1

CHAPTER-1 1.1 INTRODUCTION INDUSTRY An industry is the manufacturing of a goods or services within a category. Although industry is a broad term for any kind of economic production, in economics and urban planning, industry is a synonym for the secondary sector, which is a type of economic activity involved in the manufacturing of raw materials into goods and products. Industry means any systematic activity carried on by co-operation between an employer and his workmen for the production, supply or distribution of goods or services with a view to satisfy human wants or wishes whether or not any capital has been invested for the purpose of carrying on such activity; or such activity is carried on with a motive to make any gain or profit. INDUSTRY ANALYSIS It involves a comprehensive analysis of the industry and its market segments. This section discusses the key developments that have taken place in the industry. It also identifies and analyzes the driving factors and challenges of the industry. A description of the regulatory structure tells us about the major regulatory bodies, laws and government policies. CLASSIFICATION OF INDUSTRIES There are four key industrial economic sectors: the primary sector, the secondary sector, the tertiary sector, the quaternary sector, and the quinary sector. The economy is also broadly separated into public sector and private sector, with industry generally categorized as private. Industries are also any business or manufacturing.

2 Primary sector: These industries are involved in the extraction or production of raw materials such as mining, farming, fishing, forestry, coal mining, oil drilling, gold mining Etc. Secondary sector: The secondary sector of the economy includes those economic sectors that creates a finished, usable product. These industries are involved in the processing of raw materials such as refining, construction, and manufacturing. This sector generally takes the output of the primary sector and manufactures finished goods for export, or sale to domestic consumers. Tertiary sector: These are the service industries, e.g. Transport, dentists, doctors, and so on. The capital required for a manufacturing business (secondary sector) is usually prohibitively large. Quaternary sector: A relatively new type of knowledge industry focusing on technological research, design and development such as computer programming, and biochemistry. It focuses on the latest technology. Examples of Quaternary Industries are designing new computers/writing computer software, Researching new medicines and medical equipment. Quinary sector: The sector comprises of health, education, culture, research, police, fire service, and other government industries not intended to make a profit. The quinary sector also includes domestic activities such as those performed by stay-at-home parents or homemakers. These activities are not measured by monetary amounts but make a considerable contribution to the economy. This study An Analysis on Automobile Industry at Dun & Bradstreet information services India Pvt Ltd was conducted to analyze the performance of the automobile industry. Only four companies are taken for this study. This study helps to know about various methods for analyzing the industry to take wise decisions regarding improvements to be made for the growth and thus increasing the profitability of the industry. The financial tools ratio analysis and comparative analysis were used and suggestions were made. 1.2 INDUSTRY PROFILE

INFORMATION SERVICES INDUSTRY The information industry or information industries are industries that are information intensive in one way or the other. It is considered one of the most important economic sectors for a variety of reasons. There are many different kinds of information industries, and many different ways to classify them. Although there is no standard or distinctively better way of organizing those different views, the following section offers a review of what the term "information industry" might entail, and why. Alternative conceptualizations are that of knowledge industry and information-related occupation. The term "information industry" is mostly identified with computer programming, system design, telecommunications, and others. TYPES First, there are companies which produce and sell information in the form of goods or services. Media products such as television programs and movies, published books and periodicals would constitute probably among the most accepted part of what information goods can be. Some information is provided not as a tangible commodity but as a service. Consulting is among the least controversial of this kind. However, even for this category, disagreements can occur due to the vagueness of the term "information." For some, information is knowledge about a subject, something one can use to improve the performance of other activitiesit does not include arts and entertainments. For others, information is something that is mentally processed and consumed, either to improve other activities (such as production) or for personal enjoyment; it would include artists and architects. Second, there are information processing services. Some services, such as legal services, banking, insurance, computer programming, data processing, testing, and market research, require intensive and intellectual processing of information. Although those services do not necessarily provide information, they often offer expertise in making decisions on behalf of

4 clients. These kinds of service industries can be regarded as an information-intensive part of various industries that is externalized and specialized. Third, there are industries that are vital to the dissemination of the information goods mentioned above. For example, telephone, broadcasting and book retail industries do not produce much information, but their core business is to disseminate information others produced. These industries handle predominantly information and can be distinguished from wholesale or retail industries in general. It is just a coincidence, one can argue, that some of those industries are separately existing from the more obvious informationproducing industries. For example, in the United States, as well as some other countries, broadcasting stations produce very limited amount of programs they broadcast. But this is not the only possible form of division of labor. If legal, economic, cultural, and historical circumstances were different, the broadcasters would have been the producers of their own programs. Therefore, in order to capture the information related activities of the economy, it might be a good idea to include this type of industry. These industries show how much of an economy is about information, as opposed to materials. It is useful to differentiate production of valuable information from processing that information in a sophisticated way, from the movement of information. Fourth, there are manufacturers of information-processing devices that require research and sophisticated decision-making. These products are vital to informationprocessing activities of above mentioned industries. The products include computers of various levels and many other microelectronic devices, as well as software programs. Printing and copying machines, measurement and recording devices of various kinds, electronic or otherwise, are also in this category. The role of these tools is to automate certain information-processing activities. The use of some of these tools may be very simple (as in the case of some printing), and the processing done by the tools may be very simple (as in copying and some calculations) rather than intellectual and sophisticated. In other words, the specialization of these industries in an economy is neither production of information nor sophisticated decision-making. Instead, this segment serves as an infrastructure for those activities, making production of information and decision-making services will be a lot less efficient. In addition, these industries tend to be "high-tech" or

5 research intensive - trying to find more efficient ways to boost efficiency of information production and sophisticated decision-making. For example, the function of a standard calculator is quite simple and it is easy to how to use it. However, manufacturing a wellfunctioning standard calculator takes a lot of processes, far more than the task of calculation performed by the users. Fifth, there are very research-intensive industries that do not serve as infrastructure to information-production or sophisticated decision-making. Pharmaceutical, food processing, some apparel design, and some other "high-tech" industries belong to this type. These products are not exclusively for information production or sophisticated decisionmaking, although many are helpful. Some services, such as medical examination are in this category as well. One can say these industries involve a great deal of sophisticated decision-making, although that part is combined with manufacturing or "noninformational" activities. Finally, there are industries that are not research intensive, but serve as infrastructure for information production and sophisticated decision-making. Manufacturing of office furniture would be a good example, although it sometimes involves research in ergonomics and development of new materials. IMPORTANCE Information industries are considered important for several reasons. Even among the experts who think information industries are important, disagreements may exist regarding which reason to accept and which to reject. First, information industries are a rapidly growing part of economy. The demand for information goods and services from consumers is increasing. In case of consumers, media including music and motion picture, personal computers, video game-related industries, are among the information industries. In case of businesses, information industries include computer programming, system design, so-called FIRE (finance, insurance, and real estate) industries, telecommunications, and others. When demand for

6 these industries are growing nationally or internationally, that creates an opportunity for an urban, regional, or national economy to grow rapidly by specializing on these sectors. Second, information industries are considered to boost innovation and productivity of other industries. An economy with a strong information industry might be a more competitive one than others, other factors being equal. Third, some believe that the effect of the changing economic structure (or composition of industries within an economy) is related to the broader social change. As information becomes the central part of our economic activities we evolve into an "information society", with an increased role of mass media, digital technologies, and other mediated information in our daily life, leisure activities, social life, work, politics, education, art, and many other aspects of society. INFORMATION SERVICES INDUSTRY RESOURCES Information services (partially defined in SIC 7374 and 7376) include computer professional services (SIC 7371, 7373, 7379, and 8243), and electronic information services (in SIC 7375). Because the industry has some new subsectors and is changing, analysts and market research organizations disagree on what to call subsectors. For example, vendors information services primarily to home consumers are called general interest online services by some analysts, while others will label them as videotex services. Another example is the use of the terms facilities management, systems operation, and outsourcing for basically the same type of service. Also, interactive audiotex, 900 services, and "dial it" pay-per-call all refer to the same industry segment. Information services are a growing share of the U.S. economy, and they represent a strategic input to make their business customers more competitive internationally. Delivery of information by means of the newest electronic or photo-optic technologies is a large part of the information revolution. Information services firms are finding innovative and costeffective ways to create, store, manipulate, and cross-correlate information based increasingly on input from their customers.

7 The U.S. information services industry is well developed with 24,223 establishments competing in the marketplace, according to the Census Bureau's 1987 Census of Service Industries. The industry has nearly 1 million employees. INTERNATIONAL COMPETITIVENESS The U.S. information services industry has always had a positive balance of trade, and this trend is expected to continue. Finding new customers in foreign markets is essential if the industry is to maintain its leadership. The U.S. Government places a high priority on removing barriers to trade and investment by U.S. information services companies, and this issue is being dealt with in U.S. discussions and negotiations with members of the General Agreement on Tariffs and Trade (GATT), the International Telecommunications Union (ITU), the Organization for Economic Cooperation and Development (OECD), as well as in bilateral talks with Mexico, Canada, the European Community (EC), and other countries. The various trade associations representing the industry also play an important role in the globalization of information services. The Information Technology Association (formerly ADAPSO, the computer software and services industry association), the Information Industry Association, and the Electronic Data Interchange Association have established relationships with their overseas counterparts to promote the development of information services, to forge new commercial relationships, and to maintain open markets for trade and investment. ELECTRONIC INFORMATION SERVICES The revenues of the electronic information services industry are estimated to have grown by 18.5 percent in 1991 and amounted to $10.2 billion. Financial, credit, marketing, and travel information services are the most developed and accounted for the largest shares of the industry's revenues. Companies offering videotex services aimed primarily at home consumers gained subscribers in 1991. Electronic information services are provided by five means: online, computer diskread only memory, (CD-ROM), magnetic tape, floppy disk, and audiotex. Online delivery,

8 which sends information from computers over telephone lines and broadcast systems to subscribers' personal computers or terminals, accounts for about 78 percent of the electronic information services industry revenues. Audiotex and information on Delivery of information services through magnetic tape and floppy disk is declining. The amount of information available electronically continues to grow at a fast rate. According to Cuadra Associates, a company that publishes an annual database directory, the number of databases currently available worldwide is 6,200 (4,700 are available online and 1,500 are portable). In 1987, only 3,369 electronic databases were available. The United States is the largest producer and consumer of electronic information services. It produces more than 50 percent of the databases available in the world. CDROM are the fastest growing media for the provision of electronic information services.

1.3 COMPANY PROFILE

9 Dun & Bradstreet (NYSE:DNB), the world's leading source of global business information, knowledge and insight, has been enabling companies to Decide with Confidence for over168 years. D&B's global commercial database contains more than 160 million business records. The database is enhanced by D&B's proprietary DUNSRight Quality Process, which transforms the enormous amount of data collected daily into decision-ready insight. Through the D&B Worldwide Network - an unrivaled alliance of D&B and leading business information providers around the world - customers gain access to the world's largest and highest quality global commercial business information database. Customers use D&B Risk Management Solutions to mitigate risk, increase cash flow and drive increased profitability, D&B Sales & Marketing Solutions to analyze markets, locate prospects and increase revenue from new and existing customers; D&B Export Marketing Solutions to gain significant insight into overseas markets and increase sales; D&B Learning Solutions to facilitate professional growth and excellence among their executives ; D&B Economic Analysis Group to derive pragmatic and solutionoriented analyses of strategic economic and business developments, thereby aiding informed decision making and D&B's Research and Advisory Services to provide customized research solutions and consulting to its clients in the areas of Risk Management, Economic, Sector and Financial Research. D&B featured on FORTUNE Magazine's Most Admired Companies Industry List for four consecutive years (2006 -2009), ranking first in the Financial Data Services category. D&B ranked first in the areas of employee talent, financial soundness, long-term investment, quality of management and use of corporate assets.

D&B today

10

The worlds leading provider of global business information, knowledge and insight Established in 1841 Listed on the New York Stock Exchange (NYSE) Present in over 200 countries Manages the worlds most valuable commercial database with information on over 160 million business entities Annual revenue of US$ 1.6 billion Market capitalization of US$ 5.6 billion

Dun & Bradstreet Information Services India Pvt. Ltd. D&Bs Indian operations started in 1995 and the company has offices in Mumbai, Delhi, Chennai, Bangalore, Kolkata, Hyderabad and Ahmedabad. Dun & Bradstreet Information Services India Pvt. Ltd. (D&B India) offers a wide suite of information solutions and its services are used extensively by banks, financial institutions, multinationals, corporate entities, public sector undertakings, exporters and importers. The worlds most comprehensive commercial database D&B manages the worlds most valuable commercial database with information on over 160 million companies. Business information is gathered in over 200 countries, in 82 languages or dialects, covering 181 monetary currencies. The database is refreshed over 1.5 million times a day as part of our commitment to provide accurate, comprehensive information to our customers globally.

11 Total companies in the D&B database: 131,731,289

90,424,079 active companies in the D&B database 41,307,210 inactive companies available with historical information for file matching and data cleansing purposes

Products & Services for all your Business Information needs D&B products and services can help you turn information into insight to develop conclusive, fact-based strategies that will help you gain a competitive edge and transform your enterprise into a nimble, customer-focused, more profitable business. D&B Risk Management Solutions Provides organizations with data and insight to increase profitability while mitigating risk, thus helping them gain deeper insights into customer performance, optimize cash flows and understand potential business partners before entering into transactions. D&B Sales & Marketing Solutions A suite of services that help businesses analyze markets, locate prospects and manage customer relationships. D&B Learning Solutions Helps businesses improve their competitiveness by facilitating their executives to excel, grow and succeed through innovative, high quality, comprehensive training & education programs.

12 D&B Economic Analysis Group Helps businesses derive pragmatic and solution-oriented analyses of strategic economic and business developments, thereby aiding informed decision making. D&B Research & Advisory Services Leverages D&B's experience of working with small businesses and its proven expertise in the areas of Risk Management, Economic & Sector Research and Financial Research to provide customized solutions to its clients.

1.4 OBJECTIVE OF THE STUDY

13

PRIMARY OBJECTIVE To analyze the performance of the automobile industry at Dun & Bradstreet information services India pvt ltd. SECONDARY OBJECTIVES To study the liquidity position of the companies. To identify the profitability position of the companies. To determine the comparative statement analysis of the companies.

1.5 NEED FOR THE STUDY The aim of this project is to make people aware of how to analyze an industry and their performance to make them to know how to minimize risks on their investments. Thus it helps to minimize the risks and also helps to predict the future performance of the industry. In this study the automobile industrys performance will be analyzed and their performance level will be found to suggest where the industry has to improve its performance to sustain in the market place. 1.6 SCOPE OF THE STUDY The main objective of the study is to analyze the performances of the four companies in the automobile industry using various financial tools and techniques to minimize the risks and also to predict the future performance of the industry. This study would help to gain knowledge and proper insights in the analysis of a particular industry and it would also help the investors of share market to know the financial soundness of the companies

CHAPTER-2

14 REVIEW OF LITERATURE 2.1 Title Source Abstract This paper provides an overview of the automotive industry. The paper discusses For Motors' agreement to sell its Land Rover and Jaguar lines over to Tata Motors. The paper then discusses shifts in the industry, including green initiative being taken within the automobile industry. The paper then goes on to examine the direction of the industry, which includes facts and figures regarding the sales of vehicles over the last two years and future sales predictions. From the Paper "On the financial front, Ford Motors has entered into a definitive agreement to sell its Jaguar and Land Rover operations to Tata Motors. The Indian auto giant has agreed to pay approximately $2.3 billion for full ownership of the flagship luxury brands. As part of the transaction, Ford will continue to provide engineering support, including research and development, plus information technology and accounting. The company will certainly feel the financial benefits of the deal, as in the wake of the economic downturn Ford has experienced combined losses of over $15 billion during the past two years. (MW 2) This is an attempt at Ford at capitalizing upon the globalization of the industry." 2.2 Title Source Abstract This paper identifies how the automotive industry is affected by the economy, especially in light of the ever-increasing cost of oil. The paper reviews the relevant literature to determine the automotive industry price elasticity of supply and demand, the negative and positive externalities produced by the industry, how wage inequality is measured and its current presence in the industry and monetary and/or fiscal policies that serve to affect the automotive industry. The paper relates that during periods of economic : THE ECONOMY AND THE AUTOMOTIVE INDUSTRY : www.academon.com : THE AUTOMOTIVE INDUSTRY : www.academon.com

15 downturns, American consumers will increasingly demand more fuel-efficient vehicles and alternative fuel vehicles and will buy fewer new vehicles. From the Paper "As the average price of gasoline tops $4.00 a gallon across the country, it is little wonder that an increasing amount of attention has been paid to the automotive industry recently. Today, an increasing number of consumers are demanding that the industry become more responsive to the growing energy crisis facing the country and develop vehicles that are more fuel efficient and less costly to maintain. While the pundits continue to debate the respective efficacies of various alternative fuel approaches and the need for more domestic production, it is clear that these trends are going to continue for the foreseeable future and the cost of oil will just keep rising for the next decade or so - at least. In this environment, identifying how the automotive industry is affected by the economy assumes new relevance and importance and this topic forms the thesis of this study." 2.3 Title Source Abstract This study of the Canadian automobile industry reveals how this industry reflects, in many ways, the complex contradictions of economic development of Canada. While the automobile industry is one of Canada's major industries in terms of revenues and employees, it is not only geographically concentrated in Ontario (and, to a lesser extent, Quebec), but it is also almost entirely dependent upon and external market: the United States. The paper goes on to discuss how much like the Canadian economy as a whole, the Canadian automobile industry developed in a state of dynamic tension with the economic and political forces shaping the economic giant to the south. " : STUDY OF THE CANADIAN AUTOMOBILE INDUSTRY : www.oppapers.com

2.4 Title

: THE AUTOMBILE INDUSTRY

16 Source Abstract This paper provides a Porter's Five Forces analysis of the automobile industry. The author reviews as well as McKinsey 7s analysis of Ford and DaimlerChrysler. The paper includes charts. From the Paper "The automobile industry is a global industry dominated by large companies that participate in more than just manufacturing automobiles. It is difficult to comprehend the role that the automotive industry plays in the American economy or indeed in the global economy as a whole. It is a driver of jobs both directly and indirectly and provides considerable economic stimulus to many different countries. Today's automobiles are highly complex and use components from suppliers throughout the world." 2.5 Title Source Abstract This paper provides a Five Forces Analysis of the auto industry and concludes that near-term profits are likely to be lower rather than higher. It attempts to predict the level of future earnings in this market. From the Paper "The automobile industry is a global industry dominated by large companies that participate in more than just manufacturing automobiles. Companies such as Daimler Chrysler Ford and General Motors also manufacture defense equipment and often participate in finance. General Motors has one of the largest consumer finance operations in the United States. However automobiles remain a mainstay of these companies and their global operations. This research considers Porter's Five Forces as they relate to the automobile industry and attempts to predict the level ..." : PORTER ANALYSIS OF THE AUTOMOBILE INDUSTRY : www.papersdue.com : www.oppapers.com

2.6 Title

: TECHNOLOGY AND THE AUTOMOTIVE INDUSTRY

17 Source Abstract This paper examines how the automobile industry has advanced technologically. Giving a brief introduction of the concept of technology, the paper focuses on oil as a scarce resource and how the hydrogen powered vehicle can be a substitute for today's automobile. The paper also refers to President Bush's speech in which he pledged to spend billions of dollars in research and technology advances for the hydrogen-powered automobile. From the Paper "Technology is "a capability given by the practical application of knowledge" (Webster, p. 1211). Computers, e-commerce, and the Internet are all types of business technology. But what happens when one of our resources, such as oil, becomes scarce? The first step would be to study new technologies that can replace such scarce economic resources. "One concern is that technologies of the future will require huge sums to develop and implement, sums that individual firms cannot always raise" (McEachern, p. 125). In such crucial times, companies must seek help from the federal government." 2.7 Title Source Abstract This paper presents an analysis of the automobile industry by looking at a number of aspects of the industry and how they will affect a company's strategy and, ultimately, its competitive advantage. Some of the factors the paper considers are internal rivalries within the industry, complements within the industry, barriers to entry, buying power, supplier power and substitutes. From the Paper "The industry selected for analysis in this report is the automobile industry. Porter identified five major factors that affect the strategy that a company can utilize in the modern day market. Strategy planning in organizations is conceptually and practically complex in nature. (Greenwood and Carter, 1997) The type of product, the life cycle of the product and the process involved in designing, manufacturing and marketing of the product : THE AUTOMOBILE INDUSTRY : www.oppapers.com : www.academon.com

18 all determine the strategy that is used by a company no matter what the industry. An organization has to allow for constant and steady improvement in the company's position in the market if it has to maintain a sustainable competitive advantage. Structure-conduct performance paradigm (SCP) was used by Porter to design the five-force business strategy model that has become the foundation of business strategy studies. (Besanko, Dranove and Shanley, 2000) Successful competitive advantage is defined in a variety of performance measures such as market share, return on sales, return on investment and bottom line profitability."

CHAPTER-3

19 RESEARCH METHODOLOGY 3.1 RESEARCH METHODOLOGY Research methodology is a way to systematically solve the research. To make research systematic the researcher has to adopt certain method. Data becomes information only when a proper methodology is adopted. Thus, we can say methodology is a tool which processes the data to reliable information. 3.2 RESEARCH DESIGN A research design is purely a framework or plan for a study that guides the collection and analysis of data. It is a blue print that is followed in completing a study. Here, an analytical study would be conducted to know the financial performance of the companies. 3.3 TYPES OF RESEARCH Descriptive Research Descriptive research includes surveys and fact-finding enquiries of different kinds. The major purpose of descriptive research is description of the state of affairs as it exists at present. Analytical research Analytical research is adopted for this study. In this type of research the researcher has to use facts or information already available and analyze these to make a critical evaluation of the research. Methodology An in-depth study is done to analyze the data in finding the performance of the Automobile Industry and to suggest measure in reducing the risk. An in-depth analysis involves a close examination of the collected data. The analysis enables an interpretation of such data. These have been analyzed for four years and then findings and suggestions have been given.

20 3.4 DATA COLLECTION Primary data Primary data means data that are collected newly by the researcher. Primary data consists of the original information collected for specific purpose. Secondary Data Secondary data has been used for this study. Secondary data means data that are already available. They refer to the data which have already been collected and analyzed by someone else and which have been passed through the statistical process. The financial information about the companies was collected from internet which has been published by the companies.

3.5 FINANCIAL TOOLS AND TECHNIQUES Ratio analysis Comparative balance sheet analysis

3.5.1 RATIO ANALYSIS A ratio is a mathematical relationship between two items expressed in a quantitative form. Ratio can be defined as Relationship expressed in quantitative terms between figures which have cause and effect relationship which are connected with each other in some manner or the other. Ratio analysis involves the process of computing determining and presenting the relationship of items or groups of items of financial statements.

3.5.1.1 Liquidity Ratios

21 Liquidity Ratios measure the firm's ability to pay off current dues i.e. repayable within a year. Liquidity ratios are otherwise called as Short Term Solvency Ratios. The important liquidity ratios are 1. Current ratio 2. Quick ratio 1. Current Ratio This ratio is used to assess the firm's ability to meet its current liabilities. The relationship of current assets to current liabilities is known as current ratio. The ratio is calculated as: Current assets Current Ratio = ----------------------Current liabilities Current Assets are those assets, which are easily convertible into cash within one year. This includes cash in hand, cash at bank, sundry debtors, bills receivable, short term investment or marketable securities, stock and prepaid expenses. Current Liabilities are those liabilities which are payable within one year. This includes bank overdraft, sundry creditors, bills payable and outstanding expenses. 2. Quick Ratio Quick ratio is the relationship between quick assets and current liabilities. It measures the firms capacity to pay off current obligations immediately and is a more rigorous test of liquidity. A high quick ratio indicates that the firm is liquid and has the ability to meet its current obligations in time and on the other hand a low quick ratio represents that the firms liquidity position is not good. A standard of 1:1 is considered satisfactory. Quick Ratio = Quick Assets /Current liabilities (Quick assets = current assets inventory) 3.5.1.2 Profitability Ratios

22 The primary objective of a business is to earn profits. Profitability ratios are a test of efficiency and a measurement of control. The important profitability ratios are 1. Gross profit ratio 2. Net profit ratio 1. Gross profit Ratio This ratio indicates the extent to which selling prices of goods per unit may decline without resulting in losses on operations of a firm. It measures profitability of the firm through the relationship between gross profit and sales. It reflects the efficiency with which the firm produces its products. The gross profit ratio should be adequate to cover the operating expenses of the firm. Higher the ratio better is the profitability. Gross profit margin or ratio = Gross profit X 100 -----------------Net sales 2. Net profit Ratio It measures the relationship between net profit and sales of a firm. It indicates managements efficiency in manufacturing, administrating, and selling the products. It also indicates the firms capacity to face adverse economic conditions such as price competition, low demand etc., Higher the ratio better is the profitability Net profit margin or ratio = Net profit X 100 ------------------------Net sales

3.5.1.3 Leverage or capital structure ratios

23 Financing firms assets is a very crucial problem in every business and as general rule there should be a proper mix of debt and equity capital in financing the firms assets. Leverage ratios are calculated to test the long term financial position of a firm. These ratios are based on the relationship between borrowed funds and owners capital. 1. Debt-Equity ratio 2. Fixed assets to Net worth ratio 1. Debt-Equity Ratio Debt-equity ratio measures the relative claims of outsiders and the owners against the firms assets. It indicates the extent to which debt financing has been used in a business. The purpose is to get an idea of the cushion available to outsiders on the liquidation of the firm. A ratio of 1:1 is considered to be satisfactory. A low ratio is considered as favorable Debt equity ratio = Outsider Funds (Total Debts) ---------------------------------------Share holders funds(equity) 2 Fixed Assets to Net worth Ratio The ratio of fixed assets to Net worth indicates the extent to which shareholders funds are sunk into the fixed assets. If the ratio is more than 100%, it implies that owners funds are not sufficient to finance fixed assets. 60 to 65 per cent is considered to be satisfactory ratio. Fixed assets to net worth ratio = Fixed Assets X 100 -----------------Net Worth

3.5.2 COMPARATIVE BALANCE SHEET

24

Comparative balance sheet as on two or more different dates can be used for comparing assets and liabilities and to find out any increase or decrease in the items. Thus while in single balance sheet the emphasis is on present position, it is on change in the comparative balance sheet. 3.6 DATA USED FOR THE STUDY: The data used for analysis purpose are 5 years Financial Data like Profit and loss account Balance Sheet

3.6.1PERIOD OF THE STUDY: The period of the study is 2006-2010. 3.7 LIMITATIONS OF THE STUDY The data used for the study only covers the 5 years details Because of the time constraint the analysis was made for only four companies not for all of them. The data used are ambiguous to some extent due to confidentiality. The study heavily depends on the secondary data.

CHAPTER-4

25 DATA ANALYSIS AND INTERPRETATION 4.1 RATIO ANALYSIS LIQUIDITY RATIOS 4.1.1 Current Ratio Current Assets Current Ratio = ------------------------------------Current Liabilities Table-4.1.1 Table showing overall current ratio Company Tata Motors Maruti Suzuki Hero Honda Mahindra&Mahindra Total Current Assets(2006-10) 34686.33 13379.80 6591.81 21844.15 Total Current Liabilities(2006-10) 55526.84 14231.60 12444.91 18994.14 Current Ratio (2006-10) 0.62 0.94 0.53 1.15

Chart-4.1.1 Chart showing overall current ratio

1.4 1.2 1 0.8 0.6 0.4 0.2 0 Tata Motors Maruti Suzuki Hero Honda M&M 0.62 0.94 0.53 1.15

Interpretation The above chart shows that the current ratio of Tata motors, maruti Suzuki, hero Honda and M&M are 0.62, 0.94, 0.53 and 1.15 respectively. The ratio of M&M is higher when compared to the other companies. The ratio of hero Honda is low when compared to the other companies. 4.1.2 Quick Ratio

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Quick Ratio = Quick Assets /Current liabilities Table-4.1.2 Table showing overall quick ratio Company Total Current Assets Tata Motors Maruti Suzuki Hero Honda Mahindra&Mahindra (2006-10) 34686.33 13379.80 6591.81 21844.15 Inventories (2006-10) 11751.18 4617.60 2348.21 17543.35 Chart-4.1.2 Chart showing overall quick ratio
0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 Tata Motors Maruti Suzuki Hero Honda M&M 0.41 0.34 0.22 0.62

Total Current Liabilities (2006-10) 55526.84 14231.60 12444.91 18994.14

Quick Ratio (2006-10) 0.41 0.62 0.34 0.22

Interpretation The above chart shows that the quick ratio of Tata motors, maruti Suzuki, hero Honda and M&M are 0.41, 0.62, 0.34 and 0.22 respectively. The quick ratio in of all the companies does not reveal good liquidity position as it is lesser than the standard of 1:1. The quick ratio of maruti Suzuki is higher when compared to the other companies. PROFITABILITY RATIOS 4.1.3 Gross Profit Ratio Gross profit margin or ratio = Gross profit X 100

27 -----------------Net sales Table-4.1.3 Table showing overall gross profit ratio Company Tata Motors Maruti Suzuki Hero Honda Mahindra&Mahindra Total Gross Profit (2006-10) 13520.32 12263.30 8448.38 7466.76 Chart-4.1.3 Chart showing overall gross profit ratio
12.89 9.9 14.78 12.24

Total Net Sales (2006-10) 136554.75 95118.2 57135.13 60965.71

Gross Profit Ratio (2006-10) 9.90 12.89 14.78 12.24

16 14 12 10 8 6 4 2 0

Tata Motors

Maruti Suzuki

Hero Honda

M&M

Interpretation The above chart shows that the gross profit ratio of Tata motors, maruti Suzuki, hero Honda and M&M are 9.90, 12.89, 14.78 and 12.24 respectively. The gross profit ratio of Tata motors is less when compared to the other companies. 4.1.4 Net Profit Ratio Net profit X 100 Net profit margin or ratio = ---------------Net sales

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Table-4.1.4 Table showing overall Net profit ratio Company Total Net Profit (2006-10) Tata Motors Maruti Suzuki Hero Honda Mahindra&Mahindra 8727.82 8197.80 6310.70 5957.46 Total Net Sales (2006-10) 136554.75 95118.2 57135.13 60965.71 Net Profit Ratio (2006-10) 6.39 8.62 11.05 9.77

Chart -4.1.4 Chart showing overall Net profit ratio

12 10 8 6.39 6 4 2 0 Tata Motors Maruti suzuki Hero Honda M& M 8.62 11.05 9.77

Interpretation The above chart shows that the net profit ratio of hero Honda 11.05 is higher when compared to the other three companies. The ratios of Tata motors, maruti Suzuki and M&M are 6.39, 8.62 and 9.77 respectively. The profitability of hero Honda will be more than the other companies because of the higher net profit ratio. LEVERAGE or CAPITAL STRUCTURE RATIOS 4.1.5 Debt-Equity Ratio Outsider Funds (Total Debts)

29 Debt equity ratio = ---------------------------------------Share holders funds(equity) Table-4.1.5 Table showing overall debt-equity ratio Company Tata Motors Maruti Suzuki Hero Honda Mahindra&Mahindra Total Debts (2006-10) 43017.97 3123 627.47 12039.36 Total Equity (2006-10) 2238.47 722.50 199.70 1266.07 Chart-4.1.5 Chart showing overall debt-equity ratio Debt-Equity Ratio (2006-10) 19.22 4.33 3.14 9.50

20 15

19.22

9.5 10 5 0 Tata Motors Maruti Suzuki Hero Honda M&M 4.33 3.14

Interpretation The above chart shows that the debt-equity ratio of Tata motors 19.22 is very high when compared to other companies but the satisfactory ratio is 1:1. The debt equity ratio of maruti suzuki, hero honda and M&M are 4.33, 3.14 and 9.5 respectively. 4.1.6 Fixed Assets to Net worth Ratio: Fixed assets to net worth ratio = Fixed Assets X 100 ------------------

30 Net Worth Table-4.1.6 Table showing overall Fixed assets to Net worth ratio Company Total Fixedassets (2006-10) Tata Motors Maruti Suzuki Hero Honda Mahindra&Mahindra 44707.45 20991 13897.04 20306.04 Total Networth (2006-10) 2238.47 722.50 199.70 1266.07 Chart-4.1.6 Chart showing Fixed assets to Net worth ratio
80 60 40 20 0 Tata Motors Maruti Suzuki 16.04 19.97 29.05 69.58

F.A - Networth Ratio (2006-10) 19.97 29.05 69.58 16.04

Hero Honda

M&M

Interpretation The above chart shows that the fixed assets to net worth ratio of hero honda 69.58 is higher when compared to the other companies. The ratio of Tata motors, maruti suzuki and M&M are 19.97, 29.05 and 16.04 respectively. The ratio of M&M is low when compared to the other companies. 4.2 COMPARATIVE ANALYSIS Table-4.2.1 Comparative Balance Sheet of Tata Motors of the Year 2006-07 Particulars 2006 2007 Inc/Dec Inventories 1499.93 2500.95 1001.02

% 66.74

31 Debtors Cash & bank balance Loans & advances Total current assets Fixed assets: Investments Total Assets Current liabilities Provisions Total current liabilities Reserves & surplus Paid up Total reserves & surplus Secured loans Unsecured loans Total loans Total liabilities 1502.60 8473.91 6673.61 1215.04 7888.65 5154.20 382.87 5537.07 822.76 2114.08 2936.84 8473.91 2477.00 10878.89 6956.88 1364.32 8321.20 6458.39 385.41 6843.80 2022.04 1987.10 4009.14 10878.89 974.40 2404.98 283.27 149.28 432.55 1304.19 2.54 1306.73 1199.28 -126.98 1072.30 2404.98 64.85 28.38 4.24 12.29 5.48 25.30 0.66 23.60 145.76 -6.00 36.51 28.38 715.78 327.66 4427.94 6971.31 782.18 535.78 4582.98 8401.89 66.40 208.12 155.04 1430.58 9.28 63.52 3.50 20.52

Interpretation The above table shows that, the companys inventories and cash& bank balance have been increased by 66.74% and 63.52% respectively when compared to the previous year. The total assets of the company have been increased by 28.38% compared to the previous year. Unsecured loans have declined by 6% compared to the previous year. Table-4.2.2 Comparative Balance Sheet of Tata Motors of the Year 2007-08 Particulars Inventories Debtors Cash & bank balance 2007 2500.95 782.18 535.78 2008 2421.83 1130.73 750.14 Inc/Dec -79.12 348.55 214.36 % -3.16 44.56 40.00

32 Loans & advances Total current assets Fixed assets: Investments Total Assets Current liabilities Provisions Total current liabilities Reserves & surplus Paid up Total reserves & surplus Secured loans Unsecured loans Total loans Total liabilities 2477.00 10878.89 6956.88 1364.32 8321.20 6458.39 385.41 6843.80 2022.04 1987.10 4009.14 10878.89 4985.96 14120.02 10040.37 1989.43 12029.80 7453.96 385.54 7839.50 2461.99 3818.53 6280.52 14120.02 2508.96 3241.13 3083.49 625.11 3708.60 995.57 0.13 995.70 439.95 1831.43 2271.38 3241.13 101.29 29.79 44.32 45.82 44.57 15.42 0.03 14.55 21.76 92.17 56.66 29.79 4582.98 8401.89 4831.36 9134.06 248.38 732.17 5.42 8.71

Interpretation The above table shows that, the companys inventories have decreased by 3.16% when compared to the year 2007. The total assets of the company have been increased by 29.79% compared to the previous year. The companys debtors and cash&bank balances has been increased by 44.56% and 40% respectively than the year 2007. Table 4.2.3 Comparative Balance Sheet of Tata Motors of the Year 2008-09 Particulars Inventories Debtors Cash & bank balance Loans & advances 2008 2421.83 1130.73 750.14 4831.36 2009 2229.81 1555.20 638.17 5909.75 Inc/Dec -192.02 424.47 -111.97 1078.39 % -7.93 37.54 -14.93 22.32

33 Total current assets Fixed assets: Investments Total Assets Current liabilities Provisions Total current liabilities Reserves & surplus Paid up Total reserves & surplus Secured loans Unsecured loans Total loans Total liabilities Interpretation The above table shows that, the companys inventories and cash & bank balances have been decreased by 7.93% and 14.93% respectively when compared to the previous year 2008. The total assets of the company have been increased by 81.01% compared to the previous year. The companys total loans have increased by 109.62% than the year 2008. Table-4.2.4 Comparative Balance Sheet of Tata Motors of the Year 2009-10 Particulars Inventories Debtors Cash & bank balance Loans & advances 2009 2229.81 1555.20 638.17 5909.75 2010 2935.59 2391.92 1753.26 4618.90 Inc/Dec 705.78 836.72 1115.09 -1290.85 % 31.65 53.80 174.73 -21.84 4985.96 14120.02 10040.37 1989.43 12029.80 7453.96 385.54 7839.50 2461.99 3818.53 6280.52 14120.02 15226.90 25559.83 10968.95 1877.26 12846.26 11880.22 514.05 12394.27 5251.65 7913.91 13165.56 25559.83 10240.94 11439.81 928.58 -112.17 816.46 4426.26 128.51 4554.77 2789.66 4095.38 6885.04 11439.81 205.40 81.01 9.25 -5.64 6.79 59.38 33.33 58.10 113.30 107.25 109.62 81.01 9134.06 10332.93 1198.87 13.13

34 Total current assets Fixed assets: Investments Total Assets Current liabilities Provisions Total current liabilities Reserves & surplus Paid up Total reserves & surplus Secured loans Unsecured loans Total loans Total liabilities 15226.90 25559.83 10968.95 1877.26 12846.26 11880.22 514.05 12394.27 5251.65 7913.13 13165.56 25559.83 19891.71 31591.38 16117.80 2763.43 18881.23 14394.87 570.60 14965.47 7742.60 8883.31 16625.91 31591.38 4664.81 6031.55 5148.85 886.17 6034.97 2514.65 56.55 2511.20 2490.95 969.40 3460.35 6031.55 30.64 23.60 46.94 47.21 46.98 21.17 11.00 20.75 47.43 12.25 26.28 23.60 10332.93 11699.67 1366.74 13.23

Interpretation The above table shows that, the companys inventories and cash & bank balances have increased by 31.65% and 174.73% respectively when compared to the previous year 2009. The total assets of the company have been increased by 23.60% compared to the previous year. The companys total loans have increased by 26.28% than the year 2009. In each financial year the total assets of tata motors has increased by average of 40.70% and the cash and bank balances has increased on an average of 65.83%.

35 Investments has been increased on an average of 100.55% and the inventories and debtors has been increased by 14.98% and 36.30% respectively

Table-4.2.5 Comparative Balance Sheet of Maruti Suzuki of the Year 2006-07 Particulars Inventories Debtors Cash & bank balance Loans & advances 2006 881.20 654.80 51.60 933.10 2007 713.20 747.40 114.80 1072.60 Inc/Dec -168.00 92.60 63.20 139.50 % -19.06 14.14 122.48 14.95

36 Total current assets Fixed assets: Investments Total Assets Current liabilities Provisions Total current liabilities Reserves & surplus Paid up Total reserves & surplus Secured loans Unsecured loans Total loans Total liabilities Interpretation The above table shows that, the companys inventories have declined by 19.06% and cash & bank balances have increased by 122.48% when compared to the previous year 2006. The total assets of the company have been increased by 35.49% compared to the previous year. The companys total loans have increased by 779.78% than the year 2006. Table-4.2.6 Comparative Balance Sheet of Maruti Suzuki of the Year 2007-08 Particulars 2007 2008 Inc/Dec Inventories Debtors Cash & bank balance Loans & advances Total current assets Fixed assets: Investments 4836.70 5180.70 344.00 7.11 713.20 747.40 114.80 1072.60 2648.00 1510.20 891.60 560.10 1173.00 4134.90 797.00 144.20 445.30 100.40 1486.90 3003.60 5524.30 1704.80 480.00 2184.80 5308.10 144.50 5452.60 71.70 0.00 71.70 5524.30 4836.70 7484.70 2288.60 490.50 2779.10 6709.40 144.50 6853.90 63.50 567.30 630.80 7484.70 1833.10 1960.40 583.80 10.50 594.30 1401.30 0.00 1401.30 -8.20 567.30 559.10 1960.40 61.03 35.49 34.24 2.19 27.20 26.40 0.00 25.70 11.44 0.00 779.78 35.49 2520.70 2648.00 127.30 5.05

% 111.75 19.29 387.89 9.36 56.15

37 Total Assets Current liabilities Provisions Total current liabilities Reserves & surplus Paid up Total reserves & surplus Secured loans Unsecured loans Total loans Total liabilities Interpretation The above table shows that, the companys inventories have increased by 111.75% and cash & bank balances have increased by 387.89% when compared to the previous year 2007. The total assets of the company have been increased by 24.46% compared to the previous year. The companys total loans have increased by 42.71% than the year 2007. Table-4.2.7 Comparative Balance Sheet of Maruti Suzuki of the Year 2008-09 Particulars 2008 2009 Inc/Dec Inventories Debtors Cash & bank balance Loans & advances Total current assets Fixed assets: Investments Total Assets Current liabilities 5180.70 9315.60 2718.90 6173.80 10043.80 3250.90 993.10 728.20 532.00 19.17 7.82 19.57 1510.20 891.60 560.10 1173.00 4134.90 902.30 918.90 239.00 1809.80 3870.00 -607.90 27.30 -321.10 636.80 -264.90 7484.70 2288.60 490.50 2779.10 6709.40 144.50 6853.90 63.50 567.30 630.80 7484.70 9315.60 2718.90 369.50 3088.40 8270.90 144.50 8415.40 0.10 900.10 900.20 9315.60 1830.9 430.30 -121.00 309.30 1561.50 0.00 1561.50 -63.40 332.80 269.40 1830.90 24.46 18.80 -24.67 11.13 23.27 0.00 23.27 -99.84 58.66 42.71 24.46

% -40.25 3.06 -57.33 54.29 -6.40

38 Provisions Total current liabilities Reserves & surplus Paid up Total reserves & surplus Secured loans Unsecured loans Total loans Total liabilities Interpretation The above table shows that, the companys inventories have decreased by 40.25% and cash & bank balances have declined by 57.33% when compared to the previous year 2008. The total assets of the company have been increased by 7.82% compared to the previous year. The companys total loans have declined by 22.36% than the year 2008. Table-4.2.8 Comparative Balance Sheet of Maruti Suzuki of the Year 2009-10 Particulars Inventories Debtors Cash & bank balance Loans & advances Total current assets Fixed assets: Investments Total Assets Current liabilities 6173.80 10043.80 3250.90 8177.50 12656.50 3160.00 2003.70 2612.70 -90.90 32.45 26.01 -2.80 2009 902.30 918.90 239.00 1809.80 3870.00 2010 1508.80 909.90 248.20 1812.10 4479.00 Inc/Dec 606.50 -9.00 9.20 2.30 609 % 67.22 -0.98 3.85 0.13 15.74 369.50 3088.40 8270.90 144.50 8415.40 0.10 900.10 900.20 9315.60 380.70 3631.60 9200.40 144.50 9344.90 0.10 698.80 698.90 10043.80 11.20 543.20 929.50 0.00 929.50 0.00 -201.30 -201.30 728.20 3.03 17.59 11.24 0.00 11.05 0.00 -22.36 -22.36 7.82

39 Provisions Total current liabilities Reserves & surplus Paid up Total reserves & surplus Secured loans Unsecured loans Total loans Total liabilities 380.70 3631.60 9200.40 144.50 9344.90 0.10 698.80 698.90 10043.80 628.40 3788.40 11690.60 144.50 11835.10 26.50 794.90 821.40 12656.50 247.70 156.80 2490.20 0.00 2490.20 26.40 96.10 122.50 2612.70 65.06 4.32 27.07 0.00 26.65 26400 13.75 17.53 26.01

Interpretation The above table shows that, the companys inventories have increased by 67.22% and cash & bank balances have increased by 3.85% when compared to the previous year 2009. The total assets of the company have been increased by 26.01% compared to the previous year. The companys total loans have increased by 17.53% than the year 2009. In each financial year the total assets of maruti suzuki has increased by average of 23.45% and the cash and bank balances has increased on an average of 114.22%. Investments have been increased on an average of 29.94% and the inventories and debtors have been increased by 29.92% and 8.88% respectively.

40

Table-4.2.9 Comparative Balance Sheet of Hero Honda of the Year 2006-07 Particulars 2006 2007 Inc/Dec Inventories Debtors Cash & bank balance Loans & advances Total current assets Fixed assets: Investments Total Assets Current liabilities Provisions Total current liabilities 1508.05 2195.11 1192.98 489.92 1682.90 1721.10 2635.23 1171.50 437.24 1608.74 213.05 440.12 -21.48 -52.68 -74.16 226.55 158.66 23.22 278.63 687.06 275.58 335.25 35.26 268.04 914.13 49.03 176.59 12.04 -10.59 227.07

% 21.64 111.30 51.85 -3.80 33.05 14.13 20.05 -1.80 -10.75 -4.41

41 Reserves & surplus Paid up Total reserves & surplus Secured loans Unsecured loans Total loans Total liabilities Interpretation The above table shows that, the companys inventories have increased by 21.64% and cash & bank balances have increased by 51.85% when compared to the previous year 2006. The total assets of the company have been increased by 20.05% compared to the previous year. The companys total loans have declined by 11.09% than the year 2006. Table-4.2.10 Comparative Balance Sheet of Hero Honda of the Year 2007-08 Particulars 2007 2008 Inc/Dec Inventories Debtors Cash & bank balance Loans & advances Total current assets Fixed assets: Investments Total Assets Current liabilities Provisions Total current liabilities 1721.10 2635.23 1171.50 437.24 1608.74 2176.75 3118.24 1455.57 499.76 1955.33 455.65 483.01 284.07 62.52 346.59 26.47 18.33 24.25 14.30 21.54 275.58 335.25 35.26 268.04 914.13 317.10 297.44 130.58 196.37 941.49 41.52 -37.81 95.32 -71.67 27.36 1969.39 39.94 2009.33 0.00 185.78 185.78 2195.11 2430.12 39.94 2470.06 0.00 165.17 165.17 2635.23 460.73 0.00 460.73 0.00 -20.61 -20.61 440.12 23.39 0.00 22.93 0.00 -11.09 -11.09 20.05

% 15.07 -11.28 270.33 -26.74 2.99

42 Reserves & surplus Paid up Total reserves & surplus Secured loans Unsecured loans Total loans Total liabilities Interpretation The above table shows that, the companys inventories have increased by 15.07% and cash & bank balances have increased by 270.33% when compared to the previous year. The total assets of the company have been increased by 18.33% compared to the previous year. The companys total loans have declined by 20.08% than the year 2007. Table-4.2.11 Comparative Balance Sheet of Hero Honda of the Year 2008-09 Particulars 2008 2009 Inc/Dec Inventories Debtors Cash & bank balance Loans & advances Total current assets Fixed assets: Investments Total Assets Current liabilities Provisions Total current liabilities Reserves & surplus 2176.75 3118.24 1455.57 499.76 1955.33 2946.30 2859.18 3879.24 1678.93 526.97 2205.90 3760.81 682.43 761 223.36 27.21 250.57 814.51 31.35 24.40 15.35 5.44 12.81 27.65 317.10 297.44 130.58 196.37 941.49 326.83 149.94 217.49 325.80 1020.06 9.73 -147.50 86.91 129.43 78.57 2430.12 39.94 2470.06 0.00 165.17 165.17 2635.23 2946.30 39.94 2986.24 0.00 132.00 132.00 3118.24 516.18 0.00 516.18 0.00 -33.17 -33.17 483.01 21.24 0.00 20.90 0.00 -20.08 -20.08 18.33

% 3.07 -49.59 66.56 67.91 8.35

43 Paid up Total reserves & surplus Secured loans Unsecured loans Total loans Total liabilities Interpretation The above table shows that, the companys inventories have increased by 3.07% and cash & bank balances have increased by 66.56% when compared to the previous year 2008. The total assets of the company have been increased by 24.40% compared to the previous year. The companys total loans have declined by 40.54% than the year 2008. Table-4.2.12 Comparative Balance Sheet of Hero Honda of the Year 2009-10 Particulars 2009 2010 Inc/Dec Inventories Debtors Cash & bank balance Loans & advances Total current assets Fixed assets: Investments Total Assets Current liabilities Provisions Total current liabilities Reserves & surplus 2859.18 3879.24 1678.93 526.97 2205.90 3760.81 2425.71 3531.05 3965.69 1026.35 4992.04 3425.08 -433.47 -348.19 2286.76 499.38 2786.14 -335.73 -15.16 -8.98 136.20 94.76 126.30 -8.93 326.83 149.94 217.49 325.80 1020.06 436.40 108.39 122.09 438.46 1105.34 109.57 -41.55 -95.40 112.66 85.28 39.94 2986.24 0.00 132.00 132.00 3118.24 39.94 3800.75 0.00 78.49 78.49 3879.24 0.00 814.51 0.00 -53.51 -53.51 761 0.00 27.28 0.00 -40.54 -40.54 24.40

% 33.53 -27.71 -43.86 34.58 8.36

44 Paid up Total reserves & surplus Secured loans Unsecured loans Total loans Total liabilities 39.94 3800.75 0.00 78.49 78.49 3879.24 39.94 3465.02 0.00 66.03 66.03 3531.05 0.00 -335.73 0.00 -12.46 -12.46 -348.19 0.00 -8.83 0.00 -15.87 -15.87 -8.98

Interpretation The above table shows that, the companys inventories have increased by 33.53% and cash & bank balances have declined by 43.86% when compared to the previous year 2009. The total assets of the company have been declined by 8.98% compared to the previous year. The companys total loans have declined by 15.87% than the year 2009. In each financial year the total assets of hero honda has increased by average of 13.45% and the cash and bank balances has increased on an average of 86.22%. Investments have been increased on an average of 14.20% and the inventories and debtors have been increased by 18.33% and 5.68% respectively.

45

Table-4.2.13 Comparative Balance Sheet of M&M of the Year 2006-07 Particulars 2006 2007 Inc/Dec Inventories Debtors Cash & bank balance Loans & advances Total current assets Fixed assets: Investments Total Assets Current liabilities Provisions Total current liabilities Reserves & surplus Paid up Total reserves & surplus 1459.13 3792.25 1711.23 543.14 2254.37 2675.47 233.40 2908.87 2182.16 5188.92 2138.77 715.43 2854.20 3314.87 238.03 3552.90 723.03 1396.67 427.54 172.29 599.83 639.40 4.63 644.03 878.74 637.97 258.39 558.02 2333.12 878.48 700.89 415.89 1011.50 3006.76 -0.26 62.92 157.50 453.48 673.64

% -0.03 9.86 60.95 81.27 28.87 49.55 36.83 24.98 31.72 26.61 23.90 1.98 22.14

46 Secured loans Unsecured loans Total loans Total liabilities Interpretation The above table shows that, the companys inventories have decreased by 0.03% and cash & bank balances have increased by 60.95% when compared to the previous year 2006. The total assets of the company have been increased by 36.83% compared to the previous year. The companys total loans have increased by 85.20% than the year 2006. Table-4.2.14 Comparative Balance Sheet of M&M of the Year 2007-08 Particulars 2007 2008 Inc/Dec Inventories Debtors Cash & bank balance Loans & advances Total current assets Fixed assets: Investments Total Assets Current liabilities Provisions Total current liabilities Reserves & surplus Paid up Total reserves & surplus Secured loans Unsecured loans 2182.16 5188.92 2138.77 715.43 2854.20 3314.87 238.03 3552.90 106.65 1529.35 3671.37 6937.13 2525.31 943.46 3468.77 4111.00 239.07 4350.07 617.26 1969.80 1489.21 1748.21 386.54 228.03 614.57 796.13 1.04 797.17 510.61 440.45 68.24 33.69 18.07 31.87 21.53 24.02 0.44 22.44 478.77 28.80 878.48 700.89 415.89 1011.50 3006.76 1084.11 1004.88 310.58 866.19 3265.76 205.63 303.99 -105.31 -145.31 259.00 216.68 666.71 883.39 3792.26 106.65 1529.35 1636.00 5188.90 -110.03 862.64 752.61 1396.64 -50.78 129.38 85.20 36.83

