APROJECT REPORT

ON

FINANCIAL STATEMENT ANALYSIS OF TATA

MOTERS
LIMITED

SUBMITTED IN PARTIAL FULFILLMENT OF

BACHELOR OF BUSINESS
ADMINISTRATION
(BBA)

SAVITRIBAI PHULE PUNE UNIVERSITY

SUBMITTED BY
Komal Digamber Rindhe
Seat No: 13441

UNDER THE GUIDANCE OF

(PROF. AMEYA PATIL)
 SMT. KASHIBAI NAVALE COLLEGE OF
COMMERCE
PUNE 411004 [2020-2021]

SINHGAD TECHNICAL EDUCATION SOCIETY,S

SMT. KASHIBAI NAVALE COLLEGE OF COMMERC

(19Affiliated to University of pune and Recognized by Govt. of Maharashtra/15 Erandwane Smt. Khilare Marg. Off Karve Road.

Pune 411004 )

CERTIFICATE

This is to certify that Ms.Komal Digamber Rindhe who is a Bonafide

student of Smt. Kashibai Navale College of Commerce, Erandwane, Pune
has
worked on Project titled “Financial Statement Analysis of TATA Moters ”
and has successfully completed the project work in partial fulfilment
of award of degree of Bachelor of Business Administration (BBA).
This report is the record of student’s own efforts under our supervision and
guidelines.

Prof. Ameya Patil Dr. S. V. Deshpande

(Project Guide) (Principal)

Internal Examiner External Examiner

2
 Date:

Place:

DECLARATION

I, Komal Diamber Rindhe hereby declare that this is the record of

authentic work carried out by me during the academic year 2020-
2021 and has not been submitted to any other university or institute
the award of any degree.

Regards

Komal Diamber Rindhe

3
 ACKNOWLEDGEMENT

A wave of elation sweeps me off my feet, as I take another step forward in my academic
pursuit towards excellence with the completion of this project.I have taken efforts in this
project. However, it would not have been possible without the kind support and help of
many individuals and organizations. I would like to extend my sincere thanks to all of them.

I would like to express my very special gratitude and heartfelt thanks to our beloved
principalof Smt. Kashibai Navale College of Commerce Dr.S.V.DESHPANDE.

I am highly indebted to Prof. Ameya Patil for his guidance and constant supervision as well
as for providing necessary information regarding the project & also for his support in
completing the project.

I would like to express my gratitude towards my parents &my friends for their kind co-
operation and encouragement which help me in completion of this project.

I once again thanks all those who really helped and appreciated my work to design this
project report.

4
 INDEX

Sr. No. Particulars Page No.

Chapter 1 Working Capital Management

 Introduction 6
 Different Sources of Working Capital 8
 Determinants of Working Capital 9
 Classification of Working Capital 12
 Operating Cycle 15

Chapter 2 Company Profile

 TATA Motors 16

Chapter 3 Research Methodology

 Objective of the study 22

 Need & Importance 23
 Sources of Data collection 24
 Data Analysis & Interpretation 25

Chapter 4 Conclusion 45
Suggestions 46

Chapter 5 Bibliography 47

5
 WORKING CAPITAL MANAGEMENT

Introduction:

Working capital management refers to a company's managerial accounting strategy

designed to monitor and utilize the two components of working capital, current assets and
current liabilities, to ensure the most financially efficient operation of the company. The
primary purpose of working capital management is to make sure the company always
maintains sufficient cash flow to meet its short-term operating costs and short-term debt
obligations.

Working capital management  involves the relationship between a firm's short-

term assets and its short-term liabilities. The goal of working capital management is to ensure
that a firm is able to continue its operations and that it has sufficient ability to satisfy both
maturing short-term debt and upcoming operational expenses. The management of working
capital involves managing inventories, accounts receivable and payable, and cash.

Working capital is a measure of the company’s efficiency and short term financial
health. It refers to that part of the company’s capital, which is required for financing short-
term or current assets such a cash marketable securities, debtors and inventories. It is a
company’s surplus of current assets over current liabilities, which measures the extent to
which it can finance any increase in turnover from other fund sources.

Formula for Working Capital: Current Assets – Current Liabilities

Working Capital can be divided into two main categories:

Based on capital

1. Gross Working Capital

It refers to a firm’s investment in current assets. The sum of the current assets
is the working capital of the business. The sum of the current is quantitative aspect of
working capital which emphasizes more on quantity than on its quality, but it fails to

6
 reveal the true picture of the financial position of the business because every increase
in current liabilities will decrease the gross working capital.

