Professional Documents
Culture Documents
Financial Statement Analysis of Hetero
Financial Statement Analysis of Hetero
PROJECT REPORT ON
“FINANCIAL STATEMENTS ANALYSIS”
AT
HERO MOTORS PVT LTD
1
ABSTRACT
The financial statements are prepared on the basis of recorded facts. The recorded facts are
those which can be expressed in monetary terms. The statements are prepared for a particular
period, generally one year. The transactions are recorded in a chronological order, as and when
the events happen. The accounting records and financial statements prepared from these records
are based on historical costs. The financial statements, by nature, are summaries of the items
recorded in the business and these statements are prepared periodically, generally for the
accounting period.
The American Institute of Certified Public Accountants states the nature of financial
statements as “Financial Statements are prepared for the purpose of presenting a periodical
review of report on progress by the management and deal with the status of investment in
the business and the
results achieved during the period under review. They reflect a combination of recorded
facts, accounting principles and personal judgments.” The American Accounting
Association expresses in its statement. “Every corporate statement should be based on
accounting principles which are sufficiently uniform, objective and well understood to
justify opinions as to the condition and progress of business enterprise. Its basic
assumption was that the purpose of periodic financial statements of a corporation is to
furnish information that is necessary for the formation of dependable judgments.”
2
PARTICULARS PAGE:NO
CHAPTERS
INTRODUCTION
2
THEORETICAL FRAMEWORK
COMPANY PROFILE
3
INDUSTRY PROFILE
BIBLIOGRAPHY
INDEX
3
4
INTRODUCTION
Finance is one of the most primary requisites of a business and the modern management
obviously depends largely on the efficient management of the finance. Financial statements are
prepared primarily for decision making. They play a dominant role in setting the frame work of
managerial decisions. The finance manager has to adhere to the five R’s with regard to money.
Whether owned or borrowed funds. At the right time to preserve solvency from the right sources
and at the right cost of capital. The term financial analysis is also known as ‘analysis and
interpretation of financial statements’ refers to the process of determining financial strength and
weakness of the firm by establishing strategic relationship between the items of the Balance
Sheet, Profit and Loss account and other operative data. The purpose of financial analysis is to
diagnose the information contained in financial statements so as to judge the profitability and
Financial management is that managerial activity which is concerned with the planning and
controlling of the firm’s financial resources. As a separate activity or discipline it is of recent
origin, it was the branch of economics till 1980. Still today it has no unique body of knowledge
of its own, and it draws heavily on economics for its theoretical.
Financial management is concerned with rising of CASH and their effective utilization keeping
in view the overall objective of the firm financial management is one of the four important
functional areas of the management. The major objective of any business field of a firm is to
make a profit for its owners by producing goods or services for sale in the market. To reach the
goal, the firm purchases the various factors of the production and produces the output in cell.
The all process requires fund. Finance may be said in the circulatory system of economic body
of the firm.
Financial management is that administrative area or set of administrative functions, while related
the arrangement of each and credit so that the organization have the means to carryout is
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objectives as satisfactorily as possible. The central features is functional managements is its
formulation of firm’s strategy in determining the most effective use of the CASH, currently it the
firm and is selected the most favorable sources of additional CASH that the firm will need in the
near future.
Financial Ratio analysis is a commonly used analytical tool for verifying the performance of
a firm. While ratios are easy to compute, which in part explains their wide appeal, their
interpretation is problematic when two or more ratios provide conflicting signals. Indeed, ratio
analysis is often criticized on the grounds of subjectivity that is the analysts must pick and
choose ratios in order to assess the overall performance of a firm.
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OBJECTIVES OF THE STUDY:
1 To know the profit of HERO MOTORS PVT LTD.
2 To study of the financial statements for HERO MOTORS PVT LTD.
3 To analyze financial information that assists in estimating the earning potentials of business.
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NEED FOR THE STUDY:
1. The most common methods used for financial statement analysis are comparative statements,
common-size statements, funds flow analysis and ratio analysis.
2. These methods include calculations and comparisons of the results to historical company data,
competitors, or industry averages to determine the relative strength and performance of the
company being analyzed.
4. Financial statement analysis is used to identify the trends and relationships between financial
statement items. Both internal management and external users(such as analysts,creditors,and
investors) of the financial statements need to evaluate a company’s profitability,liquidity,and
solvency.
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METHODOLOGY OF THE STUDY
Research methodology is a way to systematically solve the research problem. It may be understood as a
science of studying how research is done scientifically. So, the research methodology not only talks about
the research methods but also considers the logic behind the method used in the context of the research
study.
Primary Data:
The primary data was collected mainly through interactions and discussions with the
company’s executives.
Secondary Data:
Secondary data is data that is neither collected directly by the user nor specifically for the
user; often under conditions not known to the user. Secondary data is cheaper and more quickly
available than primary data, but likely to need processing before it is useful.
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SCOPE OF STUDY
The scope and period of the study is being restricted to the following.
1. The scope is limited to the operations of the HERO MOTORS PVT LTD.
2. The information is obtained from the primary and secondary data was
limited to the HERO MOTORS PVT LT sheet was on the last 5 years.
LIMITATIONS OF STUDY
2. As most of the data is from the secondary sources, hence the accuracy is
limited.
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CHAPTER-2
COMPANY PROFILE
INDUSTRY PROFILE
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INTRODUCTION
The auto industry is one of India’s a lot of active and growing industries. This industry
accounts for 22 per cent of the country's accomplishment gross calm artefact (GDP). The auto
breadth is one of the bigger job creators, both anon and indirectly. It is estimated that every job
created in an auto aggregation leads to three to 5 aberrant accessory jobs.
India's calm bazaar and its advance abeyant accept been a big allure for abounding all-around
automakers. India is anon the world's third bigger exporter of two-wheelers afterwards China
and Japan. According to a address by Accustomed Chartered Bank, India is acceptable to beat
Thailand in all-around auto-export bazaar allotment by the year 2020.
The next few years are projected to appearance solid but alert advance due to bigger
affordability, ascent incomes and beginning markets. With the government’s backing, and trends
in the all-embracing book such as the abatement in prices of accustomed rubber, the Indian auto
industry is slated to attestant some aloft growth.
Market size
The accumulative adopted absolute investment (FDI) inflows into the Indian auto industry
during the aeon April 2000 – August 2014 was recorded at US$ 10,119.68 million, as per
abstracts by Department of Automated Policy and Promotion (DIPP).
Data from industry physique Society of Indian Auto Manufacturers (SIAM) showed that
137,873 commuter cars were awash in July 2014 compared to 131,257 units during the agnate
ages of 2013. Among the auto makers, Maruti Suzuki, Hyundai Motor India and Honda Cars
India emerged the top three gainers with sales advance of 15.45 per cent, 12 per cent and 11 per
cent, respectively.
The three-wheeler articulation acquaint a 24 per cent advance to 51,461 units on the aback of
added demands from the burghal market. Absolute sales beyond altered car segments grew 12
per cent year on year (y-o-y) to 1,586,123 units.
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Scooter sales accept jumped by 29 per cent in the advancing fiscal, and now anatomy 27 per cent
of the absolute bike bazaar from just 8 per cent a decade back. The ever-rising appeal for
scooters, which has far outstripped accumulation has prompted Honda to set up its aboriginal
committed scooter bulb in Ahmedabad.
Tractor sales in the country is accustomed to abound at a admixture anniversary advance amount
(CAGR) of 8–9 per cent in the next 5 years authoritative India a high-potential bazaar for
abounding all-embracing brands.
Investments
To bout assembly with demand, abounding auto makers accept started to advance heavily in
assorted segments in the industry in the endure few months. Some of the aloft investments and
developments in the auto breadth in India are as follows:
• Ashok Leyland affairs to advance Rs 450–500 crore (US$ 73.54–81.71 million) in India, by
way of basic amount (capex) and investment during FY15. The aggregation is appropriate to
administer Rs 6,000 crore (US$ 980.56 million) of assets in seven locations beyond the world,
for which aliment capex is needed.
• Honda Motors affairs to set up the world's bigger scooter bulb in Gujarat to cycle out 1.2 actor
units annually and accomplish administration position in the Indian bike market. The
aggregation affairs to absorb about Rs 1,100 crore (US$ 179.76 million) on the new bulb in
Ahmedabad, and aggrandize its ambit with a few added offerings.
• Yamaha Motor Co has restructured its business in India. Now, Yamaha Motor India (YMI) will
yield affliction of its India operations. “The restructuring is allotment of Yamaha’s mid-term
plan aimed at convalescent organisational efficiency,” as per Mr Hiroyuki Suzuki, Arch
Authoritative and Managing Director. YMI would be amenable for accumulated planning and
strategy, business planning and business expansion, superior control, and bounded ascendancy of
Yamaha India Business.
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• Government Initiatives
The Government of India encourages adopted investment in the auto breadth and allows 100 per
cent FDI beneath the automated route. To addition manufacturing, the government had bargain
customs assignment on baby cars, motorcycles, scooters and bartering cars to eight per cent from
12 per cent, on sports account cars to 24 per cent from 30 per cent, on mid-segment cars to 20
per cent from 24 per cent and on large-segment cars to 24 per cent from 27 per cent.
The government’s accommodation to boldness VAT disputes has aswell resulted in the top
Indian auto makers namely, Volkswagen, Bajaj Auto, Mahindra & Mahindra and Tata Motors
announcement an investment of about Rs 11,500 crore (US$ 1.87 billion) in Maharashtra.
The Auto Mission Plan for the aeon 2006–2016, advised by the government is aimed at
accelerating and comestible advance in this sector. Also, the absolute Regulatory Framework
beneath the Ministry of Shipping, Road Transport and Highways, plays a allotment in
accouterment a addition to this sector.
Road Ahead
The approaching of the auto industry depends on the absolute sentiments and the appeal for cars
in the market. With the anniversary division advancing up, the Indian auto breadth will see a
acceleration in appeal which is accustomed to accompany in aloft growth. An auto banker
analysis by close UBS appropriate that the Indian auto industry, benumbed on trends like the
accessible anniversary division and abatement in ammunition price, will beam a 12 per cent y-o-
y advance in FY15.
Also, befitting up with all-embracing trends, there is accustomed to be a billow in the amount of
amalgam cars in the Indian auto breadth in the years to come.
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The advance adventure for the Indian auto industry in 2014 rode on the bike articulation and not
on commuter cars or bartering vehicles, as top absorption ante and a abashed accomplishment
industry kept a analysis on demand.
The year aswell saw Competition Commission of India (CCI) levying a amends of Rs.2,544.65
crore ($415) on 14 car makers for their akin barter practices by preventing absolute repairers
advancing into the market. Some of the arch car makers aswell had to anamnesis some models
over abnormal components.
When added segments like commuter cars and bartering cars logged abrogating growth, the bike
makers registered about 13 percent advance amid January and October. Benumbed on the bike
sector's growth, the automotive industry grew 9.8 percent by aggregate year-on-year (YoY) amid
January and October.
"The bike articulation is the alone one that has clocked absolute advance at 12.9 percent YoY
(year-on-year) to adeptness sales of about 13.5 actor units by October. This can be attributed to
the low amount of two wheelers
in India," Vijay Kakade, carnality admiral for automotive and busline convenance at Frost &
Sullivan, told IANS.
He said the ablaze bartering car (LCV) articulation has been the affliction hit, with sales
abbreviation to about 330,000 units -- an 18.9 percent YoY abatement over 2013.
"The commuter car, average and abundant bartering car segments apprenticed by 0.8 and 6.5
percent appropriately during the period, compared to 2013. The abridgement in sales can be
attributed to the arrest and the top absorption ante set by the RBI (Reserve Bank of India)
abbreviation the availability of accounts options to the public," Kakade added.
"These segments accept apparent absolute signs over the accomplished few months, which is
accustomed to advance to advance in the next year."
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"The year 2014 has been a year of stagnation, which is a absolute assurance as the abatement has
stopped. The industry has apparent signs of growth, admitting slower than expected, over the
accomplished few months," Kakade remarked.
P. Balendran, carnality president, General Motors India, had agnate angle to allotment with
IANS: "Of late, we accept apparent some movements in new entries apprenticed by change
factors and some baddest manufacturers accept been accepting the allowances too."
He said the bazaar has not apparent any movement forward, admitting the customs assignment
reduction, while the chump affect has not best up due to adhesive absorption rates, which abide
at top levels.
"Although ammunition prices accept started advancing down significantly, the enquiry levels at
showrooms accept appear down and conversions are not demography abode at all. The sales of
agent cars are as well cone-shaped off because of the absorption amount gap adverse petrol,"
Balendran added.
Assured the government to abide with a lower customs assignment administration for small/mid-
sized/big cars and sports account cars (SUV) till Advance 2015, Balendran said the ante should
be connected till the Goods and Casework Tax ( GST) is alien -- acceptable the turnaround of
the auto sector.
Terming 2014 a alloyed bag for the auto industry, Sumit Sawhney, arch authoritative and
managing administrator of Renault India, told that while there has been a sea change in the
chump affect with a gradually convalescent bread-and-butter altitude in the country, the
optimism has still to construe into abiding sales growth.
"The industry is searching advanced to the account for pro-business behavior to reignite the auto
industry in India."
* All-embracing advance was 9.8 percent by aggregate year-on-year (YoY) amid January and
October.
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* Bike breadth grew 12.9 percemt
* Commuter car, average and abundant bartering car segments apprenticed by 0.8 and 6.5 till
October
* LCV articulation affliction hit, with sales falling 18.9 percent YoY abatement over 2015 till
October
* Competition Commission of India (CCI) fines 14 car-makers Rs.2,544.65 crore for akin barter
practices.
Auto manufacturers accept been aggravating to cope with economical asperous application in
endure two years. Aggravating to addition sales and implementing amount able schemes just
wasn’t enough. They aswell had to cut abounding of their advisers afar to break somewhat
balanced, in some cases. On a fashionable note, chief advisers were asked to yield autonomous
retirement (not abiding what ‘voluntary’ is accomplishing in that sentence).
Tata Motors afar from giving barter adorable offers, gave 600 of their advisers aboriginal
retirement offers, endure month. Ashok Leyland too offered 500 of their advisers with alluring
retirement schemes, endure year (pun intended).
Sales of Cars, SUVs, Vans, pick-ups, and absolute bartering car articulation went south, with
commuter car bazaar encountering aboriginal abatement in the decade. But what adored the all-
embracing book was the bike market. It took 7.31% backpack with motorcycle sales traveling
3.91% up and scooter sales benumbed 23% north. Export sales abstracts aswell contributed to
somewhat extenuative the year with acceleration of 7.21%.
The declivity larboard auto manufacturers with accumulated up account and stagnation. The
acting account appear in February, gave a accessory addition as all cars prices were bargain
marginally, but it hasn’t absolutely helped addition sales yet. Automakers are assured aid from
the government’s new account by way of added tax cuts.
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Sales abstracts of Advance 2014 shows 12.83% all-embracing advance aswell by agency of
added bike sales. Bartering Cars accept added biconcave compared to Advance 2013 and
commuter cars stagnating beneath the graph. However, all-embracing assembly has added by
9.95% comparing Advance abstracts of both years, suggesting auto makers’ aplomb in
advancing budgetary to accomplish better.
Barrage of new A articulation bunched cars by assorted auto majors seems to be accessible in
this economy, for barter as able-bodied as amount alternation entities. Maruti Suzuki
accomplished top on belvedere with 42% allotment in all-embracing car sales, followed by
Hyundai with 15% share.
Society of Indian Auto Manufacturers (SIAM) expects a 6% advance over in the budgetary
2014-15, with addition in accomplishment sector, new investment and beginning capacities in
the industry. Vikram Kirloskar, admiral of SIAM says, “Whichever government comes in…I am
searching for adherence in customs assignment and some abridgement in taxes. We are an over-
taxed industry.”
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COMPANY PROFILE
Hero MotoCorp Ltd. (Formerly Hero Honda Motors Ltd.) is the world's bigger architect of two -
wheelers, based in India.
In 2001, the aggregation accomplished the coveted position of getting the bigger bike
accomplishment aggregation in India and also, the 'World No.1' bike aggregation in agreement
of assemblage aggregate sales in a agenda year. Hero MotoCorp Ltd. continues to advance this
position till date.
Vision
The adventure of Hero Honda began with a simple eyes - the eyes of a adaptable and an
empowered India, powered by its two wheelers. Hero MotoCorp Ltd., company's new identity,
reflects its charge appear accouterment apple chic advancement solutions with renewed focus on
accretion company's cast in the all-around arena.
Mission
Hero MotoCorp’s mission is to become a all-around action accomplishing its customers' needs
and aspirations for mobility, ambience benchmarks in technology, administration and superior so
that it converts its barter into its cast advocates. The aggregation will accommodate an agreeable
ambiance for its humans to accomplish to their accurate potential. It will abide its focus on
amount conception and constant relationships with its partners
Strategy
Hero MotoCorp’s key strategies are to body a able-bodied artefact portfolio beyond categories,
analyze advance opportunities globally, continuously advance its operational efficiency,
aggressively aggrandize its adeptness to customers, abide to advance in cast architecture
activities and ensure chump and actor delight.
Manufacturing
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Hero MotoCorp two wheelers are bogus beyond 3 globally benchmarked accomplishment
facilities. Two of these are based at Gurgaon and Dharuhera which are amid in the
accompaniment of Haryana in arctic India. The third and the latest accomplishment bulb is based
at Haridwar, in the acropolis accompaniment of Uttrakhand.
Technology
In the 1980’s Hero Honda pioneered the addition of fuel-efficient, ambiance affable four-stroke
motorcycles in the country. Today, Hero Honda continues to be technology pioneer. It became
the aboriginal aggregation to barrage the Ammunition Injection (FI) technology in Indian
motorcycles, with the barrage of the Glamour FI in June 2006.
