NEED FOR STUDY

1. The study has great importance and provides benefit to various parties

whom directly or indirectly interact with the company.

2. It is beneficial to management of the company by providing crystal

clear picture regarding important aspect like liquidity, leverage, activity and profitability.
3. The study also beneficial to employees and offers motivation by

showing that how actively they are contributing for the companys growth.
4. The investors who are interested in investing in the companys shares

will also get benefited by go through the study and can easily take decision weather to invest or not to invest in the companys shares.

OBJECTIVES:

1. To study the present financial system of MARUTI SUZUKI LTD. 2. To determine profitability, liquidity ratios. 3. To analyze the capital structure of the company with the help of

leverage ratios.
4. To make comparisons between the ratios during different periods. 5. To offer appropriate suggestion for the better performance of the

company.

LIMITATIONS: The study provides an insight into the financial, personnel, marketing and other aspects of MARUTI SUZUKI. Every study will be bound with certain limitations. The below mentioned are the constraints under which the study is carried out. 1. One of the factors of the study was lack of availability of ample information. Most of the information has been kept confidential and as such as not assed as art of policy of company. 2. Time is an important limitation. The whole study was conducted in a very short period, which is not sufficient to carry out proper interpretation and analysis. 3. Cost is another limitation.

METHODOLOGY The information is collected through secondary sources during the project. That information was utilized for calculating performance evaluation and based on that, interpretations were made.

Sources of secondary data: 1. Most of the calculations are made on the financial statements of the company provided statements. 2. Referring standard texts and referred books collected some of the information regarding theoretical aspects. 3. Method- to assess the performance of the company is method of observation of the work in finance department in followed

ACKNOWLEDGEMENT An acknowledgement is the expression of ones giving to the people who have extended their help in every possible way. Help is voluntary fulfillment of duty, which all the people mentioned below have performed it to their maximum possible, in a way giving us and our research the almost important. At the onset, we wish to express our head of department PROF. SIVJYOTHI and coordinator PROF. LOVEENA ATWAL for their keen interest, constant support & help in completing this project successfully. We would also like to thanks to the authors, journals and websites for providing us the related information to our projects subject.

SR NO. 1. 2. SEC 1

TOPIC EXECUTIVE SUMMARY INTRODUCTION INTRODUCTION OF RATIO ANALYSIS

PAGE NO. 6 7 8

A 1.1 1.2

CLASSIFICATION OF RATIOS LIQUIDITY RATIO LEAVERAGE RATIO

1.3

TURN OVER RATIO

1.4

PROFITABILITY RATIO (BASED ON SALES)

13 13 16 16 17 17 18 18 19 20 20 21 21 22 22 23 24 24 25 26 26 27 28 30 30 31 31 32 32 33 33 34 37

1.5

BASED ON INVESTMENT

1.6 1.7

ADVANTAGES OF RATIO ANALYSIS DISADVANTAGES OF RATIO ANALYSIS

SEC 2

SEC 3 3.1 SEC 4

ORGANISATIONAL PROFILE VISION MISSION RATIO ANALYSIS OF MARUTI SUZUKI LTD. DATA ANALYSIS SUMMERY FINDINGS AND SUGGESTIONS

40 41 41 57 61 69

EXECUTIVE SUMMERY

In this report, we have tried to explain how one can find out financial result with the help of ratio analysis and some more in portent graphs with the help of Ratio Analysis. We can easily understand the profitability of the business, efficiency of business, useful in inter comparison. It is also useful for
7

budgeting control and decision-making. Ratio analysis helps interested parties like share holders, investors, creditors, government also and analysis to make an evaluation of a certain aspect of a firms performances. Financial analysis is essential for any business entity. It is the tool to communicate with creditors, debtors, suppliers and all those who are directly or indirectly associated with an organization. Here in this project report we have discussed about various components of balance sheet and their significance. We have done in depth analysis of ratios. Detailed analysis of creditors, debtors, equity share holders, debenture holders of Maruti Suzuki are also described. The growth trend of Maruti Suzuki is also mentioned here. We have also mentioned profit trends, dividend trends, revenue analysis, profit analysis, and analysis of companys liquidity are discussed here. In a nut shell this report gives the complete financial analysis of Maruti Suzuki for five years.

INTRODUCTION: A general technique for analyzing a business's performance or its potential performance is known as Ratios Analysis. Ratio Analysis involves calculating ratios for a business or proposed business and comparing them to ratios of other businesses within the same industry. Ratios involve dividing numbers from a business' Balance Sheet and Income Statement to create percentages and decimals. When existing businesses apply for a loan, for example, bankers will look at the company's ratios and
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compare them to ratios of other businesses within the same industry. This will determine how "stable" the company is compared to other businesses within the same industry. Moreover, ratio analysis will assist investors in determining three things about an existing business: 1. How the business is presently performing;

2. How the business has performed in the past; 3. How the business is performing relative to other businesses in the industry.

In addition, bankers and educated investors will compare ratios of nonexisting businesses (aspiring entrepreneurs planning on establishing a business) to businesses already existing within the industry to determine if the proposed business will be competitive . Moreover, ratio analysis will show investors three things regarding the performance of a potential business venture; 1. How the aspiring entrepreneur anticipates his or her business will perform in their third year of operations; 2. How the aspiring entrepreneur anticipates his or her business will be performing in the first two years of operations; and 3. How the aspiring entrepreneur's business will compare to other businesses already operating within the industry. Both existing business owners and potential business owners should calculate their own ratios. This will help to determine how well they are performing or plan to perform internally and externally. In addition, ratios are generally required in a business plan and will be closely scrutinized by bankers and other educated investors.

1. INTRODUCTION
Meaning of Ratio:A ratio is simple arithmetical expression of the relationship of one number to another. It may be defined as the indicated quotient of two mathematical expressions.
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According to Accountants Handbook by Wixon, Kell and Bedford, a ratio is an expression of the quantitative relationship between two numbers. Ratio Analysis:- Ratio analysis is the process of determining and presenting the relationship of items and group of items in the statements. According to Batty J. Management Accounting Ratio can assist management in its basic functions of forecasting, planning coordination, control and communication. It is helpful to know about the liquidity, solvency, capital structure and profitability of an organization. It is helpful tool to aid in applying judgment, otherwise complex situations. Ratio analysis can represent following three methods. Ratio may be expressed in the following three ways : 1. Pure Ratio or Simple Ratio :- It is expressed by the simple division of one number by another. For example , if the current assets of a business are Rs. 200000 and its current liabilities are Rs. 100000, the ratio of Current assets to current liabilities will be 2:1. 2. Rate or So Many Times :- In this type , it is calculated how many times a figure is, in comparison to another figure. For example , if a firms credit sales during the year are Rs. 200000 and its debtors at the end of the year are Rs. 40000 , its Debtors Turnover Ratio is 200000/40000 = 5 times. It shows that the credit sales are 5 times in comparison to debtors. 3. Percentage :- In this type, the relation between two figures is expressed in hundredth. For example, if a firms capital is Rs.1000000 and its profit is Rs.200000 the ratio of profit capital, in term of percentage, is 200000/1000000*100 = 20% CLASSIFICATION OF RATIO Ratio may be classified into the four categories as follows: A. Liquidity Ratio a. Current Ratio
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b. Quick Ratio or Acid Test Ratio B. Leverage or Capital Structure Ratio a. Debt Equity Ratio b. Debt to Total Fund Ratio c. Proprietary Ratio d. Fixed Assets to Proprietors Fund Ratio e. Capital Gearing Ratio f. Interest Coverage Ratio C. Activity Ratio or Turnover Ratio a. Stock Turnover Ratio b. Debtors or Receivables Turnover Ratio c. Average Collection Period d. Creditors or Payables Turnover Ratio e. Average Payment Period f. Fixed Assets Turnover Ratio g. Working Capital Turnover Ratio D. Profitability Ratio or Income Ratio

(A) Profitability Ratio based on Sales : a. Gross Profit Ratio b. Net Profit Ratio

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c. Operating Ratio d. Expenses Ratio

(B) Profitability Ratio Based on Investment : I. Return on Capital Employed

II. Return on Shareholders Funds : a. Return on Total Shareholders Funds b. Return on Equity Shareholders Funds c. Earning Per Share d. Dividend Per Share e. Dividend Payout Ratio f. Earning and Dividend Yield g. Price Earning Ratio

LIQUIDITY RATIO (A) Liquidity Ratio:- It refers to the ability of the firm to meet its current liabilities. The liquidity ratio, therefore, are also called Short-term Solvency Ratio. These ratio are used to assess the short-term financial position of the concern. They indicate the firms ability to meet its current obligation out of current resources. In the words of Saloman J. Flink, Liquidity is the ability of the firms to meet its current obligations as they fall due. Liquidity ratio include two ratio:
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a. Current Ratio b. Quick Ratio or Acid Test Ratio a. Current Ratio:- This ratio explains the relationship between current assets and current liabilities of a business. Formula:Current asset Current liabilities

Current Assets:- Current assets includes those assets which can be converted into cash with in a years time. Current Assets = Cash in Hand + Cash at Bank + B/R + Short Term Investment + Debtors 0(Debtors Provision) + Stock(Stock of Finished Goods + Stock of Raw Material + Work in Progress) + Prepaid Expenses. Current Liabilities :- Current liabilities include those liabilities which are repayable in a years time. Current Liabilities = Bank Overdraft + B/P + Creditors + Provision for Taxation + Proposed Dividend + Unclaimed Dividends + Outstanding Expenses + Loans Payable with in a Year. Significance :- According to accounting principles, a current ratio of 2:1 is supposed to be an ideal ratio. It means that current assets of a business should, at least , be twice of its current liabilities. The higher ratio indicates the better liquidity position, the firm will be able to pay its current liabilities more easily. If the ratio is less than 2:1, it indicate lack of liquidity and shortage of working capital. The biggest drawback of the current ratio is that it is susceptible to window dressing. This ratio can be improved by an equal decrease in both current assets and current liabilities. b. Quick Ratio:- Quick ratio indicates whether the firm is in a position to pay its current liabilities with in a month or immediately.

