FINANCIAL STATEMENT ANALYSIS ASSIGNMENT

Report on analysis of
annual report of Infosys

Submitted by

Roshan chaudhary

PRN- 17021141127
Infosys
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Infosys International Inc. has solid reputation as a business and as a information technology
consulting company.

Vision

To be globally respected corporation that provides best of breed business solutions, leveraging
technology delivered by best in class people.

Mission

To achieve our objectives in an environment of fairness, honesty and courtesy towards our
clients, employees, vendors and society at large.

Qualitative analysis

This deals with the analysis of qualitative characteristics of the company, which are highly
subjective in nature. For instance the quality of management, corporate governance practices,
ethics, reputation in the market, brand value, consistency of business strategies, etc.

While going through the annual report it was observed that Infosys talk a lot about Automation
and Design Thinking. Automation, especially, seems to be a big focus for the IT company as part
of its efforts to improve efficiencies in this world of changing technology. Going forward, this is
expected to help reduce costs for the company and improve profit margins.

Infosys is also on a cost-optimisation spree to help improve profit margins. Some of these
measures include traditional methods like improving the utilisation and reducing the number of
employees who are benched. This is a departure from the usual IT company behaviour to hire
more employees than required and benching them. The idea is to ensure the company is always
ready for more work. However, it leads to extra costs as the company has to pay these benched
employees monthly salaries. Infosys is challenging this notion and reducing its bench. Infosys
is also considering other measures like having more low-level employees than senior managers
and reducing the number of employees sent abroad for costlier, onsite projects.
 Quantitative analysis

Mostly deals with financial performance or other business metrics. For this we require certain
data sources or inputs about the company. The most common data sources are:-

Income Statement

Balance Sheet &

Cash Flow Statement

Going through the balance sheet of the Infosys, it was observed that the non- current assets has
increased in 2017 as compared to 2016 and 2015. It was noticed that the short term
investments in the current year has enormously increased to the tune of 9,643 crores from just
2 crore in 2016 while the loans in current year has decreased to 310 crore from 355 crore in
the previous year. Overall, the total assets of Infosys has increased in the current year as
compared to last year. It was also observed that the equity share capital has remained
unchanged in the current year and the total equity and liabilities has also increased at present
as compared to last year.

While Infosys optimizes its cost to improve profits, there are some factors that can offset any
gains. Three major factors are rise in depreciation charges, potentially higher variable
compensation as against 75-80% in FY16 and absence of rupee depreciation. We can see 50-
60 bps (0.5-0.6%) risk to EBIT margin in FY2017 in the absence of rupee depreciation. EBIT
or Earnings Before Interest and Taxes represents the companys profits from its core
operations. EBIT margin, thus, helps measure the companys operating profit margin the
percentage of revenue that the company pockets as operating profits.

From consolidated statement, it was observed that revenue has increased in the current year.
Also, net profit, basic EPS and book value per share has also increased. Also, liquid assets has
increased while the ROE has decreased in the current year compared to last year.