1. COMPANY PROFILE

Mahindra & Mahindra Limited (M&M) is an Indian multinational automobile manufacturing corporation headquartered in Mumbai, Maharashtra, India. It is one of the largest vehicle manufacturers by production in India and the largest seller of tractors across the world. It is a part of Mahindra Group, an Indian conglomerate.

It was ranked as the 10th most trusted brand in India, by The Brand Trust Report, India Study 2014. It was ranked 21st in the list of top companies of India in Fortune India 500 in 2011. Its major competitors in the Indian market include Maruti Suzuki, Tata Motors, Ashok Leyland, Toyota, Hyundai, Mercedes-Benz (Merc) and others.

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2. History

Mahindra & Mahindra was established on October 2, 1945 when K.C. Mahindra visited the United States of America as Chairman of the India Supply Mission. He met Barney Roos, inventor of the rugged 'general purpose vehicle' or Jeep and had a flash of inspiration: wouldn't a vehicle that had proved its invincibility on the battlefields of World War II be ideal for India's rugged terrain and its kutcha rural roads. Swift action followed thought. The Mahindra brothers joined hands with a distinguished gentleman called Ghulam Mohammed. And, Mahindra & Mohammed was set up as a franchise for assembling jeeps from Willys, USA. 

Two years later, India became an independent nation and Mahindra & Mohammed changed its name to Mahindra & Mahindra. Ghulam Mohammed migrated to Pakistan post–partition and became the first Finance Minister of Pakistan.      

Mahindra & Mahindra is the only Indian company among the top three tractor manufacturers in the world. The Group has a leading presence in key sectors of the Indian economy. The Group employs over 50,000 people and has several state–of–the–art facilities in India and overseas. 

Mahindra & Mahindra has comprehensive manufacturing facilities with high level of vertical integration. Catering to the Sector's diverse customer base spanning rural and semi urban customers, defense requirements and luxurious urban utility vehicles or SUVs. These manufacturing plants keep abreast with the latest technology to meet the growing market expectations. These manufacturing facilities have some of the best technologies and equipment in India and provide for a very challenging and satisfying work environment. Its plants in Mumbai and Nasik manufacture multi–utility vehicles and engines are produced at the Igatpuri plant. Utility Vehicles, Light commercial vehicles and 3 wheelers are manufactured at the Zaheerabad plant in Andhra Pradesh and three–wheelers at the Haridwar plant.

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3. Automobiles

Mahindra & Mahindra, branded on its products usually as 'Mahindra', produces SUVs, saloon cars, pickups, commercial vehicles, and two wheeled motorcycles and tractors. It owns assembly plants in India, Mainland China (PRC), the United Kingdom, and has three assembly plants in the United States. Mahindra maintains business relations with foreign companies like Renault SA, France.

M&M has a global presence and its products are exported to several countries. Its global subsidiaries include Mahindra Europe S.r.l. based in Italy, Mahindra USA Inc., Mahindra South Africa and Mahindra (China) Tractor Co. Ltd.

Mahindra started making passenger vehicles firstly with the Logan in April 2007 under the Mahindra Renault joint venture. M&M will make its maiden entry into the heavy trucks segment with Mahindra Navistar, the joint venture with International Truck, USA.

Mahindra produces a wide range of vehicles including MUVs, LCVs and three wheelers. It manufactures over 20 models of cars including larger, multi-utility vehicles like the Scorpio and the Bolero. It formerly had a joint venture with Ford called Ford India Private Limited to build passenger cars.

At the 2008 Delhi Auto Show, Mahindra executives said the company is pursuing an aggressive product expansion program that would see the launch of several new platforms and vehicles over the next three years, including an entry-level SUV designed to seat five passengers and powered by a small turbo diesel engine. True to their word, Mahindra & Mahindra launched the Mahindra Xylo in January 2009, and as of June 2009, the Xylo has sold over 15000 units.

Also in early 2008, Mahindra commenced its first overseas CKD operations with the launch of the Mahindra Scorpio in Egypt, in partnership with the Bavarian Auto Group. This was soon followed by assembly facilities in Brazil. Vehicles assembled at the plant in Bramont, Manaus, include Scorpio Pik Ups in single and double cab pick-up body styles as well as SUVs.

