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Project Report

(Submitted for the Degree of M.Com in Accounting & Finance under


the University of Calcutta)

Title of the Project


FINANCIAL STATEMENT ANALYSIS OF TATA COMMUNICATIONS
LIMITED

Submitted by
Name of the Candidate: Sharanya Mukherjee
Name of the College: Shri Shikshayatan College
University Registration No.: 034-1221-0725-13
University Roll No.:
College Roll No.: 14

Supervised by
Name of the Supervisor:
Name of the College: Shri Shikshayatan College

JULY 2018
SUPERVISOR’S CERTIFICATE
This is to certify that Ms.SHARANYA MUKHERJEE, a student of M.Com in Accounting &
Finance at SHRI SHIKSHAYATAN COLLEGE under the University of Calcutta has worked
under my supervision and guidance for her Project Work and prepared a Project Report with the
title. The project report, FINANCIAL STATEMENT ANALYSIS OF TATA
COMMUNICATIONS LIMITED which she is submitting, is her genuine and original work to
the best of my knowledge.

Place: Kolkata Signature:


Date: Name:
Designation:
Name of college: Shri Shikshayatan College
STUDENT’S DECLARATION

I hereby declare that the Project Work with the title FINANCIAL STATEMENT
ANALYSIS OF TATA COMMUNICATIONS LIMITED submitted by me for the partial
fulfillment of the degree of M.Com in Accounting & Finance under the University of
Calcutta is my original work and has not been submitted earlier to any other University
/Institution for the fulfillment of the requirement for any course of study.
I also declare that no chapter of this manuscript in whole or in part has been incorporated
in this report from any earlier work done by others or by me. However, extracts of any
literature which has been used for this report has been duly acknowledged providing
details of such literature in the references.

Place: Kolkata Signature:


Date: Name:
Address: 48 Ballygunge place, Kolkata-19
University Registration No.: 034-
1221-0725-13
University Roll No.:
ACKNOWLEDGEMENT
I use this opportunity to acknowledge all the help and support I got from the various quarters
without which this project would never have reached fruition. Before I get into details, I would
like to offer my heartiest gratitude to my college SHRI SHIKSHAYATAN COLLEGE and all the
people who have helped me with this project in various ways.
First of all, I would like to take this opportunity to acknowledge and show my gratitude towards
our principal madam, PROF. ADITI DEY and my respected supervisor I
would like to show my gratitude towards all the teachers of our department for their valuable
suggestions. I am thankful to for her continuous guidance and invaluable support throughout the
course of the project, and I am indebted to her for every segment of this project
NAME: SHARANYA MUKHERJEE
REGISTRATION NUMBER: 034-1221-0725-13
COURSE: M.COM PART II (ACCOUNTING & FINANCE)
UNIVERSITY OF CALCUTTA
EXECUTIVE SUMMARY
This project “FINANCIAL STATEMENT ANALYSIS OF TATA COMMUNICATIONS LTD.”
is selected to measure the financial position of Tata Communications Ltd. and the firms profit
earning ability with the help of ratio analysis. Ratio analysis is widely used for financial analysis
and can be defined as systematic use of ratios to interpret financial statement so that the firm’s
strength and weaknesses as well as it’s historical performance and current financial condition can
be determined. Ratio analysis is useful in determining the profitability and liquidity position of a
business and the overall financial health of the firm. Specific ratios such as current ratio, quick
ratio, fixed asset turnover ratio, operating profit ratio, gross profit and net profit ratios etc. have
been used in this project in order to find out the profitability and liquidity positions of the firm
and also to reach our objective that is to analyze the financial performance of the firm
successfully.
Table of content

1. INTRODUCTION.....................................................................................................................1
1.1 Overview of the Company...................................................................................................1
1.2 REVIEW OF LITERATURE...........................................................................................3
1.3 RESEARCH GAP........................................................................................................4
2. CONCEPTUAL FRAMEWORK...............................................................................................5
2.1 CONCEPT OF FINANCIAL STATEMENT ANALYSIS....................................................5
2.2 Advantages & Disadvantages of Financial Statement Analysis in Decision Making........5
3. DATA INTERPRETATION AND FINDINGS...........................................................................7
3.1 OBJECTIVES OF THE STUDY.........................................................................................7
3.2 SOURCES OF DATA COLLECTION.............................................................................7
3.3 PERIOD OF STUDY...................................................................................................7
3.4 TOOLS USED.........................................................................................................7
3.5 ANALYSIS OF DATA.............................................................................................8
4. OBSERVATION AND CONCLUSION ..................................................................................18
4.1 SUMMARY OF OBSERVATIONS....................................................................................18
4.2 CONCLUSION..............................................................................................................20
4.3 LIMITATIONS OF THE STUDY..............................................................................21
BIBLOGRAPHY............................................................................................................................i
ANNEXURE1: Profit & Loss account of Tata Communications..................................ii
ANNEXURE2: Balance Sheet of Tata Communications................................................iii
1. INTRODUCTION
Financial statement is the mirror which reflects the financial position, strength and
weakness of the company. Financial statement of the company helps to know how a business is
doing and how it’s useful internally for a company-stock holders and to its board of directors, its
managers and some employees including labor union, externally they are important to
perspective investors, to government agencies responsible for taxing and regulating, to lenders
such as bank and credit rating agencies & investment analysis & stock broker.

