CONTENTS

Financial analysis is the process of identifying the financial

strengths and weakness of the firm by properly establishing the relations
ship between the items of the balance sheet and profit loss account.
Financial analysis can be undertaken by management of the firm, or by
parties outside the firm, viz. owners, creditors, investors and others. The
nature of analysis will differ depending on the purpose of analyst.
Management, creditors, investors and others to form
judgment about the operating performance and financial position of the
firm use the information contained in this statements can get further
insight about the financial strengths and weakness of the firm to make
their best use and to be able to spot out financial weakness of the firm to
take suitable corrective actions.
Thus financial analysis is the starting point for making
plans, before using any sophisticated forecasting and planning
procedures. Understanding the past is a prereuisite for anticipating
future.
FINANCIAL MANAGEMENT
In our present day economy, finance is defined as the provision of
money at the time when it is required. Every enterprise, whether big, medium of
small, needs finance to carry its operations and to achieve its targets. In fact,
finance is so indispensable today that it is rightly said to be the lifeblood of an
enterprise. Without adequate finance, no enterprise can possibly accomplish its
objectives.
Financial management is applicable to every type of organization,
irrespective of its size ind of nature. It is as useful to a small concern as to a big
unit. ! trading concern gets the same utility from its application as a
manufacturing unit may e"pect. #his subject is important and useful for all types of
ownership organizations. Every management aims to utilize its funds in a best
possible and profitable way. $o this subject is acquiring a universal applicability.
It is indispensable in any organization as helps in%
&I' Financial planning and successful promotion of an enterprise(
&II' !cquisition of funds as and when required at the minimum possible
cost(
&III' )roper use and allocation of funds(
&I*' #aing sound financial decisions (
&*' Improving the profitability through financial controls(
&*I' Increasing the wealth of the investors and the nation( and
&vii' )romoting and mobilizing individual and corporate savings.
OBJECTIVES OF FINANCIAL MANAGEMENT
Financial management is concerned with procurement and use of
funds. Its main aim is to use business funds in such a way that the firm+s
value,earnings are ma"imized. #here are various alternatives available for using
business funds. Each alternative course has to be evaluated in detail.
#he pros and cons of various decisions have to loo into before
maing a final selection. #he decisions will have tae into consideration the
commercial strategy of the business. Financial management provides a framewor
for selecting a proper course of action and deciding a viable commercial strategy.
#he main objective of a business is to ma"imize the owner+s economic welfare.
#his objective can be achieved by%
-. )rofit .a"imization
/. Wealth ma"imization
1. Profit maximization:
)rofit earning is the main aim of every economic activity. ! business
being an economic institution must earn profit to cover its costs and provide funds
for growth. 0o business can service without earning profit. )rofits are a measure of
efficiency of a business enterprise. )rofits also serve as a protection against riss
which cannot be ensured. #he accumulated profits enable a business to face riss
lie fall in prices, competition from other units, adverse government policies etc.
#hus, profit ma"imization is considered as the main objective of business%
&i' When profit 1 earning is the aim of business then profit ma"imization should
be the obvious objective.
&ii' )rofitability is a barometer for measuring efficiency and economic prosperity
of a business enterprise, thus, profit ma"imization is justified on the grounds
of rationality.
&iii' Economic and business conditions do not remain same at all the times. #here
may be adverse business conditions lie recession, depression, severe
competition etc. ! business will be able to service under unfavorable situation
only if it has some past earnings to rely upon. #herefore a business should try
to earn more and more when situation is favorable.
&iv' )rofits are the main sources of finance for the growth of a business. $o, a
business should aim at ma"imization of profits for enabling its growth and
development.
&v' )rofitability is essential for fulfilling social goals also. ! firm by pursuing the
objective of profit ma"imization also ma"imizes socio2 economic welfare.
2. Wealth maximization
Wealth ma"imization is the appropriate objective of an enterprise
financial theory asserts that wealth ma"imization is the single substitute for
stocholder+s utility. When the firm ma"imizes the stocholder+s wealth, the
individual stocholder can use this wealth to ma"imize his individual utility. It
means that by ma"imizing stocholder+s wealth firm is operating consistently
towards ma"imizing stocholder+s utility.
OBJECTIVES OF STUDY
-. #o study the 3ross )rofit 4atio of #ata .otors for 5
assessment years.
/. #o study the 0et )rofit 4atio of #ata .otors for 5
assessment years.
5. #o study the E"pense 4atio of #ata .otors for 5
assessment years.
6. #o study the 4eturn on 7apital Employed for 5
assessment years.
RESEARCH METHODOLOGY
#he research design refers to preplanning of what a researcher does in
his study. #he design adopted in the study comes under e"ploratory and
evaluatory research. $ince the data collected from the financial statements of the
company is analyzed under various financial and tactical tools.
Modes of Data collection(
#he study is based on one type data , obtained from the #ata .otors
ltd.,
#hey are%
$econdary data
Secondary Data;
$econdary data is based on the past data i.e. 8three years !nnual 4eports
/9--2/9-6:
Sampling
Sample area : ata Motors
ools for Data !nalysis
" #nterpretation : Percentage
method
ools for Data Presentation : # ha$e
%sed tools li&e ta'le ( 'argraph " chart for
presenting my data regarding the topic.
COMPANY PROFILE

ata )*+#,-*s -imited &formerly *-,., short for ata *ngineering and -ocomoti$e
,ompany' is an Indian multinational automotive manufacturing company headquartered in
.umbai, .aharashtra, India and a subsidiary of the #ata 3roup. Its products include passenger
cars, trucs, vans, coaches, buses, construction equipment and military vehicles. It is the world;s
seventeenth2largest *E<I7=E vehicle manufacturing company, fourth2largest truc
manufacturer and second2largest bus manufacturer by volume.
8>:
#ata *E<I7=Es has auto manufacturing and assembly plants in ?amshedpur, )antnagar,
=ucnow, $anand, @harwad and )une in India, as well as in !rgentina, $outh !frica, #hailand
and the Anited Bingdom. It has research and development centres in )une, ?amshedpur,
=ucnow and @harwad, India, and in $outh Borea, $pain, and the Anited Bingdom. #ata
*E<I7=Es; principal subsidiaries include the Critish premium car maer ?aguar =and 4over
&the maer of ?aguar, =and 4over and 4ange 4over cars' and the $outh Borean commercial
vehicle manufactuer #ata @aewoo. #ata *E<I7=Es has a bus manufacturing joint venture with
.arcopolo $.!. &#ata .arcopolo', a construction equipment manufacturing joint venture with
<itachi &#ata <itachi 7onstruction .achinery', and a joint venture with Fiat which manufactures
automotive components and Fiat and #ata branded vehicles.
Founded in -D6E as a manufacturer of locomotives, the company manufactured its first
commercial vehicle in -DE6 in a collaboration with @aimler2Cenz !3, which ended in -DFD.
#ata *E<I7=Es entered the passenger vehicle maret in -DD- with the launch of the #ata $ierra,
becoming the first Indian manufacturer to achieve the capability of developing a competitive
indigenous automobile.
8G:
In -DDG, #ata launched the first fully indigenous Indian passenger car,
the Indica, and in /99G launched the #ata 0ano, the world;s most affordable car. #ata
*E<I7=Es acquired the $outh Borean truc manufacturer @aewoo 7ommercial *ehicles
7ompany in /996 and purchased ?aguar =and 4over from Ford in /99G.
#ata *E<I7=Es is listed on the Combay $toc E"change, where it is a constituent of the C$E
$E0$EH inde", the 0ational $toc E"change of India and the 0ew Ior $toc E"change. #ata
*E<I7=Es is raned 5-6th in the /9-/ Fortune 3lobal E99 raning of the world;s biggest
corporations
ANALYSIS
AND
INTERPRETATION
3ross )rofit 4atio %
Jf !ssessment Iear /9--2-/
3ross profit ratio K 3ross profit , $ales L-99
KG.DD, 6GG.>9 G -99
K -.G5
Jf !ssessment Iear /9-/2-5
3ross profit ratio K 5>.GG,F/D.6E L -99
K F.9-
Jf !ssessment Iear /9-52-6
3ross profit ratio K F9.-D,G-F.G5 L -99
K >.5F
0E# )4JFI# %
Jf !ssessment Iear /9--2-/
0et profit ratio K 0et profit , $ales L -99
K6.-5 ,6GG.>9 L -99
K9.G6
Jf !ssessment Iear /9-/2-5
0et )rofit 4atio K /9.F>,F/D.6E L -99
K 5./G
Jf !ssessment Iear /9-52-6
0et profit ratio K 69.>F,G-F.G5 L -99
K6.DD
EH)E0$E 4!#IJ %
Jf !ssessment Iear /9--2-/
E"pense 4atio K E"pense , $ales L -99
K65G.>G,6GG.>9L-99
K GD.>G
Jf !ssessment Iear /9-/2-5
E"pense ratio KEE5.G>,F/D.6E L -99
KG>.DD
Jf !ssessment Iear /9-52-6
E"pense ratio K >5-.>F,G-F.G5L-99
K GD.EG
4E#A40 J0 7!)I#!= E.)=JIE@ %
Jf !ssessment Iear /9--2-/
4eturn on 7apital Employed K )rofit before
interest M ta" , capital employed L-99
KG.DD,-99L-99
KG.DD
Jf !ssessment Iear /9-/2-5
4eturn on capital employed K 5>.GG,-99 L -99
K5>.GG
Jf !ssessment Iear /9-52-6
4eturn on capital employed K F9.-D,-99 L-99
