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Pak Suzuki Motor Company Limited (PSMC) is a public limited company with its shares
quoted on Stock Exchanges in Pakistan. The Company was formed in August 1983 in
accordance with the terms of a joint venture agreement concluded between Pakistan
Automobile Corporation Limited (representing Government of Pakistan) and Suzuki
Motor Corporation (SMC) - Japan. The Company started commercial production in
January 1984 with the primary objective of progressive manufacturing, assembling and
marketing of Cars, Pickups, Vans and 4 x 4 vehicles in Pakistan.
The foundation stone laying ceremony of the company's existing plant located at Bin
Qasim was performed in early 1989 by the Prime Minister then in office. By early 1990,
on completion of first phase of this plant, in-house assembly of all the Suzuki engines
started. In 1992, the plant was completed and production of the Margalla Car
commenced. Presently the entire range of Suzuki products currently marketed in Pakistan
are being produced at this Plant.
Under the Government's privatization policy, the Company was privatized and placed
directly under the Japanese management in September 1992. At the time of privatization,
SMC increased its equity from 25% to 40%. Subsequently, SMC progressively increased
its equity to 72.8% by purchasing remaining shares from PACO. The total foreign
investment brought in by SMC- Japan since inception stands at Rs. 1026.36 million. The
Suzuki Management immediately after privatization started expansion of the Bin Qasim
Plant to increase its installed capacity to 50,000 vehicles per year. The expansion was
completed in July 1994. Keeping this in view, the company's long term plans inter-alia
includes tapping of export markets. The company has acquired additional land measuring
about 30 acres from Pakistan Steel Mills Corporation in proximity to its Bin Qasim Plant
to set up production facilities for manufacture of some local components.
1
COMPANY INFORMATION
BOARD OF DIRECTORS
COMPANY SECRETARY
AUDITORS
2
Pak Suzuki Motor Company Ltd
Balance Sheet
AS AT JUNE 30, 2000, 2001, 2002
Current assets
Stores, spares and loose tools 29,279 41,122 46,332
Stocks 1,535,836 1,913,050 1,965,120
Trade debts 44,456 577,264 587,966
Loans, advances and prepayments 47,217 57,591 59,756
Advance income tax - net 325,351 305,250 350,420
Sales tax adjustable 32,165 6,635 36,821
Accrued income and other receivables 25,159 19,974 26,468
Cash and bank balances 729,243 231,953 988,250
---------- ---------- ---------
2,768,706 3,152,839 4,061,133
---------- ----------
Total assets 3,993,930 4,567,695 5,541,206
3
Pak Suzuki Company Ltd
Income Statement
FOR THE YEAR ENDED JUNE 30, 2000 2001, 2003
Appropriations
Transfer to/(from) general reserve 47,000 -25182 49,000
Proposed cash dividend @ 8% (2005: Nil) 39,305 -- 41,455
---------- ---------- ---------
86,305 -25182 90,455
---------- ---------- --------
Unappropriated profit carried forward 708 -- 918
========== ========== =========
4
Pak Suzuki Company Ltd
Cash Flow Statement
FOR THE YEAR ENDED JUNE 30, 2000, 2001, 2002
5
6
Common Size Analysis of Pak-Suzuki Motor Company Ltd.
Balance Sheet:
While doing the vertical analysis of Pak-Suzuki Motor co. we have taken the total assets
as a base.
Liabilities:
The firm has different liabilities in three years. However the firm relied heavily on
loans to fulfill its financing needs. The year 2000 has a heavy bills payable but this
decrease year by year. The over all liabilities of the firm is increasing constantly with the
percentage of 52.26%, 59.34% but last year has a low liability as compared to other years
with 49.20.
The firm’s long term liabilities increased due to the following effect on the ratio.
• The denominator total assets decreased due to losses suffered by the firm in these
years, which increased the ratio.
• The increase in the amount of loan i-e increase in the numerator of the ratio,
which also increased the ratio.
