Financial analyis of aftab automobile

Aftab Automobiles Limited
1
Report
On
Analyzing Financial Performance Of
For the year 2016-2018

2
University Of Liberal Arts Bangladesh
Submitted to:
Shajedul Alam
Financial Accounting
ULAB School of Business
Submitted by:
Tahmina Islam Liya
ID: 193051030 Sec: 2
MBA program
(ULAB School of Business)
Date of submission: 20 April, 2020

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Letter of Transmittals
20th
April, 2020
To,
Shajedul Alam
Lecturer, ULAB School of Business
Subject: Submission of Report on “Analyzing Financial Performance Of Aftab
Automobiles Limited’’.
Dear Sir,
With due respect, I would like to notify you that, I am very much pleased and obliged to submit
the report on ‘Analyzing Financial Performance Of Aftab Automobiles Limited ‘for the year 2016 to
2018. I have given my utmost effort to make an effective report which will enhance my
knowledge. I have tried to make a comprehensive report within the period of time I was provided
to prepare it. Any sort of suggestion regarding the report will be significantly acknowledged and I
will be at ease if my report serves its purpose. During the preparation of the report, I have
gathered lots of knowledge about the performance of automobiles companies.
Sincerely Yours,
Tahmina Islam Liya
ID: 193051030 Sec: 2
(ULAB School of Business)

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DECLARATION
I am Tahmina Islam Liya; hereby declare that the report titled ‘’Analyzing Financial Performance of
AFTAB AUTOMOBILES LTD is individually prepared by me.
I also confirm that, the report is only prepared for my academic requirement not for other
purpose and no submitted this report any other place before it. It might be with the interest of the
opposite party of the corporation. I also assure that, this report was not submitted to any other
private and public universities or any institutions.
……………………………………………….
Tahmina Islam Liya
ID: 193051030 Sec: 2
MBA program (ULAB School of Business)

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ACKNOWEDGEMENT
First I would like to thank the Almighty Allah, Alhamdulillah with his blessing; I have completed this
report successfully. It was a big challenge in completing this report as part of course Financial
Accounting, MBA program. I would also like to thank my guardian, their love, support and patience
has taught me about sacrifice, discipline and compromise.
I would like to express my gratitude to my respectable faculty Shajedul Alam for his continuous
support, inspiration and greatly appreciation to prepare this internship report on “Analyzing
Financial Performance of AFTAB AUTOMOBILES LTD.” Preparing this report was a valuable
experience for me. It acts as a window to the real life practice.
I am very grateful to AFTAB AUTOMOBILES LTD for the information they share on their website,
with the help of their available data I am able to complete my report.

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Content
sl Title Page no.
1 Executive summary 7
2 Background of the study 8
3 Scope of the study 8
4 General, specific objective 8
5 Company profile 9
6 Mission, Vision 10
7 Statement of profit or loss and other comprehensive
income
12-13
8 Statement of Financial Position 14-15
9 Statement of Changes in Equity 16
10 Ratio Analysis 18-33

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Executive summary
As I have prepared my report on “financial statement analysis of AFTAB AUTOMOBILES LTD. The
principal activities of the Company throughout the period were assembling of Toyota Land Cruiser
soft top/ Pick-up, Land Cruiser Prado, Hino Bus, Hino Mini Bus/ Truck with a yearly production
capacity of 2400 units of vehicles in 3 shifts. The Company has also subsidiary companies, e.g.
Navana Batteries Limited.
It was nice experience to prepare my report on this topic. Although this short weeks period is not
enough to learn all practices performed by financial statement analysis because, there is a lot to
learn. Still I tried to study all practices in financial statement analysis of AFTAB AUTOMOBILES
LTD.
While studying the financial statement analysis of AFTAB AUTOMOBILES LTD I got to know the
organization, their financial policies and their corporate profile.
Navana Batteries Limited (NBL) is a fully owned subsidiary company of Aftab Automobiles Limited
(AAL) holding 99.95% share. The Company has newly introduced ‘motorcycle batteries” in order to
streamline its profit earning.
At the very beginning I will discuss about what AFTAB AUTOMOBILES LTD is. And then I will
analyze their financial statement. Which will help us to know their financial position?
At the end, I have also present recommendation to the company with the attachment of
conclusion and reference.

