Description
Financial planning and statergy is the process of meeting your life goals through the proper management of your finances. Life goal can include buying a home, Saving for your child’s education, planning for your retirement etc.
Financial Planning and Strategy of Maruti Udyog Ltd
A
PROJECT REPORT
ON
“Financial Planning And Strategy”
FOR MARUTI UDYOG IMITED
SU!MITTED TO"ARDS FUFIMENT
OF
M!A DEGREE TO S"ISS !USINESS
SC#OO
ACADAMIC SESSION
$%%&'((
Pre)ared !y* Under t+e g,idance -.* S,/0itted T-*
XXXXX. X Prof. XXXX. X. XXX Mr. XXXXX
Reg. No: - SM9035
M!- SS
"onfidential Page # $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
C-ntent1
DECARATION.............................................................................................................................4
INTRODUCTION...........................................................................................................................5
INDUSTRY SEGMENT................................................................................................................7
PROJECT DESCRIPTION........................................................................................................12
STATEMENT OF PRO!EM....................................................................................................14
T#EORITCA FRAME"OR2..................................................................................................16
(ool) and (ec*ni+ue) of Financial State,ent !naly)i):..............................................#-
#. .ori/ontal and 0ertical !naly)i):..................................................................................17
&. Ratio) !naly)i):...............................................................................................................19
Financial State,ent.....................................................................................................&&
1nco,e State,ent........................................................................................................&'
1te,) on inco,e )tate,ent..........................................................................................&5
23erating )ection................................................................................................................25
Non-o3erating )ection........................................................................................................26
1rregular ite,)......................................................................................................................26
"la))ification................................................................................................................&9
enefit) fro, u)ing "a)* flo4..........................................................................................33
(y3e) of 5alance )*eet)..............................................................................................36
Per)onal 5alance )*eet......................................................................................................36
S,all 5u)ine)) 5alance )*eet..........................................................................................37
"or3orate 5alance )*eet )tructure...............................................................................3-
!))et)...................................................................................................................................37
Lia5ilitie)...............................................................................................................................38
7+uity....................................................................................................................................39
(*e alance S*eet Structure.......................................................................................39
COMPANY PROFIE.................................................................................................................45
8uic9 Fact)..................................................................................................................'6
!4ard) : !ccolade).....................................................................................................'-
Mile)tone)....................................................................................................................'9
"o,3any Fla)*5ac9....................................................................................................5#
FINANCIA SUMMARY OF MARUTI UDYOG TD3...........................................................52
ANAYSIS AND INTERPRETAION OF 2EY RATIOS.........................................................62
For,ula of ;e5t to 7+uity Ratio:..................................................................................-&
"o,3onent):................................................................................................................-&
7 "o,,unication)@................................................................101
E6ternal !,1ine11 En7ir-n0ent*........................................................................................101
(*e follo4ing 5u)ine)) en=iron,ent factor) out)ide an organi/ation *a=e a 3rofound 101
effect on t*e function) and o3eration) of an organi/ation..................................................101
i. "u)to,er)...............................................................................................................................101
ii. Su33lier).................................................................................................................................101
iii. "o,3etitor)...........................................................................................................................101
i=. Ao=ern,ent%Legal !gencie) : Regulation)....................................................................101
=. Macro 7cono,y%Mar9et):....................................................................................................101
=i. (ec*nological Re=olution....................................................................................................101
Pr-8ect 9,erie1........................................................................................................................102
!I!IOGRAP#Y.......................................................................................................................103
"onfidential Page 3 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
DECARATION
1 t*e under)igned )ole,nly declare t*at t*e re3ort of t*e 3roBect 4or9 entitled Financial
!naly)i)> Planning : Statergy> i) 5a)ed ,y o4n 4or9 carried out during t*e cour)e of
,y )tudy under t*e )u3er=i)ion of Prof. Manita. ;. S*a*
1 a))ert t*at t*e )tate,ent) ,ade and conclu)ion) dra4n are an outco,e of t*e 3roBect
4or9. 1 furt*er declare t*at to t*e 5e)t of ,y 9no4ledge and 5elief t*at t*e 3roBect re3ort
doe) not contain any 3art of any 4or9 4*ic* *a) 5een )u5,itted for t*e a4ard of any
ot*er degree%di3lo,a%certificate in t*i) Uni=er)ity or any ot*er Uni=er)ity.
CCCCCCCCCCCCCCCCCCCCCC
?Signature of t*e "andidate@
Na,e : XXXXXX XXXX
Reg. No.: SM9035
"onfidential Page ' $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
INTRODUCTION
"onfidential Page 5 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
Financial 3lanning and )tatergy i) t*e 3roce)) of ,eeting your life goal) t*roug* t*e
3ro3er ,anage,ent of your finance). Life goal can include 5uying a *o,e> Sa=ing for
your c*ildD) education> 3lanning for your retire,ent etc. Financial 3lanning i) t*e ta)9 of
deter,ining *o4 a 5u)ine)) 4ill afford to ac*ie=e it) )trategic goal) and o5Becti=e).
U)ually> a co,3any create) a Financial Plan i,,ediately after t*e =i)ion and o5Becti=e
*a=e 5een )et. (*e financial 3lan de)cri5e) eac* of t*e acti=itie)> re)ource)> e+ui3,ent
and ,aterial) t*at are needed to ac*ie=e t*e)e o5Becti=e)> a) 4ell a) t*e ti,efra,e)
in=ol=ed.
"o,,on a=enue) a=aila5el in t*e ,ar9et are:
• "o,,on Stoc9)
• ond)
• Mutual Fund)
• 1n)urance
• Aold
• Real 7)tate
• Pen)ion 3lan) etcE
"onfidential Page 6 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
INDUSTRY SEGMENT
"onfidential Page - $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
7)ta5li)*ed in ;ece,5er #9$3> Maruti Su/u9i 1ndia Ltd. *a) u)*ered a re=olution in t*e
1ndian car indu)try. (*i) car i) ,eant for an a=erage 1ndian indi=idual 4*ic* i) afforda5le
a) 4ell a) *a) elegant a33eal. Maruti Su/u9i 1ndia Ltd. i) t*e re)ult of colla5oration of
Maruti 4it* Su/u9i of Fa3an. !t t*i) ti,e> t*e 1ndian car ,ar9et *ad )tagnated at a
=olu,e of 30>000 to '0>000 car) for t*e decade ending #9$3. (*i) 4a) fro, 4*ere
Maruti too9 o=er.
(*e co,3any *a) cro))ed t*e ,ile)tone of 5eco,ing t*e fir)t 1ndian co,3any in Marc*
#99'> 5y ,anufacturing in totality one ,illion =e*icle). 1t i) 9no4n for it) ,a))-
3roduction and )elling of ,ore t*an a ,illion car). Maruti Su/u9i 1ndia Ltd. i) t*e 1ndiaG)
large)t auto,o5ile co,3any 4*ic* entered in t*e ,ar9et 4it* affir,ed ai, to render
*ig* +uality fuel H efficient and lo4 - co)t =e*icle).
Sale) figure in t*e year #993 *a) reac*ed u3 to #>96>$&0. Maruti co,e) in a =ariety of
,odel) in t*e $00 )eg,ent. 1t) car) o3erate on Fa3ane)e tec*nology> 3lia5le to 1ndian
condition) and 1ndian car u)er). y t*e year #99$-99> t*e co,3any *a) ,oderni/e t*e
e000 unit).
Recently to 4ard off t*e gro4ing co,3etition> Maruti *a) co,3leted R). ' 5illion
e 4*ic* *a) rai)ed t*e total 3roduction ca3acity to
o=er 3>&0>000 =e*icle) 3er annu,. Iit* t*e co,ing of eac* and e=ery year> t*e total
3roduction of t*e co,3any e t*e
co,3any i) 1ndiaG) leading auto,o5ile ,anufacturer) and t*e ,ar9et leader in t*e car
)eg,ent. Sale) recorded in Fune &0#0> i) R). '>-53.5$ crore) and in Marc* &0##> i) R).
5>&-$.3& crore).
.
Mar,ti Udy-g India i0ited
(y3e Pu5lic ?S7 M!RU(1> NS7 M!RU(1@
1ndu)try !uto,oti=e
Founded #9$# ?a) Maruti Udyog Li,ited@
.ead+uarter) ;el*i> 1ndia
Key 3eo3le Mr. S*in/o Na9ani)*i> Managing ;irector and "72
Product) !uto,o5ile)> Motorcycle)
Re=enue US 5.9 5illion
7,3loyee) ->-0&
Ie5)ite *tt3:%%444.,aruti)u/u9i.co,%
"onfidential Page 9 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
"!RS
Maruti Su/u9i Ki/a)*i
Maruti Su/u9i Arand
0itara &.'
Arand 0itara
2,ni
5 )eater Maruti 2,ni
$ )eater Maruti 2,ni
LPA Maruti 2,ni
Maruti !lto
!lto
!lto L<
!lto L 4it* all ot*er year) )tated in )o,e 3ercentage of t*i)
5a)e.
Cla11i.icati-n and i0itati-n1*
(*e ratio) analy)i) i) t*e ,o)t 3o4erful tool of financial )tate,ent analy)i). Ratio)
)i,3ly ,ean one nu,5er e including United Kingdo, co,3any la4> financial )tate,ent) are
often referred to a) acc-,nt1> alt*oug* t*e ter, financial )tate,ent) i) al)o u)ed>
3articularly 5y accountant).
Financial )tate,ent) 3ro=ide an o=er=ie4 of a 5u)ine))G financial condition in 5ot* )*ort
and long ter,. (*ere are four 5a)ic financial )tate,ent):
1. !alance 1+eet: al)o referred to a) )tate,ent of financial 3o)ition or condition>
re3ort) on a co,3anyG) a))et)> lia5ilitie) and net e+uity a) of a gi=en 3oint in
ti,e.
2. Inc-0e 1tate0ent: al)o referred to a) Profit and Lo)) )tate,ent ?or a OP:LO@>
re3ort) on a co,3anyG) re)ult) of o3eration) o=er a 3eriod of ti,e.
3. State0ent -. retained earning1: e
3articularly it) o3erating> in=e)ting and financing acti=itie).
For large cor3oration)> t*e)e )tate,ent) are often co,3le< and ,ay include an
e inco,e
)tate,ent and ca)* flo4 )tate,ent in furt*er detail. Note) to financial )tate,ent) are
con)idered an integral 3art of t*e financial )tate,ent).
"onfidential Page && $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
Pur3o)e of financial )tate,ent)
(*e o5Becti=e of financial )tate,ent) i) to 3ro=ide infor,ation a5out t*e financial
)trengt*> 3erfor,ance and c*ange) in financial 3o)ition of an enter3ri)e t*at i) u)eful to
a 4ide range of u)er) in ,a9ing econo,ic deci)ion).O Financial )tate,ent) )*ould 5e
under)tanda5le> rele=ant> relia5le and co,3ara5le. Re3orted a))et)> lia5ilitie) and
e+uity are directly related to an organi/ationG) financial 3o)ition. Re3orted inco,e and
e a) it for, 3art of it) !nnual Re3ort.
• 7,3loyee) al)o need t*e)e re3ort) in ,a9ing collecti=e 5argaining agree,ent)
?"!@ 4it* t*e ,anage,ent> in t*e ca)e of la5or union) or for indi=idual) in
di)cu))ing t*eir co,3en)ation> 3ro,otion and ran9ing).
&. E6ternal U1er1* are 3otential in=e)tor)> 5an9)> go=ern,ent agencie) and ot*er
3artie) 4*o are out)ide t*e 5u)ine)) 5ut need financial infor,ation a5out t*e 5u)ine))
for a di=er)e nu,5er of rea)on).
• Pro)3ecti=e investors ,a9e u)e of financial )tate,ent) to a))e)) t*e =ia5ility of
in=e)ting in a 5u)ine)). Financial analy)e) are often u)ed 5y in=e)tor) and i)
3re3ared 5y 3rofe))ional) ?financial analy)t)@> t*u) 3ro=iding t*e, 4it* t*e
5a)i) in ,a9ing in=e)t,ent deci)ion).
"onfidential Page &3 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
• Financial in)titution) ?5an9) and ot*er lending co,3anie)@ u)e t*e, to decide
4*et*er to grant a co,3any 4it* fre)* working capital or e rendering )er=ice)> or
carrying out ot*er acti=itie) t*at con)titute t*e entityG) ongoing ,aBor o3eration).
o Aeneral and ad,ini)trati=e e utilitie)>
in)urance> de3reciation of office 5uilding and e+ui3,ent> )tationery>
)u33lie)@
o Selling e ad=erti)ing> freig*t> )*i33ing>
de3reciation of )ale) e+ui3,ent@
o R : ; e for e deciding to de3reciate an
in=e)t,ent 3ro3erty t*at *a) 3re=iou)ly not 5een de3reciated. .o4e=er> c*ange)
in e)ti,ate) ?e.g. e)ti,ated u)eful life of a fi
refer) to t*e a,ount of ca)* a co,3any generate) fro, t*e re=enue) it 5ring) in>
e one ,u)t calculate
ca)* generated fro, cu)to,er) and ca)* 3aid to )u33lier). (*e difference
5et4een t*e t4o reflect) ca)* generated fro, o3eration).
&. 1n=e)t,ent ca)* flo4): "a)* recei=ed or e inco,e ?di=idend)@> or a33reciation
?ca3ital gain)@ of t*e =alue of t*e in)tru,ent. 1t i) related to )a=ing or deferring
con)u,3tion. 1n=e)t,ent i) in=ol=ed in ,any area) of t*e econo,y> )uc* a)
5u)ine)) ,anage,ent and finance no ,atter for *ou)e*old)> fir,)> or
go=ern,ent). !n in=e)t,ent in=ol=e) t*e c*oice 5y an indi=idual or an
organi/ation> )uc* a) a 3en)ion fund> after )o,e analy)i) or t*oug*t> to 3lace or
lend ,oney in a =e*icle> in)tru,ent or a))et> )uc* a) 3ro3erty> co,,odity> )toc9>
5ond> financial deri=ati=e) ?e.g. future) or o3tion)@> or t*e foreign a))et
"onfidential Page &9 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
deno,inated in foreign currency> t*at *a) certain le=el of ri)9 and 3ro=ide) t*e
3o))i5ility of generating return) o=er a 3eriod of ti,e.
1n=e)t,ent co,e) 4it* t*e ri)9 of t*e lo)) of t*e 3rinci3al )u,. (*e in=e)t,ent
t*at *a) not 5een t*oroug*ly analy/ed can 5e *ig*ly ri)9y 4it* re)3ect to t*e
in=e)t,ent o4ner 5ecau)e t*e 3o))i5ility of lo)ing ,oney i) not 4it*in t*e
o4nerG) control. (*e difference 5et4een )3eculation and in=e)t,ent can 5e
)u5tle. 1t de3end) on t*e in=e)t,ent o4nerG) ,ind 4*et*er t*e 3ur3o)e i) for
lending t*e re)ource to )o,eone el)e for econo,ic 3ur3o)e or not.
1n t*e ca)e of in=e)t,ent> rat*er t*an )tore t*e good 3roduced or it) ,oney
e+ui=alent> t*e in=e)tor c*oo)e) to u)e t*at good eit*er to create a dura5le
con)u,er or 3roducer good> or to lend t*e original )a=ed good to anot*er in
e t*e
indi=idual create) dura5le con)u,er good)> *o3ing t*e )er=ice) fro, t*e good
4ill ,a9e *i) life 5etter. 1n t*e )econd> t*e indi=idual 5eco,e) an entre3reneur
u)ing t*e re)ource to 3roduce good) and )er=ice) for ot*er) in t*e *o3e of a
3rofita5le )ale. (*e t*ird ca)e de)cri5e) a lender> and t*e fourt* de)cri5e) an
in=e)tor in a )*are of t*e 5u)ine)). 1n eac* ca)e> t*e con)u,er o5tain) a dura5le
a))et or in=e)t,ent> and account) for t*at a))et 5y recording an e+ui=alent
lia5ility. !) ti,e 3a))e)> and 5ot* 3rice) and intere)t rate) c*ange> t*e =alue of
t*e a))et and lia5ility al)o c*ange.
!n a))et i) u)ually 3urc*a)ed> or e+ui=alently a de3o)it i) ,ade in a 5an9> in
*o3e) of getting a future return or intere)t fro, it. (*e 4ord originate) in t*e Latin
O=e)ti)O> ,eaning gar,ent> and refer) to t*e act of 3utting t*ing) ?,oney or ot*er
clai,) to re)ource)@ into ot*er)G 3oc9et).Q'R (*e 5a)ic ,eaning of t*e ter, 5eing
an a))et *eld to *a=e )o,e recurring or ca3ital gain). 1t i) an a))et t*at i)
e i))uing or re3urc*a)ing )toc9> and
3aying di=idend). Finance ?3ronounced %f??nSnt)% or % fa ? ?nSnt)%@ i) t*e )cience
of fund) ,anage,ent.Q#R (*e general area) of finance are 5u)ine)) finance>
3er)onal finance> and 3u5lic finance.Q&R Finance include) )a=ing ,oney and
often include) lending ,oney. (*e field of finance deal) 4it* t*e conce3t) of
ti,e> ,oney> ri)9 and *o4 t*ey are interrelated. 1t al)o deal) 4it* *o4 ,oney i)
)3ent and 5udgeted. 2ne facet of finance i) t*roug* indi=idual) and 5u)ine))
organi/ation)> 4*ic* de3o)it ,oney in a 5an9. (*e 5an9 t*en lend) t*e ,oney
out to ot*er indi=idual) or cor3oration) for con)u,3tion or in=e)t,ent and
c*arge) intere)t on t*e loan).Loan) *a=e 5eco,e increa)ingly 3ac9aged for
re)ale> ,eaning t*at an in=e)tor 5uy) t*e loan ?de5t@ fro, a 5an9 or directly fro,
a cor3oration. ond) are de5t in)tru,ent) )old to in=e)tor) for organi/ation)
)uc* a) co,3anie)> go=ern,ent) or c*aritie).Q3R (*e in=e)tor can t*en *old t*e
de5t and collect t*e intere)t or )ell t*e de5t on a )econdary ,ar9et. an9) are
t*e ,ain facilitator) of funding t*roug* t*e 3ro=i)ion of credit> alt*oug* 3ri=ate
e+uity> ,utual fund)> *edge fund)> and ot*er organi/ation) *a=e 5eco,e
i,3ortant a) t*ey in=e)t in =ariou) for,) of de5t. Financial a))et)> 9no4n a)
in=e)t,ent)> are financially ,anaged 4it* careful attention to financial ri)9
,anage,ent to control financial ri)9. Financial in)tru,ent) allo4 ,any for,) of
)ecuriti/ed a))et) to 5e traded on )ecuritie) e )uc* a) t*e Federal Re)er=e
Sy)te, 5an9) in t*e United State) and an9 of 7ngland in t*e United Kingdo,>
are )trong 3layer) in 3u5lic finance> acting a) lender) of la)t re)ort a) 4ell a)
)trong influence) on ,onetary and credit condition) in t*e econo,y.Q'R
!ll t*ree toget*er are nece))ary to reconcile t*e 5eginning ca)* 5alance to t*e ending
ca)* 5alance.
"onfidential Page 3& $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
!ene.it1 .r-0 ,1ing Ca1+ .l-C
(*e ca)* flo4 )tate,ent ?1n financial accounting> a ca)* flo4 )tate,ent> al)o 9no4n a)
)tate,ent of ca)* flo4) or fund) flo4 )tate,ent> i) a financial )tate,ent t*at )*o4) *o4
c*ange) in 5alance )*eet account) and inco,e affect ca)* and ca)* e+ui=alent)> and
5rea9) t*e analy)i) do4n to o3erating> in=e)ting> and financing acti=itie).@ i) one of t*e
four ,ain financial )tate,ent) of a co,3any. (*e ca)* flo4 )tate,ent can 5e e t*en a co,3any 4ill often 5e dee,ed to 5e *ealt*y in
t*e )*ort-ter,. 1ncrea)ing or )ta5le ca)* 5alance) )ugge)t t*at a co,3any i) a5le to
,eet it) ca)* need)> and re,ain )ol=ent. (*i) infor,ation cannot al4ay) 5e )een in t*e
inco,e )tate,ent or t*e 5alance )*eet of a co,3any. For in)tance> a co,3any ,ay 5e
generating 3rofit> 5ut )till *a=e difficulty in re,aining )ol=ent.
(*e ca)* flo4 )tate,ent 5rea9) t*e )ource) of ca)* generation into t*ree )ection):
o3erational ca)* flo4)> in=e)ting> and financing. (*i) 5rea9do4n allo4) t*e u)er of
financial )tate,ent) to deter,ine 4*ere t*e co,3any i) deri=ing it) ca)* for o3eration).
