raj project report on financial statement analysis

8/8/2019 Raj Project Report on Financial Statement Analysis

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AMITY GLOBAL BUSINESS SCHOOL, NOIDA

A

PROJECT REPORT

ON

FINANCIAL STATEMENT ANALYSIS

SUBMITTED BY

RAJKUMAR SINGHMBA-(2009-2011)

A 30101909065

INDUSTRY GUIDE FACULTY GUIDE

MR. FARID AHMED MRS KIRANDEEP KAUR

MANAGER LECTURER


AMITY UNIVERSITY-UTTAR PRADESH


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CERTIFICATE OF ORIGIN

This is to certify that Mr. Rajkumar singh, a student of post graduate degree in management,

Amity Global Business School, Noida has worked in the Adobe Systems, under the ableguidance and supervision of Mr. Farid Ahmed, Manager, Adobe Systems. The period for which

he was on training was for 8 weeks, starting from 1 st June to 31st July. This report has the

requisite standard for the partial fulfillment for the post graduate degree in management. To the

best of our knowledge no part of this report has been reproduced from any other report and the

contents are based on original research.

Signature Signature

Kirandeep kaur Rajkumar Singh


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ACKNOWLEDGEMENT

I express my sincere gratitude to my industry guide Mr. Farid Ahmed, Manager, Adobe Systems,

for his able guidance, continuous support and cooperation throughout my project, without whichthe present work would not have been possible.

I would also like to thank the entire team of Adobe systems, for the constant support and help in

the successful completion of my project.

Also I am thankful to my faculty guide Ms. Kirandeep kaur of my institute, for her continued

guidance and invaluable encouragement.

Signature

Rajkumar Singh


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TABLE OF CONTENTS

Chapter No. Subject Page No.

Ch. 1.0 Executive summary 5-6

Ch. 2.0 Research Methodology ... 7-8

2.1 Primary Objective(s) . 8

2.2 Research Design . 8

2.3 Sample Design 8

2.4 Scope of the study .. 8

2.5 Limitations .. 8

Ch. 3.0 Critical review of Literature . 9-13

Ch. 4.0 Company Profile .. 14-23

4.1 Industry Profile .... 24-28

4.2 Swot Analysis .. 29-30

Ch. 5.0 Data Collection . 31-66

5.1 Secondary data . 31-66

Ch. 6.0 Findings & Analysis .. 67-69

Ch. 7.0 Recommendations . 70-71

Ch. 8.0 Bibliography .. 72-73

Ch. 9.0 Annexure 74-79


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EXECUTIVE SUMMARY


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CH NO. 1: EXECUTIVE SUMMARY

Adobe systems incorporated is an American computer software company headquartered in San

Jos, California, USA. The company has historically focused upon the creation of multimedia

and creativity software products, with a more recent foray towards rich internet application

software development. Computer software, or just software, is the collection of computer

programs and related data that provide the instructions telling a computer what to do. The term

was coined to contrast to the old term hardware (meaning physical devices). In contrast to

hardware, software is intangible, meaning it cannot be touched

A great variety of software companies and programmers in the world comprise the software

industry. Software can be quite a profitable industry. Bill gates, the founder of Microsoft was the

richest person in the world in 2009 largely by selling the Microsoft windows and Microsoft

office software products. Other well-known large software companies include Novell, SAP,

Symantec, Adobe Systems, and Corel.

There are many players in the computer software industry and the major one of them is

Microsoft corp and Apple Inc from which Adobe systems getting strong competition.

The study gives detail information about the profitability, solvency, capital structure etc position

of Adobe system. Its an analytical research in which I use the financial statements i.e. income

statement and balance sheet of the company available from secondary source.

Analysis of financial statements is the systematic numerical calculation of the relationship

between one fact with the other to measure the profitability, operational efficiency and the

growth potential of the business.

The financial statements, balance sheet and profit & loss account, reclassified and arranged

logically for the purpose of analysis and establishing the relationship amongst the various items

are studied horizontally and vertically. The various analytical methods or devices used to study

this horizontal or vertical relationship are known as techniques of financial analysis. A number

of such techniques are used by the financial analyst, but the most popular among these are, Ratio

analysis,Comparative financial statements,Common-size financial statements, Funds flow

analysis.

Despite the significance of analysis and interpretation of financial statements as discussed above,

it has certain limitations which an analyst and the user should kept in mind.


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RESEARCH METHODOLOGY


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CH NO. 2: RESEARCH METHODOLOGY

Research in common language refers to a search for knowledge. Research can also be defined as

a scientific and systematic search for pertinent information on a specific topic.

2.1 PRIMARY OBJECTIVE(S)

The basic objective of Financial statement analysis is two fold:

1. To do an intra-firm comparative analysis of financial statements.

2. To improve the operational efficiency and profit earning capacity of the business.

2.2RESEARCH DESIGN

Data collection: The data has been collected through secondary source.

Secondary data: Secondary data regarding sales figures, gross profit, operating cost and otheroperating expenses, operating profit, net profit, capital employed, shareholders fund, total assets

etc was collected from the companys annual report to analyze the profitability, operational

efficiency i.e. the firms ability to earn maximum profits by the best utilization of its resources.

The report covers the data for the period of 2007 to 2009.

2.3 SAMPLE DESIGN

The size of the sample is 1, top most company in the software industry i.e. Adobe systems.

2.4 SCOPE OF THE STUDY

The study has great significance and provides benefits to various parties to whom company is

directly or indirectly interact.

It is beneficial to management of the company by providing crystal clear picture regarding

profitability, operational efficiency of the business.

2.5 LIMITATIONS

1. The present study is limited to a period of the year 2007 to 2009 due to limitation of

accessibility to database and time.

2. The authenticity of the findings and recommendations depend upon the rationality of the data

available to me.


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CRITICAL REVIEW OF LITERATURE


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CH NO. 3: CRITICAL REVIEW OF LITERATURE

FINANCIAL STATEMENT ANALYSIS

MEANING: Analysis of financial statements is the systematic numerical calculation of the

relationship between one fact with the other to measure the profitability, operational efficiencyand the growth potential of the business.

OBJECTIVES OF FINANCIAL STATEMENT ANALYSIS:

1. Measuring financial standards: The business must know its financial soundness which

can be measured by calculating different ratios like proprietory and fixed asset ratio. If it

is found adverse, then corrective steps can be taken.

2. Judging solvency: Creditors are always interested in knowing the solvency of the

business to repay their loans. This can be ascertained by looking into the facts such as:

y W

hether current assets are sufficient to meet current liabilities.y Proportion of current assets to liquid assets.

y Future prospectus of the business.

y Whether debentures or other loans are secured or not.

y Managerial efficiency of the firm.

3. Measuring profitability: Financial statement shows the gross profit, net profit and other

expenses. The relationship of these items can be established with sales. To ascertain

profitability, gross profit, net profit, expenses and operating ratios may be calculated. In

case of improving or declining profitability ratios, the causes responsible for the

performance can be evaluated.

4. Judging operationalefficiency: It is very significant to know the operational efficiency

of the management. The managerial efficiency of the business can be assessed by

matching the amount of manufacturing, selling, distribution and financial expenses of te

current year with the corresponding expenses of the previous year. This can also be

judged by calculating profitability ratios.

5. Indicating trends of achievements: Financial statements of the previous year can be

compared and the trends regarding various expenses, purchases, sales, gross profit and

net profit can be ascertained. Values of assets and liabilities can be compared and the

future prospectus of the business can also be indicated.

6. Assessing the growth potential: The trend and dynamic analysis of the business

provides sufficient information indicating the growth potential of the business. If the

trend predicts gloomy picture, effective measures can be used to correct it. If cost iof

production is rising without corresponding increase in the selling price, efforts should be

made to reduce cost of production.


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7. Inter-firm and Intra-firm comparison: Analysis of the financial statements can be

made with the previous years performance of the same firm and with the performance of

the other firms in the industry. Intra-firm analysis provides an opportunity of self-

appraisal, whereas, inter-firm analysis presents the operational efficiency of the firm as

compared the other firms. Comparison helps in detecting weaknesses and adopting

corrective measures.

8. Deciding future line of action: Analysis of financial statements indicates growth

potential of the business. Comparison of actual performance with the standard

performance shows the short comings. The analysis provides sufficient information

regarding the profitability, performance and financial soundness of the business. On the

basis of these information, effective forecasting, budgeting and planning can be made.

9. Systematic presentation of data: Analysis of financial statements is an effective tool for

simplifying, systematizing, and summarizing the monotonous data. An average person ,

who has no knowledge of accounting, can draw conclusions from ratios. The facts can be

made more attractive by graphs and diagrams which can be easily understood.

Types of financial Analysis

Financial analysis can be classified into four categories:

According to Modus Operandi

1. Horizontal or dynamic analysis: When financial statements for a certain number of

years or different firms are examined analytically, the analysis is called horizontal or

dynamic.

2. Vertical or static analysis: vertical or static analysis is the study of mutual relationship

between different components or their totals of the financial statements for a definite

period of time.

According to Materials used :

3. Internal Analysis: When analysis of financial statements is made by somebody

internally related to the enterprise such as executives, employees etc. it is said to be

internal analysis.4. External analysis: An analysis made by a person not internally related to the enterprise

and meant for external users of the financial statements, is called external analysis.such

type of analysis is made by banks, investing agencies, creditors, research scholars and the

government.


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Limitations of Financial Analysis

Despite the significance of analysis and interpretation of financial statements as discussed above,

it has certain limitations which an analyst and the user should kept in mind. These limitations are

identified as follows:

1. Suffers from limitations of financial statements: Financial statements suffer from

variety of weaknesses. Assets are disclosed in the balance sheet at historical cost which is

different from current cost. Similarly, financial statements are prepared according to

certain conventions at a point of a time, whereas investors are concerned with the present

and future of the company. Certain assets and liabilities are not disclosed. Personal

judgements also affect the figures of balance sheet. Financial statements suffer from these

weaknesses, hence the analysis based upon these statements can not be said to be always

reliable.

2. Absence of universally accepted standard terminology: Accounting is not an exact

science, so it does not encompass universally accepted terminology. Different meaningsare assigned to a particular term. Depreciation is provided by different methods and

interest is charged at varied rates. In this way, there are sufficient chances of

manipulation. As a result, financial analysis proves to be defective.

3. Ignores qualitative aspects: Financial analysis is the quantitative measurement of the

performance of the firm. It does not disclose the skill, technical know- how and the

efficiency of its employees and managers. It means that analysis of financial statements

measures only the one sided performance of the business. It also completely ignores

human aspect.

4. Ignores price level changes: The results disclosed by financial statements may be

misleading, if the price level changes are not taken into consideration. The gross profit

ratio may improve with the increase in price, whereas actual efficiency may not improve.

If prices of commodities differ, the ratios of two years will not be meaningful for

comparison. Change in price affects cost of production, sales and value of assets, thereby

the comparability of ratios suffers.

5. It spottes the symptoms but not diagnose: Financial analysis shows the trends of the

affairs of the business. It may spot symptoms of financial weakness and operational

efficiency which can not be accepted. A final decision in this regard will require further

investigation and thorough diagnosis.


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TECHNIQUES OF FINANCIAL ANALYSIS

The financial statements, balance sheet and profit & loss account, reclassified and arranged

logically for the purpose of analysis and establishing the relationship amongst the various items

are studied horizontally and vertically. The various analytical methods or devices used to study

this horizontal or vertical relationship are known as techniques of financial analysis. A numberof such techniques are used by the financial analyst, but the most popular among these are as

follows:

1. Ratio analysis

2. Comparative financial statements

3. Common-size financial statements

4. Funds flow analysis


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COMPANY PROFILE


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CH NO. 4: COMPANY PROFILE

COMPANY OVERVIEW

Adobe Systems Incorporated (NASDAQ: ADBE) is an American computer software company

headquartered in San Jose, California, USA. The company has historically focused upon the

creation of multimedia and creativity software products, with a more-recent foray towards rich

Internet application software development.

Adobe was founded in December 1982 by John Warnock and Charles Geschke, who established

the company after leaving Xerox PARC in order to develop and sell the PostScript page

description language. In 1985, Apple Computer licensed PostScript for use in its LaserWriter

printers, which helped spark the desktop publishing revolution. The company nameAdobe comesfrom Adobe Creek in Los Altos, California, which ran behind the house of one of the company's

founders. Adobe acquired its former competitor, Macromedia, in December 2005, which added

newer software products and platforms such as Coldfusion, Dreamweaver, Flash and Flex to its

product portfolio.

As of August 2009, Adobe Systems has 7,564 employees, about 40% of whom work in San Jose.

Adobe also has major development operations in Orlando, FL; Seattle, WA; San Francisco,

CA; Orem, UT; Ottawa, Ontario; Minneapolis, MN; Newton, MA; San Luis Obispo,

CA; Hamburg, Germany; Noida, India; Bangalore, India; Bucharest, Romania; Beijing, China.

HISTORY

Adobe's first products after PostScript were digital fonts, which they released in a proprietary

format called Type 1. Apple subsequently developed a competing standard, TrueType, which

provided full scalability and precise control of the pixel pattern created by the font's outlines, and

licensed it to Microsoft. Adobe responded by publishing the Type 1 specification and

releasing Adobe Type Manager, software that allowed WYSIWYG scaling of Type 1 fonts on

screen, like TrueType, although without the precise pixel-level control. But these moves were

too late to stop the rise of TrueType. Although Type 1 remained the standard in the

graphics/publishing market,TrueType became the standard for business and the average

Windows user. In 1996, Adobe and Microsoft announced the OpenType font format, and in 2003

Adobe completed converting its Type 1 font library to OpenType.


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In the mid-1980s, Adobe entered the consumer software market with Adobe Illustrator, a vector-

based drawing program for the Apple Macintosh. Illustrator, which grew from the firm's in-

house font-development software, helped popularize PostScript-enabled laser printers.

Unlike MacDraw, then the standard Macintosh vector drawing program, Illustrator described

shapes with more flexible Bzier curves, providing unprecedented accuracy. Font rendering in

Illustrator, however, was left to the Macintosh's QuickDraw libraries and would not be

superseded by a PostScript-like approach until Adobe released Adobe Type Manager.

In 1989, Adobe introduced what was to become its flagship product, a graphics editing program

for the Macintosh called Photoshop. Stable and full-featured, Photoshop 1.0 was ably marketed

by Adobe and soon dominated the market.

Arguably, one of Adobe's few missteps on the Macintosh platform was their failure to develop

their own desktop publishing (DTP) program. Instead, Aldus with PageMaker in 1985

and Quark with QuarkXPress in 1987 gained early leads in the DTP market. Adobe was also

slow to address the emerging Windows DTP market. However, Adobe made great strides in that

market with the release of InDesign and its bundled Creative Suite offering. In a failure to

predict the direction of computing, Adobe released a complete version of Illustrator for Steve

Jobs' ill-fated NeXT system, but a poorly-produced version forWindows.

Despite these missteps, licensing fees from the PostScript interpreter allowed Adobe to outlast or

acquire many of its rivals in the late 1980s and early 1990s. In December 1991, Adobe released

Adobe Premiere, which Adobe rebranded to Adobe Premiere Pro in 2003. In 1994, Adobe

acquired Aldus and added Adobe PageMaker and Adobe After Effects to its production line later

in the year; it also controls the TIFF file format. In 1995, Adobe added Adobe FrameMaker, the

long-document DTP application, to its production line after Adobe acquired Frame Technology

Corp. In 1999, Adobe introduced Adobe InCopy as a direct competitor to QuarkCopyDesk.

