Komal Lalwani Final

FINANCIAL PERFORMANCE ANALYSIS
CONTENTS
ABSTRACT
Financial analysis is the process of identifying the financial
strengths and weakness of the firm by properly establishing the relations
ship between the items of the balance sheet and profit loss account.
Financial analysis can be undertaken by management of the firm, or by
parties outside the firm, viz. owners, creditors, investors and others. The
nature of analysis will differ depending on the purpose of analyst.
Management, creditors, investors and others to form
judgment about the operating performance and financial position of the
firm use the information contained in this statements can get further
insight about the financial strengths and weakness of the firm to make
their best use and to be able to spot out financial weakness of the firm to
take suitable corrective actions.
Thus financial analysis is the starting point for making
plans, before using any sophisticated forecasting and planning
procedures. Understanding the past is a prerequisite for anticipating
future.
LIST OF THE TABLES
TABLE-NO
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
PARTICULARS
COMPARITIVE INCOME STATEMENT 2003-2004
COMPARITIVE BALANCE SHEET 2003-2004
COMMON SIZE INCOME STATEMENT 2003-2007
COMMON SIZE BALANCE SHEET 2003-2004
CHANGES IN WORKING CAPITAL 2003-2004
CURRENT RATIO
QUICK RATIO
NET WORKING CAPITAL RATIO
DEBT RATIO
DEBT EQUITY RATIO
CAPITAL EMPLOYED TO NET WORTH
INVENTORY TURNOVER RATIO
DEBTORS TURNOVER RATIO
COLLECTION PERIOD
GROSS PROFIT RATIO
NET PROFIT RATIO
BALANCE SHEET OF 2003-2007
PAGE-NO
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
LIST OF CHARTS
TABLE-NO
1.
PARTICULARS
PAGE-NO
LEQUIDITY RATIOS
1.1.CURRENT RATIO
1.2.QUICK RATIO
1.3.NET WORKING CAPITAL RATIO
56
57
58
2.
LEVERAGE RATIOS
59
60
61
3.
2.1.DEBT RATIO
2.2.DEBT EQUITY RATIO
2.3.CAPITAL EMPLOYED TO NET
WORTH
ACTIVITY RATIOS
3.1.INVENTORY TURNOVER RATIO
3.2.DEBTORS TURNOVER RATIO
3.3.COLLECTION PERIOD
62
63
64
4.
PROFITABILITY RATIOS
4.1.GROSS PROFIT RATIO
4.2.NET PROFIT RATIO
65
66
INTRODUCTION
In our present day economy, finance is defined as the provision of

money at the time when it is required. Every enterprise, whether big, medium of
small, needs finance to carry its operations and to achieve its targets. In fact,
finance is so indispensable today that it is rightly said to be the lifeblood of an
enterprise. Without adequate finance, no enterprise can possibly accomplish its
objectives.
Financial management is applicable to every type of organization,
irrespective of its size kind of nature. It is as useful to a small concern as to a big
unit. A trading concern gets the same utility from its application as a
manufacturing unit may expect. This subject is important and useful for all types of
ownership organizations. Where there is a use of finance. Financial management is
helpful. Every management aims to utilize its funds in a best possible and
profitable way. So this subject is acquiring a universal applicability.
It is indispensable in any organization as helps in:
(I) Financial planning and successful promotion of an enterprise;

(II) Acquisition of funds as and when required at the minimum possible
cost;
(III) Proper use and allocation of funds;
(IV) Taking sound financial decisions ;
(V) Improving the profitability through financial controls;
(VI) Increasing the wealth of the investors and the nation; and
(vii) Promoting and mobilizing individual and corporate savings.
OBJECTIVES OF FINANCIAL MANAGEMENT
Financial management is concerned with procurement and use of

