Professional Documents
Culture Documents
Yahama Dewan
Yahama Dewan
MAYURBHANJ,ODISHA
DEPARTMENT OF COMMERCE
PROJECT REPORT
SESSION-2017-2020
REGD.NO-10134/17
CERTIFICATE
1
This is to certify that DEWAN SOREN a student of +3 3rd Year in Commerce, M.P.C.(Auto)
College,Takhatpur,Baripada,Class Roll No-BC17-229, Exam Roll No-3317011 has
undertaking the project work on title “WORKING CAPITAL MANAGEMENT OF
YAHAMA MOTOR CO., LTD” under my guidance towards particular fulfillment of the
degree. This is an original piece of work for the fulfillment of the degree.
Date:
DECLARATION
2
Here by declare that the seminar talk entitled “WORKING CAPITAL
MANAGEMENT OF YAHAMA MOTOR CO., LTD” submitted to M.P.C (Auto)
College, Takhatpur,Baripada, is an original one and has not been submitted provisionally to
any other institution including this one.
Date:03/07/2020
ACKNOWLEDGEMENT
3
I am very much thankful to the management of the “WORKING CAPITAL
MANAGEMENT OF YAHAMA MOTOR CO.,LTD”for giving me an opportunity to do
this project. The completion of this project report is a successful and satisfactory outcome of
so many helping hands.
DEWAN SOREN
Regd-10134/17
CONTENTS
4
CHAPTER TOPICS PAGE
NO. NO.
CERTIFICATE
DECLARATION
ACKNOWLEDGEMENT 1-5
CONTENTS
Suggestions 53
Conclusion, 54
CHAPTER-9 Bibliography 55
CHAPTER-1
INTRODUCTION
5
The Two –Wheeler Market Globally
Globally, the Two-wheeler Industry is concentrated in the developing world, especially China
and India, Which together account for over half the total worldwide sales of Two-wheelers.
The Japanese Manufacturers, Honda, Yamaha, Suzuki and Kawasaki, dominate the Two-
Wheeler Industry globally currently, all major two wheeler market, except India are
dominated either by Japanese firms or their joint ventures. However, in the leading markets,
such as China and India and South-Asia, a host of local players exists.
Globally, four-Stroke engines are fast replacing the Two-Stroke variants with stricter
emission norms being imposed and vehicles powered by two-stroke being banned, four-
stroke powered two-wheeler have found increasing favor.
Powered Two-Wheeler Popular in Asian Countries such as China and India where
Motorcycle dominate the PTW market. Outside India, presence of Scooters is limited.
Scooters are far more popular in Europe than in the US. Europe has very High fuel prices,
congested city streets with limited parking space, and a long history of accepting scooters as a
respectable mode of transportation, all leading to a considerable interest in scooters.
The Indian two-wheeler industry can be divided into three broad categories: scooters,
motorcycles and mopeds. Each of these categories can be further segmented on the basis of
several variables, like price, engine power, type of ignition and engine capacity.
The two-wheeler industry has come a long way since its inception in the early 1950s when
scooters were first produced in the country. Today, India is the second largest producer and
consumer of two-wheeler in the world; the Indian two-wheeler industry has grown rapidly
over the past 15 years. The demand for two-wheelers increased at a CAGR of around 11%
from 0.44million vehicles in FY 1981 to over 4.23 million in FY2019.
6
sales of various countries in 2019
9000
8000
7000
The Indian two-wheeler industry has undergone a significant change over the past 10 years
with the practical changing from mopeds to scooters and more recently, from scooters to
motorcycles. Scooters, which were considered the family vehicle for middle class Indians, are
increasingly losing their position as a cheap mode of personal transportation. With the
reduction in the price differential between scooters and motorcycles, there has been a
perceptible shift towards motorcycle motorcycles because of their better styling, higher fuel
efficiency, and higher load carrying capacity.
Further, the decline in excise duty on scooters and motorcycles has reduced their price
differential in comparison with mopeds. The change in customer preferences, better fuel
efficiency and increased affordability of motorcycles has titled the demand in favour of
motorcycles. The share of scooters sales in two-wheeler sales has been reducing steadily
since FY1990 when scooters accounted for more than half of all two-wheelers sold in the
country.
Till FY1998, scooters formed the largest segment accounting for 41% of total industry sales,
while motorcycles and mopeds accounted for 37% and 21% of all two-wheelers sales
respectively. However, during FY1999, for the first time, the sales of motorcycle
outperformed scooter sales.
