Liquidity , Risk and Profitability Analysis

ON

Objectives of the studyTo measure and evaluate the

liquidity position of TCS.To assess the trade-off between

profitability and risk To assess the Risk factor the

company

Scope of the studyThis study has focused upon the liquidity

position of TCS, the correlation between liquidity and profitability, and trade-off between profitability and risk of TCS.

We hope this study will help us to know more clearly about the liquidity, risk and profitability of TCS.

Importance of the studyWorking capital has played an important

role in the analysis of economic and operating performance of a company. The firm’s policies for managing working capital should be designed to achieve three goals, which are –

adequate liquidity, minimizing risk, and maximizing profit

Data Analysis

Liquidity Position of TCS limited

The determinants of Liquidity and Risk measurement (current assets, current liabilities, quick assets, current ratio and quick ratio) are presented in the following table.

.Liquidity Position of Tata Consultancy Services limited

YearsCurrent

assets

Quick

assets

current

liabilities

Current

ratio

Quick

ratio

2007-

20086147.29 6104.86 3330.79 1.84 1.83

2008-

20096981.45 6944.85 4382.13 1.59 1.58

2009-

20106521.87 6505.08 4162.47 1.56 1.56

2010-

20119010.83 8988.01 4807.58 1.87 1.86

2011-

2012

17541.5

9

17522.8

26128.53 2.86 2.85

TOTAL46203.0

3

46065.6

222811.5 9.72 9.69

current assets ,current liabilities ,quick assets OF TATA CONSULTANCY SERVICES

2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

02000400060008000

100001200014000160001800020000

CURRENT ASSETSQUICK ASSETS CURRENT LIABIL-ITIES

Rank correlation between Risk and ROCE of tata consultancy services limited

year

Equity & Retained earnings

Long term loans

Fixed Assets

Current Assets

Risk 1 Rank 3 ROCE Rank 2 D1 D2

2007-

2008

2480.6

3455.02

6820.5

8

6147.2

9-0.63 2 56.68 2 0 0

2008-

2009

2151.7

8563.21

9558.9

3

6981.4

5-0.98 3 45.7 4 1 1

2009-

2010

3129.8

5103.25

12409.

81

6521.8

7-1.4 4 46.31 3 -2 4

2010-

2011

2474.6

474.8

16026.

95

9010.8

3-1.49 5 45.66 5 1 1

2011-

2012

2054.6

3116.25

12712.

67

17541.

59-0.6 1 58.25 1 0 0

                 total= 6

Equityand RE ,long term loan, Fixed assets and Current assets of TATA CONSULTANCY SERVICES.

2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

EQUITY&RELONGTERMLOANSFIXED ASSETSCURRENT ASSETS

Findings

The fixed assets have increased from 6850.28 thousand in 2007-2008 to 12712.67 thousand in 2011-2012, registering a growth rate of 86.3 % during the study period.

Which indicates that the aggressive expansion and modernization activates initiated by TATA CONSULTANCY SERVICES LIMITED.

Suggestions When the firm likes TCS LTD is in a strategy to move for

expansion to cope up with huge demand for services in the

emerging Tata consultancy sectors, it is obvious to raise the

finance from whatever sources possible.

But it has to take into consideration the short term liquidity

along with the long-term investment decisions.

If the liquidity persists continuously it will affect the

profitability and in the long run it will endanger the solvency of

the firm, especially during the time of financial distress.

Conclusion

TCS should maintain adequate level of working capital to

meet the current obligations and maintain business operations.

TCS highly maintained adequate liquidity and profitability

standard.

As a result their growth rate of its fixed assets during the study

period is about in 2007 in compare to the fixed assets in 2012.

Which indicates that the aggressive expansion and

modernization activities initiated by TCS.