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In our present day economy, finance is defined as the provision

of money at the time when it is required. Every enterprise, whether big,
medium of small, needs finance to carry its operations and to achieve its
targets. In fact, finance is so indispensable today that it is rightly said to be
the lifeblood of an enterprise. Without adequate finance, no enterprise can
possibly accomplish its objectives.
Financial management is applicable to every type of
organization, irrespective of its size ind of nature. It is as useful to a small
concern as to a big unit. ! trading concern gets the same utility from its
application as a manufacturing unit may e"pect. #his subject is important
and useful for all types of ownership organizations. Every management
aims to utilize its funds in a best possible and profitable way. $o this
subject is acquiring a universal applicability.
It is indispensable in any organization as helps in%
&I' Financial planning and successful promotion of an enterprise(
&II' !cquisition of funds as and when required at the minimum possible
&III' )roper use and allocation of funds(
&I*' #aing sound financial decisions (
&*' Improving the profitability through financial controls(
&*I' Increasing the wealth of the investors and the nation( and
&vii' )romoting and mobilizing individual and corporate savings.
Financial management is concerned with procurement and use
of funds. Its main aim is to use business funds in such a way that the firm+s
value,earnings are ma"imized. #here are various alternatives available for
using business funds. Each alternative course has to be evaluated in detail.
#he pros and cons of various decisions have to loo into before
maing a final selection. #he decisions will have tae into consideration the
commercial strategy of the business. Financial management provides a
framewor for selecting a proper course of action and deciding a viable
commercial strategy. #he main objective of a business is to ma"imize the
owner+s economic welfare. #his objective can be achieved by%
-. )rofit .a"imization
/. Wealth ma"imization
1. Profit maximization:
)rofit earning is the main aim of every economic activity. !
business being an economic institution must earn profit to cover its costs
and provide funds for growth. 0o business can service without earning
profit. )rofits are a measure of efficiency of a business enterprise. )rofits
also serve as a protection against riss which cannot be ensured. #he
accumulated profits enable a business to face riss lie fall in prices,
competition from other units, adverse government policies etc. #hus, profit
ma"imization is considered as the main objective of business%
&i' When profit 1 earning is the aim of business then profit ma"imization
should be the obvious objective.
&ii' )rofitability is a barometer for measuring efficiency and economic
prosperity of a business enterprise, thus, profit ma"imization is justified
on the grounds of rationality.
&iii' Economic and business conditions do not remain same at all the times.
#here may be adverse business conditions lie recession, depression,
severe competition etc. ! business will be able to service under
unfavorable situation only if it has some past earnings to rely upon.
#herefore a business should try to earn more and more when situation
is favorable.
&iv' )rofits are the main sources of finance for the growth of a business.
$o, a business should aim at ma"imization of profits for enabling its
growth and development.
&v' )rofitability is essential for fulfilling social goals also. ! firm by pursuing
the objective of profit ma"imization also ma"imizes socio2 economic
2. !a"t# maximization
Wealth ma"imization is the appropriate objective of an
enterprise financial theory asserts that wealth ma"imization is the single
substitute for stocholder+s utility. When the firm ma"imizes the
stocholder+s wealth, the individual stocholder can use this wealth to
ma"imize his individual utility. It means that by ma"imizing stocholder+s
wealth firm is operating consistently towards ma"imizing stocholder+s
! financial statement is a collection of data organized according to
logical and consistent accounting procedures. Its purpose is to convey
an understanding of some financial aspects of a business firm. It may
show a position at a movement in time, as in the case of balance sheet,
or may reveal a series of activities over a given period of time, as in the
case of an income statement.
O$%!&ti'!( of finan&ia" (tat!m!nt(:
Financial statements are the sources of information on the basis of
which conclusions are drawn about the profitability and financial position
of a concern. #hey are the major means employed by firms to present
their financial situation of owners, creditors and the general public. #he
primary objective of financial statements is to assist in decision maing.
#he !ccounting )rinciples 3oard of !merica &!)3' states the following
objectives of financial statements%
&i' #o provide reliable financial information about economic resources and
obligations of business firm.
&ii' #o provide other needed information about changes in such economic
resources and obligations.
&iii' #o provide reliable information about changes in net resources
&resources less obligations' arising out of business activities.
