FINANCIAL STATEMENT ANALYSIS

A STUDYON

“FINANCIAL STATEMENT ANALYSIS AT SHRIRAM COMMERCIAL VEHICLE

FINANCE”

Submitted by:

BINTO.B

U S N: 1CD13MBA09

Submitted to:

VISVESVARAYA TECHNOLOGICAL UNIVERSITY, BELGAUM

In Partial Fulfillment of the Requirement for the Award of the degree of

“MASTER OF BUSINESS ADMINISTRATION”

Under the guidance of

INTERNAL GUIDE EXTERNAL GUIDE

Mr. GNANENDRA.M Mr. RAVI KUMAR

Asst. Professor-Dept. of MBA Finance Manager

CITECH, Bangalore Shriram commercial vehicle finance

CAMBRIDGE INSTITUTE OF TECHNOLOGY

K.R. PURAM, BANGALORE-36

(2013-2015)

ACKNOWLEDGEMENT

The project cannot be accomplished without the assistance and cooperation of several people. Hence I

hereby wish to express my sincere gratitude to all those who supported me throughout the study.

First and foremost I would like to thank with immense gratitude, MR. D. K. MOHAN, chairman; and

Dr. L. SURESH, Principal; &Dr. D. R. RAJ SHEKER SWAMY, Head of the Dept of Management

studies; CAMBRIDGE INSTITUTE OF TECHNOLOGY, BANGALORE for permitting me to

undertake this project work.

I am greatly thankful to my Internal Guide Mr. GNANENDRA.M, Assistant Professor in Department

of MBA; Cambridge Institute of Technology, Bangalore for his valuable time, guidance, co-operation &

support without which this report would have not been completed.

I also thank Mr. RAVI KUMAR, Finance Manager of Shriram Commercial Vehicle Finance for his

assistance, guidance & suggestion offered to me during the project and collection of necessary data by

imparting his knowledge and experience. I also thank the employees of company who have responded

me in completing the project.

Last but not least, mere acknowledgement may not redeem the debt I owe to my PARENTS FRIENDS

and well wishers for their wholehearted direct/indirect support which was a source of encouragement

during the entire course of this project.

Place: Bangalore Name: BINTO B

Date: USN: ICD13MBA09

Executive Summary

In any organization, the two important financial statements are the Balance Sheet and Profit & Loss

Account of the business. Balance Sheet is a statement of financial position of an enterprise at a particular

point of time. Profit & Loss account shows the net profit or net loss of a company for a specified period

of time. When these statements of the last few year of any organization are studied and analyzed,

significant conclusions may be arrived regarding the changes in the financial position, the important

policies followed and trends in profit and loss etc. Analysis and interpretation of financial statement has

now become an important technique of credit appraisal. The investors, financial experts, management

executives and the company all analyze these statements. Though the basic technique of appraisal

remains the same in all the cases but the approach and the emphasis in the analysis vary. A shriram

transport finance company limited interprets the financial statement so as to evaluate the financial

soundness and stability, the liquidity position and the profitability or the earning capacity of borrowing

concern. Analysis of financial statements is necessary because it helps in depicting the financial position

on the basis of past and current records. Analysis of financial statements helps in making the future

decisions and strategies. Therefore it is very necessary for every organization whether it is a financial or

manufacturing, to make financial statement and to analyze it.

The internship is a bridge between the institute and the organization. This made me to be involved in a

project that helped me to employ my theoretical knowledge about the myriad and fascinating facets of

finance. And in the process I could contribute substantially to the organization’s growth. The experience

that I gathered over the past ten weeks has certainly provided the orientation, which I believe will help

me in shouldering any responsibility in future.

CONTENTS

SL.NO. TITLE PAGE NO.

1

INTRODUCTION 1.1 ABOUT THE INTERSHIP……………………………….

1.2 EVALUATION OF FINANCIAL POSITION…………… 1.3 OPERATIONAL RESULTS…………………………….. 1.4. FINANCIAL PROGRESS………………………………..

1.5 TOPIC……………………………………………………...1.6 NEED FOR THE STUDY…………………………………1.7 OBJECTIVES OF THE STUDY………………………….1.8 SCOPE OF THE STUDY…………………………………1.9 RESEARCH DESIGHN…………………………………..1.10 DATA COLLECTION METHOD………………………1.11 ANALYTICAL TOOLS APPLIED ……………………..1.12 REVIEW OF LITERATURE……………………………..1.13 LIMITATIONS OF THE STUDY……………………….

1-61112223334445

2INDUSTRY PROFILE AND COMPANY PROFILE

2.1 INDUSTRIAL PROFILE…………………………………2.2 COMPANY PROFILE…………………………………….

7-227-1314-22

3

THEORETICAL FRAMEWOR3.1 FINANCIAL ACCOUNTING………………………3.2 FINANCIAL STATEMENT………………………..3.3 LIMITATIONS OF FINANCIAL STATEMENT…..

3.4EVALUATION AND INTERPRETATION OF FINANCIAL STATEMENT…………………………………….

3.5. TYPE OF ANALYSIS……………………………………3.6. TECHNIQUES/TOOLS OF FINANCIAL PERFORMANCE ANALYSIS………………………………………………………

24-35232324

2425

26-35

4

ANALYSIS AND INTERPRETATION4.1 COMPARITIVE FINANCIAL STATEMENT ANALYSIS…..4.2 COMMONSIZE FINANCIAL STATEMENT ANALYSIS…...4.3. TREND ANALYSIS…………………………………………..4.4 RATIO ANALYSIS……………………………………………4.5 DUPOINT ANALSIS…………………………………………

36-7337-4243-4849-5152-6767-73

5

SUMMERY OF FINDINGS5.1 FINDINGS…………………………………………………5.2 SUGGESTIONS……………………………………………5.3. CONCLUSION……………………………………………

74-77757677

LIST OF TABLES


1 COMPARATIVE INCOME STATEMENTOF SHRIRAM TRANSPORT COMPANY FOR THE YEAR ENDED

31.03.201237

2COMPARATIVE BALANCE SHEET OF SHRIRAM

TRANSPORT COMPANY THE YEAR ENDED 31.03.201238

3 COMPARATIVE INCOME STATEMENTOF SHRIRAM TRANSPORT COMPANY FOR THE YEAR ENDED

31.03.201439

4 COMPARATIVE BALANCE SHEET OF SHRIRAM TRANSPORT COMPANY FOR THE YEAR ENDED

31.03.201441

5COMMONSIZE INCOME STATEMENT OF SHRIRAM

TRANSPORT COMPANY FOR THE YEAR ENDED 31.03.2012

43

6COMMONSIZE BALANCE SHEET OF SHRIRAM

TRANSPORT COMPANY THE YEAR ENDED 31.03.201244

7 COMMONSIZE INCOME STATEMENT OF SHRIRAM TRANSPORT COMPANY FOR THE YEAR ENDED

31.03.201446

8 COMMONSIZE BALANCE SHEET OF SHRIRAM TRANSPORT COMPANY FOR THE YEAR ENDED

31.03.201447

9 TREND ANALYSIS OF INCOME STATEMENT OF SHRIRAM TRANSPORT COMPANY FOR THE YEAR

ENDED49

10 TREND ANALYSIS OF BALANCE SHEET OF SHRIRAM TRANSPORT COMPANY FOR THE YEAR

ENDED

50

11 OPERATING PROFIT RATIO 52

12 NET PROFIT RATIO 54

13 CAPITAL TURNOVER RATIO 56

14 TOTAL ASSET TURN OVER RATIO 58

15 NET WORKING CAPITAL RATIO 5916 ABSOLUTE LIQUID RATIO 61

17 CURRENT RATIO 62

18 DEBT EQUITY RATIO 6419 DEBT TO TOTAL FUNDS RATIO 65

20 EQUITY TO TOTAL FUNDS 67

21 RETURN ON EQUITY 74

LIST OF GRAPHS


1OPERATING PROFIT RATIO 53

2NET PROFIT RATIO 55

3CAPITAL TURNOVER RATIO

56

4TOTAL ASSET TURN OVER RATIO

58

5NET WORKING CAPITAL RATIO

60

6ABSOLUTE LIQUID RATIO

62

7CURRENT RATIO

63

8DEBT EQUITY RATIO

65

9DEBT TO TOTAL FUNDS RATIO

66

10EQUITY TO TOTAL FUNDS 68

11RETURN ON EQUITY

74

CHAPTER – 1

INTRODUCTION

A Study On Financial Statement Analysis at Shriram Commercial Vehicle Finance

INTRODUCTION

1.1. ABOUT THE INTERSHIP

The internship aimed to make a awareness about the company, to give a practical knowledge about

the company. The period of internship is 10 weeks. The students need to work in the organization

and make a project to a topic relating to the particular specialization.

1.2. EVALUATION OF FINANCIAL POSITION

Finance is the life-blood of business. It is rightly termed as the science of money. Finance is very

essential for the smooth running of the business. Finance controls the policies, activities and

decision of every business. Finance is that business activity which is concerned with the

organization and conversation of capital funds in meeting financial needs and overall objectives of a

business enterprise.

1.3. OPERATIONAL RESULTS

Financial management is today recognized as the most important branch of business administration.

It is the part of management which is concerned mainly raising funds in the most economic and

suitable manner, using these funds as profitability as possible: planning future operation and control

current performance and future developments through financial accounting, budgeting, statistics and

other means. Financial management is that managerial activity which is concerned with the

planning and controlling of a firm financial reserve.

. Financial management has to take decisions in various fields involving financial matter such as

anew financing whether through shares or debentures or temporary borrowings through banks and

sources inventory management and capital budgeting. These decisions to be correct should be

based on some reliable information. There for analyzing the overall performance of a concern and

study the past and present information and financial records are essential in taking various

decisions.

Citech, Department of MBA 1


1.7OBJECTIVES OF THE STUDY

o To study the financial performance of Shriram Commercial Vehicle Finance.

o To analysis the financial performances of different years through comparative statements.

o To predict the profitability and growth prospects of Shriram Commercial Vehicle Finance.

o To assess the operational efficiency of Shriram Commercial Vehicle Finance.

o To study the liquidity and solvency position of Shriram Commercial Vehicle Finance.

1.8SCOPE OF THE STUDY

o Useful in financial Position Analysis of the Shriram Commercial Vehicle Finance.

o Useful in assessing the operational efficiency.

o It helps to know about the locating the weak spots of the Shriram Commercial Vehicle

Finance.

o To know about comparison of performance.

o It‘s helpful in simplifying accounting figures.

1.9RESEARCH DESIGHN

A research designs is the arrangement of conditions for collection and analysis data in a manner that

aims to combine relevance to the research purpose with economy in procedure. Research Design is the

conceptual structure with in which research in conducted. It constitutes the blueprint for the collection

measurement and analysis of data. Research Design includes and outline of what the researcher will do

form writing the hypothesis and it operational implication to the final analysis of data.

1.9.1RESEARCH DESIGN USED IN THE STUDY

Descriptive research design is used in this study because it will ensure the minimization of bias and

maximization of reliability of data collected. Descriptive study is based on some previous understanding

of the topic. Research has got a very specific objective and clear cut data requirements The researcher

had to use fact and information already available through financial statements of earlier years and

analyze these to make critical evaluation of the available material. Hence by making the type of the



research conducted to be Analytical in nature. From the study, the type of data to be collected and the

procedure to be used for this purpose were decided.

1.10 DATA COLLECTION METHOD

SECONDARY DATA –

Last five years financial statement of shriram commercial vehicle finance

1.11 ANALYTICAL TOOLS APPLIED:

1. Comparative statement.

2. Common size statement

3. Trend Percentage.

4. Ratio Analysis.

5. Dupoint Analysis.

1.12REVIEW OF LITERATURE

Literature Review was done by referring previous studies, articles and books to know the areas

of study and analyze the gap or study not done so far. There are various studies were conducted relating

to operational performance of the company from which most relevant literatures were reviewed.

Kennedy and Muller (1999),has explained that “The analysis and interpretation of financial statements

are an attempt to determine the significance and meaning of financial statements data so that the forecast

may be made of the prospects for future earnings, ability to pay interest and debt maturates (both current

and long term) and profitability and sound dividend policy.”

