A

PROJECT REPORT
ON

“A COMPARATIVE STUDY OF FINANCIAL PERFORMANCE OF

TVS MOTORS AND HERO MOTORS”

Research Project Submitted in Fulfilment of the requirements for the

Degree of

MASTER OF BUSINESS ADMINISTRATION

Submitted to: Submitted By:

Mr. Sunil Yadav Vineeta Gaur

(HOD MBA) 22MLDMB627

Department of Master of Business Administration

Laxmi Devi Institute of Engineering & Technology, Alwar
Bikaner Technical University, Bikaner

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 CERTIFICATE

It is certified that the work contained in the project report titled “A COMPARATIVE
STUDY OF FINANCIAL PERFORMANCE OF TVS MOTORS AND HERO MOTORS”
by “VINEETA GAUR” has been carried out under my supervision and that this work has
not been submitted elsewhere for a degree.

Signature of Supervisor: ………………

Name: Mr. Sunil Yadav

Department: MBA

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 DECLARATION

I hereby declare that this project entitled “A COMPARATIVE STUDY OF FINANCIAL

PERFORMANCE OF TVS MOTORS AND HERO MOTORS” was carried out by me for
the degree of MBA under the guidance and supervision of Mr. Sunil Yadav Department of
MBA,Laxmi Devi Institute Of Engineering And Technology College. The interpretations
put forth are based on my reading and understanding of the original texts and they are not
published anywhere in any form. The other books, articles and websites, which I have made
use of are acknowledged at the respective place in the text. This research report is not
submitted for any other degree or diploma in other University.

Vineeta Gaur
22MLDMB627
MBA 4th Sem

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 ACKNOWLEDGEMENT

The success of any project study depends upon a number of factors among which the
proper guidance from the faculty in the institute plays an important role.

I take this opportunity to convey my sincere thanks and gratitude to all those who have
directly or indirectly helped and contributed towards the completion of this project.

I really indebted to Mr. Sunil Yadav, Department of MBA, Laxmi Devi Institute Of
Engineering And Technology for this kind hearted approach. His timely guidance,
supervision and encouragement have helped me to get this golden opportunity.

My project guide provided me his expert advice, inspiration and moral support in spite of
his busy schedule and assignments, has mainly provided my understanding of this project. I
am very grateful to his kind hearted approach and encouragement, which helped me
immensely in competition of this project report.

Last but not the least, I say only this much that all are not mentioned but none is forgotten
and I will like to extend my special thanks and gratitude to my parents who always
encourage me in pursuit of excellence.

(VINEETA GAUR)

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 INDEX

S.NO. CONTENTS PAGE

NO.
1. Rationale of the study 7

2. Introduction to the industry 7

3. Introduction to the company 8

4. Justification of the topic 9

5. Review of literature 11

6. Objectives of the study 19

7. Research Hypothesis 19

8. Scope of the study 19

9. Limitation of the study 19

10. Data representation and interpretation 21

11. Hypothesis testing 33

12. Major findings 35

13. Discussions and suggestions 36

14. Conclusions 36

15. References 37

16. Annexure 38

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CHAPTER 1: INTRODUCTION OF THE TOPIC

1.1 Rationale of the Study

1.2 Introduction to the Industry
1.3 Introduction to the Company
1.4 Justification of the Topic

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 INTRODUCTION OF THE TOPIC

1.1 Rationale of the Study:

1.1.1 Why the need for the study?

 To compare the companies to identify which company is the market leader.

 To understand their financial performance.

1.1.2 What information will the study add?

 It will help in analysis of companies.

 It will make us understand the companies’ market share, financial strength and
contribution to the society.

1.2 Introduction to the industry:

Automobile is one in every of the biggest industries in worldwide market. Being the chief in
product and procedure technology withinside the production sector, it's been diagnosed as one
of the drivers of monetary growth. During the last decade, properly directed efforts were made
to offer a brand new appearance to the auto coverage for figuring out the sector’s complete
ability for the economy. Aggressive advertising and marketing through the automobile finance
businesses have additionally performed a giant function in boosting vehicle demand, specifically
from the populace withinside the center earnings group.

A Nations financial system is widely known from its transport system. For immediately and fast
increase in financial system, a well-evolved and well-networked transportation system is critical.
As India’s delivery network is growing at a quick pace, Indian Automobile Industry is
developing too. Also, the Automobile enterprise has sturdy to and fro linkages and hence affords
employment to a huge phase of the population. Thus the position of Automobile Industry could
be very critical in Indian financial system. Various sorts of vehicles are manufactured with the
aid of using the Automobile Industry. Indian Automobile Industry consists of the producing of
trucks, buses, passenger cars, defense vehicles, two-wheelers.
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The automobile producing is dominated by organizations like TVS, Honda Motorcycle and
Scooter India (Pvt.) Ltd., Hero Honda, Yamaha, Bajaj, and so forth. The vehicle business in the
nation is one of the vital areas of the economy as far as the business openings that it offers. The
business straightforwardly utilizes near around 0.2 million individuals and in a indirect way
utilizes around 10 million individuals. The possibilities of the business moreover has an
orientation on the auto-segment industry which is additionally a significant area in the Indian
economy straightforwardly utilizing 0.25 million individuals.

1.3 Introduction to the Company

TVS Motors

TVS Motor Company is the third biggest 2-wheeler organization in India with an income of over
₹18,217 crore (over US$2.9 billion). It has a yearly offer of in excess of 3 million units and a
yearly limit of over 4.95 million vehicles. TVS Motor is additionally the second biggest exporter
in India with fares to more than 60 Countries. An individual from the TVS Group, it is the
biggest organization of the gathering regarding size and turnover.

