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A FINANCIAL PROJECT REPORT ON ASHOK LEYLAND (HINDUJA GROUP) SUBMITTED TO G.L.S. INSTITUTE OF BUSINESS ADMINISTRATION G.L.S.

BBBA (AFFILIATED TO THE GUJARAT UNIVERSITY) TOWARDS THE PARTIAL FULFILLMENT OF THE PAPER OF PRACTICAL STUDIES IN THE SECOND YEAR OF BACHELOR OF BUSINESS ADMINISTRATION PROGRAMME SUBMITTED BY: amit .P. nagar S.Y B.B.A. ROLL NO:-160

Acknowledgement
We forward our gratitude to respected Director, Prof. Mr. V B Patel, the faculty, the librarian and the Administrative staff of G.L.S. institute of business support. administration-G.L.S B.B.A for their

Finally, I express my sincere thanks to Prof. SHREEDA SHAH who guided me throughout the project and gave me valuable suggestions and encouragement.

Last but not the least we are grateful to Gujarat university for including group report work as the part of curriculum of B.B.A program without which we could not experience the meaning of team work and co-operation among the members of the group.

Preface
CHANGE YOURSELF OTHERWISE THE CHANGE WILL CHANGE YOU

This saying has played a guiding role while preparing this project report work. The

preparation of this project report is based on FINANCIAL DATA issued by ASHOK LEYLEND LTD. (HINDUJA GROUP) The project report is accompanied with practical experience to add some worthiness to education. This practical training in B.B.A program develops

core competencies of business world. Thus, we have a practical outlook of the managerial

experts and witness the function of management in real business.

My work in this project is, therefore, a humble attempt towards this end.

In spite of my best efforts, there may be errors of omissions and commissions, which may please be excused.

INDEX
1. 2. 3. COMPANY PROFILE FINANCIAL HIGHLIGHTS GROSS PROFIT NET PROFIT PBIT PBT ACCOUNTING POLICIES

4. 5. 6. 7. 8. 9. 10. 11. 12.

RATIO ANLYSIS DIRECTORS REPORT AUDITORS REPORT CASH FLOW STATEMENT COMMON SIZE STATEMENT SOURCE OF INFORMATION BIBLIOGRAPHY STUDENTS CONCLUSION ANNEXURE

Company Profi le

Name of the company


ASHOK LEYLEND LIMITED

(HINDUJA GROUP)

Address of the company


19, RAJAJI SALAI, CHENNAI 600001, TAMILNADU

Introduction about companies Activity


Since five decades Ashok Leyland are technology leaders by introducing technologies & product ideas in Indias commercial vehicle profile which have now become industry norms.

From 18 seats to 82 seats double Decker buses, from 7.5 tons in haulage vehicles, from numeral special application vehicle to diesel engine for industrial, marine and genet application, Ashok Leyland offer a wide range of products. 8 out of 10 Metro state transport buses in India are of Ashok Leyland with 60 million passengers per day. Ashok Leyland buses carry more people than the entire Indian Rail network.

Status in the Market


1. Ashok Leyland has more a near to 98.5% market of Marine diesel engine in India. 2. It is one of the leading suppliers of defense vehicles in the world.

3. It is one of the leading brands in India and most easily recognizable one. 4. In 2002 all the vehicle manufacturing units of Ashok Leyland were ISO 14001 certified unit with environmental management system. 5. The company has its valid capacity 84000 vehicle per annum. 6. Last year, the company acquired the Czech-based Avias Truck Business LTD. The new company formed is named as Avia Ashok Leyland.

Special Achievement
1. Indian Manufacturing Excellence Award 2007

Ashok Leylands Bhandara units bagged the platinum under the Indian manufacturing excellence award (IMEA) 2007 concluded by Fost & Sullivan regarded one of the highest award rating in Indian manufacturing market.

2. CV manufacturer of the year 2008


Ashok Leyland was declared CV manufacturer of the year at NDTV car India, bike & commercial vehicle Awards 2008

3. Best Employer in the manufacturing sector


Ashok Leyland won the CNBC-TV 18 Award for Best employer in the manufacturing sector.

4. International Award for quality circle


At the international conversion for quality control circles ICQCC 2007 held at Beijing in October 2007. Ashok Leyland quality circles won two golds & one silver more than 200 team from 13 countries participated.

Financial Highlights
Particulars Income Sales (net of excise duty) 77,291 71,682 52,477 2007-2008 (Rs in million) 2006-2007 2005-2006

Other income Total Expenditure Material cost Employee expenses Other expenses Depreciation Financial expenses Total Profit before extra ordinary item Extraordinary item income/ (Expenses) P.B.T Tax (current) P.A.T Basic Earning per share (In Rs) Diluted E.P.S (in Rs)

740 78,031 57,647 6,162 5,443 1,774 497 71,523 6,508 (127) 6,381 1,014 4,693 3.53 3.53

708 72,390 54,632 4,807 5,216 1,506 53 66,214 6,176 (131) 6,045 1,351 4,413 3.38 3.36

329 52,806 37,690 4,038 5,347 1,260 165 48,500 4,306 217 4,523 1,131 3,273 2.74 2.58

Analysis & objectives of Study


The main objective of analyzing and studying the accounts of Ashok Leyland LTD. is to figure out the condition of the company in the market. Accounts depict the financial status of the company and thus to know whether it is

financially sound or not and one should invest in it for which an analytical study is performed. Ratios help an individual to know & understand the present standing i.e. the status of the company in the market. The main objectives of analysis are: 1. Evaluation of Efficiency 2. Helps in taking decision 3. Tax decision 4. Useful to third parties 5. Useful From the view point of creditors.

Results Of Opera tion

GROSS PROFIT

The Gross profit of the company for the last three years is as follows: YEAR 2005-06 2006-07 2007-2008 Gross profit (Rs in million) 8283 7682 5566

G ss p fit (R in m n ro ro s illio ) 90 00 80 00 70 00 60 00 50 00 40 00 30 00 20 00 10 00 0 2 0 -0 05 6 2 0 -0 06 7 2 0 -2 0 07 08 2 0 -0 05 6 2 0 -0 06 7 2 0 -2 0 07 08

NET PROFIT
The Net profit of the company for the last three years is as follows: YEAR 2005-06 2006-07 2007-2008

Net profit (Rs in million) 4693 4413 3273

N t p fit (R in m n e ro s illio ) 50 00 40 50 40 00 30 50 30 00 20 50 20 00 10 50 10 00 50 0 0 2 0 -0 05 6 2 0 -0 06 7 2 0 -2 0 07 08 2 0 -0 05 6 2 0 -0 06 7 2 0 -2 0 07 08

PROFIT BEFORE INTEREST AND TAX


Profit before interest and tax means profit after deducting expenses incurred for sales and administration charges only. No fixed charges are deducted

YEAR 2005-06 2006-07 2007-2008

PBIT (Rs in million) 6879 6098 4688


P IT (R in m B s illio ) n

80 00 70 00 60 00 50 00 40 00 30 00 20 00 10 00 0 2 0 -0 05 6 2 0 -0 06 7 2 0 -2 0 07 08 2 0 -0 05 6 2 0 -0 06 7 2 0 -2 0 07 08

PROFIT BEFORE TAX


Profit before tax means net profit after deducting all expenses including depreciation, interest and tax.

YEAR 2005-06 2006-07 2007-2008

PBIT (Rs in million) 6879 6098 4688


P IT (R in m B s illio ) n

80 00 70 00 60 00 50 00 40 00 30 00 20 00 10 00 0 2 0 -0 05 6 2 0 -0 06 7 2 0 -2 0 07 08 2 0 -0 05 6 2 0 -0 06 7 2 0 -2 0 07 08

Important of cash profit


A statement showing cash inflow and cash outflow during the last year and as a result the cash balance at the end of the year is known as cash flow statement. This statement helps management to know the actual liquid or position of cash on hand and also to ascertain whether the business is able to get enough cash to meet the liabilities as and when they arise. It is prepared by comparing figures of last 2 years i.e. is a historical statement. It is useful for cash forecasting. It is useful for internal financing management. It also gives information about the trend of cash receipt & payment.

Following are the features of the cash flow:

1. Efficient cash management


If the finance manager has a clear idea of cash receipt & payments cash resources can be efficiently managed.

2. Information about cash receipt & payment


Such a statement prepared for last year is useful for comparing the figures of cash budget and points of differences may be located. Its useful to the management in meeting any future contingencies and also in capturing a profitability opportunity.

3. Give clear about cash income


Net profit is vague calculation. It is arrived on the basis of number of assumption. Cash flow help to explain gap between net profit & cash balance.

Accounting Polici es

ACCOUNTING POLICIES
The accounting policies refer to the specific accounting principles and the methods of applying those principles adopted by the enterprise in the preparation and presentation of financial statement.

There is no single list of accounting policies which are applicable to all circumstances. The differing circumstances in which enterprises operate in a situation of diverse and complex economic activity make alternative accounting principles and methods of applying those principles acceptable. The decisions of choosing policies are result of considerable judgment by the management of the enterprise.

The main consideration in the selection of Accounting policies is to prepare financial statement that show true and fair view of the state of affairs of the enterprise as at the Balance Sheet and of Profit and loss for the year ended on that date.

The following are the examples if the area in which different accounting policies may adopt by different enterprises.

Methods of depreciation, depletion and amortization. Treatment of expenditure during construction. Conversion or translation of foreign currency items. Valuation if inventories. Treatment of goodwill. Valuation if investment. Recognition of profit on long term contracts. Valuation of fixed assets. Treatment if contingent liabilities

The major considerations while selection and application of accounting policies are: a) Prudence b) Substance over form c) Materiality.

Ratio Analysi s

DEFINITION OF RATIO ANALYSIS

Ratio analysis is the study of financial condition and performance through ratios derived from items in the financial statements or from other financial or non financial.

Utilizes the data from all four financial statements and provides a broader perspective of the firms financial condition. Can ascertain the profitability of a firm, its ability to meet short-term obligations, the extent to which the company is financed by debt, and whether the management is utilizing its assets effectively. Any successful business owner is constantly evaluating the performance of his/her company, comparing it with the

company historical figures, with its industry competitors, and even with successful businesses from other industries, to complete o thorough examination of your company

effectiveness, however, you need to look at more than just easily attainable numbers like sales, profits, and total assets. You must be able to read between the lines of your financial statements and make the seemingly inconsequential numbers accessible and comprehensible.

This massive data overload could seem staggering. Luckily, there are many well-tested ratios out there that make the task a bit less daunting. Comparative ratio analysis helps you identify and quantify your companys strengths and

weaknesses, evaluate its financial position, and understand the risks you may be taking. As with any other form of analysis, comparative ratio techniques arent definitive and their results shouldnt be viewed as gospel. Many off-the balance sheet factors can play a role in the success or failure of a company. But, when

used in concert with various other business evaluation processes, comparative ratios are invaluable.

This discussion contains description and examples of the eight major types of ratio used in financial analysis: Income, Profitability, Liquidity, and Working capital, Bankruptcy, Long-term Analysis, Coverage and Leverage.

Classification:
There are two methods for classification of Ratio they are: 1. Traditional Approach 2. Functional Approach 1. Traditional Approach: The ratios are grouped in to three categories on the basis of the statements from which the figures are taken for computing the ratios. It is called the traditional classification

and has been there since the dawn of ratio analysis. (a) Revenue statement: These ratios are computed on the basis of the elements taken from revenue statement i.e. P&L account. E.g. Net profit is obtained by dividing PAT by sales which are taken from P&L A/C. (b) Balance Sheet: When two items or group of items appearing in the balance sheet are compared the ratio that is attained is known as balance sheet ratio e.g. Current ratio

(c) Composite ratio The ratio that shows a relationship between two items of which one is taken from balance-sheet and other from

P&L A/C is called composite ratio e.g. Return on capital employed. 2. Functional Ratio: Ratio are grouped in accordance with certain tests following are its types (a) Liquidity Ratio: This ratio indicates the liquidity position of the company. They suggest whether the company is in the position to meet its short terms obligation from its short assets. (b) Profitability Ratio: These ratios indicate the profit situation of the company. (c) Leverage Ratio: The composition of owners capital and the capital provided by the outsiders is reflected by this ratio.

