COURSE WORK ON FINANCIAL ACCOUNTING

ANALYSIS OF FINANCIAL ACCOUNTS OF ITC LIMITED

NAMES OF STUDENT 1. AJAY RAJ SINGH

SIGNATURE _________________

PGDM-I (2010-12)

INTRODUCTION TO THE COMPANY

HCL Infosystems Ltd. was incorporated in 1976, HCL Infosystems Ltd. is among the largest India facing ICT companies and the pioneers of modern computing in India today. HCL is engaged in developing and implementing solutions for diverse market segments across a range of technologies. Part of the $5 billion HCL Enterprise, HCL Infosystems Ltd. Is leading ICT hardware and system integration , operating in the diverse areas of ICT products & solutions, systems integration, office automation, digital lifestyles products, homeland security and managed network solutions. Endorsed with ISO 9001-2000 certification for manufacturing, HCL is fast emerging as the preferred next generation partner for companies looking to build the intelligent infrastructure of tomorrow. SERVICES
HCL provides a wide range of product and services for a diverse spectrum of customers. HCLs portfolio of products and services encompasses the following:

The main Services offered are:

1. In the enterprise segment : System integration ICT and Networking , Infrastructure Consultancy & facilities Management Service ICT products IT audit ,Security Compliance & Risk management 2. In the Consumer and Retail Segment: Computing and lifestyle products Digital lifestyle products VPN & managed network service Strategic outsourcing services Security products and solutions 3. In the Education Segment: HCL CDC Education institutions

OUR MANUFACTURING FACILITIES:

With four state-of-the-art manufacturing facilities -2 at puducherry,1 at Chennai & 1 at Uttarakhand HCL has a production base that is well-positioned to devlop and produce built to order products & peripherals across the entire range of products in ICT hardware.

HCL GEOGRAPHIC NETWORK:

Service locations catering to 4,000 towns and cities 505 HCL touch points owned and manned by HCL Network of regional response centres & contact centers 3600+ direct service engineers on field 33+ years of experience in delivering ICT services 200 seat training centre with state-of-art labs Established Escalation & Management process

VISION:
TOGETHER WE CREATE THE ENERPRISES OF TOMORROW

MISSION:
To provide world class information technology solutions and services to enable our customers to serve there customers better.

QUALITY ASSURANCE:
HCL shall deliver defect-free products, services and solutions to meet the requirements of our external and internal customers, THE FIRST TIME , EVERY TIME. Clients as on March 2009 and 191 Global 500 / Fortune 1000 clients Our global footprint spans across 35 countries We have 53 Global Development Centers and over 50 Centers of Excellence In addition, we are also leaders in Consumer Care and Lighting and Infrastructure Engineering businesses. Wipro is rated as India's number one Green Brand and among the Top 5 Global Green brands in the world by Greenpeace's Guide to Greener Electronics ranking. I

WIPRO LIMITED SCHEDULE 19 NOTES TO ACCOUNTS Significant accounting policies 1. Basis of preparation of financial statements The condensed financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles (GAAP) under the historical cost convention on the accrual basis. GAAP comprises accounting standards notified by the Central Government of India, other pronouncements of the Institute of Chartered Accountants of India, the provisions of the Companies Act, 1956 and guidelines issued by the Securities and Exchange Board of India. The recognition, measurement and disclosure provisions of AS 25, Interim Financial Reporting, have been followed for these condensed interim financial statements. 2. Use of estimates The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities on the date of the financial statements and reported amounts of revenues and expenses during the period reported. Actual results could differ from those estimates. 3. Goodwill The goodwill arising on acquisition of a group of assets is not amortised. It is tested for impairment on a periodic basis and written off, if found impaired. 4. Fixed assets, intangible assets and work-in-progress Fixed assets are stated at historical cost less accumulated depreciation. Interest on borrowed money allocated to and utilized for qualifying fixed assets, pertaining to the period up to the date of capitalization is capitalized. Assets acquired on direct finance lease are capitalized at the gross value and interest thereon is charged to profit and loss account. Intangible assets are stated at the consideration paid for acquisition less accumulated amortization. Advances paid towards the acquisition of fixed assets outstanding as of each balance sheet date and the cost of fixed assets not ready for use before such date are disclosed under capital work-in progress. Lease payments under operating lease are recognized as an expense in the profit and loss account. Payments for leasehold land are amortized over the period of lease. 5. Investments Long-term investments are stated at cost less provision for diminution in the value of such investments. Diminution in value is provided for where the management is of the opinion that the diminution is of permanent nature. Short-term investments are valued at lower of cost and net realizable value.

6. Inventories Finished goods are valued at cost or net realizable value, whichever is lower. Other inventories are valued at cost less provision for obsolescence. Small value tools and consumables are charged to consumption on purchase. Cost is determined using weighted average method. 7. Provisions and contingent liabilities The Company creates a provision when there is a present obligation as a result of an obligating event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the outflow. Disclosures for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. Where there is a possible obligation or a present obligation in respect of which the likelihood outflow of resources is remote, no provision or disclosure is made.

BALANCE SHEET
(in Rs crores) Mar ' 09 Mar ' 08

Sources of funds
Owner's fund Equity share capital Share application money Preference share capital Reserves & surplus 293.00 1.50 292.30 58.00 -

12,220.50 11,260.40 4.00 5,013.90 3,818.40 17,528.90 15,433.10

Loan funds
Secured loans Unsecured loans Total

Uses of funds
Fixed assets Gross block Less : revaluation reserve Less : accumulated depreciation Net block Capital work-in-progress Investments 3,179.60 3,179.60 1,311.80 6,884.50 2,282.20 2,282.20 1,335.00 4,500.10

Net current assets

Current assets, loans & advances Less : current liabilities & provisions Total net current assets Miscellaneous expenses not written Total 13,576.10 12,058.10 7,423.10 4,742.30 6,153.00 7,315.80 17,528.90 15,433.10 6,884.50 596.10 14650.00 749.90 14615.00

Notes:
Book value of unquoted investments Market value of quoted investments Contingent liabilities Number of equity shares outstanding (Lacs)

PROFIT AND LOSS A/C

(in Rs crores) Mar '09 Mar '08 12 mths 12 mths Income Sales Turnover Excise Duty Net Sales 21,612.80 105.50 21,507.30 17,658.10 165.50 17,492.60

Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses

-480.40 -13.90 21,013.00 3,362.80 0.00 9,242.20 0.00 0.00 4,129.60 0.00 16,734.60 Mar '09 4,758.80 4,278.40 196.80 4,081.60 533.70 0.00 3,547.90 3,547.90 574.10 2,973.80 13,371.80 586.00 99.60 14,650.00 20.30 200.00

326.90 187.00 18,006.50 3,139.30 0.00 7,409.10 299.80 557.80 2,558.00 0.00 13,964.00 Mar '08 3,715.60 4,042.50 116.80 3,925.70 456.00 0.00 3,469.70 3,469.70 406.40 3,063.30 10,824.70 876.50 148.90 14,615.00 20.96 300.00

Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%)

Comparative PROFIT AND LOSS analysis

(in crores) 2009 15611.92 5008.26 4825.74 3263.59 8.64 3.7 2010 18153.19 6329.29 6015.31 4061.00 10.62 10 Increase (Decrease) Amount %Change 2541.27 16.27 1321.03 26.27 1189.57 24.65 797.41 24.43 1.98 22.91 6.3 170.2

Sales Operating profit PBT PAT Earning per share Equity dividend (%)

I Comparative BALANCE SHEET analysis (in crores) 2009 LIABILITIES: Secured loans Unsecured loans Provisions Current liabilities ASSETS: Net block Investments Current assets 11.63 165.92 1729.51 2974.12 7271.91 2837.75 8159.73 2010 00 107.71 4549.94 3498.3 8141.40 5726.87 8127.08 Increase (Decrease) Amount %Change (11.63) (58.21) 2820.43 524.18 869.49 2889.14 (32.65) 100 35.08 163 17.62 11.95 101.8 .4

RATIO ANALYSIS
2008-2009 1. Profit margin ratio F=(profit after tax/sales)*100 =( 3263.59/15611.92)*100 =20.9% = (4061/18153.9)*100 = 22.36% (In Rs.crores) 2009-2010

Analysis=This ratio measures the amount of net profit earned by each rupee of revenue. The ratio shows that there has been a increase in return on sales from 20.9%in 2009 & 22.36% in 2010.

2.

Assets turnover F= sales / Total Assets =( 15611.92/19483.43) = .80 times = (18153.19/14769.34) = 1.2 times

Analysis = This is a ratio of measuring firms efficiency in utilizing is assets. In year 2009 is .80 times & 2010 is 1.2 times. 3. Return on Assets F= (Profit After Tax / Total Assets) *100 = (3263.59/19483.45)*100 = 16.75% = (4061/14769.34)*100 = 27.49%

Analysis = This is a measure of profitability from a given level of investment. Return on asset has increased to 16.75% in 2009 from 27.49% in 2010, indicating a increase in the overall profitability of the company.

4.

Return On Equity F= Profit After Tax / Shareholders Equity *100 = (3263.59/13735.08)*100 = 23.7% =(4061/14064.38)*100 =28.87%

Analysis = This is a measure of profitability from the standpoint of the companys shareholders. The return on equity in 2009 was 23.7% and 28.87% in 2010, which shows increase of 5.1% 5. Current Ratio F= Current Assets / Current Liabilities = (6514.75/2974.12) = 2.1:1 = (6822.54/3498.3 =1.9:1

Analysis = This ratio is used by the company to pay its debts in short term. The current ratio of company was 2.1 in 2009, which decreased to 1.9 in 2010. comparative less liquidity. 6. Quick Ratio F= Quick Assets / Current Liabilities Quick Assets = current assets (inventories + marketable securities) = (3560.01/2974.12) = (3578.01/3498.3) = 1.19:1 = 1.02:1 Analysis = This ratio relates relatively more liquid current assets, usually current assets less inventories. The ratio of the company in 2009 was 1.19 and 1.02 in 2010, which is a good indicator for liquidity of the company.

7.

Debtor Turnover Ratio F= Sales / Debtor = (15611.92/668.67) =23.3 = (18153.19/858.80) =21.1

Analysis = measures the efficacy of a firms credit and collection policy and shows the no of items each year the debtors turn into cash. The debtor turnover ratio of the company in 2009 is 23.3% and 21.1% in 2010. The fall in ratio indicates poor management of receivables. 8. Average Debt Collection Period F= Debtor / (Sales/360) = (668.67/(15611.92/360) = 15.41 = 858.8/(18153.19/360) = 17.03

Analysis = means in how many days the debtors are turning into cash. The average debt collection period in 2009 is 15.41 days, and 17.03 in 2010, which implies the company collection period has significant increment in collection. 9. Debt to Equity Ratio F= Secured Loans + Unsecured Loans / Shareholders Equity = (177.55/13735.08) = (107.71/14064.38) = .012 =.007 Analysis = This ratio indicates the extent of use of financial leverage. The ratio of the company was .012 in 2009, which decreased to .007 in 2010 secured loan is not their

10.

Liability to Equity Ratio F= Debt + Current Liability / Shareholders Equity = (2974.12/377.44) = 7.87 = (3498.3/381.82) = 9.1

Analysis = In this current liabilities and provision are added with the debt. The ratio of the company in 2009 was 7.87, which increased to 9.1 in 2010.

11.

Price Earning Ratio F= Market Price Per Share / Earning Per Share Earning Per Share = profit after tax / no. Of equity share = 208 /8.65 = 162 /10.64 =24 =15.2 Analysis = This is a extensively popular measure used in investment analysis.

12.

Price to Book Ratio F= Market Price Per Share / Book Value Per Share = ( 208 /36.39 = 5.7 = ( 162 /36.84) = 4.3

Analysis = The price of Book ratio is decreased from 2009 is 5.7 & 2010 is 4.3

13.

Interest cover F= profit before interest and tax / interest expense =

Analysis = This is a measure of the protection available to creditors for payment of interest charges by the company. 14. Earning Per Share F= Profit After Tax / No of Equity Shares = 3263.59/500 = 6.52 = 4061/500 =8.12 per sharer

Analysis = This ratio is regarded as an important measure of profitability.