A

Project Report

On
Financial Analysis
Of

Presented to

Prof. Deepa Choudhary.

Faculty Member
RASHTRASANT TUKADOJI MAHARAJ
NAGPUR UNIVERSITY
On
December 23rd , 2015
In the partial fulfillment of the requirements for
Managerial Accounting Course in the Bachelor of Business Administration
Programme
By:
PARAS BAGDE (Roll No.33)
BBA-3
KAMLA NEHRU MAHAVIDALAYA,
SAKKARDARA, NAGPUR-09
1

Preface
As a part of our syllabus of BBA programme in Final year, we are assigned some
practical and theoretical project work. In partial fulfillment of the Managerial
Accounting, course we have prepared a comprehensive project report in Financial
Analysis of the company.
Study of management will be immaterial if it is not coupled with study of financial aspect
of the business. It gives the student an opportunity to learn the connection between
comparison & execution to test & verify application of theories & help in the comparison
of management theories and practice. The study gives a chance to know about the
profitability and financial position of the firm.
We have chosen Wipro Limited which is a $3.5 Billion Global company in Information
Technology Services ,R&D Services, Business Process Outsourcing.
This report contains the analysis of the 5 years data of the company. The Financial
statements of the report are analyzed in three different ways such as

Trend Analysis

Horizontal Analysis

Ratio Analysis

Cashflow Analysis

The ratio analysis of the company has been derived for 23 ratios which help to determine
the companys performance. In the Scenario Analysis of the company we have included
the companys industrial GDP, its Market Share, Market Capitalization, Market Growth
etc.
Date: 20th December ,2015
Place: Nagpur

Paras Bagde (Roll No.33)

Acknowledgement
With a sense of gratitude and respect, we would like to extend our heartiest thanks
to all of those who provided help and guidance to make this project a big success. No
Project is ever the outcome of single individuals talent or effort. This work is no
exception. This project would not have been possible without the whole hearted
encouragement, support and co-operation of our guide, friends and well-wishers.
Although it is not possible for us to name and thank them all individually, we must make
special mention of some of the personalities and acknowledge our sincere indebtness to
them.
The successful completion of this project rests on the shoulder of many persons who have
helped us directly or indirectly. We wish to take this opportunity to express to all
those, without whose help, completion of this project would have been difficult. We
are indebted and thankful to all the individuals who have guided, advised, inspired
and supported us in making this project a success.
Our gratitude to our honorable guide Prof. Nikunj Patel for giving us the
opportunity for developing the project and his able guidance, inestimable motivation and
constant encouragement throughout our project. Without his help this project would never
have been realized in its entirety.
We are especially thankful to our Head Of Department Prof. Bhavin Pandya for
his valuable support in providing us the facilities and his valuable guidance for the
development of this project.
Date: 20th December ,2008
Place: Kadi

Ashwin Chaudhary (Roll No.5)

Priyanka Mehata (Roll No.)

Executive Summary
It is Summarize tin of all report in one or two pages so as to provide an overview of the
company. it is also called synopsis or Abstract. As a partials fulfillment of the
requirement for the Managerial Accounting Cource.We have completed a project report
on financial Analysis of Wipro Ltd.

Sales Figure is increasing at a handsome rate. it is at Rs. 58400.23 Million. in

2003-04 and it is increased to Rs. 141395.8 Million. So Sales is increased 75.05%
because of aggressive Selling Policy.

Profit after Tax is also increasing as compare to 2003-04 it is increasing 22514

Million at Rs 3408, 8747, 4388.6, 5970.4, respectivaly last four year. This is
because company has increased it sales and doing good cost management

Net worth of the company is increased in this year because of increase in Reserve
& Surplus

Current Ratio of Wipro limited is showing good position. It is 1.26 Times in 200304 then it is increased to 2.13 Times in 2007-08 this shows Company has achieved
standard Ratio.

The returns on the investment is some what decline in current year.

The EPS of Share is increased Rs. 7.43 to Rs 20.62 in 2007-08 So Share holder
are benefited.

Companys Total Assets are increased and it trying to expand its business on the
other hand debt are also increased it shows that company trying to Trading on
Equity.

After analyzing all aspect Companys performance is good.

CONTENT
Preface
Acknowledgement
Executive Summary
1. INTRODUCTION
1.1 Introduction to company
1.2 Group of companies
1.3 History
1.4 Company Profile
1.5 Registered office address
1.6 Board of director
1.7 Auditor

2. RATIO ANALYSIS
2.1 Introduction of the ratio analysis
2.2 Liquidity ratio
2.2.1 Current ratio
2.2.2 Quick ratio
2.2.3 Net working capital
2.3 Profitability ratio
2.3.1 Gross profit
2.3.2 Operating ratio
2.3.3 Net profit ratio
2.3.4 Return on investment
2.3.5 Return on equity
2.4 Assets turnover ratio
2.4.1 total asset turn over ratio
2.4.2 net fixed asset turn over
2.4.3 inventory turn over ratio
2.4.4 average age of inventories
2.4.5 debtor turn over ratio
2.5 Finance structure ratio
2.5.1 debt ratio
2.5.2 debt equity
2.5.3 interest coverage ratio
2.6 Valuation ratio
2.6.1 earning per share
2.6.2 divident pay out ratio
2.6.3 P/E ratio
2.6.4 Profit margin ratio
2.7 Du-Pont chart

3 ANNEXURES
5

4 BIBLIOGRAPHY

Chapter 1.
Introduction

Introduction to company
Group Companies
History
Company Profile
Registered Office Address
Board of Directors
6

 Auditors

1. INTRODUCTION
1.1. Introduction of company
Wipro Limited (Wipro), together with its subsidiaries and associates (collectively, the
company or the group) is a leading India based provider of IT Services and Products,
including Business Process Outsourcing (BPO) Services, globally. Further,Wipro has
other business such as India and AsiaPac IT Services and products and Consumer
Care and Lighting. Wipro is headquartered in Bangalore, India.Wipro Technologies is
a global services provider delivering technology-driven business solutions that meet
the strategic objectives clients. Wipro has 40+ Centers of Excellence that create
solutions around specific needs of industries. Wipro delivers unmatched business
value to customers through a combination of process excellence, quality frameworks
and service delivery innovation. Wipro is the World's first CMMi Level 5 certified
software services company and the first outside USA to receive the IEEE Software
Process Award.
Wipro is a $3.5 billion Global company in Information Technology Services, R&D
Services, Business process outsourcing. Team wipro is 75,000 Strong from 40
nationalities and growing. Wipro is present across 29 counries,36 Development
canters, Investors across 24 countries.
Largest third party R&D Service provider in the world.
Largest Indian Technology Infrastructure management service provider.
A vendor of choice in the middle east
Among the top 3 Indian BPO Service provider by Revenue (* Nasscom)
Among the top 2 Domestic IT Services companies in India (*IDC India)

1.2. Group Companies

Wipro Infrastructure Engineering Ltd.
8

 Wipro Inc.
cMango Pte Ltd.
Wipro Japan KK
Wipro Shanghai Ltd.
Wipro Trademarks Holding Ltd.
Wipro Travel Services Ltd.
Wipro Cyprus Private Ltd.
Wipro Consumer Care Ltd.
Wipro Health Care Ltd.
Wipro Chandrika Ltd.(a)
Wipro Holdings (Mauritius) Ltd.
Wipro Australia pty Ltd.
WMNETSERV Ltd.(a)
Quantech Global Service Ltd.
3D Network Pte Ltd.
Planet PSG Pte Ltd.
Spectramind Inc.

1.3. History

Wipro started in 1945 with the setting up of an oil factory in Amalner a small town in
Maharashtra in Jalgaon District. The product Sunflower Vanaspati and 787 laundry
soap (largely made from a bi-product of Vanaspati operations) was sold primarily in
Maharashtra and MP. The company was aptly named Western India Products Limited.
The Birth of the name Wipro - As the organization grew and diversified into
operations of Hydraulic Cylinders and Infotech, the name of the organization did not
adequately reflect its operations. Azim Premji himself in 1979 selected the name
"Wipro" largely an acronym of Western India Products. Thus was born the Brand
Wipro. The name Wipro was unique and gave the feel of an 'International" company.
So much so that some dealers even sent their cheques favouring Wipro (India)
Limited. Fortunately, the banks accepted them!!By the early 90s, Wipro had grown
into various products and services. The Wipro product basket had soaps called Wipro
Shikakai, Baby products under Wipro Baby Soft, Hydraulic Cylinders branded Wipro,
PCs under the brand name Wipro, a joint venture company with GE named Wipro GE
and software services branded Wipro. The Wipro logo was a 'W", but it was not
consistently used in the products.It was clearly felt that the organization was not
leveraging its brand name across the various businesses. The main issue remained
whether a diverse organization such as Wipro could be branded under a uniform look
and feel and could there be consistent communication about Wipro as an organization.

1.4.Company Profile
Business-Description
Wipro Limited is the first PCMM Level 5 and SEI CMM Level 5 certified IT Services
Company globally. Wipro provides comprehensive IT solutions and services,
including

systems

integration,

Information
10

Systems

outsourcing,

package

implementation, software application development and maintenance, and research

and development services to corporations globally.
The Group's principal activity is to offer information technology services. The
services include integrated business, technology and process solutions including
systems integration, package implementation, software application development and
maintenance and transaction processing. These services also comprise of information
technology consulting, personal computing and enterprise products, information
technology infrastructure management and systems integration services. The Group
also offers products related to personal care, baby care and wellness products. The
operations of the Group are conducted in India, the United States of America and
Other countries. During fiscal 2007, the Group acquired Wipro Cyprus Pvt Ltd,
Retailbox Bv, Enabler Informatica SA, Enabler France SAS, Enabler Uk Ltd, Enabler
Brazil Ltd, Enabler and Retail Consult GmbH, Cmango Inc, Cmango (India) Pvt Ltd,
Saraware Oy, Quantech Global Services and Hydroauto Group AB
Global IT Services and Products
The Company's Global IT Services and Products segment provides IT services to
customers in the Americas, Europe and Japan. The range of its services includes IT
consulting, custom application design, development, re-engineering and maintenance,
systems integration, package implementation, technology infrastructure outsourcing,
BPO services and research and development services in the areas of hardware and
software design. Its service offerings in BPO services include customer interaction
services, finance and accounting services and process improvement services for
repetitive processes.

The Global IT Services and Products segment accounted for 74% of the Company's
revenues and 89% of its operating income for the year ended March 31, 2007 (fiscal
2007). Of these percentages, the IT Services and Products segment accounted for 68%
of its revenue, and the BPO Services segment accounted for 6% of its revenue during
fiscal 2007.

11

Customized IT solutions
Wipro provides its clients customized IT solutions in the areas of enterprise IT
services, technology infrastructure support services, and research and development
services. The Company provides a range of enterprise solutions primarily to Fortune
1000 and Global 500 companies. Its services extend from enterprise application
services to e-Business solutions. Its enterprise solutions have served clients from a
range of industries, including energy and utilities, finance, telecom, and media and
entertainment. The enterprise solutions division accounted for 63% of its IT Services
and Products revenues for the fiscal 2007.
Technology Infrastructure Service
Wipro offers technology infrastructure support services, such as help desk
management, systems management and migration, network management and
messaging services. The Company provides its IT Services and Products clients with
around-the-clock support services. The technology infrastructure support services
division accounted for 11% of Wipro's IT Services and Products revenues in fiscal
2007.
Research and Development Services
Wipro's research and development services are organized into three areas of focus:
telecommunications and inter-networking, embedded systems and Internet access
devices, and telecommunications and service providers.The Company provides
software and hardware design, development and implementation services in areas,
such as fiber optics communication networks, wireless networks, data networks, voice
switching networks and networking protocols. Wipro's software solution for
embedded systems and Internet access devices is programmed into the hardware
integrated circuit (IC) or application-specific integrated circuit (ASIC) to eliminate
the need for running the software through an external source. The technology is
particularly important to portable computers, hand-held devices, consumer
electronics, computer peripherals, automotive electronics and mobile phones, as well
as other machines, such as process-controlled equipment. The Company provides
software application integration, network integration and maintenance services to

