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FINANCIAL ANALYSIS OF MASTEK LIMITED
ORGANIZATIONAL CULTURE
Mastek believes in open atmosphere, which creates easy access for all the
employees of the organization across all levels and functions. As an
organization, Mastek Ltd. believes in seven values that are practiced
throughout the organization religiously:
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FINANCIAL ANALYSIS OF MASTEK LIMITED
Open Atmosphere
Outstanding Teamwork
Pride in Work
Respect for the Individual
Customer Intimacy
Ling-term Relationship
Commitment to Results
Offerings
Mastek Ltd. offers a range of solutions and services to its clients worldwide. It
offers services in the following verticals:
Insurance
Life Insurance
General Insurance
Pensions
Government / Public Sector
Financial Services Sector
Healthcare
SERVICES
Application Security
IT Consulting
Portals
Systems Integration
Data Warehousing & Business Intelligence
Custom Application Development
Application Management Outsourcing
System Rationalization
Testing
Legacy Modernization
CRM
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FINANCIAL ANALYSIS OF MASTEK LIMITED
INDUSTRY SOLUTIONS
STRENGTHS
There are several reasons why Mastek has become a successful name in
Indian software industry. The biggest strength of the organization is its strong
vertical focus. It also has got experiential IP in Government vertical. Besides
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FINANCIAL ANALYSIS OF MASTEK LIMITED
PERFORMANCE STANDARDS
Mastek has the following performance standards:
SEI CMMI Level 3
Delivery processes certified at ISO 9001-2008
ISO 27001:2005 (Information Security Management)
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FINANCIAL ANALYSIS OF MASTEK LIMITED
Profitability Sustainability
Operational Efficiency
Liquidity
Leverage (Funding Debt, Equity, Grants)
The ratios presented below represent some of the standard ratios used in
business practice and are provided as guidelines. Not all these ratios will
provide the information you need to support your particular decisions and
strategies. You can also develop your own ratios and indicators based on
what you consider important and meaningful to your organization and
stakeholders.
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FINANCIAL ANALYSIS OF MASTEK LIMITED
How well is our business performing over a specific period, will your social
enterprise have the financial resources to continue serving its constituents
tomorrow as well as today?
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FINANCIAL ANALYSIS OF MASTEK LIMITED
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FINANCIAL ANALYSIS OF MASTEK LIMITED
Indirect Costs (sales, general, admin) Look for a steady or decreasing ratio
Sales which means you are controlling
overhead
RETURN ON ASSETS = Measures your ability to turn assets
into profit. This is a very useful
Net Profit Average measure of comparison within an
Total Assets industry.
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FINANCIAL ANALYSIS OF MASTEK LIMITED
How efficiently are you utilizing your assets and managing your liabilities?
These ratios are used to compare performance over multiple periods.
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FINANCIAL ANALYSIS OF MASTEK LIMITED
Revenue
Average Fixed Assets
3. LIQUIDITY RATIOS
Does your enterprise have enough cash on an ongoing basis to meet its
operational obligations? This is an important indication of financial health.
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FINANCIAL ANALYSIS OF MASTEK LIMITED
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FINANCIAL ANALYSIS OF MASTEK LIMITED
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FINANCIAL ANALYSIS OF MASTEK LIMITED
CLASSIFICATION OF RATIO
1. Profitability ratio
Meaning:
Implementation:
Gross profit is result of the relation between price, sales volume and
costs. A change in the gross margin can be brought about by changes
in any of these factors.
The gross profit ratio can also be used in determining the extent of loss
caused by theft, spoilage, damage and so on in the case of those firms
which follow the policy of fixed gross profit margin in pricing their
product.
The gross margin represents the limit beyond which fall in sales price
are outside the tolerance limit.
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FINANCIAL ANALYSIS OF MASTEK LIMITED
INTERPRETATION:
As mentioned above the gross profit ratio indicates the relationship
between gross profit and net sales. Here from the table we can judge
the financial position of Maruti Suzuki year wise.
Here 6 consecutive years from 2004 to 2009 are taken into
consideration. The changes in the gross profit ratio in percent are as
follows.
Here, negative sign indicates that the percent is decreased compare to
immediate previous year, while positive sign indicates that the percent
is decreased in the gross profit compare to immediate previous year.
For consecutive four years the gross profit ratio is positive. It indicates
better financial position of the company.
