.

TOPIC

A Study On Financial Statement Analysis With Reference

To Wipro Limited

By

Megha R

IV Semester PGDM

Reg no: B31920290

Project Report submitted to the AIMA in partial fulfilment of

the requirements of IV Semester PGDM degree examinations- 2020.

Ramaiah Institute of Management Studies/Sciences

New BEL Road, M.S. Ramaiah Nagar, M.S.R.I.T Post

Bangalore – 560054
 Student Declaration

I Megha R, is hereby declare that this project report titled “A study on financial statement analysis
with reference to Wipro ltd” submitted in partial fulfillment of the requirement for 4 th semester
PGDM degree examination to the AIMA, though Ramaiah Institute of Management Sciences,
Bangalore- 54 is a record of my original work done by me and has not been submitted previously
for the award of my degree or diploma to any other university.

Place: Bengaluru

Date: 09-07-2021

Candidate’s signature,

Reg no: B31920290

 Guide Certificate

This is to certify that the project report titled “A study on financial statement analysis with
reference to Wipro limited” submitted to the AIMA, in partial fulfilment of 4th semester PGDM
degree examination- 2020, by Megha R bearing Registration No. B31920290 has worked under
my supervision and guidance. I certify that no part of this project has been submitted earlier to any
department / university for the award of any degree / diploma to the best of my knowledge.

Date: 09-07-2021

Place: Bengaluru

Guide’s signature

Name: Prof. Mallika B K

 Acknowledgements:

A work like this needs support and encouragement from different sections of various
industrialists. This project researcher has taken the help of many personalities like
professors of business management and business leaders. Many of them are either
working in industries as officers or working as managers and some of them are really
business entrepreneurs who have got vast knowledge in many areas.

At the very outset this project researcher expresses thanks to the reputed AIMA for
giving me an opportunity to pursue my PGDM degree and allowed me to submit this
work for the award of PGDM degree.

Researcher also expresses thanks to Dr. M. R. Pattabiram, the Hon’ble Director of

Ramaiah Institute of management studies/ Sciences for encouraging me to do this
work by his valuable knowledge and experience in this field.

I also wish to express my sincere thanks to my guide Prof. Mallika B K, for

encouraging me to do this work by his valuable knowledge and experience in this
field.

I also wish to record my sincere thanks to the Hon. Dean Prof. Prasad Linganna for
the encouragement in writing this report.
I owe irredeemable debt to my parents. Further, I wish to record my thanks to Mr.
________, Librarian, Ramaiah Institute of Management Studies/ Sciences,
Bengaluru for his patience and timely help.

Date

Signature of the candidate

 Guide’s Profile:

Faculty Name: MALLIKA B K

Designation: Assistant Professor
Qualification: M.com., MBA., M.Phil., (Ph.D.)
Mobile No.: 9986387111
Email ID: mallika@rimsbangalore.in

Experience Details: Fourteen years of teaching experience in being worked for

institutions affiliated to VTU, Department of MBA. Have taught finance papers
like Tax management, Investment Management, Corporate Valuation, Financial
Management, Accounting for managers, Quantitative Techniques, Business
Analytics.

Publication:
• Re-engineering Microfinance in India: Opportunity and Challenges,
Bharathiya Abhiyukta Arthashastra Prabandha Patrika, Volume 1 Issue 4
March 2017 ISSN – 2395-0501.
• Impact of micro finance services on rural women entrepreneur development
– A study with reference to Bangalore rural district, Asia Pacific Journal of
Research, Volume 1 Special issue X, April 2018.
Presented on topic “Tax Savings”, Faculty development programmer organized by
Department of MBA, AIT on 7th and 8th of February, 2018.
 CONTENT

Sl.no Chapter name Page no.

1 Introduction 1
2 Literature Review 12
3 Research Methodology 17
4 Analysis Of Data 22
5 Findings and Suggestions 57
6 Bibliography 61
7 Annexure 64
Content - List of Tables:

Table no. Table name Page no.

4.1.1 Non-Current Assets Trend Analysis 24
4.1.2 Current Assets Trend Analysis 26
4.1.3 Trend Analysis of Equity 27
4.1.4 Trend Analysis of Liability 28
4.2.1 Trend Analysis of Revenue 31
4.2.2 Trend Analysis of Expenses 32
4.2.3 Comparison b/w Revenue & Expenses 33
4.2.4 Trend Analysis of Profit Percentage 35
4.4.1 Current Ratio Analysis 38
4.4.2 Quick Ratio Analysis 41
4.4.3 New Working Capital Analysis 42
4.5.1 Gross Profit Ratio Analysis 44
4.5.2 Operating Profit Ratio Analysis 46
4.5.3 Net Profit Ratio Analysis 47
4.6 Asset Turnover Ratio Analysis 49
4.7.1 Debt Ratio Analysis 51
4.7.2 Debt Equity Ratio Analysis 53
4.8.1 Earnings Per Share 54
4.8.3 Profit Margin Analysis 56
 Chapter – 1
Introduction

• Background of the study

• Introduction of company
• Overview of financial sector
• Statement of the problem
• Introduction to project

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1.1 Background of the study
Financial analysis is the process of examining a company’s performance in the context of its
industry and economic environment in order to arrive at a decision or recommendation. Foremost,
economic development of a particular country is dependent on a number of factors such as
industrial growth & development, modernization of agriculture, expansion of domestic and foreign
trade, political stability and so on. Indian IT industry has grown rapidly with an exponential growth
rate after the economic reform 1991-92. Information technology in India is an industry consisting
of two major components: IT services and business process outsourcing (BPO). The sector has
increased its contribution to India’s GDP over the years.

Financial analysis is the process of examining a company’s performance in the context of its
industry and economic environment in order to arrive at a decision or recommendation. Often, the
decisions and recommendations addressed by financial analysts pertain to providing capital to
companies specifically, whether to invest in the company’s debt or equity securities and at what
price. An investor in debt securities is concerned about the company’s ability to pay interest and
to repay the principal lent. An investor in equity securities is an owner with a residual interest in
the company and is concerned about the company’s ability to pay dividends and the likelihood that
its share price will increase.

Overall, a central focus of financial analysis is evaluating the company’s ability to earn a return
on its capital that is at least equal to the cost of that capital, to profitably grow its operations, and
to generate enough cash to meet obligations and pursue opportunities.

Fundamental financial analysis starts with the information found in a company’s financial reports.
These financial reports include audited financial statements, additional disclosures required by
regulatory authorities, and any accompanying (unaudited) commentary by management. Basic
financial statement analysis as presented in this reading provides a foundation that enables the
analyst to better understand other information gathered from research beyond the financial reports.

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1.2 Introduction of company

About Wipro:

• Wipro Headquarters : Sarjapur road, Bengaluru, Karnataka, India

• Type : Public
• Founder : Mohamed Premji
• Founded : 29 December 1945;
• Area served : Worldwide
• Industry : Conglomerate
• Key people : Rishad Premji (Chairman),
Thierry Delaporte (CEO).
• Products : Personal care, Health care, Lighting, Furniture.
• Services : IT services, Consulting, Outsourcing, Managed services.
• Traded as : BSE: 507685, NSE: WIPRO, NYSE: WIT, NSE NIFTY 50
CONSTITUENTS

Some Major Information as on 2020 about WIPRO numerical:

• No. of Employees : 175,000 (2020)

• Owner : Azim Premji (73.85%)
• Revenue : Rs. 63,862.60 Crore
• Operating Income : Rs. 12,249.00 Crore
• Net Income : Rs.9722.30 Crore

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 • Total assets : Rs.81,278.90 Crore
• Total Equity : Rs.55321.70 Crore
• Website : WWW.Wipro.Com

History of the company:

Wipro Ltd is India's one of the leading tech-companies providing IT Services including Business
Process Outsourcing (BPO) services globally. The company provides comprehensive IT Solutions
and Services including Systems Integration Information Systems Outsourcing IT Enabled Services
Package Implementation Software Application development and maintenance and Research and
Development Services to corporations globally. The company is the first PCMM Level 5 and SEI
CMM Level 5 certified IT Services Company globally. In the Indian market they are a leader in
providing IT Solutions and Services for the corporate segment in India offering System Integration
Network Integration Software Solutions and IT Services. In the Asia Pacific and Middle East
markets they provide IT Solutions and Services for global corporations. The company is
headquartered in Bangalore India. The company provides the integrated business technology and
process solution on a global delivery platform to customers across Americas Europe Middle East
and Asia Pacific. They offer business value to clients through process excellence and service
delivery innovation such as Information Technology services Product Engineering services
Technology Infrastructure services Business Process Outsourcing services and consulting services.
During the financial year 2013 Wipro carried out demerger of consumer care and lighting
infrastructure engineering businesses and other non-IT business of the company. After the
demerger Wipro became a company focused on the IT services business. Wipro Ltd was
incorporated in the year 1945 at Karnataka by Azim H Premji who is promoter and chairman of
the company. The company started as an edible oil producer and then transformed itself into
leading player in Fast Moving Consumer Goods and IT services & Products business.

