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“ Comparative Study Of Financial Statements Of Tata Consultancy Services And Infosys
For The Year 2013-2014” INTRODUCTION
“Comparative financial statements are accounting reports that show more than just the current-year activity or balances. The three major financial statements are the balance sheet, the income (or profit and loss) statement and the cash flow statement. Comparative statements are required in order to comply with generally accepted accounting principles. They give readers a more complete view of the direction of the company over time.”
Financial statements are a collection of reports about an organization's financial results and condition. They are useful for the following reasons:
To determine the ability of a business to generate cash, and the sources and uses of that cash.
To determine whether a business has the capability to pay back its debts. To track financial results on a trend line to spot any looming profitability issues. To derive financial ratios from the statements that can indicate the condition of
the business. To investigate the details of certain business transactions, as outlined in the
disclosures that accompany the statements.
The standard contents of a set of financial statements are:
Balance sheet Shows the entity's assets, liabilities, and stockholders’ equity as of the report date.
Income statement. Shows the results of the entity's operations and financial activities for the reporting period.
Statement of cash flows. Shows changes in the entity's cash flow during the reporting period.
Supplementary notes. Includes explanations of various activities, additional detail on some accounts, and other items as mandated by GAAP or IFRS.
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INTRODUCTION OF TATA CONSULTANCY SERVICE
1968 to 2000 Tata Consultancy Services Limited (TCS) was founded in 1968 as a division of
Tata Sons Limited by JRD Tata. Its early contracts included providing punched card services to sister company TISCO (now Tata Steel)working on an Inter-Branch Reconciliation System for the Central Bank of India, and providing bureau services to Unit Trust of India.
In 1975, TCS conducted its first campus interviews, held at IISc, Bangalore. The recruits comprised 12 Indian Institutes of Technology graduates and three IISc graduates, who became the first TCS employees to enter a formal graduate trainee programmer.
In 1979, TCS delivered an electronic depository and trading system called SECOM for the Swiss company SIS Sega Inter Settle. TCS followed this up with System X for the Canadian Depository System and automating the Johannesburg Stock Exchange. TCS associated with a Swiss partner, TKS Techno soft, which it later acquired.
In 1981, TCS established India's first dedicated software research and development centre, the Tata Research Development and Design Centre (TRDDC) in Pune. In 1985 TCS established India's first client-dedicated offshore development centre, set up for client Tandem.
In the early 1990s the Indian IT outsourcing industry grew rapidly due to the Y2K bug and the launch of a unified European currency, Euro. TCS created the factory model for Y2K conversion and developed software tools which automated the conversion process and enabled third-party developer and client implementation.
2000 to present By 2004, TCS's e-business activities were generating over US$500 million in
annual revenues.
On 25 August 2004 TCS became a publicly listed company.
In 2005 TCS became the first India-based IT services company to enter the bioin formatics market.
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In 2006 TCS designed an ERP system for the Indian Railway Catering and Tourism Corporation.
In 2008 TCS undertook an internal restructuring exercise which aimed to increase the company's agility.
TCS entered the small and medium enterprises market for the first time in 2011, with cloud based offerings. On the last trading day of 2011, TCS overtook RIL to achieve the highest market capitalization of any India-based company.
In the 2011/12 fiscal year TCS achieved annual revenues of over US$10 billion for the first time.
In May 2013 TCS bagged a Six Year contract from DoP worth over 1100 crore Rupees.
INTRODUCTION OF INFOSYS
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Infosys Ltd is a global technology services firm that defines designs and delivers information technology (IT)-enabled business solutions to their clients. The company provides end-to-end business solutions that leverage technology for their clients, including technical consulting, design, development, product engineering, maintenance, systems integration, package-enabled consulting, and implementation and infrastructure management services. The company also provides software products to the banking industry. They have developed finacle, a universal banking solution to large and medium size banks across India and overseas. Infosys BPO is a majority owned subsidiary. Through Infosys BPO, the company provides business process management services, such as offsite customer relationship management, finance and accounting, and administration and sales order processing. The company is having marketing and technical alliance with FileNet, IBM, Intel, Microsoft, Oracle and System Application Products. Infosys Ltd is a public limited and India's second largest software exporter company was incorporated in the year 1981 as Infosys Consultants Pvt Ltd by Mr.N.R.Narayana Murthy at Karnataka. The company was started by seven people with the investment of USD 250. The company became a public limited company in the year 1992. The company was the first Indian company to be listed on the NASDAQ at the year 1999. Infosys also forms a part of the NASDAQ-100 index. Continuously in the year 2001, 2002 and 2003, the company wins the National award for excellence in corporate governance conferred by the Government of India. In October 2, 2004, they set up a wholly owned subsidiary in People's Republic of China named Infosys Technologies (China) Co Ltd. In the year 2005, the company established Infosys Consulting Inc, a wholly owned subsidiary in Texas, US to add high-end consulting capabilities to their Global Delivery Model. The company was selected as 'Best Outsourcing Partner' by the readers of Waters, a publication covering the needs of chief information officers in the capital market firms. In the year 2007, the company increased the stake value in Progeon to 98.9% after acquiring shares from Citicorp International Financial Company. Infosys had taken over Philips' finance and administration business process outsourcing (BPO) centers spread across India, Poland and Thailand for USD 28 million. Infosys Technologies has 47% of core business assets stagnating.
MEANING OF BALANCE SHEET
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In financial accounting, a balance sheet or statement of financial position is a summary of the financial balances of a sole proprietorship, a business partnership, a corporation or other business organization, such as an LLC or an LLP. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a "snapshot of a company's financial condition “Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time of a business' calendar year.
A standard company balance sheet has three parts: assets, liabilities and ownership equity. The main categories of assets are usually listed first, and typically in order of liquidity. Assets are followed by the liabilities. The difference between the assets and the liabilities is known as equity or the net assets or the net worth or capital of the company and according to the accounting equation, net worth must equal assets minus liabilities.[
A business operating entirely in cash can measure its profits by withdrawing the entire bank balance at the end of the period, plus any cash in hand. However, many businesses are not paid immediately; they build up inventories of goods and they acquire buildings and equipment. In other words: businesses have assets and so they cannot, even if they want to, immediately turn these into cash at the end of each period. Often, these businesses owe money to suppliers and to tax authorities, and the proprietors do not withdraw all their original capital and profits at the end of each period. In other words businesses also have liabilities
FORMAT OF VERTICAL BALANCE SHEET
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Vertical form of balance sheet does not demonstrate just financial position but it also shows the flow of fund in one year. We can create our balance sheet in such shape for knowing the exact position of our funds. If we include the previous figures of liabilities and assets, then we need not to make fund flow statement because to show the comparison of two period vertical balance sheets is just like fund flow statement. In short cut, it fulfills the requirement of fund flow analysis. One more mystery can be analyzed with this form of balance sheet. We can evaluate changes in working capital by comparing two vertical balance sheets.
