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3vol4no4 PDF
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IRACST International Journal of Commerce, Business and Management (IJCBM), ISSN: 23192828
Vol. 4, No.4, August 2015
stakeholders and provided hand some return complete secondary data. This data is taken
on investment[1]. Companies profit margins from the published annual reports of Money
have fluctuations. Return on net worth has Control. Profitability ratios and statistical
been below 10% in 2 years. Any way inner techniques will be used to analyze the data.
strength of the company is remarkable.
Company can further improve its profitability Financial Analysis of Tata Motors
through optimum capital gearing and For financial analysis, some profitability
reduction in administration and financial ratios are to be calculated to assess the
expenses. financial position of the company. The basic
aim of this analysis is to reveal financial
Daniel Moses Joshuva stated in his position is increasing or decreasing.
study Financial Status of Tata Motors LTD
that company has stable growth and also PBDIT Ratio:- PBDIT is an indicator of a
suggested to reduce the expenditure[2]. companys financial performance which is
Decrease in expenses will increase the calculated in the following PBDIT
profitability. He also suggested that company calculation.
should utilize its working capital efficiency.
PBDIT = Revenue - Expenses ( excluding
Patel Vivek indicated in his study on depreciation, interest, tax )
Financial Performance of Tata Motors that This ratio tells us the net operating income
the company has issued equity capital rather after deducting operating expenses.
than going for performance share which
means the companys dividend will not be Table 1. PBDIT Ratio of Tata Motors ( Rs.
fixed but the company has provided a good Crores ) (In % )
amount of dividend to share holders[3]. Years Net Sales PBDIT PBDIT
Ratio
Despite of having large reserves, company 2009 10 35,373.29 5,253.69 14.85
has opted for loan funds. The company had a 2010 11 47,088.44 4,940.99 10.49
good operating income which shows that the 2011 12 54,306.56 4,166.39 7.67
company has a sustainable growth. 2012 13 44,765.72 3,380.31 7.55
2013 14 34,319.28 2,382.02 6.94
Financial analysis of Tata motors was
Average 43,170.66 4,024.68 9.50
carried out by Rakhi, Daniel & Patel up to the
Std Deviation 8,382.23 1,170.87 3.29
financial year 2009-10. The methodology Co-efficient of 19.42 29.09 34.63
adopted by each author is different. Here in Variance
this paper, analysis was carried out from the
financial analysis from 2009 to 2015. Source: Money control.com published annual
reports
3. METHODOLOGY
The study consists of 5 years data of Tata This ratio assumes great importance to
Motors from 2009-10 to 2013-14. This is
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IRACST International Journal of Commerce, Business and Management (IJCBM), ISSN: 23192828
Vol. 4, No.4, August 2015
money lenders and financiers as it reveals the depreciation expenses to that tune.
cash availability of the firm for payment of Highest PBT is recorded by the company
interest to the creditors. Tata Motors has in FY 2009 - 10. Next years it will be reduced.
grown highest PBDIT in FY 2009 - 10 at However, standard deviation and co-efficient
5,253.69 crores. Compared to 2010 to 2014, of variance are 4.17 and 166.40 respectively,
2010 is the best year. 2010 - 11 earnings are indicating stability in Profit Before Tax of the
also very good. Average ratio of the company company. Company earnings will be reduced
is 9.50%. Standard deviation and C0-efficient in FY 2012 - 2013 and 2013 - 14. FY 2011 -
of variance are 3.29 and 34.63 respectively, 12 has also been below par for the company in
indicating stability of the performance of the terms of PBT ratio.
company. PAT Ratio:- This ratio represents the
PBT Ratio relationship between Net Profit of the
This ratio measures combines all of the company and its Net Sales. Difference
companys profit before tax, including between net profit ratio ( PAT Ratio ) and
operating, non-operating, continuing PBT ratio reflects tax provisions made by the
operations and non-continuing operations. company. It may also include items of extra
PBT exists because tax expense is constantly ordinary nature. In net profit ratio the net
changing and taking it out helps to give an amount earned by a business after all taxation,
investor a good idea of changes in a related expenses have been deducted. The
companys profit or earnings from year to profit after tax is often a better assessment of
year. what a business is really earning and hence
can use in its operations than its total
Table 2. Profit before tax ratio of Tata Motors revenues.