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Background of the report
The objective of the report is to analyze the financial year 2016 to 2018 of the AFTAB
AUTOMOBILES LTD. Here I have analyzed the financial statement analysis of last three years. This
ratio analysis will help us to understand the present condition of the company.
Scope of the Report
This report is about the financial performance of AFTAB AUTOMOBILES LTD for the period 2016 to
2018.The focus of this report is mainly on the existing financial ratios of the company to analyze
the current financial position by AFTAB AUTOMOBILES LTD.
General Objectives
The key objective of the report is to analyze the financial performance of AFTAB AUTOMOBILES
LTD
Specific Objectives
There are some specific objectives also. This are-
To analyze the financial statements of AFTAB AUTOMOBILES Limited.
To calculate the different financial ratios .
To show the income statement (trading and profit and loss account), owner’s equity statement
and balance sheet of the latest financial year
To understand the implications in analyzing and interpreting the financial ratios .
To identify the findings and raise possible recommendations for AFTAB AUTOMOBILES LTD.

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Company Profile
In 1981 the Company was converted into Public Limited Company which is the lone largest
assembler-cum-progressive manufacturer of Toyota & Hino vehicles in the private sector of the
country.
The Company is mainly a vehicle assembler and bus-body fabricator. It has been successfully
assembling TOYOTA & HINO vehicles for Bangladesh market since 1982.
The Company was listed with Dhaka Stock Exchange Limited and Chittagong Stock Exchange
Limited in the year 1987 and 1996 respectively.
The principal activities of the Company throughout the period were assembling of Toyota Land
Cruiser soft top/ Pick-up, Land Cruiser Prado, Hino Bus, Hino Mini Bus/ Truck with a yearly
production capacity of 2400 units of vehicles in 3 shifts. The Company has also subsidiary
companies, e.g. Navana Batteries Limited.
Presently, the Company is mainly engaged in assembling and body fabrication of HINO luxury bus
of model RM2 which is in great market demand now-a-days.
HINO buses are widely operated in all the routes of the country. We have also introduced
environmental friendly (CNG driven) AK1JMKA model HINO Bus for the first time in Bangladesh.
Navana Batteries Limited (NBL) is a fully owned subsidiary company of Aftab Automobiles Limited
(AAL) holding 99.95% share. The Company has newly introduced ‘motorcycle batteries” in order to
streamline its profit earning.
Further HINO luxury buses are also plying in the International Routes, e.g. Dhaka ~ Kolkata~Dhaka
and Dhaka ~ Agartola~Dhaka.
The Bus Body Building Unit of the Company has also been modernized by introducing high-tech
equipments. Where vehicles including RM-2 (New model) buses are being painted with fully
automation ensuing international quality.

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About AFTAB AUTMOBILES LIMITED
Vision: To be the No. 1’ in the transport sector of the Country.
Mission: ‘Better Product Better Service’
UNITS
Presently there are two units under Aftab Automobiles Limited:
Bus Body Unit
In this unit they are fabricating HINO (air-conditioned / non air-conditioned) BUS BODY as per
market demand.
Motor Cycle Unit
In this unit they are assembling “Mahindra” brand Indian motor-cycles. Aftab Automobiles Limited
is the authorized sole distributor of Indian “Mahindra” brand motor-cycles in Bangladesh.
SUBSIDIARY
Navana Batteries Limited
Navana Batteries Limited is a fully owned subsidiary Company of Aftab Automobiles Limited. They
are producing various types of batteries under brand name of “Navana Battery

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Products

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Statement of profit or loss and other comprehensive income
For the month ended June 30, 2016,2017,2018
Particulars
For the
period from
September
01,2015 to
June 30,2016
For the period
from July
01,2016 to
June 30,2017
June 30,2018
Sales revenue 2,372,686,547 3,703,934,655 3,359,756,688
Cost of goods sold 1,798,670,937 2,910,178,518 2,691,496,957
Gross profit 574,015,610 793,756,137 668,259,731
less: Operating expense
Administrative expense 73,310,409 81,407,526 89,868,109
Selling and distribution expenses 46,085,548 61,302,658 78,313,163
Financial charges 159,752,681 211,703,217 220,765,998
Total Operating expenses: -279,148,638 -354,413,400 -388,947,271
Operating Profit 294,866,972 439,342,737 279,312,460
Non-operating income :
Interest Income (FDR ) 8,009,033 6,215,510 17,958,672
Add : Share of profit from associate
company 10,047,144 7,665,950 19,556,789
Profit before contribution to WPPF 312,923,149 453,224,197 316,827,921
Less: Contribution to WPPF 14,901,102 21,582,105 15,087,044
Profit before contribution to WPPF 312,923,149 453,224,197 301,740,877
Add : Share of profit from
subsidiaries 55,276,663 78,159,966 32,213,878
Net profit before tax 353,298,709 509,802,059 333,954,755
Less: Income tax Expenses :
Current tax 76,518,680 110,304,036 74,084,182

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Deferred tax -84,094 5,005,788 3,414,548
Total income tax expense -76,434,586 -115,309,824 -77,498,730
Proﬁt for the year 276,864,123 394,492,235 256,456,025
Other comprehensive Income for the
year:
Investment Valuation surplus in
share
Revaluation Gain/(Loss) on invest. in
share -6,609,021 2,751,244 -990,998
Deferred tax 550,249 -550,249
Total comprehensive income for the
year 275,873,125 392,291,240 249,296,755
Earnings per share 2.31 3.3 2.68

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Statement of Financial Position
As at June 30, 2016, 2017, 2018
as at 2016 as at 2017 as at 2018
Assets:
Non-current assets:
Property, plant and equipment 660,255,114 1,016,686,129 1,186,639,545
Capital work-in-progress 224,581,944 93,780,046
Investments in subsidiaries and
associates 938,882,482 1,060,347,751 1,136,311,043
Receivables - noncurrent maturity 2,490,724,021 1,954,611,446 2,460,241,751
Total Non-current assets 4,089,861,617 4,256,227,270 4,876,972,385
Current assets :
Receivables -current maturity 889,697,814 1,324,190,437 1,742,308,445
Stock and stores 889,905,031 1,687,540,044 1,129,353,103
Current account with Navana
Batteries Ltd. 267,477,487 194,104,312 243,227,935
Current account with Navana Group
Companies 598,662,340 1,077,561,924
Advances, deposits and prepayments 1,290,909,562 1,523,955,271 1,853,292,948
Cash and bank balances 920,584,721 424,971,917 367,031,655
Total Current assets 4,258,574,615 5,753,424,321 6,412,776,010
Total Assets 10,009,651,590 10,009,651,590 11,289,748,396
Equity and Liabilities :
Equity attributable to equity holders
Share capital 957,324,220 957,324,220 957,324,220
Share premium 1,925,858,339 1,925,858,339 1,925,858,339
Reserves 67,338,231 67,338,231 67,338,231
Retained earnings 2,416,837,684 2,722,945,676 2,878,999,350
Total Equity attributable to equity
holders 5,367,358,474 5,673,466,466 5,829,520,140

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Non-current liabilities :
Loan and deferred liabilities
(unsecured) 25,310,440 25,310,440 25,310,440
Long Term loan-noncurrent maturity 876,253,097 1,580,876,885 2,201,719,971
Deferred tax liability 72,260,264 77,816,301 85,569,797
Total Non-current liabilities 973,823,801 1,684,003,626 2,312,600,208
Current liabilities :
Long Term loan-Current maturity 292,084,366 526,958,962 733,906,656
Short term loan 920,718,015 1,324,948,819 1,447,851,956
Accrued and other current liabilities 794,451,577 887,399,473 965,869,437
Total current liabilities 2,007,253,958 2,739,307,254 3,147,628,049
Total liabilities 2,981,077,758 4,336,185,124 5,460,228,256
Total Equity and Liabilities 8,348,436,232 10,096,777,347 11,289,748,396
Net assets value per share (NAVPS) 56.07 59.26 60.89

