Wipro Fina Project Neha

Comparative study of financial statementWith reference to WIPRO and RELIANCE ltd.

Dissertation Submitted to the Padmashree Dr. D.Y. Patil University

in partial fulfillment of the requirements for the award of the Degree of

MASTERS IN BUSINESS ADMINISTRATION

Submitted by:NEHA KUMARI(Roll No.09083)

Research Guide:DR.R GOPAL

ALPHA LOKHANDE

Department of Business ManagementPadmashree Dr. D.Y. Patil University

CBD Belapur, Navi Mumbai

Executive Summary

The term “ratio” referes to the numerical and quantitative relationship between two items and variables. Ratio analysis is the systematic use of the ratio to interpret the financial statement. So that the strength and weaknesses of a firm, as well as its historical performance and current financial condition can be determined.

Financial ratios are a relatively easy way to get a basic understanding of the financial health of an organization. They range from the very simple to the complex, and the relevance of many of the ratios depends on the nature of the organization and therefore should only be compared with similar companies. This project will help to understand the liquidity, profitability and efficiency position of the company during the study period. To evaluate and analyze various facts of the financial performance of the company.

This document first explains some of the most general financial health ratios and their relevance. Next is a aection explaining how how the financial health of Wipro and Reliance limited can be analyzed by the help of financial ratio.

This project will help to identify a critical indicator of financial performance of the business and how it can be used for strategy and decision-making.

Objective of the study

To know the importance financial ratio.

To know the role played by financial ratio in WIPRO and RELIANCE.

To know understand the regulatory mechanism.

Analyze and find out short term and long term financial growth.

To know the efficiency of financial operation.

To give financial assistance for the strengthening of company.

To provide suggestions for improving the financial position

Research methodology

Research Design The research design for this study is basically analytical because it utilizes the large number of data of the company.

Data analysis tools:Ratio analysisFor data representation tables and graphs will be used.

Primary Data:Ratio calculation graphical representation

Secondary DataMagazines, journals, newspapersDifferent booksReference to the existing work done in the area.Reference to the various report, material, published by the company.Internet

Limitation of the study:

This study is limited to two financial institutions i.e WIPRO and RELIANCE.

The study is limited to time, cost and effort of the investigator.in a few span of period it is not possible to collect all the information.

There may be some vital informatiom which the organization may feel reluctant to share.they may give some wrong information

Literature review

Financial management-I. M pandey

According to author financial analysis is the process of identifying the financial strength and weakness of the firm by properly establishing the relationship between the item or balance sheet and profit and loss account .

According to author

A financial ratio is the relationship between financial variable it helps to ascertain the financial condition of the firm.

Ratio analysis is very use full tool to raise relevant question on a number of management issues it provide clues to investigate those issues in details.

With the help of ratio analysis of conclusion can be drawn regarding several aspects such as financial help profitability and operational effiency of the undertaking. Ratio point out the operating effency of the firm that is whether the management has utilized the firm’s assets correctly, to increase the investor’s wealth. It ensures a fair return to its owners and secures optimum utilization of firm assets.

Management accounting- sharma and gupta:

This book help to provid the information regarding the financial statement, this will to know how the financial statement like vertical nd horizontal can be viewed and analyzes.

Key manangement ratio- Ciaran Walse

According to author this book will provide the guidelines to understand the various management ratio whis will help to find out the company’s liquidity profitability and efficiency position of the company during the study period

Financial ratio analysis:A Handy Guid book-Charles K.Vandyck

According to author financial ratio analysis is the selection evaluation and interpretation of financial data in easier to understand ratio, which have been inentified as critical indicator of financial performance of the business and can be used to make inferences about a companies financial condition and its operation and attractiveness as an investment

Financial ratio are calculated from one or pieceses of information from a companies financial statements.

Ratio Analysis

INTRODUCTION

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 company’s strengths as well as its potential trouble spots.

The most prevalent method of analyzing a balance sheet is through ratio analysis. The ratio analysis can be for a single year or it may extend to more than one year. The ratios can also be compared with similar ratios of others concerns to make a comparative study.

First, all ratios will be worked out for each year and each set of comparable items.

The ratios worked out will be put in the context of a trend over several years.

They will be compared with similar companies/ standard ratios.

i)        for the year concerned, and

ii)      Over a period of time.

Any number of ratios can be prepared by comparing any two figures available in the balance sheet or profits and loss account or both. But to serve its purpose, the figures compared should be meaningful, having a link between them, and should satisfy the needs of the person who analysis the financial statements.

A tool used by individuals to conduct a quantitative analysis of information in a company's financial statements. Ratios are calculated from current year numbers and are then compared to previous years, other companies, the industry, or even the economy to judge the performance of the company. Ratio analysis is predominately used by proponents of fundamental analysis.

A financial ratio (or accounting ratio) is a relative magnitude of two selected numerical values taken from an enterprise's financial statements. Often used in accounting, there are many standard ratios used to try to evaluate the overall financial condition of a corporation or other organization. Financial ratios may be used by managers within a firm, by current and potential shareholders (owners) of a firm, and by a firm's creditors. Security analysts use financial ratios to compare the strengths and weaknesses in various companies.[1] If shares in a company are traded in a financial market, the market price of the shares is used in certain financial ratios.

Ratios can be expressed as a decimal value, such as 0.10, or given as an equivalent percent value, such as 10%. Some ratios are usually quoted as percentages, especially ratios that are usually or always less than 1, such as earnings yield, while others are usually quoted as decimal numbers, especially ratios that are usually more than 1, such as P/E ratio; these latter are also called multiples. Given any ratio, one can take its reciprocal; if the ratio was above 1, the reciprocal will be below 1, and conversely. The reciprocal expresses the same information, but may be more understandable: for instance, the earnings yield can be compared with bond yields, while the P/E ratio cannot be: for example, a P/E ratio of 20 corresponds to an earnings yield of 5%.

Ratio analysis is one of the techniques of financial analysis to evaluate the financial condition and performance of a business concern. Simply, ratio means the comparison of one figure to other relevant figure or figures.

According to Myers, " Ratio analysis of financial statements is a study of relationship among various financial factors in a business as disclosed by a single set of statements and a study of trend of these factors as shown in a series of statements."

Sources of data for financial ratios

Values used in calculating financial ratios are taken from the balance sheet, income statement, statement of cash flows or (sometimes) the statement of retained earnings. These comprise the firm's "accounting statements" or financial statements. The statements' data is based on the accounting method and accounting standards used by the organization.

