FINANCIAL STATEMENTS ANALYSIS

Honda Atlas Cars Pakistan

Group Leader

Muhammad Yasir Riaz (2010-043)

Group Member

Muhamamd Zeeshan Malik (2010-064)

Group Member

Bilal Saeed (2010-027)

IBA PUNJAB UNIVERYSITY

9/5/2011

Submitted to: Professor Shahid Mehmood

Financial Statement Analysis; Honda Atlas Cars Pakistan

Muhammad Yasir Riaz (2010-043) Group Leader

Submitted To: Professor Shahid Mehmood

Contents
HONDA ATLAS CARS PAKISTAN ......................................................................................................................................... 3
Stock Exchange ............................................................................................................................................................. 3
About............................................................................................................................................................................. 3
BALANCE SHEET (Honda Atlas Cars).................................................................................................................................. 4
INCOME STATEMENT (Honda Atlas Cars) ......................................................................................................................... 5
Financial Analysis .............................................................................................................................................................. 5
Ratio Analysis ................................................................................................................................................................ 5
Liquidity Ratios .......................................................................................................................................................... 5
Asset Management Ratios ........................................................................................................................................ 6
Debt Management Ratios ......................................................................................................................................... 6
Profitability Ratios ..................................................................................................................................................... 7
Common Size Analysis of Balance Sheet (Assets Side) ................................................................................................. 7
Common Size Analysis of Balance Sheet (Equity and Liabilities Side) .......................................................................... 8
Index Analysis of Balance Sheet (Assets Side) .............................................................................................................. 8
Index Analysis of Balance Sheet (Equity & Liabilities Side) ........................................................................................... 9
Common Size Analysis of Income Statement ............................................................................................................... 9
Index Analysis of Income Statement........................................................................................................................... 10

A Project of Business Finance

Page 2

Financial Statement Analysis; Honda Atlas Cars Pakistan

Muhammad Yasir Riaz (2010-043) Group Leader

Submitted To: Professor Shahid Mehmood

HONDA ATLAS CARS PAKISTAN

Honda Atlas Cars Pakistan Limited is a joint venture between Honda Motor Company Limited Japan, and the Atlas
Group of Companies, Pakistan.
The company was incorporated on November --, 1992 and joint venture agreement was signed on August ---, 1993.
The ground breaking ceremony was held on April 17, 1993 and within a record time of 11 months, construction and
erection of machinery was completed. The first car rolled off the assembly line on May 26, 1994.The Company is
listed on Karachi, Lahore and Islamabad Stock Exchanges.
On July 14, 1994, car bookings started at six dealerships in Karachi, Lahore, and Islamabad. Since then the
Dealerships Network has expanded and now the company has sixteen 3S (Sales, Service and Spare Parts) and thirty
2S (Service and Spare Parts) Pitstops network in all major cities of Pakistan. Since the commencement of production
in 1994, the company has produced and sold more than 150,000 cars till Oct, 2008.

Stock Exchange
In Karachi Stock Exchange, Honda Atlas Cars is registered as Honda Atlas Cars (Pakistan) Ltd (HCAR)

About
Honda Atlas Cars (Pakistan) Ltd. is engaged in the assembling and progressive manufacturing and sale of Honda
vehicles and spare parts. Honda Atlas Cars Pakistan Limited is a joint venture between Honda Motor Company
Limited Japan, and the Atlas Group of Companies, Pakistan. M/s Honda Motor Company Limited is the holding
company with 51% shares. The Company has introduced four models of Honda Civic and four models of Honda City,
the highest among the other car makers in Pakistan.

A Project of Business Finance

Page 3

Financial Statement Analysis; Honda Atlas Cars Pakistan

Muhammad Yasir Riaz (2010-043) Group Leader

Submitted To: Professor Shahid Mehmood

BALANCE SHEET (Honda Atlas Cars)