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Statement of Changes in Equity
For the year ended June 30, 2016, 2017, 2018
Balance as on July 01, 2016 957,324,220 1,925,858,339 67,338,231 2,416,837,684 5,367,358,474
Cash Dividend Paid -90585239 -90,585,239
Total comprehensive income for
the year 396,693,231 396,693,231
Balance as at June 30, 2017 957,324,220 1,925,858,339 67,338,231 2,722,945,676 5,673,466,466
Cash Dividend Paid -93,243,081 -93,243,081
Total comprehensive income for
the year 249,296,755 249,296,755
Balance as at June 30, 2018 957,324,220 1,925,858,339 67,338,231 2,878,999,350 5,829,520,141

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A. Profitability
Ratio:
i. Mark up
Define the markup percentage as the increase on the cost price. The mark
up sales are expressed as a percentageincrease as to try and ensure that a c
ompany can receive the proper amount of gross profit. Furthermore, markup
s arenormally used in retail or wholesale business as it is an easy way to price i
tems when a store contains several differentgoods.
2017-182016-17 2015-16
Mark up= Gross profit*100/COGS 25% 27% 32%
Advantages of Markup Pricing
The several benefits of markup pricing strategy are:
1. Enables vendors to easily calculate profits.
2. Requires little information as information on demand and costs might not always be
available.
3. Markup pricing provides the means by which fair prices can be easily
found.
4.

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Pricesbasedonfullcostaremoremorallydefensibleandallowforrevisionoffinalp
ricesbasedonchangesinpriceof raw materials etc.
5. Markup pricing reduces the cost of decision-making.
So, As we can see that the company’ share steady decline growth in every year which
is over all not good for the company as it drops 7% from 2015-16 to 2017-18 though
the decline growth was less than 2016-17 to 2017-18 just2 % compare to 5%.
ii. Margin or gross profit percentage
Gross Profit Margin established the relationship between gross profit and net
sales. This ratio is calculated by dividingthe Gross Profit by Sales. It is usually
indicated as percentage. The below presented formula is used.
2016-17 2015-16 2017-18
Margin or gross profit percentage= gross profit*100/Net Sales 20% 21% 24%
2015-16
2016-17
2017-18
0% 5% 10% 15% 20% 25%
Higher Gross Profit Ratio is an indication that the firm has higher profitability. It also reflec
ts the effective standard ofperformance of firm’s business. Higher Gross Profit Ratio will
be result of the following factors.

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(1) Increase in selling price, i.e., sales higher than cost of goods sold.
(2) Decrease in cost of goods sold with selling price remaining constant.
(3) Increase in selling price without any corresponding proportionate
increase in cost.
(4) Increase in the sales mix.
A low gross profit ratio generally indicates the
result of the following factors: (l) Increase in cost
of goods sold
(2) Decrease in selling price.
(3) Decrease in sales volume
(4) High competition.
(5) Decrease in sales mix.
Advantages
(1) It helps to measure the relationship between gross profit and net sales.
(2) It reflects the efficiency with which a firm produces its product.
(3) This ratio tells the management, that allow gross profit ratio may
indicate unfavorable purchase in gandmark-uppolicies.
(4) A low gross profit ratio also indicates the inability of the management to
increase sales.
Gross margin ratio is used to analyze how efficiently a company is using its ma
terials, labor and manufacturing relatedfixed assets to generate profits. A hig
her gross margin percentage is a favorable profit indicator and viceversa. rati
o helps organization to fix their product price. If the ratio minimum percenta
ge then indicates the product marketprice lower or product production cost
high. Here we see that gross margin ratio was not quite stable and it is not goo
dsign Aftab Automobiles limited.
As we analysis the data of Aftab Automobile Limited it indicates that its profit
margin gone down quite a bit which isnot suitable for the company as the
need to make more sale to get same amount of profit the made before.