Wipro limited is an Indian multinational corporation that provides Information technology,

consulting and business process services. Wipro limited is a leading global information
technology, consulting and business process services company. We harness the power of cognitive
computing, hyper-automation, robotics, cloud, analytics and emerging technologies to help our

4
clients adapt to the digital world and make them successful. A company recognized globally for
its comprehensive portfolio of services, strong commitment to sustainability and good corporate
citizenship, we have over 180,000 dedicated employees serving clients across six continents.
Together, we discover ideas and connect the dots to build a better and a bold new future.

Wipro Limited (NYSE: WIT, BSE: 507685, NSE: WIPRO) is a leading global information
technology, consulting and business process services company. We harness the power of cognitive
computing, hyper-automation, robotics, cloud, analytics and emerging technologies to help our
clients adapt to the digital world and make them successful. A company recognized globally for
its comprehensive portfolio of services, strong commitment to sustainability and good corporate
citizenship, we have over 180,000 dedicated employees serving clients across six continents.
Together, we discover ideas and connect the dots to build a better and a bold new future.

Milestones:

• 1945- Incorporation of Wipro

• 1982- Entry into IT products business
• 1990- Entered into 3rd party R&D service and IT service
• 2000- Listed in the NYSE and enters the BPO business
• 2014- Launched ‘Wipro digital’
• 2015- Key capabilities acquired through Designate and Appirio
• 2017- Launched new brand identity and rearticulated ‘Spirit of Wipro’ to underscore
Wipro’s commitment to transformation and evolving client expectations.

Achievements:
• In 2014 Wipro Rated as a 'High Performer' in HFS Blueprint Report on Insurance BPO
• Wipro Recognized as a Best in Class Outsourcing and Consulting Service Provider for
2014 by Consumer Goods Technology Readers
• Best WebSphere Partner Award.
• Authorized EMC Signature Partner in South Asia.

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 • Best TSG Partner of HP.
• Best System Integrator award 2007–08.
• Best Technology Partner for the Year.
• Network Integrator of the Year 2008.
• SAP Pinnacle Award 2008.
• Golden Peacock Innovation Management Award 2007.
• Riverbed Partner of the year 2007 award.
• National Partner of the Year 2007 Award from Microsoft.
• Wipro wins FIVE awards from CISCO.
• India's first ever Microsoft Platinum Partner Award.
• Wipro 3D Networks once again emerged as the most formidable partner for Nortel in FY
2006 bagging all the highest awards in significant categories – Sales, pre sales & post
sales
• Partner of the Year award: –Over Drive Excellence of the Year award –Sales Champion of

the Year award –Pre–Sales Champion of the Year award –Customer Champion of the
Year award

Some recent awards to WIPRO:

• In 2014, WIPRO was ranked 52nd among Indian’s most trusted brand according to the
Brand Trust Report, a study conducted by trust research advisory.
• Wipro won 7 awards, including best managed IT services and best system integrator in the
CIO choice awards 2015, India.
• Wipro won gold award for ‘Integrated Security Assurance Service (ISAS)’ under the
‘vulnerability assessment, remediation and management’ category of the 11th annual 2015
Info security PG’s Global excellence awards.
• In May 2016, it was ranked 755th on the force global 2000 list.
• In march 2017, Wipro was recognized as one of the world’s most ethical companies by US
based Ethisphere institute for the sixth consecutive year.
• In 2018, Wipro received ATD’s Best of the Best Award.
• Wipro has received a score of 95 out of 100 on the 2019 Corporate Equity Index.

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 • United Nations Global Compact Network India (UN GCNI) – Women at workplace awards
2019 – first runner up.
• Featured in the Bloomberg Gender Equality Index 2020
• Wipro has received a score of 90 out of 100 on the 2020 Corporate Equality Index

Wipro Subsidiaries:
• CAPCO
• Wipro digital
• Top Coder
• APPIRIO
• Yardley London
• Health plan Holdings, Inc
• Designit
• Eximius Design, LLC
• Encore Theme Technologies Pvt Ltd.
• International Techne group Incorporated
• Opus Capital markets Consultants, LLC
• Info SERVER 20 anos
• WeP Peripherals limited
• Wipro Technologies SRL
• We are 4C UK limited
• Wipro Japan KK
• ATCO I-Tec Inc.

Sustainability:
Wipro was ranked 1st in the 2010 Asian Sustainability Rating (ASR) of Indian companies and is
a member of the NASDAQ Global Sustainability Index as well as the Dow Jones Sustainability
Index.

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In November 2012 Guide to Greener Electronics, Greenpeace ranked Wipro first with a score of
7.1/10.

Listing & Shareholdings:

Listing: Wipro's initial public offering was in the 1946. Wipro's equity shares are listed on Bombay
Stock Exchange, where it is a constituent of the BSE index, and the National Stock Exchange of
India where it is a constituent of the S&P CNX Nifty. The American Depositary shares of the
company are listed at the NYSE since October 2000.

Shareholding: The table provides the share holding pattern as of 30 September 2018.

1.3 Overview of Financial sector

India’s economic progress which is largely dependent on the financial sector, it is not only a key
factor of stability in the global economy. But also, a source of immense economic opportunity for
the world. The far-reaching changes in the Indian economy since liberalization in the early 1990s
have had a deep impact on the financial sector. India’s financial sector is one of the fastest growing
sectors in the economy. The economy has witnessed increased private sector activity including an
explosion of foreign banks, insurance companies, mutual funds, venture capital and investment
institutions. The various steps taken by the government and the regulators since liberalization to
meet the challenges of a complex financial architecture have ensured that a new face of the Indian
financial sector is emerging to culminate into a strong, transparent and resilient system.

The financial services sector provides financial services to people and corporations. This segment
of the economy is made up of a variety of financial firms including banks, investment houses,
lenders, finance companies, real estate brokers, and insurance companies. As noted above, the
financial services industry is probably the most important sector of the economy, leading the world
in terms of earnings and equity market capitalization. Large conglomerates dominate this sector, but
it also includes a diverse range of smaller companies.

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 • The financial sector is a section of the economy made up of firms and institutions that
provide financial services to commercial and retail customers.
• A strong financial sector is a sign of a healthy economy.
• The financial sector generates a good portion of its revenue from loans and mortgages and
thrives in a low-interest-rate environment
• The sector is comprised of many different industries including banks, investment
companies, insurance companies, and real estate firms.

The largest companies within the financial sector are some of the most recognizable banking
institutions in the world, including the following:

• JPMorgan Chase (JPM)

• Wells Fargo (WFC)
• Bank of America (BAC)
• Citigroup (C) etc.

1.4 Statement of the problem:

The main objective of the study is to know the financial strengths & weakness of Wipro limited.
There are various methods or techniques used in analyzing financial statements; the ratio analysis
is one of the most powerful tools of financial analysis. Ratio analysis is an attempt to derive
quantitative measure or guides concerning the financial health and profitability of business
enterprises. As a tool of financial management, ratios are of crucial significance.

1.5 Introduction of terms used:

• Profit & Loss statement: The profit & result (P&L) statement is a financial statement that
summarizes the revenues, costs and expenses incurred during a specific period, usually a
fiscal quarter or year. The P&L statement is the synonyms with the Income statement.

