frcc- final draft , ratio analysis
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Ratio AnalysisPresented by:-VaishaliRochan VijayakumarBenny SolomonAshish Sharma
Uday Kiran
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History
Started in 1945 in
Mumbai, India. Original production
was on locomotives.
1954
First car rolled off ofthe assembly line.
Tatas are a family ofIndian industrialists
and philanthropists.
Tata Motors is Indias
owns the largestindependent companyin India.
Mercedes and Tata
teamed up to create atruck line.
- First majorbusiness deal withanother firm.
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Together bothcompanies started theircommercial vehicleoperations in 1960.
In 1986 the company
created and sold thefirst LCV
LCV = light commercialvehicle
Was the Tata 407
Tata Motors decided topursue joint ventures.
Cummins Engine Co.,Inc., was the firstcompany to jointlyventure with Tata in1993.
TATA began creatingnew product lines in
the late 1990s andearly 2000s.
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Corporate SocialResponsibility
A Company that cares about the future
TATA signed the United Nations GlobalCompact
TATA plays a significant role in community
development
TATA deals with Environmentally-friendlyproducts and technology
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Tata Motors today said its global sales
increased 21 per cent in July to 1,01,605 unitsover the same period last year.
Sales of luxury brands from Jaguar LandRover were at 26,921 units in July, up 41 per
cent from the same month last year. Sales of luxury sedans of Jaguar brand stood
last month at 4,064 units.
Growth and Expansion
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sales were at 22,857 units, Tata Motorssaid in a statement.
The company said total passengervehicles sales stood at 53,829 units inJuly, 2012, a jump of 45 per cent fromthe same month last year.
Commercial vehicle sales were up by 1per cent to 47,776 units from the samemonth last year
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Brand: Tata Ford GM
Sales: $7.6 billion $172 billion $181 billion
No of employees 33,900 246,000 266,000
Profit Margin 20% 17% 6.7%
Comparatively Speaking
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Current
RatioCurrent Ratio : It is the relationshipbetween the current assetsand current liabilities .
Current Ratio = CurrentAssets Current LiabilitiesIt is the most important and
widely used test of liquidity of a
business.
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Years 2012 2011 2010
Total Current Assets
56,935.30 40,881.17 42,445.64
in Rs.Cr.
Years 2012 2011 2010
Total Current Liabilities
73,268.07 55,125.62 41,720.83
Year 2012 2011 2010
Current ratio 0.77708202 0.741600185 1.01737286
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Current ratios
Current Ratio = CurrentAssets Current
LiabilitiesThe higher the
current ratio thebetter the liquidity/
short term solvency.
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Acid Test
Ratio/Quick RatioIt is the ratio between Quick CurrentAssets and Current Liabilities. Ideally,quick ratio should be 1:1
Acid Test/Quick Ratio = Quick CurrentAssets Current Liabilities
Quick Current Assets : Cash/Bank Balances+ Receivables up to 6 months + Quicklyrealizable securities like Govt. Securities andBank Fixed Deposits .
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years 2012 2011 2010
Acid testratio
0.3613439 0.325352350.38193152
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Acid test ratio
Year 2012 2011 2010
SundryDebtors 8,236.84 6,525.65 7,191.18
Year 2012 2011 2010
Cash andBank 18,238.13 11,409.60 8,743.32Year 2012 2011 2010
Total CurrentLiabilities 73,268.07 55,125.62 41,720.83
in Rs.Cr.
Acid Test/Quick Ratio =Quick Current Assets Current Liabilities
This is the mostrigorous andconservative testof a firm's
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Debt Equity
RatioIt is the relationship between borrowers
fund (Debt) and Owners Capital
(Equity).
Debt Equity Ratio = Long Term Debt Shareholders Equity
ORDebt Equity Ratio = Total Debt
Shareholders Equity
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debt equity ratio
years 2012 2011 2010
debt equity
ratio 0.843515510.900087474 4.27812655
Year 2012 2011 2010
Total Debt27,962.48 17,256.00 35,108.36
Year 2012 2011 2010
Total ShareholdersFunds 33,149.93 19171.47 8206.48
in Rs.
Cr.
Debt Equity Ratio =Total Debt
Shareholders
EquityA high debt equityratio has a seriousimplication from thefirms point of view.
High proportion of
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Inventory
Turnover Ratio
This ratio indicates the number of timesthe inventory is rotated during therelevant accounting period
Inventory turnover ratio = Cost ofgoods sold average inventory
Average Inventory = (Opening
Stock + Closing Stock) 2In days = 365days Inventory turnover ratio
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Inventory turnover ratio
Years 2012 2011 2010
Inventory turnover
ratio 9.0746971 8.43376904 7.64595019
Year 2012 2011 2010
COGS 1,46,495.24 1,07,035.24 85,109.48
Year 2012 2011 2010
averageinventory 16,143.27 12,691.27 11,131.32
in Rs.
Cr.
Inventory turnover =Cost of goods sold
ratio
average inventoryThis ratio indicates howfast inventory is sold. Ahigh ratio is good, as itshows liquidity and low
ratio shows that
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Debtor Turnover
RatioDebtors Turn Over ratio = Net CreditSales Average debtors
Net credit sales = (Gross creditsales) (Sales returns)
Average Debtors = (Opening
Debtors + Closing Debtors) 2(including bills
receivable)
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debtor turnover ratio
Years 2012 2011 2010
debtor turnover
ratio 22.4426218 17.8070180915.4378343
Year 2012 2011 2010
sales 1,65,654.49 1,22,127.92 92,519.25
Year 2012 2011 2010
averagedebtors 7,381.25 6,858.42 5,993.02
in Rs.
Cr.
Debtors Turn Over ratio= Net CreditSales Average
debtorsA high ratio showsshort time lagbetween credit salesand cash collection
and a Low ratio
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TOTAL ASSET TURNOVERRATIO
Total Assets Turnover Ratio = Cost of Goodssold
Avg. totalAssets
COGS= Sales-Gross profitParticulars 2012 2011 2010
Total fixedcharge ratio 3.98 3.21 3.04
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0
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12 total asset turnover ratio
As the Total Assets turnover is high, it implies that the investmentmade on asset has yielded the firm with high returns when comparedto the previous year i.e., it has utilized the assets effectively. So it isfavorable to the investors to invest when this ratio is taken intoaccount.
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FIXED ASSET TURNOVERRATIOS
Fixed Assets Turnover Ratio =Cost of Goods sold/ Avg. FixedAssets
Particulars 2012 2011 2010
Fixed assetturnover ratio
2.34 2.08 1.72
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Fixed asset turnover ratio
The Ratio is high when compared to the previous year which implies that the firm isutilizing the fixed assets effectively to obtain best returns which is beneficial to the firmas well as to the investors.
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CREDITORS TURNOVERRATIO
CTR=Net credit purchases / Average creditors.
Net credit purchases = (Gross credit purchases) (Purchasereturn).Avg creditors = (Opening Crs + Closing Crs) / 2.
(including bills payable)
- A business organisation has to pay creditors if it buys goodson credit. Any new creditor will give us the goods on credit ifhe knows that we pay our creditors' bill within short period oftime. So, for knowing this time period, both parties calculatecreditor turnover ratio.
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DIVIDEND PAYOUT RATIO
Dividend payout ratio = Dividend per equity
share/Earnings pershareParticular 2012 2011 2010
Dividend
payout ratio
11.01 15.97 38.96
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Dividend payout ratio
Dividend payout ratio measures the proportion of dividends paid to earning available to
shareholders. The dividend payout ratio is an important and widely used ratio. Thepayout ratio can be compared with the trend over the years or an inter firm and intra industrycomparison would throw light on its adequacy. Here in the graph it tells us that the companys
ratio is declining which discourages the investors to invest in the company as only lessdividend is being paid to them
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Net Profit Ratio
NPR= (Net Profit/ Net sales)*100
NP ratio is used to measure the overallprofitability and hence it is very useful to
proprietors. The ratio is very useful as if the netprofit is not sufficient, the firm shall not be ableto achieve a satisfactory return on itsinvestment.
PROFITABILITY RATIOS
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2012 2011 2010Net ProfitRatio
8.19410932
7.550108116 2.72039603
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12 NPR
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Gross profit Ratio
GPR= (Gross Profit/ Sales)*100
Gross profit ratio may be indicated to whatextent the selling prices of goods per unit may
be reduced without incurring losses onoperations. It reflects efficiency with which afirm produces its products. As the gross profit isfound by deducting cost of goods sold from netsales, higher the gross profit better it is.
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2012 2011 2010
GPR 11.5657897 12.35809142 8.00889545
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12GPR
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Operating profit Margin
Operating profit= Operating income/Net sales
Operating margin is a measurement of whatproportion of a company's revenue is left overafter paying for variable costs of productionsuch as wages, raw materials, etc. A healthyoperating margin is required for a company tobe able to pay for its fixed costs, such asinterest on debt.
If a company's margin is increasing, it is
earning more per dollar of sales. The higher the
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2012 2011 2010
OPM 13.3660549 14.3111829 10.6735517
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OPM
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Interest Coverage ratio
ICR = EBIT / Interest expense
A ratio used to determine how easily acompany can pay interest on outstandingdebt.
