BALANCE

SHEET OF
TATA
MOTORS
(RS IN
CRORES)
Mar '11

Mar '10

Mar '09

Mar '08

Mar '07

Total Share
Capital

634.65

570.6

514.05

385.54

385.41

Equity Share
Capital

634.65

570.6

514.05

385.54

385.41

3.06

19,351.40

14,208.55

11,855.15

7,428.45

6,458.39

24.19

24.63

25.07

25.51

25.95

20,013.30

14,803.78

12,394.27

7,839.50

6,869.75

Secured
Loans

7,766.05

7,742.60

5,251.65

2,461.99

2,022.04

Unsecured
Loans

8,132.70

8,883.31

7,913.91

3,818.53

1,987.10

Total Debt

15,898.75

16,625.91

13,165.56

6,280.52

4,009.14

CAPITAL
EMPLOYED

35,912.05

31,429.69

25,559.83

14,120.02

10,878.89

Total
Liabilities

35,912.05

31,429.69

25,559.83

14,120.02

10,878.89

21,883.32

18,416.81

13,905.17

10,830.83

8,775.80

8,466.25

7,212.92

6,259.90

5,443.52

4,894.54

13,417.07

11,203.89

7,645.27

5,387.31

3,881.26

4,058.56

5,232.15

6,954.04

5,064.96

2,513.32

Sources Of Funds

Share
Application
Money
Preference
Share Capital
Reserves
Revaluation
Reserves
Networth

Application Of Funds
Gross Block

Less: Accum.
Depreciation
Net Block

Capital Work
in Progress

Investments

22,624.21

22,336.90

12,968.13

4,910.27

2,477.00

3,891.39

2,935.59

2,229.81

2,421.83

2,500.95

2,602.88

2,391.92

1,555.20

1,130.73

782.18

638.79

612.16

638.17

750.14

535.78

Total Current
Assets

7,133.06

5,939.67

4,423.18

4,302.70

3,818.91

Loans and
Advances

5,852.42

5,248.71

5,909.75

4,831.36

6,208.53

Fixed
Deposits

1,790.13

1,141.10

503.65

1,647.17

290.98

Total CA,
Loans &
Advances

14,775.61

12,329.48

10,836.58

10,781.23

10,318.42

Deffered
Credit

Current
Liabilities

15,740.69

16,909.30

10,968.95

10,040.37

6,956.88

Provisions

3,222.71

2,763.43

1,877.26

1,989.43

1,364.32

Total CL &
Provisions

18,963.40

19,672.73

12,846.21

12,029.80

8,321.20

Net Current
Assets

-4,187.79

-7,343.25

-2,009.63

-1,248.57

1,997.22

2.02

6.05

10.09

35,912.05

31,429.69

25,559.83

14,120.02

10,878.89

Contingent
Liabilities

4,798.83

3,708.33

5,433.07

5,590.83

5,196.07

Book
Value (Rs)

314.93

259.03

240.64

202.7

177.59

Inventories
Sundry
Debtors
Cash and
Bank Balance

Miscellaneous
Expenses
Total
Assets

PROFIT AND LOSS ACCOUNT OF TATA MOTORS

(RS IN CRORES)

Mar '11

Mar '10

Mar '09

Mar '08

Mar '07

12 mths

12 mths

12 mths

12 mths

12 mths

52,067.87

38,173.39

28,538.20

33,123.54

31,089.69

4,110.63

2,800.10

2,877.53

4,355.63

4,425.44

47,957.24

35,373.29

25,660.67

28,767.91

26,664.25

Other Income

341.53

1,220.86

921.29

734.17

1,114.38

Stock Adjustments

354.22

606.63

-238.04

-40.48

349.68

48,652.99

37,200.78

26,343.92

29,461.60

28,128.31

35,047.05

25,366.12

18,801.37

20,891.33

19,879.56

471.28

362.62

304.94

325.19

327.41

Employee Cost

2,294.02

1,836.13

1,551.39

1,544.57

1,367.83

Other
Manufacturing
Expenses

1,753.46

1,289.60

866.65

904.95

872.95

Selling and Admin

Expenses

2,790.19

2,126.10

1,652.31

2,197.49

1,505.23

Miscellaneous
Expenses

2,067.42

1,707.06

1,438.89

964.78

1,051.49

-817.68

-740.54

-916.02

-1,131.40

-577.05

43,605.74

31,947.09

23,699.53

25,696.91

24,427.42

Operating
Profit

4,705.72

4,032.83

1,723.10

3,030.52

2,586.51

PBDIT

5,047.25

5,253.69

2,644.39

3,764.69

3,700.89

Interest

1,383.79

1,246.25

704.92

471.56

455.75

Income
Sales Turnover
Excise Duty
Net Sales

Total Income
Expenditure
Raw Materials

Power & Fuel Cost

Preoperative Exp
Capitalised
Total Expenses

PBDT

3,663.46

4,007.44

1,939.47

3,293.13

3,245.14

Depreciation

1,360.77

1,033.87

874.54

652.31

586.29

Other Written Off

106.17

144.03

51.17

64.35

85.02

Profit Before Tax

2,196.52

2,829.54

1,013.76

2,576.47

2,573.83

15.29

-0.07

2,196.52

2,829.54

1,029.05

2,576.47

2,573.76

384.7

589.46

12.5

547.55

660.37

Reported Net
Profit

1,811.82

2,240.08

1,001.26

2,028.92

1,913.46

Total Value
Addition

8,558.69

6,580.97

4,898.16

4,805.58

4,547.86

Preference
Dividend

1,274.23

859.05

311.61

578.43

578.07

192.8

132.89

34.09

81.25

98.25

6,346.14

5,705.58

5,140.08

3,855.04

3,853.74

28.55

39.26

19.48

52.63

49.65

200

150

60

150

150

314.93

259.03

240.64

202.7

177.59

Extra-ordinary
items
PBT (Post Extraord Items)
Tax

Equity Dividend
Corporate Dividend
Tax

Per share data (annualised)

Shares in issue
(lakhs)
Earning Per
Share (Rs)
Equity Dividend
(%)

Book Value (Rs)

THE DUPONT SYSTEM

The importance of ROE as an indicator of performance makes it desirable to divide the ratio into several
components that provide insights into the causes of a firms ROE or any changes in it. This breakdown of
ROE into component ratios is generally referred to as the DuPont system. To begin, the return on equity
(ROE) ratio can be broken down into two ratios that we have discussednet profit margin and equity
turnover.
This breakdown is an identity because we have both multiplied and divided by net sales.
This identity reveals that ROE equals the net profit margin
times the equity turnover, which implies that a firm can improve its return on equity by either
using its equity more efficiently (increasing its equity turnover) or by becoming more profitable
(increasing its net profit margin).

ROE =

2011

NET INCOME
COMMON EQUITY

THAT IS

2010

1811.82/634.65

NET SALES
COMMON EQUITY

2009

2240.08/570.6

2.85

NET INCOME
NET SALES

1001.26/514.05

3.92

2008

2028.92/385.54

1.94

5.26

a firms equity turnover is affected by its capital structure. Specifically,

a firm can increase its equity turnover by employing a higher proportion of debt capital. We can
see this effect by considering the following relationship:

NET SALES
EQUITY

THAT IS

NET SALES
TOTAL ASSETS

TOTAL ASSETS
EQUITY

Similar to the prior breakdown, this is an identity because we have both multiplied and divided
the equity turnover ratio by total assets. This equation indicates that the equity turnover ratio
equals the firms total asset turnover (a measure of efficiency) times the ratio of total assets to
equity, a measure of financial leverage. Specifically, this latter ratio of total assets to equity indicates
the proportion of total assets financed with debt. All assets have to be financed by either
equity or some form of debt (either current liabilities or long-term debt). Therefore, the higher the
ratio of assets to equity, the higher the proportion of debt to equity. This breakdown of the equity turnover
ratio implies that a firm can increase its equity turnover either by increasing its total asset turnover
(becoming more efficient) or by increasing its financial leverage ratio (financing assets with a
higher proportion of debt capital). This financial leverage ratio is also referred to as the financial
leverage multiplier whereby the first two ratios (profit margin and total asset turnover) equal
return on total assets (ROTA) and ROTA times the financial leverage multiplier equals ROE.