The shares of scooters, motorcycles and mopeds inFY2017 were 33%, 48%, and 19%,
respectively. Although, the shares of scooters and mopeds declined in FY2018 and FY2019,
the shares of motorcycles increased to 58% and 69% respectively in these years.
7
SALES OF MOTORS CYCLES
8 2018
6 2017
4
2
0
TOTAL TWO WHEELERS
In FY2017, motorcycle sales in India increased at the rate of 28% Vis-à-vis FY2019. A
significant development in the motorcycle industry during the late 1990s was the shift from
two-stroke to four-stroke technology.
Gross concept, working capital refers to a company’s investment in current assets. Current
assets are assets, which can be converted in to cash with in accounting year and include cash,
short – term investment, debtor’s bills receivables, and stock.
The term net working capital refers to the difference between current assets and current
liabilities. Current liabilities are those claimed of outsiders, which are expected to nature for
payment with in an accounting year and include creditors, bills payable, bank overdrafts and
outstanding expenses.
8
The net concept of working capital is also called qualitative concept. The financial analyst
also gives importance to this concept of working capital and he also sees it as the excess total
assets our total liabilities the net working capital and he also see it as the excess total assets
our total liabilities the net working capital, on the same analogy, must mean the success of the
current over the current liabilities, if current assets are less than current liabilities, there will
be no working capital at all.
In fact it would mean that fixed assets have been financed partially by long - term funds and
partly by the short – term funds. Judging from the liabilities side of balance – sheet, working
capital means that part of long – term capital that is used to finance current assets.
The two concept of working capital Gross & net working capitals-gross and net-are not
exclusive, they have rather equal significance from the Management viewpoint. Gross
working capital concept focus attention on two aspects of current assets Management,
The consideration of the level of investment and inadequate investment in current assets.
Another aspect of gross working capital points to the need of arranging funds to finance
current assets.
Whenever a need for working capital funds arises due to increasing level of business activity
of for any other reason, arrangement should be made quickly.
Similarly, if suddenly some surplus funds arise, they should be invested in short-term
securities. Thus, a financial manager should have knowledge of sources of working capita
funds as well as invested.
9
(b) Suggests the extent to which working capital needs may be financed by permanent source
of finds. Currant assets should be sufficiently in excess of current Liabilities to constitute a
margin of buffer for matwing obligations, which the ordinary operating cycles of a business.
In order to project their interests, short-term creditors always like a company to maintain
current assets at a higher level than current liabilities.
The net working capital concept also the judicious mixture of long-term and short-term funds
for financing current assets. For every business there is minimum amount of net working
capital, which is permathe permanent sources of finds such as owner’s capital, debentures
and long-term debt, management must, therefore, decide the extent to which current asserts
should be financed with equity capital and / or borrowed capital. The time honored and
majority accepted view of working capital is that is must measure the relationship of current
assets with current liabilities .it must, therefore, include not the whole of current assets but
that part which is not committed for payment of one year liabilities. This view of working
capital has been used in the present studynent. Therefore, a portion of working capital should
be financed with Sources of Working Capital.
10
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Deposits 4.Public
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11
8.Loans from excutive and
Directors
9.Goverment
Assistance
2. Short-Term sources.
In the context of working Capita, the meaning of risk is "Inability of a firm in maintaining
adequate current assets to pay its short-term obligations. If the working capital changes in
relation to sales, the amount of risk that a firm assumes also changes and the chance for profit
or loss increases. There is a positive relationship between the degree of risk and rate of return.
A negative relationship is experienced between the working capital in relation to sales and
degree of risk. Hence if the level of working capital increases, then the degree of risk
decreases and the chances of profit and loss are affected severely. Resting upon their
attitudes, the management changes the size of their working capital. A conservative
management prefers minimum risk by having more working capital, on the other hand;
progressive management considers greater and greater risk by decreasing the level of working
capital.
12
The objective of a management should be to maintain such a level of working capital, which
can maximize rate of return of a firm. This level may be the point at which the incremental
loss associated with the decrease in working capital investment becomes, greater than the
incremental gain associated with that investment.
Basically this principle keeps the cost of capital, in view. The cost of capital is different for
different sources of finance. It is remarkable that the cost of capital changes inversely with
risk. Thus, additional risk, results in e Principle of Maturity of the decline in the cost of
capital.
The amount of working capital invested 'in each component should be sufficiently justified
by the equity position of a firm. Every rupee invested in the working capital should contribute
to the net worth of the firm.
A firm should not leave any stone unturned regarding establishing parity between inflows and
outflows of funds within the firm because greater risk is generated with greater disparity. A
margin of safety should be maintained for the quick settlement of short-term debt.
