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Certificate
This is to certify that the report based on 3 years published Annual Report of Maruti Suzuki ltd. Is submitted by Varasani Mahendra Devjibhai to the N. R. Institute Of Business Administration affiliated to the Gujarat University in a partial fulfillment requirement for the completion of practical study at the second year B.B.A. programme for the year 2007.
1 FINANCIAL REPORT N.R.I.B.A.
---------
---------Prof. In
ACKNOWLEDGEMENT
I am highly thankful to MARUTI SUZUKI for helping me in my Practical Studies at second year B.B.A. programme. It has provided me many details and enlightens me in preparation of this financial report. I take this opportunity to thanks our director A. B. Dixit and Pro. Seema Pandit for giving me an opportunity to prepare my financial project report. She also helped me in finding out the Ratios and some important aspects.
FINANCIAL REPORT
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PREFACE
Finance management in India has substantially in scope and complexity in view of recent government policy. The modern approach to corporate finance is much more than traditional approach to financial management or with more procurement of funds. In present situational financial management is real with procurement of funds and maximum utilization of it. Finance Is A Blood Of Any Business Body. Less capital creates problems in the business and more capital is also creating problems. In this report, I am trying to explain how we can find out financial result with the help of ratio analysis and some more in portent graphs with the help of Ratio Analysis. We can easily understand the profitability of the business, efficiency of business, useful in inter comparison. It is also useful for budgeting control and decision-making. Ratio analysis helps interested parties like share holders, investors, creditors, government also and analysis to make an evaluation of a certain aspect of a firms performances.
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INDEX
Sr. no. Certificate Acknowledgement Preface Company profile Title Page No. 01 02 03 05
1.
Name of the company Registered office address Status in the market Special achievement Finance highlights Meaning of analysis and objectives of study 2.
Results of operations
Profits of three years GP,NP,EBIT,EBT,EAT Importance of cash profit (theory) Cash flow statement Conclusion 3.
Ratio Analysis
Meaning and importance of ratio and classification traditional classification & functional classification PROFITABILITY RATIO Gross profit ratio
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Net profit ratio Expense ratio Operating ratio Return on investment Return on share holders fund Return on equity share capital Return on equity shareholders fund Earning per share Dividend per share Price earning ratio Dividend yield ratio Interest coverage ratio ACTIVITY / TURNOVER RATIO: Overall turnover ratio Fixed asset turnover ratio Debtor turnover ratio Creditors ratio Creditors turnover ratio Stock turnover ratio LIQUIDITY RATIO : Current ratio Liquid ratio Quick / acid ratio LEVERAGE RATIO: Proprietary ratio Debt equity ratio Capital gearing ratio OTHERS: Long term fixed fund to fixed asset 4.
5. 6.
7.
8.
Conclusion
Findings Conclusion suggestion
REGISTERED
AND
CORPORATE
OFFICE:
11th Floor, Jeevan Prakash Building, 25, Kasturba Ganghi Marg, New Delhi 110001
Special Achievement :
MARUTI SUZUKI HAS WON OVER 50 AWARDS SINCE YEAR 2000
FINANCIAL REPORT
N.R.I.B.A.
NO. 1 IN THE AUTOMOBILES SECTOR IN THE INDIA MOST RESPECTED COMPANIES SURVEY, 2006. RANKED AMONG THE TOP 5 CAR COMPANIES IN THE 2006 WORLDS REPUTED CSOMPSNIES LIST PUBLISHED BY FORBES MAGAZINE.
MOST
1 IN CUSTOMER SATISFACTION, 7 TEARS IN ROW, 2000 06. 1 IN SALES SATISFACTION, 3 YEARS IN ARAW, 2004 06. 1 INITIAL QUALITY STUDY, 2006. 1 IN INDIA APEAL STUDY, 2006.
IN
YEARS IN A ROW,
2002
IN
RANKED
AMONG TOP
IN THE
MANUFACTURER
7
OF THE
YEAR, 2005
FINANCIAL REPORT N.R.I.B.A.
FINANCIAL HIGHLIGHT:
YEAR
Net Sales Profit Before Tax. Profit After Tax. EPS
2005 06
120,034 17,500 11,891 41.16
2006 - 07
145,922 22,798 15,620 51.12
FINANCIAL REPORT
N.R.I.B.A.
FINANCIAL REPORT
N.R.I.B.A.
CASH FLOW STATEMENT FOR THE YEAR ENDED 31st MARCH 2007
(A) Cash flow from Operating Activities : Net Profit before Tax Adjustments for : Depreciation Interest Expense Interest Income Dividend Income Net Loss on Sale / discarding of fixed assets Profit on sale of Investments Debts / Advances Written back Provisions no longer required written off Opening Loss of MSAIL adjusted from opening surplus on amalgamation Impact of transition provision of Accounting Standard 15 Employee benefit Operating profit before Working Capital changes Adjustments for changes in Working Capital (increase) / decrease in sundry debtors (increase) / decrease in other current Assets, Loan & advances (increase) / decrease in Inventories increase / (decrease) in current Liabilities and Provisions Cash generated from Operating Activities Taxes / received (Net of TDS) Net cash from Operating Activities Rs. In million 22,798 2714 376 1109 1528 4 389 22 459 84 5 22340 1035 1523 1680 5170 26632 6352 20,280
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(B) Cash flow from Investing Activities : Purchase of fixed assets Sale of fixed Assets Sale of investments Purchase of investments Interest received Dividend received Net cash from Investing Activities (C) Cash flow from Financing Activities : Proceeds from Short term borrowings Proceeds from Long term borrowings Repayment of Short term borrowings Interest paid Dividend paid Net Cash from Financing Activities Net Increase / (Decrease) in Cash & Cash Equivalents Cash and Cash Equivalents as at 1st April (Opening Balance) Cash and Cash Equivalents as at 31st March (Closing Balance) Cash and Cash Equivalents comprise Cash, Cheques & Drafts (in hand) Balance with Scheduled Bank in Current Account Balance with Scheduled Bank in Deposit Account
233 5675 317 280 1011 4300 212 14016 14228 14228 946 202 13080
Interpretation
Above cash flow profit is higher company. Also describes strong of Maruti Suzuki Ltd. Is shown that year 2006 07 net than 2005 06 and this is good condition for the investing as well as financing activities cash flow condition from the previous years cash flow activities.