9
• Income statement: An income statement is a financial statement that shows you how
profitable your business was over given reporting period. It shows your revenue, Minus
your expenses & losses.
• Balance sheet: A balance sheet is a financial statement that reports a company’s assets,
liabilities & share holders’ equity. The balance sheet is one of the 3(Income statement &
Statement of cashflows being the other two) core financial statement used to evaluate a
business.
• Working Capital Ratio: The working capital ratio is calculated simply by diving total
current assets by total current liabilities. For that reason, it can also be called the current
ratio. It is a measure of liquidity, meaning the businesses ability to meet its payment
obligation as they fall due.
• Current assets: CA are all the assets of a company that are expected to be sold or used as a
result of standard business operations over the next year. Current asset includes cash, cash
equivalents, accounts receivable, stock inventory, marketable securities, prepaid liabilities
& other liquid assets.
• Current liabilities: In accounting, current liabilities are often understood as all liabilities of
the business that are to be settled in cash within the physical year or the operating cycle of
a given firm, whichever period is longer.
• Quick Ratio: The quick ratio is an indicator of a company’s short term liquidity position
and measures a company’s ability to meet its short-term obligations with its most liquid
assets. An “acid test” is a slang term for a quick test designed to produce instant results.
• Liquidity Ratio: In finance the quick ratio is also known as the acid-test ratio is a type of
liquidity ratio, which measures the ability of a company to use its near cash or quick assets
to extinguish or retire its current liabilities immediately.
• Asset Management Ratio: AMR are the key to analyzing how effectively and efficiently
your small business is managing its assets to produce sales. AMR are also called as turnover
ratios or efficiency ratio.
• Profitability ratio: 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 tried to evaluate the overall financial
condition of a corporation or other organization.

10
• Equity: Equity represents the value that would be returned to a company’s shareholders if
all of the assets were liquidated and all of the company’s debts were paid off. We can also
think of Equity as a degree of residual ownership in a firm or asset after subtracting all
debts associated with that asset.
• Revenues: Revenue is the income generated from normal business operations and includes
discount and deduction for returned merchandise. It is the top line or gross income figure
from which costs are subtracted to determine net income.
• Expenses: Expenditure is an outflow of money, or any form of fortune in general, to another
person or group to pay for an item or service, or for a category of costs. For a tenant, rent
is an expense. For students or parent’s tuition is an expense.
• Asset: An asset is anything of value or a resource of value that can be converted into cash.
Individuals, companies and government own asset. For a company, an asset might generate
revenue, or a company might benefit in some way from owning or using the asset.
• Liability: Liabilities are any debts your company has, whether it is bank loans, mortgages,
unpaid bills, IOUs, or any other sum of money that you owe someone else. If you have
promised to pay someone a sum of money in the future and have not paid them yet, that’s
a liability.
• Costs: In business and accounting, cost is the monetary value that a company has spent in
order to produce something. Cost denotes the amount of money that a company spends on
the creation of production of goods or services. It doesn’t include the markup for profit.
• Profit and loss: An Income statement or profit and loss account is one of the financial
statements of a company and shows the company’s revenues and expenses during a
particular period. It indicates how the revenues are transformed into the net income or net
profit.

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 Chapter Two

Review of Literature

12
Literature Review was done by referring previous studies, articles and books to know the areas of
study and analyze the gap or study not done so far. There are various studies were conducted relating
to operational performance of the company from which most relevant literatures were reviewed.

According to Patrick, Ralph, Barry & Susan (2002:63-92), income statement provides the
information of the transactions occurred in a certain period of time called accounting period.

Kennedy and Muller (1999), has explained that “The analysis and interpretation of financial
statements are an attempt to determine the significance and meaning of financial statements data so
that the forecast may be made of the prospects for future earnings, ability to pay interest and debt
maturities (both current and long term) and profitability and sound dividend policy.”

According to Meigns et al. (2001), Financial Statement simply means a declaration of what is
believed to be true and which, communicated in terms of monetary unit. It describes certain
attributes of a company that is considered to fairly represent its financial activities.

Meigs and Meigs (2003) stated that the rate of return on investment (ROI) is a test of
management’s efficiency in using available resources. This review is organized under the
following sub-heads for ease of comprehension.

According to Pandey, I.M. (2005 Financial management) profitability is the ability of an entity to
earn income. It can be assessed by computing various relevant measures including the ratio of net
sales to assets, the rate earned on total assets etc.

According to Gautam, U. S. (2005) Accountancy Financial Statement is generally explained as

financial information which is the information relating to financial position of any firm in a capsule
form.
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Financial statement according to J. A Ohison (1999) was defined as a written report that
summarizes the financial status of an organization for a stated period of time. It includes an income
statement and balance sheet or statement of the financial position describing the flow of resources,
profit and loss and the distribution or retention of profit.

Susan Ward (2008), emphasis that financial analysis using ratios between key values help investors
cope with the massive numbers in company financial statements. For example, they can compute the
percentage of net profit a company is generating on the funds it has deployed. All other things
remaining the same, a company that earns a higher percentage of profit compared to other companies
is a better investment option.

M Y Khan & P K Jain (2011), have explained that the financial statements provide a summarized
view of the financial position and operations of a firm. Therefore, much can be learnt about a firm
from a careful examination of its financial statements as invaluable documents / performance reports.
The analysis of financial statements is, thus, an important aid to financial analysis.

According to Diamond (2006), all watchful business owners have an innate sense of how well their
business is doing. Almost without thinking about it, these business owners can tell you any time
during the month how close they are to butting budgeted figures. Certainly, cash in bank plays a
part, but its more than that. Helpful is the now tine review of financial statements. They are three
types of financial statements. Each will give important information about how efficiency and
effective the business is operating.

Mistry Dharmendra S. (2012) understood a study to analyze the effect of various determinants on
the profitability of the selected companies. It concluded that debt equity ratio, inventory ratio, total
assets were important determinants which effect positive or negative effect on the profitability. It
suggested to improve solvency as to reduce fixed financial burden on the company profit & give
the benefit of trading on equity to the shareholders.

14
Zafar S.M. Tariq & Khalid S.M (2012) The study explored that ratio are calculated from financial
statements which are prepared as desired policies adopted on depreciation and stock valuation by
the management. Ratio is simple comparison of numerator and a denominator that cannot produce
complete and authentic picture of business. Results are manipulated and also may not highlight
other factors which affect performance of firm by promoters.

Srivastava Anubha (2014) Data analysis has been done using the top-down approach, i.e.,
Economic analysis, industry analysis, company and technical analysis to find relationship between
automobile sector index with market index.

Buvaneswari R & Kanimozhip (2014) To study the credit worthiness of selected firms in Indian
car industry, Trichy. Professor Edward Altman of New York University developed method Z score
analysis to predict the company failure or bankruptcy. To measure the fiscal fitness of a company
combined a set of five financial ratios.

Takeh Ata & Navaprabha Jubiliy (2015) Author has made conceptual model to outline the impact
of capital structure on the financial performance i.e. capital structure is independent variable that
value is measured by using four ratios namely, financial debt, total debt equity, total asset debt and
interest coverage ratio whereas financial performance is dependent variable that value is measured
by using four ratios as return on assets, return on equity , operating profit margin and return on
capital employed. Researcher has selected 13 major steel industries and applied various statistical
tools like standard deviation, correlation matrix, anova etc. are employed for testing hypothesis
with help of SPSS22.

Kumar Rakesh Rasiklalajani & Bhatt Satyaki J. (2015) the proposed research is intended to
examine the trend and pattern of financing the capital structure of Indian companies. The study is
to analyze the determinants of total debt ratios as well as determinants of short term and long-term
ratios.

Agarwal, Nidhi (2015) The study focuses on the comparative financial performance of Maruti
Suzuki and Tata motors ltd. The financial data and information required for the study are drawn

15
from the various annual reports of companies. The liquidity and leverage analysis of both the firms
are done. To analyze the leverage position four ratios are considered namely, capital gearing, debt-
equity, total debt and proprietary ratio. The result shows that Tata motors ltd has to increase the
portion of proprietor’s fund in business to improve long term solvency position.

Jothi, K. & Geetha Lakshmi, A. (2016) This study tries to evaluate the profitability & financial
position of selected companies of Indian automobile industry using statistical tools like, ratio
analysis, mean, standard deviation, correlation.

Kumar Mohan M.S, Vasu. V. and Narayana T. (2016) The study has been made through using
different ratios, mean, standard deviation and Altman’s Z score approach to study the financial
health of the company. The study reveals there is a positive correlation between liquidity and
profitability ratios except return on total assets as well as Z score value indicate good health of the
company.