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Mahindra planned to sell the diesel SUVs and pickup trucks starting in late 2010 in North America through an independent distributor, Global Vehicles USA, based in Alpharetta, Georgia. Mahindra announced it will import pickup trucks from India in knockdown kit (CKD) form to circumvent the Chicken tax. CKDs are complete vehicles that will be assembled in the U.S. from kits of parts shipped in crates. On 18 October 2010, however, it was reported that Mahindra had indefinitely delayed the launch of vehicles into the North American market, citing legal issues between it and Global Vehicles after Mahindra retracted its contract with Global Vehicles earlier in 2010, due to a decision to sell the vehicles directly to consumers instead of through Global Vehicles. However, a November 2010 report quoted John Perez, the CEO of Global Vehicles USA, as estimating that he expects Mahindra’s small diesel pickups to go on sale in the U.S. by spring 2011, although legal complications remain, and Perez, while hopeful, admits that arbitration could take more than a year. Later reports suggest that the delays may be due to an Mahindra scrapping the original model of the truck and replacing it with an upgraded one before selling them to Americans In June 2012, a mass tort lawsuit was filed against Mahindra by its American dealers, alleging the company of conspiracy and fraud.

Mahindra & Mahindra has a controlling stake in Mahindra Reva Electric Vehicles. In 2011, it also gained a controlling stake in South Korea's SsangYong Motor Company.

Mahindra has launched its relatively heavily publicized SUV, XUV 500, code named as W201 in September 2011. The new SUV by Mahindra has been designed in-house and it is developed on the first global SUV platform that could be used for developing more SUVs. In India, the new Mahindra XUV 500 comes in a price range between Rs 11.40 lakh to Rs 15 lakh. The company is expected to launch 3 products in CY'15 (2 SUVs and 1 CV) and an XUV 500 hybrid. M&M’s two wheeler segment will launch a new scooter in Q1FY'15. Besides India, the company also targets Europe, Africa, Australia and Latin America for this model.[36] Mahindra President Mr Pawan Goenka stated that the company plans to launch six new models this fiscal. The company launched CNG version of its mini truck Maxximo on 29 June 2012. A new version of Verito in diesel and petrol options was launched by the company on 26 July 2012 to compete with Maruti's Dzire and Toyota Kirloskar Motor's Etios.

4. Milestones

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2000:  The Company adopted a new logo. Mahindra Auto Specialties Limited established – a new 100% subsidiary. Mahindra & Mahindra set up its first satellite tractor plant at Rudrapur. A new age tractor, Mahindra Arjun 605 DI (60 HP), launched. Bolero GLX (a utility vehicle) launched in response to the needs of urban consumers. 

2001:  Champion, a 3–wheeler diesel vehicle, launched. Mahindra MaXX launched, a multi–utility vehicle positioned with the caption 'Maximum Space, Maximum Comfort'. Mahindra & Mahindra tied up with Renault for Petrol Engines. A separate division established to provide Defense Solutions. Mahindra Special Services Group established to provide Information Security. Mahindra Infrastructure Developers Limited established for development and management of infrastructure projects. Mahindra Life spaces Developers Limited established for development of corporate property. 

2002:  Scorpio launched, a new generation, world–class sports utility vehicle that redefined the SUV market and lived up to its positioning: 'Nothing else will do'.

2003:  Invader launched – a sporty open top vehicle. A second tractor assembly plant set up in USA. MaXX Pik Up launched. India's first Turbo tractor launched – Mahindra Sarpanch 595 DI Super Turbo. Mahindra & Mahindra ventured into Industrial engine business.  An alliance formed between Mahindra Defense & Lockheed Martin Information Systems, UK, for defense products. Mahindra Engineering Services established.

2004:  Mahindra World Tractor(75 HP) launched in the International market.          

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Systech (earlier known as MSAT) established, to focus on developing components as well as offering engineering services.             Bolero and Scorpio launched in Latin American, Middle East and South African markets.            Signed MoU to enter into joint venture with Jiangling Motor Company Group (JMCG) of China, to acquire tractor manufacturing assets from Jiangling Tractor Company, a subsidiary of Jiangling Motor Company Group.           Mahindra & Mahindra became the first Indian company to achieve sales of one million tractors. 

