A Ratio Analysis Report on TATA MOTORS LTD
By VEER J THAKKAR
1|Page
A Project ON Ratio anaylsis on TATA MOTORS LTD By VEER J THAKKAR A report submitted in partial fulfillment of the requirements of THE MBA PROGRAM (The Class of 2015) For the Module Financial Accounting and Analysis To Mrs. Meghna Dangi
2|Page
Acknowledgements I heartily wish to extend heartfelt appreciation and gratitude to numerous Mentors, benefactors, and constituents who have collectively endowed the Wherewithal, faith and encouragement for me to navigate and complete my Project journey.
To Professor Kamlesh Mishra, my primary advisor and unflaggingadvocate, who mustered devoted, continuing, innovative and adaptivementorship to impel and shepherd my checked efforts through diverse andabounding challenges, I extend my deep and abiding respect and many, manythanks.
To Professor Jyoti Chandwani, my supporting advisor, who gently and patiently endured my academic tardiness, I offer commensurate veneration?
To the faculty and staff of the School of Management and Entrepreneurship, AURO University, Surat.
3|Page
TABLE OF CONTENT Ch. No
Topic
Page No
1.
INTRODUCTION OF THE COMPANY
6
2.
LITERATURE REVIEW
8
3.
RESEARCH METHODOLOGY
9
4.
THEORITICAL FRAME WORK OF RATIO
11
5.
RATIO ANALYSIS
15
6.
CONCLUSION AND RECOMENDATION
31
APPENDIXES 7.
Balance sheet
32
Profit and loss A/c 8.
REFERENCES
36
4|Page
EXECUTIVE SUMMARY The report included the ratio anaysisof TATA MOTORS. To see the prefomance of the company with the help of the ratio anaylsis the investor can easily measure companies stability. . For this analysis to be conducted, data is needed. Balance sheet and profit and loss account of the company are used which is purely a secondary data (given in appendixes) to make such analysis. The time period taken for conducting this analysis is from 2009 to 2013 i.e. five years. The conclusion made from this analysis is that TATA MOTORS has been declining and is performing not well in last two years, the company is going at declining sage as per the all ratio.
5|Page
CHAPTER 1 INTRODUCTION Tata Motors Limited (formerly TELCO, short for "Tata Engineering and Locomotive Company") is an Indian multinational automotivemanufacturing company headquartered in Mumbai, Maharashtra, India and a subsidiary of the Tata Group. Its products include passenger cars, trucks, vans, coaches, buses and military vehicles. It is the world's eighteenthlargest motor vehicle manufacturing company, fourth-largest truck manufacturer and secondlargest bus manufacturer by volume. Founded in 1945 as a manufacturer of locomotives, the company manufactured its first commercial vehicle in 1954 in a collaboration with DaimlerBenz AG, which ended in 1969. Tata Motors entered the passenger vehicle market in 1991 with the launch of the Tata Sierra, becoming the first Indian manufacturer to achieve the capability of developing a competitive indigenous automobile. Tata launched the Indica in 1998, the first fully indigenous Indian passenger car. Although initially criticised by autoanalysts, its excellent fuel economy, powerful engine and an aggressive marketing strategy made it one of the best selling cars in the history of the Indian automobile industry. A newer version of the car, named Indica V2, was a major improvement over the previous version and quickly became a mass-favourite. Tata Motors also successfully exported large quantities of the car to. So, On 27 September 2004, Tata Motors rang the opening bell at the New York Stock Exchange (NYSE) to mark the listing of Tata Motorsuth Africa. The success of Indica played a key role in the growth of Tata Motors. TATA OPERATION Tata Motors Cars Tata Motors is among the top four in passenger vehicles in India with products in the compact, midsize car and utility vehicle segments. The company’s manufacturing base in India is spread across Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar Pradesh), Pantnagar (Uttarakhand), Dharwad (Karnataka) and Sanand (Gujarat). Tata's dealership, sales, service and spare parts network comprises over 3,500 touch points. Tata Motors has more than 250 dealerships in more than 195 cities across 27 states and 4 Union Territories of India.[23] It has the 3rd largest Sales and Service Network after Maruti Suzuki and Hyunduai Tata Daewoo In 2004, Tata Motors acquired Daewoo Commercial Vehicle Company of South Korea. The reasons behind the acquisition were:
Company's global plans to reduce domestic exposure. The domestic commercial vehicle market is highly cyclical in nature and prone to fluctuations in the domestic economy. Tata Motors has a high domestic exposure of ~94% in the MHCV segment and ~84% in the light commercial vehicle (LCV) segment. Since the domestic commercial vehicle sales of the company are at the mercy of the structural economic factors, it is increasingly
6|Page
looking at the international markets. The company plans to diversify into various markets across the world in both MHCV as well as LCV segments. To expand the product portfolio Tata Motors recently introduced the 25MT GVW Tata Novus from Daewoo’s (South Korea) (TDCV) platform. Tata plans to leverage on the strong presence of TDCV in the heavy-tonnage range and introduce products in India at an appropriate time. This was mainly to cater to the international market and also to cater to the domestic market where a major improvement in the Road infrastructure was done through the National Highway Development Project .
