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Guys this is the Ratio analysis comparision which me and our group did on IBM and TCS... However we did not give the explaination as to why it rose or fell down..!! thank u :)
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Presented By:
Ujaas Madhan
Dharmender Goyal
Kunal Raj
Ashish Anurag
Prakash Kumar
19 October 2014 1
Comparison Of ratios of TCS AND IBM
Important ratio analysis of TCS and IBM
Following Ratios are compared:
Profitability Ratio.
Liquidity Ratio.
Leverage Ratio.
Activity Ratio.
Market/Shareholder’s Ratio.
19 October 2014 2
Comparison Of ratios of TCS AND IBM
It is assumed that $1=Rs 62.
Figures of IBM are in Rs Million.
Figures of TCS are in Rs Crores.
Only important ratios are compared in each type of ratios.
19 October 2014
Comparison Of ratios of TCS AND IBM 3
In Profitability Ratios, the profit is compared to sales, that is, profit is expressed as a percentage of sales.
Types of Profitability Ratios: Gross Profit Ratio. Net Profit Ratio. Return on Investment. Operating Profit Ratio. Return on Shareholder Funds. Return on Equity.
19 October 2014 4
Comparison Of ratios of TCS AND IBM
Gross Profit measures the percentage of gross profit to sales.
Higher the Gross Profit ratio better it is.
CALCULATIONS
TATA CONSULTANCYSERVICES(TCS)
International Business Machine (IBM)
GP= Gross Profit *100Sales
GP= Gross Profit *100Sales
= 6,238 *10081,809
= 7.62%
= 1,79,056 *1002,67,240
= 67.10%
19 October 2014 5
Comparison Of ratios of TCS AND IBM
Operating Profit ratios measures the percentage of operating profit (EBIT) in comparison to sales.
19 October 2014 6
CalculationsTCS IBM
Operating Profit Ratios= Operating Profit *100
Sales
Operating Profit Ratios= Operating Profit *100
Sales
= 19,331 *10081,809
= 23.63%
= 1,34,602 *1002,67,240
= 50.36%
Comparison Of ratios of TCS AND IBM
Net profit ratio measures the percentage of net profit in comparison to sales.
NP=GP-Indirect Expenses +Indirect Incomes
CalculationsTCS IBM
Net Profit= Net Profit *100 Sales
Net Profit= Net Profit *100 Sales
= 19,163*10081,809
= 90,272 *1002,67,240
= 23.42% = 33.72%
19 October 2014 7Comparison Of ratios
of TCS AND IBM
Total Investment in a business represents the fixed assets plus working capital.
ROI measures the effectiveness of investment in the business.
Calculations
TCS IBM
ROI= Net Profit+Interest*{1-Tax}*100Total Investment
= Net Profit+Interest*{1-Tax}*100Total Investment
= 19,163 * 100 24,240+67,137-15,670
= 25.31%
= 1,34,602 *10021,31,060
= 6.31%
19 October 2014 8
Comparison Of ratios of TCS AND IBM
It indicate the earnings with respect to the owner’s equity.
Owner’s equity represents equity capital and reserves.
CalculationsTCS IBM
ROE= Net Profit * 100 Equity Share Capital
ROE= Net Profit * 100 Equity Share Capital
= 19,163 * 10048,487
= 7,78,879 *10019,42,342
= 39.52% = 40.10%
19 October 2014 9
Comparison Of ratios of TCS AND IBM
This ratio compares the net profit with the shareholders funds and is calculated as follows:
Calculations
TCS IBM
Return on sh.holder fund Return on sh.holder fund
= Net Profit * 100Shareholder’s Funds
= 19,163 * 10049,194
= 38.95%
= Net Profit * 100Shareholder’s Funds
= 90,272 *10019,42,342
= 4.64%
19 October 201410
Comparison Of ratios of TCS AND IBM
Liquidity ratio measures the company’s ability to generate cash resources to meet its current obligations.
Types of Liquidity Ratios :
Current Ratio
Quick/Acid-Test Ratio
19 October 201411
Comparison Of ratios of TCS AND IBM
Current ratio measures the current assets in comparison to current liabilities.
The ideal ratio for current ratio is 2:1.
CalculationsTCS IBM
Current Ratio= Current AssetsCurrent Liabilities
Current Ratio= Current AssetsCurrent Liabilities
= 42,89715,670
=1,11,4761,88,666
= 2.74:1 = 0.59:1
19 October 201412
Comparison Of ratios of TCS AND IBM
It is computed by taking quick assets that are readily convertible into cash.
Calculations
TCS IBM
QR= Current Assets-InventoryCurrent Liabilities
QR= Current Assets-InventoryCurrent Liabilities
= 42,88215,670
= 77,3531,88,666
= 2.73:1 = 0.41:1
19 October 201413
Comparison Of ratios of TCS AND IBM
Leverage ratio measures the extent of risk that the company takes by introducing debt into finance.
Types Of Leverage Ratio:
Debt-Equity Ratio
Proprietary Ratio
Interest Coverage Ratio
Total Debt To Total Assets
19 October 201414
Comparison Of ratios of TCS AND IBM
It indicates the proportion of debt in relation to equity.
A heavy debt in capital is considered risky.
CalculationsTCS IBM
Debt equity ratio= Debt
equity
Debt equity ratio= Debt
equity
= 12748,487
= 17,05,24819,42,342
=0.0026:1 = 0.877:1
19 October 201415
Comparison Of ratios of TCS AND IBM
It indicates the share of shareholder’s funds with respect to total tangible assets.
It helps us to know whether the amount of capital used in business is adequate.