For e a co,3any ,ay 5e notionally 3rofita5le 5ut generating little o3erational
ca)* ?a) ,ay 5e t*e ca)e for a co,3any t*at 5arter) it) 3roduct) rat*er t*an )elling for
ca)*@. 1n )uc* a ca)e> t*e co,3any ,ay 5e deri=ing additional o3erating ca)* 5y
i))uing )*are)> or rai)ing additional de5t finance.
"o,3anie) t*at *a=e announced )ignificant 4ritedo4n) of a))et)> 3articularly good4ill>
,ay *a=e )u5)tantially *ig*er ca)* flo4) t*an t*e announced earning) 4ould indicate.
For e teleco,) fir,) t*at 3aid )u5)tantial )u,) for 3A licen)e) or for
ac+ui)ition) *a=e )u5)e+uently *ad to 4rite-off good4ill> t*at i)> indicate t*at t*e)e
in=e)t,ent) 4ere no4 4ort* ,uc* le)). (*e)e 4rite-do4n) *a=e fre+uently re)ulted in
large announced annual lo))e)> )uc* a) 0odafoneG) announce,ent in May &006 t*at it
*ad lo)t T&#.9 5illion due to a 4ritedo4n of it) Aer,an ac+ui)ition> Manne),ann> one
"onfidential Page 33 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
of t*e large)t annual lo))e) in 7uro3ean *i)tory. ;e)3ite t*i) large Olo))O> 4*ic*
re3re)ented a )un9 co)t> 0odafoneG) o3erating ca)* flo4) 4ere )olid: OStrong ca)* flo4
i) one of t*e ,o)t attracti=e a)3ect) of t*e cell3*one 5u)ine))> allo4ing o3erator) li9e
0odafone to return ,oney to )*are*older) e=en a) t*ey rac9 u3 *uge 3a3er lo))e).O
Q#R
1n certain ca)e)> ca)* flo4 )tate,ent) ,ay allo4 careful analy)t) to detect 3ro5le,)
t*at 4ould not 5e e=ident fro, t*e ot*er financial )tate,ent) alone. For e
Iorld"o, co,,itted an accounting fraud t*at 4a) di)co=ered in &00&U t*e fraud
con)i)ted 3ri,arily of treating ongoing e t*ere5y
fraudulently 5oo)ting net inco,e. U)e of one ,ea)ure of ca)* flo4 ?free ca)* flo4@
4ould 3otentially *a=e detected t*at t*ere 4a) no c*ange in o=erall ca)* flo4 ?including
ca3ital in=e)t,ent)
"onfidential Page 3' $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
!alance S+eet
1n financial accounting ?Financial accountancy ?or financial accounting@ i) t*e field of
accountancy concerned 4it* t*e 3re3aration of financial )tate,ent) for deci)ion
,a9er)> )uc* a) )toc9*older)> )u33lier)> 5an9)> e,3loyee)> go=ern,ent agencie)>
o4ner)> and ot*er )ta9e*older). Financial ca3ital ,aintenance can 5e ,ea)ured in
eit*er no,inal ,onetary unit) or unit) of con)tant 3urc*a)ing 3o4er. (*e funda,ental
need for financial accounting i) to reduce 3rinci3al-agent 3ro5le, 5y ,ea)uring and
,onitoring agent)G 3erfor,ance and re3orting t*e re)ult) to intere)ted u)er). Financial
accountancy i) u)ed to 3re3are accounting infor,ation for 3eo3le out)ide t*e
organi/ation or not in=ol=ed in t*e day to day running of t*e co,3any. Manage,ent
accounting 3ro=ide) accounting infor,ation to *el3 ,anager) ,a9e deci)ion) to
,anage t*e 5u)ine)).
1n )*ort> Financial !ccounting i) t*e 3roce)) of )u,,ari/ing financial data ta9en fro,
an organi/ationG) accounting record) and 3u5li)*ing in t*e for, of annual ?or ,ore
fre+uent@ re3ort) for t*e 5enefit of 3eo3le out)ide t*e organi/ation. Financial
accountancy i) go=erned 5y 5ot* local and international accounting )tandard).@ > a
5alance )*eet or )tate,ent of financial 3o)ition i) a )u,,ary of t*e =alue of all a))et)>
lia5ilitie) and 24ner)*i3 e+uity for an organi/ation or indi=idual on a )3ecific date> )uc*
a) t*e end of it) financial year. ! 5alance )*eet i) often de)cri5ed a) a O)na3)*otO of a
co,3anyG) financial condition on a gi=en date. 2f t*e four 5a)ic financial )tate,ent)>
t*e 5alance )*eet i) t*e only )tate,ent 4*ic* a33lie) to a )ingle 3oint in ti,e> in)tead
of a 3eriod of ti,e.
! co,3any 5alance )*eet *a) t*ree 3art): a))et)> lia5ilitie) and )*are*older)G e+uity.
(*e ,ain categorie) of a))et) are u)ually li)ted fir)t and are follo4ed 5y t*e lia5ilitie).
(*e difference 5et4een t*e a))et) and t*e lia5ilitie) i) 9no4n a) t*e net a))et) or t*e
"onfidential Page 35 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
net 4ort* of t*e co,3any. !ccording to t*e accounting e+uation> net 4ort* ,u)t e+ual
a))et) ,inu) lia5ilitie).
Record) of t*e =alue) of eac* account or line in t*e 5alance )*eet are u)ually
,aintained u)ing a )y)te, of accounting 9no4n a) t*e dou5le-entry 5oo99ee3ing
)y)te,.
! )i,3le 5u)ine)) o3erating entirely in ca)* could ,ea)ure it) 3rofit) 5y )i,3ly
4it*dra4ing t*e entire 5an9 5alance at t*e end of t*e 3eriod> 3lu) any ca)* in *and.
.o4e=er> real 5u)ine))e) are not 3aid i,,ediatelyU t*ey 5uild u3 in=entorie) of good)
to )ell and t*ey ac+uire 5uilding) and e+ui3,ent. 1n ot*er 4ord): 5u)ine))e) *a=e
a))et) and )o t*ey could not> e=en if t*ey 4anted to> i,,ediately turn t*e)e into ca)* at
t*e end of eac* 3eriod. Real 5u)ine))e) al)o o4e ,oney to )u33lier) and to ta<
aut*oritie)> and t*e 3ro3rietor) do not 4it*dra4 all t*eir original ca3ital and 3rofit) at t*e
end of eac* 3eriod. 1n ot*er 4ord) 5u)ine))e) al)o *a=e lia5ilitie).
Ty)e1 -. /alance 1+eet1
! 5alance )*eet )u,,ari/e) an organi/ation or indi=idualG) a))et> e+uity and lia5ilitie)
at a )3ecific 3oint in ti,e. 1ndi=idual) and ),all 5u)ine))e) tend to *a=e )i,3le 5alance
)*eet). Larger 5u)ine))e) tend to *a=e ,ore co,3le< 5alance )*eet)> and t*e)e are
3re)ented in t*e organi/ationG) annual re3ort. Large 5u)ine))e) al)o ,ay 3re3are
5alance )*eet) for )eg,ent) of t*eir 5u)ine))e).! 5alance )*eet i) often 3re)ented
along)ide one for a different 3oint in ti,e ?ty3ically t*e 3re=iou) year@ for co,3ari)on.
Per1-nal /alance 1+eet
! 3er)onal 5alance )*eet li)t) current a))et) )uc* a) ca)* in c*ec9ing account) and
)a=ing) account)> long-ter, a))et) )uc* a) co,,on )toc9 and real e)tate> current
"onfidential Page 36 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
lia5ilitie) )uc* a) loan de5t and ,ortgage de5t due or o=erdue> and long-ter, lia5ilitie)
)uc* a) ,ortgage and ot*er loan de5t. Securitie) and real e)tate =alue) are li)ted at
,ar9et =alue rat*er t*an at *i)torical co)t or co)t 5a)i). Per)onal net 4ort* i) t*e
difference 5et4een an indi=idualG) total a))et) and total lia5ilitie).
S0all /,1ine11 /alance 1+eet
! ),all 5u)ine)) 5alance )*eet li)t) current a))et) )uc* a) ca)*> account) recei=a5le>
and in=entory> fi 5uilding)> and e+ui3,ent> intangi5le a))et)
)uc* a) 3atent)> and lia5ilitie) )uc* a) account) 3aya5le> accrued e and long-
ter, de5t. "ontingent lia5ilitie) )uc* a) 4arrantie) are noted in t*e footnote) to t*e
5alance )*eet. (*e ),all 5u)ine))G) e+uity i) t*e difference 5et4een total a))et) and
total lia5ilitie).
Q#0R
C-r)-rate /alance 1+eet 1tr,ct,re
Auideline) for cor3orate 5alance )*eet) are gi=en 5y t*e 1nternational !ccounting
Standard) "o,,ittee and nu,erou) country-)3ecific organi/ation).
alance )*eet account na,e) and u)age de3end on t*e organi/ationG) country and t*e
ty3e of organi/ation. Ao=ern,ent organi/ation) do not generally follo4 )tandard)
e)ta5li)*ed for indi=idual) or 5u)ine))e).
1f a33lica5le to t*e 5u)ine))> )u,,ary =alue) for t*e follo4ing ite,) )*ould 5e included
on t*e 5alance )*eet:
A11et1
"onfidential Page 3- $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
"urrent a))et)
#. in=entorie)
&. account) recei=a5le
3. ca)* and ca)* e+ui=alent)
Long-ter, a))et)
#. 3ro3erty> 3lant and e+ui3,ent
&. in=e)t,ent 3ro3erty> )uc* a) real e)tate *eld for in=e)t,ent 3ur3o)e)
3. intangi5le a))et)
'. financial a))et) ?e
account) recei=a5le)> and ca)* and ca)* e+ui=alent)@
5. in=e)t,ent) accounted for u)ing t*e e+uity ,et*od
6. 5iological a))et)> 4*ic* are li=ing 3lant) or ani,al). !earer /i-l-gical a11et1
are 3lant) or ani,al) 4*ic* 5ear agricultural 3roduce for *ar=e)t> )uc* a) a33le
tree) gro4n to 3roduce a33le) and )*ee3 rai)ed to 3roduce 4ool.
Q#-R
ia/ilitie1
#. account) 3aya5le
&. 3ro=i)ion) for 4arrantie) or court deci)ion)
3. financial lia5ilitie) ?e )uc* a)
3ro,i))ory note) and cor3orate 5ond)
'. lia5ilitie) and a))et) for current ta<
5. deferred ta< lia5ilitie) and deferred ta< a))et)
6. ,inority intere)t in e+uity
-. i))ued ca3ital and re)er=e) attri5uta5le to e+uity *older) of t*e 3arent co,3any
"onfidential Page 3$ $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
E:,ity
(*e net a))et) )*o4n 5y t*e 5alance )*eet e+ual) t*e t*ird 3art of t*e 5alance )*eet>
4*ic* i) 9no4n a) t*e )*are*older)G e+uity. For,ally> )*are*older)G e+uity i) 3art of t*e
co,3anyG) lia5ilitie): t*ey are fund) Oo4ingO to )*are*older) ?after 3ay,ent of all ot*er
lia5ilitie)@U u)ually> *o4e=er> Olia5ilitie)O i) u)ed in t*e ,ore re)tricti=e )en)e of lia5ilitie)
e )*are*older)G e+uity 5y con)truction ,u)t e+ual a))et)
,inu) lia5ilitie)> and are a re)idual.
#. nu,5er) of )*are) aut*ori)ed> i))ued and fully 3aid> and i))ued 5ut not fully 3aid
&. 3ar =alue of )*are)
3. reconciliation of )*are) out)tanding at t*e 5eginning and t*e end of t*e 3eriod
'. de)cri3tion of rig*t)> 3reference)> and re)triction) of )*are)
5. trea)ury )*are)> including )*are) *eld 5y )u5)idiarie) and a))ociate)
6. )*are) re)er=ed for i))uance under o3tion) and contract)
-. a de)cri3tion of t*e nature and 3ur3o)e of eac* re)er=e 4it*in o4ner)G e+uity
T+e !alance S+eet Str,ct,re
(*e alance S*eet logic i) co,3letely con)i)tent 4it* t*e t4o 5a)ic rule) ?t*e rule) of
de5it%credit@ t*at 4ere de,on)trated at t*e 5eginning of t*e tutorial.
#. De/it Side- ;e)cri5e) eit*er a))et) t*at 5elong to t*e 5u)ine)) ?3ro3erty> a real
account> according to Rule No. & an a))et i) al4ay) a de5it@ or de5t) o4ed 5y
"onfidential Page 39 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
cu)to,er) to u). "u)to,er) according to Rule No. # - are a 3er)onal account
t*at ,u)t 5e a de5it ?t*e accounting entity ,u)t *a=e a Ode5tO to t*e 5u)ine))@.
&. Credit Side- ;e)cri5e) t*e o5ligation) of t*e 5u)ine)) to eit*er of t4o factor) a)
follo4):
#. 7 lender) and )o fort*@.
&. (*e o4ner of t*e 5u)ine)) ?"a3ital !ccount or accu,ulated 3rofit)@.
1n eit*er ca)e> according to Rule # eit*er t*e e t*ere are t4o e t*at al)o ta9e) account of t*e 5alance in
t*e Profit and Lo)) State,ent> 4ill 5e 5alanced.
"onfidential Page '0 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
Su,,ary
1n a gra3*ic for,at> t*e accounting )y)te, loo9) li9e t*i)
"onfidential Page '# $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
Financial State0ent Analy1i1
Financial )tate,ent analy)i) i) t*e 3roce)) of e financial analy)t)> and ot*er) in t*eir deci)ion-
,a9ing 3roce))e) related to )toc9)> 5ond)> and ot*er financial in)tru,ent). (*e goal in
analy/ing financial )tate,ent) i) to a))e)) 3a)t 3erfor,ance and current financial
3o)ition and to ,a9e 3rediction) a5out t*e future 3erfor,ance of a co,3any. 1n=e)tor)
4*o 5uy )toc9 are 3ri,arily intere)ted in a co,3anyG) 3rofita5ility and t*eir 3ro)3ect) for
earning a return on t*eir in=e)t,ent 5y recei=ing di=idend) and%or increa)ing t*e ,ar9et
=alue of t*eir )toc9 *olding). "reditor) and in=e)tor) 4*o 5uy de5t )ecuritie)> )uc* a)
5ond)> are ,ore intere)ted in li+uidity and )ol=ency: t*e co,3anyG) )*ort-and long-run
a5ility to 3ay it) de5t). Financial analy)t)> 4*o fre+uently )3eciali/e in follo4ing certain
indu)trie)> routinely a))e)) t*e 3rofita5ility> li+uidity> and )ol=ency of co,3anie) in order
to ,a9e reco,,endation) a5out t*e 3urc*a)e or )ale of )ecuritie)> )uc* a) )toc9) and
5ond).
!naly)t) can o5tain u)eful infor,ation 5y co,3aring a co,3anyG) ,o)t recent financial
)tate,ent) 4it* it) re)ult) in 3re=iou) year) and 4it* t*e re)ult) of ot*er co,3anie) in
t*e )a,e indu)try. (*ree 3ri,ary ty3e) of financial )tate,ent analy)i) are co,,only
9no4n a) *ori/ontal analy)i)> =ertical analy)i)> and ratio analy)i).
#-ri;-ntal Analy1i1
I*en an analy)t co,3are) financial infor,ation for t4o or ,ore year) for a )ingle
co,3any> t*e 3roce)) i) referred to a) horizontal analysis> )ince t*e analy)t i) reading
acro)) t*e 3age to co,3are any )ingle line ite,> )uc* a) )ale) re=enue). 1n addition to
co,3aring dollar a,ount)> t*e analy)t co,3ute) 3ercentage c*ange) fro, year to year
for all financial )tate,ent 5alance)> )uc* a) ca)* and in=entory. !lternati=ely> in
"onfidential Page '& $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
co,3aring financial )tate,ent) for a nu,5er of year)> t*e analy)t ,ay 3refer to u)e a
=ariation of *ori/ontal analy)i) called trend analysis. (rend analy)i) in=ol=e) calculating
eac* yearG) financial )tate,ent 5alance) a) 3ercentage) of t*e fir)t year> al)o 9no4n a)
t*e 5a)e year. I*en e t*e 5a)e year figure) are al4ay) #00
3ercent> and 3ercentage c*ange) fro, t*e 5a)e year can 5e deter,ined.
t*e analy)t calculate) eac* ite, on a )ingle financial
)tate,ent a) a 3ercentage of a total. (*e ter, vertical analysis a33lie) 5ecau)e eac*
yearG) figure) are li)ted =ertically on a financial )tate,ent. (*e total u)ed 5y t*e analy)t
on t*e inco,e )tate,ent i) net )ale) re=enue> 4*ile on t*e 5alance )*eet it i) total
a))et). (*i) a33roac* to financial )tate,ent analy)i)> al)o 9no4n a) component
percentages> 3roduce) common-size financial statements. "o,,on-)i/e 5alance
)*eet) and inco,e )tate,ent) can 5e ,ore ea)ily co,3ared> 4*et*er acro)) t*e year)
for a )ingle co,3any or acro)) different co,3anie).
Rati- Analy1i1
Ratio analy)i) ena5le) t*e analy)t to co,3are ite,) on a )ingle financial )tate,ent or
to e t*e analy)t can t*en e u)ing t*i) analytical tool
facilitate) inter co,3any a) 4ell a) intra ,any co,3ari)on). Ratio) are often cla))ified
u)ing t*e follo4ing ter,): profitability ratios ?al)o 9no4n a) o3erating ratio)@> liquidity
ratios> and solvency ratios. Profita5ility ratio) are gauge) of t*e co,3anyG) o3erating
)ucce)) for a gi=en 3eriod of ti,e. Li+uidity ratio) are ,ea)ure) of t*e )*ort-ter, a5ility
of t*e co,3any to 3ay it) de5t) 4*en t*ey co,e due and to ,eet une aleno> S4ift> Iagon-R and Jen.
9,icD Fact1
Pear of 7)ta5li)*,ent Fe5ruary #9$#
0i)ion O(*e Leader in (*e 1ndian !uto,o5ile 1ndu)try>
"reating "u)to,er ;elig*t and S*are*olderG) Iealt*U
! 3ride of 1ndia.O
1ndu)try !uto,oti=e - Four I*eeler)
Li)ting) : it) code) S7 - "ode: 53&500
NS7 - "ode: M!RU(1
loo,5erg: MULY1N
Reuter): MR(1.2
Foint 0enture Iit* Su/u9i Motor "o,3any> no4 Su/u9i Motor
"or3oration> of Fa3an in 2cto5er #9$&.
Regi)tered : "or3orate
2ffice
##t* Floor> Fee=an Pra9a)*
&5> Ka)tur5a Aand*i Marg
Ne4 ;el*i - ##000#> 1ndia
(el.: X?9#@-?##@-&33#6$3# ?#0 line)@
Fa &3'#3'#-5
Ie5)ite 444.,arutiudyog.co,
"onfidential Page '6 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
ACard1 E Acc-lade1
&0#0 ? Maruti Su/u9i ,anufacture) #0 la9* unit) in &009-#0.
&009 ? Maruti Su/u9i S4ift 5eco,e) fa)te)t to reac* 3-la9* ,ile)tone.
? Maruti Su/u9i !-)tar 5rea9) o4n record of fuel efficiency.
? Maruti Su/u9i 4in) GAolden Peacoc9 7co-1nno=ation !4ardG.
? .aryana allot) -00 acre) to Maruti Su/u9i for *i-tec* R:; co,3le<
at Ro*ta9.
? Maruti Su/u9i )*i3) out #00000t* !-)tar in le)) t*an a year.
? 1"S1 a4ard) to3 *onour) to Maruti Su/u9i for cor3orate
go=ernance.
&00$ ? Maruti Su/u9i 5eco,e) t*e fir)t 1ndian car co,3any to e
7)tee, nu,5er one in it) )eg,ent for t*e 3rd year in a ro4> S4ift
nu,5er one in t*e 3re,iu, co,3act )eg,ent.
? IagonR and 7)tee, to3 t*eir )eg,ent) in t*e F; Po4er !P7!L
)tudy.
? (NS ran9) Maruti 't* in t*e "or3orate Re3utation Strengt* ?"SR@
)tudy ?Z# in !uto )ector@-Fe5 05.
? Maruti 5agged t*e OManufacturer of t*e yearO a4ard fro, !utocar-
"N" ?&nd ti,e in a ro4@-Fe5 05.
? Fir)t 1ndian car ,anufacturer to reac* 5 ,illion =e*icle) )ale).
"onfidential Page '- $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
? u)ine)) Iorld ran9) Maruti a,ong to3 fi=e ,o)t re)3ected
co,3anie) in 1ndia-2ct 0'.
? Maruti ran9ed a,ong to3 ten ?Ran9-@ greene)t co,3anie) in 1ndia
5y u)ine)) (oday - Se3 G0'
&00' ? Maruti Su/u9i 4a) No. # in "u)to,er )ati)faction> No. # in Sale)
Sati)faction No.# in Product 8uality ?7)tee, and !lto@ and No. # in
Product !33eal ?7)tee, and Iagon R@.
? No. # in (otal "u)to,er Sati)faction ?Maruti $00> Jen and !lto@.
? u)ine)) Iorld ran9ed u) a,ong t*e countryG) fi=e ,o)t re)3ected
co,3anie).
? u)ine)) Iorld ran9ed u) t*e countryG) ,o)t re)3ected auto,o5ile
co,3any.
? 0oted Manufacturer of t*e year 5y "N".
? 0oted one of 1ndiaG) Areene)t "o,3anie) 5y u)ine)) (oday-!"
Niel)on 2RA-M!RA.
"onfidential Page '$ $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
Mile1t-ne1
#9$# ? Maruti Udyog Ltd. 4a) incor3orated.
#9$& ? Ste3ed into a F0 4it* SM" of Fa3an.
#9$3 ? Maruti $00> a -96 cc *atc*5ac9> 1ndiaG) fir)t afforda5le car 4a) 3roduced.
#9$' ? 1n)talled ca3acity reac*ed '0>000 unit). 2,ni> a -96 cc MU0 4a) in
3roduction.
#9$5 ? Launc* of Maruti Ay3)y ?9-0cc> 'I; off-road =e*icle@.
#9$6 • Produced #00>000 =e*icle) ?cu,ulati=e 3roduction@.
#9$- ? 7000 unit).
#99& ? SM" increa)e) it) )ta9e to 50 3er cent.
#99' ? Produced t*e # ,illiont* =e*icle )ince t*e co,,ence,ent of 3roduction.
#995 ? Second 3lant launc*ed> t*e in)talled ca3acity reac*ed &00>000 unit).
#996 ? Launc* of &'-*our e,ergency on-road =e*icle )er=ice.
#99- ? Produced t*e & ,illiont* =e*icle )ince t*e co,,ence,ent of 3roduction.
#99$ ? Launc* of 4e5)ite a) 3art of "RM initiati=e).
#999 ? Launc* of Maruti - Su/u9i inno=ati=e traffic 5eat in ;el*i and "*ennai a)
)ocial initiati=e).
&000 ? 1;(R ?1n)titute of ;ri=ing (raining and Re)earc*@ launc*ed Bointly 4it*
;el*i go=ern,ent to 3ro,ote )afe dri=ing *a5it).
&00# ? Launc* of cu)to,er infor,ation center) in .ydera5ad> angalore> and
"*ennai.
&00& ? SM" increa)e) it) )ta9e to 5'.& 3er cent.
? Launc* of Maruti Finance 4it* #0 finance co,3anie) in Mu,5ai.
? Start of Maruti (rue =alue in Mu,5ai.
&003 ? Production of ' ,illiont* =e*icle.
? Li)ted on S7 and NS7 after a 3u5lic i))ue o=er)u5)cri5ed #0 ti,e).
&00' ? Maruti clo)ed t*e financial year &003-0' 4it* an annual )ale of '-&#&&
unit)> t*e *ig*e)t e=er )ince t*e co,3any 5egan o3eration) &0 year) ago.
&005 ? (*e fiftiet* la9* car roll) out in !3ril> &005.
&006 ? Maruti and Mag,a in 3act for financing car) .
&00- ? Maruti )tart) dri=ing and (ec*nical (raining 1n)titute for (ri5al Pout*.
&00$ ? Maruti Su/u9i in9) agree,ent 4it* Mundra Port for a ,ega car (er,inal
for 7 on an a=erage t4o =e*icle) roll out of t*e factory in
e=ery )ingle ,inute. (*e co,3any ta9e) a33ro$?F
Ra4 ,aterial
e$=B FB>(?@ &$>(?% (%B>B$& ##9>3-6
7F%? $?>%%& A(>(F? 35>3-&
(rading
3urc*a)e)
% % % % 0
Salarie) and
4age)
$>&?B (>&=% $>$F? $>?== 3>#3-
Manufacturing
eB@B F>AB@ &>?&& ((>%=B #&>393
Managerial
re,uneration
% % % % 0
O)erating
)r-.it
9>305 #'>06& #6>&66 #9>''$ $$>@F=
YoY groth
!"#
145.2 51.1 15.7 19.6 $(&)
23erating
,argin ?N@
F3@ (%3B ((3% ((3@ ##.-
"onfidential Page 53 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
(rea)ury
inco,e
A>??? A>&(@ @>$&$ @>B%% '>-00
E!DITA #3>0$# #->9-6 &0>55$ &3>9'$ $?>(F=
7;1(! ,argin
?N@
((3@ (A3( (A3B (A3? #3.$
;e3reciation @>&@& @>B=F $>FB@ A>@F? '>5&5
E!IT
71( ,argin
?N@
$>#3&
?3(
#3>'0$
&3F
#->-0'
((3?
&0>'6#
((3?
$$>==(
1ntere)t @A@ A=% $%@ A?= 3''
Pre-ta< 3rofit ?>=&F (A>%@? (?>B%% $%>AF? &&>6#-
Pre-ta< ,argin
?N@
=3? &3B ((3B ((3? ##.5
(a< 3ro=i)ion $>$?? @>B(A B>=%& =>B$@ ->&3-
7ffecti=e ta<
rate ?N@
$&3= A@3= A$3( A$3% 3&.0
Ad8,1ted net
)r-.it
5>'&# $>535 ##>$90 #3>$63 (B>AF%
YoY groth
!"#
270.4 57.4 39.3 16.6 $*&+
X?-@ 7BAB ((>F&% (A>F=A (B>AF%
"onfidential Page 5' $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
Gra)+ical re)re1entati-n -. Pr-.it E -11 Acc-,nt*
"onfidential Page 55 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
!alance 1+eet
Peri-d Ending Mar A(> $%(% Mar A(> $%%& Mar A(> $%%F Mar A(> $%%?
A11et1
"urrent !))et)
- "a)* !nd "a)*
7+ui=alent)
#>6&->000 #9>$6$>000 3>90#>000 #'>3-'>000
S*ort (er,
1n=e)t,ent)
5&>-33>000 ##>6$&>000 #0>9'6>000 $>$0&>000
Net Recei=a5le) #&>36$>000 #5>005>000 $>$60>000 $>60#>000
1n=entory #&>&-6>000 9>>000 #0>'$3>000 ->#&3>000
2t*er "urrent !))et) #&>96#>000 #&>3#9>000 $>$'5>000 $>$'0>000
T-tal C,rrent A11et1 &(>&=B>%%% =F>%F?>%%% @A>%AB>%%% @?>?@%>%%%
Long (er, 1n=e)t,ent) &#>&35>000 &#>090>000 '#>-03>000 &6>3''>000
Pro3erty Plant and
7+ui3,ent
- - - -
Aood4ill - - - -
1ntangi5le !))et) - - - -
!ccu,ulated
!,orti/ation
- - - -
2t*er !))et) - - - -
;eferred Long (er,
!))et "*arge)
$3$>000 -9#>000 99$>000 #>##0>000
T-tal A11et1 (=&>=?A>%%% (@%>F%B>%%% ($=>F?B>%%% (%@>?$@>%%%
ia/ilitie1
"urrent Lia5ilitie)
!ccount) Paya5le &3>'6#>000 &5>9-&>000 #->0$0>000 9>&56>000
S*ort%"urrent Long
(er, ;e5t
9>-30>000 $>#33>000 #&>9$5>000 ->633>000
2t*er "urrent
Lia5ilitie)
##>655>000 $>0$#>000 ->&''>000 #'>&63>000
"onfidential Page 56 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
T-tal C,rrent
ia/ilitie1
@(>&%F>%%% A?>@(F>%%% A$>@==>%%% $B>A==>%%%
Long (er, ;e5t 3>6'0>000 5>3'5>000 5>395>000 6>'-#>000
2t*er Lia5ilitie) - - - -
;eferred Long (er,
Lia5ility "*arge)
- - - -
Minority 1ntere)t - - - -
Negati=e Aood4ill - - - -
T-tal ia/ilitie1 @?>F@?>%%% @B>(B$>%%% @%>=%@>%%% A@>=B&>%%%
St-cD+-lder1G E:,ity
Mi)c Stoc9) 23tion)
Iarrant)
- - - -
Redee,a5le Preferred
Stoc9
- - - -
Preferred Stoc9 - - - -
"o,,on Stoc9 5>69#>000 5>69#>000 5>69#>000 5>69#>000
Retained 7arning) ##5>$66>000 9#>6'0>000 $0>5'9>000 6'>&'3>000
(rea)ury Stoc9 &69>000 ?#>6-$>000@ 3#>000 #3#>000
"a3ital Sur3lu) - - #>000 -
2t*er Stoc9*older
7+uity
- - - -
T-tal St-cD+-lder
E:,ity
' ' ' '
Net Tangi/le A11et1 ' ' ' '
Ca1+ .l-C 1tate0ent
Peri-d Ending Mar A(> $%(% Mar A(>
$%%&
Mar A(>
$%%F
Mar A(>
$%%?
Net Inc-0e $=>$@?>%%% ($>$?@>%%% (?>F&&>%%% (B>FFA>%%%
O)erating Acti7itie1> Ca1+ Fl-C1 Pr-7ided !y -r U1ed In
"onfidential Page 5- $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
;e3reciation $>'#'>000 ->#65>000 5>-&->000 &>-55>000
!dBu)t,ent) (o Net
1nco,e
- - - -
"*ange) 1n !ccount)
Recei=a5le)
#>&9'>000 ?&>$0#>000@ 969>000 ?#>##5>000@
"*ange) 1n 1n=entorie) ?3>063>000@ #>&-0>000 ?3>360>000@ #>--#>000
"*ange) 1n 2t*er
23erating !cti=itie)
&6&>000 9-'>000 -95>000 #>-56>000
T-tal Ca1+ Fl-C Fr-0
O)erating Acti7itie1
A%>($(>%%% ($>=A%>%%% (&>%BF>%%% (F>?%@>%%%
In7e1ting Acti7itie1> Ca1+ Fl-C1 Pr-7ided !y -r U1ed In
"a3ital 7$0'>000@ ?#->060>000@ ?#->'30>000@ ?##>99#>000@
T-tal Ca1+ Fl-C1 Fr-0
In7e1ting Acti7itie1
4@&>((?>%%%5 F>B$F>%%% 4A%>F$A>%%%5 4$$>FA?>%%%5
Financing Acti7itie1> Ca1+ Fl-C1 Pr-7ided !y -r U1ed In
;i=idend) Paid - - - -
2t*er "a)* Flo4) fro,
Financing !cti=itie)
?35>$0$>000@ &5>5#->000 ?#3>'6'>000@ ?#0>9&0>000@
T-tal Ca1+ Fl-C1 Fr-0
Financing Acti7itie1
?BB>%%% 4B>(&(>%%%5 (>$&$>%%% 4(>A=?>%%%5
"*ange 1n "a)* and "a)*
7+ui=alent)
?#$>&'#>000@ #5>96->000 ?#0>'-3>000@ ?5>500>000@
2ey Rati-1
Data )r-7ided /y Ca)ital I9> e6ce)t C+ere n-ted3
&0##@
3
: 3''.'#
(railing P%7 ?tt,> intraday@: N%!
For4ard P%7 ?fye Mar 3#> &0#&@
#
: N%!
P7A Ratio ?5 yr e &005
Pr-.ita/ility
Profit Margin ?tt,@: $.$-N
23erating Margin ?tt,@: #0.6-N
Manage0ent E..ecti7ene11
Return on !))et) ?tt,@: #&.-#N
Return on 7+uity ?tt,@: &'.#'N
Inc-0e State0ent
Re=enue ?tt,@: &95.9&
Re=enue Per S*are ?tt,@: #>0&'.&5
8trly Re=enue Aro4t* ?yoy@: N%!
Aro)) Profit ?tt,@: 5'.-$
71(;! ?tt,@: 39.9-
Net 1nco,e !=l to "o,,on ?tt,@: &6.&5
;iluted 7PS ?tt,@: N%!
8trly 7arning) Aro4t* ?yoy@: N%!
!alance S+eet
(otal "a)* ?,r+@: N%!
(otal "a)* Per S*are ?,r+@: N%!
(otal ;e5t ?,r+@: N%!
"onfidential Page 59 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
(otal ;e5t%7+uity ?,r+@: N%!
"urrent Ratio ?,r+@: &.#9
oo9 0alue Per S*are ?,r+@: 0.00
Ca1+ Fl-C State0ent
23erating "a)* Flo4 ?tt,@: 30.#&
Le=ered Free "a)* Flo4 ?tt,@: #'.&&
"onfidential Page 60 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
ANAYSIS AND
INTERPRETAION OF 2EY
RATIOS
"onfidential Page 6# $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
i:,idity Rati-1
(3 "urrent Ratio:
"urrent ratio tell) u) t*e )*ort- ter, financial 3o)ition of t*e co,3any. "urrent Ratio of
Maruti Su/u9i *a) 5een increa)ing fro, &003 till &006 5ut *a) decrea)ed in t*e year
&00-.(*i) i) 5ecau)e current lia5ilitie) *a=e increa)ed ,ore a) co,3ared to current
a))et) in &00-.
(*e current ratio i) t*e 5e)t 9no4n ratio of financial analy)i). 1t 3re)ent) in relati=e
ter,) 4*at net 4or9ing ca3ital ,ea)ure) in a5)olute ter,).
#@- "alculation of current ratio
(*e current ratio ?"R@ i) calculated 5y di=iding current a))et) ?i.e. 4or9ing ca3ital@ 5y
current lia5ilitie).
! current ratio ,ay *a=e different ,eaning) de3ending on t*e 3oint of =ie4 of an
analy)t. 1t *a) a li+uidating ,eaning - t*e a5ility to ,a9e all nece))ary 3ay,ent) today -
4*ic* gi=e) a ,ea)ure of 3rotection or cu)*ion for lender). ut> lender) are not
intere)ted in recei=ing in=entory in lieu of t*eir clai,)> and t*ey ,ay loo9 at t*e ratio a)
an indication t*at t*e fir, i) a5le to generate fund) to ,a9e all needed 3ay,ent) in t*e
futureU t*u)> t*e ratio indicate) 4*et*er t*e fir, i) li9ely to 5e a going concern. ut> to
"onfidential Page 6& $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
infer )uc* a ,eaning> t*e ratio cannot 5e loo9ed u3on a) a )ingle )tati)tic> and it i)
nece))ary to analy/e t*e degree of li+uidity of t*e co,3onent) of 4or9ing ca3ital> a) it
i) done later in t*i) c*a3ter.
! general rule of t*u,5 )ugge)t) t*at t*e current ratio )*ould 5e clo)e to &. !) can 5e
)een in (a5le (-$.3> =ery fe4 co,3anie) in t*e c*o)en )a,3le ,eet t*e rule of t*u,5.
Ta/le T'F3A
"o,3ari)on of "urrent Ratio 5y )i/e of co,3any in #99'
Sale) [ A M I R U S
-# MM #.5 &.& &.0 #.' #.0 #.6
#-3 MM #.$ #.6 #.$ #.' #.5 #.&
3-5 MM #.$ #.- #.- #.& #.3 &.&
5-#0 MM &.0 #.5 #.6 #.# #.5 #.&
#0-&5 MM &.6 #.- #.' #.# #.' #.0
&5 X MM &.5 &.& #.3 #.0 #.3 #.0
A W Manufacturer) - ;rug) and Medicine) S1" &$33 ?&$3' in #999@
M W Manufacturer) - Mac*inery S1" 356# ?35'5 in #999@
I W I*ole)aler) - Furniture S1" 50&#
R W Retailer) - Food Store) S1" 5'##
U W (ele3*one "o,,unication> S1" '$#& ?'$#3 in #999@
S W Ser=ice) - (ra=el !gencie)> S1" '-&'
Source: Ro5ert Morri) !))ociate)> O!nnual State,ent) Studie)> #99'O
(*e food )tore and tele3*one co,3any grou3) do not e=en co,e clo)e to t*e )u33o)ed
de)ira5le le=el of &. 2nly in 3*ar,aceutical)> i) t*ere a large 3ro3ortion of fir,) 4it*
ade+uate li+uidity. Furt*er,ore> if it i) a))u,ed t*at larger fir,) are t*e )tronge)t fir,>
t*en t*e 3*ar,aceutical co,3anie) )tati)tic) )ugge)t t*at t*e i,3ro=e,ent in li+uidity
i) correlated 4it* a 3o)ition of )trengt* in t*e indu)try. Unfortunately> )uc* o5)er=ation
i) not uni=er)al 5ecau)e Bu)t t*e contrary )ee,) to ta9e 3lace in food )tore) and tra=el
agencie): larger fir,) in t*e)e )ector) *a=e t*e 4or)t li+uidity. 2ne ,ay )u)3ect t*at
"onfidential Page 63 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
t*e ea)y acce)) to credit of large food )tore c*ain) and t*e eagerne)) of food
,anufacturer) to 3lace t*eir 3roduct) on )tore )*el=e) e lo4 =alue) do not indicate a
critical 3ro5le, 5ut )*ould concern t*e ,anage,ent. 2ne e ,ar9eta5le )ecuritie) and account)
recei=a5le@ to 3ay it) current lia5ilitie). 8uic9 ratio for,ula i):
8uic9 ratio )3ecifie) 4*et*er t*e a))et) t*at can 5e +uic9ly con=erted into ca)* are
)ufficient to co=er current lia5ilitie).
1deally> +uic9 ratio )*ould 5e #:#.
1f +uic9 ratio i) *ig*er> co,3any ,ay 9ee3 too ,uc* ca)* on *and or *a=e a 3ro5le,
collecting it) account) recei=a5le. .ig*er +uic9 ratio i) needed 4*en t*e co,3any *a)
difficulty 5orro4ing on )*ort-ter, note). ! +uic9 ratio *ig*er t*an #:# indicate) t*at t*e
5u)ine)) can ,eet it) current financial o5ligation) 4it* t*e a=aila5le +uic9 fund) on
*and.
! +uic9 ratio lo4er t*an #:# ,ay indicate t*at t*e co,3any relie) too ,uc* on in=entory
or ot*er a))et) to 3ay it) )*ort-ter, lia5ilitie).
Many lender) are intere)ted in t*i) ratio 5ecau)e it doe) not include in=entory> 4*ic*
,ay or ,ay not 5e ea)ily con=erted into ca)*.
#@ "alculation of +uic9 ratio:
8uic9 or !cid (e)t Ratio ?8R@ i) calculated 5y di=iding current a))et) fro, 4*ic*
in=entory *a) 5een e 5y current lia5ilitie).
8R W ?"a)*XMar9eta5le Securitie)X!ccount) Recei=a5le@ % "urrent Lia5ilitie)
"onfidential Page 65 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
$5' M-di.icati-n1 t- calc,lati-n
(*e nu,5er) u)ed in t*e calculation of +uic9 ratio ,ay need )o,e correction for
rea)on) already ,entioned for ca)* 5alance> and rea)on) )till to co,e for current
lia5ilitie). Since t*e e it
i) al)o a33ro3riate to touc* u3on ele,ent) t*at can affect ,ar9eta5le )ecuritie).
U)ually> t*e)e )ecuritie) are *ig*ly ,ar9eta5le and t*u) it i) ea)y to o5tain recent
accurate +uotation) ?a) o33o)ed to )ecuritie) *eld for in=e)t,ent 3ur3o)e 4*ic* are
found a) 3art of fi t*e accounting rule u)ed for re3orting t*e)e )ecuritie) i) t*e co)t
,et*od. (*e co)t ,et*od re+uire) t*at t*e 3urc*a)e 3rice of a )ecurity 5e t*e 5a)i) of
it) 5alance )*eet =aluation unle)) t*e current ,ar9et =alue i) lo4er> and t*e decline in
=alue i) ot*er t*an te,3orary. I*en )uc* a decline i) recorded> an account for
O=aluation allo4anceO )*ould 5e 3re)ent on t*e 5alance )*eet. 1f )toc9) and 5ond) *a=e
5een de3re))ed> and t*e co,3any doe) not *a=e t*e =alue decline recorded> t*e
analy)t ,ay 4ant to +ue)tion 4*et*er t*e adBu)t,ent reco,,ended 5y accounting
rule)> *a) 5een ,ade. I*en t*e )toc9 and 5ond) *a=e 5een on an u3)4ing>
,ar9eta5le )ecuritie) are li9ely to 5e under)tated> 5ut no correction can 5e e t*i) ,ea)ure i) too )tringent and narro4 to allo4 ,eaningful i,3lication) a5out t*e
fir,G) future. ut> a co,3ari)on o=er ti,e ,ay 5ring to lig*t a deterioration of li+uidity
foretelling onco,ing in)ol=ency> and t*erefore> it ,u)t ne=er 5e o=erloo9ed.
