Financial Statement Analysis for Hindustan Motors Limited - Case Study Example

The paper "Financial Statement Analysis for Hindustan Motors Limited " is a great example of a finance and accounting case study. Hindustan Motors Limited is a company from India that manufactures automotive, and its headquarters is in Kolkata. It was started in 1957 and produces the two famous brands: Ambassador and Winner although it makes other brands. The company has entered in joint ventures with other company such as Isuzu. The company uses IFRS as its reporting framework, and I have used the financial statement of 2015-2015 to explain the financial analysis. In this report, it explains the financial statement, methods of financial analysis and interpretation of financial statements by use of ratio, comparative and common-size form (HBM, 2015)

A/C

15

14

change

% change

Longterm Asset

741

636

105

16.50943

CA

106

187

-81

-43.3155

sum

862

837

25

2.986858

         

liability

49

149

-100

-67.1141

capital

813

688

125

18.1686

         

presented by

       

shares

634

600

34

5.666667

reserve

179

88

91

103.4091

capital

813

688

125

18.1686

         

The company long term asset has increased over the period while the current assets have reduced this is due to change of the current liability that reduced by 67%. The company capital structure has also increased over the period

Profit and loss

 

15

14

   

income

25

182

-157

-86.2637

COGS

6

11.8

-5.8

-49.1525

gross income

19

170.2

-151.2

-88.8367

expenses

50

215

-165

-76.7442

NPBT

-31

-44.8

13.8

-30.8036

tax &interest

10.9

0

10.9

 

NPAT

-41.9

-3

-38.9

1296.667

         

This is a risky company from the analysis above the income over the year has reduced by 157% hence the company has been making losses for the period regardless of its effort of reducing expenses by 165%. The company has also reduced the Cost of goods sold by 5.8%

Ratios

Name

formula

Ratio value

2015 2014

Stockholders

ROCE

PBIT/capital employed

65.67

200.46

EPS

Preference /equity shares

5

5

Short term creditor

Current ratio

CA/ CL

0.35

0.64

Acid-test Ratio

Quick assets/ CL

0.27

0.67

Long-term creditors

Debt ratio

Total debt / total assets

7.23

3.5

Operating Profit Margin

income / sales

-250.72

-24.8

Money control (2015)

Stockholders

Regardless of the company having a constant earning the company is a time bomb as a return on the capital employed has reduced to 65 from 200 (Tsay, 2005).

Short term creditor

They show the liquidity of the company and an average company should have an average of 1. Both the quick ratio and current ratio has decreased over the period. Hence, Hindustan motors can hardly pay the current obligation (Grzegorz, 2011).

Long term obligation

The company is run on debts and regarding the efficient pricing technology, they are lacking. The company is currently running on debts in which it can be able all the debts (Kieso, 2007).

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