Current RatioLooks at the ratio betweencurrent assets and currentliabilities.
Mostly Current Ratio of 2 is consider acceptable. ForAtlas Honda, current ratio is less than acceptable butimproved during last 5 years and remain stable in last 2years at level of 1.45 which is quite acceptable.
1.311.251.491.45 1.422.214.171.124.251.31.351.41.451.51.552008 2009 2010 2011 2012Current RatioCurrent Ratio
Quick RatioIs similar to the current ratiobut it excludes inventoryfrom current assets.
A Quick Ratio of 1 or greater is acceptable. For AtlasHonda, Quick Ratio mostly remain below 1 and remaindeteriorating.
0.840.71.020.9100.20.40.60.811.22008 2009 2010 2011 2012Quick RatioQuick Ratio
1.311.251.491.45 1.450.840.71.020.9100.20.40.60.8126.96.36.199008 2009 2010 2011 2012Liqidity RatiosCurrent Ratio Quick Ratio
According to company financial statement theyare in Strong Liquidity position but their liquidityposition is not as good as they stated. Companyliquidity position appear to have remain stablebut below acceptable criteria. Company mayhave problem to satisfy its short term obligationswhen they come due. But, it is also a fact thatcompany do not have pay all its short termobligations at the same time so company shouldmanage to pay its short liabilities.Liquidity Ratios
Activity RatiosMeasures the speed with whichvarious accounts are converted intosales or cash-inflows or cash-outflows.
InventoryTurnover RatioActivity RatiosAverageCollection PeriodAveragePayment PeriodAssetTurnover Ratio
Inventory Turnover RatioMeasures the activity of afirm’s inventory.
Inventory turnover for ATLAS HONDA is improved very fastduring last 5 years and a level of 16.3 is quite remarkable.Higher Inventory Turnover leads to reducing holding cost andincrease the net income and profitability. But company need toremain conscious about inventory turnover because higherlevel of inventory turnover may indicate inadequate inventorylevel, which may leads to a loss for the business.
78.564.5661764851 50010203040506070802008 2009 2010 2011 2012PeriodsAvg. Collection Period Avg. Payment Period
Activity RatiosThe company asset performance appears tobe in a good shape. It is clear that companyhas efficiently use the various componentsof working capital cycle. It has been able toeffectively control the receivables andinventories.
Debt RatiosIndicates the amount the firmuses to generate profits fromothers’ money.
Debt RatiosDebt RatioFixed-PaymentCoverage RatioTimes InterestEarned Ratio
Debt RatioMeasures the proportion oftotal assets financed by thefirm’s creditors.
The higher degree of debt ratio shows the greater thefirm’s degree of indebtedness. Debt ratio for Atlas Hondain 2008 was nearly 61% which was not very favorablefor the organization. But during the last 5 years, the debtratio decrease continuously and reach to nearly 50%which is not very good but fair enough.
60.8955.6354.3351.9550.540102030405060702008 2009 2010 2011 2012Debt RatioDebt Ratio
Times Interest Earned RatioMeasures the firm’s ability to makecontractual interest payments. It isalso called Interest Coverage Ratio.
Interest Coverage Ratio of Atlas Honda increase duringthe last 5 years but you can see a surprising increase inthis ratio in 2012. You can understand this increase bycomparing Debt and Interest coverage ratio.
4.982.410.5616139.260204060801001201401602008 2009 2010 2011 2012Interest Coverage RatioInterest Coverage Ratio
60.8955.63 54.3351.95 50.544.982.410.5616139.260204060801001201401602008 2009 2010 2011 2012Debt RatiosDebt Ratio Interest Coverage Ratio
Debt RatiosIn this graph you can see a negative relationshipbetween Debt and Interest coverage ratio. As thecompany debt ratio decrease, the company timesinterest earned ratio increase rapidly. It is due tocompany policy introduced in 2010 to reshape itsbalance sheet approach and worked to reduce theinterest bearing liabilities to improve its balancesheet. The outcome of this policy is theAchievement of “DEBT FREE STATUS” in 2012.
Earnings Per Share (EPS)Represents the dollar amount earnedon behalf of each outstanding share ofcommon stock.
Over the years, the company is focused on maintainingsteady growth in EPS. In 2012, company delivered EPSof Rs.16.74 which is outstanding.
4.7514.8611.3916.0316.740246810121416182008 2009 2010 2011 2012Earning Per ShareEarning Per Share
Profitability RatiosThe Company’s Gross profit margin declinedbut it is due to the higher cost of goods sold.While the Operating and Net profit margin isimproving so we can evaluate that companyprofitability is improving.
Return on Total Assets (ROA)Measures the overall effectiveness of themanagement in generating profits with itsavailable assets. It is also called Returnon Investment (ROI).
The higher the firm’s return on total asset consider thebetter. Return on total asset of ATLAS HONDA appear tobe improved in last 3 year and rose to 11% despitesignificant in assets base on account of capacityexpansion.
8.0738.3610.4210.980246810122008 2009 2010 2011 2012Return on AssetReturn on Asset
Return on Common Equity (ROE)Measures the return earned on thecommon stockholders’ investmentin the firm.
Return on equity also have the same case like ROA. It isalso improved after declining in 2009 and now rose to22% due to steady income growth.
20.656.7618.321.6822.2105101520252008 2009 2010 2011 2012Return on EquityReturn on Equity
8.0738.3610.4210.9820.656.7618.321.6822.2105101520252008 2009 2010 2011 2012ReturnsReturn on Asset Return on Equity
Market RatiosRelates the firms’ market value asmeasured by its current shareprice, to certain accounting values.
Price/Earnings Ratio (P/E)Measures the amount that investorsare willing to pay for each dollar of afirm’s earnings.
The higher level price earnings ratio consider the better.Price earnings ratio for ATLAS HONDA decrease duringprevious years but it not due of low earning but due tothe higher market price of ATLAS HONDA’s shares.
14.118.710.98.88.5024681012141618202008 2009 2010 2011 2012Price Earning RatioPrice Earning Ratio
DuPont System of AnalysisSystem used to dissect the firm’s financialstatement and to assess its financialcondition.The two measures of this this system are:1.Return on total assets (ROA)2.Return on common equity (ROE)
DuPont FormulaMultiplies the firm’s net profit margin by itstotal asset turnover to calculate the firm’sreturn on total assets.
Modified DuPont FormulaRelates the firm’s return on total assets toits return on common equity using financialleverage multiplier.