ATLAS HONDA ratio analysis
83
-
Upload
bahauddin-zakariya-university -
Category
Business
-
view
609 -
download
2
Transcript of ATLAS HONDA ratio analysis
Ratio AnalysisManagerial Finance
PresentersOmer Shahzad MB-12-08
Ali Asghar MB-12-34
Zeeshan Ahmad MB-12-09
Babar Chaudhary MB-12-545
4
3
2
1
Saleem Malik MB-12-23
Financial Ratios
Market Ratios
Profitability Ratios
Debt Ratios
Activity Ratios
Liquidity Ratios
Our Organization
Vision:
Market leader in the motorcycle industry, emerging as a global competitive center of production and exports.
Ali AsgharMB-12-
34
Liquidity Ratios
Firmβs ability to satisfy its short-term obligations as they come
due.
Current Ratio
Liquidity Ratios
Quick Ratio
Current Ratio
Looks at the ratio between current assets and current
liabilities.
πΆπ’πππππ‘ πππ‘ππ=πΆπ’πππππ‘ π΄π π ππ‘π
πΆπ’πππππ‘ πΏπππππππ‘πππ
Ratios 2008 2009 2010 2011 2012
Current Ratio
1.31 1.25 1.49 1.45 1.45
πΆπ’πππππ‘ πππ‘ππ=πΆπ’πππππ‘ π΄π π ππ‘π
πΆπ’πππππ‘ πΏπππππππ‘πππ
Mostly Current Ratio of 2 is consider acceptable. For Atlas Honda, current ratio less than 2 is acceptable and has improved during last 5 years and remain stable in last 2 years at level of 1.45 which is quite acceptable.
2008 2009 2010 2011 20121.1
1.15
1.2
1.25
1.3
1.35
1.4
1.45
1.5
1.55
1.31
1.25
1.49
1.45 1.45
Current Ratio
Current Ratio
Quick Ratio
Is similar to the current ratio but it excludes inventory
from current assets.
ππ’ππππππ‘ππ=πΆπ’πππππ‘ π΄π π ππ‘π β πΌππ£πππ‘πππ¦
πΆπ’πππππ‘ πΏπππππππ‘πππ
Ratios 2008 2009 2010 2011 2012
Quick Ratio
0.84 0.70 1.02 0.9 1
ππ’ππππππ‘ππ=πΆπ’πππππ‘ π΄π π ππ‘π β πΌππ£πππ‘πππ¦
πΆπ’πππππ‘ πΏπππππππ‘πππ
A Quick Ratio of 1 or greater is acceptable. For Atlas Honda, Quick Ratio mostly remain below 1 and remain
deteriorating.
2008 2009 2010 2011 20120
0.2
0.4
0.6
0.8
1
1.2
0.84
0.7
1.02
0.9
1
Quick Ratio
Quick Ratio
2008 2009 2010 2011 20120
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.311.25
1.491.45 1.45
0.84
0.7
1.02
0.9
1
Liqidity Ratios
Current Ratio Quick Ratio
According to company financial statement they are in Strong Liquidity position but their liquidity position is not that good as they stated. Company liquidity position appear to have remain stable but below acceptable criteria. Company may have problem to satisfy its short term obligations when they come due. But, it is also a fact that company do not have paid all its short term obligations at the same time so company can manage to pay its short liabilities.
Liquidity Ratios
Omer ShahzadMB-12-
08
Activity Ratios
Measures the speed with which various accounts are converted into
sales or cash-inflows or cash-outflows.
Inventory Turnover Ratio
Activity Ratios
Average Collection Period
Average Payment Period
Asset Turnover Ratio
Inventory Turnover Ratio
Measures the activity of a firmβs inventory.
πΌππ£πππ‘πππ¦ ππ’ππππ£ππ=πΆππ π‘ππ πΊππππ ππππ
πΌππ£πππ‘πππ¦
Ratios 2008 2009 2010 2011 2012
Inventory Turnover
Ratio
7.13 10.36 14.15 15 16.3
πΌππ£πππ‘πππ¦ ππ’ππππ£ππ=πΆππ π‘ππ πΊππππ ππππ
πΌππ£πππ‘πππ¦Inventory turnover for ATLAS HONDA is improved very fast during last 5 years and a level of 16.3 is quite remarkable.
Higher Inventory Turnover leads to reducing holding cost and increase the net income and profitability. But company need to
remain conscious about inventory turnover because higher level of inventory turnover may indicate inadequate inventory
level, which may leads to a loss for the business.
2008 2009 2010 2011 20120
2
4
6
8
10
12
14
16
18
7.13
10.36
14.15
15
16.3
Inventory Turnover
Inventory Turnover
Asset Turnover Ratio
Indicates the firmβs efficiency to use assets for generating sales.
π΄π π ππ‘π ππ’ππππ£ππ=πππππ
πππ‘ππ π΄π π ππ‘π
Ratios 2008 2009 2010 2011 2012
Asset Turnover
Ratio
2.39 1.84 3 3.38 3.47
π΄π π ππ‘π ππ’ππππ£ππ=πππππ
πππ‘ππ π΄π π ππ‘π
It is generally consider that the higher the firm total asset turnover, the more efficiently its assets have been used. Asset turnover for ATLAS HONDA is improving and have
excellent level.
2008 2009 2010 2011 20120
0.5
1
1.5
2
2.5
3
3.5
4
2.39
1.84
3
3.383.47
Asset Turnover
Asset Turnover
2008 2009 2010 2011 20120
2
4
6
8
10
12
14
16
18
7.13
10.36
14.15
15
16.3
2.391.84
33.38 3.47
Turnovers
Inventory Turnover Asset Turnover
Average Collection Period
Shows the time needed to collect accounts receivables.
π΄π£ππππππΆππππππ‘πππππππππ=π΄ππππ’ππ‘π π πππππ£ππππ
π΄πππ’πππππππ Γ365
Ratios 2008 2009 2010 2011 2012
Average Collection
Period
7 Days 8.5 Days 6 Days 4.5 Days 6 Days
π΄π£ππππππΆππππππ‘πππππππππ=π΄ππππ’ππ‘π π πππππ£ππππ
π΄πππ’πππππππ Γ365
ATLAS HONDA have very good credit and collection policies. Average collection period of less than 1 week is
amazing.
2008 2009 2010 2011 20120
1
2
3
4
5
6
7
8
9
7
8.5
6
4.5
6
Average Collection Period
Avg. Collection Period
Average Payment Period
Shows the time needed to pay accounts payables.
π΄π£πππππ πππ¦ππππ‘ππππππ=π΄ππππ’ππ‘π πππ¦πππππ΄πππ’ππ ππ’ππ hππ ππ
Γ365
Ratios 2008 2009 2010 2011 2012
Average Payment Period
61 Days 76 Days 48 Days 51 Days 50 Days
π΄π£πππππ πππ¦ππππ‘ππππππ=π΄ππππ’ππ‘π πππ¦πππππ΄πππ’ππ hππ’ππ ππ ππ
Γ365
Average payment period is decreased as compared to 2009. But company still using its credit worth very well
and taking full advantage of credit period from suppliers.
2008 2009 2010 2011 20120
10
20
30
40
50
60
70
80
61
76
4851 50
Average Payment Period
Avg. Payment Period
2008 2009 2010 2011 20120
10
20
30
40
50
60
70
80
78.5
64.5
6
61
76
4851 50
Periods
Avg. Collection Period Avg. Payment Period
Activity Ratios
The companyβs assets performance appears to be in a good shape. It is clear that company has efficiently use the various components of working capital cycle. It has been able to effectively control the receivables and inventories.
Zeeshan AhmadMB-12-
09
Debt Ratios
Indicates the amount the firm uses to generate profits from
othersβ money.
Debt Ratios
Debt RatioFixed-Payment Coverage Ratio
Times Interest Earned Ratio
Debt Ratio
Measures the proportion of total assets financed by the
firmβs creditors.