Distribution
The Company's advance in the two wheeler bazaar in India is the aftereffect of an built-in
adeptness to access adeptness in new geographies and advance markets. Hero MotoCorp’s all-
encompassing sales and account adjustment now spans over to 6000 chump blow points. These
comprise a mix of accustomed dealerships, account & additional locations outlets and dealer-
appointed outlets beyond the country
Brand
The new Hero is ascent and is assertive to flash on the all-around arena. Company's new
character "Hero MotoCorp Ltd." is absolutely cogitating of its eyes to strengthen focus on
advancement and technology and creating all-around footprint. Architecture and announcement
new cast character will be axial to all its initiatives, utilizing every befalling and leveraging its
able attendance beyond sports, brawl and below activation
HERO'S MANDATE
Hero is a apple baton because of its accomplished manpower, accurate management, all-
encompassing banker network, able accumulation alternation and world-class articles with acid
angle technology from Company, Japan. The teamwork and charge are embodied in the
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accomplished akin of chump satisfaction, and this goes a continued way appear reinforcing its
administration status
BOARD OF DIRECTORS
Technical Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
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9 Mr. Pradeep Dinodia
Mr. Brijmohan Lall Munjal is the architect Administrator and Chairman of the Aggregation and
the $ 3.2 billion Hero Group. He is the Accomplished Admiral of Confederation of Indian
Industry (CII), Society of Indian Auto Manufacturers (SIAM) and was a Member of the Lath of
the Country's Axial Bank (Reserve Bank of India). In acceptance of his addition to industry, Mr.
Munjal was conferred the Padma Bhushan Accolade by the Union Government.
Mr. Brijmohan Lall Munjal is currently on the lath of the afterward companies:
22
1 Hero Honda Motors Limited Chairman and Whole-time Administrator
Year Event
1990 Joint Accord Agreement with Honda Motor Co. Ltd. Japan signed
1996 Raman Munjal Vidya Mandir inaugurated - A Academy in the anamnesis of architect
Managing Director, Mr. Raman Kant Munjal
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1998 New motorcycle archetypal - "Street" alien
Splendor declared 'World No. 1' - bigger affairs individual bike archetypal
Appointed Virender Sehwag, Mohammad Kaif, Yuvraj Singh, Harbhajan Singh and Zaheer
Khan as Cast Ambassadors
24
2004 Becomes the aboriginal Indian Aggregation to cantankerous the accumulative 7 actor sales
mark
Splendor has emerged as the World's bigger affairs archetypal for the third agenda year in a row
(2000, 2001, 2002)
Hero Honda became the Apple No. 1 Aggregation for the third afterwards year.
2006 Hero Honda is the Apple No. 1 for the 4th year in a row
25
First Scooter archetypal from Hero Honda - "Pleasure" introduced
2007 Hero Honda is the Apple No. 1 for the 5th year in a row
2008 Hero Honda is the Apple No. 1 for the 6th year in a row
2010
2011
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2012
Launch of new active versions of Glamour, Glamour FI, CBZ Xtreme, Karizma
27
2014
2015
2014
2013
2012
• "Business Baton of the Year" Accolade by Hon'ble Admiral of India, Shri. Pranab Mukherjee,
at the AlMA Managing India Awards 2013 on April 11, 2013 (Conferred on Mr. Pawan Munjal)
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• "Business Baton of the Year" Accolade in the Auto (Two Wheelers) chic by Deputy Chairman
of the Planning Commission Mr. Montek Singh Ahluwalia, at the NDTV Business
Administration Awards 2013 (Conferred on Mr. Pawan Munjal)
• Best amount for Money Bike Maker and Best Advertising in Two Wheelers Chic at the Auto
India Best Cast Awards 2012
• Digital Advertiser of the year at the Indian Digital Media Awards (IDMA) 2012
• Three awards (Launch Event of the year, Rural Engagement Progamme and Reside Patron
Accolade for Marketing Excellence) at the WOW Awards organised by EventFAQs
Adjudged the "Bike Architect of the Year" at the Bread-and-butter Times ZigWheels Car and
Bike Awards.
- "Most Recommended Two-Wheeler Cast of the Year" accolade by CNBC Awaaz Chump
Awards
- Colloquy Loyalty Awards "Innovation in Loyalty Marketing All-embracing 2011" for Hero
GoodLife
- "Best Action Generating Short or Long-Term Cast Loyalty" by the Promotion Marketing
Accolade of Asia Adjustment of Merit for Hero GoodLife
- Ranked No 1 cast in the Auto (Two-Wheelers) chic in the Cast Equity "Most Trusted Brand"
2011 survey
29
Company of the Year awarded by Bread-and-butter Times Awards for Accumulated Arete 2008-
09.
Bike Maker of the Year by ET-ZigWheels Car & Bike of the Year Awards 2009
2010 'Two-wheeler Architect of the Year' by NDTV Profit Car & Bike Awards 2009 and
Passion Pro adjudged as CNB Viewers' Choice two-wheeler
Top Indian Aggregation beneath the 'Automobile - Two-wheelers' breadth by the Dun &
Bradstreet-Rolta Accumulated Awards
Won Gold in the Reader's Digest Trusted Cast 2009 in the 'Motorcycles' category
2009 NDTV Profit Business Administration Accolade 2008 - Hero Honda Wins the Coveted
"NDTV Profit Business Administration Accolade 2008"
NDTV Profit Car India & Bike India Awards - NDTV “Viewers’ Choice Award” to Hunk in
Bike category
IndiaTimes Mindscape and Savile Row ( A Forbes Accumulation Venture ) Loyalty Awards -
“Customer and Cast Loyalty Award” in Auto (two-wheeler) sector
Asian Retail Congress Accolade for Retail Arete (Strategies and Solutions of business addition
and transformation) - Best Chump Loyalty Program in Auto category
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NDTV Profit Car India & Bike India Awards - Bike Architect of the year
2008 The NDTV Profit Car India & Bike India Awards 2007 in the afterward category:
"Bike of the Year" - CBZ X-treme by Overdrive Magazine. mer Awards 2006.
Hero Honda Motors takes ample pride in its stakeholder relationships, abnormally ones
developed at the grassroots. The Aggregation believes it has managed to accompany an
economically and socially astern arena in Dharuhera, Haryana, into the civic bread-and-butter
mainstream.
An Chip Rural Development Centre has been set up on 40 acreage of acreage forth the Delhi-
Jaipur Highway. The Centre-complete with advanced access roads, apple-pie water, and
apprenticeship accessories for both adults and children-now nurtures a vibrant, accomplished
and advantageous community.
31
The Foundation has adopted assorted villages amid aural around of the Hero Honda branch at
Dharuhera for chip rural development. This includes:
• Constructing metalled anchorage and abutting these villages to the Civic Highway (NH -8).
• Renovating primary academy barrio and accouterment aseptic baptize and toilet facilities.
• The Raman Munjal Vidya Mandir began with three classes (up to chic II) and 55 acceptance
from adjacent areas. It has now developed into a avant-garde Chief Secondary, CBSE affiliated
co-educational academy with over 1200 acceptance and 61 teachers. The academy has a ample
playground, an ultra-modern laboratory, a well-equipped audio beheld room, an action room, a
abounding library and a computer centre.
The Raman Munjal Sports Complex has basketball courts, volleyball courts, and hockey and
football breadth are acclimated by the bounded villagers. In the abreast future, sports academies
are planned for advance brawl and bassinet ball, in accord with Civic Sports Authority of India.
In adjustment to advice bounded rural people, abnormally women, Hero Honda has set up a
Vocational Training Centre. So far 26 batches absolute of about 625 women accept been
accomplished in tailoring, adornment and knitting. The Aggregation has helped women
accomplished at this centre to set up a assembly assemblage to stitch uniforms for Hero Honda
employees. Interestingly, a lot of of the women are now self-employed.
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This Scheme was launched on 21st September, 1999, accoutrement the adjacent villages of
Malpura, Kapriwas and Sidhrawali. The activity started with a bashful enrolment of 36 adults.
Hero Honda is now in the action of imparting Adult Literacy Capsules to another
Marriages are organized from time to time, decidedly for girls from astern classes, by the
Foundation by accouterment banking advice and added abutment to the families.
At Hero Honda, our ambition is not alone to advertise you a bike, but aswell to advice you every
footfall of the way in authoritative your apple a bigger abode to reside in. Besides its will to
accommodate a high-quality account to all of its customers, Hero Honda takes a angle as a
socially amenable action admiring of its ambiance and admiring of the important issues.
Hero Honda has been acerb committed not alone to ecology attention programmers but aswell
expresses the more inseparable antithesis amid the bread-and-butter apropos and the ecology and
amusing issues faced by a business. A business have to not abound at the of flesh and man's
approaching but rather serve mankid.
"We have to do something for the association from whose acreage we accomplish our wealth."
Ambiance Policy
We at Hero Honda are committed to authenticate arete in our ecology achievement on a around-
the-clock basis, as an built-in aspect of our accumulated philosophy.
33
To accomplish this we accomplish ourselves to:
• Integrate ecology attributes and cleaner assembly in all our business processes and practices
with specific application to barter of chancy chemicals, breadth applicative and strengthen the
greening of accumulation chain.
• Comply with all applicative ecology legislation and aswell authoritative our ecology discharges
through the attempt of "alara" (as low as analytic achievable).
• Institutionalise ability conservation, in particular, in the areas of oil, water, electrical energy,
paints and chemicals.
• Enhance ecology acquaintance of our advisers and dealers / vendors, while announcement their
captivation in ensuring complete ecology management.
Superior Policy
We are committed at all levels to accomplish top superior in whatever we do, decidedly in our
articles and casework which will accommodated and beat customer's growing aspirations
through:
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• Innovation in products, processes and services.
Safety Policy
Hero Honda is committed to assurance and bloom of its advisers and added bodies who may be
afflicted by its operations. We accept that the safe plan practices advance to bigger business
performance, motivated workforce and college productivity.
• Promoting assurance and bloom acquaintance amidst employees, suppliers and contractors.
Continuous improvements in assurance achievement through precautions besides accord and
training of employees.
