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THE ORGANISATION HERO CYCLES LTD
The Beginning
We look over our shoulders, we see the past. We use it to make a better
present and a beautiful tomorrow, as tomorrow isnt just another day, its
another chance for us to better ourselves and to excel.
Hero Cycles is a product of this philosophy. The philosophy that instills
commitment, team work and foresight. Heros colossal journey started before
independence. The four Munjal brothers, hailing from a small town called
Kamalia, now in Pakistan, are the men who are behind the mission.
Brotherhood apart, what knit the men together was the wealth of will,
integrity, ambition & determination. In the year 1944, they decided to start a
business of bicycle spare parts in Amritsar. Its is modest beginning and the
next 3 years saw the business grow rapidly.But the dark clouds of partition
eclipsed their plans of the future. With renewed vigour and optimism, the
operational base was shifted to Ludhiana. By 1956, the brothers had began
manufacturing key components of bicycles and as a logical way forward,
began to assemble the entire cycle at their manufacturing plant in Ludhiana.
In the early days, the plant had a capacity for 25 cycles per day. Over the next
few years, the Bicycle Unit started growing in stature and size, attracting
skilled engineers, technocrats, administrators and entrepreneurs. From a modest beginning of
mere 639 bicycles in the year 1956, Hero Cycles products over 18500 cycles a day today, the
highest in global reckoning. With the 48% share of the Indian market, this volume has
catapulted Hero in the Guinness Books of World Records in 1986 and edge over global
players is being maintained since then.
A tiny acorn has now become a mighty Oak. From cycle to two - wheelers was a natural step,
and the Hero Group came into being. The Hero Group, today, is a vast conglomerate of
companies, either in the form of collaborations, joint ventures or fully owned subsidiaries,
with more than Rs. 10000 Crore turnover annually. Hero Group, besides being the worlds
largest manufacturers of bicycles, motorcycles and chains to this date, has diversified into
newer segments like Information Technology, IT Enabled Services and Financial Services.
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THE HERO GROUP
The Hero Group has done business differently right from the inception and that is what
has helped us to achieve break-through in whatever product category we have ventured.
The Groups low key, but focused, style of management has earned the plaudits amidst
investors, employees, vendors and dealers, as also worldwide recognition.
The growth of the Group through the years has been influenced by the number of factor:
The Hero Group through the Hero Cycles Division was the first to introduce the concept
of just-in-time inventory. The Group boasts of superb operational efficiencies. Everyassembly line worker operates two machines simultaneously to save time and improve
productivity. The fact that most of the machines are either developed or fabricated in-
house has resulted in low inventory levels.
In Hero cycles Limited, the just-in-time inventory principle has been working since the
beginning of production in the limit in the unit and is functional even till date. The
vendors bring in the raw material and by the end of the day the finished product is rolled
out of the factory. This is the Japanese style of production and in India; Hero is the first
company to have mastered the art of the just-in-time inventory principle
.
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HERO GROUP COMPANIES
Hero Group ranks amongst the Top 10 Indian Business Houses comprising 18companies, with an estimated turnover of US$1.8 billion during the fiscal year 2003-2004.
Hero Cycles Limited
Hero Honda Motors Limited
Hero Cold Rolling Division
Hero Motors Limited
Hero Exports
LO GO
Majestic Auto Limited
Rockman Cycle Industries
LOG O
Highway Cycle Industries
LOG O
Sunbeam Auto Limited
LOGO
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Munjal Showa Limited
Munjal Castings
Munjal Auto Components
Hero Global Design
Hero Corporate Services Limited
Hero ITES
Hero Mind mine
Hero Soft
Munjal e-systems
Munjal Auto Industries Limited
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Easy Bill Limited
The Driving Force: Chairman
Dr.Brijmohan Lall Munjal, patriarch of the US$ 3.19 billion Hero Groupwas born in 1923, in what is now Pakistan. After partition, the Munjal
brothers started a small business of manufacturingbicycle components in Ludhiana in North India in theface of the bottlenecks of industrial infrastructure andinvestments. Dr Lall led a small time manufacturer of60 cycles a day to become a manufacturing giant,which churns out not only over 17,000 cycles per day
but is also diversified into various domains.Undoubtedly, Dr.Lall is a first generation businessentrepreneur of the 1950s'.
Dr.Lall has enriched the Hero Group with his vision of sound businessgovernance and value driven management practices. His foresight hasmade the Hero Group a leader in its business. Dr Brijmohan Lall is arole model for Indian Industry in corporate governance and ethical andvalue-driven management practices. His principle-based leadership hasled the Group companies to receive the best industrial governance and
safety awards and acquire stringent value certifications.