TYPES OF RATIOS
Some of the different types of ratios that can be calculated from data in the financial statements and used to evaluate a business include: 1) Profitability Ratios 2) Leverage Ratios 3) liquidity Ratios 4) Turnover Ratios 5) Valuation Ratios

The bottom line on the income statement is not the only important figure on the financial statements, and may not even be the most important. There is another whole dimension of valuable information that can be obtained from the data reported in the financial statements. Ratio analysis is one of many tools that

can be used to evaluate a companys performances, its current status, and its evolution over time. And if you are the owner of the business, this type of analysis can help you make the right decisions to improve your operations and make your business stronger and more successful.

Profitability Ratio (All Rs in


million)

(A) In relation to sales


1. Gross profit Ratio: Meaning:
G.P is obtained by deducting C.O.G.S from net sales. The main purpose of computing this ratio is to determine the efficiency with which production and purchase operation are carried out.

Formula:

Gross profit ratio: Gross profit *100 Net sales 2005-2006 = = 2006-2007 = = 2007-2008 = = 5730 *100 52477 10.92% 7735 *100 71682 10.79% 8780 *100 77291 11.36%

Table:
YEAR 2005-06 2006-07 2007-2008 Gross profit (%) 10.92 10.79 11.36

G s p fit (% ro s ro ) 1 .5 1 1 .4 1 1 .3 1 1 .2 1 1 .1 1 1 1 1 .9 0 1 .8 0 1 .7 0 1 .6 0 1 .5 0 2 0 -0 05 6 2 0 -0 06 7 G s p fit (% ro s ro ) 2 0 -2 0 07 08

Interpretation:
This ratio indicates an average gross margin earned on a sale of Rs 100, the limit beyond which the fall in sales prices will definitely result in losses, what portion of sales is left to cover operating & non operating expense like to pay dividend and to create reserves. Higher the ratio efficient is the production management & vice-versa. The companys ratio in the year 2005-2006 was 10.92% which decreases to 10.79% and presently on rise and has increased to 11.36%.

2. Net profit Ratio: Meaning:

This profit is obtained after deducting taxes; interest etc. the main objective of computing this ratio is to determine the overall profitability due to various factors such as operational efficiency.

Formula:
Net profit ratio: Net profit *100 Net sales 2005-2006 = 3273 *100 52477 = 2006-2007 = = 2007-2008 = = 6.24% 4413 *100 71682 6.16% 4693 *100 77291 6.07%

Table:

YEAR 2005-06 2006-07 2007-2008

Net profit (%) 6.24 6.16 6.07


N p fit (% et ro )

6 .3 6 5 .2 6 .2 6 5 .1 6 .1 6 5 .0 6 5 5 .9 2 0 -0 05 6 2 0 -0 06 7 N p fit (% et ro ) 2 0 -2 0 07 08

Interpretation:
This ratio indicates an average net margin earned on a sale of Rs 100, what portion of sales is left to pay dividend & the firms capacity to withstand adverse economic conditions when selling price is declining. The companys ratio has been decreasing ate. It has 6.24% in 2005-2006. It decreases in 2007-2008 i.e.6.16% to 6.07%.

3. Expense Ratio: Meaning:


The ratio is obtained by dividing the expense with net sales. The idea behind calculating this ratio is to decide upon the operational efficiency of the firm.

Formula:
Expense ratio: 2005-2006 = = 2006-2007 = = 2007-2008 = = expense *100 Net sales 47,076 *100 52477 89.71% 64,655 *100 71680 90.21% 69,251 *100 77291 89.60%

Table:
YEAR 2005-06 2006-07 2007-2008 Expense profit (%) 89.71 90.21 89.60
E en e p fit (% xp s ro ) 9 .3 0 9 .2 0 9 .1 0 9 0 8 .9 9 8 .8 9 8 .7 9 8 .6 9 8 .5 9 8 .4 9 8 .3 9 8 .2 9 2 0 -0 05 6 2 0 -0 06 7 E en e p fit (% xp s ro ) 2 0 -2 0 07 08

Interpretation:
This ratio tells us about the expense incurred on the scale of its products. Lower is the ratio higher is the profit margin of the company & vice-versa. The companys ratio had decline compare to the previous year. Thus the company is actively working towards expense reduction so as to increase in the profits to great amounts.

In 2005-2006 its ratio was 89.71% and in the present year it decreased to 89.60%.

4. Operating Ratio: Meaning:


Operating ratio is obtained by adding C.O.G.S. & operating expenses and dividing by net sales. The intention behind calculating this ratio is to find out the operating efficiency of the firm.

Formula:
Operating ratio: operating expense *100 cost of sales + Net sales 2005-2006 = = 2006-2007 = = 46,747+2457 *100 52477 93.76% 63,947+3322 *100 71680 93.85%

2007-2008 = =

68,511+4070 *100 77291 93.93%

Table:
YEAR 2005-06 2006-07 2007-2008 Operating ratio (%) 93.76 93.85 93.93
O eratin ratio(% p g ) 9 .9 3 5 9 .9 3 9 .8 3 5 9 .8 3 9 .7 3 5 9 .7 3 9 .6 3 5 2 0 -0 05 6 2 0 -0 06 7 O eratin ratio (% p g ) 2 0 -2 0 07 08

Interpretation:
This ratio tells us about the cost incurred on the scale of its goods. Lower the greater is the operating profit to cover the

non-operating expenses, to pay dividends to create reserves and vice-versa. The operating ratio of the company has been increasing. In last year it was 93.85% which is little bit increase in current year i.e. 93.93%.

(B) In relation to Investments:


(All Rs in million)

1. Return on capital employed: Meaning:


The ratio is obtained by dividing PBIT & capital employed. The main motive for calculative for this ratio is to find out how efficiently the long term funds supplied by debenture holder & share holders are used.

