 Namaste. In last few sessions we are discussing analysis of financial statements and in the last session we had taken up case of TCS limited. So TCS limited you all know is a leading Indian MNC which is one of the largest private sector employer in India and we had discussed their market data, equity market data, then income data, balance sheet data and cash flow. And we had also calculated some basic ratios related to PNL and related to balance sheet. Now let us go for their combined ratios. By combined what I mean is one figure is picked up from one statement, the other one is picked up from the other statement. Some of the ratios has have also been calculated on the extra information which is provided by the company ok. So first one, now the formulas for the ratios are pretty simple almost common sense, but let us try to calculate the important ratios and observe the trends in it. Now first one is exports to sales. So what is the formula here? We are trying to look at the export as a percentage of total sales. So exports are given only for first 2 years and we will divide it by their net sales which comes to about 3%, I am sorry not 3%, it is just 0.32% in March 14 and was 0.50% and in more current years the figure has not been given so it is just a 0 amount. The next one is net working capital to sales. Now which is an important ratio for working capital? We have seen that for liquidity we normally calculate current ratio which we have already calculated, but here we just compare between current assets and liabilities between two balance sheet items. But if we know working capital is mainly required to finance the operations, it is required to finance the day to day business activities. So one way to know the adequacy of working capital is to link it to the revenue which we generate or the sales which we generate using that working capital. So the ratio which is calculated is net working capital to sales. So now the working capital figure is not given although we have been given current assets and current liabilities. So compute CA minus CL which will be working capital for the numerator and divided by sales. So CA minus CL, this is the working capital divided by shall we take total revenue or net sales? Both the figures are possible, but since working capital is mainly for our own business operations, not for other income, it will be more authentic to take net sales. So it comes to 0.33, you can see gradually it is going up from 0.33 then 0.36 it went to 0.55 and in last year it has slightly come down to 0.51. So what does it mean? That company is now keeping more and more working capital. So for 1 rupee of sales they had 0.33, now it is almost 0.50. Now is it a good sign? Not necessarily, they are from liquidity angle it is good, but they are keeping too much of working capital, they are having slightly higher working capital than required. As I said we need to check from audit angle the composition of their daters because they do not have any inventory. So their major current assets are the receivables from customers. So they need to be checked. Do you remember any other ratio which is similar to this ratio? We had discussed that ratio earlier. That ratio would be sales to working capital which is known as working capital turnover ratio which is just a transposition of this ratio though it is not required in the case I will just try to calculate it. So I am writing it down here, you know that there are turnover ratios which we calculate to know the efficiency in use of that particular asset. So to know the efficiency in use of working capital we can calculate working capital turnover ratio. What is the formula? Sales upon working capital. So let us take net sales and divide it by working capital. So again in bracket we have to take sorry there is some confusion. In bracket we have to take CA minus CL. So you can see the working capital turnover ratio is slowly going down. It has gone down from 3 to 1.94. What does it show? It means the efficiency of use of working capital has been falling. Actually net working capital to sales and working capital turnover ratio is showing the same thing. I have just calculated it again to make you understand that different ratios can be used actually to calculate the same thing. Now the same thing can you calculate one more ratio for it? Do you remember we have discussed that ratio? We can express this working capital turnover ratio in terms of number of sales, a number of days of sales. Let us do that also so that you get even more clarity. This we will call it as working capital in terms of days. The formula is already with you. So try to calculate it. So working capital days we will use the transposition now. So it will be 1 divided by the turnover ratio. It is 1 upon, I do not know why it is not kicking, 1 upon C. So you will get the ratio into, if you want to do it in terms of number of days we will multiply it by 365. So you get 121 days. So from 121 it has gone up to 187. So in a year of 365 days if a particular amount is locked up in the form of working capital earlier it was 121 it has now gone up to 187 days which is you can understand is a very high amount. That means almost for half the period of the year their working capital is locked up. It is normally suppose you sell some item you can give a credit for 2 months, 3 months, 4 months which will mean a 90 days or 120 days period but here it is very high it is 187. So all these 3 ratios actually were essentially same conveying the same meaning but in a different way. Are you getting it? Now next one is sale to assets ratio. Now this is similar to this working capital turnover but this refers to the total assets. So now the total assets are used to generate sales. So we will take the total revenue here because we are going to divide it by total assets and we will divide it from the balance sheet we get total assets we will divide it by that. So we get 1.24. So you can see there is more or less stagnancy in this ratio although it ratio increased in 2015 it has now fallen to 1 point fallen a bit but still better than slightly less than March 14 1.19. That means 1 rupee of assets are converted into sale of 1.19 still norm compared to other industries it is a ratio on a lower side. So this is showing efficiency in utilization of total assets. Now next is ROPA return on total assets or return on assets as it has been called here. So in the denominator as the name suggests we will take the total assets. Here return signifies profitability so the final profits which you earn or profit after tax divided by total assets give you return ratio on total assets. So take profit after tax in the numerator and from balance sheet take total assets we get 0.28 normally we will express it as a percentage. So here you see that the ratio has been fallen earlier they were able to generate 28 percent return on the assets which has now come down to 24 percent. So more assets are getting locked up relatively giving lesser profitability. Now from the equity shareholders angle what could be interesting to them is return on equity or return on owner's fund. So what is the formula? Return is profit so PAT profit after tax divided by equity or owner's funds. So let us calculate it PAT divided by net worth 0.38 let us express it as a percentage. So 38.96 percent was return in March 14 slowly the return has been falling mainly because of lower profitability they are able to generate lesser return than equity. Now the next one similar ratio but very important ratio is return on capital. Now what is the difference in return on