Dr.Lall was amongst the first Indian industrialists to
effectively implement backward integration and he is
acknowledged as the trend setter in the area. Apart
from the promotion of the Indian industry, he is the
actively involved in many national associations such
as CII, SIAM, ASSOCHAM and PHD and is a memberof the Regional Board of the Reserve Bank of India.
He is Honorary Fellow of the Indian Institute of
Industrial Engineering.
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Dr.Lall has received various accolades and awards for his immensecontribution to the Indian industry. He was adjudged Businessman ofthe Year in 1994 by a leading business magazine - Business India.
In 1995, Dr.Lall received the National Award for outstanding
contribution to the Development of Indian Small ScaleIndustry. (NSIC award - presented by the President of India)
In 1999, the Business Baron recognized him as the "Most AdmiredCEO."
The PHD Chamber of Commerce and Industry presented him with theDistinguished Entrepreneurship Award in 1997, in recognition ofhis outstanding exemplary entrepreneurship.
Xavier Labour Relations Institute (XLRI), a premier institution hasconferred on him the honor ofSir Jehangir Ghandy Medal forIndustrial Peace in 2000.
Ernst and Young has recognized him as the "Entrepreneur of theyear 2001."
All India Management Association conferred him with the LifetimeAchievement award for "Managment"(2003)
Banaras Hindu University, Varanasi one of the most prestigious
Universities of India conferred him with a Doctrate; degree of "Doctors of letters" Honoris Causa in October 2004
The Government Of India honoured him with the prestigious "Padma Bhushan"in March 2005 for his contribution to Trade andIndustry
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MILESTONES
Heros success saga contains the element of courage, great; determination,
enterprises and perseverance coupled with vision and meticulous planning:
1956
Hero Cycles Ltd. is established.
1961
Rockman Cycle Industries Ltd. established which is today the largest manufacturer of
bicycle chains & hubs in the world.
1963
Bicycle exports take off from Indiaa faray into the international market.
1971
Highway Cycles was set up. It is today the largest manufacturer of single speed & multi-
speed freewheels in the country.
1975
Hero Cycles Limited became the largest manufacturer of bicycles in India.
1978
Majestic Auto Limited was formed and Hero Majestic Moped was introduced.
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1981
Munjal Casting established.
1984
Hero Honda Motors Limited established in joint venture with Honda Motors, Japan to
manufacture Motorcycles. It is now the worlds largest producer oftwo-wheelers.
1985
- Munjal Showa Ltd. established to manufacture shock absorbers and struts and is
today one of the topmost shock absorber manufacturers companies in this country.
- 100cc Hero Honda Motorcycle was launched, which, later on in 1988,
became No.1 among all motorcycles in India.
1986
Hero Cycles Limited entered the Guinness Books of World Records as the Largest
bicycle manufacturer in the world.
1987
Hero Motors, a division of Majestic Auto Limited set up on collaboration with Steyr
Diamler Puch of Austria.
1987
Gujarat Cycles Limited, now known as Munjal Auto Centre Ltd. was established to
manufacture and export state-of-the-art bicycles and light products in its full automated
plant at Wagodia.
1987
Sunbeam Auto Limited, earlier a unit of Highway Cycle Ind. Ltd., established as an
ancillary to Hero Honda. It has the largest die casting plant in India.
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1988
Hero Puch was introduced by Hero Motors Ltd., which was a revolutionary machine to
set new records of petrol.
1989
Ranger bicycles (a generic name for Mountain Bikes today) was introduced by Hero
Cycles Limited.
1990
Hero Cold Rolling Division established which is one of the most modern steel cold
rolling plants in India.
1991
Hero Honda received National Productivity Council Award and also the Economic Times
Harvard Business School Association Award against 200 contenders.
1991
Hero Cycles introduced Kidthe first branded bike in childrens segment.
1992
Hero Cycles introduces Impact, the first citibike in India.
1992
Munjal Showa Ltd. received national safety award.
1993
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Hero Exports was established as International Trading Division for group & non-group
products.
1995
- Hero Corporate Services Ltd. was established.
- The first exerbike from Hero Group was introduced with the name
Allegro.
1996
Hero Winner, a large wheeled scooter with a choice of 50 cc & 75 cc engines was
launched by Hero Motors Ltd.
1998
Hero Briggs & Stratton Auto (P) Ltd. was set up to produce 4-stroke two wheeler engines
in various cubic capacities.
1998
Munjal Auto Components established to manufacture gear shaft & gear blanks for
motorcycles.
2000
The first fully automated bicycles by the name POWERBIKE was introduced by
Hero Cycles Limited. Hero Corporate diversified into I.T. and I.T. Enabled Services
through its services segment Hero Corporate Services Limited.
2001
Hero Honda emerges as the market leader in motorcycles with the sales of over a million
motorcycles and a market share of 47%.
2002
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Hero Cycles Limited ties up with National Bicycle Industries, a part of Matsushita
Group, Japan, to manufacture high-end bicycles.
Fastener World established.
2002
Easy Bills Limited established to offer utility bill collection and retail services.
2003
Tie-up with Live Bridge Inc., U.S.A., Aprilia Scooters, Haly & Bombardier Rotax GmbH
of Germany.
2003
Super Starter Series Launched by Hero Cycles Limited.
2003
Hero Honda continues to be the worlds largest manufacturer of two-wheelers with the
market of more than 48%.
2004
Hero Retail Insurance Business established.
Super Smart Series introduced by Hero Cycles Limited.
2005
Hero ITES strengthens its relationship with ACS, USA USD 5 BILLION-market cap and
fortune 500 companies.
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2006
Hero Honda crosses a unit sales threshold of 3 MILLION motorcycles.
2006
Hero Honda enters the scooters segment, launches 100 cc pleasure.
2006
Hero group celebrates GOLDEN JUBILLEE YEAR since inception. It was
commemorated by sales of over 15 million motorcycles & over 100 million bicycles.
2007
Hero group has made 13 models of e-bikes.
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GLOBAL GEARING: EXPORTS
As
early as
in the
1960s'
very
few
Indian
bicycle manufacturers were interested in exports. However, the Hero Group's foray into
the overseas markets in 1963 pioneered Indian exports in the bicycle segment. It was a
move prompted essentially by the need to remain attuned to the global marketplace.
While initial exports were restricted to Africa and the Middle East, today more than 50
percent of the exports from Hero Cycles
HERO CYCLES
HERO HONDA MOTORS
HERO MOTORS
HERO CORPORATE SERVICE LIMITED
(Hero Mindmine, Munjal eSystems,
NsurePlus)
HERO MANAGMENT SERVICELIMITED(HERO ITES)
MUNJAL SHOWA LIMITED
http://www.herocycles.com/http://www.herocycles.com/http://www.herohonda.com/http://www.herohonda.com/http://www.heromotors.com/http://www.heromotors.com/http://www.herocorp.com/http://www.heromindmine.com/http://www.munjal-esystems.com/http://www.nsureplus.com/http://www.heroites.com/http://www.heroites.com/http://www.heroites.com/http://www.heroites.com/http://www.heroites.com/http://www.munjalshowa.net/http://www.munjalshowa.net/http://www.munjalshowa.net/http://www.heroites.com/http://www.heroites.com/http://www.nsureplus.com/http://www.nsureplus.com/http://www.munjal-esystems.com/http://www.heromindmine.com/http://www.herocorp.com/http://www.heromotors.com/http://www.herohonda.com/http://www.herocycles.com/ -
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Limited meet the demands of sophisticated markets in Europe and America. This is
primarily because of appropriate product development and excellent quality that Hero
offers.
The Group has been continuously upgrading technology and has set up special units - like
Gujarat Cycles Limited (now Munjal Auto Industries Limited), to meet international
quality standards. Munjal Auto Industries Limited has state-of-the-art equipments
imported from Europe and Taiwan. The unit is designed to match international standards
and is an Export Oriented Unit (EOU). Its products are supplied to the International
Markets of developed countries like United Kingdom, Germany, France etc.
The Group's exports have gone beyond cycles and their components. The success of the
Hero Majestic moped did not remain confined to Indian shores. Finding enthusiastic
buyers across the world, it became the largest exported moped from India.
Hero Puch is perhaps the first Indian two-wheeler to be homologated abroad (in Spain)
and has assembly plants in Mauritius and Egypt. Today Hero Puch mini-motorcycles can
also be seen in Paraguay, Mexico, Argentina, Turkey and Holland.
Group Company, Munjal Showa Limited is one of the largest suppliers of shock
absorbers to major auto giants in Japan, United States and the United Kingdom, amongst
other developed markets.
In 1993 Hero Exports was established as the International Trading Division for Group
and non-Group products. The Government of India recognizes Hero Exports as a Trading
House.
And the latest diversification for the Group in the export market is in the area of Software
exports and providing Business Processing and Contact Center Services through Hero
Corporate Service limited. The company exports services to many Fortune 1000
corporations in the USA, UK and Australia and has offices in UK & USA to manage
client relationships.
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VISION AND MISSION
The Vision
We, at the Hero Group are continuously striving for synergy between
technology, systems and human resources to provide products and services that meet the
quality, performance, and price aspirations of the customers. While doing so, we maintain
the highest standards of ethics and societal responsibilities, constantly innovate products
and processes, and develop teams that keep the momentum going to take the group to
excellence in everything we do.
