financial analysis of wipro ltdt
DESCRIPTION
trwerfweTRANSCRIPT
A
Executive Summary
It is Summarize tin of all report in one or two pages so as to provide an overview of the company. it is also called synopsis or Abstract. As a partials fulfillment of the requirement for the Managerial Accounting Cource.We have completed a project report on financial Analysis of Wipro Ltd. Sales Figure is increasing at a handsome rate. it is at Rs. 58400.23 Million. in 2003-04 and it is increased to Rs. 141395.8 Million. So Sales is increased 75.05% because of aggressive Selling Policy.
Profit after Tax is also increasing as compare to 2003-04 it is increasing 22514 Million at Rs 3408, 8747, 4388.6, 5970.4, respectivaly last four year. This is because company has increased it sales and doing good cost management
Net worth of the company is increased in this year because of increase in Reserve & Surplus
Current Ratio of Wipro limited is showing good position. It is 1.26 Times in 2003-04 then it is increased to 2.13 Times in 2007-08 this shows Company has achieved standard Ratio.
The returns on the investment is some what decline in current year.
The EPS of Share is increased Rs. 7.43 to Rs 20.62 in 2007-08 So Share holder are benefited.
Companys Total Assets are increased and it trying to expand its business on the other hand debt are also increased it shows that company trying to Trading on Equity.
After analyzing all aspect Companys performance is good.CONTENTPreface
Acknowledgement
Executive Summary
1. INTRODUCTION
1.1 Introduction to company
1.2 Group of companies
1.3 History
1.4 Company Profile
1.5 Registered office address
1.6 Board of director
1.7 Auditor
2. ANALYSIS OF BALANCE SHEET
2.1 Trend analysis of Balance sheet
2.1.1 Trend analysis of fixed assets
2.1.2 Trend analysis of total current assets
2.1.3 Trend analysis of share holders equity
2.1.4 Trend analysis of total current assets
2.1.5 Share holders fund
2.1.6 Sources of fund
2.1.7 Investment
2.1.8 Application of funds
2.2 Horizontal analysis of Balance sheet
2.2.1 Sources of fund 2008
2.2.2 Application of fund 2008
2.2.3 Sources of fund for five years
2.2.4 Application of fund for five years
3. ANALYSIS OF P & L ACCOUNTTrend analysis of P & L
3.1.1 Trend analysis of total income
3.1.2 Profit after tax
3.1.3 Transfer to general reserve
3.1.4 Net sales and services
3.2 Horizontal analysis of P & L
3.2.1 Comparison of PBT and Income with expenditure
4. CASH FLOW ANALYSIS
Introduction
Cash flow statementInterpretation of Cash flow statement5. RATIO ANALYSIS
Introduction of the ratio analysis
Liquidity ratio Current ratio
Quick ratio
Net working capital Profitability ratio Gross profit
Operating ratio
Net profit ratio
Return on investment
Return on equity Assets turnover ratio total asset turn over ratio
net fixed asset turn over
inventory turn over ratio
average age of inventories
debtor turn over ratio Finance structure ratio debt ratio
debt equity
interest coverage ratio Valuation ratioearning per share
divident pay out ratio
P/E ratio
Profit margin ratio
Du-Pont chart 6. SCENARIO ANALYSISbusiness unit performance
company analysis
Share holding pattern
Market capitalization7 ANNEXURES
8 BIBLIOGRAPHY
Chapter 1.
Introduction
Introduction to company
Group Companies
History
Company Profile
Registered Office Address
Board of Directors Auditors
1. Introduction
1.1. Introduction of company
Wipro Limited (Wipro), together with its subsidiaries and associates (collectively, the company or the group) is a leading India based provider of IT Services and Products, including Business Process Outsourcing (BPO) Services, globally. Further,Wipro has other business such as India and AsiaPac IT Services and products and Consumer Care and Lighting. Wipro is headquartered in Bangalore, India.Wipro Technologies is a globalservices providerdelivering technology-driven business solutions that meet the strategic objectives clients. Wipro has 40+ Centers of Excellence that create solutions around specific needs of industries. Wipro delivers unmatched business value to customers through a combination of process excellence, quality frameworks and service delivery innovation. Wipro is the World's first CMMi Level 5 certified software services company and the first outside USA to receive the IEEE Software Process Award. Wipro is a $3.5 billion Global company in Information Technology Services, R&D
Services, Business process outsourcing. Team wipro is 75,000 Strong from 40 nationalities and growing. Wipro is present across 29 counries,36 Development canters, Investors across 24 countries.
Largest third party R&D Service provider in the world.
Largest Indian Technology Infrastructure management service provider.
A vendor of choice in the middle east
Among the top 3 Indian BPO Service provider by Revenue (* Nasscom)
Among the top 2 Domestic IT Services companies in India (*IDC India)1.2. Group Companies
Wipro Infrastructure Engineering Ltd. Wipro Inc. cMango Pte Ltd. Wipro Japan KK Wipro Shanghai Ltd. Wipro Trademarks Holding Ltd.
Wipro Travel Services Ltd.
Wipro Cyprus Private Ltd.
Wipro Consumer Care Ltd.
Wipro Health Care Ltd.
Wipro Chandrika Ltd.(a)
Wipro Holdings (Mauritius) Ltd.
Wipro Australia pty Ltd.
WMNETSERV Ltd.(a)
Quantech Global Service Ltd.
3D Network Pte Ltd.
Planet PSG Pte Ltd.
Spectramind Inc.
1.3. HistoryWipro started in 1945 with the setting up of an oil factory in Amalner a small town in Maharashtra in Jalgaon District. The product Sunflower Vanaspati and 787 laundry soap (largely made from a bi-product of Vanaspati operations) was sold primarily in Maharashtra and MP. The company was aptly named Western India Products Limited.The Birth of the name Wipro - As the organization grew and diversified into operations of Hydraulic Cylinders and Infotech, the name of the organization did not adequately reflect its operations. Azim Premji himself in 1979 selected the name "Wipro" largely an acronym of Western India Products. Thus was born the Brand Wipro. The name Wipro was unique and gave the feel of an 'International" company. So much so that some dealers even sent their cheques favouring Wipro (India) Limited. Fortunately, the banks accepted them!!By the early 90s, Wipro had grown into various products and services. The Wipro product basket had soaps called Wipro Shikakai, Baby products under Wipro Baby Soft, Hydraulic Cylinders branded Wipro, PCs under the brand name Wipro, a joint venture company with GE named Wipro GE and software services branded Wipro. The Wipro logo was a 'W", but it was not consistently used in the products.It was clearly felt that the organization was not leveraging its brand name across the various businesses. The main issue remained whether a diverse organization such as Wipro could be branded under a uniform look and feel and could there be consistent communication about Wipro as an organization.
1.4. Company Profile
Business-DescriptionWipro Limited is the first PCMM Level 5 and SEI CMM Level 5 certified IT Services Company globally. Wipro provides comprehensive IT solutions and services, including systems integration, Information Systems outsourcing, package implementation, software application development and maintenance, and research and development services to corporations globally.The Group's principal activity is to offer information technology services. The services include integrated business, technology and process solutions including systems integration, package implementation, software application development and maintenance and transaction processing. These services also comprise of information technology consulting, personal computing and enterprise products, information technology infrastructure management and systems integration services. The Group also offers products related to personal care, baby care and wellness products. The operations of the Group are conducted in India, the United States of America and Other countries. During fiscal 2007, the Group acquired Wipro Cyprus Pvt Ltd, Retailbox Bv, Enabler Informatica SA, Enabler France SAS, Enabler Uk Ltd, Enabler Brazil Ltd, Enabler and Retail Consult GmbH, Cmango Inc, Cmango (India) Pvt Ltd, Saraware Oy, Quantech Global Services and Hydroauto Group AB
Global IT Services and Products
The Company's Global IT Services and Products segment provides IT services to customers in the Americas, Europe and Japan. The range of its services includes IT consulting, custom application design, development, re-engineering and maintenance, systems integration, package implementation, technology infrastructure outsourcing, BPO services and research and development services in the areas of hardware and software design. Its service offerings in BPO services include customer interaction services, finance and accounting services and process improvement services for repetitive processes.The Global IT Services and Products segment accounted for 74% of the Company's revenues and 89% of its operating income for the year ended March 31, 2007 (fiscal 2007). Of these percentages, the IT Services and Products segment accounted for 68% of its revenue, and the BPO Services segment accounted for 6% of its revenue during fiscal 2007.Customized IT solutions
Wipro provides its clients customized IT solutions in the areas of enterprise IT services, technology infrastructure support services, and research and development services. The Company provides a range of enterprise solutions primarily to Fortune 1000 and Global 500 companies. Its services extend from enterprise application services to e-Business solutions. Its enterprise solutions have served clients from a range of industries, including energy and utilities, finance, telecom, and media and entertainment. The enterprise solutions division accounted for 63% of its IT Services and Products revenues for the fiscal 2007.
Technology Infrastructure Service
Wipro offers technology infrastructure support services, such as help desk management, systems management and migration, network management and messaging services. The Company provides its IT Services and Products clients with around-the-clock support services. The technology infrastructure support services division accounted for 11% of Wipro's IT Services and Products revenues in fiscal 2007.Research and Development Services
Wipro's research and development services are organized into three areas of focus: telecommunications and inter-networking, embedded systems and Internet access devices, and telecommunications and service providers.The Company provides software and hardware design, development and implementation services in areas, such as fiber optics communication networks, wireless networks, data networks, voice switching networks and networking protocols. Wipro's software solution for embedded systems and Internet access devices is programmed into the hardware integrated circuit (IC) or application-specific integrated circuit (ASIC) to eliminate the need for running the software through an external source. The technology is particularly important to portable computers, hand-held devices, consumer electronics, computer peripherals, automotive electronics and mobile phones, as well as other machines, such as process-controlled equipment. The Company provides software application integration, network integration and maintenance services to telecommunications service providers, Internet service providers, application service providers and Internet data centers. Business Process Outsourcing Service
Wipro BPO's service offerings include customer interaction services, such as IT-enabled customer services, marketing services, technical support services and IT helpdesks; finance and accounting services, such as accounts payable and accounts receivable processing, and process improvement services for repetitive processes, such as claims processing, mortgage processing and document management. For BPO projects, the Company has a defined framework to manage the complete BPO process migration and transition. The Company competes with Accenture, EDS, IBM Global Services, Cognizant, Infosys, Satyam and Tata Consultancy Services.India and AsiaPac IT Services and ProductsThe Company's India and AsiaPac IT Services and Products business segment, which is referred to as Wipro Infotech, is focused on the Indian, Asia-Pacific and Middle-East markets, and provides enterprise clients with IT solutions. The India and AsiaPac IT Services and Products segment accounted for 16% of Wipro's revenue in fiscal 2007. The Company's suite of services and products consists of technology products; technology integration, IT management and infrastructure outsourcing services; custom application development, application integration, package implementation and maintenance, and consulting Wipro's system integration services
Include integration of computing platforms, networks, storage, data center and enterprise management software. These services are typically bundled with sales of the Company's technology products. Wipro's infrastructure management and total outsourcing services include management and operations of customer's IT infrastructure on a day-to-day basis. The Company's technology support services include upgrades, system migrations, messaging, network audits and new system implementation. Wipro designs, develops and implements enterprise applications for corporate customers. The Company's solutions include custom application development, package implementation, sustenance of enterprise applications, including industry-specific applications, and enterprise application integration. Wipro also provides consulting services in the areas of business continuity and risk management, technology, process and strategy.
Consumer Care and Lighting
Wipro's Consumer Care and Lighting business segment accounted for 5% of its revenue in fiscal 2007. The Company's product lines include hydrogenated cooking oil, soaps and toiletries, wellness products, light bulbs and fluorescent tubes, and lighting accessories. Its product lines include soaps and toiletries, as well as baby products, using ethnic ingredients. Brands include Santoor, Chandrika and Wipro Active. The Wipro Baby Soft line of infant and child care products includes soap, talcum powder, oil, diapers and feeding bottles and Wipro Sanjeevani line of wellness products.
The Company's product line includes incandescent light bulbs, compact fluorescent lamps and luminaries. It operates both in commercial and retail markets. The Company has also developed commercial lighting solutions for pharmaceutical production centers, retail stores, software development centers and other industries. Its product line consists of hydrogenated cooking oils, a cooking medium used in homes, and bulk consumption points like bakeries and restaurants. It sells this product under the brand name Wipro Sunflower. 1.5. Registered Office AddressWIPRO LIMITED
Doddakannelli, Sarjapur Road, Bangalore 560 035, India.Tel : +91-80-28440011Fax : +91-80-28440541.6. Board of Directors
Azim H . Premji Chairman
Dr Ashok S Ganguly Former Chief Ex.Officer Nortel B .C. Prabhakar Practitioner of Law Dr. Jagdish N. Sheth Professor Of Marketing-Emory Uni.Usa.
N.Vagual Chairman-ICICI Bank Ltd
Bill Owens
Former Chief Ex.Officer,Nortel P. M. Sinba
Former Chairman Pepsico India Holdings
1.7. Auditors
KPMG
BSR & Co.
Audit committee
N Vaghul - Chairman
P M Sinha - Member
B C Prabhakar - Member Board Governance and Compensation Committee
Ashok S Ganguly - Chairman
N Vaghul - Member
P M Sinha - Member
Shareholders Grievance and Administrative Committee
B C Prabhakar - Chairman
Azim H Premji - Member Chapter 2.
Analysis of Balance Sheet
Trend Analysis of Balance Sheet Horizontal Analysis of Balance Sheet
2. Analysis of Balance Sheet
2.1. Trend Analysis of Balance SheetTrend Analysis of Balance Sheet involves calculation of percentage changes in the Balance Sheet items for a no. of successive years. This is carried out by taking the items of the past financial year used as base year and items of other years are expressed as percentage of the base year. Here 2003-04 is taken as base yearPerticular2003-042004-052005-062006-072007-08
SOURCES OF FUNDS
Share Holder's Funds
Share Capital100302.27202.68207.37100.171
Share application money pending allotment100622.41290.456114.286
Reserves & Surplus100138.62122.94180.99122.516
Share holder's Equity100140.68125.18181.718121.833
Loan Funds100
Secured10022.786208.9689.7139.154
Unsecured100382.5475.796577.2411829.68
Total Loan Funds10058.947122.08616.3431171.94
Minority Interest100161.94-10.929400
Total Sources of Funds100138.55124.53149.283162.162
APPLICATION OF FUNDS
Fixed assets
Goodwill100107.8262.297268.622445.384
Gross Block100133.91118.74142.195159.492
Less:
Accumulated Depreciation100130.95129.74147.107147.775
Net Block100136.72108.75153.667154.22
Capital work in progress and advances100182.43240.03163.056131.194
Total Fixed Assets100130.83112.84175.077220.726
Investments100123.33131.09107.90948.1879
Deferred Tax Assets(Net)100101.7912099.326689.661
Current Assets, Loans & Advances
Inventories100135.23118.19200.969160.578
Sundry Debtors100130.78137.08138.168137.637
Cash & Bank Balances100176.2155.03223.775198.113
Loan & Advances10097.872230.42127.844180.692
Total Current Assets100129.24157.71154.955166.304
Less:
Current Liabilities & Provisions
Current Liabilities100143.26145.4181.719118.484
Provisions10061.257239.363.3118180.879
Total Liabilities100102.82172.99133.59130.504
Net Current Assets100231.52131.44203.29219.526
Total Application of Funds100138.55124.53149.283162.162
Table 2.1.1 Trend Analysis of Balance Sheet2.1.1 Trend Analysis of Fixed assets
Year2003-042004-052005-062006-072007-08
Total Fixed Assets100130.827112.844175.077220.726
Table 2.1.2 Trend Analysis of Fixed assets Figure 2.1.1 Trend Analysis of total fixed assetsInterpretation The fixed assets are increase in current year is good for the company.
Hear fixed assets are increasing as a increasing rate it means the company has expand its business. Fixed Assets are continuously increasing year by year.
It seems that the company has good future plans and they want to expand their business so they have invested more and more funds in fixed assets.
Fixed assets are efficiently utilized by the company due to which the profit of the company is increasing every year.
In 2006-07and 2007-08 Company has huge increase its land, patents, trade marks and rights. 2.1.2 Trend Analysis of total current assetsTable 2.1.3 Trend Analysis of total current assetsYear2003-042004-052005-062006-072007-08
Total Current Assets100129.242157.708154.955166.304
Figure 2.1.2 Trend Analysis of total current assetsInterpretation The current assets is shows the cash liquidity of the company.
Hear it is increase it year by year it means the company has sufficient liquidity for generating the business.
2.1.2 Trend Analysis of total current assetsTable 2.1.4 Trend Analysis of total LiabilitiesYear2003-042004-052005-062006-072007-08
Total Liabilities100102.817172.991133.59130.504
Figure 2.1.3 Trend Analysis of total LiabilitiesInterpretation The total liabilities is highest in 2005-06.
Liabilities is incressing rate it mean company has to developed business. And purchase raw material on credit basis.
2.1.3 Trend Analysis of share holders equity.Table 2.1.5 Trend Analysis of share holders equity.Year2003-042004-052005-062006-072007-08
Share holder's Equity100140.684125.181181.718121.833
Figure 2. 4 Trend Analysis of share holders equity.Interpretation Share holder equity is increase high in 2006-07 because the company has allocated new share.
Share holder equity is showing high fluctuation.
2.1.4 Trend Analysis of total loan fund.Table 2.1.6 Trend Analysis of total loan fund.Year2003-042004-052005-062006-072007-08
Total Loan Funds10058.9472122.076616.3431171.94
Figure 2.1.5 Trend Analysis of total loan fundsInterpretation The total trend line is slowly increase up to 2005-06. And after that it is increase at a high rate.
From 2006-07 onward the loan fund is increase because the company has expanse its business. The company has been able to raise its secured loan without shortage of funds.
Increase in secured loan shows that company has very good prestige in Financial market.
Company increasing loan funds because company want to increase its trading on equity.
2.1.5 share Holders FundsShare Holder's Funds
Year2003-042004-052005-062006-072007-08
share capital100302.273202.68207.37100.171
Share application money pending allotment100622.406290.456114.286
Reserves and Surplus100138.625122.944180.99122.516
Total100140.684125.181181.718121.833
Table 2.1.7 Trend Analysis of Share Holder's Funds
Figure 2.1.6 Trend Analysis of Share Holder's Funds
Interpretation There is increase in share capital more than two times in 2005-06 and 2006-07 and it increase three time in 2004-05 compare to base year 2003-04.In 2007-08 there is not big increase in share capital compare to 2005-06.
There is highest share capital in 2004-05.
The company has issued new shares in the 2005-06.
As a result no. of shares is increased and these funds are implemented for future plans of the company.
Reserves & surplus shows a remarkable increase in 2004-05, 2005-06 and 2006-07 and it slowly decrease in 2008. respectively with respect to the base year, this shows the company has future vision and it would like to expand its business.
Increase in Reserve & surplus shows because of increase in profit every year.
Has a hole we can say that the company is target oriented and its sticking to its policies as a result share holders funds is increasing year by year.
2.1.6 Source of Funds
Source Of Funds
Year2003-042004-052005-062006-072007-08
Share holder's Equity100140.6845125.181181.718121.833
Minority Interest100161.9446-10.929400
Total Loan Funds10058.94717122.076616.3431171.94
Total Sources of Funds100138.5534124.52769149.283162.162
Table 2.1.8 Trend Analysis of Source Of Funds
Figure 2.1.7 Trend Analysis of Sources of FundsInterpretation
The loan fund is increases six and twelve time in year 2007, 2008 respectively compare to 2003-04.
The company has observed an increase in loan funds as compared to the base year which indicates its growing reputation in the financial market.
Hence the overall sources of funds have shown big increase with respect to the base year
2.1.7 Investment
Investment
Year2003-042004-052005-062006-072007-08
Investments100123.3283131.087107.90948.1879
Table 2.1.9 Trend Analysis of Investment
Figure 2.1.8 Trend Analysis of Investment
Interpretation
Investment figure shows healthy progress of the company.
Investment has increased in 2005, 2006 and after that it has strated decrease in 2007, 2008 which shows not good growth compared to base year.
As they have invested most of their funds in Indian money market mutual funds.
Shows that the company has not take risk but the company has invested money for developed its own business.
2.1.8 Application Of Funds
Application of funds
Year2003-042004-052005-062006-072007-08
Total Fixed Assets100130.8267112.844175.077220.726
Investments100123.3283131.087107.90948.1879
Deferred Tax Assets(Net)100101.78912099.326689.661
Net Current Assets100231.5197131.437203.29219.526
Table 2. 10 Trend Analysis of Application Of Funds
Figure 2.1.9 Trend Analysis of Application Of FundsInterpretation
Graph shows that in 2007-08 Company invested more fund in fixed Assets. Company has enough cash in hand so that in any condition company can take Any Financial decision easily.
2.2 Horizontal Analysis of Balance SheetFinancial Statement present information for the last five year. Horizontal analysis of Balance Sheet deals with the amount changes and the percentage changes of the items of the Balance Sheet.
Financial Statement present comparative information for the current year and the previous year. Horizontal analysis of Balance Sheet deals with the amount changes and the percentage changes of the items of the Balance Sheet.