2007

1913.46

4.96

2011

2010

47957.24/634.65
75.56

2009

35373.29/570.6

2008

25660.67/514.05

61.9

49.91

2007

28767.91/385.54

26664.25/385.41

74.61

69.18

Combining these two breakdowns, we see that a firms ROE is composed of three ratios as
follows:

NET INCOME
COMMON EQUITY

THAT IS

NET INCOME
NET SALES

2011

2010

1811.82/634.65

2240.08/570.6

2.85

YEAR

2007
2008
2009
2010
2011

2009

2.03
1
1.12
1.33

NET PROFIT
MARGIN

2.45 7.17
7
3.9
6.33
3.77

TOTAL ASSETS
COMMON EQUITY

2008

1001.26/514.05 2028.92/385.54

3.92

SALES/TOTAL
ASSETS

NET SALES
TOTAL ASSETS

1.94

2007
1913.46/385.41

5.27

RETURN ON
TOTAL
ASSETS

TOTAL
ASSETS/EQUITY

17.57
14.21
3.90
7.09
5.01

28.22
36.62
49.72
55.08
56.58

4.96

RETURN ON
EQUITY

4.96
5.20
1.94
3.90
2.84

1) THE TOTAL ASSETS TURNOVER RATIO EXPERIENCED AN OVERALL DECLINE FROM 2.45 TO 1.33
2) THE PROFIT MARGIN IS HIGHEST IN 2007 AND 2008.LATER IT STARTED FLUCTUATING FROM 20092011.
3) THE RETURN ON TOTAL ASSETS EXPERIENCED AN OVERALL DECREASE FROM 17.57 TO 5.01 IN 2011.
4) THE FINANCIAL LEVERAGE THAT IS TOTAL ASSETS UPON EQUITY HAS INCREASED FROM 28.22 IN 2007 TO 56.58 IN 2011
5) A DECREASING RETURN ON TOTAL ASSETS AND INCREASE IN FINANCIAL LEVERAGE THE FIRM'S RETURN ON EQUITY
HAS EXPERIENCED A DECLINE FROM 4.96 TO 2.84

EXTENDED DUPONT
Beyond the original DuPont system, some analysts have suggested using an extended DuPont system, which provides additional
insights into the effect of financial leverage on the firm and also pinpoints the effect of income taxes on the firms ROE. Because
both financial leverage and tax rates have changed dramatically over the past decade, these additional insights are important. We
started with the ROE and divided it into components. In contrast, we now begin with the operating profit margin (EBIT divided by
sales) and introduce additional
ratios to derive an ROE value. Combining the operating profit margin and the total asset turnover
ratio yields the following

1) OPERATING PROFT
MARGIN
EBIT
SALES
2011

3686.48/47957.24
0.076

2010

2009

2008

2007

4219.82/35
373.29

1769.85/25
660.67

3112.38/28
767.91

3114.6/266
64.25

0.11

0.06

0.1

0.11

2010

2009

2008

2007

35373.29/3
1429.69

25660.67/2
5559.83

28767.91/1
4120.02

26664.25/1
0878.89

2) TOTAL ASSETS
TURNOVER
SALES
TOTAL ASSETS
2011

47957.24/35912.05
1.33

1.18

2.03

2.45

2010

2009

2008

2007

1246.25/31
429.69

704.92/255
59.83

471.56/141
20.02

455.75/108
78.89

0.03

0.02

0.03

0.04

3) INTEREST EXPENSE
RATE
INTEREST EXPENSE
TOTAL ASSETS
2011

1383.79/35912.05
0.03

4) FINANCIAL LEVERAGE
MULTIPLIER
TOTAL ASSETS
COMMON EQUITY
2011

35912.05/634.65

56.58

2010

2009

2008

2007

31429.69/5
70.6

25559.83/5
14.05

14120.02/3
85.54

10878.89/3
85.41

55.0
8

49.7
2

36.6
2

28.2
2

2010

2009

2008

2007

100% (589.46/2973.57)

