Financial Performance of Wipro Ltd. Bangalore.: Tinsu Johnson Reg. No: 190031000711

FINANCIAL PERFORMANCE OF WIPRO Ltd.
BANGALORE.
PROJECT REPORT
Submitted to Mahatma Gandhi University in partial fulfillment
of the requirements for the award of the Degree of
MASTER OF BUSINESS ADMINISTRATION
by
TINSU JOHNSON
Reg. No: 190031000711
Under the guidance of
Dr. V.P VIJAYAMOHAN

Faculty Guide
Accredited by NAAC with ‘A’ Grade

DEPARTMENT OF MANAGEMENT STUDIES
MAR ATHANASIOS COLLEGE FOR ADVANCED STUDIES TIRUVALLA
JUNE 2021
MAR ATHANASIOS COLLEGE
FOR ADVANCED STUDIES
TIRUVALLA
Ph: 0469 2730323 Fax: 0469 2730317 macfast@macfast.org
www.macfast.org
CERTIFICATE
This is to certify that the project report entitled “Financial Performance of Wipro
Ltd.” is a bonafide report of the project work undertaken by Tinsu Johnson, fourth
semester MBA student of our college during a period of 8 weeks commencing from
1st April to 30th May, 2021.
Dr. V.P. Vijayamohan Dr. Sudeep B. Chandramana
Faculty Guide Head, Dept. of management Studies
Rev. Dr. Cherian J. Kottayil University Examine

DECLARATION
I hereby declare that this project report entitled “FINANCIAL

PERFORMANCE OF WIPRO Ltd. BANGALORE.” is a bonafide report of the
study undertaken by me, under the guidance of Dr. V P VIJAYAMOHAN, Department of
Management Studies, MACFAST, Tiruvalla.
I also declare that this project report has not been submitted to any other
University or Institute for the award of any degree or diploma.
Place: Tiruvalla
Date: 31/05/2021 TINSU JOHNSON
ACKNOWLEDGEMENTS
First of all, I express my profound gratitude to the Lord Almighty for the
inspiration and guidance throughout this project work.
My sincere thanks to Principal Rev. Dr. Cherian J Kottayil for allowing me to do

my internship. I also express my sincere thanks and gratitude to Dr.V P
Vijayamohan, project guide and, Dr. Sudeep B Chandramana, Head of
Department of management Studies for their constant encouragement, profound
advice and supervision for the preparation of this report.
My thanks are also due to my beloved parents, siblings and friends whose love and
encouragement has helped me in completing the report.
TINSU JOHNSON
LIST OF TABLES
SI.NO. TITLE OF THE TABLE PAGE NO.
5.1.1 Current Ratio 56
5.1.2 Quick Ratio 57
5.1.3 Absolute Liquidity Ratio 58
5.1.4 Debt –Equity Ratio 60
5.1.5 Proprietary Ratio 61
5.1.6 Fixed Asset to Net Worth Ratio 63
5.1.7 Fixed Asset Turnover Ratio 64
5.1.8 Current Asset Turnover Ratio 65
5.1.9 Working Capital Turnover Ratio 66
5.1.10 Gross Profit Ratio 67
5.1.11 Net Profit Ratio 68
5.1.12 Trend Analysis of Net Profit 69
5.1.13 Estimated Profit From 2021-2022 To 2025-2026 73
5.1.14 Trend Analysis of Net Sales 74
5.1.15 Estimated Sales For 2019-2020 To 2023-2024 77

TABLE OF CONTENTS
CHAPTERS CONTENTS PAGE NO
CHAPTER 1 INTRODUCTION 1
1.1 Background of the study 3

1.2 Statement of the problem 4
1.3 Relevance and scope of the study 4
1.4 Objectives of the study 5
CHAPTER 2 PROFILE OF IT INDUSTRY IN INDIA 6
2.1 Business Process of The Study 6

2.2 Market Demand and Supply-Contribution To GDP- 10
Revenue Generation
2.3 Level and Type of Competition- Firms Operating in The 12
Industry
2.4 Pricing Strategies in The Industry 18
2.5 Prospects and Challenges of The Industry 19
2.6 Key Drivers of The Industry 24
2.7 Company Profile 26
CHAPTER 3 REVIEW OF LITERATURE 29
3.1 Brief theoretical construct related to the problem 30

3.2 An overview of earlier studies 44
3.3 uniqueness of research study 49
CHAPTER 4 METHODOLOGY OF THE STUDY 50
4.1 Research Approach and design 51

4.2 Sources of online data 51
4.3 Data analysis tools 52
4.4 Report structure 53
4.5 Limitation of the study 53
CHAPTER 5 DATA ANALYSIS, INTERPERATION, INFERENCE 54
CHAPTER 6 FINDINGS 87
CHAPTER 7 CONCLUSION 90
BIBLOGRAPHY 92
ANNEXURES 95
CHAPTER 1
INTRODUCTION
1
1 INTRODUCTION
The analysis of financial statements is the process of evaluating the relationship between parts of
the financial statements to obtain a better understanding of the firms’ performance and position.
Financial statements are annual documents prepared by the organization for periodical review on
the progress by the management and deal with the status of investment in the organization and
results achieved during the period under review. Finance is the lifeblood of every business
enterprise. It is one of the basic foundations of all kinds of economic activities. Business needs
money to make more money it is possible only when it is properly managed. The objective of
financial management is the maximization of profit. To achieve this objective, various important
decisions are taken by the manager. Analysis of financial performance is essential for making a
business decision. A subjective measure of how well a firm can use assets from its primary mode
of business and generate revenues. This term is also used as a general measure of a firm's overall
financial health over a given period and can be used to compare similar firms across the same
industry or to compare industries or sectors in aggregation. There are many different ways to
measure financial performance, but all measures should be taken in aggregation. Line items such
as revenue from operations, operating income, or cash flow from operations can be used, as well
as total unit sales. Furthermore, the analyst or investor may wish to look deeper into financial
statements and seek out margin growth rates or any declining debt. The analysis of financial
statements is an important aid to financial analysis. They provide information on how the firm
has performed in the past and what is its current financial position.
This project is done at Wipro Limited. Wipro Limited is a leading global information technology,
consulting, and business process services company. It harnesses the power of cognitive
computing, hyper-automation, robotics, cloud, analytics, and emerging technologies to help our
clients adapt to the digital world and make them successful. A company recognized globally for
its comprehensive portfolio of services, strong commitment to sustainability, and good corporate
citizenship, it has over 160,000 dedicated employees serving clients across six continents.
Together, it discovers ideas and connects the dots to build a better and bold new future. The study
mainly focused on the financial performance of Wipro Limited with special reference to liquidity
position, long-term solvency, and profitability position of the company by using ratio, trend
analysis, and common size statement. These studies also focus on the overall aspect relating to
the performance of Wipro Limited.
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1.1 BACKGROUND OF THE STUDY
Although performance systems can play a key role in communicating, evaluating, and rewarding
the achievement of strategic objectives. One of the primary critics of performance measurement
systems is that they are generally limited to financial indicators, thereby focusing the
organization on past performance and encouraging a short-term view of strategic objectives.
Investors and others stakeholders who have tremendous interest in every business, evaluate the
business and make quality investment decisions based on the financial performance of such
entities. Investors will have some level of assurance in the soundness of the management of their
investments which will be the basis for further capital investments and can focus most of their
efforts on how to improve their capital management in a different economic environment.
Finance is the lifeblood of the business. Financial management is the study of the process of
procuring and judicious use of financial resources in a view to maximizing the value of the firm.
Financial performance analysis means establishing a relationship between the items in the
balance sheet and profit and loss account for determining the financial strength and weakness of
the firm. The study entitled to know the financial position of the company that helps in making a
sound decision by analyzing the recent trend.
In this study, an attempt is made to identify the financial strength and weakness of the firm by
properly establishing a relationship between the items in the balance sheet and the profit and loss
account of Wipro Limited for the past five years. The study aims to analyze the liquidity,
profitability, solvency position of the company. The changes can be observed by comparison of
the balance sheet at the beginning and the end of a period and these changes can help in forming
an opinion about the progress of an enterprise. The present study attempted to discuss the
financial performance of the company.
For this purpose, the relevant secondary data from the study units for five years and data were
analyzed. The most common methods used for financial statement analysis are trend analysis,
common‐size statements, and ratio analysis. These methods include calculations and comparisons
of the results to historical company data, competitors, or industry averages to determine the
relative strength and performance of the company being analyzed.
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1.2 STATEMENT OF THE PROBLEM
The IT industry has become a part of everyday life, be it providing solutions for business or
entertainment. The Indian IT sector has proved to be the country’s fastest-growing segment, even
in troubled times. India continued to be a compelling investment destination, as leading
companies either set up shops in India or enhanced their existing infrastructure. The IT services
sector has witnessed tremendous growth in the last decade, fuelled by an increasing number of
business expansions, acquisitions, and greenfield projects funded both with domestic and foreign
private investment.
The shift in the role of IT from merely supporting business to transforming business, which is
driving productivity gains and creating new business models, has increased the importance of IT
to the success of companies worldwide. The ability to design, develop, implement and maintain
advanced technology platforms and solutions to address business and customer needs has become
a competitive advantage and a priority for corporations worldwide. Because of the world, the
financial and economic crisis in almost all countries economy went down in the last few years. In
India, one of the major sources of income is through IT Industry and its exports almost all
software companies are facing a financial crisis.
Hence the study aims to analyze the financial performance of Wipro Limited. This study helps to
know the financial strength of the firm, to make their best use and spot out the financial weakness
of Wipro Ltd, to make plans and take suitable corrective action through comparing the financial
performance of past five years and out the liquidity and profitability of the concern. The main
problems related to the present study are connected with the profitability of the firm, to find out
the financial efficiency, to suggest measures to improve the performance of Wipro Limited, and
to find out the liquidity and solvency position of the company.
1.3 RELEVANCE AND SCOPE OF THE STUDY

Financial statement analysis is prepared primarily for decision-making. They play a dominant
role in setting the framework and managerial conclusion and can be drawn from these statements
is of immense use in decision-making through analysis and interpretation of financial statements.
Every business undertaking needs finance for its smooth working. It has to raise funds from the
cheapest and risky source to utilize this most effectively. So, every company will be interested in
knowing its financial performance.
4
The present study titled “Financial Performance Analysis of Wipro Limited” has been carried out
to find the liquidity, solvency, profitability, and efficiency of Wipro Limited, a Private enterprise.
It is hoped that the study would be beneficial to Wipro Limited in particular and all stakeholders
in general. The study aims to analyze the liquidity, profitability, solvency position of the
company.
1.4 OBJECTIVES OF THE STUDY
• To analyze and evaluate the financial performance of Wipro Limited for five years (2015-16 to-
2019-20).
• To measure the short-term and long-term financial liquidity, solvency, profitability, and
activity ratio.
• To estimate the financial trend of the company in terms of profit, sales, and expenses.
• To prepare comparative and common size statements of the company.
5
CHAPTER 2
PROFILE OF IT INDUSTRY IN INDIA
6
2.1 BUSINESS PROCESS OF IT INDUSTRY
Information Technology (IT) is a phenomenon that has dramatically changed the daily lives of
individuals, the modes of business operations as well as market competitiveness. IT comprises of
design, development, implementation, and management of computer-based information systems,
particularly software applications and computer hardware. Today, it has grown to cover most
aspects of computing and technology. The Information Technology-enabled Services (ITeS)
industry provides services that are delivered over telecom or data network to a range of external
business areas. Examples of such Business Process Outsourcing (BPO) include customer service,
web-content development, back-office management, and network consultancy, etc. Therefore, IT
acts as a facilitator, an enabler, and also assumes the role of custodian. It facilitates large volumes
of information to be stored, processed, and/or transferred at lightning speed. Only a few selected
specialized companies in the world are engaged in IT business but most corporations and
institutions use information technology to enable functions (like better communication between
staff, suppliers, customers, asset management, etc.) that drive their business. The constant
upgrade in IT, along with increasing global competition, is adding the complexity of several
orders of scale to the related business and trade. The new organizational network structures are
holding survival and growth in such an environment of complexity. Effective implementation of
IT decreases liabilities by reducing the cost of expected failures and increases flexibility by
reducing the cost of adjustment. The capabilities and flexibilities of computer-based
communication systems become operative to business to respond to any specific information
communication requirement (e.g., Facebook, LinkedIn, Myspace, Twitter, etc. and social
networking websites become pervasive in business to communicate both collaboratively and
cooperatively between enterprises and their constituencies). The impacts of IT on all trade
industries and businesses have never been denied and it affects workers at all levels in the
organization, from the executives to middle managements and lower-level workers. So, there is
no way to deny that in the present complex socio-economic environment, computer-based
information systems have become one of the necessities of life, livelihood, business, and trade.
Indian information technology industry has played a vital role in positioning India in the global
business scenario. The IT industry has transformed a rural-based agrarian economy into a
knowledge-based digital economy. In recent decades, the IT industry is one of the economically
important growth catalysts of the Indian economy. The industry has made significant
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contributions to the various social and economic parameters like the creation of direct and
indirect employment opportunities, improvement in the standard of living, infrastructure,
educational facilities, exports, the balance of payments, etc. Information technology can be
defined as a computing technology that processes, stores and communicates information through
programmed systems. In short, IT is managing information effectively and efficiently. Software
and hardware technologies are the two major components of information technology.
IT business processes standardize all the activities of the company related to information
technology, bringing them to an elevated state of quality and excellence. With the IT business
processes, the services can assure the delivery, no matter who executes them. The absence of
clearly defined IT business processes increases the chances for errors in the processes of the
company. As a result, in a future replacement of employees, all the structure would be
compromised. In contrast, the presence of an IT governance with well-modeled processes allows
that any employee of the area satisfactorily attends to the projects, even in critical and
emergencies. It works like a business continuity plan.
IT business processes must be considered as an integral part of business process management.

