UTTAR PRADESH RAJARSHI TANDON OPEN

UNIVERSITY, PRAYAGRAJ

MINI PROJECT REPORT ON FINANCIAL

ANALYSIS OF TCS

MASTER OF COMMERCE (M.COM)

Submitted By
SHASHWAT MISRA
ENROLLMENT NUMBER: - 242051214312743
CENTRE CODE: - S051
CENTRE NAME: - ISHWAR SHARAN DEGREE
COLLEGE, PRAYAGRAJ
SESSION: - 2024-2025
SEMESTER: - I ST
PAPER CODE: - M.COM 106
 ACKNOWLEDGEMENT

I would like to express my sincere gratitude to everyone who

supported me throughout this project on Financial Analysis of TCS
(Tata Consultancy Service). First and foremost, I am deeply thankful
to my course coordinator, Mr. Gaurav Sankalp, for his invaluable
guidance, patience, and encouragement. His expert insights and
constructive feedback were instrumental in shaping this project, and
his dedication to supporting my efforts has been truly inspiring.
I am also grateful to my professors, classmates, and friends who
offered their assistance and encouragement. Their support has been a
constant source of motivation, and their advice helped me in various
aspects of the research and writing process.
Finally, I extend my heartfelt appreciation to my family for their
unwavering support and understanding throughout the duration of this
project. This accomplishment would not have been possible without
their love and encouragement.
Thank you all for your guidance, support, and belief in my work.

SHASHWAT MISRA
ENROLL. NO. 242051214312743
 Introduction to Financial Analysis

Financial analysis is a systematic approach to evaluating a company's financial

health, performance, and stability. It involves assessing financial statements,
ratios, and trends to gain insights into a company’s profitability, liquidity,
efficiency, and solvency. By studying these elements, stakeholders including
investors, creditors, and management can make informed decisions. Financial
analysis helps identify strengths and weaknesses within a company's operations
and provides guidance for future planning and investment.

The significance of financial analysis lies in its ability to provide a clear picture
of how well a company is managing its resources and generating returns. It
offers a foundation for comparing performance across companies and industries,
and it enables predictions regarding a company’s future growth, profitability,
and risk. For investors, it provides data-driven insights, allowing them to gauge
the company’s potential and risk profile. For management, financial analysis
aids in refining strategies to achieve operational and financial objectives.

Financial analysis serves as a crucial tool for assessing a company's financial

stability, operational efficiency, and overall performance. By examining a
company's financial statements namely, the balance sheet, income statement,
and cash flow statement financial analysts and stakeholders can derive valuable
insights about the company's current and future standing. The primary purpose
of financial analysis is to identify trends, assess risks, and measure a company's
profitability, liquidity, solvency, and efficiency.

Role in Assessing Company Performance

Through financial analysis, stakeholders can interpret how effectively a
company uses its resources, navigates economic cycles, and maintains
competitiveness. For example, a growing profitability ratio might signal
operational efficiency, while a declining solvency ratio could indicate an over-
reliance on debt financing. By revealing these underlying metrics, financial
analysis empowers stakeholders to make decisions based on objective data,
reducing risk and maximizing potential returns.
 INTRODUCTION TO TCS AND ITS STANDING IN IT
SECTOR

Tata Consultancy Services (TCS) is a leading global provider of IT services,

consulting, and business solutions. Established in 1968 and headquartered in
Mumbai, India, TCS operates in over 50 countries and serves clients across
diverse industries. It is a subsidiary of the Tata Group, one of India’s most
respected conglomerates, and is renowned for its innovative solutions, cutting-
edge technology, and robust operational framework.

In the IT sector, TCS is recognized as one of the world’s largest IT services

firms, both in terms of revenue and market capitalization. Known for its
resilience, strong financial position, and commitment to sustainability, TCS has
consistently been a top performer in the industry. As a financial analysis subject,
TCS offers a valuable case study in understanding how a well-managed IT giant
achieves stability and growth, even amid global challenges and technological
disruption.
Tata Consultancy Services (TCS) is a multinational technology company that
provides IT services, consulting, and business solutions. Headquartered in
Mumbai, India, TCS is a part of the Tata Group and operates in over 46
countries.
TCS is one of the largest IT services companies in the world and is known for
its focus on innovation and digital transformation. The company has a strong
presence in various industries, including banking, financial services, insurance,
healthcare, manufacturing, and telecommunications.
TCS offers a wide range of services, such as application development and
maintenance, business process outsourcing, cloud computing, cybersecurity, and
digital transformation solutions. The company is committed to providing high-
quality services and solutions to its clients.
TCS has a significant global presence, serving clients across various industries.
The company is particularly strong in sectors like banking, financial services,
insurance, healthcare, and manufacturing. It offers a comprehensive range of
services, including application development and maintenance, business process
outsourcing, cloud computing, cybersecurity, and digital transformation
solutions.
TCS is known for its large and skilled workforce, its commitment to quality and
customer satisfaction, and its ability to deliver complex IT projects on time and
within budget. The company has a strong track record of financial performance
and has consistently outperformed its peers in terms of revenue growth and
profitability.
In recent years, TCS has been actively investing in emerging technologies such
as artificial intelligence, machine learning, and the Internet of Things. This
focus on innovation has helped the company maintain its competitive edge and
position itself as a leader in the digital age.

