FIN701 Finance and Accounting: Action Learning Project Group-14

FIN701 Finance and Accounting
Action Learning Project Group-14
Financial Analysis of Tata Motors
GROUP-14
TATA Motors- Introduction
Tata Motors Group (Tata Motors) is a $37 billion organisation. It is a leading global
automobile manufacturing company. Its diverse portfolio includes an extensive range of
cars, sports utility vehicles, trucks, buses and defence vehicles. Tata Motors is one of India's
largest OEMs, offering a comprehensive range of integrated, intelligent and e-mobility
solutions.
MISSION
We innovate mobility solutions with passion to enhance the quality of life
VISION
•By FY 2024, we will become the most aspirational Indian auto brand,
consistently winning, by
• Delivering superior financial returns
• Driving sustainable mobility solutions
• Exceeding customer expectations, and
• Creating a highly engaged work force
Financial Analysis - Introduction
The financial analysis focuses on key figures in the financial statements and the
significant relationship between them. The study of financial statements is a process
of evaluating the relationship between parts of financial statements to obtain a
better understanding of the firm’s position and performance
Tata Motors – Liquidity Ratios
Current Ratio
The Current Ratio measures the number of current assets to
current liabilities.
Generally, the ratio of 1 is considered ideal for depicting that
the company has sufficient current assets to repay its
current liabilities.
Current Ratio = Current Assets / Current Liabilities
Particulars As of 31.03.2022 As of 31.03.2021
Current Assets 15619.61 15854.59
Current Liabilities 26992.81 26251.55
Current Ratio 0.57 0.60
The current ratio is in the range of 0.5 to 0.6 on account of large borrowings
(912.99 million in FY22 compared to 542.19 million in FY21 for investing in the EV
segment).
Tata Motors – Liquidity Ratios
Quick Ratio
The Quick ratio helps analyse the company’s instant paying

ability of its current obligations.
Quick Ratio Formula = (Current Assets – Inventory)/Current
Liabilities.
Current Assets 15619.61 15854.59
Current Liabilities 26992.81 26251.55
Inventory 3718.49 4551.71
Current Ratio 0.44 0.43
Even after large borrowings (912.99 million in FY22 compared to 542.19 million in
FY21 for investing in the EV segment), the quick ratio is maintained almost similar as
of last financial year
Tata Motors – Profitability Ratios
Profitability ratios analyse the earning ability of the company. It also helps in

understanding the company’s operating efficiency the business
Operating Profitability Ratio
Measures the Operating efficiency of the company;
Operating Profit Ratio Formula = Earnings Before

Interest & Tax/Sales
Operating Profit (1640.05) (2274.72)
Net Sales 1033994 837783
Operating Profit Overall loss Overall loss
Ratio
Jaguar Land Rover volumes were reduced by 16% in FY22 because of supply chain
issues. In contrast, volumes of CV and PV businesses grew by 37% and 67% against
the backdrop of the recovery of CV industry volumes and strong demand for
products.
The loss in FY22 is, however, reduced as compared to FY21. Supply chain issues
reduced Jaguar Land Rover volumes by 16% in FY22
Tata Motors – Profitability Ratios
Profitability ratios analyse the earning ability of the company. It also helps in

understanding the company’s operating efficiency the business
Receivable Turnover Ratios
Receivable Turnover Ratios help measure a company’s

effectiveness in collecting its receivables or debts.
Receivable Turnover Ratio Formula = Credit

Sales/Average Receivables.
Credit sales 47923.59 30595.02
Average Receivables 2111.78 2087.51
Receivable Turnover 22.69 14.66
Ratio
• A higher ratio means a company is selling goods quickly and managing its
inventory level effectively
• The ratio has increased in FY22 as compared to FY21

Tata Motors – Solvency Ratios
Solvency ratios measure the extent of the number of assets owned

by the company to cover its future obligations.
Debt Equity Ratio
The Debt to Equity Ratio measures the amount of equity available

with the company to pay off its debt obligations. A higher ratio
represents the company’s unwillingness to pay off its obligations.
Therefore it is better to maintain the right debt-equity ratio to
manage the company’s solvency.
Debt Equity Ratio Formula = Total Debt/Total Equity
Debt 14102.74 16326.77
Equity 11733.44 19153.47
Debt Equity Ratio 1.21 0.85
• A higher ratio means higher leverage

• The ratio has increased in FY22 as compared to FY21
Tata Motors – Solvency Ratios
Solvency ratios measure the extent of the number of assets owned

by the company to cover its future obligations.
Financial Leverage
Financial leverage measures the number of assets available to equity holders

of the company. The higher the ratio, the higher the financial risk in terms of
debt position to finance the company’s assets.
Financial Leverage Formula = Total Assets/Equity

Total Asset 63899.87 65059.66
Equity 11733.44 19153.47
Financial Leverage 5.45 3.40
• Higher ratio implies that the company is highly leveraged and could face difficulty
paying off its debt
• The ratio has increased in FY22 as compared to FY21 due to large borrowings for
investment in the EV sector and reduced sales of Jaguar
Tata Motors – Cash Flow Statement
• The cash flow statement (CFS), is a financial statement that

summarizes the movement of cash and cash equivalents (CCE) that
come in and go out of a company.
• The CFS measures how well a company manages its cash position,
meaning how well the company generates cash to pay its debt
obligations and fund its operating expenses.
• As one of the three main financial statements, the CFS
complements the balance sheet and the income statement.
Tata Motors – Cash Flow Statement
References
 Largest Automobile Manufacturer, Biggest Automobile Company in India (tatamotors.com)

 annual-report-2021-22 (1).pdf
 ijsrp-p40134.pdf
 Cash Flow Statement: What It Is and Examples (investopedia.com)
FIN701 Finance and Accounting
ACTION LEARNING PROJECT ALP – GROUP 14
GUIDE – Prof. Sabam Hutajulu
Action Learning Project (Group – 14)

FIN701 Finance and Accounting: Action Learning Project Group-14

Uploaded by

Copyright:

Available Formats

FIN701 Finance and Accounting: Action Learning Project Group-14

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

FIN701 Finance and Accounting: Action Learning Project Group-14

Uploaded by

Copyright:

Available Formats

FIN701 Finance and Accounting

Action Learning Project Group-14

Financial Analysis of Tata Motors

The Quick ratio helps analyse the company’s instant paying

Profitability ratios analyse the earning ability of the company. It also helps in

Operating Profitability Ratio

Measures the Operating efficiency of the company;

Operating Profit Ratio Formula = Earnings Before

Profitability ratios analyse the earning ability of the company. It also helps in

Receivable Turnover Ratios

Receivable Turnover Ratios help measure a company’s

Receivable Turnover Ratio Formula = Credit

• The ratio has increased in FY22 as compared to FY21

Solvency ratios measure the extent of the number of assets owned

Debt Equity Ratio

The Debt to Equity Ratio measures the amount of equity available

• A higher ratio means higher leverage

Solvency ratios measure the extent of the number of assets owned

Financial leverage measures the number of assets available to equity holders

Particulars As of 31.03.2022 As of 31.03.2021

• The cash flow statement (CFS), is a financial statement that

 Largest Automobile Manufacturer, Biggest Automobile Company in India (tatamotors.com)

Action Learning Project (Group – 14)

You might also like