FINANCIAL ANALYSIS

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FINANCIAL ANALYSISOF TATA MOTORS BY: ADITYAMBA-3B53 : 

TATA MOTORS FINANCIAL ANALYSISOF TATA MOTORS BY: ADITYAMBA-3B53

SCOPE OF THE STUDY : 

SCOPE OF THE STUDY To study Financial Analysis of TATA(SPEED) MOTORS CHANDIGARH. The study that I concluded is Financial Analysis of TATA(SPEED)MOTORS Limited is limited to analysis of Secondary data only

OBJECTIVE OF THE STUDY : 

OBJECTIVE OF THE STUDY To make Comparative Analysis of the financial position I have made my all endeavors to find out the factors affecting the financial health of the company.

LIMITATIONS OF THE STUDY : 

LIMITATIONS OF THE STUDY Limitation that was faced by me was that the major portion of my collected data was from the secondary sources . LIMITATION OF THE RATIO ANALYSIS Limited use of a single ratio Lack of Adequate standards Window dressing Price level changes

TECHNIQUE USED : 

TECHNIQUE USED Although the ‘Ratio Analysis’ has so many limitations but this is best techniques, which is used internationally, used for measuring the strength and weaknesses of the company.

ANALYSIS : 

ANALYSIS

Meaning : 

Meaning The term “Financial Analysis” also known as analysis and interpretation of financial statements refer to the process of determining financial strength and weaknesses of the firm by establishing strategic relationship between the items of the balance sheet, profit and loss account and other operative data.

Objectives : 

Objectives To diagnose the information contained in financial statements so as to judge the profitability and financial soundness of the firm . Financial statements analysis is an attempt to determine the significance and meaning of the financial statement data so that forecast may be made of the future earnings, ability to pay interest and debt maturities (both current and the long term) and profitability of a sound dividend policy

Procedure of financial statement analysis. : 

Procedure of financial statement analysis. Selection Classification Interpretation.

CALCULATION OF RATIOS : 

CALCULATION OF RATIOS

Meaning of RATIOS : 

Meaning of RATIOS A ratio is a simple arithmetical expression of the relationship of one number to another. It may be defined as the indicated quotient of two mathematical expressions or as a simple fraction, integer, decimal fraction & percentage.

CURRENT RATIOS : 

CURRENT RATIOS The current ratio is calculated by dividing current assets by liabilities with the help of following formula: Current ratio = Current Assets Current Liabilities This ratio is an indicator of the firm’s commitment to meet its short-term liabilities. YEAR RATIO 2005-06 1.22 2006-07 1.41 2007-08 1.37 2008-09 2.58

Slide 14: 

2005-06 2006-2007 2007-2008 2008-09 YEARS

DEBTORS TURNOVER RATIO:- : 

DEBTORS TURNOVER RATIO:- The liquidity position to the firm depends upon the quality of debtors to a great extent. Debtors Turnover Ratio = Credit Sales Average debtors Account Receivable = Sundry Debtors + Bills Receivable The higher the ratio, the better it is, since it would indicate that debts are being collected more promptly. YEAR RATIOS 2005-06 17.8 2006-07 10.21 2007-08 9.22 2008-09 8.02

Slide 16: 

2005-06 2006-07 2007- 08 2008- 09 YEARS

CREDITORS TURNOVER RATIO : 

CREDITORS TURNOVER RATIO We give credit but we need to control how much we give, how often and for how long. The formula for this ratio is: Creditors' Turnover=    Average Creditors    (Cost of Sales/365) YEARS RATIOS 2005-06 7.56 2006-07 8.65 2007-08 5.52 2008-09 9.41

Slide 18: 

2005-06 2006-07 2007-08 2008-09 YEARS

DEBT-EQUITY RATIO : 

DEBT-EQUITY RATIO The ratio is also called ‘External Internal Equity Ratio’. It indicates the comparative claims of outsiders and owner in the concern’s total equities the claim of depositors,mortgagors, bondholders, suppliers, and other creditors are matched with those of owner, i.e. shareholders or proprietors. Debt Equity Ratio = Total Debt Net worth YEARS RATIO 2005-06 1.93 2006-07 1.23 2007-08 1.45 2008-09 0.57

Slide 20: 

2005-06 2006-07 2007-08 2008-09 YEARS

EQUITY RATIO : 

EQUITY RATIO It is variant of debt – equity ratio. It is an important test to judge the long-term solvency of a concern. It establishes relationship between the proprietor or shareholder’s funds and the total assets. Equity ratio = Proprietor’s funds Total Assets Proprietor’s fund or Net worth = Equity Share Capital + Reserve and Surplus +Preference Share Capital. Total Assets = Total Equities or Total Resources of the concern YEARS RATIOS 2005-06 0.31 2006-07 0.37 2007-08 0.35 2008-09 0.58

Slide 22: 

2005-06 2006-07 2007-08 2008-09 YEARS

SOLVENCY RATIO : 

SOLVENCY RATIO One of many ratios used to measure a company's ability to meet long-term obligations. The solvency ratio measures the size of a company's after-tax income, excluding non-cash depreciation expenses, as compared to the firm's total debt obligations YEARS RATIOS 2005-06 0.61 2006-07 0.46 2007-08 0.51 2008-09 0.29

Slide 24: 

2005-06 2006-07 2007-08 2008-09 YEARS

NET PROFIT RATIO : 

NET PROFIT RATIO Net Profit is obtained when operating expenses; interest and taxes are subtracted from the gross profit. The net profit margin ratio is measured as follows: Net Profit Margin = Profit After Tax * 100 Sales YEARS RATIOS 2005-06 7.67 2006-07 8.60 2007-08 7.62 2008-09 12.49

Slide 26: 

2005-06 2006-07 2007-08 2008- YEARS

RETURN ON INVESTMENT : 

RETURN ON INVESTMENT A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. YEARS RATIOS 2005-06 53.69 2006-07 47.32 2007-08 44.48 2008-09 52.40

Slide 28: 

2005-06 2006-07 2007-08 2008-09 YEARS

EARNING PER SHARE RATIO : 

EARNING PER SHARE RATIO The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability. YEARS RATIOS 2005-06 19.82 2006-07 29.95 2007-08 30.34 2008-09 46.44

Slide 30: 

2005-06 2006-07 2007-08 2008-09 YEARS

DIVIDEND PAYOUT RATIO : 

DIVIDEND PAYOUT RATIO Dividend policy ratios provide insight into the dividend policy of the firm and the prospects for future growth. Two commonly used ratios are the dividend yield and payout ratio. The dividend yield is defined as follows: Dividend Yield  =  Dividends Per Share Share Price YEARS RATIOS 2005-06 0 2006-07 0.03 2007-08 0.313 2008-09 0.753

Slide 32: 

2005-06 2006-07 2007-08 2008-09 YEARS

WORKING CAPITAL TURNOVER RATIO : 

WORKING CAPITAL TURNOVER RATIO A measurement comparing the depletion of working capital to the generation of sales over a given period YEARS RATIOS 2005-06 16.23 2006-07 10.60 2007-08 10.68 2008-09 4.59

Slide 34: 

2005-06 2006-07 2007-08 2008-09 YEARS

SUGGESTIONS : 

SUGGESTIONS Increasing the market area or developing the new market Quality control Efficient utilization of resources Management of debtors Profitability Ratios Solvency Ratios Liquidity Ratios

CONCLUSION : 

CONCLUSION The conclusion derived from the study of financial analysis of international tractors limited shows that the overall financial strength of the company is extremely good. Because the current assets exceeds the current liabilities in all the financial years of the company. But current assets of the company are heavily increased during the year 2006-2007 which boosted the current ratio of the company. The working capital position of the company is better in the financial year 2001-2002 as compared to the previous years. The overall profitability of the company is good.