A

Project on
TVS MOTOR COMPANY
Subject: - Ratio Analysis

Prepared by
*****y Lohar
MBA IInd Semester 2017-2018

Submitted to
Prof.
The Faculty of management Studies
Janardan Rai Nagar Rajasthan Vidhyapeeth (Deemed) University
Pratap Nagar, Udaipur (Raj)
 INTRODUCTION:
TVS Motor Company is the third largest two-wheeler manufacturer in
India, with revenue of over 13,000 Cr ($2 billion) in 2016-17. It is the
flagship company of the Rs. 40,000 Cr ($6 billion, in 2014-15) TVS
Group. The company has annual sales of 3 million units and an annual
capacity of over 4 million vehicles. TVS Motor Company is also the 2nd
largest exporter in India with exports to over 60 Countries. Member of
the TVS Group, is the largest company of the group in terms of size and
turnover, with more than 3 crore (30 million) customers riding a TVS
bike.

TVS Motor Company Limited

Type Public company

Traded as BSE: 532343, NSE: TVSMOTOR

Industry Motorcycle

Founded 1978

Founder T. V. Sundaram Iyengar

Headquarters Chennai, Tamil Nadu, India

Number of 4 two wheeler and 1 three

locations wheeler plants
Key people Venu Srinivasan
(Chairman & Managing
Director), Sudarshan Venu
(Joint Managing Director)

Products Motorcycles, scooters, three-

wheeler vehicles and spare
parts

Revenue 13363 CR INR (2016-17)

Operating ₹4.44 billion(US$68 million)

income (2016)[1]

Net income ₹3.28 billion(US$50 million)

(2016)[1]

Total assets ₹49.22 billion(US$750 million)

(2016)[1]

Total equity ₹15.83 billion(US$240 million)

(2016)[1]

Parent Sundaram - Clayton Limited

Website www.tvsmotor.com

 NEED OF THE STUDY:-

 Comparison between two or more financial statements.

 Analysis of financial aspects in the organization.
 Analysis of financial statements through ratios
  For better understanding of financial position of the organization
 To know the strengths and weakness of the organization
 Predetermined activities are done through the ratios
 SCOPE OF THE STUDY:-
The scope of the study is limited to collecting financial data published in
the annual reports of the company every year. The analysis is done to
suggest the possible solutions. The study is carried out for 2 years (2015 -
17).
Using the ratio analysis, firms past, present and future performance can
be analyzed and this study has been divided as short term analysis and
long term analysis. The firm should generate enough profits not only to
meet the expectations of owner, but also to expansion activities.

 OBJECTIVES OF STUDY:-
1. To study and analyze the financial position of the Company through
ratio analysis.
2. To suggest measures for improving the financial performance of
organization.
3. To analyze the profitability position of the company.
4. To assess the return on investment.
5. To analyses the asset turnover ratio.
6. To determine the solvency position of company.
7. To suggest measures for effective and efficient usage of inventory
 FINANCIAL ANALYSIS:-
Financial analysis is the process of identifying the financial strengths
and weakness of the firm. It is done by establishing relationships
between the items of financial statements viz., balance sheet and profit
and loss account. Financial analysis can be undertaken by management
of the firm, viz. owners, creditors, investors and others.

 OBJECTIVES OF THE FINANCIAL ANALYSIS:-

Analysis of financial statements may be made for a particular purpose in
view.
1. To find out the financial stability and soundness of the business
enterprise.
2. To assess and evaluate the earning capacity of the business
3. To estimate and evaluate the fixed assets, stock etc., of the concern.
4. To estimate and determine the possibilities of future growth of
business.
5. To assess and evaluate the firm's capacity and ability to repay short
and long term loans.

 Ratio Analysis:-

A ratio is simple arithmetical expression of the relationship of one

number to another. It may be defined as the indicated quotient of
two mathematical expressions. Ratio analysis is the process of
determining and presenting the relationship of items and group of
items in the statements. It is helpful to know about the liquidity,
solvency, capital structure and profitability of an organiz ation. It is
helpful tool to aid in applying judgment, otherwise complex
situations.

 Standards of comparison:

The ration analysis involves comparison for a useful interpretation

of the financial statements. A single ratio in itself does not
indicate favorable or unfavorable condition. It should be compared
with some standard. Standards of comparison may consist of:
  Past ratios, i.e. ratios calculated form the past financial
statements of the same firm;
 Competitors’ ratios, i.e., of some selected firms, especially
the most progressive and successful competitor, at the same
pint in time;
 Industry ratios, i.e. ratios of the industry to which the firm
belongs; and
 Protected ratios, i.e., developed using the protected or
Performa, financial statements of the same firm.

 Financial Statement of TVS Motors Company

 Balance Sheet as on 31st March 2017
Particular Mar ' 17 Mar ' 16
EQUITIES AND LIABILITIES
SHAREHOLDER'S FUNDS
Equity Share Capital 47.51 47.51
Total Share Capital 47.51 47.51
Reserves and Surplus 2,360.82 1,889.29
Total Shareholders’ Funds 2,408.33 1,936.80
NON-CURRENT LIABILITIES
Long Term Borrowings 468.76 494.23
Deferred Tax Liabilities [Net] 125.7 175.67
Long Term Provisions 50.8 39.99
Total Non-Current Liabilities 645.26 709.89
CURRENT LIABILITIES
Short Term Borrowings 616.38 264.23
Trade Payables 1,859.36 1,543.71
Other Current Liabilities 312.47 449.47
Total Current Liabilities 2,851.08 2,315.88
Total Capital And Liabilities 5,904.67 4,962.57
ASSETS
NON-CURRENT ASSETS
Tangible Assets 1,930.64 1,545.93
Intangible Assets 53.23 46.92
Capital Work-In-Progress 62.28 30.96
Fixed Assets 2,046.15 1,623.81
Non-Current Investments 1,587.90 1,184.57
Long Term Loans And Advances 0.12 136.65
Other Non-Current Assets 83.61 0
Total Non-Current Assets 3,717.78 2,945.03
CURRENT ASSETS
Inventories 966.95 825.97
Trade Receivables 723.77 578.69
Cash And Cash Equivalents 8.51 32.84
Short Term Loans And Advances 0 521.91
Other current assets 487.66 58.13
Total Current Assets 2,186.89 2,017.54
Total Assets 5,904.67 4,962.57

 Profit and Loss Statement For the year Ended 31 st March 2018
Particular Mar ' 17 Mar ' 16
INCOME
Revenue From Operations [Gross] 13,063.82 12,094.50
Less: Excise/Service Tax/Other Levies 1,054.75 988.25
Revenue From Operations [Net] 12,009.07 11,106.25
Other Operating Revenues 126.24 137.62
Total Operating Revenues 12,135.31 11,243.87
Other Income 173.37 51.31
Total Revenue 12,308.68 11,295.18
EXPENSES
Cost Of Materials Consumed 8,620.88 7,703.54
Purchase Of Stock-In Trade 291.22 251.41
Changes In Inventories Of FG,WIP And Stock-In Trade -58.73 70.53
Employee Benefit Expenses 745.64 664.23
Finance Costs 43.95 46.24
Depreciation And Amortization Expenses 287.81 189.84

Other Expenses 1,679.23 1,803.42

Total Expenses 11,610.00 10,729.21
Profit/Loss Before Tax 698.68 565.97
Tax Expenses-Continued Operations
Current Tax 159.78 117.16
Less: MAT Credit Entitlement 0 12.46
Deferred Tax -19.18 22.92
Tax For Earlier Years 0 6.21
Total Tax Expenses 140.6 133.83
Profit/Loss For The Period 558.08 432.14

 Types of Ratio:
1. Liquidity Ratio
2. Profitability Ratio
3. Investment / Shareholder Ratio
4. Other Financial Ratio
 Liquidity Ratio:-
A liquidity ratio is an indicator of whether a company's current
assets will be sufficient to meet the company's obligations when they
become due.

