This document provides an overview of ratio analysis for Atlas Honda. It includes summaries of various financial ratios categorized as liquidity, activity, debt, profitability, and market ratios. Several ratios for Atlas Honda from 2008-2012 are presented, including current ratio, quick ratio, inventory turnover, average collection period, debt ratio, gross profit margin, return on assets, and price to earnings ratio. The document also briefly introduces the DuPont system of analysis for further assessing a company's financial condition.

3. Ratio Analysis
Managerial Finance

4. Presenters
1
Omer Shahzad
MB-12-08
2
Zeeshan Ahmad
MB-12-09
3
Saleem Malik
MB-12-23
4
Ali Asghar
MB-12-34
5
Babar Chaudhary
MB-12-54

5. Financial
Ratios

6. Market Ratios
Profitability Ratios
Debt Ratios
Activity Ratios
Liquidity
Ratios

7. Our Organization
Vision:
Market leader in the motorcycle industry, emerging
as a global competitive center of production and
exports.

8. Ali
Asghar
MB-12-34

9. Liquidity Ratios
Firm’s ability to satisfy its shortterm obligations as they come
due.

10. Liquidity Ratios
Current Ratio
Quick Ratio

11. Current Ratio
Looks at the ratio between
current assets and current
liabilities.

12. Mostly Current Ratio of 2 is consider acceptable. For
Atlas Honda, current ratio less than 2 is acceptable and
has improved during last 5 years and remain stable in
last 2 years at level of 1.45 which is quite acceptable.

13. Current Ratio
Current Ratio
1.55
1.5
1.49
1.45
1.45
1.45
1.4
1.35
1.3
1.31
1.25
1.25
1.2
1.15
1.1
2008
2009
2010
2011
2012

14. Quick Ratio
Is similar to the current ratio
but it excludes inventory
from current assets.

15. A Quick Ratio of 1 or greater is acceptable. For Atlas
Honda, Quick Ratio mostly remain below 1 and remain
deteriorating.

16. Quick Ratio
Quick Ratio
1.2
1.02
1
1
0.9
0.84
0.8
0.7
0.6
0.4
0.2
0
2008
2009
2010
2011
2012

17. Liqidity Ratios
Current Ratio
Quick Ratio
1.6
1.49
1.45
1.45
1.4
1.31
1.25
1.2
1.02
1
1
0.9
0.8
0.84
0.7
0.6
0.4
0.2
0
2008
2009
2010
2011
2012

18. Liquidity Ratios
According to company financial statement they
are in Strong Liquidity position but their liquidity
position is not that good as they stated. Company
liquidity position appear to have remain stable
but below acceptable criteria. Company may
have problem to satisfy its short term obligations
when they come due. But, it is also a fact that
company do not have paid all its short term
obligations at the same time so company can
manage to pay its short liabilities.

19. Omer
Shahzad
MB-12-08

20. Activity Ratios
Measures the speed with which
various accounts are converted into
sales or cash-inflows or cashoutflows.

21. Inventory
Turnover Ratio
Asset
Turnover Ratio
Activity Ratios
Average
Collection Period
Average
Payment Period

22. Inventory Turnover Ratio
Measures the activity of a
firm’s inventory.

23. Inventory turnover for ATLAS HONDA is improved very fast
during last 5 years and a level of 16.3 is quite remarkable.
Higher Inventory Turnover leads to reducing holding cost and
increase the net income and profitability. But company need to
remain conscious about inventory turnover because higher
level of inventory turnover may indicate inadequate inventory
level, which may leads to a loss for the business.

24. Inventory Turnover
Inventory Turnover
18
16.3
16
15
14.15
14
12
10.36
10
8
7.13
6
4
2
0
2008
2009
2010
2011
2012

25. Asset Turnover Ratio
Indicates the firm’s efficiency to
use assets for generating sales.

26. It is generally consider that the higher the firm total asset
turnover, the more efficiently its assets have been used.
Asset turnover for ATLAS HONDA is improving and have
excellent level.

