A STUDY ON COMPARATIVE FINANCIAL STATEMENT OF S&P CAPITAL IQ INFORMATION SYSTEM (INDIA) P.V.T.

LTD

Submitted to SRM SCHOOL OF MANAGEMENT By VOONNA V GURU SAI PRASAD MBA (MASTER OF BUSINESS ADMINISTRATION) (Reg no: 3511010231)

UNDER THE GUIDENCE Of J DINESH Assistant Professor Sr.G

SRM UNIVERSITY
KATTANKULATHUR, KANCHIPURAM DIST CHENNAI - 603203

SCHOOL OF MANAGEMENT
SRM UNIVERSITY Kattankulathur-603203

CERTIFICATE
This is to certify that the project work titled "A STUDY ON COMPARTIVE FINANCIAL STATEMENT OF S&P CAPITAL IQ" is a bonafide work done by VOONNA V GURU SAI PRASAD in partial fulfillment of the requirements for the award of the degree of MASTER OF BUSINESS ADMINISTRATION SRM UNIVERSITY during the period of 26.02.2012 to 26.04.2012.

Submitted

for

University

Viva-Voice

Examination

held

on

.......................................

Project Guide PROF. J DINESH

Dean DR. JAYASHREESURESH

Internal Examiner

External Examiner

DECLARATION

I hereby declare that the Project report entitled A Study on Comprative financial statement of S&P CAPITAL IQ is my own work, to the best of my knowledge and belief and a produce of my sincere effort .This Project Report is an original research carried out by me alone under the guidence of Mr J Dinesh. It contains no material previously published or written by another person nor material which to a substantial extent has been accepted for the award of any other degree or diploma of any other institute,except where due acknowledge has been made in the text.

DATE:

Voonna V Guru Sai Prasad Roll No: 3511010231 SRM School of Management

ACKNOWLEDGEMENT

First and foremost I wish to thank God, the almighty for his immense blessings and guidance throughout the training program I would like to take this opportunity to express my profound gratitude towards all those who had helped me in completing my Main Project and adding feathers to my knowledge. I am highly indebted to my DEAN, Dr. Jayashree Suresh and all other faculty, staff and students at SRM School of Management who all through my Project work stood by my side and provided me with an informative, educative and moral support and made it a worthy knowledge gaining process. I owe my sincere thanks to my Project Guide, Mr J Dinesh, for his constant support and encouragement without which this project would not have been possible. My sincere thanks to my company guide , and other executives who gave and confirmed this permission and encouraged me to go ahead with my project work. I have furthermore to thank the employees S&P CAPITAL IQ, Hyderabad.

ABSTRACT
The project mainly focuses on analyzing the performance of a company by utilizing its past data and measuring its progress in terms of various financial ratios. In the process, the companys competency is observed and analyzed by comparing it with one of its main competitors and the conclusions and interpretations are made on its performance besides predicting its future performance.
The entire project mainly required the in-depth analysis of the financial statements, data of the companies and studying of various factors that influence the liquidity status and profitability of the company.

CHAPTER

PARTICULARS

PAGE NO

CHAPTER 1 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 INDUSTRY PROFILE COMPANY PROFILE SWOT ANALYSIS FINANCIAL MANAGEMENT REVIEW OF LITERATURE NEED OF THE STUDY SCOPE OF THE STUDY OBJECTIVE OF THE STUDY 1 5 20 22 33 35 36 37

CHAPTER 2

RESEARCH METHODOLOGY

38

CHAPTER 3

LIMITATIONS

39

CHAPTER4

DATA ANALYSIS AND INTERPRETATION

40

CHAPTER 5

FINDINGS

59

CHAPTER 6

SUGGESTIONS

60

CHAPTER 7

CONCLUSION

61

BIBILOGRAPHY

63

APPENDIX

64

CHAPTER 1 INDUSTRY PROFILE: IT/ITES INDUSTRIY:

The global IT industry has matured over the years and has emerged to be a chief contributor to the global economic growth. The global IT sector, constituted by the software and services, Information Technology Enabled Services (ITES) and the hardware segments, has been on a gradual growth trajectory with a steady rise in revenues as witnessed in the past few years. ITITES industry in India has today become a growth engine for the economy, contributing substantially to increases in the GDP, urban employment and exports, to achieve the vision of a powerful and resilient India. The two arms of this industry are BPO and KPO. BPO or Business process outsourcing is the arm of ITES, which facilitates delivery of services through the use of information technology. However, it necessitates transfer of ownership and management of the process from the customer (offshore) to India based service provider. Having made an indelible mark in the global BPO business, Indian IT and ITES sector is now thriving in (KPO). Knowledge process outsourcing (KPO) is a form of outsourcing, in which knowledgerelated and informationrelated work is carried out by workers in a different company or by a subsidiary of the same organization, which may be in the same country or in an offshore location to save cost. Unlike the outsourcing of manufacturing, this typically involves highvalue work carried out by highly skilled staff. Having understood the KPO, the company under study can now be classified in context of the above. Capital IQ Information Systems (India) Pvt. Ltd. is a KPO by nature since it involves highvalue work carried out by highly skilled staff providing software solutions to clients

KPO (KNOWLEDGE PROCESS OUTSOURCING) What is KPO?

The evolution and maturity of the Indian BPO sector has given birth to yet another wave in the global outsourcing scene: KPO or Knowledge Process Outsourcin g. The success in outsourcing business process operations to India has encouraged many firms to start outsourcing their highend knowledge work as well. Cost savings, operational efficiencies, access to a highly talented workforce and improved quality are all underlying expectations in offshoring highend processes to India. Knowledge process outsourcing (KPO) is a form of outsourcing, in which knowledge related and informationrelated work is carried out by workers in a different company or by a subsidiary of the same organization, which may be in the same country or in an offshore location to save cost. Unlike the outsourcing of manufacturing, this typically involves highvalue work carried out by highly skilled staff. KPO firms, in addition to providing expertise in the processes themselves, often make many low level business decisionstypically those that are easily undone if they conflict with higherlevel business plans. It is being claimed that KPO is one step extension of Business Processing Outsourcing (BPO) because BPO Industry is shaping into Knowledge Process Outsourcing because of its favorable advantageous and future scope. But, let us not treat it only a 'B' replaced by a 'K'. In fact, Knowledge process can be defined as high added value processes chain where the achievement of objectives is highly dependent on the skills, domain knowledge and experience of the people carrying out the activity. And when this activity gets outsourced a new business activity emerges, which is called a KPO. The KPO typically involves a component of Business Processing Outsourcing (BPO), Research Process Outsourcing (RPO) and Analysis Proves Outsourcing (APO). In today's competitive environment, focus is to concentrate on core specialization and corecompetency areas and outsource the rest of the activities. Many companies and organizations have come to realize that by outsourcing non core

activities, not only cost are minimized and efficiencies improved but the total business improves because the focus shifts to the key growth areas of the business activity.

The History of Knowledge Process Outsourcing (KPO)

Knowledge Process Outsourcing or KPO has been defined as a continuation of BPO, though with rather more business complexity. KPO was started by McKinsey in India when it opened up a knowledge center back in 1987 which was then closely followed by the opening of research centers of companies like GE, Gartner and Office Tiger. However, it was not until 2006 to 2007 that KPO took off. KPO is considered as the third generation of the outsourcing revolution. IT Outsourcing is known as the first generation while Business Process Outsourcing or BPO represents the second wave which came in 2002 to 2003. During these years, outsourcing firms started to offer more than just telemarketing and sales; they offered more complex transactions such as decisionmaking and problem solving tasks. Four years later, firms began offering knowledgeintensive BPO services currently regarded as KPO services. The workforce also changed when KPO firms started to provide KPO services to different foreign and local businesses. The KPO workforce profile became more diverse as people with MBAs and those with medical, engineering, design, medical and specialist business skills were being hired by KPO companies.

KPO Services
Market Research o o o o o o o o o Data Processing Market Research Data Analysis Web Survey Analysis Marketing Questionnaire Design Database Creation Text Mining Web Mining Numerical Data Mining Data Analytics

Life sciences and Pharma Research

Web Based Market Research o Abstract Writing o Competitive Business Analysis o Syndicated Research o Competitor Analysis o Company Profiling
o Desk/Web Research

Financial Market Research o o o Applied Investment Research Financial Analysis Financial Accounting

KPO services also include the following:

Investment research services (equity, fixed income and credit, and quantitative research) Legal research services (also known as Legal Process Outsourcing) Patent research services Business Research and Analytics

CHAPTER 2 COMPANY PROFILE: CIQs VISION

To achieve a leading position in the field of fundamental data services by developing topquality customer solutions and by providing finest financial data products and tools based on cuttingedge technology and advanced quality assurance processes.

CIQs MISSION
To provide clients with consistently superior quality fundamental data and innovative research tools. To bring a fresh approach to the financial information supply business. Provide exemplary work environment and culture to attract, retain & motivate the best talent and make corporate citizen

Capital IQ, a division of Standard & Poors was started as Smart Software Tech Dev Co in 1993. There after Smart Software became subsidiary of Simply Stocks in 1997. In 2003 Simply Stocks was acquired by Capital IQ, New York. By 2005 Capital IQ became a Subsidiary of STANDARD & POORS the McGraw Hills Companies. The McGrawHill Companies, Inc., incorporated in Dec.1925, is global information services provider serving the financial services, education and business information markets with information products and services. The company has three operating segments: McGrawHill financial services, McGrawhill educational services, and McGrawHill Information and Media services.

McGrawHill Operating Segments

OVERVIEW OF MCGRAW HILLS COMPANIES

The McGrawHill Companies Inc, incorporated in December 1925, is a global information services provider serving the financial services, education and business information markets with information products and services.

The company has to three operating segments:

Financial services Educational services Information and Media services

Capital IQ in the tree of McGrawHill Companies The financial services segment operates under the Standard & Poors brand which is provider of independent credit ratings, indices, risk evaluation, investment research and valuations. Standard & Poors investment data platforms provide breadth, depth and vital information required by institutions and individuals. Combining company and securities data with its Capital IQ platform, Standard & Poors provide clients with workflow solutions and idea generation tools. With its network of credit ratings professional, it provides ratings services for an array of obligations, including corporate and municipal bonds, assetbacked and mortgagebacked securities, sovereign government and bank loans. Standard & Poors is also a provider of independent equity and funds research.

EVOLUTION OF CIQ

S u b s i

Started as Smart Software TechDevCo

d i a r y

Smart Software became Subsidiary of Simply Stocks

o f

S t a n

Simply Stocks was

acquired by Capital IQ, New York

d a r d

&

Capita IQ became a

P o

ors the McGrawHill

199 3

199 7

200 3

company

Reached 1400 employee milestone on 25th September 2006

2006

ABOUT THE STANDARD &POORS Financial Market Intelligence for Investors

Standard & Poors is the worlds premier provider of investment research, market indices, credit ratings, financial data, and fixed income research and analysis. With more than 10,000 employees and offices in nearly twodozen countries, S&P is valued by investors and financial decisionmakers everywhere for its analytical independence, market expertise and thought leadership. The global leader in credit ratings, in 2008, S&P Ratings Services published more than 1,150,000 new and revised ratings, and has issued ratings on debt securities in more than 100centuries. The total amount of debt S&P rated in 2008 was approximately US$2.8 trillion. S&P is also known for its worldfamous benchmark portfolio indicesthe S&P 500 in the United States and, globally, the S&P 1200. More than $1.5 trillion in assets

around the world are directly tied to S&P indices; more than $5.0 trillion in asset are benchmarked to them.

As one of the worlds largest producers of independent equity research and portfolio recommendations, S&P licenses its stock, market and economic research to over 1,000 institutions, including top securities firms, banks and life insurance companies, Currently, S&P offers fundamental equity options on 1900 securities globally, including over 1400 in the United States.

WHAT CIQ INDIA IS?

Capital IQ, a division of Standard & Poors, provides highimpact information and workflow solutions to over 4300 leading financial institutions, advisory firms and combination of global private and public capital market data and technology that enables endusers to draw deep market insights, generate better ideas, leverage relationships and simplify workflow. Clients can deploy the Capital IQ Platform either as a standalone solution or seamlessly integrate its components into existing business applications.

Capital IQ, India and What We Do

Ours is a clientdirected company providing leading Financial Institutions, Fund Managers, Banks, Corporations, Brokerage Firms, Institutions etc., the missioncritical investment information they require to build relationships, identify opportunities and make successful investment decisions. Our team specializes in collecting financial and business intelligence information on tens of thousands of companies worldwide. This information is extracted from company filings, reports, web sites, news and other sources, and processed into clientready information at the industrys highest quality standards. We further provide the client with a competitive edge by creating customdesigned tools that enable them to effectively analyze companies and markets as required by them. We are not just a data or software company, but a team of dynamic professionals dedicated to: Providing High Quality, Timely and Accurate Data and Tools Providing the Best Possible Client Service

Getting some business intelligence is a capital idea. Capital IQ provides business research and analysis covering some 60,000 public companies and more than 2.2 million private firms through its Web-based Capital IQ Platform. Its data includes financial information, executive contacts and profiles, merger and acquisition activity, and research reports. In addition, the company provides data feeds and software applications to help its customers organize and sift through the data. All total, Capital IQ serves more than 3,400 clients, including investment banks, investment management firms, private equity firms, universities, consultants, and corporations. Capital IQ is a part of The McGraw-Hill Companies.

CORE ACTIVITIES OF CIQ HYDERABAD

Collecting information from US listed companies and companies listed in different stock exchanges across the world. Collecting the information about Officers and Directors, News related, Competitors and Business relationship. Information on segments Information on Auditors Press releases data Short and long business description of the companies Financial data analyses and excel modeling Information about private mergers and acquisition

VALUES OF CIQ
Client orientation Knowledge sharing Leadership Integrity Performance Team work

KEY SERVICE AREAS

A vast array of company level analysis including prices, Financials, SEC filings, financial ratios and Business descriptions. Exporting or importing data into Excel spreadsheets Creating reports which can be customized Comparing companies against their peers and indices Charting and graphing the results in bar, line, pie charts and customized colors

KEY PLAYERS OF CIQ, INDIA

Financials Earnings Estimates Supple & Segments Data Generation & Integrity BIRD External Quality Assurance Securities Data Technology Corp Human Resource & Administration Finance

CIQ PLATFORM
Our solutions are based on the Capital IQ Platform, a unique combination of global private and public capital market data and technology that enables end users to draw deep market insights, generate better ideas, leverage relationships and simplify workflow. Clients can deploy the Capital IQ Platform either as a standards alone solution or seamlessly integrate its components in to existing business applications and portals via systems integration and custom data feeds. The Capital IQ Platform consists of the following integrated components.

Market Intelligence
Comprehensive information on over 42,000 public companies, 399,000 private companies, 9,200 private capital firms, 1,62,000 transactions, and 7,30,000 professionals worldwide.

Financial Analytics
Easytouse tools for financial statement analysis, comparable analysis, financial modeling, sector analysis and charting.

Idea Generation
Screening and targeting tools for identifying potential investments, investors, buyers, acquisition, sales percepts as well as financial transactions and corporate actions.

CIQ OFFICES
CIQ head quarters in New York

Regional offices
San Francisco Chicago Los Angeles Houston Boston London Various locations in India

ORGANIZATION STRCUTRE:

Executive Chairman Managing Director

Interpretative , Defined Process Levels

Decision Making, Planning & Implementation

L l

Vice president
Sr.Director/Director/Dy.Direct or

Sr.Manager/ Manager
Assistant Manager
Sr.TL/ TL /Sr. Executive
Sr. Analyst / Executive Analyst SRA / SBID / Jr. Executive

Process Execution Levels

EMPLOYEE LEVELS/CAREER PROGRESSION LEVELS

The following are the employee levels at Capital IQ Junior research associate Research associate Senior research associate Analyst Senior analyst

EMPLOYEE LEVELS/ CAREER PROGRESION LEVELS:

Senior Analyst Analyst Senior Research Associate Research Associate Junior Research Associate

PROCEDURE
Each level of employee should have certain skills and knowledge levels which can be defined and communicated to all the employees. There should be no specified time limit for promoting an employee from one level to another. But the TL/Manager should follow certain guidelines, for the same as specified by the management. The TL/Manager recommendation of each employee promotion is not the final decision. It should be approved by the management.

Junior Research Associate (JRA)

The newly hired associate will typically have a college degree and 02 years of professional experience. JRAs should be good at basic concepts of capital markets. Good

understanding of financial statements, accounting terminologies etc. JRA should be a good team player. JRA need complete assistance and guidance of TL/Manager. The productivity levels of a JRA should be near to the standard production levels and performance should be within acceptable level. .

Research Associate (RA)

RA should be good at concepts of capital markets, good understanding of financial statements, accounting terminologies etc. and should be able to apply this knowledge while processing the data. The work of RA for the most part should be free. He can operate in an independent way but may require the assistance from the TL/Manager. RA should be able be able to act individually with the laid down procedures. RA needs to be good communicator and need to have good interpretational skills. RA should considerable improvement in the productivity and should have standard productivity.

Senior Research Associate (SRA)

SRAs should have very good understanding of capital markets, financial statements and terminologies etc. And they are able to accurately apply this knowledge to process the data. The SRA is usually able to operate in an independent way, requiring only rare assistance from the TL/Manager to accomplish productivity targets. Should possess good understanding of relevant accounting standards and principles. Has to be proficient in the use of production tools and understand the intricacies of data process. So that even more difficult tasks can be accomplished without assistance. Has to be very productive and is able to accomplish tasks at above standards. SRA should have good communication skills and need to take up responsibilities from TL/Manager.

Analyst
Analyst should have expertise knowledge in subject and his respective department and must be good at analyzing critical data items. Analyst should think beyond the production area and build positive relationship with colleagues within the team and throughout the company. Should be proficient in relevant accounting standards and principles. Should have knowledge in more than one department. Should have fair knowledge about data storage and retrieval. Should have priority to official tasks over personal commitments.

Senior Analyst (SA)

SA must have expertise knowledge in subject as well as in his respective department and must be very good at analyzing critical data must have a thirst for knowledge and make consistent efforts to enhance his knowledge level and communicate the same down the line to other team members. SA acts as an individual player, who takes up projects from the manager and does research on their own. SAs are confident and competent and need to communicate with the clients to address their issues. Should be proficient in relevant accounting standards and principles. The work of the SA is extremely dependable and for the most part, error free and is always in the top tier in productivity. Should have good knowledge about data storage and retrieval.

CAPITAL IQ CLIENTS

SWOT ANALYSIS: STRENGTHS:

Large talented pool of employees. Forex and income tax are handled by its parent company i.e. Capital IQ INC and hence no marketing risk also. Company has good employee benefit schemes and employee engagements like annual day celebrations and sports day, etc. Company has open work culture and policies. Employees in the organization have high innovation and good team co-ordination. Company follows Cost + Markup revenue model.

WEAKNESSES:
All the process is based on MIS and the company needs to take care of the backups and servers maintenance. This company is human resource based but not autonomous. Processional compensation benefits for the newly hired are higher than that for the existing employees in certain divisions. Research lab is unavailable for the technology division for innovation.

OPPORTUNITIES:

Post era has seen a sudden increase in investments and hence there is a need for knowledge sharing portal. Company is situated in Hyderabad-It is cost advantage for expansion plans. Hyderabad is the fastest growing MBA hub in India. Fast pace growth of the developing nations. India is the 2nd fastest growing economy.

THREATS:
Threat of poaching- due to talented pool of employees. Threat of agitations in Hyderabad-operations might be paused at times and hence might think of other geographical locations. As the companys model is cost + markup, this markup can hinder the growth of the company. Threat of technology up gradation.

COMPETITORS:
Bloomberg LexisNexis Thomson Reuters Allsec technologies Factset

FINANCIAL MANAGEMENT:
Finance has emerged as a distinct area of study during second half of the twentieth century. But even before that some direct or indirect references to finance function were made on a casual basis. The evaluation of finance function and the changes in scope appeared due to two factors namely.

1. The continuous growth and diversity in business 2. The gradual appearance of new financial analytical tools.

Meaning of financial management:

The term financial management has been defined differently by different authors. According to Solomon financial management is concerned with the efficient use of an important Economic resource, namely capital fund.

Scope of financial management:

Financial management has under gone significant changes over the years as regards its scope and coverage. As such the role of finance manager has also undergone fundamental changes over the years. In order to have a better exposition to these changes over the years, it will be appropriate to study both the traditional concept and modern concept of the financial function.

TRADITIONAL CONCEPT:
In the beginning of the present century, which was the starting point for the scholarly writings on corporation finance, the function of finance was considered to be the task of providing funds needed by the enterprise on terms that are most favorable to the operations of the enterprise. The traditional scholars are of the view that the quantum and pattern of finance requirements and allocation of funds as among different assets is the concern of non financial executives. According to them, the finance manager has to undertake the following three functions. 1. Arrangement of funds from financial institutions 2. Arrangement of funds through financial instruments 3. Looking after the legal and according relationship between a corporation and its sources of funds.

Modern concept:
The traditional concept outlived its utility due to changed business situations since mid 1950s. Technological improvements widened marketing operations, development of a strong corporate structure, keen and healthy business competitions all made it imperative for the management to make optimum use of available financial resources for continued survival of the firm.

Finance functions:
Although it may be difficult to separate the finance functions from production, marketing and other functions, yet the functions themselves can be readily identified. We may identify two kinds of finance functions which are managerial and routine. There are four important managerial finance functions 1. Investment or long term asset mix decision 2. Financing or capital mix decision 3. Dividend or profit allocation decision 4. Liquidity or short term asset mix decision.

Investment decision:
Investment decision or capital budgeting is the oldest area of the recent thinking in finance. It relates to allocation of capital and involves decisions to commit funds to long term assets which would yield benefits in future. Its a very significant aspect in the task of measuring the prospective profitability of new investments. Future benefits are difficult to measure and cannot be predicted with certainty because of the uncertain future, capital budgeting involves risk. Investment proposals should, therefore, be evaluated in terms of both expected return and risk.

Financing decision:
Financing decision is the second important function to be performed by the financial manager. Broadly, he must decide when, where and how to acquire funds to meet the firms investment needs. The central issue before him is to determine the proportion of equity and debt. The mix of debt and equity is known as the firms capital structure. The finance manager must strive to obtain the best financing mix or optimum capital structure for his firm. The firms capital structure is optimum when the market value of shares is maximized.

Dividend decision:
Dividend decision is the third major financial decision. The financial manager must decide whether the firm should distributed all profits, or retain them, or distribute a portion and retain the balance. Like the debt policy, the dividend policy should be determined in terms of its impact on the shareholders value. The optimum dividend policy is one which maximizes the market value of the firms shares. Thus, if shareholders are not indifferent to the firms dividend policy, the financial manager must determine the optimum dividend payout ratio.

Liquidity Decision:
Current assets management which affects a firms liquidity is yet another important finance function, in addition to the management of long term assets. Current assets should be managed efficiently for safeguarding the firm against the dangers of illiquidity and insolvency. Investment in current assets affects firms profitability, liquidity and risk

Ratio analysis theory: Meaning of Ratio:

Ratio are relationships expressed in mathematical terms between figures which are connected with each other in some manner and stigmatizes a long way of accounting figures, the main contribution lies in bringing into bold relief the inter relationship which exist between various segments of business as suppressed through accounting statements and in avoiding any distortions that may results from a absolute study of accounting information. Ratio can be expressed in two ways:

Times: when one value is divided by another the unit used to express the quotient is termed as Times Percentage: if the quotient obtained is multiplied by 100, the unit of expression is
termed as percentage.

Classification of Ratios:
Ratios can be classified into different categories depending upon the basis of classification. The classification has been on the basis of the financial statement to which the determinants of a ratio belong on this basis the ratio could be classified as:

1. Profit and Loss account ratio: Ratio calculated on the basis of the item of the profit and loss account only. Example: gross profit ratio, stock turnover ratio. 2. Balance sheet ratio: ratio calculated on the basis of the figures of balance sheet only. Example: Current ratio, debit to equity ratio. 3. Composite Ratio or inter-statement ratio: ratios based on figures of profit and loss account as well as the balance sheet. Example: fixed assets turnover ratio.