Commitment to Innovation and Digital Transformation

TCS has strategically focused on driving digital transformation through its
innovative platforms and research in emerging technologies. It has heavily
invested in research and development, fostering a culture of continuous
improvement and advancement in areas like artificial intelligence, blockchain,
Internet of Things (IoT), and automation.

Sustainability and Corporate Responsibility

As part of the Tata Group, TCS is committed to corporate social responsibility
and sustainability. It undertakes various initiatives to reduce its carbon footprint,
contribute to community development, and promote educational and healthcare
programs. The company has received numerous accolades for its efforts in
corporate governance, sustainability, and workplace culture, reinforcing its
reputation as an ethically responsible and socially committed organization.
 OBJECTIVE AND SCOPE OF THE ANALYSIS

PURPOSE OF THE ANALYSIS

The primary objective of this financial analysis is to assess and evaluate the
financial health, performance, and strategic position of Tata Consultancy
Services (TCS). By examining key financial metrics, including profitability,
liquidity, efficiency, and solvency, this analysis aims to provide a
comprehensive understanding of TCS’s ability to sustain growth, manage risks,
and generate returns for its stakeholders.

The purpose of this analysis is to:

1. Evaluate TCS's financial performance: By analysing TCS's financial
statements, including the balance sheet, income statement, and cash flow
statement, the goal is to assess the company’s profitability, operational
efficiency, and long-term financial stability.
2. Understand the company's financial trends: By reviewing multiple years
of financial data, this analysis aims to identify key trends in revenue growth,
cost management, and profitability.
3. Compare TCS with industry benchmarks: The analysis will benchmark
TCS's financial performance against other major players in the IT services
sector, providing insight into its competitive position.
4. Provide insights for decision-making: The findings of this financial
analysis will help investors, management, and stakeholders make informed
decisions regarding investments, business strategies, and potential risks.

This analysis will focus on identifying both the strengths and weaknesses of
TCS’s financial performance, ultimately enabling a deeper understanding of the
company's market standing and its ability to maintain sustainable growth in the
competitive global IT landscape.
SCOPE OF THE ANALYSIS

The scope of this analysis includes an in-depth examination of TCS's financial

statements over a defined period, covering the following areas:

1. Financial Statement Analysis: Analysis of financial statements like the

balance sheet, profit and loss statement and cash flows statement helps to get an
idea about the overall stability and performance of the company.
2. Profitability Analysis: Assessment of TCS's revenue growth, operating
margins, net income, and return on equity (ROE), to understand the company's
ability to generate profits from its operations.
3. Liquidity Analysis: Evaluation of TCS's ability to meet its short-term
obligations, based on liquidity ratios such as the current ratio and quick ratio.
4. Solvency and Leverage Analysis: Examination of TCS's long-term financial
stability, focusing on debt levels, interest coverage ratios, and overall solvency.
5. Efficiency Analysis: Review of key efficiency ratios, such as asset turnover
and working capital management, to determine how well TCS utilizes its assets
to generate revenue.
6. Market Performance: Evaluation of TCS’s stock performance, valuation
metrics (like P/E ratio), and dividend policies, to assess how investors view the
company’s future prospects.
7. Risk and Financial Stability Assessment: In addition to profitability and
efficiency, this analysis will evaluate TCS’s ability to manage financial risk,
particularly in relation to external market conditions.

FINANCIAL PERIOD COVERED

The financial analysis will focus on TCS's performance over the last fiscal year,
covering the period from [Fiscal Year 2023-2024] in which the statements of
both the years are taken into consideration along with a basic trend followed for
last five years. This time frame will allow for a comprehensive understanding of
the company's financial trajectory, highlighting any significant changes, trends,
and reactions to market or economic conditions.
RESEARCH METHODOLOGY

The research methodology for this study on the financial analysis of Tata
Consultancy Services (TCS) involves a combination of descriptive,
comparative, and quantitative analysis. This approach will allow for an in-depth
understanding of the company’s financial health, performance, and its position
within the global IT industry.

1. Research Design
This study is exploratory and analytical in nature. The goal is to analyse the
financial performance of TCS using data from its published financial reports,
which will be examined using financial ratios and other tools to assess its
profitability, liquidity, efficiency, and solvency. Additionally, comparisons will
be made with key competitors in the IT services sector to benchmark TCS's
performance.

