Statements
Pak Suzuki Motors Company
SUBMITTED TO: SIR AHMED ARIF
SUBMITTED BY:
NIMRA
(2010-BPA-020)
ZAHRA RAUF
(2010-BPA-030)
SUBMISSION DATE:
24TH JANUARY 2014
EXECUTIVE SUMMARY
This project is about the Financial Analysis of Pak Suzuki Motor Company. During the
project, we have done the detailed study of Pak Suzuki Motor Company Limited like
their company financial statements, mission, and vision and industry values. With the
help of profitability, solvency, liquidity ratios and vertical, horizontal analysis, we have
conducted the analysis. In addition, the study about environmental policy and the
Automobiles industry of Pakistan .Then we had prepare financial Analysis of Pak Suzuki
Motors, we have learned that they are doing well in the Pakistani market and are leading
market shareholder. They are producing Cars at affordable prices for the low income to
middle-income people. However, they are unable to compete with Corolla and Honda in
Luxury and semi-luxury cars. They are making its space in marketing slowly but
continuously. The financial improvement of the company is gradually but continuously
increasing. The company is increasing its investments and current investment and the
creditor loan issuers have a high trust over lending loans to the company. The company
will raise its position very effectively and efficiently.
Content
1. Introduction................................................................................................................................5
1.1 History..................................................................................................................................5
1.2 Board of Directors................................................................................................................6
1.3 Audit committee....................................................................................................................7
1.4
1.5
LEGAL ADVISORS:......................................................................................................7
1. Introduction
1.1 History
Pak Suzuki Motor Company Limited (PSMCL) is a public limited company and
its shares quoted on Karachi & Lahore Stock Exchanges in Pakistan with code PSMC.
With the terms of a joint venture, agreement between Pakistan Automobile Corporation
Limited (representing Government of Pakistan) and Suzuki Motor Corporation (SMC)
Japan the Company was formulate in August 1983. PMSC started its production in
January 1984 with the objective of progressive manufacturing, assembling and marketing
of automobiles in Pakistan. By early 1990, on completion of first phase of this plant, inhouse assembly of all the Suzuki engines started. In 1992, the plant was completed and
production of the Margalla Car commenced. Under the Governments privatization
policy, PSMC was privatize and placed under Japanese management by September 1992.
At the time of privatization, SMC increased its equity from 25% to 40%. Subsequently,
SMC progressively increased its equity to 73.09% by purchasing remaining shares from
PACO (pak Suzuki Annual Report, 2012).
After privatization PSMC expand its existing plant capacity to 50000 P.A and was
complete in July 1994. Because of economic recession, the capacity remains underutilized until 2002. PSMC increases their capacity in phases after realizing growth in
demand as follows (pak Suzuki Annual Report, 2012).
PSMC completed its first phase in January 2005 by enhancing their vehicles
to 120,000 vehicles.
Its third phase was completed on 6th February 2007, by enhancing their capacity
to150, 000 vehicles and Prime Minister of Pakistan, Mr. Shaukat Aziz,
inaugurated this.
PSMC held 41% and 43% shares in SMPL respectively. PSMC issued and allot its
ordinary shares (1,233,300) of Rs.10/- each to the qualifying shareholders of
SMPL on the date of final book closure i.e. 29th October 2007 the shares trade
ceased as well. By July 2011, PSMC start effectively, operationalizes its setup.
Hidekazu
Terada Director
Chief Financial
Officer & Company
Secretary Abdul
Hamid Bhombal
Mumtaz
Ahmed
Shaikh Director
Jamil
Ahmed Director
Wazir Ali
Khoja Director
Kenichi
Ayukawa
- Director
Obaid Rashid
Zuberi Secretary
Abdul Hamid
Bhombal - Secretary
1.7 Benchmarks:
1.7.1 For the year 2002:
Introduced New BALENO also CNG version of BALENO, ALTO and CULTUS
launched. The milestone of 250,000th vehicle from the new plant crossed.
1.7.2 For the year 2003:
Suzuki Motorcycles Pakistan Ltd. merged with Pak Suzuki Motor Company.
1.7.7 For the year 2009:
The 1,000,000th vehicle rolled out from the Pak Suzuki Plant. Cargo Van was
introduced.
2. External audit firm (Ernst & Young Ford Rhodes Sidat Hyder)
2.1 History:
Its roots go back to the 19th century, contributions of many people around the
world; Founder of this company was Arthur young & alwin C Ernst. In 1906, he formed
an accounting firm, Arthur Young & Company, with his brother Stanley. They both were
innovator and Both Arthur Young, Ernst initiates an idea that accounting information can
be used to make decisions of businesses and can make a difference to clients
organizations. He inspired people to provide better service to their clients. Young also
positioned himself as a business advisor.