2. Net Working Capital

It is difference between the current assets and current liabilities or the excess
of total current assets over total current liabilities. It can also be defined as that part of
a firm’s current asset which is financed with long term funds. It may be either
negative or positive. When the current assets exceed the current liabilities, the
working capital is positive and vice-versa.
Based on time period

1. Fixed/Permanent Working Capital

Fixed working capital represents the minimum level of raw materials, work-
in-progress, finished goods, stores, accounts receivables and cash which are in
circulation to ensure continuity of production.
Fixed working capital is again divided into two parts: regular working capital
and reserve working capital. The portion of fixed working capital which is utilized to
carry out the cyclical operation of current assets in the form of conversion of liquid
cash into raw materials, raw materials into finished goods, finished goods into debtors
and debtors into liquid cash in a continuous manner is known as regular working
capital. On the other hand, the portion of fixed working capital, which is preserved for
meeting uncertain and emergent working needs, is known as reserve working capital.

2. Variable/Temporary Working Capital

If the demand for the products of the business goes up at any time it needs
additional funds to pay for more materials, labor and other expenses and to meet the
requirement of cash balance to be maintained in the changed situation. This additional
working capital needed to feed the operating cycle in busy business periods is known
as variable or temporary working capital.
Variable working capital may be further sub- divided into:
(a) Seasonal working capital
(b) Special working capital.
The additional working capital required by a concern to carry out its operating
activities in busy seasons of high market demands is known as seasonal working capital.

7
 On the other hand, the portion of working capital that is needed by a concern to meet the
extraordinary requirements of special situations is known as special working capital.

Different Sources of Working Capital:

A firm can use two types of sources to finance its working capital, namely:
(i) Long-term source
(ii) Short-term source.

(i) Long-Term Sources:

Every business organization is required to maintain a minimum balance of cash and
other current assets at all the times—irrespective of the ups and downs in the level of activity.
This type of working capital should be arranged from long-term sources of fund.
The following are the long-term sources of financing permanent working capital:
 Issue of Equity shares
 Issue of Preference shares
 Retained earnings (ploughed-back profits)
 Issue of Debentures and other long-term bonds
 Long-term loans taken from financial institutions etc.

(ii) Short-Term Sources:

The short-term financing of working capital is generally used to support the
temporary working capital which is usually needed to meet the seasonal increase or sudden
spurt in demand.
Various short-term sources of financing of temporary working capital are:
 Bank credit (e.g., cash credit, letter of credit, bills finance, working capital demand loan,
overdraft facility etc.)
 Public deposits
 Trade credit
 Outstanding expenses
 Provision for depreciation
 Provision for taxation
 Advances from customers

8
 Loans from directors
 Security money received from employees
 Receipts from factoring.
Determinants of Working Capital:
A firm should always maintain a requisite amount of working capital for smooth and
efficient functioning of its operations. The total working capital requirement is determined by
a wide variety of factors. These factors affect different enterprises differently. They also vary
from time to time.
In general, the following factors are to be considered in determining the working
capital requirement of a firm:

 Nature of Business:
The working capital requirements of a firm are widely influenced by the nature of
business. Public utilities like bus service, railways, water supply etc. have the lowest
requirements for working capital—partly because of the cash nature of their business and
partly because of their rendering service rather than manufacturing product and there is no
need of maintaining any inventory or book debt except capital assets.

 Size of the Business:

The amount of working capital requirement also depends upon the size of the business.
The size can be measured in terms of the scale of operations. A large firm with a high scale of
operation will require maintaining a large amount of working capital than a firm with a small
scale of operation.

 Production Cycle:
Production cycle is the time involved in manufacturing or processing a product. It starts
when raw materials are put in the production process and ends with the completion of
manufacturing of the product. Longer the production cycle, higher is the need of working
capital.

 Business Cycle:
The working capital requirements are also determined by the nature of the business cycle.
During the boom period, the need for working capital will increase to meet the requirements

9
of increased production and sales. On the other hand, in a slack period, the reduced volume of
operation will require relatively lower amount of working capital.

 Credit terms of Purchase and Sale:

The period of credit given by the suppliers and the period of credit granted to the
customers will affect the working capital needs of a firm. If a firm allows a very short credit
period, cash will be realized very soon from debtors. So the need for the working capital will
be less. If the firm has to purchase raw materials in cash or gets credit for shorter period, it
has to arrange for relatively higher amount of working capital.

 Seasonal Variations:
There are industries like cold drinks, ice-cream and woolen where the goods are either
produced or sold seasonally. So, in such industries, working capital requirements during
production or sale seasons will be large and these will start decreasing when the season starts
coming-to end.

 Operating Efficiency:
If the operating efficiency of a firm is very high, the resources will be properly utilised.
As a result, it improves the profitability of the firm which ultimately, helps in releasing the
pressure of working capital. On other hand, inefficiency compels the firm to maintain
relatively a high level of working capital.

 Price level changes:

If prices of input rise, the firm requires additional working capital to maintain the same
level of production.

 Growth and Expansion of the Business:

Every concern wants to grow over a period of time and with the increase in its size, so the
working capital requirements are bound to increase. A growing firm would require greater
working capital than a static one.

 Profitability and Retention Money:

The net profit earned by the firm goes to increase the working capital to the extent it has
been earned in cash. The cash profit can be found by adjusting non-cash items such as
depreciation, outstanding expenses and losses or intangible assets written-off in the net profit.

10
But what portion of this profit will be reinvested as working capital will depend upon the
retention policy of a firm which is, again influenced by corporate tax structure and dividend
policy. So, if the amount of retained profit is not immediately invested outside the business, it
would increase the amount of working capital.

 Relationship of Material Cost to Total Cost:

In manufacturing concerns, where raw material costs bear a large proportion to the total
cost of production, a greater amount of working capital will have to be maintained. For
example, in industries like textile and electronics, large sums are required to maintain the
inventory of such raw materials.

 Turnover of Current Assets:

The speed with which the current assets revolve around also affects working capital
requirements of a firm. In few cases like vegetables or fruit shops, stocks get sold very
quickly and, for this reason, a little or no working capital is required in carrying over the
stock.

11
 CLASSIFICATION OF WORKING CAPITAL RATIO

Working capital ratio means, ratios which are related with working capital management, e.g.
Current assets, current liabilities, liquidity, profitability, and risk turn off these ratios are
classified as follows:

1. Efficiency ratio

The ratios compounded under this group indicate of the organization to use the various to use
the various kinds of assets by converting them the form of sale. This ratio also called activity
ratio or assets management ratio. As the assets basically categorized as fixed assets and
current assets. Further classified according to individual components of current assets viz,
investment and receivables or debtors or as net current assets, the important of efficiency
ratio as follow,

1. Working capital turnover ratio

2. Inventory turnover ratio
3. Debtors turnover ratio
4. Current assets turnover ratio

 Working capital turnover ratio

It signifies that for an amount of sales, a relative amount of working capital is needed. If any
increase in sales contemplated working capital should be adequate and thus this ratio helps
management to maintain the adequate level of working capital. The ratio measures the
efficiency with which the working capital is being used by firm. It may thus net working
capital turnover by dividing sales by working capital.

 Inventory turnover ratio

Inventory turnover ratio indicates the efficiency of the firm in producing and selling its
products. It is calculated by dividing the cost of goods sold by average inventory. The

12
average inventory is the average of opening and closing balance of inventory in a
manufacturing company like JISL inventory of finished goods is used to calculate inventory
turnover ratio.

 Debtors turnover ratio

The derivation of this ratio is made in following way:-

Debtors turnover ratio = Credit Sales

Average Debtors
Gross sales are inclusive of excise duty and scrap sales because both may enter into
receivables by credit sales. Average receivable calculate by opening plus closing balance
divide by 2. Increasing volume of receivables without a matching increase in sales in
reflected by a low receivables turnover ratio. It is indication of slowing down of collection
system or an extend line of credit being allowed by customer organization. The letter may be
due to the fact that firm is losing out to competition.
Debtor turnover indicates the number of times debtor turnover each year. Generally
the higher the value of debtor’s turnover, the more is the management of credit.

 Current assets turnover ratio

Current assets turnover ratio is calculated to know the firms efficiency of utilizing the current
assets. Current assets include the assets like inventories, sundry debtors, bills receivables, and
cash in hand or bank, marketable securities, prepaid expenses and short term loans and
advances. This ratio includes the efficiency with which current assets turn into sales.

