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Comment on the changes in total revenues and its components
In the year 2007 Infosys had made revenues of Rs.13530 crores, while in the year 2008,
it has made revenues of Rs. 16331 crores; a clear increase of Rs. 2801 crores (20.7 % up).
The total income includes:
• Income from software services and products
• Other incomes net that include interests received on deposits with banks,
dividends received on investments in liquid mutual funds and exchange gains
• Income on sale of investments, net of taxes
Find out expense as a ratio to revenues for both the years and comment
% Of revenue in % Of revenue in
Expenses 2007 2008
Software development expenses 55.35 56.72
Selling and marketing expenses 5.47 4.67
General and administration
expenses 7.05 6.9
While the expenses as a ratio of revenue has gone up in the area of software development,
it has reduced the selling and marketing expense and its general and administration assets.
Overall there has been a marginal increase of 0.42% in expense as a ratio of Revenues.
Identify the variation in profits and profitability of the business during the period
As we see in the above exhibit the profits per se have gone up by Rs. 687 crores, but the
profitability has gone up only marginally up by 0.15 percent. Profitability is given by the
percentage of profits to the sales revenue.
1
Compare the fixed assets to longterm liabilities and interpret the result
Infosys, being a cash rich company has no debts, However, the only items that would
classify as long term liabilities is the share capital of the company, which is Rs. 286
crores in both 2007 and 2008. Hence the company is in a comfortable condition when it
comes to payables. However the company has fixed assets worth Rs.3931 crores in 2008
and Rs.3107 crores in 2007. These fixed assts are funded from the reserves and surplus of
the company (profits) as there is no increase in the share capital of the company, nor there
is an increase in the longterm loans of the company.
Relate the current assets to current liabilities and comment
Current ratio is division of current assets by current liabilities
Current ratio = Current assets
Current liabilities
As we see in the above exhibit the currents assets have gone down by Rs. 844 crores,
while the current liabilities have gone up by 321 crores. As a result the current ratio has
gone down by 1.63%. An ideal current ratio in a business scenario would be 2:1. Infosys
has a current ratio of 3.28% in 2008 which clearly a good ratio. It would also mean that
the company has current assets that exceed the value of the current liabilities. Current
liabilities and current assets have to be paid in the short term or one business cycle.
Hence, it would mean that the current liabilities can be paid off by realizing some of the
current assets.