Afs Final Report

ANALYSIS OF FINANCIAL STATEMENTS
LETTER OF TRANSMITTAL
I would like to thank all those who assisted us in compiling this report. In this report I
tried to cover as many aspects of ANALYSIS OF FINANCIAL STATEMENTS along
with the jargons that we learned in the course. Due to scarcity of time I was not able to
put in as much efforts as we would have liked to, hence this report by no means is a
comprehensive one. I would like to offer our gratitude to our teacher Mr. Maqbool Ur
Rehman for giving us the opportunity to express myself both through this report and
during lecture hours, the difference in teaching will always be memorable.
DEWAN MOTORS AND HONDA ATLAS MOTORS LTD

TABLE OF CONTENTS
LETTER OF TRANSMITTAL...........................................................................................1
TABLE OF CONTENTS ....................................................................................................2
EXECUTIVE SUMMARY ................................................................................................3
Automobile Industry in Pakistan.........................................................................................4
Sector Overview...............................................................................................................5
DEWAN FAROOQUE MOTOR COMPANY...................................................................8
Introduction:.....................................................................................................................8
Mission Statement:...........................................................................................................9
Corporate Philosophy.....................................................................................................10
Historical Perspective:...................................................................................................10
Present Past and Future of DFML:................................................................................11
DEWAN FARROQ MOTORS..........................................................................................12
FINANCIAL RATIOS ......................................................................................................12
INTERNAL ANALYSIS ..................................................................................................13
Liquidity ratios...............................................................................................................13
Efficiency Ratios............................................................................................................14
Profitability Ratios.........................................................................................................18
Debt and leverage ratios ................................................................................................20
Equity Ratios .................................................................................................................22
External analysis ...............................................................................................................25
Liquidity ratio................................................................................................................25
Efficiency ratios.............................................................................................................26
Profitability Ratios.........................................................................................................27
RETURN ON ASSET AND EQUITY..........................................................................28
Equity ratios ..................................................................................................................30
Market measures ...........................................................................................................31
Creditor Guidelines ...........................................................................................................32
Investors Guidelines ..........................................................................................................33
Conclusions and Recommendations..................................................................................34
APPENDIX........................................................................................................................35
Dewan motors ltd financial statements .........................................................................35
BALANCE SHEET AS AT JUNE 30, 2004.................................................................36
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED JUNE 30, 2004...................................................................37
Balance sheet 2006 &2005............................................................................................38
Income statement 2006 & 2005.....................................................................................39
Balance sheet 2007 & 2006...........................................................................................40
Income statement 2007 & 2006.....................................................................................41
DEWAN MOTORS AND HONDA ATLAS MOTORS LTD 2

EXECUTIVE SUMMARY
Dewan motors and Honda atlas motors need to maintain their

liquidity as it is going low from 1.0 in quick ratio and even in
current ratio if this would be continuous dewan motors might face
liquidity crunch Dewan motors need to focus on their inventories
system and receivables because of this they are facing a lots of
problems in other heads of balance sheet and income statements.
Total asset turnover for both of the companies is quite efficient.
Gross profit margins and returns are nominal should be
maintained. The main problem can be seen in net profit margin
due to the high interest expenses which led the companies into
low profitability.
Dewan motors need to utilize their asset more effectively in order
to move away from the problem of finance cost. As I said above
dewan motors interest coverage ratio is also very week the main
reason is high finance cost the company is obtaining too much of
debt in the last three years. Price to earning ratio was too weak in
start but it stabilize gradually dewan motors company need to
focus on improving their shareholders wealth Dividend seems to
be quite optimum except last year due to low profits As far as
creditors is concerned dewan motors is more credit worthy in year
2007 as compare to Honda as they have profit other wise Honda
was going good from year 2003-2006.For investment point of view
Honda atlas is much better company then dewan motors as they
providing high return in the form of capital gain and higher
dividends. Its share prices are also progressing even in the loss
year of 2007

Automobile Industry in Pakistan
The automotive assembling in Pakistan started in 1950 when National Motors