Mathur Shivam & Agarwal Krati (2016) Ratios are an excellent and scientific way to analyze the
financial performance of any firm. These indicators help the investors to invest the right company
for expected profits.

According to Patrick et al (2002:99), cash flow helps the investors and creditors to access the
ability of the firm to generate positive future cash flow, ability to meet the debt obligations and to
shed light on the cash and non-cash aspect of the investing and financial transactions.

16
 Chapter 03

Research Methodology and Data Collection

• Research objectives
• Methodology
• Limitations

17
Research Methodology is the specific procedures or techniques used to identify, select, process
and analyze information about a topic. In a search paper, the methodology section allows the reader
to critically evaluate the study’s overall reliability and validity.

In other words, the methodology chapter should justify the design choices, by showing that the
chosen methods and techniques are the best fit for the research aims and objectives, and will
provide valid and reliable results. A good research methodology provides scientifically sound
findings, whereas a poor methodology doesn’t. We’ll look at the main design choices below.

3.1 Research Objectives:

In general, the primary objective of financial statement analysis is to understand and diagnose the
information contained in financial statement with a view to judge the profitability and financial
soundness of the firm, and to make forecast about future prospects of the firm.

Objective of the study shall be:

• To analyze the profitability position of the business

• To determine financial position of the company
• To measure and analyze long term solvency position of the company
• To make comparative study of the company for 5 years using trend analysis:

Scope of the study:

• It is useful for the management.

• It gives information to the investors about the earning capacity of the business.
• With the help of Ratio analysis comparison of profitability and financial soundness can be
made.
• Current year’s ratio is compared with those of previous years and if some weak spots are
located remedial measures are taken to correct them.
• It gives information to the financial institution for providing the finance to the company.
• It gives information to the taxation authorities.

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3.2 Research Methodology

A. Sample size: Basically, Sample size refers to the number of participants or observations
included in a study.

In this research report the sample consists of a financial data of Wipro limited & subsidiaries. This
research is mainly based on the consolidated financial statements. This data is analyzed on the
basis of financial statements of Wipro limited for 5 years i.e., from 2015-16 to 2019-20 and majorly
concentrating on the quarterly results Q1, Q2, Q3, and Q4 from the year 2019-20.

B. Data collection: In general, data collection is the process of gathering and measuring
information on variables of interest in an established systematic fashion that enables one to answer
stated research questions, test hypothesis, and evaluate outcomes.

This research is based on secondary data that has been extracted from the company website
directly. In this project, secondary data has been collected from the following access:

1. Annual Report
2. Articles
3. Books

C. Statistical Tools: Statistical analysis is the science of collecting data and uncovering patterns
and trends. It is really just another way of saying “statistics”. After collecting data, you can analyze
it to summarize the data.

Some of the statistical tool that will be used in this project is:

1. Graphs: A graph can be defined as a pictorial representation or diagram that

represents data or values in an organized manner. The points on the graph often
represents the relationship between two or more things.
2. Charts: A chart is a graphical representation for data visualization, in which “the
data is represented by symbols, such as bars in a bar chart, lines in a line chart, or

19
 slices in a pie chart”. A chart can represent tabular numeric data, functions are some
kinds of quality structure and provides different information.
3. Tables: A table is an arrangement of data in rows and columns, or possibly in a
more complex structure. Tables are widely used in communication, research, and
data analysis. Tables appear in prints media, hand written notes, computer software,
architectural ornamentation, traffic science, and many other places.

D. Research design: Research Design is the way in which the research is carried out. It works as a
blue print. Research Design is the arrangement of conditions for the collection and analysis of data
in a manner that aims to combine relevance to the research purpose with economy in procedure.

The present project is descriptive in nature. In Descriptive Research Design, those studies are taken
which are concerned with describing the characteristics of a particular group. The major purpose
of descriptive research is the description of state of affairs, as it exists at present.

Exploratory Research - an exploratory research focuses on the delivery of ideas and is generally
based on secondary data. It is a preliminary investigation a preliminary investigation which does
not have a rigid design. This is because a researcher engaged in exploratory study may have to
change his focus as a result of new ideas and relation among the variables.

The study conducted through exploratory research is with the help of data obtained from the
secondary data, there is no specific sample design made or questionnaire used to obtain
information.

20
3.3. Limitations of the study
• Study is largely based on secondary published information
• It depends on past information.
• Only the last 5 years data is considered for the study
• Study is confined only of the Wipro company’s IT services segment.

21
 Chapter 4

Analysis of Data

• Analysis of balance sheet

• Analysis of Profit and Loss
• Introduction to Ratio analysis
• Liquidity Ratio
• Profitability Ratio
• Asset Turnover Ratio
• Finance Structure Ratio
• Valuation Ratio

22
4.1. Analysis of Balance sheet:

Trend Analysis of Balance sheet (Rs. In Millions)

Trend analysis of balance sheet involves calculation of percentage of changes in the balance sheet
for a no. of successive years. This is carried out by taking the past financial year used as base year.
Here 2016 is taken as base year.

Particulars 2015-16 2016-17 2017-18 2018-19 2019-20

Assets
Non-current assets 141478 144298 157040 192677 195931
Current Asset 450287 487271 429222 577304 457133
Assets held for sale - - 451 - -
Total Assets 591765 631569 586713 669981 653064
Equity and Liabilities
Total Equity 409052 467056 422626 493920 464537
Non-current liabilities 16642 26114 13728 14615 24087
Current Liabilities 166071 138399 150359 161446 164438
Total Liability 182713 164513 164087 176061 188527
Total Equity and Liability 591765 631569 586713 669981 653064

23
4.1.1 Trend analysis of non-Current assets

Particulars 2015-16 2016-17 2017-18 2018-19 2019-20

Total non-current assets (Rs.) 141478 144298 157040 192677 195931
In percentage (%) 17.02 17.36 18.89 23.17 23.57

Calculation of non-current asset in percentage:

Formula: Total of particular FY current assets / Total of 5 years current assets * 100

Total non-current assets of all 5 years are = 831424

2015-16: 141478/831424*100 = 17.02

2016-17: 144298/831424*100 = 17.36

2017-18: 157040/831424*100 = 18.89

2018-19: 192677/831424*100 = 23.17

2019-20: 195931/831424*100 = 23.57

Table 4.1.1

Non current assets (%)

25.00

20.00

15.00

10.00

5.00

0.00
2015-16 2016-17 2017-18 2018-19 2019-20

Figure 4.1.1. Non-current assets trend analysis

24
Interpretation:

• Non-current assets are increase in current year is good for the company
• The best changes in growth of non-current assets are seen between 2017-18 to 2018-19.

4.1.2 Trend analysis of current assets

Particulars 2015-16 2016-17 2017-18 2018-19 2019-20

Total current assets 450287 487271 429222 577304 457133
In percentage (%) 18.75 20.29 17.88 24.04 19.04

Calculation of current assets in percentage:

Total of particular FY current assets / Total of 5 years current assets * 100

Total current assets of all 5 years are = 2401217

2015-16: 450287/2401217*100 = 18.75

2016-17: 487271/2401217*100 = 20.29

2017-18: 429222/2401217*100 = 17.88

2018-19: 577304/2401217*100 = 24.04

2019-20: 457133/2401217*100 = 19.04

25
 Current assets (%)
30.00

25.00

20.00

15.00

10.00

5.00

0.00
2015-16 2016-17 2017-18 2018-19 2019-20

Figure 4.1.2 Current assets trend analysis

Interpretations:

• Slight stability in current assets can be seen in trend analysis.

• After the decrease in 2017-18, There was an increase in current assets from 2018-19.
• Simultaneously we can see the decrease in current asset in the last financial year 2019-20.
• Current assets show the liquidity of the company.

4.1.3 Trend analysis of Total Equity

Particulars 2015-16 2016-17 2017-18 2018-19 2019-20

Total Equity 409052 467056 422626 493920 464537
In percentage (%) 18.12 20.69 18.72 21.88 20.58

Calculation of Total Equity in percentage:

Total of particular FY total equity / Total of 5 years total equity * 100

26
Total Equity of all 5 years are = 2257191

2015-16: 409052/2257191*100 = 18.12

2016-17: 467056/2257191*100 = 20.69

2017-18: 422626/2257191*100 = 18.72

2018-19: 493920/2257191*100 = 21.88

2019-20: 464537/2257191*100 = 20.58

Total Equity in (%)

25.00

20.00

15.00

10.00

5.00

0.00
2015-16 2016-17 2017-18 2018-19 2019-20

Figure 4.1.3 Trend analysis of Equity

Interpretation:

• There was increase of Equity in 2019-20

• Equity is showing high fluctuation.
• Low Equity was shown in 2017-18.

