,037
Closing
Account 3,173,
Payable 554 1,315,584 1,853,034 3283155 3,055,037 3,387,594
Average
Account 3,638,10 3,169,09 3,221,31
Payable 3288030 2244569 1584309 1 6 6
Average Payment Period

It is a time period where a company paid against its Credit Purchase
Formula:
Days in Year
Average Account Payable Turnover Ratio
Pak Suzuki Honda
Particulars 2007 2008 2009 2007 2008 2009
Days in Years 365 365 365 365 365 365
1 4.2
Account Payable Turnover Ratio 3.89 16.77 15.63 6 4.11 4.76
Account Average Payment
Period 26 22 23 86 89 77
Avg Payment Period
100
80
60
days Pak Suzuki
40 Honda
20
0
2007 2008 2009
Analysis
In F.Y 2007 the ratio indicate that the pak Suzuki company take normally 26 days to pay their creditors which is good
because the creditors normally satisfied to received their amounts with in that period, while Honda accompany make
payment to their creditors in 86 days. Pak Suzuki Company makes early payment to their creditors so it is in better
position as compared to Honda Company. In F.Y 2008 and 2009 pak Suzuki Company have better position to pay
their debt with shorter period as compared to Honda Company which facilitate to the company make more credit
purchase. The pak Suzuki Company have better position in both the year in terms of payment made to creditors as
compared to Honda Company.
Inventory Turnover
This ratio shows that how much time in one accounting period the company Sell its inventory and is valuable for
spotting under Stocking, over Stocking, obsolescence and need for merchandise improvement. Faster turnover are
generally view as positive trend, they increase Cash flow and reduce where house and other related cost
Formula:
Cost of Goods Sold
Average Inventory
Pak Suzuki Honda

Particulars 2007 2008 2009 2007 2008 2009
Cast of Goods 46,084, 14,088,0 13,973,1
Sold 400 39,079,124 25,664,762 16955181 01 44
Average
Inventory
(Calculated
Below) 9399162 8258452 7106124 3437033 2158821 2283394
Inventory
Turnover Ratio
(In Time) 5 5 4 5 7 6
Graphic Representation
Inventory Turnover
7
6
5
4 Pak Suzuki
Ratios
3 Honda
2
1
0
2007 2008 2009
Analysis
This ratio express the management efficiency to mange the Stock through the year, and higher the inventory turnover ratio indicate the
efficient management and lower the ratio indicate inefficient
According to above ratio and graph In F.Y 2007 both the companies have same ratio of Inventory turn over means both the company 5
times to convert its raw material in to finished and sale to stock.
In F.Y 2008 The pak Honda company ratio is high as compared pak Suzuki company. Honda Company is in better position as
compared to pak Suzuki Company.
In F.Y 2009 Honda Company have high ratio as compared to pak Suzuki Company because Honda company production and sale ratio
is better than pak Suzuki Company and in better position as compared to pak Suzuki.
Calculation of Average Inventory

Formula:
Opening inventory (previous year) + Closing inventory (Current year)
2
Pak Suzuki Honda
Particulars 2007 2008 2009 2007 2008 2009
Opening
Inventory(Previou 9,613, 9,184,
s Year) 938 385 7,332,518 4169120 2,704,946 1612696
Closing Inventory 9,184,
(Current Year)) 385 7,332,518 6,879,729 2704946 1,612,696 2,954,091
Inventory 9,399,1 8,258,4 7,106,12 3,437,03 2,158,82 2,283,39
Turnover 62 52 4 3 1 4
Average Age of Inventory

This ratio is also explain average number of day where take a company to sell its inventory
Formula:
Days in Years
Inventory Turnover Ratio (Calculated Above)
Pak Suzuki Honda

Particulars 2007 2008 2009 2007 2008 2009
Days in year 365 365 365 365 365 365
Inventory
Turnover
Ratio(Calculate 4 4. 3. 6. 6.
d Above) .90 73 61 4.93 53 12
Inventory 1
Turnover Ratio 74 77 01 74 56 60
Average Age of Inventory
120
100
80
Days 60 Pak Suzuki
Honda
40
20
0
2007 2008 2009
Analysis
According to above calculated ratio in day of both the companies shows that in F.Y 2007 both the companies have same number of
days to convert the raw material into finished goods and sale but with the view of production the pak Suzuki company is in better
position because due to more production on the other hand Honda company with less production and taking the same days. So the pak
Suzuki Company is in better position and fast operation as compared to Honda Company.
In F.Y 2008 pak Suzuki company take 74 days to convert the raw material into finished goods with high cost of goods sold as compare
to Honda company while Honda company takes 56 if we see the days taken by Honda company is less as compared to pak Suzuki
company bit if we see the cost of good sold which shows that pak Suzuki company produce more products as it is in good position to
turn over heavy amount of material into finished goods. In F.Y 2009 pak Suzuki company ratio shows 101 day to convert the raw
material into finished goods with high amount of cost of goods sold and in better position as compared to Honda company while Honda
company take 60 day to convert the raw material into finished good with low amount of ratio
Operating cycle
It is also related to inventory; Operating Cycle is the Average time between purchasing and sell of the inventory It is
the sum of days of Inventory turn over and days to collect from debtors
Formula:
Age of Inventory + Collected period
Pak Suzuki Honda

