Project Report

(Submitted for the Degree of B.Com. Honours in Accounting & Finance

Under the University of Calcutta)

FINANCIAL STATEMENT ANALYSIS

Submitted by

Name of the Candidate – Suman Mondal

CU Registration No. – 561-1111-0389-19

CU Roll No. – 191561-21-0062

Name of the College – Budge Budge College

Supervised by

Name of the Supervisor – Dr. Gautam Das

Name of the College – Budge Budge College

Month & Year of Submission: July, 2022

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Annexure - 1A

Supervisor’s Certificate

This is to certify that Mr.Suman Mondal a student of B.Com. Honours in Accounting & Finance
of Budge Budge College under the University of Calcutta has worked under my supervision and
guidance for his Project Work and prepared a Project Work with the title “FINANCIAL
STATEMENT ANALYSIS” which he is submitting is his genuine and original work to the best
of my knowledge.

Signature -

Name – Dr. Gautam Das

Designation –Assistant

Professor

Name of the College – Budge Budge

College

Date –

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Annexure - 1B

Student’s Declaration

I hereby declare that the Project Work with the title “FINANCIAL STATEMENT ANALYSIS”
submitted by me for the partial fulfillment of the degree of B.Com. Honours in Accounting &
Finance under the University of Calcutta is my original work and has not been submitted earlier to
any other University /Institution for the fulfillment of the requirement for any course of study.

I also declare that no chapter of this manuscript in whole or in part has been incorporated in this
report from any earlier work done by others or by me. However, extracts of any literature which
has been used for this report has been duly acknowledged providing details of such literature in
the references.

Signature -

Name – Suman Mondal

Address – 13/14 a. Ashutosh Mukherjee

Road, Kolkata - 700137

Registration No. –561-1111-0389-19

Date –

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 Acknowledgement

Working on this project entitled “FINANCIAL STATEMENT ANALYSIS” was a source of

immense knowledge to me. I would like to thank my college “Budge Budge College” for giving
me the opportunity to undertake this research project.

I would like to express my sincere gratitude to my project supervisor “Dr. Gautam Das”, for his
guidance and valuable support, inspiring discussions and constant supervision throughout the
course of this work.

I acknowledge with a deep sense of gratitude, the encouragement and interpretations received from
our faculty members and friends. I would also like to thank my parents for their love and support.

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 Table of Content

Serial No. Particulars Page No.

1 Chapter 1: Introduction
1.1 Background of the Study 6
1.2 Need of the Study 7
1.3 Literature Review 8-9
1.4 Objectives of the Study 10
1.5 Research Methodolgy 11
1.6 Limitations of the Study 12
2 Chapter 2: Conceptual Framework
2.1 Financial Statement Analysis 13-14
2.2 Importance of Financial Statement Analysis 15
2.3 National and International Scenario 16-17
3 Chapter 3: Presentation of Data, Analysis and Findings
3.1 Tata Motors Ltd. 18-19
3.2 Data Analysis 20-23
3.3 Comparative Statement Analysis 24-27
3.4 Common-size Statement Analysis 28-31
3.4 Trend Analysis 32
3.5 Ratio Analysis 33-38
4 Chapter 4: Conclusion and Recommendations
4.1 Conclusion 39
4.2 Recommendation 40
5 Chapter 5: Bibliography and References
5.1 Bibliography 41

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 Chapter 1:

1.1 Background of the Study

Financial statement analysis (or financial analysis) is the process of reviewing and analyzing a
company's financial statements to make better economic decisions to earn income in future. These
statements include the income statement, balance sheet, statement of cash flows, notes to accounts
and a statement of changes in equity (if applicable). Financial statement analysis is a method or
process involving specific techniques for evaluating risks, performance, financial health, and
future prospects of an organization.

It is used by a variety of stakeholders, such as credit and equity investors, the government, the
public, and decision-makers within the organization. These stakeholders have different interests
and apply a variety of different techniques to meet their needs. For example, equity investors are
interested in the long-term earnings power of the organization and perhaps the sustainability and
growth of dividend payments. Creditors want to ensure the interest and principal is paid on the
organizations debt securities (e.g., bonds) when due.

Financial statements includes:

 A balance sheet
 An income statement or a statement of profit & loss.
 A statement of changes in financial position.

Most often, analysts will use three main techniques for analyzing a company's financial statements.
First, horizontal analysis involves comparing historical data. Usually, the purpose of horizontal
analysis is to detect growth trends across different time periods. Second, vertical analysis compares
items on a financial statement in relation to each other. For instance, an expense item could be
expressed as a percentage of company sales. Finally, ratio analysis, a central part of fundamental
equity analysis, compares line-item data. P/E ratios, earnings per share, or dividend yield are
examples of ratio analysis.

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1.2 Need of the Study

The financial statement analysis helps the analyst to know the financial information from the
financial data contained in the financial statements and to assess the financial health (i.e. strength
or weakness) of an enterprise. It also helps to make a forecast for the future which helps us to
prepare budgets and estimates.

In short, analysis of financial statements helps us to take various decisions at various places of a
firm. Some of the needs of financial statement analysis are as follows:

1. It helps us to know the reasons for relative changes either in profitability or in the financial
position as a whole.
2. It also helps to know both the short-term liquidity position vis-a-vis working capital
position; as also the long-term liquidity and solvency position of a firm.
3. It also highlights the operating efficiency and the present profit-earning capacity of the firm
as a whole.
4. High Courts, Supreme Court, Arbitrators also require financial statements to settle various
disputed matters.
5. Various financial journal (viz. R.B.I. Bulletins), newspapers etc. also require financial
statements for analysing and scrutinizing the financial position of a firm for the readers.

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1.3 Literature Review

Many researchers have studied financial statement analysis from different views and in different
environments. The following ones were very interesting and useful for our research:

 William (2006), Financial analysis can adopt more practices like comparative analysis,
common size analysis and compared analysis. It deals with statements that have been
designed in way to provide time perspective to the consideration of various elements of the
financial position embodied in such statement. In those statements, the figures of two or
more periods are placed side by side to facilitate comparison of both income statements
and balance sheet can be prepared in the form of comparative financial statements.
 AICPA (2008), stated that common size analysis help to evaluate the company Common
size relationship in terms of percentages of sales in terms of ratios. All items in income
statement are frequently expressed as a percentage of sales or sometimes as percentage of
cost of goods sold. A balance sheet may be analysed on the basis of the total assets.
Common size statements for the same business of different dates of periods or for two or
even more business units as of the same date or for the same period common size financial
statements are useful in analysing the internal structure of the financial statements.
 Pandey (2006), trend analysis is an aspect of technical analysis that tries to predict
the future movement of a stock based on past data. Trend analysis is based on the idea
that what has happened in the past gives traders an idea of what will happen in the future
hence trend analysis involves the collection of information from multiple time periods and
plotting the information on a horizontal line for further review. The intent of this analysis
is to spot actionable patterns in the presented information. In business, trend analysis is
typically used in two ways, Revenue and Cost analysis and Investment analysis.
 Kennedy Muller (1999), “The analysis and interpretation of financial statements are an
attempt to determine the significance and meaning of financial statements data so that the
forecast may be made of the prospects for future earnings, ability to pay interest and debt
maturines (both current and long term) and profitability and sound dividend policy.”

