FINANCIAL PERFORMANCE ANALYSIS USING RATIOS: A CASE OF HONDA ATLAS COMPANY

Abstract

The purpose ofthis case study is to analyze the financial performance of one ofthe leading Automobile companies, that is, Honda Atlas company Pakistan. Through this study, the effect ofLiquidity Ratio, Efficiency Ratio, Activity Ratio, Profitability Ratio and Leverage Ratio on Net Profit Margin ofthe company has been investigated. Net Profit Margin is one ofthe most closely followed ratios by investors and shareholders. They look at it closely to analyze how good a company is at converting revenues into profits available for the shareholders. Data has been taken for the 12 years on quarterly bases from year 2009 to year 2020. Descriptive and Inferential statistics are applied on the data to examine the financial performance of the company. Findings showed that Return On Equity, Current Ratio, and Debt to Asset Ratio have a positive and significant relationship with Net Profit Margin of the company whereas Average Collection Period shows a negative and significant relation with the Net Profit Margin of Honda Atlas company. Inventory Turnover has a positive but insignificant relationship with the Net Profit Margin ofthe company. This study is useful for the existing and potential investors’ perspective as well as for the company so that the company will be able to bring improvements in Inventory Turnover ratio and Average Collection Period. Comparative case studies can be conducted in future to compare and contrast leading automobile companies and also comparison can be made with the industry averages.