INTRODUCTION I am going to represent my home country one of the car production company Maruti Suzuki India Limited it normally known as Maruti Udyog limited is a subsidiary of Suzuki Motor Corporation. Japan, MSIL has been the leader of the Indian car market for over two and a half decades. The company manufacturer plant located at Gargaon and Manesar, south of new delhi.this manufacture plant produce over the million of car unites annually .just before 2 month ago company issue its own articles and company CEO announced a further investment RS.1700 cr.(17 billion)for annually car unit production 26,000 units. The maruti Suzuki company has car production 13 brands over 152 different variety across maruti Suzuki 800,omni and also international brands Alto and Wagon R,Swift ,A-star, Ritz and Estilo,off -roader car like Gypsy,suv Grand vitara,sedands Sx4 and swift Dzire and the newest entrant Eeco. The director and managing executive officer and admin MR.HIROFUMI NAGAO and company secretary and chief legal officer MR.ANIL RUSTGI those both spokesman said at the end of the financial year march 2010 maruti Suzuki had a market share 53.4%of Indian passenger car market.maruti Suzuki pvt ltd.company one of the largest company in asia.they sold a record 10, 18,365 vehicles in the current year 2009-10 including 1, 47,575 car units of exports outside India. The company managing director and CEO (chief executive officer) MR. SHINZO NAKANISHI said past decades in the year 2003-04 company net sales was RS.93,456 million. That was boundary by year 2004-05 in net sales 109,105 million .and in 2006-07 RS.145, 922 million and year 2007-08 maruti Suzuki net sales was RS.178, 603 million. The company revenue posted of RS.301, 197 million. Last two year CAGR is 27% of net sales. The company is listed on Bombay stock exchange and national stock exchange .the Company has over 8000 employees on its rolls. The government of Japan has honoured maruti Suzuki with the METI award for promotion of Japanese brand in India. Maruti Suzuki is one of company got the best sold car prestigious award. TO: Financial Controller FROM: Management Accountant Subject: Analysis of Maruti Suzuki Pvt ltd. Maruti Suzuki Pvt ltd.with substantial amount of car production, our main consideration has to be the ability of the company to pay for these good on time to answer this we need to consider two key aspects of their financial statements. And we have to find out what their current liquidity position is and what are the longer term prospects (profitability) for the company? It must be noted, however that the financial data provided in the accounts relates to the past whereas these two aspects relates to the presents and future. We shall have to use past data to help predict the future.
PERFORMANCE HIGHLIGHTS SALES: Maruti Suzuki recorded in highest sales in India over 4.72 lac vehicles in the domestic and exports markets which resulted in gross sales revenue of RS.112,840 million in the term of view company growth sales 25.8% over 2002-03.that figure indicated that was highest sale in growth in the last 7 years. EARNING PER SHARE: Company doing well progress in High volume of sales in car market. With importance improvement in operational efficiencies, has translated into much higher returns on investment in Earning per Share (EPS) more than RS.5.14 in 2002-03 to RS.18.77 IN 2003-04 LIQUIDITY: The current situation has risen from 1.5 to 1.9 while the acid test has failure 1.25 to 0.72.these are not high ratio like both current and acid one but not unusual for car manufacturing companies. However, the upward trend masks a potentially difficult situation because inventories (stock) have increased 1.48 % significantly. Mean while sundry debtors' downturn trend masks a potentially financial situation decreased 0.88% significantly. To financial condition increased and decreased .The Maruti Suzuki ltd now has been secured loans and unsecured loans and some long term debt for the first time. These all situations give some cause for concern, though not alarm. If possible further details are needed as to why debtors have increased by 1 %(0.88% so nearly expected) resulting in an additional 5 days (13 days -18 days) credit being offered to the customer similarly, we need to know why stock levels have risen by nearly 1.48% and stock has been lying around the warehouse for an extra 4 days (19-15) this year. PROFITABILITY: The profit and loss account shows that gross sales have upward slightly but Excise duty is more liabilities in both year and given a impact of inflation, it is likely that the volume of sales has in fact increased. Gross profit in year 2007 is 0.95% while in the year 2008 gross profit is 0.94%.so 0.1% decreased in compared to both year. Than Net profit (operating) in same level in both years like 0.17%.and retain on capital employed in the year 2007 1.42% and in the year 2008 4.88% so increased by 3.46%. All three profitability ratios have dropped significantly perhaps suggesting one of the following: Maruti Suzuki pvt ltd car productions are past their sell by date. More achieved stock are building up and customer have been offered improved payment s terms is an attempts to attract business. A few major customer are in difficulty and they neither paying on time instalments. Many time car insurance company providing one year free insurance those who loyalty customer. But after one year they cancelled insurance. This could be happen temporary and permanent. Maruti Suzuki company has international brand car importing and exporting all over the world so intense competition from overseas has caused a reduction in the selling price and, despite this, maruti Suzuki to selling car more and more via advertising and best service to providing to product because of stock level are rising. It should also be noted that the proposed dividend has risen whilst have fallen. Does this indicate confidence in the future or is it an attempt to divert attention from the current poor results. SUMMARY: The review does not reveal a thriving company but, without further information, it is hard to decide whether the situation is so bleak that you would seriously consider not supplying maruti Suzuki with their goods. Perhaps initial trading could be done on a cash basis before we felt secure enough to offer credit payments terms. Furthermore, it would be unwise for us to make any huge internal investments (purchase of machinery) until we have a bit more confidence about the long -term future of maruti Suzuki pvt ltd. On the basis of 2005-06 profit and loss accounts shown the company has not taken any loan, secured or unsecured also company registered under act section 301.the company borrowed from government end of the year balance of such loans aggregates of rupees 639 million and rupees 538 million respectively. The company has losses as at march 31, 2005 and it has not incurred any cash losses in the financial year ended on that date or in the immediately preceding financial year.
Analysis -Key % Movement for the (2007/2008) Sales increase of 1.10% (124814/113465) Cost of sales increase of 1.11% (120034/109108) These all calculated amount explain to us gross profit is high volume. Operating Expenses increase of 1.10% (106320/96653) Depreciation increase of 0.62% (2854/4568) Interest Expenses in year 2005 was 360 and 204 in 2006.so different 156 interests is increased better than last year. So company wasn't taken any loan, borrowed money from outsider source. Stock Increased of 1.32% (8812/6666) Debtors Increased of 1.09% (6548/5995) Company stock increased with 1.32% but company liabilities increased with 1.09%.so this figure indicate no any investment needed end of the year 2006.
Analysis -key % Movement For the (2008/2009) Sales increase of 1.23% (188,238/152,523) Cost of sales increase of 1.22% (178,603/145,922) This figure tells us immediately that the gross profit level will be so good. Operating expenses increase of 1.28% (160,045/124,771) Depreciation increase of 2.09% (5682/2714) Increase of 2.03% (6278/3090) Both increase exceeded the sales % increase and therefore the net margin will be poorer than the previous year. Interest expenses last year 376 but this year 596.so different 220 interests is increase better that last year. So company doesn't need using borrowed monies to finance the business. Stock increase of 1.48% (10380-7014) Debtors increase of 0.88% (6555-7474) Company stock increase with 3366 (10380-7014) but this year liabilities decrease with 919 (6555-7474).so this figure indicated where additional investment has been needed. The other significant movement from the balance sheet is in the cash/liquidity position. And also positive cash from last year been replaced by a bank loan this year. Links in to the interest payment shown on the profit and loss account.
