ASSIGNMENT ON RATIO COMPARISON OF TATA MOTORS FOR 2007 AND 2008.

Submitted to: Submitted By K.L. Chawla Kamal Kant Soni @ PG-08-36 Head, Department of Finance Esha Raj @ PG-08-29 INMANTEC Chitrangda Jaiswal @ PG-08-27

INCOME STATEMENT OF TATA MOTORS (currency in million Rs.) (2007) (2008) Revenues 323,612.0 356,514.8 Other Revenues 19.6 65.0 TOTAL REVENUES 325,143.8 358,086.0 Cost of Goods Sold 234,753.6 254,571.5 GROSS PROFIT 90,390.2 103,514.5 Selling General & Admin Expenses, Total 30,811.0 35,136.3 R&D Expenses 850.2 659.5 Depreciation & Amortization, Total 6,880.9 7,820.7 Other Operating Expenses 17,508.5 24,046.6 OTHER OPERATING EXPENSES, TOTAL 56,050.6 67,663.1 OPERATING INCOME 34,339.6 35,851.4 Interest Expense -4,650.6 -9,127.2 Interest and Investment Income 592.5 1,696.6 NET INTEREST EXPENSE -4,058.1 -7,430.6 Income (Loss) on Equity Investments 394.2 652.0 Currency Exchange Gains (Loss) 652.1 1,376.1 Other Non-Operating Income (Expenses) -1.4 -0.6 EBT, EXCLUDING UNUSUAL ITEMS 31,326.4 30,448.3 Gain (Loss) on Sale of Assets -- 1,103.6 Other Unusual Items, Total -52.2 -37.0 EBT, INCLUDING UNUSUAL ITEMS 31,274.2 31,514.9 Income Tax Expense 8,832.1 8,515.4 Minority Interest in Earnings -742.2 -1,322.5 Earnings from Continuing Operations 21,699.9 21,677.0 NET INCOME 21,699.9 21,677.0

BALANCE SHEET OF TATA MOTORS

(2007) (2008) Assets (currency in millions Rs.)

Cash and Equivalents 11,542.7 38,331.7 TOTAL CASH AND SHORT TERM INVESTMENTS 11,542.7 38,331.7 Accounts Receivable 17,022.2 20,605.1 Notes Receivable 84,553. 76,938.9 Other Receivables 62.7 11.9 TOTAL RECEIVABLES 101,638.5 97,555.9 Inventory 31,669.0 32,946.4 Prepaid Expenses 1,247.3 3,334.8 Other Current Assets 16,681.7 20,504.7 TOTAL CURRENT ASSETS 162,779.2 192,673.5 Gross Property Plant and Equipment 129,408.3 182,484.4 Accumulated Depreciation - -54,266.5 -57,652.4 NET PROPERTY PLANT AND EQUIPMENT 75,141.8 124,832.0 Goodwill 4,430.1 5,661.6 Long-Term Investments 11,745.9 26,658.3 Deferred Charges, Long Term 119.3 2,442.1 Other Intangibles -- 1,429.6 Other Long-Term Assets - --TOTAL ASSETS 254,216.3 353,697.1 LIABILITIES & EQUITY Accounts Payable 48,723.3 67,832.8 Accrued Expenses 4,704.9 5,389.3 Short-Term Borrowings 34,325. 52,503.2 Current Income Taxes Payable 1,084.2 901.4 Other Current Liabilities, Total 38,789.2 62,104.1 Unearned Revenue, Current 6.7 218.0 TOTAL CURRENT LIABILITIES 127,633.7 188,948.8 Long-Term Debt 38,693.6 63,345.5 Capital Leases -- -- Minority Interest 2,499.6 4,683.1 Deferred Tax Liability Non-Current 8,172.7 9,744.5 TOTAL LIABILITIES 176,999.6 266,721.9 Common Stock 3,853.6 3,854.9 Additional Paid in Capital 19,364.0 15,372.2 Retained Earnings 44,087.8 58,523.7 Comprehensive Income and Other 9,911.3 9,224.4 TOTAL COMMON EQUITY 77,216.7 86,975.2 TOTAL LIABILITIES AND EQUITY 254,216.3 353,697.1

Liquidity ratio Current ratio = Current assets / Current liability 2008 2007 Current Assets 192,673.5 162,779.2 Current Liability 188,948.8 127,633.7 Current Ratio (2008) 192,673.5/ 188,948.8 = 1.01 Current Ratio (2007) 162,779.2/ 127,633.7 = 1.27 Quick Ratio (2008) C.A. - Invent. / C.L. 192,673.5 - 32,946.4 / 188,948.8 = .85 Quick Ratio (2007) 162,779.2- 31,669.0/127,633.7 = 1.02 Interval measure - Current assets-inven. / avg. daily cash oper. Exp For 2008- Avg. daily cash oper. Exp - Total cash exp./ 365 67,663.1/ 365 = 185.3 Interval measure - 192,673.5 - 32,946.4 / 185.3 = 862 days For 2007 Avg. daily cash oper. Exp - 56,050.6/ 365 = 153.5 Interval measure - 162,779.2- 31,669.0 / 153.5 = 854 days In liquidity ratio, we observe that current ratio in 2008 is less in comparison of 2007. it means companies efficiency decreases in paying current liability. And in quick ratio, it also decreases. In 2008, regular cash meet was 862 days in comparison of 854 of 2007. It means firms ability to pay its daily exp. Increases.

Leverage Ratio Total debt ratio – Total debt / capital employed For 2008 Total debt - 63,345.5 Capital employed - Net worth + borrowing Or Share capital + debt. 86,975.2+ 63,345.5= 150320.7 63,345.5 / 150320.7 = .42 For 2007 Total debt - 38,693.6 Capital employed - 77,216.7 + 38,693.6= 115910.3 (shr. cap) (debt) 38,693.6 / 115910.3 = .33 Debt equity ratio - Net worth / total debt Net worth = share cap. For 2008 86,975.2/63,345.5 = 1.37 For 2007 77,216.7 /38,693.6 = 1.99 Capital equity ratio - Capital employed / net worth For 2008 150320.7 / 86,975.2= 1.73 For 2007 115910.3 / 77,216.7 = 1.50 Interest coverage ratio – EBIT + depreciation / Interest

2008 2007 Earning before tax 30,448.3 31,326.4 Add- Interest 9,127.2 4,650.6 39575.5 35977 For 2008 - 39575.5 + 7,820.7/9,127.2 = 5.19 For 2007 - 35977 + 6,880.9 / 4,650.6= 9.21 In 2008, the long term financial position getting strong than 2008. Capability of paying long term debt. is increases. As we seen, debt ratio increases. And the contribution of debt is increases in 2008 than 2007. and the part of share capital is also increases in total capital employed than 2007. it means, company is increasing its capital through shares.

Activity Ratio Inventory Turnover Ratio:- Cost of goods sold / Inventory

(2008) (2007) Cost of goods sold 254,571.5 234,753.6 Inventory 32,946.4 31,669.0 For 2008:- 254,571.5 / 32,946.4 = 7.72 For 2007 :- 234,753.6 / 31,669.0 = 7.41 Debtor Turnover Ratio :- Sales / debtor For 2008 :- 358,086.0 (sales) / 97,555.9 (debtor) = 3.67 For 2007 :- 325,143.8 (sales) / 101,638.5 (debtor) = 3.20 Average collection period (2008) = 360 / 3.67 = 98 days Average collection period (2007) = 360 / 3.20 = 112 days Assets Turnover Ratio :- Sales / Net assets or capital employed For 2008 :- 358,086.0 (sales) / 150320.7 (c.e.) = 2.38 For 2007 :- 325,143.8 (sales) / 115910.3 (c.e.) = 2.80 Working Capital Turnover Ratio:- Sales / Net working capital Net Working Capital = Current assets – Current liability For 2008 = 192,673.5 - 188,948.8 = 3724.7 For 2007 = 162,779.2 - 127,633.7 = 35145.5 For 2008 :- 358,086.0 (sales) / 3724.7 (N.W.C.) = 96.13 For 2007 :- 325,143.8 (sales) / 35145.5 (N.W.C) = 9.25 As we seen, company’s efficiency of using its assets is increasing in 2008 than 2007. The inventory turnover ratio which shows its efficiency of selling product is increasing. Average collection period is decreasing means company is selling its product more on cash basis in 2008 than 2007. but company’s assets turnover ratio is decreasing means sales is not growing according to its capital employed and working capital.

Profitability Ratio Gross Margin = Gross profit / Sales Gross Margin (2008) = 103,514.5 / 358,086.0 = .29 Gross Margin (2007) = 90,390.2 / 325,143.8 = .28 EBIT Ratio = PAT / EBIT For 2008 = 21,677.0 / 37878.9 = .57 For 2007 = 21,699.9 / 35384.5 = .61 Return on investment = EBIT / Capital employed For 2008 = 39575.5 / 150320.7 = .26 For 2007 = 35977 / 115910.3 = .31 Return on equity = PAT / Net worth For 2008 = 21,677.0 / 86,975.2 = .25 For 2007 = 21,699.9 / 77,216.7 = .28 In profitability ratio, the gross profit ratio is increasing in 2008 than 2007. it means its profit is growing in sales. But company’s EBIT ratio is decreasing means interest on capital and tax rate is increased in 2008 than 2007 which is responsible in decreasing its PAT. And company’s return on investment is decreased that indicates that its earning on capital employed is decreased in 2008 than 2007. and its ROE is also decreases means its PAT on its share capital is decreased.