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Submitted to SRM SCHOOL OF MANAGEMENT By VOONNA V GURU SAI PRASAD MBA (MASTER OF BUSINESS ADMINISTRATION) (Reg no: 3511010231)
UNDER THE GUIDENCE Of J DINESH Assistant Professor Sr.G
KATTANKULATHUR, KANCHIPURAM DIST CHENNAI - 603203
SCHOOL OF MANAGEMENT
SRM UNIVERSITY Kattankulathur-603203
This is to certify that the project work titled "A STUDY ON COMPARTIVE FINANCIAL STATEMENT OF S&P CAPITAL IQ" is a bonafide work done by VOONNA V GURU SAI PRASAD in partial fulfillment of the requirements for the award of the degree of MASTER OF BUSINESS ADMINISTRATION SRM UNIVERSITY during the period of 26.02.2012 to 26.04.2012.
Project Guide PROF. J DINESH
Dean DR. JAYASHREESURESH
I hereby declare that the Project report entitled “ A Study on Comprative financial statement of S&P CAPITAL IQ” is my own work, to the best of my knowledge and belief and a produce of my sincere effort .This Project Report is an original research carried out by me alone under the guidence of Mr J Dinesh. It contains no material previously published or written by another person nor material which to a substantial extent has been accepted for the award of any other degree or diploma of any other institute,except where due acknowledge has been made in the text.
Voonna V Guru Sai Prasad Roll No: 3511010231 SRM School of Management
the almighty for his immense blessings and guidance throughout the training program I would like to take this opportunity to express my profound gratitude towards all those who had helped me in completing my Main Project and adding feathers to my knowledge. I owe my sincere thanks to my Project Guide. staff and students at SRM School of Management who all through my Project work stood by my side and provided me with an informative. Mr J Dinesh. I have furthermore to thank the employees S&P CAPITAL IQ. My sincere thanks to my company guide .ACKNOWLEDGEMENT First and foremost I wish to thank God. I am highly indebted to my DEAN. . and other executives who gave and confirmed this permission and encouraged me to go ahead with my project work. Jayashree Suresh and all other faculty. Dr. Hyderabad. educative and moral support and made it a worthy knowledge gaining process. for his constant support and encouragement without which this project would not have been possible.
data of the companies and studying of various factors that influence the liquidity status and profitability of the company.ABSTRACT The project mainly focuses on analyzing the performance of a company by utilizing its past data and measuring its progress in terms of various financial ratios. The entire project mainly required the in-depth analysis of the financial statements. . the company’s competency is observed and analyzed by comparing it with one of its main competitors and the conclusions and interpretations are made on its performance besides predicting its future performance. In the process.
1 1.6 1.4 1.7 1.2 1.5 1.3 1.8 INDUSTRY PROFILE COMPANY PROFILE SWOT ANALYSIS FINANCIAL MANAGEMENT REVIEW OF LITERATURE NEED OF THE STUDY SCOPE OF THE STUDY OBJECTIVE OF THE STUDY 1 5 20 22 33 35 36 37 CHAPTER 2 RESEARCH METHODOLOGY 38 CHAPTER 3 LIMITATIONS 39 CHAPTER4 DATA ANALYSIS AND INTERPRETATION 40 .CHAPTER PARTICULARS PAGE NO CHAPTER 1 1.
CHAPTER 5 FINDINGS 59 CHAPTER 6 SUGGESTIONS 60 CHAPTER 7 CONCLUSION 61 BIBILOGRAPHY 63 APPENDIX 64 .
urban employment and exports. constituted by the software and services. to achieve the vision of a powerful and resilient India. “BPO or Business process outsourcing” is the arm of ITES. the company under study can now be classified in context of the above. . a partnership approach and operational excellence. The global IT sector. which facilitates delivery of services through the use of information technology. contributing substantially to increases in the GDP.CHAPTER 1 INDUSTRY PROFILE: IT/ITES INDUSTRIY: The global IT industry has matured over the years and has emerged to be a chief contributor to the global economic growth. However. it necessitates transfer of ownership and management of the process from the customer (offshore) to India‐ based service provider. Having understood the BPO. has been on a gradual growth trajectory with a steady rise in revenues as witnessed in the past few years. ‘ALLSEC TECHNOLOGIES’ is a BPO by nature since it offers business value to our Clients by combining domain expertise. IT‐ITES industry in India has today become a growth engine for the economy. The two arms of this industry are – BPO and KPO. Information Technology Enabled Services (ITES) and the hardware segments.
which includes internal business functions such as human resources or finance and accounting. This 63% is a drop from the 70% offshore share that India enjoyed last year: despite the industry growing 38% in India last year. but a commanding 63% share of the offshore component. Knowledge process outsourcing (KPO) and legal process outsourcing (LPO) are some of the sub-segments of business process outsourcing industry. BPO is typically categorized into back office outsourcing . Pune. China is also trying to grow from a very small base in this industry. and South Africa have emerged to take a share of the market. the Philippine's BPO industry will account for approximately 10 per cent of the nation's GDP. contributing 0. Trivandr um. Industry size India has revenues of US$10. The South African call centre industry has grown by approximately 8% per year since 2003 and it directly employs about 54 000 people. the Philippines have surpassed India as the largest business process outsourcing industry in the world. Important centres in India are Bangalore.9 billion from offshore BPO and US$30 billion from IT and totals BPO (expected in FY 2008). BPO that is contracted to a company's neighbouring (or nearby) country is called outsourcing.92% to South Africa's gross domestic product (GDP).Kolkata. this was associated with manufacturing firms. The Association of Southeast Asian Nation (ASEAN) countries. Patna. BPO that is contracted outside a company's country is called offshore outsourcing. the Philippines has overtaken India as the largest call center industry in the world in 2010. where ITES stands for Information Technology Enabled Service. By these estimates. Bhubaneswar and New Delhi. its market share of The offshore piece is expected to decline. the BPO industry of the Philippines is estimated to gross revenue of upwards to $25 billion by 2016. and front office outsourcing . Services trade among ACI countries has been growing at a very rapid rate over recent years. India thus has some 5-6% share of the total BPO Industry. After growing 20 per cent in 2012. other locations like Philippines. Originally. despite starting . Chennai. along with the People's Republic of China and India— known collectively as ACI countries—are likely to see services like BPO figure strongly in their economies over the medium term. In fact. while the BPO industry is expected to continue to grow in India. such as Coca Cola that outsourced large segments of its supply chain. Hyderabad. In 2010. However.which includes customer-related services such as contact centre services. and are referred to as ITES-BPO.BPO (BUSINESS PROCESS OUTSOURCING) What is BPO? Business process outsourcing (BPO) is a subset of outsourcing that involves the contracting of the operations and responsibilities of specific business functions (or processes) to a third-party service provider. Mumbai. Often the business processes are information technology-based.
compared to 13.000 jobs were moved to Eastern European countries. software. 2. customers calling to understand how to dial up to their ISP. an analysis of applied services sector policies in the region suggests there is much policymaker can do to intensify this process. While the overall size of the industry and the number of developers in Eastern Europe is lower than India. Technical Support Services Our technical support offerings include round-the-clock technical support and problem resolution for OEM customers and computer hardware.2 million people with a tertiary education. 33.from a relatively low baseline. making it an attractive choice for BPO. Service Example: Customers calling to check on their order status. Eastern Europe is also an emerging BPO destination. customers calling with a problem with their software or hardware. Customer Support Services Our customer service offerings create a virtual customer service center to manage customer concerns and queries through multiple channels including voice. allows the BPO industry in this region to continue to grow. 3. For example. Spanish. the knowledge of European language such as French. troubleshooting and Usage support. and increase the pace at which the transformation to a service economy is taking place. as well as the overall high quality of education in these locations. McKinsey reported that in 2010. the region has an estimated 17. German and Italian by many Eastern Europeans. peripherals and Internet infrastructure manufacturing companies. customers calling to verify their account status. Service Example: Customers calling to resolve a problem with their home PC. These include installation and product support. up & running support. customers calling to check their reservation status etc. Although data are scarce and must be interpreted with caution.6 million in India. customers calling to check for information on products and services. Types of Services Being Offered By BPO Companies 1. Telemarketing Services . e-mail and chat on a 24/7 and 365 days basis. especially if more specialized projects are to be outsourced.