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PROFITABLITY :
Useful information about the trend of profitability is from profitability ratio. The gross profit ratio, net profit ratio and ratio of return on investment give a good idea of the profitability of the business. On the basic of this ratio, investors get an idea about overall efficiency of managers and bank as well as other creditors draw useful conclusion about repaying capacity of the borrowers.
LIQUIDITY :
In fact the use of ratio was made initially to ascertain the Liquidity of business. The current ratio, acid test ratio will tell whether the firm will be able to meet its current liabilities and when they nature. Banks and other leaders will be able to conclude from these ratios whether the firm will be able to pay regularly the interest and loan installments.
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EFFCIENCY :
The turnover ratios are excellent guide to measure the efficiency of managers. All such ratio related to sales present a good picture of the success on the business.
INDICATE TREND :
The ratio of the last 3 to 5 years will indicate the trend in the respective fields. A particular ratio of a company , for one year may compare favorably with industry average, but its trend shows a deteriorating position, it is not desirable only ratio analysis will provide this information.
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1) Profitability ratio :
These ratios indicate the profit generating capacity of Business. This category includes: Gross Profit Ratio Net Profit Ratio Operating ratio Return on Company Employees Ratio Return on Shareholders Funds Debt Service Coverage Ratio
2) Liquidity Ratios :
These ratios indicate whether short term assets are enough to meet short - term obligation from short assets. These categories include : Current Ratio Liquid Ratio Acid Test Ratio
3) Leverage Ratios :
These ratios indicate compensation of companys capital and Its distribution into debt and equity. These categories include: Proprietary Ratio Debt Equity Ratio Capital Gaining Ratio
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Implementation :
Gross profit is result of the relation between price, sales volume and costs. A change in the gross margin can be brought about by changes in any of these factors. The gross profit ratio can also be used in determining the extent of loss caused by theft, spoilage, damage and so on in the case of those firms which follow the policy of fixed gross profit margin in pricing their product. The gross margin represents the limit beyond which fall in sales price are outside the tolerance limit.
[ Rs. In million]
2005 06 24626 120034 2004 - 05 21744 109108
INTERPRETATION :
This ratio indicates relation between G/P and Sales. For the year 200405 it was 19.93 and 2005-06 was 20.51 and increase to 24.59 in 200607.
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Implementation :
The net profit ratio is indicative of managements ability to operate the business with sufficient success not only to recover from revenue of the period the cost of merchandise or services, the expenses of operating the business and the cost of the borrowed funds, but also to leave a margin of reasonable compensation to the owners for providing their capital at risk. The ratio of net profit ratio to sales essentially expresses the cost price effectiveness of the operation.
A high net profit margin would ensure adequate return to the owners as well as enable a firm to withstand adverse economic conditions when selling price is declaiming, cost of production raising and a low net profit margin has the opposite implication.
TABLE OF THREE YEARS RATIO : PARTICULAR 200607 2005-06 2004-05 Net profit ratio 16.47 % 16.47 % 16.47 % CALCULATON :
PARTICULAR Net Profit Sales 2006 - 07 15620 145922
[ Rs. In million]
2005 06 11891 120034 2004 05 8536 109108
Interpretation :
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FINANCIAL REPORT
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This ratio shows a better profitability of the firm as compared to the last year i.e. 2005 06. This suggests a satisfactory position. It is sound financial position to the company. Higher the ratio better for the company.
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Implementation :
Some accountants calculate expenses ratio in respected of raw material consumed, direct wages and factory expenses. It is closely related to the profit margin, gross as well as net.
2005-06 2004-05
89.23 22.79
CALCULATION :
PARTICULAR Expenses Sales Total 200607 100416 109108 209524
[ Rs. In million]
2005 06 107110 120034 227144 2004-05 129349 145922 275271
INTERPRETATION :
This ratio shows relationship between expanses to sales. Above table shows that for the year 2004 05 it was 88.64 % the increase in 2005 06 up to 89.23% that indicates there is increase in operating expenses for the year 2006 07 it is 92.03% and it is higher than previous tear which shows increase in operating expenses.
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Implementation :
Some accountants calculate expenses ratio in respected of raw material consumed, direct wages and factory expenses. It is closely related to the profit margin, gross as well as net.
INTERPRETATION:
This ratio shows relationship between COGS + operating expanses to sales. Above table shows that for the year 2004 05 it was 87.33 % the increase in 2005 06 up to 86.90 % that indicates there is increase in operating expenses for the year 2006 07 it is 83.89 % and it is lower than previous year which shows increase in operating expenses.
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Implementation :
Return on investment indicates the profitability of business and is very much in use among financial analysis. The ratio is an indicator of the measure of the success of a business from the owners point of view. The ultimate interest of any business is the rate of return on invested capital. It may be measured by the ratio of income to equality capital. It determines whether a certain goal has been achieved or whether an alternative use of capital is justified.
X 100
2005 06 37.42 %
2004- 05 40.78 %
CALCULATION :
EBIT Earning before interest and tax CAPITAL EMPLOYED Capital Reserve and surplus + long term loan 2006 - 07 25888
[ Rs. In million]
2005- 06 20558 2004 05 18140
INTERPRETATION:
This ratio shows relationship between E B I T to CAPITAL EMPLOYED. Above table shows that for the year 2004 05 it was 22.19 % the increase in 2005 06 up to
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FINANCIAL REPORT
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26.54 % that indicates there is increase in E B I T for the year 2006 07 it is 24.60 % and it is higher than previous year which shows decrease in capital employed. Higher the ratio, it is better for the company.
Implication :
supplied by the creditors and owners taken to gather, the return on shareholders equity measures exclusively the return on the owners funds.
100
2004 05 21.90 %
[ Rs. In million] 2006 - 07 2005 06 2004 05 15620 2006 - 07 1445 67094 11891 2005 06 1445 53081 8536 2004 05 1445 42343
INTERPRETATION:
The ratio indicates relationship between Net profits to share holders fund therefore higher the returns to shareholders. For the year 2004 05 it is 21.90 % that increase in the year 2005 06 up to 23.70.This ratio shows downward trend in the ratio in return on shareholders fund for this company.
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Implementation :
This is probably the single most important ratio to judge whether the firm has earned a satisfactory return for its equity holders or not. Its adequacy can be judge by : (1) comparing it with the past record of the same form, (2) comparisons with the overall industry average.
Formula : = Net profit after tax -- Preference dividend Equity capital TABLE OF THREE YEARS :
PARTICULAR Ratio of Return on Equity share capital 2006 - 07 22.79 % 2005 06 21.81 %
100
2004 05 19.49 %
CALCULATION :
Net profit after tax EBIT (--)Interest EBT (--)PAT 2006- 07 25888 3090 22798 15620
[ Rs. In million]
2005 06 20558 3058 17500 11891 2004 05 18140 5091 13049
509 1
2004-05 1445
2006-07 1445
2005-06 1445
INTERPRETATION:
22 FINANCIAL REPORT N.R.I.B.A.
The ratio indicates relationship between Net profits to share holders fund therefore higher the returns to shareholders. For the year 2004 05 it is 19.49 % that increase in the year 2005 06 up to 21.81 %. This ratio shows downward trend in the ratio in return on shareholders fund for this company.
Implementation :
This is probably the single most important ratio to judge whether the firm has earned a satisfactory return for its equity holders or not. Its adequacy can be judge by : (1) comparing it with the past record of the same form, (2) comparisons with the overall industry average.
Formula : = Net profit after tax -- Preference dividend Equity share holders funds TABLE OF THREE YEARS :
PARTICULAR Ratio of Return on Equity share capital 200607 22.79 % 2005-06 21.81 %
100
2004 05 19.49 %
CALCULATION :
Net profit after tax EBIT (--)Interest EBT (--)PAT 2006 07 25888 3090 22798 15620
[ Rs. In million]
2005 06 20558 3058 17500 11891 2004 05 18140 5091 13049
509 1
2004 05
Shareholders funds
2006- 07
2005 06
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1445 67094
1445 53081
1445 42343
INTERPRETATION:
For the year 2004 05 it is 19.49 % that increase in the year 2005 06 up to 21.81%. These ratios shows downward trend in the ratio in return on shareholders fund for this company.
Implementation :
Earning per share is a widely used ratio. EPS s a measure of profitability
Formula : = profit after tax preference dividend No. of equity shareholders fund X 100
CALCULATION :
PARTICULAR PAT No. of shares 2006 - 07
[ Rs. In million]
2005 06 2004 05 15620 11891 8536 288910060 288910060 288910060
INTERPRETATION :
This ratio indicates the earning per share for shareholders of company. In the year 2004 05 ratio is 29.55 % and 2005 06 it is 41.16 % and
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Implementation :
The DPS would be a better indicator than EPS as the former shows what exactly is received by the owners.
Like the EPS, the DPS is also should not be taken at its face value
as the increase DPS may not be a reliable measure of profitability as the equality base may have increase due to increase relation without any change in the number of outstanding shares.
CALCULATION :
PARTICULAR Dividend declared No. of shares 2006 - 07 1300 288910060
[ Rs. In million]
2005 06 1011 288910060 2004 05 8536 288910060
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INTERPRETATION :
This ratio indicates the total dividend declared to no. of shares. For the year 2004 05 it is 2.00 % and 2005 06 is3.50 % and increase on 4.50 % in the year 2006 07.
Implementation :
The price earning ratio reflects the price currently being paid by the market for each Rupee of currently reported EPS. In other words, the PIE ratio measures investors expectations and the market appraisal of the earnings. Therefore, only normally sustainable earning associated with the assets are taken into account.
TABLE OF THREE YEARS : PARTICULAR 2006-07 2005-06 200405 Ratio of price 17.58 21.95 29.55 earning ratio CALCULATION :
PARTICULAR Market value EPS 2006-07 856 29.55
[ Rs. In million]
2005-06 933 41.16 2004-05 950 54.04
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INTERPRETATION :
This ratio indicates the earning per share for shareholders of company. In the year 2004 05 ratio is 17.58% and 2005 06 it is 21.95% and its increase on 29.55%. Therefore it is good for company as well as shareholders.
Implementation :
TABLE OF THREE YEARS : PARTICULAR 2006-07 2005-06 2004 05 Ratio of dividend 0.04 --yield CALCULATION :
PARTICULAR Dividend per share Market value per share 2006- 07 4.50 950
[ Rs. In million]
2005 06 2004 05 -----
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INTERPRETATION :
This ratio indicates the earning per share for shareholders of company. In the year 2004 05 ratio is 29.55 % and 2005 06 it is 41.16 % and its increase on 54.06 %.therefore it is good for company as well as shareholders.
Implementation :
This ratio uses the concept of net profits before taxes because tax is calculated after paying interest on long term loan. This ratio as the name suggests, show how many times the interest changes are covered by EBIT out of which they will be paid.
CALCULATION :
PARTICULAR EBDIT Fix interest 2006 - 07 25888 376
[ Rs. In million]
2005 06 2004 05 20558 204 18140 360
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INTERPRETATION :
This ratio indicates the EBDIT to interest. In the year 2004 05 ratio is 50.39 and 2005 06 it is 100.70 and its decrease on 68.85.therefore it is good for company as well as shareholders.
Implementation :
presents the overall picture of the performance of a firm as also enables the management to identify the factors which have a bearing on profitability.
Formula : = Net sales Capital employed TABLE OF THREE YEARS : PARTICULAR 2006-07 2005-06 2004-05 Overall Ratio 2.08 2.37 2.75 CALCULATION :
PARTICULAR Net sales Capital employed 2006-07 185922 69872
[ Rs. In million]
2005-06 120034 50527 200405 109108 39545
INTERPRETATION :
This ratio indicates net sales to capital employed. In the year 2004 05 ratio is 2.75 and 2005 06 it is 2.37 and its decrease on 2.08 in the year 2006 07. Therefore it is bad for company.
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Implementation :
the turnover ratio, the more efficiency is the management and utilization of the assets while low turnover ratios are indicative of underutilization of available resources.
Formula : = sales Fixed assets TABLE OF THREE YEARS : PARTICULAR 2006-07 2005-06 200405 Fixed assets 5.03 6.72 5.69 turnover Ratio CALCULATION :
PARTICULAR Net sales Fixed assets 2006-07 145922 28986
[ Rs. In million]
2005-06 120034 17872 2004-05 109108 19158
INTERPRETATION :
Fixed turn over ratio indicates the turnover of the company in one year. In the year 2004 05 ratio is 5.69 and 2005 06 it is 6.72 and its decrease on 5.08 in the year 2006 - 07. Therefore, it is bad for company.
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Implementation :
This figure should be measured, as in the case of average inventory, on the basis of the monthly average. It suggests that number of times the amount of credit sale is collected during the year.
TABLE OF THREE YEARS : PARTICULAR 2006-07 2005-06 Debtor turnover 20.94 19.19 Ratio CALCULATION :
PARTICULAR Sales Avg. Debtors 2006-07 145922 6967.5 2005-06 120034 6271.5
[ Rs. In million]
2004-05 109108 6444.5
INTERPRETATION :
Debtor turnover ratio indicates credit sales to avg. debtors. In the year 2004 05 ratio is 16.90 and 2005 06 it is 19.19 and its increase on 20.94 in the year 2006 07. Therefore, it is good position for company. How efficiently the amount is collected from the customers from the credit sales. As compare to previous year the no. of days collection period increase which indicate inefficiency of collection department. Lower the collection period and higher debtor turnover ratio is advisable.
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Implementation :
The generally the longer credit period achieved means the operation of the payment being financial interest feels by supper funds.
365
TABLE OF THREE YEARS : PARTICULAR 2006-07 200506 Creditors Ratio 30.64 20.77 CALCULATION :
PARTICULAR Creditors Credit purchases 2006 -07 9096 108362
200405 18.82
[ Rs. In million]
2005 06 2004 05 5551 97554 4637 89632
INTERPRETATION :
Creditor ratio indicates creditor to credit purchase. In the year 2004 05 ratio is 18.82 and 2005 06 it is 20.77 and its decrease on 18.88 in the year 2006 07. Therefore, it is good position for company.
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Implementation :
funds.
Formula : = No. of days in a year Creditors ratio TABLE OF THREE YEARS : PARTICULAR 2006-07 2005-06 2004-05 creditor turnover 11.91 17.57 19.33 Ratio CALCULATION :
PARTICULAR Days Creditors ratio 2006-07 365 30.64
[ Rs. In million]
2005-06 365 20.77 2004-05 365 18.88
INTERPRETATION :
Creditor ratio indicates creditor to credit purchase. In the year 2004 05 ratio is 19.33 and 2005 06 it is 17.57 and its increase on 11.91 in the year 2006 07. Therefore, it is good position for company.
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Implementation :
This approach has the advantage of being free from bias as it smoothens out the fluctuations in the inventory level at different period. It is measures how quickly inventory is sold. it is a test of efficient inventory management. To judge whether the ratio of a firm is satisfactory or not.