funds. Its main aim is to use business funds in such a way that the firms
value/earnings are maximized. There are various alternatives available for using
business funds. Each alternative course has to be evaluated in detail.
The pros and cons of various decisions have to look into before
making a final selection. The decisions will have take into consideration the
commercial strategy of the business. Financial management provides a framework
for selecting a proper course of action and deciding a viable commercial strategy.
The main objective of a business is to maximize the owners economic welfare.
This objective can be achieved by:
1.
Profit Maximization
2.
Wealth maximization
1. Profit maximization:
Profit earning is the main aim of every economic activity. A business
being an economic institution must earn profit to cover its costs and provide funds
for growth. No business can service without earning profit. Profits are a measure of
efficiency of a business enterprise. Profits also serve as a protection against risks
which cannot be ensured. The accumulated profits enable a business to face risks
like fall in prices, competition from other units, adverse government policies etc.
Thus, profit maximization is considered as the main objective of business:
(i) When profit earning is the aim of business then profit maximization should
be the obvious objective.
(ii) Profitability is a barometer for measuring efficiency and economic prosperity
of a business enterprise, thus, profit maximization is justified on the grounds
of rationality.
10
(iii) Economic and business conditions do not remain same at all the times. There
may be adverse business conditions like recession, depression, severe
competition etc. A business will be able to service under unfavorable situation
only if it has some past earnings to rely upon. Therefore a business should try
to earn more and more when situation is favorable.
(iv) Profits are the main sources of finance for the growth of a business. So, a
business should aim at maximization of profits for enabling its growth and
development.
(v) Profitability is essential for fulfilling social goals also. A firm by pursuing the
objective of profit maximization also maximizes socio- economic welfare.
2. Wealth maximization
Wealth maximization is the appropriate objective of an enterprise
financial theory asserts that wealth maximization is the single substitute for
stockholders utility. When the firm maximizes the stockholders wealth, the
individual stockholder can use this wealth to maximize his individual utility. It
means that by maximizing stockholders wealth firm is operating consistently
towards maximizing stockholders utility.
OBJECTIVES OF STUDY
11
RESEARCH METHODOLOGY
The research design refers to preplanning of what a researcher does in

his study.
The design adopted in the study comes under exploratory and
evaluatory research. Since the data collected from the financial statements of the
company is analyzed under various financial and tactical tools.
Data collection;
The study is based on the two types data is obtained from the tata
VEHICLEs ltd., chittoor.
They are:
Secondary data
Secondary Data;
Secondary data is based on the past data i.e. [three years Annual Reports
2011-2014
12
II
13
COMPANY PROFILE
14
III
Tata VEHICLEs Limited (formerly TELCO, short for Tata Engineering and Locomotive
Company) is an Indian multinational automotive manufacturing company headquartered in
Mumbai, Maharashtra, India and a subsidiary of the Tata Group. Its products include passenger
cars, trucks, vans, coaches, buses, construction equipment and military vehicles. It is the world's
seventeenth-largest VEHICLE vehicle manufacturing company, fourth-largest truck
manufacturer and second-largest bus manufacturer by volume.[7]
15
Tata VEHICLEs has auto manufacturing and assembly plants in Jamshedpur, Pantnagar,
Lucknow, Sanand, Dharwad and Pune in India, as well as in Argentina, South Africa, Thailand
and the United Kingdom. It has research and development centres in Pune, Jamshedpur,
Lucknow and Dharwad, India, and in South Korea, Spain, and the United Kingdom. Tata
VEHICLEs' principal subsidiaries include the British premium car maker Jaguar Land Rover
(the maker of Jaguar, Land Rover and Range Rover cars) and the South Korean commercial
vehicle manufactuer Tata Daewoo. Tata VEHICLEs has a bus manufacturing joint venture with
Marcopolo S.A. (Tata Marcopolo), a construction equipment manufacturing joint venture with
Hitachi (Tata Hitachi Construction Machinery), and a joint venture with Fiat which manufactures
automotive components and Fiat and Tata branded vehicles.
Founded in 1945 as a manufacturer of locomotives, the company manufactured its first
commercial vehicle in 1954 in a collaboration with Daimler-Benz AG, which ended in 1969.
Tata VEHICLEs entered the passenger vehicle market in 1991 with the launch of the Tata Sierra,
becoming the first Indian manufacturer to achieve the capability of developing a competitive
indigenous automobile.[8] In 1998, Tata launched the first fully indigenous Indian passenger car,
the Indica, and in 2008 launched the Tata Nano, the world's most affordable car. Tata
VEHICLEs acquired the South Korean truck manufacturer Daewoo Commercial Vehicles
Company in 2004 and purchased Jaguar Land Rover from Ford in 2008.
Tata VEHICLEs is listed on the Bombay Stock Exchange, where it is a constituent of the BSE
SENSEX index, the National Stock Exchange of India and the New York Stock Exchange. Tata
VEHICLEs is ranked 314th in the 2012 Fortune Global 500 ranking of the world's biggest
corporations
16
ANALYSIS
AND
INTERPRETATION
INTRODUCTION TO FINANCIAL STATEMENTS

A financial statement is a collection of data organized according to logical and
consistent accounting procedures. Its purpose is to convey an understanding of
some financial aspects of a business firm. It may show a position at a movement
in time, as in the case of balance sheet, or may reveal a series of activities over
a given period of time, as in the case of an income statement.
17
Objectives of financial statements:

Financial statements are the sources of information on the basis of which
conclusions are drawn about the profitability and financial position of a
concern. They are the major means employed by firms to present their financial
situation of owners, creditors and the general public. The primary objective of
financial statements is to assist in decision making. The Accounting Principles
Board of America (APB) states the following objectives of financial statements:
(i)
To provide reliable financial information about economic resources and

obligations of business firm.
(ii) To provide other needed information about changes in such economic

resources and obligations.
(iii) To provide reliable information about changes in net resources (resources less
obligations) arising out of business activities.
(iv) To provide financial information that assists in estimating the earning
potentials of business.
(v) To disclose, to the extent possible, other information related to the financial
statements that is relevant to the needs of the users of these statements.
FINANCIAL STATEMENT ANALYSIS

Financial analysis is the process of determining financial strengths
and weakness of the firm by establishing strategic relationship between the items
of the items of the balance sheet, profit and loss account and other operative data.
In the words of Myers, financial statements analysis is largely a study of
relationship among various financial factors in a business as disclosed by a single
18
set of statements, and a study of the trend of these factors as shown in series of
statements
4. PROFITABILITY RATIO:
The profitability ratios are used to calculate the efficiency of operating
of the company. Profits are ultimate goal of every company and it should be
continuously evaluated in terms of profits. Generally two major profits are
calculated, they are
i. Gross profit ratio
ii. Net profit ratio
iii. Expense ratio
iv. Return on capital employed
i.Gross profit ratio:

The first profitability ratio in relation to sales reflects the efficiency
with which management produces each unit of product. It is calculated by dividing
the Gross Profit with Sales.
Gross Profit ratio =
Sales
Gross profit
x 100
ii. Net profit ratio:

Net profit ratio explains the net profit of the company after paying
taxes of particular period. It establishes relation between net profit and sales.
19
Net Profit
Net profit ratio=

Sales
Expense ratio:
Expense/sales X100
Return on capital employed:

Profit before interest and tax/capital employed x100
20
COMPARITIVE
INCOME STATEMENT
Comparative income statement of

tata VEHICLEs ltd., 2003-2004
21
Particulars
Sales
Percentag
e
31-3-2011 31-3-2012 change
201486573 130517437 -70969136
-35.22%
Less: Cost of goods sold 239132131 155574480 -83557651
-34.94%
Gross profit/loss
-37645558 -25057043 12588515
-33.44%
12609835 10532587 -2077248
-16.47%
-50255393 -35589630 14665763
-29.18%
Less: Operating expenses

Operating profit/loss
Add: Other income
Miscellaneous income
Interest received
9500299
129866
-82.75%
11385
9.61%
Profit/loss before interest -40636613 -33820634 6815979
-16.77%
Less: Interest paid
118481
1639130 -7861169
26777116 28813070 2035954
7.60%
-67413729 -62633704 4780025
-7.09%
Less: Loss up to last year 231799275 299213004 67413729
29.08%
Net loss cumulative
20.93%
Profit/loss after interest
-299213004 -361846708 -62633704
Source: Annual Reports of TML.

Interpretation:
From the above table it was analyzed that sales and cost of goods sold were
decreased so gross loss also decreased, and there was high decrease in
miscellaneous income (i.e. 82.75%) loss increased due to lack of operational
efficiency.

22
Particulars
Sales
Percentag
e
31-3-2012 31-3-2013 change
130517437 96920394 -33597043
-25.74%
-34.28%
Gross profit/loss
-78.75%

-25057043
-5323482 19733561
10532587 11133862
601275
5.71%
-35589630 -16457344 19132286
-53.76%
Add: Other income
Interest received
1639130
10.56%
Profit/loss before interest -33820634 -11930440 21890194
-64.72%
Less: Interest paid
28813070 23326176 -5486894
-19.04%
-62633704 -35256616 27377088
-43.71%
20.93%
Net loss cumulative
143577
167.42%
13711
129866
4383327 2744197
-361846708 -397103324 -35256616
9.74%

Interpretation:
From the above table it was analyzed that the percentage decrease in cost of
goods sold is more than the decrease in sales so gross loss also decreased due to
reduce in the cost of raw materials. Even though increase in operating expenses
operating loss decreased due to effective control of raw material cost.

