CHAPTER – I

INTRODUCTION AND DESIGN OF THE STUDY

1.1 INTRODUCTION

Every business has got its own objectives and has different styles to run
effectively. But the objectives and styles would obviously lead to some results which may be
satisfactory or unsatisfactory.

Financial performance is a subjective measure of how well a firm can use

assets from its primary mode of business and generate revenues. The term is also used as a
general measure of a firm's overall financial health over a given period. Analysts and
investors use financial performance to compare similar firms across the same industry or to
compare industries or sectors in aggregate.

Finance is an integral aspect of every business. The success of an organisation

depends on how competently the firm is managing the funds available to them. The topic for
the project is a “Study on the Financial Analysis of Tata Consultancy Service”. There are
many stakeholders in a company, including trade creditors, bondholders, investors,
employees and management.

Each group has its own interest in tracking the financial performance of a
company. Understanding financial performance is essential for every organization because
most of the organization’s crucial decision depend on the financials. Understanding financial
performance is necessary because they may help in the decision making process of the
company.

Financial performance analysis is the process of determining the operating and

financial characteristics of a firm from accounting and financial statement .the goal of such
analysis is to determine the efficiency and performance of firm’s management, as reflected in
the financial records and reports.

The study on financial performance of the company is by using ratio analysis,

trend analysis and comparative statements to assess the solvency, liquidity, and profitability
of the selected company.

1
 Ratio analysis is a quantitative method of gaining insight into a company’s
liquidity, operational efficiency, and profitability by studying its financial statement such as
balance sheet and income statement.

A comparative statement is a document used to compare a particular financial

statement with prior period statements. Previous financials are presented alongside the latest
figures in side by side columns, enabling investors to identify trends, track a company’s
progress and compare it with industry rivals.

There are many ways to measure financial performance, but all measures should
be taken in aggregate. Line items, such as revenue from operations, operating income, or cash
flow from operations can be used, as well as total unit sales. Furthermore, the analyst or
investor may wish to look deeper into financial statements and seek out margin growth rates
or any declining debt. Six Sigma methods focus on this aspect.

The balance sheet is a snapshot of the finances of an organization as of a

particular date. It provides an overview of how well the company manages its assets and
liabilities. Analysts can find information about long-term vs. short-term debt on the balance
sheet. They can also find information about what kind of assets the company owns and what
percentage of assets are financed with liabilities vs. stockholders' equity.

Financial performance indicators, also known as key performance

indicators (KPIs), are quantifiable measurements used to determine, track, and project the
economic well-being of a business. They act as tools for both corporate insiders (like
management and board members) and outsiders (like research analysts and investors) to
analyse how well the company is doing especially in regard to competitors and identify
where strengths and weaknesses lie.

2
1.2 STATEMENT OF PROBLEM

The effectiveness of the financial performance involves decision making in

the organisation with the help of various analytical tools to recognize the profitability,
solvency and liquidity position and to check whether the organization is in the position to
meet their obligations in properly and timely manner. Here the problem is to study about the
financial performance of Tata Consultancy Service.

3
1.3 SCOPE OF THE STUDY

The study was conducted in Tata Consultancy Service to analyse the

effectiveness of the financial performance of the company during the last five years ranging
from 2016-2017 to 2020-2021 to have a clear and a proper outline regarding the financial
aspects of the organisation by using various analysis tools.

The balance sheet which summarize what a firm owns and owes at a point
in time. The income statement, which reports in how much a firm earned in the period of
analysis. The statement of cash flows, which reports on cash inflows and outflows to the firm
during the period of analysis.

Financial statement analysis is a judgemental process which aims to

estimate current and past financial positions and the result of an enterprise, with primary
objective of determining the best possible estimates and predictions about the future
conditions.

4
1.4 OBJECTIVE OF THE STUDY

 To analyse the financial performance of the Tata Consultancy Service.

 To gain practical knowledge in financial analysis.
 To assess the liquidity position of the company.
 To know the short term as well as long term solvency position of the firm.
 To assess the profitability of the company

5
1.5 RESEARCH METHODOLOGY

NATURE OF STUDY

This is an analytical study.

PERIOD OF STUDY

The period of the last five financial years from 2017-2018 to 2021-2022 has been
adopted as the study period.

DATA SOURCE

The study is based on secondary data which have been collected from Profit and Loss
Account, and Balance Sheet of TATA CONSULTANCY SERVICE.

Data in the study are of two types

 Primary data
 Secondary data

PRIMARY DATA

Primary data refers to the first hand data that is acquired by the researcher from the
respondent. These data are considerably accurate and the dependency is more on the primary
data as compared to the primary data.

SECONDARY DATA

Secondary data is the information that is acquired from the source of data which was
already be collected by someone or it may be available easily in the market.

6
1.6 SAMPLE DESIGN

1.6.1 Size of sample

The sample size is limited to one company. The company is Tata Consultancy
Service.

1.7 TOOLS OF ANALYSIS

For analysis, the data collected through secondary source especially the
financial statement of the company, statistical tool such as ratio analysis and comparative
balance sheet are used and the results are interpreted using tables, graphs and bar
diagrams.

TOOLS USED FOR THE STUDY

Current Assets

1) Current Ratio = --------------------------

Current Liabilities

Liquid Assets

2) Liquid Ratio = -------------------------

Current Liabilities

Absolute Liquid Assets

3) Absolute Liquidity Ratio = --------------------------------

Current Liabilities

Shareholder’s Fund

4) Proprietary Ratio = -----------------------------

Total Assets

Fixed Assets

5) Fixed Assets Ratio = --------------------------

Long Term Funds

7
 Fixed Assets

6) Capital Gearing Ratio = ----------------------------------------

Equity Shareholder’s

Fund Total Debts

7) Solvency Ratio= -------------------------------

Total Tangible Assets

Gross Profit

8) Gross Profit Ratio ----------------------------------------- X 100

=
Revenue from operations

Net Profit for the period

9) Net Profit Ratio ----------------------------------------- X 100

=
Revenue from operations

Operating Cost

10) Operating Ratio ----------------------------------------- X 100

=
Revenue from operations

Operating Profit

11) Operating Profit Ratio =---------------------------------------------100

Revenue from operations

8
1.8 LIMITATION OF THE STUDY

 Study involves only Information technology Consulting Outsourcing.

 Study is mainly based on secondary data.
 The period of study was 2017-2021 financial years only.
 The whole study was conducted in a period of three months, which is
not sufficient to carry out proper interpretation and analysis.

9
1.9 CHAPTER SCHEME

Chapter I : Introduction
The first chapter deals with Introduction, Statement of the problem
and objectives of the study, Scope of the study, Research methodology used and
Limitations of the study.
Chapter II : Theoretical aspects of ratio analysis
The second chapter deals contains theoretical aspects of ratio
analysis.
Chapter III : Industry profile and company profile
The third chapter consists industry and company profile.
Chapter IV : Data analysis and interpretation
The fourth chapter deals with the analysis and interpretation of the
collected data.
Chapter V : Findings, suggestion and conclusion
The fifth chapter consists the result of the study has been summarized
as findings, suggestions, and conclusion.

10
 CHAPTER II

THEORETICAL ASPECTS OF RATIO ANALYSIS

2.1 CONCEPTUAL REVIEW

Financial statements are prepared to review the state of investment in a business

and result achieved during the specific periods. They reflect recorded facts, accounting
convections and personal judgements. The financial statements are useful and meaningful
only when they are analysed and interpreted. Scientific method has to be adopted to analyse
and interpreted these statements as done in the case of preparation of these statements. The
effort taken to understand the implications of the statements is called analysis. Some people
call it
‟examination, criticism or interpretation‟. Therefore, it is meaningful to call it “analysis and
interpretation” .Kennedy and Muller said “analysis and interpretation of financial statements
are an attempt to determine the significance and meaning of the financial statement data so
that forecast may be made of the prospects for future earnings, ability to pay interest and debt
maturities and probability of a sound dividend policy”.

2.1.1 RATIO ANALYSIS

An analysis of financial statements based on ratios is known as ratio analysis. A

ratio is a mathematical relationship between two or more items taken from the financial
statements. Ratio analysis is the process of computing, determining, and presenting the
relationship of items. It also includes comparison and interpretation of ratios and using them
as basis for the future projections. Ratio analysis is helpful to management and outsiders to
diagnose the financial health of a business concern. It helps in measuring the profitability,
solvency and activity of a firm.

A) LIQUIDITY RATIO

Liquidity refers to the ability of the concern to meet its current obligations as and
when these become due. These ratios measure short term solvency of a firm.

1. Current ratio: The ratio of current assets to current liabilities is called „current ratio‟.
Current ratio indicates the ability of a concern to meet its current obligations as and when
they are due for payment.

11
2. Liquid ratio: This ratio is also called „quick ‟or ‟acid test‟ ratio. It is calculated by
comparing the quick assets with current liabilities.

3. Absolute liquidity ratio: This ratio is also called „super quick ratio‟ or „cash position
ratio‟. This is a variation of quick ratio. This ratio is calculated when liquidity is highly
restricted in terms of cash and cash equivalents.

