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  1. 1. 1 PROJECT REPORT ON “COMPARATIVE STUDY OF FINANCIAL STATEMENTS OF INFOSYS FOR THE YEAR 2013-2014” Submitted to University of Mumbai In Partial Fulfillment of the Requirement For M.Com (Accountancy) Semester I In the subject Financial Accounts By Name of the student : - Vivek ShriramMahajan Roll No. : - 14 -7288 Name and address of the college K. V. Pendharkar College Of Arts, Science & Commerce Dombivli (E), 421203 NOVEMBER 2014
  2. 2. 2 DECLARATION I VIVEK SHRIRAM MAHAJAN Roll No. 14 – 7288, the student of M.Com (Accountancy) Semester I (2014), K. V. Pendharkar College, Dombivli, Affiliated to University of Mumbai, hereby declare that the project for the subject Financial Accounts titled “COMPARATIVE STUDY OF FINANCIAL STATEMENTS OF INFOSYS FOR THE YEAR 2013-2014” submitted by me to University of Mumbai, for semester I examination is based on actual work carried by me. I further state that this work is original and not submitted anywhere else for any examination. Place : Dombivli Date: Signature of the Student Name: - Vivek Shriram Mahajan Roll No: - 14 -7288
  3. 3. 3 ACKNOWLEDGEMENT It is a pleasure to thank all those who made this project work possible. I Thank the Almighty God for his blessings in completing this task. The successful completion of this project is possible only due to support and cooperation of my teachers, relatives, friends and well-wishers. I would like to extend my sincere gratitude to all of them. I am highly indebted to Principal A.K.Ranade, Co-ordinater P.V.Limaye, and my subject teacher Tejashree Gawde for their encouragement, guidance and support. I also take this opportunity to express sense of gratitude to my parents for their support and co-operation in completing this project. Finally I would express my gratitude to all those who directly and indirectly helped me in completing this project. Name of the student Vivek Shriram Mahajan
  4. 4. 4 TABLE OF CONTENTS CHAPTER No Topic Page no CHAPTER 1 Introduction Introduction to Subject ………………………… Introduction to Infosys Ltd………… 5 7 CHAPTER 2 Balance Sheet Meaning of Balance sheet……………………….. Comparative Balance Sheet of Infosys………….. 14 15 CHAPTER 3 Income Statement Meaning of Income Statement……………………… Comparative Income Statement of Infosys…………. 16 17 CHAPTER 4 CashFlow Statement Meaning of Cash flow statement………………… Cash Flow Statement of Infosys ……………………. 18 20 CHAPTER 5 Comments Comments Regarding the Prospectus of the Company... 21 Conclusion 22
  5. 5. 5 CHAPTER 1: Introduction Introduction to Subject “Comparative financial statements are accounting reports that show more than just the current- year activity or balances. The three major financial statements are the balance sheet, the income (or profit and loss) statement and the cash flow statement. Comparative statements are required in order to comply with generally accepted accounting principles. They give readers a more complete view of the direction of the company over time.” Financial statements are a collection of reports about an organization's financial results and condition. They are useful for the following reasons: • To determine the ability of a business to generate cash, and the sources and uses of that cash. • To determine whether a business has the capability to pay back its debts. • To track financial results on a trend line to spot any looming profitability issues. • To derive financial ratios from the statements that can indicate the condition of the business. • To investigate the details of certain business transactions, as outlined in the disclosures that accompany the statements. The standard contents of a set of financial statements are: • Balance sheet shows the entity's assets, liabilities, and stockholders’ equity as of the report date. • Income statement shows the results of the entity's operations and financial activities for the reporting period. • Statement of cash flows shows changes in the entity's cash flow during the reporting period. • Supplementary notes. Includes explanations of various activities, additional detail on some accounts, and other items as mandated by GAAP or IFRS. If a business plans to issue financial statements to outside users (such as investors or lenders), the financial statements should be formatted in accordance with one of the major accounting frameworks, such as GAAP or IFRS. These frameworks allow for some leeway in how financial statements can be structured, so statements issued by different firms even in the same industry are likely to have somewhat different appearances.
  6. 6. 6 If financial statements are issued strictly for internal use, there are no guidelines, other than common usage, for how the statements are to be presented. At the most minimal level, a business is expected to issue an income statement and balance sheet to document its monthly results and ending financial condition. The full set of financial statements is expected when a business is reporting the results for a full fiscal year. Comparative financial statements are the complete set of financial statement that an entity issues, revealing information for more than one accounting period. The financial statements that may be included in this package are: • The income statement (showing results for multiple periods) • The balance sheet (showing the financial position of the entity as of more than one balance sheet date) • The statement of cash flow (showing the cash flows for more than one period) Another variation on the comparative concept is to report information for each of the 12 preceding months on a rolling basis. Comparative financial statements are quite useful for the following reasons: • Provides a comparison of an entity's financial performance over multiple periods, so that you can determine trends. The statements may also reveal unusual spikes in the reported information that can indicate the presence of accounting errors. • Provides a comparison of expenses to revenues and the proportions of various items on the balance sheet over multiple periods. This information can be useful for cost management purposes. • May be useful for predicting future performance, though you should rely more on operational indicators and leading indicators than on historical performance for this type of analysis. It is customary to issue comparative financial statements with additional columns containing the variance between periods, as well as the percentage change between periods. The Securities and Exchange Commission requires that a publicly held company use comparative financial statements when reporting to the public on the Form 10-K and Form 10-Q.
  7. 7. 7 Introduction to Infosys Infosys Technologies is one of the few Indian companies that have changed the way the world looks at India. Infosys Ltd (formerly Infosys Technologies) is an Indian multinational corporation that provides business consulting, information technology, software engineering and outsourcing services. It is headquartered in Bangalore, Karnataka. Infosys is the third-largest India-based IT services company by 2014 revenues, and the fifth largest employer of H-1B visa professionals in the United States in FY 2013. On 31 March 2014, its market capitalization was 188,510 crores ($31.11 billion), making it India's fifth largest publicly traded company. Infosys was co-founded in 1981 by Narayan Murthy, Nandan Nilekani, N. S. Raghavan, S. Gopalakrishnan, S. D. Shibulal, K. Dinesh and Ashok Arora after they resigned from Patni Computer Systems. The company was incorporated as "Infosys Consultants Pvt Ltd." with a capital of Rs. 10,000 (roughly $250) in Model Colony, Pune as the registered office and signed its first client, Data Basics Corporation, in New York in 1983, the company's corporate headquarters was relocated to Bangalore. Change in name: It changed its name to "Infosys Technologies Private Limited" in April 1992 and to "Infosys Technologies Limited" when it became a public limited company in June 1992. It was later renamed to "Infosys Limited" in June 2011. Infosys has many firsts to its name: The first Indian firm to list on NASDAQ; the first to offer STOCK options to its employees. The company crossed $1 billion in revenues for the first time in 2004. TCS, however, was the first Indian IT firm to top $1-bn in revenues. Infosys is an organization that inspires awe and respect, globally. Infosys has pioneered many best practices and set standards in corporate governance and HR management. As a key player in the knowledge industry, Infosys has recognized the value of its human assets in maintaining and increasing its strategic competitiveness. Infosys goes the whole hog in ensuring that their employees take pride in working with them.
  8. 8. 8 25 years sheer determination, and growth? In the last 25 years, Infosys has been growing and growing. Today, Infosys is India's second largest software exporter. It now enjoys a strong liquidity position with over Rs 6,000 crore (Rs 60 billion) in assets, including surplus cash. During 2005-2006, the Infosys internal cash accruals more adequately covered working capital requirements, capital expenditure and dividend payments leaving a surplus of Rs 1,612 crore (Rs 16.12 billion). As on March 2006, the company had liquid assets including investments in liquid mutual FUNDS of Rs 4,463 crore (Rs 44.63 billion). This collectively makes the liquidity strength of Infosys at Rs 6,078 crore (Rs 60.78 billion). Infosys had taken over Philips' finance and administration business process outsourcing (BPO) centers spread across India, Poland and Thailand for USD 28 million. Infosys Technologies has 47% of core business assets stagnating. The company scanning the markets of Europe and Japan for acquisitions in the price bands of USD 200 - USD 300 million to energies their non-linear business strategy as well as to expand its geographic reach. Infosys set up various Special Economic Zone that for the company has an additional tax benefit. They set up another Special Economic Zone unit in Chandigarh which will be eligible for 100 % deduction of profit from exports tax calculation for the first five years followed by 50% deduction for next five years. Infosys has been pursuing their expansion plans over the past few years. The future enhancement of the company is to emerge the developing economies changing the business landscape with help of accessible talent pools and the adoption of non-linear growth model, it is a long term strategy. In November 12, 2009, the company and NVIDIA Corp. entered into a partnership to develop NvidiaCuda to compute unified device architecture and technology-enabled software solutions. Also, the company signed a contract with Georgia-Pacific LLC (Georgia-Pacific), a forest and consumer products company, to implement its Supply Chain Visibility and Collaboration Suite. In December 2009, the company has set up a wholly owned unit in the U.S. to tap the multibillion dollar opportunities from government projects. The subsidiary, called Infosys Technologies Inc, will be headquartered in Dallas, Texas, where the company has most of their operations.
  9. 9. 9 In December 14, 2009, the company launched Flypp, an application platform which will empower mobile service providers to delight digital consumers through a host of ready-to-use experiential applications across the universe of devices and in December 15, 2009, they launched Finacle Advisor, an integrated platform which helps banks to deliver products and services through a fully assisted self-service channel using existing Internet banking capabilities. Also, the company incorporated a wholly owned Brazilian subsidiary, namely Infosys Techno logia Do Brasil Ltda. During the year 2009-10, Infosys Consulting Inc incorporated a wholly-owned subsidiary, Infosys Consulting India Ltd and invested Rs 1 crore in the subsidiary. SETLabs' IP Cell filed 31 patent applications in the United States Patent and Trademark Office (USPTO) and Indian Patent Office. In December 2009, Infosys BPO acquired 100% voting interests in McCamish Systems LLC (McCamish), a business process solutions provider based at Atlanta, US.. During the year 2010-11, the company formally launched their new corporate strategy, Building Tomorrow's Enterprise to showcase our plan for leading the services industry into the new era as the next generation global consulting and services company. In November 2011, Atlas Copco AB entered into an agreement with the company to handle parts of its financial processes, such as accounting to reporting and processing of supplier invoices. The project will affect approximately 230 positions within Atlas Copco, and of these Infosys will offer employment to around 70 staff working in the Czech Republic. The transition of services to Infosys is planned to begin on November 16, 2011. In December 2011, the company signed a multi-year Transformation and Business IT services contract with Syngenta AG. In a landmark contract that will provide consistency and predictability of service delivery, Infosys will consolidate Syngenta's Global Business IT services landscape under a single shared services engagement. In February 2012, Bharti Airtel chooses the company as its partner for Airtel Money, mobile wallet service by a mobile operator. Under this partnership, Infosys WalletEdge, the mobile commerce platform will enable the ubiquitous mobile wallet service to support cashless payments and settlements needs of diverse customer segments. Within a generation, Infosys, founded by professionals, has become a billion-dollar company. Riding the crest of India's IT success, Infosys has always set standards for excellence. M S Shashikala reports on the practices at Infosys, which have enabled it to become a leader in its field.
  10. 10. 10 Where are these Funds parked? These FUNDS have been deposited with banks, highly rated financial institutions and in liquid mutual funds. Infosys last year derived an average yield of 4.48 per cent (tax free) from these investments. The company received Rs 647 crore (Rs 6.47 billion) on exercise of STOCK options by employees and cash equivalents including liquid mutual funds increased by Rs 1,612 crore during 2005-06.
  11. 11. 11 Vision statement of Infosys "To be a globally respected corporation that provides best-of-breed business solutions, leveraging technology, delivered by best-in-class people." Infosys does not just want to be a corporation which just focuses on increasing its business and revenue, rather its vision is to be a corporation which provides best business solution by indulging best talented people and eventually to become a reputed and respected corporation. To help our clients meet their goals through our people, services &solutions. Missionstatement of Infosys "To achieve our objectives in an environment of fairness, honesty, and courtesy towards our clients, employees, vendors and society at large." Infosys focuses on maintaining fairness, honesty and courtesy towards their clients, employees, vendors and society in their path of achieving their objective. They believe that these three key aspects were the main factors in achieving their vision. Infosys International Inc. is dedicated to providing the people , services & solutions our clients need to meet their Information technology Challenges and business goals.
