Tcs annual report_2013-2014 analysis by Group 4 Syapass from ITM Business School, Kharghar

1. RATIO ANALYSIS
A. LIQUIDITY RATIO
1. Net Working Ratio = Current Assets – Current Liabilities
‘
Crores.
RATIO 2014 2013
Net Working Capital =
Current Assets –
Current Liabilities
=34834.81 - 12265.70 = 23330.54 - 9498.81
= 22569.11 = 13831.73
Analysis:-
• It measures a TCS’s Net Capital ceased with day to day operations.
• It depict firm’s ability to payoff its current obligations with current assets available.
• It indicate the fair ability of TCS to liquidate current and non-current liabilities.
• It indicate the relationship for cash & operating liquidity for survival of business.
• In TCS: Net Working Capital as compared to previous year has been significantly
increased to 63.17% It essentially indicate that more working capital is employed for
running day to day operations of business concern.
2. Current Ratio = Current Assets
Current Liabilities

2. ‘ Crores.
RATIO 2014 2013
Current Ratio =
Current Assets
Current Liabilities
= 34834.81
12265.70
= 23330.54
9498.81
= 2.84 : 1 = 2.45 : 1
Analysis:-
• The Viable Current Ratio is 2:1.
• It is indicative of Solvency of Currents Assets in paying of its Short term Liabilites &
Debts .
• A Higher Current ratio enables a firms ability to pay off Current Obligations and thus
provide adequate margin of safety to its creditors.
• In TCS : There is More proportionate increase in Current asset (.39%) as compared to
its Current obligations for a year 2014. This Indicate that a fair proportion of increase in
current asset in 2014 as compared to previous year.The Ratio indicate that Company has
Stressed on Investment in Current Asset in order to facilitate day to day Operations of
business.
3. Quick Ratio / Acid Test Ratio = Quick Assets
Quick Liabilities
Quick Assets = Current Assests – Stock – Prepaid Expenses
Quick Liabilities = Current Liabilities – Bank Overdraft

3. ‘ Crores.
RATIO 2014 2013
Quick Assets = Current
Assests – Stock – Prepaid
Expenses
= 34834.81-8.57-0
= 34826.24
= 23330.54-6.34-0
= 23324.2
Quick Liabilities =
Current Liabilities – Bank
Overdraft
= 12265.70-0
= 12265.70
= 9498.81-80.02
= 9418.79
Quick Ratio = Quick
Assets
Quick Liabilities
= 34826.24
12265.70
= 2.84 :1
= 23324.2
9418.79
= 2.48 : 1
Analysis:-
• It evaluates Company’s Overall Short-term Solvency or Liquidity Position .
• The Viable Acid Test Ratio is 1:1 Proportion.
• It provide Information of Highly Convertible Liquid Assets(Excluding Stock &
Marketable Securities) In Payoff Company’s Short term Obligations(Excluding Bank
Overdraft.)
• In TCS : Investment in Quick Ratio is Increased As Company is investing in high
proportion as compared to previous year (i.e.36 % more) this indicate that Company is
following conservative approach and pooling high proportions of funds in liquid assets
to facilitate day to day operations ( providing safety to its Creditors ).
B. ACTIVITY / TURNOVER / EFFICIENCY RATIO
1. Stock Turnover Ratio = Cost of Goods Sold
Average Stock / Inventory
Cost of Goods Sold = Sales – Gross Profit
Average Stock = Opening Stock + Closing Stock
2 (PG-169)

4. ‘ Crores.
RATIO 2014 2013
Cost of Goods Sold = Sales
– Gross Profit
= 64672.93 – 20453.17
= 44219.76
= 48426.14 – 13503.41
= 34922.73
Average Stock =
Opening+Closing Stock
2
= 0.54+0.61
2
= 0.58
= 0.54+0.54
2
= 0.54
Stock Turnover Ratio =
Cost of Goods Sold
Average Stock / Inventory
= 44219.76
0.58
= 76240.97 times
= 34922.73
0.54
= 64671.72 times
Analysis:-
• It represents Relative size of inventory and amount of cash available to payoff its certain
liabilities.
• A less Inventory turnover ratio means a company has less cash tied up in Company’s
Inventory in associating with Cost of Goods or services that are to be rendered &
Viceversa.
• In TCS : Stock (Inventory) of Company has been increased, and depicting significant
cost structure is ensured in holding Inventory which ultimately reflects companies has
build up inventory as compared to previous year’s & diluting companies performance.
2. Inventory Holding Period = No. Of Days / Months in a Year
Stock Turnover Ratio

