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 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 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
- Board of Directors
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Azim H . Premji Chairman
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Dr Ashok S Ganguly Former Chief Ex.Officer Nortel
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B .C. Prabhakar Practitioner of Law
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Dr. Jagdish N. Sheth Professor Of Marketing-Emory Uni.Usa.
-
N.Vagual Chairman-ICICI Bank Ltd
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Bill Owens Former Chief Ex.Officer,Nortel
-
P. M. Sinba Former Chairman Pepsico India Holdings
- Auditors
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
- Trend Analysis of Balance Sheet
- Horizontal Analysis of Balance Sheet
- ANALYSIS OF BALANCE SHEET
- Trend Analysis of Balance Sheet
Trend Analysis of Balance Sheet involves calculation of percentage changes in the Balance Sheet items for a no. of successive years. This is carried out by taking the items of the past financial year used as base year and items of other years are expressed as percentage of the base year. Here 2003-04 is taken as base year
Table 2.1.1 Trend Analysis of Balance Sheet
2.1.1 Trend Analysis of Fixed assets
Table 2.1.2 Trend Analysis of Fixed assets
Figure 2.1.1 Trend Analysis of total fixed assets
Interpretation
- The fixed assets are increase in current year is good for the company.
- Hear fixed assets are increasing as a increasing rate it means the company has expand it’s business.
- Fixed Assets are continuously increasing year by year.
- It seems that the company has good future plans and they want to expand their business so they have invested more and more funds in fixed assets.
- Fixed assets are efficiently utilized by the company due to which the profit of the company is increasing every year.
- In 2006-07and 2007-08 Company has huge increase its land, patents, trade marks and rights.
2.1.2 Trend Analysis of total current assets
Table 2.1.3 Trend Analysis of total current assets
Figure 2.1.2 Trend Analysis of total current assets
Interpretation
- The current assets is shows the cash liquidity of the company.
- Hear it is increase it year by year it means the company has sufficient liquidity for generating the business.
2.1.2 Trend Analysis of total current assets
Table 2.1.4 Trend Analysis of total Liabilities
Figure 2.1.3 Trend Analysis of total Liabilities
Interpretation
- The total liabilities is highest in 2005-06.
- Liabilities is incressing rate it mean company has to developed business. And purchase raw material on credit basis.
2.1.3 Trend Analysis of share holder’s equity.
Table 2.1.5 Trend Analysis of share holder’s equity.
Figure 2. 4 Trend Analysis of share holder’s equity.
Interpretation
- Share holder equity is increase high in 2006-07 because the company has allocated new share.
- Share holder equity is showing high fluctuation.
2.1.4 Trend Analysis of total loan fund.
Table 2.1.6 Trend Analysis of total loan fund.
Figure 2.1.5 Trend Analysis of total loan funds
Interpretation
- The total trend line is slowly increase up to 2005-06. And after that it is increase at a high rate.
- From 2006-07 onward the loan fund is increase because the company has expanse its business.
- The company has been able to raise its secured loan without shortage of funds.
- Increase in secured loan shows that company has very good prestige in Financial market.
- Company increasing loan funds because company want to increase its trading on equity.
-
Share Holder’s Funds
Table 2.1.7 Trend Analysis of Share Holder's Funds
Figure 2.1.6 Trend Analysis of Share Holder's Funds
Interpretation
- There is increase in share capital more than two times in 2005-06 and 2006-07 and it increase three time in 2004-05 compare to base year 2003-04.In 2007-08 there is not big increase in share capital compare to 2005-06.
- There is highest share capital in 2004-05.
- The company has issued new shares in the 2005-06.
- As a result no. of shares is increased and these funds are implemented for future plans of the company.
- Reserves & surplus shows a remarkable increase in 2004-05, 2005-06 and 2006-07 and it slowly decrease in 2008. respectively with respect to the base year, this shows the company has future vision and it would like to expand its business.
- Increase in Reserve & surplus shows because of increase in profit every year.
- Has a hole we can say that the company is target oriented and its sticking to its policies as a result share holder’s funds is increasing year by year.
2.1.6 Source of Funds
Table 2.1.8 Trend Analysis of Source Of Funds
Figure 2.1.7 Trend Analysis of Sources of Funds
Interpretation
- The loan fund is increases six and twelve time in year 2007, 2008 respectively compare to 2003-04.
- The company has observed an increase in loan funds as compared to the base year which indicates its growing reputation in the financial market.
- Hence the overall sources of funds have shown big increase with respect to the base year
2.1.7 Investment
Table 2.1.9 Trend Analysis of Investment
Figure 2.1.8 Trend Analysis of Investment
Interpretation
- Investment figure shows healthy progress of the company.
- Investment has increased in 2005, 2006 and after that it has strated decrease in 2007, 2008 which shows not good growth compared to base year.
- As they have invested most of their funds in Indian money market mutual funds.
- Shows that the company has not take risk but the company has invested money for developed it’s own business.
- Application Of Funds
Table 2. 10 Trend Analysis of Application Of Funds
Figure 2.1.9 Trend Analysis of Application Of Funds
Interpretation
- Graph shows that in 2007-08 Company invested more fund in fixed Assets.
- Company has enough cash in hand so that in any condition company can take
Any Financial decision easily.
2.2 Horizontal Analysis of Balance Sheet
Financial Statement present information for the last five year. Horizontal analysis of Balance Sheet deals with the amount changes and the percentage changes of the items of the Balance Sheet.
Financial Statement present comparative information for the current year and the previous year. Horizontal analysis of Balance Sheet deals with the amount changes and the percentage changes of the items of the Balance Sheet.
Table 2.2.1 Horizontal Analysis of Balance Sheet
2.2.1 analysis of sources of funds 2008
Figure: 2.2.1 Horizontal analysis Sources of funds
Interpretation
- Graph shows that in 2007-08 unseured loan is 19.77% it means that company has more taken short term borrowings for expantion of business.
- In this graph revenue is more then 50% compare to other source so it is good for company.
2.2.2 analysis of application of funds 2008
Table 2.2.3 Analysis of application of funds in 2008
Figure: 2.2.2 analysis of application of funds
Interpretation
- Graph shows that in 2007-08 the current assets loan is increase
- Sondory debtors is 13.69 so company has to recover it.
2.2.3 Sources of Funds
Table 2.2.4 Horizontal Analysis of Sources of Funds
Figure 2.2.3 Horizontal Analyses of Sources of Funds
Interpretation
- Company has raised Share Capital during 2003-04 to 2006-07 and after that it was reduced at 24% this step has been taken in order to promote expansion of their business.
- Company strive enhancement of share holder’s value through sound business decision, prudent financial management and high standard of ethics through the organizations. Reserves and surplus has been retained for future expansion of the business.
- In the base year 2003-04 total loan funds is normally up to 2006 and after that it was increase up to 25%, so it means that company has expand the business.
- Application of funds
Table 2.2.5 Horizontal Analysis of Application of Funds
Figure 2.2.4 Horizontal Analysis of Application of Funds
Interpretation
- The total fixed assets are 38% in 2004 and after that it was decrease up to 4% in 2006 and after that it was increase 10% so it means the company has bought the assets for expansion of business.
- The investment is decline slowly and gradually.
- The net current assets are increase at increasing rate so that company has a good liquidity.
- The company’s 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.
- Trend Analysis of Profit & Loss Account
- Horizontal Analysis of Profit & Loss Account
- ANALYSIS OF PROFIT & LOSS ACCOUNT
- Trend Analysis of Profit & Loss Account
Trend Analysis of Profit & Loss Account involves calculation of percentage changes in the P & L Account items for a no. of successive years. This is carried out by taking the items of the past financial year used as base year and items of other years are expressed as percentage of the base year. Here 2004-05 is taken as base year
Table 3.1.1 Trend Analysis of Profit & Loss Account
3.1.1 Trend Analysis of Total Income and Total Expenditure
Table 3.1.2 Trend Analysis of Total Income and Total Expenditure
Figure 3.1.1 Trend Analysis of Total Income and Total Expenditure
Interpretation
- 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.
- In 2006-07 Income from mutual fund dividend increased by 93.57 % and Interest on debt instrument 567 % increased in 2005-06 compare to previous year.
- Percentage Expenditures increasing year by year little more than Income increased, so that Profit margin Decrease year by year.
- Profit After Tax
Table 3.1.3Trend Analysis of Profit After Tax
Figure 3.1.2 Trend Analysis of Profit After Tax
`
Interpretation
- PAT has been rising over the years when we compare with the expenditure which has been incurred to earn this profit is also rising
- PAT has been increased all the years because of increasing in sales.
3.1.3 Trend Analysis of Profit trancfer to genral resrve
Table 3.1.4 Trend Analysis of Profit trancfer to genral resrve
Figure 3.1.3 Trend Analysis of Profit trancfer to genral resrve
Interpretation
- The graph is showing that in year 2004-05 the company has transferred big portion of net profit to genral reserve.
- Hear the in 2005 company has reinvest profit for business expansion it is good shine for the company.
3.1.4 Trend Analysis of net sales and services
Table 3.1.5 Trend Analysis of net sales and services
Figure 3.1.4 Trend Analysis of net sales and services
Interpretation
- Net sales and services are incresing from 2004 to 2005.
- From 2005 onward the net sales incresing at a stret line so hear company should tray to increse net sales.
- Horizontal Analysis of Profit & Loss Account
Financial Statement present comparison or every year what portion the rest of particular is having compare to the total income. Hear we assume that the total income is 100 then what is the of particular compare to total income. Horizontal analysis of Profit & Loss Account deals with the amount changes and the percentage changes of the items of the Profit & Loss Account in every year individually.
Table 3.2.1 Horizontal Analysis of Profit & Loss Account
3.2.1 Comparition of PBT and Expenduture with total income
Table 3.2.2 Comparition of PBT and Expenduture with total income
Figure 3.1.1 Comparition of PBT and Expenduture with total income
Interpretation
- The total expenditure is near by 80% of total income in every year.
- Every year PBT is near by 20% of total income.
- Introduction
- Cash Flow statement
- Interpretation of Cash Flow Statement
- ANALYSIS OF CASHFLOW STATEMENT
- Introduction
- Cash flow statement [CFS] provides information about the historical changes in cash by classifying cash flows during the period from operating activities, financial activities and investing activities of a concern. It shows the summary of cash flow on account of these activities.
- Operating activities as the principal revenue-production activities of the enterprise These activities determines the net profit or loss of a concern. Operating Activities refer to the operations of a business of purchasing, sales etc. Sales generate cash; purchase and expense use up the cash. Net profit leads to net increase in cash.Net increase in cash from operating activities is the main source of cash inflow.
- Investing activities as the acquisition and disposal of long tern assets and investments. Acquiring and selling of a subsidiary or other concerns should be shown as Investing Activity. Investing Activities of acquisition of fixed assets, long term investing reduces the cash and indicate cash outflow. Investing activities of disposal of fixed assets etc increase the cash inflow.
- Financial activities as the activities resulting in the changes in the size and composition of the owner’s capital and borrowing of the enterprise. Owner’s capital includes preference capital in case of a company. Financial Activities such as issue of shares, taking a loan from Bank, sale of fixed assets etc. increase the amount of cash available and form the source of cash inflow. Financial activities such as repayment of preference capital or repayment of loan reduce the amount of cash and indicates cash outflow.
4.2 Cash Flow Statement
Year ended March 31, (Ra. In Million)
Table 4. 1 Cash Flow Statement
*includes Rs. 7,278 Million in a restricted designated bank account for payment of interim dividend
- Interpretation of Cash Flow Statement
Overall Cash flow Statement shows that cash has been generated through Operating activity is Rs 23059 , 28051 , 19559, 18101, -2162.36 and in the years 2007-08, 2006-07, 2005-06, 2004-05 and 2003-04 respectively. So major part of cash inflowing is Operating department. Investment Activity Shows Cash Outflow and borrowing activities takes a little part in increasing cash.