2005:  Acquired 51% stake in SAR Transmission Private Limited, a company engaged in manufacture of gears and transmission shafts.           Farm Equipment Sector launched operations in Australia.            Mahindra & Mahindra became the first Indian auto manufacturer to launch the Common Rail Diesel Engine (CRDe), offering it in the Scorpio.            Acquired 80% stake in the joint venture with Jiangling Motors i.e. in Mahindra (China) Tractor Company.             Mahindra Renault Limited established – a joint venture with Renault to manufacture and market Logan, a mid–sized sedan, in India.             Mahindra International Limited established – a joint venture with International Truck and Engine Corporation to manufacture trucks & buses in India.  

2006:  Announced plans to set up a 3000 acres Special Economic Zone in Jaipur.         The Mahindra United football team won the Federation Cup trophy. Mahindra & Mahindra’s fifth full–scale automotive plant opened in Hardiwar Industrial Estate to manufacture three–wheeler.           The Scorpio Hybrid was unveiled at the Delhi Auto Expo along with 9 other prototype vehicles.             Mahindra & Mahindra acquired the Stokes Group of UK, the largest automotive forgings company in the UK.             Mahindra Finance became the first Mahindra Group Company in 23 years to be listed publicly and was oversubscribed 27 times.            BMW entered Mahindra World City, Chennai.            The All New Scorpio with 43 new features was launched.            Mahindra Life spaces announced plans to set up a Special Economic Zone spreading over 3000 acres in Pune.

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Scorpio was chosen for the Gondwanaland Expedition – a landmark assignment for the vehicle.             Mahindra Holidays & Resorts India Limited (the 'Company'), a leisure hospitality provider offering quality family holidays and part of the Mahindra Group of Companies.           Mahindra & Mahindra's Farm Equipment Sector (FES) showcased India's first bio–diesel .            Mahindra & Mahindra launched the Scorpio V–series.             On Nov. 1, 2007, a wholly owned affiliate of Navistar International Corporation (Other OTC: NAVZ), signed a joint venture agreement with Mahindra & Mahindra  to produce diesel engines for medium and heavy commercial trucks and buses in India.            Logan was the highest selling sedan and Scorpio the highest selling UV in July 2007.            Mahindra launched the Mahindra Pik–Up (double cab) in Chile in July 2007. 2008:  Mahindra enters into JV with TMI Pacific in Australia Project Ingenio is now Mahindra XYLO           Mahindra introduces FuelSmart system in Bolero and Scorpio SUVs            Tech Mahindra receives the Frost and Sullivan 2008 Growth Excellence Award            Anand Mahindra receives Harvard Business School Alumni Achievement Award Mahindra launches first Sustainability Report with highest GRI Rating          Mahindra First Choice Services launches first CarXSpace outlet in Chennai           Mahindra to enter the two–wheeler industry. Mahindra Tractors launch Indias first bio–diesel tractor Mahindra Intertrade inaugurates a world–class Electrical Steel processing plant in Vadodara

2009: Mahindra launches the Xylo – January 13           Mahindra launches the New, Mighty Muscular Scorpio– March 6           Tech Mahindra declared highest bidder for Satyam – April 14 

2013: Mahindra XUV500 sets a new record in the Limca Book of Records  Mahindra launches its innovative customer care initiative, Mahindra QWIK

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2014– Mahindra Group expands its footprint in the United States  Mahindra Two Wheelers debuts in Uganda Mahindra signs MoU with Government of Bhutan to promote usage of Electric Vehicles in the country

5. Profit & loss account

(Rs crore)

Mar ' 14 Mar ' 13 Mar ' 12 Mar ' 11 Mar ' 10

Income

Operating income 40,508.50 40,441.16 31,853.52 23,460.26 18,516.33

Expenses

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Mar ' 14 Mar ' 13 Mar ' 12 Mar ' 11 Mar ' 10

Material consumed

29,614.77 30,587.96 23,661.61 16,402.65 12,437.87

Manufacturing expenses

221.35 206.39 175.78 143.93 217.89

Personnel expenses

2,163.72 1,866.45 1,701.78 1,431.52 1,199.85

Selling expenses - - - - 802.02

Adminstrative expenses

3,787.45 3,071.06 2,543.63 2,027.83 901.45

Expenses capitalised

- - - - -59.55

Cost of sales 35,787.29 35,731.86 28,082.80 20,005.93 15,499.53

Operating profit 4,721.21 4,709.30 3,770.72 3,454.33 3,016.80

Other recurring income

717.99 549.17 465.79 434.15 317.99

Adjusted PBDIT 5,439.20 5,258.47 4,236.51 3,888.48 3,334.79

Financial expenses 259.22 191.19 162.75 72.49 156.85

Depreciation 863.34 710.81 576.14 413.86 370.78

Other write offs - - - - -

Adjusted PBT 4,316.64 4,356.47 3,497.62 3,402.13 2,807.16

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Mar ' 14 Mar ' 13 Mar ' 12 Mar ' 11 Mar ' 10

