Indus Motors, Current Ratios, Financial Analysis, Financial, Pak suzuki, Finance, Honda, Toyota, pakistan

1. Ratio Analysis
Business Finance
Lecturer: Najaf Shah

2. Company:

3. The company manufactures and markets Toyota brand vehicles in Pakistan. The main
product offerings include several variants of the flagship “Corolla” in the passenger cars
category, “Hilux” in the light commercial vehicles segment and “Fortuner” in Sport Utility
Vehicle (SUV) segment. The Company also sells limited units of Daihatsu brand vehicles.
Company Profile

4. Competitors

5. Sales Vs Income
63
51
30.2
57
53
39
3.35
2
0.236
3.87
1.92
1.06
Toyota Suzuki Honda Toyota Suzuki Honda
Sales Income
Rs. In million
2013
2014

6. Financial Analysis
Financial Analysis
Ratio Analysis

7. Liquidity Ratios
Firm’s ability to satisfy its short-term obligations as they come due.
Liquidity Ratio
Current Ratio
Quick Ratio
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑟𝑎𝑡𝑖𝑜 =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝑄𝑢𝑖𝑐𝑘 𝑟𝑎𝑡𝑖𝑜 =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠 − 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
Ratio Type Amount 2012 Amount 2013 Amount 2014
Current ratio
Current Assets
24,088,975
2.32
22,188,485
2.99
20,038,312
3.35Current
Liabilities 10,395,919
7,412,684 5,976,034
Quick (Acid
Test) Ratio
Current Assets
24,088,975
1.6
22,188,485
1.9
20,038,312
2.6Inventories
7,529,571
7,883,309 4,469,460
Current
Liabilities 10,395,919
7,412,684 5,976,034
Rs in ,000

8. 1.59
1.93
2.61
0.00
0.50
1.00
1.50
2.00
2.50
3.00
2012 2013 2014
Quick (Acid Test) Ratio
2.32
2.99
3.35
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
2012 2013 2014
Current ratio
Liquidity Ratio
Toyota 2014
2.0 is considered acceptable
1.0 is considered acceptable
3.35
2.53
0.89
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
Toyota Suzuki Honda
Toyota 2014
2.61
0.80
0.40
0.00
0.50
1.00
1.50
2.00
2.50
3.00
Toyota Suzuki Honda

9. Liquidity Ratio
According to company financial statement they are in Strong Liquidity
position and they are able to pay their liabilities very well. Company
liquidity position appear to have remain stable and it increased in
2014. Suzuki is also in the same strong situation, however Honda
seems in trouble due to its liabilities. Indus motor will not face any
problem in paying back its short term liabilities however Honda may
have problem to satisfy its short term obligations when they come
due. This is strong point for investors to invest in Indus motor and
least likely with Honda (a major competitor in sedan category).

10. Asset Management Ratios
Measures the speed with which various accounts are converted into sales or
cash-inflows or cash-outflows.
Asset
Management
Ratios
Inventory
turnover ratio
DSO
Fixed Asset
turn out Ratio
Total Asset
turnout ratio
𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 =
𝑆𝑎𝑙𝑒𝑠
𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 =
𝑆𝑎𝑙𝑒𝑠
𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡𝑠
DSO=
𝐴𝑐𝑐𝑜𝑢𝑛𝑡 𝑅𝑒𝑐𝑖𝑒𝑣𝑒𝑏𝑙𝑒
𝑆𝑎𝑙𝑒𝑠
Total 𝐴𝑠𝑠𝑒𝑡𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 =
𝑆𝑎𝑙𝑒𝑠
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

11. Asset Management Ratios
Ratio Type Amount 2012 Amount 2013 Amount 2014
The Inventory Turnover Ratio Sales
76,962,642
10.2
63,829,075 8.1
57,063,622
12.8
Inventory
7,529,571 7,883,309
4,469,460
The Days Sales Outstanding
(DSO)
Accounts Receivables
1,459,976
6.92
1,382,761 7.91
1,737,358
11.11
Sales
76,962,642 63,829,075
57,063,622
The Fixed Assets Turnover Ratio Sales
76,962,642
22.16
63,829,075
23.28
57,063,622
9.46
Net Fixed Assets
3,472,906 2,742,140
6,033,264
Total Asset Turnover Ratio Sales
76,962,642
2.79
63,829,075 2.54
57,063,622
2.19
Total Assets
27,575,718
25,105,975 26,110,635
Rs in ,000

12. 6.83
7.91
11.11
0.00
2.00
4.00
6.00
8.00
10.00
12.00
2012 2013 2014
The Days Sales Outstanding (DSO)
10.22
8.10
12.77
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
2012 2013 2014
The Inventory Turnover Ratio
Asset Management Ratios
2014
2014
Toyota
Toyota
12.77
3.39
8.03
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
Toyota Suzuki Honda
11.11
55.54
19.36
0.00
10.00
20.00
30.00
40.00
50.00
60.00
Toyota Suzuki Honda

13. Asset Management Ratios
Indus motor have a very good credit and collection
policies. Average collection period of around 1 week for
2013 and 2 weeks in 2014 which is amazing.
Suzuki has around 2 months time period in 2014 and
Honda has 20 days time period.
This shows that Indus motor is quite efficient in collecting
their credit within a short time.