B) SOLVENCY RATIO

The term solvency means the ability of the firm to pay of its outside liabilities, that
is, its long term and short term. Solvency ratio is also known as long term solvency ratio or
long term liquidity ratio.

1. Proprietary ratio: This ratio compares the shareholders‟ funds or owners‟ funds and total
tangible assets. In other word this ratio expresses the relationship between the proprietor’s
funds and the total tangible assets. This ratio shows the general soundness of the company.

2. Fixed assets ratio: The ratio establishes the relationship between fixed assets and long
term funds. The objective of calculating this ratio is to ascertain the proportion of long term
funds invested in fixed assets.

3. Capital gearing ratio: This ratio is also known as capitalisation or leverage ratio. It is
used to analysis the capital structure of the company. The ratio establishes relationship
between fixed interest and dividend bearing funds and equity shareholders‟ funds.

4. Solvency ratio: It is a ratio which relates the total tangible assets with total borrowed
funds. It is the other side of the coin for proprietary ratio. It is also called as „total debt‟ or
„debt ratio‟.

C) PROFITABILITY RATIOS

Ability to make maximum profit from optimum utilisation of resources by a business

concern is termed as “profitability”. Profit is an absolute measure of earning capacity of the
firm.

1. Gross profit ratio: This ratio is also known as gross margin or trading margin ratio. It
indicates the difference between sales and direct costs. It explains the relationship between
gross profit and net sales.

12
2. Net profit ratio: This ratio is also called as net profit to sales ratio. it is a measure of
management’s efficiency in operating the business successfully from the owner’s point of
view.it indicates the return on shareholder’s investments. Higher the ratio better is the
operational efficiency of the business concern.

3. Operating ratio: This ratio indicates the relationship between total operating expenses and
sales. Operating ratio measures the amount of expenditure incurred in production sales and
distribution of output.it indicates the operational efficiency of the concern.

4. Operating profit ratio: It is the ratio of profit made from the operating sources to the
sales, usually shown as a percentage. It shows the operational efficiency of the firm and is a
measure of the management’s efficiency in running the routine operations of the firm.

13
 CHAPTER III

INDUSTRY PROFILE AND COMPANY PROFILE

3.1 INDUSTRY PROFILE

In management, information technology consulting (also called IT

consulting, computer consultancy, business and technology services, computing
consultancy, technology consulting, and IT advisory) is a field of activity which focuses on
advising organizations on how best to use information technology (IT) in achieving
their business objectives.

Once a business owner defines the needs to take a business to the next level, a
decision maker will define a scope, cost and a time frame of the project. The role of the IT
consultancy company is to support and nurture the company from the very beginning of the
project until the end, and deliver the project not only in the scope, time and cost but also with
complete customer satisfaction.

Since IT-consultants are involved in projects that often have a legitimate impact on
business performance, they are invariably involved in the practice of cybernetics.

Cybernetics is a wide-ranging field concerned with regulatory and

purposive systems. The core concept of cybernetics is circular causality or feedback where
the observed outcomes of actions are taken as inputs for further action in ways that support
the pursuit and maintenance of particular conditions, or their disruption.

Cybernetics is named after an example of circular causality, that of steering a

ship, where the helmsperson maintains a steady course in a changing environment by
adjusting their steering in continual response to the effect it is observed as having.

Other examples of circular causal feedback include: technological devices such as

thermostats (where the action of a heater responds to measured changes in temperature,
regulating the temperature of the room within a set range); biological examples such as the
coordination of volitional movement through the nervous system; and processes of social
interaction such as conversation.

14
 Cybernetics is concerned with feedback processes such as steering however they
are embodied, including in ecological, technological, biological, cognitive, and social systems,
and in the context of practical activities such as designing, learning, managing, conversation,
and the practice of cybernetics itself.

Cybernetics "trans-disciplinary and anti-disciplinary" character has meant that it

intersects with a number of other fields, leading to it having both wide influence and diverse
interpretations.

15
3.2 COMPANY PROFILE

Tata Consultancy Services (TCS) is an Indian multinational information

technology (IT) services and consulting company headquartered in Mumbai. It is a part of
the Tata Group and operates in 149 locations across 46 countries.

TCS is the second largest Indian company by market capitalisation and is among
the most valuable IT services brands worldwide. In 2015, TCS was ranked 64th overall
in the Forbes World's Most Innovative Companies ranking, making it both the highest-ranked
IT services company and the top Indian company. As of 2018, it is ranked eleventh on the
Fortune India 500 list. In April 2018, TCS became the first Indian IT company to reach $100
billion in market capitalisation and second Indian company ever (after Reliance Industries
achieved it in 2007) after its market capitalisation stood at ₹6.793 trillion (equivalent to ₹7.7
trillion or US$100 billion in 2020) on the Bombay Stock Exchange.

