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A STUDY ON RATIO ANALYSIS IN TATA MOTORS.

CHAPTER-I

INTRODUCTION:

When we observed the financial statements comprising the balance sheet and profit or
loss account is that they do not give all the information related to financial operations of a
firm, they can provide some extremely useful information to the extent that the balance sheet
shows the financial position on a particular date in terms of structure of assets, liabilities and
owners' equity and profit or loss account shows the results of operation during the year. Thus
the financial statements will provide a summarized view of the firm. There fore in order to
learnt about the firm the careful examination of in valuable reports and statements through
financial analysis or ratios is required.

Meaning and Definition:

Ratio analysis is one of the powerful technique which is widely used for interpreting
financial statements. This technique serves as a tool for assessing the financial soundness of
the business. The idea of ratio analysis was introduced by Alexander Wall for the first time in
1919. Ratios are quantitative relationship between two or more variables taken from financial
statements.

Ratio analysis is defined as. "The systematic use of ratio to interpret the financial
statement so that the strength and weakness of the firm as well as its historical performance
and current financial condition can be determined.

In the financial statements we can find many items are co-related with each other For
example current assets and current liabilities, capital and long term debt, gross profit and net
profit purchase and sales etc.

Whole taking managerial decision the ratio of such items reveals the soundness of
financial position. Such information will be useful for creditors, shareholders, management
and all other people who deal with company.
Principles of Ratio Selection

The following principles should be considered before selecting the ratio:

(1) Ratio should be logically inter-related.

(2) Pseudo ratios should be avoided.

(3) Ratio must measure a material factor of business.

(4) Cost of obtaining information should be borne in mind.

(5) Ratio should be in minimum numbers.

(6) Ratio should be facilities comparable.

Advantages of Ratio Analysis

Ratio analysis is necessary to establish the relationship between two accounting


figures to highlightthe significant information to the management or users who can analyses
the business situation and tomonitor their performance in a meaningful way. The following
are the advantages of ratio analysis:

(1) It facilitates the accounting information to be summarized and simplified in a required


form.

(2) It highlights the inter-relationship between the facts and figures of various segments of
business.

(3) Ratio analysis helps to remove all type of wastages and inefficiencies.

(4) It provides necessary information to the management to take prompt decision relating to
business.

(5) It helps to the management for effectively discharge its functions such as planning,
organizing, controlling, directing and forecasting.

(6) Ratio analysis reveals profitable and unprofitable activities. Thus, the management is able
to concentrate on unprofitable activities and consider to improve the efficiency.

(7) Ratio analysis is used as a measuring rod for effective control of performance of business
activities.
(8) Ratios are an effective means of communication and informing about financial soundness
made by the business concern to the proprietors, investors, creditors and other parties.

(9) Ratio analysis is an effective tool which is used for measuring the operating results of the
enterprises.

(10) It facilitates control over the operation as well as resources of the business.

(11) Effective co-operation can be achieved through ratio analysis.

(12) Ratio analysis provides all assistance to the management to fix responsibilities.

(13) Ratio analysis helps to determine the performance of liquidity, profitability and solvency
position of the business concern.

Limitations of Ratio Analysis

Ratio analysis is one of the important techniques of determining the performance of


financial strength and weakness of a firm. Though ratio analysis is relevant and useful
technique for the business concern,the analysis is based on the information available in the
financial statements. There are some situations, where ratios are misused, it may lead the
management to wrong direction. The ratio analysis suffers from the following limitations:

Ratio analysis is used on the basis of financial statements. Number of limitations of


financialstatements may affect the accuracy or quality of ratio analysis.

Ratio analysis heavily depends on quantitative facts and figures and it ignores qualitative
data. Therefore this may limit accuracy.

Ratio Analysis is a poor measure of a firm's performance due to lack of adequate standards
laid for ideal ratios.

It is not a substitute for analysis of financial statements. It is merely used as a tool for
measuring the performance of business activities.

Ratio analysis clearly has some latitude for window dressing.

It makes comparison of ratios between companies which is questionable due to differences in


methods of accounting operation and financing.
Ratio analysis does not consider the change in price level, as such, these ratio will not help in
drawing meaningful inferences.

CLASSIFICATION OF RATIOS

Accounting Ratios are classified on the basis of the different parties interested in
making use of the ratios. A very large number of accounting ratios are used for the purpose of
determining the financial position of a concern for different purposes. Ratios may be broadly
classified in to:

(1) Classification of Ratios on the basis of Balance Sheet.

(2) Classification of Ratios on the basis of Profit and Loss Account.

(3) Classification of Ratios on the basis of Mixed Statement (or) Balance Sheet and Profit and
Loss Account.

This classification further grouped in to:

I. Liquidity Ratios

II. Profitability Ratios

III. Turnover Ratios

IV. Solvency Ratios

V. Over all Profitability Ratios

These classifications are discussed hereunder:

1. Classification of Ratios on the basis of Balance Sheet: Balance sheet ratios which establish
the relationship between two balance sheet items. For example, Current Ratio, Fixed Asset
Ratio, Capital Gearing Ratio and Liquidity Ratio etc.

2. Classification on the basis of Income Statements: These ratios deal with the relationship
between two items or two group of items of the income statement or profit and loss account.
For example, Gross Profit Ratio, Operating Ratio, Operating Profit Ratio, and Net Profit
Ratio etc.
3. Classification on the basis of Mixed Statements: These ratios also known as Composite or
Mixed Ratios or Inter Statement Ratios. The inter statement ratios which deal with
relationship between the item of profit and loss account and item of balance sheet. For
example, Return on Investment Ratio, Net Profit to Total Asset Ratio, Creditor's Turnover
Ratio, Earning Per Share Ratio and Price Earning Ratio etc

RATIO ANALYSIS

Ratio analysis is an accounting tool, which can be used to measure the solvency, the
profitability, and the overall financial strength of a business, by analyzing its financial
accounts (specifically the balance sheet and the profit and loss account).

Accounting ratios are very easy to calculate and they enable a business to highlight
which areas of its finances are weak and therefore require immediate attention.

Financial ratio analysis is a useful tool for determining a customer's overall financial
condition. Industry-wide financial ratios are published by a variety of sources, including Dun
& Bradstreet. Financial ratios are useful for making quick comparisons. Banks and trade
creditors use financial ratio analysis to help them decide whether a business is a good credit
risk or not.

Ratio analysis is a tool to help evaluate the overall financial condition of a customer's
business. Ratios are useful for making comparisons between a customer and other businesses
in an industry. A financial ratio is a simple mathematical comparison of two or more entries
from a company's financial statements. Creditors use ratios to chart a company's progress,
uncover trends and point to potential problem areas.

There are five main categories of accounting ratio:

 Liquidity ratios, these measure the solvency of the business and its ability to meet
short-term debts.
 Profitability (or 'performance') ratios, these analyses the profit made over the last year.
 Financial efficiency (or 'activity') ratios, these analyses the efficiency of the business
in terms of the use of its resources in generating sales.
 Gearing ratio, this measures the proportion of the capital of the business which has
come from external sources, and must be repaid with interest.
 Shareholders' ratios, these measure the strength of the company, its share price and its
dividends.
Ratio analysis involves the calculation and interpretation of key financial performance
indicators to provide useful insights.

Financial information is always prepared to satisfy in some way the needs of various
interested parties (the "users of accounts"). Stakeholders in the business (whether they are
internal or external to the business) seek information to find out three fundamental questions:

(1) How is the business trading?

(2) How strong is the financial position?

(3) What are the future prospects for the business?

For outsiders, published financial accounts are an important source of information to enable
them to answer the above questions.

BACKGROUND OF THE STUDY

Ratio Analysis is one of the techniques of financial analysis where ratios are used as a
yardstick for evaluating the financial condition and performance of a firm. Analysis and
interpretation of various accounting ratios gives a better understanding of financial condition
and performance of firm. Trend ratios indicate the direction of change in the performance –
improvement, deterioration or constancy- over the year.
NEED FOR THE STUDY:

Thus it is needed for following purposes:

 The ability of the firm to meet its current obligation.


 The limit or extent to which the firm has used its borrowed funds.
 The efficiency with which the firm is utilizing in generating sales revenue.
 The operating efficiency and performance of the company .

STATEMENT OF THE PROBLEM:

Ratio Analysis is an important factor for the day to day operation of the business of
the company. The study is conducted to evaluate the ratio analysis of the company and
identify and know the financial position of the company.

