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VSRD-IJBMR, Vol. 2 (7), 2012, 313-321

R RE ES SE EA AR RC CH H A AR RT TI IC CL LE E

An Analysis of Financial Statements of Public Sector Enterprise (With Special Reference to Wipro Ltd.)
1

Fozia Mehtab* and 2Arun Kr. Kaushik

ABSTRACT
The present paper aims at analyzing the financial statements of public sector enterprises with special reference to Wipro Ltd which is a $6.98 billion Global company in Information Technology Services, R&D Services, and Business Process Outsourcing. The basic research objective is to find out about the historical performance and current financial condition of Wipro Ltd with the help of various ratios and thereby to offer appropriate suggestions for the better performance of the organization. For this purpose the financial statements are analyzed in three different ways i.e. Balance Sheet Analysis, Profit & Loss Analysis and Ratio Analysis by taking the 5 years data of the company from the year 2007 to 2011. Descriptive research is used and the data is collected through discussions with 50 Employees of Bangalore unit of Wipro ltd. The study has great significance and provides benefits to various parties who directly or indirectly interact with the company. Keywords : Information Technology, Application of Funds, Sources of Funds, Net Profit, P&L Analysis.

1. INTRODUCTION
The realm of Information Technology (IT) is a fast changing one. IT is also setting pace at which the world around us is changing. At the turn of the first decade of 21st century, challenges and opportunities facing the customers and consumers of IT have become very different than what they were a decade ago. Rightly so, as the world becomes a web of connected devices and better tools are available for making better decisions, the world is looking to leverage technology more than ever before. With the global economic recession and its impact slowly receding in 2010, demand for IT services are on the growth curve once again. Customer organizations are re-aligning their budgets with spends more dominated by
____________________________ 1,2

Senior Lecturer, MBA Department, *Correspondence : foziamehtab@gmail.com

Institute

of

Management

Studies,

Roorkee,

Uttrakhand,

INDIA.

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the business users as customers use IT to differentiate themselves in the market place. Since the decline in world output by 0.6% in 2009, there have been steady signs of recovery. The world output is forecasted to expand by 4.4% in 2011. Gartner has forecasted- worldwide IT spending in 2011 will exceed US$3.6 trillion, a 5.6% increase from 2010. Companies are increasingly turning to offshore IT service providers to meet their need for high quality, cost competitive technology solutions and IT services. The scope of work includes a range of end-to-end software development, IT business solutions, research and development services, BPO, consulting and related support functions to reduce cycle time for introducing new products and services. Wipro Limited was incorporated on December 29, 1945, as Western India Vegetable Products Limited under the Indian Companies Act, VII of 1913, which is now superseded by the Companies Act, 1956.Wipro Limited (Wipro or the Parent Company), together with its subsidiaries and equity accounted investees (collectively, the Company or the Group) is a leading India based provider of IT Services, including Business Process Outsourcing (BPO) services, globally. Further, Wipro has other businesses such as IT Products, Consumer Care and Lighting and Infrastructure engineering.

2. OBJECTIVES OF RESEARCH
The research work is done for achieving the various objectives related to capital structure, financial position and comparing past and current trends of the company. Out of them main objectives are pointed as follows : To interpret the financial statement of the company so that its strengths and weaknesses can be found out. To compare the historical performance and current financial condition of the company. To analyze the liquidity, solvency and leverage position of the industry by using various activities, liquidity and leverage ratios. To simplify and summarize a long array of accounting data and make them understandable. To offer appropriate suggestions for the better performance of the organization.

3. RESEARCH METHODOLOGY 3.1. Research Design

Research is a careful inquiry or examination to discover new information or relationship and to expand and verify existing knowledge. Therefore, we used descriptive research in this study because it will ensure the minimization of bias and maximization of reliability of data collected.

3.2. Data Collection

The information is collected through primary and secondary sources during the research which is utilized for calculating performance evaluation later and based on that interpretations are made.