ASSETS

Rs. In Thousands
Year -08
4,082,955

Year-09
3,864,527

Year-10
5,190,535

intangible asses

65,903

64,636

195,830

capital work-in-progress

191,842

80,746

19,226

long term loans, advance and deposits

32,196

33,141

35,545

deferred taxation

251,008

338,165

571,214

4,623,904

4,381,215

6,012,350

50,316

83,101

101,942

2,704,946

1,612,696

2,954,091

trade and other receivables

706,092

507,852

853,218

cash and bank balances

219,859

231,880

20,487

CURRENT ASSETS

3,681,213

2,435,529

3,929,738

TOTAL ASSETS

8,305,117

6,816,744

9,942,088

property, plant and equipment

NON-CURRENT ASSETS
stores and spares
stock-in-trade

Equity and Liabilities

authorized capital

750,000

2,000,000

2,000,000

issued, subscribed and paid up capital

714,000

1,428,000

1,428,000

reserves

1,991,000

1,727,000

1,801,500

inappropriate profit

-264,332

74,678

-401,655

SHARE CAPITAL AND RESERVES

2,440,668

3,229,678

2,827,845

NON-CURRENT LIABILITIES

1,958,334

500,000

1,500,000

583,333

2,151,601

39,627

32,029

75,048

trade and other payables

3,283,155

3,055,037

3,387,594

CURRENT LIABILITIES

3,906,115

3,087,066

5,614,243

TOTAL EQUITY AND LIABILITIES

8,305,117

6,816,744

9,942,088

current portion of long term finances

short term borrowings
mark up accrued on loans and other payables

A Project of Business Finance

Page 4

Financial Statement Analysis; Honda Atlas Cars Pakistan

Muhammad Yasir Riaz (2010-043) Group Leader

Submitted To: Professor Shahid Mehmood

INCOME STATEMENT (Honda Atlas Cars)

Income Statement

Rupees in Thousands
Year 2009
14,715,495
14,088,001
627,494
209,677
139,163
23,589
4,975
297,268
233,651
63,617
11,393
75,010
0.55

Year 2008
17,055,115
16,955,181
99,934
214,889
147,274
150,585
64,514
176,158
305,491
481,649
217,109
264,540
2.08

Sales
Cost of Sales
Gross Profit
Less: Distribution and Marketing Costs
Less: Administrative Expenses
Add: Other Operating Income
Less: Other Operating Expenses
Profit/Loss from Operations
Less: Finance Cost
Profit/Loss before taxation
Taxation
Profit/Loss after taxation
Earnings per Share (rupees)

Year 2010
14,149,646
13,973,144
176,502
190,088
139,749
64,844
311,025
399,516
222,769
622,285
220,452
401,833
2.81

Financial Analysis
Ratio Analysis
Liquidity Ratios
Ratios
Current Ratio
Quick Ratio

2007
0.94
0.23

2008
0.80
0.24

2009
0.70
0.15

Its current ratio has been less than one for three years which shows that its current liabilities are greater than its
current assets. Although its current assets increased by 61% in Financial Year 2009 but its current liabilities also
increased by 82% so current ratio further decreased.
Apparently it looks that its liquidity position is very weak but actually it is not true because of the nature of its
current liabilities. In its current liabilities one main portion is its trade payables, as it purchases its raw material from
parent company Honda Japan so it can get a lot of relaxation in making payment to its parent company.
In its current liabilities one portion consist of advances from dealers which are not likely to demand all of their
money in near future. So if we consider these factors then its liquidity position looks better even with low quick and
current ratios.

A Project of Business Finance

Page 5

Financial Statement Analysis; Honda Atlas Cars Pakistan

Muhammad Yasir Riaz (2010-043) Group Leader

Submitted To: Professor Shahid Mehmood

It has to pay its payables in Japanese Yens so change in currency rate can affect the figure of payables so a risk is also
involved.
Its quick ratio is very low as most of the current assets consist of inventory, other assets like receivables and cash are
very low. Its receivables are very low or are nil as it makes sales on cash even gets money in advance which further
increases its current liabilities.
Its cash position is very low as it did its expansion in plant capacity in 2007 and a lot cash was used there.

Asset Management Ratios

Inventory Turnover (Days)
Total Asset turnover

2007
58.50
2.05

2008
43.33
2.16

2009
78.73
1.42

I have not calculated its receivable turnover as I have explained that it either does not has its receivables or they are
very low.
Its inventory turnover increased showing that it took longer for the company to sell its stock in trade. It has
increased from 43 to 79. Its basic reason is decrease in over all demand of cars due to bad financing condition. The
company has to make big batches of each model to reduce set up cost but this over production takes time in selling
as demand has decreased due to due to high interest rates.
The total asset turnover ratio has decreased showing that the assets are not being used efficiently as it has been
discussed that capacity is much higher than production and sales.

Debt Management Ratios

Debt/Equity (Times)
Times Interest Earned (Times)

2007
2.40
-0.58

2008
1.11
1.27

2009
2.52
-1.79

The total liabilities of the company have almost doubled during 2009. Its major reason is that it long term debt has
doubled.
Negative ratio is due to loss in 2007 and 2009. Long term debt is paid through profit which Honda is not generating
but still this loss does not show very weak position as major expense is depreciation expense which is converting
profit into loss and we know that the company does not has to pay this expense. It is a non cash expense. If we
exclude this expense then company can show some better debt position. But overall position is not so good as
demand of cars has decreased in last three years.