CALCULATION :
PARTICULAR 2006-07 110042 7972
[ Rs. In million]
2005-06 45408 7737 2004-05 87364 5532
INTERPRETATION :
Stock turnover ratio indicates cost of goods sold to average stock. In the year 2004 05 ratio is 15.80 times and 2005 06 it is 12.33 times and its increase on 13.80 times in the year 2006 07. Therefore, it is good for company. How efficiently stock rate in the year Higher the ratio, better position of the company as well as efficiency.
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Implementation :
The current ratio of a firm measures its short term solvency. That
is a measure of margin of safety to the creditors. The fact that a firm can rarely count on such an even flow requires that the size of the C.A. should be sufficiently larger than C.L. so that the firm would be assured of being able to pay its current maturing debts as and when it becomes due.
CALCULATION :
PARTICULAR Current assets Current liability 2006-07 38459 25015
[ Rs. In million]
2005-06 37407 198771 2004-05 29720 16080
INTERPRETATION :
Current ratio indicates current assets to current liability. In the year 2004 05 ratio is 1.84 : 1 and 2005 06 it is 1.89 : 1 and its decrease on 1.54 : 1 in the year 2006 07. Therefore, it is good for company. Mainly 2 : 1 is good. It indicates, repaying condition of the company to the current liabilities. The standard current ratio must be 2:1.
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Implementation :
a firm to meet short term obligations when they become due for payment can hardly be overstressed. In fact liquidity is a prerequisite for the very survival of a firm. It measures ability of a firm to meet its short term obligations and reflect the short term finance strength of a firm.
CALCULATION :
PARTICULAR Liquid assets Liquid liability 2006-07 31327 24575
[ Rs. In million]
2005-06 28597 18825 2004-05 23054 15095
INTERPRETATION :
Liquid ratio indicates liquid assets to liquid liability. In the year 2004 05 ratio is 1.53 : 1 and 2005 06 it is 1.52 : 1 and its decrease on 1.27 : 1 in the year 2006 07. Therefore, it is good for company. How effectively the liability paid off. The standard liquidation must be 1:1.
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Implementation :
This ratio is the most rigorous and conservative test of a firms liquidity position. Further, it is suggested that it would be useful for the management.
CALCULATION :
PARTICULAR Quick assets Liquid liability 200607 23853 24575
[ Rs. In million]
200506 22136 18825 2004-05 17059 15095
INTERPRETATION :
Quick / acid test ratio is indicates quick assets and liquid liability. In the year 2004 05 ratio is 1.13 : 1 and 2005 06 it is 1.17 : 1 and its decrease on 0.97 : 1 in the year 2006 07. Therefore, it is good for company.
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Implementation :
Proprietary ratio helps to known how many proprietary funds to total assets.
Formula : = Proprietary fund Net asset TABLE OF THREE YEARS : PARTICULAR 2006-07 2005-06 200405
Proprietary fund ratio 63.22 % 66.12 % 60.65 %
CALCULATION :
PARTICULAR Proprietary fund Total asset 2006-07 64198 101537
[ Rs. In million]
2005-06 50127 75793 2004-05 38845 64044
INTERPRETATION :
This ratio indicates the proprietary funds to total assets. For the year 2004 05 it is 60.65 %and 2005 06 is 66.12 % and decrease in 2006 07 it is 60.65 %. This is a bad for company.
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Implementation :
This ratio reflects the relative claims of creditors and shareholders against the assets of the firm. Alternatively this ratio indicates the relative proportions of debts and equity in financing the assets of a firm. The D/E ratio is an important tool of financial analysis to appraise the financial structure of a firm. It has important implication from view point of the creditors, owners and the firm itself.
CALCULATION :
PARTICULAR Debt Equity 2006-07 5674 64198
[ Rs. In million]
200506 400 50127 200405 700 38845
INTERPRETATION :
This ratio indicates the debt to equity ratio. For the year 2004 05 it is 1.80 %and 2005 06 is 0.79 % and decrease in 2006 07 it is 8.84%. This is a bad for company as compare to 2005-06 year is more debt
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ratio which indicate the more realize on debt fund rather owned fund. The good impact is interest burden will be more indirectly.
Implementation :
Capital gearing ratio is helps to preference share and dividend to equity share and helps to know about company s capital and overall growth.
Formula : = fixed investment barring capital Ordinary capital TABLE OF THREE YEARS :
PARTICULAR Capital gearing ratio 2006 07 4.36 2005 06 2004 05 0.50 2.13
CALCULATION :
PARTICULAR Deb. + preference capital Ordinary capital 2006-07 6308 1445 717
[ Rs. In million]
2005-06 2004-05 3076 1445
1445
INTERPRETATION :
This ratio indicates the debenture and preference capital to ordinary share. For the year 2004 05 in4.13% and 2005 06 is 0.50%and increased in 2006 07 is 2.13. This is bad for the company.
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ACCOUTING POLICIES
1)BASIS OF PREPARATION OF ACCOUNTS
These accounts have been prepared in accordance with the historical. Cost convention, the applicable accounting Standards issued by the institute charted accounts of India and the relent provisions of the companies act, 1956.
2) FIXED ASSETS
Fixed Assets (except freehold lamed which is carried at cost) are carried at cost of acquisition or construction or at manufacturing cost. [in case of own manufactured assets ] in the year of capitalization less accumulated depreciation. Assets required under finance lease are capitalized at the lower of their fair value and present value of minimum lease payments.
3) DEPRECIATION
Fixed assets excepts for lease hold land are depreciated on the straight line method on a prorate basis from the month in which each asset is put, to use, at the following rates :
1.
Assets capitalized before 02/04/1987. Depreciation has been provided at the rates computed in accordance with sation 205 (2) (b) of the companies act, 1956, in terms of circular no.1186 dated 21/05/86 of the government of India.
2. Assets capitalized on or after 02/04/1987. Depreciation has been provided at the rates. Prescribed in schedule x/v to the companies act 1956.except for certain fixed Assets. Where based on the managements estimates of the useful life of the assets , higher depreciation has been provide on the straight line method.
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b)
In case historical cost of an asset undergoes a change due to an increase or decrease in related long term liability. On account of foreign exchange fluctuations, change in duties etc, the depreciation on the revised unamortized despicable amount is provided prospectively over the residues useful life of asset.
4) INVESTMENTS
Investments to be held for period exceeding one year, are classified as long term investments. Long term investments are valued at cost, provision for domination in the value of such investment is made. Only if such a decline is, other then temporary on individual investment basis.
5) INVENTORIES
a) Inventories are valued of lower of cost determined on the weighted average basis and net realizable value. b) Tools are written off over a period of three years except for tools valued at Rs.5000/- or less individually which are charged off to revenue in the year of purchase.
c)
Machinery spares (other than those supplied along with main plant and machinery, which are capitalized and depreciated accordingly) are charged to revenue on consumption. Except those valued at Rs. 5000/- or less individually, which are charged off to revenue in the year of purchases.
6) INVESTMENTS
Current investments are valued at the lower of cost and fair value. Long term investments are valued at cost except. In the case of a permanent diminution in their value, in which case the necessary provisions made.
9) DIFERRED TAXES
Tax expense of the period, comprising current tax, fringe benefits tax and deferred tax, is included in determining the net profit / (loss) for the year. Current tax is recognized based on assessable profit Compute in accordance with the income tax act and at the prevailing tax rate. Deferred tax is recognized for all timing differences. Deferred tax assets are carried forward to the extent it is reasonably/ virtually certain that future taxable profit will be available against which such deferred tax assets can be realized. Deferred tax assets are reviewed at each balance sheet date and written down /written up to reflect the amount that is reasonably / virtually certain to be realized. Deferred tax assets
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and liabilities are measured at the tax rates that have been enacted or substantively enacted at the balance sheet date.
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NOTE S OF ACCOUNTS
1) C0NTINGENT LIABILITIES :
a) Claims against the Company disputed and not acknowledged as debts :
1)
Sales tax demands of Rs. 50 million( previous year Rs. 50million ). Against this, the company has deposited a sum of 2) Rs. 2 million( previous year Rs. 2 million )under protest. 3) Excise duty demands / showcases cause notices of Rs.2,592 million ( previous year Rs. 1,790 million ). Against this, the company has deposited a sum of Rs. 27 million ( previous year Rs. 29 million ) under protest.
4)
Customs duty demands of Rs. 118 million ( previous year Rs. 118 million against this the company has deposited a sum of Rs. 22 million ( previous year Rs. 22 million ) under protest.
5) Income tax demands of Rs. 8,157 million (previous year Rs. 7,620 million) against this the company has deposited a sum of Rs. 4,869 million ( previous year Rs. 2,756 million ) under protest.
6)
Service tax demands of Rs. 8,157 million (previous year Rs. 7,620 million).
a.
Guarantee given to HDFC Limited for term loan of Rs.300million (previous year Rs. 300 million (previous year Rs. 300 million)givenbyHDFC Limited to employees coOperative House Building SocietyLimited, Bonds, Against this, the contingent liability as at the year end is Rs. Nil ( previous year Rs. 34 million ). As co-lessee in agreements entered into between various vendors of the company, as lessee, and banks as lessors for leasing of dies and moulds of certain models
b.
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c.
A Guarantee given to HDFC Bank against non-fund based facilities granted by the Bank to a group company Suzuki Powertain India Limited of Rs. 2,000 million(previous year Rs.2,000 million).Against this the contingent liability as at the year end is as Rs. 26 million.
Outstanding commitments under letters of credits established by the company aggregate to Rs.1,050 million. Cotimated value of contracts on capital account , excluding Capital advances, remaining to be executed and not provided for, amount to Rs. 8,076 million. Consumption of Raw material and components includes a provision of Rs. 56 million and is net of Rs. Nil for earlier years, on account of estimated reversal of tax benefit on quantity differences on inputs. The company was granted sales tax benefit in accordance with the provisions of rule 28C of Haryana General Sales Tax Rules, 1975 for the period from 1st August, 2001 to 31st July, 2015. The ceiling amount of concession to be availed of during entitlement period is Rs. 5,644 million. Till 31st March 2007, the company has availed of sales tax benefits amounting to Rs. 1,469 million(previous year Rs.1150 million ). The company is primarily in the business of manufacture, purchase and sale of Motor Vehicles and spare parts ( automobile ). The other activities of the company comprise facilitation of Pre-owned Car sales, Fleet Management Car Financing. The income from these activities, which
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are incidental to the Companys business is not material, in financial terms but contribute significantly ingenerating the demand for the products of the company. Accordingly segment information has not been disclosed.