The Mission Statement
Its our mission to strive for synergy between technology, systems and human
resources, to produce products and services that meet the quality, performance and price
aspirations of our customers. While doing so, we maintain the highest standards of ethics
and societal responsibilities.
This mission is what drives us to new heights in excellence and helps us forge a
unique and mutually beneficial relationship with all our stakeholders. We are committed
to move ahead resolutely on this path, shown to us by visionaries like Mr. Satyanand
Munjal, Mr. Om Prakash Munjal, the late Mr. Dayanand Munjal and late Mr. Raman
Kant Munjal. Mr. Brijmohan Lall Munjal, Chairman & MDTHE HERO GROUP.
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Quality: The Driving Force
At Hero Cycles, quality is a tradition, be it in the form of well trained labour, technically
superb machines or world class quality. The conformance to quality at Hero begins on
shop floor, with every worker ensuring at each stage manufacturing, that only perfect
product passes through his hands. Heros production department too believes in following
the zero-defect approach and continuous upgradation of its manufacturing systems. The
marketing and operations teams are also constantly creating new and effective strategies
using modern management techniques. And finally, every Hero cycle goes through a
series of rigorous quality checks before it leaves the factory. No wonder, Hero is in proud
possession of ISO-9001, ISO-9002 & BVQI certifications and also ISO 14001,
environmental compliance endorsement from the Ministry of Environment.
Constant quality upgradation ensures that the company stays in the global mainstream
and maintains its edge, through excellence. A technology tie-up with National Bicycle
Industries of Japan led to the launch of the World 1 series of cycles, besides
introduction of new frame designing and features like- A-frame, D-frame, Y-frame, Swan
shaped frame, speedometers & indicators among other
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Promotions
Until 1986, the company had no need for mass communication. But as competition
started growing, Hero Cycles begun to feel the need for creating lasting impression on the
customers mind. In the mid 1980s Hero was perceived to be the manufacturer of the
basic black bicycles. The company required an image change. It needed to communicate
to customers the vast portfolio of products that it had, particularly in the recreational
segment. The launch of innovative products and their use as image builders happened
simultaneously. Since 1986, the communication strategy has been to build each product
separately and create a unique positioning for them. In this way the Ranger waspositioned as the bike for outdoor fun, Impact was the preferred choice among city riders
and Jet was projected as the lightest running roadster while Hawk was the racers edge.
Each of these launches and their promotion, gave the Hero brand a new meaning. The
brand has also used celebraties - including film stars Sanjay Dutt, Rani Mukherjee,
Hrithik Roshan and Ameesha Patel. The latest is Indias new bowling sensation, Irfan
Pathan who has also been a real life Hero cycle user.
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MAJOR PRODUCTS
The Hero Cycles Ltd. Manufactures cycles, rims , free wheels ,hubs & chains and
cold rolled strips as a main product. Company has long portfolio of different range of
cycles. Company has 132models in the list , covers all the three section-gents, ladies and
kids. It also manufactures cycles parts for its own requirements. After fulfilling the
requirements of company ,it can export its remaining quantity.
The main products are:-
i) Cycles
ii) Rims
iii) Free wheels
iv) Hubs and Chains
v) Cold Rolled strips
vi) E-Bikes
COMPETITORS
IN CYCLE MARKET:
AVON
OPERA
TI
ATLAS
OTHERS (NEELAM,KW,BS)
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OWNERSHIP OF MANAGEMENT
BOARD OF DIRECTORS
SH. BRIJMOHAN LAL MUNJAL (CHAIRMAN)
SH. SATYANAND MUNJAL (CO-CHAIRMAN CUM M.D. WORKS)
SH. OM PARKASH MUNJAL (CO-CHAIRMAN CUM M.D. MKTG. & ADMN.)
SH. VIJAY KUMAR MUNJAL (M.D. INTNL MARKETING)
SH. SURESH CHANDRA MUNJAL (M.D. DOMESTIC MKTG.)
ASHISH KUMAR MUNJAL (M.D. UNIT TO SAHIBABAD)
SH. SUNIL KANT MUNJAL (M.D. C.R.DIVISION)
SH. PANKAJ MUNJAL (M.D. NEW HERO AUTO RIM DIV.)
SH. S.K. RAI (M.D. WORKS)
DR. M.A. ZAHIR (DIRECTOR)
DR. D.R. SINGH (DIRECTOR)
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Meaning of financial analysis
The term financial analysis also known as analysis and interpretation of financial
statements refers to the process of determining financial strength and weaknesses of the
firm by establishing strategic relationship between the items the balance sheet, profit and
loss account and other operative data.
Acc. To Myers- Financial statement analysis is largely a study of relationship among
the various financial factors in a business is disclosed by a single set of statements, and a
study of the trend of these factors as shown in a series of statement.