Tata Daewoo is the second-largest heavy commercial vehicle manufacturer in South Korea. Tata Motors has jointly worked with Tata Daewoo to develop trucks such as Novus and World Truck and buses including GloBus and StarBus. In 2012, Tata will start developing a new line to manufacture competitive and fuel efficient commercial vehicles to face the competition posed by the entry of international brands like Mercedes-Benz, Volvo and Navistar into the Indian market. Tata Hispano Tata Hispano Motors Carrocera, S.A. is a bus and coach cabin manufacturer based in Zaragoza, Aragon, Spain and a wholly owned subsidiary of Tata Motors. Tata Hispano has plants in Zaragoza, Spain and Casablanca, Morocco. Tata Motors first acquired a 21% stake in Hispano Carrocera SA in 2005, and acquired the remaining 79% for an undisclosed sum in 2009, making it a fully owned subsidiary, subsequently renamed Tata Hispano Jaguar Land Rover Jaguar Land Rover PLC is a British premium automaker headquartered in Whitley, Coventry, United Kingdom and has been a wholly owned subsidiary of Tata Motors since June 2008, when it was acquired from Ford Motor Company.[25] Its principal activity is the development, manufacture and sale of Jaguar luxury and sports cars and Land Rover premium four wheel drive vehicles. It also owns the currently dormant Daimler, Lanchester and Rover brands.[26] Jaguar Land Rover has two design centres and three assembly plants in the UK. Under Tata ownership, Jaguar Land Rover has launched new vehicles including the Range Rover Evoque, Jaguar F-Type and the fourth-generation Range Rover.
7|Page
CHAPTER 2
Review of literature: The Economic Times (September15,2013), stated that, Auto major Tata Motors today said it will go ahead with planned investment of Rs 3,000 crore during the fiscal to support growth in future despite the economic slowdown. "As of now, there is no change in our plan. We will continue with our game plan of investment that we had planned during the beginning of this fiscal and we will continue to stay with that investment," Tata Motors Senior VP Commercial Passenger Vehicle Business Unit. Auto major Tata Motors today said its global sales, including Jaguar Land Rover, declined by 16.21 percent to 81,457 units in August, 2013. The company had sold 97,225 units in the corresponding period of 2012. Global sales of all passenger vehicles in August 2013 stood at 43,474 units, down 7.77 percent from 47,141 units sold in August 2012, Tata Motors said in a statement. Sales of the company's luxury brand Jaguar Land Rover, however, rose by 28.40 percent to 30,895 units during August, as compared to 24,060 units in August 2012.
The BSE (September 11,2013),stated that,Tata Motors Ltd has informed BSE regarding a Press Release dated titled "Tata Motors Group global wholesales at 81,457 in August 2013". The Tata Motors Group global wholesales in August 2013, including Jaguar Land Rover, were 81,457 numbers. Cumulative wholesales for the fiscal were 416,609 numbers. Global wholesales of all commercial vehicles Tata, Tata Daewoo and the Tata Hispano Carrocera range -- were 37,983 numbers. Cumulative commercial vehicles wholesales for the fiscal were 199,156 numbers.
8|Page
CHAPTER 3 RESEARCH METHODOLOGY RESEARCH DESIGN:A research design is the way or the methods or the procedure followed to conduct an scientific research. Some of the types of research design are exploratory research design, descriptive research design and causal research design. Each has its own meaning. Causal research design helps us to know a cause and effect relation between two variables, whereas exploratory research design is used to find new ideas and insight. Descriptive research design is a type of research method that is used when one wants to get information on the current status of a person or an object. in this study there only one company and no new ideas are to be found. The major focus would be on to know current financial position of TATA MOTORS. For this a descriptive type of research design is used.
TIME PERIOD:Data from 2009 to 2013 are collected to analyze the performance of the Ashok Leyland.
OBJECTIVES OF THE STUDY:There have been various objectives for this study, A detailed analysis of the financial statements that is the balance sheet and the income statement of TATA MOTORS The understanding and assessment of financial ratios based on the statements of the company. To recognize the position of the company through those ratios and data available. This recognition is a leading factor in changes of each and every company and the base and root of lots of management decisions.
DATA COLLECTION METHOD: There are two ways one can collect data i.e. through primary source (which means generating one’s own information by surveys or interviews etc.) or through secondary source (which are readily available like information in newspaper, magazines, websites etc.). For this report only secondary data are used as the basic objective is to study TATA MOTORS financial position, there is no need to conduct a survey or interviews, which are sources of primary data.
TYPE OF DATA:Data included in the balance sheet, profit and loss account of the company are used.
9|Page
METHOD OF ANALYSIS:Various financial ratios are used to evaluate the corporate financial positions along with various graphs and charts.
LIMITATION OF THE STUDY:No study can have zero limitations. So this report is no exception either. 1) Secondary data is never cent percent correct. So if the data used in the report for evaluation are incorrect or incomplete the results would be misleading. 2) Alteration of data at source of origin can alter the results. 3) Time constraints.
10 | P a g e
CHAPTER 4 THEOROTICAL FRAMEWORK OF RATIO
FINANCIAL RATIO ANALYSIS
Ratio analysis is such a significant technique for financial analysis. It indicates relation of two mathematical expressions and the relationship between two or more things. Financial ratio is a ratio of selected values on an enterprise's financial statement. There are many standard ratios used to evaluate the overall financial condition of a corporation or other organization. Financial ratios are used by managers within a firm, by current and potential stockholders of a firm, and by a firm‘s creditor. Financial analysts use financial ratios to compare the strengths and weaknesses in various companies. Values used in calculating financial ratios are taken from balance sheet, income statement and the cash flow of company, besides Ratios are always expressed as a decimal values, such as 0.10, or the equivalent percent value, such as 10%.