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 Susan Ward (2008), emphasis that financial analysis using ratios between key values help
investors cope with the massive amount of numbers in company financial statements.
 M Y Khan & P K Jain (2011), have explained that the Financial statements provide a
summarized view of the financial position and operations of a firm. Therefore, much can
be learnt about a firm from a careful examination of its financial statements as in valuable
documents / performance reports. The analysis of financial statements is, thus, an
important aid to financial analysis.

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1.4 Objective of Study

The significant objectives of financial statement analysis are:

 To ascertain short-term liquidity position of an enterprise by the application of various

liquidity ratios.
 To evaluate the long-term solvency position by the application of various solvency ratios;
 To assess the risk (both financial as well as business) involved with firm.
 To assess the present earning capacity of the firm for the purpose of inter-firm comparison
and thereby to assess the progress or otherwise of the firm.
 To evaluate the efficiency of the firm for proper utilisation of financial resources.
 To assess the intra-firm comparison among of the various components of the firm.
 To see the effect of various non-economic and economic factors of the firm.
 To assess the working capital position of the firm.
 To assess the performance of the firm by the application of various ratios.

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1.5 Research Methodology

The sources of data used are as follows:

Secondary Data - Secondary data refers to the statistical material which is not originated by the
investigate himself but obtained from someone else‘s records, websites, newspapers, magazines,
etc. But, it plays a significant role in the project.
For this study, the secondary data has been obtained from published reports like the annual reports
of the company, balance sheets, and profit and loss account, websites, records such as files, reports
etc.

Tools of Analysis - Tools used for analyzing of data are Comparative Statements, Common-size
Statements, Trend Analysis, Ratio Analysis and Charts and Graphs.

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1.6 Limitations of Study

 Not a Substitute of Judgement - An analysis of financial statement cannot take place of

sound judgement. It is only a means to reach conclusions.
 Based on Past Data - Only past data of accounting information is included in the financial
statements, which are analyzed. The future cannot be just like past.
 Problem in Comparability - The size of business concern is varying according to the
volume of transactions. Hence, the figures of different financial statements lose the
characteristic of comparability.
 Reliability of Figures - Sometimes, the contents of the financial statements are
manipulated by window dressing. If so, the analysis of financial statements results in
misleading or meaningless.
 Change in Accounting Methods - There must be uniform accounting policies and
methods for number of years. If there are frequent changes, the figures of different periods
will be different and incomparable. In such a case, the analysis has no value and meaning.
 Changes in the Value of Money - The purchasing power of money is reduced from one
year to subsequent year due to inflation. It creates problems in comparative study of
financial statements of different years.

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 Chapter-2

2.1 Financial Statement Analysis

Financial statement analysis is the process of identifying the strength and the weakness of the firm
by properly establishing relationships between the items of financial statements. It helps analysis
make an understanding of past performance of the firm based on which the make predictions about
the future performance and risk of the firm.

Financial Statements analysis involves the following steps:

1. Study of the surrounding environment in which firm operates.

2. Selection of relevant information from financial statements.
3. Classification or grouping of information selected from financial statements in such away
as to construct significant relationship.
4. Drawing of inferences and conclusions after applying various tools and techniques of
analysis.

We can classify financial statements analysis into different categories as follows:

On basis of Material Used:

 Internal Analysis - This analysis is undertaken by the management of the company to

monitor its financial and operating performance.
 External Analysis - This analysis is undertaken by the outside parties like supplier,
government, etc. they entirely depend on the published financial statements.

On basis Of Methods of Operations:

 Comparative Statements - A comparative statement is the historical summary of same

item or group of items of consecutive income statements or balance sheet of a company.
This statement helps us to review changes in individual account balance on a year-to-year
basis or multiyear basis.

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 Common-size Statements - When all the items of a financial statement are express on a
common basis, it is known as a common-size statements. Common-sizing is done by
expressing its all items as a percentage of its total assets or equities.
 Trend Analysis - Trend analysis is a method of making comparative study of the financial
statements over a series of accounting year. It is a statistical device of identifying direction,
speed and extent of trends in individual items in the financial statements over a long period
of time say, five years or even ten years.
 Ratio Analysis - Ratio analysis is the process of identifying strength and weakness in the
various areas of an organization with the help of ratios of relevant accounting figures. Ratio
is the mathematical expression of relationship between two figures and the expression may
in the form of pure ratio or rate or percentage.

Internal Analysis

On basis of Material
Used

External Analysis

Types of Financial Comparative

Statement Analysis Statements

Common-size
Statements
On basis of the
Methods of
Operations
Trend Analysis

Ratio Analysis

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2.2 Importance of Financial Statement Analysis

The importance of financial statement analysis can be presented as follows:

 Holding of Share - Shareholders are the owners of the company. Time and again, they
may have to take decisions whether they may have to continue with the holdings of the
company’s share or sell them out. The financial statement analysis is important as it
provides meaningful information to the shareholders in taking such decisions.
 Decisions and Plans - The management of the company is responsible for taking decisions
and formulating plans and policies for the future. They, were therefore, always need to
evaluate its performance and effectiveness of their action to realise the company’s goal I
the past. For that purpose, financial statement analysis is important to the company’s
management.
 Extension of Credit - The creditors are the providers of loan capital to the company.
Therefore they may have to take decisions as to whether they have to extend their loansto
company and demand for higher interest rates. The financial statement analysis provides
important information to them for their purpose.
 Investment Decisions - The prospective investors are those who have surplus capital to
invest in some profitable opportunities. Therefore, they often have to decide whether to
invest their capital in the company’s share. The financial statement analysis is important to
them because they can obtain useful information for their investment decision making
purpose.

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2.3 National and International Scenario

 National Scenario - Tata Motors is among the top four passenger vehicle brands in India
with products in the compact, midsize car, and utility vehicle segments. The company's
manufacturing base in India is spread across Jamshedpur (Jharkhand), Pune (Maharashtra),
Lucknow (Uttar Pradesh), Pantnagar (Uttarakhand), Dharwad (Karnataka) and Sanand
(Gujarat). Tata's dealership, sales, service, and spare parts network comprises over 3,500
touch points. Tata Motors has more than 250 dealerships in more than 195 cities across 27
states and four Union Territories of India. It has the third-largest sales and service network
after Maruti Suzuki and Hyundai.