Therefore, it has to receive many resources and investments, so they can be improved and
optimized constantly, contributing to the development and growth of the business.
Information Technology (IT) is a business sector that deals with computing, including hardware,
software, telecommunications, and generally anything involved in the transmittal of information
or the systems that facilitate communication.
GLOBAL SCENARIO
The word " software" was coined as a prank as early as 1953 and did not get visibility until the
1960s. Before this time, computers were programmed either by customers, or the fewer
commercial computer vendors of the time, such as UNIVAC and IBM. The first company
founded to provide software products and services was Computer Usage Company in 1955
(Elmer C. Kubie, 1994). Information technology, and the hardware and software associated with
the IT industry, are an integral part of nearly every major global economy. The information
technology industry has turned out to be probably the most robust in the world. IT, greater than
any other industry, has elevated productivity, mainly in the developed world, and for this reason,
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is a key driver of growth for the global economy. Economies of scale and insatiable demand from
both customers and firms symbolize this rapidly growing sector (Economy watch, 2010).
Features of the IT Industry Economies of scale for the information technology industry are high.
The marginal cost of every unit of further program or hardware is insignificant compared to the
worth addition that results from it. Unlike other customary industries, the IT enterprise is
knowledge-driven. Efficient utilization of expert labor forces within the IT sector can aid an
economic system and achieve a rapid pace of economic growth. The IT industry helps many
different sectors in the progressive system of the economic system including the services and
manufacturing sectors. The role of the IT Industry IT organizations functions as a medium of e-
governance, due to the fact it assures useful accessibility to knowledge. The utilization of
knowledge science within the provider sector improves operational effectiveness and provides
transparency. It additionally serves as a medium of skill formation. Due to its handy accessibility
and the broad type of IT merchandise readily available, the demand for IT services has expanded
noticeably these years. The IT sector has emerged as a predominant global driver of development
and employment. Size of the industry According to industry analyst Gartner, the size of the
worldwide software industry in 2013 was US$407.3 billion, an increase of 4.8% over 2012. As in
previous years, the biggest four software vendors were Microsoft, Oracle Corporation, IBM, and
SAP respectively (Gartner, 2013).
INDIAN SCENARIO
The IT industry in India is expected to play an important role in the growth of the Indian
economy. The ability of the industry to contribute to overall long-run growth will depend upon its
ability to cater to the needs of global customers. India’s position as a leader in software services
exports is being challenged by many Asian countries like China, Japan, and others. To sustain the
leadership for a longer time, India has to be proactive in terms of developing software products
along with software services. Liberalized economy and abundant talent pool available at
comparatively lesser cost have attracted many multinational companies to India. Many foreign
multinational companies are operating in India like IBM, Motorola, Oracle, Samsung, HP, etc. At
the same time, there are many Indian multi-national companies, like, Infosys, HCL, TCS, Wipro,
etc., are operating in domestic and foreign markets. IT industry is also recognized as one of the
highest-paid industries in our country.
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Government Initiative
Some of the major initiatives taken by the government to promote the IT and ITeS sector in India
are as follows:
• On May 2019, the Ministry of Electronics and Information Technology (MeitY) launched the
MeitY Start-up Hub (MSH) portal.
• In February 2019, the Government of India released the National Policy on Software Products
2019 to develop India as a software product nation
• The government has identified Information Technology as one of 12 champion service sectors
for which an action plan is being developed. Also, the government has set up a Rs 5,000 crore
(US$ 745.82 million) fund for realizing the potential of these champion service sectors.
• As a part of Union Budget 2018-19, NITI Aayog is going to set up a national-level program
that will enable efforts in AI^ and will help in leveraging AI^ technology for development works
in the country.
• In the Interim Budget 2019-20, the Government of India announced plans to launch a national
program on Artificial Intelligence and setting up a National Artificial Intelligence portal.
• National Policy on Software Products-2019 was passed by the Union Cabinet to develop India
as a software product nation
Achievements
Following are the achievements of the government during 2019-20:
• About 200 Indian IT firms are present in around 80 countries.
• IT spending in India is projected to increase by 6% to reach US$ 81.9 billion in 2021.
• Revenue of GICs (Global In-house Centres) is expected to touch US$ 50 billion by 2025.
• Highest ever revenue was generated by Indian IT firms at US$ 181 billion in 2018-19.
2.2 MARKET DEMAND & SUPPLY – CONTRIBUTION TO GDP –

REVENUE GENERATION
Supply and demand are the backbones of a market economy. Perhaps it may be one of the most
fundamental concepts of economics. Demand means how much (extent) of a product or service is
needed by buyers. The quantity demanded is the amount of a product people are ready to buy at a
convinced price. The connection between cost and quantity demanded refers to the demand
relationship. Supply means how much the market can bid. The quantity supplied is the number of
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certain goods producers are willing to supply when receiving a definite price. The relationship
between price and how much of a good or service is supplied to the market is known as the
supply relationship. Therefore, price is a reflection of supply and demand. The international IT
industry market experiences boom and bust economic cycles. A boom-and-bust cycle refers to
the rapid increase in prices, followed by a period of falling prices. IT-BPM industry’s revenue
was estimated at around US$ 191 billion in FY20, growing at 7.7% y-o-y. It is estimated to reach
US$ 350 billion by 2025. Moreover, revenue from the digital segment is expected to form 38% of
the total industry revenue by 2025. The digital economy is estimated to reach Rs. 69,89,000
crores (US$ 1 trillion) by 2025. The domestic revenue of the IT industry was estimated at US$ 44
billion and export revenue was estimated at US$ 147 billion in FY20.
As of FY20, the IT industry employed 4.3 million people Total number of employees grew to
4.47 million cumulatively for four Indian IT majors (including TCS, Infosys, Wipro, HCL Tech)
as of December 31, 2020. Indian IT industry employed 205,000 new hires, up from the 185,000
jobs added in FY19, and had 884,000 digitally skilled talents in 2019.
The most prominent IT hub is IT capital Bangalore and the other emerging destinations are
Chennai, Hyderabad, Mumbai, Pune, NCR, Jaipur, and Kolkata. India's growing stature in
information Technology enabled the country to form close ties with both the United States of
America and the European Union.
CONTRIBUTION TO GDP
India has the world's fourth-largest natural resource, with the mining sector contributing 11% of
the country's industrial GDP and 2.5% of total GDP.
Information Technology in India is an industry consisting of two major components: IT
services and business process outsourcing (BPO). The sector has increased its contribution to
India's GDP from 1.2% in 1998 to 7.7% in 2017. According to NASSCOM, the sector aggregated
revenues of US$180 billion in 2019, with export revenue standing at US$99 billion and domestic
revenue at US$48 billion, growing by over 13%. As of 2020, India's IT workforce accounts for
4.36 million employees. The United States accounts for two-thirds of India's IT services exports.
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REVENUE
Revenue from the digital segment is expected to comprise 38 percent of the forecasted US$ 350
billion industry revenue by 2025. The IT industry in India is a key part of the country’s economy.
In 2017, information technology and its various subsectors represented almost 10 percent of the
nation’s overall GDP. In the financial year 2021, this industry in India generated annual revenue
of close to 191 billion U.S. dollars.
Some of the biggest IT service providers in India include IBM and HP, as well as Indian-based
companies, Wipro and Tata Consultancy Services (TCS). Overall, in 2020, the industry provided
direct and indirect employment are nearly to 2.5 lakh people.
TCS revenue reached almost 1.57 trillion Indian rupees in 2020, making it the largest India-based
IT services company that year. This ranks it as one of the world’s largest IT services providers.
2.3 LEVEL AND TYPE OF COMPETITION – FIRMS OPERATING IN

THE INDUSTRY
From the newest consumer gadgets to the explosion in communications capability that is driving
global economic growth, technological innovation enhances our lives and provides us with new
tools to perform everyday tasks. The Federal Trade Commission promotes competition in
technology industries (like computers, software, communications, and biotechnology) as the best
way to reduce costs, encourage innovation, and expand choices for consumers. Because the
stakes are high in these fast-paced markets and the benefits to consumers and the economy
substantial, the FTC’s work in these areas is all the more important.
Technology markets can present some unique issues and challenges for policymakers,
manufacturers, distributors, and consumers. Innovation is a central aspect of rivalries among
technology firms, and the markets are dynamic: new ideas topple formerly dominant technologies
and consumers line up to buy products that are smaller, faster, and better. But the fundamental
principles of antitrust law and economics are equally applicable to even the newest industries.
1. Tata Consultancy service. – Largest IT company in India.

Tata Consultancy service is the Largest IT company in India in terms of Revenue. TCS is an IT
services, consulting, and business solutions provider that has been partnering with the world’s
largest businesses in their transformation journeys for the last fifty years.
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TCS offers a consulting-led, cognitive-powered, integrated portfolio of business, technology, and
engineering services and solutions. TCS is the largest company in India in terms of Market
Capitalization. It is the largest in the list of top 10 IT companies in India 2020.
• Revenue: Rs 152,497 Cr
• Market Cap: Rs 845,337 Cr.
• Employees: 420,000
• ROE: 35.98 %
• Sales Growth (3Yrs): 10.47 %
• Promoter holding: 72.05 %
A part of the Tata group, India’s largest multinational business group, TCS has over 420,000 of
the world’s best-trained consultants in 50 countries.
The company generated consolidated revenues of US $22.2 billion in the fiscal year ended March
31, 2021, and is listed on the BSE (formerly Bombay Stock Exchange) and the NSE (National
Stock Exchange) in India. The company has a market capitalization of Rs 29,282.73 crores.
2. Infosys
Established in 1981, Infosys is an NYSE-listed global consulting and IT services company with
more than 250,000 employees.
From a capital of US$250, to become a US$13.56 billion (FY21 revenues) company with a
market capitalization of approximately US$ 79.74 billion.
It is one of the best IT company in India

• ROE: 23.50 %
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Over 37 years, the company has catalyzed some of the major changes that have led to India’s
emergence as the global destination for software services talent. The first IT Company from India
to be listed on NASDAQ.
2. HCL Technologies
HCL Technologies is one of the best IT companies in India. The Company is a leading global IT
services company that helps global enterprises re-imagine and transform their businesses through
Digital technology transformation.
The Company focuses on providing an integrated portfolio of services underlined by its Mode 1–
2– 3 growth strategy. It is the third-largest Indian top company.
• ROE: 25.76 %
The Company leverages its global network of integrated co-innovation labs and global delivery
capabilities to provide holistic multi-service delivery in key industry verticals including Financial
Services, Manufacturing, Telecommunications, Media, Publishing, Entertainment, Retail & CPG,
Life Sciences & Healthcare, Oil & Gas, Energy & Utilities, Travel, Transportation & Logistics,
and Government.
3. Wipro Limited (NYSE: WIT, BSE: 507685, NSE):

WIPRO is a leading global information technology, consulting, and business process services
company. It is on the list of the top-five IT companies in India.
The Company harness the power of cognitive computing, hyper-automation, robotics, cloud,
analytics, and emerging technologies to help our clients adapt to the digital world and make them
successful. It is the fourth largest Indian top it companies.
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• ROE: 17.26 %
It is one of the Indian IT companies recognized globally for its comprehensive portfolio of
services, a strong commitment to sustainability, and good corporate citizenship, The Company
has over 160,000 dedicated employees serving clients across six continents. Together, one of the
best Indian IT companies to discover ideas and connect the dots to build a better and bold new
future.
4. Redington India Ltd
Established in 1993, Redington has traversed an eventful and exciting journey to one of the best
Indian IT companies. It is on the list of the top-five IT companies in India.
The incredible journey has seen us emerge from one brand, one product category, and one market
into a US $6.7 billion distribution and supply chain solutions provider to over 220 international
brands in IT and Mobility spaces, serving 30+ emerging markets.
• Revenue: Rs 47,996 Cr.

• ROE: 15.00 %
Today, new-age technologies like Artificial Intelligence (AI), Robotics, Big Data and Analytics,
Internet of Things (IoT), and 5G communications are opening new possibilities and new
opportunities for tomorrow. Redington India Ltd is the fifth largest Indian top it companies.
5. Tech Mahindra Ltd

Tech Mahindra represents the connected world, offering innovative and customer-centric
information technology experiences, enabling Enterprises, Associates, and Society to rise.
The company is a 9 billion company with 125,700+ professionals across 90 countries, helping
941 global customers including Fortune 500 companies. It is one of the best IT companies in
India.
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• Market Cap: 70,141 Cr.
• ROE: 21.58 %
The Company's convergent, digital, design experiences, innovation platforms, and reusable
assets connect across several technologies to deliver tangible business value and experiences to
our stakeholders. Tech Mahindra is the highest ranked Non-U.S. company in the Forbes Global
Digital 100 list (2018) and in the Forbes Fab 50 companies in Asia (2018).
6. Larsen & Toubro Infotech Ltd

Founded 20 years ago as the information technology arm of the Larsen & Toubro group. It is also
one of the best IT companies in India.
• ROE: 34.63 % •
Sales Growth (3Yrs): 17.34 %
LTI is a global technology consulting and digital solutions company helping more than 360
clients succeed in a converging world. With operations in 30 countries, accelerate digital
transformation with LTI’s Mosaic platform enabling their mobile, social, analytics, IoT, and
cloud journeys.
7. Mphasis Ltd
Incorporated in 1992, Mphasis serves marquee customers across the globe including six top
global banks, eleven out of fifteen top mortgage lenders, and three top global insurance
companies, and has about 22,000 employees across sixteen countries. It is among the top
software companies in India.
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• ROE: 19.96 %
Blackstone Private Equity, the world’s largest private equity firm acquired Hewlett Packard
Enterprise’s stake (60.5%) in Mphasis. This deal represents the largest technology investment as
well as the largest acquisition by Blackstone in India. Mphasis’ core reference architectures &
tools, combined with strong domain expertise in Banking, Financial Services & Insurance
verticals.
8. Mindtree Ltd
Mindtree is a global technology consulting and services company, helping enterprises marry scale
with agility to achieve competitive advantage. “Born digital,” in 1999 and now a Larsen &
Toubro Group Company, Mindtree applies its deep domain knowledge to 350+ enterprise client
engagements to break down silos, make sense of digital complexity and bring new initiatives to
market faster.
• Employees: 21000
• ROE: 24.94 %
The Company enables IT to move at the speed of business, leveraging emerging technologies and
the efficiencies of Continuous Delivery to spur business innovation. Operating in more than 15
countries across the world made up of 21,000 Employees. It is among the list of top software
companies in India.
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9. Hexaware Technologies Ltd
Hexaware is a global leader and the fastest growing next-generation provider of IT, BPO, and
consulting services. It is one of the best IT companies in India.
The Company evolved at the intersection of advanced technologies – AUTOMATE

EVERYTHING TM, CLOUDIFY EVERYTHING TM, TRANSFORM CUSTOMER
EXPERIENCES TM, that helps in fast-tracking enterprises into the digital era.
• Revenue: Rs 5,306 Cr.