In 2016–2017, parent company Tata Sons owned 72.05% of TCS and more than
70% of Tata Sons' dividends were generated by TCS. In March 2018, Tata Sons sold stocks
of TCS worth $1.25 billion in a bulk deal. As of 15 September 2021, TCS has recorded a
market capitalisation of US$200 billion, making it the first Indian IT firm to do so.

Tata Consultancy Services Limited, initially started as "Tata Computer Systems"

was founded in 1968 by division of Tata Sons Limited. Its early contracts included
punched card services to sister company TISCO (now Tata Steel), working on an Inter-
Branch Reconciliation System for the Central Bank of India, and providing bureau services to
Unit Trust of India.

In 1975, TCS delivered an electronic depository and trading system called SECOM
for Swiss company SIS Sega Inter Settle; it also developed System X for the Canadian
Depository System and automated the Johannesburg Stock Exchange. TCS associated with a
Swiss partner, TKS Teknosoft, which it later acquired.

In 1980, TCS established India's first dedicated software research and development
centre, the Tata Research Development and Design Centre (TRDDC) in Pune. In 1981, it

16
established India's first client-dedicated offshore development centre, set up for
clients Tandem. TCS later (1993) partnered with Canada-based software factory Integrity
Software Corp, which TCS later acquired.

In anticipation of the Y2K bug and the launch of a unified European currency (Euro),
Tata Consultancy Services created the factory model for Y2K conversion and
developed software tools which automated the conversion process and enabled third-party
developer and client implementation. Towards the end of 1999, TCS decided to offer
Decision Support System (DSS) in the domestic market under its Corporate Vice President
and Transformation Head Subbu Iyer.

TCS’ subsidiaries as on March 31, 2022 include the following:

 TCS Foundation
 APT Online Limited
 MP Online Limited
 TCS e-Serve International Limited
 C-Edge Technologies Limited
 Maha Online Limited
 Tata Consultancy Services (Thailand) Limited
 Tata Consultancy Services (Philippines) Inc.
 Tata Consultancy Services Asia Pacific Pte. Ltd.
 Tata Consultancy Services Malaysia Sdn. Bhd.
 Tata Consultancy Services (China) Co., Ltd.
 PT Tata Consultancy Services Indonesia
 Tata Consultancy Services Japan, Ltd.
 TCS FNS Pty Limited
 TCS Financial Solution Australia Pty Limited
 TCS Financial Solutions Beijing Co. Ltd.
 Tata Consultancy Services (South Africa) (PTY) Limited
 Tata Consultancy Services (Africa) (PTY) Limited
 Tata Consultancy Services Saudi Arabia

17
 Tata Consultancy Services Qatar L.L.C.
 Tata Consultancy Services Netherlands B.V.
 Tata Consultancy Services Deutschland GmbH
 Tata Consultancy Services Switzerland Ltd
 Tata Consultancy Services France (formerly known as Tata Consultancy
Services France SA)
 Tata Consultancy Services Sverige AB
 Tata Consultancy Services Belgium
 TCS Italia s.r.l.
 Tata Consultancy Services Luxembourg S.A.
 Tata Consultancy Services Österreich GmbH
 Tata Consultancy Services Danmark ApS
 Tata Consultancy Services De Espana, S.A.
 Tata Consultancy Services (Portugal), Unipessoal, Limitada
 Diligenta Limited
 Tata Consultancy Services UK Limited (formerly known as W12 Studios Limited)
 Tata America International Corporation
 Tata Consultancy Services Canada Inc.
 TCS Iberoamerica SA
 TCS Solution Center S.A.
 Tata Consultancy Services Do Brasil Ltda
 Tata Consultancy Services De México S.A., De C.V.
 TCS Uruguay S.A.
 Tata Consultancy Services Chile S.A.
 Tata Consultancy Services Argentina S.A.
 TATASOLUTION CENTER S.A.
 TCS Inversiones Chile Limitada
 MGDC S.C.
 TCS Business Services GmbH
 Tata Consultancy Services Ireland Limited

18
  TCS Technology Solutions AG (formerly known as Postbank Systems AG)
 Saudi Desert Rose Holding B.V (Became subsidiary w.e.f. May 26, 2021)
 Tata Consultancy Services Bulgaria EOOD (became subsidiary w.e.f August
31, 2021)
 Tata Consultancy Services Guatemala S.A (became subsidiary w.e.f September 01,
2021)

MISSION

To decouple business growth and ecological footprint from its operations to address the
environment bottom-line.

The green approach is embedded in our internal processes and services offerings.

VISION

To help customers achieve their business objectives by providing innovative, best-in-

class consulting, IT solutions and services.

To make it a joy for all stakeholders to work with us.

19
 CHAPTER IV

DATA ANALYSIS AND INTERPRETATION

4.1 DATA ANALYSIS

Data analysis is a process of inspecting, cleansing, transforming, and modelling

data with the goal of discovering useful information, informing conclusions, and supporting
decision making. Data analysis has multiple facets and approaches, encompassing diverse
techniques under a variety of names, and is used in different business, science, and social
science domains. In today’s business world, data analysis plays a role in making decisions
more scientific and helping businesses operate more effectively. Although many groups,
organizations, and experts have different ways to approach data analysis, most of them can be
distilled into a one size fits all definition. Data analysis is the process of cleaning, changing,
and processing raw data, and extracting actionable, relevant information that helps businesses
make informed decisions. The procedure helps reduce the risks inherent in decision making
by providing useful insights and statistics, often presented in charts, images, tables, and
graphs.

20
1) LIQUIDITY RATIO

TABLE - 4.1

CURRENT RATIO

Current Assets

Current Ratio = --------------------------

Current Liabilities

YEAR CURRENT CURRENT CURRENT RATIO

ASSETS LIABILITIES
2021-2022 1,08,310 42,351 2.56:1
2020-2021 99,280 34,155 2.91:1
2019-2020 90,237 22,060 4.09:1
2018-2019 92,131 22,084 4.17:1
2017-2018 81,224 17,828 4.56:1
Source: Annual Reports

INTERPRETATION

The table 4.1 shows current ratio of five years 2017-2018 to 2021-2022. The current
ratio of 2:1 is said to be an ideal one. The table shows that the current ratio of the company
varied from 4.56 to 2.56. The current ratio in the year 2017-2018 is 4.56 which came down
to
2.56 in the year 2021-2022 .This shows utilization of idle funds in the company.

21
 CHART - 4.1

CURRENT RATIO

CURRENT RATIO
5
4.56
4.5 4.17
4.09
4

3.5
2.91
3
2.56
2.5

1.5

0.5

0
2021-2022 2020-2021 2019-2020 2018-2019 2017-2018

CURRENT RATIO

22
 TABLE - 4.2

LIQUID RATIO

Liquid Assets

Liquid Ratio = -------------------------

Current Liabilities

YEAR LIQUID ASSETS CURRENT CURRENT RATIO

LIABILITIES
2021-2022 1,08,290 42,351 2.56:1
2020-2021 99,272 34,155 2.91:1
2019-2020 90,232 22,060 4.09:1
2018-2019 92,121 22,084 4.17:1
2017-2018 81,198 17,828 4.55:1
Source: Annual Reports

INTERPRETATION

The table 4.2 shows liquid ratio of five years 2017-2018 to 2021-2022. Generally,
liquid ratio of 1:1 is considered as satisfactory. The table shows that the liquid ratios of the
company in the past five years are above satisfactory ratio. The table shows that the liquid
ratio of the company varied from 4.55 to 2.56. It further means that, the company is able to
pay off its current liabilities.

23
 CHART - 4.2

LIQUID RATIO

LIQUID RATIO
5
4.55
4.5 4.09 4.17
4
3.5

2.91
3
2.56
2.5
2
1.5
1
0.5
0

2021-2022 2020-2021 2019-2020 2018-2019 2017-2018

LIQUID RATIO

24
 TABLE - 4.3

ABSOLUTE LIQUID RATIO

Absolute Liquid Assets

Absolute Liquidity Ratio = --------------------------------

Current Liabilities

YEAR ABSOLUTE CURRENT ABSOLUTE

LIQUID ASSETS LIABILITIES LIQUID RATIO
2021-2022 18,221 42,351 0.43:1
2020-2021 9,329 34,155 0.27:1
2019-2020 9,666 22,060 0.36:1
2018-2019 12,848 22,084 0.58:1
2017-2018 7,161 17,828 0.40:1
Source: Annual Reports

INTERPRETATION

The table 4.3 shows absolute liquidity ratio of five years 2017-2018 to 2021-
2022. The acceptable norm of absolute liquidity ratio is 0.5:1. Company’s absolute liquidity
ratio shall be half of current liabilities. Here, the company shows a decreasing absolute
liquidity ratio. It is not satisfactory because it is less than the ideal ratio of the absolute
liquidity ratio except at the year 2018-2019 has 0.58 which is higher than the ideal ratio of the
absolute liquidity ratio.

