indus motors toyota pakistan financial ratio analysis
TRANSCRIPT
Ratio AnalysisBusiness Finance
Lecturer: Najaf Shah
Muhammad Zahid
Mubashir Hamid
Syed Tariq
Company:
The company manufactures and markets Toyota brand vehicles in Pakistan. The main product offerings include several variants of the flagship βCorollaβ in the passenger cars category, βHiluxβ in the light commercial vehicles segment and βFortunerβ in Sport Utility Vehicle (SUV) segment. The Company also sells limited units of Daihatsu brand vehicles.
Company Profile
Competitors
Sales Vs Income
Toyota Suzuki Honda Toyota Suzuki Honda
63
51
30.2
57 53
39
3.35
2
0.236
3.87
1.92
1.06
Sales Income
Rs. In million
2013 2014
Financial Analysis
Financial Analysis
Ratio Analysis
Liquidity Ratios
Firmβs ability to satisfy its short-term obligations as they come due.
Liquidity Ratio
Current Ratio
Quick Ratio
πΆπ’πππππ‘ πππ‘ππ=πΆπ’πππππ‘ π΄π π ππ‘π
πΆπ’πππππ‘ πΏπππππππ‘πππ
ππ’ππππππ‘ππ=πΆπ’πππππ‘ π΄π π ππ‘π β πΌππ£πππ‘πππ¦
πΆπ’πππππ‘ πΏπππππππ‘πππ
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
3.35 Current
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
2.6 Inventories 7,529,571
7,883,309 4,469,460
Current Liabilities
10,395,919
7,412,684 5,976,034
Rs in ,000
2012 2013 20140.00
0.50
1.00
1.50
2.00
2.50
3.00
1.59
1.93
2.61
Quick (Acid Test) Ratio
2012 2013 20140.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
2.32
2.993.35
Current ratio
Liquidity Ratio
Toyota 2014
2.0 is considered acceptable
1.0 is considered acceptable
Toyota Suzuki Honda0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
3.35
2.53
0.89
Toyota 2014
Toyota Suzuki Honda0.00
0.50
1.00
1.50
2.00
2.50
3.00
2.61
0.80
0.40
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).
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
πΌππ£πππ‘πππ¦ ππ’ππππ£ππ=πππππ
πΌππ£πππ‘πππ¦πΉππ₯ππ π΄π π ππ‘π ππ’ππππ£ππ=
πππππ πΉππ₯ππ π΄π π ππ‘π
DSO Total
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
2012 2013 20140.00
2.00
4.00
6.00
8.00
10.00
12.00
6.837.91
11.11
The Days Sales Outstanding (DSO)
2012 2013 20140.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
10.22
8.10
12.77
The Inventory Turnover Ratio
Asset Management Ratios
2014
2014
Toyota
ToyotaToyota Suzuki Honda
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.0012.77
3.39
8.03
Toyota Suzuki Honda0.00
10.00
20.00
30.00
40.00
50.00
60.00
11.11
55.54
19.36
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.
2012 2013 20140.00
0.50
1.00
1.50
2.00
2.50
3.00 2.792.54
2.19
Total Asset Turnover Ratio
2012 2013 20140.00
5.00
10.00
15.00
20.00
25.0022.16
23.28
9.46
The Fixed Assets Turnover Ratio
Asset Management Ratios
2014
2014
Toyota
ToyotaToyota Suzuki Honda
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
9.4610.57
12.88
Toyota Suzuki Honda0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
2.19
1.89
3.18
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.
Debt Management Ratios
Indicates the amount the firm uses to generate profits from othersβ money.
Debt Management Ratios
Total Debt to Total Assets
Times Interest Earned Ratio
EBITDA Coverage Ratio
Total debt to total asset Time Interest Earned ratioEBITDA coverage ratio
Debt Management Ratios
Ratio Type Amount 2012 Amount 2013 Amount 2014
Total Debt to Total Assets RatioTotal Debts 10,561,860
0.387,412,684
0.295,976,034
0.22Total Assets
27,575,718 25,105,975 26,110,635
Rs in ,000
Debt Management Ratios (Leverage Ratios):
2014
This ratio measures the proportion of total assets financed by the firmβs creditors.
