Sie sind auf Seite 1von 12





Financial ratios are one way of comparing companies of different sizes, capacities and production level for some single piece of financial information. The use of ratio analysis to interpret financial statements is useful for managers, banks, suppliers, customers, investors, shareholders, government and employees for various purposes. The financial ratios are classifies into five groups Liquidity/Short term solvency Ratios Efficiency Ratios Profitability Ratios Leverage/Long term solvency Ratios Market Value Ratios

The following ratios are analysed for Maruti Suzuki for five years and one year of Tata Motors its competitor. A. LIQUIDITY RATIOS These ratios are used to measure a firms ability to meet short term obligations. They compare short term obligations with short term resources available to meet these obligations. Maruti Suzuki 2010-11 2009-10 3856 1208.8 2647.8 3788.4 1.01 0.69 In Cr. Rs. 2008-09 2007-08 5570 902.3 4667.7 3631.6 1.53 1.28 3190.5 1038 2152.5 3088.4 1.03 0.69 Tata Motors 2006-07 201011 3956 14775.6 713.2 3242.8 2779.1 1.42 1.16 3891 10884.6 18963.4 0.77 0.57


Current 6443.1 assets Inventories 1415 CA-INV 5028.1 Current liabilities Current Ratio Quick Ratio 4331 1.48 1.16

Current ratio: It shows the firms ability to cover its current liabilities with its current assets. Current Ratio = current assets/current liabilities Quick Ratio: Its shows the firms ability to meet current liabilities with its most liquid assets.

Quick Ratio = (current assets inventory)/ current liabilities Analysis Comparing the current ratios of Maruti with Tata motors over the period of time shows that the company is too liquid which states that it is in a better position to pay its bills or liabilities as compared to Tata motors. This shows additional profitability. Also its quick ratio is stable and constant when compared to current ratio and far better than Tata motors which states that company follows a conservative policy and liquidity of the company is better off when compared to Tata motors. B. EFFICIENCY RATIOS These are also called asset utilization ratios. These ratios give how efficiently or intensively a firm uses its assets to generate sales. Asset turnover ratio
Maruti Suzuki Tata 2011 2010 2009 2008 2007 2011 4,09,489 3,21,805 23,381.50 2,09,493 1,72,935 1,27,420 71,705 55,635 4,649.80 40,328 29,412 43,493.12 2,060.20 64,904 39,232 30,909 39,056 51,034.92 1,36,609 94,867 6,710 71,237 68,468 94,528 3.00 3.39 3.48 2.94 2.53 1.35

Particular Sales revenue total fixed assets total current assets Total assets asset turn over ratio

The amount of sales generated for every dollar's worth of assets. It is calculated by dividing sales in dollars by assets in dollars. Asset turnover ratio = total revenue/ Average total assets Analysis: The ratio has been improving for Maruti Suzuki. It shows that each Rs. invested is generating increasing amount of revenue. The asset turns over ratio for Maruti Suzuki is better that the competitor in the year 2011. This shows that the business is being run more efficiently by Maruti Suzuki Inventory turnover ratio
Maruti Suzuki 2011 2010 3,39,600 2,63,028 3,794 1,661 4,220 4,007 Tata 2008 18,396.20 1,60,045 902.3 2,247 5,408 3,828 2009 2007 2011 1,26,721 1,05,353.33 4,857 NA 2,247 NA 3,552 14,070.51

Particular cost of sales stock at the beginning stock at the end Average stock

3,794 2,728


A ratio showing how many times a company's inventory is sold and replaced over a period. Inventory Turnover Ratio = Cost of goods sold/Average Inventory Analysis: We can see that the inventory turnover ratio for Maruti Suzuki is much higher that the inventory turnover ratio of Tata motors. This means that the sales are very strong in case of Maruti. AR turnover ratio

total credit sales average accounts receivable balance

Maruti Suzuki Tata 2011 2010 2009 2008 2007 2011 366112.00 293028.00 20,729.40 178603.00 147217.00 123133.30 918.9 9502.00 8494.00 6555.00 7767.00 6877.36 38.53 34.50 22.56 27.25 18.95 17.90

