I owe my great amount of gratitude to Dr. Meera Pingle the
director of Institute for Excellence in Higher Education (IEHE) for
making me the part of this esteemed institution.
I am very much thankful to Dr. S.S.Vijayvargiya (Head of
Commerce Department) for giving me permission to use departmental
library and Anita Deshbhratar for his valuable guidance and
encouragement in academic pursuits.
Finally I sincerely thank my family and friends for their help,
moral support and encouragement to undertake and complete this project
DECLARATION BY THE STUDENT
I hereby declare that the project entitled “A project report on financial
Ratio analysis of wipro” submitted to Institute for Excellence in Higher
Education is a record of an original work done by me under the guidance
of Anita Deshbhratar Mam and this assignment is submitted for the
partial fulfillment of the requirement for the award of the degree of
Master of Commerce. The research embodied in this assignment has not
been submitted to any other University or Institution for the award of
any degree or diploma.
This is to certify that Mr. Raghvendra Singh is a regular student of
Institute for Excellence in Higher Education [I.E.H.E] Bhopal. He has
conducted an authentic research work on the topic “A project report on
financial Ratio analysis of wipro” and completed her research project
successfully under the guidance of Anita Deshbhratar this project has
been prepared for His M.Com [Final] for examination 2014-15 and is
being submitted there of.
Date of submission:-
Chapter 1: Introduction
Chapter 2: Objectives & Methodology
Need for the study
Scope for the study
Objectives of the study
Limitations of study
Chapter 3: Company Profile
Chapter 4: Data Analysis & Interpretation
Chapter 5: Findings & Suggestions
Chapter 6: Bibliography
Chapter 7: Annexure
Financial analysis is the process of identifying the financial strengths
and weakness of the firm. It is done by establishing relationships
between the items of financial statements viz., balance sheet and profit
and loss account. Financial analysis can be undertaken by management
of the firm, viz., owners, creditors, investors and others.
Objectives of the financial analysis
Analysis of financial statements may be made for a particular purpose
1. To find out the financial stability and soundness of the business
2. To assess and evaluate the earning capacity of the business
3. To estimate and evaluate the fixed assets, stock etc., of the concern.
4. To estimate and determine the possibilities of future growth of
5. To assess and evaluate the firm’s capacity and ability to repay short
and long term loans.
Parties interested in financial analysis:
The users of financial analysis can be divided into two broad groups.
1. Financial executives
2. Top management
Significance of financial analysis
Financial analysis serves the following purpose:
To know the operational efficiency of the business: The financial analysis
enables the management to find out the overall efficiency of the firm. This
will enable the management to locate the weak Spots of the business and
take necessary remedial action.
Helpful in measuring the solvency of the firm: The financial analysis
helps the decision makers in taking appropriate decisions for strengthening
the short-term as well as long-term solvency of the firm.
Comparison of past and present results: Financial statements of the
previous years can be compared and the trend regarding various expenses,
purchases, sales, gross profit and net profit can be ascertained.
Helps in measuring the profitability: Financial statements show the gross
profit, & net profit.
Inter‐firm comparison: The financial analysis makes it easy to make inter-
firm comparison. This comparison can also be made for various time
Bankruptcy and Failure: Financial statement analysis is significant tool in
predicting the bankruptcy and the failure of the business enterprise.
Financial statement analysis accomplishes this through the evaluation of the
Helps in forecasting: The financial analysis will help in assessing future
development by making forecasts and preparing budgets.
METHODS OF ANALYSIS:
A financial analyst can adopt the following tools for analysis of the
financial statements. These are also termed as methods of financial
A. Comparative statement analysis
B. Common-size statement analysis
C. Trend analysis
D. Funds flow analysis
E. Ratio analysis
NATURE Of RATIO ANALYSIS
Ratio Analysis is a powerful tool of financial analysis. A ratio is defined
as "the indicated quotient of mathematical expression" and as "the
relationship between two or more things". A ratio is used as benchmark
for evaluating the financial position and performance of the firm. The
relationship between two accounting figures, expressed mathematically,
is known as a financial ratio. Ratio helps to summarizes large quantities
of financial data and to make qualitative judgment about the firm's
financial performance. The persons interested in the analysis of financial
statements can be grouped under three head owners (or) investors who
are desired primarily a basis for estimating earning capacity. Creditors
who are concerned primarily with Liquidity and ability to pay interest
and redeem loan within a specified period. Management is interested in
evolving analytical tools that will measure costs, efficiency, liquidity
and profitability with a view to make intelligent decisions.
STANDARDS OF COMPARISON
The ratio analysis involves comparison for an useful interpretation of
the financial statements. A single ratio in itself does not indicate
favorable or unfavorable condition. It should be compared with some
standard. Standards of comparison are:
1. Past Ratios
2. Competitor's Ratios
3. Industry Ratios.
4. Projected Ratios
Past Ratio: Ratios calculated from the past financial statements of
the same firm.
Competitor's Ratio: Ratios of some selected firms, especially the
most progressive and successful competitor at the same point in
Industry Ratios: Ratios of the industry to which the firm belongs.
Projected Ratios: Ratios developed using the projected financial
statements of the same firm.
TIME SERIES ANALYSIS
The easiest way to evaluate the performance of a firm is to compare its
present ratios with past ratios. When financial ratios over a period of
time are compared, it is known as the time series analysis or trend
analysis. It gives an indication of the direction of change and reflects
whether the firm's financial performance
has improved, deteriorated or remind constant over time.