FINANCIAL RESULTS :
Marutis performance during the year as compared with that during the previous year is summarized below : Figures in Rs. Million 2006 - 07 2005 06 178,043 151,823 22,798 17,500 7,178 15,620 43,939 5,609 11,891 34,421
Gross Total Income Profit before Tax Provision for taxation ( Incl. Prev. Year ) Profit after tax Balance brought forward MSAIL (Maruti Suzuki Automobiles India Limited ) Loss : Adjusted On Amalgamation & Transition Adjustment for employee benefits Profit available for appropriation Appropriations : Debenture Redemption Reserve General Reserve Proposed Dividend Corporate Dividend tax Balance carried forward to balance sheet
DIVIDEND :
The Board recommends a dividend of 90% (i.e. Rs.4.50 Per equity share of Rs. 5 each ) for the year ended 31st March 2007 amounting to Rs. 1,300 million as against a dividend of 70% amounting to Rs.1,011 million , paid for the year ended 31st March 2006.
NETWORK :
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The record sales performance was effected through Marutis vast dealership network. The new car sales network grew from 375 outlets to 500 during the year. These outlets covered 312 cities across the country. In addition to this, there are 223. Maruti true value outlets spread across 148 cities , which are engaged in the sale , purchase and exchange of pre owned cars. Maruti true value is the largest organized pre-owned car sales network in India. The service network had a total of 2445 service outlets, covering 1172 cities.
DIRECTORS :
As per Articles of Association of the company and relevant provisions of the companies act, 1956,Mr. R.C.Bhargava ,Mrs. Pallavi Shroff and Mr. Shuji Oishi are liable to retire by rotation at the ensuing Annual General Meeting and, being eligible, offer themselves for reappointment, During the year, Mr. Tsuneo Kobayashi was elevated as Senior Joint Managing Director with effect from 13th November 2006. Pursuant to the promotion and transfer to Suzuki Motor Corporation, japan, Mr. Shinichi Takeuchi has resigned with effect from close of hours of 26th May 2007, from the post of Director and joint Managing Director. The Board records its appreciation for the invaluable contribution made by him during his tenure. Mr. Masayuki Osada was appointed as Director and whole-time Director designated as Director (Research & Development) w.e.f26th July 2007 to fill the casual vacancy caused by the resignation of Mr. Takeuchi. All the above appointments/ re-appointments are subject to the approval of the members in the ensuing Annual General Meeting. The brief resume/ details relating to the Directors who are to be appointed/re-appointed as stipulated under listing Agreement executed with the stock exchanges are furnished in the explanatory statement of the notice of the ensuing Annual General Meeting. DIRECTORS RESPONSIBILITY STATEMENT :
As required under section 217(2AA) of the companies Act, 1956, your Directors confirm having :
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a) Followed in the preparation of the Annual Accounts, the applicable accounting standards with proper explanation relating to the material departures. b) Selected such accounting policies and applied them consistently and made judgment and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your company at the end of the financial year and of the profit of your company for that period. c) Taken proper and sufficient care for the maintenance with the provisions of the Companies Act, 1956, for safeguarding the assets of your company and for preventing and detecting fraud and other irregularities ; and
d)
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AUDITORS REPORT
TO THE MEMBERS OF MARUTI UDYOG LIMITED
1.. We have audited the attached balance sheet of maruti udyog limited, as at 31st March 2007 and the related profit and loss account and cash flow statement for the year ended on that date annexed thereto, which we have signed under reference to this report. These financial statements are the responsibility of the companys management. Our responsibility is to express an option on these financial statement statements based on our audit. 2.. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on test basic, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management presentation. We believe that our audit provides reasonable basic for our opinion. 3.. As required by the companies order, 2003, as amended by the companies order,200, issued by the central government of India in terms of sub section of section 227 of the The companies Act, 1956 of India and on the basic of such checks of such checks of the books and according to the information and explanations given to us, we further report that: 1) a) The company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets. b) The fixed assets are physically verified by the management according to a phased programme designed to cover all the items , except furniture and fixtures, office application and certain other assets aggregating to Rupees 339 million , over a period of three years, which in our opinion, is reasonable having regard to the size of its assets have been physically verified by the material discrepancies between the book records and the physical inventory have been noticed.
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c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assts has not been disposed off by the company during the year. 2) a) The inventory (excluding materials lying with vendors has been physically verified by the management during the year. Confirmations have been received for materials lying with vendors at the year end. In our opinion, the frequency of verification is reasonable. b) In our opinion, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relating to the nature of its business. c) On the basis of our examination of the inventory records, In our opinion, the company is marinating proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material. 3) The company has not taken or granted any loans, secured or unsecured from/ to companies, firms or other parties covered in the register maintained under Section 301 of the act. 4) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and nature of its business for the purchase of inventory, fixed assets and for the sale of goods and service. Further, on the basis of our examination of the books and records of the company, and according to the information and explanation given to us, we have neither come across nor have been informed of any continuing failure to correct major weakness in the aforesaid internal control procedure. 5) In our opinion and according to the information and explanation gives to us, there are no transactions made in pursuance of such contracts or arrangements and exceeding the value of Rupees five lakes in respect of any party during the year, which have been made at prices which are not reasonable having regard to the prevailing market prices at the relevant time. In respect of purchase of goods and materials including components from the holding company, the prices paid for these items are not comparables these are of special nature. 6) The company has not accepted any deposits from the public with in the meaning of section 58A and 58AA or any other relevant provisions of the act and the rules framed there under.