Purpose and types of ratios

Financial ratios quantify many aspects of a business and are an integral part of the financial statement analysis. Financial ratios are categorized according to the financial aspect of the business which the ratio measures. Liquidity ratios measure the availability of cash to pay debt. Activity ratios measure how quickly a firm converts non-cash assets to cash assets. Debt ratios measure the firm's ability to repay long-term debt. Profitability ratios measure the firm's use of its assets and control of its expenses to generate an acceptable rate of return Market ratios measure investor response to owning a company's stock and also the cost of issuing stock. Financial ratios allow for comparisons

between companies between industries

between different time periods for one company

between a single company and its industry average

Ratios generally hold no meaning unless they are benchmarked against something else, like past performance or another company. Thus, the ratios of firms in different industries, which face different risks, capital requirements, and competition are usually hard to compare.

Objectives of ratio analysis

Standardize financial information for comparisons

•Evaluate current operations

•Compare performance with past performance

•Compare performance against other firms or industry standards

•Study the efficiency of operations

•Study the risk of operations

USE AND USERS OF RATIO ANALYSIS

There are basically two uses of financial ratio analysis: to track individual firm performance over time, and to make comparative judgments regarding firm performance. Firm performance is evaluated using trend analysis—calculating individual ratios on a per-period basis, and tracking their values over time. This analysis can be used to spot trends that may be cause for concern, such as an increasing average collection period for outstanding receivables or a decline in the firm's liquidity status. In this role, ratios serve as red flags for troublesome issues, or as benchmarks for performance measurement.

Another common usage of ratios is to make relative performance comparisons. For example, comparing a firm's profitability to that of a major competitor or observing how the firm stacks up versus industry averages enables the user to form judgments concerning key areas such as profitability or management effectiveness. Users of financial ratios include parties both internal and external to the firm. External users include security analysts, current and potential investors, creditors, competitors, and other industry observers. Internally, managers use ratio analysis to monitor performance and pinpoint strengths and weaknesses from which specific goals, objectives, and policy initiatives may be formed.

Standards for Comparison under Ratio AnalysisA number of financial tools have come into existence for the analysis of

financial statements. Financial statement analysis means a meaningful study of the financial statements, the balance sheet and the profit and loss account, relating to a period of an industry, to ascertain the prevailing state of affairs and reasons therefore. It is not enough to say that firm A is more profitable than firm B; one must also be able to say the causes and factors that are probably responsible for this. The object of the financial statement analysis is of great importance; for example, one’s approach to comparison of two firms

will be different from the approach of assessing profitability of investment in a firm. Standards are creatures of experiences, which are modified from time to time to meet changing conditions; they are an ideal or an average or normal results to be attained under certain conditions. Because of the changing nature of standards, constant acquaintance with the conditions under which they are set up is essential so that causes of variations from the standard can be intelligently appreciated. Standard ratios provide a bench – mark against which actual ratios can be compared. The significance of a ratio calculated can be grasped only after it is compared with the ratio. For this purpose four types of standards are employed:-

(a) Absolute standards: - These ratios are determined by the rule of thumb. For

example, in the case of current ratio 2:1 is considered to be desirable. This type of standards are those which become generally

recognised as being desirable regardless of the company, its type, the time, stage of the business cycles, or the objectives of the analyst. “The absolute standard is the weakest of all, for it suggests the existence of some inherent trait common to all business, which is generally far from the case.

(b)Historical standards: - These are the past ratios of the company. Present performance can be judged on the basis of past performance and the persons concerned can draw inferences about the improvement or otherwise of the particular aspect. Comparison with historical standards is also known as “Trend Analysis”. For this purpose, the trends rather than the actual ratios are important. Hence the behaviour of the ratios over a period is observed. By presenting a picture of operations over an extended time, trend – analysis of ratios becomes a valuable tool for the financial manager. The trend of the ratios indicates whether the concern has been moving in the direction in which it is tending to go, e. g., for measuring the rate of turnover, the ratio may be computed weekly or monthly and the points plotted on a graph to show the trend of the rate of turnover. However, it is not satisfactory from the standard point of view. It can merely compare the present efficiency with the efficiency of the past.

Horizontal standards: - These are the average ratios calculated for the entire industry or the ratios of some other firm engaged in the same line, i. e., Inter–Firm Comparison “Comparison can also be made against the achievements of other business where available. It is difficult to be sure that such comparison are on a like for like basis, even if operating in a similar market or industry, partly as to the comparison of profit, but more

particularly concerning the scope of the business under comparison.However, the difficulty in using such ratios is that no two firms are similar in size, accounting policies and corporate objectives. So, naturally there will be significant difference between the standard opted and the actual ratio. The ratios calculated for the industry as a whole provide a satisfactory standard to judge and interpret the ratios of the individual firm.

Budgeted standards: - These standards are based on budgeted figures. The actual ratios are compared with budgeted ratios and are, therefore, useful for the internal management as a tool of performance and evaluation and control. The utility even for the internal analyst depends much upon the care with which budgets are drawn up. Sometimes the assumptions made at the time of preparing the budget may go wrong because of abnormal developments. External analysts usually look to historical and / or horizontal standards. It can be concluded that ratios themselves do not directly answer the important questions about the firm. Instead they simply are relationship that, when compared to a standard of performance, identify difference or variations. Such difference can lead to understanding that brings forth changed performance. “Again as a matter of perspective, remember that

the manager uses financial statements mainly to locate problems and issues that need managerial attention. And the alert manager is interested in developing and establishing valuable and realistic standards against which ratios can be measured.

CAUTIONS ON THE USE AND INTERPRETATION OF FINANCIAL RATIOS

Financial ratios represent tools for insight into the performance, efficiency, and profitability of a firm. Two noteworthy issues on this subject involve ratio calculation and interpretation. For example, if someone refers to a firm's "profit margin" of 18 percent, are they referring to gross profit margin, operating margin, or net profit margin? Similarly, is a quotation of a "debt ratio" a reference to the total debt ratio, the long-term debt ratio, or the debt-to-equity ratio? These types of confusions can make the use of ratio analysis a frustrating experience.

Interpreting financial ratios should also be undertaken with care. A net profit margin of 12 percent may be outstanding for one type of industry and mediocre to poor for another. This highlights the fact that individual ratios should not be interpreted in isolation. Trend analyses should include a series of identical calculations, such as following the current ratio on a quarterly basis for two consecutive years. Ratios used for performance evaluation should always be compared to some benchmark, either an industry average or perhaps the identical ratio for the industry leader.

Another factor in ratio interpretation is for users to identify whether individual components, such as net income or current assets, originate from the firm's income statement or balance sheet. The income statement reports performance over a specified period of time, while the balance sheet gives static measurement at a single point in time. These issues should be recognized when one attempts to interpret the results of ratio calculations.