2. Data Collection
The data for this study will be primarily secondary data sourced from the
following:
(i) TCS’s Annual Reports: These reports will provide the financial statements
(income statement, balance sheet, and cash flow statement) for the selected
years, along with management commentary and notes on financial performance.
(ii) TCS's Investor Relations Website: This site will provide up-to-date
information on TCS's financial performance, quarterly results, and other
investor-related reports.
(iv) Industry Reports and Market Analysis: Reports from industry analysis
firms (e.g., Gartner, IDC, or McKinsey) and market research platforms will
provide insights into the broader trends in the IT services sector, as well as the
competitive landscape.
(v) Other Financial Databases: Information from financial platforms like
Bloomberg, Reuters, or Yahoo Finance may be used to gather additional
financial metrics, stock performance, and historical data for comparison
purposes.
3. Financial Tools and Techniques

The analysis will use various financial tools and techniques, including:
1. Ratio Analysis: To assess key financial indicators, such as profitability ratios
(e.g., Return on Equity, Return on Assets), liquidity ratios (e.g., Current Ratio,
Quick Ratio), efficiency ratios (e.g., Asset Turnover), and solvency ratios (e.g.,
Debt-to-Equity Ratio).
2. Trend Analysis: To identify and analyse significant patterns or changes in
TCS’s financial performance over the period of study (2018–2023).
3. Benchmarking: Comparing TCS’s financial ratios and performance metrics
against industry standards and key competitors (e.g., Infosys, Wipro) to gauge
its relative position in the market.
4. Cash Flow Analysis: Assessing the inflow and outflow of cash within the
company to understand its liquidity and operational efficiency.

4. Data Analysis and Interpretation

Once the data is collected, the financial statements of TCS will be analysed to
derive key ratios and metrics. These ratios will be compared against industry
norms and competitors to interpret the company’s financial health and
performance over the study period. The analysis will also involve:
1. Trend analysis to highlight the company's growth trajectory and key financial
developments.
2. Ratio comparison to assess how TCS stands in comparison to other firms in
the IT services sector.
3. Financial forecasting where applicable, based on historical data, to provide
insights into potential future performance.
4. Interpretation of Key Findings After the data is analysed, the results will be
interpreted to draw conclusions about TCS’s overall financial health.
5. Limitations of the Study

While this research aims to provide an in-depth analysis of TCS’s financial

performance, there are certain limitations:
1. Dependence on Secondary Data: The study relies on publicly available
secondary data, which may not always provide a complete picture, especially
for non-financial aspects like internal strategies or market sentiment.
2. Market Fluctuations: External market conditions, economic events, or
sudden changes in technology trends may impact TCS’s performance, and these
are difficult to fully account for in a purely financial analysis.

Below is a graph showing the last five-year growth of TCS to get a basic
understanding of the financial performance of the company.
 ANALYSIS OF THE COMPANY

Horizontal and Vertical Analysis are two important techniques used in financial
statement analysis to assess a company's performance and financial health. Both
of these methods involve comparing financial data over time and analysing the
structure of financial statements. Here's a detailed explanation of each:

1. Horizontal Analysis
Horizontal Analysis is a method that involves comparing financial data over a
series of periods. The main goal of horizontal analysis is to identify trends and
growth patterns in a company's financial performance over time.
Horizontal analysis examines the percentage change in financial figures over a
period of time (usually multiple years). It helps to analyse trends in revenue,
expenses, profits, and other financial metrics.
How it Works: In horizontal analysis, each line item in the financial statement
is compared with the same line item in previous years to determine the dollar
amount change and the percentage change.

Formula for Horizontal Analysis:

Current year value – Previous year value × 100
Previous year value

Example: If TCS’s revenue was ₹50,000 crore in 2022 and ₹55,000 crore in
2023, the horizontal analysis would be:
55000 – 50000 ×100
50000

This indicates a 10% increase in revenue from 2022 to 2023.

Interpretation: Horizontal analysis helps to identify:
 Growth trends: Whether the company is experiencing growth or decline.
 Consistency: Whether growth is consistent across multiple years.
 Volatility: If certain periods show large fluctuations in financial
performance.
Horizontal analysis is useful for detecting emerging trends, understanding the
company's trajectory, and making forecasts.

2. Vertical Analysis
Vertical Analysis is a method of analysing financial statements by expressing
each line item as a percentage of a base item. It provides insight into the relative
size of each financial component within the overall structure of the financial
statement.
In vertical analysis, every item on a financial statement (income statement or
balance sheet) is presented as a percentage of a base item (for the income
statement, this is usually total revenue; for the balance sheet, it is total assets).
How it Works: In the income statement, vertical analysis compares each line
item as a percentage of total revenue. In the balance sheet, each line item is
expressed as a percentage of total assets. This allows for easy comparison across
periods, companies, or industries.

