ATLAS HONDA ratio analysis

Ratio AnalysisManagerial Finance

PresentersOmer Shahzad MB-12-08

Ali Asghar MB-12-34

Zeeshan Ahmad MB-12-09

Babar Chaudhary MB-12-545

4

3

2

1

Saleem Malik MB-12-23

Financial Ratios

Market Ratios

Profitability Ratios

Debt Ratios

Activity Ratios

Liquidity Ratios

Our Organization

Vision:

Market leader in the motorcycle industry, emerging as a global competitive center of production and exports.

Ali AsgharMB-12-

34

Liquidity Ratios

Firm’s ability to satisfy its short-term obligations as they come

due.

Current Ratio

Liquidity Ratios

Quick Ratio

Current Ratio

Looks at the ratio between current assets and current

liabilities.

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑟𝑎𝑡𝑖𝑜=𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

Ratios 2008 2009 2010 2011 2012

Current Ratio

1.31 1.25 1.49 1.45 1.45

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑟𝑎𝑡𝑖𝑜=𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

Mostly Current Ratio of 2 is consider acceptable. For Atlas Honda, current ratio less than 2 is acceptable and has improved during last 5 years and remain stable in last 2 years at level of 1.45 which is quite acceptable.

2008 2009 2010 2011 20121.1

1.15

1.2

1.25

1.3

1.35

1.4

1.45

1.5

1.55

1.31

1.25

1.49

1.45 1.45

Current Ratio

Current Ratio

Quick Ratio

Is similar to the current ratio but it excludes inventory

from current assets.

𝑄𝑢𝑖𝑐𝑘𝑟𝑎𝑡𝑖𝑜=𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠− 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

Ratios 2008 2009 2010 2011 2012

Quick Ratio

0.84 0.70 1.02 0.9 1

𝑄𝑢𝑖𝑐𝑘𝑟𝑎𝑡𝑖𝑜=𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠− 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

A Quick Ratio of 1 or greater is acceptable. For Atlas Honda, Quick Ratio mostly remain below 1 and remain

deteriorating.

2008 2009 2010 2011 20120

0.2

0.4

0.6

0.8

1

1.2

0.84

0.7

1.02

0.9

1

Quick Ratio

Quick Ratio

2008 2009 2010 2011 20120

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.311.25

1.491.45 1.45

0.84

0.7

1.02

0.9

1

Liqidity Ratios

Current Ratio Quick Ratio

According to company financial statement they are in Strong Liquidity position but their liquidity position is not that good as they stated. Company liquidity position appear to have remain stable but below acceptable criteria. Company may have problem to satisfy its short term obligations when they come due. But, it is also a fact that company do not have paid all its short term obligations at the same time so company can manage to pay its short liabilities.

Liquidity Ratios

Omer ShahzadMB-12-

08

Activity Ratios

Measures the speed with which various accounts are converted into

sales or cash-inflows or cash-outflows.

Inventory Turnover Ratio

Activity Ratios

Average Collection Period

Average Payment Period

Asset Turnover Ratio

Inventory Turnover Ratio

Measures the activity of a firm’s inventory.

𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟=𝐶𝑜𝑠𝑡𝑜𝑓 𝐺𝑜𝑜𝑑𝑠𝑆𝑜𝑙𝑑

𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦

Ratios 2008 2009 2010 2011 2012

Inventory Turnover

Ratio

7.13 10.36 14.15 15 16.3

𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟=𝐶𝑜𝑠𝑡𝑜𝑓 𝐺𝑜𝑜𝑑𝑠𝑆𝑜𝑙𝑑

𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦Inventory turnover for ATLAS HONDA is improved very fast during last 5 years and a level of 16.3 is quite remarkable.

Higher Inventory Turnover leads to reducing holding cost and increase the net income and profitability. But company need to

remain conscious about inventory turnover because higher level of inventory turnover may indicate inadequate inventory

level, which may leads to a loss for the business.

