SUMMER TRAINING PROJECT REPORT

On

“FINANCIAL STATEMENT RATIO IN

TATA MOTORS”

SUBMITTED IN PARTIAL FULFILLMENT FOR THE AWARD

OF
“MASTER IN BUSINESS ADMINISTRATION”
FROM
DR. A.P.J. ABDUL KALAM TECHNICAL UNIVERSITY, UTTAR
PRADESH
SESSION 2019-2020
INTERNAL GUIDE:
MR. S. BHADRA
SUBMITTED TO: SUBMITTED BY:
Ms. Namrata Singh Dipak Kumar
(Head of Department) MBA (IIIrd Sem.)
Roll No. 1843070003.

MAHARANA INSTITUTE OF TECHNOLOGY &

SCIENCES, LUCKNOW

1
 DECLARATION

This is to declare that I, Dipak Kumar student of MBA, 3rd

semester, have personally worked on the project entitled “FINANCIAL

STATEMENT RATIO in Tata motors. The data mentioned in this

report were obtained during genuine work done and collected by me.

The data obtained from other sources have been duly acknowledged.

The result embodied in this project has not been submitted to any

other University or Institute for the award of any degree.

Date:

Place: Lucknow

2
 ACKNOWLEDGEMENT
I, Dipak Kumar, student of Master of Business Administration (M.B.A.) from

Maharana Institute of Technology & Science lucknow express my gratitude for

providing me his valuable guidance in undertaking this project.

I would also like to thank my Faculty Guide Ms. Namarata Singh (HOD)

Maharana Institute of Technology & Science lucknow for her valuable

guidance.

I would also like to extend my sincere regards to my parents and friends who has

been the source of my inspiration and helped throughout the working of this

project.

Dipak Kumar
MBA (IIIrd Sem.)
Roll No. 1843070003

3
 PREFACE

MBA (Finance) program is one of the most reputed

professional courses in the field of management. This course includes
both theory and its application contents of curriculum.

Summer training report is an integral part of the MBA program,

as each student is required to undergo summer training from an
institute of repute after 1st Year. As complimentary to that, every
trainee has to prepare and submit a report on the work conducts by the
student during his research report.

This report is in continuation of the above tradition. This

research report was done at “Tata Motors ”, Lucknow (U.P.). The
topic of the training was “Financial statement Ratio in Tata
Motors”.

During my training period, I did a research report in Tata Motors

under the guidance of market professionals at Tata Motors . This

report is an attempt to give an overview of financial study of Tata

Motors

4
 EXECUTIVE SUMMARY

This report is a summary of the dissertation done at Tata Motors .

The first few pages of the report talk about an introduction to the Tata

Motors & the need for specialists in automobile sector independently

since their incorporation & then with the profile of financial statement.

Hereafter the report talks about the Research i.e. trend analysis of

organization. Here we talk about the process of financial analysis

followed by principles of trend analysis. In the next few pages an

attempt has been made to clarify the details & descriptions which one

should know the qualities & reasons for benefits provided by Identify

costs of quality.

The last pages constitute of the findings of the Research & the

conclusion.

5
 TABLE OF CONTENTS

S.No. Particulars Page No.

1. INTRODUCTION

 financial statement
 Goals
 Profitability
 Solvency
 Liquidity
 Stability
 Method
 Ratio Analysis
 WORKING CAPITAL
 Calculation
 Book keeping for Accounts Receivable
 INVENTORY
 Origins of the word Inventory
 Business inventory
 Special terms used in dealing with inventory
 Typology
 High level inventory management
 Accounting perspectives
 ACCOUNTING FOR INVENTORY
 Financial accounting
 Inventory Accounting
 FIFO VS. LIFO ACCOUNTING
 STANDARD COST ACCOUNTING
 Theory of Constraints cost accounting
 NATIONAL ACCOUNTS
 Distressed inventory
 Inventory credit
 ACCOUNTS PAYABLE
 EXPENSE ADMINISTRATION
 INTERNAL CONTROLS
 AUDITS OF ACCOUNTS PAYABLE
 CASH BALANCE
 WORKING CAPITAL MANAGEMENT

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 MANAGEMENT OF WORKING CAPITAL
2. COMPANY PROFILE
 History
 Tata Bolt
 Operations
 TATA MOTORS CARS
 Tata Technologies
 European Technical Centre
 Joint ventures
 Fiat-Tata
 PRODUCTS
 MARKETING STRATEGIES
 CURRENTS FACTS
 OUTLOOK OF INDUSTRY
 ORGANIZATION STRUCTURE OF TATA MOTORS
3. OBJECTIVES OF THE STUDY

4. RESEARCH METHODOLOGY

5. LIMITATIONS

6. DATA ANALYSIS AND INTERPREATATION

7. FINDINGS

8. CONSLUTION

9. BIBLIOGRAPHY

10.APPENDIX

7
INTRODUCTION

8
 INTRODUCTION

Financial Statement

Financial analysis (also referred to as financial statement analysis or

accounting analysis or Analysis of finance) refers to an assessment of the

viability, stability and profitability of a business, sub-business or project.

It is performed by professionals who prepare reports using ratios that make use of

information taken from financial statements and other reports. These reports are

usually presented to top management as one of their bases in making business

decisions.

 Continue or discontinue its main operation or part of its business;

 Make or purchase certain materials in the manufacture of its product;

 Acquire or rent/lease certain machineries and equipment in the production

of its goods;

 Issue stocks or negotiate for a bank loan to increase its working capital;

 Make decisions regarding investing or lending capital;

 Other decisions that allow management to make an informed selection on

various alternatives in the conduct of its business.

Goals

Financial analysts often assess the following elements of a firm:

1. Profitability - its ability to earn income and sustain growth in both the short-

and long-term. A company's degree of profitability is usually based on the income

statement, which reports on the company's results of operations;

9
2. Solvency - its ability to pay its obligation to creditors and other third parties in

the long-term;

3. Liquidity - its ability to maintain positive cash flow, while satisfying

immediate obligations;

Both 2 and 3 are based on the company's balance sheet, which indicates the

financial condition of a business as of a given point in time.

4. Stability - the firm's ability to remain in business in the long run, without

having to sustain significant losses in the conduct of its business. Assessing a

company's stability requires the use of both the income statement and the balance

sheet, as well as other financial and non-financial indicators. etc.

Method

Financial analysts often compare financial ratios (of solvency, profitability,

growth, etc.):

 Past Performance - Across historical time periods for the same firm (the

last 5 years for example),

 Future Performance - Using historical figures and certain mathematical

and statistical techniques, including present and future values, This

extrapolation method is the main source of errors in financial analysis as past

statistics can be poor predictors of future prospects.

 Comparative Performance - Comparison between similar firms.

These ratios are calculated by dividing a (group of) account balance(s), taken from

the balance sheet and / or the income statement, by another, for example :

Net income / equity = return on equity (ROE)

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 Net income / total assets = return on assets (ROA)

Asset Management Ratios gauge how efficiently a company can change

assets into sales.

Stock price / earnings per share = P/E ratio

Comparing financial ratios is merely one way of conducting financial

analysis. Financial ratios face several theoretical challenges:

 They say little about the firm's prospects in an absolute sense. Their insights

about relative performance require a reference point from other time periods

or similar firms.

 One ratio holds little meaning. As indicators, ratios can be logically

interpreted in at least two ways. One can partially overcome this problem by

combining several related ratios to paint a more comprehensive picture of the

firm's performance.

 Seasonal factors may prevent year-end values from being representative. A

ratio's values may be distorted as account balances change from the beginning

to the end of an accounting period. Use average values for such accounts

whenever possible.

 Financial ratios are no more objective than the accounting methods employed.

Changes in accounting policies or choices can yield drastically different ratio

values.

 Fundamental analysis.

Financial analysts can also use percentage analysis which involves reducing a

series of figures as a percentage of some base amount. For example, a group of

items can be expressed as a percentage of net income. When proportionate

11
changes in the same figure over a given time period expressed as a percentage is

known as horizontal analysis. Vertical or common-size analysis, reduces all items

on a statement to a “common size” as a percentage of some base value which

assists in comparability with other companies of different sizes. As a result, all

Income Statement items are divided by Sales, and all Balance Sheet items are

divided by Total Assets.

Another method is comparative analysis. This provides a better way to determine

trends. Comparative analysis presents the same information for two or more time

periods and is presented side-by-side to allow for easy analysis.

Ratio Analysis

Ratio Analysis is a form of Financial Statement Analysis that is used to obtain a

quick indication of a firm's financial performance in several key areas. The ratios

are categorized as Short-term Solvency Ratios, Debt Management Ratios, Asset

Management Ratios, Profitability Ratios,

Ratio Analysis as a tool possesses several important features. The data, which are

provided by financial statements, are readily available. The computation of ratios

facilitates the comparison of firms which differ in size. Ratios can be used to

compare a firm's financial performance with industry averages. In addition, ratios

can be used in a form of trend analysis to identify areas where performance has

improved or deteriorated over time.

Because Ratio Analysis is based upon Accounting information, its effectiveness is

limited by the distortions which arise in financial statements due to such things as

Historical Cost Accounting and inflation. Therefore, Ratio Analysis should only

12
be used as a first step in financial analysis, to obtain a quick indication of a firm's

performance and to identify areas which need to be investigated further.

WORKING CAPITAL

Working capital, also known as net working capital or NWC, is a financial

metric which represents operating liquidity available to a business. Along with

fixed assets such as plant and equipment, working capital is considered a part of

operating capital. It is calculated as current assets minus current liabilities. If

current assets are less than current liabilities, an entity has a working capital

deficiency, also called a working capital deficit.

Net Working Capital = Current Assets − Current Liabilities

A company can be endowed with assets and profitability but short of liquidity if

its assets cannot readily be converted into cash. Positive working capital is

required to ensure that a firm is able to continue its operations and that it has

sufficient funds to satisfy both maturing short-term debt and upcoming operational

expenses. The management of working capital involves managing inventories,

accounts receivable and payable and cash.

Calculation

Current assets and current liabilities include three accounts which are of

special importance. These accounts represent the areas of the business where

managers have the most direct impact:

 accounts receivable (current asset)

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  inventory (current assets), and

 accounts receivable (current asset)

Accounts receivable

Accounts receivable (A/R) is one of a series of accounting transactions dealing

with the billing of customers who owe money to a person, company or

organization for goods and services that have been provided to the customer. In

most business entities this is typically done by generating an invoice and mailing

or electronically delivering it to the customer, who in turn must pay it within an

established timeframe called credit or payment terms.

An example of a common payment term is Net 30, meaning payment is due in the

amount of the invoice 30 days from the date of invoice. Other common payment

terms include Net 45 and Net 60 but could in reality be for any time period agreed

upon by the vendor and the customer.

While booking a receivable is accomplished by a simple accounting transaction,

the process of maintaining and collecting payments on the accounts receivable

subsidiary account balances can be a full time proposition. Depending on the

industry in practice, accounts receivable payments can be received up to 10 - 15

days after the due date has been reached. These types of payment practices are

sometimes developed by industry standards, corporate policy, or because of the

financial condition of the client.

On a company's balance sheet, accounts receivable is the amount that customers

owe to that company. Sometimes called trade receivables, they are classified as

14
current assets assuming that they are due within one year. To record a journal

entry for a sale on account, one must debit a receivable and credit a revenue

account. When the customer pays off their accounts, one debits cash and credits

the receivable in the journal entry. The ending balance on the trial balance sheet

for accounts receivable is always debit.

Business organizations which have become too large to perform such tasks by

hand (or small ones that could but prefer not to do them by hand) will generally

use accounting software on a computer to perform this task.

Associated accounting issues include recognizing accounts receivable, valuing

accounts receivable, and disposing of accounts receivable.

Accounts receivable departments use the sales ledger. Accounts receivable is

more commonly known as Credit Control in the UK, where most companies have

a credit control department.

Other types of accounting transactions include accounts payable, payroll, and trial

balance.

Since not all customer debts will be collected, businesses typically record an

allowance for bad debts which is subtracted from total accounts receivable. When

accounts receivable are not paid, some companies turn them over to third party

collection agencies or collection attorneys who will attempt to recover the debt via

negotiating payment plans, settlement offers or legal action. Outstanding advances

are part of accounts receivables if a company gets an order from its customers

with payment terms agreed in advance. Since no billing is being done to claim the

advances several times this area of collectible is not reflected in accounts

15
receivables. Ideally, since advance payment is mutually agreed term, it is the

responsibility of the accounts department to take out periodically the statement

showing advance collectible and should be provided to sales & marketing for

collection of advances. The payment of accounts receivable can be protected

either by a letter of credit or by Trade Credit Insurance.

Companies can use their accounts receivable as collateral when obtaining a loan

(asset-based lending) or sell them through factoring. Pools or portfolios of

accounts receivable can be sold in the capital markets through a securitization.

Book keeping for Accounts Receivable

Companies have two methods available to them for measuring the net value of

account receivables, which is computed by subtracting the balance of an

allowance account from the accounts receivable account.

The first method is the allowance method, which establishes a liability account,

allowance for doubtful accounts, or bad debt provision, that has the effect of

reducing the balance for accounts receivable. The amount of the bad debt

provision can be computed in two ways - either by reviewing each individual debt

and deciding whether it is doubtful (a specific provision) or by providing for a

fixed percentage, say 2%, of total debtors (a general provision). The change in the

bad debt provision from year to year is posted to the bad debt expense account in

the income statement.

The second method, known as the direct write-off method, is simpler than the

allowance method in that it allows for one simple entry to reduce accounts

receivable to its net realizable value. The entry would consist of debiting a bad

16
debt expense account and crediting the respective account receivable in the sales

ledger.

The two methods are not mutually exclusive, and some businesses will have a

provision for doubtful debts and will also write off specific debts that they know

to be bad (for example, if the debtor has gone into liquidation.)

For tax reporting purposes, a general provision for bad debts is not an allowable
[1]
deduction from profit - a business can only get relief for specific debtors that

have gone bad. However, for financial reporting purposes, companies may choose

to have a general provision against bad debts in line with their past experience of

customer payments in order to avoid over stating debtors in the balance sheet.

 inventory (current assets)

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 INVENTORY

Inventory is a list for goods and materials, or those goods and materials

themselves, held available in stock by a business. It is also used for a list of the

contents of a household and for a list for testamentary purposes of the possessions

of someone who has died. In accounting inventory is considered an asset.

Origins of the word Inventory

The word inventory was first recorded in 1601. The French term inventaire, or

"detailed list of goods," dates back to 1415. Inventory management is primarily

about specifying the size and placement of stocked goods. Inventory management

is required at different locations within a facility or within multiple locations of a

supply network to protect the regular and planned course of production against the

random disturbance of running out of materials or goods. The scope of inventory

management also concerns the fine lines between replenishment lead time,

carrying costs of inventory, asset management, inventory forecasting, inventory

valuation, inventory visibility, future inventory price forecasting, physical

inventory, available physical space for inventory, quality management,

replenishment, returns and defective goods and demand forecasting.

Other definitions of inventory management from across the web:

Involves a retailer seeking to acquire and maintain a proper merchandise

assortment while ordering, shipping, handling, and related costs are kept in check.

Systems and processes that identify inventory requirements, set targets, provide

replenishment techniques and report actual and projected inventory status.

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Handles all functions related to the tracking and management of material. This

would include the monitoring of material moved into and out of stockroom

locations and the reconciling of the inventory balances. Also may include ABC

analysis, lot tracking, cycle counting support etc.

Management of the inventories, with the primary objective of

determining.controlling stock levels within the physical distribution function to

balance the need for product availability against the need for minimizing stock

holding and handling costs.

In business management, inventory consists of a list of goods and materials held

available in stock.

An inventory can also be a self examination, a moral inventory.

Labels: Inventory Management, Procurement, Supply Chain, Supply Chain

Management

Business inventory

The reasons for keeping stock

There are three basic reasons for keeping an inventory:

1. Time - The time lags present in the supply chain, from supplier to user at

every stage, requires that you maintain certain amount of inventory to use

in this "lead time"

2. Uncertainty - Inventories are maintained as buffers to meet uncertainties in

demand, supply and movements of goods.

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 3. Economies of scale - Ideal condition of "one unit at a time at a place where

user needs it, when he needs it" principle tends to incur lots of costs in

terms of logistics. So bulk buying, movement and storing brings in

economies of scale, thus inventory.

All these stock reasons can apply to any owner or product stage.

 Buffer stock is held in individual workstations against the possibility that

the upstream workstation may be a little delayed in long setup or change-

over time. This stock is then used while that change-over is happening.

This stock can be eliminated by tools like SMED.

These classifications apply along the whole Supply chain not just within a facility

or plant.

Where these stocks contain the same or similar items it is often the work practice

to hold all these stocks mixed together before or after the sub-process to which

they relate. This 'reduces' costs. Because they are mixed-up together there is no

visual reminder to operators of the adjacent sub-processes or line management of

the stock which is due to a particular cause and should be a particular individual's

responsibility with inevitable consequences. Some plants have centralized stock

holding across sub-processes which makes the situation even more acute.

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Special terms used in dealing with inventory

 Stock Keeping Unit (SKU) is a unique combination of all the components

that are assembled into the purchasable item. Therefore any change in the

packaging or product is a new SKU. This level of detailed specification

assists in managing inventory.

 Stockout means running out of the inventory of an SKU.[1]

 "New old stock" (sometimes abbreviated NOS) is a term used in business

to refer to merchandise being offered for sale which was manufactured

long ago but that has never been used. Such merchandise may not be

produced any more, and the new old stock may represent the only market

source of a particular item at the present time.

Typology

1. Buffer/safety stock

2. Cycle stock (Used in batch processes, it is the available inventory

excluding buffer stock)

3. De-coupling (Buffer stock that is held by both the supplier and the user)

4. Anticipation stock (building up extra stock for periods of increased

demand - e.g. ice cream for summer)

5. Pipeline stock (goods still in transit or in the process of distribution - have

left the factory but not arrived at the customer yet)

Inventory examples

While accountants often discuss inventory in terms of goods for sale,

organizations - manufacturers, service-providers and not-for-profits - also have

21
inventories (fixtures, furniture, supplies, ...) that they do not intend to sell.

Manufacturers', distributors', and wholesalers' inventory tends to cluster in

warehouses. Retailers' inventory may exist in a warehouse or in a shop or store

accessible to customers. Inventories not intended for sale to customers or to

clients may be held in any premises an organization uses. Stock ties up cash and if

uncontrolled it will be impossible to know the actual level of stocks and therefore

impossible to control them.

While the reasons for holding stock are covered earlier, most manufacturing

organizations usually divide their "goods for sale" inventory into:

 Raw materials - materials and components scheduled for use in making a

product.

 Work in process, WIP - materials and components that have begun their

transformation to finished goods.

 Finished goods - goods ready for sale to customers.

 Goods for resale - returned goods that are salable.

 Spare parts

For example:

Manufacturing

A canned food manufacturer's materials inventory includes the ingredients to form

the foods to be canned, empty cans and their lids (or coils of steel or aluminum for

constructing those components), labels, and anything else (solder, glue...) that will

form part of a finished can. The firm's work in process includes those materials

from the time of release to the work floor until they become complete and ready

22
for sale to wholesale or retail customers. This may be vats of prepared food, filled

cans not yet labelled or sub-assemblies of food components. It may also include

finished cans that are not yet packaged into cartons or pallets. Its finished good

inventory consists of all the filled and labelled cans of food in its warehouse that it

has manufactured and wishes to sell to food distributors (wholesalers), to grocery

stores (retailers), and even perhaps to consumers through arrangements like

factory stores and outlet centers.

Examples of case studies are very revealing, and consistently show that the

improvement of inventory management has two parts: the capability of the

organisation to manage inventory, and the way in which it chooses to do so. For

example, a company may wish to install a complex inventory system, but unless

there is a good understanding of the role of inventory and its perameters, and an

effective business process to support that, the system cannot bring the necessary

benefits to the organisation in isolation.

Typical Inventory Management techniques include Pareto Curve ABC

Classification and Economic Order Quantity Management. A more sophisticated

method takes these two techniques further, combining certain aspects of each to

createThe K Curve Methodology. A case study of k-curve benefits to one

company shows a successful implementation.

Unnecessary inventory adds enormously to the working capital tied up in the

business as well as the complexity of the supply chain. Reduction and elimination

of these inventory 'wait' states is a key concept in Lean. Too big an inventory

reduction too quickly can cause a business to be anorexic. There are well proven

processes and techniques to assist in inventory planning and strategy, both at

23
business overview and part number level. Many of the big MRP/and ERP systems

do not offer the necessary inventory planning tools within their integrated

planning applications.

High level inventory management

It seems that around about 1880[2] there was a change in manufacturing practice

from companies with relatively homogeneous lines of products to vertically

integrated companies with unprecedented diversity in processes and products.

Those companies (especially in metalworking) attempted to achieve success

through economies of scope - the gains of jointly producing two or more products

in one facility. The managers now needed information on the effect of product

mix decisions on overall profits and therefore needed accurate product cost

information. A variety of attempts to achieve this were unsuccessful due to the

huge overhead of the information processing of the time. However, the

burgeoning need for financial reporting after 1900 created unavoidable pressure

for financial accounting of stock and the management need to cost manage

products became overshadowed. In particular it was the need for audited accounts

that sealed the fate of managerial cost accounting. The dominance of financial

reporting accounting over management accounting remains to this day with few

exceptions and the financial reporting definitions of 'cost' have distorted effective

management 'cost' accounting since that time. This is particularly true of

inventory.

Hence high level financial inventory has these two basic formulas which relate to

the accounting period:

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 1. Cost of Beginning Inventory at the start of the period + inventory

purchases within the period + cost of production within the period = cost

of goods

2. Cost of goods − cost of ending inventory at the end of the period = cost of

goods sold

The benefit of these formulae is that the first absorbs all overheads of production

and raw material costs in to a value of inventory for reporting. The second

formula then creates the new start point for the next period and gives a figure to be

subtracted from sales price to determine some form of sales margin figure.

