FINANCIAL ANALYSIS & ACC00NTINu

Accounts Receivable
Nanagement
Infosys vs. BCL Technologies

kSnI1II


^epa^eu by:
Div B, Croup
Akshita Sh^ivastav
Nait^eyee Shukla
Nikesh Solanki
Nanvenu^a Singh
Suman Rathi
Swapnil vashishtha
Septembe^
T^imeste^ - X
age of

STW of ContWnts
ACCCun1S 8LCLlvA8LL Lrror! 8ookmark not def|ned
a CredlL ollcy Lrror! 8ookmark not def|ned
b ComponenLs Lrror! 8ookmark not def|ned
lunu lLCW S1A1LMLn1S 9
lund llow of PCL 1echnologles 9
lund llow Analysls of PCL 10
lunu lLCW AnAL?SlS Cl lnlCS?S 11
lund llow Analysls of lnfosys 11
Comparlson of PCL 1echnologles and lnfosys 12
Cash llow 12
Analysls 12
AccounLs 8ecelvable ManagemenL 3
lnLroducLlon 3
CredlL ollcy 3
lnfosys v/s PCL 1echnologles Lrror! 8ookmark not def|ned
CalculaLlons Lrror! 8ookmark not def|ned
Analysls Lrror! 8ookmark not def|ned
CalculaLlons Lrror! 8ookmark not def|ned
Analysls Lrror! 8ookmark not def|ned








age of

UUounts RWUWivSTW MSnSYWWnt

IntroduUtion
Whenever Lhe goods or servlces of a flrm are sold on a credlL basls recelvables arlse Pence credlL sales
are 8ecelvables 1hey are counLed as an asseL and Lhey represenL Lhe clalms of a company agalnsL lLs
cusLomers 1hey appear on Lhe AsseLs slde of Lhe 8alance SheeL CredlL sales glve rlse Lo 8ecelvables
hence Lhe formaLlon of recelvables ls dlrecLly relaLed Lo Lhe goal of maklng credlL sales
CredlL sales are requlred for
O lncrease ln roflLs
O lncrease ln Sales
O AblllLy Lo face CompeLlLlon
1he maln goal of 8ecelvables ManagemenL ls Lo maxlmlze Lhe 8Cl ln 8ecelvables or Lo maxlmlze sales Lo
a maxlmum level up Lo whlch Lhe rlsk level ls accepLable ln order Lo keep Lhe rlsk levels under conLrol lL
ls very necessary Lo
O ConLrol and mlnlmlse Lhe cosL of credlL
O Achleve opLlmum volume of sales
O MalnLaln opLlmum level of lnvesLmenL ln recelvables


CrWdit PoiU

CredlL ollcles acL as a chlef lnfluence on Lhe level of Lhe AccounLs 8ecelvable of a company A
company makes noLeworLhy lnvesLmenL by exLendlng credlL Lo lLs cusLomers CredlL ollcy refers Lo
Lhe appllcaLlon of Lhose facLors whlch lnfluence Lhe amounL of Lrade credlL le lnvesLmenL ln
recelvables 1he credlL pollcy of Lhe company wlll vary as and when any exLernal facLors vary 1here
are Lwo maln Lypes of CredlL ollcles

|bera| or en|ent Cred|t o||cy
Pere credlL sales are made llberally Lo Lhose cusLomers whose credlLworLhlness ls elLher doubLful
or ls noL known aL all ln such cases sales are made on llberal Lerms and favourable lncenLlves are
granLed Lo cusLomers LhaL resulLs ln larger sales and hlgher proflLs

Str|ngent or |ght Cred|t o||cy
Pere credlL sales are made only Lo Lhose cusLomers whose credlL worLhlness have been LesLed and
are proved Lo be good Companles followlng such pollcy are very selecLlve ln granLlng sales ln
age of

followlng such a pollcy cosLs and bad debLs wlll be mlnlmal and no serlous problem of llquldlLy wlll
be posed

UUount rWUWivSTW Snd RStio SnSsis of HCL tWUnooYiWs Snd Infoss


2009 2010 2009 2010
Net Sales (in Rs. Cr) 67309 307876 202600 211000
;erage Recei;ables 1233.5 1788.29 3222 331868
Recei;ables Turno;er Ratio 3.79 2.84 6.25 6.37
Recei;able Turno;er in Days 96 129 38 37
PCL 1ech lnfosys


nSsis:
HCL WUnooY
O Net sales oI HCL Technology increases by 8.6 in the year 2010.
O #eceivables increase by 45 in the same year.
O This indicates that there was not the proper management oI the receivables and that`s
why sales don`t increase considerably.
O #eceivable turnover in days increases and so the net sales. This implies that management
has applied lenient credit policy and due to which there was boost in sales.

