Comparative Study between Bajaj Auto Finance Ltd and Tata Motors Finance Ltd.
Performance Evaluation of Auto Finance Companies in India
Ratio Analysis- A Comparative Study between Bajaj Auto Finance Ltd and Tata Motors Finance Ltd.
Introduction, Importance and Significance of the Study
The auto finance
industry has witnessed a swift recovery in 2009-10, after recording a 25 per
cent decline in disbursements in 2008-09. While high non-performing assets
continue to be a concern due to unbridled credit expansion in the previous
years, disbursements have picked up and credit-appraisal mechanisms are being
strengthened, pointing to a brighter outlook for the industry. Among individual
vehicle segments, we project double-digit growth in disbursements in the cars
& utility vehicles (UVs) and commercial vehicles (CVs) segments in 2009-10
and 2010-11. For the two-wheeler finance market, the outlook is much more
sombre, as financiers were badly hurt due to higher operating expenses and
rising incidence of defaults, and are unlikely to enter the market in a hurry.
The two-wheeler finance
market is estimated to witness a second consecutive year of slide (negative
6.8 per cent), recording disbursements of Rs 71 billion in 2009-10, after a
sharp fall of 31.6 per cent in disbursements in the previous year. Higher
operating expenses and rising incidence of defaults have made the segment unprofitable,
forcing many financiers to exit the market.
Rationale for the Study
Performance evaluation of a company is usually related to
how well a company can use it assets, share holder equity and liability,
revenue and expenses. Financial ratio analysis is one of the best tools of
performance evaluation of any company. This study is undertaken in order to
determine the financial position of the retail auto finance company and to make a judgment of the retail
fiance auto company efficiency, its operation and management and how well the
company has been able to utilize its assets and earn profit.
Objectives of the Study
This study has the following broad objectives:
• To work out the overall quantum of liquidity maintained
by Bajaj Auto Finance Ltd and Tata Motors Finance Ltd., and to compare the
liquidity position of both the companies.
• To examine the liquidity management of both the
companies during the period under study on the basis of technique of ratio
analysis by calculating important liquidity ratios.
• To compare the different liquidity ratios of both the
companies and test the significance of difference by using parametric Student’s
t-test.
• To evaluate the different liquidity ratios of both the
companies and to test the significance of difference by using non-parametric
Mann-Whitney U-test; and
• To draw meaningful conclusions and offer necessary
suggestions to improve the efficiency of liquidity management of both the
companies.
Hypothesis for the
Study
The following hypotheses will be formulated and tested in
the present study:
H0: There is no significant difference between the
liquidity management of the selected retail finance auto companies; and
H1: There is a significant difference between the
liquidity management of the selected retail finance auto companies.
Research Methodology
Sample Design
The current study
will be carried out by taking a sample of two leading pharmaceutical companies
of India, viz., Baja Auto Finance Ltd and Tata Motors Finance Limited.
Sources of Data
The relevant data
will be mainly gathered from the published annual reports and accounts of the
selected retail auto finance companies. The other sources which will
beconsulted are technical and trade journals, newspapers and other published
information.
Tools of Data Analysis
The present study
will apply quantitative tools such as mean, standard deviation, Coefficient of
Variation (CV), t-test, and Mann-Whitney U-test.
The technique of
ratio analysis will also use to examine
the different aspects of liquidity of both the companies.
Six liquidity
ratios, such as Current Ratio (CR), Quick Ratio (QR), Debtors Turnover Ratio
(DTR), Inventory Turnover Ratio (ITR), Current Assets Turnover Ratio (CATR),
and Working Capital Turnover Ratio (WCTR), will be calculated and analyzed to
examine the liquidity position of both the retail finance auto companies.
Expected Contribution from the Study
Liquidity
management is the functional area of finance that covers all the current
accounts of the firm. It is concerned with the management of the level of
individual current assets as well as the management of total working capital.
Liquidity means a firm’s capacity to meet its obligations when they fall due.
In other words, the firm can pay all its bills on due date and have sufficient
cash to meet emergencies . If a firm has sufficient net working capital, it is
deemed to have sufficient liquidity, while a deficit of working capital implies
negative liquidity and the company is not likely to be able to pay off even its
current liabilities, and hence, may considerably damage its reputation. Thus,
weak liquidity position is perceived as a threat to the solvency of the
company. The present study is based on net working capital concept. Excessive
working capital results in unnecessary accumulation of inventories and idle
funds which earn no return . On the other hand, inadequate working capital also
suffers from operating inefficiencies and loss of reputation when the business
is not able to honor its commitments. Therefore, it is very important to
determine the appropriate amount of working capital in order to maintain
adequate liquidity position of the company.
Chapterisation
·
Introduction
·
Literature
Review
·
Research
Methodology
·
Data
Analysis and Findings
·
Recommendations
& Conclusion
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Coursework, PowerPoint Presentations and Synopsis, than contact
Mahasagar Publications, Mumbai, India by calling +91 9819650213 or +91
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