2. Liquidity ratio

The ratios compounded under this group indicate the short term position of the organization
and also indicate the efficiency with which the working capital is being used. The most
important ratio under this group is follows,

1. Current ratio
2. Quick ratio
3. Absolute liquid ratio

13
 Current Ratio
It is computed by dividing current assets by current liabilities. This ratio is generally an
acceptable measure of short-term solvency as it indicates the extent to which he claims of
short term creditors are covered by assets that are likely to be converted into cash in a
period corresponding to the maturity of the claims.

Current Ratio = Current Assets / Current Liabilities

 Quick Ratio
The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio
measures a company’s ability to meet its short-term obligations with its most liquid
assets. For this reason, the ratio excludes inventories from current assets, and is calculated
as follows:
Quick ratio = (current assets – inventories) / current liabilities, or= (cash and equivalents
+ marketable securities+ accounts receivable) / current liabilities. The higher the quick
ratio, the better the company's liquidity position. Also known as the “acid-test ratio" or
"quick assets ratio."

 Absolute Liquid ratio

Absolute liquid ratio extends the logic further and eliminates accounts receivable (sundry
debtors and bills receivables) also. Absolute liquidity ratio relates cash, bank and marketable
securities to the current liabilities.

Since absolute liquidity ratio lays down very strict and exacting standard of liquidity,
therefore, acceptable norm of this ratio is 50 percent. It means absolute liquid assets worth
one half of the value of current liabilities are sufficient for satisfactory liquid position of a
business.

Absolute liquid ratio is calculated by using the following formula:

Absolute liquid ratio = Absolute liquid assets / Current liabilities

Where absolute liquid assets = Cash + Bank + marketable securities.

14
 OPERATING CYCLE

The need of working capital arrived because of time gap between production of goods of and
their actual realization after sale. This time gap is called “Operating cycle” or “Working
capital cycle”. The operating cycle of company consist of time period between procurement
of inventory and collection of cash from receivables.

The operating cycle is the length of time between the company’s outlay on raw material,
wages and other expenses and inflow of cash from sales of goods.

Operating cycle is an important concept in management of cash and management of cash

working capital. The operating cycle reveals the time that elapse between outlays of cash and
inflow of cash.

Quicker the operating cycle less amount of investment in working capital is needed and it
improves profitability. The duration of the operating cycle depends on nature of industries
and efficiency in working capital management.

15
The duration of the operating cycle for the purpose of estimating working capital requirement
is equivalent to the sum of duration of each these tables less the credit period allowed by the
supplier of the firm.

16
Company Profile

Part of the USD100 billion Tata group founded by Jamsetji Tata in 1868, Tata Motors is
among the world’s leading manufacturers of automobiles. They believe in ‘Connecting
aspirations’, by offering innovative mobility solutions that are in line with customers'
aspirations.

Tata Motors Group (Tata Motors) is a $45 billion organisation. It is a leading global
automobile manufacturing company. Its diverse portfolio includes an extensive range of cars,
sports utility vehicles, trucks, buses and defence vehicles. Tata Motors is India’s largest and
the only original equipment manufacturer (OEM) offering extensive range of integrated,
smart and e-mobility solutions.

They are India's largest automobile manufacturer, and we continue to take the lead in
shaping the Indian commercial vehicle landscape, with the introduction of leading-edge
powertrains and electric solutions packaged for power performances and user comfort at the
lowest life-cycle costs.
Their focus on connecting aspirations and our pipeline of tech-enabled products keeps
them at the forefront of the market. They have identified six key mobility drivers that will
17
lead us into the future – modular architecture, complexity reduction in manufacturing,
connected & autonomous vehicles, clean drivelines, shared mobility, and low total cost of
ownership.
History

Tata Motors was established in 1945 as Tata Engineering and Locomotive Co. Ltd. to
manufacture locomotives and other engineering products. It is India's largest automobile
company, with standalone revenues of Rs. 25,660.79 crores (USD 5.5 billion) in 2008–09. It
is the leader in commercial vehicles in each segment, and among the top three in passenger
vehicles with winning products in the compact, midsize car and utility vehicle segments. The
company is the world's fourth largest truck manufacturer, and the world's second largest bus
manufacturer.

The company's 23,000 employees are guided by the vision to be 'best in the manner in
which they operate best in the products they deliver and best in their value system and ethics.'
Tata Motors' presence indeed cuts across the length and breadth of India. The company's
manufacturing base in India is spread across Jamshedpur (Jharkhand), Pune (Maharashtra),
Lucknow (Uttar Pradesh), Pantnagar (Uttarakhand) and Dharwad (Karnataka). The
company's dealership, sales, services and spare parts network comprises over 3500 touch
points; Tata Motors also distributes and markets Fiat branded cars in India.