equity and return on capital? Return on equity is a return only on equity shareholders money return on capital is a total capital employed although this company does not have much debt but normally it is capital that is owner's fund plus debt taken together what is a long term capital. And what do you take in the numerator? Also we will not just take PAT we will take PAT plus tax plus finance cost. So I will put this in bracket return on capital is equal to we have been given profit after tax add taxes or we could have also taken PBT directly and to this we can add interest or the finance cost divided by in the denominator we are going to take total long term capital. So we will take again put it in bracket net worth sorry it got close net worth plus so net worth plus long term debt. So now you got 0.51 this is for the March 14 let us so 0.51 slowly it has come down to 40 percent sorry not 0.51 51 percent in as a percentage and it has gone down to 40 percent. So because of the falling margins the return on the capital employed has also fallen. Why is it higher than return on equity? Because now you are taking profit before taxes. Since this company is more or less zero debt company there was no much effect of interest because of addition of taxes the return on capital or long term capital is much better and if you compare with return on say bank might give you 8 or 9 percent return whereas TCS is able to earn as much as 51 percent return on their capital and on owners points it is 38 percent. So for most of the healthy companies it should be on a higher side are you getting it? So these return ratios are very important for owners as well as for anybody who wanting to take over the company or who wants to study the company from a long term angle. Now Lexis sales per share now this is one of the hybrid ratio this is not a financial ratio per say because denominator is number of shares but shareholders might be interested to know that how much sale is generated per one share. So it is sales. So we will take the data of net sales and let us divide it by number of shares they have given this share outstanding data EOIM is at the end of the year. So we get 417 since all the data is in rupees million this is also in rupees million. So for one share I will copy it here so for one share they are able to generate 417 millions of sales you can see there is a gradual rise. So company is able to increase its revenue although its profitability is in sort of pressure. Now the next is earning per share this refers to as you know profit available per share so what is a formula which profit will you take operating profit, profit before tax or after tax you will take profit after tax. In fact if there is a preference dividend we will deduct preference dividend also. So PAT or profit available to the owners should be in the numerator right now let us take PAT profit after tax divided by number of shares. So you can see earning per share has been increasing gradually because companies total profit is going up although profitability is falling a bit total profits are rising so earning per share is also slowly going up. Next is cash flow per share. Now some shareholders may not be happy just by knowing the earning they would probably be interested in knowing the cash generated per share again we do not know whether they want total cash flow or whether they want operating cash flow per share probably they are looking for operating cash flow. So let us go for this is a new formula so note the formula cash flow per share operating cash generated from operating activities divided by number of shares. So you can see there is a good rise from 75 to 130 more or less consistent rise in the cash flow from operating activity per share basis. Next is dividend per share so how much money is company distributing as a dividend which will be received on a per share basis. So it is simple now we will take total dividend and divide it by number of shares. I think here dividend data is not available so you will not be able to calculate dividend per share let us check once again no dividend data is not available. Now the next one is dividend yield now what do you mean by dividend yield that means as a percentage what return you are getting based on dividend. So it is dividend upon will you take number of shares no if you take dividend upon share capital you will get the rate of dividend declared but they are talking about market yield. So we will take dividend upon market price of the share or DPS upon market price since we do not have dividend data we are not able to calculate dividend yield also but it is already given on in as a share information above I will just show you. So they have given here dividend yield which is 0.7 percent this is the current dividend yield. But the current yield is known to you. The next one is book value per share now this is a very interesting and important information. So net worth is the value which shareholders will get we divide it by number of shares to know that if the company is close today how much money will each shareholder get per share basis. So please take net worth and divide it by number of shares. So from 251 you can see consistent rise to 443 that means company slowly earning profits and adding reserves so their book value is going up. Now price upon sales ratio this is referring to market prices now I think market price information is not available for all the years yeah it is there. So average market cap is given but we have not been given number of we have not been given average market price let us check again high and low market price is given but average is not given. So we will not be able to calculate price per share ratio average PE ratio that is price upon EPS again we need average price and we divided by earnings so we cannot calculate this also. Next is price to book value ratio again in absence of market price we do not know but this is an important ratio which links market prices to book value we have just calculated book value. Next is dividend payout so this is based on the dividend, dividend upon the current market price sorry dividend payout is a percentage of the amount which is distributed as a dividend from the profits so it is dividend upon profit or DPS upon EPS. So we do not know dividend data so we do not know this. Now there are three last ratios which are interesting because they are related to number of employees average sales per employee average wages per employee and average net profit plus per employee this we can calculate because we know the number of employee data. So let us go for it sales divided by number of employees so it was 2722 in rupees million and it has slowly increased to 3116 this is the revenue generated by one single employee. Now let us see what employees get for it that is their wages. Now total salaries and wages are given and divided by number of employees so you may want to be employee of TCS perhaps because 993 million was that time and today it is 1680 million for every employee single employee and net profit so we will take net profit after tax and divided by number of employees. So 637 per employee and now it is 655 you can see it is more or less kind of stagnated because profitability is under pressure although the salaries of employees has increased quite healthily. So this was an attempt to do to show you how a detailed analysis is done by especially the analysts who are trying to study a particular company in detail. So in next session we will try to take another company till that time study this carefully. Namaste. Thank you.