COMPANY EVENTS

In 1992, Adobe acquired OCR Systems, Inc., and in 1994, they acquired Aldus Corporation. On

May 30, 1997, Adobe reincorporated in Delaware by merging with and into Adobe Systems

(Delaware), which was incorporated on May 9, 1997. Adobe Systems Incorporated (Delaware)

was the surviving corporation and changed its name to Adobe Systems Incorporated concurrently

with the merger.

The company acquired GoLive Systems, Inc. and released Adobe GoLive in 1999 and began

shipping Adobe InDesign as a direct competitor toQuarkXPress and as an eventual replacement

for PageMaker. In May 2003, Adobe acquired Syntrillium Software, adding Adobe Audition to


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Adobe announced two acquisitions in 2009: on August 29, they purchased Business Catalyst,

and on September 15, Adobe bought Omniture. On November 10, the company laid off 680

employees. In 2010, Adobe announced it was investigating a "coordinated attack" against

corporate network systems in China, managed by the company. This same attack was also

brought against Google and over 20 other companies. Adobe announced the new Creative Suite

series (CS5) launched globally Monday, April 12, 2010. New software such as

Flash and Business Catalyst were also announced.

Adobe's 2010 was marked by continuing back-and-forth arguments with Apple over the latter's

non-support for Adobe Flash on its iPhone, iPad and other products. Apple CEO Steve Jobs has

claimed that Flash is not reliable or secure enough, while Adobe executives have argued that

Apple just wants to own everything.

CORPORATE LEADERSHIP

Executive Board

Charles M. Geschke Co-Chairman of the Board

John E.Warnock Co-Chairman of the Board

Shantanu Narayen President & Chief Executive Officer

Karen Cottle Senior Vice President, General Counsel, and Corporate Secretary

Mark Garrett Executive Vice President and Chief Financial Officer

Donna Morris Senior Vice President, Human Resources

Kevin Lynch Senior Vice President: Experience & Technology Group, Chief Technology Offic


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PRODUCTS

Desktop software

Adobe Photoshop, Adobe InDesign, Adobe Illustrator and Adobe Soundbooth

Server software

Adobe ColdFusion, Adobe Content Server and Adobe LiveCycle Enterprise Suite

Formats

Portable Document Format (PDF), PDF's predecessor PostScript, ActionScript, Shockwave

Flash (SWF) and Flash Video (FLV)

Web-hosted services

Adobe Kuler, Photoshop Express, and Acrobat.com

Web design programs

Adobe Dreamweaver and Adobe Contribute

Video editing and visual effects

Adobe Premiere Pro and Adobe After Effects

E-Learning software

Adobe Captivate

CURRENT PRODUCTS

Acrobat family

Acrobat Capture

Acrobat Connect (formerly Macromedia Breeze)

Presenter

Acrobat Distiller

Reader

Audition (formerly Cool Edit Pro)

Bridge

Captivate (formerly RoboDemo)

Central Output Server

ColdFusion


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Content Server

Creative Suite

Acrobat

Acrobat Connect

After Effects

Bridge

Contribute

Device Central

Dreamweaver

Dynamic Link

Encore

Fireworks

Flash Professional

Illustrator

InDesign

OnLocation (formerly Serious Magic DV Rack)

Photoshop

Premiere Pro

Soundbooth

Version Cue

Digital Editions

Digital Negative

Director

DNG Converter

Document Server

Document Policy Server

eBook Reader

Engagement Platform

eLearning Suite

Acrobat

Bridge

Captivate

Device Central


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Dreamweaver

Flash Professional

Photoshop

Presenter

Soundbooth

FDK

Flash family

Flash Professional

Flash Cast

Flash Catalyst

Flash Lite

Digital Home

Flash Media Server

Flash Media Live Encoder

Flash Player

Flex

Font Folio

InCopy

Integrated Runtime (or shortly AIR)

Kuler

LiveCycle family

Assembler

Barcoded Forms

Designer

Document Security

Forms

Form Manager

PDF Generator

Policy Server

Reader Extensions

Security Server

Media Player

Output Designer


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Online Marketing Suite

Site Catalyst

Test&Target

SearchCenter

Genesis

Discover

Recommendations

Merchandising

SiteSearch

Survey

Insight

Insight for Reital

PDF JobReady

Photoshop family

Photoshop Elements

Photoshop Express

Photoshop Lightroom

Premiere Elements

Shockwave

Source Libraries

Visual Communicator

Technical Communication Suite

Acrobat

Captivate

FrameMaker

RoboHelp

Type

Web Output Pack

Serious Magic Ovation


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FINANCIAL INFORMATION

Adobe Systems Incorporated (NASDAQ:ADBE), financial results of first quarter fiscal year2010 ended March 5, 2010.

In the first quarter of fiscal 2010, Adobe achieved revenue of $858.7 million, compared to$786.4 million reported for the first quarter of fiscal 2009 and $757.3 million reported in thefourth quarter of fiscal 2009. This represents 9 percent year-over-year revenue growth. Adobesfirst quarter revenue target range was $800 to $850 million.

Stability in our creative business, combined with strength in our Acrobat and Omnituresolutions, helped drive strong financial performance in Q1, said Shantanu Narayen, presidentand CEO of Adobe.

Adobe Systems Incorporated (NASDAQ:ADBE), financial results of second quarter fiscal year2010 ended June 4, 2010.

In the second quarter of fiscal 2010, Adobe achieved record revenue of $943.0 million,compared to $704.7 million reported for the second quarter of fiscal 2009 and $858.7 millionreported in the first quarter of fiscal 2010. This represents 34 percent year-over-year revenuegrowth. Adobes second quarter revenue target range was $875 to $925 million.

Record revenue and our strong Q2 financial performance were driven by the successful launchof Creative Suite 5, said Shantanu Narayen, president and CEO of Adobe.

For the third quarter of fiscal 2010, Adobe is targeting revenue of $950 million to $1 billion.The Companys operating margin is targeted to be 25.5 percent to 27.5 percent on a GAAP basis.


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INDUSTRY PROFILE


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CH NO. 4.1: INDUSTRY PROFILE

OVERVIEW

The software industry includes businesses involved in the development, maintenance and

publication of computer software using any business model. The industry also includes softwareservices such as training, documentation, and consulting.

HISTORY

The word "software" had been coined as a prank by at least 1953, but did not appear in print until

the 1960s. Before this time, computers were programmed either by customers, or the few

commercial computer vendors of the time, such as UNIVAC and IBM. The first company

founded to provide software products and services was Computer Usage Company in 1955. The

software industry expanded in the early 1960s, almost immediately after computers were firstsold in mass-produced quantities. Universities, government, and business customers created a

demand for software. Many of these programs were written in-house by full-time staff

programmers. Some were distributed freely between users of a particular machine for no charge.

Others were done on a commercial basis, and other firms such as Computer Sciences

Corporation (founded in 1959) started to grow. The computer-makers started bundling operating

systems software and programming environments with their machines.

When Digital Equipment Corporation brought a relatively low-priced micro-computer to market,

it brought computing within reach of many more companies and universities worldwide, and it

spawned great innovation in terms of new, powerful programming languages and methodologies.

New software was built for micro-computers, and others, including IBM, followed DECs

example quickly, resulting in the IBM AS400 amongst others.

The industry expanded greatly with the rise of the personal computer in the mid-1970s, which

brought computing to the desktop of the office worker. In subsequent years, it also created a

growing market for games, applications, and utilities. DOS, Microsoft's first product, was the

dominant operating system at the time.

