CHAPTER-1
INTRODUCTION
INTRODUCTION
Meaning of Finance
Finance may be defined as the provision of money at the time when it is required. Finance
refers to management of flows of money through an organization. It concerns with the
application of skills in the manipulation, use and control of money. Different authorities have
interpreted the term ‘Finance’ differently. However, there are three main approaches to
finance.
1) The first approach views finance to providing of funds needed by a business on
most suitable terms. This approach confines finance to the raising of funds and to
the study of financial institutions and instruments from where funds can be
procured.
2) The second approach relates to finance cash requirements.
3) The third approach views finance as being concerned with raising of funds and
their effective utilization.
Definition of Finance
According to Guthmann and Dougall, Business finance can be broadly difined as the activity
concerned with the planning, raising, controlling, and administering the funds used in
business.
In the words of panther and wert, “Business finance deals primarily with raising,
administering and disbursing funds by privately owned business units operation in
nonfinancial fields of Industry”.
According to the encyclopedia of social Sciences, “Corporation finance deals with the
financial problems of corporate enterprises. These problems include the financial aspects
According to the encyclopedia of Social Sciences, “Corporation finance deals with the financial
problems of corporate enterprises. These problems include the financial aspects of the
promotion of new enterprises and their administration during early development, the accounting
problems connected with the distinction between capital and income, the administrative
questions created by growing and expansion of a corporation which has come into financial
difficulties”.
Importance of Finance
Finance is the lifeblood and never center of business, just a circulation of blood is essential in
the human body for maintaining life, finance is a very essential to smooth running of the
business. It has been rightly termed as universal lubricant, which keeps the enterprise dynamic.
No business, whether big, medium or small can be started without an adequate amount of
finance. Right from the very beginning, i.e. conceiving an idea to business, finance is needed to
promoter or establish the business, acquire fixed assets, make investigations such as market
surveys, etc., develop product, keep men and machine at work, encourage management to make
progress and create values. Even an existing concern may require further finance for making
improvements or expanding the business. Thus the importance of finance cannot be over-
emphasized and the subject of business finance has become utmost both to the academicians
and practicing managers.
The importance of corporation finance (which is a constituent of business finance) has arisen
because of the fact that present day business activities are predominantly carried on company or
corporate form of organization. The advent of corporate enterprises has resulted into:
i. The increase in size and influenced of the business enterprises.
ii. Wide distribution of corporate ownership, and
iii. Separation of ownership and management.
Finance management is applicable to every type or organization, irrespective of its size, kind or
nature. It is as useful to a small concern as to a big unit. A trading concern gets the same utility
from its application as a manufacturing unit may expect. There is a use of finance, financial
management is helpful. Every management aims to utilize its funds in a best possible and
profitable way. So this subject is acquiring a universal applicability.
It is indispensable in any organization as it helps in:
i. Financial planning and successful promotion of an enterprise:
ii. Acquisition of funds as and when required at the minimum possible cost:
iii. Proper use and allocation of funds:
iv. Taking sound financial decisions:
v. Improving the profitability through financial controls:
vi. Increasing the wealth of the investors and the nation: and
vii. Promoting and mobilizing individual and corporate savings.
Scope of Finance
The main objective of financial management is to arrange sufficient finance for meeting short-
term and long term needs. These funds are procured at minimum costs so that profitability of
business is maximized.
Different Types of Financial Statements
Income statement:
The income statement or profit and loss Account is considered as a very useful statement of all
financial statements. It depicts the expenses incurred on production, sales and distribution and
sales revenue and the net profit or loss for a particular period. It shows whether the operations
of the firm resulted in profit or loss at the end of a particular period.
Balance Sheet:
Balance sheet is a statement which shows the financial position of a business as on a particular
date. It represents the assets owned by the business and the claims of the owners and creditors
against the assets in the form of liabilities as on the date of the statement.
Statement of Retained Earnings:
The statements of retained earnings is also called the profit and loss approbation account. It is a
link between the income statement and the balance sheet. Retained earnings are the
accumulated excess of earnings over losses and dividends. The balance shown by the income
statement is transferred to the balance sheet through this statement after making the necessary
appropriations.
Funds Flow Statement:
According to Anthony, “The funds flow statement described the sources from which additional
funds were derived and the use to which these funds were put”. Funds flow statement helps the
financial analyst in having a more detailed analysis and understanding the changes in the
distribution of resources between two balance sheet periods. The statement reveals the sources
of funds and their application for different purposes.
Cash flow Statement:
A Cash flow statement depicts the changes in cash position from one period to another. It shows
the inflow and outflow of cash and helps the management in making plans for immediate
futures. An estimated cash flow statement enables the management to ascertain the availability
of cash to meet business obligations. This statement is useful for short-term planning by the
management.
Schedules:
These are the statements which explain the items given in income statement and balance sheet.
Schedules are a part of financial statements which give detailed information about the financial
position of a business organization.
Limitations of Financial Statements
In profit and loss account net profit is ascertained on the basis of historical costs.
Profit arrived at by the profit and loss account is of interim nature. Actual profit can be
ascertained only after the firm achieves its maximum capacity.
The net income disclosed by the profit and loss account is not absolute but only relative.
The profit and loss account does not disclose factors like quality of product, efficiency
of the management etc.
The net income is the result of personal judgment and bias of accountants cannot be
removed in the matters of depreciation, stock valuation, etc.
There are certain asset and liabilities which are not disclosed by the balance sheet. For
example, the most tangible asset of a company is its managements force and a
dissatisfaction labour force is its liability which are not disclosed by the balance sheet.
The book value of assets us shown as original cost less depreciation. But in practice, the
value of the assets may differ depending upon the technological and economic changes.
The assets are valued in a balance sheet on a going concern basis. Some of the assets
may not realize their value on wining up.
The accounting year may be fixed to show a favourable picture of the business, in case
of sugar industry the balance sheet prepared in off-season depicts a better liquidity
position than in the crushing season.
An investor likes to analyse the present and future prospects of the business, while the
balance sheet shows past positions. As such the use of a balance sheet is only limited.
Due to flexibility of a accounting principles, certain liabilities like provisions for
gratuity etc. are not show in the balance sheet, giving the outsiders a misleading picture.
The financial statements are generally prepared from the point of view of shareholders
and their use in limited in decision making by the management, investors and creditors.
Even the audited financial statements does not provide complete accuracy.
Financial statements do not disclose the changes in management, loss of markets, etc.
which have a vital impact on the profitability of the concern.
The financial statements are based on accounting policies which may vary from
company to company and as such cannot be formed as a reliable basis of judgment.
Methods of analyzing Financial Statements
For analysis of financial statements, they should be re-arranged to reveal the relative
significance and effect of various items of data in relation to time period and for making inter-
firm comparisons. While re-arrangement the data, logical relationship and sequence should be
given consideration. The analysis of financial statements will help in interpretation should
logical conclusions. The important methods used in analysis of statements are as follows:
Comparative financial statements
Comparative financial statement are statements of financial position of a business designed to
provide time perspective to the consideration of various elements of financial position
embodied in such statements. Comparative financial statements reveal the following:
1. Absolute data (money value or rupee amounts)
2. Increase or reduction in absolute data in terms of money values
3. Increase or reduction in absolute data in terms of percentages
4. Comparison in term of ratios
5. Percentage of totals
Common size statements
The financial statements viz. profit and loss account and balance sheet are converted to
percentages so as to establish each element to the total figure of the statement and these
statement are called ‘common size statements’. These statements are useful in analysis of the
performance of the company by analyzing each individual element to the total figure of the
statement. These statement will also assist in analyzing the performance over years and also
with the figures of the competitive firm in the industry for making analysis of relative
efficiency. The following statement show the method of presentation of the data.
Common size Income Statement
Common size Balance sheet
Trend ratios
The trend ratios of different items are calculated for various periods for comparison purpose.
The trend ratios are the index numbers of the movements of reported financial items in the
financial statements which are calculated for more than one financial year. The calculation of
trend ratios are based on statistical technique called ‘index numbers’ the trend ratios help in
making horizontal analysis of comparative statements. It reflects the behavior of items over a
period of time. the accounting principles and policies should be consistently followed
throughout the period for which the trend ratios are calculated.
Ratio analysis
According to J. Batty “the term accounting ratio is used to describe significant relationships
which exist between figures shown in a balance sheet, in a profit and loss account, in a
budgetary control system or in any other part of the accounting organization”. the accounting
ratios indicate a quantitative relationship which is used for analysis and decision making. It
provides basis for inter-firm as well as intra-firm comparison. The ratios will be effective only
when they are compared with ratios of base period or with standards or with the industry ratios.
The financial statement viz. income statement, and Balance sheet report what has actually
happened to earnings during a specific period and presents a summary of financial position of
the company at a given point of time. the statement of retained earnings reconciles income
earned during the year and any dividends distributed with the change in retained earnings
between the start and end of the financial year under study.
Funds flow analysis
The profit and loss account and Balance sheet statement are the common important accounting
statements of a business organization. The profit and loss account provides financial
information relating to only a limited range of financial transactions entered into during an
accounting period and its impact on the profits to be reported. The Balance sheet contains
information relating to capital or debt raised or assets purchased. But both the above two
statements do not contain sufficiently wide range of information to make assessment of
organization by the end user of the information. In view of recognized importance of capital
inflows and outflows, which often involves large amounts of money should be reported to the
stakeholders, the funds flow statement is devised. In a funds flow analysis, the details of
financial resources availed and the ways in which such resources are used during a particular
accounting period, are given in a statement from called ‘Funds Flow Statement’ the sources of
funds also include the funds generated from operations internally. The funds flow statement can
explain the reasons for liquidity problems of the firm even through it is earning profits.
Cash flow analysis
Cash flow statement provides information about the cash receipts and payments of a firm for a
given period. It provides important information that compliments the profit and loss accounting
and balance sheet. The information about the cash flow of a firm is useful in providing users or
financial statements with a basis to assess the ability of the enterprise to generate cash and cash
equivalents and the needs of the enterprise to utilize these cash flow. The economic decisions
that are taken by users require an evaluation of the ability of an enterprise to generation. The
statement deals with the provision of information about the historical changes in cash
equivalents of an enterprise by means of a cash flow statement which classifies cash flows
during the period from operating, investing and financing activities.
Break-even and cost-volume profit analysis
Break – even analysis to ‘ascertainment of level of operations where total revenue equals to
total costs’. It is an analysis is a determine the probable profit or loss at any level of operations.
Break – even analysis is a method of studying the relationship among sales revenue, variable
cost and fixed cost to determine the level of operation at which all the costs are equal to its
sales revenue and it is the no profit no loss situation. This is an important made through
graphical charts. Break – even chart indicates approximate profit or loss at different levels of
sales volume within limited range. The break – even charts show fixed and variable costs and
sales revenue so that profit or loss at any given level of production or sales can be ascertained.
Value added analysis
‘Value added’ is described as “the wealth created by the reporting entity by its own and its
employees’ efforts and comprises salaries and wages, fringe benefits, interest, dividend, tax,
depreciation and net profit (retained)”.
It is also defined as “ the increase in market value resulting from an alteration in the from,
location or availability of a product or service excluded the cost of goods and services
purchased from outside’.
Chapter-2
Research design
Research design
“A COMPARATIVE STUDY OF FINANCIAL PERFORMANCE OF SELECT
AUTOMOBILE INDUSTRIES IN INDIA” (four wheelers)
Introduction:-
A well developed transport network indicates a well developed economy. For rapid
development a well-developed and well-knit transportation system is essential. As India's
transport network is developing at a fast pace, Indian Automobile Industry is growing too.
Also, the Automobile industry has strong backward and forward linkages and hence
provides employment to a large section of the population. Thus the role of Automobile
Industry cannot be overlooked in Indian Economy. All kinds of vehicles are produced by the
Automobile Industry. India Automobile Industry includes the manufacture of trucks, buses,
passenger cars, defense vehicles, two-wheelers, etc. The industry can be broadly divided into
the Car manufacturing, two-wheeler manufacturing and heavy vehicle manufacturing units.
The major Car manufacturer are Hindustan Motors, Maruti Udyog, Fiat India Private Ltd.,
Ford India Ltd ., General Motors India Pvt. Ltd., Honda Siel Cars India Ltd., Hyundai Motors
India Ltd., Skoda India Private Ltd., Toyota Kirloskar Motor Ltd., to name a few.
The two-wheeler manufacturing is dominated by companies like TVS, Honda Motorcycle &
Scooter India (Pvt.) Ltd., Hero Honda, Yamaha, Bajaj, etc. The heavy motors like buses,
trucks, defense vehicles, auto rickshaws and other multi-utility vehicles are manufactured by
Tata-Telco, Ashok Leyland, Eicher Motors, Bajaj, Mahindra and Mahindra, etc.
Statement of problem:-
The study is focused on analysis and interpretation with respect to growth of Automobile
industry. The various factors affecting the automobile industry. The Profitability,
competition, market condition, future prospective market condition for this industry. This
study will also deals with reviewing the performance of domestic automobile companies
against foreign automobile companies.
Objectives:-
1) To study the growth of Automobile industry
2) To examine profitability status.
3) To know the strengths of financial ratios in identifying financial efficiency of the
Industry.
4) To make comparative study on financial performance of Automobile Industries.
Scope of the study:-
The study will be done in Automobile Industry order to analyze the current position of
profitability of Industry. The study helps to know liquidity position as well as maintain the
profitability of the Industry. This study is confined to only the branch and it can be further
extended to other centers. The study is based on the annual reports of the company Balance
sheets, Profit and loss accounts for a period of 5 years. And performance rate of selected
Automobile Industries.
Research Methodology:-
Survey method is proposed to use for studying the samples.
Detailed study is used for studying the behavior of risk and return.
Statistical method.
Data collection:-
Data collection is a key in marketing research. The design of the data collection method
is the back bone of the research design. Normally the sources of data are classified in 2 types:
Primary data.
Secondary data
Primary data:-
The primary data has been collected from the Manager’s Dealers of popular cars.
through direct interview
Secondary data:-
The required secondary data has been collected from the published books, hand
bills, journals, project reports, internet Databanks, Internet, capital line software, etc.
Chapter scheme
Introduction
Research design
Industry profile and company profile
Analysing and interpretation of data
Summary of finding and recommendation
Bibliography
Annexure
Expectation of the study
Proper management of Automobile Industry is very essential for ensuring growth
business.
The following can be stated as the need for the study
1) To get more knowledge of the study.
2) To analyse the financial market condition.
3) To find out different Industry of the firm related to financial position and check
their effects.
CHAPTER-3
Industry profile
Introduction of Automobile Industry
The automobile History dates back to the late 18th century. Nicolas Joseph Cugnot, a French
engineer is credited with investing the first self-propelled automobile.
Cugnot’s vehicle used steam power for locomotion. The vehicle found military application in
the French army. Cugnot’s Automobile was never commercially sold.
In the beginning automobile industry was dominated by steam-powered vehicle. The vehicles
were expensive and difficult to maintain. The incidence of frequent boiler expansions also
kept potential purchasers away. Commercial history of automobiles started with the invention
of gasoline powered internal combustion engines. The German inventor, Karl Benz
constructed his first gasoline powered vehicle in 1885. At Mannheim, Germany. Commercial
production of Benz cars stated in 1888. Panhard et Levassor of France was the first company
to exclusively build and sell motor cars from 1889.
The early 1900 s saw many automobile manufacturing companies coming into existence in a
number of European countries and the United States. The first mass production automobile in
the United States was the curved-dash Oldsmobile. It was a three-horsepower machine and
sold 5,000 units by 1904. The economies of the US car market was disrupted by the arrival of
Henry Ford and his Model T car. The Model T was the world’s first mass produced vehicle-a
million units were sold by 1902- a space of 10 years.
Automobile History
Horses had dreams of them since time immemorial, but it was only in the 18 th century that the
first horseless carriage actually hit the roads. That’s not to say that the idea never struck anyone.
Seeds of the idea, in fact, originated long before the first contraption was rolled.
The History of the automobile actually began 4,000 years ago when the first wheel was used for
transportation in India. Several Italians recorded designs for wind-driven cars. The first was
Guido da Vigevano in 1335. It was a windmill-type drive to gears and thus to wheels. Vaturio
designed a similar car that was also never built. Later Leonardo da vinci designed clockwork-
driven tricycle with tiller steering and a differential mechanism between the rear wheels.
In the early 15th century, the Portuguese arrived in china and the interaction of the two cultures
led to a variety of new technologies, including the creation of a wheel that turned under its own
power. By the 1600s, small steam-powered engine models were developed, but it was another
century before a full-sized engine- powered automobile was created.
A Catholic priest named Father Ferdinan Verbiest is credited to have built a steam-powered car
for the Chinese Emperor Chien Lung in about 1678. There is no information about the
automobile. Only the event. Since James watt didn’t invent the steam engine until 1705, we can
guess that this was possibly a model automobile powered by a mechanism like Hero’s steam
engine-a spinning wheel with jets on the periphery.
Although by the mid-15th century the idea of a self-propelled automobile had been put into
practice with the development of experimental car is powered by means of springs, clockworks,
and the wind, Nicolas-Joseph Cugnot of France in considered to have built the first true
automobile in 1769. Designed by Cugnot and constructed by M. Berzin it is also the first
automobile to move under its own power for which there is a record. Cugnot’s three- wheeled
steam-powered automobile carried four persons and was meant to move artillery pieces. It had a
top speed of a little more than 3.2km/h (2mph) and had to stop every 20 minutes to build up a
fresh head of steam.
Evens was the first American who obtained a patent for” a self-propelled carriage.” He, in
fact, attempted to create a two-in-one combination of a steam wagon and a flat-bottomed
boat, which didn’t receive any attention in those days. During the 1830’s, the steam car had
made great advances. But stiff competition from railway companies and crude legislations in
Britain forced the poor steam automobile gradually out of use on roads. The early steam-
powered automobile s were so heavy that they were only practical on a perfectly flat surface
as strong as iron. A road thus made out of iron rails became the norm for the next hundred
and twenty-five years. The automobile s got bigger and heavier and more powerful and as
such they were eventually capable of pulling a train of many car s filled with freight and
passengers
Changing Faces of the Car
Mass production of cars led to cheaper vehicles. This made cars more affordable to the common
American and European citizen. The British automobile manufacturing history was
revolutionized by assembly line production methods employed by two separate car makers-
William Morris and Herbert Austin. Austin Seven was the world's first compact car. The Morris
manufactured vehicles had engine mounted on front.
The 1960s saw rapid developments in automobile manufacturing technology. A milestone in the
history of automobiles was achieved by the invention of efficient fuel injection processes,
independent suspensions and turbochargers. Pontiac Trans Am was the best selling car from
1969 to 1980. Computer Aided Design (CAD) was introduced for designing vehicles from the
1980s. Ford Taurus was the first vehicle to be built using CAD.
Company profile
Tata Motors
Tata Motors launches its first truck in collaboration with Mercedes-Benz
Tata Motors is a part of the Tata and Sons Group, founded by Jamshedji Nussarwanji Tata and
J. Baker. The company was established in 1945 as a locomotive manufacturing unit and later
expanded its operations to commercial vehicle sector in 1954 after forming a joint venture with
Daimler-Cars.
After years of dominating the commercial vehicle market in India, Tata Motors entered the
passenger vehicle market in 1992 by launching the Tata Sierra, a multi utility vehicle. After the
launch of three more vehicles, namely, Tata Estate (1992, a station wagon design based on the
earlier 'TataMobile' [1989] a light commercial vehicle which some people may still think of as
Tata's first passenger car), Tata Sumo (LCV, 1994) and Tata Safari (1998, India's first sports
utility vehicle); In 1998 Tata launched the Indica, the first fully indigenous passenger car of
India. Though the car was initially panned by auto-analysts, the car's excellent fuel economy,
powerful engine and aggressive marketing strategy made it one of the best selling cars in the
history of the Indian automobile industry. A newer version of the car, named Indica V2, was a
major improvement over the previous version and quickly became a mass-favorite. A badge
engineered version of the car was sold in the United Kingdom as the Rover City Rover. Tata
Motors also successfully exported large quantities of the car to South Africa. The success of
Indica in many ways marked the rise of Tata Motors. Note: In 1996-97 Tata launched the Tata
Sumo Deluxe and the Tata Sierra Turbo variants respectively.
Tata Pick Up, unveiled in 2007, is expected to enter European and American market by 2009.In
2007, Tata Motors generated revenues of Rs 31,884.69 crore.
In 2007, Tata Motors launched several concept models and future designs of existing models. It
also formed joint ventures with various local companies in several countries to assemble Tata
cars. Tata Motors launched a re-designed version of Tata Xenon TL during Motor Show
Bologna which would be assembled in Thailand and Argentina. A pick-up variant of Tata Sumo
was also launched under the program 'Global Pick-Up'. The company plans to launch the new
pick-up model in India, Southeast Asia, Europe, South Africa, Turkey and Saudi Arabia. Tata
Motors also unveiled newer model of Tata Indigo and Tata Elegante concept-car during the
Geneva Auto Show.
Tata Motors also formed a joint venture with Fiat and gained access to Fiat’s diesel engine
technology. Tata Motors is looking to extend its relationship with Fiat and Iveco to other
segments like the 'Global Pick-Up' program. The launch of the 'Global Pick-Up' will mark the
entry of the company into developed markets like Europe and the United States. The project
was initially a collaboration between Tata Motors and its subsidiary Tata Daewoo Commercial
Vehicles, but later Tata Motors decided to work with Iveco as Daewoo’s design was not in sync
with the needs of sophisticated European customers. The company has formed a joint venture
with Thailand’s Thonburi Company, an independent auto assembler, in which Tata Motors will
hold a 70% stake.
Tata motors
Type Public BSE: 500570 (NYSE: TTM)
Founded 1945
Founder(s) JRD Tata
Headquarters Mumbai, India
Key people Ratan Tata, Chairman
Products Automobiles and Engines
Revenue ▲ USD $9.07 billion (2006)
Net income ▲ USD $474.0 million (2006)
Parent Tata Group
Subsidiaries Jaguar Cars , Land Rover ,
Tata Daewoo Commercial Vehicle
Website TataMotors.com
Tata Motors have some distinct advantages in comparison to other multi-national competitors.
There is definite cost advantage as labor cost is 8-9 percent of sales as against 30-35 percent of
sales in developed economies. Tata motors have extensive backward and forward linkages and
it is strongly interwoven with machine tools and metals sectors. Tata Group's strong expertise in
the IT based engineering solution for products and process integration has helped Tata Motors.
India has a large auto component industry noted for its world class capabilities. There is huge
demand in domestic markets due to infrastructure developments and Tata Motors is able to
leverage its knowledge of Indian market. There are favorable Government polices and
regulations to boost the auto industry.
Maruti udyog Limited
Maruti Udyog Ltd – Profile
Office Address #11th Floor, Jeevan Prakash
25 Kasturba Gandhi Marg
New Delhi Delhi 110001
Phone 011-23316831
Business Summary
Maruti Udyog Ltd., (MUL) incorporated in 1981, is a private foreign company primarily
engaged in the manufacture of passenger cars. Formed by a joint venture between the
Indian Government and Suzuki Motor Company of Japan, the company has established
itself amongst the leaders in the Indian Auto market. Its plant located in Gurgaon, has a
capacity of manufacturing 350000 units per annum.
MUL's product range includes 10 basic models with over 50 variants, of which nine
models are manufactured by the company inhouse and one is imported from Suzuki. Over
the last decade, MUL has launched various models such as Omni, 1000, Zen, Esteem,
WagonR, Gypsy, Alto, Baleno, Vitara etc. targeting all segments of customers. In addition
to domestic sales, Maruti also exports to many European markets.
Through it's subsidiaries, the company also provides allied services like sale and purchase
of pre-owned cars, lease and fleet management service for corporates, insurance and
finance services,etc.
The company functions through a network of 303 sales outlets across 189 Indian cities,
owned and managed by its channel partners. The 1923 authorised service outlets cover a
network of over 1000 towns and cities in the country. The company is headed by Mr
Shinzo Nakanishi, the chairman and director. As on June 2005, the President of India owns
18.28% of the company while Suzuki Motor Corporation and the Indian Public own
54.21% and 2.85% respectively.
Around 1970, Sanjay Gandhi, the then Prime Minister of India Indira Gandhi's younger son,
envisioned the manufacture of an indigenous, cost-effective, low maintenance compact car
for the Indian middle-class. Indira Gandhi's cabinet passed a unanimous resolution for the
development and production of a "People's Car". Sanjay Gandhi's company was christened
Maruti Limited. The name of the car was chosen as "Maruti", after a Hindu deity named
Maruti.
