A PROJECT REPORT ON
“A BRIEF STUDY OF FINANCIAL STATEMENT WITH SPECIAL REFERENCE TO RATIO ANALYSIS”
WITH SPECIAL REFERERENCE TO
GUINEA MOTORS PVT.LTD.
SUBMITTED IN THE PARTIAL FULLFILLMENT FOR THE AWARD OF THE DEGREE OF
MASTER IN BUSINESS ADMINISTRATION
CONDUCTED BY A. N. COLLEGE,
(A CONSTITUENT
BODY MAGADH UNIIVERSITY GRADE "A" ACCREDITED BY NAAC,CPE STATUS BY UGC)
BORING ROAD,PATNA UNDER THE GUIDANCE OF Mr. A. Singh DEPT. OF MGT. ADMINISTRATION A.N.COLLEGE, PATNA SUBMITTED BY : DEEPAK KUMAR ROLL NO: -39 M.B.A. SESSION :- (20062008)
DEDICATED TO LORD KRISHNA
ACKNOWLEDGEMENT As far as the project report is concern it is inspirable part of a management education and very important as far as the final placement is concerned. The experience and knowledge one gets in this project period adds immense value towards shaping one’s career. I am very happy that I have choosen Tata Motors as the organization for my project because the learning which I had got here is unique. I am thankful to management of Guinea Motors Pvt.Ltd. that they gave me such as an opportunity to work with them. I am highly thankful to Mr. Kamesh Kumar(HOD) MBA. Without his motivation and co-operation it wouldn’t have been possible. Along with this, my thank to Mr.A.Singh (Faculty of Marketing Research) under his guidance it become possible. I am also thankful to Mr. K.S. Gouri (Faculty of Finance). I am also thankful to Mr. Akhilesh Singh(Manager Accounts- Tata Motors) motivate me for doing this project. Finally I pay my regard to my parents and my group partner of this project Vinod kumar for his all kinds of support. I express my hurtful gratitude to the institute family and staff of the organization for their co-operation for this project. DEEPAK KUMAR
PREFACE A project is a scientific and systematic study of real issue on a problem with the application of management concept and skills. The study can deal with small or big issue in any division of an organization. It can be case study where a problem has been dealt with, through the process of management. The essential equipment of a project is that, it should contain scientific collection of data, analysis and interpretation of data leading to valid conclusion. Job training is an essential part in MBA curriculum. It enables the student to share the experience in industry. My Job training was placed in “Guinea Motors Pvt. Ltd.” for period of 45 days in Patna. The topic of my project was “A brief study of Ratio Analysis.”
CONTENTS SECTION-1: Organization at Glance Profile Research and Development Manufacturing Board of Directors Product Award Milestone
COMPANY PROFILE Profile:Tata Motors Ltd. Is India’s largest automobile company, with revenues of Rs. 20,483 crores (USD 4.7 billion) in 2004-05. It is the leader by far in commercial vehicles in each segment, and the second largest in the passenger vehicles market with winning products in the compact, midsize car and utility vehicle segments. The company is the world’s fifth largest medium and heavy commercial vehicle manufacture. Established in 1945, Tata Motor’s presence indeed cuts across the length and breadth of India. Over 3 million Tata vehicles ply on India roads, since the first rolled out in 1954. The company’s manufacturing base is spread across Jamshedpur, Pune and Lucknow supported by a nationwide dealership, sales services and spare parts network comprising about 1,200 touch points. Tata Motors, the first company from India’s engineering sector to listed in the New York Stock Exchange (September 2004), has also emerged as a global automotive company. These acquisitions will further extend Tata Motors’s global footprint established through experts since 1961. The company’s commercial and several countries in Europe, Africa, the Middle East, Australia, South East Asia and Sough Asia. It has assembly operations in Malaysia, Kenya, Bangladesh, Spain, Ukraine, Russia and Senegal. The foundation of the company’s growth over the last 50 years is a deep understanding of economic stimuli and customer needs, and the ability to translate them into customer desired offerings through leading edge r&d. With 1,400 engineers and scientist, the company’s Engineering Research Centre, established in 1966, has enabled pioneering
technologies, and products. It was Tata Motors, which developed the first indigenously
developed Light Commercial Vehicle, India’s first Sports fully indigenous passenger car. Within two years of launch, Tata India became India’s largest selling car in its segment. Research and Development :Research provides the much-needed inspiration for the birth of new ideas, which in turn breathes new life into products. World-class automotive research and development are key factors that contribute to the leadership of the Company. -Engineering Research Centre (ERC): The Research Centre at Jamshedpur regularly upgrades components and aggregates. A well-equipped torture track enables rigorous and exhaustive testing of modifications before they are used as regular fitments. The Engineering Research Centre in Pune was setup in 1966 and is among the finest in the country. It has been honored with two prestigious awards-‘ The DSIR National Award for R&D Effort in Industry-1999’ and ‘ National Award for Successful Commercialization of Indigenous Technology by an Industrial Concern – 2000’.
Facilities :Engine Performance:Test Beds Chassis Dynamometer Emission Lab Electrodynamics Vibration Shaker Platform Instrumentation Laboratory Test Beds :Tata Motors has 24 engine test beds for engine development. These are fully automated with computerized data acquisition and logging. They are used to test performance, endurance, and durability. They are also used in development of components. Chassis Dynamometer Emission Lab :The ERC has a specialized AVL Zollner Chassis Dynamometer with a 508mm-twin roller for checking the emission levels of chassis. It is certified by UTAC, TUV, INTA, and ARAL. With 125kW generator, it can cater to the maximum vehicle speed of 210km/h. Inertia simulation ranges from 56kg to 3000kg. The Horiba 9000 emission system has separate CVS units for petrol and diesel.
Electrodynamics Vibration Shaker Platform:It is used for testing engine components and assemblies against Vibrations.
Instrumentation Laboratory:The instrumentation Laboratory’ at ERC Engines is equipped with a range of instruments to assist engine development. These include data acquisition systems, air flow meters, blow-by, meters, smoke meters, and oil consumption meters. Reducing emissions:A specialized laboratory has been set up to measure levels of emission of vehicles using petrol, diesel or CNG. This laboratory Tata Motors achieve fuel consumption efficiencies that would conform to international standards, under varying driving cycles. It stands testimony to Tata Motors commitment to help bring down levels of atmospheric pollution caused by vehicular exhaust.
MANUFACTURING Jamshedpur:This was the first of the Company established in 1945. It consists of 3 divisions-Truck, Engine (including the Gear Box division) and Axle. Lucknow:Established in 1991 and covering an area of 600 acres, the Lucknow Plant was established to assemble Medium Commercial Vehicles (MCVs) to meet the demand in the Northern Indian market. Pune:The Pune unit is spread over 2 geographical regions – Pimpri and Chinchwad and has a combined area of around 510 acres. It was established in 1996 and has a production Engineering Division, which has one of the most versatile tool making facilities in the Indian sub-continent. It houses a Vehicle Manufacturing complex which is one of the most integrated automotive manufacturing centers in the country producing a large variety of individual items and aggregates. Green Matters:Tata Motors, a Company that cares about the future…..true to the tradition of the Tata Group, Tata Motors is committed in letter and spirit to Corporate Social Responsibility. It is a signatory to United Nations Global Compact, and is engaged in community and social initiatives on labor and environment standard in compliance with the principles of the Global Compact. In accordance with this, it plays an active role in community development, serving rural communities adjacent to its manufacturing locations. Tata Motors concern is manifested by a dual approach-
1) Reduction of environmental pollution and regular pollution control drives 2) Restoration of ecological balance. PRODUCTS The Concept of Product A product is any thing that can be offered to market for attentions, acquisition, use or consumption. It includes physical objects, services, personalities, place, organization and ideas. The product is a bungle of physical services and symbolic particulars expected to yield satisfaction or benefits to the buyers and it incorporates facilities, services or an instrument or satisfaction to the buyers who buy it. The buyer or seller can see the product in different way. It is useful to distinguish three concept of a formal product, core product and all guaranteed product. The formal product is the physical object on service that is offered to the target markets. It is a physical object. The market as having a combination of fine characteristic, a quality, feature, styling, a brand name and packaging may recognize it. If it services, it may have these facts in an analogue manner. The core product is the essential utility of benefit that is being offered to or sought by the buyer. Product of the Organization:The Product of the organization is as per specification of Tata Motors Ltd. (1)
(2)
(3) (4) (5) (6) (7)
Indica v2 Indigo Indigo Marina Indica v2 XETA Safari SUMO Dicor
AWARDS ? Business today selects Mr. P.P. Kadle as India’s Best CFO in 2005… ? Pune Foundry Division bags prestigious Green Foundry Award… ? Tata Motors is ‘Commercial Vehicle Manufacturer of the Year’… ? ACE bags ‘Best Commercial Vehicle Design’ at the BBC-Top Great awards…. ? Jamshedpur bags National Energy Conservation award for the fourth consecutive ye…….
? Tata Motors bags the prestigious’ CII-EXIM Bank award’ for
business excellence… ? Tata Motors receive JRD QV awards for Business Excellence...
? ‘Car Maker of the Year’ Award for Tata Motor
? Tata Motors is ‘Commercial Vehicle Manufacturer or the year’… ? TNS Voice of the Customer award for Indica Diesel… ? ‘CFO of the year Award 2004’ awarded to Mr.Praveen p Kadle, Executive Director-.. ? Tata Motors wins the prestigious ‘Corporate Platinum’ Award at the India Manuf….
? Tata Motors wins ‘Golden Peacock Award’ for Corporate Social Responsibility… ? Tata Motors CVBU Pune wins National energy Award… ? Tata motors win the first CSIR Diamond jubilee technology Award… ? Tata Motors Training Division Wins “Golden Peacock National Training Award 2004” ? Tata Motors Jamshedpur and Lucknow win awards… ? TATA MOTORS CASE STUDY WINS FIRST PRIZE IN IIIE PRODUCTIVITY CONTEST… ? TATA MOTORS WINS AWARD FOR FAIR BUSINESS PRACTICES…
? Tata Indica and Tata Safari EXI win awards…
Tata motors-car plant gets two ISO certifications…
? Tata Motors bags awards at 14th National Convention of
INSAAN.. ? Indica and Safari win accolades... ? TAT MOTORS PUNE AWARDED SECOND PLACE IN NATIONAL LEVEL COMETITION IN ENERGY CO… ? Tata Motors Receives “India’s Best Employer” Award for the Employee… ? CVBU RECEIVES COMMENDATION CERTIFICATE FOR ‘STRONG COMMITMENT TO TQM’…
? Tata Motors team wins The Runners Up Position at The Asian Business Simulation C… ? THE PRESTIGIOUS BALANCED SCORECARD COLLAORATIVE HALL OF FAME AWARD… ? Tata Motors receives all India trophies for Top Exporters… ? Tata Indigo ad campaign wins Effie award… ? Golden Peacock Environment Management Award-2003… ? Industry and Technology Award, 2002…
? Advertising Awards.
? Tata Indigo- Most Exciting New Car for the Year- ICICI Bank & Overdrive Awards… ? Tata Engineering –A Socially Responsible Corporate, says TERI… ? ’Prof. Vasant Rao Rolling Trophy’ for Value Engineering – 2002… ? Tata Engineering was conferred Bharat Gaurav Purashar… ? Best Value for Money Car of the Year – Tata Indigo CNBC Auto Car Auto Awards- 2… ? Voice of the Customer Awards’ for ‘Best Diesel Small car’ Tata Indica by NFO Awrd… ? Tata Motors CVBU has won the prestigious Honda ? India CFO Award 2002.. ? Tata Engineering bags INSAAN Awards…
? National Best Training Establishment Award… ? Envirointernational… ? Good Corporate Citizen Award… ? National Award for Successful Commercialization of Indigenous Technology…
? National Award for R&D Efforts.
? Regional Top Exporter’s Trophy… ? Best Company Award at Work skills Competition… ? EEPC Award for Tata Engineering… ? Best Value for Money Car of the Year –Tata Indigo CNBC Auto car Auto Awards – 2… ? ’ Voice of the Customer Awards’ for ‘Best Diesel Small Car’ – Tata Indica by NFO Award… ? Indica CFO Award 2002… ? Tata Engineering has INSAAN Awards… ? Environternational.. ? Good Corporate Citizen award… ? National Award for Successful Commercialization of Indigenous Technology… ? National Award for R&D Efforts…
? Regional Top Exporter’s Trophy… ? Best Company Award at work skills Competition… ? EEPC Award Tata Engineering…
Milestones It has been a long and accelerated journey for Tata Motors. India’s leading automobile manufacture some significant in the company’s journey towards excellence and leadership. 1945 1958 1954 1959 1960 1966 1971 9177 1983 1985
1986
Tata Engineering and Locomotive Co. Ltd. Was established to manufacture locomotives and other engineering products. Steam road roller introduce in collaboration With Marshl Sons (UK). Collaboration with Daimler Benz AG, West Germany, for manufacture of medium commercial vehicles. The first vehicle rolled out within 6 months of the contract. Research and Development Centre set up at Jamshedpur. Exports being with the first truck being shipped to Ceylon, now Sri Lanka. Setting up of the Engineering Research centre at Pune to provide impetus to automobile Research and De3elopment. Introduction of DI Engines. First commercial vehicle manufactured in Pune. Manufacture of Heavy commercial vehicle commences. First hydraulic excavator produces with Hitachi collaboration. Production of first light commercial vehicle. Tata 407, indigenously designed, followed Tata 608. Introduction of the Automobile 206-3rd LCV model.
1989
1991
Launch of the 1st indigenous passenger car Tata Sierra. TAC 20 crane produced. Launch of the Tata Estate. Joint venture agreement signed with Cummins Engine Co. Inc. for the manufacture of horsepower and emission friendly diesel engines. Launch of Tata Sumo- the multi utility vehicle. Launch of LPT 709- a full forward control. Light commercial vehicle. Joint venture agreement signed with M/s Daimler- Benz/ Mercedes –Benz for manufacture of Mercedes Benz passenger cars in India. Joint venture agreement signed with Tata Hostel Ltd. UK for manufacturing turbo car to be used on commons engines. Mercedes Benz car E220 launched. Tata Sumo deluxe launched. Tata Sierra Turbo launched. Tata Safari – India’s first sports utility vehicles launched. 2 millionth vehicles rolled out. Indica, India’s first fully indigenous passenger car launched. 115,000 booking for Indica registered against full payment within a week. Commercial production of Indica commences is full swing. First consignment of 160 Indica shipped to Malta. Indica with Bharat Stage 2Euro ii) compliant engine launched. Utility vehicles with Bharat 2 (Euro ii) compliant engine
1992 1993
1994
1995 1996 1997 1998
1999
2000
launched. Indica 2000 (Euro ii) with multi point fuel injection petrol engine launched. Launch of CNG Buses. Launch of 1109 vehicle:- Intermediate commercial vehicle.
2001
Indica V2 launched 2nd generation Indica. 100,000th Indica wheeled out. Launch of CNG Indica. Launch of the Tata Safari EX Indica V2 becomes India’s number one car in its segment. Exits joint venture with Daimler Chrysler. Unveiling of the Tata Sedan at Auto Expo 2002. Petrol version of Indica V2 launched. Launch of the Ex series in commercial vehicles. Launch of the Tata 207 DI. 2,00,000th Indica roller out.5, 00,000th passenger vehicle rolled out. Launch of the Tata Sumo’+’ series. Launch of the Tata Indigo. Tata Engineering signed a product agreement with MG Rover of the U.K. Launch of the Tata Safari Limited Edition. The Tata Indigo Wagon unveiled at the Geneva Motor Show. On 29th July, J.R.D. Tata’s birth anniversary, Tata Engineering becomes Tata Motors Limited. 3 million vehicles produced. First City Rover roller out. 135 PS Tata Safari EXI Petrol launched. Tata SFC 407 EX Turbo Launched. Tata Motors unveils new product range at Auto Expo’04 New Tata Indica V2 Launched. Tata Motors and Daewoo Commercial Vehicle Co. Ltd. Sign investment agreement. Indigo Advent unveiled at Geneva Motors show. Tata Motors completes acquisition of Daewoo Commercial Vehicle Company. Tata LPT 909 EX Launched. Tata Daewoo Commercial Vehicle Co. Ltd (TDCV) launches the heavy duty truck ‘NOVUS’ in Korea. Sumo Victa Launched. Indigo Marina Launched. Tata Motors lists on the NYSE. Tata Motors rolls out its 500,000th Passenger vehicle. The Tata Zover unveiled at the 75th Geneva Motor show Branded buses and coaches- Starbus and Globus Launched. Tata Motors acquires 21% Stake in Hispano Carrocera SA, Spanish bus manufacturing company. Tata Ace, India’s first
2002
2003
2004
2005
mini truck Launched. Tata Motors wins JRD QV award for business excellence. The power packed Safari Decor is launch. Introduction of Indigo SX series- luxury variant of Tata Indigo. Tata Motors launches Indica V2 Turbo Diesel. One millionth passenger car produce and sold lanuguration of new factory at Jamshedpur of Novas Tata TL 4*4, India’s first Sports Utility Truck (SUT) is launched. Launch of Tata Novas. Launch of Novas range of medium trucks in Korea, by Tata Daewoo Commercial Vehicle Co.(TDCV). 2006 Tata Motors unveils new long wheel base premium Indigo & X-over Indica V2 Xeta launched.
MANUFACTURING PROCESS
Committe d Human Resource
Stamping
Transaxle & Heat Treatment
Material Resource s
BIW
Pretreatment, Coat & Painting
Engine
Efficient Machiner y & Equipmen t
Vehicle Assembly
Dispatch
Enabled Processe s
SECTION 2 ANALYSIS OF FINACIAL STATEMENT FINACIAL STATEMENT FINACIAL STATEMENT ANALYSIS STEP INVOLED NEED FOR RATIO ANALYSIS OBJECTIVES FOR AN ORGANISATION INFORMATION FOR ANALYSIS INFORMATION OF RATIOS PRECAUTIONS TYPES OF RATIO
ANALY SIS OF FINACIAL STATEMENT Financial Statement Financial Statement is an organized collection of information or data prepared as per certain acceptable accounting norms and procedures for analyzing and interpreting the result of the business transaction. The main Financial Statement is the Balance Sheet and Profit and Loss Account, which may be supported by other statements such as Fund Flow Statement, Cash Flow Statement, Trading and Manufacturing Account, etc. Balance Sheet:Balance sheet is a statement of financial position of the business entity as at a specified date. It represents, on the one side, the assets position of the concern and liability position on the other. Profit and loss Account
rofit and loss Account is a statement which provides the information relation to income and expenditure aspects of a business concern to show as to how the business has performed over a time period. Fund Flow Statement:Fund Flow Statement is the information which reflects changes that have taken place in the composition or quantum of all the founds over a time period. It explains the increase or decrease in different related accounts.
Cash Flow Statement:Cash Flow Statement is information which reflects the changes in cash position of one period when compared to other period. It takes into accounts the cash and blank balances. Trading and Manufacturing Account:Trading and Manufacturing Account shows the result of buying, manufacturing and selling of good and summarizes all the transaction occurred during a trading / manufacturing period which direct relationship to the goods dealt in by the business. Financial Statement Analysis Financial Statement Analysis is a meaning study of the financial information relation to an organization, a period or an industry to ascertain the prevailing state of affairs and the reasons therefore. It is a process of evaluation the relationship between the variables in the financial statements so as to understand the firm’s position and performance better. The focus is on key information in the financial statements and the relationship that between them. The analysis of financial of financial statement in blanks is done to examine the financial soundness in terms of long term viability (net worth), short term viability (liquidity Position, to meet the working capital requirements adequately), the profitability and the growth. Steps Involved Selection of the information relevant to the under consideration from the total information contained in a statement. Arrangement of the financial information in such a way so as to establish significant relationship between them. Interpretation and drawing of inferences and conclusions.
Need For Ratio Analysis The financial statement which we draw mainly contains number of balances, credit and debit, from perusal where of it is different to know their economics or financial significance. So to ascertain the financial relationship between relevant figures certain arithmetic calculations are needs which are called ratio analysis. Ratio analysis is the use of financial ratios to evaluate performance such as liquidity, solvency and profitability. It is considered to be one of the most appropriate methods for bankers. Objectivity Of Ratio Analysis An analyst before deciding the ratios needed by him must have a set of clear objectives before him. There may be sub-goals for an objective which may conflict with each other or at times, the objectives may come in conflict. So ratio analysis should be made in such a way so as the enable conflicting objectives or sub-goals to yields to the general goal of the business. Objectives To judge the operating efficiency of the borrower. To judge the financial wealth, solvency or soundness. To examine safety and security of advance made or to be made. The objectives of a banker may change depending upon the condition of the borrower.
Information for Analysis A complete financial statement is a prerequisite for undertaki8ng the ratio analysis. Complete financial statements, normally comprise. Balance Sheet. Trading manufacturing profit and loss account. Various schedules relating to assets and liabilities, particularly the debtors, creditors, loans and advances, investments, stocks, provisions, term loans and deposits including unsecured or subordinate loans etc. Reports of the auditors in the prescribed form in case of audited ones. Reports of the directors, if it is a company type organization. Details of contingent liabilities Details of current liabilities payable within 12 months from the date of balance sheet. Details of old or obsolete stocks, unrecoverable or disputed debts and advance given or a long term basis. Expressions of ratios Ratios can be expressed in Percentage terms, such as gross profit to sales. Terms, such as gross profit to sales. Terms of numbers like, current ratio or debt- equity ratio. Precautions As the ratio analysis suffers from certain basic limitations, it becomes necessary to take precautions for proper analysis. Old the figures which have a mutual cause and effect relationship should be considered. Ratios for different years should be placed in a tabular to compare the changes for proper analysis. The peculiar characteristic of the industry always be kept in mind while organization is being studied.
TYPES OF RATIOS A banker depends upon four types of ratios:1) Liquidity Ratios:An important characteristic of a organization is its ability to carry day to day work smoothly and without much strain on liquid surplus. Sound principle of financial demands that the long term requirements and a part of short term requirements are met from long term sources. The level of current assets should always be more than the current liabilities so that care of short term liquidity of the organization can be taken. The ratios which indicate the liquidity of the firm are:Current Ratio Current ratio is the relationship between the current assets and current liabilities. When the current ratio is higher there is larger amount of rupees available per rupee of current liabilities and firm is in a better position to meet current obligation. Current assets/ current liabilities Acid Test or Quick Ratio Quick ratio is the between quick current assets (Which include cash or bank balances+ receivables + quickly realizable securities such as government securities or quickly marketable & quoted shares and bank fixed deposit) and current liabilities. It measures the capacity of the organization to pay off current liabilities of the urgent nature immediately. Quick assets/Current liabilities
Net Working Capital Net working capital as a concept is applied for meeting working capital need of the borrower. It is working out as surplus of long term sources over the long term uses or outlays. Current assets/ Current liabilities Working Capital Turnover Ratios Working capital turnover ratios helps to know as to what extent the liquid funds in the business are betting utilized for achieving the given sales level. Various relationships are:Net sales/average working capital Average stocks /average working capital Average book debts/average working capital 2) Leverage or Solvency Ratio:Solvency ratio throw light on the long term solvency of a firm reflected in its ability to assure the long term creditors with regard to periodic payment of interest and repayment of the principle on the maturity. Solvency ratios help to judge long term solvency of a firm. Debt- Equity Ratio (Gearing) Debt- Equity ratio shows the dependence of the unit on outside long term finance.Total outside liabilities/ Net worth
3) Profitability ratiorofitability of an organization indicates its efficiency in generation of income and surplus out of the operations of main business. Profitability ratios answer to question such as whether the profits earned are adequate, what rate of return does the profits represent, what is the rate of profit for various divisions and segment of the firm, what is earning per share, where is the amount paid in divisions and what is compare profit to the factors which regulate the quantum of profit directly, such, total capital employed etc. Return on investment or Capital Employed This ratio helps to know how much the organization is earning on its capital employed. Return/Investment x 100 Where, return is the net profit before tax. Return on Equity The ratio provides information about the earning on the funds put in by the promoters or shareholders or the ones retained in the business, generate. Net profit/owned funds x 100 Gross profit & Net Ratio Gross profit is the surplus of gross profit after meeting other expenses. It can be before tax or after tax and is finally appropriated to meet the tax liability, dividend payment or drawing and to retain a part in the business which can be converted into the capital into the capital employed. Nets profit/sales x 100
Operating profit Ratio The ratio includes the margin of profit on the operations revealing the operational efficiency of the unit. Operating profit/sales x 100 Where, the operating profit represents profit minus net other income or profit from unrelated activity. Earning Power Earning power is over all profitability of an enterprise (i.e. profitability on sales as reflected in net profit margin and profitability of investment reflected by investment /assets turnover.) Earning power = net profit margin x investment turnover Where, net profit margin= net profit after taxes/sales, and investment turnover = sales/average total investment.
Alternatively, earning power = net profit after taxes/total assets. 4) Activity Ratios:Activity ratios measure the efficiency of the organization in deploying the available funds, particularly raised on short term basis. Inventory turnover Inventory turnover explains as to how the stocks have been used. An increasing and higher ratio indicates fast movement of stocks and
thereby favorable market demand of company’s products. Sales /average stocks (Average of opening and closing stocks) Fixed assets turnover Fixed Assets turnover helps to determine, how the fixed assets or the capacity have been utilized. A higher or increasing ratio indicates better use of the assets and lower ratio reflects that the use should be improved. Sales /fixed assets. 5) Coverage Ratios Coverage Ratios indicate the capability of an enterprise to service the obligations of payment of interest and installments of principal loan amount. Debt Service Coverage Ratio, (for term Loan) Debt Service Coverage ratio is a comprehensive ratio indicating the capability of an enterprise with regard to servicing both the interest charges and principle installments of a debt. Here, the term debt longterm debt and is therefore extensively used in the appraisal of long term credit facilities provided by development financial institutions and banks. Debt Service= Profit before tax – Depreciation – Interest on TL Annual principal instalment – Interest on TL Interest Coverage Ratio Interest Coverage Ratio indicates the leverage enjoyed by the enterprise in paying the interest obligation. A banker would like to have a reasonable degree of assurance that the earning capacity of the borrowing enterprise is at comfortable level so that there is no
problem envisaged in servicing the amount of interest charged during a period. Interest Coverage Rate = Profit before Tax – Depreciation – Interest Interest
Section 3
Balance sheet Income statement Assumption Ratio analysis:Liquidity ratio Profitability ratio
Balance sheet
Particulars As at 31st March 2007 As at 31st March 2006 7,790.35 2,049.40 28753.93 11,583.66 44,929.16 26,328.65 12,359.65 13,969.00 13969.00 0.28 1371.27 99.48 49.03 953.78 2473.56 2631.88 158.32 87.54 51261.03 50,177.34 50,177.34
Source of funds 1. Sales & other Income (a) Capital 7,790.35 (b) Advance against Share Capital 100.00 (c) Reserve & Surplus 2049.40 2. Loan Funds (a) Secured 21,315.00 (b) Unsecured 13,674.41 Total Source of fund 50,177.34 Application of fund 1. Fixed Assets (a) Gross Block 26,221.75 (b) Less: Depreciation 13,634.46 (c) Net Block 12,587.29 (d) Capital work in Progress 1.00 12,588.29 2. Investment 0.00 3. Current Assets Loan & Advances (a) Current Assets (i) Inventories 1477.25 (ii) Sundry Debtors 83.47 (iii) Cash & Bank Balance 839.58 (b)Loans & Advance 1397.88 Total Current Assets 3798.18 Less: Current Liabilities & Provisions Current Liabilities & Provisions 2620.22 Net Current Assets 1177.96 4. Miscellaneous Expenditure 86.93 (To the extent not written off or adjusted) Total 158981.45 5. Profit & Loss a/c Balance as Debit 1,075.98 Total Application of Funds 44, 9299.16
INCOME STATEMENT INCOME Sales Less Excise Duty paid Miscellaneous Income 2006-07 10,563.95 1870.39 8693.65 32.89 8726.45 5799.85 17.68 1816.97 97.69 1534.39 587.19 10,411.80 1919.17 2005-06 8492.63 36.47 8529.10 6174.32 -64.30 1225.45
EXPENDITURE Manufacturing Expenses Variance in stock Salaries, wages & welfare expenses Loss on assets discarded 0.00 Interest: On fixed loan & Debenture 21.67 Accounts 191.42 2121.58 Differed revenue expenditure 0.00 Deprecation 1657.34 Provision for fringe Benefit Tax 0.00 Profit/loss for the year (period) C/F -4545.94 Total Expenditure 8529.10 Profit/Loss for the year (period) Brought down -4545.94 Adjustment in Secured Loan A/C Of assignment to
213.09 61.93 1317.2 8.85 -2177.57 8726.45
-2177.57
Arcil – Tata Motors 7380.43 Debit Balance as per last A/C -36278.84 Profit/Loss carried to Balance Sheet
0.00 31732.90
INCREASING SHARE OF INTERNATIONAL BUSINESS BY 16%
LIQUIDITY RATIO
Entry Into new Markets Launch of new Products Increased Penetrations Into Existing Markets
LIQUIDITY RATIO
Ratio CURRENT RATIO
Formula Current assets/Current liabilities
31.06.2006 1.44
31.03.2005 0.88
Remarks There is an increase in current assets ,increase in cash and bank balance & loans and advances from the ratio 2005 to 2006 which is more than the increase in current liabilities. Since in stock is not good for the organization, as it is blocking the cash of the company. This is not good for the company.
QUICK RATIO
Current Assets(Stock-Prepaid Exp.)/Current liabilities
0.38
0.35
The standard liquid ratio is 1:1 i.e. liquid assets should be equal to the current liabilities. The ration has increased from 0.38 times to 0.35 times in the two financial year 2005 to 2006 respectively. It shows the sound position of the organization. Liability ratio shows the very short term liquidity or the capacity of the capacity of business to meet its obligation at short notice.
ABSOULUTE CASH RATIO Debtor Turn Ratio
Cash and Near cash/ current liabilities (Net Sales/ Average Debtors) net sales dose not include other incomes.
.10
0.10
95.0
85.37
Absolute cash ratio increase from .10 times to 0.01 times in 2006. This indicates that company carries big amount of cash. The debtors turn ratio shows Increasing trend due to Decreasing in number of debtors owen the years. In the 2006 the Net Sales Increased by 0.02 % where as average debtors Decreased by 0.19% due to Decrease in debtors over the period. It shows that there is no need to focus on debtors’ side for the financial soundness of the company.
Stock Turnover Ratio
Net sales/(Stores & Spares + Stock in Trade)
Times 15.60
Times 15.93
This Ratio shows how many times the average stock is sold during the year. Promptness of sales indicates better performance of business. The stock turnover ratio is Increase due to increase indicates that the rate of inventories replenishment is becoming fast, which is not good for the company.
Average Debt
365/Debtors
11
22
The debt collection period has decreased
PROFITABILITY RATIO
Gross profit Ratio (Gross Profit/Net sales)x100 32.76 % 30.56 % The gross profit ratio shows a increasing trend Because percentage increase in net Sales is greater than % increase in COGS. It indicates that profit available for non operational purpose is increasing and the company can use it for its expansion and other acquisition driver cautiously. The Net profit ratio has increased over the years. It might be possible that this increased trend in Net Profit after tax is due to increased in sales and other things.
Net profit Ratio
Net profit 17.90 % After tax/Net sales x 100
10.20%
Operating profit ratio EPS
Operating Profit /Net sales )x100 (Profit after tax-pref. Dividends) No of equity
17.90 %
12.73 %
-6.45
-13.46
The operating profit ratio has increased in 2006. This is due to decrease in financial expenses by 38.5 % The EPS has Decreased over the years due to Increase in no. of equity & preference shareholders. Since EPS is also being influenced by the transfer to General reserves is also being influenced by the transfer to General reserves is greater than pervious year, the increase in EPS is evident.
CONCLUSION AND RECOMMENDATION
After going through the Balance –sheet of the Financial year (05-06) and (06-07), I have concluded the status of the company which is given hereafter. • There is an increase in current assets due to increase in cash and bank balance & lone and advance respectively form the period 2005 to 2006 which is more than the increase in current liabilities. Since in stock is not good for the organization, as it is blocking the cash of the Company. This is not good for the company. • The standard liquid ratio is 1.1 i.e. liquid assets should be equal to the current liabilities. The ratio has increased from 0.38 times to 0.35 times in the two financial year 2005 to 2006 respectively. It shows the sound position of the organization. Liquidity ratio shows the very short term liquidity or the capacity of the business to meet its obligation at short notice. • The debtors turn over ratio shows Increasing trend due to Decrease number of debtor over the year. In the 2006 the Net sale Increase by 23.98% whereas average debtors Decrease by 0.19% due to increase in debtors over the period. It shows that there is need to focus on debtor’s side for the financial soundness of the company. • Average Stock Ratio shows how many times the average stock is sold during the year. Promptness of sales indicates better performance of business. The stock turnover ratio is increased due to Increase in Net Sales performance of business. 23.98% in 2006. It indicates that the rate of inventories replenishment is becoming fast, which is good for the company because it indicate faster recovery of money from debtors. Debt collection period decreasing due to decreasing amount of debtors.
• The gross profit ratio shows a increasing trend. In 2006 this ratio has increased as because percentage increase in net sales is greater than % increase in COGS. It indicates that profit available for non operational purpose is decreasing and the company can use it for its expansion and other acquisition driver cautiously. • The EPS has over demanded over the years due to increase in no. f equity & Preference shareholders. Since EPS is also being influenced by the transfer to General reserves is greater than previous year, the Decrease in EPS is evident. • Excise duty on uncleared finished goods to Rs.6.79 Lacs has not been added to the inventory as per the usual practice of the company. However this has not affected the revenue results of the company. • The company has maintained proper needs showing full particulars, including quantitative details and situation of fixed assets. • Company’s accounts are being maintained on going concern basis. • The company doesn’t have a website. So it should develop a website on which it displays its result. • Presently the company doesn’t have a chairman of the Board of Directors and the Board of meetings is cleared by one of the Directors who is elected to preside ours the meeting.
SWOT ANALYSIS for TATA’s 1 Lac Car Project
Strengths
? ? ? ?
Weaknesses
Lack of Competence ? Lack of reliable technology.
?
Goodwill of TATA brand. Own steel plants Existing dealers & service networks. Large shareholder base for capital needs.
Opportunities
? ? ?
Threats
? ? ?
Largest aspiring middle class. Huge unexploited market. Prospective buyers from the two-wheeler segment.
Maruti 800 is an established benchmark. Safety & reliability issues. Competition from second hand cars & Maruti.
BIBLIOGRAPHYBOOKS
Analysis of Balance Sheet By V.K.Saxena and C.D.Vashist Credit Appraisal, Risk Analysis and Decision Making By D.D. Mukherjee Management Accounting By M.Y.Khan and P.K.Jain
JOURNALS:Balance Sheet of TATA- MOTORS LTD.
NEWS PAPER:The Financial Express,kolkata The Business Standards,New Delhi
doc_534582507.doc
“A BRIEF STUDY OF FINANCIAL STATEMENT WITH SPECIAL REFERENCE TO RATIO ANALYSIS”
WITH SPECIAL REFERERENCE TO
GUINEA MOTORS PVT.LTD.
SUBMITTED IN THE PARTIAL FULLFILLMENT FOR THE AWARD OF THE DEGREE OF
MASTER IN BUSINESS ADMINISTRATION
CONDUCTED BY A. N. COLLEGE,
(A CONSTITUENT
BODY MAGADH UNIIVERSITY GRADE "A" ACCREDITED BY NAAC,CPE STATUS BY UGC)
BORING ROAD,PATNA UNDER THE GUIDANCE OF Mr. A. Singh DEPT. OF MGT. ADMINISTRATION A.N.COLLEGE, PATNA SUBMITTED BY : DEEPAK KUMAR ROLL NO: -39 M.B.A. SESSION :- (20062008)
DEDICATED TO LORD KRISHNA
ACKNOWLEDGEMENT As far as the project report is concern it is inspirable part of a management education and very important as far as the final placement is concerned. The experience and knowledge one gets in this project period adds immense value towards shaping one’s career. I am very happy that I have choosen Tata Motors as the organization for my project because the learning which I had got here is unique. I am thankful to management of Guinea Motors Pvt.Ltd. that they gave me such as an opportunity to work with them. I am highly thankful to Mr. Kamesh Kumar(HOD) MBA. Without his motivation and co-operation it wouldn’t have been possible. Along with this, my thank to Mr.A.Singh (Faculty of Marketing Research) under his guidance it become possible. I am also thankful to Mr. K.S. Gouri (Faculty of Finance). I am also thankful to Mr. Akhilesh Singh(Manager Accounts- Tata Motors) motivate me for doing this project. Finally I pay my regard to my parents and my group partner of this project Vinod kumar for his all kinds of support. I express my hurtful gratitude to the institute family and staff of the organization for their co-operation for this project. DEEPAK KUMAR
PREFACE A project is a scientific and systematic study of real issue on a problem with the application of management concept and skills. The study can deal with small or big issue in any division of an organization. It can be case study where a problem has been dealt with, through the process of management. The essential equipment of a project is that, it should contain scientific collection of data, analysis and interpretation of data leading to valid conclusion. Job training is an essential part in MBA curriculum. It enables the student to share the experience in industry. My Job training was placed in “Guinea Motors Pvt. Ltd.” for period of 45 days in Patna. The topic of my project was “A brief study of Ratio Analysis.”
CONTENTS SECTION-1: Organization at Glance Profile Research and Development Manufacturing Board of Directors Product Award Milestone
COMPANY PROFILE Profile:Tata Motors Ltd. Is India’s largest automobile company, with revenues of Rs. 20,483 crores (USD 4.7 billion) in 2004-05. It is the leader by far in commercial vehicles in each segment, and the second largest in the passenger vehicles market with winning products in the compact, midsize car and utility vehicle segments. The company is the world’s fifth largest medium and heavy commercial vehicle manufacture. Established in 1945, Tata Motor’s presence indeed cuts across the length and breadth of India. Over 3 million Tata vehicles ply on India roads, since the first rolled out in 1954. The company’s manufacturing base is spread across Jamshedpur, Pune and Lucknow supported by a nationwide dealership, sales services and spare parts network comprising about 1,200 touch points. Tata Motors, the first company from India’s engineering sector to listed in the New York Stock Exchange (September 2004), has also emerged as a global automotive company. These acquisitions will further extend Tata Motors’s global footprint established through experts since 1961. The company’s commercial and several countries in Europe, Africa, the Middle East, Australia, South East Asia and Sough Asia. It has assembly operations in Malaysia, Kenya, Bangladesh, Spain, Ukraine, Russia and Senegal. The foundation of the company’s growth over the last 50 years is a deep understanding of economic stimuli and customer needs, and the ability to translate them into customer desired offerings through leading edge r&d. With 1,400 engineers and scientist, the company’s Engineering Research Centre, established in 1966, has enabled pioneering
technologies, and products. It was Tata Motors, which developed the first indigenously
developed Light Commercial Vehicle, India’s first Sports fully indigenous passenger car. Within two years of launch, Tata India became India’s largest selling car in its segment. Research and Development :Research provides the much-needed inspiration for the birth of new ideas, which in turn breathes new life into products. World-class automotive research and development are key factors that contribute to the leadership of the Company. -Engineering Research Centre (ERC): The Research Centre at Jamshedpur regularly upgrades components and aggregates. A well-equipped torture track enables rigorous and exhaustive testing of modifications before they are used as regular fitments. The Engineering Research Centre in Pune was setup in 1966 and is among the finest in the country. It has been honored with two prestigious awards-‘ The DSIR National Award for R&D Effort in Industry-1999’ and ‘ National Award for Successful Commercialization of Indigenous Technology by an Industrial Concern – 2000’.
Facilities :Engine Performance:Test Beds Chassis Dynamometer Emission Lab Electrodynamics Vibration Shaker Platform Instrumentation Laboratory Test Beds :Tata Motors has 24 engine test beds for engine development. These are fully automated with computerized data acquisition and logging. They are used to test performance, endurance, and durability. They are also used in development of components. Chassis Dynamometer Emission Lab :The ERC has a specialized AVL Zollner Chassis Dynamometer with a 508mm-twin roller for checking the emission levels of chassis. It is certified by UTAC, TUV, INTA, and ARAL. With 125kW generator, it can cater to the maximum vehicle speed of 210km/h. Inertia simulation ranges from 56kg to 3000kg. The Horiba 9000 emission system has separate CVS units for petrol and diesel.
Electrodynamics Vibration Shaker Platform:It is used for testing engine components and assemblies against Vibrations.
Instrumentation Laboratory:The instrumentation Laboratory’ at ERC Engines is equipped with a range of instruments to assist engine development. These include data acquisition systems, air flow meters, blow-by, meters, smoke meters, and oil consumption meters. Reducing emissions:A specialized laboratory has been set up to measure levels of emission of vehicles using petrol, diesel or CNG. This laboratory Tata Motors achieve fuel consumption efficiencies that would conform to international standards, under varying driving cycles. It stands testimony to Tata Motors commitment to help bring down levels of atmospheric pollution caused by vehicular exhaust.
MANUFACTURING Jamshedpur:This was the first of the Company established in 1945. It consists of 3 divisions-Truck, Engine (including the Gear Box division) and Axle. Lucknow:Established in 1991 and covering an area of 600 acres, the Lucknow Plant was established to assemble Medium Commercial Vehicles (MCVs) to meet the demand in the Northern Indian market. Pune:The Pune unit is spread over 2 geographical regions – Pimpri and Chinchwad and has a combined area of around 510 acres. It was established in 1996 and has a production Engineering Division, which has one of the most versatile tool making facilities in the Indian sub-continent. It houses a Vehicle Manufacturing complex which is one of the most integrated automotive manufacturing centers in the country producing a large variety of individual items and aggregates. Green Matters:Tata Motors, a Company that cares about the future…..true to the tradition of the Tata Group, Tata Motors is committed in letter and spirit to Corporate Social Responsibility. It is a signatory to United Nations Global Compact, and is engaged in community and social initiatives on labor and environment standard in compliance with the principles of the Global Compact. In accordance with this, it plays an active role in community development, serving rural communities adjacent to its manufacturing locations. Tata Motors concern is manifested by a dual approach-
1) Reduction of environmental pollution and regular pollution control drives 2) Restoration of ecological balance. PRODUCTS The Concept of Product A product is any thing that can be offered to market for attentions, acquisition, use or consumption. It includes physical objects, services, personalities, place, organization and ideas. The product is a bungle of physical services and symbolic particulars expected to yield satisfaction or benefits to the buyers and it incorporates facilities, services or an instrument or satisfaction to the buyers who buy it. The buyer or seller can see the product in different way. It is useful to distinguish three concept of a formal product, core product and all guaranteed product. The formal product is the physical object on service that is offered to the target markets. It is a physical object. The market as having a combination of fine characteristic, a quality, feature, styling, a brand name and packaging may recognize it. If it services, it may have these facts in an analogue manner. The core product is the essential utility of benefit that is being offered to or sought by the buyer. Product of the Organization:The Product of the organization is as per specification of Tata Motors Ltd. (1)
(2)
(3) (4) (5) (6) (7)
Indica v2 Indigo Indigo Marina Indica v2 XETA Safari SUMO Dicor
AWARDS ? Business today selects Mr. P.P. Kadle as India’s Best CFO in 2005… ? Pune Foundry Division bags prestigious Green Foundry Award… ? Tata Motors is ‘Commercial Vehicle Manufacturer of the Year’… ? ACE bags ‘Best Commercial Vehicle Design’ at the BBC-Top Great awards…. ? Jamshedpur bags National Energy Conservation award for the fourth consecutive ye…….
? Tata Motors bags the prestigious’ CII-EXIM Bank award’ for
business excellence… ? Tata Motors receive JRD QV awards for Business Excellence...
? ‘Car Maker of the Year’ Award for Tata Motor
? Tata Motors is ‘Commercial Vehicle Manufacturer or the year’… ? TNS Voice of the Customer award for Indica Diesel… ? ‘CFO of the year Award 2004’ awarded to Mr.Praveen p Kadle, Executive Director-.. ? Tata Motors wins the prestigious ‘Corporate Platinum’ Award at the India Manuf….
? Tata Motors wins ‘Golden Peacock Award’ for Corporate Social Responsibility… ? Tata Motors CVBU Pune wins National energy Award… ? Tata motors win the first CSIR Diamond jubilee technology Award… ? Tata Motors Training Division Wins “Golden Peacock National Training Award 2004” ? Tata Motors Jamshedpur and Lucknow win awards… ? TATA MOTORS CASE STUDY WINS FIRST PRIZE IN IIIE PRODUCTIVITY CONTEST… ? TATA MOTORS WINS AWARD FOR FAIR BUSINESS PRACTICES…
? Tata Indica and Tata Safari EXI win awards…
Tata motors-car plant gets two ISO certifications…
? Tata Motors bags awards at 14th National Convention of
INSAAN.. ? Indica and Safari win accolades... ? TAT MOTORS PUNE AWARDED SECOND PLACE IN NATIONAL LEVEL COMETITION IN ENERGY CO… ? Tata Motors Receives “India’s Best Employer” Award for the Employee… ? CVBU RECEIVES COMMENDATION CERTIFICATE FOR ‘STRONG COMMITMENT TO TQM’…
? Tata Motors team wins The Runners Up Position at The Asian Business Simulation C… ? THE PRESTIGIOUS BALANCED SCORECARD COLLAORATIVE HALL OF FAME AWARD… ? Tata Motors receives all India trophies for Top Exporters… ? Tata Indigo ad campaign wins Effie award… ? Golden Peacock Environment Management Award-2003… ? Industry and Technology Award, 2002…
? Advertising Awards.
? Tata Indigo- Most Exciting New Car for the Year- ICICI Bank & Overdrive Awards… ? Tata Engineering –A Socially Responsible Corporate, says TERI… ? ’Prof. Vasant Rao Rolling Trophy’ for Value Engineering – 2002… ? Tata Engineering was conferred Bharat Gaurav Purashar… ? Best Value for Money Car of the Year – Tata Indigo CNBC Auto Car Auto Awards- 2… ? Voice of the Customer Awards’ for ‘Best Diesel Small car’ Tata Indica by NFO Awrd… ? Tata Motors CVBU has won the prestigious Honda ? India CFO Award 2002.. ? Tata Engineering bags INSAAN Awards…
? National Best Training Establishment Award… ? Envirointernational… ? Good Corporate Citizen Award… ? National Award for Successful Commercialization of Indigenous Technology…
? National Award for R&D Efforts.
? Regional Top Exporter’s Trophy… ? Best Company Award at Work skills Competition… ? EEPC Award for Tata Engineering… ? Best Value for Money Car of the Year –Tata Indigo CNBC Auto car Auto Awards – 2… ? ’ Voice of the Customer Awards’ for ‘Best Diesel Small Car’ – Tata Indica by NFO Award… ? Indica CFO Award 2002… ? Tata Engineering has INSAAN Awards… ? Environternational.. ? Good Corporate Citizen award… ? National Award for Successful Commercialization of Indigenous Technology… ? National Award for R&D Efforts…
? Regional Top Exporter’s Trophy… ? Best Company Award at work skills Competition… ? EEPC Award Tata Engineering…
Milestones It has been a long and accelerated journey for Tata Motors. India’s leading automobile manufacture some significant in the company’s journey towards excellence and leadership. 1945 1958 1954 1959 1960 1966 1971 9177 1983 1985
1986
Tata Engineering and Locomotive Co. Ltd. Was established to manufacture locomotives and other engineering products. Steam road roller introduce in collaboration With Marshl Sons (UK). Collaboration with Daimler Benz AG, West Germany, for manufacture of medium commercial vehicles. The first vehicle rolled out within 6 months of the contract. Research and Development Centre set up at Jamshedpur. Exports being with the first truck being shipped to Ceylon, now Sri Lanka. Setting up of the Engineering Research centre at Pune to provide impetus to automobile Research and De3elopment. Introduction of DI Engines. First commercial vehicle manufactured in Pune. Manufacture of Heavy commercial vehicle commences. First hydraulic excavator produces with Hitachi collaboration. Production of first light commercial vehicle. Tata 407, indigenously designed, followed Tata 608. Introduction of the Automobile 206-3rd LCV model.
1989
1991
Launch of the 1st indigenous passenger car Tata Sierra. TAC 20 crane produced. Launch of the Tata Estate. Joint venture agreement signed with Cummins Engine Co. Inc. for the manufacture of horsepower and emission friendly diesel engines. Launch of Tata Sumo- the multi utility vehicle. Launch of LPT 709- a full forward control. Light commercial vehicle. Joint venture agreement signed with M/s Daimler- Benz/ Mercedes –Benz for manufacture of Mercedes Benz passenger cars in India. Joint venture agreement signed with Tata Hostel Ltd. UK for manufacturing turbo car to be used on commons engines. Mercedes Benz car E220 launched. Tata Sumo deluxe launched. Tata Sierra Turbo launched. Tata Safari – India’s first sports utility vehicles launched. 2 millionth vehicles rolled out. Indica, India’s first fully indigenous passenger car launched. 115,000 booking for Indica registered against full payment within a week. Commercial production of Indica commences is full swing. First consignment of 160 Indica shipped to Malta. Indica with Bharat Stage 2Euro ii) compliant engine launched. Utility vehicles with Bharat 2 (Euro ii) compliant engine
1992 1993
1994
1995 1996 1997 1998
1999
2000
launched. Indica 2000 (Euro ii) with multi point fuel injection petrol engine launched. Launch of CNG Buses. Launch of 1109 vehicle:- Intermediate commercial vehicle.
2001
Indica V2 launched 2nd generation Indica. 100,000th Indica wheeled out. Launch of CNG Indica. Launch of the Tata Safari EX Indica V2 becomes India’s number one car in its segment. Exits joint venture with Daimler Chrysler. Unveiling of the Tata Sedan at Auto Expo 2002. Petrol version of Indica V2 launched. Launch of the Ex series in commercial vehicles. Launch of the Tata 207 DI. 2,00,000th Indica roller out.5, 00,000th passenger vehicle rolled out. Launch of the Tata Sumo’+’ series. Launch of the Tata Indigo. Tata Engineering signed a product agreement with MG Rover of the U.K. Launch of the Tata Safari Limited Edition. The Tata Indigo Wagon unveiled at the Geneva Motor Show. On 29th July, J.R.D. Tata’s birth anniversary, Tata Engineering becomes Tata Motors Limited. 3 million vehicles produced. First City Rover roller out. 135 PS Tata Safari EXI Petrol launched. Tata SFC 407 EX Turbo Launched. Tata Motors unveils new product range at Auto Expo’04 New Tata Indica V2 Launched. Tata Motors and Daewoo Commercial Vehicle Co. Ltd. Sign investment agreement. Indigo Advent unveiled at Geneva Motors show. Tata Motors completes acquisition of Daewoo Commercial Vehicle Company. Tata LPT 909 EX Launched. Tata Daewoo Commercial Vehicle Co. Ltd (TDCV) launches the heavy duty truck ‘NOVUS’ in Korea. Sumo Victa Launched. Indigo Marina Launched. Tata Motors lists on the NYSE. Tata Motors rolls out its 500,000th Passenger vehicle. The Tata Zover unveiled at the 75th Geneva Motor show Branded buses and coaches- Starbus and Globus Launched. Tata Motors acquires 21% Stake in Hispano Carrocera SA, Spanish bus manufacturing company. Tata Ace, India’s first
2002
2003
2004
2005
mini truck Launched. Tata Motors wins JRD QV award for business excellence. The power packed Safari Decor is launch. Introduction of Indigo SX series- luxury variant of Tata Indigo. Tata Motors launches Indica V2 Turbo Diesel. One millionth passenger car produce and sold lanuguration of new factory at Jamshedpur of Novas Tata TL 4*4, India’s first Sports Utility Truck (SUT) is launched. Launch of Tata Novas. Launch of Novas range of medium trucks in Korea, by Tata Daewoo Commercial Vehicle Co.(TDCV). 2006 Tata Motors unveils new long wheel base premium Indigo & X-over Indica V2 Xeta launched.
MANUFACTURING PROCESS
Committe d Human Resource
Stamping
Transaxle & Heat Treatment
Material Resource s
BIW
Pretreatment, Coat & Painting
Engine
Efficient Machiner y & Equipmen t
Vehicle Assembly
Dispatch
Enabled Processe s
SECTION 2 ANALYSIS OF FINACIAL STATEMENT FINACIAL STATEMENT FINACIAL STATEMENT ANALYSIS STEP INVOLED NEED FOR RATIO ANALYSIS OBJECTIVES FOR AN ORGANISATION INFORMATION FOR ANALYSIS INFORMATION OF RATIOS PRECAUTIONS TYPES OF RATIO
ANALY SIS OF FINACIAL STATEMENT Financial Statement Financial Statement is an organized collection of information or data prepared as per certain acceptable accounting norms and procedures for analyzing and interpreting the result of the business transaction. The main Financial Statement is the Balance Sheet and Profit and Loss Account, which may be supported by other statements such as Fund Flow Statement, Cash Flow Statement, Trading and Manufacturing Account, etc. Balance Sheet:Balance sheet is a statement of financial position of the business entity as at a specified date. It represents, on the one side, the assets position of the concern and liability position on the other. Profit and loss Account
rofit and loss Account is a statement which provides the information relation to income and expenditure aspects of a business concern to show as to how the business has performed over a time period. Fund Flow Statement:Fund Flow Statement is the information which reflects changes that have taken place in the composition or quantum of all the founds over a time period. It explains the increase or decrease in different related accounts.Cash Flow Statement:Cash Flow Statement is information which reflects the changes in cash position of one period when compared to other period. It takes into accounts the cash and blank balances. Trading and Manufacturing Account:Trading and Manufacturing Account shows the result of buying, manufacturing and selling of good and summarizes all the transaction occurred during a trading / manufacturing period which direct relationship to the goods dealt in by the business. Financial Statement Analysis Financial Statement Analysis is a meaning study of the financial information relation to an organization, a period or an industry to ascertain the prevailing state of affairs and the reasons therefore. It is a process of evaluation the relationship between the variables in the financial statements so as to understand the firm’s position and performance better. The focus is on key information in the financial statements and the relationship that between them. The analysis of financial of financial statement in blanks is done to examine the financial soundness in terms of long term viability (net worth), short term viability (liquidity Position, to meet the working capital requirements adequately), the profitability and the growth. Steps Involved Selection of the information relevant to the under consideration from the total information contained in a statement. Arrangement of the financial information in such a way so as to establish significant relationship between them. Interpretation and drawing of inferences and conclusions.
Need For Ratio Analysis The financial statement which we draw mainly contains number of balances, credit and debit, from perusal where of it is different to know their economics or financial significance. So to ascertain the financial relationship between relevant figures certain arithmetic calculations are needs which are called ratio analysis. Ratio analysis is the use of financial ratios to evaluate performance such as liquidity, solvency and profitability. It is considered to be one of the most appropriate methods for bankers. Objectivity Of Ratio Analysis An analyst before deciding the ratios needed by him must have a set of clear objectives before him. There may be sub-goals for an objective which may conflict with each other or at times, the objectives may come in conflict. So ratio analysis should be made in such a way so as the enable conflicting objectives or sub-goals to yields to the general goal of the business. Objectives To judge the operating efficiency of the borrower. To judge the financial wealth, solvency or soundness. To examine safety and security of advance made or to be made. The objectives of a banker may change depending upon the condition of the borrower.
Information for Analysis A complete financial statement is a prerequisite for undertaki8ng the ratio analysis. Complete financial statements, normally comprise. Balance Sheet. Trading manufacturing profit and loss account. Various schedules relating to assets and liabilities, particularly the debtors, creditors, loans and advances, investments, stocks, provisions, term loans and deposits including unsecured or subordinate loans etc. Reports of the auditors in the prescribed form in case of audited ones. Reports of the directors, if it is a company type organization. Details of contingent liabilities Details of current liabilities payable within 12 months from the date of balance sheet. Details of old or obsolete stocks, unrecoverable or disputed debts and advance given or a long term basis. Expressions of ratios Ratios can be expressed in Percentage terms, such as gross profit to sales. Terms, such as gross profit to sales. Terms of numbers like, current ratio or debt- equity ratio. Precautions As the ratio analysis suffers from certain basic limitations, it becomes necessary to take precautions for proper analysis. Old the figures which have a mutual cause and effect relationship should be considered. Ratios for different years should be placed in a tabular to compare the changes for proper analysis. The peculiar characteristic of the industry always be kept in mind while organization is being studied.
TYPES OF RATIOS A banker depends upon four types of ratios:1) Liquidity Ratios:An important characteristic of a organization is its ability to carry day to day work smoothly and without much strain on liquid surplus. Sound principle of financial demands that the long term requirements and a part of short term requirements are met from long term sources. The level of current assets should always be more than the current liabilities so that care of short term liquidity of the organization can be taken. The ratios which indicate the liquidity of the firm are:Current Ratio Current ratio is the relationship between the current assets and current liabilities. When the current ratio is higher there is larger amount of rupees available per rupee of current liabilities and firm is in a better position to meet current obligation. Current assets/ current liabilities Acid Test or Quick Ratio Quick ratio is the between quick current assets (Which include cash or bank balances+ receivables + quickly realizable securities such as government securities or quickly marketable & quoted shares and bank fixed deposit) and current liabilities. It measures the capacity of the organization to pay off current liabilities of the urgent nature immediately. Quick assets/Current liabilities
Net Working Capital Net working capital as a concept is applied for meeting working capital need of the borrower. It is working out as surplus of long term sources over the long term uses or outlays. Current assets/ Current liabilities Working Capital Turnover Ratios Working capital turnover ratios helps to know as to what extent the liquid funds in the business are betting utilized for achieving the given sales level. Various relationships are:Net sales/average working capital Average stocks /average working capital Average book debts/average working capital 2) Leverage or Solvency Ratio:Solvency ratio throw light on the long term solvency of a firm reflected in its ability to assure the long term creditors with regard to periodic payment of interest and repayment of the principle on the maturity. Solvency ratios help to judge long term solvency of a firm. Debt- Equity Ratio (Gearing) Debt- Equity ratio shows the dependence of the unit on outside long term finance.Total outside liabilities/ Net worth
3) Profitability ratio
rofitability of an organization indicates its efficiency in generation of income and surplus out of the operations of main business. Profitability ratios answer to question such as whether the profits earned are adequate, what rate of return does the profits represent, what is the rate of profit for various divisions and segment of the firm, what is earning per share, where is the amount paid in divisions and what is compare profit to the factors which regulate the quantum of profit directly, such, total capital employed etc. Return on investment or Capital Employed This ratio helps to know how much the organization is earning on its capital employed. Return/Investment x 100 Where, return is the net profit before tax. Return on Equity The ratio provides information about the earning on the funds put in by the promoters or shareholders or the ones retained in the business, generate. Net profit/owned funds x 100 Gross profit & Net Ratio Gross profit is the surplus of gross profit after meeting other expenses. It can be before tax or after tax and is finally appropriated to meet the tax liability, dividend payment or drawing and to retain a part in the business which can be converted into the capital into the capital employed. Nets profit/sales x 100Operating profit Ratio The ratio includes the margin of profit on the operations revealing the operational efficiency of the unit. Operating profit/sales x 100 Where, the operating profit represents profit minus net other income or profit from unrelated activity. Earning Power Earning power is over all profitability of an enterprise (i.e. profitability on sales as reflected in net profit margin and profitability of investment reflected by investment /assets turnover.) Earning power = net profit margin x investment turnover Where, net profit margin= net profit after taxes/sales, and investment turnover = sales/average total investment.
Alternatively, earning power = net profit after taxes/total assets. 4) Activity Ratios:Activity ratios measure the efficiency of the organization in deploying the available funds, particularly raised on short term basis. Inventory turnover Inventory turnover explains as to how the stocks have been used. An increasing and higher ratio indicates fast movement of stocks and
thereby favorable market demand of company’s products. Sales /average stocks (Average of opening and closing stocks) Fixed assets turnover Fixed Assets turnover helps to determine, how the fixed assets or the capacity have been utilized. A higher or increasing ratio indicates better use of the assets and lower ratio reflects that the use should be improved. Sales /fixed assets. 5) Coverage Ratios Coverage Ratios indicate the capability of an enterprise to service the obligations of payment of interest and installments of principal loan amount. Debt Service Coverage Ratio, (for term Loan) Debt Service Coverage ratio is a comprehensive ratio indicating the capability of an enterprise with regard to servicing both the interest charges and principle installments of a debt. Here, the term debt longterm debt and is therefore extensively used in the appraisal of long term credit facilities provided by development financial institutions and banks. Debt Service= Profit before tax – Depreciation – Interest on TL Annual principal instalment – Interest on TL Interest Coverage Ratio Interest Coverage Ratio indicates the leverage enjoyed by the enterprise in paying the interest obligation. A banker would like to have a reasonable degree of assurance that the earning capacity of the borrowing enterprise is at comfortable level so that there is no
problem envisaged in servicing the amount of interest charged during a period. Interest Coverage Rate = Profit before Tax – Depreciation – Interest Interest
Section 3
Balance sheet Income statement Assumption Ratio analysis:Liquidity ratio Profitability ratio
Balance sheet
Particulars As at 31st March 2007 As at 31st March 2006 7,790.35 2,049.40 28753.93 11,583.66 44,929.16 26,328.65 12,359.65 13,969.00 13969.00 0.28 1371.27 99.48 49.03 953.78 2473.56 2631.88 158.32 87.54 51261.03 50,177.34 50,177.34
Source of funds 1. Sales & other Income (a) Capital 7,790.35 (b) Advance against Share Capital 100.00 (c) Reserve & Surplus 2049.40 2. Loan Funds (a) Secured 21,315.00 (b) Unsecured 13,674.41 Total Source of fund 50,177.34 Application of fund 1. Fixed Assets (a) Gross Block 26,221.75 (b) Less: Depreciation 13,634.46 (c) Net Block 12,587.29 (d) Capital work in Progress 1.00 12,588.29 2. Investment 0.00 3. Current Assets Loan & Advances (a) Current Assets (i) Inventories 1477.25 (ii) Sundry Debtors 83.47 (iii) Cash & Bank Balance 839.58 (b)Loans & Advance 1397.88 Total Current Assets 3798.18 Less: Current Liabilities & Provisions Current Liabilities & Provisions 2620.22 Net Current Assets 1177.96 4. Miscellaneous Expenditure 86.93 (To the extent not written off or adjusted) Total 158981.45 5. Profit & Loss a/c Balance as Debit 1,075.98 Total Application of Funds 44, 9299.16
INCOME STATEMENT INCOME Sales Less Excise Duty paid Miscellaneous Income 2006-07 10,563.95 1870.39 8693.65 32.89 8726.45 5799.85 17.68 1816.97 97.69 1534.39 587.19 10,411.80 1919.17 2005-06 8492.63 36.47 8529.10 6174.32 -64.30 1225.45
EXPENDITURE Manufacturing Expenses Variance in stock Salaries, wages & welfare expenses Loss on assets discarded 0.00 Interest: On fixed loan & Debenture 21.67 Accounts 191.42 2121.58 Differed revenue expenditure 0.00 Deprecation 1657.34 Provision for fringe Benefit Tax 0.00 Profit/loss for the year (period) C/F -4545.94 Total Expenditure 8529.10 Profit/Loss for the year (period) Brought down -4545.94 Adjustment in Secured Loan A/C Of assignment to
213.09 61.93 1317.2 8.85 -2177.57 8726.45
-2177.57
Arcil – Tata Motors 7380.43 Debit Balance as per last A/C -36278.84 Profit/Loss carried to Balance Sheet
0.00 31732.90
INCREASING SHARE OF INTERNATIONAL BUSINESS BY 16%
LIQUIDITY RATIO
Entry Into new Markets Launch of new Products Increased Penetrations Into Existing Markets
LIQUIDITY RATIO
Ratio CURRENT RATIO
Formula Current assets/Current liabilities
31.06.2006 1.44
31.03.2005 0.88
Remarks There is an increase in current assets ,increase in cash and bank balance & loans and advances from the ratio 2005 to 2006 which is more than the increase in current liabilities. Since in stock is not good for the organization, as it is blocking the cash of the company. This is not good for the company.
QUICK RATIO
Current Assets(Stock-Prepaid Exp.)/Current liabilities
0.38
0.35
The standard liquid ratio is 1:1 i.e. liquid assets should be equal to the current liabilities. The ration has increased from 0.38 times to 0.35 times in the two financial year 2005 to 2006 respectively. It shows the sound position of the organization. Liability ratio shows the very short term liquidity or the capacity of the capacity of business to meet its obligation at short notice.
ABSOULUTE CASH RATIO Debtor Turn Ratio
Cash and Near cash/ current liabilities (Net Sales/ Average Debtors) net sales dose not include other incomes.
.10
0.10
95.0
85.37
Absolute cash ratio increase from .10 times to 0.01 times in 2006. This indicates that company carries big amount of cash. The debtors turn ratio shows Increasing trend due to Decreasing in number of debtors owen the years. In the 2006 the Net Sales Increased by 0.02 % where as average debtors Decreased by 0.19% due to Decrease in debtors over the period. It shows that there is no need to focus on debtors’ side for the financial soundness of the company.
Stock Turnover Ratio
Net sales/(Stores & Spares + Stock in Trade)
Times 15.60
Times 15.93
This Ratio shows how many times the average stock is sold during the year. Promptness of sales indicates better performance of business. The stock turnover ratio is Increase due to increase indicates that the rate of inventories replenishment is becoming fast, which is not good for the company.
Average Debt
365/Debtors
11
22
The debt collection period has decreased
PROFITABILITY RATIO
Gross profit Ratio (Gross Profit/Net sales)x100 32.76 % 30.56 % The gross profit ratio shows a increasing trend Because percentage increase in net Sales is greater than % increase in COGS. It indicates that profit available for non operational purpose is increasing and the company can use it for its expansion and other acquisition driver cautiously. The Net profit ratio has increased over the years. It might be possible that this increased trend in Net Profit after tax is due to increased in sales and other things.
Net profit Ratio
Net profit 17.90 % After tax/Net sales x 100
10.20%
Operating profit ratio EPS
Operating Profit /Net sales )x100 (Profit after tax-pref. Dividends) No of equity
17.90 %
12.73 %
-6.45
-13.46
The operating profit ratio has increased in 2006. This is due to decrease in financial expenses by 38.5 % The EPS has Decreased over the years due to Increase in no. of equity & preference shareholders. Since EPS is also being influenced by the transfer to General reserves is also being influenced by the transfer to General reserves is greater than pervious year, the increase in EPS is evident.
CONCLUSION AND RECOMMENDATION
After going through the Balance –sheet of the Financial year (05-06) and (06-07), I have concluded the status of the company which is given hereafter. • There is an increase in current assets due to increase in cash and bank balance & lone and advance respectively form the period 2005 to 2006 which is more than the increase in current liabilities. Since in stock is not good for the organization, as it is blocking the cash of the Company. This is not good for the company. • The standard liquid ratio is 1.1 i.e. liquid assets should be equal to the current liabilities. The ratio has increased from 0.38 times to 0.35 times in the two financial year 2005 to 2006 respectively. It shows the sound position of the organization. Liquidity ratio shows the very short term liquidity or the capacity of the business to meet its obligation at short notice. • The debtors turn over ratio shows Increasing trend due to Decrease number of debtor over the year. In the 2006 the Net sale Increase by 23.98% whereas average debtors Decrease by 0.19% due to increase in debtors over the period. It shows that there is need to focus on debtor’s side for the financial soundness of the company. • Average Stock Ratio shows how many times the average stock is sold during the year. Promptness of sales indicates better performance of business. The stock turnover ratio is increased due to Increase in Net Sales performance of business. 23.98% in 2006. It indicates that the rate of inventories replenishment is becoming fast, which is good for the company because it indicate faster recovery of money from debtors. Debt collection period decreasing due to decreasing amount of debtors.
• The gross profit ratio shows a increasing trend. In 2006 this ratio has increased as because percentage increase in net sales is greater than % increase in COGS. It indicates that profit available for non operational purpose is decreasing and the company can use it for its expansion and other acquisition driver cautiously. • The EPS has over demanded over the years due to increase in no. f equity & Preference shareholders. Since EPS is also being influenced by the transfer to General reserves is greater than previous year, the Decrease in EPS is evident. • Excise duty on uncleared finished goods to Rs.6.79 Lacs has not been added to the inventory as per the usual practice of the company. However this has not affected the revenue results of the company. • The company has maintained proper needs showing full particulars, including quantitative details and situation of fixed assets. • Company’s accounts are being maintained on going concern basis. • The company doesn’t have a website. So it should develop a website on which it displays its result. • Presently the company doesn’t have a chairman of the Board of Directors and the Board of meetings is cleared by one of the Directors who is elected to preside ours the meeting.
SWOT ANALYSIS for TATA’s 1 Lac Car Project
Strengths
? ? ? ?
Weaknesses
Lack of Competence ? Lack of reliable technology.
?
Goodwill of TATA brand. Own steel plants Existing dealers & service networks. Large shareholder base for capital needs.
Opportunities
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Threats
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Largest aspiring middle class. Huge unexploited market. Prospective buyers from the two-wheeler segment.
Maruti 800 is an established benchmark. Safety & reliability issues. Competition from second hand cars & Maruti.
BIBLIOGRAPHYBOOKS
Analysis of Balance Sheet By V.K.Saxena and C.D.Vashist Credit Appraisal, Risk Analysis and Decision Making By D.D. Mukherjee Management Accounting By M.Y.Khan and P.K.Jain
JOURNALS:Balance Sheet of TATA- MOTORS LTD.
NEWS PAPER:The Financial Express,kolkata The Business Standards,New Delhi
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