Classification of Ratios Chart

Accounting Ratios

Traditional

Functional

P&L A/c Ratios

Balance sheet Ratios

Composit e Ratios

Profitabilit y Ratios

Coverage Ratios

Turnover Ratios

Financial Ratios

Liquidity Ratios

Stability Ratios

Advantages of Ratio Analysis:

Ratio analysis is an important and ageold technique of financial analysis. The following are some of the advantages / Benefits of ratio analysis: 1. Simplifies financial statements: It simplifies the comprehension of financial statements. Ratios tell the whole story of changes in the financial condition of the business 2. Facilitates interfirm comparison: It provides data for interfirm comparison. Ratios highlight the factors associated with successful and unsuccessful firm. They also reveal strong firms and weak firms, overvalued and undervalued firms. 3. Helps in planning: It helps in planning and forecasting. Ratios can assist management, in its basic functions of forecasting. Planning, coordination, control and communications. 4. Makes interfirm comparison possible: Ratios analysis also makes possible comparison of the performance of different divisions of the firm. The ratios are helpful in deciding about their efficiency or otherwise in the past and likely performance in the future. 5. Help in investment decisions: It helps in investment decisions in the case of investors and lending decisions in the case of bankers etc.

Limitation of Ratio Analysis:

1. Limitations of financial statements: Ratios are based only on the information which has been recorded in the financial statements. Financial statements themselves are subject to several limitations. Thus ratios derived, there from, are also subject to those limitations. For example, nonfinancial changes though important for the business are not relevant by the financial statements. Financial statements are affected to a very great extent by accounting conventions and concepts. Personal judgment plays a great part in determining the figures for financial statements. 2. Comparative study required: Ratios are useful in judging the efficiency of the business only when they are compared with past results of the business. However, such a comparison only provide glimpse of the past performance and forecasts for future may not prove correct since several other factors like market conditions, management policies, etc. may affect the future operations. 3. Ratios alone are not adequate: Ratios are only indicators, they cannot be taken as final regarding good or bad financial position of the business. Other things have also to be seen. 4. Problems of price level changes: A change in price level can affect the validity of ratios calculated for different time periods. In such a case the ratio analysis may not clearly indicate the trend in solvency and profitability of the company. The financial statements, therefore, be adjusted keeping in view the price level changes if a meaningful comparison is to be made through accounting ratios. 5. Lack of adequate standard: No fixed standard can be laid down for ideal ratios. There are no well accepted standards or rule of thumb for all ratios which can be accepted as norm. It renders interpretation of the ratios

difficult. 6. Limited use of single ratios: A single ratio, usually, does not convey much of a sense. To make a better interpretation, a number of ratios have to be calculated which is likely to confuse the analyst than help him in making any good decision.

7. Personal bias: Ratios are only means of financial analysis and not an end in itself. Ratios have to interpret and different people may interpret the same ratio in different way. 8. Incomparable: Not only industries differ in their nature, but also the firms of the similar business widely differ in their size and accounting procedures etc. It makes comparison of ratios difficult and misleading .

Importance of ratio analysis:

It helps in evaluating the firms performance : With the help of ratio analysis conclusion can be drawn regarding several aspects such as financial health, profitability and operational efficiency of the undertaking. Ratio points out the operating efficiency of the firm i.e. whether the management has utilized the firms assets correctly, to increase the investors wealth. It ensures a fair return to its owners and secures optimum utilization of firms assets. It helps in interfirm comparison: Ratio analysis helps in interfirm comparison by providing necessary data. An inter firm comparison indicates relative position. It provides the relevant data for the comparison of the performance of different departments. If comparison shows a variance, the possible reasons of variations may be identified and if results are negative, the action may be initiated immediately to bring them in line . It simplifies financial statement: The information given in the basic financial statements serves no useful Purpose unless it s interrupted and analyzed in some comparable terms. The ratio analysis is one of the tools in the hands of those who want to know something more from the financial statements in the simplified manner. It helps in determining the financial position of the concern: Ratio analysis facilitates the management to know whether the firms financial position is improving or deteriorating or is constant over the years by setting a trend with the help of ratios The analysis with the help of ratio analysis can know the direction of the trend of strategic ratio may help the management in the task of planning, forecasting and controlling. It is helpful in budgeting and forecasting: Accounting ratios provide a reliable data, which can be compared, studied and analyzed. These ratios provide sound footing for future prospectus. The ratios can also serve as a basis for preparing budgeting future line of action. Liquidity position: With help of ratio analysis conclusions can be drawn regarding the Liquidity position of a firm. The liquidity position of a firm would be satisfactory if it is able to meet its current obligation when they become due. The ability to met short term liabilities is reflected in the liquidity ratio of a firm. Long term solvency: Ratio analysis is equally for assessing the long term financial ability of the Firm. The long term solvency s measured by the leverage or capital structure and profitability ratio which shows the earning power and operating efficiency, Solvency ratio shows relationship between total liability and total assets. Operating efficiency: Yet another dimension of usefulness or ratio analysis, relevant from the View point of management is that it throws light on the degree efficiency in the various activity ratios measures this kind of

operational efficiency.

Current Ratio:
Current ratio may be defined as the relationship between current assets and current liabilities. This ratio is also known as " working capital ratio". It is a measure of general liquidity and is most widely used to make the analysis for short term financial position or liquidity of a firm. It is calculated by dividing the total of the current assets by total of the current liabilities.

Formula: Current Ratio = Current Assets / Current Liabilities

Significance:
This ratio is measure of liquidity and should be used very carefully because it suffers from many limitations. It is, therefore, suggested that it should not be used as the sole index of short term solvency.
1. It is crude ratio because it measures only the quantity and not the quality of the current assets. 2. Even if the ratio is favorable, the firm may be in financial trouble, because of more stock and work in process which is not easily convertible into cash, and, therefore firm may have less cash to pay off current liabilities. 3. Valuation of current assets and window dressing is another problem. This ratio can be very easily manipulated by overvaluing the current assets. An equal increase in both current assets and current liabilities would decrease the ratio and similarly equal decrease in current assets and current liabilities would increase current ratio.

Liquid ratio:
Liquid ratio is also termed as "Liquidity Ratio", "Acid Test Ratio" or "Quick Ratio". It is the ratio of liquid assets to current liabilities. The true liquidity refers to the ability of a firm to pay its short term obligations as and when they become due.

Formula: Liquid Ratio = Liquid Assets / Current Liabilities

Significance:
The quick ratio/acid test ratio is very useful in measuring the liquidity position of a firm. It measures the firm's capacity to pay off current obligations immediately and is more rigorous test of liquidity than the current ratio. It is used as a complementary ratio to the current ratio. Liquid ratio is more rigorous test of liquidity than the current ratio because it eliminates inventories and prepaid expenses as a part of current assets. Usually high liquid ratios are an indication that the firm is liquid and has the ability to meet its current or liquid liabilities in time and on the other hand a low liquidity ratio represents that the firm's liquidity

position is not good. As a convention, a quick ratio of "one to one" (1:1) is considered to be satisfactory. However the same will vary from company to company depending upon the nature of its activities.

Fixed Assets Turnover Ratio:

Fixed assets turnover ratio is also known as sales to fixed assets ratio. This ratio measures the efficiency and profit earning capacity of the concern. Higher the ratio, greater is the intensive utilization of fixed assets. Lower ratio means under utilization of fixed assets. The ratio is calculated by using following formula Formula: Fixed Assets Turnover Ratio = Cost of Sales / Net Fixed Assets

Significance:
This ratio is often used as a measure in manufacturing industries, where major purchases are made for PP&E to help increase output. When companies make these large purchases, prudent investors watch this ratio in following years to see how effective the investment in the fixed assets .

Debtor turnover ratio:

Debtors turnover ratio or accounts receivable turnover ratio indicates the velocity of debt collection of a firm. In simple words it indicates the number of times average debtors (receivable) are turned over during a year. Formula: Debtors Turnover Ratio = Total Sales / Debtors

Significance:
Accounts receivable turnover ratio or debtors turnover ratio indicates the number of times the debtors are turned over a year. The higher the value of debtors turnover the more efficient is the management of debtors or more liquid the debtors are. Similarly, low debtors turnover ratio implies inefficient management of debtors or less liquid debtors. It is the reliable measure of the time of cash flow from credit sales. There is no rule of thumb which may be used as a norm to interpret the ratio as it may be different from firm to firm.

Net profit margin ratio:

A ratio of profitability calculated as net income divided by revenues, or net profits divided by sales. It measures how much out of every dollar of sales a company actually keeps in earnings. Profit margin is very useful when comparing companies in similar industries. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors. Profit margin is displayed as a percentage.

Formula: Net profit margin ratio= (net profit after tax/sales)*100

Significance:
Increased earnings are good, but an increase does not mean that the profit margin of a company is improving. For instance, if a company has costs that have increased at a greater rate than sales, it leads to a lower profit margin. This is an indication that costs need to be under better control.

Return on assets:
An indicator of how profitable a company is relative to its total assets. ROA gives an idea an idea as to how efficient management is at using its assets to generate earning. Calculated by dividing a companys annual by its total assets, ROA is displayed as a percentage. Sometimes this is referred to as return on investment. Formula: Return on assets=net profit after tax/total assets.

Significance:
ROA tells you what earnings were generated from invested capital (assets). ROA for public companies can vary substantially and will be highly dependent on the industry. This is why when using ROA as a comparative measure, it is best to compare it against a company's previous ROA numbers or the ROA of a similar company.

Debtequity ratio:
DebttoEquity ratio indicates the relationship between the external equities or outsiders funds and the internal equities or shareholders funds. It is also known as external internal equity ratio. It is determined to ascertain soundness of the long term financial policies of the company. Formula: debitequity ratio=Total Long Term Debts / Shareholders Funds

Significance:
Debt to equity ratio indicates the proportionate claims of owners and the outsiders against the firms assets. The purpose is to get an idea of the cushion available to outsiders on the liquidation of the firm. However, the interpretation of the ratio depends upon the financial and business policy of the company. The owners want to do the business with maximum of outsider's funds in order to take lesser risk of their investment and to increase their earnings (per share) by paying a lower fixed rate of interest to outsiders. The outsiders creditors) on the other hand, want that shareholders (owners) should invest and risk their share of proportionate

investments. A ratio of 1:1 is usually considered to be satisfactory ratio although there cannot be rule of thumb or standard norm for all types of businesses. Theoretically if the owners interests are greater than that of creditors, the financial position is highly solvent. In analysis of the longterm financial position it enjoys the same importance as the current ratio in the analysis of the shortterm financial position.

Operating ratio:
Operating ratio is the ratio of cost of goods sold plus operating expenses to net sales. It is generally expressed in percentage. Operating ratio measures the cost of operations per unit of sales. This is closely related to the ratio of operating profit to net sales. Formula: Operating Ratio = ((Cost of goods sold + Operating expenses) / Net sales)*100

Significance:
Operating ratio shows the operational efficiency of the business. Lower operating ratio shows higher operating profit and vice versa. An operating ratio ranging between 75% and 80% is generally considered as standard for manufacturing concerns. This ratio is considered to be a yardstick of operating efficiency but it should be used cautiously because it may be affected by a number of uncontrollable factors beyond the control of the firm. Moreover, in some firms, nonoperating expenses from a substantial part of the total expenses and in such cases operating ratio may give misleading results .

Working capital turnover ratio:

Working capital turnover ratio indicates the velocity of the utilization of net working capital. This ratio represents the number of times the working capital is turned over in the course of year Formula: working Capital Turnover Ratio = Cost of Sales / Net Working Capital

Significance:
The working capital turnover ratio measures the efficiency with which the working capital is being used by a firm. A high ratio indicates efficient utilization of working capital and a low ratio indicates otherwise. But a very high working capital turnover ratio may also mean lack of sufficient working capital which is not a good situation.

Gross Profit Ratio:

A financial metric used to assess a firm's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold. Gross profit margin serves as the source for paying additional expenses and future savings. Formula: gross profit Ratio = (gross profit / net sales)*100

Significance:
Gross profit ratio indicates the average margin on the goods sold. It shows whether the selling prices are adequate or not. It also the extent to which selling prices may be reduced without resulting in losses.

A low gross profit ratio may indicate a higher cost of goods sold due to higher cost of production. It may also be due to low selling prices. A high gross profit ratio may be increased by taking the following steps: Lowering cost of goods sold, selling prices remaining constant Increasing selling prices, the cost of goods remaining constant Increasing the sale of those goods which have a higher gross margin

Expense Ratio:
This ratio present the relationship that exit between each item of expenses and net sales. It indicates the portion of the sales which is consumed by various items of operating cost.

Significance:
The operating ratio is yardstick to measure the efficiency with which a business is operated. It shows the percentage of net sales that is is absorbed by cost of goods sold and operating expenses. A high operating ratio is considered unfavorable because it leaves a smaller margin of profit to meet no operating expenses. On the other hand, a lower operating ratio is considered a good sign

Earnings per Share (EPS):

In order to avoid confusion on account of the varied meanings of the term capital employed, the overall profitability can also be judged by calculating earnings per share. Formula: Earning per share=profit after taxdividend/no of equity shares .

Significance:
The earnings per share help to determining the market price of the equity share of the company. A comparison of earning per share of the company with another will also help in deciding whether the equity share capital is being effectively used or not. It also helps in estimating the company capacity to pay dividend to its equity shareholders

CHAPTER 3 REVIEW OF LITERATURE:

Financial Statement Includes:
Trading & Profit & Loss Account; which gives the result of years working. Profit & Loss Appropriation Account; which gives details about the disposal of the retained earnings. Balance Sheet; which gives the financial position of the undertaking as on the accounting date. The most important function of financial statements is to serve those who control and direct the business and may be answered the questions, how efficiently the capital of the business is being utilized, how well credit standards are being observed, and whether the financial condition is being improved.

The Meaning of Analysis and Interpretation

The financial statements are of much interest to number of groups of persons. Apart from the management there are other interested parties like shareholders, debenture holders, potential investors, bankers, trade creditors and legislature. Interpret means to put the meaning of a statement into simple terms for the benefit of a person. Analysis comprise resolving the statements by breaking them into simpler statements by a process or rearranging, regrouping and the calculation of ratios, interpretation is the mental process of understanding the terms of such statements and forming opinions or inferences about the financial health, profitability, efficiency and such other aspects of the understanding.

Objectives of Analysis and Interpretation

To evaluate the financial health of the understanding. To evaluate the earning performance of the undertaking. To evaluate the ability of the undertaking to pay interest, amortized debt and other outside liability. To evaluate the solvency of the undertaking. By the understating of solvency of the undertaking above points can be well understand. Whether current assets are sufficient to pay off the current liabilities. Proportion of liquid assets (cash and book debts) to current assets. Whether the debenture holders are secured by a floating charge of the currents assets.

Future growth of undertaking and earning.

NEED OF THE STUDY:

The financial statements are mirror which reflects the financial position and strengths or weakness of the concern. The analysis of financial statements is useful to

Corporate

Management

Investors

Creditors

Bankers

Financial institution etc

SCOPE OF THE STUDY:

The study is based on the accounting information of the S&P CAPITAL IQ INFORMATION SYSTEMS (INDIA) PVT Ltd. The study covers the period of 20072011 for analyzing the financial statement such as income statements and balance sheet. This study aims at analyzing the overall financial performance of the company by using various financial tools. The study is confined to IT/ITES sector in India and two companies under this sector namely,S&p Capital IQ and Allsec Technologies.

OBJECTIVES OF THE STUDY:

Through this project the following objectives will be achieved: To examine and compare the financial performance of two firms,S&P Capital IQ (India) Pvt. Ltd. and Allsec Technologies in the KPO domains using Financial statements. To Track the growth of S&P Capital IQ at par with the ITES sector in India To project the future prospects of S&P capital IQ and what should the company do to improve its performance To analysis the interpretation of the ratio analysis in real context To analysis liquidity position of the firm and evaluate the reason

CHAPTER 4 RESEARCH METHODOLOGY:

The data obtained for the study has to be divided into two groups:

9 9

Primary data Secondary data

Primary Data: The information and data collected by conducting personal interviews with the financial manager of capital IQ .These interviews helped me to secure first hand information about various aspects related to the management. Secondary Data: It comprises of information obtained from annual reports and other statements, files and some other important documents maintained by the organization

LIMITATIONS:
The interpretation part of the project, comprising of inter-firm analysis, will be confined to past five years financial statements. Effect of personal ability and bias of the analyst Ratio analysis becomes less effective due to price level changes Further, the study takes into consideration the quantitative aspect of the performance and not the qualitative aspect such as impact of industrial assistance of company in the economic development of the country or state, on additional employment opportunities, contribution to net domestic product, etc.

CHAPTER 4 DATA ANALYSIS AND INTERPRETATION: COMMON SIZE BANALCE SHEET ANALYSIS:
Through a common size analysis an attempt has been made to analyze the common size balance sheets of Capital IQ for a period of five years (2007to 2011 In common size analysis, the items in the balance sheet are stated as percentages of total assets and liabilities. The objective of this analysis is to study the trend in different items, both assets and liabilities in the balance sheet. The common size balance sheets are shown in the above table. Comment on the Financial Strategy of Capital IQ on the basis of Common Size Analysis: A careful observation of the common size analysis of the company reveals that it has been reducing its debt in the capital structure. At the same time the shareholders funds have been increasing due to the profits and surplus being ploughed back. This means that over the years, the company has been relying only on internal sources and not external sources of financing. This, in the long run will reduce the interest burden on the company leaving more in the hands of the company. GRAPHICAL REPRESENTATION OF INDIVIDUAL COMPONENTS OF LIABILITIES AND ASSETS AS A PERCENTAGE OF THEIR RESPECTIVE TOTALS (100%).

Sources of Funds/Liabilities:

Application of Funds:

Expenses of Capital IQ:

Expenses (%) Personnel Operating Financial Depreciation 2007 70.83 20.25 0.18 8.73 2008 77.75 16.76 0.06 5.42 2009 76.24 19.27 0.04 4.44 2010 74.17 20.32 0.02 3.94 2011 75.82 20.71 0.01 3.46

Graph:

Income of Capital IQ
Income (%) Income from Operations Other Income 2007 98.121 1.878 2008 98.838 1.161 2009 99.685 0.314 2010 99.916 0.083 2011 99.915 0.084

Graph:

Current Ratio:
Current ratio= current asset/current liabilities Current asset= sundry debtors+ Cash and Bank balances+ Other Current Assets+ Loans and Advances Current liabilities= Current Liabilities+ Provisions year Capital iq Current assets Current liability Current ratio Allsec Current asset Current liability Current ratio 718092000 219424000 557873000 133512000 898848000 177834000 955331000 190869000 813201000 235685000 131,228,943
190814058 266791647 409902273 619353389

20062007

20072008

20082009

20092010

20102011

862267667 332357759

215903126

260435346

368439526

0.79

1.23

1.57

1.68

2.59

3.27

4.17

5.05

3.45

Graph:
0

2006-07
6 5 4 3 2 1

2007-08

2008-09

2009-10

2010-

Current ratio(CIQ)

Current ratio(Allsec)

Interpretation:
The ideal current ratio of 2:1. As we can observe, over the years the current ratio of Capital IQ has increased consistently and hence this company is solvent and ensures continued liquidity and also allows a cushion. It is important to note that a very high ratio may be indicative that the firms current assets are not being used optimally and some of these assets may be remaining idle. The firm is in a better position in the year 2008 when compared to 2007 and has increased consistently. The liquidity position is best in the financial year 2011. An analysis of the financial statements of the company reveals that the liquidity position has improved with time because the components of current assets have been improving. As we can observe, the current assets for the company have been increasing continuously over last 5years. Regarding Allsec, the ratio over the last 5yrs is fluctuating and very high as far as the ideal ratio is concerned. This is because of the high amount of loans given to other companies which has increased the value of the current assets which is considered good for the company

Solvency ratio
Solvency ratio= net profit after tax+depreciation/total liabilities Total liabilities= long term liabilities+short term liabilities year Capital iq Net profit ater tax+ dep Total liabilities Solvency ratio Allsec Net profit ater tax+ dep Total liabilities 123146000 71102000 599000 51802000 89295000 102122273
179984260

20062007

20072008

20082009

20092010

20102011

226493861

254154978

962984349

164690956 0.62

215903126 0.83

260435346 0.86

368439526 0.68

332357759 2.89

219424000

133512000

177834000

180689000

235685000

Solvency ratio

0.36

1.64

0.88

0.93

0.21

Graph:

Interpretation:

This ratio indicates as to how efficiently a company utilizes its resources to get the expected returns. The solvency ratio measures the size of a company's aftertax income; excluding noncash depreciation expenses, as compared to the firm's total debt obligations. It provides a measurement of how likely a company will be to continue meeting its debt obligations Capital IQ has great fluctuation as there was not properly utilizing resources like total liabilities. But in the year 2011 we can see that it is maintaining good solvency ratio compare previous.

Regarding Allsec, is decreasing from the year 20082011 it is not good in utilization of resources when compare to Capital IQ. Capital IQ solvency has increased from 0.68 to 2.89 in the year 2011 where as Allsecs solvency has decreased from 0.93 to 0.21. SO, Capital IQ solvency is better than Allsecs

Debtor Turnover Ratio:

Debtor turnover ratio: sales/closing debtors Sales: service income+other income year Capital iq Sales Closing debtors Debtor turnover ratio Allsec Sales Closing debtors Debtor turnover ratio 1171350000 1040260000 1098470000 1327870000 1451210000 264259000 328402000 4.4 3.1 381964000 2.8 408439000 3.2 348525000 4.1 616735837 0 0
1325943691 1802474191 254768079 2081844923 371290054

20062007

20072008

20082009

20092010

20102011

2483490358 586581070 2.23

0 0

7.07

5.60

Graph:

8 7 6 5 4 3 2 1 0 2006-07 2007-08 2008-09 2009-10 2010-11 debtor turnover ratio(CIQ) debtor turnover ratio(Allsec)

Interpretation:
This ratio indicates as to how many days average sales are tied up in the amount of debtors. The efficiency of debt collection is also indicated by this ratio. A high debtors turnover ratio indicates the debts are being collected more quickly. Change in this ratio shows ability to collect from its debtors. . The firm is in a better position in the year 2009 when compared to 200708, has increased in the year 2009 and from the year 2010 slowly its decreasing. Regarding Allsec, the ratio has decreased from 200709 due to lack of proper collection from its debtors. From the year 201011 ratio is slowly increasing as because of proper collection from debtors. Allsec is in a better position in collection from debtors when compare to Capital IQ

Debt equity ratio:

Debt equity ratio: long term debt/shareholder equity Shareholder equity: share Capital+Reserves and surplus Long term debt: Unsecured Loans year Capital iq Long term debt Shareholder Debt equity ratio Allsec Long term debt 1557000 3669000 5917000 25604000 33637000 7868218
138578187 5712656 3344853 743643

20062007

20072008

20082009

20092010

20102011

0 813808479 0.40

257069922

414375986

597269637

1.37

0.83

0.62

0.61

Shareholder 1695130000 1505373000 1435577000 1367438000 1327987000 Debt equity ratio 0.12 0.08 0.12 0.13 0.17

Grap h:

1.6 1.4 1.2 1

Debt equity ratio(CIQ)

0.8 0.6 0.4 0.2 0 2006-07 2007-08 2008-09 2009-10 2010-11

Debt equity ratio(Allsec)

Interpretation:
It is difficult to determine the level of Debt equity ratio which will be beneficial to the firm. Thus an ideal debtequity ratio usually depends on the type of the industry and size of the firm. The table above shows that the debtequity ratio of Capital IQ has decreased over that past years. If a lot of debt is used to finance increased operations (high debt to equity), the company could potentially generate more earnings than it would have without this outside financing. If this were to increase earnings by a greater amount than the debt cost (interest), then the shareholders benefit as more earnings are being spread among the same amount of shareholders. A higher ratio indicates a risky position in the year 2007 while a lower ratio indicates safer financial position in the year. From the above graph we observed that debtequity ratio gradually decreases, so it will help full to company for proper utilization of debt.

Allsecs Debtequity ratio has increased considerably over the years except in the year 2008 .This is because, although in this year the loans have increased considerably, the

shareholders funds have decreases. Hence as the ratios are increasing, we could say that the company is taking more loans to fund its operations and continuous increase in the loan funds could lead to bankruptcy.

