Volume-4, Issue-7, July-2015 • ISSN No 2277 - 8160

Commerce
Research Paper Commerce
A Study on Financial Position and Performance Analysis
With Special Reference to Tata Consultancy Services

SHENBAGAM Research Scholar, Department of Commerce, Research and Development

KANNAPPAN Centre, Bharathiar University, Coimbatore. India
ABSTRACT ARAE OF STUDY – FINANCE
Despite the global economy growing up, the Indian software industry is maintaining a steady pace of growth. Financial
analysis is an aspect of the overall business finance function that involves examining historical data to gain information about the current and
future financial health of a company. IT has great possible of becoming an engine of accelerated economic growth, efficiency, improvement
for all sectors of the economy, developing India’s position in export market, improving trade insufficiency and means of efficient governance. It
enhances way in to information, protects consumers, provides access to government services, makes skill creation and training more effective,
improves liberation of health services, and promotes simplicity. The present study found that the “A study on financial position and performance
analysis with special reference to Tata Consultancy Services” for a period of five years from 2010 -2011 to 2014 -2015. The data was collected from
the company’s annual reports and other related information was gathered from the journals and books. To know the financial ratio in IT sector
the researcher have taken Tata Consultancy Services for their study. In this research paper the data have been analyzed with the help of different
accounting and statistical techniques has used to know the financial soundness of “TATA CONSULTANCY SERVICES”.

KEYWORDS : Financial analysis, Economic growth, IT Sector, Financial Ratio.

INTRODUCTION which enables the clients to design, modify and update its automa-
It is the process of establishing and interpreting various financial tion process according to their needs and requirements.
analyses helping in creation of certain decisions. The analysis also is
not an end in itself. It is only a means of improved kind of financial STATEMENT OF THE PROBLEM
strengths and weaknesses of a firm. Economics of level for the in pro- TCS is one of the companies which could survive during the past
gression technology industry are high. Unlike other common indus- decade with extending its operations worldwide. The economic slow-
tries, the IT industry is knowledge – based. Well-organized operation down in the recent past has many sectors, for which IT sector is not
of skilled labour forces in the IT sector can help an economy realize an exception. It has also faced a lot of challenges – downsizing the
a rapid. The IT industry helps many other sectors in the growth de- employees, minimizing the operations, etc. with a view to cut the
velopment of the economy including the services and developed sec- costs. Even through the IT companies charge a huge amount for soft-
tors. They are also attracted in firm’s financial structure to the extent ware development, the pay and perquisites provided to the employ-
it affects firm’s earning and risk. Management of the firm would be ees are considerably high. Under these circumstances, an appraisal of
interested in every aspect of the financial analysis. It is their respon- the financial performance of Tata Consultancy Services is felt neces-
sibility to see that the funds are used most effectively and efficiently, sary.
and the firm’s financial situation is sound. Government is also interest-
ed in financial analysis report of the companies for various purposes. SCOPE OF THE STUDY
Example: Tax purposes etc. The investors get sufficient idea to decide The IT industry can serve as a middle of e-governance, as it assures
concerning the investments of their funds in the exact company. easy convenience to information. The use of information technolo-
gy in the service sector improves operational efficiency and adds to
COMPANY PROFILE transparency. It also serves as a middle of skill structure. Growth of IT
Tata Consultancy Services (TCS) is a leader in the global marketplace industries gets awareness from every corner. Example: job-seekers, In-
and among the top 10 technology firms in the world. Its continued vestors, government, competitors etc, and all requirements financial
rapid growth is a testament to the certainty its clients experience analysis of the companies for different purposes. Hence this research
every day. Building on more than 40 years of experience, TCS add real paper presents “A study on financial position and performance analy-
value to global organisations through domain expertise plus solu- sis with special reference to Tata Consultancy Services”.
tions with proven success in the field and world-class service. TCS is
an Indian multinational information technology (IT) services, business OBJECTIVE OF THE STUDY
solutions and outsourcing Services Company headquartered in Mum- To study the financial position and performance analysis of Tata Con-
bai, Maharashtra.TCS is a subsidiary of the Tata Group and is listed sultancy Services from the year 2010 - 2011 to 2014 - 2015.
on the Bombay Stock Exchange and the National Stock Exchange of
India. It is one of India’s most valuable companies and is the largest RESEARCH METHODOLOGY
India-based IT services company by 2012 revenues. It was founded in The present study’s core objective is to find out the financial position
1968.Its founder was JRD TATA. It’s headquarter is in Mumbai, Mahar- and performance analysis of Tata Consultancy Services. The researcher
ashtra, India. Its key people are: Ratan Tata (Chairman). TCS operates among various methods for analysing financial statement to deter-
in 46 countries. TCS is now placed among the ‘Big 4’ most valuable mine the overall financial strength business. Both primary and sec-
IT services brands worldwide.TCS is one of the largest private sec- ondary data has been used for the study.
tor employers in India, and the second-largest employer among listed
Indian companies.TCS had a total of over 300,000 employees as of SOURCE OF DATA
March 2015, of which 31% were women. The number of non-Indian Researchers have also contacted the concerned officials of the com-
nationals was 21,282 as at March 31, 2013 (7.7%).The employee costs pany as and when required. The Primary data has been collected
for the FY 2012-13 were US$4.38 billion, which was approx. 38% of from Personal Interaction with Finance department and other staff
the total revenue of the company for that period. In the fiscal year members. The secondary data is mainly used for the study. The ma-
2012-13, TCS recruited a total of 69,728 new staff, of whom 59,276 jor source of data for the study has been collected from the published
were based in India and 10,452 were based in the rest of the world. annual reports, profit and loss account of 5 year period from 2010 -
As of June 2014, TCS has over 3,00,000 employees. It is world’s third 2011 to 2014 - 2015 of the Tata Consultancy Services some more
largest IT employer behind IBM and HP. TCS’s ebusiness activities were information has been collected from different websites,magazines,of-
generating over US$ 500 million in annual revenues. TCS deputes its ficial publications, accounting records, text books and journals etc.,
employees abroad for rendering on site services at the clients’ places,
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DATA ANALYSIS Hence it is concluded that there is a positive growth of Tata Consul-
Financial analysis is an aspect of the overall business finance function tancy services from the year 2011 to 2015.
that involves examining historical data to gain information about the
current and future financial health of a company. Trade creditors are Null Hypothesis 2
interested in firm’s ability to meet their claims over a very short peri- There is no growth of Operating profit of Tata Consul-
od of time. Their analysis will, therefore, be confined to the evaluation tancy Services from the year 2011 to 2015
of the firm’s liquidity position. Suppliers of long – term debt, on the
other hand, are concerned with the firm’s long – term solvency and Model Summary
survival. They analysis the firm’s profitability over time, its ability to Adjusted Std. Error of the
generate cash and able to pay interest and repay principal. Long term R R Square R Square Estimate
creditors do analysis the historical financial statements and also put .959 .920 .894 1861.964
stress on the projected financial statements. Investors who have in-
vested their money in the firm’s shares are most concerned about the ANOVA
firm’s earnings. They focus on the analysis of the firm’s present and fu-
ture profitability. This is conclusion about the exact financial position Sum of Squares Df Mean Square F Sig.
of “Tata Consultancy Services”.
Regression 120251790.948 1 120251790.948

