Navigating the Metrics: A Deep Dive into

Maruthi Suzuki India.'s Historical

Financial Ratios

Managerial accounting Assignment

Name: A. Ruthwik Bharadwaj

Roll.No:37
Section: A
INTRODUCTION OF MARUTHI SUZUKI INDUSTY

Introduction of Maruthi Suzuki:

Maruti Suzuki India Limited is a prominent automobile manufacturer in India and a
subsidiary of the Japanese automaker Suzuki Motor Corporation. Established in
1981, Maruti Suzuki has played a crucial role in revolutionizing the automotive
industry in India. The company has consistently been a market leader and has
significantly contributed to the growth and development of the Indian automotive
sector.

Maruti Suzuki's journey in India began with the launch of the iconic Maruti 800, a
small and affordable car that quickly gained popularity and became a symbol of the
middle-class aspirations for owning a car. Over the years, the company has
diversified its product portfolio to include a wide range of vehicles, from compact
cars to SUVs and premium hatchbacks. Some of its popular models include the
Maruti Swift, Maruti Alto, Maruti Baleno, Maruti Dzire, and Maruti Vitara Brezza.

The company has played a key role in introducing innovative and fuel-efficient
technologies in its vehicles, aligning with the evolving preferences of Indian
consumers. Maruti Suzuki has established a vast network of dealerships and service
centers across the country, ensuring widespread accessibility and customer support.

In addition to its commitment to manufacturing high-quality and fuel-efficient

vehicles, Maruti Suzuki has also been actively involved in various corporate social
responsibility (CSR) initiatives, focusing on education, healthcare, and community
development.

As of my last knowledge update in January 2022, Maruti Suzuki continues to be a

dominant force in the Indian automotive market, reflecting its commitment to
excellence, customer satisfaction, and sustainable business practices. Please note that
there may have been developments or changes in the company's status or operations
since then.

Importance of Ratio Analysis

* Ratio analysis is vital for assessing a company’s financial position,

liquidity, profitability, risk, solvency, efficiency, and fund utilization.

* Ratio analysis provides a comparison of financial results and trends,

aiding decision-making for company shareholders’ investments.
* Ratio analysis facilitates the analysis of financial risks.

* The primary goal of ratio analysis is to compare a company’s strengths and

weaknesses. This, in turn, contributes to an enhanced decision-making process.

* By comparing current ratios to past ratios, ratio analysis helps evaluate

a company’s progress.

* Financial ratios can help companies identify areas where they are over
performing or under-performing. This can help them make more
informed decisions about where to allocate resources.

Investors: Evaluate investment potential, assess risk, and make informed

decisions.

Creditors: Gauge the company's ability to repay debts and manage risk
exposure.
MARUTHI SUZUKI Management: Identify areas of strength and weakness,
track progress towards financial goals, and inform strategic decision-making.

Benchmarking: Compare MARUTHI SUZUKI's performance with industry peers

and identify potential areas for improvement.

OBJECTIVES OF THE STUDY

 To know the financial position of Maruthi Suzuki.

 To bring out the results of financial strength and weakness of

industry through Ratio analysis.

 To know the correct picture of financial operation of the industry in terms

of liquidity and solvency.

RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the research problem.

It may be understood as a science of studying how research is done

scientifically.

the research methodology not only talks about the research methods but also
consider the logic behind the method used in context of the research study

The secondary data used for the research and analysis is collected from Money
Control website (Money control, 2023). It has balance sheets, profit and loss
statements and cash flow statements of the past 20 years of MARUTHI
SUZUKI. Many formulas were used to calculate the ratios for analysis and
forecast the future financials, which are mentioned below.

Current ratio: Current assets / Current liabilities

Quick ratio: (Current assets – inventory) / Current liabilities

Absolute liquidity ratio: Cash and cash equivalents / Current

Liabilities Debt-equity ratio: Long term borrowings / Equity share

capital

Interest coverage ratio: Earnings before Interest and Taxes (EBIT) / Interest

Proprietary ratio: Equity share holders’ funds / Total assets

Inventory turnover ratio: Net Sales / Average inventory*

Total assets turnover ratio: Net sales / Average total assets*

Gross profit ratio: (Revenue – All direct expenses) / Revenue

Net Profit: Net Profit / Revenue

Operating Profit Ratio: (Opening stock + purchases + direct expenses – closing

stock) / Revenue

Return on Equity ratio (ROE): Net profit / Total share holders’ funds

Return on capital employed (ROI): Net profit / Total capital employed

Earnings per share (EPS): Earnings available to equity shareholders / Number

of equity shares
Price- Earnings ratio: Market price per share / Earnings per share

Dividend pay-out ratio: Dividend per share / Earnings per share

Dividend yield ratio: Dividend per share / Market price per share

Compounded annual growth rate (CAGR): [(Final value/ Beginning value)

^(1/n)] – 1

Data Analysis

1. current ratio = current asset/current liabilities

LIQUIDITY RATIO

Average

Current ratio 1.23

 Quick ratio 0.64

Absolute liquid ratio 0.216

A Current Ratio of 1.23 indicates that Maruthi Suzuki has current assets
equivalent to approximately 1.23 times its current liabilities. This suggests that
the company has sufficient short-term assets to cover its short-term obligations.
Generally, a current ratio above 1 is considered favorable, indicating good short-
term liquidity.

The Quick Ratio of 0.64 suggests that Maruthi Suzuki's immediate liquidity,
excluding inventories, is approximately 6.4. times its current liabilities. This
ratio provides a more conservative measure of short-term liquidity, excluding
less liquid assets. A quick ratio above 1 is generally considered healthy.

The Absolute Liquid Ratio of 0.216 indicates that Maruthi Suzuki's most liquid
assets (cash and marketable securities) are approximately 0.21 times its
current liabilities. This ratio provides insight into the company's ability to
meet its short-term obligations using only its most liquid assets.

SOLVENCY RATIO

Average

Debt Equity Ratio 1.407

Proprietary Ratio 0.705

Interest coverage ratio 58.25

 Maruthi Suzuki has approximately 1.40 units of debt. This is a high level of
financial leverage, suggesting that a significant portion of the company's capital
structure is financed by debt. While high leverage can amplify returns, it also
increases financial risk, as the company has to meet interest and principal
payments.

The Proprietary Ratio of 0.705 suggests that about 70.5% of Maruthi Suzuki's
total assets are funded by shareholders' equity, while the remaining percentage
is financed by external sources such as debt. A lower proprietary ratio indicates
a higher reliance on external financing, which can increase financial risk and
make the company more vulnerable to economic downturns.

An Interest Coverage Ratio of 58.25 means that Maruthi Suzuki's earnings

before interest and taxes are only 58 times its interest expense. This indicates a
relatively weak ability to cover interest payments from operating profits. A ratio
below 1 suggests that the company may struggle to meet its interest obligations,
potentially leading to financial difficulties.

PROFITABILITY RATIO

Average

Gross Profit Ratio 0.1224

Operating Profit Ratio .0863

Net Profit Ratio 0.661

Return on Equity 0.15

Return on Investment Ratio 0.1127

A Gross Profit Ratio of 12.24% indicates that, after deducting the cost of goods
sold (COGS), Maruthi Suzuki retains approximately 12.24% of its revenue as
gross profit. This ratio reflects the efficiency of the company's production and
distribution processes.
The Operating Profit Ratio of 0.0863 signifies that Maruthi Suzuki is able to
retain about 8.63% of its revenue after deducting both COGS and operating
expenses. It provides insights into the company's operational efficiency and
cost management.

The Net Profit Ratio of 0.661 indicates that Maruthi Suzuki is able to convert
approximately 66.1% of its revenue into net profit after deducting all expenses,
including taxes and interest. This ratio reflects the overall profitability of the
company.

An ROE of 0.15 signifies that Maruthi Suzuki generates a return of 15% on

average shareholders' equity. This ratio is a measure of how effectively the
company is utilizing shareholders' funds to generate profits.

A Return-on-Investment Ratio of 0.1127 indicates that Maruthi Suzuki is

generating a return of 11.27% on average total assets. This ratio provides
insights into the overall efficiency of the company in utilizing its assets to
generate profits.

ACTIVITY OR TURNOVER RATIO

Average

Inventory turnover ratio 0.1930

Debtors' Turnover Ratio

Creditors' Turnover Ratio

Assets turnover ratio 0.7097

An Inventory Turnover Ratio of 0.193 suggests that, on average, Maruthi

Suzuki is able to turn over its inventory approximately 0.193 times during the
specified
period. A higher inventory turnover ratio generally indicates efficient inventory
management, as the company is selling and replenishing its stock more
frequently.

An Assets Turnover Ratio of 0.7097 indicates that for every unit of assets,
Maruthi Suzuki generates approximately 0.71 units of sales. This ratio provides
insights into how efficiently the company utilizes its assets to generate revenue.
A higher ratio suggests better asset utilization.
CONCLUSION

Efficient management of finance is very important for the success of an

enterprise. Term financial performance is very dynamic term. The subject
matter of financial performance has been changing very rapidly. In present time
greater importance is given to financial performance. So, here an attempt is
made by me to analyze the financial performance of MARUTHI SUZUKI LTD.
While analyzing the financial performance it can be concluded that Maruthi
Suzuki is performing good in terms of Quick assets, better inventory
management, management of fixed assets, gross profit, return on capital
employed and dividend payout ratio. These factors plays important role in
forming company strategic and operational thinking. Efforts should constantly
be made to improve the financial position up to next level of performance in
order to make benchmark. This will yield greater efficiencies and improve
investor satisfaction. Lastly the policy adopted by government of India under
National steel policy (2017) and policy on preference to domestically
manufactured iron and steel products is expected to provide the much necessary
momentum to the iron and steel sector of the country.