At that time Hindustan Motors' Ambassador was the chief car, and the company had come
out with a new entrant, the Premier Padmini which was slowly gaining a part of the market
share dominated by the Ambassador. For the next ten years, the Indian car market had
stagnated at a volume of 30,000 to 40,000 cars for the decade ending 1983.
Sanjay Gandhi was awarded the exclusive contract and licence to design, develop and
manufacture the "People's Car". This exclusive rights of production generated some
criticism in certain quarters, which was directly targeted at Indira Gandhi. Over the next few
years, the company was sidelined due to the Bangladesh Liberation War and emergency.
In the early days under the powerful patronage of Sanjay Gandhi, the company was provided
with free land, tax breaks and funds. Till the end of 1970s, the company had not started the
production and a prototype test model was welcomed with criticism and skepticism. The
company went into liquidation in 1977. The media perceived it to be another area of
growing corruption. Unfortunately, Maruti started to fly only after the death of Sanjay
Gandhi, when Suzuki Motors joined the Government of India as a joint venture partner with
50% share.
After his death, Indira Gandhi decided that the project should not be allowed to die. Maruti
entered into this collaboration with Suzuki Motors, The collaboration heralded a revolution
in the Indian car industry by producing the Maruti 800. The car went on sale on December
14, 1983. It created a record by taking 13 months time to go from design to rolling out cars
from a production line.
1980’s
The introduction of the Maruti 800 in 1983, marked the beginning of a revolution in the
Indian automobile industry. Maruti Udyog brought in the latest technology then available,
more fuel-efficient cars, and brought down the prices of cars in India. This led to the
creation of a huge market for all car segments as the Indian middle class grew in size. This
in-turn brought in more players to this segment. A number of auxiliary car parts making
units were setup as most car manufacturers realised it was more cost effective to make their
car parts in India rather than import them. Maruti's most major influence was in helping the
component industry in the country because of its emphasis on localization and
indegenisation. As in the beginning that sector hadn't grown much, Maruti had to start a
dozen joint ventures with Indian entrepreneurs. It got them foreign collaborations, that led to
collaborations for other manufacturers so that over a period of time the whole component
industry was able to upgrade itself and improve its quality. Leading to a major existing
export potential in vehicle components. It also brought in better methods of financing that
allowed more people, who given their income levels could not afford to buy a car on their
own, to buy cars. It still remains the leader not only in terms of market share but also in
customer satisfaction surveys - it has consistently topped J. D. Power quality surveys,
including 2005.
1990's
By the year 1993 the company had sold up to 1,96,820 cars, mostly by selling its chief product
the Maruti 800s. By March 1994, it produced one million vehicles, becoming the first Indian
company to cross this milestone. It reached the two million mark in October, 1997 and rolled
out its 4 millionth vehicle, an Alto-LX, on April 19, 2003.
Mahindra & Mahindra
Mahindra Group is one of the largest corporate groups of India. It is a US $4.5 billion conglomerate with employee strength of over 40,000. The group has diverse business interests such as automotive, farm equipments, infrastructure, information technology, hospitality, and financial services. Mahindra Group has global presence and it is ranked amongst Forbes Top 200 list of the World's Most Reputable Companies and in the Top 10 list of Most Reputable Indian companies.
The origins of Mahindra Group can be traced back to October 2, 1945 when Mahindra brothers J.C. Mahindra & K.C. Mahindra joined hands with Ghulam Mohammad, and Mahindra & Mohammad was set up as a franchise for assembling jeeps from Willys, USA. After India's independence in 1947, Mahindra & Mohammad changed its name to Mahindra & Mahindra. Ghulam Mohammad migrated to Pakistan post-partition and became the first Finance Minister of Pakistan. Since then, Mahindra Group has gone from strength to strength and today it has evolved Into a giant group.
Business Interests of Mahindra Group
Automotive Sector: Mahindra Group is the market leader in utility vehicles in India since
inception. Mahindra also manufactures and markets utility vehicles and light commercial
vehicles, including three-wheelers. Some of the famous automobile brands of Mahindra are:
Scorpio and Bolero. Recently, Mahindra joined hands with French automobile major Renault
to enter passenger car segment. It has launched a car called Mahindra
Farm Equipment Sector: Mahindra is the largest producer of tractors in India and is among
the top five tractor brands in the world. It has its own state-of-the-art plants in India, USA,
China and Australia, and a capacity to producr 1,50,000 tractors a year.
Trade & Financial Services: Mahindra Intertrade Limited and its subsidiaries have specialized domain knowledge in imports and exports of commodities, domestic trading, marketing and distribution services. Mahindra Finance is one of the largest Non Banking Finance Companies in India with an asset base of about Rs. 5000 crores. Mahindra Insurance Brokers offer Life and Non-life Insurance plans to retail and corporate customers. Mahindra Steel Service Centre is the first steel service centre in the organized sector in India.
Infrastructure Development: Mahindra Group has interests in real estate, special economic zones, hospitality industry, infrastructure development, project engineering consultancy and design. Mahindra Holidays & Resorts is the leader in the lifetime holiday market in India. Mahindra Gesco is fastest growing Construction Company in India. Mahindra World City is developing and promoting India's first Integrated Business City. Mahindra Acres Consulting Engineers is a multidisciplinary engineering consultancy organisation.
Information Technology: Mahindra Group entered into IT sector in 1986 when it formed a
joint venture with British Telecommunications plc. The company was called Mahindra-
British Telecom. The Company has recently changed its name to Tech Mahindra. Tech
Mahindra is a leading provider of telecommunication solution and service industry world-
wide. It is India's 8th largest software exporter.
Speciality Businesses: Mahindra Group companies such as Mahindra AshTech, Mahindra
Defence, Spares Business Unit and Mahindra Logistics are into Speciality Businesses.
Mahindra AshTech undertakes turnkey contract execution for Ash Slurry System and
Travelling Water Screens. Mahindra Defence Systems looks after the requirements of India's
defence and security forces. Mahindra Logistics provide complete logistics solutions to
complex transportation needs of clients across the world.
Major Achievements of Mahindra Group
Mahindra & Mahindra made the first indigenous Jeep in the country in 1949.
Fourth largest tractor company in the world.
Largest manufacturer of tractors in India.
Largest manufacturer of MUVs, offering over 20 models
Note: The above information was last updated on 21-07-2007
or limited
Financial ratios are tools for interpreting financial statements to provide a basis for valuing
securities and appraising financial and management performance.
A good financial analyst will build in financial ratio calculations extensively in a financial
modeling exercise to enable robust analysis. Financial ratios allow a financial analyst to:
Standardize information from financial statements across multiple financial years to
allow comparison of a firm’s performance over time in a financial model.
Standardize information from financial statements from different companies to allow
an apples to apples comparison between firms of differing size in a financial model.
Measure key relationships by relating inputs (costs) with outputs (benefits) and
facilitates comparison of these relationships over time and across firms in a financial
model.
In general, there are 4 kinds of financial ratios that a financial analyst will use most
frequently, these are:
Performance ratios
Working capital ratios
Liquidity ratios
Solvency ratios
These 4 financial ratios allow a good financial analyst to quickly and efficiently address the
following questions or concerns:
Performance ratios
What return is the company making on its capital investment?
What are its profit margins?
Working capital ratios
How quickly are debts paid?
How many times is inventory turned?
Liquidity ratios
Can the company continue to pay its liabilities and debts?
Solvency ratios (Longer term)
What is the level of debt in relation to other assets and to equity?
Is the level of interest payable out of profits?
There is also an excellent financial ratio analysis template available in the Finance 3.0 forums,
that allows you to calculate, analyze and compare a set of business & financial ratios to assess
& measure the operating performance of your own business or businesses / stocks that you
intend to invest in.
Hindustan Motors
Hindustan Motors (HM) is the flagship company of the C.K. Birla Group, established by Mr. B.M. Birla.
Ambassador, Contessa and Mitsubishi Lancer are the most successful brands in the Indian market. In
MUV segment the company has given Trekker, Porter and Pushpak. RTV is also one of the
remarkable brand of HM.
Quick Facts
Founder B.M. Birla
Country India
Year of Establishment 1942
Business Group CK Birla Group
Listings & its codes NSE: HINDMOTOR; BSE: 500500
Work Station Uttarpara (West Bengal), Thiruvallar (Tamil Nadu),
Pithampur (Madhya Pradesh)
Website www.hindmotor.com
Hindustan Motors Limited (HML), was established by Mr. B.M. Birla of the industrious Birla family in
1942. It is the pioneering automobile manufacturing company and Flagship Company of the C.K. Birla
Group. The company commenced its operations in a small assembly plant in Port Okha near Gujarat.
Later the manufacturing facilities moved to Uttarpara in West Bengal in 1948, where it began the
production of - the Ambassador.
In addition to passenger cars (Ambassador, Contessa), Multi Utility Vehicles (Trekker, Porter, and
Pushpak) and the RTV, the company also manufactures passenger cars in the mid size premium
segment (Mitsubishi Lancer) and has brought in Sports Utility Vehicle (Mitsubishi Pajero) into the
Indian market in collaboration with Mitsubishi Motors of Japan.
Contributing significantly for over five decades to the Indian Automotive industry, Hindustan Motors
manufacturing facilities are situated in the states of Madhya Pradesh, Tamil Nadu and West Bengal. It
functions with a commitment to core values such as quality, safety, and environmental care, in
combination with customer-oriented total solutions.
Hindustan Motors Ltd (Hindustan Motors) was established in 1942 as a small assembly plant
for passenger cars. In 1986, the company began manufacturing HCVs. The company is
primarily engaged in the manufacture and sale of passenger cars, UVs and trucks, and
components & accessories.
Hindustan Motors manufactures passenger cars in the mid-size premium segment - namely,
Mitsubishi Lancer, Lancer Select, and Lancer Cedia and has brought the SUV Mitsubishi
Pajero into the Indian market in collaboration with Mitsubishi Motors, Japan. Hindustan
Motors has a remote services division engaged in engineering services. The company
operates with three manufacturing units at Uttarpara in WB; Chennai in TN; and a road-
trusted vehicle plant in MP. The Uttarpara plant focuses on auto components and supplies
castings, forgings, and stampings to other manufacturers. The Chennai car plant only
manufactures Mitsubishi Lancer cars and spare parts, while the plant in MP manufactures the
RTV brand of MUVs and spare parts in technical collaboration with OKA Motor Company,
Australia. The plants have a cumulative installed capacity of 63,000 vehicles p.a.
During FY07, the company sold 13,775 vehicles. During FY07, it also entered the African
market with an export order of 25 vehicles. In 2007, the company tied up with Shriram
Properties Ltd of Bangalore for the development of an integrated IT township and auto park
in Uttarpara.
1942 Incorporation at Port Okha in Gujarat as a small assembly plant for passenger cars.
1948 Shifted its activities to Uttarpara in West Bengal (close to Howrah) and set up facilities for manufacture of cars.
1971 The company further diversified its activities by setting up an Earthmoving Equipment Division at Tiruvallur, near Chennai, Tamil Nadu for the manufacture of Earthmoving equipment such as dumpers, front-end loaders, crawler tractors and so on.
1985 The company commenced a Power Products Division at Hosur (Karnataka) for manufacture of heavy duty transmission required for Earth moving Equipments.
1986 Commencement of the manufacture of Heavy Commercial Vehicles at Commercial Vehicle Division, Vadodara (Gujarat).
1987 Commenced production of petrol engines and transmissions at Pithampur (Madhya Pradesh) in collaboration with Isuzu Motor Company, Japan.
1996 The company modernized, upgraded and expanded its three existing divisions Earthmoving Equipment Division, Power Plant Division and the Uttarpara Plant.
1997 Began the production of the Road Trusted Vehicle.
1998 Commenced the Mitsubishi Lancer Car project.
2001 Earthmoving Equipment Division plant was sold off to Caterpillar (USA).
2002 Launched Mitsubishi Pajero, collaboration with Mitsubishi Motors (Japan), in India.
2004 Components Business (PUP-Pithampur and PPD - Hosur) transferred to AVTEC, a company jointly held by HM, Actis and CK Birla Group.
TOYOTA KIRLOSKAR MOTOR LTD.
As a joint venture between Kirloskar Group and Toyota Motor Corporation, Toyota
Kirloskar Motor Private Limited (TKM) aims to play a major role in the development of the
automotive industry and the creation of employment opportunities, not only through its
dealer network, but also through ancillary industries.