Formula:
Return on capital employed: *100 employed 2005-2006 = 4688 *100 15,441 P.B.I.T Capital

= 2006-2007= = 2007-2008= =

30.36% 6098 *100 19,552 31.19% 6879 *100 21917 31.39%

Table:
YEAR 2005-06 2006-07 2007-2008 Return on capital employed (%) 30.36 31.19 31.39

R rno c ital em lo ed(% etu n ap p y ) 3 .6 1 3 .4 1 3 .2 1 3 1 3 .8 0 3 .6 0 3 .4 0 3 .2 0 3 0 2 .8 9 2 0 -0 05 6 2 0 -0 06 7 R tu o c ita em lo ed(% e rn n ap l p y ) 2 0 -2 0 07 08

Interpretation:
This ratio tells us how efficiently the management is being carried out and how well the capital employed is being utilized. In the present year company has increased its capital employed by issuing debentures. The ratio has been increased from 31.19% to 31.39%.

2. Return on shareholders fund: Meaning:


The ratio is obtained by dividing PAT by equity or shareholders funds. The main purpose behind calculating for this ratio is to determine how efficiently the funds belonging to the used. share holders have been

Formula:
Return on shares holder: *100 Net profit

Shareholders fund 2005-2006 = = 2006-2007 = = 2007-2008 = = 3272 *100 6,795.81 48.16% 4413 *100 18,701.5 23.6% 4693 *100 21266 22.07%

Table:
YEAR 2005-06 2006-07 2007-2008 Return on shares holder (%) 48.16 23.6 22.07

R t r o s a e h ld r ( ) eun n h r s o e % 6 0 5 0 4 0 3 0 2 0 1 0 0 20- 6 0 50 20- 7 0 60 R t r o s a e h ld r ( ) eun n h r s o e % 20- 08 0 72 0

Interpretation:
The ratio specifies the organization ability of generating profit per 100Rs of shareholders funds. Higher the ratio more efficient is the management and utilization of shareholders funds. The company increased its capital employed thus its ratio has increased compare to last year. The company is making active & sincere efforts to use its sources more proficiently. The ratio has declining. In 2005-2006 it was great decrease at 23.6% and in 2007-2008 it was little bit decrease 22.07%.

3. Return on equity share capital: Meaning:

The ratio is obtained by dividing equity profit & equity share capital. The purpose for calculating this ratio is to decide how well the funds supplied by equity share holders are being used.

Formula:
Return on equity share capital: Equity profit *100 Equity Share capital 2005-2006 = = 2006-2007 = = 2007-2008 = = 2303.7 *100 1221.59 188.58% 3616.86 *100 1323.87 273.2% 5022.74 *100 1330.34 377.55%

Table:
YEAR 2005-06 2006-07 2007-2008 Return on equity share capital (%) 188.58 273.2 377.55
R rno e u s a c p l (% etu n q ity h re a ita ) 40 0 30 5 30 0 20 5 20 0 10 5 10 0 5 0 0 2 0 -0 05 6 2 0 -0 06 7 R rno e u s a c p l (% etu n q ity h re a ita ) 2 0 -2 0 07 08

Interpretation:
The ratio specifies the firms ability of generating profit per 100Rs of equity share capital. Higher the ratio more efficient is the utilization of funds supplied by equity share holders. The company ratio had increasing rate.

In the last ratio was 273.2%. It has increase in current year at 377.55%.

4. Return on equity shareholders fund: Meaning:


The ratio is calculated by dividing equity shareholders funds. The objective behind calculation of this ratio is to find out how efficiently the funds supplied by equity share holders have been used.

Formula:
Return on Net profit equity shareholders *100 fund: Equity Shareholders fund 2005-2006 = = 2006-2007 = = 2303.7 *100 6795.81 33.9% 3616.86 *100 18701.5 19.34%

2007-2008 = =

5022.74 *100 21260.9 23.62%

Table:
YEAR 2005-06 2006-07 2007-2008 Return on equity shareholders fund (%) 33.9 19.34 23.62
R eturn on equity s hareholders fund (% ) 40 35 30 25 20 15 10 5 0 2005-06 2006-07 R eturn on equity s hareholders fund (% ) 2007-2008

Interpretation:
The above ratio indicates the firms ability to generate profit per 100Rs of equity shareholders fund. Higher the ratio more effective is the utilization of their

resources. The company has increased its ratio compared to its last year i.e. 19.34% to 23.62%. In this particular year it has also increased its capital employed. Therefore the company is striving hard to utilize its available resources to the best of its capacity

5. Earning per share: Meaning:


The ratio is obtained by deducting preference dividend from PAT and then dividing it by number of equity shares. The purpose behind the calculation of this ratio is to find the earning of the firm on the basis of the equity shares.

Formula:
Earning per share: dividend Shares 2005-2006 = 3273.20 1992.925 PAT- Preference No. of Equity

= 2006-2007 = = 2007-2008 = =

2.74 Rs. 4412.86 1303.89 3.38 Rs. 4693.10 *100 1328.60 3.53 Rs.

Table:
YEAR 2005-06 2006-07 2007-2008 EPS (Rs) 2.74 3.38 3.53
E S (R ) P s 4 3 .5 3 2 .5 2 1 .5 1 0 .5 0 20 5-0 0 6 2 -07 006 E (R ) PS s 2 7 0 00 -20 8

Interpretation:
The ratio helps in determining the market price of the equity shares of the company. It also helps in estimating the companys capacity to pay the dividend. Higher the ratio better it is on comparing the ratio it is found the compared to last year it has little bit increase.

6. Dividend per share: Meaning:


This ratio is obtained by dividing total dividend declared by number of shares. The objective of calculating this ratio is to find out the capacity of firm to give dividend to its shareholders.

Formula:

Dividend per share: declared Shares 2005-2006 = = 2006-2007 = = 2007-2008 = = 441.17 441.17

Total dividend No. of

1 Rs. Per share 529.40 441.17 1.20 Rs. Per share 661.75 441.17 1.50 Rs. Per share

Table:
YEAR 2005-06 2006-07 2007-2008 Dividend per share 1 1.20 1.50

D id d p s are iv en er h 1 .6 1 .4 1 .2 1 0 .8 0 .6 0 .4 0 .2 0 2 0 -0 05 6 2 0 -0 06 7 D id d p s are iv en er h 2 0 -2 0 07 08

Interpretation:
This ratio indicates the firms ability to give dividend per share held by equity share holders. This ratio indicates the probability of the company and also provides a futuristic view about the company to the probable investors. The firm has its ratio on increasing rate. Last year ratio of the company was 1.20 Rs. This is increase at 1.50 Rs. Per share.

