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Common Size Analysis of TCS Financials

The document presents a common size financial statement analysis of Tata Consultancy Services Limited (TCS) from FY 2020-21 to FY 2023-24, focusing on operational efficiency, profitability, and financial health. It highlights the importance of common size analysis in comparing financial structures over time and across companies, while also providing profitability and liquidity ratios. The analysis aims to assist stakeholders in understanding TCS's financial performance and identifying growth areas and risks.

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24 views3 pages

Common Size Analysis of TCS Financials

The document presents a common size financial statement analysis of Tata Consultancy Services Limited (TCS) from FY 2020-21 to FY 2023-24, focusing on operational efficiency, profitability, and financial health. It highlights the importance of common size analysis in comparing financial structures over time and across companies, while also providing profitability and liquidity ratios. The analysis aims to assist stakeholders in understanding TCS's financial performance and identifying growth areas and risks.

Uploaded by

vahvd6674
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Common Size Financial Statement Analysis of Tata Consultancy Services Limited

1. Introduction

Common size financial statement analysis expresses each line item in a financial statement as a
percentage of a base item. For the income statement, each item is shown as a percentage of
total revenue, while for the balance sheet, each item is presented as a percentage of total assets.
This allows stakeholders to compare the structure and performance of a business over time or
against competitors regardless of company size.

This report presents a detailed common size analysis of Tata Consultancy Services Limited
(TCS), one of the largest IT service companies in the world. By analyzing data from FY 2020–21
to FY 2023–24, the report evaluates the financial trends and provides insights into the company's
operational efficiency, profitability, and financial health.

2. Research Analysis

Tata Consultancy Services (TCS), a global IT services and consulting leader, consistently delivers
strong financial results. The aim of this research is to understand TCS’s financial performance
using common size analysis.

2.1 Objective of the Research

* Analyze financial structure using vertical analysis (common size).

* Identify revenue and cost trends.

* Highlight key changes in financial structure.

* Assist in understanding profitability, liquidity, and financial leverage.

2.2 Data Source


* Official Annual Reports from TCS (FY21 to FY24)

* Balance Sheet and Profit & Loss Statement

* Notes to Accounts

2.3 Importance of Common Size Analysis

Eliminates size effect

* Helps track proportionate changes over time

* Simplifies multi-year comparisons

* Assists in decision-making by identifying growth areas and risks

2.4 Scope

* Common size income statement (% of revenue)

* Common size balance sheet (% of total assets)

* Ratios for profitability, liquidity, solvency, and efficiency

3. Ratio Analysis

Ratio analysis offers quantifiable insights into a firm’s performance. It complements common
size analysis by providing relationships among financial figures.
3.1 Profitability Ratios

Ratio FY21 FY22 FY23 FY24

Net Profit Margin (%) 22.0 23.0 23.0 23.0

Return on Assets (ROA) (%) 17.8 18.5 19.3 20.1

Return on Equity (ROE) (%) 28.6 29.3 30.1 31.5

3.2 Liquidity Ratios

Ratio FY21 FY22 FY23 FY24

Current Ratio 1.6 1.7 1.8 1.9

Quick Ratio 1.3 1.4 1.5 1.5

"Particulars": ["Revenue", "COGS", "Gross Profit", "Operating Expenses", "Operating Income", "Net
Income"],

"FY2020-21 (%)": [100, 55, 45, 18, 27, 22],

"FY2021-22 (%)": [100, 54, 46, 17, 29, 23],

"FY2022-23 (%)": [100, 53, 47, 17, 30, 23],

"FY2023-24 (%)": [100, 52, 48, 16, 32, 23]

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