ratio analysis of tata steel

8/2/2019 Ratio Analysis of Tata Steel

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By- UTKARSH GUPTA

11BSP1908

Sec - I


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About TATA STEEL.

Tata steel is a multinational company headquarteredin Jamshedpur, India and owned by Tata Group.

It is the world's seventh-largest steel company, with anannual crude steel capacity of 31 million tonnes, andthe largest private-sector steel company in Indiameasured by domestic production.

The company was also recognized as the world's beststeel producer by World Steel Dynamics in 2005


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The Board has received disclosures from keymanagerial personnel relating to material, financialand commercial transactions where they and/or theirrelatives have personal interest.

The Company has complied with the requirements ofthe Stock Exchanges. No penalties or strictures havebeen imposed on the Company by the StockExchanges.

The Company has adopted a Whistle Blower Policyand has established the necessary mechanism.

The company has set up a remuneration committee for

the benefit of employees.

Disclosures


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Liquidity Ratio Year 2010 Year 2011

Current ratio 1.12 1.89

Quick ratio 0.76 1.58

Current ratio: Its ideal ratio is 2:1Thus, here the company can pay off its shortterm debt easier in the current year ascompared to previous year.

When a large part of inventory is includedin current asset, in this situation we need tocalculate the Quick ratio to show case thesolvency of the company. Its ideal ratio is 1:1.

So the current year was good as compared to

previous year.

0

0.5

1

1.5

2

2010 2011

CR

QR


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Solvency Ratios Year 2010 Year 2011

Debt equity ratio o.68 0.64

Long term debt equity 0.68 0.64

Debt equity ratio indicatesthe proportion of the shareholders equity and debt. Sothere is not much variation.

Long term debt equityratiowhich indicates the ratio oflong term debts to its equity. Sothere is not much variation.

0.62

0.630.64

0.65

0.66

0.670.68

2010 2011

DER

LTDER


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Profitability Ratios Year 2010 Year 2011

Operating profit margin 35.70 39.00

Profit before interest &tax margin

30.95 34.17

Operating income =Operating income/ Totalrevenue

It can convert 39% of the salesin the current year which is 3.30%

more than the previous year.

PBIT increased at a rate of 3.22%as compared to previous year.

0

5

10

1520

25

30

35

4045

2010 2011

OPM

PBIT


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Profitability ratios Year 2010 Year 2011

Gross profit ratio 31.36 35.09

Net profit ratio 19.96 22.81

Gross Profit Margin= GP/NetsalesAs the GPR increases it is better forthe company. For the current year itis 35.09% which is 3.73% more thanthe previous year.

The higher the Net Profit Marginis, the more effective the company isat converting revenue into actualprofit. For the current year it is22.81% which is 2.85% more than the

previous year.

0

5

10

15

20

25

30

3540

2010 2011

GPR

NPR


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Management inventoryratio

Year 201o Year 2011

Debtors turnover ratio 46.58 67.93

Investment turnover ratio 10.90 8.07

Debtors turnover ratio indicates the number oftimes the debtors are turned over a year. Here DTR isincreased which shows the more efficient is themanagement of debtors or more liquid the debtorsare.

Inventory turnover ratio measures the number oftimes, on average, the inventory is sold during theperiod. In this case it decreases slightly which showscompany is having more stock with it compare toprevious year. 0

10

2030

40

50

60

70

2010 2011

DTR

ITR


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Management inventoryratios

Year 2010 Year 2011

FATO 1.12 0.98

TATO 0.40 0.38

Fixed asset turnover ratio isdecreased by 0.14%, company has toimprove its FATO by increasing salesor by FA or by both.

The companys TATO is slightlydecreased which is considered notgood for the companys point of view.

0

0.2

0.4

0.6

0.8

1

1.2

2010 2011

FATO

TATO


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Conclusion

Efficient utilization of resources.

Capable of paying short term expenses. There is a rise in net profit ratio and gross profit ratio

Investor can look up for this company for the purposeof investment.


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ratio analysis of tata steel

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