Financial Analysis of IT industry
Tata Consultancy
Services
Financial Statements Analysis
8/31/2014
Part A: Summary of Key Findings from Part B
Tata Consultancy Services Limited (TCS) is the largest IT company in India. Approximately
92% of its revenues are earned from international clients. The company has been growing at a very healthy rate over the years. In sales terms it has grown at a CAGR of 29.4% and in net profit terms it has grown at a CAGR of 34.7%. Since the company has significant overseas revenues, fluctuations in exchange rates also impact its revenues. It is evident from the fact that in FY14, sales grew by 16.2% in USD terms and by 33.5% in INR terms. A weaker INR helps
TCS in a stronger growth. Some of our key findings from the detailed report after studying the standalone statements of TCS and its competitors are summarised as below:
Key Accounting Policies of the Firm
The financial statements are prepared and presented under the historical cost convention on accrual basis of accounting in accordance with the Indian GAAP, except for certain financial instruments which are measured at fair value. Fixed assets exclude computers and other assets individually costing 50,000 or less. Revenues from sale of software licences are recognised upon delivery. Foreign currency monetary assets and liabilities are translated at the exchange rate prevailing on the balance sheet date and exchange gains and losses are recognised in the statement of profit and loss.
Analysis of Balance Sheet, Income Statement & Cash Flow Statement
The balance sheet has become 2.6 times over the 5 year period 2010-15. This has been possible because of a strong and constant stream of Net Profits ensuring that the Reserves and Surpluses account has increased at a CAGR of 31.2%
The company takes very little short term borrowings. These have remained negligible over the years at about 0.05% of the balance sheet size.
The company’s Cash position has been getting
Services
Financial Statements Analysis
8/31/2014
Part A: Summary of Key Findings from Part B
Tata Consultancy Services Limited (TCS) is the largest IT company in India. Approximately
92% of its revenues are earned from international clients. The company has been growing at a very healthy rate over the years. In sales terms it has grown at a CAGR of 29.4% and in net profit terms it has grown at a CAGR of 34.7%. Since the company has significant overseas revenues, fluctuations in exchange rates also impact its revenues. It is evident from the fact that in FY14, sales grew by 16.2% in USD terms and by 33.5% in INR terms. A weaker INR helps
TCS in a stronger growth. Some of our key findings from the detailed report after studying the standalone statements of TCS and its competitors are summarised as below:
Key Accounting Policies of the Firm
The financial statements are prepared and presented under the historical cost convention on accrual basis of accounting in accordance with the Indian GAAP, except for certain financial instruments which are measured at fair value. Fixed assets exclude computers and other assets individually costing 50,000 or less. Revenues from sale of software licences are recognised upon delivery. Foreign currency monetary assets and liabilities are translated at the exchange rate prevailing on the balance sheet date and exchange gains and losses are recognised in the statement of profit and loss.
Analysis of Balance Sheet, Income Statement & Cash Flow Statement
The balance sheet has become 2.6 times over the 5 year period 2010-15. This has been possible because of a strong and constant stream of Net Profits ensuring that the Reserves and Surpluses account has increased at a CAGR of 31.2%
The company takes very little short term borrowings. These have remained negligible over the years at about 0.05% of the balance sheet size.
The company’s Cash position has been getting