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A
COMPREHENSIVE PROJECT REPORT
ON
ANALYSIS OF PROFITABILITY OF TATA MOTORS LIMITED
Submitted to
Atmiya institute of technology & science
IN PARTIAL FULFILLMENT OF THE
REQUIREMENT OF THE AWARD FOR THE DEGREE OF
MASTER OF BUSINESS ADMINISTRATION
IN
Gujarat Technological University
UNDER THE GUIDANCE OF
Project Guide
Prof. (Dr.) Vijay H. Vyas
(Prof. & Head)
Submitted by
MODI TANVIR R. KHORAJIYA MAHMADARIF I. (137870592034) (137870592025)
[Batch: 2014-15]
MBA SEMESTER III/IV
Atmiya institute of technology & science
MBA PROGRAMME
Affiliated to Gujarat Technological University
Ahmadabad
2
STUDENTS’ DECLARATION
We, Modi Tanvir & Khorajiya Mahmadarif, hereby declare that the report for
Comprehensive Project entitled “ANALYSIS OF PROFITABILITY OF TATA MOTORS
LIMITED “is a result of our own work and our indebtedness to other work publications,
references, if any, have been duly acknowledged.
Place: ……..
Date:
(MODI TANVIR) (KHORAJIYA MAHMADARIF)
3
PREFACE:
In today’s world of globalization, opportunities are plenty and they keep knocking at our
doors all the time. One should be bold and ready to take risk and seek the opportunity
and put them in action.
The last few years we have witnessed of changes and rapid development all over the
business world. The era of knowledge based competition is upon us. Today India has
come out as a globalize country. The process of globalization has highly affected the
corporate world.
M.B.A. is a professional course. Practical study is very important because practical
study is one of the components of the course.
I have great pleasure in submitting our project report. The project report shall provide a
sample amount of information and comprehensive knowledge of the “TATA MOTORS
LTD.”.
The subject ‘practical studies’ particularly helps students to know the actual corporate
world, the anxieties and stress associated with the job which cannot be understood
sitting in a classroom.
4
ACKNOWLEDGEMENT:
First of all we would like to thank Gujarat technological university for introducing this
subject in our course which gives us practical knowledge about specified industry. So
we are thankful.
We believe an ocean is filled by drops and each and every drop should count, similarly
we should count favor of all our helpers here but this not possible. So forgive us for the
same.
We also would like to thank Dr.Vikas Arora dean of management department of Atmiya
institute of technology & science.
Especially, we would like to thank prof.(Dr)Vijay H. vyas, H.O.D. of management
department of Atmiya Institute of Science and Technology our mentor who guided us in
our work.
Thanking you,
5
TABLE OF CONTENT:
sr. no Topic Page no PART 1: GENRAL INFORMATION 9
1 About of the company 10
2 Overview of world market 11
3 Overview of Indian market 12
4 Major companies in industry 13
5 Major Product of the company 14
PART: 2 PRIMARY STUDY
20
6 Introduction of the study 21
7 Literature review 22
8 Problem statement 24
9 Objectives of the study 25
10 Hypothesis 25
11 Research methodology
11.1 Population 26
11.2 Sampling 26
11.3 Sampling design 26
11.4 Coverage 26
11.5 Data collection 26
12 Data analysis & interpretation 27
13 Result & findings 37
14 Limitation of the study 38
15 Conclusion & suggestion 39
Annexure
Bibliography
6
LIST OF TABLE:
Table. no Topic Page no 1 Table for gross profit margin 27
2 Table for operating profit margin 29
3 Table for net profit margin 31
4 Table for return on total asset 33
5 Table for net profit margin & return on net worth 35
List of chart:
Chart. no Topic Page no 1 Relationship between gross profit &net sales 27
2 Relationship between operating profit &net sales 29
3 Relationship between net profit &net sales 31
4 Relationship between net profit &total assets 33
5 Relationship between net profit margin &return on net worth
35
7
EXECUTIVE SUMMARY:
TITLE
Study on determining understandability of profitability analysis of TATA MOTORS LTD.