Formula for Vertical Analysis (Income Statement):

Percentage of Total Revenue = Line-Item Value ×100
Total Revenue

Formula for Vertical Analysis (Balance Sheet):

Percentage of Total Revenue = Line-Item Value ×100
Total Assets

Example: If TCS’s total revenue in 2023 is ₹60,000 crore and its cost of goods
sold (COGS) is ₹40,000 crore, the vertical analysis would be:
 COGS Percentage = 40000 × 100 = 66.67%
60000
This indicates that the cost of goods sold accounts for 66.67% of TCS’s total
revenue.
Interpretation: Vertical analysis helps to understand:
 Cost Structure: It provides insights into how much of the company's
revenue goes into various costs (e.g., COGS, operating expenses, taxes).
 Profit Margins: By comparing net income as a percentage of total
revenue, it shows how much profit the company retains after all expenses.
 Efficiency: It helps identify if certain expense categories are growing
disproportionately to revenue.
 Comparison with Industry Norms: It allows for comparison with
industry averages or competitors, which can highlight strengths or areas
for improvement.

Applications in Financial Analysis of TCS

Both horizontal and vertical analysis are valuable for conducting a detailed
financial analysis of TCS:

Horizontal Analysis: This can be used to examine TCS’s revenue growth,

profit trends, and expenses over time. For example, you can track the increase in
revenue, operating income, or net profit over several years to identify consistent
growth or periods of instability.
Vertical Analysis: This can be used to examine the proportion of costs in
relation to revenue, or to analyse the structure of TCS’s balance sheet. For
example, you might use vertical analysis to evaluate TCS’s operating expenses
relative to its total revenue or to analyse the proportion of debt versus equity in
its capital structure.

By combining both methods, you can gain a comprehensive understanding of

TCS's financial trends, cost structure, and overall financial health.
FINANCIAL STATEMENTS
OF TCS AND ITS ANALYSIS
 Equity n
Consolidated Balance Sheet t
S
h l
a i
r a
ASSETS e b
Non-current assets i
c l
Property, plant and i
equipment Capital a
work-in-progress p t
i i
Right-of- e
use assets t
Goodwill a s
Other intangible assets l
Financial assets F
Investm O i
ents t n
Trade h a
receivabl e n
es r c
B i
i e a
l q l
l u
e i l
d t i
y a
U b
n i
b Equity l
i attri
buta i
l t
l ble
to i
e e
d shar
ehol s
Loans Lea
ders se
Other financial of liab
assets Deferred tax the iliti
assets (net) Income Com es
tax assets (net) pan O
Other assets y t
Total non- Non h
current assets - e
Current assets cont r
Inventories rolli
ng f
Financial inte i
assets rest
Investm n
s a
ents T
Trade n
o c
receivabl t
es i
a a
B l
i l
l e
l l
q i
e u
d a
i b
t i
U y
n l
b i
i t
l i
l L e
e i s
d a
b E
Cash and cash i m
equivalents Other l p
balances with i l
banks Loans t o
i y
Other e e
financial assets s e
Income tax No
assets (net) n b
Other assets - e
c n
Total current assets u e
TOTAL ASSETS r f
EQUITY AND LIABILITIES r i
e t
 obligations Deferred tax
liabilities (net) Unearned
and deferred revenue
Total non-current
liabilities Current (` crore)
liabilities
Financial
liabilities 9,376 10,230
Lease
liabilities 1,564 1,234
Trade 7,886 7,560
payables 1,832 1,858
Other financial liabilities 510 867
Unearned and deferred
revenue Other liabilities 281 266
Provisions 127 149
Employee benefit 16 199
obligations Income 2 173
tax liabilities (net)
Total current liabilities
TOTAL EQUITY AND LIABILITIES 3,272 2,149
3,403 3,307
1,600 2,583
3,596 2,806
33,465 33,381
28 28

