[Link].

org © 2021 IJCRT | Volume 9, Issue 5 May 2021 | ISSN: 2320-2882

A STUDY OF FINANCIAL PERFORMANCE

ON AUTOMOBILE INDUSTRY WITH
SPECIAL HERO MOTOCROP LIMITED
NIVETHA. M

PG Student, Department of Management Studies, Sathyabama Institute of Science & Technology.

Dr. R. Thamilselvan
Associate Professor, Department of Management Studies,

Sathyabama Institute of Science & Technology, Chennai. 6000119

ABSTRACT:

This aim of this project is to analysis the liquidity and profitability position of the

company using the financial tools. This study is based on financial statements such as Ratio Analysis, Comparative
balance sheet. By using this tools combined it enables to determine in an effective manner. The study is made to
evaluate the financial position, the operational results as well as financial progress of a business concern. It explains
the ways in which ratio analysis can be of assistance in long-rang planning, budgeting and asset management to
strengthen financial performance and help avoid financial difficulties.

INTRODUCTION:
Financial position, defined as the status of financial well-being regarding a company, isImportant to every single
business. The status of the assets, liabilities, and owner’s equity (and their interrelationship) of an organization, as
reflected in its financial statement.

COMPANY PROFILE:
Hero MotoCorp Ltd. (Formerly Hero Honda Motors Ltd.) is the world's largest manufacturer of two – wheelers, based
in [Link] 2001, the Company achieved the coveted position of being thelargest two-wheeler manufacturing Company
in India and also, the ‘World No.1’ two-wheeler Company in terms of unit volume sales in a calendar year. Hero
MotoCorp Ltd. continues to maintain this position till date.
VISION:
The story began with a simple vision – the vision of a mobile and an empowered India, powered by its bikes. Hero
MotoCorp Ltd., company’s new identity, reflects its commitment towards providing world class mobility solutions with
renewed focus on expanding company’s footprint in the global arena.
MISSION:
Hero MotoCorp’s mission is to become a global enterprise fulfilling its customers’ needs and aspirations formobility,
setting benchmarks in technology, styling and quality so that it converts its customers into its brandadvocates. The
Company will provide an engaging environment for its people to perform to their true potential. Itwill continue its focus
on value creation and enduring relationships with its partners.

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II REVIEW OF LITERATURE

Kumar Mohan M.S, Vasu. V. and Narayana T. (2016) the study has been made through using different ratios, mean,
standard deviation and Altman’s Z score approach to study the financial health of the company. The study reveals
there is a positive correlation between liquidity and profitability ratios except return on total assets as well as Z score
value indicate good health of the company.

Ravichandran, M. & Subramanium M Venkata (2016) the main idea behind this study is to assessment of viability,
stability and profitability of Force motors limited. Operating position of the company can be measured by using various
financial tools such as profitability ratio, solvency ratio, comparative statement & graphs etc. This study finds that
company has got enough funds to meet its debts & liabilities. Company can further improve financial performance by
reducing the administrative, selling & operating expenses.

Jothi, K. & Geethalakshmi, A. (2016) this study tries to evaluate the profitability & financial position of selected
companies of Indian automobile industry using statistical tools like, ratio analysis, mean, standard deviation,
correlation. The study reveals the positive relationship between profitability, short term and long-term capital.

Maheswari, V. (2016) made an attempt to analyze the financial soundness of the Hero Honda motors limited have
identified three factors, namely liquidity position, solvency position and profitability position based on the study of period
2010 to 2016 using ratio analysis and Altman’s Z score model.

Agarwal, Nidhi (2015) the study focus on the comparative financial performance of Maruti Suzuki and Tata motors
ltd. The financial data and information required for the study are drawn from the various annual reports of companies.
The liquidity and leverage analysis of both the firms are done. To analyze the leverage position four ratios are
considered namely, capital gearing, debt-equity, total debt and proprietary ratio. The result shows that Tata motors ltd
has to increase the portion of proprietor’s fund in business to improve long term solvency position.

