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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


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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 Dean

PROF. J DINESH DR. JAYASHREESURESH

Internal Examiner External Examiner


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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 ofMr 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


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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 knowledgegaining 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.


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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.


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CHAPTER PARTICULARS PAGE NO

CHAPTER 1

1.1 INDUSTRY PROFILE 1

1.2 COMPANY PROFILE 5

1.3 SWOT ANALYSIS 20

1.4 FINANCIAL MANAGEMENT 22

1.5 REVIEW OF LITERATURE 33

1.6 NEED OF THE STUDY 35

1.7 SCOPE OF THE STUDY 36

1.8 OBJECTIVE OF THE STUDY 37

CHAPTER 2 RESEARCH METHODOLOGY 38

CHAPTER 3 LIMITATIONS 39

CHAPTER4 DATA ANALYSIS AND INTERPRETATION 40


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CHAPTER 5 FINDINGS 59

CHAPTER 6 SUGGESTIONS 60

CHAPTER 7 CONCLUSION 61

BIBILOGRAPHY 63

APPENDIX 64


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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 processoutsourcing (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
http://e/wiki/Outsourcinghttp://e/wiki/Outsourcing


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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 Outsourcing.

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
http://e/kpo/site/http://e/kpo/site/http://e/wiki/Outsourcinghttp://e/kpo/site/http://e/wiki/Outsourcing


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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.


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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 inIndia 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. Fouryears 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 Data Processing

o Market Research Data Analysis

o Web Survey Analysis

o Marketing Questionnaire Design

Life sciences and Pharma Research

o Database Creation

o Text Mining

o Web Mining

o Numerical Data Mining

o Data Analytics


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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 Applied Investment Research

o Financial Analysis

o 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
http://e/wiki/Legal_Process_Outsourcinghttp://e/w/index.php%3Ftitle=Patent_services_outsourcing&action=edit&redlink=1http://e/wiki/Legal_Process_Outsourcinghttp://e/w/index.php%3Ftitle=Patent_services_outsourcing&action=edit&redlink=1


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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 ofStandard & 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 ofSTANDARD & 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.


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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.

9 The company has to three operating segments:

Financial services

Educational services

Information and Media services


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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.


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EVOLUTION OFCIQ

Started as Smart

SoftwareTechDevCo

Smart Software

became

Subsidiary of

Simply Stocks

Simply Stocks was

acquired by

Capital IQ, New

York

Capita IQ

became a

S

u

b

s

i

d

i

a

r

y

o

f

S

t

a

n

d

a

r

d

&

P

o


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ors the

McGrawHill

1993

1997

2003


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company

Reached 14002006

employee milestoneon

25th

September 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


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

benchmarked to them.


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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


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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


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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.


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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 inIndia


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ORGANIZATION STRCUTRE:

ExecutiveChairman

DecisionMaking,

Planning &

ManagingDirector Implementation

Interpretative,

L l

Vice presidentDefinedProcess

LevelsSr.Director/Director/Dy.Direct

or

Sr.Manager/Manager

Process

ExecutionLevels

Assistant Manager

Sr.TL/ TL /Sr.

Executive

Sr. Analyst / Executive

Analyst

SRA / SBID / Jr. Executive


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EMPLOYEE LEVELS/CAREER PROGRESSIONLEVELS

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


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PROCEDURE

Each level of employee should have certain skills and knowledge levels which canbe 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 02years 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 interpretationalskills.

RA should considerable improvement in the productivity and should havestandard productivity.


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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 andprinciples.

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 abovestandards.

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.


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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.


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CAPITAL IQCLIENTS


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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.


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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 business2. 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.


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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 theenterprise. 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.


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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 ofmeasuring 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 interms 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


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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 ofaccounting 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 istermedasTimes

Percentage: if the quotient obtained is multiplied by 100, the unit of expression istermedaspercentage.

Classification of Ratios:

Ratios can be classified into different categories depending upon the basis ofclassification.

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.