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Formula:

Quick

asset

Quick liabilities

Liquid Assets means those assets, which will yield cash very shortly. Liquid Assets = Current Assets Stock Prepaid Expenses

Significance :- An ideal quick ratio is said to be 1:1. If it is more, it is considered to be better. This ratio is a better test of short-term financial position of the company.

LEVERAGE OR CAPITAL STRUCTURE RATIO (B) Leverage or Capital Structure Ratio :- This ratio disclose the firms ability to meet the interest costs regularly and Long term indebtedness at maturity. These ratio include the following ratios : a. Debt Equity Ratio:- This ratio can be expressed in two ways: First Approach : According to this approach, this ratio expresses the relationship between long term debts and shareholders fund. Formula: Long term debt
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Shareholders fund

Long Term Loans:- These refer to long term liabilities which mature after one year. These include Debentures, Mortgage Loan, Bank Loan, Loan from Financial institutions and Public Deposits etc. Shareholders Funds :- These include Equity Share Capital, Preference Share Capital, Share Premium, General Reserve, Capital Reserve, Other Reserve and Credit Balance of Profit & Loss Account. Significance :- This Ratio is calculated to assess the ability of the firm to meet its long term liabilities. Generally, debt equity ratio of is considered safe. If the debt equity ratio is more than that, it shows a rather risky financial position from the long-term point of view, as it indicates that more and more funds invested in the business are provided by long-term lenders. The lower this ratio, the better it is for long-term lenders because they are more secure in that case. Lower than 2:1 debt equity ratio provides sufficient protection to long-term lenders. b. Debt to Total Funds Ratio : This Ratio is a variation of the debt equity ratio and gives the same indication as the debt equity ratio. In the ratio, debt is expressed in relation to total funds, i.e., both equity and debt. Formula: Debt . Capital

Significance :- Generally, debt to total funds ratio of 0.67:1 (or 67%) is considered satisfactory. In other words, the proportion of long term loans should not be more than 67% of total funds. A higher ratio indicates a burden of payment of large amount of interest charges periodically and the repayment of large amount of loans at maturity.

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Payment of interest may become difficult if profit is reduced. Hence, good concerns keep the debt to total funds ratio below 67%. The lower ratio is better from the long-term solvency point of view. c. Proprietary Ratio:- This ratio indicates the proportion of total funds provide by owners or shareholders. Formula: Proprietors Fund Total asset

Significance :- This ratio should be 33% or more than that. In other words, the proportion of shareholders funds to total funds should be 33% or more. A higher proprietary ratio is generally treated an indicator of sound financial position from long-term point of view, because it means that the firm is less dependent on external sources of finance. If the ratio is low it indicates that long-term loans are less secured and they face the risk of losing their money. d. Fixed Assets to Proprietors Fund Ratio :- This ratio is also know as fixed assets to net worth ratio. Formula: Fixed asset Proprietors fund

Significance :- The ratio indicates the extent to which proprietors (Shareholders) funds are sunk into fixed assets. Normally , the purchase of fixed assets should be financed by proprietors funds. If this ratio is less than 100%, it would mean that
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proprietors fund are more than fixed assets and a part of working capital is provided by the proprietors. This will indicate the long-term financial soundness of business. e. Capital Gearing Ratio:- This ratio establishes a relationship between equity capital (including all reserves and undistributed profits) and fixed cost bearing capital. Formula: Fixed income bearing securities

Non fixed income bearing securities

Whereas, Fixed Cost Bearing Capital = Preference Share Capital + Debentures + Long Term Loan Significance:- If the amount of fixed cost bearing capital is more than the equity share capital including reserves an undistributed profits), it will be called high capital gearing and if it is less, it will be called low capital gearing. The high gearing will be beneficial to equity shareholders when the rate of interest/dividend payable on fixed cost bearing capital is lower than the rate of return on investment in business. Thus, the main objective of using fixed cost bearing capital is to maximize the profits available to equity shareholders.

f. Interest Coverage Ratio:- This ratio is also termed as Debt Service Ratio. This ratio is calculated as follows: Formula: Earning before interest and tax Interest expenses

18

Significance :- This ratio indicates how many times the interest charges are covered by the profits available to pay interest charges. This ratio measures the margin of safety for long-term lenders. This higher the ratio, more secure the lenders is in respect of payment of interest regularly. If profit just equals interest, it is an unsafe position for the lender as well as for the company also, as nothing will be left for shareholders. An interest coverage ratio of 6 or 7 times is considered appropriate.

ACTIVITY RATIO OR TURNOVER RATIO (C) Activity Ratio or Turnover Ratio :- These ratio are calculated on the bases of cost of sales or sales, therefore, these ratio are also called as Turnover Ratio. Turnover indicates the speed or number of times the capital employed has been rotated in the process of doing business. Higher turnover ratio indicates the better use of capital or resources and in turn lead to higher profitability.

It includes the following :

19

a. Stock Turnover Ratio:- This ratio indicates the relationship between the cost of goods during the year and average stock kept during that year. Formula: Cost of goods sold Average stock

Here, Cost of goods sold = Net Sales Gross Profit Average Stock = Opening Stock + Closing Stock/2 Significance:- This ratio indicates whether stock has been used or not. It shows the speed with which the stock is rotated into sales or the number of times the stock is turned into sales during the year. The higher the ratio, the better it is, since it indicates that stock is selling quickly. In a business where stock turnover ratio is high, goods can be sold at a low margin of profit and even than the profitability may be quit high.

b. Debtors Turnover Ratio :- This ratio indicates the relationship between credit sales and average debtors during the year : Formula: Credit purchase

Avg accounts receivables

While calculating this ratio, provision for bad and doubtful debts is not deducted from the debtors, so that it may not give a false impression that debtors are collected quickly. Significance :- This ratio indicates the speed with which the amount is collected from debtors. The higher the ratio, the better it is, since it indicates that amount from debtors is being collected more quickly. The more quickly
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the debtors pay, the less the risk from bad- debts, and so the lower the expenses of collection and increase in the liquidity of the firm. By comparing the debtors turnover ratio of the current year with the previous year, it may be assessed whether the sales policy of the management is efficient or not.

c. Average Collection Period :- This ratio indicates the time with in which the amount is collected from debtors and bills receivables. Formula: Debtors * no. of working days Net credit sales

Here, Credit Sales per day = Net Credit Sales of the year / 365

Average collection period can also be calculated on the bases of Debtors Turnover Ratio. The formula will be:

Credit purchase

Avg accounts receivables

Significance :- This ratio shows the time in which the customers are paying for credit sales. A higher debt collection period is thus, an indicates of the inefficiency and negligence on the part of management. On the other hand, if there is decrease in debt collection period, it indicates prompt payment by debtors which reduces the chance of bad debts.
21

d. Creditors Turnover Ratio :- This ratio indicates the relationship between credit purchases and average creditors during the year. Formula:Credit purchase Avg accounts payables

Note :- If the amount of credit purchase is not given in the question, the ratio may be calculated on the bases of total purchase. Significance :- This ratio indicates the speed with which the amount is being paid to creditors. The higher the ratio, the better it is, since it will indicate that the creditors are being paid more quickly which increases the credit worthiness of the firm.

d. Average Payment Period :- This ratio indicates the period which is normally taken by the firm to make payment to its creditors. Formula:Trade creditors * no. of working days Net credit purchase

Significance :- The lower the ratio, the better it is, because a shorter payment period implies that the creditors are being paid rapidly.