Particulars 2007 2008 2009 2007 2008 2009
A/C
Receivable
turnover in 1 1
Days 1.5 2.5 3.2 19.1 5.1 8.0
Inventory
Turnover in 74 7 10 5 5
days .44 7.1 1.1 74.0 5.9 9.6
Operating 1
Cycle 76 80 04 93 71 78
Operating Cycle
120
100
80
days 60 Pak Suzuki
Honda
40
20
0
2007 2008 2009
Analysis
According to this ratio, it is depend on Sum of two components one is Account receivable turnover in days and Inventory Turn over in
days the total of these components is known as Operating Cycle.
In financial year 2007 the pak Suzuki Company complete its operating cycle in 76 days and having more sales and complete its
operating cycle in reasonable days. On the other hand Honda company have 93 days to complete its operating cycle and take more
time to convert the raw material into finished goods and collected from customer so position of pak Suzuki company is better as
compared to Honda.
In F.Y2008 the ratio pak Suzuki shows 80 day for their operating cycle while Honda company shows 71 days due to short period as
compared to pak Suzuki company, Honda company is better in this year but may difference arises due to sale sale if we see sale of pak
Suzuki company is high so with high sale 9 days have no effect the position of pak Suzuki and in this view its position is better.
In F.Y 2009 pak Suzuki Company shows 104 day s to operate its cycle while Honda Company shows 78 days but due to change in sale
made pak Suzuki Company is better.
Market Ratio
It is very useful ratios on the viewpoint of Investor; all over the world the Investors are finding the marketing ratio for
its Investment.
Dividend per share

Formula = Dividend /No of Shares outstanding
Pak Suzuki Honda
Particulars 2007 2008 2009 2007 2008 2009
Dividend Paid 50 410,132 81,757 86 98 20
Number of
outstanding
Shares (in
Thousand) 823000 823000 823000 714000 1428000 1428000
Dividend Per
Share 0.00 0.50 0.10 0.00 0.00 0.00
Dividend Per Share
0.50
0.40
0.30
Ratio Pak Suzuki
0.20 Honda
0.10
0.00
2007 2008 2009
Analysis
According to above calculated ratio Pak Suzuki Company in F.Y 2008 both the companies are not in good position with respect to
dividend.
In F.Y 2008 Pak Suzuki Company is in better position as compared to Honda Company because Honda Company is not paying any
dividend.
Similar Case in F.Y 2009 pak Suzuki Company is paying dividend as compared to Honda Company but the pak Suzuki Company is
paying low dividend in this year as compare to previous year.
Earning per Share

Earnings per share are generally considered to be the single most important variable in determining a share's price. It
is also a major component of the price-to-earnings valuation ratio. It is calculated as:
Formula:
Net profit
Number of Share outstanding
Pak Suzuki Honda

Particulars 2007 2008 2009 2007 2008 2009
2,774,
Net Profit 532 624,785 255,219 (264540) 75,010 (401,833)
Number of Shares 823000 823000 823000 714000 1,428,000 1,428,000

Earning Per
Share 3.37 0.76 0.31 (0.37) 0.05 (0.28)
Earning Per Share
4.00
3.00
2.00
Ratios Pak Suzuki
1.00 Honda
-
(1.00)
2007 2008 2009
Analysis
According to above calculated ratio and graph presentation shows that In F.Y 2007 pak Suzuki Company is better
position as compared to Honda Company because Honda Company is going in loss.
In F.Y 2009 the pak Suzuki company ratio is less than as then their previous year but have more ratios as compared
to Honda Company which shows the better position of pak Suzuki Company in this year but in this year pak Suzuki
Company earned less profit as compared to previous year.
In this year Honda company earned profit but at very low ratio.
In F.Y 2009 pak Suzuki Company earning is less then their previous year showing the decreasing trend, while Honda
Company earning is in loss so pak Suzuki Company is in better position as compared to Honda Company.
Cash Flow Ratio

Cash Flow ratios Indicate the company Liquidity, Bowring Capacity and profitability.
Operating Cash Flow / Total Debt

Formula:
Operating Cash Flow
Total Debt
Pak Suzuki Honda
Particulars 2007 2008 2009 2007 2008 2009
Operating Cash
Flows 1727673 2,151,360 1,969,420 1109494 1,485,153 1,461,260
Total Debt 7224302 2,803,462 3,330,134 5864449 3,587,066 7,114,243
Operating Cash 0. 0. 0. 0. 0. 0.
Flow/ Total Debt 24 77 59 19 41 21
Operating ccahs flow to total debt
0.80
0.60

Honda
0.20
-
2007 2008 2009
Analysis
According to above ratio and graph indicate that pak Suzuki company in F.Y have ratio of .24 of operating cash flow to total
debt as compared to Honda company. Its operating cash flow ratio indicates that they utilize better in operation as compared
to Honda Company.
In F.Y 2008 pak Suzuki company have higher ratio as compared to its previous year and also Honda company have high ratio
as compared to its previous year but the pak Suzuki company have high ratio as compared to Honda company shows that the
company utilized well as compared to Honda company.
In F.Y 2009 both the companies are going in decreasing trend as compare to their previous year but pak Suzuki company
have high ratio as compared to Honda company.
Operating Cash flow / current portion of long term debt + current payable
Pak Suzuki Honda

Particulars 2007 2008 2009 2007 2008 2009
Operating Cash Flows 1727673 2,151,360 1,969,420 1109494 1,485,153 1,461,260
Current Maturity of Long term
Debt - - - 583333 - -
Current Notes payable 3,173,554 1,315,584 1,853,034 3283155 3,055,037 3,387,594
OCF/ Current Maturities of LTD 3,173, 1,315, 1,853,0 3,866, 3,055, 3,387,5
and Current Payable 554 584 34 488 037 94
Operating cash flow/current

portion of long term debt current
payable 0.54 1.64 1.06 0.29 0.49 0.43
Operatiang cash flow to current ortion of L.T
debt+current payables
2.00
1.50

Honda
0.50
-
2007 2008 2009
Analysis
According to above ratio calculated show high ratio of pak Suzuki Company as compared to Honda Company. The pak Suzuki
Company generate cash flow better against utilization of Current liabilities while Honda company utilization is low as compared
to pak Suzuki Company.
In F.Y 2009 Pak Suzuki Company have higher ratio as compared to Honda company and generate cash with higher rate as
compared to their previous year and from the ratio of Honda company means better utilization of current liabilities as
compared to Honda.
In F.Y 2009. The pak Suzuki Company is in better position as compared to Honda Company
Common Size Analysis
Horizontal analysis
Pak Suzuki Company
Pak Suzuki Company Limited
Balance Sheet
(Horizontal Analysis of Previous Three Years)
Base Year
2007 2008 2009
Description (PKR) (PKR) (PKR)
EQUITY AND LIABILITIES
CAPITAL AND RESERVES.
Authorized capital
150,000,000 (2007:150,000,000) 1,500,000 1,500,000 1,500,000
ordinary share of 10 each
1,500,000 1,500,000 1,500,000
100% 100% 100%
Issued, Subscribed, Paid up Capital 823,000 823,000 823,000
150,000,000 (2007:82300)
100% 100% 100%
Reserves 13,154,035 13329681 13502600
100% 101% 103%
13,977,035 14,152,681 14,325,600

NON-CURRENT LIABILITES
Deferred Tax liability 99,000 146,000 5,000
100% 147% 5%
99,000 146,000 5,000
CURRENT LIABILITES
Trade and other Payables 3,173,554 1,315,584 1,853,034
100% 41% 58.39
Security deposit 75978 84278 86778
100% 111% 114.21
Deposit against display of vehicle 799006 742718 723554
100% 93% 90.56
Accrued markup 0 0 1512
100% 100% 100%
Short term borrowing 0 0 80000
100% 100% 100%
Advances from customers 2,409,418 371,596 441,781
100% 15% 18%
Provision for custom duty and sale tax 667346 143286 138475
100% 21% 21%
7,125,302 2,657,462 3,243,622
21,201,337 16,956,143 17,574,222

ASSETS
NON-CURRENT ASSETS (FIXED ASSETS)
Property, Plant and equipment 4,358,151 4,578,438 4,684,671
100% 105% 107%
Intangible Assets 386,779 383,808 347,732
100% 99% 90%
Long term Investment 5,323 4,449 4,449.00
100%
Long term loan. 18,015 11,078 3,162
100% 61% 18%
Long Term Deposits 26341 24683 34609
100% 94% 131%
Long term installment sale receivables 191,220 146,077 153,478
100% 76% 80%
4,985,829 5,148,533 5,228,101
CURRENT ASSETS
store, spares and loose tools 74,554 94,468 41,749
100% 127% 56%
Stock-in trade 9,182,019 7,732,518 6,879,729
100% 84% 75%
Current portion of long term investment 356238 340951 205680
100% 96% 58%
Trade debtor 185,739 286,697 376,508
100% 154% 203%
Loans and advances 154,567 128,080 226,388
100% 83% 146%
Trade deposit and short term prepayments 23,569 51,480 31,738
100% 218% 135%
Interest accrued 49210 29432 7837
100% 60% 16%
Other receivable 39386 98667 76685
100% 251% 195%
Short term investment 137978 0 0
100% 0% 0%
Sale Tax and excise duty adjustable 503134 111754 255609
100% 22% 51%
Tax refund due from Govt. 25062 434423 780089
100% 1,733.39 3113%
Cash and bank balance 5484052 2499142 3545621
100% 45.57 65%
16,215,508 11,807,612 12,427,633
21,201,337 16,956,145 17,655,734
Profit & Loss

Profit And Loss Account
Base Year
2007 2008 2009
SALES- Net 50,844,632 39,669,730 26,234,061

100% 78% 52%
Cost of sales (46,084,400) (39,079,124) (25,664,762)
100% 85% 56%
Gross Profit 4,760,232 590,606 569,299
100% 12% 12%
Distribution and Marketing cost 427,041 309,458 214,550
100% 72% 50%
Administrative Exp 511,055 504,617 495,200
100% 99% 97%
Finance cost 143,786 53,470 12,564
100% 37% 9%
Other operating income 921,011 1,342,913 619,572
100% 146% 67%
4,599,361 1,065,974 466,557
100% 23% 10%
Other operating Exp 318,098 73,798 38,714
100% 23% 12%
Profit/ Loss before tax 4,281,263 992,176 427,843
100% 23% 10%
Taxation 1,506,731 367,391 172,624
100% 24% 11%
Profit/ Loss after Tax 2,774,532 624,785 255,219
Common Size Analysis
Horizontal analysis
Honda Company Limited
Balance Sheet
Balance Sheet
2007 2008 2009

Authorized capital
(75,000,000 (2006:75,000,000) 750,000 2,000,000 2,000,000
ordinary share of 10 each)
750,000 2,000,000 2,000,000
100% 100% 100%
Issued, Subscribed, Paid up Capital 714,000 1,428,000 1,428,000
71,400,000 (2006: 42,000,000)
100% 200% 200%
Reserves 1,991,000 1,727,000 1801500
100% 87% 90%
Accumulated (loss)/ profit (264332) 74,678 (401,655)
100% -28% 152%
2,440,668 3,229,678 2,827,845

Long Term Finances 1,958,334 500,000 1,500,000
100% 26% 77%
1,958,334 500,000 1,500,000

CURRENT LIABILITES
Current portion of long term finance 583,333 - -

100%
Short term borrowing - - 2,151,601

100%
Mark up Accrued on loans 39,627 32029 75048
100% 80% 189%
Trade and other Payables 3,283,155 3,055,037 3,387,594
100% 93% 103%
3,906,115 3,087,066 5,614,243
8,305,117 6,816,744 9,942,088
ASSETS
Property, Plant and equipment 4,082,955 3,864,527 5,190,535
100% 90% 127%
Intangible Assets 65,903 64,636 195,830
100% 98% 297%
Capital work in progress 191,842 80,746 19,226
100% 42% 10%
Long term Investment - - -
Long term loan. Advances and deposits 28,105 29,050 31,503

100% 103% 112%
Long Term Deposits 4,019 4092 4042
100% 101% 101%
338,1 571,2
Deferred Taxation 251,008 65 14
100% 135% 228%
4,381,21 6,012,35
4,623,904 6 0
CURRENT ASSETS
store, spares and loose tools 50,316 83,101 101,942
100% 165% 203%
Stock-in trade 2,704,946 1,612,696 2,954,091
100% 60% 109%
Trade debtor - - -
advances, deposits, prepayments and other receivables 706,092 507,852 853,218

100% 72% 121%
Cash and bank balances 219,859 231,880 20,487
100% 105% 9%
2,435,52 3,929,73
3,681,213 9 8
8,305,117 6,816,745 9,942,088
Profit & Loss

Base Year
2007 2008 2009
SALES- Net 17,055,115 14,715,495 14,149,646

100% 86% 83%
(14,088,001
Cost of sales (16955181) ) (13,973,144)
100% 83% 82%
Gross Profit 99,934 627,494 176,502
100% 628% 177%
Distribution and Marketing cost (214,889) (209,677) (190,088)
100% 98% 88%
Administrative Exp 147,274 (139,163) (139,749)
100% 94% 95%
Other operating expense (64,514) (4,975) (311,025)
100% 8% 482%
Other operating income 150585 23,589 64,844
100% 16% 46%
Loss /profit from operation (176,158) 297,268 (399,516)
100% 169% 227%
Finance cost (305,491) (233,651) (222,769)
100% 76% 73%
Profit/ Loss before tax (481,649) 63,617 (622,285)
100% 13% 129%
Taxation 217109 11,393 220,452
100% 5% 102%
Profit/ Loss after Tax (264,540) 75,010 (401,833)
Vertical Analysis
Pak Suzuki Company
Balance Sheet
(Vertical Analysis of Previous Three Years)
Base Year Vertical Analysis
2007 2008 2009 2007 2008 2009
Description (PKR) (PKR) (PKR) % % %
Authorized capital
150,000,000 (2007:150,000,000) 1,500,000 1,500,000 1,500,000
1,500,000 1,500,000 1,500,000
Issued, Subscribed, Paid up Capital 823,000 823,000 823,000 3.88 4.85 4.68
150,000,000 (2007:82300)
62.0
Reserves 13,154,035 13329681 13502600 4 78.61 76.83
13,977,035 14,152,681 14,325,600

Deferred Tax liability 99,000 146,000 5,000 0.47 0.86 0.03
99,000 146,000 5,000
CURRENT LIABILITES
14.9
Trade and other Payables 3,173,554 1,315,584 1,853,034 7 7.76 10.54
Security deposit 75978 84278 86778 0.36 0.50 0.49
Deposit against display of vehicle 799006 742718 723554 3.77 4.38 4.12
Accrued markup 0 0 1512 - - 0.01
Short term borrowing 0 0 80000 - - 0.46
11.3
Advances from customers 2,409,418 371,596 441,781 6 2.19 2.51
Provision for custom duty and sale tax 667346 143286 138475 3.15 0.85 0.79
7,125,302 2,657,462 3,243,622
21,201,337 16,956,143 17,574,222 100% 100% 100%

ASSETS
NON-CURRENT ASSETS (FIXED
ASSETS)
20.5
Property, Plant and equipment 4,358,151 4,578,438 4,684,671 6 27.00 26.53
Intangible Assets 386,779 383,808 347,732 1.82 2.26 1.97
Long term Investment 5,323 4,449 4,449.00 0.03 0.03 0.03
Long term loan. 18,015 11,078 3,162 0.08 0.07 0.02
Long Term Deposits 26341 24683 34609 0.12 0.15 0.20
Long term installment sale receivables 191,220 146,077 153,478 0.90 0.86 0.87
4,985,829 5,148,533 5,228,101
CURRENT ASSETS
store, spares and loose tools 74,554 94,468 41,749 0.35 0.56 0.24
Stock-in trade 9,182,019 7,732,518 6,879,729 43.3 45.60 38.97
1
Current portion of long term investment 356238 340951 205680 1.68 2.01 1.16
Trade debtor 185,739 286,697 376,508 0.88 1.69 2.13
Loans and advances 154,567 128,080 226,388 0.73 0.76 1.28
Trade deposit and short term
prepayments 23,569 51,480 31,738 0.11 0.30 0.18
Interest accrued 49210 29432 7837 0.23 0.17 0.04
Other receivable 39386 98667 76685 0.19 0.58 0.43
Short term investment 137978 0 0 0.65 - -
Sale Tax and excise duty adjustable 503134 111754 255609 2.37 0.66 1.45
Tax refund due from Govt. 25062 434423 780089 0.12 2.56 4.42
25.8
Cash and bank balance 5484052 2499142 3545621 7 14.74 20.08
16,215,508 11,807,612 12,427,633
21,201,337 16,956,145 17,655,734 100% 100% 100%