Return on equity Ratio:

Returns on equity ratio: net income/shareholders equity Shareholder equity: share Capital+Reserves and surplus Net income: Salesexpense year Capital iq Net income Shareholde r Debt equity ratio Allsec Net income 364000000 24080000 18060000 37020000 68640000 92422992
138578187 190809989 257069922 245812289 414375986 273057491 597269637

20062007

20072008

20082009

20092010

20102011

325751009 813808479 0.26

0.41

0.46

0.37

0.3

Shareholde r 1695130000 1505373000 1435577000 1367438000 1327987000 Debt equity ratio 0.16 0.09 0.05 0.04 0.02

Graph:

0.5 0.45 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2006-07 2007-08 2008-09 2009-10 2010-11
Return on Equity(CIQ) Return on Equity(Allsec)

Interpretation:
From the above graph Capital IQ has fluctuation from the year 20072009 and slowly decreasing from the year 20092011. This is due to notable maintaining shareholder fund which is directly proposition to increasing profit after tax and also there increasing personal expense of the company which include like salaries, bonus and other expenses.

Allsecs Return on Equity has reduced considerably over the years and has not shown any signs of increment over the years. As we refer from the annual report, there has been decrease in the net income of the company because less increment in income and increasing of personal expense of the company which includes like salaries, bonus and other expenses. Capital IQs return on equity is far better than Allsecs.

Return on Asset ratio:

Return on asset ratio: net profit after tax/ total assets Total assets: sundry debtors+cash and bank balances + other current assets+loans and advances Net profit after tax: salesexpenseprovision for tax year Capital iq Net profit after tax Total assets Return on assets Allsec Net profit after tax 281350000 135500000 72280000 68140000 39450000 56349189
118491735 157306064 182893651

20062007

20072008

20082009

20092010

20102011

216538842 1104669260 0.196

317901191

472283804

654935646

921243661

0.170

0.250

0.240

0.198

Total assets 1673870000 1509040000 1441490000 1393040000 1361620000 Return on assets 0.170 0.070 0.044 0.043 0.024

Grap h:

0.3 0.25 0.2 0.15 0.1 0.05 0 2006-07 2007-08 2008-09 2009-10 2010-11
Return on Asset(CIQ) Return on Asset(Allsec)

Interpretation:
Return on Assets is linked to the efficient utilization of the assets which a company owns and optimum utilization of the available assets is most desirable. Main scenario of this ratio is earning more money with less investment. From the above table it is observed that company has increasing the return during the period 20072008. But from the year 2009 it has slightly decreases.

.Allsecs has a huge dip in the ROI over the period due to increasing expenditure of the company it reflect to less profit for every year. Capital IQ is maintaining a good ROI when compare to Allsecs

Net Profit margin ratio:

Net profit margin ratio= (net profit after tax/sales)*100 year Capital iq Net profit after tax Sales Net profit margin ratio Allsec Net profit after tax sales Net profit margin ratio 281350000 135500000 72280000 68140000 39450000 56349189 616735837 9.10
118491735 157306064 182893651

20062007

20072008

20082009

20092010

20102011

216538842 2483490358 8.71

1325943691

1802474191

2081844923

8.10

8.72

8.78

1171350000 1040260000 1098470000 1327870000 1451210000 24.01 13.02 6.50 5.10 2.70

Graph:

30.01 25.01 20.01

net profit margin(CIQ)

15.01 10.01 5.01 0.01 2006-07 2007-08 2008-09 2009-10 2010-11

net profit margin(Allsec)

Interpretation:
High net profit margin ratio demonstrates effectiveness at converting sales into actual profit. Profit margins vary by industry, but all else being equal, the higher a company's profit margin compared to its competitors, the better. Net profit margin indicates how well the company converts sales into profits after all expenses is subtracted out. From the above table Capital IQs net profit margin ratio consistently maintaining by this we can say that company is good at managing income and expenditure. Less expenditure incurs good profit margin. Regarding Allsecs there is high net profit margin in the year 2007. From the year 20082011 net profit margin is goes on decreasing this is because increasing of expenditure for every year from 2008-2011. Hence as there is not proper managing of expenditure of the company it incur less profit to company. Capital IQ is good at managing expense and it has effectively converting sales into profit thats the main secret of Capital IQ as maintain constant net profit.

Operating Profit margin ratio:

Operating profit margin ratio=operating income/ net sales

Year Capital iq Operating income Net Sales Operating profit margin ratio Allsec Operating income Net Sales Operating profit margin ratio

20062007

20072008

20082009

20092010

20102011

605148222 1310574164 1796797166 2080105550 2481400254 616735837 1325943691 1802474191 2081844923 2483490358 0.981 0.988 0.996 0.999 0.999

1132788000 990161000

964922000 1220803000 1415445000

1112194000 995560000 1066529000 1305544000 1430548000 1.01 0.99 0.90 0.93 0.98

Grap h:

1.02 1 0.98 0.96 0.94 0.92 0.9 0.88 0.86 0.84 2006-07 2007-08 2008-09 2009-10 2010-11
operating profit margin(Allsec) operating profit margin(CIQ)

Interpretation:
Operating margin gives analysts an idea of how much a company makes (before interest and taxes) on each rupee of sales. When looking at operating margin to determine the quality of a company, it is best to look at the change in operating margin over time and to compare the company's yearly or quarterly figures to those of its competitors .

From the above graph we observe Capital IQs has maintaining good operating profit ratio it mainly based on operating income. From the year 2007 2011 there is slightly increasing operating profit.

From the above graph we observe Allsecs has fluctuation from the year 20072011 there is no proper management of operating income. Capital IQs is good at managing operating profit margin when compare to Allsecs.

Expense ratio:
Expense ratio=total expense/net sales Year Capital iq Total expense Net Sales Expense ratio Allsec Total expense Net Sales Expense ratio 890624000 1150822000 1168691000 1396010000 1490662000 1112194000 995560000 1066529000 1305544000 1430548000 0.80 1.15 1.09 1.06 1.04 616735837 1135133702 1556661902 1808787432 2157739349 616735837 1325943691 1802474191 2081844923 2483490358 0.870 0.850 0.863 0.868 0.868 20062007 20072008 20082009 20092010 20102011

Graph:

1.4 1.2 1 0.8 0.6 0.4 0.2 0 2006-07 2007-08 2008-09 2009-10 2010-11
expense ratio(CIQ) expense ratio(Allsec)

Interpretation:
As we can observe, the ratios of Capital IQ have increased by significant amounts. This can be attributed to the fact that the no. of employees increased over the years as company expanded due to which personal expenses increased, so the average daily expenses ratio increased gradually. Also, the operating expenses show considerable amount of increase. This shows the company has good growth and expansion. Allsesc has also shown greater increase in the ratios due to the increase in the personal expenses as compared to Capital IQ. Hence it will affect the profit as well as the share holders .Because the if the expense will increase then it will affect the profit and if the profit will decrease then it will not maximize the share holders wealth. This may create problem for the company

Earnings per Share:

Earnings per share = (profit after taxpreference dividend/no of equity share) Year Capital iq PAT(preferen ce 1105853932 4244224412 9083121613 15182594172 24560739896 dividend) No of equity shares EPS Allsec PAT(preferen ce 34055161700133827659706804634980 6112447860 3439486330 dividend) No of equity shares EPS 1695130000 1505373000 1435577000 1367438000 1327987000 20.09 8.89 4.74 4.47 2.59 138578187 7.98 257069922 16.51 414375986 21.92 597269637 25.42 813808479 30.18 20062007 20072008 20082009 20092010 20102011

Grap h:

35 30 25 20 15 10 5 0 2006-07 2007-08 2008-09 2009-10 2010-11

Earning per share(CIQ) Earning per share(Allsec)

Interpretation:
The phrase earnings in finance is referred to net profit, that is, after tax profit. Earnings per Share equals simply to the total net profit (earnings) divided by the total number of shares. What EPS means is how much net profit one share of the company is producing. Obviously the higher this ratio is, the better, because the value of the share will increase. From the above graph we observe that the Earning per Share Ratio of Capital IQ is consistently increasing which shows that the company is performing well in the market which is creating more profit for the company as well as the stock holders .It will attract more investors to invest in the company as EPS tells how much each rupees invested earns (this is true if we only consider the EPSs of the different company's stocks).In case of Allsecs it is clearly observed that share price is decreasing every year.

