ACKNOWLEDGEMENT

First of all we would like to thanks Allah who gave us the strength to complete our project. We are thankful to our teacher Sir Khurshid Alam for their support, who helped us when we were stuck in any part of the project. He also arranges extra classes for the discussion of project problems. He is a source of supervision for us.

| Pak Suzuki Motor Company

Table of Contents
1. Introduction of the company....3 1.1 History...3 1.2 Management of working capital....4 2. Ratio Analysis..5 3. Equity ratio6 4. Asset ratio7 5. Others ratios.....8 6. Profitability ratio..9 7. Marketability ratio10 8. Leverage11 9. Dividened policy.12 10. Comments on fund flow statement analysis..19 11. Conclusion and recommendations ..20 12.suggestions .........................................21

| Pak Suzuki Motor Company

Introduction of the Company

The firm was founded in 1983 as a joint venture between PAK and Suzuki, formalizing the arrangement by which Awami Auto Ltd. had produced the Suzuki SS80 from 1982. Suzuki originally owned 25% of the stock, and has gradually increased their holding; they now own 73.09%. The company now assembles a wide range of Suzuki vehicles and aims to produce 150,000 vehicles per year. The increased volume of remittances being sent home by the overseas Pakistani is also playing a vital role in a tremendous growth of market demand for automobile. The pace in growth in demand for the cars could be gauged from the very fact that banks and leasing companies has extended auto finance to the tune of rupees 24 billion in the first six months of the current fiscal year this compares to Rs. 22 billion auto finance dispersed by the banks and leasing companies doing fiscal year of 2003. Sales volume improved from 49,503 units to 65,120 units, the market shares of pak Suzuki was 51%. The capacity utilization during the year improves to 110%. The surplus production beyond designed capacity was achieved through labour efficiency and over time. Sales revenues increased by 32% corresponding to increase in volume. Gross profit decline from Rs 2.643 billion to Rs. 2.416 billion and as a percentage of a sales from 14.3% to 9.9%. The appreciation of yen and hike and prices of steel were the main factors responsible for the drop in gross profit. Selling and administrative expenses increased by rupees 44.24 million in absolute terms but as % of sales marginally declined from 1.2% to 1.1%. Financial charges mainly included markup accured on waiting for delivery of vehicles increased from Rs. 37.33 million to Rs. 40.060 million. The increase was due to increase in customers advances. The income tax expenses for the year are lower than that of last year in line with the lower profit.

| Pak Suzuki Motor Company

Management of working capital

CA-CL

=11,033,551-7,972,559
=3,060,992 The assets are increasing with greater proportional as compared to liabilities. Networking capital should be positive, and the companys capital is also positive because more assets and fewer current liabilities. Comparing to the base year 2003 current assets of the company is continuously Increasing over the year, which represents improving liquidity conditions

| Pak Suzuki Motor Company

RATIO ANALYSIS
1: Current ratios Formula: Current assets/current liabilities Year 2004 2003 Calculation 11,033,551/7,972,559 8,541,540/5,456,375 Result 1.383 1.56

Reasons: Current ratio is decreased from 1.56 in year 2003 to 1.383 in 2004. This ratio is decreased because the increase in liabilities is more than the increase in assets in 2004. 2: Acid ratio: Formula: Current assets-inventories/current liabilities Year 2004 2003 Calculation 11,033,5513,765,277/7,972,559 8,541,5402,258,413/5,456,375 Result 0.91 1.15

Reasons: This ratio is decreasing from 1.5 in 2003 to 0.91 in 2004 because the current assets are increased in less proportion than the increase in liabilities.

| Pak Suzuki Motor Company

EQUITY RATIO
1: Liability/equity Year 2004 2003 Reasons The value of year 2004 is 1.455 and that of year 2003 is 1.293, the decrease in year 2004 is because of the increase in liabilities. Calculation 7,972,559/5,475,718 5,456,275/4,218,175 result 1.455 1.293

2: Contingent liabilities/equity Year 2004 2003 Reasons The equity is greater than the previous year, because this year, the company has increased equity and more contingent liabilities from the previous which increased the ratio. Calculation 195,065,000/5,475,718 4,480,000/4,218,175 result 35.62 10.639

| Pak Suzuki Motor Company

ASSET RATIO
1: Profit/total asset Year 2004 2003 Reasons In year 2003 this ratio is 0.162 which is greater than the ratio in 2004. This shows that increase in income is proportionally less than the increase in total assets and in year 2004 the assets are generally less returns than in year 2003. 2: Admin expenses/Asset: Year 2004 2003 Reasons: The value of year 2003 is 0.016 and of year 2004 is 0.013, the decrease in year 2004 shows that the expenses of company are getting higher and its revenue is decreasing. 3: Equity/total asset Year 2004 2003 Reasons: The difference between the ratios of two ratios is almost same, so there was no increase in the total assets and the equity of the company. Calculation 5,475,718/13,448,277 4,218,175/9674550 Result 0.407 0.436 Calculation 178,772/13,448,277 159,080/9,674,550 result 0.013 0.016 Calculation 1,403,572/13,448,277 1,570,191/9,674,550 Result 0.14 0.162

| Pak Suzuki Motor Company

OTHERS RATIOS
1: Admin expenses/revenue Year 2004 2003 Reasons: The admin expense is less than the previous year because of the increase in expense and revenue from the previous year. 2: Borrowing/total liabilities Year 2004 2003 Reasons: The borrowing is more than the previous year because of the huge increase in borrowing and liabilities which increases the ratio. Calculation 699,736/7,972,559 380,544/5,456,375 Result 0.087 0.069 Calculation 178,772/24,461,966 159,080/18,484,220 Result 0.007 0.0086

PROFITABILITY RATIOS
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1: Return on equity Formula: Net profit/equity Year 2004 2003 Reasons: The return on equity is lower in 2004 than in 2003. It is decreasing because in year 2004 increase in net income is lower than increase in equity and equity is generating less return in 2004. 2: Return on investment Formula: net profit/total assets Year 2004 2003 Reasons: The value of return on investment in 2003 is 1.623 and the value in 2004 is 0.10, it measures the total effectiveness in generating profits with available assets. So the company is failing to produce profit with available asset thats the reason value in 2004 decreases. Calculation 1,403,572/13,448,277 1,570,191/9,674,500 result 0.10 1.623 Calculation 1,403,572/5,475,718 1,570,191/4,218,175 result 0.256 0.372

Marketability ratio:
1: Earnings per share
9 | Pak Suzuki Motor Company

Formula: net income-preferred stock Dividened/no of share outstanding Year 2004 2003 Reason: The earning per share of year 2004 is decreasing because the amount of net income minus preferred stock dividend is greater than the amount of for 2003. 2: Book value: Formula: assets - total liabilities Year 2004 2003 Reason: The book value is also increased due to the increase in equity due to increase in the number of shares. The book value of this year is more than the previous year. 3: P/E (price earning ratio) Formula: MPPS/EPS For the calculation of MPPS we have, 84.91/93.17=0.911 Year 2004 2003 Reason: The price earning ratio is greater in the year 2004 as compared to the year 2003 because the MPPS and EPS both increased. Calculation 0.911/2.8 0.911/3.1 Result 0.32 0.29 Calculation 13,448,277-7,972,559 9,674,550-5,456,375 Result 5,475,718 4,218,175 Calculations 1,403,572-0/491,312 1,570,191-0/491,312 Result 28%Or 2.8 31% or 3.1

Leverage
1. Operating leverage:
10 | Pak Suzuki Motor Company

For the year 2004

DOL=EBIT+FC/EBIT =2,338,271+139,702/2,338,271 =1.06 For the year 2003

DOL=EBIT+FC/EBIT = 2,597,540+118,712/2,597,540 =1.04 Reasons: In 2004 the DOL is increased because our EBIT (earning before interest and expense) and FC (fixed cost) increased 2. Financial leverage: For the year 2004

DFL=EBIT/EBIT-I-[PD/I-T] =2,338,271/2,338,271-40,060-[0/1-t] =2,338,271/2,338,271-40,060-0 =1.02 For the year 2003

DFL=EBIT/EBIT-I-[PD/I-T] =2,597,540/2,597,540-37,333-[0/1-t] = 2,597,540/2,597,540-37,333-0 =1.01 3. Total leverage: For the year 2004

Total leverage= DOL+DFL =2.08

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For the year 2003 Total leverage= DOL+DFL =2.05

Dividened Policy
1. Dividened payout ratio: For the calculation of Dividened per share, we have Formula: Dividened payout/ number of shares Year 2003 2004 calculation 147394/49131 49131/49131 Result 3 1