AUTHORIZATION RECOMMENDATION
As a part of Continuous Evaluation for Two Year MBA PROGRAMME complying
to GTU Guidelines we were required to fulfill comprehensive project at an organization
or at an institute. We are glad that we got opportunity to complete this project of TATA
motors ltd. We studied the profitability analysis of TATA motors ltd.
REVIEW
Project was focused on the study of determining understandability of profitability
analysis of TATA motors ltd., for identify the sales ability and profitability of the company
We required details related to project which is helpful us for analysis and
understanding the project which are as under :
To study the profitability analysis of TATA motors ltd.
Annual report of the company for last five years.
Gross profit ratio, net profit ratio, operating profit, return on total assets, net worth
of the last five years of the company.
PROCESS
We were briefed by our mentor on the first day about our project and its requirement. To
fulfill objective of our comprehensive project, we met with project guide and discuss
about our topic. He gave us proper guidelines about our project continuously during
whole project time period and by the help of him we can complete our project
completely and also understand analysis of the company for making to project
effectively
8
CONCLUSION
Finally the company is loss making or rather we can say decreasing their profitability but
they have good future opportunities, it has took carefully at controlling the costs of
goods sold and reduce its expenses to avoid facing difficult financial conditions in the
future.
9
PART 1:
GENRAL INFORMATION
10
ABOUT OF THE COMPANY:
Tata Motors Limited (formerly TELCO, short for Tata Engineering and
Locomotive Company) is an Indian multinational automotive manufacturing company
headquartered in Mumbai, Maharashtra, India and a subsidiary of the Tata Group. Its
products include passenger cars, trucks, vans, coaches, buses, construction equipment
and military vehicles. It is the world's 17th-largest motor vehicle manufacturing
company, fourth-largest truck manufacturer, and second-largest bus manufacturer by
volume.
Founded in 1945 as a manufacturer of locomotives, the company manufactured
its first commercial vehicle in 1954 in collaboration with Daimler-Benz 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. In 1998, Tata launched the first fully
indigenous Indian passenger car, the Indica, and in 2008 launched the Tata Nano, the
world's most affordable car. Tata Motors acquired the South Korean truck
manufacturer Daewoo Commercial Vehicles Company in 2004 and purchased Jaguar
Land Rover from Ford in 2008.
11
OVERVIEW OF WORLD MARKET:
Indian Automotive Industry growth decades started in the 1970s. Between 1970
and 1984 cars were considered a luxury product; manufacturing was licensed,
expansion was restricted;
The automotive sector in each country faces a range of varying factors particular
to their individual market conditions, and even the most pronounced growth markets in
recent years are now experiencing contraction, including Brazil (-8.9%), Russia (-7.2%),
India (-0.8%), Thailand (-23%) and Argentina (-34.3%).
These large assembly markets are also the most dominant in terms of sales,
where transaction prices remain high. The lure of additional profit through extended
retail and service networks, and aftermarket / accessories opportunities highlight the
need for sector participants to focus on both emerging areas as well as mature.
The macroeconomic environment in China has remained tepid headed into the
final quarter of 2014, with talk of stimulus measures to help revive the market. Given
this context, the sustained growth in new light vehicle sales is even more impressive,
reaching 13.6 million units through August. MPVs continue to drive much of the
momentum, growing 47.5% year to date when compared to the first eight months of
2013.
12
OVERVIEW OF INDIAN MARKET:
The automobile industry is one of the key drivers that boost the economic growth
of the country. Since the de-licensing of the sector in 1991 and the subsequent opening
up of 100 percent FDI through automatic route, Indian automobile sector has come a
long way. Today, almost every global auto major has set up facilities in the country.
The world standing for the Indian automobile sector, as per the Confederation of the
Indian industry is as follows:
Largest three-wheeler market
Second largest two-wheeler market
Tenth largest passenger car market
Fourth largest tractor market
Fifth largest commercial vehicle market
Fifth largest bus and truck segment
However, the year 2013-2014 has seen a decline in the industry’s otherwise smooth-
running growth. High inflation, soaring interest rates, low consumer sentiment and rising
fuel prices along with economic slowdown are the major reason for the downturn of the
industry.
13
MAJOR COMPANIES IN INDUSTRY:
Mahindra & Mahindra
Ashok Leyland
General motors’ India
Bajaj auto
Force motor
Volkswagen group sales India private limited
Audi Ag
Skoda auto
Fiat automobiles
Premier automobiles limited
Tata motors limited
Tata motors
Jaguar cars & land rover
14
MAJOR PRODUCTS OF THE COMPANY:
1. TATA NANO:
Announced as the most affordable production car in the world, Tata aimed for a
price of one lakh rupees, or 100,000, Tata Motors announced in 2006 that the Nano
would be manufactured in Singur, West Bengal. Local farmers soon began protesting
the forced acquisition of their land the new factory entailed. Tata first delayed the Nano
launch and later decided to build the car in a different state, Gujarat, instead.
2. TATA BOLT:
15
Tata Bolt is a new hatchback created by Tata Motors under its Falcon programme. The
car was revealed at Indian Auto Expo 2014 along with its sedan version, the Tata Zest.
The car is expected to be launched in Indian markets in the latter half of 2014 after the
launch of its sedan version. The diesel version of Tata Bolt will be fitted with 1.3-litre
quadrajet diesel engine which is already being used on Indica Vista and Manza where
as the petrol version of Tata Bolt will be powered by a new 1.2-litre turbocharged,
89 bhp engine. The new car is based on existing platforms on which Vista and Manza
are built. Tata Bolt will be built at Tata Motor's Pimpri-Chinchwad plant alongside the
Tata Vista and the Tata Indica.
3. TATA VISTA:
The Tata Indica Vista can be considered as the new, improved version of this really
popular car. Tata Indica has sold a lot of units in the country, and the country's premium
car manufacturer realized that it was high time that they improved the car, so that the
net is cast wider. The Tata Indica Vista managed to cater to a wider range of consumers
and it come fitted with lot of different features as well.
16
4. TATA INDICA:
The Tata Indica is a supermini car produced by the Indian manufacturer Tata
Motors since 1998. It is the first passenger car from Tata Motors and it is also
considered India's first indigenously developed passenger car. As of August 2008, more
than 910,000 units were produced and the platform had spawned off close to 1.2 million
vehicles. The annual sales of Indica has been as high as 144,690 units in 2006–07. As
of July 2009, monthly sales of Indica were around 8000 units. The models have also
been exported to Europe, Africa and other countries since late in 2004.
5. TATA MANZA:
17
Tata Manza is next generation sedan from the Indian car company Tata
Motors Limited. The Tata Manza is also known as The Club Class Sedan.[2] There are
eight variants available currently, four each in petrol and diesel.
Manza was first launched on 14 October 2009. It was made available in 4 variants
namely Aqua, Aura, Aura ABS and Elan, Aqua being the entry level variant and Elan
being the top most variant. In October 2012, Manza was re-launched as Manza Club
Class.
6. TATA WINGER
The Winger is offered in six variants and two seating configuration: long or short
wheelbase, high and low roof versions and also specialised ambulance and school bus
versions, as well as the plain panel van. The top of the range is a flat roof, air-
conditioned variant is a ten-seater, while the remaining five versions are offered as
either 13 or 14 seaters, taking the total number of variants to 11.
The Winger is powered by a modified version of the 2.0 litre diesel engine that is
currently offered on the Tata sumo. This 1948 cc engine comes with a turbo-charged,
inter-cooled (TCIC) version in all the variants, except in the smaller length, entry-level
Winger van. The non-turbo-charged version of the engine develops a peak power of
68 PS (50 kW) compared to the 90 PS (66 kW) that the TCIC version puts out. The
Winger meets Bharat Stage III emission standards, except for the base variant, which is
BS-II compliant
18
7. TATA ACE ZIP
After the runaway success of Tata Ace, Tata Motors decided to launch a truck smaller
than the Ace and at the price point of the three-wheeled goods carriers. It was to be a
simple design with truck-like aggregates and was to replace the anachronistic three-
wheeled cargo auto rickshaws in the Indian market. After the success of tata ace and
incorporation of the customer/user feedback, Tata has come up with a new ace in Tata
Ace Zip.
8. TATA PRIMA:
Tata Daewoo (officially Tata Daewoo Commercial Vehicle Company and formerly
Daewoo Commercial Vehicle Company) is a commercial vehicle manufacturer
19
headquartered in Gunsan, Jeollabuk-do, South Korea, and a wholly owned subsidiary of
Tata Motors. It is the second-largest heavy commercial vehicle manufacturer in South
Korea and was acquired by Tata Motors in 2004. The principal reasons behind the
acquisition were to reduce Tata's dependence on the Indian commercial vehicle market
(which was responsible for around 94% of its sales in the MHCV segment and around
84% in the light commercial vehicle segment) and expand its product portfolio by
leveraging on Daewoo's strengths in the heavy-tonnage sector.
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 began developing
a new line to manufacture competitive and fuel-efficient commercial vehicles to face the
competition posed by the entry of international brands such as Mercedes-Benz, Volvo,
and Navistar into the Indian market.
20
PART: 2
PRIMARY STUDY
21
INTRODUCTION OF THE STUDY:
Profitability is the primary goal of all business ventures. Without profitability the business
will not survive in the long run. So measuring current and past profitability and projecting
future profitability is very important.
Profitability is measured with income and expenses. Income is money generated from
the activities of the business. For example, if crops and livestock are produced and sold,
income is generated. However, money coming into the business from activities like
borrowing money does not create income. This is simply a cash transaction between
the business and the lender to generate cash for operating the business or buying
assets.
Expenses are the cost of resources used up or consumed by the activities of the
business. For example, seed corn is an expense of a farm business because it is used
up in the production process. A resource such as a machine whose useful life is more
than one year is used up over a period of years. Repayment of a loan is not an
expense; it is merely a cash transfer between the business and the lender.
Profitability is measured with an “income statement”. This is essentially a listing of
income and expenses during a period of time (usually a year) for the entire business. An
Income Statement is traditionally used to measure profitability of the business for the
past accounting period. However, a “pro forma income statement” measures projected
profitability of the business for the upcoming accounting period. A budget may be used
when you want to project profitability for a particular project or a portion of a business.
22
LITERATURE REVIEW:
Horne and Wachowicz, (2000) Working capital is an important tool for growth and
profitability for corporations. If the levels of working capital are not enough, it could lead
to shortages and problems with the day-to-day operations.
Lazard’s and Tryfonidis (2006) investigated the relationship of corporate profitability
and working capital management for firms listed at Athens Stock Exchange. They
reported that there is statistically significant relationship between profitability measured
by gross operating profit
And the Cash Conversion Cycle. Furthermore, Managers can create profit by correctly
handling the individual components of working capital to an optimal level.
Shah and Sana (2006) used Avery small sample of 7 oil and gas sector firms to
investigate this relationship for period 2001-2005.The results suggested that managers
can generate positive return for the shareholders by effectively managing working
capital.
Ganesan (2007) selected telecommunication equipment industry to study the
effectiveness of working capital management. The sample included for his research
paper included 443annual financial statements of 349telecommunication equipment
companies covering the period 2001 to 2007. The statistical tests used included
correlation, regression analyses and Analysis of variance (ANOVA). The results showed
those days of the working capital negatively affects the profitability of these firms but in
reality it does not affect the transportability of firms in telecommunication equipment
industry.
Sen. M (2009) examined the ISE (Istanbul Stock Exchange) listed firms and checked
out the relationship with the working capital. According to them there is negative
23
relationship among variables. His research uncovered the importance of the finance
directors who act as moderators or catalysts to increase the productivity of the firm in
other words they positively affect the firm’s performance.
24
PROBLEM STATEMENT:
There are so many industries contributing to economic development of nation and
morden automobiles operations touch almost every sphere of economic activity. They
have far reaching consequences on economic development of country. Automobile
sector is one of the leading industries in manufacturing sector.
Although the automobile sector is working effectively it does have to face many
problems. One of the major problems faced by the automobile sector is inconsistency in
the profit they earn. It is necessary to major the profitability of the organization which is
affected by various factors. Profit is the motive of every organization that needs to be
cared. Thus, it becomes necessary for every company to know its current trend of profit
earned.
In this context my research work is aligned towards measuring profitability of TATA
MOTORS LTD. through various ratios based on the financial data of last five years.
25
OBJECTIVES OF THE STUDY:
To study and evaluate the profit in relation to sales.
To study the profitability in relation to investment.
HYPOTHESIS:
The following hypotheses were framed to conduct the analysis and Evaluate the
profitability results of TATA MOTORS LIMITED.
H01: there is no significant relationship between gross profit margin and net sales.
H02: there is no significant relationship between operating profit and net sales.
H03: there is no significant relationship between net profit and net sales.
H04: there is no significant relationship between net profit and total assets.
H05: there is no significant relationship between net profit and net worth.
26
RESEARCH METHODOLOGY:
POPULATION:
All automobile companies which are listed in stock market.
SAMPLING:
The sample was drawn from the list of companies coming under the automobile
industry listed on the Bombay stock exchange. Which is TATA MOTORS
LIMITED.
SAMPLE DESIGN:
Simple random sampling.
COVERAGE:
The selected study unit focuses on a number of profitability variables covering a
time period of five years.
DATA COLLECTION:
We have used secondary data in my analysis.
(Annual reports, balance sheet and p&l account)
27
DATA ANALYSIS & INTERPRETATION:
Hypothesis 1:
H0: There is no significant relationship between gross profit and net sales.
Ha: There is a significant relationship between gross profit net sales.
Year Gross profit Net sales Gross profit
margin
2010 11834.66 35373.39 33.46
2011 12671.46 47088.44 26.91
2012 13837.45 54306.56 25.48
2013 12807.25 44765.72 28.61
2014 11237.34 34319.28 32.74
(Table no.1 Table for gross profit margin)
(Chart no.1 Relationship between gross profit &net sales)
0
10000
20000
30000
40000
50000
60000
2010 2011 2012 2013 2014
gross profit
net sales
28
Regression:
Model R R Square Adjusted R
Square
Std. Error of
Estimate
1 0.9733 0.947471 0.929961 262.8909
Anova test:
Model Sum of Squares
df Mean Squares
Fc Ft
1 Regression Residual Total
3739725 207334.8 3947060
1 3 4
3739725 69111.61 54.11138 0.005192
Conclusion:
Here, Fc > Ft. So Ho is rejected that means there is significant
relationship between gross profit and net sales.
Explanation:
In year 2011 and 2012 there is increase with respect to 2010 in the sales of the
company with this there is also increase in gross profit.
In year 2013 and 2014 there is decrease in sales with respect to previous year and also
decrease in gross profit.
So we can say that there is significant relationship between sales and gross profi
29
Hypothesis 2:
H0: There is no significant relationship between operating profit and net sales.
Ha: There is a significant relationship between operating profit net sales.
Year operating
profit
Net sales operating
profit margin
2010 4032.83 35373.39 11.4
2011 4665.14 47088.44 9.91
2012 4177.55 54306.56 7.69
2013 1717.98 44765.72 3.84
2014 -879.98 34319.28 -2.56
(Table no.2 Table for operating profit margin)
(Chart no.2 Relationship between operating profit &net sales)
-10000
0
10000
20000
30000
40000
50000
60000
2010 2011 2012 2013 2014
opreating profit
net sales
30
Regression:
Model R R Square Adjusted R
Square
Std. Error of
Estimate
2 0.5633 0.3173 0.089744 2216.7
Anova test:
Model Sum of Squares
df Mean Squares
Fc Ft
2 Regression Residual Total
6851589 14741278 21592867
1 3 4
6851589 4913759 1.394368 .322761
Conclusion:
Here, Fc > Ft. So Ho is rejected that means there is significant
relationship between operating profit and net sales.
Explantion:
In year 2011 there is increase in sales and there is also increase in operating profit with
respect to year 2010.
While in 2014 there is decrease in sales and there is also decrease in sales with respect
to year 2013.So we can say that there is significant relationship between sales and
operating profit.
31
Hypothesis 3:
H0: There is no significant relationship between net profit and net sales.
Ha: There is a significant relationship between net profit net sales.
Year Net profit Net sales Net profit
margin
2010 2240.08 35373.39 6.33
2011 1811.82 47088.44 3.85
2012 1242.23 54306.56 2.29
2013 301.81 44765.72 0.67
2014 334.52 34319.28 0.97
(Table no.3 Table for net profit margin)
(Chart no.3 Relationship between net profit &net sales)
0
10000
20000
30000
40000
50000
60000
2010 2011 2012 2013 2014
EAT
net sales
32
Regression:
Model R R Square Adjusted R
Square
Std. Error of
Estimate
3 0.033868 0.001147 -0.3318 1001.541
Anova test:
Model Sum of Squares
df Mean Squares
Fc Ft
3 Regression Residual Total
3455.612 3009252 3012707
1 3 4
3455.612 1003084 0.003445 0.956887
Conclusion:
Here, Fc < Ft. So Ho is accepted that means there is no significant
relationship between net profit and net sales.
Explanation:
Here there is continuous increase in sales but there is continuous decrease in net profit
of the business with respect to year 2010.
So we can say that there is no significant relationship between net profit and sales.
33
Hypothesis 4:
H0: There is no significant relationship between net profit and total assets.
Ha: There is a significant relationship between net profit and total assets.
Year Net profit Total asset Return on total
assets
2010 2240.08 31405.06 7.13
2011 1811.82 34651.49 5.29
2012 1242.23 30637.64 4.05
2013 301.81 33103.53 0.91
2014 334.52 33692.18 0.99
(Table no.4 Table for return on total asset)
(Chart no.4 Relationship between net profit &total assets)
0
5000
10000
15000
20000
25000
30000
35000
40000
2010 2011 2012 2013 2014
net profit
total asset
34
Regression:
Model R R Square Adjusted R
Square
Std. Error of
Estimate
4 0.2521 0.06511 -0.24652 1841.827
Anova test:
Model Sum of Squares
df Mean Squares
Fc Ft
4 Regression Residual Total
708770.8 10176978 10885749
1 3 4
708770.8 3392326 0.2089 0.6786
Conclusion:
Here, Fc < Ft. So Ho is accepted that means there is no significant
relationship between net profit and total assets.
Explanation:
In this the relationship between total assets and net profit is 0.2521 so it is very low so
we can say that there is no significant relationship between net profit and total assets.
In 2011There is increase in total asset while there is decrease in net profit with respect
to year 2010.
35
Hypothesis 5:
H0: There is no significant relationship between net profit margin and return on net
worth.
Ha: There is a significant relationship between net profit margin and return on net worth.
Year Net profit
margin
Return on net
worth
2010 6.33 15.14
2011 3.85 9.05
2012 2.29 6.32
2013 0.67 1.57
2014 0.97 1.74
(Table no.5 Table for net profit margin & return on net worth)
(Chart no.5 Relationship between net profit margin &return on net worth)
0
2
4
6
8
10
12
14
16
2010 2011 2012 2013 2014
net profit margin
return on net worth
36
Regression:
Model R R Square Adjusted R
Square
Std. Error of
Estimate
5 0.9958 0.9917 0.9889 0.2448
Anova test:
Model Sum of Squares
df Mean Squares
Fc Ft
5 Regression Residual Total
21.52704 0.179837 21.70688
1 3 4
21.52704 0.059946 359.1085 0.000321
Conclusion:
Here, Fc > Ft. So Ho is rejected that means there is significant
relationship between net profit margin and return on total asset.
Explanation:
The regression and the correlation of this is very highly positively correlated which is
0.99.
Another reason for this if there would be increase in return on net worth there is also
increase in the net profit margin.
37
RESULTS & FINDINGS:
In year 2010 the company having the gross profit margin 33.46 which is highest
but after a while there is decrease in that because there was not a proportionate
change in gross profit in comparison of net sales of the company.
Operating profit margin represents pure profit of the company. It increase
negatively from 11.4 to 2.56 for the given period which is bad indication of the
company performance.
Net profit margin which measures how profitable a company’s sales are after
deducting all expenses interest, taxes & preferred stock dividends declines from
6.33 to 0.97 during the given period, which implies lower level of profitability of
company.
Return on total assets is a pure measure of the efficiency of a company in
generating returns from its assets. So here there are declines from 7.13 to 0.99
during the given period, which shows negativity of the profitability of the
company.
Return on net worth which measures the returns earned on the common stock
holder’s investment in the company which is decrease from 15.14 to 1.74 within
given period. This indication reflects the bad performance of the management on
the invested financial resources.
The overall performance of TATA motors regarding profitability was bad, the
company’s customer base has been growing, and it has been declining earning
an acceptable return on invested capital.
38
LIMITATION OF THE STUDY:
This is study had the following limitation:
Financial statements are based upon part performance and part events which
can only be guides to the extent they can reasonably be considered as dues to
the future.
Here we have taken only one company so it is not proper and it is inadequate.
We have done the analysis only for the last five years which will not represent the
whole profitability of the company.
Ratios do not provide a definite answer to financial problems. There is always the
question of judgment as to what significance should be given to the figures.
Thus, one must rely upon one’s own good sense in selecting and evaluating the
ratios.
Here we have taken only one company so it is not proper thing to do the analysis
so it is one the limitation of this.
It is always a challenging job to find an adequate standard. The conclusions
drawn from the ratios can be no better than the standards against which they are
compared.
39
CONCLUSION & SUGGESTIONS:
The sales revenue of the TATA motors ltd was high, but it was observed that the
gross profit margin of the company was not increasing as per or there was not
proportionate change in that as compare to net sales.
Operating profit which represents the profit earned from producing and selling
product was also low as compared to the sales volume of the company.
Therefore, the company needs to reduce its expenses to be able to pay its debts
and gain more earnings after taxes.
Net profit margin which measures how profitable a company’s sales are after
deducting all expenses interest, taxes & preferred stock dividends declines from
6.33 to 0.97 during the given period, which implies lower level of profitability of
company.
Earning taxes, which are available for common stockholders, were also low as
compared to the sales volume of the company. This is due to effect of high
expenses on the cost of goods sold and other expenses.
Finally the company is loss making or rather we can say decreasing their
profitability but they have good future opportunities, it has took carefully at
controlling the costs of goods sold and reduce its expenses to avoid facing
difficult financial conditions in the future.
40
ANNXURE:
BALANCE SHEET: (Rs in cr.)
Particular March
2010
March
2011
March
2012
March
2013
March
2014
Source of funds
Total share capital 570.6 637.71 634.75 638.07 643.78
Equity share capital 570.6 637.71 634.75 638.07 643.78
Share application
money
0 0 0 0 0
Preference share
capital
0 0 0 0 0
Reserves 14208.55 19375.59 1899126 18496.77 18532.87
Net worth 14779.15 20013.30 19626.01 19134.84 19176.65
Secured loans 7742.60 7708.52 6915.77 5877.72 4450.01
Unsecured loans 8883.31 6929.67 4095.86 8390.97 10065.52
Total debt 16625.91 14638.19 11011.63 14268.69 14515.53
Total liabilities 31405.06 34651.49 30637.64 33403.53 33692.18
Application of funds
Gross block 18416.81 21002.78 23676.46 25190.73 26130.82
Application of fund 24.63 0 0 0 0
Less:
accm.depreciation
7212.92 7585.71 8656.94 9734.99 10890.25
Net block 11179.26 13417.07 15019.52 15455.74 15240.57
Capital work in
progress
5232.15 3799.03 4036.67 4752.80 6355.07
Investments 22336.90 22624.21 20493.55 19934.39 18458.42
Inventories 2935.59 3891.39 4588.23 4455.03 3862.53
41
Sundry debtors 2391.92 2602.88 2708.32 1818.04 1216.70
Cash and bank
balance
612.16 2428.92 1840.96 462.86 226.15
Total current assets 5939.67 8923.19 9137.51 6735.93 5305.38
Loans and advances 5248.71 5426.95 5832.03 5305.91 4374.98
Fixed deposits 1141.10 0 0 0 0
Total CA, Loans &
advances
12329.48 14350.14 14969.54 12041.84 9680.36
Deferred credit 0 0 0 0 0
Current liabilities 16909.30 16217.85 20280.82 16580.47 13334.13
Provisions 2763.43 3267.11 3600.82 2200.77 2708.11
Total CL & provisions 19672.73 19538.96 23881.64 18781.24 16042.24
Net current assets -7343.25 -5188.82 -8912.10 -6739.40 -6361.88
Miscellaneous
expenses
0 0 0 0 0
Total assets 31405.06 34651.49 30637.64 33403.53 33692.18
Contingent liabilities 3708.33 19084.08 15413.62 14981.11 12419.30
Book value (Rs) 259.03 315.36 61.84 59.98 59.58
42
PROFIT & LOSS STATEMENT:
(Rs in cr.)
Particular Mar '14 Mar '13 Mar '12 Mar '11 Mar '10
Income
Sales Turnover
34,319.2
8
44,765.7
2
54,306.5
6
47,088.4
4
38,173.3
9
Excise Duty 0 0 0 0 2,800.10
Net Sales 34,319.2 44,765.7 54,306.5 47,088.4 35,373.2
Other Income 3,262.00 1,662.33 -11.16 275.85 1,220.86
Stock Adjustments -303.35 143.6 623.84 354.22 606.63
Total Income 37,277.9 46,571.6 54,919.2 47,718.5 37,200.7
Expenditure
Raw Materials 26,040.5 33,764.4 41,081.7 35,047.0 25,366.1
Power & Fuel Cost 392.09 484.66 550.89 471.28 362.62
Employee Cost 2,877.69 2,837.00 2,691.45 2,294.02 1,836.13
Other Manufacturing
Expenses 428.74 425.76 0 0 1,289.60
Selling and Admin Expenses 0 0 0 0 2,126.10
Miscellaneous Expenses 5,156.80 5,679.52 6,428.72 4,965.17 1,707.06
Preoperative Exp Capitalized 0 0 0 0 -740.54
Total Expenses 34,895.9 43,191.3 50,752.8 42,777.5 31,947.0
43
Operating Profit -879.98 1,717.98 4,177.55 4,665.14 4,032.83
PBDIT 2,382.02 3,380.31 4,166.39 4,940.99 5,253.69
Interest 1,337.52 1,387.76 1,218.62 1,383.70 1,246.25
PBDT 1,044.50 1,992.55 2,947.77 3,557.29 4,007.44
Depreciation 2,070.30 1,817.62 1,606.74 1,360.77 1,033.87
Other Written Off 0 0 0 0 144.03
Profit Before Tax
-
1,025.80 174.93 1,341.03 2,196.52 2,829.54
Extra-ordinary items 0 0 0 0 0
PBT (Post Extra-ord Items)
-
1,025.80 174.93 1,341.03 2,196.52 2,829.54
Tax
-
1,360.32 -126.88 98.8 384.7 589.46
Reported Net Profit 334.52 301.81 1,242.23 1,811.82 2,240.08
Total Value Addition 8,855.32 9,426.94 9,671.06 7,730.47 6,580.97
Preference Dividend 0 0 0 0 0
Equity Dividend 648.56 645.2 1,280.70 1,274.23 859.05
Corporate Dividend Tax 93.4 79.03 183.02 192.8 132.89
Per share data (annualized) - - - - -
Shares in issue (lakh) 32,186.8 31,901.1 31,735.4 6,346.14 5,705.58
Earnings Per Share (Rs) 1.04 0.95 3.91 28.55 39.26
44
Equity Dividend (%) 100 100 200 200 150
Book Value (Rs) 59.58 59.98 61.84 315.36 259.03
45
BIBLIOGRAPHY:
Lazaridis, I., & Tryfonidis, D. (2006) “Relationship between working capital
management and profitability of listed companies in the stock exchange.” Journal of
Financial management and analysis, 19(1),pp26-35.
Pandey, I.M.(2006). “Financial management Text and Cases.” 9th Edition, Vikas
Publishing House, New Delhi ,pp.43-49.
Ruistagi, R.P.(1999). “Financial Management, Theory Concepts and problems.”
Galgotia publisshing company, New Delhi, p.70.
Pandey,S.(2012). “Financial structure and Profitability of IFCI Ltd,: an emperical
analysis.” Indian journal of finance, 6(10), pp.32-38.
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