Moreover, most of the companies today use the vertical form for reporting because with this balance sheet looks without any clutter. Now, we tell you the structure of vertical balance sheet. Basic formula is of accounting equation. Capital + Liabilities = Assets↓Shareholder’s fund + long term liabilities + short term liabilities = Fixed assets + current assets ↓Shareholder’s fund + Long term liabilities = Final Assets + Current Assets – Current Liabilities ↓Source of Fund = Application of Fund
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BALANCESHEET OF TATA CONSULTANCY SERVICES AND INFOSYS
FOR THE YEAR 2013-2014
PARTICULARSAMTS IN CRORES
TCS INFOSYS
1.EQUITY & LIABILITIES
SHAREHOLDERS FUNDS
a) Share capital.b) Reserves and surplus
NON -CURRENT LIABILITIES
a) Long-term borrowingsb) Deferred tax liabilities(net)c) Other long-term liabilitiesd) Long term provisions
CURRENT LIABILITIES
a) Short-term borrowingsb) Trade payablesc) Other current liabilitiesd) Short-term provisions
TOTAL
2.ASSETS
NON-CURENT ASSETS
a) Fixed assets
295.7232266.53
32562.25
83.10168.49251.87269.52772.98
80.023528.042172.713896.149676.91
43012.14
5059.48
28735772
36059
-56120
-176
-178282737886793
43028
4425
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i. Tangible assetsii. Intangible assetsiii. capital work in progress
b) Non-current investmentsc) Deferred tax assetsd) Long-term loans and advancese) Other non-current assets
CURRENT ASSETS
a) Current investmentsb) Inventoriesc) Unbilled revenuesd) Trade receivablese) Cash and cash balancesf) Short-term loans and advancesg) Other current assets
TOTAL
44.801763.856868.13
5975.73148.234630.211881.20
19503.50
348.656.34
2303.3511202.324054.164911.48682.34
23508.64
43012.14
2811355588
2764378152931
10290
1580--
6365204014392 -
32738
43028
MEANING OF PROFIT AND LOSS ACCOUNT
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An official quarterly or annual financial document published by a public company, showing earnings, expenses, and net profit. Net income is determined from this financial report by subtracting total expenses from total revenue. The profit and loss statement and the balance sheet are the two major financial reports that every public company publishes. The difference between this statement and the balance sheet deals with the periods of time that each one represents. The profit and loss statement shows transactions over a given period of time (usually quarterly or annually), whereas the balance sheet gives a snapshot holdings on a specific date. Also called income statement or earnings report
Profit and loss account is that part of final account is made for calculating the net profit or net loss. In the debit side of this account, we show all indirect loss and expenses and in the credit side of this account, we show all indirect incomes. After matching debit and credit side of profit and loss account, we can find net profit or loss of business. If organisation is company, we transfer this balance to profit and loss appropriation account; otherwise, we transfer this balance to capital account. Explanation of Profit and Loss AccountA) Debit Side of Profit and loss account1. Gross loss transferred from trading account.2. All indirect expenses like sale expenses, office expenses and legal expenses3. If credit side is more than debit side, we show net profit in debit sideB) Credit Side of Profit and Loss account1. Gross profit transferred from trading account 2. Indirect Incomes like rent, commission, and discount received 3. If debit side is more than credit side, we show net loss in credit side
Profit & Loss Account For Tata Consultancy Services And Infosys For The Year 2013-2014
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PARTICULARSAMT IN CRORES
TCS INFOSYS
I. Revenue from operationsII. Other income(net)
TOTAL REVENUE
III. Expenses:a) Employee benefit expensesb) Deferred consideration pertaining to
acquisitionc) Cost of technical sub –contractorsd) Travel expensese) Cost of software packages and othersf) Communication expensesg) Professional chargesh) Finance costsi) Depreciation and a amortizations expensej) Operation and other expenses
TOTAL EXPENSES
IV. PROFIT BEFORE TAX
V. TAX EXPENSE:a) Current taxb) Deferred taxc) MAT entitlement
VI. PROFIT FOR THE YEAR
48426.142230.3950656.53
17081.72-
-----
30.62802.86
17038.15
34953.35
15703.18
3197.4244.00
(324.58)2916.84
12789.34
65.22
40352236542717
2256585
14591509777361506
-10991557
29918
12799
3518(148)
-3370
9429
165.01
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VII. EARNINGS PER EQUITY SHARE:
basic and diluted
weighted average number of equity shares
(Face value Rs 1 and 5 each.)