Formula: Dividened per share/ earnings per share Year 2003 2004 2. Dividened yield Formula: Dividened per share/ market price per share Year 2003 2004 Dividened policy adopted Dividened policy adopted is low regular and extra Dividened policy Calculation 3/10*100 1/10*100 Result 30% 10% calculation 3/3.96*100 1/28.57*100 Result 9% 4%

Growth rate
Formula: old value/new value Calculation: 147,394/49,131 = 3.00

Cash Flow
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2004 Property, plant and equipment Intangible asset Investment and related parties Long-term loans Long term Deposits and prepayment Deferred tax asset Current assets Stores spares and loose tools Stock and trade Trade debt Loans and advances Trade deposits and prepayments Accrued income on bank deposits Other receivables investment Sales tax adjustable Cash and bank balance Total asset Share capital and
13

2003 926,083 26,845 28,800 1,751 5,531

2,203,452 13,423 28,800 2,073 5,978

Direction of change 1,277,369 -13,422 322 447

Source

Uses 1,277,369

13,422

322 447

161,000

144,000

17,000

17,000

40,661 3,765,277 140,379 25,484 30,432 55,858

23,677 2,258,413 74,057 22,755 7,855 46,941

16,984 1,506,864 66,322 2,729 22,577 8,917

16,984 1,506,864 66,322 2,729 22,577 8,917

19,488 101,365 160,611 6,693,996 11,003,551 13,448,277

18,056 357,034 5,732,752 8,541,540 9,674,550

1,432 101,365 -196,423 961,244 NA NA 196,423

1,432 101,365 961,244

| Pak Suzuki Motor Company

reserves Authorized share capital Issued subscribed and paid up share capital Reserves Current liabilities Bill payable Security deposits Trade and other payables Advances from customers and dealers Income tax payable Provision for customs duties and sales tax Total share holders equity and liabilities

1,500,000 491,312

1,500,000 491,312

4.984,406 5,475,718 656,507 62,304 1,486,926 5,288,863

3,726,863 4,218,174 350,415 58,504 948,235 3,178,181

1,257,543

1,257,543

306,092 3,800 538,691 2,110,682

306,092 3,800 538,691 2,110,682

51,670 426,289

577,175 343,865

-525,505 82,424 82,424

525,505

7,972,559 13,448,277

5,456,375 9,674,550

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Statement of sources and uses

Sources Intangible asset 13,422 Sales tax adjustable 196,423 Reserves 1,257,543 Bill payable 306,092 Security deposit 3,800 Trade and other payables 538,691 Advances from customers and dealers 2,110,682 Provision for customs, duties and sales tax 82,424 Uses in Property, plant & equipment 1,277,369 Long term loans 322 Long term deposit & prepayments 447 Deferred tax 17,000 Stores, spares & loose tools 16,984 Stock and trade 1,506,864 Trade debt 66,322 Loans and advance 2,729

Trade, deposit & prepayments 22,577 Accrued income on a bank deposit 8,917 Other receivables 1,432 Investment 101,365 Cash & bank balance 961,244 Income tax payable 525,505 Total 4,509,077 4,509,077

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Adjusted statement of uses and sources

Calculations: Gross fixed asset= net fixed asset + depreciation = 1,277,369 + 19874 = 1,297,243 Depreciation is increasing thats why we take it as source and gross profit will be taken at uses. Net fixed asset will be taken positive as it is increasing.

Sources Intangible asset 13,422 Sales tax adjustable 196,423 Reserves 1,257,543 Bill payable 306,092 Security deposit 3,800 Trade and other payables 538,691 Advances from customers and dealers 2,110,682 Provision for customs, duties and sales tax 82,424 Depreciation 19,874

Uses Long term loans 322 Long term deposit & prepayments 447 Deferred tax 17,000 Stores, spares & loose tools 16,984 Stock and trade 1,506,864 Trade debt 66,322 Loans and advance 2,729 Trade, deposit & prepayments 22,577

Accrued income on a bank deposit 8,917 Other receivables 1,432 Investment 101,365 Cash & bank balance 961,244 Income tax payable 525,505 Gross fixed profit 1,297,243 4,528,951

Total 4,528,951

In the step we find which of the entries are operating, financial and investing activities.
16 | Pak Suzuki Motor Company

Sources Intangible asset [OP] 13,422 Sales tax adjustable [OP] 196,42 Reserves [OP] 1,257,54 Bill payable [FA] 306,092 Security deposit [IA] 3,800 Trade and other payables [FA] 538,691 Advances from customers and dealers [FA] 2,110,682 Provision for customs, duties and sales tax [OP ] 82,424 Depreciation [OP] 19,874