T.S.Reddy and Y. Hari Prasad Reddy (2009), have stated that “The statement disclosing status of

investments is known as balance sheet and the statement showing the result is known as profit and loss

account”

Peeler J. Patsula (2006), he define that a sound business analysis tells others a lot about good sense and

understanding of the difficulties that a company will face. We have to make sure that people know



exactly how we arrived to the final financial positions. We have to show the calculation but we have to

avoid anything that is too mathematical. A business performance analysis indicates the further growth

and the expansion. It gives a physiological advantage to the employees and also a planning advantage.

I.M.Pandey (2007), had stated that the financial statements contain information about the financial

consequences and sources and uses of financial resources, one should be able to say whether the

financial condition of a firm is good or bad; whether it is improving or deteriorating. One can relate the

financial variables given in financial statements in a meaningful way which will suggest the actions

which one may have to initiate to improve the firm’s financial condition.

1.13LIMITATIONS OF THE STUDY:

The study is restricted for a period of five years

Due to the inadequate time it is not possible to analyze all respects relevant to the study.

The analysis is based on annual reports of the company.

Authorities were reluctant to reveal full information about the working of the Company.

The data are collected mainly based on secondary data. So all the limitations of secondary data are

applicable.



CHAPTER - 2

INDUSTRY PROFILE AND COMPANY

PROFILE



2.1 INDUSTRIAL PROFILE

In the CV market availability of credit is a very important factor on which its performance depends. The

penetration of finance in this sector is around 90%. In the 1980s, concept of auto finance was restricted

to only the rich and the affluent. However with the liberalization of the Indian economy, entry of several

foreign investors and banks has changed the scenario around. Catapulted by the growing economy, the

purchasing power of Indian middle class, gave way to a surge in the demand for automobiles. This gave

way to the role of the banks and other financial institutions, which harnessed the growth of the auto

mobile industry by offering auto loans at competitive prices. The Indian auto segment in general became

the eye candy for the financiers due to its consistent growth. The automobile loans offered by banks and

other financial institutions have proliferated the rise of the automobile sector in India by conduit of

affordable schemes at competitive rates of interest. The availability of various schemes and features and

the fact that the financing can cater to the requirements of the customer and needs has made auto

financing products viable option in India.

2.1.2 Background of the Automotive Sector

The automobile industry can be classified into

a) Passenger vehicles,

b) Commercial vehicles,

c) Three wheelers.

d) Two wheelers.

2.1.3 Categories of Auto financiers



Entry in the auto financing segment has been relatively easy and hence the gap between existing players

and new entrants is not much. Auto financing market typically remains competitive. Some of the players

in the market are:

Banks

Banks, both public and private, cover a huge portion of the auto finance market since they are among the

most established lending institutions around. They are in a position to offer competitive rates as

compared to other financers with better access to credit histories. Customers are used to working with

their local bank for a variety of day-to-day needs. Turning to them for car financing seems like the

natural next step. The CASA advantage that banks have gives them an edge over other financiers.

Non-Banking Finance Companies (NBFCs)

Acting as an aide-de-camp to banks, NBFCs occupy a significant position in financial intermediation.

NBFCs cover a signification portion of the total auto finance market India. Though banks have low cost

of funds, NBFCs have certain advantages and lesser stringent regulatory requirements as compared to

banks. NBFCs are not bound by priority sector lending requirements, not required to maintain CRR, can

customize products, have wider reach to customers. These differences have resulted in NBFCs having a

significant role playing with banks on the lending front. Also, banks have concentrated more on the car

loan segment whereas NBFCs are more focused on providing finance to the commercial vehicle

segment.

Rental Operators

Several companies provide equipment on rental for periods ranging from few weeks to years to the end

customers. Short term renting of commercial vehicles for construction and infrastructure space are

popular in India as well.

Captive leasing and Financing Arms of leading manufacturers



The captives of some major international manufacturers only recently entered the Indian market .The

captives initially only supported the expansion of the OEM’s dealer network through floor plan and

working capital financing. It is only in the last two to three years that captives have started to introduce

more sophisticated products, such as insurance and service packages.

2.1.4 Commercial Vehicle Financing: Segregation by vehicle type

Since the CV sector in itself is quite large, there are several categories/ classes of CVs which can be

considered for financing. Each category in itself is a huge market.

Lower-end – Upper-end

The main difference between the lower-end and upper-end vehicles lies in the facilities provided by

them and their prices on the assets being standard assets in the market with a ready secondary market.

The upper-end vehicles have the following advantages over the lower-end vehicles.

1. High quality equipments.

2. Better performance.

3. More precise construction.

4. High design.

5. Technologically Innovative.

The lower-end vehicles in India are much cheaper than the upper-end vehicles due to their low cost of

production.

Light – Heavy

The Light CVs refers to those commercial vehicles whose weight does not exceed 3.5 tones whereas the

Medium & heavy CVs refers to those whose weight exceeds 3.5 tones.



Earlier the demand for used vehicles was restricted to MCVs and HCVs but now the list also includes

smaller vehicles like LCVs and small commercial vehicles, this is because of the huge sales of these

kinds of vehicles in the past 5years. The demand for the used vehicles stands good even in the rural

areas, semi-urban areas and the Tier III cities. In case of the new vehicles the market is dominated by the

Small Commercial Vehicles i.e. less than 5 tones. The demand for the bigger vehicles has slipped down

because the industrial production has come down and due to the lack new investments.

2.1.5 Large Fleet Operators – Small Fleet Operators

The market for the fleet operators has been deteriorating since 2011. The sharp rise in the overall cost of

ownership combined with considerable rise in the operating costs and the constant excessive pressure on

the fleet operators. The small fleet operators are running out of cash to purchase the vehicles and service

their debt, whereas the large fleet operators are under pressure to maintain high cash reserve to maintain

their working capital.

2.1.6Auto financing products

There are several variants of financing options available to customers in the auto segment. Some of the

popular products are:

a. Vanilla loan

b. Hire purchase

c. Leasing including financial lease and operating lease

d. Conditional sale

e. Asset renting

2.1.7Financing of Commercial Vehicles

The financial products offered by financiers in the CV space are mostly leasing (both operating and

financial) and loans.

Commercial Vehicle Loan in India



Commercial vehicle loans are usually taken by individual, partnership firms, proprietorship firms, HUF

(Hindu Undivided Family), trusts, societies, self-employed, businessmen and private and public limited

companies for their financing needs for owning and running commercial vehicles. Commercial vehicle

loan options are available for buses, tippers, transit mixers or any other heavy, light or small commercial

vehicle. A commercial vehicle loan can be taken for a variety of commercial vehicles, which may be

used at different locations. While loans are sanctioned for the purchase of a new commercial vehicle,

banks also offer loans for pre-owned vehicles. Borrowers can also avail of a top up on existing loans

subject to conditions.

The interest rates range from 10% to 15% depending on the customer and vehicle segment. The rate

depends on a lot of factors such as the number of vehicles owned by the borrower, his business turnover,

repayment track record from other financiers (if any), etc. The financial institutions are able to confirm

the rate of interest once they have studied the documents. The interest rate may be fixed or variable.

Processing charges include processing fee, stamp duty and vehicle valuation charges. The processing fee

depends on the loan amount. It usually ranges from 2%-4%.

Commercial Vehicle leasing in India

Globally there is a clear domination of lease over loan. In auto financing segment over 60% of US

market and 40% of European market follows the lease route for an auto purchase. The auto-leasing

sector in India has recently picked up pace, although the market is still in its nascent stage. The scope of

growth of leases in this sector is very high owing to the large number of infrastructural projects in the

pipeline which will result in the demand for commercial vehicles to grow combined with the rising cost

of manufacturing these vehicles, users are forced to look at lease options more actively than ever before.

On the flip side, the deterrents to growth of leasing as a financial product, which may be more generic to

the product than specific to the sector, are multiplicity of taxes. For instance, in a chassis, the

combination of the chassis and the body is treated as a new asset for indirect tax purposes and

accordingly, the chassis suffers local taxes whereas the body of the vehicle is subject to works contract.

From leasing point of view sales tax in form of VAT/ CST are applicable on lease rentals. Then, at the

end of the lease if there is any transfer of ownership, sale tax is applicable on the sale consideration.

Further there may be issues of input tax credit being disallowed, adding to the costs of the transaction,



making it completely unviable. Though leasing is becoming attractive as a more popular product, the

add-on costs in the form of taxes are acting as a deterrent and add to the complexities. Nevertheless this

untapped sector provides huge opportunities to financial institutions due to its inherent benefits

pertaining to risk removal and cash flow restructuring.

Leasing has been a widely accepted product in the passenger vehicle segment owing to the tax free

perquisite benefit availed by the employees. In the current market scenario the penetration rate of leasing

in passenger vehicle segment is 25% vis-à-vis the penetration rate of leasing being 3%-4%. CV

financing and CV industry in particular is posed to several challenges in the recent times than

opportunities clearly explaining the traction in volumes and numbers.

2.1.8 Opportunities

In total, India has more than 35 financial institutions that provide financing.4 Banks have an advantage

over other financiers in the auto finance market because of the high degree of confidence by customers.

They offer lower rates, have better access to credit histories and possess the ability to process loan

approvals more quickly. 5 While banks have to cater to multiple products and services, some NBFCs are

more sector focused. Banks were taking the easier route of lending to NBFCs and also fulfilling their

priority target—lending to agriculture and allied activities. However, with the change in regulations and

the recommendations of the Nair committee on priority sector lending, private banks have realized that

they would have to boost their priority sector lending. Leasing and additional service offerings are rare

with NBFCs. Even captives typically do not offer additional services, other than insurance broking. But

with more Indians owning cars, maintenance, warranty and insurance packages have become more

attractive and international captives have begun to respond with a variety of product bundles. As

additional vehicle services are not very common, this sector offers great opportunities for captives to

differentiate themselves from competing consumer banks. In particular, customized and sophisticated

products, like maintenance or insurance packages, could help captives to raise customer awareness. As

the service business promises high profitability, there is huge potential to realize additional revenues.

2.1.9 Challenges



The current challenges on the other hand to the growth of the auto finance industry are several. The CV

industry, since the start of 2013, has entered into a downward cycle following the closure of many iron

ore mines, coupled with industrial slowdown and weak investor sentiment across sectors, which have

held back new projects. Input costs for the medium and heavy CV transport operators have gone up

significantly due to substantial increase in diesel prices, driver salaries and toll charges. At the macro-

level slowing of the economy and regulatory imbalances impacted the CV financing industry. Rise in

lending rates resulting in higher cost of funds and constantly tightening lending norms and fleet

operators/ borrowers struggling to repay debt and soaring NPA levels have led to the stunting of auto

finance market as credit evaluation and collection efforts have become more stringent. .

2.1.10Prospects

The improving road infrastructure in rural and semi-urban areas will be one of the main drivers of this

development. The growth of commercial vehicle industry has been linked to the country’s industrial

activities and the overall GDP. In the short term the CV volumes and financing has got impacted due to

the macro factors, but considering the huge infrastructural demand in the country and the strong

fundamentals, we are bullish on the long term prospects of the CV industry in general and higher

penetration CV financing in particular.



2.2 COMPANYPROFILE

2.2.1 INTRDUCTION

Shriram Commercial Vehicle Finance is India’s largest player in commercial vehicle finance that was

established in the year 1979. The company has a network of 654 branches and service centers. The

company is one of the largest asset financing NBFCs in India with a niche presence in financing pre-

owned trucks and Small Truck Owners (STOs).

The company is a part of the “SHRIRAM” conglomerate which has significant presence in financial

services viz., commercial vehicle financing business, consumer finance, life and general insurance, stock

broking, chit funds and distribution of financial products such as life and general insurance products and

units of mutual funds. Apart from these financial services, the group is also present in non-financial

services business such as property development, engineering projects and information technology.

STFC decided to finance the much neglected small truck owner. The company understood the power of

'Aspiration' much before marketing based on 'Aspiration' became fashionable. The company started

lending to the small truck owner to buy new trucks. But the company found a mismatch between the



aspiration and ability. The truck operator was honest but the equity at his command was not sufficient to

support the credit levels required to buy a new truck.

2.2.2 HISTORY AND MILESTONE

MARCH 2014, Shriram transport finance company total assets under management (AUM) increased by

5.63% to Rs.53, 102.11crore.

APRIL 2005: Shriram Group attracts largest Venture Capital Investment in the Indian non-banking

financial sector, from Overseas

JULY 2004: UTI Bank picks up equity stake in two Shriram Group companies

17MARCH 2003: Shriram Investment Limited received the Mother Teresa Award for Corporate

Citizenship.

DECEMBER2002: Shriram Group enters into strategic alliance with Citicorp Finance and Cummins

Auto Services

31AUGUST2002: Shriram Group ties up with UTI Bank for Retail Truck Financing Scheme to offer

low cost loans for purchase of new or used trucks to transport operators.

7MAY2002: Ms. Akhila Srinivasan awarded as the "Outstanding Woman Professional" for the year

2002

4FEBRUARY2000: Shriram Recon Trucks incorporated as India's first corporate network for selling

reconditioned used trucks.

15DECEMBER1999: Midcrop, the flagship company of Shriram group’s pharmacy division became

the first Indian company to win the Indian Drug Manufacturers Association

2.2.3 VISION, MISSION AND VALUES.

Helping create wealth, empowering people through prosperity, Putting people first.



The Shriram Group set out with the objective of reaching out to the common man with a host of

products and services that would be helpful to him in his path to prosperity. Over the decades, the Group

has achieved significant success in executing this objective and has created a tremendous sense of

loyalty amongst its customers.

Efficiency in operations, integrity and a strong focus on catering to the needs of the common

man, by offering him high quality and cost-effective products & services, are the values driving the

organization. These core values are deep-rooted within the organization and have been strongly adhered

to over the decades.

The group prides itself on its perfect understanding of the customer. Each product or service is

tailor-made to perfectly suit the needs of the customer. It is this guiding philosophy of putting people

first that has brought the Group closer to the grassroots and has made it the preferred choice for all

financing requirements amongst the customers.

2.2.4 Policy Statement

The Company believes that a diverse Board will enhance the quality of the decisions made by the Board

by utilizing the different skills, qualification, professional experience, gender, knowledge etc. of the

members of the Board, necessary for achieving sustainable and balanced development. For appointments

of persons to office of directors and deciding composition of the Board, the Nomination Remuneration

and Compensation Committee (NRC Committee) and the Board shall also have due regard to this policy

on Board diversity. In this process the NRC Committee /Board will take into consideration qualification

and wide experience of the directors in the fields of banking, finance, regulatory, administration, legal,

commercial vehicle segment apart from compliance of legal and contractual requirements of the

Company. The total number of directors constituting the Board shall be in accordance with the Articles

of Association of the Company. The Board of directors of the Company shall have an optimum

combination of executive and non-executive directors with at least one woman director and the

composition of the Board shall be in accordance with requirements of the Articles of Association of the

Company, the Companies Act, 2013, Listing Agreement and the statutory, regulatory and contractual

obligations of the Company.



2.2.5SERVICES OF THE COMPANY

Main Products

HEAVY DUTY TRUCK (HDT)

Defined as Heavy Commercial Vehicles or alternatively Multi Axle Vehicles having gross vehicle

weight upwards of 16.2 tons . Being a life line of the economy, these vehicles are an integral part of the

commercial activity of any country and these vehicles are usually deployed in the long haul distance and

in transportation of materials at the ports as also in the extraction of natural resources like Iron or Coal

etc.

Almost 100 percent of these vehicles are purchased only under financing and it is estimated that nearly

1.5 to 2million HCVs are plying the Indian roads. Shriram Transport offers financing options for the

purchase of both new and used vehicles to this segment which has some of the bigger fleet owners on

one end of the spectrum and the small fleet / single vehicle owner on the other.

MEDIUM, INTERMEDIATE AND LIGHT DUTY TRUCK (LDT)

These vehicles have a gross vehicle weight ranging from 5 to 16.2 tones and are engaged in medium

haulage business especially connecting rural/ semi urban roads to urban centers. The population of these

vehicles is estimated to be around 5 million. Shriram Transport offers tailor made financing solutions for

the purchase of both used and new LCVs across the country which has the highest component of ‘stand’

operators within its segmentation.

PICK UP TRUCK AND MINI TRUCK (P&MT)

These vehicles have a GVW of less than 5 tons and they fulfill the role of transportation in the spoke in

a hub and spoke arrangement. These vehicles have high concentrations in short hauls and last mile

delivery situations. Nearly 3 million of these vehicles occupy the bottom end of this industry of which

about 0.3 to 0.5 million vehicles are three wheeler goods carrying vehicles, the balance being four

wheelers. Shriram Transport gives flexible loan options to prospective buyers of these vehicles which



incidentally has the highest concentration of the small operator and driver cum owner category of

vehicle users.

PASSENGER VEHICLE

India being a country with a population of 1.4 billion coupled with a widespread geographical area and

an extensive road network, the volume of people moving from one place to another is catered to by a

wide range of passenger vehicles starting from simple three wheelers, taxis, mob’s, vans to high cost and

state of the art Volvo / Mercedes buses travelling across the length and breadth of the country. There are

nearly 10 millions of passenger vehicles that exist which make this as one of the highest potential

vertical for financing and the most insulated from economic downturns. In the car segment Shriram

Transport had earlier restricted itself to finance on yellow board (Taxi) vehicles only, keeping in line

with its philosophy of lending against an earning asset but from 2010 personal car loans have also been

included in the product range, thus aligning ourselves to changing lifestyles of the populace.

FARM EQUIPMENT

Being an agrarian economy, a substantial part of India lives in its villages and a major portion of our

population is engaged in agriculture. Shriram Transport has a granular footprint of more than 300 rural /

semi urban branches which are located in these centers to cater to the requirement of finance from

buyers of tractors, harvesters and various other farm equipments which are deployed both for

agricultural and commercial purposes. Hitherto a domain of co operative and nationalized banks’ rural

branches, this segment is 5millions lakh strong and is ever growing thanks to mechanized methods of

agriculture becoming a necessity in the wake of rural labor in availability.

CONSTRUCTION VEHICLE & EQUIPMENT

The recent impetus given by the Indian Government for infrastructure spending has exponentially

increased the potential for construction equipments which in turn prompted STFC to have a separate

subsidiary to fund the capital requirements of large and medium contractors engaged in building of



roads, bridges, dams and other infrastructure projects called Shriram Equipment Finance Co Ltd.,

(SEFC) However at STFC we do continue to fund the retail portion of this vast business with easy

solutions for buyers of tippers, dumpers, backhoe loaders and cranes and as also for the purchase of pre

owned construction equipment.

Other products

Tire Finance

Engine Replacement Finance

Co-Branded Credit Card

Freight bill discounting

2.2.6 AREAS OF OPERATION

Managing various credit operations including appraising proposals, conducting risk analysis &

scrutinizing relevant documents before sanctioning loans.

Handling approval of loan proposals & sanctioning credits after appraising solvency status &

verifying documents as well as post sanction follow-up and disbursal of loan

Managing and monitoring delinquent account collection and establishing terms of payment as

well as handling vendor management.

Preparing MIS reports to provide feedback to top management on business operations,

Handling Advancing, Collection & Credit Appraisal for finance of commercial vehicles

Looking after the cross sales of GOLD LOAN.

Undertaking proposal evaluation and disbursement.

Giving approvals for new & used cases of commercial vehicles like over funding and low IRR.

2.2.8 INFRASTRUCTURE FACILTIES



Shriram commercial vehicle Finance provides finance to contractors, sub-contractors, mine owners and

operators, plant hirers and others involved in the development of India's infrastructure sector such as:

Roads Contractors, Irrigation Contractors, Mining Owners and Operators, Quarry Owners/Operators,

Ports Contractors, Airport Contractors, Urban Infrastructure Contractors/Builders and Plant Hires - in

other words, almost every possible entity and segment contributing to the infrastructure development in

the country.

Shriram Equipment Finance with its focused retail approach in the industry brings in pronounced

advantages for both customers and manufacturers/dealers.

Millions of commercial vehicles both small and medium size, 200 000 agricultural equipments and an

equal number of construction equipments are yearly getting added in our country. These equipments are

bound to age over a period of time and changes hands from the first to the second and the third owner

during its lifetime.

There are no clear studies done to suggest the value of this industry but industry experts estimate the

value of used vehicle and equipment business (commercial vehicles, agric and construction equipments)

at Rs.75 000 Crores annually, which is probably the size of the new vehicle business in the country

today

Despite such a huge opportunity, there is no organized platform available for buying and selling of used

vehicles and equipment in the country. Identifying an opportunity and leveraging on its experience of

operating in this segment for decades, the Shriram Group has launched the concept of Shriram Auto

mall, an ideal platform for buying and selling of used and unused trucks, agricultural equipments and

construction equipments. Shriram Auto mall has launched full-fledged Auto malls at Chennai, Baroda,

Vizag, Mumbai, Manesar, Aurangabad, Ludhiana, Pathankot, Gulbarga, Hyderabad, Jammu, Jaipur,

Kolkata, faizabad and Kota. The company plans to launch about 60 Auto malls across the country.

Shriram Auto mall is the right platform for buying, selling used vehicles



2.2.9AWARDS AND RECOGNITION

Recipient of the social responsiveness awards instituted by Business world – Compaq at national level

under the auspices of FICCI, Delhi

Adjudged as the third prize winner for having rended commendable service in the areas of social welfare

and rural development

Ms. Akhila Srinivasan receiving the social responsiveness Award instituted by Business World –

Company from the Hon’ble Vice – President of India Krishna Kant in the year 1999.

Recipient of outstanding woman professional for 2000 – 01 by FICCI – FICCI Ladies organization

(FLO). The award was given by Ms. Sheila dixit Chief Minister Delhi.

Mother Teresa award for corporate citizenship instituted by Loyola institute of Business Administration

(LIBA) Chennai, 2002.

NATIONAL AWARDS WON

Business World Compaq award fota Social Responsiveness instituted by FICCI from the

Hon’ble Vice – President of India Mr. Krishna Kant on 1999.

Mother Teresa award for Corporate Citizenship instituted by Loyola Institute of Business

Administration (LIBA), Chennai in 2002.

2.2.10 SWOT ANALYSIS

Strengths

• The pioneer in the pre-owned commercial vehicles financing sector

• Pan-India presence with 488 branch offices all over the country.

• A well-defined and scalable organization structure, capable of supporting surging growth

• Low delinquency as assets are backed with adequate cover and are easy to repossess with immediate

liquidity.



• Strong financial track record driven by fast growth in AUM with low Non Performing Assets (NPAs)

Weaknesses

The Company’s business and its growth are directly linked to the GDP growth of the country

Any slowdown in GDP growth may have a negative impact on the business.

Flexibility in Earning per share.

Continuously increasing the Total Expenditure of the Company.

Opportunities

• Growth in the CV market driven by the economic growth and the infrastructure development in the

country

• Strong demand for pre-owned tractors

• Loans for working capital requirements of CV users

• Partnerships with private financiers will enable the Company to enhance its reach without significant

investments in building infrastructure

Threats

• Maintaining relationships with customers who are mobile and have no proper documentation

• Maintaining asset quality.

• Regulatory changes in the NBFC and transportation sectors.

.Increasing Number of Competitors



CHAPTER 3

THEORETICAL FRAMEWORK



THEORETICAL FRAMEWORK

3.1 FINANCIAL ACCOUNTING:

Financial accounting is the process of systematic recording of the business transactions in the

various books of accounts maintained by the organization with the ultimate intention of preparing

the financial statement there from. These financial statements are basically in two forms. One,

profitability statement which indicates the result of operations carried out by the organization during

a given period of time and second balance sheet which indicates the state of affairs of the

organization at any given point of time in terms of its assets and liabilities.

Main purpose of financial accounting is to ascertain profit or loss and to indicate financial position

of an enterprise. Two fundamental statements of financial accounting are income and expenditure

statement and balance sheet. The profit and loss account or income and expenditure account is

prepared for a particular period to find out the profitability of the firm and balance sheet is prepared

on a particular date to determine the financial position of the firm.



