The company is the India's largest automobile producing industry in the country. The company is having 24000 employees all across their units. The company was established in 1945 and enrolled its first vehicle in Uttar Pradesh in 1954 and taking over fiat in 1954.
It is the first Indian automobile company which is listed in the New York stock exchange in September 2004. The company has many mergers and accusations with other foreign companies like jaguar, land rover, and fiat to enter the foreign market and make the country aware of the foreign products present in the market.
(http://www.tatamotors.com/our_world/profile.php)
Going further with the strengths and weakness of the company:-
Strengths of the company:-
The company has various ranges of products to satisfy all kinds of consumers present in the market.
New products every time as there are variety of products for all kind of consumers starting from lower class to upper class.
With mergers and acquisitions high end profit and market leader in the country with the products and launching of new products.
New technological skills and high end employees for product creation sole distributors and manufacturers of the automobiles for lower middle class.
Weakness:-
A weak safety standard as there is less safety in Tata cars so consumer switches over to the other product.
The company follows a low cost strategy in its luxury cars also but the consumers when buys a luxury car of the company is not satisfied with the segment so shifts over to the other brand vehicle.
Shareholders not getting benefit out of the company due to low ROI.
Opportunities-
The company produces low cost vehicles so the company mainly can target lower and middle class segments for their selling as in the country middle and low class people are more than higher class.
Company can manufacture and bring up new luxury cars in the market as there are fewer players for luxury cars in the market.
Getting with new joint ventures in other countries to promote the brand and the vehicle.
Threats:-
Low safety standards of the product so it could be sold less.
Rising prices of diesel, petrol so producing more efficient vehicles.
Competitors following the same strategy that the Tata Company is following.
(http://www.freeswotanalysis.com/automobile/76-tata-motors-swot-analysis.html)
We would look into the ratio analysis of the company and compare both the financial years of the company that is 2009 and 2010 so as to see the progress of the company.
Profitability Ratio:-
Gross Margin =
Gross profit / Sales
Gross Margin (2010) =103,514.5 / 358,086.0 =.29
Gross Margin (2009) =90,390.2 /325,143.8 =.28
EBIT Ratio=PAT / EBIT
For 2009
=21,677.0 / 37878.9=.57
For 2010
=21,699.9 / 35384.5=.61
Return on investment=EBIT / Capital employed
For 2009
=39575.5 / 150320.7=.26
For 2010
=35977 / 115910.3
.3 1Return on equity
=PAT / Net worth
For 2009
=21,677.0 / 86,975.2 =.25
For 2010
=21,699.9 / 77,216.7=.28
In profitability ratio, the gross profit ratio is increasing in 2010 than 2009. It
means its profit is growing in sales. But company's EBIT ratio is decreasing means
interest on capital and tax rate is increased in 2010 than 2009 which is responsible
in decreasing its PAT.
Activity Ratio
Inventory Turnover Ratio:-Cost of goods sold / Inventory
(2010)
(2009)
Cost of goods sold
254,571.5
234,753.6
Inventory
32,946.4
31,669.0
For 2008:-
254,571.5 / 32,946.4
=7.72
For 2009:-
234,753.6 / 31,669.0
= 7.4 1
Debtor Turnover Ratio:-Sales / debtor
For 2010:-
358,086.0 (sales) / 97,555.9 (debtor) =
3.67
For 2009:-
325,143.8 (sales) / 101,638.5 (debtor) =
3.20
Average collection period (2010) = 360 / 3.67=
98 days
Average collection period (2009) = 360 / 3.20=
112 days
Assets Turnover Ratio: - Sales / Net assets or capital employed
For 2010:-
358,086.0 (sales) /150320.7 (c.e.) =
2.38
For 2009:-
325,143.8 (sales) / 115910.3 (c.e.) =
2.80
Working Capital Turnover Ratio: - Sales / Net working capital
Net Working Capital=
Current assets - Current liability
For 2010
=192,673.5 -188,948.8 = 3724.7
For 2009
= 162,779.2 - 127,633.7 = 35145.5
For 2010:-
358,086.0 (sales) / 3724.7 (N.W.C.) =96.13
For 2009:-
325,143.8 (sales) / 35145.5 (N.W.C) =9.25
As we seen, company's efficiency of using its assets is increasing in 2010 than
2009. The inventory turnover ratio which shows its efficiency of selling product is
increasing.
INCOME STATEMENT OF TATA MOTORS
(Currency in millions)
(2009)
(2010)
Revenues
323,612.0
356,514.8
Other Revenues
19.6
65.0
TOTAL REVENUES
325,143.8
358,086.0
Cost of Goods Sold
234,753.6
254,571.5
GROSS PROFIT
90,390.2
103,514.5
Selling General& Admin Expenses, Total
30,811.0
35,136.3
R&D Expenses
850.2
659.5
Depreciation & Amortization, Total
6,880.9
7,820.7
Other Operating Expenses
17,508.5
24,046.6
OTHER OPERATING EXPENSES, TOTAL
56,050.6
67,663.1
OPERATING INCOME
34,339.6
35,851.4
Interest Expense
-4,650.6
-9,127.2
Interest and Investment Income
592.5
1,696.6
NET INTEREST EXPENSE
-4,058.1
-7,430.6
Income (Loss) on Equity Investments
394.2
652.0
Currency Exchange Gains (Loss)
652.1
1,376.1
Other Non-Operating Income (Expenses)
-1.4
-0.6
EBT, EXCLUDING UNUSUAL ITEMS
31,326.4
30,448.3
Gain (Loss) on Sale of Assets
--
1,103.6
Other Unusual Items, Total
-52.2
-37.0
EBT, INCLUDING UNUSUAL ITEMS
31,274.2
31,514.9
Income Tax Expense
8,832.1
8,515.4
Minority Interest in Earnings
-742.2
-1,322.5
Earnings from Continuing Operations
21,699.9
21,677.0
NET INCOME
21,699.9
21,677.0
BALANCE SHEET OF TATA MOTORS
(2009)
(2010)
Assets
(Currency in millions Rs)
Cash and Equivalents
11,542.7
38,331.7
TOTAL CASH AND SHORT TERM INVESTMENTS
11,542.7
38,331.7
Accounts Receivable
17,022.2
20,605.1
Notes Receivable
84,553.
76,938.9
Other Receivables
62.7
11.9
TOTAL RECEIVABLES
101,638.5
97,555.9
Inventory
31,669.0
32,946.4
Prepaid Expenses
1,247.3
3,334.8
Other Current Assets
16,681.7
20,504.7
TOTAL CURRENT ASSETS
162,779.2
192,673.5
Gross Property Plant and Equipment
129,408.3
182,484.4
Accumulated Depreciation
-
-54,266.5
-57,652.4
NET PROPERTY PLANT AND EQUIPMENT
75,141.8
124,832.0
Goodwill
4,430.1
5,661.6
Long-Term Investments
11,745.9
26,658.3
Deferred Charges, Long Term
119.3
2,442.1
Other Intangibles
--
1,429.6
Other Long-Term Assets
-
--
TOTAL ASSETS
254,216.3
353,697.1
LIABILITIES & EQUITY
Accounts Payable
48,723.3
67,832.8
Accrued Expenses
4,704.9
5,389.3
Short-Term Borrowings
34,325.