In 1920, Ernst & Ernsts operating philosophy stated, The success of Ernst &
Ernst depends wholly upon the character, ability and industry of the men and women who
make up the organization. Young supported the development of professionals. In 1924,
they allied with prominent British firms: Young with Broads Paterson & Co and Ernst
with Whiney Smith & Whiney. They associate with each other and start providing
services to clients. The new organization quickly positioned itself on the leading edge of
rapid globalization, new business technologies and continuous business change. EY a
global organization of 175,000 people built a better-globalized working world.
Our Americas Area comprises 11 Regions and nearly 45,000 people. The
workplace culture of the Americas Area is regularly recognized by organizations such as
the Great Place to Work Institute and Universe, which frequently place EY near the top of
their lists for countries across the region.
2.2.2 Europe, Middle East, India and Africa (EMEIA):
Our EMEIA Area brings together more than 73,000 people from 12 Regions
across Europe, the Middle East, India and Africa. Creating EMEIA cemented our
reputation as the most globally integrated organization in our field.
2.2.3 Asia-Pacific:
Asia-Pacific brings together more than 27,000 people across five Regions. We
believe that much of our clients and our own future growth will come from the region
and Asia-Pacific Area will enable us to better serve clients looking to invest in or grow
across the region.
2.2.4 Japan:
Our Japan Area employs more than 6,500 professionals and works with many of
Japans best-known companies across the financial, manufacturing and electronics
sectors. It also acts as the hub for our Japan Business Services network nearly 350
Japanese-speaking professionals based in 60 cities around the globe who serve Japanese
clients operating overseas.
3. Automobile industry:
3.1 Introduction:
The automobile industry of Pakistan is fastest growing industry of Pakistan. It is
estimated that the industry is grown up by 32% in 2009-2010 and contributed US$ 3.6
billion to the GDP of Pakistan (muhammad Emmad, 2011).
The sector is currently employing 19200 people of Pakistan. During year 2011
with the increase of 8.7 % 221147 vehicles were produced while the sales of new vehicle
were 215732 (muhammad Emmad, 2011).
High ends cars or 1300cc dominated the Pakistani famous yet again as Toyota
corolla managed to be most famous car among people. Pak Suzuki has a monopoly on
small cars production and is biggest local dealer having a market share of 53%.
(muhammad Emmad, 2011).
A few reasons affect the Pakistani automobile industry significantly, which are as
follows:
3.2 Backgrounds:
Automobile industry in Pakistan started in 1950 and has gone through different
phases; Pakistan was the First Islamic Country in the world, which manufactured its own:
A 4 Wheel Drive Jeep of its own in late 60's called NAYA DAUR in collaboration
with WILLIS jeep.
Motorcycles in early 70's with the collaboration of JAVA motorcycle
Prototype Diesel Engines by the Lahore based company called BECO (Battala
Engineering Company).
A Motor Car of its own in early 70's with the collaboration of SKODA Motors and
named SKOPAK.
After effects of 1971 war lead to an economic shock, All the industries were
Nationalized and by then the production of NAYA DAUR jeeps, motorcycles was stopped
as their production in the country was not cost effective by then. The BECO was
nationalized and converted into PECO (Pakistan Engineering Company) which instead of
making Diesel Engines was put on manufacturing PECO Bicycles. In 1980s another
Pakistani company tried to break into Pakistan's Automobile Market, which is dominated
by foreign companies, and has no room for Home grown talent. a roadside mechanic, late
Khalil-ur-Rahman, in the early eighties was said to be successful but lacked any support
from any quarter and instead it was reported that the government then introduced a policy
of concessionary rate on CBU of Suzuki pickups, same capacity as the one that was
conceived locally and to put the last nail in the coffin the late mechanic though he would
get attention in the capital and thus shifted his garage there but could not succeed.
Later in 2005, a Pakistani company called "TMC" manufactured an auto-rickshaw
alternative called TMC Alif. It was priced between 150-200,000 PRs at the time and had
a single cylinder, 200ccEngine. The concept was very good, but rigid competition by
existing foreign companies and lack of government support killed the project. Industry
operates under franchise and technical cooperation union with Japan, Europe, Korea, and
China. There are more than 800 vendors in the country with a total investment of over 8
billion PRs. They are engaged in the manufacturing of original components for the
assembly operation under the deletion program as well as producing reconditioned and
original components for sale in the local market.
They manufacture and supply the local car assemblers with auto parts such as pistons,
engine valves, gaskets, camshafts, shock-absorbers, struts, steering mechanism, cylinder
head, wheel hubs, brake drums, wheels, bumpers, instruments and instrument panels,
gears of all types, radiators, cylinder liners, blinkers, lights, doors and door locks as well
as auto air conditioners.