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iii. Net profit to sales ratio or net profit percentage
Net Profit Ratio is also termed as Sales Margin Ratio (or) Profit Margin Ratio (o
r) Net Profit to Sales Ratio. This ratioreveals the firm's overall efficiency in op
erating the business. Net profit Ratio is used to measure the relationshipbe
tween net profit (either before or after taxes) and sales. This ratio can be
calculated by the following formula:
Net profit to sales ratio or net profit percentage= Netprofit*100 /NetSales
Net profitpercentage
14%
12%
10%
8%
6%
4%
2%
0%
2017-18 2016-17 2015-16
Net profit includes non-operating incomes and profits. Non-
Operating Incomes such as dividend received, interest oninvestment, profit o
n sales of fixed assets, commission received, discount received etc. Profit or S
ales Margin indicatesmargin available after deduction cost of production, oth
er operating expenses, and income tax from the sales revenue.Higher Net
Profit Ratio indicates the standard performance of the business concern.
2017-18 2016-17 2015-16
7% 11% 12%

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Advantages
(1) This is the best measure of profitability and liquidity.
(2) It helps to measure overall operational efficiency of the business concern.
(3) It facilitates to make or buy decisions.
(4) It helps to determine the managerial efficiency to use a firm's resources
to generate income on its invested capital.
(5) Net profit Ratio is very much useful as a tool of investment evaluation.
Net income to sales ratio is very important in operating performance measur
ement. This ratio is helpful in identifyingthe proportion of sales unit that rem
ains after the deduction of all expenses. This ratio indicates the net amount
ofprofit on each sales taka. The amount of net income includes all types of
non operating items that may occur in aparticular period. The ratio droppe
d in 2015-
16, but not increase in following years. As a result company has notgenerat
ed more profit then last years.

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iv. Return on capital employed
Return on capital employed (ROCE) is a financial ratio that measures a compa
ny's profitability and the efficiency withwhich its capital is used. In other word
s, the ratio measures how well a company is generating profits from its capita
l.The ROCE ratio is considered an important profitability ratio and is used o
ften by investors when screening forsuitable investment candidates.
2017-18 2016-172015-16
Return on capital employed= Net Profit *100/Capital employed 3% 5%5%
Return on capital employed
2017-18 2016-17 201
ROCE is especially useful when comparing the performance of companies in c
apital-
intensive sectors such as utilitiesand telecoms. This is because unlike other
fundamentals such as return on equity (ROE), which only analyzesprofitabi
lity related to a company’s common equity, ROCE considers debt and other lia
bilities as well. This provides abetter indication of financial performance for
companies with significant debt.
Adjustments may sometimes be required to get a truer depiction of ROCE.
A company may occasionally have aninordinate amount of cash on hand,
but since such cash is not actively employed in the business, it may need to
be subtracted from the Capital Employed figure to get a more accurate
measure of ROCE.
For company, the ROCE trend over the years is also an important indicator
of performance. In general, investor stand to favor companies with stable and
5% 5%
3%

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rising ROCE numbers over companies where ROCE is volatile and bounces
around from one year to the next.
But in the case of Aftab Automobile ltd. the trend dicline in 2017-
18 compare to privious year where it was 5% but in2017-18 it reduces to 3%
which is worry some and investor might not be longing to invest.
v. Return on capital
ROE is a profitability ratio that measures the ability of a firm to generate profi
ts from its shareholders investments inthe company. In other words, the retu
rn on equity ratio shows how much profit each dollar of common stockholde
rs'equity generates.
2017-18 2016-17 2015-16
Return on capital = Net Profit*100/Owner's Capital 4% 7% 6%
Return on capital
2015-16
2016-17
2017-18
0% 1% 2% 3% 4% 5% 6% 7% 8%
A return on 1 means that every dollar of common stockholders' equity gene
rates 1 dollar of net income. This is animportant measurement for potentia
l investors because they want to see how efficiently accompany will use th
6
%
7
%
4
%

