Ratio Analysis on the Financial Position of Infosys

Anna Sucharitha Dinesh – 2123647

1
 Contents
Introduction ................................................................................................................................ 3

Assumptions............................................................................................................................... 3

Conclusion ................................................................................................................................. 4

References .................................................................................................................................. 5

2
Introduction

A multinational technology and consulting firm, Infosys was established in India in 1981.
The business offers its clients all around the world a variety of services, such as technology
consulting, software development, and business process outsourcing. One of the biggest
technology businesses in India, Infosys is also well-represented in several other nations,
including the US, Europe, and Asia.

Infosys has a market valuation of more than $100 billion as of 2021 and is traded on the
Bombay Stock Exchange and the National Stock Exchange of India. A respected leader in the
global technology and consulting sector, the company has a long history of solid financial
performance and has been consistently profitable throughout the years.

Assumptions

1. In 2019, Infosys had a significant increase in it’s operating expenses. The following
assumptions are made with regard to the cause of the same. It faced a number of negative
factors that impacted its financial performance. Some of the key challenges faced by the
company during this period include:
• The slowdown in the global economy: The global economy faced a slowdown in
2019, with declining growth rates and uncertainty in key markets such as the United
States and Europe. This slowdown impacted Infosys's revenue growth, as clients
reduced their technology spending in response to the economic uncertainty.
• Increased competition: The technology services industry is highly competitive,
and Infosys faced increased competition from rival firms, both in India and
globally. This competition put pressure on the company's margins and made it
difficult to maintain its market share.

2. Apart from the negative factors, Infosys also underwent some significant changes during
the 2018-2020 period.
• Leadership changes: In August 2017, co-founder Nandan Nilekani returned to
Infosys as chairman, and in January 2018, the company's CEO and managing
director, Vishal Sikka, resigned. These changes at the top level of the company
signaled a shift in direction and a renewed focus on innovation and growth.

3
 • Increased focus on digital services: Infosys continued to invest heavily in digital
services such as artificial intelligence, machine learning, and cloud computing. The
company saw significant growth in its digital revenue, which accounted for over
38% of its total revenue in 2018-2019.

3. Impact of the covid-19 pandemic. It can be assumed that the cause of an increase in the
accounts receivable days is a result of their client’s inability to pay on time due to the
economic slowdown as a result of the pandemic, lockdowns and layoffs in the economy
in the financial year 2019-2020. Post which it slowly recovered from the same.

4. The company is assumed to be free of long-term and short-term debt. It relies on equity
funding. There was no data found on the balance sheet or it’s financials that state a source
of external debt funding.

Conclusion

The company's revenue has steadily increased throughout the years, which suggests strong
financial success. The corporation has sufficient liquidity, as evidenced by the current ratio,
which gauges a company's capacity to cover short-term obligations. The corporation has a
prudent debt structure and a strong equity position, as seen by the low debt-to-equity ratio
that has continued to exist.

Over time, the return on equity (ROE) has likewise held steady, demonstrating that the
management of the company is successfully using its equity to produce returns for its
shareholders. The company's earnings per share (EPS) have also been steadily rising, a sign
that it is operating profitably and rewarding its shareholders.

Overall, Infosys has shown a stable financial position over the past 5 years and has
consistently performed well, indicating a strong future outlook for the company. The
company is however a debt-free company and can leverage its capital structure so that it can
take advantage of the tax benefits associated with debt as the interest on debt is exempted
from tax.

4
References

Navigate your next. (n.d.). In Infosys - Consulting | IT Services | Digital Transformation.

M. (2023, October 2). Infosys Consolidated Cash Flow, Infosys Financial Statement &
Accounts. In Infosys Consolidated Cash Flow, Infosys Financial Statement & Accounts.
https://www.moneycontrol.com/financials/infosys/consolidated-cash-flowVI/IT