Financial Analysis of Hero Honda

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Financial analysis of hero honda

Submitted By:
Luke Thachet [F10026]
PraneetaSaboo [F10040]
Ruth Sequeira [F10049]
Shruthi S [F10052]

ACKNOWLEDGEMENT

We would like to express our sincere gratitude to Mr.Dwarakanathan for guiding us through to understand the concepts of Commercial and Retail Banking. We would also like to thank him for his constant support that he offered for the successful completion of this project. Working on this project has helped us gain insights into the Automobile Industry. It also aided us in the practical application of the concepts covered in academics.

Table of Contents

ACKNOWLEDGEMENT1
OVERVIEW OF THE COMPANY2
ABSTRACT2
1. CREDIT RISK ASSESSMENT2
1.1. STAGE I: FINANCIAL RATIOS2
1.1.1. Current Ratio:2
1.1.2. Total Outstanding Liabilities to Total Net Worth:2
1.1.3. EBDIT to Interest Coverage Ratio:2
1.1.4. PAT to Net Sales:2
1.1.5. Return On Capital Employed:2
1.1.6. (Inventory + Receivables)/ Sales:2
1.2. STAGE II: HISTORICAL COMPARISON2
1.3. STAGE III: INDUSTRY COMPARISON2
1.4. STAGE IV: CONTINGENT LIABILITIES2
1.5. STAGE V: INDUSTRY RISK2
1.5.1 Competition & Market Risk:2
1.5.2. Industry Cyclicality:2
1.5.3. Regulatory Risk:2
1.5.4. Technology & Quality Control:2
1.5.5. User Profile:2
1.5.6. Inputs Profile:2
1.6. STAGE VI: MANAGEMENT RISK2
1.6.1. Integrity:2
1.6.2. Expertise, Competence/ Commitment:2
1.6.3. Track Record:2
1.6.4. Structure and Systems:2
1.6.5. Capital Market Perception:2
1.7. STAGE VII: TOTAL COMPUTATION2
2. NEW MODEL2
2.1. RELEVANT RATIOS FOR MANUFACTURING COMPANIES2
2.1.1 CAPITAL STRUCTURE OF THE COMPANY2
2.1.2. INTEREST COVERAGE2
2.1.3. DEBT SERVICE COVERAGE RATIO2
2.1.4. PROFITABILITY MARGIN2
2.1.5. RETURN ON CAPITAL EMPLOYED2
2.1.6. CURRENT RATIO2
2.1.7. FIXED ASSET TURNOVER RATIO2
2.1.8. INVENTORY TURNOVER RATIO2
2.1.9. OPERATING MARGIN2
2.1.10. DEBTORS TURNOVER RATIO2
2.1.11. OPERATING CASH FLOW TO LONG TERM DEBT2
2.2. RATING CRITERIA FOR MANUFACTURING COMPANIES2
2.2.1. BUSINESS RISK ANALYSIS2
2.2.2. INDUSTRY RISK2
2.2.3. GOVERNMENT POLICIES2
2.2.4. MARKET POSITION2
2.2.5. OPERATING EFFICIENCY2
2.2.6. TECHNOLOGY2
2.2.7 ACCESS TO RESOURCES2
2.2.8. PRICE VOLATILITY OF KEY RAW MATERIAL/INPUTS2
2.2.9 HUMAN RESOURCES2
2.2.10. CAPACITY UTILIZATION AND FLEXIBILITY2
2.2.11. LEVEL OF INTEGRATION2
2.2.12. ACCOUNTING QUALITY2
2.2.13. ADEQUACY OF CASH FLOW2
2.2.14. FINANCIAL FLEXIBILITY2
2.2.15. MANAGEMENT RISK ANALYSIS2
2.2.16. PROJECT RISK ANALYSIS2
2.3. METHODOLOGY FOR SCORING2
2.4. CALCULATIONS:2
2.4.1. FINANCIAL PARAMETERS:2
2.4.2. NON-FINANCIAL PARAMETERS:2
CONCLUSION:2

OVERVIEW OF THE COMPANY

Hero Honda Ltd. is the world's largest manufacturer of two - wheelers, based in India. In 2001, the company achieved the coveted position of being the largest 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 Honda Ltd. continues to maintain this position till date.  The story of Hero Honda began with a simple vision - the vision of a mobile and an empowered India, powered by its bikes. Hero Honda 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.  Hero Honda's mission is to become a global enterprise fulfilling its customers' needs and aspirations for mobility, setting benchmarks in technology, styling and quality so that it converts its customers into its brand advocates. The company will provide an engaging environment for its people to perform to their true potential. It will continue its focus on value creation and enduring relationships with its partners.  Hero Honda's key strategies are to build...
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