Financial statement analysis involves careful selection of data from financial statements for the
primary purpose of forecasting the financial health of the company. This is accomplished by
examining trends in key financial data, comparing financial data across companies, and
analyzing key financial ratios.

Hohn N. Myres defines that “Financial statement analysis is largely a study of relationships
among the various financial factors in a business, as disclosed by a single set of statement and a
study of the trends of these factors as shown in a series of statement.”

1.1 Overview of the Company

Over the past decade, Tata Communications has evolved from a wholesale service provider
serving the Indian market to a leading provider of A New World of Communications™ to
enterprise customers and service providers worldwide.

Tata Communications is a global company with its roots in the emerging markets. Headquartered
in Mumbai and Singapore, it has more than 8500 employees across 38 countries. The $2.9 billion
company is listed on the Bombay Stock Exchange and the National Stock Exchange of India and
is the flagship telecoms arm of the $103.3 billion Tata Group.

The exponential growth of connected devices, emergence of social media, analytics, and cloud
computing (SMAC), and acceptance of bring your own device (BYOD), are all resulting in a
major transition in the way enterprises engage with technology. Both developed and emerging
economies are looking to innovation in technology. As a key enabler of information and
communication technologies to global enterprises, Tata Communications has led from the front
in ensuring a robust digital ecosystem that is equipped for the future – with the infrastructure that
can cope with customers’ demands of intelligence, scalability and flex.

Our strategic portfolios are responsive to changing business needs.

Tata Communications’ enhanced business strategy has the consumer’s requirements, trends and
movements at the heart of everything it does. It seeks to create an open infrastructure, partner

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ecosystem and platform that is fit for business and delivers that ‘just works’ experience, whilst
retaining the transparency, flexibility and control that CEO/CIO’s require to safeguard and
enhance their organizations’ customer experience and brand reputation. All of this is overlaid
onto years of investment and infrastructure through its $1.19 billion investment in the world’s
only wholly owned subsea fibre network that circles the globe.

Tata Communications’ services portfolio includes predictable high-speed connections and global
MPLS virtual private networks, Telepresence services, DDoS mitigation and detection service,
content delivery networks and cloud offerings. Tata Communications offers customised network
solutions for customers in key markets – including verticals like manufacturing , oil and gas,
banking, financial services and insurance, and media and entertainment – offering our customers
speed, quality and unparalleled network reach.

Tata Communications in numbers:

 $2.9 billion in annual revenue with 77% of this revenue generated outside of India

 Over 8500 employees globally, 30% of which are located outside India, and over 40
nationalities represented

 Largest wholesale voice carrier carrying 53 billion minutes of wholesale voice traffic
annually – that’s 1 in 10 voice calls globally

 1600 telcos use our network to connect to you (70% of the world’s mobile network
operators)

 World’s largest wholly owned submarine fibre network – more than 500,000 km of
subsea fibre, and more than 210,000 km of terrestrial fibre

 Only Tier-1 provider that is in the top five in five continents, by internet routes

 Over 25% of the world’s internet routes are on Tata Communications’ network

 400+ PoPs reach more than 200 countries and territories

 44 data centres and colocation centres with over 1 million sq. ft. of space

 13,700 petabytes of internet traffic travel over the Tata Communications’ internet
backbone each month

 15+ terabits/s of international bandwidth lit capacity

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1.2 REVIEW OF LITERATURE
Doron Nissim & Stephen H Penman(1999) in his research article on financial performance he
has pointed that this paper outlines a financial statement analysis for use in equity valuation.
Standard profitability analysis is incorporated, and extended, and is complemented with an
analysis of growth. The perspective is one of forecasting payoffs to equities. So financial
statement analysis is presented first as a matter of performa analysis of the future, with
forecasting ratios viewed as building blocks of forecasts of payoffs.

Kennedy and Muller (1999) in his research article on financial performance he has pointed that
the analysis and Inferences/interpretation of financial Statements are an attempt to determine the
significance and meaning of financial statements data So that the forecast may be made of the
prospects for future earnings, ability to pay interest and Debt maturates ( both current and long
term) and profitability and sound divided policy.

Elizabeth Duncan and Elliott (2004) in his research article on financial performance he has
pointed that

He had stated that the paper in the title of efficiency, Customer service and performance among
Australian financial institutions showed that All financial performance measures as interest
margin, return on assets, and capital adequacy are positively correlated with customer service
quality scores.

Jonas Elmorraji (2005) in his research article on financial performance he has pointed that he
tries to say that ratios can be an invaluable tool for making an Investment decision. Even so,
many new investors would rather leave their decisions to fate than try to deal with the
intimidation of financial ratios. The truth is that ratios aren’t that intimidating, Even if you don’t
have a degree in business or finance. Using ratios to make informed decisions about an
investment makes a lot of sense, once you know how use them.

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1.3 RESEARCH GAP
Research gap means the uncovered area of the particular field where further research is possible.
It may be defined as further possibility of research work in particular area. Research gap is
identified from the review of literature of the particular field and related field (area ) in which the
research worked.

From the above literature review it clearly revealed that so many researchers have done research
work on financial performance of various MNCs. No research was previously conducted on the
financial performance of Tata communications Limited with the increasing importance of
communication system in our life now a days, Tata Communication Limited has established itself
as a strong contender. As no any research work has been done on financial performance of the
Tata Communications Limited the researcher aims to fill the gap by analyzing the financial
performance of the selected company.

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2. CONCEPTUAL FRAMEWORK

2.1 CONCEPT OF FINANCIAL STATEMENT ANALYSIS

Financial statement analysis (or financial analysis) is the process of reviewing and analyzing a
company's financial statements to make better economic decisions. These statements include
the income statement, balance sheet, statement of cash flows, and a statement of changes in
equity. Financial statement analysis is a method or process involving specific techniques for
evaluating risks, performance, financial health, and future prospects of an organization.

2.2 Advantages & Disadvantages of Financial Statement Analysis in Decision Making

Financial statements are financial data documents a company publishes on an annual, biannual,
quarterly or monthly basis. These documents include the company’s net worth based on assets
and liabilities, as well as the company’s expenses, earnings and operational budget. Financial
planners and accountants may use financial statements to make decisions regarding future
planning, expansions and product launches, but there are disadvantages to using this method.
Advantage
The Ability to Detect Patterns
Financial statements reveal how much a company earns per year in sales. The sales may
fluctuate, but financial planners should be able to identify a pattern over years of sales figures.
For example, the company may have a pattern of increased sales when a new product is released.
The sales may drop after a year or so of being on the market. This is beneficial, as it shows
potential and sales patterns so executives know to expect a drop in sales.

A Chance to Budget Outline


Another advantage of using financial statements for future planning and decision making is that
they show the company’s budgets. The budgets reveal how much wiggle room the company has
to spend on launching products, developing marketing campaigns or expanding the current office
size. Knowing how much money is available for planning and decision making ensures that the
company does not spend more than expected.

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Disadvantage
Based on Market Patterns
One disadvantage of using financial statements for decision making is that the data and figures
are based on the market at that given time. Depending on the market, it may change quickly, so
executives should not assume that the numbers from a previous financial statement will remain
the same or increase. Just because a company has sold 5 million copies of a product during one
year does not guarantee it will sell the same amount or more. It may sell much less if a
competitor releases a similar product.

At-One-Time Analysis
Another disadvantage is that a single financial statement only shows how a company is doing at
one single time. The financial statement does not show whether the company is doing better or
worse than the year before, for example. If executives decide to use financial statements for
making decisions about the future, they should use several financial statements from previous
months and years to ensure they get an overall picture of how much the company is doing. The
financial statement becomes a continuous analysis, which is more useful than using a single
statement.

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3. DATA INTERPRETATION AND FINDINGS

3.1 OBJECTIVES OF THE STUDY

1. To understand the company’s financial statements


2. To know the financial performance, profitability and liquidity position of the company
3. To compare and analyze the financial statements.
4. To study the earning capacity of the company .
5. To offer suggestions based on findings of the study.

3.2 SOURCES OF DATA COLLECTION


For the success of the present study, data was collected mainly from secondary external sources
like annual reports of Tata Communication Ltd. from the FY 2012-13 to FY 2016-17 acquired
from sites like economictimes.com, goodreturns.in etc

3.3 PERIOD OF STUDY


The data for a period of 5 years from 2012-13 to 2016-17 has been taken into consideration to
assess the financial strength and weaknesses of the company.

3.4 TOOLS USED


To attain the said objectives the main tool used is Ratio Analysis and the results are presented in
the form of Scattered Charts

The following are the ratios used and their formulas:

PROFITABILITY
Operating Profit (Operating profit/ Net sales) * 100
Ratio
Gross Profit Ratio (Gross profit/ Net sales)*100
Net Profit Ratio (Net profit/Net sales)*100
Fixed Assets (Net sales/ Fixed assets)
Turnover Ratio
LIQUIDITY
Current Ratio (Current assets/ Current liabilities)
Quick Ratio (Current assets – Stock- Prepaid Expenses)/ Current
liability
Long Term debt ( Long term debt/Equity)
Equity Ratio
Owner’s Fund As A (Net worth/ Total liability)*100
Percentage of Total
Source
Debt As A Percentage (Total debt/Total liability)*100
Of Total Source

7
3.3 ANALYSIS OF DATA
Operating Profit Ratio (%)
31.3.2013 31.3.2014 31.3.2015 31.3.2016 31.3.2017

1000.21 997.94 1027.97 1170.85 1193.19


×100 ×100 ×100 ×100 ×100
4416.12 4376.40 4319.35 4790.32 5068.15
22.64% 22.80% 23.79% 24.88% 23.54%

Operating net profit ratio is calculated by dividing the operating net profit by sales. This ratio
helps in determining the ability of the management in running the business.

Object 13

Figure (I)
FINDINGS: The Operating Profit Ratio was 22.64% in 2013 which kept on increasing and
reached its peak in 2016 i.e. 24.88% and then somewhat declined in 2017 to 23.54% showing an
upward rising trend.

The fluctuations were mainly due to the changes in the net sales figures whereas the operating
profit figures remained more or less consistent.

8
Gross Profit Ratio (%)
Gross profit ratio (GP ratio) is a profitability ratio that shows the relationship between gross
profit and total net sales revenue. It is a popular tool to evaluate the operational performance of
the business. The ratio is computed by dividing the gross profit figure by net sales.

31.3.2013 31.3.2014 31.3.2015 31.3.2016 31.3.2017

1380.43 1461.89 1698.50 1355.40 1176.28


×100 ×100 ×100 ×100 ×100
4416.12 4376.40 4319.35 4790.32 5068.15
31.26% 33.4% 39.32% 28.29% 23.21%

Object 25

Figure (II)
FINDINGS: The Gross Profit Ratio was 31.26% in 2013 which kept on increasing and reached
its peak in 2015 i.e. 39.32% and then started declining from 2016 and came down to 23.21% in
2017 showing a slight downward sloping trend.

The fluctuations were mainly due to the changes in both the net sales figures (which kept on
increasing) and the gross profit figure (which kept on fluctuating).

9
Net Profit Ratio(%)
Net profit ratio (NP ratio) is a popular profitability ratio that shows relationship between net
profit after tax and net sales. It is computed by dividing the net profit (after tax) by net sales.

31.3.2013 31.3.2014 31.3.2015 31.3.2016 31.3.2017

475.24 542.43 674.62 113.20 689.83


×100 ×100 ×100 ×100 ×100
4416.12 4376.40 4319.35 4790.32 5068.15
10.76% 12.39% 15.62% 2.36% 13.6%

Object 37

Figure (III)

FINDINGS: The Net Profit Ratio was 10.76% in 2013 which kept on increasing and reached its
peak in 2015 i.e. 15.62% and then s declined sharply in 2016 to 2.36% but recovered massively
to 13.6% in 2017 showing a slight downward sloping trend.

The fluctuations were mainly due to the fluctuations in both the net profit figures (that
fluctuated) and the net sales figures (which kept on increasing)

10
Fixed Assets Turnover Ratio
Fixed assets turnover ratio (also known as sales to fixed assets ratio) is a commonly used activity
ratio that measures the efficiency with which a company uses its fixed assets to generate its sales
revenue. It is computed by dividing net sales by average fixed assets.

31.3.2013 31.3.2014 31.3.2015 31.3.2016 31.3.2017

4416.12 4376.40 4319.35 4790.32 5068.15


7501.03 7550.19 8534.66 8854.94 9363.16
0.59 0.58 0.5 0.59 0.54

Object 49

Figure (IV)
FINDINGS: The Fixed Assets turnover Ratio was 0.59 in 2013 which have undergone through
minute changes in the preceding year upto 2017 showing a downward sloping trend.

The slight fluctuations were mainly due to the changes in net sales figures (which kept on
increasing) and the fixed assets also increased in a consistent manner.