Pak Suzuki
Indus Motor
Honda Atlas etc.
2012
58,531,137
56,185,397
2,345,740
356,960
860,753
493,985
1,622,012
11,100
1,610,912
111,152
1,499,760
521,738
2011
52,718,563
50,849,153
1,869,410
263,651
735,935
620,390
1,490,214
17,845
1,472,369
107,072
1,365,297
570,876
2010
42,642,762
41,638,975
1,003,787
197,361
636,332
575,078
745,172
21,349
723,823
55,808
668,015
456,872
2009
26,234,061
25,664,762
569,299
214,550
495,200
619,572
479,121
12,564
466,557
38,714
427,843
172,624
2008
39,669,730
39,079,124
590,606
309,458
504,617
1,342,913
1,119,444
53,470
1,065,974
73,798
992,176
367,391
N.I
Unrealized gain/loss on derivative financial
978,022
794,421
211,143
255,219
624,785
329,353
648,669
11.88
41,847
836,268
9.65
2,322
213,465
2.56
255,219
3.10
624,785
7.59
2011
0.328937
0.301185
2.16524
-0.14802
0.458403
-0.53803
0.331209
-0.66626
0.381243
0.450879
0.376063
0.553865
0.271511
0.338489
0.27141
2010
0.074945
0.065504
0.699588
-0.36224
0.26102
-0.57177
-0.33434
-0.60073
-0.32097
-0.24377
-0.32672
0.243558
-0.66205
-0.65834
-0.66271
2009
-0.33869
-0.34326
-0.03608
-0.30669
-0.01866
-0.53864
-0.572
-0.76503
-0.56232
-0.47541
-0.56878
-0.53014
-0.59151
-0.59151
-0.59157
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
EBIT
0.6
0.4
0.2
Axis Title
0
2012
-0.2
2011
2010
2009
2008
2010
2009
2008
-0.4
-0.6
-0.8
EBT
0.6
0.4
0.2
Axis Title
0
2012
-0.2
-0.4
-0.6
-0.8
2011
N.I
0.8
0.6
0.4
0.2
Axis Title
0
2012
-0.2
2011
2010
2009
2008
-0.4
-0.6
-0.8
2011
6304.027
-6080.49
223.542
-31.5271
-88.0023
74.18555
-2.13389
-12.8036
163.2607
68.26472
100
2010
19976.47
-19506.2
470.2349
-92.4559
-298.097
269.4015
-10.0012
-26.1439
312.9389
214.0267
100
2009
10279.04
-10056
223.0629
-84.0651
-194.029
242.7609
-4.92283
-15.1689
167.6376
67.6376
100
2008
6349.341
6254.811
94.52948
-49.5303
-80.7665
214.94
8.558144
11.81174
158.8028
58.80279
100
150
100
50
0
2012
2011
2010
2009
2008
2011
2010
2009
2008
1139480
64467
12922396
322677
2917186
63916
8748031
240719
3545621
41749
6879729
376508
2,499,142
94468
7,732,518
286,697
353077
195491
_
303951
216586
_
251254
134963
_
205680
226388
_
340,951
128,080
29,432
prepayments
Accrued markup-income
Other receivables
Sales tax and excise duty adjustable
38918
5664
169622
970176
83271
6145
163731
1023399
43466
8652
107779
389453
31738
7837
76685
255609
51,480
_
98,667
111,754
2676742
17060451
2362674
18608777
1407713
14313132
780089
12427633
434,423
11,807,612
for sale
Non-Current Assets
Long term investments
Long-term loans
Long-term deposits, prepayments and
5463
4545
1409
4190
1523
5413
1114
4449
3162
4,449
11,078
receivables
Long-term installments sales
63451
20487
28499
34609
24,683
receivables
Deferred taxation
162650
_
232055
185829
_
212029
169864
_
204890
153478
_
195698
146,077
_
186,287
3738867
312028
4050895
21348864
4200317
303777
4504094
23324900
4226582
505760
4732342
19250364
4684671
347732
5032403
17655734
4,578,436
383,808
4,962,244
16,956,143
_
2694625
1143746
_
1486406
84728
_
3211174
3065406
75000
1436833
81197
_
3080351
327031
50000
1067839
88753
1512
1853034
441781
80000
723554
86778
sales tax
Total Current Liabilities
Deferred taxation
Equity
Share Capital and Reserves
Authorized shares capital
Issued, subscribed and paid-up share
138475
5547980
_
138475
8008085
_
138475
4752449
_
138475
3325134
5000
143,286
2,657,462
146,000
1500000
1500000
1500000
1500000
1,500,000
capital
Reserves
Total Share and Reserves
Total Equity and Liabilities
822999
14977885
15800884
21348864
822999
14493816
15316815
23324900
822999
13674916
14497915
19250364
822999
13502601
14325600
17655734
823,000
13,329,681
14,152,681
16,956,143
Fixed Assets
Property, Plant and equipment
Intangible assets
Total Non-Current Assets
Total Assets
Liabilities + Equity
Current Liabilities
Accrued markup
Trade and other payables
Advances
Short-term borrowing
Deposits against display of vehicles
Security deposits
Provisions for custom duties and
1,315,584
371,596
742,718
84278
2011
2010
2009
2008
4.885251
0.276387
55.40172
1.383401
15.15393
0.332025
45.44346
1.250465
20.08198
0.236461
38.96598
2.132497
14.73886
0.557131
45.60305
1.690815
sales receivables
Loans, advances and others
Interest accrued
Trade deposits and short-term prepayments
Accrued markup-income
Other receivables
Sales tax and excise duty adjustable
Income tax refundable-net
Total current assets
Non-current assets classified as held for sale
Non-current assets
Long term investments
Long-term loans
Long-term deposits, prepayments and
1.653844
0.915697
_
0.182295
0.026531
0.794525
4.544392
12.5381
79.91269
0.025589
_
0.021289
0.0066
1.303118
0.928561
_
0.357005
0.026345
0.701958
4.387582
10.12941
79.78074
_
_
0.017964
0.00653
1.305191
0.701093
_
0.225793
0.044945
0.55988
2.023094
7.312657
74.35253
_
_
0.028119
0.005787
1.164947
1.282235
_
0.17976
0.044388
0.434335
1.447739
4.418332
70.38865
_
_
0.025199
0.017909
2.010782
0.75536
0.173577
0.303607
receivables
Long-term installments sales receivables
Deferred taxation
Total non-current assets
Fixed assets
Property, Plant and equipment
Intangible assets
Total fixed assets
Total assets
Liabilities +equity
0.29721
0.761867
_
1.086967
_
17.51319
1.461567
20.06172
100
0.087833
0.796698
_
0.909024
_
18.00787
1.302372
19.31024
100
0.148044
0.882394
_
1.064344
_
21.95585
2.627275
24.58313
100
0.196021
0.869281
_
1.10841
_
26.53343
1.969513
28.50294
100
0.14557
0.861499
_
1.09864
_
27.00164
2.263534
29.26517
100
0.581895
0.659077
2.562039
69.63619
_
_
0.026238
0.065333
Current liabilities
Accrued markup
Trade and other payables
Advances
Short-term borrowing
Deposits against display of vehicles
Security deposits
Provisions for custom duties and sales tax
Total non-current liabilities
Deferred taxation
Equity
Share capital and reserves
Authorized shares capital
Issued, subscribed and paid-up share capital
Reserves
Total Share and reserves
Total equity and liabilities
_
_
12.62187
5.357409
_
_
16.00152
1.69883
0.259735
5.547111
0.461046
0.719337
24.68758
_
0.008564
10.49537
2.502196
0.453111
4.098125
0.4915
0.784306
18.83317
0.028319
_
_
7.758746
2.191513
6.962459
0.396874
0.648629
25.98724
_
_
13.76715
13.1422
0.321545
6.160082
0.348113
0.593679
34.33277
3.855001
70.15776
74.01276
100
3.528414
62.13881
65.66723
100
4.275239
71.03718
75.31242
100
4.66137
76.47714
81.13851
100
4.853698
78.6127
83.46639
100
2012
2011
2010
2009
2008
4.38023
0.497035
0.845039
15.67256
0.861045
2012
2011
2010
2009
2008
15
10
5
0
2012
2011
2010
2009
2008
20
15
10
5
0
2012
2011
2010
2009
2008
40
30
20
10
0
2012
2011
2010
2009
2008
BALANCE SHEET
HORIZONTAL ANALYSIS USING 2008 AS BASE YEAR
Descriptions
2012
2011
2010
2009
2008
-43.2833
-54.4052
16.7275
41.87353
-12.039
-31.7578
-32.3411
-55.8062
Stock-in-trade
36.5945
67.11757
13.13302
-11.0286
Trade debts
Current portion of long-term installments
105.1092
12.54983
-16.0371
31.3261
sales receivables
3.556523
-10.852
-26.3079
-39.6746
52.63195
69.10212
5.373985
76.75515
Assets
Interest accrued
Trade deposits and short-term prepayments
0
-24.4017
61.75408
-15.5672
-38.3489
Other receivables
71.91361
65.94302
9.235104
-22.279
768.1354
815.7605
248.4913
128.7247
516.1603
443.8649
224.042
79.56899
44.48689
57.59983
21.21953
5.251028
2.157788
-5.82153
21.66779
Long-term loans
Long-term deposits, prepayments and
-87.2811
-86.252
-89.944
-71.4569
receivables
157.0636
-16.9996
15.46003
40.21391
11.34539
27.21305
16.28388
5.066506
24.56854
13.81846
9.986204
5.051882
-18.3375
-8.25869
-7.68503
2.320334
Intangible assets
-18.7021
-20.8518
31.77422
-9.39949
-18.3657
-9.23272
-4.63302
1.413856
Total assets
25.90637
37.56018
13.53032
4.125885
104.8235
144.0873
134.1432
40.85258
Advances
207.7929
724.9298
-11.9929
18.88745
Accrued markup-income
Deferred taxation
Total non-current assets
Fixed assets
Liabilities + equity
Current liabilities
Accrued markup
Short-term borrowing
100.1306
93.45606
43.77449
-2.58025
Security deposits
0.533947
-3.65576
5.309808
2.966373
-3.35762
-3.35762
-3.35762
-3.35762
108.7699
201.3433
78.83413
25.12442
-96.5753
Deferred taxation
Equity
Share capital and reserves
Authorized shares capital
-0.00012
-0.00012
-0.00012
-0.00012
Reserves
12.36492
8.733405
2.589972
1.297255
Total equity
11.64587
8.225537
2.439354
1.221811
25.90637
37.56018
13.53032
4.125885
30
20
10
0
2012
2011
2010
2009
2008
15
10
5
0
2012
2011
2010
2009
2008
2011
-5
Axis Title
-10
-15
-20
Figure 17: Changes in Total Fixed Assets from 2008
2010
2009
2008
200
150
Axis Title
100
50
0
2012
2011
2010
2009
2008
6
4
2
0
2012
2011
2010
2009
2008
2010
2009
2008
OPERATING ACTIVITIES
1,568,44
Cash generated from operations
701,849
2,653,87
1,439,74
255,178
-
948,561
4
-
1,296,88
1,969,42
2,151,36
165,729
-259,751
FINANCING ACTIVITIES
Dividends paid
net cash used in financing
activities
-164,148
-439,469
421,646
-841,184
-423,418
-41,350
-41,060
-81,757
-410,132
1,777,70
1,046,47
2,984,91
cash equivalents
cash/cash equivalents at the
277950
1,139,48
6
2,917,18
628,435
3,545,6
9
2,499,14
0
5,484,05
0
1,417,43
6
1,139,48
21
2,917,1
2
3,545,62
2
2,499,14
the year
86
2010
2009
2008
DESCRIPTION
CASH FLOWS FROM
OPERATING ACTIVITIES
Cash generated from operations
Net cash generated from / (used
564.2893
-14.3543
-150.94
-
253.6005
48.23408
252.5091
72.95284
4.67419
78.80385
-39.2294
-80.3823
14.18529
-93.4524
24.72113
2.326031
-7.81258
13.74018
activities
Net increase or decrease in cash/
-59.0567
cash equivalents
cash/cash equivalents at the
100
100
100
-
100
100
409.9586
-164.098
564.199
-
238.8143
-183.726
the year
509.9586
-64.0983
464.199
338.8143
-83.7259
Ratios:
2012
2011
2010
2009
2008
1.057762
1.133601
0.922533
1.066935
0.907832
232.7397
242.25
291.8309
208.1763
335.1616
2.078788
1.879815
1.578916
2.439709
0.907832
days
Day sales in inventory
68.61571
92.75817
76.68372
97.84237
72.22191
Inventory turnover
3.300482
2.939867
3.41642
2.388311
3.171099
110.5899
124.1553
106.837
152.8277
115.1021
Work in capital
11512471
10600692
9560683
9102499
9150150
Current ratio
3.075074
2.323749
3.011738
3.737483
4.443191
1.171283
0.71008
1.170996
1.668475
1.533453
4.880394
4.796777
4.35523
2.819529
4.270872
0.6
0.4
0.2
0
2012
2011
2010
2009
2008
200
150
100
50
0
2012
2011
2010
2009
2008
1.5
1
0.5
0
2012
2011
2010
2009
2008
60
40
20
0
2012
2011
2010
2009
2008
INVENTORY TURNOVER
4
3.5
3
2.5
Axis Title
2
1.5
1
0.5
0
2012
2011
2010
2009
2008
80
60
40
20
0
2012
2011
2010
2009
2008
Work in Capital
14000000
12000000
10000000
8000000
Axis Title
6000000
4000000
2000000
0
2012
2011
2010
2009
2008
CURRENT RATIO
Axis Title
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
2012
2011
2010
2009
2008
2009
2008
0.8
0.6
0.4
0.2
0
2012
2011
2010
3
2
1
0
2012
2011
2010
2009
2008
Ratios:
Times interest earned
Debt ratio %
Debt to equity ratio
Debt to tangible net worth
2012
146.1272
25.98724
0.061897
10.85772
2011
83.50877
34.33277
0.051866
15.42324
2010
34.9043
24.68758
0.014564
14.98066
2009
38.13443
18.83317
0.017816
6.996349
2008
20.93593
15.67256
0.044146
6.050798
80
60
40
20
0
2012
2011
2010
2009
2008
2009
2008
DEBT RATIO %
40
35
30
25
Axis Title
20
15
10
5
0
2012
2011
2010
8
6
4
2
0
2012
2011
2010
2009
2008
Ratios:
Net profit margin
Total assets turn over
Return on assets
Due point return on assets
Operating income margin
Return on operating assets
Operating assets turn over
Sales to fixed assets
Return on investment
2012
0.017407
2.631775
0.045811
0.061522
0.028869
0.095074
2.131073
13.86987
0.094916
2011
0.015623
2.180037
0.034059
0.057838
0.029307
0.080081
1.973548
11.28954