Infoss
O Net sales oI InIosys increased by 4.3 in the year 2010.
O #eceivables increased by 2.3 in the year 2010.
O #eceivable turnover in days is decreased by one day. This indicates that there were no
severe changes in credit policy. Company became somewhat stringent in their credit
policy approach. Otherwise they didn`t have any change in their policy.




age of

CopSrison in YWnWrS

O Net sales oI HCL technologies are comparatively low than that oI InIosys but the increase
in net sales is more Ior HCL Technologies in comparison to InIosys. This gradual rise in
sales is due to change in credit policy oI HCL technology. They planned a lenient credit
policy in turn sales hop up.
O #eceivable turnover in days oI HCL technologies is Iar more than InIosys. So the
receivable management in HCL is Iocussed on increasing sale as opposed to InIosys.



Ratio nalysis
Table below show the ratios oI InIosys and HCL technologies



key I|nanc|a| kat|o
|qu|d|ty And So|vency kat|os Mar10 Mar09 !un10 !un09
key 8aLlos
uebLLqulLy 8aLlo 0 0 023 008
Long 1erm uebLLqulLy 8aLlo 0 0 011 001
CurrenL 8aLlo 7 397 167 133
Culck 8aLlo 2 67 171 106
1urnover kat|os
llxed AsseLs 33 386 239 263
lnvenLory 0 0 10233 1076
uebLors 637 623 28 379
lnLeresL Cover 8aLlo 376100 333800 1237 32
Cash I|ow Ind|cator kat|os
Larnlng 8eLenLlon 8aLlo 7067 76 8 268
ulvldend ayouL 8aLlo Cash roflL 2332 213 397 7013
ulvldend ayouL 8aLlo neL roflL 288 2703 3308 897
Infosys td nC 1ech
age of

nSsis:
Liquidit Snd sovWnU rStio

Debt to equity ratio Total long term debts/ shareholder`s Iund.
It represents the extent to which the Iirm uses borrowed Iunds. Creditors like to see this
ratio as low as possible.
or InIosys, in the year 2009 and 2010. The ratio remained 0. They don`t have any debts.
So InIosys are protecting their interest cost as they are not having any debts.
or HCL technologies the ratio increased by 1.8 Irom .08 to 0.23, so they have slight
increase in total debts. But they both have permissible value.
"uick Ratio: current assets-Inventories & Prepaid expense/current liabilities
It helps in analyzing liquidity.
#atio Ior InIosys decreases by 10 Irom 4.67 to 4.2. This indicates that their short term
obligations have decreased.
#atio Ior HCL Technologies has increased by 61 Irom 1.06 to 1.71. It indicates that
short term obligations oI HCL have increased.
Current Ratio: Current assets/ Current Liabilities
Current ratio oI InIosys has increased Irom 3.97 to 4.97, it means that there is a rise oI
12.6.
Current ratio oI HCL Technologies has increased 25 Irom 1.33 to 1.67.
Higher current ratio indicates that company has the better ability to meet payments.
Since the ratio Ior InIosys is more than that oI HCL so they have better ability to meet
payments.
In 2009 the ratio oI HCL was under 1.5. It was 1.33. The company was under perIorming
and was not in the situation to meet their short term obligations.
inally management Iormed some policies to pull the rake to 1.67 in 2010, which is an
acceptable ratio.

age of

urnovWr RStio
Total ssets Turno;er Ratio: Net sales/Working capital
ssets turnover ratio Ior InIosys decreased Irom 3.86 to 3.43 approximately 11. Net
sales have increased by 4.3. This indicates that net Iixed assets oI InIosys have
relatively increased more than the rise in sales. So the ratio dips.
TT# Ior HCL Technologies also decreases by 9. lthough net sales have increased
Ior them also but their assets have increased more in relation to sales.
It can be said that both the companies are expanding their business. That`s why their
assets are increasing more than their sales.
nterest Co;erage Ratio: BIT/Interest expense

This ratio depicts whether the company has the ability to meet its interest payments to
avoid bankruptcy.
Interest coverage ratio oI InIosys increased Irom 3358 to 3761, rise oI 12. So they can
easily pay interest obligations.
In case oI HCL their ratio is too low than InIosys and it also decreased by 72 Irom 43
to 12 i.e. they require to decrease their debts Ior longer solvency oI the company.