Financial accounting summaries transactions taking place during a period with the objective of

preparing the financial statement.

3.2 FINANCIAL STATEMENT

‘FINANCIAL STATEMENT’ refers to formal and original statements prepared by a business

concern to disclose its financial information According to John.N.Meyer, “The financial statement

provides summary of accounts of a business enterprise, the balance sheet reflecting assets, liabilities

and capital as on a certain date and the income statement showing the result of operation during a

certain period”

The financial statements are prepared with a view to depict the financial position of the concern.

They are based on the recorded facts and are usually expressed in monetary terms. The financial

statement are prepared periodically that is generally for the accounting period

The term financial statement has been widely used to represent two statements prepared by

accountants at the end of specific period. They are:

Profit and loss a/c or income statement

Balance sheet or statement of financial position

3.3 Limitation of Financial Statement:

Information shown in financial statement is not precise since it is based on practical experience and

the conventions and rules developed therefore

Financial statements do not always disclose the correct financial position of the business concern as

they are influenced by the personal opinions, judgment, subjective view and whims of accountant of

each concern

Balance sheet of a concern is a statics document it disclose the financial position of a concern on a

particular date.

Information disclosed by profit& loss a/c may not be the real profit as many items shown in the

profit & loss a/c may not the real



Financial statements are dumb, because they speak themselves. The statements require further

detailed analysis and interpretation.

Financial statement of the one period may not be comparable.

Financial statements do not disclose the contribution of man towards the efficiency of the business.

3.4. EVALUATION AND INTERPRETATION OF FINANCIAL STATEMENT

The various tools of financial statement are used for decision-making process. The financial

statement becomes a tool for future planning and forecasting. The analysis of these statements

involves their division according to similar groups and arranged in desired form. The interpretation

involves the explanation of financial facts in a simplifier’s manner.

3.5. TYPE OF ANALYSIS: The process of financial statement analysis is of different types. The

process of analysis is classified on the basis of information used and ‘modus operandi’ of analysis. The

classification is as under:

On the basis of material used:

According to material used financial analysis can be of two types:

1. External analysis: - This analysis is done by outsiders who do not have access to the detailed

internal accounting records of the business firm. These outsiders include investors, creditors, potential

investors, creditors, potential creditors, government agencies, credit agencies, and the general public.

For financial analysis, these external parties to the firm depend almost entirely on the published

financial statement.

2. Internal analysis: - The analysis conducted by persons who have access to the internal accounting

records of a business firm is known as internal analysis. Such an analysis can, therefore, be performed

by executives and employees of the organization as well as govt. agencies which have statutory powers

vested in them. Financial performance for managerial purpose is the internal type of analysis for

managerial purposes in the internal type of analysis that can be affected depending upon the purpose to

be achieved.

2. On the basis of modus operandi:



According to the method of operation followed in the analysis, financial evaluation can also be two

types:

1. Horizontal analysis: - Horizontal analysis refers to the comparison of financial data of the company

for several years. The figures for this type of analysis are presented horizontally over a number of

columns. The figures of various years are compared with standard or base year. A base year is a year

chosen as beginning point. This type of analysis is also called ‘Dynamic analyses.

2. Vertical analysis: - Vertical analysis refers to the study of relationship of the items in the financial

statement of one accounting period. In this type of analysis the figures from the financial statement of a

year are compared with a base selected from the same year’s statement. It is also known as ‘Static

Analysis’.

3.6. TECHNIQUES/TOOLS OF FINANCIAL PERFORMANCE ANALYSIS:

An analysis of financial performance can be possible through the use of one or more tools /

techniques of financial analysis:

ACCOUNTING TECHNIQUES

It is also known as financial techniques. Various accounting techniques such as Comparative

Financial Analysis, Common-size Financial Analysis, Trend Analysis, Fund Flow Analysis, Cash

Flow Analysis, CVP Analysis, Ratio Analysis, Value Added Analysis etc. may be used for the

purpose of financial analysis.

3.6.1. Comparative Financial statement Analysis

Comparative Financial Statement analysis provides information to assess the direction of change in

the business. Financial statements are presented as on a particular date for a particular period. The

financial statement Balance Sheet indicates the financial position as at the end of an accounting

period and the financial statement Income Statement shows the operating and non-operating results

for a period. But financial Managers and top management are also interested in knowing whether

the business is moving in a favorable or an unfavorable direction. For this purpose, figures of



current year have to be compared with those of the previous years. In analyzing this way,

comparative financial statements are prepared.

Objectives purpose or significance of comparative financial statements

1. To simplify data

2. To make inter period/inter-firm comparison

3. To indicate the trends

4. To enable forecasting

5. To indicate the strengths and weaknesses of the firm

6. To compare the performance

7. To analyze expenses

8. To analyze profits

Tools for comparison of financial statements

Comparative financial statement is a tool of financial analysis that depicts change in each item of the

financial statement in both absolute amount and percentage term, taking the item in preceding

accounting period as base.

Comparison and analysis of financial statements may be carried out using the following tools:

1. Comparative Balance Sheet: The comparative balance sheet shows increase and decrease in

absolute terms as well as percentages, in various assets, liabilities and capital. A comparative analysis of

balance sheets of two periods provides information regarding progress of the business firm.

The main purpose of comparative balance sheet is to measure the short- term and long-term solvency

position of the business.



2. Comparative Income Statement: Comparative income statement is prepared by taking figures of

two or more than two accounting period, to enable the analyst to have definite knowledge about the

progress of the business. Comparative income statements facilitate the horizontal analysis since each

accounting variable is analyzed horizontally.

3.6.2. Common-size Financial Statement Analysis

Common size statements are such statements in which the items of financial statements are covered into

percentage of common base. In common-size income statement, by assuming net sales as 100(i.e %)and

other individual items are converted as percentage of this. Similarly, in common –size balance

sheet ,total assets are assumed to be 100 (i.e. %) and individual assets are expressed as percentage.

Objectives of common size statements

1. Presenting the change in various items in relation to total assets or total liabilities or net sales.

2. Establishing a relationship.

3. Providing a common base for comparison.

Types of common size statements

1. Common-Size Balance Sheet: A common –size balance sheet is a statement in which total of

assets or liabilities is assumed to be equal to 100 and all the figures are expressed as percentage

of the total. That is why it is known as percentage balance sheet.

Common-size balance sheet facilitates the vertical analysis since each item of the Balance Sheet

is analyzed vertically.

2. Common-Size Income Statement: Common-size income statement is a statement in which the

figures of net sales is assumed to be equal to 100 and all other figures of “profit and loss A/c” are

expressed as percentage of net sales. This statement facilitates the vertical analysis since each

accounting variable is analyzed vertically. One can draw conclusion, regarding the behavior of

expenses over period of time by examining these percentages.



3.6.3. Trend Analysis

Trend analysis indicates changes in an item or a group of items over a period of time and helps to

drown the conclusion regarding the changes in data. In this technique, a base year is chosen and the

amount of item for that year is taken as one hundred for that year. On the basis of that the index

numbers for other years are calculated. It shows the direction in which concern is going. Trend

percentage are very useful is making comparative study of the financial statements for a number of

years. These indicate the direction of movement over a long tine and help an analyst of financial

statements to form an opinion as to whether favorable or unfavorable tendencies have developed.

This helps in future forecasts of various items. For calculating trend percentages any year may be

taken as the ‘base year’. Each item of base year is assumed to be equal to 100 and on that basis the

percentage of item of each year calculated.

3.6.4. Ratio Analysis

Meaning of Ratio: - A ratio is simple arithmetical expression of the relationship of one number to

another. It may be defined as the indicated quotient of two mathematical expressions. According to

Accountant’s Handbook by Wixon, Kell and Bedford, “a ratio is an expression of the quantitative

relationship between two numbers”.

Ratio analysis is the process of determining and presenting the relationship of items and group of

items in the statements. According to Batty J. Management, Accounting Ratio can assist

management in its basic functions of forecasting, planning coordination, control and

communication”.

It is helpful to know about the liquidity, solvency, capital structure and profitability of an

organization. It is helpful tool to aid in applying judgment, otherwise complex situations.

ADVANTAGE OF RATIO ANALYSIS

1. Helpful in analysis of Financial Statements.

2. Helpful in comparative Study.

3. Helpful in locating the weak spots of the business.

4. Helpful in Forecasting.



5. Estimate about the trend of the business.

6. Fixation of ideal Standards.

7. Effective Control.

8. Study of Financial Soundness.

LIMITATIONS OF RATIO ANALYSIS

1. Comparison not possible if different firms adopt different accounting policies.

2. Ratio analysis becomes less effective due to price level changes.

3. Ratio may be misleading in the absence of absolute data.

4. Limited use of a single data.

5. Lack of proper standards.

6. False accounting data gives false ratio.

7. Ratios alone are not adequate for proper conclusions.

8. Effect of personal ability and bias of the analyst.

CLASSIFICATION OF RATIO

PROFITABILITY RATIO

Profitability Ratio measured as a ability to make maximum profit from optimum utilization of resources

by a business concern is termed as profitability.

1. OPERATING PROFIT RATIO

This ratio is calculated as follows:


Operating Profit Ratio = (Operating Profit / Sales)*100


The difference between net profit ratio and net operating profit ratio is that net operating profit is

calculated without considering non-operating expenses and non-operating incomes. If we deduct this

ratio from 100,the result will be operating ratio. Higher operating profit ratio enables the organization to

recoup non-operating expenses out of operating profits and provide reasonable return.

2. NET PROFIT RATIO

It measures of management efficiency in operating the business successfully from the owner’s point of

view. Higher the ratio better is the operational efficiency of business concern.

Net Profit Ratio = (Net Profit after Tax / Net Sales) * 100

ACTIVITY RATIO OR TURNOVER RATIOS:

Activity ratios highlight the operational efficiency of the business concern. The term operational

efficiency refers to effective, profitable and rational use of resources available to the concern.

1. WORKING CAPITAL TURNOVER RATIO

Working capital ratio measures the effective utilization of working capital. It also measures the smooth

running of business. The ratio establishes relationship between cost of sales and working capital.

Working Capital Turnover Ratio = (Sales / Net Working Capital)

2. CAPITAL TURNOVER RATIO

Managerial efficiency is also calculated by establishing the relationship between cost of sales or sales

with the amount of capital invested in the business.

Capital Turnover Ratio = (Sales / Capital Employed)

3. TOTAL ASSET TURN OVER RATIO.



This ratio is calculated by dividing the net sales by the value of the total asset. A high ratio is indicator

of over trading of total assets while low ratio reveals ideal capacity. The traditional standard for the ratio

is two times.

SOLVENCY OR FINANCIAL RATIOS

Solvency or Financial Ratios include all ratios which express financial position of the concern. The term

financial position generally refers to short-tem and long-term solvency of the business concern,

including safety of different interested parties.

1. ABSOLUTE LIQUID RATIO

The absolute liquidity ratio is obtained by dividing cash and marketable securities by current

liabilities. It is also called cash position ratio. When liquidity is highly restricted in terms of cash

equivalents this ratio should be calculated

2. CURRENT RATIO

In order to measure the short-term liquidity or solvency of a concern, comparison of current assets and

current liabilities is inevitable. Current ratio indicates the ability of a concern to meet its current

obligations as and when they are due for payment.

Current Ratio = (Current asset / Current liabilities)

3. DEBT EQUITY RATIO


Absolute Liquid Ratio = (Cash and marketable Security/ Current Liability)*100

Total Assets Turnover Ratio = Sales / Total Assets


The debt equity ratio is determined to ascertain the soundness of the long term financial policies of the

company and also to measures the relatives’ proposition of outsider’s funds and shareholders’ funds

investments in the company.

Debt-Equity Ratio = (Total Long-term Debt / Shareholder’s Funds )

4. DEBT TO TOTAL FUNDS RATIO

This ratio gives same indication as the debt equity ratio as this is a variation of debt equity ratio. This

ratio is the relationship between long term debts and total long term funds.

Debt to Total Funds Ratio= (Long-term Debt / Total Funds)

5. EQUITY TO TOTAL FUNDS

Equity to total funds explains the relationship between equity and total funds.

Equity to Total Funds = (Equity / Total Funds)

3.6.5 DUPOINT ANALYSIS

The Du-Pont Company of USA found a system of financial analysis which has received widespread

recognition and acceptance. The Du Pont Company began to use particular approach to ratio analysis

to evaluate the firm’s performance.

DUPOINT ANALSIS

Multiplied by

Multiplied by Divided by


Return on Equity

Return on Total Asset Financial Leverage Multiplier

Net Profit Ratio Total Asset Turnover

Total Asset Equity Share holders Fund

Sales


Divided by Divided by Plus

Plus

Income Statement

Plus

Balance Sheet

Neither the “Net Profit Margin” nor the “Total Asset Turnover” ratio, by itself, provides an adequate

measure of overall profitability. The ROI ratio or “Earning Power” of invested capital provides the

answer.

The Chart indicates:

The earning power or the ROI ratio is a central measure of the overall profitability and operational

efficiency of the firm.

The Du Pont chart shows the interaction of profitability and activity ratios.

It implies that the performance of a firm can be enhanced either by generating more sales with same

amount of investment or by increasing the profit margin.

The left hand side of the Du Pont chart shows the details underlying the net profit margin ratio.

To maximize Return on Assets we should increase sales price of our products. This will increase the

net margin, which will in turn increase the return on assets.


Total Assets

Net Fixed AssetCurrent Asset

Earnings Available for Equity Shareholders

Sales

Total Assets Total Liabilities Equity Shareholders Fund

Current Liabilities Long term Liabilities


Increase in Net profit margin can also be achieved through cost-reduction.

The right had side of the Du Pont Chart throws light on the determinants of the total assets turnover

ratio.

Total assets consist of fixed assets as well as current assets.

The total turnover ratio depends how efficiently and effectively these assets are used.

Therefore to increase this ratio, one should undertake measures like inventory control, cash flow

management, receivable management, maintenance of fixed assets, etc. to use these assets

optimally.

Optimum utilization of the assets will increase productivity and result in better sales performance

in-turn influencing the assets turnover ratio.

A company should have proper control on its inventory and debtors so as to ensure an efficient cash

flow in the enterprise.

An increase in the assets turnover ratio will increase the return on assets.

This is the how ROI concept could be used for proper control using the Du Pont Chart.

Diagrams & Graphs

Diagrams and graphs are visual aids, which give a bird’s eye view of a given set of numerical data.

They present the data in simple readily comprehensible and intelligible form. Graphical presentation

of statistical data gives a pictorial effect instead of just a mass of figures. They depict more

information than the data shown in the table which through light on the existing trend and changes

in the trend of the data



CHAPTER 4

ANALYSIS AND INTERPRETATION

ANALYSIS AND INTERPRETATION

4. ACCOUNTING TECHNIQUES

4.1 Comparative Financial statement Analysis

Table No-4.1

1. COMPARATIVE INCOME STATEMENTOF SHRIRAM TRANSPORT COMPANY FOR THE YEAR ENDED 31.03.2012

Particulars in Rs Cr Percentage Increase / Decrease

2011 2012 Amount Increase /



Decrease during 2011-

2012

during 2011-2012 (In %)

IncomeSales TurnoverExcise DutyNet SalesOther incomeStock AdjustmentsTotal incomeExpendituresRaw materialsPower and Fuel CostEmployee CostOther manufacturing expansesSelling and Admin ExpensesMiscellaneous ExpensesTotal ExpensesOperating ProfitPBDITInterestPBDTDepreciationOther written offPBTTaxNet ProfitTotal Value Addition

5230.150.00

5230.15199.930.00

5883.060.00

5883.062.500.00

642.910.00

652.91(197.43)

0.00

12.290.0012.48

(98.75)0.00

5430.08 5885.56 455.48 8.39

0.000.00

358.2114.97571.39341.81

0.000.00

369.4827.46786.92316.30

0.000.0011.2712.49215.5325.51

0.000.003.1483.4337.727.46

1286.38 1500.16 213.78 16.623943.774143.702271.961871.7410.8211.99

1848.93619.051229.88

4382.904385.402474.901910.5013.4616.12

1881.12623.461257.45

439.13241.7202.9438.762.644.1332.194.4127.57

11.135.838.932.0724.4034.451.740.712.24

1286.38 1500.16 213.78 16.62

INTERPRETATION

The comparative income statement shows total income amount increase during the year 2011-2012 was

Rs.455.48 (in Cr) and increase in percentage of 8.39.

For the year 2011-2012, the total expenses indicatesRs.439.13 (in Cr) and percentage increase during the

year 2011-2012 were 11.13.

The operating profit has been increased is Rs.4382.90 (in Cr) in the year 2012 which is comparing to the

previous year was Rs.3943.77 (in Cr) and the percentage shows increase by 11.13.



The Net profit amount increases during 2011-2012 is Rs.27.57 (in Cr) and shows percentage increase by

2.24.

Table No-4.2

2. COMPARATIVE BALANCE SHEET OF SHRIRAM TRANSPORT COMPANY THE

YEAR ENDED 31.03.2012

Particulars

in Rs Cr Percentage Increase / Decrease

during 2011-2012 (In %)

2011 2012

Amount Increase / Decrease

during 2011-2012

Source Of FundsTotal share capitalEquity Share CapitalShare Application MoneyPreference Share CapitalReservesNet worthSecured LoansUnsecured loansTotal DebtTotal Liabilities

226.18226.180.000.00

4678.214904.3914869.385012.3419881.72

226.32226.320.000.00

5765.995992.3113069.144657.9417727.08

0.140.140.000.00

1087.781087.92

(1800.24)(354.4)

(2154.64)

0.060.060.000.0023.2522.18

(12.11)(7.07)(10.83)

24786.11 23719.39 (1066.72) (4.30)



Application Of FundsGross BlockLess: Revaluation ReservesLess: Accum. DepreciationNetBlockCapital Work In ProgressInvestmentsInventoriesSundry DebtorsCash and Bank BalanceTotal Current AssetsLoans and AdvancesFixed DepositsTotal CA,Loans&AdvancesCurrent LiabilitiesProvisionsTotal CL& ProvisionsNet Current AssetsMiscellaneous ExpensesTotal Assets

98.400.0059.9738.430.00

3650.700.000.00

914.26914.26

24265.042710.8527890.155579.841250.296830.1321060.02

36.94

108.250.0068.5239.730.68

3952.430.000.00

2201.97220197

26372.873106.1231680.9610514.361552.6612067.0219613.94112.62

9.850.008.551.30.68

301.710.000.00

1287.711287.412107.83395.273790.814934.52302.375236.9

(1446.08)75.68

10.010.0014.263.380.688.260.000.00

140.84140.8485.5114.5813.5988.4324.1876.67(6.87)204.87

24786.11 23719.39 (1066.72) (4.30)

INTERPRETATION

In the year 2011-2012, the investment it shows the increase for the year 2012as Rs.3952.43 (in Cr) and it has increased by 8.26%.

Current assets has been increased was Rs.220197 (in Cr) in the year 2012 which is comparing to the previous year and the percentage shows increase by 140.84.

During the year 2011, the shareholders fund amount to Rs.4904.39 (in Cr) it has been increased to the amount of Rs. 5992.31 (in Cr) and percentage increased was 22.18.

Secured loans show decreased by Rs.13069.14 over the previous year of Rs.14869.38 and decrease in percentage of 12.11.



Table No-4.3

3. COMPARATIVE INCOME STATEMENTOF SHRIRAM TRANSPORT COMPANY FOR THE YEAR ENDED 31.03.2014

Particulars


during 2013-2014 (In %)

2013 2014 Amount Increase / Decrease

during 2013-2014


6558.130.00

6558.135.460.00

7880.100.00

788.108.160.00

1321.970.00

1321.973.300.00

20.160.0020.1660.440.00

6563.59 7888.26 1324.67 20.18

0.000.00

384.760.000.00

1273.97

0.000.00

408.860.000.00

1689.70

0.000.0024.10.000.00

415.73

0.000.006.260.000.0032.63

1658.73 2098.56 439.83 26.524899.404904.862870.342034.5218.330.00

2016.19655.571360.62

5781.545789.703932.521857.1829.140.00

1828.04563.831264.21

882.14884.841062.18(177.34)

10.810.00

(188.15)(91.74)(96.41)

18.0118.0437.00(8.72)58.970.00

(9.33)(13.99)(7.08)

1658.73 2098.56 439.83 26.51



INTERPRETATION

The comparative income statement shows total income amount increase during the year 2013-2014 was

Rs 1324.67(in Cr) and increase in percentage of 20.18.

For the year 2013-2014, the total expenses indicate Rs439.83 (in Cr) and percentage increase during the

year 2013-2014 was 26.52.

The operating profit has been increased is Rs.5781.54 (in Cr) in the year 2013 which is comparing to the

previous year was Rs.4899.40 (in Cr) and the percentage shows increase by 18.01.

The Net profit amount decreases during 2013-2014 is Rs 96.41(in Cr) and shows percentage increase by

7.08.

Table No-4.4

4. COMPARATIVE BALANCE SHEET OF SHRIRAM TRANSPORT COMPANY FOR THE YEAR ENDED 31.03.2014

Particulars


during 2013-2014 (In %)

2013 2014 Amount Increase / Decrease

during 2013-2014


226.89226.890.000.00

6967.857194.7417842.835357.0923199.92

226.91226.910.000.00

8046.318273.2219563.556134.4425697.99

0.020.020.000.00

1078.461078.481720.72777.352498.07

0.00880.00880.000.0015.4815.489.6414.5110.77

30394.66 33971.21 3576.55 11.77



Application Of FundsGross BlockLess: Revaluation ReservesLess: Accum. DepreciationNetBlockCapital Work In ProgressInvestmentsInventoriesSundry DebtorsCash and Bank BalanceTotal Current AssetsLoans and AdvancesFixed Deposi0tsTotal CA,Loans&AdvancesCurrent LiabilitiesProvisionsTotal CL&ProvisionsNet Current AssetsMiscellaneous ExpensesTotal Assets

131.950.0071.9060.050.00

3568.910.000.00

6319.336319.3334884.93

0.0041204.2612643.021795.5514438.5726765.69

0.00

192.460.0091.80100.660.00

2725.260.000.00

7085.987085.9839313.79

0.0046399.7713689.201565.3015254.5031145.27

0.00

60.510.0019.940.610.00

(843.65)0.000.00

766.65766.654428.07

0.005195.511046.18(230.25)815.934379.58

0.00

45.850.0027.6867.620.00

(23.64)0.000.0012.1312.1312.690.0012.618.27

(12.82)5.6516.360.00

30394.65 33971.19 3577.25 11.77

INTERPRETATION

In the year 2013-2014, the investment it shows the decrease for the year 2014 as Rs. 843.65 (in Cr) and

it has decreased by 23.64%.

Current assets has been increased was Rs.7085.98 (in Cr) in the year 2014 which is comparing to the

previous year and the percentage shows increase by 12.13.

During the year 2013, the shareholders fund amount to Rs 7194.74(in Cr) it has been increased to the

amount of Rs. 8273.22(in Cr) and percentage increased was 15.48.Secured loans shows uptrend by

Rs.19563.55 over the previous year of Rs.17842.83 and increase in percentage of 9.64.



4.2 Common-size Financial Statement Analysis

Table No-4.5

5. COMMONSIZE INCOME STATEMENTOF SHRIRAM TRANSPORT COMPANY FOR THE YEAR ENDED 31.03.2012

Particulars 2011 2012in Rs Cr percentage in Rs Cr Percentage


5230.150.00

5230.15199.930.00

1000.001003.820.00

5883.060.00

5883.062.500.00

1000.00100

0.000420.00

5430.08 103.82 5885.56 100.00042

0.000.00

358.2114.97571.39341.81

0.000.006.85

0.002910.926.53

0.000.00

369.4827.46786.92316.30

0.000.006.28

0.00467133.765.37

1286.38 24.59 1500.16 25.493943.774143.702271.961871.7410.8211.99

1848.93619.051229.88

75.4179.2243.4335.780.00200.002235.35118.3623.51

4382.904385.402474.901910.5013.4616.12

1881.12623.461257.45

74.5074.4842.0632.47

0.002280.002731.1910.5922.49

1286.38 24.59 1500.16 25.49

INTERPRETATION

The percentage of operating profit has decreased from 75.41 in 2011 to 74.50 in 20102. This is due to

increase in sales from 5230.15(in Cr) to Rs.5883.06 (in Cr).The increase in sales because due to increase

the operating expenses.



There is relatively less decreasing in ratio of operating profit to sales as compared to increase ratio cost

of goods sold to sales. It has been possible because of decrease in operating expenses of 2012 in spite of

increase in sales .Some arguments given decrease in ratio net profit to sales from 23.51% in 2011 to

22.49% in 2012.

In conclusion it may say that company performance has deteriorated in 2011 as compared to 2012.

Operating profit absolute amount has decreased in spite increase in sales.

Table No-4.6

6. COMMONSIZE BALANCE SHEET OF SHRIRAM TRANSPORT COMPANY THE YEAR ENDED 31.03.2012

Particulars 2011 2012in Rs Cr Percentage in Rs Cr Percentage


226.18226.180.000.00

4678.214904.3914869.385012.3419881.72

0.910.910.000.0018.8719.7859.9920.2280.21

226.32226.320.000.00

5765.995992.3113069.144657.9417727.08

0.940.940.000.0024.3125.2655.1019.6474.74

24786.11 100 23719.39 100



Application Of FundsGross BlockLess: Revaluation ReservesLess: Accum. DepreciationNetBlockCapital Work In ProgressInvestmentsInventoriesSundry DebtorsCash and Bank BalanceTotal Current AssetsLoans and AdvancesFixed DepositsTotal CA,Loans&AdvancesCurrent LiabilitiesProvisionsTotal CL&ProvisionsNet Current AssetsMiscellaneous ExpensesTotal Assets

98.400.0059.9738.430.00

3650.700.000.00

914.26914.26

24265.042710.8527890.155579.841250.296830.1321060.02

36.94

0.400.000.240.150.0014.730.000.003.693.6997.9010.94112.5222.55.0427.5684.970.15

108.250.0068.5239.730.68

3952.430.000.00

2201.972201.9726372.873106.1231680.9610514.361552.6612067.0219613.94112.62

0.450.000.290.170. 0116.670.000.009.289.28

111.1813.10133.5744.336.5550.8782.690.47

24786.11 100 23719.39 100

INTERPRETATION

The current assets have increased during the financial year 2012 is 9.28% which is comparing to

2011 was 3.69% of the shriram commercial vehicle finance.

There was an increase in investment of Rs.3952.43 in the year 202 comparing to the previous

year 2013.

The current liabilities have been increased to 44.33% of the total liabilities of the shriram

commercial vehicle finance during the year 2012. The current liability was 22.5% of the total

liabilities during the year 2012.

Reserves and stock options has been increased was in the year 2012 which is Rs.5992.31 (in Cr)

comparing to the previous year and the percentage shows increase by 18.87%.

During the year 2012, the shareholders fund amount to Rs. 226.18 (in Cr) it has been increased

to the amount of Rs.226.32 (in Cr).



Table No-4.7

7. COMMONSIZE INCOME STATEMENTOF SHRIRAM TRANSPORT COMPANY FOR THE YEAR ENDED 31.03.2014

Particulars 2013 2014In Rs Cr Percentage In Rs Cr Percentage

IncomeSales TurnoverExcise DutyNet SalesOther incomeStock AdjustmentsTotal incomeExpendituresRaw materialsPower and Fuel CostEmployee CostOther manufacturing expansesSelling and Admin ExpensesMiscellaneous ExpensesTotal ExpensesOperating ProfitPBDITInterestPBDTDepreciationOther written offPBTTaxNet Profit

Total Value Addition

6558.130.00

6558.135.460.00

1000.00100

0.000830.00

7880.100.00

7880.108.160.00

1000.00100

0.001030.00

6563.59 100.00083 7888.26 100.00103

0.000.00

384.760.000.00

1273.97

0.000.005.860.000.0019.42

0.000.00

408.860.000.00

1689.70

0.000.005.170.000.0021.44

1658.73 25.29 2098.56 26.634899.404904.862870.342034.5218.330.00

2016.19655.571360.62

74.7074.8343.7631.020.00280.0030.749.9920.74

5781.545789.703932.521857.1829.140.00

1828.04563.831264.21

73.3773.4749.9023.560.00370.0023.197.15516.04

1658.73 25.29 2098.56 26.63

INTERPRETATION

The percentage of operating profit has decreased from 74.70% in 2013 to 73.37 in 2014. This is due to

increase in sales from 6558.13 (in Cr) to Rs.7880.10 (in Cr) .The increase in sales because due to



increase the operating expenses. There is relatively less decreasing in ratio of operating profit to sales as

compared to increase ratio cost of goods sold to sales.

It has been possible because of decrease in operating expenses of 2014 in spite of increase in

sales .Some arguments given decrease in ratio net profit to sales from 20.74% in 2013 to 16.04% in

2014. In conclusion it may say that company performance has deteriorated in 2013 as compared to 2014.

Operating profit absolute amount has decreased in spite increase in sales.

Table No-4.8

8. COMMONSIZE BALANCE SHEET OF SHRIRAM TRANSPORT COMPANY FOR THE YEAR ENDED 31.03.2014

Particulars 2013 2014In Rs Cr Percentage In Rs Cr Percentage


226.89226.890.000.00

6967.857194.7417842.835357.0923199.92

0.750.750.000.0022.9223.6758.7017.6373.33

226.91226.910.000.00

8046.318273.2219563.556134.4425697.99

0.670.670.000.0023.6924.3557.5918.0675.64

30394.66 100 33971.21 100



Application Of FundsGross BlockLess: Revaluation ReservesLess: Accum. DepreciationNetBlockCapital Work In ProgressInvestmentsInventoriesSundry DebtorsCash and Bank BalanceTotal Current AssetsLoans and AdvancesFixed DepositsTotal CA,Loans&AdvancesCurrent LiabilitiesProvisionsTotal CL&ProvisionsNet Current AssetsMiscellaneous ExpensesTotal Assets

131.950.0071.9060.050.00

3568.910.000.00

6319.336319.3334884.93

0.0041204.2612643.021795.5514438.5726765.69

0.00

0.430.000.230.190.0011.740.000.0020.7920.79114.770.00

135.5641.595.9147.5088.610.00

192.460.0091.80100.660.00

2725.260.000.00

7085.987085.9839313.79

0.0046399.7713689.201565.3015254.5031145.27

0.00

0.560.000270.300.008.020.000.0020.8620.86115.780.00

136.5840.290.4644.9091.680.00

30394.65 100 33971.19 100

INTERPRETATION

The current assets have increased during the financial year 2014 is 20.86% which is comparing

to 2013 was 20.79% of the shriram commercial vehicle finance.

There was an decrease in investment of Rs.20241.05 in the year 2014 comparing to the year

2013.

The current liabilities have been decreased to 41.59% of the total liabilities of the shriram

commercial vehicle finance during the year 2013. The current liability was 40.29% of the total

liabilities during the year 2014.

Reserves and stock options has been increased was in the year 2014 which is Rs.8273.22 (in Cr)

comparing to the previous year and the percentage shows increase by 23.67%.

During the year 2014, the shareholders fund amount to Rs. 226.91(in Cr) it has been increased to

the amount of Rs.226.89 (in Cr).



4.3. Trend Analysis

Table No-4.9

9. TREND ANALYSIS OF INCOME STATEMENTOF SHRIRAM TRANSPORT COMPANY FOR THE YEAR ENDED

PARTICULARS 2010 2011 2012 2013 2014

IncomeSales TurnoverExcise DutyNet SalesOther incomeStock AdjustmentsTotal incomeExpendituresRaw materialsPower and Fuel CostEmployee CostOther manufacturing expansesSelling and Admin ExpensesMiscellaneous ExpensesTotal ExpensesOperating ProfitPBDITInterestPBDTDepreciationOther written offPBTTaxNet Profit

Total Value Addition

100100100100100

118.79100

118.79206.94

100

133.62100

133.622.58100

148.951001485.65100

178.97100

178.978.44100

100 120.06 130.81 145.87 175.32

100100100100100100

100100

159.14120.0092.94612.78

100100

164.15220.20128.00567 .05

100100

170.940.000.00

2283.79

100100

181.650.000.00

3029.22100 141.65 165.19 182.66 231.09100100100100100100100100100

112.84115.38101.12139.2172.36240.28139.58137.11140.86

125.41122.11110.15142.0989.97323.04142.00138.09144.01

140.19136.423127.75151.32122.520.00

152.21145.20155.83

165.43160.98175.03138.12194.780.00

138.00124.88144.79

100 141.65 165.19 182.66 231.09



INTERPRETATION

There is a continuous increase in the income till the year ending 2014.

Similarly expenses also shows as increasing trend till the year ending 2014. In five years it has

been more than double.

There has been a substantial increase in net profit till the year ending 2013.followed by a slight

downfall in the year ending 2014.

The overall performance of the Shriram commercial vehicle is satisfactory.

Table No-4.10

10. TREND ANALYSIS OF BALANCE SHEET OF SHRIRAM TRANSPORT COMPANY FOR THE YEAR ENDED

PARTICULARS 2010 2011 2012 2013 2014


100100100100100100100100100

100.28100.28

100100

129.62127.6398.00152.47107.70

100.60100.60

100100

159.75155.9486.14141.6996.03

100.35100.35

100100

193.29187.24117.60162.96125.67

100.61100.61

100100

222.94215.30128.94186.60139.21

100 113.13 106.35 136.28 152.32



Application Of FundsGross BlockLess: Revaluation ReservesLess: Accum. DepreciationNetBlockCapital Work In ProgressInvestmentsInventoriesSundry DebtorsCash and Bank BalanceTotal Current AssetsLoans and AdvancesFixed DepositsTotal CA,Loans&AdvancesCurrent LiabilitiesProvisionsTotal CL&ProvisionsNet Current AssetsMiscellaneous Expenses

Total Assets

100100100100100100100100100100100100100100100100100100

100.79100

117.1782.75100

196.69100100

51.8451.84118.3297.72111.36142.48163.32145.89103.4299.59

110.01100

133.8885.55100

212.95100100

124.88124.88128.61111.97126.49268.48202.89257.7696.32303.35

135.17100

140.48129.31

100192.28

100100

358.37358.37170.110.00

164.52322.84234.64308.41131.440.00

197.12100

179.36216.64

100146.83

100100

401.85401.85191.710.00

185.27349.56204.55325.83152.950.00

100 111.13 106.35 136.28 152.32

INTERPRETATION

There is a continuous increase in the net worth till the year ending 2014. In five years it has been

more than double.

Similarly liabilities also show as increasing trend till the year ending 2014.

There is an investment also shows as increasing trend till the year ending 2012 followed by a

slight downfall in the year ending 2013 to 2014.

There has been a substantial increase in current asset till the year ending 2014.In five years it

has been double the amount four times.

There has been a substantial increase in total asset till the year ending 2014.

The overall performance of the Shriram commercial vehicle is good.



4.4 RATIO ANALYSIS

4.4.1 PROFITABILITY RATIOS.

1. OPERATING PROFIT RATIO

This ratio is calculated as follows:

The difference between net profit ratio and net operating profit ratio is that net operating profit is

calculated without considering non-operating expenses and non-operating incomes. If we deduct this

ratio from 100,the result will be operating ratio. Higher operating profit ratio enable the organization to

recoup non-operating expenses out of operating profits and provide reasonable return.

Table No-4.11

OPERATING PROFIT RATIO

Years

Operating Profit

(Rs in Cr)

Net Sales

(Rs in Cr) Ratios (In %)

2010 3494.72 4402.83 79.37

2011 3943.77 5230.15 75.40

2012 4382.90 5883.06 74.50

2013 4899.40 6558.13 74.71

2014 5781.54 7880.10 73.37

ANALYSIS:

From the above table, the ratio between operating profit ratio are 79.37%, 75.40%, 74.50%, 74.71%, and

73.41% for the years 2010,2011, 2012, 2013, and 2014 respectively


Operating Profit Ratio = ( Operating Profit / Sales)*100


Chart No 4.1

OPERATING PROFIT RATIO

2010 2011 2012 2013 20147071727374757677787980

Operating Profit

Operating Profit

Years

Rat

io (

In P

erce

nta

ge)

INTERPRETATION

The Operating profit ratio of Shriram Commercial Vehicle Finance in 2010 was 79.37%, after that year

operating profit of the company 2011 to 2014 continuously decreasing percentage of operating profit

ratio. Therefore the Operating profit is decreasing. It is an not good profit margin for the company. The

company should decrease operating profit for the future.

2. NET PROFIT RATIO

It measures of management efficiency in operating the business successfully from the owner’s point

of view. Higher the ratio better is the operational efficiency of business concern.

Net Profit Ratio = (Net Profit After Tax / Net Sales ) * 100



Table No-4.12

NET PROFIT RATIO

Years Net Profit(Rs in Cr) Net Sales(Rs in Cr) Ratios (In %)

2010 873.12 4402.83 19.83

2011 1229.88 5230.15 23.52

2012 1257.45 5883.06 21.37

2013 1360.62 6558.13 20.75

2014 1264.21 7880.10 16.04

ANALYSIS:

From the above table, the ratio between net profit ratio are 19.83%, 23.52%, 21.37%, 20.75%, and


NET PROFIT RATIO

Chart No 4.2



2010 2011 2012 2013 20140

5

10

15

20

25Net Profit Ratio

Net Profit Ratio

YEARS

RA

TIO

IN

PE

RC

EN

TA

GE

INTERPRETATION

The net profit is the indicative of the management’s ability to operate the business with sufficient

success. In the above bar diagram it shows that the net profit ratio of Shriram commercial vehicle

finance has increased 19.83% in 2010 and 2011 23.52 but after that years 2012 to 2014 net profit of

the company is an continuously decreasing like that company is going in future faced lot of losses.

4.4.2 TURNOVER RATIO

1. CAPITAL TURNOVER RATIO

Managerial efficiency is also calculated by establishing the relationship between cost of sales or

sales with the amount of capital invested in the business.

Capital Turnover Ratio = (Sales / Capital Employed)

Table No-4.13

CAPITAL TURNOVER RATIO

Capital Employed

(Rs in Cr)



Years Sales(Rs in Cr) Ratios(In Times)

2010 4402.83 18459.91 0.2385

2011 5230.15 19881.72 0.2631

2012 5883.06 17727.08 0.3318

2013 6558.13 23199.92 0.2827

2014 7880.10 25697.99 0.3066

ANALYSIS:

From the above table, the ratio between capital turnover ratio are 0.2385, 0.2631, 0.3318, 0.2827 and

0.3066 times for the years 2010, 2011, 2012, 2013, and 2014 respectively

Chart No 4.3

CAPITAL TURNOVER RATIO



2010 2011 2012 2013 20140

0.05

0.1

0.15

0.2

0.25

0.3

0.35

Capital Turnover Ratio

Capital Turnover Ratio

YEARS

RA

TIO

(TIM

ES

)

INTERPRETATION

In the year 2010, the sales’ comparing to 2011 it is increased to 0.2631 times and it shows that efficient

methods are adopted to use the capital employed. And also increase2012 was0.3318 time then 2013 is

decreasing for 0.2827 times. Then 2014 was increasing for0.3066 times. In 2010 to 2014, which

compares to the year it indicates higher ratio of 0.3066 times. The capital of the company has utilized

efficiently comparing to 2010.

6. TOTAL ASSET TURN OVER RATIO.

This ratio is calculated by dividing the net sales by the value of the total asset . A high ratio is

indicator of over trading of total assets while low ratio reveals ideal capacity. The traditional

standard for the ratio is two times.


Total Assets Turnover Ratio = Sales / Total Assets


Table No-4.14

TOTAL ASSET TURN OVER RATIO

Years Sales(Rs in Cr)

Total Assets

(Rs in Cr) Ratios(In Times)

2010 4402.83 22302.31 0.1974

2011 5230.15 24786.09 0.2110

2012 5883.06 23719.40 0.2480

2013 6558.13 30394.65 0.2157

2014 7880.10 33971.19 0.2319

ANALYSIS:

From the above table, the ratios between total asset turnovers are 0.1974, 0.2110, 0.2480, 0.2157 and

0.2319 times for the years 2010, 2011, 2012, 2013, and 2014 respectively

Chart No 4.4

TOTAL ASSET TURN OVER RATIO



2010 2011 2012 2013 20140

0.05

0.1

0.15

0.2

0.25

0.3

Total Asset Turnover Ratio

Total Asset Turnover Ra-tio

YEARS

RA

TIO

(TIM

ES

)

INTERPRETATION

Total Asset turnover ratio of the shriram commercial vehicle finance is an 2010 is an 0.1974 times it is

the ratio is an continuously increasing the ratio But in 2013 decreasing ratio 0.2157 after that year 2014

again increasing the total asset turnover ratio of the company.

7. NET WORKING CAPITAL RATIO

Working capital ratio measures the effective utilization of working capital. It also measures the

smooth running of business. The ratio establishes relationship between cost of sales and working

capital.

Working Capital Turnover Ratio = (Sales / Net Working Capital)

Table No-4.15

NET WORKING CAPITAL RATIO



Years Sales(Rs in Cr) Net Working capital

(Rs in Cr)

Ratios(In Times)

2010 4402.83 20362.76 0.2162

2011 5230.15 21060.02 0.2487

2012 5883.06 19613.94 0.2999

2013 6558.13 26765.69 0.2450

2014 7880.10 31145.27 0.2530

ANALYSIS:

From the above table, the ratio between net working capital are 0.2162, 0.2487, 0.2999, 0.2450 and

0.2530 times for the years 2010,2011, 2012, 2013, and 2014 respectively.

Chart No 4.5

2010 2011 2012 2013 20140

0.05

0.1

0.15

0.2

0.25

0.3

0.35

Working Capital Turnover Ratio

Working Capital Turnover Ratio

YEARS

RA

TIO

(TIM

ES)

INTERPRETATION



Working capital turnover ratio of the shriram commercial vehicle finance is an 2010 is an 0.2162 times

then the ratio is next two years increasing the ratio of the times .After that in 2013 decreasing the

working Capital turnover ratio .Then 2014 again increasing the ratio.

4.4.3 SOLVENCY OR FINANCIAL RATIOS:

ABSOLUTE LIQUID RATIO

The absolute liquidity ratio is obtained by dividing cash and marketable securities by current

liabilities. It is also called cash position ratio. When liquidity is highly restricted in terms of cash

equivalents this ratio should be calculated

Table No-4.16

Absolute liquid ratio

Years

cash and bank

balance (Rs in Cr)

Current

Liabilities(Rs in Cr) Ratios(In Times)

2010 1763.33 3916.14 0.14

2011 914.26 5579.84 0.087

2012 2201.97 10514.36 0.21

2013 6319.33 12643.02 0.50

2014 7085.98 13689.20 0.52

ANALYSIS:

From the above table, the absolute liquid ratio are0.14,0.087,0.21,0.50 and 0.52 times for the years

2010,2011, 2012, 2013, and 2014 respectively.


Absolute Liquid Ratio =( Cash and marketable Security/ Current Liability)*100


Chart No 4.6 ABSOLUTE LIQUID RATIO

INTERPRETATION

The absolute liquid ratio of 0.75 is considered satisfactory. The ratio of the company is showing the

fluctuating trend. During the year 2011 the company’s absolute liquid ratio is 0.14, then next year

decreasing .and after then again in other years it shows increasing tendency. But the liquid ratio is not in

the standard rate. From the above table it clearly shown that the company carries a small amount of cash

for the years. Since cash is the most liquid asset, a financial analyst wants to examine it effective

CURRENT RATIO

In order to measure the short-term liquidity or solvency of a concern, comparison of current assets

and current liabilities is inevitable. Current ratio indicates the ability of a concern to meet its current

obligations as and when they are due for payment.

Current Ratio = (Current asset / Current liabilities)


2010 2011 2012 2013 20140

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

ABSOLUTE LIQUID RATIO

Absolute Liquid Ratio

YEARS

RA

TIO

(TIM

ES

)


Table No-4.17

CURRENT RATIO

Years Current Asset

(Rs in Cr)

Current

Liabilities(Rs in Cr)

Ratios(In Times)

2010 20362.76 3916.14 5.199

2011 21060.02 5579.84 3.774

2012 19613.94 10514.36 1.865

2013 26765.69 12643.02 2.117

2014 31145.27 13689.20 2.275

ANALYSIS:

From the above table, the current ratio are5.199, 3.774, 1.865, 2.117, and 2.275 times for the years 2010,

2011, 2012, 2013, and 2014 respectively.

Chart No 4.7

CURRENT RATIO



2010 2011 2012 2013 20140

1

2

3

4

5

6

Current Asset Ratio

Current Asset Ratio

YEARS

RA

TIO

INTERPRETATION

The standard ratio is 2:1.This ratio indicates the extent to which short term creditors are safe in terms of

liquidity of the current assets. Thus, higher the value of the current ratio, more liquidity the firm is and

more ability it has to pay the bills. But here the company’s current ratio is more than 2 in the year2010,

2011, 2013, and 2014, so the ratio is standard liquid. And In 2012 it is decreased. Therefore it may be

interpreted to be sufficiently because the sale of the company is increased and also the expenses are

decreased.

2. DEBT EQUITY RATIO

The debt equity ratio is determined to ascertain the soundness of the long term financial policies of

the company and also to measures the relatives’ proposition of outsider’s funds and shareholders’

funds investments in the company.

3. Debt-Equity Ratio = ( Total Long-term Debt / Shareholder’s Funds )

Table No-4.18

DEBT EQUITY RATIO

Years

Long term debts

(Rs in Cr)

Shareholders’

funds(Rs in Cr) Ratios



2010 18459.91 3842.38 4.80

2011 19881.72 4904.39 4.05

2012 17727.08 5992.31 2.96

2013 23199.92 7194.74 3.22

2014 25697.99 8273.22 3.11

ANALYSIS:

From the above table, the ratio between Debt equity is 4.80, 4.05, 2.96, 3.22, and 3.11 for the years

2010,2011, 2012, 2013, and 2014 respectively.

Chart No 4.8

DEBT EQUITY RATIO

2010 2011 2012 2013 20140

1

2

3

4

5

6

DEBT EQUITY RATIO

DEBT EQUITY RATIO

YEARS

RA

TIO

INTERPRETATION



This ratio indicates the proportion of owner’s stake in the business. Excessive liabilities tend to cause

insolvency. The ratio is low during the period of 2012 because the company collected more money

through issuing shares. The ratio improving in other period. The general norm of this ratio is 1:1. This

means the funds provided by outsides and shareholders must be equal. Some expert suggests it is 2:1.

8. DEBT TO TOTAL FUNDS RATIO

Table No-4.19

DEBT TO TOTAL FUNDS RATIO

Years

Long term debts

(Rs in Cr)

Total funds

(Rs in Cr) Ratios

2010 18459.91 22302.29 0.82

2011 19881.72 24786.11 0.80

2012 17727.08 23719.39 0.75

2013 23199.92 30394.66 0.76

2014 25697.99 33971.21 0.76

ANALYSIS:



From the above table, the ratio between Debt to total fund are 0.82, 0.80, 0.75, 0.76, and 0.76 for the

years 2010,2011, 2012, 2013, and 2014 respectively.

Chart No 4.9

DEBT TO TOTAL FUNDS RATIO

INTERPRETATION

During the year 2010, the debt to total funds ratio is 0.82 and it was decreased. And 2011 was 0.80,

2012 was 0.75, 2013 was 0.76, and 2014 was 0.76 times again it had an increase in the company’s sales

comparing to previous year.

9. EQUITY TO TOTAL FUNDS RATIO

Table No-4.20

EQUITY TO TOTAL FUNDS

Equity to total funds explains the relationship between equity and total funds.