CalculationsTCS IBM
Proprietary Ratio= shareholder fund
Tangible Assets
Proprietary Ratio= shareholder fund
Tangible Assets
= 48,48766,897
= 19,42,34224,88,556
= 0.724:1 = 0.78:1
19 October 2014 16Comparison Of ratios of TCS AND
IBM
It is used to ensure that a company’s earnings are sufficient to meet its interest liabilities.
If ratio is greater than 1, the interest payment can be covered.
CalculationsTCS IBM
ICR= EBITInterest
ICR= EBITInterest
= 19,3311680
= 1,34,60223,746
= 11.506 Times = 5.668 Times
19 October 2014 17Comparison Of ratios of TCS AND
IBM
It indicates that the company has sufficient assets to meet its debt obligations.
CalculationsTCS IBM
TDTAR= Total DebtTotal Assets
TDTAR= Total DebtTotal Assets
= 25467,137
= 17,05,24824,88,556
= 0.00378:1 = 0.68:1
19 October 201418
Comparison Of ratios of TCS AND IBM
Activity Ratio reflect the efficiency in the utilization of assets. These ratios indicate how fast the assets are turned into revenues.
Types Of Activity Ratios: Inventory Turnover Ratio Average Days Of Inventory Debtors Inventory Ratio Average Days Of Debtors Creditors Turnover Ratio Average Days Of Creditors Net Working Capital Turnover Ratio
19 October 201419
Comparison Of ratios of TCS AND IBM
It indicates the number of times the inventory is turned over i.e, how faster stock is converted to sales. Higher the ratio better it is.
CalculationsTCS IBM
ITR= COGSAverage Inventory
ITR= COGSAverage Inventory
= 75,571{21,000+15,000}/2
= 88,184{8,122+8,256}/2
= 4.2 Times = 10.77 Times
19 October 201420
Comparison Of ratios of TCS AND IBM
The Velocity of Inventories is expressed as number of days of inventories carried by the company as at the balance sheet date.
CalculationsTCS IBM
ADOI= 365Inventory Turnover
ADOI= 365Inventory Turnover
= 3654.2
= 36510.77
= 87 Days = 34 Days
19 October 2014 21Comparison Of ratios of TCS AND
IBM
It indicates the number of times debtors are turned over in a year.
If the turnover is high, it means that the company’s credit collection is efficient.
CalculationsTCS IBM
DTR= Credit SalesAverage Debtor
DTR= Credit SalesAverage Debtor
= 81,809{14,095+18,230}/2
= 2,67,240{14,880+15,020}/2
= 5.061 Times = 17.87 Times
19 October 201422
Comparison Of ratios of TCS AND IBM
The Velocity of debtors is expressed by the number of days of credit sales.
CalculationsTCS IBM
ADOD= 365Debtors Turnover
ADOD= 365Debtors Turnover
= 3655.061
= 36517.87
= 72 Days = 21 Days
19 October 201423
Comparison Of ratios of TCS AND IBM
It represents the number of days of creditors to credit purchases. Reasonable CTR indicates credit terms are negotiated.
CalculationsTCS IBM
CTR= Credit PurchasesAverage Creditors
CTR= Credit PurchasesAverage Creditors
= 29,570{4269+5536}/2
= 86428{4996+6058}/2
= 6.03 Times = 15.63 Times
19 October 201424
Comparison Of ratios of TCS AND IBM
The Velocity of Creditors can be expressed as number of days of credit purchases.
CalculationsTCS IBM
ADOC= 365Creditors Turnover
ADOC= 365Creditors Turnover
= 3656.03
= 36515.63
= 61 Days = 23 Days
19 October 201425
Comparison Of ratios of TCS AND IBM
It measure the effectiveness of the management of working capital.
CalculationsTCS IBM
NWCTR= SalesNet Working Capital
NWCTR= SalesNet Working Capital
= 81,809{42,897-15,670}
= 2,67,240{148378-101794}
= 3.01 Times = 5.74 Times
19 October 2014
26
Comparison Of ratios of TCS AND IBM
These Ratios are useful to the company to evaluate the company’s performance.
Types of Market Ratio:
Earning Per Share (EPS)
Price Earnings Ratio
Dividend Per Share(DPS)
19 October 201427
Comparison Of ratios of TCS AND IBM
The ratio reflects the earnings of the company for a specific period, per equity share.
CalculationsTCS IBM
EPS= Net Income of equity shareholdersNumber of equity shares outstanding
EPS= Net Income of equity shareholdersNumber of equity shares outstanding
EPS = 19,163197.566
EPS= 3265 = 2.618521
= Rs 97.67 Per Share =2.61* 62($ to rupees) = Rs 161.82 Per Share
19 October 201428
Comparison Of ratios of TCS AND IBM
It is the relationship between the market price and EPS.
Increase in Market price and EPS will increase PE ratio.
CalculationsTCS IBM
PER= Market Price Per ShareEPS
PER= Market Price Per ShareEPS
= 210097
= 6448164.30
= 21.64 Times = 39.24 Times
19 October 201429
Comparison Of ratios of TCS AND IBM
It measures the amount of dividend declared per equity shareholder. It is calculated as follows:
CalculationsTCS IBM
DPR= Equity dividends paidEarning for equity shareholders
DPR= Equity dividends paidEarning for equity shareholders
= 5162197.566
= 2682128652
= Rs 26.11 Per Share = Rs 31 Per Share
19 October 201430
Comparison Of ratios of TCS AND IBM
19 October 2014
Comparison Of ratios of TCS AND IBM
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