5. ‘ Crores.
RATIO 2014 2013
Inventory Holding Period =
No. Of Days / Months in a Year
Stock Turnover Ratio
= 365
76240.97
= 0.0048 days
= 365
64671.72
= 0.0056 days
Analysis:-
• It is used to measure inventory management efficiency of business.
• A higher value of inventory turnover indicate better performance & a lower value means
inefficiencies in controlling inventory levels.
• A lower inventory turnover ratio may be an indication of over-stocking which may pose
risk of obsolescence and increased inventory holding costs. However, a very high value
of this ratio may be accompanied by loss of sales due to inventory shortage.
• In TCS : Management of Inventory levels are confined to maintaining a level of stock
clearance
and reducing substantial cost blocked in stock holdings in facilitating operations of
business concern
as turnover period has been reduced from 56 days Conversion cycle time to 48 days
cycle period.
3. Debtors Turnover Ratio = Net Credit Sales
Average Accounts Receivables
‘ Crores.
RATIO 2014 2013
Debtors Turnover Ratio =
Net Credit Sales
Average Accounts Receivables
= 64672.93
14471.89
= 4.47 times
= 48426.14
11202.32
= 4.32 times

6. Analysis:-
• Receivables turnover ratio measures company's efficiency in collecting its sales
on credit and collection policies. This ratio takes in consideration ONLY the
credit sales.
• Accounts receivable represents the indirect interest free loans that the company is
providing to its clients.
• A high receivables turnover ratio implies that the company operates on a cash
basis or that its extension of credit and collection of accounts receivable are
efficient.
• A low receivables turnover ratio implies that the company should re-assess its
credit policies in order to ensure the timely collection of credit sales that is not
earning interest for the firm.
• In TCS : Management of company in terms of using credit policy need
To be reviewed in providing credit period to its clients i.e. Recovery period has
been increased about 46.9% as compared to last year .
C. LONG TERM SOLVENCY / FINANCIAL STABILITY / CAPITAL
STRUCTURE RATIOS
1. Debt / Equity Ratio = Debt
Equity
Debt = Long Term Debt / Borrowed Funds
= Secured Loans and Unsecured loans
Equity = Shareholders Fund / Owned Fund
= Share Capital + Reserves & Surplus ‘ Crores.
RATIO 2014 2013
Shareholders Fund = 195.87 + 43856.01
= 44051.88
= 295.72 + 32266.53
= 32562.25
Debt / Equity Ratio =
Debt
Equity
= 89.69
44051.88
= 0.002 : 1
= 83.10
32562.25
= 0.0026 :1

7. Analysis:-
• A ratio of 1 or 1 : 1 means that creditors and stockholders equally contribute to the
assets of the business.
• A less than 1 ratio indicates that the portion of assets provided by stockholders is greater
than the portion of assets provided by creditors and a greater than 1 ratio indicates that
the portion of assets provided by creditors is greater than the portion of assets provided
by stockholders.
• A ratio of 1 : 1 is normally considered satisfactory & ideal. Sometimes Debt equity ratio
vary from industry to industry as each industy is subject to norms & regulation.
• In TCS : Ratio indicates less contribution from its stockholders and significant
contribution from equity towards generating assets & facilitating funds to ensure
operations of business concern. & Less Contributions from Long terms funds &
borrowings adhered for fetching revenues and providing business .
2. Proprietory / Net-Worth / Asset Backing Ratio
= Proprietor's Fund
Total Assets
Proprietor's Fund = Shareholder's Fund / Net Worth
= Share Capital + Reserves & Surplus
‘ Crores.
RATIO 2014 2013
Shareholders Fund = 195.87 + 43856.01
= 44051.88
= 295.72 + 32266.53
= 32562.25
Proprietory / Net-Worth /
Asset Backing Ratio =
Proprietor's Fund
Total Assets
= 44051.88
57604.19
= 0.764 : 1 or 76.4%
= 32562.25
42834.04
= 0.76 : 1 or 76 %

8. Analysis:-
• It depict the contribution of stockholders’ in total capital of the company.
• A high proprietary ratio, therefore, indicates a strong financial position of the company
and greater security for creditors. A low ratio indicates that the company is already
heavily depending on debts for its operations.
• In TCS : Near About ¾ of Contibution to Asset Creation are ensured by Company’s
Shareholders. This reflect that Company is not being taking full advantage of debt
financing for its operations essentially but indicates a strong consolidated financial
position of the company and provides greater security for creditors.
3. Capital Gearing Ratio
= Capital Bearing Fixed Interest & Dividend
Capital Not Bearing Fixed Interest & Dividend
CBFID = Long Term Borrowing + Preference Share Capital
CNBFID = Equity Share Capital + Reserves & Surplus
‘ Crores
RATIO 2014 2013
CBFID = 89.69 + 0
= 89.69
= 83.10 + 100
= 183.10
CNBFID = 195.87 + 43856.01
= 44051.88
=195.72 + 32266.53
= 32462.25
Capital Gearing Ratio =
CBFID
CNBFID
= 89.69
44051.88
=0.0020 :1 or 0.20%
= 183.10
32462.25
=0.0056 :1 or 0.56%
Analysis:-
• It show case the relationship of long term debt to total capital which is considered the