52,503.2
Current Income Taxes Payable
1,084.2
901.4
Other Current Liabilities, Total
38,789.2
62,104.1
Unearned Revenue, Current
6.7
218.0
TOTAL CURRENT LIABILITIES
127,633.7
188,948.8
Long-Term Debt
38,693.6
63,345.5
Capital Leases
--
--
Minority Interest
2,499.6
4,683.1
Deferred Tax Liability Non-Current
8,172.7
9,744.5
TOTAL LIABILITIES
176,999.6
266,721.9
Common Stock
3,853.6
3,854.9
Additional Paid in Capital
19,364.0
15,372.2
Retained Earnings
44,087.8
58,523.7
Comprehensive Income and Other
9,911.3
9,224.4
TOTAL COMMON EQUITY
77,216.7
86,975.2
TOTAL LIABILITIES AND EQUITY
254,216.3
353,697.1
Liquidity ratio
Current ratio=Current assets / Current liability
2010
2009
Current Assets
192,673.5
162,779.2
Current Liability
188,948.8
127,633.7
Current Ratio (2008)
192,673.5/ 188,948.8 =1 .01
Current Ratio (2007)
162,779.2/ 127,633.7 =1 .27
Quick Ratio (2008)
C.A. - Invent. / C.L.
192,673.5 - 32,946.4 / 188,948.8 =.85
Quick Ratio (2007)
162,779.2- 31,669.0/127,633.7 =1.02
Interval measure -Current assets-inventory. / Avg. daily cash oper. Exp
For 2010-
Average. Daily cash operational. Exp -
Total cash exp. / 365
67,663.1/ 365 = 185.3
Interval measure-
192,673.5 - 32,946.4 / 185.3 = 862 days
For 2009
Avg. daily cash operational. Expenses -
56,050.6/ 365 = 153.5
Interval measure-
162,779.2- 31,669.0 / 153.5= 854 days
In liquidity ratio, we observe that current ratio in 2010 is less in comparison of
2009. It means company's efficiency decreases in paying current liability. And in
quick ratio, it also decreases..
((http://www.scribd.com/doc/14405118/Ratio-Analysis-of-TATA-MOTORS)
HONDA Motors:-
ïƒ Honda motors was born in late 1960 first in Japan coming up with its first car in the world known as k 360 and launching the car in Japan and North Korea with all its power and motivation . The Honda motors came into India in 2000 and launched its first car in India the Honda city with the best seller acclaiming car in India and creating maximum profits out of it. The company also started producing robots in 2005 and genets in 2006 for competing Yamaha in the long run and also is the largest manufacturer of bikes in the world.
(www.hondamotors.com/history.html)
Talking about the strengths and weakness of the company:-
Strengths:-
The company is the largest manufacturer of two wheelers in the world and there is no close competition in the market of the company.
New technology and new innovative techniques.
Fuel efficient cars and products
Various segments targeting various groups and segments.
Weakness:-
Competition in different countries about the product they are launching.
Low profile vehicles not suitable in all countries
High on cost according to the consumer point of view.
Opportunities:-
Rising demand for products in various countries like India and Pakistan.
Designing of various models needed by the consumers
New innovative technology and people in the company for new products launching.
Threats:-
The company designs only petrol and hybrid vehicles which is the biggest threat to the company as the company faces lots of competition in the market due to which market launches diesel vehicles and Honda does not have diesel products in the market .
(http://kninn.blogspot.com/2010/03/swot-analysis-of-honda.html)
HONDA MOTORS RATIO ANALYSIS:-
RATIO ANALYSIS
a. CURRENT RATIO:
Current Ratio shows a firm's ability to meet current liabilities with its current assets.
Computation:
Current Ratio =Current Assets/ Current Liabilities
2009(for Honda)
Current Ratio = 5192609/4287527
Current Ratio = 1.21 times.
2010 (for Honda)
Current Ratio = 5231568/4678550
Current Ratio = 1.11 times.
Company Year
Current Ratio
Honda Motor Co., Ltd.
2010 1.11
2009 1.21
2010 0.95
Analysis:
The current ratio is lower in 2010 as compared to 2009.There is an increase in all the current assets except other receivables which decreased in 2010. The net current assets increased by ¥38959million in 2010 and at the same time the net current liabilities increased by ¥391023 million in 2009.
b. ACID TEST RATIO:
Acid Test Ratio or Quick Ratio shows a firm's ability to meet current liabilities with its most liquid
Assets.