π·πππ‘ π ππ‘ππ=πππ‘ππ πΏπππππππ‘πππ πππ‘ππ π΄π π ππ‘π
Ratios 2008 2009 2010 2011 2012
Debt Ratio
60.89 55.63 54.33 51.95 50.54
π·πππ‘ π ππ‘ππ=πππ‘ππ πΏπππππππ‘πππ πππ‘ππ π΄π π ππ‘π
The higher degree of debt ratio shows the greater the firmβs degree of indebtedness. Debt ratio for Atlas Honda
in 2008 was nearly 61% which was not very favorable for the organization. But during the last 5 years, the debt
ratio decrease continuously and reach to nearly 50% which is not very good but fair enough.
2008 2009 2010 2011 20120
10
20
30
40
50
60
70
60.89
55.6354.33
51.9550.54
Debt Ratio
Debt Ratio
Times Interest Earned Ratio
Measures the firmβs ability to make contractual interest payments. It is
also called Interest Coverage Ratio.
πππππ πΌππ‘ππππ π‘ πΈππππππ ππ‘ππ=πΈπππππππ΅πππππ πΌππ‘ππππ π‘β§πππ₯ππ
πΌππ‘ππππ π‘
Ratios 2008 2009 2010 2011 2012
Times Interest Earned Ratio
4.98 2.4 10.56 16 139.26
πππππ πΌππ‘ππππ π‘ πΈππππππ ππ‘ππ=πΈπππππππ΅πππππ πΌππ‘ππππ π‘β§πππ₯ππ
πΌππ‘ππππ π‘
Interest Coverage Ratio of Atlas Honda increase during the last 5 years but you can see a surprising increase in this ratio in 2012. You can understand this increase by
comparing Debt and Interest coverage ratio.
2008 2009 2010 2011 20120
20
40
60
80
100
120
140
160
4.982.4
10.5616
139.26
Interest Coverage Ratio
Interest Coverage Ratio
2008 2009 2010 2011 20120
20
40
60
80
100
120
140
160
60.8955.63 54.33 51.95 50.54
4.982.4
10.5616
139.26
Debt Ratios
Debt Ratio Interest Coverage Ratio
Debt Ratios
In this graph you can see a negative relationship between Debt and Interest coverage ratio. As the company debt ratio decrease, the company times interest earned ratio increase rapidly. It is due to company policy introduced in 2010 to reshape its balance sheet approach and worked to reduce the interest bearing liabilities to improve its balance sheet. The outcome of this policy is the Achievement of βDEBT FREE STATUSβ in 2012.
M. SaleemMB-12-
23
Profitability Ratios
Measures the firmsβ profits with the given level of sales.
Gross-Profit Ratio
Profitability Ratios
Net-Profit Ratio
Earning Per Share
Operating-Profit Ratio
Return on Total Assets
Return on Common Equity
Gross-Profit Ratio
Measures the percentage of each sales dollar remaining after the
firm has paid for its goods.
πΊπππ π ππππππ‘ π ππ‘ππ=πππππ βπΆπΊπ
πππππ =πΊπππ π ππππππ‘
πππππ
Ratios 2008 2009 2010 2011 2012
Gross-Profit Ratio
7.46 7.02 7.82 7.5 7.3
πΊπππ π ππππππ‘ π ππ‘ππ=πππππ βπΆπΊπ
πππππ =πΊπππ π ππππππ‘
πππππ
Gross profit margin for ATLAS HONDA is unstable and mostly deteriorating. But separate using gross profit
margin for measuring company profitability is not a good measure.
2008 2009 2010 2011 20126.6
6.8
7
7.2
7.4
7.6
7.8
8
7.46
7.02
7.82
7.5
7.3
Gross Profit Margin
Gross Profit Margin
Operating-Profit Ratio
Measures the percentage of each sales dollar remaining after all costs &
expenses other than Interests and Taxes are deducted.