9. most important by many investors and financial analysts.
• Capital gearing ratio is a useful tool to analyze the capital structure of a company and is
computed by dividing the common stockholders’ equity by fixed interest or dividend
bearing funds.
• In TCS it is Highly geared in both the years which means less common stockholders’
equity.
4. Interest Coverage Ratio = Earning Before Interest & Tax
Interest
‘ Crores
RATIO 2014 2013
Interest Coverage Ratio =
Earning Before Interest & Tax
Interest
= 23567.88
23.41
= 1006.74 times
= 15733.80
30.62
= 513.84 times
Analysis:-
• It determines the debt servicing capacity of a business enterprise keeping in view fixed
interest on long-term debt.
• Higher the ratio better it is.
• TCS has an increase in ratio by 492.9 times since last year which shows the degree of
protection creditors have from default on the payment of interest by the co.
D. PROFITABILITY RATIO
(i) With respect to SALES
1. Gross Profit Ratio = Gross Profit x 100
Net Sales

10. ‘ Crores
RATIO 2014 2013
Gross Profit Ratio = Gross
Profit x 100
Net Sales
= 20453.17 x 100
64672.93
= 31.63 %
= 13503.41 x 100
48426.14
= 27.88 %
Analysis:-
• This ratio helps in judging the relationship between gross profit and net sales.
• It is a reliable guide to the adequacy of selling prices and effciency of trading
activities.
• Higher the ratio better it shows the performance of trading activities of the co.
• TCS' ratio has increased by 3.75 % since last year, which indicates better functioning
of the co.
2. Net Operating Ratio = Net Operating Profit x 100
Net Sales
‘ Crores
RATIO 2014 2013
Net Operating Ratio =
Net Operating Profit x 100
Net Sales
= 20453.17 x100
64672.93
= 31.62 %
= 13503.41 x 100
48426.14
= 27.88 %

11. Analysis :-
• This ratio indicates the profitability of current operations. This ratio does not take into
account the company's capital and tax structure. It shows how much cash is thrown off
after most of the expenses are met.
• A high operating profit ratio means that the company has good cost control and/or that
sales are increasing faster than costs, which is the optimal situation for the company.
• TCS has increased its ratio by 3.74 % as compared to last year.
3. Net Profit Ratio
= Net Profit Before Tax or Net Profit After Tax x 100
Net Sales
‘ Crores
RATIO 2014 2013
Net Profit Ratio =
Net Profit Before Tax x 100
Net Sales
= 23544.47 x 100
64672.93
= 36.41 %
= 15703.18 x 100
48426.14
= 32.43 %
Net Profit Ratio =
Net Profit After Tax x 100
Net Sales
= 18474.92 x 100
64672.93
= 28.57 %
= 12786.34 x 100
48426.14
= 26.40 %
Analysis:-
• It indicates overall efficiency of the co. By establishing the relationship between net
profit and sales i.e. it shows the percentage of net profit earned on net sales.
• Higher the ratio better the business is.
• TCS has an increase of 2.17 % of ratio as compared to last year, it shows improvement
in operational efficiency of the business.

12. 4. Operating Ratio = Operating Cost x 100
Net Sales
Operating Cost = Cost of Goods Sold + Operating Expenses
Cost of Goods Sold = Sales – Gross Profit
‘ Crores
RATIO 2014 2013
Operating Ratio = Operating
Cost x 100
Net Sales
= 44219.76 x 100
64672.93
= 63.37 %
= 34922.73 x 100
48426.14
= 72.12 %
Analysis:-
• This ratio is calculated to judge the operational effeciency of the business. It shows the
percentage of sales that is absorbed by the cost of sales and operating expenses.
• In this lower the ratio better it is, because it would lead higher margin to meet interest ,
dividend.
• TCS is able to reduce its operating ratio by 8.75 % as compared to last year which is a
positive sign for the co. And it will have higher margin to meet interest , dividend.
5. Expense Ratio =
Cost of Goods Sold or Administrative or Selling Expenses x 100
Sales
‘ Crores
RATIO 2014 2013
Expense Ratio =
Cost of Goods Sold x 100
Sales
= 44219.76 x 100
64672.93
= 68.37 %
= 34922.73 x 100
48426.14
= 72.12 %