27
4.1.4 Trend Analysis of Total Liability

Particulars 2015-16 2016-17 2017-18 2018-19 2019-20

Total liability 182713 164513 164087 176061 188527
In percentage (%) 20.99 18.90 18.85 19.60 21.66

Calculation of Total Liability in percentage:

Total of particular FY total liability / Total of 5 years total liability * 100

Total liability of all 5 years is = 870501

2015-16: 182713/870501*100 = 20.99

2016-17: 164513/870501*100 = 18.90

2017-18: 164087/870501*100 = 18.85

2018-19: 176061/870501*100 = 19.60

2019-20: 188527/870501*100 = 21.66

Total liability in (%)

22.00
21.50
21.00
20.50
20.00
19.50
19.00
18.50
18.00
17.50
17.00
2015-16 2016-17 2017-18 2018-19 2019-20

28
 Figure 4.1.4 Trend analysis of Total Liability

Interpretation:

• Total liability is highest in 2019-20

• Liabilities in increasing which means company has to develop business, and purchase
raw material on credit basis.

4.2 Analysis of Profit and Loss:

Statement of profit and loss

(Rs. In Millions, For the year ended March 31st)

Particulars 2015-16 2016-17 2017-18 2018-19 2019-20

Revenue
Revenue from Operations 446846 456396 447100 480298 503877
Other Operating Expenses - 4082 - 940 193
Other Income 27715 25700 24796 25686 24766
Total 474561 486178 471896 506924 528836
Expenses
Total Expenses 369740 379307 371553 408219 418759
Profit before tax 104821 106871 100343 98705 110077
Total Tax Expenses 23831 25254 23115 22565 23270
Net Profit 80990 81617 77228 76140 86807

29
4.2.1 Trend analysis of Revenue

Particulars 2015-16 2016-17 2017-18 2018-19 2019-20

Total Revenue 474561 486178 471896 506924 528836
In percentage (%) 19.23 19.70 19.12 20.54 21.42

Calculation of Revenue in percentage:

Total of particular FY total Revenue / Total of 5 years total Revenue * 100

Total Revenue of all 5 years is = 2468395

2015-16: 474561/2468395*100 = 19.23

2016-17: 486178/2468395*100 = 19.70

2017-18: 471896/2468395*100 = 19.12

2018-19: 506924/2468395*100 = 20.54

2019-20: 528836/2468395*100 = 21.42

30
 Revenue (%)
22.00

21.50

21.00

20.50

20.00

19.50

19.00

18.50

18.00

17.50
2015-16 2016-17 2017-18 2018-19 2019-20

Figure 4.2.1. Trend analysis of Revenue

Interpretation:

• Revenue got increased from past 3 years & it is a good sign for the company.
• As per last 5 years data revenue got decreased only in 2017-18.

4.2.2 Trend analysis of Expenditure

Particulars 2015-16 2016-17 2017-18 2018-19 2019-20

Total Expenditure 369740 379307 371553 408219 418759
In percentage (%) 18.98 19.48 19.08 20.96 21.50

Calculation of Expenses in percentage:

Total of particular FY total Expenses / Total of 5 years total Expenses * 100

31
Total Expenses of all 5 years is = 1947578

2015-16: 474561/2468395*100 = 18.98

2016-17: 486178/2468395*100 = 19.48

2017-18: 471896/2468395*100 = 19.08

2018-19: 506924/2468395*100 = 20.96

2019-20: 528836/2468395*100 = 21.50

Expenditure (%)
22.00
21.50
21.00
20.50
20.00
19.50
19.00
18.50
18.00
17.50
17.00
2015-16 2016-17 2017-18 2018-19 2019-20

Figure 4.2.2. Trend analysis of Expenses.

Interpretation:

• Expenses are increasing from past 3 years.

• Only in 2017-18 expenses are seen decreased as on last 5 years data.

32
4.2.3 Revenue v/s Expenditure

Particulars 2015-16 2016-17 2017-18 2018-19 2019-20

Revenue in percentage (%) 19.23 19.70 19.12 20.54 21.42
Expenses in percentage (%) 18.98 19.48 19.08 20.96 21.50

22.00

21.50

21.00

20.50

20.00

19.50

19.00

18.50

18.00

17.50
2015-16 2016-17 2017-18 2018-19 2019-20

Revenue (%) Expenditure (%)

Figure 4.2.3. Comparison of Revenue and Expenses

Interpretation:

• The above chart is the comparison of Revenue and Expenses from last 5 years data (i.e.,
from 2016 to 2020)
• From 2016 to 18 revenue was higher than the expenses incurred by the company.
• Percentage Expenditure increasing year by year little more than income increased, so that
profit margin decreases year by year.

33
 • In 2017-18 there is no huge effect on net profit

4.2.4 Trend analysis of Net Profit

Particulars 2015-16 2016-17 2017-18 2018-19 2019-20

Net Profit 80990 81617 77228 76140 86807
Profit (%) 20.11 20.26 19.17 18.90 21.55

Calculation of Net Profit in percentage:

Total of particular FY total Net profit / Total of 5 years total Net profit * 100

Total Net profit of all 5 years is = 402782

2015-16: 80990/402782*100 = 20.11

2016-17: 81617/402782*100 = 20.26

2017-18: 77228/402782*100 = 19.17

2018-19: 76140/402782*100 = 18.90

2019-20: 86807/402782*100 = 21.55

34
 Profit (%)
22.00

21.50

21.00

20.50

20.00

19.50

19.00

18.50

18.00

17.50
2015-16 2016-17 2017-18 2018-19 2019-20

Figure 4.2.4 Trend analysis of Profit percentage

Interpretation:

• Huge profit was shown in the last year (2019-20).

• There was constant decrease in profit for last 3 years i.e., from 2017 to 19.

35
4.3. Introduction to Ratio Analysis

Ratio analysis is a quantitative method of gaining insight into a company's liquidity, operational
efficiency, and profitability by studying its financial statements such as the balance sheet and
income statement. Ratio analysis is a cornerstone of fundamental equity analysis.

Ratios are comparison points for companies. They evaluate stocks within an industry. Likewise,
they measure a company today against its historical numbers. In most cases, it is also important to
understand the variables driving ratios as management has the flexibility to, at times, alter its
strategy to make its stock and company ratios more attractive. Generally, ratios are typically not
used in isolation but rather in combination with other ratios.

It can be further classified as different categories

• Liquidity Ratio
• Profitability Ratio
• Asset Turnover Ratio
• Finance structure Ratio
• Valuation Ratio

36
4.4. Liquidity Ratio

Liquidity ratio measure a company's ability to pay off its short-term debts as they become due,
using the company's current or quick assets.

Liquidity ratios are an important class of financial metrics used to determine a debtor's ability to
pay off current debt obligations without raising external capital. Liquidity ratios measure a
company's ability to pay debt obligations and its margin of safety through the calculation of
metrics.

The following Liquidity ratios are calculated for the company:

• Current ratio
• Quick ratio
• Net working capital

4.4.1. Current Ratio

The 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 2:1 i.e., Current assets should
be equal to current liabilities.

Current ratio = Current assets / Current liabilities

Calculation of current ratio

2015-16: 450287 / 166071 = 2.71

2016-17: 487271 / 138399 = 3.52

2017-18: 429222 / 150359 = 2.85

2018-19: 577304 / 161446 = 3.57

2019-20: 457133 / 164438 = 2.78

37
 Particulars 2015-16 2016-17 2017-18 2018-19 2019-20
Current Ratio 2.71 3.52 2.85 3.57 2.78

CURRENT RATIO
4

3.5

2.5

1.5

0.5

0
2015-16 2016-17 2017-18 2018-19 2019-20

Figure 4.4.1. Current Ratio Analysis

Interpretation:

• The current ratio is fluctuating year by year.

• Current ratio is always 2:1 it means the current assets are two times of current liabilities.