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Classification of Ratios Chart

Accounting Ratios

Traditional Functional

P&L A/c BalanceComposite

Profitability Coverage Turnover Financia

Ratios sheet Ratios Ratios Ratios Ratios Ratios

Ratios

Liquidity Stability

Ratios Ratios


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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 offinancial statements. Ratios tell the whole story of changes in the financialcondition of the business

2. Facilitates interfirm comparison: It provides data for interfirmcomparison. Ratios highlight the factors associated with successful andunsuccessful firm. They also reveal strong firms and weak firms, overvaluedand undervalued firms.

3. Helps in planning: It helps in planning and forecasting. Ratios can assistmanagement, in its basic functions of forecasting. Planning, coordination,control and communications.

4. Makes interfirm comparison possible: Ratios analysis also makespossible comparison oftheperformance of different divisions of the firm. The

ratios are helpful in deciding about their efficiency or otherwise in the pastand likely performance in the future.

5. Help in investment decisions: It helps in investment decisions in the caseof investorsandlending decisions in the case of bankers etc.

Limitation of Ratio Analysis:

1. Limitations of financial statements: Ratios are based only on theinformation which has been recorded in the financial statements. Financialstatements themselves are subject to several limitations. Thus ratios derived,there from, are also subject to those limitations. For example, nonfinancialchanges though important for the business are not relevant by the financial

statements. Financial statements are affected to a very great extent byaccounting conventions and concepts. Personal judgment plays a great partin determining the figures for financial statements.

2. Comparative study required: Ratios are useful in judging the efficiency ofthe businessonlywhen they are compared with past results of the business.However, such a comparison only provide glimpse of the past performanceand forecasts for future may not prove correct since several other factors likemarket conditions, management policies, etc. may affect the futureoperations.

3. Ratios alone are not adequate: Ratios are only indicators, they cannot betaken asfinalregarding good or bad financial position of the business. Otherthings have also to be seen.

4. Problems of price level changes: A change in price level can affect thevalidity ofratioscalculated for different time periods. In such a case the ratioanalysis may not clearly indicate the trend in solvency and profitability of thecompany. The financial statements, therefore, be adjusted keeping in viewthe price level changes if a meaningful comparison is to be made throughaccounting ratios.

5. Lack of adequate standard: No fixed standard can be laid down for idealratios. There are nowell accepted standards or rule of thumb for all ratioswhich can be accepted as norm. It renders interpretation of the ratios


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difficult.

6. Limited use of single ratios: A single ratio, usually, does not convey muchof a sense. To make abetter interpretation, a number of ratios have to becalculated which is likely to confuse the analyst than help him in making anygood decision.


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7. Personal bias: Ratios are only means of financial analysis and not an end initself. Ratios have to interpret and different people may interpret the sameratio in different way.

8. Incomparable: Not only industries differ in their nature, but also the firms ofthe similarbusiness 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 ratioanalysis conclusion can bedrawn regarding several aspects such as financialhealth, profitability and operational efficiency of the undertaking. Ratio pointsout the operating efficiency of the firm i.e. whether the management hasutilized the firms assets correctly, to increase the investors wealth. Itensures a fair return to its owners and secures optimum utilization of firmsassets.

It helps in interfirm comparison: Ratio analysis helps in interfirmcomparison by providingnecessary data. An inter firm comparison indicatesrelative position. It provides the relevant data for the comparison of theperformance of different departments. If comparison shows a variance, thepossible 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 andanalyzed in some comparable terms. The ratio analysis is one of the tools inthe hands of those who want to know something more from the financialstatements in the simplified manner.

It helps in determining the financial position of the concern: Ratioanalysis facilitates the management to know whether the firms financial

position is improving or deteriorating or is constant over the years by settinga trend with the help of ratios The analysis with the help of ratio analysis canknow the direction of the trend of strategic ratio may help the managementin the task of planning, forecasting and controlling.

It is helpful in budgeting and forecasting: Accounting ratios provide areliable data, which can be compared, studied and analyzed. These ratiosprovide sound footing for future prospectus. The ratios can also serve as abasis for preparing budgeting future line of action.

Liquidity position: With help of ratio analysis conclusions can be drawnregarding the Liquidityposition of a firm. The liquidity position of a firm wouldbe satisfactory if it is able to meet its current obligation when they becomedue. 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 theleverage or capital structure and profitability ratio which shows the earningpower and operating efficiency, Solvency ratio shows relationship betweentotal liability and total assets.