Account receivable turn over ratio

The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets. A/R Turnover = Net Credit Sales/Average A/Rs Analysis: The AR turnover ratio of Maruti Suzuki is much higher than the Tata motors which mean that Maruti Suzuki operates more or less in cash basis. Tata motors should re look at its credit policies. AP Turnover Ratio

Particular Total Supplier ratio Average account payable AP turn over ratio

Maruti Suzuki 2011 2010 29,531 23,461 40,798 35,678

Tata 2009
918.9 3,250.90

2008 8,549 28,187

2007 2011 9,256 26,684.78 25,132 37,114.65 0.718982

0.723835 0.657576 3.537817 0.303296 0.368295

These ratios quantify the rate at which a company pays off its suppliers. Accounts payable turnover ratio is calculated by taking the total purchases made from suppliers and dividing it by the average accounts payable amount during the same period. AP Turnover Ratio = Total Supplier Purchases/Average APs Analysis: If the turnover ratio is falling from one period to another, this is a sign that the company is taking longer to pay off its suppliers than it was before. The opposite is true when the turnover ratio is increasing, which

means that the company is paying of suppliers at a faster rate. So for Maruti the ratio is increasing which means that the company is paying its creditors in a faster rate and the rate is similar to the Tata motors in the fiscal year ending 2011.

C. PROFITABILITY RATIOS These ratios show the overall effectiveness of the operations. It mainly concentrates on net income i.e. how well the organization has managed to maximize its net income for better effectiveness. The different profitability ratios are discussed below for Maruti Suzuki and Tata Motors Profit margin
Maruti Suzuki 2011 2010 2009 2008 2007 36,543.70 29,437.10 20,715.40 18,050.70 14,834.00 2,307.10 2,545.00 1,231.70 1,789.90 1,588.30 0.06 6.3 0.09 8.6 0.06 5.9 0.10 9.9 0.10 10.7 Tata 2011 122,932.83 9,220.79 0.08 7.5

Particular Net sales Net profit Profit margin Profit margin %

Profit margin, net margin, net profit margin or net profit ratio all refer to a measure of profitability. It is calculated by finding the net profit as a percentage of the revenue. The profit margin is mostly used for internal comparison. A low profit margin indicates a low margin of safety: higher risk that a decline in sales will erase profits and result in a net loss, or a negative margin. Profit Margin = Net Profit/Sales Analysis: The ratio as seen is decreasing from year 2007 to 2010 which implies that the revenue generated is lower than the cost involved but in 2010 the profitability has been increase and shows higher revenue than costs incurred. It also shows that the pricing which Maruti kept was not proper as compared to its competitor as the ratio is lower than TATAs. TATAs have better control over cost as compared to Maruti. Return on assets (ROA)

The return on assets (ROA) percentage company's assets are in generating revenue.


how profitable a

Particular Total assets Net income ROA

Maruti Suzuki 2011 2010 2009 14,722.70 13,064.60 10,333.20

2008 9,512.50

2007 7,660.70

Tata 2011 52,209.48

37,419.30 30,180.60 20,864.50 18,897.10 14,943.80 126,064.14 2.54 2.31 2.02 1.99 1.95 2.41

ROA = Net Income/Total Assets Analysis: The ROA is increasing since 2007 till date which depicts that Maruti is utilising its assets very efficiently. It is investing in assets to generate income better than TATAs. Return on Equity Return on equity (ROE) measures the rate of return on the ownership interest (shareholders' equity) of the common stock owners. It measures a firm's efficiency at generating profits from every unit of shareholders' equity (also known as net assets or assets minus liabilities). ROE shows how well a company uses investment funds to generate earnings growth.
Maruti Suzuki 2011 2010 2009 14,308.80 12,182.60 9,565.30 Tata 2011 19,171.47

Particular Shareholders Equity Net income ROE

2008 8,627.10

2007 7,006.50

37,419.30 30,180.60 20,864.50 18,897.10 14,943.80 126,064.14 2.62 2.48 2.18 2.19 2.13 6.58

ROE= Net Income/Average Shareholders Equity Analysis: The ROE is the money raised from the shareholders. Maruti has increased in the ROE percentage. It has improved to invest money to generate income out of shareholders equity. But the ratio is very less than TATA, this implies that Maruti is less risky company than TATA because its debt is less as compared to TATA. Return on capital employed (ROCE) ROCE compares earnings with capital invested in the company. It is similar to Return on Assets (ROA), but takes into account sources of financing. NOPAT is
equal to EBIT * (1 - tax) -- the return on the capital employed should be measured in after tax terms.