38
Inventories:

Particulars 2015-16 2016-17 2017-18 2018-19 2019-20

Finished goods (including stock 8 5 3 3 3
in transit
Stock in trade 4512 2746 2171 2723 1125
Stores and Spares 871 808 769 677 613
TOTAL Stock 5391 3559 2943 3403 1741

Cash and cash equivalents

Particulars 2015-16 2016-17 2017-18 2018-19 2019-20

Cash and cash equivalents 99049 35166 23220 103902 104440
Bank overdraft 657 1544 3998 3 0
Total 98392 33622 19222 103899 104440

Note: The above Inventories and cash equivalents have been copied separately from the company
website to calculate quick ratio for the same.

4.4.2. 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. Current liabilities are obtained by deducting bank over draft from
current liabilities.

Quick ratio = Quick assets / Quick liabilities

Calculation of Quick assets = Current assets - stock

39
2015-16: 450287 – 5391 = 444896

2016-17: 487271 – 3559 = 483712

2017-18: 429222 – 2943 = 426279

2018-19: 577304 – 3403 = 573901

2019-20: 457133 – 1741 = 455392

Calculation of Quick liabilities = Current liabilities – bank overdraft

2015-16: 166071 – 657 = 166071

2016-17: 138399 – 1544 = 136855

2017-18: 150359 – 3998 = 146361

2018-19: 161446 – 3 = 161443

2019-20: 164438 – 0 = 164438

Calculation of Quick Assets = Quick assets / Quick liabilities

2015-16: 444896 / 166071 = 2.68

2016-17: 483712 / 136855 = 3.53

2017-18: 426279 / 146361 = 2.91

2018-19: 573901 / 161443 = 3.55

2019-20: 455392 / 164438 = 2.77

40
 Particulars 2015-16 2016-17 2017-18 2018-19 2019-20
Quick Ratio 2.68 3.53 2.91 3.55 2.77

QUICK RATIO
4

3.5

2.5

1.5

0.5

0
2015-16 2016-17 2017-18 2018-19 2019-20

Figure 4.4.2. Quick Ratio Analysis

Interpretation:

• Standard ratio is 1:1

• Company’s quick assets is more than quick liabilities for all these 5 years
• So, all the years has quick ratio exceeding 1, the firm is in position to meet its immediate
obligation in all years.

4.4.3. Net Working Capital

Net working capital is the difference between a company's current assets, such as cash, accounts
receivable (customers' unpaid bills), and inventories of raw materials and finished goods, and its
current liabilities, such as accounts payable.

Networking Capital = Current Assets – Current Liabilities

Calculation of Networking capital

41
2015-16: 450287 – 166071 = 284216

2016-17: 487271 – 138399 = 348872

2017-18: 429222 – 150359 = 278863

2018-19: 577304 – 161446 = 415858

2019-20: 457133 - 164438 = 292695

Particulars 2015-16 2016-17 2017-18 2018-19 2019-20

Networking capital 284216 348872 278863 415858 292695

NETWORKING CAPITAL
450000

400000

350000

300000

250000

200000

150000

100000

50000

0
2015-16 2016-17 2017-18 2018-19 2019-20

Figure 4.4.3. Net Working Capital Analysis

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.

42
4.5. Profitability Ratios

Profitability ratios are a class of financial metrics that are used to assess a business's ability to
generate earnings relative to its revenue, Operating costs, balance sheet assets, or shareholders’
equity over time, using data from a specific point in time.

Profitability ratios assess a company's ability to earn profits from its sales or operations, balance
sheet assets, or shareholders' equity. Profitability ratios indicate how efficiently a company
generates profit and value for shareholders.

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

4.5.1. Gross Profit Ratio

Gross profit ratio (GP ratio) is a financial ratio that measures the performance and efficiency of a
business by dividing its gross profit figure by the total net sales. It is then called gross
profit percentage or gross profit margin.

Particulars 2015-16 2016-17 2017-18 2018-19 2019-20

Gross Profit 155716 158858 159296 172812 174147
Sales 539962 579951 544871 585845 610232

Gross Profit Ratio = Gross profit / sales * 100

43
Calculation of Gross Profit Ratio:

2015-16: 155716 / 539962 * 100 = 28.84

2016-17: 158858 / 579951 * 100 = 27.39

2017-18: 159296 / 544871 * 100 = 29.23

2018-19: 172812 / 585845 * 100 = 29.5

2019-20: 174147 / 610232 * 100 = 28.54

Particulars 2015-16 2016-17 2017-18 2018-19 2019-20

Gross Profit Ratio 28.84 27.39 29.23 29.5 28.54

GROSS PROFIT RATIO

30

29.5

29

28.5

28

27.5

27

26.5

26
2015-16 2016-17 2017-18 2018-19 2019-20

Figure 4.5.1. Gross Profit Ratio Analysis

44
Interpretation:

• Gross profit shows how much efficient company is in production.

• In 2019-20 gross profit decreased due to higher production cost.

4.5.2. Operating Profit Ratio

Operating Profit Margin is a profitability or performance ratio that reflects the percentage
of profit a company produces from its operations, prior to subtracting taxes and interest charges.
It is calculated by dividing the operating profit by total revenue.

Operating profit ratio = Operating profit / Sales * 100

Calculation of operating profit ratio

2015-16: 97021 / 516307 * 100 = 18.72

2016-17: 93879 / 554179 * 100 = 16.94

2017-18: 84294 / 546359 * 100 = 15.43

2018-19: 99910 / 585845 * 100 = 17.05

2019-20: 105730 / 610232 * 100 = 17.33

Particulars 2015-16 2016-17 2017-18 2018-19 2019-20

Operating Profit Ratio 18.72 16.94 15.43 17.05 17.33

45
 OPERATING PROFIT RATIO
30

29.5

29

28.5

28

27.5

27

26.5

26
2015-16 2016-17 2017-18 2018-19 2019-20

Figure 4.5.2 Operating Profit Ratio Analysis

Interpretation:

• Operating Ratio is lowest during 2017.

• This shows that the expenses incurred to earn profit were less.

4.5.3. Net profit Ratio

The net profit percentage is the ratio of after-tax profits to net sales. It reveals the remaining
profit after all costs of production, administration, and financing have been deducted from
sales, and income taxes recognized. As such, it is one of the best measures of the overall results
of a firm, especially when combined with an evaluation of how well it is using its working
capital. The measure is commonly reported on a trend line, to judge performance over time. It
is also used to compare the results of a business with its competitors.

Net profit ratio = Net Profit / Net Sales * 100

Particulars 2015-16 2016-17 2017-18 2018-19 2019-20

Net profit 89597 85179 80031 90179 97718

46
 Net Sales 516307 554179 546359 589060 613401
Net Profit Ratio 17.35 15.37 14.65 15.31 15.93

Net profit ratio = Net Profit / Net Sales * 100

2015-16: 89597 / 516307 * 100 = 17.35

2016-17: 85179 / 554179 * 100 = 15.37

2017-18: 80031 / 546359 * 100 = 14.65

2018-19: 90179 / 589060 * 100 = 15.31

2019-20: 97718 / 613401 * 100 = 15.93

NET PROFIT RATIO

18

17.5

17

16.5

16

15.5

15

14.5

14

13.5

13
2015-16 2016-17 2017-18 2018-19 2019-20

Figure 4.5.3 Net Profit Ratio Analysis

47
Interpretation:

• The ratio is fluctuating

• Company has risen its profit in 2019-20 because the company has increased its sale.
• The overall ratio is showing good position of the company
• In 2015-16 Net profit ratio is high compared to all 5 years in the above-mentioned figure.

4.6. Asset turnover Ratio

The asset turnover ratio measures the value of a company's sales or revenues relative to the value
of its assets. The asset turnover ratio can be used as an indicator of the efficiency with which a
company is using its assets to generate revenue.