TKM's growth since inception can be attributed to one simple, yet important aspect of its
business philosophy - "Putting Customer First". While managing growth, TKM has
maintained its commitment to provide quality products at a reasonable price and has made
every effort to meet changes in customer needs..
TKM firmly believes that the success of this venture depends on providing high quality
products and services to all valued customers through the efforts of its team members.
TKM, along with its dedicated dealers and suppliers, has adopted the "Growing Together"
philosophy of its parent company TMC to create long-term business growth. In this way,
TKM aims to further contribute to progress in the Indian automotive industry, realise greater
employement opportunities for local citizens, improve the quality of life of the team
members and promote robust economic activity in India.
All Toyota employees are expected to embody these values in their daily work, including
environmental protection activities. To "respect" the environment, we go to the source to
identify and analyse problems ("Genchi Genbutsu"), move forward to "challenge"
conventional ideas and old habits, to improve further ("kaizen") through "teamwork."
The framework provided by The Toyota Way enables our company to respond to, among
other things, the environmental challenges at various stages of the life-cycle of a vehicle.
These include greenhouse gas emissions, waste reduction, increased recycling and the
banning of hazardous substance use in parts and components. These challenges will have
inevitable consequences for Toyota's organisation and employees, and we must balance them
with our desire for future growth. In 1992, the Toyota Guiding Principles were established in
direct response to the international initiatives agreed to at the Rio 'Earth Summit.' This
summit focussed on the potential for a clash between trade and environmental rules, and
resulted in a statement of principles about forest management, conservation and sustainable
development.
The Toyota Guiding Principles are a cornerstone of our corporate management philosophy.
These principles were updated in 1997, to ensure they continue to provide Toyota with a
clear path towards achieving sustainable development.
These principles have been explored and developed in Toyota's Global Vision 2010, adopted
in April 2002, which proposes a series of long-term policies on the theme of "Innovation into
the Future." Toyota's Global Vision 2010 guides management in its response to long-term
social changes, combining consideration for the environment, the benefit to our customers of
value-added products and the encouragement of our employees through shared prosperity
and social involvement.
Based on the Guiding Principles, which codify Toyota's business spirit, the Toyota Earth
Charter (adopted in 1992 and revised in 1997) embodies a comprehensive approach to global
environmental issues. It outlines Toyota's basic policy and action guidelines towards
effective environmental management and improvements. The Toyota Earth Charter
underlines a commitment to environmental excellence, not only through broad principles, but
in concrete examples of what can be done through action guidelines. In connection with the
Toyota Guiding Principles and the Toyota Earth Charter, a European Environmental Policy
was developed as a means of linking principles, goals, targets and action plans with
management structures and systems.
Recognition
At TKM, we look to continuously improve not only our products but also our processes and
service. Our obsession with perfection has been recognised by various institutions such as JD
Power and TNS Automotive, as well as automotive publications like Overdrive, as the reason
for the success of Toyota products in India and across the globe
Chapter-4
Data analysis
Data Analysing and Interpretation
Ratio Analysis
According to J. Batty “the term accounting ratio is used to describe significant relationships
which exist between figures shown in a balance sheet, in a profit and loss account, in a
budgetary control system or in any other part of the accounting organization”. the accounting
ratios indicate a quantitative relationship which is used for analysis and decision making. It
provides basis for inter-firm as well as intra-firm comparison. The ratios will be effective only
when they are compared with ratios of base period or with standards or with the industry ratios.
The financial statement viz. income statement, and Balance sheet report what has actually
happened to earnings during a specific period and presents a summary of financial position of
the company at a given point of time. the statement of retained earnings reconciles income
earned during the year and any dividends distributed with the change in retained earnings
between the start and end of the financial year under study.
1) Liquidity Ratio
The liquidity Ratios measures the liquidity of the firms and its ability to meet its maturing
short term obligations. Liquidity is defined as the realise value in money, the most liquid of
assets. It refers to the ability to pay in cash, the that are due. The corporate liquidity has two
dimensions viz., quantitative and qualitative concepts. The qualitative aspects includes the
quantum, structure and utilization of liquid assets and in the qualitative aspect, it is the ability
to meet all present and potential demands on cash from any source in a manner that
minimizes cost and maximises the value of the firm. Thus, corporate liquidity is a vital factor
in business.
a) Current Ratio
b) Quick Ratio
c) Absolute Liquid Ratio
d) Defensive- Interval Ratio.
4.1) Current Ratio:
This ratio measure the solvency of the company in short-term. Current assets are those assets
which can be converted into cash within a year. Current liabilities and provisions are those
liabilities that are payable within a year.
Current Ratio= Current AssetsCurrent Liabilities
Table no: 4.1
The table showing comparative current ratio:
Company Current assets Current liabilities Ratios
Tata Motors 10383.78 8667.2 1.198
Maruti Udyog Ltd 3837.9 2449.2 1.567
Mahindra & Mahindra 3655.37 2307.55 1.584
Hindustan Motors 192.16 173.93 1.104
Toyota Kirloskar 6.09 0.83 7.337
The current ratio revels the ability of the firm to meet all the obligations maturing within a
year. Conventionally it is said that the current ratio should be 2:1. It means that for every one
rupee for current liability the firm must have two rupees worth of current assets. The reasons
for this conventional norm is that, all the current assets con not be converted into cash
immediately.
Chart no: 4.1
The chart showing comparative current ratio:
Tata
Motors
Maruti Udyo
g Ltd
Mahindra
& Mah
indra
Hindustan M
otors
Toyo
ta Kirlo
skar
1.19800000000001
1.56699999999999 1.584 1.104
7.337
current Ratios current Ratios
Interpretation:
A current ratio of 2:1 indicates a highly solved position. A current ratio of 1.33:1 is
considered by banks as the minimum acceptable level for providing working capital finance.
The constituents of the current asset are as important as the current assets themselves for
evaluation of a company’s solvency position. Toyota kirloskar Ltd very high current ratio
(7.337) will have adverse impact on the profitability of the organization. A high current ratio
may be due to the piling up of inventory, inefficiency in collection of debtors, high balance in
cash and bank accounts without proper investment etc. Hindustan Motors is low current
ratio(1.104) current assets are highly liquid. When the compare to the other companies.
4.2) Quick Liquid / Acid Test Ratio:-
Quick ratio is used as a measure of the company’s ability to meet its current obligations.
Since bank over draft is secured by the inventories, the other current assets must be sufficient
to meet other current liabilities. This ratio is also called quick ratio or acid test ratio. It
establishes the relationship between Liquid assets are those which can be converted in to cash
without any loss or delay. All current assets, expecting stock and prepaid expenses, are
considered to be liquid assets. Liquid liabilities are those liabilities which are payable
immediately. All current liabilities, excepting Bank over draft, are considered to be liquid
liabilities.
Liquid Ratio= Liquid AssetsLiquid Liabilities
Table no: 4.2
Table showing Comparative Liquid ratio:
company Liquid assets Liquid liabilities Ratios
Tata Motors 10383.78 8667.2 1.198
Maruti Udyog Ltd 3837.9 2449.2 1.567
Mahindra & Mahindra 3655.37 2307.55 1.585
Hindustan Motors 192.16 173.93 1.105
Toyota Kirloskar 6.09 0.83 7.337
A quick ratio of 1:1 is considered to be satisfactory, it takes in to account only liquid assets
whose realized value is almost certain. A firm 1:1 quick ratio is expected to be able discharge
all its current obligations.
Chart no: 4.2
The chart showing Comparative Liquid ratio:
Tata
Motors
Maruti Udyo
g Ltd
Mahindra
& Mah
indra
Hindustan M
otors
Toyo
ta Kirlo
skar
1.19800000000001
1.56699999999999 1.585 1.105
7.337
Liquid Ratios Liquid Ratios
Interpretation:
This chart showing quick ratio of 1:1 indicates highly solvent position. 2.78:1. this ratio
serves as a supplement to the current ratio in analysing liquidity. Toyota kirloskar Ltd quick
ratio 7.337:1 it indicates highly solvent position when the compare to the other companies.
Hindustan Motors it indicates 1.105 low liquidity ratio when the compare to the other
companies.
4.3) Absolute Liquid / Super Quick Ratio:-
It is the ratio of absolute liquid assets to quick liabilities. However, for calculation purposes,
it is taken as ratio of absolute liquid assets to current liabilities. Absolute liquid assets include
cash in hand, cash at bank and short-term or temporary investments.
Absolute Liquid assets
Current Liabilities
Absolute Liquid assets = cash in hand + cash at bank + short-term investments
Table No: 4.3
Table showing Comparative absolute liquid ratio
Company Cash and Bank Short-term
investment
Current Liabilities Ratio
Tata motors 2397.31 4910.27 8667.2 0.843
Maruti Udyog 324 5180.7 2449.2 2.247
Mahindra & Mahindra
861.23 4215.06 2307.55 2.199
Hindustan Motors 13.78 71.79 173.93 0.492
Toyota Kirloskar motors Ltd
0.33 1 0.83 1.602
The company’s absolute liquid ratio is 0.64:1 and an ideal ratio is 0.5:1 it means that more
than 50% of current assets are highly liquid. Hence the company’s liquidity position can be
able to meet uncertainties in payment obligations of short-term liabilities.
Chart No: 4.3
Chart showing comparative Absolute liquid ratio
Tata
motors
Maruti Udyo
g
Mahindra
& Mah
indra
Hindustan M
otors
Toyo
ta Kirlo
skar m
otors Lt
d
0.843000000000001
2.247 2.199
0.4921.602
Absolute liquid RatioAbsolute liquid Ratio
Interpretation:
This chart showing Maruti Udyog Ltd is more than the liquid liabilities (2.247) when the
company showing good performance when the compare to the other companies that is 2.2:1
hence the company liquidity position can be able to meet full payment obligations of short-
term liabilities. Hindustan Motors low liquid ratio shows 0.492:1 it means that more than
50% of current assets are highly liquid. Hence the company liquidity position can be able to
meet Uncertainties in payment obligations of short-term liabilities, when the compare to the
other companies.
Profitability Ratios
The profitability ratios are to help assessing the adequacy of profit earned by the company
and also to discover whether profitability is increasing or declining. The profitability of the
firm is the net result of a large number of policies and decisions. The profitability ratios show
the combined effects of liquidity, asset management and debt management on operating
results. Profitability ratios are measured with reference to sales, capital employed, total asset
employed, shareholders funds etc.
4.4) Gross profit margin:-
The ratio measures the gross profit margin on the total net sales made by the company. The
gross profit represents the excess of sales proceeds during the period under observation over
their cost, before taking into account administration, selling and distribution and financing
changes. The ratio measures the efficiency of the company’s operations and this can also be
compared with the previous years results to ascertain to ascertain the efficiency.
sales−Cost of Goods sold
sales×100 ( or )
Gross Profitsales
×100
Table No: 4.4
The table showing Comparative Gross Profit Ratio
company Gross profit Sales Ratios
Tata Motors 3228.78 28529.4 11.317
Maruti Udyog Ltd 3071.2 17891.6 17.165
Mahindra &
Mahindra
1645.43 11281.73 14.58
Hindustan Motors 66.96 704.66 9.502
Toyota Kirloskar 3.77 5.94 63.468
Chart No: 4.4
Chart shows comparative Gross Profit Ratio
Tata
Motors
Maruti Udyo
g Ltd
Mahindra
& Mah
indra
Hindustan M
otors
Toyo
ta Kirlo
skar
11.317 17.165 14.58 9.502
63.468
Gross profit Ratios Gross profit Ratios
Interpretation:
A high margin enables all operating expenses to be covered and provides a reasonable return
to the shareholders. In order to keep the ratio high, management has to minimize cost of
goods sold and improve sale performance.
From the above table it clearly shows that the gross profit ratio of Toyota kirloskar is 63.468
has been increased when compared to other companies.
Selling and distribution and financing changes. The ratio measures the efficiency of the
company’s operations and this can also be compared to the other company results to ascertain
to ascertain the efficiency.
4.5) Net profit margin ratio
The ratio is designed to focus-attention on the net profit margin arising from business
operations before intrest and tax is deducted. The convention is to express profit after tax and
intrest as percentage of sales. A drawback is that the percentage which results varies
depending on the sources employed to finance business activity. Intrest is charged above the
line while dividends are deducted below the line. It is for this reason that net profit i.e.,
earning before intrest and tax (EBIT) is used this ratio reflects net profit margin on the total
sales after deducting all expenses but before deducting intrest and taxation. This ratio
measures the efficiency of operation of the company. The net profit is arrived at form gross
profit after deducting administration, selling and distribution expenses. The non-operating
incomes and expenses are ignored in computation of net profit before tax, depreciation and
intrest. This ratio could be compared with that of the previous years and with that of
competitors to determine the trend in net profit margins of the company and its performance
in the industry.