13. Analysis:-
• This ratio indicates how much is the cost incurred by the co. in expenses like cost of
goods sold, administrative and selling expenses.
• Lower the ratio the better is expense ratio as it indicates reduction in expenses.
• The ratio of TCS has reduced by 3.75 % as compared to last year which is a good sign.
(ii) With Respect to Investment
1. Return on Capital Employed
= Earning Before Interest & Tax x 100
Capital Employed
Capital Employed = Shareholders fund + Long Term Loans
OR
Capital Employed = Fixed Assets + Working Capital
Working Capital = Current Assets – Current Liabilities
‘ Crores
RATIO 2014 2013
Capital Employed =
Shareholders fund + Long
Term Loans
= 44051.88 + 89.69
= 44138.57
= 32562.25 + 83.10
= 32645.35
Return on Capital Employed =
Earning Before Interest & Tax
x 100
Capital Employed
= 23567.88 x 100
44138.57
= 53.40 %
= 15733.88 x 100
32645.35
= 48.20 %
Analysis:-

14. • This ratio evaluates the earning capacity of company and determines whether or not the
company is making optimum utilization of its assets.
• Higher the ratio signifies better the return on investment of the company.
• TCS' ROI has increased by 5.2 % as compared to last year, which indicates overall
performance of the co. Is going good and its borrowing policy is also wise.
2. Return On Proprietor's Fund
= Net Profit After Tax x 100
Proprietor's Fund
Proprietor's Fund = Shareholders Fund / Net Worth
= Share Capital + Reserves & Surplus
‘ Crores
RATIO 2014 2013
Net Profit After Tax x 100
Proprietor's Fund
= 18474.92 x100
44051.88
= 41.94 %
= 12786.34 x 100
32562.25
= 39.27 %
Analysis:-
• This Ratio indicates the percentage of return that the company is able to earn on
shareholder's fund. It serves as a guide to the investors for making investment decision.
• Higher the ratio better is the return on proprietor's fund.
• This simplifies that TCS is earning good return on proprietor's fund and has good
profitability as well as compared to last year because the co. Has increased its ratio by
2.97 % which is a good sign.
• This gives better understanding for decision making and a clear picture to investors and
creditors whether to invest in a co. Or not.
3. Return on Equity Share Capital

15. = Net Profit After Tax – Preference Dividend x 100
Equity Shareholder's fund
‘ Crores
RATIO 2014 2013
Return on Equity Share Capital
= Net Profit After Tax –
Preference Dividend x 100
Equity Shareholder's fund
= 18474.92 - 19 x 100
44051.88
= 41.89 %
= 12786.34 – 22 x 100
32562.25
= 39.20 %
Analysis:-
• This ratio indicates the return which the management is realising from shareholder's
equity and shows how effectively it is been utilised.
• Higher the ratio the better is Return on equity.
• This year TCS' ratio has increased by 2.69 % which is a good sign for the company
which indicates co. Has increased its sahre capital.
E. VALUATION OF RATIO
1. Earning Per Share = Net Profit After Tax – Preference Dividend
No. Of Equity Shares
‘ Crores
RATIO 2014 2013
Earning Per Share =
Net Profit After Tax – Preference
Dividend
No. Of Equity Shares
= 18474.92 - 19
195,87,27,979
= 0.000009422 per share
= 12786.34 – 22
195,72,20,996
= 0.000006521 per share

16. Analysis:-
• This ratio indicates per share earning of a Company in a particular year. It also helps in
evaluating the prevailing market share in the light of profit earning capacity.
• In this Higher the ratio the better is the EPS of company.
• TCS has increased its EPS by 0.03 % which is a good sign for the company.
2. Dividend Per Share = Equity Dividend Paid
No. Of Equity Shares
‘ Crores
RATIO 2014 2013
Dividend Per Share = Equity
Dividend Paid
No. Of Equity Shares
= 3608.63
195,87,27,979
= 0.000001842 per share
= 3608.63
195,72,20,996
= 0.000001843 per share
Analysis:-
• Objective of computing this ratio is to measure the dividend distributed per equity share.
• In this Higher the ratio the better is the DPS.
• In this Ratio we can analyse, TCS has not able to increase its Equity Dividend but not
even reduced it as almost same no. Of people invested in company , so TCS is in stable
position.
3. Dividend Payout Ratio = Dividend Per Share x 100
Earning Per Share
‘ Crores
RATIO 2014 2013
Dividend Payout Ratio =
Dividend Per Share x 100
Earning Per Share
= 0.000001842 x 100
0.000009422
= 19.55 %
= 0.000001843 x 100
0.000006521
= 28.26 %
Analysis :-
• This ratio indicates the percentage of earnings that the company has distributed in the

17. form of dividends.
• As compared to last year TCS' percentage of Dividend Payout ratio has Decreased by
8.71 % .
• A low ratio may indicate the company is using much of its earnings to reinvest in the
company in order to grow further.