SUMMER PROJECT REPORT

ON
RATIO ANALYSIS:
A TOOL OF FINANCIAL STATEMENT ANALYSIS
(TATA CONSULTANCY SERVICES)

FOR THE PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD

OF

BACHELOR OF COMMERCE (HONOURS)

UNDER THE GUIDANCE SUBMITTED BY

OF
Dr. Ankur Agrawal Mayank Agrawal
B.COM (H)
[2020-2023]
Enrolment No. 20200183

INSTITUTE OF BUSINESS MANAGEMENT AND

COMMERCE, MANGALAYATANUNIVERSITY,33 rd
KM
STONE, ALIGARH-MATHURA HIGHWAY, BESWAN,
ALIGARH

1
 CERTIFICATION FROM FACULTY

This is to certify that the work entitled “RATIO ANALYSIS: A TOOL OF FINANCIAL
STATEMENT ANALYSIS” is a piece of SIP project work done by Mr. Mayank Agrawal
under my guidance and supervision for the degree of MBA /BBA /B.Com. from
Mangalayatan university Aligarh.

To the best of knowledge and belief the Report:

(i) Embodies the work of the candidate himself.

(ii) Has duly been completed.

(iii) Fulfills the requirement of the Ordinance relating to the MBA/BBA degree of the
University and

(iv) Up to the standard both in respect of contents and language for being referred to the
examiner.

Signature

Date.

2
 DECLARATION

I, Mayank Agrawal hereby declare that the project work entitled “RATIO ANALYSIS: A

TOOL OF FUNDAMENTAL STATEMENT ANALYSIS”

submitted towards partial fulfillment of requirements for the award of BACHELOR OF

COMMERCE (HONOURS) is my original work, based on secondary data available on the

website and the dissertation has not formed the basis for an award of any degree associate

ship, fellowship or any similar title to the best of my knowledge.

Place:

Mayank Agrawal

Enrolment No. 20200183

Date:

3
 ACKNOWLEDGEMENTS

I have taken efforts in this project. However, it would not have been possible without the kind
support and help of many individuals and collage. I would like to extend my sincere thanks to
all of them.

I express my sincere thanks to Prof. Rajeev Sharma, who is the head of our department
INSTITUTE OF BUSINESS ADMINISTRATION AND COMMERCE of
MANGALAYATAN UNIVERSITY, BESWAN has given
me the opportunity to do this project.

I am grateful to my internal guide Dr. Ankur Agrawal, Professor, Dept of IBMC,

MANGALAYATAN UNIVERSITY. My project guide who supported me with his guidance
for this project work was timely, and aptly and also installed confidence and enthusiasm in me
at every stage. And I also thank other faculty, librarian, friends, and relatives.

My gratitude will not be complete if I do not thank the Almighty and my loving parents who
have been supportive throughout the project.

Mayank Agrawal

B.COM(H)

Enrolment No. 20200183

4
 PREFACE

It is a matter of great pleasure and privilege for me to place before the esteemed readers of
this report on "RATIO ANALYSIS: A TOOL OF FINANCIAL STATEMENT ANALYSIS".
The report mainly features the financial analysis of TATA CONSULTANCY SERVICES, in
the ratio analysis form.

This project helped me to understand the professional working environment and helped me to
get the deeper understanding of the process of Ratio analysis & interpretation and how
decisions are taken to strengthen the financial position.

For this study 5 years balance sheet have been taken for ratio analysis & interpretation. Main
objective in understanding this project is to supplement academic knowledge with absolute
practical exposure to day-to-day function of the business organization.

The first phase of the project is to study and develop a deeper understanding of the concept of
Ratio analysis of financial statements.

Second phase includes the analysis of the company's financial position based on calculation of
various ratios like liquidity ratios, profitability ratios, turnover ratios and leverage ratios.

The final phase is about drawing conclusion about the company's financial position on the
ratios so calculated.

5
 TABLE OF CONTENTS

SL. No. TITLE PAGE NO.

Executive Summary 8
Chapter-01 Introduction 9-21
1.1Tata Consultancy Services 9-16
1.2Financial Statements 17
Analysis
1.3Ratio Analysis 17-21
21
1.4 Objectives

Chapter -02 literature review 22-25

Chapter -03 3.1 Research 26

Methodology
27
3.2 Scope of Study
Chapter -04 Data Collection & its 28-34
Tool
Chapter -05 Data analysis and its
35-64
interpretation

Finding 65-66

6
 Conclusion 67

IMPLICATION OF 68
STUDY

Suggestions/ Recommendation 69

Limitations 70

Bibliography 71

7
 EXECUTIVE SUMMARY

This summer internship project report is prepared at "TATA CONSULTANCY SERVICES

on "Ratio Analysis: A TOOL FOR FINANCIAL STATEMENT ANALYSIS " using ratio
analysis as a part of the curriculum of the B.COM(H) program at the " MANGALAYATAN
UNIVERSITY." This report will provide an assessment and analysis of the profitability,
liquidity, solvency performance, and financial position of TATA CONSULTANCY
SERVICES, using figures from the financial statements of the last 5 years.

Ratio analysis is widely used for financial analysis. It is defined as the systematic use of ratios
to interpret the financial statements so that the strengths and the weakness of a firm as well as

its historical performance and current financial condition can be determined. The ratios were
able to provide a clear view of the overall performance of the company.

The company has a healthy liquidity position which means that it can rely on its current assets
to finance the current liabilities and does not have to commit to long-term debts.

It has been recommended that the company should look into ways of improving sales in
periods of low demand to improve profitability and also increase financing to expand and

grow the business.

Given the nature of the business, it would have been interesting to evaluate the business by
comparing it with past years’ results and also with the industry benchmark.

8
 CHAPTER – 01

INTRODUCTION

1.1 TATA CONSULTANCY SERVICES: -

Tata Consultancy Services, a global leader in IT services, consulting, and business solutions,
leverages technology for business information and helps catalyze change. TCS is an Indian
multinational information technology services and consulting company that has been
partnering with many of the world’s largest businesses in their transformation journeys for
over 50 years. Its headquarters is located in Mumbai. It is a part of the Tata Group and
operates in 150 locations across 46 countries. Tata Consultancy Services launched as a
division of Tata Sons on April 1, 1968, as a management and technology consultancy that
would create demand for downstream computer services. As of Dec2022 TCS has a market
capitalization of $145.17 BILLION. This makes TCS the world’s 72nd most valuable
company by market capitalization. TCS has become 2nd most valuable brand in the IT services
sector globally. RAJESH GOPINATHAN is the Chief Executive Officer and Managing
Director of Tata Consultancy Services. TCS offers a consulting-led, cognitive-powered,

integrated portfolio of business, technology, and engineering services and solutions. About
23% of employees (from the 4600+ responders) think that TCS is a brand that can help
them boost their careers. Another important factor that lures the workforce towards TCS
is the company’s work environment. About 16% of employees voted for TCS for providing a
suitable and healthy work environment.

VISION
➤To decouple business growth and ecological footprint from its operations to address the
environment bottom-line.

➤to grow sustainably and help our customers achieve sustainable growth through our green
solutions and service offerings"

MISSION
➤To help customers achieve their business objectives by providing innovative, best-in-class
consulting, IT solutions and services.

9
VALUES

➤Integrity, leading change, excellence, respect for the individual, and fostering an
environment of learning and sharing.

 SWOT ANALYSIS OF TATA CONSULTANCY SERVICES

STRENGTHS

•High Quality & Price Performance

•Large Pool of Knowledge Workers

•Flexibility and Adaptability

•Reliability

•High Growth

•Large Projects

WEAKNESSES

•Lack of Domestic Computerization

•Project Management Skills

•Localization

OPPORTUNITIES

•Global Market

•Domestic Demand

•E-Commerce/E-Business

THREATS

•Economical Threat

•Technological Threats:

•Government interference

•Lack of Speed

10
 IMPORTANT PRODUCTS OFFERED

➤ Hospital management software (TATA- HMS)

➤Tata Bio-Suite

➤Master craft - modeling tool for software architecture

➤ ADEX - modeling tool & repository for storing application models.

➤ Apollo (Insurance Software)

➤ IIMS (Integrated Insurance Management System)

 BUSINESSES SERVED

1. Banking

2. Insurance

3. Financial Services

4. Manufacturing

5. Energy and Utilities

6. Retail and Consumer Goods

7. Transportation

8. Telecom

9. Government

10. Life Sciences and Healthcare

11. Media and Entertainment

11
 COMPETITORS

1. IBM

2. Infosys Technologies Limited

3. Wipro Cooperation

4. Tech Mahindra

5. Larsen and turbo infotech

6. Mindtree

7. HCL Tech

8. Sapient Cooperation

9. Oracle

10. Hewlett Packard Global Soft Ltd

11. Mphasis

12. Hexaware technology

And many more.

 TATA CONSULTANCY SERVICES SERVED

IT Services

➤Application Development Maintenance Reengineering, Testing

➤Packaged Software

➤Implementation, Systems Integration

Asset Based Solutions

➤IT Products

➤Product Based Services

12
Global Consulting

➤IT Consulting
➤Business Consulting
➤Quality Consulting

Engineering & Industrial Services

➤Product & Process Engineering

➤Embedded Systems
➤Plant Automation Services

➤Enterprise Asset Management

IT Infrastructure

➤IT Outsourcing, Network Consulting and Integration,

➤Hardware Support and Installation

➤Infrastructure Management

BPO

➤Inbound Call Centers, Back Office Support

➤Engineering Services

➤Database Services

➤Clinical Data Management, Statistical Analysis & Medical Writing

13
 HISTORY OF TATA CONSULTANCY SERVICES

➤Tata Consultancy Services Ltd (TCS) was founded in 1968 by a division of Tata Sons
Limited.

➤In 1981, TCS established India's first dedicated software research and development center,
the Tata Research Development and Design Center (TRDDC) in
Pune.

➤In 1985 TCS established India's first client-dedicated offshore development center, set up
for client Tandem.

➤On 25 August 2004, TCS became a publicly listed company.

➤In 2005, TCS became the first India based IT services company to enter the bioinformatics
market, and in the same year TCS changed the tagline from "Beyond the Obvious" to
"Experience Certainty".

➤In 2006, it designed an ERP system for the Indian Railway Catering and Tourism
Corporation.

➤By 2008, its e-business activities were generating over US$500 million in annual revenues.

➤TCS entered the small and medium enterprises market for the first time in 2011, with

cloud-based offerings. On the last trading day of 2011, it overtook RIL to achieve the highest
market capitalization of any India-based company. In the 2011-12 fiscal year, TCS achieved
annual revenues of over US$10 billion for the first time.

➤In May 2013, TCS was awarded a six-year contract worth over 11 billion (US$140 million)
to provide services to the Indian Department of Posts. In 2013, the firm moved from the 13th
position to 10th position in the League of top 10 global IT services companies.

14
➤In July 2014, it became the first Indian company with over 5 trillion (equivalent to ₹6.8
trillion or US$85 billion in 2020) market capitalization.

➤In Jan 2015, TCS ends RIL's 23-year run as India's most profitable firm.

➤In Jan 2017, the company announced a partnership with Auras, Inc., a payments technology
company, to deliver payment solutions for retailers using TCS Omni Store, a first of its kind
unified store commerce platform. In the same year, TCS China was associated as a joint
venture with the Chinese government.

➤In March 2018, Tata Sons sold stocks of TCS worth $1.25 billion in a bulk deal.

➤TCS received the 2019 American Business Awards from Four Stevie’s.

➤On 8 October 2020, TCS surpassed Accenture in market capitalization to become the
world's most-valuable IT company with a market cap of $144.73 billion.

➤On 25 January 2021, TCS again surpassed Accenture briefly, in market capitalization to
become the world's most-valuable IT company with a market cap of $170 billion. The same
day, TCS became India's most valuable company, surpassing Reliance Industries with a
market cap of 12.55 trillion (US$160 billion). In 2021 Tata is also one of the largest job
provider in India hiring 43,000 individuals in H1 FY22.In October 2021, N Ganapathy
Subramaniam, the COO of TCS, stated that its platforms and products business is worth
approximately $3 billion. The company's platforms and products business include TCS' SaaS-
based platforms, and according to Subramaniam, between October 2020 and October 2021,
95% of the deals won by TCS have been for its cloud platforms and SaaS platforms. Also, in
2021 TCS got a millennial makeover. Under the leadership of Rajshree R, TCS Chief
Marketing Officer (CMO), the company changed the tagline from "Experience Certainty" to
"Building on Belief". In May 2021, alongside consortium partner Neurotechnology, TCS was
selected by the Unique Identification Authority of India (UIDAI) to provide biometric
technology for the Aadhaar digital ID program. The Aadhaar program has been described by
the World Bank Chief Economist Paul Romer as the "most sophisticated ID program in the
world" owing to the existing database of over 1.3billion citizens.

15
 ACQUISITION

➤CMC Limited-October 2001

➤Airline Financial Support Service India (AFSI)-January 2004
➤Aviation Software Development Consultancy India (ASDC)-March 2004
➤Phoenix Global Solutions-May 2004
➤Swedish Indian IT Resources AB (SITAR)-May 2005
➤Pearl Group-October 2005
➤Financial Network Services (FNS)-October 2005
➤Comicon-November 2005
➤Tata Infotech-February 2006
➤TCS Management-November 2006
➤TKS-Teknosoft-November2006
➤Citigroup Global Services Limited-December 2008
➤Supervalu Services India-September 2010
➤Computational Research Laboratories-August 2012
➤Alti SA-April 2013
➤Bridgepoint Group-November 2018
➤Postbank Systems-November 2020
➤Pramerica Systems Ireland-December

16
1.2 A FINANCIAL STATEMENT ANALYSIS: -

Financial Statements are records that provide an indication of the organization’s financial
status. It quantitatively describes the financial health of the company. It helps in the
evaluation of a company’s prospects and risks for the purpose of making a business decision.
The objective of the financial statement is to provide information about the financial position,
performance, and changes in the financial position of enterprises that is useful to a wide range
of users in making economic decisions. Financial statements should be understandable,
relevant, reliable, and comparable. They give an accurate picture of a company’s condition
and operating results in a condensed form. Reported assets, liabilities, and equity are directly
related to an organization’s financial position whereas reported income and expenses are
directly related to an organization’s financial performance.

The Analysis of financial statements is a process of evaluating the relationship between

component parts of a financial statement to obtain a better understanding of a firm financial
position. The analysis is a process of critically examining the accounting information given in
a financial statement. For the purpose of analysis, individual items are studied; their
interrelationship with other related figures is established.

The Analysis of financials refers to the treatment of the information contained in the financial
statement in a way as to afford a full diagnosis of the profitably and financial position of the
firm concerned.

1.3 Ratio Analysis: A tool of Financial Statements Analysis: -

The ratio is the mathematical comparison of financial statement accounts or categories. These
relationships between the financial statement accounts help inventors, creditors, and internal
Organization management understand how well a business is performing and areas of reading
improvement. The ratio is the most common and widespread tool used to analyze a business’s
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

mathematical comparison based on proportions, big and small companies can use ratios to
compare their financial information. In a sense, financial ratios don’t take into consideration
the size of an organization or the industry.

