Ratio Analysis: Presented By: Ajay Banka

Ratio Analysis

Presented By: Ajay Banka

Tata Motors      

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Industry Established Founder Chairman Headquarter Revenues

: : : : : :

Employees

:

Automobile Company. 1945 . JRD Tata. Ratan Tata Mumbai (India). Rs.70,938.85 crores (2008-09) 23,000.

Cont…. 

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It’s a Dual Listed Company (BSE & NYSE). Manufacturing and Assembly Plant at Jamshedpur, Pantnagar, Lucknow, Ahmedabad and Pune in India. Also in, Argentina, South Africa and Thailand.

Products    

Cars and utility vehicles Concept vehicles Commercial vehicles Military vehicles

Liquidity ratio Current ratio = Current assets / Current liability 

2008 Current Assets



Current Liability

188,948.8



Current Ratio (2008)

192,673.5/ 188,948.8 = 1.01



Current Ratio (2007)

162,779.2/ 127,633.7 = 1.27

Quick Ratio 

2007 192,673.5

162,779.2 127,633.7

C.A. - Invent. / C.L.

Quick Ratio (2008) 192,673.5 - 32,946.4 / 188,948.8 = .85 Quick Ratio (2007) 162,779.2- 31,669.0/127,633.7

= 1.02

Cont… 

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Interval measure = Current assets-inven. / avg. daily cash oper. Exp For 2008 : Avg. daily cash oper. Exp.Total cash exp./ 365 67,663.1/ 365 = 185.3 Interval measure 192,673.5 - 32,946.4 / 185.3 = 862 days For 2007 : Avg. daily cash oper. Exp 56,050.6/ 365 = 153.5 Interval measure 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

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For 2008

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Total debt : 63,345.5 Capital employed : Net worth + borrowing Or Share capital + debt. 86,975.2+ 63,345.5= 150320.7 63,345.5 / 150320.7 = .42 For 2007 Total debt : 38,693.6 Capital employed : 77,216.7 + 38,693.6= 115910.3 (shr. cap) (debt) 38,693.6 / 115910.3 = .33

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:

Total debt / capital employed

Cont… 

Debt equity ratio

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For 2008 For 2007

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Capital equity ratio -

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For 2008 For 2007

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-

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 / Intere

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Earning before tax Add- Interest Total

2008 30,448.3 9,127.2 39575.5

2007 31,326.4 4,650.6 35977

Cont…. 

For 2008 : 5.19

39575.5 + 7,820.7/9,127.2 =



For 2007 : 9.21

35977 + 6,880.9 / 4,650.6=

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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.

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Activity Ratio Inventory Turnover Ratio = Cost of goods sold / Inventory (2008)

(2007)

Cost of goods sold : 234,753.6 Inventory :

32,946.4

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For 2008

254,571.5 / 32,946.4 =



For 2007 7.41

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: :

254,571.5 31,669.0

234,753.6 / 31,669.0

7.72 =

Cont… Debtor Turnover Ratio =

Sales / debtor

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For 2008 :

358,086.0 (sales) / 97,555.9 (debtor)

= 3.67

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For 2007 :

325,143.8 (sales) / 101,638.5 (debtor)

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Average collection period

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Average collection period

(2007) = 360 / 3.20 = 112 days

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Assets Turnover Ratio :

Sales / Net assets or capital employed

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For 2008 :



For 2007 :

= 3.20

(2008) = 360 / 3.67 = 98 days

358,086.0 (sales) / 150320.7 (c.e.)

= 2.38

325,143.8 (sales) / 115910.3 (c.e.)

= 2.80

Cont… Working Capital Turnover Ratio = Sales / Net working capital 

Net Working Capital

=

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For 2008 : For 2007 :

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For 2008 :

358,086.0 (sales) / 3724.7 (N.W.C.) =

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For 2007 :

325,143.8 (sales) / 35145.5 (N.W.C) = 09.25

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= =

Current assets – Current liability 192,673.5 - 188,948.8 = 3724.7 162,779.2 - 127,633.7 = 35145.5 96.13

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  

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Gross Margin Gross Margin (2008) = .29 Gross Margin (2007) = .28 EBIT Ratio = For 2008 = For 2007 = Return on investment= For 2008 = For 2007 =

= =

Gross profit / Sales 103,514.5 / 358,086.0

=

90,390.2 / 325,143.8

PAT / EBIT 21,677.0 / 37878.9 = .57 21,699.9 / 35384.5 = .61 EBIT / Capital employed 39575.5 / 150320.7 = .26 35977 / 115910.3 = .31

Cont…. 

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Return on equity For 2008 .25 For 2007

=

PAT / Net worth

=

21,677.0 / 86,975.2

=

=

21,699.9 / 77,216.7 =

.28

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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