A project will go haywire if it doesn't have its objectives clear.

If one knows the whole, only then the right

path can be decided and with disciplined work and positive attitude achieving this objective will a catwalk.

Therefore, we also set down the objectives before starting the project which are as follows:

To study business models in general

. To study Best fit and its activities

. To analyze the products & services offered by Best fit

. To understand the costing & revenue structure

. To know the service/product delivery mechanism

. To study the business model of Best fit

To know the present profitability pattern of Best fit

To recommend fresh business model which will

crease its profitability

INTRODUCTION TO BUSINESS MODELS

It was in the early 1970s when the word business model appeared for the first time as an economic keyword
in public talk .

The business model constitutes a holistic concept, considering all elements that build the anatomy of a
firm's core logic for creating and appropriating value

By "business model" people mean everything from how a company earns its money to how it structures
the organization.

In principle, a business model does not matter to customers; it is important to the company and the
organization of its business. The business model determines the external relationships with suppliers,
customers and partners. However,
Definition

Magretta (2002) defines business models as "stories that explain how enterprises work".

Peter Drucker and defines "a good business model" as the one that provides answers to the following
questions

Who is customer and what does the customer value?

What is the underlying economic logic that explains how we can deliver value to the customers at an
appropriate cost?

Basis for designing the business model

Organizational Form

Transactional Process (Client - Company)

Delivery (Brick & Mortar, Partners, Distributors)

Revenue

Price

Chain of command (internal)

E-Commerce

Customers (B2C, B2B)

TYPES OF BUSINESS MODELS

BUSINESS MODEL

A business model is the way that a company sells products to its customers. It describes how business
creates, delivers, and captures value.

Different types of Business Model:

1) Business-to-Business (B2B)

2) Business-to-Consumer (B2C)

3) Consumer-to-Consumer (C2C)

4) Business-to-Government (B2G)

5) Consumer-to-Business (C2B)

EVOLUTION OF INTERNET BUSINESS MODEL

E-Business established themselves in 2 phases:

The first phase comprised the following trends:

1. Business organizations rushed to establish an e commerce website.

2. Little or no regard was given check how reliable the site needed be.

3. It was a matter of beating competition.

Drawback: There was no little integration with the production side of the business.

Reasons: Growth of consumer base, Request for real-time order status and Return of products

In the Second phase, organizations started planning about integrating the back-end and real time
transaction processing.
Business are using Internet Technologies and a integrating their systems and processes more efficiently
are now breaking the barrier

This has been possible due to : Capitalizing on a continuous business proposal and correctly applying
technology.

BUSINESS-TO-BUSINESS MODEL

This model needs two or more business organizations that do business with each other. It entails
commercial activity among companies, through the Internet as a medium.

Types of B2B

1 Supplier Oriented

2) Buyer Oriented

3) Intermediate Oriented

For example, an automobile manufacturer makes several B2B transactions such as buying tires, glass for
windscreens, and rubber hoses for its vehicles. The final transaction, a finished vehicle sold to the
consumer, is a single B2C transaction.

BUSINESS TO CONSUMER (B TO C)

Business or transactions conducted directly between a company and consumers who are the end-users of
its products or services.

This model enables consumers to browse, select and merchandise online from wider variety of sellers and
at better prices

CONSUMER-TO-CONSUMER (C2C)

Consumer to Consumer (or citizen-to citizen) electronic commerce involves the electronically facilitated
transactions between consumers through some third party. A common example is the online auction, in
which a consumer posts an item for sale and other consumers bid to purchase it.
BUSINESS-TO-GOVERNMENT

An example of a business to government company a firm that offers IT consulting services to a

government agency. The government uses the B2G arrangement in order to keep its technology up to date
and in working condition, while at the same time limiting expenses by not taking on full-time staff.

CONSUMER-TO-BUSINESS (C2B)

Consumer-to-business (C2B) is a business model which consumers (individuals) create value and
businesses consume that value. For example, when a consumer writes reviews or when a consumer gives
a useful idea for new product development then that consumer is creating value for the business the
business adopts the input.
INDUSTRY OVERVIEW

The automotive industry comprises a wide range of companies and organizations involved in
the design, development, manufacturing, marketing, selling, repairing, and modification of motor
vehicles.It is one of the world's largest industries by revenue (from 16% such as in France up to 40% to
countries like Slovakia).

The word automotive comes from the Greek autos (self), and Latin motivus (of motion), referring to any
form of self-powered vehicle. This term, as proposed by Elmer Sperry (1860–1930), first came into use
to describe automobiles in 1898.

The OICA counts over 50 countries that assemble, manufacture, or disseminate automobiles. Of those,
only 15 countries (boldfaced in the list below) currently possess the capability to design original
production automobiles from the ground up, and 17 countries (listed below) have at least one million
produced vehicles a year (as of 2023).

USA 10,611,555
U.K. 1,025,474
TURKEY 1,468,393
Thailand 1,841,663
Spain 2,451,221
Slovakia 1,080,000
Republic of Korea 4,243,597
Mexico 4,002,047
Japan 8,997,440
Indonesia 1,395,717
India 5,851,507
Germany 4,109,371
France 1,505,076
Czechia 1,404,501
China 30,160,966
(plus Taiwan) (30,446,928)
Canada 1,553,026
 Brazil 2,324,838

The Indian passenger car market was valued at US$ 32.70 billion in 2021, and it is expected to reach a
value of US$ 54.84 billion by 2027 while registering a CAGR of over 9% between 2022-27. The global
EV market was estimated at approximately US$ 250 billion in 2021 and by 2028, it is projected to grow
by 5 times to US$ 1,318 billion.

In April 2024, the total production of passenger vehicles*, three-wheelers, two-wheelers, and quadricycles
was 23,58,041 units. In FY24, the total production of passenger vehicles, commercial vehicles, three-
wheelers, two-wheelers, and quadricycles was 2,84,34,742 units.

In the third quarter of 2023-24, total production of passenger vehicles*, commercial vehicles**, three
wheelers, two wheelers, and quadricycles was 7.13 million units.

India accomplished a significant milestone, with the sale of 13,25,112 EVs in FY24 (till January 2024).

Indian Automobile Market Analysis

The Analysis Of Automobile Industry In India Market size is estimated at USD 126.67 billion in 2024,
and is expected to reach USD 187.85 billion by 2029, growing at a CAGR of 8.20% during the forecast
period (2024-2029).

The Indian economy has been expanding with the rise in disposable income of middle-class consumers.
This, in turn, has a favorable impact on the increasing demand for automobiles. Vehicle manufacturing
has increased rapidly over the last few years as a result of the country's low production costs. The
automotive industry is gaining traction as vehicle manufacturing increases.

Increasing corporate interest in tapping into rural markets has been instrumental in driving the expansion
of the Indian automobile industry. The surge in logistics and passenger transportation sectors is driving
the demand for commercial vehicles. Prospective market growth is projected to be fueled by emerging
trends such as the adoption of electric vehicles, particularly in the three-wheeler and small passenger
vehicle segments. However, the primary challenge for the Indian automobile industry is regulatory
compliance and adherence to stringent emissions standards.
The country stands as a notable player in automotive exports, with robust growth prospects anticipated in
the coming years. Moreover, various government initiatives like the Automotive Mission Plan 2026,
Scrappage Policy, and production-linked incentive schemes are poised to elevate India's status to a key
global leader in the automotive sector.

Indian Automobile Market Trends

The Two-Wheelers Segment to Register Fastest Growth over the Forecast Period

The Indian two-wheeler industry is gaining immense popularity in the country due to the fuel efficiency
and lower purchase costs of two-wheelers, the country's rapidly growing population, road traffic
congestion, lack of parking spaces, inadequate mobility infrastructure, and reduced carbon emissions,
particularly in electric variants.

Moreover, the two-wheelers segment dominates the market in terms of volume, owing to the expanding
middle-class population and a huge percentage of Indians being young. India has a line-up of festivals and
auspicious periods between August and November, pushing up two-wheeler sales in the country. Rural
India, which forms nearly two-thirds of the country's population, accounts for 55% of the total two-
wheeler sales.

