A Comparative study on the Financial

Position of TCS and Wipro ltd.

A Project Report submitted in Partial Fulfilment to the requirement for the

degree of

B.COM HONOURS

To the Department of Commerce

The Bhopal School of Social Sciences

April 2021

Submitted by: - Submitted To:-

Neeti Shrivastava Dr. Rasmeet Kaur Malhi
B.com (Honours) 3rd year

1
 Certificate
It is certified that the work contained in the project report titled, “a comparative
study on the financial position of TCS and Wipro ltd” by Neeti Shrivastava, has
been carried out under my supervision and that the work has not been submitted
somewhere else for a degree.

Signature:

2
 Declaration

I hereby declare that this project report entitled “A comparative study on financial statements of
TCS and Wipro ltd” was carried out by me for the degree of B.com (Honours) under the guidance
and supervision of Dr. Rasmeet Kaur Malhi of Department of Management. BSSS College the
interpretation put forth are based on my readings and understanding of the original texts and they
are not published anywhere in any form. The other books, articles and websites, which I have made
used of are acknowledged at the respective place in the text. This research report is not submitted
for any other degree or diploma in any other university.

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 Acknowledgment

I would like to take this opportunity to thank Dr. Rasmeet Kaur Malhi (Teacher guide) to have
provided me with such a great opportunity to work on this research project. She guided us in
preparation of the project and every time we reached with our difficulties, she welcomed them
which helped us to successfully complete our project. And lastly I would like to thank you my
family and friends who supported me in this project.

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 Chapter-1
Introduction

1.1 Rationale of study

1.2 Introduction to IT Industry
1.3 Introduction to TCS
1.4 Justification of study

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1.1Rationale of the study
Financial analysis nowadays is an important instrument for the critical review of the performance
of a business. It helps the concern to analyze the financial data and provide information which is
required to take decisions regarding investments and also help to understand financial position
better. The financial analysis portrays the financial health of a company and helps the companies
to improve their financial resources and manage generated funds efficiently.

1.2Introduction to the industry

IT services in India was established in Mumbai in 1967 with the creation of TATA Consultancy
services who was partnered with Burroughs in 1977 which beggar export of IT services. IT
industry consist of two components i.e. IT services and business process outsourcing. This sector
is consist of software development consultancies, software management online services and
BPO.IT industry achieved its breakthrough from 1990’s and it is one of the important industries
in India. The main reason for rapid development of IT industry is the vast reservoir of technically
skilled manpower which has transformed India into software super power.

According to an article in the Times of India, India's liberalization was possible due to its IT
industry. In the 1990s, the industry started off with an export of nearly $100 million with around
5,000 employees. Now it is an industry that thrives globally and India's IT exports are now around
$70 billion with 2.8 million employees working in this sector. The article states that the IT sector
is one of the top two industries in the country today. (wikipedia, n.d.)

6
The sector has increased its contribution to India's GDP from 1.2% in 1998 to 7.7% in
2017. According to NASSCOM, the sector aggregated revenues of US$180 billion in 2019, with
export revenue standing at US$99 billion and domestic revenue at US$48 billion, growing by over
13%. As of 2020, India's IT workforce accounts for 4.36 million employees. The United
States accounts for two-thirds of India's IT services exports. (wikipedia, n.d.)

India’s IT industry is expected to grow at a rate of 12-14% during 2016-2017 as per a report by
India’s software industry body national association of software and services companies (wikipedia,
n.d.).This severely states that information technology is a sector which will make an appearance
in the coming days as India’s economy require more hardware software and IT services. One of
the biggest benefit of IT industry is the employment it can generate in India. There are many other
benefits like export and foreign direct Investments (FDI). IT industry is not limited to only software
development. Technology is used in libraries, hospitals, banks, shops, airports and many more
other places through database. Management systems. Among other sectors, IT sector in India is
driving growth for the last decade and more, India is now a major destination for IT outsourcing.
The top IT companies that offer job opportunities in India are TCS, Wipro Technologies,
Cognizant Yahoo, Google, Tech Mahindra, Infosys Technologies and many more.

1.3Introduction of the companies

Tata Consultancy Services is a multinational technology company which has its specialty in IT
services and consulting its headquarters in Mumbai Maharashtra India. TCS is the largest IT sector
company in the world by its market capitalization of $169.2 billion. It is established in 1968, it
was founded by Jamsethji Tata 1848 and it is the India’s most reverence institutions today.

TCS is one of the largest employers of women with 35.3% of women employees. TCS became the
first Indian IT company to reach $100 billion market capitalization with a value of $102.6 billion
in Bombay Stock Exchange and a second Indian company ever after the Reliance industries that
achieved the same in 2007. TCS is ranked 10th on the Fortune India 500 list in 2018.It is the
world's 9th largest IT service provider by revenue. TCS is ranked 64th overall in Forbes World's
most innovative company ranking, making it the highest-ranked IT services company ever. In the
latest, TCS, the biggest software services company, has added 12,000 jobs in the first quarter of

7
2019 and sent offer letters to 30,000 fresh graduates building the employment level in the country.
(conduira online, n.d.).

Their mission is to help customer achieve their business objectives by providing innovative, best-
in-class consulting, IT solutions and services.

Tata Consultancy Services (TCS) achieved annual sales of about 1.57 trillion Indian rupees in its
2020 fiscal year, which is the equivalent of around 21 billion U.S. dollars. The annual revenue of
TCS has seen rapid growth in the last seven years: the FY2020 revenue more than doubled that
from the FY2013. ( Statista Research Department, 2021).

TCS continually enhances its human capital by recruiting the best talent which are available in
each of the markets it operates in, TCS providing a supportive and energetic workplace to hold
that talent, TCS invests in up skilling individuals with the newest technology skills, and giving
them career paths matching their ambitions.

The company’s industry-aligned, customer-centric organization structure has resulted in every

commercial enterprise unit acquiring huge area depth, and the account teams within these devices
constructing up great customer-specific contextual knowledge. This domain expertise, contextual
knowledge, task administration experience and technology expertise received on the job represents
a conversion of human capital into intellectual capital.

TCS applies some of its intellectual capital in the direction of investments in research and
innovation, exploring the innovative use of new applied technologies to solve business problems
across different industry verticals. In addition to its own intellectual capital, TCS also companions
with superior technology providers, start-ups and academic researchers to leverage their
intellectual capital and to generate solutions.

Some of the creative software solutions tested by R&I that are evaluated to have a material market
potential are productized, adding to TCS’ large portfolio of products and platforms. These expands
the enterprise, intelligence capital create new revenue streams, adding to the financial capital and
enhance its brand positioning that is relationship capital. TCS uses its intellectual
capital and human assets to build effective, customized technology and business solutions that
address the customer’s business problems. Further, its ability to stitch together complex, integrated
solutions that address the needs of all stakeholders in the enterprise, along with the high levels of

8
trust engendered in customer relationships, helps it win large transformation deals. These deals
bring in high quality revenues, powering industry-leading organic growth and margins, boosting
the company’s financial capital.

These solutions create immense value for our customers by helping them embrace new business
models, pursue new revenue streams, deliver superior customer experiences or build resilience and
efficiency into their operations, and gain competitive differentiation.

TCS constantly invests in building newer capabilities and expanding its offerings. By cross-selling
and up-selling these new offerings, customer engagements continually expand over the years,
covering newer and newer areas of the enterprise’s operations. This further broadens and deepens
the contextual knowledge of customers’ business and IT landscapes, further enhancing
TCS’ intellectual capital. (india education, n.d.)

This combination of business knowledge, contextual knowledge, technology depth, and

intellectual property has become a steadily deepening moat around the company’s business model
and sharpened its differentiated positioning. (tcs, n.d.)

The investments in people, research and innovation, and intellectual property creation are all
charged off and not capitalized. The company’s capital expenditure to support its growth
– manufacturing capital – towards building campuses, agile workspaces, innovation centers, and
Pace Ports is modest relative to its size. (tcs, n.d.)

TCS’ physical operations consume social capital in the form of license to operate in each of the
communities, and natural capital in terms of its environmental footprint. TCS enhances its social
capital with local communities across the world by investing in areas such as education, skill
development, employability, health and wellness, and the environment, mapped to UN
Development Goals. On the environmental front, TCS has a systematic program to reduce its
carbon and resource consumption footprint – including the use of green IT, green buildings,
intelligent energy management using its own IT-based solution and water and waste recycling.
(tcs, n.d.)

TCS’ business model and strategy have resulted in deep and enduring consumer relationships, a
brilliant and engaged workforce, a balanced expansion of its addressable market, a strong
reputation as a responsible corporate citizen and a proven track record in carry longer term

9
stakeholder value. All of this has significantly increased the company’s brand value, which is a
computable measure of its social and relationship capital with stakeholders. Customer-centricity
is at the heart of TCS policy, organization structure and investment decisions. TCS customer-
centric worldview helps spot trends early, embrace business opportunities by making the right
investments and reduce risks while do its social and environmental responsibilities.

TCS invests in broadening and deepening customer relationships by continually looking for new
areas in their value chain where it can add value, proactively investing in building newer
capabilities, reskilling its workforce and launching newer services, solutions, products and
platforms. In addition to the IT budgets, TCS is now benefiting from the departmental budgets of
other stakeholders within the customers’ organizations – business heads, CMOs, CROs, COOs,
CFOs and even CEOs. This has not only embedded TCS deeper into their businesses but has also
resulted in higher quality revenues, stronger revenue growth and enhanced share of wallet, as
evidenced by the client metrics reported every quarter and every year. (tcs, n.d.)

The products and platforms, coupled with business model innovations, represent new, high quality
revenue streams that are growing very fast. At an aggregate level, this strategy has resulted in deep
and enduring customer relationships, and a steady expansion of the addressable market.

Wipro Limited is an Indian multinational corporation that provides information technology,

consulting and business process services. It is headquartered in Bangalore, Karnataka, India. The
company was incorporated on 29 December 1945 in Amalner, Maharashtra by Mohamed Premji
as "Western India Palm Refined Oil Limited", later abbreviated to "Wipro". It was initially set up
as a manufacturer of vegetable and refined oils in Amalner, Maharashtra, British India, under
the trade names of Kisan, Sunflower, and Camel .In 1966, after Mohamed Premji's death, his
son Azim Premji took over Wipro as its chairman at the age of 21. (wikipedia, n.d.)

In the Indian market, Wipro is a leader in providing IT solutions and services for the corporate
segment in India offering system integration, network integration, software solutions and IT
services. Wipro also has profitable presence in niche market segments of consumer products and
lighting. In the Asia Pacific and Middle East markets, Wipro provides IT solutions and services
for global corporations. (NDTV, 2012)

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Wipro ltd contributes 7.5%to India’s GDP in 2012. The sector aggregate revenue of US$31.76
billion and seventh largest IT services firm in the world. To focus on core IT business, it demerged
its non-IT business into a separate company named Wipro Enterprises Limited with effect from
31st March 2013.

Wipro ltd is a leader in providing IT solutions and services for the corporate segment in India
offering system integration, network integration software solutions and IT services, Wipro also
has profitable presence in niche market segments of consumer products and lighting. In the Asia
Pacific and Middle East markets, Wipro provides IT solutions and services for global corporations.

1.4 Justification

This project is an attempt to facilitate the investors and the management to assess the financial
position of a firm from the proprietor’s point of view. In order to identify the financial management
efficiency this paper will analyze management efficiencies shareholders fund in IT companies of
India, especially for TCS and Wipro ltd.

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Chapter: 2

12
Review of literature
2.1 International reviews
2.2 National reviews

Review of literature
According to (Dusan Baran, 2016), their study is to give the knowledge about financial analysis
and business process in the area of activity like liquidity, profitability and indebtness and to know
the strength and opportunities of the companies.

(Adedeji, 2014) This study is done to analyze the ratios of the organization. This study confirms
that there is a relationship between ratio analyze and organizational performance. It states that ratio
highlights the effective management of the organization.

(Kumbhaj, 2014) Analyzed and compared the financial position of TCS and WIPRO Ltd and
found WIPRO is performing better than TCS.

(Singh, 2016) Concluded in his study that Return on Equity of TCS is better than return on equity
of WIPRO and return on investment of TCS is better than the return on investment of WIPRO. He
also analyzed that there is significant difference between ROE and ROI of TCS and ROE and ROI
of WIPRO.

(A.S, 2014) Analyzed that financial position of TCS and concluded that the both short term and
long term liquidity position of TCS is good. The company has managed efficiently its net worth
and total assets was satisfactory.

(Ganesamoorthy, 2017) Conducted to study the profitability of Information Technology (IT)

companies in India. They applied ratios analysis, mean, standard deviation and co-efficient of

13
variation as the tools for analysis. Their study found that profitability in terms of net profit ratio
and operating profit ratio is good in case of three companies and low in case of two companies.

(S. Sabarinathan) The study includes profitability, cost of goods sold and other overall financial
performance of the company. The study has major concentration on ratio analysis from the 5-year
balance sheets and profit and loss A/C. Based on the findings, the study says that it will help the
management to interpret its weaknesses and problems and certainly help the management in taking
financial decisions.

“Financial Performance Analysis of Selected Software Companies”, examined liquidity,

profitability and leverage position of thirty four software companies during the period 1999-1998
to 2001-2002 by using ratios, correlation and multiple regression analysis. The study revealed
favorable liquidity and working capital position. They concluded that the companies rely on the
internal financing and overall profitability position of the software companies showed a
moderately increasing trend. ((Sarangi, 2010)

(Sarangi, 2010) Study analyzed the financial performance of leading software companies like
TCS, Infosys, Wipro and Satyam. The study being an external analyst, had to depend mainly upon
secondary data for the purpose of studying the financing performance of software Industries in
India from the top 10 software companies in India which is enlisted by NASSCOM, the four
selected companies for the study are Tata Consultancy, Wipro ltd, Infosys ltd, and Satyam
Computer Service. The data and information required for the study have been collected mostly from the
annual reports of the unit for the period from 2000-2001 to 2008-2009. In order to evaluate the financial
performance, tools like Anova, mean, standard deviation and correlation test have been used.

Debt ratios show how effectively the organization uses other people’s money and whether it is
using a lot of borrowed money. (Lasher, 2005)

(al, 2007)Expressed the concern that most researchers divide financial ratios into four groups, i.e
profitability, solvency, liquidity and activity ratios.

(Lermack, 2003)Showed the benefits of financial ratios analysis. He showed that financial ratios
are an important and well-established technique of financial analysis.

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(Ehrhardt, 2010)Stated that financial ratios are designed to help evaluate financial statements.
Financial ratios are used as a planning and control tool, and financial ratios analysis is used to
evaluate the performance of an organization.

(R., 2008)Said that financial analysis is the process of identifying the strengths and weakness of
the firm with the help of accounting information provided in the Profit and Loss Account and
Balance Sheet.

(George, 2003 )Identified that financial analysis of companies is usually undertaken so that
investors, creditors, and other stakeholders can make decisions regarding their companies. The
focus of this paper is on the financial analysis of companies who trade freely and therefore make
the data and information public needed by stakeholders.