Uses Long term loans [FA] 322 Long term deposit & prepayments[OP] 447 Deferred tax [OP] 17,000 Stores, spares & loose tools [OP] 16,984 Stock and trade [OP] 1,506,864 Trade debt [FA] 66,322 Loans and advance [OP ] 2,729 Trade, deposit & prepayments [OP] 22,577 Accrued income on a bank deposit [OP] 8,917 Other receivables [OP] 1,432 Investment [ IA ] 101,365 Cash & bank balance 961,244 Income tax payable [OP] 525,505 Gross fixed profit [ IA ] 1,297,243 4,528,951

Total 4,528,951

Cash flow from operating activities

Intangible asset Sales tax adjustable Reserves Provision for customs, duties and sales tax Depreciation Long term deposit & prepayments Deferred tax Stores, spares & loose tools Stock and trade Loans and advance Trade, deposit & prepayments Accrued income on a bank deposit 13,422 196,423 1,257,543 82,424 19,874 <447> <17,000> <16,984> <1,506,864> <2,729> <22,577> <8,917>

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Other receivables Income tax payable

<1,432> <525,505>

________________________________________________________________ Operating Activities <532,769>

Cash flow from investing activities

Security deposit Investment Gross fixed profit Investing Activities 3,800 <101,365> <1,297,243> <1,394,808>

Cash flow from financial activities

Bill payable Trade and other payables Advances from customers and dealers Long term loans Trade debt Financial Activities 306,092 538,691 2,110,682 <322> <66,322> 2,888,821

Increase / decrease in cash

18 | Pak Suzuki Motor Company

961,244

Cash and cash balance 1January 2003 Cash and cash balance 31 December 2004

5,732,752 6,693,996

Comments on Funds Flow statement analysis

Cash flow show the inflow and outflow of the company. We have observed that the net cash from operating activity has increase from the previous year. But if we see the Dividened product, it decrease from previous year, the reason may be the same or increase amount of inventory. But at the end of year amount of cash and cash equivalent is higher than the previous year and it show the good picture of business because more the liquid asset we have, good the business is.

Conclusion and Recommendations

If we look at the overall performance of the company, then it is hard to say that the company is in a good position. Sales revenues increased by 32% corresponding to increase in volume. Gross profit decline from Rs 2.643 billion to Rs. 2.416 billion and as a percentage of a sales from
19 | Pak Suzuki Motor Company

14.3% to 9.9%. The appreciation of yen and hike and prices of steel were the main factors responsible for the drop in gross profit. Selling and administrative expenses increased by rupees 44.24 million in absolute terms but as % of sales marginally declined from 1.2% to 1.1%. Financial charges mainly included markup accured on waiting for delivery of vehicles increased from Rs. 37.33 million to Rs. 40.060 million. The increase was due to increase in customers advances. The income tax expenses for the year are lower than that of last year in line with the lower profit. Companys short term and long term solvency seems to be in trouble somehow. It will definitely be bankrupt and the major contributor towards its bankruptcy (if there is any) will be heavy taxes and duties and low per capita consumption. But this is due to debt financing of expanding projects Company has a bright future and its solvency will improve in future. Company is giving dividends in the years in which it incurred profit. So it is attractive for Dividend seekers. Future is looking brighter for motor industry due to economic and political stability in the country.

Suggestions
Pak Suzuki motor company has good sponsors but its short term and long term financial position is poor. There is need for the management to be encouraged by policy initiative by the Government.

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| Pak Suzuki Motor Company

The company has taken so many heavy loans for different expansion processes but they will just only provide benefits in long run period of time, so the management of PSMC should take effective steps to utilize these funds. Despite a difficult past, changes at the company and economic level lead to an improved outlook for KSML s future. There is rising demand for CARS, and cars prices are firm. The company is also attempting to reduce its substantial financial charges through debt restructuring. Management is quit efficient in reducing cost of production. Most of the companys sales are in cash from and account receivable turn is also very low and operating activities are carried out with efficiency. Assets are not utilize as efficiently as it could be, if company can boost its sales then high leverage will definitely support increase in the net income due to multiplier effect of financial and operating leverage. Future is looking brighter for CARS, manufacturers due to economic and political stability in the country. But there are some threats also.

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