ππππππ‘πππ ππππππ‘ π ππ‘ππ=ππππππ‘πππ ππππππ‘
πππππ
Ratios 2008 2009 2010 2011 2012
Operating-Profit Ratio
6.02 4.4 4.65 4.62 4.3
ππππππ‘πππ ππππππ‘ π ππ‘ππ=ππππππ‘πππ ππππππ‘
πππππ
Operating profit margin for ATLAS HONDA decreased in 2009, but remain quite stable after that.
2008 2009 2010 2011 20120
1
2
3
4
5
6
7
6.02
4.44.65 4.62
4.3
Operating Profit Margin
Operating Profit Margin
Net-Profit Ratio
Measures the percentage of each sales dollar remaining after all costs &
expenses including Interests and Taxes are deducted.
πππ‘ ππππππ‘ π ππ‘ππ=πΈπππππππ π΄π£πππππππ πππ πΆπππππππ‘πππhπππππ
πππππ
Ratios 2008 2009 2010 2011 2012
Net-Profit Ratio
3.37 1.63 2.78 3.08 3.16
πππ‘ ππππππ‘ π ππ‘ππ=πΈπππππππ π΄π£πππππππ πππ πΆπππππππ‘πππhπππππ
πππππ
Net profit margin also decreased during 2009 but company recovered very well and its net profit
continuously increasing from last 3 years.
2008 2009 2010 2011 20120
0.5
1
1.5
2
2.5
3
3.5
4
3.37
1.63
2.78
3.083.16
Net Profit Margin
Net Profit Margin
2008 2009 2010 2011 20120
1
2
3
4
5
6
7
8
9
7.46
7.02
7.827.5
7.3
6.02
4.44.65 4.62
4.3
3.37
1.63
2.783.08 3.16
Profitibility Ratios
Gross Profit Margin Operating Profit Margin Net Profit Margin
Earnings Per Share (EPS)
Represents the dollar amount earned on behalf of each outstanding share of
common stock.
πΈππ=πΈπππππππ π΄π£πππππππ πππ πΆπππππ hππ‘πππ πππππ
ππ’ππππ ππ hπ ππππ ππ πΆπππππππ‘πππππ’π‘π π‘ππππππ
Ratios 2008 2009 2010 2011 2012
Earnings Per
Share (EPS)
4.75 14.86 11.39 16.03 16.74
πΈππ=πΈπππππππ π΄π£πππππππ πππ πΆπππππ hππ‘πππ πππππ
ππ’ππππ ππ hπ ππππ ππ πΆπππππππ‘πππππ’π‘π π‘ππππππ
Over the years, the company is focused on maintaining steady growth in EPS. In 2012, company delivered EPS
of Rs.16.74 which is outstanding.
2008 2009 2010 2011 20120
2
4
6
8
10
12
14
16
18
4.75
14.86
11.39
16.03
16.74
Earning Per Share
Earning Per Share
Profitability Ratios
The Companyβs Gross profit margin declined but it is due to the higher cost of goods sold. While the Operating and Net profit margin is improving so we can evaluate that company profitability is improving.
Babar HussainMB-12-
54
Return on Total Assets (ROA)
Measures the overall effectiveness of the management in generating profits with its available assets. It is also called Return
on Investment (ROI).
π ππ΄=πΈπππππππ π΄π£πππππππ ππππΆπππππ hππ‘πππ πππππ
πππ‘ππ π΄π π ππ‘π
Ratios 2008 2009 2010 2011 2012
Return on Total Assets (ROA)
8.07 3 8.36 10.42 10.98
π ππ΄=πΈπππππππ π΄π£πππππππ ππππΆπππππ hππ‘πππ πππππ
πππ‘ππ π΄π π ππ‘π
The higher the firmβs return on total asset consider the better. Return on total asset of ATLAS HONDA appear to
be improved in last 3 year and rose to 11% despite significant in assets base on account of capacity
expansion.
2008 2009 2010 2011 20120
2
4
6
8
10
12
8.07
3
8.36
10.42
10.98
Return on Asset
Return on Asset
Return on Common Equity (ROE)
Measures the return earned on the common stockholdersβ investment
in the firm.
