CHAPTER-I

Introduction

The term financial analysis, also known as analysis and interpretation of financial statements,
refers to the process of determining financial strengths and weaknesses of the firm by
establishing strategic relationship between the items of the balance sheet, profit and loss account
and other operative data. “Analyzing financial statements,” according to Metcalf and Titard, “is a
process of evaluating the relationship between component parts of a financial statement to obtain
a better understanding of a firm‟s position and performance." There are various methods or
techniques used in analyzing financial statements such as comparative statements, schedule of
changes in working capital, common-size percentages, funds analysis, trend analysis and ratio
analysis. The ratio analysis is the most powerful tool of financial analysis.
The Main purpose of the study is to provide theoretical framework for analyzing financial
statements,To study the financial position of the company and current status of TATA Motors
ltd.and to understand the financial soundness of the company.

Sources of data This study heavily relies and is based on secondary data. The secondary data
comprised of the 76th integrated annual reports of TATA Motors ltd. , ranging for a period of 2
years from 2019-20 to 2020-21 . Various other reports like the company magazines, bulletins
have also been used. Published text books like financial management, corporate finance,
financial analysis and management accounting have been used for the purpose of this study.
Relevant websites have also been used. Discussions with concerned personnel in TATA Motors
ltd have also been appropriately used to supplement the secondary data.

Tools of data analysis The data collected for the study was analyzed using financial tools and
statistical tools. The financial tools of analysis include ratio analysis covering interest coverage
ratio , debt-equity ratio and liquid ratio also trend percentage analysis. There are various tool
and techniques available for analyzing financial statements of a company

In the section 2 the review of literature was discussed , section 3 comprises of the research and
methodology and in the section 4 result and discussion was discussed and the section 5
comprises of summary and conclusion

1
 CHAPTER-II
Review and Literature
In order to have proper insight into the various aspects of the problem under study. it will be
useful and imperative to review the studies conducted in the past. Till now , many studies have
been conducted on the different aspects to measuring the financial efficiency of public and
private sectors but it has been rarely tried to work on the problems of these undertakings and
suggested for taking out the one or two or some other aspects of finance or focus on other
industry. There is wide range of literature available on financial performance analysis of
different automobile companies in conforming to its dynamic value and significance of intuitive
nature. A good dealing in analytical part of literature exists at broad levels like size and
technology, problem associated with productivity, financial performance, and capacity
utilization. Relevant existing literature and studies have been clipped below. A researcher has
studied this literature for gaining insight into the problem. In this section an attempt is made to
review the earlier studies in evaluating the operating and financial performance of automobile
industries in order to identify the gap that exists in the study on automobile industries.

Sekar, Gowri and Ramya(2020)examined the influence of capital structure on the performance of
the company. It is measured using EBIT-EPS analysis. In this paper an attempt is made to
analyze the capital structure of Tata Motors Limited during the period 2003-04 to 2019-2020, so
as to understand the factors that influenced the capital structure decisions of the company and to
know the impact of capital structure decisions on profitability and performance of the company.
The company's performance is measured through EBIT-EPS analysis. Increase in the level of
debt and net worth increases the debt equity ratio. Capital structure is the crucial decision to be
taken by every business, the positives and negatives of these decisions plays a important role in
determining the future of every business. Agarwal(2019) studied the comparative financial
performance of Maruti Suzuki India Limited and Tata Motors Limited. Financial appraisal is the
process of determining the operating and financial characteristics of a firm from accounting and
financial statements. Financial performance of Maruti Suzuki India Limited and Tata Motors
Limited has been studied by Liquidity analysis and leverage analysis (long term solvency
analysis). Liquidity analysis attempts to analyses the companies’ ability to meet its short-term

2
obligations. Leverage ratios assess the long-term solvency of a firm i.e ability to repay the
principal amount when due; and the ability to pay the interest and dividend promptly and
periodically.Surekha and Krishnaiah(2020) observed how much profit has been earned. This is
possible by using Profitability ratios. These ratios are the most important and reliable indicators
to measure the financial performance of Tata Motors. These ratios check the current operating
performance of the Tata Motors, and are very helpful for the management to take remedial
measures if there is a declining trend. In this paper, analysis reveals the prosperity of Tata
Motors from 2016 to 2020. Prosperity can be examined by using profitability ratios, statistical
tools and growth chart. Jain, Shukla and Gupta(2020) have made this research paper to analyse
the financial position of the selected automobile companies for last five years. The present study
is based on secondary data. Financial position is analysed by using different ratios. From the
study, position of Maruti Suzuki & Tata Motors is ascertained.Prabhakaran and Banu(2020)
analysed of financial position is a process of evaluating relationship between component parts of
financial statements to obtain a better understanding of the firm's position and performance. This
study covers over all financial analysis of TATA Motors by using financial ratios, liquidity,
solvency, activity and profitability. The study covers only seven years between 2013-14 to 2019-
20.