Essence of ratio analysis: Financial ratio analysis helps us to understand how profitable a business is, if it has enough money to pay debts and we can even tell whether its shareholders could be happy or not. Financial ratios allow for comparisons: 1. between companies 2. between industries 3. between different time periods for one company 4. between a single company and its industry average To evaluate the performance of one firm, its current ratios will be compared with its past ratios. When financial ratios over a period of time are compared, it is called time series or trend analysis. It gives an indication of changes and reflects whether the firm‘s financial performance has improved or deteriorated or remained the same over that period of time. It is not the simply changes that has to be determined, but more importantly it must be recognized that why those ratios have changed. Because those changes might be result of changes in the accounting polices without material change in the firm‘s performances. Another method is to compare ratios of one firm with another firm in the same industry at the same point in time. This comparison is known as the cross sectional analysis. It might be more useful to select some competitors which have similar operations and compare their ratios with the firm‘s. This comparison shows the relative financial position and performance of the firm. Since it is so easy to find the financial statements of similar firms through publications or Medias this type of analysis can be performed so easily. 11 | P a g e
To determine the financial condition and performance of a firm, its ratios may be compared with average ratios of the industry to which the firm belongs. This method is known as the industry analysis that helps to ascertain the financial standing and capability of the firm in the industry to which it belongs. Industry ratios are important standards in view of the fact that each industry has its own characteristics, which influence the financial and operating relationships. But there are certain practical difficulties for this method. First finding average ratios for the industries is such a headache and difficult. Second, industries include companies of weak and strong so the averages include them also. Sometimes spread may be so wide that the average may be little utility. Third, the average may be meaningless and the comparison not possible if the firms with in the same industry widely differ in their accounting policies and practices. However if it can be standardized and extremely strong and extremely weak firms be eliminated then the industry ratios will be very useful.
What does ratio analysis tell us? After such a discussion and mentioning that these ratios are one of the most important tools that is used in finance and that almost every business does and calculate these ratios, it is logical to express that how come these calculations are of so importance. What are the points that those ratios put light on them? And how can these numbers help us in performing the task of management? The answer to these questions is: We can use ratio analysis to tell us whether the business: 1. is profitable 2. has enough money to pay its bills and debts 3. could be paying its employees higher wages, remuneration or so on 4. is able to pay its taxes 5. is using its assets efficiently or not 6. has a gearing problem or everything is fine 7. is a candidate for being bought by another company or investor But as it is obvious there are many different aspects that these ratios can demonstrate. So for using them first we have to decide what we want to know, then we can decide which ratios we need and then we must begin to calculate them.
Which Ratio for whom: As before mentioned there are varieties of people interested to know and read these information and analyses, however different people for different needs. And it is because each of these groups have different type of questions that could be answered by a specific number and ratio.
12 | P a g e
Therefore we can say there are different ratios for different groups, these groups with the ratio that suits them is listed below: 1. Investors: These are people who already have shares in the business or they are willing to be part of it. So they need to determine whether they should buy shares in the business, hold on to the shares they already have or sell the shares they already own. They also want to assess the ability of the business to pay dividends. As a result the Return on Capital Employed Ratio is the one for this group. 2. Lenders: This group consists of people who have given loans to the company so they want to be sure that their loans and also the interests will be paid and on the due time. Gearing Ratios will suit this group. 3. Managers: Managers might need segmental and total information to see how they fit into the overall picture of the company which they are ruling. And Profitability Ratios can show them what they need to know. 4. Employees: The employees are always concerned about the ability of the business to provide remuneration, retirement benefits and employment opportunities for them, therefore these information must be find out from the stability and profitability of their employers who are responsible to provide the employees their need. Return on Capital Employed Ratio is the measurement that can help them. 5. Suppliers and other trade creditors: Businesses supplying goods and materials to other businesses will definitely read their accounts to see that they don't have problems, after all, any supplier wants to know if his customers are going to pay them back and they will study the Liquidity Ratio of the companies. 6. Customers: are interested to know the Profitability Ratio of the business with which they are going to have a long term involvement and are dependent on the continuance of presence of that. 7. Governments and their agencies: are concerned with the allocation of resources and, the activities of businesses. To regulate the activities of them, determine taxation policies and as the basis for national income and similar statistics, they calculate the Profitability Ratio of businesses. 8. Local community: Financial statements may assist the public by providing information about the trends and recent developments in the prosperity of the business and the range of its activities as they affect their area so they are interested in lots of ratios. 9. Financial analysts: they need to know various matters, for example, the accounting concepts employed for inventories, depreciation, bad debts and so on. therefore they are interested in possibly all the ratios. 10. Researchers: researchers' demands cover a very wide range of lines of enquiry ranging from detailed statistical analysis of the income statement and balance sheet data extending over many years to the qualitative analysis of the wording of the statements depending on their nature of research. 13 | P a g e
CLASSIFICATION OF RATIOS In isolation, a financial ratio is a useless piece of information. In context, however, a financial ratio can give a financial analyst an excellent picture of a company's situation and the trends that are developing. A ratio gains utility by comparison to other data and standards. Financial ratios quantify many aspects of a business and are an integral part of financial statement analysis. Financial ratios are categorized according to the financial aspect of the business which the ratio measures. Although these categories are not fixed in all over the world however there are almost the same, just with different names: 1. Profitability ratios which use margin analysis and show the return on sales and capital employed. 2. Rate of Return Ratio (ROR) or Overall Profitability Ratio: The rate of return ratios are thought to be the most important ratios by some accountants and analysts. One reason why the rate of return ratios is so important is that they are the ratios that we use to tell if the managing director is doing their job properly.
3. Liquidity ratios measure the availability of cash to pay debt, which give a picture of a company's short term financial situation. 4. Solvency or Gearing ratios measures the percentage of capital employed that is financed by debt and long term finance. The higher the gearing, the higher the dependence on borrowing and long term financing. The lower the gearing ratio, the higher the dependence on equity financing. Traditionally, the higher the level of gearing, the higher the level of financial risk due to the increase volatility of profits. It should be noted that the term ―Leverage‖ is used in some texts. 5. Turn over Ratios or activity group ratios indicate efficiency of organization to various kinds of assets by converting them to the form of sales. 6. Investors ratios usually interested by investors.
14 | P a g e
CHAPTER 5 Financial analysis of TATA MOTORS
1. CURRENT RATIO: The two liquidity ratios, the current ratio and the acid test ratio, are the most important ratios in almost the whole of ratio analysis and they are also the simplest to use. Liquidity ratios provide information about a firm‘s ability to meet its short- term financial obligations. They are of particular interest to those extending short term credit to the firm. Two frequently-used liquidity ratios are current and quick ratio. While liquidity ratios are most helpful for short-term creditors/suppliers and bankers, they are also important to financial managers who must meet obligations to suppliers of credit and various government agencies. A company's ability to turn short-term assets into cash to cover debts is of the utmost importance when creditors are seeking payment. Bankruptcy analysts and mortgage originators frequently use the liquidity ratios to determine whether a company will be able to continue as a going concern. A complete liquidity ratio analysis can help uncover weaknesses in the financial position of the business. Generally, the higher the value of the ratio, the larger the margin of safety that the company possesses to cover short-term debts. Current Assets Current ratio = ------------------------Current Liabilities
Rupees (in Cores) YEAR 2009 Current Assets
4423.18
Current Liabilities 10968.95 CURRENT RATIO
0.40
2010
2011
2012
2013
5939.67
7133.06
8411.63
6735.93
16909.30
15740.69
21271.45
16580.47
0.35
0.45
0.39
0.40
15 | P a g e
Current ratio 0.5 0.45
0.45 0.4
0.4
0.39
0.4
0.35
0.35 0.3 0.25
Current ratio
0.2 0.15 0.1 0.05 0 2009
2010
2011
2012
2013
ANALAYSIS: As per the figure shown the company current liabilities are more than company assets,for the good position the ratio should be above the one,but hers the tatamotors current ratio is less than one,the assets stabilities are less than liablities
2. QUICK OR ACID TEST RATIO: The essence of this ratio is a test that indicates whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory. So it is the backing available to liabilities that must be paid almost immediately. There are two terms of liquid asset and liquid liabilities in this formula, Liquid asset is all current assets except the inventories and prepaid expenses, because prepaid expenses cannot be converted to cash. The liquid liabilities include all current liabilities except bank overdraft and cash credit since they are not required to be paid off immediately. Liquid Assets Quick or Acid test Ratio = ----------------------Liquid Liabilities
Rupees (in Cores) YEAR
2009
2010
2011
2012
2013
Liquid Assets
2193.37
3004.08
3,241.67
3,823.40
2,280.90
Liquid Liabilities
10968.95
16909.30
15740.69
21271.45
16580.47
QUICK RATIO
0.20
0.18
0.20
0.18
0.14
16 | P a g e
0.2 0.18 0.16 0.14 0.12 Quick ratio
0.1 0.08 0.06 0.04 0.02 0 2009
2010
2011
2012
2013
ANALYSIS: The above graph suggests that the company has more liquid liabilities than liquid assets, it is bad sign for the company, company should not be able to meet the liquid liabilities which are higher as compare to liquid assets. The company liquid assets are continuously shows negative impact on liquid assets
3. TURN OVER RATIO: Accounting ratios that measure a firm's ability to convert different accounts within their balance sheets into cash or sales. Companies will typically try to turn their production into cash or sales as fast as possible because this will generally lead to higher revenues. Such ratios are frequently used when performing fundamental analysis on different companies.
I.
CURRENT ASSETS TURN OVER RATIO: It is almost like the fixed asset turnover ratio, it calculates the capability of organization to earn sales with usage of current assets. So it indicates with what ratio current assets are turned over in the form of sales. Net Sales Current Assets turn over ratio = ---------------------Current Assets
17 | P a g e
Rupees (in Cores) YEAR
2009
2010
2011
2012
2013
Net Sales
25,660.67
35,373.29
47,957.24
54,217.22
44,765.72
Current Assets
4423.18
5939.67
7133.06
8411.63
6735.93
CURRENT ASSETS TURNOVER RATIO
5.80
5.95
6.72
6.44
6.64
Current Asset Turnover Ratio 6.72
6.8 6.6
6.64 6.44
6.4 6.2 6
5.95
Current Asset Turnover Ratio
5.8
5.8 5.6 5.4 5.2 2009
2010
2011
2012
2013
ANALYSIS: As per the graph shown the companies current turnover ratio is rapidly is increase but 2011 is at highest 6.72TIMES
II.
WORKING CAPITAL TURNOVER RATIO: As its name suggests it is the relationship between turnover and working capital. It is a measurement comparing the depletion of working capital to the generation of sales over a given period. This provides some useful information as to how effectively a company is using its working capital to generate sales.
A company uses working capital to fund operations and purchase inventory. These operations and inventory are then converted into sales revenue for the company. The working capital turnover ratio is used to analyze the relationship between the money used to fund operations and the sales generated from these operations. The formula related is: 18 | P a g e
Net Sales Working Capital turnover ratio = ---------------------Working Capital
Rupees (in Cores) YEAR
2009
2010
2011
2012
2013
Net Sales
25,660.67
35,373.29
47,957.24
54,217.22
44,765.72
Working Capital
6,545.77
10,969.63
8,607.63
12,859.82
9,844.54
WORKING CAPITAL TURNOVER RATIO
3.92
3.22
5.58
4.22
4.55
Working Capital Turnover Ratio 6
5.58
5 4
4.55 4.22
3.92 3.22
3 2 1 0 2009
2010
2011
2012
2013
Analysis: The graph shows that when shareholder’s invested their money in to the business, it helps to increase the sales. At the year starting in increasing continuously, it means that 1 rupees the shareholders investing the result shows direct impact on sales, the net sales in increasing reasoned may be requirement of working capital or machinery etc. But in the last year it gives decreasing trend.
III. CAPITAL EMPLOYED TURNOVER RATIO: The capital employed turnover ratio tells us the state of the relationship between the shareholders' investment in the business and the sales that the management of the business has been able to generate from it.
19 | P a g e
Net Sales Capital employed turnover ratio = ----------------------Capital Employed Rupees (in Cores) YEAR
2009
2010
2011
2012
2013
Net Sales
25,660.67
35,373.29
47,957.24
54,217.22
44,765.72
Capital Employed
25,559.83
31,429.69
35,912.05
30,379.29
33,403.53
CURRENT EMPLOYED TURNOVER RATIO
1.00 TIMES
1.13 TIMES
1.34 TIMES
1.78 TIMES
1.34 TIMES
Current Employed Turnover Ratio 1.78 1.8 1.6 1.34
1.4 1.2
1.34
1.13 1
1
Current Assets Turnover Ratio
0.8 0.6 0.4 0.2 0 2009
2010
2011
2012
2013
. Analysis: The graph shows that when shareholder’s invested their money in to the business, it helps to increase the sales. At the year starting in increasing continuously, it means that 1 rupees the shareholders investing the result shows direct impact on sales, the net sales in increasing reasoned may be requirement of working capital or machinery etc.. But in the last year it gives negative trend.
IV.
SOLVENCY OR GEARING RATIO:
Gearing is concerned with the relationship between the long terms liabilities that a business has and its capital employed. The idea is that this relationship ought to be in balance. It is a general term describing a financial ratio that compares some form of owner's equity (or 20 | P a g e
capital) to borrowed funds. The shareholders and lenders of long term loans may be interested in this ratio.
DEBT EQUITY RATIO: This ratio reflects the relative claims of creditors and share holders against the assets of the firm, debt equity ratios establishment relationship between borrowed funds and owner capital to measure the long term financial solvency of the firm. The ratio indicates the relative proportions of debt and equity in financing the assets of the firm. It is calculated as: Debt equity ratio =
Debt ------------------------Shareholder’s fund
The debts side consists of all long term liabilities of the firm. The shareholders‘ fund is the share capital plus reserve and surpluses. The lower the debt equity ratio the higher the degree of protection enjoyed by the creditors. The debt equity ratio defined by the controller of capital issue, debt is defined as long term debt plus preference capital which is redeemable before 12 years and shareholders‘ fund is defined as paid up equity capital plus preference capital which is redeemable after 12 years plus reserves & surpluses. The general norm for this ratio is 2:1. on case of capital intensive industries as norms of 4:1 is used for fertilizer and cement industry and a norms of 6:1 is used for shipping units. Rupees (in Cores) YEAR
2009
2010
2011
2012
2013
Debt
13,165.56
16,625.91
15,898.75
11,011.63
14,268.69
Shareholder’s Fund
514.05
570.6
634.65
634.75
638.07
CURRENT ASSETS TURNOVER RATIO
25.61 TIME
29.14TIME
25.05TIME
17.35TIME
22.36TIME
21 | P a g e
Debt equity ratio 35 29.14
30 25.61
25.05
25
22.36
20
17.35 Debt equity ratio
15 10 5 0 2009
2010
2011
2012
2013
Analysis: The graph shows that company shareholders have lesser contribution than creditors. The huge amount of debt is the reason behind that, it is not good for the company to increase his debt and not fully utilize the shareholder’s funds. High amount of debt increase the interest upon it, indirectly it affect to the income and profit.
PROPRITERY RATIO: It is primarily the ratio between the proprietor‘s funds and total assets. It indicates the relationship between owners fund and total assets. And shows the extent to which the owner s‘fund are sunk in assets or different kinds of it. NOTE: Owner‘s funds is equal to Shareholders Funds
Proprietary ratio =
Proprietors fund ---------------------Total Assets
Rupees (in Cores) YEAR
2009
2010
2011
2012
2012
Propriter’s Fund
514.05
570.6
634.65
634.75
638.07
Total Assets
25,559.83
31,429.69
35,912.05
30,379.29
33,403.53
CURRENT ASSETS TURNOVER RATIO
2.01%
1.82%
1.77%
2.09%
1.91%
22 | P a g e
Proprietary ratio 2.20% 2.09%
2.10% 2.01% 2.00%
1.91% 1.90%
Proprietary ratio
1.82% 1.77%
1.80% 1.70% 1.60% 2009
2010
2011
2012
2013
Analysis: As per data, Proprietor ratio shows overall positive relationship between propriters fund and total assets. When the proprietor fund is increasing at that time investment in assets value or return also increased. In year 2012 there is boom of 2.09%,but in last year 2013 again decrease by 1.91%. .
GROSS PROFIT RATIO: The gross profit margin ratio tells us the profit a business makes on its cost of sales. It is a very simple idea and it tells us how much gross profit our business is earning. Gross profit is the profit we earn before we take off any administration costs, selling costs and so on. So we should have a much higher gross profit margin than net profit margin. High ratios are favorable in this, since it indicates the business is earning a good return on the sale of its merchandise.
Gross profit ratio =
Gross Profit ------------------ X 100 Net Sales
23 | P a g e
Rupees (in Cores) YEAR
2009
2010
2011
2012
2013
Gross Profit
13,905.17
18,416.81
21,883.32
27,111.76
30,312.14
Net Sales
25,660.67
35,373.29
47,957.24
54,217.22
44,765.72
Gross Profit Ratio
54.19 %
52.06%
45.63%
50.01%
67.71%
Gross profit ratio 67.71% 70.00% 60.00%
54.19%
52.06% 45.63%
50.00%
50.01%
40.00% Gross profit ratio 30.00% 20.00% 10.00% 0.00% 2009
2010
2011
2012
2013
Analysis: From the above graph the Gross profit ratio shows the decrease trend in the GP which is bad sign for the company, company should have to increase or maintain its high level of GP but is going in negative way. As compare to year 20110to 2010, there is big increase in gross profit in all five years, it is 67.71%.
NET PROFIT RATIO: This shows the portion of sales available to owners after all expenses. A high profit ratio is higher profitability of the firm. This ratio shows the earning left for shareholder as percentage of Net sales. Net Margin Ratio measures the overall efficiency of production, Administration selling, financing, pricing and Taste Management. Net Profit After tax Net profit ratio = ----------------------------- X 100 Net Sales 24 | P a g e
Rupees (in Cores) YEAR
2009
2010
2011
2012
2013
NPAT
1,001.26
2,240.08
1,811.82
1,242.23
301.81
Net Sales
25,660.67
35,373.29
47,957.24
54,217.22
44,765.72
Net Profit Ratio
3.90%
6.33%
3.78%
2.29%
0.67%
Net Profit Ratio 7.00%
6.33%
6.00% 5.00%
3.90%
3.78%
4.00% Net Profit Ratio 2.29%
3.00% 2.00%
0.67%
1.00% 0.00% 2009
2010
2011
2012
2013
Analysis: The graph shows the increase and decrease trend, in first two year it was increasing than it went down, it indicate decrease in profitability of the shareholders. As compae frist two year in last year it has been boom indecreasing.
25 | P a g e
OPERATING NET PROFIT RATIO: The graph shows the increase and decrease trend, in first two year it was increasing than it went down, it indicate decrease in profitability of the shareholders. As compare to first two year last year it has been boom indecreasing. This ratio establishes the relation between the net sales and the operating net profit. The concept of operating net profit is different from the concept of net profit operating net profit is the profit arising out of business operations only. This is calculated as follows: Operating net profit = Net Profit + Non operating expenses – non operating income. Alternatively, this profit can also be calculated by deducting only operating expenses from the gross profit. This ratio is calculated with help of the following formula.
Operating net Profit Operating net profit ratio = ---------------------------- X 100 Net Sales
Rupees (in Cores) YEAR
2009
Operating Net Profit 1,723.10
2010
2011
2012
2013
4,032.83
4,705.72
4,177.55
1,717.98
Net Sales
25,660.67
35,373.29
47,957.24
54,217.22
44,765.72
Operating Net Profit Ratio
6.71%
11.40%
9.81%
7.70%
3.84%
Operating Net Profit Ratio 12.00%
11.40%
10.00%
9.81%
8.00%
7.70% 6.71%
6.00%
Operating Net Profit Ratio
4.00%
3.84%
2.00% 0.00% 2009
2010
2011
2012
2013
26 | P a g e
Analysis: As shown in graph, in year 2009 the operating net profit ratio increases, it continuous till second year an than it is going up to its highest level of 11.40. it shows the negative direction which is decrease in operating net profit ratio. In the last year as compare to first year it goes to below the first year level.
OVER ALL PROFITABILITY RATIO OR ROR RATIO: The ROI is perhaps the most important ratio of all. It is the percentage of return on funds invested in the business by its owners. In short, this ratio tells the owner whether or not all the effort put into the business has been worthwhile. If the ROI is less than the rate of return on an alternative, the owner may be wiser to sell the company, put the money in risk-free investment such as a bank savings account, , and avoid the daily struggles of small business management. These Liquidity, Leverage, Profitability, and Management Ratios allow the business owner to identify trends in a business and to compare its progress with the performance of others through data published by various sources. The owner may thus determine the business's relative strengths and weaknesses.
