36196831 22902527 financial ratio analysis infosys presentation
TRANSCRIPT
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
1/43
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
2/43
Fact File of Infosys
. -nfosys Technologies Ltd delivers ITnabled business solutions to enable Global.000 companies win in a Flat World
nfosys has a global footprint with sales
ffices in 30 countries and development, , , , ,entres in India US China Australia UK
, .anada Japan and many other countries ,nfosys has over 105 000 employees of 73
.ationalities
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
3/43
Fact File of Infosys..
Financial Summary* (LTM Sep 09)
Total Income : Rs. 22,478 crore
Net profit after taxes : Rs. 6,321 crore
Earnings per share (Rs. 5) : Rs. 110.34 (basic)
Total assets : Rs. 20,757 crore
Cash and cash equivalents : Rs. 13,796 crore
* Indian GAAP
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
4/43
Ratio Analysis
of
Financial Statements
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
5/43
Financial Ratios..
Financial ratios are tools for interpreting financial
statements to provide a basis for valuing securities
and appraising financial and management
performance.
In general, there are 4 kinds of financial ratiosthat a financial analyst will use most frequently,
these are:
Performance ratios
Working capital ratiosLiquidity ratiosSolvency ratios
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
6/43
Liquidity Ratios
Can the company continue to pay its
liabilities and debts?
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
7/43
Current Ratio
Current Ratio = Total Current Assets/ TotalCurrent Liabilities
The ratio is regarded as a test of liquidity.for a company
It expresses the 'working capital' relationshipof current assets available to meet the company's
.current obligations
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
8/43
Current Ratio..
Mar-05 Mar-06 Mar-07 Mar-08 Mar-092.8 2.75 4.96 3.3 4.71
By Industry norm current ratio for service industry is around 1.
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
9/43
Current Ratio..
Inferences
. .In current scenario Infosys has Rs 4 71 to pay. . . %Rs 1 i e it has 370 more capacity to repay its
.short term liabilities
This depicts a sound financial heath of thecompany as far as repaying short term obligations.are concerned
. -Current ratio decreased from 4 96 in Mar 07 to. - .3 3 in Mar 08
Reason??
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
10/43
Quick Ratio
Quick Ratio = (Cash + Account receivables +
short term investments)/ Current
liabilities
Mar-09 Mar-08 Mar-07 Mar-06 Mar-05
4.67 3.28 4.91 2.73 2.77
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
11/43
Profitability Ratio
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
12/43
AssetsTotal
IncomeNet:ROA =
The return on assets (ROA) percentage shows howprofitable a company's assets are in generatingrevenue.
:Return on Assets ROA
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
13/43
Mar-09 Mar-08 Mar-07 Mar-06 Mar-05
32.14 32.06 32.34 31.35 31.66
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
14/43
EquityCommonTotal
IncomeNet:ROE =
It measures a firm's efficiency at generating profits fromevery unit of shareholders' equity (also known as netassets or assets minus liabilities).ROE shows how well a company uses investmentfunds to generate earnings growth.
:Return on Equity ROE
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
15/43
Mar-09 Mar-08 Mar-07 Mar-06 Mar-05
32.67 33.14 33.89 35.1 36.32
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
16/43
Return on Capital Employed (ROCE) is used in financeas a measure of the return that a company is realisingfrom its capital employed.
( )Return on Capital Employed ROCE
et profits =eturn on Capital Employed apital employed
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
17/43
Mar-09 Mar-08 Mar-07 Mar-06 Mar-05
37.71 37.81 37.05 39.51 42.54
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
18/43
The Return on Equity (ROE) &
Return on Equity (ROE) bothhas .
It shows that the companyhas utilize the shareholdersfunds less efficiently.
This is unfavorable forCompany's image as it mayresult in decrease in theconfidence in the investorsmind for companys
performance.
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
19/43
Asset Turnover
Asset turnover is a financial ratio that measures the efficiency of a company's useof its assets in generating sales revenue or sales income to the company.
http://en.wikipedia.org/wiki/Financial_ratiohttp://en.wikipedia.org/wiki/Assethttp://en.wikipedia.org/wiki/Assethttp://en.wikipedia.org/wiki/Financial_ratio -
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
20/43
Mar-09 Mar-08 Mar-07 Mar-06 Mar-05
0.77 0.79 0.69 0.67 0.62
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
21/43
Working Capital/Sales
The Working Capital Productivity Ratio helps explain how well the company isusing its working capital.
Working Capital Productivity Ratio = Revenue / (Current Assets Current Liabilitie
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
22/43
Mar-09 Mar-08 Mar-07 Mar-06 Mar-05
0.61 0.54 0.54 0.42 0.35
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
23/43
As it is a Service oriented company , it does
not have any stock kept with it. So there isno amount blocked in stock. So the investment required in working capital
is less.
Gross Profit Amount approx 15% andOperating Net profit amount
approx 18 %.This means that Operating
activities of Infosys is more efficient as
compared to Software developmentactivities(production activities) .
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
24/43
Operational & FinancialRatios
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
25/43
Earnings Per Share
Earnings per Share are calculated tofind out overall profitability of theorganization.
NPAT
Earnings per share = Number of equity share
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
26/43
Mar-09 Mar-08 Mar-07 Mar-06 Mar-05
101.65 78.15 66.14 87.72 70.52
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
27/43
DIVIDEND PER SHARE
DPS shows how much is paid as dividendto the shareholders on each share held.
Dividend Paid to Ordinary
Shareholders
Dividend per Share = Number of equity share
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
28/43
Mar-09 Mar-08 Mar-07 Mar-06 Mar-05
23.5 33.25 11.5 45 11.5
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
29/43
The Company is currently paying approx17% of its Current Earnings as Dividend
( D/P ratio is 16.93% ). Fromshareholders Long term point of view it isgood that company is retaining itsapprox 83% of its present earnings for its
future growth.
Therefore (through Fixed Assets turnoverratio & D/P ratio) it seemsthat company is retaining significantamount for its future .
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
30/43
Book NAV/Share
An expression for net asset value thatrepresents a fund's (mutual,exchange-traded, and closed-end) or
a company's value per share
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
31/43
Mar-09 Mar-08 Mar-07 Mar-06 Mar-05
311.35 235.84 195.14 249.89 194.15
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
32/43
Tax Rate
An average tax rate is the ratio of theamount of taxes paid to the tax base(taxable income or spending).
Let a be the average tax rate.Let t be the tax liability.Let i be the taxable income.
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
33/43
Mar-09 Mar-08 Mar-07 Mar-06 Mar-05
13.33 12.35 8.51 11.12 14.58
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
34/43
Analysis of Financial Ratios
Sales amount 19% but Cost of sales22% (bcoz salaries paidto software development employees26% ). This has resulted in a less
proportionate in Gross profit (15%)
Sales 19% but debtors - significant35%.
It is due to the in Debtors collectionperiod from 64 to 72 days i.e. debtors aregiven more credit period.
This has resulted in
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
35/43
Contd.
But if we see ,ultimately itsOperating net profit ratio has
still from 32.13 to 31.72.
This is due to asignificant increase inCost of sales by 22%.
Therefore we analyze that its Cost of
sales has so much material affect that it isreducing both GPRatio & operating profit ratio.
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
36/43
As we will see further there is a healthy %increase in Net profit amount by approx
18% (as compared to
Gross Profit Amount by approx 15% ).This improvement inits performance is majorly due toimprovement in Extra-ordinary items like
interest received on deposits from banks( by 257 % ).
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
37/43
Funds available with the company has
approx 21% . In 2007-08 companyhas not issued any new equity or debt .Therefore the company has raised its funds
only through its Reserves & Surplus whichis approx 21%.
Now the company has employed these fundsin following ways:
1) Acquired new fixed assets . This hasresulted in more depreciation chargedto profits in P & L a/c.
This has ultimately the Operatingprofit ratio.
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
38/43
Contd.
2) used to finance the working capitalrequirements.
3) has also made some new Investments in
the current year ( by 15 % )
There is a in Fixed assets turnover ratio. At first look it may appears that the
company has utilized its Fixed assets lessefficiently.
However it has acquired New Fixed assetsworth
Rs 1050 crores in the year 2007-08 which
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
39/43
Company has no Debt and Preference capitalwhich means that there is no Capital Gearingratio, no Debt-Equityratio and no Interest Coverage ratio
As Infosys is a Debt Free company , it has certainAdvantages and Disadvantages
ADVANTAGES :
Not dependent on External Borrowers
No Interest burden , therefore higherprofits.
No burden of Loan Repayment
Can Get Loans easily in Future DISADVANTAGE:
Gives lower E.P.S. for Shareholders.
S GG S O S
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
40/43
SUGGESTIONS1.
2.Company needs to reduce its cost ofsales i.e. Software Developmentrelated expenses, to increase its
Gross Profit ratio andOperating net ratio.
3.
4.Company needs to have stringentcredit policy, to reduce the fundsrequired for working capital.
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
41/43
Contd.
3.Do efficient utilization ofshareholders funds to improve itsROI & ROE to maintain its
goodwill in investors mind.4.4. May go for some Debt borrowing
to increase E.P.S. for shareholders.
-
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
42/43
References
www.infosys.com
http://finapps.forbes.com
www.moneycontrol.com
http://www.infosys.com/http://finapps.forbes.com/http://www.moneycontrol.com/http://www.moneycontrol.com/http://finapps.forbes.com/http://www.infosys.com/ -
8/8/2019 36196831 22902527 Financial Ratio Analysis Infosys Presentation
43/43
Thank You.