27. Asset Turnover
Asset Turnover
4
3.5
3.38
3
3.47
3
2.5
2.39
2
1.84
1.5
1
0.5
0
2008
2009
2010
2011
2012

28. Turnovers
Inventory Turnover
Asset Turnover
18
16.3
16
15
14.15
14
12
10.36
10
8
7.13
6
4
3
2
3.38
3.47
2.39
1.84
0
2008
2009
2010
2011
2012

29. Average Collection Period
Shows the time needed to
collect accounts receivables.

30. ATLAS HONDA have very good credit and collection
policies. Average collection period of less than 1 week is
amazing.

31. Average Collection Period
Avg. Collection Period
9
8.5
8
7
7
6
6
6
5
4.5
4
3
2
1
0
2008
2009
2010
2011
2012

32. Average Payment Period
Shows the time needed to
pay accounts payables.

33. Average payment period is decreased as compared to
2009. But company still using its credit worth very well
and taking full advantage of credit period from suppliers.

34. Average Payment Period
Avg. Payment Period
80
76
70
60
61
51
50
48
50
40
30
20
10
0
2008
2009
2010
2011
2012

35. Periods
Avg. Collection Period
Avg. Payment Period
80
76
70
60
61
51
50
48
50
40
30
20
10
7
8.5
6
4.5
6
0
2008
2009
2010
2011
2012

36. Activity Ratios
The company’s assets performance appears to
be in a good shape. It is clear that company has
efficiently use the various components of working
capital cycle. It has been able to effectively
control the receivables and inventories.

37. Zeeshan
Ahmad
MB-12-09

38. Debt Ratios
Indicates the amount the firm
uses to generate profits from
others’ money.

39. Debt Ratios
Times Interest
Earned Ratio
Debt Ratio
Fixed-Payment
Coverage Ratio

40. Debt Ratio
Measures the proportion of
total assets financed by the
firm’s creditors.

41. The higher degree of debt ratio shows the greater the
firm’s degree of indebtedness. Debt ratio for Atlas Honda
in 2008 was nearly 61% which was not very favorable
for the organization. But during the last 5 years, the debt
ratio decrease continuously and reach to nearly 50%
which is not very good but fair enough.

42. Debt Ratio
Debt Ratio
70
60
60.89
55.63
54.33
51.95
50
50.54
40
30
20
10
0
2008
2009
2010
2011
2012

43. Times Interest Earned Ratio
Measures the firm’s ability to make
contractual interest payments. It is
also called Interest Coverage Ratio.

44. Interest Coverage Ratio of Atlas Honda increase during
the last 5 years but you can see a surprising increase in
this ratio in 2012. You can understand this increase by
comparing Debt and Interest coverage ratio.

45. Interest Coverage Ratio
Interest Coverage Ratio
160
140
139.26
120
100
80
60
40
20
16
10.56
4.98
0
2008
2.4
2009
2010
2011
2012

46. Debt Ratios
Debt Ratio
Interest Coverage Ratio
160
140
139.26
120
100
80
60
60.89
55.63
54.33
51.95
50.54
40
20
16
10.56
4.98
0
2008
2.4
2009
2010
2011
2012

47. Debt Ratios
In this graph you can see a negative relationship
between Debt and Interest coverage ratio. As the
company debt ratio decrease, the company times
interest earned ratio increase rapidly. It is due to
company policy introduced in 2010 to reshape its
balance sheet approach and worked to reduce the
interest bearing liabilities to improve its balance
sheet. The outcome of this policy is the
Achievement of “DEBT FREE STATUS” in 2012.

48. M. Saleem
MB-12-23

49. Profitability Ratios
Measures the firms’ profits with
the given level of sales.

50. Gross-Profit
Ratio
Operating-Profit
Ratio
Net-Profit
Ratio
Profitability Ratios
Earning
Per Share
Return on
Total Assets
Return on
Common Equity

51. Gross-Profit Ratio
Measures the percentage of each
sales dollar remaining after the
firm has paid for its goods.

52. Gross profit margin for ATLAS HONDA is unstable and
mostly deteriorating. But separate using gross profit
margin for measuring company profitability is not a good
measure.

53. Gross Profit Margin
Gross Profit Margin
8
7.82
7.8
7.6
7.5
7.46
7.4
7.3
7.2
7.02
7
6.8
6.6
2008
2009
2010
2011
2012

54. Operating-Profit Ratio
Measures the percentage of each sales
dollar remaining after all costs &
expenses other than Interests and Taxes
are deducted.

55. Operating profit margin for ATLAS HONDA decreased in
2009, but remain quite stable after that.

56. Operating Profit Margin
Operating Profit Margin
7
6
6.02
5
4.65
4.62
4.4
4.3
4
3
2
1
0
2008
2009
2010
2011
2012

57. Net-Profit Ratio
Measures the percentage of each
sales dollar remaining after all costs &
expenses including Interests and
Taxes are deducted.

58. Net profit margin also decreased during 2009 but
company recovered very well and its net profit
continuously increasing from last 3 years.

59. Net Profit Margin
Net Profit Margin
4
3.5
3.37
3.08
3
3.16
2.78
2.5
2
1.63
1.5
1
0.5
0
2008
2009
2010
2011
2012

60. Profitibility Ratios
Gross Profit Margin
Operating Profit Margin
Net Profit Margin
9
8
7.82
7.5
7.46
7.02
7
6
7.3
6.02
5
4.65
4.4
4.62
4.3
4
3.37
3.08
3
3.16
2.78
2
1.63
1
0
2008
2009
2010
2011
2012

61. Earnings Per Share (EPS)
Represents the dollar amount earned
on behalf of each outstanding share of
common stock.

62. Over the years, the company is focused on maintaining
steady growth in EPS. In 2012, company delivered EPS
of Rs.16.74 which is outstanding.

63. Earning Per Share
Earning Per Share
18
16.74
16.03
16
14.86
14
12
11.39
10
8
6
4.75
4
2
0
2008
2009
2010
2011
2012

64. Profitability Ratios
The Company’s Gross profit margin declined
but it is due to the higher cost of goods sold.
While the Operating and Net profit margin is
improving so we can evaluate that company
profitability is improving.

65. Babar
Hussain
MB-12-54

66. Return on Total Assets (ROA)
Measures the overall effectiveness of the
management in generating profits with its
available assets. It is also called Return
on Investment (ROI).

67. The higher the firm’s return on total asset consider the
better. Return on total asset of ATLAS HONDA appear to
be improved in last 3 year and rose to 11% despite
significant in assets base on account of capacity
expansion.

68. Return on Asset
Return on Asset
12
10.98
10.42
10
8
8.36
8.07
6
4
3
2
0
2008
2009
2010
2011
2012

69. Return on Common Equity (ROE)
Measures the return earned on the
common stockholders’ investment
in the firm.

70. Return on equity also have the same case like ROA. It is
also improved after declining in 2009 and now rose to
22% due to steady income growth.

71. Return on Equity
Return on Equity
25
21.68
20
22.21
20.65
18.3
15
10
6.76
5
0
2008
2009
2010
2011
2012

72. Returns
Return on Asset
Return on Equity
25
21.68
20
22.21
20.65
18.3
15
10.42
10
10.98
8.36
8.07
6.76
5
3
0
2008
2009
2010
2011
2012

73. Market Ratios
Relates the firms’ market value as
measured by its current share
price, to certain accounting values.

74. Market Ratios
Price/Earnings
Ratio
Market/Book
Ratio

75. Price/Earnings Ratio (P/E)
Measures the amount that investors
are willing to pay for each dollar of a
firm’s earnings.

76. The higher level price earnings ratio consider the better.
Price earnings ratio for ATLAS HONDA decrease during
previous years but it not due of low earning but due to
the higher market price of ATLAS HONDA’s shares.

77. Price Earning Ratio
Price Earning Ratio
20
18.7
18
16
14
14.1
12
10.9
10
8.8
8
8.5
6
4
2
0
2008
2009
2010
2011
2012

78. DuPont System of Analysis
System used to dissect the firm’s financial
statement and to assess its financial
condition.
The two measures of this this system are:
1. Return on total assets (ROA)
2. Return on common equity (ROE)

79. DuPont Formula
Multiplies the firm’s net profit margin by its
total asset turnover to calculate the firm’s
return on total assets.

81. Modified DuPont Formula
Relates the firm’s return on total assets to
its return on common equity using financial
leverage multiplier.