TVS Motor makes the biggest scope of 2-wheelers, beginning from mopeds, to bikes,
suburbanite bikes, to dashing motivated bicycles like the Apache arrangement and the RR310.
Whatever your prerequisite be, we have one for everybody.

TVS Motor's solidarity lies in its broad innovative work, bringing about items that are industry
driving as far as development. We at TVS convey absolute consumer loyalty by expecting client
need and introducing quality vehicles at the perfect time and at the perfect cost.

TVS has consistently represented creative, simple to-deal with, and climate amicable items,
sponsored by solid client assistance. In excess of 44 million + customers have purchased a TVS
item to date. TVS items give you only motivations to smile!

The organization has four assembling plants, three situated in India (Hosur in Tamil Nadu,
Mysore in Karnataka and Nalagarh in Himachal Pradesh) and one in Indonesia at Karawang.

Hero Motors

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MotoCorp Limited, previously Hero Honda, is an Indian global motorcycle and cruiser producer
situated in New Delhi, India. The organization is the biggest two-wheeler maker on the planet,
and furthermore in India, where it has a piece of the pie of about 46% in the bike classification.
Starting at 31 December 2020, the market capitalization of the organization was ₹68,474 crore
(US$9.6 billion).

With advancement at the center of its way of thinking, the New Delhi (India) settled Hero
MotoCorp has been at the forefront of planning and growing innovatively progressed bikes and
bikes for clients all throughout the planet. It turned into the world's biggest two-wheeler maker
in 2001, as far as unit volume deals in a schedule year, and has kept up the pined for title for as
long as 20 successive years.

With more than 100 million fulfilled customers across the globe, it keeps on supporting
financial advancement and strengthening through its scope of items and administrations.

Driven by Dr. Pawan Munjal, Chairman, Hero MotoCorp, it has taken fast walks to grow its
essence to 40 nations across Asia, Africa, and South and Central America. Legend MotoCorp is
a genuinely worldwide undertaking with a labor force that involves individuals from various
ethnicities including India, Bangladesh, Colombia, Germany, Austria, Japan and France.

MotoCorp is the predominant market pioneer in India – the world's biggest two-wheeler market
– with more than half offer in the homegrown motorcycle market.

1.4 Justification of the study

1.4.1 What is the potential utility of the findings (local, national, global)?

 This analysis will help the investors who want to invest in such companies.
 To identify their good points and points of improvement.

1.4.2 What are the implications of the study outcome?

 Comparison for their market share.

 Comparison of profitability.
 Ratio analysis to find out their financial strength.

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CHAPTER 2: LITERATURE REVIEW

2.1 International Reviews

2.2 National Reviews

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 LITERATURE REVIEW

1. Kennedy and Muller (1999), has explained that “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 matureness (both current and long term) and
profitability and sound dividend policy.”

2. T.S.Reddy and Y. Hari Prasad Reddy

Without subjecting these to data analysis, many fallacious conclusions might be drawn
concerning the financial condition of the enterprise. Financial statement analysis is
undertaken by creditors, investors and other financial statement users in order to
determine the credit worthiness and earning potential of an entity.

3. 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. For example, they can compute the percentage of net profit a company is
generating on the funds it has deployed. All other things remaining the same, a company
that earns a higher percentage of profit compared to other companies is a better
investment option.

4. 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 invaluable
documents / performance reports. The analysis of financial statements is, thus, an
important aid to financial analysis.

5. Sheela Christina (2017) [2] carried out the study on Financial Performance of Wheels
India Limited-Chennai. The study deals with Analytical type of research design with the
help of secondary data collection method. For this purpose the researcher took past five
years‟ data and also checked out for the validity and reliability before conducting the
study. The researcher used the following financial tool namely ratio analysis,
comparative balance sheet and DuPont analysis and also statistical tools such as trend
analysis and
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 correlation. Profitability ratios indicate there is a decrease in the profit level, utilization
of fixed assets and working capital in the last financial year. Thus the company can take
necessary steps to improve sales and profit. Finally, the study reveals that the financial
performance is satisfactory.

6. Neha Mittal (2018) [3] studies the determination of capital structure choice of the
selected Indian industries. The main objective is to investigate whether and to what
extent the main structure theories can explain the capital structure choice of Indian firms.
It has applied multiple regression models on the selected industries by taking data for the
period 2009- 2017. It examines the relevance of capital structure in selected Indian
industries based on a regression analysis and data study. It concludes that the main
variables determining capital structure of industries in India are agency cost, assets
structure, non-debt tax shield and size. The coefficients of these variables are significant
at one per cent and five per cent levels.
7. Tehrani et al2 developed a model that evaluates a companies’ performance using the
technique of data envelopment analysis. Performance assessment indexes were generated
from financial statements as well as ratios from articles and books. Due to the huge
number of variables, data envelopment analysis was used to analyse the collected data in
the study. Parameters used to measure performance included Liquidity, Activity,
Leverage, Economic Added Value, and Profitability ratios. The result of the analysis
disclosed that nine out of the thirty-six companies were efficient; implying that the
remainder twenty- seven companies were inefficient. Some gaps identified in the study
are that it focused on evaluating the selected companies for internal efficiency without some
form of ranking. It also excluded qualitative indexes in developing the proposed model.
8. Sumninder and Samiya3 analysed how size, solvency, liquidity, equity capital, and
leverage impacted on the profitability of some life insurance companies. The research
employed multiple linear regression analysis to quantity the extent to which the specified
indicators influenced the profitability of the firms over a 5 year period. The sample for
this study included 18 Indian life insurers (including 1 public and 17 private). The results
of the study revealed that size and liquidity of life insurers positively influenced the
firms’ profitability whilst the reverse holds for equity capital. Insurance leverage and

