Finance for Managers

Indus Motors Ratio

Analysis
Sir.Rakesh Prakash
Rameez Hassan

2017
Introduction:
Indus Motors is a Pakistani automobile manufacturer and joint venture between House of
Habib, Toyota Tsusho and Toyota Motors, based in Karachi, Pakistan since 1990.Indus
Motors is the authorized assembler and manufacturer of Toyota and Daihatsu vehicles, auto
parts and accessories in Pakistan since 1 July 1990 at its 105 acres (0.42 km2) manufacturing
plant at Port Bin Qasim Industrial Zone, outside Karachi.

Economic Environment of Indus Motors:

Environmental analysis is the most important factor in improvement of organizations
performance. It helps in identifying the internal & external elements regarding company &
their products for their stability in the market. Here we focus two types of environmental
factors:

Macro Environmental Analysis (External Factors)

Micro Environmental Analysis (Internal Factors)

MACRO ENVIRONMENTAL ANALYSIS

In this analysis we considered PEST analysis for Indus Motors:

POLITICAL FACTOR:
Pakistan is a democratic country but political condition is not so well. Investment in private
sector is equal to none and the other thing lots of companies shift their business in
Bangladesh or other countries just because of current situation of Pakistan. Tax is imposed
heavily on beverages industry. Trade agreement is supported but there are also strict
restrictions following these. There is no regulation in the favor of the labor community. They
are not even paid equivalent to their work.

ECONOMICAL FACTOR:
It is a second largest element of PEST analysis. It involves economy conditions, inflation rate,
employment level, spending power etc. In Pakistan unemployment is up above the sky.
People are searching for jobs even after getting 16-18 years of education. Unemployment
level reduces the buying power of consumers and in the end economy starts declining.

SOCIAL FACTOR:
People of Every income level live in Pakistan Upper class, Middle Class and Lower Class.
Some people have large family size and some has low family size so Indus Motors Should
keep in mind the requirement of every type of customer and there are people who are of
Upper class they are status conscious they need unique and elegant looks in the car while
other may prefer space, comfort etc.

TECHNOLOGICAL FACTOR:
Technological changes aim to get the instant results and it does happen. Technology is all
about the quick and accurate outcomes. Research and development department of Pakistan
is not less than the others. Indus Motors must maintain proper research and development
team to know the dynamic and ever changing needs of their customer to get competitive
edge over their customer with the use of new and improved Technology

ENVIRONMENTAL FACTORS:
Environmental factor is one of the very important factor which we work on social responsibility and
what we do to better for our environment. Indus Motors production industries should be in such
areas where people can't get affected by pollution. There should be rules relating to the recycling of
industrial waste other materials used by the company.

RATIO ANALYSIS OF INDUS MOTORS:

1.LIQUIDITY RATIO: Liquidity ratios measure a firm's ability to meet its current
obligations.

a.WORKING CAPITAL: The ratio indicates the short-term solvency of a business and
in determining if a firm can pay its current liabilities when due.
 2016 2015 2014 2013 2012
18,883,185 19,742,657 13,990,096 12,206,246 11,512,471

INTERPRETATION:
1)In 2012,the working capital of Indus motors was 13,693,056.

2)In 2013, the working capital of Indus Motors was 14,774,917.

3)In 2014, the working capital of Indus Motors was 14,062,278.

4)In 2015, the working capital of Indus Motors was 13,861,221.

5)In 2016, the working capital of Indus Motors was 17,473,164.

b.CURRENT RATIO: Provides an indication of the liquidity of the business by

comparing the amount of current assets to current liabilities.

2016 2015 2014 2013 2012

1.58424245 1.52576461 3.35311211 2.99319396 2.31715685
4 6 4 3 7

INTERPRETATION:
1)In 2012,the Current Ratio of Indus motors was 2.317156857

2)In 2013, the Current Ratio of Indus Motors was 2.993193963

3)In 2014, the Current Ratio of Indus Motors was 3.353112114

4)In 2015, the Current Ratio of Indus Motors was 1.525764616

5)In 2016, the Current Ratio of Indus Motors was 1.584242454

c.Quick Ratio: A measurement of the liquidity position of the business. The quick ratio
compares the cash plus cash equivalents and accounts receivable to the current liabilities.
 2016 2015 2014 2013 2012
1.32393066 1.2924743 2.60521476 1.92970481 1.59287543
1 5 3 4 5

INTERPRETATION:
1)In 2012,the Quick Ratio of Indus motors was 1.323930661

2)In 2013, the Quick Ratio of Indus Motors was 1.29247435

3)In 2014, the Quick Ratio of Indus Motors was 2.605214763

4)In 2015, the Quick Ratio of Indus Motors was 1.929704814

5)In 2016, the Quick Ratio of Indus Motors was 1.592875435

d.CASH RATIO: Indicates a conservative view of liquidity such as when a company has
pledged its receivables and its inventory

2016 2015 2014 2013 2012

1.2182400 1.19945225 1.87239078 1.46956527 1.29491707
1 2 6 5 3

INTERPRETATION:
1)In 2012,the Cash Ratio of Indus motors was 1.294917073

2)In 2013, the Cash Ratio of Indus Motors was 1.469565275

3)In 2014, the Cash Ratio of Indus Motors was 1.872390786

4)In 2015, the Cash Ratio of Indus Motors was 1.199452252

5)In 2016, the Cash Ratio of Indus Motors was 1.21824001

2.PROFITABILITY RATIO: profitability ratios measure management's ability to

control expenses and to earn a return on the resources committed to the business.
NET PROFIT MARGIN: A measure of net income dollars generated by each dollar of
sales

2016 2015 2014 2013 2012

1.2182400 1.19945225 1.87239078 1.46956527 1.29491707
1 2 6 5 3

INTERPRETATION:
1)In 2012,the Net Profit Margin of Indus motors was 1.294917073

2)In 2013, the Net Profit Margin of Indus Motors was 1.469565275

3)In 2014, the Net Profit Margin of Indus Motors was 1.872390786

4)In 2015, the Net Profit Margin of Indus Motors was 1.199452252

5)In 2016, the Net Profit Margin of Indus Motors was 1.21824001

RETURN ON ASSETS: Measures the company's ability to utilize its assets to create
profits.

2016 2015 2014 2013 2012

1.2182400 1.19945225 1.87239078 1.46956527 1.29491707
1 2 6 5 3

INTERPRETATION:
1)In 2012,the Return on Assets of Indus motors was 1.294917073

2)In 2013, the Return on Assets of Indus Motors was 1.469565275

3)In 2014, the Return on Assets of Indus Motors was 1.872390786

4)In 2015, the Return on Assets of Indus Motors was 1.199452252

5)In 2016, the Return on Assets of Indus Motors was 1.21824001

RETURN ON EQUITY: Measures the income earned on the shareholder's investment
in the business.

2016 2015 2014 2013 2012

1.2182400 1.19945225 1.87239078 1.46956527 1.29491707
1 2 6 5 3

INTERPRETATION:
1)In 2012,the Return on Equity of Indus motors was 1.294917073

2)In 2013, the Return on Equity of Indus Motors was 1.469565275

3)In 2014, the Return on Equity of Indus Motors was 1.872390786

4)In 2015, the Return on Equity of Indus Motors was 1.199452252

5)In 2016, the Return on Equity of Indus Motors was 1.21824001

Gross Profit Margin: Indicates the relationship between net sales revenue and the
cost of goods sold.

2016 2015 2014 2013 2012

1.2182400 1.19945225 1.87239078 1.46956527 1.29491707
1 2 6 5 3

INTREPRETATION:
1)In 2012,the Gross Profit Margin of Indus motors was 1.294917073

2)In 2013, the Gross Profit Margin of Indus Motors was 1.469565275

3)In 2014, the Gross Profit Margin of Indus Motors was 1.872390786

4)In 2015, the Gross Profit Margin of Indus Motors was 1.199452252
5)In 2016, the Gross Profit Margin of Indus Motors was 1.21824001

LEVERAGE RATIO: ratios measure the degree of protection of suppliers of long-

term funds and can also aid in judging a firm's ability to raise additional debt and its capacity
to pay its liabilities on time.

DEBT TO ASSET RATIO: Provides information about the company's ability to absorb
asset reductions arising from losses without jeopardizing the interest of creditors.

2016 2015 2014 2013 2012

1.2182400 1.19945225 1.87239078 1.46956527 1.29491707
1 2 6 5 3

INTREPRETATION:
1)In 2012,the Debt to Asset Ratio of Indus motors was 1.294917073

2)In 2013, the Debt to Asset Ratio of Indus Motors was 1.469565275

3)In 2014, the Debt to Asset Ratio of Indus Motors was 1.872390786

4)In 2015, the Debt to Asset Ratio of Indus Motors was 1.199452252

5)In 2016, the Debt to Asset Ratio of Indus Motors was 1.21824001

DEBT TO EQUITY RATIO: Indicates how well creditors are protected in case of the
company's insolvency.