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d. Fixed Assets Turnover Ratio :- This ratio reveals how efficiently the fixed assets are being utilized. Formula:Fixed asset

Long term funds

Here, Net Fixed Assets = Fixed Assets Depreciation Significance:- This ratio is particular importance in manufacturing concerns where the investment in fixed asset is quit high. Compared with the previous year, if there is increase in this ratio, it will indicate that there is better utilization of fixed assets. If there is a fall in this ratio, it will show that fixed assets have not been used as efficiently, as they had been used in the previous year.

e. Working Capital Turnover Ratio :- This ratio reveals how efficiently working capital has been utilized in making sales. Formula :Stock .

Working capital

Here, Cost of Goods Sold = Opening Stock + Purchases + Carriage + Wages + Other Direct Expenses - Closing Stock Working Capital = Current Assets Current Liabilities

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Significance :- This ratio is of particular importance in non-manufacturing concerns where current assets play a major role in generating sales. It shows the number of times working capital has been rotated in producing sales. A high working capital turnover ratio shows efficient use of working capital and quick turnover of current assets like stock and debtors. A low working capital turnover ratio indicates under-utilization of working capital. Profitability Ratios or Income Ratios (D) Profitability Ratios or Income Ratios:- The main object of every business concern is to earn profits. A business must be able to earn adequate profits in relation to the risk and capital invested in it. The efficiency and the success of a business can be measured with the help of profitability ratio. Profitability ratios are calculated to provide answers to the following questions: i. ii. iii. iv. v. Is the firm earning adequate profits? What is the rate of gross profit and net profit on sales? What is the rate of return on capital employed in the firm? What is the rate of return on proprietors (shareholders) funds? What is the earning per share?

Profitability ratio can be determined on the basis of either sales or investment into business.

(A) Profitability Ratio Based on Sales : a) Gross Profit Ratio : This ratio shows the relationship between gross profit and sales.

24

Formula :

Gross profit Net sales

Here, Net Sales = Sales Sales Return

Significance:- This ratio measures the margin of profit available on sales. The higher the gross profit ratio, the better it is. No ideal standard is fixed for this ratio, but the gross profit ratio should be adequate enough not only to cover the operating expenses but also to provide for deprecation, interest on loans, dividends and creation of reserves.

b) Net Profit Ratio:- This ratio shows the relationship between net profit and sales. It may be calculated by two methods: Formula: Net profit after tax Net sales =*100

Here, Operating Net Profit = Gross Profit Operating Expenses such as Office and Administrative Expenses, Selling and Distribution Expenses, Discount, Bad Debts, Interest on short-term debts etc.
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Significance :- This ratio measures the rate of net profit earned on sales. It helps in determining the overall efficiency of the business operations. An increase in the ratio over the previous year shows improvement in the overall efficiency and profitability of the business. (c) Operating Ratio:- This ratio measures the proportion of an enterprise cost of sales and operating expenses in comparison to its sales. Formula: Operating profit Net sales =*100

Where, Cost of Goods Sold = Opening Stock + Purchases + Carriage + Wages + Other Direct Expenses - Closing Stock Operating Expenses = Office and Administration Exp. + Selling and Distribution Exp. + Discount + Bad Debts + Interest on Short- term loans.
Operating Ratio and Operating Net Profit Ratio are inter-related. Total of both these ratios will be 100.

Significance:- Operating Ratio is a measurement of the efficiency and profitability of the business enterprise. The ratio indicates the extent of sales that is absorbed by the cost of goods sold and operating expenses. Lower the operating ratio is better, because it will leave higher margin of profit on sales. (d) Expenses Ratio:- These ratio indicate the relationship between expenses and sales. Although the operating ratio reveals the ratio of total operating expenses in relation to sales but some of the expenses include in operating ratio may be increasing while some may be decreasing. Hence, specific expenses ratio are computed by dividing each type of expense with the net sales to analyze the causes of variation in each type of expense. The ratio may be calculated as :

26

(a) Material Consumed Ratio = Material Consumed/Net Sales*100 (b) Direct Labour cost Ratio = Direct labour cost / Net sales*100 (c) Factory Expenses Ratio = Factory Expenses / Net Sales *100 (a), (b) and (c) mentioned above will be jointly called cost of goods sold ratio. It may be calculated as: Cost of Goods Sold Ratio = Cost of Goods Sold / Net Sales*100 (d) Office and Administrative Expenses Ratio = Office and Administrative Exp./ Net Sales*100 (e) Selling Expenses Ratio = Selling Expenses / Net Sales *100 (f) Non- Operating Expenses Ratio = Non-Operating Exp./Net sales*100

Significance:- Various expenses ratio when compared with the same ratios of the previous year give a very important indication whether these expenses in relation to sales are increasing, decreasing or remain stationary. If the expenses ratio is lower, the profitability will be greater and if the expenses ratio is higher, the profitability will be lower. (B) Profitability Ratio Based on Investment in the Business:These ratio reflect the true capacity of the resources employed in the enterprise. Sometimes the profitability ratio based on sales are high whereas profitability ratio based on investment are low. Since the capital is employed to earn profit, these ratios are the real measure of the success of the business and managerial efficiency. These ratio may be calculated into two categories:

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I. Return on Capital Employed II. Return on Shareholders funds I. Return on Capital Employed :- This ratio reflects the overall profitability of the business. It is calculated by comparing the profit earned and the capital employed to earn it. This ratio is usually in percentage and is also known as Rate of Return or Yield on Capital. Formula: Earnings before interest and tax Total asset current liabilities

Where, Capital Employed = Equity Share Capital + Preference Share Capital + All Reserves + P&L Balance +Long-Term Loans- Fictitious Assets (Such as Preliminary Expenses OR etc.) Non-Operating Assets like Investment made outside the business. Capital Employed = Fixed Assets + Working Capital

Advantages of Return on Capital Employed: Since profit is the overall objective of a business enterprise, this ratio is a barometer of the overall performance of the enterprise. It measures how efficiently the capital employed in the business is being used. Even the performance of two dissimilar firms may be compared with the help of this ratio. The ratio can be used to judge the borrowing policy of the enterprise. This ratio helps in taking decisions regarding capital investment in new projects. The new projects will be commenced only if the rate of return on capital employed in such projects is expected to be more than the rate of borrowing.
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 This ratio helps in affecting the necessary changes in the financial policies of the firm. Lenders like bankers and financial institution will be determine whether the enterprise is viable for giving credit or extending loans or not. With the help of this ratio, shareholders can also find out whether they will receive regular and higher dividend or not.

II. Return on Shareholders Funds :Return on Capital Employed Shows the overall profitability of the funds supplied by long term lenders and shareholders taken together. Whereas, Return on shareholders funds measures only the profitability of the funds invested by shareholders.

These are several measures to calculate the return on shareholders funds: (a) Return on total Shareholders Funds :For calculating this ratio Net Profit after Interest and Tax is divided by total shareholders funds.
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Formula:

Net profit after interest and tax Shareholders fund

Where, Total Shareholders Funds = Equity Share Capital + Preference Share Capital + All Reserves + P&L A/c Balance Fictitious Assets

Significance:- This ratio reveals how profitably the proprietors funds have been utilized by the firm. A comparison of this ratio with that of similar firms will throw light on the relative profitability and strength of the firm.

(b) Return on Equity Shareholders Funds:Equity Shareholders of a company are more interested in knowing the earning capacity of their funds in the business. As such, this ratio measures the profitability of the funds belonging to the equity shareholders. Formula: Net income

Shareholders equity

Where, Equity Shareholders Funds = Equity Share Capital + All Reserves + P&L A/c

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Balance Fictitious Assets Significance:- This ratio measures how efficiently the equity shareholders funds are being used in the business. It is a true measure of the efficiency of the management since it shows what the earning capacity of the equity shareholders funds. If the ratio is high, it is better, because in such a case equity shareholders may be given a higher dividend. (c) Earning Per Share (E.P.S.) :- This ratio measure the profit available to the equity shareholders on a per share basis. All profit left after payment of tax and preference dividend are available to equity shareholders. Formula: Net income preference dividend No. of equity shares

Significance:- This ratio helpful in the determining of the market price of the equity share of the company. The ratio is also helpful in estimating the capacity of the company to declare dividends on equity shares.

(d) Dividend Per Share (D.P.S.):- Profits remaining after payment of tax and preference dividend are available to equity shareholders. But of these are not distributed among them as dividend . Out of these profits is retained in the business and the remaining is distributed among equity shareholders as dividend. D.P.S. is the dividend distributed to equity shareholders divided by the number of equity shares. Formula: Dividend paid to equity shareholders Avg no. of issued equity shareholders

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(e) Dividend Payout Ratio or D.P. :- It measures the relationship between the earning available to equity shareholders and the dividend distributed among them. Formula: Dividend per share Earning per share (f) Earning and Dividend Yield :- This ratio is closely related to E.P.S. and D.P.S. While the E.P.S. and D.P.S. are calculated on the basis of the book value of shares, this ratio is calculated on the basis of the market value of share. Formula: Annual dividend per share Price per share

(g) Price Earning (P.E.) Ratio:- Price earning ratio is the ratio between market price per equity share & earnings per share. The ratio is calculated to make an estimate of appreciation in the value of a share of a company & is widely used by investors to decide whether or not to buy shares in a particular company.

Significance :- This ratio shows how much is to be invested in the market in this companys shares to get each rupee of earning on its shares. This ratio is used to measure whether the market price of a share is high or low.
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Formula:

Market value per share Earnings per share

ADVANTAGES OF RATIO ANALYSIS Ratio analysis is very useful tool of management accounting. With this, we can analyze business's financial position. We also check company's short term and long term solvency with ratio analysis. Following are the main advantages of ratio analysis. 1. Helpful in Decision Making: All our financial statements are made for providing information. But this information is not helpful for decision making because financial statements provide only raw information. When we calculate different ratios in ratio analysis, at that time, we get useful information. I can explain it with simple example. Suppose, we calculate our interest coverage ratio which is 10times but our competitor company's interest coverage ratio is 15 times. It means
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capacity of the profit of our competitor company is more than us. By seeing this, we can take decisions for increasing our profitability. 2. Helpful in Financial Forecasting and Planning : Every year we calculate lots of accounting ratios. When we make trend of all these ratios, we can get useful information for our future forecasting and planning. For example, we can tell five year collection period with following way 2007 = 90 days 2008 = 70 days 2009 = 60 days 2010 = 50 days 2011 = 30 days From this trend, we know that we are decreasing the days for collection money from our debtors. With this information, we can make two plans. One is effective use of money which we are getting from our debtors more fastly and second we can also check the behavior of our debtors by comparing this with sales trend. Like this, there are lots of ratios which are also useful for better planning. 3. Helpful in Communication : Ratio analysis are more important from communication point of view. Suppose, we have to appoint new sales agents for our company. At that time, we can communicate them by using our company's sales and profit related ratios. There is no need of hi-tech for understanding the meaning of any specific ratio. For example, our gross profit in 2010 is 26.6% and in 2011, it is 28.55%. By just telling this ratio, we can understand whether our company is growing or falling. 4. Helpful in Co-ordination : No company has all the strength points. Company's financial results shows some strength points and some weak points. Ratio analysis can create coordination between strength points and weak points.
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5. Helps in Control: Ratio analysis can also use for controlling our business. We can easily create the standard of each financial item of our balance sheet and profit and loss account. On this basis, we can also calculate standard ratios. By comparing standard ratios with actual accounting ratios, we can find variance. These variance may be favorable and unfavorable. On this basis, we can control our business from financial point of view. 6. Helpful for Shareholder's decisions : For example, I am a shareholder. I want to invest in any company's shares. Before buying any company's shares, I will be interested to know company's long term solvency. So, I have to calculate long term solvency ratios. In which, I have to calculate fixed assets to net worth ratio, fixed assets to long term debt ratio. On this basis, I can know the level of fixed assets and its main resource. After checking my money's security, I will be interested to know my return on this investment. ROI, EPS and DPS are most useful ratios which I can calculate for knowing this.

7. Helpful for Creditors decisions: Creditors are those persons who provide goods on credit to company or provides short period loan to company. All the creditors are interested to know whether company will repay their debt or not. For this, they calculate current ratio and quick liquid ratio and average payment period. On this basis, they take decisions.

8. Helpful for employees' decisions : Every employee wants to increase his salary. He also wants to get more and more incentives from company. For this, he takes help from company's
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profitability ratios. Profitability ratios will be helpful for employees to pressure on the company for increasing their salary.

9. Helpful for Govt. decisions : Different companies analyze their accounting ratios and publish on the net and print newspapers. Govt. collects all these information. On this basis, Govt. makes policies. If ratios will wrong, Govt. policies will become wrong. For example, Govt. collects income data of all companies in different industries for calculation the national income.

Ratio analysis is a scientific attempt devised by intelligent humans to reasonably predict the further outcome of investment. As true as this may be, investors still need to use ratio analysis with caution. Other fundamental factors should be allowed to play its role in the development of investments strategy and subsequently following it. In this article are some of the already identified limitations of ratios analysis.

DISADVANTAGES OF RATIOS

1. PROBLEM IN GETTING COMPARABLE INFORMATION:

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It is a known fact that ratios are useless if they are not compared with ratios from similar entity. You must compare likes to have realistic information. In practice, it is impossible to consciously find two companies that are identical in every sense.

2. USE OF OUTDATED INFORMATION:

Historical accounting information is the primary source of data used for investment ratio analysis. This alone is enough to render every other factor useless. It is hard to make any meaningful judgment from information that is already out of date.

3. RATIOS ARE SUBJECTIVE:

No two humans will give two exact judgments even while presented with the same information. Personal sense of judgment must be introduced and this makes it prone to having personal investment bias.

4. ANALYSIS CANNOT BE USED IN ISOLATION:

Yes, an investment ratio analysis cannot be used in isolation. It must be combined with some other information from other sources. This makes it possible for element of wrong judgment to be introduced into the decision
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making variables through the introduction of information from unreliable and unverifiable source.

5. RATIOS ARE NOT DEFINITE:

Ratio analyses are just guide and never a definite or concrete assertion. This makes it possible for wrong investment decision to be taken. Investment ratio analysis is not like mathematics and is therefore susceptible to inflows of noise. 6. RATIOS ARE SUBJECT TO MANIPULATION (CREATIVE ACCOUNTING, INAPPROPRIATE ACCOUNTING POLICIES):

Creative accounting and other form of manipulations like window dressing of accounts is a serious factor that affects financial statements ratio analysis. An investment analyst working on ratio analysis should bear this at the back of his or her mind.

7. RATIOS HAVE NO STANDARD FORM: There are no generally acceptable formats for presenting and interpreting ratios. This is in addition to the fact that ratio analyses are subjective in nature. All the above points show that ratio analysis cannot be used in isolation and should be used with wisdom and caveat. Investing is not a pure science and like every other management science discipline deals with a lot of behavioral factors and unstable variables Analyse carefully and wisely!

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2. ORGANISATIONAL PROFILE
INTRODUCTION: Maruti Udyog Limited (MUL) was established in Feb 1981 through an Act of Parliament, to meet the growing demand of a personal mode of transport caused by the lack of an efficient public transport system. It was established with the objectives of - modernizing the Indian automobile industry, producing fuel efficient vehicles to conserve scarce resources and producing indigenous utility cars for the growing needs of the Indian population. A license and a Joint Venture agreement were signed with the Suzuki Motor Company of Japan in Oct 1983, by which Suzuki acquired 26% of the equity and agreed to provide the latest technology as well as Japanese management practices. Suzuki was preferred for the joint venture because of its track record in manufacturing and selling small cars all over the
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world. There was an option in the agreement to raise Suzukis equity to 40%, which it exercised in 1987.Five years later, in 1992, Suzuki further increased its equity to 50% turning Maruti into a non-government organization managed on the lines of Japanese management practices. Maruti created history by going into production in a record 13 months. Maruti is the highest volume car manufacturer in Asia, outside Japan and Korea, having produced over 5 million vehicles by May 2005. Maruti is one of the most successful automobile joint ventures, and has made profits every year since inception till2000- 01. In 2000-01, although Maruti generated operating profits on an income of Rs 92.5 billion, high depreciation on new model launches resulted in a book loss.

Registered and corporate office 11th Floor, Jeevan Prakash Building,25, Kasturba Ganghi Marg, New Delhi 110001 KEY DATA 1. country 2. BSE 3. NSE 4. exchanges 5. Major industry 6. Sub industry automotive mfrs. 7. Sales (2010-11)
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:INDIA : 532500 : Maruti : BOM : automotive : diversified : 38000 crore

8. Employees 9. Currency 10. Market cap. 11. Fiscal year end 12. Shares o/s 13. Share type 14. Closely held shares

: 7159 : Indian rupee : 399,028,129,369 : march : 288,910,060 : ordinary : 156,618,440

VISION: The leader in the India automobile industry, creating customer delight and shareholders wealth; a pride of India. MISSION: To provide maximum value of money to their customer through continuous improvements of products and services.

LEAN MANUFACTURING: Maruti Production System or MPS draws learning's from its parent company Suzuki Motor Corporation's concepts on `lean manufacturing' under Suzuki Production System i.e. SPS. Setting trends in new products and achieving customer delight starts with Manufacturing Excellence and Maruti's manufacturing excellence hinges around four important pillars-Cost, Quality, Safety and Productivity. Cost Every employee working on the line is 'cost sensitive' and functions in capacity of a Cost Manager. He is a key contributor in suggesting how to keep costs of production under control.