A Project of Business Finance

Page 6

Financial Statement Analysis; Honda Atlas Cars Pakistan

Muhammad Yasir Riaz (2010-043) Group Leader

Submitted To: Professor Shahid Mehmood

Profitability Ratios
Net Profit Margin
Return on Asset
Return on Equity
Earning Per Share

2007
-1.55
-3.19
-10.84
-3.71

2008
0.51
1.10
2.32
0.55

2009
-2.84
-4.04
-14.21
-2.81

As the company is in loss therefore all profitability ratios are negative. Actually in this type of business big fixed cost
is involved which can only be recovered if production is done at large scale but due to low demand it is very difficult
to recover and which converts the contribution generated from sale into loss. Although it looks that its shareholders
are in loss but that is not the reality its parent company sells parts to it and earns profit on this sale so even if Honda
Atlas is in loss still parent company is earning profit.
ROA went down because of the dual reason of decreasing returns and increase in asset size. The asset base of the
company widened during 2007 due to capacity expansion and introduction of new models because there was
increasing trend of demand when this expansion was started.
The company was able to keep its cost of sales in a bit low during 2009. The cost of sales in 2009 due to restricted
production of cars and cost minimization. However, lower costs could not restrict the impact of lower sales revenue
on the profitability of the company.

Common Size Analysis of Balance Sheet (Assets Side)

ASSETS
property, plant and equipment
intangible asses
capital work-in-progress
long term loans, advance and deposits
deferred taxation
NON-CURRENT ASSETS
stores and spares
stock-in-trade
trade and other receivables
cash and bank balances
CURRENT ASSETS

TOTAL ASSETS

A Project of Business Finance

Year -08
4,082,955
65,903
191,842
32,196
251,008
4,623,904
50,316
2,704,946
706,092
219,859
3,681,213
8,305,117

Rs. In Thousands
Year-09
Year-10
3,864,527 5,190,535
64,636
195,830
80,746
19,226
33,141
35,545
338,165
571,214
4,381,215 6,012,350
83,101
101,942
1,612,696 2,954,091
507,852
853,218
231,880
20,487
2,435,529 3,929,738
6,816,744 9,942,088

Common Size (%)

Year 2008 Year 2009 Year 2010
49%
57%
52%
1%
1%
2%
2%
1%
0%
0%
0%
0%
3%
5%
6%
56%
64%
60%
1%
1%
1%
33%
24%
30%
9%
7%
9%
3%
3%
0%
44%
36%
40%
100%
100%
100%

Page 7

Financial Statement Analysis; Honda Atlas Cars Pakistan

Muhammad Yasir Riaz (2010-043) Group Leader

Submitted To: Professor Shahid Mehmood

Common Size Analysis of Balance Sheet (Equity and Liabilities Side)

Indexed (%)
Year
2009
29%
21%
25%
1%
47%
7%
0%
0%
0%

Year
2010
20%
14%
18%
-4%
28%
15%
0%
22%
1%

45%
45%
100%

34%
56%
100%

property, plant and equipment

intangible asses
capital work-in-progress

Rs. In Thousands
Year 2008 Year 2009 Year 2010
4,082,955 3,864,527 5,190,535
65,903
64,636
195,830
191,842
80,746
19,226

Indexed (%)
Year 2008 Year 2009
100%
95%
100%
98%
100%
42%

Year 2010
127%
297%
10%

long term loans, advance and deposits

deferred taxation
NON-CURRENT ASSETS
stores and spares
stock-in-trade
trade and other receivables
cash and bank balances
CURRENT ASSETS
TOTAL ASSETS

32,196
251,008
4,623,904
50,316
2,704,946
706,092
219,859
3,681,213
8,305,117

100%
100%
100%
100%
100%
100%
100%
100%
100%

110%
228%
130%
203%
109%
121%
9%
107%
120%

Equity and Liabilities

authorized capital
issued, subscribed and paid up capital
reserves
inappropriate profit
SHARE CAPITAL AND RESERVES
NON-CURRENT LIABILITIES
current portion of long term finances
short term borrowings
mark up accrued on loans and other
payables
trade and other payables

CURRENT LIABILITIES
TOTAL EQUITY AND LIABILITIES

Rs. In Thousands
Year 2008 Year 2009 Year 2010
750,000
714,000
1,991,000
-264,332
2,440,668
1,958,334
583,333

2,000,000
1,428,000
1,727,000
74,678
3,229,678
500,000

2,000,000
1,428,000
1,801,500
-401,655
2,827,845
1,500,000

39,627

32,029

2,151,601
75,048

Year
2008
9%
9%
24%
-3%
29%
24%
7%
0%
0%

3,283,155
3,906,115
8,305,117

3,055,037
3,087,066
6,816,744

3,387,594
5,614,243
9,942,088

40%
47%
100%

Index Analysis of Balance Sheet (Assets Side)

ASSETS

A Project of Business Finance

33,141
338,165
4,381,215
83,101
1,612,696
507,852
231,880
2,435,529
6,816,744

35,545
571,214
6,012,350
101,942
2,954,091
853,218
20,487
3,929,738
9,942,088

103%
135%
95%
165%
60%
72%
105%
66%
82%

Page 8

Financial Statement Analysis; Honda Atlas Cars Pakistan

Muhammad Yasir Riaz (2010-043) Group Leader

Submitted To: Professor Shahid Mehmood

Index Analysis of Balance Sheet (Equity & Liabilities Side)

Equity and Liabilities

Rs. In Thousands
Year 2008
Year 2009
Year 2010

authorized capital
issued, subscribed and paid up capital
reserves
unappropriated profit
SHARE CAPITAL AND RESERVES
NON-CURRENT LIABILITIES

750,000
714,000
1,991,000
(264,332)
2,440,668
1,958,334

current portion of long term finances

short term borrowings

583,333

mark up accrued on loans and

other payables
trade and other payables
CURRENT LIABILITIES
TOTAL EQUITY AND LIABILITIES

39,627

32,029

3,283,155
3,906,115
8,305,117

3,055,037
3,087,066
6,816,744

2,000,000
1,428,000
1,727,000
74,678
3,229,678
500,000

Indexed (%)
Year 2008 Year 2009 Year 2010

2,000,000
1,428,000
1,801,500
(401,655)
2,827,845
1,500,000

100%
100%
100%
100%
100%
100%

267%
200%
87%
-28%
132%
26%

267%
200%
90%
152%
116%
77%

0%

0%

2,151,601

100%
100%

75,048

100%

81%

189%

3,387,594
5,614,243
9,942,088

100%
100%
100%

93%
79%
82%

103%
144%
120%

Common Size Analysis of Income Statement

Rupees in Thousands

Income Statement
Sales
Cost of Sales
Gross Profit
Less: Distribution and Marketing
Costs
Less: Administrative Expenses
Add: Other Operating Income
Less: Other Operating Expenses
Profit/Loss from Operations
Less: Finance Cost
Profit/Loss before taxtation
Taxation
Profit/Loss after taxation
Earnings per Share (rupees)

A Project of Business Finance

Common Size (%)

Year
Year
Year
2008
2009
2010
100%
100%
100%
99%
96%
99%
1%
4%
1%

Year 2008

Year 2009

Year 2010

17,055,115
16,955,181
99,934

14,715,495
14,088,001
627,494

14,149,646
13,973,144
176,502

214,889

209,677

190,088

1%

1%

1%

147,274
150,585
64,514
176,158
305,491
481,649
217,109
264,540
2.08

139,163
23,589
4,975
297,268
233,651
63,617
11,393
75,010
0.55

139,749
64,844
311,025
399,516
222,769
622,285
220,452
401,833
2.81

1%
1%
0%
1%
2%
3%
1%
2%

1%
0%
0%
2%
2%
0%
0%
1%

1%
0%
2%
3%
2%
4%
2%
3%

Page 9

Financial Statement Analysis; Honda Atlas Cars Pakistan

Muhammad Yasir Riaz (2010-043) Group Leader

Submitted To: Professor Shahid Mehmood

Index Analysis of Income Statement

Rupees in Thousands
Income Statement
Sales
Cost of Sales
Gross Profit
Less: Distribution and
Marketing Costs
Less: Administrative Expenses
Add: Other Operating Income
Less: Other Operating Expenses
Profit/Loss from Operations
Less: Finance Cost
Profit/Loss before taxtation
Taxation
Profit/Loss after taxation
Earnings per Share (rupees)

A Project of Business Finance

Year 2008

Year 2009

Year 2010

17,055,115
16,955,181
99,934
214,889

14,715,495
14,088,001
627,494
209,677

14,149,646
13,973,144
176,502
190,088

147,274
150,585
64,514
176,158
305,491
481,649
217,109
264,540
2.08

139,163
23,589
4,975
297,268
233,651
63,617
11,393
75,010
0.55

139,749
64,844
311,025
399,516
222,769
622,285
220,452
401,833
2.81

Common Size (%)

Year
Year
Year
2008
2009
2010
100%
86%
83%
100%
83%
82%
100%
628%
177%
100%
98%
88%
100%
100%
100%
100%
100%
100%
100%
100%

94%
16%
8%
169%
76%
13%
5%
28%

95%
43%
482%
227%
73%
129%
102%
152%

Page 10