Analysis of Financial Statements

Analysis of Financial StatementsPak Suzuki Motors Company

SUBMITTED TO: SIR AHMED ARIF SUBMITTED BY:NIMRA (2010-BPA-020)ZAHRA RAUF (2010-BPA-030)SUBMISSION DATE: 24TH JANUARY 2014

FATIMA JINNAH WOMEN UNIVERSITY

EXECUTIVE SUMMARYThis project is about the Financial Analysis of Pak Suzuki Motor Company. During the project, we have done the detailed study of Pak Suzuki Motor Company Limited like their company financial statements, mission, and vision and industry values. With the help of profitability, solvency, liquidity ratios and vertical, horizontal analysis, we have conducted the analysis. In addition, the study about environmental policy and the Automobiles industry of Pakistan .Then we had prepare financial Analysis of Pak Suzuki Motors, we have learned that they are doing well in the Pakistani market and are leading market shareholder. They are producing Cars at affordable prices for the low income to middle-income people. However, they are unable to compete with Corolla and Honda in Luxury and semi-luxury cars. They are making its space in marketing slowly but continuously. The financial improvement of the company is gradually but continuously increasing. The company is increasing its investments and current investment and the creditor loan issuers have a high trust over lending loans to the company. The company will raise its position very effectively and efficiently.

Contents1. Introduction51.1 History51.2 Board of Directors61.3 Audit committee71.4Human resource department:71.5LEGAL ADVISORS:71.6 Environmental policy:71.7 Benchmarks:81.7.1 For the year 2002:81.7.2 For the year 2003:81.7.3 For the year 2004:81.7.4 For the year 2005:81.7.5 For the year 2006:91.7.6 For the year 2007:91.7.7 For the year 2009:91.7.8 For the year 2010:91.7.9 For the year 2011:91.7.10 For the year 2012:91.8 Integrated Management Policy92. External audit firm (Ernst & Young Ford Rhodes Sidat Hyder)102.1 History:102.2 Global Structure:102.2.1 Americas:112.2.2 Europe, Middle East, India and Africa (EMEIA):112.2.3 Asia-Pacific:112.2.4 Japan:113. Automobile industry:123.1 Introduction:123.2 Backgrounds:133.2 major companies:143.3 Sales of major companies:144. Financial statements and analysis:154.1 Income Statement:154.2 Balance Sheet194.3 Cash Flow Statement:294.4 Liquidity, Debt paying, and Profitability Ratios:314.4.1 Liquidity Ratios Analysis:314.4.2 Long-Term Debt Paying ability Ratios364.4.3 Profitability Ratios:385. Comprehensive analysis:435.1 Horizontal and vertical analysis:435.1.1 Horizontal analysis:435.1.2 Vertical Analysis:445.2 Ratios Analysis:455.2.1 Liquidity Ratios Analysis455.2.2 Long-Term Debt Paying ability Ratios Analysis465.2.3 Profitability Ratios analysis466. Recommendations ... 47

1. Introduction1.1 HistoryPak Suzuki Motor Company Limited (PSMCL) is a public limited company and its shares quoted on Karachi & Lahore Stock Exchanges in Pakistan with code PSMC. With the terms of a joint venture, agreement between Pakistan Automobile Corporation Limited (representing Government of Pakistan) and Suzuki Motor Corporation (SMC) Japan the Company was formulate in August 1983. PMSC started its production in January 1984 with the objective of progressive manufacturing, assembling and marketing of automobiles in Pakistan. 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. Under the Governments privatization policy, PSMC was privatize and placed under Japanese management by September 1992. At the time of privatization, SMC increased its equity from 25% to 40%. Subsequently, SMC progressively increased its equity to 73.09% by purchasing remaining shares from PACO (pak Suzuki Annual Report, 2012).After privatization PSMC expand its existing plant capacity to 50000 P.A and was complete in July 1994. Because of economic recession, the capacity remains under-utilized until 2002. PSMC increases their capacity in phases after realizing growth in demand as follows (pak Suzuki Annual Report, 2012). PSMC completed its first phase in January 2005 by enhancing their vehicles capacity to 80,000 vehicles. Then its second phase was complete in January 2006 by enhancing their capacity to 120,000 vehicles. Its third phase was completed on 6th February 2007, by enhancing their capacity to150, 000 vehicles and Prime Minister of Pakistan, Mr. Shaukat Aziz, inaugurated this. PSMC held 41% and 43% shares in SMPL respectively. PSMC issued and allot its ordinary shares (1,233,300) of Rs.10/- each to the qualifying shareholders of SMPL on the date of final book closure i.e. 29th October 2007 the shares trade ceased as well. By July 2011, PSMC start effectively, operationalizes its setup. The Company continues to be making its place in automobile industry of Pakistan. With passing time, PSMC has developed an effective and comprehensive network countrywide.1.2 Board of Directors

Figure 1: Board of Directors1.3 Audit committee

Figure 2: Audit committee1.4 Human resource department:

Figure 3: Human resource department1.5 LEGAL ADVISORS:

Figure 4: LEGAL ADVISORS1.6 Environmental policy:As a general manufacturer of automobiles, motorcycles, outboard motors, etc., Suzuki addresses environmental conservation at all stages in its operations from development to disposal. In product development, they took every effort to improve their products that are reducing noise and exhaust emissions, clean energy vehicles (pak Suzuki Annual Report, 2012). In manufacturing, they took steps to reduce environmental risks and the use of alternative energy. In distribution, they improve transportation efficiency. In marketing, they improve environmental management and proper disposal of end-of-life products, provide our employees with environmental education, and promote environmental management at our dealers, social action programs in local communities (pak Suzuki Annual Report, 2012).1.7 Benchmarks:1.7.1 For the year 2002:Introduced New BALENO also CNG version of BALENO, ALTO and CULTUS launched. The milestone of 250,000th vehicle from the new plant crossed.1.7.2 For the year 2003:PSMC received ISO 9001: 2000 certification from AibVincotte International Limited Brussels, Belgium, 20th Anniversary Celebrations. Commencement of Component export to Hungary, Sub-leasing of land to Vendors Industry of Pak Suzuki adjacent to its assembly plant.1.7.3 For the year 2004: New Plastic Injection Molding Shop commenced production of Bumpers, Instrument Panels Radiator Grills and Wheel Caps.1.7.4 For the year 2005:Inauguration of first phase of capacity expansion (80,000 vehicles) by the Federal Minister for Production, Industries and Special Initiatives. Achieved milestone of 100,000 online factory fitted CNG Vehicles. The Company received ISO 14001: 2004 and OHSAS 18001: 1999 certification from AIB-VINCOTTE International Limited Brussels, Belgium.1.7.5 For the year 2006:Second phase of capacity expansion (120,000 Vehicles) completed. Production of locally manufactured LIANA Car. Production of 100,000 vehicles crossed in a calendar year.1.7.6 For the year 2007:Suzuki Motorcycles Pakistan Ltd. merged with Pak Suzuki Motor Company.1.7.7 For the year 2009:The 1,000,000th vehicle rolled out from the Pak Suzuki Plant. Cargo Van was introduced.1.7.8 For the year 2010:1300 cc locally manufactured car Swift was introduced.1.7.9 For the year 2011:Inauguration of new motorcycle plant at Bin Qasim.1.7.10 For the year 2012:Automatic version of Suzuki Swift 1300cc was introduced. New Suzuki Motorcycle Raider 110cc was launch replacing Shogun. Complete range of Suzuki products was upgrade to Euro II technology.1.8 Integrated Management PolicyPSMC made its self-accountable for corporate citizenship by managing quality, environmental, safety & occupational health matters as an essential part of their business. PSMC have listed some fundamental principles for fulfilling its responsibility, which are as follows: To provide top quality products at competitive price to the satisfaction and requirement for customers. To conduct our operations in compliance with applicable environmental, occupational health & safety laws and regulations. To recognize the inter-relationship between energy and the environment, and promotion of the efficient use of energy throughout system. To ensure safe disposal of waste generated from facility and will minimize the discharge of waste materials into the environment by utilizing responsible pollution control practices. To seek opportunities to improve adherence to these principles.2. External audit firm (Ernst & Young Ford Rhodes Sidat Hyder)2.1 History:Top of FormIts roots go back to the 19th century, contributions of many people around the world; Founder of this company was Arthur young & alwin C Ernst. In 1906, he formed an accounting firm, Arthur Young & Company, with his brother Stanley. They both were innovator and Both Arthur Young, Ernst initiates an idea that accounting information can be used to make decisions of businesses and can make a difference to clients organizations. He inspired people to provide better service to their clients. Young also positioned himself as a business advisor.In 1920, Ernst & Ernsts operating philosophy stated, The success of Ernst & Ernst depends wholly upon the character, ability and industry of the men and women who make up the organization. Young supported the development of professionals. In 1924, they allied with prominent British firms: Young with Broads Paterson & Co and Ernst with Whiney Smith & Whiney. They associate with each other and start providing services to clients. The new organization quickly positioned itself on the leading edge of rapid globalization, new business technologies and continuous business change. EY a global organization of 175,000 people built a better-globalized working world.2.2 Global Structure:Ernst & young comprised of the Executive and Regions. They supervise our brand, business planning, global strategy, investments & priorities. Four service lines are represented and enabled by the four functions of Markets, Operations, People and Risk. This structure allows us to make quick decisions, execute strategies and provide services to our clients wherever they are doing business.The Executive includes: Global leadership governance bodies Four geographic Areas.The four geographic Areas are:2.2.1 Americas: Our Americas Area comprises 11 Regions and nearly 45,000 people. The workplace culture of the Americas Area is regularly recognized by organizations such as the Great Place to Work Institute and Universe, which frequently place EY near the top of their lists for countries across the region.2.2.2 Europe, Middle East, India and Africa (EMEIA):Our EMEIA Area brings together more than 73,000 people from 12 Regions across Europe, the Middle East, India and Africa. Creating EMEIA cemented our reputation as the most globally integrated organization in our field.2.2.3 Asia-Pacific:Asia-Pacific brings together more than 27,000 people across five Regions. We believe that much of our clients and our own future growth will come from the region and Asia-Pacific Area will enable us to better serve clients looking to invest in or grow across the region.2.2.4 Japan: Our Japan Area employs more than 6,500 professionals and works with many of Japans best-known companies across the financial, manufacturing and electronics sectors. It also acts as the hub for our Japan Business Services network nearly 350 Japanese-speaking professionals based in 60 cities around the globe who serve Japanese clients operating overseas.

3. Automobile industry:3.1 Introduction:The automobile industry of Pakistan is fastest growing industry of Pakistan. It is estimated that the industry is grown up by 32% in 2009-2010 and contributed US$ 3.6 billion to the GDP of Pakistan (muhammad Emmad, 2011).The sector is currently employing 19200 people of Pakistan. During year 2011 with the increase of 8.7 % 221147 vehicles were produced while the sales of new vehicle were 215732 (muhammad Emmad, 2011).High ends cars or 1300cc dominated the Pakistani famous yet again as Toyota corolla managed to be most famous car among people. Pak Suzuki has a monopoly on small cars production and is biggest local dealer having a market share of 53%. (muhammad Emmad, 2011).A few reasons affect the Pakistani automobile industry significantly, which are as follows: Unstable economic and political situation Higher interest rate for financing and leasing. Depreciation of Pak Rupee against Japanese Yen and US dollar High import tariffs and increases in the prices of raw material.3.2 Backgrounds:Automobile industry in Pakistan started in 1950 and has gone through different phases; Pakistan was the First Islamic Country in the world, which manufactured its own: A 4 Wheel Drive Jeep of its own in late 60's called NAYA DAUR in collaboration with WILLIS jeep. Motorcycles in early 70's with the collaboration of JAVA motorcycle Prototype Diesel Engines by the Lahore based company called BECO (Battala Engineering Company). A Motor Car of its own in early 70's with the collaboration of SKODA Motors and named SKOPAK.After effects of 1971 war lead to an economic shock, All the industries were Nationalized and by then the production of NAYA DAUR jeeps, motorcycles was stopped as their production in the country was not cost effective by then. The BECO was nationalized and converted into PECO (Pakistan Engineering Company) which instead of making Diesel Engines was put on manufacturing PECO Bicycles. In 1980s another Pakistani company tried to break into Pakistan's Automobile Market, which is dominated by foreign companies, and has no room for Home grown talent. a roadside mechanic, late Khalil-ur-Rahman, in the early eighties was said to be successful but lacked any support from any quarter and instead it was reported that the government then introduced a policy of concessionary rate on CBU of Suzuki pickups, same capacity as the one that was conceived locally and to put the last nail in the coffin the late mechanic though he would get attention in the capital and thus shifted his garage there but could not succeed. Later in 2005, a Pakistani company called "TMC" manufactured an auto-rickshaw alternative called TMC Alif. It was priced between 150-200,000 PRs at the time and had a single cylinder, 200ccEngine. The concept was very good, but rigid competition by existing foreign companies and lack of government support killed the project. Industry operates under franchise and technical cooperation union with Japan, Europe, Korea, and China. There are more than 800 vendors in the country with a total investment of over 8 billion PRs. They are engaged in the manufacturing of original components for the assembly operation under the deletion program as well as producing reconditioned and original components for sale in the local market.They manufacture and supply the local car assemblers with auto parts such as pistons, engine valves, gaskets, camshafts, shock-absorbers, struts, steering mechanism, cylinder head, wheel hubs, brake drums, wheels, bumpers, instruments and instrument panels, gears of all types, radiators, cylinder liners, blinkers, lights, doors and door locks as well as auto air conditioners.3.2 major companies:The major automobiles companies of Pakistan are Pak Suzuki Indus Motor Honda Atlas etc.3.3 Sales of major companies:

Figure 5: major Automobiles in Pakistan www.slideshare.net/.../overview-of-pak-suzuki-motor4. Financial statements and analysis:4.1 Income Statement:Table 1: Income StatementPAK SUZUKI MOTOR COMPANY LIMITED

INCOME STATEMENT

For Year Ended

Descriptions:20122011201020092008

Turnover - net58,531,13752,718,56342,642,76226,234,06139,669,730

Cost of sales56,185,39750,849,15341,638,97525,664,76239,079,124

Gross profit2,345,7401,869,4101,003,787569,299590,606

Distribution costs356,960263,651197,361214,550309,458

Administrative expenses860,753735,935636,332495,200504,617

Other operating income493,985620,390575,078619,5721,342,913

EBIT1,622,0121,490,214745,172479,1211,119,444

Finance costs11,10017,84521,34912,56453,470

1,610,9121,472,369723,823466,5571,065,974

Other operating expenses111,152107,07255,80838,71473,798

EBT1,499,7601,365,297668,015427,843992,176

Taxation521,738570,876456,872172,624367,391

N.I978,022794,421211,143255,219624,785

Unrealized gain/loss on derivative financial instrument - net of tax329,35341,8472,322