Current Ratio

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The current ratio is a liquidity ratio that measures whether or not a firm has enough resources to
meet its short-term obligations. It compares a firm's current assets to its current liabilities

31.3.2013 31.3.2014 31.3.2015 31.3.2016 31.3.2017

3199.80 3870.23 3198.26 3606.06 3285.64


2409.71 2593.63 2855.45 3047.56 3152.82
1.33 1.49 1.12 1.18 1.04

Object 61

Figure (V)

FINDINGS: The Current Ratio was 1.33 in 2013 which kept on fluctuating and in 2017 to it
stood at 1.04 showing a downward sloping trend.

The fluctuations were mainly due to the fluctuations in the current asset figures whereas the
current liability figures increased consistently

12
Quick Ratio
31.3.2013 31.3.2014 31.3.2015 31.3.2016 31.3.2017

3199.80−328.62 3870.23−522.63 3198.26−152.86 3606.06−84.64 3285.64−101.79


2409.71 2593.63 2855.45 3047.56 3152.82
1.20 1.30 1.06 1.15 1.01

In finance, the acid-test or quick ratio or liquidity ratio measures the ability of a company to use
its near cash or quick assets to extinguish or retire its current liabilities immediately. Quick assets
include those current assets that presumably can be quickly converted to cash at close to
their book values. It is the ratio between quick or liquid assets and current liabilities

QUICK RATIO
1.4
1.2
1
R
A 0.8
T 0.6
I
O 0.4
0.2
0
2012.5 2013 2013.5 2014 2014.5 2015 2015.5 2016 2016.5 2017 2017.5
YEAR

Figure (VI)
FINDINGS: The Quick Ratio was 1.20 in 2013 which kept on fluctuating and in 2017 the figure
stood at 1.01% showing a slight downward sloping trend.

The fluctuations were mainly due to the fluctuations in the current asset figures whereas the
current liability figures increased consistently and also due to changes in non liquid current
assets.

13
Long Term debt Equity Ratio
The ratio is calculated by taking the company's long-term debt and dividing it by the book value
of common equity. The greater a company's leverage, the higher the ratio.

31.3.2013 31.3.2014 31.3.2015 31.3.2016 31.3.2017

250 250 60 5 5
285 285 285 285 285
0.8 0.8 0.2 0.02 0.02

LONG TERM DEBT EQUITY RATIO


0.9
0.8
0.7
0.6
R
A 0.5
T 0.4
I 0.3
O
0.2
0.1
0
2012.5 2013 2013.5 2014 2014.5 2015 2015.5 2016 2016.5 2017 2017.5
YEAR

Figure (VII)

FINDINGS: The Long Term Debt Equity Ratio was 0.8 in 2013 and 2014 but had a sharp fall in
2016 i.e. 0.02 and stayed consistent in 2017 showing a steep downward sloping trend.

The fluctuations were solely due to the changes in the long term debt figures whereas the equity
figures remained same throughout.

Owner’s Fund As A Percentage of Total Source (%)

14
The ratio is calculated to find out the weightage of the total fund of the owner(s) in relation to
the total amount of liability

31.3.2013 31.3.2014 31.3.2015 31.3.2016 31.3.2017

7516.42 7885.61 8351.83 8318.86 9255.21


×100 ×100 ×100 ×100 ×100
8291.12 8826.79 8877.47 9002.65 9992.46
90.65% 89.33% 94.07% 92.34% 92.62%

OWNER'S FUND AS A PERCENTAGE OF TOTAL SOURCE


95
94
93
92
R
A 91
T 90
I 89
O
88
87
86
2012.5 2013 2013.5 2014 2014.5 2015 2015.5 2016 2016.5 2017 2017.5
YEAR

Figure (VIII)
FINDINGS: The Percentage of Owner’s fund in relation to Total Source was 90.65% in 2013
which kept on fluctuating and in 2017 the figure stood at 92.62% showing an upward rising
trend.

The fluctuations were mainly due to consistent rise in both the values of owners fund and the
total source.

15
Debt As A Percentage Of Total Source(%)
The ratio is calculated to find out the weightage of the debt (outside) in relation to the total
amount of liability

31.3.2013 31.3.2014 31.3.2015 31.3.2016 31.3.2017

250+ 524.70 250+ 691.18 60+ 465.64 5+ 687.79 5+ 732.25


×100 ×100 ×100 ×100 ×100
8291.12 8826.79 8877.47 9002.65 9992.46
9.35% 10.67% 5.93% 7.66% 7.38%

DEBT AS A PECENTAGE OF TOTAL SOURCE


12
10
8
R
A 6
T
I 4
O
2
0
2012.5 2013 2013.5 2014 2014.5 2015 2015.5 2016 2016.5 2017 2017.5
YEAR

Figure (XI)

FINDINGS: The Percentage of Debt in relation to Total Source was 9.35% in 2013 which kept
on fluctuating and in 2017 the figure stood at 7.38% showing a slight downward sloping trend.

The fluctuations were mainly due to consistent rise in both the values of debt and the total
source.

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CORRELATION BETWEEN EPS AND DPS

Earnings per share (EPS) are the portion of a company's profit allocated to each outstanding
share of common stock. Earnings per share serve as an indicator of a company's profitability.

Dividend per share (DPS) is the sum of declared dividends issued by a company for every
ordinary share outstanding. The figure is calculated by dividing the total dividends paid out by a
business, including interim dividends, over a period of time by the number of outstanding
ordinary shares issued

YEAR 31.3.2013 31.3.2014 31.3.2015 31.3.2016 31.3.2017

EPS 16.68 19.03 23.67 13.78 24.20

DPS 3 4.5 5.5 4.3 6

CORRELATION BETWEEN EPS AND DPS


30

25
E 20
P
S 15
,
D 10
P
S
5

0
2012.5 2013 2013.5 2014 2014.5 2015 2015.5 2016 2016.5 2017 2017.5
YEAR

Figure (X)
FINDINGS: The EPS was Rs.16.68 in 2013 which kept on increasing and reached its peak in
2015 i.e. Rs 23.67 and then declined sharply in 2016 to Rs 13.78 but recovered massively in
2017 i.e. Rs 24.20 showing an upward rising trend. The DPS was Rs3 in 2013 and kept on
increasing slightly each year but in 2016 it was slightly lower i.e. Rs4.3 assuming due to massive

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fall in EPS but again went up to Rs 6 in 2017 showing slightly upward rising trend. But as a
whole the company managed to pay reasonable amount of dividend to its shareholders and it
managed to maintain a fair margin between EPS and the final DPS otherwise it would lead to
capital erosion.

4. OBSERVATION AND CONCLUSION

4.1 SUMMARY OF OBSERVATIONS

1. The Operating Profit Ratio was 22.64% in 2013 which kept on increasing and reached its
peak in 2016 i.e. 24.88% and then somewhat declined in 2017 to 23.54% showing an
upward rising trend. The fluctuations were mainly due to the changes in the net sales
figures whereas the operating profit figures remained more or less consistent.
2. The Gross Profit Ratio was 31.26% in 2013 which kept on increasing and reached its
peak in 2015 i.e. 39.32% and then started declining from 2016 and came down to
23.21% in 2017 showing a slight downward sloping trend. The fluctuations were mainly
due to the changes in both the net sales figures (which kept on increasing) and the gross
profit figure (which kept on fluctuating).
3. The Net Profit Ratio was 10.76% in 2013 which kept on increasing and reached its peak
in 2015 i.e. 15.62% and then s declined sharply in 2016 to 2.36% but recovered
massively to 13.6% in 2017 showing a slight downward sloping trend. The fluctuations
were mainly due to the fluctuations in both the net profit figures (that fluctuated) and the
net sales figures (which kept on increasing)
4. The Fixed Assets turnover Ratio was 0.59 in 2013 which have undergone through minute
changes in the preceding year upto 2017 showing a downward sloping trend. The slight
fluctuations were mainly due to the changes in net sales figures (which kept on
increasing) and the fixed assets also increased in a consistent manner.
5. The Current Ratio was 1.33 in 2013 which kept on fluctuating and in 2017 to it stood at
1.04 showing a downward sloping trend. The fluctuations were mainly due to the
fluctuations in the current asset figures whereas the current liability figures increased
consistently.
6. The Quick Ratio was 1.20 in 2013 which kept on fluctuating and in 2017 the figure stood
at 1.01% showing a slight downward sloping trend. The fluctuations were mainly due to
the fluctuations in the current asset figures whereas the current liability figures increased
consistently and also due to changes in non liquid current assets.
7. The Long Term Debt Equity Ratio was 0.8 in 2013 and 2014 but had a sharp fall in 2016
i.e. 0.02 and stayed consistent in 2017 showing a steep downward sloping trend. The
fluctuations were solely due to the changes in the long term debt figures whereas the
equity figures remained same throughout.