1. Current Ratio:-
The relationship between current assets and current liabilities is
established by Current Ratios. The ideal current ratio is 2: 1.

Current Ratio = Current Assets / Current Liabilities

Year Current Assets Current Liability Current Ratio

2015-2016 2017.54 2315.88 0.87
2016-2017 2186.89 2851.08 0.77

Conclusion: - The Company does not have the ability to pay its
liabilities, as the definition says that lower the ratio, low the ability
of the firm to pay its liabilities.

2. Acid Test / Quick Ratio:-

The acid test ratio is a stringent and meticulous test of a firm’s
ability to pay its short-term obligations ‘as and when they are due.
Quick assets and current liabilities can be associated with the help
of Quick Ratio. The ideal Quick Ratio is 1: 1 and is considered to
be appropriate.

Quick Ratio = Liquid Asset (Current Assets – Stock &

Prepaid Expenses) / Current Liabilities

Year Liquid Assets Current Liability Quick Ratio

 2015-2016 1191.57 2315.88 0.51
2016-2017 1219.94 2851.08 0.43

Conclusion: - The Company should take some actions to increase

the amount of highly liquid assets and decrease the amount of
current assets.

 Profitability Ratio:-
Profitability ratios compare income statement accounts and
categories to show a company’s ability to generate profits from its
operations. Profitability ratios focus on a company’s return on
investment in inventory and other assets. These ratios basically
show how well companies can achieve profits from their
operations.
1. Gross Profit Ratio:
The gross profit ratio is essentially the percentage markup on
merchandise from its cost.

Gross Profit Ratio = Gross Profit / Net Sales

Year Gross Profit Net Sales Gross Profit Ratio

2015-2016 3080.77 11106.25 27.74%
2016-2017 3155.70 12009.07 26.28%
Conclusion: - The Decreasing trend of the gross profit margin
indicates the company not has ability of an enterprise to earn gross
profit. While in year 2015-2016 company was earning 27.74% of
the gross profit per sales, in year 2016-2017 this amount decreased
to 26.28% of sales.

2. Net Profit Ratio:

 The profit margin ratio shows what percentage of sales are left
over after all expenses are paid by the business.

Net Profit Ratio = Net Profit / Net Sales

Year Net Profit Net Sales Net Profit Ratio

2015-2016 432.14 11106.25 3.89 %
2016-2017 558.08 12009.07 4.65 %

Conclusion: - The Increasing trend of the Net profit Ratio

indicates the company has ability of an enterprise to earn Net
Profit. While in year 2015-2016 company was earning 3.89% of
the Net profit per sales, in year 2016-2017 this amount increased to
4.65% of sales.

3. Return on Assets Ratio:

The return on assets ratio or ROA measures how efficiently a
company can manage its assets to produce profits during a period.

Return on Assets = Net Income / Total Average Assets

Year Net Income Total Assets Return on Assets

2015-2016 432.14 4962.57 8.71 %
2016-2017 558.08 5904.67 9.45 %

Conclusion: - Based on the calculation about, current ROA is only

9.45% while the previous year ROA was 8.71%. Based on this
ratio, we can say that the current performance is Good than the
previous year in term of efficiency.

4. Return On Capital Employed:

 Return on capital employed shows investors how many Rupees in
profits each Rupees of capital employed generates. ROCE is a
long-term profitability ratio because it shows how effectively
assets are performing while taking into consideration long-term
financing.

Return on Capital Employed = Net Operating Profit / (Total

Assets- Current Liabilities)

Year Net Operating Total Return on Assets

Profit Assets- C.L
2015-2016 432.14 2646.69 16.33 %
2016-2017 558.08 3053.59 18.28 %

Conclusion: - Based on the calculation about, current ROA is only

9.45% while the previous year ROA was 8.71%. Based on this
ratio, we can say that the current performance is Good than the
previous year in term of Resource efficiency.

