ashok ley land

7/31/2019 Ashok Ley Land

1/105


2/105

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 administration-G.L.S B.B.A for their

support.

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.


3/105

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


4/105

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. COMPANY PROFILE

2. FINANCIAL HIGHLIGHTS

GROSS PROFIT

NET PROFIT

PBIT

PBT

3. ACCOUNTING POLICIES


5/105


6/105

Company

Profile

Name of the company

ASHOK LEYLEND LIMITED


7/105

(HINDUJA GROUP)

Address of the company

19, RAJAJI SALAI,

CHENNAI 600001,

TAMILNADU

Introduction about companies ActivitySince five decades Ashok Leyland are technology

leaders by introducing technologies & product ideas in Indias

commercial vehicle profile which have now become industry norms.


8/105

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 Railnetwork.

Status in the Market

1. Ashok Leyland has more a near to 98.5% market of Marinediesel engine in India.

2. It is one of the leading suppliers of defense vehicles in theworld.


9/105

3. It is one of the leading brands in India and most easilyrecognizable one.

4. In 2002 all the vehicle manufacturing units of Ashok Leyland

were ISO 14001 certified unit with environmentalmanagement system.

5. The company has its valid capacity 84000 vehicle per annum.

6. Last year, the company acquired the Czech-based AviasTruck Business LTD. The new company formed is named asAvia Ashok Leyland.

Special Achievement

1. Indian Manufacturing Excellence Award 2007


10/105

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.


11/105

Financial Highlights

(Rs in million)

Particulars 2007-2008 2006-2007 2005-2006

Income

Sales (net of excise duty) 77,291 71,682 52,477


12/105

Other income 740 708 329

Total 78,031 72,390 52,806

Expenditure

Material cost 57,647 54,632 37,690Employee expenses 6,162 4,807 4,038

Other expenses 5,443 5,216 5,347

Depreciation 1,774 1,506 1,260

Financial expenses 497 53 165

Total 71,523 66,214 48,500

Profit before extra ordinaryitem

6,508 6,176 4,306

Extraordinary item income/(Expenses)

(127) (131) 217

P.B.T 6,381 6,045 4,523

Tax (current) 1,014 1,351 1,131

P.A.T 4,693 4,413 3,273

Basic Earning per share(In Rs)

3.53 3.38 2.74

Diluted E.P.S (in Rs) 3.53 3.36 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


13/105

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.


14/105

ResultsOf

Operation

GROSS PROFIT


15/105

The Gross profit of the company for the last three

years is as follows:

YEAR Gross profit(Rs in million)

2005-06 8283

2006-07 7682

2007-2008 5566

Gross profit (Rs in million)

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

2005-06 2006-07 2007-2008

2005-06

2006-07

2007-2008


16/105

NET PROFIT

The Net profit of the company for the last three years is as follows:

YEAR Net profit(Rs in million)

2005-06 4693

2006-07 4413

2007-2008 3273

Net profit (Rs in million)

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

2005-06 2006-07 2007-2008

2005-06

2006-07

2007-2008


17/105

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 PBIT (Rs in million)

2005-06 6879

2006-07 6098

2007-2008 4688

PBIT (Rs in million)

0

1000

2000

3000

4000

5000

6000

7000

8000

2005-06 2006-07 2007-2008

2005-06

2006-07

2007-2008


18/105

PROFIT BEFORE TAX

Profit before tax means net profit after deducting all

expenses including depreciation, interest and tax.

YEAR PBIT (Rs in million)

2005-06 6879

2006-07 6098

2007-2008 4688

PBIT (Rs in million)

0

1000

2000

3000

4000

5000

6000

7000

8000

2005-06 2006-07 2007-2008

2005-06

2006-07

2007-2008


19/105

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 internalfinancing management.

It also gives information about the trend of cash receipt & payment.


20/105

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.


21/105

Accounting

Policies


22/105

ACCOUNTING POLICIES

The accounting policies refer to the specific accounting

pr inciples and the methods of applying those pr inciples adopted

by the enterpr ise in the prepara tion and presentat ion of financial

statement.