2016 2015 2014 2013 2012

1.2182400 1.19945225 1.87239078 1.46956527 1.29491707
1 2 6 5 3
INTREPRETATION:
1)In 2012,the Debt to Equity Ratio of Indus motors was 1.294917073

2)In 2013, the Debt to Equity Ratio of Indus Motors was 1.469565275

3)In 2014, the Debt to Equity Ratio of Indus Motors was 1.872390786

4)In 2015, the Debt to Equity Ratio of Indus Motors was 1.199452252

5)In 2016, the Debt to Equity Ratio of Indus Motors was 1.21824001

INTEREST COVERAGE RATIO: Indicates a company's capacity to meet interest

payments. Uses EBIT (Earnings Before Interest and Taxes)

2016 2015 2014 2013 2012

1.2182400 1.19945225 1.87239078 1.46956527 1.29491707
1 2 6 5 3

INTREPRETATION:
1)In 2012,the Interest Coverage Ratio of Indus motors was 1.294917073

2)In 2013, the Interest Coverage Ratio of Indus Motors was 1.469565275

3)In 2014, the Interest Coverage Ratio of Indus Motors was 1.872390786

4)In 2015, the Interest Coverage Ratio of Indus Motors was 1.199452252

5)In 2016, the Interest Coverage Ratio of Indus Motors was 1.21824001

LONG TERM DEBT TO WORKING CAPITAL RATIO:

 2016 2015 2014 2013 2012
1.2182400 1.19945225 1.87239078 1.46956527 1.29491707
1 2 6 5 3

INTREPRETATION:
1)In 2012,the Long Term Debt to Working Capital Ratio of Indus motors was 1.294917073

2)In 2013, the Long Term Debt to Working Capital Ratio of Indus Motors was 1.469565275

3)In 2014, the Long Term Debt to Working Capital Ratio of Indus Motors was 1.872390786

4)In 2015, the Long Term Debt to Working Capital Ratio of Indus Motors was 1.199452252

5)In 2016, the Long Term Debt to Working Capital Ratio of Indus Motors was 1.21824001

EFFICIENCY RATIO: activity or turnover ratios provide information about

management's ability to control expenses and to earn a return on the resources committed
to the business.

INVENTORY TURNOVER: Indicates the liquidity of the inventory.

2016 2015 2014 2013 2012

1.2182400 1.19945225 1.87239078 1.46956527 1.29491707
1 2 6 5 3

INTERPRETATION:
1)In 2012,the Inventory Turnover Ratio of Indus motors was 1.294917073
2)In 2013, the Inventory Turnover Ratio of Indus Motors was 1.469565275

3)In 2014, the Inventory Turnover Ratio of Indus Motors was 1.872390786

4)In 2015, the Inventory Turnover Ratio of Indus Motors was 1.199452252

5)In 2016, the Inventory Turnover Ratio of Indus Motors was 1.21824001

ACCOUNT RECEIVABLE TURNOVER:

Indicates the liquidity of the company's receivables.

2016 2015 2014 2013 2012

1.2182400 1.19945225 1.87239078 1.46956527 1.29491707
1 2 6 5 3

INTERPRETATION:
1)In 2012,the Account Receivable Turnover of Indus motors was 1.294917073

2)In 2013, the Account Receivable Turnover of Indus Motors was 1.469565275

3)In 2014, the Account Receivable Turnover of Indus Motors was 1.872390786

4)In 2015, the Account Receivable Turnover of Indus Motors was 1.199452252

5)In 2016, the Account Receivable Turnover of Indus Motors was 1.21824001

ACCOUT PAYABLE TUROVER: Indicates the liquidity of the firm's payables.

2016 2015 2014 2013 2012

1.2182400 1.19945225 1.87239078 1.46956527 1.29491707
1 2 6 5 3
INTERPRETATION:
1)In 2012, the Account Payable Turnover of Indus motors was 1.294917073

2)In 2013, the Account Payable Turnover of Indus Motors was 1.469565275

3)In 2014, the Account Payable Turnover of Indus Motors was 1.872390786

4)In 2015, the Account Payable Turnover of Indus Motors was 1.199452252

5)In 2016, the Account Payable Turnover of Indus Motors was 1.21824001

Operating Cycle: Indicates the time between the acquisition of inventory and the
realization of cash from sales of inventory. For most companies the operating cycle is less
than one year, but in some industries it is longer.

2016 2015 2014 2013 2012

1.2182400 1.19945225 1.87239078 1.46956527 1.29491707
1 2 6 5 3

INTERPRETATION:
1)In 2012,the Operating cycle of Indus motors was 1.294917073

2)In 2013, the Operating cycle of Indus Motors was 1.469565275

3)In 2014, the Operating cycle of Indus Motors was 1.872390786

4)In 2015, the Operating cycle of Indus Motors was 1.199452252

5)In 2016, the Operating cycle of Indus Motors was 1.21824001