(. Altman, 1968)In this study author talks about relationship among various financial factors in a
business as disclosed by a single set of statements and a study of trend of those factors as shown
in a series of statements.”

(Kannappan, 2015)In his research paper titled “A study on financial position and performance
analysis with special reference to Tata Consultancy Services” analyzed the financial ratio in term
of profitability and asset position found that there was high profitability and absolute liquidity ratio
year by year from 2011 to 2015. The return on net worth of the company also showed steady
progress. The technique used in study were ANOVA and coefficient of correlation & regression.

(Bhatt, 2018)Studied in his research paper about profitability ratio analysis with specific reference
to Indian Petroleum Industry including BPCL, HPCL, ONGC and RIL. It is found that ONGC‟s
profitability is the highest among other petroleum companies in India.

(Yuvraj)Analyzed thee Financial Performance of TCS and Wipro with respect to Ratio Analysis
for financial year 2011-12. The financial analysis implies that the current and future financial
health of TCS is better than that of Wipro Ltd.

Ratio analysis is such a significant technique for financial analysis. It indicates relation of two
mathematical expressions and the relationship between two or more things. Financial ratio is a
ratio of selected values on an enterprise's financial statement. (Osamah)

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16
 Chapter – 3
Research Methodology
3.1 Objectives of the study

3.2 Research hypothesis

3.3 Scope of the study

3.4 Secondary method

3.5 Limitations

3.1 Objectives of the study

The present research paper aims to measure the financial performance of Indian IT companies
like TCS and Wipro ltd using comparative financial ratios. The financial information necessary
for financial ratios was derived from these financial statements. The information was then
summarized and processed to come up with comparative financial ratios that were used in the
analysis.

Thus, the study specifically aims to meet the following objectives.

1. It is used to analyze the short terms fund of companies.

2. The use of ratio in accounting and financial management to know the profitability
financial position and operating efficiency of an enterprise.
3. It is used to analyze the liquidity position of both the companies.

3.3 Research Hypothesis

Hypothesis testing is a technique through which some claims can be proved or disproved. It is a
logical test of finding and conclusions.

For the present study present hypothesis is formulated

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Null hypothesis (Ho)-There is no significant difference between financial performance of TCS
and Wipro ltd

Alternative Hypothesis (H1)-There is significant relationship between financial performance of

TCS and Wipro ltd.

3.3 Scope of the study

The aim of this research is to compare and evaluate the financial performance of TCS and Wipro
ltd. Over the last five years using ratio analysis. The project would also assist in determining the
causes or factors that lead to the good or bad. Financial performance of both firms. This analysis
would help the companies and the comparison will help the management to make the
management decisions. This research would be useful to investors who are new to market. It will
the investors to identify risk before investing.

3.4 Secondary Method

Research design = the research design is used for this study is descriptive research design.

Research gap= this study mainly concentrated on selected IT companies and it analyzed short
term as well as long term financial position.

Universe= Indian IT industry

Sample Size= IT companies

 TCS
 Wipro ltd

Time period of study= 2-3 months

Data collection Period= Secondary data has been used to collect the data for this research like
annual reports of five years of the companies, previous research papers, magazines, journals and
internet.

Tools and Techniques

Ratio analysis technique which includes gross profit, operating profit, return on Equity, Return on
long term fund, current ratio, quick ratio, net profit ratio, cash profit margin, debt to equity ratio,

18
return on capital employed ratio, inventory turnover ratio, debtors turnover ratio is used to find out
profitability, liquidity position of the companies.

3.5 Limitations

The project is based on secondary data and the secondary data was taken from the annual reports
of the companies and financial data websites. It may be possible that the data shown in the annual
reports or on the websites may be window dressed which does not show the actual position of the
companies.

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Chapter: 4

Data Representation and Analysis

4.1 Data interpretation and representation

4.2 Hypothesis Testing

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4.1Data Interpretation and representation

Liquidity Ratio

Liquidity Ratio is a financial ratio which is used to determine the company’s abilities to pay its
short-term debt. When it comes to financing, liquidity is a necessary thing to consider about and
liquidity ratio is an essential accounting tool that is used to decide the current debt repaying ability
of a borrower this ratio shows. Whether and individual or enterprise can pay off its short term dues
besides any exterior financial help.

Current Ratio

Current Ratio suggests the financial capability of an enterprise to set off the current obligations by
utilizing its current assets.

Formula

Current Ratio= Current Assets/Current Liabilities

YEAR TCS WIPRO

2016 3.3 2.7
2017 4.2 2.9
2018 4.8 2.8
2019 6.4 3.5
2020 4.7 2.9
Mean 4.68 2.96
Standard Deviation 1.130044 0.31305
Coefficient of variance 0.241 0.105
Growth 0.42 7.4

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 7

0
2016 2017 2018 2019 2020

TCS WIPRO

Interpretation

From the above table and graph, I have concluded that the current ratio of TCS is highest in
comparison with Wipro ltd. High current ratio indicates that the firm will able to pay their short
term dues without any exterior financial help. The idle current ratio is 2:1 and Wipro ltd is also in
a good position to pay its short term dues without any exterior financial help. In 2019 both the
companies TCS and Wipro has the highest current ratio with 6.4:1 and 3.5:1.

