Ratio analysis of two

IT industries

INFOSYS

TCS
Ratio Analysis
It’s a tool which enables the banker or lender


to arrive at the following factors :

 Liquidity position
Profitability
Solvency
Financial Stability
Quality of the Management
Safety & Security of the loans & advances to
be or already been provided
How a Ratio is
expressed?
As Percentage - such as 25% or 50% . For example
if net profit is Rs.25,000/- and the sales is
Rs.1,00,000/- then the net profit can be said to be
25% of the sales.
As Proportion - The above figures may be
expressed in terms of the relationship between net
profit to sales as 1 : 4.
As Pure Number /Times - The same can also be
expressed in an alternatively way such as the sale is
4 times of the net profit or profit is 1/4th of the sales.
Classification of Ratios
Balance Sheet Ratio P&L Ratio or Balance Sheet and Profit
Income/Revenue & Loss Ratio
Statement Ratio

Financial Ratio Operating Ratio Composite Ratio

Current Ratio Gross Profit Ratio Fixed Asset Turnover
Quick Asset Ratio Operating Ratio Ratio, Return on Total
Proprietary Ratio Expense Ratio Resources Ratio,
Debt Equity Ratio Net profit Ratio Return on Own Funds
Stock Turnover Ratio Ratio, Earning per Share
Ratio, Debtors’ Turnover
Ratio,
 Current Ratio

It is the relationship between the current

assets and current liabilities of a concern.
Current Ratio = Current Assets
Current
Liabilities
TCS INFOSYS

Current assets (in crores) 7876.91 5507

Current Liabilities (in 3545.8 1162

crores)
Current Ratio 2.2:1 4.7:1
 Proprietory Ratio
T h is ra tio in d ica te s th e exte n t to
w h ich Ta n g ib le A sse ts a re fin a n ce d
b y O w n e r’ s Fu n d .
Proprietary Ratio = Proprietors
funds * 100
Total assets TCS INFOSYS

Proprietory Funds 8850.10 8388

Total assets 10788.5 8496

Proprietar 82.8% 98.73%

y Ratio
 Gross Profit Ratio
B y co m p a rin g G ro ss Pro fit p e rce n ta g e to N e t S a le s w e ca n
a rrive a t th e G ro ss Pro fit R a tio w h ich in d ica te s th e
m a n u fa ctu rin g e fficie n cy a s w e lla s th e p ricin g p o licy o f
th e co n ce rn
G ro ss Pro fit R a tio = G ro ss Pro fit * 100
S a le s
TC S INFOSYS

Gross Profit(in crores) 5367.90 5871

Net Sales(in crores) 18914.26 13149

Gross Profit Ratio 28.38% 44.65%

 Net Profit Ratio
It measures overall profitability.
Net Profit Ratio= Net profit *
100
Net sales

TCS INFOSYS

Net Profit (In crore) 4212.63 3783

Net Sales (In crore) 18914.26 13149

Net Profit Ratio 22.27% 28.77%

 Operating Ratio
Higher the ratio indicates operational efficiency

Operating Ratio = C O G S + O p e ra tin g E xp e n se s

* 100
N e t S a le s
TCS INFOSYS

Operating Expenses (in 5803.03 2575

crore)
Net Sales (in crore) 18914.26 5912

Operating Ratio 30.68% 43.55%

 Return On Shareholders Equity
Return On Shareholders Equity = Net Profit
* 100
Share-Holders fund

TC S IN FO S Y S

N e t Pro fit 4212.6 3783

S h a re -H o ld e rs Fu n d s 8850.10 11162

Return On Shareholders 47.59% 33.89%

Equity
Return on Capital Employed
 Average Capital Employed is the average of the equity share capital and
long term funds provided by the owners and the creditors of the firm at
the beginning and end of the accounting period.

 Return on capital employed = EBIT * 100
 capital employed


TC S IN FO S Y S

E B IT 4918.28 5104.38

C a p ita le m p lo ye d 9640.35 11162

Ratio 51.01% 45.73%

THANK –YOU

Niranjan S. Bapat
Kaushal Achtani