WCM PROJECT ON WIPRO AND TCS

BYSHASHWAT BAJPAI SANJITA AGRAWAL DEVESH SINGH ANKIT KUMAR

CONTENTS

PROFILE OF THE COMPANY RATIO ANALYSIS

CORRELATION ANALYSIS
WORKING CAPITAL LEVERAGE CONCLUSION

PROFILE OF THE COMPANY Wipro is the third largest IT

service company in India in India.

TCS is the Largest IT company in India. TCS has over 276,000 of the worlds best-trained IT consultants in 44 countries.

As of March 2013, the company has 145,000 employees with a presence in 54 countries.

The company posted revenues The company posted revenue of $6.9 billion for the financial of $11.6 billion (fiscal year year ended Mar 31, 2013. ending March 31, 2013). We add real value to global Wipro is globally recognized organizations through domain for its innovative approach expertise plus solutions with towards delivering business value and its commitment to proven success in the field and sustainability. world-class service.

RATIO ANALYSIS

PROFITABILITY RATIOS:

A company should earn profits to survive and grow over a long period of time. Profitability ratios are calculated to measure the operating efficiency of the company.
PROFITABILITY RATIO Profit margin Return on investment Return on net worth

WIPRO 2012 22.19 18.22 22.98

2011 20.77 18.89 24.70

TCS 2012 29.30 19.95 44.24

2011 29.96 13.62 38.80

ANALYSIS

A higher profit margin of WIPRO indicates a more profitable company that has better control over its costs compared to its competitors. Return on investment of WIPRO is almost constant for the two consecutive years which shows a satisfactory position of the company.

Although there is a slight dip in the return on net worth yet there is no matter of concern as it will improve in the upcoming years.

LEVERAGE RATIOS
These debt ratios allow the owner of the business to determine how well the business can meet its long-term debt obligations.
LEVERAGE RATIOS
Debt equity ratio Net working capital to current assets ratio

WIPRO 2012 0.22

2011

TCS 2012

2011

0.22 0.01 0.01 58.51

61.07

56.38

59.14

ANALYSIS

WIPRO is able to maintain its debt equity ratio as 0.22 in the year 2011 and 2012 showing a constant performance. Net working capital to current assets ratio of WIPRO is increasing in the year 2012 as compared to 2011 indicating smooth functioning and handling of the working capital in the company.

TURNOVER PRODUCTIVITY RATIOS

Turnover productivity ratios or activity ratios are employed to evaluate the efficiency with which the firm manages and utilizes its assets. They are called turnover ratios because they indicate the speed with which the assets are being converted or turned over into sales.
TURNOVER PRODUCTIVITY RATIOS Inventory turnover ratio Fixed asset turnover ratio Capital employed ratio WIPRO 2012 2011 TCS 2012 2011

40.36 6.16 1.07

42.82 6.41 1.19

9,386.18 5.39 55.31

5,451.71 4.91 44.38

ANALYSIS

The fall in Wipros inventory turnover ratio may be an indication of over-stocking which may pose risk of obsolescence and increased inventory holding costs but it may also reflect a planned inventory buildup in the case of material shortages or in anticipation of rapidly rising prices. Fixed asset turnover ratio of WIPRO is decreasing in current year by 0.25 times may be due to over-investment in plant, equipment, or other fixed assets .This would overcome by selling the inventory to reduce the capital invested in fixed assets or increasing the sales.

Capital turnover ratio of WIPRO is decreasing from 1.19 to 1.07 in 2012 as against 2011 indicating a decline which means that the efficiency utilization of the capital is not up to the mark.