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8. The Percentage of Owner’s fund in relation to Total Source was 90.65% in 2013 which
kept on fluctuating and in 2017 the figure stood at 92.62% showing an upward rising
trend. The fluctuations were mainly due to consistent rise in both the values of owners
fund and the total source.
9. The Percentage of Debt in relation to Total Source was 9.35% in 2013 which kept on
fluctuating and in 2017 the figure stood at 7.38% showing a slight downward sloping
trend. The fluctuations were mainly due to consistent rise in both the values of debt and
the total source.
10. The EPS was Rs.16.68 in 2013 which kept on increasing and reached its peak in 2015
i.e. Rs 23.67 and then declined sharply in 2016 to Rs 13.78 but recovered massively in
2017 i.e. Rs 24.20 showing an upward rising trend. The DPS was Rs3 in 2013 and kept
on increasing slightly each year but in 2016 it was slightly lower i.e. Rs4.3 assuming due
to massive fall in EPS but again went up to Rs 6 in 2017 showing slightly upward rising
trend. But as a whole the company managed to pay reasonable amount of dividend to its
shareholders and it managed to maintain a fair margin between EPS and the final DPS
otherwise it would lead to capital erosion.

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4.2 CONCLUSION

From the ratio analysis of the firm we come to know about the profitability of the firm. Liquidity ratios give
idea about maintenance of liquid assets in the company. From the analysis of the working capital and its
components of TATA COMMUNICATIONS LTD, we found that the company follows aggressive
policy of managing liquidity .The Company is earning huge profits and is in good financial health.
TATA COMMUNICATIONS LTD has been maintaining a positive net working capital for the last 5 F.Ys
and this proves that the company is in sound financial health. This indicates the managerial efficiency of the
company. The company does not have unnecessary funds tied up in the form cash or any current assets
increasing the liquidity and thus decreasing the profitability of the company. As there is a tradeoff between
profitability and liquidity the firm maintains current assets up to the level necessary for the smooth functioning
of the business. On the current liabilities side are also not that high to create a problem in the company’s
functioning. The profitability ratio shows that the organization is making good profits and paying
dividend worth Rs.6 per share. This proves TATA COMMUNICATIONS LTD’s credibility.

20
4.3 LIMITATIONS OF THE STUDY
Limitation of the financial statement analysis and interpretation of Tata Communications Ltd.
have been stated as under

1. It is suffering from limitation of financial statement


2. Price level changes is ignored in financial analysis
3. Quantity aspect is also ignored in financial analysis.
4. Lack of exactness in financial statement analysis and so it is difficult to interpret.
5. The qualitative elements like quality of management, quality of labor are ignored.
6. In many situations the accountant has to make choice out of various alternatives
available like choice in the method of inventory valuation-which involves personal
judgment of the accountant, the financial statements are not free from biasness

21
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Barker, Richard (2001) Determining value: valuation models and financial statements. Harlow:
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reflect implications of current earnings for future earnings”’, in Journal of accounting and
economics. Amsterdam: North Holland.
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recommendations?’, in Accounting review. Menasha, Win: [publisher not identified].
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Business & Financial News, Breaking US & International News | Reuters.com (no date).
Available at: http://www.reuters.com/.
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http://cws.cengage.co.uk/palepu_peek2/students/stu_weblinks.html.
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research. London: Institute of Chartered Accountants in England & Wales, 16.
Demirakos EG et al (no date) ‘What valuation models do analysts use?’, in Accounting horizons.
Salt Lake City,Utah: American Accounting Association.
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equity capital’, in Accounting review. Menasha, Win: [publisher not identified].
Elliott, Barry and Elliott, Jamie (2012) Financial accounting and reporting. 15th ed. Harlow:
Financial Times Prentice Hall.
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in Accounting review. Menasha, Win: [publisher not identified].

1
ANNEXURE1: Profit & Loss account of Tata ------------------- in Rs. Cr. -------------------
Communications
Mar 17 Mar 16 Mar 15 Mar 14 Mar 13

12 mths 12 mths 12 mths 12 mths 12 mths

INCOME
Revenue From Operations [Gross] 5,068.15 4,790.32 4,316.03 4,330.05 4,416.12
Revenue From Operations [Net] 5,068.15 4,790.32 4,316.03 4,330.05 4,416.12
Other Operating Revenues 0.00 0.00 3.32 46.35 0.00
Total Operating Revenues 5,068.15 4,790.32 4,319.35 4,376.40 4,416.12
Other Income -16.91 209.77 670.53 463.95 380.22
Total Revenue 5,051.24 5,000.09 4,989.88 4,840.35 4,796.34
EXPENSES
Operating And Direct Expenses 1,923.39 1,828.73 1,673.44 1,875.95 1,963.20
Employee Benefit Expenses 757.09 763.93 728.50 640.81 639.46
Finance Costs 30.68 31.30 25.25 59.51 119.69
Depreciation And Amortisation Expenses 764.58 742.99 718.94 680.23 762.40
Other Expenses 1,194.48 1,005.57 889.44 861.70 813.25
Total Expenses 4,670.22 4,372.52 4,035.57 4,118.20 4,298.00
Mar 17 Mar 16 Mar 15 Mar 14 Mar 13