% 23.41 43.37 -25.32 -14.37 8.61

47 Total loans Total liabilities Interpretation The above table shows that, the companys inventories have increased by 23.41% and cash & bank balances have decreased by 25.32% when compared to the previous year 2007. The total assets of the company have been increased by 33.69% compared to the previous year. The companys total loans have increased by 58.13% than the year 2007. Table-4.2.15 Comparative Balance Sheet of M&M of the Year 2008-09 Particulars Inventories Debtors Cash & bank balance Loans & advances Total current assets Fixed assets: Investments Total Assets Current liabilities Provisions Total current liabilities Reserves & surplus Paid up Total reserves & surplus Secured loans Unsecured loans Total loans 3671.37 6937.13 2525.31 943.46 3468.77 4111.00 239.07 4350.07 617.26 1969.80 2587.06 5154.35 9296.73 3520.20 1277.56 4797.76 4971.35 272.62 5243.97 981.00 3071.76 4052.76 1482.98 2359.60 994.89 334.10 1328.99 860.35 33.55 893.90 363.74 1101.96 1465.70 40.39 34.01 39.40 35.41 38.31 20.93 14.03 20.55 58.93 55.94 56.66 2008 1084.11 1004.88 310.58 866.19 3265.76 2009 1060.67 1043.65 635.61 1402.45 4142.38 Inc/Dec -23.44 38.77 325.03 536.26 876.62 % -2.16 3.86 104.65 61.91 26.84 1636.00 5188.90 2587.06 6937.13 951.06 1748.23 58.13 33.69

48 Total liabilities Interpretation The above table shows that, the companys inventories have decreased by 2.16% and cash & bank balances have increased by 104.65% when compared to the previous year 2008. The total assets of the company have been increased by 34.01% compared to the previous year. The companys total loans have increased by 56.66% than the year 2008. Table-4.2.16 Comparative Balance Sheet of M&M of the Year 2009-10 Particulars Inventories Debtors Cash & bank balance Loans & advances Total current assets Fixed assets: Investments Total Assets Current liabilities Provisions Total current liabilities Reserves & surplus Paid up Total reserves & surplus Secured loans Unsecured loans 5154.35 9296.73 3520.20 1277.56 4797.76 4971.35 272.62 5243.97 981.00 3071.76 5753.88 10710.38 3822.50 1796.54 5619.04 7539.27 290.96 7830.23 602.45 2277.70 599.53 1413.65 302.30 518.98 821.28 2567.92 18.34 2586.26 -378.55 -794.06 11.63 15.21 8.59 40.62 17.12 51.65 6.73 49.32 -38.59 -25.85 2009 1060.67 1043.65 635.61 1402.45 4142.38 2010 1188.78 1258.08 475.17 2034.47 4956.50 Inc/Dec 128.11 214.43 -160.44 632.02 814.12 % 12.08 20.55 -25.24 45.07 19.65 6937.13 9296.73 2359.60 34.01

49 Total loans Total liabilities 4052.76 9296.73 2880.15 10710.38 -1172.61 1413.65 -28.93 15.21

Interpretation The above table shows that, the companys inventories have increased by 12.08% and cash & bank balances have decreased by 25.24% when compared to the previous year 2009. The total assets of the company have been increased by 15.21% compared to the previous year. The companys total loans have decreased by 28.93% than the year 2009. In each financial year the total assets of Mahindra & Mahindra has increased by average of 29.94% and the cash and bank balances has increased on an average of 28.76%. Investments have been increased on an average of 42.45% and the inventories and debtors have been increased by 8.33% and 5.68% respectively. When the performances of all the four companies are compared, the total assets of the companies have increased on an average of 26.89%, the cash & bank balances has increased on an average of 73.75%, investments have been increased on an average of 46.79% and the inventories & debtors have been increased on an average of 17.89% and 14.14% respectively.

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CHAPTER-5 5.1 FINDINGS The current ratio of Tata motors, maruti Suzuki, hero Honda and M&M are 0.62, 0.94, 0.53 and 1.15 respectively. The ratio of M&M 1.15 is higher when compared to the other companies. The ratio of hero Honda 0.53 is low when compared to the other companies. The quick ratio of Tata motors, maruti Suzuki, hero Honda and M&M are 0.41, 0.62, 0.34 and 0.22 respectively. The quick ratio in of all the companies does not reveal good liquidity position as it is lesser than the standard of 1:1. The quick ratio of maruti Suzuki is higher when compared to the other companies. The gross profit ratio of Tata motors, maruti Suzuki, hero Honda and M&M are 9.90, 12.89, 14.78 and 12.24 respectively. The gross profit ratio of Tata motors is less when compared to the other companies. The net profit ratio of hero Honda 11.05 is higher when compared to the other three companies. The ratios of Tata motors, maruti Suzuki and M&M are 6.39, 8.62 and 9.77 respectively. The profitability of hero Honda will be more than the other companies because of the higher net profit ratio. The debt-equity ratio of Tata motors 19.22 is very high when compared to other companies but the satisfactory ratio is 1:1. The debt equity ratio of maruti suzuki, hero honda and M&M are 4.33, 3.14 and 9.5 respectively. The fixed assets to net worth ratio of hero honda 69.58 is higher when compared to the other companies. The ratio of Tata motors, maruti suzuki and M&M are 19.97, 29.05 and 16.04 respectively. The ratio of M&M is low when compared to the other companies.

51 In each financial year the total assets of tata motors has increased by average of 40.70% and the cash and bank balances has increased on an average of 65.83%.investments has been increased on an average of 100.55% and the inventories and debtors has been increased by 14.98% and 36.30% respectively. In each financial year the total assets of maruti suzuki has increased by average of 23.45% and the cash and bank balances has increased on an average of 114.22%. Investments have been increased on an average of 29.94% and the inventories and debtors have been increased by 29.92% and 8.88% respectively. The total assets of the Hero honda have been increased by 20.05% compared to the previous year. The companys total loans have declined by 11.09% than the year 2006. The total assets of the company have been declined by 8.98% compared to the previous year 2009. The companys total loans have declined by 15.87% in the year 2010. In each financial year the total assets of hero honda has increased by average of 13.45% and the cash and bank balances has increased on an average of 86.22%. Investments have been increased on an average of 14.20% and the inventories and debtors have been increased by 18.33% and 5.68% respectively. The total assets of the M&M have been increased by 36.83% compared to the previous year 2006. The companys total loans have increased by 85.20% in the year 2007. In each financial year the total assets of Mahindra & Mahindra has increased by average of 29.94% and the cash and bank balances has increased on an average of 28.76%. Investments have been increased on an average of 42.45% and the inventories and debtors have been increased by 8.33% and 5.68% respectively. When the performances of all the four companies are compared, the total assets of the companies have increased on an average of 26.89%, the cash & bank balances has increased on an average of 73.75%, investments have been increased on an average of 46.79% and the inventories & debtors have been increased on an average of 17.89% and 14.14% respectively.

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5.2 SUGGESTIONS The firms need to improve their short-term financial position by managing the current assets and current liabilities effectively to maintain the standard ratio of 2:1. The borrowed debt has to be invested properly so as to maximize the earning capacity of the firms. The firms have sufficient funds to finance the fixed assets. They can use these funds to finance working capital also so as to improve the short-term financial position. The firms have to formulate competitive strategies to increase the sales and profits.

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5.3 CONCLUSION Analysis of an industry with respect to their financial performance is necessary. It may be concluded that all the four companies are earning profits which shows that the profitability of the companies are positive and the financial position of all the companies are good. To improve their performance, they have to improve their short term financial position by managing the current assets and liabilities. This study clearly shows that all the companies have a reasonable growth in every year. As the companies are in the fast growing industry they have more opportunities to show their better performances in future.

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BIBLIOGRAPHY

Pandey I M, Financial Management , 9th edition, New Delhi, Vikas Publishing House pvt. Ltd., 1978.

Kothari C R, Research Methodology , Second Revised edition, Chennai, New Age International (P) Ltd. Publishers, 1985

M Y Khan, P K Jain, Management Accounting , 4th edition, New Delhi, Tata McGraw-Hill Publishing Company Ltd., 1984

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