(Vertical Analysis of Previous Three Years)
Base Year Vertical Analysis
2007 2008 2009 2007 2008 2009
SALES- Net 50,844,632 39,669,730 26,234,061 100% 100% 100%

(90.6 (98.5 (97.83
Cost of sales -46,084,400 -39,079,124 -25,664,762 4) 1) )
Gross Profit 4,760,232 590,606 569,299 9.36 1.49 2.17
Distribution and Marketing cost 427,041 309,458 214,550 0.84 0.78 0.82
Administrative Exp 511,055 504,617 495,200 1.01 1.27 1.89
Finance cost 143,786 53,470 12,564 0.28 0.13 0.05
Other operating income 921,011 1,342,913 619,572 1.81 3.39 2.36
4,599,361 1,065,974 466,557 9.05 2.69 1.78
Other operating Exp 318,098 73,798 38,714 0.63 0.19 0.15
Profit/ Loss before tax 4,281,263 992,176 427,843 8.42 2.50 1.63
Taxation 1,506,731 367,391 172,624 2.96 0.93 0.66
Profit/ Loss after Tax 2,774,532 624,785 255,219 5.46 1.57 0.97
Vertical Analysis
Honda Company
Balance sheet of Honda Company
Description 2007 2008 2009 2007 2008 2009

(PKR) (PKR) (PKR) %age %age %age
Authorized capital
(75,000,000 (2006:75,000,000) 750,000 2,000,000 2,000,000
ordinary share of 10 each)
750,000 2,000,000 2,000,000
Issued, Subscribed, Paid up Capital 714,000 1,428,000 1,428,000 8.60 20.95 14.36
71,400,000 (2006: 42,000,000)
Reserves 1,991,000 1,727,000 1801500 23.97 25.33 18.12
(3.18
Accumulated (loss)/ profit (264332) 74,678 (401,655) ) 1.10 (4.04)
2,440,668 3,229,678 2,827,845

Long Term Finances 1,958,334 500,000 1,500,000 23.58 7.33 15.09
1,958,334 500,000 1,500,000

CURRENT LIABILITES
Current portion of long term finance 583,333 - - 7.02 - -
Short term borrowing - - 2,151,601 - - 22
Mark up Accrued on loans 39,627 32029 75048 0.48 0.47 0.75
Trade and other Payables 3,283,155 3,055,037 3,387,594 39.53 44.82 34.07
3,906,115 3,087,066 5,614,243
8,305,117 6,816,744 9,942,088 100% 100% 100%
ASSETS

Property, Plant and equipment 4,082,955 3,864,527 5,190,535 49.16 56.69 52.21
Intangible Assets 65,903 64,636 195,830 0.79 0.95 1.97
Capital work in progress 191,842 80,746 19,226 2.31 1.18 0.19
Long term Investment - - -
Long term loan. Advances and deposits 28,105 29,050 31,503 0.34 0.43 0.32
Long Term Deposits 4,019 4092 4042 0.05 0.06 0.04
338,16 571,2
Deferred Taxation 251,008 5 14 3.02 4.96 5.75
4,623,904 4,381,216 6,012,350
CURRENT ASSETS
store, spares and loose tools 50,316 83,101 101,942 0.61 1.22 1.03
Stock-in trade 2,704,946 1,612,696 2,954,091 32.57 23.66 29.71
Trade debtor - - -
advances, deposits, prepayments and other

receivables 706,092 507,852 853,218 8.50 7.45 8.58
Cash and bank balances 219,859 231,880 20,487 2.65 3.40 0.21
3,681,213 2,435,529 3,929,738
8,305,117 6,816,745 9,942,088 100% 100% 100%
Base Year
2007 2008 2009 2007 2008 2009
SALES- Net 17,055,115 14,715,495 14,149,646 100% 100% 100%

(99.41 (95.7 (98.75
Cost of sales (16955181) (14,088,001) (13,973,144) ) 4) )
Gross Profit 99,934 627,494 176,502 0.59 4.26 1.25
(214,889 (1.26 (1.42
Distribution and Marketing cost ) (209,677) (190,088) ) ) (1.34)
(147,274 (0.86 (0.95
Administrative Exp ) (139,163) (139,749) ) ) (0.99)
(64,514 (0.38 (0.03
Other operating expense ) (4,975) (311,025) ) ) (2.20)
Other operating income 150585 23,589 64,844 0.88 0.16 0.46
(176,158 (1.03
Loss /profit form operation ) 297,268 (399,516) ) 2.02 (2.82)
(305,491 (1.79 (1.59
Finance cost ) (233,651) (222,769) ) ) (1.57)
(481,649 (2.82
Profit/ Loss before tax ) 63,617 (622,285) ) 0.43 (4.40)
Taxation 217109 11,393 220,452 1.27 0.08 1.56
(264,540 (1.55
Profit/ Loss after Tax ) 75,010 (401,833) ) 0.51 (2.84)
Review of Descriptive Information