Net Income Final648,669836,268213,465255,219624,785

Earnings per share11.889.652.563.107.59

Table 2: income statement horizontal analysisPAK SUZUKI MOTOR COMPANY LIMITED

INCOME STATEMENT

For Year Ended

Descriptions:2012201120102009

Turnover - net0.4754610.3289370.074945-0.338690

Cost of sales0.4377340.3011850.065504-0.343260

Gross profit2.9717512.165240.699588-0.036080

Distribution costs0.153501-0.14802-0.36224-0.306690

Administrative expenses0.7057550.4584030.26102-0.018660

Other operating income-0.63215-0.53803-0.57177-0.538640

EBIT0.4489440.331209-0.33434-0.5720

Finance costs-0.79241-0.66626-0.60073-0.765030

0.5112110.381243-0.32097-0.562320

Other operating expenses0.5061650.450879-0.24377-0.475410

EBT0.5115870.376063-0.32672-0.568780

Taxation0.4201160.5538650.243558-0.530140

N.I0.5653740.271511-0.66205-0.591510

Net Income Final0.0382280.338489-0.65834-0.591510

Earnings per share0.5652170.27141-0.66271-0.591570

Figure 6: EBIT Horizontal Analysis

Figure 7: EBT Horizontal Analysis

Figure 8: Net Income horizontal Analysis

Table 3: income statement Vertical AnalysisPAK SUZUKI MOTOR COMPANY LIMITED

PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED

Description20122011201020092008

Turnover net9023.2676304.02719976.4710279.046349.341

Cost of sales-8661.64-6080.49-19506.2-100566254.811

Gross profit361.6236223.542470.2349223.062994.52948

Distribution costs-55.0296-31.5271-92.4559-84.0651-49.5303

Administrative expenses-132.695-88.0023-298.097-194.029-80.7665

Other operating income76.1536374.18555269.4015242.7609214.94

Finance costs-1.7112-2.13389-10.0012-4.922838.558144

Other operating expenses-17.1354-12.8036-26.1439-15.168911.81174

Profit before taxation231.2057163.2607312.9389167.6376158.8028

Taxation-80.432168.26472214.026767.637658.80279

Profit after taxation100100100100100

Figure 9: Profit Before Taxation4.2 Balance SheetTable 4: Balance SheetPAK SUZUKI MOTOR COMPANY LIMITED

BALANCE SHEET

As on Year Ended

Descriptions20122011201020092008

Assets

Cash and bank balances14174301139480291718635456212,499,142

Stores, spares and loose tools8309564467639164174994468

Stock-in-trade1056219412922396874803168797297,732,518

Trade debts588042322677240719376508286,697

Current portion of long-term installments sales receivables353077303951251254205680340,951

Loans, advances and others195491216586134963226388128,080

Interest accrued____29,432

Trade deposits and short-term prepayments3891883271434663173851,480

Accrued markup-income5664614586527837_

Other receivables1696221637311077797668598,667

Sales tax and excise duty adjustable9701761023399389453255609111,754

Income tax refundable-net267674223626741407713780089434,423

Total Current Assets1706045118608777143131321242763311,807,612

Non-current assets classified as held for sale5463____

Non-Current Assets

Long term investments45454190541344494,449

Long-term loans140915231114316211,078

Long-term deposits, prepayments and receivables6345120487284993460924,683

Long-term installments sales receivables162650185829169864153478146,077

Deferred taxation_____

232055212029204890195698186,287

Fixed Assets

Property, Plant and equipment37388674200317422658246846714,578,436

Intangible assets312028303777505760347732383,808

Total Non-Current Assets40508954504094473234250324034,962,244

Total Assets2134886423324900192503641765573416,956,143

Liabilities + Equity

Current Liabilities

Accrued markup___1512

Trade and other payables26946253211174308035118530341,315,584

Advances11437463065406327031441781371,596

Short-term borrowing_750005000080000

Deposits against display of vehicles148640614368331067839723554742,718

Security deposits8472881197887538677884278

Provisions for custom duties and sales tax138475138475138475138475143,286

Total Current Liabilities55479808008085475244933251342,657,462

Deferred taxation___5000146,000

Equity

Share Capital and Reserves

Authorized shares capital 15000001500000150000015000001,500,000

Issued, subscribed and paid-up share capital822999822999822999822999823,000

Reserves1497788514493816136749161350260113,329,681

Total Share and Reserves1580088415316815144979151432560014,152,681

Total Equity and Liabilities2134886423324900192503641765573416,956,143

Table 5: BALANCE SHEET VERTICAL ANALYSISPAK SUZUKI MOTOR COMPANY LIMITED

BALANCE SHEET

VERTICAL ANALYSIS

Descriptions20122011201020092008

Assets

Cash and bank balances6.639374.88525115.1539320.0819814.73886

Stores, spares and loose tools0.3892240.2763870.3320250.2364610.557131

Stock-in-trade49.4742755.4017245.4434638.9659845.60305

Trade debts2.7544421.3834011.2504652.1324971.690815

Current portion of long-term installments sales receivables1.6538441.3031181.3051911.1649472.010782

Loans, advances and others0.9156970.9285610.7010931.2822350.75536

Interest accrued____0.173577

Trade deposits and short-term prepayments0.1822950.3570050.2257930.179760.303607

Accrued markup-income0.0265310.0263450.0449450.044388

Other receivables0.7945250.7019580.559880.4343350.581895

Sales tax and excise duty adjustable4.5443924.3875822.0230941.4477390.659077

Income tax refundable-net12.538110.129417.3126574.4183322.562039

Total current assets79.9126979.7807474.3525370.3886569.63619

Non-current assets classified as held for sale0.025589____

Non-current assets_____

Long term investments0.0212890.0179640.0281190.0251990.026238

Long-term loans0.00660.006530.0057870.0179090.065333

Long-term deposits, prepayments and receivables0.297210.0878330.1480440.1960210.14557