As per the Society of Indian Automobile Manufacturers (SIAM), two-wheeler sales increased from
1,35,70,008 to 1,58,62,087 units in FY-2022-23 compared to the previous year.

According to the Society of Manufacturers of Electric Vehicles, sales of electric two-wheelers, which was
53,258 in April 2022, increased to 86,194 units in March 2023 and registered exponential growth.

Moreover, due to the high demand for two-wheelers in India, numerous automotive companies are
focusing on launching new models with advanced features, better fuel-efficient models, and security
measures. For instance,

In January 2024, Ducati revealed its plans to introduce eight new motorcycle models to the Indian market.
The renowned Italian luxury motorcycle brand will also inaugurate two new showrooms in India in 2024.
Among the upcoming Ducati offerings showcased at the Ducati World Premiere 2024 are the Multistrada
V4 RS, DesertX Rally, Panigale V4 Racing Replica 2023, Diavel for Bentley, Monster 30° Anniversario,
and Panigale V4 SP2 30° Anniversario 916.
In January 2023, India's two-wheeler maker, Hero MotoCorp, started commercial production trials for
flex fuel motorcycles, which will be introduced in the 100-125 cc mass market.

Furthermore, the growing demand for two-wheelers for touring purposes is trending in the country. Many
companies collaborate with large groups and organized clubs to explore new destinations in India and
across the country's borders. This, in turn, is further anticipated to boost the two-wheelers segment of the
Indian automobile industry.

The Electric Fuel Type Segment is Expected to Witness Significant Growth over the Forecast Period

The Indian government's strict regulations in response to the rising levels of vehicular emissions and
increased demand for environment-friendly automobiles are likely to drive the growth of the industry over
the forecast period. Along with various schemes, the government announced a battery-swapping policy in
the Union Budget 2022-2023, allowing depleted batteries to be switched out for charged ones at specific
charging points, increasing the viability of electric vehicles for potential buyers.

Electric vehicle sales in India jumped by 49.25% year-on-year to 15,29,947 units in 2023, according to
data released by the Federation of Automobile Dealers' Association (FADA).
The Government of India has undertaken multiple initiatives to promote the manufacturing and adoption
of electric vehicles in the country to reduce emissions and develop e-mobility in the wake of rapid
urbanization. The National Electric Mobility Mission Plan (NEMMP) and Faster Adoption and
Manufacturing of Hybrid & Electric Vehicles in India (FAME I and II) helped create the initial interest
and exposure to electric mobility.

Moreover, the country announced an ambitious roadmap for decarbonization during COP26, outlining
targets for 2030. These include a 50% reduction in carbon emissions from the energy sector and achieving
a renewable energy capacity of 500 GW. India aims to triple its current renewable capacity to meet these
objectives. It has committed to the global EV30@30 campaign, striving for electric vehicles (EVs) to
represent at least 30% of new vehicle sales by 2030.

As of March 2023, a total of 6,586 public charging stations (PCS) were operational in the country. Delhi
had the largest number of public electric vehicle charging stations in India, close to 1.9 thousand stations.
It was followed distantly by Karnataka at 704 stations. In India, the majority of electric vehicles were
electric two and three-wheelers.

The Indian government has also provided tax exemptions and subsidies to electric vehicle manufacturers
and consumers to promote the domestic electric vehicle industry. As per the phased manufacturing
proposal, the government has imposed a 15% customs duty on parts used to manufacture electric vehicles
and 10% on imported lithium-ion cells.

With 100% FDI, new production centers, and a greater drive to improve charging infrastructure, India's
electric vehicle industry is picking up speed. Other development factors for the Indian electric vehicle
industry include federal subsidies and policies supporting more significant discounts for Indian-made
electric two-wheelers and a boost for localized ACC battery storage manufacturers. Improved government
regulations and policies, such as not requiring licenses to operate EV charging stations in the country, are
further aiding the market's growth.

Hence, the Indian automobile industry is expected to witness robust growth during the forecast period due
to the aforementioned factors.

With 100% FDI, new production centers, and a greater drive to improve charging infrastructure, India's
electric vehicle industry is picking up speed. Other development factors for the Indian electric vehicle
industry include federal subsidies and policies supporting more significant discounts for Indian-made
electric two-wheelers and a boost for localized ACC battery storage manufacturers. Improved government
regulations and policies, such as not requiring licenses to operate EV charging stations in the country, are
further aiding the market's growth.

Hence, the Indian automobile industry is expected to witness robust growth during the forecast period due
to the aforementioned factors.

Indian Automobile Industry Overview

The Indian automobile industry is reasonably concentrated, with the top five players having most of the
market share in all the segments. The major players in the passenger car segment include Maruti Suzuki
India Limited (Suzuki Motor Corporation), Tata Motors Limited, Hyundai Motor Company, Mahinda and
Mahindra Limited, and Honda Motor Company.

The two-wheeler market is also concentrated, with major players occupying the majority share of the
market. The key players in the two-wheeler market include Hero MotoCorp Limited, Honda Motorcycle
& Scooter India Pvt. Ltd (Honda Motor Company), TVS Motor Company, Bajaj Auto Limited, and Royal
Enfield.
Major players in the various segments are investing in R&D and infrastructure to gain the upper hand. For
instance,

In November 2023, Toyota Motor Corporation announced the expansion of its third car manufacturing
plant in Bidadi, Karnataka, India, with an investment of approximately INR 3,300 crore (USD 396
million), which would increase its production capacity by 100 thousand units per annum.

In June 2023, Musashi Seimitsu Industries, Japan, invested INR 700 million (USD 8.42 million) to expand
its manufacturing facility in India. The company collaborated with Bharat New-Energy Company (BNC)
Motors in India.

Indian Automobile Market Leaders

Mahindra & Mahindra Ltd

Tata Motors Limited

Honda Cars India Ltd (Honda Motor Company)

Maruti Suzuki India Ltd. (Suzuki Motor Corporation)

Bajaj Auto Limited

Problems identifications in market

Problem - "HOW TO INCREASE PROFITABILITY"

Problem Characteristics

. Problem is "Market Related"

An over-served market dense with competition and market entry barriers

. A minority supplier suppressed & harassed dominant suppliers

Distribution Problem

. Set A Problem (Upstream Corporate Value Chain Innovation) - There may be a need for divestitures in
relation to underutilized capacities

PROBLEMS FORMULATIONS

Sub-Problems

. Staff idle time increased due to la of projects/business in their line of expertise

Loosing contracts due to lack of reaching the clients in time

(marketing) Lack of empowerment and thus more internal

transactions/approvals which complicates the process

Loosing contracts due delivery time clashes

Loosing contracts due to competitive pricing

Loosing contracts e to lack of relative experience

Ratio analysis is a method of examining a company's balance sheet and income statement to learn about
its liquidity, operational efficiency, and profitability. It doesn't involve one single metric; instead, it is a
way of analyzing a variety of financial data about a company. Ratio analysis is a cornerstone
of fundamental equity analysis.

There are many different ratios that investors and other business experts can analyze to make predictions
about a company's financial stability and potential future growth. These can be used to evaluate either
how a company's performance has changed over time or how it compares to other businesses in its
industry.

KEY TAKEAWAYS

Ratio analysis compares line-item data from a company's financial statements to evaluate it profitability,
liquidity, efficiency, and solvency.
Ratio analysis can track how a company is performing over time or how it compares to another business
in the same industry or sector.

Ratio analysis may also be required by external parties that set benchmarks often tied to risk, such as
lenders.

While ratios offer useful insight into a company, they should be paired with other metrics to obtain a
broader picture of a company's financial health.

Examples of ratio analysis include the current ratio, gross profit margin ratio, and inventory turnover
ratio.

How Ratio Analysis Works

Investors and analysts use ratio analysis to evaluate the financial health of companies by scrutinizing past
and current financial statements. For example, comparing the price per share to earnings per share allows
investors to find the price-to-earnings (P/E) ratio, a key metric for determining the value of a company's
stock.

The ratios of these different financial metrics from a company can be used to:

Evaluate a company's performance over time

Estimate likely future performance

Compare a company's financial standing with industry averages

Measuring how a company stacks up against others within the same sector

Every figure needed to calculate the ratios used in ratio analysis is found on a company's financial
statements.

