18-12-2012, 03:03 PM
Financial Statements Analysis for Hero MotoCorp Ltd
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INTRODUCTION
Financial statements are prepared primarily for decision making. They play a dominant role in setting the framework of managerial decisions. But the information provided in the financial statements is not an end in itself as no meaningful conclusions can be drawn from these statements alone. However, the information provided in the financial statements is of immense use in making decisions through analysis and interpretation of financial statements. Financial analysis ‘the process of identifying the financial strengths and weaknesses of the firm by properly establishing relationship between the items of the balance sheet and the profit and loss account’. There are various methods or techniques used in analyzing financial statements financial statements are an important source of information for evaluating the performance and prospects of firm, if properly analyzed and interpreted these statements can provide valuable insights into firm’s performance. Analysis of financial statements is if interest to lenders, investors, security analyst, manager and others.
Financial statements analysis may be done for a variety of purposes, which may range from simple analysis of short term liquidity position of the form to a comprehensive assessment of the strengths and weakness of the firm in various areas, it is helpful in assessing corporate excellence , judging credit worthiness forecasting bond rating, evaluating intrinsic value of equity shares predicting bankruptcy and assessing market risk.
Analysis of financial statement
Analysis refers to the process of critical examination of the financial information contained in the financial statement in order to understand and make decisions regarding the operations of the firm. The analysis is basically study of the relationship among various financial facts and figure as given in a set of financial statements. Complex figures as given in this statements are dissected\broken up into simple and variable elements and significant relationship are established between the elements of the same statements are different financial statements.
External analysis:-
This analysis is done by outsiders who do not have access to the detailed internal accounting records of the business firm. These outsiders include investors, potential investors, creditors, potential creditors, government agencies, credit agencies and the general public.
Internal Analysis:-
The analysis conducted by persons who have access to the internal accounting records of a business firm is known as internal analysis. Such an analysis can, therefore, be performed by executives and employees of the organization as well as government agencies which have statutory powers vested in them.
On the basis of modus operandi:-
According to the method of operation followed in the analysis, financial analysis can also be of
Horizontal analysis:-
Horizontal analysis refers to the comparison of financial data of a company for several years. The figures for this types of analysis are presented horizontally over a number of columns. The figures of the various year are compared with standard or base year. This type of analysis is also ‘Dynamic analysis’ as it is based on the data from year to year rather than on
Vertical Analysis:-
Vertical analysis refers to the study of relationship of the various items in the financial statements of one accounting period. In the types of analysis is the figures from financial statement of a year are compared with a base selected from the same year’s statement. It is also known as ‘Static analyses.
OBJECTIVES OF FINANCIAL STATEMENTS
Broadly the objective of the Analysis of Financial statement is to understand the information contained in the financial statement with a view to the weakness and strengths of the firm and to make forecast about the future prospects of the firm and their by enabling the financial analyst to take different decision regarding the operation of the firm.
Automobile industry in India
The automobile industry in India is the ninth largest in the world with an annual production of over 2.3 million units in 2008 In 2009, India emerged as Asia's fourth largest exporter of automobiles, behind Japan, South Korea and Thailand.
Following economic liberalization in India in 1991, the Indian automotive industry has demonstrated sustained growth as a result of increased competitiveness and relaxed restrictions. Several Indian automobile manufacturers such as Tata Motors, Maruti Suzuki and Mahindra and Mahindra, expanded their domestic and international operations. India's robust economic growth led to the further expansion of its domestic automobile market which attracted significant India-specific investment by multinational automobile manufacturers. In February 2009, monthly sales of passenger cars in India exceeded 100,000 units.
bryonic automotive industry emerged in India in the 1940s. Following the independence, in 1947, the Government of India and the private sector launched efforts to create an automotive component manufacturing industry to supply to the automobile industry. However, the growth was relatively slow in the 1950s and 1960s due to nationalization and the license raj which hampered the Indian private sector. After 1970, the automotive industry started to grow, but the growth was mainly driven by tractors, commercial vehicles and scooters. Cars were still a major luxury. Japanese manufacturers entered the Indian market ultimately leading to the establishment of Maruti Udyog. A number of foreign firms initiated joint ventures with Indian companies.
