Ratio Analysis Of Tata Motors
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ASSIGNMENT ON RATIO COMPARISON OF TATA MOTORS FOR 2007 AND 2008.
Submitted to: K.L. Chawla Head, Department of Finance INMANTEC
Submitted By Kamal Kant Soni @ PG-08-36 Esha Raj @ PG-08-29 Chitrangda Jaiswal @ PG-08-27
INCOME STATEMENT OF TATA MOTORS Revenues Other Revenues TOTAL REVENUES Cost of Goods Sold GROSS PROFIT Selling General & Admin Expenses, Total R&D Expenses Depreciation & Amortization, Total Other Operating Expenses OTHER OPERATING EXPENSES, TOTAL OPERATING INCOME Interest Expense Interest and Investment Income NET INTEREST EXPENSE Income (Loss) on Equity Investments Currency Exchange Gains (Loss) Other Non-Operating Income (Expenses) EBT, EXCLUDING UNUSUAL ITEMS
Gain (Loss) on Sale of Assets Other Unusual Items, Total EBT, INCLUDING UNUSUAL ITEMS Income Tax Expense Minority Interest in Earnings Earnings from Continuing Operations NET INCOME
(2007) 323,612.0 19.6 325,143.8 234,753.6 90,390.2 30,811.0 850.2 6,880.9 17,508.5 56,050.6 34,339.6 -4,650.6 592.5 -4,058.1 394.2 652.1 -1.4 31,326.4
--52.2 31,274.2 8,832.1 -742.2 21,699.9 21,699.9
(currency in million Rs.) (2008) 356,514.8 65.0 358,086.0 254,571.5 103,514.5 35,136.3 659.5 7,820.7 24,046.6 67,663.1 35,851.4 -9,127.2 1,696.6 -7,430.6 652.0 1,376.1 -0.6 30,448.3
1,103.6 -37.0 31,514.9 8,515.4 -1,322.5 21,677.0 21,677.0
BALANCE SHEET OF TATA MOTORS Assets Cash and Equivalents TOTAL CASH AND SHORT TERM INVESTMENTS Accounts Receivable Notes Receivable Other Receivables TOTAL RECEIVABLES Inventory Prepaid Expenses Other Current Assets TOTAL CURRENT ASSETS Gross Property Plant and Equipment Accumulated Depreciation NET PROPERTY PLANT AND EQUIPMENT Goodwill Long-Term Investments Deferred Charges, Long Term Other Intangibles Other Long-Term Assets TOTAL ASSETS LIABILITIES & EQUITY Accounts Payable Accrued Expenses Short-Term Borrowings Current Income Taxes Payable Other Current Liabilities, Total Unearned Revenue, Current TOTAL CURRENT LIABILITIES Long-Term Debt Capital Leases Minority Interest Deferred Tax Liability Non-Current TOTAL LIABILITIES Common Stock Additional Paid in Capital Retained Earnings Comprehensive Income and Other TOTAL COMMON EQUITY TOTAL LIABILITIES AND EQUITY
(2007) (2008) (currency in millions Rs.) 11,542.7 38,331.7 11,542.7 38,331.7 17,022.2 20,605.1 84,553. 76,938.9 62.7 11.9 101,638.5 97,555.9 31,669.0 32,946.4 1,247.3 3,334.8 16,681.7 20,504.7 162,779.2 192,673.5 129,408.3 182,484.4 -54,266.5 -57,652.4 75,141.8 124,832.0 4,430.1 5,661.6 11,745.9 26,658.3 119.3 2,442.1 -1,429.6 -254,216.3 353,697.1 48,723.3 4,704.9 34,325. 1,084.2 38,789.2 6.7 127,633.7 38,693.6 -2,499.6 8,172.7 176,999.6 3,853.6 19,364.0 44,087.8 9,911.3 77,216.7 254,216.3
67,832.8 5,389.3 52,503.2 901.4 62,104.1 218.0 188,948.8 63,345.5 -4,683.1 9,744.5 266,721.9 3,854.9 15,372.2 58,523.7 9,224.4 86,975.2 353,697.1
Liquidity ratio Current ratio = Current assets / Current liability 2008
2007
Current Assets
192,673.5
162,779.2
Current Liability
188,948.8
127,633.7
Current Ratio (2008)
192,673.5/ 188,948.8 = 1.01
Current Ratio (2007)
162,779.2/ 127,633.7 = 1.27
Quick Ratio (2008)
C.A. - Invent. / C.L. 192,673.5 - 32,946.4 / 188,948.8 = .85 162,779.2- 31,669.0/127,633.7 = 1.02
Quick Ratio (2007) Interval measure -
Current assets-inven. / avg. daily cash oper. Exp
For 2008Avg. daily cash oper. Exp Interval measure For 2007 Avg. daily cash oper. Exp Interval measure -
Total cash exp./ 365 67,663.1/ 365 = 185.3 192,673.5 - 32,946.4 / 185.3 = 862 days 56,050.6/ 365 = 153.5 162,779.2- 31,669.0 / 153.5 = 854 days
In liquidity ratio, we observe that current ratio in 2008 is less in comparison of 2007. it means companies efficiency decreases in paying current liability. And in quick ratio, it also decreases. In 2008, regular cash meet was 862 days in comparison of 854 of 2007. It means firms ability to pay its daily exp. Increases.
Leverage Ratio Total debt ratio –
Total debt / capital employed
For 2008 Total debt Capital employed Or For 2007 Total debt Capital employed -
Debt equity ratio
63,345.5 Net worth + borrowing Share capital + debt. 86,975.2+ 63,345.5= 150320.7 63,345.5 / 150320.7 = .42 38,693.6 77,216.7 + 38,693.6= 115910.3 (shr. cap) (debt) 38,693.6 / 115910.3 = .33 -
For 2008 For 2007 Capital equity ratio For 2008 For 2007
Net worth / total debt Net worth = share cap. 86,975.2/63,345.5 = 1.37 77,216.7 /38,693.6 = 1.99 Capital employed / net worth 150320.7 / 86,975.2= 1.73 115910.3 / 77,216.7 = 1.50
Interest coverage ratio – EBIT + depreciation / Interest Earning before tax Add- Interest
2008 30,448.3 9,127.2 39575.5
For 2008 For 2007
2007 31,326.4 4,650.6 35977
- 39575.5 + 7,820.7/9,127.2 = 5.19 - 35977 + 6,880.9 / 4,650.6= 9.21
In 2008, the long term financial position getting strong than 2008. Capability of paying long term debt. is increases. As we seen, debt ratio increases. And the contribution of debt is increases in 2008 than 2007. and the part of share capital is also increases in total capital employed than 2007. it means, company is increasing its capital through shares.
Activity Ratio Inventory Turnover Ratio:- Cost of goods sold / Inventory
Cost of goods sold Inventory
(2008) 254,571.5 32,946.4
(2007) 234,753.6 31,669.0
For 2008:-
254,571.5 / 32,946.4
=
7.72
For 2007 :-
234,753.6 / 31,669.0
=
7.41
Debtor Turnover Ratio :- Sales / debtor For 2008 :-
358,086.0 (sales) / 97,555.9 (debtor) =
3.67
For 2007 :-
325,143.8 (sales) / 101,638.5 (debtor) =
3.20
Average collection period (2008) = 360 / 3.67 =
98 days
Average collection period (2007) = 360 / 3.20 =
112 days
Assets Turnover Ratio :- Sales / Net assets or capital employed For 2008 :-
358,086.0 (sales) / 150320.7 (c.e.) =
2.38
For 2007 :-
325,143.8 (sales) / 115910.3 (c.e.) =
2.80
Working Capital Turnover Ratio:- Sales / Net working capital Net Working Capital = Current assets – Current liability For 2008 For 2007
= 192,673.5 - 188,948.8 = 3724.7 = 162,779.2 - 127,633.7 = 35145.5
For 2008 :-
358,086.0 (sales) / 3724.7 (N.W.C.) = 96.13
For 2007 :-
325,143.8 (sales) / 35145.5 (N.W.C) = 9.25
As we seen, company’s efficiency of using its assets is increasing in 2008 than 2007. The inventory turnover ratio which shows its efficiency of selling product is increasing. Average collection period is decreasing means company is selling its product more on cash basis in 2008 than 2007. but company’s assets turnover ratio is decreasing means sales is not growing according to its capital employed and working capital.
Profitability Ratio Gross Margin
=
Gross profit / Sales
Gross Margin (2008) =
103,514.5 / 358,086.0 = .29
Gross Margin (2007) =
90,390.2 / 325,143.8 = .28
EBIT Ratio
=
PAT / EBIT
For 2008 For 2007
= =
21,677.0 / 37878.9 21,699.9 / 35384.5
=
EBIT / Capital employed
= =
39575.5 / 150320.7 = .26 35977 / 115910.3 = .31
=
PAT / Net worth
= =
21,677.0 / 86,975.2 = .25 21,699.9 / 77,216.7 = .28
Return on investment For 2008 For 2007 Return on equity For 2008 For 2007
= .57 = .61
In profitability ratio, the gross profit ratio is increasing in 2008 than 2007. it means its profit is growing in sales. But company’s EBIT ratio is decreasing means interest on capital and tax rate is increased in 2008 than 2007 which is responsible in decreasing its PAT. And company’s return on investment is decreased that indicates that its earning on capital employed is decreased in 2008 than 2007. and its ROE is also decreases means its PAT on its share capital is decreased.
Submitted to: K.L. Chawla Head, Department of Finance INMANTEC
Submitted By Kamal Kant Soni @ PG-08-36 Esha Raj @ PG-08-29 Chitrangda Jaiswal @ PG-08-27
INCOME STATEMENT OF TATA MOTORS Revenues Other Revenues TOTAL REVENUES Cost of Goods Sold GROSS PROFIT Selling General & Admin Expenses, Total R&D Expenses Depreciation & Amortization, Total Other Operating Expenses OTHER OPERATING EXPENSES, TOTAL OPERATING INCOME Interest Expense Interest and Investment Income NET INTEREST EXPENSE Income (Loss) on Equity Investments Currency Exchange Gains (Loss) Other Non-Operating Income (Expenses) EBT, EXCLUDING UNUSUAL ITEMS
Gain (Loss) on Sale of Assets Other Unusual Items, Total EBT, INCLUDING UNUSUAL ITEMS Income Tax Expense Minority Interest in Earnings Earnings from Continuing Operations NET INCOME
(2007) 323,612.0 19.6 325,143.8 234,753.6 90,390.2 30,811.0 850.2 6,880.9 17,508.5 56,050.6 34,339.6 -4,650.6 592.5 -4,058.1 394.2 652.1 -1.4 31,326.4
--52.2 31,274.2 8,832.1 -742.2 21,699.9 21,699.9
(currency in million Rs.) (2008) 356,514.8 65.0 358,086.0 254,571.5 103,514.5 35,136.3 659.5 7,820.7 24,046.6 67,663.1 35,851.4 -9,127.2 1,696.6 -7,430.6 652.0 1,376.1 -0.6 30,448.3
1,103.6 -37.0 31,514.9 8,515.4 -1,322.5 21,677.0 21,677.0
BALANCE SHEET OF TATA MOTORS Assets Cash and Equivalents TOTAL CASH AND SHORT TERM INVESTMENTS Accounts Receivable Notes Receivable Other Receivables TOTAL RECEIVABLES Inventory Prepaid Expenses Other Current Assets TOTAL CURRENT ASSETS Gross Property Plant and Equipment Accumulated Depreciation NET PROPERTY PLANT AND EQUIPMENT Goodwill Long-Term Investments Deferred Charges, Long Term Other Intangibles Other Long-Term Assets TOTAL ASSETS LIABILITIES & EQUITY Accounts Payable Accrued Expenses Short-Term Borrowings Current Income Taxes Payable Other Current Liabilities, Total Unearned Revenue, Current TOTAL CURRENT LIABILITIES Long-Term Debt Capital Leases Minority Interest Deferred Tax Liability Non-Current TOTAL LIABILITIES Common Stock Additional Paid in Capital Retained Earnings Comprehensive Income and Other TOTAL COMMON EQUITY TOTAL LIABILITIES AND EQUITY
(2007) (2008) (currency in millions Rs.) 11,542.7 38,331.7 11,542.7 38,331.7 17,022.2 20,605.1 84,553. 76,938.9 62.7 11.9 101,638.5 97,555.9 31,669.0 32,946.4 1,247.3 3,334.8 16,681.7 20,504.7 162,779.2 192,673.5 129,408.3 182,484.4 -54,266.5 -57,652.4 75,141.8 124,832.0 4,430.1 5,661.6 11,745.9 26,658.3 119.3 2,442.1 -1,429.6 -254,216.3 353,697.1 48,723.3 4,704.9 34,325. 1,084.2 38,789.2 6.7 127,633.7 38,693.6 -2,499.6 8,172.7 176,999.6 3,853.6 19,364.0 44,087.8 9,911.3 77,216.7 254,216.3
67,832.8 5,389.3 52,503.2 901.4 62,104.1 218.0 188,948.8 63,345.5 -4,683.1 9,744.5 266,721.9 3,854.9 15,372.2 58,523.7 9,224.4 86,975.2 353,697.1
Liquidity ratio Current ratio = Current assets / Current liability 2008
2007
Current Assets
192,673.5
162,779.2
Current Liability
188,948.8
127,633.7
Current Ratio (2008)
192,673.5/ 188,948.8 = 1.01
Current Ratio (2007)
162,779.2/ 127,633.7 = 1.27
Quick Ratio (2008)
C.A. - Invent. / C.L. 192,673.5 - 32,946.4 / 188,948.8 = .85 162,779.2- 31,669.0/127,633.7 = 1.02
Quick Ratio (2007) Interval measure -
Current assets-inven. / avg. daily cash oper. Exp
For 2008Avg. daily cash oper. Exp Interval measure For 2007 Avg. daily cash oper. Exp Interval measure -
Total cash exp./ 365 67,663.1/ 365 = 185.3 192,673.5 - 32,946.4 / 185.3 = 862 days 56,050.6/ 365 = 153.5 162,779.2- 31,669.0 / 153.5 = 854 days
In liquidity ratio, we observe that current ratio in 2008 is less in comparison of 2007. it means companies efficiency decreases in paying current liability. And in quick ratio, it also decreases. In 2008, regular cash meet was 862 days in comparison of 854 of 2007. It means firms ability to pay its daily exp. Increases.
Leverage Ratio Total debt ratio –
Total debt / capital employed
For 2008 Total debt Capital employed Or For 2007 Total debt Capital employed -
Debt equity ratio
63,345.5 Net worth + borrowing Share capital + debt. 86,975.2+ 63,345.5= 150320.7 63,345.5 / 150320.7 = .42 38,693.6 77,216.7 + 38,693.6= 115910.3 (shr. cap) (debt) 38,693.6 / 115910.3 = .33 -
For 2008 For 2007 Capital equity ratio For 2008 For 2007
Net worth / total debt Net worth = share cap. 86,975.2/63,345.5 = 1.37 77,216.7 /38,693.6 = 1.99 Capital employed / net worth 150320.7 / 86,975.2= 1.73 115910.3 / 77,216.7 = 1.50
Interest coverage ratio – EBIT + depreciation / Interest Earning before tax Add- Interest
2008 30,448.3 9,127.2 39575.5
For 2008 For 2007
2007 31,326.4 4,650.6 35977
- 39575.5 + 7,820.7/9,127.2 = 5.19 - 35977 + 6,880.9 / 4,650.6= 9.21
In 2008, the long term financial position getting strong than 2008. Capability of paying long term debt. is increases. As we seen, debt ratio increases. And the contribution of debt is increases in 2008 than 2007. and the part of share capital is also increases in total capital employed than 2007. it means, company is increasing its capital through shares.
Activity Ratio Inventory Turnover Ratio:- Cost of goods sold / Inventory
Cost of goods sold Inventory
(2008) 254,571.5 32,946.4
(2007) 234,753.6 31,669.0
For 2008:-
254,571.5 / 32,946.4
=
7.72
For 2007 :-
234,753.6 / 31,669.0
=
7.41
Debtor Turnover Ratio :- Sales / debtor For 2008 :-
358,086.0 (sales) / 97,555.9 (debtor) =
3.67
For 2007 :-
325,143.8 (sales) / 101,638.5 (debtor) =
3.20
Average collection period (2008) = 360 / 3.67 =
98 days
Average collection period (2007) = 360 / 3.20 =
112 days
Assets Turnover Ratio :- Sales / Net assets or capital employed For 2008 :-
358,086.0 (sales) / 150320.7 (c.e.) =
2.38
For 2007 :-
325,143.8 (sales) / 115910.3 (c.e.) =
2.80
Working Capital Turnover Ratio:- Sales / Net working capital Net Working Capital = Current assets – Current liability For 2008 For 2007
= 192,673.5 - 188,948.8 = 3724.7 = 162,779.2 - 127,633.7 = 35145.5
For 2008 :-
358,086.0 (sales) / 3724.7 (N.W.C.) = 96.13
For 2007 :-
325,143.8 (sales) / 35145.5 (N.W.C) = 9.25
As we seen, company’s efficiency of using its assets is increasing in 2008 than 2007. The inventory turnover ratio which shows its efficiency of selling product is increasing. Average collection period is decreasing means company is selling its product more on cash basis in 2008 than 2007. but company’s assets turnover ratio is decreasing means sales is not growing according to its capital employed and working capital.
Profitability Ratio Gross Margin
=
Gross profit / Sales
Gross Margin (2008) =
103,514.5 / 358,086.0 = .29
Gross Margin (2007) =
90,390.2 / 325,143.8 = .28
EBIT Ratio
=
PAT / EBIT
For 2008 For 2007
= =
21,677.0 / 37878.9 21,699.9 / 35384.5
=
EBIT / Capital employed
= =
39575.5 / 150320.7 = .26 35977 / 115910.3 = .31
=
PAT / Net worth
= =
21,677.0 / 86,975.2 = .25 21,699.9 / 77,216.7 = .28
Return on investment For 2008 For 2007 Return on equity For 2008 For 2007
= .57 = .61
In profitability ratio, the gross profit ratio is increasing in 2008 than 2007. it means its profit is growing in sales. But company’s EBIT ratio is decreasing means interest on capital and tax rate is increased in 2008 than 2007 which is responsible in decreasing its PAT. And company’s return on investment is decreased that indicates that its earning on capital employed is decreased in 2008 than 2007. and its ROE is also decreases means its PAT on its share capital is decreased.
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