system problem resolutions related to desktop. 7. Catalog Data Entry. 10. OCR with Editing & Indexing Services. Data entry of E-Books / Electronic Books. 6. office productivity tools support including browsers and mail.. 7.Our telesales and telemarketing outsourcing services target interaction with potential customers for ‘prospecting’ like either for generating interest in products and services. Data Capture / Collection. outbound calling to existing customers to sell a new rate card for a mobile service provider or outbound calling to sell credit or debit cards etc. 5. 5. Employee IT Help-desk Services Our employee IT help-desk services provide technical problem resolution and support for corporate employees. product usage queries. 4. 6. Receipt and Bill Data Entry. 8. Scanning. 2. routing specific requests to designated contacts and remote diagnostics etc. Data Conversion Services. Data entry from Paper/Books with highest accuracy and fast turnaround time (TAT) Data entry from Image file in any format Business Transaction Data entry like sales / purchase / payroll. 11. 8. Data Entry into Software Program and application. Insurance Processing Our insurance processing services provide specialized solutions to the insurance sector and support critical business processes applicable to the industry right from new business acquisition to policy maintenance to claims processing. Business Card Data Entry into any Format. IT operational issues. 3. Service Example: of this service include level 1 and 2 multi-channel support across a wide range of shrink wrapped and LOB applications. 12. Data Entry and compilation from Web site. Data Entry: Yellow Pages / White Pages Keying. outbound calling to retail households to sell leisure holidays. new service requests. Data Entry Services / Data Processing Services 1. 9. notebooks. OS. . Service Example: Outbound calling to sell wireless services for a telecom provider. or to up-sell / promte and cross sell to an existing customer base or to complete the sales process online. 4. connectivity etc. Data Entry from hardcopy/Printed Material into text or required format.
Telecommunication & Healthcare With over 10 years of experience servicing Global clients. Retail. reliable. it’s a culture that percolates into everything we do. worldclass services. Payroll & HR services.at Allsec. technologies. Energy & Utilities. Allsec has the expertise to customize solutions that focus on customer delight. with a team of vibrant and passionate employees. Internet / Online / Web Research. a partnership approach and operational excellence. 10. We offer business value to our Clients by combining domain expertise. founded in 1998. who delight in driving customer and client satisfaction. Our services address your questions on cost. Our solutions are reflective of our outlook and focus. Our service delivery objectives are focused on Clients’ Return on Investment while enhancing the “customer experience” quotient. optimization. CHAPTER 2 COMPANY PROFILE: Allsec Technologies Ltd is a global business processes outsourcing company. Building Lasting Relationships . 11. what we do best. scale. We look at being a dependable and reliable partner that answers your questions with the right differentiated solution. We nurture growth. We grow by delivering consistent. Our spectrum of BPO services cover the entire customer lifecycle that include front-office and back-office processes – contact centre processes. Business Analytics / Knowledge services and Endto-end Mortgage services. innovation and progress.9. Our accreditations stand testimony to the fact that Allsec is a worthy partner. As a pioneer in . Book Keeping and Accounting Services. Form Processing Services. Our solutions support industries such as BFSI. risk & compliance and visibility. We understand that our clients' success is our success. We handle millions of customer transactions every year and pride ourselves as a provider of outstanding customer experience.
Allsec’s approach to managing your processes is result focused. "the retained function can focus on working more closely with the business to help improve decision making.Business Process Outsourcing provider for US. namely capital fund. The gradual appearance of new financial analytical tools. Meaning of financial management: The term financial management has been defined differently by different authors. it will be appropriate to study both the traditional concept and modern concept of the financial function. We derive custom solutions that identify such vulnerabilities and address them with solutions that not only emphasize on improving performance but also on cost reduction and in parallel bring out the real value to be gained. privacy and quality governance. 1. We remain focused on understanding your specific needs. Our flexible business model enables you to maintain profitability against the challenges posed by increasing demands of maintaining competitive edge and customer expectations for a quicker but quality service Fact based and process-driven. while we take care of the rest ” FINANCIAL MANAGEMENT: Finance has emerged as a distinct area of study during second half of the twentieth century. In order to have a better exposition to these changes over the years. The evaluation of finance function and the changes in scope appeared due to two factors namely. As such the role of finance manager has also undergone fundamental changes over the years. elements of your business functions that are vulnerable to highvolume work load and the transient nature of its manual processes that impacts your time and effort. Allsec has been offering multi-vertical services for optimizing your business process together with easing them with security. . The continuous growth and diversity in business 2. But even before that some direct or indirect references to finance function were made on a casual basis. Scope of financial management: Financial management has under gone significant changes over the years as regards its scope and coverage. UK and Indian market. According to Solomon financial management is concerned with the efficient use of an important Economic resource.
TRADITIONAL CONCEPT: In the beginning of the present century. yet the functions themselves can be readily identified. Looking after the legal and according relationship between a corporation and its sources of funds. Liquidity or short term asset mix decision. According to them. Technological improvements widened marketing operations. which was the starting point for the scholarly writings on corporation finance. We may identify two kinds of finance functions which are managerial and routine. There are four important managerial finance functions 1. development of a strong corporate structure. . Arrangement of funds through financial instruments 3. Dividend or profit allocation decision 4. keen and healthy business competitions all made it imperative for the management to make optimum use of available financial resources for continued survival of the firm. marketing and other functions. Finance functions: Although it may be difficult to separate the finance functions from production. Modern concept: The traditional concept outlived its utility due to changed business situations since mid 1950’s. Arrangement of funds from financial institutions 2. the function of finance was considered to be the task of providing funds needed by the enterprise on terms that are most favorable to the operations of the enterprise. Investment or long term asset mix decision 2. the finance manager has to undertake the following three functions. Financing or capital mix decision 3. 1. The traditional scholars are of the view that the quantum and pattern of finance requirements and allocation of funds as among different assets is the concern of non financial executives.
Like the debt policy. Thus. The optimum dividend policy is one which maximizes the market value of the firm’s shares. the dividend policy should be determined in terms of its impact on the shareholders value. where and how to acquire funds to meet the firm’s investment needs. if shareholders are not indifferent to the firm’s dividend policy. Dividend decision: Dividend decision is the third major financial decision. Current assets should be managed efficiently for safeguarding the firm against the dangers of illiquidity and insolvency. or retain them. Future benefits are difficult to measure and cannot be predicted with certainty because of the uncertain future. be evaluated in terms of both expected return and risk. The central issue before him is to determine the proportion of equity and debt. The finance manager must strive to obtain the best financing mix or optimum capital structure for his firm. he must decide when. The financial manager must decide whether the firm should distributed all profits. Investment proposals should. It’s a very significant aspect in the task of measuring the prospective profitability of new investments. capital budgeting involves risk. in addition to the management of long term assets. or distribute a portion and retain the balance. the financial manager must determine the optimum dividend payout ratio. Investment in current assets affects firm’s profitability.Investment decision: Investment decision or capital budgeting is the oldest area of the recent thinking in finance. The mix of debt and equity is known as the firm’s capital structure. Liquidity Decision: Current assets management which affects a firm’s liquidity is yet another important finance function. The firm’s capital structure is optimum when the market value of shares is maximized. It relates to allocation of capital and involves decisions to commit funds to long term assets which would yield benefits in future. therefore. Broadly. liquidity and risk . Financing decision: Financing decision is the second important function to be performed by the financial manager.
stock turnover ratio. the unit of expression is termed as percentage. Profit and Loss account ratio: Ratio calculated on the basis of the item of the profit and loss account only. Composite Ratio or inter-statement ratio: ratios based on figures of profit and loss account as well as the balance sheet. Classification of Ratios: Ratios can be classified into different categories depending upon the basis of classification. 3. Ratio can be expressed in two ways: Times: when one value is divided by another the unit used to express the quotient is termed as “Times” Percentage: if the quotient obtained is multiplied by 100. the main contribution lies in bringing into bold relief the inter relationship which exist between various segments of business as suppressed through accounting statements and in avoiding any distortions that may results from a absolute study of accounting information.Ratio analysis theory: Meaning of Ratio: Ratio are relationships expressed in mathematical terms between figures which are connected with each other in some manner and stigmatizes a long way of accounting figures. 2. Example: Current ratio. . Balance sheet ratio: ratio calculated on the basis of the figures of balance sheet only. The classification has been on the basis of the financial statement to which the determinants of a ratio belong on this basis the ratio could be classified as: 1. Example: gross profit ratio. Example: fixed assets turnover ratio. debit to equity ratio.
Classification of Ratios Chart Accounting Ratios Traditional Functional P&L A/c Ratios Balance sheet Ratios Composit e Ratios Profitabilit y Ratios Coverage Ratios Turnover Ratios Financial Ratios Liquidity Ratios Stability Ratios .
Proprietor 5. Return on 3. Gross Profit Ratio 7. Interest Turnover Ratio Coverage Ratio 4. Total Asset 5. Dividend Total Assets Yield Ratio 4. Debtors 2. DSCR Turnover Ratio 1. Acid 2. Inventory 1. Payout ShareholdersRatio Fund 3. Return on 2. Price Equity Earnings ShareholdersRatio Fund 2. Creditors 3. Net Profit Ratio . Return on 1. Liabilities Test Turnover Ratio to Equity Ratio/ Ratio Quick Ratio 3. Debt Current Turnover Ratio Equity Ratio Ratio 2.Liquid ity / Short Term Solve ncy Ratio Asset Management /Turnover (Activity) Ratios Financial Profitabilit Structure / y Ratio Capitalisatio n Ratio Market Related /Test Ratio 1. EPS Turnover Ratio Ratio 6. ROCE 5. Fixed Asset 4. 1.
therefore. overvalued and undervalued firms. in its basic functions of forecasting. Financial statements are affected to a very great extent by accounting conventions and concepts. Planning. In such a case the ratio analysis may not clearly indicate the trend in solvency and profitability of the company. there from. may affect the future operations. management policies. Facilitates inter‐firm comparison: It provides data for inter‐firm comparison. 3. Makes inter‐firm comparison possible: Ratios analysis also makes possible comparison of the performance of different divisions of the firm. Ratios tell the whole story of changes in the financial condition of the business 2. Ratios highlight the factors associated with successful and unsuccessful firm.Advantages of Ratio Analysis: Ratio analysis is an important and age‐old technique of financial analysis. Limitation of Ratio Analysis: 1. However. Ratios can assist management. Thus ratios derived. they cannot be taken as final regarding good or bad financial position of the business. They also reveal strong firms and weak firms. For example. are also subject to those limitations. The financial statements. Limitations of financial statements: Ratios are based only on the information which has been recorded in the financial statements. 4. The ratios are helpful in deciding about their efficiency or otherwise in the past and likely performance in the future. 5. co‐ordination. non‐financial changes though important for the business are not relevant by the financial statements. control and communications. 5. Ratios alone are not adequate: Ratios are only indicators. etc. 2. Financial statements themselves are subject to several limitations. Helps in planning: It helps in planning and forecasting. Other things have also to be seen. such a comparison only provide glimpse of the past performance and forecasts for future may not prove correct since several other factors like market conditions. 4. Personal judgment plays a great part in determining the figures for financial statements. Help in investment decisions: It helps in investment decisions in the case of investors and lending decisions in the case of bankers etc. The following are some of the advantages / Benefits of ratio analysis: 1. Comparative study required: Ratios are useful in judging the efficiency of the business only when they are compared with past results of the business. 3. Simplifies financial statements: It simplifies the comprehension of financial statements. Lack of adequate standard: No fixed standard can be laid down for ideal . be adjusted keeping in view the price level changes if a meaningful comparison is to be made through accounting ratios. Problems of price level changes: A change in price level can affect the validity of ratios calculated for different time periods.
ratios. Limited use of single ratios: A single ratio. usually. There are no well accepted standards or rule of thumb for all ratios which can be accepted as norm. To make a better interpretation. a number of ratios have to be calculated which is likely to confuse the analyst than help him in making any good decision. It renders interpretation of the ratios difficult. does not convey much of a sense. 6. .
Long term solvency: Ratio analysis is equally for assessing the long term financial ability of the Firm. relevant from the View point of management is that it throws light on the degree efficiency in the various activity ratios measures this kind of • • • • • • • . profitability and operational efficiency of the undertaking. Incomparable: Not only industries differ in their nature. The ratios can also serve as a basis for preparing budgeting future line of action. The liquidity position of a firm would be satisfactory if it is able to meet its current obligation when they become due. which can be compared. the action may be initiated immediately to bring them in line . If comparison shows a variance. The ability to met short term liabilities is reflected in the liquidity ratio of a firm. These ratios provide sound footing for future prospectus. It simplifies financial statement: The information given in the basic financial statements serves no useful Purpose unless it s interrupted and analyzed in some comparable terms. Personal bias: Ratios are only means of financial analysis and not an end in itself. It provides the relevant data for the comparison of the performance of different departments.7. whether the management has utilized the firm’s assets correctly.e. The ratio analysis is one of the tools in the hands of those who want to know something more from the financial statements in the simplified manner. It helps in determining the financial position of the concern: Ratio analysis facilitates the management to know whether the firm’s financial position is improving or deteriorating or is constant over the years by setting a trend with the help of ratios The analysis with the help of ratio analysis can know the direction of the trend of strategic ratio may help the management in the task of planning. Operating efficiency: Yet another dimension of usefulness or ratio analysis. to increase the investor’s wealth. the possible reasons of variations may be identified and if results are negative. An inter firm comparison indicates relative position. The long term solvency s measured by the leverage or capital structure and profitability ratio which shows the earning power and operating efficiency. 8. Ratios have to interpret and different people may interpret the same ratio in different way. It helps in inter‐firm comparison: Ratio analysis helps in inter‐firm comparison by providing necessary data. but also the firms of the similar business widely differ in their size and accounting procedures etc. It makes comparison of ratios difficult and misleading . forecasting and controlling. Importance of ratio analysis: • It helps in evaluating the firm’s performance : With the help of ratio analysis conclusion can be drawn regarding several aspects such as financial health. It is helpful in budgeting and forecasting: Accounting ratios provide a reliable data. studied and analyzed. Liquidity position: With help of ratio analysis conclusions can be drawn regarding the Liquidity position of a firm. Solvency ratio shows relationship between total liability and total assets. It ensures a fair return to its owners and secures optimum utilization of firm’s assets. Ratio points out the operating efficiency of the firm i.
operational efficiency. .
Current Ratio for AllsecTechnologies YEAR Current Ratio Mar '13 5.24 Mar '09 5. This ratio can be very easily manipulated by overvaluing the current assets. An equal increase in both current assets and current liabilities would decrease the ratio and similarly equal decrease in current assets and current liabilities would increase current.39 Mar '12 3. It is calculated by dividing the total of the current assets by total of the current liabilities. and. Formula: Current Ratio = Current Assets / Current Liabilities Significance: This ratio is measure of liquidity and should be used very carefully because it suffers from many limitations. the firm may be in financial trouble. 2. It is.91 Mar '11 2.Current Ratio: Current ratio may be defined as the relationship between current assets and current liabilities. Valuation of current assets and window dressing is another problem.8 Mar '10 4. This ratio is also known as " working capital ratio". It is crude ratio because it measures only the quantity and not the quality of the current assets. therefore firm may have less cash to pay off current liabilities. therefore.05 . Even if the ratio is favourable. because of more stock and work in process which is not easily convertible into cash. suggested that it should not be used as the sole index of short term solvency. It is a measure of general liquidity and is most widely used to make the analysis for short term financial position or liquidity of a firm. 3. 1.
91 Mar '11 3.05 . because it excludes inventory from current assets. there are situations in which the current ratio would overestimate a company's short-term financial strength. YEAR Quick Ratio Mar '13 5. a more well-known liquidity measure.(Bank overdraft) The quick ratio is more conservative than the current ratio.39 Mar '12 3. Inventory is excluded because some companies have difficulty turning their inventory into cash. AllsecTechnologies Quick Ratio for last five years.45 Mar '10 5. Formula: Current Ratio = Current Assets-(stock and Prepaid expenses)/Current Liabilities. Quick assets include those current assets that presumably can be quickly converted to cash at close to their book values. In the event that shortterm obligations need to be paid off immediately. A company with a Quick Ratio of less than 1 cannot currently pay back its current liabilities.01 Mar '09 5.Interpretation Acid Test Ratio/Quick Ratio/Liquid Ratio Acid-test or quick ratio or liquid ratio measures the ability of a company to use its near cash or quick assets to extinguish or retire its current liabilities immediately.
High inventory levels are unhealthy because they represent an investment with a rate of return of zero." Formula: Inventory Ratio=Cost of goods sold/Average inventory Significance • This ratio should be compared against industry averages. is used when computing inventory turnover. Average inventory accounts for any seasonality effects on the ratio. A high ratio implies either strong sales or ineffective buying. For more accurate inventory turnover figures. • • • Allsec Technologies inventory turnover ration There is no inventory turnover ratio in the case of this company as Allsec technologies is involved in selling services to clients . ((beginning inventory + ending inventory)/2). Companies selling perishable items have very high turnover.Inventory Turnover Ratio A ratio showing how many times a company's inventory is sold and replaced over a period. The days in the period can then be divided by the inventory turnover formula to calculate the days it takes to sell the inventory on hand or "inventory turnover days. the average inventory figure. A low turnover implies poor sales and. A low turnover is usually a bad sign because products tend to deteriorate as they sit in a warehouse. therefore. It also opens the company up to trouble should prices begin to fall. excess inventory.
It is calculated by dividing sales in dollars by assets in dollars Formula= Net sales/Total assets Significance Asset turnover measures a firm's efficiency at using its assets in generating sales or revenue . This ratio measures the efficiency and profit earning capacity of the concern. Debtor turnover ratio: Debtor’s turnover ratio or accounts receivable turnover ratio indicates the velocity of debt collection of a firm. greater is the intensive utilization of fixed assets.Fixed Assets Turnover Ratio: Fixed assets turnover ratio is also known as sales to fixed assets ratio. Lower ratio means under‐ utilization of fixed assets. where major purchases are made for PP&E to help increase output. In simple words it indicates the number of times .the higher the number the better. The ratio is calculated by using following formula Formula: Fixed Assets Turnover Ratio = Net Sales / Net Fixed Assets Significance: This ratio is often used as a measure in manufacturing industries. while those with high profit margins have low asset turnover Allsec Technologies for assets turnover ratio Allsec Technologies doesn’t have any total assets turnover ration. When companies make these large purchases. It also indicates pricing strategy: companies with low profit margins tend to have high asset turnover. Allsec Technologies Fixed assets turnover ratio The company has not got any fixed assets turnover ratio as there are no fixed assets involved in the business. prudent investors watch this ratio in following years to see how effective the investment in the fixed assets . Higher the ratio. Total Assets Turnover Ratio: The amount of sales generated for every dollar's worth of assets.
09 2. low debtors turnover ratio implies inefficient management of debtors or less liquid debtors. Similarly.72 Interpretation Creditor turnover ratio .77 3. It is the reliable measure of the time of cash flow from credit sales.74 3. There is no rule of thumb which may be used as a norm to interpret the ratio as it may be different from firm to firm. Formula: Debtors Turnover Ratio = Net Credit Sales /Average Debtors Significance: Accounts receivable turnover ratio or debtor’s turnover ratio indicates the number of times the debtors are turned over a year.average debtors (receivable) are turned over during a year. Allsec Technologies Debtor turnover ratio YEAR Debtors Turnover Ratio Mar '13 Mar '12 Mar '11 Mar '10 Mar '09 3. The higher the value of debtor’s turnover the more efficient is the management of debtors or more liquid the debtors are.65 3.
It measures how much out of every dollar of sales a company actually keeps in earnings. Formula: Creditor Turnover Ratio=Net credit Purchases/Average creditors Allsec Technologies Creditor turnover ratio Allsec Technologies doesn’t have any creditor turnover ratio. Net profit margin ratio: A ratio of profitability calculated as net income divided by revenues. . Accounts payable turnover ratio is calculated by taking the total purchases made from suppliers and dividing it by the average accounts payable amount during the same period. Profit margin is displayed as a percentage. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors.A short-term liquidity measure used to quantify the rate at which a company pays off its suppliers. or net profits divided by sales. Profit margin is very useful when comparing companies in similar industries.
Return on assets: An indicator of how profitable a company is relative to its total assets. This is why when using ROA as a comparative measure. Formula: debit‐equity ratio=Total Long Term Debts / Shareholders Funds Significance: Debt to equity ratio indicates the proportionate claims of owners and the outsiders against the firm’s assets. ROA for public companies can vary substantially and will be highly dependent on the industry. Significance: ROA tells you what earnings were generated from invested capital (assets). This is an indication that costs need to be under better control. The outsider’s creditors) on the other hand. ROA gives an idea an idea as to how efficient management is at using its assets to generate earning. The purpose is to get an idea of the cushion available to outsiders on the liquidation of the firm. it leads to a lower profit margin. want that shareholders (owners) should invest and risk their share of proportionate . Sometimes this is referred to as “return on investment”. it is best to compare it against a company's previous ROA numbers or the ROA of a similar company. ROA is displayed as a percentage. However. if a company has costs that have increased at a greater rate than sales. The owners want to do the business with maximum of outsider's funds in order to take lesser risk of their investment and to increase their earnings (per share) by paying a lower fixed rate of interest to outsiders. For instance. but an increase does not mean that the profit margin of a company is improving. Calculated by dividing a company’s annual by its total assets.Formula: Net profit margin ratio= (net profit after tax/sales)*100 Significance: Increased earnings are good. It is also known as external internal equity ratio. Debtequity ratio: Debt‐to‐Equity ratio indicates the relationship between the external equities or outsiders funds and the internal equities or shareholders funds. Formula: Return on assets=net profit after tax/total assets. It is determined to ascertain soundness of the long term financial policies of the company. the interpretation of the ratio depends upon the financial and business policy of the company.
.investments. Theoretically if the owner’s interests are greater than that of creditors. A ratio of 1:1 is usually considered to be satisfactory ratio although there cannot be rule of thumb or standard norm for all types of businesses. the financial position is highly solvent. In analysis of the long‐term financial position it enjoys the same importance as the current ratio in the analysis of the short‐term financial position.
This ratio is considered to be a yardstick of operating efficiency but it should be used cautiously because it may be affected by a number of uncontrollable factors beyond the control of the firm. Formula: Operating Ratio = ((Cost of goods sold + Operating expenses) / Net sales)*100 Significance: Operating ratio shows the operational efficiency of the business. It is generally expressed in percentage. An operating ratio ranging between 75% and 80% is generally considered as standard for manufacturing concerns. Gross Profit Ratio: A financial metric used to assess a firm's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold. Gross profit margin serves as the source for paying additional expenses and future savings. Moreover. Formula: gross profit Ratio = (gross profit / net sales)*100 . Operating ratio measures the cost of operations per unit of sales. non‐operating expenses from a substantial part of the total expenses and in such cases operating ratio may give misleading results .Operating ratio: Operating ratio is the ratio of cost of goods sold plus operating expenses to net sales. A high ratio indicates efficient utilization of working capital and a low ratio indicates otherwise. in some firms. But a very high working capital turnover ratio may also mean lack of sufficient working capital which is not a good situation. Working capital turnover ratio: Working capital turnover ratio indicates the velocity of the utilization of net working capital. Lower operating ratio shows higher operating profit and vice versa. This is closely related to the ratio of operating profit to net sales. This ratio represents the number of times the working capital is turned over in the course of year Formula: working Capital Turnover Ratio = Cost of Sales / Net Working Capital Significance: The working capital turnover ratio measures the efficiency with which the working capital is being used by a firm.
Significance: The earnings per share help to determining the market price of the equity share of the company. the overall profitability can also be judged by calculating earnings per share. A high gross profit ratio may be increased by taking the following steps: • • • Lowering cost of goods sold. Formula: Earning per share=profit after tax‐dividend/no of equity shares . Significance: The operating ratio is yardstick to measure the efficiency with which a business is operated. It may also be due to low selling prices. A low gross profit ratio may indicate a higher cost of goods sold due to higher cost of production. It also the extent to which selling prices may be reduced without resulting in losses.Significance: Gross profit ratio indicates the average margin on the goods sold. a lower operating ratio is considered a good sign Earnings per Share (EPS): In order to avoid confusion on account of the varied meanings of the term capital employed. It shows the percentage of net sales that is is absorbed by cost of goods sold and operating expenses. On the other hand. the cost of goods remaining constant Increasing the sale of those goods which have a higher gross margin Expense Ratio: This ratio present the relationship that exit between each item of expenses and net sales. It also helps in estimating the company capacity to pay dividend to its equity shareholders . A high operating ratio is considered unfavorable because it leaves a smaller margin of profit to meet no‐ operating expenses. A comparison of earning per share of the company with another will also help in deciding whether the equity share capital is being effectively used or not. It shows whether the selling prices are adequate or not. It indicates the portion of the sales which is consumed by various items of operating cost. selling prices remaining constant Increasing selling prices.
CHAPTER 3 REVIEW OF LITERATURE: Financial Statement Includes: • • • Trading & Profit & Loss Account. which gives details about the disposal of the retained earnings.” The Meaning of Analysis and Interpretation The financial statements are of much interest to number of groups of persons. interpretation is the mental process of understanding the terms of such statements and forming opinions or inferences about the financial health. efficiency and such other aspects of the understanding. Interpret means to put the meaning of a statement into simple terms for the benefit of a person. Analysis comprise resolving the statements by breaking them into simpler statements by a process or rearranging. Apart from the management there are other interested parties like shareholders. and whether the financial condition is being improved. which gives the result of year’s working. bankers. potential investors. how well credit standards are being observed. “The most important function of financial statements is to serve those who control and direct the business and may be answered the questions. Balance Sheet. which gives the financial position of the undertaking as on the accounting date. . profitability. debenture holders. how efficiently the capital of the business is being utilized. regrouping and the calculation of ratios. Profit & Loss Appropriation Account. trade creditors and legislature.
. By the understating of solvency of the undertaking above points can be well understand. amortized debt and other outside liability. To evaluate the earning performance of the undertaking. • • • Whether current assets are sufficient to pay off the current liabilities.Objectives of Analysis and Interpretation • • • To evaluate the financial health of the understanding. Proportion of liquid assets (cash and book debts) to current assets. To evaluate the ability of the undertaking to pay interest. • To evaluate the solvency of the undertaking. Whether the debenture holders are secured by a floating charge of the currents assets. • Future growth of undertaking and earning.
• • . This study aims at analyzing the overall financial performance of the company by using various financial tools.NEED OF THE STUDY: The financial statements are mirror which reflects the financial position and strengths or weakness of the concern. The study covers the period of 2007‐2011 for analyzing the financial statement such as income statements and balance sheet. The study is confined to IT/ITES sector in India and two companies under this sector namely.S&p Capital IQ and Allsec Technologies. The analysis of financial statements is useful to • Corporate • Management • Investors • Creditors • Bankers • Financial institution etc SCOPE OF THE STUDY: • The study is based on the accounting information of the S&P CAPITAL IQ INFORMATION SYSTEMS (INDIA) PVT Ltd.
Ltd. • • To Track the growth of S&P Capital IQ at par with the ITES sector in India To project the future prospects of S&P capital IQ and what should the company do to improve its performance • • To analysis the interpretation of the ratio analysis in real context To analysis liquidity position of the firm and evaluate the reason .OBJECTIVES OF THE STUDY: Through this project the following objectives will be achieved: • To examine and compare the financial performance of two firms. and Allsec Technologies in the KPO domains using Financial statements.S&P Capital IQ (India) Pvt.
etc. comprising of inter-firm analysis.These interviews helped me to secure first hand information about various aspects related to the management. will be confined to past five years’ financial statements.CHAPTER 4 RESEARCH METHODOLOGY: The data obtained for the study has to be divided into two groups: ¾ ¾ Primary data Secondary data Primary Data: The information and data collected by conducting personal interviews with the financial manager of capital IQ . • Effect of personal ability and bias of the analyst • Ratio analysis becomes less effective due to price level changes • Further. Secondary Data: It comprises of information obtained from annual reports and other statements. contribution to net domestic product. on additional employment opportunities. . files and some other important documents maintained by the organization LIMITATIONS: • The interpretation part of the project. the study takes into consideration the quantitative aspect of the performance and not the qualitative aspect such as impact of industrial assistance of company in the economic development of the country or state.
in the long run will reduce the interest burden on the company leaving more in the hands of the company. The common size balance sheets are shown in the above table. The objective of this analysis is to study the trend in different items. Sources of Funds/Liabilities . both assets and liabilities in the balance sheet. At the same time the shareholders’ funds have been increasing due to the profits and surplus being ploughed back. the company has been relying only on internal sources and not external sources of financing. Comment on the ‘Financial Strategy’ of Capital IQ on the basis of ‘Common Size Analysis’: A careful observation of the common size analysis of the company reveals that it has been reducing its debt in the capital structure. This means that over the years. the items in the balance sheet are stated as percentages of total assets and liabilities.CHAPTER 4 DATA ANALYSIS AND INTERPRETATION: COMMON SIZE BANALCE SHEET ANALYSIS: Through a common size analysis an attempt has been made to analyze the common size balance sheets of Capital IQ for a period of five years (2007to 2011 In common size analysis. This. GRAPHICAL REPRESENTATION OF INDIVIDUAL COMPONENTS OF LIABILITIES AND ASSETS AS A PERCENTAGE OF THEIR RESPECTIVE TOTALS (100%).
Application of Funds: Graph: .
685 0.084 Graph: .314 2010 99.161 2009 99.878 2008 98.Income of Capital IQ Income (%) Income from Operations Other Income 2007 98.083 2011 99.915 0.916 0.121 1.838 1.