Cash Flow ndicators Ratio
arning #etention #atio Net income-dividends/ Net income
#atio Ior InIosys decreased by 5 Irom 74.6 to 70.67. This indicates they spend Iewer
amounts in dividend paying.
Company management has decided to increase the net income in turn cutting dividends.
In contrary this ratio is increased by 82 Irom 26.48 to 48.4 Ior HCL Technologies.
HCL wants to improve its customer perception towards their company, that`s why they
increased dividends.


age of

ConUusion
By studying the ratios oI HCL and InIosys, we have Iound that InIosys is Iar more stable
company then HCL. They have high sales and high current ratio. ven the receivables are
managed well in InIosys. They are pretty stringent in their credit policy on the other hand HCL is
lenient to have more customers.
We Iinally assess InIosys as Iundamentally strong company. verything is Iine there Ior the
investors to invest.



















age of

D LUW SMS

und ow of HCL WUnooYiWs:

(8s ln Crs)

?ear 10!un 9!un



Cash proflL 13032 122387

lncrease ln equlLy 171 078

lncrease ln oLher neLworLh 63987 0

lncrease ln loan funds 88366 88

uecrease ln gross block 0 0

uecrease ln lnvesLmenLs 0 12339

uecrease ln worklng caplLal 0 0

CLhers 0 0

1oLal lnflow 28308 2976


App||cat|on of funds

Cash loss 0 0

uecrease ln neLworLh 0 2392

uecrease ln loan funds 0 0

lncrease ln gross block 39313 33678

lncrease ln lnvesLmenLs 16703 0

lncrease ln worklng caplLal 313 186618

ulvldend 2703 6976

CLhers 0 0

1ota| Cutf|ow 28308 2976

age of

und ow nSsis of HCL:

O 1he roflL of PCL 1echnologles ls 8s 13032 cr

O 1he lncremenL ln Loan amounL ls 8S 88366 cr
O 1he LoLal lnflow ln Lhe company ls 8s 28308 cr
O 1he ma[or sources are Cash roflL and Loan
O 1he lncrease ln Cross 8lock ls 8s 39313 Crore So Lhe LoLal flxed asseLs have lncreased by
39313 Crore
O 1he lnvesLmenL of Company Lhls year has lncreased by 8s 16703 Crore
O 1he lncrease ln worklng caplLal ls 8s 313 Crore revlous as year lncrease ln worklng caplLal
was 8s 186618 Cr So Lhe lncrease ln CurrenL llablllLles ls comparaLlvely more Lhan lncrease ln
CurrenL AsseL
O Powever company has lssued dlvldends of 8s 2703 Cr whlch ls comparaLlvely very less Lhan
prevlous year's lnvesLmenL ln dlvldends whlch was 8s 6976 Cr 1hls dlvldend was declared
afLer approval wlLh shareholders
Ma[orlLy of lunds for Lhe year !uly 2009 !une 2010 were uLlllzed ln lnvesLmenLs and llxed AsseLs So
we can say LhaL company has some expanslon plans













age of

D LUW LYSIS U IUSYS

(8s ln Crs)


?ear

10
Mar
9
Mar



Cash proflL

619 6169

lncrease ln equlLy

1 0

lncrease ln oLher neLworLh

0 0

lncrease ln loan funds

0 0

uecrease ln gross block

0 0

uecrease ln lnvesLmenLs

0 0

uecrease ln worklng caplLal

0 0

CLhers

0 0

1oLal lnflow

6193 6169


App||cat|on of funds

Cash loss

0 0

uecrease ln neLworLh

13 133

uecrease ln loan funds

0 0

lncrease ln gross block

163 833

lncrease ln lnvesLmenLs

3621 1

lncrease ln worklng caplLal

832 3793

ulvldend

13 133

CLhers

0 0
1ota| Cutf|ow

6193 6169

und ow nSsis of Infoss:
O Cash proflL of lnfosys for Lhe year !uly 2009 !une 2010 ls 8s 673 Cr
O 1here ls a decrease ln lnvesLmenLs of 8s 3301 Cr
O 1he company has lnvesLed 8s 667 Cr more ln Cross 8lock
O Company has lssued dlvldends of 8s 33 Cr Whlch ls comparaLlvely very hlgh Lhan prevlous
year's dlvldends
O 1he worklng CaplLal has lncreased Lo 8s 3399 Crore
So ma[orlLy of funds are uLlllzed ln lssue of dlvldends and ln llxed AsseLs Slnce Worklng CaplLal of
Company ls very hlgh company ls havlng loL of CurrenL AsseLs So we can also say LhaL lunds are noL
uLlllzed properly

age of

CopSrison of HCL WUnooYiWs Snd Infoss:
O Cash roflL of lnfosys ls much hlgher Lhan PCL 1echnologles
O lor Lhe year !une 2009 !uly 2011 PCL has more lnvesLmenLs so lL can be sald LhaL PCL has
some expanslon plans whereas lnfosys has lnvesLed money ln lssue of share
CSs ow

Infosys Cash I|ow 8s ln Crore
Cash I|ow |ncrease decrease Mar Mar
neL roflL 8efore 1ax 101 77200 67100
neL Cash lrom CperaLlng AcLlvlLles 1232 387600 313200
neL Cash (used ln)/from lnvesLlng AcLlvlLles 911 33100 19300
neL Cash (used ln)/from llnanclng AcLlvlLles 6332 18600 23000
neL (decrease)/lncrease ln Cash and Cash LqulvalenLs 13793 100800 260000
Cpenlng Cash Cash LqulvalenLs 2326 1028900 768900
Closlng Cash Cash LqulvalenLs 892 1129700 1028900

nC Cash I|ow 8s ln Crore
Cash I|ow |ncrease decrease Iun Iun
neL roflL 8efore 1ax 336 113282 119392
neL Cash lrom CperaLlng AcLlvlLles 206 73926 3879
neL Cash (used ln)/from lnvesLlng AcLlvlLles 7806 139911 30683
neL Cash (used ln)/from llnanclng AcLlvlLles 1003 33883 21382
neL (decrease)/lncrease ln Cash and Cash LqulvalenLs 93769

7916 67893
Cpenlng Cash Cash LqulvalenLs 377 100 68688
Closlng Cash Cash LqulvalenLs 20066 68 136383

nSsis:
1 neL roflL 8efore Lax for lnfosys has lncreased Lo 101 ln Mar '10 whereas for PCL lL has
decreased Lo 336 ln !une '10 Lhus lnfosys's sales have lncreased comparaLlvely
2 neL Cash from CperaLlng AcLlvlLles for lnfosys has lncreased Lo 1232 ln Mar '10 because
8evenue lncreased vla sales and ower/luel CosL and admln expenses lncreased for lnfosys
whereas for PCL lL has lncreased Lo 206 ln !une '10 because Lhe neL sales and oLher lncome
has lncreased buL PCL's Lmployee cosL Admln expenses and mlsc expenses also lncreased
reasonably
age of

3 neL Cash from lnvesLlng AcLlvlLles for lnfosys has lncreased Lo 911 ln Mar '10 because
Lhe lnvesLmenL for lnfosys has lncreased and for PCL lL has lncreased Lo 7806 ln !une '10
neL Cash from llnanclng AcLlvlLles for lnfosys has decreased Lo 6332 ln Mar '10 because
Lhelr lnvesLmenL has lncreased Lhus Lhe llnanclng power has comparaLlvely decreased lor PCL
Lhere has been an lncrease of 1003 ln !une '10
3 neL Cash Cash LqulvalenLs for lnfosys has decreased Lo 13793 ln Mar '10 as Lhelr
lnvesLmenLs were lncreased reasonably lor PCL Lhere was an lncrease of 93769 ln !une '10
due Lo lnvesLmenL plans
6 Cpenlng and Closlng Cash Cash LqulvalenLs for lnfosys has lncreased Lo 2326 and 892
respecLlvely whereas Lhere was a slgnlflcanL decrease ln PCL by 377 and 20066
respecLlvely