General Tyre Balance Sheet Analysis (2006-1010)

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General Tyres and Rubber Company

History and Balance Sheet Analysis

Submitted By Shazil Ahmad M .Naqeeb Arshad

Submitted to Sir Asim Khan


General Tyres and Rubber Company

ACKNOWLEDGEMENTS We would like to express the deepest appreciation for my teacher and mentor, Sir Asim Khan, who has shown the attitude and the substance of a genius: he continually and convincingly conveyed a spirit of adventure with regard to analysis, and an excitement with reference to teaching. He has been the motivation behind my extensive analysis and without his guidance and persistent help this project would not have been possible.


General Tyres and Rubber Company

EXECUTIVE SUMMARY The company that we have chosen to do the analysis belongs to the Automobile Parts and Accessories Sector and its name is The General Tyre and Rubber Company. We have collected complete financial reports from the stock exchange to analyse the performance of the company thoroughly. We have made 20 CCs to asses and measure the performance of the selected company with more precision and accuracy. Each CC includes various ratios and accounts to help an investor find out the over-all trend and performance of the company with a glimpse of an eye. We have analysed that the over-all performance of the company has gone worse from FY 06 to FY 10. One could easily tell that the company isnt performing well just by looking at its net income, sales, equity, and cash flows from operating activities and net profit margin. Although, this company is one of the largest companies of Pakistan which manufactures tyres but by looking at the financial data we could conclude that even large corporations like this could incur losses. The net income of the company for the 2008 and 2009 are negative which means the company has been incurring losses for two years. The sales of the company have increased but it isnt in proportion to the debt that it has been taking to run the business. The equity has decreased which shows that lesser no. of investors are interested in investing the company as opposed to the previous years. Over-all the companys performance is good than other companies in the same sector but its performance is not as good as an ideal companys performance is supposed to be.


General Tyres and Rubber Company

HISTORY General Tire, Inc., is a world leader in the manufacture and marketing of tires of all kinds and is a major exporter of tires around the world. A subsidiary of Continental Aktiengesellschaft (A.G.), Europe's second-largest tire and rubber manufacturer--and the fourth-largest in the world, General Tire constitutes the biggest and most important component of this German tire holding company. On the eve of the twenty-first century, the worldwide tire and rubber industry was in the hands of five major producers. In the nineteenth century, long before the invention of synthetic rubber and only a few decades after the discovery of vulcanization, hundreds of rubber and tire companies vied with one another. A very unlikely city, Akron, Ohio, was dubbed the "rubber capital of the world" in the late nineteenth century, and it was in Akron that the General Tire and Rubber Company was established in 1915. It is one of the few original American tire companies to have survived to the present day. The founder of the company, William F. O'Neil, was a native of the city, although he and his partner, Winfred E. Fouse, had first entered the rubber tire business in Kansas City, Missouri. In early 1909 O'Neil and Fouse pooled their capital and established the Western Rubber & Supply Company (renamed the Western Tire & Rubber Company in 1911), which only sold already made tires. Both partners, however, had bigger dreams; they were natives of Akron, where O'Neil's father, a wealthy merchant, agreed to give the two young entrepreneurs a loan in order to open a tire manufacturing business. In 1915 The General Tire & Rubber Company was launched. While O'Neil's father was president of the new company, William O'Neil, in the role of general manager, wielded most of the authority, and delegated little of it until his death in 1960.


General Tyres and Rubber Company

INTRODUCTION The General Tyre and Rubber Company of Pakistan Limited (Gentipak) is Pakistans premier industry. It was established in 1963 by General Tire USA and has been in production since 1964.

Gentipak has a Technical Services Agreement (TSA) with CONTINENTAL AG (Germanys largest tyre manufacturer) which enables it to produce tyres of GENERAL brand and provides the latest technology for production of tyres based on Continentals, R&D. The Plant and the Offices are located in suburb of Karachi. Initial production capacity was only 120,000 tyres per annum but is now around 2,000,000 tyres per annum. The plant is constantly upgraded and is equipped with the most modern technology in tyre manufacturing.