Car manufacturing industry require low custom duties and excise duty which is higher compared with regional
countries and one of the reasons for higher prices of car Manufacturing Company. Now in currently budget the duties
impose on import product which will lead to increase in manufacturing costs, which will adversely affect the
profitability of the sector. The convance is need for every people and willing to have their own. These industries are
going in less profit and as Honda is going in loss, this is a big loss of Govt. because if these type of industries goes in
profit it become an important source of Govt. revenue. Govt. Should reduce duties and other taxes on import so these
product may prepare at lower cost and which in capacity of more people which will increase sale and Govt. revenue,
and also encourage to investor and the circulation of money increase in the country which also provide the
opportunity for employment and boost a strong economy in the country. Our economy is facing problem and we are
under developed country and the arising economic condition effect the whole business circulation in the country
which have bad effect on economy and door for the investment in the country is close with reference to car
manufacturing industry their condition in Pakistan is poor and not generating profit or bearing low profit and these
luxuries go beyond the capacity of common man and difficult to operate for car manufacturing company activities.
Comparisons
Trend Analysis
Trend analysis is the comparison of the firm financial position of the firm where we see that the firm is going to
increasing or decreasing trend or it retain its financial position as compare of previous years
There are several ratios which use in above but there trends are given below:
Pak Suzuki
Liquidity Ratio
Ratio 2007 2008 2009
3
1 Current Ratio 2.3 4.4 .7
1
2 Acid Test Ratio/Quick Ratio 1.0 1.5 .7
2
3 Sales to working Capital 5.6 4.3 .9
6.0
5.0
1 Current Ratio
4.0
3.0 2 Acid test Ratio
2.0 3 Sales to working