CROSS SECTIONAL ANALYSIS
Another way to comparison is to compare ratios of one firm with some
selected firms in the industry at the same point in time. This kind of
comparison is known as the cross-sectional analysis. It is more useful to
compare the firm's ratios with ratios of a few carefully selected
competitors, who have similar operations.
To determine the financial conditions and performance of a firm. Its
ratio may be compared with average ratios of the industry of which the
firm is a member. This type of analysis is known as industry analysis
and also it helps to ascertain the financial standing and capability of the
firm & other firms in the industry. Industry ratios are important
standards in view of the fact that each industry has its characteristics
which influence the financial and operating relationships.
TYPES OF RATIOS
Management is interested in evaluating every aspect of firm's
performance. In view of the requirement of the various users of ratios,
we may classify them into following four important categories:
1. Liquidity Ratio
2. Leverage Ratio
3. Activity Ratio
4. Profitability Ratio
It is essential for a firm to be able to meet its obligations as they become
due. Liquidity Ratios help in establishing a relationship between cast and
other current assets to current obligations to provide a quick measure of
liquidity. A firm should ensure that it does not suffer from lack of
liquidity and also that it does not have excess liquidity. A very high
degree of liquidity is also bad, idle assets earn nothing. The firm's funds
will be unnecessarily tied up in current assets. Therefore it is necessary
to strike a proper balance between high liquidity. Liquidity ratios
can be divided into three types:
Current ratio is an acceptable measure of firm’s short-term solvency
Current assets includes cash within a year, such as marketable securities,
debtors and inventors. Prepaid expenses are also included in current
assets as they represent the payments that will not made by the firm in
future. All obligations maturing within a year are included in current
liabilities. These include creditors, bills payable, accrued expenses,
short-term bank loan, income-tax liability in the current year. The
current ratio is a measure of the firm's short term solvency. It indicated
the availability of current assets in rupees for every one rupee of current
liability. A current ratio of 2:1 is considered satisfactory. The higher the
current ratio, the greater the margin of safety; the larger the amount
of current assets in relation to current liabilities, the more the firm's
ability to meet its obligations. It is a cured -and-quick measure of
the firm's liquidity. Current ratio is calculated by dividing current assets
and current liabilities.
Quick Ratio establishes a relationship between quick or liquid assets
and current liabilities. An asset is liquid if it can be converted into cash
immediately or reasonably soon without a loss of value. Cash is the most
liquid asset, other assets that are considered to be relatively liquid asset
and included in quick assets are debtors and bills receivables and
marketable securities (temporary quoted investments).
Inventories are converted to be liquid. Inventories normally require
some time for realizing in to cash; their value also has a tendency to
fluctuate. The quick ratio is found out by dividing quick assets by
current liabilities. Generally, a quick ratio of 1:1 is considered to
represent a satisfactory current financial condition. Quick ratio is a more
penetrating test of liquidity than the current ratio, yet it should be used
cautiously. A company with a high value of quick ratio can suffer from
the shortage of funds if it has slow- paying, doubtful and long duration
outstanding debtors. A low quick ratio may really be prospering and
paying its current obligation in time.
Cash is the most liquid asset; a financial analyst may examine Cash
Ratio and its equivalent current liabilities. Cash and Bank balances and
short-term marketable securities are the most liquid assets of a firm,
financial analyst stays look at cash ratio. Trade investment is marketable
securities of equivalent of cash. If the company carries a small amount
of cash, there is nothing to be worried about the lack of cash if the
company has reserves borrowing power. Cash Ratio is perhaps the most
stringent Measure of liquidity. Indeed, one can argue that it is overly
stringent. Lack of immediate cash may not matter if the firm stretch its
payments or borrow money at short notice.
Financial leverage refers to the use of debt finance while debt capital is
a cheaper source of finance: it is also a riskier source of finance. It helps
in assessing the risk arising from the use of debt capital. Two types of
ratios are commonly used to analyze financial leverage.
1. Structural Ratios
2. Coverage ratios
Structural Ratios are based on the proportions of debt and equity in the
financial structure of firm. Coverage Ratios shows the relationship
between Debt Servicing, Commitments and the sources for meeting
these burdens. The short-term creditors like bankers and suppliers of raw
material are more concerned with the firm's current debt-paying ability.
On the other hand, long-term creditors like debenture holders, financial
institutions are more concerned with the firm's long-term financial
strength. To judge the long-term financial position of firm, financial
leverage ratios are calculated. These ratios indicated mix of
funds provided by owners and lenders. There should be an appropriate
mix of Debt and owner's equity in financing the firm's assets.
The process of magnifying the shareholder's return through the use of
Debt is called "financial leverage" or "financial gearing" or "trading on
equity". Leverage Ratios are calculated to measure the financial risk and
the firm's ability of using Debt to share holder's advantage. Leverage
Ratios can be divided into five types.
Debt equity ratio.
Interest coverage ratio
Capital gearing ratio
Debt equity ratio
It indicates the relationship describing the lenders contribution for each
rupee of the owner's contribution is called debt-equity ratio. Debt equity
ratio is directly computed by dividing total debt by net worth. Lower the
debt-equity ratio, higher the degree of protection. A debt-equity ratio of
2:1 is considered ideal. The debt consists of all short term as well as
long-term and equity consists of net worth plus preference capital plus
Deferred Tax Liability.
Several debt ratios may used to analyze the long-term solvency of a
firm. The firm may be interested in knowing the proportion of the
interest-bearing debt in the capital structure. It may, therefore, compute
debt ratio by dividing total total-debt by capital employed on net assets.
Total debt will include short and long-term borrowings from financial
institutions, debentures/bonds, deferred payment arrangements for
buying equipments, bank borrowings, public deposits and any other
interest-bearing loan. Capital employed will include total debt net worth.
Interest Coverage Ratio
The interest coverage ratio or the time interest earned is used to test the
firms’ debt servicing capacity. The interest coverage ratio is computed
by dividing earnings before interest and taxes by interest charges. The
interest coverage ratio shows the number of times the interest charges
are covered by funds that are ordinarily available for their payment. We
can calculate the interest average ratio as
earnings before depreciation, interest and taxes divided by interest.
The total shareholder's fund is compared with the total tangible assets of
the company. This ratio indicates the general financial strength of
concern. It is a test of the soundness of financial structure of the concern.
The ratio is of great significance to creditors since it enables them to find
out the proportion of share holders funds in the total investment of
Capital gearing ratio:
This ratio makes an analysis of capital structure of firm. The ratio
shows relationship between equity share capital and the fixed cost
bearing i.e., preference share capital and debentures.
Turnover ratios also referred to as activity ratios or asset management
ratios, measure how efficiently the assets are employed by a firm. These
ratios are based on the relationship between the level of activity,
represented by sales or cost of goods sold and levels of various assets.
The improvement turnover ratios are inventory turnover, average
collection period, receivable turn over, fixed assets turnover and total
assets turnover. Activity ratios are employed to evaluate the efficiency
with which the firm manages and utilize its assets. These ratios are also
called turnover ratios because they indicate the speed with which assets
are being converted or turned over into sales. Activity ratios thus involve
a relationship between sales and assets.
A proper balance between sales and assets generally reflects that asset ut
Activity ratios are divided into four types:
Total capital turnover ratio
Working capital turnover ratio
Fixed assets turnover ratio
Stock turnover ratio
Total capital turnover ratio:
This ratio expresses relationship between the amounts invested in this
assets and the resulting in terms of sales. This is calculated by dividing
the net sales by total sales. The higher ratio means better utilization and
Some analysts like to compute the total assets turnover in addition to or
instead of net assets turnover. This ratio shows the firm's ability in
generating sales from all financial resources committed to total assets.
Working capital turnover ratio:
This ratio measures the relationship between working capital and sales.
The ratio shows the number of times the working capital results in sales.
Working capital as usual is the excess of current assets over current
liabilities. The following formula is used to measure the ratio:
Fixed asset turnover ratio:
The firm may which to know its efficiency of utilizing fixed assets and
current assets separately. The use of depreciated value of fixed assets in
computing the fixed assets turnover may render comparison of firm's
performance over period or with other firms.
The ratio is supposed to measure the efficiency with which fixed assets
employed a high ratio indicates a high degree of efficiency in asset
utilization and a low ratio reflects inefficient use of assets. However, in
interpreting this ratio, one caution should be borne in mind, when the
fixed assets of firm are old and substantially depreciated the fixed assets
turnover ratio tends to be high because the denominator of ratio is very
Stock turnover ratio
Stock turnover ratio indicates the efficiency of firm in producing and
selling its product. It is calculated by dividing the cost of goods sold by
the average stock. It measures how fast the inventory is moving through
the firm and generating sales. The stock turnover ratio reflects the
efficiency of inventory management. The higher the ratio, the more
efficient the management of inventories and vice versa .However, this
may not always be true. A high inventory turnover may be caused by a
low level of inventory which may result if frequent stock outs and loss
of sales and customer goodwill.
A company should earn profits to survive and grow over a long period
of time. Profits are essential but it would be wrong to assume that every
action initiated by management of a company should be aimed at
maximizing profits. Profit is the difference between revenues and
expenses over a period .Profit is the ultimate 'output' of a company and
it will have no future if it fails to make sufficient profits. The
financial manager should continuously evaluate the
efficiency of company in terms of profits. The profitability ratios are
calculated to measure the operating efficiency of company. Creditors
want to get interest and repayment of principal regularly. Owners want
to get a required rate of return on their investment. Generally, two major
types of profitability ratios are calculated:
•Profitability in relation to sales
•Profitability in relation to investment
Profitability Ratio can be divided into six types:
Gross profit ratio
Operating profit ratio
Net profit ratio
Return on investment
Earns per share
Operating expenses ratio
Gross profit ratio
First profitability ratio in relation to sales is the gross profit margin the
gross profit margin reflects. The efficiency with which management
produces each unit of product. This ratio indicates the average spread
between the cost of goods sold and the sales revenue. A high gross profit
margin is a sign of good management. A gross margin ratio may
increase due to any of following factors: higher sales prices
cost of goods sold remaining constant, lower cost of
goods sold, sales prices remaining constant. A low gross profit margin
may reflect higher cost of goods sold due to firm's inability to purchase
raw materials at favorable terms, inefficient utilization of plant and
machinery resulting in higher cost of production or due to fall
in prices in market. This ratio shows the margin left after meeting
manufacturing costs. It measures the efficiency of production as well as
pricing. To analyze the factors underlying the variation in gross profit
margin,the proportion of various elements of cost (Labor, materials and
manufacturing overheads) to sale may studied in detail.
Operating profit ratio
This ratio expresses the relationship between operating profit and sales.