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 solvency showed no interrelatedness with profitability. A significant gap in the work is

to do with the restricted number of variables deployed as indicators of the profitability of

insurance companies.
9. Bhunia et al4 researched into the financial performance of some public sector
pharmaceutical and drug enterprises in India. The research was aimed at assessing both
short and long term solvency, profitability and liquidity trends, efficiency of financial
processes and to examine determinants of liquidity and profitability behaviours. To
evaluate how the chosen ratios jointly influence the financial position and profitability of
the firms, the multiple regression technique was used. The research sampled two public
enterprises from the pharmaceutical and drug sector that were listed on Bombay Stock
Exchange. The performance indicators deployed included solvency, profitability,
efficiency, financial stability, operating efficiency and liquidity ratios. It found that both
companies had strong liquidity positions. Financial stability of the two companies also
demonstrated an increasingly declining trend. A notable gap in the study was the
complete reliance on published financial data. Thus, it’s prone to all the weaknesses
inherent in the summarized published financial statements.
10. Duarte et al6 studied the interrelatedness between particular operational practices (TQM,
JIT, services outsourcing and ISO certification) and the firm’s profitability and growth as
financial indicators. This work sourced secondary data from PAEP database. Data from
3,589 companies in the industrial sector were sampled for the study. The multiple
regression technique was employed in the analysis. The study did not find any positive
relationship between financial performance and operational practices. A negative association
between outsourcing and both profitability and growth was revealed. The study also found a
weak negative association between ISO certification and growth. A key shortfall of the work is
to do with the use of information contained in a database designed for a different purpose.
11. Assumptah and Martin7 analysed how Capital Structure affect financial performance of
Banks listed in Nairobi Securities Exchange; and explicitly establish how leverage risk,
debt equity, debt, interest rate and their blends affect the operations of listed banks in the
Nairobi Stock Exchange (NSE). Evaluation metrics employed comprised leverage risk,
debt equity ratio, Gross Profit Margin, Debt, interest rates, ROE, ROA and Net Profit
Margin (NPM). The study used descriptive research design. Regression and correlation

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 analysis were applied to primary quantitative data. The study established that capital
structure influenced the financial performance of 56.4% of the listed banks on NSE. Due
to the limited sample size employed in the regression analysis, the resultant model is
exposed to grave technical interpretation errors.
12. Rouf8 studied the relationship between Profitability and Corporate Governances
Disclosure levels of companies listed in Bangladesh. Data of 94 listed non-financial
companies, was sourced from the library of Dhaka stock exchange. Multiple ordinary
least squares regression was used. The study established a high positive correlation
between profitability and the level of corporate governance disclosure. Major limitation
is the use of exclusively non-financial companies, affecting the generalization of the
results. Second, the author’s generated disclosure index which was employed in the
study is sensitive and can upset the results if the items of information were not properly
selected.
13. Kumbirai and Webb9 examined the performance of commercial banks in South from
2005 to 2009. Credit quality, liquidity and Profitability ratios were the metrics deployed
in the analysis. The paper relied on descriptive financial ratio analysis to analyse,
measure and describe the performance of the banks. The sampling frame included all the banks
operational in the country between 2005 and 2009. Top five commercial banks by the value of
total assets as at end of the 2009 commercial year were sampled. The study determined that total
bank performance improved significantly in the first two years of the study. A substantial
variation in trend was observed at the inception of the global financial crisis in 2007, hitting peak
levels during 2008-2009. This occasioned decreasing profitability, liquidity and declining credit
quality in the South African Banking sector. A notable gap in the study is the use of only three
financial ratios which did not permit a comprehensive analysis of the banks financial
performance.
14. Mwangi and Murigu10 conducted a study to examine the factors that influence the
profitability of Kenya’s general insurance firms. Parameters deployed were Return on
Assets, Retention ratio, Liquidity, Equity Capital, Size, Management Competence index
and ownership. The study adopted a descriptive research design and deployed multiple
regression analysis as well. All the twenty three general insurance companies in Kenya
were sampled. The research employed a four year secondary data spanning 2009 to
2012. The results showed that higher equity capital, management capability and leverage
facilitated improved financial performance of the general insurance companies in Kenya.
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 Foreign ownership and size nonetheless, exhibited an inverse relationship with firms’
return on assets. As a limitation, the research did not consider the structural changes in

the Kenyan economy that may affect the financial performance of the general insurance
companies’ overtime. Besides, the changes in financial performance may vary over time
and a linear model can have a strong limitation in capturing the actual relationship
among the variables of interest.

15. Adesina et al11 evaluated how the capital structure of quoted Nigerian banks relates with
their financial performances. Parameters used were profit before tax, equity and debt.
The survey research design was employed and data analysis was undertaken by
deploying the Ordinary Least Square (OLS) regression to capture the kind of the
associations between the banks’ financial performances and the corresponding capital
structure. To filter out the banks in the top tier with relatively high capital structure,
stratified sampling was adoptedfor the study. This resulted in the selection of the ten most
capitalized banks. The annual reports of the sampled banks were scrutinized and data on pretax
profits, debt and equity for 2005 to 2012 period were extracted. The research established a
significant positive impact of equity and debt on financial performance of the banks. The gap in
the work is the exclusive reliance on OLS in a two variable regression analysis, which may
expose the model to technical flaws. The potential threat to the model is its failure to capture the
feedback effect of the variables of interest.
16. Davidson et al12 aimed at establishing the nature of interrelatedness that exits between
financial performance and the culture of an organization. Financial ratios were generated
from firms’ income statements for performance analysis. The organizational culture was
measured by Denison Organizational Culture Survey method. The survey administration
covered a sample of 327 respondents. Correlations coefficients greater than 0.5 level
between some subscales (customer focus, team orientation, vision, core values and
agreements) and some financial ratios were attained. However, most of the correlations
failed the statistical significance test and as a result, the finding were considered as
uncertain. Of the four profitability ratios, the cultural trait consistency displayed
significant correlation with two. A use of one organization, with the respective
departments acting as units of comparison constitute a limitation to the generalization of
the findings. Again the methodology assumed, rather unrealistically, that each