-
Operating Activities : Profit before tax is increased by Rs. 25038.17 Million and Net Cash generated by Operating activity is increased by Rs. 25221.36 Million because,
- Depreciation and amortizations are increased by Rs. 3387.15 Million in between four year.
- Trade and other receivable are also increased by Rs. 8214.59 Million in between four year.
-
Investing Activities : Net Cash outflow from investing activities is Rs. 11528 Million because,
- Company has increased its plan and equipment worth Rs.10625 Million in between four year.
-
Investment is also increase worth Rs. 220977 Million in between four year.
- From this inference that these investments has been met out of the cash from Operations or borrowings.
- Investments in Fixed Assets could be part of Company’s plan of expansion or modernization.
-
Financial Activities : From the section on cash flow from Financial Activities company think to proceeds in both short term and long term borrowings with proceeds from exercise of employee stock option.
- Introduction To The Ratio Analysis
- Liquidity Ratios
- Profitability Ratios
- Finance Structure Ratios
- Valuation Ratios
- The Du-Pont Chart
- RATIO ANALYSIS
- Introduction 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 company’s 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
- Liquidity 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 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
- 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. It’s 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
Table 5. 1 Current Ratio Analysis
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.
5.2.2 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
Table 5. 2 Quick Ratio Analysis
Figure 5. 2 Quick Ratio Analysis
Interpretation
- Standard Ratio is 1:1
- Company’s 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.
- 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.
5.2.3 Networking Captial
Networking capital = Current Assets – Current Liabilities
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.
5.3 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
5.3.1 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
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.
5.3.2 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
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.
- From the graph conclusion is made that company is not on the right track by efficiently cutting down manufacturing, administrative and selling distribution expenses.
5.3.3 Net Profit Ratio
= Net profit x 100
Net sales
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 company’s 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.
5.3.4 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
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.
- The company’s Total Assets is increased to 86.51%, so ROI is decreased so conclusion made that company is not utilizing its assets and investment efficiently.
5.3.5 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
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.
5.4 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)
5.4.1 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
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 company’s view point.
- In the year 2005-06 ratio is increased because of company’s total assets is increased by 24.52%, but sales is increased by 29.92%.So the ratio is increased but in current year it is decreased because sale increasing by 41.45% and Assets increasing by 49.28%.
5.4.2 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
Table 5.10 Net Fixed Asset Turnover Ratio Analysis
Figure 5.10 Net Fixed Assets Turnover Ratio Analysis
Interpretation
- 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.
5.4.3 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
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.
5.4.4 Average age of Inventories
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
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
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
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 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. So they can invest that money on Assets, HRD and other investments.
5.5 Finance Structure Ratios
Finance Structure Ratios indicate the relative mix or blending of owner’s 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
5.5.1 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
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.
5.5.2 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
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.
5.5.3 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
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.
5.6 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
5.6.1 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
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.
5.6.2 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
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.
5.6.3 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
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 company’s 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.
5.6.4 Profit margin ratio
Profit margin ratio= PAT/Sales*100
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.
5.7 The Du-Pont Chart
Table 5.20 Do-Pont chart
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 company’s 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 company’s efficiency in utilizing its assets.
-
So overall it can be interpreted that the company’s ROA is good .
- Company should try its best to increase sales and profit.
- The Du point chart Shows the complete picture of company’s performance.
- Company Analysis
- Share Holding Pattern
- Company Analysis
- Share Holding Pattern
- SCENARIO ANALYSIS
- Business Unit Performance
- Company Analysis
- Share Holding Pattern
FINDINGS
- 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.
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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.
SUGGESTION
- The company’s 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 company’s 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.
ANNEXURE-1
BALANCE SHEET Rs (In Million)
ANNEXURE-2
PROFIT & LOSS ACCOUNT
RS. (In Million)
ANNEXURE-3
CASH FLOW STATEMENT FOR THE YEAR ENDED ON MARCH 31 Rs(In Million)
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.
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