7. Price earning Ratio: Meaning:

This ratio is obtained by dividing market value per share by earning per share. The main aim to calculate this ratio is to attract prospective investors to invest in the company. It is expressed in times.

Formula:
Price earning per share: per share per share 2005-2006 = = 2006-2007 = = 2007-2008 = = 40.25 2.74 14.69 Times 38.45 3.38 11.38 Times 34.48 3.53 9.77 Times Market value Earning

Table:
YEAR 2005-06 2006-07 2007-2008 Price earning (Times) 14.69 11.38 9.77
P e earn g p s are (T es ric in er h im ) 1 6 1 4 1 2 1 0 8 6 4 2 0 2 0 -0 05 6 2 0 -0 06 7 P e earn g p s are (T es ric in er h im ) 2 0 -2 0 07 08

per

share

Interpretation:
This ratio tells us about the market value of the share and its marketing standing. It reflects the investors confidence in the company. The higher the ratio the better is the market position of the confidence of the investors.

Here in companys Ratio has been decreased to 9.77 times from 11.38 times but from the working of the company it seems it will be able to cover this differences soon.

8. Dividend yield Ratio: Meaning:


This ratio is obtained by dividing dividend per share by market value per share. The purpose behind calculation of this ratio is to find the companys capacity to give dividend the equity shareholders.

Formula:
Dividend yield ratio: share *100 share 2005-2006 = = 2006-2007 = 1.34 *100 40.25 3.33 % 1.52 *100 38.45 Dividend per Market value per

= 2007-2008 = =

4% 1.5 *100 34.48 4.4%

Table:
YEAR 2005-06 2006-07 2007-2008 Dividend yield ratio (%) 3.33 4 4.4
D id iv end y ield ratio (% ) 5 4 .5 4 3 .5 3 2 .5 2 1 .5 1 0 .5 0 2 0 -0 05 6 2 0 -0 06 7 D id d y iv en ield ratio (% ) 2 0 -2 0 07 08

Interpretation:

This ratio tells us about the dividend declared per equity share. The more dividends it gives the better is its market standing and has excess profit to meet the contingent liabilities. The company has trying to increase this Ratio. In 2005-2006 & 20062007 it was 3.33% & 4%. In current year it increases to 4.4%.

9. Interest coverage Ratio: Meaning:


This ratio is obtained by dividing PBIT by interest on loan. The objective of computing this ratio is to measure the debt servicing capacity of a firm so far fixed interest on long term debt & debenture is concerned.

Formula:
Interest coverage ratio: P.B.D.I.T

Interest on loan

2005-2006 = = 2006-2007 = = 2007-2008 = =

5948 165 36.05 Times 7604 53 143.47 Times 8653 498 17.38 Times

Table:
YEAR 2005-06 2006-07 2007-2008 Interest coverage ratio (Times) 36.05 143.47 17.38

Interes c v t o erag ratio (Tim ) e es 10 6 10 4 10 2 10 0 8 0 6 0 4 0 2 0 0 2 0 -0 05 6 2 0 -0 06 7 In teres c v t o erage ratio (T es im ) 2 0 -2 0 07 08

Interpretation:
The interest coverage ratio shows the number of times the amount of interest on long term debt is covered by the profits out which it would be paid. It indicates the limit beyond which the firms ability to pay the interest is affected. Higher the ratio better is the firms condition to pay debts but too high ratio of the company in last year was good at 143.47 times. But it is decrease high level at present year. It is 17.38 times.

3.3 Activity/Turnover Ratio


million)

(All Rs. in

1. Overall Turnover Ratio: Meaning:


This ratio is obtained by dividing net sales by capital employed. The main idea behind calculating this ratio is to find the efficiency with which the capital employed is being utilized.

Formula:
Overall Turnover ratio: employed 2005-2006 = = 2006-2007 = = 2007-2008 = 52,477 15,898.37 3.30 Times 71,682 21,957.65 3.26 Times 77,291 28,776.42 Net sales Capital

2.69 Times

Table:
YEAR 2005-06 2006-07 2007-2008 Overall Turnover ratio (times) 3.30 3.26 2.69
O verall Turnover ratio (tim ) es 3.5 3 2.5 2 1.5 1 0.5 0 2005-06 2006-07 O verall Turnover ratio (tim ) es 2007-2008

Interpretation:
The ratio indicates the firms ability to generate sales per rupees of capital employed. The higher the ratio more efficient is the management and utilization of capital employed. The ratio in the present year has decrease 3.26 times to 2.69 times.

2. Fixed Assets Turnover Ratio: Meaning:


This ratio is calculated by dividing net sales with fixed assets. The purpose behind calculating this ratio is to know how well is fixed assets of the company being utilized.

Formula:
Fixed Assets Turnover ratio: sales Fixed assets 2005-2006 = = 2006-2007 = 52,477 9432.71 5.56 Times 71,682 13,070.33 Net

= 2007-2008 = =

5.84 Times 77,291 15,255.50 5.07 Times

Table:
YEAR 2005-06 2006-07 2007-2008 Fixed Assets Turnover ratio (times) 5.56 5.84 5.07

F ixed A s T rn v ratio (tim ) s ets u o er es 6 5.8 5.6 5.4 5.2 5 4.8 4.6 2 5-0 00 6 2 6 00 -07 F ixed A s T rn v ratio (tim ) s ets u o er es 20 7 0 0 -20 8

Interpretation:

The ratio indicates the firms ability to generate sales in relation to investment in fixed assets. Higher the ratio better is the utilization of the fixed assets to generate the sales. Currently this ratio has decline. The ratio had increased from 5.56 to 5.84 and presently it has decreased to 5.07 times.

3. Debtors Turnover Ratio: Meaning:


This ratio is obtained by dividing debtors by credit sales. The objective of computing this ratio is to resolve the efficiency with which the trade debtors are managed.