OBJECTIVES OF THE STUDY:

 Main Objective is to study the different ratios used in TATA MOTORS


 To know the mills financial performance based on ratios.
 To find out the companies efficiency based on past and present profitability
ratios
 To study the liquidity position of the company.
 To improve its future performance by analyzing its financial statements

SCOPE OF THE STUDY:

 As it is very difficult to decide any inference from the mass of figures included in
financial statements. So in order to judge accurately the financial health of the firm, it
is generally regroup and analyze the figures as disclosed by these financial statement.
 The use of Ratio Analysis or Accounting Ratios enables conclusions to be drawn from
the figures as to know the earning capacity, operational efficiency, and financial
condition etc. of a concern.
 The study includes the calculation of different financial ratios. It compares three years
financial statements of the company to know its performance in these different years.
 To know whether the company is growing or incurring losses or it is stagnant in its
performance.

PERIOD OF THE STUDY:

The study was carried out in TATA MOTORS , in the field of Ratio analysis for the
period of 2011 to 2016.

METHODOLOGY OF STUDY

 Research design
 Data Collection

RESEARCH DESIGN:

The research design is a pattern or an outline of research project working. It is a statement


of only essential elements of study, those that provide basic guidelines for the details of the
project. The present study is being conducted followed by Descriptive Research Design.

DATA COLLECTION:

 Primary Data
 Secondary Data

Primary Data

The research vehicle for primary data collection is unstructured


interview with the managers to get information regarding all variables for the performance
of a firm.
Secondary Data

It is collected from Annual Report, relevant files & records of TATA


MOTORS.

LIMITATION OF THE STUDY:

 The study is done only on the Balance sheet and profit and Loss A/c
 Study is based on information provided by the company.
 The limitation of ratio analysis is itself a limitation in achievement the set objective.

CHAPTERIZATION OF THE STUDY:


 CHAPTERIZATION I: Deals with Introduction
 CHAPTERIZATION II: Deals with Review of literature
 CHAPTERIZATION III: Deals with Company profile
 CHAPTERIZATION IV: Deals with Data Analysis and Interpretation
 CHAPTERIZATION V: Deals with Finding Suggestion and Conclusion
CHAPTER-II
REVIEW OF LITERATURE

Bollen (1999)
Conducted a study on Ratio Variables on which he found three different uses of ratio
variables in aggregate data analysis: (1) as measures of theoretical concepts, (2) as a meansto
control an extraneous factor, and (3) as a correction for heteroscedasticity. In the use of
ratiosas indices of concepts, a problem can arise if it is regressed on other indices or variables
thatcontain a common component. For example, the relationship between two per capita
measures may be confounded with the common population component in each variable.
Regarding thesecond use of ratios, only under exceptional conditions will ratio variables be a
suitable means of controlling an extraneous factor. Finally, the use of ratios to correct for
heteroscedasticity is alsooften misused. Only under special conditions will the common form
forgers soon with ratiovariables correct for heteroscedasticity. Alternatives to ratios for each
of these cases arediscussed and evaluated.
Cooper (2000)
Conducted a study on Financial Intermediation on which he observed that thequantitative
behavior of business-cycle models in which the intermediation process acts either asa source
of fluctuations or as a propagator of real shocks. In neither case do we find
convincingevidence that the intermediation process is an important element of aggregate
fluctuations. For an economy driven by intermediation shocks, consumption is not smoother
than output,investment is negatively correlated with output, variations in the capital stock are
quite large, andinterest rates are procyclical. The model economy thus fails to match
unconditional moments for the U.S. economy. We also structurally estimate parameters of a
model economy in whichintermediation and productivity shocks are present, allowing for the
intermediation process to propagate the real shock. The unconditional correlations are closer
to those observed only whenthe intermediation shock is relatively unimportant.
Khatik S.K,Varghese Titto (2013)
“Financial analysisof steel authority of India limited” states that financial analysis is used
to analyze whether an entity is stable, solvent, liquid or profitable enough to be invested in
financial analysis is just like doctor who examine the fitness of the human body. For analysis
of the financial position of the SAIL, gross profit ratio, net profit and operating ratio,
productivity investment and solvency ratios are calculated.
Rakesh and Kulkarni (2012) analyzed the Gujarat Food Testing industry working capital
evaluation on selected five company for the eleven years and performed ratio analysis,
descriptive statistics etc. The study concluded with all the company financial performance
with sound effective as well as current and quick ratio, current asset on total asset, sales,
turnover etc. are analyzed with the help of hypothesis and used ANOVA. In this research also
researcher followed this attributes.

Each company could invest on the basis of current performance compared with previous year
or with other company. Decision making, additional investment, liquidity position changes in
working capital depend upon the performance & return of company reports. Funds are highly
required for day-to -day business operations of the firm and how to utilize it and in what way
should avoid loses from the investment are discussed here plus, it happens by ineffective
management. The objective of the paper is to analyze the performance of Food Testing
industry in the selected companies from Tamil Nadu. In addition, the data collected from the
CMIE and used the tools of ANOVA and descriptive statistics

Zahid and nanik (2011) concludes the overall performance of the Food Testing sector was
adversely affected by crisis through analysis of income statement, debt payment ability,
management and inventory sales, receivables, productivity, fixed assets, etc.

Nusrat and Assocham (2014) analyzed the performance of sector analysis on 28 Food
Testing companies from BSE with the attributes of net sales, net profit, interest cost, raw
material, power and fuel cost.
Virambhai (2010)Food Testing industry productivity and financial efficiency focused on
industry’s current position and its performance. It concluded the company/management
should try to increase the production, minimize the cost and operating expenses, exercise
proper control on liquidity position, reduction of power, fuel, borrowing funds, overheads,
interest burden, etc

Ajay Kumar (2011) discussed on Indian Food Testing industry analysis with inflation, Food
Testing production, sales, Income, PAT, Income, etc. and found the export and import
performance in the crisis period.
South Asia network of economic research institute report on “Impact of financial crisis on
Food Testing industry of Pakistan” (2011) March by Imran Alam states when developing
countries saw record declines in their stock markets. These declines were registered in those
sectors which were dependent on the markets of developed world. Its repercussions were seen
in developing countries also.

Ongoing financial crisis has affected them through many channels. However, exports,
employment and investment are suspected to be affected most. Food Testing sector is the
most important sector of Pakistan’s economy, contributing about 57% to the export earnings
and 46% to the employment. The results revealed that rising unemployment rate; high cost of
production, lower demand and exchange rate volatility in foreign countries had Unpleasant
impact on Pakistan’s export indents. The main cause of the above mentioned deteriorating
conditions is said to be the ongoing financial crisis.

CHAPTER – III

INDUSTRY PROFILE AND COMPANY PROFILE

Tata Motors

Tata Motors is India's largest automobile company, with consolidated revenues of Rs1,88,818
crore (USD 34.7 billion) in 2012-13. Through subsidiaries and associate companies, Tata
Motors has operations in the UK, South Korea, Thailand, Spain, South Africa and Indonesia.
Among them is Jaguar Land Rover, the business comprising the two iconic British brands.
Following a strategic alliance with Fiat in 2005, it has set up an industrial joint venture with
Fiat Group Automobiles to produce both Fiat and Tata cars and Fiat powertrains.
Tata Motors is the country's market leader in commercial vehicles and among the top three in
passenger vehicles. It is also the world's fifth-largest truck and fourth-largest bus
manufacturer. Tata Motors commercial and passenger vehicles are being marketed in several
countries in Europe, Africa, the Middle East, South Asia, South East Asia, South America,
CIS and Russia. It has franchisee / joint venture assembly operations in Bangladesh, Ukraine
and Senegal.

The company, formerly known as Tata Engineering and Locomotive Company, began
manufacturing commercial vehicles in 1954 with a 15-year collaboration agreement with
Daimler Benz of Germany. It has, since, developed Tata Ace, India's first indigenous light
commercial vehicle; the Prima range of trucks; the Ultra range of international standard light
commercial vehicles; Tata Safari, India's first sports utility vehicle; Tata Indica, India's first
indigenously manufactured passenger car; and the Nano, the world's most affordable car.

Tata Motors has over 4,500 engineers, technicians and scientists at R&D centres in India,
South Korea, Italy, Spain and the UK.

Areas of business

Tata Motors makes passenger cars, multi-utility vehicles and light, medium and heavy
commercial vehicles.
 Passenger cars: The company launched the compact Tata Indica in 1998, the sedan
Indigo in 2002 and the station wagon Indigo Marina in 2004.

 Utility vehicles: The Tata Sumo was launched in 1994 and the Tata Safari in 1998.

 Commercial vehicles: The commercial vehicle range extends from the light two-tonne
truck to heavy dumpers and multi-axled vehicles in the above 40-tonne segment.

 Passenger buses: The company also manufactures and sells passenger buses, 12-
seaters to 60-seaters, in the light, medium and heavy segments.

Joint ventures, subsidiaries, associates

Tata Motors has a joint venture (JV, 51:49) with Marcopolo, the Brazil-based maker of bus
and coach bodies. Tata Motors (SA) (Proprietary) is Tata Motors' JV with Tata Africa Holding
(Pty); the JV assembly plant at Rosslyn, Pretoria, assembles light, medium and heavy
commercial vehicles ranging from 4-50 tonnes from semi knocked down kits.

Other associates include:

 Tata Daewoo Commercial Vehicle Company, a 100-percent subsidiary of Tata Motors


in the business of heavy commercial vehicles (www.tata-daewoo.com).

 Tata Motors European Technical Centre is a UK-based, 100-percent subsidiary


engaged in design engineering and development of products.

 Telco Construction Equipment Company makes construction equipment and provides


allied services. Tata Motors has a 60 percent holding; the rest is held by Hitachi
Construction Machinery Company, Japan (www.telcon.co.in/).

 Tata Technologies provides specialised engineering and design services, product


lifecycle management and product-centric information technology services
(www.tatatechnologies.com/).

 Tata Motors (Thailand) is a joint venture between Tata Motors (70 percent) and
Thonburi Automotive Assembly Plant Co (30 percent) to manufacture and market the
company’s pickup vehicles in Thailand (www.tatamotors.co.th/).
 Tata Cummins manufactures high horsepower engines used in the company’s range of
commercial vehicles.

 HV Transmissions and HV Axles are 100-percent subsidiaries that make gearboxes


and axles for heavy and medium commercial vehicles.

 TAL Manufacturing Solutions is a 100-percent subsidiary that provides factory


automation solutions and designs and manufactures a wide range of machine tools
(www.tal.co.in/).

 Hispano Carrocera is a Spanish bus manufacturing company in which Tata Motors


acquired a 100 percent stake in 2009 (www.tatahispano.com).

 Concorde Motors is a 100 percent subsidiary retailing Tata Motors’ range of passenger
vehicles (www.concordemotors.com/).

 Tata Motors Finance is a 100 percent subsidiary in the business of financing


customers and channel partners of Tata Motors (www.tmf.co.in).

Tata Motors was established in 1945 as Tata Engineering and Locomotive Co. Ltd. to
manufacture locomotives and other engineering products. It is India's largest automobile
company, with standalone revenues of Rs. 25,660.79 crores (USD 5.5 billion) in 2008–09. It
is the leader in commercial vehicles in each segment, and among the top three in passenger
vehicles with winning products in the compact, midsize car and utility vehicle segments. The
company is the world's fourth largest truck manufacturer, and the world's second largest bus
manufacturer.
The company's 23,000 employees are guided by the vision to be 'best in the manner in which
they operate best in the products they deliver and best in their value system and ethics.'
Tata Motors' presence indeed cuts across the length and breadth of India. Over 4 million Tata
vehicles ply on Indian roads, since the first rolled out in 1954. The company's manufacturing
base in India is spread across Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar
Pradesh), Pantnagar (Uttarakhand) and Dharwad (Karnataka). Following a strategic alliance
with Fiat in 2005, it has set up an industrial joint venture with Fiat Group Automobiles at
Ranjangaon (Maharashtra) to produce both Fiat and Tata cars and Fiat powertrains. The
company is establishing a new plant at Sanand (Gujarat). The company's dealership, sales,
services and spare parts network comprises over 3500 touch points; Tata Motors also
distributes and markets Fiat branded cars in India.
Tata Motors, the first company from India's engineering sector to be listed in the New York
Stock Exchange (September 2004), has also emerged as an international automobile
company. Through subsidiaries and associate companies, Tata Motors has operations in the
UK, South Korea, Thailand and Spain. Among them is Jaguar Land Rover, a business
comprising the two iconic British brands that was acquired in 2008. In 2004, it acquired the
Daewoo Commercial Vehicles Company, South Korea's second largest truck maker. The
rechristened Tata Daewoo Commercial Vehicles Company has launched several new products
in the Korean market, while also exporting these products to several international markets.
Today two–thirds of heavy commercial vehicle exports out of South Korea are from Tata
Daewoo. In 2005, Tata Motors acquired a 21% stake in Hispano Carrocera, a reputed Spanish
bus and coach manufacturer, with an option to acquire the remaining stake as well. Hispano's
presence is being expanded in other markets. In 2006, it formed a joint venture with the
Brazil–based Marcopolo, a global leader in body–building for buses and coaches to
manufacture fully–built buses and coaches for India and select international markets. In 2006,
Tata Motors entered into joint venture with Thonburi Automotive Assembly Plant Company
of Thailand to manufacture and market the company's pickup vehicles in Thailand. The new
plant of Tata Motors (Thailand) has begun production of the Xenon pickup truck, with the
Xenon having been launched in Thailand at the Bangkok Motor Show 2008.
Tata Motors is also expanding its international footprint, established through exports since
1961. The company's commercial and passenger vehicles are already being marketed in
several countries in Europe, Africa, the Middle East, South East Asia, South Asia and South
America. It has franchisee/joint venture assembly operations in Kenya, Bangladesh, Ukraine,
Russia and Senegal.
The foundation of the company's growth over the last 50 years is a deep understanding of
economic stimuli and customer needs, and the ability to translate them into customer–desired
offerings through leading edge R&D. With over 2,000 engineers and scientists, the company's
Engineering Research Centre, established in 1966, has enabled pioneering technologies and
products. The company today has R&D centres in Pune, Jamshedpur, Lucknow, in India, and
in South Korea, Spain, and the UK. It was Tata Motors, which developed the first
indigenously developed Light Commercial Vehicle, India's first Sports Utility Vehicle and, in
1998, the Tata Indica, India's first fully indigenous passenger car. Within two years of launch,
Tata Indica became India's largest selling car in its segment. In 2005, Tata Motors created a
new segment by launching the Tata Ace, India's first indigenously developed mini–truck.
In January 2008, Tata Motors unveiled its People's Car, the Tata Nano, which India and the
world have been looking forward to. The Tata Nano has been subsequently launched, as
planned, in India in March 2009. A development, which signifies a first for the global
automobile industry, the Nano brings the comfort and safety of a car within the reach of
thousands of families. The standard version has been priced at Rs.100, 000 (excluding VAT
and transportation cost).
Designed with a family in mind, it has a roomy passenger compartment with generous leg
space and head room. It can comfortably seat four persons. Its mono–volume design will set a
new benchmark among small cars. Its safety performance exceeds regulatory requirements in
India. Its tailpipe emission performance too exceeds regulatory requirements. In terms of
overall pollutants, it has a lower pollution level than two–wheelers being manufactured in
India today. The lean design strategy has helped minimise weight, which helps maximise
performance per unit of energy consumed and delivers high fuel efficiency. The high fuel
efficiency also ensures that the car has low carbon dioxide emissions, thereby providing the
twin benefits of an affordable transportation solution with a low carbon footprint.
In May 2009, Tata Motors ushered in a new era in the Indian automobile industry, in keeping
with its pioneering tradition, by unveiling its new range of world standard trucks. In their
power, speed, carrying capacity, operating economy and trims, they will introduce new
benchmarks in India and match the best in the world in performance at a lower life–cycle
cost.
The years to come will see the introduction of several other innovative vehicles, all rooted in
emerging customer needs. Besides product development, R&D is also focussing on
environment–friendly technologies in emissions and alternative fuels.
Through its subsidiaries, the company is engaged in engineering and automotive solutions,
construction equipment manufacturing, automotive vehicle components manufacturing and
supply chain activities, machine tools and factory automation solutions, high–precision
tooling and plastic and electronic components for automotive and computer applications, and
automotive retailing and service operations.
True to the tradition of the Tata Group, Tata Motors is committed in letter and spirit to
Corporate Social Responsibility. It is a signatory to the United Nations Global Compact, and
is engaged in community and social initiatives on labour and environment standards in
compliance with the principles of the Global Compact. In accordance with this, it plays an
active role in community development, serving rural communities adjacent to its
manufacturing locations.
Product range of the company includes:
Passenger Cars:
 Indica Vista, Indica V2, indica V2 Turbo, Indica V2 Xeta, Indica V2 Dicor., Aria, Zest
and Bolt (upcoming)
 Indigo XL, Indigo, Indigo Marina Indigo CS.
 Nano.
Utility Vehicles:
 Safari Dicor.
 Sumo Grande.
 Sumo.
 Xenon XT.
Truks:
 Medium & Heavy Comm. Vehicles, Tata Novus.
 Intermediate Comm. Vehicles.
 Light Commercial Vehicles, TL 4×4, Small Commercial Vehicles.
Commercial Passenger Carriers:
 Buses.
 Winger.
 Magic
Defence Vehicles
Subsidiaries of the company:
 Jaguar Land Rover.
 Tata Technologies Ltd. (TTL) and its subsidiaries.
 Telco Construction Equipment Co. Ltd. (Telcon).
 HV Axles Ltd. (HVAL).
 HV Transmissions Ltd. (HVTL).
 TAL Manufacturing Solutions Ltd. (TAL).
 Sheba Properties Ltd. (Sheba).
 Concorde Motors (India) Ltd. (Concorde).
 Tata Daewoo Commercial Vehicle Company Ltd (TDWCV).
 Hispano Carrocera S. A. (HC).
 Tata Motors Insurance Broking & Advisory Services Ltd (TMIBASL).
 Tata Motors European Technical Centre plc.
 Tata Motors Finance Limited.
 Tata Motors Thailand.
 Tata Marcopolo Motors Ltd (TMML).
 Tata Motors (SA) Proprietary Ltd (TMSA).
 TML Distribution Company Ltd (TDCL).
Milestones:
 1945 Tata Engineering and Locomotive Co. Ltd. was established to manufacture
locomotives and other engineering products.
 1948 Steam road roller introduced in collaboration with Marshall Sons (UK).
 1954 Collaboration with Daimler Benz AG, West Germany, for manufacture of
medium commercial vehicles. The first vehicle rolled out within 6 months of the contract.
 1959 Research and Development Centre set up at Jamshedpur.
 1961 Exports begin with the first truck being shipped to Ceylon, now Sri Lanka.
 1966 Setting up of the Engineering Research Centre at Pune to provide impetus to
automobile Research and Development.
 1971 Introduction of DI engines.
 1977 First commercial vehicle manufactured in Pune.
 1983 Manufacture of Heavy Commercial Vehicle commences.
 1985 First hydraulic excavator produced with Hitachi collaboration.
 1986 Production of first light commercial vehicle, Tata 407, indigenously designed,
followed by Tata 608.
 1989 Introduction of the Tatamobile 206 – 3rd LCV model.
 1991 Launch of the 1st indigenous passenger car Tata Sierra. TAC 20 crane
produced. One millionth vehicle rolled out.
 1992 Launch of the Tata Estate.
 1993 Joint venture agreement signed with Cummins Engine Co. Inc. for the
manufacture of high horsepower and emission friendly diesel engines.
 1994 Launch of Tata Sumo – the multi utility vehicle. Launch of LPT 709 – a full
forward control, light commercial vehicle. Joint venture agreement signed with M/s
Daimler – Benz / Mercedes – Benz for manufacture of Mercedes Benz passenger cars in
India. Joint venture agreement signed with Tata Holset Ltd., UK for manufacturing
turbochargers to be used on Cummins engines.
 1995 Mercedes Benz car E220 launched.
 1996 Tata Sumo deluxe launched.
 1997 Tata Sierra Turbo launched. 100,000th Tata Sumo rolled out.
 1998 Tata Safari – India's first sports utility vehicle launched. 2 millionth vehicle
rolled out. Indica, India's first fully indigenous passenger car launched.
 1999 115,000 bookings for Indica registered against full payment within a week.
Commercial production of Indica commences in full swing.
 2000 First consignment of 160 Indicas shipped to Malta. Indica with Bharat Stage 2
(Euro II) compliant diesel engine launched. Utility vehicles with Bharat 2 (Euro II)
compliant engine launched. Indica 2000 (Euro II) with multi point fuel injection petrol
engine launched. Launch of CNG buses. Launch of 1109 vehicle – Intermediate
commercial vehicle.
 2001 Indica V2 launched – 2nd generation Indica. 100,000th Indica wheeled out.
Launch of CNG Indica. Launch of the Tata Safari EX Indica V2 becomes India's number
one car in its segment. Exits joint venture with Daimler Chrysler.
 2002 Unveiling of the Tata Sedan at Auto Expo 2002. Petrol version of Indica V2
launched. Launch of the EX series in Commercial vehicles. Launch of the Tata 207 DI.
2,00,000th Indica rolled out. 5,00,000th passenger vehicle rolled out. Launch of the Tata
