INTRODUCTION:
RESEARCH METHODOLOGY:
The study is based on secondary data. Data pertaining behavior of
liquidity solvency and profitability position were collection from the
Balance Sheet and Profit & Loss account of ashokLeyland. The necessary
data were obtained from published annual report.
TOOLS AND TECHNIQUE:
RATIO ANALYSIS
Liquid ratio
Solvency ratio
Profitability ratio
The third chapter deals with analysis & interpretation of the ratios.
its also makes spare parts and engines for industrial and marine applications.
11500 employees are working in this company, it sells about 60,000 vehicles
medium and heavy commercial vehicle segment with a market share of 28%,
Ashok Leyland is a market leader in the bus segment. The company claims
to carry over 60 million passengers a day, more people than the entire Indian
The origin of Ashok Leyland can be traced to the urge for self-reliance
assemble Austin cars. The company was renamed and started manufacturing
mainly due to the product design legacy carried over from British Leyland.
The 5, 00,000 vehicle they have put on the road have considerably eased the
the Czech based- Avia. Called Avia Ashok Leyland Motors s.r.o., this will
According to the company, the joint venture sold 518 LCVs in Europe
despite tough economic conditions. the company will expand its product
progressing on land acquisition, and the production plans are in place. Aside
from the full expansion planned for the company, Ashok Leyland is also
paying close attention to the environment. they are one of the companies
uncover ways to make their vehicles more fuel efficient and reduce
emissions
CURRENT STATUS
The company has also maintained its profitable track record for 60
years. The annual turnover of the company was USD 1.4 billion in 2008-09.
Finland for high pressure die casting and recently, with John Deere for
construction equipment.
PARENT
Hinduja group
FACILITIES
Alwar, Rajasthan
Bhandara, Maharastra
ACHIEVEMENTS
Ashok Leyland has a near 85% market share in the Marine Diesel
Luxura
Viking BS-I - city bus
Cheetah BS-I
Cheetah BS-II
Panther
12M bus
Stag Mini
Stag CNG
CHAPTER –III
RATIO ANALYSIS
MEANING:
Ratios are relationship expressed in mathematical items between figures
CLASSIFICATION:
Current Asset
Current ratio= ______________
Current Liability
CURRENT RATIO
* Rs .in . Cr
INTERPRETATION:
The rule of thumb of current ratio is 2:1 the ratio shows a fluctuating
trend. In the year 2005-2006 the ratio was 1.11 and it was decreased from
0.90 to 0.74 in 2006-2007 and 2007-2008. In 2008-2009 the ratio was
decreased to 1.07 and 2009-2010 the ratio was again decreased to 0.94.
This ratio also termed as acid test or quick ratio. This is ascertaining
by comparing the liquid asset and current liability. It is the test of liquidity to
the ability of the current ratio .the term “liquidity” refers to the ability of a
firm to pay its short term obligation. The rule of thumb is 1:1.
Liquid Asset
Liquid ratio = _______________
Current Liability
LIQUID RATIO
*Rs .in. Cr
INTERPRETATION:
The rule of thumb of liquid ratio is 1:1. The liquid ratio in the year
2005-2006 and it was decreased from 0.32 to 0.19 in 2006-2007 and 2007-
2008. The ratio was again increased to 0.47 in 2008-2009 and 2009-2010.
The ratio was again decreased to 0.40 in the year 2005-2006 to 2009-2010.
The ratio measures the relationship between cash and near cash item
on the hand and immediately maturing obligation on the other. The
inventory and debtor are excluded from current asset to calculate this ratio.
The rule of thumb is 0.5:1.
Current Liability
* Rs. In. Cr
INTERPRETATION:
The rule of thumb of absoluter liquid ratio is 0.5:1. In the year 2005-
2006 the ratio was 0.10 and next year onwards it was decreasing trend. In
the year 2006-2007 to 2008-2009, the ratio was decreased from 0.04 to 0.02.
In 2009-2010 the ratio was decreased to 0.06.
Net Sales
Inventory turnover ratio= ____________
Inventory
* Rs. in . Cr
INTERPRETATION:
The inventory turnover ratio in the year 2005-2006 was 5.95 but it
was increased to 6.87 in 2006-2007. In 2007-2008 to 2009-2010 the ratio
was decreased from 6.51 to 4.53.
It may be of interest to see average time taken for clearing the stock.
This can be possible by calculating inventory conversion period. This period
is calculated by dividing the number of days by inventory turnover ratio.
* Rs. In. Cr
INTERPRETATION:
In the year 2005-2006 the conversion period was 61 days and it was
decreased to 56 days in 2006-2007. In 2007-2008 the days slightly increased
to 56 days. In 2008-09 and 2009-10 the days was increased from 78 to 80
days.
It established the relationship between the net credit sales and average
debtor. It indicates the number of times the collection debtor has turnover
during the year. The higher the ratio is better result with ratio is better result
with efficient management.
*Rs. In. Cr
INTERPRETATION:
In this year 2005-2006 the ratio was 12.60 times and it decreased to
14.07 in 2006-2007. In 2007-2008 the ratio again increased to 21.21 and it
was decreased to 6.43 in 2008-2009. In 2009-2010 it was slightly increased
to 7.27.