Limited, a public limited company and the pioneer in the industry, came into
existence, established by General Motors of USA National Motors assembled
passenger cars as well as commercial vehicles which carried “General Motors”
brands such as Bedford, Vauxhall, Chevrolet.
A regular car industry started in the country in 1983, when Suzuki commenced
production eyeing the small and LCV car segment of 800cc-1000cc range, and
introduced Suzuki car which targeted the middle-income group (constituting the
larger segment of the market) by providing an affordable car.
Then there was a long gap until the early 90’s when Indus Motor Company was
established to manufacture Toyota vehicles in Pakistan. Soon after Honda Atlas
came with the Civic and Gandhara Nissan entered the market with Sunny.
In the late 90,s Dewan Farooque Motors set up a plant to manufacture Hyundai
and Kia vehicles in Pakistan. Since then the market has changed all together.
After struggling through nineties, a decade full of uncertainties and frequent
policy the Pakistani Auto Industry has been able to achieve double digit growth
consistently since the last 4 years. The industry operates under franchise and
technical cooperation agreements with Japanese, European and Korean
manufacturers.
Lately Few new market players entered the market such as Gandhara Nissan
again with now the imported Nissan range of vehicles, Dewan Mushtaq Motors

with imported Mitsubishi range of vehicles, Nexus Automotive with Chevrolet

imported vehicles and others imported Chinese vehicles such as Karakoram
Motors, Roma Automobiles and Foton by Dewan Innovations Limited along with
Pak Cherry Automobiles. Sigma Motors made its mark with Rover recently.
Apart from these the big brands of the auto industry also entered the Pakistani
market such as BMW , Mini & Rolls Royce by Dewan Motors, Porsche, Mercedes
and Audi have also launched their brands in Pakistan catering to the very upper
niche.
Sector Overview
There are presently 82 vehicle assemblers in the industry producing passenger

cars, light commercial vehicles, trucks, buses, tractors and 2/3 wheelers. Besides
these there are over 400 players in the vendor industry. The total direct
employment in the sector is around 500,000. The auto industry has played a
significant role in the large scale manufacturing industry as it contributes
Contribution to GDP Rs. 153 billion to the economy besides import substitution
resulting in annual foreign exchange savings of over $ 1 billion. An investment of
over Rs. 100 billion as been done in the automobile sector giving Revenues of
above Rs. 50 billion that accounts for 8% of the total. There is still potential in the
auto industry for more investment. During the period July-April 2006-07
automobile industries recorded some what subdued growth in
assembling/manufacturing business.

Name of Companies Investment (Rs. in million)

2000-01 2001-02 2002-03 2003-04 2004-05
Pak Suzuki Motor Company
Ltd. 3,000 3,094 3,105 3,874 5,144
Indus Motor Company Ltd. 2,154 2,357 2,442 2,579
Honda Atlas Cars (Pakistan)

Ltd. 1,094 1,128 1,188 1,417 1,619
Sigma Motors (Pvt) Ltd. 3 13 34 115 160
Hinopak Motors Ltd. 20.8 42 44 139.6 133.4
Ghandhara Nissan Ltd. 710 708 709 1,093 1,119
Sind Engineering Ltd. 193.607 221.692 254.801 197.153 143.261
VPL Ltd.
Ghandhara Industries Ltd. ~ ~ 0.042 5.485 ~
Master Motor Corporation

Ltd. ~ ~ 161 208 155
Millat Tractors Ltd.
Al-Ghazi Tractors Ltd.
Atlas Honda Ltd. 42.15 181.38 132.06 1,056.59 2,000.00
Dawood Yamaha Ltd. 10.37 16.007 139.654 24.58 13.332
Suzuki Motorcycles Pakistan

Ltd. 208 260 270 358 430
Pakistan Cycle Industrial

Cooperative 33.15 33.57 35.64 38.73 40.63
Society Ltd.

Plum Qingqi Motors Ltd. 485.9 505.3 471.5 555.2 513.5
Fateh Motors Ltd.

DEWAN FAROOQUE MOTOR COMPANY
Introduction:
It was five years ago that Dewan Mushtaq Group diversified its business
activities by entering into the automobile industry. Dewan Farooque Motors
Limited signed Technical License Agreements with Hyundai Motor Company and
Kia Motors Corporation in December 1998, as the progressive manufacturer and
distributor of Hyundai and Kia vehicles in Pakistan.
Dewan Farooque Motors Limited acquired franchises of Hyundai Motor

Company and Kia Motors Corporation to bring in Korean technology to the
country to produce vehicles of high quality at reasonable prices, offering the
highest value for money.
Over the past five years, Dewan Farooque Motors Limited (DFML) has
earned national recognition in producing a diversified range of vehicles for people
from different walks of life. The plant has state-of-the-art production facilities
located at Sujawal, around 145 km from Karachi in southern Pakistan.

Mission Statement:
The mission of Dewan Mushtaq Group is to be the finest organization, and

to conduct business responsibly and in a straightforward way.
Our basic aim is to benefit the customers, employees and shareholders,

and to fulfill our commitment to the society.
Our hallmark is honesty, initiative and teamwork of our people, and our
ability to respond effectively to change in all aspects of life including technology,
culture and environment.
We will create a work environment, which motivates, recognizes, and

rewards achievements at all levels of the organization, because in God we trust
and in people we believe.
We will always conduct ourselves with integrity and strive to

be the best.