Residual 10400727.792 3 3466909.264 34.686 0.010**
(Rs in Crores)
Total 130652518.740 4
NET ABSOLUTE RETURN
YEAR PROFIT CURRENT LIQUID LIQUID ON NET Note: **represents significant at 1% level
RATIO RATIO RATIO RATIO WORTH
2010 - 2011 25.86 2.02 2.01 0.79 38.66 Coefficients
2011 - 2012 28.25 2.60 2.60 0.69 44.16 Unstandardized Standardized
2012 – 2013 26.40 2.49 2.49 0.66 39.27 Coefficients Coefficients T Sig.
2013 - 2014 28.57 3.68 3.68 1.71 41.94 B Std. Error Beta
2014 - 2015 26.17 3.27 3.27 1.61 42.40 Case Sequence -3467.734 588.805 -.959 -5.889 .010
Source: Annual Reports (Constant) 25806.690 1952.844 13.215 .001

STATISTICAL ANALYSIS
Null Hypothesis 1

There is no growth of Total Income of Tata Consultancy

services from the year 2011 to 2015
Table 1
Model Summary
R R Square Adjusted R Square Std. Error of the Estimate
.996 .992 .989 2075.519

ANOVA
Sum of Squares df Mean Square F Sig.
Regression 1533925597.806 1 1533925597.806
Residual 12923331.224 3 4307777.075 356.083 0.000** The above table shows that Operating profit of Tata Consultancy Ser-
Total 1546848929.030 4
vices from the year 2011 to 2015. It is observed from the study F value
Note: **represents significant at 1% level is 34.686 and corresponding p value is 0.010, which is less than 0.01.
Coefficients Therefore, the null hypothesis is rejected at 1% level of significant.
Hence it is concluded that there is a positive operating profit of Tata
Unstandardized Standardized Consultancy services from the year 2011 to 2015.
Coefficients Coefficients T Sig.
B Std. Error Beta Null Hypothesis 3
Case Sequence -12385.175 656.337 -.996 -18.870 .000 There is no growth of Net Profit of Tata Consultancy Ser-
(Constant) 90821.523 2176.822 41.722 .000 vices from the year 2011 to 2015
Model Summary
R R Square Adjusted R Square Std. Error of the Estimate
.979 .958 .945 1173.970