Computation:
Quick ratio = (Current Assets-Inventory)/Current Liabilities.
2009 (for Honda)
Quick ratio = (5192609-1183116)/4287527
Quick ratio = 0.93 times.
2010 (for Honda)
Quick ratio = (5231568-1199260)/4678550
Quick ratio = 0.86 times
8
Company Year
Quick Ratio
Honda Motor Co., Ltd.
2010 0.86
2009 0.93
Analysis:
We have seen that the company had a lower current ratio in 2010 and was unable to meet its short term obligations as compared to 2009. Whereas the quick ratio identifies the role played by the inventories in this context. Therefore the ratio shows that in year 2010 it has decreased as compared to 2009 due to the fact that the investment in inventories is increased by ¥16144 million only and current liabilities have increased by ¥391023 million.
ASSET MANAGEMENT RATIOS.
c. INVENTORY TURNOVER RATIO
Computation:
Inventory Turnover Ratio = Sales/Inventory
2009 (for Honda)
Inventory Turnover Ratio = 9819973/1183116
Inventory Turnover Ratio = 8.32 times
2010 (for Honda)
Inventory Turnover Ratio = 11304485/1199260
Inventory Turnover Ratio = 9.42 times
Company Year
Inventory Turnover Ratio
Company Year
Quick Ratio
Honda Motor Co., Ltd.
2010 0.86
2009 0.93
c. INVENTORY TURNOVER RATIO
Computation:
Inventory Turnover Ratio = Sales/Inventory
2007 (for Honda)
Inventory Turnover Ratio = 9819973/1183116
Inventory Turnover Ratio = 8.32 times
2010 (for Honda)
Inventory Turnover Ratio = 11304485/1199260
Inventory Turnover Ratio = 9.42 times
Company Year
Inventory Turnover Ratio
Honda Motor Co., Ltd.
2010 9.42
2009 8.32
d. FIXED ASSETS TURNOVER RATIO
This ratio measures the extent of turnover or volume of gross income generated by the fixed assets of a
Company or in other words the efficiency in their utilization.
Computation:
Fixed Assets Turnover Ratio = Sales/Fixed Assets
2009 (for Honda)
Fixed assets Turnover Ratio = 9819973/2078728
Fixed assets Turnover Ratio = 4.72 times
2010 (for Honda)
Fixed assets Turnover Ratio = 11304485/2201299
Fixed assets Turnover Ratio = 5.13 times
Company Year
Fixed Asset Turnover Ratio
Honda Motor Co., Ltd.
2010 5.13
2009 4.72
e. TOTAL ASSETS TURNOVER RATIO
Computation:
Total Assets Turnover Ratio = Sales/Total Assets
2009 (for Honda)
Total Assets Turnover Ratio=9819973/120336500
Total Assets Turnover Ratio = 0.81 times
2010 (for Honda)
Total Assets Turnover Ratio=11304485/12615543
Total Assets Turnover Ratio = 0.89 times
Company Year
Total Assets Turnover Ratio
Honda Motor Co., Ltd.
2010 0.89
2009 0.81
f. NET PROFIT TURNOVER RATIO
Computation:
Net Profit Turnover Ratio = Sales/Net Profit
2009 (for Honda)
Net Profit Turnover Ratio = 9819973/592322
Net Profit Turnover Ratio = 16.57 times
2010 (for Honda)
Net Profit Turnover Ratio = 11304485/600039
Net Profit Turnover Ratio = 18.83 times
Company Year
Net Profit Turnover Ratio
Honda Motor Co., Ltd.
2010 18.83
2009 16.57
(http://www.scribd.com/doc/7682754/Honda-Financial-Report-2010-Analysis-With-Ratio-Analysis)