Capital
1.0
-
2007 2008 2009
Analysis
According to ratio and graphic representation showing the liquidity of company in increasing trend in all the three years but have
fluctuations in increasing trend some move more and some moving less in up ward but in F.Y 2008 as per liquidity the current Assets
ratio and Liquidity ratio are more as compared to their previous year and showing up ward but the working capital ratio is showing a
decreasing trend as compared to year In F.Y 2009 the pak Suzuki company showing positive trend but the ratio is less than year 2008
in current Assets. But the liquidity ratio is high as compared to previous year showing good liquidity to meet the obligation of company
and working capital ratio is showing low trend as compared to their previous year in 2009.
Honda
Honda
Ratio 2007 2008 2009
1 Current Ratio 0.94 0.79 0.70
2 Quick Ratio 0.24 0.24 0.16
(75.83 (8.40
3 Sale to working Capital ) (22.59) )
10.00
-
(10.00)
(20.00)
(30.00)
1 Current Ratio
(40.00)
(50.00) 2 Quick Ratio
(60.00) 3 Sale to w orking Cpaital
(70.00)
(80.00)
2007 2008 2009
Honda
Analysis
According to graphic presentation and calculated data it show the liquidity trend of Honda Company which is going in down ward trend
with respect to working capital. In F.Y 2007 the current ratio and quick ratio of Honda company is very low and this low trend remain in
all three years means company liquidity is not enough to meet current obligation for this purpose they based on loan due to which
expense of interest payment increase as expense .In F.Y2007 sale to working capital ratio was high as compared to 2008 and similarly
showing a decreasing trend in year 2009 So the quality of working capital also showing decreasing trend.
Pak Suzuki
Leverage Ratio
Pak Suzuki
Ratio 2007 2008 2009
0. 0. 0.
1 Debt / Equity 52 20 23
0. 0. 0.
2 Current worth/net worth 67 66 65
0.0 0.01 0.00
3 Total Capital Ratio 07 02 03
4 Fixed Assets/Equity 0.31 0.32 0.33
Graphic representation:
0.70
0.60
0.50
0.40 1 Debt / Equity
0.30 2 Current worth/networth
0.20 3 Total Capital Ratio
0.10 4 Fixed Assets/Equity
-
2007 2008 2009
Pak Suzuki
Analysis
According to above ratios and graph presentation as per leverage ratio debt to equity ratio is high in F.Y 2007 it indicate that pak
Suzuki leverage trend is going up ward as compared to other years. The current worth to net worth ratio showing slightly difference
decreasing trend in all three years. In F.Y 208 Total capitalization ratio is low as compared to F.Y 2008. Fixed Assets to equity ratio to
equity ratio showing increasing trend from F.Y 2007 To F.Y 2009 but this increase is on 1% increase as compared to years which is
little change.
Honda
Leverage Ratio
Honda
Ratio 2008 2009 2010
2. 1. 2.5
1 Debt / Equity 40 11 2
(0. (0. (0.
2 Current worth/networth 09) 21) 64)
0. 0. 0.3
3 Total Capital Ratio 45 13 5
4 Fixed Assets/Equity 1.67 1.20 1.84
3.00
2.50
2.00
1.50
1 Debt / Equity
1.00
2 Current worth/networth
0.50
- 3 Total Capital Ratio
(0.50) 4 Fixed Assets/Equity
(1.00)
2007 2008 2009
Honda
Analysis
According to above ratio and graphic presentation it indicate that leverage trend of Honda company is going towards a mixture trend
some upward and some down ward as if we see in the year 2007 Debt to equity ratio is high as compared to 2008 and also increasing
rend in F.Y 2009. In F.Y 2007 Current net worth ratio is very low and in F.Y 2008 it has down ward trend with and with more ratios in
F.Y 2009. The Total Capital ratio was low in F.Y 2007 and showing a decreasing trend in F.Y 2008 but having increasing trend in F.Y
2009. Fixed Assets to equity ratio was high in F.Y 2007 and have decreasing trend in F.Y 2008 but against showing increasing trend in
F.Y 2009.
Pak Suzuki
Profitability Ratio
Pak Suzuki
Ratio 2007 2008 2009
1 Net Profit Margin 5.46% 1.57% 0.97%
2 Return on investment (ROI) 30.63% 7.01% 2.99%
3 Gross profit margin 9.36% 1.49% 2.17%
35.00%
30.00%
25.00%
20.00%
1 Net Profit Margin
15.00%
2 Return on investment (ROI)
10.00%
5.00% 3 Gross profit margin
0.00%
2007 2008 2009
Pak suzuki
Analysis
According to above ratio and graphic presentation it indicate that Company trend is towards upward direction but at a decreasing rate.
If we see in the F.Y year 2007 the net profit margin is high as compared to F.Y 2008 and 2009 which means that profitability trend is
more as compared to year 2008 and 2009 and have a decreasing trend in coming year. In F.Y 2007 Return on investment is higher as
compared to other years and showing decreasing trend in F.Y 2008 and more decreasing in F.Y 2009.The Gross profit margin is high in
F.Y 2007 and decreasing trend in F.Y 2008 and showing some increasing trend in F.Y 2009 as compared to F.Y 2008.
Honda Company
Profitability Ratio
Honda
Ratio 2007 2008 2009
1 Net Profit -1.55% 0.51% -2.84%
2 Return on Investment -4.00% 7.97% -9.23%
3 Total Capital Ratio 0.59% 4.26% 1.25%
8.00%
6.00%
4.00%
2.00%
0.00%
1 Net Profit
-2.00%
-4.00% 2 Return on Investment
-6.00% 3 Gross Profit
-8.00%
-10.00%
2007 2008 2009
Honda
Analysis
The profitability trend of Honda Company is showing a down ward trend. In year 2007 Net profit ratio is showing downward
trend and company not generating profit as compared to F.Y 2008. In F.Y 2008 Company generating profit but with very low
ratio and next coming year also down ward trend with high ratio and company sustain loss. The return on investment have
directly effect with profit and showing the same trend as in which net profit move in all three financial Years and showing down
ward trend in two F.Y 2007 and 2009 and showing upward trend in F.Y 2008. The Gross profit is showing up ward trend with
low ratio in F.Y 2007 and have high ratio in F.Y 2008 as compared to previous year. In F.Y 2009 have upward trend with low
ratio.
Industry Analysis:
If we see the analysis of industries the Auto mobile companies facing problem to run in the country badly due to decrease in
sale volume which reduce their profits and creates hurdle to operate their activities. With reference to Pak Suzuki company its sale
volume decrease 29 % as compared to previous year this arises due to the economic condition prevailing in the country and sharp rises
in prices of material which depress the demand and are going in depressing position. Due to cost push inflation resulting deprecation of
pak rupee and also limited financing by banks. The fluctuations in condition and companies activities are effected and not going on a
stable condition as profitability is going towards down ward trend from year to next follow year which is a danger for the company. The
company earning profit after tax in year 2009 which is less then previous year the reason for that is drop in sale of auto mobile company
and exchange rate which also effect their production and increasing the production cost.
In case of Honda company analysis is made and showing bad position of the company form in three years. The company is not earning
profit and going in loss. The financial position is not good of Honda Company this also happen due to rise in sale prices and car
financing rates. The car assembly had to increase the sale price because of cost up due to exchange rate and under utilization of
production capacity. The finance cost was high due to increase in mark up on short term and long term loans. This company is going
with the corporation of partner who provide capital to meet the requirement of working capital and investment made in new models.
The Automobile companies have distinct position in industry but the imposes duties and taxes and exchange loss also badly effect the
auto mobile companies. With all this it is necessary for the protection of industry to maintain the economic condition suitable in the
country provide some special relaxation in duties and taxes which will help to low operating cost and demand will increase which will
boost sale of Auto mobile industry and circulation of funds and investment opportunity in the country. The with drawl of federal excise
duty5% in budget 2009-2010 is good for Automobile companies and other initiative take by the Govt. for the improvement of this sector
which should ensure a reasonable return on equity and open the door for investment and long run survival of the industry . The
industrial demand can increase by reducing high car financing cost and reduce in cost of production and this sector can serve important
source of Revenue for Govt. and Investment Opportunities in the country which help to maintain Economic stability and for the
companies engaged in this sector.
Interpretation
Financial Statement Analysis is the process of examining the relationship among the financial statement elements with a
view to effective decision making. This is achieved by examining the financial statements in detail to ascertain the validity
of the trends and predictions on which the future decisions will be made. The process integrates the various different
aspects of financial reporting by trying to predict the combined effect of horizontal, vertical and trend analysis.
The subject matter of this project is the Auto Mobile industry. It is a very important industry all over the world,
infrastructure of the Country in the Current Financial Years the Auto Mobile Industry of Pakistan is in Loss due to some
financial and legally crises and bad economic condition. The main purpose of this project is to analysis the Financial
Statement’s of the said companies with regards to its Ratios, there horizontal and vertical analysis and also explain the
trend of the companies either these are going to rising or losing or remain constant with regards to its previous years, and
also recommend that which company is best according to the analysis.
According to the financial Statement of both companies, as per the profit and loss statement of both the companies the
Pak Suzuki Company is better as compare of Honda Company because its gross profit Margin is better than the Honda
Company in three year analysis. According to the various analysis conducted in this report Pak Suzuki Company is in
better position as compare to Honda Company because its better Financial position.
Conclusion
At the end of this comprehensive piece of work, I can safely conclude that both the chosen organization in the Auto
mobile sector of Pakistan is suffering. There are two facets to this problem. Firstly this is due to the economic
condition. and second reason for decline in profit is that the manufacturing costs of these firms are not being meet
their requirements.
The main reasons associated with this decline are interlinked if they are analyzed carefully. The long term debts are
rising because the companies are unable to meet their requirement of Investments and the expenses in the day to
day manufacturing activities For this they have to takes loans, which put them further into debt and it starts a never
ending cycle. The situation boils down to the inability of the firms to meet there manufacturing and selling costs. The
major reasons attributed to this are the increasing rates of taxation by the government of Pakistan. The taxes have
risen and hence left the firms out of pocket as if it were. Also, the Duties has risen appreciably over the past two
years which means that import duties and bills of these firms rose even further. In this scenario, the firms face an
uphill struggle to meet their costs and unless the status quo is broken, these firms would go out of business very
soon.
Recommendation
Manufacturing industries are playing important role in the economy of the country and serve as a important source of Revenue, to stay
the economic condition in the country and source of employment in Pakistan but due to economic crises these industries are suffering
loss which have bad effect on the economy of the country and causes of rises in unemployment in the country. Due to slump the
investor have no interest to invest money it this sector and the owner and stake holder who invested is not getting reward of their risk
and effort as example of Honda company on reviewing the picture is clear about company financial health and suffering loss so in
these circumstances it can not grow I would like to recommend that Govt. should pay special attention to this sector whether it relate to
give them a good push for survival because to run economy these industries are playing their role but in the current situation these
industries are badly effected by economic condition currently prevailing in Pakistan. It is not only dangers for Pakistan prosperity about
also difficult for the companies to long run in the country. Govt. should reduce the duties and taxes on import so that operating cost of
these companies should be reduce to cover their expenses and help in generating profit and also taking the services of expert to run
these organization. The pak Suzuki and Honda Company should review their policies and strategy to go with profit and try to overcome
their internal weakness and operational strategy which help them to generate profit. If it is not do the remaining industry will also shut
down and cause bad effect which could not imagine.
Methodology
Data collection sources