5. Return On Equity:
The return on equity ratio or ROE is a profitability ratio that
measures the ability of a firm to generate profits from its
shareholders investments in the company.

Return on Equity = Net Income / Shareholder’s Equity

Year Net Income Shareholder’s Return on Equity

Equity
2015-2016 432.14 1936.80 22.31 %
2016-2017 558.08 2408.33 23.17 %
 Conclusion: - Based on the calculation about, Company that
generates high returns relative to their shareholder's equity are
company that pay their shareholders off handsomely, creating
substantial assets for each Rupees invested. These businesses are
more than likely self-funding companies that require no additional
debt or equity investments.

 Investment / Shareholder Ratio:

That can be used by shareholders in order to assess the worth of a
particular company and their shares:

1. Earnings per Share: This measures the company's potential

dividends that it could pay to shareholders.

Earnings per Share = Profit after tax / Number of ordinary shares

Year Profit After No of EPS

Tax Shares
2015-2016 432.14 47.51 9.10
2016-2017 558.08 47.51 11.75

Conclusion: - Based on the calculation about, current EPS is

11.75 while the previous year EPS was 9.10. Based on this ratio,
we can say that the company earning is increase

2. Dividend per Share: This measures the size of the dividends that
the company actually pays to its shareholders.

Dividend per share = Total Dividend / Number of ordinary shares

Year Total Dividend No of DPS

Shares
 2015-2016 118.77 47.51 2.50
2016-2017 118.78 47.51 2.50

Conclusion: - Based on the calculation about, No change in the

DPS of previous year and current year ratio

3. Dividend Cover: This measures how many more times the

dividends could have been paid out of the profit after tax.

Dividend Cover = Profit after tax / Total dividend paid

Year Profit After Total Dividend Cover

Tax Dividend Ratio
2015-2016 432.14 118.77 3.64
2016-2017 558.08 118.78 4.70

Conclusion: - Dividend coverage ratio is greater than 1, it

indicates that the earnings generated by the company are enough to
serve shareholders with their dividends. which may mean the
company will be able to sustain its current level of dividend
payouts.

 Other Financial Ratio:

1. Debt to Equity Ratio: Debt/Equity (D/E) Ratio, calculated by

dividing a company’s total liabilities by its stockholders' equity, is
a debt ratio used to measure a company's financial leverage.

Debt / Equity Ratio = Total Liability / Shareholder’s Equity

 Year Total Liability Shareholder’s D/E Ratio
Equity
2015-2016 758.46 1936.80 0.39
2016-2017 1085.14 2408.33 0.45

Conclusion: - Lower values of debt-to-equity ratio are favorable

indicating less risk. Company ratio in current year is 0.45 is lower
than ideal ratio i.e. 1:2. A debt-to-equity ratio of 1.00 means that
half of the assets of a business are financed by debts and half by
shareholders' equity. A value lower than 1.00 means that more
assets are financed by money of shareholder that those financed by
debt.

2. Fixed Assets Turnover Ratio: Fixed-asset turnover is the ratio of

sales (on the profit and loss account) to the value of fixed assets
(on the balance sheet). It indicates how well the business is using
its fixed assets to generate sales.

Fixed Assets Turnover Ratio = Net Sales / Net Fixed Assets

Year Net Sales Net Fixed Fixed Assets

Assets Turnover Ratio
2015-2016 11243.87 1623.81 9.62
2016-2017 12135.31 2046.15 5.93

Conclusion: - Generally, a high fixed assets turnover ratio

indicates better utilization of fixed assets and a low ratio means
inefficient or under-utilization of fixed assets. The company FATR
is current year is 5.93 is lower than of previous year that mean
inefficient or under utilization of fixed assets.