Project Report

(Submitted for the Degree of B.Com Honours in Accounting

Finance under the University of Calcutta)

Title of the Project

FINANCIAL STATEMEMT ANALYSIS OF INFOSYS LIMITED

Submitted By
NAME OF THE CANDIDATE – VICKY

REGISTRATION NO. – 145-1111-0097-18

UNIVERSITY ROLL NO. – 181145-21-0260

COLLEGE – Goenka college of commerce and business administration

COLLEGE ROLL NO. - 111

Supervised By
NAME OF THE SUPERVISOR – PROF. ASIT KR. GHOSH

COLLEGE – Goenka college of commerce and business administration

Month & year of submission

JULY 2021

1
Annexure- IA

Supervisor's Certificate

This is to certify that Asit kr. ghosh, a student of B.Com. Honours in

Accounting & Finance of Goenka college of commerce and business
enterprise under the University of Calcutta has worked under my
supervision and guidance for her Project Work and prepared a Project
Report with the title FINANCIAL STATEMEMT ANALYSIS OF INFOSYS
LIMITED which he is submitting, is his genuine and original
work to the best of my knowledge.

Signature :

Date :

Name : Asit kr. ghosh

Designation : Professor

Name of College : Goenka College of commerce and business administration

Place : Kolkata

2
Annexure- IB

Student's Declaration

I hereby declare that the Project Work with the title FINANCIAL
STATEMEMT ANALYSIS OF INFOSYS LIMITED submitted by me for the
partial fulfilment of the degree of B.Com. Honours in Accounting &
Finance under the University of Calcutta is my original work and has not
been submitted earlier to any other University /Institution for the
fulfilment of the requirement for any course of study.
I also declare that no chapter of this manuscript in whole or in part
has been incorporated in this report from any earlier work done by
others or by me.
However, extracts of any literature which has been used for this report
has been duly acknowledged providing details of such literature in the
references.

Signature :

Date :

Name : VICKY

Address : MG ROAD KOLKATA – 700034X

Registration No. : 145-1111-0097-18

Place : Kolkata

3
 ACKNOWLEDGEMENT

I would like to thank University of Calcutta for providing with such a

wonderful opportunity to prepare the project by including this as part
of our study curriculum. I am very grateful to my college and my
principal.

I am also very thankful to my supervisor Asit kr. ghosh for his valuable
and timely guidance throughout the project. His feedbacks, guidance
and support have been very useful. I would thank him for being my
mentor in doing this project. This project has allowed me a practical
exposure in the corporate field and a brief introduction in the day to day
working of an organisation.

Last but not the least I would like to thank my parents and friends
for their support and guidance.

VICKY

4
 CONTENT
2

Chapter Particulars Page no.

No.
1 INTRODUCTION 6-15
Background of study 7-10
Review of literature 11-12
Objective of the study 13
Limitation of study 13
Data sources and Methodology 14
Chapter planning 15
2 CONCEPTUAL FRAMEWORK 16-28

Company profile 16-19

Financial statement analysis 20-26
Ratio analysis a method of financial 27-28
method analysis.
3 PRESENTATION OF DATA ANALYSIS & 29-50
FINDINGS
Analysis of Different ratio’s 30-49
Findings 50
4 CONCLUSION,RECOMMENDATION & 51-54
BIBLIOGRAPHY
Conclusion 52
Recommendation 53
Bibliography 54

5
CHAPTER : 1
INTRODUCTION

6
 INTRODUCTION

Financial statement analysis is the process of reviewing and

analyzing a company's financial statements to make better
economic decisions to earn income in future. These
statements include the income statement, balance sheet,
statement of cash flows, notes to accounts, etc. Financial
statement analysis is a method or process involving specific
techniques for evaluating risks, performance, financial health,
and future prospects of an organization. It is used by a variety
of stakeholders, such as credit and equity investors, the
government, the public, and decision-makers within the
organization. These stakeholders have different interests and
apply a variety of different techniques to meet their needs. For
example, equity investors are interested in the long-term
earnings power of the organization and perhaps the
sustainability and growth of dividend payments. Creditors
want to ensure the interest and principal is paid on the
organizations debt securities when due. All these can be
known to a great extent by financial statement analysis of the
company.

7
 BACKGROUND OF THE STUDY

Common methods of financial statement analysis include

fundamental analysis, horizontal and vertical analysis and the
use of financial ratios. Historical information combined with a
series of assumptions and adjustments to the financial
information may be used to project future performance. The
study of financial statement is prepared for the purpose of
presenting a periodical review or report by the management

The different tools used for analyzing the financial statement

includes comparative statement analysis, common size
statement analysis, trend analysis, ratio analysis, cash flow
statement analysis, fund flow statement analysis, net working
capital analysis or statement changes in working capital and
cost volume profit analysis.

Comparative statements: Comparative statements deal with

the comparison of different items of the Profit and Loss
Account and Balance Sheets of two or more periods. Separate
comparative statements are prepared for Profit and Loss
Account as Comparative Income Statement and for Balance
Sheets.
Common Size Statements: A vertical presentation of financial

8
information is followed for preparing common-size statements.
The total assets or total liabilities or sales are taken as 100 and
the balance items are compared to the total assets, total liabilities
or sales in terms of percentage. Thus, a common size statement
shows the relation of each component to the whole. Separate
common size statement is prepared for profit and loss account as
Common Size Income Statement and for balance sheet as
Common Size Balance Sheet.
Ratio Analysis: Ratio analysis is an attempt of developing
meaningful relationship between individual items in the balance
sheet or profit and loss account. Ratio analysis is not only useful
to internal parties of business concern but also useful to external
parties. Ratio analysis highlights the liquidity, solvency, profitability
and capital gearing.

9
 NEED OF THE STUDY

The purpose of this project is to understand the financial position of the

company and assessment of financial ratios based on the statements
of the company. The aim of the project is to understand the strength
and weakness of the company through the ascertain ratios and data
available. We will try to understand how different decisions are taken
and forecasts are made based on the past data available.

Financial statements analysis helps us to take various decisions at

various places of a firm. It helps us to know the reasons for relative
changes either in profitability or in the financial position as a whole.

10
 LITERATURE REVIEW

Literature review is indispensable part of a thesis/article because it

represents the whole range of research in the past on the topic selected
by the researcher on the basis of which research design of a study is
formulated. Literature review gives better insight and helps to bridge gap
for the research to be undertaken. Efforts have been made to present a
common scheme of various facets and issues relating to this empirical
studies carried out in past. Some important conclusions and research
gap have been drawn from the review of some research papers, articles,
theses and textbooks available in the accessible libraries and internet
sources.

Anshan Lakshmi (2003) made “A Study of the Financial Performance

with Reference to Steel Industries Kerala Ltd”. This study covered from
1977-1998 to 2001-2002. The objectives of the study was to analyze
and evaluate the working capital management, to analyze the liquidity
position of the company, to evaluate the receivables, payables and cash
management and to suggest ways and means to improve the present
date of working capital.

The major tools used for the analysis said that the working capital
management suggested that the inventory management have to be
corrected.

Krishna Prasad Upadhyay (2004) used different types of financial ratios

to check up the financial performance of the selected finance

11
companies. Basically in this study he used solvency ratio, liquidity ratio,
efficiency ratio, profitability ratio and valuation ratio. Different measures
like return on investment, return on equity, return on assets, earning per
share, dividend per share, and asset utilization ratio are used to assess
the profitability of the companies. He concluded his study stating that
the solvency position of both companies is not sound and credit
creation capacity is good in both the companies in aggregate

Moses Joshuva Daniel (2013) in his study “A Study on Financial Status

of TATA Motors Ltd” stated the main objectives to analyzing the overall
financial status of the TATA Motors Ltd by using various financial tools.
In order to analyze financial status in terms of Profitability, Solvency,
Activity and Financial stability various accounting ratios have been used.
It is cleared from the study that the company’s financial performance is
satisfactory.
The company has stable growth and it shows a greater status in all the
areas it works. The company has been suggested to reduce the
expenditure as it increases every year. Decrease in expenses will
increase the profitability.

12
 OBJECTIVE OF THE STUDY

Through financial statement analysis we can determine and identify

financial strengths, weaknesses and relationships that exist in the
company. The objectives of the study are as follows:
 To ascertain short-term liquidity position & long-term solvency
position of the firm by the application of various liquidity ratios &
solvency ratios.
 To assess the risk involved with firm. To assess the
performance of the firm by the application of various ratios.
 Above all, the company is able to analyze its own performance
over a specific time period.
 To evaluate the efficiency of the firm for proper utilisation of financial
resources.
 To assess the intra-firm comparison among of the various components of
the firm.

LIMITATION OF THE STUDY

 The study is limited to the analysis of the financial statement of

Infosys Limited only. Therefore we cannot get an idea of the
performance of the competitors.
 The project is done using secondary data which is not as reliable as primary
data.MONEYCONTROL.COM
 There might be manipulation in the data published by the company.
 There might be confidential information or any trade secret which
are not published in the financial reports of the company.

13
 RESEARCH METHODOLOGY

Research in common parlance refers to a search for knowledge. One

can also define research as a scientific and systematic search for
pertinent information on a specific topic. In fact, research is an art of
scientific investigation.

The title of the study is “Financial Statement Analysis Of Infosys

Limited” The report is of study of the financial statements of Infosys
limited of the period of five years from 2016- 17 to 2020-21.

The research is based on secondary data. Secondary data is the data

that have been already collected by and readily available from other
sources. Such data are cheaper and more quickly obtainable than the
primary data and also may be available when primary data cannot be
obtained at all. Financial data are taken from the company’s site and
annual reports of the last five years from current year are used in this
study

The tools which will be used for analysis of financial statements are as follows:
 Ratio Analysis with the help of different types of ratio.

For the purpose of evaluating:

 Financial performance of the company in last five years.
 Changes in the financial position of the company in last five years
 Short term liquidity position of the company.
 Long term solvency position of the company.
 Efficiency of the company.

14
 CHAPTER PLANNING
There will be four chapters in this project report:

Chapter1 which is the “introduction” chapter contains a brief introduction

about the financial statement analysis, background of the study, need of
the study, literature review, objective, limitation, methodology and chapter
planning.

Chapter 2 “conceptual frameworks” contains meaning, objective, advantages,

limitation, users of financial statement analysis and a brief company profile of
Infosys limited.

Chapter3 “presentation of data, analysis and finding” contains various tables

and charts of different types of ratio based on the data of five years and their
analysis and finding.

Chapter4 “conclusion and recommendation” contains the conclusion of the

study and recommendation.

15
CHAPTER : 2
CONCEPTUAL FRAMEWORK

16
 COMPANY PROFILE

Infosys was established by seven engineers in Pune, Maharashtra, India

with an initial capital of $250 in 1981. It was registered as Infosys
Consultants Private Limited on 2 July 1981. In 1983, it relocated its
office to Bangalore, Karnataka, India.

The company changed its name to Infosys Technologies Private Limited

in April 1992 and to Infosys Technologies Limited when it became a
public limited company in June 1992. It was later renamed to Infosys
Limited in June 2011.

Infosys Limited is an Indian multinational corporation that provides

business consulting, information technology and outsourcing services.
It has its headquarters in Bangalore, Karnataka, India.

Infosys is the second-largest Indian IT company after Tata Consultancy

Services by 2017 revenue and 596th largest public company in the
world based on revenue On March 29, 2019, its market capitalization
was $46.52 billion. The credit rating of the company is A− (rating by
Standard & Poor's)

Infosys provides software development, maintenance and independent

validation services to companies in finance, insurance, manufacturing
and other domains. One of

17
 its known products is Finacle which is a universal banking solution
with various modules for retail & corporate banking.

Its key products and services are:

 NIA – Next Generation Integrated AI Platform.

 Infosys Consulting – a global management consulting service
 Infosys Information Platform (IIP) – Analytics platform
 EdgeVerve Systems which includes finacle, a global banking platform
 Panaya Cloud Suite
 Skava

INTERNATIONAL SENARIO

Infosys limited is an Indian multinational information technology company that

provides business consulting information technology and outsourcing services.
The company was founded in pune and its headquartered in Bangalore. Infosys is
the second- largest Indian IT company after tata consultancy services by 2020
revenue figures and the 602nd largest public company I nthe world according to
Forbes global 2000 ranking. On 31 december 2020, its market capitalization was
$71.92 biliion.

Infosys is a global leader in next-generation digital services and consulting. We

enable clients in more than 50 countries to navigate their digital transformation.
With nearly four decades of experience in managing the systems and workings of
global
enterprises, we expertly steer our clients through their digital journey. We do it by
enabling the
enterprise with an AI-powered core that helps prioritize the execution of change.
We also
empower the business with agile digital at scale to deliver unprecedented levels of
performance

18
and customer delight. Our always-on learning agenda drives their continuous
improvement
through building and transferring digital skills, expertise, and ideas from our
innovation
ecosystem.
Infosys has 82 sales and marketing offices and 123 development centres across
the world as of 31 March 2018, with major presence in India, United States, China,
Australia, Japan, Middle East and Europe.
In 2019, 60%, 24%, and 3% of its revenues were derived from projects in North
America, Europe, and India, respectively. The remaining 13% of revenues were
derived from the rest of the world.