ASSETS:
Fixed Assets:
The fixed assets of the firm show a gradual decrease year by year from 200, 2001
to 2002. This slight decrease may be due to the decrease in the net assets of the firm due
to the losses rather than due to any capital expenditure done on the fixed assets. The long
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term investment show a slight increase in the percentage but long term loans, deposits
and repayments of the firm is decreasing with a slight percentage. This mainly show to
improve the cash flow situation of the firm. This also suggests that the firm is facing cash
shortage problems.
Current Assets:
In current assets the firm stores, spares and loose tools are increasing slightly with
the percentage of 0.73, 0.90 and 0.84 respectively but in the year 2002 it decreases.
Stocks increased in 2000 and 2001 but it decrease in year 2002 with the percentage of
38.45%, 41.88% and 35.46 respectively of total assets., showing great increase and
causing severe cash shortage problem to the firm in that year. Short term investments of
the firm are also showing a continuous decrease both in monetary terms and as
percentage to total assets. They also reflect the losses and the cash shortage problems
faced by the firm in these years. The trade debts show a mixed picture during the years in
the year 2000 it has less amount with less percentage as compare to other years. In year
2001 it has an increased in the trade debts but also decrease in 2002. The over all current
assets of 2000 and 2001 are the same percentage but it is slightly high in 2002 as
compare to other years of 2000 and 2001.
In the analysis year 2000 as the base year and horizontal analysis is done taking the
values of 1996 as a base.
The share capital of the firm remains constant in the three years of analysis. They
remain at 100% in the years that is the share capital neither decreased nor increased
during these years.
The capital reserves show a slight increase in the year 2001 by only 96.38 and in
2001 it is 97.67 which is slightly high as compare to the previous data. This shows the
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commitment of the organization to expand in the future as the firm constantly maintains
this reserves and even increased it a little even though that the firm suffered heavy losses
in these years.
Liabilities:
In liabilities side the bills payable is increased from 96.60% to 78.37%. There
were no debentures in the years 1997 and 1998. The long term loans show a great
increase in the years of analysis. This show a great increase in the long term debt of the
firm. It also reflects that the firm is relying on debt to fulfill its capital requirements
rather than any other source of finance.
The tax provision was also increase in the year 2002 than 2001 and 1998.
Fixed Assets:
They show a constant increase over the years, it shows that capital investment is
done in fixed assets, it also shows that the long term investment was increased year by
year with new capital of the firm. The firm long term loans, deposits and repayments
slightly increase with the percentage of 110.05% to 112.46% it means that the firm makes
further investment in their operations.
Current Assets:
Same situation with the current assets it shows an increasing trend in the year
2001 with 140.45% and 158.24% in 2002. Trade debts and stocks also increase slightly,
it means the over all current assets of the firm is slightly increasing year by year. The
main considering issue of the business is the cash and bank balances but it shows a
different percentage as we compare to the year. In year 2001 it was 31.81% which is not
enough as compare to the 2002 where it is 135.52% which is a huge difference and in
year 2001 the firms also get loss.
9
Common Size Analysis with Horizontal Analysis
Income Statement
The net sales of income statement of 2004 analysis of horizontal is same because we over
all divide the each amount with each other the result would be the same. So analyzing the
income statement the net sales increases from 86.37% to 102.97% in 2001 and 2002, it
shows an increase in volume of sales.
Same situation the gross profit margin increased which represented managerial and
production efficiency in this year. But in 2001 the gross profit decrease again due to high
cost of production in this year as compare to 2000 year and 2001.
The selling and administration expenses decrease slightly in 2001 and 2002 from
116.39% to 104.37%, less expenses shows high operating profit.
The other income also decrease in 2001 and 2002 from 267.91% to 204.31%. The
increase in the year shows more efficient production as compare to 2002.
Financial charges also decreases in 2002 but high in 2001 which reflects the long term
debts. And taxation increased 2002 with 77.19% as we compare with the previous record
that is 75.96%.
Vertical Analysis.