Quick Ratio

This ratio test the short term liquidity of the firm in its strict meaning because it compares current
liabilities with quick assets and not with current assets. Quick ratio measures the capability of a
firm to pay its short term liabilities by having assets that are easily convertible into cash.

Formula

Quick Assets/ Current Liabilities

Year TCS WIPRO

2016 3.3 2.8

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 2017 4.2 2.9
2018 4.8 2.8
2019 6.4 3.5
2020 4.7 2.9
Mean 4.68 2.96
Standard Deviation 1.130044 0.294958
Coefficient of variance 0.241 0.099
Growth 0.42 0.035

Quick Ratio
7

0
2016 2017 2018 2019 2020

TCS WIPRO

Interpretation

The ideal quick ratio is 1, if the quick ratio is 1:1 then it indicates that the company can pay its
current debts by without selling its long term assets. If a company has a quick ratio higher than the
1:1 this means company owns more quick assets than current liabilities. From the above table it
can be concluded that by comparing between the two companies TCS has more quick assets than
WIPRO and TCS can pay its currents debts without selling its long term assets. In the year 2016,
2017, 2018 the quick ratio of TCS is increasing in the year 2019 the quick ratio of TCS was the

23
highest with 6.4:1 this means that the in the 2019 TCS has the more quick assets and in the year
2020 the company’s quick ratio reduced from 6.4 to 4.7 it means TCS must have sold its quick
assets to pay off its debt. WIPRO ltd quick ratio is increasing and decreasing from 2.8 to 2.9 and
again in 2019 WIPRO ltd has its highest quick ratio of 3.5 and in the year 2020 WIPRO ltd must
have sold its quick assets to pay off its current debts.

Gross Profit Ratio

Gross Profit Ratio is ratio which has the relationship between gross profit and Net revenue of the
companies. It is used to measure a company’s financial health, the amount left from sales after
subtracting the cost of goods sold.

Formula

Gross Profit/Net Sales*100

Year TCS ltd WIPRO ltd

2016 29.80% 18.14%
2017 27.52% 16.25%
2018 26.86% 15.18%
2019 26.99% 16.38%
2020 26.39% 16.77%
Mean 27.51 16.544
Standard Deviation 1.340 1.0691

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 Coefficient of variance 0.0487 0.0646
Growth -11.4 -7.5

Gross Profit Ratio

35

30

25

20

15

10

0
2016 2017 2018 2019 2020

TCS WIPRO

Interpretation

The higher the gross profit margin the better it is. A higher gross profit margin indicates the
company did it well in managing its cost of sales. From the above table it can be conclude that
comparing between the two companies TCs and Wipro ltd. TCS has the higher the gross profit
margin and it is performing well. In the year 2016 TCS has the highest gross profit ratio. In the
year 2016 Wipro ltd also had the highest gross profit margin and it drop down in 2017 but after
2017 it starts increasing.

Net Profit Ratio

Net Profit ratio, calculates how much net income or profit it generates as percentage of revenue. It
is the most important indicators of company’s financial health. It is a popular profitability ratio
that shows relationship between net profit after tax and net sales.

Formulae

Net Profit/Net Sales*100

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 Year TCS ltd WIPRO ltd
2016 26.87% 17.22%
2017 25.51% 15.82%
2018 25.92% 17.27%
2019 24.4% 17.72%
2020 25.33% 18.35%
Mean 25.606 17.276
Standard Deviation 0.89994 0.9318
Coefficient of variance 0.0351 0.0539
Growth -5.73% 6.56%
30

25

20

15

10

0
2016 2017 2018 2019 2020

TCS WIPRO

Interpretation

Net Profit Ratio calculates the overall profitability of company considering all direct as well as
indirect cost. A high ratio represents a positive return in the company and better the company is.
From above table by comparing between the companies TCS ltd and WIPRO ltd. It can be
concluded that TCS ltd has the highest Net Profit ratio. In the year 2016 TCS ltd has the highest
Net Profit ratio by 26.87% it means that the company’s financial health and the overall profit after

26
deducting the taxes is good. Wipro ltd also have a convincing profit after the deduction of tax.
After 2017 the profit of Wipro ltd starts increasing .

Operating Ratio

Operating Ratio shows the efficiency of company’s management by comparing the total operating
expense of a company to net sales. It shows how efficiently company is keeping its cost low while
generating revenue. The smaller the ratio the more efficient the company is at generating revenue.

Formulae=Cost of Goods Sold + Operating Expense/Net Sales *100

Year TCS WIPRO

2016 31.50 18.91
2017 29.22 17.06
2018 28.56 15.47
2019 28.38 17.04
2020 28.44 17.32
Mean 29.22 17.16
Standard deviation 1.3179 1.2215
Coefficient of variance 0.0451 0.0711
Growth -9.71 -9.25

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 Operating Ratio
35

30

25

20

15

10

0
2016 2017 2018 2019 2020

TCS WIPRO

Interpretation

It shows the efficiency of company’s management by comparing the total operating expense of a
company to net sales. Its shows how efficiently company’s is keeping its cost low while generating
revenue. The smaller the ratio the more efficient the company is at generating revenue. In the
above the table it can be concluded that between both the companies Wipro ltd operating expenses
are low.