KF9.-D
INTRODUCTION TO FINANCIAL STATEMENTS
! financial statement is a collection of data organized according to logical and
consistent accounting procedures. Its purpose is to convey an understanding of
some financial aspects of a business firm. It may show a position at a movement
in time, as in the case of balance sheet, or may reveal a series of activities over
a given period of time, as in the case of an income statement.
.'/ecti$es of financial statements:
Financial statements are the sources of information on the basis of which
conclusions are drawn about the profitability and financial position of a
concern. #hey are the major means employed by firms to present their financial
situation of owners, creditors and the general public. #he primary objective of
financial statements is to assist in decision maing. #he !ccounting )rinciples
Coard of !merica &!)C' states the following objectives of financial statements%
&i' #o provide reliable financial information about economic resources and
obligations of business firm.
&ii' #o provide other needed information about changes in such economic
resources and obligations.
&iii' #o provide reliable information about changes in net resources &resources less
obligations' arising out of business activities.
&iv' #o provide financial information that assists in estimating the earning
potentials of business.
&v' #o disclose, to the e"tent possible, other information related to the financial
statements that is relevant to the needs of the users of these statements.
FINANCIAL STATEMENT ANALYSIS
Financial analysis is the process of determining financial strengths
and weaness of the firm by establishing strategic relationship between the items
of the items of the balance sheet, profit and loss account and other operative data.
In the words of .yers, Nfinancial statements analysis is largely a study of
relationship among various financial factors in a business as disclosed by a single
set of statements, and a study of the trend of these factors as shown in series of
statements
0. P1.2#!3#-#4 1!#.:
!n ability to earn ma"imum from ma"imum use of available
resources by the business concerns is nown as O)rofitability+. #he status of
profitability depends upon the quantum of sales,nature of costs and proper use of
financial resources. #he profitability ratios are used to calculate the efficiency of
operating of the company. )rofits are ultimate goal of every company and it should
be continuously evaluated in terms of profits. )rofitability analysis comprises the
stydy of sales , analysis of cost of goods sold , analysis of gross margin on sales ,
analysis of operating e"penses , analysis of operating profit M analysis of profit in
relation to sales and capital. 3enerally four major profits are calculated, they are
i. 3ross profit ratio
ii. 0et profit ratio
iii. E"pense ratio
iv. 4eturn on capital employed
i.5ross profit ratio:
#he first profitability ratio in relation to sales reflects the efficiency
with which management produces each unit of product. #he 3ross profit ratio may
be interpreted by comparing the ratio of the same concern over a period of time or
comparing the ratio of the two similar concerns or by comparing the ratio of a year
with some standard fi"ed by management . 0ormally , a higher ratio is always
considered good M serves as a inde" of higher profitability. It is calculated by
dividing the 3ross )rofit with $ales.

3ross profit
3ross )rofit ratio K " -99
$ales
ii. 6et profit ratio:
It is also called as 0et )rofit to $ales 4atio. 0et profit ratio e"plains
the net profit of the company after paying ta"es of particular period. It establishes
relation between net profit and sales M as such e"pressed as percentage to sales.
Net Profit
0et profit ratioK
$ales
Expense ratio:
EACH EXPENSE IS RELATED TO SALES & EXPRESSED
AS PERCENTAGE TO SALES. ITS FORMULA IS :-
Expense/sales X100
Return on capital employed:
#his is also nown as 4eturn on Investments or simply as 4ate of 4eturn
.$ufficient profit as compared to sales is not enough, unless sales itself is adequate
with refernce to capital employed . #his brings forth the need for calculating
4eturn on 7apital Employed which measures the adequacy or otherwise of profit
in relation to capital employed. It is calculated as %2
Profit before interest and tax/capital employed x100
COMPARITIVE
INCOME STATEMENT

$ource% !nnual 4eports of #.=.
#nterpretation:
From the above table it can be interpreted that sales and cost of goods sold
were decreased so gross loss also decreased, and there was high decrease in
miscellaneous income &i.e. G/.>EP' loss increased due to lac of operational
efficiency.
Comparative income statement of
tata *E<I7=Es ltd., /9-/2/9-5
Particulars 5-252/9-/ 5-252/9-5
change
Percentag
e
$ales -59E->65> DFD/95D6255ED>965 2/E.>6P
=ess% 7ost of goods sold -EEE>66G9 -9//65G>F2E5559F96 256./GP
3ross profit,loss 2/E9E>965 2E5/56G/ -D>55EF- 2>G.>EP
=ess% Jperating e"penses -9E5/EG> ---55GF/ F9-/>E E.>-P
Jperating profit,loss 25EEGDF59 2-F6E>566 -D-5//GF 2E5.>FP
Add: Other income
.iscellaneous income -F5D-59 65G55/> />66-D> -F>.6/P
Interest received -/DGFF -65E>> -5>-- -9.EFP
)rofit,loss before interest 255G/9F56 2--D59669 /-GD9-D6 2F6.>/P
=ess% Interest paid /GG-59>9 /55/F->F 2E6GFGD6 2-D.96P
)rofit,loss after interest 2F/F55>96 25E/EFF-F />5>>9GG 265.>-P
=ess% =oss up to last year /DD/-5996 5F-G6F>9G F/F55>96 /9.D5P
0et loss cumulative 25F-G6F>9G25D>-955/625E/EFF-F D.>6P

$ource% !nnual 4eports of #.=.
#nterpretation:
From the above table it can be interpreted that the percentage decrease in
cost of goods sold is more than the decrease in sales so gross loss also decreased
due to reduce in the cost of raw materials. Even though increase in operating
e"penses operating loss decreased due to effective control of raw material cost.
Comparative income statement of
tata *E<I7=Es ltd., /9-52/9-6
)articulars 5-252/9-5 5-252/9-6 change
Percentag
e
$ales DFD/95D6 -/6F/DFE> />>9D/F5 /G.EDP
=ess% 7ost of goods sold -9//65G>F >/G>>>>92/D5FF-9F 2/G.>/P
3ross profit,loss 2E5/56G/ E->E-GG> E>9>E5FD 2-9>/.-6P
=ess% Jperating e"penses ---55GF/ 5E6FGF6D /6556>G> /-G.E>P
Jperating profit,loss 2-F6E>566 -F/G5/5G 5/>69EG/ 2-DG.D6P
Add: Other income
.iscellaneous income 65G55/> 6FF6DGG /G-FF- F.65P
Interest received -65E>> ->/DG- /D696 /9.6GP
)rofit,loss before interest 2--D59669 /--/-/9> 559E-F6> 2/>>.96P
=ess% Interest paid /55/F->F /D5/9->G EDD699/ /E.>9P
)rofit,loss after interest 25E/EFF-F 2G-DGD>- />9E>F6E 2>F.>6P
=ess% =oss up to last year 5F-G6F>9G 5D>-955/6 5E/EFF-F D.>6P
0et loss cumulative 25D>-955/6269E59//DE 2G-DGD>- /.9FP

$ource% !nnual 4eports of #.=.
#nterpretation:
From the above table it can be interpreted that sales percentage
increased and at the same time cost of goods sold decreased so the firm earned
gross profit due to high control in purchase of raw materials. @ue to increase in
operating e"penses loss increased &/.9FP' the firm has no control over the
operating activities.
RATIO

ANALYSIS
PROFITABILITY RATIOS
Table1: Gross proit ratio
Iears 3ross profit,loss $ales 4atio
/9--2-/ 25>F6EEEG /9-6GFE>5 2-G.FGP
/9-/2-5 2/E9E>965 -59E->65> 2-D./9P
/9-52-6 2E5/56G/ DFD/95D6 2E.6DP
#nterpretation:
In the above graph , years are taen on "2a"is M 3ross )rofit 4atio is
taen on y2a"is. From the given data it can be interpreted that gross profit ratio
was negative for most of the years e"cept the year /99F it is due to inefficiency in
producing goods.
Table2: Net pr!"t rat"
Iears 0et profit,loss $ales 4atio
/9--2-/ 2F>6-5>/D /9-6GFE>5 255.6FP
/9-/2-5 2F/F55>96 -59E->65> 26>.DDP
/9-52-6 25E/EFF-E DFD/95D6 25F.5GP
$ource% !nnual 4eports of #.=

#nterpretation:
From the above graph it was analyzed that in all the years the net
profit ratio is negative due to over all inefficiency in the firm.
Balance sheet
FINDINGS

Jperating loss decreased up to the year /9-6 .
#he tata motors ltd. earned net profit in all the years.
It had been maintaining high inventory levels for all the years.
In most of the years debtor+s collection period was very high.
#he funds were also raised through debts with high interest rates.
$ome funds are lost in operations.
Suggestions
#.= should adopt cost control measures by drawing inspiration from
prospering *E<I7=E factories.
#.= should reduce operating and administrative e"penses, it will increase
overall efficiency of the firm.
! high level of debt introduces infle"ibility in the firms operations due to
increasing interference and pressures from creditors. ! high debt company is
able to borrow funds on very restrictive terms and conditions. $o, it should raise
owners funds.

Conclusio
n
-. #here was a continuous increase in
the 3ross profit ratio from the
financial year /9--2-/ to /9-52-6.
/. #here was a continuous increase in
the 0et profit ratio from the
financial year /9--2-/ to /9-52-6.
5. #here was some decrease in the
manufacturing e"penses in the
financial year /9-/2-5 but it again
increased by /P in the ne"t
financial year /9-52-6.
6. #here was a continuous increase in
the 4eturn on capital employed
from the financial year /9--2-/ to
/9-52-6.
LIMITATIONS
-. #ime was the major constraint.
/. It was a tedious tas to get the current
annual reports or e"act financial
position of the firm.
5. It was e"pensive to get the data M
prepare the project report.
BIBLIOGRAPH
BOOKS
Financial .anagement
@r. $.). 3A)#!
/99D
$ahitya Chawan )ublications
Financial .anagement #heory and )ractice
)rasanna 7handra
$i"th Edition
#ata .c 3raw <ill )ublishing company.
.anagement !ccounting )rinciples and )ractice
4. B. $harma $ahashi B. 3upta
Eight edition
alyani publishers.
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