Sumo'+' Series Launch of the Tata Indigo. Tata Engineering signed a product agreement
with MG Rover of the UK.
 2003 Launch of the Tata Safari Limited Edition. The Tata Indigo Station Wagon
unveiled at the Geneva Motor Show. On 29th July, J. R. D. Tata's birth anniversary, Tata
Engineering becomes Tata Motors Limited. 3 millionth vehicle produced. First CityRover
rolled out 135 PS Tata Safari EXi Petrol launched Tata SFC 407 EX Turbo launched
 2004 Tata Motors unveils new product range at Auto Expo '04. New Tata Indica V2
launched Tata Motors and Daewoo Commercial Vehicle Co. Ltd. sign investment
agreement Indigo Advent unveiled at Geneva Motor Show Tata Motors completes
acquisition of Daewoo Commercial Vehicle Company Tata LPT 909 EX launched Tata
Daewoo Commercial Vehicle Co. Ltd. (TDCV) launches the heavy duty truck 'NOVUS' ,
in Korea Sumo Victa launched Indigo Marina launched Tata Motors lists on the NYSE
 2005 Tata Motors rolls out the 500,000th Passenger Car from its Car Plant Facility in
Pune The Tata Xover unveiled at the 75th Geneva Motor Show Branded buses and coaches
– Starbus and Globus – launched Tata Motors acquires 21% stake in Hispano Carrocera
SA, Spanish bus manufacturing Company Tata Ace, India's first mini truck launched Tata
Motors wins JRD QV award for business excellence. The power packed Safari Dicor is
launched Introduction of Indigo SX series – luxury variant of Tata Indigo Tata Motors
launches Indica V2 Turbo Diesel. One millionth passenger car produced and sold
Inauguration of new factory at Jamshedpur for Novus Tata TL 4X4, India's first Sports
Utility Truck (SUT) is launched Launch of Tata Novus Launch of Novus range of medium
trucks in Korea, by Tata Daewoo Commercial Vehicle Co. (TDCV)
 2006 Tata Motors vehicle sales in India cross four million mark Tata Motors unveils
new long wheel base premium Indigo & X–over concept at Auto Expo 2006 Indica V2
Xeta launched Passenger Vehicle sales in India cross one–million mark Tata Motors and
Marcopolo, Brazil, announce joint venture to manufacture fully built buses & coaches for
India & markets abroad Tata Motors first plant for small car to come up in West Bengal
Tata Motors extends CNG options on its hatchback and estate range TDCV develops South
Korea's first LNG–Powered Tractor– Trailer Tata Motors and Fiat Group announce three
additional cooperation agreements Tata Motors introduces a new Indigo range
 2007 Construction of Small Car plant at Singur, West Bengal, begins on January 21
New 2007 Indica V2 range is launched Tata Motors launches the longwheel base Indigo
XL, India's first stretch limousine Common rail diesel (DICOR) engine extended to Indigo
sedan and estate range Tata Motors and Thonburi Automotive Assembly Plant Co.
(Thonburi), announce formation of a joint venture company in Thailand to manufacture,
assemble and market pickup trucks. Roll out of 100,000th Ace Tata–Fiat plant at
Ranjangaon inaugurated Launch of a new Upgraded range of its entry level utility vehicle
offering, the Tata Spacio. CRM–DMS initiative crosses the 1000th location milestone
Launch of Magic, a comfortable, safe, four–wheeler public transportation mode, developed
on the Ace platform Launch of Winger, India’s only maxi–van Fiat Group and Tata Motors
announce establishment of Joint Venture in India Launch of the Sumo Victa Turbo DI, the
new upgraded range of its entry–level utility vehicle, the Sumo Spacio Tata Motors
launches Indica V2 Turbo with dual airbags and ABS Launch of new Safari DICOR 2.2
VTT range, powered by a new 2.2 L Direct Injection Common Rail (DICOR) engine.
Rollout of the one millionth passenger car off the Indica platform.
 2008 Ace plant at Pantnagar (Uttarakhand) begins production. Indica Vista – the new
generation Indica, is launched. Tata Motors' new plant for Nano to come up in Gujarat.
Latest common rail diesel offering– the Indica V2 DICOR, launched. Indigo CS (Compact
Sedan), world’s first sub four–metre sedan, launched. Launch of the new Sumo –– Sumo
Grande, which combines the looks of an SUV with the comforts of a family car. Tata
Motors unveils its People's Car, Nano, at the ninth Auto Expo. Xenon, 1–tonne pick–up
truck, launched in Thailand. Tata Motors signs definitive agreement with Ford Motor
Company to purchase Jaguar and Land Rover. Tata Motors completes acquisition of Jaguar
Land Rover. Tata Motors introduces new Super Milo range of buses. Tata Motors is
Official Vehicle Provider to Youth Baton Relay for The III Commonwealth Youth Games
Pune 2008. Indica Vista – the second generation Indica, is launched. Tata Motors launches
passenger cars and the new pick–up in D.R. Congo.
 2009 Tata Marcopolo Motors' Dharwad plant begins production. Tata Motors launches
Nano – The People's Car Introduction of new world standard truck range. Launch of
premium luxury vehicles – Jaguar XF, XFR and XKR and Land Rover Discovery 3, Range
Rover Sport and Range Rover from Jaguar and Land Rover in India.
 2010: Tata Ace becomes India's first 1–lakh brand in goods commercial vehicles.
Jaguar Land Rover announces opening of its Dealership in New Delhi. Tata Motors to
construct heavy truck plant in Myanmar under Government of India's Line of Credit. The
company’s Passenger Car Division launches ‘Tata Motors Service Edge' for leading edge
customer service.
 2011: Tata Motors unveils Assembly Plant in South Africa. Jaguar Land Rover
inaugurates new vehicle assembly plant in Pune India. Jaguar celebrates 50 years of iconic
E–Type. Jaguar c–x75 scoops Louis Vuitton award in Paris. Tata Pixel, new city car
concept for Europe, displayed at the 81st Geneva Motor Show. Tata Motors displays Tata
Nano EV at the 80th Geneva Motor Show.
 Tata Venture launched
Launch of Tata Divo Luxury Coach and Tata Starbus Ultra
Launch of Tata Nano 2012
Tata Sumo Gold introduced
Range Rover Evoque launched in India
New Tata Indica Vista launched
Tata Magic IRIS and Tata Ace Zip launched
Tata Indica eV2 introduced with 25 kmpl mileage
Tata Pixel, a city car concept for Europe, displayed at the Geneva Motor Show
Refreshed Tata Indigo Manza introduced
Tata Prima ConsTruck range launched
Tata Motors unveiled assembly plant in South Africa
Tata Nano began international journey with Sri Lanka
Tata Motors completes 50 years of its International Business
Jaguar Land Rover inaugurated its vehicle assembly plant in Pune
Tata Nano launched in Nepal
HVTL amalgamates into HVAL renamed as TML Drivelines Ltd.
Tata Motors (Lucknow) produced & dispatched the first Hybrid Chassis to Spain
Tata Motors (Dharwad) rolled out the first Tata Ace Zip
Tata 407 celebrated its silver jubilee year
Jaguar celebrates 50 years of iconic E–Type
 2012: Tata Motors enters Bangladesh’s new car market
Tata Ace races through the one–million mark in just 2,680 days
Tata Safari Storme, the Real SUV, hits the road
Launch of PT Tata Motors Indonesia
Tata Motors plant at Dharwad comes on stream
Tata Motors enters into distribution agreement in Myanmar
Launch of Tata Ace in South Africa
 2013 :Tata Nano becomes the first Auto Brand in India to cross 3 million fans on
Facebook
The Tata Indigo eCS enters Limca Book of Records
Tata Motors' Jamshedpur plant rolls out its two millionth truck
Tata Nano offered industry first phenomenon – Swipe your credit card and drive home a
Nano
Tata Motors launches the world–class range of Tata PRIMA trucks in Sri Lanka
Achievements/ recognition:
 Tata Motors among India’s most Trusted Brand in cars
 Tata Motors wins award at the Bangkok International Motor Expo
 Tata Motors – Investor Relations ranked first in India
 Nirmal Gram Puraskar awarded to Potka panchayat.
 Tata Motors bags the NDTV Profit Business Leadership Award 2008
 Tata Motors awarded the Top Exporter Trophy by EEPC
 CVBU Pune wins Rajiv Gandhi National Quality Award for 2007.
 PCBU bags Handa Golden Key Award.
 Tata Motors receives Uptime Champion Award 2007
 Aggregates Business, CVBU, bags 'Best Supplier Award' from ECEL
 'NDTV Profit' Business Leadership Award
 Tata Motors bags National Award for Excellence in Cost Management.
 Tata Motors' TRAKIT bags silver award for 'Excellence in Design'
 Tata Motors Pune – CVBU has bagged the 'Golden Peacock National Quality Award
 Tata Motors was awarded four prestigious honours, at the 'CNBC TV18– Autocar.
 Tata Motors chosen as India's Most Trusted Brand in Cars.
 Business today selects Mr. P.P. Kadle as India's Best CFO in 2005.
 Pune Foundry Division bags prestigious Green Foundry Award.
 Tata Motors is 'Commercial Vehicle Manufacturer of the Year'.
 ACE bags 'Best Commercial Vehicle Design' at the BBC–Top Gear Awards.
 Jamshedpur bags National Energy Conservation Award for the fourth consecutive
year. Tata Motors bags the prestigious' CII–EXIM Bank award' for business excellence.
 Tata Motors receives JRD QV awards for Business Excellence.
 'Car Maker of the Year' Award for Tata Motors.
 Tata Motors is 'Commercial Vehicle Manufacturer of the Year'.
 TNS Voice of the Customer Award for Indica Diesel.
 'CFO of the Year Award 2004' awarded to Mr Praveen P Kadle, Executive Director
 Tata Motors wins the prestigious 'Corporate Platinum' Award Tata Motors wins
'Golden Peacock Award' for Corporate Social Responsibility.
 Tata Motors CVBU Pune wins National Energy Award.
 Tata Motors – Jamshedpur wins 'Energy Efficient Unit Award'.
 Tata Motors wins the first CSIR Diamond Jubilee Technology Award.
 Tata Motors Training Division Wins 'Golden Peacock National Training Award 2004'.
 Tata Motors case study wins first prize in iiie productivity contest.
 Tata Motors wins award for fair business practices.
 Tata Indica and Tata Safari EXi win awards.
 Tata Motors–Car plant gets two ISO certifications.
 Tata Motors bags awards at 14th National Convention of INSAAN
 Indica and Safari win accolades
 Tata Motors pune awarded second place in national level competition in energy co.
 Tata Motors Receives 'India's Best Employer' Award from the Employe.
 Tata Motors, CVBU, Pune has won the prestigious Handa Golden Key award institute
 CVBU receives commendation certificate for 'strong commitment to TQM'.
 Tata Motors team wins The Runners up Position at The Asian Business Simulation
 The Prestigious Balanced Scorecard Collaborative Hall Of Fame Award
 Tata Motors receives all India trophies for Top Exporters
 Tata Indigo ad campaign wins Effie award
 Golden Peacock Environment Management Award – 2003
 Industry and Technology Award, 2002
Advertising Awards
 Tata Indigo – Most Exciting New Car of the Year – ICICI Bank & Overdrive Awa
 Tata Engineering – A Socially Responsible Corporate, says TERI
 'Prof. Vasant Rao Rolling Trophy' for Value Engineering – 2002
 Tata Engineering was conferred Bharat Gaurav Puraskar
 Best Value for Money Car of the Year – Tata Indigo CNBC Auto Car Auto Awards – 2
 'Voice of the Customer Award' for 'Best Diesel Small Car' – Tata Indica by NFO A
 India CFO Award 2002
 Tata Engineering bags INSAAN awards
 National Best Training Establishment Award
Envirointernational
 Good Corporate Citizen award
 National Award for Successful Commercialisation of Indigenous Technology
 National Award for R&D Efforts
 Regional Top Exporter's Trophy
 Best Company Award at Workskills Competition
 EEPC Award for Tata Engineering
CHAPTER-IV