Cash Profit Margin

Some Researchers used Earnings before Interest and Tax and Depreciation and Amortization, to
sales ratio called cash profit margin, to calculate operating performance. It is cash flow ratio which
measures cash of operating activities as a percentage of sales revenue in a given period. It measures
how efficiently a company’s convert sales into cash. It is indicator of earnings quality, because it
includes transaction that involve actual transfer of money.

Formula= Cash flow from operating activities /Net sales*100

Year TCS WIPRO

2016 23.47 19.35

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 2017 23.19 18.64
2018 22.00 17.73
2019 22.29 17.79
2020 22.27 18.56
Mean 22.64 18.41
Standard Deviation 0.644 0.671
Coefficient of variance 0.0284 0.0364
Growth -3.53% -4.25%

Cash profit ratio

25 23.47 23.19
22 22.29 22.27

19.35
20 18.63 18.56
17.73 17.79

15

10

0
2016 2017 2018 2019 2020

TCS WIPRO

Interpretation

The higher the ratio the more cash available from sales. From the above table It can be concluded
that from comparing both the companies TCS has the highest cash profit margin ratio, which means
there is more cash available from the sales. In the year 2016 TCS has the highest cash profit margin.
However Wipro ltd also has the highest cash profit margin in the year 2016 and after 2019 it start
increasing.

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Debt to Equity Ratio

This ratio reflects the long term financial position of a firm and is calculated in the form of
relationship between outsider’s funds and internal equities. Debt includes debentures, loans from
financial institutions and other long term liabilities while equity covers equity share capital,
preference share capital and reserves and surplus.

Formula= Debt/Equity

Year TCS ltd WIPRO ltd

2016 0.994 0.26
2017 1.37 0.26
2018 1.230 0.26
2019 0.117 0.17
2020 0.00 0.11
Mean 0.742 0.212
Standard Deviation 0.639 0.069
Coefficient of variance 0.861 0.325
Growth -1 -0.57

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 Debt to Equity Ratio
1.6

1.4

1.2

0.8

0.6

0.4

0.2

0
2016 2017 2018 2019 2020

TCS Wipro

Interpretation

A low amount of debt indicates that the company is getting financing more from funding from
shareholders. A higher ratio indicates that the company is getting finance by more borrowing
money, which subjects the company to potential risk if debt levels are too high. From the above
table it can be concluded that TCS is getting finance more from borrowing debts and from the last
five years the ratio starts decreasing and this is satisfactory, and Wipro ltd debt to equity ratio is
low which means the company is getting financing from shareholders and over the last five year
the ratio starts decreasing which is satisfactory.

Return on Equity capital

It is used to measure financial performance of the companies. It is considered to measure of the

profitability of a company in relation to shareholders equity. It is calculated by dividing net income
by shareholders equity. Because shareholders equity is equal to a company’s assets minus its debt,
ROE is considered the return on net assets.

Formula= Net Profit after Interest, Tax and Preference Dividend)/ Paid-up Equity
Capital*100

31
 Year TCS ltd WIPRO ltd
2016 22.33 17.38
2017 22.28 15.31
2018 20.97 14.68
2019 21.48 15.25
2020 20.60 15.90
Mean 21.532 15.704
Standard Deviation 0.771 1.031
Coefficient of Variance 0.035 0.065
Growth -7.74 -0.0008

Return on equity capital

25

20

15

10

0
2016 2017 2018 2019 2020

TCS Wipro

Interpretation

If the ratio is higher the return will be more and it is good for the company and it indicates that the
return to the shareholders are getting are satisfactory. From the above table it can be concluded
that from both the companies TCS has the higher return on equity capital in the year 2016 with
22.33 and its growth all over the year is decreasing.

32
Return on capital Employed

Return on Capital Employed, it is a profitability ratio which measures how efficiently a company
is using its capital to generate profits. It is considered one of the best profitability ratios and it is
used by investors to determine whether a company is suitable to invest in or not.

Formula= Earnings before Interest and Tax/Capital Employed*100

Year TCS ltd WIPRO ltd

2016 51.31 21.20
2017 46.66 18.59
2018 39.99 17.91
2019 39.94 17.81
2020 44.72 20.72
Mean 44.524 19.246
Standard Deviation 4.8015 1.6021
Coefficient of Variance 0.1078 0.0832
Growth -12.84 -2.26

Return on Capital Employed

60

51.31
50 46.66
44.72
39.99 39.94
40

30

21.2 20.72 20.72

18.59 17.91
20

10

0
2016 2017 2018 2019 2020

33
Interpretation

Higher the return on capital employed is always more favorable as it indicates that more profits
are generated of capital employed. From the above table it can be concluded that comparing the
two companies TCS has the higher return on its capital employed which indicates that more profits
are generated from the capital employed. Wipro ltd had the highest return on capital employees is
in the year 2016 it drop down in the year 2017 and 2018 after 2018 it starts get increasing.