25
 CHART - 4.3

ABSOLUTE LIQUID RATIO

ABSOLUTE LIQUID RATIO

0.7

0.58
0.6

0.5
0.43
0.4
0.4 0.36

0.3 0.27

0.2

0.1

0
2021-2022 2020-2021 2019-2020 2018-2019 2017-2018

ABSOLUTE LIQUID RATIO

26
2) SOLVENCY RATIO

TABLE - 4.4

PROPRIETARY RATIO

Shareholder’s Fund

Proprietary Ratio = -----------------------------

Total Assets

YEAR SHAREHOLDER’S TOTAL ASSETS PROPRIETARY

FUND RATIO
2021-2022 89,139 1,41,514 0.63:1
2020-2021 86,433 1,30,759 0.66:1
2019-2020 84,126 1,20,899 0.69:1
2018-2019 89,446 1,14,943 0.78:1
2017-2018 85,128 1,06,296 0.80:1
Source: Annual Reports

INTERPRETATION

The table 4.4 shows proprietary ratio of five years 2017-2018 to 2021-2022. A ratio
of 0.5:1 or above is considered as satisfactory. The table shows that the proprietary ratios of
the company in the past five years are above satisfactory ratio, which indicates safety to the
creditors and more of shareholder’s fund in the total assets of the company. Therefore, the
company’s financial position for the last five years is sound.

27
 CHART - 4.4

PROPRIETARY RATIO

PROPRIETARY RATIO
0.9
0.8 0.78 0.8

0.69
0.7 0.66
0.63
0.6
0.5
0.4
0.3
0.2
0.1
0

2021-2022 2020-2021 2019-2020 2018-2019 2017-2018

PROPRIETARY RATIO

28
 TABLE - 4.5

FIXED ASSETS RATIO

Fixed Assets

Fixed Assets Ratio = --------------------------

Long Term Funds

Long term funds = share capital +reserves and surplus + long term liabilities

YEAR FIXED ASSETS LONG TERM FIXED ASSETS

FUNDS RATIO
2021-2022 20,716 89,139 0.23:1
2020-2021 20,149 86,433 0.23:1
2019-2020 20,124 84,126 0.24:1
2018-2019 11,553 89,490 0.13:1
2017-2018 11,506 85,182 0.14:1
Source: Annual Reports

INTERPRETATION

The table 4.5 shows fixed assets ratio of five years 2017-2018 TO 2021-2022. This
ratio should not generally be more than 1. In the year 2017-2018 the ratio is 0.14 which
decreases to 0.13 in the year 2018-2019 after increased to 0.24 in the year 2019-2020 and
decreased to
0.23 in both years of 2020-2021 & 2021-2022, even it is lower when compared to the
standard rate. This indicates that a portion of working capital has been financed by long term
funds.

29
 CHART - 4.5

FIXED ASSETS RATIO

FIXED ASSETS RATIO

0.3

0.25 0.24
0.23 0.23

0.2

0.15 0.14
0.13

0.1

0.05

2021-2022 2020-2021 2019-2020 2018-2019 2017-2018

FIXED ASSETS RATIO

30
 TABLE - 4.6

CAPITAL GEARING RATIO

Fixed Assets

Capital Gearing Ratio = ----------------------------------------

Equity Shareholder’s Fund

YEAR FIXED ASSETS EQUITY SHAREHOLDER’S CAPITAL

FUND GEARING RATIO

2021-2022 20,716 366 56.60:1

2020-2021 20,149 370 54.45:1
2019-2020 20,124 375 53.66:1
2018-2019 11,553 375 30.81:1
2017-2018 11,506 191 60.24:1
Source: Annual Reports

INTERPRETATION

The table 4.6 shows capital gearing ratio of five years 2017-2018 to 2021-2022. In
the year 2017- 2018 the ratio is around 60.24 which gradually decreased to 56.60 in the year
2021- 2022. Here the company shows higher ratio than the standard ratio which is 1:1. This
indicates that the company is highly geared.