Takeh Ata & Navaprabha Jubiliy (2015) Author has made conceptual model to outline the impact of capital structure
on the financial performance i.e. capital structure is independent variable that value is measured by using four ratios
namely, financial debt, total debt equity, total asset debt and interest coverage ratio whereas financial performance is
dependent variable that value is measured by using four ratios as return on assets, return on equity , operating profit
margin and return on capital employed. Researcher has selected 13 major steel industries and applied various
statistical tools like standard deviation, correlation matrix, anova etc are employed for testing hypothesis with help of
SPSS22.

Moses Joshua Daniel (2016) in his study “A Study on Financial Status of TATA Motors Ltd” stated the main objectives
to analyzing the overall financial status of the TATA Motors Ltd by using various financial tools. In order to analyze
financial status in terms of Profitability, Solvency, Activity and Financial stability various accounting ratios have been
used. It is cleared from the study that 37 the company’s financial performance is satisfactory. The company has stable
growth and it shows a greater status in all the areas it works. The company has been suggested to reduce the
expenditure as it increases every year. Decrease in expenses will increase the profitability.

Hotwani Rakhi (2013) the author examines the profitability position and growth of company in light of sales and
profitability of Tata Motors for past ten years. Data is analyzed through rations, standard deviations and coefficient of
variance. The study reveals that there not exists a strong relationship between sales & profitability of company.

Daniel A. Moses Joshunar (2013) the study has been conducted to identify the financial strength and weakness of
the Tata motors Ltd. using past 5year financial statements. Trend analysis & ratio analysis used to comment of financial
status of company. Financial performance of company is satisfactory and also suggested to increase the loan levels
of company for the better performance.

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III OBJECTIVES OF STUDY:

Primary objectives:
 To Study the Financial Performance of Automobile Industry (Two Wheeler)
Secondary objectives:
 To Evaluate the Liquidity Position of the Company Under Study
 To Evaluate the Profitability Position of the Company Under Study.
 To Evaluate the Turnover Position of the Company Under Study.
 To Study the Performance of the Company through Comparative Analysis
and Common Size Statement.

SCOPE OF THE STUDY:

 The project is pertained to the company’s data available for past 10 years.
 Their report starts with the outline of the organization in focus, presenting the mission and vision of
the organization.
 Those who looking information about financial performance analysis of India Motocrop Limited. They
might get help from this report.

NEED FOR THE STUDY:

 Financial analysis is the starting point for making plans, before using any forecasting and planning
procedure.
 Every company should know its financial performance. By knowing the financial performance, they
can able to analysis whether the company attains satisfactory level or not. They can able to know the
liquidity position, profitability position and the solvency position.
 The financial performance is done whether the funds of the company is utilized in an effective manner
or not. So, in order to understand the financial position of Hero Motocrop Limtied.
 By analysis of financial performance of Hero Motocrop Limited. ltd it would be able to get a fair picture
of the financial positions of the company.
 Whether the financial condition of the firm is sound.
 By showing the financial performance to various lenders and creditors it is possible to get credit in
easy terms if good financial condition is maintained in the company within assets out weighting the
liabilities.
 This study suggests possible solution to overcome working capital problem.

Limitations:

 Financial statements are generally based on historical book cost.

 The ratio analysis does not predict the future. It shows the historical data.
 The financial position disclosed by balance sheet can’t be exact hence they have interim reports.
 The period of study is a short one and in-depth study was not possible.
 To have a better analysis it is advisable to base the study on the monthly or quarterly operational data of the
organization. Data of this type are not available for outsiders. So, the study has to bare these limitation

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IV DATA ANALYSIS AND INTERPRETATION

4.1 CURRENT RATIO:

YEAR CURRENT CURRENT CURRENT
ASSETS LIABILITIES RATIO CURRENT RATIO
2016 5,935.09 4,048,82
1.465 3
2017 7,453,18 4,093.33
1.820 2
2018 8,848.18 4,343.32
2.037 1
2019 8,115.64 4,130.36
0
1.964
2016 2017 2018 2019 2020
2020 8,280.56 3,976.06
2.084

INTERPRETATION:

The above table shows that the current ratio in the year 2016 was 0.86 and 0.146 and then it Increase to 1.820
in the year 2017, further move downwards to 2.037 in the year 2018. The Current Ratio of all the above three years is
above the Standard, So the Society can meet its short term Obligation.