Operating efficiency:Yet another dimension of usefulness or ratio analysis,relevant from theView point of management is that it throws light on thedegree efficiency in the various activity ratios measures this kind of


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operational efficiency.


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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 thecurrent 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 ofthe current assets.

2. Even if the ratio is favorable, the firm may be in financial trouble, because ofmore 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. Thisratio can be very easily manipulated by overvaluing the current assets. Anequal increase in both current assets and current liabilities would decreasethe ratio and similarly equal decrease in current assets and current liabilitieswould 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


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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.


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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 ofdebtors 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.


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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 cushionavailable 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


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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.


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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 numberof 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 WorkingCapital

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


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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 ofthe 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


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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 theaccounting 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 thebenefit 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.


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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 thecurrents assets.

Future growth of undertaking and earning.


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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

INFORMATIONSYSTEMS (INDIA) PVT Ltd. The study covers the period of

20072011 for analyzing thefinancialstatement 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&pCapital IQ and Allsec Technologies.


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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 CapitalIQ (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


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CHAPTER 4

RESEARCH METHODOLOGY:

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

9 Primary data

9 Secondary data

Primary Data:

The information and data collected by conducting personal interviews withthe financial

manager of capital IQ .These interviews helped me to secure first hand informationabout 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.


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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 ofCommon 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:


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Application of Funds:

Expenses of Capital IQ:

Expenses (%) 2007 2008 2009 2010 2011

Personnel 70.83 77.75 76.24 74.17 75.82

Operating 20.25 16.76 19.27 20.32 20.71

Financial 0.18 0.06 0.04 0.02 0.01

Depreciation 8.73 5.42 4.44 3.94 3.46

Graph:


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Income of Capital IQ

Income (%) 2007 2008 2009 2010 2011

Income from Operations98.121

98.838 99.685 99.916 99.915

Other Income 1.878 1.161 0.314 0.083 0.084

Graph:


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Current Ratio:

Current ratio= current asset/current liabilities

Current asset= sundry debtors+ Cash and Bank balances+ Other CurrentAssets+ Loans and Advances

Current liabilities= Current Liabilities+ Provisions

year 20062007 20072008 20082009 20092010 20102011

Capital iq

Current 131,228,943 266791647 409902273 619353389 862267667

assets

Current 190814058 215903126 260435346 368439526 332357759

liability

Currentratio 0.79 1.23 1.57 1.68 2.59

Allsec

Currentasset 718092000 557873000 898848000 955331000 813201000

Current 219424000 133512000 177834000 190869000 235685000

liability

Current

ratio3.27

4.17 5.055 3.45

Graph:

6

5

4

3

2

1

0

2006-07 2007-08 2008-09 2009-1


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Current ratio(CIQ) Current ratio(Allsec)


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Interpretation:

The ideal current ratio of2:1. As we can observe, over the years the current

ratio ofCapital IQ has increased consistently and hence this company is solventand 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.

RegardingAllsec, the ratio over the last 5yrs is fluctuating and very high asfar 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 20062007 20072008 20082009 20092010 20102011

Capital iq

Net profit 102122273 179984260 226493861 254154978 962984349ater tax+dep

Total 164690956 215903126 260435346 368439526 332357759

liabilities

Solvency 0.62 0.83 0.86 0.68 2.89

ratio

Allsec

Net profit 123146000 71102000 599000 51802000 89295000ater tax+

dep

Total 219424000 133512000 177834000 180689000 235685000

liabilities


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Solvency 0.36 1.64 0.88 0.93 0.21

ratio


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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.

RegardingAllsec, 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


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Debtor Turnover Ratio:

Debtor turnover ratio: sales/closing debtors

Sales: service income+other income

year 20062007 20072008 20082009 20092010 20102011

Capital iq

Sales 616735837 1325943691 1802474191 2081844923 2483490358

Closing 0 0 254768079 371290054 586581070

debtors

Debtor 0 0 7.07 5.60 2.23turnoverratio

Allsec

Sales 1171350000 1040260000 1098470000 1327870000 1451210000

Closing 264259000 328402000 381964000 408439000 348525000

debtors

Debtor 4.4 3.1 2.8 3.2 4.1turnoverratio

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)


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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 betterposition in the year 2009 when compared to 200708, has increased in the year

2009 and from the year 2010 slowly its decreasing.

