20906431 ratio analysis of hero honda

8/7/2019 20906431 Ratio Analysis of Hero Honda

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LOGO



COMPANY PROFILE & INTRODUCTION:

´Heroµ is the brand name used by the Munjal brothers inthe year 1956 with the flagship company Hero Cycles.

The joint venture between India's Hero Group and HondaMotor Company, they are related to Jagdish Lal Munjal.

During the 80s, Hero Honda became the first company inIndia to prove that it was possible to drive a vehicle withoutpolluting the roads.

As Brijmohan Lall Munjal, the Chairman, Hero HondaMotors succinctly points out.

'Fill it - Shut it - Forget it¶.



O ver 20 million Hero Honda two wheelers tread Indian

roads today. These are almost as many as the number of people in Finland, Ireland and Sweden put together!.

Hero Honda has consistently grown at double digits since

inception; and today, every second motorcycle sold in the

country is a Hero Honda. Every 30 seconds, someone in India

buys Hero Honda's top -selling motorcycle ² Splendor.

Hero Honda bikes currently roll out from its three globally

benchmarked manufacturing facilities. Two of these are basedat Dharuhera and Gurgaon in Haryana and the third state of

the art manufacturing facility was inaugurated at Haridwar,

Uttrakhand in April this year.



These plants together are capable of churning out

3.9 million bikes per year.

Hero Honda is worlds third largest two wheeler

maker.

By 2002 Hero Group had sold 86 million bicycles

producing 16000 bicycles a day.

Today Hero Honda has an assembly line of nine

different models of motorcycles available. It holds the

record for most popular bike in the world by sales for

Its Splendor model.



PRODUCTS:

HERO HONDA CD100

HERO HONDA JOY

HERO HONDA CD

DAWN



HERO HONDA SLPENDORHERO HONDA SLPENDOR PLUS

HERO HONDA PASSION PLUS HERO HONDA PASSION



CBZ EXTREMECBZ

KARIZMA



RATIO ANALYSIS



Liquidity Ratios.

1)CURRENT RATIO:

CURRENT ASSETS

CURRENT LIABILITIES

Interpretation:

The ideal ratio 2:1 . The liquidity position of the company is not satisfactory

because it is not reached the ideal ratio 2:1 . The company should increase the

current assets and decrease the current liabilities.

2005 2006 2007 2008

0.31 0.51 0.62 0.57



Q uick Ratio:

Current assets inventories.

Current liabilities

Interpretation:the liquidity position of the company is not satisfactory because the ratio isdecrease and not reached the ideal ratio 1:1 the company should increasequick assets such as cash and bank balance and decrease the current liabilities.

2005 2006 2007 2008

0.11 0.30 0.36 0.33



LEVERAGE RATIOS:LEVERAGE RATIOS:

1)Debt equity Ratio

2)Proprietary Ratio

3)Fixed Asset Ratio

4)Interest Coverage RatiO



Debt Equity Ratio:

Long term debts/Equity share holder funds.

InterpretationInterpretation:

The Ideal Ratio is 2:1.The solvency position of the company

is satisfactory but it should decrease the loans such as secured

and unsecured. It should increase the reserves and share

capital also.

2005 2006 2007 2008

0.14 0.09 0.07 0.04



P roprietary Ratio:

Net WorthNet Worth / / Total AssetsTotal Assets

Interpretation:

These ratio is the indicative of strong financial positionof business . The higher the ratio , the better it is. but the

company

Should increase the shareholders funds.

2005 2006 2007 2008

0.83 0.87 0.89 0.92



F ixed Assets Ratio:

F ixed Assets

Net worth

Interpretation:This ratio is satisfactory and the ideal ratio is 0.67 and it willnever be more than 1 , the long term funds are used to buy oracquire the fixed assets.

2005 2006 2007 2008

0.42 0.45 0.51 0.50



Interest coverage Ratio:

PBIT/Fixed Interest Charges

Interpretation:

The ideal ratio is 6. This Ratio indicates whether a business isearning sufficient profits to pay the interest charges. This ratio isnot satisfactory and company should increase the sales and profits ,to pay the interest charges for the long term debts.

2005 2006 2007 2008

117.74 231.38 55.20 40.38



Turn Over Ratios

1)inventory holding periods

2)working capital turnover

3)inventory turnover ratio

4)fixed assets turnover ratio



Inventory Holding P eriod Inventory Holding P eriod ::

No . Of Days In Years/S.T.RNo . Of Days In Years/S.T.R

Interpretation:

The Inventory turnover ratio also be expressed in termsof no. of days (or) months it takes for the stock to get converted

into sales. Here the company is satisfactory and company has towork hard to have more sales

2005 2006 2007 2008

11.38days 10.58 10.42 11.93



Working Capital Working Capital TurnOver TurnOver RatioRatio

Net Sales/Working Capital

Interpretation:The Company should increase the sales and also increasethe working capital i.e., increase the current assets anddecrease current liabilities .

2005 2006 2007 2008

-7.85 -11.75 -17.49 -11.64



Inventory TurnOver Ratio:

CGS/Avg. Inventory

Interpretation:

The ideal ratio is 8. the company should control the cost of goods sold

expenses and increase the sales in order to increase the ratio.

2005 2006 2007 2008

31.80 34.02 34.56 30.17



F ixed Assets Turn Over Ratio:

TurnOverTurnOver/ Fixed Assets/ Fixed Assets

Interpretation:

The ideal ratio is 5. the ratio is decreasing from year to year and we should

increase the sales up to the maximum level and we should use the fixed assetsup to full 100% capacity.

2005 2006 2007 2008

10.38 8.77 7.30 6.67



P rofitability Ratios:

1)Gross P rofit Ratio

2)Operating Ratio

3)Earning per share



EARNING PER SHARE:

2005 2006 2007 2008

RS.40.59 RS.48.64 RS.42.96 RS.48.47

Interpretation : The profits of the company are increasing

slightly and we should increase the sales and we shoulddecrease the cost of goods sold , operating expenses. The

shareholders returns on their investment is increasing year to

year

PAT-Preference dividends

No. of Equity shares



Gross p rofit ratio:

gross profit X 100

Sales

Interpretation:The profitability position of the company is satisfactory The profitability position of the company is satisfactory

because of the Gross profit ratio is increasing from year to yearbecause of the Gross profit ratio is increasing from year to yearbut it is not enough the company should control the cost of but it is not enough the company should control the cost of goods sold expenses and increase the sales.goods sold expenses and increase the sales.

2005 2006 2007 2008

15.91% 15.91% 12.34% 13.46%



Operating Ratio:

CGS + Operating Exp X 100

Net Sales

Interpretation:

The company had controlled the operating expenses thats why the ratio isdecreased ,the lower the ratio the better it is, the company should continuethis performance in the future also. It is satisfactory .

2005 2006 2007 2008

85.30% 85.40% 89.07% 88.09%

20906431 ratio analysis of hero honda

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