Maruti analysis

1. Management Accounting
CIA-1
By –
1723013
1723027
1723042
1723072
1723075

3. • ALL THE AMOUNT MENTIONED IN THE
STATEMENTS ARE IN CRORES

4. Comparative income statement

5. Interpretation
• Company has increased its revenue by 6 % in the year
2018, but due to the fall in the other income the
aggregate income has not increased as much as
revenue.
• With increase in the revenue it is necessary that the
expenditure will increase but the increase in interest is
286.4% which is much more than the expected rate.
• There has been 5.99% increase in depreciation which is
justifiable as there has been a subsequent increase in
the value of assets. Also it can be seen that there is a
significant increase in the tax which is a result of
increased revenue of the company.

6. • Profit before tax and debenture increased by
9.71% which shows the growth of the company
and if we compare the profit after tax which is
5.23 % that is a clear indicator that the company
is performing overall good but they have to
manage the financial cost wisely.
• There has also been an increase in earnings per
share by 5.23% signifying the improvement of the
share price of the company in the market.

7. Comparative balance sheet

11. Interpretation
• There is a significant increase in the value of total
shareholders’ funds due to an increase of 14.68% in
total reserves and surplus.
• Coming to the non-current liabilities, the deferred tax
liabilities have increased by 19.88% that indicates that
the estimated tax was less than the actual tax to be
paid. Other long term liabilities have increased by
43.46% which is a very significant difference as they
have increased the investment in fixed assets. There
has been a 21.004% increase in the long term
provisions. Total non-current liabilities have increased
by 36.25%.

12. • There was an opposite outcome for the short
term borrowings. The company has almost paid
off 77.08% of their short term borrowings which
show that the company wants to create a good
credibility in the market. The trade payables
increased by 25.44% which is justifiable since it is
an automobile company therefore, it has to take
credit from suppliers. Total current liabilities have
increased by 16% which approximately balances
the current liability section of the balance sheet.

13. • The total capital and liabilities have increased by 15.84% which is
in accordance with the growth rate of the company.
• There is a significant change in the capital work in progress of
about 69.75% while the change in the value of total fixed assets
is just 6.49%. This change in capital work in progress is because
of the new manufacturing facility being established in Gujarat
and new upgraded showrooms known as Maruti arena being
opened.
• There is an increase of 21.12% in the value of non-current
assets. This maybe because of risk-management and utilizing the
revenues in a proper direction. There is a significant increase in
both non-current investments and other non-current assets
while there is a significant decrease in long term loans and
advances

14. • The value of current assets has decreased by
9.73% due to fall in the values of current
investments, inventories and other current assets
whereas the values of trade receivables, cash and
cash equivalents and short term loans and
advances increased.
• The company is performing well and is working
towards growth therefore, most of the fixed
assets and long term investments of the company
are being jammed in capital work in progress and
risk management respectively

15. Common size income statement

16. • There is no significant change in the equity of
the company along with earnings per share
when we compare the two on the basis of the
revenue that the company has generated in
the two years, 2017 and 2018 respectively.
• The company needs to look into the reasons
for decrease in the other incomes and manage
its financial costs to maintain the profits and
continue to grow and develop.

17. Interpretation
• There is an increase in the revenue generated by 4728.2.
Even though there has been an increase in the revenue, the
other incomes have decreased when we compare them on
the basis of the revenue generated along with the
expenditure incurred by the company.
• There has been an increase in the interest paid from 2017
to 2018 yet the change in profit before depreciation and tax
is negligible. Although there is very minimal change in the
depreciation recorded, there has been an increase in the
profit before tax.
• A significant change in tax on the basis of revenue can also
be seen. The net profit of the company on the basis of its
revenue has decreased from 9.50 to 9.42 indicating that the
company has not been able to maintain its profits.

18. Common size balance sheet

22. • There has been a significant increase in the total
liabilities and capital from 2017 to 2018.
• The change in the equity share capital from 2017 to
2018 on the basis of total liabilities and capital is very
minimal. There is a slight change in the reserves and
surplus of the company whereas the total
shareholders’ fund has increased with slight
significance.
• There is an increase in the overall non-current liabilities
when we compare them to the total liabilities that the
company has. This shows that the company looking
forward towards diversification in the product line.

23. • The total current liabilities of the company has increased
which can be seen by trade payables and short term
provisions even though there has been a decrease in short
term borrowings and other current liabilities when
compared to total liabilities and capital.
• The increase in trade payable and short term provisions
together is significantly more than the total decrease in
short term borrowings and other current liabilities.
• There is decrease in the tangible assets of the company
along with a significant decrease in intangible assets. There
has been an increase in the capital work in progress
showing that the company is working towards expansion.
The overall fixed assets of the company have decreased.