It is worked out by dividing operating profit by net sales. With the help
of this ratio, one can judge the managerial efficiency which may not be
reflected in the net profit ratio.
Net profit ratio
Net profit is obtained when operating expenses, interest and taxes are
subtracted from the
gross profit. Net profit margin ratio established a relationship between n
et profit and sales and indicatesmanagement's efficiency in
manufacturing, administering and selling products. This ratio also
indicates the firm's capacity to withstand adverse economic conditions.
A firm with a high net margin ratio would be in an advantageous
position to survive in the face of falling
selling prices, rising costs of production or declining demand for product
This ratio shows the earning left for share holders as a percentage of net
sales. It measures overall efficiency of production, administration,
selling, financing. Pricing and tax management. Jointly considered, the
gross and net profit margin ratios provide a valuable understanding of
the cost and profit structure of the firm and enable the analyst to identify
the sources of business efficiency / inefficiency.
Return on investment:
This is one of the most important profitability ratios. It indicates the
relation of net profit with capital employed in business. Net profit for
calculating return of investment will mean the net profit before interest,
tax, and dividend. Capital employed means long term funds.
Earnings per share
This ratio is computed by earning available to equity share holders by
the total amount of equity share outstanding. It reveals the amount of
period earnings after taxes which occur to each equity share. This ratio is
an important index because it indicates whether the wealth of each share
holder on a per share basis as changed over the period.
Operating expenses ratio
It explains the changes in the profit margin ratio. A higher operating
expenses ratio is unfavorable since it will leave a small amount of
operating income to meet interest, dividends. Operating expenses ratio is
a yardstick of operating efficiency, but it should be used cautiously. It is
affected by a number of factors such as external uncontrollable factors,
internal factors. This ratio is computed by dividing operating expenses
by sales. Operating expenses equal cost of goods sold plus selling
expenses and general administrative expenses by sales.
NEED OF THE STUDY
The study enables us to have access to various facts of the organization.
It helps in understanding the needs for the importance and advantage of
materials in the organization, the study also helps to exposure our minds
to the integrated materials management the
various procedures, methods and technique adopted by the organization.
The study provides knowledge about how the theoretical aspects are put
in the organization.
OBJECTIVES OF STUDY
To analyze the profitability position of the company.
To assess the return on investment.
To analyze the asset turnover ratio.
To determine the solvency position of company.
To analyze the capital structure of the company through leverage
• The study was limited to only FIVE years Financial Data.
•The study is purely based on secondary data which were taken
primarily from Published annual reports of WIPRO.
•The ratio is calculated from past financial statements and these are not
indicators of future.
•The study is based on only on the past records.
• Non availability of required data to analysis the performance.
•The short span of the time provided also one of limitations.
Research is designed as a systematic, gathering recording and
analysis of data about problem relating to any particular field.
It determines strength reliability and accuracy of the project.
Research design pertains to the great research approach or strategy
adopted for a particular project. A research project has to be conducted
making sure that the data is collected adequately and economically.
The study used Descriptive research design for the purpose of getting an
insight over the issue. It is to provide an accurate picture of some aspects
of market environment. Descriptive research is used when the objective
is to provide systematic description that is as factual and accurate as
1. Method of data collection:
Secondary data - Through the internet and published data.
In view of the objects of the study listed above an exploratory research
design has been adopted. Exploratory research is one which is largely
interprets and already available information and it lays particular
emphasis on analysis and interpretation of the existing and available
•To know the financial status of the company.
•To know the credit worthiness of the company.
•To offer suggestions based on research finding.
Introduction of company
Wipro Limited (Wipro), together with its subsidiaries and associates
(collectively, the company or the group) is a leading India based
provider of IT Services and Products, including Business Process
Outsourcing (BPO) Services, globally. Further, Wipro has other
business such as India and Asia IT Services and products and
Consumer Care and Lighting. Wipro is headquartered in Bangalore,
India. Wipro Technologies is a global services provider delivering
technology-driven business solutions that meet the strategic
objectives clients. Wipro has 40+ ‘Centers of Excellence’ that
create solutions around specific needs of industries. Wipro
delivers unmatched business value to customers through a
combination of process excellence, quality frame works and service
delivery innovation. Wipro is the World's first CMM Level 5
certified software Services Company and the first outside USA to
receive the IEEE Software Process Award. Wipro is a $3.5 billion
Global company in Information Technology Services, R&D Services,
Business process outsourcing. Team Wi pro is 75,000
Strong from 40nationalities and growing. Wipro is present
across 29 countries, 36 Development centers, Investors across
Largest third party R&D Service provider in the world.
Largest Indian Technology Infrastructure management service
A vendor of choice in the middle east
Among the top 3 Indian BPO Service provider by Revenue (*
Among the top 2 Domestic IT Services companies in India (*IDC
Wipro Infrastructure Engineering Ltd
Wipro Japan KK
Wipro Shanghai Ltd.
Wipro Trademarks Holding Ltd.
Wipro Travel Services Ltd.
Wipro Cyprus Private Ltd.
Wipro Consumer Care Ltd.
Wipro Health Care Ltd.
Wipro Chandrika Ltd.(a)
Wipro Holdings (Mauritius) Ltd.
Wipro Australia Ltd.
Quantech Global Service Ltd.
Planet PSG Pte Ltd.
