Submitted To:Prof. (Dr.) Surendra SunderarajanA Report on Financial Analysis Of

Prepared By:Bhatt Nistha (Roll No.02)Ramchandani Hitesh (Roll No.26) Ratio Analysis Financial Condition (LIQUIDITY RATIOS)Sr. No.RatioFormula2013 142012 13Interpretation

1.Current RatioCurrent Assets/ Current Liabilities43019/9138

= 4.707735313/6286

= 5.6177It is computed to assess the short term financial position of the company. The current ratio here is reduced from 5.61 to 4.70. This means that firms ability to meet its short term obligation has gone down in current year as compared to last year.

Financial Performance (ACTIVITY RATIOS)Sr. No.RatioFormula2013 142012 13Interpretation

1.Fixed AssetsTurnover RatioNet Sales/Fixed Assets

50133/8229

= 6.0922 times

40352/6836

= 5.9028 timesThe ratio here indicates that how well the company has utilized its fixed assets to improve its sales. And here the ratio has improved from last year means that use of less fixed assets made possible higher generation of sales. (increase in fixed assets = 20.3774% & increase in Net sales= 24.2392% )

PROFITABILITY RATIOSSr. No.RatioFormula2013 142012 -13Interpretation

1.Gross Profit RatioGross Profit/ Sales17992/50133= 35.8885%15072/40352=37.3513%This ratio establishes the relationship of gross profit on sales of a company. It shows the average margin on goods sold. The ratio here is deteriorated by 1.4628% compared to last year means that average margin on goods sold has gone down.

2.Net Profit RatioProfit after Tax/ Sales10648/50133= 21.2395%9421/40352= 23.3470%This ratio helps in determining the profitability and managerial efficiency of the business. The ratio here has gone down means that operational efficiency of company has been deteriorated.

3.Return on EquityProfit after Tax/ Net Worth10648/47530= 22.4026%9421/39797= 23.6726%It indicates that how well the company has utilised its shareholders funds & explains the return available to the equity shareholders as a percentage of their claim to the firm. The ratio here has gone down indicates that the share holders funds are not utilised in an effective manner.

MARKET VALUE RATIOSSr. No.RatioFormula2013 142012 13Interpretation

1.EPS(Basic)PAT/No. of shares10648/(2865)= 186.15389421/(2865)=164.7028The proportion of companies profit allocated to each of common stock. It serves as an indicator of companies profitability from the owners point of view. The improved EPS indicates that profit INR 21.45 per share has increased.

2.P/E RatioShare Price(closing as on 31.3.2013)/EPS3278.85/186.1538

= 17.61362295.7/164.7028

= 13.9384A high price earning ratio resulting from increased market price per share is beneficial to the shareholders. It indicates high managerial efficiency, high profitability and good market reputation. Ratio is increased INR 3.68. It indicates increasing cash generating ability of the firm.

3.Dividend Yield RatioDividend per Share/Share price63/3278.85

=1.9214%42/2295.7

=1.8295%It is a ratio which shows how much a company pays out in dividends each year relative to its share price. The improved ratio indicates that company has paid more dividend per share compared to last year.

CAPITAL ASSET PRICING MODEL (CAPM)E(r) = Rf + i (E (rm) - Rf)E(r) = cost of equityRf = risk-free rate of return = 8.50% (Source: http://www.rbi.org.in/home.aspx#) = beta value of Infosys = 0.70 (source: http://in.reuters.com/finance/stocks/overview?symbol=INFY.NS) E (rm) = Expected average return on the capital market = 25.36 (Source: http://ycharts.com/companies/INFY/return_on_equity) (Dec. 31, 2014)

E (Ri) = Rf+ [(E (Rm) Rf) ]= 8.50 + (25.36 8.50) * 0.70= 8.50 + 11.802= 20.302%Thus, as per the CAPM model, the investors can expect a 20.302% rate of return on equity in 2015 for Infosys equity shares which is above the risk free rate. So investors can still invest in the Infosys stocks. Trend Analysis of Sales, EPS and Stock Price

YearSales2009-10227422010-11275012011-12337342012-13403522013-1450133Here, we can see its sales have been increased by 24.24% in 2013-14 over 2012-13. This indicates that company has used its operational ability effectively which lead to improved sales.

YearEPS2009-10108.992010-11119.452011-12145.552012-13164.702013-14186.15Here EPS is increasing continuously, but if we see ROE, then its deceasing. That means Infosys has not utilized share holders fund properly.

YearStock Price2009-102752.22010-112905.22011-122373.052012-132295.42013-143278.85The Stock Price here is fluctuating. Now, goal of any Finance manager is to maximize share holders wealth i.e. to maximize stock price. Now generally good decisions are always reflected in term of increase in stock price. In case of Infosys, stock price is fluctuating, that means decisions made by Infosys are not consistent. CAPITAL STRUCTURE OF INFOSYSInfosys is debt free company. It doesnt have any outstanding debt or fixed deposits. The company presently generates sufficient cash internally to finance all its operational, financing and investment requirements. Advantages Loan can be easily procured in future, if required. Cost of Bank loan can be avoided. Absence of maturity date eliminates the obligation of future payment. Dividend can be foregone. No dependence on external borrowers. Capital gains on equity are treated favourable in terms of taxation. It is inflation hedge.

Disadvantages Raising equity finance is costly, time consuming and may take the management focus away from the core business activities. Company being debt free, gives lower earnings per share (EPS) to the share holders. Dilution of voting power, due to subsequent issue. Most expensive source of financing, as dividend is paid out of PAT i.e. Profit after Tax. Floatation cost is also high.

Dividend PolicyAnnouncement DateEffective DateDividend TypeDividend (%)Remarks

15-04-201429-05-2014Final860%Rs.43.0000 per share(860%)Final Dividend

26-09-201317-10-2013Interim400%Rs.20.0000 per share(400%)Interim Dividend

12-04-201330-05-2013Final540%Rs. 27.0000 per share (540%) Final Dividend

As per the stated dividend policy, Infosys Ltd. can pay up-to 30% of the consolidated profit after tax as dividend. The company declares dividend twice a year (i.e. October and April). The Board has decided to increase the dividend pay-out ratio up to 40% of post-tax profits effective fiscal 2014.Dividend Payout RatioFormula2013 142012 13Interpretation

Dividend per share/EPS63/186.1538 = 33.8429%42/164.7028= 25.5004%Here increased dividend payout ratio indicates that the greater portion of profit available to the equity shareholders has been distributed while a smaller portion has been retained. The shareholders are likely to get more cash dividend.

4