31
 CHART - 4.6

CAPITAL GEARING RATIO

CAPITAL GEARING RATIO

70
60.24
60 56.6
54.45 53.66

50

40
30.81

30

20

10

0
2021-2022 2020-2021 2019-2020 2018-2019 2017-2018

CAPITAL GEARING RATIO

32
 TABLE - 4.7

SOLVENCY

RATIO

Total Debts

Solvency Ratio= ------------------------------

Total Tangible Assets

Total debts = long term borrowings +current liabilities

YEAR TOTAL DEBTS TOTAL TANGIBLE SOLVENCY

ASSETS RATIO
2021-2022 42,662 20,716 2.06:1
2020-2021 34,184 18,743 1.82:1
2019-2020 22,089 18,935 1.17:1
2018-2019 22,144 10,411 2.13:1
2017-2018 19,803 10,216 1.94:1
Source: Annual Reports

INTERPRETATION

The table 4.7 shows solvency ratio of five years 2017-2018 to 2021-2022. If the ratio
is more than one it is treated as satisfactory. Here, in the year 2019-2020 the ratio is 1.17
which is lower when comparing with other years solvency ratio. Thus the company shows
higher ratio than the satisfactory ratio which indicates the solvency and financial position are
strong. And in the creditor’s point of view, it shows a greater margin of safety to them.

33
 CHART - 4.7

SOLVENCY

RATIO

SOLVENCY RATIO
2.5
2.13
2.06
1.94
2 1.82

1.5
1.17

0.5

0
2021-2022 2020-2021 2019-2020 2018-2019 2017-2018

SOLVENCY RATIO

34
3) PROFITABILITY RATIO

TABLE - 4.8

GROSS PROFIT RATIO

Gross Profit

Gross Profit Ratio ----------------------------------------- X 100

=
Revenue from operations

YEAR GROSS PROFIT REVENUE FROM GROSS PROFIT

OPERATION RATIO
2021-2022 1,95,772 1,91,772 102.09%
2020-2021 1,67,311 1,64,177 101.91%
2019-2020 1,61,541 1,56,949 102.92%
2018-2019 1,50,774 1,46,463 102.94%
2017-2018 1,26,660 1,23,104 102.88%
Source: Annual Reports

INTERPRETATION

The table 4.8 shows gross profit ratio of five years 2017-2018 to 2021-2022. There is
no norm to interpret gross profit ratio. Generally, a higher ratio is considered better. Here, the
company has higher gross profit ratio.

35
 CHART - 4.8

GROSS PROFIT RATIO

Gross Profit Ratio

103.2
103 102.92 102.94
102.88
102.8
102.6
102.4
102.2
Percenta

102
102.09
101.8
101.91
101.6
101.4

101.2
2021-2022 2020-2021 2019-2020 2018-2019 2017-2018

Gross Profit Ratio

36
 TABLE - 4.9

NET PROFIT RATIO

Net Profit for the period

Net Profit Ratio ----------------------------------------- X 100

=
Revenue from operations

YEAR NET PROFIT FOR REVENUE FROM NET PROFIT

THE PERIOD OPERATION RATIO

2021-2022 38,449 1,91,772 20%
2020-2021 32,562 1,64,177 19.8%
2019-2020 32,447 1,56,949 20.6%
2018-2019 31,562 1,46,463 21.5%
2017-2018 25,880 1,23,104 21%
Source: Annual Reports

INTERPRETATION

The table 4.9 shows net profit ratio of five years 2017-2018 to 2021-2022.
Generally, the ideal net profit ratio is 10%. The table shows that the Net profit ratio of the
company in the past five years are above satisfactory, which indicates safety to the creditors
and more of shareholders. Therefore, the company’s financial position for the last five years
is sound.

37
 CHART- 4.9

NET PROFIT RATIO

Net Profit Ratio

22%
21.50%
22%
21% 21%
21%
20.60%
21%

20% 19.80%

20%

19%

19%
2021-2022 2020-2021 2019-2020 2018-2019 2017-2018

Net Profit Ratio

38
 TABLE - 4.10

OPERATING RATIO

Operating Cost

Operating Ratio ----------------------------------------- X 100

=
Revenue from operations

YEAR OPERATING COST REVENUE FROM OPERATING

OPERATION RATIO
2021-2022 1,07,554 1,91,772 56.08%
2020-2021 93,276 1,64,177 56.81%
2019-2020 87,857 1,56,949 55.97%
2018-2019 80,516 1,46,463 54.97%
2017-2018 69,010 1,23,104 56.05%
Source: Annual Reports

INTERPRETATION

The table 4.10 shows operating ratio of five years 2017-2018 to 2021-2022. In the
year 2017-2018 has the ratio of 56.05% which declines to 54.97% in the year 2018-2019 and
increases to 56.08% in the year 2021-2022.The ideal ratio of operating ratio is 60% to 80%.
Although, the lower it is, the better. Here, the company has lower ratio, which indicates that
the expenses are decreasing. This is a positive sign for the company.

