CHAPTER 3

TATA MOTORS

DATA, ANALYSIS AND FINDINGS

ANALYSIS OF FINANCIAL STATEMENT:-

Here we will study the financial situation of Tata Motors by evaluating various ratio; to begin with we will first evaluate the liquidity ratio, then profitability ratio and so on..

LIQUIDITY RATIOS:It is essential for a firm to be able to meet its obligations as they become due. Liquidity Ratioshelp in establishing a relationship between cast andother current assets to current obligations to provide aquick measure of liquidity. A firm should ensure that it does not suffer fromlack of liquidity and also thatit does not have excess liquidity.A very high degree of liquidity is also bad,idle assets earn nothing. The firm's funds will be unnecessarily tied up in current assets..

CURRENT RATIO:formula

Current Ratio = current assets Current liabilities

YEAR
CURRENT ASSETS CURRENT LIABILITIES CURRENT RATIO

2009 2010 2011 2012 2013 6,735.93 9,137.51 8,923.19 5,939.67 4,423.18 16,580.47 20,280.82 16,271.85 16,909.30 10,968.95 0.4062 0.4505 0.52 0.35 0.40

ACID TEST RATIO:FORMULA

Acid test Ratio= Liquid Assets Liquid Liabilities

Note: Liquid Assets= Current Assets stock prepaid Expenses. Liquid Liabilities= Current liabilities- Bank overdraft.

YEAR
LIQUID ASSETS LIQUID LIABILITIES

2009

2010

2011

2012

2013

ACID TEST RATIO 0.58

0.44

0.54

0.43

0.40

PROFITABILITY RATIO:It can be defined as a ratio that explains the profitability of a company during aspecific period of time. It explains how profitable a company is. These ratios can be compared during different financial years to see the overall performance of a company..

GROSS PROFIT RATIO:-

Formula:

Gross profit Ratio= Gross profit Net Sales YEAR

Gross profit Net Sales
Gross profit ratio

x 100

2009

2010

2011

2012

2013

3.20

8.38

6.95

4.68

-0.21

NET PROFIT RATIO :Formula

Net Profit Ratio = Net Profit Net Sales

x 100

YEAR Net Profit Net Sales

Net profit Ratio

2009

2010

2011

2012

2013

3.77

6.26

3.81

2.26

0.64

OPERATING PROFIT RATIO:Formula

Operating Profit Ratio= Operating Profit x 100 Net sales

YEAR
OPERATING PROFIT

2009

2010

2011

2012

2013

Net sales Operating profit Ratio 6.71 11.40 9.90 7.69 3.83

INTEREST COVERAGE RATIO :Formula

INTEREST COVERAGE RATIO= Profit Before Interest & Tax Fixed Interest charges

YEAR PBIT
FIXED INTEREST CHARGES
INTEREST COVERAGE RATIO

2009

2010

2011

2012

2013

SOLVENCY RATIOS:Solvency or Gearing ratios measures the percentage of capitalemployed that is financed by debts and long term finance. The higher the dependence on borrowing and long term financing.The lower the gearing ratio, 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 profit.

1..CAPITAL GEARING/DEBT EQUITY RATIO:Formula

Debt equity ratio=

Debt Shareholders Fund

YEAR DEBT

2009

2010

2011

2012

2013

SHAREHOLDERS FUND DEBT EQUITY 1.06 RATIO

1.12

0.73

0.56

0.75

PROPRIETARY RATIO:Formula

PROPRIETARY RATIO = Proprietors Fund Total Assets

Year Proprietors fund Total Assets Proprietary

2009

2010

2011

2012

2013

ratio

RATE OF RETURN RATIO:The Rate of Return is perhaps the most important ratio of all..it is the percentage of return on funds invested in the business by its owners. These ratio use to tell us if the managing director is doing their job properly.

RETURN ON CAPITAL EMPLOYED RATIO;Formula

Return on capital employed= profit before interest&tax x 100 Capital employed

Note; capital Employed= Fixed Assets + Net Current Assets

Year PBIT
CAPITAL EMPLOYED RETURN ON CAP EMPLOYED

2009

2010

2011

2012

2013

6.41----

10.37

10.75

10.26

5.95

RETURN ON EQUITY :Formula

Return on Equity =

profit before tax Equity shareholders fund

x 100

Equity Shareholders Fund = Fixed Assets + Net Current Assets long term liability

Year

2009

2010

2011

2012

2013

PBT Equity Share holders fund Return on Equity

LEVERAGE RATIO :LEVERAGE is a percentage return on equity and the net rate of return on total capitalization. There will be no leverage if a company is not required to pay fixed cost or fixed interest obligation. Leverage is the result of the employment of an asset or funds having a fixed cost or fixed interest obligation

FINANCIAL LEVERAGE;FORMULA

Financial leverage =

Profit before interest & tax Profit before tax

YEAR PBIT

2009

2010

2011

2012

2013

PBT FINANCIAL LEVERAGE

INVESTORS RATIO:EARNINGS PER SHARE:Formula

EPS =Profit Available to Equity Shareholders Number of Equity Shares

YEAR PAES NO OF SHARES

2009

2010

2011

2012

2013

EPS

SUMMARY OF RATIOS
Table of financial Ratios of TATA MOTORS LTD for last five years

YEAR
Current Ratio Acid Test Ratio Gross profit Ratio Net profit Ratio Operating Profit Ratio Interest COVERAGE RATIO Debt Equity ratio

2009

2010

2011

2012

2013

Proprietary Ratio Return on cap employed Return on equity Financial Leverage EPS