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FINANCIAL ANALYSIS OF MASTEK LIMITED
A high net profit margin would ensure adequate return to the owners
as well as enable a firm to withstand adverse economic conditions
when selling price is declaiming, cost of production raising and a low
net profit margin has the opposite implication.
It indicates the portion of sales revenue is left to the proprietors after
all operating expenses are paid.
The higher the ratio, the better will be the profitability. In order to have
a better idea of profitability, the gross profit ratio and net profit ratio
may be simultaneously considered. If the gross profitability increases
over the five years but net profit is declining, it indicates that
administrative expenses are slowly rising.
Formula: Gross profit X 100
sales
Interpretation:
Here 6 consecutive years from 2004 to 2009 are taken into
consideration. The changes in the net profit ratio in percent are as
follows.
Higher the net profit ratio shows better financial position of the
company.
Due to various reasons this ratio goes down. If the administration
department is not sufficient then net profit ratio goes down or the
control mechanism is not efficient at all check points then also it
affects net profit of the company.
Net profit is the profit that is available to the proprietors of the firm
after clearing all outstanding and expenses. Thus, higher the ratio
yields higher profit.
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FINANCIAL ANALYSIS OF MASTEK LIMITED
Implementation:
Some accountants calculate expenses ratio in respected of raw
material consumed, direct wages and factory expenses.
It is closely related to the profit margin, gross as well as net.
Formula: Expenses X 100
sales
FOR EXPENSES RATIO
INTERPRETATION:
This ratio shows relationship between expanses to sales.
Above table shows that for the year 2004 05 it was 88.64 % the
increase in 2005 06 up to 89.23% that indicates there is increase in
operating expenses for the year 2006 07 it is 92.03% and it is higher
than previous year which shows increase in operating expenses.
This operating expense may be due to growth in the organization or it
may reflect inefficacy of administrative control on expenses.
Here negative sign shows decrease in operating expenses.
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FINANCIAL ANALYSIS OF MASTEK LIMITED
OPRATION RATIO
Particulars 2009 2008 2007 2006 2005 2004 2003
Operating 2114.8 1510.4 1244.21 900.15 801.54 786.54 840.88
Expenses
COGS 3498.6 3744.5 3197.01 2506.35 2160.04 1673.64 1168.58
Net Sales 20530.1 17891.6 14696.3 12015.9 10923.8 9104.4 7180.1
Operating 27.3423 29.3708 30.22 28.3499 27.1113 27.0219 27.9865
Ratio
INTERPRETATION:
This ratio shows relationship between COGS + operating expanses to
sales.
Above table shows that for the year 2004 05 it was 87.33 % the
increase in 2005 06 up to 86.90 % that indicates there is increase in
operating expenses for the year 2006 07 it is 83.89 % and it is lower
than previous year which shows increase in operating expenses.
In the year 2008-09 there is 28% increase in the operating expenses.
This is may be due to inefficient operation management and also there
may be some other expenses for sales or promotion may incur during
this year.
INTERPRETATION:
This ratio shows relationship between E B I T to CAPITAL EMPLOYED.
Higher the ratio, it is better for the company.
In the year 2008- 09 there is decrease of 43.15 percent in the gross
profit of the company. This show slow- down in companys sale. It is
due to recession during that period where an overall sale was affected.
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FINANCIAL ANALYSIS OF MASTEK LIMITED
INTERPRETATION:
The ratio indicates relationship between Net profits to share holders
fund therefore higher the returns to shareholders.
For the year 2004 05 it is 19.49 % that increase in the year 2005 06
up to 21.81 %.
This ratio shows downward trend in the ratio in return on shareholders
fund for this company.
For the financial year 2008-09 there is 85% increase in the ratio in
return on shareholders fund. Here, year 2008-09 shows marked
improvement that is why it is taken into consideration.
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FINANCIAL ANALYSIS OF MASTEK LIMITED
INTERPRETATION:
For the year 2004 05 it is 19.64 % that increase in the year 2005 06
up to 21.95%.
These ratios shows downward trend in the ratio in return on
shareholders fund for this company.
Here in the year 2008-09 there is decrease of 69% compared to
previous year in the ROI which shows upward trend in the company.
[1.9] Earning per share:
Meaning:
EPS measures the profit available to the equity shareholders on a per
share basis, that is, the amount that they can get on every share head.