2008 2009 2010 2011 20120

2

4

6

8

10

12

14

16

18

7.13

10.36

14.15

15

16.3

Inventory Turnover

Inventory Turnover

Asset Turnover Ratio

Indicates the firm’s efficiency to use assets for generating sales.

𝐴𝑠𝑠𝑒𝑡𝑠𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟=𝑆𝑎𝑙𝑒𝑠

𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

Ratios 2008 2009 2010 2011 2012

Asset Turnover

Ratio

2.39 1.84 3 3.38 3.47

𝐴𝑠𝑠𝑒𝑡𝑠𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟=𝑆𝑎𝑙𝑒𝑠

𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

It is generally consider that the higher the firm total asset turnover, the more efficiently its assets have been used. Asset turnover for ATLAS HONDA is improving and have

excellent level.

2008 2009 2010 2011 20120

0.5

1

1.5

2

2.5

3

3.5

4

2.39

1.84

3

3.383.47

Asset Turnover

Asset Turnover

2008 2009 2010 2011 20120

2

4

6

8

10

12

14

16

18

7.13

10.36

14.15

15

16.3

2.391.84

33.38 3.47

Turnovers

Inventory Turnover Asset Turnover

Average Collection Period

Shows the time needed to collect accounts receivables.

𝐴𝑣𝑒𝑟𝑎𝑔𝑒𝐶𝑜𝑙𝑙𝑒𝑐𝑡𝑖𝑜𝑛𝑝𝑒𝑟𝑖𝑜𝑑=𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒

𝐴𝑛𝑛𝑢𝑎𝑙𝑆𝑎𝑙𝑒𝑠×365

Ratios 2008 2009 2010 2011 2012

Average Collection

Period

7 Days 8.5 Days 6 Days 4.5 Days 6 Days

𝐴𝑣𝑒𝑟𝑎𝑔𝑒𝐶𝑜𝑙𝑙𝑒𝑐𝑡𝑖𝑜𝑛𝑝𝑒𝑟𝑖𝑜𝑑=𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒

𝐴𝑛𝑛𝑢𝑎𝑙𝑆𝑎𝑙𝑒𝑠×365

ATLAS HONDA have very good credit and collection policies. Average collection period of less than 1 week is

amazing.

2008 2009 2010 2011 20120

1

2

3

4

5

6

7

8

9

7

8.5

6

4.5

6

Average Collection Period

Avg. Collection Period

Average Payment Period

Shows the time needed to pay accounts payables.

𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑃𝑎𝑦𝑚𝑒𝑛𝑡𝑝𝑒𝑟𝑖𝑜𝑑=𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑃𝑎𝑦𝑎𝑏𝑙𝑒𝐴𝑛𝑛𝑢𝑎𝑙 𝑃𝑢𝑟𝑐 h𝑎𝑠𝑒𝑠

×365

Ratios 2008 2009 2010 2011 2012

Average Payment Period

61 Days 76 Days 48 Days 51 Days 50 Days

𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑃𝑎𝑦𝑚𝑒𝑛𝑡𝑝𝑒𝑟𝑖𝑜𝑑=𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠𝑃𝑎𝑦𝑎𝑏𝑙𝑒𝐴𝑛𝑛𝑢𝑎𝑙 h𝑃𝑢𝑟𝑐 𝑎𝑠𝑒𝑠

×365

Average payment period is decreased as compared to 2009. But company still using its credit worth very well

and taking full advantage of credit period from suppliers.

2008 2009 2010 2011 20120

10

20

30

40

50

60

70

80

61

76

4851 50

Average Payment Period

Avg. Payment Period

2008 2009 2010 2011 20120

10

20

30

40

50

60

70

80

78.5

64.5

6

61

76

4851 50

Periods

Avg. Collection Period Avg. Payment Period

Activity Ratios

The company’s assets performance appears to be in a good shape. It is clear that company has efficiently use the various components of working capital cycle. It has been able to effectively control the receivables and inventories.