In the early years of the 21st century, another successful business model has arisen for hostedsoftware, called software as a service, or SaaS; this was at least the third time this model had

been attempted. SaaS reduces the concerns about software piracy, since it can only be accessed

through theWeb, and by definition no client software is loaded onto the end user's PC.


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SOFTWARE SECTORS

There are several types of businesses in the software industry. Infrastructure software, including

operating systems, middleware and databases, is made by companies such

as Microsoft, IBM, Sybase, EMC, Oracle and VMWare. Enterprise software, the software that

automates business processes in finance, production, logistics, sales and marketing, is made

by Oracle, SAP AG , Sage and Infor. Security software is made by the likes of Symantec, Trend

Micro and Kaspersky. Several industry-specific software makers are also among the largest

software companies in the world: SunGard, making software for banks, BlackBoard making

software for schools, and companies like Qualcomm or CyberVision making software for

telecom companies. Other companies do contract programming to develop unique software for

one particular client company, or focus on configuring and customizing suites from large

vendors such as SAP or Oracle.

SIZE OF THE INDUSTRY

According to market researcher DataMonitor, the size of the worldwide software industry in

2008 was US$ 303.8 billion, an increase of 6.5% compared to 2007. Americas account for 42.6%

of the global software market's value. DataMonitor forecasts that in 2013, the global software

market will have a value of US$ 457 billion, an increase of 50.5% since 2008.

INDUSTRY & ORGANISATION

A great variety of software companies and programmers in the world comprise the software

industry. Software can be quite a profitable industry: Bill Gates, the founder of Microsoft was

the richest person in the world in 2009 largely by selling the Microsoft Windows and Microsoft

Office software products. The same goes for Larry Ellison, largely through his Oracle

database software. Through time the software industry has become increasingly specialized.

Non-profit software organizations include the Free Software Foundation, GNU

Project and Mozilla Foundation. Software standard organizations like theW3C, IETF develop

software standards so that most software can interoperate through standards such

as XML, HTML, HTTP or FTP.

Other well-known large software companies include Novell, SAP, Symantec, Adobe Systems

and Corel.


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THE SOFTWARE INDUSTRY IN INDIA

With the huge success of the software companies in India, the Indian software industry in turn

has become successful in making a mark in the global arena. This industry has been instrumental

in driving the economy of the nation on to a rapid growth curve. As per the study of NASSCOM-

Deloitte, the contribution of IT/ITES industry to the GDP of the country has soared up to a shareof 5% in 2007 from a mere 1.2% in 1998. Besides, this industry has also recorded revenue of

US$ 64 billion with a growth rate of 33% in the fiscal year ended in 2008.

The export of software has also grown up, which has been instrumental in the huge success of

the Indian software companies as well as the industry. In fact, software export from India

accounts for more than 65% of the total software revenue. The domestic software market largely

depends upon sale of software packages and products, which constitute major part of revenues.

Products account for almost 40% of the domestic market. On the other hand, more than 80% of

revenue from software exports comes from software services like custom software development

and consultancy services etc.

REASONS BEHIND SUCESS OF INDIAN SOFTWARE COMPANIES

There are a number of reasons why the software companies in India have been so successful.

Besides the Indian software companies, a number of multinational giants have also plunged into

the India IT market.

India is the hub of cheap and skilled software professionals, which are available in abundance. It

helps the software companies to develop cost-effective business solutions for their clients. As a

result, Indian software companies can place their products and services in the global market in

the most competitive rate. This is the reason why India has been a favorite destination for

outsourcing as well. Many multinational IT giants also have their offshore development centers

in India.

Most of the software companies in India are into varied types of business. There can be severaltypes of business in the IT sectors:

y Infrastructure Software: These include OS, middleware and databases.y Enterprise Software: These automate business process in diverse verticals like finance,

sales and marketing, production and logistics.y

Security Softwarey Industry-specific Softwarey Contract Programming


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SOFTWARE COMPANIES IN INDIA

It's the technological revolution that at times brings surprising opportunities for some nations.

India, though not among the front runners in terms of economic growth, has successfully utilized

such opportunities in the revolution to become an IT hotspot. For the past several years, India has

been an increasingly favored destination for customized software development. As a result, anumber of software companies in India have come up. Not only the number of players has

increased in the Indian IT market, but at the same time, Indian software companies have done

considerably well in the global market. Such huge success of software companies in India has

given birth to a new speculation whether other developing countries should imitate Indian

example and whether the success of India would constitute a competitive challenge to the

software industry of the developed world or not.

TOP SOFTWARE COMPANIES IN INDIA

There are plenty of software companies in India which have been doing well. However, some ofthe top Indian software companies can be listed as:

y Tata Consultancy Servicesy Wipro Limitedy Infosysy HCL Technologiesy Tech Mahindray Patni Computer Systemsy

i-flex Solutionsy MphasiSy L&T Infotechy IBM India


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SWOT ANALYSIS


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CH NO. 4.2: SWOT ANALYSIS

SWOT Analysis, is a strategic planning tool used to evaluate the Strengths, Weaknesses,Opportunities, and Threats involved in a project or in a business venture. It involves specifyingthe objective of the business venture or project and identifying the internal and external factors

that are favorable and unfavorable to achieving that objective.

The aim of any SWOT analysis is to identify the key internal and external factors that areimportant to achieving the objective. SWOT analysis groups key pieces of information into twomain categories:

Internal factors - The strengths and weaknesses internal to the organization.

External factors - The opportunities and threats presented by the external environment.

FACTORS STRENGTH WEAKNESS

Internal

1. Strong market position indigital media business.

2. Diversified revenue base.

3. Strong balance sheet.

1. Decline in profitability.

OPPORTUNITIES THREATS

External

1. Growing digital devicesmarket.

2. Increasing use of internet.

3. New product launches.

1. Intense competition.


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DATA COLLECTION


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CH NO. 5: DATA COLLECTION

While deciding about the method of data collection to be used for the study, there are two

methods of data collection are available. i.e. primary and secondary.

PRIMARY DATA:

The primary data are those which are collected afresh and for the first time, and thus happens to

be original in character.

SECONDARY DATA:

The secondary data, on the other hand, are those which have already been collected by someone

else and which have already been passed through the statistical process.

Secondary data means data

that already available i.e. they refer to the data which have already been collected and analyzed by someone else. Secondary data may either be published data or unpublished data. Usually

published are available in (a) various publications of the central, state and local governments. (b)

Various publications of foreign governments or of international bodies and their subsidiary

organization. (c) Reports and publication of various associations connected with business and

industry, banks, stock exchanges etc. (d) technical and trade journals. (e) Books, magazine and

newspapers. (f) Reports prepared by research scholars, universities, economists, etc in different

fields and (g) public records and statistics, historical documents, and other sources of published

information. The sources of unpublished data are many ; they may be found in diaries, letters,

unpublished biographies and autobiographies and also may be available with scholars and

research workers, trade associations, labour bureaus and other public/private individuals and

organizations.

By way of caution, before using secondary data, we must check that they possess

following characteristics.

1. Reliability of data: The reliability can be tested by finding out such things about the said

data: (a) who collected the data? (b) What were the sources of data? (c) Were they

collected by using proper methods? (d) At what time they are collected? (e) Was there

any bias of the compiler? (f)What level of accuracy was desired?Was it achieved?

2. Suitability of data: The data that are suitable for one enquiry may not necessarily be

found suitable in another enquiry. Hence if the available data are found to be unsuitable,

they should not be used by the researcher. In this context, the researcher must very

carefully scrutinize the definition of various terms and units of collection used at the time

of collecting the data from the primary source originally. Similarly, the object, scope and


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nature of the original enquiry must also be studied. If the researcher finds differences in

these, the data will remain unsuitable for the present enquiry and should not be used.

3. Adequacy of data: if the level of accuracy achieved in data is found inadequate for the

purpose of the present enquiry, they will be considered as inadequate and should not be

used by the researcher. The data will also be considered inadequate, if they are related to

an area which may be either narrower wider than the area of the present enquiry.