13
CHAPTER-2
The study was conducted at YAMAHA MOTOR, keeping in mind the following objectives:
14
Estimate about trends in business.
CHAPTER-3
REVIEW OF LITERATURE
RATIO ANALYSIS
Ratio analysis is a powerful tool of financial analysis. A ratio is defined as “the indicated
quotient of two mathematical expressions” and “as the relations between two or more things”.
In financial analysis, a ratio is used as a benchmark for evaluating the financial position and
performance. The absolute accounting figures reported in the financial statement do not
provide a meaningful understanding of the performance and financial position of a firm. For
example, a Rs. 5 crores net profit may look impressive, but firm’s performance can be said to
be good or bad only when the net profit figure is related to firm’s investment.
15
Ratio helps to summarize large quantities of financial data and to make qualitative judgment
about the firm’s performance.
Competitors ratio, i.e., ratio of some selected firms, especially the most progressive and
successful competitor, at the same point of time;
Time ratio analysis: The easiest way to evaluate the performance of the firm is to compare
its present ratio with the past ratios. When financial ratios over a period of time are
compared, it is known as time series analysis. It gives an indication of the direction of change
and reflects whether firms financial performance has improved, deteriorated or remain
constant over time.
Cross sectional analysis: Another way of comparison is to compare ratio of the firm with
some selected firms in the same industry at the same point in time. The kind of comparison is
known as the cross-sectional analysis. The kind of comparison indicates the relative financial
position and performance of the firm. A firm can easily report to such a comparison, as it is
not difficult to get the published financial statements of the similar firms.
16
Industry analysis: To determine financial condition and performance of a firm, its ratio
may be compared with average ratio of the industry of which firm is a member. The sort of
analysis is known as industrial analysis, help member to ascertain the financial standing and
capabilities of the firm vis-à-vis other firms in the industry. Industry ratios are important
standard in the view of the fact that each industry has its characteristics, which influence the
financial and operating relationships.
Practical difficulties:
“A ratio is simply one number expressed in terms of another. It is found by dividing one
number into the other”.
Thus, we can say that the relationship between two figures, expressed in arithmetical
terms is called a ‘ratio’.
17
To study comparative studies.
Helpful in forecasting.
SCOPE OF ANALYSIS
The financial analyst use ratio to determine those financial characteristics of the firm in
which they are interested. With the help of ratios, one can determine:
The extent to which firm has used its long term solvency by borrowing funds;
The efficiency to which firm is utilizing its assets in generating sales revenue;
18
The overall operating efficiency and performance of the firm.
Performance analysis: In fact, it has to be realized that the short and long term financial
position and the profitability of the firm are tested in every kind of financial analysis, but the
emphasis would differ. Some ratios are more important in one kind of analysis than other. If a
short term creditor analysis only the current position and find it satisfactory, he cannot be
certain about about the safety of his claim if the firm’s long term financial position or
profitability is unfavorable. The satisfactory current position would become adverse in future
if the current resources are consumed by the long term financial condition. Similarly, the
‘good’ long-term financial position is no guarantee for the long term creditor’s claims if the
current position or the profitability of the firm is ‘bad’.
Credit analysis: In credit analysis, the analyst will usually select a few important ratios. It
may use the current ratio or quick-asset ratio to judge the liquidity or debt-paying ability;
debt-equity ratio to determine the stake of the owners in the business and the firm’s capacity
to survive in the long run and any one of the profitability. For example, return on capital
employed, to determine the firms earning prospects.
Security analysis: the major focus of security analysis is on the long term profitability.
Profitability is dependent on number of factors. One would certainly be concerned with the
efficiency with which the firm utilizes its assets and the financial risk to which the firm is
exposed. So along with profitability ratio one would also analyze the activity ratio and
leverage ratio.
Competitive analysis: the ratio of the firm does not revel by themselves do not reveal
anything. For meaningful interpretation, the ratios of firm should be compared with the ratios
of similar firms and industry. The comparison will reveal whether the firm is significantly out
of line with its competitors.
19
Trend analysis: The ratio analysis will reveal the financial condition of the firm more
reliably when trend in ratio over time are analyzed. The trend analysis of the ratio adds
considerable significance to the financial analysis because it studies ratio of several years and
isolates the exceptional instances occurring in one or two periods. Although the trend analysis
of company’s ratio is itself informative, but it is more informative to compare the trend in
company’s ratio with the trend in industries ratios.
The ratio analysis is widely used technique to evaluate financial position and performance of
a business. But there are certain problems in using these ratios. The following are certain
limitations of using ratio analysis:
The difference in the definition of items in the balance sheet and the profit and loss
statement make the interpretation ratios more difficult.