31,481 36,897

44,434 41,049
9,143 8,905
9,016 7,123
4,270 3,909
491 1,325

1,703 1,319
151 8
12,267 9,707
1,12,984 1,10,270
1,46,449 1,43,651

362 366
90,127 90,058
90,489 90,424
830 782
91,206

6,516 6,203
365 353
686 536
977 792
482 1,003
9,026 8,887

1,505 1,485
9,981 10,515
8,362 9,068
3,640 3,843
6,524 4,892
140 345
4,519 4,065
11,433 9,345
46,104 43,558
1,46,449 1,43,651
ANALYSIS OF BALANCE SHEET
1. Total Assets Growth
- FY 2024: ₹1,46,449 crore
- FY 2023: ₹1,43,651 crore
- Increase: ₹2,798 crore (1.95%)
- Insight: The company’s total assets increased slightly, suggesting
controlled expansion.
2. Non-Current Assets
- FY 2024: ₹33,465 crore
- FY 2023: ₹33,381 crore
- Increase: ₹84 crore (0.25%)
- Property, Plant, and Equipment: Decreased from ₹10,230 crore in
FY 2023 to ₹9,376 crore in FY 2024, indicating potential asset sales
or reduced capital expenditure.
- Right-of-Use Assets: Increased from ₹7,560 crore to ₹7,886 crore,
reflecting new lease agreements or extensions.
3. Current Assets
- FY 2024: ₹1,12,984 crore
- FY 2023: ₹1,10,770 crore
- Increase: ₹2,214 crore (2.00%)
-Trade Receivables: Increased from ₹41,049 crore to ₹44,434 crore,
signalling higher sales on credit.
- Cash and Cash Equivalents: Increased slightly from ₹8,905 crore
to ₹9,143 crore, indicating a stable liquidity position.
4. Equity
- Share Capital: Reduced marginally from ₹366 crore in FY 2023 to
₹362 crore in FY 2024.
 - Other Equity: Grew from ₹90,058 crore to ₹90,127 crore,
suggesting retained earnings and possibly a moderate increase in
reserves.
- Total Equity: Increased from ₹91,206 crore in FY 2023 to ₹91,319
crore in FY 2024, indicating a stable equity base.
5. Non-Current Liabilities
- FY 2024: ₹9,026 crore
- FY 2023: ₹8,887 crore
- Increase: ₹139 crore (1.56%)
- Lease Liabilities: Increased from ₹6,203 crore to ₹6,516 crore,
likely due to new long-term leases.
- Deferred Tax Liabilities (Net)*: Increased from ₹792 crore to
₹977 crore, which might be due to deferred tax provisions on future
tax obligations.
6. Current Liabilities
- FY 2024: ₹46,104 crore
- FY 2023: ₹43,558 crore
- Increase: ₹2,546 crore (5.84%)
- Trade Payables: Decreased from ₹10,515 crore to ₹9,981 crore,
indicating improved payment cycles or lower procurement.
- Other Financial Liabilities: Increased from ₹9,068 crore to ₹8,362
crore, showing a rise in current liabilities.
- Provisions: Increased from ₹4,405 crore to ₹4,519 crore, possibly
due to higher provision for employee benefits or other obligations.

The balance sheet reflects a modest growth in assets, primarily driven

by current assets.
ANALYSIS OF PROFIT AND LOSS STATEMENT
1. Total Income
- FY 2024: ₹2,45,315 crore
- FY 2023: ₹2,28,907 crore
- Increase: ₹16,408 crore (7.17%)
- Revenue from Operations: Increased from ₹2,25,458 crore in FY 2023 to
₹2,40,893 crore in FY 2024, indicating healthy business growth.
- Other Income: Rose from ₹3,449 crore to ₹4,422 crore, possibly due to
higher returns on investments or other non-operational gains.
2. Total Expenses
- FY 2024: ₹1,82,360 crore
- FY 2023: ₹1,72,000 crore
- Increase: ₹10,360 crore (6.02%)
- Employee Benefit Expenses: Increased from ₹1,27,522 crore to ₹1,40,131
crore, reflecting higher salaries, benefits, or an increase in workforce.
- Cost of Equipment and Software Licenses: Increased from ₹1,881 crore to
₹3,702 crore, possibly due to investments in technology upgrades.
- Depreciation and Amortisation: Rose from ₹4,985 crore to ₹5,022 crore,
indicating continued utilization of assets over their life span.
- Other Expenses: Decreased from ₹36,796 crore to ₹32,764 crore, suggesting
improved operational efficiencies or reduced miscellaneous expenses.
3. Profit Before Tax (PBT)
- FY 2024: ₹61,997 crore
- FY 2023: ₹56,907 crore
- Increase: ₹5,090 crore (8.94%)
- Insight: Strong revenue growth and controlled expense increase led to an
improved PBT margin.
4. Tax Expense
- FY 2024: ₹15,898 crore
 - FY 2023: ₹14,604 crore
- Increase: ₹1,294 crore (8.86%)
- Current Tax: Increased from ₹14,757 crore to ₹15,864 crore.
- Deferred Tax: Changed from a negative ₹153 crore to a positive ₹34 crore,
implying adjustments in deferred tax liabilities.
5. Profit for the Year
- FY 2024: ₹46,099 crore
- FY 2023: ₹42,303 crore
- Increase: ₹3,796 crore (8.97%)
- Insight: The company achieved a strong profit growth, aligning with revenue
increase and efficient cost management.
6. Other Comprehensive Income (OCI)
- FY 2024: ₹237 crore
- FY 2023: ₹492 crore
- Re-measurement of Defined Employee Benefit Plans*: Shifted from a gain
of ₹350 crore in FY 2023 to a minor loss of ₹2 crore in FY 2024.
- Net Change in Fair Value of Investments: Minor losses and gains across
various equity and derivative instruments, reflecting market volatility.
- Total Comprehensive Income: Slightly lower at ₹46,336 crore in FY 2024
compared to ₹42,795 crore in FY 2023, due to a reduction in OCI.
7. Earnings Per Share (EPS)
- FY 2024: ₹125.88
- FY 2023: ₹115.19
- Increase: ₹10.69 per share (9.28%)
- Insight: This significant rise in EPS reflects enhanced profitability,
benefiting shareholders directly.

This Profit and Loss statement reflects the company's strong financial health,
with sustained revenue growth, effective cost control, and higher profitability
for FY 2024.
ANALYSIS OF CASH FLOWS STATEMENT
1. Cash Flows from Operating Activities
- Profit for the Year:
- FY 2024: ₹46,099 crore
- FY 2023: ₹42,303 crore
- Increase of ₹3,796 crore (8.97%), reflecting strong profitability.
- Adjustments:
- Depreciation and Amortisation: ₹4,985 crore in FY 2024 vs. ₹5,022 crore in
FY 2023, showing consistency in non-cash expenses.
- Tax Expense: ₹15,898 crore in FY 2024, up from ₹14,604 crore in FY 2023,
indicating a higher tax outlay in line with increased profits.
- Interest Income: Reduced slightly to ₹3,781 crore from ₹3,248 crore,
potentially due to lower interest-yielding investments.
- Operating Profit Before Working Capital Changes:
- FY 2024: ₹63,709 crore
- FY 2023: ₹59,148 crore
- Increase of ₹4,561 crore (7.71%), indicating improved operational
efficiency.
- Net Change in Working Capital:
- Inventories: No significant change in FY 2024 (stable), suggesting consistent
inventory management.
- Trade Receivables: Decrease of ₹3,327 crore in FY 2024 compared to
₹6,501 crore in FY 2023, indicating improved collections.
- Trade Payables: Decreased by ₹632 crore in FY 2024, compared to an
increase of ₹2,036 crore in FY 2023, indicating better cash outflows to
suppliers.
- Net Cash Generated from Operating Activities:
- FY 2024: ₹44,338 crore
- FY 2023: ₹41,965 crore
 - Increase of ₹2,373 crore (5.65%), reflecting a strong cash inflow from core
business activities.
2. Cash Flows from Investing Activities
- Bank Deposits Placed: ₹9,471 crore in FY 2024, up from ₹4,548 crore in
FY 2023, indicating higher funds set aside in deposits.
- Purchase of Investments: ₹1,41,011 crore in FY 2024, slightly up from
₹1,29,745 crore in FY 2023, showing a significant investment strategy.
- Proceeds from Disposal/Redemption of Investments:
- FY 2024: ₹1,47,204 crore
- FY 2023: ₹1,22,687 crore
- Increase of ₹24,517 crore (20%), suggesting a more aggressive approach to
liquidate investments for liquidity.
- Net Cash Generated from Investing Activities:
- FY 2024: ₹6,026 crore
- FY 2023: ₹39 crore
- Increase of ₹5,987 crore, showing a significant improvement in cash
inflow from investment activities, primarily due to proceeds from investment
redemptions.
3. Cash Flows from Financing Activities
- Dividend Paid: ₹25,137 crore in FY 2024, down from ₹41,347 crore in FY
2023, indicating a lower payout ratio or revised dividend policy.
- Buy-back of Equity Shares: ₹17,000 crore in FY 2024, with no buyback
activity in FY 2023, reflecting a return of capital to shareholders.
- Interest Paid: Slight decrease from ₹779 crore in FY 2023 to ₹699 crore in
FY 2024, showing reduced finance costs.
- Net Cash Used in Financing Activities:
- FY 2024: ₹ (48,536) crore
- FY 2023: ₹ (47,878) crore
- Increase of ₹658 crore in outflow, mainly due to the buy-back and dividend
payments, demonstrating substantial cash returns to shareholders.
4. Net Change in Cash and Cash Equivalents
 - FY 2024: ₹1,828 crore inflow
- FY 2023: ₹ (5,874) crore outflow
- This significant positive change in FY 2024 reflects improved cash position
due to higher operating and investing cash inflows.
5. Cash and Cash Equivalents at Year-End
- FY 2024: ₹9,016 crore
- FY 2023: ₹7,123 crore
- Increase of ₹1,893 crore, showcasing a better liquidity position at the end of
FY 2024.

Summary
Operating Activities: Continued strong performance with consistent cash
inflow growth, indicating stable operations.
Investing Activities: Strategic investments and redemptions led to a substantial
positive cash flow, highlighting effective liquidity management.
Financing Activities: Major cash outflows due to dividends and share buy-
back, demonstrating the company's focus on shareholder returns.
Overall Liquidity: Increased cash and cash equivalents, showcasing improved
liquidity at year-end, which strengthens the financial stability of the company.

This cash flow analysis reflects a robust operational performance, proactive

investment management, and strong commitment to shareholder returns in FY
2024.

RATIO ANALYSIS
A. Liquidity Ratios: Liquidity ratios analyse the ability of a company to pay
off both its current liabilities as they become due as well as their long-term
liabilities as they become current. The liquidity ratio measures a company's
ability to cover its short-term obligations using its most liquid assets. A higher
liquidity ratio indicates better short-term financial health, suggesting the
company can easily meet its immediate debts.