Wipro started in 1945 with the setting up of an oil factory in Amalner a
small town in Maharashtra in Jalgaon District. The product
Sunflower Vanaspati and 787 laundry soap (largely made from a bi-
product of Vanaspati operations) was sold primarily in Maharashtra
and MP . The co mpany was named western india
pro du cts Ltd.
The Birth of the name Wipro
As the organization grew and diversified into operations of
Hydraulic Cylinders and InfoTech, the name of the organization did not
adequately reflect its operations. Azim Premji himself in 1979
selected the name “Wipro" largely an acronym of Western India
Products. Thus was born the Brand Wipro. The name Wipro was
unique and gave the feel of an 'International" company. So much so
that some dealers even sent their cheques favoring Wipro
(India)Limited. Fortunately, the banks accepted them!!By the
early 90s, Wipro had grown into various products and services. The
Wipro product basket had soaps called Wipro Shikakai, Baby
products under Wipro Baby Soft, Hydraulic Cylinders
branded Wipro, PCs under the brand name Wipro, a joint
venture company with GE named Wipro GE and software
services branded Wipro. The Wipro logo was a 'W", but it was
not consistently used in the products. It was clearly felt that the
organization was not leveraging its brand name across the various
Co mp an y p ro fil e
B u s in e s s D e s c rip t io n
Wipro Limited is the first P CMM Level 5 and SEI
CMM Level 5 certified IT Services Company globally.
Wipro provides comprehensive IT solutions and services,
including systems integration, Information Systems outsourcing,
package implementation, software application development and
maintenance, and research and development services to corporations
globally. The Group's principal activity is to offer
information technology services. The services include
integrated business, technology and process solutions including
systems integration, package implementation, software application
development and maintenance and transaction processing. These
services also comprise of information technology consulting,
personal computing and enterprise products, information
technology infrastructure management and systems integration
services. The Group also offers products related to personal care,
baby care and wellness products. The operations of the Group are
conducted in India, the United States of America and Other
countries. During fiscal 2007, the Group acquired Wipro
Cyprus Pvt Ltd, Retailbox By, Enabler Informatics SA, Enabler
France SAS, Enabler Uk Ltd, Enabler Brazil Ltd, Enabler and Retail
Consult GmbH, Cmango Inc, Cmango (India) Pvt Ltd,Saraware Oy,
Quantech Global Services and Hydroauto Group.
Global IT Services and Products
The Company's Global IT Services and Products segment
provides IT services to customers in the Americas, Europe and
Japan. The range of its services includes IT consulting, custom
application design, development, re-engineering and maintenance,
systems integration, package implementation, technology infrastructure
outsourcing, BPO services and research and development services
in the areas of hardware and software design. Its service offerings in
BPO services include customer interaction services, finance and
accounting services and process improvement services
for repetitive processes!
The Global IT Services and Products segment accounted for 74%
of the Company’s revenues and 89% of its operating income for
the year ended March 31, 2007 (fiscal 2007). Of these
percentages, the IT Services and Products segment accounted
for 68% of its revenue, and the BPO Services segment accounted
for 6% of its revenue during fiscal 2007.
Customized IT solutions
Wipro provides its clients customized IT solutions in the
areas of enterprise IT services, technology infrastructure
support services, and research and development services. The
Company provides a range of enterprise solutions primarily to
Fortune1000 and Global 500 companies. Its services extend
from enterprise application services to e-Business solutions.
Its enterprise solutions have served clients from arrange of
industries, including energy and utilities, finance, telecom, and
media and entertainment. The enterprise solutions division accounted
for 63% of its IT Services and Products revenues for the fiscal 2007.
Technology Infrastructure Service
Wi pro o ffers techno l o gy infrastru ctu re su ppo rt
services, su ch as hel p desk management, syst ems
management and mi gratio n, netwo rk management and
messaging services. The Company provides its IT Services and Products
clients with around-the-clock support services. The technology
infrastructure support services division accounted for 11% of
Wipro's IT Services and Products revenues in fiscal2007.
Research and Development Services
Wipro's research and development services are organized into
three areas of focus: telecommunications and inter-networking,
embedded systems and Internet access devices, and
telecommunications and service providers. The Company
provides software and hardware design, development and
implementation services in areas, such as fiber optics
communication networks, wireless networks, data networks,
voice switching networks and networking protocols. Wipro's
software solution for embedded systems and Internet access
devices is programmed into the hardware integrated circuit
(IC) or application-specific integrated circuit (ASIC) to
eliminate the need for running the software through an
external source. The technology is particu larly impo rtant
to po rtable co mpu ters, hand-held devices,
co nsu mer electronics, computer peripherals, automotive electronics
and mobile phones, as well as other machines, such as process-
controlled equipment. The Company providessoftware
application integration, network integration and maintenance
services to telecommunications service providers, Internet service
providers, application service providers and Internet data centers.
Business Process Outsourcing Service
Wipro BPO's service offerings include customer interaction
services, such as IT-enabled customer services, marketing
services, technical support services and IT helpdesks; finance
and accounting services, such as accounts payable and accounts
receivable processing, and process improvement services for
repetitive processes, such as claims processing, mortgage processing
and document management. For BPO projects, the Company has a
defined framework to manage the complete BPO process migration and
transition. The Company competes with Accenture, EDS, IBM Global
Services, Cognizant, Infosys, Satyam and Tata
Consultancy Services. India andAsiaPac IT Services and
The Company's India and Asia Pac IT Services and Products business
segment, which is referred to as Wipro InfoTech, is focused on the
Indian, Asia-Pacific and Middle-East markets, and provides
enterprise clients with IT solutions. The India and AsiaPacIT Services
and Products segment accounted for 16% of Wipro's revenue in
fiscal2007. The Company's suite of services and products consists of
technology products; technology integration, IT management
and infrastructure outsourcing services; custom application
development, application integration, package implementation
and maintenance, and consulting.