π ππΈ=πΈπππππππ π΄π£πππππππ πππ πΆπππππππ‘πππhπππππ
πΆπππππππ‘πππ πΈππ’ππ‘π¦
Ratios 2008 2009 2010 2011 2012
Return on
Common Equity (ROE)
20.65 6.76 18.30 21.68 22.21
π ππΈ=πΈπππππππ π΄π£πππππππ πππ πΆπππππ hππ‘πππ πππππ
πΆπππππππ‘πππ πΈππ’ππ‘π¦
Return on equity also have the same case like ROA. It is also improved after declining in 2009 and now rose to
22% due to steady income growth.
2008 2009 2010 2011 20120
5
10
15
20
25
20.65
6.76
18.3
21.6822.21
Return on Equity
Return on Equity
2008 2009 2010 2011 20120
5
10
15
20
25
8.07
3
8.36
10.4210.98
20.65
6.76
18.3
21.6822.21
Returns
Return on Asset Return on Equity
Market Ratios
Relates the firmsβ market value as measured by its current share price,
to certain accounting values.
Price/Earnings Ratio
Market Ratios
Market/Book Ratio
Price/Earnings Ratio (P/E)
Measures the amount that investors are willing to pay for each dollar of a
firmβs earnings.
π /πΈπ ππ‘ππ=ππππππ‘ πππππ πππ π hπππππ πΆπππππππ‘πππ
πΈπππππππ πππ πhπππ
Ratios 2008 2009 2010 2011 2012
Price/Earnings
Ratio (P/E)
14.1 18.7 10.9 8.8 8.5
π /πΈπ ππ‘ππ=ππππππ‘ πππππ πππ π hπππππ πΆπππππππ‘πππ
πΈπππππππ πππ πhπππ
The higher level price earnings ratio consider the better. Price earnings ratio for ATLAS HONDA decrease during previous years but it not due of low earning but due to the higher market price of ATLAS HONDAβs shares.
2008 2009 2010 2011 20120
2
4
6
8
10
12
14
16
18
20
14.1
18.7
10.9
8.8 8.5
Price Earning Ratio
Price Earning Ratio
DuPont System of Analysis
System used to dissect the firmβs financial statement and to assess its financial
condition.
The two measures of this this system are:
1.Return on total assets (ROA)2.Return on common equity (ROE)
DuPont Formula
Multiplies the firmβs net profit margin by its total asset turnover to calculate the firmβs
return on total assets.
π ππ΄=πΈπππππππ π΄π£πππππππ ππππΆπππππ hππ‘πππ πππππ
πππππ Γ
πππππ πππ‘ππ π΄π π ππ‘π
βπ ππ΄=πΈπππππππ π΄π£πππππππ πππ πΆπππππ hππ‘πππ πππππ
πππ‘ππ π΄π π ππ‘π
Ratios 2008 2009 2010 2011 2012
Return on Total Assets (ROA)
8.07 3 8.36 10.42 10.98
π ππ΄=πΈπππππππ π΄π£πππππππ ππππΆπππππ hππ‘πππ πππππ
πππ‘ππ π΄π π ππ‘π
Modified DuPont Formula
Relates the firmβs return on total assets to its return on common equity using financial
leverage multiplier.
π ππΈ=π ππ΄ΓπΉπΏπ
βπ ππΈ=πΈπππππππ π΄π£πππππππ ππππΆπππππ hππ‘πππ πππππ
πππ‘ππ π΄π π ππ‘π π₯
πππ‘ππ π΄π π ππ‘π πΆπππππππ‘πππ πΈππ’ππ‘π¦
βπ ππΈ=πΈπππππππ π΄π£πππππππ ππππΆπππππ hππ‘πππ πππππ
πΆπππππππ‘ππππΈππ’ππ‘π¦
Ratios 2008 2009 2010 2011 2012
Return on
Common Equity (ROE)
20.65 6.76 18.30 21.68 22.21
π ππΈ=πΈπππππππ π΄π£πππππππ πππ πΆπππππππ‘πππhπππππ
πΆπππππππ‘πππ πΈππ’ππ‘π¦
