Service sector companies:

1. You can't calculate GPM

2. Large part of costs are Fixed costs => They don't change in proportion to my
revenues. Eg: Salaries of my work-force, which is contrary to RM in manuf org.
3. In Services FC have major share, in manuf, VC are major share.
4. Unbilled revenue (gen on selling price.
for milestone proj on cost price
time and matl on selling price)
5. FA % of total are very small and not very important for service co.
ROW8 OPR and ROW9 NPR
OPR decreasing by 5%, NPR decreasing by 3.5%.
Possible causes:
1. Competition / getting low per-hour rate contracts i.e. low billing rates
2. High opr costs
3. Exchange rate, Re appreciates. We can rule this out because Re depreciated.
4. Lower resource utilization
Huge bench
5. Replacement of old contracts
They enter into long-term contracts. Pipeline of contracts are important. It
tells when these margins are coming. Their pipeline is shrinking.
ROW10 Unbilled revenue
Be careful for this for service sector. Ideally we want this to be as low as pos
sible
ROW13 ROE ROW14 ROA:
Decreasing. Company is not having enough opportunities for profitable growth. Th
is co. is more thinking of of organic growth; but less of MandA. The company has
possiblity reached its limit of organic growth. It should start looking for alt
ernative ways of growing.
ROW17 Efficiency analysis
ROW19 FA T/O ratio
FA % of total are very small and not very important for service co. Not importan
t, except for Hospitality and Airlines where its higher.
ROW20 NWC T/O ratio
NWC T/O its on a declining trend. Co. is having problems with managing with work
ing capital