An examination of five financial ratios: The Altman Z Score is a technique used to assess the creditworthiness of selected passenger car companies

Abstract

This research tried to investigate the financial health of Indian passenger’s car companies. Assessing financial health is something that has been done for a long time. The research will last five years, from 2015-16 to 2019-20. The financial performance of the selected vehicle firms is assessed using Altman's Z Score. The Altman Z-score is a credit-strength test result that is based on five financial ratios that may be calculated using data from a company's annual report. With 3.49 million units sold in the passenger and commercial vehicle categories combined in 2020, India was the fifth-largest auto market. In 2019, it was the seventh-largest commercial vehicle manufacturer. Domestic automotive manufacturing increased at a CAGR of 2.36 percent between FY16 and FY20, reaching 26.36 million vehicles. Between FY16 and FY20, domestic automotive sales increased at a 1.29 percent compound annual growth rate (CAGR), with 21.55 million vehicles sold in FY20.The total number of passenger vehicles produced in FY21 was 22,652,108. The total production volume of passenger vehicles, three-wheelers, two wheelers, and quadricycles reached 2,214,745 units in October 2021 (excluding BMW, Mercedes, Tata Motors, and Volvo Auto).The automobile sector is currently confronting challenges in order to reduce liquidity risk and increase profitability, not only in India but globally. By 2022, the major automobile firms in India are anticipated to make India the world's leader in the two-wheeler and four-wheeler sectors. To overcome the difficulties and meet the challenges of vehicle production, industries are encouraged to bring in additional investments into the stream in order to reduce liquidity risk and increase profitability. The liquidity and profitability trade-off can be effectively addressed in the manufacturing sector by enhancing and implementing effective monetary methods. The study aids in the provision of recommendations to businesses in order to help them avoid financial difficulty by utilising Altman's Z-Score model is a popular tool for predicting bankruptcy. In this study, the financial performance of vehicle firms was examined, as well as the risk of bankruptcy for a sample of automobile companies in the industry.