TABLE: 7
INTERPRETATION:
The collection period in the year 2005-2006 the days was 28. In 2006-
07 and 2007-2008 it was reduced from 25 days to 17 days. In 2008-2009 it
was increased to 56 days and it was decreased to 50 days in 2009-2010.
This ratio indicates the number of time the working capital is turned
over in the course of a year. . The higher ratio indicates efficient utilization
of working capital. The higher may be the result of high turnover of
inventories of receivable
Net sales
Working capital turnover ratio= ____________________
INTERPRETATION:
This ratio is also known as internal and external equality ratio .it is
mainly calculated to assess the soundness of long term financial policies and
to determine the relative’s stakes of outsiders and owners. It indicates the
relationship between debt and equity.
Shareholders fund
* Rs. In. Cr
INTERPRETATION:
The rule of thumb is 2:1. The debt equity in the year 2005-06 was
0.48 but and 2006-2007 it was decreased to 0.33 and next three year it was
slightly increased from 0.41 to 0.62 in the year 2007-2008 to 2009-2010.
The ratio shows that the long term debt is very low, so the company
can make use of the law cost of fund, and it was satisfactory.
CHART : 9
3.10. PROPRIETARY RATIO:
This ratio is also called as equity ratio or owner’s fund ratio. This ratio
points out relationship between the shareholders fund and total asset of the
company. It indicates the proportion of total asset financed by shareholders.
Shareholders fund
Proprietary ratio= _________________
Total asset.
PROPRIETARY RATIO
*Rs. in. Cr
INTERPRETATION:
The rule of thumb is above 50% of the ratio is satisfactory. The ratio
shows in the year 2005-2006 was 0.67 and it was increased to 0.74 in 2006-
2007 and 2007-2008. In 2008-2009 the ratio was decreased to 0.63 and
again decreased to 0.61 in 2009-2010.
Fixed asset
Shareholders fund
TABLE: 11
* Rs. In. Cr
INTERPRETATION:
*Rs. In. Cr
INTERPRETATION:
In the year 2005-2006 the fixed asset ratio was 1.51 and it was
decreased from 1.38 to 1.36 in 2006-2007 and 2007-2008. In 2008-2009 the
ratio was slightly increased from 1.42 to 1.64 in 2008-2009 and 20092010.
current asset
*Rs. in. Cr
INTERPRETATION:
The ratio shows fluctuating trend. In the year 2005-2006 the ratio was
1.05 and it was reduced from 0.88 to 0.68 in 2006-2007 to 2008-2009. But it
was slightly increased to 0.77.
This shows more than 50% of share holders are invested in current
asset.
CHART :13
3.14. FIXED ASSET TURNOVER RATIO:
Net sales
Fixed asset turnover ratio= ________________
*Rs. In. Cr
INTERPRETATION:
The fixed asset turnover ratio. The ratio was decreasing trend was
5.68 in the year 2005-2006. And it easy slightly reduced from 5.63 to 5.22 in
2006.2007 and 2007-2008. In 2008-2009 and 2009-2010 the ratio was again
decreased from 1.81 to 1.75.
The ratio implies the company utilizes the fixed asset to achieve the
highest sales.
CHART : 14
PROFITABILITY RATIO
Gross profit
Gross profit ratio= ________________ X 100
Net profit
*Rs. In. Cr
INTERPRETATION:
This ratio represent in percentage. The ratio shows in the year 2005-
2006, 2006-2007and 2007-2008 was 10 % and the ratio was decreased to 6%
in the year 2008-2009. In 2009-2010 the ratio again increased to 10%.
The Gross profit ratio was increasing trend, so overall ratio was
satisfactory.
CHART :15
3.16. NET PROFIT RATIO:
Net profit ratio indicate the relationship between net profit and sales
the efficiency of the manufacturing, welling and other activities of the firm
Net sales
TABLE: 16
*Rs. In. Cr
INTERPRETATION:
The ratio shows in the year 2005-2006 was 6% and the ratio was
decreased to 5% in 2006-2007 and 2007-2008. Again the ratio was
decreased to 3% in 2008-2009 and it was increased again 5% in 2009-2010.
Because the company has been increased the net sales and overall net
profit was increased trend.
CHART :16
3.17. OPERATING PROFIT RATIO:
Operating profit
Operating profit ratio = _______________ X 100
Net sales
TABLE: 17
*Rs. in. Cr
INTERPRETATION:
The ratio was 10% in the year 2005-2006 and slightly decreased to
9% in 2006-2007. In 2007-2008 again reached 10% and it was decreased to
7% in 2008-2009. In 2009-2010 the ratio was increased to 10%.
The overall operating profit and sales are increased and reduce the
expenses.
CHART :17
3.18. SELLING AND ADMINISTRATION EXPENSES:
Net sales
TABLE: 18
*Rs. in. Cr
INTERPRETATION:
FINDINGS:
The current ratio and absolute ratio was maintained lower cash
than ideal ratio. So, the company cab take step to increase the cash
position to meet its expenses.
The company is allowed credit period for 50 days. The debt
collection period can be reduced with in 30days.
The company should increase the long term debt.
To reduce the investor cost of the company must follow average
inventory system,
Otherwise, the company was making investment in current asset
and reducing cost of sales at the same time increasing sales and
profit was good in earlier days.
CONCLUSION: