PERFORMANCE DRIVERS OF A COMPANY

Current ratio: current assets/current liabilities

Conventionally- 2:1
Quick ratio: (current assets-stock)/(current liabilities-bank
overdraft)
Conventionally: 1:1
Inventory turnover ratio: It depicts number of times a companys
inventory is turned into sales.
High ITR= efficient inventory management because the average
inventory holding period would be less.
Debt turnover ratio: Number of times each year the debtors turn
into cash.
High DTR=quality of the companys portfolio of debtors is good.

 Working capital turnover : Working capital is defined as the

amount by which current assets exceed current liabilities. A
higher working capital turnover ratio is better. It means that
the company is utilizing its working capital more efficiently
i.e. generating more revenue using less investment.
Assets Turnover Ratio: The asset turnover ratio is an
efficiency ratio that measures a company's ability to
generate sales from its assets by comparing net sales with
average total assets. In other words, this ratio shows how
efficiently a company can use its assets to generate sales.
Inventory Turnover Ratio: This is an efficiency ratio that
shows how effectively inventory is managed by comparing
cost of goods sold with average inventory for a period. This
measures how many times average inventory is "turned" or
sold during a period.

HERO MOTOCORP

RATIOS
Current
Ratio
Quick Ratio
Inventory
Turnover
Ratio
Debtors
Turnover
Ratio
Asset
Turnover
Ratio

2014-13

2013-12

2012-11

2011-10

0.65
0.47

0.67
0.52

0.42
0.28

0.24
0.15

37.75

37.33

40.84

43.88

31.88

50.72

117.09

162.08

4.63

4.49

4.85

4.85

HERO MOTOCORP

Year

Loans and
Debtors to
Inventories to Cash and Bank Advances to
current assets current assets Balance to
current assets
current assets
0.539
0.392
0.069
0.705
2014-13
0.448
0.429
0.122
0.945
2013-12
0.271
0.673
0.056
0.923
2012-11
0.186
0.746
0.068
1.114
2011-10

MOTAALS TEST

Year

Debtors to
current
assets

Cash and
Inventories Bank
to current
Balance to
assets
current
assets
1
3

Loans and
Advances to Cumulative Overall
current
ranking
assets
1
9
2

2014-13

2013-12

12

2012-11

2011-10

11

The company(hero motocorp) performed better in year 2011-12 but its liquidity position
has fluctuated over the years and has gone better in the year 2013-14

TVS MOTORS

TVS MOTORS

RATIOS
Current
Ratio
Quick
Ratio
Inventory
Turnover
Ratio
Debtors
Turnover
Ratio
Asset
Turnover
Ratio

2014-13

2013-12

2012-11

2011-10

0.87

0.85

0.71

0.57

0.51

0.44

0.59

14.52

13.86

12.19

13.27

25.09

26.43

28.24

25.17

4.35

3.87

3.88

3.38

TVS
Year

Debtors to
current assets

Inventories to
current assets

Cash and Bank

Balance to
current assets

Loans and
Advances to
current assets

2014-13

0.346

0.568

0.086

0.549

2013-12

0.363

0.616

0.021

0.453

2012-11

0.281

0.703

0.016

0.361

2011-10

0.336

0.656

0.007

0.577

MOTAALS TEST

Year

Debtors to
current
assets

Inventories
to current
assets

Cash and
Bank
Balance to
current
assets

Loans and
Advances to Cumulative Overall
current
ranking
assets

2014-13

11

2013-12

11

2012-11

2011-10

10

The company TVS performed better in the year 201112

Correlations (TVS)
Correlations

Operating Profit
Margin
Current Ratio

Quick Ratio

Pearson
Correlation
Sig. (2-tailed)
N
Pearson
Correlation
Sig. (2-tailed)
N
Pearson
Correlation
Sig. (2-tailed)

Inventor Debtor Assets

Operating
y
s
Turnov
Profit
Current Quick Turnove Turnov
er
Margin
Ratio
Ratio r Ratio er Ratio Ratio
1
-.970* -.820
-.303
.746
.654