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3.3. Sources of Primary Data

The information and data are collected through rough formal and informal discussion with the officers of accounts department of the company on the basis of needs.

3.4. Sources of Secondary Data

Most of the calculations are made on the financial statements of the company provided statements like published annual reports, financial reports, companys websites etc. Referring standard texts and referred books are concerned to collect some of the information regarding theoretical aspects.

4. SAMPLING DESIGN
Population: Sample Size: Sampling Unit: One Public Sector Enterprise, i.e., WIPRO LTD. 5 years financial data of WIPRO LTD. Bangalore Unit of WIPRO

5. DATA ANALYSIS AND INTERPRETATION

Financial reports, balance sheets, annual reports and annual plans are analyzed with the application of ratio analysis. Graphical and tabular presentations of the collected data are done to show the financial position of the company. The data analysis is done using various activity, solvency, profitability and turnover ratios.

6. FUTURE SCOPE OF THE RESEARCH:

The study will analyze the financial statements in public sector industries through the ratio analysis which will contribute further to management of the industry as well as various other concerned parties. The study will also contribute to other interested parties and stock holders as a better management of financial statements and its analysis leads to improvement in performance and profitability. The study can also be helpful to other similar organization and industries and enterprises as a whole as well for analyzing their financial statements and its interpretations through ratio analysis. The most important aspect and contribution of the study will be to identify the reasons of the solvency, liquidity and financial performance of the industries by the application of financial statement analysis.

7. LIMITATIONS OF THE RESEARCH

The data for collection was available up to March, 2011 only. Financial statement analysis becomes less effective due to price level changes. It may be misleading in the absence of absolute data. Limited use of a single data. Lack of proper standards.

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False accounting data gives false ratio. Ratios alone are not adequate for proper conclusions. Seasonality affects ratios. Sometimes its difficult to interpret deviations in ratios.

8. DATA ANALYSIS
Trend Analysis of Fixed assets: the trend analysis of fixed assets of WIPRO LTD. is done based on data given in table 1: Table 1: Trend Analysis of Fixed Assets Year Total Fixed Assets 2006-07 1645.90 2007-08 2282.20 2008-09 5743.30 2009-10 6761.30 2010-11 7779.30

Source: http://www.wipro.com/

Fig. 1: Trend Analysis of Fixed Assets INTERPRETATION The fixed assets are increasing year by year; its a good sign for the company. Fixed Assets are increasing at an increasing rate it means the company has expanded its business. It seems that the company has good future plans and it wants to expand its business therefore it has invested more and more funds in fixed assets. Fixed assets are efficiently utilized by the company due to which the profit of the company is increasing every year. In 2009-10 and 2010-11 Company has huge increase its land, patents, trademarks and rights.

Trend Analysis of Total Income and Total Expenditure : the trend analysis of total income and total expenditure of WIPRO LTD. is done based on data given in table 2: Table 2 : Trend Analysis of Total Income and Total Expenditure Years Total Income Total Expenditure 2006-07 13,683.90 10,429.40 2007-08 17,492.60 13,777.00 2008-09 21,507.30 16,748.60 2009-10 22,922.00 17,420.50 2010-11 26,300.50 20,539.60

Source: http://www.wipro.com/

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Fig. 2 : Trend Analysis of Total Income and Total Expenditure INTERPRETATION Though the sales has been continuously increased from past 3 years but the proportionate expenditure is also rising so overall not making any huge effect on net profit of this company. Total income of the company is increasing at a better increasing rate as compared to total expenditure.

Trend Analysis of Sources of Funds : the trend analysis of sources of funds of WIPRO LTD. is done based on data given in table 3: Table 3 : Trend Analysis of Source Of Funds Year Share Capital Share Application Money Reserves and Surplus Loan Funds Total 2006-07 291.8 3.5 9025.1 237.6 9558.4 2007-08 292.3 58 11260.4 3822.4 15433.1 2008-09 293 1.5 12220.5 5,014 17528.9 2009-10 2010-11 293.6 490.8 1.8 0.7 17396.8 20829.4 5,530.20 4744.1 23222.4 26065 Source: http://www.wipro.com/

Fig. 3 : Trend Analysis of Sources of Funds INTERPRETATION The loan fund is increasing at a very good rate year by year from 2006 to 2011. The company has observed a good increase in loan funds as compared to the base year which indicates that its reputation is increasing in the financial market year by year. There is a great fluctuation in share application money from 2006 to 2011. The companys reserve and surpluses are increasing year by year it shows that the companys overall profit is increasing at a growing rate.

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The graph shows that the companys overall sources of funds have increased very much from the base year so it can be interpreted that the company has become able to maintain a very reputation in the market in the last five years.

Trend Analysis of Application of Funds: the trend analysis of application of funds of WIPRO LTD. is done based on data given in table 4: Table 4 : Trend Analysis of Application of Funds Year Total Fixed Assets Investments Capital work-in-progress Net Current Assets 2006-07 1645.90 4348.7 489.5 2574.3 2007-08 2282.20 4500.1 1335 7315.8 2008-09 5743.30 6895.3 1311.8 6142.2 2009-10 6761.30 8966.5 991.1 2010-11 7779.30 10,813.4 603.1

9608.5 10,411.50 Source: http://www.wipro.com/

Fig. 4 : Trend Analysis of Application of Funds INTERPRETATION Graph shows that companys net current assets are increasing year by year except a slight decrease in 200809. There are many fluctuations in companys work-in-progress. Fixed Assets are continuously increasing year by year. The companys overall investment is increasing year by year from 2006 to 2011. It seems that the company has good future plans and it wants to expand its business therefore it has invested more and more funds in fixed assets. Fixed assets are efficiently utilized by the company due to which the profit of the company is increasing every year. In 2009-10 and 2010-11, Company has huge increase in its land, patents, trademarks and rights.

Trend Analysis of Net Profit: the trend analysis of Net Profits of WIPRO LTD. is done based on data given in

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table 5: Table 5 : Trend Analysis of Net Profit Year Net Profit 2006-07 2,842.10 2007-08 3,063.30 2008--09 2,973.80 2009-10 4,898.00 2010-11 4,843.70 Source: http://www.wipro.com/

Fig. 5 : Trend Analysis of Net Profit INTERPRETATION The graph shows an increasing trend in the net profit of the company. In the year 2008-09, there is found a little down trend in the net profit but afterwards it again started rising at a good rate of increase. In the year 2009-10 there has been the highest growth in net profit.

9. RESULTS
The leverage position of the company is not found much strong because dividend payout has gone down much in the current year from the previous year so the industry needs to adopt a proper dividend policy for the shareholders. The current ratio shows a fluctuating trend as 1.83 in the year 08-09, 2.39 in the year 09-10 and 2.29 during the year 10-11.This shows continuous increases in both current assets and current liabilities. Fixed assets are efficiently utilized by the company due to which the profit of the company is increasing every year. Company keeps enough cash in hand so that in any condition it can take any financial decision easily.

10. CONCLUSION
After analyzing the financial statements of the company it can be concluded that though the financial position of the company is found quite satisfactory as the companys sales is rising continuously still it should take some steps to decrease its expenses because the net profit has not increased much in the last few years and also the company should try to increase its profit after tax. By looking at the above graphs if the historical and present situation is compared t it could be concluded that the companys performance has improved much in the last few years as almost all the sources of funds as well as

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net profit of the company have increased. The total expenditure is near by 80% of total income in every year but after looking at other aspects like the constant increase in sales of the company it can be concluded that the growth in the income is better than the expenditure incurred in last few years.