• Employees: 18,294 • ROE: 26.53 %
HTL's growth strategy is further strengthened by expanding global delivery capability, with 33
global offices and 18,294+ employees. HTL service customers in over two dozen languages,
from every major time zone and every major regulatory zone.
2.4 PRICING STRATEGIES OF THE INDUSTRY
Software pricing strategy plays a significant role in augmenting software market sales. It can be
interpreted as an important tool in the marketing toolbox which a company needs to consider
before launching a product in the market. The managerial group in the software industry has
conventionally improved their pricing strategies based on cost-related criteria. Cost-based pricing
strategies concentrate on the product value to the customer. Furthermore, they are also focusing
on the short-term value to the vendor. On the other hand, value-based pricing is based on the
customer's understanding of the value of the product. Value-based pricing strategies pay attention
to innovating long-term value for the customer. The pricing strategy aims to set a price that the
customer sees in the product while meeting profits on investment goals. Pricing approaches are
based on customer’s perceptions of value are planned and long-term in nature. This is due to the
fact of capturing unique value from each market segment through the pricing mechanism.
Furthermore, software firms need to invest to make sure the long-term benefits of value-based
pricing are discussed. The investment of software companies in strategic pricing helps in making
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quality decisions making about the product during the product development cycle. Moreover, it
also provides a good understanding of how customers value price alternatives and come up with
prices that they are willing to pay.
2.5 PROSPECTS AND CHALLENGES OF THE INDUSTRY PROSPECTS
Every crisis also carries the seeds of opportunity within. The Indian IT industry had become used
to a comfort zone of easy accessibility of and US market and maybe this scare can lead to a
reworking of the business strategies to ultimately become a stronger and more evolved industry.
“What does not kill you, makes you stronger”. Confronted with this situation the industry might
start looking at adapting itself to the changing environment to survive and become stronger.
Some positives which can come out of this crisis are:
1. Diversification of Market
The old age of not keeping all your eggs in one basket is squarely applicable here. The Indian IT
industry has been for long overly dependent on the US market and consequently, there was
inertia in looking for other opportunities. With the access to that market likely to be restricted, the
industry will be forced to look for a market elsewhere if only to survive. Other nations especially
the EU, Australia, and even China may also sense an opportunity to take advantage of this
situation and many companies have started to plan to move their businesses to places outside the
US. Many European nations provide an excellent business environment and can match the
facilities and salaries at par with or even better than the US. Indian IT companies need to
aggressively leverage their skill sets, experience, and cost-effectiveness to make up for the loss of
business in the US. China has a lot of pent-up demand for such skillsets and the nascent markets
of Latin America and even Africa are also open to exploration. Such shift can only take place
over some time and some pain is inevitable in the short run. However, there is potential for the
industry to become truly global and stronger in the long run.
1. Strengthening of Domestic IT Industry

The Indian IT industry has for long been too focused on the outside especially on the US market.
The domestic market is also a huge one and growing very fast. Often the best talent was geared to
be sent abroad and consequently, there is a dearth of quality manpower at home. With space now
squeezing, many such talents will have to be utilized at home and the benefits can accrue quickly.
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Despite the income difference, the Indian middle-class population alone is bigger than the entire
population of the USA and Europe. This massive market is set to explode and there is a lot of
opportunity for growth. Ashok Soota, former president of Wipro and Executive Chairman of
Happiest Minds Technologies, mentions that more work will now move offshore. “The effect will
be two-fold: We will bring more of the work offshore, which is a long-term advantage for the
Indian IT industry. Besides, it will drive Indian companies up in the value chain, because the kind
of people who we send will be premium people, people who are consultants and highly
experienced and skilled,” he said. That could well mean, again, that US companies lose out on
cost-effective work that Indian engineers do for them. The gain will of course accrue to the
Indian companies.
1. Diversification of Domestic Market

Another aspect that needs attention is that so far, the Indian IT industry is also concentrated in
few places within India. Bengaluru is the hub with Hyderabad and Gurgaon accounting for most
of the rest. The cost overheads are very high in these places and the urban infrastructure is
woefully inadequate. Bengaluru especially has been struggling with an expansion of required
infrastructure and consequently, costs have soared. The slowdown may force the companies to
look at the smaller cities to reduce costs and source local talent cheaply. Recently Hyderabad, a
hub of cyber activity has recovered from political instability and has declared itself ready to
challenge Bengaluru as the IT capital of the country. The Apple Corporation has finalized
Hyderabad as its proposed location in India. This will then result in the diffusion of the IT
services industry in the hinterland with beneficial results. There are many smaller cities likes
Chandigarh, Pune, Bhubaneswar, Vadodara, Vizag, etc. which are vying to share a piece of the IT
pie. However, much will depend on the urban infrastructure and the business environment
provided by the various states to ensure ease of business. This internal diversification is as
essential as the external one to ensure balanced growth.
1. Reverse Brain Drain

This isn’t the first time India has stood in the throes of a potential historic homecoming of talent.
The burst of the dot-com bubble in 2001 led several non-resident Indians to return home, many of
them tech workers. The global economic crisis beginning in 2008 forced many to relocate. After
that, the start-up boom in India successfully tempted many back homes. It is easy to see why
optimists think the Trump scare may finally do for India what the country has been trying hard to
do for ages – bring back its engineers and scientists. There are some green shoots as well. Indians
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living in the US have started to make cold calls to head-hunters exploring opportunities here.
India’s Narendra Modi-led government has taken measures to woo back and retain scientists. The
government is offering fellowships and opportunities to work in reputed organizations to ensure
that scientists return home. It’s also encouraging large Silicon Valley corporations like Apple to
set up manufacturing in India. India’s union minister for science and technology Harsh Vardhan
recently noted the rise in the number of scientists returning to the country. “Around 175-180
scientists have returned to India in the recent past.” What seems to be working in the country’s
favor is a combination of new opportunities, better infrastructure, and government impetus on
start-ups.
CHALLENGES
Over the last three decades, the IT industry in India has seen significant growth. It accounted for
8% of the total GDP (Gross Domestic Product) of the country in 2012-2013 and jumped up to
9.5% in 2014-2015. This growth has made IT the fifth-largest industry in India.
Overall, the IT industry in India employed around 4 million people in 2017, up to 170k from the
previous year. Much of the employment is concentrated at large firms. For example, Tata
Consultancy Services (TCS) employs over 275k people, and Infosys employs 156k.
Despite the recent growth of the IT industry in India, there are signs the growth is slowing.
According to the National Association of Software and Services Companies (NASSCOM), the IT
sector in India only grew by 5% in 2018. Furthermore, hiring rates have decreased by around
40% in the last three years.
This slowdown is being felt by even the leading IT companies, who are starting to lay off
employees. For instance, Wipro has dropped 600 employees, Cognizant has cut at least 6,000
jobs, Tata Teleservices fired 500-600 employees, and Aircel handed pink slips to more than 700
employees.
But why is this happening? What is dragging down the pace of growth in India’s IT industry?
Below are the top 5 challenges facing the IT Industry in India:
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1. H1-B Visas
The H1-B visa is a program that allows companies based in the US to temporarily employ highly
skilled professions from other countries. This year, the Trump administration changed the policy
of issuing H1-B visas. Unfortunately, the new procedure makes it difficult for companies to
prove that the H1-B worker comes with specific and non-speculative qualifying assignments in a
certain occupation.
According to the USCIS (US Citizenship and Immigration Services), nearly 75% of H1-B visa
holders are Indian citizens.The new H1-B policy is negatively impacting the IT industry in India
and people looking to find jobs in the US. Several small and medium enterprises in India rely on
the US market and H1-B visas. Also, the new policy states that the minimum salary of an H1-B
visa holder should be a minimum of $130,000. Given this high salary, understandably, a lot of
companies in the US now opt to hire Americans.
2. Economic Slowdown
The IT Industry in India draws most of its clients from Western countries like the US, the UK,
Spain, and Canada. In the last few years, these Western countries have faced slowing economic
growth, which has hurt the growth of the IT industry in India.
To add oil to the fire, there has always been a biasing relationship between the dollar and the
rupee. The increasing value of the dollar against the rupee has further strained the industry.
3. Data protection and privacy rules

The new data protection and privacy rules enforced by other countries are preventing Indian
companies to serve in those countries. For example, the European Union’s GDPR (General Data
Protection Regulation) law became effective in May 2018.
GDPR applies to all the companies that operate in the EU or have their customers in the region –
any company that deals with the personal data of European customers need to comply with
GDPR rules.
Since not all the IT companies in India can comply with GDPR and other data protection rules,
many had to stop serving EU customers. As mentioned above, most of the clients of the Indian IT
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industry are from Western countries, and many clients are choosing development options closer
to home. GDPR is preventing some Indian tech companies from working with European clients.
4. Domestic Challenges
Today, traditional business models have become outdated. It is the era of digital transformation,
where companies around the world are embracing modern technologies like cloud computing,
artificial intelligence (AI), the Internet of Things (IoT), and blockchain. These technologies help
them reduce costs, accelerate time to market, save time and increase employee productivity.
However, Indian organizations are slow in adopting these technologies. They are still stuck with
the traditional models. This is because of the lack of skilled employees, conventional
infrastructure, as well as restrictive regulations.
In India, more than 400,000 students graduate every year. Yet, only 20% of them get
employment. This is because the universities and colleges are focused on providing degrees
rather than enhancing student skills. This has created a gap between supply and demand.
IT companies are not finding the right talent that can go along their digital transformation
journey. Further, this study suggests that Indian IT companies will have to cut jobs because they
are not adopting modern technologies. Furthermore, a report from McKinsey and Company
reveals that 50% of the workforce in the IT industry could be irrelevant over the next few years.
5. Negative reputation around the world

India’s IT giant, TCS was slammed by a penalty of $420 million by the US court in April 2016.
The US-based company Epic Systems had accused TCS of stealing trade secrets, confidential
information, and data that belonged to Epic.
Infosys paid a penalty of $1 million for violating the visa and immigration rules in the US. The
company was accused of employing foreign workers in New York without paying taxes and
wages.
TCS and Infosys are the pillars of the IT industry in India. Such incidents negatively impact the
image of the Indian IT industry in the global market.
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These are the major challenges faced by the IT industry in India. These challenges have become
barriers to the growth of leading IT companies in the country and jobs are being lost.
But these challenges can be overcome! Not much can be done about policy changes in the US
and Europe, but much can be done. First, IT companies need to embrace digital technologies to
keep up with the competition around the globe. Second, universities need to teach students hard
skills. Third, IT giants need to set an example and improve India’s reputation in the global
market.
2.6 KEY DRIVERS OF THE INDUSTRY

(1) Cost of sales
For a technology company, the cost of sales is fairly low. The Cost of Sales include:
• Cost of technology upgrades (including the cost of development). Usually, the upgrades are
released every year.
• Cost of hardware refresh: Usually, most of the technology companies have an enterprise-
wide agreement for their server and storage upgrade [like IBM (NYSE: IBM), HP (NYSE: HP),
Dell and Oracle (NYSE: ORCL)] and networking equipment’s upgrade like Cisco (NASDAQ:
CSCO). The refresh period is usually 3-5 years.
• Cost of documentation, duplicating software, training, packaging (if media is supplied),

and cost of maintenance (predominantly data center maintenance other than what has been
specified in ‘Point b’ above): Nowadays, most of the companies enable software download
feature to avoid costs associated with documentation and media.
These three costs account for 15-20% of the sales revenue, leaving 85% for Selling, General and
Administrative Expenses (SG&A), Marketing, and Research & Development (R&D). Hence, it’s
not surprising to see Technology companies investing handsome amounts in Marketing and
R&D. To give you a perspective, in FY11, Oracle invested $ 4.5 billion in R&D. With $ 35.6
billion in total revenues, that’s 12%, a good investment for Oracle.
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(2) Customer acquisition
A technology company writes a piece of code once and sells the same code to every customer.
Hence, the company can make a huge profit by a good customer acquisition strategy. More
customers, more profit! Most often, we see them doing so by hiring a sales force at 50:50 (fixed:
variable) compensation structure, with Executives remunerated with stock options for the
variable component.
Also, can be seen is the Channel Sales Operating Strategy, which phenomenally reduces their
customer acquisition cost, but increases their market outreach and sales. This strategy proves to
be beneficial to the local customers as well. Oracle India generates 85% of its sales through its
Partners.
(3) Investments
Unlike manufacturing companies, technology companies invest a small portion of their sales in
Property Plant and Equipment (PPE). The only investments they usually make are
• the real estate: appreciating land and buildings, most of it will be on the lease, and
• the equipment – depreciating computers (predominantly servers, desktops, and laptops) and
their accessories.
For a large established technology brand, the cost of such investments will be fairly low (as
compared to its small industry participants) because they enjoy more bargaining/negotiating
leverage. Hence, their cost of sales is further relaxed (as a percentage of total revenue).
To increase employee productivity, the technology companies offer nutritious food from well-
known caterers within their campus such that their employees do not have to head out during
meal hours. In other words, resource utilization is high. Google is one such company.
Additionally, most of the technology companies offer infrastructure that harbours state-of-the-art
gym, entertainment, and transportation facilities. This increases employee productivity to a great
extent. It also serves as a good reason for talent retention. So, when we add these factors
(employee productivity and talent retention) to the revenue, it translates to a huge economic
benefit.
Considering the above, it’s not uncommon for technology organizations to earn an operating
profit of 35% – 40% of sales. This is a good margin for a large public company.
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India is the topmost offshoring destination for IT companies across the world. Having proven its
capabilities in delivering both on-shore and off-shore services to global clients, emerging
technologies now offer an entire new gamut of opportunities for top IT firms in India. Export
revenue of the industry is set to grow 1.9% to $150 billion while domestic revenues are projected
to rise at a faster clip of 3.4% to $45 billion. The industry is expected to grow to US$ 350 billion
by 2025 and BPM is expected to account for US$ 50- 55 billion out of the total revenue.
2.7 PROFILE OF WIPRO LIMITED

Wipro Limited (NYSE: WIT, BSE: 507685, NSE: WIPRO) is a leading global
information technology, consulting, and business process services company. It harnesses the
power of cognitive computing, hyper-automation, robotics, cloud, analytics, and emerging
technologies to help our clients adapt to the digital world and make them successful. A company
recognized globally for its comprehensive portfolio of services, strong commitment to
sustainability, and good corporate citizenship, it has over 160,000 dedicated employees serving
clients across six continents. Together, it discovers ideas and connects the dots to build a better
and bold new future.
It began business as a vegetable oil manufacturer in 1945 at Amalner, a small town in Western
India, and thereafter, forayed into soaps and other consumer care products. During the early
1980s, it entered the Indian IT industry by manufacturing and selling mini computers. In the
1990s, it leveraged our hardware R&D design and software development expertise and began
offering software services to global clients. In 2013, it demerged the non-IT Diversified
Businesses. With a track record of over 25 years in IT Services, today it focused entirely on the
global Information Technology business. Wipro is listed on National Stock Exchange and
Bombay Stock Exchange in India and New York Stock Exchange in the U.S.A.
VALUES
The Spirit of Wipro is the core of Wipro. These are our Values. It is about who we are. It is our
character. It is reflected consistently in all our behaviour. The Spirit is deeply rooted in the
unchanging essence of Wipro. It also embraces what we must aspire to be. It is the indivisible
synthesis of the four values. The Spirit is a beacon. It is what gives us direction and a clear sense
of purpose. It energizes us and is the touchstone for all that we do.
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SPIRIT OF WIPRO
BE PASSIONATE ABOUT CLIENTS’ SUCCESS

Be passionate about clients’ success. We succeed when we make our clients successful. We
collaborate to sharpen our insights and amplify this success. We execute with excellence always.
TREAT EACH PERSON WITH RESPECT

We treat every human being with respect. We nurture an open environment where people are
encouraged to learn, share and grow. We embrace a diversity of thought, cultures, and people.
BE GLOBAL AND RESPONSIBLE

We will be global in our thinking and our actions. We are responsible citizens of the world. We
are energized by the deep connectedness between people, ideas, communities, and the
environment.
UNYIELDING INTEGRITY IN EVERYTHING WE DO

Integrity is our core and is the basis of everything. It is about following the law, but it’s more. It
is about delivering on our commitments. It is about honesty and fairness in action. It is about
being ethical beyond any doubt, in the toughest of circumstances.
SUSTAINABILITY HIGHLIGHTS
A SUSTAINABLE, EMPOWERING WORKPLACE

➢ 300,000+ employees trained in digital skills as of FY 2020
➢ 52,000+ employees are using Top Gear, a social learning and crowdsourcing platform to learn
emerging technologies
➢ 136,000+ employees, contractors, and service providers trained in Health & Safety
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ENGAGEMENT
➢ Focus pillars of inclusion - Gender, Persons with Disabilities, Nationalities, LGBT,
Underprivileged Communities and Suppliers
➢ 73.6% overall engagement score in the Employee Perception Survey (EPS 2017) – an
increase of 12.5 percentage points compared to EPS 2015
➢ Inclusion & Diversity and Health & Safety – Highest rated engagement drivers in EPS 2017
➢ 100,000+ employees on collaborative social platforms like Yammer and Microsoft Teams
➢ 8 Wipro locations equipped with Day Care Centres
ECOLOGICAL SUSTAINABILITY
ENERGY & EMISSIONS

➢ Over 14% reduction in global people-based emissions intensity to 1.2 tons per person per
annum
➢ 33% (92 million units) of our total India Energy Consumption comes from Renewable Energy
(RE). Our RE target for next year is 95 million units
➢ 70% increase in energy-saving due to server virtualization from last year
➢ 5.5% reduction in air travel footprint (in terms of both distance and emissions) compared to
2016-17 and nearly 24% reduction since 2015-16.
BIODIVERSITY & WATER

➢ 11.5% reduction in water consumption to 991 litres per employees
➢ 10 % of water recycled in 2018-19 compared to 32 % in 2020-21

➢ Participative urban water programs in Bengaluru & Pune
➢ 13 Sustainability seeding fellows in boarded till date

➢ Completed third campus biodiversity retrofit project-Wetland park in Bengaluru Campus
RECOGNITIONS
➢ Association for Talent Development (ATD) – Best of Best Award for FY 2020
➢ Society for Human Resource Management (SHRM) India HR Excellence Awards 2017-
Excellence in Diversity and Inclusion - Winner
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➢ Society for Human Resource Management (SHRM) India HR Excellence Awards 2017 -
Excellence in HR Analytics – Winner
➢ United Nations Global Compact Network India (UN GCN) – Women at Workplace Awards
2018 – 2nd Runner Up
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CHAPTER 3
REVIEW OF LITERATURE
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3.1 BRIEF THEORETICAL CONSTRUCT RELATED TO THE PROBLEM
FINANCIAL PERFORMANCE ANALYSIS
Financial performance analysis is the process of identifying the financial strengths and
weaknesses of the firm by properly establishing the relationship between the items of the balance
sheet and the profit and loss account. It also helps in short-term and long-term forecasting and
growth can be identified with the help of financial performance analysis. The dictionary meaning
of ‘analysis’ is to resolve or separate a thing into its elements or components parts for tracing
their relation to the things as a whole and each other. The analysis of a financial statement is a
process of evaluating the relationship between the parts of a financial statement to obtain a better
understanding of the firm’s position and performance. This analysis can be undertaken by the
management of the firm or by parties outside the name, owners, creditors, investors.
FINANCE
“Managing a firm’s finance is both an art and science. It requires not only feel for the situation
and analytical steel but also a thorough knowledge of the technique and tools of financial analysis
and the knowledge to apply them and interpret the results”.
“Finance is defined as the administrative function in an organization which relate with the
arrangement of cash and credit to the organization to carry out its objectives as satisfactory as
possible”.
Every business enterprise whether large, medium, and small size needs finance to carry out its
operations and to achieve its targets. Finance is rightly said to be the lifeblood of an enterprise.
The main activities essential to the successful administration of finance in any organization
consist of financial planning and control, determinant of business success, Focal point of decision
making, raising the needed fund, financial analysis, and measure of performance. The plan of any
organization should be laid down because of the organization’s financial strength and weakness.
Financial analysis is the starting point for making plans, before using any sophisticated
forecasting and budgeting procedure. Analysis of past things should be of great value in
improving the standards, techniques, and procedures of financial control involved in the business
activities.
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FINANCIAL MANAGEMENT
Financial Management is that managerial activity that is concerned with the planning and
controlling of the firm’s financial resources. It was a branch of economics till 1890 and as a
discipline, it is of recent origin. The three important managerial functions are Investment asset
mix decision, Financing or capital mix decision, and Dividend or profit allocation decision. A
firm’s success and even survival depend on its ability and willingness to maintain production and
investment in fixed or working capital are to a very considerable extend determined by its
financial policies both past and present.
FINANCIAL STATEMENT
A financial statement is an organized collection of data according to logical and consistent
accounting procedures. Its purpose is to convey an understanding of some financial aspects of a
business firm. It may show a position at a moment as in the case of a balance sheet or may reveal
a series of activities over a given period, as in the case of an income statement.
The objective of financial statements is to provide information about the financial position,
performance, and changes in the financial position of an enterprise that is useful to a wide range
of users in making economic decisions. “Financial statements should be understandable, relevant,
reliable, and comparable. Reported assets, liabilities, equity, income, and expenses are directly
related to an organization’s financial position.
Financial Statements are intended to be understandable by readers who have “a reasonable
knowledge of business and economic activities and accounting and who are willing to study the
information diligently.”
Financial statements may be used by users for different purposes:

Owners and managers require financial statements to make important business decisions that
affect its continued operations. Financial analysis is then performed on these statements to
provide management with a more detailed understanding of the figures. These statements are also
used as part of management’s annual report to the stockholders.
➢ Employees also need these reports in making collective bargaining agreements (CBA) with the
management, in the case of labor unions or for individuals in discussing their compensation,
promotion, and rankings.
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➢ Prospective investors make use of financial statements to assess the viability of investing in a
business. Financial analyses are often used by investors and are prepared by professionals, thus
providing them with the basis for making investment decisions.
➢ Financial institutions use them to decide whether to grant a company fresh working capital or
extend debt securities to finance expansion and other significant expenditures.
➢ Government entities need financial statements to ascertain the propriety and accuracy of taxes
and other duties declared and paid by a company.
➢ Vendors who extend credit to a business require financial statements to assess the
creditworthiness of the business.
➢ The media and the general public are also interested in financial statements for a variety of
reasons.
The Main Financial Statements are:

i) Balance Sheet: It is a statement showing all the assets owned by the firms and represents
all the liabilities including the equities of owners and outsiders at a particular time.
ii) Profit and Loss account: It shows the summary of operations of a firm in a given period
providing details of revenue, cost, and profit.
FINANCIAL ANALYSIS
It is the process of identifying the financial strength and weakness of a firm from the available
accounting data and financial statements. The analysis is done by properly establishing the
relationship between the items of the balance sheet and the profit and loss account. The first task
of a financial analyst is to determine the information relevant to the decision under consideration
from the total information contained in the financial statement. The second step is to arrange
information in a way to highlight significant relationships. The final step is interpretation and
drawing inferences and conclusions. Thus, financial analysis is the process of selection relating to
and evaluation of the accounting data/information
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OBJECTIVES OF FINANCIAL ANALYSIS
The following are the main objectives of the analysis of financial statements:
• To gauge the financial position and financial performance of the firm.
• To determine the debt capacity of the firm.
• To determine the long-term liquidity of the funds.
• To judge the solvency of the firm.
• To measure the efficiency of operations.
• To know the progress of the firm.
• To estimate the earning capacity of the firm.
USE OF FINANCIAL ANALYSIS

Following are the uses of financial Analysis:
• Debt Analysis: This is to check the borrowing capacity of a firm, which can be done through
the analysis of Debt-equity.
• Credit Analysis: Financial Analysis helps a firm that is extending credit to a prospective
customer to know the risk associate with extending the credit.
• Security analysis: Dividend pay-out policy and behavior a share can be assessed with the help
of financial analysis.
• Mergers & Acquisition: A company generating surplus cash flows with its competitors may be
tempted to expand the business by acquitting other companies and make a profitable investment.
• General Business Analysis: General business Indicators assess the future potential of the
company. They help in identifying the key factors which will influence the profitability of the
company.
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• Regulatory Compliance: Regulators consists of registrars of companies, department of
company affairs, stock exchanges, SEBI analyses these to ensure compliance with the prevailing
rules and regulation.
LIMITATIONS OF FINANCIAL ANALYSIS
• Variation in accounting policies and procedures: Due to the diversity of accounting practices
found in practice, comparative financial statement analysis may be vitiated.
• Misleading results in the absence of absolute data: Results shown by financial analysis may be
misleading in the absence of absolute data.
• Suffering from the limitation of financial statements: Financial statements are prepared
according to certain conventions at a point in time, whereas the investor it’s concerned with the
present and future of the company.
• Ignoring price level changes: The results shown by financial statements may be misleading if
price level changes have not been accounted for.
• Ignoring qualitative aspect: Financial analysis does not measure the qualitative aspects of the
firm. E.g.: Skill, Technical know-how, etc.
• financial statements are affected by the personal ability and bias of analysis: The financial
statement is often analyzed and interpreted by the shrewd analyst who may have their views
reflected in the analysis.
TOOLS OR TECHIQUES OF FINANCIAL ANALYSIS
1. Comparative Statements
Comparative statements deal with the comparison of different items of the Profit and Loss
Account and Balance Sheets of two or more periods. Separate comparative statements are
prepared for Profit and Loss Account as Comparative Income Statement and for Balance Sheets.
As a rule, any financial statement can be presented in the form of comparative statement such as
comparative balance sheet, comparative profit and loss account, comparative cost of production
35
statement, comparative statement of working capital and the like. From practical point of view,
generally, two financial statements (balance sheet and income statement) are prepared in
comparative form for financial analysis purposes. Not only the comparison of the figures of two
periods but also be relationship between balance sheet and income statement enables an in depth
study of financial position and operative results
The comparative statement may show:
i) Absolute figures (rupee amounts).

ii) Changes in absolute figures i.e., increase or decrease in absolute figures.
iii) Absolute data in terms of percentages.
iv) Increase or decrease in terms of percentages.
The analyst is able to draw useful conclusions when figures are given in a comparative
position. The figures of sales for a quarter, half -year or one year may tell only the present
position of sales efforts. When sales figures of previous periods are given along with the figures
of current periods then the analyst will be able to study the trends of sales over different periods
of time. Similarly, comparative figures will indicate the trend and direction of financial position
and operating results
Types of Comparative Statements:
The two comparative statements are
i) Balance sheet
ii) Income statement.
Comparative Balance Sheet
The financial condition of the business concern can be find out by preparing comparative balance
sheet. The various items of Balance sheet for two different periods are used. The assets
are classified as current assets and fixed assets for comparison. Likewise, the liabilities are
classified as current liabilities, long term liabilities and shareholders’ net worth. The term
shareholders’ net worth includes Equity Share Capital, Preference Share Capital, Reserves and
Surplus and the like.
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Comparative Income Statement
Three important information are obtained from the Comparative Income Statement. They
are Gross Profit, Operating Profit and Net Profit. The changes or the improvement in the
profitability of the business concern is find out over a period of time. If the changes or
improvement is not satisfactory, the management can find out the reasons for it and some
corrective action can be taken
2. Common Size Statements
A vertical presentation of financial information is followed for preparing common-size

statements. Besides, the rupee value of financial statement contents are not taken into
consideration. But only percentage is considered for preparing common size statement.
The total assets or total liabilities or sales is taken as 100 and the balance items are
compared to the total assets, total liabilities or sales in terms of percentage. Thus, a common size
statement shows the relation of each component to the whole. Separate common size statement is
prepared for profit and loss account as Common Size Income Statement and for balance sheet as
Common Size Balance Sheet.
3 Trend Analysis
The ratios of different items for various periods are find out and then compared under this
analysis. The analysis of the ratios over a period of years gives an idea of whether the business
concern is trending upward or downward. This analysis is otherwise called as PyramidMethod
Trend analysis is the process of trying to look at current trends in order to predict future
ones and is considered a form of comparative analysis. This can include attempting to determine
whether a current market trend, such as gains in a particular market sector, is likely to continue,
as well as whether a trend in one market area could result in a trend in another. Though an
analysis may involve a large amount of data, there is no guarantee that the results will be correct.
Advantages of Trend Analysis:
(a) Possibility of making Inter-firm Comparison:
Trend analysis helps the analyst to make a proper comparison between the two or more firms
over a period of time. It can also be compared with industry average. That is, it helps to
understand the strength or weakness of a particular firm in comparison with other related firm in
the industry
37
(b) Usefulness:
Trend analysis (in terms of percentage) is found to be more effective in comparison with the
absolutes figures/data on the basis of which the management can take the decisions.
(c) Useful for Comparative Analysis:
Trend analyses is very useful for comparative analysis of date in order to measure the financial
performances of firm over a period of time and which helps the management to take decisions for
the future i.e., it helps to predict the future.
(d) Measuring Liquidity and Solvency:
Trend analysis helps the analyst/and the management to understand the short-term liquidity
position as well as the long-term solvency position of a firm over the years with the help of
related financial Trend ratios.
(e) Measuring Profitability Position:
Trend analysis also helps to measure the profitability positions of an enterprise or a firm over the
years with the help of some related financial trend ratios (e.g., Operating Ratio, Net Profit Ratio,
Gross Profit Ratio etc.)
Disadvantages of Trend Analysis:
(a) Selection of Base Year:
It is not so easy to select the base year. Usually, a normal year is taken as the base year. But it is
very difficult to select such a base year for the propose of ascertaining the trend. Otherwise,
comparison or trend analyses will be of no value.
(b) Consistency:
It is also very difficult to follow a consistent accounting principle and policy particularly
when the trends of business accounting are constantly changing.
(c) Useless in Inflationary Situations:
Analysis of trend percentage is useless at the time of price-level change (i.e., in inflation).
Trends of data which are taken for comparison will present a misleading result.
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4. Ratio Analysis
Ratio analysis is an attempt of developing meaningful relationship between individual items (or
group of items) in the balance sheet or profit and loss account. Ratio analysis is not only useful to
internal parties of business concern but also useful to external parties. Ratio analysis highlights
the liquidity, solvency, profitability and capital gearing. The ratios are categorized as
• Liquidity Ratio
• Leverage Ratio,
• Turnover Ratio
• Profitability ratio
A. Liquidity Ratio-
It measures the ability of the firm to meet its short-term obligations that is capacity of the firm to
pay its current liabilities as and when they fall due. Thus, these ratios reflect the short-term
financial solvency of a firm. A firm should ensure that it does not suffer from lack of liquidity.
The failure to meet obligations on due time may result in bad credit image, loss of creditors
confidence, and even in legal proceedings against the firm on the other hand very high degree of
liquidity is also not desirable since it would imply that funds are idle and earn nothing. So
therefore, it is necessary to strike a proper balance between liquidity and lack of liquidity.
The various ratios that explain about the liquidity of the firm are;
• Current Ratio
• Acid Test Ratio / quick ratio
• Absolute liquid ratio / cash ratio.
1.Current Ratio
The current ratio measures the short-term solvency of the firm. It establishes the relationship
between current assets and current liabilities. It is calculated by dividing current assets by current
liabilities.
Current Ratio = Current Asset/Current Liabilities
Current assets include cash and bank balances, marketable securities, inventory, and debtors,
excluding provisions for bad debts and doubtful debtors, bills receivables and prepaid
39
Expenses. Current liabilities include sundry creditors, bills payable, short- term loans, income-
tax liability, accrued expenses and dividends payable.
Advantages of Current Ratio:
• It measures the liquidity of the firm