0.089137
2010
0.005071
2.163023
0.010968
0.036302
0.017896
0.052062
2.028503
8.798809
0.046077
2009
0.009944
1.453622
0.014455
0.026137
0.018668
0.038553
1.400041
5.099902
0.029866
2008
0.015988
2.304718
0.036847
0.05621
0.028646
0.094807
1.96226
7.875293
0.070105
0.01
0.01
0.01
0
0
0
2012
2011
2010
2009
2008
1.5
1
0.5
0
2012
2011
2010
2009
2008
RETURN ON ASSETS
Axis Title
0.05
0.05
0.04
0.04
0.03
0.03
0.02
0.02
0.01
0.01
0
2012
2011
2010
2009
2008
0.03
0.02
0.01
0
2012
2011
2010
2009
2008
0.02
0.01
0.01
0
2012
2011
2010
2009
2008
0.05
0.04
0.03
0.02
0.01
0
2012
2011
2010
2009
2008
8
6
4
2
0
2012
2011
2010
2009
2008
return on investment
0.1
0.09
0.08
0.07
0.06
Axis Title
0.05
0.04
0.03
0.02
0.01
0
2012
2011
2010
2009
2008
5. Comprehensive analysis:
We have reviewed the income statement, cash flow statement, and balance sheet
of Pak Suzuki Motor Company Limited for the five years 2012, 2011, 2010, 2009 and
2008 respectively. As our review, their Management is responsible for the preparation and
presentation of this financial information with following the accounting standards
reporting system. Pak Suzuki Company is a vehicle production and selling industry for
which it should have strong liquidity as well as high range of fixed assets like machinery,
land, equipment, franchises etc.
The horizontal analysis based on following 2008 as base year for all other years.
The total non-current assets are increased 44.48%, 57.6%, 21.22, 5.25% from the year
2008. the portions of non-current assets showed following trends as the cash balance and
bank balance decreased by the 43.28 % and 54.41% in the years 2012 and 2011 while in
other years increase of 16.78 and 41.87 showed that 2009 and 2010 was less liquid then
those of 2012 and 2011. The store and the spare and loose tools of the company had
started decrease from the 2008 may be due to the having more spare parts sales. The
spare and loose tools are 12.04%, 31.76%, 32.34% and 55.81% less than in 2008.
Receivables are increasing yearly then from the 2008 which means the company
made majors sales on credit to company but it is not good for the company that it bare
much risk of debtors. The long-term investment of the company during the years
remained unusual as it remained constant in the 2009 and then in the year 2010, it
showed high increase of 21.67% then it showed decrease of 5.82% than year 2008, in
year 2012 again investments had increase of 2.16 than of 2008. The fixed assets overall
decreased 18.37%, 9.23%, 4.63%, in which the property plants and equipment also the
intangible assets both decreased 18.7% but in year 2011 intangibles decrease 16%, more
than property plant and equipment other companies have trust in company for issuing
loans supplies on credit as the liabilities increased 108.77%, 201.34%, 78.83%, and
25.12%.
5.1.2 Vertical Analysis:
During the year 2012, 2011, 2010, 2009, 2008 the current assets were 79.91%,
79.78%, 74.35%, 70.38%, and 69.63% respectively of the total assets. The company fully
understand their need to have current assets more the fixed assets their major part of
investment are related to the current assets and the total current assets yearly increases as
the company increased investments. From year, 2012 the portions of the current assets are
increased approximately 45% percent, which shows a good investment by investor in
company. In addition, the company has opened some new franchises. In current assets the
major part was of stock in trade, which is good sign for that, the company is investing its
cash and utilizing it to earn more. During the year 2011, the stock in trade was 55 % of
total current assets but in 2012, 2010 and 2008 was 49 %, 45%, and 45% but in year 2009
the major stock was reduced to 38% and liquidity position of company was not as good
as it was in 2011.