Awards:

 In 2020, Infosys was ranked No. 1 in the HFS Top 10 Agile Software
Development 2020 report

 In 2020, Infosys was recognized as a leader in Retail and CPG Digital Services by
Avasant.

 In 2019, Infosys was a winner of the United Nations Global Climate Action
Award in 'Climate Neutral Now' category.

 In 2019, Infosys was ranked as the 3rd Best Regarded Company in the World by
Forbes.

 In 2017, HfS Research included Infosys in Winner's Circle of HfS Blueprint for
Managed Security Services, Industry 4.0 services and Utility Operations.

 In 2013, Infosys was ranked 18th largest IT services provider in the world by HfS
Research In the same year, it was ranked 53rd in Forbes list of World's Most
Innovative Companies.

 In 2012, Infosys was ranked No. 19 amongst the world's most innovative
companies by Forbes In the same year, Infosys was in the list of top twenty
green companies in Newsweek's Green Rankings for 2012.

 In 2006, Institute of Chartered Accountants of India included Infosys into Hall of

Fame for being the winner of Best Presented Accounts for 11 consecutive years.

19
MEANING OF FINANCIAL STATEMENT ANALYSIS

Financial statements are prepared primarily for decision-

making. They play a dominant role in setting the framework of
managerial decisions. But the information provided in the
financial statements is not an end in itself as no meaningful
conclusions can be drawn from these statements alone.
However, the information provided in the financial statements
is of immense use in making decisions through analysis and
interpretation of financial statements. Financial analysis is the
process of identifying the financial strengths and weaknesses
of the firm by properly establishing relationship between the
items of the balance sheet and the profit and loss account.
There are various methods or techniques used in analyzing
financial statements, such as comparative statements, trend
analysis, common-size statements, schedule of changes in
working capital, funds flow and cash flow analysis, cost-
volume-profit analysis and ratio analysis.

The term financial analysis, also known as analysis and

interpretation of financial statements', refers to the process of
determining financial strengths and weaknesses of the firm by
establishing strategic relationship between the items of the
balance sheet, profit and loss account and other operative data.
20
The purpose of financial analysis is to diagnose the
information contained in financial statements so as to judge
the profitability and financial soundness of the firm. A financial
analyst analyses the financial statements with various tools of
analysis before commenting upon the financial health or
weaknesses of an enterprise. The analysis and interpretation
of financial statements is essential to bring out the mystery
behind the figures in financial statements. Financial
statements analysis is an attempt to determine the
significance and meaning of the financial statement data so
that forecast may be made of the future earnings, ability to pay
interest and debt maturities and profitability of a sound
dividend policy.

The term financial statement analysis includes both

'analysis' and 'interpretation'. A distinction should, therefore,
be made between the two terms. While the term 'analysis' is
used to mean the simplification of financial data by
methodical classification of the data given in the financial
statements, 'interpretation' means
explaining the meaning and significance of the data so
simplified. However, both analysis and interpretation' are
interlinked and complimentary to each other Analysis is
useless without interpretation and interpretation without
analysis is difficult or even impossible.

21
OBJECTIVE OF FINANCIAL STATEMENT ANALYSIS

The following are the main objectives of the analysis of financial

statements:-

 To estimate the earning capacity of the firm.

 To judge the financial position and financial performance of the
firm.
 To determine the debt capacity of the firm.
 To determine the long-term liquidity of the funds as well as
solvency.
As a matter of fact, the objectives of analysis of these
statements, depends to a large extent on the point of the view
of the analyst, the degree of interest in the company and the
need for depth of enquiry and finally on the amount and quality
of the data available. A trade creditor considering what action
to take on long overdue accounts may well focus his inquiry on
the immediate financial condition have the firm and liquidity in
the resources. In contrast, a security analysis considering a
purchase of equity shares may tend to centre its efforts on the
measurement of financial condition and future profitability of
the firm. The object of the analysis determines the extent,
depth and the nature of analysis. If a thorough analysis is
desired and the full data needed are not available or if the
suspicion exists that the firm is trying to hide or confuse its
real position, the financial analyst must be virtual detective in
order to find out the truth.
22
ADVANTAGES OF FINANCIAL STATEMENT ANALYSIS

The different advantages of financial statement analysis are listed

below:

 The most important benefit if financial statement

analysis is that it provides an idea to the investors about
deciding on investing their funds in a particular company.
 Another advantage of financial statement analysis is that
regulatory authorities like can ensure the company
following the required accounting standards.
 Financial statement analysis is helpful to the government
agencies in analyzing the taxation owed to the firm.
 Above all, the company is able to analyze its own
performance over a specific time period.