DATA ANANLYSIS AND INTERPRETATION

MEANING AND DEFINITION

 Ratio analysis is one of the powerful techniques which are widely used
for interpreting financial statements. This technique serves as a tool for
assessing the financial soundness of the business. it can be used to
compare the risk and return relationship of firms of different sizes. The
term ratio refers to the numerical or quantitative relationship between two
items/ variables.
 The idea of ratio analysis was introduced by Alexander Wall for the first
time in 1919. Ratios are quantitative relationship between two or more
variables taken from financial statements.
 Ratio analysis is defined as, “the systemic use of ratio to interpret the
financial statement so that the strength and weakness of the firm a well as
its historical performance and current financial condition can be
determined.
 In the financial statement we can find many items are co-related with
each other for example current assets and current liabilities, capital and
long term debt, gross profit and net profit purchase and sales etc

INTRODUCTION TO RADIO ANALYSIS

Ratio analysis is a technique of analyzing the financial statement of industrial


concerns. Now a day this technique is sophisticated and is commonly used in
business concerns. Ratio analysis is not an end but it is only means of better
understanding of financial strength and and weakness of a firm.

Ratio analysis is one of the most powerful tools of financial analysis which
helps in analyzing and interpreting the health of the firm. Ratio’s are proved as the
basic instrument in the control process and act as back bone in schemes of the
business forecast.

With the help of ratio we can determine

 The ability of the firm to meet its current obligation.


 The limit or extent to which the firm has used its borrowed funds.
 The efficiency with which the firm is utilizing in generating sales revenue.
 The operating efficiency and performance of the company .

PROFITABILITY RATIOS :

1. Return on Investment (ROI)/Return on Capital Employed


[Operating Profit/Capital Employed]

ROI = Operating Profit x 100

Share Capital + Reserves & Surplus + Long Term Loans

Year 2016 2015 2014 2013


ROI 25.88% 32.43% 33.78% 35.32%

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1 2 3 4

RETURN ON INVESTMENTS

2. Return On Share Holders Funds

ROSF = Net Profit after Tax & Interest x 100

Share Holders Funds

Year 2016 2015 2014 2013

ROSF 25.88% 27.85% 27.61% 30.09%


12

10

0
1 2 3 4

RETURN ON SHAREHOLDERS FUNDS

3. Return On Total Assets

ROTA = Net Profit after Tax & Interest x 100

Total Assets

Year 2016 2015 2014 2013


ROTA 14.37% 17.59% 18.04% 18.72%

0.2
0.18
0.16
0.14
0.12
Year
0.1
0.08 ROTA
0.06
0.04
0.02
0
1 2 3

4. RETURN ON GROSS CAPITAL EMPLOYED

ROGC = Net Profit before Tax & Interest x 100

Total Assets Excluding Fictitious Assets

Year 2016 2015 2014 2013


ROGC 21.26% 27.04% 27.63% 28.51%

100%
90%
80%
70%
60% ROGC
50%
40% Year

30%
20%
10%
0%
1 2 3

5. EARNING PER SHARE

EPS = Net Profit after Tax – Preference Divident x 100

No.Of Equity share

Year 2016 2015 2014 2013


EPS 52.63 49.65 39.93 34.19

100%
90%
80%
70%
60% EPS
50%
40% Year

30%
20%
10%
0%
1 2 3

6. PRICE EARNING RATIO

PER = Market Price Per Equity Share x 100

Earning Per share

Year 2016 2015 2014 2013


PER 7.60 8.06 10.02 11.70

12

10

8
PER
6
Year
4

0
1 2 3

7. GROSS PROFIT RATIO

GPR = Gross Profit x 100

Net Sales
Year 2016 2015 2014 2013

GPR 29.61% 30.47% 32.01% 32.34%

0.33
0.32
0.32
0.31
0.31 Year
0.3
GPR
0.3
0.29
0.29 GPR
0.28
1
2 Year
3

8. NET PROFIT RATIO

NPR = Net Profit x 100

Net Sales
Year 2016 2015 2014 2013

NPR 12.72% 12.84% 13.89% 13.40%

100%
90%
80%
70%
60%
NPR
50%
40% Year
30%
20%
10%
0%
1 2 3

9. OPERATING COST RATIO

OCR = Operating Cost x 100

Net Sales
= 100 – Net Profit Ratio

Year 2016 2015 2014 2013

OCR 89.94% 88.49% 87.84% 87.92%

0.9

0.9

0.89

0.89 Year

0.88 OCR

0.88

0.87

0.87
1 2 3

10. PAY OUT RATIO

POR = Dividend Per Equity Share x 100

Earning Per Share


Year 2016 2015 2014 2013

POR 28.51% 30.20% 32.35% 34.31%

0.35

0.3

0.25

0.2 Year
0.15
POR
0.1

0.05
POR
0
1
2 Year
3

11. RETAINED EARNING RATIO

RER = Retained Earning Per Share x 100

Earning Per Share


= 1 – Dividend Pay Out Ratio

Year 2016 2015 2014 2013

RER 52.63 49.65 39.93 34.19

60

50

40

Year
30
RER
20

10

0
1 2 3

12. DIVIDEND YIELD RATIO

DYR = Dividend Per Share x 100

Market Price Per share


Year 2016 2015 2014 2013

DYR 3.75% - - -
Market Price - Not Available for the year 2015 2014 2013

DYR 3.75% - -

0.8 DYR 3.75% - -

0.6

0.4

0.2

0
2013

COVERAGE RATIOS

1. Fixed Charge Cover Ratio

FCCR = Income before Interest & Tax

Interest Charges
Year 2016 2015 2014 2013

FCCR 7.05 7.98 7.98 8.65

9
8
7
6
5 FCCR

4 Year
3
2
1
0
1 2 3

2. DEBT SERVICE COVERAGE RATIO

DSCR = Net Profit before Interest & Tax

Interest + Principal Repayment

1- Tax Rate
Year 2016 2015 2014 2013

DSCR
Principal Amount is not available.

TURNOVER RATIOS

1. Fixed Asset Turnover Ratio

FATR = Net Sales Times

Net Fixed Asset


Year 2016 2015 2014 2013

FATR 5.33 7.08 5.77 5.52

5
FATR
4
Year
3

0
1 2 3

2. WORKING CAPITAL TURNOVER RATIO


FATR = Net Sales Times

Current Assets – Current Liabilities

Year 2016 2015 2014 2013

WCTR -105.30 9.87 8.09 31.94

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1 2

3. DEBTOR TURNOVER RATIO


DTR = Credit Sales

Average Receivable Accounts

Year 2016 2015 2014 2013

DTR 29.27 40.68 33.54 25.25

100%
90%
80%
70%
60% DTR
50%
40% Year

30%
20%
10%
0%
1 2 3

4. DEBT COLLECTION PERIOD RATIO

DCPR = 12 or 365
Debtors Turnover Ratio

Year 2016 2015 2014 2013

DCPR 0.41 0.29 0.36 0.48

0.5
0.45
0.4
0.35
0.3
Year
0.25
0.2 DCPR
0.15
0.1
0.05 DCPR
0
1
2 Year
3

5. CREDITOR TURNOVER RATIO


CTR = Total Purchase

Accounts Payable( Raw Material Cost – Sundry Creditors)

Year 2016 2015 2014 2013

CTR 4.34 4.75 5.03 5.26

4
Year
3
CTR
2

1
CTR
0
1
2 Year
3

6. DEBT PAYMENT PERIOD


DPP = Average Accounts Payable

Average Monthly Credit Purchase(units in months)

Year 2016 2015 2014 2013

DPP 1.69 1.54 1.42 1.33

1.8

1.6
1.4
1.2

1 Year
0.8
DPP
0.6
0.4

0.2
0
1 2 3

7. STOCK/ INVENTORY TURNOVER RATIO


STR = Cost of Goods Sold During the Year

Average Inventory

Year 2016 2015 2014 2013

STR 3.51 3.35 3.28 3.52

3.55

3.5

3.45

3.4
STR
3.35
Year
3.3

3.25

3.2

3.15
1 2 3

Financial Ratios

1. FIXED ASSET RATIO


FAR = Fixed Assets of the company

Long Term Funds

2. Current Ratio

CR = Current Asset CA

Current Liabilities CL

3. Liquidity Ratio

Quick Ratio = CA – Inventory

Current Liabilities

4. Debt Equity Ratio

DER = Total Long Term Fund

Shareholders funds

CHAPTER-V
FINDINGS

I. LIQUIDITY RATIO:

1. From the current ratio it is found that the ratio is not satisfactory because
the % increase in current assets is less than the % increase in current liabilities
during the year 2011-2016.The highest ratio recorded is 3.04 in 2011 and the
lowest ratio recorded is 0.42 in the year 2013.And less than the standard ratio.

2. From the quick ratio it is found that the ratio is not satisfactory because
the ratios recorded during the year were less than the standard ratio.In the year
2015 the ratio recorded is 0.15 and the ratio recorded highest was 2.01 in the
year 2011.

II. LEVERAGE RATIO:

1. From the debt equity ratio it is found that the ratio recorded during the
year 2011,2012,&2013 is satisfactory as the ratios are near to the standard ratio
but during the year 2014,2015& 2016 it is not satisfactory as the ratios are very
high compared to the standard ratio.

