In continuation of Case 5.5 given in Chapter 5, the summarized balance sheets of Hero Honda Motors
Question:
In continuation of Case 5.5 given in Chapter 5, the summarized balance sheets of Hero Honda Motors Limited and Tech Mahindra Limited for the year ended 31st March 2017 are given below:
Case 5.5
Hero MotoCorp Ltd. (Formerly Hero Honda Motors Ltd.) is the world’s largest manufacturer of twowheelers, based in India. In 2001, the company had achieved the coveted position of being the largest twowheeler manufacturing company in India and also, the ‘World No.1’ twowheeler company in terms of unit volume sales in a calendar year. Hero MotoCorp Ltd. continues to maintain this position till date.It derives its income from manufacturing and sale of motorcycles. Tech Mahindra Limited is engaged in the IT solutions and services, business process services and IT platforms. The company is present in 90 countries with over 115,000 associates.
The statements of profit and loss of two companies for the year ended 31st March 2017 are reproduced below:
Questions for Discussion
1. Comment upon the key differences in the composition of expenses for the two companies.
2. Hero Motocop has reported excise duty as a separate line item. Likewise, Tech Mahindra reported subcontracting expense as a separate line item rather than clubbing them with other expenses. What accounting principle in involved?
Questions for Discussion
1. Compare the composition of assets and liabilities of the two companies and identify the key differences.
2. Which of the two companies have higher level of liquidity?
3. Which of the two companies is likely to have higher level of depreciation? Why?
4. Tech Mahindra Limited has large noncurrent investments whereas Hero Honda Motors Limited has large current investments. What does it indicate?
5. Justify the difference between the level of trade receivables and inventories of the two companies.
Step by Step Answer: