Analysis of a Credit Strength of Selected Automobile Companies : A Quantitative Approach Using the Z-Score-Based on Five Financial Ratio

This paper has attempted to study the financial health of automobile companies in India. Assessing the financial health has been done for a long period. The study is done for the period of 5 years from 2015-16 to 2019-20. Altman's Z Score is applied to assess the financial performance of the companies selected automobile companies. The Altman Z-score is the output of a credit-strength test which is based on five financial ratios that can calculate from data found on a company's annual report. Today the automobile industry in India is world’s fourth largest and Seventh largest manufacturer of commercial vehicles. Automobile industry is largest sector which contribute the 45% manufacturing Gross domestic product and 7.1% GDP to nation. Today automobile industry not only in India but worldwide facing the problems in order to minimize the risk of liquidity and to maximize profitability. The major automobile players in the Indian market are expected to make India a leader in the two-wheeler and four-wheeler market in the world by 2021. To overcome the difficulty and meet the challenges of automobile Industries are encouraged to attract more investments into the stream in order to minimize the risk of liquidity and to maximize profitability. The liquidity and profitability trade off can be tackled efficiently by improving and adopting effective monetary strategies into the manufacturing sector. The study helps to provide suggestions to the firms to avoid financial distress by using One common bankruptcy prediction method is Altman’s Z-Score model. In this study an attempt has been made to analyse the financial performance of automobile companies and also to predict the risk of bankruptcy for selected automobile companies in the industry