Inventory turnover ratio

This ratio establishes a relationship between the cost of goods sold during a given period and the
average amount of inventory carried during that period. The main objectives of this ratio is to find
out whether stock has been used efficiently or not and to check up whether only the required
minimum amount has been invested in stock.

Year TCS Wipro

2016 6790.38 95.07
2017 5617.43 141.38
2018 4734.77 161.68
2019 14646.3 149.38
2020 31389.8 327.82
Mean 12635.7 175.066
Standard Deviation 11198.3 89.032
Coefficient of Variance 0.88 0.508
Growth 3.622 2.52

34
 Inventory Turnover Ratio
35000

30000

25000

20000

15000

10000

5000

0
2016 2017 2018 2019 2020

TCS WIPRO

Interpretation

A low turnover ratio implies that weak sales and possibly excess inventory, also known as
overstocking. A high ratio on the other hand implies either strong sales or insufficient inventory.
From the above table it can be conclude that TCS has the highest inventory ratio with 31389.3
times it implies that the TCS ltd has the highest sales in comparison to Wipro ltd.

Return on long term fund

Long term return is a calculation which provides investors with a return estimate they can target
over a long period of time in a company. This measure can be comparable to a savings account
rate.

Formula

Earnings before Interest and Tax /Net Capital Employed

Year TCS Wipro

2016 44.79 25.17

35
 2017 40.03 21.69
2018 40.08 20.63
2019 46.66 20.72
2020 51.31 23.26
Mean 44.57 22.29
Standard Deviation 4.759 1.924
Coefficient of Variance 0.106 0.086
Growth 14.55 -7.5

Return on long term fund

60
51.31
50 46.66
44.79
40.03 40.08
40

30 25.17
21.69 23.26
20.63 20.72
20

10

0
2016 2017 2018 2019 2020

TCS WIPRO

Interpretation

Higher the rate of return the more will it will good to invest in a company. From the above table it
is depicted that TCS has the more rate of return in the year 2020 and it indicates that the lenders
and creditors are in safe margin and the returns can be used for future.

36
Debtors Turnover Ratio

This is also called the Trade Receivables Ratio. It establishes a relationship between net credit
sales and average debtors of the year and indicates the speed with which the amount is collected
from debtors. (gupta, 2020).

Formula=

Year TCS Wipro

2016 4.88 5.36
2017 5.05 5.70
2018 5.18 5.56
2019 5.60 5.86
2020 5.42 5.97
Mean 5.226 5.69
Standard Deviation 0.287 0.241
Coefficient of Variance 0.054 0.042
Growth 11.06 6.1

37
 Debt turnover ratio
7

0
2016 2017 2018 2019 2020

TCS WIPRO

Interpretation

The higher the ratio, the better it is, since it indicate that to the firm but also reduces the amount
of bad debt. From the above table it can be concluded that comparing both of the companies clearly
Wipro ltd has the highest debt turnover ratio in the year 2020 with 5.97 times which indicates that
it reduces the amount of bad debts.

38
4.2 Hypothesis Testing

For the analysis of financial position, of the companies under study, an inter comparison of firms
has done from ratio analysis. Here are the following observations and conclusions.

1. Current Ratio

The ideal ratio for current ratio is 2:1 and from the above data of five years for both the companies
it has been concluded that the ratios of both the companies is higher than the ideal ratio 2:1 and it
indicates that the companies are in the position to pay off its short term dues.

In the above case null hypothesis is rejected there is a significant relationship between the financial
positions of both the companies.

2. Quick Ratio

The ideal ratio for quick ratio is 1:1 and from the above data of five years for both the companies
it has been concluded that the ratios of both the companies is higher than the ideal ratio of 1:1which
shows that the company has quick assets more than the current liabilities and its assets are easily
convertible into cash.

In the above case null hypothesis is rejected there is a significant relationship between the financial
position of both the companies.

3. Gross profit ratio

The ideal percentage of gross profit ratio is 65% it is considered to be healthy from the above data
of five years for both the companies it has been concluded that the ratios of both the companies
TCS and Wipro ltd the gross profit ratio is lower than the ideal ratio which means companies need
to increase their profits.

In the above case null hypothesis has been rejected there is a significant relationship between the
financial position of both the companies.

4. Net Profit ratio

The good percentage of net profit which is considered is 20%. From the above data of all five years
for both the companies TCS and Wipro is has been concluded that TCS net profit margin is higher

39
than the ideal percentage it shows that TCS is in good position and the net profit margin of Wipro
ltd is less than 20%.

In the above case alternative hypothesis has been rejected there is a significant difference between
the financial position of both the companies,

5. Operating Ratio

The ideal percentage of operating ratio should be less than 60%. From the above data of all the
five years for both the companies TCS and Wipro ltd. It has been concluded that the operating
margin of both the companies is lower than the 60% which means the companies operation expense
are lower which is good.

In the above ratio the null hypothesis has been rejected there is a significant relationship between
the financial positions of both the companies.

6. Cash profit margin

The ideal percentage of cash profit margin is 60%. From the above data of all the five years for
both the companies TCS and Wipro ltd it has been concluded that the cash profit margin of both
the companies is lower than the ideal percentage 60% and it indicated that both the companies has
lower level of profitability.