The ratios calculated at a point of time are less informative and defective as they
suffer from short term changes.
The ratios are generally calculated from past financial statement and, thus are no
indicators of future.
20
Standards of comparison: Ratios of a company have meaning only when they are compared
with some standards. It is difficult to find out a proper basis of comparison. Usually it is
recommended that ratios will be compared with industry averages. But industry averages are
not easily available.
Compare differences: Situations of two companies are never same. Similarly, the factors
influencing the performance of a company in one year may change in another. Thus, the
comparison of ratios of the companies becomes difficult and meaningless when they are
operating in different situations.
Price level changes: The accounting figures, presented in financial statements, are
expressed in the momentary unit, which is used to remain constant. The prices change over
years, which effects accounting earnings. At least three effects of inflation can be identified;
first, nominal value of inventory increase, second, asset is stated at original cost (less
depreciation) in the balance sheet. Because of inflation, their current value or replacement
cost will be much higher than book value, third, inflation affects accounting profits of the
firms, which borrow. If the interest rates is fixed, shareholders gains at the cost of lenders.
In practice, differences exist as to the meaning of certain terms. Diversity of views exists as
to what would be included in the net worth or shareholders equity, current assets or liability.
Historical data:
The basis to calculate ratios are historical financial statements. The financial analyst is more
interested in what happens in future, while the ratios indicate in the past. Management of the
company has information about the company’s future plan and policies and be able to predict
future happenings to a certain extend. But the outside analyst has to rely on the past ratios,
which may not necessarily reflect the firm’s financial positions and performance in the future.
21
TYPES OF RATIO:
Usually ratios are calculated from the accounting data, can be grouped into various classes
according to financial activity or functions to be evaluated.
Short term creditors: - mainly interested in the liquidity and short term solvency of the
firm
Long term creditors: - more interested in the solvency and profitability of the firm.
1 . Liquidity ratios
“Liquidity” refers to the ability of the firm to meet its current obligations. It is also called as
‘short term solvency ratios’. These ratios are used to assess the short-term financial position
of the concern. They indicate the firm’s ability to meet its current obligation out of the
current resources.
“Liquidity is the ability of the firm to meet its current obligations as they fall due”.
“Liquidity is the ease with which assets may be converted into cash without loss”.
22
Liquidity Ratios are:
1. Current Ratio.
2. Quick Ratio.
3. Cash Ratio.
2 . Leverage ratios
Long term creditors like the debentures holders; financial institutions etc. are interested in the
firm’s long-term financial strength. These ratios are calculated to assess the ability of the firm
to meet its long-term liability as and when they become due.
To judge the financial position of the , financial leverage, or capital structure ratio are
calculated. These ratios indicate mix of funds provided by owners and lenders.
1. Debt-equity ratio
3. Proprietary ratio
3 . Activity ratios
Activity ratios are employed to evaluate the efficiency with which the firm manages and
utilizes the assets. These are also called the turnover ratios, because they indicate the speed
with which assets are being inverted or turned over into sales. Higher turnover ratios indicate
the better utilization of capital or resources and in turn lead to higher profitability.
23
Several activity ratios are calculated to judge the effectiveness of assets utilisation.
These are:
4 . Profitability ratios
A company should earn profits to survive and grow over a long period of time. Profit is the
measurement of the efficiency of the business.
4. Return on Investment.
5. Return on Equity.
24
CHAPTER-4
COMPANY PROFILE
Yamaha made its initial foray into India in 1985. Subsequently, it entered into a 50:50
joint venture with the Escorts Group in 1996. However, in August 2001, Yamaha
acquired its remaining stake as well, bringing the Indian operations under its complete
control as a 100% subsidiary of Yamaha Motor Co., Ltd, Japan.
25
Yamaha Motor is highly customer-driven and has a countrywide network of over 400
dealers.
The company pioneered the volume bike segment with the launch of its 100 cc 2-
stroke motorcycle RX 100. Since then, it has introduced an entire range of 2-stroke
and 4-stroke bikes in India. Presently, its product portfolio includes Crux (100cc),
Alba (106cc) and Gladiator (125cc).
MISSION OF YAMAHA
Build the Winning Team with capabilities for success, thriving in a climate for action
and delivering results. Our employees are the most valuable assets and we intend to
develop them to achieve international level of professionalism with progressive career
development. As a good corporate citizen, we will conduct our business ethically and
socially in a responsible manner with concerns for the environment.