Formula:
Debtors Turnover ratio: Credit sales Debtors

2005-2006 = = 2006-2007 = = 2007-2008 = =

52,477 4243.37 12.37 Times 71,682 5228.75 13.71 Times 77,291 3758.35 20.57 Times

Table:
YEAR 2005-06 2006-07 2007-2008 Debtors (times) 12.97 13.71 20.57 Turnover ratio

D ebtorsTu rnov ratio (tim ) er es 2 5 2 0 1 5 1 0 5 0 2 05 0 -06 2 6 7 00 -0 D ebtorsTu rnover ratio (tim ) es 20 0 7-20 08

Interpretation:
This ratio is directly point to the collection policy of the company. It is always good to collect money from debtors as soon as possible because the more the collection is delayed it results in making the credit policy more liberal. The companys ratio has increase from 13.71 times to 20.57 times.

4. Creditors Ratio: Meaning:

This ratio is obtained by adding creditors and Bills payable and dividing it by credit purchases. The chief motive is to find how well the creditors are being managed.

Formula:
Creditors Ratio: *365 Net credit purchase 2005-2006 = = 2006-2007 = = 2007-2008 = = 6919.81 *365 47,075.85 53.65 = 54 days 10,137.12 *365 64,654.91 57.23 = 57 days 12,925.58 *365 69,251.34 68.13 = 68 days creditors + B.P

Table:

YEAR 2005-06 2006-07 2007-2008

Creditors Ratio (days) 54 57 58


C ito R red rs atio (d s ay )

5 9 5 8 5 7 5 6 5 5 5 4 5 3 5 2 2 0 -0 05 6 2 0 -0 06 7 C ito R red rs atio (d s ay ) 2 0 -2 0 07 08

Interpretation:
This ratio tells us about the market standing of the company. An established has more creditability hence is in a position to pay its creditors later. The company should pay early to avail the cash discount. The creditors ratio has increased to great amount suggesting the fact that the company should argument its working capital.

5. Creditors Turnover Ratio: Meaning:


The objective of computing this ratio is to determine the efficiency with which the creditors are managed.

Formula:
Creditors Turnover Ratio: in a year s ratio 2005-2006 = 365 54 No. of Day Creditor

= 6.76 times 2006-2007 = 365 57

= 6.40 times 2007-2008 = 365 68

= 5.37 times

Table:
YEAR 2005-06 2006-07 2007-2008 Creditors (times) 6.76 6.40 5.37 Turnover Ratio

C ito T rn v R red rs u o er atio (tim ) es 8 7 6 5 4 3 2 1 0 2 0 -0 05 6 2 0 -0 06 7 C ito T rn v R red rs u o er atio (tim ) es 2 0 -2 0 07 08

Interpretation:
This ratio tells us about the market standing of the company. An established has more creditability hence is in

a position to pay its creditors later. The company should pay early to avail the cash discount. The creditors ratio has increased to great amount suggesting the fact that the company should argument its working capital.

6. Stock Turnover Ratio: Meaning:


This ratio is calculated by dividing C.O.G.S by average cost. The purpose of calculating this ratio is to determine the efficiency with which the inventory is utilized.

Formula:
Stock Turnover Ratio: C.O.G.S Average stock

2005-2006 =

46,747 7353.21

= 6.36 times

2006-2007 =

63,947 9864.41

= 6.48 times 2007-2008 = 68,511 11471.175

= 5.97 times

Table:
YEAR 2005-06 2006-07 2007-2008 Stock Turnover Ratio (times) 6.36 6.48 5.97
S c T rn er R to k u ov atio (tim ) es 6 .6 6 .5 6 .4 6 .3 6 .2 6 .1 6 5 .9 5 .8 5 .7 2 0 -0 05 6 2 0 -0 06 7 S c T rn v R to k u o er atio (tim ) es 2 0 -2 0 07 08

Interpretation:

This ratio indicates the speed with which the inventory is converted in to sales. Higher the ratio more efficient will be its utilization. Moreover too high ratio or too low ratio may lead to further investigation. The company is trying to decrease the ratio. In last year ratio was 6.48 times which decrease 5.97 times in present year is.

Liquidity Ratio (All Rs. in million) 1. Current Ratio: Meaning:


This ratio is calculated by dividing current assets with current liabilities. The main purpose to calculate this ratio is to measure the firms ability to meet its short term obligations and to also determine its short term solvency condition. It also determines whether the company is in a position to meet its short term obligation from its short term Assets.

Formula:

Current Ratio: 2005-2006 =

Current Assets Current Liabilities 19,297.74 11,468.95

= 1.68:1 2006-2007 = 20,281.35 16,516.25

= 1.23:1 2007-2008 = = 20,511.19 19,267.09 1.06:1

Table:
YEAR 2005-06 2006-07 2007-2008 Current Ratio 1.68:1 1.23:1 1.06:1

C urrent R atio 1 .8 1 .6 1 .4 1 .2 1 0 .8 0 .6 0 .4 0 .2 0 20 05-06 2006-07 C urrent R atio 2007-2008

Interpretation:
This ratio indicates rupees of current assets available for each rupee of current liability. Higher the ratio greater is the margin of safety for short term creditors or vice-versa. Traditionally ratio of 2:1 is considered satisfactory. The company is having a ratio less than 2:1 i.e. 1.06 in present year. So company has trying to reach at ideal Ratio 2:1.

2. Liquid Ratio:

Meaning:
This ratio is obtained by dividing liquid assets with liquid liabilities. The objective of computing this ratio is to find the firms ability to meet the short obligations as when due without relying on the realization of stock.

Formula:
Liquid Ratio: Liquid Assets Liquid Liabilities 10,272.13 11,468.95

2005-2006 =

= 0.9:1 2006-2007 = 9578.14 16,516.25

= 0.58:1 2007-2008 = = 8272.05 19,267.09 0.43:1

Table:
YEAR 2005-06 2006-07 2007-2008 Liquid Ratio 0.9:1 0.58:1 0.43:1
Liquid R atio 1 0 .9 0 .8 0 .7 0 .6 0 .5 0 .4 0 .3 0 .2 0 .1 0 20 05-06 2006-07 Liquid R atio 2007-2008

Interpretation:
This ratio tells us ability of the firm to meet its short term obligations without relying on the organization of the stock. Traditionally ratio of 1:1 is satisfactory Ratio. But

the companys has not good in present year i.e. 0.43:1 company ratio was decrease last two years from 0.9 to 0.58 & 0.43.

3. Quick Ratio: Meaning:


This ratio is calculated by dividing Quick assets by liquid liability. The idea of calculating this ratio is to measure the firms ability to meet its short obligations without relying on stock & debtors.

Formula:
Quick Ratio: Quick Assets Liquid Liability 6028.76 11,468.95

2005-2006 =

= 0.53:1 2006-2007 = 4349.39

16,516.25 = 0.26:1 2007-2008 = = 4513.7 19,267.09 0.23:1

Table:
YEAR 2005-06 2006-07 2007-2008 Quick Ratio 0.53:1 0.26:1 0.23:1
Q ic R u k atio 0 .6 0 .5 0 .4 0 .3 0 .2 0 .1 0 2 0 -0 05 6 2 0 -0 06 7 Q ic R u k atio 2 0 -2 0 07 08

Interpretation:
This ratio suggests whether the cash & cash equivalents are sufficient to meet the short term liabilities.

Traditionally a ratio of 0.5:1 is satisfactory level. Higher the ratio better it is, but it should not to be followed blindly as too high ratio may be the result of large amount of ideal funds. The companys ratio as present is 0.23:1 which has decline from 0.26:1 in 2006-2007; it was decreased from 2005-2006 i.e.0.53:1.

Leverage Ratio

(All Rs. in million)

1. Proprietor Ratio: Meaning:


The ratio is obtained by dividing proprietor fund by net assets. The objective of computing this ratio is to find out what proportion of the proprietors fund is used to finance the purchase of the assets.

Formula:

Proprietor Ratio: Proprietor fund *100 Total Assets 2005-2006 = = 2006-2007= = 2007-2008= = 6795.79 *100 22,768 29.85% 18,701.5 *100 27,074.77 69.07% 21,266.9 *100 32,680.11 65.08%

Table:
YEAR 2005-06 2006-07 2007-2008 Proprietor Ratio (%) 29.85 69.07 65.08

P p ro rieto R r atio (% ) 8 0 7 0 6 0 5 0 4 0 3 0 2 0 1 0 0 2 0 -0 05 6 2 0 -0 06 7 P p ro rieto R r atio (% ) 2 0 -2 0 07 08

Interpretation:
This ratio indicates the extent to which the assets of the firm have been financed by the proprietors money. Higher the ratio more are the assets purchased from the proprietors money and less is the dependence on other sources. The companys ratio of 20052006 was 29.85% which has been increased in 2006-2007 it was 69.07%. In present year it is decrease to 65.08%. It indicates that company trying to decrease this ratio and become self reliant.

2. Debt equity Ratio:

Meaning:
The ratio is obtained by dividing by long term liability by shares holders fund. The objective of computing this ratio is to measure the relative proportion of debt and equity in financing the assets of the firm.

Formula:
Debt Equity Ratio: *100 2005-2006 = = 2006-2007= = 2007-2008= = Long Term Liability Share holders fund 1846.91 *100 6795.79 27.18% 3256.15 *100 18,701.5 17.41% 7509.52 *100 21,266.9 35.31%

Table:
YEAR 2005-06 2006-07 2007-2008 Debt Equity Ratio (%) 27.18 17.41 35.31
D ebt E ity R qu atio (% ) 4 0 3 5 3 0 2 5 2 0 1 5 1 0 5 0 2 05 0 -06 2 6 7 00 -0 D t E uity R eb q atio (% ) 20 0 7-20 08

Interpretation:
This ratio indicates the margin of safety to long term debt. A low debt equity ratio implies the use of more equity then debt which means a longer safety margin for debt provides since owners equity is treated as a margin of safety by debenture holder & viceversa.

This ratio has increased from last two years which means the reliance on debt with respect to shareholders fund is increasing. The ratio is at present is 35.31%.

3. Capital Gearing Ratio: Meaning:


The ratio is obtained by dividing fixed interest bearing capital by ordinary capital. The objective is to find out what proportion to fix return bearing security to non fix return bearing security in the firms total capital.

Formula:
Capital Gearing Ratio: Bearing Capital *100 Capital 2005-2006 = = 2006-2007= 1846.91 *100 1221.59 151% 3256.15 *100 Fixed Interest Ordinary

1323.87 = 2007-2008= = 246% 7509.52 *100 1330.34 564%

Table:
YEAR 2005-06 2006-07 2007-2008 Capital Gearing Ratio (%) 151 246 564

C ital G ap earin R g atio (% ) 60 0 50 0 40 0 30 0 20 0 10 0 0 2 05 6 0 -0 20 -07 06 C ital G ap earin R g atio (% ) 2 07 0 0 -2 08

Interpretation:

This ratio indicates the proportion of fix return bearing capital that is available for every 100 Rs. of equity capital. More the ratio more risk is involved. The companys Ratio has been increased. Last year it was 246% which is increased to 546% at present year.

Other 1. Long Term funds to Fixed Assets: Meaning:


The ratio is obtained by dividing long term funds by fixed assets. The calculating this ratio is to find proportion of fixed assets that have been purchased from the long term funds.

Formula:
Long Term funds to Fixed Assets: term fund *100 Long

Fixed Assets 2005-2006 = = 2006-2007= = 2007-2008= = 15,441 *100 9432.71 163.70% 19,552 *100 13,070.33 149.59% 21,917 *100 15,255.50 143.67%

Table:
YEAR 2005-06 2006-07 2007-2008 Long Term funds to Fixed Assets (%) 163.70 149.59 143.67

L n T r f n st F e A s t ( ) o g e m u d o ix d s e s % 10 7 15 6 10 6 15 5 10 5 15 4 10 4 15 3 10 3 20- 6 0 50 20- 7 0 60 L n T r f n st F e As t ( ) o g e m u d o ix d s e s % 20- 08 0 72 0

Interpretation:
A sound business technique is to acquire the major permanent assets from the permanent capital and temporary capital should be used in current assets. If temporary capital is used for buying the fixed assets then the financial position of the company may be disturbed. Higher the ratio more is the dependence on long term funds. The companys long term fund is decrease. In 2005-2006 and 2006-2007 it was 163.70% and 149.59%. In present it is decreased at 143.67%.