Tata also has franchisee/joint venture assembly operations in Kenya, Bangladesh, Ukraine,
Russia, and Senegal. Tata has dealerships in 26 countries across 4 continents. Tata is
present in many countries, it has managed to create a large consumer base in the Indian
subcontinent, namely India, Bangladesh, Bhutan, Sri Lanka and Nepal. Tata is also present
in Italy, Spain, Poland, Romania, Turkey, Chile, South Africa, Oman, Kuwait, Qatar, Saudi
Arabia, United Arab Emirates, Bahrain, Iraq, Syria and Australia.

 International Scenario - Through subsidiaries and associate companies, Tata Motors has
operations in the UK, South Korea, Thailand, South Africa and Indonesia. Among them is
Jaguar Land Rover, acquired in 2008.

In 2004, it acquired the Daewoo Commercial Vehicles Company, South Korea’s second
largest truck maker. The rechristened Tata Daewoo Commercial Vehicles Company has
launched several new products in the Korean market, while also exporting these products
to several international markets. Today two-thirds of heavy commercial vehicle exports
out of South Korea are from Tata Daewoo. In 2006, Tata Motors entered into joint venture
with Thonburi Automotive Assembly Plant Company of Thailand to manufacture and
market the company’s pickup vehicles in Thailand, and entered the market in 2008. Tata
Motors (SA) (Proprietary) Ltd., Tata Motors' joint venture with Tata Africa Holding (Pty)
Ltd. set up in 2011, has an assembly plant in Rosslyn, north of Pretoria. The plant can

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assemble; semi knocked down (SKD) kits, light, medium and heavy commercial vehicles
ranging from 4 tonnes to 50 tonnes.

The manufacturing capabilities are supported by Internal Operations & Systems to enable
optimized operations and systems through ESM, Kaizen, IT support, SAP, e-Procurement,
e-NPI, BSES, TML and other Standards, e-connectivity Interface for Suppliers, Dealers &
Customers, strategic sourcing.

Supply chain is managed though the latest tools and techniques with a state-of-the-art
‘Siebel’ e-CRM package, Dealers and Vendors network management systems, VCM/SRM
and on-line customer and channel partner information.

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 Chapter-3

3.1 Tata Motors Ltd.

Tata Motors Limited is an Indian multinational automotive manufacturing company,

headquartered in the city of Mumbai, India which is part of Tata Group. The company produces
passenger cars, trucks, vans, coaches, buses, luxury cars, sports cars, construction equipment.

Formerly known as Tata Engineering and Locomotive Company (TELCO), the company was
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
Motors entered the passenger vehicle market in 1988 with the launch of the TataMobile followed
by the Tata Sierra in 1991, becoming the first Indian manufacturer to achieve the capability of
developing a competitive indigenous automobile. 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 Motors acquired the South Korean truck manufacturer Daewoo Commercial Vehicles
Company in 2004. Tata Motors has been the parent company of Jaguar Land Rover since the
company established it for the acquisition of Jaguar Cars and Land Rover from Ford in 2008.

Tata Motors' principal subsidiaries include British premium car maker Jaguar Land Rover and the
South Korean commercial vehicle manufacturer Tata Daewoo. Tata Motors has a construction-
equipment manufacturing joint venture with Hitachi, and a joint venture with Stellantis which
manufactures automotive components and Fiat Chrysler and Tata branded vehicles. On Oct 12,
2021 private equity firm TPG invested $1 billion in Tata Motors' electric vehicle subsidiary.

Tata Motors has auto manufacturing and vehicle plants in Jamshedpur, Pantnagar, Lucknow,
Sanand, Dharwad, and Pune in India, as well as in Argentina, South Africa, the United Kingdom,
and Thailand. It has research and development centres in Pune, Jamshedpur, Lucknow, and
Dharwad, India and South Korea, the United Kingdom, and Spain. Tata Motors is listed on the
BSE (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. The company is ranked 265th on
the Fortune Global 500 list of the world's biggest corporations as of 2019.

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On 17 January 2017, Natarajan Chandrasekaran was appointed chairman of the company Tata
Group. Tata Motors increase its utility vehicle market share to over 85 in FY 2019.

Tata Motors Ltd. mission is to innovate mobility soutions with passion to enhance the quality of
life.

Their vision is by FY 2024, the company will become the most aspirational India auto brand,
consistently winning, by

 Delivering superior financial returns.

 Delivering sustainable mobility solutions.
 Exceeding customer expectations, and

 Creating a highly engaged work force.

3.2 Data Analysis

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Balance Sheet of Tata Motors Ltd. (Rs. in
for last 5 years crore)
Particulars 31/03/2021 31/03/2020 31/03/2019 31/03/2018 31/03/2017
I. ASSETS
(1) Non-current assets
(a) Property, plant and equipment 79640.05 77882.83 72619.86 73867.84 59594.56
(b) Capital work-in-progress 8377.14 8599.56 8538.17 16142.94 10186.83
(c) Right of use of assets 6490.66 6275.34 - - -
(d) Goodwill 803.72 777.06 747.87 116.45 673.32
(e) Other intangible assets 51773.18 42171.91 37866.74 47429.57 35676.2
(f) Intangible assets under development 12586.79 27022.73 23345.67 23890.56 23512.01
(g) Investment in equity accounted
investees 4200.79 4418.89 4743.38 4887.89 4606.01
(h) Financial assets:
(i) Other investments 1368.3 1028.05 1497.51 763.76 690.76
(ii) Finance receivables 16846.82 16833.77 22073.17 15479.53 10753.13
(iii) Loans and advances 1204.59 782.78 407.42 495.41 753.66
(iv) Other financial assets 5813.98 4749.57 2809.18 4563.87 2911.12
(i) Deferred tax assets (net) 4520.35 5457.9 5151.11 4158.7 4457.34
(j) Non-current assets (net) 1003.3 1152.05 1024.56 899.9 260.2
(k) Other non-current assets 1608.49 5381.57 2938.73 2681.25 2847.36
196238.16 202534.01 183763.37 195377.67 156922.5
(2) Current assets
(a) Inventories 36088.59 37456.88 39605€.23 42634.98 35085.31
(b) Financial assets:
(i) Other investments 19051.19 10861.54 8938.33 14663.75 15041.15
(ii) Trade receivables 12679.08 11172.69 18996.17 19893.3 14075.55
(iii) Cash and cash equivalents 31700.01 18467.8 21559.8 14716.75 13986.76
(iv) Bank balance other than (iii) above 15092.45 15259.17 11089.02 19897.16 22091.12
(v) Finance receivables 17868.09 14245.3 11551.52 8401.65 6810.12
(vi) Loans and advances 1749.4 935.25 1268.7 1451.14 710.45
(vii) Other financial assets 5274.32 4586.48 3213.56 3857.64 1555.94
(c) Current tax assets (net) 865.31 142.8 184.37 208.91 935.47
(d) Assets classified as held-for-sale 220.8 194.43 162.24 2585.19 -
(e) Other current assets 6298.4 6264.91 6862.22 7662.37 6539.99
146887.64 119587.25 123431.16 135972.84 116831.86
TOTAL ASSETS 343125.8 322121.26 307194.53 331350.51 273754.36
II. EQUITY AND LIABILITIES
Equity
(a) Equity share capital 765.81 719.54 679.22 679.22 679.22
(b) Other equity 54480.91 62358.99 59500.34 94748.69 57382.67
(c) Non-controlling interests 1573.49 813.56 523.06 525.06 453.17
56820.21 63892.09 60702.62 95952.97 58515.06
(1) Non-current liabilities
(a) Financial liabilities
(i) Borrowings 93112.77 83315.62 70973.67 61199.5 60629.18
(ii) Lease liabilities 5412.06 5162.94 - - -

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 (iii) Other financial liabilities 2556.35 3858.48 2792.71 2739.14 11409.58
(b) Provisions 13606.76 14736.69 11854.85 10948.44 9004.46
(c) Deferred tax liabilities (net) 1555.89 1941.87 1491.04 6125.8 1174
(d) Other non-current liabilities 12312.58 8759.52 13922.21 11165.19 17392.56
128556.41 117775.12 101034.48 92178.07 99609.78
(2) Current liabilities
(a) Financial liabilities
(i) Borrowings 21662.79 16362.53 20150.26 16794.85 13859.94
(ii) Lease liabilities 814 814.18 - - -
(iii) Trade payables 68179.84 63626.88 68513.53 72038.41 57698.33
(iv) Acceptances 7860.31 2771.33 3177.14 4901.42 4834.24
(v) Other financial liabilities 34854.59 36544 32855.65 31267.49 25634.83
(b) Provisions 12848.03 10329.04 10196.75 7953.5 5807.76
(c) Current tax liabilities (net) 1086.44 1040.14 1017.64 1559.07 1392.58
(d) Liabilities associated with assets
held-for-sale - - - 1070.18 -
(e) Other current liabilities 10443.18 8965.95 9546.46 7634.55 6401.84
157749.18 140454.05 145457.43 143219.47 115629.52
TOTAL EQUITY AND LIABILITIES 343125.8 322121.26 307194.53 331350.51 273754.36
Source: Secondary Data

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Statement of Profit and Loss of Tata (Rs. in
Motors Ltd. for last 5 years crore)
Particulars 31/03/2021 31/03/2020 31/03/2019 31/03/2018 31/03/2017
I. Revenue from operations
(a) Revenue 246972.17 258594.36 299190.59 289386.25 274492.12
(b) Other operating revenue 2822.58 2473.61 2747.81 2954.39 -
Total revenue from operations 249794.75 261067.97 301938.4 292340.64 274492.12
II. Other income (includes government
grants/incentives) 2643.19 2973.15 2965.31 3957.59 754.54
III. Total income (I+II) 252437.94 264041.12 304903.71 296298.23 275246.66
IV. Expenses:
(a) Cost of materials consumed
(i) Cost of materials consumed 141392.43 152968.74 182254.45 173371.19 160147.12
(ii) Basis of adjustment on hedge
accounted derivatives -35.16 -297.27 -1245.37 -1378.6 -777.57
(b) Purchase of products for sale 12250.09 12228.35 13258.83 15903.99 13924.53
(c) Changes in inventories 4684.16 2231.19 2053.28 -2046.58 -7399.92
(d) Excise duty - - - 790.16 4799.61
(e) Employee benefits expense 27648.48 30438.6 33243.87 30300.09 28332.89
(f) Finance costs 8097.17 7243.33 5758.6 4681.79 4238.01
(g) Foreign exchange (gain)/loss (net) -1732.15 1738.74 905.91 -1185.28 3910.1
(h) Depreciation and amorisation expenses 23546.71 21425.43 23590.63 21553.59 17904.99
(i) Product development/engineering
expenses 5226.63 4188.49 4224.57 3531.87 3413.57
(j) Other expenses 40921.97 57087.46 62238.12 60184.21 55430.06
(k) Amount transferred to capital and other
accounts -12849.13 -17503.4 -19659.59 -18588.09 -16876.96
Total expenses 249151.2 271749.66 306623.3 287118.34 267046.43
V. Profit/loss before exceptional items
and tax (III-IV) 3286.74 -7708.54 -1719.59 9179.89 8200.23
VI. Exceptional items:
(a) Defined benefit pension plan
amendment past service cost 84.81 - 147.93 -3609.01 -
(b) Employee seperation cost 459.9 436.14 1371.45 3.68 67.61
(c) Charge associated with change in JLR
strategy 14994.3 - - - -
(d) Write off/ provision for tangible and
intangible assets (net) 114 -73.04 180.97 1641.38 -
(e) Impairment losses in passenger vehicle
business -1182.41 1418.64 - - -
(f) Provision for onerous contracts and
related supplier claims -663 777 - - -
(g) Reversal for cost of closure of operation
of a subsidiary -46.58 -65.62 381.01 - -
(h) Impairment in subsidiaries - 353.2 - - -

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 (i) Provision for loan given to a joint
venture - 25.12 - - -
(k) Provision for impairment in JLR - - 27837.91 - -1182.17
(l) Profit on sale of investment in a
subsidiary company - - -376.98 - -
(m) Others - - 109.27 -11.19 -
VII. Profit/(loss) before tax (V-VI) -10474.28 -10579.98 -31371.15 11155.03 9314.79
VIII. Tax expense/(credit) (net):
(a) Current tax 1710.18 1893.05 2225.23 3303.46 3137.66
(b) Deferred tax 831.68 -1497.8 -4662.68 1038.47 113.57
Total tax expense/(credit) (net) 2541.66 395.25 -2437.45 4341.93 3251.23
IX. Profit/(loss) for the year from
continuing operations (VII-VII) -13016.14 -10975.23 -28933.7 6813.1 6063.56
X. Share of profit/(loss) of joint ventures
and associated (net) -378.96 -1000 209.5 2278.26 1493
XI. Profit/(loss) for the year (IX-X) -13395.1 -11975.23 -28724.2 9091.36 7556.56
Source: Secondary Data

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3.3 Comparative Statement Analysis
Tata Motors Ltd.
Comparative Balance Sheet as on 31/3/21

Absolute Percentage
Particulars 31/03/2020 31/03/2021 change (Rs.) change (%)
I. ASSETS
(1) Non-current assets
(a) Property, plant and equipment 77882.83 79640.05 1757.22 2.25623542
(b) Capital work-in-progress 8599.56 8377.14 -222.42 -2.5864114
(c) Right of use of assets 6275.34 6490.66 215.32 3.43120851
(d) Goodwill 777.06 803.72 26.66 3.4308805
(e) Other intangible assets 42171.91 51773.18 9601.27 22.7669793
(f) Intangible assets under development 27022.73 12586.79 -14435.94 -53.4214715
(g) Investment in equity accounted
investees 4418.89 4200.79 -218.1 -4.93562863
(h) Financial assets:
(i) Other investments 1028.05 1368.3 340.25 33.0966393
(ii) Finance receivables 16833.77 16846.82 13.05 0.07752274
(iii) Loans and advances 782.78 1204.59 421.81 53.8861494
(iv) Other financial assets 4749.57 5813.98 1064.41 22.4106603
(i) Deferred tax assets (net) 5457.9 4520.35 -937.55 -17.1778523
(j) Non-current assets (net) 1152.05 1003.3 -148.75 -12.911766
(k) Other non-current assets 5381.57 1608.49 -3773.08 -70.1111386
202534.01 196238.16 -6295.85 -3.10854
(2) Current assets
(a) Inventories 37456.88 36088.59 -1368.29 -3.65297377
(b) Financial assets:
(i) Other investments 10861.54 19051.19 8189.65 75.4004497
(ii) Trade receivables 11172.69 12679.08 1506.39 13.482787
(iii) Cash and cash equivalents 18467.8 31700.01 13232.21 71.6501695
(iv) Bank balance other than (iii) above 15259.17 15092.45 -166.72 -1.09258892
(v) Finance receivables 14245.3 17868.09 3622.79 25.4314756
(vi) Loans and advances 935.25 1749.4 814.15 87.0515905
(vii) Other financial assets 4586.48 5274.32 687.84 14.997122
(c) Current tax assets (net) 142.8 865.31 722.51 505.959384
(d) Assets classified as held-for-sale 194.43 220.8 26.37 13.5627218
(e) Other current assets 6264.91 6298.4 33.49 0.53456474
119587.25 146887.64 27300.39 22.828847
TOTAL ASSETS 322121.26 343125.8 21004.54 6.5206935
II. EQUITY AND LIABILITIES
Equity
(a) Equity share capital 719.54 765.81 46.27 6.43049726
(b) Other equity 62358.99 54480.91 -7878.08 -12.633431
(c) Non-controlling interests 813.56 1573.49 759.93 93.4079847
63892.09 56820.21 -7071.88 -11.06847

Page | 24
 (1) Non-current liabilities
(a) Financial liabilities
(i) Borrowings 83315.62 93112.77 9797.15 11.7590795
(ii) Lease liabilities 5162.94 5412.06 249.12 4.82515776
(iii) Other financial liabilities 3858.48 2556.35 -1302.13 -33.7472269
(b) Provisions 14736.69 13606.76 -1129.93 -7.66746128
(c) Deferred tax liabilities (net) 1941.87 1555.89 -385.98 -19.8767168
(d) Other non-current liabilities 8759.52 12312.58 3553.06 40.5622683
117775.12 128556.41 10781.29 9.154132
(2) Current liabilities
(a) Financial liabilities
(i) Borrowings 16362.53 21662.79 5300.26 32.3926679
(ii) Lease liabilities 814.18 814 -0.18 -0.02210813
(iii) Trade payables 63626.88 68179.84 4552.96 7.15571783
(iv) Acceptances 2771.33 7860.31 5088.98 183.629521
(v) Other financial liabilities 36544 34854.59 -1689.41 -4.62294768
(b) Provisions 10329.04 12848.03 2518.99 24.3874552
(c) Current tax liabilities (net) 1040.14 1086.44 46.3 4.45132386
(d) Liabilities associated with assets held-
for-sale - - - -
(e) Other current liabilities 8965.95 10443.18 1477.23 16.4760009
140454.05 157749.18 17295.13 12.313728
TOTAL EQUITY AND LIABILITIES 322121.26 343125.8 21004.54 6.5206935
Table-3.1

Percentage change (%)

25 22.828847
20
15 12.313728
9.154132
10
5

0 -3.10854
Non-current current Assets Equity Non-current Current
-5
assets liabilities liabilities
-11.06847
-10
-15

Fig-3.1

Page | 25
 Tata Motors Ltd.

Comparative Income Statement as on 31/3/21

Absolute Percentage
Particulars 31/03/2020 31/03/2021 change (Rs.) change (%)
I. Revenue from operations
(a) Revenue 258594.36 246972.17 -11622.19 -4.49437103
(b) Other operating revenue 2473.61 2822.58 348.97 14.1077211
Total revenue from operations 261067.97 249794.75 -11273.22 -4.318117
II. Other income (includes government
grants/incentives) 2973.15 2643.19 -329.96 -11.09799
III. Total income (I+II) 264041.12 252437.94 -11603.18 -4.394459
IV. Expenses:
(a) Cost of materials consumed
(i) Cost of materials consumed 152968.74 141392.43 -11576.31 -7.56776188
(ii) Basis of adjustment on hedge accounted
derivatives -297.27 -35.16 262.11 -88.1723686
(b) Purchase of products for sale 12228.35 12250.09 21.74 0.17778359
(c) Changes in inventories 2231.19 4684.16 2452.97 109.939987
(d) Excise duty - - - -
(e) Employee benefits expense 30438.6 27648.48 -2790.12 -9.16638742
(f) Finance costs 7243.33 8097.17 853.84 11.7879484
(g) Foreign exchange (gain)/loss (net) 1738.74 -1732.15 -3470.89 -199.62099
(h) Depreciation and amorisation expenses 21425.43 23546.71 2121.28 9.90075812
(i) Product development/engineering expenses 4188.49 5226.63 1038.14 24.7855432
(j) Other expenses 57087.46 40921.97 -16165.49 -28.3170595
(k) Amount transferred to capital and other
accounts -17503.4 -12849.13 4654.27 -26.5906624
Total expenses 271749.66 249151.2 -22598.46 -8.315911
V. Profit/loss before exceptional items and
tax (III-IV) -7708.54 3286.74 10995.28 -142.6376
VI. Exceptional items:
(a) Defined benefit pension plan amendment
past service cost - 84.81 84.81 100
(b) Employee seperation cost 436.14 459.9 23.76 5.44779199
(c) Charge associated with change in JLR
strategy - 14994.3 14994.3 100
(d) Write off/ provision for tangible and
intangible assets (net) -73.04 114 187.04 -256.078861
(e) Impairment losses in passenger vehicle
business 1418.64 -1182.41 -2601.05 -183.348136
(f) Provision for onerous contracts and related
supplier claims 777 -663 -1440 -185.328185
(g) Reversal for cost of closure of operation of
a subsidary -65.62 -46.58 19.04 -29.015544
(h) Impairment in subsidiaries 353.2 - -353.2 -100

Page | 26
 (i) Provision for loan given to a joint venture 25.12 - -25.12 -100
(k) Provision for impairment in JLR - - - -
(l) Profit on sale of investment in a subsidiary
company - - - -
(m) Others - - - -
VII. Profit/(loss) before tax (V-VI) -10579.98 -10474.28 105.7 -0.999057
VIII. Tax expense/(credit) (net):
(a) Current tax 1893.05 1710.18 -182.87 -9.66007237
(b) Deferred tax -1497.8 831.68 2329.48 -155.526773
Total tax expense/(credit) (net) 395.25 2541.66 2146.41 543.05123
IX. Profit/(loss) for the year from continuing
operations (VII-VII) -10975.23 -13016.14 -2040.91 18.595601
X. Share of profit/(loss) of joint ventures and
associated (net) -1000 -378.96 621.04 -62.104
XI. Profit/(loss) for the year (IX-X) -11975.23 -13395.1 -1419.87 11.856724
Table-3.2

Absolute Change (Rs.)

Absolute change (Rs.)

2146.41
105.7 621.04
-1419.87

-11607.57446

-22598.46

Fig-3.2

Page | 27
3.4 Common-size Financial Statement Analysis

Tata Motors Ltd.

Common-size Balance Sheet as on 31/3/21

% on Total % on Total
Particulars 31/03/2020 Assets 31/03/2021 Assets
I. ASSETS
(1) Non-current assets
(a) Property, plant and equipment 77882.83 24.1781092 79640.05 23.2101608
(b) Capital work-in-progress 8599.56 2.66966545 8377.14 2.44141944
(c) Right of use of assets 6275.34 1.94812972 6490.66 1.89162692
(d) Goodwill 777.06 0.24123214 803.72 0.23423479
(e) Other intangible assets 42171.91 13.0919362 51773.18 15.0886876
(f) Intangible assets under development 27022.73 8.38899301 12586.79 3.66827269
(g) Investment in equity accounted
investees 4418.89 1.37180949 4200.79 1.2242711
(h) Financial assets:
(i) Other investments 1028.05 0.31915 1368.3 0.39877503
(ii) Finance receivables 16833.77 5.22591089 16846.82 4.90980859
(iii) Loans and advances 782.78 0.24300787 1204.59 0.35106366
(iv) Other financial assets 4749.57 1.47446648 5813.98 1.69441645
(i) Deferred tax assets (net) 5457.9 1.69436193 4520.35 1.31740312
(j) Non-current assets (net) 1152.05 0.35764482 1003.3 0.29240005
(k) Other non-current assets 5381.57 1.67066589 1608.49 0.46877559
202534.01 62.875083 196238.16 57.191316
(2) Current assets
(a) Inventories 37456.88 11.6281924 36088.59 10.5175973
(b) Financial assets:
(i) Other investments 10861.54 3.37187927 19051.19 5.55224644
(ii) Trade receivables 11172.69 3.46847333 12679.08 3.69516953
(iii) Cash and cash equivalents 18467.8 5.73318259 31700.01 9.23859704
(iv) Bank balance other than (iii) above 15259.17 4.73708876 15092.45 4.39851798
(v) Finance receivables 14245.3 4.42234083 17868.09 5.20744578
(vi) Loans and advances 935.25 0.29034097 1749.4 0.50984216
(vii) Other financial assets 4586.48 1.42383648 5274.32 1.53713886
(c) Current tax assets (net) 142.8 0.04433113 865.31 0.25218448
(d) Assets classified as held-for-sale 194.43 0.06035926 220.8 0.06434958
(e) Other current assets 6264.91 1.94489181 6298.4 1.83559499
119587.25 37.124917 146887.64 42.808684
TOTAL ASSETS 322121.26 100 343125.8 100
II. EQUITY AND LIABILITIES
Equity
(a) Equity share capital 719.54 0.22337551 765.81 0.22318636
(b) Other equity 62358.99 19.3588557 54480.91 15.8778238
(c) Non-controlling interests 813.56 0.25256327 1573.49 0.45857525
63892.09 19.834795 56820.21 16.559585

Page | 28
 (1) Non-current liabilities
(a) Financial liabilities
(i) Borrowings 83315.62 25.8646759 93112.77 27.1366274
(ii) Lease liabilities 5162.94 1.60279393 5412.06 1.57728157
(iii) Other financial liabilities 3858.48 1.19783463 2556.35 0.7450183
(b) Provisions 14736.69 4.57488897 13606.76 3.96553101
(c) Deferred tax liabilities (net) 1941.87 0.6028382 1555.89 0.45344594
(d) Other non-current liabilities 8759.52 2.71932377 12312.58 3.58835739
117775.12 36.562355 128556.41 37.466262
(2) Current liabilities
(a) Financial liabilities
(i) Borrowings 16362.53 5.07961815 21662.79 6.3133667
(ii) Lease liabilities 814.18 0.25275575 814 0.23723078
(iii) Trade payables 63626.88 19.7524622 68179.84 19.8702167
(iv) Acceptances 2771.33 0.8603375 7860.31 2.29079539
(v) Other financial liabilities 36544 11.3447961 34854.59 10.1579625
(b) Provisions 10329.04 3.20656886 12848.03 3.74440803
(c) Current tax liabilities (net) 1040.14 0.32290324 1086.44 0.31663023
(d) Liabilities associated with assets held-
for-sale - - - -
(e) Other current liabilities 8965.95 2.78340834 10443.18 3.04354263
140454.05 43.60285 157749.18 45.974153
TOTAL EQUITY AND LIABILITIES 322121.26 100 343125.8 100
Table-3.3

Common-size Balance Sheet

80

60 57.191316

40 62.875083 42.808684
16.559585 37.466262 45.974153
20 37.124917
19.834795 36.562355 43.60285
0
Non-current
current
assets Equity
Assets
Non-current
liabilities Current
liabilities
% on Total Assets(2020) % on Total Assets(2021)

Fig-3.3

Page | 29
 Tata Motors Ltd.