Grow through continuously innovating our business processes for creating value and
knowledge across our customers thereby earning the loyalty of our partners &
increasing our stakeholder value.
26
C0RE COMPETENCIES OF YAMAHA
Customer #1
We put customers first in everything we do. We take decisions keeping the customer
in mind.
Challenging Spirit
We strive for excellence in everything we do and in the quality of goods & services
we provide. We work hard to achieve what we commit & achieve results faster than
our competitors and we never give up.
Team-work
We are honest, sincere, open minded, fair & transparent in our dealings. We actively
listen to others and participate in healthy & frank discussions to achieve the
organization's goals
HISTORY OF YAMAHA
27
Genichi Kawakami
"I want to carry out trial manufacture of motorcycle engines." It was from these words
spoken by Genichi Kawakami (Yamaha Motor's first president) in 1953, that today's
YAMAHA MOTORS Company was born
.
"If you're going to do something, be the best."
Genichi Kawakami was the first son of Kaichi Kawakami, the third-generation
president of Nippon Gakki (musical instruments and electronics; presently Yamaha
Corporation). Genichi studied and graduated from Takachiho Higher Commercial
School in March of 1934. In July of 1937, he was the second Kawakami to join the
Nippon Gakki Company.
In 1953, Genichi was looking for a way to make use of idle machining equipment that
had previously been used to make aircraft propellers. Looking back on the founding
of Yamaha Motor Company, Genichi had this to say "While the company was
performing well and had some financial leeway, I felt the need to look for our next
area of business. So, I did some research." He explored producing many products,
including sewing machines, auto parts, scooters, three-wheeled utility vehicles, and
motorcycles. Market and competitive factors led him to focus on the motorcycle
market. Genichi actually visited the United States many times during this period.
28
When asked about this decision, he said, "I had my research division chief and other
managers visit leading motorcycle factories around the country. They came back and
told me there was still plenty of opportunity, even if we were entering the market late.
I didn't want to be completely unprepared in this unfamiliar business so we toured to
German factories before setting out to build our first 125cc bike. I joined in this tour
around Europe during which my chief engineers learned how to build motorbikes. We
did as much research as possible to insure that we could build a bike as good as any
out there. Once we had that confidence, we started going."
OVERVIEW OF YMC
29
Ever since the founding Yamaha Motor Company has been a company that continues
to develop its expertise in the field of small Engines and Fiber Glass Reinforced
Plastic (FRP) Manufacturing as well as Electronic Control Technologies Yamaha
Pursues the ideals of building products of “High Quality” and “High Performance”.
In product building and promotional efforts Yamaha takes as one of the fundamental
ideals the concept that products, which are people friendly, should be Environment
Friendly and products that are environment friendly should also be people friendly.
This concept is born of our awareness that “ It is the Earth and Possible”.
Yamaha Motor Company Supplies the “Power” that moves people and helps them to
live to their fullest as human beings. Yamaha vehicles have the practical advantage of
using the minimum of energy for human transport that means less negative impact on
the Environment.
Technological Advantages
At Yamaha business and leisure are treated as insuperable parts of life that is a reason
of striving to help bring people around the world a more active life.
Sales (Consolidated):- 1,267.2 billion yen ( from January 1, 2019 to December 31,
2019) Parent: 75.6 billion yen (from January 1, 2019 to December 31, 2019)
LOGO:-
31
CORPORATE PHILOSPHY
For society, for the world … Yamaha works to realize our corporate mission of
creating Kando
Yamaha Motor is a company that has worked ever since its founding to build products
defined by the concepts of “high-quality and high-performance” and “light weight and
compactness” as we have continued to develop new technologies in the areas of small
engine technology and FRP processing technology as well as control and component
technologies.
It can also be said that our corporate history has taken a path where “people” are the
fundamental element and our product creation and other corporate activities have
always been aimed at touching people’s hearts. Our goal has always been to provide
products that empower each and every customer and make their lives more fulfilling
by offering greater speed, greater mobility and greater potential.
Said in another way, our aim is to bring people greater joy, happiness and create
Kando* in their lives.
As a company that makes the world its field and offers products for the land, the
water, the snowfields and the sky, Yamaha Motor strives to be a company that “offers
32
new excitement and a more fulfilling life for people all over the world” and to use our
ingenuity and passion to realize peoples’ dreams and always be the ones they look to
for “the next Kando.”
FUTURE OF YAMAHA
India Yamaha Motor is all set to launch its next season of YAMAHA RACING as
“YAMAHA IS R15 ONE MARKET RACE” as a part of the SIDVIN FMSCI
INDIAN NATIONAL CHAMPIONSHIP, 2013 at Madras Motor Race Track from
4th June, at Chennai.
After kick starting the trend two years back, Yamaha is back to fuel the growing
appetite for superbikes in India with the launch of Super Sports 2013 in the Indian
market. With the launch of this machine, Yamaha is all set to enhance the joy of
Indian riders and experience true ‘Art of Engineering’, which lies at the heart of
Yamaha’s creations
This time we shifted our focus to the 150 cc range, through which we sought to
reestablish our brand. We have spent around IRs 6 billion in the last two years on
infrastructure, new moulds, parts and assembly units. We now manufacture 600,000
units a year working in two shifts.
If demand rises even more, we can add another shift. Next year, we hope to increase
our total exports to 150,000 units. In Nepal, Yamaha expect a growth this year to
equal last year´s
33
YZF-R15 YZF-R1
GLADIATOR YZF-R1V
RACING BIKES
34
CHAPTER-5
The extent to which firm has used its long term solvency by borrowing funds;
The efficiency to which firm is utilizing its assets in generating sales revenue; and
35
CHAPTER-6
RESEARCH METHODOLOGY
The success of any study calls for the development of most efficient plan for
gathering the desired information. Therefore a properly defined research methodology
is a prerequisite for carrying out the successful research which in turn demands clear
objectives.
Research is a Process of Systematic Study or Search for any particular topic, subject
or area of investigation, backed by the collection, compilation and presentation of
relevant details or data.
36
It is careful search or inquiry into any subject which is an endeavor to discover or find
out valuable facts which would be useful for the further application or utilization.
There are several ways of collecting the appropriate data, which differ considerably in
context of money, cost, time and other resources. They can be broadly divided into
two categories:
During my study I used both the sources of data collection i.e. Primary & Secondary
source of data. As far as secondary data is concerned, it included company profile,
company records, brochures, and various publications, Internet etc.
Besides secondary data collections, primary sources like Interview and observations
are used for undertakings the study.
37
CHAPTER-7
DATA ANALYSIS
&
INTERPRETATIONS
SOLVENCY RATIO:
Current Ratio: This ratio explains the relationship between current assets and
current liabilities of a business. The formula of calculating the ratio is :
Current Assets
38
Current Liabilities
Current Assets: include those assets which can be converted into cash within a
year’s time and current liabilities include those liabilities which are repayable in a
year’s time. This ratio indicates the availability of current assets in rupees for every
one rupee of current liability.
135.56
For the year 2015-16 (in crore) = ─────── = 4.79:1
28.74
168
For the year 2016-17 (in crore) = −−−−−−− = 5.23
32.12
174
For the year 2017-18 (in crore) = −−−−−−− = 7.23
40.52
200
For the year 2018-19 (in crore) = −−−−−−− = 8.63
35.55
39
CURRENT RATIO
5
4
3
CURRENT RATIO
2
1
0
2015-16 2016-17 2017-18 2018-19
YEARS
Comments: Although the high ratio shown by the graph says that we can easily meet up
our current liabilities but too high ratio is also not beneficial for the company as it shows that
because of poor investment policies of the management and poor control of inventory, assets
are lying idle and they should be further invested.
QUICK RATIO:
Quick ratio indicates whether the firm is in a position to pay its current liabilities within a
month or immediately.
Liquid assets
Quick Ratio = ──────────────
Current liabilities
40
Liquid assets mean those assets which will cash very shortly. All current assets
accept stock and prepaid expenses are included in liquid assets. Stock is excluded
from liquid assets because it has to be sold before it converted into cash. Prepaid
expenses are also excluded from it because they are not expected to be converted into
cash.
79.75
For the year 2015-16 (in crore) =───────── = 3.46:1
29.63
89.75
For the year 2016-17 (in crore) =───────── = 3.17:1
28.31
92.18
For the year 2017-18 (in crore) =───────── = 4.55:1
31.09
96.15
For the year 2018-19 (in crore) =───────── = 4.77:1
33.54
Quick Ratio
5
4
3
Quick Ratio
2
1
0
2015-16 2016-17 2017-18 2018-19
YEARS
41
Significance: Generally, the quick ratio of 1:1 is considered to be satisfactory. Quick
ratio thus more rigorous test of liquidity than the current ratio ands, when used
together
with current ratio, it gives a better picture of short term financial position of the firm.
Comments: Since quick ratio is increasing over the years, it gives a better picture of
firm’s short term financial position so firm is in a position to pay its current liabilities
immediately or within a month.
