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INTERNATIONAL SCHOOL OF BUSINESS AND

MEDIA; NANDE, PUNE

Project Report on

FINANCIAL STATEMENT ANALYSIS OF


WIPRO
In fulfilment of curriculum of

Business Reporting Presentation

SUBMITTED TO:
PROF. SANGEETA SOMAN
{FACULTY- B.R.P}

SUBMITTED BY:
MANISH KUMAR SHAW
{SEC-C; ROLL NO: 18230}

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INTERNATIONAL SCHOOL OF BUSINESS AND MEDIA
NANDE, PUNE

DECLARATION

I Mr. Manish Kumar Shaw, Roll No. 18230 of International School of Business And
Media, Nande, Pune (Trimester II) for Business Reporting Presentation has completed project
on FINANCIAL STATEMENT ANALYSIS OF WIPROin the academic year 2017-
18. This information submitted is true and original to the best of my knowledge.

Date: Signature of student


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INTERNATIONAL SCHOOL OF BUSINESS AND MEDIA
NANDE, PUNE

CERTIFICATAE

Ms. Sangeeta Soman hereby certifies that Mr. Manish Kumar Shaw a student of
International School of Business And Media, Nande, Pune of P.G.D.M (Trimester II) Roll no.
18230, has completed Project on in the Academic Year 2017-18. This information submitted
is true and Original to the FINANCIAL STATEMENT ANALYSIS OF WIPRO best of
my Knowledge.

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ACKNOWLEDGEMENT

I would like to thank my college for giving me this opportunity for taking such a challenging
project, which has enhanced my knowledge about FINANCIAL STATEMENT
ANALYSIS OF WIPRO.

I would like to thank my Project Guide of PGDM course Prof. Sangeeta Soman for
consistent guidance and mentoring for my research project

I am also grateful to my friends for giving support in my project. Lastly, I would like to thank
each and every person who helped me in completing the project especially my parents.

NO ENDEAVOUR ACHIEVES SUCCESS WITHOUT THE ADVICE & COOPERATION OF OTHER

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INDEX

Sl. Particulars Page No.


No.
1 Cover page 01-01
2 Declaration 02-02
3 Student's Certificate 03-03
4 Acknowledgement 04-04
5 Introduction 06-13
6 Review of Literature and Methodology 14- 21
7 Data Analysis and Interpretation 22- 26
8 Findings 27-27
9 Conclusion 28-28
10 Bibliography 29-29
11 Annexure 30- 37

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INTRODUCTION
The process of critical evaluation of the financial information contained in the financial
statements in order to understand and make decisions regarding the operations of the firm is
called Financial Statement Analysis. It is basically a study of relationship among various
financial facts and figures as given in a set of financial statements, and the interpretation thereof
to gain an insight into the profitability and operational efficiency of the firm to assess its
financial health and future prospects.
The term financial analysis includes both analysis and interpretation. These two are
complimentary to each other. Analysis is useless without interpretation, and interpretation
without analysis is difficult or even impossible.
Analysis means establishing a meaningful relationship between various items of the two
financial statements with each other in such a way that a conclusion is drawn. By financial
statements we mean two statements :
(i) Profit and loss Account or Income Statement
(ii) Balance Sheet or Position Statement
These are prepared at the end of a given period of time. They are the
indicators of profitability and financial soundness of the business concern. The term financial
analysis is also known as analysis and interpretation of financial statements. It refers to the
establishing meaningful relationship between various items of the two financial statements i.e.
Income statement and position statement. It determines financial strength and weaknesses of
the firm. Analysis of financial statements is an attempt to assess the efficiency and performance
of an enterprise. Thus, the analysis and interpretation of financial statements is very essential
to measure the efficiency, profitability, financial soundness and future prospects of the business
units.

Objectives of financial analysis-


a) Measuring the profitability
b) Indicating the trend of achievements
c) Assessing the growth potential of the business
d) Comparative position in relation to other firms
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e) Assess overall financial strength
f) Assess solvency of the firm

Parties Interested in financial statement analysis-


Analysis of financial statements has become very significant due to widespread interest of
various parties in the financial results of a business unit. The various parties interested in the
analysis of financial statements are :
(i) Investors : Shareholders or proprietors of the business are interested in the well being of
the business. They like to know the earning capacity of the business and its prospects of future
growth.
(ii) Management : The management is interested in the financial position and performance of
the enterprise as a whole and of its various divisions. It helps them in preparing budgets and
assessing the performance of various departmental heads.
(iii) Trade unions : They are interested in financial statements for negotiating the wages or
salaries or bonus agreement with the management.
(iv) Lenders : Lenders to the business like debenture holders, suppliers of loans and lease are
interested to know short term as well as long term solvency position of the entity.
(v) Suppliers and trade creditors : The suppliers and other creditors are interested to know
about the solvency of the business i.e. the ability of the company to meet the debts as and when
they fall due.
(vi) Tax authorities : Tax authorities are interested in financial statements for determining the
tax liability.
(vii) Researchers : They are interested in financial statements in undertaking research work in
business affairs and practices.
(viii) Employees : They are interested to know the growth of profit. As a result of which they
can demand better remuneration and congenial working environment.
(ix) Government and their agencies : Government and their agencies need financial
information to regulate the activities of the enterprises/industries and determine taxation policy.
They suggest measures to formulate policies and regulations.
(x) Stock exchange :The stock exchange members take interest in financial statements for the
purpose of analysis because they provide useful financial information about companies.

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Demerits of financial statement analysis-
1. Mislead the user

The accuracy of financial information largely depends on how accurately financial statements
are prepared. If their preparation is wrong, the information obtained from their analysis will
also be wrong which may mislead the user in making decisions.

2. Not useful for planning

Since financial statements are prepared by using historical financial data, therefore, the
information derived from such statements may not be effective in corporate planning, if the
previous situation does not prevail.

3. Qualitative aspects

Then financial statement analysis provides only quantitative information about the company's
financial affairs. However, it fails to provide qualitative information such as management labor
relation, customer's satisfaction, management's skills and so on which are also equally
important for decision making.

4.Comparison not possible

The financial statements are based on historical data. Therefore comparative analysis of
financial statements of different years cannot be done as inflation distorts the view presented
by the statements of different years.

5.Wrong judgment

The skills used in the analysis without adequate knowledge of the subject matter may lead to
negative direction . Similarly, biased attitude of the analyst may also lead to wrong judgment
and conclusion.

Merits of financial statement analysis-


a) This statement is useful to the management as guidance, as it explains always the funds
movement in the organization.

b) Company managers can compare sources with other sources and ascertain the results. If the
style of change is not observed, it may lead to financial problems.

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c) If the company depends on external sources for additional funds, it becomes burden on
capital structure; working capital of the organization can be increased by reducing other liquid
assets.

d) The funds flow statement shows ways for this purpose. It is useful to the management as a
good tool to understand the funds movement in the organization very easily.

e) It is useful to forecast funds flow. It can also be used to know the working capital
requirements. It provides reasonable time to ascertain future funds requirements and make
suitable arrangements to get the same.

f)The most important benefit if financial statement analysis is that it provides an idea to the
investors about deciding on investing their funds in a particular company.

Nature of financial statements-

Financial Statements are prepared on the basis of business transactions recorded in the books
of Original Entry or Subsidiary Books, Ledger, and Trial Balance. Recording the transactions
in the books of primary entry supported by document proofs such as Vouchers, Invoice Note
etc.
According to the American Institute of Certified Public Accountants, "Financial Statement
reflects a combination of recorded facts, accounting conventions and personal judgments and
conventions applied which affect them materially." It is therefore, nature and accuracy of the
data included in the financial statements which are influenced by the following factors:
(1) Recorded Facts.
(2) Generally Accepted Accounting Principles.
(3) Personal Judgments.
(4) Accounting Conventions.

Tools of financial statement analysis-

The tools or techniques which are commonly used for analyzing and interpreting financial

statements are as follows-

a) Comparative financial statements

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In brief, comparative study of financial statements is the comparison of the financial statements
of the business with the previous years financial statements. It enables identification of weak
points and applying corrective measures.
Practically, two financial statements (BALANCE SHEET and INCOME STATEMENT) are
prepared in comparative form for analysis purposes:
1. Comparative Balance Sheet
The comparative balance sheet shows the different assets and liabilities of the firm on different
dates to make comparison of balances from one date to another. The comparative balance sheet
has two columns for the data of original balance sheets. A third column is used to show
change(increase/decrease) in figures. The fourth column may be added for giving
percentages of increase or decrease. While interpreting comparative Balance sheet the
interpreter is expected to study the following aspects :
(i) Current financial position and Liquidity position
(ii) Long-term financial position
(iii) Profitability of the concern
(i) For studying current financial position or liquidity position of a concern one should examine
the working capital in both the years. Working capital is the excess of current assets over
current liabilities.
(ii) For studying the long-term financial position of the concern, one should examine the
changes in fixed assets, long-term liabilities and capital.
(iii) The next aspect to be studied in a comparative balance sheet is the profitability of the
concern. The study of increase or decrease in profit will help the interpreter to observe whether
the profitability has improved or not.

2. Comparative Income statement


The income statement provides the results of the operations of a business. This statement
traditionally is known as trading and profit and loss A/c. Important components of income
statement are net sales, cost of goods sold, selling expenses, office expenses etc. The figures
of the above components are matched with their corresponding figures of previous years
individually and changes are noted. The comparative income statement gives an idea of the
progress of a business over a period of time. The changes in money value and percentage can
be determined to analyse the profitability of the business. Like comparative balance sheet,
income statement also has four columns. The first two columns are shown figures of various

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items for two years. Third and fourth columns are used to show increase or decrease in figures
in absolute amount and percentages respectively.
The analysis and interpretation of income statement will involve the
following :
The increase or decrease in sales should be compared with the increase or decrease in cost
of goods sold.
To study the operating profits
The increase or decrease in net profit is calculated that will give an idea about the overall
profitability of the concern.

b) Common Size Statements-


The common size statements (BALANCE SHEET and INCOME STATEMENT) are shown
in analytical percentages. The figures of these statements are shown as percentages of total
assets, total liabilities and total sales respectively.
Take the example of Balance Sheet. The total assets are taken as 100 and different assets are
expressed as a percentage of the total. Similarly, various liabilities are taken as a part of total
liabilities.

1) Common size balance sheet


A statement where balance sheet items are expressed in the ratio of each asset to total assets
and the ratio of each liability is expressed in the ratio of total liabilities is called common size
balance sheet.
Thus the common size statement may be prepared in the following way.
The total assets or liabilities are taken as 100
The individual assets are expressed as a percentage of total assets i.e.
100 and different liabilities are calculated in relation to total liabilities.

2) Common size income statement


The items in income statement can be shown as percentages of sales to show the relations of
each item to sales.

c) Cash flow statements-


It refers to the analysis of actual movement of cash into and out of an organization. The flow
of cash into the business is called as cash inflow or positive cash flow and the flow of cash out
of the firm is called as cash outflow or a negative cash flow. The difference between the inflow
and outflow of cash is the net cash flow. Cash flow statement is prepared to project the manner

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in which the cash has been received and has been utilized during an accounting year as it shows
the sources of cash receipts and also the purposes for which payments are made. Thus, it
summarizes the causes for the changes in cash position of a business enterprise between dates
of two balance sheets.
Cash Flow Statement is prepared according to the Accounting Standard-3 (Revised) on Cash
Flow Statement. The standard requires the Cash Flow Statement to be prepared showing cash
flow under three parameters, which are :-

1. Cash Flows from Operating Activities;


2. Cash Flows from Investing Activities; and
3. Cash Flows from Financing Activities.

Purpose:- To ascertain the sources (receipts) of Cash and Cash Equivalents under operating,
investing and financing activities by the enterprise. It also depicts the net change in Cash and
Cash Equivalents being the difference between receipts and payments under the three activities
between the dates of two balance sheet.

d) Ratio analysis-
It describes the significant relationship which exists
between various items of a balance sheet and a statement of profit and loss of a firm. As a
technique of financial analysis, accounting ratios measure the comparative significance of the
individual items of the income and position statements. It is possible to assess the profitability,
solvency and efficiency of an enterprise through the technique of ratio analysis .
1) Liquidity ratios

To meet its commitments, business needs liquid funds. The ability of the business to pay the
amount due to stakeholders as and when it is due is known as liquidity, and the ratios calculated
to measure it are known as Liquidity Ratios. These are essentially short-term in nature.

2) Solvency ratios

Solvency of business is determined by its ability to meet its contractual obligations towards
stakeholders, particularly towards external stakeholders, and the ratios calculated to measure
solvency position are known as Solvency Ratios. These are essentially long-term in nature.

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3) Turnover ratios

This refers to the ratios that are calculated for measuring the efficiency of operations of
business based on effective utilisation of resources. Hence, these are also known as Efficiency
Ratios.

4) Profitability ratios

It refers to the analysis of profits in relation to revenue from operations or funds (or assets)
employed in the business and the ratios calculated to meet this objective are known as
Profitability Ratios

e) Trend analysis

It is a technique of studying the operational results and financial position over a series of years.
Using the previous years data of a business enterprise, trend analysis can be done to observe
the percentage changes over time in the selected data. The trend percentage is the percentage
relationship, in which each item of different years bear to the same item in the base year. Trend
analysis is important because, with its long run view, it may point to basic changes in the nature
of the business. By looking at a trend in a particular ratio, one may find whether the ratio is
falling, rising or remaining relatively constant. From this observation, a problem is detected or
the sign of good or poor management is detected.

f) Fund flow analysis

A report on the movement of funds or working capital. In a narrow sense the term fund means
cash and the fund flow statement depicts the cash receipts and cash disbursements/ payments.
It highlights the changes in the cash receipts and payments as a cash flow statement in addition
to the cash balances i.e., opening cash balance and closing cash balance. Contrary to the earlier,
the fund means working capital i.e., the differences between the current assets and current
liabilities.

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REVIEW OF LITERATURE

This part provides a review of some notable, theoratical and empirical research worksdone by various
institutions and authors in evaluating the financial performance.

Carlson (1970), He studied the Risk adjusted Performance of the international firms. He
concluded that even though some of the funds have outperformed there was no consistency in
performance.

Miss. H. Rehana Praveen in her study on Performance Evaluation of Ponnambalam Finance


, Coimbatore mainly suggested that for improving the performance of the Finance the firm must
recovered all its bad debts within time.

Miss. P. Uchimahali in her study on Performance Analysis of Lakshmi Engineering Works ,


Kovilpatti analyzed and suggested that the company must take efforts to
reduce the stock level and utilize investments in fixed and current assets to strengthen the position of the
company.

Friends and Blume (1970) commented on the Risk adjustment performance of measures of
sharpe and Treynor . There suggestion was that improved measures of firms performance for
any period could be obtained by adjusting earlier measures depending on the degree of risk.

Piotroski (2000) shows that the combined use of nine selected accounting variables has greater
power to discriminate between stronger and weaker firms in terms of their future returns than
alternative fundamental based factors . Thus, the financial signals we use to establish the
strength of loser firms are his nine factorsii. These financial signals measure three areas of the
companys financial position, namely profitability, financial gearing/liquidity and operating
efficiency. A binary approach is taken in which a signal (e.g. rise or fall in return on capital
employed last year compared with the previous year) is classified as either good or bad,
depending on the signals implication for future share returns and profitability. If the signal is
good it contributes a value of one to the overall L-score. Given that there are nine signals the
maximum L-score is nine. If the signal is bad then the contribution is zero. Therefore the lowest
L-score is zero. Thus we have 10 levels of aggregate financial signal strength, from 0 to 9

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Tracy (1999) called cash the "lubricant" of business. Without cash it is difficult for a business
to function and it increases the likelihood that a business may fail. But, Tracy warned that cash
flows only show part of the picture and give no information about the business' profit or
financial condition. Since cash flows only show part of the picture, other types of financial
reports are needed.

O'Bannon (2005) cautioned business owners against being lulled to sleep by the power of
current accounting software products, which cannot replace the knowledge gained by using
professional financial advice. O'Bannon felt that one of the primary benefits of the newer
software is that it allows owners and financial advisors to speak the same language and lets
business owners provide easy to use documentation to their accountant. Accountants and other
financial advisors can use software to quickly perform somewhat complex analysis and
generate reports for their clients.

Arar (2012) wrote that small businesses operating in the 2010s have "more accounting software
options than ever, including Web-based subscriptions." For those businesses with large
inventories or client databases, however, or those that choose not to entrust data to the cloud,
such desktop tools as Acclivity Account Edge Pro 2012, Intuit QuickBooks 2013, and Sage 50
Complete Accounting 2013 are good options.

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Research Methodology

Research is designed as a systematic, gathering recording and analysis of data about


problem relating to any particular field.

It determines strength reliability and accuracy of the project.

Research Design:

Research design pertains to the great research approach or strategy adopted for a particular
project. A research project has to be conducted making sure that the data is collected
adequately and economically.

The study used Descriptive research design for the purpose of getting an insight over the
issue. It is to provide an accurate picture of some aspects of market environment. Descriptive
research is used when the objective is to provide systematic description that is as factual and
accurate as possible.

1. Method of data collection:


Secondary data - Through the internet and published data.

In view of the objects of the study listed above an exploratory research design has been adopted.
Exploratory research is one which is largely interprets and already available information and it
lays particular emphasis on analysis and interpretation of the existing and available
information.

To know the financial status of the company.

To know the credit worthiness of the company.

To offer suggestions based on research finding.

This research is based on "RATIO ANALYSIS" and interpretation of financial statement, to


know the financial position of the company , identify financial weakness of the firm and to
suggest remedial.

Financial ratios are mathematical comparisons of financial statement accounts or categories.


These relationships between the financial statement accounts help investors, creditors, and
internal company management understand how well a business is performing and areas of
needing improvement.
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Financial ratios are the most common and widespread tools used to analyze a business' financial
standing. Ratios are easy to understand and simple to compute. They can also be used to
compare different companies in different industries. Since a ratio is simply a mathematically
comparison based on proportions, big and small companies can be use ratios to compare their
financial information. In a sense, financial ratios don't take into consideration the size of a
company or the industry. Ratios are just a raw computation of financial position and
performance.

Ratios allow us to compare companies across industries, big and small, to identify their
strengths and weaknesses.

They are divided into 4 main categories-

1) Liquidity ratios-

Liquidity ratios analyze the ability of a company to pay off both its current liabilities as they
become due as well as their long-term liabilities as they become current. In other words, these
ratios show the cash levels of a company and the ability to turn other assets into cash to pay off
liabilities and other current obligations.

Some of the liquidity ratios are-

a) Current ratio-

The current ratio is a liquidity and efficiency ratio that measures a firm's ability to pay off its
short-term liabilities with its current assets. The current ratio is an important measure of
liquidity because short-term liabilities are due within the next year.

CR= Current assets / Current liabilities

b) Liquid ratio/ Quick ratio -

The quick ratio or acid test ratio is a liquidity ratio that measures the ability of a company to
pay its current liabilities when they come due with only quick assets. Quick assets are current
assets that can be converted to cash within 90 days or in the short-term. Cash, cash equivalents,

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short-term investments or marketable securities, and current accounts receivable are considered
quick assets.

LR= Current assets - Inventories / Current liabilities

c) Super quick ratio-

This ratio is a further improvement over the quick ratio. It takes into account only the most
liquid assets like cash and marketable securities.

SQR= Cash and Bank + Marketable securities / Total current liabilities

2) Turnover ratios-

Efficiency ratios also called activity ratios measure how well companies utilize their assets to
generate income. Efficiency ratios often look at the time it takes companies to collect cash from
customer or the time it takes companies to convert inventory into cashin other words, make
sales. These ratios are used by management to help improve the company as well as outside
investors and creditors looking at the operations of profitability of the company.

Some of the turnover ratios are-

a) Inventory turnover ratio-

The inventory turnover ratio is an efficiency ratio that shows how effectively inventory is
managed by comparing cost of goods sold with average inventory for a period. This measures
how many times average inventory is "turned" or sold during a period. In other words, it
measures how many times a company sold its total average inventory dollar amount during the
year.

ITR= Cost of goods sold / Average inventory

b) Receivables turnover ratio-

Accounts receivable turnover is an efficiency ratio or activity ratio that measures how many
times a business can turn its accounts receivable into cash during a period. In other words, the

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accounts receivable turnover ratio measures how many times a business can collect its average
accounts receivable during the year.

RTR= Net credit sales / Average receivables

c) Working Capital turnover ratio-

The working capital ratio, also called the current ratio, is a liquidity ratio that measures a firm's
ability to pay off its current liabilities with current assets. The working capital ratio is important
to creditors because it shows the liquidity of the company.

WCTR= Annual net sales / Average working capital

3) Solvency ratios / Leverage ratios-

Solvency ratios, also called leverage ratios, measure a company's ability to sustain operations
indefinitely by comparing debt levels with equity, assets, and earnings. In other words,
solvency ratios identify going concern issues and a firm's ability to pay its bills in the long
term. Many people confuse solvency ratios with liquidity ratios. Although they both measure
the ability of a company to pay off its obligations, solvency ratios focus more on the long-term
sustainability of a company instead of the current liability payments.

Some of the solvency ratios are-

a) Debt -Equity ratios-

The debt to equity ratio is a financial, liquidity ratio that compares a company's total debt to
total equity. The debt to equity ratio shows the percentage of company financing that comes
from creditors and investors. A higher debt to equity ratio indicates that more creditor financing
(bank loans) is used than investor financing (shareholders).

DER= Debt / Shareholder's fund (net worth)

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b) Equity ratio-

The equity ratio is an investment leverage or solvency ratio that measures the amount of assets
that are financed by owners' investments by comparing the total equity in the company to the
total assets.

ER= Total equity / Total assets

c) Debt ratio-

Debt ratio is a solvency ratio that measures a firm's total liabilities as a percentage of its total
assets. In a sense, the debt ratio shows a company's ability to pay off its liabilities with its
assets. In other words, this shows how many assets the company must sell in order to pay off
all of its liabilities.

DR= Total liabilities / Total assets

4) Profitability ratios-

Profitability ratios compare income statement accounts and categories to show a company's
ability to generate profits from its operations. Profitability ratios focus on a company's return
on investment in inventory and other assets. These ratios basically show how well companies
can achieve profits from their operations.

Some of the profitability ratios are-

a) Gross profit ratio-

The gross profit ratio shows the proportion of profits generated by the sale of products or
services, before selling and administrative expenses. It is used to examine the ability of a
business to create sellable products in a cost-effective manner. The ratio is of some importance,
especially when tracked on a trend line, to see if a business can continue to provide products
to the marketplace for which customers are willing to pay a reasonable price.

GPR= Gross profit / Net sales *100

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b)Net profit ratio-

The net profit percentage is the ratio of after-tax profits to net sales. It reveals the remaining
profit after all costs of production, administration, and financing have been deducted from
sales, and income taxes recognized. As such, it is one of the best measures of the overall results
of a firm, especially when combined with an evaluation of how well it is using its working
capital. The measure is commonly reported on a trend line, to judge performance over time. It
is also used to compare the results of a business with its competitors.

NPR= Profit after tax / Net sales* 100

c) Return on investments / Return on assets-

The return on assets ratio, often called the return on total assets, is a profitability ratio that
measures the net income produced by total assets during a period by comparing net income to
the average total assets. In other words, the return on assets ratio or ROA measures how
efficiently a company can manage its assets to produce profits duringa period.

ROI= EBIT / Average total asset

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Data Analysis and Interpretation-

Key financial ratios of Wipro-

Mar Mar '14 Mar '13 Mar '12


'15
Investment Valuation Ratios
Face Value 2.00 2.00 2.00 2.00
Dividend Per Share 12.00 8.00 7.00
6.00
Operating Profit Per Share (Rs) 37.26 36.93 28.15 24.58
Net Operating Profit Per Share (Rs) 166.91 157.15 134.91 128.86
Free Reserves Per Share (Rs) -- -- -- --
Bonus in Equity Capital 96.37 96.47 96.59 96.77
Profitability Ratios
Operating Profit Margin(%) 22.32 23.50 20.86 19.07
Profit Before Interest And Tax Margin(%) 19.26 20.73 18.03 16.09
Gross Profit Margin(%) 20.43 21.60 18.75 16.71
Cash Profit Margin(%) 20.52 20.12 18.38 16.50
Adjusted Cash Margin(%) 20.52 20.12 18.38 16.50
Net Profit Margin(%) 19.88 19.06 17.00 14.78
Adjusted Net Profit Margin(%) 18.74 18.29 16.35 14.23
Return On Capital Employed(%) 26.85 29.47 26.72 22.04
Return On Net Worth(%) 23.66 25.16 23.31 19.23
Adjusted Return on Net Worth(%) 23.66 25.16 23.31 19.23
Return on Assets Excluding Revaluations 140.22 119.03 98.38 99.04
Return on Assets Including Revaluations 140.22 119.03 98.38 99.04
Return on Long Term Funds(%) 30.60 32.87 31.11 24.56
Liquidity And Solvency Ratios
Current Ratio 2.16 1.98 1.55 1.94
Quick Ratio 2.95 2.53 2.02 2.50
Debt Equity Ratio 0.17 0.15 0.17 0.22
Long Term Debt Equity Ratio 0.03 0.03 -- 0.09
Debt Coverage Ratios
Interest Cover 30.09 26.64 21.45 10.77
Total Debt to Owners Fund 0.17 0.15 0.17 0.22
Financial Charges Coverage Ratio 32.24 28.61 23.44 12.00
Financial Charges Coverage Ratio Post Tax 25.72 22.68 19.02 9.97
Management Efficiency Ratios
Inventory Turnover Ratio 85.96 169.80 103.68 40.51
Debtors Turnover Ratio 4.94 4.55 4.04 4.61
Investments Turnover Ratio 85.96 169.80 103.68 40.51
Fixed Assets Turnover Ratio 4.59 4.46 4.17 3.81
Total Assets Turnover Ratio 1.03 1.16 1.19 1.09
Asset Turnover Ratio 1.11 1.25 1.15 1.14

Average Raw Material Holding -- -- -- --


Average Finished Goods Held -- -- -- --
Number of Days In Working Capital 176.44 127.39 97.56 118.08
Profit & Loss Account Ratios
Material Cost Composition 5.96 6.57 8.13 14.78
Imported Composition of Raw Materials Consumed 76.47 68.97 68.49 33.71
Selling Distribution Cost Composition -- -- -- --
Expenses as Composition of Total Sales 89.21 88.93 84.57 73.98
Cash Flow Indicator Ratios 31.48
Dividend Payout Ratio Net Profit 36.17 26.71 30.52
Dividend Payout Ratio Cash Profit 33.03 24.29 27.15 27.16
Earning Retention Ratio 63.83 73.29 69.48 68.52
Cash Earning Retention Ratio 66.97 75.71 72.85 72.84
Adjusted Cash Flow Times 0.67 0.56 0.64 0.97

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Mar Mar '14 Mar '13 Mar '12
'15
Earnings Per Share 33.18 29.95 22.94 19.05
Book Value 140.22 119.03 98.38 99.04

Balance Sheet of Wipro-

Notes 2015 2014


EQUITY AND LIABILITIES

Shareholders funds
Share capital 3 4,937 4,932
Reserves and surplus 4 341,279 288,627
346,216 293,559
Share application money pending allotment(1) 5
Non-current liabilities
Long term borrowings 6 10,632 10,061
Deferred tax liabilities 47(ii) 567 1,379
Other long term liabilities 7 281 629
Long term provisions 8 2,736 2,889
14,216 14,958
Current liabilities
Short term borrowings 9 49,704 35,042
Trade payables 10 57,288 53,566
Other current liabilities 11 25,511 24,048
Short term provisions 12 41,150 36,196
173,653 148,852
TOTAL EQUITY AND LIABILTIES 534,085 457,369

ASSETS

Non-current assets
Fixed assets
Tangible assets 13 35,700 36,215
Intangible assets and goodwill 14 4,684 3,535
Capital work-in-progress 3,612 2,751
Non-current investments 16 55,797 51,968
Deferred tax assets 47(ii) 1,659 1,487
Long term loans and advances 16 30,710 29,981
Other non-current assets 17 3,368 5,390
135,530 131,327
Current assets
Current investments 18 51,888 58,392
Inventories 19 4,794 2,283
Trade receivables 20 81,442 85,509
23
Cash and bank balances 21 156,675 105,549
Short term loans and advances 22 52,561 29,293
Other current assets 23 51,195 45,016
398,555 326,042
TOTAL ASSETS 534,085 457,369

Significant accounting policies 2

Here is the ratio analysis of the company for the year 2015 based on the above Annual report
of Wipro:

1) Liquidity ratio-

a) Current ratio = 398555/ 173653

= 2.29

Interpretation-

Ideal ratio is 2:1 so in this case company is covering under the ratio. High ratio indicates under
trading and over capitalization.

b) Quick ratio = 398555 - 4794 / 173653

= 2.26

Interpretation-

Ideal ratio is 1:1 so in this case company is not covering under the ratio. High ratio indicates
that the firm is liquid and has the ability to meet its current or liquid liabilities in time.

2) Turnover ratio-

a) Inventory turnover ratio = 473182 / 3538.5

= 133.72

Interpretation-

Ideal ratio is 8 times so in this case company is covering under the ratio. Low ratio may reflect
dull business , over investment in inventory, accumulation of stock and excessive quantities of

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certain inventory items in relation to immediate requirements. High ratio indicates that the firm
is selling inventory relatively quickly.

b) Receivables turnover ratio = 473182 / 83475.5

= 5.66

Interpretation-

Ideal ratio is 10-12 times so in this case company is not covering under the ratio . Low ratio
may reflects low collection period of the sound management policy.

3) Solvency ratio-

a) Debt Equity ratio = 10632 / 346216

= 0.03

Interpretation-

Ideal ratio is 2:1 so in this case company is not covering under the ratio. If debt is less than 2
times the equity, it means the creditors are relatively less and the financial structure is sound ,
if debt is more than 2 times the equity it is vice versa.

b) Equity ratio = 346216 / 534085

= 0.64

Interpretation-

Ideal ratio is 0.5:1 so in this case company iscovering under the ratio. Higher the ratio indicate
the better long term solvency position of the company.

c) Debt ratio = 173653 / 534085

= 0.32

Interpretation-

Ideal ratio is 2:1 so in this case company is not covering under the ratio. Lower the ratio higher
will be the debt which will create troubles for the company.

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4) Profitability ratio-

a) Gross profit ratio = 14326.05/ 9843.20 *100

= 145.54%

Interpretation-

A low ratio may indicate unfavorable purchasing while higher the gross profit ratio better the
results.

b) Net profit ratio = 9663.17 / 9843.20 *100

= 98.17%

Interpretation-

Higher the ratio , greater is the capacity of the firm to withstand adverse economic conditions
and vice versa.

c) Return on investment = 33.18 / 495727

= 6.69%

Interpretation-

ROI should be at or above a company's borrowing rate . Higher the ratio higher will be the
earning's from a company's total pool of capital.

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Findings
As in case of liquidity ratio, the current ratio of the company is more than its ideal ratio so this
implies that the company is prudently handling in current assets and liabilities. Quick ratio is
exceeding 1; the firm is in a position to meet its immediate obligation in all the years.

As in case of turnover ratio, the inventory ratio is very more as compared


to the ideal ratio so this means that company has improve its performance by doing high
turnover. Receivables ratio is low which implies that the company should re-assess its credit
policies in order to ensure the timely collection of credit sales that is not earning interest for
the firm.

As in case of solvency ratio, the debt-equity ratio is very low as compared to


its ideal ratio , this gives a lot of opportunity to company to raise debts for rapid expansion in
future. Having such low debts in the balance sheet also means that the cost of capital for the
company is on the higher side. Equity ratio is high as compared to the ideal ratio which implies
that the company is not more prone to losses for large portion of its earnings is spent in paying
interests. Debt ratio is also low which is favorable than a high ratio. It implies a more stable
business with the potential of longevity because a company with lower ratio also has a lower
overall debt.

As in case of profitability ratio, Gross profit ratio, when it is high indicates


that the company can make a reasonable profit, as long as it keeps the overhead cost in control.
When it is low, it indicates that the business is unable to control its production cost. Net profit
ratio, a low profit margin indicates a low margin of safety: higher risk that a decline in sales
will erase profits and result in a net loss. The higher the margin is, the more effective the
company is in converting revenue into actual profit. Return on investment, a higher ROI means
that investment gains compare favorably to investment costs while a lower ratio is unfavorable.

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Conclusion

According to the research we find that the companys overall position is good. The company achieves
sufficient profits in past 4 years. Fixed assets are efficiently utilized by the company due to which the
profit of the company is increasing every year.

The long term solvency of the company is good. The company maintains low liquidity to achieve
high profitability. The company distributes dividend to its shareholders every year. Inventory turnover
is increased as compared to after all year so management should take care about good efficiency of
stock management. Net fixed asset turnover ratio is increasing year by year because of sale is
increasing continuously and as the company sale is continuously rising but the net profit is not so
much increased so management should take some step to decrease its expenses.

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Bibliography

http://accountlearning.blogspot.in/2010/02/limitations-of-financial-statement.html
http://dosen.narotama.ac.id/wp-content/uploads/2013/02/Chapter-6-Financial-
Statements-Analysis-and-Interpretation.pdf
http://www.ncert.nic.in/ncerts/l/leac204.pdf
http://www.yourarticlelibrary.com/financial-management/financial-statements-
concept-objectives-advantages-and-other-details/29434/
http://download.nos.org/srsec320newE/320EL27.pdf
http://www.bitsvizagmba.com/study-
mm/Financial___Accounting/Financial%20&%20Accounting/Lesson-07.pdf
www.myaccountingcourse.com/financial-ratios
http://www.wipro.com/about-Wipro/
https://en.wikipedia.org/wiki/Wipro
http://www.scribd.com/doc/28985450/Marketing-Strategy-of-WIPRO-by-
Srinivas#scribd
http://www.answers.com/Q/Vision_and_mission_statement_of_wipro_company
file:///C:/Users/lenovo/Desktop/Wipro%20Annual%20Report%20April%202015.html
file:///C:/Users/lenovo/Desktop/Wipro%20Key%20Financial%20Ratios,%20Wipro%
20Financial%20Statement%20%26%20Accounts.html

.BOOKS-
Financial Management, Theory Concepts and Problems - Dr. R.P. Rustagi
Financial Management- I.M. Pandey
Financial Statement Analysis (Class 12) - NCERT Publishers

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Annexure

Company profile ( Wipro) -

Wipro Limited (Western India Products Limited) is an Indian multinational digital strategy,
IT Consulting and system integration services company headquartered in Bangalore, India.
Azim Hashim Premji (born 24 July 1945) is an Indian business tycoon and philanthropist
who is the chairman of Wipro Limited, guiding the company through four decades of
diversification and growth to emerge as one of the Indian leaders in the software industry.
Wipro Limited (Wipro) is a global information technology (IT), services
company. Wipro provides a range of IT services, software solutions and research and
development services in the areas of hardware and software design to companies worldwide.
Wipro Technologies is a global services provider delivering technology-driven business
solutions that meet the strategic objectives clients. As of December 2015, the company
has 170,664 employees servicing about 900 of the Fortune 1000 corporations and has
operations in 67 countries. On 31 March 2015, its market capitalization was approximately $
35 Billion, making it one of India's largest publicly traded companies and seventh largest IT
Services firm in the World. Wipro Limited demerged its non-IT businesses into a separate
company named Wipro Enterprise Limited in 2013.

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 Asia IT Services and products and Consumer Care and Lighting. Wipro has
40+ Centres of Excellence that create solutions around specific needs of
industries. Wipro delivers unmatched business value to customers through a
combination of process excellence, quality frame works and service delivery innovation.
Wipro is the World's first CMM 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 S e r v i c e s , B u s i n e s s
process outsourcing. Team Wipro is 75,000 Strong from 40nationalities
and growing. Wipro is present across 29 countries, 36 Development
centers, Investors across 24 countries.

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Wipro is globally recognized for its innovative approach towards delivering business value
and its commitment to sustainability. Wipro champions optimized utilization of natural
resources, capital and talent. Today we are a trusted partner of choice for global businesses
looking to differentiate at the front and standardize at the core through technology
interventions.
In todays world, organizations will have to rapidly reengineer themselves and be more
responsive to changing customer needs. Wipro is well positioned to be a partner and co-
innovator to businesses in their transformation journey, identify new growth opportunities
and facilitate their foray into new sectors and markets.

Group Companies

Wipro Infrastructure Engineering Ltd

Wipro Inc.

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.

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Wipro Australia Ltd.

Management of the company-


Board of Directors

1. AzimH .Premji Chairman


2. Dr Ashok S Ganguly Former Chief Ex. Officer Nortel
3. B .C. Prabhakar Practitioner of Law
4. Dr. Sheth Professor Of Marketing-Emory Uni.Usa.
5. N. Vagual Chairman-ICICI Bank Ltd
6. Bill Owens Former Chief Ex. Officer, Nortel
7. P. M. Sinba Former Chairman PepsiCo India Holding

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
AzimHPremji Member

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Marketing strategies adopted by Wipro
Wipro focuses largely on "pull" marketing initiatives, targeting prospective clients while they
are searching for relevant IT information. Mostly this mean web based marketing with four
key components-

- search engine promotion

- thought leadership content on leading IT portals and directories

- web seminars and events

- website content

Wipro's corporate strategies are

- Planning to aggressively develop the R & D services by focusing on high growth markets .

-Focused on new client acquisition in Europe and Asia.

- Wipro's own website is the fulcrum of the entire lead generation program.

- Consciously focused on increasing the revenue contribution from higher end service lines.

- Special offers and more than 400 case studies to get visitors to demonstrate and register
their special interests.

- Comprehensive web monitoring.

- Wipro uses permission marketing to strengthen relationships and move prospects along the
sales cycle.

-Marketing team relies on the prospect database to create carefully targeted lists based on
incoming traffic , client profiles and ongoing web activity.

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Vision

Contribute for global e-society, where a wide range of information is being exchanged
beyond time and space over global networks, which breaks down the boundaries among
countries, regions and cultures, allowing individuals to take part in various social activities in
an impartial, secure way.
Continuous effort to enhance people's lifestyle and quality by means of developing new
technology in wireless communication.

Mission
Our mission is to be a RF System Solution Provider, through its innovative research and
design works for a new world of broadband wireless communications.

Our Goals:
To support customers who rely on our ability as an advanced RF System Solution Provider
To build up core competencies through collaboration with technological partners
To contribute to the Ubiquitous Networking Society by providing chip level RF system
solutions

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Product lines
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 s e r v i c e s ,
finance and accounting services and process improvement services
f o r repetitive processes!
The Global IT Services and Products segment accounted for 74% of the Companys
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


e n t e r p r i s e I T services, technology infrastructure support services, and research
and development services. The Company provides a range of enterprise solutions primarily
to Fortune1 0 0 0 a n d G l o b a l 5 0 0 c o m p a n i e s . I t s s e r v i c e s e x t e n d f r o m
e n t e r p r i s e a p p l i c a t i o n services to e-Business solutions. Its enterprise solutions
have served clients from arrange o f 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,
n e t w o r k m a n a g e m e n t a n d 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 fiscal2007.
35
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 d e v i c e s , a n d t e l e c o m m u n i c a t i o n s a n d s e r v i c e p r o v i d e r s . T h e
C o m p a n y p r o v i d e s 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 e m b e d d e d s ys t e m s a n d I n t e r n e t a c c e s s d e v i c e s i s
p r o g r a m m e d i n t o t h e h a r d w a r e integrated circuit (IC) or application -specific
integrated circuit (ASIC) to eliminate t h e n e e d f o r r u n n i n g t h e s o f t w a r e
through an external source. The technology is p a r t i c u l a r l y i m p o r t a n t
t o p o r t a b l e c o m p u t e r s , h a n d - h e l d d e v i c e s , c o n s u m e r 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 S e r v i c e s ,
C o g n i z a n t , I n f o s y s , S a t ya m a n d T a t a C o n s u l t a n c y S e r v i c e s . I n d i a a n d
Asia Pac IT Services and Products

The Company's India and Asia Pac 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 Asia Pac 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;
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technology int egration, IT management and inf rastructure outsourci ng
s e r v i c e s ; custom application development, application integration, package
implementation and maintenance, and consulting.

Wipro's system integration services

Include integration of computing platforms, network s, storage, data


c e n t r e a n d enterprise management software. These services are typically bundled
with sales of the Company's technology products. Wipro 'designs, develops and
implements enterprise applications for c o r p o r a t e c u s t o m e r s . T h e C o m p a n y ' s
solutions include custom application development, package
i m p l e m e n t a t i o n , s u s t e n a n c e o f e n t e r p r i s e a p p l i c a t i o n s , including industry-
specific applications, and enterprise application integration. Wipro a l s o provides
consulting services in the areas of business continuity and
r i s k management, technology, process and strategy.

Consumer Care and Lighting

Wipro's Consumer Care and Lighting business segment accounted for 5%


o f i t s 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 l a m p s a n d l u m i n a r i e s . I t
o p e r a t e s b o t h i n c o m m e r c i a l a n d r e t a i l m a r k e t s . T h e Company has
also developed commercial lighting sol utions for
p h a r m a c e u t i c a l production centers, retail stores, software development centres
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.

37