100% (12.5/1064.93)

100% (547.55/260.82)

100% (660.37/2658.85)

0.19

0.98
9

5) TAX RETENTION RATE

100% - INCOME TAX
NET
BEFORE
TAX
2011

100% - (384.7/23026)

0.98

0.8

0.76

TO DEMONSTRATE THE USE OF EXTENDED DUPONT SYSTEM, THE FIRM'S OPERATING PROFIT MARGIN IN
2007 AND 2010 WAS AT ITS PEAK.SUBSEQUENTLY IT DECLINED TO A LOW POINT IN 2009 AND 2011.
FIRM'S TOTAL ASSET TURNOVER EXPERIENCED
A DECLINE FROM 2.45 IN 2007 TO 1.33 IN 2011.
THE INTEREST EXPENSE RATE SHOWS THE NEGATIVE IMPACT RATE ON
FINANCIAL LEVERAGE.IN 2007 IT WAS 0.04.LATER IN 2011 IT SHOWED 2.03.
FINANCIAL LEVERAGE MULTIPLIER SHOWS THE POSITIVE IMPACT ON FIRM'S OPERATING PERFORMANCE.AS IN
2007 IT WAS 28.22 AND IN 2011 IT INCREASED TO 56.58.THIS SHOWS A STRONG PERFORMANCE BY THE FIRM.
THE TAX RETENTION RATE SHOWS THE STRONG POSIVITIVE EFFECT OF LOWER TAX RATE WHICH
CAUSED A HIGHER TAX RETENTION RATE THAT INCREASED IN 2009 AND 2011 THAT WAS 0.98.

EVALUATING OPERATING PERFORMANCE

1. Total asset turnover ratio- the total asset turnover ratio indicates the effectiveness of the
firms use of its total assets base .It is essential to compare this ratio of that of the other
firm industry because this particular ratio varies between industries. This ratio varies
from the range of 1 or less than 1 for large and capital intensive industries

TOTAL ASSETS TURNOVER RATIO =

2007
26664.25/(12878.89+8473.9)
2
1.55

2008
28767.91/(14120.02+10878.89)
2
1047

2009
25660.67/(25559.83+14120.02)
2
2.66

NET SALES
AVERAGE TOTAL
NET ASSETS

2010
35373.29/(31429.69+25559.83)
2
0.8

2011
47957.24/(35912.05+31429.69)
2
0.92

Equity turnover ratio In addition to

specific asset turnover ratios, it is useful to
examine the turnover for alternative capital
components. the difference between this
ratio and asset turnover ratio is that it
excludes current liability and long term
debt
2007
26664.25/(385.41+382.87)
2
46.22

2008
28767.91/(385.54+385.41)
2
49.75

2009
25660.67/(514.05+385.54)
2

36.3

2010
35373.29/(570.6+514.05)
2
42.74

2011
47957.24/(634.65+570.6)
2
52.13

Return on total equity-the return on

equity is very important to the owners of
the company because it indicates the rate
of return that management has earned on
the capital provided by the owners after
accounting for payments to all other capital
suppliers
2007
1913.46/(385.41+382.87)
2
3.31

2008
2028.92/(385.54+385.41)
2

3.5

2009
1001.26/(514.05+385.54)
2
1.41

2010
2240.08/(570.6+514.05)
2
2.7

201
1
1811.82/(634.65+5
70.6)
2
9.43