• It represents the working capital position of a firm
• It represents the liquidity of a company
• It represents margin of safety
• It tells us the short-term solvency of a firm.
Disadvantages of Current Ratio:
• Its accuracy can be deterred as, pertaining to different businesses, depending on a

variant of factors
• Over-valuation of stock also contributes to its tipping accuracy
• It measures the firm liquidity on the basis of quantity and not quality, which
comes across as a crude method.
2.Acid Test Ratio / Quick Ratio
It has been an important indicator of the firm’s liquidity position and is used as a complementary
ratio to the current ratio. It establishes the relationship between quick assets and current
liabilities. It is calculated by dividing quick assets by the current liabilities.
Acid Test Ratio = Quick Assets/Current liabilities
Quick assets are those current assets, which can be converted into cash immediately or within
reasonable short time without a loss of value. These include cash and bank balances, sundry
debtors, bill’s receivables and short-term marketable securities. The ideal Quick Ratio is 1: 1 and
is considered to be appropriate. High Acid Test Ratio is an accurate indication that the firm has
relatively better financial position and adequacy to meet its current obligation in time.
Advantages of Quick Ratio:
• It tells us the liquidity position of a firm

• It is used to remove the errors of current ratio
• It is used as supplementary to the current ratio
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3.Absolute Liquid Ratio / Cash Ratio
It shows the relationship between absolute liquid or super quick current assets and liabilities.
Absolute liquid assets include cash, bank balances, and marketable securities. The most
favourable and optimum value for this ratio should be 1: 2. It indicates the adequacy of the 50%
worth absolute liquid assets to pay the 100% worth current liabilities in time. If the ratio is
relatively lower than one, it represents the company’s day-to-day cash management in a poor
light. If the ratio is considerably more than one, the absolute liquid ratio represents enough funds
in the form of cash in order to meet its short-term obligations in time.
Absolute liquid ratio = Absolute liquid assets/Current liabilities.
B. Leverage Ratio
The solvency or leverage ratios throws light on the long-term solvency of a firm reflecting its
ability to assure the long-term creditors with regard to periodic payment of interest during the
period and loan repayment of principal on maturity or in predetermined instalments at due dates.
There are thus two aspects of the long-term solvency of a firm.
• Ability to repay the principal amount when due.

• Regular payment of the interest.
The ratio is based on the relationship between borrowed funds and owner’s capital it is computed
from the balance sheet, the second types are calculated from the profit and loss a/c. The various
solvency ratios are;
• Debt equity ratio

• Debt to total capital ratio
• Proprietary (Equity) ratio
• Fixed assets to net worth ratio.
1.Debt Equity Ratio
Debt equity ratio shows the relative claims of creditors (Outsiders) and owners (Interest) against
the assets of the firm. Thus, this ratio indicates the relative proportions of debt and equity in
financing the firm’s assets. It can be calculated by dividing outsider funds (Debt) by shareholder
funds (Equity)
Debt equity ratio = Outsider Funds (Total Debts)/Shareholder Funds or Equity
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The outsider fund includes long-term debts as well as current liabilities. The shareholder funds
include equity share capital, preference share capital, reserves and surplus including accumulated
profits. However fictitious assets like accumulated deferred expenses etc. should be deducted
from the total of these items to shareholder funds. The shareholder funds so calculated are known
as net worth of the business.
2.Proprietary (Equity) Ratio
This ratio indicates the proportion of total assets financed by owners. It is calculated by dividing
proprietor (Shareholder) funds by total assets.
Proprietary (equity) ratio = Shareholder funds/Total assets
This ratio shows the financial strength of the company. It helps the creditors to find out the
proportion of shareholders fund in the total assets. Higher ratio indicates a secured position to
creditors and a low ratio indicates greater risk to creditors. It indicates the long term solvency of
the firm.
3.Fixed Assets to Net Worth Ratio
This ratio establishes the relationship between fixed assets and shareholder funds. It is calculated
by dividing fixed assets by shareholder funds.
Fixed assets to net worth ratio = Fixed Assets / Net Worth *100
The shareholder funds include equity share capital, preference share capital, reserves and surplus
including accumulated profits. However fictitious assets like accumulated deferred expenses etc.
should be deducted from the total of these items to shareholder funds. The shareholder funds so
calculated are known as net worth of the business.
4.FixedAssets to Long Term Funds Ratio
Fixed assets to long term funds ratio establish the relationship between fixed assets and long-
term funds and is calculated by dividing fixed assets by long term funds.
Fixed assets to long term funds ratio = Fixed Assets /Long-term Funds*100
C. Turnover Ratio
The relationship between assets and sales is known as assets turnover ratio. Several assets
turnover ratios can be calculated depending upon the groups of assets, which are related to sales.
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• Total asset turnover.
• Net asset turnover
• Fixed asset turnover
• Current asset turnover
• Net working capital turnover ratio
1.Total Asset Turnover
This ratio shows the firm’s ability to generate sales from all financial resources committed to
total assets. It is calculated by dividing sales by total assets.
Total asset turnover = Total Sales/Total Assets
2.Net Asset Turnover
This is calculated by dividing sales by net assets.Net assets represent total assets minus current
liabilities. Intangible and fictitious assets like goodwill, patents, accumulated losses, deferred
expenditure may be excluded for calculating the net asset turnover.
Net asset turnover = Total Sales/Net Assets
3.Fixed Asset Turnover
The ratio indicates the extent to which the investments in fixed assets contribute towards the
sales. If compared with the previous year it indicates that, whether the investment in the fixed
assets has been judicious or not.
Fixed asset turnover = Total Sales/Net Fixed Assets
4.Current Asset Turnover
The sales to current asset ratio is best measured over several periods and needs to be compared to
industry averages as the amount of current asset widely among industries. It is divided by
calculating sales by current assets
Current asset turnover = Total Sales/Current Assets
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D. Profitability Ratio
The profitability ratio of the firm can be measured by calculating various profitability ratios.
General two groups of profitability ratios are calculated.
a. Profitability in relation to sales. (General profitability ratios)
b. Profitability in relation to investments. (Overall profitability ratios) Profitability in return on

sales;
1. Gross profit margin or ratio
2. Net profit margin or ratio
3. Operating profit margin or ratio
1. Gross Profit Margin or Ratio
It measures the relationship between gross profit and sales. It is calculated by dividing gross
profit by sales. Gross profit is the difference between sales and cost of goods sold.
Gross profit margin or ratio = Gross profit /Net sales *100
2. Net Profit Margin or Ratio
It measures the relationship between net profit and sales of a firm. It indicates management’s
efficiency in manufacturing, administrating, and selling the products. It is calculated by dividing
net profit after tax by sales.
Net profit margin or ratio = Earnings after tax /Net Sales *100
3.Operating Profit Margin or Ratio
It establishes the relationship between total operating expenses and net sales. It is calculated by
dividing operating expenses by the net sales. Operating expenses includes cost of goods
produced/sold, general and administrative expenses, selling and distributive expenses.
Operating profit margin or ratio = Operating expenses /Net sales *100
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Profitability in relation to Investment;
1. Return on gross investment or gross capital employed
2. Return on net investment or net capital employed
3. Return on shareholder’s investment or shareholder’s capital employed.
1. Return on Gross Investment
This ratio establishes the relationship between net profit and the gross capital employed. The term
gross capital employed refers to the total investment made in business. The conventional
approach is to divide Earnings After Tax (EAT) by gross capital employed.
Return on gross capital employed = Earnings after Tax (EAT) /Gross capital employed
*100
2. Return on Capital Employed
It is calculated by dividing Earnings before Interest & Tax (EBIT) by the net capital employed.
The term net capital employed is the gross capital in the business minus current liabilities. Thus,
it represents the long-term funds supplied by creditors and owners of the firm.
Return on net capital employed = Earnings before Interest & Tax (EBIT) /Net capital
Employed*100
3. Return on Share Capital Employed
This ratio establishes the relationship between earnings after taxes and the shareholder
investment in the business. This ratio reveals how profitability the owners’ funds have been
utilized by the firm. It is calculated by dividing Earnings after tax (EAT) by shareholder capital
employed.
Return on share capital employed = Earnings after tax (EAT) /Shareholder capital employed *100
45
3.2 AN OVERVIEW OF EARLIER STUDIES
The review of literature guides the researchers in getting a better understanding of the
methodology used, limitations of various available estimation procedures and databases, and
lucid interpretation and reconciliation of the conflicting results. Besides this, their view of
empirical studies explores the avenues for future and present research efforts related to the
subject matter.
The use of financial statement analysis and interpretation in investment decisions has been
addressed by a series of authors in one way or the other. In some instances, the use of this
analysis to determine the profitability of a company and specifically returns on investment and
optimal management decisions have been stated. This part provides a review of some notable,
theoretical, and empirical research works done by various institutions and researchers.
1. Agarwal B.D (2005) profitability is the measure of the amount by which a company’s
revenues exceed its relevant expenses. Profitability ratios are used to evaluate management’s
ability to create earnings from revenues generating bases within the organization. As per
business, dictionary.com profitability is the ability of a firm to generate net income
consistently. It is often measured by price to earnings ratio. A review of literature and theories
on determinants of profitability explains that the profitability determinants were divided into
two main categories, namely the internal determinants and external determinants. The internal
determinants include management controllable factors such as liquidity, investment in
securities, investment in subsidiaries, loans, and overhead expenditure.
2. Smith (2006) shows that the financial statements as the end product of the financial
statement, that purpose to reveal the financial position of the enterprises the results of its
recent activities and analysis of what has been done with earnings.
3. Robert R Antony (2006) a historical performance engagement is an analysis of a company’s

past and current financial performance and the company's such performance to similarly-sized
industries providing insight into a company’s historical growth, profitability, debt capacity,
and overall liquidity.
46
4. Usha S (2010) analyzed the financial performance of 65 software companies. The study
found that some of the selected ratios have shown inconsistent performance in liquidity,
solvency, efficiency coverage, share related, and profitability ratios throughout the study
period.
5. Khan and Jain (2011) say that the ratio analysis is a widely used tool of financial analysis. It
can be used to compare the risk and return to interpret the financial statement so that strengths
and weakness of a firm by properly establishing a relationship between the items of the
balance sheet and profit and loss account. Financial analysis can be undertaken by the
management of a firm or by parties outside the firm, viz. owners, creditors, investors, and
others.
6. Sathe (2011) The financial analysis of sugar unit was done by using Ratio Analysis technique
and analyzed previous five years financial statements from 2004-05 to 2008-09. It was
observed that the particular unit needs to improve its liquidity position and should utilize its
financial resources which help increase the profitability of the sugar unit.
7. Farhan, Raza, and Akram (2011) ranked the venture capital companies operating in
Pakistan during the period of 2006-2009 based on their financial performance. Ratio analysis
technique was used to rank the venture capital companies using profitability/efficiency ratios
and total assets as proxies of financial performance. This study concludes that TRG Pakistan
Limited is at first in ranking based on the return of assets (ROA), return on equity (ROE), and
total assets, and at second on the base of earnings per share (EPS). AMZ Ventures Limited is
at first on the base of earnings per share (EPS), at second in ranking based on return on assets
(ROA), return on equity (ROE), and total assets. TMT Ventures Limited is third based on all
ratios and total assets. This is the first attempt that was made to facilitate the students,
investors, and management of the company with useful information regarding
financial performance of all venture capital companies operating in Pakistan.
8. Rapheal Nisha (2013) the author tries to evaluate the financial performance of the Indian tire
industry. The study was conducted for the period 2003-04 to 2011-12 to analyze the
performance with financial indicators, sales trends, export trend, production trend, etc. The
result suggests the key to success in the industry is to improve labor productivity and
flexibility and capital efficiency.
47
9. Dr. V.P.T. Dhevika, Dr. O.T.V Latasri, and H. Gayathri (2013) carried out financial
performance analysis of CITY UNION BANK using ratio analysis technique. They measured
the parameters like liquidity, solvency, profitability, and borrowings of the bank for a period
of five years. The paper concluded that the bank has been able to grow its market share and
has been able to meet its higher working capital requirements and increased volume of its
operations.
10. Hema A.S (2014) undertook a study to analyze the financial performance of one of the
leading companies in the IT sector, Tata Consultancy Services Ltd, for the study period of ten
years from 2004-05 - 2014 The researcher used tools like ratio analysis, mean, standard
deviation, compound annual growth rate, and multiple regression analysis. The study
evidence was that both short term and long-term liquidity position of TCS was good. The
Company had efficiently managed its net worth and total assets for maximizing the profits.
The growth of the company in terms of Working capital and Total assets were satisfactory.
11. Idhayajothi. R. et al (2014) the main idea behind this study is to analyze the financial
performance of Ashok Leyland Ltd. at Chennai. The result shows that financial performance
is sound and also suggested improving financial performance by reducing the various
expenses.
12. Rupesh Kumbhaj and Yuvraj Kumbhaj (2014) studied to analyze the financial position of
TCS and Wipro for ratio analysis for a study period of five years from 2008 to 2012. The
study evidence was that the current and future health of TCS was better than that of Wipro
and ratio analysis was a useful tool for users of financial statements as it highlighted
important information in a simple form quickly.
13. Akshita Jain and Subramanyam Ganti (2015) undertook a study to demonstrate the use of
the Taxonomic Method designed by Polish Mathematicians. The paper investigated the
performance of 20 IT companies in India in light of 10 financial indicators. The purpose of
this research was to integrate and extend the method of evaluating the company's performance
based on various indicators. Ten performance indicators used by researchers for analysis were
EPS, current ratio, net profit, sales ratio, Net profit ratio, Turnover, Expense ratio, Return on
assets, Enterprise value, and wages to sales ratio. The research evidence was that WIPRO was
48
the best performer and more profitable out of the set of 20 companies while cluster analysis
summarised that TCS was the only one in its category, whereas, WIPRO and Infosys were
almost identical companies.
14. Maheswari, V. (2015) attempted to analyze the financial soundness of Hero honda motors
limited have identified three factors, namely liquidity position, solvency position, and
profitability position based on the study of the period 2002 to 2010 using ratio analysis.
15. Asma Khan and Jyoti Singhal (2015) made a study to analyze the performance of selected
three IT companies, namely, HCL technologies, Tech Mahindra and Wipro in terms of ratios
for a study period of five years from 2010 to 2014. The research evidence was that the
performance of HCL Technologies was satisfactory except in Return on net worth and Return
on long term funds, whereas in the case of Tech Mahindra, Return on net worth and Return
on long term funds were satisfactory. Wipro showed an average performance during the study
period.
16. Siddhartha Sankar Saha and Mitrendu Narayan Roy (2015) undertook a study to analyze
the business performance of the Indian Computer software industry for a study period of ten
years from 2003-04 to 2012-13 of ten select companies. The research evidence that, Tata
Consultancy Services (TCS), Infosys, and Wipro were the top companies in terms of their
ROI and EVA.
17. MahendraMaisuria and IdrishAllad (2016) in their study evidenced that the financial
performance of Oracle Fin Services was very satisfactory in terms of Net Profit ratio and EPS
but its Net worth Ratio and return on Capital Employed are not so sound.
18. K.P. Venugopala Rao and Farha Ibrahim (2017) conducted a financial performance
analysis of IDBI bank. The said analysis was done by ratios and for the period from the year
2011-2012 to 2015-2016. They found out that employment of assets and solvency of bank
was in tune with the industry average. It also concluded that banks should improve upon their
performance in deposits that provide cheaper funds.
19. Pavithra et al., (2017) in her “study on the analysis of financial performance with reference
to Jeppiaar Cements Pvt Ltd”. The study has been carried out for a period of 5 years and it is
49
not sufficient enough to analyze the entire aspect of the company. The objective of their study
is the overall profitability position, trend financial analysis of the company. It can be
suggested that the company must be made more vigilant to maintain or improve the present
situation because if there is any further fall in the current ratio. It may be a serious problem
for the company. The study concluded that the company's overall financial performance
normal. The current assets have to properly maintain to bring the current ratio to normal.
20. Sharmila. P (2019) This research paper examines the financial performance of Hindustan
Unilever Limited (HUL) using ratio analysis such as Liquidity, Solvency, Profitability, and
Trend analysis of the company. To analysis, the financial performance of the company's last
five years data is collected for the study. It is suggested that the company should maintain the
share capital to pay a dividend to the shareholders. The company can concentrate more on
reserves for the expansion of the business in the future and the current assets should be
increased to improve the liquidity position of the company.
21. Dr. Seema Thakur (2019) Based on her study; findings have been reached that the company
has got enough funds to encounter its obligations including debts & as well as liabilities. The
income statement of Dabur India Limited shows sales of the company improved every year at
a good rate and profit also greater than before every successive year.
22. Mr. R. Ramachandran, Mr. P. Kandhakumar, Dr. P. Kannadas (2019) This research is
undertaken “A study on Financial Performance Analysis of Alangulam Primary Agriculture
Cooperative Credit Society (PACCS)”. The various tools used for ratio analysis, regression
analysis, comparative balance sheet, common size balance sheet, time series analysis.
Through the analysis of the study, it finds out the increase and decreases position in a
particular field of the PACCS.
23. VasaniSureshbhai Vithalbhai (2020): “Financial Performance of Banks in India: A Study of

