FINANCIAL STATEMENT ANALYSIS OF INFOSYS

About Infosys
Infosys Technologies Ltd. (NASDAQ: INFY) was started in 1981 by seven people with US$
250. Today, we are 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 also provides a complete range of services by
leveraging our domain and business expertise and strategic alliances with leading technology
providers.

Infosys' offerings span business and technology consulting, application services, systems
integration, product engineering, custom software development, maintenance, re-engineering,
independent testing and validation services, IT infrastructure services and business process
outsourcing

Infosys pioneered the Global Delivery Model (GDM), which emerged as a disruptive force in the
industry leading to the rise of offshore outsourcing. The GDM is based on the principle of taking
work to the location where the best talent is available, where it makes the best economic sense,
with the least amount of acceptable risk.

Infosys has a global footprint with over 50 offices and development centres in India, China,
Australia, the Czech Republic, Poland, the UK, Canada and Japan. Infosys and its subsidiaries
have 105,453 employees as on September 30, 2009

Infosys takes pride in building strategic long-term client relationships. Over 97% of our revenues
come from existing customers.

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1. Strategy Analysis

Infosys Ltd:

Infosys was started in 1981 by seven people with US$ 250. Many of the world’s
most successful organizations rely on Infosys to deliver measurable business value.
Infosys provides business consulting, technology, engineering and outsourcing
services to help clients in over 30 countries build tomorrow’s enterprise. Infosys
Labs and its breakthrough intellectual property can be leveraged as a co-creation
engine to accelerate innovation across the enterprise.

Infosys pioneered the Global Delivery Model (GDM), based on the principle of
taking work to the location where the best talent is available, where it makes the
best economic sense, with the least amount of acceptable risk. Continued leadership
around GDM enables Infosys to drive extraordinary efficiencies and free up clients’
resources for strategic transformation or innovation initiatives.

Infosys has a global footprint with 68 offices and 70 development centers in US,
India, China, Australia, Japan, Middle East, UK, Germany, France, Switzerland,
Netherlands, Poland, Canada and many other countries. Infosys and its subsidiaries
have 151,151 employees as on June 30, 2012.

Infosys takes pride in building strategic long-term client relationships. 99.1% of our
revenues come from existing customers (Q1 FY 13).

Infosys gives back to the community through the Infosys Foundation that funds
learning and education.

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SWOT Analysis Infosys

Infosys is one of the largest businesses in India with a turnover in excess of $4

billion in 2008. The company specializes in Information Technology (IT) and
consulting. N.R. Narayana Murthy and six others started the company in 1981, and
it is now the largest IT company in India with its headquarters in Bangalore
(although it was started in Pune). It employs more than 90,000 IT professionals and
was famously rated 'Best Employer in India. It operates in a number of business
sectors from banking to retail, and its services tend to encompass end -to-end IT
solutions which includes a whole bundle of added-value solutions from
infrastructure to software engineering.

Strengths
• Since the company is based in India its competitive advantage is enhanced.
The Indian economy, despite weak economic indicators such as relatively
high rates of inflation, has low labor costs. The workforce has relatively high
skills levels in Information Technology. Couple these two elementstogether
and you have an operational basis that offers low-cost based, highly skilled
competitive advantage. Trained Indian personnel often speak very good
English and are sensitive to Western culture, underpinned by India's colonial
past.
• Infosys is in a strong financial position. The business turned over more than
$4 billion in 2008. This means that it has the capital to expand, and also the
basis to leverage potential investors.

• The company has bases in 44 global development centres, most of which are
located in India, although the company has offices in many developed and
developing nations. This means not only that Infosys is becoming a global
brand but also that it has the capability to support the global operations of
multinational clients.

Weaknesses

• Infosys on occasion struggles in the US markets, and has particular problems

in securing United States Federal Government contracts in North America.
Since these contracts are highly profitable and tend to run for long periods of
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time, Infosys is missing out on lucrative business. Added to this is the fact
that its competitors do well in terms of securing the same Federal business
(and one should also take into account that many of its competitors are
domiciled in the US and there could be political pressure on the US
Government to award contracts to domestic organizations).

• Despite being a huge IT company in relation to its Indian competitors,

Infosys is much smaller than its global competitors. As discussed above,
Infosys generated $4 billion in 2008, which is relatively low in comparison
with large global competitors such as Hewlett-Packard ($91 billion), IBM
($91 billion), EDS ($21 billion) and Accenture ($18 billion).

• It is sometimes argued that Infosys is weaker when it comes to high-end

management consultancy, since it tends to work at the level of operational
value creation. Competitors such as IBM and Accenture tend to dominate
this space.

Opportunities

• At a time of recession in the global economy, it may appear that some

companies will reduce take up of services that Infosys offers. However, in
tough times clients tend to focus upon cost reduction and outsourcing - with
are strategies that Infosys offers. So hard times could be profitable for
Infosys.

• There is a new and emerging market in China as the country undergoes a

huge industrial revolution.

• The strategic alliance between Infosys and Schlumberger gives the IT

company access to lucrative business in the gas and oil industries.

• There has been a trend over recent years for European and North American
companies to base some or all of their operation in India. This is called an
offshore service. Essentially there is a seamless link between domestic
operations and services hosted in India. Examples include
telecommunications companies such as British Telecom and banks such as
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HSBC that have customer service and support centres based in India. Think
about the times that you have made calls to a support line to find that the
adviser is in Mumbai or Bangalore and not in your home market.

Threats
• India is not the only country that is undergoing rapid industrial expansion.
Competitors may come from countries such as China or Korea where there
are large pools of low-cost labor, and developing educational infrastructures
such as universities and technology colleges.
• Customers may switch to other offshore service companies in other
countries such as China or Korea.

• Other global players have realised that India has the benefit of low-cost,
highly-skilled labor that often speaks English and is culturally sensitive to
Western practices. As with all global IT players, Infosys has to compete for
skilled labor and this may have the effect of driving up wage levels, and
making it more difficult to recruit and retain staff.

Fact File of Infosys

Infosys Technologies Ltd (NASDAQ: INFY) delivers IT-enabled business solutions to enable
Global 2000 companies win in a Flat World. Our solutions focus on providing strategic
differentiation and operational superiority to clients. We leverage our domain and business
expertise along with a complete range of services.

With Infosys, clients are assured of a transparent business partner, world -class processes, speed
of execution and the power to stretch their IT budget by leveraging the Global Delivery Model
that Infosys pioneered.

Infosys has a global footprint with sales offices in 30 countries and development centres in India,
US, China, Australia, UK, Canada, Japan and many other countries. Infosys has over 105,000
employees of 73 nationalities.

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Key Facts

Senior Executives
Chairman of the Board and Chief Narayana N.R.
Mentor: Murthy
Chief Executive Officer and S.
Managing Director : Gopalakrishnan

Financial Summary (LTM Sep 09)

IFRS
Revenues: US$ 4,568 million

Net Income after taxes: US$ 1,283 million

Earnings per ADS: US$ 2.25 (basic)

Total assets: US$ 5,188 million

Cash and cash equivalents: US$ 2,878 million

Indian GAAP (consolidated)

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

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INTRODUCTION

Financial statement is a collection of data organized according to logical & consistent accounting
procedures. Its purpose is to convey an understanding of some financial aspects of a business
firm. The term ‘financial analysis’, also known as analysis and interpretation of financial
statements refers to the process of determining financial strength & weakness of the firm by
establishing strategic relationship between the items of the balance sheet, profit & loss account
and other operative data.

Infosys Established in 1981, Infosys is a NASDAQ listed global consulting and IT services
company with more than 145,000 employees. From a capital of US$ 250, we have grown to
become a US$ 6.825 billion (LTM Q3- FY12 revenues) company with a market capitalization of
approximately US$ 30 billion.

In our journey of over 29 years, we have catalysed some of the major changes that have led to
India's emergence as the global destination for software services talent. We pioneered the Global
Delivery Model and became the first IT company from India to be listed on NASDAQ. Our
employee stock options program created some of India's first salaried millionaires.

OBJECTIVES
➢ To study the financial results of “INFOSYS”.
➢ To know the financial solvency of the company.
➢ To make comparative study with other year.
➢ To know the capacity of payment of dividend &interest.
➢ To know the managerial capacity.
➢ To know the financial strengths &weakness of the company.
➢ To know the profitability of the company in the form of ratios.

LIMITATIONS

➢ It is only a study of interim reports.

➢ Financial analysis is based upon only monetary information & non-monetary factors are
ignored.
➢ It doesn’t consider changes in price levels.
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➢ As the financial statements are prepared on the basis of going concern concept, it doesn’t
give exact position.
➢ Changes in accounting procedures by a firm may often make financial analysis
misleading.
➢ Analysis is only a means & not an end in itself.

METHODS TO BE USED
The data should be derived from the secondary source due to lack of time. The figures given in
financial statement are not of much use to the decision maker. These figures are to be analysed
over a period of time or in relation to other figures, so that significant conclusions could be
drawn regarding the strengths and witness of a business enterprise. The tools of financial
analysis help in this regard. The analysis and interpretation of financial statement is used to
determine the financial position & results of operation as well. The numbers of devices or tools
are used to study the relationship between different statements. An effort is made to use the
devices to which clearly analyse the position of the enterprise. The tools or devices are:
➢ Comparative statement.
➢ Common size statement.
➢ Ratio analysis.
➢ Trend analysis.
➢ Cash flow statement.
➢ Fund flow statement
➢ Cost volume profit analysis

OBJECTIVE:

To understand the information contained in financial statements with a view to know the
strength or weaknesses of the firm and to make forecast about the future prospects of the firm
and thereby enabling the financial analyst to take different decisions regarding the operations of
the firm.

RATIO ANALYSIS:

Fundamental Analysis has a very broad scope. One aspect looks at the general
(qualitative) factors of a company. The other side considers tangible and measurable factors
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(quantitative). This means crunching and analyzing numbers from the financial statements. If
used in conjunction with other methods, quantitative analysis can produce excellent results.

Ratio analysis isn't just comparing different numbers from the balance sheet, income
statement, and cash flow statement. It's comparing the number against previous years, other
companies, the industry, or even the economy in general. Ratios look at the relationships
between individual values and relate them to how a company has performed in the past, and
might perform in the future.

MEANING OF RATIO:
A ratio is one figure express in terms of another figure. It is a mathematical yardstick that
measures the relationship two figures, which are related to each other and mutually
interdependent. Ratio is express by dividing one figure by the other related figure. Thus a ratio is
an expression relating one number to another. It is simply the quotient of two numbers. It can be
expressed as a fraction or as a decimal or as a pure ratio or in absolute figures as “so many
times”. As accounting ratio is an expression relating two figures or accounts or two sets of
account heads or group contain in the financial statements.

MEANING OF RATIO ANALYSIS:

Ratio analysis is the method or process by which the relationship of items or group of
items in the financial statement are computed, determined and presented.
Ratio analysis is an attempt to derive quantitative measure or guides concerning the
financial health and profitability of business enterprises. Ratio analysis can be used both in trend
and static analysis. There are several ratios at the disposal of an annalist but their group of ratio
he would prefer depends on the purpose and the objective of analysis.

While a detailed explanation of ratio analysis is beyond the scope of this section, we will focus
on a technique, which is easy to use. It can provide you with a valuable investment analysis tool.

This technique is called cross-sectional analysis. Cross-sectional analysis compares financial

ratios of several companies from the same industry. Ratio analysis can provide valuable
information about a company's financial health. A financial ratio measures a company's
performance in a specific area. For example, you could use a ratio of a company's debt to its
equity to measure a company's leverage. By comparing the leverage ratios of two companies,
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you can determine which company uses greater debt in the conduct of its business. A company
whose leverage ratio is higher than a competitors has more debt per equity. You can use this
information to make a judgment as to which company is a better investment risk.

However, you must be careful not to place too much importance on one ratio. You obtain a better
indication of the direction in which a company is moving when several ratios are taken as a
group.

OBJECTIVE OF RATIOS

➢ Ratio is work out to analyse the following aspects of business organization-

➢ Solvency-
➢ Long term
➢ Short term
➢ Immediate
➢ Stability
➢ Profitability
➢ Operational efficiency
➢ Credit standing
➢ Structural analysis
➢ Effective utilization of resources
➢ Leverage or external financing

FORMS OF RATIO:

Since a ratio is a mathematical relationship between to or more variables / accounting

figures, such relationship can be expressed in different ways as follows –

A] As a pure ratio:

For example the equity share capital of a company is Rs. 20,00,000 & the preference
share capital is Rs. 5,00,000, the ratio of equity share capital to preference share capital is
20,00,000: 5,00,000 or simply 4:1.

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B] As a rate of times:

In the above case the equity share capital may also be described as 4 times that of
preference share capital. Similarly, the cash sales of a firm are

Rs. 12,00,000 & credit sales are Rs. 30,00,000. so the ratio of credit sales to cash sales can be
described as 2.5 [30,00,000/12,00,000] or simply by saying that the credit sales are 2.5 times
that of cash sales.

C] As a percentage:

In such a case, one item may be expressed as a percentage of some other item. For
example, net sales of the firm are Rs.50,00,000 & the amount of the gross profit is Rs. 10,00,000,
then the gross profit may be described as 20% of sales [ 10,00,000/50,00,000]

STEPS IN RATIO ANALYSIS

The ratio analysis requires two steps as follows:

1] Calculation of ratio

2] Comparing the ratio with some predetermined standards. The standard ratio may be the past
ratio of the same firm or industry’s average ratio or a projected ratio or the ratio of the most
successful firm in the industry. In interpreting the ratio of a particular firm, the analyst cannot
reach any fruitful conclusion unless the calculated ratio is compared with some predetermined
standard. The importance of a correct standard is oblivious as the conclusion is going to be based
on the standard itself.

Parties interested in Ratio Analysis

Ratio analysis serves the purpose of various parties interested in financial statements. Primarily
the objective of ratio analysis and interpreting the financial statements is to get adequate
information useful for the performance of various functions like planning, coordinating,
controlling, communication and forecasting etc.
The interested parties may be:

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Share holders/Investors:
Investor in the company will like to access the financial position of company where he is going
to invest. The first concern would be the security of the investment and then the return on the
investment in the form of interest and dividends. So, Investors concentrate on the firm’s financial
structure to the extent that influences the firm’s earning ability and risk.

Trade creditors:
They are interested in firm’s ability to meet its claims over a short period of time. So, their
analysis is usually confined to evaluation of firm’s liquidity position.

The long-term creditors:

They are concerned with firm’s long-term future solvency and survival. They analyse the firm’s
profitability over a period of time, its ability to generate cash, ability to pay interest, repay the
principle and relationship between various sources of funds.

Employees:
Employees are interested in financial position the concern especially profitability. Their wages
and amount of fringe benefits are related to the volume of profits earned by the concern. The
employees make use of the information available in the financial statements.

Government:
Government is interested to know the overall financial health of the company. Various financial
statements published by the industrial units are used to calculate the ratios for determining short-
term, long-term and overall financial position of the firm. Government may base its future
policies on the basis of industrial information available from various units.

Management:
Management of the firm requires these statements for its own evaluation and decision making.
Moreover, it is responsible for the overall performances of the firm maintaining its solvency so
as to be able to meets short-term and long-term obligations to the creditors and at the same time
ensuring an adequate rate of return, consistent with safety of funds of its owner. Financial

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analysis may not provide exact answer to the questions but it will be an indication of
forthcoming future.

1- Operational & Financial Ratios

(a) Earnings Per Share (Rs)
Meaning:

Earnings per Share are calculated to find out overall profitability of the organization. Earnings
per Share represent earning of the company whether or not dividends are declared. If there is
only one class of shares, the earning per share are determined by dividing net profit by the
number of equity shares. EPS measures the profits available to the equity shareholders on each
share held.

Formula:
NPAT
Earnings per share =
Number of equity share

The higher EPS will attract more investors to acquire shares in the company as it indicates that
the business is more profitable enough to pay the dividends in time. But remember not all profit
earned is going to be distributed as dividends the company also retains some profits for the
business.
For Infosys the variance of EPS ratio for 5 years is -

Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05

108.08 78.06 65.42 90.65 68.38

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(b)Cash earnings per share Ratio:

Formula:

(Net operating cash flow-current depreciation of fixed assets-amortization of intangible assets-

amortization deferred charges-interest expense and cost of raising funds in cash + investment
income in cash)

Total equity

For Infosys the variance of CEP ratio for 5 years is –

Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

113.86 87.69 74.34 102.54 80.44

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(c) DIVIDEND PER SHARE: -

Meaning:

DPS shows how much is paid as dividend to the shareholders on each share held.

Formula:

Dividend Paid to Ordinary Shareholders

Dividend per Share =

Number of Ordinary Shares

For Infosys the variance of DPS ratio for 5 years is

Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

24.15 44.35 17.66 49.89 16.2

(d)Book NAV/Share (Rs)

An expression for net asset value that represents a fund's (mutual, exchange-traded, and closed-
end) value per share. It is calculated by dividing the total net asset value of the fund or company
by the number of shares outstanding. It is also referred to as "book value per share". Calculated
as

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Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

311.35 235.84 195.14 249.89 194.15

(e) Tax Rate:

An average tax rate is the ratio of the amount of taxes paid to the tax base (taxable income or
spending).
To calculate the average tax rate on an income tax, divide total tax liability by taxable income:
• Let a be the average tax rate.
• Let t be the tax liability.
Let i be the taxable income.

For Infosys the variance of tax ratio for 5 years is

Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

13.33 12.35 8.51 11.12 14.58

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2- Margin Ratios
(a) Core EBITDA Margin ratio :

EBITDA is the acronym for Earnings before Interest, Taxes, Depreciation, and Amortization.

EBITDA Margin refers to EBITDA divided by total revenue. EBITDA margin measures the
extent to which cash operating expenses use up revenue.

Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

36.57 36.09 34.98 34.71 35.76

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(b)EBIT Margin rartio:

In financial and business accounting, earnings before interest and taxes (EBIT) or operating
income is a measure of a firm's profitability that excludes interest and income tax expenses.[1]
EBIT = Operating Revenue – Operating Expenses (OPEX) + Non-operating Income
Operating Income = Operating Revenue – Operating Expenses

Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

33.14 32.6 31.45 30.18 32.51

(c)Pre Tax Margin:

Net Earnings + Income Tax

Pre tax Margin =
Net Sales

Explanation of Pre tax Margin:

The Pre tax Margin measures how well a company can generate before-tax profits at the current
level of sales. Importance of Pretax Margin:

As with any margin, a high or increasing Pretax Margin is usually a positive sign, showing the
company is able to keep its operations costs low, while being able to pull in strong earnings. The
Pretax Margin varies greatly between industries, so you will have to compare the results for the
company you are analyzing to industry averages.

Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

33.13 32.59 31.45 30.17 32.49

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(d)PAT Margin rate :

The after tax profit margin ratio tells you the profit per sales dollar after all expenses are
deducted from sales. In other words, the after tax profit margin ratio shows you the percentage of
net sales that remains after deducting the cost of goods sold and all other expenses including
income tax expense. The calculation is: Net Income after Tax /Net Sales.
The profit margin ratio is most useful when it is compared to 1) the same company’s profit
margin ratios from earlier accounting periods, 2) the same company’s targeted or planned profit
margin ratio for the current accounting period, and 3) the profit margin ratios of other companies
in the same industry during the same accounting period.

Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

27.52 27.37 28.05 26.17 27.28

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(e) Cash Profit Margin ratio

Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

30.66 28.23 28.57 28.58 30

3- Performance Ratios
(a) ROA ratio :
The return on assets (ROA) percentage shows how profitable a company's assets are in
generating revenue.ROA can be computed as:

This number tells you what the company can do with what it has, i.e. how many dollars of
earnings they derive from each dollar of assets they control. Its a useful number for comparing
competing companies in the same industry. The number will vary widely across different
industries. Return on assets gives an indication of the capital intensity of the company, which
will depend on the industry; companies that require large initial investments will generally have
lower return on assets.

Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

34.76 33.09 33.47 36.21 35.29

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(b) ROE ratio:

Return on Equity (ROE, Return on average common equity, return on net worth, Return on
ordinary shareholders' funds) (equity) measures the rate of return on the ownership interest
(shareholders' equity) of the common stock owners. It measures a firm's efficiency at generating
profits from every unit of shareholders' equity (also known as net assets or assets minus
liabilities). ROE shows how well a company uses investment funds to generate earnings growth.

Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

32.67 33.13 33.89 35.1 36.33

(c) ROCE Ratio :

Return on Capital Employed (ROCE) is used in finance as a measure of the returns that a
company is realising from its capital employed. It is commonly used as a measure for comparing
the performance between businesses and for assessing whether a business generates enough
returns to pay for its cost of capital.

Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

37.71 37.81 37.05 39.51 42.54

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(d)Asset Turnover:
Asset turnover is a financial ratio that measures the efficiency of a company's use of its assets in
generating sales revenue or sales income to the company.[1]

• "Sales" is the value of "Net Sales" or "Sales" from the company's income statement
• "Average Total Assets" is the value of "Total assets" from the company's balance sheet in
the beginning and the end of the fiscal period divided by 2.

Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

0.77 0.79 0.69 0.67 0.62

(e)Sales/Fixed Asset Ratio

Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

3.39 3.47 3.38 3.18 3.2

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(f)Working Capital/Sales(x)
The Working Capital Productivity Ratio helps explain how well the company is using its
working capital. Historically this has been a useful guide to investors or stakeholders seeking to
assess a company’s ability to manage cash. Any measure of cash management is important to
understand since a business needs cash to operate, this is the oxygen that businesses need to live.
This ratio is purported to have been established by the US management consultant George Stalk
while working in Japan. The ratio gives a possible indication of the relationship between
financial performance and process improvement.
The Working Capital Productivity ratio can be defined as:

Revenue
Working Capital Productivity Ratio =
(Current Assets – Current Liabilities)

Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

0.61 0.54 0.54 0.42 0.35

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3- Efficiency Ratios

(a)Fixed Capital/Sales(x)

Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

25.89 26.83 25.58 27.8 27.36

(b)Receivable days

Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

58.39 62.8 52.88 56.02 50.16

(c) Payable days

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This ratio shows how many days it takes to pay accounts payable. This ratio is similar to
accounts payable turnover (above.) The business may be losing valuable creditor discounts by
not paying promptly.
The formula is:
365 days
_____________________

Accounts Payable Turnover

Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

17.14 38.16 35.43 37.09 41.41

(d) PER Ratio

The P/E ratio (price-to-earnings ratio) of a stock (also called its "P/E", "PER", "earnings
multiple," or simply "multiple") is a measure of the price paid for a share relative to the annual
net income or profit earned by the firm per share.[2] It is a financial ratio used for valuation: a
higher P/E ratio means that investors are paying more for each unit of net income, so the stock is
more expensive compared to one with lower P/E ratio There are various P/E ratios, all defined
as:

Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

13.03 18.3 30.43 16.99 15.97

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(e)PCE ratio
A measure of price changes in consumer goods and services. Personal consumption
expenditures consist of the actual and imputed expenditures of households; the measure includes
data pertaining to durables, non-durables and services. It is essentially a measure of goods and
services targeted toward individuals and consumed by individuals

Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

11.63 16.31 27.07 14.54 14

(f) Price/Book Ratio

A ratio used to compare a stock's market value to its book value. It is calculated by dividing the
current closing price of the stock by the latest quarter's book value per share.
It is also known as the "price-equity ratio". Calculated as:

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Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

4.25 6.06 10.31 5.96 5.8

(g) Yield Ratio

The return on an investment. This refers to the interest or dividends received from a security and
are usually expressed annually as a percentage based on the investment's cost, its current market
value or its face value.

It is a comparison of the expected yield of one bond to the expected yield of another. A yield
ratio is important when deciding whether to invest in one bond or another; generally, the one
with the higher yield wins out. However, it is important to take into account the after tax basis
when taking the yield ratio of a corporate bond and a tax-exempt municipal bond. A corporate
bond yields less than its stated interest rate because of taxation, whereas a tax-exempt municipal
bond does not. Thus, a municipal bond paying a lower interest rate will often net the bondholder
more than a corporate bond with a slightly higher interest rate, depending upon one's tax bracket.

Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

1.77 2.32 0.57 1.51 0.51

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(h) EV/Net Sales(x)

A valuation measure that compares the enterprise value of a company to the company's sales.
EV/sales gives investors an idea of how much it costs to buy the company's sales. This measure
is an expansion of the price-to-sales valuation, which uses market capitalization instead of
enterprise value. EV/sales is seen as more accurate because market capitalization does not take
into account as well as enterprise value the amount of debt a company has, which needs to be
paid back at some point

Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

3.29 4.82 8.34 4.19 4.22

(i) EV/Core EBITDA(x)

An indicator of a company's financial performance which is calculated in the following EBITDA

calculation:

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EBITDA is essentially Net Income with interest, taxes, depreciation, and amortization added
back to it. EBITDA can be used to analyze and compare profitability between companies and
industries because it eliminates the effects of financing and accounting d ecisions. However, this
is a non-GAAP measure that allows a greater amount of discretion as to what is (and is
not) included in the calculation. This also means that companies often change the items included
in their EBITDA calculation from one reporting period to the next. When a company is valued
using EBITDA - it is known as a EBITDA Valuation.

Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

9 13.35 23.84 12.08 11.79

(j) EV/EBIT(x)

Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

9.93 14.78 26.51 13.89 12.97

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(k) EV/CE(x)

Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

3.75 5.59 9.82 5.49 5.52

4- Financial Stability Ratios

(a) Total Debt/Equity(x)

A measure of a company's financial leverage, calculated by dividing its total

liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is
using to finance its assets.

Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

0 0 0 0 0

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(b) Current Ratio :

A liquidity ratio that measures a company's ability to pay short-term obligations.

The Current Ratio formula is:

Also known as "liquidity ratio", "cash asset ratio" and "cash ratio".

Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

4.71 3.3 4.96 2.75 2.8

(c) Quick Ratio

It is an indicator of a company's short-term liquidity. The quick ratio measures a

company's ability to meet its short-term obligations with its most liquid assets. The higher the
quick ratio, the better the position of the company.

The quick ratio is calculated as:

Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

4.67 3.28 4.91 2.73 2.77

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Analysis of Financial Ratios:

1- Sales amount increase by 19% but Cost of sales increase by 22% (bcoz salaries paid
to software development employees increase by 26% ). This has resulted in a less
proportionate increase by in Gross profit (15%).
2- Sales increase by 19% but debtors increase by significant 35%.
It is due to the increase in Debtors collection period from 64 to 72 days i.e. debtors are
given more credit period. This has resulted in decrease of Debtors turnover ratio.

3- As it is a Service oriented company , it does not have any stock kept with it. So there is
no amount blocked in stock.So the investment required in working capital is less.
4- Gross Profit Amount increase by approx 15% and Operating Net profit amount increase
by approx 18 %.This means that Operating activities of Infosys is more efficient as
compared to Software development activities(production activities).
5- But if we see ,ultimately its Operating net profit ratio has still decrease from 32.13 to
31.72.This is due to a significant increase in Cost of sales by 22%.
6- Therefore we analyze that its Cost of sales has so much material affect that it is reducing
both GP Ratio & operating profit ratio.
7- 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 in its performance is majorly due to improvement in Extra-ordinary items
like interest received on deposits from banks (increase by 257 % ).
8- Funds available with the company has increases by approx 21% . In 2007-08 company
has not issued any new equity or debt .Therefore the company has raised its funds only
through its Reserves & Surplus which is approx 21%.

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9- Now the company has employed these funds in following ways: 1) Acquired
new fixed assets . This has resulted in more depreciation charged to profits in P & L
a/c.This has ultimately decreases the Operating profit ratio.
2) used to finance the working capital requirements.
3) has also made some new Investments in the current year(increases by
15 )
10- There is a decreases in Fixed assets turnover ratio. At first look it may appears that the
company has utilized its Fixed assets less efficiently.However it has acquired New Fixed
assets worth Rs 1050 crores in the year 2007-08 which may help the company in Future
growth.
11- 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 :
➢ Not dependent on External Borrowers

➢ No Interest burden , therefore higher profits.

➢ No burden of Loan Repayment

➢ Can Get Loans easily in Future.

DISADVANTAGE:
➢ Gives lower E.P.S. for Shareholders.

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Conclusions:
1- Company needs to reduce its cost of sales i.e. Software Development related expenses, to
increase its Gross Profit ratio and Operating net ratio.
2- Company needs to have stringent credit policy, to reduce the funds required for working
capital.
3- Do efficient utilization of shareholders funds to improve its ROI & ROE to maintain its
goodwill in investors mind.
4- May go for some Debt borrowing to increase E.P.S. for shareholders.

Annexure- 1
Balance sheet
Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05

Sources of funds
Owner's fund
Equity sha re capital 286 286 286 138 135.29
Share application money - - - - -
Preference share capital - - - - -
Reserves & surplus 17,523.00 13,204.00 10,876.00 6,759.00 5,106.44

Loan funds
Secured loans - - - - -
Unsecured loans - - - - -
Total 17,809.00 13,490.00 11,162.00 6,897.00 5,241.73

Uses of funds
Fixed assets
Gross block 5,986.00 4,508.00 3,889.00 2,837.00 2,182.72
Less : revaluation reserve - - - - -
Less : accumula ted depreciation 2,187.00 1,837.00 1,739.00 1,275.00 1,005.82
Net block 3,799.00 2,671.00 2,150.00 1,562.00 1,176.90
Capital work-in-progress 615 1,260.00 957 571 317.52
Investments 1,005.00 964 839 876 1,328.70

Net current assets

Current assets, loans & advances 15,732.00 12,326.00 9,040.00 6,105.00 3,764.65
Less : current liabilities & provisions 3,342.00 3,731.00 1,824.00 2,217.00 1,346.04
Total net current assets 12,390.00 8,595.00 7,216.00 3,888.00 2,418.61
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Miscellaneous expenses not written - - - - -

Total 17,809.00 13,490.00 11,162.00 6,897.00 5,241.73

Notes:

Book value of unquoted investments 1,005.00 964 839 876 1,328.70

Market value of quoted investments - - - - -

Contingent liabilities 347 603 670 523 289.87

Number of equity sha resoutstanding (Lacs) 5728.3 5719.96 5712.1 2755.55 2705.71

Annexure- 2

Profit loss account

Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05

Income
Operating income 20,264.00 15,648.00 13,149.00 9,028.00 6,859.66

Expenses
Material consumed 20 18 22 16 13.55
Manufacturing expenses 1,822.00 1,549.00 1,378.00 854 603.67
Personnel expenses 9,975.00 7,771.00 6,316.00 4,274.00 3,183.25
Selling expenses 83 89 63 55 82.34
Adminstrative expenses 1,456.00 1,257.00 1,144.00 839 650.65
Expenses capitalised - - - - -
Cost of sales 13,356.00 10,684.00 8,923.00 6,038.00 4,533.46
Operating profit 6,908.00 4,964.00 4,226.00 2,990.00 2,326.20
Other recurring income 874 678 333 221 118.68
Adjusted PBDIT 7,782.00 5,642.00 4,559.00 3,211.00 2,444.88
Financial expenses 2 1 1 1 1.09
Depreciation 694 546 469 409 268.22
Other write offs - - - - -
Adjusted PBT 7,086.00 5,095.00 4,089.00 2,801.00 2,175.57
Tax charges 895 630 352 303 325.3
Adjusted PAT 6,191.00 4,465.00 3,737.00 2,498.00 1,850.27
Non recurring items -372 5 46 -77 54.11
Other non cash adjustments -1 - -5 - -4.59
Reported net profit 5,818.00 4,470.00 3,778.00 2,421.00 1,899.79
Earnigs before appropriation 12,460.00 9,314.00 5,973.00 3,849.00 1,970.30
Equity dividend 1,345.00 1,902.00 649 1,238.00 309.8
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Preference dividend - - - - -
Dividend tax 228 323 102 174 42.17
Retained earnings 10,887.00 7,089.00 5,222.00 2,437.00 1,618.33

INFOSYS:

(a) The Company is maintaining proper records showing full particulars,

including quantitative details and situation, of fixed assets.

(b) The fixed assets are physically verified by the Management according to a
phased programme designed to cover all the items over a period of 2 years which,
in our opinion, is reasonable having regard to the size of the Company and the
nature of its assets. Pursuant to the programme, a portion of the fixed assets has
been physically verified by the Management during the year and no material
discrepancies between the book records and the physical inventory have been
noticed.

(c) According to the information and explanation given to us, the Company
procures inventories specifically for the purpose of executing certain contracts and
no inventory is held at any point of time during the year. Accordingly clauses (ii)(a)
and (ii)(b) of Paragraph 4 of the order are not applicable to the Company.

(d) The Company has granted a loan to body corporate covered in the register
maintained under Section 301 of the Act. The maximum outstanding amount
is26,95,65,993 and the body has never defaulted in payments.

(e) The Company has not taken any loans, secured or unsecured, from companies,
firms or other parties covered in the register maintained under Section 301 of the
Act.

(f) The company has no material dues but have income tax dues due to some
disputes.The exact figure can be found out in company’s annual report.

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(g) The Company has no accumulated losses.

(h) According to the records of the Company examined by us and the

information and explanation given, the Company has not defaulted in
repayment of dues to any financial institution or bank or debenture holders
as at the balance sheet date.

INFOSYS:

The financial statements have been prepared in compliance with the companies act
1956, guidelines by the SEBI and Generally Accepted Accounting
Principles(GAAP )in India.

Industry Structure and Developments:

Changing economic and business conditions, evolving consumer preferences and
rapid technological transformations are driving corporations to transform the
manner in which they operate. Companies are now more focussed on their core
business objectives such as revenue growth and profitability.

There is increasing need for highly skilled IT professionals to optimize the business
process but the organizations are quite reluctant to grow their in-house IT
development. This has led to their increased dependence on other specialized
corporations. According to Global Tech Market Outlook IT consulting and
outsourcing are to grow by 6.3% in 2012-13.

Financial Condition:
The sources of funds were identified as:
• Share capital
• Reserves and surplus

Applications of funds were on fixed assets and investment like increasing stake in
Infosys BPO and other investments on various subsidies.

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Organization
Our go-to-market business units are organized as:
• Financial Services and Insurance
• Life Sciences and Healthcare
• Retail, Consumer Packaged Goods and Logistics
• Communications, Telecom OEM and Media
• Energy, Utilities, Resources and Services
• Manufacturing
• Hi-tech
• Others, which includes India, Japan, China, Infosys Public
Services and other Public Service enterprises
Our solutions have been primarily classified as digital
and core.
Digital:
• Experience
• Insight
• Innovate
• Accelerate
• Assure
Core:
• Application management services
• Proprietary application development services
• Independent validation solutions
• Product engineering and management
• Infrastructure management services
• Traditional enterprise application implementation
• Support and integration services
Our products and platforms include:
• Finacle®
• Edge Suite
• Infosys NIA®
• Infosys McCamish
• Panaya®
• Skava ®
• Stater Mortgage Servicing Platform
• Wingspan®
• Infosys Meridian
• CyberNext
• LEAP

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Infrastructure
We added 0.86 million sq. ft. of physical infrastructure sp ace during the year.
The total available space as on March 31, 2021 stands at 52.83 million sq. ft.
We have presence in more
than 50 countries across 234 locations as on March 31, 2021.

Mergers and acquisitions

• Infosys has a systematic M&A approach aimed to strengthen digital
services capabilities, deepen industry expertise, and expand geographical
footprint. Focused on executing Infosys’ Agile Digital strategy, during
the year, the Company completed three acquisitions:
• GuideVision, s.r.o. a leading ServiceNow Elite Partner in Europe
augmenting Infosys Cobalt TM portfolio of cloud services and
strengthening nearshore delivery presence on October 1, 2020

• Kaleidoscope Animations, Inc., a US-based product design and

development firm strengthening presence in Medical devices, Consumer
and Industrial markets on October 9, 2020

• Beringer Commerce Inc. and Beringer Capital Digital Group Inc.,

collectively known as Blue Acorn iCi, an award-winning, Adobe
Platinum partner in the US, and a leader in digital customer exp erience,
commerce and analytics on October 27, 2020

• These acquisitions through Infy Consulting Company Ltd (a_ wholly-

owned subsidiary of Infosys Consulting Holding AG) and Infosys Nova
Holdings LLC (a whollyowned subsidiary of Infosys Limited) were made
for a total consideration of ` 1,407_ crore, comprising a cash
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consideration of ` 1,307_crore and contingent consideration with an

estimated fair value of ` 100 crore as on the date of acquisition. Refer to
Note 2.1 of the Consolidated financial statements for further details of
these acquisitions.

Subsidiaries
We, along with our subsidiaries, provide consulting, technology, outsourcing
and next-generation digital services. At the beginning of the year, we had 23
direct subsidiaries and 52 step-down subsidiaries. As on March 31, 2021, we
have 24 direct subsidiaries and 62 step -down subsidiaries. The changes in
subsidiaries during the year is included in the Standalone financial statements
of the Company. During the year, the Board of Directors reviewed the affairs of
the subsidiaries. In accordance with Section 129(3) of the Companies Act, 2013,
we have prepared the Consolidated financial statements of the Company, which
form part of this Annual Report. Further, a statement containing the salient
features of the financial statements of our subsidiaries in the prescribed format
AOC-1 is appended as Annexure 1 to the Board’s report.