23
Particulars
Sales
Percentag
e
31-3-2013 31-3-2014 change
96920394 124629657 27709263
28.59%
-28.72%
Gross profit/loss
-5323482 51751887 57075369
-1072.14%
11133862 35468649 24334787
218.57%
-16457344 16283238 32740582
-198.94%
Add: Other income
4383327
4664988
281661
6.43%
143577
172981
29404
20.48%
Profit/loss before interest -11930440 21121207 33051647
-277.04%
Interest received
Less: Interest paid

23326176 29320178 5994002

-35256616
25.70%
-8198971 27057645
-76.74%
9.74%
Net loss cumulative
2.06%
-397103324 -405302295 -8198971

Interpretation:
From the above table it was analyzed that sales percentage increased
and at the same time cost of goods sold decreased so the firm earned gross profit
due to high control in purchase of raw materials. Due to increase in operating
expenses loss increased (2.06%) the firm has no control over the operating
activities.
24
COMPARITIVE
BALANCE SHEET
25
COMMON SIZE
INCOME
STATEMENT
26
COMMONSIZE
BALANCE
SHEET
27
RATIO
28
ANALYSIS
Table3: Capital employed to net worth

Years
2003
Capital employed
325654257
Net Worth
61201511
Ratio
5.32
2004
260575021
7940102
32.82
2005
287272474
-7955293
-36.11
2006
435610011
245159
1776.85
29
2007
352622327
-88281982
-3.99
Source: Annual Reports of TML
Interpretation:
From the above graph it was analyzed that capital employed to net
worth was 5.32%, increased to 32.83% in 2004, became negative in 2005,2007 and
in the year 2006 increased to 1776.85% due to changes in the value of net worth of
the firm.
PROFITABILITY RATIOS
Table1: Gross profit ratio
Years
Gross profit/loss
Sales
Ratio
2011-12
-37645558
201486573
-18.68%
2012-13
-25057043
130517437
-19.20%
30
2013-14
-5323482
96920394
-5.49%
Interpretation:
From the above graph it was analyzed that gross profit ratio was
negative for most of the years except the year 2006 it is due to inefficiency in
producing goods.
Table2: Net profit ratio

Years
Net profit/loss
Sales
Ratio
2011-12
-67413729
201486573
-33.46%
2012-13
-62633704
130517437
-47.99%
2013-14
-35256615
96920394
-36.38%
Source: Annual Reports of TML
31
Interpretation:
From the above graph it was analyzed that in all the years the net
profit ratio is negative due to over all inefficiency in the firm.
32
Balance sheet
33
Balance sheet of tata VEHICLEs ltd chittoor.for the years 2003-2007

31-3-2006
31-3-2007
ASSETS
31-3-2011
31-3-201
LIABILITIES
Share
capital
31-3-2011
31-3-2012
31-3-2013
140,958,700
140,960,300
140,961,400
141,140,700
142,553,600
Reserves
219,357,188
228,727,884
248,088,004
264,309,028
268,006,835
U.D.P
Reserves to
be invested
Auditfund
Borrowings
Deposits
64,227
64,227
64,227
64,227
64,227
24,703
9,696
235,616,210
28,836,536
24,703
9,696
223,822,462
28,812,457
24,703
9,696
266,073,588
29,154,179
24,703
9,696
404,340,806
31,024,046
24,703
9,696
405,702,422
35,201,887
Creditors
182,912,074
115,020,074
108,107,592
140,980,325
229,172,905
6,094,478
27,190,688
40,525,798
49,024,989
46,928,301
Outstanding
interest
Total
813,873,812
764,632,491
833,009,187
1,030,918,520
1,127,664,576
F.D.S with banks

Shares in other
co-operative
institutions
Loans to other
co-operative
factories
250,000
2,250
228,550
228
3,000,000
1,000
Fixed assets
Deficts
Cash on hand
Cash at bank
Deposits with
various agencies
Loans and
advances to
members
Debtors
Interest
receivable
Closing stock
Loss
222,136,732
47,944
1,283,980
4,095,240
222,136
47
22
15,881
1,254,826
1,261
6,461,883
54,412,361
6,386
54,894
1,826,488
219,662,805
299,213,003
1,826
96,849
361,846
Total
813,873,812
764,632
34
findings
35
FINDINGS
Cost of goods sold was more than the sales except the year 2006. So, the tata
VEHICLEs ltd. got gross loss in most of the years.
Operating loss decreased up to the year 2006 and then increased in the year
2007.
The tata VEHICLEs ltd. did not earned net profit in all the years.
It had been maintaining high inventory levels for all the years.
In most of the years debtors collection period was very high.
Most of the funds rose through debts with high interest rates.
Most of the funds were lost in operations.
36
Suggestions
37
SUGGESSIONS
TML should adopt cost control measures by drawing inspiration from

prospering VEHICLE factories.
TML should reduce operating and administrative expenses, it will increase over
all efficiency of the firm.
A high level of debt introduces inflexibility in the firms operations due to
increaseasing interference and pressures from creditors. A high debt company
is able to borrow funds on very restrictive terms and conditions. So, it should
raise owners funds.
TML can adopt forward integration strategy by opening retail outlets where its
own VEHICLE can be sold. It increases revenues one hand and cash position
on the other.
38
Conclusion
39
CONCLUSION
The present study of FINANCIAL PERFORMANCE ANALYSIS IN

TATA VEHICLES LTD,. Was conducted with the help of annual report.
Various financial tools are used in the study from the ratio analysis it has
been found out that the average collection period of the company is high and
capital gearing is low. To extent possible the study has achieved its stated
objectives. It is on the part of the company to accept the suggestions.
TML Profitability position was deteriorated year by year, liquidity position
also moderate, long term solvency of the firm is also moderate due to high
debts, the firms efficiency in utilizing assets is also very low.
Finally the study helped me to acquire practical knowledge that was only
over by books and papers alone. I take up this opportunity to thank one and
all for making this study a complete one.
40
BEBLIOGRAP
HY
41
BIBILOGRAPHY
BOOKS
Financial Management I. M. Pandey Ninth Edition Vikash Publishing house
Pvt ltd.
Financial Management Theory and Practice
Prasanna Chandra Sixth
Edition Tata Mc Graw Hill Publishing company.

Management Accounting Principles and Practice R. K. Sharma
Sahashi K.
Guptha Eigth edition kalyani publishiers.

Dr .S.N. Maheswari-financial management G.G.S. Indraprasatha university ,
new delhi.
WEBSITES
www.cliffsnotes.com
www.financial-education.com
42
THANK
YOU
43

Komal Lalwani Final

Загружено:

Сведения о документе

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Komal Lalwani Final

Загружено:

Авторское право:

Доступные форматы

FINANCIAL PERFORMANCE ANALYSIS

FINANCIAL PERFORMANCE ANALYSIS

FINANCIAL PERFORMANCE ANALYSIS

LIST OF THE TABLES

FINANCIAL PERFORMANCE ANALYSIS

FINANCIAL PERFORMANCE ANALYSIS

FINANCIAL PERFORMANCE ANALYSIS

FINANCIAL PERFORMANCE ANALYSIS

FINANCIAL PERFORMANCE ANALYSIS

In our present day economy, finance is defined as the provision of

(I) Financial planning and successful promotion of an enterprise;

OBJECTIVES OF FINANCIAL MANAGEMENT

FINANCIAL PERFORMANCE ANALYSIS

Financial management is concerned with procurement and use of

FINANCIAL PERFORMANCE ANALYSIS

FINANCIAL PERFORMANCE ANALYSIS

The research design refers to preplanning of what a researcher does in

The design adopted in the study comes under exploratory and

FINANCIAL PERFORMANCE ANALYSIS

FINANCIAL PERFORMANCE ANALYSIS

FINANCIAL PERFORMANCE ANALYSIS

FINANCIAL PERFORMANCE ANALYSIS

INTRODUCTION TO FINANCIAL STATEMENTS

Objectives of financial statements:

To provide reliable financial information about economic resources and

(ii) To provide other needed information about changes in such economic

FINANCIAL STATEMENT ANALYSIS

i.Gross profit ratio:

Gross Profit ratio =

ii. Net profit ratio:

FINANCIAL PERFORMANCE ANALYSIS

Net profit ratio=

Return on capital employed:

FINANCIAL PERFORMANCE ANALYSIS

Comparative income statement of

Less: Cost of goods sold 239132131 155574480 -83557651

-37645558 -25057043 12588515

12609835 10532587 -2077248

-50255393 -35589630 14665763

Less: Operating expenses

Profit/loss before interest -40636613 -33820634 6815979

Less: Interest paid

26777116 28813070 2035954

-67413729 -62633704 4780025

Less: Loss up to last year 231799275 299213004 67413729

Net loss cumulative

Profit/loss after interest

-299213004 -361846708 -62633704

Source: Annual Reports of TML.

Comparative income statement of

Less: Cost of goods sold 155574480 102243876 -53330604

Less: Operating expenses

-35589630 -16457344 19132286

Add: Other income

Profit/loss before interest -33820634 -11930440 21890194

Less: Interest paid

28813070 23326176 -5486894

-62633704 -35256616 27377088

Less: Loss up to last year 299213004 361846708 62633704

Net loss cumulative

Profit/loss after interest

-361846708 -397103324 -35256616

Source: Annual Reports of TML.

Comparative income statement of