Asset Turnover = Total Sales / (Beginning assets + Ending assets / 2)

Where:

Total Sales = Annual sales total

Beginning Assets = Assets at start of the year

Ending Assets = Assets at end of the year

Particulars 2015-16 2016-17 2017-18 2018-19 2019-20

Total Sales 516307 554179 546359 589060 613409

48
 Beginning Asset 534085 589249 631569 586713 669981
Ending Asset 591765 631569 586713 669981 653064
Asset Turnover Ratio 62.21 65.11 59.07 63.91 61.56

Calculate of Asset turnover ratio:

Asset Turnover Ratio = Total Sales / (Beginning assets + Ending assets / 2)

2015-16: 516307 / (534085 + 591765 / 2) = 62.21

2016-17: 554179 / (589249 + 631569 / 2) = 65.11

2017-18: 546359 / (631569 + 586713 / 2) = 59.07

2018-19: 589060 / (586713 + 669981 / 2) = 63.91

2019-20: 613409 / (669981 + 653064 / 2) = 61.56

ASSET TURNOVER RATIO

66

65

64

63

62

61

60

59

58

57

56
2015-16 2016-17 2017-18 2018-19 2019-20

Figure 4.6. Asset Turnover Ratio Analysis

49
Interpretation:

• Lowest asset turnover ratio is seen in 2017-18.

• Highest was seen in 2016.17
• In 2019-20 ratio is decreased compared to last year.

4.7. Finance Structure Ratios

Financial structure refers to the mix of debt and equity that a company uses to finance its
operations. It can also be known as capital structure. Financial managers use the weighted average
cost of capital as the basis for managing the mix of debt and equity. Debt to capital and debt to
equity are two key ratios that are used to gain insight into a company’s capital structure.

The following Finance ratios are calculated for company:

• Debt Ratio
• Debt Equity Ratio

4.7.1. Debt Ratio

The debt ratio is a financial ratio that measures the extent of a company’s leverage. The debt ratio
is defined as the ratio of total debt to total asset, expressed as a decimal or percentage. It can be
interpreted as the proportion of a company’s assets that are financed by debt.

50
 Particulars 2015-16 2016-17 2017-18 2018-19 2019-20
Total debt 125221 142412 138259 99467 78042
Total Asset 591765 631569 586713 669981 653064
Debt Ratio 0.21 0.22 0.23 0.10 0.12

Debt Ratio = Total Debt / Total Assets

Calculation of Debt ratio:

2015-16: 125221 / 591765 = 0.21

2016-17: 142412 / 631569 = 0.22

2017-18: 138259 / 586713 = 0.23

2018-19: 99467 / 669981 = 0.10

2019-20: 78042 / 653064 = 0.12

DEBT RATIO
0.25

0.2

0.15

0.1

0.05

0
2015-16 2016-17 2017-18 2018-19 2019-20

Figure 4.7.1 Debt Ratio Analysis

51
Interpretation:

• From above figure it is clear that Ratio is fluctuating

• In 2017-18 there was high debt ratio.
• There was low debt ratio in 2018-19.

4.7.2. Debt Equity Ratio

The debt-equity ratio is a measure of the relative contribution of the creditors and shareholders or
owners in the capital employed in business. Simply stated, ratio of the total long-
term debt and equity capital in the business is called the debt-equity ratio.

Particulars 2015-16 2016-17 2017-18 2018-19 2019-20

Debt Equity Ratio 0.3 0.3 0.3 0.2 0.1

Debt Equity Ratio = Total Debt / Total Equity

2015-16 = 125221 / 409052 = 0.3

2016-17 = 142412 / 467056 = 0.3

2017-18 = 138259 / 422626 = 0.3

2018-19 = 99467 / 493920 = 0.2

2019-20 = 78042 / 464537 = 0.1

52
 DEBT EQUITY RATIO
0.35

0.3

0.25

0.2

0.15

0.1

0.05

0
2015-16 2016-17 2017-18 2018-19 2019-20

Figure 4.7.2. Debt Equity Ratio Analysis

Interpretation:

• There is a decrease in debt equity ratio from 2018 to 20.

4.8. Valuation ratios

A valuation ratio is any one of several calculations that determines whether a particular security is
cheap or expensive when compared to a certain measure, such as profits or enterprise value.
Valuation ratios are generally presented on a per share basis and thus are more useful to the equity
investors.

53
The following valuation Ratios are calculated for the company:

• Earnings per share

• P/E Ratio
• Profit Margin

4.8.1. Earnings Per Share

Earnings per share is the monetary value of earnings per outstanding share of common stock for a
company. Earnings per share (EPS) is calculated as a company's profit divided by the outstanding
shares of its common stock. The resulting number serves as an indicator of a company's
profitability.

Particulars 2015-16 2016-17 2017-18 2018-19 2019-20

Earnings Per Share 36.47 17.49 16.85 14.99 16.67

EPS
40 36.47
35

30

25

20 17.49 16.85 16.67

14.99
15

10

0
2015-16 2016-17 2017-18 2018-19 2019-20

Figure 4.8.1 Earnings per share

54
Interpretation:

• Earnings per share is increasing in 2019-20 as a increasing rate it is good for investor and
shareholder.
• EPS was gradually decreasing since 2015-16 for the next 3 years & got hikes in 2019-20.

4.8.2. P/E Ratio

The price-to-earnings ratio (P/E ratio) is the ratio for valuing a company that measures its current
share price relative to its per-share earnings (EPS). The price-to-earnings ratio is also sometimes
known as the price multiple or the earnings multiple. PE Ratio was 11.8 in 2020 and 17 in 2019 as
per annual reports of 2019-20.

P/E Ratio = Market value of share / Earnings per share

4.8.3. Profit Margin

Profit margin is one of the commonly used profitability ratios to gauge the degree to which a
company or a business activity makes money. It represents what percentage of sales has turned
into profits. Simply put, the percentage figure indicates how many cents of profit the business has
generated for each dollar of sale. For instance, if a business reports that it achieved a 35% profit
margin during the last quarter, it means that it had a net income of $0.35 for each dollar of sales
generated.

Profit Margin = Net Income / Net Sales

Particulars 2015-16 2016-17 2017-18 2018-19 2019-20

Net Income 539962 579951 486937 471896 528836
Net Sales 516307 554179 546359 589060 613401
Profit Margin 1.04 1.05 0.89 0.80 0.86

55
 PROFIT MARGIN
1.2

0.8

0.6

0.4

0.2

0
2015-16 2016-17 2017-18 2018-19 2019-20

Figure 4.8.3 Profit Margin Analysis

Interpretation:

• Profit margin is fluctuating year by year.

• In 2019-20 the profit margin is increased and it is a good sign for the company.

56
 Chapter 5

Findings and suggestions

• Findings
• Suggestions
• Conclusion

57
5.1. Findings

• A vast fluctuation is seen in all the ratios for past 3 years.

• 2015-16 & 2016-17 has maintained all ratios equally.
• The company was trading at a Price to Earning (PE) ratio of 11.8 in 2020, the PE ratio was
17 in 2019.
• All the years has quick ratio exceeding 1, the firm is in the position to meet its immediate
obligation in all the years.
• When we look at the balance sheet non-current assets are increased gradually, current
assets and Equity were at peak in 2019 as a result of revenue increase, whereas liability
was high in 2020.
• Increase in Liability means company has to develop its business and purchase raw material
on credit basis.
• Increased amount on purchase of goods and services leads to increase in expenditure.
• The net profit has been continuously increased from past three years.
• Debt ratio decreased for next 2 years after 2018 which leads to least likely affect business
risk.
• Debt equity ratio also decreased from past 3 years (2018-20). A low debt to equity ratio
indicates a lower amount of financing by debt via lenders v/s funding through equity via
shareholders.
• Profit ratio shows how much efficient company is in production.
• Higher profit is the very good shine for the company.
• Increase in Sales and Profit together is a reward to generate positive goodwill with
employees.
• On March 11, 2020, as covid-19 spread rapidly, both in terms of number of cases and the
effected countries, the WHO characterized Covid-19 as a pandemic. The continued spread
of covid-19 could adversely affect workforces, customers, economies and financial
markets globally, potentially leading to further economic downturn. Even WIPRO has
faced some problems by the end of financial year 2019-20.

58
5.2. Suggestion

• The profit margin shows decline in current years so that company should try to increase
profit after tax.
• Current ratio is good so company has fully utilized cash liquidity for business development.
• The company is not trading at a significant discount at present. In order to enhance your
margin of safety, buy this stock only when price drops.

59
5.3. Conclusion

According to this research we find that the company’s overall position is at a good position. The
company achieved sufficient profit in past years. Assets are efficiently utilized by the company
due to which profit is increasing every year.

The long-term solvency of the company is good. The Company maintains low liquidity to achieve
high profitability. The company distributes dividend every year to its shareholders. Management
has to take care about good efficiency of stock management. Sales and Profit has been increased
in 2020 as it is a good sign of the company’s goodwill. If the expenses decrease the company can
get more profit turnover.

