1

Comparing Annual Report of Mahindra Satyam

and Infosys for the YEAR 2011-12
Evaluation of Financial Performance in 2011-12
Date: Dec 07, 2012
Vs
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Financial Performance Evaluation for the YEAR 2011-12
GROUP MEMBERS
Sanjay Ghosh [11]
Kaushik Ganguly [03] Arghya Basu Adhikary [41]
Avash Chakraborty [17]
Chiranjib Rudra [05]
Tathagata Ghosh Nirmal Yadav [07]
Sandip Ghosh [22]
Anthony Gomes [13]
3
Financial Performance Evaluation for the YEAR 2011-12
Serial
No.
Topic
1 A General Overview
I.The Balance Sheet
II.Statement of Profit and Loss
2 Liquidity Ratio
I.Current Ratio
II.Acid Test Ratio
III.Proprietary Ratio
3 Capital Structure Ratio
I. Fixed assets to long term funds ratio
II. Debt Equity Ratio
III. Shareholders Equity Ratio
4 Profitability Ratio
I.Net Profit Margin
II.Net Profit Ratio
III.Cash Profit Ratio
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Financial Performance Evaluation for the YEAR 2011-12
This project is prepared to analyze the financial performance of the two major
Multinational Company namely - Mahindra Satyam and Infosys from their respective
Balance Sheet and Statement of Profit and loss for the Year Ended March 31, 2012.
Here we have compared the various financial ratios from the accounting
statement. Financial ratios quantify many aspects of a business and are an integral part
of the financial statement analysis. Financial ratios are categorized according to the
financial aspect of the business which the ratio measures. Like Liquidity ratios measure
the availability of cash to pay debt. Profitability ratios measure the firm's use of its
assets and control of its expenses to generate an acceptable rate of return. Market
ratios measure investor response to owning a company's stock and also the cost of
issuing stock.

A General Overview
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Financial Performance Evaluation for the YEAR 2011-12
The Balance Sheet :-
The Balance Sheet for accounting is an extremely important and often used statement
of entity condition. It shows the extent of entity ownership of assets, liability and
equity at a given point in time.
The balance sheet shows what the business has (assets) and what the
business owes against those assets (liabilities). The difference between the assets
and the liabilities shows the net worth of the business. The net worth of the business
is important as it is a measurement of the time the business is expected to stay in
financial power. The balance sheet also provides the business with information on
how best it is able to pay its debts. The balance sheet assists the managers of
businesses in making decisions regarding purchasing of equipments for the
business. They use them to assure the business is complying with laws, regulations
and taxing requirements.
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Financial Performance Evaluation for the YEAR 2011-12
Statement of Profit and Loss :-

The Profit and Loss Account or Income Statement is prepared to ascertain overall result
of business activities for an accounting year. This account presents all the revenues or
incomes and all expenses for earning that revenue.
The major aim of the business entity is to earn profit. Hence, profit and loss
account is prepared to calculate the net profit or net loss of the business. This
statement lists all sales, cost-of-goods (COGS), and expenses generated by the
company for the current accounting period. Most companies generate monthly and
yearly P&Ls for review by management and outside users.
Thus Profit and Loss account summarizes the results of operations for the
given accounting period whereas Balance Sheet represents the financial status of an
enterprise at a particular point of time.


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Financial Performance Evaluation for the YEAR 2011-12
Liquidity Ratio :-

Current ratio- It is the test of a company's financial strength. It is the liquidity ratio
that measures a company's ability to pay short-term obligations. It calculates what
amount of money in assets are likely to be converted to cash within one year in order
to pay debts that come due during the same year. It is also called the liquidity ratio.




Current Asset
Current Liability
Current Ratio =

1 : 30 . 2
23070
53136

Calculation of Current Ratio for Mahindra Satyam
for the Year Ended March 31, 2012.
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Financial Performance Evaluation for the YEAR 2011-12



Current Asset
Current Liability
Current Ratio =

1 : 72 . 4
6037
28465

High current ratio means adverse impact on the profitability of the organisation it
may be due to the inefficiency in collection of debtors, high balance in cash, bank
account without proper investment, piling up of huge inventory. So from the above
we conclude that Mahindra Satyam is more profitable.