1. Current Ratio = Current Assets

Current Liabilities

Year 2024: 1,12,948 = 2.45

46,104
Year 2023: 1,10,770 = 2.54
43,558

2. Quick Ratio = Current Assets – Inventories

Current Liabilities

Year 2024: 1,12,948 – 28 = 2.45

46,104
Year 2023: 1,10,770 – 28 = 2.54
43,558
B. Profitability Ratios: Measure a company’s ability to generate earnings
relative to sales, assets and equity. These ratios assess the ability of a company
to generate earnings, profits and cash flows relative to relative to some metric,
often the amount of money invested. They highlight how effectively the
profitability of a company is being managed.

1. Net Profit Margin = Net Profit x 100

Total Revenue

Year 2024: 46,099 x 100 = 18.8%

2,45,315
Year 2023: 42,303 x 100 = 18.5%
2,28,907

2. Return on Assets (ROA) = Net Profit x 100

Total Assets
 Year 2024: 46,099 x 100 = 31.5%
1,46,449
Year 2023: 42,303 x 100 = 29.4%
1,43,651

3. Return on Equity (ROE): Net Profit x 100

Equity

Year 2024: 46,099 x 100 = 50.5%

91,319
Year 2023: 42,303 x 100 = 46.4%
91,206
C. Efficiency Ratios (Activity Ratios): Accounting ratios that measure a
firm's ability to convert different accounts within its balance sheets into cash or
sales. Activity ratios are used to measure the relative efficiency of a firm based
on its use of its assets, leverage or other such balance sheet items. These ratios
are important in determining whether a company's management is doing a good
enough job of generating revenues, cash, etc. from its resources.

1. Inventory Turnover = Cost of Goods Sold

Ratio Average Inventory

Assuming Cost of Goods Sold is Total Expenses minus Interest and

Depreciation
Total Expenses (2024): ₹1,82,360 crore
Adjusted Expenses (excluding interest and depreciation) = ₹1,76,597 crore
(Estimated)
Year 2024: 1,76,597 = 6314.18
28
2. Accounts Receivable Turnover Ratio = Total Revenue
Average Accounts Receivable
Assuming receivables from balance sheet

Year 2024: 2,45,315 = 5.52

44,434
Year 2023: 2,28,907 = 5.57
41,049

3. Asset Turnover Ratio = Total Revenue

Average Total Assets

Year 2024: 2,45,315 = 1.67

1,46,449
 Year 2023: 2,28,907 = 1.59
1,43,651

D. Leverage Ratios (Debt Management Ratios): Debt Management

Ratios attempt to measure the firm's use of Financial Leverage and ability to
avoid financial distress in the long run. These ratios are also known as Long-
Term Solvency Ratios. Debt is called Financial Leverage because the use of
debt can improve returns to stockholders in good years and increase their losses
in bad years. Debt generally represents a fixed cost of financing to a firm.

1. Debt-to-Equity Ratio = Total Liabilities

Equity

Year 2024: 46,104 = 0.505

91,319
Year 2023: 43,558 = 0.477
91,206
2. Interest Coverage Ratio = EBIT
Interest Expense

Year 2024: 62,955 = 80.9

778
Year 2023: 56,907 = 73.0
779

3. Debt Ratio = Total Liabilities

Total Assets

Year 2024: 46,1041 = 0.315

46,449
Year 2023: 43,558 = 0.303
1,43,651
SUMMARY AND ITS INTERPRETATION

Liquidity: The current and quick ratios indicate strong liquidity, showing that
TCS has sufficient short-term assets to cover its current liabilities. These ratios
are slightly lower in 2024 compared to 2023, but they are still comfortably
above 1, indicating good liquidity management.

Profitability: TCS demonstrates strong profitability. Both Net Profit Margin

and ROE have increased year-over-year, reflecting improved efficiency and
profitability.

Efficiency: High inventory turnover and accounts receivable turnover ratios

suggest effective management of assets. The Asset Turnover Ratio also shows
an increase, indicating that TCS is generating more revenue per unit of asset in
2024 than in 2023.

Leverage: TCS maintains a low debt-to-equity and debt ratio, showing

conservative leverage. The high interest coverage ratio also indicates that TCS
has ample earnings to cover its interest obligations, highlighting low financial
risk.

This comprehensive analysis points to TCS's solid financial health, strong

liquidity, robust profitability, effective asset management, and conservative
leverage.
 FINDINGS

Based on the financial analysis conducted on Tata Consultancy Services (TCS),

the following key findings emerged:

1. Liquidity Ratios: Current Ratio and Quick Ratio both improved slightly
from 2023 to 2024, indicating an improvement in TCS's ability to cover its
short-term liabilities with its current assets. A current ratio above 1.0
suggests sufficient liquidity, with the quick ratio reflecting efficient
management of highly liquid assets.

