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ACCOUNTS

ASSIGNMENT ON
RATIO ANALYSIS

INFOSYS LTD.

Infosys was co-founded in 1981 by N. R. Narayana Murthy, Nandan


Nilekani, N. S. Raghavan, S. Gopalakrishnan, S. D. Shibulal, K.
Dinesh and Ashok Arora after they resigned from Patni Computer
Systems.
Infosys ranked among the most innovative companies in
a Forbes survey, leading technology companies in a report by The
Boston Consulting Group and top ten green companies in Newsweek's
Green Rankings.
Infosys was voted India's most admired company in The Wall Street
Journal Asia every year since 2000

Mr. K.V. Kamath is the chairman of the board and Mr. S.D. Shibulal is
the CEO and Managing director as per Annual Report 2011-12

CONSOLIDATED BALANCE SHEET OF INFOSYS


------------------- in Rs. Cr. ------------------Mar '12

Mar '11 Mar '10

Mar '09

Mar '08

12 mths

12 mths

12 mths

12 mths

12 mths

Sources Of Funds
Total Share Capital
Equity Share Capital
Share Application Money
Preference Share Capital
Init. Contribution Settler
Preference Share Application Money
Employee Stock Opiton
Reserves
Revaluation Reserves
Networth
Secured Loans
Unsecured Loans
Total Debt
Minority Interest
Policy Holders Funds
Group Share in Joint Venture
Total Liabilities

286
286
0
0
0
0
0
31,046.00
0
31,332.00
0
0
0
0
0
0
31,332.00

286
286
0
0
0
0
0
25,690.00
0
25,976.00
0
0
0
0
0
0
25,976.00

286
286
0
0
0
0
0
22,763.00
0
23,049.00
0
0
0
0
0
0
23,049.00

286
286
0
0
0
0
0
17,968.00
0
18,254.00
0
0
0
0
0
0
18,254.00

286
286
0
0
0
0
0
13,509.00
0
13,795.00
0
0
0
0
0
0
13,795.00

Mar '12

Mar '11 Mar '10

Mar '09

Mar '08

12 mths 12 mths 12 mths 12 mths 12 mths


Application Of Funds
Gross Block
Less: Accum. Depreciation
Net Block
Capital Work in Progress
Investments
Inventories
Sundry Debtors
Cash and Bank Balance
Total Current Assets
Loans and Advances
Fixed Deposits
Total CA, Loans & Advances
Deffered Credit
Current Liabilities
Provisions
Total CL & Provisions
Net Current Assets
Minority Interest
Group Share in Joint Venture
Miscellaneous Expenses
Total Assets
Contingent Liabilities
Book Value (Rs)

9,194.00
3,639.00
5,555.00
1,034.00
372
0
5,882.00
20,591.00
26,473.00
5,193.00
0
31,666.00
0
3,475.00
3,820.00
7,295.00
24,371.00
0
0
0
31,332.00

8,501.00
3,266.00
5,235.00
525
144
0
4,653.00
777
5,430.00
5,817.00
14,318.00
25,565.00
0
2,853.00
2,640.00
5,493.00
20,072.00
0
0
0
25,976.00

7,839.00
2,893.00
4,946.00
409
3,712.00
0
3,494.00
1,128.00
4,622.00
4,619.00
9,428.00
18,669.00
0
2,575.00
2,112.00
4,687.00
13,982.00
0
0
0
23,049.00

7,093.00
2,416.00
4,677.00
677
0
0
3,672.00
912
4,584.00
3,442.00
8,783.00
16,809.00
0
2,041.00
1,868.00
3,909.00
12,900.00
0
0
0
18,254.00

5,439.00
1,986.00
3,453.00
1,324.00
72
0
3,297.00
884
4,181.00
2,890.00
6,066.00
13,137.00
0
1,912.00
2,279.00
4,191.00
8,946.00
0
0
0
13,795.00

