10-11-2012, 01:11 PM
FINANCIAL PLANNING AND STATERGY FOR MARUTI UDYOG LIMITED
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INTRODUCTION
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 is the task of determining how a business will afford to achieve its strategic goals and objectives. Usually, a company creates a Financial Plan immediately after the vision and objective have been set. The financial plan describes each of the activities, resources, equipment and materials that are needed to achieve these objectives, as well as the timeframes involved.
INDUSTRY SEGMENT
Established in December 1983, Maruti Suzuki India Ltd. has ushered a revolution in the Indian car industry. This car is meant for an average Indian individual which is affordable as well as has elegant appeal. Maruti Suzuki India Ltd. is the result of collaboration of Maruti with Suzuki of Japan. At this time, the Indian car market had stagnated at a volume of 30,000 to 40,000 cars for the decade ending 1983. This was from where Maruti took over.
The company has crossed the milestone of becoming the first Indian company in March 1994, by manufacturing in totality one million vehicles. It is known for its mass-production and selling of more than a million cars. Maruti Suzuki India Ltd. is the India's largest automobile company which entered in the market with affirmed aim to render high quality fuel – efficient and low - cost vehicles.
Sales figure in the year 1993 has reached up to 1,96,820. Maruti comes in a variety of models in the 800 segment. Its cars operate on Japanese technology, pliable to Indian conditions and Indian car users. By the year 1998-99, the company has modernize the existing facilities and expand its capacity by 1,00,000 units.
Recently to ward off the growing competition, Maruti has completed Rs. 4 billion expansion project at the current site, which has raised the total production capacity to over 3,20,000 vehicles per annum. With the coming of each and every year, the total production of the company exceed by 4,00,000 vehicles.
In the small car segment it produces the Maruti 800 and the Zen. The big car segment includes the Maruti Esteem and the Maruti 1000. Along with them, the company also manufactures Maruti Omni. Other models includes Wagon R and the Baleno.
PROJECT DESCRIPTION
A project report on “Financieal Planning & Statergy” is specifically designed as per the industry standards and as part of the sumbission to MBA project report.
All companies are having their own planning and business strategies but the company who is having the best, is the most successful company among its competitors. So the company can get success within its competitors by applying best and effective financial planning and strategies.
There is a strong MNC presence in the Indian care segment market. The Fast Moving small car segment is the third largest sector in the economy with a total market size in excess of Rs 80,000 crore. This industry essentially comprises small, medium and large car products and caters to the everyday need of the population.
The project will study the availability, visibility and category movement of Maruti Udyog Limited.
A detailed study and research work will be done by collecting and analyzing the primary data obtained from car segment.
Purpose of financial statements
The objective of financial statements is to provide information about the financial strength, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions." Financial statements should be understandable, relevant, reliable and comparable. Reported assets, liabilities and equity are directly related to an organization's financial position. Reported income and expenses are directly related to an organization's financial performance.
Financial statements are intended to be understandable by readers who have "a reasonable knowledge of business and economic activities and accounting and who are willing to study the information diligently."
• Owners and managers require financial statements to make important business decisions that affect its continued operations. Financial analysis are then performed on these statements to provide management with a more detailed understanding of the figures. These statements are also used as part of management's report to its stockholders, as it form part of its Annual Report.
• Employees also need these reports in making collective bargaining agreements (CBA) with the management, in the case of labor unions or for individuals in discussing their compensation, promotion and rankings.
Income Statement
An Income Statement, also called a Profit and Loss Statement (P&L), is a financial statement for companies that indicates how Revenue (money received from the sale of products and services before expenses are taken out, also known as the "top line") is transformed into net income (the result after all revenues and expenses have been accounted for, also known as the "bottom line"). The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported.
Charitable organizations that are required to publish financial statements do not produce an income statement. Instead, they produce a similar statement that reflects the fact that the charity is not operating to make a profit.
Cash Flow
Cash flow is a term that refers to the amount of cash being received and spent by a business during a defined period of time, sometimes tied to a specific project. Measurement of cash flow can be used
• to evaluate the state or performance of a business or project.
• to determine problems with liquidity (In accounting, liquidity (or accounting liquidity) is a measure of the ability of a debtor to pay his debts as and when they fall due. It is usually expressed as a ratio or a percentage of current liabilities.). Being profitable does not necessarily mean being liquid. A company can fail because of a shortage of cash, even while profitable.
• to generate project rate of returns. The time of cash flows into and out of projects are used as inputs to financial models such as internal rate of return, and net present value.
• to examine income or growth of a business when it is believed that accrual accounting concepts do not represent economic realities. Alternately, cash flow can be used to 'validate' the net income generated by accrual accounting.
Financial Statement Analysis
Financial statement analysis is the process of examining relationships among financial statement elements and making comparisons with relevant information. It is a valuable tool used by investors and creditors, financial analysts, and others in their decision-making processes related to stocks, bonds, and other financial instruments. The goal in analyzing financial statements is to assess past performance and current financial position and to make predictions about the future performance of a company. Investors who buy stock are primarily interested in a company's profitability and their prospects for earning a return on their investment by receiving dividends and/or increasing the market value of their stock holdings. Creditors and investors who buy debt securities, such as bonds, are more interested in liquidity and solvency: the company's short-and long-run ability to pay its debts. Financial analysts, who frequently specialize in following certain industries, routinely assess the profitability, liquidity, and solvency of companies in order to make recommendations about the purchase or sale of securities, such as stocks and bonds.
Vertical Analysis
When using vertical analysis, the analyst calculates each item on a single financial statement as a percentage of a total. The term vertical analysis applies because each year's figures are listed vertically on a financial statement. The total used by the analyst on the income statement is net sales revenue, while on the balance sheet it is total assets. This approach to financial statement analysis, also known as component percentages, produces common-size financial statements. Common-size balance sheets and income statements can be more easily compared, whether across the years for a single company or across different companies.
Ratio Analysis
Ratio analysis enables the analyst to compare items on a single financial statement or to examine the relationships between items on two financial statements. After calculating ratios for each year's financial data, the analyst can then examine trends for the company across years. Since ratios adjust for size, using this analytical tool facilitates inter company as well as intra many comparisons. Ratios are often classified using the following terms: profitability ratios (also known as operating ratios), liquidity ratios, and solvency ratios. Profitability ratios are gauges of the company's operating success for a given period of time. Liquidity ratios are measures of the short-term ability of the company to pay its debts when they come due and to meet unexpected needs for cash. Solvency ratios indicate the ability of the company to meet its long-term obligations on a continuing basis and thus to survive over a long period of time. In judging how well on a company is doing, analysts typically compare a company's ratios to industry statistics as well as to its own past performance.