This ratio shows the profitability of the firm from the owners point of
view. By comparing EPS of the current year with past years the path of
the trend of profitability can be ascertained.
It is essential that EPS of the company should be compared with the
other companies and also average of the company before giving final
opinion.
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FINANCIAL ANALYSIS OF MASTEK LIMITED
The limitation of EPS is that it does not show how much dividend is
actually paid to shareholders and how much profit is retained in
business.
Implementation:
Earning per share is a widely used ratio. EPS s a measure of profitability
INTERPRETATION:
This ratio indicates the earning per share for shareholders of company. In the
year 2004 05 ratio is 29.77 % and 2005 06 it is 41.43 % and its increase
on 2006-07 is 53.14%.therefore it is good for company as well as
shareholders.
INTERPRETATION:
This ratio indicates the total dividend declared to no. of shares. For the
year 2004 05 it is 2 % and 2005 06 is3.50 % and increase on 4.50
% in the year 2006 07.
For the year 2007-08 is 96% increased compared to previous year
while for the year 2008-09 it is decreased to 26.84%. Thus for the
current year it is decreased. It indicates slow-down in the financial
position of the company.
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FINANCIAL ANALYSIS OF MASTEK LIMITED
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FINANCIAL ANALYSIS OF MASTEK LIMITED
For the year 2007-08 the ratio is decreased by 109.9% and for 2008-09
it is increased by 76.51%. So for current situation is good for company
as well as shareholders.
INTERPRETATION:
This ratio indicates the EBDIT to interest. In the year 2004 05 ratio is
49.93 and 2005 06 it is 100.8 and its decrease on 68.85.therefore it is
good for company as well as shareholders.
For the year 2008-09 the interest covering ratio is 47.71 while for the
year 2007-08 it is 52.53.It is decreasing for the last 2 financial years
due to the fluctuation in for-ex.
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FINANCIAL ANALYSIS OF MASTEK LIMITED
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FINANCIAL ANALYSIS OF MASTEK LIMITED
Implementation:
This figure should be measured, as in the case of average inventory, on the
basis of the monthly average. It suggests that number of times the amount
of credit sale is collected during the year.
Formula: Credit sales
Avg. Debtors
INTERPRETATION:
Debtor turnover ratio indicates credit sales to avg. debtors.
In the year 2004 05 ratio is 20.69 and 2005 06 it is 23.69 and its
increase on 24.69 in the year 2006 07. Therefore, it is good position
for company.
In the year 2008-09 there is 1% decrease in the Debtors turnover ratio
compare to previous year and 2007-08 there is 17.91% increase in the
debtors turnover ratio.
How efficiently the amount is collected from the customers from the
credit sales.
As compare to previous year the no. of days collection period increase
which indicate inefficiency of collection department.
Lower the collection period and higher debtor turnover ratio is
advisable.
INTERPRETATION:
Creditor ratio indicates creditor to credit purchase. In the year 2004 05
ratio is 19.63 and 2005 06 it is 21.57 and its increase on 30.63 in the year
2006 07.In the year 2007-08 there is decrease on 22.38 times i.e. decrease
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FINANCIAL ANALYSIS OF MASTEK LIMITED
INTERPRETATION:
Creditor ratio indicates creditor to credit purchase. In the year 2004
05 ratio is 18.59 and 2005 06 it is 16.92 and its increase on 11.91 in
the year 2006 07. Therefore, it is good position for company.
During the year 2007-08 ratio is 16.30. It increases in compare to
previous financial year thus it indicates good position of the company.
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FINANCIAL ANALYSIS OF MASTEK LIMITED
INTERPRETATION:
Stock turnover ratio indicates cost of goods sold to average stock.
In the year 2004 05 ratio is 17.36 times and 2005 06 it is 14.43
times and its increase on 20.80 times in the year 2006 07.
For the year 2008-09 and 2007-08 the ratio are 23.05 times and 17.3
times respectively. It is more in 2008-09 compare to 2007-08. It
indicates better position of the company.
Therefore, it is good for company. How efficiently stock rate in the year
Higher the ratio, better position of the company as well as efficiency.
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FINANCIAL ANALYSIS OF MASTEK LIMITED
3. Liquidity Ratio:
[3.1] Current Ratio:
Meaning:
The current ratio is the ratio of total current assets to total current
liability. It is calculated by dividing current assets by current liability.