Manufacturing management is more interested in inventory turnover ratio or

average days to sell inventory since it tells them something about relative

inventory levels.

Inventory turn over ratio (also known as inventory turns) = cost of goods sold /

Average Inventory = Cost of Goods Sold / ((Beginning Inventory + Ending

Inventory) / 2) and its inverse

Average Days to Sell Inventory = Number of Days a Year / Inventory Turn Over

Ratio = 365 days a year / Inventory Turn Over Ratio

This ratio estimates how many times the inventory turns over a year. This number

tells us how much cash/goods are tied up waiting for the process and is a critical

measure of process reliability and effectiveness. So a factory with two inventory

turns has six months stock on hand which generally not a good figure (depending

upon industry) whereas a factory that moves from six turns to twelve turns has

probably improved effectiveness by 100%. This improvement will have some

25
negative results in the financial reporting since the 'value' now stored in the

factory as inventory is reduced.

Whilst the simplicity of these accounting measures of inventory are very useful

they are in the end fraught with the danger of their own assumptions. There are in

fact so many things which can vary hidden under this appearance of simplicity

that a variety of 'adjusting' assumptions may be used. These include:

 Specific Identification

 Weighted Average Cost

 Moving-Average Cost

 FIFO .

Inventory Turn is a financial accounting tools for evaluating inventory and it is

not necessarily a management tool. Inventory management should be forward

looking. The methodology applied is based on historical cost of goods sold. The

ratio may not be able to reflect the usability of future production demand as well

as customer demand.

Business models including Just in Time (JIT) Inventory, Vendor Managed

Inventory (VMI) and Customer Managed Inventory (CMI) attempt to minimize

on-hand inventory and increase inventory turns. VMI and CMI have gained

considerable attention due to the success of third party vendors who offer added

expertise and knowledge that organizations may not possess.

Accounting perspectives

26
The basis of Inventory accounting

Inventory needs to be accounted where it is held across accounting period

boundaries since generally expenses should be matched against the results of that

expense within the same period. When processes were simple and short then

inventories were small but with more complex processes then inventories became

larger and significant valued items on the balance sheet. This need to value unsold

and incomplete goods has driven many new behaviours into management practise.

Perhaps most significant of these are the complexities of fixed cost recovery,

transfer pricing, and the separation of direct from indirect costs. This, supposedly,

precluded "anticipating income" or "declaring dividends out of capital". It is one

of the intangible benefits of Lean and the TPS that process times shorten and stock

levels decline to the point where the importance of this activity is hugely reduced

and therefore effort, especially managerial, to achieve it can be minimised.

ACCOUNTING FOR INVENTORY

Each country has its own rules about accounting for inventory that fit with their

financial reporting rules.

So for example, organizations in the U.S. define inventory to suit their needs

within US Generally Accepted Accounting Practices (GAAP), the rules defined

by the Financial Accounting Standards Board (FASB) (and others) and enforced

by the U.S. Securities and Exchange Commission (SEC) and other federal and

state agencies. Other countries often have similar arrangements but with their own

GAAP and national agencies instead.

27
It is intentional that financial accounting uses standards that allow the public to

compare firms' performance, cost accounting functions internally to an

organization and potentially with much greater flexibility. A discussion of

inventory from standard and Theory of Constraints-based (throughput) cost

accounting perspective follows some examples and a discussion of inventory from

a financial accounting perspective.

The internal costing/valuation of inventory can be complex. Whereas in the past

most enterprises ran simple one process factories, this is quite probably in the

minority in the 21st century. Where 'one process' factories exist then there is a

market for the goods created which establishes an independent market value for

the good. Today with multi-stage process companies there is much inventory that

would once have been finished goods which is now held as 'work-in-process'

(WIP). This needs to be valued in the accounts but the valuation is a management

decision since there is no market for the partially finished product. This somewhat

arbitrary 'valuation' of WIP combined with the allocation of overheads to it has led

to some unintended and undesirable results.

Financial accounting

An organization's inventory can appear a mixed blessing, since it counts as an

asset on the balance sheet, but it also ties up money that could serve for other

purposes and requires additional expense for its protection. Inventory may also

cause significant tax expenses, depending on particular countries' laws regarding

depreciation of inventory, as in Thor Power Tool Company v. Commissioner.

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Inventory appears as a current asset on an organization's balance sheet because the

organization can, in principle, turn it into cash by selling it. Some organizations

hold larger inventories than their operations require in order to inflate their

apparent asset value and their perceived profitability.

In addition to the money tied up by acquiring inventory, inventory also brings

associated costs for warehouse space, for utilities, and for insurance to cover staff

to handle and protect it, fire and other disasters, obsolescence, shrinkage (theft and

errors), and others. Such holding costs can mount up: between a third and a half of

its acquisition value per year.

Businesses that stock too little inventory cannot take advantage of large orders

from customers if they cannot deliver. The conflicting objectives of cost control

and customer service often pit an organization's financial and operating managers

against its sales and marketing departments. Sales people, in particular, often

receive sales commission payments, so unavailable goods may reduce their

potential personal income. This conflict can be minimised by reducing production

time to being near or less than customer expected delivery time. This effort,

known as "Lean production" will significantly reduce working capital tied up in

inventory and reduce manufacturing costs (See the Toyota Production System).

Inventory Accounting

By helping the organization to make better decisions, the accountants can help the

public sector to change in a very positive way that delivers increased value for the

taxpayer’s investment. It can also help to incentivise progress and to ensure that

reforms are sustainable and effective in the long term, by ensuring that success is

29
appropriately recognized in both the formal and informal reward systems of the

organization.

To say that they have a key role to play is an understatement. Finance is connected

to most, if not all, of the key business processes within the organization. It should

be steering the stewardship and accountability systems that ensure that the

organization is conducting its business in an appropriate, ethical manner. It is

critical that these foundations are firmly laid. So often they are the litmus test by

which public confidence in the institution is either won or lost.

Finance should also be providing the information, analysis and advice to enable

the organizations’ service managers to operate effectively. This goes beyond the

traditional preoccupation with budgets – how much have we spent so far, how

much have we left to spend? It is about helping the organization to better

understand its own performance. That means making the connections and

understanding the relationships between given inputs – the resources brought to

bear – and the outputs and outcomes that they achieve. It is also about

understanding and actively managing risks within the organization and its

activities.

30
 FIFO VS. LIFO ACCOUNTING

When a dealer buys goods from inventory, the value of the inventory is reduced

by the cost of goods sold (COGS). This is simple where the COGS has not varied

across those held in stock; but where it has, then an agreed method must be

derived to evaluate it. For commodity items that one cannot track individually,

accountants must choose a method that fits the nature of the sale. Two popular

methods which normally exist are: FIFO and LIFO accounting (first in - first out,

last in - first out). FIFO regards the first unit that arrived in inventory as the first

one sold. LIFO considers the last unit arriving in inventory as the first one sold.

Which method an accountant selects can have a significant effect on net income

and book value and, in turn, on taxation. Using LIFO accounting for inventory, a

company generally reports lower net income and lower book value, due to the

effects of inflation. This generally results in lower taxation. Due to LIFO's

potential to skew inventory value, UK GAAP and IAS have effectively banned

LIFO inventory accounting.

STANDARD COST ACCOUNTING

Standard cost accounting uses ratios called efficiencies that compare the labour

and materials actually used to produce a good with those that the same goods

would have required under "standard" conditions. As long as similar actual and

standard conditions obtain, few problems arise. Unfortunately, standard cost

accounting methods developed about 100 years ago, when labor comprised the

most important cost in manufactured goods. Standard methods continue to

emphasize labor efficiency even though that resource now constitutes a (very)

small part of cost in most cases.

31
Standard cost accounting can hurt managers, workers, and firms in several ways.

For example, a policy decision to increase inventory can harm a manufacturing

managers' performance evaluation. Increasing inventory requires increased

production, which means that processes must operate at higher rates. When (not

if) something goes wrong, the process takes longer and uses more than the

standard labor time. The manager appears responsible for the excess, even though

s/he has no control over the production requirement or the problem.

In adverse economic times, firms use the same efficiencies to downsize, rightsize,

or otherwise reduce their labor force. Workers laid off under those circumstances

have even less control over excess inventory and cost efficiencies than their

managers.

Many financial and cost accountants have agreed for many years on the

desirability of replacing standard cost accounting. They have not, however, found

a successor.

Theory of Constraints cost accounting

Eliyahu M. Goldratt developed the Theory of Constraints in part to address the

cost-accounting problems in what he calls the "cost world". He offers a substitute,

called throughput accounting, that uses throughput (money for goods sold to

customers) in place of output (goods produced that may sell or may boost

inventory) and considers labor as a fixed rather than as a variable cost. He defines

inventory simply as everything the organization owns that it plans to sell,

including buildings, machinery, and many other things in addition to the

categories listed here. Throughput accounting recognizes only one class of

32
variable costs: the trully variable costs like materials and components that vary

directly with the quantity produced.

Finished goods inventories remain balance-sheet assets, but labor efficiency ratios

no longer evaluate managers and workers. Instead of an incentive to reduce labor

cost, throughput accounting focuses attention on the relationships between

throughput (revenue or income) on one hand and controllable operating expenses

and changes in inventory on the other. Those relationships direct attention to the

constraints or bottlenecks that prevent the system from producing more

throughput, rather than to people - who have little or no control over their

situations.

33
 NATIONAL ACCOUNTS

Inventories also play an important role in national accounts and the analysis of the

business cycle. Some short-term macroeconomic fluctuations are attributed to the

inventory cycle.

Distressed inventory

Also known as distressed or expired stock, distressed inventory is inventory

whose potential to be sold at a normal cost has or will soon pass. In certain

industries it could also mean that the stock is or will soon be impossible to sell.

Examples of distressed inventory include products that have reached its expiry

date, or has reached a date in advance of expiry at which the planned market will

no longer purchase it (e.g. 3 months left to expiry), clothing that is defective or out

of fashion, and old newspapers or magazines. It also includes computer or

consumer-electronic equipment that is obsolescent or discontinued and whose

manufacturer is unable to support it. One current example of distressed inventory

is the VHS format.

Inventory credit

Inventory credit refers to the use of stock, or inventory, as collateral to raise

finance. Where banks may be reluctant to accept traditional collateral, for example

in developing countries where land title may be lacking, inventory credit is a

potentially important way of overcoming financing constraints. This is not a new

concept; archaeological evidence suggests that it was practiced in Ancient Rome.

Obtaining finance against stocks of a wide range of products held in a bonded

warehouse is common in much of the world. It is, for example, used with

34
Parmesan cheese in Italy.[5] Inventory credit on the basis of stored agricultural

produce is widely used in Latin American countries and in some Asian countries.

A precondition for such credit is that banks must be confident that the stored

product will be available if they need to call on the collateral; this implies the

existence of a reliable network of certified warehouses. automobile sector s also

face problems in valuing the inventory. The possibility of sudden falls in

commodity prices means that they are usually reluctant to lend more than about

60% of the value of the inventory at the time of the loan.

ACCOUNTS PAYABLE

(CURRENT LIABILITY)

Accounts payable is a file or account that contains money that a person or

company owes to suppliers, but has not paid yet (a form of debt). When you

receive an invoice you add it to the file, and then you remove it when you pay.

Thus, the A/P is a form of credit that suppliers offer to their purchasers by

allowing them to pay for a product or service after it has already been received.

The profession is unregulated, though there are international standard setting

bodies, an example of which is the International Accounts Payable Professionals

(IAPP), an association of more than 5,000 members in the United States, Canada,

the United Kingdom and other countries.[1] As part of its Professional Standards

Framework,[2] the IAPP has established a new definition of accounts payable:

Accounts payable is a strategic, value-added accounting function that performs the

primary non-payroll disbursement functions in an organization. As such, the AP

35
operation plays a critical role in the financial cycle of the organization. AP enables

an organization to accomplish its objectives by bringing a systematic, disciplined

approach to evaluate and improve the effectiveness of the entire payables process.

In addition to the traditional AP activities whereby liabilities to third-party entities

(suppliers, vendors, taxing authorities, etc.) are recognized and paid based on the

credit policies agreed to between the company and its suppliers, today's AP

departments have taken on much wider roles including fraud prevention, cost

reduction, workflow system solutions, cash-flow management, internal controls

and vendor (supply chain) financing.

In households, accounts payable are ordinarily bills from the electric company,

telephone company, cable television or satellite dish service, newspaper

subscription, and other such regular services. Householders usually track and pay

on a monthly basis by hand using cheques or credit cards. In a business, there is

usually a much broader range of services in the A/P file, and accountants or

bookkeepers usually use accounting software to track the flow of money into this

liability account when they receive invoices and out of it when they make

payments. Increasingly, large firms are using specialized Accounts Payable

Automation to automate the paper and manual elements of processing an

organization's invoices.

Commonly, a supplier will ship a product, issue an invoice, and collect payment

later, which creates a cash conversion cycle, a period of time during which the

supplier has already paid for raw materials but hasn't been paid in return by the

final customer.

36
When the invoice arrives it is matched to the packing slip and purchase order, and

if all is in order, the invoice is paid. This is referred to as the three-way match.

Quite a few organizations have been told that their vendors won’t be sending

paper invoices in the future. They insist on e-invoicing, fax or email. You can take

advantage of this new methodology in an organized manner. It’s not that hard.

Here’s what Accounts Payable Now & Tomorrow suggests:

1) Set up a single e-mail address to be used exclusively for the receipt of invoices.

Whoever is responsible for either processing the invoices that come into this

address or forwarding them for approval should have the password, as should their

backup and perhaps the department manager. The important thing is the e-mail

account not belong to one person but several in case of absences etc.

2) Set up a dedicated fax number to be used for accounts payable invoices only.

Invoices can be retrieved throughout the day and integrated into the normal

accounts payable workflow.

3) Set up an e-fax facility to receive faxed invoices into an e-mail account. This

should eliminate the problem of illegible invoices.

4) Make sure your new e-mail address and fax number are included in all

correspondence with vendors, especially your New Vendor Welcome kit

EXPENSE ADMINISTRATION

Expense administration is usually closely related to accounts payable, and

sometimes those functions are performed by the same employee. The expense

administrator verifies employees' expense reports, confirming that receipts exist to

37
support airline, ground transportation, meals and entertainment, telephone, hotel,

and other expenses. This documentation is necessary for tax purposes and to

prevent reimbursement of inappropriate or erroneous expenses. Airline expenses

are, perhaps, the most prone to fraud because of the high cost of air travel and the

confusing nature of airline-related documentation, which can consist of an array of

reservations, receipts, and actual tickets.

Petty cash is also usually paid out by A/P personnel in the form of a check made

out to an employee, who cashes the check at the bank and puts the cash in the

petty cashbox.

38
 INTERNAL CONTROLS

A variety of checks against abuse are usually present to prevent embezzlement by

accounts payable personnel. Separation of duties is a common control. Nearly all

companies have a junior employee process and print a cheque and a senior

employee review and sign the cheque. Often, the accounting software will limit

each employee to performing only the functions assigned to them, so that there is

no way any one employee – even the controller – can singlehandedly make a

payment.

Some companies also separate the functions of adding new vendors and entering

vouchers. This makes it impossible for an employee to add himself as a vendor

and then cut a cheque to himself without colluding with another employee. This

file is referred to as the master vendor file. It is the repository of all significant

information about the company's suppliers. It is the reference point for accounts

payable when it comes to paying invoices.

In addition, most companies require a second signature on cheques whose amount

exceeds a specified threshold.

Accounts payable personnel must watch for fraudulent invoices. In the absence of

a purchase order system, the first line of defense is the approving manager.

However, A/P staff should become familiar with a few common problems, such as

"Yellow Pages" ripoffs in which fraudulent operators offer to place an

advertisement. The walking-fingers logo has never been trademarked, and there

are many different Yellow Pages-style directories, most of which have a small

distribution. According to an article in the Winter 2000 American Payroll

39
Association's Employer Practices, "Vendors may send documents that look like

invoices but in small print they state "this is not a bill." These may be charges for

directory listings or advertisements. Recently, some companies have begun

sending what appears to be a rebate or refund check; in reality, it is a registration

for services that is activated when the document is returned with a signature."

In accounts payable, a simple mistake can cause a large overpayment. A common

example involves duplicate invoices. An invoice may be temporarily misplaced or

still in the approval status when the vendors calls to inquire into its payment

status. After the A/P staff member looks it up and finds it has not been paid, the

vendor sends a duplicate invoice; meanwhile the original invoice shows up and

gets paid. Then the duplicate invoice arrives and inadvertently gets paid as well,

perhaps under a slightly different invoice number.

40
 AUDITS OF ACCOUNTS PAYABLE

Auditors often focus on the existence of approved invoices, expense reports, and

other supporting documentation to support checks that were cut. The presence of a

confirmation or statement from the supplier is reasonable proof of the existence of

the account. It is not uncommon for some of this documentation to be lost or

misfiled by the time the audit rolls around. An auditor may decide to expand the

sample size in such situations.

Auditors typically prepare an ageing structure of accounts payable for a better

understanding of outstanding debts over certain periods (30, 60, 90 days, etc).

Such structures are helpful in the correct presentation of the balance sheet as of

year end.

The current portion of debt (payable within 12 months) is critical, because it

represents a short-term claim to current assets and is often secured by long term

assets. Common types of short-term debt are bank loans and lines of credit.

An increase in working capital indicates that the business has either increased

current assets (that is received cash, or other current assets) or has decreased

current liabilities, for example has paid off some short-term creditors.

Implications on M&A: The common commercial definition of working capital

for the purpose of a working capital adjustment in an M&A transaction ( i .e for a

working capital adjustment mechanism in a sale and purchase agreement) is equal

to:

41
CASH BALANCE:

Current Assets - Current Liabilities excluding deferred tax assets/liabilities,

excess cash, surplus assets and/or deposit balances.

items often attract a one-for-one purchase price adjustment.

42
 WORKING CAPITAL MANAGEMENT

Decisions relating to working capital and short term financing are referred to as

working capital management. These involve managing the relationship between a

firm's short-term assets and its short-term liabilities. The goal of working capital

management is to ensure that the firm is able to continue its operations and that it

has sufficient cash flow to satisfy both maturing short-term debt and upcoming

operational expenses.

Decision criteria

By definition, working capital management entails short term decisions -

generally, relating to the next one year period - which are "reversible". These

decisions are therefore not taken on the same basis as Capital Investment

Decisions (NPV or related, as above) rather they will be based on cash flows and /

or profitability.

 One measure of cash flow is provided by the cash conversion cycle - the

net number of days from the outlay of cash for raw material to receiving

payment from the customer. As a management tool, this metric makes

explicit the inter-relatedness of decisions relating to inventories, accounts

receivable and payable, and cash. Because this number effectively

corresponds to the time that the firm's cash is tied up in operations and

unavailable for other activities, management generally aims at a low net

count.

 In this context, the most useful measure of profitability is Return on capital

(ROC). The result is shown as a percentage, determined by dividing

43
 relevant income for the 12 months by capital employed; Return on equity

(ROE) shows this result for the firm's shareholders. Firm value is

enhanced when, and if, the return on capital, which results from working

capital management, exceeds the cost of capital, which results from capital

investment decisions as above. ROC measures are therefore useful as a

management tool, in that they link short-term policy with long-term

decision making. See Economic value added (EVA).

MANAGEMENT OF WORKING CAPITAL

Guided by the above criteria, management will use a combination of policies and

techniques for the management of working capital. These policies aim at

managing the current assets (generally cash and cash equivalents, inventories and

debtors) and the short term financing, such that cash flows and returns are

acceptable.

 Cash management. Identify the cash balance which allows for the

business to meet day to day expenses, but reduces cash holding costs.

 Inventory management. Identify the level of inventory which allows for

uninterrupted production but reduces the investment in raw materials - and

minimizes reordering costs - and hence increases cash flow; see Supply

chain management; Just In Time (JIT); Economic order quantity (EOQ);

Economic production quantity

 Debtors management. Identify the appropriate credit policy, i.e. credit

terms which will attract customers, such that any impact on cash flows and

the cash conversion cycle will be offset by increased revenue and hence

Return on Capital (or vice versa); see Discounts and allowances.

44
  Short term financing. Identify the appropriate source of financing, given

the cash conversion cycle: the inventory is ideally financed by credit

granted by the supplier; however, it may be necessary to utilize a bank

loan (or overdraft), or to "convert debtors to cash" through "factoring".

Working capital is directly affecting by other management issues, such as product

mix, supply chain design and business model (for example agent vs. distributor)

45
COMPANY PROFILE

46
 COMPANY PROFILE

Tata Motors

Tata Motors Limited

Type Public

Traded as BSE: 500570 (BSE SENSEX Constituent)

NSE: TATAMOTORS

NYSE: TTM

Industry Automotive

Founded 1945

Headquarters Mumbai, India

Area served Worldwide

Key people Natarajan Chandrasekaran(Chairman)

Chandrasekaran Ramakrishnan (President

and Group CFO)

Guenter Butschek (CEO)

Products Automobiles

Sport Cars

Commercial vehicles

Coaches

Buses

47
 Construction equipment

Military vehicles

Automotive parts

Services Automotive design, engineering and

outsourcing services

Vehicle leasing

Vehicle service

Revenue ₹2.697 trillion(US$40 billion)

(2016)[2]

Operating ₹216.5 billion(US$3.2 billion) (2016)

income

Profit ₹95.88 billion(US$1.4 billion) (2016)

Total assets ₹2.619 trillion(US$39 billion) (2016)

Total equity ₹763.5 billion(US$11 billion) (2016)

Number of 60,000 (2016)

employees

Parent Tata Group

Divisions Tata Motors Cars

Subsidiaries Jaguar Land Rover

Tata Daewoo

Tata Hispano

Website www.tatamotors.com

48
Tata Motors Limited (formerly TELCO, short for Tata Engineering and

Locomotive Company) is an Indian multinational automotive manufacturing

company headquartered in Mumbai, India, and a member of the Tata Group. Its

products include passenger cars, trucks, vans, coaches, buses, sports cars,

construction equipment and military vehicles.

Tata Motors has auto manufacturing and assembly plants

in Jamshedpur, Pantnagar, Lucknow, Sanand, Dharwad, and Pune in India, as well

as in Argentina, South Africa, Great Britain and Thailand. It has research and

development centres in Pune, Jamshedpur, Lucknow, and Dharwad, India and in

South Korea, Great Britain and Spain. Tata Motors' principal subsidiaries

purchased the English premium car maker Jaguar Land Rover (the maker of

Jaguar and Land Rover cars) and the South Korean commercial vehicle

manufacturer Tata Daewoo. Tata Motors has a bus-manufacturing joint venture

with Marcopolo S.A. (Tata Marcopolo), a construction-equipment manufacturing

joint venture with Hitachi (Tata Hitachi Construction Machinery), and a joint

venture with Fiat Chrysler which manufactures automotive components and Fiat

Chrysler and Tata branded vehicles.

TATA Tiago

Founded in 1945 as a manufacturer of locomotives, the company manufactured its

first commercial vehicle in 1954 in a collaboration with Daimler-Benz AG, which

ended in 1969. Tata Motors entered the passenger vehicle market in 1991 with the

49
launch of the Tata Sierra, becoming the first Indian manufacturer to achieve the

capability of developing a competitive indigenous automobile.[4] In 1998, Tata

launched the first fully indigenous Indian passenger car, the Indica, and in 2008

launched the Tata Nano, the world's cheapest car. Tata Motors acquired the South

Korean truck manufacturer Daewoo Commercial Vehicles Company in 2004 and

purchasedJaguar Land Rover from Ford in 2008.

Tata Motors is listed on the (BSE) Bombay Stock Exchange, where it is a

constituent of the BSE SENSEX index, the National Stock Exchange of India, and

the New York Stock Exchange. The company is ranked 226th on the Fortune

Global 500 list of the world's biggest corporations as of 2016.[5]

On 17 January 2017, Natarajan Chandrasekaran was appointed chairman of the

company.

TATA Hexa is a crossover vehicle launched in January 2017. This vehicle is the

successor of TATA Aria.

History

50
The first-generation(1998–07) Tata Indica; one of the best-selling cars in the

history of the Indian automobile industry

Tata Bolt

Tata entered the commercial vehicle sector in 1954 after forming a joint venture

with Daimler-Benz of Germany. After years of dominating the commercial

vehicle market in India, Tata Motors entered the passenger vehicle market in 1991

by launching the Tata Sierra, a multi utility vehicle. Tata subsequently launched

the Tata Estate (1992; a station wagon design based on the earlier 'TataMobile'

(1989), a light commercial vehicle), the Tata Sumo (1994; LCV) and the Tata

Safari (1998; India's first sports utility vehicle).

Tata launched the Indica in 1998, the first fully indigenous Indian passenger car.

Although initially criticized by auto analysts, its excellent fuel economy, powerful

engine, and an aggressive marketing strategy made it one of the best-selling cars

in the history of the Indian automobile industry. A newer version of the car,

named Indica V2, was a major improvement over the previous version and

quickly became a mass favourite. Tata Motors also successfully exported large

numbers of the car to South Africa. The success of the Indica played a key role in

the growth of Tata Motors.

In 2004, Tata Motors acquired Daewoo's South Korea-based truck manufacturing

unit, Daewoo Commercial Vehicles Company, later renamed Tata Daewoo.

51
On 27 September 2004, Tata Motors rang the opening bell at the New York Stock

Exchange to mark the listing of Tata Motors.

In 2005, Tata Motors acquired a 21% controlling stake in the Spanish bus and

coach manufacturer Hispano Carrocera. Tata Motors continued its market area

expansion through the introduction of new products such as buses (Starbus and

Globus, jointly developed with subsidiary Hispano Carrocera) and trucks (Novus,

jointly developed with subsidiary Tata Daewoo).

In 2006, Tata formed a joint venture with the Brazil-based Marcopolo, Tata

Marcopolo Bus, to manufacture fully built buses and coaches.[10]

In 2008, Tata Motors acquired the English car maker Jaguar Land Rover,

manufacturer of the Jaguar and Land Rover from Ford Motor Company.

In May 2009, Tata unveiled the Tata World Truck range jointly developed with

Tata Daewoo; the range went on sale in South Korea, South Africa,

the SAARC countries, and the Middle East at the end of 2009.

Tata acquired full ownership of Hispano Carrocera in 2009.

In 2009, its Lucknow plant was awarded the "Best of All" Rajiv Gandhi National

Quality Award.

In 2010, Tata Motors acquired an 80% stake in the Italian design and engineering

company Trilix for €1.85 million. The acquisition formed part of the company's

plan to enhance its styling and design capabilities.[18]

In 2012, Tata Motors announced it would invest around ₹6 billion in the

development of Futuristic Infantry Combat Vehicles in collaboration with DRDO.

In 2013, Tata Motors announced it will sell in India, the first vehicle in the world

to run on compressed air (engines designed by the French company MDI) and

dubbed "Mini CAT".

52
In 2014, Tata Motors introduced first Truck Racing championship in India "T1

Prima Truck Racing Championship".

On 26 January 2014, the Managing Director Karl Slym was found dead. He fell

from the 22nd floor to the fourth floor of the Shangri-La Hotel in Bangkok, where

he was to attend a meeting of Tata Motors Thailand.

On 2 November 2015, Tata Motors announced Lionel Messi as global brand

ambassador at New Delhi, to promote and endorse passenger vehicles globally.

On 27 December 2016, Tata Motors announced the Bollywood actor Akshay

Kumar as brand ambassador for its commercial vehicles range.

On 9 March 2017, Tata Motors announced that it has signed a memorandum of

understanding with Volkswagen to develop vehicles for India's domestic market.

Operations

Tata Motors has vehicle assembly operations in India, Great Britain, South Korea,

Thailand, Spain and South Africa. It plans to establish plants in Turkey, Indonesia,

and Eastern Europe.

53
TATA MOTORS CARS

Tata Motors Cars

The Tata Prima

Tata Motors Cars is a division of Tata Motors which produces passenger cars

under the Tata Motors marque. Tata Motors is among the top four passenger

vehicle brands in India with products in the compact, midsize car, and utility

vehicle segments. The company's manufacturing base in India is spread across

Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar Pradesh),

Pantnagar (Uttarakhand), Dharwad (Karnataka) and Sanand (Gujarat). Tata's

dealership, sales, service, and spare parts network comprises over 3,500 touch

points. Tata Motors has more than 250 dealerships in more than 195 cities across

27 states and four Union Territories of India. It has the third-largest sales and

service network after Maruti Suzuki and Hyundai.

Tata LPT Trucks made at overseas plants

Tata also has franchisee/joint venture assembly operations in Kenya, Bangladesh,

Ukraine, Russia, and Senegal. Tata has dealerships in 26 countries across 4

continents. Tata is present in many countries, it has managed to create a large

consumer base in the Indian Subcontinent, namely India, Bangladesh, Bhutan, Sri

Lanka and Nepal. Tata is also present in Italy, Spain, Poland, Romania,

Turkey, Chile, South Africa, Oman, Kuwait, Qatar, Saudi Arabia, United Arab

Emirates, Bahrain, Iraq, Syria and Australia.

54
Tata Daewoo

The Tata Prima heavy truck on the roads of Lucknow

Tata Daewoo (officially Tata Daewoo Commercial Vehicle Company and

formerly Daewoo Commercial Vehicle Company) is a commercial vehicle

manufacturer 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.

Tata Hispano

55
Tata Hispano Habit bus at Madrid Airport

Tata Hispano Motors Carrocera, S.A. was a bus and coach manufacturer based in

Zaragoza, Aragon, Spain, and a wholly owned subsidiary of Tata Motors. Tata

Hispano has plants in Zaragoza, Spain, and Casablanca, Morocco. Tata Motors

first acquired a 21% stake in Hispano Carrocera SA in 2005,[9] and purchased the

remaining 79% for an undisclosed sum in 2009, making it a fully owned

subsidiary, subsequently renamed Tata Hispano. In 2013, Tata Hispano ceased

production at its Zaragoza plant.

Jaguar Land Rover

The Range Rover Evoque.

Jaguar Land Rover

Jaguar Land Rover PLC is an English premium automaker headquartered

in Whitley, Coventry, Great Britain, and has been a wholly owned subsidiary of

Tata Motors since June 2008, when it was acquired from Ford Motor Company of

USA. Its principal activity is the development, manufacture and sale of Jaguar

Cars luxury and sports cars and Land Rover premium four-wheel-drive vehicles.

56
Jaguar Land Rover has two design centres and three assembly plants in Great

Britain. Under Tata ownership, Jaguar Land Rover has launched new vehicles

including the Range Rover Evoque, Jaguar F-Type, the Jaguar XF, the Jaguar XE,

the Jaguar XJ (X351) the second-generation Range Rover Sport, the fourth-

generation Land Rover Discovery, and the Range Rover (L405).

TML Drivelines

TML Drivelines Ltd. is a wholly owned subsidiary of Tata Motors engaged in the

manufacture of gear boxes and axles for heavy and medium commercial vehicles.

It has production facilities at Jamshedpur and Lucknow. TML Forge division is

also a recent acquisition of TML Drivelines. TML Drivelines was formed through

the merger of HV Transmission and HV Axles .

Tata Technologies

Tata Technologies Limited (TTL) is an 86.91%-owned subsidiary of Tata Motors

which provides design, engineering, and business process outsourcing services to

the automotive industry. It is headquartered in Pune (Hinjewadi) and also has

operations in London, Detroit and Thailand. Its clients include Ford, General

Motors, Honda, and Tata Motors.

The British engineering and design services company Incat International, which

specialises in engineering and design services and product lifecycle management

in the automotive, aerospace, and engineering sectors, is a wholly owned

subsidiary of TTL. It was acquired by TTL in August 2005 for ₹4 billion.

European Technical Centre

The Tata Motors European Technical Centre (TMETC) is an automotive design,

engineering, and research company based at Warwick Manufacturing

Group (WMG) on the campus of the University of Warwick in Great Britain. It

57
was established in 2005 and is a wholly owned subsidiary of Tata Motors. It was

the joint developer of the World Truck.[38]

In September 2013, it was announced that a new National Automotive Innovation

Campus would be built at WMG at Warwick's main campus at a cost of £100

million. The initiative will be a partnership between Tata Motors, the university,

and Jaguar Land Rover, with £30 million in funding coming from Tata Motors.

Joint ventures

Tata Marcopolo

Tata Marcopolo

A Tata Marcopolo bus in use inChandigarh, India

Tata Marcopolo is a bus-manufacturing joint venture between Tata Motors (51%)

and the Brazil-based Marcopolo S.A. (49%). The joint venture manufactures and

assembles fully built buses and coaches targeted at developing mass rapid

transportation systems. It uses technology and expertise in chassis and aggregates

from Tata Motors, and know-how in processes and systems for bodybuilding and

bus body design from Marcopolo. Tata Marcopolo has launched a low-floor city

bus which is widely used by transport corporations in many Indian cities. Its

manufacturing facility is based in Dharwad, Karnataka State, India.

58
Fiat-Tata

Fiat-Tata is an India-based joint venture between Tata and Fiat

Automobiles which produces Fiat and Tata branded passenger cars, as well as

engines and transmissions. Tata Motors has gained access to Fiat's diesel

engine and transmission technology through the joint venture.

The two companies formerly also had a distribution joint venture through which

Fiat products were sold in India through joint Tata-Fiat dealerships. This

distribution arrangement was ended in March 2013; Fiats have since been

distributed in India by Fiat Automobiles India Limited, a wholly owned subsidiary

of Fiat.

Tata Hitachi Construction Machinery

Tata Hitachi Construction Machinery is a joint venture between Tata Motors

and Hitachi which manufactures excavators and other construction equipment. It

was previously known as Telcon Construction Solutions.

59
 PRODUCTS

For details of Tata Motors passenger cars, see Tata Motors Cars. For details of

Land Rover products, see Land Rover. For details of Jaguar products, see Jaguar

Cars.

Commercial vehicles

The Tata TL

A Tata 407 water truck

A Tata Starbus

60
Tata Motors trucks in Rajasthan, India

A loaded semi-forward Tata truck

TATA Semi-Forward Cab 1210SE Truck

TATA 1210 Series - long running production model

61
Tata twin-axle lorry in South India

Tata Ace

Tata Ace Zip

Tata Super Ace

Tata TL/Telcoline/207 DI pickup truck

Tata 407 Ex and Ex2

Tata 709 Ex

Tata 807 (Steel cabin chassis, cowl chassis, medium bus chassis, steel cabin +

steel body chassis)

Tata 809 Ex and Ex2

Tata 909 Ex and Ex2

Tata 1109 (Intermediate truck/ LCV bus)

Tata 1512c (medium bus chassis)

Tata 1515c/1615 (medium bus chassis)

Tata 1612c/1616c/1618c (heavy bus chassis)

Tata 1618c (semilow-floor bus chassis)

Tata 1623 (rear-engined low-floor bus chassis)

Tata 1518C (Medium truck) 10 ton

Tata 1613/1615c (medium truck)

Tata 1616/1618c (heavy duty truck)

Tata 2515c/2516c,2518c (heavy duty 10 wheeler truck)

62
Tata Starbus (branded buses for city, intercity, school bus, and standard passenger

transportation)

Tata Divo (Hispano Divo fully built luxury coach)

Tata CityRide (12- to 20-seater buses for intracity use)

Tata 3015 (heavy truck)

Tata 3118 (heavy truck) (8×2)

Tata 3516 (heavy truck)

Tata 4018 (heavy truck)

Tata 4923 (ultraheavy truck) (6×4)

Tata Novus (heavy truck designed by Tata Daewoo)

Tata Prima (the World Truck designed by Tata Motors and Tata Daewoo)

Tata Prima LX (stripped-down version of Tata Prima)

Tata Prima (Racing Trucks)

Tata Ultra (ICV Segment)

Tata Winger - Maxivan

Military vehicles

Tata LSV (Light Specialist Vehicle)

Tata Mine Protected Vehicle (4×4)

Tata 2 Stretcher Ambulance

Tata 407 Troop Carrier, available in hard top, soft top, 4×4, and 4×2 versions

Tata LPTA 713 TC (4×4)

Tata LPT 709 E

Tata SD 1015 TC (4×4)

Tata LPTA 1615 TC (4×4)

Tata LPTA 1621 TC (6×6)

63
Tata LPTA 1615 TC (4×2)

Tata Landrover 1515 F

TATA SUMO 4*4

Tata Xenon

Tata 207

Tata Motors proposed overhaul of armoured fighting vehicles and infantry main

combat vehicles in 2015. The inter-ministerial committee was chaired by

Secretary in the Department of Industrial Policy and Promotion (DIPP) approved

most of the proposals from the defense Manufacturing sector in India.

Electric vehicles

Tata Motors has unveiled electric versions of the Tata Indica passenger car

powered by TM4 electric motors and inverters, as well as the Tata

Ace commercial vehicle, both of which run on lithium batteries.

Tata Motors' UK subsidiary, Tata Motors European Technical Centre, has bought

a 50.3% holding in electric vehicle technology firm Miljøbil Grenland/Innovasjon

of Norway for US$1.93 million, which specialises in the development of

innovative solutions for electric vehicles, and plans to launch the electric Indica

hatchback in Europe next year. In September 2010, Tata Motors presented four

CNG–Electric Hybrid low-floored Starbuses to the Delhi Transport Corporation,

to be used during the Commonwealth Games. These were the first

environmentally friendly buses to be used for public transportation in India.

Notable vehicles

Tata Nano

64
Tata Nano is often cited as the world's most affordable car

The Nano was launched in 2009 as a city car intended to appeal as an affordable

alternative to the section of the Indian populace that is primarily the owner of

motorcycles and has not bought their first car. Initially priced at ₹100,000

(US$1,500), the vehicle attracted a lot of attention for its relatively low price.

65
Tata Ace

Tata Ace was India's first mini truck

Tata Ace, India's first indigenously developed sub-one-ton minitruck, was

launched in May 2005. The minitruck was a huge success in India with auto

analysts claiming that Ace had changed the dynamics of the light commercial

vehicle (LCV) market in the country by creating a new market segment termed

the small commercial vehicle segment. Ace rapidly emerged as the first choice for

transporters and single truck owners for city and rural transport. By October 2005,

LCV sales of Tata Motors had grown by 36.6% to 28,537 units due to the rising

demand for Ace. The Ace was built with a load body produced by Autoline

Industries. By 2005, Autoline was producing 300 load bodies per day for Tata

Motors.

Ace is still a top seller for TML with 500,000 units sold by June 2010. In 2011,

Tata Motors invested Rs 1000 crore in Dharwad Plant, Karnataka, with the

capacity of 90,000 units annually and launched two models of 0.5-T capacity as

Tata Ace Zip, Magic Iris.

Ace has also been exported to several Asian, European, South American, and

African countries and all-electric models are sold throughPolaris

Industries' Global Electric Motorcars division.[53] In Sri Lanka, it is sold through

Diesel and Motor Engineering (DIMO) PLC under the name of DIMO Batta.

Tata 407

66
The Tata 407 is a light commercial vehicle (LCV) that has sold over 500,000 units

since its launch in 1986 In India, this vehicle dominates market share of the LCV

category, accounting for close to 75% of LCV sales.

TATA MOTORS

The largest passenger automobile and commercial vehicle manufacturing

company of India Tata Motors Limited, was formerly called TELCO (TATA

Engineering and Locomotive Company), has its headquarters in Bombay, now

Mumbai, India. Established in 1945, listed on the New York Stock Exchange in

2004 has created Rs. 320 billion wealth and was one of the top

10 wealth creators in India, with manufacturing facilities in the towns of

Jamshedpur, Lucknow, and Pune. This company was founded by Jamshetji Tata

and is run by Ratan Tata under the flagship company known as Tata and sons

group. He commands 22000 employees working in three plants as well as other

regional and zonal offices across the length and breadth of India.

Tata motor’s passenger cars still need to reach acceptable international

requirements. The company commands an imposing 65% share of the domestic

commercial vehicle market and is trying to modernize this segment. The financial

business of Tata motors was separated into a subsidiary company in sep. 2006,

where it recorded a strong financial performance during the last 5 year period.

From year 2005-2009, the profits of the company went up at a CAGR of 36.4%, to

attain Rs. 331, 525 million in 2008from Rs. 95, 731 Million in 2003. By floating

two rights issues at the end of Sep 2009 Tata Motors Ltd expected to raise Rs 4,

67
150 crores. They are offering one ordinary share valued at Rs. 340 every six

shares expecting to net Rs. 2.90 Crores, the so called “A” share would have

different voting and dividend rights, for every such 6 shares held at a face value of

305 would raise Rs. 1.960 Crores, these proceed would be utilized for an early

repayment of the short term funding of 2.3 Billion $ (Rs. 10,189 Crores)

Borrowed for Acquisition of jaguar and Land Rover from their principle “The

Ford Motor Company’s”.

As TATA MOTORS is regarded as one of the best fuel efficient cars. Hence I

conducted a study on the consumer perception about small cars. Firstly, I took

three brands of small cars; Zen estilo,

Indica and Santro for a comparative study of small car segment.

Later I went through the process of filling the questionnaires, to know exactly

what the customer’s of small cars perceived about their cars. Tata motors were

established on September 1, 1945, originally for the manufacture of Steam

Locomotives at Jamshedpur.

All the cars taken for the sample showed that the consumers perceived them as

almost same in all the attributes like safety, comfort and luxury. But, at the end the

research was limited due to small sample size, small sample area and time

constraints.

68
TELCO (TATA Engineering and Locomotive Company)

Multinational Corporation.

Headquarters in Mumbai.

India's largest passenger automobile and commercial vehicle manufacturing

company.

World's 19th largest automaker.

Sales: 19,654.41cr.

Stock price: Rs. 347

In 1969 Tata motors had become an independent producer of Medium

Commercial Vehicles. It had also developed the capability of designing, testing

and manufacturing such vehicles.

Leading commercial vehicle manufacturer and has significant presence in the

multi-utility and passenger car segments.

69
With the Launch of Tata Indica, a Euro 2 compliant vehicle is the country’s first

indigenously designed, developed and manufactured passenger car.

With the launch of Tata nano, Tata has penetrated the market to its extreme by

making a car available for Rs. 132000 only. This is the cheapest car in India till

date and with the announcement of its diesel variant it has made potential buyers

to eagerly wait for it.

70
Products of TATA Motors

71
[1] Passenger cars and utility vehicles

72
[2]Commercial vehicles

[3] Military vehicles

73
[4] Concept vehicles

2000 Aria Roadster

2001 Aria Coupe

2002 Tata Indica

2002 Tata Indica

2004 Tata Indigo Advent

2005 Tata Xover

2006 Tata Cliffrider

2007 Tata Elegante

2009 Tata Prima

74
Tata Indicia Xeta

Webster's

Dictionary circa 2050 Indica: A successful Indian product of truly Indian origins.

The word is derived from the first automobile to be designed, manufactured and

sold successfully by an Indian company. Several variants of its original hatchback

design were spawned and eventually over one million vehicles based on the

platform were sold. The diesel-engine vehicle sold in large numbers across the

nation and even has the notable achievement of having been exported to several

countries across the globe. The diesel-engine Indica received notable appreciation

from all around, whereas the petrol-fuelled versions played second fiddle on the

sales graphs.

TATA Motors has launched a new version of its small car. Christened Indica V2

Xeta, the petrol-powered car with a 1.4-litre engine is said to deliver a mileage of

14 kmpl under standard test conditions. The Xeta's engine, delivering 70 PS, is far

more powerful than the earlier version. Besides common black and silver, the car

is available in three flashy hues. The Xeta is touted be among the first few small

cars to sport beige interiors. Besides these compelling features, the pricing is also

75
attractive, at Rs 2.94 lakh for the AC model. The Xeta range is priced between Rs

2.69 to Rs 3.65 lakh ex-showroom Delhi. Customers may avail themselves of

loans of up to 90 per cent from select financiers over a seven-year period with

EMIs as low as Rs 4,471.

We can have some inside view of this wonderful car:

76
 MARKETING STRATEGIES

TATA unveiled its long awaited 1 Lakh rupee car (actually a little over 1 lakh

after tax) for the masses and they call it “The People’s Car”. It’s a sweet looking

small car, just enough to take four people around the city. 1 Lakh rupees roughly

translate to 2500 rupees monthly installment and because of this reason TATA is

expect to sell record breaking numbers and leave Indian roads blocked.

TATA Nano

TATA Nano will hit the roads and as it is a definite threat to Maruti 800. TATA

stated that the initial production of this car will be of 250,000 a year. After about

four years of hard efforts TATA Nano (1 lakh rupee car) was on road now.

The introduction of the Nano received media attention due to its targeted low

price. The car is expected to boost the Indian economy, create entrepreneurial-

opportunities across India, as well as expand the Indian car market by 65%. The

car was envisioned by Ratan Tata, Chairman of the Tata Group and Tata Motors,

who has described it as an eco-friendly "people's car". Nano has been greatly

appreciated by many sources and the media for its low-cost and eco-friendly

initiatives which include using compressed-air as fuel and an electric-version (E-

Nano). Tata Group is expected to mass manufacture the Nano, particularly the

electric-version, and, besides selling them in India, to also export them worldwide.

Critics of the car have questioned its safety in India (where reportedly 90,000

people are killed in road-accidents every year), and have also criticized the

pollution that it would cause (including criticism by Nobel Peace Prize winner

Rajendra Pachauri). However, Tata Motors has promised that it would definitely

release Nano's eco-friendly models alongside the gasoline model.

77
78
CURRENTS FACTS

Today Advertising is one of the most common ways to make car buyer or car

enthusiast aware of the new car with special promotion price. Another more

important way of advertising is to create an image or brand image. Take BMW Z3

for example, it was introduced in 1996 and shortly the car has been used in the

famous James Bond movie. Over the years Tata Motors have been successful in

creating their brand image.

The packaging, innovations, and quality control. Tata Motors provide many

innovative features to attract car lover. One of these innovations is the Tata Safari

4X4 Dicor that has “Reverse Guide System”. A weather-proof camera is fixed to

the rear car to help the driver while reversing the car.

There are various factors to determine a price of a car. These factors are such as

market condition (it can’t be too low or too high with the prices of same vehicle

from competitors, it has to be at par), cost incurred to build a car, profit by

company, dealer profit. Giving discount every month and special promotion for

certain type of vehicle also one of the strong strategy use by Tata Motors.

Discount can be made from Company’s profit or from dealer’s profit at certain

range.

Place of dealership does play an important role. The channel of distribution,

physical location, and dealership method of distribution and sales is generally

adopted. The distribution of vehicle must be in a very systematic way, from the

plant to dealership and to end user. This is not only in India itself but also to the

world-wide dealership.

79
OUTLOOK OF INDUSTRY

The industry witnessed a change in demand dynamics in last few years. The

demand for LCVs in the <=3.5 tones segment is rising at the cost of demand in 5

to 7.5 tones category, while demand in 7.5 to 12 tones segment and 16.2 to 25

tones segment is booming at the cost of demand in 12 to 16.2 tones segment.

Demand for trailers of >35.2 tones is witnessing a surge while demand for semi-

trailers in 26.4 to 35.2 tones segment is suffering. This structural shift in demand

dynamics is due to the evolution of Hub & Spoke model of distribution, which is

now adopted by transportation players because of improved road infrastructure

and also the ban on trucks in many cities by the authorities to tackle the traffic

congestion issues. According to the Hub & Spoke model, HCVs plying over the

highways to transport goods to different states and districts, while MCVs are used

in distributing goods to different cities and the last leg of distribution in intra city

is done by using <=3.5 tonner vehicles

80
GLOBAL OPERATIONS

Tata Motors has been aggressively acquiring foreign brands to increase its global

presence. 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. Tata Motors has also acquired from Ford

the rights to three other brand names: Daimler, Lanchester and Rover. 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, giving it controlling

rights of the company. Hispano’s presence is being expanded in other markets. On

Tata's journey to make an international foot print, it continued its expansion

through the introduction of new products into the market range of buses (Starbus

& Globus) as well as trucks (Novus). These models were jointly developed with

its subsidiaries Tata Daewoo and Hispano Carrocera. In May, 2009 Tata unveiled

the Tata World Truck range jointly developed with Tata Daewoo. They will debut

in South Korea, South Africa, the SAARC countries and the Middle-East by the

end of 2009. In 2006, it formed a joint venture with the Brazil-based Marco polo,

a global leader in body-building for buses and coaches to manufacture fully-built

buses and coaches for India and select international markets. Tata Motors has

expanded its production and assembly operations to several other countries

including South Korea, Thailand, South Africa and Argentina and is planning to

81
set up plants in Turkey, Indonesia and Eastern Europe. Tata also franchisee/joint

venture assembly operations in Kenya, Bangladesh, Ukraine, Russia and Senegal.

Tata has dealerships in 26 countries across 4 continents. Though Tata is present in

many counties it has only managed to create a large consumer base in the Indian

Subcontinent namely India, Bangladesh, Bhutan, Sri Lanka and Nepal and has a

growing consumer base in Italy, Spain and South Africa.

The Government of India announced an automobile policy in December 1997.

The policy required majority-owned subsidiaries of foreign car firms to invest at

least US$50 million in equity if they wished to set up manufacturing projects in

India. It also forced them to take on export obligations to fund their auto part

imports and required them to submit to a schedule for increasing the share of

locally made parts in their cars. Mere car assembling operations were not

welcomed. An Indian cabinet panel will soon consider a new automobile policy

that aims to set fresh investment guidelines for foreign firms wishing to

manufacture vehicles in the country. Investments in making auto parts by a

foreign vehicle maker will also be considered a part of the minimum foreign

investment made by it in an auto-making subsidiary in India. The move is aimed

at helping India emerge as a hub for global manufacturing and sourcing for auto

parts. The policy sets an export target of $1 billion by 2005 and US$2.7 billion by

2010.

The policies adopted by Government will increase competition in domestic

market, motivate many foreign commercial vehicle manufactures to set up shops

in India, whom will make India as a production hub and export to nearest market.

Thus Tata Motors CV will have to face tough competition in near future, which

might affect its growth negatively.

82
ORGANIZATION STRUCTURE OF TATA MOTORS

83
OBJECTIVES OF

THE STUDY

84
 OBJECTIVES OF THE STUDY

1. To know the causes of the financial statement of Tata Motors

2. To know procedure of financial statement of Tata Motors .

3. To know the working capital management of Tata Motors

85
 RESEARCH METHODOLOGY

The report is the result of a survey which was undertaken in Tata

Motors. The objectives of the project has been fulfilled by getting

response from the Employee's associated to these segments through a

personal interview in finance department. The responses available

through the balance sheet and personal interview are used to evaluate

the working capital management of the company.

THE RESEARCH PROBLEM

The problem formulation is the first step to a successful research

process. The summer training undertaken the problem of analyzing

the trend analysis of automobile sector ing industry of the company

and to find out the ratio analysis of company.

THE RESEARCH DESIGN

The research design used in the project is Descriptive

Research. The investigation is carried upon the working capital in

Tata Motors in Lucknow. The reason for choosing this design is to

get responses from the company’s Balance sheet.

86
 COLLECTION OF DATA

The data has been taken from secondary source

 Secondary data source

Secondary data was collected from following sources

Balance sheet

Websites

Books

Personal consultation

THE AREA OF WORK

The field work is conducted in the Tata Motors in

financial department Lucknow .

87
 THE ANALYTICAL TOOLS USED

The analytical tools used are mostly graphical in nature

which include

 Bar Charts

 Tables showing percentage

88
 LIMITATIONS

It is not possible to remove the limitation of any investigators. So this

project also has certain limitation that is:

1) Information was gathered through the rating of the subject, thus

biasness is possible.

2) As the sample size was small it is possible that it may not

represent the precise picture.

3) Employees of the organization may hide the fact.

4) The management did not agree to disclose all the confidential

data.

5) Number of respondent are very less, so clear conclusion can’t

be drawn.

89
 DATA ANALYSIS AND INTERPRETATION

PERFORMANCE HIGHLIGHTS

Company has completed another successful year in 2017-18

registering impressive growth over the previous year. During the year,
the company has registered a net profit of Rs. 30.50 million by
increasing production to Rs. 191.77 million from a level of Rs. 149.83
million during the previous year. The turnover during the year has
increased by 35.40% to Rs. 194.59 million from Rs. 143.72 million
during the previous year. During the year 2016-17, net worth of the
company reached a level of Rs. 87.28 million. The major highlights of
performance during the year 2016-17 are summarized below.

(Rupees in million)

s.no. Particulars 2017-18 2016-17 Increased by

1 Turnover 194.59 143.72 35.40%
2 Production 191.77 149.83 27.99%
3 Value added 74.91 61.46 21.88%
4 Net profit before 30.50 19.14 59.35%
tax
5 Value added per 6.69 5.06 32.21%
employee (Rs. In
lacs)
6 New worth 87.28 56.96 53.23%

90
 1 What is Profitability Ratio (EBIT) in Tata Motors in last 5 year?

PROFITABILITY RATIO -:

EBIT (Earnings Before Interest and Taxes)

Revenue - COGS- Operating Expenses

EBIT =
Year EBIT

2013-14 -24.94

2014-15 -10.86

2015-16 1.84

2016-17 19.14

2017-18 30.5

INTERPETATION:

Profitability Ratio (EBIT) in Tata Motors in last 5 year is increased year

by year in 2013-14 is -24.94 and in 2017-18 is 30.50

91
Q.2 What is Return on Assets in Tata Motors in last 2 year?

Return on Assets
Return on Assets = Net Income / Assets * 100

2016-17 33.52%

2017-18 34.94%

INTERPETATION:

Return on Assets in Tata Motors in last 2 year is increased year by year in

2016-17 is 33.52 and in 2017-18 is 34.94%

92
Q. 3 What is solvency ratio in Tata Motors in last 5 year?

SOLVENCY RATIO

2013-14
-113.4%
2014-15
-121.61%
2015-16
-117.14%
2016-17
56.96%
2017-18
87.28%

INTERPETATION:

solvency ratio in Tata Motors in last 5 year is increased year by year in

2013-14 is -113.40 and in 2017-18 is 87.28%

93
Q.4 What is Liquidity Ratio in Tata Motors in last 2 year?

2016-17 1.4
2017-18 4.57
LIQUIDITY RATIO

In finance, the Acid-test or quick ratio or liquid ratio measures the

ability of a company to use its near cash or quick assets to
immediately extinguish or retire its current liabilities. Quick assets
include those current assets that presumably can be quickly converted
to cash at close to their book values.

INTERPETATION:

The quick ratio 2016-17 is 1.4 and in 2017-18 the ratio is increasing
4.57.

94
Q. 5 What is Current Ratio in Tata Motors in last 2 year?

2017-18 4.53
2016-17 2.4
CURRENT RATIO

The current ratio is a financial ratio that measures whether or not a

firm has enough resources to pay its debts over the next 12 months. It
compares a firm's current assets to its current liabilities. It is expressed
as follows:

INTERPETATION:

The current ratio 2016-17 is 2.40 and in 2017-18 the ratio is increasing

4.53.

95
Q. 6 What is Networking Capital in Tata Motors in last 2 year?

NETWORKING CAPITAL

Net Working Capital =Current Assets –Current Liabilities

2017-18 2016-17
Current assets 30581.46 13222.70
Current liabilities 6749.80 5506.25
Net W.C. 23831.66 7716.45

INTERPETATION:

The NETWORKING CAPITAL 2016-17 is 7716.45 and in 2017-18 the

ratio is increasing 23831.66.

96
Q.7 What is activity ratio in Tata Motors in last 5 year?

ACTIVITY RATIO

Rs. In million

2013-14 51.4

2014-15 70.07

2015-16 94.42

2016-17 143.72

2017-18 194.59

INTERPETATION:

The activity ratio in Tata Motors in last 5 year is increase year by year
2013-14 is 51.40 and in 2017-18 the ratio is increasing by 194.59.

97
Q.8 What is debt equity ratio in Tata Motors in last 2 year?

2016-17 1.26%
2017-18 1.02%
DEBT EQUITY RATIO

Debt equity ratio =total liabalities /share holders equity

INTERPETATION:

The Dept equity ratio 2016-17 is 1.02 and in 2017-18 the ratio is

increasing 1.26.

98
Q. 9 What is value added per employee in Tata Motors in last 5 year?
VALUE ADDED PER EMPLOYEE

Rs. In Lakhs

2013-14 1.93

2014-15 2.8

2015-16 4.02

2016-17 5.06

2017-18 6.69

INTERPETATION:

The value added per employee in Tata Motors in last 5 year 2013-14 is

1.93 and in 2017-18 the ratio is increasing 6.69.

99
FINDINGS

100
 FINDINGS

The summary of results of various ratios are presented. The summary

of major findings are mentioned below :-

(I) Gross Working Capital :- Trend of Gross Working Capital (

GWC) or total current assets showed an upward trend. The total

investment in current assets increases from Rs. 7716.45 million to Rs.

23831 million during the period under reviewed. This is a good

indication from the smooth running of the day-to-day operation as

well as paying the current obligation points of review. But since 2014-

15 it has been decreased continuously the main factor for this is

decrease in sundry debtors.

Net Working Capital ( NWC) :- Likewise GWC trend of NWC also

showed an increasing trend up to 2017-18 but thereafter it has

decreased year by year. The highest NWC was in the year of 2014-15

and lowest being in the year of 2015-16. The factor contributed to

decrease is the decrease in sundry debtors considerably and also

increase in sundry creditors and other current liabilities. This must be

reviewed and attempts to reduce the other current liabilities. This

attempts shall improve the liquidity position of organization.

101
Position of Liquidity or Trend in liquidity :- Analysis of various

liquidity ratio express the trend of liquidity over the past twelve years.

Analysis of current ratio reveals that the ratio shown an increasing

trend up to 2013-14 but thereafter it decreased . It was highest in the

year of 2017-18 being 3.97:1 thereafter it has decreased continuously

and comes to 1.09 in 2015-16. This is below the norms. It should be

improve by reducing the other current liabilities and sundry creditors.

However current ratio in many cases does not reveal the real picture of

liquidity as the same is trend analysis only . It takes into consideration

all the components of current assets (e.g.) inventory and debtors,

which ultimately takes some times for conversion into cash.

Analysis of the Super quick ratio also reveals that the trend is

increasing up to 2013-14 but after that it decreased. It has .71:1 in

2017-18 and then comes to .66:1 except slightly increased in the year

2015-16 .In the year 2016-17 it is below than the standard norms of

1:1. These leads to analysis of super quick ratio which is quite

relevant in this case.

The results shows a gloomy picture in comparison to current & quick

ratio. Since super quick ratio excludes aspects of sundry debtors from

the components of current assets in comparison to super quick ratio,

102
hence analysis of sundry debtors needs for the investigation. This

aspect is further summarized and explained in expressing the results of

efficiency of working capital used.

Over all receivable management shows a gloomy picture, which

indicates inefficiency in receivable management. However the

situation is quite improving due to continuous efforts of present

management. In a nut shell the position of sundry debtors requires

more constituent collection effort, special cell to monitor and review

the position incessantly, pressure on various state electricity

department and SEB through central govt. for speed collection of

receivable.

103
CONCLUSION

104
 CONCLUSION
In spite of various obstacle hurdles, limitations and bottlenecks,

financial statement in Tata Motors has a bright future for growth and

expansion. The organization is a profit making and contributing lot in

the path of the progress of the nation by providing easy ratio analysis

of Tata Motors to various states including some strategic remote

areas. Financial statement of Tata Motors is the only pioneer

organization in the field of Financial statement in Tata Motors sector

at present . As mentioned in this chapter the organization is already

working on its planning for rapid growth by commissioning more

projects, entering. Our nation is facing acute shortage of technology .

Thus to achieve rapid industrialization & growth of other sector

including software. Financial statement of Tata Motors has to play a

greater role by increasing its capacity manifold in future / coming days

and the organization has great importance from the nations point of

view.

Trend analysis in a business enterprise is synonymous with the blood

of the human body. The importance of Trend analysis from liquidity

and profitability point of view can not be over emphasized. Both these

significant aspects largely depends upon efficient management of

Trend analysis, (i.e.) management of inventory, receivable, cash &

105
bank balances and short term creditors & other short-term liabilities,

liquidity which refers to the ability of a firm to meet its current

obligations encompasses current assets and their structure. In recent

times high importance is being given corporate liquidity as it has

direct impact on profitability as well as long term survival of the

firms. Maintaining sound liquidity and profitability position ultimately

depends upon efficient and smooth management of working .

The present study is divided into five parts. In this part

importance of the study, importance of ratio analysis and potential,

status and development of Financial statement of Tata Motors , data

and methodology of the study has been discussed. In the second part

the objectives of the study has clearly defined. In third chapter deals

with various concepts, aspects & dimensions of working capital. In

forth part an attempt is made to know the trend, status and

management of Trend analysis through analysis by using various

financial and statistical techniques. In fifth chapter summery of result,

findings, scope of futures research limitations of study etc. has been

described briefly.

106
BIBILIOGRAPHY

107
 BIBILIOGRAPHY

1- I M PANDEY FINANCIAL MANAGEMENT

2- C.R. KOTHARI Research Methodology

3- Website : www.Tata Motors .com

4- www.google.com

5- www.wikipedia.com

108
APPENDIX

109
 Questionnaire
Q.1 What is Profitability Ratio (EBIT) in Tata Motors in last 5 year?

Year EBIT
2013-14
2014-15
2015-16
2016-17
2017-18

Q.2 What is Return on Assets in Tata Motors in last 2 year?

2016-17
2015-16
Q. 3 What is Solvency Ratio in Tata Motors in last 5 year?

2013-14
2014-15
2015-16
2016-17
2017-18

Q.4 What is Liquidity Ratio in Tata Motors in last 2 year?

2016-17
2017-18
Q. 5 What is Current Ratio in Tata Motors in last 2 year?

2016-17
2017-18

110
Q. 6 What is Netwroking Capital in Tata Motors in last 2 year?

2017-18 2016-17
Current assets
Current liabilities
Net W.C.

Q.7 What is activity ratio in Tata Motors in last 5 year?

2013-14
2014-15
2015-16
2016-17
2017-18

Q.8 What is debt equity ratio in Tata Motors in last 2 year?

2016-17
2017-18

Q. 9 What is value added per in Tata Motors in last 5 year?

2013-14
2014-15
2015-16
2016-17
2017-18

111
Balance Sheet of Tata Motors ------------------- in Rs. Cr. -------------------
Mar '18 Mar '17 Mar '16 Mar '15 Mar '14

12 mths 12 mths 12 mths 12 mths 12 mths

Sources Of Funds
Total Share Capital 489.52 489.52 489.52 489.52 489.52
Equity Share Capital 489.52 489.52 489.52 489.52 489.52
Reserves 31,804.92 32,563.83 33,595.08 32,557.53 29,954.58
Networth 32,294.44 33,053.35 34,084.60 33,047.05 30,444.10
Secured Loans 0.00 0.00 0.00 2,550.00 1,286.00
Unsecured Loans 89.55 126.29 61.00 104.77 129.20
Total Debt 89.55 126.29 61.00 2,654.77 1,415.20
Total Liabilities 32,383.99 33,179.64 34,145.60 35,701.82 31,859.30
Mar '17 Mar '16 Mar '15 Mar '14 Mar '13

12 mths 12 mths 12 mths 12 mths 12 mths

Application Of Funds
Gross Block 5,279.20 12,965.92 12,304.80 11,812.47 10,585.56
Less: Accum.
1,683.32 9,002.73 8,164.28 7,119.53 6,127.07
Depreciation
Net Block 3,595.88 3,963.19 4,140.52 4,692.94 4,458.49
Capital Work in Progress 168.34 315.36 517.80 642.12 1,171.59
Investments 661.42 663.40 417.67 420.17 429.17
Inventories 7,372.38 9,637.39 10,101.66 9,797.55 11,763.82
Sundry Debtors 22,075.56 24,428.98 26,223.50 28,071.92 29,234.49
Cash and automobile
10,491.79 10,085.99 9,812.70 11,872.93 7,732.05
sector Balance
Total Current Assets 39,939.73 44,152.36 46,137.86 49,742.40 48,730.36
Loans and Advances 16,864.83 17,595.79 17,253.28 17,293.54 15,338.84
Total CA, Loans &
56,804.56 61,748.15 63,391.14 67,035.94 64,069.20
Advances
Current Liabilities 19,653.30 22,069.67 23,281.09 26,763.33 29,327.02
Provisions 9,192.91 11,440.79 11,040.44 10,326.02 8,942.13
Total CL & Provisions 28,846.21 33,510.46 34,321.53 37,089.35 38,269.15
Net Current Assets 27,958.35 28,237.69 29,069.61 29,946.59 25,800.05
Total Assets 32,383.99 33,179.64 34,145.60 35,701.82 31,859.30

Contingent Liabilities 13,992.77 8,778.10 6,016.83 11,337.90 3,441.04

Book Value (Rs) 131.94 135.04 139.26 135.02 124.38

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