3
 TABLE NO.1 - SUMMARY OF REVIEW OF LITERATURE

SL Author’s Article/Topic Objective of the Time/ Sample Firm Research

NO Name Name study Data Period Asset Methodology
1 M Sekar, Procedia The main 2003-04 TATA EBIT-EPS analysis
Ms M Economics and objective of the to Motors
Gowri Finance 11, 445- study is to 2019-2020
And 458, 2019 examine the
Ms G performance of
Ramya the
TATA Motors
2 Nidhi Agarwal International The main 2019-2020 TATA Accounting
Journal in objective of the Motors Ratios
Management & study is to focus And
Social Science on the Maruti
comparative Suzuki
financial
performance of
Maruti Suzuki
India Limited and
Tata Motors
Limited.
3 B Surekha and Ratio 10 The Main purpose 2016-2020 TATA Profitability
K Rama of this study to Motors Ratio
Krishnaiah observe how much
profit has been
earned by TATA
Motors
4 Megha Jain, International The main 2019-2020 TATA Financial
Abhikrati Scientific objective of this Motors Ratio
Shukla Research research paper is
And In to analyse the
Swati Multidisciplinary financial position
Gupta Studies of the selected
automobile
companies for last
five years
5 G EXCEL This 2013-14 to TATA Ratio
Prabhakaran International study 2019-20 Motors Analysis
And Journal of covers over all
J Nazarin Multidisciplinary financial analysis
Banu Management of
Studies TATA
Motors
by
using financial
ratios, liquidity,
solvency, activity
and profitability
2.1.Objective of the study
4
The Main purpose of the study is to provide theoretical framework for analyzing financial
statements,To study the financial position of the company and current status of TATA Motors
ltd.and to understand the financial soundness of the company.

CHAPTER-III

5
3.1.Data and Sample

Sources of data This study heavily relies and is based on secondary data. The secondary data
comprised of the 76th integrated annual reports of TATA Motors ltd. , ranging for a period of 2
years from 2019-20 to 2020-21 . Various other reports like the company magazines, bulletins
have also been used. Published text books like financial management, corporate finance,
financial analysis and management accounting have been used for the purpose of this study.
Relevant websites have also been used. Discussions with concerned personnel in TATA Motors
ltd have also been appropriately used to supplement the secondary data.

3.2.Tools and techniques

Tools of data analysis The data collected for the study was analyzed using financial tools and
statistical tools. The financial tools of analysis include ratio analysis covering interest coverage
ratio , debt-equity ratio and liquid ratio also trend percentage analysis. There are various tool
and techniques available for analyzing financial statements of a company
Analysis and interpretation
In order to make Comprehensive study about the financial statements of TATA Motors , I have
taken 3 key financial ratios such as :- Debt-equity ratio , interest coverage ratio , liquidity ratio .
These can be explained as below
Table no.2

Type Of Ratio Formula Used Components

Interest Coverage Ratio
The EBIT includes
Profit after tax and the
EBIT / Interest Expenses interest expenses
includes other expenses
in the balance sheet

The total debt includes

Debt(Excluding leases)/ the long term
Debt Equity Ratio Shareholder’s Equity borrowings and
shareholder’s fund
includes equity share
capital and reserve and
surplus

The liquid asset

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 Liquid asset / includes includes the
Liquid Ratio Current Liability cash and cash
equivalent and current
liability includes total
current liability

CHAPTER-V

7
Result and discussion

Following are the key financial ratio of Tata Motors

Table no.3

Type Of Ratio FY 2020-21 FY 2019-20

Debt equity ratio 2.46 1.88

Liquid ratio 1.33 0.98

Interest Coverage Ratio 1.1 0.04

Chart no.1 - Key Financial Rati os

FY 2020-21 FY 2019-20
2.46

1.88

1.33

1.1
0.98

0.04

D e b t e q u i t y r a ti o L i q u i d r a ti o I n t e r e s t C o v e r a g e R a ti o

Interpretation

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Interest Coverage ratio :- Due to higher Earnings before other income (excluding Incentives),
finance costs, foreign exchange gain/(loss) (net), exceptional items and tax at both Tata motors
and Jaguar Land Rover, in FY 2020-21 compare to FY 2019-20, the interest coverage ratio is
high.

