Comparison between Dewan Motors & Suzuki Motors Limited

The automobile has become an important and indispensable means of transport. Quick

and reliable mobility is essential both for personal needs as well as business. The

automobile industry is a key industry in many countries, and its development is directly

related to the development of the nation as a whole.

The present situation of the automobile industry in Pakistan is exactly in the middle of

the historic path of development. There are a number of challenges to be overcome, such

as realizing economies of scale, generating a bigger market, and ensuring fair and healthy

competition among the manufacturers for the benefit of consumers. Automobile

companies throughout the world are faced with the challenge of global competition.

DEWAN FAROOQUE MOTORS AND PAK SUZUKI MOTORS

The Dewan Farooque Motors is belongs to the corporate group of Dewan Farooque,

which is the one of the leading groups of Pakistan. The key brand of Dewan Farooque

Motors is the Santro brand by Hyundai. The car comes under the 1000cc segment and has

registered the rapid growth after the introduction of its new model.

Pak Suzuki motor company ltd is a public limited company with its shares quoted on

stock exchanges in Pakistan. The Suzuki management immediately after privatization-

started expansion of the Bin Qasim Plant to increased its capacity to 50,000 vehicles per

year. The company continues to be in the forefront of automobile industry of Pakistan.

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RATIO ANALYSIS

PAK SUZUKI MOTOR COMPAY LIMITED

(1) Working Capital = Current Assent – Current liabilities

Years Current Assets Current Liabilities

W. Capital

2000 3152839 2710563 442276

2001 2768706 2087090 681616

2002 7183211 5511463 1671748

2003 8541540 5603769 2937771

Comment:

Pak Suzuki Motor Company Limited has enough working capital which is a good sign. You can see that Assets are growing up and Current liabilities are also going to increase and when you see the proportion of working capital that is also growing.

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(2) Current Ratio: Current Assets / Current Liabilities Years Current Assets Current

LiabilitiesCurrent ration

2000 3152839 2710563 1.16

2001 2768706 2087090 1.33

2002 7183211 5511463 1.3

2003 8541540 5603769 1.5

Comments:

In year 2003Pak Suzuki Motor company Limited is in very strong position if you compare this to the other years you can easily to reach the decision that 2003 is the best year and 2000 year is not satisfactory.

(3) Acid Test Ratio = Quick Assets / Current Liabilities

Years Quick Assets Current Liabilities

Ratio

2000 4502145 2710563 1.66

2001 4725149 2087090 2.26

2002 5190168 5511463 0.94

2003 5797749 5603769 1.03

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Comments:The ideal Acid test ration is 1:1 and you can see in 2002 the company has over quick assets which goes idol but in 2003 it is good because it is very close to an ideal ratio.

(4) Inventory Turn over Ratio = Cost of goods sold / Average Inventory

Years Cost of goods sold Average Inventory

Ratio

2000 6578898 1999521 3.29

2001 7599439 2054251 3.70

2002 9614256 2088767 4.6

2003 15840739 NA

Comments:

In all the years the company has high turnover which is a good sign for company it means company earning a lot of profit and that has overcome its expenses.

(5) Ratio of Plant Assets to Long Tem Liabilities

= Plant Assets / Total Liabilities

Years Plant Assets L. Liabilities Ratio

2000 4567695 1171204 3.9

2001 3993930 1024085 3.9

2002 8159447 1665193 4.9

2003 9674550 1896971 5.1

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Comments:

The ratio is growing year by year which is a good sign it means if company want to take some extra debts that can take because company has very good ratio.

(6) Debt Ratio = Total Debts / Total Assets

Years Total Debts Total Asset Ratio

2000 2807563 4567695 0.61

2001 2132090 3993930 0.53

2002 551463 8159447 0.07

2003 5603769 9674550 0.58

Comments:

In all years the company has very satisfactory debt ratio but in 2002 it is not good it means that company has more self proportion in the investment that should take more money as a loan and in other years company has good ration that can take ratio with out any hesitation.

(7) Total Asset Turn Over Ratio = Net sales / Total Assets

Years Net Sales Total Assets Ratio

2000 6889145 4567695 1.51

2001 7976122 3993930 1.20

2002 10994067 8159447 1.35

2003 18484220 9674550 1.91

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Comments:

The company’s total asset turn over ratio is very good it has minimum ratio in 2001 and maximum ratio in 2003 it means the company ratio is growing up steady which is a good sign. It means the company utilizing its fewer resources and getting high profit.

(8) Gross Profit Ratio = Gross profit / Net Sales

Years Gross profit Net sales Ratio

2000 310247 6889145 0.045

2001 376683 7976122 0.05

2002 1379811 10994067 0.13

2003 2643481 18484220 0.14

Comments:

The company’s gross profit ratio is not enough in 2000 it has very less but in 2003 it is comparatively growing, in a nut shell we can say the gross profit ratio is growing.

(9) Profit Margin Ratio = Net Income / Net Sales

Years Net Income Net sales Ratio

2000 (26600) 19816 (1.34)

2001 141013 20434 6.9

2002 850097 29484 28.83

2003 1570191 49503 31.72

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Comments:The company’s profit marging ratio result is very proficient because in 2000 the company’s ratio was in negative but with passing of year it gain very good result and in 2003 it got very good result.

(10) Working Capital Turnover Ratio

= Cost of goods sold / net working capital

Years Cost of goods sold Working capital Ratio

2000 6578898 442276 14.88

2001 7599439 681616 11.15

2002 9614256 1671748 5.75

2003 15840739 2937771 5.39

Comments

If the working capital ratio is less it is benefited for the company its means the company is spending less and getting more product.