Long-term installments sales receivables0.7618670.7966980.8823940.8692810.861499

Deferred taxation_____

Total non-current assets1.0869670.9090241.0643441.108411.09864

Fixed assets_____

Property, Plant and equipment17.5131918.0078721.9558526.5334327.00164

Intangible assets1.4615671.3023722.6272751.9695132.263534

Total fixed assets20.0617219.3102424.5831328.5029429.26517

Total assets100100100100100

Liabilities +equity

Current liabilities_____

Accrued markup___0.008564_

Trade and other payables12.6218713.7671516.0015210.495377.758746

Advances5.35740913.14221.698832.5021962.191513

Short-term borrowing0.3215450.2597350.453111

Deposits against display of vehicles6.9624596.1600825.5471114.0981254.38023

Security deposits0.3968740.3481130.4610460.49150.497035

Provisions for custom duties and sales tax0.6486290.5936790.7193370.7843060.845039

Total non-current liabilities25.9872434.3327724.6875818.8331715.67256

Deferred taxation0.0283190.861045

Equity

Share capital and reserves

Authorized shares capital

Issued, subscribed and paid-up share capital3.8550013.5284144.2752394.661374.853698

Reserves70.1577662.1388171.0371876.4771478.6127

Total Share and reserves74.0127665.6672375.3124281.1385183.46639

Total equity and liabilities100100100100100

Figure 10: Total Current Assets as % of Total Assets

Figure 11: Total Non-Current Assets as % of total Assets

Figure 12: Total Fixed Assets as % of Total Assets

Figure 13: Total Non-Current Liabilities as % of Total Assets

Figure 14: Total Equity and Reserves as % of Total Assets Table 6: BALANCE SHEET HORIZONTAL ANALYSIS USING 2008 AS BASE YEARPAK SUZUKI MOTOR COMPANY LIMITED

BALANCE SHEET

HORIZONTAL ANALYSIS USING 2008 AS BASE YEAR

Descriptions20122011201020092008

Assets

Cash and bank balances-43.2833-54.405216.727541.873530

Stores, spares and loose tools-12.039-31.7578-32.3411-55.80620

Stock-in-trade36.594567.1175713.13302-11.02860

Trade debts105.109212.54983-16.037131.32610

Current portion of long-term installments sales receivables3.556523-10.852-26.3079-39.67460

Loans, advances and others52.6319569.102125.37398576.755150

Interest accrued0

Trade deposits and short-term prepayments-24.401761.75408-15.5672-38.34890

Accrued markup-income

Other receivables71.9136165.943029.235104-22.2790

Sales tax and excise duty adjustable768.1354815.7605248.4913128.72470

Income tax refundable-net516.1603443.8649224.04279.568990

Total current assets44.4868957.5998321.219535.2510280

Non-current assets classified as held for sale

Non-current assets

Long term investments2.157788-5.8215321.6677900

Long-term loans-87.2811-86.252-89.944-71.45690

Long-term deposits, prepayments and receivables157.0636-16.999615.4600340.213910

Long-term installments sales receivables11.3453927.2130516.283885.0665060

Deferred taxation

Total non-current assets24.5685413.818469.9862045.0518820

Fixed assets

Property, Plant and equipment-18.3375-8.25869-7.685032.3203340

Intangible assets-18.7021-20.851831.77422-9.399490

Total fixed assets-18.3657-9.23272-4.633021.4138560

Total assets25.9063737.5601813.530324.1258850

Liabilities + equity

Current liabilities

Accrued markup

Trade and other payables104.8235144.0873134.143240.852580

Advances207.7929724.9298-11.992918.887450

Short-term borrowing

Deposits against display of vehicles100.130693.4560643.77449-2.580250

Security deposits0.533947-3.655765.3098082.9663730

Provisions for custom duties and sales tax-3.35762-3.35762-3.35762-3.357620

Total non-current liabilities108.7699201.343378.8341325.124420

Deferred taxation-96.57530

Equity

Share capital and reserves

Authorized shares capital 0

Issued, subscribed and paid-up share capital-0.00012-0.00012-0.00012-0.000120

Reserves12.364928.7334052.5899721.2972550

Total equity 11.645878.2255372.4393541.2218110

Total equity and liabilities25.9063737.5601813.530324.1258850

Figure 15: Changes in Total Current Assets from 2008

Figure 16: Changes in Total Non-Current Assets from 2008

Figure 17: Changes in Total Fixed Assets from 2008

Figure 18: Changes in Total Non-Current Liabilities from 2008

Figure 19 Changes in Total Equity from 2008 4.3 Cash Flow Statement:Table 7: cash flow statementPAK SUZUKI MOTOR COMPANY LIMITED

CASH FLOW STATEMENT

FOR THE YEAR ENDED

DESCRIPTION20122011201020092008

CASH FLOWS FROM OPERATING ACTIVITIES

Cash generated from operations1,568,442255,178948,5612,653,876-1,439,744

Net cash generated from / (used in) operating activities701,849-1,296,887-165,7291,969,420-2,151,360