Tata Motors is also expanding its international footprint, established through exports
since 1961. The company's commercial and passenger vehicles are already being marketed in
several countries in Europe, Africa, the Middle East, South East Asia, South Asia and South
America.

The foundation of the company's growth over the last 50 years is a deep
understanding of economic stimuli and customer needs, and the ability to translate them into
customer–desired offerings through leading edge R&D.

Facilities

Their strong focus on excellence in manufacturing ensures that their facilities carry out every
step in the manufacturing process — from design to production to assembly — with the

18
highest standards of quality. Their R&D, design and manufacturing facilities are located in
more than 20 sites across Asia, Africa and Europe.

Manufacturing
Their manufacturing facilities have more than just state-of-the-art technology; they have the
best and passionate engineering and quality talent working to produce superior vehicles.
Striving for excellence is an integral part of the Tata Motors culture. Their plants are certified
for world class manufacturing and quality standards. Their focus on automation and
technology has kept us at the forefront of the automobile industry.

Design

At Tata Motors, design is vital simply because a vehicle’s colour, shape and features are
crucial to its being bought. Their recent offerings, Bolt, Zest and Ultra, reflect global design
dimensions. While designing commercial vehicles, their designers focus on safety,
maintenance and elements such as driver fatigue. Their designers bear in mind that to the man
on the street, the vehicle must convey a trendy, trustworthy message.

R&D Centers

Tata Motors’ mission is to offer the best vehicle experience to its global customers.
Consequently, its R&D centres focus on various issues such as the look and feel of a vehicle,
safety and efficiency and of course, fuel economy.

19
 Products

Tiago Bolt

Zest Indigo

Safari Storme Aria

20
 SWOT Analysis

Strength

 The company has a strategy in place for the next stage of its expansion. Not only is it
focusing upon new products and acquisitions, but it also has a programme of intensive
management development in place in order to establish its leaders for tomorrow.
 The company has had a successful alliance with Italian mass producer Fiat since 2006. This
has enhanced the product portfolio for Tata and Fiat in terms of production and knowledge
exchange.

Weakness

 The company’s passenger car products are based upon 3rd and 4th generation platforms,
which put Tata Motors Limited at a disadvantage with competing car manufacturers.
 Despite buying the Jaguar and Land Rover brands; Tata has not got a foothold in the luxury
car segment in its domestic, Indian market.

Opportunities

 Nano is the cheapest car in the World – retailing at little more than a motorbike. Whilst the
World is getting ready for greener alternatives to gas-guzzlers the Nano the answer in terms
of concept or brand.

Threat

 Other competing car manufacturers have been in the passenger car business for 40, 50 or
more years. Therefore Tata Motors Limited has to catch up in terms of quality and lean
production.

21
 Sustainability and environmentalism could mean extra costs for this low-cost producer. This
could impact its underpinning competitive advantage. Obviously, as Tata globalises and buys
into other brands this problem could be alleviated.

OBJECTIVE OF THE STUDY

Study of working capital management is important because unless the working capital is
managed effectively, monitored efficiently planned properly and reviewed periodically at
regular intervals to remove bottlenecks if any, the company cannot earn profits and increase
its turnover.

 To study the working capital management of Tata Motors Limited.

 To study the optimum level of current assets and current liabilities of the company.
 To study the liquidity position through various capital related ratios.
 To study the working capital components such as receivables accounts, cash
management, inventory position.
 To study the ways and means of working capital finance of Tata Motors Limited.

22
 NEED & IMPORTANCE

 Working Capital provides smooth flow of production in the company.

 A sound management of working capital helps in completing the operating cycle quickly.
This enables a firm to increase its profitability.

 Firms with more efficient working capital management will generate more free cash
flows which will result in higher business valuation and enterprise value.

 A firm paying its suppliers on time will also benefit from a regular flow of raw materials,
ensuring that the production remains uninterrupted and clients receive their goods on
time.

23
 SOURCES OF DATA COLLECTION

Research may be very broadly defined as systematic gathering of data and information and its
analysis for advancement of knowledge in any subject.

The information & data required in the project was mainly collected through secondary
sources.