1,116.00
545.64

1,085.00
452.42

329
401.67

376
318.66

667
241.17

CONSOLIDATED KEY FINANCIAL RATIOS OF


INFOSYS
------------------- in Rs. Cr. ------------------Mar '11

Mar '10

Mar '09

Mar '08

Mar '07

5
-156.23
478.99
444.74
93.59

5
-137.03
396.32
394.93
93.59

5
-125.66
378.7
313.69
93.59

5
-91.59
291.82
235.68
93.59

5
-76.89
243.22
191.94
93.59

32.61
28.3
29.51
26.67
26.67
23.84
23.84
35.74
26.31
26.15
452.42
452.42
35.74

34.57
29.42
30.59
29.95
29.95
26.49
26.49
34.1
27.18
26.8
401.67
401.67
34.1

33.18
28.47
29.67
31.79
31.79
26.48
26.48
40.25
32.8
35.2
318.66
318.66
40.25

31.38
26.69
27.8
30.17
29.15
26.8
26.8
38.65
33.77
32.4
241.17
241.17
38.65

31.61
27.25
27.91
30.49
30.49
27.1
27.1
37.42
34.26
33.98
197.04
197.04
37.42

Investment Valuation Ratios


Face Value
Dividend Per Share
Operating Profit Per Share (Rs)
Net Operating Profit Per Share (Rs)
Free Reserves Per Share (Rs)
Bonus in Equity Capital

Profitability Ratios
Operating Profit Margin(%)
Profit Before Interest And Tax Margin(%)
Gross Profit Margin(%)
Cash Profit Margin(%)
Adjusted Cash Margin(%)
Net Profit Margin(%)
Adjusted Net Profit Margin(%)
Return On Capital Employed(%)
Return On Net Worth(%)
Adjusted Return on Net Worth(%)
Return on Assets Excluding Revaluations
Return on Assets Including Revaluations
Return on Long Term Funds(%)

Liquidity And Solvency Ratios


Current Ratio
Quick Ratio
Debt Equity Ratio
Long Term Debt Equity Ratio

4.65
4.56
---

3.98
3.89
---

4.3
4.26
---

3.13
3.11
---

4.47
4.43
---

--5,069.50
3,845.50

--4,383.50
3,586.50

--2,703.33
2,250.67

--5,931.00
5,258.00

--4,726.00
4,371.00

-6.75
-3.63
1.09
3.63

-6.35
-3.29
1.02
3.29

-6.23
-3.39
1.23
3.39

-5.82
-3.51
1.27
3.51

-6.87
-3.43
1.3
3.43

--262.75

--221.33

--214.08

--192.94

--193.38

0.1
-0.47
--

0.1
-0.19
--

0.12
-0.6
--

0.17
-1.51
--

26.71
23.34
72.91
76.37
--

26.26
23.3
75.53
78.12
--

47.75
42.32
50.23
56.1
--

19.47
17.18
80.37
82.7
--

Debt Coverage Ratios


Interest Cover
Total Debt to Owners Fund
Financial Charges Coverage Ratio
Financial Charges Coverage Ratio Post Tax

Management Efficiency Ratios


Inventory Turnover Ratio
Debtors Turnover Ratio
Investments Turnover Ratio
Fixed Assets Turnover Ratio
Total Assets Turnover Ratio
Asset Turnover Ratio
Average Raw Material Holding
Average Finished Goods Held
Number of Days In Working Capital

Profit & Loss Account Ratios


Material Cost Composition
0.09
Imported Composition of Raw Materials Consumed
-Selling Distribution Cost Composition
0.17
Expenses as Composition of Total Sales
--

Cash Flow Indicator Ratios


Dividend Payout Ratio Net Profit
Dividend Payout Ratio Cash Profit
Earning Retention Ratio
Cash Earning Retention Ratio
AdjustedCash Flow Times