Despite these issues, financial ratios remain useful tools for both internal and external evaluations of key aspects of a firm's performance. A working knowledge and ability to use and interpret ratios remains a fundamental aspect of effective financial management. The value of financial ratios to investors became even more apparent during the stock market decline of 2000, when the bottom dropped out of

the soaring "dot.com" economy. Throughout the long run-up, some financial analysts warned that the stock prices of many technology companies—particularly Internet start-up businesses—were overvalued based on the traditional rules of ratio analysis. Yet investors largely ignored such warnings and continued to flock to these companies in hopes of making a quick return. In the end, however, it became clear that the old rules still applied, and that financial ratios remained an important means of measuring, comparing, and predicting firm performance.

classification

PROFITABILITY RATIOS

These ratios tell us whether a business is making profits - and if so whether at an acceptable rate. The key ratios are:

Ratio Calculation Comments

Gross Profit Margin

[Gross Profit / Revenue] x 100 (expressed as a percentage

This ratio tells us something about the business's ability consistently to control its production costs or to manage the margins its makes on products its buys and sells. Whilst sales value and volumes may move up and down significantly, the gross profit margin is usually quite stable (in percentage terms). However, a small increase (or decrease) in profit margin, however caused can produce a substantial change in overall profits.

Operating Profit Margin

[Operating Profit / Revenue] x 100 (expressed as a percentage)

Assuming a constant gross profit margin, the operating profit margin tells us something about a company's ability to control its other operating costs or overheads.

Return on capital employe

Net profit before tax, interest and

ROCE is sometimes referred to as the "primary ratio"; it tells us what returns management has made on the resources made available to them before making any distribution of those

d ("ROCE")

dividends ("EBIT") / total assets (or total assets less current liabilities

returns.

EFFICIENCY RATIOS

These ratios give us an insight into how efficiently the business is employing those resources invested in fixed assets and working capital.

Ratio Calculation Comments

Sales /Capital Employed

Sales / Capital employed

A measure of total asset utilisation. Helps to answer the question - what sales are being generated by each pound's worth of assets invested in the business. Note, when combined with the return on sales (see above) it generates the primary ratio - ROCE.

Sales or Profit / Fixed Assets

Sales or profit / Fixed Assets

This ratio is about fixed asset capacity. A reducing sales or profit being generated from each pound invested in fixed assets may indicate overcapacity or poorer-performing equipment.

Stock Turnover

Cost of Sales / Average Stock Value

Stock turnover helps answer questions such as "have we got too much money tied up in inventory"?. An increasing stock turnover figure or one which is much

larger than the "average" for an industry, may indicate poor stock management.

Credit Given / "Debtor Days"

(Trade debtors (average, if possible) / (Sales)) x 365

The "debtor days" ratio indicates whether debtors are being allowed excessive credit. A high figure (more than the industry average) may suggest general problems with debt collection or the financial position of major customers.

Credit taken / "Creditor Days"

((Trade creditors + accruals) / (cost of sales + other purchases)) x 365

A similar calculation to that for debtors, giving an insight into whether a business i taking full advantage of trade credit available to it.

LIQUIDITY RATIOS

Liquidity ratios indicate how capable a business is of meeting its short-term obligations as they fall due:

Ratio Calculation Comments

Current Ratio

Current Assets / Current Liabilities

A simple measure that estimates whether the business can pay debts due within one year from assets that it expects to turn into cash within that year. A ratio of less than one is often a cause for concern, particularly if it persists for any length of

time.

Quick Ratio (or "Acid Test"

Cash and near cash (short-term investments + trade debtors)

Not all assets can be turned into cash quickly or easily. Some - notably raw materials and other stocks - must first be turned into final product, then sold and the cash collected from debtors. The Quick Ratio therefore adjusts the Current Ratio to eliminate all assets that are not already in cash (or "near-cash") form. Once again, a ratio of less than one would start to send out danger signals.

STABILITY RATIOS

These ratios concentrate on the long-term health of a business - particularly the effect of the capital/finance structure on the business:

Ratio Calculation Comments

Gearing Borrowing (all long-term debts + normal overdraft) / Net Assets (or Shareholders' Funds)

Gearing (otherwise known as "leverage") measures the proportion of assets invested in a business that are financed by borrowing. In theory, the higher the level of borrowing (gearing) the higher are the risks to a business, since the payment of interest and repayment of debts are not "optional" in the same way as dividends. However, gearing can be a financially sound part of a business's capital structure particularly if the

business has strong, predictable cash flows.

Interest cover

Operating profit before interest / Interest

This measures the ability of the business to "service" its debt. Are profits sufficient to be able to pay interest and other finance costs?

INVESTOR RATIOS

There are several ratios commonly used by investors to assess the performance of a business as an investment:

Ratio Calculation Comments

Earnings per share ("EPS")

Earnings (profits) attributable to ordinary shareholders / Weighted average

A requirement of the London Stock Exchange - an important ratio. EPS measures the overall profit generated for each share in existence over a particular period.

ordinary shares in issue during the year

Price-Earnings Ratio ("P/E Ratio")

Market price of share / Earnings per Share

At any time, the P/E ratio is an indication of how highly the market "rates" or "values" a business. A P/E ratio is best viewed in the context of a sector or market average to get a feel for relative value and stock market pricing.

Dividend Yield

(Latest dividend per ordinary share / current market price of share) x 100

This is known as the "payout ratio". It provides a guide as to the ability of a business to maintain a dividend payment. It also measures the proportion of earnings that are being retained by the business rather than distributed as dividends.

classification of various profitability ratios: -

a. Gross Profit Ratio b. Net Profit Ratio

c. Operating Net Profit Ratio

d. Operating Ratio

e. Return on Investment or Return on Capital Employed

f. Return on Equity

g. Earning Per Share

Meaning, Objective and Method of Calculation: -

a. Gross Profit Ratio: Gross Profit Ratio shows the relationship between Gross Profit of the concern and its Net Sales. Gross Profit Ratio can be calculated in the following manner: -

Gross Profit Ratio = Gross Profit/Net Sales x 100

Where Gross Profit = Net Sales – Cost of Goods Sold

Cost of Goods Sold = Opening Stock + Net Purchases + Direct Expenses – Closing Stock

And Net Sales = Total Sales – Sales Return

Objective and Significance: Gross Profit Ratio provides guidelines to the concern whether it is earning sufficient profit to cover administration and marketing expenses and is able to cover its fixed expenses. The gross profit ratio of current year is compared to previous years’ ratios or it is compared with the ratios of the other concerns. The minor change in the ratio from year to year may be ignored but in case there is big change, it must be investigated. This investigation will be helpful to know about any departure from the standard mark-up and would indicate losses on account of theft, damage, bad stock system, bad sales policies and other such reasons.