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eirmoney to generate net income. ROE is also an indicator of how effective m
anagement is at using equity financing tofund operations and grow the
company.
Return on equity measures how efficiently a firm can use the money from
shareholders
to generate profits and grow the company. Unlike other return on investmen
t ratios, ROE is a profitability ratio fromthe investor's point of view not the
company.
Return on equity is the measurement of shareholders wealth maximization. I
t indicates how much shareholders earnedfrom their investment. The higher
the ratio indicates higher the shareholders wealth maximization. Return on e
quity ishighest in 2016-
17 return shows 7%. This indicate that the company management is not eff
ective in using equityfinancing in 2017-18 year as the return show only 4%
which is 3% less than previous year.
B. Liquidity Ratio
Ratios that show the relationship of a firm’s cash and other current assets t
o its current liabilities. This includes (i) Current ratio (ii) Quick ratio
i. Current Ratio
Current Ratio establishes the relationship between current Assets and curre
nt liabilities. It attempts to measure theability of a firm to meet its current
obligations. In order to compute this ratio, the following formula is used:
2017-18 2016-172015-16
Current Ratio = Current Asset: Current Liability 2.04 2.172.12

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The ideal current ratio is 2: 1. It indicates that current assets double the c
urrent liabilities is considered to besatisfactory. Higher value ofcurrent rati
o indicates more liquid of the firm's ability to pay its current obligation in time.
On the other hand, a low value of current ratio means that the firm may find i
t difficult to pay its current ratio as onewhich is generally recognized as the
patriarch among ratios.
Advantages of Current Ratios:
(1) Current ratio helps to measure the liquidity of a firm.
(2) It represents general picture of the adequacy of the working capital position of a
company.
(3) It indicates liquidity of a company.
(4) It represents a margin of safety, i.e., cushion of protection against current
creditors.
(5) It helps to measure the short-term financial position of a company or short-term
solvency of a firm.
Disadvantages of Current Ratio:
(1) Current ratios cannot be appropriate to all businesses it depends on many other
factors.
(2) Window' dressing is another problem of current ratio, for example, overvaluation
of closing stock.
(3) It is a crude measure of a firm's liquidity only on the basis Of quantity and not
quality of current assets.
The current ratio measures the company’s ability to pay off its current liability
. Here we can see that current ratio washighest in 2016-
17 with compare in previous years and following year. The statistics indicates
a good liquidity positionof the company. They have enough cash in hand to m
eet the short term liabilities. But it also denotes that company hashuge idle m
oney, so it is not good sign for the Aftab Automobiles Ltd. So in a concluding

26
note I would like to saycompany should utilize their idle money in a profitable
manner
ii. Quick Ratio
Quick Ratio also termed as Acid Test or Liquid Ratio. It is supplementary to th
e current ratio. The acid test ratio is amore severe and stringent test of a firm'
s ability to pay its short-
term obligations 'as and when they become due. QuickRatio establishes the r
elationship between the quick assets and current liabilities. In order to com
pute this ratio, thebelow presented formula is used :
2017-18 2016-172015-16
Quick Test Ratio= Current Asset -Inventory: Current Liability 1.68 1.531.68
Acid Test Ratio
1.70
1.65
1.60
1.55
1.50
1.45
2017-18
2016-17
2015-16
The ideal Quick Ratio of 1:1 is considered to be satisfactory. High Acid Test R
atio is an indication that the firm hasrelatively better position to meet its curr
ent obligation in time. On the other hand, a lowvalue of quick ratio exhibiting
that the firm's liquidity position is not good.

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Advantages
(1) Quick Ratio helps to measure the
liquidity position of a firm. (2) It is used
as a supplementary to the current ratio.
(3) It is used to remove inherent defects of current ratio.
We know this ratio show’s a firm’s ability to cover its current liabilities wit
h its most liquid asset. This ratioconcentrates on more liquid assets like cas
h and marketable securities. We can say that although Aftab AutomobilesLtd
.'s ability to meet the current liabilities was higher the standard level, which
means they have to much ideal cashwhich the can invest in short term
investment of proper utilization of money.
C. Efficiency Ratio:
i. Stock Turnover
Inventory is the account of all the goods a company has in its stock, includ
ing raw materials, work-in-
progressmaterials, and finished goods that will ultimately be sold. Inventory t
ypically includes finished goods, such as clothingin a department store. Howe
ver, inventory can also include raw materials that go into the production of fin
ished goods,called work-in-progress.

