Project Report on Financial Analysis of Hcl

INTRODUCTION Set up in 1976 as one of India's one of a kind IT garage new organizations, today the HCL Group has reached out to four associations in India - HCL Infosystems, HCL Technologies, HCL Healthcare and HCL Talent Care. The social event makes yearly livelihoods of over US$ 6.5 billion with more than 105,000 specialists from 100 nationalities working more than 31 countries, including more than 500 reasons of region in India. A pioneer of current enlisting, HCL has various firsts amazingly including the presentation of the 8-bit microchip based PC in 1978 well before its overall partners.

HCL's development courses of action cover the entire cluster of organizations that fuse structure organization, application progression, BPO and advancement scattering. Another hopeful in social protection, HCL hopes to give innovative helpful organizations, things and planning to deal with the creating interest for quality therapeutic administrations in India. HCL Avitas, regarding Johns Hopkins Medicine International, is the human administrations movement arm of HCL Healthcare. HCL Talent Care is envisioned as a consolidated capacity game plans association keeping an eye all in all scope of employability needs in India.

HCL (Hindustan Computers Limited) Technologies Limited is an Indian overall IT organizations association headquartered in Noida, Uttar Pradesh. It offers organizations including programming directing, endeavor change, remote establishment organization, building and R&D organizations, and business strategy outsourcing (BPO).

HCL has working environments in 31 countries to give advantages across over industry verticals, including avionics & shield, essentialness & utilities, independent programming traders, creating, capable organizations, servers & limit, auto, cash related organizations, mechanical amassing, media & preoccupation, retail & buyer, telecom, customer devices, government, life sciences & human administrations, remedial devices, semiconductors, and travel, transportation & logistics.

OBJECTIVE

The objective of this project is simple. We aim at finding out the ratios of past three years. The ratio includes of Profitability ratios, Liquidity ratios, Capital structure analysis ratio, Activity analysis ratio, and so on. Once all these ratios are found out for all the three years. We compare them with each other. By doing this we can tell whether the company is in profit or loss. We can make statements whether the company is doing good or not. We can answer all such question i.e. is the company growing, Do we need to make any amendments. It helps the customers, stakeholders, investors. All these people can see whether the company is in profit or loss. This helps them in taking any decision in reference to the company. Every company’s financial report should be disclosed. And if we compare them with the previous years, it’s more appropriate. It even helps the company as the comparison can be helpful for them. They can judge whether they have to make any changes. This is the main objective of this study. That is to find out all the ratios and compare them with the previous year. This is important because it gives a clear picture of what is the company’s financial position is. And according to that the company takes further decisions. It is easy and more convenient for all, i.e. the customers, the stakeholders, and the shareholders. So, this is the main objective. We can state our aim according to the financial statements and the comparison. Our aim should be appropriate. It is very necessary for a company to compare its financial positions. Our aim is to provide the customers and the stakeholders with the comparison for them to take decision accordingly. It helps to know the areas which need more attention, areas that need improvement, to provide deeper analysis of profitability, liquidity, solvency and efficiency of business. If properly done, improves the user’s understanding with which the business is being conducted.

FINANCIAL TOOLS AND TECHNIQUES

Many financial ratios are being used to evaluate the company’s financial statements. All the ratios help us in analyzing the company’s current profit and losses, sales, purchases as well as past profit and losses, sales and purchases. The following ratios are being used here. (1)LIQUIDITY RATIO: Liquidity ratio is calculated to measure the liquidity of the business. It means the solvency of the business. They are analyzed by the current assets and liabilities in the balance sheet. This ratio includes another two ratios. These are as follows: (a.) Current ratio- Current ratio is the proportion of current assets to the current liabilities. It is shown as, Current assets ----------------------Current liabilities Current assets includes short term investments, cash, cash equivalents, stock, trade receivables etc and current liabilities includes short term borrowings, trade

payables etc. The excess of current assets over current liabilities provide a safety margin. (b) Quick ratio-It is the ratio of liquid assets to current liabilities. It is calculated as, Quick Assets ---------------------Current liabilities

Quick assets are those assets which can be converted into cash very easily. This ratio concentrates upon the capacity of the business to meet its short term obligations without any flaws. The ideal ratio is 1:1. Lower ratio is risky and higher ratio is unnecessary deployment of resources.

