The main objective of this report is to conduct the financial trend analysis of the company…”wipro company” which is listed under the bombaystock exchange and National stock exchange
The financial trend analysis will basically help in calculating the various financial ratio such as profitability ratio, turnover ratio, leverage ratio..
This analysis wiil help to calculae true financial position of a company..
The various element of report are summarized as follows:
• To study the background of a company
• To collect the financial statement i.e balance sheet &profit loss of company for past 3 years
• To study these financial statement and calculate various ratios..
INTRODUCTION OF COMPANY
Today wipro is one of the most successful technological companies in India and around the world. Wipro ltd. Iincorporated in the year 1945 by Mohamed hasham premji. Azim H premji is
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Current assets include cash with in year. Like securities, inventory, prepaid expense. Current ratio should be 2:1 it is satisfactory ratio. Higher current ratio more safety. Current Liabilities are creditors, bill payable, etc.
Formula
Current ratio = Current assets / current Liabilities
Quick ratio : quick ratio helps to measure how well company can meet short term financial Liabilities.. quick ratio is also known as acid ratio.. it includes current assets minus inventory and prepaid expenses and current Liabilities
Formula
Quick ratio = cash+ cash equivalent+ short term investment + current receivable / current Liabilities
And total current assets- inventories - prepaid expenses /current Liabilities
Debt ratio: Debt ratio use to analysis long term solvency of any company. It can be calculated by dividing total Liabilities by total assets of a firm. Lower the ratio more stability of
Quick ratio is another measure of liquidity. In quick ratio we consider only liquid assets and its standard ratio is 1:1. Quick ratio of Peyton Approved is 7.63. Thus, there is no doubt that the company has got excellent liquidity. Company has enough liquid assets to pay off current liabilities.
The current ratio shows the short-term debt-paying ability of the company also known as liquidity ratio. Components of the current ratio are current assets and current liabilities. To find the current ratio, divide current assets by current liabilities. For example if a current ratio was 2:1, then that company would be able to pay off its short term debt easily. But you should also look at the types of debt the company has because some assets might be larger. For the current ratio a rule of thumb is the ratio should be around 2:1. The company wants to at least make sure that the value of the current assets covers at least the amount of the short-term obligations. In 2013 the current ratio is 1.75 and in 2014 the current ratio is 1.8. This is showing a favorable
This ratio indicates whether it can respond to the current liabilities by using current assets. As many times, we can cover short-term obligations, as better for the company. This indicates that significant and high improvement in the liquidity. The increase in the current ratio 11.5 % will result in an increase in current assets where the current liabilities increased by 2.1%.
Liquidity is important for any firm as it is an assessment of the ability to pay its' liabilities in the short term. There are two main liquidity ratios: the current and the quick ratio. The current ratios divides the current assets by the current liabilities to assess how many times the current assets can pay the current liabilities (Elliott and Elliott, 2011). Traditional ratios are usually in the region of 1.5, but this may vary depending on the industry and nature of the business (Elliott and Elliott, 2011). The current ratio is shown in table 1.
1. You are analyzing a company that has cash of $2,000, accounts receivable of $3,700, fixed assets of $10,900, accounts payable of $6,600, and inventory of $4,100. What is the quick ratio?
This ratio is similar to current ratio, except that it excludes inventory from current assets. Inventory is subtracted because it is considered to be less liquid than other current assets, that is, it cannot be easily used to pay for the company’s current liabilities. A company having a quick ratio of at least 1.0, is considered to be financially stable. It has sufficient liquid assets and hence, it will be able to pay back its debts easily (Qasim Saleem et al., 2011).
These ratios are computed to judge the short term liquidity of the business. Two most important liquidity ratios are current ratio and quick ratio. These ratios determine the ability of firm to meets its current liabilities out of its current/quick assets.
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| This ratio measures a company’s ability to meet its short-term obligations with its most liquid assets, which is why inventory is omitted.
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The quick ratio reflects on a company’s ability to meet its current liabilities without liquidating inventories that could require markdowns. It is a more stringent test of liquidity than the current ratio and may provide more insight into company liquidity in some cases. For Colgate-Palmolive, the quick ratio has declined from 0.73 in 2008 to 0.58 in 2010. While this does not necessarily mean a problem, a higher current ratio and quick ratio analysis will mean that the company will not have difficulty in meeting its short-term obligations from its operations and not by liquidating its assets.
Long term creditors and shareholders are interested in this part of ratios and very carefully to deal with it. It evaluates how the company is using or managing its debt. Debt asset ratio and times interest earned and times interest earned will be calculated in
The quick ratio of 1.46 is a further analysis into the actual monetary values that are highly liquid and excluding fixed assets as part of the assets. The CFO/Avg. current liabilities also show a healthy 73%, 28% in 2004, on average of which is still higher than the industry.