It is also known as a working capital ratio, as it is measure of working
capital available at a particular time. It is a measure of short term
financial strength of the business and shows whether the business will
be able to meet its current liabilities, as and when they mature.
Implementation:
The current ratio of a firm measures its short term solvency. That is a
measure of margin of safety to the creditors. The fact that a firm can rarely
count on such an even flow requires that the size of the C.A. should be
sufficiently larger than C.L. so that the firm would be assured of being able to
pay its current maturing debts as and when it becomes due.
Formula: Current Assets
Current liability
INTERPRETATION:
Current ratio indicates current assets to current liability. In the year
2004 05 ratio is 1.84: 1 and 2005 06 it is 1.89: 1 and its decrease
on 1.43: 1 in the year 2006 07. Therefore, it is good for company.
For the year 2008-09 the ratio is 1.61:1 and for the year 2007-08 it is
1.61:1. So for the year 2008-09 it is good as ideal is 2:1 and 1.61:1
closer to ideal one.
Mainly 2:1 is good. It indicates, repaying condition of the company to
the current liabilities. The standard current ratio must be 2:1.
[3.2] Liquid Ratio:
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FINANCIAL ANALYSIS OF MASTEK LIMITED
Meaning:
It is obtained by dividing the liquid assets by liquid liabilities.
It liquid ratio is designed to show the amount of cash available to meet
immediate payments.
If the liquid assets are equal to or more than liquid liabilities, the
condition may be considered as satisfactory.
Implementation:
The importance of adequate liquidity in the sense of the ability of a
firm to meet short term obligations when they become due for
payment can hardly be overstressed.
In fact liquidity is a prerequisite for the very survival of a firm. It
measures ability of a firm to meet its short term obligations and reflect
the short term finance strength of a firm.
Formula: Liquid assets
Liquid liability
INTERPRETATION:
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FINANCIAL ANALYSIS OF MASTEK LIMITED
Liquid ratio indicates liquid assets to liquid liability. In the year 2004 05
ratio is 1.43: 1 and 2005 06 it is1.44: 1 and its decrease on 1.21: 1 in the
year 2006 07. Therefore, it is good for company. How effectively the liability
paid off. For the year 2008-09 the ratio is 1.35:1 which shows slight better
condition compare to FY 2004-05.The standard liquidation must be 1:1.
INTERPRETATION:
Quick acid test ratio is indicates quick assets and liquid liability. In the year
2004 05 ratio is 1.84: 1 and 2005 06 it is 1.89: 1 and its decrease on 1.4:
1 in the year 2006 07. Therefore, it is good for company.
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FINANCIAL ANALYSIS OF MASTEK LIMITED
INTRODUCTION OF LEVERAGE
Investors in a business like for the business to use debt financing but only up
to a point. Beyond a certain point, investors get nervous about too much
debt financing as it drives up the company's default risk.
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FINANCIAL ANALYSIS OF MASTEK LIMITED
DEFINITION OF 'LEVERAGE'
Leverage is most commonly used in real estate transactions through the use
of mortgages to purchase a home.
TYPES OF LEVERAGE
On the basis of nature of risk associated with the investing and financing
activities of a firm, leverage can be divided or classified as follow:
1. OPERATING LEVERAGE
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FINANCIAL ANALYSIS OF MASTEK LIMITED
Operating leverage is used to measure the business risk. Business risk is the
risk of the firm not being able to cover its fixed operating costs.
2. FINANCIAL LEVERAGE
Financial leverage is related with the financing activities of a firm. The fixed
return sources of capital influence the earning of variable return sources. The
effect is known as financial leverage.
Financial leverage is used to measure the financial risk. Financial risk refers
to the risk of the firm not being able to cover its fixed financial costs.
3. COMBINED LEVERAGE
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FINANCIAL ANALYSIS OF MASTEK LIMITED
1. Proprietary ratio:
Meaning:
The ratio shows the proportion of proprietors funds to the total assets
employed in known in the proprietary ratio.
Implementation:
Proprietary ratio helps to known how many proprietary funds to total
assets.
The higher the ratio, the stronger the financial position of the
enterprise, as it signifies that the proprietors have provided larger
funds to purchase assets. This ratio cannot exceed 100%; it means that
the business does not use any outside funds. There are no outside
liabilities. Purchases are made for cash only and firm carries business
entirely from own funs only. A very high ratio therefore is not desired
as it shows insufficient use of outside fund is made.