Zeeshan AhmadMB-12-

09

Debt Ratios

Indicates the amount the firm uses to generate profits from

others’ money.

Debt Ratios

Debt RatioFixed-Payment Coverage Ratio

Times Interest Earned Ratio

Debt Ratio

Measures the proportion of total assets financed by the

firm’s creditors.

𝐷𝑒𝑏𝑡 𝑅𝑎𝑡𝑖𝑜=𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

Ratios 2008 2009 2010 2011 2012

Debt Ratio

60.89 55.63 54.33 51.95 50.54

𝐷𝑒𝑏𝑡 𝑅𝑎𝑡𝑖𝑜=𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

The higher degree of debt ratio shows the greater the firm’s degree of indebtedness. Debt ratio for Atlas Honda

in 2008 was nearly 61% which was not very favorable for the organization. But during the last 5 years, the debt

ratio decrease continuously and reach to nearly 50% which is not very good but fair enough.

2008 2009 2010 2011 20120

10

20

30

40

50

60

70

60.89

55.6354.33

51.9550.54

Debt Ratio

Debt Ratio

Times Interest Earned Ratio

Measures the firm’s ability to make contractual interest payments. It is

also called Interest Coverage Ratio.

𝑇𝑖𝑚𝑒𝑠 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑎𝑟𝑛𝑒𝑑𝑅𝑎𝑡𝑖𝑜=𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝐵𝑒𝑓𝑜𝑟𝑒 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡∧𝑇𝑎𝑥𝑒𝑠

𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡

Ratios 2008 2009 2010 2011 2012

Times Interest Earned Ratio

4.98 2.4 10.56 16 139.26

𝑇𝑖𝑚𝑒𝑠 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑎𝑟𝑛𝑒𝑑𝑅𝑎𝑡𝑖𝑜=𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝐵𝑒𝑓𝑜𝑟𝑒 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡∧𝑇𝑎𝑥𝑒𝑠

𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡

Interest Coverage Ratio of Atlas Honda increase during the last 5 years but you can see a surprising increase in this ratio in 2012. You can understand this increase by

comparing Debt and Interest coverage ratio.

2008 2009 2010 2011 20120

20

40

60

80

100

120

140

160

4.982.4

10.5616

139.26

Interest Coverage Ratio

Interest Coverage Ratio

2008 2009 2010 2011 20120

20

40

60

80

100

120

140

160

60.8955.63 54.33 51.95 50.54

4.982.4

10.5616

139.26

Debt Ratios

Debt Ratio Interest Coverage Ratio

Debt Ratios

In this graph you can see a negative relationship between Debt and Interest coverage ratio. As the company debt ratio decrease, the company times interest earned ratio increase rapidly. It is due to company policy introduced in 2010 to reshape its balance sheet approach and worked to reduce the interest bearing liabilities to improve its balance sheet. The outcome of this policy is the Achievement of “DEBT FREE STATUS” in 2012.

M. SaleemMB-12-

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Profitability Ratios

Measures the firms’ profits with the given level of sales.

Gross-Profit Ratio

Profitability Ratios

Net-Profit Ratio

Earning Per Share

Operating-Profit Ratio

Return on Total Assets

Return on Common Equity

Gross-Profit Ratio

Measures the percentage of each sales dollar remaining after the

firm has paid for its goods.

𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡 𝑅𝑎𝑡𝑖𝑜=𝑆𝑎𝑙𝑒𝑠−𝐶𝐺𝑆

𝑆𝑎𝑙𝑒𝑠=𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡

𝑆𝑎𝑙𝑒𝑠

Ratios 2008 2009 2010 2011 2012

Gross-Profit Ratio

7.46 7.02 7.82 7.5 7.3

𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡 𝑅𝑎𝑡𝑖𝑜=𝑆𝑎𝑙𝑒𝑠−𝐶𝐺𝑆

𝑆𝑎𝑙𝑒𝑠=𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡

𝑆𝑎𝑙𝑒𝑠

Gross profit margin for ATLAS HONDA is unstable and mostly deteriorating. But separate using gross profit

margin for measuring company profitability is not a good measure.

