Maruti Suzuki does not have many assets that can be converted into liquid in a

Maruti suzuki does not have many assets that can be

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Maruti Suzuki does not have many assets that can be converted into liquid in a short span, which shows the company is not financially secure in the short term. Company depends a lot on its inventory. 2017 2018 0 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45 0.4 0.3 0 Quick Ratio/Acid Test ratio/Liquid ratio Quick Ratio/Acid test ratio/Liquid ratio
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SOLVENCY RATIOS DEBT - EQUITY RATIO ( Ideal 2:1 ) Debt-Equity ratio - This is a measurement of the percentage of the company’s balance sheet that is financed by suppliers, lenders, creditors and obligors versus what the shareholders have committed. Maruti Suzuki has zero debt which means that the major part of finance is funded through equity. This results in a higher price earning ratio. A higher P/E ratio results in better future MPS. Both the years the company has maintained zero debt. PROPRIETARY/ NET WORTH RATIO ( Ideal 0.5:1 ) The net worth ratio states the return that shareholders could receive on their investment in a company, if all of the profit earned were to be passed through directly to them. This ratio is very important for the shareholder as it tells them about the investors return. It establishes the relationship between shareholders funds and total assets. Maruti Suzuki has a ratio of 0.6:1 ( Higher than ideal ratio of 0.5:1 ) which indicates that the company has good long term solvency. 2017 2018 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.67 0.69 0 Proprietary ratio/Net worth ratio propreitory ratio/Net worth ratio
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This ratio is very important for the bankers as it depicts the credit worthiness of the company Maruti Suzuki has zero debt therefore the company is self- sufficient in terms of finance. FIXED ASSETS TO NET WORTH RATIO ( Ideal 0.75:1 ) It is obtained by dividing the depreciated book value of fixed assets by the amount of proprietor’s funds. Maruti Suzuki has a ratio lower than the ideal ratio which states that less of fixed assets are funded through equity funds. 2017 2018 0 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.36 0.31 0 Fixed Asset to Net Worth Ratio Fixed asset to net worth ratio INTEREST COVERAGE RATIO ( Ideal 6-7 times )
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The purpose of this ratio is to show the percentage of proprietor’s fund investment in current assets. Maruti Suzuki has a less ratio as compared to fixed asset to net worth ratio which states that less of company’s current assets are funded by the owners funds. This is a good sign as company does not want much of owners funds to get blocked with the current assets. 2017 2018 0 0.05 0.1 0.15 0.2 0.25 0.24 0.19 0 Current Asset to Net Worth Ratio Current Asset to net worth ratio CURRENT ASSETS TO NET WORTH RATIO CURRENT LIABILITY TO NET WORTH RATIO ( Ideal 1:3 ) It is expressed as a proportion and is obtained by dividing current liabilities by proprietor's fund. Maruti Suzuki has maintained an ideal ratio in this parameter.
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  • Fall '19
  • Maruti Suzuki India Limited

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