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 CHART - 4.10

OPERATING RATIO

Operating Ratio
56.81
57

56.5
56.08 56.05
55.97
56
Percenta

55.5

54.97
55

54.5

54

2021-2022 2020-2021 2019-2020 2018-2019 2017-2018

Operating Ratio

40
 TABLE - 4.11

OPERATING PROFIT RATIO

Operating Profit

Operating Profit Ratio =----------------------------------------------100

Revenue from operations

YEAR OPERATING REVENUE FROM OPERATING PROFIT

PROFIT
OPERATION RATIO
2021-2022 51,687 1,91,772 26.95%
2020-2021 43,760 1,64,177 26.65%
2019-2020 42,248 1,56,949 26.92%
2018-2019 41,563 1,46,463 28.38%
2017-2018 34,092 1,23,104 27.69%
Source: Annual Reports

INTERPRETATION

The table 4.11 shows operating profit ratio of five years 2017-2018 to 2021-
2022. An operating profit ratio higher than 15% is considered good. The company has higher
ratio for the past five years, especially in the year 2018-2019, the ratio is 28.38%. It indicates
that the company is earning enough money from business operations to pay for all of the
associated costs involved in maintaining the business.

41
 CHART - 4.11

OPERATING PROFIT RATIO

Operating Profit Ratio

29

28.5 28.38

28
27.69
Percenta

27.5
26.95 26.92
27
26.65
26.5

26

25.5
2021-2022 2020-2021 2019-2020 2018-2019 2017-2018

Operating Profit Ratio

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 CHAPTER V

FINDINGS, SUGGESTIONS AND CONCLUSIONS

5.1 FINDINGS

 Current ratio is above the ideal ratio and in the year 2017-2018 has the highest ratio of
4.56:1.

 The liquid ratios of the company in the past five years are above satisfactory ratio and
in the years 2019-2020 and 2017-2018 have the ratio of 4.09 and 4.55.

 Absolute liquidity ratio is not satisfactory because it is less than the ideal ratio except
at the year 2018-2019 which have the ratio of 0.58:1.

 Proprietary ratio of the company is above the ideal ratio. It indicates safety to the
creditors and more of shareholder’s fund in the total assets of the company.

 Fixed assets ratio of the company is lower than the ideal ratio. But the company’s
fixed assets ratio has been gradually increased to 0.24:1 in the year 2019-2020 even it
is lower when compared to ideal ratio.

 Capital gearing ratio of the company shows higher ratio than the standard ratio. This
indicates that the company’s equity capital is less than its fixed income earing funds.

 Solvency ratio of the company is more than the ideal ratio which indicates the
solvency and financial position are strong in the company.

 Gross profit ratio of the company is better because the gross profit ratio is more than
100% in the past five years.

 The company is succeed to attain the ideal ratio of net profit ratio which means the
company shows higher return to the shareholders of the company.

43
 The company has lower operating ratio which indicates that the expenses are
decreasing. This is a positive sign for the company.

 The company has higher operating profit ratio for the past five years. It indicates that
the company is earning enough money from business operations to pay for all of the
costs involved in maintaining the business.

44
5.2 SUGGESTIONS

 The company has to improve its usage of outsiders fund to manage their earnings.

 The company can increase their net margin by increasing revenues, such as through
selling more goods or services or by increasing prices.

 The company may increase its liquidity position through investing in readily
marketable securities there by maintaining sufficient working capital.

 The company’s share capital is constant for the past two years. They have to improve
its share capital by improving the net earnings.

45
5.3 CONCLUSIONS

The study highlights the financial analysis of Tata Consultancy Service is

satisfactory. To conclude, Tata Consultancy Service company has shown its impact on
industry. This study helped to know the financial strength and weakness of the company. The
financial statement of the company was analysed and interpreted with the help of balance
sheet and profit & loss account of last five years 2017-2018 to 2021-2022. Looking at all five
years, 2021-2022 is considered the best financial year in the researched years, as it also
improved its profitability in the year 2021-2022. The company has a scope of improvement in
the future.

46
 BIBLIOGRAPHY

REFERENCE:

 T.S.Reddy & Dr.Y.Hariprasad Reddy management accounting. Margham

Publications.
 Harini M, project on “A Study on the Financial Analysis of INFOSYS Ltd”.
 E.Gayathiri, project on “Working Capital Analysis of Mahindra and
Mahindra Limited”.

WEBSITES:

 https://en.wikipedia.org/wiki/Tata_Consultancy_Services
 https://en.wikipedia.org/wiki/Information_technology_consulting
 https://www.moneycontrol.com/financials/tataconsultancyservices/balance-
sheetVI/TCS
 https://www.tcs.com/subsidiaries

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