managerial accounting assignment - projected financial statements of maruti suzuki

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Business & Mgmt

Published on February 18, 2014

Author: TusharUpadhyay

Source: slideshare.net

Managerial Accounting Assignment No. 2 Projected financial statements of Maruti Suzuki Ltd. for year 2013-14 Tushar Upadhyay Roll No: 311140 Division A

Statement of Profit and loss Growth rate * In percentage Compounded Annual growth rate (CAGR) Budgeted valueand increase over 201314 22.48 13.26 49370.17(+13.26) 0.51 18.45 16.41 45791.83(+16.41) -7.56 -19.47 50.96 15.35 5816.26(+15.35) 16.77 22.84 12.32 63.49 21.37 2259.06(+21.37) 71.41 25.04 0 11.53 19.04 287.72(+19.04) 2008-09 2009-10 2010-11 2011-12 2012-13 Sales 10.28 37.60 13.81 -2.81 Cost of goods sold 16.62 39.67 28.57 EBIT -20.95 81.76 Depreciation 24.34 Dividends -30.03 Parameters EBIT, DEPRECIATION AND DIVIDENDS GROWTH RATE SALES AND COGS GROWTH RATE Sales COGS 45 EBIT 40 Depreciation Dividends 100 35 80 30 25 60 20 40 15 20 10 5 0 0 -20 -5 2008-09 2009-10 2010-11 2011-12 2012-2013 CAGR -40 2008-09 2009-10 2010-11 2011-12 2012-2013 CAGR

Balance sheet * In percentage Growth rate Compounded Annual growth rate (CAGR) Budgeted value and increase over 201314 4.50 0 151.00(0) 9.52 22.33 15.12 21387.83(+15.11) -43.77 5.25 125.85 -244.20 -1847.15(-244.19) -2.80 22.20 38.23 9.51 -13.43 5060.61(-13.43) 19.70 19.33 12.61 25.26 33.76 11.37 21867.12(11.37) 2.12 2.75 124.29 8.89 -21.87 -259.53 -6444.21(-259.53) 2008-09 2009-10 2010-11 2011-12 2012-13 0.00 0.00 0.00 0.00 11.05 26.65 17.17 -20.19 12.22 19.57 Parameters Share capital Net worth Long term liabilities Current liabilities Gross Block Current Assets 200 Long term and current liability growth rate Gross block and current assets growth rate Share capital and Net worth growth rate 30 100 200 25 100 20 0 -100 cagr 15 0 10 2008-09 2009-10 2010-11 2011-12 2012-13 -100 2008-09 2009-10 2010-11 2011-12 2012-13 5 -200 -200 0 2008-09 2009-10 2010-11 2011-12 2012-13 -300 Long term liability current liability share capital Net worth cagr -300 Gross block current assets cagr

Analysis and Basis for the Budgeted values  There are too many minor as well as major dips and spikes in the above graphs that can be attributed to various political, social, environmental factors as well as company decisions. But we will try to see major dips and spikes in the graphs above  The first major dip that we see is in the Sales and COGS graph in 2011-12 whereby sales of Maruti Suzuki declined by -2.81%. It happened because of the Manesar plant incident and strike by the labor union.  Similarly in the case of EBIT and dividends, they followed the same pattern due to again, the above mentioned incident.  For the year 2012-13 Maruti Suzuki saw an increase in sales contributed by new product launches, increase in supply of diesel vehicles (which was an implication of budget 2012) and also because the number of sales in 2011 were low which made the base for calculation low itself.  Since Maruti Suzuki’s market share mainly comes from small car segment which is sensitive to fuel prices and economic conditions, the demand for its cars keep on fluctuating with a slight increase/decrease in fuel prices and inflation, the manesar plant and two plants in Gurgaon were shut down periodically to match the supply and demand.  On the basis of above as well as by the fact that as World Bank has lowered India’s growth for 2014 fiscal from 6.1% to 4.8%, it can be said that the budgeted growth rate of sales of 13.26% would not be right. The Company has also declared its forecast to be between 6-8%.  Already according to budget 2013 an excise duty of 3% was imposed on passenger vehicles in April, 2013 which will further dampen sales for the fiscal.  Also India ratings, a research firm, solidifies the low sales growth for 2014 by saying that outlook for the Indian automotive industry would be negative for the first time in 6 years.  This year has also seen the rupee dwindle over and over, which may lead to high import costs, which in turn may lead to hike in price and low sales.

 According to business standard Maruti Suzuki will cut down its import by 4% In order to maintain profitability, Thus due to this action may lead to increase in EBIT. Also as the Indian currency has become cheaper, it would lead to imports being cheaper and thus higher EBIT  Maruti Suzuki’s websites also suggest the company implementing various cost reduction programs such as cost engineering and reduction in material costs by localization initiatives. This clearly suggests there would be future reduction in COGS.  Maruti Suzuki is set to launch its new SUV XA Alpha by 2014, this may boost sales but not by much as with rising fuel prices SUV becomes somewhat redundant.

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