Project Writing on Comprehensive Financial Statement Analysis of Tata Motors Ltd. (FY 2023-24) HS 2nd Year 

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Comprehensive Financial Statement Analysis of Tata Motors Ltd. Project Class 12 Accountancy | Accountancy Project Writing HS 2nd Year HS 2026

Comprehensive Financial Statement Analysis of Tata Motors Ltd. (FY 2023-24)

(A Study of Liquidity, Solvency, and Profitability Ratios)

INDEX 

1. Declaration 

2. Certification

3. Acknowledgment 

4. Introduction

5. Objectives

6. Methodology

7. Importance of the study

8. Topic of Discussion

    (i) Introduction to company

    (ii) A Study of Liquidity

    (iii) A Study of Solvency

    (iv) A Study of Profitability Ratios

9. Conclusion

10. References

Comprehensive Financial Statement Analysis of Tata Motors Ltd. (FY 2023-24)
(A Study of Liquidity, Solvency, and Profitability Ratios)

INTRODUCTION 

Finance is an integral aspect of every business. Financial Statement Analysis is a process of evaluating the relationship between component parts of a financial statement to obtain a better understanding of a firm’s position and performance. The analysis of the balance sheet of a company, income statement, and cash flow statement, as well as the interpretation of trends and identification of weaknesses and strengths, may provide enough information for management to make sales and profit projections for the next three to five years. 

Financial Statement Analysis can make a reasonable estimate of how well the company will fare in the coming years based on knowledge of general economic and industry trends. Businesses that need to plan equipment purchases and other initiatives can benefit from such analyses. Financial analysis aids in evaluating whether an organization's investment is adequate, whether its management is competent, and whether its employees are effective. 

Finally, organization can identify its progress, profits and growth. Profitability is critical to any organization. Growth, expansion, and diversification are all required for survival. Profit is necessary to satisfy investors, repay debts or loans, pay wages and salaries to employees, and cover other day-to-day costs. Profit is a strong indicator of a company's overall performance.

OBJECTIVES

The main objectives of this study are as follows:

• To analyze the liquidity position of Tata Motors Ltd. for FY 2023–24 and assess its ability to meet short-term obligations.
• To examine the solvency position of the company and evaluate its long-term financial stability and capital structure.
• To study the profitability performance of Tata Motors Ltd. by analyzing key profitability ratios.
• To understand the overall financial health of the company through systematic ratio analysis.
• To develop analytical and interpretative skills in financial statement analysis using real corporate data.
• To provide useful insights for students, investors, and other stakeholders regarding the financial performance of Tata Motors Ltd.
• To gain practical knowledge in analysis..

METHODOLOGY

The methodology for a comprehensive financial statement analysis of Tata Motors Ltd. for FY 2023-24 involves a systematic process using various analytical tools, including ratio analysis, trend analysis, and comparative statements, across different aspects of the company's performance and position.  

• Research Design and Approach: This study employs a descriptive and analytical research design, focusing on a quantitative analysis of Tata Motors' financial data. The analysis is comprehensive, involving an in-depth examination of the company's financial health, performance, and future prospects based on its published financial statements.
• Data Collection: The analysis relies solely on secondary data collected from the Tata Motors Limited's 79th Integrated Annual Report for FY 2023-24 (covering financial performance up to March 31, 2024).
• Analytical Tools and Techniques: Presenting financial data of FY 2023-24 in side-by-side columns. 

IMPORTANCE OF THE STUDY

The importance of this study can be understood from the following points:

• For Students and Researchers: Enhances practical understanding of financial statement analysis and application of ratio analysis concepts.
• For Investors: Helps investors evaluate the profitability and financial stability of Tata Motors Ltd. before making investment decisions.
• For Creditors and Lenders: Assists banks and financial institutions in assessing the company’s liquidity and solvency position to judge creditworthiness.
• For Management: Provides valuable insights into operational efficiency, financial strengths, and areas requiring improvement.
• For Economic and Industry Analysis: Contributes to understanding the financial performance of a major player in the Indian automobile industry.
• For Policy and Strategic Decisions: Helps stakeholders evaluate how well the company is positioned to handle economic fluctuations and future expansion.

INTRODUCTION TO COMPANY 

Tata Motors limited, is an Indian multinational automotive manufacturing company headquartered in Mumbai, Maharashtra, India. It is a part of Tata group, an Indian conglomerate. Its products include passenger cars, trucks, vans, coaches, buses, sports cars, construction equipment’s and military vehicles.

Formally, known as Tata Engineering and Locomotive Company (TELCO), Tata Motors is a part of the Tata Group. Tata Motors has auto manufacturing and assembly plants in Jamshedpur, Pantnagar, Lucknow, Sanand, Dharwad, and Pune in India, as well as in Argentina, South Africa, Great Britian, and Thailand. It has research and development centers in Pune, Jamshedpur, Lucknow, and Dharwad, India and South Korea, Great Britian and spain. 