RETURN ON ASSETS RATIO: This ratio actually measures the profitability of the investments in the firm. And the related formula is: Net Profit After tax Returns on assets = ---------------------------- X 100 Assets
Rupees (in Cores) YEAR
2009
2010
2011
2012
2013
NPAT
1,001.26
2,240.08
1,811.82
1,242.23
301.81
Assets
5435.87
5936.76
6621.14
6607.32
7959.92
Returns on Assets
3.50%
7.14%
9.53%
8.57%
5.45%
27 | P a g e
Returns on Assets 12.00% 10.00%
9.53% 8.57%
8.00% 7.14% 6.00% 4.00%
5.45%
Returns on Assets
3.50%
2.00% 0.00% 2009
2010
2011
2012
2013
Analysis: The graph shows the trend increasing in first three years and after that it goes down. In starting years the return on asset ratio is increase. This means that the company is increasing their revenue per unit of asset but then it becomes negative. This is bad signs for the company. But overall company is average returns of 6.8.
RETURNS ON CAPITAL EMPLOYED: This Ratio is considered to be very important. It indicates the percentage of net profits before interest and tax to total capital employed. It reflects the overall efficiency with which capital is used. The ratio of a particular business should be compared with other business firms in the same industry to find out the exact position of the business.
It is calculated as:
Returns on capital employed =
Net Profit before interest and tax ----------------------------------------- X 100 Capital Employed
Note: Capital Employed = Equity Capital + Preference Capital + Reserves and Surplus + Long Term Debt- Fictitious Assets
28 | P a g e
Rupees (in Cores) YEAR
2009
2010
2011
2012
2013
NPBIT
1769.85
4219.82
3686.48
2559.65
1562.69
Capital Employed
25,559.83
31,429.69
35,912.05
30,379.29
33,403.53
Returns on capital employed
6.92%
13.43%
10.27%
8.43%
4.68%
Return On Capital Ratio 16.00% 13.43%
14.00% 12.00%
10.27% 10.00% 8.00%
8.43% 6.92%
Return On Capital Ratio
6.00%
4.68%
4.00% 2.00% 0.00% 2009
2010
2011
2012
2013
ANALYSIS: In graph, return on capital employed is Decreasing year 2013, , in year 2010 shareholders get benefit maximum 13.43%.the overall business efficiency is increasing.in last year it is very less.
RETURNS ON EQUITY: This ratio also known as return on shareholders‘ funds or return on proprietors‘ funds or return on net worth, indicates the percentage of net profit available for equity shareholders to equity shareholders‘ funds and not on total capital employed. It is calculated as:
Return on equity ratio =
NPAT – Preference Dividend --------------------------------------- X 100 Equity shareholders fund 29 | P a g e
Rupees (in Cores) YEAR
2009
2010
2011
2012
2012
NPAT
1,001.26
2,240.08
1,811.82
1,242.23
301.81
Equity Shareholder fund
514.05
570.6
634.65
634.75
638.07
Returns on equity ratio
194.78%
392.58%
285.48%
195.70%
47.30%
Return On Capital Ratio 450.00% 392.58%
400.00% 350.00%
285.48%
300.00% 250.00% 200.00%
195.70%
194.78%
Series 1
150.00% 100.00% 47.30%
50.00% 0.00% 2009
2010
2011
2012
2013
Analysis: The figure shows that the returns on equity is increasing in the beginning and touches highest level in the year 2010 which is 329.58% then it is declining in last two year the reason is decrease in company profit
30 | P a g e
CHAPTER 6 CONCULSION From last two years the automobiles sectors has been struggle. After analysing all the ratio, current ratio has mostly remained below the 1 which means the company has been under pressure of not having enough assets to repay their short term obligations. Quick ratio suggests that the company has more liquid liabilities than liquid assets, it is bad sign for the company, company should not be able to meet the liquid liabilities which are higher as compare to liquid assets. Current assets turnover ratio shows that company current assets value is more than 6 times in that year, company capability to earn profit through current assets is very good. As per the data, the working capital not that much capable to generate the sales revenue, when company needs the working capital that were not available at that time so it should defiantly have impact on sales. The capital employed shows that when shareholder’s invested their money in to the business, it helps to increase the sales. The net sales in increasing reasoned may be requirement of working capital or machinery etc.. The debt equity ratio describes that company creditors have higher contribution than shareholders. Company is only depending on debt not utilizing the shareholders capital. The gross profit is continuously going down and net profit ratio also going negative after the three years. The company overall performance is weak it may be for high debt and increase in interest upon it. From the ratio analysis the company TATA MOTORS profile is decling due to the decline of whole automobile industries should be advisable not to invest in the company.
31 | P a g e
APPENDIX BALANCE SHEET OF COMPANY Balance sheet of Tata Motors Mar '13 Mar '12 Mar '11 Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities
Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories
Mar '10
Mar '09
638.07 638.07
634.75 634.75
634.65 634.65
570.6 570.6
514.05 514.05
0
0
3.06
0
0
0
0
0
0
0
18,496.7 7 0
18,709.1 6 23.75
19,351.4 0 24.19
14,208.5 5 24.63
11,855.1 5 25.07
19,134.8 4 5,877.72 8,390.97 14,268.6 9 33,403.5 3
19,367.6 6 6,915.77 4,095.86 11,011.6 3 30,379.2 9
20,013.3 0 7,766.05 8,132.70 15,898.7 5 35,912.0 5
14,803.7 8 7,742.60 8,883.31 16,625.9 1 31,429.6 9
12,394.2 7 5,251.65 7,913.91 13,165.5 6 25,559.8 3
Mar '13
Mar '12
Mar '11
Mar '10
Mar '09
30,312.1 4 11,611.4 4 18,700.7 0 1,507.84
27,111.7 6 9,965.87
21,883.3 2 8,466.25
18,416.8 1 7,212.92
13,905.1 7 6,259.90
17,145.8 9 2,073.96
13,417.0 7 4,058.56
11,203.8 9 5,232.15
7,645.27
19,934.3 9 4,455.03
20,493.5 5 4,588.23
22,624.2 1 3,891.39
22,336.9 0 2,935.59
12,968.1 3 2,229.81
6,954.04
32 | P a g e
Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets
Contingent Liabilities Book Value (Rs)
1,818.04 462.86
2,708.32 1,115.08
2,602.88 638.79
2,391.92 612.16
1,555.20 638.17
6,735.93
8,411.63
7,133.06
5,939.67
4,423.18
5,305.91
6,400.65
5,852.42
5,248.71
5,909.75
0 725.88 1,790.13 1,141.10 503.65 12,041.8 15,538.1 14,775.6 12,329.4 10,836.5 4 6 1 8 8 0 0 0 0 0 16,580.4 21,271.4 15,740.6 16,909.3 10,968.9 7 5 9 0 5 2,200.77 3,600.82 3,222.71 2,763.43 1,877.26 18,781.2 24,872.2 18,963.4 19,672.7 12,846.2 4 7 0 3 1 -6,739.40 -9,334.11 -4,187.79 -7,343.25 -2,009.63 0 0 0 0 2.02 33,403.5 3
30,379.2 9
35,912.0 5
31,429.6 9
25,559.8 3
2,838.67
3,284.12
4,798.83
3,708.33
5,433.07
59.98
60.95
314.93
259.03
240.64
33 | P a g e
PROFIT AND LOSS Profit and loss account Tata Motor Mar '13 Mar '12 Mar '11 Mar '10 Income Sales Turnover
Mar '09
49,319.7 3 4,554.01 44,765.7 2 1,662.33 143.6 46,571.6 5
59,220.9 4 5,003.72 54,217.2 2 -11.16 623.84 54,829.9 0
52,067.8 7 4,110.63 47,957.2 4 341.53 354.22 48,652.9 9
38,173.3 9 2,800.10 35,373.2 9 1,220.86 606.63 37,200.7 8
28,538.2 0 2,877.53 25,660.6 7 921.29 -238.04 26,343.9 2
33,764.4 0 Power & Fuel Cost 484.66 Employee Cost 2,837.00 Other Manufacturing 95.61 Expenses Selling and Admin 0 Expenses Miscellaneous 6,963.47 Expenses Preoperative Exp -953.8 Capitalised Total Expenses 43,191.3 4 Mar '13
41,081.7 9 550.89 2,691.45 2,386.91
35,047.0 5 471.28 2,294.02 1,753.46
25,366.1 2 362.62 1,836.13 1,289.60
18,801.3 7 304.94 1,551.39 866.65
3,248.91
2,790.19
2,126.10
1,652.31
1,610.69
2,067.42
1,707.06
1,438.89
-907.13
-817.68
-740.54
-916.02
50,663.5 1 Mar '12
43,605.7 4 Mar '11
31,947.0 9 Mar '10
23,699.5 3 Mar '09
12 mths
12 mths
12 mths
12 mths
12 mths
1,717.98 3,380.31 1,387.76 1,992.55 1,817.62 0
4,177.55 4,166.39 1,218.62 2,947.77 1,606.74 0
4,705.72 5,047.25 1,383.79 3,663.46 1,360.77 106.17
4,032.83 5,253.69 1,246.25 4,007.44 1,033.87 144.03
1,723.10 2,644.39 704.92 1,939.47 874.54 51.17
Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials
Operating Profit PBDIT Interest PBDT Depreciation Other Written Off
34 | P a g e
Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs)
174.93 0 174.93
1,341.03 0 1,341.03
2,196.52 0 2,196.52
2,829.54 0 2,829.54
1,013.76 15.29 1,029.05
-126.88 301.81 9,426.94 0 645.2 77.55
98.8 1,242.23 9,581.72 0 1,280.70 181.54
384.7 1,811.82 8,558.69 0 1,274.23 192.8
589.46 2,240.08 6,580.97 0 859.05 132.89
12.5 1,001.26 4,898.16 0 311.61 34.09
31,901.1 6 0.95
31,735.4 7 3.91
6,346.14
5,705.58
5,140.08
28.55
39.26
19.48
100 59.98
200 60.95
200 314.93
150 259.03
60 240.64
35 | P a g e
BIBLOGRAPHY http://en.wikipedia.org/wiki/Tata_Motors https://www.google.co.in/?gws_rd=cr&ei=eCg_Ut68IMnDrAf1k4HwCw#q=tatamotors.com http://www.moneycontrol.com/stocks/company_info/stock_news.php?sc_id=TEL&durationType=Y &Year=2010
36 | P a g e