Table 4.2: Quick Ratio for the period of 2016 – 2020:

QUICK QUICK QUICK 2

YEAR ASSETS LIABILITIES RATIO 1.8
2016 5,262.11 4,048,82 1.299 1.6
1.4
2017 6,796.87 4,093.33 1.660 1.2
1
0.8
2018 8,024.06 4,343.32 1.847
0.6
0.4
2019 7,043.27 4,130.36 1.705 0.2
0
2020 7,188.59 3,976.06 1.807 2016 2017 2018 2019 2020

INTERPRETATION:

The Chart Shows that Liquid Ratio in 2016 is Below 1.5, in 2017- 2020 is Above 1.5. The Quick Ratio of all
the Above Five Years is Above the Standard, So the Society can meet its Short term Obligation. The Company is Able
to Generate Enough from Operations to Pay for its Current Obligation with Current Assets.

CASH RATIO:

CASH & CASH CURRENT RATIO

YEAR EQUIVALENTS LIABILITIES (Times)
0.08
2016 131.36 4,048,82 0.0324 0.06

2017 136.73 4,093.33 0.0334 0.04

0.02
2018 141.34 4,343.32 0.0325
0
2016 2017 2018 2019 2020

2019 136.46 4,130.36 0.0330

2020 241.86 3,976.06 0.0608

SOURCE: SECONDARY DATA

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INTERPRETATION:
The above table shows that the cash ratio from 2016 to 2020. The Cash Ratio of all the Above Five Years is
Above the Standard. In the year of 2018 and 2019 the cash ratio goes down and the year of 2019, it goes up. In 2020,
the company having 0.060% of cash to pay its current liability

Working Capital Ratio for the period of 2016 – 2020 (Rs. In Cr.)

YEAR WORKING TOTAL RATIO

CAPITAL SALE (Times) 15
2016 1,886.27 28,442.70 6.63
10
2017 3.359.85 28,474.99 11.79
5
2018 4,504.86 32,230.49 13.97

2019 3,985.28 33,650.54 11.84 0

2016 2017 2018 2019 2020
2020 4,304.50 28,836.09 14.92

SOURCE: SECONDARY DATA

INTERPRETATION:
That Chart Shows that Working Capital in 2016 is 6.63. It Further Increases up to 11.79 and In 2020 the Working
Capital is 14.92.
The Company Working Capital is Rising Up.

Gross Profit Ratio for the period of 2016 – 2020 (Rs. In Cr.)

GROSSS SALE RATIO(%)

YEAR PROFIT
2016 4,434.87 28,442.70 15.609 20

2017 4,658.46 28,474.99 16.381 15

2018 5,244.16 32,230.49 16.290 10

5
2019 5,010.73 33,650.54 14.890
0
2020 3,896.32 28,836.09 13.588 2016 2017 2018 2019 2020

SOURCE: SECONDARY DATA

INTERPRETATION:
The ratio indicates the efficiency of production or trading operations. In 2014 the gross profit margin was
15.6%. In 2015 and 2016, the gross profit margin was 16.38% and 0.34 used

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TREND ANALSIS RATIO:

Trend analysis for current assets for the period 2016-2020 (Rs. In Cr)

CURRENT TREND
YEAR ASSETS ANALYSIS 200

150

2016 5,935.09 100 100

50
2017 7,453,18 125.5 0
2016 2017 2018 2019 2020
2018 8,848.18 149

2019 8,115.64 137.7

2020 8,280.56 139.5

SOURCE: SECONDARY DATA

INTERPRETATION:
From the above trend analysis showing, it is inferred as base year 2016. Current asset has been Increasing during
the year 2016 and 2017. The current year 2020 trend percentage for current asset is 139.5.
Trend analysis for current liability for the period 2016-2020 (Rs. In Cr)

YEAR CURRENT TREND

LIABILTIES ANALYSIS

2016 4,048,82 100 110

105
2017 4,093.33 101
100

2018 4,343.32 107 95

90
2019 4,130.36 102 2016 2017 2019 2020

2020 3,976.06 98

SOURCE: SECONDARY DATA

INTERPRETATION:
From the above trend analysis showing, it is inferred as base year 2016. Current Liabilities has been Increasing
during the year 2016 and 2017. The current year 2020 trend percentage for current asset is 98.