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RATIO ANALYSIS

OF

ADOBE SYSTEMS


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LIQUIDITY OR SHORT TERM SOLVENCY RATIOS

These ratios play a key role in the analysis of the short term financial position of a business.

Liquidity refers to a firms ability to meet its current financial obligation as they arise.

1.

Current ratio or working capital ratio

Meaning: Current ratio may be defined as the relationship between current assets and

current liabilities.

Current ratio: Current assets

Current liabilities

For 2009:

Current assets = 24,73,624

Current liabilities = 8,44,553

Current ratio = 24,73,624 x 100

8,44,553

= 2.92 : 1

For 2008:




7,62,599

= 3.58 : 1

For 2007:




8,52,410

= 3 : 1


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Interpretation: Current ratio of a firm measures its short term solvency and reflects its

ability to meet short term obligation when they are due. The higher the current ratio, the

larger the amount of rupees available per rupee of current liabilities, the more the firms

ability to meet current obligations and the greater the safety of funds to short term

creditors. A current ratio of 2:1 is considered satisfactory.

ACTIVITY OR EFFICIENCY RATIO

The funds of creditors and owners are invested in various assets to generate sales and profit.

The better the management of these assets, the larger the amount of sales. Activity ratio enable

the firm to know how efficiently these assets are employed by it. Therefore, an activity ratio may

be defined as a test of relationship between sales or cost of goods sold and various assets of the

firm.

1.

Total assets turnover ratioMeaning: This ratio expresses the relationship between cost of goods sold / net sales and

total assets / investments of a firm. It is also called Total investment turnover ratio.

Total assets turnover ratio = Net sales or COGS

Total assets

For 2009:

Net sales = 29,45,853

Total assets = 72,82,237

Total assets turnover ratio = 29,45,853

72,82,237

= .40 times

For 2008:

Net sales = 35,79,889


Total assets turnover = 35,79,889

58,21,598

= .61 times

For 2007:

Net sales = 31,57,881


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Total assets turnover = 31,57,881

57,13,679

= .55 times

Interpretation: This ratio indicates the number of times the assets are turned over in a

year in relation to sales. A higher total assets turnover ratio is the indicator of effective

utilization of investment in assets, whereas lower assets turnover ratio indicates that

assets are not properly utilized in comparison to sales. Thus, there is an over investment

in assets. Extremely high ratio means over-trading in the business.

2.

Fixed assets turnover ratio

Meaning: This ratio expresses the relationship between fixed assets ( less depreciation)

and net sales or cost of goods sold.

Fixed assets turnover ratio = Net sales or cost of goods sold

Fixed assets ( less depreciation)

For 2009:

Net sales = 29,45,853

Fixed assets = 3,88,132

Fixed assets turnover ratio = 29,45,853

3,88,132

= 7.58 times

For 2008:

Net sales = 35,79,889


Fixed assets turnover ratio = 35,79,889

3,13,037

= 11.43 times


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For 2007:

Net sales = 31,57,881


Fixed assets turnover assets = 31,57,881

2,89,758

= 10.89 times

Interpretation: This ratio measures the efficiency and profit earning capacity of the firm.

The higher the ratio, the greater is the intensive utilization of fixed assets. Lower ratio

means under utilization of fixed assets and excessive investment in these assets. As

volume of sales depend on variety of factors such as price, quality of goods,

salesmanship, marketing etc. It is argued that no direct relationship can be established

between sales and fixed assets. Accordingly, it is not recommended for general use.

3. Current assets turnover ratio

Meaning: This ratio expresses relationship between current assets and net sales or cost of

cost sold.

Current assets turnover ratio = Net Sales or COGS

Current assets

For 2009:Net sales = 29,45,853


Current assets turnover ratio = 29,45,853

24,73,624

= 1.19 times

For 2008:

Net sales = 35,79,889


Current assts turnover ratio = 35,79,889

27,35,103


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= 1.30 times

For 2007:

Net sales = 31,57,881


Current assets turnover ratio = 31,57,881

25,72,977

= 1.22 times

Interpretation: This ratio reflects the efficiency and capacity of working capital. It is a

very useful technique for non-manufacturing units requiring lesser working capital. On

the basis of this ratio, efficiency or inefficiency of current assets and over or under

investment in the firm is examined.

4. Working capital turnover ratioMeaning: This ratio establishes the relationship between net working capital and net

sales or cost of goods sold.

Working capital turnover ratio = Net sales or cost of goods sold

Net working capital

For 2009:

Net sales = 29,45,853

Net working capital = 16,29,071

Working capital turnover ratio = 29,45,853

16,29,071

= 1.80 times

For 2008:

Net sales = 35,79,889

Net working capital = 19,72,504

Working capital turnover ratio = 35,79,889

19,72,504


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Capital employed = 26,11,106

Capital turnover ratio = 35,79,889

26,11,106

= 1.37 times

For 2007:

Net sales = 31,57,881


Capital turnover ratio = 31,57,881

23,07,403

= 1.36 times

Interpretation: The efficiency and effectiveness of the operations are judged by

comparing the sales or cost of sales with amount of capital employed in the business and

not with assets held in the business. Therefore, this ratio is a better measurement of

efficient use of capital employed. Efficient use of capital symbolizes profit earning

capacity and managerial efficiency of the firm.

PROFITABILITY RATIOS OF ADOBE SYSTEMS

Profitability ratios based on sales

1. Gross Profit RatioMeaning: This ratio expresses the relationship of gross profit on sales to net sales in

terms of percentage. Expressed as a formula, the gross profit ratio is:

Gross Profit Ratio = Gross Profit x 100

Net Sales

For 2009:

Gross profit = 2,649,121

Net Sales = 2,945,853


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Gross Profit Ratio = 2,649,121 x 100

2,945,853

= 89.92 %

For 2008:

Gross profit = 3,217,259

Net Sales = 3,579,889


3,579,889

= 89.87 %

For 2007:

Gross Profit = 2,803,187

Net Sales = 3,157,881


3,157,881

= 88.76 %

Interpretation: In the above calculation, the gross profit ratio of adobe systems is

increasing from year to year. In the year 2008, there is a change (increase) in gross profit

ratio of about 1.11 % from 88.76 % to 89.87 %. In the year 2009, there is a change

(increase) in gross profit ratio of about .05 % from 89.87 % to 89.92 %. In the year 2009,

the increase in gross profit ratio as compare to the year 2008 is declining. This is due to

the declining in profit in comparison to Sales or due to increasing in cost.

2. Operating RatioMeaning: This ratio expresses the relationship between operating cost and net sales.

Operating cost means cost of goods sold plus operating expenses.

Expressed as a formula:

Operating Ratio: Operating Costs x 100

Net Sales


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For 2009:

Operating cost = Cost of goods sold + Operating expenses

= 2, 96,732 + 1,958,608

= 22, 55,340

Net Sales = 2,945,853

Operating Ratio = 22, 55,340 x 100

29, 45,853

= 76.55 %

For 2008:

Operating cost = Cost of goods sold + Operating expenses

= 3, 62,630 + 2,188,988

= 25, 51,618

Net Sales = 3,579,889

Operating Ratio = 25, 51,618 x 100

35,79,889

= 71.27 %

For 2007:

Operating Cost = Cost of goods sold + Operating expenses

= 354,694 + 1,945,602

= 23, 00,296

Net sales = 3,157,881

Operating ratio = 23, 00,296 x 100

3,157,881

= 72.84 %

Interpretation: Operating ratio shows the percentage of net sales that is absorbed by cost

of goods sold and operating expenses. Hence, the lower the operating ratio, the higher the


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operating profit to recover non-operating expenses such as interest, dividend etc and vice-

versa. In the year 2008 the operating ratio is low as compare to the year 2009 & 2007 that

is why operating profit in the year 2008 is more as compare to the year 2009 & 2007. So

we have to decrease the operating ratio to increase the operating profit by decreasing the

cost of goods sold as well as operating expenses and increase in sales.