CASH FLOWS FROM INVESTING ACTIVITIES

Net cash used in investing activities-259,751-439,469-421,646-841,184-423,418

CASH FLOWS FROM FINANCING ACTIVITIES

Dividends paid-41,350-41,060-81,757-410,132

net cash used in financing activities-164,148 - - - -

Net increase or decrease in cash/ cash equivalents277950-1,777,706-628,4351,046,479-2,984,910

cash/cash equivalents at the beginning of the year1,139,4802,917,1863,545,6212,499,1425,484,052

cash/cash equivalents at the end of the year1,417,4301,139,4802,917,1863,545,6212,499,142

Table 8: cash flow Statement vertical analysisPAK SUZUKI MOTOR COMPANY LIMITED

CASH FLOW STATEMENT

FOR THE YEAR ENDED

20122011201020092008

DESCRIPTION

CASH FLOWS FROM OPERATING ACTIVITIES

Cash generated from operations564.2893-14.3543-150.94253.600548.23408

Net cash generated from / (used in) operating activities252.509172.95284-4.6741978.80385-39.2294

CASH FLOWS FROM INVESTING ACTIVITIES

Net cash used in investing activities-93.452424.7211367.09461-80.382314.18529

CASH FLOWS FROM FINANCING ACTIVITIES

Dividends paid2.3260316.533691-7.8125813.74018

net cash used in financing activities-59.0567

Net increase or decrease in cash/ cash equivalents100100100100100

cash/cash equivalents at the beginning of the year409.9586-164.098-564.199238.8143-183.726

cash/cash equivalents at the end of the year509.9586-64.0983-464.199338.8143-83.7259

4.4 Liquidity, Debt paying, and Profitability Ratios:4.4.1 Liquidity Ratios Analysis:Table 9: Liquidity RatiosRatios:20122011201020092008

Day sales in receivables1.0577621.1336010.9225331.0669350.907832

Account receivables turnover232.7397242.25291.8309208.1763335.1616

Account receivables turnover in days2.0787881.8798151.5789162.4397090.907832

Day sales in inventory68.6157192.7581776.6837297.8423772.22191

Inventory turnover3.3004822.9398673.416422.3883113.171099

Inventory turnover in days110.5899124.1553106.837152.8277115.1021

Work in capital1151247110600692956068391024999150150

Current ratio3.0750742.3237493.0117383.7374834.443191

Acid test ratio1.1712830.710081.1709961.6684751.533453

Sales to work in capital4.8803944.7967774.355232.8195294.270872

Figure 20: Day Sales in Receivables

Figure 21: Account Receivables Turnover

Figure 22: Account Receivables Turnover in Days

Figure 23: Day Sales in Inventory

Figure 24: Inventory Turnover

Figure 25: Inventory Turn Over in Days

Figure 26: Work in Capital

Figure 27: Current Ratio

Figure 28: Acid Test Ratio

Figure 29: Sales to Work In Capital4.4.2 Long-Term Debt Paying ability RatiosTable 10: Long-Term Debt Paying ability RatiosRatios:20122011201020092008

Times interest earned146.127283.5087734.904338.1344320.93593

Debt ratio %25.9872434.3327724.6875818.8331715.67256

Debt to equity ratio0.0618970.0518660.0145640.0178160.044146

Debt to tangible net worth10.8577215.4232414.980666.9963496.050798

Figure 30: Times Interest Earned

Figure 31: Debt Ratio

Figure 32: Debt to Tangible net Worth4.4.3 Profitability Ratios:Table 11: Profitability RatiosRatios:20122011201020092008