! general rule of t*u,5 )ugge)t) t*at t*e +uic9 ratio )*ould 5e around #. !) can 5e
)een in (a5le (-$.'> t*e rule of t*u,5 *old) for all t*e indu)trie) e food
)tore).
Ta/le T'F3B
"o,3ari)on of 8uic9 Ratio 5y co,3any )i/e
Sale) [ A M I R U S
-# MM 0.9 #.3 0.$ 0.3 0.9 #.6
#-3 MM #.# # 0.9 0.' # #.#
3-5 MM # # # 0.5 #.# #.$
5-#0 MM #.3 0.$ 0.9 0.' #.# #.#
#0-&5 MM #.3 0.$ 0.9 0.5 #.& #
&5 X MM #.& # 0.9 0.' #.# 0.$
A W Manufacturer) - ;rug) and Medicine) S1" &$33
M W Manufacturer) - Mac*inery S1" 356#
I W I*ole)aler) - Furniture S1" 50&#
R W Retailer) - Food Store) S1" 5'##
U W (ele3*one "o,,unication> S1" '$#&
S W Ser=ice) - (ra=el !gencie)> S1" '-&'
Source: Ro5ert Morri) !))ociate)> O!nnual State,ent) Studie)> #99'O
(*e fact t*at +uic9 ratio =alue) are clo)e to t*e t*eoretical =alue of one i) )ur3ri)ing in
lig*t of t*e 4ide)3read de=iation) of current ratio =alue) fro, it) t*eoretical =alue of
t4o> o5)er=ed in (a5le (-$.3. (*i) )ugge)t) t*at t*e +uic9 ratio i) ,ore ro5u)t. 1n fact>
t*e a33arent oddity of e
and )*ould not lead anyone to 5elie=e t*at food )tore) in t*e United State) 4ill )oon
clo)e and 3eo3le 4onGt *a=e any 3lace to 5uy ,il9 and 5read. (*e rea)on i) )i,3ly t*at
food )tore) did not - u3 until =ery recently - )ell on credit.
"onfidential Page 6- $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
3. !5)olute "a)* Ratio:
(*i) ratio te)t) t*e li+uidity on an i,,ediate 5a)i) a) it te)t) for li+uidity 4it* t*e ca)*
and near ca)* ite,) only. (*e ratio *a) )*o4n a con)idera5le increa)e till &006 5ut *a)
declined in t*e year &00-.
"a)* Ratio i) an indicator of co,3anyG) )*ort-ter, li+uidity. 1t ,ea)ure) t*e a5ility to
u)e it) ca)* and ca)* e+ui=alent) to 3ay it) current financial o5ligation). "a)* Ratio
for,ula i):
"a)* ratio ,ea)ure) t*e i,,ediate a,ount of ca)* a=aila5le to )ati)fy )*ort-ter,
lia5ilitie). ! ca)* ratio of 0.5:# or *ig*er i) 3referred.
"a)* ratio i) t*e ,o)t con)er=ati=e loo9 at a co,3anyG) li+uidity )ince i) ta9ing in t*e
con)ideration only t*e ca)* and ca)* e+ui=alent).
"a)* ratio i) u)ed 5y creditor) 4*en deciding *o4 ,uc* credit> if any> t*ey 4ould 5e
4illing to e current lia5ilitie) al)o
re3re)ent) fir,G) o5ligation) to out)ider) and t*ey are an i,3ortant deter,inant of ri)9.
.o4e=er> 4e ad=i)e t*at to calculate de5t e+uity ratio current lia5ilitie) )*ould 5e
included in out)iderG) fund). (*e ratio calculated on t*e 5a)i) out)iderG) fund) e000\ X -5>000\ X #0>000@ % #0>000
W #6 ti,e)
\1nco,e after intere)t i) [->5000 X inco,e ta< [-5>000
Signi.icance -. de/t 1er7ice rati-*
(*e interest coverage ratio i) =ery i,3ortant fro, t*e lenderG) 3oint of =ie4. 1t
indicate) t*e nu,5er of ti,e) intere)t i) co=ered 5y t*e 3rofit) a=aila5le to 3ay intere)t
c*arge).
1t i) an inde< of t*e financial )trengt* of an enter3ri)e. ! *ig* de5t )er=ice ratio or
intere)t co=erage ratio a))ure) t*e lender) a regular and 3eriodical intere)t inco,e. ut
t*e 4ea9ne)) of t*e ratio ,ay create )o,e 3ro5le,) to t*e financial ,anager in rai)ing
fund) fro, de5t )ource).
General G,ideline1 .-r t+e Intere1t C-7erage Rati-
!) a general rule of t*u,5> in=e)tor) )*ould not o4n a )toc9 t*at *a) an intere)t
co=erage ratio under #.5. !n intere)t co=erage ratio 5elo4 #.0 indicate) t*e 5u)ine)) i)
*a=ing difficultie) generating t*e ca)* nece))ary to 3ay it) intere)t o5ligation). (*e
*i)tory and con)i)tency of earning) i) tre,endou)ly i,3ortant. (*e ,ore con)i)tent a
co,3anyD) earning)> t*e lo4er t*e intere)t co=erage ratio can 5e.
"onfidential Page -' $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
71( *a) it) )*ort co,ing)> t*oug*> 5ecau)e co,3anie) do 3ay ta t*erefore it i)
,i)leading to act a) if t*ey didnDt. ! 4i)e and con)er=ati=e in=e)tor 4ould )i,3ly ta9e
t*e co,3anyD) earning) 5efore intere)t and di=ide it 5y t*e intere)t e e=en if it i) ,ore rigid t*an a5)olutely
nece))ary.
Pr-.ita/ility Rati-1
6. Return on "a3ital 7,3loyed ?R2"7@
1t i) a ratio t*at indicate) t*e efficiency and 3rofita5ility of a co,3anyG) ca3ital
in=e)t,ent). R2"7 )*ould ideally 5e *ig*er t*an t*e rate at 4*ic* t*e co,3any
5orro4)> ot*er4i)e any increa)e in 5orro4ing 4ill reduce )*are*older)G earning). R2"7
*a) increa)ed till &005 5ut *a) di,ini)*ed )ince t*en.
Ret,rn -n Ca)ital E0)l-yed Rati- 4ROCE Rati-5*
(*e 3ri,e o5Becti=e of ,a9ing in=e)t,ent) in any 5u)ine)) i) to o5tain )ati)factory
return on ca3ital in=e)ted. .ence> t*e return on ca3ital e,3loyed i) u)ed a) a ,ea)ure
of )ucce)) of a 5u)ine)) in reali/ing t*i) o5Becti=e.
Return on ca3ital e,3loyed e)ta5li)*e) t*e relation)*i3 5et4een t*e 3rofit and t*e
ca3ital e,3loyed. 1t indicate) t*e 3ercentage of return on ca3ital e,3loyed in t*e
5u)ine)) and it can 5e u)ed to )*o4 t*e o=erall 3rofita5ility and efficiency of t*e
5u)ine)).
De.initi-n -. Ca)ital E0)l-yed*
"onfidential Page -5 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
Ca)ital e0)l-yed and o3erating 3rofit) are t*e ,ain ite,). "a3ital e,3loyed ,ay 5e
defined in a nu,5er of 4ay). .o4e=er> t4o 4idely acce3ted definition) are Ogr-11
ca)ital e0)l-yedO and Onet ca)ital e0)l-yedO. Aro)) ca3ital e,3loyed u)ually ,ean)
t*e total a))et)> fi u)ed in 5u)ine))> 4*ile net ca3ital e,3loyed
refer) to total a))et) ,inu) lia5ilitie). 2n t*e ot*er *and> it refer) to total of ca3ital>
ca3ital re)er=e)> re=enue re)er=e) ?including 3rofit and lo)) account 5alance@>
de5enture) and long ter, loan).
Calc,lati-n -. Ca)ital E0)l-yed*
Met+-d''(3 1f it i) calculated fro, t*e a))et) )ide> 1t can 5e 4or9ed out 5y adding t*e
follo4ing:
#. (*e fi eit*er at original co)t or
at re3lace,ent co)t after deducting de3reciation. 1n day) of inflation> it i) 5etter to
include fi ca)* at 5an9> )undry de5tor)> 5ill)
recei=a5le> )toc9> etc.
'. (o find out net ca3ital e,3loyed> current lia5ilitie) are deducted fro, t*e total of
t*e a))et) a) calculated a5o=e.
Gr-11 ca)ital e0)l-yed I Fi6ed a11et1 L In7e1t0ent1 L C,rrent a11et1
Net ca)ital e0)l-yed I Fi6ed a11et1 L In7e1t0ent1 L "-rDing ca)ital\3
\Ior9ing ca3ital W current a))et) ] current lia5ilitie).
Preca,ti-n1 F-r Calc,lating Ca)ital E0)l-yed*
"onfidential Page -6 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
I*ile ca3ital e,3loyed i) calculated fro, t*e a))et )ide> t*e follo4ing 3recaution)
)*ould 5e ta9en:
#. Regarding t*e =aluation of fi no4aday) it i) con)idered nece))ary to
=alue t*e a))et) at t*eir re3lace,ent co)t. (*i) i) 4it* a =ie4 to 3ro=iding for t*e
continuing 3ro5le, of inflation) during t*e current year). Under re3lace,ent co)t
,et*od) t*e fi or on =aluation of
e t*e 3ro=i)ion for de3reciation
)*ould 5e recalculated )ince de3reciation c*arged ,ig*t *a=e 5een calculated
on original co)t of a))et).
&. 1dle a))et)^a))et) 4*ic* cannot 5e u)ed in t*e 5u)ine)) )*ould 5e e )tand5y 3lant and ,ac*inery e))ential to t*e
nor,al running of t*e 5u)ine)) )*ould 5e included.
3. 1ntangi5le a))et)> li9e good4ill> 3atent)> trade ,ar9)> rig*t)> etc. )*ould 5e
e if t*ey *a=e )ale =alue or if t*ey *a=e 5een 3urc*a)ed t*ey
,ay 5e included. 1n=e)t,ent) ,ade out)ide t*e 5u)ine)) )*ould 5e e net 3rofit *a) to 5e
adBu)ted for t*e follo4ing:
• Net 3rofit )*ould 5e ta9en 5efore t*e 3ay,ent of ta< or 3ro=i)ion for ta re+uired to 3ay fi i) generated fro, re=enue). ! lo4 3rofit ,argin ratio indicate) t*at t*e
5u)ine)) i) una5le to control it) 3roduction co)t). Aro)) 3rofit ratio *a) 5een ,ore or
le)) )a,e in t*e concerned 3eriod.
Gr-11 Pr-.it Margin
!lt*oug* 4e are only a fe4 line) into t*e inco,e )tate,ent> 4e can already calculate
our fir)t financial ratio. (*e gro)) 3rofit ,argin i) a ,ea)ure,ent of a co,3anyG)
,anufacturing and di)tri5ution efficiency during t*e 3roduction 3roce)). (*e gro)) 3rofit
tell) an in=e)tor t*e 3ercentage of re=enue % )ale) left after )u5tracting t*e co)t of
good) )old. ! co,3any t*at 5oa)t) a *ig*er gro)) 3rofit ,argin t*an it) co,3etitor) and
indu)try i) ,ore efficient. 1n=e)tor) tend to 3ay ,ore for 5u)ine))e) t*at *a=e *ig*er
efficiency rating) t*an t*eir co,3etitor)> a) t*e)e 5u)ine))e) )*ould 5e a5le to ,a9e a
decent 3rofit a) long a) o=er*ead co)t) are controlled ?o=er*ead refer) to rent> utilitie)>
etc.@
(o calculate gro)) 3rofit ,argin> u)e t*i) for,ula: Aro)) Profit _ (otal Re=enue
Calc,lating Sa0)le Gr-11 Pr-.it Margin
For illu)tration 3ur3o)e)> letG) calculate t*e gro)) 3rofit ,argin of Areen4ic* Aolf
Su33ly ?a fictional co,3any@ u)ing it) inco,e )tate,ent. Pou 4ill find t*e )tate,ent at
t*e 5otto, of t*i) 3age in (a5le AAS-#.
"onfidential Page $' $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
!))u,e t*e a=erage golf )u33ly co,3any *a) a gro)) ,argin of 30N. ?Pou can find t*i)
)ort of indu)try-4ide infor,ation in =ariou) financial 3u5lication)> online finance )ite)
)uc* a) ,oneycentral.co,> or rating agencie) )uc* a) Standard and Pore)@.
Ie can ta9e t*e nu,5er) fro, Areen4ic* Aolf Su33lyG) inco,e )tate,ent and 3lug
t*e, into our for,ula:
[#6&>0$' gro)) 3rofit _ ['05>&09 total re=enue W 0.'0
(*e an)4er> .'0 ?or '0N@> tell) u) t*at Areen4ic* i) ,uc* ,ore efficient in t*e
3roduction and di)tri5ution of it) 3roduct t*an ,o)t of it) co,3etitor).
Gr-11 Pr-.it Margin -7er Ti0e
(*e gro)) ,argin tend) to re,ain )ta5le o=er ti,e. Significant fluctuation) can 5e a
3otential )ign of fraud or accounting irregularitie). 1f you are analy/ing t*e inco,e
)tate,ent of a 5u)ine)) and gro)) ,argin *a) *i)torically a=eraged around 3N-'N> and
)uddenly it )*oot) u34ard) of &5N> you )*ould 5e )eriou)ly concerned. For ,ore
infor,ation on 4arning )ign) of accounting fraud> 1 reco,,end .o4ard Sc*ilitG)
Financial S*enanigan): &nd edition: .o4 to ;etect !ccounting Ai,,ic9) and Fraud in
Financial Re3ort).
"onfidential Page $5 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
#y)-t+e1i1 Te1ting*
"onfidential Page $6 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
.y3ot*e)i) te)ting i) t*e rational fra,e4or9 for a33lying )tati)tical te)t).
(*e ,ain +ue)tion 4e u)ually 4i)* to e and )o,e of t*e nu,5er) are dra4n fro, a )tandard nor,al di)tri5ution
4it* un9no4n ,ean.
No4 letD) )ay 4e ta9e a nu,5er out of t*e *at. (*ere are t4o *y3ot*e)e) t*at are
3o))i5le:
a .0: t*e null *y3ot*e)i). (*e nu,5er i) fro, a )tandard nor,al di)tri5ution 4it* ` W 0.
a .!: t*e alternati=e *y3ot*e)i). (*e nu,5er i) not fro, a )tandard nor,al di)tri5ution
4it*
` W 0.
(*e art of )tati)tic) i) in finding good 4ay) of for,ulating criteria> 5a)ed on t*e =alue of
one ,ore )tati)tic)> to eit*er acce3t or reBect t*e null *y3ot*e)i) .0.
"onfidential Page $- $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
Figure #: Nu,5er) dra4n fro, t4o different )tandard nor,al di)tri5ution) are t*ro4n
into Fo*n "*oderaD) *at.
1t )*ould 5e noted t*at .0 and .! can 5e al,o)t anyt*ing> and a) co,3licated or a)
)i,3le a) 4e 4i)*. 1f a *y3ot*e)i) i) )tated )uc* t*at it )3ecifie) t*e entire di)tri5ution>
4e call it a )i,3le *y3ot*e)i). 2t*er4i)e> 4e call it a co,3o)ite *y3ot*e)i). !) you
,ig*t i,agine> ,ore rigorou) te)t) can 5e done 4it* )i,3le *y3ot*e)e)> 5ecau)e t*ey
)3ecify t*e entire di)tri5ution> fro, 4*ic* 3ro5a5ility =alue) can 5e co,3uted.
"onfidential Page $$ $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
(y3e 1 and (y3e 11 error). 1n any te)ting )ituation> t4o 9ind) of error could occur:
a (y3e 1 ?fal)e 3o)iti=e@. Ie reBect t*e null *y3ot*e)i) 4*en itD) actually true.
a (y3e 11 ?fal)e negati=e@. Ie acce3t t*e null *y3ot*e)i) 4*en itD) actually fal)e.
Say 1 *and you a 3rofit 5oo9ing )tate,ent of t*e Maruti. .o4 4ould you tell if itD) fairV 1f
you )tudied t*e ,ar9et )ale) turno=er for la)t #0 year) and it ,ay ca,e u3 6 ti,e) t*at
t*e turno=er i) ,ore t*an &>00>000 ,> 4*at 4ould you )ayV I*at if it ca,e u3 *ead) 3
ti,e)> in)teadV
1n t*e fir)t ca)e youDd 5e inclined to )ay t*at t*e )ale) turn o=er 4a) fair and in t*e
)econd ca)e youDd 5e inclined to )ay it 4a) 5ia)ed to4ard) unfair. .o4 certain are youV
2r> e=en ,ore )3ecifically> *o4 li9ely i) it actually t*at t*e turn o=er i) ,ore t*an
&>00>000 , in eac* ca)eV
#y)-t+e1i1 Te1ting
8ue)tion) li9e t*e one) a5o=e fall into a do,ain called hypothesis testing. .y3ot*e)i)
te)ting i) a 4ay of )y)te,atically +uantifying *o4 certain you are of t*e re)ult of a
)tati)tical e000 , 4a) fair> *o4 li9ely i) it t*at youDd o5)er=e t*e re)ult)
4e didV (4o> 4*at i) t*e li9eli*ood t*at t*e turn o=er fair gi=en t*e re)ult) you
o5)er=edV
2f cour)e> an e Lt*i)
turno=er of t*e co,3any i) fair>M and t*en calculate t*e li9eli*ood t*at your o5)er=ation)
are due to 3ure c*ance rat*er t*an a real difference in t*e 3o3ulation.
(*e confidence inter=al i) t*e le=el at 4*ic* you reBect t*e null *y3ot*e)i). 1f t*ere i) a
95N c*ance t*at t*ereD) a real difference in your o5)er=ation)> gi=en t*e null
*y3ot*e)i)> t*en you are confident in reBecting it. (*i) al)o ,ean) t*ere i) a 5N c*ance
youDre 4rong and t*e difference i) due to rando, fluctuation).
(*e null *y3ot*e)i) can 5e any ,at*e,atical )tate,ent and t*e te)t you u)e de3end)
on 5ot* t*e underlying data and your null *y3ot*e)i). 1n our co,3anyD) turno=er
e000 , 4a) different
enoug* to 5e )ignificant. 1n t*i) ca)e 4e 4ere ,ea)uring t*e sample mean.
Ie can ,ea)ure anyt*ing> t*oug*: t*e )a,3le =ariance> correlation> etc. ;ifferent te)t)
need) to 5e u)ed to deter,ine 4*et*er t*e)e are )tati)tically )ignificant.
"onfidential Page 93 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
"onfidential Page 9' $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
Rec-0endati-n1 .-r t+e
c-0)any
"onfidential Page 95 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
(*ey are for4ard loo9ing: !ccrued re)ult) of t*e 3a)t year % +uarter
• "o,3anyD) =alue de3end) on it) future 3rofita5ility 4*ic* de3end) on ,any
factor) not reflected in t*e 5alance )*eet> 4*ic* are non-,onetary
o Nature and inno=ati=ene)) of it 3roduct)
o (ec*nology land)ca3e ?3roduct o5)ole)cence@
o "o,3etitor)
o 7cono,ic condition) ?rece))ion % 5oo,@> go=ern,ent 3olicie)
o Staff and ,anage,ent ,orale
Financial Manage0ent
Internal and E6ternal !,1ine11 En7ir-n0ent
"onfidential Page 96 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
"onfidential Page 9- $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
Internal !,1ine11 En7ir-n0ent*
1nternal en=iron,ent of 5u)ine)) nor,ally con)i)t) of t*e follo4ing.
i. Finance
ii. Mar9eting
iii. .u,an Re)ource)
i=. 23eration) ?Production> Manufacturing@
=. (ec*nology
=i. 2t*er Function) ?Logi)tic)> "o,,unication)@
E6ternal !,1ine11 En7ir-n0ent*
(*e follo4ing 5u)ine)) en=iron,ent factor) out)ide an organi/ation *a=e a 3rofound
effect on t*e function) and o3eration) of an organi/ation.
i. "u)to,er)
ii. Su33lier)
iii. "o,3etitor)
i=. Ao=ern,ent%Legal !gencie) : Regulation)
=. Macro 7cono,y%Mar9et):
=i. (ec*nological Re=olution
"onfidential Page 9$ $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
Pr-8ect 9,erie1
8 #. I*at i) ,eant 5y Matc*ing "once3tV
8 &. I*at are non-ca)* e
Financial planning and statergy is the process of meeting your life goals through the proper management of your finances. Life goal can include buying a home, Saving for your child’s education, planning for your retirement etc.
Financial Planning and Strategy of Maruti Udyog Ltd
A
PROJECT REPORT
ON
“Financial Planning And Strategy”
FOR MARUTI UDYOG IMITED
SU!MITTED TO"ARDS FUFIMENT
OF
M!A DEGREE TO S"ISS !USINESS
SC#OO
ACADAMIC SESSION
$%%&'((
Pre)ared !y* Under t+e g,idance -.* S,/0itted T-*
XXXXX. X Prof. XXXX. X. XXX Mr. XXXXX
Reg. No: - SM9035
M!- SS
"onfidential Page # $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
C-ntent1
DECARATION.............................................................................................................................4
INTRODUCTION...........................................................................................................................5
INDUSTRY SEGMENT................................................................................................................7
PROJECT DESCRIPTION........................................................................................................12
STATEMENT OF PRO!EM....................................................................................................14
T#EORITCA FRAME"OR2..................................................................................................16
(ool) and (ec*ni+ue) of Financial State,ent !naly)i):..............................................#-
#. .ori/ontal and 0ertical !naly)i):..................................................................................17
&. Ratio) !naly)i):...............................................................................................................19
Financial State,ent.....................................................................................................&&
1nco,e State,ent........................................................................................................&'
1te,) on inco,e )tate,ent..........................................................................................&5
23erating )ection................................................................................................................25
Non-o3erating )ection........................................................................................................26
1rregular ite,)......................................................................................................................26
"la))ification................................................................................................................&9
enefit) fro, u)ing "a)* flo4..........................................................................................33
(y3e) of 5alance )*eet)..............................................................................................36
Per)onal 5alance )*eet......................................................................................................36
S,all 5u)ine)) 5alance )*eet..........................................................................................37
"or3orate 5alance )*eet )tructure...............................................................................3-
!))et)...................................................................................................................................37
Lia5ilitie)...............................................................................................................................38
7+uity....................................................................................................................................39
(*e alance S*eet Structure.......................................................................................39
COMPANY PROFIE.................................................................................................................45
8uic9 Fact)..................................................................................................................'6
!4ard) : !ccolade).....................................................................................................'-
Mile)tone)....................................................................................................................'9
"o,3any Fla)*5ac9....................................................................................................5#
FINANCIA SUMMARY OF MARUTI UDYOG TD3...........................................................52
ANAYSIS AND INTERPRETAION OF 2EY RATIOS.........................................................62
For,ula of ;e5t to 7+uity Ratio:..................................................................................-&
"o,3onent):................................................................................................................-&
7 "o,,unication)@................................................................101
E6ternal !,1ine11 En7ir-n0ent*........................................................................................101
(*e follo4ing 5u)ine)) en=iron,ent factor) out)ide an organi/ation *a=e a 3rofound 101
effect on t*e function) and o3eration) of an organi/ation..................................................101
i. "u)to,er)...............................................................................................................................101
ii. Su33lier).................................................................................................................................101
iii. "o,3etitor)...........................................................................................................................101
i=. Ao=ern,ent%Legal !gencie) : Regulation)....................................................................101
=. Macro 7cono,y%Mar9et):....................................................................................................101
=i. (ec*nological Re=olution....................................................................................................101
Pr-8ect 9,erie1........................................................................................................................102
!I!IOGRAP#Y.......................................................................................................................103
"onfidential Page 3 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
DECARATION
1 t*e under)igned )ole,nly declare t*at t*e re3ort of t*e 3roBect 4or9 entitled Financial
!naly)i)> Planning : Statergy> i) 5a)ed ,y o4n 4or9 carried out during t*e cour)e of
,y )tudy under t*e )u3er=i)ion of Prof. Manita. ;. S*a*
1 a))ert t*at t*e )tate,ent) ,ade and conclu)ion) dra4n are an outco,e of t*e 3roBect
4or9. 1 furt*er declare t*at to t*e 5e)t of ,y 9no4ledge and 5elief t*at t*e 3roBect re3ort
doe) not contain any 3art of any 4or9 4*ic* *a) 5een )u5,itted for t*e a4ard of any
ot*er degree%di3lo,a%certificate in t*i) Uni=er)ity or any ot*er Uni=er)ity.
CCCCCCCCCCCCCCCCCCCCCC
?Signature of t*e "andidate@
Na,e : XXXXXX XXXX
Reg. No.: SM9035
"onfidential Page ' $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
INTRODUCTION
"onfidential Page 5 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
Financial 3lanning and )tatergy i) t*e 3roce)) of ,eeting your life goal) t*roug* t*e
3ro3er ,anage,ent of your finance). Life goal can include 5uying a *o,e> Sa=ing for
your c*ildD) education> 3lanning for your retire,ent etc. Financial 3lanning i) t*e ta)9 of
deter,ining *o4 a 5u)ine)) 4ill afford to ac*ie=e it) )trategic goal) and o5Becti=e).
U)ually> a co,3any create) a Financial Plan i,,ediately after t*e =i)ion and o5Becti=e
*a=e 5een )et. (*e financial 3lan de)cri5e) eac* of t*e acti=itie)> re)ource)> e+ui3,ent
and ,aterial) t*at are needed to ac*ie=e t*e)e o5Becti=e)> a) 4ell a) t*e ti,efra,e)
in=ol=ed.
"o,,on a=enue) a=aila5el in t*e ,ar9et are:
• "o,,on Stoc9)
• ond)
• Mutual Fund)
• 1n)urance
• Aold
• Real 7)tate
• Pen)ion 3lan) etcE
"onfidential Page 6 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
INDUSTRY SEGMENT
"onfidential Page - $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
7)ta5li)*ed in ;ece,5er #9$3> Maruti Su/u9i 1ndia Ltd. *a) u)*ered a re=olution in t*e
1ndian car indu)try. (*i) car i) ,eant for an a=erage 1ndian indi=idual 4*ic* i) afforda5le
a) 4ell a) *a) elegant a33eal. Maruti Su/u9i 1ndia Ltd. i) t*e re)ult of colla5oration of
Maruti 4it* Su/u9i of Fa3an. !t t*i) ti,e> t*e 1ndian car ,ar9et *ad )tagnated at a
=olu,e of 30>000 to '0>000 car) for t*e decade ending #9$3. (*i) 4a) fro, 4*ere
Maruti too9 o=er.
(*e co,3any *a) cro))ed t*e ,ile)tone of 5eco,ing t*e fir)t 1ndian co,3any in Marc*
#99'> 5y ,anufacturing in totality one ,illion =e*icle). 1t i) 9no4n for it) ,a))-
3roduction and )elling of ,ore t*an a ,illion car). Maruti Su/u9i 1ndia Ltd. i) t*e 1ndiaG)
large)t auto,o5ile co,3any 4*ic* entered in t*e ,ar9et 4it* affir,ed ai, to render
*ig* +uality fuel H efficient and lo4 - co)t =e*icle).
Sale) figure in t*e year #993 *a) reac*ed u3 to #>96>$&0. Maruti co,e) in a =ariety of
,odel) in t*e $00 )eg,ent. 1t) car) o3erate on Fa3ane)e tec*nology> 3lia5le to 1ndian
condition) and 1ndian car u)er). y t*e year #99$-99> t*e co,3any *a) ,oderni/e t*e
e000 unit).
Recently to 4ard off t*e gro4ing co,3etition> Maruti *a) co,3leted R). ' 5illion
e 4*ic* *a) rai)ed t*e total 3roduction ca3acity to
o=er 3>&0>000 =e*icle) 3er annu,. Iit* t*e co,ing of eac* and e=ery year> t*e total
3roduction of t*e co,3any e t*e
co,3any i) 1ndiaG) leading auto,o5ile ,anufacturer) and t*e ,ar9et leader in t*e car
)eg,ent. Sale) recorded in Fune &0#0> i) R). '>-53.5$ crore) and in Marc* &0##> i) R).
5>&-$.3& crore).
.
Mar,ti Udy-g India i0ited
(y3e Pu5lic ?S7 M!RU(1> NS7 M!RU(1@
1ndu)try !uto,oti=e
Founded #9$# ?a) Maruti Udyog Li,ited@
.ead+uarter) ;el*i> 1ndia
Key 3eo3le Mr. S*in/o Na9ani)*i> Managing ;irector and "72
Product) !uto,o5ile)> Motorcycle)
Re=enue US 5.9 5illion
7,3loyee) ->-0&
Ie5)ite *tt3:%%444.,aruti)u/u9i.co,%
"onfidential Page 9 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
"!RS
Maruti Su/u9i Ki/a)*i
Maruti Su/u9i Arand
0itara &.'
Arand 0itara
2,ni
5 )eater Maruti 2,ni
$ )eater Maruti 2,ni
LPA Maruti 2,ni
Maruti !lto
!lto
!lto L<
!lto L 4it* all ot*er year) )tated in )o,e 3ercentage of t*i)
5a)e.
Cla11i.icati-n and i0itati-n1*
(*e ratio) analy)i) i) t*e ,o)t 3o4erful tool of financial )tate,ent analy)i). Ratio)
)i,3ly ,ean one nu,5er e including United Kingdo, co,3any la4> financial )tate,ent) are
often referred to a) acc-,nt1> alt*oug* t*e ter, financial )tate,ent) i) al)o u)ed>
3articularly 5y accountant).
Financial )tate,ent) 3ro=ide an o=er=ie4 of a 5u)ine))G financial condition in 5ot* )*ort
and long ter,. (*ere are four 5a)ic financial )tate,ent):
1. !alance 1+eet: al)o referred to a) )tate,ent of financial 3o)ition or condition>
re3ort) on a co,3anyG) a))et)> lia5ilitie) and net e+uity a) of a gi=en 3oint in
ti,e.
2. Inc-0e 1tate0ent: al)o referred to a) Profit and Lo)) )tate,ent ?or a OP:LO@>
re3ort) on a co,3anyG) re)ult) of o3eration) o=er a 3eriod of ti,e.
3. State0ent -. retained earning1: e
3articularly it) o3erating> in=e)ting and financing acti=itie).
For large cor3oration)> t*e)e )tate,ent) are often co,3le< and ,ay include an
e inco,e
)tate,ent and ca)* flo4 )tate,ent in furt*er detail. Note) to financial )tate,ent) are
con)idered an integral 3art of t*e financial )tate,ent).
"onfidential Page && $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
Pur3o)e of financial )tate,ent)
(*e o5Becti=e of financial )tate,ent) i) to 3ro=ide infor,ation a5out t*e financial
)trengt*> 3erfor,ance and c*ange) in financial 3o)ition of an enter3ri)e t*at i) u)eful to
a 4ide range of u)er) in ,a9ing econo,ic deci)ion).O Financial )tate,ent) )*ould 5e
under)tanda5le> rele=ant> relia5le and co,3ara5le. Re3orted a))et)> lia5ilitie) and
e+uity are directly related to an organi/ationG) financial 3o)ition. Re3orted inco,e and
e a) it for, 3art of it) !nnual Re3ort.
• 7,3loyee) al)o need t*e)e re3ort) in ,a9ing collecti=e 5argaining agree,ent)
?"!@ 4it* t*e ,anage,ent> in t*e ca)e of la5or union) or for indi=idual) in
di)cu))ing t*eir co,3en)ation> 3ro,otion and ran9ing).
&. E6ternal U1er1* are 3otential in=e)tor)> 5an9)> go=ern,ent agencie) and ot*er
3artie) 4*o are out)ide t*e 5u)ine)) 5ut need financial infor,ation a5out t*e 5u)ine))
for a di=er)e nu,5er of rea)on).
• Pro)3ecti=e investors ,a9e u)e of financial )tate,ent) to a))e)) t*e =ia5ility of
in=e)ting in a 5u)ine)). Financial analy)e) are often u)ed 5y in=e)tor) and i)
3re3ared 5y 3rofe))ional) ?financial analy)t)@> t*u) 3ro=iding t*e, 4it* t*e
5a)i) in ,a9ing in=e)t,ent deci)ion).
"onfidential Page &3 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
• Financial in)titution) ?5an9) and ot*er lending co,3anie)@ u)e t*e, to decide
4*et*er to grant a co,3any 4it* fre)* working capital or e rendering )er=ice)> or
carrying out ot*er acti=itie) t*at con)titute t*e entityG) ongoing ,aBor o3eration).
o Aeneral and ad,ini)trati=e e utilitie)>
in)urance> de3reciation of office 5uilding and e+ui3,ent> )tationery>
)u33lie)@
o Selling e ad=erti)ing> freig*t> )*i33ing>
de3reciation of )ale) e+ui3,ent@
o R : ; e for e deciding to de3reciate an
in=e)t,ent 3ro3erty t*at *a) 3re=iou)ly not 5een de3reciated. .o4e=er> c*ange)
in e)ti,ate) ?e.g. e)ti,ated u)eful life of a fi
refer) to t*e a,ount of ca)* a co,3any generate) fro, t*e re=enue) it 5ring) in>
e one ,u)t calculate
ca)* generated fro, cu)to,er) and ca)* 3aid to )u33lier). (*e difference
5et4een t*e t4o reflect) ca)* generated fro, o3eration).
&. 1n=e)t,ent ca)* flo4): "a)* recei=ed or e inco,e ?di=idend)@> or a33reciation
?ca3ital gain)@ of t*e =alue of t*e in)tru,ent. 1t i) related to )a=ing or deferring
con)u,3tion. 1n=e)t,ent i) in=ol=ed in ,any area) of t*e econo,y> )uc* a)
5u)ine)) ,anage,ent and finance no ,atter for *ou)e*old)> fir,)> or
go=ern,ent). !n in=e)t,ent in=ol=e) t*e c*oice 5y an indi=idual or an
organi/ation> )uc* a) a 3en)ion fund> after )o,e analy)i) or t*oug*t> to 3lace or
lend ,oney in a =e*icle> in)tru,ent or a))et> )uc* a) 3ro3erty> co,,odity> )toc9>
5ond> financial deri=ati=e) ?e.g. future) or o3tion)@> or t*e foreign a))et
"onfidential Page &9 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
deno,inated in foreign currency> t*at *a) certain le=el of ri)9 and 3ro=ide) t*e
3o))i5ility of generating return) o=er a 3eriod of ti,e.
1n=e)t,ent co,e) 4it* t*e ri)9 of t*e lo)) of t*e 3rinci3al )u,. (*e in=e)t,ent
t*at *a) not 5een t*oroug*ly analy/ed can 5e *ig*ly ri)9y 4it* re)3ect to t*e
in=e)t,ent o4ner 5ecau)e t*e 3o))i5ility of lo)ing ,oney i) not 4it*in t*e
o4nerG) control. (*e difference 5et4een )3eculation and in=e)t,ent can 5e
)u5tle. 1t de3end) on t*e in=e)t,ent o4nerG) ,ind 4*et*er t*e 3ur3o)e i) for
lending t*e re)ource to )o,eone el)e for econo,ic 3ur3o)e or not.
1n t*e ca)e of in=e)t,ent> rat*er t*an )tore t*e good 3roduced or it) ,oney
e+ui=alent> t*e in=e)tor c*oo)e) to u)e t*at good eit*er to create a dura5le
con)u,er or 3roducer good> or to lend t*e original )a=ed good to anot*er in
e t*e
indi=idual create) dura5le con)u,er good)> *o3ing t*e )er=ice) fro, t*e good
4ill ,a9e *i) life 5etter. 1n t*e )econd> t*e indi=idual 5eco,e) an entre3reneur
u)ing t*e re)ource to 3roduce good) and )er=ice) for ot*er) in t*e *o3e of a
3rofita5le )ale. (*e t*ird ca)e de)cri5e) a lender> and t*e fourt* de)cri5e) an
in=e)tor in a )*are of t*e 5u)ine)). 1n eac* ca)e> t*e con)u,er o5tain) a dura5le
a))et or in=e)t,ent> and account) for t*at a))et 5y recording an e+ui=alent
lia5ility. !) ti,e 3a))e)> and 5ot* 3rice) and intere)t rate) c*ange> t*e =alue of
t*e a))et and lia5ility al)o c*ange.
!n a))et i) u)ually 3urc*a)ed> or e+ui=alently a de3o)it i) ,ade in a 5an9> in
*o3e) of getting a future return or intere)t fro, it. (*e 4ord originate) in t*e Latin
O=e)ti)O> ,eaning gar,ent> and refer) to t*e act of 3utting t*ing) ?,oney or ot*er
clai,) to re)ource)@ into ot*er)G 3oc9et).Q'R (*e 5a)ic ,eaning of t*e ter, 5eing
an a))et *eld to *a=e )o,e recurring or ca3ital gain). 1t i) an a))et t*at i)
e i))uing or re3urc*a)ing )toc9> and
3aying di=idend). Finance ?3ronounced %f??nSnt)% or % fa ? ?nSnt)%@ i) t*e )cience
of fund) ,anage,ent.Q#R (*e general area) of finance are 5u)ine)) finance>
3er)onal finance> and 3u5lic finance.Q&R Finance include) )a=ing ,oney and
often include) lending ,oney. (*e field of finance deal) 4it* t*e conce3t) of
ti,e> ,oney> ri)9 and *o4 t*ey are interrelated. 1t al)o deal) 4it* *o4 ,oney i)
)3ent and 5udgeted. 2ne facet of finance i) t*roug* indi=idual) and 5u)ine))
organi/ation)> 4*ic* de3o)it ,oney in a 5an9. (*e 5an9 t*en lend) t*e ,oney
out to ot*er indi=idual) or cor3oration) for con)u,3tion or in=e)t,ent and
c*arge) intere)t on t*e loan).Loan) *a=e 5eco,e increa)ingly 3ac9aged for
re)ale> ,eaning t*at an in=e)tor 5uy) t*e loan ?de5t@ fro, a 5an9 or directly fro,
a cor3oration. ond) are de5t in)tru,ent) )old to in=e)tor) for organi/ation)
)uc* a) co,3anie)> go=ern,ent) or c*aritie).Q3R (*e in=e)tor can t*en *old t*e
de5t and collect t*e intere)t or )ell t*e de5t on a )econdary ,ar9et. an9) are
t*e ,ain facilitator) of funding t*roug* t*e 3ro=i)ion of credit> alt*oug* 3ri=ate
e+uity> ,utual fund)> *edge fund)> and ot*er organi/ation) *a=e 5eco,e
i,3ortant a) t*ey in=e)t in =ariou) for,) of de5t. Financial a))et)> 9no4n a)
in=e)t,ent)> are financially ,anaged 4it* careful attention to financial ri)9
,anage,ent to control financial ri)9. Financial in)tru,ent) allo4 ,any for,) of
)ecuriti/ed a))et) to 5e traded on )ecuritie) e )uc* a) t*e Federal Re)er=e
Sy)te, 5an9) in t*e United State) and an9 of 7ngland in t*e United Kingdo,>
are )trong 3layer) in 3u5lic finance> acting a) lender) of la)t re)ort a) 4ell a)
)trong influence) on ,onetary and credit condition) in t*e econo,y.Q'R
!ll t*ree toget*er are nece))ary to reconcile t*e 5eginning ca)* 5alance to t*e ending
ca)* 5alance.
"onfidential Page 3& $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
!ene.it1 .r-0 ,1ing Ca1+ .l-C
(*e ca)* flo4 )tate,ent ?1n financial accounting> a ca)* flo4 )tate,ent> al)o 9no4n a)
)tate,ent of ca)* flo4) or fund) flo4 )tate,ent> i) a financial )tate,ent t*at )*o4) *o4
c*ange) in 5alance )*eet account) and inco,e affect ca)* and ca)* e+ui=alent)> and
5rea9) t*e analy)i) do4n to o3erating> in=e)ting> and financing acti=itie).@ i) one of t*e
four ,ain financial )tate,ent) of a co,3any. (*e ca)* flo4 )tate,ent can 5e e t*en a co,3any 4ill often 5e dee,ed to 5e *ealt*y in
t*e )*ort-ter,. 1ncrea)ing or )ta5le ca)* 5alance) )ugge)t t*at a co,3any i) a5le to
,eet it) ca)* need)> and re,ain )ol=ent. (*i) infor,ation cannot al4ay) 5e )een in t*e
inco,e )tate,ent or t*e 5alance )*eet of a co,3any. For in)tance> a co,3any ,ay 5e
generating 3rofit> 5ut )till *a=e difficulty in re,aining )ol=ent.
(*e ca)* flo4 )tate,ent 5rea9) t*e )ource) of ca)* generation into t*ree )ection):
o3erational ca)* flo4)> in=e)ting> and financing. (*i) 5rea9do4n allo4) t*e u)er of
financial )tate,ent) to deter,ine 4*ere t*e co,3any i) deri=ing it) ca)* for o3eration).
For e a co,3any ,ay 5e notionally 3rofita5le 5ut generating little o3erational
ca)* ?a) ,ay 5e t*e ca)e for a co,3any t*at 5arter) it) 3roduct) rat*er t*an )elling for
ca)*@. 1n )uc* a ca)e> t*e co,3any ,ay 5e deri=ing additional o3erating ca)* 5y
i))uing )*are)> or rai)ing additional de5t finance.
"o,3anie) t*at *a=e announced )ignificant 4ritedo4n) of a))et)> 3articularly good4ill>
,ay *a=e )u5)tantially *ig*er ca)* flo4) t*an t*e announced earning) 4ould indicate.
For e teleco,) fir,) t*at 3aid )u5)tantial )u,) for 3A licen)e) or for
ac+ui)ition) *a=e )u5)e+uently *ad to 4rite-off good4ill> t*at i)> indicate t*at t*e)e
in=e)t,ent) 4ere no4 4ort* ,uc* le)). (*e)e 4rite-do4n) *a=e fre+uently re)ulted in
large announced annual lo))e)> )uc* a) 0odafoneG) announce,ent in May &006 t*at it
*ad lo)t T&#.9 5illion due to a 4ritedo4n of it) Aer,an ac+ui)ition> Manne),ann> one
"onfidential Page 33 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
of t*e large)t annual lo))e) in 7uro3ean *i)tory. ;e)3ite t*i) large Olo))O> 4*ic*
re3re)ented a )un9 co)t> 0odafoneG) o3erating ca)* flo4) 4ere )olid: OStrong ca)* flo4
i) one of t*e ,o)t attracti=e a)3ect) of t*e cell3*one 5u)ine))> allo4ing o3erator) li9e
0odafone to return ,oney to )*are*older) e=en a) t*ey rac9 u3 *uge 3a3er lo))e).O
Q#R
1n certain ca)e)> ca)* flo4 )tate,ent) ,ay allo4 careful analy)t) to detect 3ro5le,)
t*at 4ould not 5e e=ident fro, t*e ot*er financial )tate,ent) alone. For e
Iorld"o, co,,itted an accounting fraud t*at 4a) di)co=ered in &00&U t*e fraud
con)i)ted 3ri,arily of treating ongoing e t*ere5y
fraudulently 5oo)ting net inco,e. U)e of one ,ea)ure of ca)* flo4 ?free ca)* flo4@
4ould 3otentially *a=e detected t*at t*ere 4a) no c*ange in o=erall ca)* flo4 ?including
ca3ital in=e)t,ent)
"onfidential Page 3' $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
!alance S+eet
1n financial accounting ?Financial accountancy ?or financial accounting@ i) t*e field of
accountancy concerned 4it* t*e 3re3aration of financial )tate,ent) for deci)ion
,a9er)> )uc* a) )toc9*older)> )u33lier)> 5an9)> e,3loyee)> go=ern,ent agencie)>
o4ner)> and ot*er )ta9e*older). Financial ca3ital ,aintenance can 5e ,ea)ured in
eit*er no,inal ,onetary unit) or unit) of con)tant 3urc*a)ing 3o4er. (*e funda,ental
need for financial accounting i) to reduce 3rinci3al-agent 3ro5le, 5y ,ea)uring and
,onitoring agent)G 3erfor,ance and re3orting t*e re)ult) to intere)ted u)er). Financial
accountancy i) u)ed to 3re3are accounting infor,ation for 3eo3le out)ide t*e
organi/ation or not in=ol=ed in t*e day to day running of t*e co,3any. Manage,ent
accounting 3ro=ide) accounting infor,ation to *el3 ,anager) ,a9e deci)ion) to
,anage t*e 5u)ine)).
1n )*ort> Financial !ccounting i) t*e 3roce)) of )u,,ari/ing financial data ta9en fro,
an organi/ationG) accounting record) and 3u5li)*ing in t*e for, of annual ?or ,ore
fre+uent@ re3ort) for t*e 5enefit of 3eo3le out)ide t*e organi/ation. Financial
accountancy i) go=erned 5y 5ot* local and international accounting )tandard).@ > a
5alance )*eet or )tate,ent of financial 3o)ition i) a )u,,ary of t*e =alue of all a))et)>
lia5ilitie) and 24ner)*i3 e+uity for an organi/ation or indi=idual on a )3ecific date> )uc*
a) t*e end of it) financial year. ! 5alance )*eet i) often de)cri5ed a) a O)na3)*otO of a
co,3anyG) financial condition on a gi=en date. 2f t*e four 5a)ic financial )tate,ent)>
t*e 5alance )*eet i) t*e only )tate,ent 4*ic* a33lie) to a )ingle 3oint in ti,e> in)tead
of a 3eriod of ti,e.
! co,3any 5alance )*eet *a) t*ree 3art): a))et)> lia5ilitie) and )*are*older)G e+uity.
(*e ,ain categorie) of a))et) are u)ually li)ted fir)t and are follo4ed 5y t*e lia5ilitie).
(*e difference 5et4een t*e a))et) and t*e lia5ilitie) i) 9no4n a) t*e net a))et) or t*e
"onfidential Page 35 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
net 4ort* of t*e co,3any. !ccording to t*e accounting e+uation> net 4ort* ,u)t e+ual
a))et) ,inu) lia5ilitie).
Record) of t*e =alue) of eac* account or line in t*e 5alance )*eet are u)ually
,aintained u)ing a )y)te, of accounting 9no4n a) t*e dou5le-entry 5oo99ee3ing
)y)te,.
! )i,3le 5u)ine)) o3erating entirely in ca)* could ,ea)ure it) 3rofit) 5y )i,3ly
4it*dra4ing t*e entire 5an9 5alance at t*e end of t*e 3eriod> 3lu) any ca)* in *and.
.o4e=er> real 5u)ine))e) are not 3aid i,,ediatelyU t*ey 5uild u3 in=entorie) of good)
to )ell and t*ey ac+uire 5uilding) and e+ui3,ent. 1n ot*er 4ord): 5u)ine))e) *a=e
a))et) and )o t*ey could not> e=en if t*ey 4anted to> i,,ediately turn t*e)e into ca)* at
t*e end of eac* 3eriod. Real 5u)ine))e) al)o o4e ,oney to )u33lier) and to ta<
aut*oritie)> and t*e 3ro3rietor) do not 4it*dra4 all t*eir original ca3ital and 3rofit) at t*e
end of eac* 3eriod. 1n ot*er 4ord) 5u)ine))e) al)o *a=e lia5ilitie).
Ty)e1 -. /alance 1+eet1
! 5alance )*eet )u,,ari/e) an organi/ation or indi=idualG) a))et> e+uity and lia5ilitie)
at a )3ecific 3oint in ti,e. 1ndi=idual) and ),all 5u)ine))e) tend to *a=e )i,3le 5alance
)*eet). Larger 5u)ine))e) tend to *a=e ,ore co,3le< 5alance )*eet)> and t*e)e are
3re)ented in t*e organi/ationG) annual re3ort. Large 5u)ine))e) al)o ,ay 3re3are
5alance )*eet) for )eg,ent) of t*eir 5u)ine))e).! 5alance )*eet i) often 3re)ented
along)ide one for a different 3oint in ti,e ?ty3ically t*e 3re=iou) year@ for co,3ari)on.
Per1-nal /alance 1+eet
! 3er)onal 5alance )*eet li)t) current a))et) )uc* a) ca)* in c*ec9ing account) and
)a=ing) account)> long-ter, a))et) )uc* a) co,,on )toc9 and real e)tate> current
"onfidential Page 36 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
lia5ilitie) )uc* a) loan de5t and ,ortgage de5t due or o=erdue> and long-ter, lia5ilitie)
)uc* a) ,ortgage and ot*er loan de5t. Securitie) and real e)tate =alue) are li)ted at
,ar9et =alue rat*er t*an at *i)torical co)t or co)t 5a)i). Per)onal net 4ort* i) t*e
difference 5et4een an indi=idualG) total a))et) and total lia5ilitie).
S0all /,1ine11 /alance 1+eet
! ),all 5u)ine)) 5alance )*eet li)t) current a))et) )uc* a) ca)*> account) recei=a5le>
and in=entory> fi 5uilding)> and e+ui3,ent> intangi5le a))et)
)uc* a) 3atent)> and lia5ilitie) )uc* a) account) 3aya5le> accrued e and long-
ter, de5t. "ontingent lia5ilitie) )uc* a) 4arrantie) are noted in t*e footnote) to t*e
5alance )*eet. (*e ),all 5u)ine))G) e+uity i) t*e difference 5et4een total a))et) and
total lia5ilitie).
Q#0R
C-r)-rate /alance 1+eet 1tr,ct,re
Auideline) for cor3orate 5alance )*eet) are gi=en 5y t*e 1nternational !ccounting
Standard) "o,,ittee and nu,erou) country-)3ecific organi/ation).
alance )*eet account na,e) and u)age de3end on t*e organi/ationG) country and t*e
ty3e of organi/ation. Ao=ern,ent organi/ation) do not generally follo4 )tandard)
e)ta5li)*ed for indi=idual) or 5u)ine))e).
1f a33lica5le to t*e 5u)ine))> )u,,ary =alue) for t*e follo4ing ite,) )*ould 5e included
on t*e 5alance )*eet:
A11et1
"onfidential Page 3- $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
"urrent a))et)
#. in=entorie)
&. account) recei=a5le
3. ca)* and ca)* e+ui=alent)
Long-ter, a))et)
#. 3ro3erty> 3lant and e+ui3,ent
&. in=e)t,ent 3ro3erty> )uc* a) real e)tate *eld for in=e)t,ent 3ur3o)e)
3. intangi5le a))et)
'. financial a))et) ?e
account) recei=a5le)> and ca)* and ca)* e+ui=alent)@
5. in=e)t,ent) accounted for u)ing t*e e+uity ,et*od
6. 5iological a))et)> 4*ic* are li=ing 3lant) or ani,al). !earer /i-l-gical a11et1
are 3lant) or ani,al) 4*ic* 5ear agricultural 3roduce for *ar=e)t> )uc* a) a33le
tree) gro4n to 3roduce a33le) and )*ee3 rai)ed to 3roduce 4ool.
Q#-R
ia/ilitie1
#. account) 3aya5le
&. 3ro=i)ion) for 4arrantie) or court deci)ion)
3. financial lia5ilitie) ?e )uc* a)
3ro,i))ory note) and cor3orate 5ond)
'. lia5ilitie) and a))et) for current ta<
5. deferred ta< lia5ilitie) and deferred ta< a))et)
6. ,inority intere)t in e+uity
-. i))ued ca3ital and re)er=e) attri5uta5le to e+uity *older) of t*e 3arent co,3any
"onfidential Page 3$ $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
E:,ity
(*e net a))et) )*o4n 5y t*e 5alance )*eet e+ual) t*e t*ird 3art of t*e 5alance )*eet>
4*ic* i) 9no4n a) t*e )*are*older)G e+uity. For,ally> )*are*older)G e+uity i) 3art of t*e
co,3anyG) lia5ilitie): t*ey are fund) Oo4ingO to )*are*older) ?after 3ay,ent of all ot*er
lia5ilitie)@U u)ually> *o4e=er> Olia5ilitie)O i) u)ed in t*e ,ore re)tricti=e )en)e of lia5ilitie)
e )*are*older)G e+uity 5y con)truction ,u)t e+ual a))et)
,inu) lia5ilitie)> and are a re)idual.
#. nu,5er) of )*are) aut*ori)ed> i))ued and fully 3aid> and i))ued 5ut not fully 3aid
&. 3ar =alue of )*are)
3. reconciliation of )*are) out)tanding at t*e 5eginning and t*e end of t*e 3eriod
'. de)cri3tion of rig*t)> 3reference)> and re)triction) of )*are)
5. trea)ury )*are)> including )*are) *eld 5y )u5)idiarie) and a))ociate)
6. )*are) re)er=ed for i))uance under o3tion) and contract)
-. a de)cri3tion of t*e nature and 3ur3o)e of eac* re)er=e 4it*in o4ner)G e+uity
T+e !alance S+eet Str,ct,re
(*e alance S*eet logic i) co,3letely con)i)tent 4it* t*e t4o 5a)ic rule) ?t*e rule) of
de5it%credit@ t*at 4ere de,on)trated at t*e 5eginning of t*e tutorial.
#. De/it Side- ;e)cri5e) eit*er a))et) t*at 5elong to t*e 5u)ine)) ?3ro3erty> a real
account> according to Rule No. & an a))et i) al4ay) a de5it@ or de5t) o4ed 5y
"onfidential Page 39 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
cu)to,er) to u). "u)to,er) according to Rule No. # - are a 3er)onal account
t*at ,u)t 5e a de5it ?t*e accounting entity ,u)t *a=e a Ode5tO to t*e 5u)ine))@.
&. Credit Side- ;e)cri5e) t*e o5ligation) of t*e 5u)ine)) to eit*er of t4o factor) a)
follo4):
#. 7 lender) and )o fort*@.
&. (*e o4ner of t*e 5u)ine)) ?"a3ital !ccount or accu,ulated 3rofit)@.
1n eit*er ca)e> according to Rule # eit*er t*e e t*ere are t4o e t*at al)o ta9e) account of t*e 5alance in
t*e Profit and Lo)) State,ent> 4ill 5e 5alanced.
"onfidential Page '0 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
Su,,ary
1n a gra3*ic for,at> t*e accounting )y)te, loo9) li9e t*i)
"onfidential Page '# $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
Financial State0ent Analy1i1
Financial )tate,ent analy)i) i) t*e 3roce)) of e financial analy)t)> and ot*er) in t*eir deci)ion-
,a9ing 3roce))e) related to )toc9)> 5ond)> and ot*er financial in)tru,ent). (*e goal in
analy/ing financial )tate,ent) i) to a))e)) 3a)t 3erfor,ance and current financial
3o)ition and to ,a9e 3rediction) a5out t*e future 3erfor,ance of a co,3any. 1n=e)tor)
4*o 5uy )toc9 are 3ri,arily intere)ted in a co,3anyG) 3rofita5ility and t*eir 3ro)3ect) for
earning a return on t*eir in=e)t,ent 5y recei=ing di=idend) and%or increa)ing t*e ,ar9et
=alue of t*eir )toc9 *olding). "reditor) and in=e)tor) 4*o 5uy de5t )ecuritie)> )uc* a)
5ond)> are ,ore intere)ted in li+uidity and )ol=ency: t*e co,3anyG) )*ort-and long-run
a5ility to 3ay it) de5t). Financial analy)t)> 4*o fre+uently )3eciali/e in follo4ing certain
indu)trie)> routinely a))e)) t*e 3rofita5ility> li+uidity> and )ol=ency of co,3anie) in order
to ,a9e reco,,endation) a5out t*e 3urc*a)e or )ale of )ecuritie)> )uc* a) )toc9) and
5ond).
!naly)t) can o5tain u)eful infor,ation 5y co,3aring a co,3anyG) ,o)t recent financial
)tate,ent) 4it* it) re)ult) in 3re=iou) year) and 4it* t*e re)ult) of ot*er co,3anie) in
t*e )a,e indu)try. (*ree 3ri,ary ty3e) of financial )tate,ent analy)i) are co,,only
9no4n a) *ori/ontal analy)i)> =ertical analy)i)> and ratio analy)i).
#-ri;-ntal Analy1i1
I*en an analy)t co,3are) financial infor,ation for t4o or ,ore year) for a )ingle
co,3any> t*e 3roce)) i) referred to a) horizontal analysis> )ince t*e analy)t i) reading
acro)) t*e 3age to co,3are any )ingle line ite,> )uc* a) )ale) re=enue). 1n addition to
co,3aring dollar a,ount)> t*e analy)t co,3ute) 3ercentage c*ange) fro, year to year
for all financial )tate,ent 5alance)> )uc* a) ca)* and in=entory. !lternati=ely> in
"onfidential Page '& $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
co,3aring financial )tate,ent) for a nu,5er of year)> t*e analy)t ,ay 3refer to u)e a
=ariation of *ori/ontal analy)i) called trend analysis. (rend analy)i) in=ol=e) calculating
eac* yearG) financial )tate,ent 5alance) a) 3ercentage) of t*e fir)t year> al)o 9no4n a)
t*e 5a)e year. I*en e t*e 5a)e year figure) are al4ay) #00
3ercent> and 3ercentage c*ange) fro, t*e 5a)e year can 5e deter,ined.
t*e analy)t calculate) eac* ite, on a )ingle financial
)tate,ent a) a 3ercentage of a total. (*e ter, vertical analysis a33lie) 5ecau)e eac*
yearG) figure) are li)ted =ertically on a financial )tate,ent. (*e total u)ed 5y t*e analy)t
on t*e inco,e )tate,ent i) net )ale) re=enue> 4*ile on t*e 5alance )*eet it i) total
a))et). (*i) a33roac* to financial )tate,ent analy)i)> al)o 9no4n a) component
percentages> 3roduce) common-size financial statements. "o,,on-)i/e 5alance
)*eet) and inco,e )tate,ent) can 5e ,ore ea)ily co,3ared> 4*et*er acro)) t*e year)
for a )ingle co,3any or acro)) different co,3anie).
Rati- Analy1i1
Ratio analy)i) ena5le) t*e analy)t to co,3are ite,) on a )ingle financial )tate,ent or
to e t*e analy)t can t*en e u)ing t*i) analytical tool
facilitate) inter co,3any a) 4ell a) intra ,any co,3ari)on). Ratio) are often cla))ified
u)ing t*e follo4ing ter,): profitability ratios ?al)o 9no4n a) o3erating ratio)@> liquidity
ratios> and solvency ratios. Profita5ility ratio) are gauge) of t*e co,3anyG) o3erating
)ucce)) for a gi=en 3eriod of ti,e. Li+uidity ratio) are ,ea)ure) of t*e )*ort-ter, a5ility
of t*e co,3any to 3ay it) de5t) 4*en t*ey co,e due and to ,eet une aleno> S4ift> Iagon-R and Jen.
9,icD Fact1
Pear of 7)ta5li)*,ent Fe5ruary #9$#
0i)ion O(*e Leader in (*e 1ndian !uto,o5ile 1ndu)try>
"reating "u)to,er ;elig*t and S*are*olderG) Iealt*U
! 3ride of 1ndia.O
1ndu)try !uto,oti=e - Four I*eeler)
Li)ting) : it) code) S7 - "ode: 53&500
NS7 - "ode: M!RU(1
loo,5erg: MULY1N
Reuter): MR(1.2
Foint 0enture Iit* Su/u9i Motor "o,3any> no4 Su/u9i Motor
"or3oration> of Fa3an in 2cto5er #9$&.
Regi)tered : "or3orate
2ffice
##t* Floor> Fee=an Pra9a)*
&5> Ka)tur5a Aand*i Marg
Ne4 ;el*i - ##000#> 1ndia
(el.: X?9#@-?##@-&33#6$3# ?#0 line)@
Fa &3'#3'#-5
Ie5)ite 444.,arutiudyog.co,
"onfidential Page '6 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
ACard1 E Acc-lade1
&0#0 ? Maruti Su/u9i ,anufacture) #0 la9* unit) in &009-#0.
&009 ? Maruti Su/u9i S4ift 5eco,e) fa)te)t to reac* 3-la9* ,ile)tone.
? Maruti Su/u9i !-)tar 5rea9) o4n record of fuel efficiency.
? Maruti Su/u9i 4in) GAolden Peacoc9 7co-1nno=ation !4ardG.
? .aryana allot) -00 acre) to Maruti Su/u9i for *i-tec* R:; co,3le<
at Ro*ta9.
? Maruti Su/u9i )*i3) out #00000t* !-)tar in le)) t*an a year.
? 1"S1 a4ard) to3 *onour) to Maruti Su/u9i for cor3orate
go=ernance.
&00$ ? Maruti Su/u9i 5eco,e) t*e fir)t 1ndian car co,3any to e
7)tee, nu,5er one in it) )eg,ent for t*e 3rd year in a ro4> S4ift
nu,5er one in t*e 3re,iu, co,3act )eg,ent.
? IagonR and 7)tee, to3 t*eir )eg,ent) in t*e F; Po4er !P7!L
)tudy.
? (NS ran9) Maruti 't* in t*e "or3orate Re3utation Strengt* ?"SR@
)tudy ?Z# in !uto )ector@-Fe5 05.
? Maruti 5agged t*e OManufacturer of t*e yearO a4ard fro, !utocar-
"N" ?&nd ti,e in a ro4@-Fe5 05.
? Fir)t 1ndian car ,anufacturer to reac* 5 ,illion =e*icle) )ale).
"onfidential Page '- $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
? u)ine)) Iorld ran9) Maruti a,ong to3 fi=e ,o)t re)3ected
co,3anie) in 1ndia-2ct 0'.
? Maruti ran9ed a,ong to3 ten ?Ran9-@ greene)t co,3anie) in 1ndia
5y u)ine)) (oday - Se3 G0'
&00' ? Maruti Su/u9i 4a) No. # in "u)to,er )ati)faction> No. # in Sale)
Sati)faction No.# in Product 8uality ?7)tee, and !lto@ and No. # in
Product !33eal ?7)tee, and Iagon R@.
? No. # in (otal "u)to,er Sati)faction ?Maruti $00> Jen and !lto@.
? u)ine)) Iorld ran9ed u) a,ong t*e countryG) fi=e ,o)t re)3ected
co,3anie).
? u)ine)) Iorld ran9ed u) t*e countryG) ,o)t re)3ected auto,o5ile
co,3any.
? 0oted Manufacturer of t*e year 5y "N".
? 0oted one of 1ndiaG) Areene)t "o,3anie) 5y u)ine)) (oday-!"
Niel)on 2RA-M!RA.
"onfidential Page '$ $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
Mile1t-ne1
#9$# ? Maruti Udyog Ltd. 4a) incor3orated.
#9$& ? Ste3ed into a F0 4it* SM" of Fa3an.
#9$3 ? Maruti $00> a -96 cc *atc*5ac9> 1ndiaG) fir)t afforda5le car 4a) 3roduced.
#9$' ? 1n)talled ca3acity reac*ed '0>000 unit). 2,ni> a -96 cc MU0 4a) in
3roduction.
#9$5 ? Launc* of Maruti Ay3)y ?9-0cc> 'I; off-road =e*icle@.
#9$6 • Produced #00>000 =e*icle) ?cu,ulati=e 3roduction@.
#9$- ? 7000 unit).
#99& ? SM" increa)e) it) )ta9e to 50 3er cent.
#99' ? Produced t*e # ,illiont* =e*icle )ince t*e co,,ence,ent of 3roduction.
#995 ? Second 3lant launc*ed> t*e in)talled ca3acity reac*ed &00>000 unit).
#996 ? Launc* of &'-*our e,ergency on-road =e*icle )er=ice.
#99- ? Produced t*e & ,illiont* =e*icle )ince t*e co,,ence,ent of 3roduction.
#99$ ? Launc* of 4e5)ite a) 3art of "RM initiati=e).
#999 ? Launc* of Maruti - Su/u9i inno=ati=e traffic 5eat in ;el*i and "*ennai a)
)ocial initiati=e).
&000 ? 1;(R ?1n)titute of ;ri=ing (raining and Re)earc*@ launc*ed Bointly 4it*
;el*i go=ern,ent to 3ro,ote )afe dri=ing *a5it).
&00# ? Launc* of cu)to,er infor,ation center) in .ydera5ad> angalore> and
"*ennai.
&00& ? SM" increa)e) it) )ta9e to 5'.& 3er cent.
? Launc* of Maruti Finance 4it* #0 finance co,3anie) in Mu,5ai.
? Start of Maruti (rue =alue in Mu,5ai.
&003 ? Production of ' ,illiont* =e*icle.
? Li)ted on S7 and NS7 after a 3u5lic i))ue o=er)u5)cri5ed #0 ti,e).
&00' ? Maruti clo)ed t*e financial year &003-0' 4it* an annual )ale of '-&#&&
unit)> t*e *ig*e)t e=er )ince t*e co,3any 5egan o3eration) &0 year) ago.
&005 ? (*e fiftiet* la9* car roll) out in !3ril> &005.
&006 ? Maruti and Mag,a in 3act for financing car) .
&00- ? Maruti )tart) dri=ing and (ec*nical (raining 1n)titute for (ri5al Pout*.
&00$ ? Maruti Su/u9i in9) agree,ent 4it* Mundra Port for a ,ega car (er,inal
for 7 on an a=erage t4o =e*icle) roll out of t*e factory in
e=ery )ingle ,inute. (*e co,3any ta9e) a33ro$?F
Ra4 ,aterial
e$=B FB>(?@ &$>(?% (%B>B$& ##9>3-6
7F%? $?>%%& A(>(F? 35>3-&
(rading
3urc*a)e)
% % % % 0
Salarie) and
4age)
$>&?B (>&=% $>$F? $>?== 3>#3-
Manufacturing
eB@B F>AB@ &>?&& ((>%=B #&>393
Managerial
re,uneration
% % % % 0
O)erating
)r-.it
9>305 #'>06& #6>&66 #9>''$ $$>@F=
YoY groth
!"#
145.2 51.1 15.7 19.6 $(&)
23erating
,argin ?N@
F3@ (%3B ((3% ((3@ ##.-
"onfidential Page 53 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
(rea)ury
inco,e
A>??? A>&(@ @>$&$ @>B%% '>-00
E!DITA #3>0$# #->9-6 &0>55$ &3>9'$ $?>(F=
7;1(! ,argin
?N@
((3@ (A3( (A3B (A3? #3.$
;e3reciation @>&@& @>B=F $>FB@ A>@F? '>5&5
E!IT
71( ,argin
?N@
$>#3&
?3(
#3>'0$
&3F
#->-0'
((3?
&0>'6#
((3?
$$>==(
1ntere)t @A@ A=% $%@ A?= 3''
Pre-ta< 3rofit ?>=&F (A>%@? (?>B%% $%>AF? &&>6#-
Pre-ta< ,argin
?N@
=3? &3B ((3B ((3? ##.5
(a< 3ro=i)ion $>$?? @>B(A B>=%& =>B$@ ->&3-
7ffecti=e ta<
rate ?N@
$&3= A@3= A$3( A$3% 3&.0
Ad8,1ted net
)r-.it
5>'&# $>535 ##>$90 #3>$63 (B>AF%
YoY groth
!"#
270.4 57.4 39.3 16.6 $*&+
X?-@ 7BAB ((>F&% (A>F=A (B>AF%
"onfidential Page 5' $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
Gra)+ical re)re1entati-n -. Pr-.it E -11 Acc-,nt*
"onfidential Page 55 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
!alance 1+eet
Peri-d Ending Mar A(> $%(% Mar A(> $%%& Mar A(> $%%F Mar A(> $%%?
A11et1
"urrent !))et)
- "a)* !nd "a)*
7+ui=alent)
#>6&->000 #9>$6$>000 3>90#>000 #'>3-'>000
S*ort (er,
1n=e)t,ent)
5&>-33>000 ##>6$&>000 #0>9'6>000 $>$0&>000
Net Recei=a5le) #&>36$>000 #5>005>000 $>$60>000 $>60#>000
1n=entory #&>&-6>000 9>>000 #0>'$3>000 ->#&3>000
2t*er "urrent !))et) #&>96#>000 #&>3#9>000 $>$'5>000 $>$'0>000
T-tal C,rrent A11et1 &(>&=B>%%% =F>%F?>%%% @A>%AB>%%% @?>?@%>%%%
Long (er, 1n=e)t,ent) &#>&35>000 &#>090>000 '#>-03>000 &6>3''>000
Pro3erty Plant and
7+ui3,ent
- - - -
Aood4ill - - - -
1ntangi5le !))et) - - - -
!ccu,ulated
!,orti/ation
- - - -
2t*er !))et) - - - -
;eferred Long (er,
!))et "*arge)
$3$>000 -9#>000 99$>000 #>##0>000
T-tal A11et1 (=&>=?A>%%% (@%>F%B>%%% ($=>F?B>%%% (%@>?$@>%%%
ia/ilitie1
"urrent Lia5ilitie)
!ccount) Paya5le &3>'6#>000 &5>9-&>000 #->0$0>000 9>&56>000
S*ort%"urrent Long
(er, ;e5t
9>-30>000 $>#33>000 #&>9$5>000 ->633>000
2t*er "urrent
Lia5ilitie)
##>655>000 $>0$#>000 ->&''>000 #'>&63>000
"onfidential Page 56 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
T-tal C,rrent
ia/ilitie1
@(>&%F>%%% A?>@(F>%%% A$>@==>%%% $B>A==>%%%
Long (er, ;e5t 3>6'0>000 5>3'5>000 5>395>000 6>'-#>000
2t*er Lia5ilitie) - - - -
;eferred Long (er,
Lia5ility "*arge)
- - - -
Minority 1ntere)t - - - -
Negati=e Aood4ill - - - -
T-tal ia/ilitie1 @?>F@?>%%% @B>(B$>%%% @%>=%@>%%% A@>=B&>%%%
St-cD+-lder1G E:,ity
Mi)c Stoc9) 23tion)
Iarrant)
- - - -
Redee,a5le Preferred
Stoc9
- - - -
Preferred Stoc9 - - - -
"o,,on Stoc9 5>69#>000 5>69#>000 5>69#>000 5>69#>000
Retained 7arning) ##5>$66>000 9#>6'0>000 $0>5'9>000 6'>&'3>000
(rea)ury Stoc9 &69>000 ?#>6-$>000@ 3#>000 #3#>000
"a3ital Sur3lu) - - #>000 -
2t*er Stoc9*older
7+uity
- - - -
T-tal St-cD+-lder
E:,ity
' ' ' '
Net Tangi/le A11et1 ' ' ' '
Ca1+ .l-C 1tate0ent
Peri-d Ending Mar A(> $%(% Mar A(>
$%%&
Mar A(>
$%%F
Mar A(>
$%%?
Net Inc-0e $=>$@?>%%% ($>$?@>%%% (?>F&&>%%% (B>FFA>%%%
O)erating Acti7itie1> Ca1+ Fl-C1 Pr-7ided !y -r U1ed In
"onfidential Page 5- $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
;e3reciation $>'#'>000 ->#65>000 5>-&->000 &>-55>000
!dBu)t,ent) (o Net
1nco,e
- - - -
"*ange) 1n !ccount)
Recei=a5le)
#>&9'>000 ?&>$0#>000@ 969>000 ?#>##5>000@
"*ange) 1n 1n=entorie) ?3>063>000@ #>&-0>000 ?3>360>000@ #>--#>000
"*ange) 1n 2t*er
23erating !cti=itie)
&6&>000 9-'>000 -95>000 #>-56>000
T-tal Ca1+ Fl-C Fr-0
O)erating Acti7itie1
A%>($(>%%% ($>=A%>%%% (&>%BF>%%% (F>?%@>%%%
In7e1ting Acti7itie1> Ca1+ Fl-C1 Pr-7ided !y -r U1ed In
"a3ital 7$0'>000@ ?#->060>000@ ?#->'30>000@ ?##>99#>000@
T-tal Ca1+ Fl-C1 Fr-0
In7e1ting Acti7itie1
4@&>((?>%%%5 F>B$F>%%% 4A%>F$A>%%%5 4$$>FA?>%%%5
Financing Acti7itie1> Ca1+ Fl-C1 Pr-7ided !y -r U1ed In
;i=idend) Paid - - - -
2t*er "a)* Flo4) fro,
Financing !cti=itie)
?35>$0$>000@ &5>5#->000 ?#3>'6'>000@ ?#0>9&0>000@
T-tal Ca1+ Fl-C1 Fr-0
Financing Acti7itie1
?BB>%%% 4B>(&(>%%%5 (>$&$>%%% 4(>A=?>%%%5
"*ange 1n "a)* and "a)*
7+ui=alent)
?#$>&'#>000@ #5>96->000 ?#0>'-3>000@ ?5>500>000@
2ey Rati-1
Data )r-7ided /y Ca)ital I9> e6ce)t C+ere n-ted3
&0##@
3
: 3''.'#
(railing P%7 ?tt,> intraday@: N%!
For4ard P%7 ?fye Mar 3#> &0#&@
#
: N%!
P7A Ratio ?5 yr e &005
Pr-.ita/ility
Profit Margin ?tt,@: $.$-N
23erating Margin ?tt,@: #0.6-N
Manage0ent E..ecti7ene11
Return on !))et) ?tt,@: #&.-#N
Return on 7+uity ?tt,@: &'.#'N
Inc-0e State0ent
Re=enue ?tt,@: &95.9&
Re=enue Per S*are ?tt,@: #>0&'.&5
8trly Re=enue Aro4t* ?yoy@: N%!
Aro)) Profit ?tt,@: 5'.-$
71(;! ?tt,@: 39.9-
Net 1nco,e !=l to "o,,on ?tt,@: &6.&5
;iluted 7PS ?tt,@: N%!
8trly 7arning) Aro4t* ?yoy@: N%!
!alance S+eet
(otal "a)* ?,r+@: N%!
(otal "a)* Per S*are ?,r+@: N%!
(otal ;e5t ?,r+@: N%!
"onfidential Page 59 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
(otal ;e5t%7+uity ?,r+@: N%!
"urrent Ratio ?,r+@: &.#9
oo9 0alue Per S*are ?,r+@: 0.00
Ca1+ Fl-C State0ent
23erating "a)* Flo4 ?tt,@: 30.#&
Le=ered Free "a)* Flo4 ?tt,@: #'.&&
"onfidential Page 60 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
ANAYSIS AND
INTERPRETAION OF 2EY
RATIOS
"onfidential Page 6# $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
i:,idity Rati-1
(3 "urrent Ratio:
"urrent ratio tell) u) t*e )*ort- ter, financial 3o)ition of t*e co,3any. "urrent Ratio of
Maruti Su/u9i *a) 5een increa)ing fro, &003 till &006 5ut *a) decrea)ed in t*e year
&00-.(*i) i) 5ecau)e current lia5ilitie) *a=e increa)ed ,ore a) co,3ared to current
a))et) in &00-.
(*e current ratio i) t*e 5e)t 9no4n ratio of financial analy)i). 1t 3re)ent) in relati=e
ter,) 4*at net 4or9ing ca3ital ,ea)ure) in a5)olute ter,).
#@- "alculation of current ratio
(*e current ratio ?"R@ i) calculated 5y di=iding current a))et) ?i.e. 4or9ing ca3ital@ 5y
current lia5ilitie).
! current ratio ,ay *a=e different ,eaning) de3ending on t*e 3oint of =ie4 of an
analy)t. 1t *a) a li+uidating ,eaning - t*e a5ility to ,a9e all nece))ary 3ay,ent) today -
4*ic* gi=e) a ,ea)ure of 3rotection or cu)*ion for lender). ut> lender) are not
intere)ted in recei=ing in=entory in lieu of t*eir clai,)> and t*ey ,ay loo9 at t*e ratio a)
an indication t*at t*e fir, i) a5le to generate fund) to ,a9e all needed 3ay,ent) in t*e
futureU t*u)> t*e ratio indicate) 4*et*er t*e fir, i) li9ely to 5e a going concern. ut> to
"onfidential Page 6& $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
infer )uc* a ,eaning> t*e ratio cannot 5e loo9ed u3on a) a )ingle )tati)tic> and it i)
nece))ary to analy/e t*e degree of li+uidity of t*e co,3onent) of 4or9ing ca3ital> a) it
i) done later in t*i) c*a3ter.
! general rule of t*u,5 )ugge)t) t*at t*e current ratio )*ould 5e clo)e to &. !) can 5e
)een in (a5le (-$.3> =ery fe4 co,3anie) in t*e c*o)en )a,3le ,eet t*e rule of t*u,5.
Ta/le T'F3A
"o,3ari)on of "urrent Ratio 5y )i/e of co,3any in #99'
Sale) [ A M I R U S
-# MM #.5 &.& &.0 #.' #.0 #.6
#-3 MM #.$ #.6 #.$ #.' #.5 #.&
3-5 MM #.$ #.- #.- #.& #.3 &.&
5-#0 MM &.0 #.5 #.6 #.# #.5 #.&
#0-&5 MM &.6 #.- #.' #.# #.' #.0
&5 X MM &.5 &.& #.3 #.0 #.3 #.0
A W Manufacturer) - ;rug) and Medicine) S1" &$33 ?&$3' in #999@
M W Manufacturer) - Mac*inery S1" 356# ?35'5 in #999@
I W I*ole)aler) - Furniture S1" 50&#
R W Retailer) - Food Store) S1" 5'##
U W (ele3*one "o,,unication> S1" '$#& ?'$#3 in #999@
S W Ser=ice) - (ra=el !gencie)> S1" '-&'
Source: Ro5ert Morri) !))ociate)> O!nnual State,ent) Studie)> #99'O
(*e food )tore and tele3*one co,3any grou3) do not e=en co,e clo)e to t*e )u33o)ed
de)ira5le le=el of &. 2nly in 3*ar,aceutical)> i) t*ere a large 3ro3ortion of fir,) 4it*
ade+uate li+uidity. Furt*er,ore> if it i) a))u,ed t*at larger fir,) are t*e )tronge)t fir,>
t*en t*e 3*ar,aceutical co,3anie) )tati)tic) )ugge)t t*at t*e i,3ro=e,ent in li+uidity
i) correlated 4it* a 3o)ition of )trengt* in t*e indu)try. Unfortunately> )uc* o5)er=ation
i) not uni=er)al 5ecau)e Bu)t t*e contrary )ee,) to ta9e 3lace in food )tore) and tra=el
agencie): larger fir,) in t*e)e )ector) *a=e t*e 4or)t li+uidity. 2ne ,ay )u)3ect t*at
"onfidential Page 63 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
t*e ea)y acce)) to credit of large food )tore c*ain) and t*e eagerne)) of food
,anufacturer) to 3lace t*eir 3roduct) on )tore )*el=e) e lo4 =alue) do not indicate a
critical 3ro5le, 5ut )*ould concern t*e ,anage,ent. 2ne e ,ar9eta5le )ecuritie) and account)
recei=a5le@ to 3ay it) current lia5ilitie). 8uic9 ratio for,ula i):
8uic9 ratio )3ecifie) 4*et*er t*e a))et) t*at can 5e +uic9ly con=erted into ca)* are
)ufficient to co=er current lia5ilitie).
1deally> +uic9 ratio )*ould 5e #:#.
1f +uic9 ratio i) *ig*er> co,3any ,ay 9ee3 too ,uc* ca)* on *and or *a=e a 3ro5le,
collecting it) account) recei=a5le. .ig*er +uic9 ratio i) needed 4*en t*e co,3any *a)
difficulty 5orro4ing on )*ort-ter, note). ! +uic9 ratio *ig*er t*an #:# indicate) t*at t*e
5u)ine)) can ,eet it) current financial o5ligation) 4it* t*e a=aila5le +uic9 fund) on
*and.
! +uic9 ratio lo4er t*an #:# ,ay indicate t*at t*e co,3any relie) too ,uc* on in=entory
or ot*er a))et) to 3ay it) )*ort-ter, lia5ilitie).
Many lender) are intere)ted in t*i) ratio 5ecau)e it doe) not include in=entory> 4*ic*
,ay or ,ay not 5e ea)ily con=erted into ca)*.
#@ "alculation of +uic9 ratio:
8uic9 or !cid (e)t Ratio ?8R@ i) calculated 5y di=iding current a))et) fro, 4*ic*
in=entory *a) 5een e 5y current lia5ilitie).
8R W ?"a)*XMar9eta5le Securitie)X!ccount) Recei=a5le@ % "urrent Lia5ilitie)
"onfidential Page 65 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
$5' M-di.icati-n1 t- calc,lati-n
(*e nu,5er) u)ed in t*e calculation of +uic9 ratio ,ay need )o,e correction for
rea)on) already ,entioned for ca)* 5alance> and rea)on) )till to co,e for current
lia5ilitie). Since t*e e it
i) al)o a33ro3riate to touc* u3on ele,ent) t*at can affect ,ar9eta5le )ecuritie).
U)ually> t*e)e )ecuritie) are *ig*ly ,ar9eta5le and t*u) it i) ea)y to o5tain recent
accurate +uotation) ?a) o33o)ed to )ecuritie) *eld for in=e)t,ent 3ur3o)e 4*ic* are
found a) 3art of fi t*e accounting rule u)ed for re3orting t*e)e )ecuritie) i) t*e co)t
,et*od. (*e co)t ,et*od re+uire) t*at t*e 3urc*a)e 3rice of a )ecurity 5e t*e 5a)i) of
it) 5alance )*eet =aluation unle)) t*e current ,ar9et =alue i) lo4er> and t*e decline in
=alue i) ot*er t*an te,3orary. I*en )uc* a decline i) recorded> an account for
O=aluation allo4anceO )*ould 5e 3re)ent on t*e 5alance )*eet. 1f )toc9) and 5ond) *a=e
5een de3re))ed> and t*e co,3any doe) not *a=e t*e =alue decline recorded> t*e
analy)t ,ay 4ant to +ue)tion 4*et*er t*e adBu)t,ent reco,,ended 5y accounting
rule)> *a) 5een ,ade. I*en t*e )toc9 and 5ond) *a=e 5een on an u3)4ing>
,ar9eta5le )ecuritie) are li9ely to 5e under)tated> 5ut no correction can 5e e t*i) ,ea)ure i) too )tringent and narro4 to allo4 ,eaningful i,3lication) a5out t*e
fir,G) future. ut> a co,3ari)on o=er ti,e ,ay 5ring to lig*t a deterioration of li+uidity
foretelling onco,ing in)ol=ency> and t*erefore> it ,u)t ne=er 5e o=erloo9ed.