Current Ratio: Current ratio= current asset/current liabilities Current asset= sundry debtors+ Cash and Bank balances+ Other Current Assets+ Loans and Advances Current liabilities= Current Liabilities+ Provisions Graph: 6 5 4 Current ratio(CIQ) 3 2 1 0 Current ratio(Allsec) 2006-07 2007-08 2008-09 2009-10 2010-11 .
As we can observe.Interpretation: The ideal current ratio of 2:1. over the years the current ratio of Capital IQ has increased consistently and hence this company is solvent and ensures continued liquidity and also allows a cushion. the ratio over the last 5yrs is fluctuating and very high as far as the ideal ratio is concerned. the current assets for the company have been increasing continuously over last 5years.89 219424000 133512000 177834000 180689000 235685000 .83 260435346 0. As we can observe. Regarding Allsec. The firm is in a better position in the year 2008 when compared to 2007 and has increased consistently. This is because of the high amount of loans given to other companies which has increased the value of the current assets which is considered good for the company Solvency ratio Solvency ratio= net profit after tax+depreciation/total liabilities Total liabilities= long term liabilities+short term liabilities Year Capital iq Net profit ater tax+ dep Total Liabilities Solvency Ratio Allsec Net profit ater tax+ dep Total Liabilities 123146000 ‐71102000 599000 51802000 89295000 102122273 179984260 2006‐2007 2007‐2008 2008‐2009 2009‐2010 2010‐2011 226493861 254154978 962984349 164690956 0.68 332357759 2.62 215903126 0. It is important to note that a very high ratio may be indicative that the firms current assets are not being used optimally and some of these assets may be remaining idle.86 368439526 0. The liquidity position is best in the financial year 2011. An analysis of the financial statements of the company reveals that the liquidity position has improved with time because the components of current assets have been improving.
64 0.Solvency Ratio 0.88 0.21 .36 1.93 0.
excluding non‐cash depreciation expenses. Capital IQ solvency has increased from 0.Graph: Interpretation: This ratio indicates as to how efficiently a company utilizes its resources to get the expected returns.89 in the year 2011 where as Allsec’s solvency has decreased from 0. SO. is decreasing from the year 2008‐2011 it is not good in utilization of resources when compare to Capital IQ. Regarding Allsec.68 to 2.93 to 0. Capital IQ solvency is better than Allsec’s . as compared to the firm's total debt obligations. The solvency ratio measures the size of a company's after‐tax income. It provides a measurement of how likely a company will be to continue meeting its debt obligations Capital IQ has great fluctuation as there was not properly utilizing resources like total liabilities.21. But in the year 2011 we can see that it is maintaining good solvency ratio compare previous.
23 0 0 7.1 616735837 0 0 1325943691 1802474191 254768079 2081844923 371290054 2006‐2007 2007‐2008 2008‐2009 2009‐2010 2010‐2011 2483490358 586581070 2.4 3.07 5.1 381964000 2.60 Graph: 8 7 6 5 4 3 2 1 0 2006-07 2007-08 2008-09 2009-10 2010-11 debtor turnover ratio(CIQ) debtor turnover ratio(Allsec) .8 408439000 3.2 348525000 4.Debtor Turnover Ratio: Debtor turnover ratio: sales/closing debtors Sales: service income+other income year Capital iq Sales Closing debtors Debtor turnover ratio Allsec Sales Closing debtors Debtor turnover ratio 1171350000 1040260000 1098470000 1327870000 1451210000 264259000 328402000 4.
The firm is in a better position in the year 2009 when compared to 2007‐08. A high debtor’s turnover ratio indicates the debts are being collected more quickly.13 0.40 257069922 414375986 597269637 1.12 0. The efficiency of debt collection is also indicated by this ratio. the ratio has decreased from 2007‐09 due to lack of proper collection from its debtors. has increased in the year 2009 and from the year 2010 slowly its decreasing.12 0.Interpretation: This ratio indicates as to how many days average sales are tied up in the amount of debtors.08 0.62 0. Allsec is in a better position in collection from debtors when compare to Capital IQ Debt equity ratio: Debt equity ratio: long term debt/shareholder equity Shareholder equity: share Capital+Reserves and surplus Long term debt: Unsecured Loans year Capital iq Long term debt Shareholder Debt equity ratio Allsec Long term debt 1557000 3669000 5917000 25604000 33637000 7868218 138578187 5712656 3344853 743643 2006‐2007 2007‐2008 2008‐2009 2009‐2010 2010‐2011 0 813808479 0. Change in this ratio shows ability to collect from its debtors. From the year 2010‐11 ratio is slowly increasing as because of proper collection from debtors.37 0. .83 0.61 Shareholder 1695130000 1505373000 1435577000 1367438000 1327987000 Debt equity ratio 0. Regarding Allsec.17 .
2 1 Debt equity ratio(CIQ) 0. If a lot of debt is used to finance increased operations (high debt to equity).2 0 2006-07 2007-08 2008-09 2009-10 2010-11 Debt equity ratio(Allsec) Interpretation: It is difficult to determine the level of Debt‐ equity ratio which will be beneficial to the firm. the . so it will help full to company for proper utilization of debt.This is because. then the shareholders benefit as more earnings are being spread among the same amount of shareholders. Allsec’s Debt‐equity ratio has increased considerably over the years except in the year 2008 . If this were to increase earnings by a greater amount than the debt cost (interest). A higher ratio indicates a risky position in the year 2007 while a lower ratio indicates safer financial position in the year. the company could potentially generate more earnings than it would have without this outside financing.4 0. The table above shows that the debt‐equity ratio of Capital IQ has decreased over that past years.6 0. Thus an ideal debt‐equity ratio usually depends on the type of the industry and size of the firm.8 0. From the above graph we observed that debt‐equity ratio gradually decreases.4 1.Grap h: 1. although in this year the loans have increased considerably.6 1.
shareholder’s funds have decreases. Hence as the ratios are increasing, we could say that the company is taking more loans to fund its operations and continuous increase in the loan funds could lead to bankruptcy.
Return on equity Ratio:
Returns on equity ratio: net income/shareholders equity Shareholder equity: share Capital+Reserves and surplus Net income: Sales‐expense year Capital iq Net income Shareholde r Debt equity ratio Allsec Net income 364000000 24080000 18060000 37020000 68640000 92422992
138578187 190809989 257069922 245812289 414375986 273057491 597269637
325751009 813808479 0.26
Shareholde r 1695130000 1505373000 1435577000 1367438000 1327987000 Debt equity ratio 0.16 0.09 0.05 0.04 0.02
0.5 0.45 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2006-07 2007-08 2008-09 2009-10 2010-11
Return on Equity(CIQ) Return on Equity(Allsec)
From the above graph Capital IQ has fluctuation from the year 2007‐2009 and slowly decreasing from the year 2009‐2011. This is due to notable maintaining shareholder fund which is directly proposition to increasing profit after tax and also there increasing personal expense of the company which include like salaries, bonus and other expenses.
Allsec’s Return on Equity has reduced considerably over the years and has not shown any signs of increment over the years. As we refer from the annual report, there has been decrease in the net income of the company because less increment in income and increasing of personal expense of the company which includes like salaries, bonus and other expenses. Capital IQ’s return on equity is far better than Allsec’s.
