Group Assignment: Analysis of Infosys’ annual report for the year 2007-08 Comment on the changes in total revenues and its components In the year 2007 Infosys had made revenues of Rs.13530 crores, while in the year 2008, it has made revenues of Rs. 16331 crores; a clear increase of Rs. 2801 crores (20.7 % up). The total income includes: • • •
Income from software services and products Other incomes net that include interests received on deposits with banks, dividends received on investments in liquid mutual funds and exchange gains Income on sale of investments, net of taxes
Find out expense as a ratio to revenues for both the years and comment % Of revenue in % Of revenue in 2007 2008 55.35 56.72 5.47 4.67
Expenses Software development expenses Selling and marketing expenses General and administration expenses Total Expenses
7.05
6.9
67.87
68.29
While the expenses as a ratio of revenue has gone up in the area of software development, it has reduced the selling and marketing expense and its general and administration assets. Overall there has been a marginal increase of 0.42% in expense as a ratio of Revenues. Identify the variation in profits and profitability of the business during the period Particulars
2007 Rs. 3783 crores 28.72
Profits Profitability
2008 Rs. 4470 crores 28.57
As we see in the above exhibit the profits per se have gone up by Rs. 687 crores, but the profitability has gone up only marginally up by 0.15 percent. Profitability is given by the percentage of profits to the sales revenue. 1
Compare the fixed assets to longterm liabilities and interpret the result Infosys, being a cash rich company has no debts, However, the only items that would classify as long term liabilities is the share capital of the company, which is Rs. 286 crores in both 2007 and 2008. Hence the company is in a comfortable condition when it comes to payables. However the company has fixed assets worth Rs.3931 crores in 2008 and Rs.3107 crores in 2007. These fixed assts are funded from the reserves and surplus of the company (profits) as there is no increase in the share capital of the company, nor there is an increase in the longterm loans of the company.
Relate the current assets to current liabilities and comment Particulars Current assets Current liabilities Current ratio*
2007 Rs. 5705 crores Rs. 1162 crores
2008 Rs. 4864 crores Rs. 1483 crores
4.91 : 1
3.28 : 1
Current ratio is division of current assets by current liabilities Current ratio = Current assets Current liabilities As we see in the above exhibit the currents assets have gone down by Rs. 844 crores, while the current liabilities have gone up by 321 crores. As a result the current ratio has gone down by 1.63%. An ideal current ratio in a business scenario would be 2:1. Infosys has a current ratio of 3.28% in 2008 which clearly a good ratio. It would also mean that the company has current assets that exceed the value of the current liabilities. Current liabilities and current assets have to be paid in the short term or one business cycle. Hence, it would mean that the current liabilities can be paid off by realizing some of the current assets.
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