RATIO ANALYSIS

1. Liquidity ratios –

a) Current Ratio –

As we can see, the current ratio from 2017 to 2022 is above 2:1
(It ranges between 2.32 to 4.20) which shows that the company may not have any
short-term financial obligations as they have adequate number of assets as to
liabilities.

b) Quick Ratio / Acid Test Ratio –

As per the calculations, the Quick ratio from the year 2017 to 2022 is above its
standard requirement that is 1:1 (ratio ranges between 2.31 to 4.16).
As the Quick ratio is above 1:1, the company has good ability to pay off its short-
term liabilities as they are in good position of short-term liquidity.

c) Cash Ratio –

The cash ratio from 2017 to 2022 is between 0.41 to 0.99.

The highest cash ratio was in the year 2021 that was 0.99.
The lowest cash ratio was in the year 2018 that was 0.33.
As per the last year, the cash ratio was 0.43, which is lower than 1 which indicates
that the company was not having adequate level of cash to pay off their short term
liabilities

2. Leverage Financial ratios –

a) Debt Ratio –

As we can see that the company has tried to maintain its debt ratio at 1
continuously from the year 2017 to 2022, there were major changes in the debt of
company

b) Debt to Equity Ratio –

As per the industry standards the debt to equity ratio should be around 2 to 2.5,
but our company’s debt ratio ranges between 1.46 to 1.64 and it’s not more risky
as the company has its future plans where they will pull up the ratio up to 2.

C) Interest Coverage Ratio –

From the year 2017 to 2022 Wipro had Interest Coverage Ratio between 15.74 and
went up to 31.36 which show that company is in good position to clear out all its
outstanding debts and in future it won’t be Non-Performing Asset for any lender and will
create good brand image in the market.
3. Profitability Ratios –

a) Operating Margin Ratio –

Wipro, while creating its strong hold on interest coverage (loan Payoff) and maintaining
good brand image and brand value in market, the company was able to generate operating
margin ratio that ranges from 19% to 24%.

As per the Conference call details Wipro has signed 11 business deals with Multi-National
Companies with Contract Value of USD 725 Million, hence Wipro will be in the position to
gain more Profit margins and hence will benefit the investors.

c) Return on Assets Ratio –

As per the Industry Standards the return on assets should be between 5% to 20% and
Wipro is able to generate ratio between 0.11 to 0.13 which is decent ratio.

In future there are good chances that the ratio will go above 15% to 22% as the company
has won Project where it will build an end to end fully automated warehouse in Europe.

c) Return on Equity Ratio –

From the year 2017 to 2020, Wipro had generated Return on equity ratio of 0.16 to 0.20,
as we can see the overall return on equity is growing year by year which shows good sign
for investment.

As per the details of Conference calls of October 2022 Acquisition remained core part of
their business expansion strategy and returned around 50% of their Net Income to the
Shareholders.

4) Efficiency Ratio -

a) Assets Turnover Ratio –

If we see from the year 2018 to 2022 Wipro was generating an Assets turnover ratio of
0.54 to 0.84, which is directly double as per industry standards , this gives us an proper
picture that company is efficiently using its assets to gain more returns and to grow in
future with consistency
b) Inventory Turnover Ratio –

The company is in position where it is growing its Inventory turnover ratio from 0.13 to
0.18, if we see from the year 2018 to 2022 we can see stable growth in the inventory ratio
(that means the company from year 2018 went from 13x to 18x of inventory turnover)

c) Receivable turnover Ratio –

Wipro has created such business relations where it is able to generate receivable turnover
ratio between 3 to 4. If we see from year 2018 to 2021 consistently they were able to
generate ratio of 3 and in the year 2022 the ratio went to 4 (that means company has
made such efficient business relations, where they are not facing any issues related to
receiving of payments)

E } Valuation Ratio –

a) Price to earnings ratio –

From the year 2017 to 2022 Price earnings ratio showed some positive results as it went
from 28.09 to 16.49, as per the standards PE ratio should be below 20, from the year 2021
PE ratio is showing some positive results and we can invest in it as the share price is less
than the earnings it is generating.

b) Sales and Margin ratio -