1957220996 571400091
Comparative Statement Of Vertical Balance Sheet
PARTICULARSFor the year 2011-12 & 2012-2013
TCS INFOSYS
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Increase/decrease
Increase/decrease
Amt % Amt %
1.EQUITY & LIABILITIES
SHAREHOLDERS FUNDS
a) Share capital.b) Reserves and surplus
NON -CURRENT LIABILITIES
a) Long-term borrowingsb) Deferred tax liabilities(net)c) Other long-term liabilitiesd) Long term provisions
CURRENT LIABILITIES
a) Short-term borrowingsb) Trade payablesc) Other current liabilitiesd) Short-term provisions
TOTAL
2.ASSETS
NON-CURENT ASSETS
a) Fixed assetsi. Tangible assetsii. Intangible assetsiii. capital work in progress
b) Non-current investmentsc) Deferred tax assets
-7705.627705.62
(13.13)50.3954.28114.74206.28
80.02680.13574.15(492.87)841.438753.33
1047.32(6.66)364.031404.69
-31.3731.00
(13.64)42.6727.4774.1336.40
-23.8835.92
(11.23)9.5225.55
26.1012.9426.0025.71
-6662.006662.00
-5659-
115
-16688214911977974
43211525502134
-21.4621.26
--
47.97-
93.50
-721.7428.833.9017.3420.79
9.8797.6393.2234.73
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d) Long term loans and advancese) Other non-current assets
CURRENT ASSETS
a) Current investmentsb) Inventoriesc) Unbilled revenuesd) Trade receivablese) Cash and cash balances
TOTAL
828.678.49297.4
(755.68)1783.57
16.106.086.86
(28.66)10.07
373204165
162892
932576.989.90
106.6735.72
Year 2012-2013 & 2013-2014, taken 2012-2013 as base year.
Comparative Statement Of Profit And Loss Account
PARTICULARS
For the year 2011-2012&2012-2013
TCS INFOSYS
Increase/decrease Increase/decrease
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Amt % Amt %
I. Revenue from operations
II. Other income(net)TOTAL REVENUE
III. Expenses:a) Employee benefit
expensesb) Deferred
consideration pertaining to acquisition
c) Cost of technical sub –contractors
d) Travel expensese) Cost of software
packages and othersf) Communication
expensesg) Professional chargesh) Finance costsi) Depreciation and a
amortizations expense
j) Operation and other expenses
TOTAL EXPENSES
IV. PROFIT BEFORE TAX
10321.91(454.79)9867.12
3509.04
-
-
--
--
14.22
114.69
3892.32
7530.27
2336.85
27.09(16.94)24.19
25.85
-
-
--
--
86.71
16.67
29.61
27.50
17.48
66184617079
4225
85
682
387123
8723-
171
196
5979
1100
19.6224.2119.86
23.04
-
87.77
34.4918.81
31.754.76
-
18.43
14.40
24.98
9.40
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V. TAX EXPENSE:a) Current taxb) Deferred taxc) MAT entitlement
VI. PROFIT FOR THE YEAR
VII. EARNINGS PER EQUITY SHARE:
basic and diluted
332.0482.93111.52526.49
1810.36
9.27
11.59(213.02)(25.57)22.03
16.49
16.57
205(202)
-3
1097
19.18
6.19(374.07)
-(367.88)
13.17
13.15
Year 2012-2013 & 2013-2014, taken 2012-2013 as base year.
Chapter:5
MEANING OF CASH FLOW: Definition:
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“A financial statement that reflects the inflow of revenue vs. the outflow of expenses resulting from operating, investing and financing activities during a specific time period”
Cash flow statements and projections express a business's results or plans in terms of cash in and out of the business, without adjusting for accrued revenues and expenses. The cash flow statement doesn't show whether the business will be profitable, but it does show the cash position of the business at any given point in time by measuring revenue against outlays.