Net profit margin0.0174070.0156230.0050710.0099440.015988

Total assets turn over2.6317752.1800372.1630231.4536222.304718

Return on assets0.0458110.0340590.0109680.0144550.036847

Due point return on assets0.0615220.0578380.0363020.0261370.05621

Operating income margin0.0288690.0293070.0178960.0186680.028646

Return on operating assets0.0950740.0800810.0520620.0385530.094807

Operating assets turn over2.1310731.9735482.0285031.4000411.96226

Sales to fixed assets13.8698711.289548.7988095.0999027.875293

Return on investment0.0949160.0891370.0460770.0298660.070105

Figure 33: Net Profit Marging

Figure 34: Total Assets Turnover

Figure 35: Return on Assets

Figure 36: Duo Pont Return on Assets

Figure 37: Operating Income Margin

Figure 38: Return on Operating Assets

Figure 39: Sales to Fixed Assets

Figure 40: Return on Investment

5. Comprehensive analysis:We have reviewed the income statement, cash flow statement, and balance sheet of Pak Suzuki Motor Company Limited for the five years 2012, 2011, 2010, 2009 and 2008 respectively. As our review, their Management is responsible for the preparation and presentation of this financial information with following the accounting standards reporting system. Pak Suzuki Company is a vehicle production and selling industry for which it should have strong liquidity as well as high range of fixed assets like machinery, land, equipment, franchises etc. 5.1 Horizontal and vertical analysis:5.1.1 Horizontal analysis:The horizontal analysis based on following 2008 as base year for all other years. The total non-current assets are increased 44.48%, 57.6%, 21.22, 5.25% from the year 2008. the portions of non-current assets showed following trends as the cash balance and bank balance decreased by the 43.28 % and 54.41% in the years 2012 and 2011 while in other years increase of 16.78 and 41.87 showed that 2009 and 2010 was less liquid then those of 2012 and 2011. The store and the spare and loose tools of the company had started decrease from the 2008 may be due to the having more spare parts sales. The spare and loose tools are 12.04%, 31.76%, 32.34% and 55.81% less than in 2008.Receivables are increasing yearly then from the 2008 which means the company made majors sales on credit to company but it is not good for the company that it bare much risk of debtors. The long-term investment of the company during the years remained unusual as it remained constant in the 2009 and then in the year 2010, it showed high increase of 21.67% then it showed decrease of 5.82% than year 2008, in year 2012 again investments had increase of 2.16 than of 2008. The fixed assets overall decreased 18.37%, 9.23%, 4.63%, in which the property plants and equipment also the intangible assets both decreased 18.7% but in year 2011 intangibles decrease 16%, more than property plant and equipment other companies have trust in company for issuing loans supplies on credit as the liabilities increased 108.77%, 201.34%, 78.83%, and 25.12%.5.1.2 Vertical Analysis:During the year 2012, 2011, 2010, 2009, 2008 the current assets were 79.91%, 79.78%, 74.35%, 70.38%, and 69.63% respectively of the total assets. The company fully understand their need to have current assets more the fixed assets their major part of investment are related to the current assets and the total current assets yearly increases as the company increased investments. From year, 2012 the portions of the current assets are increased approximately 45% percent, which shows a good investment by investor in company. In addition, the company has opened some new franchises. In current assets the major part was of stock in trade, which is good sign for that, the company is investing its cash and utilizing it to earn more. During the year 2011, the stock in trade was 55 % of total current assets but in 2012, 2010 and 2008 was 49 %, 45%, and 45% but in year 2009 the major stock was reduced to 38% and liquidity position of company was not as good as it was in 2011. During year 2012, 2011, 2010, 2009, 2008 the company had 6.6 %, 4.88%, 15.15%, 20.08%, and 14.73% cash and bank balances which shows in year 2011 and 2012 the company was investing its major part in stock in trade. The company had minimum ratio of receivables as total part of current assets which shows company have great collection powers of debt. The company during year 2012, 2011, 2010, 2009, and 2008 had 1.09%, 0.91%, 1.06%, 1.11%, and 1.10% of non-current assets as portion of total assets. The major part of the non-current assets are long-term installments sales receivables and then of long-term deposits, prepayments and long-term receivables. The second major part of investments during were of the fixed assets which were counted to be 20.06 %, 19.31%, 24.58%, 28.50%, and29.27 respectively. During year, 2010 company sold its some property plant and equipment from 26.53% to 21.95% then in 2011,company sold more and had decreased to 18.08 % now the property plant and equipment are 17.51% of fixed assets. Total non-current Liabilities of years 2012, 2011, 2010, 2009, 2008 are 25.99%, 34.33%, 24.69%, 18.83%, and 15.67% respectively. If we see the liability portions the major parts of the liability are trade payables which are 12.62%, 13.77%, 16.00%, 10.50%, and 7.76% percent while the years this shows that the company have less liabilities and randomly payoff its liabilities. The sales are increasing yearly like for years 2012, 2011, 2010, 2009, 2008 sales were 9023.27%, 6304.03%, 19976.47%, 10279.04%, and6349.34% of the profit, which is showing high productivity. The sales of company are very high then previous year.5.2 Ratios Analysis:5.2.1 Liquidity Ratios AnalysisThe sales as on the receivables are 1.05, 1.13, 0.92, 1.07, 0.91 which shows that a minimum part of the sales are made on receivables Since it is profitable to convert sales into cash quickly. Lower values of Days Sales receivables are favorable however, it is more meaningful to create monthly or weekly trend. Any significant increase in the trend is unfavorable and indicates inefficiency in credit sales collection. The collection periods of the receivables are as 232.73, 242.25, 291.83, 208.18, and 335.16 for the respective years 2012, 2011, 2010, 2009, and 2008. The high value of collection period is favorable and shows no indicate inefficiency in collecting outstanding sales. This Increase in accounts receivable turnover overtime generally indicates improvement in the process of cash collection on credit sales but very high values of this ratio may not be favorable, if achieved by extremely strict credit terms since such policies may repel potential buyers.After realizing this company had making effort to lessen them as it shows a 100 number decrease in collection period in the 2012 than in the year 2008. The day sales in inventory show figures of 68.62, 92.75, 76.68, 97.84, and 72.22, which mostly means that lower values of are generally favorable and higher values, are unfavorable for Business which sell perishable goods such as fruits and vegetables must have very low values of days' sales in inventory. Whereas companies selling non-perishable goods such as cars have high values of days of inventory like the Pak Suzuki shows a higher values of the inventory. The current ratio of company during years were 3.08, 2.32, 3.01, 3.74, and 4.44 and the quick ratio are as 1.17, 0.71, 1.17, 1.67, 1.53, these figures shows that the most liquid assets of a PSMC are equal to its total debts and the PSMC will just manage to pay all its debts by using its quick assets. As showing the value in 2008 quick ratio which is quite high, say 4.44, is not favorable to a company this means that the company has idle current assets and is inefficient. The current ratios of the company means the company will be able to pay all its current liabilities in immediate short term and creditors usually prefer high cash ratio. The company has its major part of investments working and increases yearly than 2008.5.2.2 Long-Term Debt Paying ability Ratios Analysis:Times interest earned during the years 2012, 2011, 2010, 2009 and 2008 was 146.13, 83.51, 34.90, 38.13, 20.94, which shows greater ability of a business to repay its interest and debt. With the year, the ability to repay its loans increases which attract lending companies. Furthermore increase in values of debt ratio in future will mean higher risk in operation since the business would find it difficult to obtain loans for new projects claim debt ratio 25.98, 34.33, 24.68, 18.83, and 15.67 respectively mean that this much assets are claimed but liabilities. Debts to equity ratio are 0.06, 0.05, 0.01, 0.02, and 0.04 means a favorable efficient ratio indicating less risk. Debt to tangible net worth shows higher debt included in the capital employed means higher risk of insolvency 10.85, 15.42, 14.98, 6.99, 6.05 as for years 2012, 2011, 2010, 2009, and 2008.5.2.3 Profitability Ratios analysis:Net profit margin of 0.02, 0.02, 0.01, 0.01, and 0.02 shows a constant 20% return on sales however company is not earning efficient but it is not going in loss it is maintaining its productivity. Return on assets for the respective years are 0.045811, 0.034059, 0.010968, 0.014455, and 0.036847 and Return on operating assets 0.095074, 0.080081, 0.052062, 0.038553, 0.094807 these lower turnover ratio tells that the company is not using its assets optimally. Due point return on assets 0.062, 0.058, 0.036, 0.026, 0.056 provides that company's strength lies and where there is a room for improvement. Operating income margin 0.03, 0.03, 0.02, 0.02, 0.03 a higher value of operating margin ratio is favorable and indicates that more proportion of revenue is going to operating income. An increase in operating margin ratio overtime means that the profitability is improving. Lower value of return on investments indicates lower profitability but company has fluctuating returns like 0.094916, 0.089137, 0.046077, 0.029866, and 0.070105.