RegardingAllsec, 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 20062007 20072008 20082009 20092010 20102011

Capital iq

Long term 7868218 5712656 3344853 743643 0

debt

Shareholder 138578187 257069922 414375986 597269637 813808479

Debt equity 1.37 0.83 0.62 0.61 0.40

ratio

Allsec

Long term 1557000 3669000 5917000 25604000 33637000

debt

Shareholder 1695130000 1505373000 1435577000 1367438000 1327987000

Debt equity 0.12 0.08 0.12 0.13 0.17

ratio


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Graph:

1.6

1.4

1.2

1

0.8

0.6

0.4

0.2

0

2006-07 2007-08 2008-09 2009-10 2010-11

Debt equity ratio(CIQ)

Debt equity ratio(Allsec)

Interpretation:

It is difficult to determine the level of Debt equity ratio which will bebeneficial 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

ofCapital 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 exceptin the year 2008

.This is because, although in this year the loans have increased considerably, the


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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.


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Return on equity Ratio:

Returns on equity ratio: net income/shareholders equity

Shareholder equity: share Capital+Reserves and surplus

Net income: Salesexpense

year 20062007 20072008 20082009 20092010 20102011

Capital iq

Net income 92422992 190809989 245812289 273057491 325751009

Shareholder 138578187 257069922 414375986 597269637 813808479

Debtequity 0.41 0.46 0.37 0.3 0.26

ratio

Allsec

Net income 364000000 24080000 18060000 37020000 68640000

Shareholder 1695130000 1505373000 1435577000 1367438000 1327987000

Debtequity 0.16 0.09 0.05 0.04 0.02

ratio

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)


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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 maintainingshareholder 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 isfar 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+loansand advances

Net profit after tax: salesexpenseprovision for tax

year 20062007 20072008 20082009 20092010 20102011

Capital iq

Net profit 56349189 118491735 157306064 182893651 216538842

after tax

Total assets 317901191 472283804 654935646 921243661 1104669260

Return on 0.170 0.250 0.240 0.198 0.196

assets

Allsec

Net profit 281350000 135500000 72280000 68140000 39450000

after tax

Total assets 1673870000 1509040000 1441490000 1393040000 1361620000

Return on 0.170 0.070 0.044 0.043 0.024

assets


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Graph:

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 toAllsecs


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Net Profit margin ratio:

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

year 20062007 20072008 20082009 20092010 20102011

Capital iq

Net profit 56349189 118491735 157306064 182893651 216538842

after tax

Sales 616735837 1325943691 1802474191 2081844923 2483490358

Net profit 9.10 8.10 8.72 8.78 8.71margin

ratio

Allsec

Net profit 281350000 135500000 72280000 68140000 39450000

after tax

sales 1171350000 1040260000 1098470000 1327870000 1451210000

Net profit 24.01 13.02 6.50 5.10 2.70marginratio

Graph:

30.01

25.01

20.01

15.01

10.01

5.01

0.01

2006-07 2007-08 2008-09 2009-10 2010-11

net profit margin(CIQ)

net profit margin(Allsec)


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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 thecompany 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.

RegardingAllsecs there is high net profit margin in the year 2007. From the year 2008-

2011 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 ofCapital IQ as maintain constant net profit.

Operating Profit margin ratio:

Operating profit margin ratio=operating income/ net sales

Year 20062007 20072008 20082009 20092010 20102011

Capital iq

Operating 605148222 1310574164 1796797166 2080105550 2481400254

income

Net Sales 616735837 1325943691 1802474191 2081844923 2483490358

Operating 0.981 0.988 0.996 0.999 0.999profit

margin

ratio

Allsec

Operating 1132788000 990161000 964922000 1220803000 1415445000income

Net Sales 1112194000 995560000 1066529000 1305544000 1430548000

Operating 1.01 0.99 0.90 0.93 0.98profitmargin

ratio


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Graph:

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(CIQ)

operating profit

margin(Allsec)

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 operatingmargin 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 toAllsecs.