Selected Private Sector Banks”. This study aims to evaluate the performance of selected
private sector Banks in India. The aim is also to study the profitability performance of private
sector banks.
24. Sunaina Dubey, Yogesh Puri (2021): “A Study on Financial Performance of Selected Public
and Private Sector Banks – A Comparative Analysis”. This study analyses the financial
50
performance of selected public sector banks in India using the CAMEL Approach. A satisfied
employee commits himself to work. In the present study, Indian banks- five public and five
private sector banks based on their total assets have been considered. This case has taken up
for five years from 2015-20. The present study analyses the financial performance of the
select banks. Five parameters of CAMEL-Capital Adequacy, Asset Quality, Management
Efficiency, Earning Ability, and Liquidity are considered to rank the banks on their
performance.
3.3 UNIQUENESS OF RESEARCH STUDY

Finance is a crucial part of any business. Many of the previous studies are focus on the
performance evaluation of selected IT Companies. The above kinds of literature clearly state that
many studies have been done on profitability, financial performance, and liquidity analysis of
various industries. The present study mainly concentrated on analyzing and evaluating the overall
financial efficiency of Wipro Ltd and the financial trend of the company for a period of five
years.
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CHAPTER 4
METHODOLOGY OF THE STUDY
52
4.1 METHODOLOGY OF THE STUDY
The study of financial performance of Wipro Limited is analytical and descriptive in nature using
mainly secondary data. Secondary data has been collected from the company records, various
magazines, journals, reports, and websites of the company.
4.2 SOURCES OF DATA

• Annual reports published by the company.
• Company website
• Publications, Journals, and other official records
• Theoretical part from the reference books
4.4 DATA ANALYSIS TOOLS

The data of WIPRO LIMITED for the year (2015-2016 to 2019-2020) used in this study has been
taken from secondary sources i.e., from published annual reports of the company. Editing
classification and tabulation of the financial data, which are collected from the abovementioned
sources, have been done as per the requirement of the study. For assessing the financial
performance analysis, in this study the following techniques are used:
➢ 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.
➢ Trend Analysis: It is a technique of studying the operational results and financial position over
a series of years.
➢ Comparative Analysis: These are the statements showing the profitability and financial
position of a firm for different periods in a comparative form to give an idea about the position of
two or more periods.
➢ Common Size Statement: A common size financial statement displays items as a percentage of
a common base figure, total sales revenue, or total assets, for example. This type of financial
statement allows for easy analysis between companies, or between periods, for the same
company. This analysis is also known as ‘Vertical analyses.
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4.5 REPORT STRUCTURE
This project work is divided into the following chapters:
Chapter 1- Introduction.
Chapter 2- Industry profile
Chapter 3- Review of Literature
Chapter 4- Methodology of the study
Chapter 5- Analysis of the financial performance of WIPRO Limited
Chapter 6- Findings of the Study
Chapter 7- Conclusion.
4.6 LIMITATIONS OF THE STUDY
➢ Due to the outbreak of a pandemic disease (COVID 19), deep and effective study cannot be
possible.
➢ The study is purely based on secondary data which were taken from Published annual reports
of WIPRO.
➢ The ratio is calculated from past financial statements and these are not indicators of the
future.
➢ The study is based on the data in the Balance Sheet and Profit & Loss Account of the
company and the accuracy directly depends on source bias.
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CHAPTER 5
DATA ANALYSIS, INTERPRETATION & INFERENCE
55
5.1 DATA ANALYSIS
Researchers often find data analysis the most enjoyable part of carrying out a research study,
since after all the hard work and waiting they get a chance to find out the answers. So, analyzing
the data and interpreting the results are the reward of the work of collecting data.
It is used in all of the sciences; it is used in business, administration, and policy. Data do not,
however, “speak for themselves”. They reveal what the researcher can detect. Analysis,
especially in the case of survey or experimental data involves converting raw data into
information, which is meaningful. As with most other aspects of a study, analysis and
interpretation of the study should relate to the study objectives and research questions.
TOOLS USED FOR ANALYSIS
5.1 RATIO ANALYSIS
Ratio Analysis is one of the most powerful tools of financial analysis. It is an important old
technique. Ratios are designed to show how one number is related to another. The data given in
the financial statement are in absolute form and are dump and are unable to communicate
anything. Ratios are a relative form of financial data and are a very useful technique to check
upon the efficiency of the firm. Some ratios indicate the trend and progress or downfall of the
firm. Ratio analysis is an important and widely used tool of analysis of financial statements.
In the view of requirements of the various users of the ratio, it is divided into the following
important categories:
➢Liquidity ratio
➢Leverage ratio
➢Activity ratio
➢Profitability ratio
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➢LIQUIDITY RATIOS
Liquidity ratios measure the ability of the firm to meet its current obligation. It includes:
5.1.1 CURRENT RATIO
Current ratio is the most common ratio for measuring liquidity. It represents the ratio of current
asset to current liabilities. It is also called working capital ratio.
Current ratio = Current Assets
Current liabilities
TABLE 5.1.1 CURRENT RATIO
YEAR CURRENT CURRENT CURRENT RATIO

ASSETS LIABILITIES
2015-2016 398555 173653 2.29
2016-2017 450287 166071 2.71
2017-2018 487271 138399 3.52
2018-2019 429673 150359 2.85
2019-2020 477304 161446 2.95

Average 2.39
INTERPRETATION
From the above analysis, it was found that the current ratio of WIPRO LIMITED in the year
2015- 2016 is 2.29 in the year 2016-2017 increased to 2.71 again increased to 3.52 in the year
2017-2018. But in the year 2018-2019 it was decreased to 2.85 and in the year 2019-2020, it
57
increased to 2.95. The ideal current ratio is 2:1. Here the current ratio is above 2:1 so the current
ratio is at a highly satisfactory level. So, the liquidity position of WIPRO LIMITED is highly
appreciable.
INFERENCE
The ideal current ratio is 2:1. In this analysis, the average current ratio is 2.39 which is more than
the ideal ratio so the liquidity position is sufficient.
5.1.2 QUICK RATIO
This ratio is also known as Acid test ratio or Liquid ratio. It is the best measure of the liquidity of
the company. It shows the ability of business to meet its immediate financial commitments.
Quick ratio is more conservative than the current ratio. The quick asset is computed by adjusting
current asset to eliminate those assets which are not in cash.
Quick ratio /Acid Test Ratio = Quick Assets/Current liabilities
TABLE 5.1.2 QUICK RATIO
YEAR QUICK ASSET CURRENT QUICK RATIO

(Cr.) LIABILITY
(Cr.)
2015-2016 558290 173653 3.21
2016-2017 471390 166071 2.84
2017-2018 551400 138399 3.10
2018-2019 476060 150359 3.17
2019-2020 903590 161446 5.60
Average 3.58
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Interpretation:
Quick ratio is the test of business solvency. The standard quick ratio is 1:1. A higher ratio
indicates sound financial position, here the ratios are 3.21, 2.84, 3.10, 3.17, 5.60 and the average
ratio is 3.58. We can conclude that firm has not in a position to meet its current liabilities
immediately or within a month.
5.1.3 ABSOLUTE LIQUIDITY RATIO

This ratio is obtained by dividing cash and marketable securities by current liabilities. It is also
known as the cash position ratio.
Absolute Liquidity Ratio = Cash + Marketable securities

Current Liabilities
TABLE 5.1.3 ABSOLUTE LIQUIDITY RATIO
YEAR CASH AND BANK CURRENT ABSOLUTE

BALANCE LIABILITIES LIQUIDITY
RATIO
2015-2016 156675 173653 0.9
2016-2017 120078 166071 0.72
2017-2018 35166 138399 0.25
2018-2019 23220 150359 0.15
2019-2020 103902 161446 0.64
Average 2.66
59
INTERPRETATION
Maintaining liquidity is very difficult considered to a firm. The ratio of 0.75:1 is considered ideal
for an enterprise to meet liabilities. The ratio of WIPRO LIMITED is not an ideal one. The
analysis shows the absolute liquidity ratio of WIPRO LIMITED was 0.9 in 2015-16 and the ratio
was decreased in the year 2016-17 as 0.72 again decreased to 0.25 the in the year 2017-18 and in
the year 2018-19 ratio became 0.15. But the ratio shows an increase of 0.64 in 2019-20 So, the
liquidity position of WIPRO LIMITED is not satisfactory.
INFERENCE
The ideal absolute liquidity ratio is 1:2. In this analysis, the ratio is 0.64 in the year 2019-20. So,
the absolute liquidity is not satisfactory.
5.1.4 SOLVENCY RATIO / LEVERAGE RATIO

Solvency means the ability of the business to repay its outside liabilities in the long run. Solvency
ratios are meant to measure the long-term financial position of the business.
5.1.4 DEBT – EQUITY RATIO
Debt – equity ratio expresses the relationship between debt and equity. Debt – equity ratio is
computed by dividing total debt by net worth.
Debt – Equity Ratio = Debt
Equity
60
TABLE 5.1.4 DEBT-EQUITY RATIO
YEAR DEBT EQUITY DEBT- EQUITY
RATIO
2015-2016 187869 346216 0.54
2016-2017 182713 409052 0.44
2017-2018 164513 467056 0.35
2018-2019 164087 422626 0.38
2019-2020 176061 493920 0.35
Average 0.41
INTERPRETATION
From the above analysis, it was found that the Debt equity ratio of WIPRO LIMITED was 0.54 in
the year 2015-16 and was decreased to 0.44 in the year 2016-17 and again decreased to 0.35 in
2017-18 and increased to 0.38 in the year 2018-19. Then it again decreased to 0.35 in 2019-20.
This analysis shows that portion of assets provided by a shareholder is greater than the portion of
assets provided by creditors. The ratio shows the satisfactory capital structure of the firm. Then
the outside debt is 0.35 times their owners’ equity. A ratio of less than 2 is considered
satisfactory.
INFERENCE
An acceptable norm for this ratio is considered to be 2:1. A lower ratio shows that the portion of
assets provided by a shareholder is greater than the portion of assets provided by creditors. Here,
the lower ratio is favourable from the point of view of the firm.
61
5.1.5 PROPRIETARY RATIO
The proprietary ratio relates to the shareholders’ fund to total assets. This ratio shows the long-
term solvency of the business. The total assets include all assets including goodwill (excluding
fictitious assets). The acceptable norm of the ratio is 1:3. A high proprietary ratio indicates a
strong financial position of the company and greater security for creditors. A low ratio indicates
that the company is already heavily dependent on debts for its operations.
Proprietary Ratio = Shareholders Fund

Total Assets
TABLE 5.1.5 PROPRIETARY RATIO
YEAR SHAREHOLDERS TOTAL ASSET PROPRIETARY

FUND
RATIO
2015-2016 346216 534085 0.65
2016-2017 409052 591765 0.70
2017-2018 467056 631569 0.74
2018-2019 422626 586713 0.72
2019-2020 493920 669981 0.74
Average 0.71
62
INTERPRETATION
The proprietary ratio reveals that how much funds are contributed by the owners in financing the
asset of the firm. From the above analysis, it was found that in the year 2015-16 out of total
shareholders’ contribution used in business about 69% of the total liabilities. The proprietary
ratio of WIPRO LIMITED shows an increasing trend in the year 2014-15 to 2017-18 and a
decreasing trend in the year 2018-19 but again it increased to 0.74 in the year 2019-20. A high
proprietary ratio indicates a strong financial position of the company and greater security for
creditors.
INFERENCE
The acceptable norm of the ratio is 1:3. The proprietary ratio of WIPRO LIMITED shows an
increasing trend in the year 2015-16 to 2017-18 and a decreasing trend in the year 2018-19, but
again it increased to 0.74 in the year 2019-20. Having a very high proprietary ratio does not
always mean that the company has an ideal capital structure. A company with a very high
proprietary ratio may not be taking full advantage of debt financing for its operations that is also
not a good sign for the stockholders.
5.1.6 FIXED ASSET TO NET WORTH RATIO
This ratio shows the relationship between fixed assets and shareholders’ fund. The purpose of this
ratio is to find out the percentage of the owners’ fund is invested in fixed assets such as property,
plant and equipment, and the extent to which funds are available for the company’s operation. If
the ratio is greater than 1, it means that creditor’s funds have been used to acquire a part of the
fixed assets.
Fixed assets to net worth ratio = Fixed Assets / Shareholders fund
63
Table 5.1.6FIXED ASSETS TO NET WORTH RATIO
YEAR FIXED ASSET SHAREHOLDERS RATIO

(Cr.) FUND (Cr.)
2015-2016 39312 346216 0.59
2016-2017 40513 409052 0.45
2017-2018 44496 467056 0.39
2018-2019 50932 422626 0.37
2019-2020 59869 493920 0.36
Average 0.432
Interpretation:
If the ratio is greater than one, it means that creditors fund has been used to acquire a part of
fixed asset. The average ratio of the company is 0.432, here the ratios are very much
satisfactory. So, we can conclude that Maruti Suzuki India Ltd does not need creditors fund
for acquiring fixed asset.
➢ ACTIVITY RATIOS
Activity ratios measure how efficiently assets are employed by the firm. These ratios indicate the
speed with which assets are converted into sales. These ratios are also called efficiency ratios. It
includes:
5.1.7 FIXED ASSET TURNOVER RATIO

This ratio indicates the extent to which the investment in fixed assets contributes towards sales.
Fixed assets turnover ratio = Net sales / Income

Fixed assets
64
TABLE 5.1.7 FIXED ASSET TURNOVER RATIO
YEAR NET SALES/ FIXED ASSETS FIXED ASSET TURNOVER

INCOME RATIO
2015-2016 437088 39312 11.11
2016-2017 474561 40513 11.71
2017-2018 486178 44496 10.92
2018-2019 471896 50932 9.26
2019-2020 506924 59869 8.46
Average 10.29
INTERPRETATION
From the above figure it was found that the fixed asset turnover ratio of WIPRO LIMITED in
the year 2015-16 was 11.11 and then increased to 11.71 in 2016-17. But in the year 2017-18 the
ratio was decreased as 10.92 Again in 2018-19 it was decreased to 9.26. And in the year 2019-
20 it decreased to 8.46 which shows that the company was over investing in the fixed asset of
the company.
INFERENCE
The fixed asset turnover ratio decreased in 2019-20 as 8.46. It shows that the company was over
investing in the fixed asset of the company.
5.1.8 CURRENT ASSET TURNOVER RATIO
Current assets ratios indicate the efficiency with which current assets turns into sales. A high
ratio implies that the current assets are being utilized efficiently by the firm and also indicates
reduced lock up of funds in current assets. An analysis of this firm over a period of time reflects
working capital management of the firm.
Current Asset Turnover Ratio = Net Sales

Current
TABLE 5.1.8 CURRENT ASSET Assets
TURNOVER RATIO
65
TABLE 5.1.8 CURRENT ASSET TURNOVER RATIO
YEAR NET SALES/ INCOME CURRENT CURRENT ASSET

TURNOVER RATIO
ASSETS
2015-2016 437088 398555 1.09
2016-2017 474561 450287 1.05
2017-2018 486178 487271 0.99
2018-2019 471896 429673 1.09
2019-2020 506924 477304 1.06
Average 1.056
INTERPRETATION
From the above figures, it was found that the Current asset turnover ratio of WIPRO LIMITED in
the year 2015-16 was 1.09 and then decreased in the remaining years. In the year 2018-19, the
ratio was increased to 1.09. And again, it decreased to 1.06 in 2019-20. It shows the overall sale
of the company was higher than the current asset of the company.
INFERENCE
The Current asset turnover ratio increased in 2019-20 as 1.06. It shows the overall sale of the
company was higher than the current asset of the company.
5.1.9 WORKING CAPITAL TURNOVER RATIO

This ratio reflects the turnover of the firm’s net working capital in the year. It is a good measure
of over - trading and under – trading.
Working capital Turnover Ratio = Net Sales / Income

Working Capital
66
TABLE 5.1.9 WORKING CAPITAL TURNOVER RATIO
YEAR NET SALES/ WORKING WORKING

INCOME CAPITAL CAPTAL
TURNOVER RATIO
2015-2016 437088 224902 1.94
2016-2017 474561 284216 1.66
2017-2018 486178 348872 1.39
2018-2019 471896 279314 1.68
2019-2020 506924 315858 1.60
Average 1.654
INTERPRETATION
From the above figure, the working capital turnover ratio of WIPRO LIMITED is 1.94 in the year
2015-16. In the year 2016-17, the ratio is decreased to 1.66. In the year 2017-18, the ratio again
decreased to 1.39. In the year 2018-19, the ratio is 1.68 and it then decreased to 1.6 in 2019-20.
Here the sales substantially increased but at the same time, the networking capital also gets
increased.
INFERENCE
As the table shows working capital is positive. The working capital turnover ratio is more in the
year 2015-16 and less in the year 2017-18.
67
➢PROFITABILITY RATIOS
Profitability is an indication of the efficiency on which the operations of the business are carried
on. Poor operational performance may indicate poor sales and hence low profit. It includes:
5.1.10 GROSS PROFIT RATIO

The gross profit ratio plays an important role in two management areas. In the area of financial
management, the ratio serves as a valuable indicator of the firm ability to utilize effectively
outside source of funds. The ratio expected the relation between the gross profit and sales. The
ratio is calculated by gross profit by net sales.
Gross Profit Ratio = Gross Profit × 100 Net sales / Income
TABLE 5.1.10 GROSS PROFIT RATIO
YEAR GROSS PROFIT NET SALES / GROSS PROFIT

INCOME RATIO
2015-16 105570 437088 24.15
2016-17 104821 474561 22.08
2017-18 106871 486178 21.98
2018-19 100343 471896 21.26
2019-20 98705 506924 19.47
Average 21.78
68
INTERPRETATION
Mostly higher gross profit ratio is considered better. The above table shows the relationship
between the gross profit and net sales in percentage. In 2015-2016 the gross profit was 24.15 and
it decreasing to 22.08, 21.98 in the next two years and increasing to 21.26, 19.47 in the last two
years. The average ratio is 21.78.
INFERENCE
The net profit ratio was decreased in the year 2019-20 as 19.47 because the sales were higher
than the net profit of the company.
5.1.11 NET PROFIT RATIO
Net profit ratio is a measure of the overall profitability. A firm with a high net profit ratio is in an
advantageous position to survive in the face of rising cost of production and falling selling prices.
Net profit margin or ratio = Net Profit / Net Sales
Table 5.1.11 Net Profit Ratio
YEAR NET PROFIT NET SALES NET PROFIT

(Cr.) (Cr.) RATIO
2015-2016 81931 437088 0.18
2016-2017 80990 474561 0.17
2017-2018 80990 486178 0.16
2018-2019 77228 471896 0.16
2019-2020 76140 506924 0.15
Average 0.164
69
Interpretation:
This ratio is used to measure the overall profitability and hence it is very useful to proprietors.
Here the ratio shows increasing trend year after year so operational efficiency of the concern
reaches the highest level in the year 2017-2018 and 2018-2019 and efficiency of the concern is
very poor in the year 2015–2016.This fluctuating trend indicate the need of cost management and
sales promotion
5.2 TREND ANALYSIS

Trend signifies tendency. Trend ratio is also an important tool of horizontal financial analysis.
Under this technique of financial analysis, the ratios of different items for various periods are
calculated and then a comparison is made.
Trend Percentage = Current year amount × 100 Base year amount
A. The table showing the trend for NET PROFIT from 2015-16 to 2019-20
TABLE 5.1.12
NET PROFIT
Year X Y XY X2
2015-2016 1 81931 81931 1
2016-2017 2 80990 161980 4
81617
2017-2018 3 244851 9
77228
2018-2019 4 308921 16
2019-2020 5 76140 380700 25
Total 15 397906 1178383 55
70
FIGURE 1
NET PROFIT FROM 2015-16 TO 2019-20
NET PROFIT
83000
82000
81000
80000
79000
78000
NET PROFIT
77000
76000
75000
74000
73000
2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
Interpretation: The net profit shows a gradual increase from 2015-2016 and reaches the
maximum in the year 2019-2020.
Y= a + bX
Where,
b = N*∑XY - ∑X∑Y
N*∑X2 -∑(X)2
= 5*1178383 – 15*397906
5* 55 – (15*15)
= 5*1178383 – 15*397906
5* 55 – 225
= 5*1178383 – 15*397906
275 – 225
71
= 5891915 – 5968590
275 – 225
b = - 1533.5
a= ∑Y - b (∑X)
N
= 397906 + 1533.5 * 6
5
= 397906 + 23002.5
5
= 420908.5
5
a = 84181.7
Profit for the year 2021- 2022 to 2025- 2026
Y= a+bX
• 2021 – 2022
Y = 84181.7 + 1533.5 * 6
= 84181.7+ 9201
= 93382.7
• 2022 – 2023
Y = 84181.7 + 1533.5 * 7
= 84181.7+ 10734.5
= 94916.2
72
2023 – 2024
Y = 84181.7 + 1533.5 * 8
= 84181.7+12268
= 96449.7
• 2024 – 2025
Y = 84181.7 + 1533.5 * 9
= 84181.7+13801.5
= 97983.2
• 2025 – 2026
Y = 84181.7 + 1533.5 * 10
= 84181.7+15335
= 99516.7
73
Table 5.1.13
Estimated profit from 2021-2022 to 2025-2026
YEAR PROFIT
2021-2022 93382.7
2022-2023 93382.7
2023-2024 96449.7
2024-2025 97983.2
2025-2026 99516.7
Figure .2
Future Profit
PROFIT
100000
99000
98000
97000
96000
95000
PROFIT
94000
93000
92000
91000
90000
2021-2022 2022- 2023 2023-2024 2024-2025 2025-2026
74
Interpretation:
From the past data (2015-2016 to 2019 -2020) of the trend of net profit is estimated for the
next five years (2021-2022 to 2025-202) the graph shows that the movement of net profit
has a positive trend in the future.
B. The table showing the trend for net sales from 2014-2015 to 2018-2019
Table 5.1.14
Net Sales
YEAR X Y XY X2
2015-2016 1 437088 437088 1
2016-2017 2 474561 949122 4
2017-2018 3 486178 1458534 9
2018-2019 4 471896 1887584 16
2019-2020 5 506924 2534620 25
TOTAL 15 2376647 7266948 55
Figure .3
Sales trend from 2015-2016 to 2019-2020
SALES
3000000
2500000
2000000
1500000
SALES
1000000
500000
0
2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
75
Interpretation:
The sales show a gradual decrease from 2015-2016 to 2019-2020
Y= a + bX
Where,
b = N *∑XY - ∑X∑Y
N *∑X 2 - ∑(X) 2
= 5*7266948 – 15*2376647
5*55 - (15*15)
= 36334740 – 35649705
275 – 225
= 685035
50
b = 137007
a= ∑Y - b (∑X)
N
= 2376647 – 137007 * 15
5
= 321542 – 2055105
5
= -1733563
5
= -346712.6
76
Sales for the year 2021-2022 to 2025-2026
Y= a + bX
• 2021 - 2022
Y = -346712.6 + 137007*6
= -346712.6 + 822042
= 475329.4
• 2022 – 2023
Y = -346712.6 + 137007*7
= -346712.6 + 959049
= 612336.4
• 2023 – 2024
Y = -346712.6 + 137007*8
= -346712.6 + 1096056
= 749343.
• 2024 – 2025
Y = -346712.6 + 137007*9
= -346712.6 + 1233063
= 886350.4
• 2025 – 2026
Y = -346712.6 + 137007*10
= -346712.6 + 1370070
= 1023357.4
77
Table 5.15
Estimated sales for 2019-2020 to 2023-2024
YEAR SALES
2021 – 2022 475329.4
2022 – 2023 612336.4
2023 – 2024 749343.4
2024 – 2025 886350.4
2025 - 2026 1023357.4
Figure 4
Future Sales
SALES
1200000
1000000
800000
600000
SALES
400000
200000
0
2021-2022 2022-2023 2023-2024 2024-2025 2025-2026
78
Interpretation:
From the past data (2015-2016 to2019-2020) the trend of net sales is estimated for the next
five years (2021-2022 to 2025-2026) the graph shows that the movement of net sales for the
future has a positive trend.
79
COMPARATIVE STATEMENT ANALYSIS
Comparative Balance Sheet of Wipro Ltd, year ended March 2015-2016 and 2016-2017
Particulars 2015 - 2016 2016 - 2017 Inc/Dec % of

changes
Equity and liabilities

Share capital 4937 4941 4 0.08
Reserves and surplus 341279 404111 62832 18.41
Non- current liabilities

Long term borrowing 10632 11465 833 7.83
Deferred tax liabilities 567 722 155 27.34
Other long term liabilities 281 464 183 65.12
Long term provision 2736 3991 1255 45.87
Current liabilities
Short term borrowing 49704 55495 5791 11.65
Trade payable 57288 59931 2643 4.61
Other current liabilities 25511 26652 1141 4.47
Short term provision 41150 23993 (17157) (41.69)
Total 534085 591765 57680 10.80
Assets
Non- current asset
Fixed asset
Tangible Assets 35700 37262 1562 4.37
Intangible assets & goodwill 4684 4625 (59) (1.25)
Capital work in progress 3612 3251 (361) (9.99)
Non- current investment 55797 57328 1531 2.74
Deferred tax assets 1659 2904 1245 75.05
80
2874
Long term loans and advances 30710 33584 (844) 9.36
Other non- current asset 3368 2524 (25.06)
Current asset 75414
Current investment 51888 127302 468 14.34
Inventories 4794 5262 5606 9.76
Trade receivable 81442 87048 (36597) 6.88
Cash and cash equivalents 156675 120078 2434 (23.36)
Short term loans and advances 52561 54995 4407 4.63
Other current asset 51195 55602 8.61
Total 534085 591765 57680 10.80
81
Particulars 2016-2017 2017-2018 Inc/Dec % of

changes

Share capital 4941 4861 (80) (1.62)

Long term borrowing 11465 11463 (2) (0.02)
Deferred tax liabilities 722 1391 669 92.66
Long term provision 3991 3733 (258) (6.46)
Current liabilities
Short term borrowing 55495 50186 (5309) (9.57)
Trade payable 59931 38186 (21745) (36.28)
Short term provision 23993 6269 (17724) (73.87)
Total 591765 631569 39804 6.73
Assets
Non- current asset
Fixed asset
Tangible Assets 37262 37555 293 0.79
Intangible assets & goodwill 4625 6067 1442 31.18
Capital work in progress 3251 6941 3690 113.50
Deferred tax assets 2904 2352 (552) (19.01)
Long term loans and advances 33584 7649 (25935) (77.22)
82
Other non- current asset 2524 23740 21216 840.57
Current asset
Inventories 5262 3559 (1703) (32.36)
Trade receivable 87048 81299 (5749) (6.60)
Cash and cash equivalents 120078 35166 (84912) (70.71)
Short term loans and advances 54995 50660 (4335) (7.88)
Other current asset 55602 25110 (30482) (54.82)
Total 591765 631569 39804 6.73
83

changes
Share capital 4861 9048 4187 86.13

Reserves and surplus 462195 413578 (48617) (10.52)

Deferred tax liabilities 1391 463 (928) (66.71)
Current liabilities
Short term borrowing 50186 46477 (3709) (7.39)
Trade payable 38186 41762 3576 9.36
Short term provision 6269 7934 1665 26.56
Total 631569 7934 (44856) (7.10)

Assets
Non- current asset
Fixed asset
Tangible Assets 37555 38026 471 1.25
Non- current investment 59994 58416 (15.78) (2.63)
Deferred tax assets 2352 4520 2168 92.18
Long term loans and advances 7649 7565 (84) (1.10)
84
Current asset
Current investment 291467 248412 (43055) (14.77)
Inventories 3559 2943 616 17.31
Trade receivable 81299 95020 13721 16.88
Cash and cash equivalents 35166 23220 11946 33.97
Short term loans and advances 50660 36706 13954 27.54
Other current asset 25110 22921 (1748) (6.96)
Total 631569 586713 (44856) (7.10)
85

changes
Share capital 9048 12068 3020 33.38


Deferred tax liabilities 463 104 (359) (77.54)
Current liabilities
Short term borrowing 46477 50522 4045 8.70
Trade payable 41762 47655 5893 14.11
Other current liabilities 54186 53979 (207) (0.38)
Short term provision 7934 9290 1356 17.09
Total 7934 669981 83268 14.19

Assets
Non- current asset
Fixed asset
Tangible Assets 38026 38742 716 1.88
Deferred tax assets 4520 3910 (610) (13.50)
Long term loans and advances 7565 8389 824 10.89
86
Current asset
Inventories 2943 3403 460 15.63
Trade receivable 95020 90463 (4557) (4.80)
Cash and cash equivalents 23220 103902 80682 (347.47)
Short term loans and advances 36706 26756 (9950) (27.11)
Other current asset 22921 32792 9871 43.07
Total 586713 669981 83268 14.19
87
CHAPTER 6
FINDINGS OF THE STUDY
88
6.1 FINDINGS.
1. The ideal current ratio is 2:1. In this analysis the current ratio is 2.95 which is more
than the ideal ratio so the liquidity position is sufficient.
2. In the absolute liquidity ratio analysis, the ratio is 0.64 in the year 2019-20. So, the
absolute liquidity is not satisfactory.
3. Debt Equity Ratio shows that portion of assets provided by shareholder is greater than
the portion of assets provided by creditors.
4. The financial strength of WIPRO LIMITED analyzed through proprietary ratio shows
below average performance. The proprietary ratio of the firm was always below 1
percent. In the year 2015-16 was 0.64 and in the year of 2019-20 it was 0.72.
5. The fixed asset turnover ratio decreased in 2019-20 as 8.46. It shows that the
company was over investing in the fixed asset of the company.
6. The current asset turnover ratio of WIPRO LIMITED shows almost consistent
position. In the year 2017-18 it is lowest and 2018-19 it is at highest.
7. Working capital turnover ratio shows working capital is positive. Working capital
turnover ratio is more in the year 2015-16 and less in the year 2017-18.
8. Gross profit ratio was very high in the year 2015-16 and very low in the year 2019-20
which indicates that special attention of the management is needed.
9. Similarly, Net profit ratio is decreasing year by year which is not at all acceptable.
10. Return on total assets of WIPRO LIMITED was comparatively low in the year
2019-20 and high in the year 2015-2016.
89
6.2RECOMMENDATIONS
1. In the present day, financial performance is a vital aspect, which ultimately decides the
success of the any organization. So Financial Analysis should be done regularly to ensure
business growth.
2. The liquidity ratios need to be worked out and analyzed properly to bring out the
inefficiencies if any in the existing system so that the firm can get higher benefits.
3. The company maintains profitability position but it can improve its profitability position.
It should take necessary steps to improve profitability by utilizing its fixed assets.
4. The study shows that the Net profit ratio is decreasing year by year which is not at all
acceptable so necessary steps should be taken to maintain the profit of the firm.
5. It is suggested that the company should maintain high amount of cash and bank balances
in all financial year. The study reveals that the only limited cash balance is kept for
immediate expenses which is less than the current liabilities.
6. A systematic and well manned working policy should be formulated and put into practice
so that liquidity position of the firm remains stable so that firm can meet its immediate
expenses.
7. Reducing the operating expenditure by effective use of funds helps to increase the
operating income. This further help to increase the profit of the firm.
90
CHAPTER 7
CONCLUSION
91
7.1 CONCLUSION
Financial performance analysis is the process of identifying the financial strengths and
weaknesses of the firm by properly establishing the relationship between the items of balance
sheet and profit and loss account. It also helps in short-term and long-term forecasting and
growth can be identified with the help of financial performance analysis. The main objective
of the study was to evaluate and analyze the profitability and trend analysis relationship of
WIPRO LIMITED. The interpretation tools used ratio analysis, trend analysis and common
size statement etc. The study was conducted with the help of Annual report of the year 2015-
2016 to 2019-2020. The study shows that the company should maintain high amount of cash
and bank balances to meet the current liabilities. There is low liquidity for the firm. The study
shows that the company should reduce the operating expenditure by effective use of funds
helps to increase the operating income thereby improve the profitability of the company. Here
the financial performance of the company is satisfactory and it can be improving. The
liquidity and profitability should maintain good liquid assets.
The study shows that the company was over investing in the fixed asset of the
company, so the company should take necessary steps to maintain the fixed assets. The
current liability for the financial year 2019-20 seems to be an uptrend so it should take care,
otherwise most of the cash and bank balances will be taken off, so to ensure correct amount
of cash and bank balances are kept, current liabilities should be reduced.
Debt Equity Ratio shows that portion of assets provided by shareholder is greater than
the portion of assets provided by creditors. So, the company is having good financial
background. Net profit ratio is decreasing year by year which is not at all acceptable so
necessary steps should be taken to maintain the profit of the firm. otherwise, the company
will not be able to gain profit out of expense.
92
BIBLIOGRAPHY
93
BIBLIOGRAPHY
BOOKS
➢ Khan, M. Y. and Jain, P. K. (2007), Financial Management Text and Problems, 5th
Edition, Tata Mac Grawhill Publishing Ltd., New Delhi.
➢ Pandey L M (2002) “Financial Management”, sixth edition Vikass Publishing house Pvt
Ltd., New Delhi.
➢ Agarwal, B.D; (2005) Advanced financial accounting, New Delhi; Pitambar Publishing
Compan
WEBSITES:
• www.wipro.com
• www.ibef.org
• www.wikipedia.com
• www.investindia.gov.in
• www.shodhganga.inflibnet.ac.in
ANNUALS:
Annual reports of WIPRO LIMITED 2015-16 to 2019-20.
ARTICLES & JOURNALS

• Dr. Thakur Seema 2019 “A Study on Financial Performance Analysis of Dabur India
Limited”, International Journal of Scientific & Engineering Research Volume 10, Issue 9.
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ANNEXURES
96
BALANCE SHEET OF 2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
WIPRO LIMITED
EQUITIES AND
LIABILITIES
SHAREHOLDER'S FUNDS
Equity Share Capital 4,937 4,941 4,861 9,048 12,068
TOTAL SHARE CAPITAL 4,937 4,941 4,861 9,048 12,068
Reserves and Surplus 3,41,279 4,04,111 4,62,195 4,13,578 4,81,578
TOTAL RESERVES AND 3,41,279 4,04,111 4,62,195 4,13,578 4,81,578

SURPLUS
TOTAL SHAREHOLDERS 3,46,216 4,09,052 4,67,056 4,22,626 4,93,646
FUNDS
NON-CURRENT
LIABILITIES
Long Term Borrowings 10,632 11,465 11,463 724 220
Deferred Tax Liabilities [Net] 567 722 1,391 463 104
Other Long-Term Liabilities 281 464 9,527 10,853 1,309
Long Term Provisions 2,736 3,991 3,733 1,688 1,196
TOTAL NON-CURRENT 14,216 16,642 26,114 13,728 2,829

LIABILITIES
CURRENT LIABILITIES
Short Term Borrowings 49,704 55,495 50,186 46,477 50,522
Trade Payables 57,288 59,931 38,186 41,762 47,655
Other Current Liabilities 25,511 26,652 43,758 54,186 53,979
Short Term Provisions 41,150 23,993 6,269 7,934 9,290
TOTAL CURRENT 1,73,653 1,66,071 1,38,399 1,50,359 1,61,446

LIABILITIES
TOTAL CAPITAL AND 5,34,085 5,91,765 6,31,569 5,86,713 6,57,921

LIABILITIES
97
ASSETS
NON-CURRENT ASSETS
Tangible Assets 35,700 37,262 37,555 38,026 38,742
Intangible Assets 4,684 4,625 6,067 5,644 5,268
Capital Work-In-Progress 3,612 3,251 6,941 12,906 21,127
FIXED ASSETS
Non-Current Investments 55,797 57,328 59,994 58,416 82,503
Deferred Tax Assets [Net] 1,659 2,904 2,352 4,520 3,910
Long Term Loans and 30,710 33,584 7,649 7,565 8,389

Advances
Other Non-Current Assets 3,368 2,524 23,740 29,963 32,738
TOTAL NON-CURRENT 1,35,530 1,41,478 1,44,298 1,57,040 1,92,677

ASSETS
CURRENT ASSETS
Current Investments 51,888 1,27,302 2,91,467 2,48,412 2,19,988
Inventories 4,794 5,262 3,559 2,943 3,403
Trade Receivables 81,442 87,048 81,299 95,020 90,463
Cash and Cash Equivalents 1,56,675 1,20,078 35,166 23,220 1,03,902
Short Term Loans and 52,561 54,995 50,660 36,706 26,756

Advances
OtherCurrentAssets 51,195 55,602 25,110 22,921 32,792
TOTAL CURRENT ASSETS 3,98,555 4,50,287 4,87,261 4,29,222 4,77,304
TOTAL ASSETS 5,34,085 5,91,765 6,31,559 5,86,262 6,69,981
98

Financial Performance of Wipro Ltd. Bangalore.: Tinsu Johnson Reg. No: 190031000711

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Financial Performance of Wipro Ltd. Bangalore.: Tinsu Johnson Reg. No: 190031000711

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FINANCIAL PERFORMANCE OF WIPRO Ltd.

Under the guidance of

Dr. V.P VIJAYAMOHAN

Accredited by NAAC with ‘A’ Grade

Dr. V.P. Vijayamohan Dr. Sudeep B. Chandramana

Faculty Guide Head, Dept. of management Studies

Rev. Dr. Cherian J. Kottayil University Examine

I hereby declare that this project report entitled “FINANCIAL

My sincere thanks to Principal Rev. Dr. Cherian J Kottayil for allowing me to do

SI.NO. TITLE OF THE TABLE PAGE NO.

5.1.1 Current Ratio 56

5.1.2 Quick Ratio 57

5.1.3 Absolute Liquidity Ratio 58

5.1.4 Debt –Equity Ratio 60

5.1.5 Proprietary Ratio 61

5.1.6 Fixed Asset to Net Worth Ratio 63

5.1.7 Fixed Asset Turnover Ratio 64

5.1.8 Current Asset Turnover Ratio 65

5.1.9 Working Capital Turnover Ratio 66

5.1.10 Gross Profit Ratio 67

5.1.11 Net Profit Ratio 68

5.1.12 Trend Analysis of Net Profit 69

5.1.13 Estimated Profit From 2021-2022 To 2025-2026 73

5.1.14 Trend Analysis of Net Sales 74

5.1.15 Estimated Sales For 2019-2020 To 2023-2024 77

1.1 Background of the study 3

CHAPTER 2 PROFILE OF IT INDUSTRY IN INDIA 6

2.1 Business Process of The Study 6

CHAPTER 3 REVIEW OF LITERATURE 29

3.1 Brief theoretical construct related to the problem 30

4.1 Research Approach and design 51

CHAPTER 5 DATA ANALYSIS, INTERPERATION, INFERENCE 54

1.3 RELEVANCE AND SCOPE OF THE STUDY

1.4 OBJECTIVES OF THE STUDY

IT business processes must be considered as an integral part of business process management.

2.2 MARKET DEMAND & SUPPLY – CONTRIBUTION TO GDP –

2.3 LEVEL AND TYPE OF COMPETITION – FIRMS OPERATING IN

1. Tata Consultancy service. – Largest IT company in India.

It is one of the best IT company in India

3. Wipro Limited (NYSE: WIT, BSE: 507685, NSE):

• Revenue: Rs 47,996 Cr.

5. Tech Mahindra Ltd

6. Larsen & Toubro Infotech Ltd

The Company evolved at the intersection of advanced technologies – AUTOMATE

• Revenue: Rs 5,306 Cr.

2.4 PRICING STRATEGIES OF THE INDUSTRY

2.5 PROSPECTS AND CHALLENGES OF THE INDUSTRY PROSPECTS

1. Strengthening of Domestic IT Industry

1. Diversification of Domestic Market

1. Reverse Brain Drain

3. Data protection and privacy rules

5. Negative reputation around the world

2.6 KEY DRIVERS OF THE INDUSTRY

• Cost of documentation, duplicating software, training, packaging (if media is supplied),

2.7 PROFILE OF WIPRO LIMITED

BE PASSIONATE ABOUT CLIENTS’ SUCCESS

TREAT EACH PERSON WITH RESPECT

BE GLOBAL AND RESPONSIBLE

UNYIELDING INTEGRITY IN EVERYTHING WE DO

A SUSTAINABLE, EMPOWERING WORKPLACE

➢ 8 Wipro locations equipped with Day Care Centres

ENERGY & EMISSIONS

BIODIVERSITY & WATER