Purpose of financial statement analysis:
The purpose of financial statement analysis depends upon the need of person who is
analyzing these statements. These varying needs may be:-
To know the earning capacity or profitability of the firm.
To know the solvency position of firm.
To know the financial strength of the business.
To make comparative study with other firms. To know the capability of payment of interest and dividend.
To know the trend of the business.
To know the efficiency of the management.
To provide useful information to the management.
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Tools of financial Analysis:
The analysis and interpretation of financial statement is used to determine the
financial position and results of operations as well. A number of methods or devices are
used to study the relationship between different statements. A financial analyst may use
following methods:-
Comparative statements
Ratio analysis
Fund Flow analysis
Common size statement
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COMPARATIVE STATEMENTS
The comparative financial statements are statements of the financial position at different
period; of time. The elements of financial position are shown in a comparative form so as
to give an idea of financial position at two or more periods. From practical point of view,
generally, two financial statements (balance sheet and income statement) are prepared in
comparative form for financial analysis purpose. Not only the comparison of the figure of
two periods but also be relationship between balance sheet and income statement may
show:
i. Absolute figures (rupee amounts)
ii. Changes in absolute figures (increase or decrease in absolute figures)
iii. Absolute data in term of percentages
iv. Increase or decrease in terms of percentages
1. COMPARATIVE BALANCE SHEET
The comparative balance sheet analysis is the study of the trend of the same
items, groups of items and computed items in two or more balance sheets of the same
business enterprise on different dates. The changes can be observed by comparison of the
balance sheet at the beginning and at the end of a period and changes can help in forming
an opinion about the progress of an enterprise.
The comparative balance sheet has two columns for the data of original balance
sheets. A third column is used to show increase in figures. The fourth column may be
added for giving percentages of increases or decreases.
2. COMPARATIVE INCOME STATEMENT
The comparative income statement gives an idea of a business over a period of
time. The changes in absolute data in money values and percentages can be determined to
analyze the profitability of the business. It has also four columns. First two columns give
figures of various items for two years. Third and fourth columns are used to show
increase or decrease in figures in absolute amounts and percentages respectively.
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HERO CYCLE LTD.
I) COMPARATIVE STATEMENT
A) Comparative Balance Sheet
Particulars 2006 2007 Increase/Decrease %age
Assets
Fixed Assets 1968881237 1893341411 - 75539826 -3.84
Investments 2851504001 3843437861 +991933860 +34.79
Deferred Tax Assets (Net) 4892714 19845655 +14952941 +305.62
Current Assets
- Inventories 766521142 805661034 +39139892 +5.11
- Sundry Debtors 1860512457 2228592486 +368080029 +19.78
- Cash & Bank Balance 69481654 22134657 - 47346997 -68.14
Loan and advances 337661837 457780835 +120118998 +35.57
Total Assets 7859455042 9270793939 +1411338897 +17.95
Liabilities
Shareholder Fund 4427446105 5364231022 +936784917 +21.16
Loan Funds 1567876432 1732223697 +164347265 +10.48
Current Liabilities
- Liabilities 1640425867 1978589143 +338163276 +20.61- Provisions 223706638 19575007 -27956561 -14.28
Total Liabilities 7859455042 9270793939 +1411338897 +17.95
Interpretation
1. Comparative Balance Sheet reveals that total Assets of Hero cycle increased
during a year by 17.95%.
2. There has been increase in shareholder funds by 21.16%.
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HERO CYCLE LTD
B) Comparative Income Statement
Particulars 2006 2007 Increase/
Decrease(Rs).
%age
Net Sales 11369337410 13308705116 +1939367706 +17.06
Less : Cost of Goods Sold(Material consumed,manufacturing expenses &personal expenses)
9756380835 11733069767 +1976688932 +20.26
Gross Profit 1612956575 1575635349 -37321226 -2.31
Less : Operating expenses(Administrative expenses,financial expenses, sellingexpenses & depreciation)
1147615431 1139418653 -8196778 -1.76
Operating profit/loss 465341144 313168939 -29124448 -6.25
Add: Other income 1077448184 898158858 -179289326 -16.64
Less:non operating exp. 906615865 123047757 -783568108 -86.43
Net profit Before Tax 636173463 121132797 +575154334 +90.41
Less : Taxprovision forwealth tax, taxation, fringebenefit tax & deferred tax
-28757839 185742059 +214499898 +745.88
Net profit After tax 664931302 1025585738 +360654436 +54.24
Interpretation
There has been decrease in the gross profit by 2.31% because the rate of increase
in sales is less than the rate of increase in cost of goods sold. But the non operating
expenses decreases by 86.43% so net profit increases.
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II) COMMON SIZE STATEMENT
A) Common Size Balance Sheet
Particulars 2006 2007
Amount (Rs.) %age Amount (Rs.) %ageAssets
Fixed Assets 1968881237 25.05 1893341411 20.42
Investments 2851504001 36.28 3843437861 41.46
Deferred Tax Assets (Net) 4892714 0.06 19845655 0.22
Current Assets
- Inventories 766521142 9.76 805661034 8.69
- Sundry Debtors 1860512457 23.67 2228592486 24.04
- Cash & Bank Balance 69481654 0.88 22134657 0.24
Loan and advances 337661837 4.30 457780835 4.93
Total Assets 7859455042 100.00 9270793939 100.00
Liabilities
Shareholder Fund 4427446105 56.33 5364231022 57.86Loan Funds 1567876432 19.95 1732223697 18.69
Current Liabilities
- Liabilities 1640425867 20.87 1978589143 21.34
- Provisions 223706638 2.85 19575007 2.11
Total Liabilities 7859455042 100.00 9270793939 100.00
Interpretation
The investment in fixed assets, current assets and investment are same in both the years.
The ratio of shareholders funds and the loan funds are do not change much.
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II) COMMON SIZE STATEMENT
B) Common Size Income Statement
Particulars 2006 2007
Amount (Rs.) %age Amount (Rs.) %ageNet Sales 11369337410 100.00 13308705116 100.00
Less : Cost of Goods Sold
(Material consumed,manufacturing expenses &personal expenses)
9756380835 85.81 11733069767 88.16
Gross Profit 1612956575 14.19 1575635349 11.84
Less : Operating expenses(Administrative expenses,
financial expenses, sellingexpenses & depreciation)
1147615431 10.09 1139418653 8.56
Operating profit/loss 1147615431 4.09 1139418653 3.28
Add: Other income 1077448184 9.48 898158858 6.75
Less:non operating exp. 906615865 7.97 123047757 0.92
Net profit Before Tax 636173463 5.60 121132797 9.10
Less : Taxprovision for
wealth tax, taxation, fringebenefit tax & deferred tax
-28757839 -2.53 185742059 1.40
Net profit After tax 664931302 5.85 1025585738 7.71
Interpretation
In 2006 the cost of goods sold is 85.81% of sales which increase to 88.16% in
year 2007 resulting the decrease in gross profit from 14.19% to 11.84% but the company
is successful in controlling non operating expenses i.e. 7.97% to 0.92% so net profit
increases in 2007.
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HERO CYCLES LTD.
Cash Flow Statement
Particulars 2006 2007 Increase/Decrease %age
Profit Before Tax 6361.73 12113.28 +5751.55 90.41
Net Cash Flow Operating Activity 8382.83 2996.85 -5385.98 -64.25
Net Cash used in InvestingActivity
-4988.22 -3143.35 -1844.87 -36.98
Net Cash used in FinancingActivity
-3471.47 -326.97 -3144.50 -90.58
Net Inc/Dec in Cash &Equivalent
-76.86 -473.47 +396.61 +516.02
Cash and Equivalent at theBegin of the Year
771.68 694.82 -76.86 -9.96
Cash and Equivalent at theEnd of the Year
694.82 221.35 -473.47 -68.14
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FUND FLOW ANALYSIS
Definition of Fund
A question arises as to the definition of FUND. It means:
Funds may mean change in cash only;
Funds may mean change in working capital (the difference between current assets
and current liabilities) only.
A more comprehensive definition of funds may be given as follows:
Funds may mean change in financial resources, arising from changes in working
capital items and from financing and investing activities of the enterprise, which
may involve only non-current items.
The funds flow statement analyses only the causes of changes in the firms
working capital position. The cash flow statement is prepared to analyze changes in the
flow of cash only. These statements fail to consider the changes in the firms total
financial resources. They do not reveal some significant items that do not affect the
firms cash or working capital position, but considerably influence the financing position
and asset mix of the firm.
The statement of changes in financial position is an extension of the funds flow
statement or the cash flow statement. Therefore, to get better insights, a firm may preparea comprehensive, all inclusive, statement of changes in financial position incorporating
changes in the firms cash and working capital positions involving:
Changes in the firms working capital position,
Changes in the firms cash position, and
Changes in the firms total financial resources.
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Statement of Changes in Working Capital
Particulars 2006 2007 Effect on Working
Capital
Increase Decrease
Current Assets
- Inventories 766521142 805661034 39139892 -
- Sundry Debtors 1860512457 2228592486 368080029 -
- Cash & Bank Balance 69481654 22134657 - 47346997
(A) 2696515253 3056388177
Current Liabilities
- Liabilities 1640425867 1978589143 - 338163276
- Provisions 223706638 195750077 27956561 -
(B) 1864132505 2174339220
Working capital (A-B) 832382748 882048957 - -
Net increase in workingcapital
4966209 - - 49666209
Total 882048957 882048957 435176482 435176482
Note : Provision should be taken as current liability
FUND FLOW STATEMENT
Sources Amount
(Rs.)