  12. 12. 12 Products and Services offeredby the company: IT Services • Application Services • Architecture Services • Enterprise Quality Services • Independent Validation Services • Information Management Services • Infrastructure Services • Packaged Application Services • SOA Services • Systems Integration Services Engineering Services • Product Engineering • Manufacturing Process and Plant Solutions • Lifecycle Management • Consulting Services • Information & Technology Strategies • Product Innovation • Next Generation Commerce • Core Process Excellence • Learning & Complex Change BPO Services • Business Platforms • Customer Service Outsourcing • Finance and Accounting • Human Resource Outsourcing • Knowledge Services • Legal Services • Order Management • Sourcing and Procurement Outsourcing
  13. 13. 13 Product and Platforms • Collaborative Analytics • Finacle • Infosys Active Desk • Infosys m Connect • Infosys Unified Communications and Collaboration (UC) Subsidiaries of the company: • Infosys BPO • Infosys Consulting • Infosys Australia • Infosys China • Infosys Mexico
  14. 14. 14 CHAPTER 2: Balance Sheet In financial accounting, a balance sheet or statement of financial position is a summary of the financial balances of a sole proprietorship, a business partnership, a corporation or other business organization, such as an LLC or an LLP. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a "snapshot of a company's financial condition “Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time of a business' calendar year. A standard company balance sheet has three parts: assets, liabilities and ownership equity. The main categories of assets are usually listed first and typically in order of liquidity. Assets are followed by the liabilities. The difference between the assets and the liabilities is known as equity or the net assets or the net worth or capital of the company and according to the accounting equation, net worth must equal assets minus liabilities. A business operating entirely in cash can measure its profits by withdrawing the entire bank balance at the end of the period, plus any cash in hand. However, many businesses are not paid immediately; they build up inventories of goods and they acquire buildings and equipment. In other words: businesses have assets and so they cannot, even if they want to, immediately turn these into cash at the end of each period. Often, these businesses owe money to suppliers and to tax authorities, and the proprietors do not withdraw all their original capital and profits at the end of each period. In other words businesses also have liabilities.
  15. 15. 15 Comparative Balance Sheet of Infosys for year 2013 & 2014 Particulars MAR'14 MAR'13 ( Cr.) ( Cr.) Increase / Decrease (Amount) Increase / Decrease (%) EQUITY AND LIABILITIES Share Capital 286 287 -1 -0.35 Share Warrants & Outstanding Shareholder's Funds 42,092.00 36,059.00 6033 16.73 Long-Term Borrowings 0 0 0 Secured Loans 0 0 0 Unsecured Loans 0 0 0 Deferred Tax Assets / Liabilities -542 -322 -220 68.32 Other Long Term Liabilities 364 120 244 203.33 Long Term Trade Payables 0 0 0 Long Term Provisions 0 0 0 Total Non-Current Liabilities -178 -202 24 -11.88 Trade Payables 68 178 -110 -61.80 Current Liabilities - - - - Other Current Liabilities 4,071.00 2,827.00 1244 44.00 Short Term Borrowings 0 0 0 Short Term Provisions 6,117.00 3,788.00 2329 61.48 Total Current Liabilities 10,256.00 6,793.00 3463 50.98 Total Liabilities 52,170.00 42,650.00 9520 22.32 ASSETS Gross Block 10,420.00 8,060.00 2360 29.28 Less: Accumulated Depreciation 4,688.00 3,607.00 1081 29.97 Less: Impairment of Assets 0 0 0 Net Block 5,732.00 4,453.00 1279 28.72 Lease Adjustment A/c 0 0 0 Capital Work in Progress 954 1,135.00 -181 -15.95 Intangible assets under development 0 0 0 Pre-operative Expenses pending 0 0 0 Assets in transit 0 0 0 Non Current Investments 3,968.00 2,764.00 1204 43.56 Long Term Loans & Advances 2,269.00 1,552.00 717 46.20 Other Non Current Assets 10 8 2 25.00 Total Non-Current Assets 12,933.00 9,912.00 3021 30.48 Total Reserves 41,806.00 35,772.00 6034 16.87 Current Assets Loans & Advances Currents Investments 2,749.00 1,580.00 1169 73.99 Inventories 0 0 0 Cash and Bank 24,100.00 20,401.00 3699 18.13 Other Current Assets 2,799.00 2,453.00 346 14.11 Short Term Loans and Advances 2,253.00 1,939.00 314 16.19 Total Current Assets 39,237.00 32,738.00 6499 19.85 Net Current Assets (Including Current Investments) 28,981.00 25,945.00 3036 11.70 Total Current Assets Excluding Current Investments 36,488.00 31,158.00 5330 17.11 Miscellaneous Expenses not written off 0 0 0 Total Assets 52,170.00 42,650.00 9520 22.32 Contingent Liabilities 193 554 -361 -65.16 Total Debt 0 0 0 Book Value (in Cr.) 735.87 0 735.87 Adjusted Book Value (in Cr.) 735.87 0 735.87