Return on Asset ratio:
Return on asset ratio: net profit after tax/ total assets Total assets: sundry debtors+cash and bank balances + other current assets+loans and advances Net profit after tax: sales‐expense‐provision for tax year Capital iq Net profit after tax Total assets Return on assets Allsec Net profit after tax 281350000 135500000 72280000 68140000 39450000 56349189
118491735 157306064 182893651
216538842 1104669260 0.196
Total assets 1673870000 1509040000 1441490000 1393040000 1361620000 Return on assets 0.170 0.070 0.044 0.043 0.024
Grap h: 0.05 0 2006-07 2007-08 2008-09 2009-10 2010-11 Return on Asset(CIQ) Return on Asset(Allsec) Interpretation: Return on Assets is linked to the efficient utilization of the assets which a company owns and optimum utilization of the available assets is most desirable.1 0. . Main scenario of this ratio is earning more money with less investment. But from the year 2009 it has slightly decreases.2 0.25 0. From the above table it is observed that company has increasing the return during the period 2007‐2008.15 0.3 0. Capital IQ is maintaining a good ROI when compare to Allsec’s .Allsec’s has a huge dip in the ROI over the period due to increasing expenditure of the company it reflect to less profit for every year.
70 Graph: 30.71 1325943691 1802474191 2081844923 8.10 118491735 157306064 182893651 2006‐2007 2007‐2008 2008‐2009 2009‐2010 2010‐2011 216538842 2483490358 8.01 13.01 20.78 1171350000 1040260000 1098470000 1327870000 1451210000 24.01 2006-07 2007-08 2008-09 2009-10 2010-11 net profit margin(Allsec) .01 0.01 net profit margin(CIQ) 15.50 5.01 25.10 8.02 6.72 8.01 10.10 2.Net Profit margin ratio: Net profit margin ratio= (net profit after tax/sales)*100 year Capital iq Net profit after tax Sales Net profit margin ratio Allsec Net profit after tax sales Net profit margin ratio 281350000 135500000 72280000 68140000 39450000 56349189 616735837 9.01 5.
Net profit margin indicates how well the company converts sales into profits after all expenses is subtracted out. but all else being equal.999 0. Less expenditure incurs good profit margin.981 0. Capital IQ is good at managing expense and it has effectively converting sales into profit that’s the main secret of Capital IQ as maintain constant net profit.99 0. the higher a company's profit margin compared to its competitors.988 0. Regarding Allsec’s there is high net profit margin in the year 2007.996 0. From the above table Capital IQ’s net profit margin ratio consistently maintaining by this we can say that company is good at managing income and expenditure. the better.93 0.999 1132788000 990161000 964922000 1220803000 1415445000 1112194000 995560000 1066529000 1305544000 1430548000 1. Hence as there is not proper managing of expenditure of the company it incur less profit to company.01 0. Operating Profit margin ratio: Operating profit margin ratio=operating income/ net sales Year Capital iq Operating income Net Sales Operating profit margin ratio Allsec Operating income Net Sales Operating profit margin ratio 2006‐2007 2007‐2008 2008‐2009 2009‐2010 2010‐2011 605148222 1310574164 1796797166 2080105550 2481400254 616735837 1325943691 1802474191 2081844923 2483490358 0.90 0.98 . Profit margins vary by industry. From the year 20082011 net profit margin is goes on decreasing this is because increasing of expenditure for every year from 2008-2011.Interpretation: High net profit margin ratio demonstrates effectiveness at converting sales into actual profit.
Grap h: 1.86 0. From the above graph we observe Capital IQ’s has maintaining good operating profit ratio it mainly based on operating income.88 0. it is best to look at the change in operating margin over time and to compare the company's yearly or quarterly figures to those of its competitors . Capital IQ’s is good at managing operating profit margin when compare to Allsec’s.02 1 0.84 2006-07 2007-08 2008-09 2009-10 2010-11 operating profit margin(Allsec) operating profit margin(CIQ) Interpretation: Operating margin gives analysts an idea of how much a company makes (before interest and taxes) on each rupee of sales. From the year 2007‐ 2011 there is slightly increasing operating profit. From the above graph we observe Allsec’s has fluctuation from the year 2007‐2011 there is no proper management of operating income.9 0.98 0.96 0. When looking at operating margin to determine the quality of a company.94 0.92 0. .
870 0.4 1.2 1 0.850 0.04 616735837 1135133702 1556661902 1808787432 2157739349 616735837 1325943691 1802474191 2081844923 2483490358 0.8 0.4 0.06 1.15 1.6 0.868 0.Expense ratio: Expense ratio=total expense/net sales Year Capital iq Total expense Net Sales Expense ratio Allsec Total expense Net Sales Expense ratio 890624000 1150822000 1168691000 1396010000 1490662000 1112194000 995560000 1066529000 1305544000 1430548000 0.09 1.2 0 2006-07 2007-08 2008-09 2009-10 2010-11 expense ratio(CIQ) expense ratio(Allsec) .868 2006‐2007 2007‐2008 2008‐2009 2009‐2010 2010‐2011 Graph: 1.80 1.863 0.
the ratios of Capital IQ have increased by significant amounts. Allse’sc has also shown greater increase in the ratios due to the increase in the personal expenses as compared to Capital IQ.Interpretation: As we can observe.18 2006‐2007 2007‐2008 2008‐2009 2009‐2010 2010‐2011 .74 4. the operating expenses show considerable amount of increase.98 257069922 16.92 597269637 25.47 2. Hence it will affect the profit as well as the share holders .Because the if the expense will increase then it will affect the profit and if the profit will decrease then it will not maximize the share holders wealth.51 414375986 21. so the average daily expenses ratio increased gradually. This can be attributed to the fact that the no. of employees increased over the years as company expanded due to which personal expenses increased.09 8.59 138578187 7. This shows the company has good growth and expansion.42 813808479 30. This may create problem for the company Earnings per Share: Earnings per share = (profit after tax‐preference dividend/no of equity share) Year Capital iq PAT(preferen ce 1105853932 4244224412 9083121613 15182594172 24560739896 dividend) No of equity shares EPS Allsec PAT(preferen ce 34055161700133827659706804634980 6112447860 3439486330 dividend) No of equity shares EPS 1695130000 1505373000 1435577000 1367438000 1327987000 20. Also.89 4.
because the value of the share will increase. Earnings per Share equals simply to the total net profit (earnings) divided by the total number of shares.In case of Allsec’s it is clearly observed that share price is decreasing every year.It will attract more investors to invest in the company as EPS tells how much each rupees invested earns (this is true if we only consider the EPSs of the different company's stocks). Obviously the higher this ratio is. that is. . after tax profit. the better.Grap h: 35 30 25 20 15 10 5 0 2006-07 2007-08 2008-09 2009-10 2010-11 Earning per share(CIQ) Earning per share(Allsec) Interpretation: The phrase “earnings” in finance is referred to net profit. From the above graph we observe that the Earning per Share Ratio of Capital IQ is consistently increasing which shows that the company is performing well in the market which is creating more profit for the company as well as the stock holders . What EPS means is how much net profit one share of the company is producing.
Operating profit margin ratio is constant 0. ¾ ¾ ¾ ¾ ¾ ¾ ¾ .46 the high profitability in the year 2007‐08 (0. why because of the company don’t have any stock.93. The company liquidity position year by year increases .71% in the year 2010‐11 where as Allsec is going on decreasing Return on equity ratio is fluctuating in between 0.46) and lowest in the year 2010‐11.6 to 0.The ratio is fluctuating In between 0.27% to 8.594 in this year ratio is good and liquidity position is better.01 to 0. Earnings per share of the company is increasing from 2007‐2011 that means profit of the company is satisfactory where as Allsec’s EPS is going on decreasing profit of the company is not satisfactory because of expenses are increasing than income.71% the company maintains the net profit margin ratio of 8. In the year 2006‐07net profit is 57228939 the year 2010‐11 is 216538842 so the business is gradually increasing.FINDINGS: The liquidity position of the company is satisfactory.99 from the year 2007‐2011 where as Allsec’s Operating profit margin is fluctuating in between 1. this company purely financial service company .594 which is due to the current assets gradually increase and current liabilities gradually decreasing. Quick ratio of the company is fluctuating in between 0.Quick ratio ideal ratio is 1:1 and present ratio in the year 2010‐11 is 2.594 this ratio equal to the current ratio. Net profit margin ratio is changed slightly from 9. Capital IQ company net profit is year by year increases and the business is also increases.824 to 2.824 to 2.