17
According to Myers, “Ratio analysis of financial statements is a study of the relationship
among various financial factors in a business as disclosed by a single set of statements and a
study of the trend of these factors as shown in a series of statements.”

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

IMPORTANCE OF RATIO ANALYSIS

1. Useful in financial position Analysis

2. Useful in simplifying accounting figures

3. Useful in assessing the operational efficiency

4. Useful in forecasting purpose

5. Useful in locating the weak spots of the business

6. Useful in comparison of performance

Here are some of the key ratios that investors and creditors consider when
judging how profitable an organization should be:

1. PROFITABILITY RATIOS

Profitability ratios compare income statement accounts and categories to show an

organization's ability to generate profits from its operations. Profitability ratios focus on an
organization's return on investment in inventory and other assets. These ratios basically show
how good companies can achieve profits from their operations.

In other words, profitability ratios can be used to judge whether companies are making
enough operational profit from their assets. In this sense, profitability ratios relate to
efficiency ratios because they show how good companies are at using their assets to generate
profits. Profitability is also important to the concept of solvency and going concerned.

18
SOME PROFITABILITY RATIOS

1. NET PROFIT RATIO

2. RETURN ON SHAREHOLDERS’ FUND

3. GROSS CAPITAL RATIO

4. NET CAPITAL EMPLOYED RATIO

5. RETURN ON EQUITY CAPITAL

2. TURNOVER RATIO

TURNOVER RATIO is also known as the efficiency ratio or the more popular ACTIVITY
RATIO. The role of the activity ratio or turnover ratio is in the evaluation of the efficiency of
a business by careful analysis of inventories, fixed assets, and accounts receivables. Turnover
ratios measure the company's efficiency in employing its assets to generate revenue.

The larger the turnover ratio, the better as it shows that the company is optimally utilizing its
assets as resources to earn revenue. Turnover ratios are calculated by dividing the revenues by
the average asset balance. It is also termed as efficiency ratio because it shows the company's
efficiency in the conversion of assets into sales which in turn reflects the ROI.

SOME IMPORTANT TURNOVER RATIOS ARE AS FOLLOWS: -

1. TRADE RECEIVABLES TURNOVER RATIO

2. AVERAGE COLLECTION TURNOVER RATIO

3. TOTAL ASSETS TURNOVER RATIO

4. FIXED ASSETS TURNOVER RATIO

5. CURRENT ASSETS TURNOVER RATIO

6. NET ASSETS TURNOVER RATIO OR CAPITAL TURNOVER RATIO

19
7. WORKING CAPITAL TURNOVER RATIO

3. LIQUIDITY RATIO

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

Liquidity is not only a measure of how much cash a business has. It is also a measure of how
easy it will be for the Organization to raise enough cash or convert assets into cash.

Assets like accounts receivable, trading securities, and inventory are relatively easy for many
companies to convert into cash in the short term. Thus, these assets go into the liquidity
calculation of an organization.

HERE ARE THE MOST COMMON LIQUIDITY RATIOS:

1. CURRENT RATIO

2. LIQUID RATIO

3. CASH RATIO

4. LEVERAGE RATIO

Leverage ratios, also called Solvency ratios, measure an organization'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 an organization to pay off its obligations, solvency ratios
focus more on the long-term sustainability of an organization instead of the current liability
payments. Solvency ratios show an organization's ability to make payments and pay off its
long-term obligations to creditors, bondholders, and banks. Better solvency ratios indicate a
more creditworthy and financially sound Organization in the long term.

20
 THE MOST COMMON SOLVENCY RATIOS INCLUDE:

1. DEBT TO TOTAL CAPITAL RATIO

2. EQUITY RATIO

3. DEBT-EQUITY RATIO

4. FIXED ASSETS RATIO

5. PROPRITORY RATIO

1.4 OBJECTIVE: -

 To know the Liquidity Position.

 To know about Over-All Profitability

 To know about Operating Efficiency.

 To develop practical understanding of ratios based on financial statements.

 To develop clarity about different types of ratios and their significance in financial set up.

 To study and analyze the financial position of the Company through ratio
analysis.

 To suggest measures for improving the financial performance of organization.

 To study and compare the financial position of company with its competitors through ratio
analysis.

21
 CHAPTER – 02

LITERATURE REVIEW

A literature review is the summary and critical evaluation of previous published and
unpublished researches made by various scholars and researchers. The source of literature
review may be newspapers, articles, journals, magazines, books, thesis, reports etc. It may
also include discussions, methodological issues and suggestions for future research.

In the beginning of nineteenth century essential improvement in ratio analysis occurred. In

this period few developments are endogenous. First, large number of ratios was conceived in
comparison to earlier periods. Second, proper ratio criteria were appeared. In this regard most
famous was current ratio criterion. Third, different analysts understand the need of inter-firm
analysis and for that purpose it felt the need for relative ratio criterion. Despite these
developments ratio analysis has been used for analysis in this period and those felt the need of
using ratio analysis only used current ratio.

Two very important exogenous developments in this period because of which need of ratios
has surfaced were federal income tax code in 1913 and the establishment of the Federal
Reserve System in 1914. These two developments also helped to improve the content of
financial statements as well as increased the demand of financial statements.

In 1920s, interest in ratio analysis increased dramatically. Many publications on the topic of
ratio analysis published during this period. Different credit agencies, trade unions, universities
and individuals seeking analyses compiled industry data on ratio analysis.

Justin (1924) argued that the method of gathering industry data and calculates averages were
called "Scientific ratio analysis". The word "scientific" in this title was not entirely correct
because no evidence had been found that the hypothesis formulation and hypothesis testing
actually carried out.

Horrigan (1968) says ratios analysis has come into existence since early ages and the main
reason of the development of ratio analysis was its use in the analysis of the properties of
ratios in 300 B.C. in recent time it is used as a standard tool for the analysis of financial
statement. In nineteenth century, main reasons of using ratio analysis are power of financial
institutions and shifting of management to professional managers. Ratio analysis used for two

22
purposes that are credit and managerial. In managerial approach profitability and in credit
approach capacity of firm to pay debts is the main point of focus. Generally, ratio analysis is
used credit analysis.

There was rapid expansion of financial knowledge in nineteenth century and to study this
rapidly expanding knowledge analyst first compared similar items then moved further and
compared current assets and liabilities as well with other ratios. In that period current ratio
was the most significant ratio among all other available ratios. To analyze the operating
results Dupont analysis is also used. The result divided into three parts and then compared
with other companies to point out the problem and strong areas of business.

Bliss (1923) says basic relationship within the business is indicated by the ratios and
developed complete model based on the ratios. The purpose model was not mature but
inspired others to start working on this theory.

Gilman (1925) has following concerns on ratio analysis:

(1) ratios are bond with time and changed as time passed so cannot be interpreted.
(2) ratios are not natural measure for judging the performance companies manipulated them.
(3) ratios easily affect the mind of viewers and hide the actual position. and
(4) ratios swing widely that also affect the dependability.

Foulke (1931) create and promoted own set of financial ratios successfully. This set of
financial ratios were printed and promptly known as important and prominent group of ratios.

Fitzpatrick (1932) with the help of thirteen different type of ratios analysis 120 failed firms
and found that three out of thirteen ratios predict the failure of firms with precise accuracy
while other ratios also shown some prediction power.

Rasmer and foster (1931) used eleven ratios to examine that the successful firms has higher
ratios than unsuccessful firms. Although this study was immature but immaturity was ignored
by considering the vital contribution this study has in the evaluation of usefulness of ratios.
Security and exchange commission of America was formed in 1934. This also expands the
flow and number of financial statements and with the help of this peripheral factor importance
of ratio analysis further enhanced and realized.

23
In 1940s many nations expressed interest in ratio analysis. Current ratio has used in credit
management in Australia after intense scrutiny. In England data has collected from different
organization and sort in "pyramid" in order to used that data in ratio analysis so that decision
made on more rational basis. In other wards British method is more management oriented
than American system that is credit oriented. Indian and Canadian system is similar to
American system and same kind of ratios and criteria has been used. In Japan data is available
in grouping on the basis of industry and sizes of firms. China and Russia used several ratios as
control measure in investment and working capital.

Marwin (1942) by using several ratios analyze financial trends of huge successful and
unsuccessful firms. Compared normal ratios of industry with mean ratios of large
unsuccessful firms and find out that the three ratios current ratio, net working capital to total
assets and net worth to debt were able to foresee failure before actual failure happened. This
study shows the actual power of prediction of ratio analysis and results were still reliable.

Walter (1957) included cash flow statement items in ratio analysis. At the end of world war
fund statement came into existence and with fund statement fund statement ratios was also
produced.

Hickman (1958) used times interest earned ratio and net profit ratio to predict the default rate
on corporate bond.

Saulnier (1958) says firms with low current ratio and debt ratio has greater chance to default
then firms with high ratios.

Moore and Atkinson (1961) point out the relationship between capacity to pay and financial
ratios and shows results of ratio analysis influence the borrowing ability of firms.

Beaver (1967) also examined the prediction power of ratio analysis and point out ratios
ability to predict failure as early as five years before the collapsed. Statistical technique used
in the study was more powerful than earlier studies and fund statement data was used to
calculate ratio. This study set the foundation for future research on ratio analysis.

Sorter and Becker (1964) examined the relationship between psychological model and
corporate personality of financial ratios and find out that long-established corporation

24
maintain greater liquidity and solvency ratios.
Pinches and Mingo (1973) evaluate the structure of ratios and found that ratios can be
divided into different groups. Present general classification of financial ratios on logical basis.
Results concluded that the ratios can be divided into four groups that are financial leverage,
short-term capital intensiveness, return on investment and long-term capital intensiveness.

Stevens (1973) also studies the topic of ratio classification and grouped the financial ratios in
four categories that include activity, liquidity, leverage and profitability.

Pinches, Mingo, and Caruthers (1973) and Pinches, Eubank, Mingo, and Caruthers (1975)
carry on further worked on this subject and categorized the financial ratios in seven factors
that include receivable turnover, capital turnover, short-term liquidity, return on investment,
inventory turnover, financial leverage and cash position.

Libby (1975) also studies the division of financial ratios and condenses that division from
seven to five. Five divisions include liquidity, activity, cash position, profitability and assets
balance. Johnson (1979) further studies the research of Pinches (1973) and added another
factor that is decomposition measure into seven factors. Twelve different factors or division
of financial ratios are presented in five different studies. On the basis of five published studies
assortment of financial ratios are very time consuming because the results of published studies
were very diverse.

Chen and Shimerda (1981) deeply examined five published studies and find out that some of
the twelve factors that has been presented in the studies has same and simply name is
changed. Therefore, twelve factors are grouped into seven factors. Seven factors are cash
position, financial leverage, inventory turnover, short-term liquidity, return on investment,
receivable turnover and capital turnover.

Gombola and Ketz (1983) found that the fund and income statement are produced for
different purpose and profitability ratios did not has the information that cash flow ratios
provide. In other words, both ratios gave important as well as different information from one
and other.

25
 CHAPTER-03
3.1 RESEARCH METHODOLOGY

Research methodology is a methodology for collecting all sorts of information and data
pertaining to the subject in question. The objective is to examine all the issues involved and
conduct a situational analysis. The methodology includes the overall research design,
sampling, procedure, and fieldwork done. The methodology used in the study consisted of a
sample survey using both primary and secondary data. The primary data has been collected
with the questionnaire as well as personal observation book, and magazine; journals have
been referred for secondary data. The questionnaire has been drafted and presented by the
researcher himself.

DEFINITION OF RESEARCH METHODOLOGY

“The process used to collect information and data for making business decisions. The
methodology may include publication research, interview, survey, and other research
techniques, and could include both present and historical information.”
In simple terms methodology, can be defined as it is used to give a clear-cut idea of what the
researcher is carrying out his or her research. To plan at the right point in time and advance
the research work methodology makes the right platform for the researcher to map out the
research work in relevance to make solid plans.

More methodology guides the researcher to involve and to believe in his or her field of
inquiry. In most situations the aim of the research and the research topic won’t be the same at
all times it varies from its objectives and flow of the research but by adopting a suitable
methodology this can be achieved.

On the other hand, from the methodology, the internal environment constitutes understanding
and identifying the right type of research, strategy, philosophy, time horizon, and approaches,
followed by the right procedures and techniques based on his or her research work. On the
other hand, the research methodology acts as the nerve center because the entire research is
bounded by it, and to perform good research work, the internal and external environment must
follow the right methodology process.
26
Types of Research

 Descriptive Research

 Exploratory Research

RESEARCH DESIGN

Research design is a framework or plan to be used as a guide in collecting and analyzing data.
It is a blueprint that is followed in completing a study. The research design may be
exploratory or descriptive in nature.

This project is based on descriptive research design. The objective of the descriptive research
is used for frequencies, averages and other statistical calculations. Qualitative research often
has the aim of description and researchers may follow-up with examinations of why the
observations exist and what the implications of the findings are.

3.2 SCOPE OF STUDY: -

While studying the aspect of the TCS realized it is a great effort by the TCS to serve the
people of India and the Indian market with their products & services. Because in India it is
very difficult to do such kind of business because of different policies, corruption, politics,
and most importantly the taste of the consumer. Instead of such difficulties, TCS is in the 2nd
position among the top IT companies in the world.

The scope of the study is identified after and during the study is conducted. The main scope of
the study is to put into practical the theoretical aspect of the study into real life work
experience.
Using ratio analysis, firms past, present and future performance is analyzed and this study can
be divided into short term analysis and long-term analysis.

The scope covers the opportunity realized and experience gained of actually calculating ratios

27
on the true facts and figures of the company. The company's performance is observed for a
period of 5 years through Ratio analysis.

28
 CHAPTER-04

DATA COLLECTION & ITS INSTRUMENT

4.1 DATA COLLECTION: -

Before we define what is data collection, it’s essential to ask the question, “What is data?”
The abridged answer is, data in various kinds of information formatted in a particular way.
Therefore, data collection is the process of gathering, measuring, and analyzing accurate data
from a variety of relevant sources to find answers to research problems, answer questions,
evaluate outcomes, and forecast trends and probabilities.

Knowledge is power, information is knowledge, and data is information in digitized form, at

least as defined in IT. Hence, data is power. But before you can leverage that data into a
successful strategy for your organization or business, you need to gather it. That’s your first
step.

So, to help you get the process started, we shine a spotlight on data collection. What exactly is
it? Believe it or not, it’s more than just doing a Google search!

Collection of data is done by different sources, i.e. –

PRIMARY DATA

As the name implies, this is original, first-hand data collected by the data researchers. This
process is the initial information-gathering step, performed before anyone carries out any
further or related research. Primary data results are highly accurate provided the researcher
collects the information. However, there’s a downside, as first-hand research is potentially
time-consuming and expensive

SECONDARY DATA

Secondary data is collected from various sources like – websites, Journals, Reports,
Accounting Books (Published by business organizations), etc.

Secondary data is data that is not collected from the primary source, which means Secondary
data is the data that has been already collected by and is readily available from other sources.
Such data are cheaper and more quickly obtainable than the primary data and may be
available when primary data cannot be obtained at all.

So, for this type of research report, we use Secondary Data, because, this type of data is
29
easily available on websites.

30
www.moneycontrol.com

www.economicstime.com

are the websites that are used for the collection of data.

4.2 DATA COLLECTION INSTRUMENTS

DATA COLLECTION INSTRUMENTS refers to the instruments/tools used to gather data,

such as a paper questionnaire or a system for computer-assisted interviews (in case of
primary data) and financial statements, Profit & Loss Accounts, and accounting books of
a company (in case of secondary data).

FINANCIAL STATEMENTM OF TATA CONSULTANCY SERVICES

31
32
33
PROFIT & LOSS ACCOUNT OF TATA CONSULTANCY SERVICES

34
35
CAPITAL STRUCTURE OF TATA CONSULTANCY SERVICES

36
 CHAPTER-05

DATA ANALYSIS AND INTERPRETATION

1. NET PROFIT RATIO: -

also referred to as the net profit margin ratio. Profit margin is a measure of profitability. It is a
profitability ratio that measures the company’s profits to the total amount of money brought
into the business.

NET PROFIT RATIO = NET PROFIT*100

NET SALE

YEARS NET PROFIT NET SALE RATIO

2018 31,931 97,356 32.79%
2019 40,705 1,23,170 33.04%
2020 41,991 1,31,306 31.98%
2021 42,120 1,35,963 30.98%
2022 49,723 1,60,341 31.01%

INTERPRETATION

Net Profit Ratio also referred to as the Net Profit Margin Ratio, is a profitability ratio that
measures the company's profits to the total amount of money brought into the business.

A good margin will vary considerably by industry and size of business, but as a general rule
of thumb, a 10% net profit margin is considered average, a 20% margin is considered high (or
“good”), and a 5% margin is low. So, in TATA CONSULTANCY SERVICES, we found
that the net profit margin ratio is good.

GRAPHICAL REPRESENTATION
37
 NET PROFIT RATIO
NET PROFIT RATIO

33.04
32.79

31.98

30.98 31.01

NET PROFIT RATIO

2018 2019 2020 2021 2022

2. RETURN ON SHAREHOLDERS’ FUND

It is also known as Return on proprietor’s fund OR return on net worth

RETURN ON SHAREHOLDERS’ INVESTMENT =

NET PROFIT (AFTER INTEREST & TAX) * 100

SHAREHOLDER’S FUND

YEARS NET SHAREHOLDERS RATIO

PROFIT ’ FUND
2018 25,241 75,866 33.27%
2019 30,065 78,898 38.10%
2020 33,260 74,368 44.72%
2021 30,960 74,794 41.39%
2022 38,187 77,173 49.48%

38
INTERPRETATION

The return on shareholders' investment ratio shows how much money is returned to the
owners as a percentage of the money they have invested or retained in the company. It is one
of the calculations used to measure profitability.

A return of between 15-20% is considered good. ROSI is also used when evaluating stocks, as
well as other financial ratios. In TATA CONSULTANCY SERVICES, we found that ROSI
Ratio has a highly positive change.

GRAPHICAL INTERPRETATION

RETURN ON SHAREHOLDERS' INVESTMENT

RETURN ON SHAREHOLDERS' INVESTMENT

49.48
44.72
41.39
38.1
33.27

RETURN ON SHAREHOLDERS' INVESTMENT

2018 2019 2020 2021 2022

39
3. GROSS CAPITAL EMPLOYED =

NET PROFIT (BEFORE TAX & INTREST) * 100

TOTAL ASSETS

YEAR NET TOTAL ASSETS RATIO

S PROFIT

2018 31,931 91,056 35.07%

2019 40,705 99,500 40.91%

2020 41,991 1,04,975 40%

2021 42,120 1,09,381 38.51%

2022 49,723 1,21,263 41%

INTERPRETATION

The term Return on Gross Capital Employed (ROGCE) refers to a financial ratio that can be
used to assess a company's profitability and capital efficiency. In other words, this ratio can
help to understand how well a company is generating profits from its capital as it is put to use.

The calculation of ROCE tells you the amount of profit a company is generating per $1 of
capital employed. The more profit per $1 a company can generate, the better. Thus, a higher
ROCE indicates stronger profitability across company comparisons. So, the analysis shows
that TATA CONSULTANCY SERVICES has indicated stronger profitability.

40
 GRAPHICAL REPRESENTATION

GROSS CAPITAL EMPLOYED

GROSS CAPITAL EMPLOYED

40.91 41
40
38.51

35.07

GROSS CAPITAL EMPLOYED

2018 2019 2020 2021 2022

4. NET CAPITAL EMPLOYED =

NET PROFIT (BEFORE TAX & INTEREST) * 100

CAPITAL EMPLOYED

CAPITAL EMPLOYED = TOTAL ASSETS – CURRENT

LIABILITIES

YEAR NET CAPITAL RATIO

S PROFIT EMPLOYED

2018 31,931 83,362 38.30%

2019 40,705 80,856 50.34%

2020 41,991 80,994 51.87%

41
2021 42,120 80,604 52.26%

2022 49,723 76,998 64.58%

INTERPRETATION

Capital employed is derived by subtracting current liabilities from total assets; or

alternatively by adding noncurrent liabilities to owners' equity. Net Capital Employed
tells you how much has been put to use in investment. Return on Net Capital Employed
(RONCE) is a common financial analysis metric to determine the return on investment.
In TATA CONSULTANCY SERVICES, the RONCE is in a highly positive volatile
form.

GRAPHICAL INTERPRETATION

NET CAPITAL EMPLOYED

NET CAPITAL EMPLOYED

64.58

50.34 51.87 52.26

38.3

NET CAPITAL EMPLOYED

2018 2019 2020 2021 2022

5. RETURN ON EQUITY CAPITAL

42
The return on shareholders' equity ratio shows how much money is
returned to the owners as a percentage of the money they have invested or
retained in the company. It is one of five calculations used to measure
profitability.

RETURN ON EQUITY CAPITAL =

NET PROFIT (AFTER TAX & INTEREST) * 100

PAID- UP EQUITY CAPITAL

YEARS NET PAID-UP RATIO

PROFIT EQUITY
CAPITAL
2018 25,241 191.43 13,185.5
%

2019 30,065 375.24 8,012.21

%
2020 33,260 375.24 8,863.66
%
2021 30,960 369.91 8,369.60
%

2022 38,187 365.91 10,433.17

%

INTERPRETATION

Return on equity (ROE) is the measure of a company's net income divided by its
shareholders' equity. ROE is a gauge of a corporation's profitability and how efficiently
it generates those profits.

The higher the ROE, the better a company is at converting its equity financing into
profits. In TATA CONSULTANCY SERVICES the ROE is higher.

43
GRAPHICAL REPRESENTATION

RETURN ON EQUITY CAPITAL

RETURN ON EQUITY CAPITAL

13185.5

10433.17
8863.66 8369.6
8012.21

RETURN ON EQUITY CAPITAL

2018 2019 2020 2021 2022

6. TRADE RECEIVABLES TURNOVER RATIO =

NET SALE
TRADE RECEIVABLES

YEAR NET TRADE RATIO

S SALE RECEIVAB
LES
2018 97,356 18,882 5.16:1
2019 1,23,170 24,029 5.13:1

2020 1,31,306 28,660 4.58:1

2021 1,35,963 25,222 5.39:1

2022 1,60,341 29,852 5.37:1

INTERPRETATION

44
 The accounts receivable turnover ratio, or receivables turnover ratio, is used in business
accounting to quantify how well companies are managing the credit that they extend to
their customers by evaluating how long it takes to collect the outstanding debt
throughout the accounting period.

In TATA CONSULTANCY SERVICES the receivables turnover ratio is mostly the

same.

GRAPHICAL REPRESENTATION

TRADE RECEIVABLKES TURNOVER

RATIO
TRADE RECEIVABLKES TURNOVER RATIO

5.39 5.37
5.16 5.13

4.58

TRADE RECEIVABLKES TURNOVER RATIO

2018 2019 2020 2021 2022

7. AVERAGE COLLECTION PERIOD =

TRADE RECEIVABLES * 12 MONTHS

45
 SALES

YEARS TRADE SALE MONT

RECEIVAB HS
LES
2018 18,882 97,356 2.33
2019 24,029 1,23,170 2.34

2020 28,660 1,31,306 2.62

2021 25,222 1,35,963 2.22

2022 29,852 1,60,341 2.23

INTERPRETATION

The average collection period is the average number of days it takes a business to
collect and convert its accounts receivable into cash. The average collection period is
also used to calculate another liquidity measure, the receivables turnover ratio. A
shorter average collection period (60 days or less) is generally preferable and means a
business has higher liquidity. In TATA CONSULTANCY SERVICES, the Average

Collection period is more than 60 days.

46
GRAPHICAL REPRESENTATION

AVERAGE COLLECTION PERIOD

AVERAGE COLLECTION PERIOD

2.62

2.33 2.34
2.22 2.23

AVERAGE COLLECTION PERIOD

2018 2019 2020 2021 2022

8. TOTAL ASSETS TURNOVER RATIO =

NET SALES
TOTAL ASSETS

YEARS NET TOTAL RATIO

SALE ASSETS
2018 97,356 91,056 1.07:1
2019 1,23,170 99,500 1.24:1

2020 1,31,306 1,04,975 1.25:1

2021 1,35,963 1,09,381 1.24:1

2022 1,60,341 1,21,263 1.32:1

47
INTERPRETATION

The total assets turnover ratio takes into account both fixed as well as current assets to
measure the overall efficiency in the generation of revenue with asset utilization. In
simple language, the ratio measures the efficiency of how well a company uses assets
to produce sales.

A higher ratio is favorable, as it indicates a more efficient use of assets. Conversely, a

lower ratio indicates the company is not using its assets as efficiently. In TATA
CONSULTANCY SERVICES the

GRAPHICAL REPRESENTATION

TOTAL ASSETS TURNOVER

RATIO
TOTAL ASSETS TURNOVER RATIO

1.32
1.24 1.25 1.24
1.07

TOTAL ASSETS TURNOVER RATIO

2018 2019 2020 2021 2022

48
9. FIXED ASSETS TURNOVER RATIO =

NET SALES
FIXED ASSETS

YEAR NET FIXED RATIO

S SALE ASSETS
2018 97,356 10,678 9.12:1
2019 1,23,170 10,495 11.74:1

2020 1,31,306 16,903 7.77:1

2021 1,35,963 16,920 8.03:1

2022 1,60,341 17,670 9.07:1

INTERPRETATION

The fixed assets turnover ratio measures how efficiently a company uses its fixed
assets to generate revenue. Fixed assets involve huge capital invested in them, which
makes it crucial to be optimally utilized for a longer time Interpretation. The fixed asset
turnover ratio is the ratio of net sales to net fixed assets.

A high ratio indicates that the business is: Doing an effective job of generating sales
with a relatively small amount of fixed assets. A low ratio indicates that a business: Is
overinvested in fixed assets. In TATA CONSULTANCY SERVICES, it is in good
condition with high ratio.

GRAPHICAL REPRESENTATION

49
 RATIO
FIXED ASSETS TURNOVER RATIO

11.74

9.12 9.07
7.77 8.03

10. CURRENT ASSETS TURNOVER RATIO =

FIXED ASSETS TURNOVER RATIO

2018 2019 2020 2021 2022NET

SALES
CURRENT ASSETS

YEAR NET CURRENT RATIO

S SALE ASSETS
2018 97,356 68,222 1.43:1
2019 1,23,170 79,032 1.56:1

2020 1,31,306 79,194 1.66:1

2021 1,35,963 83,160 1.63:1

2022 1,60,341 94,192 1.70:1

50
INTERPRETATION

The Current asset turnover ratio can be used as an indicator of the efficiency with
which a company is using its current assets (cash, inventory, accounts receivable, etc.)
to generate revenue. The higher the current asset turnover ratio, the more efficient a
company is at generating revenue from its assets. In TATA CONSULTANCY

SERVICES CAT RATIO IS increasing year by year.

GRAPHICAL REPRESENTATION

CURRENT ASSETS TURNOVER

RATIO
CURRENT ASSETS TURNOVER RATIO

1.7
1.66
1.63
1.56

1.43

CURRENT ASSETS TURNOVER

RATIO
2018 2019 2020 2021 2022

51
11. NET ASSETS TURNOVER OR CAPITAL TURNOVER RATIO=

NET SALES
NET ASSETS OR CAPITAL EMPLOYED

YEAR NET NET RATIO

S SALE ASSETS
2018 97,356 83,362 1.17:1
2019 1,23,170 80,856 1..52:1

2020 1,31,306 80,894 1.621

2021 1,35,963 80,604 1.69:1

2022 1,60,341 76,998 2.08:1

INTERPRETATION

Capital turnover (also called equity turnover) is a measure that calculates how
efficiently the company is managing the capital invested by the shareholders in the
company to generate revenues. If the ratio is high, it shows that the company efficiently
utilizes the amount of capital invested. In contrast, if the ratio is low, it indicates that
the company is not managing its capital investment efficiently to generate the required
revenue, i.e., the company has to invest the funds appropriately to achieve the sales
target by utilizing the owner’s funds company. In TATA CONSULTANCY
SERVICES NAT Ratio is increasing year by year, that’s mean the company efficiently
utilizes the amount of capital invested.

52
 GRAPHICAL REPRESENTATION

NET ASSETS TURNOVER OR CAPITAL

TURNOVER RATIO
NET ASSETS TURNOVER OR CAPITAL TURNOVER RATIO

2.08
1.62 1.69
1.52
1.17

NET ASSETS TURNOVER OR CAPITAL TURNOVER RATIO

2018 2019 2020 2021 2022

12. WORKING CAPITAL TURNOVER RATIO =

NET SALES
WORKING CAPITAL

WORKING CAPITAL =
CURRENT ASSETS -CURRENT LIABILITES

YEAR NET NET RATIO

S SALE ASSETS
2018 97,356 54,164 1.79:1
2019 1,23,170 60,136 2.05:1

2020 1,31,306 55,168 2.38:1

2021 1,35,963 54,635 2.49:1

2022 1,60,341 56,291 2.85:1

53
INTERPRETATION

Working capital ratio measures the company's efficiency in using its working capital to
generate revenue for the business. It also indicates the relation between liquidity and
profitability of the business. Generally, a high working capital turnover ratio is better.
A low ratio indicates inefficient utilization of working capital. The ratio should be
carefully interpreted because a very high ratio may be a sign of insufficient working
capital. And in TATA CONSULTANCY SERVICES it is well condition.

GRAPHICAL REPRESENTATION

WORKING CAPITAL TURNOVER

RATIO
WORKING CAPITAL TURNOVER RATIO

2.85
2.5 2.38 2.49

1.79

WORKING CAPITAL TURNOVER RATIO

2018 2019 2020 2021 2022

54
13. CURRENT RATIO =

CURRENT ASSETS
CURRENT LIABILITIES

The ideal Ratio is 2:1

YEAR CURREN CURRENT RATI

S TASSETS LIABILITI O
ES
2018 68,222 14,058 4.9:1
2019 79,032 18,896 4.2:1

2020 79,194 24,026 3.3:1

2021 83,160 28,525 2.9:1

2022 94,192 37,901 2.5:1

INTERPRETATION

The current ratio is a liquidity ratio that measures a company's ability to pay short-term
obligations or those due within one year. It tells investors and analysts how a company
can maximize the current assets on its balance sheet to satisfy its current debt and other
payables. It must be analyzed in the context of the industry the Organization primarily
relates to. The underlying trend of the ratio must also be monitored over a period of
time.

In TATA CONSULTANCY SERVICES, I analyze that the current ratios of different

5 years represent positive change, which results that the current ratio is being very

close to the ideal current ratio of 2:1 which was a good sign for the organization.

55
 GRAPHICAL REPRESENTATION

CURRENT
RATIO
CURRENT RATIO

4.9
4.2
3.3
2.9
2.5

CURRENT
RATIO
2018 2019 2020 2021 2022

14. LIQUID OR QUICK OR ACID TEST RATIO =

LIQUID ASSETS
CURRENT LIABILITIES

The ideal Ratio is 1:1

LIQUID ASSETS = CURRENT ASSETS – INVENTORY

YEAR LIQUID CURRENT RATI

S ASSETS LIABILITI O
ES
2018 68,197 14,058 4.85:1
2019 79,022 18,896 4.18:1

2020 79,189 24,026 3.29:1

2021 83,153 28,525 2.82:1

2022 94,173 5637,901 2.48:1

 INTERPRETATION

The quick ratio measures a company's capacity to pay its current liabilities without
needing to sell its inventory or obtain additional financing. The quick ratio is
considered a more conservative measure than the current ratio, which includes all
current assets as coverage for current liabilities.
As we have seen in TATA CONSULTANCY SERVICES, the liquid ratios of
different 5 years represent positive change, which results that the liquid ratio being
close enough to the ideal condition 1:1 and it indicates that the organization maintains
its liquidity for paying Short-term debts.

GRAPHICAL REPRESENTATION

LIQUID OR QUICK OR ACID TEST RATIO

LIQUID OR QUICK OR ACID TEST RATIO

4.85
4.18
3.29
2.92
2.48

LIQUID OR QUICK OR ACID TEST RATIO

2018 2019 2020 2021 2022

15. CASH RATIO OR CASH COVERAGE RATIO =

57
 FINANCIAL ASSETS
TOTAL CURRENT LIABILITIES

The ideal Cash Ratio is greater than 1

YEAR FINANCI TOTAL RATI

S AL CURRENT O
ASSETS LIABILITI
ES
2018 38,560 14,058 2.74
2019 37,180 18,896 1.97

2020 30,510 24,026 1.27

2021 31,456 28,525 1.10

2022 42,954 37,901 1.13

INTERPRETATION

The cash ratio is a measurement of a company's liquidity. It specifically calculates the

ratio of a company's total cash and cash equivalents to its current liabilities. The metric
evaluates a company's ability to repay its short-term debt with cash or near-cash
resources, such as easily marketable securities. This information is useful to creditors
when they decide how much money, if any, they would be willing to loan a company.

As we have seen in the financial analysis of TATA CONSULTANCY SERVICES, we

realize that they were in fine condition. Because all ratios of different years are above
of the ideal ratio of 1.

58
 Graphical Representation

CASH RATIO OR CASH COVERAGE

RATIO
CASH RATIO OR CASH COVERAGE RATIO

2.74

1.97

1.27 1.13
1.1

CASH RATIO OR CASH COVERAGE RATIO

2018 2019 2020 2021 2022

16. DEBT TO TOTAL CAPITAL RATIO =

LONG-TERM DEBT
TOTAL CAPITAL OR CAPITAL EMPLOYED

YEARS LONG- CAPITAL RATIO

TERM EMPLOYED
DEBT
2018 1,132 76,998 0.0147:1

2019 1,706 80,604 0.0211:1

2020 6,581 80,949 0.0812:1

2021 6,602 80,856 0.0749:1

2022 6,189 83,362 0.0742:1

59
INTERPRETATION

Every business uses assets to generate sales and profits, and capitalization
refers to the amount of money raised to purchase assets. A business can
raise money by issuing debt to creditors or by selling stock to
shareholders. You can see the amount of capital raised as reported in the
long-term debt and stockholders' equity accounts on a company's balance
sheet.

A higher ratio result means that a company is more highly leveraged,

which carries a higher risk of insolvency. TATA CONSULTANCY
SERVICES has low ratio result mean that it carries a low risk of
insolvency.

GRAPHICAL REPRESENTATION

DEBT TO TOTAL CAPITAL

RATIO
DEBT TO TOTAL CAPITAL RATIO

0.0812
0.0749 0.0742

0.0211
0.0147

DEBT TO TOTAL CAPITAL

RATIO
201 201 202 202 202
8 9 0 1 2

60
17. EQUITY RATIO =

SHAREHOLDER’S FUND
CAPITAL EMPLOYED

YEAR SHAREH CAPITAL RATI

S OLDERS EMPLOYED O
’ FUND

2018 75,866 76,998 0.0147:

1
2019 78,898 80,604 0.0211:
1
2020 74,368 80,949 0.0812:
1

2021 74,794 80,856 0.0749:

1
2022 77,173 83,362 0.0742:
1
INTERPRETATION

The equity ratio is the solvency ratio that helps measure the value of the assets financed
using the owner's equity. Generally, a business wants to shoot for an equity ratio of
about 0.5, or 50%, which indicates that there's more outright ownership in the business
than capital Employed. But in TAT CONSULTANCY SERVICES has equity ratio
more than 0.5 or 50% that gives the positive review

about company.

61
GRAPHICAL REPRESENTATION

EQUITY
RATIO
EQUITY RATIO

0.985
0.978

0.925 0.926
0.918

EQUITY RATIO

2018 2019 2020 2021 2022

18. DEBT EQUITY RATIO =

LONG- TERM DEBT

SHAREHOLDER’S FUND

YEAR LONG- SHAREH RATI

S TERM OLDERS O
DEBT ’ FUND

2018 1,132 75,866 0.0149:

1
2019 1,706 78,898 0.0216:
1
2020 6,581 74,368 0.0884:
1

2021 6,062 74,794 0.0810:

1
2022 6,189 77,173 0.0801:
62 1
INTERPRETATION

The debt-to-equity ratio helps companies analyze its financial strategy and helps them
know if the company is using debt financing or equity financing for running their
operations. A high debt-to-equity ratio indicates that a company is borrowing more
capital from the market to fund its operations, while a low debt-to-equity ratio means
that the company is utilizing its assets and borrowing less money from the market. The
debt equity ratio of TATA CONSULTANCY SERVICES is very low.

GRAPHICAL REPRESENTATION

DEBT EQUITY
RATIO
DEBT EQUITY RATIO

0.0884
0.081 0.0801

0.0216
0.0149

DEBT EQUITY RATIO

2018 2019 2020 2021 2022

63
19. FIXED ASSETS RATIO =

NET FIXED ASSETS

NET WORTH

NET WORTH = SHAREHOLDERS’FUND + LONG-TERM

LIABILITIES

YEAR FIXED NET RATIO

S ASSETS WORTH
2018 10,678 76,998 0.138:1

2019 10,495 80,604 0.130:1

2020 16,903 80,949 0.208:1

2021 16,920 80,856 0.029:1

2022 17,670 83,362 0.211:1

INTERPRETATION
64
The fixed-assets- to long-term-liabilities ratio is a way of measuring the solvency of a
company. A company's long-term debts are often secured with fixed assets, which is
why creditors are interested in this ratio.

Although a ratio result that is considered indicative of a "healthy" company varies by

industry, generally speaking, a ratio result of less than 0.5 is considered good, than

FATTL Ratio of TATA CONSULTANCY SERVICES is healthy ratio .

GRAPHICAL REPRESENTATION

FIXED ASSETS RATIO

FIXED ASSETS RATIO

0.208 0.209 0.211

0.138 0.13

FIXED ASSETS RATIO

2018 2019 2020 2021 2022

20. PROPRIETO RATIO =

SHAREHOLDERS’ FUND
TOTAL ASSETS

65
YEAR SHAREH TOTAL RATIO
S OLDERS ASSETS
’ FUND

2018 75,866 91,056 0.83:1

2019 78,898 99,500 0.79:1

2020 74,368 1,04,975 0.70:1

2021 74,794 1,09,381 0.68:1

2022 77,173 1,21,263 0.63:1

66
INTERPRETATION

Proprietary ratio is a type of solvency ratio that is useful for determining the amount or
contribution of shareholders or proprietors towards the total assets of the business.

A high proprietary ratio indicates that a business is in a strong position and provides
relief to creditors, while a low proprietary ratio shows the dependence of the company
on the debt financing in order to run its business. Proprietary Ratio of TATA

CONSULTANCY SERVICES is strong. But during the period it's down.

GRAPHICAL REPRESENTATION

PROPRIETORY
RATIO
PROPRIETORY RATIO

83.31 79.29
70.84 68.37 63.64

PROPRIETORY RATIO

2018 2019 2020 2021 2022

67
 FINDING
➤ As we see that the current ratio of the company is not that must satisfactory in the
past 5 years, but the company is improving and moving towards the idle ratio. But in
each year Current Assets are more than Current liabilities which shows the company in
a position of paying its liabilities.

➤ Ideal quick ratio is 1:1 but company ratio is not on to that so company increase
their cash balance & other quick assets in order to increase their liquidity position. But
the company is moving towards the idle ratio.

➤ Company's cash ratio is good but it is continuously declining. The company

needs to find reason of such decline.

➤ Net profit are volatile during the period of study, which indicates that firm's
efficient management in manufacturing and trading operations.

➤ The Return on Investment has been stable in the last five years as it varies
between 30% - 50% respectively in all the years. This highlights consistency in
investment returns.

➤ In the past five years return on Gross Capital Employed has validity with positive
rate. This is positive sign about the performance of TCS.

➤ Return on Net Capital Employed has positive change with High rate.

➤In the year 2018 debt equity ratio is 0.0149 (1.49%) but it is increased to 0.0801
(8.01%) in 2022 and increased every year. It shows that the company is losing its
condition.
➤ Equity ratio is decreasing every year. It indicates ratio 0.985 in 2018 and 0.926 in
2022.

➤Fixed Assets Ratio is 0.138 in 2018 but also 0.211 in 2022. It is show that TCS
increases use of capital to create Fixed Assets.

➤ Proprietary Ratio is decreasing that results it turns from 0.83% (in 2018) to
0.63% (in 2022)

➤Debt to total capital Ratio is increased by 0.595 between 2018 and 2022
68
➤Trade Receivables turnover Ratio is increased by 0.21 points during the period of
2018 - 2022.

➤Total Assets turnover Ratio is 1.07 in 2018 and 1.32 in 2022. It represents
increasement.

➤Fixed Assets turnover Ratio is decreasing by 0.5 points.

➤Current Assets turnover Ratio is 1.43 (14%) in 2018 and increased to 1.70
(17%) in 2022.

➤Capital turnover Ratio is 1.17 in 2018 and 2.08 in 2022.

69
 CONCLUSION

In this project I Calculate some ratio, this ratio is useful for interpretation of company's
financial position with this study. Financial Analysis plays a very important role in
providing facts and figures for the decision makers. In the same way ratios, will act
analysis kit in the hands of financial analyst, these ratios will help is and in answering
the basic question like why, how what of these statements.

Now a day's financial analysis in very much in consideration for decision making. in
deciding what to do and what not to do are required to analyze the data as per their
requirements. Thus, in my project I try brief outline of ratio analysis is that how to
analyze the facts and figures given in the financial statements.

Throughout my project, I have analyzed Organization's financial position and pros and
cons of the situations and I have also interpreted the data and interpreted the facts and
figures with accuracy. Based on the analysis and interpretation I tried to give my
findings as per my best knowledge.

This project definitely guides the company for formulating the financial strategies in
the future. Finally, project really helps me in knowing the practical things of the
corporate world. Really, I enjoyed this project work in its real spirit.

70
 IMPLICATION OF STUDY

The importance of the study is to find out how it will be helpful for the investors who
trade doesn’t make much analysis before investing in a particular stock when compared
to other nations investors make a 90% loss, only 10% make a profit because they lack
in analyzing a stock.

The main aim of this study is to help the investors to analyze the stocks both on the
basis of fundamentally and technically which provides an opportunity to know about
the position of the stocks for both long and the short period of time. Thus, by analyzing
the stock fundamentally and technically, provides an opportunity to make a profit when
compared to others who don’t Investment is for the long term, anyone should not rely
on intra-day trading for regular income or wealth appreciation.

71
 SUGGESTION/ RECOMANDATION

1. The company should keep a check on its Current liabilities in order to make the
current Ratio an ideal one.

2. The company should strive to keep a check at its Quick Ratio and Current Ratio as it
is declining when compared to company's competitors. This can be done by controlling
Current liabilities.

3. The company's profitability is stable on individual level as well as industry wide.

It is suggested to ensure maintenance of this stability or profitability. Also, the
company should take steps to further improve profitability.

4. Solvency Ratios are low as compare to other companies in the industry. The
company should maintain it so as to retain its shareholders in the long run.

72
 LIMITATIONS

1) Ratio analysis is used on the basis of financial statements. Number of limitations of

financial statements may affect the accuracy or quality of ratio analysis.

2) Ratio analysis heavily depends on quantitative facts and figures and it ignores
qualitative data. Therefore, this may limit accuracy.

3) Ratio analysis is a poor measure of a firm's performance due to lack of adequate

standards laid for ideal ratios.

4) It is not a substitute for analysis of financial statements. It is merely used as a tool

for measuring the performance of business activities.

5) Ratio analysis clearly has some latitude for window dressing.

6) It makes comparison of ratios between companies which is questionable due to

differences in methods of accounting operation and financing.

7) Ratio analysis does not consider the change in price level, as such, these ratios will
not help in drawing meaningful inferences.

73
 BIBLIOGRAPHY

WEBSITE:

 www.google.com
 www.moneycontrol.com
 www.tcs.com
 www.equitymaster.com
 economictimes.indiatimes.com

BOOKS

 Dr. S.M. Shukla, Accountancy, Sahitya Bhavan Publishing house, Agra

 T.S. GREWAL, Analysis of financial statements, Sultan Chand & Sons Pvt Ltd
Educational publisher, New Delhi

74