2008 2009 2010 2011 20126.6

6.8

7

7.2

7.4

7.6

7.8

8

7.46

7.02

7.82

7.5

7.3

Gross Profit Margin

Gross Profit Margin

Operating-Profit Ratio

Measures the percentage of each sales dollar remaining after all costs &

expenses other than Interests and Taxes are deducted.

𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡 𝑅𝑎𝑡𝑖𝑜=𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡

𝑆𝑎𝑙𝑒𝑠

Ratios 2008 2009 2010 2011 2012

Operating-Profit Ratio

6.02 4.4 4.65 4.62 4.3

𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡 𝑅𝑎𝑡𝑖𝑜=𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡

𝑆𝑎𝑙𝑒𝑠

Operating profit margin for ATLAS HONDA decreased in 2009, but remain quite stable after that.

2008 2009 2010 2011 20120

1

2

3

4

5

6

7

6.02

4.44.65 4.62

4.3

Operating Profit Margin

Operating Profit Margin

Net-Profit Ratio

Measures the percentage of each sales dollar remaining after all costs &

expenses including Interests and Taxes are deducted.

𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 𝑅𝑎𝑡𝑖𝑜=𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝐴𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒 𝑓𝑜𝑟 𝐶𝑜𝑚𝑚𝑜𝑛𝑆𝑡𝑜𝑐𝑘h𝑜𝑙𝑑𝑒𝑟

𝑆𝑎𝑙𝑒𝑠

Ratios 2008 2009 2010 2011 2012

Net-Profit Ratio

3.37 1.63 2.78 3.08 3.16

𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 𝑅𝑎𝑡𝑖𝑜=𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝐴𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒 𝑓𝑜𝑟 𝐶𝑜𝑚𝑚𝑜𝑛𝑆𝑡𝑜𝑐𝑘h𝑜𝑙𝑑𝑒𝑟

𝑆𝑎𝑙𝑒𝑠

Net profit margin also decreased during 2009 but company recovered very well and its net profit

continuously increasing from last 3 years.

2008 2009 2010 2011 20120

0.5

1

1.5

2

2.5

3

3.5

4

3.37

1.63

2.78

3.083.16

Net Profit Margin

Net Profit Margin

2008 2009 2010 2011 20120

1

2

3

4

5

6

7

8

9

7.46

7.02

7.827.5

7.3

6.02

4.44.65 4.62

4.3

3.37

1.63

2.783.08 3.16

Profitibility Ratios

Gross Profit Margin Operating Profit Margin Net Profit Margin

Earnings Per Share (EPS)

Represents the dollar amount earned on behalf of each outstanding share of

common stock.

𝐸𝑃𝑆=𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝐴𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒 𝑓𝑜𝑟 𝐶𝑜𝑚𝑚𝑜𝑛 h𝑆𝑡𝑜𝑐𝑘 𝑜𝑙𝑑𝑒𝑟

𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 h𝑆 𝑎𝑟𝑒𝑠𝑜𝑓 𝐶𝑜𝑚𝑚𝑜𝑛𝑆𝑡𝑜𝑐𝑘𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔

Ratios 2008 2009 2010 2011 2012

Earnings Per

Share (EPS)

4.75 14.86 11.39 16.03 16.74

𝐸𝑃𝑆=𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝐴𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒 𝑓𝑜𝑟 𝐶𝑜𝑚𝑚𝑜𝑛 h𝑆𝑡𝑜𝑐𝑘 𝑜𝑙𝑑𝑒𝑟

𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 h𝑆 𝑎𝑟𝑒𝑠𝑜𝑓 𝐶𝑜𝑚𝑚𝑜𝑛𝑆𝑡𝑜𝑐𝑘𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔

Over the years, the company is focused on maintaining steady growth in EPS. In 2012, company delivered EPS

of Rs.16.74 which is outstanding.