Include integration of computing platforms, networks,
storage, data center andenterprise management software.
These services are typically bundled with sales of the Company's
technology products. Wipro's infrastructure management and
totalo u tso u rcing services inclu de management and
o peratio ns o f cu sto mer' s ITinfrastructure on a day-to-day
basis. The Company's technology support servicesinclude
upgrades, system migrations, messaging, network audits and new
system implementation. Wipro designs, develops and implements
enterprise applications for co rpo rate cu sto mers. The
Co mpany' s so lu tio ns inclu de cu sto m
applicatio ndevelopment, package implementation,
sustenance of enterprise applications,including industry-specific
applications, and enterprise application integration. Wiproalso
pro vides co nsu lting services in the areas o f bu siness
co ntinu ity and risk management, technology, process and
ConsumerCare and Lighting
Wipro's Consumer Care and Lighting business segment
accounted for 5% of itsrevenue in fiscal 2007. The Company's
product lines include hydrogenated cookingoil, soaps and
toiletries, wellness products, light bulbs and fluorescent tubes,
andlighting accessories. Its product lines include soaps and
toiletries, as well as baby products, using ethnic ingredients.
Brands include Santoor, Chandrika and WiproActive. The Wipro
Baby Soft line of infant and child care products includes
soap,talcum powder, oil, diapers and feeding bottles and Wipro
Sanjeevani line of wellness products.The Company's product line
includes incandescent light bulbs, compact fluorescentlamps
and lu minaries. It o perat es bo t h in co mmercial and
retail market s. TheCompany has also developed
commercial lighting solutions for
pharmaceutical production centers, retail stores, software
development centers and other industries.Its product line consists
of hydrogenated cooking oils, a cooking medium used inhomes,
and bulk consumption points like bakeries and restaurants. It sells this
productunder the brand name Wipro Sunflower.
Registered Office Address
WIPRO LIMITEDDoddak annelli, Sarjapur Road,Bangalore – 560 035,
Board of Directors
1. Azim H . Premji Chairman
2. Dr Ashok S Ganguly Former Chief Ex.Officer Nortel
3. B .C. Prabhakar Practitioner of Law
4. Dr. Sheth Proffessor Of Marketing-Emory Uni.Usa.
5. N.Vagual Chairman-ICICI Bank Ltd
6. Bill Owens Former Chief Ex.Officer,Nortel
7. P. M. Sinba Former Chairman Pepsico India
Audi to rs
BSR & Co.
N Vaghul – Chairman
P M Sinha - Member
B C Prabhakar – Member
Board Governanceand CompensationCommittee
Ashok S Ganguly – Chairman
N Vaghul - Member
P M Sinha – Member
Shareholders’ Grievance and Administrative Committee
B C Prabhakar – Chairman
Azim H Premji – Member
It measures the ability of the firm to meet its short-term obligations, that is capacity of the firm to
pay its current liabilities as and when they fall due. Thus these ratios reflect the short-term
financial solvency of a firm. A firm should ensure that it does not suffer from lack of liquidity.
The failure to meet obligations on due time may result in bad credit image, loss of creditors
confidence, and even in legal proceedings against the firm on the other hand very high degree of
liquidity is also not desirable since it would imply that funds are idle and earn nothing. So
therefore it is necessary to strike a proper balance between liquidity and lack of liquidity.
The various ratios that explains about the liquidity of the firm are
1. Current Ratio
2. Acid Test Ratio / quick ratio
3. Absolute liquid ration / cash ratio
1. CURRENT RATIO
The current ratio measures the short-term solvency of the firm. It establishes the relationship
between current assets and current liabilities. It is calculated by dividing current assets by
Current Ratio = Current Asset
Current assets include cash and bank balances, marketable securities, inventory, and debtors,
excluding provisions for bad debts and doubtful debtors, bills receivables and prepaid expenses.
Current liabilities includes sundry creditors, bills payable, short- term loans, income-tax
liability, accrued expenses and dividends payable.
Current ratio is always 2:1 it means the current assets two time of current
After observing the figure the current ratio is fluctuating.
In the year 2008 ratio is showing good shine.
Here ratio is increase as a increasing rate from 2004 to 2008.
Company is nowhere near the ideal ratio in every year but every company
cannot achieve this ratio.
Current ratio is increased in 2007-08 as compared to 2003-04 becauseof
increase in Inventories 100.96% and 123.77 % increased in Cash and Bank
Current ratio is decreased in 2005-06 as compared to the last
year because of increase in liabilities by 45.39% and 93.19% in
increasing in Provision.
2. ACID TEST RATIO / QUICK RATIO
It has been an important indicator of the firm’s liquidity position and is used as a complementary
ratio to the current ratio. It establishes the relationship between quick assets and current
liabilities. It is calculated by dividing quick assets by the current liabilities.
Acid Test Ratio = Quick Assets
Quick assets are those current assets, which can be converted into cash immediately or within
reasonable short time without a loss of value. These include cash and bank balances, sundry
debtors, bill’s receivables and short-term marketable securities.