Particular PBDIT Depreciation EBIT Total Assets ROCE

Maruti Suzuki 2011 2010 4,302.00 4,577.50

2009 2,507.90

2008 3,201.60

2007 2,632.30

Tata 2011 18,110.90

1,031.30 841.40 716.50 572.70 275.50 4,655.51 3,270.70 3,736.10 1,791.40 2,628.90 2,356.80 13,455.39 14,722.70 13,064.60 10,333.20 9,512.50 7,660.70 52,209.48 0.22 0.29 0.17 0.28 0.30 0.26

ROCE = EBIT/Capital Employed Analysis: Return on Capital Employed ratio indicates whether the company is earning sufficient revenues and profits in order to make the best use of its capital assets. The ratio is decreasing which shows that company do not have control over the assets as indicated in profit margin too. Maruti is not as efficient as TATA.

D. LEVERAGE RATIOS These ratios are intended to address the firms long run ability to meet its obligations or financial leverage. It shows the ability of the company to pay its debt in the long run. The different leverage ratios for Maruti Suzuki and its competitor Tata Motors are given in the table and each ratio is analysed below. MARUTI SUZUKI in cr Rs TATA MOTORS in cr Rs Particulars 2010-11 2009-10 2008-09 2007-08 2006-07 2010-11 Total Debt Total Assets Shareholders Equity EBIT Interest Depreciation Debt Ratio Debt-to-Equity Ratio TIE CashCoverage Ratio 309.3 14167.8 13867.5 3244.7 24.4 1013.5 0.02 0.02 133 174.52 821.4 12656.5 11835.1 3661.6 33.5 825 0.07 0.07 109.3 134 698.9 10043.8 9344.9 1761.8 51 706.5 0.07 0.08 34.5 48.4 900.2 9315.6 8415.4 2554.5 59.6 568.2 0.10 0.11 42.86 52.4 630.8 7484.70 6853.9 2322.8 37.6 271.4 0.08 0.09 61.78 69 15898.75 35912.05 20013.30 3686.48 1383.79 1360.77 0.44 0.79 2.66 3.65

Debt Ratio: This ratio indicates what proportion of debt a company has relative to its assets. Debt ratio = Total Debt/Total Assets Analysis: Looking at Maruti Suzuki and Tata Motors it can be seen that the scale of production is different and also the debt appetite very different. While Maruti Suzuki has taken very less debt compared to assets, Tata Motors have taken relatively large debt compared to total assets. There was decrease in debt ratio when five years data was analysed. The more Debt ratio the more deteriorating is the financial structure. It can be seen from the data that the total debt is decreasing while the total assets were increasing. From the balance sheet of Maruti Suzuki of five years it can be seen that fixed assets also increased that they are investing in long term assets and decreasing their risk appetite. Debt-to-Equity Ratio: It indicates what portion of equity and debt the company is using to finance its assets. Debt-to-Equity ratio = Total Debt/Shareholders Equity Analysis: Looking at Maruti Suzuki and Tata Motors D/E ratio Tata Motors have relatively higher ratio than that of Maruti Suzuki and there is considerable difference. The risk appetite of Tata Motors is high and looking at the balance sheet of Tata Motors both Debt and Equity has considerably increased, thus they are expanding their units and thus D/E ratio always maintained high. Thus it has higher interest charges. For Maruti Suzuki seeing the above table it can be noted that the Total Debt has decreased and Total shareholders equity has increased so this can be seen that the financing done by Maruti Suzuki is mostly through equity than debt from 2007 till 2011. The D/E ratio has drastically decreased thus it can show that they are not expanding but financing for existing units. Times Interest Earned: It is also called as Interest Coverage Ratio. It measures how well a company has its interest obligations covered. Times Interest Earned = EBIT/Interest Analysis: There is a tremendous gap between TIE of Tata Motors and Maruti Suzuki. Due to high debt appetite for expansion the interest rate also became high (1383.79) compared to Maruti Suzukis two digit 24.4. Due to aggressive expansion TIE decreased over years for Tata Motors. While for Maruti Suzuki since its debt has decreased over years and is very less comparable to equity the interest rate is also low and thus TIE has increased over years. Thus it will be able to cover its interest well than Tata Motors in long run.