14. 2.79
2.54
2.19
0.00
0.50
1.00
1.50
2.00
2.50
3.00
2012 2013 2014
Total Asset Turnover Ratio
22.16
23.28
9.46
0.00
5.00
10.00
15.00
20.00
25.00
2012 2013 2014
The Fixed Assets Turnover Ratio
Asset Management Ratios
2014
2014
Toyota
Toyota
9.46
10.57
12.88
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
Toyota Suzuki Honda
2.19
1.89
3.18
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
Toyota Suzuki Honda

15. Asset Management Ratios
Indus Motor company higher fixed-asset turnover ratio shows
that the company has been more effective in using the
investment in fixed assets to generate revenues.
Looking at the Fixed asset turn over ratio investors are
more likely to invest in Indus Motor company because of
large generation of revenue from these assets.
Higher Total Asset turnover of Indus Motor shows that
company can operate with fewer assets than other less efficient
competitors, and so requires less debt and equity to operate.
The result is of this high ratio is comparatively greater return to
its shareholders.

16. Debt Management Ratios
Indicates the amount the firm uses to generate profits from others’ money.
Debt Management
Ratios
Total Debt to Total
Assets
Times Interest Earned
Ratio
EBITDA Coverage
Ratio
Total debt to total asset=
𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
Time Interest Earned ratio=
𝐸𝐵𝐼𝑇
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡
EBITDA coverage ratio=
𝐸𝐵𝐼𝑇𝐷𝐴+𝐿𝑒𝑎𝑠𝑒 𝑃𝑎𝑦𝑚𝑒𝑛𝑡
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡+𝐿𝑒𝑎𝑠𝑒 𝑃𝑎𝑦𝑚𝑒𝑛𝑡+𝑃𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙 𝐴𝑚𝑜𝑢𝑛𝑡

17. Debt Management Ratios
Ratio Type Amount 2012 Amount 2013 Amount 2014
Total Debt to Total Assets Ratio
Total Debts 10,561,860
0.38
7,412,684
0.29
5,976,034
0.22
Total Assets
27,575,718
25,105,975 26,110,635
Rs in ,000

18. Debt Management Ratios (Leverage Ratios):
2014
This ratio measures the proportion of total assets financed by the firm’s
creditors.
The higher degree of debt ratio shows the greater the firm’s degree of
indebtedness. Debt ratio for Indus Motor is low which can be manageable by
the company. In 2014 Total debt to Total Asset ratio is decreased which shows
company is managing its debt well.
However, Honda posses a risk for investors because of their greater liabilities.
0.38
0.30
0.23
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
2012 2013 2014
Total Debt to Total Assets Ratio
Toyota
0.23
0.32
0.81
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
Toyota Suzuki Honda

19. Profitability Ratios:
Indicates the amount the firm uses to generate profits from others’ money.
Profitability
ratios
Profit margin
on sales
Basic earning
power
Return on
Assets
Return on
equity
Profit Margin on sales=
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝑆𝑎𝑙𝑒𝑠
B 𝑎𝑠𝑖𝑐 𝐸𝑎𝑟𝑛𝑖𝑛𝑔 𝑃𝑜𝑤𝑒𝑟 =
𝐸𝐵𝐼𝑇
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
Return on Assets=
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
Return on E 𝑞𝑢𝑖𝑡𝑦 =
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝐶𝑜𝑚𝑚𝑜𝑛 𝐸𝑞𝑢𝑖𝑡𝑦

20. Profitability Ratios:
Ratio Type Amount 2012 Amount 2013 Amount 2014
Profit Margin on Sales
Net Income 4,302,715
0.06
3,357,545 0.05 3,873,452
0.07
Sales
76,962,642 63,829,075
57,063,622
Basic Earning Power
EBIT 6,312,267
0.23
4,969,775 0.20 5,016,497
0.19
Total Assets
27,575,718
25,105,975 26,110,635
0.15
Return on Assets (ROA)
Net Income 4,302,715
0.16
3,357,545 0.13 3,873,452
Total Assets
27,575,718
25,105,975 26,110,635
Return on Common Equity (ROE)
Net Income 4,302,715
0.25
3,357,545 0.19 3,873,452
0.19
Common Equity 17,013,858 17,700,000 19,900,000
Rs in ,000

21. Profitability Ratios:
2014
2014
Toyota
Toyota
0.06 0.05
0.07
0.00
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
2012 2013 2014
Profit Margin on Sales 0.07
0.04
0.03
0.00
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
Toyota Suzuki Honda
0.23
0.20
0.19
0.17
0.18
0.19
0.20
0.21
0.22
0.23
0.24
2012 2013 2014
Basic Earning Power
0.19
0.09
0.17
0.00
0.05
0.10
0.15
0.20
0.25
Toyota Suzuki Honda

22. Profitability Ratios:
Indus motors Profit margin on Sales shows that it is in much
better position as compare to other competitors. Higher ratios
ensures higher dividend to investors and payback creditors
liabilities.
The higher the Basic Earning Power ratio, the more effective a
company is at generating income from its assets. Hence Indus
Motor company is in strong position as compare to its
competitors.
Its is useful for comparing firms with different tax situations
and different degrees of financial leverage.

23. Profitability Ratios:
2014
2014
Toyota
Toyota
0.16
0.13
0.15
0.12
0.13
0.13
0.14
0.14
0.15
0.15
0.16
0.16
2012 2013 2014
Return on Assets (ROA) 0.15
0.07
0.09
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
0.16
Toyota Suzuki Honda
0.25
0.19 0.20
0.00
0.05
0.10
0.15
0.20
0.25
0.30
2012 2013 2014
Return on Common Equity (ROE)
0.20
0.10
0.45
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
0.50
Toyota Suzuki Honda

24. Profitability Ratios:
Measures the overall effectiveness of the management
in generating profits with its available assets. It is also
called Return on Investment (ROI).
The higher the firm’s return on total asset consider the
better. Return on total asset of Indus Motor appear to
be improved from year and rose to 14.8%.
The return on equity ratio (ROE) measures how much the
shareholders earned for their investment in the company.
Indus Motors has higher ratio percentage shows that
management is efficiently utilizing its equity base and the
better return is to investors.

25. Market Value Ratio
Relates the firms’ market value as measured by its current share price, to
certain accounting values.
Market value
ratio
Price earning
ratio
Cash flow per
share
Market/ book
ratio
Price/Cash flow
share
Cash Flow per share=
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒+𝐷𝑒𝑝𝑟.& 𝐴𝑚𝑚𝑜𝑟.
𝐶𝑜𝑚𝑚𝑜𝑛 𝑆ℎ𝑎𝑟𝑒 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔
Market / Book ratio=
𝐶𝑜𝑚𝑚𝑜𝑛 𝑒𝑞𝑢𝑖𝑡𝑦
𝑆ℎ𝑎𝑟𝑒𝑠 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔
Price / cash flow share=
𝑀𝑎𝑟𝑘𝑒𝑡 𝑃𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒
𝐶𝑎𝑠ℎ 𝑓𝑙𝑜𝑤 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒
𝑃 𝐸 𝑅𝑎𝑡𝑖𝑜 =
𝑀𝑎𝑟𝑘𝑒𝑡 𝑃𝑟𝑖𝑐𝑒 𝑃𝑒𝑟 𝑆ℎ𝑎𝑟𝑒
𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑃𝑒𝑟 𝑆ℎ𝑎𝑟𝑒

26. Market Value Ratio
Ratio Type Amount 2012 Amount 2013 Amount 2014
Price/Earnings Ratio (P/E Ratio)
Market Price Per Share 245.69
4.49
304
7.12
462
9.38
Earnings Per Share 54.74 42.72 49.28
Price/ Cash Flow Ratio
Market Price Per Share 245.69
17.55
304
2.18
462
2.96
Cash Flow Per Share 14 139.40 156.41
Cash Flow Per Share
Net Income 4,302,715
139.13
3,357,545
139.40
3,873,452
156.41
Depreciation and
Amortization
6,633,030 7,599,412 8,420,087
Common Share
Outstanding
78,600 78,600 78,600
Market/ Book Ratio
Market Price Per Share 245.69
113.50
304
135.09
462
182.60
Book Value Per Share 2.16 2.25 2.53
Book Value Per Share
Common Equity 17,013,858
2.16
17,700,000
2.25
19,900,000
2.53
Share Outstanding 7,860,000 7,860,000 7,860,000
Rs in ,000

27. Market Value Ratios
2014
2014
Toyota
Toyota
4.49
7.12
9.38
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
2012 2013 2014
Price/Earnings Ratio (P/E Ratio)
9.38
10.01
7.31
0.00
2.00
4.00
6.00
8.00
10.00
12.00
Toyota Suzuki Honda
139.13 139.40
156.41
130.00
135.00
140.00
145.00
150.00
155.00
160.00
2012 2013 2014
Cash Flow Per Share 156.41
36.93
15.24
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
Toyota Suzuki Honda

28. Market Value Ratios
Price/Earning ratio shows that Investor for Indus Motors has
to pay Rs. 9.38 to earn Rs. 1
Incase of Honda, the amount is quite higher.
Looking at Indus its ratio is increasing, which shows positive
growth. Hence Indus is returning good rate to its investors.
Cash flow per share is more reliable than price/earning ratio.
Most of the investors look at cash flow per share and
positive growth in this ratio shows the company growth in
profitability.

29. Market Value Ratios
Toyota 2014
For value investors, M/B remains a tried and tested method for finding low-priced
stocks that the market has neglected. If a company is trading for less than its book
value (or has a M/B less than one), it normally tells investors one of two things:
either the market believes the asset value is overstated, or the company is earning
a very poor (even negative) return on its assets.
Indus motors I having a positive value and is increased in 2014 showing a positive
trend in market value as well it gain investors trust.
113.50
135.09
156.41
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
2012 2013 2014
Market/ Book Ratio 156.41
23.37
2.56
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
Toyota Suzuki Honda