  16. 16. 16 CHAPTER 3: Income Statement An official quarterly or annual financial document published by a public company, showing earnings, expenses, and net profit. Net income is determined from this financial report by subtracting total expenses from total revenue. The income statement and the balance sheet are the two major financial reports that every public company publishes. The difference between this statement and the balance sheet deals with the periods of time that each one represents. The profit and loss statement shows transactions over a given period of time (usually quarterly or annually), whereas the balance sheet gives a snapshot holdings on a specific date. Profit and loss account is that part of final account is made for calculating the net profit or net loss. In the debit side of this account, we show all indirect loss and expenses and in the credit side of this account, we show all indirect incomes. After matching debit and credit side of profit and loss account, we can find net profit or loss of business. If organization is company, we transfer this balance to profit and loss appropriation account; otherwise, we transfer this balance to capital account.
  17. 17. 17 Comparative Income Statement of Infosys for year 2013 & 2014 Particulars MAR'14 MAR'13 ( Cr.) ( Cr.) Increase / Decrease (Amount) Increase / Decrease (%) Income Sales Turnover 44341 36765 7576 20.61 Less :Excise Duty - - - - Net Sales 44341 36765 7576 20.61 Other Income 2576 2298 278 12.10 Stock Adjustments - - - - Total Income 46917 39063 7854 20.11 Expenditure - - - - Raw Materials - - - - Power & Fuel Cost - - - - Employee Cost 24350 19932 4418 22.17 Other Manufacturing Expenses 3990 2969 1021 34.39 Selling and Admin Expenses - - - Miscellaneous Expenses 3474 2849 625 21.94 Preoperative Exp Capitalised - - - - Total Expenses 31814 25750 6064 23.55 Operating Profit 12,527.00 11,015.00 1512 13.73 PBDIT 15103 13313 1790 13.45 Interest - - - - PBDT 15,103.00 13,313.00 1790 13.45 Depreciation 1,101.00 956.00 145 15.17 Other Written Off - - - - Profit Before Tax 14002 12357 1645 13.31 Extra-ordinary items - - - - PBT (Post Extra-ord Items) 14,002.00 12,357.00 1645 13.31 Tax 3808 3241 567 17.49 Reported Net Profit 10,194.00 9,116.00 1078 11.83 Total Value Addition 31814 25750 6064 23.55 Preference Dividend - - - - Equity Dividend 3618 2412 1206 50.00 Corporate Dividend Tax 615 403 212 52.61 Per share data (annualised) - - - - Shares in issue (lakhs) 5,714.03 5,742.36 -28.33 -0.49 Earning Per Share (Rs) 178.40 158.75 19.65 12.38 Equity Dividend (%) 1260 840 420 50.00 Book Value (Rs) 736.64 627.95 108.69 17.31
  18. 18. 18 CHAPTER 4: Cash Flow Statement “A financial statement that reflects the inflow of revenue vs. the outflow of expenses resulting from operating, investing and financing activities during a specific time period” Cash flow statements and projections express a business's results or plans in terms of cash in and out of the business, without adjusting for accrued revenues and expenses. The cash flow statement doesn't show whether the business will be profitable, but it does show the cash position of the business at any given point in time by measuring revenue against outlays. The cash flow statement should be prepared on a monthly basis during the first year, on a quarterly basis for the second year, and annually for the third year. The following 17 items are listed in the order they need to appear on your cash flow statement: 1. Cash refers to cash on hand in the business. 2. Cash sales are income from sales paid for by cash. 3. Receivables are income from the collection of money owed to the business resulting from sales. 4. Other income is income from investments, interest on loans that have been extended, and the liquidation of any assets. 5. Total income is the sum of total cash, cash sales, receivables and other income. 6. Material/merchandise is the raw material used in the manufacture of a product (for manufacturing operations only), the cash outlay for merchandise inventory (for merchandisers such as wholesalers and retailers), or the supplies used in the performance of a service. 7. Direct labor is the labor required to manufacture a product (for manufacturing operations only) or to perform a service. 8. Overhead is all fixed and variable expenses required for the operations of the business. 9. Marketing/sales is all salaries, commissions and other direct costs associated with the marketing and sales departments. 10. R&D is labour expenses required to support the research and development operations of the business.