However it is desirable that this ratio must be high and steady because any fall in it would put the management in difficulty in the

realisation of fixed expenses of the business.

b. Net Profit Ratio: Net Profit Ratio shows the relationship between Net Profit of the concern and Its Net Sales. Net Profit Ratio can be calculated in the following manner: -

Net Profit Ratio = Net Profit/Net Sales x 100

Where Net Profit = Gross Profit – Selling and Distribution Expenses – Office and Administration Expenses – Financial Expenses – Non Operating Expenses + Non Operating Incomes.

And Net Sales = Total Sales – Sales Return

Objective and Significance: In order to work out overall efficiency of the concern Net Profit ratio is calculated. This ratio is helpful to determine the operational ability of the concern. While comparing the ratio to previous years’ ratios, the increment shows the efficiency of the concern.

c. Operating Profit Ratio: Operating Profit means profit earned by the concern from its business operation and not from the other sources. While calculating the net profit of the concern all incomes either they are not part of the business operation like Rent from tenants, Interest on Investment etc. are added and all non-operating expenses are deducted. So, while calculating operating profit these all are ignored and the concern comes to know about its business income from its business operations.

Operating Profit Ratio shows the relationship between Operating Profit and Net Sales. Operating Profit Ratio can be calculated in the following manner: -

Operating Profit Ratio = Operating Profit/Net Sales x 100

Where Operating Profit = Gross Profit – Operating Expenses

Or Operating Profit = Net Profit + Non Operating Expenses – Non

Operating Incomes

And Net Sales = Total Sales – Sales Return

Objective and Significance: Operating Profit Ratio indicates the earning capacity of the concern on the basis of its business operations and not from earning from the other sources. It shows whether the business is able to stand in the market or not.

d. Operating Ratio: Operating Ratio matches the operating cost to the net sales of the business. Operating Cost means Cost of goods sold plus Operating Expenses.

Operating Ratio = Operating Cost/Net Sales x 100

Where Operating Cost = Cost of goods sold + Operating Expenses

Cost of Goods Sold = Opening Stock + Net Purchases + Direct Expenses – Closing Stock

Operating Expenses = Selling and Distribution Expenses, Office and Administration Expenses, Repair and Maintenance.

Objective and Significance: Operating Ratio is calculated in order to calculate the operating efficiency of the concern. As this ratio indicates about the percentage of operating cost to the net sales, so it is better for a concern to have this ratio in less percentage. The less percentage of cost means higher margin to earn profit.

e. Return on Investment or Return on Capital Employed: This ratio shows the relationship between the profit earned before interest and tax and the capital employed to earn such profit.

Return on Capital Employed

= Net Profit before Interest, Tax and Dividend/Capital Employed x 100

Where Capital Employed = Share Capital (Equity + Preference) + Reserves and Surplus + Long-term Loans – Fictitious Assets

Or

Capital Employed = Fixed Assets + Current Assets – Current Liabilities

Objective and Significance: Return on capital employed measures the profit, which a firm earns on investing a unit of capital. The profit being the net result of all operations, the return on capital expresses all efficiencies and inefficiencies of a business. This ratio has a great importance to the shareholders and investors and also to management. To shareholders it indicates how much their capital is earning and to the management as to how efficiently it has been working. This ratio influences the market price of the shares. The higher the ratio, the better it is.

f. Return on Equity: Return on equity is also known as return on shareholders’ investment. The ratio establishes relationship between profit available to equity shareholders with equity shareholders’ funds.

Return on Equity

= Net Profit after Interest, Tax and Preference Dividend/Equity Shareholders’ Funds x 100

Where Equity Shareholders’ Funds = Equity Share Capital + Reserves and Surplus – Fictitious Assets

Objective and Significance: Return on Equity judges the profitability from the point of view of equity shareholders. This ratio has great interest to equity shareholders. The return on equity measures the profitability of equity funds invested in the firm. The investors favour the company with higher ROE.

g. Earning Per Share: Earning per share is calculated by dividing the net profit (after interest, tax and preference dividend) by the

number of equity shares.

Earning Per Share

= Net Profit after Interest, Tax and Preference Dividend/No. Of Equity Shares

Objective and Significance: Earning per share helps in determining the market price of the equity share of the company. It also helps to know whether the company is able to use its equity share capital effectively with compare to other companies. It also tells about the capacity of the company to pay dividends to its equity shareholders.

Classification of Turnover/Activity/Performance Ratios: -

a. Capital Turnover Ratiob. Fixed Assets Turnover Ratio

c. Working Capital Turnover Ratio

d. Stock Turnover Ratio

e. Debtors Turnover Ratio

f. Debt Collection Period

Meaning, Objective and Method of Calculation: -

a. Capital Turnover Ratio: Capital turnover ratio establishes a relationship between net sales and capital employed. The ratio indicates the times by which the capital employed is used to generate sales. It is calculated as follows: -

Capital Turnover Ratio = Net Sales/Capital Employed

Where Net Sales = Sales – Sales Return

Capital Employed = Share Capital (Equity + Preference) + Reserves

and Surplus + Long-term Loans – Fictitious Assets.

Objective and Significance: The objective of capital turnover ratio is to calculate how efficiently the capital invested in the business is being used and how many times the capital is turned into sales. Higher the ratio, better the efficiency of utilisation of capital and it would lead to higher profitability.

b. Fixed Assets Turnover Ratio: Fixed assets turnover ratio establishes a relationship between net sales and net fixed assets. This ratio indicates how well the fixed assets are being utilised.

Fixed Assets Turnover Ratio = Net Sales/Net Fixed Assets

In case Net Sales are not given in the question cost of goods sold may also be used in place of net sales. Net fixed assets are considered cost less depreciation.

Objective and Significance: This ratio expresses the number to times the fixed assets are being turned over in a stated period. It measures the efficiency with which fixed assets are employed. A high ratio means a high rate of efficiency of utilisation of fixed asset and low ratio means improper use of the assets.

c. Working Capital Turnover Ratio: Working capital turnover ratio establishes a relationship between net sales and working capital. This ratio measures the efficiency of utilisation of working capital.

Working Capital Turnover Ratio = Net Sales or Cost of Goods Sold/Net Working Capital

Where Net Working Capital = Current Assets – Current Liabilities

Objective and Significance: This ratio indicates the number of times the utilisation of working capital in the process of doing business. The higher is the ratio, the lower is the investment in working capital and the greater are the profits. However, a very high turnover indicates a sign of over-trading and puts the firm in

financial difficulties. A low working capital turnover ratio indicates that the working capital has not been used efficiently.

d. Stock Turnover Ratio: Stock turnover ratio is a ratio between cost of goods sold and average stock. This ratio is also known as stock velocity or inventory turnover ratio.

Stock Turnover Ratio = Cost of Goods Sold/Average Stock

Where Average Stock = [Opening Stock + Closing Stock]/2

Cost of Goods Sold = Opening Stock + Net Purchases + Direct Expenses – Closing Stock

Objective and Significance: Stock is a most important component of working capital. This ratio provides guidelines to the management while framing stock policy. It measures how fast the stock is moving through the firm and generating sales. It helps to maintain a proper amount of stock to fulfill the requirements of the concern. A proper inventory turnover makes the business to earn a reasonable margin of profit.

e. Debtors’ Turnover Ratio: Debtors turnover ratio indicates the relation between net credit sales and average accounts receivables of the year. This ratio is also known as Debtors’ Velocity.

Debtors Turnover Ratio = Net Credit Sales/Average Accounts Receivables

Where Average Accounts Receivables = [Opening Debtors and B/R + Closing Debtors and B/R]/2

Credit Sales = Total Sales – Cash Sales

Objective and Significance: This ratio indicates the efficiency of the concern to collect the amount due from debtors. It determines the efficiency with which the trade debtors are managed. Higher the

ratio, better it is as it proves that the debts are being collected very quickly.

f. Debt Collection Period: Debt collection period is the period over which the debtors are collected on an average basis. It indicates the rapidity or slowness with which the money is collected from debtors.

Debt Collection Period = 12 Months or 365 Days/Debtors Turnover Ratio

Or

Debt Collection Period = Average Trade Debtors/Average Net Credit Sales per day

Or

365 days or 12 months x Average Debtors/Credit Sales

It may be noted that some authors prefer to use 360 days instead of 365 days for the sake of convenience.

Objective and Significance: This ratio indicates how quickly and efficiently the debts are collected. The shorter the period the better it is and longer the period more the chances of bad debts. Although no standard period is prescribed anywhere, it depends on the nature of the industry.

Classification of Liquidity Ratios:

a. Current Ratio b. Liquid Ratio

Meaning, Objective and Method of Calculation:

a. Current Ratio: Current ratio is calculated in order to work out

firm’s ability to pay off its short-term liabilities. This ratio is also called working capital ratio. This ratio explains the relationship between current assets and current liabilities of a business. Where current assets are those assets which are either in the form of cash or easily convertible into cash within a year. Similarly, liabilities, which are to be paid within an accounting year, are called current liabilities.

Current Ratio = Current Assets/Current Liabilities

Current Assets include Cash in hand, Cash at Bank, Sundry Debtors, Bills Receivable, Stock of Goods, Short-term Investments, Prepaid Expenses, Accrued Incomes etc.

Current Liabilities include Sundry Creditors, Bills Payable, Bank Overdraft, Outstanding Expenses etc.

Objective and Significance: Current ratio shows the short-term financial position of the business. This ratio measures the ability of the business to pay its current liabilities. The ideal current ratio is suppose to be 2:1 i.e. current assets must be twice the current liabilities. In case, this ratio is less than 2:1, the short-term financial position is not supposed to be very sound and in case, it is more than 2:1, it indicates idleness of working capital.

b. Liquid Ratio: Liquid ratio shows short-term solvency of a business in a true manner. It is also called acid-test ratio and quick ratio. It is calculated in order to know how quickly current liabilities can be paid with the help of quick assets. Quick assets mean those assets, which are quickly convertible into cash.

Liquid Ratio = Liquid Assets/Current Liabilities

Where liquid assets include Cash in hand, Cash at Bank, Sundry Debtors, Bills Receivable, Short-term Investments etc. In other words, all current assets are liquid assets except stock and prepaid expenses.

Current liabilities include Sundry Creditors, Bills Payable, Bank Overdraft, Outstanding Expenses etc.

Objective and Significance: Liquid ratio is calculated to work out the liquidity of a business. This ratio measures the ability of the business to pay its current liabilities in a real way. The ideal liquid ratio is suppose to be 1:1 i.e. liquid assets must be equal to the current liabilities. In case, this ratio is less than 1:1, it shows a very weak short-term financial position and in case, it is more than 1:1, it shows a better short-term financial position.

Classification of Solvency Ratios:

a. Debt-Equity Ratio b. Debt to Total Funds Ratio

c. Fixed Assets Ratio

d. Proprietary Ratio

e. Interest Coverage Ratio

Meaning, Objective and Method of Calculation: -

a. Debt-Equity Ratio: Debt equity ratio shows the relationship between long-term debts and shareholders funds’. It is also known as ‘External-Internal’ equity ratio.

Debt Equity Ratio = Debt/Equity

Where Debt (long term loans) include Debentures, Mortgage Loan, Bank Loan, Public Deposits, Loan from financial institution etc.

Equity (Shareholders’ Funds) = Share Capital (Equity + Preference) + Reserves and Surplus – Fictitious Assets

Objective and Significance: This ratio is a measure of owner’s stock in the business. Proprietors are always keen to have more funds from borrowings because:

(i) Their stake in the business is reduced and subsequently their risk too

(ii) Interest on loans or borrowings is a deductible expenditure while computing taxable profits. Dividend on shares is not so allowed by Income Tax Authorities.

The normally acceptable debt-equity ratio is 2:1.

b. Debt to Total Funds Ratio: This ratio gives same indication as the debt-equity ratio as this is a variation of debt-equity ratio. This ratio is also known as solvency ratio. This is a ratio between long-term debt and total long-term funds.

Debt to Total Funds Ratio = Debt/Total Funds

Where Debt (long term loans) include Debentures, Mortgage Loan, Bank Loan, Public Deposits, Loan from financial institution etc.

Total Funds = Equity + Debt = Capital Employed

Equity (Shareholders’ Funds) = Share Capital (Equity + Preference) + Reserves and Surplus – Fictitious Assets

Objective and Significance: - Debt to Total Funds Ratios shows the proportion of long-term funds, which have been raised by way of loans. This ratio measures the long-term financial position and soundness of long-term financial policies. In India debt to total funds ratio of 2:3 or 0.67 is considered satisfactory. A higher proportion is not considered good and treated an indicator of risky long-term financial position of the business. It indicates that the business depends too much upon outsiders’ loans.

c. Fixed Assets Ratio: Fixed Assets Ratio establishes the relationship of Fixed Assets to Long-term Funds.

Fixed Assets Ratio = Long-term Funds/Net Fixed Assets

Where Long-term Funds = Share Capital (Equity + Preference) + Reserves and Surplus + Long- term Loans – Fictitious Assets

Net Fixed Assets means Fixed Assets at cost less depreciation. It will also include trade investments.

Objective and Significance: This ratio indicates as to what extent fixed assets are financed out of long-term funds. It is well established that fixed assets should be financed only out of long-term funds. This ratio workout the proportion of investment of funds from the point of view of long-term financial soundness. This ratio should be equal to 1. If the ratio is less than 1, it means the firm has adopted the impudent policy of using short-term funds for acquiring fixed assets. On the other hand, a very high ratio would indicate that long-term funds are being used for short-term purposes, i.e. for financing working capital.

d. Proprietary Ratio: Proprietary Ratio establishes the relationship between proprietors’ funds and total tangible assets. This ratio is also termed as ‘Net Worth to Total Assets’ or ‘Equity-Assets Ratio’.

Proprietary Ratio = Proprietors’ Funds/Total Assets

Where Proprietors’ Funds = Shareholders’ Funds = Share Capital (Equity + Preference) + Reserves and Surplus – Fictitious Assets

Total Assets include only Fixed Assets and Current Assets. Any intangible assets without any market value and fictitious assets are not included.

Objective and Significance: This ratio indicates the general financial

position of the business concern. This ratio has a particular importance for the creditors who can ascertain the proportion of shareholder’s funds in the total assets of the business. Higher the ratio, greater the satisfaction for creditors of all types.

e. Interest Coverage Ratio: Interest Coverage Ratio is a ratio between ‘net profit before interest and tax’ and ‘interest on long-term loans’. This ratio is also termed as ‘Debt Service Ratio’.

Interest Coverage Ratio = Net Profit before Interest and Tax/Interest on Long-term Loans

Objective and Significance: This ratio expresses the satisfaction to the lenders of the concern whether the business will be able to earn sufficient profits to pay interest on long-term loans. This ratio indicates that how many times the profit covers the interest. It measures the margin of safety for the lenders. The higher the number, more secure the lender is in respect of periodical interest.

WIPRO

INTRODUCTION

Introduction to company Group of companies

History Company Profile Registered office address Board of director

Auditors.

Introduction of companyWipro 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)

Group Companies

Wipro infrastructure Engineering Ltd.

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.

HistoryWipro 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.

Company Profile

Business-DescriptionWipro 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 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.

Customized IT solutionsWipro 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 ServiceWipro 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 ServicesWipro'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 telecommunications service providers, Internet service providers, application service providers and Internet data centers.

Business Process Outsourcing ServiceWipro 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 Middle- East 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 servicesInclude 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 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 LightingWipro'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.

Registered Office Address

WIPRO LIMITEDDoddakannelli, Sarjapur Road,Bangalore – 560 035, India.Tel : +91-80-28440011Fax : +91-80-28440541.6. Board of DirectorsAzim H . Premji ChairmanDr Ashok S Ganguly Former Chief Ex.Officer NortelB .C. Prabhakar Practitioner of LawDr. Jagdish N. Sheth Professor Of Marketing-Emory Uni.Usa.

N.Vagual Chairman-ICICI Bank LtdBill OwensFormer Chief Ex.Officer,NortelP. M. SinbaFormer Chairman Pepsico India HoldingsAzim Premji.CHAIRMANAuditorsKPMGBSR & Co.Audit committeeN Vaghul - ChairmanP M Sinha - MemberB C Prabhakar - MemberBoard Governance and Compensation CommitteeAshok S Ganguly - ChairmanN Vaghul - MemberP M Sinha - MemberShareholders’ Grievance and Administrative CommitteeB C Prabhakar - ChairmanAzim H Premji – MemberRATIOS OF WIPRO

FINAL ACCOUNT OF WIPRO LTD.

Balance Sheet of Wipro ------------------- in Rs. Cr. -------------------

Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

12 mths 12 mths 12 mths 12 mths 12 mths

Sources Of FundsTotal Share Capital 285.15 291.80 292.30 293.00 293.60Equity Share Capital 285.15 291.80 292.30 293.00 293.60Share Application Money 7.49 3.50 58.00 1.50 1.80Preference Share Capital 0.00 0.00 0.00 0.00 0.00Reserves 6,135.30 9,025.10 11,260.40 12,220.50 17,396.80Revaluation Reserves 0.00 0.00 0.00 0.00 0.00Networth 6,427.94 9,320.40 11,610.70 12,515.00 17,692.20Secured Loans 45.06 23.20 4.00 0.00 0.00Unsecured Loans 5.10 214.80 3,818.40 5,013.90 5,530.20Total Debt 50.16 238.00 3,822.40 5,013.90 5,530.20Total Liabilities 6,478.10 9,558.40 15,433.10 17,528.90 23,222.40

Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

12 mths 12 mths 12 mths 12 mths 12 mths

Application Of FundsGross Block 2,364.53 1,645.90 2,282.20 5,743.30 6,761.30Less: Accum. Depreciation 1,246.27 0.00 0.00 2,563.70 3,105.00Net Block 1,118.26 1,645.90 2,282.20 3,179.60 3,656.30Capital Work in Progress 612.36 989.50 1,335.00 1,311.80 991.10Investments 3,459.20 4,348.70 4,500.10 6,895.30 8,966.50Inventories 148.65 240.40 448.10 459.60 606.90

Sundry Debtors 1,968.07 2,582.30 3,646.60 4,446.40 4,754.70Cash and Bank Balance 822.42 1,849.20 3,732.10 1,902.10 1,938.30Total Current Assets 2,939.14 4,671.90 7,826.80 6,808.10 7,299.90Loans and Advances 1,136.96 1,666.50 4,231.30 4,202.00 5,519.40Fixed Deposits 0.58 0.00 0.00 2,507.10 3,726.00Total CA, Loans & Advances 4,076.68 6,338.40 12,058.10 13,517.20 16,545.30Deffered Credit 0.00 0.00 0.00 0.00 0.00Current Liabilities 1,776.83 2,998.90 3,361.60 5,564.30 4,706.00Provisions 1,011.56 765.20 1,380.70 1,810.70 2,230.80Total CL & Provisions 2,788.39 3,764.10 4,742.30 7,375.00 6,936.80Net Current Assets 1,288.29 2,574.30 7,315.80 6,142.20 9,608.50Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00Total Assets 6,478.11 9,558.40 15,433.10 17,528.90 23,222.40

Contingent Liabilities 509.18 661.60 749.90 1,045.40 778.00Book Value (Rs) 45.03 63.86 79.05 85.42 120.49

Profit & Loss account of Wipro

------------------- in Rs. Cr. -------------------

Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

12 mths 12 mths 12 mths 12 mths 12 mths

IncomeSales Turnover 10,264.09 13,758.50 17,658.10 21,612.80 23,006.30Excise Duty 36.97 74.60 165.50 105.50 84.30Net Sales 10,227.12 13,683.90 17,492.60 21,507.30 22,922.00Other Income 151.92 288.70 326.90 -480.40 875.30Stock Adjustments 24.21 86.30 187.00 -3.80 111.00Total Income 10,403.25 14,058.90 18,006.50 21,023.10 23,908.30ExpenditureRaw Materials 1,391.88 1,975.30 3,139.30 3,438.80 4,140.40Power & Fuel Cost 86.46 0.00 0.00 154.00 141.40Employee Cost 4,279.03 5,768.20 7,409.10 9,249.80 9,062.80Other Manufacturing Expenses 934.24 120.50 299.80 1,687.80 2,071.80Selling and Admin Expenses 801.07 27.60 557.80 1,523.00 1,475.10Miscellaneous Expenses 274.76 2,624.10 2,558.00 691.40 640.00Preoperative Exp Capitalised 0.00 0.00 0.00 0.00 0.00Total Expenses 7,767.44 10,515.70 13,964.00 16,744.80 17,531.50

Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

12 mths 12 mths 12 mths 12 mths 12 mths

Operating Profit 2,483.89 3,254.50 3,715.60 4,758.70 5,501.50PBDIT 2,635.81 3,543.20 4,042.50 4,278.30 6,376.80Interest 3.13 7.20 116.80 196.80 108.40PBDT 2,632.68 3,536.00 3,925.70 4,081.50 6,268.40Depreciation 292.26 359.80 456.00 533.60 579.60Other Written Off 0.00 0.00 0.00 0.00 0.00Profit Before Tax 2,340.42 3,176.20 3,469.70 3,547.90 5,688.80Extra-ordinary items -33.85 0.00 0.00 0.00 0.00PBT (Post Extra-ord Items) 2,306.57 3,176.20 3,469.70 3,547.90 5,688.80Tax 286.10 334.10 406.40 574.10 790.80Reported Net Profit 2,020.48 2,842.10 3,063.30 2,973.80 4,898.00Total Value Addition 6,375.55 8,540.40 10,824.70 13,306.00 13,391.10Preference Dividend 0.00 0.00 0.00 0.00 0.00Equity Dividend 712.88 873.70 876.50 586.00 880.90Corporate Dividend Tax 99.98 126.80 148.90 99.60 128.30Per share data (annualised)Shares in issue (lakhs) 14,257.54 14,590.00 14,615.00 14,649.81 14,682.11Earning Per Share (Rs) 14.17 19.48 20.96 20.30 33.36Equity Dividend (%) 250.00 300.00 300.00 200.00 300.00Book Value (Rs) 45.03 63.86 79.05 85.42 120.49

RATIO ANALYSIS AND INTERPRETATION

Liquidity Ratio:Current RatioQuick RatioNet working capital Ratio

Current ratio:This ratio shows the proportion of Current Assets to Current Liabilities. It is alsoknown as “Working Capital Ratio” as it is a measure of working capital available at aparticular time. It’s a measure of short term financial strength of the business. Theideal current ratio is 2:1 i.e. Current Assets should be equal to Current Liabilities.Current Ratio = Current Assets/ Current Liabilities

year 2010 2009 2008 2007 2006Current

ratio2.39 1.83 2.54 1.68 1.46

Interpretation: Current ratio is always 2:1,it means the current assest is two time of

current liability. After observing the figure the current ratio is fluctuating. Here ratio is increased from 2006 to 2008 and after that there is

slight decrease in 2009 but in 2010 it goes increase to 2.39 which shows that in 2010 company is able to meet its current liability.

Company is no where ideal ratio in every year but every company can not acheive this ratio.

Current ratio increases in 2008 and 2010 because of increase in current assest and decrease in current liability in these years.

Quick ratio:

Year 2010 2009 2008 2007 2006Quick ratio 2.29 1.76 2.44 1.61 1.40

Interpretation: Standard ratio is 1:1 Companys qiuck assest is more than its quick liability for all these

five years. In 2008 and 2010 the ratio is increasing because of increase in cash

and bank balance. So all the years quick ratio exceeding 1,the firm is in position to

meets its immediate obligation in all the years. The quick ratio was at its peak in 2008 while it was lowest in 2006.

Net working capital: Networking capital = Current Assets – Current Liabilities

Year 2010 2009 2008 2007 2006Net

working

9608.50 6142.20 61577.00 28050.00 13798.00

capital Ratio

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 currentassets. It is Increasing Double than year by year from 2006 to 2008

because of assets increasing fast than liabilities but in 2009 to 2010 there is a slight increase.

Profitability Ratio:

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 thecompany.The following Profitability Ratios are calculated for the company.Gross profit ratio

Operating ratio

Net profit ratio

Rate of return on investment

Rate of return on equity

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 2010 2009 2008 2007 2006

Gross profit ratio

21.47 19.64 18.63 21.15 21.42

Interpretation:

GP Ratio shows how much efficient company is in Production. GP is decreasing 2008 and 2009 due to higher production cost. Gross sales and services are increasing in 2006, 2007 and 2010 so in

effect Gross profit ratio is increase.

Operating ratio:This ratio shows the relation between Cost of Goods Sold + Operating

Expenses andNet Sales. It shows the efficiency of the company in managing the

operating costsbase with respect to Sales. The higher the ratio, the less will be the

margin availableto proprietors.Operating Profit Ratio = COGS+Operating expences X 100 Sales

year 2010 2009 2008 2007 2006

Operating ratio

24.00 22.12 21.24 23.78 24.28

Interpretation:Operating ratio is lowest during current 2008. This shows that the expenses incurred to earn profit were less

compared to theprevious two years. Operating ratio is decreases in 2008 and 2009 which showsthat company is not on the right track by efficiently cutting down

manufacturing, administrative and selling distribution expenses.

Net profit ratio:Net profit x 100Net sales

year 2010 2009 2008 2007 2006

Net profit rati

20.97 13.53 17.19 20.34 19.53

o

Interpretation:

After observing the figure the ratio is fluctuating. Company has rise in its net profit in 2010 as compared to the previous

yearsbecause the company has increased its sales. Though the company’s sale is continuously rising but the net profit is

not so muchincreased so management should take some steps to decrease its

expenses. The overall ratio is showing good position of the company.

Return on Investment:Rate of Return on Investment indicates the profitability of business and is

very muchin use among financial analysts.ROI= EBIT X 100 Total Assets

Year 2010 2009 2008 2007 2006

Return on Investment

25.19 31.34 26.51 30.50 31.39

Interpretation:

From the above observation it can be seen that ratio is fluctuating. In the year 2009 Rate of Return on Investment is slightly increase as

comparedto previous year Ratio is decreasing in 2006 to 2008 at decreasing rate because of

assets increase compare to sales. The company’s Total Assets is increased so ROI is decreased thereforeConclusion made that company is not utilizing its assets and investment

efficiently.

Assets Turnover Ratio:Asset Turnover Ratio are basically productivity ratios which measure the outputproduced from the given input deployed. This relationship is shown as underProductivity = Output InputAssets 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 Asset Turnover RatioInventory Turnover RatioDebtors Turnover Ratio

Total Asset Turnover Ratio:The amounts invested in business are invested in all assets jointly and

sales areaffected through them to earn profits. Thus it is the ratio of Sales to Total

Assets. .It isthe ratio which measures the efficiency with which assets were turned

over a period.Total Asset Turnover Ratio = Sales Total Assets

Year 2010 2009 2008 2007 2006Total Asset Turnover Ratio

0.99 1.24 1.14 1.43 1.58

Interpretation:

The total assets turnover ratio is almost same in all years. The Assets turnover Ratio is between 1 to 1.5 in all 5 years which shows

effectiveUtilization of assets from the company’s view point. In the year 2005-06 ratio is increased because of company’s total

assets isincreased and sales is also increased.So the ratio is increase.

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 stockYear 2010 2009 2008 2007 2006Inventory

turnover Ratio

45.40 56.15 39.41 57.23 78.23

Interpretation:

From the above calculation we can say that the ratio is decreasing. It means

Inventory cannot quickly convert in to sales. So that it is bad for the company.

In 2006, ratio is increased as compared to other 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.

Debtor Turnover Ratio:

Debtor turnover ratio: The debtor turnovers suggest the no. of times the amount of

credit sale is collected during the year.Debtor’s Turnover Ratio = Sales Average Debtors

Year 2010 2009 2008 2007 2006Debtor

Turnover Ratio

4.98 5.32 5.62 6.01 6.06

Interpretation:Debtor turnover indicates how quickly the company can collect its credit

salesrevenue. Here the ratio is continuously decreasing, so that the company’s

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. Therefore, they can invest that money on Assets, HRD and other investments.

Finance structure ratio:Finance Structure Ratios indicate the relative mix or blending of owner’s

funds andoutsiders’ debt funds in the total capital employed in the business. It

should be noted thatequity funds are the prime fund which increase progressively through

reinvestment ofprofits, while outside debt funds are supplementary funds and are added

at the discretionof the management.The following Finance Ratios are calculated for the company.Debt RatioDebt equityInterest coverage Ratio

Debt equity ratio:This ratio is only another form proprietary ratio and establishes relation

between theoutside long term liabilities and owner funds. It shows the proportion of

long termexternal equity & internal Equities.Debt Equity Ratio = Total Long Term debt Share holder equity

Year 2010 2009 2008 2007 2006Debt

equity ratio

0.31 0.400.33 0.03 0.01

Interpretation: The normally acceptable debt equity ratio is 2:1. This ratio is a measure of owner’s stock in the business. 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.

In the year 2010,2009 and 2008, the company is some what sufficient to discharge its debts.

Debt Ratio:

Debt ratio indicates the long term debt out of the total capital employed.Debt Ratio = Long Term Debt Total Capital EmployedYear 2010 2009 2008 2007 2006Long term

Debt Equity Ratio

0.01 0.01 0.33 0.03 _

Interpretation:

From the above calculation it seems that the ratio is fluctuating. In 2008 the ratio is increased as compared to the previous year because

the totalloan funds are increased by 661.56%. In 2006 Company has issued equity Share and also loan is decreased. Its means that now company trying to increasing Trading on equity.

Interest coverage Ratio:Interest Coverage Ratio: The ratio indicates as to how many times the

profit coversthe payment of interest on debentures and other long term loans hence it

is alsoknown as times interest earned ratio. It measures the debt service

capacity of the firmin respect of fixed interest on long term debts.Interest Coverage Ratio = EBIT Interest

Year 2010 2009 2008 2007 2006

Interest coverage Ratio

49.41 23.85 30.71 442.14 735.79

Interpretation:

After observing the figure it shows that the ratio has mix trend from the year 2008 to 2010.

In the year 2007 and 2006 ,company has not much debt compare to EBIT so interest coverage ratio is high but in 2007 and 2006,company increasing its external debt so company have pay more interest among its earnings therefore, interest coverage ratio falling down compare to previous years.

Valuation Ratio:

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.

Earning per share

Dividend pay-out Ratio

Profit Margin

Earning per share:This ratio measures profit available to equity share holders on per share

basis. It is notthe actual amount paid to the share holders as dividend but is the

maximum that canbe paid to them.Earnings per Share = Net Profits for Equity Shares No. of Equity Shares

year 2010 2009 2008 2007 2006

Earning per share: 33.36 20.30 20.96 19.48 14.17

Interpretation:Earninig per share is increasing as a increasing rate it is good for invester

and shareholder. In 2010, Profit is increasing and Number of Equity share Holder is also

increased .Therefore ,EPS Ratio is increasing in Current year.

Dividend payout Ratio:This ratio indicate split of EPS between Cash Dividends and reinvestment

of Profit. Ifthe Company has Profitable projects than it will prefer to keep dividend

pay out ratiolower.Dividend pay-out Ratio = Dividend per Share in Rs. Earnings per share in Rupees

year 2010 2009 2008 2007 2006

Dividend payout Ratio

20.60 23.05 33.47 35.20 40.23

Interpretation:

In all years there is fluctuation in ratio. If the company wants to prosper in future with flying colours then

ideally moreamounts should be reinvested in the business rather than distributing as

dividend. In 2005-06 company has reinvested in business for expansion.

Profit margin Ratio:

Profit margin ratio= PAT/Sales*100

year 2010 2009 2008 2007 2006

Profit margin Ratio

20.97 13.53 17.19 20.34 19.53

Interpretation:

The ratio shows almost equal from 2006 to 2008 it means the company has maintain the equal ratio in these years.

The ratio is increase in current year it is good sign for the company.