Generally it is said that proprietors fund should be enough to cover
fixed assets. And also reasonable proportion must be maintained
between owned funds and borrowed funds, so the benefit of trading on
equity is obtained. Which in turn increase the rate of equity dividend.
Formula: Proprietary fund
Net asset
FOR PROPEIETARY RATIO
Particulars 2009 2008 2007 2006 2005 2004 2003
Total 9344.9 8415.4 6853.9 5452.6 4378.8 3591.2 3098
Proprietary
Funds
Total Assets 10043.8 9315.6 7484.7 5524.3 4686.4 3903.1 3554
Proprietary 93.0414 90.3366 91.5721 98.7020 93.4363 92.0089 87.1693
Ratio 7832 3962 405 98 2639 1599 8661
INTERPRETATION:
This ratio indicates the proprietary funds to total assets. For the year 2006
07 it is 91.57 % and 2007 08 is90.33 % and increase in 2008 09 it is 93.04
%. This is a good for company.
2. Debt equity ratio:
Meaning:
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FINANCIAL ANALYSIS OF MASTEK LIMITED
Implementation:
INTERPRETATION:
This ratio indicates the debt to equity ratio. For the year 2004 05
it is 8 %and 2005 06 is 4 % and increase in 2006 07 it is 6%.
This is a bad for company as compare to 2005-06 year is more
debt ratio which indicate the more realize on debt fund rather
owned fund. The good impact is interest burden will be more
indirectly.
For the year 2008-09 and 2007-08 the debt equity ratio is 9% and
10% respectively.
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FINANCIAL ANALYSIS OF MASTEK LIMITED
he rapid increase in the amount of current assets indicates that the retail
chain has probably gone through a rapid expansion over the past few years
and added both receivables and inventory. The sudden jump in current
liabilities in the last year is particularly disturbing, and is indicative of the
company suddenly being unable to pay its accounts payable, which have
correspondingly ballooned. The acquirer elects to greatly reduce her offer
for the company, in light of the likely prospect of an additional cash infusion
in order to bring its operations onto an even keel.
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FINANCIAL ANALYSIS OF MASTEK LIMITED
The first factor evaluated in any investment analysis is risk. The reason for
this is simple: if the risk of the investment is too great then loss is quite
likely. In this case, cash flows and resale value generally do not matter
because the investment is worth nothing. To evaluate risk, one simply uses a
variation of this formula:
Despite this, risk is not a definite factor. One must evaluate all the factors
related to the investment: market, industry, governmental, company, and
more. In this way evaluating risk is as much of an art as a science.
The second factor of investment analysis is cash flows. Cash flows occur in
many ways: dividends from a publicly traded stock, interest payments on a
bond, or even free cash flow which can be distributed to the investors in a
small business (again, in the form of dividends). Cash flows are one of the
methods of repayment on an investment. Thus, an investor will want to
evaluate cash flows to see if they repay the investment while also repaying
the assumed value of the risk on the investment. Many methods of
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FINANCIAL ANALYSIS OF MASTEK LIMITED
evaluating cash flows exist:future value of cash flows, Discounted Cash Flow
Analysis, and others provide each investor with a method of analysis based
in the type of investment being considered. Regardless, ignoring the analysis
of cash flows is a quick path to loss of investment capital.
The third factor of investment analysis is resale value. Profit from resale is
made through a gain in the market value of the asset. When the asset is sold
to another investor for a value higher than the original purchase price, profit
from resale value has occurred. In the process of investment analysis, an
investor will want to measure the expected rate of growth on the asset to
make sure that the value of this and any associated cash flows are larger
than the loss of investment and the estimated value of the risk of the
investment.
The study of how an investment is likely to perform and how suitable it is for
a given investor. Investment analysis is key to any sound portfolio-
management strategy. Investors not comfortable doing their own investment
analysis can seek professional advice from a financial advisor.
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FINANCIAL ANALYSIS OF MASTEK LIMITED
the investment decision. Key factors should include entry price, expected
time horizon, and reasons for making the decision at the time.
REFERENCE
WEBLIOGRAPHY
WWW.GOOGLE.COM
WWW.SLIDSHARE.COM
WWW.INVESTOPIDIA .COM
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