Project Overview:
Financial Analysis of
Tata Company
This project presents an analytical overview of Tata Company, focused on
classic accountancy topics critical for Class 12 students. We will explore the
Cash Flow Statement using detailed calculations, apply ratio analysis to
evaluate financial health, and examine balance sheets to uncover structural
changes over time.
Through a case study of a specific Tata company, known for its diversified
presence in steel, automotive, and IT sectors, the project provides a
comprehensive view into real-world corporate finances and accounting
principles.
Tata Company: A Brief
History
Establishment & Core Business Areas
Milestones Steel production and processing
The Tata Group was founded in 1868 Automobiles and commercial
by Jamsetji Tata. It expanded from vehicles
textiles to steel manufacturing and
Information technology services
later into automotive and technology
Consumer products and
sectors, marking several milestones
telecommunications
such as the launch of Tata Steel in
1907 and Tata Motors in 1945.
Global Presence & CSR
Tata operates in over 100 countries with a workforce exceeding 750,000 employees.
Their CSR initiatives include education, health, and environmental sustainability
programs impacting millions.
Common Size Balance
Sheet Analysis
Asset Liability
Composition Structure
Fixed assets represent 55% Debt constitutes 40% of total
of total assets in 2023, up assets, a slight rise indicating
from 50% in 2022, suggesting leverage increase. Equity now
investment in long-term makes up 50%, maintaining a
capacity. balanced capital structure.
Insights
The shift toward fixed assets and higher borrowings reflects a growth
phase with reliance on debt, which needs monitoring for
sustainability.
Comparative Balance Sheet Analysis
Assets: 2022 vs. 2023 Liabilities: 2022 vs. Analysis of Changes
2023
PP&E increased by 15% due to new Major increase in borrowings signals
plant commissioning Shareholders9 funds increased by aggressive expansion but may raise
Investments rose by 10% reflecting 12%, indicating retained earnings financial risk. Growth in retained
strategic acquisition growth earnings strengthens equity base,
Borrowings rose 20%, pointing to balancing the capital structure.
higher debt financing
Ratio Analysis:
Assessing Financial
Performance
Ratio 2022 2023 Industry Avg.
Current Ratio 1.5 1.3 1.4
Debt-Equity 0.7 0.85 0.9
Ratio
Gross Profit 35% 38% 36%
Margin
Return on Equity 14% 15.5% 13%
The company9s current ratio is slightly below 2022, indicating marginally lower
liquidity. However, profitability ratios outperform industry averages, reflecting
efficient operations and strong equity returns.
Cash Flow Statement: Operating
Activities
1 Net Profit 2 Adjustments
Starting point for cash flows, showing solid profitability in Include depreciation and amortization expense, which are
the period. non-cash charges added back.
3 Working Capital Changes 4 Cash Generated
Variations in inventory, receivables, and payables indicating Robust positive cash from operations confirms healthy core
operational efficiency. business performance.
Cash Flow Statement:
Investing Activities
Capital Investment
Expenditures Sales
Significant outflows for new Inflow from divesting non-
plant and machinery, core assets to optimize asset
supporting growth initiatives. portfolio.
Net Investing Cash Flow
Negative cash flow due to expansion but aligned with strategic
direction.
Cash Flow Statement:
Financing Activities
Borrowings Debt Repayment
Increased debt financing to Scheduled repayments
support capital expenditure ensuring manageable long-
and strategic acquisitions. term leverage.
Dividends Paid
Consistent dividend payout reflecting commitment to shareholders.
Diagrammatic Financial Presentation
Pie Chart: Asset Bar Graph: Revenue Line Graph: Debt- Key Financial Values
Allocation Growth Equity Ratio Trend
Metric 2022 2023
Reven 120,00 138,00
ue 0 0
(INR
Cr.)
Net 12,500 14,100
Profit
(INR
Cr.)
Total 300,0 340,0
Assets 00 00
(INR
Cr.)
Conclusion: Key
Findings and
Recommendations
The Tata company demonstrates strong financial health, characterized by
consistent profitability and robust operating cash flow. Strengths include
efficient asset utilization and competitive profitability ratios surpassing
industry averages.
However, the rising debt levels and slight liquidity decline require vigilance.
Recommendations include focusing on managing leverage by optimizing
debt structure and improving current assets management to enhance
liquidity.
Overall, Tata's strategic investments and financial discipline position it well
for sustained growth and shareholder value enhancement.