  19. 19. 19 11. G&A is labor expenses required to support the general and administrative functions of the business. 12. Taxes are all taxes, except payroll, paid to the appropriate government institutions. 13. Capital represents the capital requirements to obtain any equipment needed to generate income. 14. Loan payments are the total of all payments made to reduce any long-term debts. 15. Total expenses are the sum of material, direct labor, overhead expenses, marketing, sales, R&D, G&A, taxes, capital and loan payments. 16. Cash flow is the difference between total income and total expenses. This amount is carried over to the next period as beginning cash. 17. Cumulative cash flow is the difference between current cash flow and cash flow from the previous period.
  20. 20. 20 Cash Flow Statement of Infosys for year 2013 & 2014 Particulars MAR'14 MAR'13 ( Cr.) ( Cr.) Net Profit Before Taxes 14002 12274 Adjustments for Expenses & Provisions -952 -920 Adjustments for Liabilities & Assets -273 -1268 Cash Flow from operating activities 9148 6942 Cash Flow from investing activities -2,307 -2,824 Cash Flow from financing activities -3177 -3319 Effect of exchange fluctuation on translation reserve 0 0 Net increase/(decrease) in cash and cash equivalents 3664 799 Opening Cash & Cash Equivalents 20402 19557 Cash & Cash Equivalent on Amalgamation / Take over / Merger 0 0 Cash & Cash Equivalent of Subsidiaries under liquidations 0 0 Translation adjustment on reserves / op cash balances foreign subsidiaries 0 0 Effect of Foreign Exchange Fluctuations 34 45 Closing Cash & Cash Equivalent 24100 20401
  21. 21. 21 CHAPTER 5: Comments Regarding the Prospectus of the Company 1. Share Capital of INFOSYS have been decreased by 0.35% in 2014. 2. Share holders’ Funds have been increased drastically by 16.73 % in 2014. 3. Total current liabilities have increased drastically by 50.98 % 2014. 4. Fixed assets have been increased in 2014 from 4453 cr. to 5732 cr. which is 28.72 % more compared to year 2013. 5. Other noncurrent assets in Infosys have increased by 25 %. 6. Current investment in 2013 is 1580 cr. & in 2014 is 2749 cr. which shows the increase of 73.99 %. 7. Total current assets in Infosys amounted to Rs. 39237 cr. 8. Total Income for year 2014 is 46917 cr. which is 20.11 % more compared to year 2013. 9. Net profit before tax in cash flow is 14002 cr. in year 2014 and cash flow for the operating activity is Rs 9148 cr. 10. Net increase in cash and cash equivalent is Rs.3664 cr. 11. Closing cash and cash equivalent for year 2014 is Rs.24100 cr.
  22. 22. 22 Conclusion Infosys earlier known as Imperial Company has proved its existence through introducing various innovative schemes and that also are considered as competitive in present market. At the same time we can conclude that they need to focus on their human resources in order to achieve the maximum market share. The company has very high margins, high returns on capital, has shown extremely high growth rates and has one of the best managements in the country.