LIQUIDITY RATIOS
Liquidity ratio means the ability of the firm to meet its current obligation. A firm should ensure that it strike a proper balance between high liquidity and lack of liquidity because imbalance will result in poor credit worthiness, loss of creditors, confidence or even results in the closure of the company.
LIQUIDITY RATIOS WIPRO 2012 2011 TCS 2012 2.45:1 2011 2.41:1

Current ratio

2.57:1

2.29:1

Quick ratio

2.48:1

2.20:1

2.45:1

2.41:1

ANALYSIS

WIPRO has a current ratio of 2.57:1 in 2012 against 2.29:1 in 2011 reflecting an increase in current ratio in 2012 through which we can interpret that the company is insufficiently liquid.
As quick ratio indicates an important index to measure the firms liquidity so Wipro should undertake certain measures which will help in bringing down the quick ratio of a company.

CORRELATION
Correlation is a statistical measure of how two securities move in relation to each other.

CORRELATION ANALYSIS OF WIPRO

YEARS 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 CR 2.57 1.09 1.47 1.42 1.68 2.54 1.1 1.33 1.45 1.92 QR 2.79 1.13 1.45 1.4 1.61 2.44 1.76 2.26 2.4 2.48 ITR 52.05 51.17 57.38 69.56 57.23 39.41 56.15 45.4 43.12 48.33 CATAR 0.57870527 0.564926877 0.539346452 0.62930083 0.663123535 0.781314188 0.771137949 0.719714586 0.541219468 0.599048085 CASR 0.492897062 0.396974424 0.369528671 0.398614664 0.46320128 0.689325772 0.628493581 0.729146671 0.702127336 0.72975643 ROI 56.44 37.25 52.27 58.41 65.35 68.07 43.12 54.62 44.79 45.33

correlation 0.610339

0.21802 5 0.036571

0.409511

-0.03837

SUMMARY OUTPUT
Regression Statistics Multiple R 0.798027624

R Square
Adjusted R Square Standard Error Observations

0.636848089
0.182908201 9.008648119 10

CORRELATION MATRIX
YEARS ROI CR QR ITR CASR ROI 1.00 0.610339 0.218025 0.036571 -0.03837 1.00 0.709777 -0.39852 0.193225 1.00 -0.640043 0.7205318 1.00 -O.73391 1.00 CR QR ITR CASR CATAR

CATR

1.00

ANALYSIS
When there is high degree of correlation between the independent variables then there is the existence of multicollinearity. It is observed from the table that there is no high correlation between the above given independent variables therefore in case of WIPRO there is no multicollinearity between the variables that are of independent nature.

WORKING CAPITAL LEVERAGE It measures the sensitivity of the return on investment

(ROI) due to changes in the level of current assets. The higher the degree of WCL the greater the risk and viceversa. But at the same time it increases the possibility of higher return on investment.
YEARS CURRENT ASSETS 1967.65 2038.42 2672.86 4076.68 TOTAL ASSETS 3400.09 3608.29 4955.73 6478.11 DCA 70.77 634.44 1403.82 WCL=(CA/TA+DCA) 0.57870526 0.48045008 0.47813572 0.51721849

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

6338.40
12058.1 13517.2 16713.5 18466.3 23120.80

9558.40
15433.10 17528.90 23222.40 26065.00 29595.70

2261.72
5719.7 1459.1 3196.3 1752.8 4654.5

0.53623821
0.57004746 0.71188118 0.63263900 0.66383035 0.67505591

2009-10
2010-11 2011-12

ANALYSIS

The variability in level of investment in current assets is more helpful in 2008-09 and least supportive in the year 2004-05 for improving the profitability of the company under study. The table also reveals that the values of WCL in all the years under study are less than 1 showing that in all the years the increase in the rate of return on investments less than the proportion of decrease in level of working capital investment i.e. level of investment in current assets.

CONCLUSION
The study of correlation analysis reveals both positive and negative coefficients. The study of working capital leverage (WCL) of the company under study registered a fluctuating trend during the study period. The values of WCL in all the years under study are always less than unity hence it may be concluded that the increase in profitability of the company is less than the proportion to decrease in working capital throughout the study period. From the correlation matrix we have alsocome to a conclusion in case of our company i.e. WIPRO there is no multicollinearity between the independent and dependent factors.

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