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7) In our opinion, the company has an internal audit system commensurate with its size and nature of its business. 8) We have broadly reviewed the books of account maintained by the company in respect of products where , pursuant to the rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of sub section (i) of section 209 of the act and are of the opinion that prima facie, the prescribed account and records have been made and maintained . We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete. 9) According to the information and explanations given to us and the records of the company examined by us, in our opinion, the company is regular in depositing undisputed statutory dues in respect of provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, service tax, customs duty, excise duty, less and other material statutory dues as applicable with the appropriate authorities. 10) The company has no accumulated losses as at March 31,2007 and it has not incurred any cash losses in the financial year ended on that date or in the immediately preceding financial year.
11) According to the records of the company examined by us and the information and explanations gives to us, the company has not defaulted in repayment of dues to any bank or debenture holders as at the balance sheet date. 12) The company has no granted any loans and advances on the basic of security by way of pledge of shares, departures and other securities. 13) The provisions of any special statute applicable to chit fund/nidhi/mutual benefit fund /societies are not applicable to the company. 14) In our opinion, the company is not a dealer or trader in shares, securities, debentures and other investments. 15) In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantee given by the company, for loans taken by others from banks or financial institutions during the year, are no prejudicial to the interest of the company.
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16) In our opinion, and according to the information and explanations given to us, on an overall basic, the term loans have been applied for the purpose for which they were obtained. 17) On the basic of an overall examination of the balance sheet of the company, in our opinion and according to the information and explanations given to us , there are no funds raised on a short-term basic which have been used for long term investment. 18) The company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the act during the year. 19) The company has created security and charge in respect of debentures issued and outstanding to the year-end. 20) The company has not raised any money by public issue during the year. 21) During the course of our examination of the books and records of the company , carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the company, noticed or reported during the year, nor have we been informed of such case by the management.
Audit committee: Mr. Amal Ganguli Mr. Shinzo Nakanishi Mrs. pallavi Shroff Mr. D. S. Brar chairman member member member
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INTRODUCTION
A part from ratio analysis another useful way of analyzing financial statements to convert them into percentage when this method is pursued the income statement exhibits each expenses item or group of expenses as a percentage of net sales, and net sales are taken at 100%. Similarly each individual assets and liability classification is shown as percentage of total liabilities. Respectively statements prepared in this way are referred to as common size statements prepared for one firm over the years would highlight the relative changes in each group of expenses, assets and liabilities. This statements can be equally useful for absolute figures of the same industry are not comparable.
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Total Less: vehicles/dies for own use Add: increase / Decrease in work Progress, finished, Goods and spares Total EARNING BEFORE ABOVE Interest Depreciation Differed revenue Expenditure charged off Total Profit Before Tax Less : Tax Expense Current Tax Deferred Tax Fringe Benefits Tax Previous years Total Profit after Tax Brought forward From previous year allount Total Less: Appropriation Debenture Redemption Reserve General Reserve Proposed Dividend Tax Corporate Dividend Tax Total
124,771 143
106,320 67
2,007 2,150
86.74 17.74
1,997 2,064
86.86 17.12
(0.07) 0.62
367 2,714 3,090 22,798 6,089 897 67 125 7,178 15,620 43,851 59,471 17 562 1,300 219 3,098
0.26 2.11 2.11 15.63 4.17 0.61 0.04 0.08 1.17 30.11 40.76 0.01 1.07 0.89 0.15 38.63
204 2,854 3,058 17,500 5,873 321 57 6,251 11,891 34,421 46,312 31 1,189 1,011 142 2,373
0.1 (0.51) (0.43) 1.05 (0.72) 0.35 0.08 0.79 1.43 2.17
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SOURCES OF FUND Capital Reserve and Surplus LOAN FUNDS Secured Loans Unsecured Loans DEFFERRED TAX Deferred Tax Liability TOTAL APPLICATION OF FUNDS FIXED ASSETS Net Block Capital Work in Progress INVESTMEENTS CURRENT ASSETS LOANS AND ADVANCES Inventories Sundry debtors Cash and bank Other Current Assets Loans and Advances CURRENT LIABILITIES AND PROVISIONS Current liabilities Provisions Net Current Assets TOTAL
7791 56,022
1.39 100
1100 47,964
2.29 100
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difference
SOURCES OF FUND Capital Reserve and Surplus LOAN FUNDS Secured Loans Unsecured Loans DEFFERRED TAX Deferred Tax Liability TOTAL APPLICATION OF FUNDS FIXED ASSETS Net Block Capital Work in Progress INVESTMEENTS CURRENT ASSETS LOANS AND ADVANCES Inventories Sundry debtors Cash and bank Other Current Assets Loans and Advances CURRENT LIABILITIES AND PROVISIONS Current liabilities Provisions Net Current Assets TOTAL
7791 56,022
1.39 100
1100 47,964
2.29 100
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CONCLUSION
When summarizing the financial results of MARUTI UDYOG LIMITED. I have observed that their working is quite reasonable financial. It is very good company. There are no any debts of long term liabilities of the company. To conclude, from of the overall analysis of financial management of the company, I can say that it is financial sound and well managed three consecutive years shows and applauding position. I was also able to well understand my financial concepts. It was a tough task to make this project but at last I able to complete the project report of analysis of annual report of the company MARUTI UDYOG LIMITED.
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FINDINGS:
Annual Report of MARUTI UDOG LIMITED of 3 Years 1) 2004 05 2) 2005 06 3) 2006 07
Financial Management by khan & jain information about ratios and accounting policy. B. S. SHAH
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