The cash flow statement should be prepared on a monthly basis during the first year, on a quarterly basis for the second year, and annually for the third year. The following 17 items are listed in the order they need to appear on your cash flow statement:
1. Cash refers to cash on hand in the business.2. Cash sales are income from sales paid for by cash.3. Receivables are income from the collection of money owed to the business
resulting from sales.4. Other income is income from investments, interest on loans that have been
extended, and the liquidation of any assets.5. Total income is the sum of total cash, cash sales, receivables and other income.6. Material/merchandise is the raw material used in the manufacture of a product
(for manufacturing operations only), the cash outlay for merchandise inventory (for merchandisers such as wholesalers and retailers), or the supplies used in the performance of a service.
7. Direct labor is the labor required to manufacture a product (for manufacturing operations only) or to perform a service.
8. Overhead is all fixed and variable expenses required for the operations of the business.
9. Marketing/sales is all salaries, commissions and other direct costs associated with the marketing and sales departments.
10.R&D is labor expenses required to support the research and development operations of the business.
11.G&A is labor expenses required to support the general and administrative functions of the business.
12.Taxes are all taxes, except payroll, paid to the appropriate government institutions.
13.Capital represents the capital requirements to obtain any equipment needed to generate income.
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14.Loan payments are the total of all payments made to reduce any long-term debts.
15.Total expenses are the sum of material, direct labor, overhead expenses, marketing, sales, R&D, G&A, taxes, capital and loan payments.
16.Cash flow is the difference between total income and total expenses. This amount is carried over to the next period as beginning cash.
17.Cumulative cash flow is the difference between current cash flow and cash flow from the previous period.
CASH FLOW OF TATA CONSULTANCY SERVICES
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19
CASH FLOW OF INFOSYS
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TATA CONSULTANCY SERVICES
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1. SHARE CAPITAL
The Authorized, Issued, Subscribed and Fully paid-up share capital comprises of equity shares and redeemable preference shares having a par value of ` 1 each as follows:
(b) Rights, preferences and restrictions attached to shares Equity shares The Company has one class of equity shares having a par value of ` 1 each. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the
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remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding. Preference shares Preference shares would be redeemable at par at the end of six years from the date of allotment i.e. March 28, 2008, but may be redeemed at any time after 3 years from the date of allotment at the option of shareholder. These shares would carry a fixed cumulative dividend of 1% per annum and a variable non-cumulative dividend of 1% of the difference between the rate of dividend declared during the year on the equity shares of the Company and the average rate of dividend declared on the equity shares of the Company for three years preceding the year of issue of the redeemable preference shares.
Details of shares held by shareholders holding more than 5% of the aggregate shares in the Company
Shares allotted as fully paid up by way of bonus shares (during 5 years preceding March 31, 2013)
The Company allotted 97,86,10,498 equity shares as fully paid up bonus shares by utilisation of Securities premium reserve on June 18, 2009 pursuant to a shareholder’s resolution passed by postal ballot on June 12, 2009.
RESERVES AND SURPLUS
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Reserves and surplus consist of the following reserves
The Board of Directors at its meeting held on April 17, 2013 has recommended a final dividend of ` 13 per equity share
LONG TERM BORROWINGS Long - term borrowings consist of the following:
Obligations under finance lease are secured against fixed assets obtained under finance lease arrangements.
DEFERRED TAX BALANCESMajor components of the deferred tax balances consist of the following
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OTHER LONG - TERM LIABILITIES Other long - term liabilities consist of the following:
Other liabilities comprise: Fair value of foreign exchange forward and currency option Contracts secured against trade receivables -Capital creditors 54.34Others 197.53
LONG - TERM PROVISIONS Long - term provisions consist of the following:
Provision for employee benefits includes provision for gratuity and other retirement benefits.
25
SHORT - TERM BORROWINGS Short term borrowings consist of the following:
Bank Overdrafts are secured against book debts .