While the model provides an umbrella to the company during rainy days since that mark‐up rate is fixed and that company is bound to earn more than it expended on the product sold. Thus the company should take steps in this regard to improve its profits which will automatically reflect in the net profit margin in the form higher values signifying an improvement.SUGGESTIONS: The following recommendations have been made only in respect of those ratios where CIQ’s performance is poorer ¾ Current Ratio – The current ratio of CIQ in the financial year 2006‐07 was 0. The company can therefore take steps to increase its income from both core and subsidiary operations by altering its revenue model. In the year 2010‐11 CR is improved to 2. leaving less scope for higher profit on product. Thus the company can improve this ratio and bring it closer to the ideal ratio of 2:1 by either increasing its current assets or reducing its current liabilities. This can be attributed to the cost plus mark‐up revenue model of the company which has limited the company’s scope for earning a high profit margin. This could once again be attributed to the cost plus mark‐up revenue model followed by the firm which has proved to be both a boon and bane for it. This will improve the efficiency of CIQ . . ¾ Operating Profit Margin – The analysis of the company’s income statements reveal the expenses have been increasing at a rate higher than that of the income.824.59 this will improve the short‐term liquidity position of the company ¾ Net Profit Margin – The net profit of the firm has been falling despite both sales and net profit of the firm increasing every year. there is no scope to earn more that the rate fixed.
The availability of current assets to pay off current liabilities is fairly sufficient to meet the obligations arising out of current liabilities to the tune. .CONCLUSION: RATIOS Liquidity Ratios: Current Ratio Net Working Capital Profitability Ratios: Operating Profit Margin Net Profit Margin Return on Equity Return on Investments Turnover Ratio: debtor turnover Solvency Ratios: Debt Equity Debt Asset Leverage Ratios: Fixed Assets to Networth CAPITAL IQ ALLS EC slightly • The liquidity position of the company has gradually and consistently increased during the years. • The profitability position of the company is more or less consistent over the years and shows that the company is profitable enough. • Turnover ratios show an increase which states that the company’s sales are quite higher than the net investments in the fixed assets.
there are no debts to this company as it is totally funded by Capital IQ INC. Capital IQ has succeeded in coping up with it and performed well because of its revenue model. Charging a higher percentage of mark-up from the customer i.• Solvency Ratio of Capital IQ is very good over the years. the parent company Capital IQ’s financial performance has proved to be better. . Although the investments in the fixed assets over the years have reduced. If the company continues to progress and perform at this pace its liquidity position will also improve in the coming financial years’. The company indeed has a bright future ahead. Though the impact of global financial crisis was high on IT/ ITES sector. As such. Average Daily Expense Ratio of this company has increased considerably which justifies the expansion plans.e. this company doesn’t require much of the investments How can the company improve its net profit? Both of the above parameters of measuring the profitability of the firm can be improved by: • • Changing the revenue model of the company.
Satyaprasad Oxford dictionary of accounting www. Maheshwari Finance management by Dr B.com www.capitaliq.G.BIBILOGRAPHY: Annual report of Capital IQ (2007‐2011) Annual report of Allsec (2007‐2011) Finance management by Dr S.wikipeida.allsectech.accountingformanagement.com .com www.com www.N.investopedia.com www.
539 19.887 ‐ ‐ ‐ ‐ Gross Block Less: Accumulated Depreciation 260.45 201.35 6 9 8 274442263 196722892 Net Block Capital Work in Progress(including capital advances) 227536912 8.000 7.200.703.298.8 57 99 276236855 229755353 44.175.653.403.218 5.38 82.92 407.1 207.259.2 48 ‐ 4.232.853 743643 806633479 ‐ 6.541 1794592 2218441 Total Intangible Assets 205.258 39.247.712.000 7.89 207.818.104.22.1685 141875242 3 245774704 177.656 3.612.344.775.98 7 2 6 590094637 7.849.208.429.792 186.958.983 ‐ 1216162 .18 411.000 7175000 7175000 Reserves and surplus Unsecured Loans Deferred tax liabilities (net) APPLICATION OF FUNDS : 131.492.74 1 343135141 1 548349219 424259804 204.18 249.506.APPENDIX: BALANCE SHEET OF CAPITAL IQ INFORMATION SYSTEMS LIMITED Particulars SOURCES OF FUNDS: Share Capital 2006 ‐ 07 2007 ‐ 08 2008 ‐ 09 2009‐10 2010‐11 7.
544 45209145 11430078 41496978 .486 25653417 23.Investments Deferred tax assets (net) ‐ ‐ ‐ 6.220.401.765.900 37.
782.435.335 72.3 26 46 368439526 332357759 Net Current Assets (33.951 6 149570741 155639510 Provisions 176718249 16469095 Total Current Liabilities 6 215.036.791.821.164 65442284 716107 22.29 262.540.210 99.243.231 340139 73795827 5378395 196512375 28.260.956 149.Current Assets.27 131228943 7 3 619353389 Total Current Assets Less : Current Liabilities and Provisions 862267667 Current Liabilities 116.768.57 417.17 129.750.521 7 250913863 153.45 43.360.131.466.888.461.799 182280912 266.774 233.252.89 120940689 5 0 218868785 130.402 66.659.903.43 178.64 409.07 9 371290054 Sundry Debtors ‐ ‐ 586581070 Cash and Bank balances Other Current Assets Loans and Advances 102.53 4 8 82.623.92 ) 50.902.1 260.150.720.613. Loans & Advances 254.83 2 8 9 598013280 529909908 Total 813808479 .
215 367519275 1635999139 446920416 45.105.474.453 (16.928.574.837 2007 – 08 2008 – 09 2009‐10 20010‐11 1.770.828 605.001 106.310.133.989 245.797.803 .164 1.318.369.735.025 1739373 2481400254 2090104 2483490358 1.166 2080105550 15.191 2081844923 882.556.312.845 61.648.983.422.803 80.809.615 616.000.506.006 72.PROFIT & LOSS ACCOUNT OF CAPITAL IQ INFORMATION SYSTEMS LIMITED 2006 ‐ 07 INCOME Service income Other income Total income EXPENDITURE Personnel expenses Operating and other expenses depreciation Impairment loss Financial expenses Total 371.148.225 116000000 3847559 21988601 90163840 105500000 3712167 ‐ 109212167 fringe benefit tax 1.554.796.416 88.527 5.992 prior period items Provision for tax Current tax Deferred tax charge 29.084 ‐ 933.254 99.187.797 ‐ 595.399.691 1.812.056 190260339 1.943.802.773.677.274 71261327 28132252 357367 74645507 ‐ 174287 2157739349 325751009 1.782 69.702 1.222 11.000 5.525 ‐ 732.932 524.902 1808787432 190.787) 4.661.492.903.496.522.214.171.1248.644) 5.000 Total tax expense 36.289 273057491 Profit before tax and 92.035 (13.135.073.325.895.616 1341517211 299.170.
491.735 157.349.064 182893651 216538842 prior period items (879.750) ‐ ‐ ‐ ‐ .Profit after tax and before prior period items 56.189 118.306.
06 4 18289365 1 21653884 2 Balance bought forward from previous year 71.914.248 129.491.92 2 40494098 6 58783463 7 Surplus carried to 129.634.73 5 157.228.92 2 404.NET PROFIT 57.143.98 6 58783463 7 80437347 9 .939 118.18 7 247.143.306.940.634.187 balance sheet 247.
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