Ratios are comparison points for companies and are not generally used in isolation. Instead, they are
compared either to past ratios for the same company or to the same ratio from other companies.

For example, if the average P/E ratio of all companies in the S&P 500 index is 20, and the majority of
companies have P/Es between 15 and 25, a stock with a P/E ratio of seven is probably undervalued. In
contrast, one with a P/E ratio of 50 likely is overvalued. The former may trend upwards in the future,
while the latter may trend downwards until each aligns with its intrinsic value.

Ratio analysis is often used by investors, but it can also be used by the company itself to evaluate how
strategic changes have impacted sales, growth, and performance.
Current Ratio:

The current ratio measures the company’s potential to repay its current obligations using its current assets.

Current Ratio = Current Assets / Current Liabilities

Quick Ratio:

The quick ratio, or the Acid-test ratio, measures the company’s ability to forecast current or short-term
liabilities and quick assets.

Quick Ratio = Current Assets - Inventories / Current Liabilities

Cash Ratio:

The cash ratio measures the company’s ability to repay short-term obligations using its most liquid current
assets, namely cash and cash equivalents.

Cash ratio = Cash and Cash equivalents / Current Liabilities

Solvency Ratios

The solvency ratios measure the company’s ability to repay its long-term obligations. The primary purpose
of this ratio is to check whether the company is generating sufficient cash flows to cover its liabilities.
Some common solvency ratios include:

Debt to Asset Ratio:

This ratio indicates the company’s ability to pay debts by comparing its total debt to its assets and how
much debt is against the assets. A lower ratio indicates less debt than assets, indicating a stronger financial
position.

Debt to Asset Ratio = Total Liabilities / Total Assets

Debt to Equity Ratio:

This ratio also indicates the company’s proportions of total liabilities of the company in relation to total
shareholders’ equity.
Debt to Equity Ratio = Total liabilities / Shareholders' equity

Interest coverage ratio:

The interest coverage ratio measures the company’s ability to pay its interest expenses for the debts taken.

Interest coverage ratio = Earning Before Interest and Taxes / Interest Expense

Provision Coverage Ratio (PCR):

This ratio is mainly used to evaluate banks’s stocks. It measures how much a bank’s provisions cover its
loss arising due to nonperforming assets.
Typically, a PCR ratio above 70% is considered ideal for the banks.

PCR = Total Non-Performing Assets / Total Provisions for Loan Losses

Capital Adequacy Ratio (CAR):

This ratio indicates the bank’s capital adequacy in relation to its risk-weighted assets.

CAR = (Tier 1 Capital + Tier 2 Capital + Tier 3 Capital) / (Risk-Weighted Assets)

Profitability Ratios

The profitability ratio is another important financial metric used to evaluate a company’s ability to
generate profits relative to its revenue, assets, equity, or capital employed. Simply put, it tells you how the
company is utilizing its resources to generate profits.

Some of the profitability ratios include:

ROCE (%):

Return on capital employed or ROCE indicates how efficiently a company is generating profits in relation
to its total capital employed.

ROCE (%) = EBIT / Capital Employed × 100

ROE (%):
Return on equity, or ROE, indicates how efficiently the company is generating profits relative to its
shareholders’ equity.

ROE (%) = Net Income / Total Shareholder’s Equity × 100

ROA (%):

Return on assets, or ROA, indicates how much profit a company generates by using its total assets.

ROA (%) = Net Income / Total Assets × 100

EBIT Margin (%):

EBIT Margin (Earnings Before Interest and Taxes Margin) indicates the company’s profitability as a
percentage of its revenue before deducting interest and taxes.

EBIT Margin = ( EBIT / Net Revenue ) × 100%

Net Margin (%):

Net margin refers to the percentage of revenue that finally translates into net profits after deducting all
expenses.

Net Margin = (Net Income / Net Revenue) × 100

Operating Profit Margin:

Operating profit margin indicates the percentage of revenue that the company generates as operating profit
after deducting operating expenses only.