FINDINGS:
The liquidity position of the company is satisfactory. The company liquidity position year by year increases .The ratio is fluctuating In between 0.824 to 2.594 which is due to the current assets gradually increase and current liabilities gradually decreasing. Quick ratio of the company is fluctuating in between 0.824 to 2.594 this ratio equal to the current ratio, why because of the company dont have any stock, this company purely financial service company .Quick ratio ideal ratio is 1:1 and present ratio in the year 201011 is 2.594 in this year ratio is good and liquidity position is better. Net profit margin ratio is changed slightly from 9.27% to 8.71% the company maintains the net profit margin ratio of 8.71% in the year 201011 where as Allsec is going on decreasing Return on equity ratio is fluctuating in between 0.6 to 0.46 the high profitability in the year 200708 (0.46) and lowest in the year 201011. Capital IQ company net profit is year by year increases and the business is also increases. In the year 200607net profit is 57228939 the year 201011 is 216538842 so the business is gradually increasing. Earnings per share of the company is increasing from 20072011 that means profit of the company is satisfactory where as Allsecs EPS is going on decreasing profit of the company is not satisfactory because of expenses are increasing than income. Operating profit margin ratio is constant 0.99 from the year 20072011 where as Allsecs Operating profit margin is fluctuating in between 1.01 to 0.93.

SUGGESTIONS:
The following recommendations have been made only in respect of those ratios where CIQs performance is poorer 9 Current Ratio The current ratio of CIQ in the financial year 200607 was 0.824. Thus the company can improve this ratio and bring it closer to the ideal ratio of 2:1 by either increasing its current assets or reducing its current liabilities. In the year 201011 CR is improved to 2.59 this will improve the shortterm liquidity position of the company 9 Net Profit Margin The net profit of the firm has been falling despite both sales and net profit of the firm increasing every year. This could once again be attributed to the cost plus markup revenue model followed by the firm which has proved to be both a boon and bane for it. While the model provides an umbrella to the company during rainy days since that markup rate is fixed and that company is bound to earn more than it expended on the product sold, there is no scope to earn more that the rate fixed, leaving less scope for higher profit on product. Thus the company should take steps in this regard to improve its profits which will automatically reflect in the net profit margin in the form higher values signifying an improvement. 9 Operating Profit Margin The analysis of the companys income statements reveal the expenses have been increasing at a rate higher than that of the income. This can be attributed to the cost plus markup revenue model of the company which has limited the companys scope for earning a high profit margin. The company can therefore take steps to increase its income from both core and subsidiary operations by altering its revenue model. This will improve the efficiency of CIQ

CONCLUSION:

RATIOS Liquidity Ratios: Current Ratio Net Working Capital Profitability Ratios: Operating Profit Margin Net Profit Margin Return on Equity Return on Investments Turnover Ratio: debtor turnover Solvency Ratios: Debt Equity Debt Asset Leverage Ratios: Fixed Assets to Networth

CAPITAL IQ

ALLS EC

slightly

The liquidity position of the company has gradually and consistently increased during the years. The availability of current assets to pay off current liabilities is fairly sufficient to meet the obligations arising out of current liabilities to the tune. The profitability position of the company is more or less consistent over the years and shows that the company is profitable enough. Turnover ratios show an increase which states that the companys sales are quite higher than the net investments in the fixed assets.

Solvency Ratio of Capital IQ is very good over the years. As such, there are no debts to this company as it is totally funded by Capital IQ INC.

Average Daily Expense Ratio of this company has increased considerably which justifies the expansion plans. Although the investments in the fixed assets over the years have reduced, this company doesnt require much of the investments

How can the company improve its net profit?

Both of the above parameters of measuring the profitability of the firm can be improved by:

Changing the revenue model of the company. Charging a higher percentage of mark-up from the customer i.e. the parent company

Capital IQs financial performance has proved to be better. If the company continues to progress and perform at this pace its liquidity position will also improve in the coming financial years. Though the impact of global financial crisis was high on IT/ ITES sector, Capital IQ has succeeded in coping up with it and performed well because of its revenue model. The company indeed has a bright future ahead.

BIBILOGRAPHY:
Annual report of Capital IQ (20072011) Annual report of Allsec (20072011) Finance management by Dr S.N. Maheshwari Finance management by Dr B.G. Satyaprasad

Oxford dictionary of accounting www.capitaliq.com www.allsectech.com www.investopedia.com www.accountingformanagement.com

www.wikipeida.com

APPENDIX:
BALANCE SHEET OF CAPITAL IQ INFORMATION SYSTEMS LIMITED

Particulars SOURCES OF FUNDS: Share Capital

2006 07

2007 08

2008 09

200910

201011

7,175,000

7,175,000

7,175,000

7175000

7175000

Reserves and surplus Unsecured Loans Deferred tax liabilities (net) APPLICATION OF FUNDS :

131,403,18 249,849,92 407,200,98 7 2 6 590094637 7,868,218 5,712,656 3,344,853 743643

806633479

6,703,887

Gross Block Less: Accumulated Depreciation

260,429,18 411,506,74 1 343135141 1 548349219

424259804

204,298,38 82,775,725 141875242 3 245774704 177,653,45 201,259,89 207,208,35 6 9 8 274442263

196722892

Net Block Capital Work in Progress(including capital advances)

227536912

8,958,792 186,612,2 48

4,232,258

39,541

1794592

2218441

Total Intangible Assets

205,492,1 207,247,8 57 99 276236855 229755353 44,539 19,983 1216162

Investments Deferred tax assets (net)

6,401,900

37,765,486 25653417 23,220,544 45209145

11430078 41496978

Current Assets, Loans & Advances 254,768,07 9 371290054

Sundry Debtors

586581070

Cash and Bank balances Other Current Assets Loans and Advances

102,260,43 178,623,53 4 8 82,540,164 65442284 716107 22,131,774 233,231 340139

73795827 5378395 196512375

28,252,402 66,036,335 72,360,799 182280912 266,791,64 409,902,27 131228943 7 3 619353389

Total Current Assets Less : Current Liabilities and Provisions

862267667

Current Liabilities

116,659,17 129,821,89 120940689 5 0 218868785 130,613,45 43,750,210 99,243,951 6 149570741

155639510

Provisions

176718249

16469095 Total Current Liabilities 6

215,903,1 260,435,3 26 46 368439526 332357759

Net Current Assets

(33,461,956 149,466,92 ) 50,888,521 7 250913863 153,150,29 262,782,57 417,720,83 2 8 9 598013280

529909908

Total

813808479

PROFIT & LOSS ACCOUNT OF CAPITAL IQ INFORMATION SYSTEMS LIMITED

2006 07 INCOME Service income Other income Total income EXPENDITURE Personnel expenses Operating and other expenses depreciation Impairment loss Financial expenses Total 371,399,001 106,206,828 605,148,222 11,587,615 616,735,837

2007 08

2008 09

200910

2001011

1,310,574,164 1,796,797,166 2080105550 15,369,527 5,677,025 1739373

2481400254 2090104 2483490358

1,325,943,691 1,802,474,191 2081844923

882,648,056 190260339

1,186,895,616 1341517211 299,983,215 367519275

1635999139 446920416

45,773,084 933,932 524,312,845

61,492,525 732,782

69,187,797 595,274

71261327 28132252 357367

74645507 174287 2157739349 325751009

1,135,133,702 1,556,661,902 1808787432 190,809,989 245,812,289 273057491

Profit before tax and 92,422,992 prior period items Provision for tax Current tax Deferred tax charge 29,000,000 5,170,803

80,928,035 (13,105,787) 4,496,006 72,318,254

99,554,453 (16,818,644) 5,770,416 88,506,225

116000000 3847559 21988601 90163840

105500000 3712167 109212167

fringe benefit tax 1,903,000 Total tax expense 36,073,803

Profit after tax and before prior period items

56,349,189

118,491,735

157,306,064

182893651

216538842

prior period items (879,750)

NET PROFIT

57,228,939

118,491,73 5

157,306,06 4 18289365 1

21653884 2

Balance bought forward from previous year

71,914,248

129,143,18 7

247,634,92 2

40494098 6

58783463 7

Surplus carried to 129,143,187 balance sheet

247,634,92 2

404,940,98 6

58783463 7

80437347 9

ALLSEC CONSOLIDATOR REPORT