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COMPARATIVE BALANCE SHEET OF 2016-2017 (Rs. In Cr)

PARTICULARS 2016 2017 AMT CHANGES

(2016-2017)
ASSETS
Tangible Assets 3,717.85 4,310.73 592.88
Intangible Assets 118.89 84.86 34.03

Capital Work in 288.34 270.72 17.62

Progress
FIXED ASSETS 4,442.14 4,860.64 418.5

Non-Current 1,019.36 1,349.00 329.64

Investments

Other Non-CurrenT 73.68 983.08 909.4

Assets

TOTAL NON- 6,405.60 7,241.08 835.48

CURRENT ASSETS
CURRENT ASSETS

Trade Receivable 1,282.80 1,561.87 279.07

Cash and Cash 136.73

Equivalents

TOTAL CURRENT 5,935.09 7,453.18 1518.09

ASSETS

TOTAL ASSETS 14,694.26 16,738.80 2,044.54

LIABILITIES

Equity Share Capital 39.94 39.94 -

TOTAL SHARE 39.94 39.94 -

CAPITAL

Reserves and Surplus 7,904.81 10,071.35 2166.54

TOTAL 7,944.75 10,111.29 2166.54

SHAREHOLERS
FUNDS

TOTAL NON-
CURRENT 347.12 489.64 142.52
LIABILITIES

CURRENT
LIABILITIES

Trade Payables 2,766.88 3,247.27 480.39

Short Term Provisions 798.75 39.01 -759.74

TOTAL CURRENT
LIABILITIES 4,048.82 4,093.33 44.51

FINDINGS:

 The current year 2020 current ratio is found to be the highest 2.084 due to the decrease in the liabilities.
 The Quick Ratio of all the above then Four years is above the Standard Quick Ratio.
 The current year 2020 cash ratio has increased to 1.20 when compared to the previous year 2019 with 1.17.
 The Fixed Assets Turnover Ratio of the firm has in 2019 the ratio is 15.335 and it increase in the next year
2020 with 22.390.
 The Current Assets Turnover Ratio is Increasing during the Period of 2017 and again decrease in the Period
of 2019, and Again increase in the Next year 2020 with 22.390.
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 Share Capital has been remained Constant.

 Gross profit ratio is rising which is good for the company.
 Net profit ratio is showing rising percentage of profit of Hero MotoCrop Limited which show it is a growing
company.
 It Showed that Inventory Turnover Ratio of company is in 2016 Which rises to in 20 and increases again to
 The Working Capital Ratio is Increasing during the Period of 2017 and 2018 Again Decreasing in the Period
of 2019, and Again Increasing in the Next Year 2020 with 14.92

SUGGESTIONSt is suggested to the company can strongly focus on cost reduction strategy that will make a company
more profitability.
 The company has a bright future if it concentrates more on its working capital short term, investments, thus
achieving the overall objectives of the company.
 Thus it is essential to avoid excessive liquidity but to maintain sufficient liquidity to ensure smooth running of
the company operation.
 The company has better liquidity position and has to maintain same in the future.
 If Company Cut Down its Unnecessary expenses then they can increase their net Profit Which is a major
Impact for Company.
 Company may look into the measures how to reduce the loans and Loans and Advances in the coming periods.
 Company may look into maintain the current assets and current liabilities. Current liabilities may reduce coming
periods

CONCLUSION:

 The Company has been to increase its Sales and Profit during the Year. The Net Profit ratio has increased
which proved the company has been able to control the cost Effectively.
 Financial performance can improve the financial strength of company. The company liquidity position has to
increase and it will solve future problem. The company is maintaining the reserves and surplus better so it
can face financial stress in the future. To proper maintain of financial performance to achieve the company
goal.
 The Current Assets of the company are enough to meet the Current Liabilities, Hero Moto Crops Limited
Holding the Highe4st Share in Two Wheeler’s Market.
 The company has increasing liabilities over years. The company has also raised its investments and reserves
for future purpose.
 This clearly shows that the company is in the developing nature and their position in the society is satisfactory.

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