Operating Profit Margin = (Operating Profit / Net Revenue) × 100

Cash Profit Margin (%):

Cash profit margin or operating cash flow margin represents the percentage of revenue that finally
converts into cash profits.

Cash Profit Margin = ( Cash Profit or Cash Flow from Operating Activities / Net Revenue )×100%

Yield on Advances:
It is the percentage return that banks earn on their loan portfolio.

Yield on Advances = Interest Income / Avg. Advances

Yield on Investments:

It indicates the percentage of return that banks earn on their investments.

Yield on Investments = Annual Income / Investment Value

Interest Spread:

The interest spread represents the difference in interest rates between the interest rate offered on deposits
and the interest rate charged on loans or debts by banks or other financial institutions.

Interest Spread = (Interest Income / Avg. Interest Earning Assets) – (Interest Expense / Avg. Interest
Bearing Liabilities)

Net Interest Margin (NIM):

The net interest margin (%) indicates the difference between a bank’s or any financial entity’s interest
revenue and the interest expense (paid to depositors) in proportion to the total assets generating interest.

NIM = (Investment Returns - Interest Expenses) / Average Earning Assets

PBIT Margin (%):

PBIT is used to assess a company’s operating profitability. It measures the percentage of revenue that
remains after covering operating expenses, but before accounting for interest and tax expenses. This
margin provides insight into the company’s operational efficiency and its ability to generate profits from
its core business activities.

PBIT Margin (%) = [Revenue / PBIT ] × 100

Cost to Income Ratio:

Cost to Income Ratio is a financial metric commonly used to evaluate the efficiency of a company’s
operations, particularly in the banking and financial services sector. It measures the proportion of
operating expenses relative to the operating income, providing insights into how well a company is
managing its costs in relation to its income.

Cost to Income Ratio=(Operating Income / Operating Expenses) × 100

Growth Ratios

The growth ratio tells you about the growth rate of various key metrics such as revenue, EBIT, Net profit,
etc. It will give you an idea about whether the respective metrics have increased or decreased over the past
year.

Revenue Growth (%):

It represents the percentage change in the net revenue as compared to the previous year’s revenue.

Revenue Growth (%) = (Current Year Revenue - Past Year Revenue) / Past Year Revenue

EBIT Growth (%):

This represents the percentage change in EBIT (Earnings Before Interest and Taxes) compared to the
previous year’s EBIT.

EBIT Growth (%) = (Current Year EBIT - Past Year EBIT) / Past Year EBIT

Net Profit Growth (%):

It shows the percentage change in net income compared to the previous year’s net income.

Net Profit (%) = (Current Year Net Profit - Past Year Net Profit) / Past Year Net Profit

EPS Growth (%):

It represents the percentage change in EPS (Earnings Per Share) compared to the previous year’s EPS.

EPS Growth (%) = (Current Year EPS - Past Year EPS) / Past Year EPS

Operating Efficiency Ratios

The operating efficiency ratio or efficiency ratio tells about how well the company is using its resources
to generate revenue and increase profits. Some of the operating efficiency ratios include:
Working Capital Days:

Working capital days indicate the total number of days that a company takes to convert its working capital
into revenue or cash flow.

Working Capital Days = (Working Capital × 365) / Sales Revenue

Receivable Days:

This measures the average number of days a company takes to collect cash from its credit customers.

Receivable Days = (Average Accounts Receivable / Total Credit Sales) × 365

Inventory Days:

This evaluates how long a company takes to sell its inventory.

Inventory Days = (Average Inventory / Cost of Goods Sold) × 365.

Payable Days:

This indicates the average days a company takes to pay its vendor or suppliers.

Payable Days = (Accounts Payable / Cost of Goods Sold) × Number of Days.

Cash Conversion Cycle (CCC):

This measures the total cumulative time it takes the company to convert its investments into cash flow
from sales.

CCC = Inventory Days + Receivable Days - Payable Days.

LDR / CDR / RDR / Accommodation Charge Notification:

Loans to Deposits Ratio (LDR) or Credit to Deposit Ratio (CDR) ratio is typically used to assess a bank’s
liquidity by comparing its loans to its deposits.