2. From the current assets to proprietors fund ratio is not satisfactory as the
proprietory funds invested in the current assets is less in the year 2016 is less
compared to previous years .The highest ratio recorded is 1.97 in the year 2011
and the lowest ratio recorded is 1.55 in the year 2013.
III. PROFITABILITY RATIOS:

1. From the gross profit ratio it is found that the ratio is satisfactory during
the last three years from 2013 to 2016. The highest ratio recorded in the year
2015 is 21.65 and the lowest ratio recorded is 0.11 in the year 2011.

2. From the operating profit ratio it is found that the ratio is highly
satisfactory during the considered financial years. The highest ratio recorded is
100.08 in the year 2013 and the lowest is 66.56 in the year 2015.

3. From the return on investment it is found that the ratio calculated for the
considered financial years is good. The ratio is satisfactory as the return on
investment is effective and good, comparing the previous years.

IV. ACTVTY RATIOS:

1. From the inventory turnover ratio it is found that the ratio is not
satisfactory as the inventory holding period is very high, compared during the
financial years.

2. From the fixed assets turnover ratio it s found that the ratio is satisfactory
as the ratios are raising yearly during the comparative years.
SUGGESTION

A ratio is a way of comparing two or more quantities.Analysing any


company’s current ration,quick ratio,Debt-Equity ratio,Gross Margin
percentage, Net Profit Margin,Operating Profit Margin, Depreciation Expense
to Operating expense ration,Inventory Turnover,Times Interest Earned is Ration
analysis.

Ratio analysis is used to judge the financial success of an economic


entity. One popular ratio is the current ratio which is current assets divided by
current liabilities. This provides an idea of whether the entity can pay
forthcoming bills. A ratio of less than one is a dangerous signal in that current
bills are greater than current assets such as cash. This report is based on the
rules of Business Mathematics.It carries a minimum marks.This report will help
us to upgrade our grades we get in our exams.It also enrich our knowledge
about ratio analysing of companies.

1. The company may improve its current ratio by decreasing the current
liabilities because in the year 2015-16 current assets are decreased and it may
also improve its quick ratio.

2. The company may decrease its total debt as there is increase in total debt
the year 2015-16. The company may increase its investment in current assets.

3. Long terms solvency of the company has to be improved by limiting


amount invested by outsiders to the amount invested by the owner of the
company. This can be achieved by purchasing the shares gradually.

4. The proper management of the inventory can improve liquidity position


and efficiency of the company.
Ratios are just one number divided by another and as such really don’t
mean much. The trick is in the way ratios are analyzed and used by the decision
maker. A good strategy is to compare the ratios to some sort of benchmark, such
as industry averages or to what a company has done in the past, or both. Once
ratios are calculated, an analyst needs some benchmarks to find out where the
company stands at that particular point. Useful benchmarks are industry
comparisons and company trends.

It may be useful to compare a company to certain industry averages to get


a feel for how the company is performing. In that case it is necessary to obtain
industry performance measures.One of the ways in which financial statements
can be put to work is through ratio analysis. Ratios are simply one number
divided by another; as such they may or not be meaningful. In finance, ratios are
usually two financial statement items that may be related to one another and
may provide the prudent user a good deal of information. Of the myriad of
ratios that could be generated, some will be more meaningful than others.
Generally ratios are divided into four areas of classification that provide
different kinds of information: liquidity, turnover, profitability and debt.
RECOMMENDATIONS

• Tata motors doesn’t have any direct market and outlets so it can be a
disadvantage so they should facilitate their customers through pricing strategies
and if they start direct market or open the outlets so the prices will fall
automatically and customers need not to pay any extra money to the suppliers.

• Tata motors Pakistan mostly depends on the local raw material and
sometimes the quality of the raw material is not as good as in the other countries
so they should not rely on the local raw material if they want to provide the
quality products.

• ENERGY foods should introduce other product lines and expand the
business.

• ENERGY foods should distribute their products to more geographical


areas.

• As Tata Motors is a well-known product and ENERGY food is not as


known internationally as Tata Motors is, so they need to spend more money on
the marketing activities.

• ENERGY food is better than Tata Motors in the financial analysis so if


they expand their product line and cover the same geographical area as Tata
Motors has covered so ENERGY can appear as a strong competitor of Tata
Motors

CONCLUSION

Reveals the performance of the company in terms of financial aspects. It


is found that there is increase in sales gross profit during 2012 to 2016. The cash
balance is also increased for the above Saied years this is due to company’s
revised policy in debt collection. It is also observed that the current ratio is not
so satisfactory which creates chunks in the current assets in the form of sundry
debtors and inventory.

Ratios are a powerful tool in the interpretation of the accounts and can
discover issues and problems not immediately evident from the accounts and
financial information provided in the annual report. The can provide the basis
for inter-firm comparisons allowing managers to benchmark the performance
and efficiency of the firm against its competitors. Trends can then be examined
and analysed. Stakeholders may use ratios to support their decision making.
Employees, for example may use profit ratios to support pay claims and
creditors can use liquidity ratios to evaluate whether debts will be repaid.

Since a ratio is simply a mathematically comparison based on


proportions, big and small companies can be use ratios to compare their
financial information. In a sense, financial ratios don't take into consideration
the size of a company or the industry. Ratios are just a raw computation of
financial position and performance.

References

1). Annual reports of Nirani sugars ltd. For 2011, 2012, 2013, 2014, 2015 and
2016.
2). J Madegouda “Accounting for managers”

3). Khan M and P.K. Jain “Financial management”

Profit & Loss Statement

Particulars Mar 2016 Mar 2015 Mar 2014 Mar 2013 Mar 2012
No of Months 12 12 12 12 12
Gross Sales 330939.3 318194.8 240041.2 204825.7 154935.2
Sales 325218.3 310647 234394.1 202174.2 152087.4

Job Work / Contract receipts 0 0 0 0 0

Prcessing Charges / Service


Income 0 0 0 0 0

Others operational income 5721 7547.8 5647.1 2651.5 2847.8

Less :Inter divisional transfers 0 0 0 0 0


Less: Sales Returns 0 0 0 0 0
Less: Excise 43631.1 43494.5 34019.2 30634.4 22703
Net Sales 287308.2 274700.3 206022 174191.3 132232.2
EXPENDITURE :

Increase/Decrease in Stock 330 -2736.9 -2569.1 -1458.2 1419.8


Opening Balances
Work In Progress 3013.2 2863.1 2644.6 1766.4 1182.2
Finished Goods 0 0 0 0 0

Shares, Units and Bonds 0 0 0 0 0


Other 11030.2 8443.4 5332.9 4752.9 6756.9
Less :
Work In Progress 2960 3013.2 2863.1 2644.6 1766.4
Finished Goods 0 0 0 0 0

Shares, Units and Bonds 0 0 0 0 0


Other 10753.4 11030.2 7683.5 5332.9 4752.9

Raw Materials Consumed 201901.9 193749.3 142638.6 119313 83413.9

Opening Raw Materials 8725.9 7326.9 6300.6 3497.2 2380.7

Purchases Raw Materials 184980.6 180556.3 133677.5 115447 79850.6

Closing Raw Materials 7785.7 8725.9 7326.9 6300.6 3497.2

Other Direct Purchases /


Brought in cost 0 14592 9987.4 6651.2 4679.8
Others 15981.1 0 0 18.2 0
Power & Fuel Cost 3251.9 3274.1 2585.1 2378.1 2145.2
Employee Cost 15260.1 13556.3 11332.5 10295.1 8745.6

Other Manufacturing Expenses 22395.1 19651.3 14852.1 12666.4 9172.6

General and Administration


Expenses 1695 1584.4 1354.6 810.3 755.4

Selling and Distribution


Expenses 9939.5 12330.5 9919.1 8665.8 7809.3

Miscellaneous Expenses 3631.1 1669.9 850 481.1 468.8

Less: Pre-operative Expenses


Capitalised 0 0 0 0 0
Total Expenditure 258404.6 243078.9 180962.9 153151.6 113930.6

Operating Profit (Excl OI) 28903.6 31621.4 25059.1 21039.7 18301.6


Other Income 7640.3 3658.4 3562.5 2297.5 1001.2
Interest 1432.4 554.4 671.4 636.6 412.2
Dividend 1318.9 869.4 414 198.7 30.8
Profits on sale of FA 0 0 0 0 0