Applications Amount
(Rs.)
Raising of Loans 164347265 Net Increase in Working Capital 49666209
Funds from operation 1135177199 Purchase of Investment 991933860
Purchase of Fixed Assets 137805397
Loan of Advances given 120118998
1299524464 1299524464
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WORKING NOTES
Adjusted Profit and Loss Account
Particulars Amount
(Rs.)
Particulars Amount
(Rs.)
To Dep. on fixedAssets
213345223 By Balance b/d 4029233305
To Balance c/d 4966018222 By Deferred Tax 14952941
By Fund from Operation(Bal. Figure)
1135177199
5179363445 5179363445
FIXED ASSETS
Particulars Amount
(Rs.)
Particulars Amount
(Rs.)
To Balance b/d 1968881237 By Adjusted P & L A/c(Dep.)
213345223
To purchase on FixedAssets (Bal. figure)
137805397 By Balance c/d 1893341411
2106686634 2106686634
Interpretation : As seen from the above analysis that there is increase in working capital
which, indicate that company is having sufficient current assets to pay back the current
liabilities in time. There is increase in amount of loans by 10.48% and it is being utilized
in financing the fixed assets & investments.
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1. Current Ratio
It is also known as Working capital ratio. It is a measure of liquidity and used in making
analysis of short term financial position.
Current Ratio = Current Assets / Current Liabilities.
TABLE 1.1 (Current Ratio)
FIGURE 1.1
Interpretation : It is decreasing in the year 2007 because current liabilities are increased
this year as compare to 2006. Overall this ratio is satisfactory as it is nearest to the thumbrule i.e. 2:1
Current Ratio
0
0.5
1
1.5
2
2006 2007
Years
Year 2006 2007
Current assets 2696515253 3056388177
Current liabilities 1640425867 1978589143
Current Ratio 1.64 1.54
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2. Liquid Ratio
Liquid Ratio is more rigors test of liquidity than the current ratio. It is the ratio
between quick ratio & current liabilities. Quick ratio refers to all current assets except
Inventory & prepaid expenses.
Liquid Ratio = Liquid assets / Current Liabilities
Liquid assets = Current Assets- Prepaid ExpInventories
Year 2006 2007
Liquid assets 1929994111 2250727143
Current liabilities 1640425867 1978589143
Liquid Ratio 1.18 1.14
TABLE 1.2(Liquid Ratio)
FIGURE 1.2
Interpretation: As seen from the analysis this ratio is almost same in both the years
quite satisfactory with a thumb rule i.e. 1.5 : 1. Companys current assets involved large
amount of debtors in it.
Liquid Ratio
0
0.5
1
1.5
2006 2007
Years
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3. Working Capital Turnover Ratio
It indicates the velocity of utilization of net working capital. It indicates the
efficiency with which working capital is being used by the company.
Working Capital Turnover Ratio = Net Sales /Average working capital
Year 2006 2007
Net sales 11369337410 13308705116
Average working capital 1170612956.5 1066944210
Working Capital Turnover Ratio 9.71 12.47
TABLE 1.3 (Working Capital Turnover Ratio)
FIGURE 1.3
Interpretation : Working capital turnover ratio is increasing as we can see from the
above table becomes 12.47 in 2007 from 9.71 in 2006 due to increase in sales
Working Capital Turnover Ratio
0
5
10
15
2006 2007
Years
Times
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4. Debt Equity Ratio
It shows the relationship between external and internal equities & it is calculated
to measure the claim of outsiders and owners against companys assets
The outsider's funds include all debts/ liabilities to outsiders, whether in form of
debentures, bonds, mortgage or bills.
The shareholders funds include equity + preference share capital included capital
reserve, revenue reserve and reserves representing accumulated profits and surpluses.
Debt Equity Ratio = Long term Debts / Shareholders Funds*100
Year 2006 2007
Long term Debts 1567876432 1732223697
Shareholders Funds 4427446105 5364231022
Debt Equity Ratio 35.41 32.29
TABLE 1.4(Debt Equity Ratio)
FIGURE 1.4
Interpretation : There has been a slight decrease in this ratio due to the fact that now the
company is relying more on own funds then on outsiders funds. As such ratio has been
improved and that amount is blocked in inventories.