Corporate Philosophy
The Group’s corporate philosophy is based on following principles laid down by

its founders and predecessors:
- Credibility, integrity and honesty
- Straight forward business dealings
- Work as a worship
- Spirit of social service and human respect
By following the above philosophy, the Group enjoys an excellent corporate

image amongst business community, banks, financial institutions, and
governmental circles. The market price of Group companies’ shares is the most
prominent reflection of this confidence.
Historical Perspective:
The Dewan family started business in 1916 at Patiyala State in the Punjab
province of India when a small cottage industry was set up by Dewan
Mohammad and his son Dewan Mushtaq Ahmed to manufacture garments.
During 1918 another trading firms was established for importing clothing and
other commodities, which were sold all over India.
In 1947 Dewan family migrated to Pakistan and settled in Karachi. They

formed Dewan Mushtaq Sons and started trading in commodities like tea, sugar,
garments, and fabrics. By the late fifties the firm’s turnover had risen to around
US$ 7 million.
In 1968 the Dewan family, under leadership of Dep[wan Mohammad Umar
Farooque, ably supported by his younger brother Dewan Mohammad Salman
Farooqui, and decided to enter the industrial Arena. They first ventured into
Textile yarn spinning and thereafter diversified into sugar and Polyester Staple
Fibre.
The fourth generation of Dewan family is now aggressively expanding and

diversifying in the fields of Acrylic Fibre, Automobiles & Motorcycles and
Technology development.
Dewan Zia-ur-Rehman Farooqui, the present group Chairman took over the
group in 1992. He provides strategic direction and made the group a business
conglomerate in last 13 years. Dewan Mohammad Yousuf Farooqui is the group
Managing Director, who is ambitious and has drive to implement and run new
projects successfully.

Present Past and Future of DFML:
Dewan Mushtaq Group is one of the most prominent and reputed

industrial groups in Pakistan. Dewan enjoys the absolute confidence of the
general public, local and foreign capital markets, financial institutions and the
Government.
The history of Dewan Mushtaq Group goes way back to the year 1916.In
1968; Dewan entered the industrial arena and set up the first industrial unit in
1970 in the name of Dewan Textile Mills Limited. Thereafter, the group diversified
into sugar and Polyester Staple Fibre. Dewan Zia-ur-Rehman Farooqui, the
present group Chairman took the helm in 1992. His strategic direction and vision
has helped to turn the group into a business conglomerate in the last thirteen
years.
Dewan Mohammad Yousuf Farooqui, the group Managing Director, is an

entrepreneur par excellence and has a gift to conceive, implement and run new
projects successfully. At present, Dewan Mushtaq Group deals in cotton textile,
polyester fibre, acrylic fibre, sugar, automobile, cement and oil & gas exploration

DEWAN FARROQ MOTORS

FINANCIAL RATIOS
Ratios 2003 2004 2005 2006 2007

Liquidity Ratios
Current ratio 0.75 0.83 1.04 1.05 1.03

Quick Ratio 0.36 0.32 0.45 0.9 0.67
1,730,8 4,402,1 5,631,0
Working capital 3,271,664 4,561,447
66 59 80
Efficiency ratios
Inventory Turnover 4.98 3.04 4.21 3.13 4.06

Average Collection
13.54 13.23 10 30.23 47.57
Period
Cash cycle 86.83 133.29 96.7 146.84 137.47
Total Asset Turnover 1.35 1.129 1.39 1.16 1.05
Profitability Ratios
Gross Profit Margin 13.47% 10.70% 11.94% 12.22% 11.98%
Net profit Margin 2.97% 3.39% 3.48% 2.13% 0.84%
Return on Total Assets 12.04% 8.30% 10.70% 8.18% 6.60%
Return on Equity 16.53% 20.92% 23.52% 13.94% 4.49%
Debt or Leverage
Ratio
Debt Ratio 0.75 0.8 0.612 0.79 0.75
Times Interest Earned
2.1 5.54 4.92 2.16 1.27
Ratio
Equity Ratios
Price to Earnings Ratio 47.97 9.96 4.84 7.37 8.89
Dividend Payout 52.53% 32.50% 37.70% 40.00% 0.00%
Dividend Yield 0.03 0.06 0.05 0.06 0.00