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Expense ratio:

Expense ratio=total expense/net sales

Year 20062007 20072008 20082009 20092010 20102011

Capital iq

Totalexpense 616735837 1135133702 1556661902 1808787432 2157739349

Net Sales 616735837 1325943691 1802474191 2081844923 2483490358

Expenseratio 0.870 0.850 0.863 0.868 0.868

Allsec

Total

expense 890624000 1150822000 1168691000 1396010000 1490662000

Net Sales 1112194000 995560000 1066529000 1305544000 1430548000

Expenseratio 0.80 1.15 1.09 1.06 1.04

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)


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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, theoperating 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

thepersonalexpenses 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 20062007 20072008 20082009 20092010 20102011

Capital iq

PAT(preference 1105853932 4244224412 90831216131518259417224560739896

dividend)

No of equity 138578187 257069922 414375986 597269637 813808479

shares

EPS 7.98 16.51 21.92 25.42 30.18

Allsec

PAT(preference 34055161700133827659706804634980 6112447860 3439486330

dividend)

No of equity 1695130000 1505373000 1435577000 1367438000 1327987000

shares

EPS 20.09 8.89 4.74 4.47 2.59


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Graph:

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 ofAllsecs it is clearly observed that share price isdecreasing every year.


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FINDINGS:

9 The liquidity position of the company is satisfactory. The company liquidity

position year by year increases .The ratio is fluctuating In between 0.824 to2.594 which is due to the current assets gradually increase and currentliabilities gradually decreasing.

9 Quick ratio of the company is fluctuating in between 0.824 to 2.594 this ratioequal to the current ratio, why because of the company dont have any stock,this company purely financial service company .Quick ratio ideal ratio is 1:1and present ratio in the year 201011 is 2.594 in this year ratio is good andliquidity position is better.

9 Net profit margin ratio is changed slightly from 9.27% to 8.71% the companymaintains the net profit margin ratio of 8.71% in the year 201011 where asAllsec is going on decreasing

9 Return on equity ratio is fluctuating in between 0.6 to 0.46 the highprofitability in the year 200708 (0.46) and lowest in the year 201011.

9 Capital IQ company net profit is year by year increases and the business isalso increases. In the year 200607net profit is 57228939 the year 201011 is216538842 so the business is gradually increasing.

9 Earnings per share of the company is increasing from 20072011 that meansprofit of the company is satisfactory where as Allsecs EPS is going ondecreasing profit of the company is not satisfactory because of expenses areincreasing than income.

9 Operating profit margin ratio is constant 0.99 from the year 20072011 whereas Allsecs Operating profit margin is fluctuating in between 1.01 to 0.93.


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SUGGESTIONS:

The following recommendations have been made only in respect of thoseratios 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 netprofitof 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 revealtheexpenses 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

.


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CONCLUSION:

RATIOS CAPITAL IQ

ALLS

EC

Liquidity Ratios:

Current Ratio

Net Working Capital

Profitability Ratios:

Operating Profit Margin

Net Profit Margin slightly

Return on Equity

Return on Investments

Turnover Ratio:

debtor turnover

Solvency Ratios:

Debt Equity

Debt Asset

Leverage Ratios:

Fixed Assets to Networth

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.


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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 beimproved 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.


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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
http://www.capitaliq.com/http://www.allsectech.com/http://www.investopedia.com/http://www.accountingformanagement.com/http://www.wikipeida.com/http://www.capitaliq.com/http://www.capitaliq.com/http://www.allsectech.com/http://www.allsectech.com/http://www.investopedia.com/http://www.investopedia.com/http://www.accountingformanagement.com/http://www.accountingformanagement.com/http://www.wikipeida.com/


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APPENDIX:

BALANCE SHEET OF CAPITAL IQ INFORMATION SYSTEMSLIMITED

Particulars 2006 07 2007 08 2008 09 200910 201011

SOURCES OF FUNDS:

Share Capital 7,175,000 7,175,000 7,175,000 7175000 7175000

Reserves and surplus131,403,187

249,849,922

407,200,986 590094637 806633479

Unsecured Loans 7,868,218 5,712,656 3,344,853 743643

Deferred tax liabilities(net) 6,703,887

APPLICATION OFFUNDS :

Gross Block

260,429,18

1 343135141

411,506,74

1 5483492

allesc ratios orig

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