There is no s ingle lis t 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.


23/105

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) Materiali ty.


24/105

Ratio

Analysis


25/105

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


26/105

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


27/105

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


28/105

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 arelationship between two items of which one

is taken from balance-sheet and other from


29/105

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 liquidityposition 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 ownerscapital and the capital provided by the

outsiders is reflected by this ratio.


30/105

TYPES OF RATIOSSome 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


31/105

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 inmillion)

(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:


32/105

Gross profit ratio: Gross profit *100Net sales

2005-2006 = 5730 *10052477

= 10.92%

2006-2007 = 7735 *10071682

= 10.79%

2007-2008 = 8780 *10077291

= 11.36%

Table:

YEAR Gross profit (%)

2005-06 10.92

2006-07 10.79

2007-2008 11.36


33/105

Grossprofit (%)

10.5

10.6

10.7

10.8

10.9

11

11.1

11.2

11.3

11.4

11.5

2005-06 2006-07 2007-2008

Grossprofit (%)

Interpretation:

This ratio indicates an averagegross 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 hasincreased to 11.36%.

2. Net profit Ratio:

Meaning:


34/105

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 sales2005-2006 = 3273 *10052477

= 6.24%

2006-2007 = 4413 *10071682

= 6.16%

2007-2008 = 4693 *10077291

= 6.07%

Table:


35/105

YEAR Net profit (%)

2005-06 6.24

2006-07 6.16

2007-2008 6.07

Net profit (%)

5.95

6

6.05

6.1

6.15

6.2

6.25

6.3

2005-06 2006-07 2007-2008

Net profit (%)

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%.


36/105

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: expense *100Net sales

2005-2006 = 47,076 *10052477

= 89.71%

2006-2007 = 64,655 *10071680

= 90.21%

2007-2008 = 69,251 *10077291

= 89.60%


37/105

Table:

YEAR Expense profit (%)

2005-06 89.71

2006-07 90.21

2007-2008 89.60

Expense profit (%)

89.289.389.489.589.689.789.889.9

9090.190.290.3

2005-06 2006-07 2007-2008

Expense profit (%)

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.


38/105

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: cost of sales +operating expense *100

Net sales

2005-2006 = 46,747+2457 *10052477

= 93.76%

2006-2007 = 63,947+3322 *10071680

= 93.85%


39/105

2007-2008 = 68,511+4070 *10077291

= 93.93%

Table:

YEAR Operating ratio (%)

2005-06 93.76

2006-07 93.85

2007-2008 93.93

Operating ratio (%)

93.65

93.7

93.75

93.8

93.85

93.9

93.95

2005-06 2006-07 2007-2008

Operating ratio (%)

Interpretation:


cost incurred on the scale of its goods. Lower

the greater is the operating profit to cover the


40/105

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 bydebenture holder & share holders are used.

Formula:

Return on capital employed: P.B.I.T*100

Capitalemployed

2005-2006 = 4688 *10015,441


41/105

= 30.36%

2006-2007= 6098 *10019,552

= 31.19%

2007-2008= 6879 *10021917

= 31.39%

Table:

YEAR Return on capital employ

(%)

2005-06 30.36

2006-07 31.19

2007-2008 31.39

Return on capital employed (%)

29.8

30

30.2

30.4

30.6

30.8

31

31.2

31.4

31.6

2005-06 2006-07 2007-2008

Return on capital employed (%)


42/105

Interpretation:

This ratio tells us how

efficiently the management is being carriedout 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 dividingPAT by equity or shareholders funds. The

main purpose behind calculating for this ratio

is to determine how efficiently the funds

belonging to the share holders have been

used.

Formula:

Return on shares holder: Net profit*100


43/105

Shareholdersfund

2005-2006 = 3272 *100

6,795.81

= 48.16%

2006-2007 = 4413 *10018,701.5

= 23.6%

2007-2008 = 4693 *10021266

= 22.07%

Table:

YEAR Return on shares holder(%)

2005-06 48.16

2006-07 23.6

2007-2008 22.07


44/105

Returnon sharesholder (%)

0

10

20

30

40

50

60

2005-06 2006-07 2007-2008

Returnon sharesholder (%)

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:


45/105

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 *100Equity

Share capital

2005-2006 = 2303.7 *1001221.59

= 188.58%

2006-2007 = 3616.86 *1001323.87

= 273.2%

2007-2008 = 5022.74 *100

1330.34

= 377.55%


46/105

Table:

YEAR Return on equity share capi

(%)

2005-06 188.58

2006-07 273.2

2007-2008 377.55

Return on equity share capital (%)

0

50

100

150

200

250

300

350

400

2005-06 2006-07 2007-2008

Return on equity share capital (%)

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.


47/105

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 equity shareholders fund:Net profit *100

EquityShareholders fund

2005-2006 = 2303.7 *1006795.81

= 33.9%2006-2007 = 3616.86 *10018701.5

= 19.34%


48/105

2007-2008 = 5022.74 *10021260.9

= 23.62%

Table:

YEAR Return on equ

shareholders fund (%)

2005-06 33.92006-07 19.34

2007-2008 23.62

Return on equity shareholdersfund (%)

0

5

10

15

2025

30

35

40

2005-06 2006-07 2007-2008

Return on equity shareholders fund (%)

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


49/105

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: PAT- Preference

dividend No. of EquityShares

2005-2006 = 3273.201992.925


50/105

= 2.74 Rs.

2006-2007 = 4412.86

1303.89

= 3.38 Rs.

2007-2008 = 4693.10 *1001328.60

= 3.53 Rs.

Table:

YEAR EPS (Rs)

2005-06 2.74

2006-07 3.382007-2008 3.53

EPS (Rs)

0

0.5

1

1.5

2

2.5

3

3.5

4

2005-06 2006-07 2007-2008

EPS (Rs)


51/105

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 dividendto its shareholders.

Formula:


52/105

Dividend per share: Total dividenddeclared

No. ofShares

2005-2006 = 441.17441.17

= 1 Rs. Per share

2006-2007 = 529.40441.17

= 1.20 Rs. Per share

2007-2008 = 661.75441.17

= 1.50 Rs. Per share

Table:

YEAR Dividend per share

2005-06 1

2006-07 1.20

2007-2008 1.50


53/105

Dividend per share

0

0.2

0.4

0.6

0.81

1.2

1.4

1.6

2005-06 2006-07 2007-2008

Dividend per share

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 1.50Rs. Per share.

7. Price earning Ratio:

Meaning:


54/105


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: Market valueper shareEarning

per share

2005-2006 = 40.252.74

= 14.69 Times

2006-2007 = 38.453.38

= 11.38 Times

2007-2008 = 34.483.53

= 9.77 Times


55/105

Table:

YEAR Price earning per sha

(Times)

2005-06 14.69

2006-07 11.38

2007-2008 9.77

Price earning per share (Times)

0

2

4

6

8

1012

14

16

2005-06 2006-07 2007-2008

Price earning per share (Times)

Interpretation:


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.


56/105

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 bydividing 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: Dividend pershare *100

Market value pershare

2005-2006 = 1.34 *100

40.25

= 3.33 %

2006-2007 = 1.52 *10038.45


57/105

= 4%

2007-2008 = 1.5 *100

34.48

= 4.4%

Table:

YEAR Dividend yield ratio (%)

2005-06 3.33

2006-07 4

2007-2008 4.4

Dividend yield ratio (%)

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

2005-06 2006-07 2007-2008

Dividend yield ratio (%)

Interpretation:


58/105


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 & 2006-

2007 it was 3.33% & 4%. In current year itincreases to 4.4%.

