Ratio Analysis of Hcl Tech Essay Example for Free

Ratio Analysis of Hcl Tech Essay It provides software-led IT solutions, remote infrastructure management and BPO services, focused mainly on transformational outsourcing. The company leverages its extensive offshore infrastructure and global network of offices in 31 countries to deliver solutions across selected verticals including financial services, retail and consumer, life sciences, aerospace, automotive, semiconductors, telecom, media publishing and entertainment. HCL takes pride in its philosophy of â€Å"Employees First, Customers Second† which empowers their 84,403 employees to create a real value for the customers. HCL Technologies, along with its subsidiaries, had consolidated revenues of US$ 4. 5 billion, as on 31st March 2013. HCL Leadership team 2. Objectives of Study Development of industries depends on several factors such as financial, personnel, technology, quality of product and marketing. Financial aspects assume a significant role in determining the growth of industries. All the company’s operations virtually affect its need for cash. Most of these data covering operations area are however outside the direct responsibility of the financial executives. The firm whose present operations are inherently difficult should try to makes its financial analysis to enable its management to stay on top of its working position. In this context I am undertaking financial ratio analysis of HCL Technologies to examine and understand financial performance of the company. Using ratio analysis this project will provide the insights of – * The growth and development of HCL Technologies for last 5 years (FY 08-12) * The behavior of liquidity and profitability of HCL Technologies * The factors determining the liquidity and profitability of HCL Technologies Scope The scope of the study is limited to financial data published in the annual reports of the company every year. The analysis is done to suggest possible solutions for financial growth of the organization. This study is carried out for 5 years (2008-2012). Also data provided by external agencies are used for analysis of future predication. 3. Concept of Financial Statement amp; Ratio Analysis 2 3. 2 Financial Statement To understand the information contained in financial statements with a view to know the strength or weaknesses of the organization, to make forecast about future prospects and thereby enabling the management and external parties to take different decisions regarding the operations. Fundamental analysis has a very broad scope. One aspect looks at the general (qualitative) factors of the company. The other side considers tangible and measurable factors (quantitative). This means crunching and analyzing numbers from the financial statements if used in conjunction with other methods, quantitative analysis can produce excellent results. Ratio Analysis Ratio analysis is the method or process by which relationship/group of items in the financial statement are computed, determined and presented. Ratio analysis is an attempt to derive quantitative measure or guides concerning the financial health and profitability of business enterprises. Ratio analysis can be used both in trend and static analysis. Purpose of several ratios depends on the objective of analysis. A financial ratio measures a company’s performance in a specific area. For example, you could use a ratio of a company’s debt to its equity to measure a company’s gearing. By comparing the gearing ratios of two companies, you can determine which company uses greater debt per equity. You can use this information to make a judgment as to which company is better investment risk. However, you must be careful not to place too much importance on one ratio. You obtain better indication of the direction in which a company is moving when several ratios are taken as a group. Ratios are worked out to analyze the following aspects of an enterprise: a. Solvency: i. Long term ii. Short term iii. Immediate b. Profitability c. Operational Efficiency d. Credit standing e. Effective utilization of resources f. Investment Analysis 3. 4 Significance of Ratio Analysis in Financial Statement Ratio analysis is very important in revealing the financial position and soundness of the business so used by various parties * Management: The group that has the most interest in financial statement analysis is management. Management needs to discover quickly any area of mismanagement so that corrective action can be quickly taken. It mainly helps in: * Decision making: Ratio analysis helps in making decision from the information provided in these financial Statements. Financial forecasting and planning: Planning is looking ahead and the ratios calculated for a number of years a work as a guide for the future. * Communicating: The financial strength and weakness of a firm are communicated in a more easy and understandable manner using ratios. * Co-ordination: Better communication of efficiency and weakness of an enterprise result in better co-ordination in the enterprise * Control: The weaknesses are otherwise, if any, come to the knowledge of the managerial, which helps, in effective control of the business. * Investors or Shareholders Investors are interested in financial statements to evaluate current earnings and to predict future earnings. Financial statements influence greatly the price at which stock is bought and sold. * Lenders: Bankers before granting loans usually require that financial statements be submitted. Whether or not a loan is made depends heavily on a company’s financial condition and its prospects for the future. * Employees: Employees are mainly concerned about the profitability. Their salaries and increments are dependent on the profit made by the company. * Government: