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A PROJECT REPORT

ON

A Comparative Study of Financial Health of Suppliers of Tata Motors Using Ratio Analysis AT TATA MOTORS LIMITED PIMPRI, PUNE.

SUBMITTED TO UNIVERSITY OF PUNE IN PARTIAL FULFILLMENT OF AWARD OF DEGREE OF MASTERS IN BUSINESS ADMINISTRATION BY NILESH SHARAD DANDAWATE THROUGH PROJECT GUIDE PROF. SHANTANU PENDASE PCETS S. B. PATIL INSTITUTE OF MANAGEMENT, NIGADI, PUNE. 2009-2011

ACKNOWLEDGEMENT A successful project is never a work of individual; it is always a result of collective efforts put in by many people during the course of project. Thus I take this opportunity to extend my gratitude to all people who helped completion. I would like to sincerely thank Mr. J S Hegde (General Manager CVBU) Material Pricing Committee and Mr. R P Panchbhai, Sr. Manager HR for providing me with this opportunity. I would also like to thank Mr. A A Madankar Asst. General Manager (MPC), who conceived the idea of this Project, Mr. Jaykumar S Chuttar Asst General Manager (MPC), & Mr. V Keerthivasan Asst. Manager (MPC) who as my guide was instrumental in the completion of this project. At the outset I would like to gratefully acknowledge the very kind and patient guidance I have received from my project guide Prof. Shantanu Pendase, without whose critical evaluation and consent at every stage of the project this would not have been possible. I am grateful to Dr. H D Thorat, DIRECTOR of S B Patil Institute of Management. This study has indeed helped me to explore more knowledgeable avenues related to my topic and I am sure it will help me in my upcoming carrier. and encouraged me. As the whole work is outcome of integrated efforts of all those concerned with it, through whose cooperation and effective guidance I could achieve its

(Nilesh S Dandawate)

INDEX

Sr. No. 1 2 3 4 5 6 7 8 9 10 11 12

Chapter Title Executive summary Introduction Objective of the Project Company Profile Review of literature Research Methodology Data Analysis & Interpretation Limitations Observations & Findings Conclusions Suggestions & Recommendations Bibliography

Page No. 4-5 68 9 10 11 17 18 27 28 30 31 70 71 72 73 74 75 76 77 78 79 80

Executive Summary

Executive Summary

Tata Motors Limited is Indias largest automobile company. It is the leader by far in commercial vehicles in each segment, and the second largest in the passenger vehicles market with winning products in the compact, midsize car, and utility vehicle segment. The company is the worlds fourth largest medium and heavy commercial vehicle manufacturer. Success of any big organization is depending upon financial sound suppliers.

Financial Statement Analysis is one of the most important parts in Financial Management. Financial Statement Analysis of suppliers of Tata Motors Ltd helps us in scanning the suppliers financial position. This analysis reveals the comparative position of suppliers of the Tata Motors Ltd over period of time & with other suppliers in the same industry.

In this relation, I have tried to study the Financial Statements of Suppliers of Tata Motors Ltd. from various aspect of financial position i.e. Liquidity, Leverage, Assets Management and Profitability with the help of annual reports from 2004-05 to 2008-09 & other related information gathered from the Company. From that study, I come to know that suppliers of Tata Motors Ltd are financially sound and it can sustain in adverse financial condition.

The Ratio Analysis is one of the tools in the hands of those who want to know something more from the Financial Statement. The relationship between to accounting figure expressed mathematically is known as Ratio. For analyzing financial position of suppliers of Tata Motors I have referred following books.

Financial Management by I M Pandey Financial Management by Macmillan Publication Financial Management by S C Kuchhal

CHAPTER - 1 Introduction

INTRODUCTION RATIO ANALYSIS:

Ratio analysis is a widely used tool of financial analysis. It can be used to compare the risk and return relationships of firms of different sizes. It is defined as the systematic use of ratios to interpret the financial statements so that the strengths and weaknesses of a firm as well as its historical performance and current financial condition can be determined. The term ratio refers to the numerical or quantitative relationship between two items/variables. For example, this relationship can be expressed as (i) percentages, say, net profits are 25% of sales (assuming net profits of Rs25000 and sales of Rs100000), (ii) fraction (net profit is 1/4th of sales)and (iii)proportion of numbers (the relationship between net profits and sales is 1:4). The rationale of ratio analysis lies in the fact that it makes related information comparable. A single figure by itself has no meaning but when expressed in terms of a related fig. It yields significant inference. The Balance Sheet and the Statement of Income are essential, but they are only the starting point for successful financial management. Apply Ratio Analysis to financial Statements to analyze the success, failure, and progress of your business. Ratio Analysis enables business owner/manager to spot trends in a business and to compare its performance and condition with the average performance of similar businesses in the same industry. To do this compare your ratios with the average of businesses similar to yours and compare your own ratios for several successive years, watching especially for any unfavorable trends that may be starting. Ratio analysis may provide the all-important early warning indications that allow you to solve your business problems before your business is destroyed by them. What is ratio analysis? MEANING: - Ratio analysis is a systematic use of ratios to interpret/assess the performance and status of the firm. Ratio can be defined as numerical or an arithmetical relationship between two figures. For example: - If 4000 is divided by 10000, the ratio can be expressed as 0.4 or 2:5 or 40%

There are some need & scope of the study:-

Trade creditors may be interested primarily in the liquidity of a firm because the ability of the business unit. To pay their claims are best judged by means of a through analysis of its liquidity. The shareholders and the potential investors may be interested in the present and future earnings per share. We can use ratio analysis for following purpose.
1) Measuring Short Term Solvency of business. 2) Measuring Long Term Solvency of Business. 3) Measuring Operating Efficiency.

4) Measuring Profitability 5) Comparison of Inter-firm position. 6) Indicating Trend of Achievement. 7) Assessing the Growth of Potential of the Business. The major objective of project was to calculate the ratios and to find out the exact position of the suppliers as compared to other companies in the same sector. There is scope and objectives but still there were some limitations as follows:

Time factor: Time has to be taken into account in dealing a particular method of data collection. The time at disposal, thus affected the selection method of data collected.

Data collected from the company: The authenticity and genuinity of the data received cannot be tested as every company does not disclose all of its records. UNIMAC is a Pvt. Company. It does not disclose all of its data.

Primary Data: Owing to the busy schedule of the executives and the staff in the company, extensive data could not be collected; which might affect the results of study.

Objectives

Objectives

Comparative Study of Financial Health of Suppliers of Tata Motors using Ratio Analysis.

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To study the Financial Position of Supplier for better Credit availment & sustainability of suppliers Business.

To find out the financial strength and weakness of Supplier. To comparing financial statements to know profit and operating efficiency of Supplier.

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CHAPTER -2 Company Profile

Establishment

TATA MOTORS LIMITED

Type

:-

Public (NYSE:TTM)

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Founded Headquarters Industry Products Revenue Website

::::::-

1960 INDIA Automotive Commercial, Passenger, Utility Vehicles F.Y.2009-10 Rs. 90519 crores (USD 20 billion) www.tatamotors.com

Tata Motors Limited, formerly known as TELCO (TATA Engineering and Locomotive Company), is Indias largest passenger automobile and commercial vehicle manufacturing company. It is also the worlds 4th largest commercial vehicle manufacturer. It is part of the Tata Group. Tata Motors is widely credited for putting India on the automotive map by designing and developing its own range of cars. Tata Motors date back to 1945 when they started making Trains. Tata Motors was first listed on the NYSE in 2004. It has its manufacturing base in Jamshedpur, Lucknow and Pune. In 2004 it also bought Daewoos truck manufacturing unit in South Korea. In March 2005, it acquired a 21% stake in Hispano Carrocera SA, giving it controlling rights in the company. Tata Motors and the Fiat group have signed a new memorandum of understanding (MoU) to establish a 50:50 joint venture to manufacture passenger vehicles, engines and transmission systems for both domestic and export markets. There are 24000 employees in Tata Motors.

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3rd March, 1839 19th May, 1904 In 1868, Jamsetji Nusserwanji Tata starts a private trading firm, laying the foundation of the Tata Group. Dreams of Jamsetji Tata
1907 1910 1911

The Tata Iron and Steel Company (now Tata Steel) is established to set up India's first iron and steel plant in Jamshedpur. The plant started production in 1912.

The first of the three Tata Electric Companies, The Tata Hydro-Electric Power Supply Company, (now Tata Power) is set up.

The Indian Institute of Science is established in Bangalore to serve as a centre for advanced learning.

1868: Jamsetji Nusserwanji Tata started a private trading firm, laying the the Tata Group. 1874:

Foundation of

The central India spinning, weaving and manufacturing company is set up,

marking the group's entry into textiles.

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1903: The Indian hotels company is incorporated to set up the Taj Mahal palace and tower, luxury hotel, which opened in 1903.

1907: The Tata iron and steel company (now Tata steel) is established to up Indias first iron and steel plant in Jamshedpur. The plant started production in 1912. (Sir Dorab Tata) 1910: The first of the three Tata electric companies, the Tata Hydro-Electric Supply Company, (now Tata power) is set up. 1911: The Indian institute of science is established in Bangalore to serve as a centre for advanced learning. Power

ERC

1932: Tata airlines, a division of Tata sons, is established, opening up the sector in India by Mr. JRD Tata 1945: Telco was set up at Jamshedpur

CVBU

PCBU

aviation

AUTO

PE

Foundry

TMD

Common Services

1965: Pune plant was established by Mr. Sumant Moolgaonkar under the guidance of JRD Tata. Present Chairman of Tata Motors is Mr.

Engine

Ratan Tata. Factories

FINANCE

Axle

CX

H.R.

Company Structure Gear Box Structure of Pune Plant:

Cost Center

Internal Audit

PRESS SHOP

TATA MOTORS 15 PUNE PLANT MPC

Strategic Sourcing

Products
Passenger cars ad utility vehicle Tata Sierra

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Tata Estate Tata Sumo/Spacio Tata Safari/Dicor Tata Indica Tata Indigo Tata Indigo Marina Concept Vehicles 2000 Aria Roadster 2001 Aria Coupe 2002 Tata Indiva 2004 Tata Indigo Advent 2005 Tata Xover 2006 Tata Cliffrider 2007 Tata Elegante Commercial Vehicles Tata Ace, Tata Ace Magic Tata TL/Telcoline/207 DI pickup Truck Tata 407 Tata 709 E Tata 1109 (Intermediate truck) Tata 1510/1512(Medium bus) Tata 1610/1616 (Heavy bus) Tata 1613/1615 (Medium Truck) Tata 2515/2516 (Medium Truck) Tata 3015 (Heavy truck) Tata 3516 (Heavy truck) Tata Novus (Heavy truck designed by Tata Daewoo) Tata winger Military vehicle Tata 407 Troop Carrier, available in hard top, soft top, 4*4, and 4*2 versions Tata LPTA 713 TC (4*4) Tata LPT 709 E Tata SD 1015 TC (4*4) Tata LPTA 1615 TC(4*4) Tata LPTA 1621 TC(6*6) Tata LPTA 1615 TC(4*2 Buses Starbus Globus Marcopolo

Competitors of Tata Motors

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TATA MOTORS LTD

Maruti Suzuki Ltd

General Motors

Ashok Leyland

Ford Motors Co.

Mahindra & Mahindra

Eicher Motors Ltd

Toyota Motors Ltd

Force Motors

Hyundai Motors Ltd

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CHAPTER 3 Review of Literature

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1) Therotical Background

RATIO ANALYSIS [A] Meaning & Importance:Ratio can be defined as numerical or an arithmetical relationship between two figures. It is expressed when one figures is divided by the other. Ratio Analysis: Ratio Analysis is a widely- used tool of financial analysis. It can be used to compare the risk and return relationships of firms of different sizes. It is defined as the systematic use of ratio to interpret the financial statements so that the strengths and weaknesses of a firm as well as its historical performance and current financial condition can be determined. The alternative methods of expressing items that are related to each other are, for purposes of financial analysis, referred to as ratio analysis. Ratios reveal the relationship in a more meaningful way so as to enable equity investors; management and lenders make better investment and credit decisions. Ratios enable analysts to draw conclusions regarding financial operations. The use of ratios, as a tool of financial analysis, involves their comparison, for a single ratio, like absolute figures, fails to reveal the true position. Comparison with related facts is, therefore, the basis of ratio analysis. Time Series Analysis The easiest way to evaluate the performance of a firm is to compare its present ratios with the past ratios. When financial ratios over a period of time are compared, it is known as the time series analysis. It gives an indication of the direction of changes and reflects whether the firms financial performance has improved, deteriorated or remained constant over time. Cross Sectional Analysis Another way of comparison is to compare ratios of one firm with some selected firm in the same industry at the same point in time. This kind of comparison is known as the cross sectional analysis or inter firm comparison. In most cases, it is more useful to compare the firms ratios with ratios of a few carefully selected competitors, who have similar operation. This kind of comparison indicates the relative financial position and performance of the firm.

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Proforma Analysis Sometimes future ratios are used as the standards of comparison. Future ratios can be developed from the projected, or proforma financial statements. The comparison of current or past ratios with future ratios shows the firms relative strength and weakness in the past and the future. If the future ratios indicate weak financial position, corrective action should be initiated. Importance: As a tool of financial management, ratios are of crucial significance. The importance of ratio

analysis lies in the fact that it presents facts on a comparative basis and enables the drawing of inferences regarding the performance of a firm. Ratio analysis is relevant in assessing the performance of a firm in respect of the following aspects: (i) liquidity position, (ii) long-term solvency, (iii) operating efficiency, (iv) overall profitability, (v) inter-firm comparison, and (vi) trend analysis. Liquidity Position: With the help of ratio analysis conclusion can be drawn regarding the liquidity position of a firm. The liquidity position of a firm would be satisfactory if it is able to meet its current obligations when they become due. A firm can be said to have the ability to meet its short- term liabilities if it has sufficient liquid funds to pay the interest on its short- maturing debt usually within a year as well as to repay the principal. This ability is reflected in the liquidity ratios of a firm. Long- term Solvency: Ratio analysis is equally useful for assessing the long-term financial viability of a firm. This aspect of the financial position of a borrower is of concern to the long-term creditors, security analysts and the present and potential owners of a business. The long-term solvency is measured by the leverage/ capital structure and profitability ratios, which focus on earning power. Operating Efficiency: Yet another dimension of the usefulness of the ratio analysis, relevant from the viewpoint of management and utilization of its assets. The various activity ratios measure this kind of operational efficiency. In fact, the solvency of a firm is, in the ultimate analysis, dependent upon the sales revenues generated by the use of its assets-total as well as its components.

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Overall Profitability: Unlike the outside parties, which are interested in one aspect of the financial position of a firm, the management is constantly concerned about the ability of the firm to meet its short-term as well as long-term obligations to its creditors, to ensure a reasonable return to its owners and secure optimum utilization of assets of the firm. Inter-firm Comparison: Ratio analysis not only throws light on financial position of a firm but also serves as a steppingstone to remedial measures. This is made possible due to Interfirm comparison and comparison with industry averages. A single figure of a particular ratio is meaningless unless it is related to some standards or norm. One of the popular techniques is to compare the ratios of a firm with the industry average.

Trend Analysis: Ratio analysis enables a firm to take the time dimension into account. In other words, whether the financial position of a firm is improving or deteriorating over the years. This is made possible by the use of trend analysis. The significance of a trend analysis of ratios lies in the fact that the analysts can know the direction of movement, that is, whether the movement is favorable or unfavorable. Utility Of Ratio Analysis: The ratio analysis is the most powerful tool of the financial analysis. Many diverse groups of people are interested in analyzing the financial information to indicate the operating and financial efficiency, and growth of the firm. These people use ratios to determine those financial characteristics of the firm in which they are interested. With the help of ratios, one can determine: The ability of the firm to meet its current obligations; The extent to which the firm has used its long-term solvency by borrowing funds; The efficiency with which the firm is utilizing its assets in generating sales revenue, and The overall operating efficiency and performance of the firm.

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Performance analysis: A short-term creditor will be interested in the current financial position of the firm, while a longterm creditor will pay more attention to the solvency of the firm. The long-term creditor will also be interested in the profitability of the firm. The equity shareholders are generally concerned with their return and bother about the firms financial condition only when their earnings are depressed. In fact, it has to be realized that the short-term and long-term financial position and the profitability of the firm are tested in every kind are more important in one kind of analysis than others. If a short-term creditor analyses only the current position and finds it satisfactory, he/she cannot be certain about the safety of his/her claim if the firms long-term financial position or profitability is unfavorable. The satisfactory current position would become adverse in future if the current resources are consumed by the unfavorable long-term financial condition.

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[B] Classification of Ratios:

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1. Liquidity Ratio:
Liquidity ratios measure the ability of a firm to meet its short- term obligations and reflect the shortterm financial strengths / solvency of a firm. The importance of adequate liquidity in the sense of the ability of a firm to meet current / short- term obligations when they become due for payment can hardly be overstressed. i) Current Ratio: The Current Ratio is the ratio of total current assets to total current liabilities. Current assets include cash and bank balance, marketable securities, inventory of raw materials, semi-finished (work-inprogress) and finished goods, debtors, bills receivable and prepaid expenses. Current liabilities are trade creditors, bills payable, bank credit, and provision for taxation, dividends payable and outstanding expenses. Current Ratio = Current Assets Current liabilities As a conventional rule, a current ratio of 2:1 or more is considered satisfactory. The Tata Motors has a current ratio of 1.20:1 therefore, it may be interpreted to be insufficiently liquid. This rule is based on the logic that in a worse situation, even if the value of current assets become half than, the firm will be able to meet its obligation. ii) Acid- Test/ Quick Ratio/ Liquid Ratio: The acid-test ratio is a measure of liquidity designed to overcome the defect of the current ratio. It is often referred to as quick ratio because it is a measurement of a firms ability to convert its current assets quickly into cash in order to meet its current liabilities. The acid-test ratio is the ratio between quick current assets and current liabilities. The quick assets are the current assets excluding inventory and prepaid expenses. The ideal ratio is 1:1. Current Assets Inventory Prepaid expenses Acid-Test Ratio = Current Liabilities

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iii) Debtor Turnover Ratio: This ratio establishes a relationship between net credit sales and average trade debtors. The objective of computing this ratio is to determine the efficiency with which the trade debtors are managed. It indicates the number of times the debtors are turned over during a year. Generally, the higher the value of debtors turnover the more efficient is the management of debtors/sales or more liquid are the debtor. Debtor Turnover Ratio = Credit Sales Average A/c Receivable 2) Profitability Ratios: Apart from the creditors; the owners, management or the company itself is interested in the financial soundness of a firm. The operating efficiency of a firm and its ability to ensure adequate returns to its shareholders/ owners depends ultimately on the profits earned. The profitability of a firm can be measured by its profitability ratios. i) Gross Profit Margin A financial metric used to assess a firm's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold. Gross profit margin serves as the source for paying additional expenses and future savings. Gross Profit is also known as "gross margin". Gross Profit Margin = Gross Profit Net Sales The Gross Profit Margin reflects the efficiency with which management produces eac unit of product. This ratio indicates the average spread between the cost of goods sold and the sales revenue. When we subtract the gross profit margin from 100 per cent we obtain the ratio of cost of goods sold to sales. Both the ratios show profit relative to sales after deduction of production cost, and indicate the relation between production cost and selling price. A high gross profit margin relative to the industry average implies that the firm is able to produce at relative lower cost. A high gross profit margin ratio is a sigh of good management.

100

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ii) Operating Profit Margin: Operating margin is a measurement of what proportion of a company's revenue is left over after paying for variable costs of production such as wages, raw materials, etc. A healthy operating margin is required for a company to be able to pay for its fixed costs, such as interest on debt. Operating Profit is also known as "operating profit margin". Operating margin gives analysts an idea of how much a company makes (before interest and taxes) on each dollar of sales. When looking at operating margin to determine the quality of a company, it is best to look at the change in operating margin over time and to compare the company's yearly or quarterly figures to those of its competitors. If a company's margin is increasing, it is earning more per dollar of sales. Higher the margin, is better.

Operating Profit Margin =

Operating Profit Net Sales

X 100

iii) Net Profit Margin: Profit margin is very useful when comparing companies in similar industries. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors. Profit margin is displayed as a percentage of 20% profit margins. Increased earnings are good, but an increase does not mean that the profit margin of a company is improving. Net Profit Margin = Net Profit Net Sales Net Profit margin ratio establishes a relationship between net profit and sales and indicates managements efficiency in manufacturing, administering and selling the product. This ratio is the overall measure of the firms ability to turn each rupee sales into net profit. If the net margin is inadequate, the firm will fail to achieve satisfactory return on shareholders fund. This ratio indicates the firms capacity to withstand adverse economic conditions. A firm with high net margin ratio would be in an advantageous position to survive in the face of falling selling prices, rising cost of production or declining demand for product.

100

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3. Financial ratios: i) Debt-Equity ratio Debt-equity ratio = Total debt Total equity A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. The debt/equity ratio also depends on the industry in which the company operates. The cost of this debt financing may outweigh the return that the company generates on the debt through investment and business activities and become too much for the company to handle. It indicates the margin of safety of long-term creditor. A low debt-equity ratio implies the use sof more equity than debt which means a larger safety margin for creditor since owners equity is treated as a margin of safety by creditor and vice versa. 4. Operating ratios: i) Inventory Turnover Ratio: This ratio establishes a relationship between costs of goods sold and average inventory. The main objective of computing of this ratio is to determine the efficiency with which the inventory is utilized.

Inventory Turnover Ratio

Cost of Goods Sold Average Inventory

It indicates the speed with which the inventory is converted into sales. In general, a high ratio indicates efficient performance since an improvement in the ratio shows that either the same volume of sales has been maintained with a lower investment in stocks, or the volume of sales has increased without any increase in amount of stocks. However, too high ratio and too low ratio, call for further investigation. A too high ratio may be the result of a very low inventory levels which may result in frequent stock-outs and thus the firm may incur high srock out costs. On the other hands, a too low ratio may be the result of excessive inventory levels, slow-moving or obsolete inventory and thus, the firm may incur high carrying costs. Thus, a firm should have neither a very high nor a very low stock turnover ratio, it should have a satisfactory level.

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CHAPTER 4 Meet Kirti Mam Research Methodology

29

RESEARCH METHODOLOGY

RESEARCH (MEANING): The very common meaning of research is a search for knowledge. Research is an art of scientific investigation. It is a movement from the known to the unknown. Curiosity is an essential natural feeling of every human being. Whenever the unknown fact confront us, we try to find the meaning and causes of that fact. This feeling of human being is the mother of all knowledge and the method which he employs for obtaining the knowledge of whatever the unknown, is called as Research. DEFINITION OF RESEARCH: Research is the process of systematically obtaining accurate answers to significant and pertinent questions by the use of the scientific method gathering and interpreting information. CLOVER and BALSLEY. RESEARCH METHODOLOGY:

A project is research activity with defined scope and object in particular subject for specific period. Research is essentially a systematic and objective analysis and recording of controlled observations that may lead to development of generalization, principles, or theories, resulting in prediction and possibly ultimate control events. Financial Ratio Analysis groups the ratios into categories which tell us about different facets of a companys finances and operations. Data Sources: Primary Data Personal discussions with the concerned officials.

Secondary Data Annual Reports Internet sites

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The sources that are mentioned above as a secondary sources are insufficient to provide the data that are required to complete the research so there is a need to collect information from the primary sources. From extracting the basic data to the comparison of the data and formulation of the information, apart from the various reference that were available, a lot of guidance from finance division an authority concerned was used for complete guidance. Methods of Data Analysis & Statistic Techniques: For data analysis Tools are used as

- Tabular Analysis
- Graphical Analysis - Percentage or Ratio Analysis

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CHAPTER 5 Data Analysis & Interpretation

32

Suppliers Profile
Bharat Forge Ltd.
Incorporation Year Registered Office Industry Chairman Managing Director Customer 1961 Mundhava, Pune Cantonment, Pune, Maharashtra 411036. Casting & Forging B N Kalyani B N Kalyani Tata Motors Ltd. (Since 15 years)

Nelcast Ltd.

Incorporation Year Registered Office

1982 34 Industrial Estate, Gudur Andhra Pradesh 524101. Casting & Forging P Radhakrishna Reddy P Radhakrishna Reddy Tata Motors Ltd. (Since 12 years)

Industry Chairman Managing Director Customer

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Bharat Forge
Profit & Loss A/c
Particulars INCOME : Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income EXPENDITURE : Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Administration Expenses Miscellaneous Expenses Less: Pre-operative Expenses Capitalised Total Expenditure Operating Profit Interest Cost of Goods Sold Gross Profit Depreciation Profit Before Tax Tax Fringe Benefit tax Deferred Tax Reported Net Profit Extraordinary Items Adjusted Net Profit Adjst. below Net Profit P & L Balance brought forward Statutory Appropriations Appropriations P & L Balance carried down Dividend Preference Dividend Equity Dividend % Earnings Per Share-Unit Curr Mar 2004 866.92 70.25 796.67 54.28 -2.79 848.16 310.43 62.44 51.7 94.04 34.16 36.64 0.39 589.02 259.14 32.36 569.89 226.78 45.77 181.01 53.5 0 2.6 124.91 1.52 123.39 0.54 50.03 0 62.49 112.99 37.67 2.92 100 31 Mar 2005 1258.63 91.57 1167.06 59.24 27.77 1254.07 538.91 86.96 66.5 118.38 48.55 60.91 0.13 920.08 333.99 33.56 866.63 300.43 52.56 247.87 85.63 0 0.61 161.63 0 161.63 -0.1 112.99 0 92.62 181.9 53.98 2.18 125 38.32 Mar 2006 1651.44 120.92 1530.52 100.17 29.48 1660.17 739.03 114 91.72 160.01 55.5 57.69 0.01 1217.94 442.23 54.79 1143.08 387.44 73.04 314.4 88.64 3.3 15.49 206.97 0.81 206.16 0.06 181.9 0 103.47 285.46 66.8 1.14 150 8.83 Mar 2007 1990.84 155.8 1835.04 110.49 22.47 1968 832.47 156.76 107.67 196.7 64.67 68.62 0.11 1426.78 541.22 82.11 1375.93 459.11 99.8 359.31 100.23 2 16.13 240.95 -4.28 245.23 4.14 285.46 0 117.1 413.45 77.93 0.82 175 10.18
(Amt in Crores)

Mar 2008 2314.37 172.54 2141.83 173.49 20.64 2335.96 979.2 178.4 144.88 232.58 87.99 72.33 0.13 1695.25 640.71 104.99 1606.11 535.72 138.94 396.78 98 6.8 18.39 273.59 21.1 252.49 0 413.45 0 130.01 557.03 77.93 0.71 175 11.65

Mar 2009 2114.78 120.03 1994.75 111.8 33.07 2139.62 970.3 171.81 139.16 209.34 73.75 168 0 1732.36 407.26 100.37 1687.86 306.89 149.44 157.45 0 5.3 48.86 103.29 -49.58 152.87 -2.91 557.03 0 40.66 616.75 22.27 0 50 4.47

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Earnings Per Share(Adj)-Unit Curr Book Value-Unit Curr

6.15 58.72

7.66 106.81

8.83 51.92

10.18 59.13

11.65 66.16

4.47 66.77

Bharat Forge
Balance sheet
Particulars SOURCES OF FUNDS : Share Capital Reserves Total Equity Share Warrants Equity Application Money Total Shareholders Funds Secured Loans Unsecured Loans Total Debt Total Liabilities APPLICATION OF FUNDS : Gross Block Less : Accumulated Depreciation Less:Impairment of Assets Net Block Lease Adjustment Capital Work in Progress Producing Properties Investments Current Assets, Loans & Advances Inventories Sundry Debtors 821.97 370.79 0 451.18 0 95.01 0 34.38 948.78 421.33 0 527.45 0 275.9 0 38.35 1265.12 489.87 0 775.25 0 370.7 0 444.02 1735.06 583.13 0 1151.93 0 274.8 0 450.71 2029.64 711.77 0 1317.87 0 427.13 0 593.67 2684.44 853.28 0 1831.16 0 232.28 0 367.2 67.68 183.56 0 0 251.24 219.05 66.52 285.57 536.81 59.56 383 0 0 442.56 383.2 34.67 417.87 860.43 54.46 1109.67 0 0 1164.13 381.6 610.86 992.46 2156.59 54.54 1272.26 0 0 1326.8 373.57 1028.04 1401.61 2728.41 44.54 1428.74 0 0 1473.28 461.58 825.91 1287.49 2760.77 44.54 1442.39 0 0 1486.93 870.66 937.21 1807.87 3294.8 Mar 200 4 Mar 2005 Mar 2006 Mar 2007
(Amt in crores)

Mar 2008

Mar 2009

133.13 100.14

186.08 143.06

254.27 188.55

302.79 253.95

338.12 356.29

364.24 260.11

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Cash and Bank Loans and Advances Total Current Assets Less : Current Liabilities and Provisions Current Liabilities Provisions Total Current Liabilities Net Current Assets Miscellaneous Expenses not written off Deferred Tax Assets Deferred Tax Liability Net Deferred Tax Fixed Assets Total Assets Contingent Liabilities

8.6 273.65 515.52

28.13 427.52 784.79

505.41 587.02 1535.25

736.28 555.99 1849.01

164.99 766.6 1626

366.7 727.23 1718.28

338.07 148.79 486.86 28.66 8.13 4.47 85.02 -80.55 21.29 536.81 344.23

431.83 257.36 689.19 95.6 4.3 4.22 85.39 -81.17 75.64 860.43 326.93

511.5 361.72 873.22 662.03 1.25 6.89 103.55 -96.66 621.34 2156.59 384.06

575.69 309.8 885.49 963.52 0.23 7.33 120.11 -112.78 879.4 2728.41 467.49

634.33 451.33 1085.66 540.34 0 20.57 138.81 -118.24 1134.77 2760.77 521.84

391.34 301.11 692.45 1025.83 0 21.98 183.65 -161.67 1576.52 3294.8 608.35

Nelcast Ltd
Profit & Loss A/c
Particulars INCOME : Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income EXPENDITURE : Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Administration Expenses Miscellaneous Expenses Less: Pre-operative Expenses Capitalised Mar 2004 152.42 19.76 132.66 0.56 4.59 137.81 56.71 24.56 5.29 26.59 8.29 0 0 Mar 2005 240.87 30.57 210.3 1.16 2.85 214.31 105.88 31.11 6.52 38.18 12.59 0 0 Mar 2006 270.32 34.01 236.31 1.06 0.34 237.71 106.6 34.33 7.61 59.36 7.62 0.09 0 Mar 2007 350.1 44.34 305.76 1.27 -3.74 303.29 127.73 38.03 9.8 76.38 9.12 0.18 0
(Amt in crores)

Mar 2008 403.66 47.21 356.45 3.46 20.78 380.69 168.9 43.65 12.12 95.23 11.01 0.04 0

Mar 2009 322.71 32.4 290.31 2.48 19.09 311.88 146.75 34.37 13.9 83.82 10 0.18 0

36

Total Expenditure Operating Profit Interest Cost of Goods Sold Gross Profit Depreciation Profit Before Tax Tax Fringe Benefit tax Deferred Tax Reported Net Profit Extraordinary Items Adjusted Net Profit Adjst. below Net Profit P & L Balance brought forward Statutory Appropriations Appropriations P & L Balance carried down Dividend Preference Dividend Equity Dividend % Earnings Per Share-Unit Curr Earnings Per Share(Adj)Unit Curr Book Value-Unit Curr

121.44 16.37 8.44 124.73 7.93 3.31 4.62 0.4 0 1.77 2.45 0 2.45 0 0 0 2.45 0 0.59 0 5 2 NA 14.94

194.28 20.03 8.96 199.23 11.07 3.53 7.54 0.84 0 1.41 5.29 0 5.29 0 0 0 5.29 0 1.93 0 15 3.91 NA 16.65

215.61 22.1 7.66 221.87 14.44 4 10.44 3.03 0.2 -0.12 7.33 -0.01 7.34 -0.31 2.23 0 6.93 2.32 2.57 0 20 5.42 NA 19.59

261.24 42.05 7.45 271.16 34.6 4.6 30 7.73 0.21 2.29 19.77 -0.09 19.86 0 2.32 0 14.5 7.59 3.89 0 30 14.68 NA 33.36

330.95 49.74 4.79 311.5 44.95 5.57 39.38 10.4 0.17 2.78 26.03 0.02 26.01 0 7.59 0 16.11 17.51 5.22 0 30 14.45 14.45 87.73

289.02 22.86 10.48 277.93 12.38 6.56 5.82 0.68 0.17 1.19 3.78 0 3.78 0 17.51 0 3.04 18.25 1.74 0 10 2 2 88.73

Nelcast Ltd
Balance sheet
Particulars SOURCES OF FUNDS : Share Capital Reserves Total Equity Share Warrants Equity Application Money Total Shareholders Funds Secured Loans Unsecured Loans Total Debt Total Liabilities APPLICATION OF FUNDS : Gross Block Less : Accumulated Depreciation Less:Impairment of Assets Net Block Lease Adjustment Mar 2004 11.85 5.85 0 0 17.7 48.25 16.24 64.49 82.19 Mar 2005 12.85 8.54 0 0 21.39 56.39 19.19 75.58 96.97 Mar 2006 12.85 12.32 0 0 25.17 62.1 12.3 74.4 99.57 Mar 2007 13.05 30.49 0 0 43.54 60.22 13.27 73.49 117.03
(Amt in crores)