3. Operating Profit Ratio:Meaning: This ratio is also called Operating profit margin. It establishes the

relationship between operating profit and net sales. It is also defined as the ratio of profit

before depreciation, interest and tax. It is calculated as follows:

Operating Profit Ratio = Operating profit x 100

Net Sales

For 2009:

Operating profit = 690,513

Net sales = 2,945,853

Operating profit ratio = 690,513 x 100

29, 45,853

= 23.44 %

For 2008:

Operating profit = 1,028,271

Net sales = 3,579,889

Operating profit ratio = 1,028,271 x 100

3,579,889

= 28.72 %

For 2007:

Operating profit = 857,585


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Net sales = 3,157,881Operating profit ratio = 857,585 x 100

3,157,881=

27.15 %

Interpretation: This ratio indicates the net profitability of the main business i.e.

operating efficiency of a firm. The higher the operating ratio, the better would be the

operational efficiency of the firm. A higher operating profit ratio means that a firm has

been able not only to increase its sales but also been able to cut down its operating

expenses. In the year 2008 operating profit is highest in comparison to the year 2009 and

2007 and it is due to the low operating expenses as well as low cost of goods sold. So the

operating efficiency of the firm in the year 2008 is good as compare to that of 2009 &

2007.

4. Expenses Ratio:Meaning: Expenses ratio shows the relationship of different expenses to net sales.

a) Research & Development Expenses Ratio= Research & Development Expenses x 100

Net Sales

For 2009:

Research & Development expenses = 565,141

Net sales = 2,945,853

R & D Expenses Ratio = 565,141 x 100

2,945,853

= 19.18 %

For 2008:


Net sales = 3,579,889


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3,579,889= 18.49 %

For 2007:


Net Sales = 3,157,881


3,157,881

= 19.41 %

Interpretation: Research & development expenses ratio should be low. Low R&D

expenses ratio leads to an increase in operating profit ratio. In the year 2008 the

Research & Development expenses ratio is low as compare to the year 2009 &

2007.Due to the low Research and development expenses in the year 2008, the

operating profit ratio is high in the same year.

b) Selling, general & administrative exp ratio = Selling, general & admin exp x 100

Net sales

For 2009:

Selling, general & admin expenses = 1,280,652

Net Sales = 2,945,853

Selling, general & admin expenses ratio = 1,280,652 x 1002,945,853

= 43.47 %

For 2008:


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Net sales = 3,579,889

Selling, general & admin expenses ratio = 1,426,632 x 100

3,579,889

= 39.85 %

For 2007:


Net sales = 3,157,881

Selling, general & admin expenses ratio = 1,259,370 x 1003,157,881

= 39.88 %

Interpretation: Selling, general & administrative expenses ratio should be low. Low

Selling, general & administrative expenses ratio leads to an increase in operating

profit ratio. In the year 2008 the Selling, general & administrative expenses ratio is

low as compare to the year 2009 & 2007.Due to the low Selling, general &

administrative expenses in the year 2008, the operating profit ratio is high in the same

year.c) Non-Recurring Expenses Ratio = Non-recurring expenses x 100

Net Sales

For 2009:

Non-recurring expenses = 41,260

Net sales = 2,945,853

Non-recurring expenses ratio = 41,260 x 100

2,945,853

= 1.4 %

For 2008:


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Non-recurring expenses = 32,053

Net sales = 3,579,889

Non-recurring expenses ratio = 32,053 x 100

3,579,889

= .89 %

For 2007:

Non-recurring expenses = 555

Net sales = 3,157,881

Non-recurring expenses ratio = 555 x 100

3,157,881

= .017 %

Interpretation: The above calculation shows that there is an increase in Non-

recurring expenses from year to year. An increase in this non-recurring expenses

leads to decline in operating profit ratio as operating profit declines. There is a

continuing rise in the non-recurring expense from year 2007 to year 2009. This

expense needs to be control to increase the operating profit that further leads toincrease in net profit of the company.

d) Other Expenses Ratio = Other expenses x 100

Net sales

For 2009:

Other expenses = 71,555

Net sales = 2,945,853

Other expenses ratio = 71,555 x 100

2,945,853

= 2.42 %


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For 2009:

Net profit (before tax) =701,520 Net profit (after tax) = 386,508

Net sales = 2,945,853 Net sales = 2,945,853

Net Profit Ratio = 701,520 x 100 Net Profit Ratio = 386,508 x 100

2,945,853 2,945,853

= 23.81 % = 13.12 %

For 2008:

Net profit (before tax) = 1,078,508 Net profit (after tax) = 871,814 Net sales = 3,579,889 Net sales = 3,579,889

Net Profit Ratio = 1,078,508 x 100 Net Profit Ratio = 871,814 x 100

3,579,889 3,579,889

= 30.12 % = 24.35 %

For 2007:

Net profit (before tax) = 947,190 Net profit (after tax) = 723,807

Net sales = 3,157,881 Net sales = 3,157,881

Net Profit Ratio = 947,190 x 100 Net Profit Ratio = 723,807 x 100

3,157,881 3,157,881

= 29.99 % = 22.92 %

Interpretation: In the above calculation the net profit ratio (before tax) is highest in the year

2008 as compare to that of the year 2009 & 2007. It shows that in the year 2008 owner gotadequate returns. A high net profit ratio is preferable as it is the indication of overall profitability

and efficiency of the business. In the year 2009 net profit ratio (before tax) is 23.81 %, which is

very low as compare to previous year.

In the above calculation the net profit ratio (after tax) is highest in the year 2008 as compare to

that of the year 2009 & 2007. It shows that in the year 2008 owner got adequate returns. A high

net profit ratio is preferable as it is the indication of overall profitability and efficiency of the


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business. In the year 2009 net profit ratio (after tax) is 13.12 %, which is very low as compare to

previous year.

Profitability Ratios based on capital/investments:

6. Return on Capital Employed:Meaning: This ratio expresses the relationship between profits and capital employed and

is calculated in percentage by dividing the net profit by capital employed. The formula

used is as follows:

Return on Capital employed = Net Profit (before interest and tax) x 100

Net Capital employed

Net Capital employed = FA(less depreciation) + current assets current liabilities.

For 2009:

Net Profit (before interest and tax) = 704,927

Net Capital employed = 2,415,707

Return on capital employed = 704,927 x 100

2,415,707

= 29.18 %

For 2008:

Net Profit (before interest and tax) = 1,088,527

Net capital employed = 2,611,106

Return on capital employed = 1,088,527 x 100

2,611,106

= 41.68 %

For 2007:

Net Profit (before interest and tax) = 947,443


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Net capital employed = 2,307,403

Return on capital employed = 947,443 x 100

2,307,403

= 41.06 %

Interpretation: The return on capital employed provides a test of profitability related to

the long term funds. The higher the ratio, the more effective and efficient would be the

utilization of capital and vice-versa. In the year 2008 the return on capital employed is

high as compare to the year 2009 & 2007. This shows the effective utilization of capital

in the year 2008 as compare to that of the year 2009 & 2007.

7.

