Student, Department of Business Management,
Jhulelal Institute of Technology.
Prof. Amar Satijani
Assistant Professor, Department of Business Management,
Jhulelal Institute of Technology, Nagpur
The automobile sectors is the dominant player not only in India but also in the economy of the economy, the due to its forward and backward linkages with several key segment of the economy, the industry has a strong multiplier effect of industrial growth. The industry has been evolving over the year, meeting up with challenges as varied as transition, consolidation and restructuring and thereby adopting to the new market environment. The present paper measures the financial performance of two major automobile companies of Indian origin, Tata motors and Maruti Suzuki after the policy of liberalization and reveals the comparative financial strength of both companies under study on the basis of liquidity, efficient use of assets, profitability etc.
Keywords: Financial, profitability, liquidity Ratio, Current Ratio.
The term “Ratio Analysis” refers to the analysis of the financial statement in conjunction with the interpretation of financial results of a particular period of operations, derived with the help of ‘ratio’. Ratio Analysis is used to determine the financial soundness a business concern. In this blog post, we will introduce ratio analysis, what it is used for. What are the advantages and disadvantages of it and limitations. To measure the financial efficiency of a company or industry Ratio Analysis is a very useful tool which given the financial conditions of a company or industry. Ratio Analysis is a concept or technique which is as old as accounting concept. Ratio Analysis is a scientific tool to measure the financial conditions / efficiency of the firm. Financial Ratio Analysis is a vital apparatus for the interpretation of financial statement. It also help to find out any cross sectional and time series linkages between various ratio unlike in the past when security was considered to be sufficient consideration for bank and financial institution to grant loan advance. Nowadays the entire lending is need based and the emphasis is on the financial viability of a proposal and not only on security alone. Further all business decision contains and element of risk. The risk id more in the case of decision relating ti credits Ratio Analysis and other quantitative techniques facilitate assessment of this risk. Ratio Analysis is used as way of analyzing the performance of a company. They are important tools for financial analysis. Financial ratio are the most common and widespread tools used to analyze a business financial standing. Ratio are easy to understand and simple to compute they can also be used to compare different companies in different industries. Since a ratio is simply a mathematically comparison based on proportions, big and small companies can be use ratio to compare their financial information. In a sense, financial ratios don't take into consideration the size of a company or the industry. Ratio are just a raw computation of inancial position and performance.
OBJECTIVES OF THE STUDY
- To find out profitability position of the organization.
- To study the liquidity position of the company.
- To study the financial position of with help of ratio analysis.
Research comprises defining and redefining problems, formulating hypothesis or suggested solution; collecting, organizing and evaluating data; making deductions and reaching conclusion; and at last carefully testing the conclusion to determine whether they fit the formulating hypothesis.
METHODS OF DATA COLLECTION:-
Data collection is the most important activity or process in research. Data collection plays a crucial role in finding the actual problem and solution to that problem. Generally there are two methods for finding the data:-
- Primary Data
- Secondary Data
Only Secondary data has been used for the study
Secondary Data:- Secondary data is that data which is already exist in books, internet, Company website, Company officials /employee, Company data base, Company journals. So, this data is collected through these available sources.
- From the Ratio Analysis of balance sheet and profit & loss statement it is found that liquidity ratio (i.e. current ratio and quick ratio) in case of both the companies are not good enough. Because, is most of the year it is found that they have not been able to maintain the standard i. e 2:1 in case of current ratio and 1:1 in case of quick ratio .
- So far solvency position is concern, debt equity ratio of Maruti Suzuki ltd and Tata motors ltd is too low, which signifies that they are not utilizing the cheapest sources.
- Gross profit net profit ratio for both the companies are not satisfactory.
- From the gross profit it can be seen that Tata motors ltd has a falling gross profit whereas Maruti Suzuki ltd has a rise in gross profit.
- Net profit of Maruti Suzuki ltd is rising but net profit of Tata motors ltd falling Maruti Suzuki ltd has more profit earning than Tata motors.
- Return on capital employee ratio is satisfactory in both the companies except in 2014- 2015 and 2018-2019 year in Tata motors ltd in those year the return was low.
- Return on equity ratio also good except in 2014-2015 and 2017-2018 year in Tata motors ltd there negative figure.
- Inventory turnover so, during the period of study out of two Maruti Suzuki ltd showed higher inventory turnover ratio this implied that the company was efficient in converting its finished good into turnover.
- Fixed assets turnover ratio out of the selected companies Maruti Suzuki hand higher fixed assets turnover ratio during the study period. A higher of this ratio suggest that management was able to make good use of investment in fixed assets.
- Finally we can say that operating ratio is also good throughout the five year.
Analysis and interpretation of financial statement is an important too in assessing company & performance. It reveals the strengths and weakness of firm it help the clients to decide in which firm the risk is less or in which one they should invest so that maximum benefit can be earned. It is know that investing in any company involves a lot of risk. So before putting up money in any company one must have through knowledge about its past records and performances based on the data available the trend of the company can be predicted in near future. Even through, the volatility in the financial market is also a major concern. Investors must take into account the business cycle for investment in any company, which is not predictable.
After analysis both the companies financially we come on the conclusion that there is not much difference in the companies in short term solvency and liquidity and in profitability. The long term solvency of both the firms is different as the values of debt equity ratio and equity ratio are significant that means both the firm are different in meeting their long term obligations and long term solvency. The efficiency of utilizing the assets is also different of both the firm as the turnover ratio comparison of both the firms shows the significant difference in the efficiency of both the firms.
Keeping in view the above observation relating to the study, the following measures are suggested which would go on a long way to improve the performance of Indian automobile industry.
- The policy of borrowed financing in automobile industry is not proper. So, the company should try reduce the fixed charges burden gradually by decreasing borrowed funds and by enhancing in owner fund.
- Tata motors should efficiently control its current assets to pay its current liabilities so that the creditors the company feel secured about the repayment of their amount by the company.
SR NO. BOOK NAME AUTHOR NAME
- Business Finance S.R. Sharma & V. K. Jain
- Financial Management L. M. Pandey
- Financial Management CMA Ravi M.