12

telecommunications service providers, Internet service providers, application service

providers and Internet data centers.
Business Process Outsourcing Service
Wipro BPO's service offerings include customer interaction services, such as ITenabled customer services, marketing services, technical support services and IT
helpdesks; finance and accounting services, such as accounts payable and accounts
receivable processing, and process improvement services for repetitive processes,
such as claims processing, mortgage processing and document management. For BPO
projects, the Company has a defined framework to manage the complete BPO process
migration and transition. The Company competes with Accenture, EDS, IBM Global
Services, Cognizant, Infosys, Satyam and Tata Consultancy Services.India and
AsiaPac IT Services and Products
The Company's India and AsiaPac IT Services and Products business segment, which
is referred to as Wipro Infotech, is focused on the Indian, Asia-Pacific and MiddleEast markets, and provides enterprise clients with IT solutions. The India and AsiaPac
IT Services and Products segment accounted for 16% of Wipro's revenue in fiscal
2007. The Company's suite of services and products consists of technology products;
technology integration, IT management and infrastructure outsourcing services;
custom application development, application integration, package implementation and
maintenance, and consulting

Wipro's system integration services

Include integration of computing platforms, networks, storage, data center and
enterprise management software. These services are typically bundled with sales of
the Company's technology products. Wipro's infrastructure management and total
outsourcing services include management and operations of customer's IT
infrastructure on a day-to-day basis. The Company's technology support services
include upgrades, system migrations, messaging, network audits and new system
implementation. Wipro designs, develops and implements enterprise applications for
corporate customers. The Company's solutions include custom application

13

development, package implementation, sustenance of enterprise applications,

including industry-specific applications, and enterprise application integration. Wipro
also provides consulting services in the areas of business continuity and risk
management, technology, process and strategy.
Consumer Care and Lighting
Wipro's Consumer Care and Lighting business segment accounted for 5% of its
revenue in fiscal 2007. The Company's product lines include hydrogenated cooking
oil, soaps and toiletries, wellness products, light bulbs and fluorescent tubes, and
lighting accessories. Its product lines include soaps and toiletries, as well as baby
products, using ethnic ingredients. Brands include Santoor, Chandrika and Wipro
Active. The Wipro Baby Soft line of infant and child care products includes soap,
talcum powder, oil, diapers and feeding bottles and Wipro Sanjeevani line of wellness
products.
The Company's product line includes incandescent light bulbs, compact fluorescent
lamps and luminaries. It operates both in commercial and retail markets. The
Company has also developed commercial lighting solutions for pharmaceutical
production centers, retail stores, software development centers and other industries.
Its product line consists of hydrogenated cooking oils, a cooking medium used in
homes, and bulk consumption points like bakeries and restaurants. It sells this product
under the brand name Wipro Sunflower.

1.5. Registered Office Address

WIPRO LIMITED
Doddakannelli, Sarjapur Road,
Bangalore 560 035, India.
Tel : +91-80-28440011
Fax : +91-80-2844054

1.6. Board of Directors

Azim H . Premji

Chairman

Dr Ashok S Ganguly

Former Chief Ex.Officer Nortel

B .C. Prabhakar

Practitioner of Law
14

Dr. Jagdish N. Sheth

Professor Of Marketing-Emory Uni.Usa.

N.Vagual

Chairman-ICICI Bank Ltd

Bill Owens
Former Chief Ex.Officer,Nortel

P. M. Sinba
Former Chairman Pepsico India Holdings

Azim Premji
Chairmen & Managing Director

15

1.7. Auditors

KPMG
16

BSR & Co.

Audit committee
N Vaghul

Chairman

P M Sinha

Member

B C Prabhakar

Member

Board Governance and Compensation Committee

Ashok S Ganguly - Chairman
N Vaghul

- Member

P M Sinha

- Member

Shareholders Grievance and Administrative Committee

B C Prabhakar

- Chairman

Azim H Premji

- Member

17

Chapter 2.
Ratio Analysis
Introduction To The Ratio Analysis
Liquidity Ratios
Profitability Ratios
Finance Structure Ratios
Valuation Ratios
The Du-Pont Chart

18

2. RATIO ANALYSIS
2.1Introduction Of The Ratio Analysis
Ratio analysis involves establishing a comparative relationship between the
components of financial statements. It presents the financial statements into various
functional areas, which highlight various aspects of the business like liquidity,
profitability and assets turnover, financial structure. It is a powerful tool of financial
analysis, which recognizes a companys strengths as well as its potential trouble
spots.
It can be further classified as in different categories of Ratio.
Liquidity Ratios
Profitability Ratios
Asset Turnover Ratios
Finance Structure Ratios
Valuation Ratios

2.1Liquidity Ratio
Liquidity refers to the existence of the assets in the cash or near cash form. This ratio
indicates the ability of the company to discharge the liabilities as and when they
19

mature. The financial resources contributed by owners or supplemented by outside

debt primarily come in the cash form as under in the balance sheet form.
The following Liquidity Ratios are calculated for the company.
Current Ratio
Quick Ratio
Net Working Capital

2.1.1 Current Ratio

This ratio shows the proportion of Current Assets to Current Liabilities. It is also
known as Working Capital Ratio as it is a measure of working capital available at a
particular time. Its a measure of short term financial strength of the business. The
ideal current ratio is 2:1 i.e. Current Assets should be equal to Current Liabilities.
Current Ratio

Current Assets
Current Liabilities

Year
Ratios

Current Ratio
2003-04
2004-05 2005--06
1.26
1.58
1.44

Table 5. 1 Current Ratio Analysis

20

2006-07
1.67

2007-08
2.13

Figure 5. 1 Current Ratio Analysis

Interpretation
Current ratio is always 2:1 it means the current assets two time of current liability.
After observing the figure the current ratio is fluctuating.
In the year 2008 ratio is showing good shine.
Hear ratio is increase as a increasing rate from 2004 to 2008.
Company is no where near the ideal ratio in every year but every company can not
achieve this ratio.
Current ratio is increased in 2007-08 as compared to 2003-04 because of increase in
Inventories 100.96% and 123.77 % increased in Cash and Bank balance.
Current ratio is decreased in 2005-06 as compared to the last year because of
increase in liabilities by 45.39% and 93.19% in increasing in Provision.

21

2.2.2 Quick Ratio

This ratio is designed to show the amount of cash available to meet immediate
payments. It is obtained by dividing the quick assets by quick liabilities. Quick Assets
are obtained by deducting stocks from current assets. Quick liabilities are obtained by
deducting bank over draft from current liabilities.
Quick Ratio

Quick Assets
Current Liabilities

Year
Ratios

Quick Ratio
2003-04
2004-05 2005--06
1.2

1.5

1.4

2006-07

2007-08

1.6

2.0

Table 5. 2 Quick Ratio Analysis

Figure 5. 2 Quick Ratio Analysis

Interpretation
Standard Ratio is 1:1
Companys Quick Assets is more than Quick Liabilities for all these 5 years.
In 2007-08 the ratio is increasing because of increase in bank and cash balance.
So all the years has quick ratio exceeding 1, the firm is in position to meet its
immediate obligation in all the years.

22

 In 2005-06 quick ratio is decreased because the increase in quick assets is less
proportionate to the increased quick liabilities.
The Quick ratio was at its peak in 2007-08, while was lowest in the 2004-05.
2.2.3 Networking Captial
Networking capital = Current Assets Current Liabilities
Net working capital
2003-04
2004-05
2005-06

Year
Trend

4534.3

10497.8

13798.0

2006-07

2007-08

28050.0

61577.0

Table 5.3 Networking Capital

Figure 5.3 Networking capital

Interpretation

This ratio represents that part of the long term funds represented by the net
worth and long term debt, which are permanently blocked in the current
assets.

It is Increasing Double than year by year because of assets increasing fast than
liabilities.

23

2.3 Profitability Ratios

A company should earn profits to survive and grow over a long period of time. It
would be wrong to assume that every action initiated by management of company
should be aimed at maximizing profits, irrespective of social as well as economical
consequences. It is a fact that sufficient must be earned to sustain the operation of the
business to be able to obtain funds from investors for expansion and growth and to
contribute towards the responsibility for the welfare of the society in business
environment and globalization.
The profitability ratios are calculated to measure the operating efficiency of the
company.
The following Profitability Ratios are calculated for the company.

Gross Profit Ratio

Operating Profit Ratio

Net Profit Ratio

Rate Of Return On Investment

Rate Of Return On Equity

24

2.3.1 Gross Profit Ratio

This is the ratio expressing relationship between gross profit earned to net sales. It is a
useful indication of the profitability of business. This ratio is usually expressed as
percentage. The ratio shows whether the mark-up obtained on cost of production is
sufficient however it must cover its operating expenses.
Gross Profit Ratio = Gross Profit

X 100

Sales
Year
Trend

Gross profit ratio analysis

2003-04
2004-05 2005--06
2006-07
29.8

31.7

32.6

33.7

2007-08
33.0

Table 5.4 Gross Profit Ratio Analysis

Figure 5.4 Gross Profit Ratio Analysis

Interpretation
GP Ratio shows how much efficient company is in Production.
GP is decreasing 2007-08 due to higher production cost.
Gross sales and services are increasing year by year so in effect Gross profit ratio is
icreasing year by year up to 2007.

25

2.3.2 Operating Profit Ratio

This ratio shows the relation between Cost of Goods Sold + Operating Expenses and
Net Sales. It shows the efficiency of the company in managing the operating costs
base with respect to Sales. The higher the ratio, the less will be the margin available
to proprietors.
Operating Profit Ratio =

COGS+Operating expences

X 100

Sales
Year
Trend

Operating ratio
2003-04
2004-05
2005--06
83.5

80.0

79.0

2006-07

2007-08

77.9

81.7

Table 5.5 Operating Profit Ratio Analysis

Figure 5.5 Operating Profit Ratio Analysis

Interpretation
Operating ratio is lowest during current 2007.
This shows that the expenses incurred to earn profit were less compared to the
previous two years.
Operating ratio is decreses feom 2004 to anward decreasing rate.

26

 From the graph conclusion is made that company is not on the right track by
efficiently cutting down manufacturing, administrative and selling distribution
expenses.

27

2.3.3 Net Profit Ratio

= Net profit

x 100

Net sales
Year
Trend

2003-04

Net profit ratio

2004-05 2005-06

16.3

19.4

2006-07

2007-08

19.8

17.7

19.2

Table 5.6 Net Profit Ratio Analysis

Figure 5.6 Net Profit Ratio Analysis

Interpretation
After observing the figure the ratio is fluctuating.
Company has rise in its net profit in 2006-07 as compared to the previous year
because the company has increased its sales 41.45% .
Though the companys sale is continuously rising but the net profit is not so much
increased so management should take some steps to decrease its expenses.
Sales is decrease in 2008 compare to 2007
The overall ratio is showing good position of the company.

28

2.3.4 Return On Investment

Rate of Return on Investment indicates the profitability of business and is very much
in use among financial analysts.
ROI=

EBIT

X 100

Total Assets

Year
Trend

Return On Investment
2003-04
2004-05
2005--06
32.7

39.7

2006-07

2007-08

30.6

18.6

35.7

Table 5.7 Rate of Return on Investment Ratio Analysis

Figure 5.7 Rate of Return on Investment Ratio Analysis

Interpretation
From the above observation it can be seen that ratio is fluctuating.
In the year 2005-06 Rate of Return on Investment is slightly increase as compared
to previous year
Ratio is decreasing after 2005 at adecreasing rate because of asseets increase
compare to sales.

29

 The companys Total Assets is increased to 86.51%, so ROI is decreased so

conclusion made that company is not utilizing its assets and investment efficiently.

30

2.3.5 Rate of Return on Equity

Rate of Return on Equity shows what percentage of profit is earned on the capital
invested by ordinary share holders.
Rate of Return on Equity =

Profit for the Equity

Net worth

Year
Trend %

2003-04
22.2

Rate of return on
equoty
2004-05
2005--06
11.5

7.1

2006-07

2007-08

10.0

5.5

Table 5.8 Rate of Return on Equity Ratio Analysis

Figure 5.8 Rate of Return on Equity Analysis

Interpretation
ROE is remaining almost same Between 2005 to 2007, but it is decrease in2008
because the the company has increase share capital but profit not getting that much
increase.
Company is getting same return on equity.
As a result the share holders are getting higher return every year and investment
portfolio scheme selection was a judicious decision taken by the company.
This happens because Profit and Share Capital both increasing same way.

31

2.4 Asset Turnover Ratios

Asset Turnover Ratio are basically productivity ratios which measure the output
produced from the given input deployed. This relationship is shown as under
Productivity =

Output
Input

Assets are inputs which are deployed to generate production (or sales). The same set
of assets when used intensively produces more output or sales. If the asset turnover is
high, it shows efficient or productive use of input.
The following Assets Turnover Ratios are calculated for the company.

Total Assets Turnover

Net Fixed Assets Turnover

Net Working Capital Turnover

Inventory Turnover Ratio

Debtor Turnover (in times)

32

2.4.1 Total Asset Turnover Ratio

The amounts invested in business are invested in all assets jointly and sales are
affected through them to earn profits. Thus it is the ratio of Sales to Total Assets. .It is
the ratio which measures the efficiency with which assets were turned over a period.
Total Asset Turnover Ratio =

Sales
Total Assets

Year
Trend

Total assets turnover ratio

2003-04
2004-05
2005-06
2006-07
1.5

1.5

1.6

1.5

2007-08
1.2

Table 5.9 Total Asset Turnover Ratio Analysis

Figure 5.9 Total Asset Turnover Ratio Analysis

Interpretation
The total assets turnover ratio is almost same in all years.
The Assets turnover Ratio is near by 1.5 in all 5 years which shows effective
utilization of assets from the companys view point.
In the year 2005-06 ratio is increased because of companys total assets is increased
by 24.52%, but sales is increased by 29.92%.So the ratio is increased but in current

33

year it is decreased because sale increasing by 41.45% and Assets increasing by

49.28%.
2.4.2 Net Fixed Assets Turnover
To ascertain the efficiency & profitability of business the total fixed assets are compared
to sales. The more the sales in relation to the amount invested in fixed assets, the more
efficient is the use of fixed assets. It indicates higher efficiency. If the sales are less as
compared to investment in fixed assets it means that fixed assets are not adequately
utilized in business. Of course excessive sale is an indication of over trading and is
dangerous.
Net Fixed Assets Turnover Ratio =

Sales
Net Fixed Assets

Year
Time

2003-04
4.0

Total fixed assets turnover ratio

2004-05 2005--06 2006-07
2007-08
4.2

4.9

Table 5.10 Net Fixed Asset Turnover Ratio Analysis

Figure 5.10 Net Fixed Assets Turnover Ratio Analysis

Interpretation

34

4.0

2.4

 Here the ratio of Net Fixed Asset Turnover is continuously increasing up to 2006
and after that it has strated decline.Because sales as wellas assets boths are equally
increase.
Net Fixed Assets Turnover Ratio is increasing year by year because of Sale is
increasing continuously.
It indicates that the company maximizes the use of its fixed assets to earn profit in
the business so that whatever amount is invested by company in fixed asset, gives
maximum productivity which helps to increase sales as well as profit.

35

2.4.3 Inventory Turnover Ratio

Inventory Turnover Ratio: The no. of times the average stock is turned over during the
year is known as stock turnover ratio.
Inventory Turnover Ratio =

COGS
Average stock

Total Inventory turnover ratio

2003-04 2004-05 2005-06 2006-07 2007-08

Year
Time

30.3

22.6

24.3

19.8

16.0

Table 5. 11 Inventory Turnover Ratio Analysis

Figure 5. 11 Inventory Turnover Ratio Analysis

Interpretation
From the above calculation we can say that the ratio is decreasing. It mens
inventory is not spdly convert in to sales. So that it is bad for the company.
In 2003-04 ratio is increased as compared to after that all year so management
should take care about good efficiency of stock management.
But in 2006 onward ratio is decreasing because of increase in COGS. So company
should devise a systematic operational plan for inventory control.

2.4.4 Average age of Inventories

36

This ratio indicates the waiting period of the investments in inventories and is measured
in days, weeks or months. Inventory turnover and average age of inventories are inversely
related.
Average age of Inventories Ratio =

360 days
Inventory Turnover

Year
Days

2003-04

Average age of Inventories

2004-05
2005--06
2006-07

11.9

15.9

14.8

2007-08

18.2

22.4

Table 5. 12 Average age of Inventories Ratio Analysis

Figure 5. 12 Average age of Inventories Ratio Analysis

Interpretation
This graph shows that inventory convert into cash in short time period.
Inventory turnover ratio is low in 2003-04 So In this year inventory is converted in
cash 11.9 days.
The inventory conversation in to cash time duration is increases from 2004 to every
year so the management should tray to efficient inventory conversation,so it will It
shows that company effectiveness utilizing its Inventories in quickly.
5.4.5 Debtor Turnover Ratio

37

Debtor turnover ratio: The debtor turnovers suggest the no. of times the amount of
credit sale is collected during the year.
Debtors Turnover Ratio =

Sales
Average Debtors

Year
Time

Debtors turn over in (times)

2004-05
2005--06
2006-07

2003-04
4.9

3.8

3.7

2007-08
3.7

1.5

Table 5. 13 Debtor Turnover Ratio Analysis

Figure 5.13 Debtor Turnover Ratio Analysis

Interpretation
Debtor turnover indicates how quickly the company can collect its credit sales
revenue.
Here the ratio is continuously decreasing, so that the companys collection of credit
sales is efficient management is improved its collection period every year so it
shows that the management have an ability to collect its money from his debtors. So
they can invest that money on Assets, HRD and other investments.

5.5 Finance Structure Ratios

38

Finance Structure Ratios indicate the relative mix or blending of owners funds and
outsiders debt funds in the total capital employed in the business. It should be noted that
equity funds are the prime fund which increase progressively through reinvestment of
profits, while outside debt funds are supplementary funds and are added at the discretion
of the management.
The following Finance Ratios are calculated for the company.

Debt Ratio

Debt-Equity Ratio

Interest Coverage Ratio

39

2.5.1 Debt Ratio

Debt ratio indicates the long term debt out of the total capital employed.
Debt Ratio =

Long Term Debt

Total Capital Employed

Table 5. 14 Debt Ratio Analysis

Trend

2003-04
0.0284

Debt Ratio
2004-05 2005-06
0.0165
0.0114

2007-08
2006-07
0.384
0.0383

Figure 5. 14 Debt Ratio Analysis

Interpretation
From the above calculation it seems that the ratio is fluctuating.
In 2007-08 the ratio is increased as compared to the previous year because the total
loan funds are increased by 661.56%.
In 2005-06 Company has issued equity Share and also loan is decreased.
Its means that now company trying to increasing Trading on equity.

40

2.5.2 Debt-Equity Ratio

This ratio is only another form proprietary ratio and establishes relation between the
outside long term liabilities and owner funds. It shows the proportion of long term
external equity & internal Equities.
Debt Equity Ratio =

Total Long Term debt

Share holder equity

Table 5.15 Debt - Equity Ratio Analysis

Debt- Equity Ratio
2003-04
Year
2004-05
2005-06
0.027
Trend
0.012
0.011

2006-07
0.030

2007-08
0.376

Figure 5. 15 Debt-Equity Ratio Analysis

Interpretation
It shows companies accumulated more equity than required company has to refocus
to its strategic policies and plans and try to accumulate more debt funds in future so
as to make the balance between debt and equity.
There is only current year ratio is some what sufficient.

41

2.5.3 Interest Coverage Ratio

Interest Coverage Ratio: The ratio indicates as to how many times the profit covers
the payment of interest on debentures and other long term loans hence it is also
known as times interest earned ratio. It measures the debt service capacity of the firm
in respect of fixed interest on long term debts.
Interest Coverage Ratio =

EBIT
Interest

Year
Trend

2003-04
3.4

Intrest coverage ratio

2004-05
2005--06
5.0

4.5

2006-07
4.2

2007-08
21.9

Table 5. 16 Interest Coverage Ratio Analysis

Figure 5. 16 Interest Coverage Ratio Analysis

Interpretation
After observing the figure it shows that the ratio has mix trend up to 2006.
In the year 2007-08 company has not much debt compare to EBIT so interest
coverage ratio is high but in 2007-08 company increasing its external debt so
company have pay more interest among its earnings so interest coverage ratio
falling down compare to previous year.

42

2.6 Valuation Ratios

Valuation ratios are the result of the management of above four categories of the
functional ratios. Valuation ratios are generally presented on a per share basis and thus
are more useful to the equity investors.
The following Valuation Ratios are calculated for the company.

Earnings Per Share

Dividend pay-out Ratio

P/E Ratio

Profit Margin

43

2.6.1 Earnings Per Share

This ratio measures profit available to equity share holders on per share basis. It is not
the actual amount paid to the share holders as dividend but is the maximum that can
be paid to them.
Earnings per Share = Net Profits for Equity Shares
No. of Equity Shares
Table 5.17 Earnings per Share

Year
Trend(Rs.)

2003-04
7.43

Earnings Per Share

2004-05
2005-06
11.70
14.70

2006-07
20.62

2007-08
22.62

Figure 5.17 Earnings per Share Ratio Analysis

Interpretation
Earninig per share is increasing as a increasing rate it is good for invester and share
holder.
In 2007-08 Profit is increasing by 42.30% and No Equity share Holder increased by
2.03%, Due to that EPS Ratio is increasing in Current year.

44

2.6.2 Dividend Pay-out Ratio

This ratio indicate split of EPS between Cash Dividends and reinvestment of Profit. If
the Company has Profitable projects than it will prefer to keep dividend pay out ratio
lower.
Dividend pay-out Ratio =

Dividend per Share in Rs.

Earnings per share in Rupees

Table 5. 18 Dividend Pay-out Ratio Analysis

Dividend pay-out Ratio
2003-04
Year
2004-05
2005-06
2006-07
1.54
Trend(Rs.)
4.68
2.94
3.77

2007-08
3.43

Figure 5. 18 Dividend Pay-out Ratio Analysis

Interpretation
In all years there is fluctuation in ratio.
If the company wants to prosper in future with flying colors then ideally more
amounts should be reinvested in the business rather than distributing as dividend.
In 2005-06 company has reinvested in business for expansion.

45

2.6.3 P/E Ratio

P/E Ratio is computed by dividing the current market price of a share by earning per
share. This is Popular measure extensively used in Investment analysis.
P/E Ratio =

Current Market Price of Share

Earnings per Share

Table 5. 19 P/E Ratio Analysis

20003-04
31.36

Year
Trend

P/E Ratio
2004-05
19.91

2005-06
15.85

2006-07
11.30

200708
10.30

Figure 5. 19 P/E Ratio Analysis

Interpretation

In 2004-05 P/E Ratios is high means Share price of company is Stable and Share
holder are interested to invest in the companys share.

But in 2006-07 P/E Ratio is Falling down word So company share price is not as
stable as compare to previous year.

46

2.6.4 Profit margin ratio

Profit margin ratio=

Year
Net Sales and Services
PAT
Ratio

PAT/Sales*100

32829

2006-07
149982
29,421

2005-06
106030
20674

2004-05
81605.6
16285.4

2003-04
58400.23
10315

16%

20%

19%

20%

18%

2007-08
199796

Table 5. 20 Profit margin ratio

Figure 5. 20 Profit margin ratio

Interpretation

The ratio is shows equal for middle three year it means the company has maintain
the equal ratio for year 2005 to 2007.

The ratio shows decline in current year it is bad sign for the company.

47

2.7 The Du-Pont Chart

ROA (IN %)
2007-08
2006-07
2005-06
2004-05
2003-04

30.88
53
63.08
67.8
75.6

Profit margin (in %)

Assets turn over(in Rs.)

2007-08

0.16

2007-08

1.93

2006-07
2005-06
2004-05
2003-04

0.20
0.19
0.20
0.18

2006-07
2005-06
2004-05
2003-04

2.65
3.32
3.39
4.20

Profit after tax

Sales

Sales

2007-08 32829

2007-08 199575

2007-08 199575

2007-08 103160

2006-07
2005-06
2004-05
2003-04

2006-07 149751
2005-06 106164
2004-05 81596
2003-04 58648

2006-07
2005-06
2004-05
2003-04

2006-07
2005-06
2004-05
2003-04

29421
20674
16285
10315

Table 5.20 Do-Pont chart

48
Figure 5. 24 The Du-Point Chart

149751
106164
81596
58648

Asset

56535
31951
24049
13969

Interpretation

DuPont chart shows that how profitability is there in the business. When profit margin
is multiplied by total Assets turnover ratio that gives ROA. Profit Margin is obtained
by dividing PAT by Total sales. Total Asset Turnover is obtained by the sales divided
total assets.

It is like a Tree having various braches connected to each other.

It show companys efficiency in making right decision of Investment

Total Assets turnover is decreasing in current year because of huge increase in net fix
assets and net current asset which is more than double compare to previous year.

The Chart shows the total assets turnover that indicate the companys efficiency in
utilizing its assets.

So overall it can be interpreted that the companys ROA is good .

Company should try its best to increase sales and profit.

The Du point chart Shows the complete picture of companys performance.

49

FIND
INGS

Though the sales has been continuously increased from past 3 years but the
proportionate expenditure is also rising so overall not making any huge effect on net
profit of this company.

Hear the in 2005 company has reinvest profit for business expansion it is good
shine for the company.

The total expenditure is near by 80% of total income in every year.

Every year PBT is near by 20% of total income.

Fixed assets are efficiently utilized by the company due to which the profit of the
company is increasing every year.

Liabilities is incressing rate it mean company has to developed business. And

purchase raw material on credit basis.

Company has enough cash in hand so that in any condition company can take
Any Financial decision easily.
All the years has quick ratio exceeding 1, the firm is in position to meet its
immediate obligation in all the years.
GP Ratio shows how much efficient company is in Production.

50

SUG
GESTION

The companys future plans for expansion seem clear due to increased
investment in Fixed Assets .Efficient use of these Assets has enabled the
company to observe an increased profit.

Though the companys sale is continuously rising but the net profit is not so
much increased so management should take some steps to decrease its
expenses.

Company should try its best to increase sales and profit.

The profit margin ratio shows decline in current year so that company should
tray to increase profit after tax

Current ratio is very good it is 2.13:1 so company has fully utilize cash
liquidity for business development.

51

Annexure

52

ANNEXURE-1
BALANCE SHEET

Rs (In Million)

2007-08
2006-07
2005--06 2004-05 2003-04
SOURCES OF FUNDS
Share Holder's Funds
Share Capital
2923
2918
2852 1407.14
465.52
Share application money
pending a
40
35
75
12.05
Reserves & Surplus
113991
93042
63202 51407.1
37083.7
Share holder's Equity
116954
95995
66129 52826.3
37549.5
Loan Funds
Secured
2072
1489
451
215.89
947.47
Unsecured
42778
2338
307
405.03
105.88
Total Loan Funds
44850
3827
758
620.92
1053.35
Minority Interest
116
29 265.33
163.84
Total Sources of Funds
161920
99851
66887 53712.6
38766.7
APPLICATION OF FUNDS
Fixed assets
Goodwill
42209
9477
3528 5663.16
5252.36
Gross Block
56280
35287
24816 20899.6
15607.1
Less:
Accumulated Depreciation
28067
18993
12911 9951.77
7599.48
Net Block
28213
18294
11905 10947.9
8007.63
Capital work in progress and
advances
13370
10191
6250 2603.85
1427.28
Total Fixed Assets
83792
37962
21683 19214.9
14687.3
Investments
16022
33249
30812 23504.9
19058.8
Deferred Tax Assets(Net)
529
590
594
495
486.3
Current Assets, Loans & Advances
Inventories
6664
4150
2065 1747.25
1292.02
Sundry Debtors
40453
29391
21272 15518.3
11865.6
Cash & Bank Balances
39270
19822
8858 5713.57
3242.7
Loan & Advances
29610
16387
12818 5562.85
5683.78
Total Current Assets
115997
69750
45013
28542
22084.1
Less:
Current Liabilities & Provisions
Current Liabilities
39890
33667
18527 12742.1
8894.2
Provisions
14530
8033
12688 5302.14
8655.58
53

Total Liabilities
Net Current Assets
Total Application of Funds

54420
61577

41700
28050

54

31215
13798

18044.2
10497.8

17549.8
4534.28

ANNEXURE-2
PROFIT & LOSS ACCOUNT
RS. (In Million)
2007-08

2006-07

2005-06

2004-05

2003-04

201451

203970

151,330
1348
149982
2963
152945

106805
775
106030
1536
107566

82330.3
724.7
81605.6
944.79
82550.3

59161.07
760.84
58400.23
1315.99
59716.22

140224

102420

71484

54081.4

39150.23

14216

9547

7003

5638.13

5401.64

10750

124
7866
119957
32988
3868

35
5265
83787
23779
3391

56.12
3826.91
63602.6
18947.8
2749.59

3097.15
35.07
47684.39
12031.83
1680.56

333

29120
6
295

20388
-1
288

16198.2
88.12
175.33

10351.27
-59.19
22.92

32829

29,421

20674

16285.4

10315

2919
1489

7238
1459
1268

7129
1000

3478.84
493.38

5818.98
931.04
864.85

22575

19456

12545

12313.2

2700.13

22.62
22.51

20.62
20.41

14.7
14.48

11.7
11.6

14.87
14.85

1,451,127,719

1,426,966,318

1,406,505,974

1,391,554,372

693,870,390

1,458,239,060

1441.469,952

1,427,915,724

1,404,334,256

694,545,321

Income
Gross Sales and Services
Less: Excise Duty
Net Sales and Services
Other Income
Total Income
Expenditure
Cost of Sales and Services
Selling and marketing
expenses
General and administrative
expenses
Interest
Total Expenditure

1655
199796
4174

1690
166900
37070

PROFIT BEFORE TAXATION

4550

Provision for taxation including FBT

PROFIT BEFORE MINORITY
INTEREST /SHARE IN
EARNING OF ASSOCIATES

32520

Minority interest
Share in earning of Associates

-24

PROFIT FOR THE PERIOD

(PAT)

Appropriations
Interim dividend
Proposed dividend
Tax on dividend
TRANSFERTO GENERAL
RESERVE

5846

EARNINGS PER SHARE-EPS

Equity shares of par value Rs.2/- each

Basic (in Rs.)

Diluted (in Rs.)
Number of Shares for calculating EPS

Basic (in Rs.)

Diluted (in Rs.)

55

ANNEXURE-3
CASH FLOW STATEMENT FOR THE YEAR ENDED ON MARCH 31
Rs(In Million)

A. Cash Flow from Operating Activities

Adjustments for :
Depreciation and amortizations
Amortizations of stock compensation
Unrealized foreign exchange Net
Interest on borrowings
Dividend/interest Net
(Profit)/Loss on sale of investments
Gain on sale of fixed assets
Working Capital Changes :
Trade and other receivable
Loans and advances
Inventories
Trade and other payables
Net cash generated from operations
Direct taxes paid
Net cash generated by operating
activities
B. Cash flows from investing activities:
Acquisition of property, fixed assets
Plant and equipment(Inc. advances)
Proceeds from sale of fixed assets
Purchase of investments
Proceeds on sale/from maturities on
Investments
Inter-corporate depo sit
Net payment for acquisition of Business
Dividend/interest income received
Net cash generated by/(used in)
Investing
C. Cash flows from financing activities:
Proceeds from exercise of Employee
Stock Option
Share application money pending
allotment

2008

2007

2006

2005

2004

5359
1166
-595
1690
-2802
-771
-174

3,978
1,078
457
125
-2,118
-588
-10

3,096
688
65
35
-1,069
-238
-8

2,456.24
342.62
92.45
56.12
715.15
35.59
109.8

1971.85

-11885
-5157
-1565
6182
28518
-5459

-7,633 -6,991 4,433.69

-299 -1,033
311.74
-1,120
-317
455.23
5,445 6,150 4,180.42
32,303 24,102 20,456.00
-4,252 -4,543 2,354.70

-3670.41
-359.89
-281.5
2748.13
-594
-1568.36

23059

28,051 19,559 18,101.30

-2162.36

-132.77
-762.41
-107

-14226
479

-13,005 -7927 6,465.43 -4100.97

149
113
168.98
121.86
-231684 123,579 59,047 70,145.11 10706.51
250013
150
-32790
2490
-25568

56

122042 52,043 66,383.54

48.06
-650 285.3
-6608 -2,777
617.99
-465.27
2,118
923
254.15
777.85
-19533 16672 144035.2 14039.68

541

9,458

4,704

2,576.58

40

35

63

12.05

238.6

Interest paid on borrowings

Dividends paid (including distribution tax
Proceeds/(repayment) of long term
Proceeds/(repayment) of short term
Proceeds from issuance of shares by
Subsidery
Net cash generated by financing
Activities
Net increase in cash and cash equivalents
During the period
Cash and cash equivalents at the
Beginning of the period
Effect of translation of cash balance
Cash and cash equivalents at the end of
Period *

-1690
-12632
-74970
110641

-125
-8,875
142
1825

-35
56.12
-3,998 7,575.76
-268 -200
432.43

55

35

266.19

21985

2495

266

19476

11013

3154

2469.95

-958.77

19822
-28

8858
-49

5714
-10

3242.7
0.92

4210.08
-8.61

39270

19822

8858

5713.57

3242.7

57

-262.36
463.02

147.53
-5209 12954.48

Bibliography

58

BIBLIOGRAPHY
Books:
Annual Report of Wipro Limited for Financial Year 2004-05, 2006-07,2007-08.
Narayanaswamy R., (1998): Financial Accounting: A Managerial Perspective,
Prentice-Hall of India Private Ltd, New Delhi., Third Edition, Reprint 2003
Khan M.Y. and Jain P.K., (1992):Financial Management, Tata McGraw-Hill
Publishing Co Ltd., New Delhi., Third Edition.
.

Websites
http://www.wipro.com
http://www.bseindia.com//shareholding/shareholding_new.asp
http://www.cmie.com//indutries//gdp.asp

http://www.wipro.com/investors/annual_reports.htm
http://www.wipro.com/investors/pdf_files/AR07_08_first_book_final.pdf
http://www.wipro.com/investors/pdf_files/AR07_08_second_book_final.pdf
http://www.wipro.com/investors/pdf_files/Wipro_AR_2006_07_Part_1.pdf
http://www.wipro.com/investors/pdf_files/Wipro_AR_2006_07_Part_2.pdf
http://www.wipro.com/investors/pdf_files/Wipro_annual%20report_2005-06.pdf
http://www.wipro.com/investors/pdf_files/Wipro_Annual_Report_2004_2005.pdf

59

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