Debt Equity Ratio:- The consolidated gross debt has increased by 14.4% in FY 2020-21
compared to FY 2019-20. The net debt (net of cash and cash equivalent including bank balances,
mutual fund and deposit with financial institution - current) equity ratio is increased by 7.3% to
1.25 as at March 31, 2021 compared to 1.16 as at March 31, 2020. Equity attributable to
shareholders of Tata Motors Limited decreased to `55,247 crores as at March 31, 2021,
compared to `63,079 crores as at March 31, 2020. This decrease is mainly due to losses of
`13,451 crores and actuarial losses in pension reserve of `5,901 crores, offset by hedging reserve
gain of `4,147 crores, currency translation reserve gain of `3,853 crores and securities premium
of `2,556 crores pursuant to conversion of share warrants.

Liquid Ratio :- Cash and cash equivalents increased by `13,232 crores in FY 2020-21 to `31,700
crores from `18,468 crores in FY 2019-20, including a favourable currency translation of `1,592
crores from GBP to Indian rupees. The increase in cash and cash equivalents (excluding currency
translation) resulted from the changes to our cash flows in FY 2020-21 when compared to FY
2019-20

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 CHAPTER-V

Summary and conclusion

The study highlights, the financial performance of Tata Motors Ltd is satisfactory. To conclude,
Tata Motors company has shown its impact on industry. We can see the downfall of the
company, but it is expected, as it is such a big company. During the year 2019-20 and 2020-21 it
will earned a loss of 12009 crores and 13488 crores consecutively . So , it will try to improve the
profitability in next financial year respectively . it is expected that it will recover the loss .
Sources of data This study heavily relies and is based on secondary data. The secondary data
comprised of the 76th integrated annual reports of TATA Motors ltd. , ranging for a period of 2
years from 2019-20 to 2020-21 . Various other reports like the company magazines, bulletins
have also been used. Published text books like financial management, corporate finance,
financial analysis and management accounting have been used for the purpose of this study.
Relevant websites have also been used. Discussions with concerned personnel in TATA Motors
ltd have also been appropriately used to supplement the secondary data. Tools of data analysis
The data collected for the study was analyzed using financial tools and statistical tools. The
financial tools of analysis include ratio analysis covering interest coverage ratio , debt-equity
ratio and liquid ratio also trend percentage analysis. There are various tool and techniques
available for analyzing financial statements of a company . The study has certain limitations that
the result of the study will depends upon the accuracy of the data provided by the company , I
have taken the data for the period of only 3 years from 2018-19 to 2020-21 , the tools and
techniques which I have used have its own limitation and I have used only the secondary data .
The study examines the liquidity , solvency , profitability and the working capital position of the
business which can be used by the management of the Tata Motors in order to take necessary
decision , the creditors can be use the study to analyse the liquidity position and to determine
the safety level available to them , the investors will also use the research paper in order to
examine the profitability and the bankers and lenders also can study the long term solvency
from the study undertaken in this research paper .

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Reference

 Ms. Kamsala Sandhya (2021), “ An Organization Study On Tata Motors Limited ”

,Department Of Management Studies And Research Centre, Volume 1,Issue 1,Pp 1-50
 Dr, M Sekar ,Ms. M. Gowri , Ms . G . Ramya(2014), “ A Study On Capital Structure
And Leverage Of Tata Motors Limited: Its Role And Future Prospects”, Symbiosis
Institute Of Management Studies Annual Research Conference, Volume 11 ,Issue 1 , Pp
445-458
 B .Surekha , K.Rama Krishnaiah (2015), “ A Study On Financial Analysis Of Tata
Motors International Journal Of Commerce , Volume 4 Issue 4 , Pp 1224-1228
 G Prabhakaran, J Nazirin Banu(2014) ,’’A Study On Financial Analysis Of Tata Motors
Ltd .,Navi Mumbai India ,’’Excel International Journal Of Multidisciplinary
Management Studies, Volume 4 , Issue 3 , Pp 109-120
 Nidhi Agarwal(2015), ‘’ A Comparative Study Of Financial Statement Analysis Of Tata
Motors, International Journal In Management And Social Science, Volume 3 , Issue 7 ,
Pp 68-74

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