In the 1980s, a number of Japanese manufacturers launched joint-ventures for building motorcycles and light commercial-vehicles. It was at this time that the Indian government chose Suzuki for its joint-venture to manufacture small cars. Following the economic liberalization in 1991 and the gradual weakening of the license raj, a number of Indian and multi-national car companies launched operations. Since then, automotive component and automobile manufacturing growth has accelerated to meet domestic and export demands.
HISTORY OF THE TWO WHEELERS:
The Britannica Encyclopedia a motorcycle as a bike or tricycle propelled by an internal –combustion engine (or, less often by an electric engine). The automobile was the reply to the 19th –century reams of self-propelling the horse-drawn bikeriage. Similarly, the invention of the motorcycle created the self –propelling bicycle. The first commercial design was three-wheeler built by Edward Butler in Great Britain in 1884. This employed a horizontal single-cylinder gasoline engine mounted between two steer able front wheels and connected by a drive chain to the rear wheel. The 1900s saw the conversion of many bicycles or pedal cycles by adding small, centrally mounted spark ignition engine engines. There was then felt the need for reliable constructions. This led to road trial tests and competition between manufacturers. Tourist Trophy (TT) races were held on the Isle of main in 1907 as reliability or endurance races. Such were the proving ground for many new ideas from early two-stroke-cycle designs to supercharged multivalent engines mounted on aerodynamic, bikebon fiber reinforced bodywork.
INVENTION OF TWO WHEELERS:
The invention of two wheelers is a much-debated issue. “Who invented the first motorcycle?” May seem like a simple question, “safety”, bicycle, i.e., bicycle with front and rear wheels of the same size, with a pedal crank mechanism to drive the rear wheel. Those bicycles in turn described from high-wheel bicycles. The high –wheelers descended from an early type of pushbike, without pedals, propelled by the rider’s feet pushing against the ground. These appeared around 1800, used iron banded wagon wheels, and were called “bone-crushers”, both for their jarring ride, and their tendency to toss their riders. Gottiieb Daimler (who credited with the building the first motorcycle in 1885, one wheel in the front and one in the back, although it had a smaller spring-loaded outrigger wheel on each side. It was constructed mostly of wood, the wheels were of the iron-banded wooden-spooked wagon-type and it definitely had a “bone-crusher” chassis!
FURTHER DEVELOPMENTS:
Most of the developments during the early phase concentrated on three and four-wheeled design since it was complex enough to get the machines running with out having to worry about them falling over. The next notable two-wheeler though was the Hildebrand & Wolf Mueller, patented in Munich in 1894. In 1895, the French firm of DeDion-button built and engine that was to make the mass production and common use of motorcycle possible. The first motorcycle with electric start and a fully modem electrical system; the Hence special from the Indian Motorcycle Company astounded the industry in 1931. Before World War 1, IMC was the largest motorcycle manufacturer in the world producing over 20000 bikes per year.
INCREASING POPULARITY:
The popularity of the vehicle grew especially after 1910, in 1916; the Indian motorcycle company introduced the model H racer, and placed it on sale. During World War 1, all branches of the armed forces in Europe used motorcycles principally for dispatching. After the war, it enjoyed a sport vogue until the Great Depression began in motorcycles lasted into the late 20th century; weight the vehicle being used for high-speed touring and sport competitions. The more sophisticated of a 125cc model. Since then, an increasing number of powerful bikes have blazed the roads.
HISTORICAL INDUSTRY DEVELOPMENTS:
Indian is the second largest manufacturer and producer to two wheelers in the World. It stands next only to Japan and China in terms of the number of V produced and domestic sales respectively. This destination was achieved due to variety of reason like restrictive policy followed by the government of India towards the passenger bike industry, rising demand for personal transport, inefficiency in the public transportation system etc. The Indian two-wheelers industry made a small beginning in the early 50s when Automobile products of India (API) started manufacturing scooters in the country. Until 1958, API and Enfield were the sole producers.
The two –wheelers market was opened were opened to foreign competition in the mid-80s. And the then market leaders-Escorts and Enfield – were caught unaware by the onslaught of the 100cc bikes of the four Indo- Japanese joint ventures. With the availability of fuel-efficiency low power bikes, demand swelled, resulting in Hero Honda –then the only producer of four stroke bikes (100cc category), gaining a top slot.