9. Interest coverage Ratio:

Meaning:


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


59/105

Interest on loan

2005-2006 = 5948165

= 36.05 Times

2006-2007 = 760453

= 143.47 Times

2007-2008 = 8653498

= 17.38 Times

Table:

YEAR Interest coverage ratio (Tim

2005-06 36.05

2006-07 143.47

2007-2008 17.38


60/105

Interest coverage ratio (Times)

0

20

40

60

80100

120

140

160

2005-06 2006-07 2007-2008

Interest coverage ratio (Times)

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 (All Rs. inmillion)


61/105

1. Overall Turnover Ratio:

Meaning:


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: Net sales

Capitalemployed

2005-2006 = 52,477

15,898.37

= 3.30 Times

2006-2007 = 71,68221,957.65

= 3.26 Times

2007-2008 = 77,29128,776.42


62/105

= 2.69 Times

Table:

YEAR Overall Turnover ratio (time

2005-06 3.30

2006-07 3.26

2007-2008 2.69

Overall Turnover ratio (times)

0

0.5

1

1.5

2

2.5

3

3.5

2005-06 2006-07 2007-2008

Overall Turnover ratio (times)

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.


63/105

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: Netsales

Fixedassets

2005-2006 = 52,477

9432.71

= 5.56 Times

2006-2007 = 71,68213,070.33


64/105

= 5.84 Times

2007-2008 = 77,29115,255.50

= 5.07 Times

Table:

YEAR Fixed Assets Turnover ra(times)

2005-06 5.56

2006-07 5.84

2007-2008 5.07

Fixed Assets Turnover ratio (times)

4.6

4.8

5

5.2

5.4

5.6

5.8

6

2005-06 2006-07 2007-2008

Fixed AssetsTurnover ratio (times)

Interpretation:


65/105

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:


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 salesDebtors


66/105

2005-2006 = 52,4774243.37

= 12.37 Times

2006-2007 = 71,6825228.75

= 13.71 Times

2007-2008 = 77,2913758.35

= 20.57 Times

Table:

YEAR Debtors Turnover ra(times)

2005-06 12.97

2006-07 13.71

2007-2008 20.57


67/105

Debtors Turnover ratio (times)

0

5

10

15

20

25

2005-06 2006-07 2007-2008

Debtors Turnover ratio (times)

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:


68/105

This ratio is obtained by addingcreditors and Bills payable and dividing it bycredit purchases. The chief motive is to findhow well the creditors are being managed.

Formula:

Creditors Ratio: creditors + B.P*365

Net credit purchase

2005-2006 = 6919.81 *36547,075.85

= 53.65 = 54 days

2006-2007 = 10,137.12 *36564,654.91

= 57.23 = 57 days

2007-2008 = 12,925.58 *36569,251.34

= 68.13 = 68 days

Table:


69/105

YEAR Creditors Ratio (days)

2005-06 54

2006-07 572007-2008 58

Creditors Ratio (days)

52

53

54

55

56

57

58

59

2005-06 2006-07 2007-2008

Creditors Ratio (days)

Interpretation:


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.


70/105

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: No. of Dayin a year

Creditors ratio

2005-2006 = 365

54

= 6.76 times

2006-2007 = 36557

= 6.40 times

2007-2008 = 36568


71/105

= 5.37 times

Table:

YEAR Creditors Turnover Ra

(times)

2005-06 6.76

2006-07 6.402007-2008 5.37

CreditorsTurnover Ratio (times)

0

1

2

3

4

5

6

7

8

2005-06 2006-07 2007-2008

CreditorsTurnover Ratio (times)

Interpretation:


market standing of the company. An

established has more creditability hence is in


72/105

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.SAverage stock

2005-2006 = 46,747

7353.21

= 6.36 times


73/105

2006-2007 = 63,9479864.41

= 6.48 times

2007-2008 = 68,51111471.175

= 5.97 times

Table:

YEAR Stock Turnover Ratio (times

2005-06 6.36

2006-07 6.48

2007-2008 5.97

Stock Turnover Ratio (times)

5.7

5.8

5.9

6

6.1

6.2

6.3

6.4

6.5

6.6

2005-06 2006-07 2007-2008

Stock Turnover Ratio (times)

Interpretation:


74/105

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 dividingcurrent assets with current liabilities. Themain purpose to calculate this ratio is tomeasure the firms ability to meet its shortterm obligations and to also determine itsshort term solvency condition. It alsodetermines whether the company is in a

position to meet its short term obligation fromits short term Assets.