58.71
52.19
40.93
47.53
--

GROSS PROFIT RATIO IS THE RATIO OF GROSS PROFIT TO NET SALES I.E. SALES LESS SALES RETURNS. THE RATIO
THUS REFLECTS THE MARGIN OF PROFIT THAT A CONCERN IS ABLE TO EARN ON ITS TRADING AND MANUFACTURING
ACTIVITY. IT IS THE MOST COMMONLY CALCULATED RATIO. IT IS EMPLOYED FOR INTER-FIRM AND INTER-FIRM
COMPARISON OF TRADING RESULTS.
GP RATIO =GROSS PROFIT / (NET SALES 100)

INTERPRETATION OF GROSS
PROFIT MARGIN
The gross profit margin of Infosys reduces in the year
2009 but it increase tremendously in the year 2009 &
2010 as compare to previous years. The reason
being the company is getting more efficient in
production because of increase in demand. But it
slightly decrease in the year 2011 reason could be
the company has to cut price to generate sales.

NET PROFIT MARGIN IS NET PROFIT DIVIDED BY SALES AND EXPRESSED AS A PERCENTAGE. NET PROFIT IS EQUAL
TO SALES MINUS THE COST OF GOODS SOLD, OPERATING EXPENSES, INTEREST AND TAXES. FINANCIAL RATIOS,
SUCH AS NET PROFIT MARGIN, EXPRESS RELATIONSHIPS BETWEEN FINANCIAL STATEMENT ITEMS. THESE RATIOS
ARE USEFUL FOR ASSESSING PERFORMANCE OVER TIME AND COMPARING THE FINANCIAL RESULTS OF COMPANIES
IN THE SAME INDUSTRY. HOWEVER, THEY ARE USUALLY NOT VERY MEANINGFUL AS STANDALONE NUMBERS.
GROSS PROFIT MARGIN = GROSS PROFIT TOTAL REVENUE

INTERPRETATION OF NET
PROFIT MARGIN
The net profit margin of Infosys decreased over
the period from 2007-2011 because sales has
been increasing but profit after tax is increasing
at much slower rate

OPERATING MARGIN OR OPERATING PROFIT MARGIN MEASURES WHAT PROPORTION OF A


COMPANY'S REVENUE IS LEFT OVER, AFTER DEDUCTING DIRECT COSTS AND OVERHEAD AND BEFORE
TAXES AND OTHER INDIRECT COSTS SUCH AS INTEREST.
OPERATING MARGIN FORMULA IS: EBIT/NET SALES*100

INTERPRETATION OF
OPERATING PROFIT MARGIN
The operating profit margin increases from the year
2008 to 2010. This is due to sales are increasing
faster than costs, which is the optimal situation for the
company. But in the year 2011 operating profit
margin decreases which is not a good sign for a
company.

RETURN ON CAPITAL EMPLOYED (ROCE) IS THE RATIO OF NET OPERATING PROFIT OF A COMPANY TO
ITS CAPITAL EMPLOYED. IT MEASURES THE PROFITABILITY OF A COMPANY BY EXPRESSING ITS
OPERATING PROFIT AS A PERCENTAGE OF ITS CAPITAL EMPLOYED.
ROCE =NET OPERATING PROFIT/CAPITAL EMPLOYED
WHERE CAPITAL EMPLOYED IS THE SUM OF STOCKHOLDERS' EQUITY AND LONG-TERM FINANCE.

INTERPRETATION OF RETURN
OF CAPITAL EMPLOYED
The Return on Capital Employed of Infosys
increases smoothly from the year 2007 to 2009
which means company generates more
earnings per rupee of capital employed. It
decreases in the year 2010 which indicates
lower profitability. But in the year 2011 it again
increases reason could be the company
reduces its capital investment.