Calculation of Current Ratio for Infosys for the Year
Ended March 31, 2012.
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Financial Performance Evaluation for the YEAR 2011-12
Liquidity Ratio :-

Acid Test Ratio-It is the stringent test of liquidity and is also called the quick ratio.
The acid-test ratio is a measure of how well a company can meet its short-term
financial liabilities. The ratio is found by dividing the most liquid current assets (cash,
marketable securities, and accounts receivable) by current liabilities. The Acid-Test
ratio provides a more rigorous assessment of a company's ability to pay its current
liabilities.



Current Asset - Stock
Current Liability-BOD
Acid Test
Ratio =

3 . 2 296 . 2
23070
52990
0 23070
146 53136

Calculation of Acid Test Ratio for Mahindra

Satyam for the Year Ended March 31, 2012.
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Financial Performance Evaluation for the YEAR 2011-12




Current Asset - Stock
Current Liability-BOD
Acid Test
Ratio =

1 : 72 . 4
0 6037
0 28465

Companies with ratios of less than 1 cannot pay their current liabilities and should
be looked at with extreme caution. This is a crosscheck comparison with current
ratio to assess the inventry position. Lower ratio means higher solvent position of
the company.
Calculation of Acid Test Ratio for Infosys for
the Year Ended March 31, 2012.
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Financial Performance Evaluation for the YEAR 2011-12
Liquidity Ratio :-

The proprietary ratio- (also known as the shareholders equity ratio) is the proportion
of shareholders' equity to total assets, and as such provides a rough estimate of the
amount of capitalization currently used to support a business. If the ratio is high, this
indicates that a company has a sufficient amount of equity to support the functions of
the business, and probably has room in its financial structure to take on additional
debt, if necessary.



Shareholders Funds
Total tangible assets
Proprietary Ratio =
1 : 39 . 4
7535
33142

Calculation of Proprietary Ratio for Mahindra
Satyam for the Year Ended March 31, 2012.
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Financial Performance Evaluation for the YEAR 2011-12
Where,
Shareholder funds = Share capital + Reserves Fictitious Assets
= (2354 + 30788 0) = 33142
1 : 4 . 7
4045
29757

Larger the proportion of shareholders equity(funds), the stronger is the
financial position of the firm. This ratio indicate the degree to which
insecured creditors are protected against the loss in the event of
liquidation.So in this case Infosys has better protection .

Calculation of Proprietary Ratio for Mahindra
Satyam for the Year Ended March 31, 2012.
Proprietary Ratio
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Financial Performance Evaluation for the YEAR 2011-12
Fixed Asset to Long Term Fund Ratio:-

Fixed assets to long term funds ratio establishes the relationship between fixed
assets and long-term funds and is calculated by dividing fixed assets by long term
funds

Fixed Assets
Long-term Funds

Fixed Asset to long
term fund ratio=
201 .
37379
7535
4237 30788 2354
0 7535

Where, Fixed Assets = Tangible Assets + Intangible Assets

Long-term Funds = share capital + reserves & surplus + long term loans
Fixed Asset to long
term fund ratio
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Financial Performance Evaluation for the YEAR 2011-12
Fixed Asset to Long Term Fund Ratio:-




Fixed Asset to long
term fund ratio
130 .
1431 29470 287
16 4045

Calculation of Fixed Asset to Long Term Fund

Ratio for Infosys for the Year Ended March 31,
2012.
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Financial Performance Evaluation for the YEAR 2011-12
Debt Equity Ratio:-

It indicates the relationship between the external equities or outsiders funds and the
internal equities or shareholders funds. The two basic components of debt to equity
ratio are outsiders funds i.e. external equities and share holders funds, i.e., internal
equities.

Debt
Equity
All external longterm liabilities
Share Capital and all resources and provisions
Debt Equity ratio=
000693 .
33142
23

Debt Equity ratio=
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Financial Performance Evaluation for the YEAR 2011-12
Debt Equity Ratio:-

INFOSYS:-

Debt
Equity
= All external longterm liabilities
Share Capital and all resources and provisions
Debt Equity ratio=
000705 .
1417
1
29757
21

Justification-Higher Ratio is considered a risky position of the firm as more
debt is involved. Lower ratio indicates a sound financial position of the fund
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Financial Performance Evaluation for the YEAR 2011-12
Capital Structure Ratio:-

Shareholders Equity Ratio :-It is the ratio of total company equity held by
shareholders to the total value of assets held by the company. This ratio reflects how
much money shareholders would receive if all company assets were liquidated, and is
used to determine how much of the company's assets are owned by shareholders.




Shareholders Equity
Total Tangible Asset



Shareholders Equity Ratio =
1 : 4 . 4
7535
33142

Calculation of Shareholders Equity Ratio for

Mahindra Satyam for the Year Ended March 31, 2012.
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Financial Performance Evaluation for the YEAR 2011-12
Capital Structure Ratio:-




Shareholders Equity
Total Tangible Asset



1 : 4 . 4
7535
33142

Calculation of Shareholders Equity Ratio
for Infosys for the Year Ended March 31,
2012.
Shareholders Equity Ratio =
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Financial Performance Evaluation for the YEAR 2011-12
Profitability Ratio:-

Net Profit Margin :-It is used to measure the overall profitability and hence it is
very useful to proprietors. The ratio is very useful as if the net profit is not sufficient,
the firm shall not be able to achieve a satisfactory return on its investment.






Net Profit Margin= (PBIT/Net Sales)*100
% 20 . 20 100
59643
12049

Calculation of Net Profit Margin for Mahindra
Satyam for the Year Ended March 31, 2012.
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Financial Performance Evaluation for the YEAR 2011-12
Profitability Ratio:-







Net Profit Margin= (PBIT/Sales)*100
% 5 . 35 100
31254
11096

Calculation of Net Profit Margin for Infosys
for the Year Ended March 31, 2012.
This ratio measures the efficiency of operation of selling and distribution
of expenses.
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Financial Performance Evaluation for the YEAR 2011-12
Profitability Ratio:-

Net Profit Ratio :-It is used to measure the overall profitability and hence it is very
useful to proprietors. The ratio is very useful as if the net profit is not sufficient, the
firm shall not be able to achieve a satisfactory return on its investment.






Net Profit Ratio= (Net Profit/Sales)*100
% 16 . 20 100
59643
12028

Calculation of Net Profit Ratio for Mahindra
Satyam for the Year Ended March 31, 2012.
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Financial Performance Evaluation for the YEAR 2011-12
Profitability Ratio:-







Net Profit Ratio= (Net Profit/Sales)*100
% 10 . 27 100
31254
8470

Calculation of Net Profit Ratio for Infosys
for the Year Ended March 31, 2012.
This ratio also indicates the firm's capacity to face adverse economic
conditions such as price competition, low demand, etc. Obviously, higher
the ratio the better is the profitability. Hence from the above we can
conclude that Infosys has a higher profitability.
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Financial Performance Evaluation for the YEAR 2011-12
Profitability Ratio:-

Cash Profit Ratio :-It is the measurement of cash generation in the business as a
result of the operations expressed in terms of sales. This ratio is more reliable
indicator of performance where there are sharp volatility in the profit before tax.






Cash Profit Ratio=
% 67 . 22 100
59643
1494 12028

Calculation of Cash Profit Ratio for Mahindra

Satyam for the Year Ended March 31, 2012.
100
Pr

NetSales
on Depreciati ofit Net
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Financial Performance Evaluation for the YEAR 2011-12
Profitability Ratio:-







Cash Profit Ratio=
% 64 . 29 100
31254
794 8470

Calculation of Cash Profit Ratio for Infosys for

the Year Ended March 31, 2012.
100
Pr

NetSales
on Depreciati ofit Net
So from the above we can say that Infosys has a better cash profit ratio
than Mahindra Satyam
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Financial Performance Evaluation for the YEAR 2011-12
Conclusion :-

From the above we can come to conclusion that for certain financial aspects
Mahindra Satyam has performed better but in some other Infosys has done well.
Thus Financial statements are mainly prepared for decision making
purposes. Analysis of financial statements is an attempt to assess the efficiency and
performance of an enterprise.







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Financial Performance Evaluation for the YEAR 2011-12