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Time Series Analysis (Infosys) Current Ratio

Infosys's current ratio has generally increased over the years from 2006-2010, indicating healthy current assets to meet obligations. The quick ratio is the same as the current ratio as Infosys has no inventory. The interval ratio increased over this period from 356 to 442 days, showing sufficient liquidity to fund operations. Leverage ratios are all zero as Infosys is wholly equity funded with no debt. While profit margins and some turnover ratios decreased as assets grew faster than sales, the interest coverage ratio increased, demonstrating ample earnings to pay interest.

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70 views4 pages

Time Series Analysis (Infosys) Current Ratio

Infosys's current ratio has generally increased over the years from 2006-2010, indicating healthy current assets to meet obligations. The quick ratio is the same as the current ratio as Infosys has no inventory. The interval ratio increased over this period from 356 to 442 days, showing sufficient liquidity to fund operations. Leverage ratios are all zero as Infosys is wholly equity funded with no debt. While profit margins and some turnover ratios decreased as assets grew faster than sales, the interest coverage ratio increased, demonstrating ample earnings to pay interest.

Uploaded by

Gaurav Mishra
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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TIME SERIES ANALYSIS (INFOSYS)

Current ratio :-

The current ratio of Infosys is almost increasing over the years except for the year 2008
because Infosys’s current liabilities in 2008 grew proportionately more in comparison to its
current assets in the same year. But overall its current ratio is healthy enough(approx. 4.5 in
the year 2010) which shows that the company’s current assets to meet its obligations is
increasing.

Quick Ratio:

This is same as current ratio since the company has no inventory.

Interval Ratio :

The interval ratio of has increased over the years from 356 days to 442 days from year 2006 to
2010 which indicates that the company has sufficient liquid assets to finance its operations for
442 days.

Net Working Capital ratio :

This ratio measures the firm’s potential reservoir of funds .This ratio has increased over the
years except for the year 2010 because reserves has increased in greater proportions
compared to current assets and liabilities. And this ratio indicates the net working capital of
firm w.r.t net assets. As there is no debt and share capital has remained almost constant from
2007-2010 so net assets is more dependent on reserves which is increasing over the period of
time from 2006-2010.

Leverage Ratios :
All the leverage ratios of Infosys are zero since it is wholly equity funded and has taken no
debt.

Interest Coverage Ratio :

It measures the firm debt serving capacity.This shows that how many times the earnings are
w.r.t the interest to be paid by it .Infosys’s interest coverage ratio has increased from 2006-
2008 and decreased in the year 2009 because interest doubled that year compared to
previous year.The high interest coverage ratio of more than approx. 11000 shows that the
company has sufficient earnings w.r.t interest that it has to be paid.

Net Profit Margin Ratio :

It measures the company’s efficiency in manufacturing , administering and selling the products
i.e. how successful the company is in converting its sales into net profit. It has decreased over
the period from 2007-2010 because sales has been increasing but profit after tax (PAT) is
increasing at a much slower rate. Whereas in 2006-2007 pat increased at a substantial rate
compared to sales.

Return on Total Assets :

It measures the earnings after taxes w.r.t total assets of the firm. It is equal to return on the
total assets. In our case it is constantly decreasing at a slow pace over the period specified.
Reason being that total assets are continuously increasing

Net asset turnover ratio:


It tells how much times of sales is a company producing for one rupees of capital employed in
net assets.In case of Infosys it is decreasing over a period of time taken.ie 2006-2010.The
reason being the net assets which are growing at a faster rate compared to the sales being
generated.

Working capital turnover ratio:-

It tells that for every one rupee of sales, the company needs that much amount of net current
assets. In case of Infosys the working capital turnover ratio is decreasing over the period of
2006-2010 because net current assets are increasing from 2006-2010 .

Current asset turnover ratio:

It tells how fast are the current assets being converted into sales. So over the period from
2006-10 the current asset turnover ratio is decreasing because sales is increasing at slower
rate compared to the current assets.

Total assets turnover ratio:

It tells the firms ability to generate sales from all financial resources committed to total
assets.it is decreasing from 2006-10 for the same reason as the above.

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