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 department would have a unique cultural character that may differ to some extent from
each other.
17. Mahbuba and Farzana13 surveyed how CSR relates to profitability of Dutch Bangla
Bank Ltd (DBBL). The study employed OLS regression run from SPSS to evaluate the
effect of CSR on profitability. Hypothesis testing was employed to validate the claim of
CSR expenditure having a direct relationship with profit (after tax). Data for the work
was gleaned from the annual reports of the bank for the 2002 to 2011 time period. The
research found that 90.7% of the variations in profits of the bank was accountable to the
benefits emanating from corporate social responsibility. The use of only one profitability
measure, profit after tax, in the research constitute a limitation. The study could have
evaluated the relationship between the dependent variable, CSR and other profitability ratios for
a wider scope of the analysis and hence conclusions.
18. Anlesinya et al15 investigated a possible correlation of corporate social responsibility
and financial performance of MTN Ghana Limited. Their work also ascertained the
extent of variability in the financial performance that was explained by identified
constituents of CSR namely, environmental, community, consumers/customers and
employees’ responsibility. Questionnaire administration was employed to collect the
required data. Data collected was analysed with the aid of Statistical Product and
Services Solutions (SPSS) version 16.0. Of the estimated forty (40) management staff of
MTN Ghana Limited, thirty-five (35) participants were selected from the target
population.
Standard multiple and hierarchical regression tools were the analytical methods
employed for the work. The work revealed a positive relation between MTN’s financial
performance and corporate social responsibility. It was also found that, only CSR
towards community accounted for the highest variance in corporate financial
performance. A major limitation is the scope of using only MTN whereas there are other
major players in the telecommunication sector. Also, the point of view of customers
should have been sought via primary sources.

19. Danquah16 assessed the effect of Emotional Intelligence (EI) on Relationship Marketing
(RM), financial performance, service quality and customer satisfaction while assessing
the mediation of RM, customer satisfaction and service quality in the EI and financial
performance relationship. This study adopted a descriptive/quantitative research
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 technique. It also combined primary (questionnaires) with secondary (annual reports)
data for the study. Data analysis was done using SPSS. Respondents, 220 employees and
customers for each bank, were contacted from 20 out of the 28 banks. The study
established a positive relationship between emotional intelligence and relationship
marketing, service quality, customer satisfaction and financial performance. Emotional
intelligence came out as a strong predictor of service quality, customer satisfaction,
relationship marketing and financial performance. Relationship marketing plays the key
mediation role in the relationship between EI and financial. Two gaps were identified.
First, Customer loyalty could have been included and used to assess its relationship
with emotional intelligence.Additionally, the study focused on only commercial banks.
Expanding the scope to include other service sectors such as telecommunication, insurance,
health and hospitality would provide a stronger basis for generalizing this study’s results.
20. Gyamfi et al17, investigated the performance differences between foreign and local
banks in Ghana. The study deployed ratio analysis to examine how the 25 selected local
and foreign banks performed; with the use of time series data from 2005-2010.
Parameters employed were Asset Quality, ROA, Management Efficiency, ROE, Capital
Adequacy, Bank size, Earning Performance and Liquidity. The study found that on both
ROA and ROE, local Ghanaian banks performed better than foreign banks. The foreign
banks on the other hand, showed greater capital adequacy ratio and more quality assets
(loans) than their local counterparts. The study also found local banks more efficiently
21. managed than foreign ones; while the foreign banks are more liquid and have more
earnings power relative to the local banks in Ghana. However, performance was not
measured against a standard threshold such as industry averages which could have
provided a more comprehensive report on their performance.

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CHAPTER 3: RESEARCH METHODOLOGY

3.1 Objectives of the Study

3.2 Research Hypothesis

3.3 Scope of Study

3.4 Limitation of the Study

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 RESEARCH METHODOLOGY

3.1 Objectives of the study:

 The study's main goal is to learn about TVS Motors and Hero MotoCorp's
financial strengths and weaknesses using Comparative Financial Ratio research.
 To assess the company's performance using ratios as a yardstick for measuring
productivity.
 To gain a better understanding of the companies' liquidity, profitability, and
 To assess and examine different aspects of a company's financial performance.
 To examine the different components of TVS Motors Company and Hero Motors'
financial statements for the past five years and review them in order to determine the
companies' financial power.

3.2 Research Hypothesis:

3.3 Scope of the study:
3.3.1 Name of the companies:

 TVS Motors
 Hero Motors

3.3.2 No. of years taken for study: 5

3.3.3 Ratios used are:

 Profitability Ratio- Net Profit Ratio, Operating Ratio

 Turnover Ratio- Stock Turnover ratio, Debtors Turnover Ratio, Working
capital Turnover Ratio
 Liquidity Ratio- Current Ratio, Liquid Ratio
 Solvency Ratio- Debt-Equity Ratio, Fixed Assets Ratio

3.4 Limitation for the study:

 Have not taken any other company.
 Have not taken any other ratios other than above mentioned ratios for calculation.

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CHAPTER 4: DATA REPRESENTATION AND ANALYSIS

4.1 Data representation & interpretation

4.2 Hypothesis testing

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4.1 DATA REPRESENTATION AND INTERPRETATION:

4.4.1 PROFITABILITY RATIOS- The earnings power of an organization is calculated by

this ratio. They demonstrate how effectively an organization uses its assets to generate profit and
value for its shareholders.

A. Net Profit Ratio: It determines the relationship between a company's net profit and
revenue. A good margin varies by industry, but a 10% net profit margin is considered
average, a 20% margin is considered high, and a 5% margin is considered low. Its
formula is:

Net Profit Ratio= Net Profit*100/Net sales

Significance:
 The net profit margin is the amount of net income produced as a percentage of total sales.
 The net profit margin assists investors in determining whether a company's
management is generating enough profit from its revenue and whether operating
expenses and overhead costs are being kept under control.
 One of the most significant indicators of a company's overall financial health is its
net profit margin.

Net Profit Ratio

Year TVS Hero
2016 0.21 0.92
2017 0.20 0.83
2018 0.18 0.85
2019 0.17 0.82
2020 0.13 0.91

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 Net Profit Ratio
1.00 0.92 0.91
0.90 0.83 0.85 0.82
0.80
0.70
0.60
0.50
0.40
0.30 0.21 0.20 0.18
0.20
0.17 0.13
0.10
-
20162017201820192020

TVSHero

The Net Profit ratio calculation for TVS Motors is 21% for the year 2015-2016, 20% for
the year 2016-2017, 18% for the year 2017-2018, 17% for the year 2018- 2019, 13% for
the year 2019-2020 and for Hero Motors is 92% for the year 2015-2016, 83% for the
year 2016-2017, 85% for the year 2017-2018, 82% for the year 2018- 2019, 91% for the
year 2019-2020. A high net profit ratio suggests that the company's profitability has been
strong. A low net profit ratio, on the other hand, means that the company's profitability is
weak. The net profit ratio of Hero Motors is better that of TVS Motors in all the 5 years
which means Hero Motors is performing well.

B. Operating Ratio: The operating ratio compares a company's overall operating cost
(OPEX) to net revenue to determine management performance. The operating ratio
demonstrates how well a company's management keeps costs down when increasing
revenue or sales. The lower the percentage, the more effective the business is at
producing sales compared to overall expenses. Its formula is:

Operating Ratio= Operating Cost/Net Sales*100

Significance:

 The operating ratio compares a company's gross operating cost to net revenue to
determine how efficient its management is in managing cost.
 A declining operating ratio is regarded as a positive indicator, as it shows that

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  operating expenses are becoming a smaller percentage of net sales.

Operating
Ratio
Years TVS Hero
2016 93.30 85.49
2017 93.50 84.97
2018 92.70 83.94
2019 92.13 85.35
2020 91.81 86.27

Operating Ratio
96.00
94.00 93.30 93.50
92.70 92.13
92.00 91.81
90.00
88.00
86.00
84.00 86.27
85.49 84.97 85.35
82.00 83.94
80.00
78.00

20162017201820192020

TVSHero

The operating ratio calculation for TVS Motors is 93.3% for the year 2015-2016, 93.5%
for the year 2016-2017, 92.7% for the year 2017-2018, 92.13% for the year 2018- 2019,
91.81% for the year 2019-2020 and for Hero Motors is 85.49% for the year 2015-2016,
84.97% for the year 2016-2017, 83.94% for the year 2017-2018, 85.35% for the year
2018- 2019, 86.27% for the year 2019-2020. It's preferable to have an operating ratio
of 80 or less. A high operating ratio means that the company's costs are high, resulting in
a decrease in earnings. A low operating ratio, on the other hand, is a positive measure for
the business because it demonstrates how well the company keeps costs low when
producing income or sales. The operating ratio of Hero Motors here again is better than
that of TVS Motors in all the 5 years which means Hero Motors is performing well.

4.4.2 TURNOVER RATIOS- The sum of assets or liabilities that a business substitutes in

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relation to its revenue is represented by this ratio.

A. Stock Turnover Ratio: The amount of times inventory is sold or consumed in a given
time span is measured by inventory turnover. For most industries, a healthy inventory
turnover ratio is between 5 and 10, indicating that you sell and restock your inventory
every 1-2 months. This ratio strikes a good balance between keeping enough stock on
hand and not having to reorder too much. Its formula is:

Stock Turnover Ratio=

Cost of goods sold/Average Stock or Inventory

Significance:

 It assesses the soundness of a retailer's inventory procedures.

 It also reveals a lack of inventory preparation and management strategies.
 A retailer can easily improve his profitability by bringing less inventories by
improving Inventory Turnover.
 Inventory Turnover provides a useful comparison and keeps the retailer up to date
with current trends.

Stock turnover
ratio
Years TVS Hero
2016 12.54 28.98
2017 11.91 32.17
2018 11.88 30.38
2019 12.93 24.60
2020 10.96 18.20

The stock turnover ratio calculation for TVS Motors is 12.54 for the year 2015-2016,
11.91 for the year 2016-2017, 11.88 for the year 2017-2018, 12.93 for the year 2018-
2019, 10.96 for the year 2019-2020 and for Hero Motors is 28.98 for the year 2015-
2016, 32.17 for the year 2016-2017, 30.38 for the year 2017-2018, 24.6 for the year
2018- 2019, 18.2 for the year 2019-2020. A stock turnover ratio of 5-10 is regarded as
ideal. The
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 higher a company's inventory turnover ratio is in a given year, the better it is for its
future. Low inventory turnover equates to low revenue, excess inventory (overstocking),
and poor inventory liquidity. By looking at both the companies, Hero Motors is
performing well than TVS Motors in this ratio too in all the 5 years which indicates that
there is considerable demand for Hero products.

Stock turnover ratio

35.00 32.17
30.38
28.98
30.00
24.60
25.00
20.00
18.20
3
15.0012.54 11.91 11.8 8 12.9 10.96
10.00
5.00
-

2016 2017 2018 2019 2020

TVSHero

A. Debtors Turnover Ratio: The Debtors Turnover ratio demonstrates how easily credit
purchases are converted to cash. The higher the ratio, the better, as it indicates that debts
are being recovered quickly. Its formula is:

Debtors Turnover Ratio=

Net Credit Sales/Average Debtors

Significance: This ratio shows how well debtors or revenues are managed. The term
"high debtor turnover ratio" refers to the efficient management of debtor sales and debtor
liquidation, and vice versa. For Debtors Turnover Ratio, there is no rule of thumb or
normal ratio.

Debtors turnover ratio

Year TVS Hero
2016 1.95 0.63

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 2017 2.34 0.60
2018 2.34 0.54
2019 2.04 0.59
2020 2.06 0.55

Debtors Turnover Ratio

2.50 2.34 2.34
2.04 2.06
1.95
2.00

1.50

1.00
0.63 0.60 0.54 0.59 0.55
0.50

-
2016 2017 2018 2019 2020

TVSHero

The debtors turnover ratio calculation for TVS Motors is 1.95 for the year 2015-2016,
2.34 for the year 2016-2017, 2.34 for the year 2017-2018, 2.04 for the year 2018- 2019,
2.06 for the year 2019-2020 and for Hero Motors is 0.63 for the year 2015-2016, 0.60 for
the year 2016-2017, 0.54 for the year 2017-2018, 0.59 for the year 2018- 2019, 0.55 for
the year 2019-2020. A debtor turnover ratio of 6 is considered ideal, meaning that debtors
purchase and pay back 6 times per year on average. The higher a company's debtors
turnover ratio is in a given year, the better it is for the business. By looking at both the
companies, debtors turnover ratio of the TVS Motors is more than that of Hero Motors in
this 5 years which indicates that TVS Motors is more efficient than Hero Motors at
collecting credit from the customers.

B. Working Capital Turnover Ratio: Working capital turnover is a metric that calculates
how effectively a business uses its cash to fund revenue and expansion. A high ratio,
typically over 80%, may mean that a business lacks sufficient capital to sustain its sales
growth. Its formula is:

Working Capital Turnover Ratio= Cost of Goods Sold/Working Capital

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Significance: Working capital is a measure for determining how effectively a business is
run and how financially secure it is in the short term. The working capital ratio, which is
calculated by dividing current assets by current liabilities, determines if a business has
enough cash flow to pay off short-term debts and expenditures.

Working capital turnover

ratio
Years TVS Hero
2016 -20.87 79.80
2017 -14.92 6.36
2018 -9.55 4.99
2019 -15.61 5.85
2020 -9.47 4.57

Working capital turnover ratio

100.00
79.80
80.00

60.00

40.00

20.00 6.36 4.99 5.85 4.57

- (20.00)
2016 2017 2018 2019 2020
(9.55) (9.47)
(14.92) (15.61)
(20.87)
(40.00)

TVSHero

The working capital turnover ratio calculation for TVS Motors is -20.87 for the year
2015- 2016, -14.92 for the year 2016-2017, -9.55 for the year 2017-2018, -15.61 for
the year 2018- 2019, -9.47 for the year 2019-2020 and for Hero Motors is 79.8 for the
year 2015- 2016, 6.36 for the year 2016-2017, 4.99 for the year 2017-2018, 5.85 for the
year 2018- 2019, 4.57 for the year 2019-2020. Greater productivity is shown by a higher
ratio. A ratio in the neighborhood of 2 is considered fine, while a ratio of less than 1 is a
clear predictor of potential liquidity issues. In the chart, working capital turnover ratio of
Hero Motors is more than 1 whereas ratio of TVS Motors is negative in all the 5 years

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 which means that the company's liabilities are high. Clearly, it can be seen that Hero
Motors is performing well than TVS Motors in this ratio as well.

4.4.3 LIQUIDITY RATIOS: The consequence of separating cash and other financial assets
by short-term borrowings and current liabilities yields liquidity ratios. They demonstrate how
many times the cash and liquid assets will offset short-term debt obligations. Liquidity levels
greater than one suggest that the corporation is in good financial shape and is less likely to go
bankrupt.

A. Current Ratio: The current ratio assesses a firm's ability to meet short-term
commitments, such as those due within a year. A healthy current ratio is between 1.2 and
2, indicating that the company has 2 times more current assets than liabilities to offset its
liabilities. Its formula is:

Current Ratio= Current Assets/Current Liabilities

Significance:

 This financial measure aids in determining a company's current financial position.

 A higher ratio usually means more liquidity and stability.
 It also aids in determining a company's ability to handle creditors.
 The financial instrument aids in a better understanding of a company's
working capital requirements.
 This ratio can also be used to determine a company's operating cycle and its
ability to generate sales.

Current Ratio
Year TVS Hero
2016 0.81 1.78
2017 0.77 1.82
2018 0.68 2.04
2019 0.78 1.96
2020 0.72 2.08

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 Current Ratio
2.50
2.04 2.08
1.96
2.00 1.781.82

1.50

1.00 0.81
0.77 0.78 0.72
0.68

0.50

-
2016 2017 2018 2019 2020

TVSHero

The current ratio calculation for TVS Motors is 0.81 for the year 2015-2016, 0.77 for the
year 2016-2017, 0.68 for the year 2017-2018, 0.78 for the year 2018- 2019, 0.72 for the
year 2019-2020 and for Hero Motors is 1.78 for the year 2015-2016, 1.82 for the year
2016- 2017, 2.04 for the year 2017-2018, 1.96 for the year 2018- 2019, 2.08 for the year
2019- 2020. A high current ratio indicates that the company is liquid and capable of
meeting its current obligations on time, when and when they are due. The protection of
short-term creditors' funds is higher. A low current ratio, on the other hand, means that
the firm's liquidity situation is poor. A strong current ratio ranges from 1.2 to 2,
indicating that the company has 2 times more current assets than liabilities to support its
debts. The above chart shows that Hero Motors’ current ratio is around 2 in all the 5
years which is a good sign for the company whereas TVS Motors’ current ratio is below
1.2 which is not a good indicator. Hence, here also Hero Motors is performing well than
TVS Motors in terms of current ratio.

B. Liquid Ratio: A liquidity ratio is a financial ratio that is used to assess a company's
ability to meet its short-term debt obligations. The ideal sound fast ratio is 1:1, and the
construction industry follows this norm. Its formula is:

Liquid Ratio= Liquid Assets/Current Liabilities

Significance: The fast ratio is important to lenders because it indicates the percentage of

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a company's debts that could be paid off rapidly by turning assets into cash. Lenders also
consider this ratio because the more liquid a company's assets are, the better suited it is
to respond to changing market conditions.

Liquid Ratio
Year TVS Hero
2016 0.51 1.59
2017 0.43 1.66
2018 0.43 1.85
2019 0.49 1.71
2020 0.49 1.81

Liquid Ratio
2.00 1.85
1.81
1.80 1.66 1.71
1.60 1.59
1.40
1.20
1.00
0.80
0.60
0.40 0.51 0.49 0.49
0.20 0.43 0.43
-

20162017201820192020

TVSHero

The liquid ratio calculation for TVS Motors is 0.51 for the year 2015-2016, 0.43 for the
year 2016-2017, 0.43 for the year 2017-2018, 0.49 for the year 2018- 2019, 0.49 for
the year 2019-2020 and for Hero Motors is 1.59 for the year 2015-2016, 1.66 for the year
2016- 2017, 1.85 for the year 2017-2018, 1.71 for the year 2018- 2019, 1.81 for the year
2019- 2020. If the real quick ratio is equal to or greater than the normal quick ratio of
1:1, the company is liquid and can pay its immediate liabilities without difficulty.
However, if the quick ratio is lower than the normal ratio, the company is not liquid. A
high current ratio indicates that the company is liquid and capable of meeting its current
obligations on time, when and when they are due. The above chart shows that quick ratio

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 of TVS Motors is less than 1 in all the 5 years which indicates that the liquidity position
of the company is not good. The quick ratio of Hero Motors is more than 1 in all the 5
years which clearly shows that the capacity of the company is reasonably good. Hence,
in this ratio Hero Motors is performing well than TVS Motors.

4.4.4 SOLVENCY RATIOS: A solvency ratio is a measure of a company's financial stability

that determines if its cash flow is adequate to meet its long-term liabilities.

A. Debt-Equity Ratio: The debt-equity ratio is a measure of the creditors' and

shareholders' or owners' respective contributions to the capital employed in a company.
While the ideal debt-to-equity ratio varies by sector, the general consensus is that it does
not exceed 2.0. Although some very large companies in fixed asset-heavy industries may
have ratios greater than 2, others may have ratios lower than 2. Its formula is:

Debt-Equity Ratio= Debt/Equity

Significance:

 The debt-to-equity ratio is a key metric in financial analysis that allows prospective
investors to assess a company's health.
 The debt-to-equity ratio is also useful in determining shareholder earnings. When a
business has a lot of debt, it has to pay a lot of interest, which cuts into earnings. A drop
in earnings means a drop in dividends paid to common shareholders.
 When a small business applies for a loan, lenders and creditors look at the debt to equity
ratio. It indicates the entity's credit worthiness and how consistent they are with
instalment payments.
 It is beneficial for management to explain market rivalry. The debt-to-equity ratio can be
used to compare an entity's results to that of its rivals. This can aid management in
making impromptu decisions in order to achieve the optimal debt/equity ratio.

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 The debt-equity ratio calculation for TVS Motors is 0.252 for the year 2015-2016, 0.195
for the year 2016-2017, 0.1103 for the year 2017-2018, 0.212 for the year 2018- 2019,
0.25003 for the year 2019-2020 and for Hero Motors is nil for all the year 5 years. While
the ideal debt-to-equity ratio varies by sector, the general consensus is that it does not
exceed 2.0. In the chart, it can be seen that the debt-equity ratio of both the companies is

Debt-equity ratio
0.3
0.252 0.25003
0.25
0.212
0.195
0.2

0.15 0.1103

0.1

0.05

0 2016 2017 2018 2019 2020

TVSHero

below 2 in all the 5 years which indicates a good sign. Hero Motors can be seen better
than TVS Motors in term of this ratio as Hero Motors do not have any debt-equity ratio
in any of the 5 years.

B. Fixed Assets Ratio: The Fixed Assets Ratio shows how much fixed assets each unit of
long-term funds is financing. A fixed asset turnover ratio of 2.5 or more is considered
strong in the retail sector, while a business in the utilities sector is more likely to strive
for an asset turnover ratio of 0.25 to 0.5. Its formula is:

Fixed Assets Ratio=

Net Fixed Assets/Shareholders’ Funds+Long-term Liabilities

Significance: The fixed asset turnover ratio measures how well a business generates
revenue from its current fixed assets. A higher ratio indicates that management is

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making better use of its fixed assets. A high FAT ratio says nothing about a company's
ability to produce consistent revenues or cash flows.