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Quality A product of poor quality requires repeated inspections, entails wastage in terms of repairs and replacements. "Do it right first time", is the principle followed to avoid wastage. To ensure quality, robots were devices and deployed especially where they reduced worker fatigue and were critical in delivering consistent quality. With consistent improvements in the plant the company was able to manufacture over 600,000 vehicles in 2006-07 with an installed capacity of just 350,000 vehicles per year. Safety "Home or work place; Safety takes First Place". This has been the motto of the company where safety is concerned. Maruti attaches great significance to safety of its people and strongly advocates that safety at work place adds to quality of the products and improves productivity of the plant significantly. In the Japanese manufacturing system, the central role is accorded, not so much to Quality, Productivity or Cost, but to Safety. When process flow, lay-out and systems are designed for maximum safety, they automatically contribute to better quality and productivity.

OBJECTIVES : These are some objectives of companies which company wants to achieve. (a) Teamwork and recognition that each employees future growth and prosperity is totally dependent on the companys growth and prosperity (b) Strict work discipline for individuals and the organization

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(c) Constant efforts to increase the productivity of labor and capital (d) Steady improvements in quality and reduction in costs (e) Customer orientation (f) Long-term objectives and policies with the confidence to realize the goals (g) Respect of law, ethics and human beings. ACHIEVEMENTS (a) The path to success translated into practices that Marutis culture approximated from the Japanese management practices. (b) Maruti adopted the norm of wearing a uniform of the same color and quality of the fabric for all its employees thus giving an identity. (c) All the employees ate in the same canteen. They commuted in the same buses without any discrimination in seating arrangements. (d) Employees reported early in shifts so that there were no time loss in-between shifts. (e) Attendance approximated around 94-95%. (f) The plant had an open office system and practiced on-thejob training, quality circles, kaizen activities, and teamwork and job- rotation. (g) Near-total transparency was introduced in the decision making process. (h) There were laid-down norms, principles and procedures for group decision making. (i) These practices were unheard of in other Indian organizations but they worked well in Maruti. During the pre- liberalization period the focus was solely on production.

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(j) Employees were handsomely rewarded with increasing

bonus as Maruti produced more and sold more in a sellers market commanding an almost monopoly situation. (k) The automobile industry has undergone significant changes since Henry Ford first introduced the assembly line technique for the mass production of cars. Production concepts, processes and the associated technologies have changed dramatically since the first cars were built. Some 70 years ago, car assembly was primarily manual work.

EXPORTS:

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What do countries like Poland, Finland, Iceland, Malta, Switzerland, The Netherlands, Algeria and Italy have in common? Maruti Suzuki exports, entry-level models across the globe to over 120 countries and the focus has been to identify new markets. Some important markets include Latin America, Africa, South East Asia and Oceana. The Company clocked its highest ever exports at 147,575 units, a growth of 111% in the Fiscal Year 2009-10. The star performer has been A-Star which is also the fifth World Strategic Model by Suzuki. A-star, as a Made-in-India car, represents Maruti Suzuki aspirations as an Indian company to emerge as a global hub for manufacturing and exporting small cars. Alto and M800 are the other most popular models in the overseas market. Joining the team of growth drivers is our latest launch Alto K10.

Milestones: 1. MSIL Receives Gold Trophy for "Top Exporter for the Year 2008-09" for the Northern region. 2. The Company clocked its highest ever exports at 147,575 units, a growth of 111% in the Fiscal Year2009-10. 3. The world loves Alto - more than 2 million units sold 4. A star crosses the 2 million mark in just three years

COMPETITION:-

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Most of the major global players are present in the Indian market; few more are expected to enter. Financial strength assumes importance as high are required for building capacity and maintaining adequacy of working capital. Access to distribution network is important. Lower tariffs in post WTO may expose Indian companies to threat of imports. Rivalry within the industry: High There is keen competition in select segments. (Compact and mid size segments). New multinational players may enter the market. Market strength of suppliers: Low a large number of automotive components suppliers. Automotive players are rationalizing their vendor base to achieve consistency in quality. Market strength of consumers: Increasing Increased awareness among consumers has increased expectations. Thus the ability to innovate is critical. Product differentiation via new features, improved performance and after-sales supports critical. Increased competitive intensity has limited the pricing power of manufacturers. Threat from substitutes: Low to medium With consumer preferences changing, inter product substitution is taking place (Minicabs are being replaced by compact or mid sized cars).Setting up integrated manufacturing facilities may require higher capital investments than establishing assembly facilities for semi knocked down kits or complete knocked down kits. In recent years, even though the ratio of sales to capacity (an important indicator of the ability to reach break-even volumes) of the domestic car manufacturers have improved, it is still low for quite a few car manufacturers in India.

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Additionally, in terms of engine capacity, the Indian passenger car market is moving toward scars of higher capacity. This apart, competition is likely to intensify in the SUV segment in India following the launch of new models at competitive prices.

KEY STRATEGIC INITIATIVES BY MARUTI

A) TURNAROUND STRATEGIES MARUTI FOLLOWED:-

Maruti was the undisputed leader in the automobile utility-car segment sector, controlling about 84% of the market till 1998. With increasing competition from local players like Telco, Hindustan Motors, Mahindra & Mahindra and foreign players like Daewoo, PAL, Toyota, Ford, Mitsubishi, GM, the whole auto industry structure in India has changed in the last seven year sand resulted in the declining profits and market share for Maruti. At the same time the Indian government permitted foreign car producers to invest in the automobile sector and hold majority stakes. In the wake of its diminishing profits and loss of market share, Maruti initiated strategic responses to cope with Indias liberalization process and began to redesign itself to face competition in the Indian market. Consultancy firms such as AT Kearney & McKinsey, together with an internationally reputed OD consultant, Dr. Athreya, have been consulted on modes of strategy and organization development during the redesign process. The redesign process saw Maruti complete a Rs. 4000 mn expansion project which increased the total production capacity to over 3,70,000 vehicles per annum. Maruti executed a plan to launch new models for different segments of the market. In its redesign plan, Maruti, launches a new model every year, reduce production costs by achieving
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85-90% indigenization for new models, revamp marketing by increasing the dealer network from 150 to 300 and focus on bulk institutional sales, bring down number of vendors and introduce competitive bidding. Together with the redesign plan, there has been a shift in business focus of Maruti. When Maruti commanded the largest market share, business focus was to sell what we produce. The earlier focus of the whole organization was "production, production and production" but now the focus has shifted to "marketing and customer focus". This can be observed from the changes in mission statement of the organization:1984:
I. CURRENT STRATEGIES FOLLOWED BY MULTI.

PRICING STRATEGY - CATERING TO ALL SEGMENTS:Maruti caters to all segment and has a product offering at all price points. It has a car priced at Rs.1,87,000.00 which is the lowest offer on road. Maruti gets 70% business from repeat buyers who earlier had owned a Maruti car. Their pricing strategy is to provide an option to every customer looking for up gradation in his car. Their sole motive of having so many product offering is to be in the consideration set of every passenger car customer in India. Here is how every price point is covered.