DEWAN FAROOQUE MOTORS LIMITED

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(1) Working Capital = Current Assent – Current liabilities

Years Current Assets Current Liabilities

W. Capital

2000 2454084 2454084 0

2001 1852563 1852563 0

2002 1815632 1815632 0

2003 1730866 1730866 0

Comment:

Dewan Motor Company has not working capital which is impossible. The current assets and currents liabilities are equal which not a good sign is. The company must have working capital to run the daily expenses.

(2) Current Ration: Current Assets / Current Liabilities

Years Current Assets Current Liabilities

Current ration

2000 2454084 2454084 1.0

2001 1852563 1852563 1.0

2002 1815632 1815632 1.0

2003 1730866 1730866 1.0

Comments: Current Assets ratios is 1:1 which is not good, The company must have some extra current assets over the current liabilities.

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(3) Acid Test Ratio = Quick Assets / Current Liabilities

Years Quick Assets Current Liabilities

Ratio

2000 2650411 2454084 1.08

2001 3464293 1852563 1.87

2002 2832386 1815632 1.56

2003 3444423 1730866 1.99

Comments:

Acid test ratio is satisfactory this is growing up steady which is a good sign it means the company has more quick assets over the current liabilities.

(5)Inventory Turn over Ratio = Cost of goods sold / Average Inventory

Years Cost of goods sold Average Inventory

Ratio

2000 903329 311493 2.9

2001 3204532 1033720 3.1

2002 3882778 862840 4.5

2003 4063378 766675 5.3

Comments:

Inventory turn over ratio is very proficient because it is up standing year by year it mean the company has over come its extra expenses.

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(5)Ratio of Plant Assets to Long Tem Liabilities

= Plant Assets / Total Liabilities

Years Plant Assets L. Liabilities Ratio

2000 2726181 1171204 2.9

2001 3476846 1024085 2.8

2002 3516853 1665193 3.8

2003 3477741 1896971 4.9

Comments:

The plant assets are more as compared to the long term liabilities, ratio is growing upward by passing of the year and it is good sign but keep in mind that the assets should not be keep idle.

(6) Debt Ratio = Total Debts / Total Assets

Years Total Debts Total Asset Ratio

2000 998767 4567695 0.22

2001 1095867 3993930 0.15

2002 1236849 8159447 0.15

2003 2743710 9674550 0.28

Comments:

The debt ratio is not good because company has invested its own amount in the business but at the moment the financial institutions are giving loan at low rate the companies should take this facility and enhance its business by taking the loan at low rate(7) Total Asset Turn Over Ratio = Net sales / Total Assets

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Years Net Sales Total Assets Ratio

2000 1001294 2726181 0.37

2001 3389370 3476846 0.97

2002 4256192 3516853 1.21

2003 4695993 3477741 1.35

Comments:

The Company’s total asset turn over ratio is very good it is enhancing with the passage of time and its grown rate is also very high.

(8) Gross Profit Ratio = Gross profit / Net Sales

Years Gross profit Net sales Ratio

2000 97965 1001294 0.10

2001 184838 3389370 0.05

2002 373414 4256192 0.09

2003 632615 4695993 0.13

Comments:

The company’s gross profit ratio is also satisfactory in 2001 it is bad but when it cross the 2001 its profit ratio increased and in 2003 the ratio is highest as compare to the other years.

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(9) Profit Margin Ratio = Net Income / Net Sales

Years Net Income Net sales Ratio

2000 63557 1001294 0.06

2001 (31150) 3389370 (0.01)

2002 11942 4256192 0.01

2003 139709 4695993 0.03

Comments:

Net profit margin ratio is not bad because its ratio in 2001 it goes to negative and in 2002 its ratio is less as compare to the 2000 when we talk about the 2003 it is not satisfactory as compared to the 2000, in a nut shell we can say the company can perform well in net profit margin point of view.

(10) Working Capital Turnover Ratio

= Cost of goods sold / net working capital

Years Cost of goods sold Working capital Ratio

2000 903329 0 NA

2001 3204532 0 NA

2002 3882778 0 NA

2003 4063378 0 NA

Comments:

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Working capital turnover ratio is very bad because company has not working capital, and its ratio goes to zero.

Comparison between Dewan Motors & Suzuki Motors Limited

0500000

10000001500000200000025000003000000

1 2 3 4

year

Suzuki Motor

Dewan Motor

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Current ratio

00.5

11.5

2

1 2 3 4

year

Ra

tio

Suzuki Motor

Dewan Motor

Acid Test Ratio

0

1

2

3

1 2 3 4

Year

Ra

tio

Suzuki Motor

Dewan Motor

Inventory turn over ratio

0

2

4

6

2000 2001 2002 2003

years

rati

o

Suzuki Motor

Dewan Motor

Plant asset to long term liability

0123456

1 2 3 4

Suzuki Motor

Dewan Motor

14

Total Asset turn over ratio

0

1

2

3

1 2 3 4

Year

Ra

tio

Suzuki Motor

Dewan Motor

Debt Ratio

00.20.40.60.8

1 2 3 4

Year

Ra

tio

Suzuki Motor

Dewan Motor

Gross profit Ratio

0

0.05

0.1

0.15

1 2 3 4

Year

Ra

tio

Suzuki Motor

Dewan Motor

Working capital turn over ratio

05

101520

1 2 3 4

year

Ra

tio

Suzuki Motor

Dewan Motor

15

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APPENDIX

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References

ANNUAL REPORTS:

DEWAN FAROOQUE MOTORS PAK SUZUKI MOTORS LTD

BOOK

Fundamentals Of Financial Management 5th Edition

INTERNET www.dewan_motors.com www.paksuzuki.com.pk

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