&iv' #o provide financial information that assists in estimating the earning
potentials of business.
Financial analysis is the process of determining financial
strengths and weaness of the firm by establishing strategic relationship
between the items of the items of the balance sheet, profit and loss account
and other operative data. In the words of .yers, 4financial statements
analysis is largely a study of relationship among various financial factors in
a business as disclosed by a single set of statements, and a study of the
trend of these factors as shown in series of statements.
! finan&ia" ratio &or a&&o*ntin+ ratio' is a relative magnitude of two
selected numerical values taen from an enterprise5s financial statements.
6ften used in accounting, there are many standard ratios used to try to
evaluate the overall financial condition of a corporation or other
organization. Financial ratios may be used by managers within a firm, by
current and potential shareholders &owners' of a firm, and by a firm5s
creditors. Financial analysts use financial ratios to compare the strengths
and weanesses in various companies.
If shares in a company are traded
in a financial maret, the maret price of the shares is used in certain
financial ratios.
9atios can be e"pressed as a decimal value, such as :.-:, or given as an
equivalent percent value, such as -:;. $ome ratios are usually quoted as
percentages, especially ratios that are usually or always less than -, such
as earnings yield, while others are usually quoted as decimal numbers,
especially ratios that are usually more than -, such as ),E ratio( these latter
are also called m*"ti,"!(. <iven any ratio, one can tae its reciprocal( if the
ratio was above -, the reciprocal will be below -, and conversely. #he
reciprocal e"presses the same information, but may be more
understandable% for instance, the earnings yield can be compared with
bond yields, while the ),E ratio cannot be% for e"ample, a ),E ratio of /:
corresponds to an earnings yield of =;.
So*r&!( of -ata for finan&ia" ratio(
*alues used in calculating financial ratios are taen from the balance sheet,
income statement, statement of cash flows or &sometimes' the statement of
retained earnings. #hese comprise the firm5s >accounting statements> or
financial statements. #he statements5 data is based on the accounting
method and accounting standards used by the organization.
P*r,o(! an- t.,!( of ratio(
Financial ratios quantify many aspects of a business and are an integral
part of the financial statement analysis. Financial ratios are categorized
according to the financial aspect of the business which the ratio measures.
Li/*i-it. ratio( measure the availability of cash to pay debt.
ratio( measure how quicly a firm converts non2cash assets to cash
0!$t ratio( measure the firm5s ability to repay long2term debt.
Profita$i"it. ratio( measure the firm5s use of its assets and control of its
e"penses to generate an acceptable rate of return.
Mar1!t ratio(
measure investor response to owning a company5s stoc and also the cost
of issuing stoc.
#hese are concerned with the return on investment for
shareholders, and with the relationship between return and the value of an
investment in company+s shares.
Financial ratios allow for comparisons
between companies
between industries
between different time periods for one company
between a single company and its industry average
9atios generally are not useful unless they are benchmared against
something else, lie past performance or another company. #hus, the
ratios of firms in different industries, which face different riss, capital
requirements, and competition are usually hard to compare.
A&&o*ntin+ m!t#o-( an- ,rin&i,"!(
Financial ratios may not be directly comparable between companies that
use different accounting methods or follow various standard accounting
practices. .ost public companies are required by law to use generally
accepted accounting principles for their home countries, but private
companies, partnerships and sole proprietorships may not use accrual
basis accounting. Barge multi2national corporations may use International
Financial 9eporting $tandards to produce their financial statements, or they
may use the generally accepted accounting principles of their home
#here is no international standard for calculating the summary data
presented in all financial statements, and the terminology is not always
consistent between companies, industries, countries and time periods.
0!finition of 4Profita$i"it. 3atio(4
! class of financial metrics that are used to assess a business5s ability to
generate earnings as compared to its e"penses and other relevant costs
incurred during a specific period of time. For most of these ratios, having a
higher value relative to a competitor5s ratio or the same ratio from a
previous period is indicative that the company is doing well.
!n ability to earn ma"imum from ma"imum use of available resources by
the business concerns is nown as C)rofitability+. #he status of profitability
depends upon the quantum of sales,nature of costs and proper use of
financial resources. #he profitability ratios are used to calculate the
efficiency of operating of the company. )rofits are ultimate goal of every
company and it should be continuously evaluated in terms of profits.
)rofitability analysis comprises the stydy of sales , analysis of cost of goods
sold , analysis of gross margin on sales , analysis of operating e"penses ,
analysis of operating profit D analysis of profit in relation to sales and
<enerally four major profits are calculated, they are
i. <ross profit ratio
ii. 0et profit ratio
iii. E"pense ratio
iv. 9eturn on capital employed
i.Gro(( ,rofit ratio:
#he first profitability ratio in relation to sales reflects the
efficiency with which management produces each unit of product. #he
<ross profit ratio may be interpreted by comparing the ratio of the same
concern over a period of time or comparing the ratio of the two similar
concerns or by comparing the ratio of a year with some standard fi"ed by
management . 0ormally , a higher ratio is always considered good D
serves as a inde" of higher profitability. It is calculated by dividing the
<ross )rofit with $ales.

<ross profit
<ross )rofit ratio G " -::
ii. N!t ,rofit ratio:
It is also called as 0et )rofit to $ales 9atio. 0et profit ratio
e"plains the net profit of the company after paying ta"es of particular
period. It establishes relation between net profit and sales D as such
e"pressed as percentage to sales.
0et )rofit
0et profit ratioG X 100
Each e"pense is related to sales D e"pressed as percentage to sales.
Its formula is %2

E"pense ratio G " -::
3!t*rn on &a,ita" !m,"o.!- is an accounting ratio used in finance, valuation, and
T#! form*"a
&E"pressed as a ;'
It is similar to 9eturn on !ssets &96!', but - taes into account sources of
financing. 0et 6perating )rofit !fter #a" &06)!#' is equal to E3I# H &- 2
ta"' 22 the return on the capital employed should be measured in after ta"
O,!ratin+ in&om!
E3I# stands for Earnings before interest and ta"
Ca,ita" !m,"o.!-
In the denominator we have net assets or capital employed instead of total
assets &which is the case of 9eturn on !ssets'. Eapital Employed has
many definitions. In general it is the capital investment necessary for a
business to function. It is commonly represented as total assets less
current liabilities &or fi"ed assets plus woring capital requirement'.
96EE uses the reported &period end' capital numbers( if one instead uses
the average of the opening and closing capital for the period, one obtains
3!t*rn on A'!ra+! Ca,ita" Em,"o.!- &3OACE'.
3OCE is used to prove the value the business gains from its assets and
liabilities. ! business which owns lots of land will have a smaller 96EE
compared to a business which owns little land but maes the same profit.
It basically can be used to show how much a business is gaining for its
assets, or how much it is losing for its liabilities.
0ra7$a&1( of 3OCE
#he main drawbac of 96EE is that it measures return against the boo
value of assets in the business. !s these are depreciated the 96EE will
increase even though cash flow has remained the same. #hus, older
businesses with depreciated assets will tend to have higher 96EE than
newer, possibly better businesses. In addition, while cash flow is affected
by inflation, the boo value of assets is not. Eonsequently revenues
increase with inflation while capital employed generally does not &as the
boo value of assets is not affected by inflation''.
#ata .otors Bimited &formerly #EBE6, short for >#ata Engineering and
Bocomotive Eompany>' is an
Indian multinational automotive manufacturing company headquartered
in .umbai, .aharashtra, India and a subsidiary of the #ata <roup. Its
products include passenger cars, trucs, vans, coaches, buses and military
vehicles. It is the world5s eighteenth2largest motor vehicle manufacturing
company, fourth2largest truc manufacturer and second2largest bus
manufacturer by volume.
#ata .otors has auto manufacturing and assembly plants
in Iamshedpur, )antnagar, Bucnow, $anand, Fharwad and )une in India,
as well as in !rgentina, $outh !frica, #hailand and the Jnited Kingdom. It
has research and development centres in )une, Iamshedpur, Bucnow
and Fharwad, India, and in $outh Korea, $pain, and the Jnited Kingdom. It
has a bus manufacturing joint venture with .arcopolo $.!.,a construction
equipment manufacturing joint venture with Litachi and a joint venture
with Fiat in India.