OTHER CURRENT LIABILITIES Other current liabilities consist of the following
Other payables comprises of:Fai r value of foreign exchange forward and currency optionContracts secured against trade receivables57.86 Statutory liabilities498.96 Capital creditors 226.35 Class action suit settlement consideration 161.63 Others 479.18
Obligations under finance lease are secured against fixed assets obtained under finance lease arrangements.
SHORT - TERM PROVISIONS Short - term provisions consist of the following:
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Provisions for employee benefits include provision for compensated absences and other short - term employee benefits.
NON - CURRENT INVESTMENTS Non - current investments consist of the following:
27
28
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LONG - TERM LOANS AND ADVANCES (Unsecured) Long - term loans and advances (unsecured) consist of the following:
30
OTHER NON - CURRENT ASSETS Other non - current assets consist of the following:
CURRENT INVESTMENTS Current investments consist of the following:
31
INVENTORIES Inventories consist of the following:
Inventories are carried at the lower of cost and net realizable value.
UNBILLED REVENUES Unbilled revenue as at March 31, 2013 amounting to ` 2303.35 crores (March 31, 2012: ` 1567.47 crores) primarily comprises of the revenue recognised in relation to efforts incurred on turnkey contracts priced on a fixed time, fixed price basis of ` 1509.25 crores (March 31, 2012: ` 1208.10 crores).
TRADE RECEIVABLES Trade receivables (Unsecured) consist of the following
32
CASH AND BANK BALANCES Cash and bank balances consist of the following:
Balances with banks in current accounts do not include fourteen bank accounts having a balance of ` 1.35 crores (March 31, 2012: ` 0.31 crore) operated by the Company on behalf of a third party.
SHORT - TERM LOANS AND ADVANCES Short – term loans and advances (Unsecured) consist of the following:
OTHER CURRENT ASSETS Other current assets consist of the following:
33
REVENUE FROM OPERATIONS Revenue from operations consist of revenues from:
OTHER INCOME (NET) Other income (net) consists of the following:
OPERATION AND OTHER EXPENSES
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Operation and other expenses consist of the following:
FINANCE COSTS Finance costs consist of the following:
INFOSYS:
35
1. SHARE CAPITAL:
DuringtheyearendedMarch31,2012,theamountofpersharedividendrecognizedasdistributionstoequityshareholderswas`47.ThedividendfortheyearendedMarch31,2012includes`22pershareoffinaldividend,`15pershareofinterimdividendand`10pershareofspecialdividend-10yearsofInfosys BPO operations.
The Board of Directors, in their meeting on October 12, 2012, declared an interim dividend of `15 per equity share. Further the Board of Directors, in their meeting on April 12, 2013, proposed a final dividend of `27 per equity share. The proposal is subject to the approval of shareholders at the Annual General Meeting to be held on June 15, 2013. The total dividend appropriation for the year ended March 31, 2013 amounted to `2,815 crore including corporate dividend tax of `403 crore
RESEVES AND SURPLUS
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DEFERRED TAXES
37
OTHER LONG TERM LIABILITIES
OTHER CURRENT LIABILITIES
38
SHORT TERM PROVISIONS
INVESTMENTS
39
LONG TERM LOANS AND ADVANCES
OTHER NON CURRENT ASSETS
40
TRADE RECEIVEBALES
CASH AND CASH EQUIVALENTS
SHORT TERM LOANS AND ADVANCES
41
OTHER INCOME:
EXPENSES
42
TAX EXPENSES
RESEARCH AND DEVELOPMENT EXPENDITURE
43
Reconciliation Of Basic And Diluted Shares Used In Computing Earnings Per Share.
44
CONCLUSION
TCS also one of the successful private sector company in India. It is the company that has pioneered many services first time in India. TCS was the first to offer a product called one view by which customers are able to view their accounts in six branches on one page on their website.Infosys earlier known as Imperial Company has proved its existence through introducing various innovative schemes and that also are considered as competitive in present market. At the same time we can conclude that they need to focus on their human resources in order to achieve the maximum market share.
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