.030
4
1

.180
4
.935

.697
4
.484

.254
4
-.884

.346
4
-.463

.030
4
-.820

4
.935

.065
4
1

.516
4
.686

.116
4
-.986*

.537
4
-.138

.180

.065

.314

.014

.862

4
-.970*

Debtor
Invento
s
Operati
ry
Turnov
ng Profit Curren Quick Turnov
er
Margin t Ratio Ratio er Ratio Ratio

Inventory Turnover Ratio

Pearson
Correlation
Sig. (2tailed)
N
Debtors Turnover Ratio
Pearson
Correlation
Sig. (2tailed)
N
Assets Turnover Ratio
Pearson
Correlation
Sig. (2tailed)
N
*. Correlation is significant at the 0.05 level

-.303

.484

.686

.697

.516

.314

4
.746

4
-.884

4
-.986*

.254

.116

.014

.203

4
.654

4
-.463

4
-.138

4
.502

.346

.537

.862

.498

4
(2-tailed).

4
-.797

-.797

.502

.203

.498

4
1

4
-.004
.996

4
-.004

4
1

.996
4

TATA MOTORS

RATIOS / YEAR

2014 2013 2012 2011

Operating Profit
Margin(%)

2.56 3.83 7.69

Current Ratio

0.43 0.42

Quick Ratio

0.36

Inventory Turnover
Ratio

Mean

S.D.

C.O.V

9.9

6.00

3.40 56.66%

0.5 0.52

0.47

0.05 10.68%

0.4 0.43 0.54

0.43

0.08 17.85%

8.89 10.05 11.84 12.1

10.72

1.52 14.21%

Debtors Turnover Ratio 22.62 19.78 20.45 18.86

20.43

1.60

Assets Turnover Ratio

1.02

1.4 1.66 1.43

1.38

7.83%

0.27 19.25%

Correlations

Operating Profit Margin

Current Ratio

Quick Ratio

Operati
ng
Inventory
Profit Current
Turnover
Margin Ratio Quick Ratio
Ratio
Pearson
1
.836
.875
.978*
Correlat
ion
Sig. (2-
.164
.125
.022
tailed)
N
4
4
4
4
Pearson
.836
1
.850
.918
Correlat
ion
Sig. (2.164
.150
.082
tailed)
N
4
4
4
4
Pearson
.875
.850
1
.851
Correlat
ion
Sig. (2.125
.150
.149
tailed)
N
4
4
4
4

Debtors
Turnover
Ratio
-.894

Assets
Turnover
Ratio
.850

.106

.150

4
-.555

4
.611

.445

.389

4
-.827

4
.491

.173

.509

Inventory Turnover Ratio

Pearson
Correlat
ion

.978*

.918

.851

Sig. (2tailed)
N
Pearson
Correlat
ion

.022

.082

.149

4
-.894

4
-.555

4
-.827

.106

.445

.173

.218

4
.850

4
.611

4
.491

4
.849

Sig. (2.150
.389
tailed)
N
4
4
*. Correlation is significant at the 0.05 level (2-tailed).

.509

.151

Debtors Turnover Ratio

Assets Turnover Ratio

Sig. (2tailed)
N
Pearson
Correlat
ion

4
-.782

-.782

.849

.218

.151

4
1

4
-.687

.313
4
-.687

4
1

.313
4

INVENTORIES/
CURRENT ASSET DEBTORS/CA

BANK/CA

LOAN/CA

2013-14

72.08

22.93

4.26

82.40

2012-13

66.13

26.99

6.87

78.77

2011-12

50.21

29.63

20.14

63.81

2010-11

43.60

29.16

27.22

60.82

MOTAALS TEST

Year

Debtors to
current
assets

Inventories
to current
assets

Cash and
Bank
Balance to
current
assets

Loans and
Advances to Cumulative Overall
current
ranking
assets

2014-13

13

2013-12

11

2012-11

2011-10

RATIOS / YEAR

2014 2013 2012 2011

Mean

S.D.

C.O.V

Operating Profit
Margin(%)

11.7 9.76 6.99

9.9

9.875

1.943 20.27%

Current Ratio

0.78 1.04 1.13 1.47

1.105

0.285 25.79%

Quick Ratio

0.68 0.90 1.03 1.14

0.9375

0.197 21.00%

25.21 23.48 19.63 25.83

23.54

2.78

Debtors Turnover Ratio 29.85 35.50 38.23 43.66

36.81

5.74 15.61%

Assets Turnover Ratio

2.322

0.10 10.81%

Inventory Turnover
Ratio

2.02 2.36 2.28 2.63

11.6%


Operating Profit Margin

Current Ratio

Opera
ting
Profit Curre
Inventory Debtors
Assets
Margi nt Quick Turnover Turnover Turnover
n
Ratio Ratio
Ratio
Ratio
Ratio
Pears
1 -.390 -.631
.885
-.492
-.291
on
Correl
ation
Sig.
.610 .369
.115
.508
.709
(2tailed)
N
4
4
4
4
4
4
Pears -.390
1 .960*
.084
.994**
.964*
on
Correl
ation
Sig.
.610
.040
.916
.006
.036
(2tailed)
N
4
4
4
4
4
4

Quick Ratio

Inventory Turnover Ratio

Debtors Turnover Ratio

Assets Turnover Ratio

Pearson
Correlati
on
Sig. (2tailed)

-.631

.960*

.369

.040

N
Pearson
Correlati
on
Sig. (2tailed)

4
.885

4
.084

4
-.197

.115

.916

.803

N
Pearson
Correlati
on
Sig. (2tailed)

4
-.492

4
.994**

4
.986*

4
-.029

.508

.006

.014

.971

N
Pearson
Correlati
on
Sig. (2tailed)

4
-.291

4
.964*

4
.905

4
.173

4
.947

.709

.036

.095

.827

.053

*. Correlation is significant at the 0.05 level (2-tailed).

**. Correlation is significant at the 0.01 level (2-tailed).

-.197

.986*

.905

.803

.014

.095

4
1

4
-.029

4
.173

.971

.827

4
1

4
.947
.053
4
1

INVENTORIES/
CURRENT ASSET DEBTORS/CA

BANK/CA

LOAN/CA

2013-14

45.44

37.77

16.82

86.86

2012-13

45.56

35.20

19.18

94.78

2011-12

34.74

18.10

47.11

55.17

2010-11

29.80

17.30

52.83

45.88

MOTAALS TEST

Year

Debtors to
current
assets

Inventories
to current
assets

Cash and
Bank
Balance to
current
assets

Loans and
Advances to Cumulative Overall
current
ranking
assets

11

11

10

2014-13
2013-12
2012-11
2011-10

CONCLUSION As we observed the following ratios of 6 companies

chosen by us:
Tata motors, Hyundai, Maruti- Suzuki, Ford, TVS Motors
Under the period of study of four from 2011-2014, these
are the conclusions we drew

 Current Ratios: It shows a decreasing trend that means

current assets are reducing while the current liabilities
may be increasing too. None of the observed companies
keep 2:1 ratio.
Quick Ratio: It also shows the decreasing trend in the
industry. Hence the industry needs to improve its quick
ratio as of now.
Inventory Turnover Ratio too has decreased which
means the time lag of inventory to convert into sales
has increased. This means the demand analysis for the
industry is overestimated and not appropriate. So
industry should look into it and try to reduce it.

 Debtors Turnover Ratio: Higher debtor turnover ratio is good

because more higher debtor turnover ratio means, more
fastly, we are collecting money. But in the automobile industry
it is lower thats why it needs to be improved.
Assets Turnover Ratio: This ratio measures how efficiently a
firm uses its assets to generate sales. Higher turnover ratios
mean the company is using its assets more efficiently.This
ratio has increased for almost all companies which shows that
industry is using its assets effectively.
Working Capital Turnover Ratio: Working capital is defined as
the amount by which current assets exceed current liabilities.
A higher working capital turnover ratio is better. It means that
the company is utilizing its working capital more efficiently i.e.
generating more revenue using less investment. This ratio is
increasing for all companies which is a good sign for industry.

 Relationship between liquidity and profitability: Current

ratio and Quick Ratio are usually used to assess the
liquidity position of a company. From the scatter plots it
is observed that there is a negative relationship
between Profitability and Current/Quick Ratio.
Hence it can be concluded that there is a negative
relationship between profitability and liquidity. As the
liquidity increases, profitability decreases.
So despite the huge potential and emerging automobile
market, individual profitability of firms is going down.