Formula:


75/105

Current Ratio: Current AssetsCurrent Liabilities

2005-2006 = 19,297.7411,468.95

= 1.68:1

2006-2007 = 20,281.3516,516.25

= 1.23:1

2007-2008 = 20,511.1919,267.09

= 1.06:1

Table:

YEAR Current Ratio

2005-06 1.68:1

2006-07 1.23:1

2007-2008 1.06:1


76/105

Current Ratio

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2005-06 2006-07 2007-2008

Current Ratio

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:


77/105

Meaning:


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 AssetsLiquid Liabilities

2005-2006 = 10,272.13

11,468.95

= 0.9:1

2006-2007 = 9578.1416,516.25

= 0.58:1

2007-2008 = 8272.0519,267.09

= 0.43:1


78/105

Table:

YEAR Liquid Ratio

2005-06 0.9:1

2006-07 0.58:1

2007-2008 0.43:1

Liquid Ratio

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.80.9

1

2005-06 2006-07 2007-2008

Liquid Ratio

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


79/105

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 AssetsLiquid Liability

2005-2006 = 6028.7611,468.95

= 0.53:1

2006-2007 = 4349.39


80/105

16,516.25

= 0.26:1

2007-2008 = 4513.719,267.09

= 0.23:1

Table:

YEAR Quick Ratio2005-06 0.53:1

2006-07 0.26:1

2007-2008 0.23:1

Quick Ratio

0

0.1

0.2

0.3

0.4

0.5

0.6

2005-06 2006-07 2007-2008

Quick Ratio

Interpretation:

This ratio suggests whether the

cash & cash equivalents are sufficient to meet

the short term liabilities.


81/105

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 in2006-2007; it was decreased from 2005-2006

i.e.0.53:1.

Leverage Ratio(All Rs. in million)

1. Proprietor Ratio:

Meaning:


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:


82/105

Proprietor Ratio: Proprietor fund *100Total Assets

2005-2006 = 6795.79 *100

22,768

= 29.85%

2006-2007= 18,701.5 *10027,074.77

= 69.07%

2007-2008= 21,266.9 *10032,680.11

= 65.08%

Table:

YEAR Proprietor Ratio (%)2005-06 29.85

2006-07 69.07

2007-2008 65.08


83/105

Proprietor Ratio (%)

0

10

20

30

40

50

60

70

80

2005-06 2006-07 2007-2008

Proprietor Ratio (%)

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 2005-

2006 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:


84/105

Meaning:


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: Long Term Liability*100

Share holders fund

2005-2006 = 1846.91 *100

6795.79

= 27.18%

2006-2007= 3256.15 *10018,701.5

= 17.41%

2007-2008= 7509.52 *100

21,266.9

= 35.31%


85/105

Table:

YEAR Debt Equity Ratio (%)2005-06 27.18

2006-07 17.41

2007-2008 35.31

Debt Equity Ratio (%)

0

5

10

15

20

25

30

35

40

2005-06 2006-07 2007-2008

Debt Equity Ratio (%)

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 debtprovides since owners equity is treated as a

margin of safety by debenture holder & vice-

versa.


86/105

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 dividingfixed 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: Fixed InterestBearing Capital *100

OrdinaryCapital

2005-2006 = 1846.91 *1001221.59

= 151%

2006-2007= 3256.15 *100


87/105

1323.87

= 246%

2007-2008= 7509.52 *1001330.34

= 564%

Table:

YEAR Capital Gearing Ratio (%)

2005-06 151

2006-07 246

2007-2008 564

Capital Gearing Ratio (%)

0

100

200

300

400

500

600

2005-06 2006-07 2007-2008

Capital Gearing Ratio (%)

Interpretation:


88/105

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:


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: Longterm fund *100


89/105

FixedAssets

2005-2006 = 15,441 *100

9432.71

= 163.70%

2006-2007= 19,552 *10013,070.33

= 149.59%

2007-2008= 21,917 *10015,255.50

= 143.67%

Table:

YEAR Long Term funds to Fix

Assets (%)

2005-06 163.70

2006-07 149.59

2007-2008 143.67


90/105

Long Termfundsto Fixed Assets(%)

130

135

140

145

150

155

160

165

170

2005-06 2006-07 2007-2008

Long Termfundsto Fixed Assets(%)

Interpretation:

A sound business technique isto 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 isdecreased at 143.67%.


91/105

Directors

Report


92/105

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


93/105

The directorsrecommend 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 Commercialborrowings(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:


94/105

(Rs. in million)

Particulars 2007-2008 2006-200

Profit Before Tax 6381.50 6045.06Less:

Provision for Taxation 1688.40 1632.20

4693.10 4412.86

Add:

Transfer from /(to)Debenture Redemption Reserve 50 135

Balance profit from last year 3616.86 2303.70

General Reserve (1000) (1000) 7359.96 5851.56

Add:

Excess Provision written back dividend - 29.62

(Including corporate dividend tax)

Profit available for appropriation 7359.96 5881.18

Appropriation:

Dividend 2006-2007 - 1985.81

Proposed dividend 2007-2008 1997.71 -Corporate Dividend Tax 339.51 278.51

Balance Profit carried to B/S 5022.74 3616.86

Earning per share (face value 1 Rs.)

Basic 3.53 3.38

Diluted 3.53 3.36

External Commercialborrowings(ECBS)


95/105

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.

Corporate Governance

Your company has consistently

adopted high standards of corporate

governance. The code of conduct is for the


96/105

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 isdue to expire on May 31, 2009.

Mr. Vinod.k.Dasari thechair operating officers of the companywho was co-opted to the Board as anadditional Directors vacates office at the

ensuring A.G.M. Mr. D.J.Balaji Roa, Mr.

P.N.Ghatalia and Mr. D.G.HindujaDirectors retire by rotation at theforthcoming A.G.M. and are eligible forre-oppintment.

The Board of DirectorsChairman- R.J.Sherhoney

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


97/105

A.K.DasP.N.GhataliaS.R.KrishnaswamiS.Raha

F.SahamiS.ShroffA.Spare

Managing Director- R.Seharayee

Whole Time Director- Vinod.K.Dasari

Auditors


98/105

Report

Analysis of Auditors Report

Following points indicates

that the report is qualified:


99/105

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 theinformation 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 accountingstandards referred to in section 211(3c) of the

companies act 1956.


100/105

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 withaccounting principles usually accepted in

India.

1. 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 yearon that date.


101/105

Mr. Krishnaswami

& Rjan

Charted

Accountant

Deloitte Haskins &

Sells

Charted

Accountant

M.K Rajan

Partner

R.Laxminarayan

Partner

Membership No.

33023

PLACE: Chennai

DATE: May 08,2008.

Membership No. 4059

SOME IMPORTANT TERMS USED

IN CASH FLOW STATEMENT

Cash comprises cash on hand and

demand deposits with banks.

Cash equivalents are shortterm,

highly liquid investments that are readily

convertible into known amounts of cash

and which are subject to and

insignificant risk of changes in value.


102/105

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


103/105

a) PROFIT AND LOSS

ACCOUNT.

b) BALANCE SHEET.

Below is the common size statement.

Firstly BALANCE SHEET and

Secondly the PROFIT AND LOSS

ACCOUNT

SOURCES OF INFORMATION

www.indianbusiness.com
http://www.indianbusiness.com/http://www.indianbusiness.com/


104/105

BIBLIOGRAPHY

PRASANNA CHANDRA

FINANCIAL MANAGEMENT

MANAGEMENT BOOK OF ICSI

FOUNDATION

CONCLUSION


105/105

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 sophisticatedtechnology

The company has a bright future

My best wishes for future success of the

company.

ashok ley land

Documents