Return on Shareholders fund or Net worth:

Meaning: This ratio expresses the percentage relationship between net profit (after

interest and tax) and proprietors funds or shareholders investment. This is also known as

Return on proprietors fund. It is used to ascertain the earning power of shareholders

investment. It is computed as follows:

Return on Shareholders fund = Net Profit (after interest and tax) x 100

Shareholders fund

Shareholders fund = Eq. share capital + Pref. share capital + Reserve & surplus

For 2009:

Net profit (after interest and tax) = 386,508

Shareholders fund = 4,890,568

Return on Shareholders fund = 386,508 x 100

4,890,568

= 7.90 %

For 2008:




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4,410,354

= 19.76 %

For 2007:




4,649,982

= 15.56 %

Interpretation: In the above calculation, the return on shareholders fund is high in the

year 2008 as compare to the year 2009 and 2007. There is a change (increase) of about

4.20 % from year 2007 to year 2008. There is a change (decrease) of about 11.86 % from

year 2008 to year 2009. Now in the year 2009 its 7.90 % which is low as compare to that

of previous year and needs to be raise.

8. Return on Total Assets:Meaning: Profitability can also be measured by establishing relationship between net

profits and total assets. This ratio is computed by dividing the net profits after tax by total

funds invested or total assets.

Return on total assets = Net Profit after tax + Interest x 100

Total Tangible assets

For 2009:

Net profit after tax + interest = 3, 89,915

Total tangible assets = 3,260,260

Return on Total assets = 3, 89,915 x 100

3,260,260


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= 11.95 %

For 2008:

Net Profit after tax + interest = 8, 81,833



3,381,265

= 26.07 %

For 2007:

Net Profit after tax + interest = 7, 24,060



3,162,958

= 22.89 %

Interpretation: High return on total assets is considered as the satisfactory ratio. In theyear 2008 the return on total assets is high as compare to that of the year 2009 and

2007.There is a change (increase) of about 3.2 % from year 2007 to the year 2008. There

is a change (decrease) of about 14.12 % from the year 2008 to the year 2009. The basic

objective of this ratio is to measure the effectiveness of the use of these funds. The result

of the year 2009 shows that the funds invested in total assets are not properly utilized.

LEVERAGE OR CAPITAL STRUCTURE RATIO

Leverage or capital structure ratios are calculated to judge the long-term solvency or the financial

position of the firm. Hence, these are also known as long-term solvency ratios.


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1. Debt-Equity ratio

Meaning: This ratio indicates the relative proportion of debt and equity in financing the

assets of a firm. In other, words, debt-equity reveals the relationship between internal and

external sources of funds of a firm.

Debt-Equity ratio = long term debts

Shareholders funds or net worth

For 2009:

Long-term debt = 10,00,000


Debt-equity ratio = 10,00,000

48,90,568

= 0.20 : 1

For 2008:

Long-term debt = 3,50,000


Debt-equity ratio = 3,50,000

44,10,354

= 0.079 : 1

For 2007:

Long-term debt = nil


Debt-equity ratio = nil

46,49,982

= 0 : 1

Interpretation: This ratio plays an important role in analyzing the long term solvency of

a company. It indicates the firms capacity to pay long term debts and procure additional


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loans. This ratio indicates the owners capital invested in total assets of the business. A

low debt-equity ratio provides sufficient safety margin to creditors due to high stake of

owners in the capital of the company. A high debt equity ratio shows the claims of

creditors are greater than those of owners, hence lesser safety.

2. Proprietory ratio

Meaning: This ratio is also called owners equity or net worth to total assets ratio. It

establishes relationship between proprietors or shareholders funds total assets of the

business.

Proprietory ratio = Proprietors fundsTotal assets

For 2009:

Proprietors funds = 48,90,568


Proprietory ratio = 48, 90,568

72,82,237

= 0.67 : 1

For 2008:




58,21,598

= 0.75 : 1

For 2007:



Proprietory ratio = 46,49,982


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57,13,679

= 0.81 : 1

Interpretation: This ratio highlights the general financial strength of the firm. It is of

great importance to creditors since it enables them to find out the proportion of

shareholders fund in the total assets used in the business. So, higher the ratio, the more

secured is the position of creditors, and the lower the ratio the greater is the risk to the

creditors.

3. Solvency or debt to total assets ratio

Meaning: This ratio measures the long term solvency of the firm. It reveals the

relationship between total assets and total external liabilities.

Solvency ratio = Total debts

Total assets

For 2009:

Total debts = 23,91,669


Solvency ratio = 23,91,669

72,82,237

= 0.32 : 1

For 2008:




58,21,598

= 0.24 : 1

For 2007:


Total assets = 57,13 679


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57,13 679

= 0.18 : 1

Interpretation: This ratio measures the proportion of total assets provided by creditors

(long-term as well as short term ) of the firm i.e. what part of assets is being financed

from loans. If total assets are more than external liabilities, the firm is treated as solvent.

So, higher the ratio, the greater is the amount of creditors that is being used to generate

profits for the owners of the firm.

4.

Fixed assets ratio

Meaning: This ratio is also called the capital employed to fixed assts ratio. It expresses

the relationship between long term funds or capital employed and fixed assets of the firm.

Fixed assets ratio = Capital employed

Fixed assets

For 2009:



Fixed assets ratio = 24,15,707

3,88,132

= 6.22 : 1

For 2008:

Capital employed = 26,11 106



3,13,037

= 8.34 : 1


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For 2007:




2,89,758

= 7.96 : 1

Interpretation: This ratio indicates whether proper adjustments between long term

sources and long term uses of capital exists or not. Fixed assets ratio of more than one

reveals that long term funds have been employed to finance current assets . on the

contrary, a ratio of less than one indicates that a part of fixed assets is financed by short

term funds i.e. bank overdraft.

5. Interest coverage ratio or debt service ratio

Meaning: This ratio measures the debt servicing capacity of a firm and more particularly,

where payment of fixed interest on long term loans is concerned. It is determined by

dividing the operating profits or net profits before interest and tax by the fixed interest

charges.

Interest coverage ratio = Net profit (before interest and tax)

Fixed interest charges

For 2009:

Net profit (before interest and tax) = 7,04,927

Fixed interest charges = 3,407

Interest coverage ratio = 7,04,927

3,407

= 206 times

For 2008:


Fixed interest charges = 10,019



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10,019

= 108 times

For 2007:


Fixed interest charges = 253


253

= 3744 times

Interpretation: The interest coverage ratio is very important from lenders point of view.

It gives an idea of the number of times the fixed interest charges are covered by netearnings of the firm out of which they will be paid. The higher the ratio, the more is the

interest paying capacity of the firm and safety margin available to long term creditors.

But, too high a ratio may only indicate the unused capacity of a firm which will reduce

the profits from trading on equity.


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COMPARATIVE FINANCIAL STATEMENTS


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COMPARATIVE FINANCIAL STATEMENTS

Comparative financial statements are those statements which summarise and present related

accounting data for a number of years incorporating therein the changes (absolute or relative orboth) in individual items.

Comparative balance sheetAs at 27 nov 2009

Particulars As at 27 november

ASSETS

1. Cash & cash equivalent2. Short term investments3. Net Receivables4. Other current assets5. Long term investments6. Property, plant & equipment7. Goodwill8. Intangible assets

2009

9,99,4879,04 9864,88,29680,8552,07,2393,88,13234,94,5895,27,388

2008

8,86,45011,32,7525,77,9471,37,9542,83,8283,13,03721,34,7303,05,603

Amount(change)

1,13,037(2,27,766)(89,651)(57,099)(76,589)75,09513,59,8592,21,785

%(change)

12.75 %(20.10) %(15.51) %(41.38) %(26.98) %23.98 %63.70 %72.57 %

TOTAL 70,90,972 57,72,301 14,68,199 25.43 %

LIABILITIES

1. Accounts payable2. Other current liabilities3. Long-term debt4. Other liabilities5. Deferred long term liabilities

5,25,1843,19,36910,00,0002,57,9132,89,203

5,18,6352,43,9643,50,0001,49,9611,48,684

6,54975,4956,50,0001,07,9521,40,519

1.26 %30.94 %185.71 %71.98 %94.50 %

TOTAL 23,91,669 14,11,244 9,80,425 69.47 %


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COMMON-SIZE FINANCIAL STATEMENTS

Financial statements that depicts financial data in the shape of vertical percentages are known as

common size statements. In such statements, all figures are converted into a common unit by

expressing them as a percentage of a key figure in the statement. The total of financial statement

is reduced to 100 and each item is shown as a component to the whole.