Standard Ratio is 1:1
Company’s Quick Assets is more than Quick Liabilities for all these 5 years.
In 2007-08 the ratio is increasing because of increase in bank and cash
So all the years has quick ratio exceeding 1, the firm is in
position to meet its immediate obligation in all the years.
In 2005-06 quick ratio is decreased because the increase in
quick assets is less proportionate to the increased quick liabilities.
The Quick ratio was at its peak in 2007-08, while was lowest in the 2004-05.
Networking capital = Current Assets – Current Liabilities
This ratio represents that part of the long term funds represented
by the net worth and long term debt, which are
permanently blocked in the current assets.
It is in increasing double then year by year because of assets increasing
fast then Liabilities
The profitability ratio of the firm can be measured by calculating various
profitability ratios. General two groups of profitability ratios are
a. Profitability in relation to sales.
b. Profitability in relation to investments.
A company should earn profits to survive and grow over a long
period of time. Itwould be wrong to assume that every action
initiated by management of companyshould be aimed at
maximizing profits, irrespective of social as well as
economicalconsequences. It is a fact that sufficient must be earned to
sustain the operation of the business to be able to obtain funds from
investors for expansion and growth and tocontribute towards
the responsibility for the welfare of the society in
businessenvironment and globalization.The profitability ratios
are calculated to measure the operating efficiency of
The following Profitability Ratios are calculated for the company.
Gross Profit Ratio
Operating Profit Ratio
Net Profit Ratio
Rate Of Return On Investment
Rate Of Return On Equity
GROSS PROFIT MARGIN OR RATIO
It measures the relationship between gross profit and sales. It is
calculated by dividing gross profit by sales. It is a useful indication of
the profitability of business. This ratio is usually expressed
as percentage. The ratio shows whether the mark-up obtained on
cost of production is sufficient however it must cover its operating
Gross profit margin or ratio = Gross profit X 100
GP Ratio shows how much efficient company is in Production.
GP is decreasing 2007-08 due to higher production cost.
Gross sales and services are increasing year by year so in effect Gross profit
ratio is increasing year by year up to 2007.
This ratio shows the relation between Cost of Goods Sold + Operating
Expenses and Net Sales. It shows the efficiency of the company in
managing the operating costs base with respect to Sales. The higher
the ratio, the less will be the margin available to proprietors.
Operating profit margin or ratio = Operating expenses X 100
Operating expenses includes cost of goods produced/sold, general and
administrative expenses, selling and distributive expenses.
Operating ratio is lowest during current 2007.
This shows that the expenses incurred to earn profit
were less compared to the previous two years.
Operating ratio is decreses feom 2004 to anward decreasing rate.
From the graph conclusion is made that company is
not on the right track byefficiently cutting down
manufacturing, administrative and selling
NET PROFIT MARGIN OR RATIO
It measures the relationship between net profit and sales of a firm. It
indicates management’s efficiency in manufacturing, administrating, and
selling the products. It is calculated by dividing net profit after tax by
Net profit margin or ratio = Earning after tax X 100
After observing the figure the ratio is fluctuating.
Company has rise in its net profit in 2006-07 as
compared to the previous year because the company
has increased its sales 41.45% .
Though the company’s sale is continuously rising but the
net profit is not so much increased so management should
take some steps to decrease its expenses.
Sales is decrease in 2008 compare to 2007
The overall ratio is showing good position of the company.
Return on Investment
Rate of Return on Investment indicates the profitability of business and is very
much in use among financial analysis.
From the above observation it can be seen that ratio is fluctuating.
In the year 2005-06 Rate of Return on Investment is slightly increase as
compared to previous year
Ratio is decreasing after 2005 at a decreasing rate because
of assets increase compare to sales.
The company’s Total Assets is increased to 86.51%, so ROI
is decreased so conclusion made that company is not utilizing its assets
and investment efficiently.
Rate of Return on Equity
Rate of Return on Equity shows what percentage of profit is
earned on the capital invested by ordinary share holders.
ROE is remaining almost same Between 2005 to 2007, but it is
decrease in2008 because the the company has increase share capital but
profit not getting that much increase.
Company is getting same return on equity.
As a result the share holders are getting higher return every year
and investment portfolio scheme selection was a judicious decision taken
by the company.
This happens because Profit and Share Capital both increasing same way.
ASSETS TURNOVER RATIO
The relationship between assets and sales is known as assets turnover
ratio. Several assets turnover ratios can be calculated depending upon
the groups of assets, which are related to sales.
Total asset turnover.
Net asset turnover
Fixed asset turnover
Current asset turnover
Net working capital turnover ratio
TOTAL ASSETS TURNOVER
This ratio shows the firm’s ability to generate sales from all financial
resources committed to total assets. It is calculated by dividing sales by
The total assets turnover ratio is almost same in all years.
The Assets turnover Ratio is near by 1.5 in all 5 years which
shows effective utilization of assets from the company’s view point.
In the year 2005-06 ratio is increased because of company’s
total assets is increased by 24.52%, but sales is increased by 29.92%.So
the ratio is increased but in current year it is decreased becaus e
sale increasing by 41.45% and Assets increasing by 49.28%.
Net Fixed Assets Turnover
To ascertain the efficiency & profitability of business the total fixed assets are
comparedto sales. The more the sales in relation to the amount invested in
fixed assets, the moreefficient is the use of fixed assets. It indicates
higher efficiency. If the sales are less ascompared to investment in
fixed assets it means that fixed assets are not adequatelyutilized
in business. Of course excessive sale is an indication of over
trading and is dangerous.