II. OFFERING ONE STOP SHOP TO CUSTOMERS OR CREATING DIFFERENT REVENUE STREAMS:Maruti has successfully developed different revenue streams without making huge investments in the form of MDS, N2N, Maruti Insurance and Maruti Finance. These help them in making the customer experience hassle free and helps building customer satisfaction. Maruti Finance: In a market where more than 80% of cars are financed, Maruti has strategically entered into this and has successfully created a revenue stream for Maruti. This has been found to be a major driver in converting a Maruti car sale in certain cases. Finance is one of the major
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decision drivers in car purchase. Maruti has tied up with 8 finance companies to form a consortium. This consortium comprises Citicorp Maruti, Maruti Countrywide, ICICI Bank, HDFC Bank, Kotak Mahindra, Sundaram Finance, Bank of Punjab and IndusInd BankLtd.( erstwhile-Ashok Leyland Finance).Maruti Insurance : Insurance being a major concern of car owners. Maruti has brought all car insurance needs under one roof. Maruti has tied up with National Insurance Company, Bajaj Allianz, New India Assurance and Royal Sundaram to bring this service for its customers. From identifying the most suitable car coverage to virtually hassle-free claim assistance its your dealer who takes care of everything. Maruti Insurance is a hassle-free way for customers to have their cars repaired and claims processed at any Maruti dealer workshop in India. True Value Initiative to capture used car market Another significant development is MULs entry into the used car market in 2001, allowing customers to bring their vehicle to a Maruti True Value outlet and exchange it for a new car, by paying the difference. They are offered loyalty discounts in return. This helps them retain the customer. III. REPOSITIONING OF MARUTI PRODUCTS:Whenever a brand has grown old or its sales start dipping Maruti makes some facelifts in the models. Other changes have been made from time to time based on market responses or consumer feedbacks or the competitor moves. Here are the certain changes observed indifferent models of Maruti. Omni has been given a major facelift in terms of interiors and exteriors two months back. Anew variant called Omni Cargo, which has been positioned as a vehicle for transporting cargo and meant for small traders. It has received a very good response from market. A variant with LPG is receiving a very good response from customers who look for low cost of running. Versa prices have been slashed and right now the lowest variant starts at 3.3 lacs. They decreased the engine power from 1600cc to 1300cc and modified it again considering consumers perception. This was a result of intensive survey
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done all across the nation regarding the consumer perception of Versa. Esteem has gone through three facelifts. A new look last year has helped boost up the waning sales of Esteem. Baleno was launched in 1999 at 7.2 lacs. In 2002 they slashed prices to 6.4 lacs. In 2003they launched a lower variant as Baleno LXi at 5.46 lacs. This was to reduce the price and attract customers. Wagon-R was perceived as dull boxy car when it was launched. This made it a big failure on launch. Then further modifications in engine to increase performance and a facelift in the form of sporty looking grills on the roof. Now its of the most successful models in Maruti stable. Zen has been modified four times till date. They had come up with a limited period variant called Zen Classic. That was limited period offer to boost short term sales. Maruti 800 has so far been face lifted two times. Once it came with MPFi technology and other time it came up with changes in front grill, head light, rear lights and with round curves all around. IV. CUSTOMER CENTRIC APPROACH:Marutis customer centricity is very much exemplified by the five times consecutive wins at J DPower CSI Awards. Focus on customer satisfaction is what Maruti lives with. Maruti has successfully shed off the public- sector laid back attitude image and has inculcated the customer-friendly approach in its organization culture. The customer centric attitude is imbibed in its employees. Maruti dealers and employees are answerable to even a single customer complain. There are instances of cancellation of dealerships based on customer feedback. Maruti has taken a number of initiatives to serve customer well. They have even changed their showroom layout so that customer has to walk minimum in the showroom and there are norms for service times and delivery of vehicles. The Dealer Sales Executive, who is the first interaction medium with the Maruti customer when the customer walks in Maruti showroom, is trained on greeting etiquettes. Maruti has proper customer complain handling cell under the CRM department. The Maruti call center is another effort which brings Maruti closer to its customer. Their Market Research department remains on its toes to study the changing consumer behavior and market
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needs. Maruti enjoys seventy percent repeat buyers which further bolsters their claim of being customer friendly. Maruti is investing a lot of money and effort in building customer loyalty programmes. V. COMMITTED TO MOTORIZING INDIA:Maruti is committed to motorizing India. Maruti is right now working towards making things simple for Indian consumers to upgrade from two-wheelers to the car. Towards this end, Maruti partnerships with State Bank of India and its Associate Banks took organized finance to small towns to enable people to buy Maruti cars. Rs. 2599 scheme was one of the outcomes ofthis effort. Maruti expects the compact cars, which currently constitute around 80% of the market, to be the engine of growth in the future. Robust economic growth, favorable regulatory framework, affordable finance and improvements in infrastructure favor growth of the passenger vehicles segment. The low penetration levels at 7 per thousand and rising income levels will augur well for the auto industry. Maruti is busy finetuning another innovation. While researching they found that rural people had strange notions about a car - that the EMI (equated monthly installments) would range between Rs 4,000 and Rs 5,000. That, plus another Rs 1,500-2,000 for monthly maintenance, another Rs 1,000 for fuel (would be the cost of using the car). To counter that apprehension, the company is working on a novel idea. Control over the fuel bill is in the consumers hands. But, maintenance need not be. Says Khattar: "What the company is doing now is saying how much you spend on fuel is in your hands anyway. As far as the maintenance cost is concerned, if you want it that way, we will charge a little extra in the EMI and offer free maintenance."

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VI. DISINVESTMENT AND IPO OF MARUTI UDYOG LIMITED:It was a long and tough journey, but a rewarding one at the end. A reward worth Rs 2,424crore, making it the biggest privatization in India till date. The size of Marutis sell- off deal is proof of its success. On the investment of Rs 66 crore it made in 1982, when Maruti Udyog Limited (MUL) was formally set up, the sale represents a staggering return of 35 times The best part of the deal is the Rs 1,000 crore control premium the Government has been able to extract from Suzuki Motor Corporation for relinquishing its hold over Indias largest car company. Now looking at the strategy point of it for Suzuki, of course, complete control of MUL means a lot. Maruti is its most profitable and the largest car company outside Japan. Suzuki will now be in the drivers seat and will not have to mind the whims and fancies of ministers and bureaucrats. Decisions will now become quicker. The response to changing market conditions and technological needs will be faster, says Jagdish Khattar, managing director, MUL. After the disinvestment Suzuki became the decision maker at MUL. They flowed fund in India for the major revamp in MUL. Quoting from the report that appeared in The Economic Times, 4th April 2005, -The Indian car giant Maruti Udyog Limited has finalized its two mega investment plans anew car plant and an engine and transmission manufacturing plant. Both the projects will be implemented by two different companies. At its meeting the companys board approved a total investment of Rs3,271.9 crore for these two ventures, which will be located in Haryana. The above signifies when GOI was a major stakeholder in the MUL strategies which lead to investment have had a bureaucracy factor in it but after the disinvestment strategy followed is a TOP DOWN approach with a fast implementation. Suzukis proposed two-wheeler facility in India, would start making motorcycles and scooters by the end of 2005 through a joint venture, in which Maruti has 51 per cent stake. The twowheeler unit will have a capacity of 250,000 units a year.The
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disinvestment followed by IPO gives the insight in the fact that now all the strategicdecisions are taken by Maruti Suzuki Corporation. Disinvestment had helped by removing thered tape and bureaucracy factor from its strategic decision making process. VII. REALISATION OF IMPORTANCE OF VEHICLE MAINTENANCE SERVICES MARKET:In the old days, the companys operations could be boiled down to a simple three-box flow chart. Components came from the vendors to the factory where they were assembled and then sent out to the dealers. In this scheme, you know where the companys revenues come from. The new scheme is more complicated. It revolves around the total lifetime value of a car. Work on this began in 1999, when a MUL team, wondering about new revenue streams, traveled across the world. Says R.S. Kalsi, general manager (new business), MUL: "While car companies were moving from products to services, trying to capture more of the total life time value of a car, MUL was just making and selling cars." If a buyer spends Rs 100 on a car during its entire life, one-third of that is spent on its purchase. Another third went into fuel. And the final third went into maintenance. Earlier, Maruti was getting only the first one-third of the overall stream. As the Indian market matured, customers began to change cars faster. Says Kalsi: "So the question was, if a car is going to see three users in, say, a life span of 10years, how can I make sure that it comes back to me each time it changes hands ? So Maruti has changed gears to take a big share of this final one-third spent on maintenance. Maintenance market has a huge market potential. Even after having fifty lakh vehicles on road Maruti is only catering to approximately 20000 vehicles through its service stations everyday. For this they are conducting free service workshops to encourage consumers to come to their service stations. Maruti has increased its authorized service stations to 1567 across 1036cities. Every regional office is having a separate services and maintenance department which look after the growth of this revenue stream.