CASH RATIO
Since cash is the most liquid asset, a financial analyst may examine cash ratio and its
equivalent to current liabilities. Trade investments and marketable securities
equivalent to cash; so they may be included in cash ratio.
13.31
For the year 2015-16 (in crore) = ──────── = 0.47:1
28.31
20.26
For the year 2016-17 (in crore) = ─────── = 0.52:1
16.55
56.88
For the year 2017-18 (in crore) = ──────── = 1.83:1
18.63
42
63.21
For the year 2018-19 (in crore) = ──────── = 2.62:1
75.71
Cash Ratio
6
5
4
3 CASH RATIO
2
1
0
2015-16 2016-17 2017-18 2018-19
YEARS
Significance : cash ratio generally helps in finding out whether the cash is being
proper utilized in the business or not and to check that whether or not cash is lying
ideal in the firm, if yes then to make proper utilization of cash
.
Comments: As we can see that circulation of cash has decreased over the past years.
It shows that debtors are not making prompt payments and company is not able to
make better utilization of cash.
ACTIVITY RATIO
Inventory Turnover Ratio: Inventory turnover indicates the efficiency of the firm
in producing and selling its products. It is calculated by dividing the cost of goods
sold by the average inventory.
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Cost of Goods Sold
Inventory Turnover Ratio = ────────────────
Average inventory
Cost of goods Sold = Opening Stock + Purchases + Direct Charges – Closing Stock.
Cost of Goods Sold = Net Sales – Gross Profit.
211.93
For the year 2015-16 (in crore) = ─────── = 6.21 times
34.08
278.74
For the year 2016-17 (in crore) = ─────── = 6.59 times
42.25
357.14
For the year 2017-18 (in crore) = ─────── = 7.42 times
48.12
400.25
For the year 2018-19 (in crore) = ─────── = 7.57 times
52.84
InventoryTurnoverRatioGraph
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Inventory Turnover Ratio
5
4.5
4
3.5
3 Inventory Turnover
2.5 Ratio
2
1.5
1
0.5
0
2015-16 2016-17 2017-18 2018-19
YEARS
Significance: This ratio indicates whether or not the stock has been efficiently
utilized. It shows the speed with which the stock is rotated into sales. The higher the
ratio, the better it is, since it indicates that the stock is selling quickly. In business
where stock turnover is high goods can be sold at low margin of profit and even then
the profitability can be high.
Comments:Inventory turnover ratio of the company is quite good earlier it means that
there is proper outflow of the stock and goods do not remain in the go down for a long
time. As we can see that inventory turnover is decreasing which shows that there is
overspending in stock which is left unused.
This ratio indicates the relationship between the credit sales and average debtors or
debtor of the current year.
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Average Debtors + Average B/R
Bills receivables are added in debtors for the purpose of calculation of this ratio.
While calculating this ratio, provision for bad debt and doubtful debt is not deducted
from total debtors, so that it may not give a false impression that debtors are collected
quickly.
123.51
For the year 2015-16 (in crore) = ─────── = 2.72 times
45.25
179.12
For the year 2016-17 (in crore) = ─────── = 3.55 times
50.38
198.67
For the year 2017-18 (in crore) = ─────── = 3.78 times
57.82
252.83
For the year 2018-19 (in crore) = ─────── = 4.83 times
48.0
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Debtors Turnover Ratio
6
4
2 Debtors Turnover Ratio
0
2015-16 2016-17 2017-18 2018-19
YEARS
Significance: This ratio indicates the speed with which the amount is collected from
debtors. The higher the ratio, the better it is, since it indicates that amount from
debtors is being collected more quickly. The less the risk from bad debt, and so the
lower the expenses of collection and increase in the liquidity of the firm.
Comment - turnover ratio of the company is 2.72 which is quite good it means there
is efficient credits sales policy of the management. So there is less risk of bad debts
but there is increase in the ratio from the last year. But still the ratio is low as
compared to year 2007- 08 which was 3.47 times, so company should take
appropriate steps to increase the ratio.
Working capital turnover ratio indicates the velocity of the utilization of net working
capital. This ratio represents the number of times the working capital is turned over in
the course of year
Cost of sales
Working capital turnover Ratio = ────────── × 100
Net working capital
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Net Working Capital = Current assets – Current liabilities = $60,000 − $30,000 =
$30,000
25.67
For the year 2015-16 (in crore) = ────── × 100 = 20.03 %
128.17
32.62
For the year 2016-17 (in crore) = ────── × 100 = 25.05 %
138.42
31.54
For the year 2017-18 (in crore) = ────── × 100 = 28.66 %
149.86
32.57
For the year 2018-19 (in crore) = ────── × 100 = 30.76 %
156.19
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Gross Profit Ratio
5
4
3 Significance: This
Gross Profit Ratio
2
1
ratio measures the
0
2015-16 2016-17 2017-18 2018-19
margin of profit
YEARS available on sales. No
ideal standard is fixed
for this ratio, but it should be adequate enough to meet not only operating expenses
but also to provide for depreciation, interest on loans, dividends and creation of
reserve.
