Essays on Financial Statement Analysis for Hindustan Motors Limited Case Study

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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).

References

Tsay, R. S. (2005). Analysis of financial time series (Vol. 543). John Wiley & Sons.

Grzegorz, M. (2011). Financial Analysis in the Enterprise: A Value-Based Liquidity Frame-work. Available at SSRN 1839367.

Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2007). Intermediate Accounting (12th ed.). Hoboken, NJ: John Wiley & Sons, p. 1320 ISBN 0-471-74955-9

Altman, E. I. (1968). Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. The journal of finance, 23(4), 589-609.

White, G. I., Sondhi, A. C., & Fried, D. (2003). The analysis and use of financial statements (Vol. 1). John Wiley & Sons.

Bauer, R., Hoevenaars, R., & Steenkamp, T. (2006). Asset Liability Management. Oxford

Handook of Pensions and Retirement Income, 417-440.

Wild, J. J., Bernstein, L. A., Subramanyam, K. R., & Halsey, R. F. (2004). Financial statement analysis. McGraw-Hill.

Sannikov, Y. (2013). Dynamic security design and corporate financing. Handbook of the Economics of Finance, 2, 71-122.

HBM (2015) http://www.hindmotor.com/inv-fr.asp { assesed 13 Jan 2016}

money control(2015) http://www.moneycontrol.com/financials/hindustanmotors/balance-sheet/HM#HM { assesed 13 Jan 2016}

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