Vertical analysis gives a more insight of the cost and revenue structure of the firm during
the years
The gross profits of the firm decreases from 4.72% to 4.50% in 2000 and 2001 and in
2002 it also decreases with 4.38%. This represents production efficiency or reduced cost
of inputs in the year. The decrease also shows high percentage of cost of sales in the year.
The selling and administration expenses it increases in 2001 with 3.41% but low in 2000
and 2001 with 2.53% to 2.56%, but it does not create severe effect on the operating profit
of the firm and a similar trend of operating profits was observed in years as that gross
profit.
Operating profit of the firm slightly decreases in 2001 and 2002 from 1.10% to 1.81%
because in these tow years we have higher expenses as compare to the 2000, that is why
it show less operating profit in these two years.
Other income of the firm increases in 2001 with 1.08% and in 2002 it is 0.69 is higher
than year 2000.
10
Financial charges only highly increase in year 2001 as compare to the 2000 and
2002 that may be the high debts of the firm for expending their operation.
Taxation decreases in 2002 with the percentage of 0.35 and in 2001 it is 0.41 as
compare to its previous year
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FINANCIAL RATIO ANALYSIS
We will analyze the firms performance by calculating and interpreting 4 basic types of
Financial Ratios but here we calculate according to the chapter topic. Usually we have
these four basic types of fianancial ratios
1. Activity Ratios
2. Debt Ratios
3. Profitability Ratios
4. Market Ratios
According to the Book chapter we have different ratios in different according to the topic,
so each ratio is calculated to the chapter ratios, here we have four different chapter of the
book.
According to this chapter we calculate each ratios of Pak Suzuki Motor Company limited
for year 2004, 2005 and 2006.
12
13
All ratio formulae regarding this chapter And
Solution
Gross Receivables
• Days Sales In Receivables = -----------------------------------------------
Net Sales / 365
44,456
2000 =--------------------- = 2.03
7,976,122 / 365
577,264
2001 =------------------------- = 30.58
6,889,145 / 365
587,966
2002 =---------------------------- = 26.13
8,213,245 / 365
Net Sales
• Accounts Receivables Turnover =----------------------------------------
Average Gross Receivables
7,976,122
2000 =--------------------------- = 25.66
310,860
6,889,145
2001 =---------------------------- = 11.82
582,615
14
310,860
2000 =-------------------------------- = 14.23
7,976,122 / 365
582,615
2001 =------------------------------ = 30.86
6,889,145 / 365
Ending Inventory
• Day’s Sales In Inventory =----------------------------------------
Cost of Goods Sold / 365
1,535,836
2000 =--------------------------------- = 73.76
7,599,439 / 365
1,913,050
2001 =------------------------------ = 106.14
6,578,898 / 365
1,965,120
2002 =---------------------------- = 82.03
7,853,909 / 365
7,599,439
2000 =----------------------------- = 4.41
1,724,443
15
6,578,898
2001 =-------------------------- = 3.39
1,939,085
Average Inventory
• Inventory Turnover in Days =-----------------------------------------
Cost of Goods Sold / 365
1,724,443
2000 =------------------------------ = 82.82
7,599,439 / 365
1,939,085
2001 =---------------------------- = 107.58
6,578,898 / 365
Current Assets
• Current Ratio =-------------------------------------
Current Liabilities
2,768,706
2000 =--------------------------- = 1.33
2,087,090
16
3,152,839
2001 =---------------------------- = 1.16
2,710,563
4,061,133
2002 =---------------------------- = 2.24
1,814,796
Sales
• Sales To Working Capital =-----------------------------------------------------
Average Working Capital
7,976,122
2001 =------------------------ = 14.19
561,946
6,889,145
2001 =-------------------------- = 5.12
1,344,307
17
Solved Calculation of All above Ratio formulae
18
2000 and 2002 but there is an high increase in 2001 with 106.14% it means in this
year the inventory is not controlled properly as compare to other years.
Inventory Turnover:
It indicates the liquidity of the inventory. The calculation shows a slight decrease in
2000 and 2001 from 4.41% to 3.39%. In this situation the firm tends to overstate
inventory turnover due to liquidity of its inventory.
Operating Cycle:
This computation consists of combination of days sales in ending receivables and the
number of days in sales in ending of inventory. The calculation of this ratio shows
that an increase in 2001 with 138.44% as compare to the previous data of 2000 it is
109.05% this indicates moderate liquidity at the end of the year.
Current Ratio:
It determines the short term debt paying ability. It increase slightly in 2000 and 2001
from 1.33% to 1.16% and in 2002 it shows 2.24%.
Acid-Test Ratio:
Cash Ratio:
19
20
All ratio formulae regarding this chapter and solution
Operating Income
• Times Interest Earned =------------------------------------------------------
Interest Expense + Capitalized Interest
174,952
2000 =---------------------- = 2.41
72,480
75’457
2001 =-------------------- = 0.34
221,971
148,796
2002 =---------------------- = 1.73
85,921
Operating Income
• Fixed Charge Coverage =------------------------------------------------------
Interest Expense + Capitalized interest +
Interest Portion of Rentals
Its calculation is same because we have not any interest portion of rentals in our
financial report of the company so, that is why calculating without rental our result
would be the same as above.
Total Liabilities
• Debt Ratio =-----------------------------------------
Total Assets
99,000+2,087,090
2000 =--------------------------------- = 0.55
3,993,930
97,000+2,710,563
2001 =---------------------------------- = 0.61
21
4,567,695
97,000+1,814,796
2002 =---------------------------------- = 0.35
5,541,206
Total Liabilities
• Debt / Equity Ratio =------------------------------------------
Shareholder’s Equity
99,000+2,087,090
2000 =------------------------------------ = 1.21
1,807,840
97,000+2,710,563
2001 =----------------------------------- = 1.61
1,760,132
97,000+1,814,796
2002 =----------------------------------- = 1.08
` 1,777,152
Total Liabilities
• Debt To Tangible Net Worth =----------------------------------------------------------
Shareholder’s Equity – Intangible Assets
Debt to tangible net worth also show same result while calculating the ratio because,
the firm has not any intangible assets in its financial report that is why its results
same as the debt / equity ratio shows.
22
Times Interest Earned:
Time earned ratio indicates a Suzuki long term paying
ability from the income statement. Suzuki have very low time interest earned
ratio. In 2001 time interest ratio is high as compare to 2002 because in 2001
company is in profit and have a fund to meet the debt obligation. But in 2002
Suzuki’s time interest earned ratio is low because in 2002 Suzuki was in loss.
Debt Ratio:
Debt ratio indicate the Suzuki long term debt ability from it
balance sheet. In 2000 and in 2001 debt financing is more then 50%. It shows
that financial institution have confidence on Suzuki. Because of lose in 2001 debt
ratio is decline. Company have borrow to fulfill the gap of lose in 2001. so ratio is
higher as compare to previous year.
23
24
All ratio formula regarding this chapter
87,013
2000 =-------------------------------------- = 0.01
7,976,122
(26,600)
2001 =--------------------------------------- = -0.004
6,889,145
90,460
2002 =---------------------------------------- = 0.011
8,213,245
Net sales
• Total Asset Turnover =------------------------------------------
Average Total Assets
7,976,122
25
2000 =-------------------------------------- = 1.86
4,280,812.5
6,889,145
2001 =-------------------------------------- = 1.36
5,054,450.5
87,013
2000 =-------------------------------------- = 0.02
4,280,812
(26,600)
2001 =-------------------------------------- = -0.0052
5054450.5
Operating Income
• Operating Income Margin =-------------------------------------------
Net Sales
174,954
2000 =---------------------------------- = 0.0219
7,976,122
26
75,457
2001 =---------------------------------- = 0.0109
6,889,145
148,796
2002 =----------------------------------- = 0.0181
8,213,245
Net Sales
• Operating Asset Turnover =--------------------------------------------
Average Operating Assets
7,976,122
2000 =--------------------------------- = 3.25
2,450,667.5
6,889,145
2001 =------------------------------------ = 1.37
5,015,483
Operating Income
• Return on Operating Assets =-------------------------------------
Average Operating Assets
174,954
2000 =------------------------------------ = 0.071
2,450,667.5
75,457
2001 =------------------------------------ = 0.015
5,015,483
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2001 = (0.0109)(1.37) = 0.015
Net Sales
• Sales to Fixed Assets =---------------------------------------------------
Average Net Fixed Assets
(Exclude Construction in Progress)
7,976,122
2000 =---------------------------------------- = 6.28
1,269,507.5
6,889,145
2001 =-------------------------------------- = 4.98
1,382,140.5
28
870,013
2000 =------------------------------------------ = 0.048
1,783,986
(26,600)
2001 =------------------------------------------ = -0.015
1,768,642
87,013 + 72,480
2000 =-------------------------------------------- = 0.003
4,280,812.5
(26,600) + 221,971
2001 =------------------------------------------- = 0.038
5,054,450.5
Gross Profit
• Gross Profit Margin =---------------------------------
Net Sales
376,683
2000 =---------------------------------------- = 0.047
7,976,122
310,247
2001 =--------------------------------------- = 0.045
6,889,145
29
359,336
2002 =---------------------------------------- = 0.043
8,213,245
30
is also shows that its profit margin is in negative. And next year is in positive that
shows that company is gradually increasing its profits.
This ratio shows how Suzuki have ability to generate sale through its
assets. This is indicating that total asset turnover is decreasing. It is decreasing
because in 2001 company was in lose.
Return on Assets:
This ratio shows that how much Suzuki asset is producing profits. Suzuki
return on assets ratio shows that company is not using its asset properly because it is
not is producing much profit.
This ratio shows that how Suzuki fixed asset is producing its sale. Suzuki is fixed
asset incentive firm. So this ratio is show that Suzuki fixed asset is producing 6.28
and in next year it is gradually decrease.
31
Return on Investment:
It ratio shows earning performance of the Suzuki without regard to the way
the investment is financed. It shows how Suzuki utilize its asset. This ratio is
decrease substiantly. Because company has faced the lose in 2001.
This ratio shows that how Suzuki is utilizing its total equity. Suzuki’s return
on common equity is increasing gradually.
32
33
All ratio formulae regarding this chapter
87,013-39,305
34
2000 =----------------------------- = 0.55
87,013
-26,600-0
2001 =---------------------------- =1
-26,600
90,460-41,455
2002 =---------------------------- = 0.54
90,460
1,807,840
2000 = ----------------------------- = 0.012
150,000,000
1,760,132
2001 = ------------------------------ = 0.011
150,000,000
1,777,152
2002 = ----------------------------- = 0.011
150,000,000
35
• Materiality of Options =---------------------------------------------------
Number of Shares of Common Stock
Outstanding
Dividend Payout:
Dividend Yield:
This ratio indicates the amount of stockholder equity that relate to each
share of outstanding common stock. This ratio shows that Suzuki book value
is same in all years.
Materiality of Options:
37
• Operating cash flow / current Operating cash flow
Maturities of long term debt and =-----------------------------------------
Current notes payable . current maturities of long term
Debt and current notes payable
38
Note: The ration can not be solved because there is no portion of long term debts in
our current notes payables.
1,529,931
2000 =----------------------------- = 0.73
2,087,090
966,956
2001 =---------------------------- = 0.36
2,710,563
1,647,173
2002 =--------------------------- = 0.91
1,814,796
1,529,931 - 0
2000 =----------------------------- = 10.19
150,000
966,956
2001 =------------------------- = 6.44
150,000
1,647,173
2002 =------------------------ = 10.98
150,000
1,529,931
2000 =------------------------ = 19366.22
39
79
966,956
2001 =---------------------- = 5.31
181,997
1,647,173
2002 =----------------------- = 20,087.47
82
40