The lower the ratio, the more the company isburdened by debt expense. When acompany's interest coverage ratio is 1.5 orlower, its ability to meet interest expenses
may be questionable.
Coverage Ratios
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2012 2011 2010
ICR7.42449249 7.3274514 4.00560171
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ICR
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Fixed charge coverage ratios
Fixed charge coverage ratio = EBIT + Fixed
ChargeFixed
charge+ Interest
A ratio that indicates a firm's ability to satisfy fixedfinancing expenses, such as interest and leases.
For example, since leases are a fixed charge, thecalculation determining a company's ability leaseswould be (EBIT + Lease Expenses) / (Lease Expenses +Interest).
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2012 2011 2010
FCCR 7.42449249 7.32745144.00560171
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12FCCR
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Debt service coverage ratio
DSCR = Net operating Income
Total Debt service
In corporate finance, it is the amount of cash flowavailable to meet annual interest and principalpayments on debt, including sinking fund payments.
A DSCR of less than 1 would mean a negative cashflow. A DSCR of less than 1, say .95, would mean thatthere is only enough net operating income to cover 95%of annual debt payments.
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2012 2011 2010
DSCR
7.437918736.81749655
2 3.5976425
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DSCR
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Analysis of share prices
Live BSE QuotesAug 29, 2012
2:53:00 PM
Price
(Rs)
247.15
Open (Rs)
242.50
High (Rs)
248.00
Low
(Rs)
241.35%
Change
0.80
Volume
806,880
Value (Rs)
199,420,392
52-
Week
H/L
320.60
/137.65Valuation
EPS (Rs)*
6.63
P/E Ratio (x)
37.28
Market Cap (Rs m)
669,215.47
P/BV (x)
2.02
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Analysis
1) Tata Motor's luxury Jaguar Land Rover (JLR)models disappointed on the margins frontin the March quarter. Margins in the fiscalfourth quarter grew at 14.6 per cent againstexpectations of 18.2 per cent growth.
2) Margins were hit on account ofhigher staffcosts post fresh hiring. Higher ad-spendand incentives also led to the fall .Weak EBITmargins were driven by higher other expenses.
3) One-off tax credit of Rs. 1,826 crore inQ4 contributed to Tata's 139 per cent quarterlyprofit leap.
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4)Core domestic business performancewas lacklustre. Domestic car market grewjust 2.2 % in the last financial year. High
interest rates and slowing economic growthhave dampened demand in Asia's third-largest
economy.
5) frontloading of purchases ahead of theunveiling of the federal budget for the 2012/13that, as widely expected, raised excise duties
for vehicles.
6) Brokerages downgraded the stock orcut their target price post earnings.
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Market capitalization (or market cap) is
the total value of the tradable shares ofa publicly traded company.
In the case of TATA Motors market cap as onAugust 23, 2012 is
Market capitalization
Rs Cr $ Billion
Tata Motors 77,820 14.08
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Tata Motors being part of the Tataconglomerate has its philosophy deeply linkedto the core philosophy of the Tata group.It has fair, ethical and transparentgovernance practices along with highest
standards of professionalism, honesty,integrity and ethical behaviour. Thecompany gives maximum importance to the3
value creation and sustainability of all the
other stakeholders viz. customers, creditors,employees, vendors, community and theGovernment. Tata Motors have implementedthe Tata Business Excellence model whichis a part of Tatacode of conduct applicable to all subsidiar
Corporate Governance
Future outlook of the
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The overall Tata Motors Group sales crossed the1 million mark in 2010-11, higher by 24.2%
compared to the previous year.
Nano sales increased to 70,431 vehicles, agrowth of 129% from 30,763 vehicles in theprevious year. But the company stillconcentrated Nano to increase its sale as it was
when launched. The company also plans to launch a diesel
version of Nano in future.
The concept car of TATA is PIXEL. It has thefeature of Tablet activated key less entry, touch
screen information selection, voice activatedmedia functions, zero turn and space efficientparking.
The volume growth, market sales, vehicle saleskeeps increasing for Tata motor Ltd.
R&D expenditure and as a % net turn over
Future outlook of thecompany
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The automobile industry in India the tenth largest inthe world with an annual production of approximately2 million units is expected to become one of themajor global automotive industries in the
coming years. The global automobile industryproduction in 2010, registering a growth of about 22%and 38% respectively over the previous year.
The Tata motors ltd. recorded sale growth of 22.8%over the previous year in the Indian domestic market
representing a 24.3% market share in the Indianindustry. It exported 58,089 vehicles from India, agrowth of 70.3% over the previous year.
Tata Motors is has done of a very good job in the pastfive years of strengthening its position in the market.It appears to have an excellent opportunity for future.
The company must focus on combining its unique
Conclusion
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