YEAR2007-082006-072005--062004-052003-04
SOURCES OF FUNDS
Share Capital1.352.062.911.960.83
Share application money pending allotment0.020.020.080.020.00
Reserves & Surplus52.6965.7364.4271.6465.85
Secured0.961.050.460.301.68
Unsecured19.771.650.310.560.19
Minority Interest0.050.020.370.29
Current Liabilities18.4423.7818.8917.7615.79
Provisions6.725.6712.937.3915.37
TOTAL100100.00100.00100.00100.00
APPLICATION OF FUNDS
Total Fixed Assets38.7326.8222.1026.7826.08
Investments7.4123.4931.4132.7633.84
Deferred Tax Assets(Net)0.240.420.610.690.86
Current Assets, Loans & Advances0.000.000.000.000.00
Inventories3.082.932.102.432.29
Sundry Debtors18.7020.7621.6821.6321.07
Cash & Bank Balances18.1514.009.037.965.76
Loan & Advances13.6911.5813.077.7510.09
TOTAL100100100100100
Table 2.2.1 Horizontal Analysis of Balance Sheet2.2.1 analysis of sources of funds 2008
Share Capital1.35
Share application money pending allotment0.02
Reserves & Surplus52.69
Secured0.96
Unsecured19.77
Minority Interest0.05
Current Liabilities18.44
Provisions6.72
Table 2.2.2 Horizontal Analysis of sources of funds
Figure: 2.2.1 Horizontal analysis Sources of funds
Interpretation
Graph shows that in 2007-08 unseured loan is 19.77% it means that company has more taken short term borrowings for expantion of business. In this graph revenue is more then 50% compare to other source so it is good for company.2.2.2 analysis of application of funds 2008
Total Fixed Assets38.73
Investments7.41
Deferred Tax Assets(Net)0.24
Current Assets, Loans & Advances0.00
Inventories3.08
Sundry Debtors18.70
Cash & Bank Balances18.15
Loan & Advances13.69
Table 2.2.3 Analysis of application of funds in 2008
Figure: 2.2.2 analysis of application of fundsInterpretation
Graph shows that in 2007-08 the current assets loan is increase Sondory debtors is 13.69 so company has to recover it. 2.2.3 Sources of Funds
Sources of Funds
Year2003-042004-052005--062006-072007-08
Share holder's Equity97%98%99%96%72%
Total Loan Funds3%1%1%4%28%
Total Sources of Funds100%100%100%100%100%
Table 2.2.4 Horizontal Analysis of Sources of Funds
Figure 2.2.3 Horizontal Analyses of Sources of Funds
Interpretation Company has raised Share Capital during 2003-04 to 2006-07 and after that it was reduced at 24% this step has been taken in order to promote expansion of their business.
Company strive enhancement of share holders value through sound business decision, prudent financial management and high standard of ethics through the organizations. Reserves and surplus has been retained for future expansion of the business.
In the base year 2003-04 total loan funds is normally up to 2006 and after that it was increase up to 25%, so it means that company has expand the business.
2.2.4 Application of funds
Application of Funds
Year2003-042004-052005-062006-072007-08
Total Fixed Assets38%36%32%38%52%
Investments49%44%46%33%10%
Deferred Tax Assets(Net)1%1%1%1%0%
Net Current Assets12%20%21%28%38%
Total Application of Funds100%100%100%100%100%
Table 2.2.5 Horizontal Analysis of Application of Funds
Figure 2.2.4 Horizontal Analysis of Application of Funds
Interpretation
The total fixed assets are 38% in 2004 and after that it was decrease up to 4% in 2006 and after that it was increase 10% so it means the company has bought the assets for expansion of business.
The investment is decline slowly and gradually.
The net current assets are increase at increasing rate so that company has a good liquidity.
The companys future plans for expansion seem clear due to increased investment in Fixed Assets .Efficient use of these Assets has enabled the company to observe an increased profit.
Chapter 3.
Analysis of Profit & Loss Account
Trend Analysis of Profit & Loss Account
Horizontal Analysis of Profit & Loss Account
3. Analysis of Profit & Loss Account
3.1. Trend Analysis of Profit & Loss AccountTrend Analysis of Profit & Loss Account involves calculation of percentage changes in the P & L Account items for a no. of successive years. This is carried out by taking the items of the past financial year used as base year and items of other years are expressed as percentage of the base year. Here 2004-05 is taken as base year
2003-042004-052005-062006-072007-08
Income
Gross Sales and Services100139.16129.73142133.12
Less: Excise Duty10095.25106.94174122.77
Net Sales and Services100139.74129.93141133.21
Other Income10071.79162.58193140.87
Total Income100138.24130.3142133.36
Expenditure
Cost of Sales and Services100138.14132.18143136.91
Selling and marketing expenses100104.38124.21136148.91
General and administrative expenses1001.81262.373548669.4
Interest100109.12137.5814921.48
Total Expenditure100133.38131.74143139.13
PROFIT BEFORE TAXATION100157.48125.5139112.37
Provision for taxation including FBT100163.61123.33114117.63
PROFIT BEFORE MINORITY INTEREST /SHARE IN EARNING OF ASSOCIATES100156.49125.87143111.68
Minority interest100-148.9-1.13-600-400
Share in earning of Associates100764.97164.26102112.88
PROFIT FOR THE PERIOD100157.88126.95142111.58
Appropriations
Interim dividend10040.33
Proposed dividend100373.65204.9220400.69
Tax on dividend10057.05202.68127117.43
TRANSFERTO GENERAL RESERVE100456.02101.88155116.03
EARNINGS PER SHARE-EPS
Equity shares of par value Rs.2/- each
Basic (in Rs.)10078.68125.64140109.70
Diluted (in Rs.)10078.11124.83141110.29
Number of Shares for calculating EPS100
Basic (in Rs.)100200.55101.07101101.69
Diluted (in Rs.)100202.19101.68101101.69
Table 3.1.1 Trend Analysis of Profit & Loss Account3.1.1 Trend Analysis of Total Income and Total ExpenditureTable 3.1.2 Trend Analysis of Total Income and Total Expenditure
Trend analysis of total income & expenditure
2003-042004-052005-062006-072007-08
Total Income100138.238130.304142133.36
Total Expenditure100133.382131.735143139.13
Figure 3.1.1 Trend Analysis of Total Income and Total Expenditure
Interpretation
Though the sales has been continuously increased from past 3 years but the proportionate expenditure is also rising so overall not making any huge effect on net profit of this company.
In 2006-07 Income from mutual fund dividend increased by 93.57 % and Interest on debt instrument 567 % increased in 2005-06 compare to previous year.
Percentage Expenditures increasing year by year little more than Income increased, so that Profit margin Decrease year by year.
3.1.2 Profit After Tax
Profit after tax
Year2003-042004-052005-062006-072007-08
Profit after tax100157.481125.497139112.37
Table 3.1.3Trend Analysis of Profit After Tax
Figure 3.1.2 Trend Analysis of Profit After Tax
`
Interpretation
PAT has been rising over the years when we compare with the expenditure which has been incurred to earn this profit is also rising
PAT has been increased all the years because of increasing in sales.3.1.3 Trend Analysis of Profit trancfer to genral resrveYear2003-042004-052005-062006-072007-08
TRANSFERTO GENERAL RESERVE100456.022101.883155116.03
Table 3.1.4 Trend Analysis of Profit trancfer to genral resrve
Figure 3.1.3 Trend Analysis of Profit trancfer to genral resrve
Interpretation
The graph is showing that in year 2004-05 the company has transferred big portion of net profit to genral reserve.
Hear the in 2005 company has reinvest profit for business expansion it is good shine for the company.
3.1.4 Trend Analysis of net sales and services
Year2003-042004-052005-062006-072007-08
Net Sales and Services100139.735129.93141133.21
Table 3.1.5 Trend Analysis of net sales and services
Figure 3.1.4 Trend Analysis of net sales and servicesInterpretation
Net sales and services are incresing from 2004 to 2005.
From 2005 onward the net sales incresing at a stret line so hear company should tray to increse net sales.
3.2. Horizontal Analysis of Profit & Loss AccountFinancial Statement present comparison or every year what portion the rest of particular is having compare to the total income. Hear we assume that the total income is 100 then what is the of particular compare to total income. Horizontal analysis of Profit & Loss Account deals with the amount changes and the percentage changes of the items of the Profit & Loss Account in every year individually.