Secondary sources will be used for data collection for this project. These include internet and the Stock exchange for gathering the data
as these companies are listed in Lahore stock exchange to collect their annual reports and then examine them.
Data Processing
Microsoft word and excel work sheets to compute the different ratio and analysis. This would include tabulating, summarizing and
presenting the data graphically with the tolls available in Microsoft office and perform some manual work and calculations.
Bibliography
Abid, Namatullah. Financial Statement Analysis.

Ghani, MA. Advance Financial Accounting
Honda website: Available at http://www.honda.com.pk
Pak Suzuki Website: Available at http://www.paksuzuki.com.pk
Karachi stock exchange website: Available at http://www.kse.com
Consultancy from Seniors Mr. Shahzad Ahmad (ACMA)
Introduction of Student
• Last Degree Obtain : B.Com

• Organization Name : NNR Company (Pvt) Limited
• Designation : Tax Officer
• Experience (Years) : 8 Years

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Virtu al University of Pakistan

Evaluation Sheet for Project

Name of Student: Rauf Bilal

Financial statement Analysis of

Department of Management sciences,

Chapter No 2: Project proceedings....................................12

2.1 Liquidity Ratio................................................................12

2.2 Leverage Ratio................................................................16

2.4 Activity Ratio

2.5 Market Ratio…………………………………………………58

2.9 Review of Descriptive Information...........................74

Over View of the company(Honda)

Over view of the company. (Pak Suzuki)

Processing and Analysis

Current Ratio 2.3 4.4 3.7 0.94 0.79 0.70

Quick Ratio /Acid Test Ratio:

Ratios 1 Pak Suzuki

Sales to Working Capital

Ratio 5.6 4.3 2.9 (75.83) (22.6) (8.4)

Calculation of Working Capital

Time Interest Earn

Working for EBIT

Less Distribution cost (309,458)

Less Administrative Cost (504,617)

Add other operating Income 1342913

Worker profit participation fund 53298

Fixed Charge Coverage

Pak Suzuki Honda

Debt Ratio 0.3 0.3 0.2 0.71 0.53 0.72

Ratios 0.4 Pak Suzuki

Debt to Tangible Net worth Ratio

Debt to Tangible Net 0. 0. 0.

Tangible Net Worth ratio = (Owner's Equity - Intangible Assets)

Current worth / Net worth Ratio

Calculation of Current worth

Pak Suzuki Honda

Total Capitalization Ratio

Pak Suzuki Honda

Total Capitalization Ratio

Fixed Asset / Equity Ratio

Ratios 1 Pak Suzuki

Long term Asset versus Long term Debts

Long term Assets

Ratios 2.00% Pak Suzuki

Pak Suzuki Honda

Ratios 5.00% Pak Suzuki

Calculation of Average Assets

DuPont Return on Assets

Pak Suzuki Honda

Net Income / Net Sales 0 0. 0. 0. (0. (0.

Net Sales / Assets 2 2. 1. 2. 2. 1.

Calculation of Net Income to sale

Calculation of Net Sales / Assets

Pak Suzuki Honda

Operating Income Margin

Pak Suzuki Honda

Operating ncome Margin

Operating Assets turnover

Pak Suzuki Honda

Operating Assets Turn over

Return on operating Assets

Sales to Fixed Assets