 Primary data is data that is collected by a researcher from first-hand sources, using
methods like surveys, interviews, or experiments. It is collected with the research project
in mind, directly from primary sources.

 Secondary data means data that are already available i.e., they refer to the data which
have already been collected by someone else and data has been passed through a
statistical process. It is the second hand data. Secondary data is data gathered from
studies, surveys, or experiments that have been run by other people or for other research.

24
 DATA ANALYSIS & INTERPRETATION

BALANCESHEET AND CASH FLOW STATEMENT

OF
TATA MOTORS

25
Tata Motors Balance Sheet for 5 Years

26
Tata Motors Cash Flow Statement

27
Tata Motors Profit & Loss Statement
28
CALCULATION OF WORKING CAPITAL

29
 Year 2018 2017 2016 2015 2014

Current Assets - Current -9247.29 -8781.27 -6840.05 -11797.66 -12058.47

Liabilities

Interpretation:

30
 As from the above table and graph we observe that the working capital is negative of
all five years which shows liquidity is very low.

 Working capital has increased negatively from -12058.47 to -9247.29 from year 2014
to year 2018.

 In year 2015 there is slight rise in working capital i.e. -11797.66 but still negative.

 In year 2018 the working capital of the company has decreased negatively from -
8781.27 to -9247.29, but still company has negative working capital.

 According to above working capital statement we can observe that company

recovering debts positively as compared to year 2014. The loss is comparatively less
in the year 2018.

RATIOS RELATED TO WORKING CAPITAL

31
1. Current Ratio

Particular 2018-2017 2017-2016 2016-2015 2015-2014 2014-2013

Current Assets 14971.66 12757.08 11861.69 8572.97 6739.06

Current 24218.95 21538.35 18701.74 20370.63 18797.53

Liabilities

Current Ratio 0.62 0.59 0.63 0.42 0.36

Current Ratio = Current Assets

Current Liabilities

Interpretation:

32
 Current ratio is that which measures a company’s ability to pay short term and
obligations. It indicates the short term solvency.

 Ideally it must be two times but if it is below one, it indicates inadequacy of current assets
to repay current liabilities.

 It has a pretty constant value and floats below the 0.7 mark which means that the business
does not have a healthy level of Current assets over Current liabilities.

 In the years 2014 & 2015, the ratio is almost near 0.4. But in the years 2016-2018, the
current assets have significantly increased as compared to the previous years.

2. Liquid Ratio

33
Particular 2018-2017 2017-2016 2016-2015 2015-2014 2014-2013

Current Assets- 8619.62 7204.07 9816.11 3770.89 2876.53

Inventories

Current Liabilities- 24218.95 21538.35 18701.74 20370.63 87797.53

Bank Overdraft

Liquid Ratio 0.35 0.33 0.52 0.18 0.32

Liquid Ratio = Current Assets – Inventories

Current Liab. – Bank Overdraft

Interpretation:

34
 In accounting, the term liquidity is defined as the ability of a company to meet its
financial obligations as they come due.

 The liquidity ratio, then, is a computation that is used to measure a company’s ability to
pay its short term debts. Even it indicates the short term solvency.

 Ideally it must be one times.

 In the years 2014-2018 the quick ratio of Tata Motors is less than 1 which is quite lesser
than the ideal liquid ratio which means that they had a low ability to meet its short term
liquidity goals.

 The short term liquidity position of the business is not satisfactory.

3. Stock Turnover Ratio

35
Particulars 2018-2017 2017-2016 2016-2015 2015-2014

Cost of goods sold 48311.09 36701.4 33666.8 31413.82

Average inventory 5952.52 5335.46 4960 4331.80

Stock TOR 8.11 6.87 6.78 7.25

Stock turnover ratio = Cost of goods sold

Average inventory

Interpretation:

36
 It is observed that inventory turnover ratio indicates maximum sales achieved with the
minimum investment in the inventory.

 According to above chart and table we can see that stock management has not
deteriorated.

 In the year 2016-2017 ratio was 6.87 and has increased to 8.11 in year 2017-2018. This
indicates that the firm has a higher profitability index in this period.

 In year 2014-2015 there was slight raise but again it shows decreasing trend.so as we
observed we can say stock management is not good.

