ASSIGNMENT OF

FINACIAL ACCOUNTING MANAGEMENT

ON
TATA MOTORS
(INNOVATIVE TECHNIQUES OF FINANCIAL STATEMENT
ANALYSIS)

UNDER GUIDANCE BY:-

MR. RAMAKRISHNA MISHRA
(ASST. PROFESSOR IN ACCOUNTING, BIITM)

PRESENTED BY:-
MANISHA NAYAK (91)
MANOJ KUMAR BEHERA (92)
MANORANJAN MALLICK (93)
MEGHA KANUNGO (94)
NARENDRA KUMAR SAHOO (95)
NIHAR RANJAN DAS (96)
INTRODUCTION
To study the progress is very important. Through this study,
organization can recognize its strengths and weaknesses, so that
they can be properly analysed. Profitability analysis helps to the
organization to identify whether investment is sufficient or not,
management is capable or not, organization has efficient workers
or not. Finally, organization can identify its progress, profits and
growth. Profit is important for any business. For surviving, growth,
expansion and diversification it is necessary. Profit is important to
satisfy the investors, to repay the debt or loans, to pay wages and
salaries to staff and other day-to- day expenses. Profit is the most
useful measure of overall efficiency of a business. This study aims
at analysing the overall financial study of the Tata Motors by using
various financial tools. The study is based on the accounting
information of Tata Motors. This study covers a period of 2011 to
2016, for analysing the financial statements such as income
statements and balance sheet. The data of the past five years are
taken into account for the study. The performance is compared
with in those periods.
FINANCIAL ANALYSIS OF TATA MOTORS

METHODOLOGY

So here are various methods or techniques that are used in

analysing financial statements, such as comparative statement,
schedule of changes in working capital, common size percentages,
funds analysis, trend analysis, and ratios analysis. Following are the
most important tools and techniques of financial statement
analysis.
HORIZONTAL AND VERTICAL ANALYSIS

HORIZONTAL ANALYSIS:
Comparison of two or more year’s financial data is known as
horizontal analysis or trend analysis. Horizontal is facilitated by
showing changes between years in both dollar and percentage
form.
VERTICAL ANALYSIS:
Vertical analysis is the procedure of preparing and presenting
common size statements, Common size statements is one that
shows the items appearing on it in percentage form us well as in
dollar form. Each item is stated as a percentage of some total of
which that item is an apart. Key financial changes and trends can be
highlighted by the use of common size statements.
RATIO ANALYSIS:
The ratios analysis is the most powerful tool of financial statement
analysis. Ratios simply mean one number expressed in terms of
another ratio is a statistical yardstick by means of which
relationship between two or various figures can be compared or
measured. Ratios can be found out by dividing one number by
another number. Ratios show how one number is related to
another.
FINANCIAL ANALYSIS:
Financial ratio analysis involves calculating certain standardized
relationship between figures appearing in the financial statements
and then using those relationships called ratios to analyse the
business' financial position and financial performance.

Due to varying size of businesses different comparison of two

businesses is not possible. Certain techniques have to be applied in
simplifying the financial statements and making them comparable.
These induce financial ratio analysis and common-size financial
statements. Ratios are divided into different categories such as
liquidity ratios, profitability ratios, etc.
GRAPHICAL ANALYSIS: Graphs provide visual representation of the
performance that can be easily compared over time. The graphs
may be line graphs, column graphs or pie charts.
TREND ANALYSIS: Trend analysis is used to reveal the trend of
items with the passage of time and is generally used as a statistical
tool. Trend analysis is used in conjunction with ratio analysis,
horizontal and vertical analysis to spot a particular trend, explore
the causes of the same and if required prepare future projections.
REGRESSION ANALYSIS: Regression analysis is a statistical tool used
to establish and estimate relationship among variables. Generally,
the dependent variable is related to one or more independent
variables. In case of financial statement analysis, the dependent
variable may be, say, sales, and it is required to estimate its
relationship with the independent variable, say, a macroeconomic
factor like Gross Domestic Product.
DEFINITION OF FINANCIAL STATEMENT ANALYSIS

Financial statement analysis is defined as the process of identifying

financial strengths and weaknesses of the firm by properly
establishing relationship between the items of the balance sheet
and the profit and loss account
Financial statements, which are a accounting reports, serve as the
principal method of communicating financial information about a
business entity Or an individual to outside parties such as banks
and investors. In a technical sense financial statements summary.
The accounting process and provide a tabulation of account titles
and amounts of money. Furthermore, financial statements report
the financial position or financial status of a business or individual
as well as financial changes at a particular time or during a period
General purpose financial statements are designed to meet the
needs of many diverse users, particularly present and potential
owners, shareholders and creditors. Financial statements result
from simplifying, condensing, and aggregating masses of data
obtained primarily from the financial system. They are an output of
the accounting system. Companies release financial statements at
least once a year for their accounting period. Companies either
follow the calendar-year accounting periods (January 1 through
December 31), or they follow their own fiscal year, which can be
any complete 12-month period.
PURPOSE OF FINANCIAL STATEMENT ANALYSIS

Financial statements are prepared to meet external reporting

obligations and also for decision making purposes. They play
dominant role in setting the framework of managerial decisions.
But the information provided in the financial statements is not an
end in itself as no meaningful conclusions can be drawn from this
statement alone. However, the information provided in the
financial statements is of immense use in making decisions through
analysis and interpretation of financial statements.
Few numbers appearing on financial statements may not have
much significance standing by themselves. It is the relationship of
one figure to another and the amount and direction of change
overtime that are important in financial statement analysis. How
does the analyst key in on significant relationship, How does the
analyst dig out the important trends and changes in company?
Three analytical Techniques are widely used; Dollar and percentage
changes on statement, common size statements, and financial
ratios and formulas.
Advantages of Financial Statement Analysis:
The different advantages of financial statement analysis are listed
below.
• The most important benefit if financial statement analysis is that
it provides an idea to the investors about deciding on investing
their funds in a specific company.
• Merits of financial ratio analysis is Another advantage of financial
statement analysis is that regulatory authorities can ensure the
company following the required accounting standards or not .
•Financial statement analysis is helpful to the government agencies
in analysing the taxation owed to the firm.
• Financial statements analysis can help the government agencies
to analyse the taxation due to the company.
• Above all, company can analyse its own performance over the
period through financial statements analysis. Through financial
statement analysis you can determine and identify financial
strengths, weaknesses and relationships that exist in a company.
• Comparing the financial statement analysis numbers over time to
spot trends and changes that Affect company business.
Limitations of Financial Statement Analysis:
Although financial statement analysis is highly useful tool, it has
two limitations. These two limitations involve the comparability of
financial data between companies and the need to look beyond
ratios.
1. Different companies operate in different industries each having
different environmental conditions such as regulation, market
structure, Etc such factors are so significant that a comparison of
two companies from different industries might be misleading.
2. Financial accounting information is affected by estimates and
assumptions. Accounting standards all owe different accounting
policies, which impairs comparability and hence ratio analysis is
less useful in such situations.
3. Ratio Analysis explains relationships between past information
while users are more concerned about current future information.
4. Ratio Analysis Is hampered by potential limitations with
accounting and the data in the financial statements themselves.
This can include errors as well as accounting mismanagement,
which involves distorting the raw data used to derive financial
ratios.
5. Proponents of the stronger of the efficient-market hypothesis,
technical analyst, and behavioural economist argue the
fundamental analysis is limited us a stock valuation tool, all for
there on distinct reasons.
6. Ratio analysis can also omit important aspects of a firm’s success,
such as key intangible, like brand, relationships, skills and culture.

SEGMENT WISE MARKET SHARE IN 2015-1016

DOMESTIC & EXPORT SHARE
Passenger Car -- 25468121478
Multi Utility Vehicles -- 26543892
Commercial Vehicles – 1010819931
Two Wheelers -- 100002256765
Three Wheelers -- 2113851535
Percentage Growth -- 16.632.8

TATA GROUP
ABOUT TATA MOTORS:

Tata Motors have quite the history under their belt, starting with
the company's foundation in 1945 as a locomotive producer. Tata
Motors is just one part of the business group Tata. The other
ventures of Tata Group include Tata Steel, Tata Consultancy
Services, Tata Technologies, Tata Tea, Titan Industries, Tata Power,
Taj Hotels, and so on.
Headquartered in Mumbai, India, Tata Motors is a multinational
corporation amounting for 70% cumulative market share in the
domestic commercial vehicle segment Today, the company is the
world's second largest manufacturer of commercial vehicles, world'
s four. Largest truck manufacturer and world's second largest bus
manufacturer. It is a dual-listed company, which is traded on both
the Bombay Stock exchange as well as the New York Stock
Exchange.
Tata got into the motoring business in 1954 when it starting
producing heavy trucks. in a joint venture with Daimler-Benz AG. So
in 1960. The first truck rolled out of the factory's door in Pune,
India, a copy of a German Daimler truck.
THE SIGNIFICANT RECENT EVENTS:

In the early 1990s, the company began its expansion into the car
market first passenger vehicle was Tata Sierra, a multi utility
vehicle that was launched in 1991. Tata came up with three other
automobiles, namely, Tata
Estate in 1992 (a station wagon based on the earlier 'Tata Mobile'
in 1989), Tata Sumo in 1994 (LCV) and Tata Safari in 1998 (India's
first SUV). After thoroughly an analysing the demand of the
consumers, the chairman of Tata Group at that time Mr. Ratan
Tata, decided to build a small car, which was practically a new
venture. Thus, in 1998, India's first fully indigenous passenger car,
Tata Indica was launched. Their first car was the Tata Indica a
model that enjoyed an unexpected success both. In India and
Europe (UK and Italy). The Indica won people over with its low fuel
consumption and powerfuI engine. Also it was inexpensive and
relatively easy to build maintain. The second generation of Indica,
V2 was even more successful It was so successful that Rover began
selling it in the UK under the name of CityRover.
indica’s high success gave Tata Motors the financial power to take
over Daewoo Motors in 2004. This gave the company an
opportunity to give their brand international exposure. Today,
Daewoo's trucks are sold as Tata Daewoo Commercial Vehicle in
South Korea. In 2005, the company acquired 21% share in Hispano
Carrocera SA, earning the controlling rights of the company. In
January 2008, the global automobile sector showcased the world's
cheapest car in the form of Tata Nano. Launched by Tata Motors,
the car cost only RS 1 00,000 .
Other surprising acquisitions by the Tata Group include jaguar and
Land Rover as of March 26,2008 for a net $2 billion US dollars.
Lately, Tata has made known its aggressiveness when it comes to
gaining exposure and acquiring new brands. Tata Motors acquired
the jaguar Land Rover (JLR) business from the Ford Motor
Company, which included the Daimler and Lanchester brands.
Tata Motors formed 51:49 joint ventures with Marco polo of Brazil
and came up with manufacturing and assembling fully-built buses
and coaches targeting the developing mass rapid transportation
systems. Tata and Marcopolo jointly have launched low-floor city
buses that are widely used by Delhi, Mumbai, Lucknow and
Bangalore transport corporations. Tata Motors has been
continuously acquiring foreign brands to increase its global
presence The Company operates in the UK South Korea, Thailand
and Spain. Today, Tata Motors has its auto manufacturing and
assembly plants in Jamshedpur, Pantnagar, Lucknow, Ahmedabad
and Pune in India, and in Argentina, South Africa, South Korea and
Thailand. It is further planning to set up more plan. In Turkey,
Indonesia and Eastern Europe.
Tata Motors' financial power comes from the fact that its labor
costs amount to only 9% of the profit, a reason for which many
other car producers, including Volvo decided to move operations to
India. Another important factor in Tata's success is the fact that the
group holds several machine tools and metal producing plan,
Further reducing production costs.

OBJECTIVES OF THE PROJECT:

To analyse the financial statement of TATA Motors Ltd. from the Year 2011 to
2016.
To interpret the analysis and the trend of the financial results.
To use various activity ratios and liquidity ratios to find out the activity of assets
and liabilities and to find out the liquidity position of the company.
Standardize financial information for comparisons.
Evaluate current operations.
Compare performance with past performance.
Compare performance against other firms or industry standards.
Study the efficiency of operations.
Study the risk of operations.
To know about Liquidity Position.
To Know about Operating Efficiency.
To know about Over-All Profitability.
To Know About Inter Firm Comparison

TATA MOTORS
Tata Motors Limited, a USD 42 billion organization, is a leading global automobile
manufacturer with a portfolio that covers a wide range of cars, sports vehicles,
buses,trucks and defense vehicles. Our marquee can be found on and off-road in
over 175countries around the globe.

1945TATA MOTORS Established

60,000Employee Strength

$42 Billion Company Turnover

>9 Million Vehicles Sold

>6,600Sales & Service Points

Tata Motors is part of the USD 100 billion Tata group founded by Jamsetji Tata in 1868.
Sustainability and the spirit of ‘giving back to society’ is a core philosophy and good
corporate citizenship is strongly embedded in our DNA. Tata Motors is India’s largest
automobile company. We bring to the customer a proven legacy of thought leadership with
respect to customercentricity and technology. We are driving the transformation of the
Indian commercial vehicle landscape by offering customers leading edge auto technologies,
packaged for power performances and lowest life-cycle costs. Our new passenger cars are
designed for superior comfort, connectivity and performance. What keeps us at the
forefront of the market is our focus on future-readiness and our pipeline of tech-enabled
products. Our design and R&D centers located in India, the UK, Italy and Korea strive to
innovate new products that achieve performances that will fire the imagination of Gen Next
customers. Across the globally dispersed organization that we are today, there is one thing
that energizes and drives all our people and our activities and that is our mission “to be
passionate in anticipating and providing the best vehicles and experiences that excite our
customers globally'

RATIO ANALYSIS
ANALYSIS OF PROFITABILITY
The present study has been made in order to analysis profitability through ratio of
the automobile of companies in India. The profitability ratios which have been
discussed like:
(1) Gross profit ratio (2) Operating profit ratio (3) Return on net capital employed (4)
Net profit ratio (5) Return on total assets ratio (6) Return on net worth of the
company understudy has been also made.
1. Gross profit is basically relative term as percent of net sales, which registered in
fluctuating trend during the period of study. An average gross profit ratio of
Mahindra and Mahindra Motors and Tata motors was high as compared to other
selected companies. These companies showed good profitability, whereas other
three auto-mobile companies’ profitability condition was not good, this may affect
the market reputation as well as investors.
2. The null hypothesis of gross profit ratio (company wise as well as ear wise) is not
rejected. It can be concluded that there is no significant difference in Gross Profit
Ratio between considered automobile companies as well as between considered
years.
3. Operating profit margin ratio is used to measure company's pricing strategy and
operating efficiency. This ratio is basically concerned with operating income and net
sales. Operating profit margin ratio showed a fluctuating trend during the period of
study. Operating profit margin ratio of all selected companies was less than 13%,
whereas in the Hind Motors, this ratio marked in negative. This situation indicates
that company management was not satisfactory. So, Hind motors did not have to
make control over the cost of goods sold and strategy of sales was not properly.
4. The alternative hypothesis is accepted in the case of operating profit margin ratio
and this is indicated that there is significant difference in operating ratio between
considered automobile companies. Whereas, the null hypothesis of operating profit
margin ratio is not rejected and this is indicated that there is no significant difference
in operating ratio between considered years.
5. The study shows that return on the capital employed in the selected automobile
company has marked fluctuating trend during all the years of study period. All the
selected companies have tried to maintain this ratio in range of 20% to 49%. This
situation indicates that the each company try to give minimum to shareholders.
6. From the table it can be said that, the null hypothesis of return on capital
employed ratio (company wise as well as year wise) is accepted means that there is
no significant difference in Return on capital Employed between considered
automobile companies as well as between considered years.
7. An average of Net profit ratio indicated that selected auto-mobile Companies
except Hind Motors were quite satisfactory. Hind Motors as marked in negative
trend. Net profit ratio was highest marked in Premier Motors that being an average
of 16.98% and it was followed by M & M.
8. The alternative hypothesis is accepted in the case of net profit ratio (companies -
wise) means that there is significant difference in net profit ratio between
considered automobile companies. While the null hypothesis is not rejected in the
case of year wise net profit ratio and it can be said that there is no significant
difference in net profit ratio between considered years.
9. The return on assets ratio highest marked in M & M Motors means efficient use of
fund or efficient management of funds. Whereas lowest marked in Hind Motors
which means that inefficient use of funds. For the Hind Motors this lead toward over-
capitalization and this situation is harmful. So, it’s advisable to use funds in efficient
manner. Mahindra & Mahindra Motors, 171 Premier Motors, Tata Motors and Force
Motors have tried to maintain an average 5% to 11% respectively. It means that
these companies tried to get minimum return through funds. Here, also above three
companies should try to use funds in efficient manner.

RATIO ANALYSIS
• Ratio analysis is quantitative analysis of information contained in a company's
financial statements.
• Ratio analysis is used to evaluate various aspects of a company's operating and
financial performance such as its efficiency, liquidity, profitability and solvency.
• Ratios are also compared across different companies in the same sector to s. how
they stack up, and to get an idea of comparative valuations.
• In our analysis, we will evaluate five aspects of the company and its competitors :
1. Operating Performance(EBT margin, Net Profit margin, Return on Assets, Return
on equity)
2. Activity Levels(Total Asset turnover)
3. Liquidity Position (Current Ratio)
4. Leverage (Debt to Equity)
5. Stock Valuation Multiples (Price to Earnings Ratio, Price to Sales Ratio.
Key Financial Ratios of Tata Motors

Mar '17 Mar '16 Mar '15 Mar '14 Mar '13

Investment Valuation Ratios

Face Value 2.00 2.00 2.00 2.00 2.00

Dividend Per Share 0.18 0.50 -- 4.10 2.00

Operating Profit Per Share (Rs) 3.67 6.82 -3.84 -2.83 5.36

Net Operating Profit Per Share (Rs) 130.64 124.78 112.76 106.53 140.33

Free Reserves Per Share (Rs) -- -- -- -- --

Bonus in Equity Capital 16.38 16.38 17.28 17.28 17.44

Profitability Ratios

Operating Profit Margin(%) 2.80 5.46 -3.40 -2.65 3.81

Profit Before Interest And Tax Margin(%) -3.80 -0.31 -10.06 -7.82 -0.23

Gross Profit Margin(%) -3.88 -0.32 -10.58 -8.69 -0.24

Cash Profit Margin(%) 1.26 6.85 -4.53 7.72 5.41

Adjusted Cash Margin(%) 1.26 6.85 -4.53 7.72 5.41

Net Profit Margin(%) -5.59 0.55 -13.05 0.97 0.67

Adjusted Net Profit Margin(%) -5.46 0.52 -12.41 0.87 0.64

Return On Capital Employed(%) -1.86 5.48 -5.61 2.52 5.92

Return On Net Worth(%) -11.91 1.04 -31.93 1.74 1.57

Adjusted Return on Net Worth(%) -11.50 2.67 -29.21 4.56 3.75

Return on Assets Excluding Revaluations 61.28 65.80 46.10 59.51 59.91

Return on Assets Including Revaluations 61.28 65.87 46.18 59.58 59.98

Return on Long Term Funds(%) -2.15 6.03 -7.21 2.94 7.28

Liquidity And Solvency Ratios

Current Ratio 0.52 0.53 0.42 0.43 0.42

Quick Ratio 0.42 0.41 0.42 0.36 0.40

Debt Equity Ratio 0.92 0.63 1.35 0.76 0.75

Long Term Debt Equity Ratio 0.66 0.48 0.83 0.51 0.42

Debt Coverage Ratios

Interest Cover -0.47 1.35 -1.22 0.64 1.43

Total Debt to Owners Fund 0.92 0.63 1.35 0.76 0.75

Financial Charges Coverage Ratio 1.40 3.00 0.40 2.18 2.74

Financial Charges Coverage Ratio Post Tax 1.31 2.81 -0.33 2.80 2.53

Management Efficiency Ratios

Inventory Turnover Ratio 8.92 9.52 8.23 9.78 11.07

Debtors Turnover Ratio 24.00 31.58 31.14 22.60 19.78

Investments Turnover Ratio 8.92 9.52 8.23 9.78 11.07

Fixed Assets Turnover Ratio 1.34 1.65 1.48 1.49 2.03

Total Assets Turnover Ratio 1.20 1.29 1.16 1.12 1.48

Asset Turnover Ratio 1.16 1.19 1.06 1.02 1.40

Average Raw Material Holding -- -- -- -- --

Average Finished Goods Held -- -- -- -- --

Number of Days In Working Capital -80.04 -42.52 -41.83 -69.72 -40.55

Profit & Loss Account Ratios

Material Cost Composition 72.53 70.90 78.15 75.94 75.42

Imported Composition of Raw Materials Consumed -- 3.87 4.84 5.07 4.18

Selling Distribution Cost Composition -- -- -- -- --

Expenses as Composition of Total Sales 12.73 12.88 15.37 20.24 10.91

Cash Flow Indicator Ratios

Dividend Payout Ratio Net Profit -- 26.04 -- 193.87 213.77

Dividend Payout Ratio Cash Profit 12.46 2.26 -- 26.96 30.44

Earning Retention Ratio 102.54 89.79 100.00 25.83 10.15

Cash Earning Retention Ratio 89.41 98.01 -- 77.98 74.56

Adjusted Cash Flow Times 33.11 4.60 -- 4.93 5.63

GRAPHICAL ANALYSIS

TREND ANALYSIS
CONCLUSION
I would like to conclude that the prosperity of Tata Motors Ltd., is wealthy for the
last 2years period. But the last 2 years of profitability is not wealthy, It was found to
be in a gradual decreasing manner regarding the Net Sales and the Net Profits of the
company since 2011 onwards. These changes in the profits might have occurred due
to:
1. High taxation
2. High cost of borrowed funds
3. High depreciation cost
4. High expenses etc.
5. Overtaking luxury brands.
6. Wrong managerial decisions.
Which can be modified by implementing proper financial management concepts.
Thus it can be concluded that inner strength of the company is remarkable. Company
can further improve its profitability through optimum capital gearing and reduction
in administration and Financial expenses