Founded in -M@= as a manufacturer of locomotives, the company
manufactured its first commercial vehicle in -M=@ in a collaboration
with Faimler23enz !<, which ended in -MAM. #ata .otors entered the
passenger vehicle maret in -MM- with the launch of the #ata $ierra,
becoming the first Indian manufacturer to achieve the capability of
developing a competitive indigenous automobile.
In -MMN launched the
first fully indigenous Indian passenger car, the Indica.
#ata .otors acquired the $outh Korean truc manufacturer Faewoo
Eommercial *ehicles Eompany in /::@.
#ata .otors purchased the 3ritish premium car maer Iaguar Band
9over &Iaguar, Band 9over and 9ange 9over cars' in /::N.
#ata .otors is listed on the 3ombay $toc E"change, where it is a
constituent of the 3$E $E0$EO inde", the 0ational $toc E"change of
India and the 0ew Por $toc E"change. #ata .otors is raned ?-@th in
the /:-/ Fortune <lobal =:: raning of the world5s biggest corporations.
#ata entered the commercial vehicle sector in -M=@ after forming a joint
venture with Faimler23enz of <ermany. !fter years of dominating the
commercial vehicle maret in India, #ata .otors entered the passenger
vehicle maret in -MM- by launching the #ata $ierra, a multi utility vehicle.
!fter the launch of three more vehicles, #ata Estate &-MM/( a station
wagon design based on the earlier 5#ata.obile5 &-MNM', a light commercial
vehicle', #ata $umo &-MM@( BE*' and #ata $afari &-MMN( India5s first sports
utility vehicle'.
#ata launched the Indica in -MMN, the first fully indigenous Indian
passenger car. !lthough initially criticised by auto2analysts, its e"cellent
fuel economy, powerful engine and an aggressive mareting strategy made
it one of the best selling cars in the history of the Indian automobile
industry. ! newer version of the car, named Indica */, was a major
improvement over the previous version and quicly became a mass2
favourite. #ata .otors also successfully e"ported large quantities of the car
to $outh !frica. #he success of Indica played a ey role in the growth of
#ata .otors.
In /::@ #ata .otors acquired Faewoo5s $outh Korea2based truc
manufacturing unit, Faewoo Eommercial *ehicles Eompany, later
renamed #ata Faewoo.
6n /Q $eptember /::@, #ata .otors rang the opening bell at the 0ew Por
$toc E"change &0P$E' to mar the listing of #ata .otors.
In /::=, #ata .otors acquired a /-; controlling stae in the $panish bus
and coach manufacturer Lispano Earrocera.
#ata .otors continued its
maret area e"pansion through the introduction of new products such as
buses &$tarbus D <lobus, jointly developed with subsidiary Lispano
Earrocera' and trucs &0ovus, jointly developed with subsidiary #ata
In /::A, #ata formed a joint venture with the 3razil2based .arcopolo, #ata
.arcopolo 3us, to manufacture fully built buses and coaches.
In /::N, #ata .otors acquired the 3ritish car maer Iaguar Band 9over,
manufacturer of the Iaguar, Band 9over and Faimler lu"ury car brands,
from Ford .otor Eompany.
In .ay /::M #ata unveiled the #ata World #ruc range jointly developed
with #ata Faewoo.
Febuting in $outh Korea, $outh !frica, the $!!9E
countries and the .iddle2East by the end of /::M.
#ata acquired full ownership of Lispano Earrocera in /::M.
In /:-:, #ata .otors acquired an N:; stae in the Italian design and
engineering company #rili" for R-.N= million. #he acquisition formed part of
the company5s plan to enhance its styling and design capabilities.
In /:-/, #ata .otors announced it will invest around A billion on
developing Futuristic Infantry Eombat *ehicles in collaboration with F9F6.
In /:-?, #ata .otors announced it will sell in India, the first vehicle in the
world to run on compressed air &engines designed by the French company
.FI' and dubbed >.ini E!#>.
#he role of a responsible citizen does not go unheeded in #elcon, in the
true spirit of the #ata group. #elcon wors in close collaboration with a
number of 0<6s to channelize its wor. #elcon5s thrust remains
educations, environment and health.

In an environment protection drive several multiple thousands of tree

samplings were planted in Fharwad and Iamshedpur inside the factory
premises and in the #elcon townships. #his remains an ongoing annual
activity, never to give up.