(2) SOLVENCY RATIO: Solvency ratio tells us the ability of the company to service its debt in long term. The following ratio comes under solvency ratio. - Debt Equity Ratio - Interest Coverage Ratio - Debt to Capital Employed Ratio - Proprietary Ratio - Total Assets to Debt Ratio

(a)Debt Equity Ratio-This ratio measures the relationship between the long term debts and equity. The ratio is as follows. Long term debts ----------------------Shareholder’s fund Where, *Shareholder’s fund = Share capital + reserve and surplus + against share warrants

Money received

(b) Debt to Capital Employed-It is the ratio of long term debts to the total external and internal funds. It is shown as follows: Debt -------------------------------Shareholder’s equity + debt

(c) Proprietary ratio-It shows the relationship of shareholder’s fund to net assets and is calculated as: Shareholder’s fund --------------------------------------Net assets or capital employed

(d)Total Assets to Debt ratio-This ratio measures the extent of the coverage of long term debts by assets. It is calculated as: Total assets

-------------------Long term debts (e) Interest Coverage ratio- It is the ratio which deals with the servicing of interest of loan. It measures the interest paid on long term debts. It reveals the number of times interest on long term debts is covered by the profit available. It is calculated as follows: Net profit before interest and tax -------------------------------------------Interest on long term debts (3) Activity Turnover Ratio-This ratio measures the speed at which, the activities are being performed. This ratio tells us about the number of times the assets employed are being turned into sales during an accounting period. Higher turnover means that better utilization of assets and signifies improved efficiency and profitability. There are four sub ratios in this. -Inventory Turnover -Trade Receivable Turnover -Trade Payable Turnover Net Assets Turnover

(a)Inventory Turnover ratio-It tells us on an average the number of times the inventory is converted into revenue from operations during an accounting period. It determines the number of times stock (inventory) is purchased during a year. It is calculated as follows: Cost from revenue from operations -----------------------------------------------

Average inventory (b)Trade receivable turnover ratio-It explains the relation between the credit revenue from operations and trade receivables. This ratio has emphasis on the number of times the receivables have turned over and converted into cash in an accounting period. It is calculated as follows: Net credit revenue from operations ----------------------------------------------Average trade receivables where, Average trade receivables = Opening debtor + Closing debtors/2 (c)Trade payable turnover ratio-This ratio indicates the pattern of payment of trade payables. This ratio is related to credit purchases and average trade payables. Lower ratio means the credit allowed by the supplier is low. Net purchases -----------------------------Average trade payable Average trade payable= Opening creditors + closing creditors /2

(d)Net Assets turnover ratio-It is associated with the revenue from operations and net assets. Higher the ratio means higher profitability and better activity. It basically means better utilization of resources Revenue from operations -------------------------------------Capital employed

(4) Profitability Ratio-The profitability is basically summarized in the profit and loss account. It is calculated to know the earning capacity of the firm. Under this, there are many more ratios which are used to analyse the profit and efficiency of the business. -Gross Profit Ratio -Net Profit Ratio -Operating Ratio -Operating Profit Ratio (a)Gross profit ratio-It tells us about the gross margin on the product sold. Low ratio indicates unfavorable sales. Gross profit*100 ----------------------------------Net Revenue of operations

(B)Net Profit ratio-It is basically related to the concept of profit. It measures the overall efficiency of the business. Net profit*100 ----------------------------------Revenue from operations

(c)Operating Ratio-It is the relationship between the cost of operation and revenue from operations. It includes all the expenses like selling, administrative, office etc. (Cost of revenue from operations + operating expenses)*100 -------------------------------------------------------------------------------------

Net revenue from operations (d)Operating Profit ratio-It is calculated to reveal operating margin of the business. It is very useful for inter firms and intra firms comparisons. Lower the ratio means good and healthy firm. Operating profit*100 -------------------------------Revenue from operations Where,Operating profit = Revenue from operations – Operating cost