Debt Equity Ratio
0
10
20
30
40
2006 2007
Years
Percentage
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1. Net Profit Ratio
Net profit ratio established a relationship between net profit and sales. This ratio
is the overall measure of firms profitability and is calculated as:
Net Profit Ratio = Net profit after tax / Net Sales *100
TABLE 1.5(Net Profit Ratio)
FIGURE 1.5
Interpretation : There has been decrease in the Gross Profit by 2.31% because the rate
of increase in sales is less than the rate of increase in cost of goods sold. The non-
operating expenses decrease by 86.43% so net profit increases.
Year 2006 2007
Net profit after tax 664931302 1025585738
Net sales 11369337410 13308705116
Net Profit Ratio 5.84 7.71
Net Profit Ratio
0
2
4
6
8
10
2006 2007
Years
Percentage
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(6) Equity Ratio
Establish the relationship between shareholders funds and total assets of the
company, the components of this ratio are
Equity Ratio = Shareholders Funds / Total Assets *100
Year 2006 2007
Shareholders Funds 4427446105 5367231022
Total Assets 7516900491 8793167449
Equity Ratio 59 61
TABLE 1.6(Equity Ratio)
FIGURE 1.6
Interpretation : Companyis relying more shareholder funds than on loan funds. This is
favourable point for the creditors as companys equity ratio in 2006 is 59% and in 2007 is
61% .
Equity Ratio
0
10
2030
40
50
60
70
2006 2007
Years
Percentage
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FINDINGS
1. Companys is utilizing long term loans to finance fixed assets and investments but
it has started relying on own funds.
2. There is decrease in gross profit of the company due to increase in cost of goods
sold but there is increase in net profits due to decrease in non operating expense.
3. Debtors are also increasing which is not good sign for the company in long run.
4. Current liabilities are increasing by 20.61%. Where as cash decreases very much
by 68.14%
5. There is stability in equity share capital.
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SUGGESTIONS
1. The Company is enjoying a good current position. It should take steps to further
improve its position by repositioning the composition of current assets as large
amount has been block in debtors and inventories.
2. Large amounts of funds are blocked in debtors. Company should reduce its
debtors so that the blocked amount is properly utilized.
3. Inventory control is not proper. The Company has not defined the minimum and
the maximum stock level scientifically. Therefore there is blockage of funds.
Moreover, the safety stock level is also not defined. So the company should apply
the proper Inventory Control System so that there is no wastage of funds.
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BIBLIOGRAPHY
Sites: -
www.herocycles.com
www.google.com
Book Author
Management Accounting R.K.Sharma
Annual Reports of HERO CYCLES LIMITED at ending year 31ST
MARCH 2006 AND
2007.
http://www.herocycles.com/http://www.herocycles.com/ -
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FINANCIAL ANALYSIS OF
HERO CYCLE LTD.
Submitted To Submitted ByMrs. Pooja Jain Inderjeet Kaur
B.Com 3rd year
Roll No. 629
SRI AUROBINDO COLLEGE OF COMMERCE &
MANAGEMENT
FEROZPUR ROAD, LUDHIANA
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ACKNOWLEDGEMENT
Behind this successful undertaking is the blessing and guidance of many. This
formal piece of acknowledgement may not be sufficient to express my feelings of
gratitude and deep respect that have experienced during my learning process at Hero
Cycles. This endeavor would not have been successful without the help and
encouragement from a lot of people with whom I had good fortunate of interacting during
course of journey. I am indebted to Mrs. Pooja Jain for the knowledge and experience
that I gained from her during course of study which I can easily look at as my most
rewarding phase the course of my study. Without his immaculate and intellectual
guidance, sustained efforts and friendly approach, it would have been difficult to achieve
the result in a short span of period.
Not leaving behind the contribution of all other staff members at college for
sharing with us the wealth of their experience and knowledge.
Inderjeet Kaur
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ABSTRACT
The term Financial Analysis also known as analysis and interpretation of
financial statements refers to the process of determining financial strength and
weaknesses of the firm by establishing strategic relationship between the items the
balance sheet, profit and loss account and other operative data. Myers- Financial
statement analysis is largely a study of relationship among the various financial factors in
a business is disclosed by a single set of statements, and a study of the trend of these
factors as shown in a series of statement. The Hero Group has done business differently
right from the inception and that is what has helped us to achieve break-through in
whatever product category we have ventured. The Groups low key, but focused , style of
management has earned the plaudits amidst investors, employees, vendors and dealers, as
also worldwide recognition.
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TABLE OF CONTENTS
S.No. Particulars Page No.
2. Company Profile 120
3. Financial Analysis 2122
4. Comparative Statement 2326
5. Common Size Statement 2729
6. Cash Flow Statement 3031
7. Fund Flow Statement 3235
8. Ratio Analysis 3642
9. Findings & Suggestions 4345
10. Bibliography 4647
11. Annexure 4858