Master of Operational Research (MOR) | Semester-III (2022-2023)

Department of Operational Research | South Campus

University of Delhi

Elective Course (MOR-305): Financial Management

Assignment: Financial Ratio Analysis of TATA Motors

Submitted to: Dr. Kaushal Kumar

By: Harshini

About the Company

Tata Motors Limited is an Indian multinational automotive manufacturing
company, headquartered in Mumbai, India, which is part of the Tata Group.
The company produces passenger cars, trucks, vans, coaches, buses.

Formerly known as Tata Engineering and Locomotive Company (TELCO), the

company was 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 1988 with the launch of the TataMobile followed by the Tata
Sierra in 1991, becoming the first Indian manufacturer to achieve the capability
of developing a competitive indigenous automobile. In 1998, Tata launched the
first fully indigenous Indian passenger car, the Indica, and in 2008 launched the
Tata Nano, the world's most affordable car. Tata Motors acquired the South
Korean truck manufacturer Daewoo Commercial Vehicles Company in 2004.
Tata Motors has been the parent company of Jaguar Land Rover since the
company established it for the acquisition of Jaguar Cars and Land Rover from
Ford in 2008.
Tata Motors' principal subsidiaries include British 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
construction-equipment manufacturing joint venture with Hitachi (Tata Hitachi
Construction Machinery), and a joint venture with Stellantis which
manufactures automotive components and Fiat Chrysler and Tata branded
vehicles. On 12 October 2021, private equity firm TPG invested $1 billion in
Tata Motors' electric vehicle subsidiary.
Tata Motors has auto manufacturing and vehicle plants in Jamshedpur,
Pantnagar, Lucknow, Sanand, Dharwad, and Pune in India, as well as in
Argentina, South Africa, the United Kingdom, and Thailand. It has research and
development centres in Pune, Jamshedpur, Lucknow, Dharwad, India and
South Korea, the United Kingdom, and Spain. Tata Motors is listed on the BSE
(Bombay Stock Exchange), where it is a constituent of the BSE SENSEX index,
the National Stock Exchange of India, and the New York Stock Exchange. The
company is ranked 265th on the Fortune Global 500 list of the world's biggest
corporations as of 2019.
On 17 January 2017, Natarajan Chandrasekaran was appointed chairman of the
company Tata Group. Tata Motors increased its UV market share to over 8% in
FY-2019.
Tata Motors is India’s largest selling commercial vehicle manufacturer and is
amongst the top three in the passenger vehicles market. Its operations span
across India, the UK, South Korea and South Africa with network of 86
subsidiaries, 10 associate companies, 4 joint ventures and 2 joint operations as
on March 31, 2022. The US$ 37-billion Tata Motors Group is a leading global
automobile manufacturer with many offerings across commercial, passenger
and electric vehicles. It focuses on engineering and tech-enabled automotive
solutions to bring the future of mobility closer. The Company is pioneering
India’s Electric Vehicle transition and enjoys considerable advantage in one of
the fastest growing automotive markets in the world.
Financial Ratio Analysis
The list of ratios that has been computed are:
A. Financial Ratio
1. Average Day's cost of goods sold
2. Days Sales in Inventory
3. Average credit sales per day
4. Days Sales Outstanding
5. Operating Cycle
6. Average Purchases per day
7. Days Payable Outstanding
8. Cash Conversion Cycle
B. Measures of Liquidity
9. Current Ratio
10.Quick Ratio
11.Net Working Capital to Sales Ratio
C. Measures of Profitability
12.Gross Profit Margin
13.Operating Profit Margin
14.Net Profit Margin
D. Activity Ratios
15.Inventory Turnover Ratio
16.Accounts Receivable Turnover Ratio
17.Total Asset Turnover Ratio
E. Financial Leverage Ratio
a) Component Percentage Ratio
18.Debt to assets ratio
19.Debt to equity ratio
b) Coverage Ratio
20.Interest Coverage Ratio
21.Cashflow interest Coverage Ratio
F. Return on Investment
22.Basic Earning Power Ratio
23.Return on Assets Ratio
24.Return on Equity Ratio
Financial Ratios
1. Average Day’s Cost of Goods Sold:
It is the average cost of goods sold by the firm per day.
𝐶𝑜𝑠𝑡 𝑜𝑓 𝐺𝑜𝑜𝑑𝑠 𝑆𝑜𝑙𝑑
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐶𝑜𝑠𝑡 𝑜𝑓 𝐺𝑜𝑜𝑑𝑠 𝑆𝑜𝑙𝑑 =
365

Particular March 31, 2022 March 31, 2021

Avg days cost of goods sold 86.83 52.19
(in days)

2. Days Sales in Inventory:

𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
𝐷𝑎𝑦𝑠 𝑆𝑎𝑙𝑒𝑠 𝑖𝑛 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 =
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑑𝑎𝑦𝑠 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑔𝑜𝑜𝑑𝑠 𝑠𝑜𝑙𝑑

Particular March 31, 2022 March 31, 2021

Days Sales in Inventory (in 42.82 87.21
crores)

3. Average Credit Sales per Day:

𝐶𝑟𝑒𝑑𝑖𝑡 𝑠𝑎𝑙𝑒𝑠
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐶𝑟𝑒𝑑𝑖𝑡 𝑆𝑎𝑙𝑒𝑠 𝑝𝑒𝑟 𝐷𝑎𝑦 =
365

Particular March 31, 2022 March 31, 2021

Average Credit Sales per 129.49 82.67
Day (in days)

4. Days Sales Outstanding:

𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠
𝐷𝑎𝑦𝑠 𝑆𝑎𝑙𝑒𝑠 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 =
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐶𝑟𝑒𝑑𝑖𝑡 𝑆𝑎𝑙𝑒𝑠 𝑝𝑒𝑟 𝐷𝑎𝑦

Particular March 31, 2022 March 31, 2021

Days Sales Outstanding (in 16.30 25.25
crores)
5. Operating Cycle:

𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐶𝑦𝑐𝑙𝑒 = 𝐷𝑎𝑦 𝑆𝑎𝑙𝑒𝑠 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 + 𝐷𝑎𝑦𝑠 𝑆𝑎𝑙𝑒𝑠 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔

Particular March 31, 2022 March 31, 2021

Operating Cycle (in days) 59.12 112.46

6. Average Purchases per Day:

𝐴𝑛𝑛𝑢𝑎𝑙 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑠
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑠 𝑝𝑒𝑟 𝐷𝑎𝑦 =
365
Where,

𝐴𝑛𝑛𝑢𝑎𝑙 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑠
= 𝐶𝑜𝑠𝑡 𝑜𝑓 𝑀𝑎𝑡𝑒𝑟𝑖𝑎𝑙𝑠 + 𝐶𝑙𝑜𝑠𝑖𝑛𝑔 𝑆𝑡𝑜𝑐𝑘 − 𝑂𝑝𝑒𝑛𝑖𝑛𝑔 𝑆𝑡𝑜𝑐𝑘

Particular March 31, 2022 March 31, 2021

Average Purchases per Day 99.50 21.60
(in crores)

7. Days Payable Outstanding (DPO):

𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑃𝑎𝑦𝑎𝑏𝑙𝑒
𝐷𝑎𝑦𝑠 𝑃𝑎𝑦𝑎𝑏𝑙𝑒 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 =
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑠 𝑝𝑒𝑟 𝑑𝑎𝑦

Particular March 31, 2022 March 31, 2021

Days Payable Outstanding 61.33 375.69
(in days)

8. Cash Conversion Cycle:

𝐷𝑎𝑦𝑠 𝑃𝑎𝑦𝑎𝑏𝑙𝑒 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 = 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐶𝑦𝑐𝑙𝑒 + 𝐷𝑃𝑂

Particular March 31, 2022 March 31, 2021

Cash Conversion Cycle (in 120.45 488.15
days)
Measures of Liquidity
9. Current ratio:
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑅𝑎𝑡𝑖𝑜 =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

Particular March 31, 2022 March 31, 2021

Current Ratio 0.57 0.603

10.Quick Ratio:

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠 − 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦

𝑄𝑢𝑖𝑐𝑘 𝑅𝑎𝑡𝑖𝑜 =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

Particular March 31, 2022 March 31, 2021

Quick Ratio 0.44 0.43

11.Net Working Capital to Sales Ratio:

𝑁𝑒𝑡 𝑊𝑜𝑟𝑘𝑖𝑛𝑔 𝐶𝑎𝑝𝑖𝑡𝑎𝑙

𝑁𝑒𝑡 𝑊𝑜𝑟𝑘𝑖𝑛𝑔 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑡𝑜 𝑆𝑎𝑙𝑒𝑠 𝑅𝑎𝑡𝑖𝑜 =
𝑆𝑎𝑙𝑒𝑠

Particular March 31, 2022 March 31, 2021

Net Working Capital to Sales -0.24 -0.34

Measures of Profitability
12.Gross Profit Margin:

𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑡
𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 =
𝑅𝑒𝑣𝑒𝑛𝑢𝑒

Particular March 31, 2022 March 31, 2021

Gross Profit Margin 0.23 0.294

13.Operating Profit Margin:

𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑡
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 =
𝑅𝑒𝑣𝑒𝑛𝑢𝑒
 Particular March 31, 2022 March 31, 2021
Operating Profit Margin 0.01 -0.005

14.Net Profit Margin:

𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑡
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 =
𝑅𝑒𝑣𝑒𝑛𝑢𝑒

Particular March 31, 2022 March 31, 2021

Net Profit Margin -0.29 -0.79

Activity Ratios
15.Inventory Turnover Ratio:
𝐶𝑜𝑠𝑡 𝑜𝑓 𝐺𝑜𝑜𝑑𝑠 𝑆𝑜𝑙𝑑
𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜 =
𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦

Particular March 31, 2022 March 31, 2021

Inventory Turnover Ratio 8.52 4.18

16.Accounts Receivable Turnover Ratio:

𝐶𝑟𝑒𝑑𝑖𝑡 𝑆𝑎𝑙𝑒𝑠
𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜 =
𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑟𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠

Particular March 31, 2022 March 31, 2021

Accounts Receivables 22.37 14.45
Turnover Ratio

17.Total Assets Turnover Ratio:

𝑅𝑒𝑣𝑒𝑛𝑢𝑒
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜 =
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

Particular March 31, 2022 March 31, 2021

Total Assets Turnover Ratio 0.74 0.46
Financial Leverage Ratio
18.Debt to Asset Ratio:

𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡
𝐷𝑒𝑏𝑡 𝑡𝑜 𝐴𝑠𝑠𝑒𝑡 𝑅𝑎𝑡𝑖𝑜 =
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

Particular March 31, 2022 March 31, 2021

Debt to Asset Ratio 0.61 0.62

19.Debt to Equity Ratio:

𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡
𝐷𝑒𝑏𝑡 𝑡𝑜 𝐸𝑞𝑢𝑖𝑡𝑦 𝑅𝑎𝑡𝑖𝑜 =
𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑦

Particular March 31, 2022 March 31, 2021

Debt to Equity Ratio 1.96 2.12

20.Interest Coverage Ratio:

𝐸𝐵𝐼𝑇
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐶𝑜𝑣𝑒𝑟𝑎𝑔𝑒 𝑅𝑎𝑡𝑖𝑜 =
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠

Particular March 31, 2022 March 31, 2021

Interest Coverage Ratio 0.34 -0.13

21.Cashflow Interest Coverage Ratio:

𝐶𝑎𝑠ℎ𝑓𝑙𝑜𝑤 𝐶𝑜𝑣𝑒𝑟𝑎𝑔𝑒 𝑅𝑎𝑡𝑖𝑜

𝐶𝑎𝑠ℎ𝑓𝑙𝑜𝑤 𝑓𝑟𝑜𝑚 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛𝑠 + 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 + 𝑡𝑎𝑥𝑒𝑠
=
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠

Particular March 31, 2022 March 31, 2021

Cashflow Interest Coverage 2.96 3.07
Ratio
Return on Investment
22.Basic Earning Power Ratio:

𝐸𝐵𝐼𝑇
𝐵𝑎𝑠𝑖𝑐 𝐸𝑎𝑟𝑖𝑛𝑔 𝑃𝑜𝑤𝑒𝑟 𝑅𝑎𝑡𝑖𝑜 =
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

Particular March 31, 2022 March 31, 2021

Basic Earning Power Ratio 0.011 -0.004

23.Return on Assets Ratio:

𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝐴𝑠𝑠𝑒𝑡𝑠 𝑅𝑎𝑡𝑖𝑜 =
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

Particular March 31, 2022 March 31, 2021

Return on Assets Ratio -0.02 -0.04

24.Return on Equity:

𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝐸𝑞𝑢𝑖𝑡𝑦 𝑅𝑎𝑡𝑖𝑜 =
𝐸𝑞𝑢𝑖𝑡𝑦

Particular March 31, 2022 March 31, 2021

Return on Equity Ratio -0.069 -0.126

Conclusion
This ratio analysis quite obviously showcases the impact that COVID-19 had on
TATA Motor’s financial growth, revenue and sales.