The higher degree of debt ratio shows the greater the firmβs 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.
2012 2013 20140.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40 0.38
0.30
0.23
Total Debt to Total Assets Ratio
Toyota
Toyota Suzuki Honda0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
0.23
0.32
0.81
Profitability Ratios:
Indicates the amount the firm uses to generate profits from othersβ money.
Profitability ratios
Profit margin on sales
Basic earning power
Return on Assets
Return on equity
Profit Margin on sales BReturn on Assets Return on E
Profitability Ratios:
Ratio Type Amount 2012 Amount 2013 Amount 2014
Profit Margin on SalesNet Income 4,302,715
0.063,357,545 0.05 3,873,452
0.07Sales
76,962,642
63,829,075 57,063,622
Basic Earning PowerEBIT 6,312,267
0.234,969,775 0.20 5,016,497
0.19Total Assets
27,575,718 25,105,975 26,110,635
0.15Return on Assets (ROA)
Net Income 4,302,7150.16
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
0.253,357,545 0.19 3,873,452
0.19Common Equity 17,013,858 17,700,000 19,900,000
Rs in ,000
Profitability Ratios:
2014
2014
Toyota
Toyota2012 2013 2014
0.00
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.06 0.05
0.07
Profit Margin on Sales
Toyota Suzuki Honda0.00
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.07
0.04
0.03
2012 2013 20140.17
0.18
0.19
0.20
0.21
0.22
0.23
0.240.23
0.200.19
Basic Earning Power
Toyota Suzuki Honda0.00
0.05
0.10
0.15
0.20
0.25
0.19
0.09
0.17
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.
Profitability Ratios:
2014
2014
Toyota
Toyota2012 2013 2014
0.12
0.13
0.14
0.15
0.16 0.16
0.13
0.15
Return on Assets (ROA)
Toyota Suzuki Honda0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
0.16 0.15
0.07
0.09
2012 2013 20140.00
0.05
0.10
0.15
0.20
0.25
0.300.25
0.19 0.20
Return on Common Equity (ROE)
Toyota Suzuki Honda0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
0.50
0.20
0.10
0.45
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 firmβs 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.
Market Value Ratio
Relates the firmsβ 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 shareMarket / Book ratio Price / cash flow share
π /πΈπ ππ‘ππ=ππππππ‘ πππππ πππ hπ ππππΈπππππππ πππ hπ πππ
Market Value Ratio
Ratio Type Amount 2012 Amount 2013 Amount 2014
Price/Earnings Ratio (P/E Ratio)Market Price Per Share 245.69
4.49304
7.12462
9.38Earnings Per Share 54.74 42.72 49.28
Price/ Cash Flow RatioMarket Price Per Share 245.69
17.55304
2.18462
2.96Cash 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
156.41Depreciation and
Amortization 6,633,030 7,599,412 8,420,087
Common Share Outstanding 78,600 78,600 78,600
Market/ Book RatioMarket Price Per Share 245.69
113.50304
135.09462
182.60Book Value Per Share 2.16 2.25 2.53
Book Value Per ShareCommon Equity 17,013,858
2.1617,700,000
2.2519,900,000
2.53Share Outstanding 7,860,000 7,860,000 7,860,000
Rs in ,000
Market Value Ratios
2014
2014
Toyota
Toyota2012 2013 2014
0.001.002.003.004.005.006.007.008.009.00
10.00
4.49
7.12
9.38
Price/Earnings Ratio (P/E Ratio)
Toyota Suzuki Honda0.00
2.00
4.00
6.00
8.00
10.00
12.00
9.3810.01
7.31
2012 2013 2014130.00
135.00
140.00
145.00
150.00
155.00
160.00
139.13 139.40
156.41
Cash Flow Per Share
Toyota Suzuki Honda0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
156.41
36.93
15.24
Market Value Ratios
Price/Earning ratio shows that Investor for Indus Motors has to pay Rs. 9.38 to earn Rs. 1Incase 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.
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.
2012 2013 20140.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
113.50
135.09
156.41
Market/ Book Ratio
Toyota Suzuki Honda0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
156.41
23.37
2.56
Thank you!