4. Debtors Turnover Ratio

37
Particulars 2018-2017 2017-2016 2016-2015 2015-2014

Credit Sales 58831.41 44316.34 42845.47 36294.74

Average Debtors 2803.90 2086.79 1580.03 1165.59

Debtor TOR 20.98 21.23 27.11 31.13

Debtors turnover ratio = Credit Sales

Average Debtors

Interpretation:

38
 Debtors Turnover Ratio indicates number of times the debtors were recovered in a year.
Higher the ratio higher will be the efficiency of the collection department.

 As shown in chart ratio in 2014-2015 was 31.13 times, in 2015-2016 was 27.11 times, in
2016-2017 was 21.23 times and in 2017-2018 was 21.98 times.

 It indicates decreasing trend which means that collection department’s efficiency

decreasing year by year.

 According to the graph, in the 5 years, the company has an unreasonable ratio, this means
that the company is not able to realize their debts and that they cannot pay off their
debtors easily.

5. Creditor Turnover Ratio

39
Particulars 2018-2017 2017-2016 2016-2015 2015-2014

Credit Purchase 42482.21 32251.23 29618.74 28367.83

Average Credit 8247 6112.06 6996.91 9262.50

Credit TOR 5.15 5.27 4.23 3.06

Creditor turnover ratio = Credit Purchase

Average Creditor

Interpretation:

40
 Creditors Turnover Ratio indicates number of times the creditors were paid off in a year.
Higher the ratio higher will be the efficiency of the payables department.

 In the years from 2014-2015 up until 2017-2018 the ratio of the company is consistently
increasing. This indicates that the company is liquid enough to pay off their investors.

 There is a slight decrease in the year 2017-2018 from 2016-2017. But the deviation is not
that significant.

 Overall the company is quite liquid enough to have a consistent creditor turnover ratio.

6. Current Assets Turnover Ratio

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Particular 2018-2017 2017-2016 2016-2015 2015-2014 2014-2013

Sales 58831.41 44316.34 42845.47 36294.74 34288.11

Current assets 14971.66 12757.08 11861.69 8572.97 6739.06

Current assets 3.92 3.47 3.61 4.23 5.08

TOR

Current Assets Turnover Ratio = sales

Current assets

Interpretation:

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 Current Asset Turnover Ratio indicates the sales achieved for every one time investment
in current assets. Higher the ratio, higher will be the current asset management.

 The current asset turnover ratio in the company shows increasing trend only in year 2013-
2014. In the following years, it shows a decreasing trend in the ratio.

 The current asset management efficiency has decreased. The ratio has increased slightly
in the year 2017-2018, 3.92 from 3.47 in 2016-2017.

 It shows the company is taking efforts to increase their return on investments.

7. Working Capital Turnover Ratio

Particular 2018-2017 2017-2016 2016-2015 2015-2014 2014-2013

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Sales 58831.41 44316.34 42845.47 36294.74 34288.11

Working Capital -9247.29 -8781.27 -6840.05 -11797.66 -12058.47

WCT Ratio -6.36 -5.04 -6.26 -3.07 -2.84

Working Capital Turnover Ratio = Sales

Working Capital

Interpretation:

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 According to the graph, in almost all years, the company has a negative ratio, this means
that the company has low amount of net sales while not being able to maintain its
working capital margin.

 The Net sales are very high while the working capital was low. There is a constant
decrease in the Working Capital Ratio.

 The ratio is constantly on the negative side. But it the years 2015-2016 & 2017-2018 the
ratio has decreased negatively as compared to earlier years.

CONCLUSION

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The study of working capital management of Tata Motors has revealed that:

 The working capital of TATA MOTORS is negative of all five years, which indicates
company is unable to cover its short term liabilities with its current assets.

 The basic objective of working capital management is to minimize cost to the firm.

 The working capital management should aim to optimize production and sales with
minimum risk and cost.

 Working capital of the company has decreasing trend at first and then increasing trend
but the working capital of company is still negative which indicates poor liquidity.

SUGGESTIONS

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 The Current & Quick ratios are almost up to the standard requirement. So the working
capital management, Tata Motors is satisfactory & has to try to increase or maintain it
further.

 The company should take precautionary measures for investing & collecting funds
from receivables & to reduce the bad debts.

 Creditor’s turnover ratio is increasing. Company is making prompt payment to its

creditors. On-time payment to suppliers will increase the credibility of the firm.

BIBLIOGRAPHY

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 Cases in Finance/Project by Ameya Patil - Nirali Prakashan
 Classroom Lectures
 Wikipedia
 www.tatamotors.com
 www.moneycontrol.com

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