E-*&ationa" a((i(tan&! to t#! ,#.(i&a"". -i(a$"!-:
!ssistance is e"tended to schools imparting special education such as
the $pastic $ociety of $outhern India $chool and Karnataa $chool for
the Feaf. $ponsorship of education for children of Beprosy patients
residing in self2settled colonies, in collaboration with 0av Iagran .anav
So&ia" -!'!"o,m!nt%
!wareness programmes for women in villages in areas of hygiene,
education and all2round development. Industrial training to worthy school
Infra(tr*&t*r! (*,,ort to "o&a" !-*&ationa" in(tit*tion(:
Eonstruction of boundary wall and toilets and supply of furniture to village
schools in 3elur. !ssistance to schools in Iamshedpur to set up computer
laboratories and sports facilities.
P*$"i& 8!a"t# an- Fami". !"far! %
#elcon sponsors immunization programmes in collaboration with )arivar
Kalyan $ansthan that e"tends medical help to thousands of children who
have no access to basic health programmes. #he year is dotted with blood
donation and medical camps. Family planning counseling and programmes
are held in collaboration with )arivar Kalyan $ansthan whereby people are
imparted lectures and operations are performed.
-. #o study the <ross )rofit 9atio of #ata .otors for ? assessment
/. #o study the 0et )rofit 9atio of #ata .otors for ? assessment
?. #o study the E"pense 9atio of #ata .otors for ? assessment
@. #o study the 9eturn on Eapital Employed for ? assessment years.
#he research design refers to preplanning of what a researcher
does in his study. #he design adopted in the study comes under
e"ploratory and evaluatory research. $ince the data collected from the
financial statements of the company is analyzed under various financial
and tactical tools.
Mo-!( of 0ata &o""!&tion(
#he study is based on one type data , obtained from the #ata
.otors ltd.,
#hey are%
$econdary data
S!&on-ar. 0ata9
$econdary data is based on the past data i.e. 7three years !nnual
9eports /:--2/:-@8
Sam,"in+ :
Sam,"! ar!a : Tata Motor(
Too"( for 0ata Ana".(i( ; Int!r,r!tation : P!r&!nta+! m!t#o-
Too"( for 0ata Pr!(!ntation : I #a'! *(!- too"( "i1! ta$"! < $ar+ra,# ;
&#art for ,r!(!ntin+ m. -ata r!+ar-in+ t#! to,i&.
1. Gro(( Profit 3atio :
6f !ssessment Pear /:--2-/
<ross profit ratio G <ross profit , $ales H-::
GN.MM, @NN.Q: N -::
G -.N?
6f !ssessment Pear /:-/2-?
<ross profit ratio G ?Q.NN,A/M.@= H -::
G A.:-
6f !ssessment Pear /:-?2-@
<ross profit ratio G A:.-M,N-A.N? H -::
G Q.?A
)!ar Gro(( Profit 3atio =3( in Cr>
/:--2-/ -.N?
/:-/2-? A.:-
/:-?2-@ Q.?A
<ross )rofit ratio &9s in Er'
/:--2-/ /:-/2-? /:-?2-@
<ross )rofit ratio &9s in
In the above graph , years are taen on "2a"is D <ross profit ratio is taen
on y2 a"is . From the given data it can be interpreted that there was an
increase in <)9 by //N.@-; from the financial year /:--2-/ to /:-/2-?.
Further there was an increase of //.@A ; in the year /:-?2-@.
6f !ssessment Pear /:--2-/
0et profit ratio G 0et profit , $ales H -::
G@.-? ,@NN.Q: H -::
6f !ssessment Pear /:-/2-?
0et )rofit 9atio G /:.AQ,A/M.@= H -::
G ?./N
6f !ssessment Pear /:-?2-@
0et profit ratio G @:.QA,N-A.N? H -::
)!ar N!t Profit 3atio =3( in Cr>
/:--2-/ ?.@A
/:-/2-? 2.2@
/:-?2-@ A.BB
0et )rofit ratio &9s in Er'
/:--2-/ /:-/2-? /:-?2-@
0et )rofit ratio &9s in
In the above graph years are taen on "2a"is D 0et profit
ratio is taen on y2a"is . From the given data it can be
interpreted that there was an increase in 0)9 by /@@; from
the financial year /:--2-/ to /:-/2-?. Further there was an
increase of =/.-?; in the year /:-?2-@.