Human resources management

Our professionals are our most important assets. We are committed to hiring
and retaining the best talent and being among the industry’s leading employers.
For this, we focus on promoting a collaborative, transparent and p articipative
organization culture, and rewarding merit and sustained high performance. Our
human resource management focuses on allowing our employees to develop
their skills, grow in their career and navigate their next.

Internal complaints committee

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Infosys’ goal has always been to create an open and safe workplace for every
employee to feel empowered, irrespective of gender, sexual preferences, and
other factors, and contribute to the best of their abilities. Towards this, the
Company has set up the Anti-Sexual Harassment Initiative (ASHI), which
proudly completes 21 years of enabling a positive and safe work environment
for our employees.

Our ASHI practices have set an industry benchmark as it ranked first among
300+ companies that participated in an external survey on the best anti-sexual
harassment initiatives in 2017, 2019 and 2020. Infosys has constituted an
Internal Committee (IC) in all the development centers of the Company across
India to consider and resolve all sexual harassment complaints reported by
women. The IC has been constituted as per the Sexual Harassment of Women at
Workplace (Prevention, Prohibition and Redressal) Act, 2013, and the
committee includes external members from NGOs or with relevant exp erience.
Investigations are conducted and decisions made by the IC at the respective
locations, and a senior woman employee is the presiding officer over every
case.
Half of the total members of the IC are women. The role of the IC is not
restricted to mere redressal of complaints but also encompasses prevention and
prohibition of sexual harassment. In the last one year, the IC has worked
extensively on creating awareness on relevance of sexual harassment issues in
the new normal by using brand-new and innovative measures to help employees
understand the forms of sexual harassment while working remotely. The details
of sexual harassment complaints that were filed, disposed of and pending during
the financial year are provided in the Business Responsibility Report of this
Annual report.

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Particulars of employees
The Company had 2,04,396 employees on standalone basis and 2,59,619
employees on consolidated basis as of March 31, 2021. The percentage increase
in remuneration, ratio of remuneration of each director and key managerial
personnel (KMP) (as required under the Companies Act, 2013) to the median of
employees’ remuneration, and the list of top 10 employees in terms of
remuneration drawn, as required under Section 197(12) of the Companies Act,
2013, read with Rule 5 of the Companies (Appointment and Remuneration of
Managerial Personnel) Rules, 2014, form part of Annexure 3 to this Board’s
report.

The statement containing particulars of employees emp loyed throughout the

year and in receipt of remuneration of ` 1.02 crore or more per annum and
employees employed for part of the year and in receipt of remuneration of ` 8.5
lakh or more per month, as required under Section 197(12) of the Comp anies
Act, 2013, read with Rule 5 of the Companies (Appointment and Remuneration
of Managerial Personnel) Rules, 2014, is provided in a separate exhibit forming
part of this report and is available on the website of the Company,_at
https://www.infosys.com/investors/ reports-filings/Documents/exhibitboards-
report2021.pdf.

The Annual Report and accounts are being sent to the shareholders excluding
the aforesaid exhibit. Shareholders interested in obtaining this information may
access the same from the Company website. In accordance with Section 136 of
the Companies Act, 2013, this exhibit is available for inspection by
shareholders through electronic mode.

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Employee stock options / Restricted Stock Units (RSUs)

The Company grants share-based benefits to eligible employees with a view to
attracting and retaining the best talent, encouraging employees to align
individual performances with Company objectives , and p romoting increased
participation by them in the growth of the Company.

Infosys Expanded Stock Ownership Program 2019 (“the 2019 Plan”)

On June 22, 2019, pursuant to approval by the shareholders in the AGM, the
Board has been authorized to introduce, offer, issue and p rovide share-based
incentives to eligible employees of the Company and its subsidiaries under the
2019 Plan. The maximum number of shares under the 2019 Plan shall not
exceed 5,00,00,000 equity shares. To implement the 2019 Plan, up to
4,50,00,000 equity shares may be issued by way of secondary acquisition of
shares by the Infosys Expanded Stock Ownership Trust. The RSUs grant ed
under the 2019 Plan shall vest based on the achievement of defined annual
performance parameters as determined by the administrator (the nomination and
remuneration committee). The performance parameters will be based on a
combination of relative Total Shareholder Return (TSR) against selected
industry peers and certain broader market domestic and global indices and
operating performance metrics of the Company as decided by the administrator.
Each of the above performance parameters will be distinct for the p urposes of
calculation of the quantity of shares to vest based on performance. These
instruments will generally vest between a minimum of one to a maximum of
three years from the grant date.

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CONCLUSION
INFOSYS:

• The company has unnecessarily kept its capital in assets as current

ratio is 5.11. So, Infosys should make proper utilization of its assets.

• Market sentiments are negative, thus the company’s management should

take appropriate steps to revive the company before it starts making losses.

• The company doesn’t have any debt as all investment is through equity capital.

• Being a software firm, Infosys doesn’t have any inventories.

• The company should take steps to earn its receivables from debtors as
debtors turnover ratio has increased during 2011-12.

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REFERENCES

[1] www.nseindia.com

[2] www.infosys.com

[3] www.wikipedia.org

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