Liquidity , Risk and Profitability Analysis

ON

Objectives of the study

To measure and evaluate the liquidity position of TCS. To assess the trade-off between profitability and risk To assess the Risk factor the company

Scope of the study

This study has focused upon the liquidity position of TCS, the correlation between liquidity and profitability, and trade-off between profitability and risk of TCS. We hope this study will help us to know more clearly about the liquidity, risk and profitability of TCS.

Importance of the study

Working capital has played an important role in the analysis of economic and operating performance of a company. The firms policies for managing working capital should be designed to achieve three goals, which are adequate liquidity, minimizing risk, and maximizing profit

Data Analysis
Liquidity Position of TCS limited

The determinants of Liquidity and Risk measurement (current assets, current liabilities, quick assets, current ratio and quick ratio) are presented in the following table.

.Liquidity Position of Tata Consultancy Services limited

Years Current assets 6147.29 Quick assets 6104.86 current liabilities 3330.79 Current ratio 1.84 Quick ratio 1.83

20072008 20082009 20092010 2010-

6981.45

6944.85

4382.13

1.59

1.58

6521.87

6505.08

4162.47

1.56

1.56

2011
20112012 TOTAL

9010.83

8988.01

4807.58

1.87

1.86

17541.59 46203.03

17522.82 46065.62

6128.53 22811.5

2.86 9.72

2.85 9.69

current assets ,current liabilities ,quick assets OF TATA CONSULTANCY SERVICES

20000 18000 16000 14000 12000 10000 8000 6000 4000 2000 0

CURRENT ASSETS

QUICK ASSETS
CURRENT LIABILITIES

Rank correlation between Risk and ROCE of tata consultancy services limited
year Equity & Long Retaine term d loans earning s 2480.6 455.02 2008 20082009 20092010 20102011 20112012 3 2151.7 563.21 8 3129.8 103.25 5 2474.6 74.8 4 2054.6 116.25 3 67 59 95 12712. 3 17541. -0.6 1 58.25 1 0 0 81 16026. 7 9010.8 -1.49 5 45.66 5 1 1 3 12409. 5 6521.8 -1.4 4 46.31 3 -2 4 8 9558.9 9 6981.4 -0.98 3 45.7 4 1 1 Fixed Assets Current Assets Risk 1 Rank 3 ROCE Rank 2 D1 D2

2007-

6820.5

6147.2 -0.63 2 56.68 2 0 0

Equityand RE ,long term loan, Fixed assets and Current assets of TATA CONSULTANCY SERVICES.
20000 18000 16000 14000 12000 10000 8000 6000 4000 2000 0

EQUITY&RE LONGTERMLOANS FIXED ASSETS CURRENT ASSETS

Findings
The fixed assets have increased from 6850.28 thousand in 2007-2008 to 12712.67 thousand in 2011-2012, registering a growth rate of 86.3 % during the study period. Which indicates that the aggressive expansion and modernization activates initiated by TATA CONSULTANCY

SERVICES LIMITED.

Suggestions

When the firm likes TCS LTD is in a strategy to move for expansion to cope up with huge demand for services in the emerging Tata consultancy sectors, it is obvious to raise the finance from whatever sources possible.

But it has to take into consideration the short term

liquidity along with the long-term investment decisions.

If the liquidity persists continuously it will affect the profitability and in the long run it will endanger the solvency of the firm, especially during the time of

financial distress.

Conclusion

TCS should maintain adequate level of working capital to meet

the current obligations and maintain business operations.

TCS highly maintained adequate liquidity and profitability standard.

As a result their growth rate of its fixed assets during the study
period is about in 2007 in compare to the fixed assets in 2012.

Which indicates that the aggressive expansion and modernization activities initiated by TCS.