Equity to Total Funds = ( Equity / Total Funds)


2010 2011 2012 2013 20140.7

0.72

0.74

0.76

0.78

0.8

0.82

0.84

Debt To Total Fund Ratio

Debt To Total Fund Ratio

YEARS

RA

TIO

(TIM

ES)


Years

Equity funds

(Rs in Cr)

Total funds

(Rs in Cr) Ratios(In Times)

2010 3842.38 22302.29 0.17

2011 4904.39 24786.11 0.20

2012 5992.31 23719.39 0.26

2013 7194.74 30394.66 0.24

2014 8273.22 33971.21 0.24

ANALYSIS:

From the above table, the ratios between equity to total funds are 0.17, 0.20, 0.26, 0.24, and 0.2 for the

years 2010, 2011, 2012, 2013, and 2014 respectively.

Chart No 4.10

2010 2011 2012 2013 20140

0.05

0.1

0.15

0.2

0.25

0.3

Equity To Total Funds

Equity To Total Funds

YEARS

RA

TIO

(TIM

ES)



INTERPRETATION

In the year 2010 equity to total funds ratio was 0.17 and it shows upward trend of 2011 was 0.20. In

2012 was 0.26 times, 2013 was 0.24 and 2014 was0.24. During the year 2010 to 2014 comparing to the

year equity to total funds ratio is increasing.

4.5 DUPOINT ANALSIS

The Du-Pont Company of USA found a system of financial analysis which has received widespread

recognition and acceptance. The Du Pont Company did not begin to use particular approach to ratio

analysis to evaluate the firm’s performance. Neither the “Net Profit Margin” nor does the “Total Asset

Turnover” ratio, by itself, provides an adequate measure of overall profitability. The ROI ratio or

“Earning Power” of invested capital provides the answer

DUPOINT ANALSIS 2014

Net Profit Ratio = Earnings Available for Equity Shareholders /Sales

= 126.21/7880.10

= 0.16

Total Assets = Current Asset Loans &advances + Net Fixed Asset

= 46399.77 +2825.99

= 49225.71

Return on Total Asset = Net Profit Ratio * Total Assets Turnover

= 0.0256

Total Liabilities = Current Liabilities and Provision + Equity Shareholders Fund



= 15254.50 + 25697.99

= 40952.49

Financial Leverage Multiplier= Total Asset / Equity Share holders Fund

=5.95

Return on Equity = Return on Total Asset * Financial Leverage Multiplier

= 0.1523

DUPOINT ANALSIS 2013


= 0.2015


= 46399.77 +2825.99

= 44833.22


= 0.0303




= 37637.79


= 6.631


= 0.2009

DUPOINT ANALYSIS 2012


= 0.2136


= 35673.12


= 0.0352


= 29794.10




= 5.593


= 0.2095



= 0.2352


= 31616.24


= 0.0389


= 26711.85




= 6.4465


= 0.2508



= 0.08475


= 26946.89


= 0.0138


= 23141.58




= 7.0130


= 0.0967

Table No 4.21

RETURN ON EQUITY

YEAR 2010 2011 2012 2013 2014

RATIO(In %) 09.67 25.08 20.95 20.09 15.23

ANALYSIS:

From the above table, the ratio Return on equity Ratio are 79.37%, 75.40%, 74.50%, 74.71%, and


Chart No 4.12



2010 2011 2012 2013 20140

5

10

15

20

25

30

RETURN ON EQUITY

RETURN ON EQUITY

YEAR

RA

TIO

(IN

PE

RC

EN

TA

GE

)

INTERPRETATION

The Return on Equity of Shriram Commercial Vehicle Finance in 2012 was 25.08%, increasing after

that year return on equity of the company 2012 to 2014 continuously decreasing percentage of return on

equity ratio. Therefore the return on equity is decreasing. It is a not good profit margin for the company.

The company should decrease return on equity for the future.



Chapter 5

SUMMERY OF FINDINGS

5.1 FINDINGS

The Operating profit ratio of Shriram Commercial Vehicle Finance is continuously decreasing

percentage of operating profit ratio. Therefore the Operating profit is decreasing. It is a not good

profit margin for the company. The company should decrease operating Expenses for the future.

Net profit ratio has increased 19.83% in 2010 and 2011 23.52 but after that years 2012 to 2014

net profit of the company is an continuously decreasing like that company is going in future

faced lot of losses.

In 2013 decreasing ratio 0.2157 after that year 2014 again increasing the total asset turnover ratio

of the company.



The absolute liquid ratio of 0.75 is considered satisfactory. The ratio of the company is showing

the fluctuating trend. But the liquid ratio is not in the standard rate.

The company’s current ratio is more than 2 in 4 years; there for it is interpret that is standard

liquid.

On comparing balance sheet of the company the share capital shows stable position

During the period of study the total income was always more the total expenditure which is

good for the company

The analysis shows that the liabilities of the company are increasing year after year and firm

carries on a huge loss

The trend analysis shows the company’s position is improving, and also its fluctuating.

This is a clear indication of overall operation is decreasing the return on equity of the company.

5.2 SUGGESTIONS

All ratio of the firm is not satisfactory. Mainly Operating profit ratio and net profit ratios are

continuously decreasing. So The Company can increase sales and reduce the expenditure for the

better profitability.

The management may take proper decisions to maintain their liquidity position in the long run.

Because current liquid ratio is not standard rate. It’s an ratio is fluctuating.

The liquidity position could be strengthened by reducing the current liabilities.

The company takes step to reduce their operating cost, which should be benefit to the

organization.

The company must take necessary step to maintain the ratios at the standard level.



The trend is showing positive trend, but they have to cut down the total cost

5.3.Conclusion

THE STUDY ON FINANCIAL STATEMENT ANALSIS is under taken from Shriram

Commercial Vehicle Finance. This study is conducted for evaluating the financial position, operational

result and the financial progress of the organization, for finding out whether the organization is in profit

or loss. From the analysis we could find that the liquidity position of the organization is not satisfactory.

The organization should try to improve the turnover ratio of the working capital in order to increase the

sales. This will helps to increase the profitability of the organization. Though the income of the Shriram

Commercial Vehicle Finance has increased over the period in the same pace as of expenses. But the

company’s has not succeeded in maintaining a reasonable profitability position. Though current assets



and liabilities (current liquidity) of the company is not so satisfactory but company has succeeded in

maintaining a stable solvency position over the years. As far as the ratio of external and internal equity

is concerned. Company’s investments are also showing an decreasing trend. The profitability, efficiency

and financial soundness are not achieved throughout the analysis of five different years. So coming

year’s shriram commercial vehicle finance try to reduce the operating expenses and increase the sales

then company can maintain good profit in future.

BIBILIOGRAPHY

S.N. Maheshwari, S.K. Maheshwari, -An Introduction to Accountancy.:vikas publishers.

S.P.Jain, K.L.Narang and SimmiAgrawal- Accounting for Managers: Kalyani Publishers.

Neeti Gupta, financial management, kalyani publication.

Annual report shriram commercial vehicle finance.

www.stfc.in

Www.accounting for management.

www.wikipedia.com





ANNEXURE

PROFIT AND LOSS ACCOUNT OF SHRIRAM COMMERCIAL VEHICLE FINANCE

As On Mar 2010, Mar 2011, Mar 2012, Mar2013, Mar 2014. (Rs. In Cr)

2014 2013 2012 2011 2010Income

Sales Turnover 7880.1 6558.13 5883.06 5230.15 4402.83Excise Duty 0.00 0.00 0.00 0.00 0.00

Net Sales 780.1 6558.13 588.06 5230.15 4402.83Other Income 8.16 5.46 2.5 199.93 96.61

Stock Adjustments 0.00 0.00 0.00 0.00 0.00Total Income 7888.26 6563.59 5885.56 5430.08 4499.44


http://www.wikipedia.com/

http://www.accounting/


ExpendituresRaw materials 0.00 0.00 0.00 0.00 0.00

Power and Fuel Cost 0.00 0.00 0.00 0.00 0.00Employee Cost 408.86 384.26 369.48 358.21 225.08

Other Manufacturing Expenses 0.00 0.00 27.46 14.97 12.47Selling and Admin Expenses 0.00 0.00 786.92 571.39 614.78

Miscellaneous Expenses 1689.7 1273.97 316.3 341.81 55.78Total Expenses 2098.56 1658.73 1500.16 1286.38 908.11

Operating Profit 5781.54 4899.4 4382.9 3943.77 3494.72PBDIT 5789.7 4904.86 4385.4 4143.7 3591.33Interest 3932.52 2870.34 2474.9 2271.96 2246.79PBDT 1857.18 2034.52 1910.5 1871.74 1344.54

Depreciation 29.14 18.33 13.46 10.82 14.96Other Written Off 0.00 0.00 16.12 11.99 4.99

PBT 1828.04 2016.19 1881.27 1848.93 1324.59Tax 563.83 655.57 623.46 619.05 451.47

Reported Net Profit 1264.21 1360.62 1257.45 1229.88 373.12Total Value Addition 2098.56 1658.73 1500.16 1286.38 908.11Preference Dividend 0.00 0.00 0.00 0.00 0.00

Equity Dividend 158.82 159 147.09 146.85 136.01Corporate Dividend Tax 26.99 26.5 23.86 24.39 22.77

Per Share Data(Annualized)Shares in issue(lakhs) 2268.83 2268.64 2263.01 2261.61 2255.18

Earnings Per Share(Rs) 55.72 59.98 55.57 54.38 38.72Equity Dividend (%) 70 70 65 65 60

Book Value(Rs) 964.65 317.14 264.79 216.85 170.04BALANCE SHEET OF SHRIRAM COMMERCIAL VEHICLE FINANCEAs On Mar 2010, Mar 2011, Mar 2012, Mar 2013, Mar2014. (Rs. In Cr)

2014 2013 2012 2011 2010Source Of FundsTotal Share capital 226.91 226.89 226.32 226.18 225.54

Equity Share Capital 226.91 226.89 226.32 226.18 225.54Share Application Money 0.00 0.00 0.00 0.00 7.62Preference Share Capital 0.00 0.00 0.00 0.00 0.00

Reserves 8046.31 6967.85 5765.99 4678.21 3609.22Net worth 8273.22 7194.74 5992.31 4904.39 3842.38

Secured Loans 19563.55 17842.83 13069.14 14869.38 15172.48Unsecured Loans 6134.44 5357.09 4657.94 5012.34 3287.43



Total Debt 25697.99 23199.12 17727.08 19881.72 18459.91Total Liabilities 33971.21 30394.66 23719.39 24786.11 22302.29

Application Of FundsGross Block 192.46 131.95 108.25 98.40 97.62

Less: Revaluation Reserve 0.00 0.00 0.00 0.00 0.00Less:Accum.Depreciation 91.8 71.9 68.52 59.97 51.18

Net Block 100.66 60.05 39.73 38.43 46.44Capital Work in Progress 0.00 0.00 0.00 0.00 0.00

Investments 2725.26 3568.91 3952.43 3650.7 1856.02Inventories 0.00 0.00 0.00 0.00 0.00

Sundry Debtors 0.00 0.00 0.00 0.00 0.00Cash and Bank Balance 7085.98 6319.33 2201.97 914.26 1763.33

Total Current Assets 7085.98 6319.33 2201.97 914.26 1763.33Loans and Advances 39313.79 34884.93 26372.87 24265.04 20507.09

Fixed Deposits 0.00 0.00 0.00 0.00 0.00Total CA,Loans&

Advances46399.77 41204.26 31680.96 27890.15 25044.41

Deferred Credit 0.00 0.00 0.00 0.00 0.00Current Liabilities 13689.20 12643.02 10514.36 5579.84 3916.14

Provisions 1565.30 1795.55 1552.66 1250.29 765.53Total CL&Provisions 15254.50 14438.57 12067.02 6830.13 4681.67Net Current Assets 33971.19 30394.65 23719.4 24786.09 20362.76

Miscellaneous Expanses 0.00 0.00 0.00 0.00 0.00Total Assets 33971.19 30394.65 23719.40 24786.09 22302.81

Contingent Liabilities 3597.56 2778.43 65.50 7.42 8.85



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