Tax charges 611.08 1,094.27 727.00 857.51 759.00

Adjusted PAT 3,705.56 3,262.20 2,770.62 2,544.62 2,048.16

Nonrecurring items

52.79 90.62 108.27 117.48 -32.90

Other non cash adjustments

- - - - 72.49

Reported net profit

3,758.35 3,352.82 2,878.89 2,662.10 2,087.75

Earnings before appropriation

13,710.27 11,257.36 9,087.43 7,250.47 5,453.07

Equity dividend 758.21 798.17 767.48 706.08 549.52

Preference dividend

- - - - -

Dividend tax 104.04 92.98 101.13 96.56 74.23

Retained earnings 12,848.02 10,366.21 8,218.82 6,447.83 4,829.32

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6. Balance sheet(Rs crore)

Mar ' 14 Mar ' 13 Mar ' 12 Mar ' 11 Mar ' 10

Sources of funds Owner's fund Equity share capital

295.16 295.16 294.52 293.62 282.95

Share application money

- - - 0.02 8.01

Preference share capital

- - - - -

Reserves & surplus

16,496.03 14,363.76 11,876.57 10,019.75 7,527.60

Loan funds Secured loans 294.10 266.67 400.18 407.23 602.45

Unsecured loans 3,451.06 2,960.40 2,774.04 1,913.87 2,277.70

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Mar ' 14 Mar ' 13 Mar ' 12 Mar ' 11 Mar ' 10

Total 20,536.35 17,885.99 15,345.31 12,634.49 10,698.71

Uses of funds

Fixed assets

Gross block 10,242.58 8,602.96 7,502.36 5,858.26 4,866.18

Less : revaluation reserve

- - - - 11.67

Less : accumulated depreciation

4,365.63 3,645.10 3,216.34 2,725.35 2,537.77

Net block 5,876.95 4,957.86 4,286.02 3,132.91 2,316.74

Capital work-in-progress

1,228.44 863.48 794.73 773.68 1,374.31

Investments 11,379.85 11,833.46 10,310.46 8,925.63 6,398.02

Net current assets

Current assets, loans & advances

12,803.41 9,798.79 8,520.77 6,707.56 6,224.56

Less : current liabilities & provisions

10,752.30 9,567.60 8,566.67 6,905.29 5,619.04

Total net current assets

2,051.11 231.19 -45.90 -197.73 605.52

Miscellaneous expenses not written

- - - - 4.12

Total 20,536.35 17,885.99 15,345.31 12,634.49 10,698.71

Notes:

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Mar ' 14 Mar ' 13 Mar ' 12 Mar ' 11 Mar ' 10

Book value of unquoted investments

8,014.42 8,206.29 6,674.89 5,479.48 4,806.15

Market value of quoted investments

26,284.66 17,757.90 14,508.74 15,867.63 12,216.75

Contingent liabilities

6,421.09 87.20 2,307.66 1,893.85 2,020.79

Number of equity shares outstanding (Lacs)

6158.92 6139.81 6139.75 6139.40 5659.08

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7. FINANCIAL RATIO ANALYSIS

Financial statement analysis is a judgmental process. One of the primary objectives is identification of major changes in trends, and relationships and the investigation of the reasons underlying those changes. The judgment process can be improved by experience and the use of analytical tools. Probably the most widely used financial analysis technique is ratio analysis, the analysis of relationships between two or more line items on the financial statement. Financial ratios are usually expressed in percentage or times.

Generally, financial ratios are calculated for the purpose of evaluating aspects of a company's operations and fall into the following categories: liquidity ratios measure a firm's ability to meet its current obligations. profitability ratios measure management's ability to control expenses and to earn a return on the resources committed to the business. leverage ratios measure the degree of protection of suppliers of long-term funds and can also aid in judging a firm's ability to raise additional debt and its capacity to pay its liabilities on time. efficiency, activity or turnover ratios provide information about management's ability to control expenses and to earn a return on the resources committed to the business. A ratio can be computed from any pair of numbers.