2008 2009 2010 2011 20120

2

4

6

8

10

12

14

16

18

4.75

14.86

11.39

16.03

16.74

Earning Per Share

Earning Per Share

Profitability Ratios

The Company’s Gross profit margin declined but it is due to the higher cost of goods sold. While the Operating and Net profit margin is improving so we can evaluate that company profitability is improving.

Babar HussainMB-12-

54

Return on Total Assets (ROA)

Measures the overall effectiveness of the management in generating profits with its available assets. It is also called Return

on Investment (ROI).

𝑅𝑂𝐴=𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝐴𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒 𝑓𝑜𝑟𝐶𝑜𝑚𝑚𝑜𝑛 h𝑆𝑡𝑜𝑐𝑘 𝑜𝑙𝑑𝑒𝑟

𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

Ratios 2008 2009 2010 2011 2012

Return on Total Assets (ROA)

8.07 3 8.36 10.42 10.98

𝑅𝑂𝐴=𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝐴𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒 𝑓𝑜𝑟𝐶𝑜𝑚𝑚𝑜𝑛 h𝑆𝑡𝑜𝑐𝑘 𝑜𝑙𝑑𝑒𝑟

𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

The higher the firm’s return on total asset consider the better. Return on total asset of ATLAS HONDA appear to

be improved in last 3 year and rose to 11% despite significant in assets base on account of capacity

expansion.

2008 2009 2010 2011 20120

2

4

6

8

10

12

8.07

3

8.36

10.42

10.98

Return on Asset

Return on Asset

Return on Common Equity (ROE)

Measures the return earned on the common stockholders’ investment

in the firm.

𝑅𝑂𝐸=𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝐴𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒 𝑓𝑜𝑟 𝐶𝑜𝑚𝑚𝑜𝑛𝑆𝑡𝑜𝑐𝑘h𝑜𝑙𝑑𝑒𝑟

𝐶𝑜𝑚𝑚𝑜𝑛𝑆𝑡𝑜𝑐𝑘 𝐸𝑞𝑢𝑖𝑡𝑦

Ratios 2008 2009 2010 2011 2012

Return on

Common Equity (ROE)

20.65 6.76 18.30 21.68 22.21

𝑅𝑂𝐸=𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝐴𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒 𝑓𝑜𝑟 𝐶𝑜𝑚𝑚𝑜𝑛 h𝑆𝑡𝑜𝑐𝑘 𝑜𝑙𝑑𝑒𝑟

𝐶𝑜𝑚𝑚𝑜𝑛𝑆𝑡𝑜𝑐𝑘 𝐸𝑞𝑢𝑖𝑡𝑦

Return on equity also have the same case like ROA. It is also improved after declining in 2009 and now rose to

22% due to steady income growth.

2008 2009 2010 2011 20120

5

10

15

20

25

20.65

6.76

18.3

21.6822.21

Return on Equity

Return on Equity

2008 2009 2010 2011 20120

5

10

15

20

25

8.07

3

8.36

10.4210.98

20.65

6.76

18.3

21.6822.21

Returns

Return on Asset Return on Equity

Market Ratios

Relates the firms’ market value as measured by its current share price,

to certain accounting values.

Price/Earnings Ratio

Market Ratios

Market/Book Ratio

Price/Earnings Ratio (P/E)

Measures the amount that investors are willing to pay for each dollar of a

firm’s earnings.

𝑃 /𝐸𝑅𝑎𝑡𝑖𝑜=𝑀𝑎𝑟𝑘𝑒𝑡 𝑃𝑟𝑖𝑐𝑒 𝑃𝑒𝑟 𝑆 h𝑎𝑟𝑒𝑜𝑓 𝐶𝑜𝑚𝑚𝑜𝑛𝑆𝑡𝑜𝑐𝑘

𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑃𝑒𝑟 𝑆h𝑎𝑟𝑒

Ratios 2008 2009 2010 2011 2012

Price/Earnings

Ratio (P/E)

14.1 18.7 10.9 8.8 8.5

𝑃 /𝐸𝑅𝑎𝑡𝑖𝑜=𝑀𝑎𝑟𝑘𝑒𝑡 𝑃𝑟𝑖𝑐𝑒 𝑃𝑒𝑟 𝑆 h𝑎𝑟𝑒𝑜𝑓 𝐶𝑜𝑚𝑚𝑜𝑛𝑆𝑡𝑜𝑐𝑘

𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑃𝑒𝑟 𝑆h𝑎𝑟𝑒

The higher level price earnings ratio consider the better. Price earnings ratio for ATLAS HONDA decrease during previous years but it not due of low earning but due to the higher market price of ATLAS HONDA’s shares.

2008 2009 2010 2011 20120

2

4

6

8

10

12

14

16

18

20

14.1

18.7

10.9

8.8 8.5

Price Earning Ratio

Price Earning Ratio

DuPont System of Analysis

System used to dissect the firm’s financial statement and to assess its financial

condition.

The two measures of this this system are:

1.Return on total assets (ROA)2.Return on common equity (ROE)

DuPont Formula

Multiplies the firm’s net profit margin by its total asset turnover to calculate the firm’s

return on total assets.

𝑅𝑂𝐴=𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝐴𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒 𝑓𝑜𝑟𝐶𝑜𝑚𝑚𝑜𝑛 h𝑆𝑡𝑜𝑐𝑘 𝑜𝑙𝑑𝑒𝑟

𝑆𝑎𝑙𝑒𝑠×

𝑆𝑎𝑙𝑒𝑠𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

⇒𝑅𝑂𝐴=𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝐴𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒 𝑓𝑜𝑟 𝐶𝑜𝑚𝑚𝑜𝑛 h𝑆𝑡𝑜𝑐𝑘 𝑜𝑙𝑑𝑒𝑟

𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

Ratios 2008 2009 2010 2011 2012

Return on Total Assets (ROA)

8.07 3 8.36 10.42 10.98

𝑅𝑂𝐴=𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝐴𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒 𝑓𝑜𝑟𝐶𝑜𝑚𝑚𝑜𝑛 h𝑆𝑡𝑜𝑐𝑘 𝑜𝑙𝑑𝑒𝑟

𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

Modified DuPont Formula

Relates the firm’s return on total assets to its return on common equity using financial

leverage multiplier.

𝑅𝑂𝐸=𝑅𝑂𝐴×𝐹𝐿𝑀

⇒𝑅𝑂𝐸=𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝐴𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒 𝑓𝑜𝑟𝐶𝑜𝑚𝑚𝑜𝑛 h𝑆𝑡𝑜𝑐𝑘 𝑜𝑙𝑑𝑒𝑟

𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠𝑥

𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠𝐶𝑜𝑚𝑚𝑜𝑛𝑆𝑡𝑜𝑐𝑘 𝐸𝑞𝑢𝑖𝑡𝑦

⇒𝑅𝑂𝐸=𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝐴𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒 𝑓𝑜𝑟𝐶𝑜𝑚𝑚𝑜𝑛 h𝑆𝑡𝑜𝑐𝑘 𝑜𝑙𝑑𝑒𝑟

𝐶𝑜𝑚𝑚𝑜𝑛𝑆𝑡𝑜𝑐𝑘𝐸𝑞𝑢𝑖𝑡𝑦

Ratios 2008 2009 2010 2011 2012

Return on

Common Equity (ROE)

20.65 6.76 18.30 21.68 22.21

𝑅𝑂𝐸=𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝐴𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒 𝑓𝑜𝑟 𝐶𝑜𝑚𝑚𝑜𝑛𝑆𝑡𝑜𝑐𝑘h𝑜𝑙𝑑𝑒𝑟

𝐶𝑜𝑚𝑚𝑜𝑛𝑆𝑡𝑜𝑐𝑘 𝐸𝑞𝑢𝑖𝑡𝑦