LIMITATIONS OF FINANCIAL STATEMENT ANALYSIS

In spite of financial statement analysis being a highly useful

tool, it also features some limitations, including comparability
of financial data and the need to look beyond ratios. Although
comparisons between two companies can provide valuable
clues
about a company’s financial health, alas, the differences
between companies’ accounting methods make it, sometimes,
difficult to compare the data of the two.

23
Besides, many a times, sufficient data are on hand in the form
of foot notes to the financial statements so as to restate data
to a comparable basis. Or else, the analyst should remember
the lack of data comparability before reaching any clear-cut
conclusion. However, even with this limitation, comparisons
between the key ratios of two companies along with industry
averages often propose avenues for further investigation.

24
 USERS OF FINANCIAL STATEMENT ANALYSIS

Financial Statement Analysis includes different users of the

information. The user of information is divided into internal users
which include management of the organization for whom financial
statement is used for decision making and external users
including owners, creditors, employee, government, general public
and customers, having a financial interest in the company. The
users of information are discussed below:

Internal User

 Management: Intelligent decision in relation to performance is

taken by the managers by the use of financial statement
analysis. For example, the management judge cost on each
distribution channel or how much amount of cash the
organization is left with.

External User

 Owner: The small business entrepreneurs requires to know

whether the organization is earning profit or not. It helps the
owners to take decision relating with strategies and policies.
 Investors: Investors are the people who require financial
information so that they can judge the company’s performance
and ascertain how to handle the investments done by them in
the company. So, on the basis of performance the investors
decide to keep the investments or to sell it off.
 Creditors: Creditors focus on how the company will make the
payment as and when it will become due. The cash flow

25
 statement provides the company’s liquidity and the ability of
the company to make short short-term payments.
 Government: To understand the performance of the economy in
general and plan the financial and industrial policies, the
government goes through the financial statements of the
organization. To calculate the Tax burden on the company, tax
authorities analyses organization’s statement

 Employees: Employees have interest in knowing whether there

is security in employment and is there any chance of pay rise.
Hence, they are abreast of stability and profitability of the
company. The Employee is also interested in knowing the
expansion plan of the organization which will increase their
career prospects.
 Customers: Customers require to know the capability of the
organization to serve its clients in future. They also require to
know whether the stability of the operations in more if the
customer is totally dependent on the supply.
 General Public: General Public includes students, researcher
and analyst will be interested in analysing the financial
statement. They ascertain the impact of the organization on
economy, local community or environment.

26
 Ratio Analysis – A method of Financial
Statement Analysis
Ratio Analysis enables the business owner/manager to spot
trends in a business and to compare its performance and
condition with the average performance of similar businesses
in the same industry. To do this compare your ratios with the
average of businesses similar to yours and compare your own
ratios for several successive years, watching especially for any
unfavourable trends that may be starting. Ratio analysis may
provide the all-important early warning indications that allow
you to solve your business problems before your business is
destroyed by them.
The Balance Sheet and the Statement of Income are essential,
but they are only the starting point for successful financial
management. Apply Ratio Analysis to Financial Statements to
analyse the success, failure, and progress of your business.
Importance of financial statement analysis in an organization.
In our money-oriented economy, Finance may be defined as
provision of money at the time it is needed. To everyone
responsible for provision of funds, it is problem of securing
importance to so adjust his resources as to provide for a
regular outflow of expenditure in face of an irregular inflow of
income.
1. The profit and loss account (Income Statement).
27
2. The balance sheet
In companies, these are the two statements that have been
prescribed and their contents have been also been laid down by
law in most countries including India.
There has been increasing emphasis on:
(a) Giving information to the shareholder in such a manner as to
enable them to grasp it easily
(b) Giving much more information e.g. funds flow statement,
again with a view to facilitating easy understanding and to
place a year results in perspective through comparison with
post year results.
(c) The director’s report being quite comprehensive to cover
the factors that have been operating and are likely to operate in
the near future as regards to the various Functions of
production, marketing, finance, labour, government policies,
and environment in general.
Financial statements are being made use of increasingly by
parties like Bank, Governments, Institutions, and Financial
Analysis etc. The statement should be sufficiently informative
so as to serve as wide a curia as possible.
The financial statement is prepared by accounts based on the
activities that take place in production and non-production
wings in a factory. The accounts convert activities in monetary
terms to the help know the position.

28
CHAPTER : 3
PRESENTATION OF DATA,
ANALYSIS AND FINDINGS

29
 RATIO ANALYSIS
Ratio analysis is a quantitative method of gaining insight into a
company's liquidity, operational efficiency, and profitability by
studying its financial statements.

PROFITABILITY RATIO
a. Net profit Ratio: It is a measure of the firm's overall ability to turn

each rupee of sales into net profit. This ratio is very useful to the
proprietor as it indicates overall profitability of the concern.

Table 1 : net profit ratio (Source- Infosys.com)

Net profit ratio = Net Profit *100
Net Sales
Net Profit After Tax Net Sales
Year Net Profit Ratio
(in crores) ( in
crores)
2016-17 13,818.00 59,289.00 23.30%
2017-18 16,155.00 61,941.00 26.08%
2018-19 15410.00 67,885.00 22.70%
2019-20 16,639.00 89,457.00 18.60%
2020-21 19,423.00 1,06,137.00 18.30%

30
INTERPRETATION
Net profit ratio was 23.30%, 26.08%, 22.70%, 18.60%, 18.30%, in
respective year of 16-17, 17-18, 18-19, 19-20, and 20-21 so the
company achieved maximum Net profit ratio in the year 17-18.
The overall ratio is showing a good position of profitability of the
company.

31
b. Return on Assets: It is a measure of the profitability of all
financial resources invested in the firm’s assets or on total
funds without any regard to the sources of fund.

Table 2: return on assets (Source- Infosys.com)

Return on Assets = Net Profit
Total Assets

Net Profit Total

Year Return on Assets
(in Assets ( in
crores) crores)
2016-17 13,818.00 79,885.00 17.29%

2017-18 16,155.00 75,877.00 21.29%

2018-19 15,410.00 84,738.00 18.18%

2019-20 16,639.00 92,768.00 17.36%

2020-21 19,423.00 108,386.00 17.92%

32
INTERPRETATION
Return on asset ratio are 17.29%, 21.29%, 18.18%, 17.36% and
17.92% in respective year of
2016-17, 2017-18, 2018-19, 2019-20 and 2020-21 so the
company achieved maximum Return on asset ratio in 2017-18.

33
c. Return on Shareholders’ Equity: This ratio indicates how well
the firm has used the resources of the owners. It reflects the
extent to which the objective of the owner has been
accomplished.

Table 3: Return on shareholders’ equity (Source- Infosys.com)

Return on Shareholders’ Equity = PAT
Shareholders’ Equity

Shareholders’ Return on
PAT
Year Equity Shareholders’
(in crores)
( in crores) Equity
2016-17 13,818.00 68,017.00 20.31%

2017-18 16,155.00 63,502.00 25.44%

2018-19 15,410.00 64,477.00 23.90%

2019-20 16,639.00 70,207.00 23.70%

2020-21 19,423.00 76,169.00 25.50%

34
INTERPRETATION

Return on equity ratio was 20.31%, 25.44%, 23.90%, 23.70%, 25.50%,

in respective year
of 2016-17, 2017-18, 2018-19, 2019-20 and 2020-21 so the
company achieved maximum Return on shareholder's equity
ratio in 2020-21.

35
d. Return on Capital Employed: It is the most important
profitability ratio as it reflects the overall efficiency with
which capital is used. It indicates how well management has
used the funds supplied by outsiders & owners.

Table 4: return on capital employed (Source- Infosys.com)

Return on Capital Employed = EBIT
Capital Employed

EBIT Capital Employed Return on Capital

Year
(in crores) ( in crores) Employed
2016-17 18,938.00 68,099.00 27.80%

2017-18 19,908.00 64,215.00 31.00%

2018-19 19,927.00 69,308.00 28.75%

2019-20 20,477.00 77,548.00 26.40%

2020-21 24,477.00 90,764.00 26.96%

36
INTERPRETATION

Return on capital employed was 27.80%, 31.00%, 28.75%, 26.40%,

and 26.96%, in respective
year of 2016-17, 2017-18, 2018-19, 2019-20 and 2020-21
and the company achieved maximum Return on capital
employed in 2017-18.