Given the large quantity of variables included in financial statements, a very long list of meaningful ratios can be derived. A standard list of ratios or standard computation of them does not exist. The following ratio presentation includes ratios that are most often used when evaluating the credit worthiness of a customer. Ratio analysis becomes a very personal or company driven procedure. Analysts are drawn to and use the ones they are

comfortable with and understand.

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Working CapitalWorking capital compares current assets to current liabilities, and serves as the liquid reserve available to satisfy contingencies and uncertainties. A high working capital balance is mandated if the entity is unable to borrow on short notice. The ratio indicates the short-term solvency of a business and in determining if a firm can pay its current liabilities when due.

FormulaCurrent Assets

- Current Liabilities

Mar ' 14 = 12,803.41 -10,752.30

Mar ' 13 = 9,798.79 - 9,567.60

Mar ' 12 = 8,520.77 - 8,566.67

Mar ' 11 = 6,707.56 - 6,905.29

Mar ' 10 = 6,224.56 - 5,619.04

Mar ' 14 Mar ' 13 Mar ' 12 Mar ' 11 Mar ' 102,051.11 231.19 -45.90 -197.73 605.52

Acid Test or Quick RatioA measurement of the liquidity position of the business. The quick ratio

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compares the cash plus cash equivalents and accounts receivable to the current liabilities. The primary difference between the current ratio and the quick ratio is the quick ratio does not include inventory and prepaid expenses in the calculation. Consequently, a business's quick ratio will be lower than its current ratio. It is a stringent test of liquidity.

FormulaCash + Marketable Securities + Accounts Receivable

Current Liabilities

Current RatioProvides an indication of the liquidity of the business by comparing the amount of current assets to current liabilities. A business's current assets generally consist of cash, marketable securities, accounts receivable, and inventories. Current liabilities include accounts payable, current maturities of long-term debt, accrued income taxes, and other accrued expenses that are due within one year. In general, businesses prefer to have at least one dollar of current assets for every dollar of current liabilities. However, the normal current ratio fluctuates from industry to industry. A current ratio significantly higher than the industry average could indicate the existence of redundant assets. Conversely, a current ratio significantly lower than the industry average could indicate a lack of liquidity.

FormulaCurrent Assets

Current Liabilities

Mar ' 14 = 12,803.41 /10,752.30

Mar ' 13 = 9,798.79 /9,567.60

Mar ' 12 = 8,520.77 /8,566.67

Mar ' 11 = 6,707.56 /6,905.29

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Mar ' 10 = 6,224.56 /5,619.04

Mar ' 14 Mar ' 13 Mar ' 12 Mar ' 11 Mar ' 10

1.19 1.02 0.99 0.97 1.11

Cash RatioIndicates a conservative view of liquidity such as when a company has pledged its receivables and its inventory, or the analyst suspects severe liquidity problems with inventory and receivables.

FormulaCash Equivalents + Marketable Securities

Current Liabilities

Profitability Ratios

Net Profit Margin (Return on Sales)A measure of net income dollars generated by each dollar of sales.

FormulaNet Income *

Net Sales

* Refinements to the net income figure can make it more accurate than this ratio computation. They could include removal of equity earnings from investments, "other income" and "other expense" items as well as minority share of earnings and nonrecurring items.

Return on AssetsMeasures the company's ability to utilize its assets to create profits.

FormulaNet Income *

(Beginning + Ending Total Assets) / 2

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Operating Income MarginA measure of the operating income generated by each dollar of sales.

FormulaOperating Income

Net Sales

Return on InvestmentMeasures the income earned on the invested capital.

FormulaNet Income *

Long-term Liabilities + Equity

Return on EquityMeasures the income earned on the shareholder's investment in the business.

FormulaNet Income *

Equity

Return on AssetsA combination of financial ratios in a series to evaluate investment return. The benefit of the method is that it provides an understanding of how the company generates its return.

FormulaNet Income *

Salesx

SalesAssets

xAssetsEquity

Gross Profit MarginIndicates the relationship between net sales revenue and the cost of goods sold. This ratio should be compared with industry data as it may indicate insufficient volume and excessive purchasing or labor costs.

Formula

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Gross ProfitNet Sales

Efficiency Ratios

Cash TurnoverMeasures how effective a company is utilizing its cash.

FormulaNet Sales

Cash

Sales to Working Capital (Net Working Capital Turnover)Indicates the turnover in working capital per year. A low ratio indicates inefficiency, while a high level implies that the company's working capital is working too hard.

FormulaNet Sales

Average Working Capital

Total Asset TurnoverMeasures the activity of the assets and the ability of the business to generate sales through the use of the assets.

FormulaNet Sales

Average Total Assets

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Fixed Asset TurnoverMeasures the capacity utilization and the quality of fixed assets.

FormulaNet Sales

Net Fixed Assets

Days' Sales in ReceivablesIndicates the average time in days, that receivables are outstanding (DSO). It helps determine if a change in receivables is due to a change in sales, or to another factor such as a change in selling terms. An analyst might compare the days' sales in receivables with the company's credit terms as an indication of how efficiently the company manages its receivables.

FormulaGross Receivables

Annual Net Sales / 365

Accounts Receivable TurnoverIndicates the liquidity of the company's receivables.

FormulaNet Sales

Average Gross Receivables

Accounts Receivable Turnover in DaysIndicates the liquidity of the company's receivables in days.

FormulaAverage Gross Receivables

Annual Net Sales / 365

Days' Sales in InventoryIndicates the length of time that it will take to use up the inventory through sales.

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FormulaEnding Inventory

Cost of Goods Sold / 365

Inventory TurnoverIndicates the liquidity of the inventory.

FormulaCost of Goods SoldAverage Inventory

Inventory Turnover in DaysIndicates the liquidity of the inventory in days.

FormulaAverage Inventory

Cost of Goods Sold / 365

Operating CycleIndicates the time between the acquisition of inventory and the realization of cash from sales of inventory. For most companies the operating cycle is less than one year, but in some industries it is longer.

FormulaAccounts Receivable Turnover in Days

+ Inventory Turnover in Day

Days' Payables OutstandingIndicates how the firm handles obligations of its suppliers.

FormulaEnding Accounts Payable

Purchases / 365

Payables TurnoverIndicates the liquidity of the firm's payables.

Formula

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PurchasesAverage Accounts Payable

Payables Turnover in DaysIndicates the liquidity of the firm's payables in days.

FormulaAverage Accounts Payable

Purchases / 365

Bad-Debt to Accounts Receivable RatioBad-debt to Accounts Receivable ratio measures expected uncollectibility on credit sales. An increase in bad debts is a negative sign, since it indicates greater realization risk in accounts receivable and possible future write-offs.

FormulaBad Debts

Accounts Receivable

Bad-Debt to Sales RatioBad-debt ratios measure expected uncollectibility on credit sales. An increase in bad debts is a negative sign, since it indicates greater realization risk in accounts receivable and possible future write-offs.

FormulaBad Debts

Sales

Book Value per Common ShareBook value per common share is the net assets available to common stockholders divided by the shares outstanding, where net assets represent stockholders' equity less preferred stock. Book value per share tells what each share is worth per the books based on historical cost.

Formula

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(Total Stockholders' Equity - Liquidation Value of Preferred Stocks - Preferred Dividends in Arrears)Common Shares Outstanding

Current-Liability RatiosCurrent-liability ratios indicate the degree to which current debt payments will be required within the year. Understanding a company's liability is critical, since if it is unable to meet current debt, a liquidity crisis looms. The following ratios are compared to industry norms.

FormulasCurrent to Non-current = Current Liabilities

Non-current LiabilitiesCurrent to Total = Current Liabilities

Total Liabilities

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8. IMPORTANCE

Ratio analysis is an important technique of financial analysis. It is a means for judging the financial health of a business enterprise. It determines and interprets the liquidity, solvency, profitability,etc. of a business enterprise.

It becomes simple to understand various figures in the financial statements through the use of different ratios. Financial ratios simplify, summaries’, and systemize the accounting figures presented in financial statements.

With the help of ratio analysis, comparison of profitability and financial soundness can be made between one industry and another. Similarly comparison of current year figures can also be made with those of previous years with the help of ratio analysis and if some weak points are located, remedial measures are taken to correct them.

If accounting ratios are calculated for a number of years, they will reveal the trend of costs, sales, profits and other important facts. Such trends are useful for planning.

Financial ratios, based on a desired level of activities, can be set as standards for judging actual performance of a business. For example, if owners of a business aim at earning profit @ 25% on the capital which is the prevailing rate of return in the industry then this rate of 25% becomes the standard. The rate of profit of each year is compared with this standard and the actual performance of the business can be judged easily.

Ratio analysis discloses the position of business with different viewpoint. It discloses the position of business with liquidity viewpoint, solvency view point, profitability viewpoint, etc. with the help of such a study, we

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can draw conclusion regarding the financial health of business enterprise.

9. SUMMARY OF RATIOS

Mar ' 14

Mar ' 13

Mar ' 12

Mar ' 11

Mar ' 10

Adjusted EPS (Rs) 60.17 53.13 45.13 41.45 36.19Adjusted cash EPS (Rs)

74.18 64.71 54.51 48.19 42.74

Reported EPS (Rs) 61.02 54.61 46.89 43.36 36.89Reported cash EPS (Rs)

75.04 66.18 56.27 50.10 43.44

Dividend per share 14.00 13.00 12.50 11.50 9.50Operating profit per share (Rs)

76.66 76.70 61.41 56.26 53.31

Book value (excl rev res) per share EPS (Rs)

272.63 238.75 198.23 167.99 137.95

Book value (incl rev res) per share EPS (Rs)

272.63 238.75 198.23 167.99 138.15

Net operating income per share EPS (Rs)

657.72 658.67 518.81 382.13 327.20

Free reserves per share EPS (Rs)

- - - - 120.24

Profitability ratiosOperating margin (%)

11.65 11.64 11.83 14.72 16.29

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Gross profit margin (%)

9.52 9.88 10.02 12.96 14.29

Net profit margin (%)

9.11 8.17 8.90 11.14 11.08

Adjusted cash margin (%)

11.08 9.69 10.35 12.38 12.84

Adjusted return on net worth (%)

22.06 22.25 22.76 24.67 26.23

Reported return on net worth (%)

22.38 22.87 23.65 25.81 26.74

Return on long term funds (%)

22.28 25.50 23.85 27.52 27.73

Leverage ratiosLong term debt / Equity

0.22 0.21 0.26 0.22 0.46

Total debt/equity 0.22 0.22 0.26 0.22 0.36Owners fund as % of total source

81.76 81.95 79.31 81.62 73.05

Fixed assets turnover ratio

2.11 2.43 2.28 2.01 1.85

Liquidity ratiosCurrent ratio 1.19 1.02 0.99 0.97 1.11Current ratio (inc. st loans)

1.19 1.02 0.99 0.96 1.11

Quick ratio 0.93 0.77 0.71 0.72 0.86Inventory turnover ratio

14.45 16.71 13.51 13.85 17.91

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10. CONCLUSION

Ratios make the related information comparable. A single figure by itself has no meaning, but when expressed in terms of a related figure, it yields significant interferences. Thus, ratios are relative figures reflecting the relationship between related variables. Their use as tools of financial analysis involves their comparison as single ratios, like absolute

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figures, are not of much use.

Ratio analysis has a major significance in analyzing the financial performance of a company over a period of time. Decisions affecting product prices, per unit costs, volume or efficiency have an impact on the profit margin or turnover ratios of a company.

Financial ratios are essentially concerned with the identification of significant accounting data relationships, which give the decision-maker insights into the financial performance of a company.

The analysis of financial statements is a process of evaluating the relationship between component parts of financial statements to obtain a better understanding of the firm‘s position and performance.

The first task of financial analyst is to select the information relevant to the decision under consideration from the total information contained in the financial statements. The second step is to arrange the information in a way to highlight significant relationships. The final step is interpretation and drawing of inferences and conclusions. In brief, financial analysis is the process of selection, relation and evaluation.

Ratio analysis in view of its several limitations should be considered only as a tool for analysis rather than as an end in itself. The reliability and significance attached to ratios will largely hinge upon the quality of data on which they are based. They are as good or as bad as the data itself. Nevertheless, they are an important tool of financial analysis.

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11. BIBLIOGRAPHY

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1. Mahindra & Mahindra' Official Website

2. WWW.Business world.com

3. WWW.Autowold.com

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