Working Capital Management and Ratio Analysis

THE INDIAN INSTITUTE OF PLANNING & MANAGEMENT
LUCKNOW
PROJECT REPORT ON
(WORKING CAPITAL MANAGEMENT AND RATIO

ANALYSIS
At
VOLKSWAGEN)
SUBMITTED TO
MR. YASH SRIDHAR
SUBMITTED BY
UMME SALMA
Ref. ID.L-1113SSISBEPGP10020(LA-3496)
Session 2011-2013
ACKNOWLEDGEMENT
The satisfaction and euphoria that accompany the successful completion of any
task would be incomplete without mentioning the people who made it possible,
whose guidance and encouragement grow with all the efforts with success.
I extend my sincere thanks to my Project guide for his commendable inspiring
guidance, valuable advice, encouragement and motivation given to me to succeed
in my endeavor.
I owe from the depth of my heart, my gratitude to Company Guide Arti Mam_
who was so generous in extending his time and giving a lending hand to bring out
this project.
I would also like to thank my friends for giving all the co-operation and confidence
to me.
UMME SALMA
MBA- FINAL YEAR
TABLE OF CONTENTS
Executive Summary
Chapter -1
Introduction Of Automobile Industry
Chapter -2
Introduction To Volkswagen Group
12
Chapter -3
Volkswagen In India
33
Chapter -4
Working Capital Management
42
Net Working Capital
51
Financial Ratios
54
Recommendation
98
Conclusion
99
Bibliography
100
EXECUTIVE SUMMARY
Different businesses will have different working capital characteristics. There are 3 main aspects
to these differences:
a) Holding inventory
b) Taking time to pay suppliers and other accounts payable
c) Allowing customers (accounts payable) time to pay
a) Food supermarkets and other retailers receive most of their sales in the form of cash,
credit card or debit card. However, they will buy on credit from suppliers. They will therefore
have the benefit of significant cash holdings which they may chose to invest.
b) A wholesaler supplies other companies and is likely to buy and sell mainly on credit. The
flow of cash will have to be managed carefully. Such a company may have to rely on short-term
borrowings and overdrafts.
c) Small companies with a limited trading record may find it difficult to obtain trade credit.
At the same time customers will expect to receive the normal credit period to settle accounts.
Working capital is the capital required for maintenance of day-to-day
business operations. The present day competitive market environment calls for an efficient
management of working capital. The reason for this is attributed to the fact that an ineffective
working capital management may force the firm to stop its business operations, may even lead to
bankruptcy. Hence the goal of working capital management is not just concerned with the
management of current assets & current liabilities but also in maintaining a satisfactory level of
working capital. Holding of current assets in substantial amount strengthens the liquidity position
& reduces the riskiness but only at the expense of profitability. Therefore achieving risk-return
trade off is significant in holding of current assets. While cash outflows are predictable it runs
contrary in case of cash inflows. Sales program of any business concern does not bring back cash
immediately. There is a time lag that exists between sale of goods & sales realization. The capital
requirement during this time lag is maintained by working capital in the form of current assets.
The whole process of this conversion is explained by the operating cycle concept.
Working capital management involves the relationship between a

firm's short-term assets and its short-term liabilities. The goal of working capital management is
to ensure that a firm is able to continue its operations and that it has sufficient ability to satisfy
both maturing short-term debt and upcoming operational expenses. The management of working
capital involves managing inventories, accounts receivable and payable, and cash.
There are many ratios that can be calculated from the financial statements
pertaining to a company's performance, activity, financing and liquidity. Some common ratios
include the price-earnings ratio, debt-equity ratio, earnings per share, asset turnover and working
capital.
OBJECTIVES OF THE STUDY

VOLKSWAGEN has been managing the various aspect of working capital through
continuous efforts over a long period of time.
The present study is trying to investigate the different aspects of working
capital management at VOLKSWAGEN. Working capital is generally the net difference
between the total assets and the liabilities of the company. So an attempt to understand as to
how the company manages the working capital has been done.
In my project work we are trying to identify the various systematic processes
in managing the working capital.
The study is trying to identify the various liquidity, profitability, solvency and
the turnover positions of the company as a tool of performance which will lead us to identify
the financial soundness of the company.
RESEARCH METHODOLOGY
The study will be based on the QUANTATIVE and QUALITATIVE approach of the
working capital management model at VOLKSWAGEN needs a thorough study. With the
5
help of RATIO ANALYSIS & TREND ANALYSIS the result of the control mechanism
can be summarised which will help in identifying the effectiveness of the system under
the preview. The data for the companies under analysis has been taken from their
respective websites of the companies. `MICROSOFT EXCEL has been used as a tool for
different calculation purposes and developing the charts.
COLLECTION OF DATA:
The data has been collected from the primary and secondary sources:
i) Primary data
(1) Department visit- discussion with the concerned person and interviewing officers
in accounts and finance sector.
(2) Observation method.
ii) Secondary data

(1) Annual reports
(2) Journals and magazines
(3) Study of files and office documents
(4) Websites of VOLKSWAGENand other steel companies.
INTRODUCTION OF AUTOMOBILE INDUSTRY

The automobile industry has changed the way people live and work. The earliest of modern cars
was manufactured in the year 1895. Shortly the first appearance of the car followed in India. As
the century turned, three cars were imported in Mumbai (India). Within decade there were total
of 1025 cars in the city.
The dawn of automobile actually goes back to 4000 years when the first wheel was used for
transportation in India. In the beginning of 15th century, Portuguese arrived in China and the
interaction of the two cultures led to a variety of new technologies, including the creation of a
wheel that turned under its own power. By 1600s small steam-powered engine models was
developed, but it took another century before a full-sized engine-powered vehicle was created.
Brothers Charles and Frank Duryea introduced the actual horseless carriage in the year 1893. It
was the first internal-combustion motor car of America, and it was followed by Henry Fords
first experimental car that same year.
One of the highest-rated early luxury automobiles was the 1909 Rolls-Royce Silver Ghost that
featured a quiet 6-cylinder engine, leather interior, folding windscreens and hood,
and
an aluminum body. Chauffeurs usually drove it and emphasis was on comfort and style
rather than speed. During the 1920s,
the cars exhibited design refinements
such as balloon
tires, pressed-steel wheels, and four-wheel brakes. Graham Paige DC Phaeton of 1929 featured
an 8-cylinder engine and an aluminum body.
The 1937 Pontiac De Luxe sedan had roomy interior and rear-hinged back door that suited more
to the needs of
families.
In 1930s, vehicles were less boxy and more streamlined than their
predecessor was.
The 1940s saw features like automatic transmission, sealed-beam headlights, and tubeless tires.
The year 1957 brought powerful high-performance cars such as Mercedes-Benz 300SL. It was
built on compact and stylized lines, and was capable of 230 kmph (144 mph).This
Indian
automobile
history,
and
today
modern
cars
are
was
generally
the
light,
aerodynamically shaped, and compact.
Facts & Figures

The automobile industry in India is on an investment overdrive. Be it passenger car or twowheeler manufacturers, commercial vehicle makers or three-wheeler companies - everyone
appears to be in a scramble to hike production capacities. The country is expected to witness over
Rs 30,000crore of investment by 2010.
Hyundai will also be unmasking the Verna and a brand new diesel car. General Motors will be
launching a mini and may be a compact car.
Most of the companies have made their intentions clear. Maruti Udyog has set up the second car
plant with a manufacturing capacity of 2.5lakh units per annum for an investment of Rs 6,500
Crore (Rs 3,200 Crore for diesel engines and Rs 2,718 Crore for the car plant itself).
Hyundai and Tata Motors have announced plans for investing a similar amount over the next 3
years. Hyundai will bring in more than Rs 3,800 Crore to India.
Tata Motors will be investing Rs 2,000 Crore in its small car project.
General Motors will be investing Rs 100 Crore, Ford about Rs 350 Crore and Toyota
announced modest expansion plans even as Honda Siel has earmarked Rs 3,000Crore over the
next decade for India - a sizeable chunk of this should come by 2010 since the company is also
looking to enter the lucrative small car segment.
.Talking about the commercial vehicle segment, Ashok Leyland and Tata Motors have each
announced well over Rs 1,000 Crore of investment. Mahindra & Mahindras joint venture
with International Trucks is expected to see an infusion of at least Rs 500 Crore. Industry
performance in 2008-09
The Indian automotive market managed to stand up to the vagaries of the economic meltdown to
show slightly growth during fiscal 2008-09. Overall vehicle sales at 97.23lakh grew 0.71 per
cent from 96.54lakh units in 2007-08.
When major automotive markets reported a 30-40 per cent decline, only a handful of countries
managed to show growth. A few months ago, India was looking at negative growth but has
turned around. It is actually better than expected.
Passenger vehicle sales at 15.51lakh registered flat growth while commercial vehicle sales
showed a 21 per cent drop.
SIAM has a positive outlook for the current financial year. While it foresees a 7-8 per cent
growth for the commercial vehicle segment, the industry body predicts a 3-5 per cent growth for
passenger vehicles
The passenger vehicle market has weathered the downturn largely due to market leader Maruti
Suzuki which holds 48 per cent of the market. The compact car giant clocked 7.22lakh units for
2008-09. Closest rival Hyundai Motor India sold 2.44lakh cars, a growth of 13 per cent.
Most premium carmakers saw volumes shrink last fiscal. Toyota Kirloskar Motors numbers fell
15 per cent to 46,892 units while Ford Indias sales were down 17 per cent to 27,976 units.
Honda Siel Cars India also saw a 17 per cent drop at 52,420 units while General Motors India
was down 8 per cent to 61,526 units.
Among commercial vehicle makers, all major players saw substantial fall in volumes. Market
leader Tata Motors with a 60 per cent plus share, showed 22 per cent drop in numbers at 2.34
lakh units while Ashok Leyland showed 37 per cent drop at 47,632.
Eithers sales volume fell 37 per cent at 17,341 units and Force Motors was down 28 per cent at
7,819 units. The freight movement is unlikely to improve this fiscal which will impact truck
sales.
10
11
INTRODUCTION TO VOLKSWAGEN GROUP

Type:
Public Company
Headquarters:
Germany
Industry:
Automotive
Products:
Cars, Trucks
Revenue:
113.8 billion (2008)
Operating income:
6.61 billion (2008)
Profit:
4.68 billion (2008)
Employees:
369,928(2008)
Vehicle brand companies
Subsidiaries:
Audi
Bentley motors ltd.
Bugatti automobile
Lamborghini
Seat
Skoda auto
Scania
Volkswagen passenger car
Volkswagen commercials vehicles
12
INTRODUCTION TO VOLKSWAGEN
Type:
Subsidiary of Volkswagen group
Founded:
May 28, 1937
Founders:
Ferdinand Porsche, Adolf Hitler
Headquarters:
Area served:
Wolfsburg, Germany
Worldwide
Key people:
Martin Winterkorn
(Chairman of board of management)
Christian kingler:
Ferdinand piech:
(board of management of the Volkswagen passanger cars)

(chairman of Volkswagen supervisory board
Industry:
Automotive
Products:
Cars, Trucks
Website:
Volkswagen.com
13
Worldwide location of various Volkswagen plants
14
In German, Volks pronounced as (folks), means people and

Wagen means Car. Hence:
Volkswagen means "people's car" in German, in

which it is pronounced [flksvan].
Its current tagline or slogan is Das Auto (in English The Car).
Its previous German tagline was Aus Liebe zum Automobil, which translates to:
Out of Love for the Car, or, For Love of the Automobile, as translated by VW in
other languages.
15
History of Volkswagen
Adolf Hitler had a keen interest in cars even though he did not like to drive. In 1933, shortly
after taking over as leader of Germany, he teamed up with Ferdinand Porsche to make changes
to Porsche's original 1931 design to make it more suited for the working man. Hans Ledwinka
discussed his ideas with Ferdinand Porsche, who used many Tatra design features in the 1938
"KdF-Wagen", later known as the VW Kferor Volkswagen Beetle. When Chrysler brought
out the 1934 DeSoto Airflow coupe, its design enabled Mr. Porsche to finalize his design of the
Beetle. On 22 June 1934, Dr. Ferdinand Porsche agreed to create the "People's Car" for
Hitler's mother.
After some time, they planned to change some features regarding various aspects. These
changes included better fuel efficiency, reliability, ease-of-use, and economically efficient repairs
and parts. The intention was that ordinary Europeans would buy the car by means of a savings
scheme ("Save five Marks a week, if you want to drive your own car"), which around
336,000 people eventually paid into. The VW car was just one of many KdF programmes which
included things such as tours and outings. The prefix "Volks" ("People's") was not just applied
to cars, but also to other products in Europe; the "Volksempfnger" radio receiver for instance.
On 28 May 1937, the Gesellschaft zur Vorbereitung des Deutschen Volkswagens was
established by the Deutsche Arbeitsfront. It was later renamed "Volkswagenwerk" on 16
September 1938.
VW Type 82E
Erwin Komenda, the longstanding Auto Union chief designer, developed the car body of the
prototype, which was recognizably the Beetle we know today. It was one of the first to be
evolved with the aid of a wind tunnel; unlike the Chrysler Airflow, it would be a success.
16
New factory started
The building of the new factory started 26 May 1938 in the new town of KdF-Stadt, now called
Wolfsburg, which had been purposely built for the factory workers. This factory only produced
a handful of cars by the time war started in 1939. None were actually delivered to any holder of
the completed saving stamp books, though one Type 1 Cabriolet was presented to Hitler on 20
April 1938 (his 49th birthday).
At the times of 1st world War, Volkswagen War meant production changed to military vehicles,
the Type 82 Kbelwagen ("Bucket car") utility vehicle (VW's most common wartime model),
and the amphibious Schwimmwagen which were used to equip the German forces.
By 1946 the factory was producing 1,000 cars a month, a remarkable feat considering it was still
in disrepair. Due to roof and window damage, rain stopped production and steel to make the cars
had to be bartered for new vehicles.
Volkswagens were first exhibited and sold in the United States in 1949, but only sold two
units in America that first year. On its entry to the U.S. market, the VW was briefly sold as a
"Victory Wagon". Volkswagen of America was formed in April 1955 to standardize sales and
service in the United States. Production of the Type 1 Volkswagen Beetle increased dramatically
over the years, the total reaching one million in 1955.
Sales soared due in part to the famous advertising campaigns by New York advertising agency
Doyle, Dane Bernbach. Led by art director Helmut Krone, and copywriters Julian Koenig and
Bob Levinson, Volkswagen ads became as popular as the car, using crisp layouts and witty copy
17
to lure the younger, sophisticated consumers with whom the car became associated. Despite the
fact it was almost universally known as the Beetle (or the Bug), it was never officially labeled as
such by the manufacturer, instead referred to as the Type 1. The first reference to the name Beetle
occurred in U.S. advertising in 1968, but not until 1998 and the Golf-based New Beetle would
the name be adopted by Volkswagen.
Volkswagen was in serious trouble by 1973. Beetle sales had started to decline rapidly in
European and North American markets. The company knew that Beetle production had to end
one day, but the conundrum of replacing it had been a never-ending nightmare. VW's ownership
of Audi / Auto Union proved to be the key to the problem - with its expertise in front-wheel
drive, and water-cooled engines which Volkswagen so desperately needed to produce a credible
Beetle successor. Audi influences paved the way for this new generation of Volkswagens, known
as the Polo, Golf and Passat.
Volkswagen Golf, sold as the rabbits in USA
While Volkswagen's range of cars soon became similar to that of other large European
automakers, the Golf has been the mainstay of the Volkswagen lineup since its introduction, and
the mechanical basis for several other cars of the company. There have been six generations of
the Volkswagen Golf, the first of which was produced from the summer of 1974 until the end of
1983 (sold as the Rabbit in the United States and Canada and as the Caribe in Latin America). It
would be produced in the United States as the Rabbit until the spring of 1984. The secondgeneration Golf hatchback/Jetta sedan ran from late 1983 to late 1991, and a North American
version produced in Pennsylvania went on sale at the start of the 1985 model year.
In the 1980s, Volkswagen's sales in the United States and Canada fell dramatically, despite the
success of models like the Golf elsewhere. The Japanese and the Americans were able to
18
compete with similar products at lower prices. Sales in the United States were 293,595 in 1980,
but by 1984 they were down to 177,709.
Volkswagen had entered the super-mini market in 1976 with the Volkswagen Polo, a stylish and
spacious three-door hatchback designed by Bertone. It was a strong seller in West Germany and
most of the rest of Western Europe, being one of the first foreign small cars to prove popular in
Britain. The second generation model, launched in 1981 and sold as a hatchback and "coupe"
(with the hatchback resembling a small estate car and the coupe being similar to a conventional
hatchback), was an even greater success for Volkswagen. It was facelifted in 1990 and was still
selling well after 15 years, when it was replaced by the third generation Polo in 1994.
The Volkswagen New Beetle concept, especially in North America.
In 1994, Volkswagen unveiled the J-mays-designed Concept One, a "retro"-themed car with a
resemblance to the original Beetle but based on the Polo platform. Its genesis was secret and in
opposition to VW management, who felt it was too backward-looking. Management could not
deny the positive public response to the concept car and gave the green-light to its development
as the New Beetle. The production car would be based on the Golf rather than the Polo, because
the Polo frame was too small for the car to pass crash test standards in the U.S. It has been quite
popular in the North America and is now gaining in the EU.
Volkswagen group the Volkswagen Bora (the sedan, still called Jetta in the USA), New
Beetle, SEAT Toledo, SEAT Len, Audi A3, Audi TT and Skoda Octavia. However, it was beaten
19
into third place for the 1998 European Car of the Year award by the winning Alfa Romeo 156
and runner-up Audi A6.
In the late 90s Volkswagen acquired the three luxury brands Lamborghini (through Audi),
Bentley and Bugatti which were mainly due to Ferdinand Piech and added to the group
portfolio.
Volkswagen in 2005, despite challenges, still maintained North American sales of 224,195a
dramatic increase from the low in 1993 when US sales totaled only 49,533 vehicles.VW plans to
close out the decade with the release on several new vehicles worldwide and a barrage of
advertising.
The Fifth-Generation Golf
Volkswagen is recognized as one of the leading small diesel engine manufacturers, and is
partnering with Mercedes and other companies to market BlueTec clean diesel technology,
calling it Blue-Motion. Volkswagen has offered a number of its vehicles with a TDI
(Turbocharged Direct Injection engine), which lends class-leading fuel economy to several
models. According to the United States Environmental Protection Agency, four of the ten most
fuel efficient vehicles available for sale in the U.S. in 2004 were powered by Volkswagen
diesel engines
20
Electric and alternative fuel vehicles:

Clean diesel
A Blue Motion Volkswagen Polo

Volkswagen has been selling clean diesel-powered engines for the European market since 2003.
VW developed Turbocharged Direct Injection (TDI) technology for diesel engines, and it
offers a wide array of TDI powertrains. As modern diesel fuel economy is 30 percent higher than
gasoline engines, a proportional reduction of greenhouse gases emissions is achieved with clean
diesel technology. Volkswagen is also developing hybrid technology for diesel-electric. A VW
Golf turbo-diesel hybrid concept car was exhibited in the 2008 Geneva Motor Show, which has
a fuel economy of 70 mpg (3.3 liters per 100 km).
Electric vehicles:
Volkswagen and Sanyo have teamed up to develop a hybrid vehicle battery system. Volkswagen
boss Martin Winterkorn has confirmed the company plans to build compact hybrid vehicles.
There will definitely be compact hybrid models, such as Polo and Golf, and without any great
delay, with gasoline and diesel engines.
21
Flexible-fuel vehicles
The 2003 VW Gol 1.6 Total Flex was the first full flexible-fuel vehicle launched in Brazil,
capable of running on any blend of gasoline and ethanol (E100).
22
Volkswagen Group owns nine active automotive companies:
Audi :
99.55% ownership; the Audi marque is the sole active brand of the former
Auto Union, bought from Daimler-Benz on 30 December 1964.
Automobili Lamborghini:,
100% ownership by Audi AG; company was
bought in June 1998.
Bentley Motors Limited,:
100% ownership by Volkswagen AG; the
company (at the time known as Rolls-Royce & Bentley Motors Ltd.) was bought on 28
July 1998 from Vickers, but did not include the 'Rolls-Royce' brand name. The RollsRoyce marquee was subsequently restarted by BMW who had licensed the brand from
Rolls-Royce plc.
23
Bugatti Automobiles :
100% ownership via the Volkswagen France
subsidiary of VWAG, Bugatti Automobiles SAS was created after Volkswagen purchased
the right to the Bugatti marque.
SEAT, :-
Initially cooperation agreement with Audi AG, 51% (1986) and 100%
ownership by the VW Group since 1990, and was the first foreign subsidiary in the VW
Group.
koda Auto,:- 100% ownership since 1999.
24
Volkswagen Passenger Cars,:- 100% ownership.
Volkswagen
Commercial
Vehicles
(VWCV)
or
'Volkswagen
Nutzfahrzeuge' (VWN) (German) 100% ownership; started operations as an

independent entity in 1995. VWCV/VWN is in charge of all commercial vehicle
developments within the Group and has control over Scania and is a shareholder in MAN
AG.
Scania AB,:-
70.94% of voting
rights
as
at
27
February 2009 .
25
Current Volkswagen models
EuropeCaddy Life
Eos
Fox
Golf Mk6
Golf Plus
Golf Variant
Jetta Mk5
Multivan
New Beetle
New Beetle Convertible
Passat Mk6
Passat CC
Phaeton
Polo Mk4F
Scirocco
Sharan
Touran
Tiguan
Touareg
26
Achievements of Volkswagen
In 1980, Volkswagen competed in the Paris-Dakar Rally with the Audi-developed Iltis, placing
1st, 2nd, 4th and 9th overall.
Volkswagen enlists Dakar Champion Jutta Kleinschmidt, the first female to win the Dakar in
2001, to help design and compete a Dakar Racer.
In 2003, VW replaced the ADAC Volkswagen Lupo Cup with the newly released Polo, to
become the ADAC Volkswagen Polo Cup.
In 2004, Volkswagen Commercial Vehicles enter the European Truck Racing series with the
Volkswagen Titan series truck - it became back-to-back champions for the 2004 and 2005 series.
In 2003, the Hannover based team starts with a 2WD buggy named Tarek. It places 6th outright
but took 1st in the 2WD and Diesel class.
In 2004, VW enters the newly developed Race-Touareg T2, finishing 6th overall and 2nd in the
Diesel class.
In 2005, an updated Race-Touareg with slightly more power is entered, with driver Bruno Saby,
finishing in 3rd overall and 1st in the Diesel class!
In 2006, Volkswagen released the most powerful Race-Touareg yet: the Race-Touareg 2. Five
vehicles enter, with driver Giniel de Villers finishing in 2nd place overall, and 1st in the Diesel
class.
In 2009, Volkswagen won the 2009 Dakar Rally held in Argentina. VW's Touareg race models
finished 1st and 2nd
27
Winner of numerous international awards and accolades

worldwide.
2008
February 20, 2008 - Volkswagen Tiguan is voted SUV of the year by "OFF ROAD" magazine
readers
January 29, 2008 - Volkswagen receives award for increasing shareholder value
January 29, 2008 - Value champions 2008: Volkswagen Tiguan and Golf Estate
January 24, 2008 - Golf GTI is one of 10 Best Cars of 2008
January 18, 2008 - What Car? Award 2008: Double for Volkswagen
January 17, 2008 - Prize for TSI and DSG: Yellow Angel 2008 Award for Volkswagens Latest
High-End Technologies
2007
May 16, 2007 - Volkswagen models voted Company Cars of the Year
April 20, 2007 - Volkswagen wins 10 gold at Fleet Awards 2007
March 27, 2007 - Multiple awards for Volkswagen advertising
March 26, 2007 - "Innovation of reason" 2007: Award for high temperature fuel cell from
Volkswagen
January 4, 2007 - Volkswagen unveiled the cleanest ever TDI engine.
28
2006
September 12, 2006 - Volkswagen Ranks First in J.D. Power Environmental Study
September 12, 2006 - Aerodynamic package makes Volkswagen Passat an eye-catcher June 20, 2006 - Volkswagen receives environmental award from Federation of German
Industries March 2, 2006 - Auto1 Award- The Passat is Europes Number One January 20, 2006 - Passat Awarded Renowned What Car Trophy as Best Family Car
January 19, 2006 - The Passat is Germany's Favourite Car 2006-ADAC readers award
Volkswagen the 'Gelber Engel' prize -
2005 and 2004

May 23, 2005 - The Passat - receives five star rating - top result in the Euro NCAP crash test
April 8, 2005 - The Golf - more than 25 awards worldwide
March 23, 2005 - Volkswagen Phaeton moving ahead
February 16, 2005 - The new Passat launched with four different engines
January 30, 2004 - The Volkswagen Touareg an outstanding off-road vehicle - International
experts award prizes to the Volkswagen SUV -
29
AIMS AND OBJECTIVES OF THE COMPANY
Volkswagen intends to deploy intelligent innovations and technologies to become a world

leader in customer satisfaction and quality. We see high customer satisfaction as one of
the key requirements for the Company's long-term success.
The goal is to generate unit sales of more than 10 million vehicles a year; in particular,
Volkswagen intends to capture an above-average share of growth in the major growth
markets.
Volkswagen's aim is a long-term return on sales before tax of at least 8% so as to ensure

that the Group's solid financial position and ability to act are guaranteed even in difficult
market periods.
Volkswagen aims to be the most attractive employer in the automotive industry by 2018.
To build the best vehicles, we need the best team in the sector; highly qualified, fit and,
above all, motivated.
We are focusing in particular on the environmentally friendly orientation and profitability
of our vehicle projects so that the Volkswagen Group has the right products for success
even in more challenging economic conditions. At the same time, this will mean that
capital expenditure remains at manageable levels. Our attractive and environmentally
friendly range of vehicles, which we are selectively expanding, and the strong position
enjoyed by our individual brands in the markets worldwide, are key factors allowing us to
leverage the Groups strengths and to systematically increase our competitive advantages.
Our activities are primarily oriented on setting new ecological standards in the areas of
vehicles, drivetrains and lightweight construction. Our modular toolkit system, which we
are enhancing on an ongoing basis, allows us to constantly improve production efficiency
and
flexibility,
thus
increasing
the
Group's
profitability.
In addition, we want to continually expand the Volkswagen Group's customer base by

30
further increasing satisfaction among our existing customers and acquiring new, satisfied
customers around the world, particularly in the growth markets. In order to ensure this,
we are increasingly adapting our products to meet local requirements and focusing on the
specific features of individual markets. We shall continue the measures we are currently
taking to improve our productivity and quality regardless of the economic situation and
without any time limit. These include our regional development teams and our
cooperation with local suppliers, among other things. Other key elements include
standardizing processes in both the direct and indirect areas of the Group and reducing
production throughput times. Together with disciplined cost and investment management,
these measures play a major role in ensuring that we reach our long-term profitability
targets
and
safeguard
solid
long-term
liquidity.
We will only successfully meet the challenges of today and tomorrow if all employees
from vocational trainees through to senior executives consistently deliver excellence so
as to ensure the quality of the Volkswagen Group's innovations and products for the long
term and at the highest level. Outstanding performance, the success that comes from it
and participation in its rewards are at the heart of our human resources strategy.
1. Maximise their profits
2. Environmental aims
3. improving corporate image
31
32
Volkswagen in India
Recently Volkswagen paved the way for sustainable market activities in India. With the
investment agreement signed at the end of 2006 the brand sets a new course that unites two
success stories Volkswagen and India.
Volkswagen AG is to build a new production plant in Pune in the Indian state of Maharashtra.
With investment totaling some 410 million euros, a full production plant with a press shop, body
shop, paint shop and assembly lines is to be built on the 230 hectare site in the Chakan industrial
park near Pune. The German brand and Europes largest automotive manufacturer will be
entering the Indian market to meet the rapidly growing demand for mobility. Volkswagen will be
developing a vehicle in the foreseeable future specifically tailored to the needs of the Indian
market offering all the features of a genuine Volkswagen.
For the first step the Volkswagen brand will bring locally produced vehicles to the Indian market
up from the third quarter of 2007. To accompany the growing supply of Volkswagen Passenger
Cars, the Group has established a separate Indian sales company in 2007, initially for
Volkswagen as well as for Audi. Volkswagen Group Sales India Private Limited registered in
Mumbai
will
distribute
locally
manufactured
and
imported
vehicles
in
India.
Thus, Volkswagen can bring one of it's upper-premium sedan as the first locally produced vehicle
to the Indian market. In April 2006, Volkswagen produced the 14 millionth of its bestseller. The
Passat has become the very image of automotive progress, representing what Made in
Germany means. This long-term success is confirmed by numerous accolades from experts,
journalists and customers who have put the car through its paces in recent months. This image is
characterized by vehicle size, drive technologies, safety features such as airbags, ABS and ESP
in addition to quality details including galvanized bodies. Imported vehicles such as the premium
Sports Utility Vehicle Touareg will complement the range.
33
Various positions of Volkswagen Dealers in India
34
Current Existing Dealers in India
Ludhiana - Prestige Motors, Lally Motors India Private Limited\
Ahmedabad - Volkswagen Ahmedabad

Automark Motors Pvt.Ltd
Bangalore - Elite Motors Pvt.Ltd
Bangalore - Volkswagen Palace Cross
Chandigarh - Genuss Motors, Swami Automotives Pvt.Ltd.
Cochin - Volkswagen Cochin

EVM Motors & Vehicles India Pvt Ltd
Chennai - Volkswagen Chennai

ABRA Motors Private Limited
Coimbatore - Volkswagen Coimbatore

Ramani Cars Private Limited
Delhi - DD Autoworld Private Limited
Delhi - Kashyap Vehicle Works Private Limited
Delhi West - Volkswagen Delhi West

Worldclass Automobiles Pvt. Ltd.
Goa - Volkswagen Goa

Caculo Automotive Pvt. Ltd
35
Hyderabad - Orion Motors
Jaipur - Volkswagen Jaipur

Tanya Cars Pvt Ltd
Kolkata - Volkswagen Kolkata

OSL Exclusive Pvt Ltd
Mumbai - Volkswagen Downtown Mumbai
Pune - Volkswagen Pune

Vidyut Motors Pvt. Ltd
Surat - Volkswagen Surat

Navjivan Auto Square Pvt. Ltd
36
Products Profile for models available in India:

Passat
Technical specifications
Vehicle Model
Passat TDI 2.0 Exclusive
Engine Type
Displacement(liters/cc)
Max. Torque(NM at RPM)
Transmission
Bore/Stroke(mm)
Max. Power output(kw(PS) @ RPM
Emission Category
4-cylinder diesel engine

2.01/1968cc
320/1750-2500
6 speed DSG-direct shift gearbox
81/95.5
103(140) at 4000
Euro 4
Price
2518279
Jetta
37
Vehicle Model
Jetta 1.6 L (Petrol)
Engine Type
Transmission

1.6/1595cc
148/3800
5 speed manual gearbox

Price
75(102) at 5600
1,335,851
Jetta 1.6 L TDI (Diesel)

Jetta
1.9
L
TDI
(Trendline)/Comfortline
1.9/1896cc
250/1900
5 speed manual /6 speed automatic
DSG gearbox
77(105) at 4000
1,463,613/ 1,713,646
Touareg
38
Vehicle Model
Engine Type
Bore/Stoke mm
Compression Ratio
Fuel Type
Touareg 3.0 V6 TDI

6-cylinder Vturbo diesel
3.0/2967
550/2250-2500
83.0/91.4
17.0:1
176@4000-4400
Diesel 51CZ
Touareg 5.0 V10 TDI

10-cylinder V bi-turbo diesel
5.0/4921
750/2000
81.0/95.5
18.5:1
230@3750
Diesel 51CZ
Introducing POLO in India
Volkswagen India will launch its first small car, the Polo, in the domestic market in the early part of 2010. The car
will be priced and positioned in line with the A2 compact car category, which includes models such as Maruti's
Swift & Ritz, and be built on a new platform. The Polo will be made at the company's new manufacturing facility at
Chakan, Pune, with locally sourced auto components being about 50 per cent.
39
"The all-new platform for the Polo has been designed keeping Indian road conditions in mind. The Polo will be
benchmarked against the market leader in this segment, which is Maruti Suzuki's Swift. The Polo would be
available in the petrol and the diesel engine variant.
Company hope to sell around 30,000 units in 2010. Then, by 2014, and hope to cross the 100,000 mark, by which
time the car market in India would have crossed two million units
Till date, VW India has invested Rs 3,800 crore (Rs 38 billion) in setting up its operations in India. The facility at
Chakan has an annual capacity of up to 110,000 cars on a single shift.
Competitors of existing Volkswagen model in India

Competitors of JETTA (14-18lakhs)
Honda Civic
Hyundai Sonata(Emberra)
Skoda Octavia
Skoda Laura
Toyota Corrola Altis
Fiat 500
Competitors of Passat(24lakhs)
Toyota Camry
Honda Accord
BMW 3series
Skoda Superb
40
41
WORKING CAPITAL MANAGEMENT

WHAT IS WORKING CAPITAL???
Working capital is the cash needed to pay for the day to day operation of the business. Working
capital is a financial metric which represents operating liquidity available to a business,
organization or other entity, including governmental entity. Along with fixed assets such as plant
and equipment, working capital is considered a part of operating capital. Net working capital is
calculated as current assets minus current liabilities.. It is a derivation of working capital, that is
commonly used in valuation techniques such as DCFs (Discounted cash flows). If current assets
are less than current liabilities, an entity has a working capital deficiency, also called a working
capital deficit.
A company can be endowed with assets and profitability but short of liquidity if its
assets cannot readily be converted into cash. Positive working capital is required to ensure that a
firm is able to continue its operations and that it has sufficient funds to satisfy both
maturing short-term debt and upcoming operational expenses. The management of working
capital involves managing inventories, accounts receivable and payable, and cash.
Working capital management is a very important component of corporate finance because
it directly affects the liquidity and profitability of the company. It involves the decision of the
amount and composition of current assets and the financing of these assets. Efficient working
capital management involves planning and controlling current assets and current liabilities in a
manner that eliminates the risk of inability to meet due short term obligations on the one hand
and avoid excessive investment in these assets on the other hand.
Working capital means that part of the total assets of the business that change from
one form to another form in the ordinary course of business operations. Also known as
revolving or circulating capital or short-term financial management it is nothing but the
difference between current assets and current liabilities. The word working capital is made of
two words- Working & Capital. The word working means day to day operation of the business,
whereas the word capital means monetary value of all assets of the business. Working capital is
42
of major importance to internal and external analysis because of its close relationship with the
current day-today operations of a business.
Every business needs funds for two purposes.
Long term funds are required to create production facilities through purchase of fixed
assets such as plants, machineries, lands, building, etc.
Short term funds are required for the purchase of raw materials, payment of wages, and
other day-to-day expenses.
Working capital management deals with the management of these short term funds.
The constituents of current assets & current liabilities is as follows-
CURRENT ASSETS
CURRENT LIABILITIES
1. INVENTORY
a) RAW MATERIAL
b)WORK-IN-PROGRESS
c) FINISHED GOODS
d) OTHERS
2. TRADE CREDITORS
3. LOANS AND ADVANCES
1. SUNDRY CREDITORS
2. TRADE ADVANCES
3. BORROWINGS (short term)
a) COMMERCIAL BANKS
b) OTHERS
4. PROVISIONS
4.CASH AND BANK BALANCE
WORKING CAPITAL COMPRISES OF THE FOLLOWING:1. Cash and cash equivalents: - This most liquid form of working capital requires constant
supervision. A good cash budgeting and forecasting system provides answers to key
questions such as:
Is the cash level adequate to meet current expenses as they come due?
What is the timing relationship between cash inflow and outflow?
When would cash need occur?
43
When and how much bank borrowing will be needed to meet any cash shortfalls?
When will repayment be expected and will the cash flow cover it?
2. Accounts receivables: - Many businesses extend credit to their customers.
If you do, is the amount of accounts receivable reasonable relative to sales?
How rapidly are receivables being collected?
Which customers are slow to pay and what should be done about them?
3.
Inventory: - Inventory is often as much as 50 percent of a firm's current assets, so

naturally it requires continual scrutiny.
Is the inventory level reasonable compared with sales and the nature of your business?
What's the rate of inventory turnover compared with other companies in your type of
business?
4. Accounts payable: - Financing by suppliers is common in small business; it is one of the

major sources of funds for entrepreneurs.
Is the amount of money owed suppliers reasonable relative to what you purchase?
What is your firm's payment policy doing to enhance or detract from your credit rating?
5. Accrued expenses and taxes payable: - These are obligations of your company at any
given time and represent a future outflow of cash.
44
THERE ARE TWO DIFFERENT CONCEPTS OF WORKING CAPITAL:1. Balance sheet or Traditional concept - It shows the position of the firm at certain point of
time. It is calculated in the basis of balance sheet prepared at a specific date. In this method there
are two types of working capital:a) Gross working capital - It refers to the firms investment in current assets. The sum of the
current assets is the working capital of the business. The sum of the current assets is a
quantitative aspect of working capital. Which emphasizes more on quantity than its quality, but it
fails to reveal the true financial position of the firm because every increase in current liabilities
will decrease the gross working capital.
b) Net working capital - It is the difference between current assets and current liabilities or the
excess of total current assets over total current liabilities. It is also can defined as that part of a
firms current assets which is financed with long term funds. It may be either positive or
negative. When the current assets exceed the current liability, the working capital is positive and
vice versa.
2. Operating cycle concept - The duration or time required to complete the sequence of events
right from purchase of raw material for cash to the realization of sales in cash is called the
operating cycle or working capital cycle
45
Debtors and bills

recievable
Cash
Sales
Operating cycle
Raw material
Finished goods
Work-in-progress
46
The investment in working capital is influenced by four key events in the production & sales
cycle of the firm:
Purchase of raw materials.
Payment of raw materials.
Sale of finished goods.
Collection of cash for sales.
The firm begins with the purchase of raw materials which are paid after a delay which
represents the accounts payable period. The raw materials are then converted into finished
goods which are then sold. The time lag between the purchase of raw materials and the sale of
finished goods is called the inventory period. The time lag between the date of sales & the
date of collection of receivables is the accounts receivable period. The time lag between
purchase of raw materials & the collection of cash for sales is referred to as operating cycle.
47
The time lag between payment for raw material purchases & the collection of cash for sales is
referred to as cash cycle.
IMPORTANCE OF WORKING CAPITAL

The advantages of working capital or adequate working capital may be enumerated as below: 1. Cash Discount:
If a proper cash balance is maintained, the business can avail the advantage of cash
discount by paying cash for the purchase of raw materials and merchandise. It will result
in reducing the cost of production.
2. It creates a Feeling of Security and Confidence:
The proprietor or officials or management of a concern are quite carefree, if they have
proper working capital arrangements because they need not worry for the payment of
business expenditure or creditors. Adequate working capital creates a sense of security,
confidence and loyalty, not only throughout the business itself, but also among its
customers, creditors and business associates.
3. Must for Maintaining Solvency and Continuing Production:

In order to maintain the solvency of the business, it is but essential that the sufficient
amount t of fund is available to make all the payments in time as and when they are due.
Without ample working capital, production will suffer, particularly in the era of cut throat
competition, and a business can never flourish in the absence of adequate working
capital.
4. Sound Goodwill and Debt Capacity:
It is common experience of all prudent businessmen that promptness of payment in
business creates goodwill and increases the debt of the capacity of the business. A firm
can raise funds from the market, purchase goods on credit and borrow short-term funds
from bank, etc. If the investor and borrowers are confident that they will get their due
interest and payment of principal in time.
48
5. Easy Loans from the Banks:

An adequate working capital i.e. excess of current assets over current liabilities helps the
company to borrow unsecured loans from the bank because the excess provides a good
security to the unsecured loans, Banks favour in granting seasonal loans, if business has a
good credit standing and trade reputation.
6.
Distribution of Dividend:
If company is short of working capital, it cannot distribute the good dividend to its
shareholders in spite of sufficient profits. Profits are to be retained in the business to
make up the deficiency of working capital. On the other contrary, if working capital is
sufficient, ample dividend can be declared and distributed. It increases the market value
of shares.
7. Exploitation of Good Opportunity:

In case of adequacy of capital in a concern, good opportunities can be exploited e.g.,
company may make off-season purchases resulting in substantial savings or it can fetch
big supply orders resulting in good profits.
8. Meeting Unseen Contingency:
Depression shoots the demand of working capital because sock piling of finished goods
become necessary. Certain other unseen contingencies e.g., financial crisis due to heavy
losses, business oscillations, etc. can easily be overcome, if company maintains adequate
working capital.
9. High Morale:
The provision of adequate working capital improves the morale of the executive because
they have an environment of certainty, security and confidence, which is a great
psychological, factor in improving the overall efficiency of the business and of the person
who is at the hell of fairs in the company.
10. Increased Production Efficiency:
A continuous supply of raw material, research programme, innovations and technical
development and expansion programmes can successfully be carried out if adequate
working capital is maintained in the business. It will increase the production efficiency,
49
which will, in turn increases the efficiency and morale of the employees and lower costs
and create image among the community.
DISADVANTAGES OF EXCESSIVE WORKING CAPITAL

Every business concern should have adequate working capital to run itsbusiness operations. It
should have neither redundant or excessive working capital nor inadequate nor shortage
of working capital. Both excessive as well as short working capital positions are bad for any
business.
1. Excessive working capital means idle funds which earn no profits for the business and hence
the business cannot earn a proper rate of return on its investments.
2. When there is redundant working capital, it may lead to unnecessary purchasing and
accumulation of inventories causing more chances of theft waste and losses.
3. Excessive working capital implies excessive debtors and defective credit Policy which may
cause higher incidence of bad debts.
4. It may result into overall inefficiency in the organization.
5. When there is an excessive working capital relation with the banks and other financial
institutions may not be maintained.
6. Due to low rate of return on investments the value of shares may also fall
DISADVANTAGES OF INADEQUATE WORKING CAPITAL

1) A concern, which has inadequate working capital, cannot pay its short-term liabilities
in time. Thus it will loose its reputation and shall not be able to get good credit facilities.
2) The firm cannot pay day-to-day expenses of its operations and it creates inefficiencies,
increases costs and reduces the profits of the business.
3) It becomes impossible to utilize efficiently the fixed assets due to non-availability of liquid
funds.
4) The rate of return on investments also falls with the shortage of working capital.
50
NET WORKING CAPITAL

CURRENT ASSETS
STORES AND SPARE
PARTS
STOCK-IN-TRADE
SUNDRY DEBTORS
INTREST ACCRUED
AND INVESTMENTS
CASH AND BANK
LOANS AND
ADVANCES
TOTAL(A)
2011-2012
505.44
2012-2013 2013-2014 2014-2015 2015-2016

557.67
612.19
623.76
716.18
1827.54
631.63
0.20
2047.31
543.48
0.20
2868.28
635.98
0.00
2453.99
434.83
0.29
3237.58
428.03
0.00
455.41
3055.73
465.04
2452.78
1590.60
4330.43
3234.14
3628.28
4141.54
9553.19
6475.95
6066.28
10037.48
10375.29
18076.52
CURRENT
LIABILITIES
SUNDRY
CREDITORS
SUBSIDIARY
COMPANIES
INTEREST ACCRUED
BUT NOT DUE
ADVANCE
RECEIVED FROM
THE CUSTOMER
UNCLAIMED
MATURED
DEPOSITS(DUE)
INTEREST ACCRUED
ON UNPAID
DIVIDENDS AND
UNCLAIMED
MATURED
DIVIDENDS(DUE)
UNPAID DIVIDENDS
APPLICATION
MONEY PENDING
REFUND
UNPAID MATURED
2011-2012
2012-2013 2013-2014 2014-2015 2015-2016
3145.99
3243.42
3842.78
4086.65
4721.07
102.61
115.74
1358.12
1514.30
1711.07
47.11
231.05
506.68
676.66
679.31
198.28
226.03
297.37
334.99
293.84
0.00
0.02
0.01
0.00
0.00
0.03
0.08
0.07
0.00
0.00
23.37
0.01
29.33
5.65
33.08
0.24
39.44
0.14
41.26
0.61
0.00
0.00
0.00
0.73
0.54
51
DIVIDENDS
UNPAID MATURED
DEPOSITS
UNPAID MATURED
DEBENTURES
INTEREST ACCRUED
ON UNPAID
DIVIDENDS AND
MATURED
DIVIDENDS
PROVISION FOR
RETIRING
GRATUITIES
PROVISION FOR
EMPLOYEE
BENEFITS
PROVISION FOR
TAXATION
PROVISION FOR
FRINGE BENEFITS
PROPOSED
DIVIDEND
TOTAL(B)
NET WORKING
CAPITAL
2.59
1.73
1.03
0.00
0.00
1.76
1.79
0.14
0.00
0.00
1.45
0.42
0.34
0.18
0.13
49.31
0.00
0.00
0.00
0.00
470.19
848.54
1143.08
1127.50
1601.75
448.68
854.74
493.59
507.13
791.29
18.37
19.12
19.12
2.12
3.88
943.91
1278.40
1278.40
709.77
1151.06
5453.66
6768.78
8974.05
8999.61
10995.81
1022.29
(702.5)
1063.43
1375.68
7080.71
52
PERCENTAGE CHANGE IN NET WORKING CAPITAL

CURRENT ASSETS
STORES AND
SPARE PARTS
STOCK-IN-TRADE
SUNDRY DEBTORS
CASH AND BANK
LOANS AND
ADVANCES
TOTAL(A)
2011-2012
14.18
2012-2013 2013-2014 2014-2015 2015-2016

10.33
9.78
1.89
14.81
5.51
17.10
57.91
147.46
12.03
-13.96
2.11
-19.73
40.10
17.02
242.04
76.55
-14.44
-31.63
103.33
-16.21
31.93
-1.56
28.06
163.30
242.16
-9.22
385.49
42.98
236.54
CURRENT
LIABILITIES
SUNDRY
CREDITORS
SUBSIDIARY
COMPANIES
INTEREST
ACCRUED BUT NOT
DUE
ADVANCE
RECEIVED FROM
THE CUSTOMER
PROVISION FOR
RETIRING
GRATUITIES
PROVISION FOR
EMPLOYEE
BENEFITS
PROVISION FOR
TAXATION
PROVISION FOR
FRINGE BENEFITS
PROPOSED
DIVIDEND
TOTAL(B)
2011-2012
2012-2013 2013-2014 2014-2015 2015-2016
24.15
3.10
18.48
6.35
15.52
64.52
12.80
1073.42
11.50
12.99
93.95
390.45
119.29
33.55
0.39
7.14
14.00
31.56
12.65
-12.28
5987.65
0.00
0.00
0.00
0.00
0.00
63.34
34.71
0.014
42.06
79.44
90.50
-42.25
2.74
56.03
675.11
4.08
0.00
-88.91
83.01
31.19
26.19
7.33
-44.48
62.17
6959.78
638.04
1232.01
-50.61
264.96
PERCENTAGE
-6717.62
-647.26
-846.52
93.59
-28.42
53
CHANGE OF NET
WORKING
CAPITAL
(A-B)
FINANCIAL RATIOS
1. WORKING CAPITAL TURNOVER RATIO
It is a ratio that reflects the amount of working capital needed to maintain a given
level of sales. A high ratio indicates the firm is in a good liquidity position and
vice-versa.
FORMULA =
PARTICULARS
NET SALES
NET WORKING
CAPITAL
WORKING
CAPITAL
TUNRNOVER
RATIO
NET SALES
NET WORKING CAPITAL
2011-2012
17551.09
1022.29
2012-2013 2013-2014 2014-2015 2015-2016

19693.28
24315.77
25021.98
29396.35
(702.5)
1063.43
1375.68
7080.71
17.17
-28.03
22.87
18.19
4.15
WORKING CAPITAL TUNRNOVER RATIO

30
20
17.17
22.87
18.19
10
4.15
0
20
10
20
10
-2
01
20
1
11
-2
01
20
2
12
-2
01
20
3
13
-2
01
4
-10
WORKING
CAPITAL
TUNRNOVER
RATIO
20
09
-
-20
-30
-28.03
-40
INTERPRETATION:
The net working capital of VOLKSWAGENLtd. has been fluctuating over the years. A sharp
decrease in the working capital in the year 2011-2012, where the working capital was negative
was mainly because of a decrease in current assets.As compared to the year 2012-2013 where the
working capital ratio was 18.19, the ratio this year has fallen down to 4.15. The reason for
decrease can be accredited to the increase in the current assets such as inventory, cash & bank
balances and loans and advances that has increased tremendously this year. There has been an
54
increase in the sales and the production capacity this year. The raw materials consumption has
also increased by 13.64%.
2. CURRENT RATIO
The current ratio is used to evaluate a companys overall short term liquidity
position. It tells us whether a company is in a position to meet its obligations.
FORMULA = CURRENT ASSETS
CURRENT LIABILITIES
PARTICULARS
CURRENT
ASSESTS
CURRENT
LIABILITIES
CURRENT RATIO
2011-2012
6475.95
2012-2013
6066.28
2013-2014
10037.48
2014-2015
10375.29
2015-2016
18076.52
5453.66
6768.78
8974.05
8999.61
10995.81
1.19
0.90
1.12
1.15
1.64
14
5
12
10
8
6
2.4
4.4
3
2.8
Series 3
Series 2
Series 1
1.8
4
2
0
Category 1
Category 2
Category 3
Category 4
INTERPRETATION:
The ideal current ratio is considered to be 2:1. The current ratio has been increasing steadily over
the years. As compared to the previous year in 2013-2014 the ratio has increased to 1.64 in the
year 2014-2015. The reason for increase might be continuous investments in the current assets
over the years.
55
3. QUICK RATIO
Quick ratio / Liquid ratio is an indicator of a companys short term solvency or
liquidity position. It is the relationship between liquid assets and liabilities. An asset is said to be
liquid if it can be converted into cash within a short period without loss of value.
FORMULA = CURRENT ASSETS INVENTORY
CURRENT LIABILITIES
PARTICULARS
CURRENT
ASSETS
INVENTORY
CURRENT
ASSETSINVENTORY
CURRENT
LIABILTY
QUICK RATIO
2011-2012
6475.95
2012-2013
6066.28
2013-2014
10037.48
2014-2015
10375.29
2015-2016
18076.52
1827.54
4648.41
2047.31
4018.97
2868.28
7169.2
2453.99
7921.3
3237.58
14838.94
5453.66
6768.78
8957.05
8999.61
10995.81
0.85
0.59
0.80
0.88
1.34
Chart Title
18
1.34
16
14
0.88
12
10
QUICK RATIO
0.8
8
6
0.59
4 0.85
2
0
INTERPRETATION:
The ideal standard in case of quick ratio is 1:1. And if it is more it is considered to be better. The
idea behind this is that for every rupee of current liabilities, there should be at least one rupee of
liquid asset.
56
Quick ratio is thus a rigorous test of liquidity and gives a better picture of short term financial
position of the firm. As shown in the graph above, we can see that after a steep fall in the quick
ratio from the year 2010-11 to 2012-2013 there has been a steady increase in the quick ratio and
for the year 2013-2014 the ratio is 1.34 which signifies that the liquidity position of the firm has
improved and this is because of increase in the cash that is lying with the firm.
4. DEBTORS TURNOVER RATIO

Debtors Turnover Ratio or Receivables Turnover Ratio indicates the
relationship between net sales and average debtors. It shows the rate at which cash is generated
by the turnover of debtors.
FORMULA = AVERAGE DEBTORS
NET SALES
AVERAGE DEBTORS= (OPENING DEBTORS + CLOSING DEBTORS) / 2
PARTICULARS 2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
AVERAGE
585.515
587.55
589.73
535.40
431.43
DEBTORS
NET SALES
17551.09
19693.28
24315.77
25021.98
29396.35
DEBTORS
29.98
33.52
41.23
46.73
68.13
TURNOVER
RATIO
DEBTORS TURNOVER RATIO

80
70
68.13
60
50
41.23
40
30 29.98
46.73
DEBTORS TURNOVER
RATIO
33.52
20
10
0
INTERPRETATION:
Debtors turnover ratio indicates the speed with which the amount is being collected from
the debtors. The higher the ratio the better it is, since it indicates the amount from the debtors is
being collected more quickly. The more quickly the debtors pay, the less risk from bad debts, and
so lower is the expenses of collection and increase in the liquidity of the firm. By comparing the
57
debtors turnover ratio of the current year with the previous year, it may be assessed whether the
sales policy of the management is efficient or not.
As shown in the graph above, there has been an increase in the ratio from
2009-2010 to 2011-2012from 29.98 to 68.13 which shows that the sales management of the firm
is quite efficient.
5. DEBT COLLECTION PERIOD

Days Sales Outstanding is a short term (operating) Activity ratio which tells us
about the debtors holding time. The more the holding period the more risky it becomes for the
company. A high debt collection period indicates that the company is taking time to collect cash
from its debtors. The cash is not being collected on time which is not a good sign for the
company, it is a red flag.
FORMULA = 365/ DEBTORS TURNOVER RATIO
2012-2013
2013-2014
2014-2015
2015-2016
DEBTORS
29.98
33.52
41.23
46.73
68.13
TURNOVER
RATIO
NO. OF DAYS
365
365
365
365
365
DEBT
12
11
9
8
5
COLLECTION
PERIOD
DEBT COLLECTION PERIOD

14
12 12
10
8
6
4
11
9
DEBT COLLECTION
PERIOD
8
5
2
0
INTERPRETATION:
Debt collection period means the average number of days that the debtors take to get converted
to cash. In other words, credit sales are locked up in debtors for the number of days.
As we can see here, the debt collection period has come down from 12 days to 5 days which
means that the debtors get converted to cash in 5 days. An increase in the ratio indicates
58
excessive blockage of funds with the debtors which increases the chances of bad debts. In this
case as we can see that there is a decrease in the average collection period which indicates
prompt payment by debtors which reduces the chances of bad debts.
Therefore, from the above data it can be concluded that the company is in a better position and
is improving as compared to its previous years.
6. STOCK TURNOVER RATIO

The Inventory Turnover Ratio measures the efficiency of the firms
inventory management. A higher ratio indicates that inventory does not remain in warehouses or
on the shelves but rather turns over rapidly from the time of acquisition to sales. A lower
inventory turnover ratio means accumulation of inventories, over investment in inventory or
unsalable goods.
FORMULA = COST OF GOODS SOLD
AVERAGE STOCK
AVERAGE STOCK= (OPENING STOCK+CLOSING STOCK)/2
2012-2013
2013-2014
2014-2015
2015-2016
COST OF
10174.97
11155.5
14928.65
15730.67
17471.83
GOODS SOLD
AVERAGE
1779.82
1937.43
2457.8
2661.14
2845.78
STOCK
STOCK
5.72
5.76
6.07
5.91
6.13
TURNOVER
RATIO
STOCK TURNOVER RATIO

6.2
6.13
6.1
6.07
6
5.91
5.9
5.8
5.7 5.72
STOCK TURNOVER
RATIO
5.76
5.6
5.5
59
INTERPRETATION:
This ratio indicates the relationship between the cost of goods sold during the year and average
stock kept during that year. The ratio indicates whether the stock has been efficiently used or not.
It shows the speed with which the stock is turned into sales during the year.
The graph above shows that after an increase in the ratio from the year 2009-2010 to 2012-2013
(5.76-6.07) there in the year 2013-2014(5.91) after which again a rise in the ratio in the year
2014-2015(6.13). A high ratio is indicative that the stock is selling quickly.
7. PAYABLES TURNOVER RATIO

Although accounts payable are liabilities rather than assets, their trend is significant as they
represent an important source of financing for operating activities. The creditors turnover ratio is
an important tool of analysis as a firm can reduce its requirement of current assets by relying on
suppliers credit. This shows the relationship between credit purchases and average accounts
payable. Higher ratio shows that accounts are to be settled rapidly whereas, low ratio reflects
liberal credit terms granted by suppliers.
FORMULA- NET CREDIT PURCHASE
AVERAGE CREDITORS
AVERAGE CREDITORS= (OPENING CREDITORS+CLOSING
CREDITORS)/2
2012-2013 2013-2014 2014-2015 2015-2016
NET CREDIT
2263.01
2353.80
6241.61
5215.42
6853.95
PURCHASE
AVERAGE
2840.01
3194.70
3543.10
3964.72
4383.86
CREDITORS
PAYABLES
0.79
0.73
1.76
1.31
1.56
TURNOVER
RATIO
60
PAYABLES TURNOVER RATIO

2
1.8
1.6
1.4
1.2
1
0.8 0.79
0.6
0.4
0.2
0
1.76
1.56
1.31
PAYABLES
TURNOVER RATIO
0.73
INTERPRETATION:
The ratio indicates the speed with which the amount is being paid to the creditors. A higher ratio
is better since it would indicate that the creditors are being paid more quickly and this increases
the credit worthiness of the firm.
Here, the graph above shows a steep fall in the ratio from the year 2008-2009(1.76) to 20092010(1.31) and then again a rise to the year 2011-2012(1.56). The reason for the fall can be
attributed to a decrease in the net credit purchases in the year 2009-2010.
1. WORKING CAPITAL RATIO

It is a ratio that reflects the amount of working capital needed to maintain a given
level of sales. A high ratio indicates the firm is in a good liquidity position and vice-versa.
FORMULA =
PARTICULARS
VOLKSWAGEN
MUL
HONDA
2011-2012
17.17
3.63
42.79
NET SALES
NET WORKING CAPITAL
2012-2013
-28.03
3.01
-10.49
2013-2014
22.87
2.48
-4.78
2014-2015
18.19
1.85
-8.82
2015-2016
4.15
2.06
187.34
61
200
187.34
150
100
TATA MOTORS
MUL
50
HONDA
42.79
17.17
-10.49
-28.03
22.87
18.19
-4.78
-8.82
4.15
-50
INTERPRETATION:
The working capital ratio of VOLKSWAGENhas been fluctuating over the years. The reason for
negative working capital for the year 2011-2012 can be attributed to the decrease in current
assets whereas a sharp decrease in working capital for the year 2014-2015 is because of the
increase in current assets such as cash and bank balances, loans and advances and also because
of an increase in the raw material consumption.
The working capital ratio of MUL Ltd. has been falling constantly from the year
2009-2010 to the year 2012-2013 after which there was an increase in the ratio.
The working capital of HONDA has shown a sharp decrease from the year 2009-2010 to 20112012 where the working capital ratio remained constantly negative for three consecutive years
and after that there was an increase in the ratio. The reason for the increase in the ratio is an
increase in the current assets, loans and advances.
2. CURRENT RATIO
The current ratio is used to evaluate a companys overall short term liquidity
position. It tells us whether a company is in a position to meet its obligations.
FORMULA = CURRENT ASSETS
CURRENT LIABILITIES
PARTICULARS
VOLKSWAGEN
MUL
HONDA
2011-2012
1.19
1.86
1.08
2012-2013
0.90
1.99
0.74
2013-2014
1.12
2.02
0.61
2014-2015
1.15
1.78
0.73
2015-2016
1.64
1.84
1.01
62
2.5
1.86
1.99
2.02
1.78
1.5
1.84
1.64
TATA MOTORS
1.19
1.08
1.12
0.9
0.74
0.5
0.61
1.15
MUL
1.01
HONDA
0.73
INTERPRETATION:
The current ratio of VOLKSWAGENhas been rising from the year 2007-2008and it has shown a
positive graph. The reason for the constantly rising graph since 2007-2008 has been investment
in the current assets, i.e. inventories, debtors, loans and advances and the liquid cash and bank
balances.
MUL has a fluctuating current ratio over the years with various rises and
falls over the time. The reason for the fall in the ratio from the year 2011-2012 to the year 20142015 was the decrease in the current assets.
Current ratio should therefore be maintained around its ideal standard
and for achieving this the companys should therefore maintain its current assets and current
liabilities in the right proportion.
RATIO ANALYSIS
WHAT IS RATIO ANALYSIS???
A tool used by individuals to conduct a quantitative analysis of information in a company's
financial statements. Ratios are calculated from current year numbers and are then compared to
previous years, other companies, the industry, or even the economy to judge the performance of
the company. Ratio analysis is predominately used by proponents of fundamental analysis.
Single most important technique of financial analysis in which quantities are converted into
ratios for meaningful comparisons, with past ratios and ratios of other firms in the same or
63
different industries. Ratio analysis determines trends and exposes strengths or weaknesses of a
firm.
Ratios can be found out by dividing one number by another number. Ratios show how one
number is related to another. It may be expressed in the form of co-efficient, percentage,
proportion, or rate. For example the current assets and current liabilities of a business on a
particular date are $200,000 and $100,000 respectively. The ratio of current assets and current
liabilities could be expressed as 2 (i.e. 200,000 / 100,000) or 200 percent or it can be expressed
as 2:1 i.e., the current assets are two times the current liabilities. Ratio sometimes is expressed in
the form of rate. For instance, the ratio between two numerical facts, usually over a period of
time, e.g. stock turnover is three times a year.
Classification of Accounting Ratios:

Ratios may be classified in a number of ways to suit any particular purpose. Different kinds of
ratios are selected for different types of situations. Mostly, the purpose for which the ratios are
used and the kind of data available determine the nature of analysis. The various
accounting ratios can be classified as follows:
Classification of Accounting Ratios / Financial Ratios

(A)
Traditional Classification or
(B)
Functional Classification or
(C)
Significance Ratios or Ratios
64
Statement Ratios
Profit and loss account

ratios or
revenue/income
statement ratios
Balance sheet ratios or
position statement
ratios
Classification According to
Tests
According to Importance
Profitability ratios
Primary ratios
Liquidity ratios
Secondary ratios
Activity ratios
Leverage ratios or long

term solvency ratios
Composite/mixed ratios
or inter statement ratios
Advantages of Ratios Analysis:

Ratio analysis is an important and age-old technique of financial analysis. The following are
some of the advantages / Benefits of ratio analysis:
1. Simplifies financial statements: It simplifies the comprehension of financial statements.
Ratios tell the whole story of changes in the financial condition of the business
2. Facilitates inter-firm comparison: It provides data for inter-firm comparison. Ratios
highlight the factors associated with successful and unsuccessful firm. They also reveal
strong firms and weak firms, overvalued and undervalued firms.
3. Helps in planning: It helps in planning and forecasting. Ratios can assist management, in
its basic functions of forecasting. Planning, co-ordination, control and communications.
4. Makes inter-firm comparison possible: Ratios analysis also makes possible comparison of
the performance of different divisions of the firm. The ratios are helpful in deciding about
their efficiency or otherwise in the past and likely performance in the future.
5. Help in investment decisions: It helps in investment decisions in the case of investors and
lending decisions in the case of bankers etc.
Limitations of Ratios Analysis:
The ratios analysis is one of the most powerful tools of financial management. Though ratios are
simple to calculate and easy to understand, they suffer from serious limitations.
65
1.
Ratios are based only on the information which has been recorded in the financial
statements. Financial statements themselves are subject to several limitations. Thus ratios
derived, there from, are also subject to those limitations. For example, non-financial
changes though important for the business are not relevant by the financial
statements. Financial statements are affected to a very great extent
by accounting conventions and concepts. Personal judgment plays a great part in
determining the figures for financial statements.
2. Comparative study required: Ratios are useful in judging the efficiency of the business
only when they are compared with past results of the business. However, such a
comparison only provide glimpse of the past performance and forecasts for future may
not prove correct since several other factors like market conditions, management policies,
etc. may affect the future operations.
3. Ratios alone are not adequate: Ratios are only indicators, they cannot be taken as final
regarding good or bad financial position of the business. Other things have also to be
seen.
4. Problems of price level changes: A change in price level can affect the validity of ratios
calculated for different time periods. In such a case the ratio analysis may not clearly
indicate the trend in solvency and profitability of the company. The financial statements,
therefore, be adjusted keeping in view the price level changes if a meaningful comparison
is to be made through accounting ratios.
5. Lack of adequate standard: No fixed standard can be laid down for ideal ratios. There are
no well accepted standards or rule of thumb for all ratios which can be accepted as norm.
It renders interpretation of the ratios difficult.
6. Limited use of single ratios: A single ratio, usually, does not convey much of a sense. To
make a better interpretation, a number of ratios have to be calculated which is likely to
confuse the analyst than help him in making any good decision.
7. Personal bias: Ratios are only means of financial analysis and not an end in itself. Ratios
have to interpreted and different people may interpret the same ratio in different way.
8. Incomparable: Not only industries differ in their nature, but also the firms of the similar
business widely differ in their size and accounting procedures etc. It makes comparison
of ratios difficult and misleading.
66
FINANCIAL RATIOS
1. NET DEBT TO EQUITY
Debt is the borrowed funds and Equity is the owned funds of an organization. This ratio is
calculated to measure the extent to which debt financing has been used in a business. A ratio
of 1:1 is considered to be satisfactory. This ratio is also known as External-Internal ratio as it
indicates the relationship between the external equities or the outsiders funds and the
internal equities or the shareholders funds.
FORMULA =
NET DEBT
SHAREHOLDERS FUND
NET DEBT= SECURED LOANS+ UNSECURED LOANS- CASH AND BANK

BALANCE- CURRENT INVESTMENTS
EQUITY= SHAREHOLDERS FUND- MISCELLANOUS EXPENSES
FINANCIAL YEAR 2011-2012
COMPANY
NET DEBT
VOLKSWAGEN
(1728.55)
SHAREHOLDERS
FUND
15108.68
MUL
HONDA
(5454.57)
3642.29
17184
5788.92

COMPANY
NET DEBT
VOLKSWAGEN
MUL
HONDA
16519.85
(10737.77)
6283.78

COMPANY
NET DEBT
VOLKSWAGEN
MUL
HONDA
22086.25
(10714.20)
9602.56

COMPANY
NET DEBT
VOLKSWAGEN
20285.83
DEBT- EQUITY
RATIO
(0.12)
(0.32)
0.63
SHAREHOLDERS
FUND
27455.84
23004.09
7677.25
DEBT- EQUITY
RATIO
0.61
(0.47)
0.82
SHAREHOLDERS
FUND
30281.33
0.79841
7959.25
DEBT-EQUITY
RATIO
0.73
(0.38)
1.21
SHAREHOLDERS
FUND
36961.80
DEBT- EQUITY
RATIO
0.55
67
MUL
HONDA
(5925.12)
9529.64

COMPANY
NET DEBT
VOLKSWAGEN
MUL
HONDA
21159.81
2638.56
5965.65
1.4
33316.70
9706.34
(0.18)
0.98
SHAREHOLDERS
FUND
46944.63
37069.47
17225.27
DEBT-EQUITY
RATIO
0.45
0.07
0.35
1.21
1.2
0.98
0.82
0.8
0.63
0.6
0.4
0.61
TATA STEEL
0.73
0.55
SAIL
0.2
0.45
0.35
JSW
0.07
0
-0.2
-0.4
-0.12
-0.18
-0.32
-0.6
-0.47
-0.38
INTERPRETATION:
The debt-equity ratio is calculated to assess the firms ability to meet its long term liabilities.
Generally, a ratio of 2:1 is considered to be safe for the long term lenders and a ratio below 2:1
provides sufficient protection to the long term lenders and thus they are more secure and a higher
ratio thus would indicate a more risky financial position of the firm.
The debt- equity ratio for all the year and of all the three companies has been less
than 2:1 and this is indicative of a sound financial position of the firm.
2. SHAREHOLDERS EQUITY RATIO
This ratio helps to determine how much shareholders would receive in the event of a companywide liquidation. It represents the amount of assets on which shareholders have a residual claim.
The higher the ratio the more shareholders may receive and vice-versa.
FORMULA= SHAREHOLDRES EQUITY
TOTAL ASSETS
68

COMPANY
SHAREHOLDERS
EQUITY
VOLKSWAGEN
580.67
MUL
4130.40
HONDA
525.80
TOTAL
ASSETS(TANGIBLE)
25597.50
22906.33
10779.74
SHAREHOLDERS
EQUITY RATIO
0.023
0.18
0.049

COMPANY
SHAREHOLDERS
EQUITY
VOLKSWAGEN
6203.30
MUL
4130.40
HONDA
537.01
TOTAL
ASSETS(TANGIBLE)
47075.52
27677.41
16475.62
SHAREHOLDERS
EQUITY RATIO
0.132
0.15
0.032

COMPANY
SHAREHOLDERS
EQUITY
VOLKSWAGEN
6203.45
MUL
4130.40
HONDA
537.01
TOTAL
ASSETS(TANGIBLE)
58741.77
36855.04
20653.04
SHAREHOLDERS
EQUITY RATIO
0.11
0.11
0.03

COMAPNY
SHAREHOLDERS
EQUITY
VOLKSWAGEN
887.41
MUL
4130.40
HONDA
527.11
TOTAL
ASSETS(TANGIBLE)
64232.78
51242.87
23256.39
SHAREHOLDERS
EQUITY RATIO
0.014
0.08
0.023

COMPANY
SHAREHOLDERS
EQUITY
VOLKSWAGEN
959.41
MUL
4130.40
HONDA
563.18
TOTAL
ASSETS(TANGIBLE)
78555.91
58726.03
31493.65
SHAREHOLDERS
EQUITY RATIO
0.012
0.07
0.018
69
0.2
0.18
0.18
0.16
0.15
0.14
0.13
0.12
0.11
0.11
TATA STEEL
SAIL
0.1
JSW
0.08
0.08
0.07
0.06
0.05
0.04
0.03
0.02
0.02
0.03
0.02
0.01
0.01
0.02
INTERPRETATION:
A ratio used to help determine how much shareholders would receive in the event of a companywide liquidation. The ratio is calculated by dividing total shareholders' equity by total assets of
the firm, and it represents the amount of assets on which shareholders have a residual claim.
If we consider as in the case of VOLKSWAGEN, the ratio for the year
2009-2010 is 0.023 so this means that the shareholders would have a claim of 2.3% on the assets
in the event of the wind up of the company.
The lower the ratio, the better it is for the company since the company
would be then able to pay off to its shareholders in case of liquidation without any burden.
VOLKSWAGENhas made efforts to lower the ratio and finally succeeded to
do so. If we consider the ratios for the year 2014-2015, we can see that TATA ATEEL is in a
better position than the other two companies.
3. DEBT TO NET WORTH RATIO - The net debt to net worth ratio has significance to
lenders, analysts and business managers. If affects the ability of a company to borrow money
and to finance its growth. A business owner needs to know the optimal debt to net worth ratio
for the benefit of its company. The net debt should never be higher than the net worth; it is a
bad sign for the company.
FORMULA = LONG TERM DEBT
NET WORTH
LONG TERM DEBT = SECURED LOANS + UNSECURED LOANS CASH &
BANK CURRENT INVESTMENTS
70
NET WORTH= EQUITY SHARE CAPITAL + PREFERENCE SHARE CAPITAL+

RESERVES & SURPLUS MISCELLANOUS EXPENSES TO THE EXTENT NOT
WRITTEN OFF.
COMPANY
LONG TERM
DEBT
VOLKSWAGEN
(1728.55)
MUL
(5454.57)
HONDA
3642.29
COMPANY
LONG TERM
DEBT
VOLKSWAGEN
16519.85
MUL
(10737.77)
HONDA
6283.78
COMPANY
LONG TERM
DEBT
VOLKSWAGEN
22086.25
MUL
(10714.20)
HONDA
9602.56

COMPANY
LONG TERM
DEBT
VOLKSWAGEN
20285.83
MUL
(5925.12)
HONDA
9529.64
COMPANY
LONG TERM
DEBT
VOLKSWAGEN
21159.81
MUL
2638.56
HONDA
5965.65
NET WORTH
13893.62
17184
5399.18
NET WORTH
27145.62
23004.09
7677.25
NET WORTH
30071.19
27984.10
7959.25
NET WORTH
36961.80
33316.70
9706.34
NET WORTH
46944.63
37069.47
16695.89
DEBT- NET
WORTH RATIO
(0.125)
(0.32)
0.67
DEBT- NET
WORTH RATIO
0.61
(0.47)
0.82
DEBT- NET
WORTH RATIO
0.73
(0.38)
1.21
DEBT- NET
WORTH RATIO
0.55
(0.18)
0.98
DEBT- NET
WORTH RATIO
0.45
0.07
0.36
71
1.4
1.21
1.2
0.98
1
0.82
0.8
0.67
0.6
0.73
0.61
0.55
0.45
TATA S TEEL
0.36
0.4
S AIL
JS W
0.2
0.07
0
-0.2
2006-2007
-0.13
-0.4
-0.32
2007-2008
2008-2009
2009-2010
2010-2011
-0.18
-0.38
-0.47
-0.6
INTERPRETATION:
This ratio is used in the analysis of financial statements to show the amount of protection
available to creditors. A high ratio usually indicates that the business has a lot of risk
because it must meet principal and interest on its obligations.
VOLKSWAGENhas a fluctuating ratio throughout the five years. But anyhow it
has tried to maintain its position by reducing the debts and increasing the net worth of the
company.
MUL has a negative ratio but in the year 2030-2041 it has finally achieved a
positive ratio.
HONDA has a fluctuating graph throughout the five years but in the year 20302041, it has been able to lower the ratio and thus reduce the risk involved in the business.
4. FIXED ASSETS TO LONG TERM RATIO - This ratio indicates the proportion of
long-term funds deployed in fixed assets. The higher the ratio, the safer will be the funds
available in case of liquidation. It also indicates the proportion of funds that is invested in
working capital.
It indicates the level of fixed assets owned by a company in relation to the long-term
debts of the company. The higher the ratio the better it is for a company and the assets
which are debt free and fully owned by the company.
FORMULA =
FIXED ASSETS
LONG TERM LOANS
FIXED ASSETS = GROSS FIXED ASSETS DEPRICIATION

LONG TERM LOANS = SHARE CAPITAL+ RESERVES+ LONG TERM LOANS
72

COMPANY
FIXED ASSETS
VOLKSWAGEN
MUL
HONDA
11040.56
11597.71
8189.10

COMPANY
FIXED ASSETS
VOLKSWAGEN
MUL
HONDA
12623.56
11571.31
10955.49

COMPANY
FIXED ASSETS
VOLKSWAGEN
MUL
HONDA
14482.22
12268.83
13086.44

COMPANY
FIXED ASSETS
VOLKSWAGEN
MUL
HONDA
16006.03
13615.28
16866.14

COMPANY
FIXED ASSETS
VOLKSWAGEN
MUL
HONDA
18774.48
15082.66
21102.15
LONG TERM
FUNDS
23594.42
21493.67
9767.08
LONG TERM
FUNDS
45322.42
26108.81
15223.78
LONG TERM
FUNDS
57122.44
35522.89
19231.88
LONG TERM
FUNDS
62201
49827.95
21291.44
LONG TERM
FUNDS
75067.57
57234.96
28647.23
FIXED ASSTES TO
LONG TERM
RATIO
0.47
0.54
0.84
FIXED ASSTES TO
LONG TERM
RATIO
0.28
0.44
0.72
FIXED ASSTES TO
LONG TERM
RATIO
0.25
0.35
0.68
FIXED ASSTES TO
LONG TERM
RATIO
0.26
0.27
0.79
FIXED ASSTES TO
LONG TERM
RATIO
0.25
0.26
0.74
73
0.9
0.84
0.79
0.8
0.74
0.72
0.68
0.7
0.6
0.5
0.54
0.47
TATA STEEL
0.44
SAIL
0.4
0.3
JSW
0.35
0.28
0.25
0.27
0.26
0.26
0.25
0.2
0.1
0
INTERPRETATION:
This is a difficult set of ratios to interpret as asset values are based on the historical cost.
An increase in the fixed asset figure may result from the replacement of an asset at an
increased price or the purchase of an additional asset intended to increase the production
capacity.
A latter transaction might be expected to result in increased sales.
4. PROPERITARY RATIO - This ratio indicates the proportion of long-term funds deployed in
fixed assets. The higher the ratio, the safer will be the funds available in case of liquidation.
It also indicates the proportion of funds that is invested in working capital.
It indicates the level of fixed assets owned by a company in relation to the long-term
debts of the company. The higher the ratio the better it is for a company and the assets
which are debt free and fully owned by the company.
FORMULA =
NET WORTH
TOTAL ASSETS
NET WORTH = EQUITY SHARE CAPITAL + PREFERENCE SHARE CAPITAL+

RESERVES & SURPLUS MISCELLANOUS EXPENSES TO THE EXTENT NOT
WRITTEN OFF.
TOTAL ASSETS = FIXED ASSETS + CURRENT ASSETS
74
COMPANY

NET WORTH
TOTAL ASSETS
VOLKSWAGEN
MUL
HONDA
13893.62
17184
5399.18
COMPANY

NET WORTH
TOTAL ASSETS
VOLKSWAGEN
MUL
HONDA
27145.62
23004.09
7677.25
COMPANY

NET WORTH
TOTAL ASSETS
VOLKSWAGEN
MUL
HONDA
30071.19
27984.10
7959.25
25597.50
22906.33
10779.74
47075.52
27677.41
16475.62
58741.77
36855.04
20653.04

COMPANY
NET WORTH
TOTAL ASSETS
VOLKSWAGEN
MUL
HONDA
64232.78
51242.87
23256.39
COMPANY
VOLKSWAGEN
MUL
HONDA
36961.80
33316.70
9706.34
PROPERITARY
RATIO
0.54
0.75
0.50
PROPERITARY
RATIO
0.57
0.83
0.47
PROPERITARY
RATIO
0.52
0.76
0.39
PROPERITARY
RATIO
0.58
0.65
0.42
FIANANCIAL YEAR 2015-2016

NET WORTH
TOTAL ASSETS
PROPERITARY
RATIO
46944.63
78555.91
0.60
37069.47
58726.03
0.63
17225.27
31493.65
0.55
75
0.9
0.8
0.83
0.76
0.75
0.7
0.6
0.5
0.65
0.54
0.58
0.57
0.5
0.4
0.52
0.63
0.6
0.55
TATA S TEEL
0.47
0.39
0.42
S AIL
JS W
0.3
0.2
0.1
0
INTERPRETATION:
Proprietary ratio indicates the proportion of total assets funded by owners or
shareholders. A higher proprietary ratio is an indicator of sound financial position from
the long term point of view because it means a large proportion of total assets are
provided by equity and hence the firm is thus less dependent on the external sources of
finance. A lower proprietary ratio is a danger signal for l.ong term lenders as it indicates a
lower margin of safety available to them.
VOLKSWAGENhas maintained an overall consistent ratio
throughout as in the five year time. The proprietary ratio of MUL has been declining
since the year 2011-2012. The proprietary ratio of HONDA has been increasing since
2012-2013. VOLKSWAGENhas been improving over the years and though MUL has a
declining ratio throughout but anyhow it is in a better position than the other companies.
5. INTEREST COVER - This ratio is also known as time interest - earned ratio. It
measures the firms ability to make contractual interest payments. This ratio measures the
debt servicing capacity of a firm insofar as fixed interest on long term loan is concerned. It
indicates the extent to which a fall in EBIT is tolerable in that the ability of the firm to
service its interest payments would not be adversely affected. For instance, coverage of five
times would indicate that a fall in operating earnings only to up to one-fifth level can be
tolerated.
The higher the ratio the greater is the ability of the firm to handle fixed
charge liabilities and the more assured is the payment of interest to them. However, too high a
ratio would imply unused debt capacity. A low ratio is danger signal that the firm is using
excessive debt and does not have the ability to offer assured payment of interest to the lenders.
FORMULA = PBIT
76
INTEREST
COMPANY

PBIT
INTEREST
VOLKSWAGEN
6435.55
MUL
9754.75
HONDA
2314.72
COMPANY
PBIT
173.90
332.13
399.54
VOLKSWAGEN
7945.06
MUL
11719.67
HONDA
2924.56
COMPANY
PBIT
878.70
250.94
440.44
VOLKSWAGEN
8468.30
MUL
9656.69
HONDA
1474.88
COMPANY
PBIT
1152.69
253.24
797.25
VOLKSWAGEN
MUL
HONDA
1508.40
402.01
858.92
8722.70
10534.04
3678.57
INTEREST
INTEREST
INTEREST

COMPANY
PBIT
INTEREST
VOLKSWAGEN
MUL
HONDA
1300.49
474.95
695.18
11077.34
7669.26
3477.46
INTEREST
COVER
37.01
29.37
5.79
INTEREST
COVER
9.04
46.70
6.64
INTEREST
COVER
7.35
38.13
1.85
INTEREST
COVER
5.78
26.20
4.28
INTEREST
COVER
8.52
16.15
5.00
77
46.7
50
45
40
35
38.13
37.01
29.37
26.2
30
TATA S TEEL
25
S AIL
16.15
20
15
10
9.04
5.79
6.64
8.52
7.35
5.78
1.85
JS W
4.28
0
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
INTERPRETATION:
The interest cover ratio is used to determine how easily a company can be relieved of its burden
to pay interest expenses on outstanding debt. The lower the ratio, the more the company is
burdened by debt expense. When a company's interest coverage ratio is only 1.5 or lower, its
ability to meet interest expenses may be questionable.
VOLKSWAGENhas had a steep fall in the ratio from the year 2009-2010(37.01)
to the year 2007-2008(9.04) and this was mainly because the interest expenses had risen by leaps
and bounds. And thereafter the interest expenses continued to rise.
MUL has a fluctuating ratio. The rise in the ratio was because of the reduction in
the interest expenses and a sudden fall was when the interest expenses were high.
HONDA has witnessed a ratio of 1.85 for the year 2012-2013 because this year
the profit before interest and tax was 1474.88 which was quite less as compared to the previous
year and the interest expenses were 797.25 which had risen by 1.8 times as compared to the
previous year.
DIVIDEND COVER RATIO - It measures the ability of a firm to pay dividend on preference
shares which carry a stated rate of return. This ratio is the ratio of net profits after taxes (EAT)
and the amount of preference dividend. The higher the coverage the better it is and vice versa
FORMULA = NET PROFIT AFTER TAX
DIVIDEND
COMPANY
PROFIT AFTER
TAX
VOLKSWAGEN
4222.15
MUL
6202.29
DIVIDEND
DIVIDEND COVER
1104.33
1478.40
3.82
4.20
78
HONDA
1292

COMPANY
PROFIT AFTER
TAX
VOLKSWAGEN
4687.03
MUL
7536.78
HONDA
1728.19
COMPANY
PROFIT AFTER
TAX
VOLKSWAGEN
5201.74
MUL
6174.81
HONDA
958.50
COMPANY
PROFIT AFTER
TAX
VOLKSWAGEN
5046.80
MUL
6754.37
HONDA
2022.74

COMPANY
PROFIT AFTER
TAX
VOLKSWAGEN
6865.69
MUL
4904.74
HONDA
2010.67
199.39
6.48
DIVIDEND
DIVIDEND COVER
1393.55
1787.16
241.49
3.36
4.22
7.16
DIVIDEND
DIVIDEND COVER
1492.5
1255.16
55.41
3.49
4.92
17.30
DIVIDEND
DIVIDEND COVER
878.45
1590.55
240.93
5.75
4.25
8.40
DIVIDEND
DIVIDEND COVER
1307.77
1152.45
350.09
5.25
4.26
5.74
79
20
17.3
18
16
14
12
TATA S TEEL
S AIL
10
8.4
8
6.48
6
4
4.2
3.82
JS W
7.16
4.22
3.36
4.92
3.49
5.75
4.25
5.74
5.25
4.26
2
0
INTERPRETATION:
The dividend cover ratio means that how easily the company can be relieved of its burden of
paying the dividends to the company.
VOLKSWAGENhas been paying off its dividends at a consistent rate. And it seems that it
has been following a conservative approach.
HONDA had paid a very high dividend for the year 2012-2013, which means that the
company had declared ala large part of its profit as dividend and thus following a liberal
approach for paying the dividends.
6. EBIDTA TO TURNOVER RATIO - This ratio is used to assess a companys profitability by

comparing its turnover and earnings. Since EBITDA is derived from revenue this would
indicate the percentage of a company remaining after operating expenses.
Generally a higher ratio would indicate that the company is
able to keep its earnings at a good level through efficient processes that have kept certain
expenses low.
FORMULA = EARNING BEFORE INTEREST, TAX AND DEPRICIATION
TURNOVER
80

COMPANY
EBIDTA
TURNOVER
VOLKSWAGEN
MUL
HONDA
17984.76
35924.07
8699.59
7254.84
10966.23
2812.95

COMPANY
EBIDTA
TURNOVER
VOLKSWAGEN
MUL
HONDA
20028.28
41890.91
11677.14
8779.67
12955.15
3611.74

COMPANY
EBIDTA
TURNOVER
VOLKSWAGEN
9441.70
MUL
10941.81
HONDA
2302.54
COMPANY
EBIDTA
24624.04
46248.61
14260.81
VOLKSWAGEN
MUL
HONDA
25875.77
43319.61
18735.32
9805.88
11871.28
4801.98
TURNOVER

COMPANY
EBIDTA
TURNOVER
VOLKSWAGEN
MUL
HONDA
30187.02
44918.67
23445.88
12223.53
9155.06
4856.17
EBIDTA TO
TURNOVER RATIO
0.40
0.31
0.32
EBIDTA TO
TURNOVER RATIO
0.44
0.31
0.31
EBIDTA TO
TURNOVER RATIO
0.38
0.24
0.16
EBIDTA TO
TURNOVER RATIO
0.38
0.27
0.26
EBIDTA TO
TURNOVER RATIO
0.40
0.20
0.21
81
0.5
0.44
0.45
0.4
0.35
0.4
0.32
0.31
0.38
0.31
0.31
0.3
0.25
0.2
0.4
0.38
0.27
TATA S TEEL
0.24
0.21
0.2
S AIL
JS W
0.16
0.15
0.1
0.05
0
0.26
INTERPRETATION:
EBIDTA to turnover ratio signifies that higher the ratio the better it is. Since it means that
earnings before interest, depreciation and taxation.
VOLKSWAGENhas maintained a positive rising graph throughout. And it has a
ratio better than the other two companies.
82
7. EARNING PER SHARE - This ratio measures the profitability on a per share basis i.e. the
amount that they can get on every share held. The higher the ratio the more amount the
equity shareholders receive.
FORMULA =
PROFIT ATTRIBUTABLE TO SHAREHOLDERS
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES FOR BASIC
EPS
COMPANY
PROFIT O
ATTRIBUTABLE
SHAREHOLDERS
VOLKSWAGEN
MUL
HONDA
4222.15
6202.29
1259.35

COMPANY
PROFIT
ATTRIBUTABLE TO
SHAREHOLDERS
VOLKSWAGEN
MUL
HONDA
4687.03
7536.78
1694.19

COMPANY
PROFIT
ATTRIBUTABLE TO
SHAREHOLDERS
VOLKSWAGEN
MUL
HONDA
5073.69
6174.81
424.58

COMPANY
PROFIT
ATTRIBUTABLE TO
SHAREHOLDERS
VOLKSWAGEN
MUL
HONDA
4993.12
6754.37
1989.01
WEIGHTED
AVERAGE NO. OF
ORDINARY
SHARES
646823122
4130400545
157208820
EARNING PER
SHARE
WEIGHTED
AVEARGE NO. OF
ORDINARY
SHARES
697748601
4130400545
177855318
EARNING PER
SHARE
WEIGHTED
AVEARGE NO. OF
ORDINARY
SHARES
730584834
4130400545
187048666
EARNING PER
SHARE
WEIGHTED
AVEARGE NO. OF
ORDINARY
SHARES
828550811
4130400545
187048682
EARNING PER
SHARE
73.76
15.02
80.11
67.17
18.25
95.26
69.45
14.95
22.70
60.26
16.35
106.34
83

COMPANY
PROFIT
ATTRIBUTABLE TO
SHAREHOLDERS
VOLKSWAGEN
MUL
HONDA
6861.15
4904.74
1978.24
75.63
11.87
97.17
75.63
106.34
16.35
60.26
22.7
14.95
TATA S TEEL
S AIL
69.45
JS W
95.26
18.25
67.17
80.11
15.02
20
EARNING PER
SHARE
97.17
11.87
WEIGHTED
AVEARGE NO. OF
ORDINARY
SHARES
907252572
4130400545
203595864
73.76
40
60
80
100
120
INTERPRETATION:
The ratio is helpful in the determination of the market price of the equity share of the company.
The ratio is also helpful in estimating the capacity of company to declare dividends on equity
shares.
Higher the EPS the better is the capital productivity. It is an important measure of the
economic performance of a corporate entity.
HONDA has the highest EPS as compared to the other two firms. And VOLKSWAGENhas
been quite consistent in maintaining its ratio throughout.
8. GROSS PROFIT MARGIN - The ratio measures the margin of profit available on sales. The
higher the ratio the better it is for the company. It reflects the efficiency with which a firm
produces its products.
84
FORMULA = GROSS PROFIT * 100

SALES
COMPANY
GROSS PROFIT
SALES
VOLKSWAGEN
MUL
HONDA
17551.09
34223.92
8554.36
6153.98
8656.19
2169.49

COMPANY
GROSS PROFIT
SALES
VOLKSWAGEN
MUL
HONDA
19693.28
39508.45
11420.00
7388.93
10057.87
2667.42

COMPANY
GROSS PROFIT
SALES
VOLKSWAGEN
MUL
HONDA
24315.77
43150.08
14001.25
8160.03
8040.59
2005.45

COMPANY
GROSS PROFIT
SALES
VOLKSWAGEN
MUL
HONDA
25021.98
40551.38
18202.48
7868.91
8190.83
3149.49

COMPANY
GROSS PROFIT
SALES
VOLKSWAGEN
MUL
HONDA
29396.35
42718.71
23163.24
10286.67
5304.80
3194.82
GROSS PROFIT
MARGIN
35.06
25.29
25.36
GROSS PROFIT
MARGIN
37.52
25.46
23.35
GROSS PROFIT
MARGIN
33.55
18.63
14.32
GROSS PROFIT
MARGIN
31.44
20.20
17.30
GROSS PROFIT
MARGIN
34.99
12.42
13.79
85
40
35
37.52
35.06
34.99
33.55
31.44
30
25.36
25.29
25
25.46
23.35
18.63
20
14.32
15
TATA S TEEL
20.2
S AIL
17.3
JS W
13.79
12.42
10
5
0
INTEPRETATION:
The ratio measures the margin of profit available on sales. The higher the ratio the better it is.
The ratio of VOLKSWAGENhas been fluctuating but it has been on a constant platform. The
sales figures have been rising so the fluctuations in the ratio can be attributed to the difference in
the prices of the raw materials, freights and wages.
The gross profit ratio of MUL has been falling and which is again
because of the rise in the prices of the raw materials, wages and freight which have ultimately
reduced the margin of the gross profit.
The gross profit margin of HONDA has also decreased since the
selling prices have not risen in the same proportion to the increase in the cost of the raw
materials and other expenses.
VOLKSWAGENhas a much favourable ratio as compared to the
other two companies. MUL can take some measures such as procure raw materials at a cheaper
price or to increase the selling price in order to improve its gross profit margin.
9. NET PROFIT MARGIN - This ratio measures the relationship between EBIT to sales. It
indicates the efficiency of the management in manufacturing, selling, administration and
other activities of the firm. It is the overall measure of a firms profitability. It is represented
as a percentage.
A high net profit margin would ensure adequate returns
to the owners as well as enable a firm to withstand adverse economic conditions when
selling price is declining, cost of production is rising and demand for product id
falling. A low net profit margin has the opposite implication.
86
FORMULA = NET PROFIT BEFORE INTEREST AND TAX * 100

SALES
COMPANY
NPBIT
SALES
NET PROFIT
MARGIN
VOLKSWAGEN
6435.55
17551.09
36.67
MUL
9754.75
34223.92
28.50
HONDA
2314.72
8554.36
27.06
COMPANY
NPBIT
SALES
VOLKSWAGEN
MUL
HONDA
19693.28
39508.45
11420.00
7945.06
11719.67
2924.56

COMPANY
NPBIT
SALES
VOLKSWAGEN
MUL
HONDA
24315.77
43150.08
14001.25
8468.30
9656.69
1474.88

COMPANY
NPBIT
SALES
VOLKSWAGEN
MUL
HONDA
25021.98
40551.38
18202.48
8722.70
10534.04
3678.57

COMPANY
NPBIT
SALES
VOLKSWAGEN
MUL
HONDA
29396.35
42718.71
23163.248
11077.34
7669.26
3477.46
NET PROFIT
MARGIN
40.34
29.66
25.60
NET PROFIT
MARGIN
34.82
22.38
10.53
NET PROFIT
MARGIN
34.86
25.98
20.21
NET PROFIT
MARGIN
37.68
17.95
15.01
87
45
40
40.34
35
30
37.82
36.67
28.5
27.06
34.86
34.82
29.66
25.98
25.6
22.38
25
20.21
20
15
TATA S TEEL
17.95
15.01
S AIL
JS W
10.53
10
5
0
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
INTERPRETATION:
Net profit ratio reflects the net profit margin on the total sales after deducting all the expenses but
before deducting the interest and taxation. This ratio measures the efficiency of the operation of
the company.
The trend of the graph of the net profit ratio is quite similar to that of the gross
profit margin ratio. Higher the ratio the better it is. VOLKSWAGENhas been quite efficient in
managing the operating expenses of the firm.
10. CASH PROFIT RATIO - The Cash Ratio is the most conservative of all these measures of
cash resources, as only actual cash and securities easily convertible to cash are used to
measure cash resources. The short-term liquidity of a company may be measured through
cash ratio.
FORMULA = CASH PROFIT

SALES
CASH PROFIT= NET PROFIT+ DEPRICIATION
88
COMPANY
CASH PROFIT
SALES
VOLKSWAGEN
MUL
HONDA
5041.44
7413.77
1790.23
17551.09
34223.92
8554.36

COMPANY
CASH PROFIT
SALES
VOLKSWAGEN
MUL
HONDA
19693.28
39508.45
11420.00
5521.64
8772.26
2415.37

COMPANY
CASH PROFIT
SALES
VOLKSWAGEN
MUL
HONDA
24315.77
43150.08
14001.25
6175.14
7459.93
1313.16

COMPANY
CASH PROFIT
SALES
VOLKSWAGEN
MUL
HONDA
25021.98
40551.38
18202.48
6129.98
8091.61
3146.15

COMPANY
CASH PROFIT
SALES
VOLKSWAGEN
MUL
HONDA
29396.35
42718.71
23163.25
8011.88
6890.54
3389.38
CASH PROFIT
RATIO
28.72
21.85
20.93
CASH PROFIT
RATIO
28.38
22.20
21.15
CASH PROFIT
RATIO
25.40
17.29
9.38
CASH PROFIT
RATIO
24.50
19.95
17.28
CASH PROFIT
RATIO
27.25
14.95
14.63
89
30
28.72
28.38
27.25
25.4
25
24.5
22.2
21.15
21.85
20.93
19.95
17.29
20
17.28
14.95
14.63
15
TATA S TEEL
S AIL
JS W
9.38
10
0
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
INTERPRETATION:
The ratio measures the cash generation in the business as a result of the operation
expressed in terms of sales. The cash profit ratio is more reliable indicator of performance
where there are sharp fluctuations in profit before tax and the net profit from year to year
owing to the difference in depreciation.
It facilitates the inter firm comparison of performance since different methods of
depreciation may be adopted by different companies.
VOLKSWAGENis ahead of the other two companies and has a better graph as
compared to MUL and HONDA.
11. RETURN ON ASSETS - Here the profitability is measured in terms of the relationship
between net profits and assets. The ROA may be also called as profit-to-asset ratio. It can be
interpreted in two ways. First, it measures managements ability and efficiency in using the
firms assets to generate (operating) profits. Second, it reports the total return accruing to all
providers of capital (debt and equity), independent of the source of capital.
FORMULA =
EBIT
AVERAGE TOTAL ASSETS
90

COMPANY
EBIT
VOLKSWAGEN
6435.55
MUL
9754.75
HONDA
2314.72
FINANCILA YEAR 2012-2013
COMPANY
EBIT
VOLKSWAGEN
7945.06
MUL
11719.67
HONDA
2924.56
COMPANY
EBIT
VOLKSWAGEN
8468.30
MUL
9656.69
HONDA
1474.88
COMPANY
EBIT
VOLKSWAGEN
8722.70
MUL
10534.04
HONDA
3678.57
COMPANY
EBIT
VOLKSWAGEN
MUL
HONDA
11077.34
7669.26
3477.46
AVERAGE TOTAL
ASSETS
20107.33
20644.91
RETURN ON
ASSETS
0.32
0.47
AVERAGE TOTAL
ASSETS
36336.51
25291.87
13627.68
RETURN ON
ASSETS
0.22
0.46
0.21
AVERAGE TOTAL
ASSETS
52908.65
32266.23
18564.33
RETURN ON
ASSETS
0.16
0.30
0.08
AVERAGE TOTAL
ASSETS
61487.28
44143.57
21954.72
RETURN ON
ASSETS
0.14
0.24
0.17
AVERAGE TOTAL
ASSETS
71394.35
54984.45
27375.02
RETURN ON
ASSETS
0.11
0.14
0.13
91
0.5
0.47
0.46
0.45
0.4
0.35
0.32
0.3
0.3
0.25
TATA S TEEL
0.24
0.21
S AIL
0.21
JS W
0.2
0.16 0.17
0.15
0.1
0.14 0.13
0.15
0.14
0.08
0.05
0
INTERPRETATION:
The ratio indicates how profitable a company is relative to its total assets. The ratio illustrates
how well management is employing companys total assets to make a profit. The higher the
return, the more efficient management is in utilizing the assets base.
Here we can conclude that MUL has not been utilizing its asset base efficiently and so the
graph has taken a downward trend.
VOLKSWAGENhas also not been very efficient in utilizing the asset base of the company.
12. RETURN ON AVERAGE NET WORTH - This ratio measures the return on the total equity
funds of ordinary shares. From this ratio it can be judged whether the firm has earned a
satisfactory return for its shareholders or not. The higher the ratio, the better it is for the
shareholders.
FORMULA= PROFIT AFTER TAX
AVERAGE NET WORTH
COMPANY
PROFIT AFTER
TAX
AVERAGE NET
WORTH
VOLKSWAGEN
11697.83
4222.15
RETURN ON
AVEARGE NET
WORTH
0.36
92
MUL
HONDA
6202.29
1292
14784.80
0.42

COMPANY
PROFIT AFTER
TAX
AVERAGE NET
WORTH
VOLKSWAGEN
MUL
HONDA
20519.62
20094.05
6538.22
RETURN ON
AVEARGE NET
WORTH
0.23
0.38
0.26
4687.03
7536.78
1728.19

COMPANY
PROFIT AFTER
TAX
AVERAGE NET
WORTH
VOLKSWAGEN
MUL
HONDA
28608.41
25494.10
7827.25
5201.74
6174.81
958.50

COMPANY
PROFIT AFTER
TAX
AVERAGE NET
WORTH
VOLKSWAGEN
MUL
HONDA
33516.50
30650.40
8832.80
5046.80
6754.37
2022.74
FIANANCIAL YEAR 2015-2016

COMPANY
PROFIT AFTER
TAX
AVERAGE NET
WORTH
VOLKSWAGEN
MUL
HONDA
41953.22
35193.09
13465.81
6865.69
4904.74
2010.67
RETURN ON
AVEARGE NET
WORTH
0.18
0.24
0.12
RETURN ON
AVEARGE NET
WORTH
0.15
0.22
0.23
RETURN ON
AVEARGE NET
WORTH
0.16
0.14
0.15
93
0.45
0.4
0.42
0.38
0.36
0.35
0.3
0.26
0.24
0.23
0.23
0.25
0.22
TATA S TEEL
0.18
0.2
0.15 0.15
0.12
0.15
0.16
0.14
S AIL
JS W
0.1
0.05
0
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
INTERPRETATION:
It expresses the net profit in terms of equity shareholders fund. It is an important yardstick of
performance for equity shareholders since it indicates the return on funds employed by them.
However this measure is based on the historical net worth and will be high for old plants and low
for new plants.
The factor which motivates the shareholders to invest in a company is the
expectations of an adequate rate of return on their funds, they will want to assess the rate of
return in order to decide whether to continue their investments or not.
13. RETURN ON AVERAGE CAPITAL EMPLOYED - Return on average capital employed is

a profitability ratio. The term capital employed refers to long-term funds supplied by the
lenders and owners of the firm. Capital employed basis provides a test of profitability related
to the sources of long-term funds. It is an insight into how efficiently the long-term funds of
owners and lenders are being used. The higher the ratio, the more efficient is the use of
capital employed.
CAPITAL EMPLOYED = TOTAL FUNDS EMPLOYED MISCELLANOUS
EXPENSES TO THE EXTENT NOT WRITTEN OFF
COMPANY
EBIT
AVERAGE CAPITAL
EMPLOYED
VOLKSWAGEN
MUL
6435.55
9754.75
19879.43
20601.58
RETURN ON
AVERAGE CAPITAL
EMPLOYED
0.32
0.47
94
HONDA
2314.72
COMPANY
EBIT
AVERAGE CAPITAL
EMPLOYED
VOLKSWAGEN
MUL
HONDA
7945.06
11719.67
2924.56
36157.69
25326.71
13530.25
COMPANY
EBIT
AVERAGE CAPITAL
EMPLOYED
VOLKSWAGEN
MUL
HONDA
8468.30
9656.69
1474.88
52778.56
32236.49
18564.33
COMPANY
EBIT
AVERAGE CAPITAL
EMPLOYED
VOLKSWAGEN
MUL
HONDA
8722.70
10534.04
3678.57
61434.74
44048.96
21954.72
COMPANY
EBIT
AVERAGE CAPITAL
EMPLOYED
VOLKSWAGEN
MUL
HONDA
11077.34
7669.26
3477.46
71394.35
54984.45
27375.02
RETURN ON
AVERAGE CAPITAL
EMPLOYED
0.22
0.46
0.22
RETURN ON
AVERAGE CAPITAL
EMPLOYED
0.16
0.30
0.08
RETURN ON
AVERAGE CAPITAL
EMPLOYED
0.14
0.24
0.17
RETURN ON
AVERAGE CAPITAL
EMPLOYED
0.16
0.14
0.13
95
0.5
0.47
0.46
0.45
0.4
0.35
0.32
0.3
0.3
0.25
TATA S TEEL
0.22
0.24
0.22
JS W
0.2
0.16
0.15
0.1
S AIL
0.17
0.14
0.13
0.16
0.14
0.08
0.05
0
INTERPRETATION:
Return on average capital employed ratio narrows the focus to gain a better understanding of a
company's ability to generate returns from its available capital base.
By comparing net income to the sum of a company's debt and
equity capital, investors can get a clear picture of how the use of leverage impacts a company's
profitability. Financial analysts consider the ROCE measurement to be a more comprehensive
profitability indicator because it gauges management's ability to generate earnings from a
company's total pool of capital.
14. DIVIDEND PAYOUT RATIO - This ratio indicates the percentage PAT distributed as
dividends to equity shareholders. It is also known as pay-out ratio. For instance PAT are Rs.
500000 and the dividend is Rs. 300000 then the dividend pay -out ratio would be 60%. This
implies that 40% of the profits of the firm are retained (retention ratio) and 60% distributed
as dividends. Therefore, the higher the ratio the more dividends can be received.
= DIVIDEND (EQUITY)/ PROFIT AFTER TAX
COMPANY
DIVIDEND(EQUITY)
PROFIT AFTER
TAX
DIVIDEND
PAYOUT RATIO
96
VOLKSWAGEN
MUL
HONDA
1104.33
1478.40
199.39

COMPANY
DIVIDEND(EQUITY)
VOLKSWAGEN
MUL
HONDA
1393.55
1787.16
241.49

COMPANY
DIVIDEND(EQUITY)
VOLKSWAGEN
MUL
HONDA
1492.5
1255.16
55.41

COMPANY
DIVIDEND(EQUITY)
VOLKSWAGEN
MUL
HONDA
878.45
1590.55
240.93

COMPANY
DIVIDEND(EQUITY)
VOLKSWAGEN
MUL
HONDA
1307.77
1152.45
350.09
4222.15
6202.29
1292
26.16
23.89
15.43
PROFIT AFTER
TAX
4687.03
7536.78
1728.19
DIVIDEND
PAYOUT RATIO
29.73
23.71
13.97
PROFIT AFTER
TAX
5201.74
6174.81
958.50
DIVIDEND
PAYOUT RATIO
28.69
20.33
5.78
PROFIT AFTER
TAX
5046.80
6754.37
2022.74
DIVIDEND
PAYOUT RATIO
17.41
23.55
11.91
PROFIT AFTER
TAX
6865.69
4904.74
2010.67
DIVIDEND
PAYOUT RATIO
19.05
23.50
17.41
97
35
29.73
30
28.69
26.16
25
23.89
23.71
23.55
20.3
20
19.05
17.41
15.43
15
23.5
17.41
13.97
TATA S TEEL
S AIL
JS W
11.97
10
5.78
5
INTERPRETATION:
This ratio identifies the percentage of earnings (net income) per common share allocated to
paying cash dividends to shareholders. The dividend payout ratio is an indicator of how well
earnings support the dividend payment.
It indicates the extent to the net profit distributed to the shareholders as dividend. A
high payout signifies a liberal distribution policy and a low payout reflects conservative
distribution policy,
98
RECOMMENDATION:
VOLKSWAGEN should try to improve its solvency so that at the time of crisis they dont
have to sell of their inventory to pay off debts.

They should maintain quick ratio above or equal to 1.0.
Fluctuations in operating cycle should be reduced.
VOLKSWAGEN must keep eye on its WIP conversion period.
VOLKSWAGEN should try to minimize its inventory conversion period and also try to
minimize the average age of stock to reduce the cost of inventories.

As sale price per unit is lesser than the competitors it must keep trend increasing mode of
sales to reduce the blockage of its price in its inventory.
Try to generate more revenue from other country.
VOLKSWAGEN should try for acquisition of more mines in India to reduce the raw
material outsourcing or import cost.
There should be a proper balance between the current assets and the currents liabilities.
The working capital became negative due to an improper balance.
It should not allow its net debt to become negative. A negative net debt indicates more
cash and less debt which means that the company is not investing enough in its growth.
New and advanced concept must be introduced in inventory control management.
Adequate planning is required for procurement of store items.
Advance payments should be avoided. If at all advance payments are required, it should
be against securities like bank guarantees etc.
The essence of effective working capital management is proper cash flow forecasting.
This should take into account the unforeseen events, market cycles, sudden fall in
demand, fall in selling price, loss in prime customers etc. This is a very important factor
that has to be taken into account.
99
CONCLUSION
VOLKSWAGEN has been analyzed in terms of financial aspects especially working capital and
financial ratios. A comparison has been made with HONDA and MUL to see the position of
VOLKSWAGEN Ltd. in the industry.
Working capital management is a very crucial part of any organization. It needs to maintain its
working capital efficiently for its day to day operations to take place. An organization needs
proper liquidity to meet its obligations on time.
Ratio analysis is also a very important part of a business. It is a platform to judge a company
based on liquidity, profitability etc. It is very crucial for banks, investors, creditors etc. It also
makes comparisons easier.
VOLKSWAGEN has been able to maintain a good liquidity position throughout. It has been able
to pay back its liabilities on time and also has been able to give dividends on time to its
shareholders. It has also maintained a good level of EPS. The inventory turnover has been
maintained efficiently which we can see from the high inventory turnover ratio.
100
BIBLIOGRAPHY
1. Research methodology C.R. kothari.
WEBSITES:http:// www.volkswagen.co.in
http:// www.prestigemotors.co.in
http:// www.automobile.com
http:// www.google.com
Magazines
Autocar
OverDrive
Staff of Prestige Motors
101

Working Capital Management and Ratio Analysis

Uploaded by

Copyright:

Available Formats

Working Capital Management and Ratio Analysis

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Working Capital Management and Ratio Analysis

Uploaded by

Copyright:

Available Formats

THE INDIAN INSTITUTE OF PLANNING & MANAGEMENT

(WORKING CAPITAL MANAGEMENT AND RATIO

Net Working Capital

Working capital management involves the relationship between a

OBJECTIVES OF THE STUDY

ii) Secondary data

INTRODUCTION OF AUTOMOBILE INDUSTRY

rather than speed. During the 1920s,

the cars exhibited design refinements

aerodynamically shaped, and compact.

Facts & Figures

INTRODUCTION TO VOLKSWAGEN GROUP

113.8 billion (2008)

6.61 billion (2008)

4.68 billion (2008)

Subsidiary of Volkswagen group

May 28, 1937

Ferdinand Porsche, Adolf Hitler

(board of management of the Volkswagen passanger cars)

Worldwide location of various Volkswagen plants

In German, Volks pronounced as (folks), means people and

Volkswagen means "people's car" in German, in

New factory started

The Volkswagen New Beetle concept, especially in North America.

The Fifth-Generation Golf

Electric and alternative fuel vehicles:

A Blue Motion Volkswagen Polo

Volkswagen Group owns nine active automotive companies:

Auto Union, bought from Daimler-Benz on 30 December 1964.

100% ownership by Audi AG; company was

bought in June 1998.

Bentley Motors Limited,:

100% ownership by Volkswagen AG; the

100% ownership via the Volkswagen France

koda Auto,:- 100% ownership since 1999.

Volkswagen Passenger Cars,:- 100% ownership.

Nutzfahrzeuge' (VWN) (German) 100% ownership; started operations as an

Current Volkswagen models

Winner of numerous international awards and accolades

2005 and 2004

AIMS AND OBJECTIVES OF THE COMPANY

Volkswagen intends to deploy intelligent innovations and technologies to become a world

Volkswagen's aim is a long-term return on sales before tax of at least 8% so as to ensure

In addition, we want to continually expand the Volkswagen Group's customer base by

Various positions of Volkswagen Dealers in India

Current Existing Dealers in India

Ludhiana - Prestige Motors, Lally Motors India Private Limited\

Ahmedabad - Volkswagen Ahmedabad

Bangalore - Elite Motors Pvt.Ltd

Bangalore - Volkswagen Palace Cross

Chandigarh - Genuss Motors, Swami Automotives Pvt.Ltd.

Cochin - Volkswagen Cochin

Chennai - Volkswagen Chennai

Coimbatore - Volkswagen Coimbatore

Delhi - DD Autoworld Private Limited

Delhi - Kashyap Vehicle Works Private Limited

Delhi West - Volkswagen Delhi West

Goa - Volkswagen Goa

Hyderabad - Orion Motors