Common-size Income Statement as on 31/3/21

Particulars 31/03/2020 % on Sales 31/03/2021 % on Sales

I. Revenue from operations
(a) Revenue 258594.36 100 246972.17 100
(b) Other operating revenue 2473.61 0.95655992 2822.58 1.14287371
Total revenue from operations 261067.97 100.95656 249794.75 101.14287
II. Other income (includes government
grants/incentives) 2973.15 1.1497351 2643.19 1.070238
III. Total income (I+II) 264041.12 102.10629 252437.94 102.21311
IV. Expenses:
(a) Cost of materials consumed
(i) Cost of materials consumed 152968.74 59.1539351 141392.43 57.2503493
(ii) Basis of adjustment on hedge accounted
derivatives -297.27 -0.1149561 -35.16 -0.01423642
(b) Purchase of products for sale 12228.35 4.72877676 12250.09 4.96010947
(c) Changes in inventories 2231.19 0.86281464 4684.16 1.89663475
(d) Excise duty - - - -
(e) Employee benefits expense 30438.6 11.7707904 27648.48 11.194978
(f) Finance costs 7243.33 2.80103943 8097.17 3.27857588
(g) Foreign exchange (gain)/loss (net) 1738.74 0.67238125 -1732.15 -0.70135433
(h) Depreciation and amorisation expenses 21425.43 8.28534311 23546.71 9.5341552
(i) Product development/engineering expenses 4188.49 1.61971437 5226.63 2.11628298
(j) Other expenses 57087.46 22.0760654 40921.97 16.5694661
(k) Amount transferred to capital and other -
accounts -17503.4 6.76867044 -12849.13 -5.20266312
Total expenses 271749.66 105.08723 249151.2 100.8823
V. Profit/loss before exceptional items and tax
(III-IV) -7708.54 -2.980939 3286.74 1.3308139
VI. Exceptional items:
(a) Defined benefit pension plan amendment past
service cost - - 84.81 0.0343399
(b) Employee 30eparation cost 436.14 0.16865797 459.9 0.18621531
(c) Charge associated with change in JLR strategy - - 14994.3 6.07125086
(d) Write off/ provision for tangible and intangible -
assets (net) -73.04 0.02824501 114 0.04615905
(e) Impairment losses in passenger vehicle
business 1418.64 0.54859665 -1182.41 -0.47876245
(f) Provision for onerous contracts and related
supplier claims 777 0.30047059 -663 -0.2684513
(g) Reversal for cost of closure of operation of a -
subsidary -65.62 0.02537565 -46.58 -0.01886042

Page | 30
 (h) Impairment in subsidiaries 353.2 0.13658457 - -
(i) Provision for loan given to a joint venture 25.12 0.00971406 - -
(k) Provision for impairment in JLR - - - -
(l) Profit on sale of investment in a subsidiary
company - - - -
(m) Others - - - -
VII. Profit/(loss) before tax (V-VI) -10579.98 -4.091342 -10474.28 -4.241077
VIII. Tax expense/(credit) (net):
(a) Current tax 1893.05 0.73205386 1710.18 0.69245859
(b) Deferred tax -1497.8 -0.5792083 831.68 0.33675049
Total tax expense/(credit) (net) 395.25 0.1528456 2541.66 1.0291281
IX. Profit/(loss) for the year from continuing
operations (VII-VII) -10975.23 -4.244188 -13016.14 -5.270286
X. Share of profit/(loss) of joint ventures and
associated (net) -1000 -0.386706 -378.96 -0.153442
XI. Profit/(loss) for the year (IX-X) -11975.23 -4.630894 -13395.1 -5.423729
Table-3.4

Common-size Income Statement

120 102.21311
100 100.8823
80
60 102.10629 105.08723
40
20 -4.241077 1.0291281
0 -0.153442
-5.423729
-20 -4.091342 0.1528456
-0.386706
-4.630894

% on Sales(2020) % on Sales(2021)

Fig-3.4

Page | 31
3.5 Trend Analysis

Tata Motors Ltd.

Trend Analysis of last 5 years Profit

Particulars 31/3/2017 31/3/2018 31/3/2019 31/3/2020 31/3/2021

Net Profit/(Loss) 7556.56 9091.36 -28724.2 -11975.23 -13395.1
% Change - 20.31 -415.95 141.69 -11.86
Table-3.5

Trend Analysis
15000
10000
5000
0
-5000
-10000
-15000
-20000
-25000
-30000
-35000
31/3/2017 31/3/2018 31/3/2019 31/3/2020 31/3/2021
Net Profit/(Loss) 7556.56 9091.36 -28724.2 -11975.23 -13395.1
% Change 0 20.31 -415.95 141.69 -11.86

Fig-3.5

Page | 32
3.6 Ratio Analysis

Current ratio - It is the ratio of current assets to current liabilities. It indicates the ability of the
business to meets its current maturing obligation. It is also known as Working Capital Ratio. Where
current assets include cash and those assets which are expected to be converted into cash and cash
equivalent shortly. Current liabilities includes sundry creditors, bill payable, outstanding expenses,
short-term loan, etc.

Current ratio = Current asset/Current liabilities

Years 2021 2020 2019 2018 2017

Current Assets 146887.64 119587.25 123431.16 135972.84 116831.86

Current Liabilities 157749.18 140454.05 145457.43 143219.47 115629.52

Current Ratio 0.93:1 0.85:1 0.85:1 0.95:1 1.01:1

Table-3.6

Current Ratio
1.05
1
0.95
0.9
0.85
0.8
0.75
2021 2020
2019
2018
2017

2021 2020 2019 2018 2017

Current Ratio 0.93 0.85 0.85 0.95 1.01

Fig-3.6

Interpretation - The ideal ratio is 2:1. In the year 2021 it is found that the ratio is 0.93:1 which is
below the ideal ratio which means the company has more current liabilities than current assets.
Similarly, the ratios of 2020, 2019, 2018 and 2017 are 0.85, 0.85, 0.95 and 1.01 respectively. In
all the above years current assets are less than current liabilities which shows that the financial
position of company is not good. The company should try to efficiently utilize its resources.

Page | 33
Quick Ratio – This ratio is also known as liquid ratio or acid test ratio. It is the ratio of quick
assets to quick liabilities. It measures for judging immediate solvency position of a firm. Where
quick assets includes total current assets less inventories and quick liabilities includes total current
liabilities less bank overdraft.

Quick Ratio = Quick Assets /Quick Liabilities

Years 2021 2020 2019 2018 2017

Quick Assets 110799.05 82130.37 83825.93 93337.86 81746.55

Quick Liabilities 136086.39 124091.52 125307.17 126424.62 101769.58

Quick Ratio 0.81:1 0.66:1 0.67:1 0.74:1 0.80:1

Table-3.7

Quick Ratio

0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0 2021 2020 2019 2018 2017
Quick Ratio 0.81 0.66 0.67 0.74 0.8

Fig-3.7

Interpretation - Acid test ratio or quick ratio is a refinement over current ratio. The ideal has
been 1:1. But it is found that the ratio is decreasing continuously from 2017 to 2020 are 0.8,
0.74, 0.67 and 0.66 and in 2021 there is a rise 0.81 but then also it is less than the ideal ratio
which means the company has no liquid assets to its currents liabilities and should be treated
with caution and current assets are dependent on inventories.