LDR = (Total Loans / Total Deposits) × 100%

Leverage Ratio:
Leverage ratio is a financial metric used to evaluate a company’s debt levels relative to its equity or assets.
It provides insights into the degree to which a company is using borrowed money (debt) to finance its
operations and growth. Higher leverage ratios indicate higher levels of debt, which can imply greater
financial risk but also the potential for higher returns.

Leverage Ratio = Total Debt / EBITDA

Valuation Ratios

The valuation ratios are one of the most commonly used ratios in stock market analysis. It helps you to
analyze whether the company’s stock is undervalued or overvalued in the market.

Price-to-Earnings Ratio:

Price-to-earnings ratio or P/E ratio compares a company’s

Market price to its earnings per share. It gives you insight into how much investors are willing to pay for
each dollar of earnings.

P/E Ratio = Market Price Per Share / Earnings Per Share

Price-to-book ratio:

P/B ratio compares a company’s market value to its book value, indicating whether a stock is overvalued
or undervalued based on its assets.

Price-to-Book Ratio (P/B) = Market Capitalization / Book Value of Equity

Dividend Yield (%):

Dividend yield shows the percentage of a company’s stock price that is given to the stockholders as
dividends.

Dividend Yield = Cash Dividend Per Share / Market Price Per Share

EV/EBITDA:

This ratio compares a company’s enterprise value relative to its earnings before interest, taxes,
depreciation, and amortization.
EV/EBITDA = Enterprise Value / EBITDA

Market Value Ratios

Adjusted EPS (₹):

Adjusted EPS indicates the company’s per-share earnings after adjusting for extraordinary items or non-
core profits and losses.

Cash EPS (₹):

Cash EPS is the company’s per-share earnings generated from operating activities.

Cash EPS = Operating Cash Flow / Diluted Shares Outstanding

Adjusted Book Value (₹):

Adjusted Book Value represents the company’s worth by removing non-operating assets and liabilities,
such as goodwill and intangible assets, from its balance sheet, offering a clearer view of its true value.

Adjusted book value = Adjusted Asset - Adjusted Liability

Dividend Yield%:

Dividend yield indicates the ratio of dividend per share to the current market price of the stock.

Dividend Yield Ratio = Dividend Per Share/Market Value Per Share

Cash Flow per Share (₹):

Cash flow per share represents net cash flow generated per share.

Cash Flow per Share = (Operating Cash Flow - Preferred Dividends) / Total Common Shares
Outstanding

Free Cash Flow per Share (₹):

Free cash flow per share represents free cash flow generated per share.
Free Cash Flow per Share = (Net Operating Profit after Taxes - Net Investment in Operating
Capital) / Total Common Shares Outstanding

Basic EPS (₹):

Basic earnings per share indicates net income generated per the company’s outstanding share.

Basic EPS = [Net Income / Total Shares Outstanding] × 100

Diluted EPS (₹):

Diluted EPS is the extended version of EPS. It accounts not only for the existing outstanding shares but
also includes the potential shares that could be created through instruments like warrants, convertible
securities, and employee stock options. It reflects the net income available after considering the maximum
possible share dilution.

Diluted EPS = (Net income - Preferred dividends) / (Weighted Avg Shares Outstanding + Dilutive
Securities)

Dividend per Share (₹):

Dividend per share signifies the dividend distributed per outstanding share.

DPS = Total Dividends Paid Out in a Year/Outstanding Shares of the Company

OR

DPS = Earnings Per Share × Dividend Payout Ratio

Book Value Per Share:

Book Value Per Share (BVPS) is a financial measure used in stock market analysis to determine the per-
share value of a company based on its equity available to common shareholders. It represents the value of
a company’s assets that shareholders would theoretically receive if the company were to liquidate.

BVPS = (Number of Outstanding Common Shares) / (Total Shareholders’ Equity − Preferred

Equity)
Uses of Ratio in Stock Market Analysis

Ratio analysis serves various purposes in stock market analysis. Here are some of them:

Financial Health Assessment: Ratios help you evaluate a company’s financial health, including its
liquidity, stability, and profitability.

