Introduction

Tata Consultancy Services Limited (TCS) is a subsidiary of the Tata Group, an Indian
information technology consulting and business solutions company which operates in 46
countries worldwide. TCS Limited was founded in 1968 by a division of Tata Sons Limited. Its
early contracts included punched card services to TISCO (now Tata Steel), working on an Inter-
Branch Reconciliation System for the Central Bank of India. In 1975 TCS made an electronic
depository and trading system called SEMCOM for Swiss company. TCS also established India's
first software research and development center called Tata Research Development and Design
Centre in Pune, Maharashtra. On 25 August 2004, TCS became a Publicly Listed Company

Some important aspects related to TCS are mentioned below.

 TCS is one of the largest employers of women with 35.3% of women employees.
 TCS became the first Indian IT company to reach $100 billion market capitalization with a value
of $102.6 billion in Bombay Stock Exchange and a second Indian company ever after the
Reliance industries that achieved the same in 2007.
 TCS is ranked 10th on the Fortune India 500 list in 2018.
 It is the world's 9th largest IT service provider by revenue.
 TCS is ranked 64th overall in Forbes World's most innovative company ranking, making it the
highest-ranked IT services company ever.
 In the latest, TCS, the biggest software services company, has added 12,000 jobs in the first
quarter of 2019 and sent offer letters to 30,000 fresh graduates building the employment level in
the country publicly Listed Company.

TCS Company Organization Heads

1) N. Chandrasekaran is the chairman of the Tata consultancy services.

2) Rajesh Gopinathan is the CEO and Managing Director of Tata Consultancy Services.

TCS Mission Statement

“To help customers achieve their business objectives by providing innovative, best-in-class
consulting, IT solutions and services & to make it a joy for all stakeholders to work with us.”

Tagline Of The Company

Experience Certainty.
Headquarters Of The Company

Mumbai, Maharashtra, India

Products & Services Provided

TCS provides a wide range of information technology-related products and services including
application development, business process outsourcing, capacity planning, consulting, enterprise
software, hardware sizing, payment processing, software management, and technology education
services. The firm's established software products are TCS BaNCS and TCS MasterCraft.

Geographical Presence

TCS is a global leader in technology and consulting services. It enables clients in 46 countries to
create and execute strategies for their digital transformation.

A part of the Tata group, TCS has 3,95,000 associates(including subsidiaries) representing 131
nationalities, spanning across 46 countries as of March 31, 2018. The company generated
consolidated revenues of US $19.09 billion( a growth of 8.6% over the previous year) for the
year ended on March 31, 2018, and is listed on the National Stock Exchange and Bombay Stock
Exchange in India.
 RATIO ANALYSIS

A. LIQUIDITY RATIO: Liquidity ratios analyse 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.

1. Current Ratio = Current Assets

Current Liabilities
‘Crores
Year 2014-15 2015-16 2016-17 2017-18 2018-19

Current Ratio 2.78 3.41 3.09 2.85 2.85

Analysis:-

 The Viable Current Ratio is 2:1.

 A Higher Current ratio enables a firms ability to pay off Current Obligations and thus
provide adequate margin of safety to its creditors.
 There is More proportionate increase in Current asset as compared to its Current
obligations .

2. Quick Ratio / Acid Test Ratio = Quick Assets

Quick Liabilities

Quick Assets = Current Assets – Stock – Prepaid Expenses

‘Crores

Year 2014-15 2015-16 2016-17 2017-18 2018-19

Quick Ratio 2.80 3.27 2.93 2.67

2.74
Analysis:-

 It evaluates Company’s Overall Short-term Solvency or Liquidity Position .

 The Viable Acid Test Ratio is 1:1 Proportion.
 Investment in Quick Ratio is Increased As Company is investing in high proportion as
compared to previous year (i.e.36 % more) this indicate that Company is following
conservative approach and pooling high proportions of funds in liquid assets to facilitate
day to day operations.

B. ACTIVITY / TURNOVER / EFFICIENCY RATIO : Accounting ratios that measure a

firm's ability to convert different accounts within its balance sheets into cash or sales.
Activity ratios are used to measure the relative efficiency of a firm based on its use of its
assets, leverage or other such balance sheet items. These ratios are important in
determining whether a company's management is doing a good enough job of generating
revenues, cash, etc. from its resources.

1. Stock Turnover Ratio = Cost of Goods Sold

Average Stock / Inventory

Cost of Goods Sold = Sales – Gross Profit

Average Stock = Opening Stock + Closing Stock

2
‘Crores
Years 2014-15 2015-16 2016-17 2017-18 2018-19

Ratio 5,962.90 9,540.44 4,413.95 3,894.24 12,317.00

Analysis:-

 It represents Relative size of inventory and amount of cash available to pay off its certain
liabilities.
 A less Inventory turnover ratio means a company has less cash tied up in Company’s
Inventory in associating with Cost of Goods or services that are to be rendered & Vice
versa.
 Stock (Inventory) of Company has been increased, and depicting significant cost
structure is ensured in holding Inventory which ultimately reflects companies has built up
inventory as compared to previous year’s & diluting companies performance.
 2. Debtors Turnover Ratio = Average Accounts Receivables
Net Credit Sales

‘ Crores
Years 2014-15 2015-16 2016-17 2017-18 2017-18

Ratio 4.67 4.76 5.20 5.49 5.74

Analysis:-

 The days sales outstanding formula shows investors and creditors how well companies'
can collect cash from their customers. Obviously, sales don't matter if cash is never
collected. This ratio measures the number of days it takes a company to convert its sales
into cash.
 A lower ratio is more favorable because it means companies collect cash earlier from
customers and can use this cash for other operations. It also shows that the accounts
receivables are good and won't be written off as bad debts.
 Companies with high days sales ratios are unable to convert sales into cash as quickly as
firms with lower ratios.

C. DEBT MANAGEMENT RATIOS: Debt Management Ratios attempt to measure the

firm's use of Financial Leverage and ability to avoid financial distress in the long run.
These ratios are also known as Long-Term Solvency Ratios. Debt is called Financial
Leverage because the use of debt can improve returns to stockholders in good years and
increase their losses in bad years. Debt generally represents a fixed cost of financing to a
firm.

1. Debt to Equity Ratio = Debt

Equity
. Debt = Long Term Debt / Borrowed Funds
= Secured Loans and Unsecured loans
Equity = Shareholders Fund / Owned Fund
= Share Capital + Reserves & Surplus

Years 2014-15 2015-16 2016-17 2017-18 2018-19

Ratio _ _ _ _ 0.01
Analysis:-

 A ratio of 1 or 1: 1 means that creditors and stockholders equally contribute to the assets
of the business.
 Ratio indicates less contribution from its stockholders and significant contribution from
equity towards generating assets & facilitating funds to ensure operations of business
concern. & Less Contributions from Long terms funds & borrowings adhered for fetching
revenues and providing business.

2. Interest Coverage Ratio = Earning Before Interest & Tax

Interest
‘ Crores
Years 2014-15 2015-16 2016-17 2017-18 2018-19

Ratio 302.89 2257.85 1880.13 1065.37 240.44

Analysis:-

 It determines the debt servicing capacity of a business enterprise keeping in view fixed
interest on long-term debt.
 Higher the ratio better it is.
 TCS has an increase in ratio by 492.9 times since last year which shows the degree of
protection creditors have from default on the payment of interest by the company.

D. Asset Management Ratios: Asset management (turnover) ratios compare the assets of
a company to its sales revenue. Asset management ratios indicate how successfully a
company is utilizing its assets to generate revenues.

1. Fixed Assets Turnover Ratio = Net Sales

Fixed assets

‘Crores

Years 2014-15 2015-16 2016-17 2017-18 2018-19

Ratio 5.23 9.48 4.96 4.79 5.67

Analysis:-
 It is a measure of the company’s ability to generate net sales from fixed-assets
investments
 A higher value of this ratio shows that the company has been more effective in using the
investment in fixed assets to generate revenue.
 There is a increase in the value of the ratio in 2018-19 as compared to 2017-18.
 It means that the efficiency of the firm to generate revenues from investment in fixed
assets has gone down.

2. Total Asset Turnover Ratio = Net sales

Total Asset
‘Crores

Years 2014-15 2015-16 2016-17 2017-18 2018-19

Ratio 1.61 1.32 1.18 1.28 1.56

Analysis: -
 If a company can generate more sales with fewer assets it has a higher turnover ratio
which tells it is a good company because it is using its assets efficiently. A lower turnover
ratio tells that the company is not using its assets optimally.

E. Profitability Ratio:- Measure a company’s ability to generate earnings relative to sales,

assets and equity. These ratios assess the ability of a company to generate earnings,
profits and cash flows relative to relative to some metric, often the amount of money
invested. They highlight how effectively the profitability of a company is being managed.

1. Operating Margin Ratio = Operating Income X 100

Net sales
‘Crores

Years 2014-15 2015-16 2016-17 2017-18 2018-19

Ratio 28.57 31.50 29.22 28.56 28.38

Analysis:-
 The operating profit margin ratio is a key indicator for investors and creditors to see how
businesses are supporting their operations
 A higher operating margin is more favorable compared with a lower ratio because this
shows that the company is making enough money from its ongoing operations to pay for
its variable costs as well as its fixed costs.

2. Profit Margin Ratio = Net Profit X 100

Revenue
‘Crores

Years 2014-15 2015-16 2016-17 2017-18 2018-19

Ratio 26.17% 26.87% 25.51% 25.92% 24.40%

Analysis:-

 The profit margin ratio directly measures what percentage of sales is made up of net
income. In other words, it measures how much profits are produced at a certain level of
sales.
 Profit margin is an indicator of how efficient a company is and how well it controls its
costs. The higher the margin is, the more effective the company is in converting revenue
into actual profit.

3. Return on Assets Ratio = Net Income X 100

Total Assets

‘ Crores
Years 2014-15 2015-16 2016-17 2017-18 2018-19

Ratio 231.87 329.94 395.96 396.31 210.26

Analysis:-

 It only makes sense that a higher ratio is more favourable to investors because it shows
 that the company is more effectively managing its assets to produce greater amounts of
net income.
 A positive ROA ratio usually indicates an upward profit trend as well. ROA is most
useful for comparing companies in the same industry as different industries use assets
differently. For instance, construction companies use large, expensive equipment while
software companies use computers and servers

4. Return on Equity Ratio = Net Income X 100

Equityshareholders

Years 2014-15 2015-16 2016-17 2017-18 2018-19

Ratio 52.77% 45.03% 38.43% 42.00% 51.78%

Analysis:-

 This ratio indicates the return which the management is realising from shareholder's
equity and shows how effectively it is been utilised.
 Higher the ratio the better is Return on equity.
 This year TCS' ratio has increased by 9 % which is a good sign for the company which
indicates co. has increased its share capital.

F. MARKET VALUE RATIO: An equation that compares the current stock price to
a financial indicator on the company's financial statements. The most often used indicator
is a company's earnings per share.

1. Earning Per Share = Net Profit After Tax – Preference Dividend

No. Of Equity Shares

‘ Crores

Years 2014-15 2015-16 2016-17 2017-18 2018-19

Ratio 55.55 45.00 40.00 50.00 42.00

Analysis:-

 This ratio indicates per share earning of a Company in a particular year. It also helps in
evaluating the prevailing market share in the light of profit earning capacity.
 In this Higher the ratio the better is the EPS of company.
 TCS has increased its EPS by 0.03 % which is a good sign for the company.

2. Dividend Per Share = Equity Dividend Paid

No. Of Equity Shares

‘ Crores

Years 2014—15 2015-16 2016-17 2017-18 2018-19

Ratio 79.00 43.50 47.00 50.00 30.00

Analysis:-
 Objective of computing this ratio is to measure the dividend distributed per equity share.
 In this Higher the ratio the better is the DPS.

3. Dividend Payout Ratio = Dividend Per Share x 100

Earnings Per Share

Years 2014-15 2015-16 2016-17 2017-18 2018-19

Ratio 80.35 34.63 38.73 36.78 33.54

Analysis :-
 This ratio indicates the percentage of earnings that the company has distributed in the
form of dividends.
 As compared to last year TCS' percentage of Dividend Payout ratio has Decreased by 3
%.
 A low ratio may indicate the company is using much of its earnings to reinvest in the
company in order to grow further.