Directo rs Report

The Director wish to appreciation of the continued co-operation of the central and state government, Bankers, Financial Institution, Costumers, Dealers and Suppliers and also to valuable assistance and advice received from major shareholders of Hinduja Automotive LTD., the Hinduja Group and all the shareholders. The director also wishes to thank all the employees for their contribution, support and continued co-operation through the year.

Dividend

The directors recommend a dividend of 150% (Rs. 1.50 per equity share of Rs. 1) of the years ended March 31, 2008. The dividend also be payable on the shares arising from conversion of foreign currency convertible notes (FCCNS) issued in April 2004, to the extent converted up to the book closure Date.

External Commercial borrowings(ECBS)


During the financial year despite a difficult situation in the financial market, the company contracted for ECBS for a sum of us $270mn. To part fund is apex requirements and overseas investments. Out of the above the company has draw us $90mn.during the year 2007-2008.

Directors Report
Financial Highlights:

(Rs. in million) Particulars Profit Before Tax Less: Provision for Taxation Add: Transfer from /(to) Debenture Redemption Reserve Balance profit from last year General Reserve Add: Excess Provision written back dividend (Including corporate dividend tax) Profit available for appropriation Appropriation: Dividend 2006-2007 Proposed dividend 2007-2008 Corporate Dividend Tax Balance Profit carried to B/S Earning per share (face value 1 Rs.) Basic Diluted

2007-2008 6381.50 1688.40 4693.10 50 3616.86 (1000) 7359.96 7359.96 1997.71 339.51 5022.74 3.53 3.53

2006-2007 6045.06 1632.20 4412.86 135 2303.70 (1000) 5851.56 29.62 5881.18 1985.81 278.51 3616.86 3.38 3.36

External Commercial borrowings(ECBS)

The foreign currency convertible notes (FCCNS) are for us $100mn issued on April 2004 are convertible in to shares of the company (us $1 = Rs.44.10). As on March 31, 2008 99,000 notes (99%) have already been converted in to underlying shares, there by increasing the paid up capital as March 31, 2008.

Sub-Division of shares
The sub division of your

companys shares (from face value of Rs.10/each to a face value of Rs.1/- each) was effected in July 2004. The number of share holders continues to increase an as on march 31, 2008. The number of share holders was 3, 03,954 as against 2, 00,091 share holders as of March 31, 2007.

adopted

Corporate Governance
Your company has consistently high standards of corporate

governance. The code of conduct is for the

Board and the senior management March 2005. The certification by the managing Director regarding the code of conduct or the statutory Auditors of the company have examined as required by SEBI guidelines is also furnished separately.

Directors:
The present term of Mr. R.Serhasayee, Managing director is due to expire on May 31, 2009. Mr. Vinod.k.Dasari the chair operating officers of the company who was co-opted to the Board as an additional Directors vacates office at the ensuring A.G.M. Mr. D.J.Balaji Roa, Mr. P.N.Ghatalia and Mr. D.G.Hinduja Directors retire by rotation at the forthcoming A.G.M. and are eligible for re-oppintment.

The Board of Directors


ChairmanR.J.Sherhoney

Co-Chairman- D.G.Hinduja D.J.Balaji

A.K.Das P.N.Ghatalia S.R.Krishnaswami S.Raha F.Sahami S.Shroff A.Spare Managing Director- R.Seharayee Whole Time Director- Vinod.K.Dasari

Auditor s

Re port

Analysis of Auditors Report


Following points indicates that the report is qualified:

They have audited the attached balance sheet of Ashok Leyland Limited as at March 31, 2008. The P&L a/c and the cash flow statement for the year ended on that date annexed thereto, signed by us under reference to this report. This financial statement is the responsibility of the companys management. They have obtained all the information and explanation which to the best of our knowledge and belief were necessary for the purpose of their audit. The financial statement dealt with by this report is in agreement with the books of account. In their opinion, the foresaid financial statement comply in all material respects with the applicable accounting standards referred to in section 211(3c) of the companies act 1956.

The company has neither grant nor taken any loan secured or unsecured during the year under section 301 of the act. They believe that according to the explanations given to them the information disclosed by the company is true in accordance with needs of the company act 1956 and give a fair view in conformity with accounting principles usually accepted in India. In case of the balance sheet of the state of affairs of the company as on 31st March. 2. In case of P&L account of the profit of the company for the year ended on that date. 3. In case of cash flow statement of the cash flows of the company for the year on that date.

1.

Mr. Krishnaswami & Rjan Charted Accountant Deloitte Haskins & Sells Charted Accountant M.K Rajan Membership No. 4059

Partner R.Laxminarayan Partner Membership 33023 PLACE: Chennai DATE: 2008. May 08, No.

SOME IMPORTANT TERMS USED IN CASH FLOW STATEMENT Cash comprises cash on hand and

demand deposits with banks.

Cash

equivalents

are

short-

term,

highly liquid investments that are readily convertible into known amounts of cash and which are subject to and

insignificant risk of changes in value.

Cash flows are inflows and outflows of cash and cash equivalent.

Operating activities are the principle revenue production activities of the enterprise and other activities that are not investing or financing activities.

Investing activities are the acquisition and disposal if long term assets and other investments not included in cash equivalents.

COMMON SIZE STATEMENT


It is the statement prepared to know about the share of different particulars in

a) PROFIT AND ACCOUNT. b) BALANCE SHEET.

LOSS

Below is the common size statement. Firstly BALANCE SHEET and Secondly the PROFIT AND LOSS ACCOUNT

SOURCES OF INFORMATION

www.indianbusiness.com

BIBLIOGRAPHY
PRASANNA CHANDRA FINANCIAL MANAGEMENT MANAGEMENT BOOK OF ICSI FOUNDATION

CONCLUSION

According to me company is not working efficiently in current years The cash profit position of the company is also good. The company maintains the solvency efficiently. Currently company works more in the cotton sector with sophisticated technology The company has a bright future My best wishes for future success of the company.