raio analysis

8/10/2019 Raio Analysis

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ACCOUNTS

ASSIGNMENT ONRATIO ANALYSIS


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INFOSYS LTDInfosys was co-founded in 1981 by N. R. Narayana Murthy , NandanNilekani , N. S. Raghavan , S. Gopalakrishnan , S. D. Shibulal , K.Dinesh and Ashok Arora after they resigned from Patni ComputerSystems .Infosys ranked among the most innovative companies ina Forbes survey, leading technology companies in a report by TheBoston Consulting Group and top ten green companies in Newsweek 'sGreen Rankings.Infosys was voted India's most admired company in The Wall StreetJournal Asia every year since 2000 Mr. K.V. Kamath is the chairman of the board and Mr. S.D. Shibulal isthe CEO and Managing director as per Annual Report 2011-12
http://en.wikipedia.org/wiki/N._R._Narayana_Murthyhttp://en.wikipedia.org/wiki/Nandan_Nilekanihttp://en.wikipedia.org/wiki/Nandan_Nilekanihttp://en.wikipedia.org/wiki/N._S._Raghavanhttp://en.wikipedia.org/wiki/S._Gopalakrishnanhttp://en.wikipedia.org/wiki/S._D._Shibulalhttp://en.wikipedia.org/wiki/K._Dineshhttp://en.wikipedia.org/wiki/K._Dineshhttp://en.wikipedia.org/wiki/Patni_Computer_Systemshttp://en.wikipedia.org/wiki/Patni_Computer_Systemshttp://en.wikipedia.org/wiki/Forbeshttp://en.wikipedia.org/wiki/The_Boston_Consulting_Grouphttp://en.wikipedia.org/wiki/The_Boston_Consulting_Grouphttp://en.wikipedia.org/wiki/Newsweekhttp://en.wikipedia.org/wiki/The_Wall_Street_Journal_Asiahttp://en.wikipedia.org/wiki/The_Wall_Street_Journal_Asiahttp://en.wikipedia.org/wiki/K.V._Kamathhttp://en.wikipedia.org/wiki/CEOhttp://en.wikipedia.org/wiki/CEOhttp://en.wikipedia.org/wiki/K.V._Kamathhttp://en.wikipedia.org/wiki/K.V._Kamathhttp://en.wikipedia.org/wiki/The_Wall_Street_Journal_Asiahttp://en.wikipedia.org/wiki/The_Wall_Street_Journal_Asiahttp://en.wikipedia.org/wiki/Newsweekhttp://en.wikipedia.org/wiki/The_Boston_Consulting_Grouphttp://en.wikipedia.org/wiki/The_Boston_Consulting_Grouphttp://en.wikipedia.org/wiki/The_Boston_Consulting_Grouphttp://en.wikipedia.org/wiki/Forbeshttp://en.wikipedia.org/wiki/Patni_Computer_Systemshttp://en.wikipedia.org/wiki/Patni_Computer_Systemshttp://en.wikipedia.org/wiki/Patni_Computer_Systemshttp://en.wikipedia.org/wiki/Patni_Computer_Systemshttp://en.wikipedia.org/wiki/K._Dineshhttp://en.wikipedia.org/wiki/K._Dineshhttp://en.wikipedia.org/wiki/S._D._Shibulalhttp://en.wikipedia.org/wiki/S._D._Shibulalhttp://en.wikipedia.org/wiki/S._Gopalakrishnanhttp://en.wikipedia.org/wiki/S._Gopalakrishnanhttp://en.wikipedia.org/wiki/N._S._Raghavanhttp://en.wikipedia.org/wiki/N._S._Raghavanhttp://en.wikipedia.org/wiki/Nandan_Nilekanihttp://en.wikipedia.org/wiki/Nandan_Nilekanihttp://en.wikipedia.org/wiki/Nandan_Nilekanihttp://en.wikipedia.org/wiki/N._R._Narayana_Murthyhttp://en.wikipedia.org/wiki/N._R._Narayana_Murthyhttp://en.wikipedia.org/wiki/N._R._Narayana_Murthyhttp://en.wikipedia.org/wiki/N._R._Narayana_Murthy


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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 FundsTotal Share Capital 286 286 286 286 286Equity Share Capital 286 286 286 286 286Share Application Money 0 0 0 0 0Preference Share Capital 0 0 0 0 0Init. Contribution Settler 0 0 0 0 0Preference Share Application Money 0 0 0 0 0Employee Stock Opiton 0 0 0 0 0

Reserves 31,046.00 25,690.00 22,763.00 17,968.00 13,509.00Revaluation Reserves 0 0 0 0 0Networth 31,332.00 25,976.00 23,049.00 18,254.00 13,795.00Secured Loans 0 0 0 0 0Unsecured Loans 0 0 0 0 0Total Debt 0 0 0 0 0Minority Interest 0 0 0 0 0Policy Holders Funds 0 0 0 0 0Group Share in Joint Venture 0 0 0 0 0Total Liabilities 31,332.00 25,976.00 23,049.00 18,254.00 13,795.00


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12 mths 12 mths 12 mths 12 mths 12 mths

Application Of FundsGross Block 9,194.00 8,501.00 7,839.00 7,093.00 5,439.00Less: Accum. Depreciation 3,639.00 3,266.00 2,893.00 2,416.00 1,986.00Net Block 5,555.00 5,235.00 4,946.00 4,677.00 3,453.00Capital Work in Progress 1,034.00 525 409 677 1,324.00Investments 372 144 3,712.00 0 72Inventories 0 0 0 0 0Sundry Debtors 5,882.00 4,653.00 3,494.00 3,672.00 3,297.00

Cash and Bank Balance 20,591.00 777 1,128.00 912 884Total Current Assets 26,473.00 5,430.00 4,622.00 4,584.00 4,181.00Loans and Advances 5,193.00 5,817.00 4,619.00 3,442.00 2,890.00Fixed Deposits 0 14,318.00 9,428.00 8,783.00 6,066.00Total CA, Loans & Advances 31,666.00 25,565.00 18,669.00 16,809.00 13,137.00Deffered Credit 0 0 0 0 0Current Liabilities 3,475.00 2,853.00 2,575.00 2,041.00 1,912.00Provisions 3,820.00 2,640.00 2,112.00 1,868.00 2,279.00Total CL & Provisions 7,295.00 5,493.00 4,687.00 3,909.00 4,191.00Net Current Assets 24,371.00 20,072.00 13,982.00 12,900.00 8,946.00Minority Interest 0 0 0 0 0Group Share in Joint Venture 0 0 0 0 0Miscellaneous Expenses 0 0 0 0 0Total Assets 31,332.00 25,976.00 23,049.00 18,254.00 13,795.00

Contingent Liabilities 1,116.00 1,085.00 329 376 667Book Value (Rs) 545.64 452.42 401.67 318.66 241.17


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CONSOLIDATED KEY FINANCIAL RATIOS OFINFOSYS

------------------- in Rs. Cr. -------------------


Investment Valuation RatiosFace Value 5 5 5 5 5

Dividend Per Share -- -- -- -- --Operating Profit Per Share (Rs) 156.23 137.03 125.66 91.59 76.89Net Operating Profit Per Share (Rs) 478.99 396.32 378.7 291.82 243.22Free Reserves Per Share (Rs) 444.74 394.93 313.69 235.68 191.94Bonus in Equity Capital 93.59 93.59 93.59 93.59 93.59

Profitability RatiosOperating Profit Margin(%) 32.61 34.57 33.18 31.38 31.61Profit Before Interest And Tax Margin(%) 28.3 29.42 28.47 26.69 27.25

Gross Profit Margin(%) 29.51 30.59 29.67 27.8 27.91Cash Profit Margin(%) 26.67 29.95 31.79 30.17 30.49Adjusted Cash Margin(%) 26.67 29.95 31.79 29.15 30.49Net Profit Margin(%) 23.84 26.49 26.48 26.8 27.1Adjusted Net Profit Margin(%) 23.84 26.49 26.48 26.8 27.1Return On Capital Employed(%) 35.74 34.1 40.25 38.65 37.42Return On Net Worth(%) 26.31 27.18 32.8 33.77 34.26Adjusted Return on Net Worth(%) 26.15 26.8 35.2 32.4 33.98

Return on Assets Excluding Revaluations 452.42 401.67 318.66 241.17 197.04Return on Assets Including Revaluations 452.42 401.67 318.66 241.17 197.04Return on Long Term Funds(%) 35.74 34.1 40.25 38.65 37.42


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Liquidity And Solvency RatiosCurrent Ratio 4.65 3.98 4.3 3.13 4.47

Quick Ratio 4.56 3.89 4.26 3.11 4.43

Debt Equity Ratio -- -- -- -- --

Long Term Debt Equity Ratio -- -- -- -- --

Debt Coverage RatiosInterest Cover -- -- -- -- --

Total Debt to Owners Fund -- -- -- -- --

Financial Charges Coverage Ratio 5,069.50 4,383.50 2,703.33 5,931.00 4,726.00

Financial Charges Coverage Ratio Post Tax 3,845.50 3,586.50 2,250.67 5,258.00 4,371.00

Management Efficiency RatiosInventory Turnover Ratio -- -- -- -- --

Debtors Turnover Ratio 6.75 6.35 6.23 5.82 6.87

Investments Turnover Ratio -- -- -- -- --

Fixed Assets Turnover Ratio 3.63 3.29 3.39 3.51 3.43Total Assets Turnover Ratio 1.09 1.02 1.23 1.27 1.3

Asset Turnover Ratio 3.63 3.29 3.39 3.51 3.43

Average Raw Material Holding -- -- -- -- --

Average Finished Goods Held -- -- -- -- --

Number of Days In Working Capital 262.75 221.33 214.08 192.94 193.38

Profit & Loss Account RatiosMaterial Cost Composition 0.09 0.1 0.1 0.12 0.17Imported Composition of Raw Materials C -- -- -- -- --

Selling Distribution Cost Composition 0.17 0.47 0.19 0.6 1.51

Expenses as Composition of Total Sales -- -- -- -- --

Cash Flow Indicator RatiosDividend Payout Ratio Net Profit 58.71 26.71 26.26 47.75 19.47

Dividend Payout Ratio Cash Profit 52.19 23.34 23.3 42.32 17.18

Earning Retention Ratio 40.93 72.91 75.53 50.23 80.37

Cash Earning Retention Ratio 47.53 76.37 78.12 56.1 82.7

AdjustedCash Flow Times -- -- -- -- --


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


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INTERPRETATION OF GROSSPROFIT MARGIN

The gross profit margin of Infosys reduces in the year2009 but it increase tremendously in the year 2009 &

2010 as compare to previous years. The reasonbeing the company is getting more efficient inproduction because of increase in demand. But itslightly decrease in the year 2011 reason could be

the company has to cut price to generate sales .


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NET PROFIT MARGIN IS NET PROFIT DIVIDED BY SALES AND EXPRESSED AS A PERCENTAGE. NET PROFIT IS EQUALTO 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 RATIOSARE USEFUL FOR ASSESSING PERFORMANCE OVER TIME AND COMPARING THE FINANCIAL RESULTS OF COMPANIESIN THE SAME INDUSTRY. HOWEVER, THEY ARE USUALLY NOT VERY MEANINGFUL AS STANDALONE NUMBERS.GROSS PROFIT MARGIN = GROSS PROFIT TOTAL REVENUE


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INTERPRETATION OF NETPROFIT MARGIN

The net profit margin of Infosys decreased overthe period from 2007-2011 because sales hasbeen increasing but profit after tax is increasingat much slower rate


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OPERATING MARGIN OR OPERATING PROFIT MARGIN MEASURES WHAT PROPORTION OF ACOMPANY'S REVENUE IS LEFT OVER, AFTER DEDUCTING DIRECT COSTS AND OVERHEAD AND BEFORETAXES AND OTHER INDIRECT COSTS SUCH AS INTEREST.OPERATING MARGIN FORMULA IS: EBIT/NET SALES*100


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INTERPRETATION OF

OPERATING PROFIT MARGIN

The operating profit margin increases from the year

2008 to 2010. This is due to sales are increasingfaster than costs, which is the optimal situation for thecompany. But in the year 2011 operating profitmargin decreases which is not a good sign for a

company .


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


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INTERPRETATION OF RETURNOF CAPITAL EMPLOYED

The Return on Capital Employed of Infosysincreases smoothly from the year 2007 to 2009

which means company generates moreearnings per rupee of capital employed. Itdecreases in the year 2010 which indicateslower profitability. But in the year 2011 it againincreases reason could be the companyreduces its capital investment.


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


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INTERPRETATION OFCURRENT RATIO

The current ratio of Infosys is almost increasingover the years except for the year 2008

because the current liablities in 2008 grewproportionally more in comparison to currentasset in the same year. But overall its current

ratio is healthy enough which showscompanys current assets to meet its obligationis increasing


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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 CONVERTTO 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


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INTERPRETATION OF QUICKRATIO

In all 5 years the Quick Ratio of Infosys is above 1which is good. If the company's liquidity ratio has

increased that indicates that a company isexperiencing solid top-line growth, quickly convertingreceivables into cash, and easily able to cover itsfinancial obligations. If increased that means the

company does not manage their asset that well orprobably has more short term obligations. However,the company does not seem to face any financialdistress in the future years .


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


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INTERPRETATION OF

DEBTORS TURNOVER RATIOThe debtors turnover ratio of Infosys decreased in theyear 2008, it is because the huge difference in increase of

sales and debtors. Debtors increase significantly compareto sales. It is due to decrease in debtors collectionperiod. This has result in decrease in debtors turnoverratio. Thereafter we can see an increasing trend from

year 2008 to 2011 which indicates that a short lapse oftime between sales and the collection of cash or itsextension of credit and collection of accounts receivableare efficient .


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


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INTERPRETATION OF ASSET

TURNOVER RATIO

The asset turnover Ratio of Infosys decreases fromthe year 2008-2010. It may appears that the companyhas utilised its assets less effectively. But we can seeenormous increase in the year 2011 reason being ithas increased its assets which may help in increase

in companys future growth .

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