Financial Statement Analysis plays a vital role in business activity. Financial Statement Analysis tells the company stability in the country. Financial Statement analysis is the key factor to comparison the company. Financial Statement Analysis provides the better option of investment and generates more revenue another investment. Financial Statement explained effectively and efficiently company stability. Financial Statement describes significant relationship between companies. Because of this Analysis, a manager can make good decisions and find the best possible solutions of the problems in a business and in business related everything. A manager, creditors, investors, auditors, Shareholder, analysts, regulators and consumers determine the financial position of a company with the help of this Financial statement analysis.
1.2 Background:
1.2.1 Industry Background:
Automobile corporation was established as business dealing in motor vehicle import and distribution. Automobile is one of major industries of Pakistan. Automobile industries generate the more revenue for Pakistan Govt. and contribute the stability of economy. Automobile industry provides strong, beautiful and sufficient price cars for customer. In our country many automobiles plants are being operated by different companies. Pakistan imports a mass quantity of vehicle from many other countries like Japan, UK, Germany. The motor industry in Pakistan was started in 1950 and nationalization was established in 1980. The motor industry operates under license and technical co-operation agreement with China Korea Japan & Europe. The level of motor industry has been step by step growing over the year.
1.2.2 Suzuki Motors Limited:
With a corporate history spanning over 85 years Suzuki Motor Corporation has achieved international success by maintaining a continuous policy of designing and producing value-packed, quality products to innovatively meet everyday customer needs.
During the last 40 years, design and technological expertise has produced a range of unique and ground breaking 4x4 vehicles that emphasizes this spirit and achieved an enviable reputation and respect throughout the world.
A longtime leader in the vehicle manufacturing industry, Suzuki Company, based in Japan. The company has a strong and longstanding tradition of service, reliability, and quality that reaches back many of the years. Sponsored by Suzuki the Company was incorporated in Japan.
The manufacturing plant operating is one of the most efficient and best maintained in the country and has mass annual production.
1.2.3 Honda Motors Limited:
Honda Company’s headquarter is based in Tokyo, Japan. And it was established in September 24, 1948. Honda Motor Co., Ltd. operates under the basic principles of "Respect for the Individual".
Honda Atlas Cars Pakistan Limited is a joint venture between Honda Motor Company Limited Japan, and the Atlas Group of Companies, Pakistan.
The company was incorporated on November, 1992 and joint venture agreement was signed on August, 1993. The company is listed on Karachi, Lahore and Islamabad Stock Exchanges.
On July 14, 1994, car bookings started at six dealerships in Karachi, Lahore, and Islamabad. In addition to providing regular service to customers, the company also regularly conducts Service Campaigns, to facilitate customer's need for service. This has given our customers absolute confidence in our cars, clearly evident from the ever increasing sale volumes.
It is the constant endeavor of Honda Atlas Cars (Pakistan) Limited to achieve No .1 Customer satisfaction. Honda Atlas Cars (Pakistan) Limited is committed to meet customer expectations, and to provide good value for money. Currently 8 different models of Honda CIVIC and CITY cars are being offered in wide range of colors with unique technological and other features.
1.3 Objectives:
The main objective of our project is to analyze the financial position and financial strength of company. The major purpose of our project to calculate and analyze of two top motor companies in Pakistan one is Honda Motor Limited and second is Suzuki Motor Limited. Financial Statement Analysis shows the true and clear picture of company. Financial Statement Analysis provides information of company operations and performance and also provides the realistic and actual facts and figures to investors, creditor, stakeholder and shareholder. Some objectives of financial statement analysis are as following:
To find out the strengths and weaknesses of the companies through financial Statement Analysis.
Provide reliable, clear, and actual figure of financial statement to shareholders and investors.
To provide true and right figure of financial information.
Provide faithful financial information about the changes in company resources and company growth.
To provide bright way for future growth of the two companies.
To show all financial information according to the needs of creditor, investor, stakeholder, and shareholder.
Which company is better performing?
Which company is better for the investment?
1.4 Significance:
Financial statement analysis is very important for every organization. When financial statement analysis is conducted a lot of data is summarizes and is describes briefly which helps in good decision making. This statement analysis is basically tells about the financial position of the company. Significance of the project would be directly to the study of the companies under the selected project. This analysis creates an opportunity to have a lot of data at their disposal for conducting analysis and for further decision making. The competitors of the above mentioned companies definitely have the significance of this project. They would be able to judge where they stand with respect to other companies.
Chapter 2: Project Proceedings
Project Proceedings
My project will be base on calculation and analysis of financial ratios of the companies. The main part of this project would be faithful to the calculation and analysis of the various financial ratios. Financial Ratio shows the financial strength and position of the company as compared to another company. Following are some common ratios which are used in this project.
2.1 Ratio Analysis
The ratios analysis is a major tool of financial statement analysis. In simple word Ratio means is the numerical relationship between two variables which are connected with each other. Following are some common ratios which are used in this project.
Liquidity ratios:
Liquidity ratios are the ratios measure the short term financial position of a firm. Liquidity ratios are designed to check the ability of the firm to meet short term obligation.
Current ratio
Acid test ratio
Quick ratio
Working capital
Sales to Working Capital
Activity Ratios:
Activity ratios are also known as Efficiency ratios. Activity ratios measure the efficiency of the company. These are also known as turnover ratios.
Inventor / stock turnover ratio
Average collection period
Debtor / receivables turnover ratio
Fixed assets turnover ratio
Creditors / payable turnover ratio
Operating cycle
Long Term Solvency or Leverage Ratios:
Debt Coverage Ratio
Time Interest Earn
Debt to equity ratio
Equity Ratio
Interest coverage ratio
Profitability Ratios
Expense ratio
Operating ratio
Return on equity capital
Earnings Per Share Ratio
Gross profit ratio
Net profit ratio
Dividend yield ratio
Dividend payout ratio
Common size analysis
Horizontal analysis
Vertical analysis
Chapter No 3: Methodology
Data Collection Sources:
Data collected from internet and stock exchange and more beneficial is secondary sources of data are used in this project. Honda and Suzuki Company are good reputation in the country and collect the data very easily and available in the website. Honda and Suzuki Motors Company are listed in Lahore stock exchange to collected annual report, balance sheet, and projected related data and then evaluate them.
Data Collection Tools/Instruments:
Data collection tools are based on observation. Observation is working as lifeblood is data collection tools. Observation is a beneficial tool of gathering data. Observation is the data collection tool that fulfills the need of Financial Statement Analysis. I am working on financial statement analysis of two major listed companies because I will use Observational data collection tool.
3.3 Data Processing and Analysis:
According to my project I will use Microsoft Word and Microsoft Excel work sheets to calculate the various ratios and also used tables, graphs/ charts and mathematical operations to show the clear financial position of the firm. With the use of table, graph and charts easily checkout the company status and company growth.