Net Profit before Intrest∧Tax
sales×100
Table No: 4.5
The table showing Comparative Net profit margin ratio:
Company Net profit before intrest and Tax Sales Ratio’s
Tata Motors 3654.39 28529.4 12.81
Maruti Udyog Ltd 3130.8 17891.6 17.499
Mahindra & Mahindra 1733.02 11281.73 15.36
Hindustan Motors 86.99 704.66 12.34
Toyota Kirloskar Ltd 3.77 5.94 63.468
Chart No: 4.5
Chart shows comparative Net Profit Ratio
Tata
Motors
Maruti Udyo
g Ltd
Mahindra
& Mah
indra
Hindustan M
otors
Toyo
ta Kirlo
skar L
td
12.8117.49899999999
99 15.36 12.34
63.468
Net Profit Margin Ratio Net Profit Margin Ratio
Interpretation:
It is a measure of overall profitability of the firm. The higher ratio. The greater would be the
return to the shareholders and vice versa. A net profit margin of 10% is considered normal
this ratio is very useful to control cost and to increase the sales.
The Toyota kirloskar Ltd 63.468 the higher ratio the greater would be the return to the
shareholders, Hindustan motors (12.34) shows the lower net profit margin when the compare
to the other companies.
4.6) Cash Profit Ratio
The cash profit ratio is a more reliable indicator of performance where there are sharp
fluctuation in the profit before tax and net profit from year to year owing to difference in
depreciation changed. Cash profit ratio evaluates the efficiency of operations in terms of cash
generation and is not affected by the method of depreciation charged. It also facilitate inter-
firm comparison of performance since different methods of depreciations may be adopted by
different companies.
CashProfitsales
×100
Cash profit = Net profit + Depreciation
Table No: 4.6
The Table showing Comparative Cash profit ratio:
company Net Profit Depreciation Sales Ratios
Tata Motors 2028.92 652.31 28529.4 9.4
Maruti Udyog
Ltd
1730.8 568.2 17891.6 12.85
Mahindra &
Mahindra
1103.37 238.66 11281.73 11.90
Hindustan
Motors
30.84 21.15 704.66 7.38
Toyota Kirloskar 2.48 0.09 5.94 43.26
Chart No: 4.6
Chart shows comparative Cash Profit ratio.
Tata
Motors
Maruti Udyo
g Ltd
Mahindra
& Mah
indra
Hindustan M
otors
Toyo
ta Kirlo
skar
9.4 12.85 11.9 7.38
43.26
Cash Profit RatiosCash Profit Ratios
Interpretation:
Cash profit ratio the Toyota kirloskar company (43.26) will show the higher cash profit
margin when compare to the other companies. It is better position, Hindustan Motors low
cash profit margin when compare to the other companies. that is (7.38) when increase cash
sales comes in better position.
Cash profit ratio evaluates the efficiency of operations in terms of cash generation and is not
affected by the method of depreciation charged. It also facilitate inter-firm comparison of
performance since different methods of depreciations may be adopted by different
companies.
4.7) Return on Total Asset:-
The profitability of the firm is measured by establishing relation of net profit with the total
assets of the organization. This ratio indicates the efficiency of utilization of assets in
generating revenue.
Net Profit after TaxTotal assets
×100
Table No: 4.7
The Table showing Comparative Return on Total Asset Ratio:
Company Net profit after Tax Total assets Ratio’s
Tata Motors 2028.92 14120.02 14.37
Maruti Udyog Ltd 1730.8 9315.6 18.58
Mahindra & Mahindra 1103.37 6937.13 15.90
Hindustan Motors 30.84 260.37 11.84
Toyota Kirloskar Ltd 2.48 5.28 46.97
Chart No: 4.7
Chart shows comparative Return on Total Assets ratio.
Tata
Motors
Maruti Udyo
g Ltd
Mahindra
& Mah
indra
Hindustan M
otors
Toyo
ta Kirlo
skar L
td
14.37 18.58 15.9 11.84
46.97
Return on Total AssetsReturn on Total Assets
Interpretation:
Return on total assets the Toyota kirloskar Ltd is higher Return46.97 and then compare to the
other companies Hindustan motors is low return (11.84). when the compare to the other
companies.
The profitability of the firm is measured by establishing relation of net profit with the total
assets of the organization. This ratio indicates the efficiency of utilization of assets in
generating revenue.
4.8) Return on Shareholders’ Funds (or) Funds on Net worth:-
This ratio expresses the net profit in terms of the equity shareholders funds. This ratios is an
important yardstick of performance for equity shareholders since it indicates the return on the
fund employed by them. However, this measures is based on the historical net worth and will
be high for old plants and low for new plants.
Net Profit after Intrest∧TaxNet worth
×100
Net worth = Equity capital + Reserves and Surplus
Table No: 4.8
The Table showing Comparative Funds on Net worth Ratio:
company Net Profit after
intrest and tax
Equity capital Reserves &
surplus
Ratios
Tata Motors 1879.43 385.54 7453.96 23.97
Maruti Udyog
Ltd
1705.01 144.5 8270.9 20.26
Mahindra &
Mahindra
935.31 239.07 4111 21.50
Hindustan
Motors
30.84 161.26 -29.08 23.33
Toyota Kirloskar 2.22 0.05 5.23 42.04
Chart No: 4.8
Chart shows comparative Funds on net worth ratio.
Tata
Motors
Maruti Udyo
g Ltd
Mahindra
& Mah
indra
Hindustan M
otors
Toyo
ta Kirlo
skar
23.97 20.26 21.5 23.3342.04
Funds on Net worth RatiosFunds on Net worth Ratios
Interpretation:
This cart showing Funds on net worth ratio shows Toyota kirloskar is high ratio (42.04)
compare to the other companies Maruti Udyog company is low( 20.26) Funds on net worth.
This ratio is an important yardstick of performance for equity shareholders since it indicates
the return on the fund employed by them. This measures is based on the historical net worth
and will be high for old plants and low for new plants.
4.9) Operating Ratio
This ratio establishes the relationship between operating cost and sales
Operating Ratio=OperatingCostSales
×100
Operating cost = Cost of Goods Sold + Operating Expenses
Table No: 4.9
The Table showing Comparative operating Ratio:
company Sales Cost of Goods
sold
Operating
Expenses
Ratios
Tata Motors 28529.4 29461.85 25807.46 193.73
Maruti Udyog
Ltd
17891.6 19115.5 15984.7 196.18
Mahindra &
Mahindra
11281.73 12069.38 10336.36 198.60
Hindustan
Motors
704.66 822.16 735.17 221.00
Toyota Kirloskar 5.94 6.61 2.84 159.09
Chart No: 4.9
Chart shows comparative Operating ratio:
Tata
Motors
Maruti Udyo
g Ltd
Mahindra
& Mah
indra
Hindustan M
otors
Toyo
ta Kirlo
skar
193.73 196.18 198.6 221159.09
Operating Ratios Operating Ratios
Interpretation:
This chart shows the operating ratio the overall operating efficiency of the business.
Hindustan Motors High operating ratio 221% is undesirable as it leaves a small portion of
income to meet other non- operating expenses like interest on loans when the compare to the
other companies. A low ratio is better and reflects the efficiency of the management. The
Toyota kirloskar Ltd 159.09 % lower the ratio, the higher would be the profitability. When
the compare to the other companies.
4.10) Operating Profit Ratio
Operating profit ratio studies the relationship between operating profit (EBIT – Earning
Before Intrest and Tax) and sales. The purpose of this ratio is to find out the amount of
operating profit for each rupee of sales.
Operating Profit Ratio=OperatingProfitSales
×100
Operating profit = Gross profit - Operating Expenses
Table No: 4.10
The Table showing Comparative operating Profit Ratio:
Company Sales Operating Profit Ratios
Tata Motors 28529.4 3654.39 12.81
Maruti Udyog Ltd 17891.6 3130.8 17.50
Mahindra &
Mahindra
11281.73 1733.02 15.36
Hindustan Motors 704.66 86.99 12.34
Toyota Kirloskar 5.94 3.77 63.46
Chart No: 4.10
Chart shows comparative Operating Profit ratio:
Tata
Motors
Maruti Udyo
g Ltd
Mahindra
& Mah
indra
Hindustan M
otors
Toyo
ta Kirlo
skar
12.81 17.5 15.36 12.34
63.46
Operating Profit RatioOperating Profit Ratio
Interpretation:
A high ratio is an indicator of the operational efficiency of the Toyota kirloskar (63.46) and
Hindustan Motors (12.34) a low ratio stands for operational inefficiency of the firm, when
the compare to the other companies. The purpose of this ratio is to find out the amount of
operating profit for each rupee of sales.
4.11) Expenses Ratio:-
This ratio studies the relationship between factory expenses and sales. this ratio shows the
manufacturing efficiency of the organization.
Factory Expenses Ratio=Factory ExpensesSales
×100
Table No: 4.11
The Table showing Comparative Expenses Ratio
company Factory Expenses Sales Ratios
Tata Motors 25807.46 28529.4 90.46
Maruti Udyog
Ltd
15984.7 17891.6 89.34
Mahindra &
Mahindra
10336.36 11281.73 91.62
Hindustan
Motors
735.17 704.66 104.32
Toyota Kirloskar 2.84 5.94 47.81
Chart No: 4.11
Chart shows comparative Factory Expenses ratio:
Tata
Motors
Maruti Udyo
g Ltd
Mahindra
& Mah
indra
Hindustan M
otors
Toyo
ta Kirlo
skar
90.46 89.34 91.62 104.3247.81
Factory Expenses Ratio Factory Expenses Ratio
Interpretation:
Factory expenses ratio pay the highest expenses Hindustan Motors (104.32) and then
compare to the other companies. the lowest expenses pay Toyota kirloskar (47.81) company
when compare to the other companies.
The manufacturing efficiency of the organization high expenses is low profit earn, low
expenses will give you the higher profit.
4.12) Stock Turnover Ratio:
This ratio establishes the relationship between cost of goods sold and average value of
inventory of stock. The purpose of this ratio is to show the number of times the inventory of
a firm is rotated in a year. It gives an indication of the efficiency of inventory management.
StockTurnover Ratio= SalesInventory
×100
Table No: 4.12
The Table showing Comparative Stock Turnover Ratio:
company Sales Inventories Ratios
Tata Motors 28529.4 2421.83 1178.01
Maruti Udyog Ltd 17891.6 1038.00 1723.66
Mahindra & Mahindra 11281.73 1084.11 1040.64
Hindustan Motors 704.66 82.05 858.82
Toyota Kirloskar 5.94 0 0
Chart No: 4.12
Chart shows comparative Stock Turnover ratio:
Tata
Motors
Maruti Udyo
g Ltd
Mahindra
& Mah
indra
Hindustan M
otors
Toyo
ta Kirlo
skar
1178.011723.66
1040.64 858.820
Stock Turnover RatioStock Turnover Ratio
Interpretation:
This chart showing A high inventory turnover ratio Maruti Udyog Ltd (1723.66) is an index
of efficient inventory management and a low ratio Toyota kirloskar Ltd (0) stands for
inefficient inventory management. A low ratio also implies that the firm has excess stock in
relation to production and sales, When the compare to the other companies.
Combined Ratios
The ratio which is calculated by taking one item or one group of item from Trading Profit
and Loss account and another item or the group of another item is taken from Balance sheet
is called mixed ratio.
4.13) Return on Shareholder’s Equity:
This ratio shows the relationship between net profit after taxes and shareholder’s equity. It
reveals the rate of return on owner’s funds. This ratio is also known ‘Return on Net worth’.