ANOVA
Sum of Squares df Mean Square F Sig.
Regression 95313471.949 1 95313471.949
Residual 4134613.583 3 1378204.528 69.158 0.004**
Total 99448085.533 4
Note: **represents significant at 1% level
Coefficients
Unstandardized Standardized
Coefficients Coefficients T Sig.
The above table shows that Total income of Tata Consultancy Services B Std. Error Beta
from the year 2011 to 2015. It is observed from the study F value is Case Sequence -3087.288 371.242 -.979 -8.316 .004
356.083 and corresponding p value is 0.000, which is less than 0.01. (Constant) 23074.702 1231.270 18.741 .000
Therefore, the null hypothesis is rejected at 1% level of significant.
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Null Hypothesis 5
There is no growth of Book value of share of Tata Consultancy
Services from the year 2011 to 2015

Model Summary
R R Square Adjusted R Square Std. Error of the Estimate
.980 .961 .948 13.347

ANOVA
Sum of Squares df Mean Square F Sig.
Regression 13183.435 1 13183.435
Residual 534.388 3 178.129 74.010 0.003**
Total 13717.823 4
Note: **represents significant at 1% level
The above table shows that Net profit of Tata Consultancy Services
from the year 2011 to 2015. It is observed from the study F value is Coefficients
69.158 and corresponding p value is 0.004, which is less than 0.01. Unstandardized Standardized
Therefore, the null hypothesis is rejected at 1% level of significant. Coefficients Coefficients t Sig.
Hence it is concluded that there is a positive net profit of Tata Consul- B Std. Error Beta
tancy services from the year 2011 to 2015. Case Sequence -36.309 4.221 -.980 -8.603 .003
(Constant) 278.657 13.998 19.907 .000
Null Hypothesis 4
There is no growth of Earning per share of Tata Consul-
tancy Services from the year 2011 to 2015
Model Summary
R R Square Adjusted R Square Std. Error of the Estimate
.979 .959 .946 5.937

ANOVA

Sum of Squares df Mean Square F Sig.

Regression 2483.146 1 2483.146

Residual 105.740 3 35.247

70.451 0.004** The above table shows that Book value of Tata Consultancy Services
Total 2588.885 4 from the year 2011 to 2015. It is observed from the study F value is
74.010 and corresponding p value is 0.003, which is less than 0.01.
Note: **represents significant at 1% level Therefore, the null hypothesis is rejected at 1% level of significant.
Hence it is concluded that there is a positive book value of Tata Con-
Coefficients sultancy services from the year 2011 to 2015.
Unstandardized Standardized FINDINGS
Coefficients Coefficients
T Sig. The Net profit ratio of the company increases year by year. A higher
B Std. Error Beta ratio is preferable, indicating higher profitability. As it denotes in-
creases in selling price without change in cost of goods sold respec-
Case Sequence -15.758 1.877 -.979 -8.393 .004 tively the management efficiency in operating business is successful.

(Constant) 117.734 6.227 18.908 .000 The Current Asset ratio of the company also good for all the years
from 2011 to 2015 as it indicates the company is working in an effi-
ciency manner.

The liquid ratio of the company is increased all the years from 2011
to 2015 the firm has the capacity to pay off its short term debts using
its liquid assets. Here in all the years the firm liquid ratio position was
good.

The absolute liquid ratio is useful only when used in conjunction with
current ratio and quick ratio. Throughout the years from 2013 the ra-
tio is low but from 2011 to 2015 the firm streamlined how to pay off
its liabilities.

The Return on Net worth of the company this ratio is of great impor-
tance to the present and prospective shareholders as well as the man-
agement of the company. Here in all the years from 2011 to 2015 the
The above table shows that Earning per share of Tata Consultancy company is following a steady process to return funds to the share-
Services from the year 2011 to 2015. It is observed from the study F holders and that is very well encourageble, so the investment from
value is 70.451 and corresponding p value is 0.004, which is less than the shareholders will increase so as the company grows.
0.01. Therefore, the null hypothesis is rejected at 1% level of signifi-
cant. Hence it is concluded that there is a positive Earning per share CONCLUSION
of Tata Consultancy services from the year 2011 to 2015. The information technology (IT) industry has become of the health-
iest industries in the world. IT, more than any other industry or
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economic side, has an improved productivity, particularly in the de-

veloped in the world, and therefore is a key in importance of global
economic growth. In this competitive environment, survival of every
company is a great challenge. The growth of a company can be meas-
ured in terms of its client base. However, the financial performance of
a company could be assessed by examining its liquidity profitability
and growth Liquidity is the ability of the firm to meet its liabilities.
It helps the creditors, banks and other financial institutions to make
decisions on lending to the concerned firm Profitability, on the other
hand, means the ability of the firm in earning profits and its efficiency
to utilize the assets towards maximizing the profits. The study con-
cludes that “TATA CONSULTANCY SERVICES” liquidity and solven-
cy position are considered satisfactory.

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