(e) Return on Investment-This ratio tells us about the overall utilization of funds of a firm. It measures the returns in the business. It examines the efficiency of the business. Profit before Interest and Tax*100 ---------------------------------------------Capital Employed

RATIO ANALYSIS OF HCL TECHNOLOGIES (2011-2014)

LIQUIDITY RATIOS

CURRENT RATIO Current Ratio = Current Assets / Current Liabilities Current Assets= Current Investments + Inventories + Trade Receivables + Cash & Cash Equivalents + Short term loans & advances + Other current assets Current Liabilities=Short term borrowings + Trade Payables + Other Current Liabilities + Short Term Provisions

YEARS

2012

2013

2014

Current Assets

4678.71

8633.76

14006.52

Current Liabilities

3231.99

4586.03

5343.08

Current Ratio

1.44:1

1.88:1

2.62:1

LIQUID RATIO / QUICK RATIO / ACID TEST RATIO

Liquid Ratio = Liquid or quick assets / Quick Liabilities Liquid Assets = All current assets excluding inventories and prepaid expenses. Liquid Liabilities = All current liabilities excluding bank overdraft.

YEARS 

2012

2013

2014

Liquid Assets

4578.72

8551.92

13990.98

Liquid Liabilities

3231.99

4586.03

5343.08

Liquid Ratio

1.41:1

1.86:1

2.61:1

SOLVENCY RATIOS

DEBT EUITY RATIO Debt Equity Ratio = Debt/ Equity OR Long Term Debts / Shareholders Fund Debt = Long term borrowings + long term provisions Equity = Share capital + Reserves & surplus

YEARS

2012

2013

2014

Debt

688.83

698.64

202.73

Equity

6603.81

10232.73

15745.61

Debt equity ratio

0.10:1

0.068:1

0.012:1

TOTAL ASSET TO DEBT RATIO

Total asset to debt ratio = Total asset / Debt Total Asset = Current assets + Non current assets Debt = Long term borrowings + long term provisions

YEARS

2012

2013

2014

Total assets

10877.03

15959.33

21814.50

Debt

688.83

698.64

202.73

Total assets to debt 15.7:1 ratio

22.8:1

107.6:1

PROPRIETARY RATIO

Proprietary ratio = Proprietor’s funds / Total assets Proprietor’s funds = Shareholder’s funds ( Share capital + reserve & surplus) Total assets =Current assets + non current assets

YEARS

2012

2013

2014

Proprietor’s funds

6603.81

10232.73

15745.61

Toatal assets

10877.03

15959.33

21314.5

Proprietary ratio

0.607:1

0.64:1

0.72:1

ACTIVITY “OR” TURNOVER RATIOS

TRADE RECEIVABLES TURNOVER RATIO Trade receivables turnover ratio = Credit revenue from operations / Average trade receivables Credit revenue from operations = Revenue from operations operations

– Cash revenue from

Average trade receivables = Opening trade receivables + Closing trade receivables /2

YEARS 

2012

Credit revenue from 8907.22 operations

2013

2014

12517.82

16497.37

Average receivables

trade 1824.84

Trade receivables 4.88:1 turnover ratio

2350.81

2966.7

5.32:1

5.56:1

TRADE PAYABLES TURNOVER RATIO

Trade payables turnover ratio = Net Credit Purchases / Average Trade Payables Trade payables = Trade creditors + Bills payables Average trade payable = opening trade payables + closing trade payables / 2

YEARS 

2012

2013

2014

Net credit purchases

8907.22

12517.82

16497.37

Average payables

trade 1446.72

Trade payables 6.15:1 turnover ratio

4047.73

8663.44

3.09:1

1.09:1

WORKING CAPITAL TURNOVER RATIO

Working capital turnover ratio = Revenue from operations / Working capital Working capital = Current assets - Current liabilities