Comments: As the figure clearly states that the revenue generated from sales is
increasing but the profit is going down by few digits because of increase in
manufacturing activities. But still the ratio of the current year is quite significant but
still the company need to find the reason for this continuous decrease in the ratio
which might be problematic in near future.
27.73
For the year 2015-16 (in crore) = ─────── × 100 = 48 %
57.64
29.61
49
For the year 2016-17 (in crore) = ─────── × 100 = 51 %
58.66
30.61
For the year 2017-18 (in crore) = ─────── × 100 = 52 %
59.65
34.85
For the year 2018-19 (in crore) = ─────── × 100 = 55%
64.77
5
Return on Investment
4
3
2
Return on Investment
1
0
2015-16 2016-17 2017-18 2018-19
YEARS
Significance: This ratio helps in taking decisions regarding capital investment in the new
projects. The new projects will be commenced only if the rate of return on capital employed /
net worth in such projects is expected to be more than the rate of borrowings.
Comments: As the figure clearly states that the revenue generated from sales is increasing
but the profit is going down by few digits because of increase in manufacturing activities. But
still the ratio of the current year is quite significant but still the company need to find the
reason for this continuous decrease in the ratio which might be problematic in near future.
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CHAPTER-8
51
FINDINGS
After collection and analyzing the data, the researcher has to accomplish the task of
drawing inferences. Its only through interpretation that researcher can expose
relations and processes that underlie his findings. Thus interpretations a device
through which the factor that seems to explain what has been observed by researcher
in the course of the study can be understood better. So for the simplification I have
divided my findings in four parts:
Leverage Ratio:
Debt ratio of the firm is decreasing which indicates that the firm is able to pay its
debts in time.
Debt to total funds ratio is also decreasing and firm is finally paid all of its debt in
the current years which tell that firm is free from all outside liabilities. And now it can
invest its money in market or it can also easily take loans from lenders.
Proprietary ratio of the firm is also much higher than 33 % which is the indicator of
sound financial position as firm is less dependent on external sources of finance.
Turnover Ratios:
Fixed assets ratio revels how efficiently the fixed assets are being utilized in the
business. As indicated by an increase this shows proper utilization of assets.
Inventory turnover ratio is quite high which indicates that stock is regulated into
business at regular intervals and one can also measure the sales polices of the firm.
Debtor turnover ratio also shows an increase which indicates that the amount is
regularly collected by the debtors so there is less risk of bad debts and collection
period also satisfies the requirement of the company.
52
Profitability Ratios :
Gross profit ratio compared with the previous years shows a gradual decrease which
sounds problematic for the company.
Net profit ratio decrease with the high volumes compared to the previous years. This
is due to depreciation provision and increase in manufacturing and operating
expenses.
SUGGESTIONS
Gross profit ratio of the company is declining, this could be due to: Increase in
the prices of raw material. Increase in the manufacturing expenses. There is
fall in prices of unsold goods, there by reducing the value of unsold goods.
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Focused attention should be paid by initiating a special drive to expatiate
recoveries from sundry debtors.
The net profit ratio of the firm also decreases. It shows the inefficiency and
unpredictability of the business. This decline is because in expenses borne by
operating activities.
The liquidity ratio shows that the liquidator’s position of the company is quite
satisfactory. All the ratios such as the current ratio, quick ratio and cash ratio
show a significant increase in comparison with past years. The company has to
make full utilization of its assets.
Leverage position of the company is good as we can see that the ratio
continuously decreases and lastly the firm is able to pay all its debt in current
year. So the firm should try to maintain it and should invest its money in some
profitable activities.
CONCLUSION
These were some of the ratio that was very regularly used at Thomson press for the
necessary analysis activities performed by it from time to time. Thomson press uses
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this technique usually to check out its current functioning and to compare its
performance on regular basis with the past years.
This technique is useful in inter-firm analysis and to judge once performance standard
as ratio helps to set some standard marks which the firm target to achieve in the given
span of time.
CHAPTER-9
BIBLIOGRAPHY
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www.Yamaha-motor-india.com
www.india-today.com
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