PHOENIX MOTORS PVT LTD is dealership blazon of business. PHOENIX MOTORS PVT
LTD. is accustomed on 21st advance 2003. The business is active by alone one man. The buyer
name is ch .madhu mathi the close is amid at habsiguda in Hyderabad.
Generally the auction will be either on banknote base or on institutional basis. Bank like ICICI,
HDFC and CENTURION are accouterment loans to customers.
35
Advertising action of archetype motors:
They are giving the ads through newspapers, bank paintings, hoardings and acreage staff. They
are advance sales by introducing the schemes, accumulation bookings, institutional sales and
chump door-to-door activities.
Agents associates are categorized for technicians, 25 associates are allotted for acreage staff, 5
associates are recruited for sales for persons, 5 bodies are placed for evaluating for additional
parts, 5 associates are allotted for authoritative accounts and addition 3 bodies for banknote
transaction and added associates are allotted for actual work.
Customer relationship:
They absorb the exhibit accouterment a customer’s huge accepting basin game, internet ability
and television with home there system. They accommodate acerbity aliment programs on every
week.
According to added dealers PHOENIX motors in aboriginal in sales and best in service. They
amusement customer, is the actual important being at PHOENIX motors chump achievement is
their motto, why because, they will annoyed chump is the best advertisement. They
accommodate bigger amount for the barter and as able-bodied as advisers also. At PHOENIX
motors the chump is the boss.
Average they are affairs 28 cars per day. PHOENIX motors PVT L.T.D is the A.P s NO.1
dealership in sales and added activities? It is a QLAD (qualify baton through superior dealer). At
PHOENIX motor they gave the superior account to the barter why because ‘the amount is
continued abandoned but the superior is remembered for ever”. They amusement superior has
a...
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U Understanding customer’s needs
Assurance on proprietary items like Tyros, Tubes and Battery etc, will be anon handled by the
corresponding aboriginal articles (OEM’s) except AMCO for batteries and Dunlop and Falcon
tires and Tubes. In case of any birthmark in proprietary items, added than the aloft two
mentioned OEM’S the dealers have to access the Brach appointment banker of the
corresponding manufacture.
For AMCO batteries and Dunlop and falcon tires, tubes claims will be accustomed at our
accustomed dealerships per the mutually agreed agreement and altitude amid HERO and of these
two OEM’s in case the affirmation is not accustomed for invalid reasons. Then the affirmation
forth with the abnegation agenda anatomy the OEM can be beatific to the assurance breadth at
gorgon plan afterwards due to advocacy of the breadth account engineer. If any added six
casework or consecutive paid casework is not availed as per the recommended agenda
accustomed in the owner’s manual. If HERO recommended engine oil is not used. To
accustomed abrasion & breach apparatus like bulbs, electric wiring, filters, atom plug, clamp
plates, braded shoes, fasteners, bushing washers, oil seals, gaskets, elastic locations (other than
tyre and tube) artificial components, chain$ sprockets and in case of caster rim misalignment or
bend.
If there is any accident due o modification or accessories of accessories added than ones
recommended by HERO. If the motor has been acclimated in any aggressive contest like
tracking contest or rallies. If there is any accident to the corrective apparent due to automated
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abuse or added accidental factors. For clams fabricated for any consequential accident due to any
antecedent malfunction. For accustomed abnormality like noise, vibration, oil seepage, which do
not affect the achievement of the motorcycles.
PHOENIX motors participate and conduct social service activities. Recently the phoenix
motors organized a BLOOD DONATION CAMP for the trust on 21 st January 2006.they
motivated on the consumers to participated in this camp and also provide certificate for the
customers
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THE MARKETED BIKES OF PHOENIX (All Hero Moto Corp.)
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40
41
42
CUSTOMER RELATIONSHIP:
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To entertain the customers the showroom providing a customers huge having pool game,
Internet facility and television with home theatre system. They provide bike maintenance
programs on every week. According to other dealers PHOENIX motors in first in sales and best
in service. They treat customer, is the very important person at PHOENIX motors customer
satisfaction is their motto, why because, the well satisfied customer is the best advertisement.
They provide better value for the customers and as well as employees also. At PHONIX motors
the customer is the boss.
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CHAPTER-III
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THEORITICAL FRAME WORK
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Fund Flow Statement: According to Anthony,” The funds Flow Statement described the sources
from which the additional funds were derived and the use to which these funds were put”. Funds
flow statements help the financial analyst in having amore detailed analysis and understanding
the changes in the distribution of resources between two balance sheet periods. The statement
reveals the sources of funds and their application for different purposes.
Cash Flow Statements: A cash flow statement depicts the changes in cash position from one
period to another. It shows the inflow and outflow of cash and helps the management in making
plans for immediate future. An estimated cash flow statement enables the management to
ascertain the availability of cash to meet business obligations. This statement is useful for short
term planning by management.
Schedules & Note to Financial Statements: Schedules are the statements, which explain the
items given in the income statement and balance sheet. Schedules are a part of financial
statement, which give detailed information about the financial position of a business
organization. Certain notes are often used to supplement the information comprised in basic
financial statements. These are virtually a part of financial statements.
Annual Reports / Corporate reports: Apart from the financial statements annual report contains
other relevant information such as Management discussion & analysis, Reports on corporate
Governance, Director’s report, details of the subsidiary companies. These reports play as
important role as financial statements of the company in understanding of the complete financial
position.
NATURE OF FINANCIAL STATEMENTS
According to the American Institute of Certified Public Accountants, financial statements reflect
“ a combination of recorded facts, accounting conventions and personal judgments and
conventions applied affect them materially”. It means that data presented in financial statements
is affected by recorded facts, accounting concepts & conventions and personal judgments.
a) Recorded facts: The term-recorded facts refer to the figures, which are shown in the book of
accounts. The figures, which are not recorded in the books, are not depicted in financial
statements, no matter how important or unimportant those facts are.
b) Accounting policies, Assumptions, concepts & conventions:
Accounting policies encompasses the principles, bases, conventions, rules and procedures
adopted by in preparing and presenting financial statements. Accounting policies of the
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organisation are consistently followed over along period of time and are reported as schedule
to financial statements or as notes to financial statements in the annual report.
As per accounting standards Board, India, fundamental accounting assumptions mean “basic
accounting assumptions which underline the preparation & presentation of financial
statements. Usually, they are not specifically stated because their acceptance and use are
assumed. Disclosure is necessary if they are not followed”. Some fundamental accounting
assumptions are going concern concept, consistency, accrual etc.
Accounting concepts are basic framework on the basis of which accounting work is carried
out. Some accounting concepts are Business entity concept, Money measurement concept,
going concern concept, cost concept, matching concept, Dual aspect concept etc.
Accounting conventions are the principles, which enjoy the sanctity of application on
account of long usage, are termed as accounting conventions. E.g. consistency,
conservatism, materiality, full disclosure.
c) Personal Judgments: Personal judgments of the accountant are of importance despite of
properly laid down concepts, conventions, policies and assumptions. The judgment needs to
be exercised in proper classification of assets, classification of expenditure into capital &
revenue, creation of provisions and reserves.
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VARIOUS TECHNIQUES OF FINANCIAL ANALYSIS
Comparative Financial Statements: Comparative financial statements are statements of financial
position of a business designed to provide time perspective to the to the consideration of various
elements of financial position embodied in such statements. Comparative statements reveal the
following:
(i) Absolute data (Money value or rupee amounts)
(ii) Increase or reduction in absolute data (in terms of money values)
(iii) Increase or reduction in absolute data (in terms of percentage)
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‘Value added’ is described as “ the wealth created by the reporting entity by its own and its
employees’ efforts and comprises salary, wages, fringe benefits, interest, dividend, tax,
depreciation and net profit (Retained).
Value added is the increase in the market value brought by an alteration in the form, location or
availability of a product or service excluding the cost of bought in material or services used in
that product or service. To carry out the Value added analysis, a typical statement of added
value is prepared as routine part of management information system. The value added statement
is basically rearrangement of information given in income statement.
Types of Financial Analysis
(i) On the basis of Material Used: The analysis can be of following types:
Internal Analysis: It indicates the analysis carried out by those parties who have the access
to the book and records of the company. Naturally, it indicates basically the analysis carried
out by management of the company to enable the decision making process. This may also
indicate the analysis carried out in legal or statutory matters where the parties which are not
a part of management of the company may have the access to the books and records of the
company.
External Analysis: It indicates the analysis carried out by those parties who do not have the
access the books an\d records of the company. This may involve the analysis carried out by
creditors, prospective investors, and other outsiders. Naturally, those outsiders are required to
depend upon the published financial statements. As such, the depth & correctness of the external
analysis is restricted, though some of the recent amendments of the statutes like Companies Act,
1956 hamait mandatory for the companies to reveal maximum information relating to the
operations & financial position, in order to facilitate the
Horizontal Analysis: The horizontal analysis consists of the study of the behavior of each of the
item in the financial statement- that is, its increase & decrease with the passage if time. It is also
known as dynamic type of analysis since it shows the changes, which have taken palace. The
comparison of the items is made across the year, , the eyes look at the comparative analysis is at
the horizontal level , hence the analysis id termed as horizontal analysis.
Vertical Analysis: In vertical analysis a study is made of the quantitative relationship between
he various items in the financial statements on a particular date. It’s a static type of analysis or
study of position. Such an analysis is useful in comparing the performance of several companies
in the same group or divisions or department in the same company. Since this analysis depends
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on the data for one period, this is not very conducive to a proper analysis of the company’s
financial position. It is also called ‘Static’ analysis as it is frequently used for referring to ratio
developed on the date or for one accounting period.
Analysis can be done both horizontally and vertically. As a matter of fact one type of analysis is
incomplete in itself. Both are complementary to each other. Both these analysis form the
backbone of the technique of financial statement analysis.
1. Profitability and
2. Financial soundness
Analysis and interpretation of financial statement therefore, refers to such a treatment of the information
contained in the Income Statement and Balance Sheet so as to afford full diagnosis of the profitability and
BALANCE SHEET:-
A balance sheet is the basic financial statement. It presents data on a company’s financial conditions on a
particular date, based on conventions and generally accepted principles of accounting. The amount shown
in the statements on the balances, at the time it was prepared in the various accounts listed in the
statement summarizes the business operations during the specific period and shows the results of such
operations in the form of net income or net loss. By comparing the income statements of successive
comparative statement of the cost of goods manufactured and sold. It is prepared at regular intervals and
shows what a business enterprise owns and what it owes. It provides information which helps in the
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assessment of the three main aspects of an enterprises position – its profitability, liquidity and solvency.
Of these, the later two are concerned with an enterprises ability to meet its liabilities, while profitability is
most useful overall measure of its financial conditions, the balance sheet is a statements of assets,
liabilities capital on specified date. It is therefore a static statement, indicating resources and the allocation
of these resources to various categories of asset. It is so to say financial photography finance. Liabilities
The shareholders equity comprises the total owner ship claims in a firm. This claim includes net worth of
shareholders equity and preferred stock. The traditional company balance sheet statement of assets valued
on the basis of their original cost and the means by which they have been financed by its shareholders,
1. A balance sheet gives only a limited picture of state of affairs of a company, because it
2. The values shown on the balance sheet for some of the assets are never accurate
3. A balance sheet assumes that the real value of money remain constant.
4. On the basis of balance sheet, it is not possible to arrive at any conclusion about the success of an
INCOME STATEMENT
The results of operations of a business for a period of time are presented in the income statement.
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From the accounting point of view, an income statement is subordinate to the balance sheet because the
former simply presents the details of the changes in the retained earnings in balance sheet accounts.
However, if vital source of financial information an income statement summarizes the results of business
operations during specific period and shows in the form of net income or net loss by comparing income
statements for successive periods, it is possible to observe the progress of the business the statement is
supplemented by a comparative statement of cost of goods manufactured and sold. It summarizes firms
Financial statements are sometimes recast for facility of scrutiny. The effects of the conductor
Businesses are reflected in its balance sheet by changes in assets and liabilities and in its net worth.
The comparative income statement presents a review of operating activities in business. A comparative
balance sheet shows effect of the operations on the assets and liabilities. The practice of presenting
comparative statement in the annual report is now becoming wide spread because it is a connection
between balance sheet and income statement. Considerations like price levels and accounting methods are
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Common-size statements
The percentage balance sheet is often known as the common size balance sheet. Such balance
sheet are, in a broad sense ratio analysis general items in the profit and loss accounts and in the
balance sheet are expressed in analytical percentages when expressed in the form, the balance
sheet and profit and loss account are referred to as a common size statement. Such statements
are useful in comparative analysis of the financial position in operating results of the business.
A cash flow statement is the financial analysis of the net income or profit after including book expense
items which currently do not use cash; for example, depreciation, depletion and amortization. Revenue
items, which do not currently provide funds, are to be deducted. A gross cash flow is net profit after tax
plus provision for depreciation. A net cash flow is arrived after deducting dividends from the gross cash
flow. The cash flow is very significant because it represents the actual amount of cash available to the
business.
Ratio Analysis
Financial ratio analysis is the calculation and comparison of ratios which are derived from the
information in a company's financial statements. The level and historical trends of these ratios can
be used to make inferences about a company’s financial condition, its operations and attractiveness
as an investment.
Financial ratios are calculated from one or more pieces of information from company’s financial
statements. For example, the "gross margin" is the gross profit from operations divided by the total
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sales or revenues of a company, expressed in percentage terms. In isolation, a financial ratio is a
useless piece of information. In context, however, a financial ratio can give a financial analyst an
excellent picture of a company's situation band the trends that are developing.
A ratio gains utility by comparison to other data and standards. Taking our example, a gross
profit margin for a company of 25% is meaningless by itself. If we know that this company's
competitors have profit margins of 10%, we know that it is more profitable than its industry peers
which are quite favorable. If we also know that the historical trend is upwards, for example has
been increasing steadily for the last few years, this would also be a favorable sign that management
Classification of Ratios
Financial ratio analysis involves the calculation and comparison of ratios which are derived from
the information given in the company's financial statements. The historical trends of these ratios
can be used to make inferences about a company’s financial condition, its operations and its
investment attractiveness.
Financial ratio analysis groups the ratios into categories that tell us about the different facets of a
company's financial state of affairs. Some of the categories of ratios are described below:
Liquidity Ratios give a picture of a company's short term financial situation or solvency
Turnover Ratios show how efficient a company's operations and how well it is using its
assets.
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Liquidity Ratios
Liquidity Ratios are ratios that come off the Balance Sheet and hence measure the Liquidity of the
company as on a particular day i.e. the day that the Balance Sheet was prepared. These ratios are
important in measuring the ability of a company to meet both its short term and long term
obligations.
1. Current Ratio
2. Liquid Ratio
1. Current Ratio:
An indication of a company's ability to meet short-term debt obligations; the higher the ratio, the
more liquid the company is. Current ratio is equal to current assets divided by current liabilities.
If the current assets of a company are more than twice the current liabilities, then that company
is generally considered to have good short-term financial strength. If current liabilities exceed
current assets, then the company may have problems meeting its short-term obligations.
2. Quick Ratio:
Liquid ratio is also known as ‘quick’ or ‘Acid test ‘ratio. Liquid assets refer to assets which are
quickly convertible into cash. Current Assets other stock and prepaid expenses are considered as
quick assets. The ideal liquid ratio accepted ‘norm’ for liquid ratio ‘1’.
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Quick Assets = Total Current Assets (minus) Inventory
Working Capital is more a measure of cash flow than a ratio. The result of this calculation must
be a positive number. Companies look at Net Working Capital over time to determine a
company's ability to weather financial crises. Loans are often tied to minimum working capital
requirements.
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Net working capital ratio = Net Working Capital / Capital Employed
Turnover Ratios
The turnover ratio is also known as activity or efficiency ratios. They indicates the efficiency
with which the capital employed is rotated in the business (i.e.) the speed at which capital
employed in the business rotates. Higher the rate of rotation, the greater will be the profitability.
Turnover ratios indicate the number of times the capital has been rotated in the process of doing
business.
Fixed asset turnover is the ratio of sales (on your Profit and loss account) to the value of your
fixed assets (on your balance sheet). It indicates how well your business is using its fixed assets
to generate sales.
Generally speaking, the higher the ratio, the better, because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue. A declining ratio may
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Working capital refers to investment in current assets. This is also known as gross concept of
working capital. There is another concept of working capital known as net working capital. Net
working capital is the difference between current assets and current liabilities. Analysts intend to
establish a relationship between working capital and salsas the two are closely related. Through
this ratio we are attempting to see that one rupee blocked by the organization in net working
capital is generating how much sales. Higher the ratio better it is.So, the working capital can be
defined either as a gross working capital, which include funds invested in all current assets, or as
net working capital, which denotes the difference between the current assets current liabilities of
an organization.
Debtor’s turnover ratio measures the efficiency with which the debtors are converted into cash.
This ratio indicates both the quality of debtors and the collection efforts of the business
The numerator of this ratio should preferably be credit sales. This is so because the denominator
is logically related to credit sales as it arises from credit sales only. Cash sales do not generate
debtors. However, as the information related to credit sales is not separately available in
corporate accounts, so total sales could be taken in the numerator. Average debtors are
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Debtor’s Turnover Ratio = Credit sales / Average accounts receivables
The ratio indicates the extent to which the debt has been collected in time. It gives the average
debt collection period. The ratio is very helpful to lenders because it explains to them whether
their borrowers are collecting money within a reasonable time. An increase in the period will
This ratio indicates whether investment in inventory is efficiently used or not. It is therefore
explains whether investment in inventories is within proper limits or not. The Inventory turnover
ratio signifies the liquidity of the Inventory. A high inventory turnover ratio indicates brisk sales.
The ratio is, therefore a measure to discover the possible trouble in the form of over stocking or
over valuation.
It is difficult to establish a standard ratio of inventory because it will differ from industry to
industry.
Profitability Ratios
Profitability is an indication of the efficiency with which the operation of the business is carried
on. Poor operational performance may indicate poor sales and hence poor profits. A lower
profitability may arise due to lack of control over the expenses. Bankers, financial institutions
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and other creditors look at the profitability ratios as an indicator whether or not the firm earns
substantially more than it pays interest for the use of borrowed funds.