28
2017-18 2016-172015-16
Stock Turnover= COGS/ Average Stock 1.91 2.262.52
Stock Turnover
2015-16
2016-17
2017-18
0.00 0.50 1.00 1.50 2.00 2.50 3.00
The higher the inventory turnover, the better since a high inventory turnove
r typically means a company is selling goods very quickly and that demand
for their product exists.
Low inventory turnover, on the other hand, would likely indicate weaker sale
s and declining demand for a company’s products.
Inventory turnover provides insight as to whether a company is managing i
ts stock properly. The company mayhave overestimated demand for their pr
oducts and purchased too many goods as shown by low turnover. Conversely,
ifinventory turnover is very high, they might not be buying enough invent
ory and may be missing out on salesopportunities.
Inventory turnover also shows whether a company’s sales and purchasin
g departments are in sync. Ideally,inventory should match sales. It can be q
uite costly for companies to hold onto inventory that isn’t selling, which iswh
2.
5
2
2.
2
6
1.
9
1

29
y inventory turnover can be an important indicator of sales effectiveness bu
t also for managing operating costs.Alternatively, for a given amount of
sales, using less inventory to do so will improve inventory turnover.
As we can see the analysis, it2017-
18 the inventory turnover is lower than privious year that indicates weaker s
alesand not properly managing the stock which is not great for the company.
Getting new idear or promoting more mighthelp Company to sell more and
the turnover will get in stander level.
Findings of the report
Financial Ratio Analysis also referred to as 'Quantitative Analysis' is consider
ed to be the most important step whileanalyzing a company from an invest
ment perspective. It is a study of ratios between various items in financial
statements. Ratios are classified as profitability ratios, liquidity ratios, asse
t utilization ratios, leverage ratios andvaluation ratios based on the indicatio
ns they provide. Balance sheet, Income Statement and Cash Flow Statements
arethe most important financial statements and if properly analyzed and int
erpreted can provide valuable insights into acompany's business.
Financial Ratios is commonly used by current and potential investors, creditor
s and financial institutions to evaluate acompany's past performance to spot
trends in a business and to compare its performance with the average indus
tryperformance. It also enables them to identify strengths and weaknesses of
a business and to justify further investmentsin the business. Internally, mana
gers use these ratios to monitor performance and to set specific goals, objecti
ves, andpolicy initiatives. These are the most common questions any investo
r has in his mind when he looks at the financialstatements of a company he
plans to invest in. While massive amount of numbers in a financial stateme
nt may bebewildering and intimidating to a layman investor, Financial Ratio
Analysis enables him to understand these numbersin an organized fashion.

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The most important assumption the analyst should make sure while drawin
g conclusions based on financial ratios isthat the accounting policy of the co
mpany has remained constant over the period of review. Changes in accoun
tingpolicies may distort the indications provided by the ratios. For example, c
ompanies that intend to enhance their assetreturn ratios may change the de
preciation accounting method applied; thus providing misleading asset retur
n ratios.The analyst should therefore make adjustments for any material diff
erences in accounting policies before evaluatingratios.
Similarly, it is equally important to allow for any material differences in acc
ounting policies while comparing thecompany with other industry players.
While ratios do provide valuable insight into the company's past performanc
eand potential problems, they cannot be evaluated on a standalone basis. Fo
r a thorough examination of a business, theanalyst must read between the li
nes and check for any major fluctuations in any line item in financial statem
ents.Nonrecurring items and extra-
ordinary expense or income items must be excluded for meaningful analysis.
Similarly,wide fluctuations in revenue figure or expense figure should be jus
tified. Here the importance of Note to financialstatements cannot be
overemphasized. Information
provided in these notes to financial statements can be very helpful in avoidin
g inappropriate investment decisions dueto misleading financial ratios.

Aftab Automobiles Ltd.
31
Conclusion
AFTAB AUTOMOBILES LTD is well known company. After analyzing their
company’s financial statement we find out that their overall financial situation is
not so good. They need to work hardly to achieve their growth or betterment of
the company. If they don’t give more efforts it would be very threaten for them
so they might lose their position in the market.
Reference
AFTAB AUTOMOBILES LTD, official website: https://www.aftabautomobiles.com/
AFTAB AUTOMOBILES LTD, Annual report 2016, 2017, 2018

Financial analyis of aftab automobile

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