Comparison: Ratios allow a comparison of a company’s performance with that of industry peers and
benchmarks.

Forecasting: Ratios also assist you in forecasting future performance and potential returns of the company
by analyzing its growth ratios.

Stock Valuation: It also helps you determine whether the company’s stock is overvalued, undervalued,
or fairly valued based on the P/E Ratio or P/B ratio.

Conclusion

In conclusion, ratio analysis is a powerful tool that offers valuable insights into a company’s financial
performance and future prospects. By analyzing different ratios, you gain a comprehensive view of the
company’s liquidity, solvency, profitability, and growth. These findings enable comparison of a
company’s stock with others or industry averages, aiding in investment decisions.

However, while ratio analysis provides key financial insights, it’s not the sole factor in evaluating stock
performance. External factors such as market conditions, industry dynamics, and management style also
impact a company’s stock. Therefore, a comprehensive evaluation of stock is crucial before making an
investment decision.
IN RATOANALYSIS OF 6 AUTOMOBILESCOMPANIES

PBDIT MARGIN OF DIFFERENT COUNTRIES ARE DIFFERENT AND THE HIGHEST FOR BAJAJ
AUTO 22.88%

PBIT MARGIN OF BAJAJ AUTO 22.1%

PBT MARGIN OF BAJAJ AUTO 21.98 %

NET PROFIT MARGIN OF BAJAJ AUTO 16.73%

RETUEN ON NETWORK EQUITY 30.08%

RETURN ON CAPITAL EMPLOYED38.68%

RETUEN ON ASSETS 21.83%

TOTAL DEBT/EQUITY HIGHEST OF TATA MLOTORS 0.46

ASSET TURNOVER RATIO HIGHEST OF TVS MOTORS 2.11

THE ANALYSIS OF LIQUIDITY RATIOS ARE

CURRENT RATIO HIGHEST OF HONDA INDIA POWER PRODUCT LIMITED 14.19%

QUICK RATIO HIGHEST OF HONDA AND INDIA POWER PRODUCT LIMITED 3.51%

INVENTORY TURNOVER RATIO HIGHEST OF BAJAJ AUTO 18.92%

DIVIDEND PAYOUT RATIO HIGHEST OF BAJAJ AUTO 52.96%

DIVIDEND PAYOUT RATIO OF BAJAJ AUTO 50.06

EARNING RETENTION RATIO OF TATA MOTORS 90.25

CASH EARNING RETENTION RATIO OFTATA MOTORS 92.23

The TNMM is similar to the cost plus and resale price methods in the sense that it uses the margin approach.
This method is useful in instances where it is difficult to compare at gross profit margin such as in situations
where different accounting treatments are adopted. The method examines the net profit margin relative to an
appropriate base such as costs, sales or assets attained by a MNE from a controlled transaction. As with the
cost plus or resale price methods, this margin should preferably be derived from comparable uncontrolled
transactions between the same taxpayer and independent parties. If there are no comparable uncontrolled
transactions involving that MNE, reference may be made to the net profit margin that would have been earned
in comparable transactions by an independent person. Functional analysis of the associated person as well as
the independent person will have to be applied to determine comparability.

EXAMPLE FOR TNMM

X is a Malaysian subsidiary of Y, located overseas. Y manufactures computers, which it sells to X and other
associated distributors in different countries. The computers distributed by X bear company Y's trademark.
X also provides technical support to all its customers.
 Sales 100,000

Cost of goods sold 90,000

Gross Profit 10,000

Operating expenses 15,000

Net loss (5000)

Margin (Net Loss) -5%

Trading account for X

Assume that the CUP method is not applied as no reliable adjustments can be made to account for differences
with similar products in the market; and the resale price method is not used as no comparable measurement
of gross margin can be found due to differences in accounting practices amongst independent distributors.
The TNMM is adopted on the basis of net profit return to sales. It was found that the net profit margin to sales
earned in a comparable transaction by an independent person is 5%.

Adjustments on X will be as follows:

Net profit of X = 100,000 x 5% = 5,000

Adjusted cost of goods sold = 100,000 – 15,000 – 5,000 =80,000