In the above ratio null hypothesis has been rejected there is a significant relationship between the
financial position of the companies.

7. Debt to Equity Ratio

The ideal ratio for debt to equity ratio is 2:1. From the above data of all the five years for both the
companies TCS and Wipro ltd it has been concluded that the debt to equity ratio of both the
companies is lower than the ideal ratio 2:1 which is good it indicated that both the companies does
not totally depend on debt.

In the above ratio null hypothesis has been rejected there is a significant relationship between the
financial position of the companies.

8. Return on Equity Capital

40
The ideal percentage for ROE is 20%. From the above data of all the five years for both the
companies TCS and Wipro ltd it has been concluded that the TCS has the higher percentage of
ROE which is good. Wipro ltd ROE percentage is less than 20%.

In the above ratio alternative hypothesis has been rejected there is a significant difference between
the financial position of both the companies.

9. Return on Capital Employed

The ideal percentage for return on capital is up to 10%. From the above data of all the five years
for both the companies TCS and Wipro ltd it has been concluded that both the companies have
higher percentage than 10% which is good.

In the above ratio alternative hypothesis has been rejected there is a significant difference between
the financial position of both the companies.

10. Inventory Turnover Ratio

The ideal ratio for inventory turnover ratio is between 5 to 10 times. From the above data of all the
five years for both the companies TCS and Wipro ltd it has been concluded that both the companies
have much more higher percentage than 10% which indicates there sales are more.

In the above ratio alternative hypothesis has been rejected there is a significant difference between
the financial position of both the companies.

41
 Chapter-5

Results and Discussions

5.1 Major Findings

5.2 Discussions and Suggestions

5.3 Conclusion

42
5.1 Major Findings

Current ratio of both the companies are very good which mean its liquidity position of both the
companies are good. Especially of TCS, net profit ratio of TCS is good it is more than ideal ratio
Wipro ltd. net profit ratio is also good it is less than ideal ratio bit it is more than average ratio
which is good. Operating ratio is low which is good both the companies especially Wipro is
keeping its operating expenses low. Debt to equity ratio is very good both the companies are less
depended on debt specially TCS it more depends on equity then debt. The return on equity are
good more than ideal ratio of TCS. Return on capital employed are very good of both the
companies it indicates the profits are generated more from capital employed. Inventory turnover
of both the companies indicates the good sales, less stock. The return on long term funds are good
which shows that lenders and creditors are at safety margins.

5.2 Discussions and Suggestions

Both the companies TCS and Wipro ltd need to increase their gross profit ratio by reducing cost
of goods sold without changing your selling price. A decrease in cost of goods sold will cause an
increase in gross profit margin. Net profit ratio, Wipro ltd has less profit margin then the ideal
percentage. It can get better by increasing revenues through selling more goods and services or by
increasing prices. In comparison to TCS Inventory turnover ratio of Wipro ltd is need to be
increased from proper forecasting and effective marketing and bye negotiating price rates
regularly.

5.3 Conclusion

TCS and Wipro ltd are leading companies in the information and technology industry. Both the
companies have and important role to play for the economy as well as investors. With references
to the above analysis the financial position of TCS can be said as better than that of Wipro ltd. As
seen in the above analysis, almost on every parameter the performance of TCS suppressed the
Wipro ltd. Although it is not an alarm warning situation for Wipro ltd but in comparison to TCS
ltd it should improve its management efficiency in utilizing the shareholders fund and it should
work on its marketing skills.

43
 Objectives Conclusions
It is used to analyze the short terms fund of Short term funds of both companies are
companies satisfactory
The use of ratio in accounting and financial TCS has the satisfactory profitability position
management to know the profitability financial Between the both companies and the operating
position and operating efficiency of an efficiency of Wipro is satisfactory.
enterprise
It is used to analyze the liquidity position of Liquidity position of both the companies are
both the companies. satisfactory.

44
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Wikipedia information technology in India

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20increased%20its,%2C%20growing%20by%20over%2013%25.

Wikipedia – Tata Consultancy services https://en.wikipedia.org/wiki/Tata_Consultancy_Services

Srinivasan, 2018 A Study on Financial Ratio Analysis of Vellore Cooperative Sugar Mills at
Ammundi, Vellore , https://www.coursehero.com/file/55911770/2-issn-IJSRMS-0976pdf/

Shah Shreeda, Shah Viral A study on financial performance using ratio analysis of Visa ltd steel

https://www.scribd.com/document/410290135/AStudyOnFinancialPerformanceUsingRatioAnaly
sisofVisaSteelLimitedfinal-docx

Musheer Saria, Ganesamoorthy.L, FINANCIAL PERFORMANCE OF SELECT INFORMATION TECHNOLOGY

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www.moneycontrol.com

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R Judith Priya, V Sukithangam, J Subhashree, C Uma, A comparative study on performance of
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Bhatt R. (2012). “Profitability Ratio Analysis with Specific Reference to Indian

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Kumbhaj R. & Y. “Financial Analysis of Tcs and Wipro with respect to Ratio Analysis.” Altius
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46
ANNEXURE

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