2. Profitability Ratios: Net Profit Margin and Return on Equity (ROE)

showed growth in 2024, suggesting that TCS was more effective in
converting revenue into profit and generating returns for its shareholders.
This reflects TCS's strong operational efficiency and profitability in
2024.The Return on Assets (ROA) remained stable, indicating consistent
asset utilization in generating profits.

3. Efficiency Ratios: The Asset Turnover Ratio and Receivables Turnover

Ratio indicate that TCS improved its asset and receivables management,
with faster turnover rates from 2023 to 2024. This shows TCS's effectiveness
in generating revenue from its asset base and collecting receivables
promptly.

4. Leverage Ratios: TCS maintained a stable Debt to Equity Ratio and Debt
Ratio, suggesting a balanced capital structure with limited reliance on debt
financing. The Interest Coverage Ratio increased, indicating an improved
ability to meet interest obligations, which reflects a healthy financial position
with ample earnings to cover interest expenses.

5. Consistent Revenue Growth: TCS has demonstrated steady revenue growth

over the analysed period (e.g., 2023–2024), reflecting its strong market
presence, client retention, and consistent expansion in global markets.
Horizontal analysis reveals that TCS’s revenue has increased year-on-year,
 underscoring its resilience and ability to capitalize on growth opportunities
in the IT services sector.
6. Healthy Liquidity and Solvency Position: TCS’s current and quick ratios
reveal a solid liquidity position, showing that the company holds enough
short-term assets to cover immediate liabilities. The low debt-to-equity ratio
further indicates a conservative approach to debt, allowing TCS to remain
financially stable and less susceptible to external financial pressures.

7. Strong Cash Flow Management: The company’s operating cash flows have
been consistently positive, indicating a stable cash generation capability
from core operations. This strong cash flow is critical for supporting TCS's
dividend policies, reinvestment in technology, and other capital expenditure
needs without relying on external financing.

8. Competitive Positioning: When benchmarked against key competitors (e.g.,

Infosys, Wipro), TCS’s financial ratios, especially in terms of profitability
and efficiency, reveal a competitive edge in the IT services industry. TCS’s
consistent investment in innovation and digital transformation has further
strengthened its market position and growth potential, setting it apart from
peers.

9. Focus on Shareholder Value: TCS’s dividend policy reflects its

commitment to providing value to shareholders. The company’s high
dividend payout ratios and steadily increasing dividends over the years
underscore its strong financial performance and confidence in sustained
future earnings.
 CONCLUSION

In conclusion, TCS’s financial performance analysis indicates a strong and well-

managed organization with a robust foundation in the global IT services
industry. The findings suggest that TCS is not only financially healthy, with
significant revenue growth and high profitability, but also efficient in managing
its resources. TCS’s low reliance on debt, combined with its strong cash flow
and liquidity, demonstrates financial prudence and resilience in fluctuating
economic conditions.

The analysis also reveals TCS’s dedication to maintaining a competitive

advantage through strategic investments in technology, enabling it to sustain its
market leadership and adapt to emerging industry trends. TCS’s commitment to
shareholder value is evident in its consistent dividend payments, reflecting its
solid financial footing and shareholder-focused approach.

Overall, TCS appears well-positioned for future growth and profitability,

supported by its financial strength, innovation-driven strategies, and effective
management practices. These findings highlight TCS’s potential to continue
leading the IT services sector, delivering value to its stakeholders, and adapting
to new opportunities in an evolving digital landscape.
 RECOMMENDATIONS

1. Enhance Operational Efficiency: Focus on cost optimization through

automation to improve margins and service delivery.

2. Diversify Revenue Streams: Expand into emerging markets and high-

demand sectors like healthcare and renewable energy to reduce dependency on
current markets.

3. Expand Digital Services: Increase offerings in AI, cloud, and cybersecurity

to stay competitive in the growing digital market.

4. Strengthen Talent Strategy: Invest in employee retention and training to

maintain service quality and innovation.

5. Maintain Low Debt: Continue a conservative debt approach to minimize

financial risk and improve resilience to market fluctuations.

6. Increase Shareholder Returns: Consider higher dividends or buybacks to

boost investor confidence.

7. Expand CSR Efforts: Strengthen sustainability initiatives to enhance brand

image and loyalty.

8. Boost R&D: Invest in technology R&D to stay ahead in emerging areas,

ensuring long-term growth and market relevance.

These recommendations provide a focused roadmap for sustained growth and

financial stability for TCS.
 BIBLIOGRAPHY

Websites: -
 on. https://www.tcs.com/content/dam/tcs/investor-relations/financial-
statements/2023-24/ar/annual-report-2023-2024.pdf
 economictimes.indiatimes.com › Markets › Stocks
 profit.ndtv.com/topic/tcs-annual-report
 www.moneycontrol.com
 www.tcs.com

Books: -
 Taxmann’s Management Accounting by R. P. Rustagi