11. REFERENCES
[1] Annual Report of Wipro Limited for Financial Year 2010-11 from Wipro_form_20f_07_17_11.pdf [2] http://www.wipro.com/ [3] http://ethesis.nitrkl.ac.in/1953/1/10605038.pdf

12. ANNEXURE
1. Analysis of Balance Sheet Mar ' 11 Sources of Funds Owner's Fund Equity share capital Share application money Preference share capital Reserves & surplus Loan Funds Secured loans Unsecured loans Total Uses of funds Fixed assets Gross block Less : revaluation reserve Less : accumulated depreciation Net block Capital work-in-progress Investments Net current assets Current assets, loans & advances Less : current liabilities & provisions Total net current assets Miscellaneous expenses not written Total Notes: Book value of unquoted investments Market value of quoted investments Contingent liabilities Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07

490.8 0.7 20,829.40 4,744.10 26,065.00

293.6 1.8 17,396.80 5,530.20 23,222.40

293 1.5 12,220.50 5,013.90 17,528.90

292.3 58 11,260.40 4 3,818.40 15,433.10

291.8 3.5 9,025.10 23.2 214.8 9,558.40

7,779.30 3,542.30 4,237.00 603.1 10,813.40

6,761.30 3,105.00 3,656.30 991.1 8,966.50

5,743.30 2,563.70 3,179.60 1,311.80 6,895.30

2,282.20 2,282.20 1,335.00 4,500.10

1,645.90 1,645.90 989.5 4,348.70

18,466.30 8,054.80 10,411.50 26,065.00

16,545.30 6,936.80 9,608.50 23,222.40

13,517.20 7,375.00 6,142.20 17,528.90

12,058.10 4,742.30 7,315.80 15,433.10

6,338.40 3,764.10 2,574.30 9,558.40

8,425.70 2,392.30 707.3

5,884.90 1,855.60 778

6,884.50 1,045.40

749.9

1,234.10 661.6

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Number of equity shares outstanding (Lacks)

24544.09

14682.11

14649.81

14615

14590

Source: http://www.wipro.com/ 2. Analysis of Profit And Loss Account Mar ' 11 Income Operating income Expenses Material consumed Manufacturing expenses Personnel expenses Selling expenses Administrative expenses Expenses capitalised Cost of sales Operating profit Other recurring income Adjusted PBDIT Financial expenses Depreciation Other write offs Adjusted PBT Tax charges Adjusted PAT Nonrecurring items Other non cash adjustments Reported net profit Earnings before appropriation Equity dividend Preference dividend Dividend tax Retained earnings 26,300.50 3,774.00 2,979.90 10,937.40 412.7 2,435.60 20,539.60 5,760.90 662.3 6,423.20 58.6 600.1 5,764.50 861.8 4,902.70 -59 4,843.70 4,843.70 981.8 490.8 220.4 3,150.70 Mar ' 10 22,922.00 4,029.40 2,213.20 9,062.80 378.1 1,737.00 17,420.50 5,501.50 434.2 5,935.70 108.4 579.6 5,247.70 790.8 4,456.90 441.1 4,898.00 4,898.00 880.9 128.3 3,888.80 Mar ' 09 21,507.30 3,442.60 1,841.80 9,249.80 308.4 1,906.00 16,748.60 4,758.70 468.2 5,226.90 196.8 533.6 4,496.50 574.1 3,922.40 -948.6 2,973.80 2,973.80 586 99.6 2,288.20 Mar ' 08 17,492.60 2,952.30 299.8 7,409.10 532.1 2,583.70 13,777.00 3,715.60 326.9 4,042.50 116.8 456 3,469.70 406.4 3,063.30 3,063.30 3,063.30 876.5 148.9 2,037.90 Mar ' 07 13,683.90 1,889.00 120.5 5,768.20 2,651.70 10,429.40 3,254.50 288.7 3,543.20 7.2 359.8 3,176.20 334.1 2,842.10 2,842.10 2,842.10 873.7 126.8 1,841.60

Source : http://www.wipro.com/

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