24. • There has been a significant increase in both non-current
investments and long term loans and advances but the increase in
the other non-current assets is insignificant. In all the total non-
current assets of the company has increased a lot indicating
investment in the company for the purpose of diversification and
expansion.
• The current investments, other current assets and inventories of
Maruti have decreased to a great extent because of the new policy
of Maruti which offers the customers the service to customize their
vehicle according to the demand. Trade receivables, cash and cash
equivalents and the short term loans and advances have increased.
The total current assets have decreased as the increase in some
particular current assets is significantly less than the decrease in the
other current assets.

25. • When we see the overall comparison of
Maruti from 2017 to 2018 we can see that
they are trying to redefine their policies to
innovate and follow a new style of business
through their customer centric services which
can be seen by the significant change in
capital work in progress and current assets,
inventory management.

26. Trend analysis

27. Interpretation
• There has been a constant increase in research and
development along with sales and profit. The total
increase in r and d has been of approximately 2.24
times. The increase in r and d from 2015 to2016 is less
due to the problems created by the workers at the
Gurgaon facility.
• The sales have also increased by 2.25 times over the
period of the last 7 years. This is due to the constant
innovation in the r and d department that the company
has to offer to its customers in India. The sales from
2013 to2014 because of new emerging competitions
from the international market.

28. • The profit before tax for Maruti has increased by more
than 5 times over the period of last seven years. There
has been a drastic increase from the years 2016 to
2017 due to the introduction of new segment of
Maruti India called Nexa which offers the customer a
whole new experience of premium cars with the
Maruti trust and service.
• The trend analysis shows that Maruti has used its
revenue in a optimum level and compete with
international brands through its innovative research
and development team which can be seen from the
performance as a whole.

29. Ratio analysis

30. 1) Liquidity ratios
• Current ratio – the current ratio of the company is 0.5
which indicates that the liquidity of the company is not
good and it will not able to pay its current liabilities
with is current assets.
• Quick ratio – when we have a look at the quick ratio
its around 0.3 which is a result of low current assets of
the company
• Conclusion- when we have the look at the business
what Maruti do ,low liquidity ratio is not a very big
issue as because of the business with heavy investment
in fixed assets may be successful even the ratio is low

32. 2) Profitability ratios
• Net profit ratio – it shows the profit margin of the company able to
earn and have a rough idea about the profitability of the company,
when we see Maruti’s net profit ratio which is around 14.2% which
less the market average this is because of the low budget car
segment market of Maruti.
• Return on total assets – with a ROA of 18.388% Maruti shows that
the company is effectively use its current and fixed assets and
which is able to earn a decent return out of it.
• Return on equity - this is most useful ratio for investors of the
company. They only want to know the return from their investment
which about 26.35 % for Maruti which tells that it’s a good time to
invest in Maruti to invest to get a good return
• Conclusion – when we look at all the profitability ratio Maruti is
giving a good return to is investor and able to utilize its assets in an
efficient way

34. 3) Activity ratios
•
• Fixed asset turnover ratio - fixed asset turnover ratio for Maruti is
around 1.5 it is a justifiable because it is a business which needs
heavy fixed assets but it can be also interpreted that the company
has over invested in the capital assets.
• Current asset turnover ratio - current assets return is very high as
compared to fixed but it does not put a significant influence
because Maruti is a capital asset oriented industry (9.21)
• Total asset turnover ratio – it’s about 1.3 which from the first point
can be very clear that because of two reasons it can be low
• Conclusion – when we compare all the ratio it can be said that
company has over fixed assets to solve it they need to improve their
sales.

36. 4) Solvency ratios
• Debt to equity ratio - its around 0.05 which means that company
has a very small amount of external liabilities as compared to
internal liability which is good sign for the shareholders of the
company will able to earn them more return but a very small debt
to equity ratio will be a concern for many because it will not help to
magnify the opportunity of low cost fund available in the market
• Debt to capital employed ratio- when we look at the Debt to
capital employed ratio company it very low around 4% which is
good as it always better to have a less of external fund in the total
capital of the company
• Conclusion – the above two ratio shows that the solvency position
of the company is very good but if the solvency is very good it will
not fulfill the interest of shareholder as it will not able to properly
utilize the external fund benefit, therefore there should be mix of
external and internal fund which will fulfill both the needed
solvency and optimum use of resources