Chapter II

Research and Methodology

The study is based on secondary data . It has been collected from the financial reports of
the TATA motors Ltd., from the period of 2015 to 2018 and also from online publications,
articles, journals and websites

Contribution

Contribution is the difference between sales and variable cost or marginal cost of sales. It may
also be defined as the excess of selling price over variable cost per unit.

Contribution = Sales - Variable cost

Profit Volume Ratio

Profit volume ratio, also called 'contribution ratio' or 'marginal ratio' reveals the rate of
contribution per product as a percentage of turnover. It indicates the relationship of contribution
to turnover.

P/V ratio = Contribution *100 Sales

Break-Even point (in US dollars)

Break-even analysis is a method of studying the relationship among sales revenue, variable cost
and fixed cost to determine the level of operation at which all the costs are equal to its sales
revenue and this point is known as no profit no loss point.

Break-Even point = Fixed cost * Sales Contribution

Break-Even Ratio

Break-Even Ratio is the relationship between break-even sales and actual sales of a business
concern . Break-even ratio is ascertained by the following formula:

Break-Even ratio = Break even sales * 100 Actual sales

Chapter III

Results and Findings

For financial analysis, some profitability ratios are to be calculated to assess the financial
position of the company. The basic aim of this analysis is to reveal financial position is
increasing or decreasing.

(Currency in USD)
Year Sales Variable Cost Contribution
2015 2,942,425,700.00 1,682,639,000.00 1,259,786,700.00
2016 2,698,496,600.00 1,499,519,200.00 1,198,977,400.00
2017 2,705,112,600.00 1,476,602,100.00 1,228,510,500.00
2018 2,648,928,600.00 1,469,648,500.00 1,179,280,100.00
Source: https://finance.yahoo.com/qoute/TTM/financials?p=TTM
Table No 1: Contribution

The above table depicted that the contribution is highest at one billion, two hundred fifty
nine million, seven hundred eighty-six thousand and seven hundred US dollars
(1,259,786,700.00 US dollars) in the year 2015 , and it is lowest at one billion, one hundred
seventy-nine million, two hundred eighty thousand, and one hundred US dollars
(1,179,280,100.00 US dollars) in the year 2018. Sales has to be improved so as to increase the
contribution.
 (Currency in USD)
Year Sales Contribution P/V Ratio
2015 2,942,425,700.00 1,259,786,700.00 42.81
2016 2,698,496,600.00 1,198,977,400.00 44.43
2017 2,705,112,600.00 1,228,510,500.00 45.41
2018 2,648,928,600.00 1,179,280,100.00 44.52
Source: https://finance.yahoo.com/qoute/TTM/financials?p=TTM
Table No. 2: Profit Volume Ratio

It is shown from the table no.2, during the study period profit volume ratio is higher at
about forty-five point forty-one percent (45.41%) in the year 2017, and its lowest profit and
volume ratio is at about forty-two point eighty-one percent ( 40.55% )in the year 2015. Profit
volume ratio has to be increased for the betterment of the company.

(Currency in USD)
Break-Even
Year Fixed Cost Contribution Sales
Point

2015 1,141,911,500.00 1,259,786,700.00 2,942,425,700.00 2,667,110,031.19

2016 1,043,039,400.00 1,198,977,400.00 2,698,496,600.00 2,347,532,384.32

2017 1,035,115,000.00 1,228,510,500.00 2,705,112,600.00 2,279,266,338.34

2018 924,969,100.00 1,179,280,100.00 2,648,928,600.00 2,077,688,840.09

Source: https://finance.yahoo.com/qoute/TTM/financials?p=TTM
Table No 3: Break-even Point

It is clear from the table above that the breakeven point is higher in the year 2015 and it is
lower in the year 2018. Increase in sales and contribution is essential for the stability of break-
even point. Though they have increased their contribution several times, their sales remain static
or just slightly increase.

(Currency in USD)
Year Break-Even Point Actual Sales Break-even Ratio
2015 2,667,110,031.19 2,942,425,700.00 90.64
2016 2,347,532,384.32 2,698,496,600.00 86.99
2017 2,279,266,338.34 2,705,112,600.00 84.26
2018 2,077,688,840.09 2,648,928,600.00 78.44
Source: https://finance.yahoo.com/qoute/TTM/financials?p=TTM
Table No. 4: Break-even Point Ratio

It is inferred from the table above, the break-even ratio is higher at ninety point sixty-four
(90.64) in the year 2015 and lower at seventy-sight point forty-four (78.44) in the year 2018.
Break-even point only determines the break even ratio, it is crucial to improve break-even point
to enhance the break even ratio in the business is inevitable.

References:

Tata Motors Ltd Tata Motors Lim (TTM) Stock Historical Prices & Data. (2019, March 22).
https://finance.yahoo.com/quote/TTM/history?p=TTM&fbclid=IwAR3N6QL5JODKJ6nrcPJwZ
CXUavBc9JthznExdEjS40uxNFoq4WDZ9NQlYjE

Wall street journal. (n.d.). Retrieved from https://quotes.wsj.com/TTM/financials/annual/income-

statement?fbclid=IwAR2THMdGHUFYerr3u1QgR9NDMMZzV37lczn1xpGAKVicPofNkMt4L
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K. Rajeswara Rao and G. Prasad, “Accounting and Finance” Jai Bharat Publications, 10th
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Bagavathi R.S.N.Pillai - Management Accounting,S.Chand and Company Ltd., 4th edition,

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