! general rule of t*u,5 )ugge)t) t*at t*e +uic9 ratio )*ould 5e around #. !) can 5e
)een in (a5le (-$.'> t*e rule of t*u,5 *old) for all t*e indu)trie) e food
)tore).
Ta/le T'F3B
"o,3ari)on of 8uic9 Ratio 5y co,3any )i/e
Sale) [ A M I R U S
-# MM 0.9 #.3 0.$ 0.3 0.9 #.6
#-3 MM #.# # 0.9 0.' # #.#
3-5 MM # # # 0.5 #.# #.$
5-#0 MM #.3 0.$ 0.9 0.' #.# #.#
#0-&5 MM #.3 0.$ 0.9 0.5 #.& #
&5 X MM #.& # 0.9 0.' #.# 0.$
A W Manufacturer) - ;rug) and Medicine) S1" &$33
M W Manufacturer) - Mac*inery S1" 356#
I W I*ole)aler) - Furniture S1" 50&#
R W Retailer) - Food Store) S1" 5'##
U W (ele3*one "o,,unication> S1" '$#&
S W Ser=ice) - (ra=el !gencie)> S1" '-&'
Source: Ro5ert Morri) !))ociate)> O!nnual State,ent) Studie)> #99'O
(*e fact t*at +uic9 ratio =alue) are clo)e to t*e t*eoretical =alue of one i) )ur3ri)ing in
lig*t of t*e 4ide)3read de=iation) of current ratio =alue) fro, it) t*eoretical =alue of
t4o> o5)er=ed in (a5le (-$.3. (*i) )ugge)t) t*at t*e +uic9 ratio i) ,ore ro5u)t. 1n fact>
t*e a33arent oddity of e
and )*ould not lead anyone to 5elie=e t*at food )tore) in t*e United State) 4ill )oon
clo)e and 3eo3le 4onGt *a=e any 3lace to 5uy ,il9 and 5read. (*e rea)on i) )i,3ly t*at
food )tore) did not - u3 until =ery recently - )ell on credit.
"onfidential Page 6- $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
3. !5)olute "a)* Ratio:
(*i) ratio te)t) t*e li+uidity on an i,,ediate 5a)i) a) it te)t) for li+uidity 4it* t*e ca)*
and near ca)* ite,) only. (*e ratio *a) )*o4n a con)idera5le increa)e till &006 5ut *a)
declined in t*e year &00-.
"a)* Ratio i) an indicator of co,3anyG) )*ort-ter, li+uidity. 1t ,ea)ure) t*e a5ility to
u)e it) ca)* and ca)* e+ui=alent) to 3ay it) current financial o5ligation). "a)* Ratio
for,ula i):
"a)* ratio ,ea)ure) t*e i,,ediate a,ount of ca)* a=aila5le to )ati)fy )*ort-ter,
lia5ilitie). ! ca)* ratio of 0.5:# or *ig*er i) 3referred.
"a)* ratio i) t*e ,o)t con)er=ati=e loo9 at a co,3anyG) li+uidity )ince i) ta9ing in t*e
con)ideration only t*e ca)* and ca)* e+ui=alent).
"a)* ratio i) u)ed 5y creditor) 4*en deciding *o4 ,uc* credit> if any> t*ey 4ould 5e
4illing to e current lia5ilitie) al)o
re3re)ent) fir,G) o5ligation) to out)ider) and t*ey are an i,3ortant deter,inant of ri)9.
.o4e=er> 4e ad=i)e t*at to calculate de5t e+uity ratio current lia5ilitie) )*ould 5e
included in out)iderG) fund). (*e ratio calculated on t*e 5a)i) out)iderG) fund) e000\ X -5>000\ X #0>000@ % #0>000
W #6 ti,e)
\1nco,e after intere)t i) [->5000 X inco,e ta< [-5>000
Signi.icance -. de/t 1er7ice rati-*
(*e interest coverage ratio i) =ery i,3ortant fro, t*e lenderG) 3oint of =ie4. 1t
indicate) t*e nu,5er of ti,e) intere)t i) co=ered 5y t*e 3rofit) a=aila5le to 3ay intere)t
c*arge).
1t i) an inde< of t*e financial )trengt* of an enter3ri)e. ! *ig* de5t )er=ice ratio or
intere)t co=erage ratio a))ure) t*e lender) a regular and 3eriodical intere)t inco,e. ut
t*e 4ea9ne)) of t*e ratio ,ay create )o,e 3ro5le,) to t*e financial ,anager in rai)ing
fund) fro, de5t )ource).
General G,ideline1 .-r t+e Intere1t C-7erage Rati-
!) a general rule of t*u,5> in=e)tor) )*ould not o4n a )toc9 t*at *a) an intere)t
co=erage ratio under #.5. !n intere)t co=erage ratio 5elo4 #.0 indicate) t*e 5u)ine)) i)
*a=ing difficultie) generating t*e ca)* nece))ary to 3ay it) intere)t o5ligation). (*e
*i)tory and con)i)tency of earning) i) tre,endou)ly i,3ortant. (*e ,ore con)i)tent a
co,3anyD) earning)> t*e lo4er t*e intere)t co=erage ratio can 5e.
"onfidential Page -' $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
71( *a) it) )*ort co,ing)> t*oug*> 5ecau)e co,3anie) do 3ay ta t*erefore it i)
,i)leading to act a) if t*ey didnDt. ! 4i)e and con)er=ati=e in=e)tor 4ould )i,3ly ta9e
t*e co,3anyD) earning) 5efore intere)t and di=ide it 5y t*e intere)t e e=en if it i) ,ore rigid t*an a5)olutely
nece))ary.
Pr-.ita/ility Rati-1
6. Return on "a3ital 7,3loyed ?R2"7@
1t i) a ratio t*at indicate) t*e efficiency and 3rofita5ility of a co,3anyG) ca3ital
in=e)t,ent). R2"7 )*ould ideally 5e *ig*er t*an t*e rate at 4*ic* t*e co,3any
5orro4)> ot*er4i)e any increa)e in 5orro4ing 4ill reduce )*are*older)G earning). R2"7
*a) increa)ed till &005 5ut *a) di,ini)*ed )ince t*en.
Ret,rn -n Ca)ital E0)l-yed Rati- 4ROCE Rati-5*
(*e 3ri,e o5Becti=e of ,a9ing in=e)t,ent) in any 5u)ine)) i) to o5tain )ati)factory
return on ca3ital in=e)ted. .ence> t*e return on ca3ital e,3loyed i) u)ed a) a ,ea)ure
of )ucce)) of a 5u)ine)) in reali/ing t*i) o5Becti=e.
Return on ca3ital e,3loyed e)ta5li)*e) t*e relation)*i3 5et4een t*e 3rofit and t*e
ca3ital e,3loyed. 1t indicate) t*e 3ercentage of return on ca3ital e,3loyed in t*e
5u)ine)) and it can 5e u)ed to )*o4 t*e o=erall 3rofita5ility and efficiency of t*e
5u)ine)).
De.initi-n -. Ca)ital E0)l-yed*
"onfidential Page -5 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
Ca)ital e0)l-yed and o3erating 3rofit) are t*e ,ain ite,). "a3ital e,3loyed ,ay 5e
defined in a nu,5er of 4ay). .o4e=er> t4o 4idely acce3ted definition) are Ogr-11
ca)ital e0)l-yedO and Onet ca)ital e0)l-yedO. Aro)) ca3ital e,3loyed u)ually ,ean)
t*e total a))et)> fi u)ed in 5u)ine))> 4*ile net ca3ital e,3loyed
refer) to total a))et) ,inu) lia5ilitie). 2n t*e ot*er *and> it refer) to total of ca3ital>
ca3ital re)er=e)> re=enue re)er=e) ?including 3rofit and lo)) account 5alance@>
de5enture) and long ter, loan).
Calc,lati-n -. Ca)ital E0)l-yed*
Met+-d''(3 1f it i) calculated fro, t*e a))et) )ide> 1t can 5e 4or9ed out 5y adding t*e
follo4ing:
#. (*e fi eit*er at original co)t or
at re3lace,ent co)t after deducting de3reciation. 1n day) of inflation> it i) 5etter to
include fi ca)* at 5an9> )undry de5tor)> 5ill)
recei=a5le> )toc9> etc.
'. (o find out net ca3ital e,3loyed> current lia5ilitie) are deducted fro, t*e total of
t*e a))et) a) calculated a5o=e.
Gr-11 ca)ital e0)l-yed I Fi6ed a11et1 L In7e1t0ent1 L C,rrent a11et1
Net ca)ital e0)l-yed I Fi6ed a11et1 L In7e1t0ent1 L "-rDing ca)ital\3
\Ior9ing ca3ital W current a))et) ] current lia5ilitie).
Preca,ti-n1 F-r Calc,lating Ca)ital E0)l-yed*
"onfidential Page -6 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
I*ile ca3ital e,3loyed i) calculated fro, t*e a))et )ide> t*e follo4ing 3recaution)
)*ould 5e ta9en:
#. Regarding t*e =aluation of fi no4aday) it i) con)idered nece))ary to
=alue t*e a))et) at t*eir re3lace,ent co)t. (*i) i) 4it* a =ie4 to 3ro=iding for t*e
continuing 3ro5le, of inflation) during t*e current year). Under re3lace,ent co)t
,et*od) t*e fi or on =aluation of
e t*e 3ro=i)ion for de3reciation
)*ould 5e recalculated )ince de3reciation c*arged ,ig*t *a=e 5een calculated
on original co)t of a))et).
&. 1dle a))et)^a))et) 4*ic* cannot 5e u)ed in t*e 5u)ine)) )*ould 5e e )tand5y 3lant and ,ac*inery e))ential to t*e
nor,al running of t*e 5u)ine)) )*ould 5e included.
3. 1ntangi5le a))et)> li9e good4ill> 3atent)> trade ,ar9)> rig*t)> etc. )*ould 5e
e if t*ey *a=e )ale =alue or if t*ey *a=e 5een 3urc*a)ed t*ey
,ay 5e included. 1n=e)t,ent) ,ade out)ide t*e 5u)ine)) )*ould 5e e net 3rofit *a) to 5e
adBu)ted for t*e follo4ing:
• Net 3rofit )*ould 5e ta9en 5efore t*e 3ay,ent of ta< or 3ro=i)ion for ta re+uired to 3ay fi i) generated fro, re=enue). ! lo4 3rofit ,argin ratio indicate) t*at t*e
5u)ine)) i) una5le to control it) 3roduction co)t). Aro)) 3rofit ratio *a) 5een ,ore or
le)) )a,e in t*e concerned 3eriod.
Gr-11 Pr-.it Margin
!lt*oug* 4e are only a fe4 line) into t*e inco,e )tate,ent> 4e can already calculate
our fir)t financial ratio. (*e gro)) 3rofit ,argin i) a ,ea)ure,ent of a co,3anyG)
,anufacturing and di)tri5ution efficiency during t*e 3roduction 3roce)). (*e gro)) 3rofit
tell) an in=e)tor t*e 3ercentage of re=enue % )ale) left after )u5tracting t*e co)t of
good) )old. ! co,3any t*at 5oa)t) a *ig*er gro)) 3rofit ,argin t*an it) co,3etitor) and
indu)try i) ,ore efficient. 1n=e)tor) tend to 3ay ,ore for 5u)ine))e) t*at *a=e *ig*er
efficiency rating) t*an t*eir co,3etitor)> a) t*e)e 5u)ine))e) )*ould 5e a5le to ,a9e a
decent 3rofit a) long a) o=er*ead co)t) are controlled ?o=er*ead refer) to rent> utilitie)>
etc.@
(o calculate gro)) 3rofit ,argin> u)e t*i) for,ula: Aro)) Profit _ (otal Re=enue
Calc,lating Sa0)le Gr-11 Pr-.it Margin
For illu)tration 3ur3o)e)> letG) calculate t*e gro)) 3rofit ,argin of Areen4ic* Aolf
Su33ly ?a fictional co,3any@ u)ing it) inco,e )tate,ent. Pou 4ill find t*e )tate,ent at
t*e 5otto, of t*i) 3age in (a5le AAS-#.
"onfidential Page $' $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
!))u,e t*e a=erage golf )u33ly co,3any *a) a gro)) ,argin of 30N. ?Pou can find t*i)
)ort of indu)try-4ide infor,ation in =ariou) financial 3u5lication)> online finance )ite)
)uc* a) ,oneycentral.co,> or rating agencie) )uc* a) Standard and Pore)@.
Ie can ta9e t*e nu,5er) fro, Areen4ic* Aolf Su33lyG) inco,e )tate,ent and 3lug
t*e, into our for,ula:
[#6&>0$' gro)) 3rofit _ ['05>&09 total re=enue W 0.'0
(*e an)4er> .'0 ?or '0N@> tell) u) t*at Areen4ic* i) ,uc* ,ore efficient in t*e
3roduction and di)tri5ution of it) 3roduct t*an ,o)t of it) co,3etitor).
Gr-11 Pr-.it Margin -7er Ti0e
(*e gro)) ,argin tend) to re,ain )ta5le o=er ti,e. Significant fluctuation) can 5e a
3otential )ign of fraud or accounting irregularitie). 1f you are analy/ing t*e inco,e
)tate,ent of a 5u)ine)) and gro)) ,argin *a) *i)torically a=eraged around 3N-'N> and
)uddenly it )*oot) u34ard) of &5N> you )*ould 5e )eriou)ly concerned. For ,ore
infor,ation on 4arning )ign) of accounting fraud> 1 reco,,end .o4ard Sc*ilitG)
Financial S*enanigan): &nd edition: .o4 to ;etect !ccounting Ai,,ic9) and Fraud in
Financial Re3ort).
"onfidential Page $5 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
#y)-t+e1i1 Te1ting*
"onfidential Page $6 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
.y3ot*e)i) te)ting i) t*e rational fra,e4or9 for a33lying )tati)tical te)t).
(*e ,ain +ue)tion 4e u)ually 4i)* to e and )o,e of t*e nu,5er) are dra4n fro, a )tandard nor,al di)tri5ution
4it* un9no4n ,ean.
No4 letD) )ay 4e ta9e a nu,5er out of t*e *at. (*ere are t4o *y3ot*e)e) t*at are
3o))i5le:
a .0: t*e null *y3ot*e)i). (*e nu,5er i) fro, a )tandard nor,al di)tri5ution 4it* ` W 0.
a .!: t*e alternati=e *y3ot*e)i). (*e nu,5er i) not fro, a )tandard nor,al di)tri5ution
4it*
` W 0.
(*e art of )tati)tic) i) in finding good 4ay) of for,ulating criteria> 5a)ed on t*e =alue of
one ,ore )tati)tic)> to eit*er acce3t or reBect t*e null *y3ot*e)i) .0.
"onfidential Page $- $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
Figure #: Nu,5er) dra4n fro, t4o different )tandard nor,al di)tri5ution) are t*ro4n
into Fo*n "*oderaD) *at.
1t )*ould 5e noted t*at .0 and .! can 5e al,o)t anyt*ing> and a) co,3licated or a)
)i,3le a) 4e 4i)*. 1f a *y3ot*e)i) i) )tated )uc* t*at it )3ecifie) t*e entire di)tri5ution>
4e call it a )i,3le *y3ot*e)i). 2t*er4i)e> 4e call it a co,3o)ite *y3ot*e)i). !) you
,ig*t i,agine> ,ore rigorou) te)t) can 5e done 4it* )i,3le *y3ot*e)e)> 5ecau)e t*ey
)3ecify t*e entire di)tri5ution> fro, 4*ic* 3ro5a5ility =alue) can 5e co,3uted.
"onfidential Page $$ $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
(y3e 1 and (y3e 11 error). 1n any te)ting )ituation> t4o 9ind) of error could occur:
a (y3e 1 ?fal)e 3o)iti=e@. Ie reBect t*e null *y3ot*e)i) 4*en itD) actually true.
a (y3e 11 ?fal)e negati=e@. Ie acce3t t*e null *y3ot*e)i) 4*en itD) actually fal)e.
Say 1 *and you a 3rofit 5oo9ing )tate,ent of t*e Maruti. .o4 4ould you tell if itD) fairV 1f
you )tudied t*e ,ar9et )ale) turno=er for la)t #0 year) and it ,ay ca,e u3 6 ti,e) t*at
t*e turno=er i) ,ore t*an &>00>000 ,> 4*at 4ould you )ayV I*at if it ca,e u3 *ead) 3
ti,e)> in)teadV
1n t*e fir)t ca)e youDd 5e inclined to )ay t*at t*e )ale) turn o=er 4a) fair and in t*e
)econd ca)e youDd 5e inclined to )ay it 4a) 5ia)ed to4ard) unfair. .o4 certain are youV
2r> e=en ,ore )3ecifically> *o4 li9ely i) it actually t*at t*e turn o=er i) ,ore t*an
&>00>000 , in eac* ca)eV
#y)-t+e1i1 Te1ting
8ue)tion) li9e t*e one) a5o=e fall into a do,ain called hypothesis testing. .y3ot*e)i)
te)ting i) a 4ay of )y)te,atically +uantifying *o4 certain you are of t*e re)ult of a
)tati)tical e000 , 4a) fair> *o4 li9ely i) it t*at youDd o5)er=e t*e re)ult)
4e didV (4o> 4*at i) t*e li9eli*ood t*at t*e turn o=er fair gi=en t*e re)ult) you
o5)er=edV
2f cour)e> an e Lt*i)
turno=er of t*e co,3any i) fair>M and t*en calculate t*e li9eli*ood t*at your o5)er=ation)
are due to 3ure c*ance rat*er t*an a real difference in t*e 3o3ulation.
(*e confidence inter=al i) t*e le=el at 4*ic* you reBect t*e null *y3ot*e)i). 1f t*ere i) a
95N c*ance t*at t*ereD) a real difference in your o5)er=ation)> gi=en t*e null
*y3ot*e)i)> t*en you are confident in reBecting it. (*i) al)o ,ean) t*ere i) a 5N c*ance
youDre 4rong and t*e difference i) due to rando, fluctuation).
(*e null *y3ot*e)i) can 5e any ,at*e,atical )tate,ent and t*e te)t you u)e de3end)
on 5ot* t*e underlying data and your null *y3ot*e)i). 1n our co,3anyD) turno=er
e000 , 4a) different
enoug* to 5e )ignificant. 1n t*i) ca)e 4e 4ere ,ea)uring t*e sample mean.
Ie can ,ea)ure anyt*ing> t*oug*: t*e )a,3le =ariance> correlation> etc. ;ifferent te)t)
need) to 5e u)ed to deter,ine 4*et*er t*e)e are )tati)tically )ignificant.
"onfidential Page 93 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
"onfidential Page 9' $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
Rec-0endati-n1 .-r t+e
c-0)any
"onfidential Page 95 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
(*ey are for4ard loo9ing: !ccrued re)ult) of t*e 3a)t year % +uarter
• "o,3anyD) =alue de3end) on it) future 3rofita5ility 4*ic* de3end) on ,any
factor) not reflected in t*e 5alance )*eet> 4*ic* are non-,onetary
o Nature and inno=ati=ene)) of it 3roduct)
o (ec*nology land)ca3e ?3roduct o5)ole)cence@
o "o,3etitor)
o 7cono,ic condition) ?rece))ion % 5oo,@> go=ern,ent 3olicie)
o Staff and ,anage,ent ,orale
Financial Manage0ent
Internal and E6ternal !,1ine11 En7ir-n0ent
"onfidential Page 96 $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
"onfidential Page 9- $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
Internal !,1ine11 En7ir-n0ent*
1nternal en=iron,ent of 5u)ine)) nor,ally con)i)t) of t*e follo4ing.
i. Finance
ii. Mar9eting
iii. .u,an Re)ource)
i=. 23eration) ?Production> Manufacturing@
=. (ec*nology
=i. 2t*er Function) ?Logi)tic)> "o,,unication)@
E6ternal !,1ine11 En7ir-n0ent*
(*e follo4ing 5u)ine)) en=iron,ent factor) out)ide an organi/ation *a=e a 3rofound
effect on t*e function) and o3eration) of an organi/ation.
i. "u)to,er)
ii. Su33lier)
iii. "o,3etitor)
i=. Ao=ern,ent%Legal !gencie) : Regulation)
=. Macro 7cono,y%Mar9et):
=i. (ec*nological Re=olution
"onfidential Page 9$ $%#9%&0#'
Financial Planning and Strategy of Maruti Udyog Ltd
Pr-8ect 9,erie1
8 #. I*at i) ,eant 5y Matc*ing "once3tV
8 &. I*at are non-ca)* e