During year 2012, 2011, 2010, 2009, 2008 the company had 6.6 %, 4.88%,
15.15%, 20.08%, and 14.73% cash and bank balances which shows in year 2011 and
2012 the company was investing its major part in stock in trade. The company had
minimum ratio of receivables as total part of current assets which shows company have
great collection powers of debt. The company during year 2012, 2011, 2010, 2009, and
2008 had 1.09%, 0.91%, 1.06%, 1.11%, and 1.10% of non-current assets as portion of
total assets. The major part of the non-current assets are long-term installments sales
receivables and then of long-term deposits, prepayments and long-term receivables. The
second major part of investments during were of the fixed assets which were counted to
be 20.06 %, 19.31%, 24.58%, 28.50%, and 29.27 respectively. During year, 2010
company sold its some property plant and equipment from 26.53% to 21.95% then in
2011,company sold more and had decreased to 18.08 % now the property plant and
equipment are 17.51% of fixed assets.
Total non-current Liabilities of years 2012, 2011, 2010, 2009, 2008 are 25.99%,
34.33%, 24.69%, 18.83%, and 15.67% respectively. If we see the liability portions the
major parts of the liability are trade payables which are 12.62%, 13.77%, 16.00%,
10.50%, and 7.76% percent while the years this shows that the company have less
liabilities and randomly payoff its liabilities. The sales are increasing yearly like for years
2012, 2011, 2010, 2009, 2008 sales were 9023.27%, 6304.03%, 19976.47%, 10279.04%,
and
6349.34% of the profit, which is showing high productivity. The sales of company
The sales as on the receivables are 1.05, 1.13, 0.92, 1.07, 0.91 which shows that a
minimum part of the sales are made on receivables Since it is profitable to convert sales
into cash quickly. Lower values of Days Sales receivables are favorable however, it is
more meaningful to create monthly or weekly trend. Any significant increase in the trend
is unfavorable and indicates inefficiency in credit sales collection. The collection periods
of the receivables are as 232.73, 242.25, 291.83, 208.18, and 335.16 for the respective
years 2012, 2011, 2010, 2009, and 2008. The high value of collection period is favorable
and shows no indicate inefficiency in collecting outstanding sales. This Increase in
accounts receivable turnover overtime generally indicates improvement in the process of
cash collection on credit sales but very high values of this ratio may not be favorable, if
achieved by extremely strict credit terms since such policies may repel potential buyers.
After realizing this company had making effort to lessen them as it shows a 100
number decrease in collection period in the 2012 than in the year 2008. The day sales in
inventory show figures of 68.62, 92.75, 76.68, 97.84, and 72.22, which mostly means that
lower values of are generally favorable and higher values, are unfavorable for Business
which sell perishable goods such as fruits and vegetables must have very low values of
days' sales in inventory. Whereas companies selling non-perishable goods such as cars
have high values of days of inventory like the Pak Suzuki shows a higher values of the
inventory.
The current ratio of company during years were 3.08, 2.32, 3.01, 3.74, and 4.44
and the quick ratio are as 1.17, 0.71, 1.17, 1.67, 1.53, these figures shows that the most
liquid assets of a PSMC are equal to its total debts and the PSMC will just manage to pay
all its debts by using its quick assets. As showing the value in 2008 quick ratio which is
quite high, say 4.44, is not favorable to a company this means that the company has idle
current assets and is inefficient. The current ratios of the company means the company
will be able to pay all its current liabilities in immediate short term and creditors usually
prefer high cash ratio. The company has its major part of investments working and
increases yearly than 2008.
5.2.2 Long-Term Debt Paying ability Ratios Analysis:
Times interest earned during the years 2012, 2011, 2010, 2009 and 2008 was
146.13, 83.51, 34.90, 38.13, 20.94, which shows greater ability of a business to repay its
interest and debt. With the year, the ability to repay its loans increases which attract
lending companies. Furthermore increase in values of debt ratio in future will mean
higher risk in operation since the business would find it difficult to obtain loans for new
projects claim debt ratio 25.98, 34.33, 24.68, 18.83, and 15.67 respectively mean that this
much assets are claimed but liabilities. Debts to equity ratio are 0.06, 0.05, 0.01, 0.02,
and 0.04 means a favorable efficient ratio indicating less risk. Debt to tangible net worth
shows higher debt included in the capital employed means higher risk of insolvency
10.85, 15.42, 14.98, 6.99, 6.05 as for years 2012, 2011, 2010, 2009, and 2008.