Here the ratio of Net Fixed Asset Turnover is continuously
increasing up to 2006and after that it has strated decline.Because sales as
well as assets boths are equally increase.
Net Fixed Assets Turnover Ratio is increasing year by year
because of Sale is increasing continuously.
It indicates that the company maximizes the use of its fixed assets to earn
profit inthe business so that whatever amount is invested by
company in fixed asset, gives maximum productivity which helps to
increase sales as well as profit.
Inventory Turnover Ratio
Inventory Turnover Ratio: The no. of times the average stockis turned over during
the year is known as stockturnover ratio.
F ro m the ab o ve c alc ulatio n we c an s ay that the ratio is
d ec reas ing. It mens inventory is not spdly convert in to sales. So that
it is bad for the company.
In 2003-04 ratio is increased as compared to after that all
year so management should take care about good efficiency of stock
But in 2006 onward ratio is decreasing because of increase in COGS. So
companyshould devise a systematic operational plan for inventory control.
Debtor Turnover Ratio
Debtor turnover ratio: The debtor turnovers suggest the
no. of times the amount of credit sale is collected during the
Debtor turnover indicates how quickly the company can collect
its credit sales revenue.
Here the ratio is continuously decreasing, so that the company’s collection of credit
sales is efficient management is improved its collection period every
year so its hows that the management have an ability to collect its money from
his debtors. So they can invest that money on Assets, HRD and other investments.
The solvency or leverage ratios throws light on the long term solvency
of a firm reflecting it’s ability to assure the long term creditors with
regard to periodic payment of interest during the period and loan
repayment of principal on maturity or in predetermined instalments at
due dates. There are thus two aspects of the long-term solvency of a
The ratio is based on the relationship between borrowed funds and
owner’s capital it is computed from the balance sheet, the second type
are calculated from the profit and loss a/c. The various solvency ratios
The following Finance Ratios are calculated for the company.
Interest Coverage Ratio
Debt ratio indicates the long term debt out of the total capital employed
From the above calculation it seems that the ratio is fluctuating.
In 2007-08 the ratio is increased as compared to the previous year because the total
loan funds are increased by 661.56%.
In 2005-06 Company has issued equity Share and also loan is decreased.
Its means that now company trying to increasing Trading on equity.
This ratio is only another form proprietary ratio and establishes
relation between theoutside long term liabilities and owner
funds. It shows the proportion of long termexternal equity &
It shows companies accumulated more equity than required
company has to refocus to its strategic policies and plans and try to
accumulate more debt funds in future so as to make the balance
between debt and equity.
There is only current year ratio is some what sufficient.
Interest Coverage Ratio
Interest Coverage Ratio: The ratio indicates as to how many
times the profit covers the payment of interest on
debentures and other long term loans hence it is also
known as times interest earned ratio. It measures the debt service
capacity of the firm in respect of fixed interest on long term debts
After observing the figure it shows that the ratio has mix trend up
In the year 2007-08 company has not much debt
compare to EBIT so interest coverage ratio is high
but in 2007-08 company increasing its external debt
so company have pay more interest among its earnings so
interest coverage ratio falling down compare to previous year.
Though the sales has been continuously increased
from past 3 years but the proportionate expenditure is also
rising so overall not making any huge effect on net profit of this
Here the in 2005 company has reinvest profit for business
expansion it is good shine for the company.
The total expenditure is near by 80% of total income in every year.
Every year PBT is near by 20% of total income.
Fixed assets are efficiently utilized by the company due to which
the profit of the company is increasing every year.
Liabilities are increasing rate it mean company has to
developed business. And purchase raw material on credit
Company has enough cash in hand so that in any condition
company can take Any Financial decision easily.
All the years has qu ick ratio excee di n g 1 , the
firm is in po sitio n to meet its immediate obligation in
all the years.
GP Ratio shows how much efficient company is in Production.
The co mpan y’ s fu tu re plans fo r expansio n seem
clear du e to increas e d investment in Fixed Assets
.Efficient use of these Assets has enabled the company
to observe an increased profit.
Though the company’s sale is continuously rising but the
net profit is not so mu ch increas e d so manage m e nt
sho u ld take so me steps to decrea se its expenses.
Company should tryitsbest to increase sales and profit.
The profit margin ratio shows decline in current year so that
company should try to increase profit after tax
Current ratio is very good it is 2.13:1 so company
has fully utilize cash liquidity for business development.
According to this Research we find that The company's overall
position is at a good position. The company achieves sufficient
profits in past four years. Fixed assets are efficiently utilized by the
company due to which the profit of the company is increasing
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. Inventory
turnover ratio is increased as compared to after that
all year so management should take care about good
efficiency of stock management.Net Fixed Assets Turnover
Ratio is increasing year by year because of Sale is
increasing continuously and Though the company’s sale is
continuously rising but the net profit is not so mu ch
increased so management sho u ld take so me steps
to decreas e its expenses.
Annual Reportof Wipro Limited for Financial Year 2004-05, 2006-07,2007-
Narayanaswamy R., (1998): “Financial Accounting”: A Managerial
Perspective,Prentice-Hall of India Private Ltd, New Delhi., Third Edition,
Khan M.Y. and Jain P.K., (1992):”Financial Management”, Tata
McGraw-HillPublishing Co Ltd., New Delhi., Third Edition..