MARKET /BOOK VALUE 3.29 1.70 1.13 1.06 0.77
EPS 0.79 2.49 3.97 3.04 1.90

INTERNAL ANALYSIS
Liquidity ratios
liquidity ratio
1.2
1
0.8
current ratio
0.6
quick ratio
0.4
0.2
0
2003 2004 2005 2006 2007
years
ANALYSIS:
The current ratio of the company is been progressing since five years
but I think the company is facing a lots of problems facing related to
liquidity this could be the reason behind is the inventory problems or
a company might be facing problems in receiving their credits, but still
the company progress in current ratio is quite nominal it had
increased after 2004 but it is stable since last 3 years. So it is been
observed that company might have highlighted their problems and
trying to resolve them The past five year performance of the company
related to the quick ratio is telling us that the company is highly
involved in inventory problems and the reason behind this that they
are taking to much time in converting their inventory into sales thus in
such a way the company liquidity is below 1.0 this could be a most
dangerous sign for the company .this problems may lead company
towards liquidity crunch. The another reason could be that company
is taking too much time in receiving their credits

Efficiency Ratios
INVENTRY TURNOVER
INVENTRY TURNOVER
4
TIMES
0
2003 2004 2005 2006 2007
YEAR
ANALYSIS
The inventory turnover of the company is been observed that it is

fluctuating since past five years. as I said above that the company is
facing liquidity crisis thus these problems are leading towards liquidity
problems in such a way we can say that since past five year the
company can convert maximum 5 times in last year of 2003 and then
its keep on fluctuating although it has touched lowest figure in 2006 to
3 times , so thus the sales of the company are sounds like changing
at a higher rate and keep on fluctuating .

AVERAGE COLLECTION PERIOD
average collection period
50
40
30
days
20
10
0
2003 2004 2005 2006 2007
year
Analysis
As we can see that the company is taking too much time in receiving
their credits and we can see that by this trend since past 5 year in
2003 and 2004 the company was quite efficient in collecting their
receivables but after year 2005 the company is facing hell lot of
collection problems this problem could lead the company towards
inappropriate growth rate a company should have a nominal
collection period in order to get their payments back and reinvest
those amount

CASH CYCLE
CASH CYCLES
160
140
120
100
DAYS
80 Series1
60
40
20
0
2003 2004 2005 2006 2007
YEAR
Analysis
This ratio basically shows that the how much a company is taking to
convert their inventories into sales and then into cash. In the
beginning the company was quite efficient in converting their
inventories into cash. But later on this period of time increase
drastically the main reason could be the problems in inventories and
in receivables a company needs to improve their cash cycle in order
to improve their liquidity position

TOTAL ASSET TURNOVER
ASSET TURNOVER
1.6
1.4
1.2
1
TIMES
0.8
0.6
0.4
0.2
0
2003 2004 2005 2006 2007
YEAR
Analysis
This ratio of a company is basically telling us about that efficiency of

the company and how company is utilizing their asset this ratio is
been consistent in the past 5 years as we can see that its been stable
but it achieved its highest in the year 2005 but it decreased in in the
year 2006 and 2007
The company should utilize their asset and properly use it. From the
beginning the company we have seen problems in receivables and
inventory so company should resolve this probe as soon as possible

Gross profit and net profit margin
16.00%
14.00%
12.00%
10.00%
return
GP margin
8.00%
NP margin
6.00%
4.00%
2.00%
0.00%
1 2 3 4 5
years
Analysis
The company gross profitability is been quite consistent and from five
years its been stable only slight changes have been occurred but we
have seen a decreased in Np margin in last 2 years it seems that the
company is highly debt finance and the interest expense of the
company is hurting company’s profitability the main reason could be
that company is taking high loans thus leads to high interest
expenses

RETURN ON ASSET AND EQUITY
RETURN
25.00%
20.00%
15.00% ROA
10.00% ROE
5.00%
0.00%
2003 2004 2005 2006 2007
YEARS
ANALYSIS
The company return in the beginning was quite nominal and going
very good in fact till 2005 it was progressing and increasing smoothly
but after 2005 the company’s return on asset and on equity suddenly
decreased drastically and in such a ways the company start loosing
their investor the main reason could be high financing cost, and the
problems in inventories the company should utilize their assets and
work on sales

Debt and leverage ratios
DEBT RATIO
DEBT RATIO
0.8
0.6
Series1
0.4
0.2
0
2003 2004 2005 2006 2007
YEAR
Analysis
The company debt ratio is been quite consistent through out the
period in just 2005 it was decreased the it came back to it certain
level this is harming company in financing cost but it could be resolve
if the company would focus on other factors.