YEARS Revenue operations

Working capital

2012

2013

2014

from 329,103

345,518

403,684

121,486

122,602

177,190

Working capital 2.70:1 turnover ratio

2.8:1

2.27:1

PROFITABILITY RATIOS

GROSS PROFIT RATIO Gross Profit Ratio = (GrossProfit*100) / Revenue from operations Gross profit = Revenue from operations – Cost of revenue from operations

YEARS

2012

2013

2014

Gross profit

10226.39

10627.51

15347.9

Revenue operations

from 8907.22

Gross profit ratio

1.14:1

12517.82

16497.37

1.84:1

1.93:1

NET PROFIT RATIO

Net Profit Ratio = ( Net profit*100) / Revenue from operations Net Profit = Gross profit + other incomes – indirect expenses – tax

YEARS

2012

2013

2014

Net profit

2360.74

4451.20

7397.66

Revenue operations

Net profit ratio

from 8907.22

1.26:1

12517.82

16497.37

1.35:1

1.44:1

GRAPHICAL REPRESENTATION OF THE RATIOS

1. CURRENT RATIO

2.5

2

1.5 2012 2013 1

2014

0.5

0 Current ratio

2. QUICK RATIO / ACID TEST RATIO

2.5

2

1.5 2012 2013 1

2014

0.5

0 Quick Ratio

3) DEBT EQUITY RATIO

0.05 0.04 0.04 0.03 0.03

2012 2013

0.02

2014

0.02 0.01 0.01 0 Debt equity ratio

4) TOTAL ASSET TO DEBT RATIO

160 140 120 100 2012

80

2013 2014

60 40 20 0 Total asset to debt ratio

5) PROPRIETARY RATIO

0.8 0.7 0.6 0.5 2012

0.4

2013 2014

0.3 0.2 0.1 0 proprietary ratio

6) TRADE RECEIVABLES TURNOVER RATIO

5 4.5 4 3.5 3 2012

2.5

2013

2

2014

1.5 1 0.5 0 Trade receivables turnover ratio

7) TRADE PAYABLES TURNOVER RATIO

0.8 0.7 0.6 0.5 2012

0.4

2013 2014

0.3 0.2 0.1 0 Trade payables turnover ratio

8) WORKING CAPITAL TURNOVER RATIO

3 2.5 2 2012

1.5

2013 2014

1 0.5 0 Working capital turnover ratio

9) GROSS PROFIT RATIO

25

20

15 2012 2013 10

2014

5

0 Gross profit ratio

10) NET PROFIT RATIO

25

20

15 2012 2013 10

2014

5

0 Net profit ratio

CONCLUSION

The forward-looking announcements contained in this identify with HCL's feelings regarding future events, a huge bit of which are by their slant, inherently questionable and outside Wipro's control. Such clarifications consolidate, yet are definitely not limited to, decrees regarding HCL's advancement prospects, its future cash related working results, and its game plans, cravings and points. Wipro alarms perusers that the forward-looking declarations contained in this manner are subject to threats and insecurities that could achieve genuine results to fluctuate physically from the results anticipated by such announcements. Such threats and vulnerabilities join, however are not confined to, risks and dangers concerning in our pay, pay and advantages, our ability to deliver and direct improvement, phenomenal competition in IT advantages, our ability to keep up our cost good position, pay augments in India, our ability to draw in and hold significantly skilled specialists, time and cost attacks on settled worth, changed course of events contracts, client center, restrictions on movement, our ability to manage our overall operations, diminished enthusiasm for advancement in our key focus zones, unsettling influences in telecom sorts out, our ability to successfully complete and consolidate potential acquisitions, hazard for damages on our organization gets, the accomplishment of the associations in which we make key theories, withdrawal of money related authoritative propelling powers, political feebleness, war, true blue controls on raising capital or picking up associations outside India, unapproved usage of our ensured advancement, and general budgetary conditions affecting our business and industry. Additional threats that could impact our future working results are more totally delineated in our filings with the United States Securities and Exchange Commission, including, however not confined to, Annual Reports on Form 20-F.

REFERENCES

1) HCL Technologies. 2) S.N. Maheshwari 3) Wikipedia