Tata Motors’ principle subsidiaries purchased the English premium car maker Jaguar Land Rover (the maker of Jaguar and Land Rover cars) and the South Korean commercial vehicle manufacturer Tata Daewoo. Tata Motors has a bus- manufacturing joint venture with Fiat Chrysler which manufactures automotive components and Fiat Chrysler and Tata branded vehicles. 

Furthermore, Tata Motors has OEMs offering an extensive range of integrated, smart and e- mobility solutions. Its vehicle scan now be found on the roads in more than 125countries. The company generates majority of sales from international markets.

Founded in 1945 as a manufacturer of locomotives, the company manufactured its first commercial vehicle in 1954 in collaboration with Daimler-Benz AG, which ended 1969. Tata Motors entered the passenger vehicle market in 1988 with the launch of the Tata Mobile followed by the Tata Sierra in1991, becoming the first Indian manufacturer to achieve the capability of developing a competitive indigenous automobile. 

Tata Motors Ltd., a flagship company of the Tata Group, is one of India’s largest automobile manufacturers with a strong presence in passenger vehicles, commercial vehicles, and luxury automobiles through Jaguar Land Rover (JLR). In the financial year 2023–24, Tata Motors operated in a challenging yet opportunity-rich environment marked by global economic uncertainty, rising input costs, technological transformation, and a growing focus on electric mobility.

This project focuses on a comprehensive financial statement analysis of Tata Motors Ltd. for FY 2023–24 using ratio analysis. The study specifically examines liquidity, solvency, and profitability ratios to evaluate the company’s short-term financial strength, long-term stability, and operational efficiency. Ratio analysis is an effective tool because it simplifies complex financial data and allows meaningful comparison across time and with industry standards.

A Study Of Liquidity, Solvency, And Profitability Ratios

Tata Motors Ltd. demonstrated a strong financial performance in the fiscal year 2023-24 (FY24), achieving record high revenues and profits. The company's liquidity position improved significantly with a record high free cash flow, its solvency improved with a reduced net automotive debt, and its profitability saw substantial gains, with a PAT of ₹31,807 crore. 

Liquidity Analysis

Tata Motors' liquidity position improved dramatically in FY24, primarily driven by strong operational performance and favorable working capital management. 

• Free Cash Flow (FCF): The company reported its highest-ever FCF for the automotive business, an inflow of ₹26,925 crore in FY24, a significant increase from ₹7,840 crore in FY23. This substantial cash generation ability is a key indicator of strong liquidity and operational efficiency.

• Working Capital: The favorable working capital contributed to the record free cash flow, highlighting efficient management of short-term assets and liabilities. 

Solvency Analysis

The company's solvency position strengthened considerably, as it actively worked towards becoming net automotive debt-free. 

• Net Automotive Debt: Net automotive debt was reduced significantly to ₹16,000 crore at the end of FY24. The India business became debt-free, and the company is on track to become net automotive debt-free on a consolidated basis in FY25.

• Gross Debt: Gross debt was also reduced during the period, which helped in reducing finance costs by ₹239 crore in FY24. The Jaguar Land Rover (JLR) segment's net debt reduced to £0.7 billion as of March 31, 2024.

• Debt-to-Equity Ratio: While a specific consolidated debt-to-equity ratio was not explicitly detailed, the substantial reduction in net automotive debt indicates an improved, more sustainable capital structure. 

Profitability Analysis

Tata Motors achieved record profitability in FY24, with growth across all business segments. 

• Profit After Tax (PAT): Consolidated PAT reached a record ₹31,807 crore in FY24, a substantial turnaround from ₹2,690 crore in FY23.

• Revenue: The Group's revenue was the highest ever at ₹4,37,928 crore in FY24, a 26.6% increase from FY23.

• Net Profit Margin (NPM): The NPM surged to 7.26% in FY 2023-24, a massive improvement from 0.77% in FY 2022-23 and a net loss in FY 2021-22. The company reported its highest ever profits in FY24.

• EBITDA and EBIT Margins: The consolidated EBITDA margin improved significantly to 14.3% (a 360 bps increase), and the EBIT margin reached 8.3% (a 470 bps increase). All individual business units (JLR, CV, PV) saw improvements in their respective EBITDA and EBIT margins. 

Overall, FY 2023-24 was a landmark year for Tata Motors, characterized by record revenues and profits and a significant strengthening of its balance sheet. 

Conclusion

The comprehensive financial statement analysis of Tata Motors Ltd. for FY 2023–24 reveals a remarkable improvement in its financial performance. The company demonstrated strong liquidity, improved solvency, and high profitability. Reduction in debt, better operational efficiency, and increased market demand played a key role in strengthening its financial position.

The study concludes that Tata Motors Ltd. is financially sound and well-positioned for future growth. Ratio analysis proved to be an effective tool in evaluating the company’s financial health and can be useful for investors, creditors, management, and students alike.

Bibliography: For successfully completing this project, I have taken help from the followings 

(i) NCERT Textbook

(ii) Teacher 

(iii) Tata Motors Limited's 79th Integrated Annual Report for FY 2023-24

(iv) edunation19