BALANCE SHEET ANALYSIS
1. INFOSYS
● Shareholdr’s funds increased, indicating growth in equity and retained earnings. The
company has strong financial position, with growth of cash and cash equivalents.
● Decrease in long term borrowings, showing good debt management.
● There was a significant rise in total assets and liabilities, suggesting that infosys may be
investing more in short term projects or inventories.
● This is because increase in current assets is almost entirely responsible for total asset
growth.
2. WIPRO
● Although share capital remained constant, there was an increase in reserves, showing that
the company may have retained most of the past year’s earnings.
● Non-current liabilities increased, mostly due to growth in deferred tax liability.
● Decrease in current liabilities due to decrease in short term borrowing and provisions.
● There was an increase in current and non-current assets, due to growth of capital WIP,
non-current investments, and current investments.
ACCOUNTING RATIOS
Calculations
Interpretation
INFOSYS
1. Current Ratios
Current assets / Current Liab.
Above industry avg of 1.2 shows strong
liquidity, and indicates ability to meet short
term obligations.
52082 / 27442 = 1.9
2. Liquid Ratio
Above industry avg of 1, this shows a good
liquidity position of the company.
CA - Stock / CL
52082 - 0 / 27442 = 1.9
3. Price Earning Ratio
IT companies generally have high P/E ratios.
It shows that investors are willing to pay more
M.P per share / EPS
the shares.
1480 / 55.4 = 26.67
4. Net Profit Ratio
(N.P / Sales) * 100
Above industry average of 10%. This shows
that the company has a very high profit
margin as compared to the industry.
(23,268 / 1,24,014) * 100 = 18.76%
5. Return on Investment
(NPA : Int & Tax / Shareholder’s funds) *
Above industry average of 15%. This shows
that Infosys generates high returns on their
investments.
100
(23268 / 67745) * 100 = 34.34%
6. Earning per share
Infosys EPS is considered to be strong
compared to other companies of the industry.
Net Profit / No. of shares
23.268 / 419.39 = 55.48
7. Debtors turnover ratio
Sales / Debtors
Slightly lower than the industry average of 6
times. This shows that Infosys collects debts a
lot slower than other companies.
1,24,014 / 20,773 = 5.96 times
8. Creditors turnover ratio
It is 0, because Infosys has no debt to be
repaid.
Purchases / Creditors
0 / 2426 = 0 times
9. Working Cap. turnover ratio
Net sales / W.C
Above average of 4 times, shows that Infosys
is better at generating revenue from their
working capital.
1,24,014 / 24640 = 5.03 times
10. Debt/Equity Ratio
Long term debt / Shareholder’s funds
0 / 67745 = 0
This is 0, as Infosys is a debt-free company.
The company does not use financial
leveraging to increase EPS.
11. Proprietory ratio
This is considered very high, which means
that Infosys has a strong equity base.
Shareholder’s funds / Total Assets
67745 / 99387 = 68.16%
12. Total Assets / Debt Ratio
Infosys is a no debt company, hence assets
don’t cover debts.
Total Assets / Debt
99387 / 0 = 0%
Calculations
Interpretation
WIPRO
1. Current Ratio
Current Assets / Current Liab.
53,977.8 / 18,842.8 = 2.8
2. Liquid Ratio
Significantly above average (1.2), indicating
exceptional ability to meet the short term
obligations.
Much higher than average of 1, showing a
very good liquidity position of the company.
CA - Stock / CL
53,977.8 - 91.3 / 18,842.8 = 2.85
3. Price Earning Ratio
Price is generally higher than Infosys for the
earnings showing larger demand for shares.
485 / 16.76 = 28.95
4. Net Profit Ratio
Above the industry average, but still lower
than Infosys. Shows healthy profit margin.
N.P / Sales * 100
9176.7 / 67,753.4 * 100 = 13.54 %
5. Retrun on Investment
The ROI is lower than the industry average,
showing less return than the other companies.
N.P after tax & int / shareholder’s funds * 100
9167.7 / 62762.3 * 100 = 14.6%
6. Earnings per share
The EPS of Wipro is considered to be lower
than most companies in the industry.
Net Profit / No. of shares
9167.7 / 547.8 = Rs. 16.75
7. Debtors turnover ratio
Just like Infosys, Wipro collects debts slower
than the other companies.
Sales / Debtors
67753.4 / 13273.2 = 5.104 times
8. Creditors turnover ratio
Purchases / Creditors
378.2 / 5,300.2 = 0.071 times
9. Working Capital turnover ratio
Net sales / W.C
Much below average of 8 times, showing that
Wipro pays off their debts very quickly.
Longer payment terms may benefit the
company.
Wipro is less efficient at generating revenue
from working capital compared to the industry
(4 times).
67,753.4 / 35,135 = 1.92 times
10. Debt / Equity Ratio
Like Infosys, Wipro too is a no debt company.
A little debt would benefit the company.
Long term debt / Shareholder’s funds
0 / 62762.3 = 0%
11. Propriety Ratio
Shareholder’s funds / Total Assets
Very high as per industry average. This shows
that they have a good equity base compared to
liabilities, like Infosys.
62762.3 / 85307.6 * 100 = 73.57%
12. Total Asset / Debt ratio
Total Assets / Debt
85307.6 / 0 = 0%
Wipro is a no debt company, thus, assets are
not needed to payoff debts.
SOLUTIONS FOR IMPROVING
1. INFOSYS
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Improve debt collection with better credit policies, early payment discounts etc.
Further reduce other current liabilities.
Increase cash and cash equivalents, through better collection, better payment terms etc.
Include some debt financing for better EPS.
Consider strategic investments for further growth and expansion of company.
2. WIPRO
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Reduce trade payables, by maintaining good supplies relations.
Reduce other current liabilities of the firm.
Better management of working capital.
Monitor debtor turnover to ensure good cashflow.
Like Infosys, a little bit of the debt financing would benefit the company EPS.