Year2003-042004-052005-062006-072007-08
Income
Gross Sales and Services99.07%99.73%99.29%98.94%98.77%
Less: Excise Duty1.27%0.88%0.72%0.88%0.81%
Net Sales and Services97.80%98.86%98.57%98.06%97.95%
Other Income2.20%1.14%1.43%1.94%2.05%
Total Income100.00%100.00%100.00%100.00%100.00%
Expenditure
Cost of Sales and Services65.56%65.51%85.32%66.97%68.75%
Selling and marketing expenses9.05%6.83%6.51%6.24%6.97%
General and administrative expenses5.19%0.07%0.03%0.08%5.27%
Interest0.06%4.64%4.89%5.14%0.83%
Total Expenditure79.85%77.05%77.89%78.43%81.83%
PROFIT BEFORE TAXATION20.15%22.95%22.11%21.57%18.17%
Provision for taxation including FBT2.81%3.33%3.15%2.53%2.23%
PROFIT BEFORE MINORITY INTEREST /SHARE IN EARNING OF ASSOCIATES17.33%19.62%18.95%19.04%15.94%
Minority interest-0.10%0.11%0.00%0.00%-0.01%
Share in earning of Associates0.04%0.21%0.27%0.19%0.16%
PROFIT FOR THE PERIOD17.27%19.73%19.22%19.24%16.10%
Appropriations
Interim dividend9.74%4.73%1.43%
Proposed dividend1.56%4.21%6.63%0.95%2.87%
Tax on dividend1.45%0.60%0.93%0.83%0.73%
TRANSFERTO GENERAL RESERVE4.52%14.92%11.66%12.72%11.07%
Table 3.2.1 Horizontal Analysis of Profit & Loss Account3.2.1 Comparition of PBT and Expenduture with total incomeYear2003-042004-052005-062006-072007-08
Total Income100.00%100.00%100.00%100.00%100.00%
Total Expenditure79.85%77.05%77.89%78.43%81.83%
PROFIT BEFORE TAXATION20.15%22.95%22.11%21.57%18.17%
Table 3.2.2 Comparition of PBT and Expenduture with total income
Figure 3.1.1 Comparition of PBT and Expenduture with total incomeInterpretation
The total expenditure is near by 80% of total income in every year.
Every year PBT is near by 20% of total income.
Chapter 4.
Analysis of Cash Flow Statement
Introduction
Cash Flow statement
Interpretation of Cash Flow Statement
4. ANALYSIS OF CASHFLOW STATEMENT
4.1. Introduction Cash flow statement [CFS] provides information about the historical changes in cash by classifying cash flows during the period from operating activities, financial activities and investing activities of a concern. It shows the summary of cash flow on account of these activities.
Operating activities as the principal revenue-production activities of the enterprise These activities determines the net profit or loss of a concern. Operating Activities refer to the operations of a business of purchasing, sales etc. Sales generate cash; purchase and expense use up the cash. Net profit leads to net increase in cash.Net increase in cash from operating activities is the main source of cash inflow.
Investing activities as the acquisition and disposal of long tern assets and investments. Acquiring and selling of a subsidiary or other concerns should be shown as Investing Activity. Investing Activities of acquisition of fixed assets, long term investing reduces the cash and indicate cash outflow. Investing activities of disposal of fixed assets etc increase the cash inflow.
Financial activities as the activities resulting in the changes in the size and composition of the owners capital and borrowing of the enterprise. Owners capital includes preference capital in case of a company. Financial Activities such as issue of shares, taking a loan from Bank, sale of fixed assets etc. increase the amount of cash available and form the source of cash inflow. Financial activities such as repayment of preference capital or repayment of loan reduce the amount of cash and indicates cash outflow.
4.2 Cash Flow Statement Year ended March 31, (Ra. In Million)
Table 4. 1 Cash Flow Statement20082007200620052004
A. Cash Flow from Operating Activities
Adjustments for :
Depreciation and amortizations53593,9783,0962,456.241971.85
Amortizations of stock compensation11661,078688342.62
Unrealized foreign exchange Net-5954576592.45-132.77
Interest on borrowings16901253556.12
Dividend/interest Net-2802-2,118-1,069715.15-762.41
(Profit)/Loss on sale of investments-771-588-23835.59
Gain on sale of fixed assets-174-10-8109.8-107
Working Capital Changes :
Trade and other receivable -11885-7,633-6,9914,433.69-3670.41
Loans and advances -5157-299-1,033311.74-359.89
Inventories-1565-1,120-317455.23-281.5
Trade and other payables61825,4456,1504,180.422748.13
Net cash generated from operations2851832,30324,10220,456.00-594
Direct taxes paid-5459-4,252-4,5432,354.70-1568.36
Net cash generated by operating activities2305928,05119,55918,101.30-2162.36
B. Cash flows from investing activities:
Acquisition of property, fixed assets
Plant and equipment(Inc. advances)-14226-13,005-79276,465.43-4100.97
Proceeds from sale of fixed assets479149113168.98121.86
Purchase of investments -231684-123,579-59,04770,145.11-10706.5
Proceeds on sale/from maturities on Investments 25001312204252,04366,383.5448.06
Inter-corporate depo sit150-650-285.3
Net payment for acquisition of Business-32790-6608-2,777617.99-465.27
Dividend/interest income received24902,118923254.15777.85
Net cash generated by/(used in) Investing -25568-19533-16672144035.2-14039.7
C. Cash flows from financing activities:
Proceeds from exercise of Employee Stock Option5419,4584,7042,576.58238.6
Share application money pending allotment40356312.05
Interest paid on borrowings-1690-125-3556.12
Dividends paid (including distribution tax-12632-8,875-3,9987,575.76-262.36
Proceeds/(repayment) of long term-74970142-268-463.02
Proceeds/(repayment) of short term1106411825-200432.43
Proceeds from issuance of shares by Subsidery5535266.19147.53
Net cash generated by financing Activities219852495266-5209-12954.5
Net increase in cash and cash equivalents During the period194761101331542469.95-958.77
Cash and cash equivalents at the Beginning of the period19822885857143242.74210.08
Effect of translation of cash balance-28-49-100.92-8.61
Cash and cash equivalents at the end of Period *392701982288585713.573242.7
*includes Rs. 7,278 Million in a restricted designated bank account for payment of interim dividend4.2. Interpretation of Cash Flow StatementOverall Cash flow Statement shows that cash has been generated through Operating activity is Rs 23059 , 28051 , 19559, 18101, -2162.36 and in the years 2007-08, 2006-07, 2005-06, 2004-05 and 2003-04 respectively. So major part of cash inflowing is Operating department. Investment Activity Shows Cash Outflow and borrowing activities takes a little part in increasing cash. Operating Activities : Profit before tax is increased by Rs. 25038.17 Million and Net Cash generated by Operating activity is increased by Rs. 25221.36 Million because, Depreciation and amortizations are increased by Rs. 3387.15 Million in between four year. Trade and other receivable are also increased by Rs. 8214.59 Million in between four year. Investing Activities : Net Cash outflow from investing activities is Rs. 11528 Million because,
Company has increased its plan and equipment worth Rs.10625 Million in between four year. Investment is also increase worth Rs. 220977 Million in between four year. From this inference that these investments has been met out of the cash from Operations or borrowings.
Investments in Fixed Assets could be part of Companys plan of expansion or modernization.
Financial Activities : From the section on cash flow from Financial Activities company think to proceeds in both short term and long term borrowings with proceeds from exercise of employee stock option.Chapter 5.
Ratio Analysis
Introduction To The Ratio Analysis Liquidity Ratios Profitability Ratios Finance Structure Ratios Valuation Ratios The Du-Pont Chart
5. Ratio Analysis
5.1. Introduction Of The Ratio AnalysisRatio analysis involves establishing a comparative relationship between the components of financial statements. It presents the financial statements into various functional areas, which highlight various aspects of the business like liquidity, profitability and assets turnover, financial structure. It is a powerful tool of financial analysis, which recognizes a companys strengths as well as its potential trouble spots.
It can be further classified as in different categories of Ratio.
Liquidity Ratios
Profitability Ratios
Asset Turnover Ratios
Finance Structure Ratios
Valuation Ratios
5.2. Liquidity RatioLiquidity refers to the existence of the assets in the cash or near cash form. This ratio indicates the ability of the company to discharge the liabilities as and when they mature. The financial resources contributed by owners or supplemented by outside debt primarily come in the cash form as under in the balance sheet form.
The following Liquidity Ratios are calculated for the company.
Current Ratio
Quick Ratio
Net Working Capital
5.2.1. Current RatioThis ratio shows the proportion of Current Assets to Current Liabilities. It is also known as Working Capital Ratio as it is a measure of working capital available at a particular time. Its a measure of short term financial strength of the business. The ideal current ratio is 2:1 i.e. Current Assets should be equal to Current Liabilities.
Current Ratio = Current Assets
Current Liabilities
Current Ratio
Year2003-042004-052005--062006-072007-08
Ratios1.261.581.441.672.13
Table 5. 1 Current Ratio Analysis
Figure 5. 1 Current Ratio Analysis
Interpretation
Current ratio is always 2:1 it means the current assets two time of current liability.
After observing the figure the current ratio is fluctuating. In the year 2008 ratio is showing good shine.
Hear ratio is increase as a increasing rate from 2004 to 2008. Company is no where near the ideal ratio in every year but every company can not achieve this ratio. Current ratio is increased in 2007-08 as compared to 2003-04 because of increase in Inventories 100.96% and 123.77 % increased in Cash and Bank balance. Current ratio is decreased in 2005-06 as compared to the last year because of increase in liabilities by 45.39% and 93.19% in increasing in Provision.
5.2.2 Quick RatioThis ratio is designed to show the amount of cash available to meet immediate payments. It is obtained by dividing the quick assets by quick liabilities. Quick Assets are obtained by deducting stocks from current assets. Quick liabilities are obtained by deducting bank over draft from current liabilities.
Quick Ratio = Quick Assets
Current Liabilities
Quick Ratio
Year2003-042004-052005--062006-072007-08
Ratios1.21.51.41.62.0
Table 5. 2 Quick Ratio Analysis
Figure 5. 2 Quick Ratio Analysis
Interpretation
Standard Ratio is 1:1
Companys Quick Assets is more than Quick Liabilities for all these 5 years.
In 2007-08 the ratio is increasing because of increase in bank and cash balance.
So all the years has quick ratio exceeding 1, the firm is in position to meet its immediate obligation in all the years.
In 2005-06 quick ratio is decreased because the increase in quick assets is less proportionate to the increased quick liabilities.
The Quick ratio was at its peak in 2007-08, while was lowest in the 2004-05.
5.2.3 Networking Captial
Networking capital = Current Assets Current Liabilities
Net working capital
Year2003-042004-052005-062006-072007-08
Trend4534.310497.813798.028050.061577.0
Table 5.3 Networking Capital
Figure 5.3 Networking capitalInterpretation
This ratio represents that part of the long term funds represented by the net worth and long term debt, which are permanently blocked in the current assets. It is Increasing Double than year by year because of assets increasing fast than liabilities.5.3 Profitability Ratios
A company should earn profits to survive and grow over a long period of time. It would be wrong to assume that every action initiated by management of company should be aimed at maximizing profits, irrespective of social as well as economical consequences. It is a fact that sufficient must be earned to sustain the operation of the business to be able to obtain funds from investors for expansion and growth and to contribute towards the responsibility for the welfare of the society in business environment and globalization.
The profitability ratios are calculated to measure the operating efficiency of the company.
The following Profitability Ratios are calculated for the company. Gross Profit Ratio
Operating Profit Ratio
Net Profit Ratio
Rate Of Return On Investment Rate Of Return On Equity5.3.1 Gross Profit Ratio
This is the ratio expressing relationship between gross profit earned to net sales. It is a useful indication of the profitability of business. This ratio is usually expressed as percentage. The ratio shows whether the mark-up obtained on cost of production is sufficient however it must cover its operating expenses.
Gross Profit Ratio = Gross Profit X 100
Sales
Gross profit ratio analysis
Year2003-042004-052005--062006-072007-08
Trend29.831.732.633.733.0
Table 5.4 Gross Profit Ratio Analysis
Figure 5.4 Gross Profit Ratio Analysis
Interpretation
GP Ratio shows how much efficient company is in Production.
GP is decreasing 2007-08 due to higher production cost.
Gross sales and services are increasing year by year so in effect Gross profit ratio is icreasing year by year up to 2007. 5.3.2 Operating Profit Ratio
This ratio shows the relation between Cost of Goods Sold + Operating Expenses and Net Sales. It shows the efficiency of the company in managing the operating costs base with respect to Sales. The higher the ratio, the less will be the margin available to proprietors.
Operating Profit Ratio = COGS+Operating expences X 100
Sales
Operating ratio
Year2003-042004-052005--062006-072007-08
Trend83.580.079.077.981.7
Table 5.5 Operating Profit Ratio Analysis
Figure 5.5 Operating Profit Ratio Analysis
Interpretation
Operating ratio is lowest during current 2007.
This shows that the expenses incurred to earn profit were less compared to the previous two years. Operating ratio is decreses feom 2004 to anward decreasing rate.
From the graph conclusion is made that company is not on the right track by efficiently cutting down manufacturing, administrative and selling distribution expenses.
5.3.3 Net Profit Ratio
= Net profit x 100
Net sales
Net profit ratio
Year2003-042004-052005-062006-072007-08
Trend16.319.419.219.817.7
Table 5.6 Net Profit Ratio Analysis
Figure 5.6 Net Profit Ratio Analysis
Interpretation
After observing the figure the ratio is fluctuating.
Company has rise in its net profit in 2006-07 as compared to the previous year because the company has increased its sales 41.45% .
Though the companys sale is continuously rising but the net profit is not so much increased so management should take some steps to decrease its expenses. Sales is decrease in 2008 compare to 2007
The overall ratio is showing good position of the company.5.3.4 Return On Investment
Rate of Return on Investment indicates the profitability of business and is very much in use among financial analysts.
ROI= EBIT X 100
Total Assets
Return On Investment
Year2003-042004-052005--062006-072007-08
Trend32.739.735.730.618.6
Table 5.7 Rate of Return on Investment Ratio Analysis
Figure 5.7 Rate of Return on Investment Ratio Analysis
Interpretation
From the above observation it can be seen that ratio is fluctuating.
In the year 2005-06 Rate of Return on Investment is slightly increase as compared to previous year Ratio is decreasing after 2005 at adecreasing rate because of asseets increase compare to sales. The companys Total Assets is increased to 86.51%, so ROI is decreased so conclusion made that company is not utilizing its assets and investment efficiently.
5.3.5 Rate of Return on Equity
Rate of Return on Equity shows what percentage of profit is earned on the capital invested by ordinary share holders.
Rate of Return on Equity =Profit for the Equity
Net worth
Rate of return on equoty
Year2003-042004-052005--062006-072007-08
Trend %22.211.57.110.05.5
Table 5.8 Rate of Return on Equity Ratio Analysis
Figure 5.8 Rate of Return on Equity Analysis
Interpretation
ROE is remaining almost same Between 2005 to 2007, but it is decrease in2008 because the the company has increase share capital but profit not getting that much increase. Company is getting same return on equity.
As a result the share holders are getting higher return every year and investment portfolio scheme selection was a judicious decision taken by the company.
This happens because Profit and Share Capital both increasing same way.5.4 Asset Turnover RatiosAsset Turnover Ratio are basically productivity ratios which measure the output produced from the given input deployed. This relationship is shown as under
Productivity = Output
Input
Assets are inputs which are deployed to generate production (or sales). The same set of assets when used intensively produces more output or sales. If the asset turnover is high, it shows efficient or productive use of input.
The following Assets Turnover Ratios are calculated for the company.
Total Assets Turnover
Net Fixed Assets Turnover
Net Working Capital Turnover
Inventory Turnover Ratio
Debtor Turnover (in times)5.4.1 Total Asset Turnover Ratio The amounts invested in business are invested in all assets jointly and sales are affected through them to earn profits. Thus it is the ratio of Sales to Total Assets. .It is the ratio which measures the efficiency with which assets were turned over a period.
Total Asset Turnover Ratio = Sales
Total Assets
Total assets turnover ratio
Year2003-042004-052005-062006-072007-08
Trend1.51.51.61.51.2
Table 5.9 Total Asset Turnover Ratio Analysis
Figure 5.9 Total Asset Turnover Ratio AnalysisInterpretation
The total assets turnover ratio is almost same in all years.
The Assets turnover Ratio is near by 1.5 in all 5 years which shows effective utilization of assets from the companys view point.
In the year 2005-06 ratio is increased because of companys total assets is increased by 24.52%, but sales is increased by 29.92%.So the ratio is increased but in current year it is decreased because sale increasing by 41.45% and Assets increasing by 49.28%.
5.4.2 Net Fixed Assets Turnover
To ascertain the efficiency & profitability of business the total fixed assets are compared to sales. The more the sales in relation to the amount invested in fixed assets, the more efficient is the use of fixed assets. It indicates higher efficiency. If the sales are less as compared to investment in fixed assets it means that fixed assets are not adequately utilized in business. Of course excessive sale is an indication of over trading and is dangerous.
Net Fixed Assets Turnover Ratio = Sales
Net Fixed Assets
Total fixed assets turnover ratio
Year2003-042004-052005--062006-072007-08
Time4.04.24.94.02.4
Table 5.10 Net Fixed Asset Turnover Ratio Analysis
Figure 5.10 Net Fixed Assets Turnover Ratio Analysis
Interpretation
Here the ratio of Net Fixed Asset Turnover is continuously increasing up to 2006 and after that it has strated decline.Because sales as wellas assets boths are equally increase. Net Fixed Assets Turnover Ratio is increasing year by year because of Sale is increasing continuously.
It indicates that the company maximizes the use of its fixed assets to earn profit in the business so that whatever amount is invested by company in fixed asset, gives maximum productivity which helps to increase sales as well as profit.
5.4.3 Inventory Turnover Ratio
Inventory Turnover Ratio: The no. of times the average stock is turned over during the year is known as stock turnover ratio.
Inventory Turnover Ratio = COGS
Average stock
Total Inventory turnover ratio
Year2003-042004-052005-062006-072007-08
Time30.322.624.319.816.0
Table 5. 11 Inventory Turnover Ratio Analysis
Figure 5. 11 Inventory Turnover Ratio Analysis
Interpretation
From the above calculation we can say that the ratio is decreasing. It mens inventory is not spdly convert in to sales. So that it is bad for the company. In 2003-04 ratio is increased as compared to after that all year so management should take care about good efficiency of stock management.
But in 2006 onward ratio is decreasing because of increase in COGS. So company should devise a systematic operational plan for inventory control.
5.4.4 Average age of Inventories
This ratio indicates the waiting period of the investments in inventories and is measured in days, weeks or months. Inventory turnover and average age of inventories are inversely related.
Average age of Inventories Ratio = 360 days
Inventory Turnover
Average age of Inventories
Year2003-042004-052005--062006-072007-08
Days11.915.914.818.222.4
Table 5. 12 Average age of Inventories Ratio Analysis
Figure 5. 12 Average age of Inventories Ratio AnalysisInterpretation
This graph shows that inventory convert into cash in short time period. Inventory turnover ratio is low in 2003-04 So In this year inventory is converted in cash 11.9 days. The inventory conversation in to cash time duration is increases from 2004 to every year so the management should tray to efficient inventory conversation,so it will It shows that company effectiveness utilizing its Inventories in quickly. 5.4.5 Debtor Turnover RatioDebtor turnover ratio: The debtor turnovers suggest the no. of times the amount of credit sale is collected during the year.
Debtors Turnover Ratio = Sales
Average DebtorsDebtors turn over in (times)
Year2003-042004-052005--062006-072007-08
Time4.93.83.73.71.5
Table 5. 13 Debtor Turnover Ratio Analysis
Figure 5.13 Debtor Turnover Ratio Analysis
Interpretation
Debtor turnover indicates how quickly the company can collect its credit sales revenue.
Here the ratio is continuously decreasing, so that the companys collection of credit sales is efficient management is improved its collection period every year so it shows that the management have an ability to collect its money from his debtors. So they can invest that money on Assets, HRD and other investments.
5.5 Finance Structure RatiosFinance Structure Ratios indicate the relative mix or blending of owners funds and outsiders debt funds in the total capital employed in the business. It should be noted that equity funds are the prime fund which increase progressively through reinvestment of profits, while outside debt funds are supplementary funds and are added at the discretion of the management.
The following Finance Ratios are calculated for the company.
Debt Ratio
Debt-Equity Ratio
Interest Coverage Ratio
5.5.1 Debt Ratio Debt ratio indicates the long term debt out of the total capital employed.
Debt Ratio = Long Term Debt
Total Capital EmployedTable 5. 14 Debt Ratio Analysis
Debt Ratio
2003-042004-052005-062006-072007-08
Trend0.02840.01650.01140.03830.384
Figure 5. 14 Debt Ratio Analysis
Interpretation
From the above calculation it seems that the ratio is fluctuating.
In 2007-08 the ratio is increased as compared to the previous year because the total loan funds are increased by 661.56%.
In 2005-06 Company has issued equity Share and also loan is decreased.
Its means that now company trying to increasing Trading on equity.5.5.2 Debt-Equity Ratio This ratio is only another form proprietary ratio and establishes relation between the outside long term liabilities and owner funds. It shows the proportion of long term external equity & internal Equities. Debt Equity Ratio = Total Long Term debt
Share holder equity
Table 5.15 Debt - Equity Ratio AnalysisDebt- Equity Ratio
Year2003-042004-052005-062006-072007-08
Trend0.0270.0120.0110.0300.376
Figure 5. 15 Debt-Equity Ratio Analysis
Interpretation It shows companies accumulated more equity than required company has to refocus to its strategic policies and plans and try to accumulate more debt funds in future so as to make the balance between debt and equity. There is only current year ratio is some what sufficient.
5.5.3 Interest Coverage Ratio
Interest Coverage Ratio: The ratio indicates as to how many times the profit covers the payment of interest on debentures and other long term loans hence it is also known as times interest earned ratio. It measures the debt service capacity of the firm in respect of fixed interest on long term debts.
Interest Coverage Ratio = EBIT
InterestIntrest coverage ratio
Year2003-042004-052005--062006-072007-08
Trend3.45.04.54.221.9
Table 5. 16 Interest Coverage Ratio Analysis
Figure 5. 16 Interest Coverage Ratio Analysis
Interpretation
After observing the figure it shows that the ratio has mix trend up to 2006. In the year 2007-08 company has not much debt compare to EBIT so interest coverage ratio is high but in 2007-08 company increasing its external debt so company have pay more interest among its earnings so interest coverage ratio falling down compare to previous year.5.6 Valuation RatiosValuation ratios are the result of the management of above four categories of the functional ratios. Valuation ratios are generally presented on a per share basis and thus are more useful to the equity investors.
The following Valuation Ratios are calculated for the company.
Earnings Per Share
Dividend pay-out Ratio
P/E Ratio
Profit Margin
5.6.1 Earnings Per Share
This ratio measures profit available to equity share holders on per share basis. It is not the actual amount paid to the share holders as dividend but is the maximum that can be paid to them.
Earnings per Share = Net Profits for Equity Shares
No. of Equity SharesTable 5.17 Earnings per Share
Earnings Per Share
Year2003-042004-052005-062006-072007-08
Trend(Rs.)7.4311.7014.7020.6222.62
Figure 5.17 Earnings per Share Ratio Analysis
Interpretation
Earninig per share is increasing as a increasing rate it is good for invester and share holder.
In 2007-08 Profit is increasing by 42.30% and No Equity share Holder increased by 2.03%, Due to that EPS Ratio is increasing in Current year. 5.6.2 Dividend Pay-out RatioThis ratio indicate split of EPS between Cash Dividends and reinvestment of Profit. If the Company has Profitable projects than it will prefer to keep dividend pay out ratio lower.
Dividend pay-out Ratio = Dividend per Share in Rs.
Earnings per share in RupeesTable 5. 18 Dividend Pay-out Ratio AnalysisDividend pay-out Ratio
Year2003-042004-052005-062006-072007-08
Trend(Rs.)1.544.682.943.773.43
Figure 5. 18 Dividend Pay-out Ratio Analysis
Interpretation
In all years there is fluctuation in ratio. If the company wants to prosper in future with flying colors then ideally more amounts should be reinvested in the business rather than distributing as dividend. In 2005-06 company has reinvested in business for expansion. 5.6.3 P/E Ratio
P/E Ratio is computed by dividing the current market price of a share by earning per share. This is Popular measure extensively used in Investment analysis.
P/E Ratio = Current Market Price of Share
Earnings per ShareTable 5. 19 P/E Ratio Analysis
P/E Ratio
Year20003-042004-052005-062006-07200708
Trend31.3619.9115.8511.3010.30
Figure 5. 19 P/E Ratio Analysis
Interpretation
In 2004-05 P/E Ratios is high means Share price of company is Stable and Share holder are interested to invest in the companys share.
But in 2006-07 P/E Ratio is Falling down word So company share price is not as stable as compare to previous year.
5.6.4 Profit margin ratio
Profit margin ratio= PAT/Sales*100
Year2007-082006-072005-062004-052003-04
Net Sales and Services19979614998210603081605.658400.23
PAT3282929,4212067416285.410315
Ratio16%20%19%20%18%
Table 5. 20 Profit margin ratio
Figure 5. 20 Profit margin ratioInterpretation The ratio is shows equal for middle three year it means the company has maintain the equal ratio for year 2005 to 2007.
The ratio shows decline in current year it is bad sign for the company.
5.7 The Du-Pont Chart
SHAPE \* MERGEFORMAT
Table 5.20 Do-Pont chart
Interpretation DuPont chart shows that how profitability is there in the business. When profit margin is multiplied by total Assets turnover ratio that gives ROA. Profit Margin is obtained by dividing PAT by Total sales. Total Asset Turnover is obtained by the sales divided total assets. It is like a Tree having various braches connected to each other. It show companys efficiency in making right decision of Investment Total Assets turnover is decreasing in current year because of huge increase in net fix assets and net current asset which is more than double compare to previous year. The Chart shows the total assets turnover that indicate the companys efficiency in utilizing its assets. So overall it can be interpreted that the companys ROA is good .
Company should try its best to increase sales and profit.
The Du point chart Shows the complete picture of companys performance.Chapter 6.
Scenario Analysis
Company Analysis Share Holding Pattern
Chapter 6.
Scenario Analysis
Company Analysis Share Holding Pattern
6. Scenario Analysis
6.1. Business Unit Performance
6.2. Company Analysis6.2.1. Share Holding Pattern
Findings
Though the sales has been continuously increased from past 3 years but the proportionate expenditure is also rising so overall not making any huge effect on net profit of this company.
Hear the in 2005 company has reinvest profit for business expansion it is good shine for the company.
The total expenditure is near by 80% of total income in every year.
Every year PBT is near by 20% of total income.
Fixed assets are efficiently utilized by the company due to which the profit of the company is increasing every year.
Liabilities is incressing rate it mean company has to developed business. And purchase raw material on credit basis.
Company has enough cash in hand so that in any condition company can take Any Financial decision easily.
All the years has quick ratio exceeding 1, the firm is in position to meet its immediate obligation in all the years. GP Ratio shows how much efficient company is in Production.
SUggestion
The companys future plans for expansion seem clear due to increased investment in Fixed Assets .Efficient use of these Assets has enabled the company to observe an increased profit.
Though the companys sale is continuously rising but the net profit is not so much increased so management should take some steps to decrease its expenses. Company should try its best to increase sales and profit.
The profit margin ratio shows decline in current year so that company should tray to increase profit after tax
Current ratio is very good it is 2.13:1 so company has fully utilize cash liquidity for business development.
Bibliography
Bibliography
Books:
Annual Report of Wipro Limited for Financial Year 2004-05, 2006-07,2007-08.
Narayanaswamy R., (1998): Financial Accounting: A Managerial Perspective, Prentice-Hall of India Private Ltd, New Delhi., Third Edition, Reprint 2003
Khan M.Y. and Jain P.K., (1992):Financial Management, Tata McGraw-Hill Publishing Co Ltd., New Delhi., Third Edition.
.
Websites
http://www.wipro.com
http://www.bseindia.com//shareholding/shareholding_new.asp http://www.cmie.com//indutries//gdp.asp http://www.wipro.com/investors/annual_reports.htm http://www.wipro.com/investors/pdf_files/AR07_08_first_book_final.pdf http://www.wipro.com/investors/pdf_files/AR07_08_second_book_final.pdf http://www.wipro.com/investors/pdf_files/Wipro_AR_2006_07_Part_1.pdf http://www.wipro.com/investors/pdf_files/Wipro_AR_2006_07_Part_2.pdf http://www.wipro.com/investors/pdf_files/Wipro_annual%20report_2005-06.pdf http://www.wipro.com/investors/pdf_files/Wipro_Annual_Report_2004_2005.pdfAzim Premji
Chairmen & Managing Director
ROA (IN %)
2007-0830.88
2006-0753
2005-0663.08
2004-0567.8
2003-0475.6
Sales
2007-08 199575
2006-07 149751
2005-06 106164
2004-05 81596
2003-04 58648
Assets turn over(in Rs.)
2007-08 1.93
2006-07 2.65
2005-06 3.32
2004-05 3.39
2003-04 4.20
Profit margin (in %)
2007-08 0.16
2006-07 0.20
2005-06 0.19
2004-05 0.20
2003-04 0.18
Profit after tax
2007-08 32829
2006-07 29421
2005-06 20674
2004-05 16285
2003-04 10315
Sales
2007-08 199575
2006-07 149751
2005-06 106164
2004-05 81596
2003-04 58648
Asset
2007-08 103160
2006-07 56535
2005-06 31951
2004-05 24049
2003-04 13969
Figure 5. 24 The Du-Point Chart
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