CURRENT RATIO:
IT IS USED TO APPRAISE THE ABILITY OF THE COMPANY TO SATISFY ITS CURRENTDEBTS
OUT OF THE CURRENT ASSETS. GENERALLY, 2 TO 1 CURRENT RATIO IS CONSIDERED.THE
SATISFACTORY MINIMUM CURRENT RATIO= CURRENT ASSETS/CURRENT LIABILITIES

INTERPRETATION OF
CURRENT RATIO
The current ratio of Infosys is almost increasing
over the years except for the year 2008
because the current liablities in 2008 grew
proportionally more in comparison to current
asset in the same year. But overall its current
ratio is healthy enough which shows
companys current assets to meet its obligation
is increasing

QUICK RATIO/ACID TEST RATIO:


THE QUICK RATIO IS THE STRINGENT TEST TO LIQUIDITY. IT IS FOUNDED BY DIVIDING THE MOST LIQUID CURRENT
ASSETS BY CURRENT LIABILITIES. INVENTORY IS NOT INCLUDED SINCE THE LENGTH OF TIME NEEDED TO CONVERT
TO CASH IS LONG. PREPAID EXPENSES ARE ALSO NOT AN ELEMENT SINCE THEY ARE NOT CONVERTIBLE IN CASH.
GENERALLY ACCEPTABLE RATIO IS 1 TO 1.
QUICK RATIO=QUICK ASSETS/CURRENT LIABILITIES

INTERPRETATION OF QUICK
RATIO
In all 5 years the Quick Ratio of Infosys is above 1
which is good. If the company's liquidity ratio has
increased that indicates that a company is
experiencing solid top-line growth, quickly converting
receivables into cash, and easily able to cover its
financial obligations. If increased that means the
company does not manage their asset that well or
probably has more short term obligations. However,
the company does not seem to face any financial
distress in the future years.

DEBTORS TURNOVER RATIO:


IT INDICATES THE VELOCITY OF DEBT COLLECTION OF A FIRM. IN SIMPLE WORDS IT INDICATES THE
NUMBER OF TIMES AVERAGE DEBTORS (RECEIVABLE) ARE TURNED OVER DURING A YEAR. TRADE
DEBTORS ARE EXPECTED TO BE CONVERTED INTO CASH WITHIN A SHORT PERIOD OF TIME AND ARE
INCLUDED IN CURRENT ASSETS. HENCE, THE LIQUIDITY POSITION OF CONCERN TO PAY ITS SHORT
TERM OBLIGATIONS IN TIME DEPENDS UPON THE QUALITY OF ITS TRADE DEBTORS.
DEBTORS TURNOVER RATIO = NET CREDIT SALES /AVERAGE DEBTORS

INTERPRETATION OF
DEBTORS TURNOVER RATIO
The debtors turnover ratio of Infosys decreased in the
year 2008, it is because the huge difference in increase of
sales and debtors. Debtors increase significantly compare
to sales. It is due to decrease in debtors collection
period. This has result in decrease in debtors turnover
ratio. Thereafter we can see an increasing trend from
year 2008 to 2011 which indicates that a short lapse of
time between sales and the collection of cash or its
extension of credit and collection of accounts receivable
are efficient .

ASSET TURNOVER MEASURES A FIRM'S EFFICIENCY AT USING ITS ASSETS IN GENERATING SALES
OR REVENUE - THE HIGHER THE NUMBER THE BETTER. IT ALSO INDICATES PRICING STRATEGY:
COMPANIES WITH LOW PROFIT MARGINS TEND TO HAVE HIGH ASSET TURNOVER, WHILE THOSE
WITH HIGH PROFIT MARGINS HAVE LOW ASSET TURNOVER.
ASSET TURNOVER= NET SALES/AVERAGE TOTAL ASSET

INTERPRETATION OF ASSET
TURNOVER RATIO
The asset turnover Ratio of Infosys decreases from
the year 2008-2010. It may appears that the company
has utilised its assets less effectively. But we can see
enormous increase in the year 2011 reason being it
has increased its assets which may help in increase
in companys future growth.