Ratio analysis of TATA Motors

Liquidity Ratio
a) Current Ratio = current Assets / current liabilities

∗ For the year 2005: 7448.88/7268.8 =0.99

∗ For the year 2006: 9812.06/78888.65 = 1.24

∗ For the year 2007: 10318.42/8321.20 =1.24

∗ For the year 2008: 10781.23/12029.80 =0.89

∗ For the year 2009: 12846.58/12846.21 =0.84

Analysis: The standard Ratio is 2:1. In the given figures, there are no values equaling the ratio 2:1. Thus
this indicates to unacceptable situation of the company, since liabilities are more.

b) Quick ratio = Current assets stock hold/current liabilities

∗ For the year 2005: 7106.4/7268.8 =0.97

∗ For the year 2006: 9668.06/7888.65 = 1.22

∗ For the year 2007: 10061.51/8321.20 =1.20

∗ For the year 2008: 10781.23/12029.80 =0.86

∗ For the year 2009: 12846.58/12846.21 =0.82

Analysis: The standard ratio of quick ratio is 1:1. In the value above, all values are acceptable. Thus, this
indicates to the quick assets which are easily converted to cash and thus meets the current obligations.

Leverage Ratio
a) Total debt Ratio = total debt hold/ (capital employed/ Net assets)

∗ For the year 2005: 6606.81/3147.75 = 2.10

∗ For the year 2006: 8447.52/5467.06 = 1.54

∗ For the year 2007: 10852.94/5852.53 =1.85

∗ For the year 2008: 14094.51/4113.23 =3.42

∗ For the year 2009: 25534.76/5610.57 = 4.55

Analysis: this is satisfactory. Since, owner’s capital is more thus, no burden for the company. Thus,
meeting the obligations is comparatively easy.

Profitability Ratio
a) Gross profit Ratio = Gross profit hold/ sales

∗ For the year 2005: 11.49%

∗ For the year 2006: 11.65%

∗ For the year 2007: 13.42%

∗ For the year 2008: 12.86%

∗ For the year 2009: 10.06%

Analysis: in the year 2007, a higher gross profit ratio indicates to good or better goods management and
similarly in the year 2009, reflects higher cost of goods sold due to firms liabilities to purchase raw
materials at favorable forms, inefficient utilization of resources.

b) Net margin= profit after tax/ sales

∗ For the year 2005: 6.35%

∗ For the year 2006: 6.39%

∗ For the year 2007: 8.45%

∗ For the year 2008: 7.74%

∗ For the year 2009: 5.90%

Analysis: The ratio indicates to the firm’s capacity to withstand adverse economic conditions. Thus,
higher the value betters the company’s financial status. Thus, on 2007 comparatively the company’s
position is good and it’s lower on 2009.

c) Operating profit Ratio = EBIT/ sales

∗ For the year 2005: 85.69%

∗ For the year 2006: 87.04%

∗ For the year 2007: 87.31%

∗ For the year 2008: 98.32%

∗ For the year 2009: 100.24%

Analysis: Sales are proportional to EBIT. Year by year sales are increasing and with this EBIT is also
increasing. Thus, in the year 2009, the company is in a better position.

Ratio analysis of Mahindra & Mahindra

Liquidity Ratio
c) Current Ratio = current Assets / current liabilities

∗ For the year 2005: 1.9

∗ For the year 2006: 1.24

∗ For the year 2007: 1.37

∗ For the year 2008: 1.10

∗ For the year 2009: 1.05

Analysis: The standard Ratio is 2:1. Thus, for the year 2005 the values got are closer. Thus, this meets the
current obligations. But for the year 06, 07, 08, 09, the values are degrading. Thus, moving towards the
direction of loss, liabilities are increasing.

d) Quick ratio = Current assets stock hold/current liabilities

∗ For the year 2005: (22356.41-174.05)/ 1980.58 = 1.10

∗ For the year 2006: 1.2

∗ For the year 2007: 1.4

∗ For the year 2008: 1.05

∗ For the year 2009: 1.02

Analysis: Generally the quick ratio is 1:1. Here the value for 2008 and 2009 are nearer to 1.

Leverage Ratio = Net worth/ Total debts

= Equity share capital+ Reserves & Surplus/secured loans+ unsecured loans

∗ For the year 2005: 0.52

∗ For the year 2006: 0.76

∗ For the year 2007: 0.68

∗ For the year 2008: 0.62

∗ For the year 2009: 0.42

Analysis: Based on value got for the years 05, 06, 07 & 08are acceptable but for 2009 it is 0.46 value is
not acceptable. This indicates to owners contribution is less than outsider’s liabilities, thus it indicates
burden to the company.

Inventory turnover ratio= costs of goods sold/ Avg inventory

∗ For the year 2005: 33.75

∗ For the year 2006: 70.39

∗ For the year 2007: 137.07

∗ For the year 2008: 60.08

∗ For the year 2009: 76.99

Analysis: This ratio indicates the efficiency of the firm in selling its product. Thus, the higher the value
indicates to the better performance of the company.

Profitability Ratio
b) Gross profit Ratio = Gross profit hold/ sales

∗ For the year 2005: 11.15%

∗ For the year 2006: 10.33%

∗ For the year 2007: 10.7%

∗ For the year 2008: 9.91%

∗ For the year 2009: 7.61%

Analysis: in the year 2005, a higher gross profit ratio indicates to good or better goods management and
similarly in the year 2009, reflects higher cost of goods sold due to firms liabilities to purchase raw
materials at favorable forms, inefficient utilization of resources.

d) Net margin= profit after tax/ sales or EBIT/ sales

∗ For the year 2005: 5.23%

∗ For the year 2006: 6.03%

∗ For the year 2007: 6.36%

∗ For the year 2008: 6.00%

∗ For the year 2009: 3.90%

Analysis: The ratio indicates to the firm’s capacity to withstand adverse economic conditions. Thus,
higher the value betters the company’s financial status. Thus, on 2007 comparatively the company’s
position is better and it is bad in2009.

Ratio analysis of Jindal steel & Power Ltd

Liquidity Ratio
e) Current Ratio = current Assets / current liabilities

∗ For the year 2005: 457.69/ 589.67= 0.776

∗ For the year 2006: 894.27/ 906.31= 0.986

∗ For the year 2007: 1010.44/1209.91= 0.8351

∗ For the year 2008: 1360.29/1533.54=0.887

∗ For the year 2009: 1706.28/3125.83=0.5458

Quick ratio = Current assets stock hold/current liabilities

∗ For the year 2005: 457.69-257.55/589.67 = 0.339

∗ For the year 2006: 894.27-568.65/589.67=0.552

∗ For the year 2007: 1010.44 - 642.44/ 1209.91=0.304

∗ For the year 2008: 1306.29-980.56/1533.54=0.247

∗ For the year 2009: 1706.28-1209.96/3125.83=0.158

Solvency Ratio
Debt equity Ratio = Total debt/ net worth

∗ For the year 2005: 1495.86/2815.24 = 0.5313

∗ For the year 2006: 2745.37/4590.08= 0.5981

∗ For the year 2007: 3507.72/ 6004.45= 0.5842

∗ For the year 2008: 3863.35/7619.73 =0.5070

∗ For the year 2009: 4962.65/ 10377.97=0.4782

Interest coverage ratio = EBIT/ fixed interest charges

 ∗ For the year 2005: 916.15/ 92.51=9.903

∗ For the year 2006: 1032.81/108.02=9.56

∗ For the year 2007: 1049.81/173.19=6.062

∗ For the year 2008: 2295.91/243.02=9.47

∗ For the year 2009: 2637.86/ 267.89=9.85

Turnover ratio/ efficiency ratio

Stock turnover ratio= sales/ avg stock at cost

∗ For the year 2005: 2253.60/257.55= 8.75

∗ For the year 2006: 0.76

∗ For the year 2007: 0.68

∗ For the year 2008: 0.62

∗ For the year 2009: 0.42

Analysis: Based on value got for the years 05, 06, 07 & 08are acceptable but for 2009 it is 0.46 value is
not acceptable. This indicates to owners contribution is less than outsider’s liabilities, thus it indicates
burden to the company.

Inventory turnover ratio= costs of goods sold/ Avg inventory

∗ For the year 2005: 33.75

∗ For the year 2006: 70.39

∗ For the year 2007: 137.07

∗ For the year 2008: 60.08

∗ For the year 2009: 76.99

Analysis: This ratio indicates the efficiency of the firm in selling its product. Thus, the higher the value
indicates to the better performance of the company.
Profitability Ratio
c) Gross profit Ratio = Gross profit hold/ sales

∗ For the year 2005: 11.15%

∗ For the year 2006: 10.33%

∗ For the year 2007: 10.7%

∗ For the year 2008: 9.91%

∗ For the year 2009: 7.61%

Analysis: in the year 2005, a higher gross profit ratio indicates to good or better goods management and
similarly in the year 2009, reflects higher cost of goods sold due to firms liabilities to purchase raw
materials at favorable forms, inefficient utilization of resources.

e) Net margin= profit after tax/ sales or EBIT/ sales

∗ For the year 2005: 5.23%

∗ For the year 2006: 6.03%

∗ For the year 2007: 6.36%

∗ For the year 2008: 6.00%

∗ For the year 2009: 3.90%

Analysis: The ratio indicates to the firm’s capacity to withstand adverse economic conditions. Thus,
higher the value betters the company’s financial status. Thus, on 2007 comparatively the company’s
position is better and it is bad in2009.