Cash Coverage Ratio: In TIE ratio EBIT is used which is not the real measure of cash available to pay interest. So cash coverage ratio adds the depreciation. Cash Coverage Ratio = (EBIT+Depreciation)/Interest Analysis: This is frequently used as a measure of cash flow available to meet financial obligations. In EBIT, depreciation the non-cash expense has been deducted out. Thus it also gives similar results as of TIE. Since Tata motors are more debt appetite their interest is more compared to that of Maruti Suzuki and the EBDIT is almost similar to that of Maruti Suzuki thus giving low cash coverage ratio. Thus Maruti Suzuki is in very safe position compared to that of Tata Motors. Maruti Suzuki has increased its cash coverage ratios over the five years.

E. MARKET VALUE RATIOS Market value ratios evaluate the economic status of a company in the wider marketplace. Market value ratios include the earnings per share, price earnings ratio, dividend yield, book value per share, market value per share, and the market/book ratio. Market value ratios give management an idea of what the firm's investors think of the firm's performance and future prospects. Here we have calculated the ratios for Maruti Suzuki for different years to find out its performance in the market and how investors look at the company.

Market Value Ratio/Year Earnings per Share Dividend per Share Book Value Per Share As on 31st Price Earnings March Ratio As on 31st Market Value March per Share As on 31st Market book March ratio

2006-07 54.06 4.5 237.23 13.93 753

For 2007-08 59.91 5 291.28 13.96 836.15

Maruti 2008-09 42.48 3.5 323.45 18.25 775.1

2009-10 90.85 6 409.65 15.45 1403.9


As on 1303-2012 79.21 57.29 7.5

For TATA MOTORS 2010-2011 28.55 20

479.99 15.95

479.99 23.87


8.71 1367.55 248.8 3.17 2.87 2.40 3.43 2.63 2.85 0.79

Earnings per Share: In the simplest terms, earnings per share give an investor the return on their investment in a share of stock of a publicly traded firm on a share price basis. Earnings per share (EPS) = Net Income Available to Common Shareholders/Number of Common Shares Outstanding Analysis: Maruti shows an increase in EPS from 2007 and 2008 but due to recession it falls in 2009. Currently it is showing a value of 57.29. If we see according to industry standards, EPS is high over years which show that investors get good return as compared to most of other companies in the market. Dividend per Share: Dividends per share are the amount of dividends that a publicly-traded company pays per share of common stock, over their reporting period that they have issued. The remainder of the company's net income, which is not paid out as dividends, is retained by the company for growth and is known as retained earnings. Dividends Paid /Shares Outstanding Common Stock = Dividends per Share Analysis: For Maruti Suzuki this value is going up every year which gives a signal to the investors that the company is doing well financially. If it goes down then it could mean that the investors are selling shares out of fear which is not the case here. Book value per Share: The purpose of calculating book value per share is to relate shareholder's equity to the number of shares of common stock outstanding. Since the number of shares of preferred stock is not considered, this gives a more "real" value to the common shares outstanding. Book value may not be same as market value. Book Value per Share = Shareholder's Equity - Preferred Stock/Average Outstanding Common Stock Analysis: In this case market value is much higher than book value, which means the financial markets are likely experiencing a bull market. Price Earnings Ratio: It is a very important ratio for publicly traded businesses because it tells investors how much they are paying per share (price) for each rupee of earnings (net income) by the company. In other words, the price to earnings ratio shows how much investor is willing to pay for shares of stock of the company per dollar of reported profit. Current Market Price of Company Stock/Earnings per Share of Stock = Price Earnings Ratio Analysis: P/E ratio of Maruti is, though higher than the industry standards but is less than its competitors like TATA Motors which is currently having P/E ratio as 49.14. so it shows investors are less willing to pay for a share of Maruti. Market value per share: The market price per share of stock or the price per share of stock is a current measure of price not an accounting, or historical, measure of the value of stock like the book value per share, which is based on the information from a company's balance sheet. The market price per share is a financial metric that investors use to determine whether or not to purchase a stock.

Market Price per Share = Net Income - Preferred Dividends/Number of Shares of Common Shares Outstanding Analysis: Market price for Maruti is increasing year by year approximately 10 %. Whenever an investor wants to buy a stock of a company, rather than looking at price per share, they should look at market cap. The per-share price is virtually meaningless to investors doing fundamental analysis. The reason we arent concerned with per-share price is that it is always changing and, since each company has a different number of outstanding shares, it doesnt give us a clue to the value of the company. For that number, we need the market capitalization or market cap number. As for hero corp. market price is 1962.75 presently but its P/E ratio is only 19.75 which is less than Maruti Suzuki. Market book Ratio: The market to book ratio is used by security analysts to determine if a stock is undervalued or overvalued. If a stock is undervalued, the price is expected to rise. If it is overvalued, the price is expected to fall. Investors looking for value stocks often look for low market to book companies. Market to book looks at the value the market places on the book value of a company. Market to book = Share price of the stock/Book value per share Analysis: Here for Maruti it is showing a very high value which means that stock of this company is overvalued by the investors. Its market price is very high as compared to book value over years. This is the reason that it is earning a very high return on its assets ANALYSIS OF ALL RATIOS TOGETHER: Based on the liquidity and leverage ratios we can say that Maruti Suzuki is having low current liabilities and debt appetite compared to Tata Motors. Since the scale of current assets and liabilities is very different from each other for both Tata Motors and Maruti Suzuki, we compare these ratios. Through these ratios it can be seen that Tata motors is going for more of short term financing than on long term basis and also has great difficulty in paying them back due to low current and quick ratio (both less than 1) compared to Maruti Suzuki. Maruti Suzuki has both the ratios more than 1. Thus the creditors feel risky to invest in Tata Motors than that of Maruti Suzuki. The interest coverage ratio or TIE is also considerably less compared to that of Maruti Suzuki and thus this also shows that Maruti Suzuki is safe for creditors compared to that of Tata Motors. Looking at the efficiency ratios it can be seen that Maruti Suzuki is more efficient than Tata Motors. By looking at both liquidity and efficiency ratios it can be noted that Tata motors is expanding its production line aggressively and thus it uses high debt to finance them. Thus even though Maruti Suzuki uses comparatively conservative policy in financing it is more efficient than that of Tata Motors. Thus the high current ratio or quick ratio doesnt signify slow moving inventory. Since they have good working capital they are able to pay the creditors also faster than Tata Motors. Looking at the profitability ratios it can be seen that Maruti Suzuki is not that profitable compared to that of Tata Motors. ROCE and ROA provide the answer for investors if it is worthwhile to invest or not. But ROE takes the perspective of shareholder and sees if it is beneficial or not. Even market value ratios look at shareholders perspective. Based on ROE it can be seen that Tata Motors have strong investment opportunities and effective expense management compared to

that of Maruti Suzuki. The return on the equity invested is less for Maruti. ROCE and ROA of both Tata Motors and Maruti Suzuki even though the values are close, Tata gives better returns thus the profitability of Maruti is less. When efficiency is high and profitability is less it shows that the price for Maruti can be increased for better profitability or it can also be true that COGS is more for Maruti compared to Tata Motors due to relative conservative policy and relatively high working capital management thus increasing the inventory for safety. Lastly looking at the analysis of Market Value ratios it can be seen that all ratios are favourable for investors for Maruti Suzuki compared to that of Tata motors except Dividends per share. Even though dividends have increased in five years for Maruti it has not reached near to that of Tata Motors. This can also show that the company instead of issuing more on dividends is investing back into the company for lower risks and lower D/E ratio. So even though DPS is less compared to Tata motors investors/shareholders will be more interested in Maruti as all other ratios like EPS are high compared to that of Tata Motors. Fewer dividends can also be accounted to less profitability of Maruti compared to that of Tata.

Thus Maruti Suzuki has good liquidity, leverage ratios, low debt appetite, high efficiency, low profitability and high earnings per share compared to that of Tatas. This is due to the risk appetite Tata has where investors/creditors who has high risk appetite will be investing in Tata compared to that of Maruti. Maruti is conservative and low geared compared to that of Tata.