37
 SHORT TERM SOLVENCY RATIO
a. Current Ratio: It is also known as working capital ratio is a
popular tool to evaluate short-term solvency position of a
business. A higher current ratio indicates strong solvency
position and is therefore considered better.

Table 5: Current Ratio (Source- Infosys.com)

Current Ratio = Current Asset
Current Liability

Current Asset Current Liability

Year Current Ratio
(in crores) ( in crores)
2016-17 47,682.00 11,786.00 4.05

2017-18 44,090.00 11,662.00 3.78

2018-19 46,223.00 15,430.00 3.00

2019-20 43,820.00 15,220.00 2.88

2020-21 48,282.00 17,662.00 2.73

38
INTERPRETATION
The above table shows the current ratio of five years of Infosys
Ltd. The Current Ratio of Infosys Ltd. varied from 2.73 to 4.05.
The solvency position of Infosys Ltd. in terms of current ratio
was above the standard norm volume of 2:1 for the entire
period which shows the solvency position of the company is
favorable.

39
b. Quick Ratio: It is also known as “acid test ratio” and “liquid
ratio” and is used to test the ability of a business to pay its
short-term debts. It measures the relationship between liquid
assets and current liabilities.

4 Table 6: Quick Ratio (Source- Infosys.com)

Quick Ratio = Liquid Asset
Current Liability

Liquid Asset Current Liability

Year Quick Ratio
(in crores) ( in crores)
2016- 47,682.00 11,786.00 4.05
17
2017- 44,090.00 11,662.00 3.78
18
2018- 46,223.00 15,430.00 3.00
19
2019- 43,820.00 15,220.00 2.88
20
2020- 48,282.00 17,622.00 2.73
21

40
INTERPRETATION
The current ratio and the liquid ratio are same because the
company Infosys Ltd. mainly dealt in the service sector which
is why they do not have the element of inventories or raw
material or stock in trade etc. It was above the standard norm
of 1:1 for the entire period which shows the firm has the ability
to meet its current liabilities.

41
 LONG TERM SOLVENCY RATIO
a. Proprietary Ratio: (also known as net worth ratio or equity
ratio) is used to evaluate the soundness of the capital
structure of a company. It is computed by dividing the
stockholders’ equity by total assets.

5 Table 7: Proprietary Ratio (Source- Infosys.com)

Proprietary Ratio = Shareholders’ Equity _
Total Asset

Shareholders’
Total
Year Equity Proprietary Ratio
( in crores) Asset ( in
crores)
2016-17 68,017.00 79,885.00 85.14%

2017-18 63,502.00 75,877.00 83.69%

2018-19 64,477.00 84,738.00 76.09%

2019-20 70,207.00 92,768.00 75.68%

2020-21 76,169.00 108,386.00 70.27%

42
INTERPRETATION

Proprietary ratio was 85.14%, 83.69%, 76.09%, 75.68%, 70.27%, in

respective year of
2016-17, 2017-18, 2018-19, 2019-20 and 2020-21. We can
observe that the ratio was increasing up to 2016-17 then
it is again decreasing.

43
a. Debt Equity Ratio: It is a long term solvency ratio that
indicates the soundness of long- term financial policies of a
company. It shows the relation between the portion of
assets financed by creditors and the portion of assets
financed by stockholders.

Table 8: Debt Equity Ratio (Source- Infosys.com)

Debt Equity Ratio = Total Debt_
Equity

Total Debt Equity

Year Debt Equity Ratio
(in crores) ( in crores)
2016-17 11,868.00 68,017.00 0.17

2017-18 12,375.00 63,502.00 0.19

2018-19 16,219.00 64,477.00 0.25

2019-20 18,807.00 70,207.00 0.26

2020-21 22,408.00 76,169.00 0.29

44
INTERPRETATION
The standard norm for the ratio is 2:1. The debt equity ratio is far
away from its standard norms.

Therefore we can say that the firm is losing the benefit of having debt
capital. The benefit of debt financing is that it allows a business to
leverage a small amount of money into a much larger sum, enabling
more rapid growth than might otherwise be possible. In addition,
payments on debt are generally tax-deductible.

45
 OTHER RATIOS
a. Asset Turnover Ratio: It is an activity ratio that measures
the efficiency with which assets are used by a company.
It is computed by dividing net sales by average total
assets for a given period.