Mar 2008 17.4 135.25 0 0 152.65 64.54 9.82 74.36 227.01

Mar 2009 17.4 136.99 0 0 154.39 157.76 14.9 172.66 327.05

68.65 15.75 0 52.9 0

76.08 19.28 0 56.8 0

86.27 23.18 0 63.09 0

101.03 27.55 0 73.48 0

138.48 32.88 0 105.6 0

145.96 39.44 0 106.52 0

37

Capital Work in Progress Producing Properties Investments Current Assets, Loans & Advances Inventories Sundry Debtors Cash and Bank Loans and Advances Total Current Assets Less : Current Liabilities and Provisions Current Liabilities Provisions Total Current Liabilities Net Current Assets Miscellaneous Expenses not written off Deferred Tax Assets Deferred Tax Liability Net Deferred Tax Fixed Asset Total Assets Contingent Liabilities

0 0 0.24

0 0 0.28

0 0 0.28

2.35 0 0.28

11.72 0 0.28

98.75 0 0.28

30.45 26.81 0.26 3.66 61.18

36.53 36.66 0.29 6.52 80

37.71 38.48 0.77 8.57 85.53

37.09 46.05 0.34 10.81 94.29

64.3 76.68 11.7 18.26 170.94

83.32 54.61 0.53 28.57 167.03

23.17 0.83 24 37.18 0 0 8.13 -8.13 21.01 82.19 1.24

28.44 2.14 30.58 49.42 0 0 9.53 -9.53 16.97 96.97 1.22

36.38 3.54 39.92 45.61 0 1.02 10.43 -9.41 14.04 99.57 0.47

38.91 2.76 41.67 52.62 0 0 11.7 -11.7 22.74 117.03 0.43

40.94 6.11 47.05 123.89 0 0 14.48 -14.48 56.07 227.01 1.56

27.82 2.04 29.86 137.17 0 0 15.67 -15.67 160.02 327.05 0.04

Liquidity Ratios of Suppliers


(1) Current Ratio = Current Assets / Current Liabilities (Amt in crores)
Year ==> Company
Bharat Forge Nelcast Mar 200 4 1.06 2.55 Mar 200 5 1.14 2.62 Mar 200 6 1.76 2.14 Mar 200 7 2.09 2.26 Mar 200 8 1.50 3.63 Mar 2009 2.48 5.59

38

6.00 5.00 Current Ratio 4.00 3.00 2.00 1.00 0.00 Mar 2004

Current Ratio

Mar 2005 Mar 2006

Mar 2007

Mar 2008 Mar 2009 Bharat Forge Nelcast

Year

A relatively high Current Ratio is an indication that firm is liquid and has the ability to pay its current obligation in time as and when they become due. In respect of above 2 suppliers of Tata Motors Nelcast has better Current Ratio than Bharat Forge so we can say that Nelcast is in a position that its can pay its current liabilities as and when it become due as compare to Bharat Forge. Here, Nelcast Ltd has continuously good current ratio over the Bharat Forge Ltd. So Nelcast Ltd will not face any problem to meet is current liabilities. From the above ratio we can say that Nelacast Ltd is in a good position for better Credit availment.

(2) Acid Test Ratio = Current Assets Inventory Prepaid Exps. / Current Liabilities

(Amt in crores)
Year ==> Company
Bharat Forge Nelcast Mar 200 4 0.79 2.8 Mar 200 5 0.87 2.27 Mar 200 6 1.47 1.37 Mar 200 7 1.75 1.2 Mar 200 8 1.19 1.42 Mar 2009 1.96 1.28

39

3 2.5 Acid Test Year 2 1.5 1 0.5 0 M ar 2004 M ar 2005

Acid Test Ratio

M ar 2006

M ar 2007

M ar 2008

M ar 2009

Year

Bharat Forge Nelcas t

This ratio is computed by dividing the quick assets by the current liabilities. This ratio is usually expressed as a pure ratio e.g. 1:1. From the computation of above ratio we can say that both companies are in good position that it can repay its liabilities. Here, both companies has better Acid Test Ratio but if we consider average of last three year then Bharat Forge Ltd has better Acid Test Ratio than Nelcast Ltd. For better credit availment Tata Motors should prefer Nelcast ltd on the basis of average of last three year Acid Test Ratio.

(3) Debtor Turnover Ratio = Credit Sales / Average A/c Receivable

(Amt in crores)
Year ==> Company
Bharat Forge Nelcast Mar 200 4 7.96 4.95 Mar 200 5 6.55 6.63 Mar 200 6 7.04 6.29 Mar 200 7 6.92 7.23 Mar 200 8 6.01 5.81 Mar 2009 6.95 4.42

40

10.00 8.00 DTR 6.00 4.00 2.00 0.00 Mar 2004

Debtor Turnover Ratio

Mar 2005

Mar 2006

Mar 2007

Mar 2008

Mar 2009

Year

Bharat Forge Nelcast

Normally, in any manufacturing organization high debtor turnover ratio is preferable. Higher the value of DTR the more efficient is the management of sales. From the above computation on an average of six years Bharat Forge Ltd has good Debtor Turnover Ratio. It is advisable that we can get more credit from Bharat Forge Ltd as compare to Nelcast Ltd. There is no rule of thumb which may be used as a norm to interpret the ratio as it may be different from firm to form, depending upon the nature of business.

Profitability Ratios of Suppliers


(1) Gross Profit Ratio = Gross Profit Net Sales
Year ==> Company

X 100 (Amt in crores)

Mar 2004

Mar 2005

Mar 2006

Mar 2007

Mar 2008

Mar 2009

41

Bharat Forge (%) Nelcast (%)

28.47 5.98

25.74 5.26

25.31 6.11

25.02 11.32

25.01 12.61

15.38 4.26

30.00 Gross Profit Ratio 25.00 20.00 15.00 10.00 5.00 0.00

Gross Profit Ratio

Mar 2004 Mar 2005 Mar 2006 Mar 2007 Mar 2008 Mar 2009 Year Bharat Forge (%) Nelcast (%)

Higher the ratio, the more efficient the production and purchase management. As compare the Gross Profit Ratio of Bharat Forge Ltd it is very good than Nelcast Ltd. Bharat Forge Ltd can easily meet is operating as well as non operating expenses. Bharat Forge Ltd has more profit margin than Nelcast Ltd so it can be said that Bharat Forge Ltd can give more Credit to Tata Motors, because it has more profit margin to cover its Direct Expenses.

(2) Operating Profit Ratio =

Operating Profit Net Sales

100

(Amt in crores)
Year ==> Company
Bharat Forge (%) Mar 2004 32.53 Mar 2005 28.62 Mar 2006 28.89 Mar 2007 29.49 Mar 2008 29.91 Mar 2009 20.42

42

Nelcast (%)

12.34

9.52

9.35

13.75

13.95

7.87

Operating Profit Ratio Operating Profit Ratio 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 Mar 2004 Mar 2005 Mar 2006 Year Mar 2007 Mar 2008 Mar 2009 Bharat Forge (%) Nelcast (%)

Bharat Forge Ltd. has higher Operating Profit Ratio than Nelcast Ltd. for last five year. Only in year 2009 Bharat Forge Ltd.s operating profit is decreased as compare to previous year. But as compare to Nelcast Ltd, Bharat Forge Ltd has good operating profit ratio. So Bharat Forge Ltd is in position that it can recover its operating expenses from operating profit. Bharat Forge Ltds operating efficiency is good as compare to Nelcast Ltd. so Tata Motors can demand more credit from Bharat Forge Ltd.

(3) Net Profit Ratio =

Net Profit Net Sales

100

(Amt in crores)
Year ==> Company
Bharat Forge (%) Nelcast (%) Mar 200 4 15.68 1.85 Mar 200 5 13.85 2.52 Mar 200 6 13.52 3.10 Mar 200 7 13.13 6.47 Mar 200 8 12.77 7.30 Mar 2009 5.18 1.30

43

18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 Mar 2004 Mar 2005

Net Profit Ratio

Net Profit Ratio

Mar 2006

Mar 2007

Year

Mar 2008 Mar 2009 Bharat Forge (%) Nelcast (%)

This ratio measures the relationship between Net Profit and Net Sales. Bharat Forge Ltd has more profit margin than Nelcast Ltd. so Bharat Forge Ltd is in a position that it can withstand in an adverse economic conditions when selling price is declining, cost of production is rising and demand for product is falling. In an adverse economic condition Tata Motors can get more credit from Bharat Forge Ltd as compare to Nelcast Ltd. because Bharat Forge Ltd has good profit margin than Nelcast Ltd.

Solvency Ratios of Suppliers


(1) Debt-Equity Ratio = Long Term Debts Shareholders Funds (Amt in crores)
Year ==> Company
Mar 200 4 Mar 200 5 Mar 200 6 Mar 200 7 Mar 200 8 Mar 2009

44

Bharat Forge Nelcast

1.14 3.64

0.94 3.53

0.85 2.96

1.06 1.69

0.87 0.49

1.22 1.12

Debt-Equity Ratio 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 Mar 2004 Mar 2005 Mar 2006 Mar 2007 Mar 2008 Mar 2009 Year Bharat Forge Nelcast

Debt-Equity Ratio

This ratio establishes a relationship between long-term debts and share-holders fund. Here Bharat Forge Ltd has a less Debt-Equity ratio than Nelcast Ltd. from that we can say that Bharat Forge uses fewer debts for its operation than Nelcast. Nelcast Ltd was uses more debts for its business, but continuously Nelcast Ltd reduces its Debts from year 2004 to 2009. That mean Nelcast take more leverage of Equity capital for its business. Bharat Forge Ltd has low Debts as compare to Nelcast Ltd so we can say that Bharat Forge has more stability than Nelcast Ltd. If Tata Motors took more credit from Bharat Forge Ltd it will not affect the liquidity of Bharat Forge ltd.

Activity Ratio
(1) Inventory Turnover Ratio = Cost of Goods Sold Average Inventory (Amt in crores)
Year==> Company
Bharat Forge

Mar 2004 4.28

Mar 2005 5.43

Mar 2006 5.19

Mar 2007 4.94

Mar 2008 5.01

Mar 2009 4.81

45

Nelcast

4.10

5.95

5.98

7.25

6.14

3.77

If we consider performance of last five years then it is clear that Nelcast Ltd is good in managing its inventory as compare to Bharat Forge Ltd. High Inventory Turnover Ratio is always preferable. Except in the year 2009 Bharat Forge Ltd has more Inventory Turnover Ratio than Nelcast Ltd. But from the average of the last five year Nelcast Ltd is good in converting its inventory in sales. So Tata Motors can relay more upon Nelcast Ltd for material supply.

Profile of Clutch Suppliers


Ceekay Daikin Ltd
Incorporation Year Registered Office Industry 1973 Plot No L-4 MIDC Indl Area,Chikalthana, Aurangabad (Maharashtra), Maharashtra-431210 Auto Ancillaries

46

Chairman Managing Director Customer

Mahesh B Kothari Mahesh B Kothari Tata Motors Ltd. (Since 18 years)

Clutch Auto Ltd.


Incorporation Year Registered Office 1971 2E/14 1st Floor,Jhandewalan Extension, New Delhi, New Delhi-110055 Auto Ancillaries V K Mehta V K Mehta Tata Motors Ltd. (Since 15 years)

Industry Chairman Managing Director Customer

Ceekay Daikin Ltd


Profit & Loss A/c
Particulars INCOME : Mar 2004 Mar 2005 Mar 2006 Mar 2007 Mar 2008
(Amt in crores)

Mar 2009

47

Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income EXPENDITURE : Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Administration Expenses Miscellaneous Expenses Less: Pre-operative Expenses Capitalised Total Expenditure Operating Profit Interest Cost of Goods Sold Gross Profit Depreciation Profit Before Tax Tax Fringe Benefit tax Deferred Tax Reported Net Profit Extraordinary Items Adjusted Net Profit Adjst. below Net Profit

64.13 8.4 55.73 1.82 -0.62 56.93

78.71 10.74 67.97 3.06 0.76 71.79

99.1 13.32 85.78 2.01 0.11 87.9

105.32 15.49 89.83 4.8 0.06 94.69

118.55 18.08 100.47 2.86 -0.16 103.17

118.99 15.11 103.88 3.14 -0.71 106.31

28.99 1.5 6.39 1.3 8.6 1.33 0 48.11 8.82 4.36 51.27 4.46 3.48 0.98 0.06 0 0.17 0.75 -0.01 0.76 0

40.35 1.52 7.22 2.39 9.2 1.1 0 61.78 10.01 3.96 61.92 6.05 3.31 2.74 0.2 0 0.32 2.22 0 2.22 0

50.03 1.72 7.82 2.88 11.39 1.14 0 74.98 12.92 3.46 76.32 9.46 3.84 5.62 0.48 0.14 0 5 -0.05 5.05 0

52.68 1.97 8.82 3.12 12.17 1.23 0 79.99 14.7 3.14 78.27 11.56 4.27 7.29 0.81 0.15 2.36 3.97 0 3.97 0

59.6 2.26 10.01 3.55 13.5 1.96 0 90.88 12.29 3.19 91.37 9.1 4.63 4.47 0.89 0.16 0.75 2.67 0 2.67 0

67.17 3 10.81 5.15 12.84 3.43 0 102.4 3.91 5.41 105.38 -1.5 5.81 -7.31 0.01 0.16 0 -7.48 0 -7.48 0

48

P & L Balance brought forward Statutory Appropriations Appropriations P & L Balance carried down Dividend Preference Dividend Equity Dividend % Earnings Per Share-Unit Curr Earnings Per Share(Adj)Unit Curr Book Value-Unit Curr

0.07 0 0 0.82 0 0 0 1.86 1.86 31.91

0.82 0 0 3.04 0 0 0 5.51 5.51 36.65

3.04 0 1.32 6.72 0.81 0 20 12.13 12.13 44.34

6.72 0 1.05 9.64 0.81 0 20 9.5 9.5 45.26

9.64 0 0.86 11.45 0.61 0 15 6.38 6.38 46.82

11.45 0 0 3.97 0 0 0 0 0 28.24


(Amt in crores)

Ceekay Daikin Ltd


Balance sheet
Particulars SOURCES OF FUNDS : Share Capital Reserves Total Equity Share Warrants Equity Application Money Total Shareholders Funds Secured Loans Unsecured Loans Total Debt Total Liabilities APPLICATION OF FUNDS : Gross Block Less : Accumulated Depreciation Less:Impairment of Assets Net Block Lease Adjustment Capital Work in Progress Producing Properties Investments Current Assets, Loans & Advances Inventories Sundry Debtors Cash and Bank Loans and Advances Total Current Assets Mar 2004 4.03 8.83 0 0 12.86 35.22 16.12 51.34 64.2 Mar 2005 4.03 10.74 0 0 14.77 31.58 15.71 47.29 62.06 Mar 2006 4.03 13.84 0 0 17.87 29.78 15.24 45.02 62.89 Mar 2007 4.03 14.21 0 0 18.24 30.84 15.29 46.13 64.37 Mar 2008 4.03 14.84 0 0 18.87 35.32 20.85 56.17 75.04 Mar 2009 4.03 7.35 0 0 11.38 33.33 35.44 68.77 80.15

59.84 32.42 0 27.42 0 3.17 0 0.48

63.56 35.43 0 28.13 0 2.86 0 0.48

69.48 39.11 0 30.37 0 4.1 0 0

76.04 43.01 0 33.03 0 4.33 0 0

82.7 47.34 0 35.36 0 8.84 0 0

107.52 53.13 0 54.39 0 5.63 0 0

20.64 15.27 0.22 4.97 41.1

23 15.06 0.17 4.52 42.75

23.23 17.03 0.12 5.37 45.75

23.17 15.95 0.57 4.53 44.22

23.66 17.98 0.9 10.32 52.86

28.69 19.77 0.7 12.02 61.18

49

Less : Current Liabilities and Provisions Current Liabilities Provisions Total Current Liabilities Net Current Assets Miscellaneous Expenses not written off Deferred Tax Assets Deferred Tax Liability Net Deferred Tax Fixed Assets Total Assets Contingent Liabilities

11.89 0.72 12.61 28.49 0.68 4.59 0.63 3.96 23.1 64.2 0.57

15.46 0.91 16.37 26.38 0.57 4.27 0.63 3.64 19.31 62.06 2.92

18.1 2.85 20.95 24.8 0.58 3.67 0.63 3.04 17.14 62.89 3.11

15.75 2.43 18.18 26.04 0.29 1.31 0.63 0.68 20.15 64.37 4.88

18.99 3.05 22.04 30.82 0.1 0 0.08 -0.08 22.18 75.04 4.86

38.32 2.65 40.97 20.21 0 0 0.08 -0.08 18.97 80.15 23.67

Clutch Auto Ltd


P & L A/C
Particulars INCOME : Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income EXPENDITURE : Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Administration Expenses Miscellaneous Expenses Less: Pre-operative Expenses Capitalised Total Expenditure Operating Profit Interest Cost of Goods Sold Gross Profit Depreciation Profit Before Tax Tax Fringe Benefit tax Deferred Tax Reported Net Profit Mar 2004 82.01 9.18 72.83 2.96 0.95 76.74 37.77 1.8 9.03 7.41 8.58 1.52 0 66.11 10.63 5.79 67.99 4.84 4.41 0.43 0.02 0 0.8 -0.39 Mar 2005 105.67 11.43 94.24 0.94 3.32 98.5 51.59 2.39 9.83 8.41 9.52 0.5 0 82.24 16.26 5.63 83.61 10.63 4.34 6.29 0.79 0 -0.21 5.71 Mar 2006 162.89 13.25 149.64 0.77 2.21 152.62 86.54 3.24 11.91 11.16 13.16 2.09 0 128.1 24.52 6.95 132.07 17.57 4.67 12.9 1.23 0.2 -1.08 12.55 Mar 2007 255.62 20.69 234.93 0.04 5.05 240.02 143.38 3.27 15.06 16.89 19.72 1.81 0 200.13 39.89 9.52 204.56 30.37 5.17 25.2 5.07 0.12 -0.95 20.96 Mar 2008 237.98 21.05 216.93 0.07 4.81 221.81 134.96 3.88 18.85 15.65 13.58 0.41 0 187.33 34.48 12.58 195.03 21.9 5.86 16.04 2.15 0.16 0.27 13.46
(Amt in crores)

Mar 2009 219.92 22.38 197.54 0.07 0.81 198.42 112.01 3.45 21.28 16.14 16.98 0.69 0 170.55 27.87 14.48 184.15 13.39 7.76 5.63 1.46 0.17 -0.46 4.46

50

Extraordinary Items Adjusted Net Profit Adjst. Below Net Profit P & L Balance brought forward Statutory Appropriations Appropriations P & L Balance carried down Dividend Preference Dividend Equity Dividend % Earnings Per Share-Unit Curr Earnings Per Share(Adj)-Unit Curr Book Value-Unit Curr

0 -0.39 0 1.72 0 0 1.33 0 0 0 0 0 17.13

0 5.71 0 1.33 0 0 7.04 0 0 0 6.47 6.47 23.59

-0.01 12.56 0 7.04 0 -0.92 20.51 1.4 0 10 8.83 8.83 38.07

0.01 20.95 0 20.51 0 0 41.47 0 0 0 13.51 13.51 59.4

-0.01 13.47 0 41.47 0 0 54.93 0 0 0 8.25 8.25 70.52

0 4.46 0 54.93 0 0 59.39 0 0 0 2.73 2.73 73.25

Clutch Auto Ltd


Balance sheet
Particulars SOURCES OF FUNDS : Share Capital Reserves Total Equity Share Warrants Equity Application Money Total Shareholders Funds Secured Loans Unsecured Loans Total Debt Total Liabilities APPLICATION OF FUNDS : Gross Block Less : Accumulated Depreciation Less:Impairment of Assets Net Block Lease Adjustment 8.82 28.54 0 0 37.36 50.87 9.26 60.13 97.49 8.82 34.14 0 0 42.96 45.59 8.5 54.09 97.05 14 61.35 0 0 75.35 59.44 8.83 68.27 143.62 15.52 98.62 0 0 114.14 80.26 12.68 92.94 207.08 16.32 120.63 0 0 136.95 83.48 12.89 96.37 233.32 16.32 124.99 0 0 141.31 108.11 17.04 125.15 266.46 Mar 2004 Mar 2005 Mar 2006 Mar 2007
(Amt in crores)

Mar 2008

Mar 2009

82.61 24.45 0 58.16 0

83.73 28.38 0 55.35 0

87.45 32.56 0 54.89 0

94.62 37.73 0 56.89 0

115.13 42.75 0 72.38 0

183.06 49.73 0 133.33 0

51

Capital Work in Progress Producing Properties Investments Current Assets, Loans & Advances Inventories Sundry Debtors Cash and Bank Loans and Advances Total Current Assets Less : Current Liabilities and Provisions Current Liabilities Provisions Total Current Liabilities Net Current Assets Miscellaneous Expenses not written off Deferred Tax Assets Deferred Tax Liability Net Deferred Tax Fixed Assets Total Assets Contingent Liabilities

0.03 0 0

0.14 0 0

0.97 0 0

11.77 0 0

19.79 0 0

17.96 0 0

23.08 41.55 2.74 2.49 69.86

26.7 48.43 2.04 3.05 80.22

32 74.28 8.68 5.54 120.5

38.06 105.88 28.48 16.21 188.63

44.68 100.52 34.56 12.55 192.31

46.31 96.74 12.57 24.6 180.22

25.18 2.17 27.35 42.51 2.81 0.91 6.93 -6.02 27.63 97.49 1.33

32 3.46 35.46 44.76 2.61 0.83 6.64 -5.81 16.83 97.05 6.34

22.99 6.5 29.49 91.01 1.48 1.07 5.8 -4.73 23.12 143.62 6.03

37.19 9.44 46.63 142 0.2 1.31 5.09 -3.78 18.45 207.08 6

39.63 7.61 47.24 145.07 0.13 1.66 5.71 -4.05 41.01 233.32 7.48

53.49 8.04 61.53 118.69 0.07 1.98 5.57 -3.59 86.24 266.46 7.56

Liquidity Ratios of Clutch Suppliers


(1) Current Ratio = Current Assets / Current Liabilities (Amt in crores)
Year ==> Company
Ceekay Daikin Clutch Auto Mar 200 4 3.26 2.55 Mar 200 5 2.61 2.26 Mar 200 6 2.18 4.09 Mar 200 7 2.43 4.05 Mar 200 8 2.40 4.07 Mar 2009 1.49 2.93

52

Current Ratio 5.00 Current Ratio 4.00 3.00 2.00 1.00 0.00 Mar 2004 Mar 2005 Mar 2006 Mar 2007 Mar 2008 Mar 2009 Year Ceekay Daikin Clutch Auto

In above interpretation both companies have sufficient Current Asset Ratio. Both companies are in a position to meet its current liabilities as and when arises. In the year 2009 Clutch Auto Ltd has more current ratio than Ceekay Daikin Ltd. as per industry standard Ceekay Daikin Ltd has less Current Ratio. So it may face some problem to meet its due. Clutch Auto Ltd is in a good position to meet its current liabilities. From the above calculations Tata Motors can get more credit from Clutch Auto Ltd.

(2) Acid Test / Quick / Liquid Ratio = Current Assets Inventory Prepaid Exps. / Current Liabilities (Amt in crores)
Year ==> Company
Ceekay Daikin Clutch Auto Mar 200 4 1.62 1.71 Mar 200 5 1.21 1.51 Mar 200 6 1.07 3.00 Mar 200 7 1.16 3.23 Mar 200 8 1.32 3.13 Mar 2009 0.79 2.18

53

3.50 Acid Test Ratio 3.00 2.50 2.00 1.50 1.00 0.50 0.00 Mar 2004 Mar 2005

Acid Test Ratio

Mar 2006

Mar 2007

Mar 2008

Mar 2009

Year

Ceekay Daikin Clutch Auto

Clutch Auto ltd is in a good position to meet its current liabilities as and when its due. As compare to Ceekay Daikin Ltd Clutch Auto Ltd has very good Liquid Ratio. In a year 2009 Ceekay Daikin Ltds current ratio is below industry standard. But Clutch Auto Ltd is in very good position in respect of Acid Test Ratio. Ceekay Daikin Ltd may face some problem to meet its obligation. From the above calculation we can say that Tata Motors can get more credit from Clutch Auto ltd, because its liquidity position is better than Ceekay Daikin ltd.

(2) Debtor Turnover Ratio = Credit Sales / Average A/c Receivable

(Amt in crores)
Year ==> Company
Ceekay Daikin Clutch Auto Mar 200 4 3.65 1.75 Mar 200 5 4.48 2.09 Mar 200 6 5.35 2.44 Mar 200 7 5.45 2.61 Mar 200 8 5.92 2.10 Mar 2009 5.50 2.00

54

7.00 6.00 5.00 DTR 4.00 3.00 2.00 1.00 0.00 Mar 2004

Debtor Turnover Ratio

Mar 2005

Mar 2006

Mar 2007

Year

Mar 2008 Mar 2009 Ceekay Daikin Clutch Auto

Ceekay Daikin Ltd has good Debtor Turnover Ratio so it can generate more cash from its debtors. Clutch Auto Ltd has less Debtor Turnover Ratio as compare to Ceekay Daikin Ltd. There no industry standard for Debtor Turnover Ratio but more Turnover Ratio indicates that firm manages its inventory management more efficiently. Ceekay Daikin ltd is managing its sales in a good manner. So Tata Motors can get more credit from Ceekay Daikin Ltd.

Profitability Ratios of Suppliers


(1) Gross Profit Ratio = Gross Profit Net Sales
Year ==> Company
Ceekay Daikin (%) Clutch Auto (%) Mar 2004 8.00 6.65 Mar 2005 8.90 11.28 Mar 2006 11.03 11.74 Mar 2007 12.87 12.93

100 (Amt in crores)


Mar 2008 9.06 10.10 Mar 2009 -1.44 6.78

55

Gross Profit Ratio 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 -2.00 -4.00 Mar 2004 Mar 2005 Mar 2006 Mar 2007 Mar 2008 Mar 2009

Gross Profit Ratio

Year

Ceekay Daikin (%) Clutch Auto (%)

Gross Profit Ratio indicates an average gross margin earned of Rs. 100. High Gross Profit margin is preferable because company has to recover its operating as well as non operating expenses from gross profit. Here, Ceekay Daikin Ltd suffer gross loss in the year 2009 so it is not in a position that it can give credit to Tata Motors, contrarily Ceekay Daikin Ltd will demand advance payment for its production activity. So Tata Motors prefer Clutch Auto Ltd for credit purchase.

(2) Operating Profit Ratio =

Operating Profit Net Sales

100

(Amt in crores)
Year ==> Company
Ceekay Daikin (%) Clutch Auto (%) Mar 200 4 15.83 14.60 Mar 200 5 14.73 17.25 Mar 200 6 15.06 16.39 Mar 200 7 16.36 16.98 Mar 200 8 12.23 15.89 Mar 2009 3.76 14.11

56

Operating Profit Ratio

20.00 15.00 10.00 5.00 0.00 Mar 2004

Operating Profit Ratio

Mar 2005

Mar 2006

Mar 2007

Mar 2008

Mar 2009

Year

Ceekay Daikin (%) Clutch Auto (%)

Clutch Auto Ltd has good operating profit ratio so its operational efficiency is good as compare to Clutch Auto Ltd. In a year 2009 Clutch Auto has 3.5 times greater operating profit ratio so Clutch Auto can give more credit to Tata Motors.

(3) Net Profit Ratio =

Net Profit Net Sales

100 (Amt in crores)

Year ==> Company


Ceekay Daikin (%) Clutch Auto (%)

Mar 200 4 1.35 -0.54

Mar 200 5 3.27 6.06

Mar 200 6 5.83 8.39

Mar 200 7 4.42 8.92

Mar 200 8 2.66 6.20

Mar 2009 -7.20 2.26

57

10.00 8.00 6.00 4.00 2.00 0.00 -2.00 -4.00 -6.00 -8.00 -10.00

Net Profit Ratio

Net Profit Ratio

Mar 2004

Mar 2005

Mar 2006

Mar 2007

Mar 2008

Mar 2009

Year

Ceekay Daikin (%) Clutch Auto (%)

Net profit ratio indicates an overall profitability of business concern. Net profit ratio shows an average margin earned on a sale of Rs.100. In a year 2009 Ceekay Daikin ltd suffers a net loss. So it is not in position to give a credit to Tata Motors. Clutch Auto Ltd also not have a good profit margin so Tata Motors has to negotiate to get more credit from Clutch Auto Ltd. Tata Motors can give more business to Clutch and can get more credit.

Solvency Ratio of Suppliers


(1) Debt-Equity Ratio = Long Term Debts Shareholders Fund (Amt in crores)
Year ==> Company
Ceekay Daikin Mar 200 4 3.99 Mar 200 5 3.20 Mar 200 6 2.52 Mar 200 7 2.53 Mar 200 8 2.98 Mar 2009 6.04

58

Clutch Auto

1.61

1.26

0.91

0.81

0.70

0.89

Debt-Equity Ratio 7.00 Debt-Equity Ratio 6.00 5.00 4.00 3.00 2.00 1.00 0.00 Mar 2004 Mar 2005 Mar 2006 Mar 2007 Mar 2008 Mar 2009 Year Ceekay Daikin Clutch Auto

From a year 2004 to 2009 Ceekay Daikin Ltd has more Debt-Equity ratio as compare to Clutch Ltd. In a year 2009 Ceekay Daikin ltd. have very big Debt-Equity ratio so it is taking more leverage of outsider debts to its business.

Clutch Auto Ltd taking more leverage of Equity for its business. It have very less debts as compare to Ceekay Daikin. So Clutch Auto Ltd has more solvency than Ceekay Daikin Ltd so Tata Motors can get more credit from Clutch Auto Ltd.

Activity Ratio
(1) Inventory Turnover Ratio = Cost of Goods Sold Average Inventory (Amt in crores)
Year ==> Company
Ceekay Daikin

Mar 2004 2.48

Mar 2005 2.84

Mar 2006 3.30

Mar 2007 3.37

Mar 2008 3.90

Mar 2009 4.03

59

Clutch Auto

2.95

3.36

4.50

5.84

4.71

4.05

In a year 2009 both companies have their Inventory Turnover Ratio almost same. So we can say that in the year 2009 both companies are at same level to manage their inventory. But if consider past performance, then Clutch Auto is in a good position as compare to Ceekay Daikin to manage its inventory. From this interpretation it is advisable that Tata Motors focus more on Clutch Auto because it is good in managing inventory so it can better offers to Tata Motors.

Profile of Suppliers of Raw Material


Kirloskar Ferrous Industries Ltd.

Incorporation Year Registered Office

1991 13 Laxmanrao Kirloskar Road,Khadki, Pune, Maharashtra-411003


60

Industry Chairman Managing Director Customer

Steel Pig Iron Atul C Kirloskar R V Gumaste Tata Motors Ltd. (Since 10 years)

Sesa Goa Ltd.


Incorporation Year Registered Office Industry Chairman Managing Director Customer 1965 Sesa Ghor,20 EDC Complex Patto, Panaji, Goa-403001 Steel Pig Iron S D Kulkarni P K Mukharjee Tata Motors Ltd. (Since 20 years)

Kirloskar Ferrous Industries Ltd


Profit & Loss A/c
Particulars INCOME : Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Mar 2004 435.03 59.9 375.13 9.44 5.86 Mar 2005 561.39 63.64 497.75 4.26 -9.3 Mar 2006 560.83 78.05 482.78 5.1 -1.17 Mar 2007 613.24 88.61 524.63 6.44 7.79 Mar 2008 843.77 117.18 726.59 18.35 7.28
(Amt in crores)

Mar 2009 789.66 90.29 699.37 5.09 -5.59

61

Total Income EXPENDITURE : Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Administration Expenses Miscellaneous Expenses Less: Pre-operative Expenses Capitalised Total Expenditure Operating Profit Interest Cost of Goods Sold Gross Profit Depreciation Profit Before Tax Tax Fringe Benefit tax Deferred Tax Reported Net Profit Extraordinary Items Adjusted Net Profit Adjst. below Net Profit P & L Balance brought forward Statutory Appropriations Appropriations P & L Balance carried down Dividend Preference Dividend Equity Dividend % Earnings Per Share-Unit Curr Earnings Per Share(Adj)Unit Curr Book Value-Unit Curr

390.43 250.3 16.37 10.57 32.68 10.01 7.04 0 326.97 63.46 24.43 336.1 39.03 11.79 27.24 0 0 -4.48 31.72 -5.5 37.22 0 -114.75 0 0 -83.03 0 0 0 4.39 4.43 -1.5

492.71 376.17 16.34 11.81 32.32 11.75 1.15 0 449.54 43.17 10.79 465.37 32.38 11.63 20.75 0 0 -1.08 21.83 -0.09 21.92 0 -83.03 0 12.93 -74.13 0 11.34 0 1.23 1.24 -0.26

486.71 339.02 18.14 13.15 35.73 19.43 1.58 0 427.05 59.66 8.52 431.64 51.14 11.39 39.75 0.34 0.15 13.18 26.08 0.01 26.07 36.11 -74.13 0 25.97 -37.91 0 22.78 0 0.02 0.02 -0.25

538.86 332.16 27.25 17.67 52.03 20.24 1.39 0 450.74 88.12 7.59 444.1 80.53 13.99 66.54 3.62 0.13 18.33 44.46 -0.09 44.55 0 -37.91 0 4.85 1.7 0 4.25 0 2.89 2.89 19.21

752.22 470.19 28.82 28.68 85.98 42.03 2.87 0 658.57 93.65 9.31 642.25 84.34 18.54 65.8 3.73 0.23 12.81 49.03 1.37 47.66 0 1.7 0 17.02 33.71 10.28 0 15 3.45 3.45 21.91

698.87 453.84 32.11 29.74 87.01 28.94 11.27 0 642.91 55.96 12.66 656.07 43.3 23.04 20.26 3.54 0.16 8.61 7.95 -0.61 8.56 0 33.71 0 11.8 29.86 10.09 0 10 0.45 0.45 21.65

Kirloskar Ferrous Industries Ltd


Balance sheet
Particulars SOURCES OF FUNDS : Share Capital Reserves Total 176.91 -83.03 176.91 -74.13 140.8 -37.91 68.5 194.63 68.5 231.64 68.65 228.66 Mar 2004 Mar 2005 Mar 2006 Mar 2007
(Amt in crores)

Mar 2008

Mar 2009

62

Equity Share Warrants Equity Application Money Total Shareholders Funds Secured Loans Unsecured Loans Total Debt Total Liabilities APPLICATION OF FUNDS : Gross Block Less : Accumulated Depreciation Less:Impairment of Assets Net Block Lease Adjustment Capital Work in Progress Producing Properties Investments Current Assets, Loans & Advances Inventories Sundry Debtors Cash and Bank Loans and Advances Total Current Assets Less : Current Liabilities and Provisions Current Liabilities Provisions Total Current Liabilities Net Current Assets Miscellaneous Expenses not written off

0 0 93.88 17.3 45 62.3 156.18

0 0 102.78 22.1 31.33 53.43 156.21

0 0 102.89 16.02 16.33 32.35 135.24

0 0 263.13 20.11 0 20.11 283.24

0 0.01 300.15 3.94 0 3.94 304.09

0 0 297.31 18.85 0 18.85 316.16

230.68 97.21 0 133.47 0 0.29 0 0

232.81 108.47 0 124.34 0 4.15 0 0

240.07 119.67 0 120.4 0 4.31 0 0

286.09 133.4 0 152.69 0 19.85 0 0

330.65 151.86 0 178.79 0 67.62 0 0

431.57 166.12 0 265.45 0 63.42 0 0

37.96 29.74 10.7 27.82 106.22

56.16 54.83 38.66 28.81 178.46

43.02 45.08 8.34 28.82 125.26

52.77 79.4 110.54 24.19 266.9

93.24 95.1 43.43 73.26 305.03

57.66 69.2 12.68 40.5 180.04

105.26 0.49 105.75 0.47 1.62

159.26 13.49 172.75 5.71 0.6

96.23 26.73 122.96 2.3 0

144.41 1.7 146.11 120.79 0

220.11 4.35 224.46 80.57 0

144.42 16.83 161.25 18.79 0

63

Deferred Tax Assets Deferred Tax Liability Net Deferred Tax Fixed Assets Total Assets Contingent Liabilities

59.56 39.23 20.33 49.96 156.18 27.24

56.32 34.91 21.41 -22.25 156.21 145.28

41.39 33.16 8.23 9.98 135.24 56.6

16.82 26.91 -10.09 16.34 283.24 81.39

2.33 25.22 -22.89 -0.94 304.09 95.05

2.48 33.98 -31.5 136.12 316.16 77.28

Sesa Goa Ltd


Profit & Loss A/c
Particulars INCOME : Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income EXPENDITURE : Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Administration Expenses Miscellaneous Expenses Less: Pre-operative Expenses Capitalised Total Expenditure Operating Profit Interest Cost of Goods Sold Gross Profit Depreciation Profit Before Tax Tax Fringe Benefit tax Deferred Tax Reported Net Profit Extraordinary Items Adjusted Net Profit Adjst. below Net Profit P & L Balance brought forward Statutory Appropriations Mar 2004 650.03 0 650.03 52.74 -5.12 697.65 82.96 8.72 28.78 200.13 205.74 4.74 0 531.07 166.58 7.8 491.25 158.78 16 142.78 42.3 0 1.7 98.78 0.21 98.57 0 6.64 0 Mar 2005 1509.43 0 1509.43 60.65 13.01 1583.09 281.91 11.19 39.36 290.9 235.83 5.38 0 864.57 718.52 5.5 796.41 713.02 25.6 687.42 227.3 0 -2.26 462.38 -0.05 462.43 0 55.26 0 Mar 2006 1771.77 0 1771.77 51.96 23.35 1847.08 352.17 11.25 40.81 364.86 234.28 8.71 0 1012.08 835 3.26 940.03 831.74 24.66 807.08 268.16 0.92 -1.4 539.4 0.11 539.29 0 41.71 0 Mar 2007 2023.83 0 2023.83 72.19 -5.64 2090.38 383.3 10.93 49.88 437.55 268.28 7.14 0 1157.08 933.3 2.17 1092.7 931.13 31.28 899.85 287.7 0.54 5.2 606.41 -1.86 608.27 0 51.58 0 Mar 2008 3602.16 0 3602.16 106.15 29.2 3737.51 437.54 10.55 53.15 831.78 107.76 15.7 0 1456.48 2281.03 1.51 1322.64 2279.52 42.58 2236.94 742.9 0.64 1.4 1492 0.3 1491.7 0 50.54 0
(Amt in crores)

Mar 2009 5082.47 0 5082.47 253.84 38.44 5374.75 492.91 10.57 80.62 1777.01 144.78 190.68 0 2696.57 2678.18 3.38 2407.67 2674.8 44.1 2630.7 684 0.75 3.46 1942.49 22.28 1920.21 0 60.31 0

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Appropriations P & L Balance carried down Dividend Preference Dividend Equity Dividend % Earnings Per Share-Unit Curr Earnings Per Share(Adj)Unit Curr Book Value-Unit Curr

97.2 8.22 19.68 0 100 48.91 1.22 160.32

475.93 41.71 88.56 0 225 114.33 5.72 184.01

529.53 51.58 157.45 0 400 131.43 6.57 275.44

607.45 50.54 157.45 0 400 147.72 7.39 382.71

1482.23 60.31 177.13 0 450 371.42 18.57 709.13

1907.23 95.57 177.13 0 225 24.29 24.29 57.39

Sesa Goa Ltd


Balance sheet
Particulars SOURCES OF FUNDS : Share Capital Reserves Total Equity Share Warrants Equity Application Money Total Shareholders Funds Secured Loans Unsecured Loans Total Debt Total Liabilities APPLICATION OF FUNDS : Gross Block Less : Accumulated Depreciation Less:Impairment of Assets Net Block Lease Adjustment Capital Work in Progress Producing Properties Investments Current Assets, Loans & Advances Inventories Sundry Debtors Cash and Bank Loans and Advances Total Current Assets Less : Current Liabilities and Provisions Current Liabilities Provisions Total Current Liabilities Net Current Assets Mar 2004 19.68 295.83 0 0 315.51 53.86 24.04 77.9 393.41 Mar 2005 39.36 684.89 0 0 724.25 1.11 15.45 16.56 740.81 Mar 2006 39.36 1044.76 0 0 1084.12 0.21 9.62 9.83 1093.95 Mar 2007 39.36 1467 0 0 1506.36 0 0 0 1506.36 Mar 2008 39.36 2751.77 0 0 2791.13 0 0 0 2791.13
(Amt in crores)

Mar 2009 78.72 4439.06 0 0 4517.78 1.91 0 1.91 4519.69

291.92 107.49 0 184.43 0 10.31 0 66.95

442.87 170.93 0 271.94 0 15.51 0 345.96

471.69 187.96 0 283.73 0 45.32 0 516.16

596.78 213.87 0 382.91 0 15.94 0 867.81

637.82 239.73 0 398.09 0 15.85 0 2000.44

739.27 281.27 0 458 0 48.19 0 3019.68

62.94 78.19 62.47 69.24 272.84

159.42 146.66 9.97 22.52 338.57

279.46 217.18 31.14 29.7 557.48

255.01 227.14 14.43 32.49 529.07

263.52 443.07 13.16 50.35 770.1

231.7 256.73 12.17 1099 1599.6

84.51 25.41 109.92 162.92

85.59 96.58 182.17 156.4

122.97 137.97 260.94 296.54

107.72 129.55 237.27 291.8

162.5 177.35 339.85 430.25

313.93 239.32 553.25 1046.35

65

Miscellaneous Expenses not written off Deferred Tax Assets Deferred Tax Liability Net Deferred Tax Fixed Assets Total Assets Contingent Liabilities

2.56 0.78 34.54 -33.76 120.57 393.41 151

0.2 1.43 50.63 -49.2 402.24 740.81 113.04

0 2.2 50 -47.8 536.47 1093.95 189.57

0 4.03 56.13 -52.1 977.29 1506.36 265.48

0 3.98 57.48 -53.5 2021.03 2791.13 738.79

0 9.34 61.87 -52.53 2920.09 4519.69 1793.01

(1) Current Ratio =

Current Assets / Current Liabilities (Amt in crores)

Year ==> Company


Kirloskar Ferrous Sesa Goa

Mar 200 4 1.00 2.48

Mar 200 5 1.03 1.86

Mar 200 6 1.02 2.14

Mar 200 7 1.83 2.23

Mar 200 8 1.36 2.27

Mar 2009 1.12 2.89

3.50 3.00 Current Ratio 2.50 2.00 1.50 1.00 0.50 0.00 Mar 2004 Mar 2005

Current Ratio

Mar 2006

Mar 2007

Mar 2008

Mar 2009

Year

Kirloskar Ferrous Sesa Goa

Current Ratio indicates the ability of the firm of meeting short term liabilities. Normally 2:1 is consider as good sing of current ratio. As per the interpretation Kirloskar Ferrous has its Current Ratio below the normal acceptable level. Sesa Goa Ltd has good Current Ratio than Kirloskar Ferrous Ltd. So Tata Motors can get credit from Sesa Goa because it can meet its short term liabilities without any difficulty.

66

(3) Acid Test / Quick / Liquid Ratio = Current Assets Inventory Prepaid Exps. /Current Liabilities

(Amt in crores)
Year ==> Company
Kirloskar Ferrous Sesa Goa Mar 200 4 0.65 1.91 Mar 200 5 0.71 0.98 Mar 200 6 0.67 1.07 Mar 200 7 1.47 1.16 Mar 200 8 0.94 1.49 Mar 2009 0.76 2.47

3.00 Acid Test Ratio 2.50 2.00 1.50 1.00 0.50 0.00

Acid Test Ratio

Mar 2004 Mar 2005 Mar 2006

Mar 2007 Mar 2008 Mar 2009 Kirloskar Ferrous Sesa Goa

Year

Acid Test Ratio shows the liquid cash in the hand of business to meet its short term liabilities as and when it arises. Acid Test Ratio does not include inventory. From that ratio we can judge about liquidity position of any business. As per the interpretation Sesa Goa has good Acid Test ratio than Kirloskar Ferrous Ltd. So Tata Motors can demand more credit from Sesa Goa because it can meet its shot term obligation without any difficulty.

67

(4) Debtor Turnover Ratio = Credit Sales / Average A/c Receivable (Amt in crores)
Year ==> Company
Kirloskar Ferrous Sesa Goa Mar 200 4 12.61 8.31 Mar 200 5 11.77 13.43 Mar 200 6 9.66 9.74 Mar 200 7 8.43 9.11 Mar 200 8 8.33 10.75 Mar 2009 8.51 14.53

16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 Mar 2004

Debtor Turnover Ratio

DTR

Mar 2005

Mar 2006

Mar 2007

Mar 2008

Mar 2009

Year

Kirloskar Ferrous Sesa Goa

Debtor Turnover Ratio indicates the number of times the debtor turned over during a year. There is no industry standard for Debtor turnover ratio that how many times debtors should be turned. From the above calculations we can say that Sesa Goa Ltd is more efficient that Kirloskar Ferrous Ltd. So Tata Motors can get more credit from Sesa Goa Ltd as compare to Kirloskar Ferrous Ltd.

68

Profitability Ratios

(1) Gross Profit Ratio =

Gross Profit Net Sales

100 (Amt in crores)

Year ==> Company


Kirloskar Ferrous (%) Sesa Goa (%)

Mar 200 4 10.40 24.43

Mar 200 5 6.51 47.24

Mar 200 6 10.59 46.94

Mar 200 7 15.35 46.01

Mar 200 8 11.61 63.28

Mar 2009 6.19 52.63

Gross Profit Ratio 70.00 Gross Profit Ratio 60.00 50.00 40.00 30.00 20.00 10.00 0.00 Mar 2004 Mar 2005 Mar 2006 Mar 2007 Mar 2008 Mar 2009 Year Kirloskar Ferrous (%) Sesa Goa (%)

Gross Profit Ratio indicates the gross margin earned by business on sales of Rs.100.

69

Here we can see that Sesa Goa has huge gross profit margin than Kirloskar Ferrous Ltd. so Tata Motors can get more credit from Sesa Goa for steel material. Sesa Goa is in a position that it can manage its business if Tata Motors get credit from them.

(2) Operating Profit Ratio = Operating Profit Net Sales

100 (Amt in crores)

Year ==> Company


Kirloskar Ferrous (%) Sesa Goa (%)

Mar 200 4 16.92 25.63

Mar 200 5 8.67 47.60

Mar 200 6 12.36 47.13

Mar 200 7 16.80 46.12

Mar 200 8 12.89 63.32

Mar 2009 8.00 52.69

Operating Profit Ratio 70.00 Operating Profit Ratio 60.00 50.00 40.00 30.00 20.00 10.00 0.00 Mar 2004 Mar 2005 Mar 2006 Mar 2007 Mar 2008 Mar 2009 Year Kirloskar Ferrous (%) Sesa Goa (%)

The main objective of computing of this ratio is to determine the operational efficiency of the management.
70

From the above date we can conclude that Sesa Goa Ltd has better operating profit ratio than Kirloskar Ferrous Ltd. so Sesa Goa Ltd is in a position to cover non-operating expenses, to pay dividend and to create reserve. So we can conclude that Sesa Goa Ltd can give better credit to Tata Motors than Kirloskar Ferrous Ltd.

(3) Net Profit Ratio =

Net Profit Net Sales

100 (Amt in crores)

Year ==> Company


Kirloskar Ferrous (%) Sesa Goa (%)

Mar 200 4 8.46 15.20

Mar 200 5 4.39 30.63

Mar 200 6 5.40 30.44

Mar 200 7 8.47 29.96

Mar 200 8 6.75 41.42

Mar 2009 1.14 38.22

Net Profit Ratio 45.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 Mar 2004 Mar 2005 Mar 2006 Mar 2007 Mar 2008 Mar 2009 Year Kirloskar Ferrous (%) Sesa Goa (%)

This ratio indicates overall profitability of business concern. Higher the ratio, greater is the profitability of firm. In respect of above data we can say that Sesa Goa Ltd has greater profitability than Kirloskar Ferrous Ltd. Sesa Goas ratio indicates that its business is in a good condition so it has ability to withstand adverse economy condition.
71

Net Profit Ratio

From the above data we can conclude that Tata Motors can get more credit from Sesa Goa Ltd than Kirloskar Ferrous Ltd because its profitability is more than Kirloskar Ferrous Ltd.

Solvency Ratio
(1) Debt-Equity Ratio = Long Term Debts / Shareholders Fund

(Amt in crores)
Year ==> Company
Kirloskar Ferrous Sesa Goa Mar 200 4 0.66 0.25 Mar 200 5 0.52 0.02 Mar 200 6 0.31 0.01 Mar 200 7 0.08 0.00 Mar 200 8 0.01 0.00 Mar 2009 0.06 0.00

Debt-Equity Ratio 0.70 Debt-Equity Ratio 0.60 0.50 0.40 0.30 0.20 0.10 0.00 Mar 2004 Mar 2005 Mar 2006 Mar 2007 Mar 2008 Mar 2009 Kirloskar Ferrous Year Sesa Goa

This ratio establishes a relationship between long- term debts and share-holders funds. Sesa Goa Ltd has zero amounts of debts for last three year. Kirloskar Ferrous Ltd has some amount of debts but this amount is also almost zero.

72

So from this ratio we can conclude that both firm may using other costly source of capital for its business. Both companies are solvent both have ability to pay regularly interest on long-term borrowings, repayment of the principal amount at the maturity and the security of their loan. On the basis of above data we can say that Tata Motors can get better credit policy from both suppliers because both suppliers dont have any big amount of borrowings.

Activity Ratio
(1) Inventory Turnover Ratio = Cost of Goods Sold Average Inventory (Amt in crores)
Year ==> Company
Kirloskar Ferrous Sesa Goa

Mar 2004 8.85 7.81

Mar 2005 9.89 7.16

Mar 2006 8.70 4.28

Mar 2007 9.27 4.09

Mar 2008 8.80 5.10

Mar 2009 8.70 9.72

It indicates the speed with which the inventory is converted into sales. From the above calculation it is clear that Kirloskar Ferrous convert its inventory on an average 9 times in a year. On the other hand Sesa Goa converts its inventory on an average 6 times in a year.

73

Except in a year 2009 Sesa Goa is in a better position as compare to Kirloskar Ferrous Ltd. for conversion of inventory into sales. Generally, high Inventory Turnover Ratio indicates efficient performance. So it can be said that Kirloskar Ferrous is more efficient than Sesa Goa in managing inventory.

Put under RM heading Limitations

74

Limitations of Ratio Analysis


(1)False Results: Ratios are based upon the financial statement. In case financial ratio is incorrect or

the date upon which ratios are based is incorrect ratio calculated will also be false & defective.
(2)Limited use of Single Ratio: A single ratio, usually, does not convey much of sense. To make a

better interpretation a number of ratios have to be calculated which is likely to confuse the analyst than help him in making any meaningful decision.
(3)Absence of Standard Universally Accepted Terminology: Different meanings are given to

particular term such as some firms take profit before interest and after tax; other may take profit before interest and tax. This ratio can be comparable only when both the firms adopt uniform terminology.
(4)Ignoring Qualitative Factors: Ratio analysis is the quantitative measurement of the performance

of the business. It ignores the qualitative aspect of the firm. It show that ratio is only one sided to measure the efficiency of business.
(5)Incomparable: Not only industries differ in their nature but also the firms of the similar business

widely differ in their size and accounting procedures, etc. It makes comparison of ratios difficult and misleading. Moreover, companies are made difficult due to differences in definitions of various financial terms used in the ratio analysis.
(6)Personal Bias: Ratios are only means of financial analysis and not an end in itself. Ratios have to

be interpreted and different people may interpret the same ratio in different ways.
(7)Window Dressing: Financial statements can easily be window dressed to present a better picture

of its financial and profitability position to outsider. Hence, one has to be careful in making decision from ratios calculated from such financial statement. But it may be very difficult for an outsider to know about the window dressing made by a firm.
(8)Ratios no Substitutes: Ratio analysis is merely a tool of financial statement. Hence, ratios

become useless if separated from the statements from which they are computed.

75

(9)Actual Data used for Pricing of Material is not available: While doing this project some data

which is used by Tata Motors Ltd for deciding pricing is not available. (10) Cost of Capital of Tata Motors is not available.

OBSERVATIONS & FINDINGS

76

Observations & Findings


(1) Tata Motors Ltd has normally 30 days credit period to its suppliers. (2) In respect of Casting & Forging suppliers Bharat Forge is financially in a good position that it can

give more credit to Tata Motors Ltd. Bharat Forge ltd is financially better that Nelcast Ltd. (3) (4) Liquidity ratios of Nelcast Ltd are better than Bharat Forge Ltd. Profitability & Solvency ratios of Bharat Forge Ltd are better than Nelcast Ltd. So from that

basis we can say that Bharat Forge can give more credit to Tata Motors. (5) In respect of Clutch Suppliers only Debtor Turnover Ratio of Ceekay Daikin Ltd is better than

Clutch Auto Ltd. (6) All other profitability as well as liquidity and solvency ratios of Clutch Auto Ltd are better than

Ceekay Daikin Ltd. for the period under consideration. (7) In a year 2009 Ceekay Daikin Ltd suffer losses so it cannot give more credit to Tata Motors ltd.

But Clutch Ltd can give more credit to Tata Motors ltd. (8) For steel suppliers Sesa Goa Ltd is all time better than Kirloskar Ferrous Ltd all Liquidity,

Profitability and solvency ratios of Sesa Goa Ltd are much better than Kirloskar Ferrous Ltd (9) So for steel suppliers Tata Motors ltd should demand more credit from Sesa Goa Ltd.
77

(10)

Cost of Capital of Clutch Auto Ltd is 6.81% & Bharat Forge Ltd is 11.95%

CHAPTER -6 Conclusion

78

CONCLUSION

The primary motive of project is Comparative Study of financial health & sustainability of suppliers of Tata Motors Ltd. using Ratio Analysis. The conclusions drawn regarding Analysis and Interpretation of Financial Ratio of suppliers of TATA Motors Ltd. are based on Historical data i.e. Balance Sheet and Profit & Loss Account of respective year- 2004-05 to 2008-09. Data Collected is based on the secondary Basis. Following methods are used to reach the rational conclusion:
From the computation of different ratios of suppliers we can come know that all suppliers of Tata

Motors are financial healthy.


From the Liquidity, Profitability Ratios of Suppliers we can conclude that suppliers of Tata

Motors can sustain in long run. Financial position of suppliers of Tata Motors is good so Tata Motors can get more credit from suppliers. Financial position of suppliers of Tata Motors is good so Tata Motors can get more credit from its suppliers in adverse economic condition.

79

Recommendations

80

Recommendation

Financial Position of Suppliers of Tata Motors:

It can be said that overall financial position of suppliers of the company is normal but it should be required to be improved from the point of view of and liquidity.

Maintaining Status: It is advisable that to keep the customer relationship by having the fair transactions. Company should stretch the credit period given by the supplier.

Suppliers Position in market :

Suppliers can sustain its position by maintaining same financial policies and techniques. But Tata Motors should help suppliers to improve its position in the market.

Liquidity of the Supplier:

The current ratio of Kirloskar Ferrous Ltd is below standard. So Supplier should try to maximize its current assets. All other suppliers have good current ratio.
Profitability of the Supplier:

Ceekay Daikin Ltd & Kirloskar Ferrous Ltd should try to improve its profitability. From this observation we found that financial health of these suppliers is not good.

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If cost of capital of Tata Motors Ltd is less than suppliers cost of capital than Tata Motors should go in for supplier credit.

Bibliography

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BIBLIOGRAPHY Books Referred


1) Mr. I M Pandey (2004) Financial Management Ninth Edition, Vikas Publishing House

Noida.
2) Mr. S C Kuchhal (2005) Financial Management 3) Macmillan Publication (2005) Financial Management

3) Mr. C.R.Kothari (2005) Research Methodology

Websites References

www.google.com

(all referred to collect relevant information for the project.) (referred for company profile) (referred for financial statements)

www.tatamotors.com www.moneypore.com-

Directors Report
Clutch Auto Ltd: Bharat Forge Ltd: For Cost of Capital For Cost of Capital

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