TIMES INTREST EARNED

TIMES INTREST EARNED
6
5
4
3
2
1
0
2003 2004 2005 2006 2007
YEAR
Analysis
The company was capable enough with covering their finance cost till
2005 but after this the company profitability starts declining thus in
such a way company was unable to cope with their interest expenses
and in such a ways the efficiency of recovering loans has been
decreased

Equity Ratios
PRICE/EARNING RATIO
60.00
50.00
40.00
30.00
20.00
10.00
0.00
1 2 3 4 5
YEAR
DIVIDEND PAYOUT
EP
5.00
4.00
Analysis
3.00
The company price and earning has been performing very
significantly in till the year 2005 but after that it start decline like other
RS
ratios of the company this is a reflection of low profitability and and

thus it creates an impact on the price and earnings of the company
2.00
this will lead the company toward low volume and away from
investors
1.00
0.00
DIVIDEND YIELD AND PAYOUT

DIVIDEND YIELD
0.07
0.06
0.05
0.04
0.03
0.02
0.01
0.00
2003 2004 2005 2006 2007
YEAR
Dividend payout
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2003 2004 2005 2006 2007
year
ANALYSIS:
The dividend payment of the company was quite good in the

entire period from 2003 till 2006; in 2007 the company was
unable to pay dividend in the last year due to a very low
profitability and in such a way company was unable to pay
dividend to their shareholders . The dividend yield remains quite
consistent with past year except 2007. So it is hopeful the next
year would be good for a company.

MARKET/BOOK VALUE
MARKET/BOOK VALUE
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
2003 2004 2005 2006 2007
YEAR
Analysis
the market to book value tells us the phenomenon between the

market value and book value of the firm this ratio was performing very
efficiently in the beginning but it start declining due to various factors
such as liquidity and profitability part these two factors made the price
down for dewan motors and in such a ways the difference b/w the
market and book value start concision and even lesser

External analysis
Honda atlas Pakistan has been taken as a comparing company

because size of the company is more less is same.
Liquidity ratio
Curre
1.0
nt 0.75 0.83 1.04 1.03 Dewan 1.9 1.2 1.1 1.1 0.9
5 Honda
ratio Motor
Atlas
Quick s
0.36 0.32 0.45 0.9 0.67 1.2 0.9 0.7 0.4 0.2
Ratio
Analysis
As far as the liquidity concerned of the two companies.
Honda atlas is far better than dewan motors the main reason could
be that they have maintained their inventories and receivables in
such a way that have better liquidity as compare to dewan motors but
in the last year.
Honda atlas also faced problem in their liquidity and that’s why they
are suffering.

Efficiency ratios
Inventor
3.1
y 4.98 3.04 4.21 4.06 4.6 6.5 6.7 6.7 4.9
3 Dewan
Turnover Honda
Motor
Total Atlas
1.1 s 1.3 1.6
Asset 1.35 1.129 1.39 1.05 2.57 1.4 2.1
6 3 4
Turnover
Analysis
In efficiency ratio the dewan motors is also behind Honda atlas

because Honda atlas Is quite efficient in converting their in inventory
into sales and thus with utilization of asset as we can see that though
out five years.
Honda atlas is performing well in inventory turnover and utilization of

asset. Thus in regard of efficiency ratios we can say that the Honda
atlas is better than dewan motors

Gross
Profit 10.7 11.9 12.2 11.6 8.10 1.70 4.60
13.47% 11.98% 0.60%
Margi 0% 4% 2% 0% % % %
n Dewan Honda
Net Motors Atlas
profit 3.39 3.48 2.13 7.10 4.40 1.00 2.80 -
2.97% 0.84%
Margi % % % % % % % 1.60%
n
Analysis
In profitability dewan motors is performing well as compare to Honda

atlas but we can see that in np margin
Honda is doing well the main reason is that dewan motors has a
higher financing cost that’s leading is to low profitability in such a
ways we can say that Honda is not taking up so much loans as
compare to dewan motors. and the expenses of dewan motors are
much higher than Honda atlas this will lead to low np margin so in
such a way Honda Is better that dewan in margin .
But dewan motors has the potential to compete with Honda.

Retur
-
n on 12.04 8.30 10.70 8.18 11.5 1.30
6.60% 5.80% 7.60% 3.10
ASSE % % % % 9% %
% Hond
T Dewan
a
Retur Motors Atlas
-
n on 16.5 20.9 23.52 13.9 21.6 0.08 30.00
4.49% 0.23% 10.30
Equit 3% 2% % 4% 0% % %
%
y
RETURN ON ASSET AND EQUITY
ANALYSIS
As we can see that the return of dewan motors is much higher than
the Honda atlas. And in the last year Honda has a negative return
because they have incurred a major loss in 2007
So in such a ways dewan motor is providing higher return

consistently form past five year in fact more than Honda. And Honda
has also incurred a major loss in last year so the next year it would be
expected that they would recover their loss only so the return would
ultimately lower than dewan motors.

Debt or Leverage Ratio
0.61 0.8
Debt Ratio 0.75 0.8 0.79 0.75 0.43 0.72 0.7 0.7
2 2
Times Dewan Honda
Interest Motors 686. 179. 28. Atlas
2.1 5.54 4.92 2.16 1.27 16.2 0.1
Earned 1 5 2
Ratio
Analysis
In debt ratio we can see that both the companies have a very slight
difference, dewan motor is bit higher than Honda atlas and that’s why
it is incurring high financing cost
Interest coverage ratio is basically tell u about how much operating

profit is higher than the interest expense in dewan motor we can see
that they have higher profit but its no optimum Honda atlas was
performing well in this regard but in last year they also failed to
compete with the interest expense the major reason would be low
sales.

Equity ratios
Dividend 52.53 32.5 37.7 40.0

0.00% 42.5 43.7 58.3 41.7 0
Payout % 0% 0% 0% Dewan Honda
Dividend 6.04 5.20 5.90 Motors 8.40 4.80 3.10 6.25 Atlas
2.60% 0.00% 0.00%
Yield % % % % % % %
Analysis
In equity’s dewan motors Is performing well as well as Honda atlas

both companies are providing average 40% of dividend pay out ,
in such a ways both companies’ dividend policies seems to be quite

similar in case of dividends but in last year they failed to provide
dividends to their shareholders because of low profitability .
As far as dividend yield is concerned Honda is doing better in some

years but both the companies are more or less have some
opportunities on an average

Market measures
Price to
19.
Earnings 47.97 9.96 4.84 7.37 8.89 6.7 9.1 6.7 -15.7
2
Ratio Dewan Honda
MARKET Motors Atlas
1.4
/BOOK 3.29 1.70 1.13 1.06 0.77 1.34 1.93 1.75 1.7
8
VALUE
Analysis
Dewan motor in starting wasn’t performing well in starting but

gradually it started to improve their p/e ratio as far as Honda is
concerned it also more or less same but in last year it fall down to
negative the main reason could be net loss for the year of 2007 so it
would be hopeful that Honda will recover the loss next year and
perform well as it has a image in the market
Market to book value basically depends on the open market trading

phenomenon dewan motors is not doing much well as compare to
Honda atlas .Honda atlas is performing well through out years and
also in the condition of loss it shows that investors has expectation
from Honda and trust on its name

Creditor Guidelines
• As far as credit is concerned we observed financial ratios and I

would conclude that ratios are not good enough for providing
credit to dewan motors.
• But if we see Honda atlas motors they seems to be quite

efficient in controlling their operating activities
• dewan motors is taking too much time in converting its

inventories into sales and then receivables into cash
• so those people are planning to provide credit to dewan motors

should once take a sight of its efficiency ratios
• Honda atlas motors is highly eligible for providing credit

because they are too quick in converting their inventories in to
sales and then into cash except the last year
• If we see only year 2007 dewan motors is more credit worthy

then Honda atlas as Honda have incurred a loss so they would
not be able to fulfill payments this year very soon

Investors Guidelines
 For the investors it is quite confusing to determine that which

company is better from dewan motors and Honda atlas
 From the past five year dewan and Honda both were providing
valuable dividends except the last year as there were very low
profitably in automobile industry
 As we can see that both companies dividend pay out is more or

less is same and dividend yield is slightly different but this is a
fact that Honda is slightly a bigger company then dewan motors
 But from stock market point of view Honda atlas is much better
then dewan motors this can be said by the P/E ratio of both the
company
 Dewan motors has a very high P/E ratio which can led investors
to move away from dewan motors shares
 Eps of Honda atlas is higher then dewan motors except the last
year due lost incurred by the company

 Market to book value share is suggesting that Honda atlas has

the potential to come back in a industry because its share
prices are still stable in face progressing even In case of loss
 From my point of view I would be recommending Honda atlas

shares for investment point of view
Conclusions and Recommendations
• Both the companies need to maintain their liquidity as it is going

low from 1.0 in quick ratio and even in current ratio if this would
be continuous dewan motors might face liquidity crunch
• Dewan motors need to focus on their inventories system and

receivables because of this they are facing a lots of problems in
other heads of balance sheet and income statements.
• Total asset turnover for both of the companies is quite efficient.

Gross profit margins and returns are nominal should be
maintained.
• The main problem can be seen in net profit margin due to the
high interest expenses which led the companies into low
profitability.
• Dewan motors need to utilize their asset more effectively in

order to move away from the problem of finance cost.
• As I said above dewan motors interest coverage ratio is also

very week the main reason is high finance cost the company is
obtaining too much of debt in the last three years.
• Price to earning ratio was too weak in start but it stabilize

gradually dewan motors company need to focus on improving
their shareholders wealth Dividend seems to be quite optimum
except last year due to low profits

• As far as creditors is concerned dewan motors is more credit

worthy in year 2007 as compare to Honda as they have profit
other wise Honda was going good from year 2003-2006.
• For investment point of view Honda atlas is much better

company then dewan motors as they providing high return in
the form of capital gain and higher dividends. Its share prices
are also progressing even in the loss year of 2007.
APPENDIX
Dewan motors ltd financial statements

BALANCE SHEET
ANALYSIS AS AT
OF FINANCIAL JUNE
STATEMENTS
30, 2004
Note June 30, June 30,
2004 2003
ASSETS (Rs. in '000)
NON-CURRENT ASSETS
Tangible fixed assets
Operating fixed assets at cost less accumulated depreciation 3 1,831,134 1,746,875

Capital work-in-progress 4 122,219 138,290
1,953,353 1,885,165
Long-term investment 5 - -
Deferred cost 6 - 2,922
CURRENT ASSETS
Stores and spares 7 57,492 47,648

Stock-in-trade 8 1,930,805 815,501
Trade debts 238,781 150,756
Advances, deposits, prepayments and other receivables 9 770,415 405,620
Cash and bank balances 10 151,952 170,129
3,149,445 1,589,654
TOTAL ASSETS 5,102,798 3,477,741
EQUITY AND LIABILITIES
SHARE CAPITAL AND RESERVES
Share Capital Authorized
80,000,000 (2003: 80,000,000) Ordinary shares of Rs.10 each
Issued, subscribed and paid-up 800,000 800,000

Reserve for issue of Bonus shares
Inappropriate profit 11 734,031 734,031
36,702 -
223,989.487 110,655
NON-CURRENT LIABILITIES
Long term loans-secured 994,722 844,686
Liability against assets subject to finance lease
Long term deposits 12 150,000 430,000
Deferred Liabilities 13 - -
40,000 41,616
CURRENT LIABILITIES 14 130,030 54,943
Current maturity of long term loans
Current maturity of liability against assets subject to finance lease
Short term finances-secured 363,333 295,000
Creditors, accrued and other liabilities - 202,711
Taxation 15 1,595,552 376,290
Unclaimed dividend 16 1,698,923 1,135,612
Proposed dividend 17 56,416 23,480
419 -
73,403 73,403
COMMITMENTS 3,788,046 2,106,496
TOTAL EQUITY AND LIABILITIES 18
The annexed notes from 1 to 33 form an integral part of these accounts. 5,102,798 3,477,741
Dewan Mohammad Yousuf Farooqui Dewan Abdullah Ahmed Deputy Managing

President / Chief Executive Director
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED JUNE 30, 2004
June 30, June 30,
Note 2004 2003
(Rs in '000)
GROSS SALES 19 7,685,778 5,534,746
Sales tax (949,959) (717,538)
Commission and discounts (148,531) (121,215)
19 (1,098,490) (838,753)
NET SALES 6,587,288 4,695,993
Cost of sales 19 5,881,534 4,063,378
GROSS PROFIT 705,754 632,615
Amortization of deferred cost 6 2,922 2,922
Administration and selling expenses 20 279,278 210,710
OPERATING PROFIT 423,554 418,983
OTHER INCOME 21 1,133 1,457

424,687 420,440
Financial charges 22 76,550 200,374

Workers profit participation fund 17,407 11,003
93,957 211,377
PROFIT BEFORE TAXATION 330,730 209,063
TAXATION 23 107,291 69,354
NET PROFIT FOR THE YEAR 223,439.399 139,709
UNAPPROPRIATED PROFIT BROUGHT FORWARD 110,655 44,349
PROFIT AVAILABLE FOR APPROPRIATION 334,094 184,058
APPROPRIATIONS
Proposed dividend 10% (2003: 10%) (Re. 1 per share) 73,403 73,403
Issue of Bonus Shares @ 5% (2003: NIL) 36,702
110,105 73,403
UNAPPROPRIATED PROFIT CARRIED FORWARD 223,989 110,655
BASIC EARNINGS PER SHARE (Rupees.) 24

3.04 1.90
The annexed notes from 1 to 33 form an integral part of these accounts.
Dewan Mohammad Yousuf Farooqui Dewan Abdullah Ahmed

President / Chief Executive Deputy Managing Director
Balance sheet 2006 &2005

Income statement 2006 & 2005

Balance sheet 2007 & 2006

Income statement 2007 & 2006


Afs Final Report

Diunggah oleh

Informasi Dokumen

Deskripsi Asli:

Hak Cipta

Format Tersedia

Bagikan dokumen Ini

Bagikan atau Tanam Dokumen

Opsi Berbagi

Apakah menurut Anda dokumen ini bermanfaat?

Apakah konten ini tidak pantas?

Hak Cipta:

Format Tersedia

Afs Final Report

Diunggah oleh

Hak Cipta:

Format Tersedia

ANALYSIS OF FINANCIAL STATEMENTS

DEWAN MOTORS AND HONDA ATLAS MOTORS LTD

DEWAN MOTORS AND HONDA ATLAS MOTORS LTD 2

Dewan motors and Honda atlas motors need to maintain their

DEWAN MOTORS AND HONDA ATLAS MOTORS LTD 3

Automobile Industry in Pakistan

The automotive assembling in Pakistan started in 1950 when National Motors

DEWAN MOTORS AND HONDA ATLAS MOTORS LTD 4

with imported Mitsubishi range of vehicles, Nexus Automotive with Chevrolet

There are presently 82 vehicle assemblers in the industry producing passenger

DEWAN MOTORS AND HONDA ATLAS MOTORS LTD 5

Name of Companies Investment (Rs. in million)

Indus Motor Company Ltd. 2,154 2,357 2,442 2,579

Honda Atlas Cars (Pakistan)

Sigma Motors (Pvt) Ltd. 3 13 34 115 160

Hinopak Motors Ltd. 20.8 42 44 139.6 133.4

Ghandhara Nissan Ltd. 710 708 709 1,093 1,119

Sind Engineering Ltd. 193.607 221.692 254.801 197.153 143.261

Ghandhara Industries Ltd. ~ ~ 0.042 5.485 ~

Master Motor Corporation

Millat Tractors Ltd.

Al-Ghazi Tractors Ltd.

Atlas Honda Ltd. 42.15 181.38 132.06 1,056.59 2,000.00

Dawood Yamaha Ltd. 10.37 16.007 139.654 24.58 13.332

Suzuki Motorcycles Pakistan

Pakistan Cycle Industrial

DEWAN MOTORS AND HONDA ATLAS MOTORS LTD 6

Plum Qingqi Motors Ltd. 485.9 505.3 471.5 555.2 513.5

Fateh Motors Ltd.

DEWAN MOTORS AND HONDA ATLAS MOTORS LTD 7

DEWAN FAROOQUE MOTOR COMPANY

Dewan Farooque Motors Limited acquired franchises of Hyundai Motor

DEWAN MOTORS AND HONDA ATLAS MOTORS LTD 8

The mission of Dewan Mushtaq Group is to be the finest organization, and

Our basic aim is to benefit the customers, employees and shareholders,

We will create a work environment, which motivates, recognizes, and

We will always conduct ourselves with integrity and strive to

DEWAN MOTORS AND HONDA ATLAS MOTORS LTD 9

The Group’s corporate philosophy is based on following principles laid down by

By following the above philosophy, the Group enjoys an excellent corporate

In 1947 Dewan family migrated to Pakistan and settled in Karachi. They

The fourth generation of Dewan family is now aggressively expanding and

DEWAN MOTORS AND HONDA ATLAS MOTORS LTD 10

Present Past and Future of DFML:

Dewan Mushtaq Group is one of the most prominent and reputed

Dewan Mohammad Yousuf Farooqui, the group Managing Director, is an

DEWAN MOTORS AND HONDA ATLAS MOTORS LTD 11

DEWAN FARROQ MOTORS

Ratios 2003 2004 2005 2006 2007

Current ratio 0.75 0.83 1.04 1.05 1.03

Inventory Turnover 4.98 3.04 4.21 3.13 4.06

Total Asset Turnover 1.35 1.129 1.39 1.16 1.05

Dividend Yield 0.03 0.06 0.05 0.06 0.00

DEWAN MOTORS AND HONDA ATLAS MOTORS LTD 12

DEWAN MOTORS AND HONDA ATLAS MOTORS LTD 13

The inventory turnover of the company is been observed that it is

DEWAN MOTORS AND HONDA ATLAS MOTORS LTD 14

AVERAGE COLLECTION PERIOD

average collection period

DEWAN MOTORS AND HONDA ATLAS MOTORS LTD 15

DEWAN MOTORS AND HONDA ATLAS MOTORS LTD 16

TOTAL ASSET TURNOVER

This ratio of a company is basically telling us about that efficiency of