(Rs. Crores ) ( In% ) Table 3. Profit after tax ratio of Tata Motors
Years Net Sales PBT PBT Ratio ( Rs.Crores ) (In% )
2009 10 35,373.29 2,829.54 7.99 Years Net Sales PAT PAT
2010 11 47,088.44 2,196.52 4.66 Ratio
2011 12 54,306.56 1,341.03 2.47 2009 - 10 35,373.29 2,240.08 6.33
2012 13 44,765.72 174.93 0.39
2013 14 34,319.28 -1,025.80 -2.99 2010 - 11 47,088.44 1,811.82 3.85
Average 43,170.66 1,103.24 2.51 2011 - 12 54,306.56 1,242.23 2.29
Std Deviation 8,382.23 1,551.33 4.17
2012 - 13 44,765.72 301.81 0.67
Co-efficient of 19.42 140.62 166.40
2013 - 14 34,319.28 334.52 0.98
Variance
Average 43,170.66 1,186.09 2.82
Source: Money control.com published annual Std Deviation 8,382.23 867.86 2.33
reports Co-efficient of 19.42 73.17 82.54
Variance
Companys PBT ratio is mostly in line
with the PBDIT ratio above. Average PBT
ratio for the company is 2.51% as against Source: Money control.com published
average PBDIT ratio of 9.50%. Difference information
between these ratios indicates interest and
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IRACST International Journal of Commerce, Business and Management (IJCBM), ISSN: 23192828
Vol. 4, No.4, August 2015
We have seen that FY 2009 - 10 has been the to be the minimum bench mark return for any
best year for the company as it has recorded investment. One can safely earn the return
highest PBDIT and PBT in that year. This without risk.
ratio indicates that company witnessed its This ratio reveals that poor performance
highest net profit in FY 2009 - 10. 2010 - 11 is of the company as average ratio stands at
also good. On an average, companys net 6.77% which is considerably below the bench
profit ratio stands at 2.82%. Standard mark level. FY 2009 - 10 emerges as the best
deviation and Co-efficient of Variance is high year for the company in terms of return on net
at 2.33 and 82.54 respectively. worth. Companys position is good in the first
years and shows poor in the last two years.
RONW Ratio:- Return on Net Worth is also Standard deviation and Co-efficient of
known as Return on Equity ( ROE ). The variance are 5.66 and 83.60.
amount of net income returned as a Table 5.Percentage increase in profits in
percentage of share holders equity is called proportion to percentage increase in sales
RONW. RONW ratio measures a corporations Years Percentage Percentage
increase increase
profitability by revealing how much profit a In Sales In Profits
company generates with the money 2009 - 10 - -
shareholders have invested. 2010 - 11 33.12 - 19.12
2011 - 12 15.33 - 31.44
Table 4. Return on Net Worth ratio of Tata 2012 - 13 - 17.57 - 75.70
Motors ( Rs.Crores ) (In% ) 2013 - 14 - 23.34 10.84
Years Net Worth PAT RONW
Ratio
2009 10 14,779.15 2,240.08 15.16 This table shows the comparison of increase
2010 11 20,013.30 1,811.82 9.05 in sales with increase in profits. In the FY
2011 12 19,626.01 1,242.23 6.33 2010 - 11, it found to be highest percentage
2012 13 19,134.84 301.81 1.58 decrease in sales among all and the FY 2013 -
2013 14 19,176.65 334.52 1.74 14 shows the lowest. The reasons for the
Average 18,545.99 1,186.09 6.77 variation may be due to high tax, high
Std Deviation 2,172.55 867.86 5.66 borrowed funds, high depreciation cost etc.
Co-efficient of 11.71 73.17 83.60 In FY 2013 - 14 the percentage increase
Variance in profits is found to be highest when
compared to the remaining periods. (negative
Source: Money control.com published sign indicates the decreasing pattern of the
information profits). In FY 2012 - 13 the percentage
Stake holders of the company are most decrease in profits is found to be more
concerned with this ratio as it indicates return significant than the other financial years.
on amount invested by them in the firm. 4. RESULTS
Normally, a return of more than 8% or the rate Table 6. Profitability ratios of Tata Motors
Years PBDIT PBT PAT RONW
offered by the bank on deposits is considered Ratio Ratio Ratio Ratio
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IRACST International Journal of Commerce, Business and Management (IJCBM), ISSN: 23192828
Vol. 4, No.4, August 2015
REFERENCES
Source: Money control.com Annual reports
[1]. K. Rajeswara Rao and G. Prasad, Accounting and
This table shows considerable growth attained
Finance Jai Bharat Publications, 10th Edition,
by the company in last five years. 2009-10 is
2008, pp.20.1 - 20.26.
the best financial year.
[2]. Dr.S.N.Maheswari - Financial Management -
Principles and practice, S.Chand & Company Ltd,
CONCLUSION
9th edition, 2004.
I would like to conclude that the prosperity of
[3]. Hotwani, Rakhi. "PROFITABILITY ANALYSIS
Tata Motors Ltd., is wealthy for the last 5
OF TATA MOTORS." Ratio2.8918.06 (2001):
years period. It was found to be in a gradual
763-35.
increasing manner regarding the Net Sales
[4]. Bagavathi R.S.N.Pillai - Management Accounting,
and the Net Profits of the company since 2009
S.Chand and Company Ltd., 4th edition, 1997.
onwards. These changes in the profits might
[5]. Annual reports of Tata Motors.
have occurred due to:
[6]. Sharma R.K. and Gupta Shashi K., Financial
1. High taxation
Management, Kalyani Publisher, New Delhi,
2. High cost of borrowed funds
2008.
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