1(a). As compared to the year 2019, the owners’ equity has decreased in the year 2020. What is the
most important reason for the same? 

Owner's equity has decreased from Rs. 22,162.52 to Rs. 18,387.65 as Liabilities have significantly
increased to Rs. 25,810.82 from Rs. 22,940.81, such as Borrowings, Lease and other financial liabilities

MFA Assignment – 1 (Gr.29)

(Chandiran, Hari, Vidarshana, Vikash, Smita)

1(b) Tata Motors Limited had a loss of Rs. 7,289.63 but the Cash Outflow due to operation is only
Rs. 1,454.59. Give any two reasons for such a difference between the two.   

Loss of Rs. 7,289.63 is largely contributed by provisions such as

1. Depreciation and Amortisation - Rs. 3375

2. Provision for Impairment of Passenger Vehicle Business - Rs 1418
3. Provision for Onerous Contracts - Rs. 777
4. Provision for Loan given, etc - Rs. 385
5. Others

The Cash Outflow of Rs. 1454.59 does not reflect the above provisions and so the difference

1(c) Do you think that the financial position of Tata Motors Limited has deteriorated over the FY
2019-20?  

Yes. The financial position of Tata Motors Limited has deteriorated over the FY 2019-20 as shown by
the comprehensive loss of Rs. 7668.35 over profit of Rs. 1997.17 in 2018-19

1(d) Prepare a Common-Size Balance Sheet for the year 2019-20 by taking Total Assets as a base.
From the Common-Size Balance Sheet, answer the following:                      

What is the proportion of Current Assets and Non-Current Assets?

 What is the proportion of Owners’ Equity and Outsiders’ Liabilities?

Common-Size Balance Sheet

Assets 2019-20

Non-Current Assets 49021.11 78%

Current Assets 13568.76 22%

Total Assets 62589.87 100

Equity and Liabilities

Equity 18387.65 29%

Liabilities 44202.22 71%

Total Equity and Liabilities 62589.87 100

1(e) Prepare a Common-Size Income Statement for the year 2018-19 by using the Total Income as a
base? What is the proportion of Profit for the Year out of the Total Income? 

Common-Size Income Sheet

2018-19

Profit from continuing operations 2020.60 2.8%

Total Income 71757.42

2. Ten-Year Highlights of the important financial indicators of Colgate-Palmolive (India) Limited are
 given. 
Using the above Ten-Year Financial Data of Colgate-Palmolive (India) Limited, you are required
to calculate the Index Number Trend by taking the FY 2010-11 as the base year, you are required
to fill up the following table:               

Particulars 2010-11 2019-20

Sales 231740 448757

100 193.65

Net Profit After Tax 40258 81647

100 202.81

Net Fixed Assets 26731 120664

100 451.40

SHAREHOLDERS’ FUNDS 38,405 1,59,416

100 415.09

Dividend Per Share (Rs.) 22 28

100 127.27

Question 5: The Financial Statements of NTPC Limited taken from their Annual
Reports are given in the EXCEL File. Analyze NTPC Limited Financial Statements and
answer the following questions using different tools of Financial Statement Analysis.
Please try to share at least 2 different analyses for each question. Click here to
download the file. 

5(a) Is NTPC LTD. growing?

Particulars 31-Mar- 31-Mar- 31-Mar- 31-Mar- 31-Mar-
16 17 18 19 20
Income          
Revenue from operations 70,843.81 78,273.44 83,452.70 90,307.43 97,700.39
Other income 1,165.35 1,068.86 1,755.25 1,872.13 2,778.02
Total income 72,009.16 79,342.30 85,207.95 92,179.56 1,00,478.41

NTPC has grown over the period 16-17 to 20-21 as their Total Income (Top Line)
and Revenue from operations has steadily increased.
5(b) Is NTPC LTD. having sufficient liquid resources to meet its liabilities as and when
they arise?

Current Ratio 0.94 0.79 0.86 0.76 0.89

Quick Ratio 0.72 0.61 0.72 0.62 0.69

As both Current and Quick ratio are less than 1 (Current Liabilities are greater than
current Assets), NTPC has barely enough resources to meet its liabilities as and
when they arise.

5(c) Is NTPC LTD. making sufficient profits?

Particulars 31-Mar- 31-Mar- 31-Mar- 31-Mar- 31-Mar-

16 17 18 19 20
Profit for the year 10,769.60 9,385.2 10,343.17 11,749.8 10,112.81
6 9

Net Profit Margin 15.0% 11.8% 12.1% 12.7% 10.1%

Dupont Analysis 6.45% 6.61% 6.27% 5.98% 6.48%

Both Absolute profits and Net Profit Margin have decreased over the time study.
The Du Pont Analysis indicates that the Profits in relation to Net Assets have not
grown.

5(d) Is NTPC Limited using its assets – Long term as well as short term – effectively
and efficiently?
Particulars 31-Mar- 31-Mar- 31-Mar- 31-Mar- 31-Mar-
16 17 18 19 20
Income          
Revenue from operations 70,843.81 78,273.4 83,452.70 90,307.4 97,700.39
4 3

Total Assets Turnover Ratio 32.9% 33.1% 32.1% 31.1% 29.8%

Current Assets Turnover Ratio 238% 276% 227% 214% 200%

The asset turnover ratio (Current and Total) has decreased over the last three years
(33.1% to 29.8%), and therefore can be concluded that it is not being used
efficiently.
5(e) Is NTPC LTD. solvent?

31-Mar- 31-Mar- 31-Mar- 31-Mar- 31-Mar-

Particulars
16 17 18 19 20

Debt Equity Ratio 0.98 1.06 1.12 1.17 1.37

Interest Coverage Ratio 4.21 4.35 4.10 3.69 3.13

Debt Equity Ratio (Leverage Ratio) is increasing over time which implies increased
debt burden and therefore reduced solvency.
Interest coverage ratio is decreasing over time which means capability to meet debt
burden is less and therefore reduced solvency.

5(f) What are the driving forces behind the profitability of NTPC LTD.?

Particulars 31-Mar- 31-Mar-17 31-Mar- 31-Mar- 31-Mar-

16 18 19 20
Income          
Revenue from operations 70,843.81 78,273.44 83,452.70 90,307.43 97,700.39
Other income 1,165.35 1,068.86 1,755.25 1,872.13 2,778.02
Total income 72,009.16 79,342.30 85,207.95 92,179.5 1,00,478.41
6
Expenses  
Fuel cost 43,798.59 47,572.19 48,315.47 52,493.74 54,241.82
Electricity purchased for trading   - 1,313.51 2,713.68 2,776.44
Employee benefits expense 3,581.65 4,324.60 4,734.67 4,779.89 4,925.60
Finance costs 3,296.41 3,597.20 3,984.25 4,716.74 6,781.97
Depreciation and amortization expenses 5,172.34 5,920.82 7,098.86 7,254.36 8,622.85
Other expenses 5,576.49 5,092.38 7,421.73 7,548.63 8,663.81
Total expenses 61,425.48 66,507.19 72,868.49 79,507.04 86,012.49
Profit before tax and regulatory deferral 10,583.68 12,835.11 12,339.46 12,672.5 14,465.92
account balances 2
Exceptional items   782.95      
Profit before tax 10,583.68 12,052.16 12,339.46 12,672.52 14,465.92
PBT % 15% 15% 14% 14% 14%

At PBT level, the company is able to maintain growth at 14% over last three years despite
increases in Finance cost, Depreciation, amortization and other expenses due to
significant growth in Total Income.

Particulars 31-Mar- 31-Mar-17 31-Mar- 31-Mar- 31-Mar-

 16 18 19 20
Tax expense
Current tax          
Current year 2,103.92 2,705.75 2,576.80 2,955.00 2,493.29
Earlier years (2453.48) (107.56) (951.3) (105.88) 2,660.17
Deferred tax, net 175.73 332.63 923.79 (5,767.83) 4,028.49
Total tax expense (173.83) 2,930.82 2,549.29 (2,918.71) 9,181.95
Profit before regulatory deferral account 15,591.2
10,757.51 9,121.34 9,790.17 5,283.97
balances 3
Net movement in regulatory deferral account 12.09 263.92 553.00 (3,841.34) 4,828.84
balances (net of tax)
Profit for the year 10,769.60 9,385.26 10,343.17 11,749.8 10,112.81
9
PAT% 15% 12% 12% 13% 10%

At PAT level, there is drop in profitability during 2020-21 due to Tax liability (Earlier Tax,
2660.17 and Deferred tax, 4028.49), which is not seen in the previous years.

In summary, the key driving force for profitability is increasing Income offset by Finance
costs, Depreciation and Amortization, other expenses, and tax.