60
 Chapter 6

Bibliography

61
Bibliography:

Dr. M. Ravichandran [ CITATION DrM16 \l 1033]

Johnson, G.C. 1970. “Ratio Analysis and the Prediction of Firm Failure: Comment.”

Anthony, R.N., and J.S. Reece. 1975. Principles of Management Accounting. Homewood, IL:
Richard Irwin Inc.

Batty, J. 1966. Management Accountancy. London, UK: MacDonald and Evans Ltd.

Gaur Jighyasu (2010) focuses on the measurement of financial performance of business group

Beaver, W. H. 1966. Financial ratios as predictors of failure. Journal of Accounting

Research (Empirical Research in Accounting: Selected Studies): 71-111.

Beaver, W. H. 1968. Market prices, financial ratios, and the prediction of failure. Journal of
Accounting Research (Autumn): 179-192.

Shinde Govind P. & Dubey Manisha (2011) the study has been conducted considering the
segments

Jonathan Anderson and Millicent Poole. (2014), “Assignment and Thesis Writing”, Wiley
India Pvt. Ltd., New Delhi

M Kumbirai, R Webb (2010) A financial ratio analysis of commercial bank performance in

South Africa

Dobrowolski S.P. (1971), The Economics of Corporation Finance, McGraw Hill, New York,
1971

Brigham, E.F. and Ehrhardt M.C (2002), Financial Management Theory and Practice,
Thomson South-Western, A division of Thomson Learning Inc., Eastern Press, Bangalore Pvt.
Ltd., Bangalore.

Balasubramanian N (1993), Corporate Financial Policies and Shareholders Returns: The

Indian Experience, Himalaya Publishing, Bombay

62
 Bradley, J.P. (1968), Administrative Financial Management (New York: Holt Rinechart and
Winston, Inc.,

Kulkarni, P.V. (1996), Financial Management - A Conceptual Approach, Himalaya Publishing

House, Bombay.

Websites:

https://www.investopedia.com/financial-edge/0910/6-basic-financial-ratios-and-what-they-tell-
you.aspx

https://www.wipro.com/about-us/

https://www.accountingtools.com/articles/ratio-analysis

https://www.wipro.com/investors/annual-reports/

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 Chapter 7
Annexure

• Balance Sheet
• Profit and Loss

64
Annexure – 1
Balance sheet

2016 2017 2018 2019 2020

ASSETS
Non-current assets
Property, plant & Equipment 37262 37555 38062 38742 50473
Right-of-use Assets - - - - 8160
Capital work-in-progress 3251 6941 12906 21127 18735
Goodwill - 3882 3882 3882 4571
Other intangible assets 4625 2185 1762 1386 3190
Financial assets
Investments 57328 59994 58416 82503 77350
Derivative assets 106 41 173
Trade receivables 3998 4446 4373 4462
Loans to subsidiaries - - - - -
Other financial assets 33584 3545 3078 3843 4416
Deferred tax asset (net) 2904 2352 4520 3910 4333
Non-current tax asset (net) 12008 18349 20549 11103
Other non-current assets 2524 11732 11614 12189 9138
Total Non-current assets 141478 144298 157040 192677 195913
Current Assets
Inventories 5262 3559 2943 3403 1741
Financial assets
Investments 127302 291467 248412 219988 189635
Trade receivables 87048 81299 95020 90463 92570
Cash and cash equivalents 120078 35166 23220 103902 104440
Derivative assets 9747 1232 4920 2964
Unbilled receivables 32845 30256 16023 17964
Loans to Subsidiaries 54995 1917 - - 9472
Other financial assets - 6151 5218 5813 6807
Current tax assets (net) - 7701 4799 3307 839
Contract assets - - - 10845 12432
Other current assets 55602 17419 18122 18640 18269
Total Current Assets 450287 487271 429222 477304 457133
Assets held for sale - - 451 - -
Total Assets 591765 631569 586713 669981 653064
EQUITY
Equity Share Capital 4941 4861 9048 12068 11427
Other Equity 404111 462195 413578 481852 453110
Total Equity 409052 467056 422626 493920 464537
Liabilities
Non-current Liabilities

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Financial liabilities
Borrowings 11465 11463 724 220 220
Derivative liabilities - 2 - - -
Other financial liabilities - 77 - - -
Provisions 3991 3733 1688 1196 2133
Deferred tax liabilities (net) 722 1391 463 104 -
Non-current tax liabilities (net) 9099 8557 9978 11654
Other non-current liabilities 464 349 2296 3117 3770
Total Non-Current Liabilities 16642 26114 13728 14615 24089
Current Liabilities
Financial Liabilities
Borrowings 55495 11463 46477 50522 50019
Trade payables 59931 38186 41762 47655
(a) Total outstanding dues of - - - - 131
Micro, small, and medium
enterprise
(b) Total outstanding dues of - - - - 45295
creditors other than micro,
small, and medium enterprise
Derivative liabilities - 2708 2198 1270 7231
Lease liabilities - 3124
Other financial liabilities - 17628 25343 24990 18657
Contract liabilities - 11506 12709 14862 14272
Provisions 23993 6269 7934 9290 11302
Current tax liabilities (net) 6792 8961 7185 9758
Other current liabilities 26652 5124 4975 5672 4649
Total Current Liabilities 166071 138399 150359 161446 164438
Total Liabilities 164087 176061 188527
TOTAL EQUITY AND 591765 631569 586713 669981 653064
LIABILITIES

66
Annexure – 2
Statement of Profit and Loss account

2016 2017 2018 2019 2020

REVENUE/ INCOME
Revenue from Operations 446846 456396 447100 480298 503877
Other Operating Income - 4082 - 940 193
Other Income 27715 25700 24796 25686 24766
Total 474561 486718 471896 506924 528836
EXPENSES
Cost of Materials Consumed 2 - - - -
Purchase of Stock-in-trade 26555 21869 14696 11420 7983
Changes in Inventories of finished (531) 1640 577 (553) 1599
goods, work in progress and stock-in-
trade.
Employee Benefit Expenses 213797 218544 217562 238085 261718
Finance cost 5278 3921 3843 5249 5352
Depreciation and amortization 8688 10477 10148 9343 11411
expenses
Sub-contracting / technical fees / third - - 78623 89225 87918
party application
Travel - - 14607 15005 15373
Facility Expenses - - 13397 14598 13925
Communication - - 4136 3698 3784
Legal and Professional Charges - - 3078 2525 2784
Marketing and Brand Building - - 2596 2304 2227
Other Expenses 115951 122856 8290 17320 4685
Total Expenses 369740 379307 371553 408219 418759
Profit before Tax 104821 106871 100343 98705 110077
Tax Expenses
Current Tax 24523 24304 24345 22725 22067
Deferred Tax (692) 950 (1230) (160) 1203
Total Tax Expenses 23831 25254 23115 22565 23270
Profit for the Year 80990 81617 77228 76140 86807
Other Comprehensive Income (OCI)
Items that will not be reclassified to
profit or loss:
Defined benefit plan actuarial - 191 746 169 (869)
gains/(losses)
Net Change in Fair Value of financial - (183) (1760) (1473) (91)
instruments through OCI
Income tax relating to items that will - (28) 160 34 193
not be reclassified to profit or loss

67
Items that will be reclassified to
profit or loss:
Net change in time value of option - 1787 2 579 (649)
contracts designated as cash flow
hedges
Net change in intrinsic value of option - 9 (95) 1014 (1941)
contracts designated as cash flow
hedges
Net change in fair value of forward - 77 (7368) 1567 (3309)
contracts designated as cash flow
hedges
Net change in fair value of Financial - 4872 (663) (8) 1015
Instruments through OCI
Income tax relating to items that will - (1571) 1678 (636) 1367
be reclassified to profit or loss
Total Other Comprehensive (loss)/ - 5154 (7300) 1246 (4284)
income for the year, net of taxes
Total Comprehensive income for the - 86771 69928 77386 82523
year
Earnings per Equity share
Basic 32.97 33.61 16.26 12.67 14.88
Diluted 32.91 33.51 16.23 12.64 14.84
Number of shares
Basic - 2428540 4750043 600737 583338
505 400 6837 4018
Diluted - 2435673 4758361 602230 584782
569 975 4367 3239

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69