Financial Statements Ratio Analysis of Infosys

About Infosys• Infosys Technologies Ltd. (NASDAQ.INFY) was started in 1981 by

seven people with US$250.• Today , it is a global leader in the “next generation” of IT and

consulting with revenues of over US$4 billion.• Infosys defines, designs and delivers technology-enabled business

solutions that help global 2000 companies win in a flat world.• Infosys offers application services , system integration , product

engineering , business process outsourcing etc.• Infosys has a global footprint with over 50 offices and

development centre's in India , china , US, UK, Canada , Japan etc. Infosys and its subsidiaries have 1,05,453 employees as on December 31,2009.

Fact file of Infosys

• On July 2, 2011 Infosys technologies will complete its 30 years .

• In these 30 years , however , Infosys has set new standards in governance and wealth creation (both for employees and shareholders ).

• During the fiscal year ended on march 31, 2006 , Infosys generated revenues of 2.152 billion USD and had a net income of 555 million USD.

• Infosys derived 65% of revenues from North America and 25% from Europe.

Ratio Analysis of Infosys

• Profitability ratio• Liquidity ratio• Long term solvency ratio• Activity ratio

Profitability ratioRATIO 2009-08 2008-07 2007-06 2006-05 2005-04

EPS= (NPAT/No. of equity share)

108.08 78.06 65.42 90.65 68.38

DPS= (T.D. paid to share holder/No. of sh. Out standing)

24.15 44.35 17.66 49.89 16.20

Book value per share= (Equity shareholder fund/No. of sh. Out standing)

311.35 235.84 195.14 249.89 194.15

RATIO 2009-08 2008-07 2007-06 2006-05 2005-04

ROE= (Net income after tax/Share holder equity)

32.67 33.13 33.89 35.10 36.33

ROCE= (Net income before tax/Capital employed)

37.71 37.81 37.05 39.51 42.54

Interpretation• In the above table we can see that EPS in

2007,2008,2009 is increasing i.e. 65.42,78.06,108.08. Hence higher EPS will attract more investors to acquire share in the company . As it indicates that the business is more profitable enough to pay the dividend in time.

• ROE of the company in last five years is 32.67,33.13,33.89,35.10,36.33. which shows percentage return on equity or return per equity share. Table shows that company has marketable value of equity share.

• DPS of the company in 2009 and 2008 is 24.15 and 44.35 which shows that its DPS is reduced and the company is giving less dividend per share to their shareholders . In order to attract more shareholders the company has to increase the DPS.

Liquidity ratioRATIO 2009-08 2008-07 2007-06 2006-05 2005-04

Current ratio= (CA/CL)

4.71:1 3.30:1 4.96:1 2.75:1 2.80:1

Quick ratio= (Quick assets/CL)

4.67:1 3.28:1 4.91:1 2.73:1 2.77:1

Interpretation

• In year 2008,2009 current ratio is increased from 3.30 to 4.71 which shows that the company is using its current assets very efficiently .

• In last two years liquid ratio is increased from 3.28 to 4.67 which shows company's ability to meet its short-term obligations with its most liquid assets. The higher the liquidity ratio ,the better the position of the company.

Long term solvency ratioRATIO 2009-08 2008-07 2007-06 2006-05 2005-04

Debt equity =(Debt/Equity)

- - - - -

Capital gearing = (Fixed interest bearing security/Owners fund)

- - - - -

Interpretation• Company has no debt and preference capital which

means that there is no capital gearing ratio , no debt-equity ratio , and no interest coverage ratio.

• As Infosys is a debt free company , it has certain advantages and disadvantages.

ADVANTAGES:- 1. Not dependent on external borrowers. 2.No interest burden , hence high profit. 3. No burden for loan payment. DISADVANTAGES:- 1. Gives lower EPS for shareholders.

Activity ratioRATIO 2009-08 2008-07 2007-06 2006-05 2005-04

FA turnover= (Net sales/FA)

3.39 3.47 3.38 3.18 3.20

WC Turnover= (Net sales/ WC)

0.61 0.54 0.54 0.42 0.35

Debtors collection period= (Months or Days/DTR)

58.39 62.80 52.88 56.02 50.16

Creditors payment period= (Months or Days/CTR)

17.14 38.16 35.43 37.09 41.41

Interpretation• In the above table we can see that the fixed asset

ratios are similar in last five years i.e. 3.39,3.47,3.38,3.18,3.20 . Which means that the company is utilizing its fixed assets very efficiently.

• All debtors are considered good and reliable . Because we can see that the debtors collection period is less i.e. 58.39,62.80,52.88 days . So its good for the company.

• In 2009 creditors payment period is less as compare to previous year i.e. 17.14 and 38.16 . So again its beneficial for the company.

Depreciation method used by Infosys

• The company is using straight line depreciation method .

• Depreciation is calculated over the useful life of assets estimated by the management.

• Depreciation for assets purchased / sold during a period is proportionately charged.

• Individual low cost assets(acquired for less than Rs.5000/-) are depreciated over a period of one year from the date of acquisition.

Presented by:- Richa Motwani Renu Antil Vinika Tyagi Vishal Kharra Vishal kushwaha

Rahul jain