Profits on sale of Investments 1518.1 354.8 1776.4 312 39.8

Forex Exchange Gains 1376.1 652.1 0 0 0


Other 1994.8 1227.7 700.7 1150.2 518.4
Operating Profit 36543.9 35279.8 28621.6 23337.2 19302.8
Interest 4256.1 3685.1 2934.9 2178.1 2024.8
PBDT 32287.8 31594.7 25686.7 21159.1 17278
Depreciation 6523.1 5862.9 5209.4 4501.6 3826

Profit Before Taxation &


Exceptional Items 25764.7 25731.8 20477.3 16657.5 13452

Exceptional Income / Expenses 0 0 56.5 -138.5 -528.6


Profit Before Tax 25764.7 25731.8 20533.8 16519 12923.4
Provision for Tax 5475.5 6597.2 5245 4149.5 4820

Current Income Tax 1390.1 4760 3633.5 3638.2 960


Deferred Tax 4015.4 1772.2 1421.5 511.3 3860
Fringe Benefit tax 70 65 190 0 0
Others 0 0 0 0 0
Profits After Tax 20289.2 19134.6 15288.8 12369.5 8103.4
Appropriations 30427.5 26902.2 20945.4 16027.5 9340.5
General Reserve 0 0 0 0 0

Proposed Equity Dividend 5784.3 5780.7 4979.4 4521.9 2821.1

Preference Dividend 0 0 0 0 0

Corporate Dividend Tax 812.5 982.5 698.4 634.2 361.4


Statutory Reserve 0 0 0 0 0

Other Appropriation 0 0.7 0 15.4 0

Profit & Loss Balance C/F 13830.7 10138.3 7767.6 5856 3658
Equity Dividend % 150 150 130 125 80
Earnings Per Share 52.63 49.65 39.94 34.19 22.96
Book Value 202.54 177.33 143.58 113.15 101.08

Balance Sheet
Balance Sheet

(Rs.in Millions)
Particulars Mar 2016 Mar 2015 Mar 2014 Mar 2013 Mar 2012
SOURCES OF FUNDS
- Share Capital 3855.40 3854.10 3828.70 3617.90 3530.00
Equity - Paid Up 3854.90 3853.60 3828.20 3617.40 3529.50
Adjustments to Equitys 0.00 0.00 0.00 0.00 0.00

Preference Capital Paid Up 0.00 0.00 0.00 0.00 0.00


Unclassified Shares Paid Up 0.00 0.00 0.00 0.00 0.00
Face Value 10.00 10.00 10.00 10.00 10.00
Share warrants & Outstandings 0.00 0.00 0.00 0.00 38.30
- Total Reserve 74539.60 64843.40 51542.00 37496.00 32367.70
Securities Premium 15372.20 19364.00 18287.00 14738.90 16813.40
Capital Reserves 0.00 0.00 0.00 0.00 0.00

Profit & Loss Account Balance 13830.70 10138.30 7767.60 5856.00 3658.00
General Reserves 41164.30 31164.30 21306.20 13536.30 8531.50

Debenture Redemption Reserve 3343.50 3343.50 3343.50 3341.50 3341.50


Capital Redemption Reserve 22.80 22.80 22.80 22.80 22.80
Exchange Fluctuation reserve 0.00 0.00 0.00 0.00 0.00
Statutory Reserves 0.00 0.00 0.00 0.00 0.00
Other Reserves 805.60 810.00 814.40 0.00 0.00
Revaluation reserve 255.10 259.50 263.90 0.00 0.00
Shareholder's Funds 78395.00 68697.50 55370.70 41113.90 35897.70
- Secured Loans 24619.90 20220.40 8227.60 4898.10 9426.50

Non Convertible Debentures 1705.00 755.00 755.00 825.00 1625.00


Term Loans – Banks 0.00 0.00 0.00 0.00 2859.80
Term Loans – Institutions 0.00 0.00 0.00 2217.60 2251.10
Working Capital Loans - Bank 0.00 0.00 0.00 0.00 0.00
Deferred Credit 0.00 0.00 0.00 0.00 0.00

Hire Purchase / Financial Lease 0.00 0.00 0.00 0.00 0.00


Other Secured 24619.90 20220.40 8227.60 2680.50 4315.60
- Unsecured Loans 38185.30 19871.00 21140.80 20056.10 3171.20
Fixed Deposits – Public 0.00 0.00 0.00 0.00 0.00
Commercial Paper 1000.00 0.00 0.00 0.00 0.00

Deferred Tax Loan 0.00 0.00 3.60 1.70 2.90


Other Unsecured Loan 37185.30 19871.00 21137.20 20054.40 3168.30
Total Debts 62805.20 40091.40 29368.40 24954.20 12597.70

Total Liabilities 141200.20 108788.90 84739.10 66068.10 48495.40


APPLICATION OF FUNDS :
Gross Block 108308.30 87758.00 79715.50 66119.50 59854.00

Less: Accumulated Depreciation 54435.20 48945.40 44015.10 34542.80 30236.90


Less: Impairment of Assets 0.00 0.00 0.00 0.00 0.00
Net Block 53873.10 38812.60 35700.40 31576.70 29617.10
Lease Adjustment A/c 0.00 0.00 0.00 0.00 0.00
Capital Work in Progress 50649.60 25133.20 9511.90 5388.40 2860.90

Pre-operative Expenses pending 0.00 0.00 0.00 0.00 0.00


Assets in transit 0.00 0.00 0.00 0.00 0.00
- Investments 49102.70 24770.00 20151.50 29120.60 30567.70
Quoted Equity 4896.90 2182.80 2182.80 2772.80 2779.00
Unquoted Equity 10170.50 4133.30 4127.70 3737.30 4142.20
Units 7907.90 519.90 1755.50 10007.50 14909.60

Other Investments 26127.40 17934.00 12085.50 12603.00 8736.90

Market Value of Quoted Investements 25305.50 13230.80 15500.00 12608.50 7327.60

Current Assets, Loans & Advances


- Inventories 24218.30 25009.50 20122.40 16013.60 11474.40
Raw Materials 7785.70 8725.90 7326.90 6300.60 3497.20
Work-in Progress 2960.00 3013.20 2863.10 2644.60 1766.40
Finished Goods 0.00 0.00 0.00 0.00 0.00
Stores and Spare 1111.50 1390.00 1355.00 1423.50 1078.10
Other Inventory 12361.10 11880.40 8577.40 5644.90 5132.70
- Sundry Debtors 11307.30 7821.80 7157.80 8113.20 6149.90

Debtors more than Six months 956.80 883.60 698.60 717.40 1379.20
Debtors Others 10696.50 7256.20 6802.10 7916.80 5801.10

Less : Provisions for Doubtful Debts 346.00 318.00 342.90 521.00 1030.40
Cash and Bank 23973.10 8267.60 11194.30 20050.40 7704.90
Other Current Assets 8402.00 7217.90 353.20 309.40 212.60
Loans and Advances 35937.10 56803.70 57785.40 26975.40 11415.20
Total Current Assets 103837.80 105120.50 96613.10 71462.00 36957.00

Less : Current Liabilities and Provisions

Sundry Creditors 46531.80 40799.40 28384.80 22697.30 22771.40


Acceptances 37385.10 20038.00 26973.90 28072.80 15843.30
Bank Overdraft / Short term credit 0.00 0.00 0.00 0.00 0.00

Unclaimed Dividend 80.40 66.30 54.80 35.40 70.10

Interest Accrued But Not Due 287.50 254.20 190.80 195.90 160.40

Other Liabilities 2387.20 2478.90 3398.90 3746.30 3398.80

- Provisions 19894.30 13643.20 12150.40 11260.60 4306.40

Proposed Equity Dividend 5784.30 5780.70 4979.40 4521.90 1421.60

Provision for Corporate Dividend Tax 812.50 982.50 698.40 634.20 182.10

Provision for Tax 0.00 0.00 0.00 0.00 0.00

Other Provisions 13297.50 6880.00 6472.60 6104.50 2702.70

Total Current Liabilities 106566.30 77280.00 71153.60 66008.30 46550.40

Net Current Assets -2728.50 27840.50 25459.50 5453.70 -9593.40

Miscellaneous Expenses not written off 60.50 100.90 141.20 181.60 221.90

Deferred Tax Assets 3974.50 1766.00 1507.50 1026.90 1350.60

Deferred Tax Liability 13731.70 9634.30 7732.90 6679.70 6492.10

Deferred Tax Assets / Liabilities -9757.20 -7868.30 -6225.40 -5652.80 -5141.50


Total Assets 141200.20 108788.90 84739.10 66068.20 48532.70

Contingent Liabilities 20430.00 14717.50 9928.60 3116.20 2672.80

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