1. Return on Investment
6. Operating ratio
7. Payout ratio
1. Return on Investment:
It is also called as “Return on Capital Employed”. It indicates the percentage of return on the total capital
The term ‘operating profit ‘ means ‘profit before interest and tax’ and the term ‘capital employed ‘ means
sum-total of long term funds employed in the business. i.e. Share capital + Reserve and surplus + long
In case it is desired to work out the productivity of the company from the shareholder’s point of view, it
Return on shareholder’s fund = Net profit after Interest and Tax/Shareholders’ fund*100
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The term profit here means ‘Net Income after the deduction of interest and tax’. It is different from the
“Net operating profit” which is used for computing the ‘Return on total capital employed’ in the business.
This is because the shareholders are interested in Total Income after tax including Net non-operating
This ratio is computed to know the productivity of the total assets.The term ‘Total Assets’ includes the
fixed asset, current asset and capital work in progress of the company. The above table clearly reveals the
relationship between the net profit and Total Assets employed in the business.
In order to avoid confusion on account of the varied meanings of the term capital employed, the overall
profitability can also be judged by calculating earnings per share with the help of the following formula:
Earning Per Equity Share = Net Profit after Tax / Number of Equity Shares X 100
The earnings per share of the company helps in determining the market price of the equity shares of the
company. A comparison of earning per share of the company with another will also help in deciding
whether the equity share capital is being effectively used or not. It also helps in estimating the company’s
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Earning Per Equity Share = Net Profit after Tax / Number of Equity Shares X 100
This ratio indicates the Net margin on a sale of Rs.100.This ratio helps in determining the efficiency with
which affairs of the business are being managed. An increase in the ratio over the previous period
indicates improvement in the operational efficiency of the business. The ratio is thus on effective measure
to check the profitability of business. However, constant increase in the above ratio after year is a definite
6. Operating Ratio:
This ratio is a complementary of Net Profit ratio. In case the net profit ratio is20%. It means that the
The operating cost include the cost of direct materials, direct labor and other overheads, viz., factory,
office or selling.
This ratio is the test of the operational efficiency with which the business is being carried. The operating
ratio should be low enough to leave a portion of sales to give a fair to the investors.
Payout Ratio:
This ratio indicates what proportion of earning per share has been used for paying dividend. The payout
ratio is the indicator of the amount of earnings that have been ploughed back in the business. The lower
the payout ratio, the higher will be the amount of earnings ploughed back in the business and vice versa.
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Payout Ratio =Dividend per equity share/Earning per equity share*100
This ratio is particularly useful for those investors who are interested only in dividend income.
The ratio is calculated by comparing the ratio of dividend per share with its market value.
The term ‘solvency’ refers to the ability of a concern to meet its long term obligations. The long term
indebtedness of a firm includes debenture holders, financial institutions providing medium and long term
loans and other creditors selling goods on installment basis. So, the long term Solvency ratios indicate a
firm’s ability to meet the fixed interest and costs and repayment schedules associated with its long term
1. Debt-Equity Ratio
Debt –Equity ratio also known as External- Internal Equity Ratio is calculated to measure the relative
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Outsiders fund includes all debts/liabilities to outsiders, whether long term or short term or whatever in
the form of debentures bonds, mortgages or bills. The shareholders fund consist of equity share capital,
preference share capital , capital reserves, revenue reserves, and reserves representing accumulated
This ratio is used to test the debt servicing capacity of a firm. The ratio is calculated as:
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A financial statement (or financial report) is a formal record of the financial activities of a
business, person, or other entity. In British English—including United Kingdom company law—
a financial statement is often referred to as an account, although the term financial statement is
also used, particularly by accountants.
For a business enterprise, all the relevant financial information, presented in a structured manner
and in a form easy to understand, are called the financial statements. They typically include four
basic financial statements, accompanied by a management discussion and analysis:[1]
Statement of Financial Position: also referred to as a balance sheet, reports on a company's
assets, liabilities, and ownership equity at a given point in time.
Statement of Comprehensive Income: also referred to as Profit and Loss statement (or a "P&L"),
reports on a company's income, expenses, and profits over a period of time. A Profit & Loss
statement provides information on the operation of the enterprise. These include sale and the
various expenses incurred during the processing state.
Statement of Changes in Equity: explains the changes of the company's equity throughout the
reporting period
Statement of cash flows: reports on a company's cash flow activities, particularly its operating,
investing and financing activities.
For large corporations, these statements are often complex and may include an extensive set of
notes to the financial statements[2] and explanation of financial policies and management
discussion and analysis. The notes typically describe each item on the balance sheet, income
statement and cash flow statement in further detail. Notes to financial statements are considered
an integral part of the financial statementsFinancial statement analysis (or financial analysis) the
process of understanding the risk and profitability of a firm (business, sub-business or project)
through analysis of reported financial information, particularly annual and quarterly reports.
Financial statement analysis consists of 1) reformulating reported financial statements, 2)
analysis and adjustments of measurement errors, and 3) financial ratio analysis on the basis of
reformulated and adjusted financial statements. The two first steps are often dropped in practice,
meaning that financial ratios are just calculated on the basis of the reported numbers, perhaps
with some adjustments. Financial statement analysis is the foundation for evaluating and pricing
credit risk and for doing fundamental company valuation.
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1) Financial statement analysis typically starts with reformulating the reported financial
information. In relation to the income statement, one common reformulation is to divide reported
items into recurring or normal items and non-recurring or special items. In this way, earnings
could be separated in to normal or core earnings and transitory earnings. The idea is that normal
earnings are more permanent and hence more relevant for prediction and valuation. Normal
earnings are also separated into net operational profit after taxes (NOPAT) and net financial
costs. The balance sheet is grouped, for example, in net operating assets (NOA), net financial
debt and equity.
2) Analysis and adjustment of measurement errors question the quality of the reported
accounting numbers. The reported numbers can for example be a bad or noisy representation of
invested capital, for example in terms of NOA, which means that the return on net operating
assets (RNOA) will be a noisy measure of the underlying profitability (the internal rate of return,
IRR). Expensing of R&D is an example when such investment expenditures are expected to
yield future economic benefits, suggesting that R&D creates assets which should have been
capitalized in the balance sheet. An example of an adjustment for measurement errors is when
the analyst removes the R&D expenses from the income statement and put them in the balance
sheet. The R&D expenditures are then replaced by amortization of the R&D capital in the
balance sheet. Another example is to adjust the reported numbers when the analyst suspects
earnings management.
3) Financial ratio analysis should be based on regrouped and adjusted financial statements. Two
types of ratio analysis are performed: 3.1) Analysis of risk and 3.2) analysis of profitability:
Analysis of risk typically aims at detecting the underlying credit risk of the firm. Risk analysis
consists of liquidity and solvency analysis. Liquidity analysis aims at analyzing whether the firm
has enough liquidity to meet its obligations when they should be paid. A usual technique to
analyze illiquidity risk is to focus on ratios such as the current ratio and interest coverage. Cash
flow analysis is also useful. Solvency analysis aims at analyzing whether the firm is financed so
that it is able to recover from a losses or a period of losses. A usual technique to analyze
insolvency risk is to focus on ratios such as the equity in percentage of total capital and other
ratios of capital structure. Based on the risk analysis the analyzed firm could be rated, i.e. given
a grade on the riskiness, a process called synthetic rating.
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Ratios of risk such as the current ratio, the interest coverage and the equity percentage have no
theoretical benchmarks. It is therefore common to compare them with the industry average over
time. If a firm has a higher equity ratio than the industry, this is considered less risky than if it is
above the average. Similarly, if the equity ratio increases over time, it is a good sign in relation
to insolvency risk.
Analysis of profitability refers to the analysis of return on capital, for example return on equity,
ROE, defined as earnings divided by average equity. Return on equity, ROE, could be
decomposed: ROE = RNOA + (RNOA - NFIR) * NFD/E, where RNOA is return on net
operating assets, NFIR is the net financial interest rate, NFD is net financial debt and E is equity.
In this way, the sources of ROE could be clarified.
Unlike other ratios, return on capital has a theoretical benchmark, the cost of capital -
also called the required return on capital. For example, the return on equity, ROE, could be
compared with the required return on equity, kE, as estimated, for example, by the capital asset
pricing model. If ROE < kE (or RNOA > WACC, where WACC is the weighted average cost of
capital), then the firm is economically profitable at any given time over the period of ratio
analysis. The firm creates values for its owners.
Insights from financial statement analysis could be used to make forecasts and to evaluate credit
risk and value the firm's equity. For example, if financial statement analysis detects increasing
superior performance ROE - kE > 0 over the period of financial statement analysis, then this
trend could be extrapolated into the future. But as economic theory suggests, sooner or later the
competitive forces will work - and ROE will be driven toward kE. Only if the firm has a
sustainable competitive advantage, ROE - kE > 0 in "steady state"Purpose of financial
statements by business entities"The objective of financial statements is to provide information
about the financial position, performance and changes in financial position of an enterprise that
is useful to a wide range of users in making economic decisions."[3] Financial statements should
be understandable, relevant, reliable and comparable. Reported assets, liabilities, equity, income
and expenses are directly related to an organization's financial position.Financial statements are
intended to be understandable by readers who have "a reasonable knowledge of business and
economic activities and accounting and who are willing to study the information diligently."[3]
Financial statements may be used by users for different purposes:
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Owners and managers require financial statements to make important business decisions that
affect its continued operations. Financial analysis is then performed on these statements to
provide management with a more detailed understanding of the figures. These statements are
also used as part of management's annual report to the stockholders.
Employees also need these reports in making collective bargaining agreements (CBA) with the
management, in the case of labor unions or for individuals in discussing their compensation,
promotion and rankings.
Prospective investors make use of financial statements to assess the viability of investing in a
business. Financial analyses are often used by investors and are prepared by professionals
(financial analysts), thus providing them with the basis for making investment decisions.
Financial institutions (banks and other lending companies) use them to decide whether to grant a
company with fresh working capital or extend debt securities (such as a long-term bank loan or
debentures) to finance expansion and other significant expenditures.
Government entities (tax authorities) need financial statements to ascertain the propriety and
accuracy of taxes and other duties declared and paid by a company.
Vendors who extend credit to a business require financial statements to assess the
creditworthiness of the business.
Media and the general public are also interested in financial statements for a variety of reasons.
Government financial statements
The rules for the recording, measurement and presentation of government financial statements
may be different from those required for business and even for non-profit organizations. They
may use either of two accounting methods: accrual accounting, or cash accounting, or a
combination of the two (OCBOA). A complete set of chart of accounts is also used that is
substantially different from the chart of a profit-oriented business
The financial statements that not-for-profit organizations such as charitable organizations and
large voluntary associations publish, tend to be simpler than those of for-profit corporations.
Often they consist of just a balance sheet and a "statement of activities" (listing income and
expenses) similar to the "Profit and Loss statement" of a for-profit. Charitable organizations in
the United States are required to show their income and net assets (equity) in three categories:
Unrestricted (available for general use), Temporarily Restricted (to be released after the donor's
time or purpose restrictions have been met), and Permanently Restricted (to be held perpetually,
e.g., in an Endowment).
70
Personal financial statements
Personal financial statements may be required from persons applying for a personal loan or
financial aid. Typically, a personal financial statement consists of a single form for reporting
personally held assets and liabilities (debts), or personal sources of income and expenses, or
both. The form to be filled out is determined by the organization supplying the loan or aid.
Although laws differ from country to country, an audit of the financial statements of a public
company is usually required for investment, financing, and tax purposes. These are usually
performed by independent accountants or auditing firms. Results of the audit are summarized in
an audit report that either provide an unqualified opinion on the financial statements or
qualifications as to its fairness and accuracy. The audit opinion on the financial statements is
usually included in the annual report.
There has been much legal debate over who an auditor is liable to. Since audit reports
tend to be addressed to the current shareholders, it is commonly thought that they owe a legal
duty of care to them. But this may not be the case as determined by common law precedent. In
Canada, auditors are liable only to investors using a prospectus to buy shares in the primary
market. In the United Kingdom, they have been held liable to potential investors when the
auditor was aware of the potential investor and how they would use the information in the
financial statements. Nowadays auditors tend to include in their report liability restricting
language, discouraging anyone other than the addressees of their report from relying on it.
Liability is an important issue: in the UK, for example, auditors have unlimited liability.
In the United States, especially in the post-Enron era there has been substantial concern
about the accuracy of financial statements. Corporate officers (the chief executive officer (CEO)
and chief financial officer (CFO)) are personally liable for attesting that financial statements "do
not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by th[e] report." Making or certifying
misleading financial statements exposes the people involved to substantial civil and criminal
liability. For example Bernie Ebbers (former CEO of WorldCom) was sentenced to 25 years in
federal prison for allowing WorldCom's revenues to be overstated by billion over five years.
71
Different countries have developed their own accounting principles over time, making
international comparisons of companies difficult. To ensure uniformity and comparability
between financial statements prepared by different companies, a set of guidelines and rules are
used. Commonly referred to as Generally Accepted Accounting Principles (GAAP), these set of
guidelines provide the basis in the preparation of financial statements, although many companies
voluntarily disclose information beyond the scope of such requirements.
Recently there has been a push towards standardizing accounting rules made by the
International Accounting Standards Board ("IASB"). IASB develops International Financial
Reporting Standards that have been adopted by Australia, Canada and the European Union (for
publicly quoted companies only), are under consideration in South Africa and other countries.
The United States Financial Accounting Standards Board has made a commitment to converge
the U.S. GAAP and IFRS over time.
Inclusion in annual reports
To entice new investors, most public companies assemble their financial statements on fine
paper with pleasing graphics and photos in an annual report to shareholders, attempting to
capture the excitement and culture of the organization in a "marketing brochure" of sorts.
Usually the company's chief executive will write a letter to shareholders, describing
management's performance and the company's financial highlights.
In the United States, prior to the advent of the internet, the annual report was considered the
most effective way for corporations to communicate with individual shareholders. Blue chip
companies went to great expense to produce and mail out attractive annual reports to every
shareholder. The annual report was often prepared in the style of a coffee table book.
Moving to electronic financial statements
Financial statements have been created on paper for hundreds of years. The growth of the Web
has seen more and more financial statements created in an electronic form which is
exchangeable over the Web. Common forms of electronic financial statements are PDF and
HTML. These types of electronic financial statements have their drawbacks in that it still takes a
human to read the information in order to reuse the information contained in a financial
statement.
72
73
CHAPTER-IV
DATA ANALYSIS
AND
INTERPRETATION
74
DATA ANALYSIS AND INTERPRETATION
The following are some of the ratios that are used in this for evaluating the company
performance with particular reference to “HERO MOTORS limited”
LIQUIDITY RATIOS :
The liquidity of a business firm is measured in terms of the ability to satisfy its short – term
obligations which are due. Liquidity is nothing but solvency of the firm’s over all financial
position the case with which it can pay its bills.
1) Current ratio:
Current ratio= current assets / current liabilities
(Rs in Millions)
Note :
Chart-1
75
.
Interpretation:
76
2) QUICK RATIO( Acid test ratio):
(Rs in Million)
Current Ratio in
Years Quick assets
liabilities %
2013-14 3,437.47 3,629.70 0.95
2014-15 3,394.66 3,080.02 1.10
2015-16 2,524.20 2,563.82 0.98
2016-17 2,592.86 2,313.57 1.12
2017-18 3,122.77 2,423.55 1.29
Note :
The quick ratio is more conservative than the current ratio, a more well-known liquidity
measure, because it excludes inventory from current assets.
The ratio is also an indicator of short-term solvency of the company.
77
Chart-2
Interpretation:
In the year 2014 the quick ratio was high and 15-2016 the ratio is very low and again in
the year 2017 and 2018 was increased.
The standard of quick ratio is 1:1 and the company should not maintain the ideal ratio.
The company not able to meet current obligations .it can interpreted based on the
previous ratio.
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3) ABSOLUTE QUICK RATIO:
Absolute quick ratio=quick assets/current liabilities.
(Rs in Millions)
Interpretation:
Absolute ratio of the company was 0.43 in the year 2014. And the rest of the following
years the ratio is fluctuating .and in 2017 the ratio has decreased to 0.046 .
The company is not maintaining proper liquidity assets to meet current obligations.
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LEVERAGE RATIO :
1) PROPRIETOR RATIO
Proprietors ratio or equity ratio=shareholders funds/total assets.
(Rs in Millions)
Note:
A high proprietary ratio will indicate a relatively little danger to the creditors, etc., in the
event of forced reorganization or winding up of the company.
A ratio below 50% alarming for the creditors since they may have to lose heavily in the
event of the company’s liquidation on account of heavy losses.
80
Chart -4
(Rs in Millions )
Interpretation:
In the year 2014 the proprietary ratio was 0.38 but in the next year 2015 , it increased to
0.42 and again in the year 2016 it come down to 0.38 and it increased to 0.44 in next year
and the following year 2018 ratio was fell down to 0.39.
It can analyses that the proprietary ratio has fluctuating.
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ACTIVITY RATIO:
(Rs in Millions)
WORKING
YEARS Sales RATIO
CAPITAL
2013-14 52,476.57 1,420.52 36.94
2014-15 71,681.76 1,539.97 46.55
2015-16 77,291.23 642.72 120.26
2016-17 59,810.73 960.82 62.25
2017-18 72,447.10 1,177.82 61.51
Note:
A company's efficiency, financial strength and cash-flow health show in its management
of working capital.
82
CHART-5
INTERPRETATION:
A high working capital turnover ratio may be the result of favourable turnover of
inventories and receivables. The low working capital turnover ratio indicates the
efficient utilization of working capital.
Working capital turnover ratio of the company was 6.36 in the year 2014 and it
had been increasing till the 2015,and in next the ratio was slow down to 5.81,and
in the year 2018 the ratio again increased to 6.14.
In the 2015 the working capital ratio was very high, compare to rest of the years.
83
2) FIXED ASSETS TURNOVER RATIO:
Fixed assets turnover ratio = Cost of sales / net fixed assets
(Rs in Millions)
NOTE:
The fixed assets turnover can further be divided into turnover of each item of fixed assets
to find out the extent each fixed assets has been properly used. For example
84
Chart-6
Interpretation:
In the year 2014 the fixed assets turnover ratio was 4.95, and rest of the following
year the ratio was slow down like 4.95, 4.53, 1.63, 1.64.
The overall performance of fixed assets turnover ratio of the company is not
satisfactory up to the year 2018.
The company following straight line method so net fixed assets was decreased.
85
CAPITAL TURNOVER RATIO:
Capital turnover ratio = cost of goods sold/capital employed.
(Rs in Millions)
Chart-7
Interpretation:
The capital turnover ratio was very high in the year 2015.
Capital turnover of the company was 3.10 in the year 2014 and next following
year the ratio had increased to 3.25 and the ratio came to down to 1.48 in the year
2017 and again has increased .