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VIII. PLAYING ON COST LEADERSHIP:Maruti is the price dictator in Indian automobile industry. Its the low cost provider of car. The lowest car on road is from Maruti stable i.e. Maruti 800. Maruti achieves this through continuous improvements in operational efficiency and productivity. The company has set itself (and its vendors) the target of a 50% improvement in productivity and a 30% reduction in costs in three years. The ability to keep lowering the prices sets Maruti apart from other players in the league. Maruti spread the overheads over a larger base. The impressive sales and profits were the result of major efforts within the company. Maruti also increased focus on vendor management. Maruti consolidated its vendor base. This has provided its vendors with higher volumes and higher efficiencies. Maruti does that by working with vendors, assuring them that for every drop in price, volumes will go up. Maruti is now encouraging its vendors to develop R&D capability for specialized components. Based upon such activities, product competitiveness in the market will further increase. Maruti also made strides in applying IT to manufacturing. A new Vehicle Tracking System improved efficiency on the shop floor and enhanced quality control. The e Nagare system, adopted from Suzuki Motor Corporation, smoothened Marutis Just In Time operations. (B). MAJOR FUTURE STRATEGIES PHASING OUT ZEN IN 2007 :The launch of Swift and phasing out Zen is a strategic move. Alto was launched keeping in mind that it will take over Maruti 800 market in future. Perhaps being the flagship product phasing out of Maruti 800 faced lots of resistance from dealers all over. Another reason behind not phasing out Maruti 800 was the fear of brand shift of customers to other competitors product. Swift was launched in May, 2005 in the price band starting from 4 lacs. Before launch of Swift Maruti management had decided that they will phase out Zen since it had already came up with two modifications. The major reason behind this decision was cannibalization of Wagon R and Swift due to
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overlapping of price band. It is a rational decision to kill a product before it starts facing the decline stage in product cycle. Maruti is offering Rs. 3000.00 more margins to dealer on the sale of Wagon-R as compared to Zen. This is to let dealer push Wagon R instead of Zen. (C). MARUTI PLANS FOR A BIG DIESEL FOR A YEAR:The new car manufacturing company, called Maruti Suzuki Automobiles India Limited, will be a joint venture between Maruti Udyog and Suzuki Motor Corporation holding a 70 per cent and30 per cent stake respectively. The Rs1,524.2 crore plant will have a capacity to roll out 1lakh cars per year with a capacity to scale up to 2.5 lakh units per annum. The new car manufacturing plant will begin commercial production by the end of 2006.Maruti would set up a diesel engine plant at Gurgaon in line with its plan to become a major player in diesel vehicles in a couple of years. This has been done in the wake of major competition from Tata Indica and meets the growing demand of diesel cars in India. While the annual growth in the diesel segment was 13 per cent in the last three years, it was 19-20 percent in the first quarter (April-June) of the current fiscal. Maruti has currently an insignificant presence in diesel vehicle. It will manufacture new generation CRDI (common rail direct injection) engines in collaboration with Fiat-GM Opel and engines will be of 1200 cc. The plant with a capacity to produce one lakh diesel engines would be operational in 2006. At present, Peugeot of France, supplies diesel engines for Marutis Zen and mid-sized Esteem models. This will further reduce the imported component in Maruti vehicles, making them more competitive in the Indian market. (D). MARUTI PLANS FOR A NEW ENGINE AND TRANSMISSION PLANT:The engine and the transmission plant will be owned by Suzuki Power train India Limited in which Suzuki Motor Corporation
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would hold 51 per cent stake and Maruti Udyog holding the balance. The ultimate total plant capacity would be three lakh diesel engines. However, the initial production would be 1 lakh diesel engines, 20,000 petrol engines and 1.4 lakh transmission assemblies. Investment in this facility will be Rs.1,747.7 crore. The commercial production will start by the end of 2006. (E). INDIA AS EXPORT HUB FOR MARUTI:Three years back as an experiment, based on the increasing design capabilities of suppliers in countries like India, McKinsey did an exercise to figure out just how much money could be saved if automobiles were to be made in overseas locations like India, Mexico and South Africa -- an automobile BPO, so to speak. The result was staggering: the industry stands to gain $ 150 billion annually in cost savings, and an additional $ 170 billion annually in new revenues once demand shoots up following the drop in prices, and the combination of which means a 25 per cent increase in existing revenue levels. According to the study, over 90 per cent of automobiles today are sold in the countries the year made in, so there is a lot of money to be made by shifting the production overseas. Till recently, just 100,000 cars produced in low-cost countries were exported to high-cost ones --presumably this figure is going up now that Altos from Maruti, Santros from Hyundai, Indicas from Tata Motors, and Ikons from Ford, among others, are being regularly exported out of India. yet, as McKinsey points out, since it just costs $ 500 and just three weeks (and both figures are falling) to ship out a car to anywhere in the world, why produce cars in high-wage is lands? If a car was produced in India instead of in Japan, the study says, it will cost 22-23 per cent less, after factoring in higher import duties for components/steel, lower levels of automation, and transport costs. In August, 2003 Maruti crossed a milestone of exporting 300,000 vehicles since its first exporting 1986. Europe is the largest destination of Marutis exports and coincidentally after the first commercial shipment of 480 units to Hungary in 1987, the 300,00 mark was crossed by the shipment of 571 units to the same country. The top ten destination of the cumulative
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exports have been Netherlands, Italy, Germany, Chile, U.K., Hungary, Nepal, Greece, France and Poland in that order.. Maruti exported more than 51,000 vehicles in 2003-04which was 59% higher than last year. In the financial year 2003-04 Maruti exports contributed to more than 10% of total Maruti sales. (F). MARUTI EMERGING AS R&D HUB FOR SUZUKI MOTOR CORPORATION :Japanese auto major Suzuki is all set to convert Maruti Udyog Ltds research and development(R&D) facility as its Asia hub by 2007 for the design and development of new compact cars, according to a top official of the firm. The countrys leading car manufacturer will make substantial investments to upgrade its research and development centre at Gurgaon in Haryana for executing design and development projects for Suzuki. This includes localization, modernization and greater use of composite technologies in upcoming models. The company will be hiring more software engineers and technocrats to handle Suzukis R&D projects. Investment would be more in terms of manpower than in infrastructure, which is already in place. Apart from working on innovative features, the R&D teams will focus on latest technologies using CAD-CAM tools to roll out new models that will meet the needs of MULs diverse customers in the future. The reasons as to why it can be good for R&D is that Firstly the cost involved in R&D and infrastructure is low in India as compared to other countries. Also the technical skills are abundantly available; again at a cheaper cost. Secondly, India is growing as an export hub along with the Indian market growing aggressively into becoming an attractive one for investors. Thirdly, Suzukis investment in India, is also important as it has completely divested now as a result MUL will now become a 100% subsidiary of Suzuki in the coming year. KEY SUCCESS FACTORS (1)The Quality Advantage Maruti Suzuki owners experience fewer problems with their vehicles than any other car manufacturer in India (J.D. Power IQS Study 2004). The Alto was chosen No.1 in the premium

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compact car segment and the Esteem in the entry level mid size car segment across 9parameters. (2)A Buying Experience Like No Other Maruti Suzuki has a sales network of 307 state-of -the-art showrooms across 189 cities, with a workforce of over 6000 trained sales personnel to guide MUL customers in finding the right car. (3)Quality Service Across 1036 Cities In the J.D. Power CSI Study 2004, Maruti Suzuki scored the highest across all 7 parameters :least problems experienced with vehicle serviced, highest service quality, best in-service experience, best service delivery, best service advisor experience, most user-friendly service and best service initiation experience.92% of Maruti Suzuki owners feel that work gets done right the first time during service. The J.D. Power CSI study 2004 also reveals that 97% of Maruti Suzuki owners would probably recommend the same make of vehicle, while 90% owners would probably repurchase the same make of vehicle. (4)One Stop Shop At Maruti Suzuki, customers will find all car related needs met under one roof. Whether it is easy finance, insurance, fleet management services, exchange- Maruti Suzuki is set to provide a single-window solution for all car related needs. (5) The Low Cost Maintenance Advantage The acquisition cost is unfortunately not the only cost customers face when buying a car. Although a car may be affordable to buy, it may not necessarily be affordable to maintain, as some of its regularly used spare parts may be priced quite steeply. Not so in the case of a Maruti Suzuki. It is in the economy segment that the affordability of spares is most competitive, and it is here where Maruti Suzuki shines. (6)Lowest Cost of Ownership the highest satisfaction ratings with regard to cost of ownership among all models are all Maruti Suzuki vehicles: Zen, Wagon R, Esteem, Maruti 800, Alto and Omni. (7) Technological Advantage

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It has introduced the superior 16 * 4 Hypothec engines across the entire Maruti Suzuki range. This new technology harnesses the power of a brainy 16-bit computer to a fuel-efficient 4-valve engine to create optimum engine delivery.

3. RATIO ANALYSIS OF MARUTI SUZUKI INDIA LTD.

RATIO ANALYSIS: The term Ratio refers to the numerical and quantitative relationship between two items or variables. These relationships can be exposed as
Percentages Fractions Proportion of numbers

Ratio analysis is defined as the systematic use of the ratio to interpret the financial statements. So that the strengths and weaknesses of a firm, as well as its historical performance and current financial condition can be determined. Ratio reflects a quantitative relationship helps to form a quantitative judgments.

STEPS IN RATIO ANALYSIS.

The first task of the financial analysis is to select the information

relevant to the decision under consideration from the statements and calculates appropriate ratios.
To compare the calculated ratios with the ratios of the same firm

relating to the past or with the industry ratios. It facilitates in assessing success or failure of the firm.

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 Third step is to interpretation, drawing of inferences and report

writing conclusions are drawn after comparison in the shape of reporter recommended courses of action

BASIS OR STANDARDS OF COMPARISON: Ratios are relative figures reflecting the relation between variables. They enable analyst to draw conclusions regarding financial operations. They use of ratios as a tool of financial analysis involves the comparison with related facts. This is the basis of ratio analysis. The basis of ratio analysis is of four types.
Past ratios, calculated from past financial statements of the firm.

Competitors ratio, of the some most progressive and successful

competitor firm at the same point of time.

Industry ratio, the industry ratios to which the firm belongs to.

Projected ratios, ratios of the future developed from the projected

or pro forma financial statements

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INTERPRETATION OF THE RATIOS: The interpretation of ratios is an important factor. The inherent limitations of ratio analysis should be kept in mind while interpreting them. The impact of factors such as price level changes, change in accounting policies, window dressing etc., should also be kept in mind when attempting to interpret ratios. The interpretation of ratios can be made in the following ways.

Single absolute ratio

Group of ratios

Historical comparison

Projected ratios

Inter-firm comparison

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GUIDELINES OR PRECAUTIONS FOR USE OF RATIOS The calculation of ratios may not be a difficult task but their use is not easy. Following guidelines or factors may be kept in mind while interpreting various ratios is:
Accuracy of financial statements

Objective or purpose of analysis

Selection of ratios

Use of standards

Caliber of the analysis

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DATA ANALYSIS
1) LIQUIDITY RATIO CURRENT RATIO = CURRENT ASSET / CURRENT LIABILITIES CURRENT CURRENT RATIO YEAR ASSET LIABILITY 2010 3856.00 3788.40 1.02:1 2011 6443.10 4331.00 1.49:1

1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2010 2011 Ratio

Comment: Standard of current ratio is 2:1. Therefore, the higher the current ratio, the greater the short term solvency. When we compare both the years ratio, in 2011 it is quite satisfactory from last year. I.e. from 1.02 to 1.49 in 2011.

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2) PROFITABILITY RATIO OPERATING MARGIN = OPERATING PROFIT / NET SALES * 100 OPERATING NET SALES RATIO YEAR PROFIT 2010 3737.90 29317.70 12.74% 2011 3343.20 36561.50 9.14 %

14 12 10 8 6 4 2 0 2010 2011 Ratio (in % )

Comment: This ratio is final indication of the operational efficiency of the management through this we can identify the companies overall operational efficiency. According to the graph, it shows that overall efficiency is not good.

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3) LEAVERAGE RATIO DEBT EQUITY RATIO = DEBT / EQUITY DEBT EQUITY YEAR 2010 12656.50 11835.1 2011 14176.80 13867.5 RATIO 1.06 1.02

1.06 1.05 1.04 1.03 1.02 1.01 1 2010 2011 Ratio

Comment: Here the standard ratio is 2:1. a high debt equity ratio would indicate that company should prefers to go for fixed charge capital rather than to go for equity, this ratio helps to decide the debt equity proportion. Therefore, lower the debt equity ratio higher would be the degree of protection enjoyed by the creditors. Through this graph we can identify that in 2011 debt equity ratio is lower which is good for the company.

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4) TURNOVER RATIO NET PROFIT MARGIN = NET PROFIT / NET SALES NET PROFIT NET SALES RATIO YEAR 2010 2402.20 29317.70 8.16% 2011 2230.80 36561.50 6.10%

9 8 7 6 5 4 3 2 1 0 2010 2011 Ratio (in % )

Comment: This ratio measures the overall efficiency of production, administration, selling, financing etc. it shows the actual earning for shareholders. Through this ratio shareholders can decide whether to invest or not so if company wants more shareholders so they can identify this ratio and try to improve the same. Normally, high ratio of net profit to net sales is necessary for the success of the business. The plotted graph shows that compare to 2010, in 2011 this ratio is not satisfactory.

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TOTAL ASSET TURNOVER RATIO = SALES / TOTAL ASSET SALES CURRENT RATIO YEAR ASSET 2010 32174.10 3856.00 8.34 2011 40865.50 6443.10 6.34

9 8 7 6 5 4 3 2 1 0 Ratio

2010

2011

Comment: This ratio is indicating the proportion utilization of its asset in generating sales, which means whether the company is able to utilize its asset properly for generating sales. According to graph, in 2011 MARUTI is utilizing its total asset low as compared to 2010.

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FIXED ASSET TURNOVER RATIO = SALES / FIXED ASSET SALES FIXED ASSET RATIO YEAR 2010 32174.10 10406.70 3.09 2011 40865.50 11737.70 3.48

3.5 3.4 3.3 3.2 3.1 3 2.9 2.8 2010 2011 Ratio

COMMENT: It is quite similar to the total asset turnover ratio but firm consider fixed asset rather than total asset to generate sales. The graph is showing that the company is utilizing its fixed asset in very good proportion in 2011 compare to 2010. So it is good for the company.

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CAPITAL TURNOVER RATIO = SALES / CAPITAL EMPLOYED SALES CAPITAL RATIO YEAR EMPLOYED 2010 32174.10 12656.60 2.54 2011 40865.50 14176.80 2.88

2.9 2.8 2.7 2.6 2.5 2.4 2.3 2010 2011 Ratio

Comment: Net worth include of equity and surplus. If this ratio is greater than industrial average, it indicates that the company has been using less efficient use of equity financing. MARUTI SUZUKI is using its equity financing more in 2011 compare to the 2010.

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RETURN ON NET WORTH = PROFIT /CAPITAL EMPLOYED*100 PROFIT CAPITAL RATIO YEAR EMPLOYED 2010 2497.60 12656.60 19.73% 2011 2288.60 14176.80 16.14%

20 18 16 14 12 10 8 6 4 2 0

Ratio (in % )

2010

2011

Comment: It should be more than 15%. If the investors want to invest in the companys share so they will first check this ratio and decide. The graph shows that in 2011 company is not able to impress more shareholders compare to the last year because it falls down.

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4. FINDINGS AND SUGGESTIONS. FINDINGS

1. The current ratio is has shown in a fluctuating trend as 1.02, 1.49

during 2011 which indicates continues increase in current asset and current liabilities.

2. Operating profit ratio is decreasing comparing to last year i.e. 12.74 to

9.14%.

3. Debt- equity ratio is coming lower from 1.06 to 1.02 in 2011 which

helps to increase the degree of protection enjoyed by the creditors.

4. Net profit ratio is in decreasing trend during 2011 that shows that

company is not earning sufficient profit compare to the last year. i.e. 8.14% to 6.14%.

5. Total asset turnover ratio shows decreasing fluctuation that shows that

company has utilized total asset low as compared to 2010.

6. Fixed asset ratio is in increasing trend from the 2010 which shows that

company is in good position to utilize its fixed asset to generate sales.

7. The capital turnover ratio is increased in 2011.

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8. Return on net worth ratio is decreasing compare to the last year. It

should be more than 15% and in both the year it is satisfactory.

SUGGESTIONS:

1) After the analysis of financial Statements, the company status is better, because the Net working capital of the company is doubled from the last years position. 2) The company profits are huge in the current year; it is better to declare the dividend to shareholders. 3) The company is utilizing the fixed assets, which meagerly help to the growth of the organization. The company should maintain that perfectly. 4) The company fixed deposits are raised from the inception, it gives the other income i.e., Interest on fixed deposits. 5) Company should try to maintain the return on net worth ratio which comes down in the current year.

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Following is the chart showing proportion of net sales and profit after tax.

400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 20092010 20102011 NET SALES PAT

CONCLUSION: Companys net sale is increasing in current year, but with the increase in net sales, net profit is comes down in 2011.

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Sales volume of the company at domestic and international level.

120,000 100,000 80,000 60,000 40,000 20,000 0 2009- 20102010 2011 DOMESTIC EXEPORTS

CONCLUSION:The companys overall position is at a good position. Particularly the current years position is well due to raise in the sales level from the last year position. It is better for the organization to diversify the funds to different sectors in the present market scenario.

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Mar ' 11 Sources of fund Owners fund Equity share capital Share application money Preference share capital Reserves & surplus Secured loans Unsecured loans Total Uses of fund Fixed assets Gross block Less : revaluation reserve Less : accumulated depreciation Net block Capital work-in-progress Investments Net current asset Current assets, loans & advances Less : current liabilities & provisions Total net current assets Miscellaneous expenses not written Total Notes Book value of unquoted investments Market value of quoted investments 4,395.60 264.00 6,443.10 4,331.00 2,112.10 14,176.80 11,737.70 6,208.30 5,529.40 1,428.60 5,106.70 144.50 13,723.00 31.20 278.10 14,176.80

Mar ' 10

144.50 11,690.60 26.50 794.90 12,656.50

10,406.70 5,382.00 5,024.70 387.60 7,176.60

3,856.00 3,788.40 67.60 12,656.50

11.10 215.10

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Mar ' 11 Contingent liabilities Number of equity shares outstanding (Lacs) 5,450.60 2889.10

Mar ' 10 3,657.20 2889.10

Mar ' 11 Income Operating income Expenses Material consumed Manufacturing expenses Personnel expenses Selling expenses Administrative expenses Expenses capitalized Cost of sales Operating profit Other recurring income Adjusted PBDIT Financial expenses Depreciation Other write offs Adjusted PBT Tax charges Adjusted PAT Non recurring items Other non cash adjustments 28,806.80 2,159.60 703.60 960.00 614.00 -25.70 33,218.30 3,343.20 745.70 4,088.90 24.40 1,013.50 3,051.00 820.20 2,230.80 38.90 18.90 36,561.50

Mar ' 10

29,317.70

22,435.40 1,278.20 545.60 916.00 404.60 25,579.80 3,737.90 617.70 4,355.60 33.50 825.00 3,497.10 1,094.90 2,402.20 44.30 51.10

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Mar ' 11 Reported net profit Earnings before appropriation Equity dividend Preference dividend Dividend tax Retained earnings 2,288.60 12,338.50 216.70 35.10 12,086.70

Mar ' 10 2,497.60 10,501.80 173.30 28.80 10,299.70

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BIBLIOGRAPHY Referred books: Financial management Internet sites www.scribd.com www.ercap.org www.allprojects.com

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