6 Table 9: Asset Turnover Ratio (Source- Infosys.com)

Asset Turnover Ratio = Net Sales _
Total Asset

Net Sales Total Asset Turnover

Year
( in Asset ( in Ratio
crores) crores)
2016-17 59,289.00 79,885.00 74.2
1
2017-18 61,941.00 75,877.00 81.6
3
2018-19 67,885.00 84,738.00 80.1
1
2019-20 89,457.00 92,768.00 96.4
3
2020-21 1,06,137.00 108,386.00 97.9
2

46
INTERPRETATION
Total Assets Turnover Ratio of the company is rotating their
assets into business purpose. Above Table shows the Total
Assets Turnover Ratio for the period of five years. The
company achieved the highest asset turnover ratio in 2020-
21 which is 97.92%.

47
a. Capital Turnover Ratio: Capital Turnover Ratio indicates the

efficiency of the organization with which the capital

employed is being utilized. A high capital turnover ratio
indicates the capability of the organization to achieve
maximum sales with minimum amount of capital
employed.

Table 10: Capital Turnover Ratio (Source- Infosys.com)

Capital Turnover Ratio = Net Sales
Shareholder's fund

Net Sales Shareholder's Fund Capital Turnover

Year
( in ( in crores) Ratio
crores)
2016-17 59,289.00 68,017.00 87.16%

2017-18 61,941.00 63,502.00 97.54%

2018-19 67,885.00 64,477.00 105.29%

2019-20 89,457.00 70,207.00 127.42%
2020-21 1,06,137.00 76,169.00 139.34%

48
INTERPRETATION
Capital turnover ratio was 87.16%, 97.54%, 105.29%, 127.42% and
139.34% in respective year
of 2016-17, 2017-18, 2018-19, 2019-20 and 2020-21 so the
company achieved maximum capital turnover ratio in 2020-
21.

49
 FINDINGS

 The net profit ratio is satisfactory and showing a good

position of profitability of the company.

 The company achieved maximum Return on asset ratio

in 2017-18 which is 21.29%.

 The company achieved maximum Return on shareholder's equity

ratio in 2020-21 which is 25.50%.

 Return on capital employed was highest in the 2017-18

which is 31.00%

 The solvency position of Infosys Ltd. in terms of current

ratio is above the standard norm volume of 2:1 for the entire
period of which study is made which shows the solvency
position of the company is favorable.

 We can observe that the proprietary ratio was increasing

up to 2016-17 then it is again decreasing.

 The company achieved the highest asset turnover ratio in 2020-21

which is 97.92%.

 Capital turnover ratio was 87.16%, 97.54%, 105.29%, 127.42% and

139.34% in respective year of 2016-17, 2017-18, 2018-19, 2019-20,
2020-21. So the company achieved maximum capital turnover
ratio in 2020-21.

50
CHAPTER : 4
CONCLUSION AND
RECOMENDATION

51
 CONCLUSION
The objective of the project was to analyse the financial
statement and to determine and identify financial strengths,
weaknesses and relationships that exist in the company.

The conclusion of the above study is as follows:

 Financial statement analysis provides valuable insights

into a firm's performance. By doing this study we get to
understand the basics of financial statement analysis
and how it is done with the help of data available.
Financial statement analysis helps us in understanding
the overall position of the company.
 The profitability position of the company is satisfactory
which we can see from the various tables and charts of
profitability ratios.
 The company does not have much debt capital and
because of that the risk is also not there or very minimal
risk.
 Though the liquidity and solvency position of the

company is declining year by year but it is not bad as it

is over the standard ratios.

52
 RECOMMENDATIONS
The following recommendations are made:

 The company’s current ratio as well as quick ratio is

declining year by year so the company should try to
utilize cash liquidity for business development properly
in comparison of the previous year.
 The company should try to use more of debt capital to
improve the profitability of the company. A calculative risk
of using debt capital should be taken as it has other
benefits also such as reducing the tax burden, etc.
 Company should not use proper working capital management
techniques.
 The major part of the company deals in BPO which to
large extent depends on the efficiency of the employees
therefore they should do time to time training and skill
development programs for the staff to get the maximum
benefit of the human resources.

53
 BIBLIOGRAPHY
The sources of the data are as follows:

 www.infosys.com
 www.wikipedia.com
 www.moneycontrol.com
 www.investopedia.com
 Text books and study material for reference.

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