Ratio 2009 2008
Profitability Gross profit 0.94% (178603/188238) 0.95 (145922/152523) Net Margin 0.17% (31308/188238) 0.17% (25888/152,523) ROCE 4.88 %( 31308/2722+3695) 1.42 % (25888/13326+4905)
Liquidity ratio :( Short term Solvency) Current ratio 1.9:1 (30909/28187) 1.5:2 (38341/25015) Acid test - Quick Ratio 0.72:1(30909-10380/28187 1.25:2(383417014/25015)
Efficiency Ratio: Stock turnover 19 days (10380X365/209493) 15days (7014X365/171442) Debtors collection period 12.71 (13 days) 17.88(18 days) (6555X365/188238) (7474X365/152523) Creditors payment 42.67 (43 days) 42.81(43 days) (24492X365/209493) (20110X365/171442)
Capital structure: (long term solvency) Gearings 3.90% 6.40% Borrowed capital X100/total capital (3695 X 100/94857) (4905 X 100 /76522) Interest cover: PBIT /interest 53 Times (31308/596) 69 Times (25888/376) Dividend cover: PAT /dividends 11.97 %( 17308/1445) 12.01 %( 15620/1300) Debt Ratio: 0.22% 0.24% Fixed assets +Investment +Current assets/Current liabilities and provisions.) (40,328+51,807+30,909/28,187) (29,104+34,092+38,341/25,015) Ratio 2007 2008 2005 2006
PROFITABILITY Gross profit 0.94% 0.95% 0.95% 109770/114981 0.95% 91296/95976 Net margin 0.17% 0.17% 0.16% 18542/114981 0.14% 14083/95976 ROCE 4.88% 1.42% 1.35% 18542/13640 2.89% 14083/4871
LIQUIDITY: Current ratio 1.9:1 1.5:2 1.8:2 29720/16080 1.3:1 20189/15318 Quick ratio 0.72:1 1.25:2 1.43:1 29720-6666/16080 1.04:1 20189-4398/15138
EFFICIENCY RATIO: Stock Turnover 19 Days 15Days 14 Days 21 Days Debtor collection period 12.71(13 Days) 17.88(18 Days) 18.82(19 Days) 20.2(20 Days) Creditors payments 42.67(43 Days) 17.88(18 Days) 29 Days 32 Days
CAPITAL STRUCTURE Gearing Ratio 3.90% 6.40% 7.20% 8.30% Interest Cover 53 Times 69 Times 50 Times 18140/360 32 Times13805/434 Dividend cover 11.97% 12.01% 14.76% 8536/578 12.51% 5421/433 Debt ratio 0.22% 0.24% 0.25% 0.28%
BIBLOGRAPHY AND REFERENCES Business Finance (Theory and practice) Eddie McLan university of Plymouth business school www.pearson.co.uk seventh Edition Financial management (Theory and Practice) Eugene F. Brigham (university of Florida,) Michael C.Ehrharat (university of Tennessee). Principles of Money, Banking and Financial Market (12th Edition) Lawrence S.Ritter (Late New York University) William L.Silber (New York university) Gregory F. UDELL (Indiana university). Brealey Mcuers (Principles of corporate Finance) McGraw Hill Richard A. Brealey (Emeritus Professor of Finance, London Business School) Stewart C. Myers (Gordon Y.Billard Professor of Finance Sloan School of management Mcissachusells institutes of Technology) INVESTMENTS (Seventh Edition) Zvi Bodie (Boston University) Alex Kane (university of California, San Diego) Alan J.Marcus (Boston College) "Financial Theory and Corporate Policy" Thomas E.copeland (managing director of finance dept., Cambridge) J.fred.Weston (university of California at Los Angeles) Kuldeep Shastri (University of Pittsburgh) www.investopedia.com/university/ratio www.thetimes100.co.uk/.../theroy-ratio-analysis-301.php Annual Report of Maruti Suzuki www.marutisuzuki.com/annual-report-newroom.aspx Maruti Suzuki India Directors Report, Maruti Suzuki www.moneycontrol.com Maruti Suzuki Ltd 2(1)-Annual Report Analysis. www.scribd.com/Annual-Report-Analysis-Maruti-Suzuki-Ltd-2-1 www.wikinvest.com/stock/maruti_suzuki_india_(BOM:532500)