Page | 34
Debt-Equity Ratio – It is a measure of the relative contribution of the creditors and
shareholders or owners in the capital employed in business. Simply this ratio expresses the
relationship between debt capital and shareholders fund of the company. Where long-term Debt
is includes total non-current liabilities and shareholders fund is equal to total equity.

Debt-Equity Ratio = Long-term Debt/Shareholders Fund

Years 2021 2020 2019 2018 2017

Long-term Debt 128556.4 117775.1 101034.5 92178.07 99609.78

Shareholders Fund 56820.21 63892.09 60702.62 95952.97 58515.06

Debt-equity Ratio 2.26:1 1.84:1 1.66:1 0.96:1 1.7:1

Table-3.8

Debt-Equity Ratio

2.5

1.5

0.5

0
2021 2020 2019 2018 2017
Debt-equity Ratio 2.26 1.84 1.66 0.96 1.7

Fig-3.8

Interpretation - The ideal debt-equity ratio is 2:1. In the year 2021 the debt equity ratio is 2.26:1
which means the company is financing a significant amount of its potential growth through
borrowings and it is a higher risk to lenders and investors. And in years 2020, 2019,2018 and 2017
the debt-equity ratio is less 2:1 which means that company has equal or lesser liabilities as
compared to its assets.

Page | 35
Total Asset Turnover Ratio - The total asset turnover ratio compares the sales of a company to
its assets base. The ratio measures the ability of an organization to efficiently produce sales, and
is typically used by third parties to evaluate the operations of a business. Therefore it is expressed
as times. Where sale is equal to revenue and total assets include both non-current assets and current
assets.

Years 2021 2020 2019 2018 2017

Sales 246972.17 258594.36 299190.59 289386.25 274492.12
Total Assets 343125.8 322121.26 307194.53 331350.51 273754.36

Total Assets Turnover Ratio 0.72 times 0.8 times 0.97 times 0.87 times 1 times
Table-3.9

Total Asset Turnover Ratio

2017 1

2018 0.87
Total Assets Turnover
2019 0.97 Ratio

2020 0.8

2021 0.72

0 0.5 1

Fig-3.9

Interpretation - The ideal ratio for this is >1 because it means that the company is able to generate
enough revenue for itself. In the year 2017 total asset turnover ratio is 1 which is a good situation
for the company but from then it goes on decreasing and in year 2021 it is 0.72 though it is still
slightly normal for the company but company must look after it for its rise.

Page | 36
Proprietary Ratio - The proprietary ratio is the proportion of shareholders equity to total assets,
and as such provides a rough estimate of the amount of capitalization currently used to support a
business. It is generally expressed as percentage. Where shareholders fund is equal to total equity
and total assets include both non-current assets and current assets.

Proprietary Ratio = [Shareholders Fund/ Total Assets] x 100

Years 2021 2020 2019 2018 2017

Shareholders Fund 56820.21 63892.09 60702.62 95952.97 58515.06

Total Assets 343125.8 322121.26 307194.53 331350.51 273754.36

Proprietary Ratio 16.56% 19.83% 19.76% 28.96% 21.38%

Table-3.10

Proprietary Ratio
35.00%

30.00%

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%
2021 2020 2019 2018 2017
Proprietary Ratio 16.56% 19.83% 19.76% 28.96% 21.38%

Fig-3.10

Interpretation - The higher the ratio better the long term solvency position of the company. As
we can say from 2017 to 2021 the proprietary ratio is continuously goes on decreasing which
means that company is using too much of debt rather than equity to support operation which is
very risky. So, to increase its proprietary ratio company should issue equity shares to increasesits
shareholders fund.

Page | 37
Gross Profit Ratio - Gross profit ratio is a financial ratio that measures the performance and
efficiency of a business by dividing its gross profit figure by the total net sales and it is expressed
in percentage. Where gross profit means revenue less cost of materials consume less purchase of
product for sale less change in inventories and sales means revenue.

Gross Profit Ratio = [Gross Profit/Net Sales] x 100

Years 2021 2020 2019 2018 2017

Gross Profit 88645.49 91166.08 101624.03 102157.65 107820.39

Sales 246972.17 258594.36 299190.59 289386.25 274492.12

Gross Profit Ratio 35.89% 35.25% 33.97% 35.3% 39.28%

Table-3.11

Gross Profit Ratio

40.00%
39.00%
38.00%
37.00%
36.00%
35.00%
34.00%
33.00%
32.00%
31.00%
1 2 3 4 5
Gross Profit Ratio 35.89% 35.25% 33.97% 35.30% 39.28%

Fig-3.11

Interpretation – This ratio throws light at managerial efficiency in production and sales
performance. A higher gross profit reaveals a lower cost of production and lower gross profit may
indicate higher cost of production. From the year 2017 to 2019 the gross profit is decreasing
gradually which is not good for the business, but in the year 2020 it slightly increases means
company is using its resources more efficiently than previous years.

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 Chapter-4

4.1 Conclusion

To conclude, the Tata Motors Ltd. has shown its impact on the industry. We can see the down fall
of the Tata Motors, but it is expected, as it is such a big company. In this report, we have seen that
there is an abnormal amount of debt from Tata Motors. Their ability to make the contractual
payment has also been hugely decreased. Looking at all these 5 years 2017 is considered as the
best financial year out of these five years. It had the highest current ratio gross profit ratio, debt-
equity ratio, proprietary ratio, total asset turnover ratio and quick ratio in the year 2017 and after
then rates keep on fluctuating, which clearly shows the liability has decreased over time. If the
company manages its assets well and finances its debt properly, it is expected to recover from the
loss. In the year 2021 we can see company tries to recover its financial position but still they have
to work for more equity share capital, to have more current assets than current liabilities, they have
to increase their sales, they have to use less borrowings from the investors. And they should
properly utilize their resources to recover their losses and pay off their debts.

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4.2 Recommendation

 The company should find a way to improve its financial position because it has more
current liabilities over current assets which indicates that the company will not be able to
meet its short term debts.
 The company must increase its revenue to maintain it liquidity position.
 For raising funds company should issue equity shares rather than borrowing from investors
 The company should formulae the strategy to use the fixed assets more effectively to
generate more revenues.
 They should lower the cost of production in order to increase their gross profit.
 The company should pay their creditors on time in order to decrease their current liabilities.
 The company must utilize its resources efficiently to turn their losses into profit.
 They should increase their proprietary ratio to lower the dependence on external fund and
hence, greater is the solvency of the firm.

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 Chapter-5

5.1 Bibliography

Websites:-

 www.wikipedia.com
 www.investopidia.com
 www.accountlearning.com
 www.yourarticlelibrary.com
 www.bartleby.com
 www.tatamotors.com

Annual Reports:-

 Tata Motors Ltd. from 2017-2021

Books:-

 Financial Reporting and Financial Statement Analysis - Dr. Jayanta Ghosh

 Management Accounting - T.S.Grewal’s

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