Recommendations:

The company should work on its productivity capacity; it should try to generate more from its operating assets. The operating income will make a significant change in their financial positions. The company is decreasing its investments and it should try to invest its idle cash in investing activities. Company should maintain its localization in order to reduce the cost of products and keep the prices competitive besides saving of foreign exchange as per great fluctuations in Currency of Pakistan.Moreover, company has good financial positions and great impact on lender. It should try to maintain debt ratio figure to maintain the lenders trust on it is as the debt ratio is increasing gradually.

Table of figures:Figure 1: Board of Directors6Figure 2: Audit committee7Figure 3: Human resource department7Figure 4: LEGAL ADVISORS7Figure 5: Major Automobiles in Pakistan .........................................................................14Figure 6: EBIT Horizontal Analysis16Figure 7: EBT Horizontal Analysis17Figure 8: Net Income horizontal Analysis17Figure 9: Profit Before Taxation18Figure 10: Total Current Assets as % of Total Assets23Figure 11: Total Non-Current Assets as % of total Assets23Figure 12: Total Fixed Assets as % of Total Assets24Figure 13: Total Non-Current Liabilities as % of Total Assets24Figure 14: Total Equity and Reserves as % of Total Assets25Figure 15: Changes in Total Current Assets from 200827Figure 16: Changes in Total Non-Current Assets from 200827Figure 17: Changes in Total Fixed Assets from 200828Figure 18: Changes in Total Non-Current Liabilities from 200828Figure 19 Changes in Total Equity from 200829Figure 20: Day Sales in Receivables32Figure 21: Account Receivables Turnover32Figure 22: Account Receivables Turnover in Days33Figure 23: Day Sales in Inventory33Figure 24: Inventory Turnover34Figure 25: Inventory Turn Over in Days34Figure 26: Work in Capital35Figure 27: Current Ratio35Figure 28: Acid Test Ratio36Figure 29: Sales to Work In Capital36Figure 30: Times Interest Earned37Figure 31: Debt Ratio37Figure 32: Debt to Tangible net Worth38Figure 33: Net Profit Marging39Figure 34: Total Assets Turnover39Figure 35: Return on Assets40Figure 36: Duo Pont Return on Assets40Figure 37: Operating Income Margin41Figure 38: Return on Operating Assets41Figure 39: Sales to Fixed Assets42Figure 40: Return on Investment42

Table of TablesTable 1: Income Statement15Table 2: income statement horizontal analysis15Table 3: income statement Vertical Analysis18Table 4: Balance Sheet19Table 5: Balance Sheet Vertical Analysis21Table 6: Balance Sheet Horizontal Analysis Using 2008 As Base Year25Table 7: Cash flow Statement29Table 8: Cash flow Statement vertical analysis30Table 9: Liquidity Ratios31Table 10: Long-Term Debt Paying ability Ratios36Table 11: Profitability Ratios38

References:pak Suzuki Annual Report. (2012).pak Suzuki Annual Report. (2011).pak Suzuki Annual Report. (2010)pak Suzuki Annual Report. (2009)pak Suzuki Annual Report. (2008)www.paksuzuki.commuhammad Emmad, N. B. (2011, dec 20). where do we see pak suzuki in the future.