86
3) CURRENT ASSETS TO FIXED ASSETS:
Current assets to fixed assets = current assets/fixed assets
(Rs in Millions)
Chart-8
Current Fixed
Years Ratio
assets assets
2013-14 5,050.22 14,528.66 0.35
2014-15 4,619.99 17,656.18 0.26
2015-16 3,206.54 26,646.95 0.12
2016-17 3,274.39 46,609.62 0.07
2017-18 3,601.37 51,371.83 0.07
Interpretation:
This is ratio expressed relationship between current asset to fixed assets.
In the year 2014 the percentage of ratio was very high compare to rest of the years.
Current assets to fixed assets ratio of the company was 1.53 in the year 2014 and
1.52 in the year 2015.it is gradually degreased in the year 2016-12.
87
PROFITABILITY RATIO
(Rs in Millions )
Chart-9
10
0
2013-14 2014-15 2015-16 2016-17 2017-18
RATIO*100
Interpretation:
88
In the year 2017 the gross profit is low and the rest of the year 2014, 2015,2016
the profit had fluctuating .
2) NET PROFIT:
Net profit=net profit(AIT)/net sales*100
(Rs in Millions)
Chart-10
0
2013-14 2014-15 2015-16 2016-17 2017-18
RATIO*100
In
terpretation:
Net profit ratio of the company was 0.62(6.20) in the year 2014. It is the
highest ratio in the entire study period.
In the year 2015 the net profit was 4,412(Millions),it was highest profit
compare to the rest of the years.
From 2014 to 2017 the net profit ratio is continually decreased like 6.2 (2014),
6.1 (2015),6.0 (2016), 3.1(2017) and the end of the year 2018 the net ratio
again hiked to 5.8.
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3) RETURN ON TOTAL ASSETS:
Return on total assets = net profit (BIT) / total assets*100
(Rs in Millions)
Note:
90
Chart -11
10
0
2013-14 2014-15 2015-16 2016-17 2017-18
Column2
Interpretation:
The return on total assets of the company in year 2014 is 8.8 ,in the year 2015 is 9.8 but
in the year 2016 the ratio is slow down to 8.4.
Over all study of the return on total assets of the company is fluctuating.
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4) RESERVE & SURPLUS TO TOTAL CAPITAL:
Reserve & Surplus to total capital = reserve & surplus /capital
(Rs in Millions)
RESERVE
YEARS & CAPITAL RATIO
SURPLUS
2013-14 7,702.24 1,221.59 6.31
2014-15 6,998.83 1,323.87 5.29
2015-16 4,867.24 1,330.34 3.66
2016-17 4,134.34 1,330.34 3.11
2017-18 3,505.01 1,330.34 2.63
Chart-12
25
20
15
10
0
2013-14 2014-15 2015-16 2016-17 2017-18
Series 1
Interpretation:
Note:
The earning per share helps in determining the market price of the equity shares of the
company.
It is also estimating the company’s capacity to pay divided to its equity shareholders.
Chart -13
EARNING PER-SHARE
RATIO
3.38 3.53
2.74
3.18
1.42
2013-14
2014-15
2015-16
2016-17
2017-18
93
Interpretation:
94
6) PRICE-EARNING RATIO:
(Rs in millions)
Chart-14
PRICE-EARNINGS RATIO
RATIO
16.73
3.12
3.13 6.74
3.36
2013-14
2014-15
2015-2016
2016-17
2017-18
Interpretation:
95
The price-earnings ratio of the company was 3.12 in the year 2014, the price
earning ratio is gradually increasing .those ratio are consequently 3.12, 3.13,
3.36, 16.73 and the end of the year the company’s price earning ratio slow
down to 6.74.
The company is maintaining the sufficient ratio,it shows the investor to invest
their investments.
The overall price earning ratio position of the company is satisfactory up to
the year 2017 and in the year 2018 the ratio has come down.
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7) RETURN ON INVESTMENT:
Return on investment = net profit (AIT) / Share holders funds
SHARE
NET
YEARS HOLDERS RATIO*100
PROFIT(AIT0
FUND
2013-14 3,273.20 7,798.16 0.41974004
2014-15 4,412.86 7,094.75 0.6219895
2015-16 4,693.10 4,963.16 0.94558709
2016-17 1,899.96 4,230.26 0.44913622
2017-18 4,236.75 3,600.93 1.1765705
Chart-15
RETURN ON INVESTMENT
25
20
15
10
0
2013-14 2014-15 2015-16 2016-17 2017-18
Column3
Interpretation:
The return on investment of the company was .41 in the year 2014 and the
return on investment ratio is gradually degreasing ,those ratio are 0.41, 21,
5.4, and 11.5.
In the year, 2014 and 2015 the ratio was .62, it is highest ratio in my entire
study period.
The overall performance of company is not satisfactory because company is
not maintaining proper idle ratio.
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CHAPTER-5
98
FINDINGS
The current ratio of firm is not maintaining standard i.e. 2:1 in selecting period. So it
indicates the idle funds and inefficient utilization of funds and indicates the weak position of
the firm.
The company’s current ratio maintaining average ratio 1:5.
The quick ratio of company is also not at all supporting standard norm i.e. 1:1. So it shows
inefficient utilization of the company funds.
In case of proprietor ratio the company could not maintain the optimum level of the ratio. It
is fluctuating.
The company has maintained the efficient reserve and surplus throughout my study analysis.
The company is maintaining weighted average method while calculating earnings per share.
The return on investment ratio has continuously degreasing .
Gross profit of company is fluctuating.
Net profit of company is continuously degreasing trend in my analyses.
The company is maintaining fixed assets & current assets in proper manner.
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SUGGESTIONS:
It is suggested for the company that it should maintain required level of current
assets ratio.
It is suggested that the company should maintain standard norm then only it can
enhance the maximum profits.
It is suggested that the company should maintain optimum level of proprietor
ratio.
Sales are very important to every organization to sustain the growth , so company
should try to control the cost of goods sold.
They have to go in for advertisement and sales promotion policy.
The company profit has fluctuating so better to take strategic decisions, it must be
made for the profit to increase.
Funds are utilizing in proper manner.
The company is following straight line method in depreciation so better to adopt
diminishing method.
Earnings per share value is continuously fluctuating trend so the must be maintain
increasing trend.
100
CONCLUSION:
This study on the financial performance of "HERO MOTORS LIMITED" proved really
useful to the company to assess its financial position. The study has brought the problem in
maintaining constant liquidity of the company and the working capital which has to be improved
to avoid financial crunch. In the future, the study was extremely useful in identifying the major
areas of concern affecting the financial of the firm.
The study was also extremely useful for the researcher it gave several opportunities to learn
the financial process of the company. It was a learning experience for the researcher as the study
acted as a bridge to apply theory with practical application.
The study could be used as base for future studies in this area. The financial analysis is the
authoritative tool for determining financial strength & weakness of the firm. The financial
performance of the “HERO MOTORS LIMITED “is good.
101
Bibliography:
Books:
Web sites:
www.google.com
www.wikipedia.com
www.investopedia.com
www.accountingformanagement.com
102
-----------------
-- in Rs. Cr.
------------------
Balance Sheet of HERO MOTORS -
Mar '18 Mar '17 Mar '16 Mar '15 Mar '14
Sources Of Funds
Total Share Capital 95.92 95.92 95.92 95.92 95.92
Equity Share Capital 95.92 95.92 95.92 95.92 95.92
Reserves 7,702.24 6,998.83 4,867.24 4,134.34 3,505.01
Networth 7,798.16 7,094.75 4,963.16 4,230.26 3,600.93
Secured Loans 9.87 37.22 9.37 3.47 6.65
Unsecured Loans 0 0 22.18 28.62 32.86
Total Debt 9.87 37.22 31.55 32.09 39.51
Total Liabilities 7,808.03 7,131.97 4,994.71 4,262.35 3,640.44
Application Of Funds
Gross Block 3,326.16 3,084.09 3,869.41 3,008.41 2,908.10
Less: Accum. Depreciation 757.63 479.41 1,244.27 1,042.92 895.9
Net Block 2,568.53 2,604.68 2,625.14 1,965.49 2,012.20
Capital Work in Progress 1,391.84 219.76 0 139.54 37.95
Investments 2,577.34 2,913.60 2,439.68 1,893.78 1,030.19
Inventories 2,178.43 2,194.09 1,610.12 1,802.18 1,665.05
Sundry Debtors 1,138.20 994.63 759.06 728.87 712.36
Cash and Bank Balance 120.84 205.94 155.02 61.81 745.36
Total Current Assets 3,437.47 3,394.66 2,524.20 2,592.86 3,122.77
Loans and Advances 1,612.75 1,225.33 682.34 681.53 478.6
Total CA, Loans & Advances 5,050.22 4,619.99 3,206.54 3,274.39 3,601.37
Current Liabilities 3,629.70 3,080.02 2,563.82 2,313.57 2,423.55
Provisions 150.2 146.04 805.62 697.28 617.72
Total CL & Provisions 3,779.90 3,226.06 3,369.44 3,010.85 3,041.27
Net Current Assets 1,270.32 1,393.93 -162.9 263.54 560.1
Total Assets 7,808.03 7,131.97 4,901.92 4,262.35 3,640.44
Contingent Liabilities 1,108.50 1,463.64 351.2 598.28 447.75
Book Value (Rs) 81.3 73.97 51.74 44.1 37.54
103