Returnon Shareholders Eqity= Ner profit afterTaxShareholdr ' s Equity
¿×100¿
Table No: 4.13
The Table showing Comparative Return on share holder’s equity ratio
company Net profit after tax Shareholder’s Equity Ratios
Tata Motors 2028.92 150 13.526
Maruti Udyog Ltd 1730.8 100 17.308
Mahindra &
Mahindra
1103.37 115 9.59
Hindustan Motors 30.84 0 0
Toyota Kirloskar 2.48 0 0
Chart No: 4.13
Chart shows comparative Return on share holders’ equity ratio:
Tata
Motors
Maruti Udyo
g Ltd
Mahindra
& Mah
indra
Hindustan M
otors
Toyo
ta Kirlo
skar
13.52617.308
9.59
0 0
Return on Shareholders Eqity Return on Shareholders Eqity
Interpretation:
This chart showing Return on share holder’s equity ratio maximum return on Maruti Udyog
Ltd (17.308) will give you the equity share holders it is improve the company reputation and
intrest to invest this company. But Hindustan Motors and Toyota kirloskar Ltd Return on
equity shareholders is (0) the future market condition shareholders cannot intrest to invest
this companies. It is affect on company growth rate, When the compare to the other
companies.
4.14) Return on Total Resources:
This ratio shows the relationship between net profit after taxes and total assets. It reveals the
rate of return on total assets. This ratio is also known ‘Net profit to total assets’.
Return on Total Resources¿Net profit after tax
Total assets×100
Table No: 4.14
The Table showing Comparative Return on Total Resources ratio:
company Net profit after tax Total assets Ratios
Tata Motors 2028.92 14120.02 14.369
Maruti Udyog Ltd 1730.8 9315.6 18.579
Mahindra & Mahindra 1103.37 6937.13 16.294
Hindustan Motors 30.84 260.37 11.844
Toyota Kirloskar 2.48 5.28 46.969
Chart No: 4.14
Chart shows comparative Return on Total Resources ratio:
Tata
Motors
Maruti Udyo
g Ltd
Mahindra
& Mah
indra
Hindustan M
otors
Toyo
ta Kirlo
skar
14.369 18.579 16.294 11.844
46.969
Return on Total Resources RatioReturn on Total Resources Ratios
Interpretation:
This chart shows Return on total asset ratio the highest return Toyota kirloskar (46.969) and
then compare to the other companies. the lowest return Hindustan Motors (11.844).
It reveals the rate of return on total assets. This ratio shows the relationship between net
profit after taxes and total assets.
4.15) Intrest coverage ratio:
This ratio shows the relationship between net profit before intrest and tax and intrest.
Intrest coverage Ratio=Net profit (before intrest tax)
Intrest×100
Table No: 4.15
The Table showing Comparative Intrest coverage Ratio:
company Net profit before
intrest and Tax
Intrest Ratios
Tata Motors 3654.39 425.61 858.62
Maruti Udyog Ltd 3130.8 59.6 5253.02
Mahindra & Mahindra 1733.02 87.59 1978.55
Hindustan Motors 86.99 20.03 434.29
Toyota Kirloskar 3.77 0 0
Chart No: 4.15
Chart shows comparative Intrest coverage ratio:
Tata
Motors
Maruti Udyo
g Ltd
Mahindra
& Mah
indra
Hindustan M
otors
Toyo
ta Kirlo
skar
858.62
5253.02
1978.55 434.289999999999 0
Intrest coverage Ratio Intrest coverage Ratio
Interpretation:
This chart shows Intrest coverage ratio Maruti Udyog Ltd (5253.02) pay the highest intrest
rate to the current liabilities is high because profitability position is low, when the compare
to the other companies. Toyota kirloskar Ltd doesn’t pay any intrest because the current
liabilities is low (0) the company more profit earn, when the compare to the other companies.
4.16) Dividend payout ratio:
This ratio shows the relationship between dividend per equity share and earning per share.
Dividend payout ratio ¿Dividend per equity share
Earning per share×100
Table No: 4.16
The Table showing Comparative Dividend Payout Ratio:
company Dividend per equity
share
Earnings per share Ratio
Tata Motors 578.43 50.52 1144.9
Maruti Udyog Ltd 144.5 59.03 244.79
Mahindra &
Mahindra
282.61 44.54 634.51
Hindustan Motors 0 1.91 0
Toyota Kirloskar 0 4960 0
Chart No: 4.16
Chart shows comparative Dividend Payout ratio:
Tata
Motors
Maruti Udyo
g Ltd
Mahindra
& Mah
indra
Hindustan M
otors
Toyo
ta Kirlo
skar
1144.9
244.79634.51
0 0
Dividend payout ratio Dividend payout ratio
Interpretation:
This chart shows Dividend payout ratio Tata Motors pay maximum Dividend (1144.9) pay to
the equity shareholders equity share holders computation to invest this company the company
growth rate is stabilize, Hindustan Motors and Toyota kirloskar didn’t pay any dividend it is
earn more profit but equity shareholders con not intrest to invest this companies. When the
compare to the other companies.
4.17) Earnings per share:
This ratio shows the relationship between net profit after taxes and preference dividend and
number of equity shares. This ratio is also known ‘earning per share’.
Earning per share= Net profit after taxes−preferencedividendNO.of equity shares
×100
Table No: 4.17
The Table showing Comparative Earnings per Share ratio:
Company Earnings per share
Tata Motors 50.52
Maruti Udyog Ltd 59.03
Mahindra & Mahindra 44.54
Hindustan Motors 1.91
Toyota Kirloskar 4960
Chart No: 4.17
Chart shows comparative Earnings Per share ratio:
Tata
Motors
Maruti Udyo
g Ltd
Mahindra
& Mah
indra
Hindustan M
otors
Toyo
ta Kirlo
skar
50.52 59.03 44.54 1.91
4960
Earning per shareEarning per share
Interpretation:
This chart shows Earnings per share for the Toyota kirloskar (4960) shareholders will earn
maximum earning per share, it is share holders benefit the future market basis easy to invest
this company. Hindustan Motors is only 1.91 % earn the shareholders it is low. But the future
market investor not easy to invest this company, it is difficult to collect the money. When the
compare to other companies
4.18) Debt equity ratio
Debt equity ratio shows the relationship between borrower funds and owners fund the
purpose of this ratio is to shown the extent of the firms dependences on external liabilities. In
order to calculate its ratio. The required components are external liabilities and owners
equity. External liability includes both long-term as well as short-term borrowings. The term
owners funds includes equity share capital, preference share capital. Reserves and surplus,
but excludes past accumulated losses such preliminary expenses, discount on issue of share
or debentures, underwriting commission and profit and loss account debt balanced etc. since
there are two approaches to work out this ratio.
Debt equity Ratio=Total debtEquity
Table No: 4.18
The Table showing Comparative debt equity ratio:
Company Total debt Equity Ratio
Tata Motors 6280.52 7839.5 0.80
Maruti Udyog Ltd 900.2 8415.4 0.107
Mahindra & Mahindra 2587.06 4350.07 0.59
Hindustan Motors 128.19 132.18 0.97
Toyota Kirloskar 0 5.28 0
Chart No: 4.18
Chart shows comparative Debt equity ratio:
Tata
Motors
Maruti Udyo
g Ltd
Mahindra
& Mah
indra
Hindustan M
otors
Toyo
ta Kirlo
skar
0.8
0.1070.59
0.970000000000001
0
Debt equity Ratio Debt equity Ratio
Interpretation:
From the above chart showing For analysing the capital structure, debt-equity ratio gives an
idea about the relative share of funds of outside and owners invested in the business. The
ratio of long term debt of equity is generally regarded as safe if it is 2:1.
Debt is the easy to sources of fund equity and debt is equal proportion Hindustan motors is
0.97:1 is debt portion, Toyota kirloskar debt is zero 0:1 only equity is there in this company.
When the compare to the other companies.
Chapter - 5
Findings
FINDINGS
This study has been undertaken at Automobile Companies to analyze the financial
performance of the company by using Ratio analysis technique where the last five years
Balance sheet and Profit and loss account were considered for analyzing various financial
ratios. The major findings with respect to the study are stated below:
Though the current ratio of Toyota kirloskar Motors is highly solved position. And
then compare to the other companies, the Tata motors current ratio is low when the
Compare to the other companies.
A quick ratio of 1:1 indicates highly solvent position. Maruti Udyog Ltd is low liquid
solvent position this ratio serves as a supplement to the current ratio in analysing
liquidity, compare to the other companies Toyota kirloskar is highly liquid solvent
position when compare to the other companies.
The company’s absolute liquid ratio Maruti Udyog Ltd is high and Hindustan Motors
is Low ratio shows when the compare to the other companies.
Gross profit margin ratio A high margin enables the Toyota kirloskar is high and
Hindustan Motors is low ratio shows when the compare to the other companies.
Net profit margin ratio It is a measure of overall profitability of the firm. The higher
ratio. The greater would be the return to the shareholders and vice versa. A net profit
margin of 10% is considered normal this ratio is very useful to control cost and to
increase the sales. The Toyota kirloskar Ltd the higher ratio the greater would be the
return to the shareholders, Hindustan motors shows the lower ratio.
Return on total assets the Toyota kirloskar Ltd is higher Return and then compare to
the other companies Hindustan motors is low return.
Funds on net worth ratio shows Toyota kirloskar is high ratio compare to the other
companies Maruti Udyog company is low Funds on net worth.
The operating ratio shows the overall operating efficiency of the business. High
operating ratio is undesirable as it leaves a small portion of income to meet other non-
operating expenses like interest on loans. A low ratio is better and reflects the
efficiency of the management. The lower the ratio, the higher would be the
profitability.
Operating profit ratio a high ratio is an indicator of the operational efficiency of the
Toyota kirloskar and Hindustan Motors a low ratio stands for operational
inefficiency of the firm.
Factory expenses ratio pay the highest expenses Hindustan Motors. and then compare
to the other companies. The lowest expenses pay Toyota kirloskar company when
compare to the other companies.
A high inventory turnover ratio is an index of efficient inventory management and a
low ratio stands for inefficient inventory management. A low ratio also implies that
the firm has excess stock in relation to production and sales.
Return on share holder’s equity ratio maximum return on Maruti Udyog Ltd. And
then compare to the other companies
Intrest coverage ratio Maruti Udyog Ltd pay the highest intrest and compare to the
other companies Toyota kirloskar (0) cannot pay in any intrest.
Dividend payout ratio Tata Motors pay maximum Dividend when compare to the
other companies.
Earnings per share for shareholders Toyota kirloskar will give you the maximum
earning per share when compare to other company and Hindustan Motors. will give
low earning per share.
Debt-equity ratio equal proportion of the company Hindustan Motors. Toyota
kirloskar is no debt when the compare to the other companies.
SUGGESTIONs
SUGGESTIONS
This study has been undertaken at Automobile Companies to analyze the financial
performance of the company by using Ratio analysis technique where the last five years
Balance sheet and Profit and loss account were considered for analyzing various financial
ratios.
Necessary steps should be taken by the Toyota kirloskar Ltd Company to increase operating
ratio, stock turnover ratio, Return on shareholders’ ratio and Dividend payout ratio to improve
company reputation and future market growth and equity share holders easy to invest this
company. When the compare to the other companies.
The Toyota kirloskar Ltd Should Decrease the Factory Expenses ratio, Intrest coverage ratio
and Debt equity ratio, the expenses reduce the profitability will be increase, Intrest coverage
ratio will be decrease the barrowing money and total debt reduce or taken the secured loan is
better, because the intrest rate is low when Increase the profitability. Debt equity ratio should
be decreased the equal proportion of debt and equity is preferable. When compare to the other
companies.
Necessary steps should be taken by the Maruti Udyog Ltd company to increase Quick ratio
is used as a measure of the company’s ability to meet its current obligations. The other
current assets must be sufficient to meet other current liabilities. It establishes the
relationship between Liquid assets are those which can be converted in to cash without any
loss or delay. Liquid liabilities are those liabilities which are payable immediately. The
company should be decreased Funds on net worth ratio This ratio is an important yardstick of
performance for equity shareholders since it indicates the return on the fund employed by
them. This measures is based on the historical net worth and will be high for old plants and
low for new plants. When compare to the other companies.
Necessary steps should be taken by the Mahindra and Mahindra company to we have any
ratios increase or decrease is not necessary when compare to the other companies it is medium
position should be increase the profit position in future market computation.
Necessary steps should be taken by the Hindustan Motor company to increase Net profit
ratio, cash profit ratio, Return on total asset ratio, operating ratio and dividend payout ratio the
company sales increase the profit also increase and it is increase the cash sales when come the
cash profit, operating profit increase the sales also increase. Dividend payout ratio increased
by the equity share holders invest to the company
The company Should Decrease by Absolute liquid ratio, return on total Resources and Earning
per share the company take the debt proportion must and should be increased, it is comes
better position . When compare to the other companies
Necessary steps should be taken by the Tata Motors company to increase current ratio and
gross profit ratio, the current assets are more than the current liabilities is better position the
company must do to increase the current assets, the Gross profit ratio will be increased by
sales are also maximum level to sell the products and company Gross profit ratio increased.