12 mths 12 mths 12 mths 12 mths 12 mths

Profit/Loss Before Exceptional, ExtraOrdinary Items


381.02 627.57 954.31 722.15 498.34
And Tax
Exceptional Items 823.82 -22.63 48.96 81.33 158.35
Profit/Loss Before Tax 1,204.84 604.94 1,003.27 803.48 656.69
Tax Expenses-Continued Operations
Current Tax 602.50 150.32 399.36 353.01 206.58
Deferred Tax -87.49 61.94 -70.71 -91.96 -25.13
Total Tax Expenses 515.01 212.26 328.65 261.05 181.45
Profit/Loss After Tax And Before ExtraOrdinary Items 689.83 392.68 674.62 542.43 475.24
Profit/Loss From Continuing Operations 689.83 392.68 674.62 542.43 475.24
Profit/Loss For The Period 689.83 392.68 674.62 542.43 475.24
Mar 17 Mar 16 Mar 15 Mar 14 Mar 13

12 mths 12 mths 12 mths 12 mths 12 mths

OTHER ADDITIONAL INFORMATION


EARNINGS PER SHARE
Basic EPS (Rs.) 24.20 13.78 23.67 19.03 16.68
Diluted EPS (Rs.) 24.20 13.78 23.67 19.03 16.68
VALUE OF IMPORTED AND INDIGENIOUS RAW MATERIALS
STORES, SPARES AND LOOSE TOOLS
Imported Stores And Spares 0.00 0.00 0.33 1.12 0.30
Indigenous Stores And Spares 0.00 0.00 20.04 16.71 20.52
DIVIDEND AND DIVIDEND PERCENTAGE
Equity Share Dividend 147.50 199.11 156.75 128.25 85.50

2
Tax On Dividend 0.00 0.00 20.13 12.80 13.72
Equity Dividend Rate (%) 60.00 43.00 55.00 45.00 30.00

ANNEXURE2: Balance Sheet of Tata ------------------- in Rs. Cr. -------------------


Communications
Mar '17 Mar '16 Mar '15 Mar '14 Mar '13

12 mths 12 mths 12 mths 12 mths 12 mths

Sources Of Funds
Total Share Capital 285.00 285.00 285.00 285.00 285.00
Equity Share Capital 285.00 285.00 285.00 285.00 285.00
Reserves 8,970.21 8,610.74 8,066.83 7,600.61 7,231.42
Networth 9,255.21 8,895.74 8,351.83 7,885.61 7,516.42
Secured Loans 5.00 5.00 60.00 250.00 250.00
Unsecured Loans 732.25 678.79 465.64 691.18 524.70
Total Debt 737.25 683.79 525.64 941.18 774.70
Total Liabilities 9,992.46 9,579.53 8,877.47 8,826.79 8,291.12
Mar '17 Mar '16 Mar '15 Mar '14 Mar '13

12 mths 12 mths 12 mths 12 mths 12 mths

Application Of Funds
Gross Block 10,233.65 9,655.61 9,702.38 9,065.86 9,361.29
Less: Accum. Depreciation 6,236.71 5,845.96 5,527.99 4,828.68 4,527.84
Net Block 3,996.94 3,809.65 4,174.39 4,237.18 4,833.45
Capital Work in Progress 0.00 557.91 235.95 310.04 174.66
Investments 5,366.22 4,487.38 4,124.32 3,002.97 2,492.92
Inventories 14.83 6.39 3.95 4.15 4.20
Sundry Debtors 806.98 846.33 717.63 685.44 861.02
Cash and Bank Balance 101.79 84.64 152.86 522.63 328.62
Total Current Assets 923.60 937.36 874.44 1,212.22 1,193.84
Loans and Advances 2,362.04 2,729.65 2,323.82 2,658.01 2,005.96
Total CA, Loans & Advances 3,285.64 3,667.01 3,198.26 3,870.23 3,199.80
Current Liabilities 2,636.46 2,697.48 2,098.86 2,140.73 2,177.03
Provisions 516.36 244.94 756.59 452.90 232.68
Total CL & Provisions 3,152.82 2,942.42 2,855.45 2,593.63 2,409.71
Net Current Assets 132.82 724.59 342.81 1,276.60 790.09
Total Assets 9,495.98 9,579.53 8,877.47 8,826.79 8,291.12

3
Contingent Liabilities 10,344.71 5,093.94 35,600.93 31,280.86 21,836.06
Book Value (Rs) 324.74 312.13 293.05 276.69 263.73