General Tyres and Rubber Company

VISION To be the leader in tyre technology by building the Companys image through quality improvement, competitive prices, customers satisfaction and meeting social obligations.


General Tyres and Rubber Company


To offer quality products at competitive prices to our customers. To endeavor to be the market leader by enhancing market share, consistently improving efficiency and the quality of our products.


To improve performance in all operating areas, so that profitability increases thereby ensuring growth for the company and increasing return to the stakeholders.


To create a conducive working environment leading to enhanced productivity, job satisfaction and personal development of our employees.


To discharge its obligation to society and environment by contributing to social welfare and adopting environmental friendly practices and processes.


General Tyres and Rubber Company



General Tyres and Rubber Company

CC#2: Income Statement (Profit and Loss Account)


General Tyres and Rubber Company

CC#2: Analysis of Income Statement (Profit and Loss Account) CC.2 shows the income statement of The General Tyre and Rubber Company from year 2006 to 2010. It shows that the sales of the company have increased over the years in FY 2006 to FY 2010.The Sales have been increased by the 58 percent if we compare it to FY 2006. The distribution cost the company has been increasing over the years. However, the Administrative expense has shown fluctuations and it is showing a decreasing trend from FY 06 to FY 10. The Finance Cost of the company has increased drastically from a very small value in FY 06 to a relatively very high value in FY 09and this drastic increase tells us that the company has started to rely heavily on debts and it is giving out huge amount of interests on these loans. The taxes of the company are showing a declining trend and taxation value for FY 09 is negative because of the fact that the EBT of the company for this year is negative but in the FY 10 the company EBT is positive and company gave tax, the positive trend in the FY 2010 is due the new contracts with the Toyota and Altas Honda. The Net income of the company is showing a declining trend and it has incurred huge amount of losses in FY 08 and FY 09. The increasing amount of interest expenses has played a huge role in the decline and eventual loss of the company. Overall, the net income of the General Tyre and Rubber Company shows that the performance of the company over the years is getting poorer and poorer but in FY 2010 the company made a record increase in the net income because in the FY 2010 the after myth of recession are decreased and on the same time the company got the two major contracts and they have increased the prices of their tyre as compare to the other brands and in the year FY 09 two long liabilities have come to end so the FY 10 starts with the lesser obligation so at that year company have given lesser interest so thats why the net income of the company at that time period is positive.


General Tyres and Rubber Company

CC#3: Balance Sheet


General Tyres and Rubber Company

CC#3: Analysis of Balance Sheet CC.3 includes the balance sheet of The General Tyre and Rubber Company from FY 2006 to FY 2010. The total no. of share outstanding from FY 06 to FY 10 is same. This shows that the company hasnt been increasing its no. of shareholders. However, the total amount of equity has shown a slight decrease and it is because of the decrease in the value of reserves that the company has been holding from the FY 06 to FY 09 but in the FY 2010 the equity portion is increased as compare to the previous years this is because the unappropriated profit is increased because in the FY 10 company reinvested its profit to expand the business rather than giving dividends to its shareholders. Total long-term liabilities of the company have increased from FY 06 to FY 07 but then it decreased from the FY 08 to FY 10. It seems like a good strategy on the part of the company because the company has decreased its liabilities due to adverse political and economic conditions in Pakistan. The Current liabilities of the company show an upward trend from FY 06 to FY 10. The total sum of Liabilities and Equity shows an uptrend because of the drastic increase in current liabilities from FY 05 to FY 09. Fixed Assets of the company do not show a drastic change they are rather same over the years. However, the current assets have increased from FY 06 to FY 10. This could be the counter effect of the increase in the current liabilities. Total Assets of the company also show an uptrend due to the increase in current assets.