This company only increases these two ratio the company reputation and profitability position
is increase. And it comes in a better position and computation to the other companies. When
compare to the other companies
CONCLUSION
CONCLUSION
This study has been undertaken at Automobile Companies to analyze the financial
performance of the company by using Ratio analysis technique where the last five years
Balance sheet and Profit and loss account were considered for analyzing various financial
ratios.
Automobile companies is a very reputed company for manufacturing world renowned Toyota
kirloskar Ltd net profit ratio is higher than the compare to the other companies Innovation of
new products, maintaining the good quality of the products and active involvement of the
company personnel with the entire activities made it reputed across the country as well as
around the world.
During the project work the office staffs have been found very co-operative in providing
necessary information related to the project.
From the entire study it is found that the company should take necessary measures to improve
few areas like- Cost management, cash and inventory management and investment decisions.
In order to improve the overall performance, the management must take all possible steps,
review and modify various policies, cash budgets and inventory status by using sound
information management system to enable management to have a close control over the
various operations.
The automobile Industry day by day face the competitiveness. And other country manufacturer
new technology and low cost will face in future market condition.
BIBLIOGRAPHY
BIBLIOGRAPHY
1. Reference Books:
RAVI M. KISHORE
Financial Management
(6th Edition)
Khan Jain
Financial Management Accounting
(4th Edition)
SHASHI K. GUPTA
R.K. SHARMA
NEETI GUPTA
Financial Management
(Second Edition)
2. Websites:
www.Automobli Industry.com
www.Tatamotor.com
www.Maruti Udyog.com
www.M&M.com
www.Hindmotor.com
www.Tayotamotor india.com
www.google.com
www.yahoo.com
3. Annual Reports:
Financial assessment year 2004, 2005, 2006, 2007, 2008.Balance sheet and profit and
loss account.
Annexure
Mahindra and Mahindra Balance sheet SOURCES OF FUNDS : 2008 2007 2006 2005 2004 Share Capital 239.07 238.03 233.4 111.65 116.01 Reserves Total 4111 3314.88 2675.47 1874.88 1659.02 Total Shareholders Funds 4350.07 3552.91 2908.87 1986.53 1775.03 Secured Loans 617.26 106.65 216.67 336.82 485.23 Unsecured Loans 1969.8 1529.35 666.71 715.8 244.58 Total Debt 2587.06 1636 883.38 1052.62 729.81
Total Liabilities 6937.13 5188.91 3792.25 3039.15 2504.84
APPLICATION OF FUNDS : Gross Block 3656.13 3229.69 2885.52 2699.71 2520.86 Less : Accumulated Depreciation 1841.68 1639.12 1510.26 1335.56 1167.67
Less:Impairment of Assets 0 0 0 0 0 Net Block 1814.45 1590.57 1375.26 1364.15 1353.19 Lease Adjustment 0 0 0 0 0 Capital Work in Progress 546.45 280.6 179.19 110.73 38.41 Investments 4215.06 2237.46 1669.08 1189.79 1111.15 Current Assets, Loans & Advances Inventories 1084.11 878.48 878.74 759.97 500.13 Sundry Debtors 1004.88 700.89 637.97 511.53 400.48 Cash and Bank 861.23 1326.07 730.31 623.98 233.32 Loans and Advances 705.15 842.73 502.04 404.08 391.01 Total Current Assets 3655.37 3748.17 2749.06 2299.56 1524.94 Less : Current Liabilities and Provisions Current Liabilities 2307.55 1950.22 1520.84 1260.01 1009.86 Provisions 943.46 715.43 530.8 499.7 319.38 Total Current Liabilities 3251.01 2665.65 2051.64 1759.71 1329.24 Net Current Assets 404.36 1082.52 697.42 539.85 195.7 Miscellaneous Expenses not written
off 13.53 17.55 18.05 24.38 9.64 Deferred Tax Assets 161.04 168.77 43.64 39.03 29.48 Deferred Tax Liability 217.76 188.56 190.39 228.78 232.73 Net Deferred Tax -56.72 -19.79 -146.75 -189.75 -203.25
Total Assets 6937.13 5188.91 3792.25 3039.15 2504.84
Contingent Liabilities 479.04 367.6 454.33 386.31 407.21
profit and loss account2008 2007 2006 2005 2004
INCOME : Sales Turnover 12866.3 11183.5 9241.73 7647.8 5886.31 Excise Duty 1584.57 1334.64 1136.5 1054.82 955.43
Net Sales11281.7
3 9848.86 8105.23 6592.98 4930.88 Other Income 638.54 590.13 493.22 226.55 205.2 Stock Adjustments 149.11 6.41 103.2 174.05 21.43
Total Income12069.3
8 10445.4 8701.65 6993.58 5157.51
EXPENDITURE : Raw Materials 7875.02 6834.34 5816.97 4776.69 3374.3 Power & Fuel Cost 91.33 65.19 57.46 52.64 45.64 Employee Cost 845.77 660.1 544.99 457.41 412.43 Other Manufacturing Expenses 208.61 186.86 156.65 134.45 99.95 Selling and Administration Expenses 1076.73 844.28 633.83 417.6 332.63 Miscellaneous Expenses 285.39 253.85 191.81 258.17 228.02 Less: Pre-operative Expenses Capitalised 46.49 47.1 26.53 31.84 15.78
Total Expenditure10336.3
6 8797.52 7375.18 6065.12 4477.19
Operating Profit 1733.02 1647.88 1326.47 928.46 680.32 Interest 87.59 19.8 26.96 30.24 76.93 Gross Profit 1645.43 1628.08 1299.51 898.22 603.39 Depreciation 238.66 209.59 200.01 184.05 165.2 Profit Before Tax 1406.77 1418.49 1099.5 714.17 438.19 Tax 278.75 365.73 285.4 215 63.5 Fringe Benefit tax 0 0 0 0 0 Deferred Tax 24.65 -15.63 -43 -13.5 26.15 Reported Net Profit 1103.37 1068.39 857.1 512.67 348.54 Extraordinary Items 150.06 93.42 174.87 8.96 24.39 Adjusted Net Profit 953.31 974.97 682.23 503.71 324.15
P & L Balance brought forward 2125.08 1475.75 996.4 742.84 423.94
Appropriations 452.97 419.06 377.75 259.11 29.64 P & L Balance carried down 2775.48 2125.08 1475.75 996.4 742.84
Dividend 282.61 282.23 243.97 150.81 104.41 Preference Dividend 0 0 0 0 0 Equity Dividend % 115 115 100 130 90
Earnings Per Share-Unit Curr 44.54 43.1 35.26 44.02 28.89 Earnings Per Share(Adj)-Unit Curr 44.54 43.1 35.26 22.01 14.45 Book Value-Unit Curr 181.44 148.72 124.06 176.64 151.72
Maruti udyog Ltd Balance sheet
SOURCES OF FUNDS : 2008 2007 2006 2005 2004 Share Capital 144.5 144.5 144.5 144.5 144.5 Reserves Total 8270.9 6709.4 5308.1 4234.3 3446.7 Total Shareholders Funds 8415.4 6853.9 5452.6 4378.8 3591.2 Secured Loans 0.1 63.5 71.7 307.6 311.9 Unsecured Loans 900.1 567.3 0 0 0
Total Debt 900.2 630.8 71.7 307.6 311.9
Total Liabilities 9315.6 7484.7 5524.3 4686.4 3903.1
APPLICATION OF FUNDS : Gross Block 7285.3 6146.8 4954.6 5053.1 4566.7 Less : Accumulated Depreciation 3988.8 3487.1 3259.4 3179.4 2735.9 Less:Impairment of Assets 0 0 0 0 0 Net Block 3296.5 2659.7 1695.2 1873.7 1830.8 Lease Adjustment 0 0 0 0 0 Capital Work in Progress 736.3 250.7 92 42.1 74.9 Investments 5180.7 3409.2 2051.2 1516.6 1677.3 Current Assets, Loans & Advances Inventories 1038 701.4 881.2 666.6 439.8 Sundry Debtors 655.5 747.4 646.1 599.5 689.4 Cash and Bank 324 1422.8 1401.6 1029.4 240.2 Loans and Advances 1820.4 1533.4 812 676.5 649.5 Total Current Assets 3837.9 4405 3740.9 2972 2018.9 Less : Current Liabilities and Provisions Current Liabilities 2449.2 2011 1505.8 1218.8 1211.4 Provisions 1116.5 1061.4 471.3 389.2 320.4 Total Current Liabilities 3565.7 3072.4 1977.1 1608 1531.8 Net Current Assets 272.2 1332.6 1763.8 1364 487.1 Miscellaneous Expenses not written off 0 0 0 0 16.3 Deferred Tax Assets 99.6 110.1 121.1 125.4 125.5 Deferred Tax Liability 269.7 277.6 199 235.4 308.8 Net Deferred Tax -170.1 -167.5 -77.9 -110 -183.3
Total Assets 9315.6 7484.7 5524.3 4686.4 3903.1
Contingent Liabilities 2016.3 1684.4 881.4 1051.4 1297.3
profit and loss account
INCOME : 2008 2007 2006 2005 2004 Sales Turnover 21025.2 17205.9 14753.1 13335.7 11047.4 Excise Duty 3133.6 2509.6 2737.2 2411.9 1943 Net Sales 17891.6 14696.3 12015.9 10923.8 9104.4 Other Income 887.6 598.4 429.2 403.2 377.6 Stock Adjustments 336.3 -243.1 236 141.7 3.2
Total Income 19115.5 15051.6 12681.1 11468.7 9485.2
EXPENDITURE : Raw Materials 13791.5 10739 9335.6 8563.2 6973.3 Power & Fuel Cost 147.3 97.4 57.2 58.1 95.8 Employee Cost 346.83 266.29 211.45 191.46 293.76 Other Manufacturing Expenses 197.8 153.5 141.3 92.7 71.1 Selling and Administration Expenses 1145.35 941.67 668.56 580.01 536.44 Miscellaneous Expenses 355.92 264.94 211.19 185.53 206.7 Less: Pre-operative Expenses Capitalised 0 0 0 0 0
Total Expenditure 15984.7 12462.8 10625.3 9671 8177.1
Operating Profit 3130.8 2588.8 2055.8 1797.7 1308.1 Interest 59.6 37.6 20.4 36 43.4 Gross Profit 3071.2 2551.2 2035.4 1761.7 1264.7 Depreciation 568.2 271.4 285.4 456.8 494.9 Profit Before Tax 2503 2279.8 1750 1304.9 769.8 Tax 759.8 621.4 587.3 524.6 251.5 Fringe Benefit tax 9.8 6.7 5.7 0 0 Deferred Tax 2.6 89.7 -32.1 -73.3 -23.8 Reported Net Profit 1730.8 1562 1189.1 853.6 542.1 Extraordinary Items 25.79 26.71 -7.97 -6.5 -79.72 Adjusted Net Profit 1705.01 1535.29 1197.07 860.1 621.82
Adjst. below Net Profit 0 -8.8 0 0 0 P & L Balance brought forward 5637.3 4393.9 3442.1 2757.4 2335.9 Statutory Appropriations 0 0 0 0 0 Appropriations 342.4 309.8 237.3 168.9 120.6 P & L Balance carried down 7025.7 5637.3 4393.9 3442.1 2757.4
Dividend 144.5 130 101.1 57.8 43.3 Preference Dividend 0 0 0 0 0 Equity Dividend % 100 90 70 40 30
Earnings Per Share-Unit Curr 59.03 53.29 40.65 29.25 18.56 Earnings Per Share(Adj)-Unit Curr 59.03 53.29 40.65 29.25 18.56
Book Value-Unit Curr 291.19 237.16 188.67 151.52 124.26
Tata motors Balance sheet
SOURCES OF FUNDS : 2008 2007 2006 2005 2004 Share Capital 385.54 385.41 382.87 361.79 353 Reserves Total 7453.96 6484.34 5154.2 3749.6 3236.77 Total Shareholders Funds 7839.5 6869.75 5537.07 4111.39 3589.77 Secured Loans 2461.99 2022.04 822.76 489.81 942.65
Unsecured Loans 3818.53 1987.1 2114.08 2005.61 317.12 Total Debt 6280.52 4009.14 2936.84 2495.42 1259.77
Total Liabilities 14120.02 10878.89 8473.91 6606.81 4849.54
APPLICATION OF FUNDS : Gross Block 10830.83 8775.8 7971.55 6611.95 5985.4 Less : Accumulated Depreciation 5443.52 4894.54 4401.51 3454.28 3023.69 Less:Impairment of Assets 0 0 0 0 0 Net Block 5387.31 3881.26 3570.04 3157.67 2961.71 Lease Adjustment 0 0 0 0 0 Capital Work in Progress 5064.96 2513.32 951.19 538.84 286.09 Investments 4910.27 2477 2015.15 2912.06 3056.77 Current Assets, Loans & Advances Inventories 2421.83 2500.95 2012.24 1601.36 1147.44 Sundry Debtors 1130.73 782.18 716.6 798.58 614.99 Cash and Bank 2397.31 826.76 1119.43 2005.04 770.49 Loans and Advances 4433.91 6402.16 5639.54 2681.05 1162.78 Total Current Assets 10383.78 10512.05 9487.81 7086.03 3695.7 Less : Current Liabilities and Provisions Current Liabilities 8667.2 6363.68 5726.82 5414.61 4228.13 Provisions 1989.43 1364.32 1215.04 1126.06 430.64 Total Current Liabilities 10656.63 7728 6941.86 6540.67 4658.77 Net Current Assets -272.85 2784.05 2545.95 545.36 -963.07 Miscellaneous Expenses not written off 6.05 10.09 14.12 18.16 22.19 Deferred Tax Assets 397.45 176.6 150.75 102.69 135.06 Deferred Tax Liability 1373.17 963.43 773.29 667.97 649.21 Net Deferred Tax -975.72 -786.83 -622.54 -565.28 -514.15
Total Assets 14120.02 10878.89 8473.91 6606.81 4849.54
Contingent Liabilities 2953.57 2527.78 1558.65 1102.68 839.45
profit and loss account2008 2007 2006 2005 2004
INCOME : Sales Turnover 32885.03 31611.21 23673.43 20152.03 15165.85 Excise Duty 4355.63 4425.44 3380.13 3063.44 2270.3 Net Sales 28529.4 27185.77 20293.3 17088.59 12895.55 Other Income 972.93 574.11 693.92 560.29 427.79
Stock Adjustments -40.48 349.68 256.91 144 -141.98
Total Income 29461.85 28109.56 21244.13 17792.88 13181.36
EXPENDITURE : Raw Materials 20190.19 19374.93 14263.86 11929.48 8341.39 Power & Fuel Cost 325.19 327.41 258.51 237.81 214.52 Employee Cost 1534.41 1361.2 1141.48 1037.93 879.49 Other Manufacturing Expenses 1847.43 1618.68 1251.02 1017.11 722.95 Selling and Administration Expenses 1442.91 1322.88 985.74 795.03 645.73 Miscellaneous Expenses 1598.73 1153.53 784.56 673.78 644.75 Less: Pre-operative Expenses Capitalised 1131.4 577.05 308.85 218.13 144.89
Total Expenditure 25807.46 24581.58 18376.32 15473.01 11303.94
Operating Profit 3654.39 3527.98 2867.81 2319.87 1877.42 Interest 425.61 368.51 293.49 217.81 202.48 Gross Profit 3228.78 3159.47 2574.32 2102.06 1674.94 Depreciation 652.31 586.29 520.94 450.16 382.6 Profit Before Tax 2576.47 2573.18 2053.38 1651.9 1292.34 Tax 139.01 476 363.35 363.82 96 Fringe Benefit tax 7 6.5 19 0 0 Deferred Tax 401.54 177.22 142.15 51.13 386 Reported Net Profit 2028.92 1913.46 1528.88 1236.95 810.34 Extraordinary Items 149.49 37.4 145.42 24.77 -29.95 Adjusted Net Profit 1879.43 1876.06 1383.46 1212.18 840.29
Adjst. below Net Profit 0 0 0 0 0 P & L Balance brought forward 1013.83 776.76 585.6 365.8 123.71 Statutory Appropriations 0 0 0 0 0 Appropriations 1659.68 1676.39 1337.72 1017.15 568.25 P & L Balance carried down 1383.07 1013.83 776.76 585.6 365.8
Dividend 578.43 578.07 497.94 452.19 282.11 Preference Dividend 0 0 19.94 0 0 Equity Dividend % 150 150 130 125 80
Earnings Per Share-Unit Curr 50.52 47.1 37.59 32.44 21.93 Earnings Per Share(Adj)-Unit Curr 48.93 45.61 36.4 31.42 21.24
Book Value-Unit Curr 202.68 177.57 143.93 113.64 101.69
Hindustan Motors Balance sheet
SOURCES OF FUNDS : Share Capital 161.26 161.26 161.26 161.26 161.26 Reserves Total -29.08 -57.87 -70.02 -26.24 -87.4 Total Shareholders Funds 132.18 103.39 91.24 135.02 73.86 Secured Loans 63.07 123.21 116.02 97.29 309.94 Unsecured Loans 65.12 72.58 44.98 68.89 63.46 Total Debt 128.19 195.79 161 166.18 373.4
Total Liabilities 260.37 299.18 252.24 301.2 447.26
APPLICATION OF FUNDS : Gross Block 486.02 487.29 479.53 470.21 749.95 Less : Accumulated Depreciation 321.78 301.62 280.28 265.55 431.13 Less:Impairment of Assets 0 0 0 0 0 Net Block 164.24 185.67 199.25 204.66 318.82 Lease Adjustment 0 0 0 0 0 Capital Work in Progress 5.58 1.81 0.33 0.32 0.28 Investments 71.79 70.61 70.25 70.57 1.5 Current Assets, Loans & Advances Inventories 82.05 102.76 85.87 79.52 158.34 Sundry Debtors 45.62 38.66 51.33 42.6 97.84 Cash and Bank 13.78 63.27 8.87 57.23 15.68 Loans and Advances 50.71 50.86 50.71 56.43 54.13 Total Current Assets 192.16 255.55 196.78 235.78 325.99 Less : Current Liabilities and Provisions Current Liabilities 173.93 204.97 209.37 211.28 244.89 Provisions 8.68 9.69 7.34 6.21 0 Total Current Liabilities 182.61 214.66 216.71 217.49 244.89 Net Current Assets 9.55 40.89 -19.93 18.29 81.1 Miscellaneous Expenses not written off 9.21 0.2 2.34 7.36 4.27 Deferred Tax Assets 0 0 0 0 41.29 Deferred Tax Liability 0 0 0 0 0 Net Deferred Tax 0 0 0 0 41.29
Total Assets 260.37 299.18 252.24 301.2 447.26
Contingent Liabilities 162.45 46.29 223.62 235.33 147.93
profit and loss account2008 2007 2006 2005 2004
INCOME : Sales Turnover 853.01 806.37 553.05 1352.13 858.88 Excise Duty 148.35 139.86 97.03 237.3 81.07 Net Sales 704.66 666.51 456.02 1114.83 777.81 Other Income 118.98 81.96 14.21 206.5 9.83 Stock Adjustments -1.48 9.45 -1.03 -17.79 -18.02
Total Income 822.16 757.92 469.2 1303.54 769.62
EXPENDITURE : Raw Materials 489.03 491.27 324.83 698.13 470.02 Power & Fuel Cost 13.65 16.15 12.61 29.62 23.13 Employee Cost 85.41 68.5 50.83 135.31 108.33 Other Manufacturing Expenses 18.12 19.09 14.05 41.91 30.55 Selling and Administration Expenses 87.8 84.49 57.33 119.39 96.19 Miscellaneous Expenses 41.21 25.69 19.77 77.71 44.96 Less: Pre-operative Expenses Capitalised 0.05 0.02 0.02 0.69 0.11
Total Expenditure 735.17 705.17 479.4 1101.38 773.07
Operating Profit 86.99 52.75 -10.2 202.16 -3.45 Interest 20.03 16.73 8.84 48.34 55.35 Gross Profit 66.96 36.02 -19.04 153.82 -58.8 Depreciation 21.15 23.23 18 51.06 41.2 Profit Before Tax 45.81 12.79 -37.04 102.76 -100 Tax 14.32 -1.1 5.82 -0.03 -0.01 Fringe Benefit tax 0.65 0.59 0.83 0.3 0 Deferred Tax 0 0 0 41.29 -19.05 Reported Net Profit 30.84 13.3 -43.69 61.2 -80.94 Extraordinary Items 85.29 70.57 7.2 126.49 1.75 Adjusted Net Profit -54.45 -57.27 -50.89 -65.29 -82.69
Adjst. below Net Profit 0 0 0 0 0 P & L Balance brought forward -73.15 -86.45 -43.88 -105.08 -24.14 Statutory Appropriations 0 0 0 0 0 Appropriations 0 0 -1.12 0 0 P & L Balance carried down -42.31 -73.15 -86.45 -43.88 -105.08
Dividend 0 0 0 0 0 Preference Dividend 0 0 0 0 0 Equity Dividend % 0 0 0 0 0
Earnings Per Share-Unit Curr 1.91 0.82 0 3.04 0 Earnings Per Share(Adj)-Unit Curr 1.91 0.82 0 3.04 0
Book Value-Unit Curr 7.58 5.67 4.85 7.56 3.76
Toyota kirloskar balance sheet
SOURCES OF FUNDS : Share Capital 0.05 0.05 0.05 Reserves Total 5.23 2.75 2.64 Total Shareholders Funds 5.28 2.8 2.69 Secured Loans 0 0 0 Unsecured Loans 0 0 0
Total Debt 0 0 0
Total Liabilities 5.28 2.8 2.69
APPLICATION OF FUNDS : Gross Block 0.57 0.42 0.18 Less : Accumulated Depreciation 0.21 0.12 0.09 Less:Impairment of Assets 0 0 0 Net Block 0.36 0.3 0.09 Lease Adjustment 0 0 0 Capital Work in Progress 0 0 0 Investments 1 2.5 2.5 Current Assets, Loans & Advances Inventories 0 0 0 Sundry Debtors 3.85 0.58 0.65 Cash and Bank 0.33 0.12 0.07 Loans and Advances 1.91 0.18 0.09 Total Current Assets 6.09 0.88 0.81 Less : Current Liabilities and Provisions Current Liabilities 0.83 0.73 0.64 Provisions 1.36 0.15 0.07 Total Current Liabilities 2.19 0.88 0.71 Net Current Assets 3.9 0 0.1 Miscellaneous Expenses not written off 0 0 0 Deferred Tax Assets 0.02 0.01 0.01 Deferred Tax Liability 0 0.01 0.01 Net Deferred Tax 0.02 0 0
Total Assets 5.28 2.8 2.69
Contingent Liabilities 0.07 0 0
profit and loss account2008 2007 2006
INCOME : Sales Turnover 5.94 0.75 0.23 Excise Duty 0 0 0 Net Sales 5.94 0.75 0.23
Other Income 0.67 0.39 0.44 Stock Adjustments 0 0 0
Total Income 6.61 1.14 0.67
EXPENDITURE : Raw Materials 0 0 0 Power & Fuel Cost 0.03 0.04 0.03 Employee Cost 0.71 0.6 0.33 Other Manufacturing Expenses 0.02 0.03 0.02 Selling and Administration Expenses 2.04 0.24 0.13 Miscellaneous Expenses 0.04 0 0.05 Less: Pre-operative Expenses Capitalised 0 0 0
Total Expenditure 2.84 0.91 0.56
Operating Profit 3.77 0.23 0.11 Interest 0 0 0 Gross Profit 3.77 0.23 0.11 Depreciation 0.09 0.04 0.03 Profit Before Tax 3.68 0.19 0.08 Tax 1.19 0.06 0.04 Fringe Benefit tax 0.03 0.01 0 Deferred Tax -0.02 0.01 -0.01 Reported Net Profit 2.48 0.11 0.05 Extraordinary Items 0.26 0 0 Adjusted Net Profit 2.22 0.11 0.05
Adjst. below Net Profit 0 0 0 P & L Balance brought forward 0.25 0.14 0.09 Statutory Appropriations 0 0 0 Appropriations 0 0 0 P & L Balance carried down 2.73 0.25 0.14
Dividend 0 0 0 Preference Dividend 0 0 0 Equity Dividend % 0 0 0
Earnings Per Share-Unit Curr 4960 220 100 Earnings Per Share(Adj)-Unit Curr NA NA NA Book Value-Unit Curr 10560 5600 5380