6f !ssessment Pear /:--2-/
E"pense 9atio G E"pense , $ales H -::
6f !ssessment Pear /:-/2-?
E"pense ratio G==?.NQ,A/M.@= H -::
6f !ssessment Pear /:-?2-@
E"pense ratio G Q?-.QA,N-A.N?H-::
)!ar Ex,!n(! 3atio =3( in Cr>
/:--2-/ @B.C@
/:-/2-? @C.BB
/:-?2-@ @B.D@
E"pense 9atio &9s in Er'
/:--2-/ /:-/2-? /:-?2-@
E"pense 9atio &9s in Er'
In the above graph , years are taen on "2a"is D E"pense
ratio is taen on y2a"is . From the given data it can be
interpreted that there was an increase in e"pense ratio by
-.MM; from the financial year /:--2-/ to /:-/2-?. Further
there was an decrease of -.N:; in the year /:-?2-@.
6f !ssessment Pear /:--2-/
9eturn on Eapital Employed G )rofit before interest D ta" , capital
employed H-::
6f !ssessment Pear /:-/2-?
9eturn on capital employed G ?Q.NN,-:: H -::
6f !ssessment Pear /:-?2-@
9eturn on capital employed G A:.-M,-::H-:: GA:.-M
)!ar Ex,!n(! 3atio =3( in Cr>
/:--2-/ @.BB
/:-/2-? 2C.@@
/:-?2-@ E?.1B
9eturn on capital employed &9s in Er'
/:--2-/ /:-/2-? /:-?2-@
9eturn on capital
employed &9s in Er'
In the above graph , years are taen on "2a"is D 9eturn on
capital employed is taen on y2a"is .From the given data it
can be interpreted that there was an increase in return on
capital employedby ?/-.?=; from the financial year/:--2-/
to /:-/2-?. Further there was an increase of =N.NM;in the
year /:-?2-@.
)E9EE0#!<E 6F I0E9E!$E I0 )96FI#!3IBI#P 9!#I6%
)EA3 GP3 NP3
/:--2-/ 22 22 22 22
/:-/2-? //N.@:; /@@; -.MM; ?/-.?=;
/:-?2-@ //.@A; =/.-?; -.N:; =N.NM;
6perating loss decreased up to the year /:-@ .
#he tata motors ltd. earned net profit in all the years.
It had been maintaining high inventory levels for all the years.
In most of the years debtor+s collection period was very high.
#he funds were also raised through debts with high interest rates.
$ome funds are lost in operations.
#.B should adopt cost control measures by drawing inspiration from
prospering *ELIEBE factories.
#.B should reduce operating and administrative e"penses, it will
increase overall efficiency of the firm.
! high level of debt introduces infle"ibility in the firms operations due to
increasing interference and pressures from creditors. ! high debt
company is able to borrow funds on very restrictive terms and
conditions. $o, it should raise owners funds.
)96FI#!3IBI#P 9!#I6 !0!BP$I$ is defined as systematic use of
ratio to interpret the financial statements so that strength and
weaness of firm as well as historical performance and current
financial condition can be determined.
#he profitability ratio is an aid to management in maing decisions.
#he ratio if discriminately and wisely interpreted be useful tool of
financial analysis.
!ccording to analysis of profitability ratios of three years of #ata
.otors Eo., I came to now that the company made a good effort to
increase the profit. It has used the all the assets effectively to get
good returns. #he ratios lie gross profit ,net profit D return on capital
employed all are increasing year by year it shows that company is in
profit maing. #ata .otors has good brand name and it has
maintained a good relationship between customers. !nd it can
increase its profit still better in the upcoming time period.
-. #ime was the major constraint.
/. It was a tedious tas to get the current annual reports or e"act
financial position of the firm.
?. It was e"pensive to get the data D prepare the project report.
@. #he study is done only on 3alance $heet D )rofit and loss a,c of
the company.
Financial .anagement
Fr. $.). <J)#!
$ahitya 3hawan )ublications
Financial .anagement #heory and )ractice
)rasanna Ehandra
$i"th Edition
#ata .c <raw Lill )ublishing company.
.anagement !ccounting )rinciples and )ractice
9. K. $harma $ahashi K. <upta
Eight edition
alyani publishers.