5.2.3 Profitability Ratios analysis:
Net profit margin of 0.02, 0.02, 0.01, 0.01, and 0.02 shows a constant 20% return
on sales however company is not earning efficient but it is not going in loss it is
maintaining its productivity. Return on assets for the respective years are 0.045811,
0.034059, 0.010968, 0.014455, and 0.036847 and Return on operating assets 0.095074,
0.080081, 0.052062, 0.038553, 0.094807 these lower turnover ratio tells that the
company is not using its assets optimally. Due point return on assets 0.062, 0.058, 0.036,
0.026, 0.056 provides that company's strength lies and where there is a room for
improvement. Operating income margin 0.03, 0.03, 0.02, 0.02, 0.03 a higher value of
operating margin ratio is favorable and indicates that more proportion of revenue is going
to operating income. An increase in operating margin ratio overtime means that the
profitability is improving. Lower value of return on investments indicates lower
profitability but company has fluctuating returns like 0.094916, 0.089137, 0.046077,
0.029866, and 0.070105.
Recommendations:
The company should work on its productivity capacity; it should try to generate
more from its operating assets.
The operating income will make a significant change in their financial positions.
The company is decreasing its investments and it should try to invest its idle cash in
investing activities.
Company should maintain its localization in order to reduce the cost of products
and keep the prices competitive besides saving of foreign exchange as per great
fluctuations in Currency of Pakistan.
Moreover, company has good financial positions and great impact on lender. It
should try to maintain debt ratio figure to maintain the lenders trust on it is as the debt
ratio is increasing gradually.
Table of figures:
Figure 1: Board of Directors................................................................................................6
Figure 2: Audit committee...................................................................................................7
Figure 3: Human resource department................................................................................7
Figure 4: LEGAL ADVISORS............................................................................................7
Figure 5: Major Automobiles in Pakistan .........................................................................14
Figure 6: EBIT Horizontal Analysis..................................................................................16
Figure 7: EBT Horizontal Analysis...................................................................................17
Figure 8: Net Income horizontal Analysis.........................................................................17
Figure 9: Profit Before Taxation........................................................................................18
Figure 10: Total Current Assets as % of Total Assets........................................................23
Figure 11: Total Non-Current Assets as % of total Assets.................................................23
Figure 12: Total Fixed Assets as % of Total Assets...........................................................24
Figure 13: Total Non-Current Liabilities as % of Total Assets..........................................24
Figure 14: Total Equity and Reserves as % of Total Assets...............................................25
Figure 15: Changes in Total Current Assets from 2008.....................................................27
Figure 16: Changes in Total Non-Current Assets from 2008............................................27
Figure 17: Changes in Total Fixed Assets from 2008........................................................28
Figure 18: Changes in Total Non-Current Liabilities from 2008......................................28
Figure 19 Changes in Total Equity from 2008..................................................................29
Figure 20: Day Sales in Receivables.................................................................................32
Figure 21: Account Receivables Turnover........................................................................32
Figure 22: Account Receivables Turnover in Days...........................................................33
Figure 23: Day Sales in Inventory.....................................................................................33
Figure 24: Inventory Turnover...........................................................................................34
Figure 25: Inventory Turn Over in Days...........................................................................34
Figure 26: Work in Capital................................................................................................35
Figure 27: Current Ratio....................................................................................................35
Figure 28: Acid Test Ratio.................................................................................................36
Figure 29: Sales to Work In Capital...................................................................................36
Table of Tables
Table 1: Income Statement................................................................................................15
Table 2: income statement horizontal analysis..................................................................15
Table 3: income statement Vertical Analysis.....................................................................18
Table 4: Balance Sheet.......................................................................................................19
Table 5: Balance Sheet Vertical Analysis...........................................................................21
Table 6: Balance Sheet Horizontal Analysis Using 2008 As Base Year............................25
Table 7: Cash flow Statement............................................................................................29
Table 8: Cash flow Statement vertical analysis.................................................................30
Table 9: Liquidity Ratios...................................................................................................31
Table 10: Long-Term Debt Paying ability Ratios..............................................................36
Table 11: Profitability Ratios.............................................................................................38
References:
pak Suzuki Annual Report. (2012).
pak Suzuki Annual Report. (2011).
pak Suzuki Annual Report. (2010)
pak Suzuki Annual Report. (2009)
pak Suzuki Annual Report. (2008)
www.paksuzuki.com
muhammad Emmad, N. B. (2011, dec 20). where do we see pak suzuki in the future.