Fixed assets ratio

Years TVS Hero
2016 0.55 0.33
2017 0.54 0.36
2018 0.58 0.32
2019 0.49 0.29
2020 0.44 0.32

Fixed assets ratio

0.70
0.60 0.58
0.55 0.54
0.49
0.50 0.44
0.40 0.36
0.33 0.32 0.32
0.29
0.30

0.20
0.10
-

2016 2017 2018 2019 2020

TVSHero

The fixed assets ratio calculation for TVS Motors is 0.55 for the year 2015-2016, 0.54
for the year 2016-2017, 0.58 for the year 2017-2018, 0.29 for the year 2018- 2019, 0.32
for the year 2019-2020 and for Hero Motors is 0.33 for the year 2015-2016, 0.36 for the
year 2016-2017, 0.32 for the year 2017-2018, 0.29 for the year 2018- 2019, 0.32 for the
year 2019-2020. Fixed assets ratio of both the companies are good but as it can be seen
in the chart that ratio of TVS Motors is more that of Hero Motors for all the 5 years
which indicates that the TVS Motors is using its fixed assets to generate sales better than
Hero Motors.

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CHAPTER 5: RESULTS AND DISCUSSIONS

5.1 Major Findings

5.2 Discussions & Suggestions

5.3 Conclusion

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5.1 Major Findings:
 Hero Motors is growing and grooming as a consulting firm in the automobile industry by
looking at their achievements and financial report of the company.
 The Hero Motors Net Profit ratio is higher than ideal norm 80%. It shows good financial
position of company.
 Both the companies, TVS Motors and Hero Motors operating ratio are above 80%. This
means both the companies will have to make effort to reduce operating cost.
 A stock turnover ratio of 5-10 is regarded as ideal ratio and both TVS Motors and Hero
Motors is above this range which means the higher a company's inventory turnover ratio
is in a given year, the better it is for its future.
 A debtor turnover ratio of 6 is regarded as ideal ratio. But in this both the companies i.e.
TVS Motors and Hero Motors are having ratios below 6.
 The TVS Motors working capital turnover ratio is lower than ideal Ratio 2 which is a
clear predictor of potential liquidity issues.
 The Hero Motors Current ratio is higher than ideal ratio which shows that the company
more current assets than liabilities to offset its liabilities. But all the current ratio of TVS
Motors is below ideal ratio, so the organisation should put its full effort into reducing
current liabilities in order to keep liquid capital at an optimal pace.
 A liquid ratio of 1:1 is regarded as ideal ratio. The ratio of Hero Motors in all the years is
more than 1 which shows the company is liquid and can pay its immediate liabilities
without difficulty.
 A debt-equity ratio of 2 is regarded as ideal ratio and both the companies i.e. TVS
Motors and Hero Motors are having ratios less than 2 which indicates the good sign for
both the companies.
 A fixed asset turnover ratio of 2.5 or more is considered strong and TVS Motors are
having ratios more than 2.5 which means they are generating more cash flow by selling
assets.

5.2 Discussion and suggestions:

 It is suggested to Hero Motors to continue the same with respect to the net profit ratio,
current ratio, liquid ratio, working capital turnover ratio as these are higher ideal norm
which is beneficial for the company.

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  It is suggested to TVS Motors to continue the same with respect to the fixed assets
turnover ratio as this ratio is higher ideal norm which is beneficial for the company.
 It is suggested to both TVS Motors and Hero Motors to continue the same with respect
to the stock turnover ratio, debt-equity ratio as these are satisfying ideal norm which is
beneficial for both the companies.
 It is suggested to Hero Motors to make sincere attempts to improve its fixed assets ratio
by selling more.
 It is suggested to TVS Motors to make sincere attempts to improve its net profit ratio,
current ratio, liquid ratio, working capital turnover ratio by improving sales and reducing
liabilities by paying off debts.
 It is suggested to both Hero Motors and TVS Motors to make sincere attempts to reduce
operating profit and improve debtors turnover ratio by making more profits by way of
sales and by collecting more from debtors.

5.3 Conclusion:
The study was conducted on the comparative study of financial performance of TVS Motors and
Hero Motors for the period of 5 years. From the study it is determine that Hero Motors company
financial performance was seeing to be sound than the TVS Motors company, because the
company tries to increase its production and also net profit. So, the investors can make decision
to invest in Hero Motors Company.

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 REFERENCES

Websites:-

https://www.heromotocorp.com/en-in/

https://en.wikipedia.org/wiki/Hero_MotoCorp https://www.tvsmotor.com/

https://ajmjournal.com/HTMLPaper.aspx?Journal

https://www.bartleby.com/essay/Literature-Review-Of-Financial-Statement-PJ5X4ZQ9N6

Others: Books and Magazines: -

Management Accounting by Dr. S.P. Gupta and Dr. K.L. Gupta, Sahitya Bhawan Publications

37 | P a g e
 ANNEXURE

Balance Sheet of TVS Motors for the year 2016-17:

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Statement of Profit and Loss of TVS Motors for the year 2016-17:

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Balance Sheet of TVS Motors for the year 2017-18:

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Statement of Profit and Loss of TVS Motors for the year 2017-18:

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Balance Sheet of TVS Motors for the year 2018-19:

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Statement of Profit and Loss of TVS Motors for the year 2018-19:

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Balance Sheet of TVS Motors for the year 2019-20:

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Statement of Profit and Loss of TVS Motors for the year 2019-20:

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Balance Sheet of Hero Motors for the year 2016-17:

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Statement of Profit and Loss of Hero Motors for the year 2016-17:

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Balance Sheet of Hero Motors for the year 2017-18:

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Statement of Profit and Loss of Hero Motors for the year 2017-18:

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Balance Sheet of Hero Motors for the year 2018-19:

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Statement of Profit and Loss of Hero Motors for the year 2018-19:

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Balance Sheet of Hero Motors for the year 2019-20:

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Statement of Profit and Loss of Hero Motors for the year 2019-20:

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