Common-size balance sheet

As at 27 nov 2009

Particulars Amount Percent to total

ASSETS

1. Cash & cash equivalent

2. Short term investments3. Net Receivables4. Other current assets5. Long term investments6. Property, plant & equipment7. Goodwill8. Intangible assets

9,99,487

9,04 9864,88,296

80,8552,07,2393,88,132

34,94,5895,27,388

14.09

12.766.881.142.925.47

49.287.43

Total 70,90,972 100

LIABILITIES

1. Accounts payable2. Other current liabilities3. Long-term debt4. Other liabilities5. Deferred long term liabilities

5,25,1843,19,369

10,00,0002,57,9132,89,203

21.9513.3541.8110.7812.09

Total 23,91,669 100


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Common-size Income statement

As at 27 nov 2009

Particulars Amount Percent to total

Total RevenueLess :Cost of revenue

Gross profit

Less :Operating expensesResearch developmentSelling, gen, adminisNon recurringOthers

Operating income or loss

Add: other income

Income before interest & tax

Less: interest

Income before tax

Less: income tax

Net income or income after tax

29,45,8532,96,732

26,49,121

5,65,14112,80,652

41,26071,555

6,90,513

14,414

7,04,927

3,407

7,01,520

3,15,012

3,86,508

10010.07

89.93

19.1843.471.402.42

23.44

0.48

23.92

0.11

23.81

10.69

13.12


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Statement of changes in working capital

Particulars Current year Previousyear

Effect on working capitalIncrease decrease

Current Assets

1. Cash & cash equivalents2. Short term investments3. Net receivables4. Other current assets

9,99,4879,04,9864,88,296

80,855

8,86,45011,32,752

5,77,9471,37,954

1,13,037------

--2,27,766

89,65157,099

Total 24,73,624 27,35,103 1,13,037 3,74,516

Current Liabilities

1. Accounts payable2. Other current liabilities

5,25,184

3,19,369

5,18,635

2,43,964

--

--

6,549

75,405

Total 8,44,553 7,62,599 -- 81,954

Net working capital

Net increase in working capital

16,29,071

3,43,433

19,72,504 1,13,037

3,43,433

4,56,470

19,72,504 19,72,504 4,56,470 4,56,470


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FINDINGS AND ANALYSIS


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CH NO. 6: FINDINGS & ANALYSIS (Intra-firm comparison)

1. Current ratio for the year 2009 is 2.92: 1, which is considered satisfactory as compare to

that of previous year ratio.

2. Total assets turnover ratio for the current year is .40 times which is not satisfactory ascompare to that of previous year i.e. .61 times.

3. Fixed assets turnover ratio is 7.58 times which is low as compare to that of previous year

i.e. 11.43 times and hence not satisfactory.

4. Current assets turnover ratio for the current year is 1.19 times which is low as compare to

that of previous year i.e. 1.30 times.

5. Working capital turnover ratio for the current year is 1.80 times which is equal as compare

to that of previous year i.e. 1.81 times.

6. Capital turnover ratio for the current year is 1.21 times which is low as compare to that of

previous year i.e. 1.37 times.

7. Debt-Equity ratio is increasing from year to year and it is higher in the current year i.e.

0.20: 1 which is not treated as safer from safety margin to creditors point of view.

8. Proprietory ratio is declining year on year i.e. 0.67: 1 in current year and 0.75: 1 in the

previous year.

9. Solvency or debt to total assets ratio is increasing year on year , which is not satisfactorand

needs to be decline.

10. Gross profit ratio in increasing from 89.87 % in the previous year to 89.92 % in the

current year 2009.

11. Operating ratio is increasing from 71.27 % in the previous year to 76.55 % in the current

year 2009.

12. Operating profit ratio is declining from 28.72 % in the previous year to 23.44 % in the

current year 2009.

13. Research and development expenses ratio is increasing from 18.49 % in the previous yearto 19.18 % in the current year 2009.

14. Selling, general and administrative expenses ratio is increasing from 39.85 % in the

previous year to 43.47 5 in the current year 2009.


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15. Non-recurring expenses ratio is increasing from 0.89 % in the previous year to 1.40 % in

the current year 2009.

16. Other expenses ratio is increasing from 1.90 % in the previous year to 2.42 % in the

current year 2009.

17. Net profit ratio (before tax) is declining from 30.12 % in the previous year to 23.81 % in


18. Net profit ratio (after tax) is declining from 24.35 % in the previous year to 13.12 % in


19. Return on capital employed is declining from 41.68 % in the previous year to 29.18 % in


20. Return on shareholders fund is declining from 19.76 % in the previous year to 7.90 % in


21. Return on total assets is declining from 26.07 % in the previous year to 11.95 % in the

current year 2009.


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RECOMMENDATION


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CH NO. 7: RECOMMENDATION

1. Operating ratio of Adobe systems is high i.e. 76.55 % and needs to be control

(decline).Operating ratio consist of cost of goods sold and operating expenses. Ifoperating ratio is high that means companys expenses are more, that leads to high

operating ratio. High operating ratio than again leads to low operating profit ratio and low

net profit ratio that is not satisfactory.

2. To increase operating profit ratio, operating profit must be increased by declining

operating costs.

3. Net profit ratio (after tax) shows the real position of the firm/business , and needs to be

raised by declining the operating cost as well as cost of long term funds i.e. interest on

debentures or on other long term funds.

4. Return on shareholders funds is too low i.e. 7.90 % and needs to be raised; otherwise

investors lose their confidence on company.

5. Return on total assets is low and needs to be raised. It can be raised by increasing the net

profit after tax.

6. Return on capital employed is low and needs to be raised. It can be raised by increasing

the net profit by effective utilization of capital employed.

7. To improve current assets ratio, investment in current assets such as cash in hand, debtors

etc needs to be decline.

8. To improve total assets turnover ratio, further investment in assets needs to minimize and

revenue needs to be increase.

9. To improve current assets turnover ratio, working capital turnover ratio, capital turnover

ratio, current assets needs to be decline.


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BIBLIOGRAPHY


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CH NO. 8: BIBLIOGRAPHY

1. www.adobe.com

2. M R Agarwal, Financial Management.


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ANNEXURE


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Income Statement of Adobe systems

Annual Data All numbers in thousands

PERIOD ENDING Nov 27, 2009 Nov 28, 2008 Nov 30, 2007

Total Revenue 2,945,853 3,579,889 3,157,881

Cost of Revenue 296,732 362,630 354,694

Gross Profit 2,649,121 3,217,259 2,803,187

Operating Expenses

Research Development 565,141 662,057 613,242

Selling General and Administrative 1,280,652 1,426,632 1,259,370

Non Recurring 41,260 32,053 555

Others 71,555 68,246 72,435

Total Operating Expenses 1,958,608 2,188,988 1,945,602

Operating Income or Loss 690,513 1,028,271 857,585

Income from Continuing Operations

Total Other Income/Expenses Net 14,414 60,256 89,858

Earnings Before Interest And Taxes 704,927 1,088,527 947,443

Interest Expense 3,407 10,019 253

Income Before Tax 701,520 1,078,508 947,190

Income Tax Expense 315,012 206,694 223,383

Minority Interest - - -

Net Income From Continuing Ops 386,508 871,814 723,807

Non-recurring Events

Discontinued Operations - - -

Extraordinary Items - - -

Effect Of Accounting Changes - - -

Other Items - - -

Net Income 386,508 871,814 723,807

Preferred Stock And Other Adjustments - - -

Net Income Applicable To Common Shares $386,508 $871,814 $723,807


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Balance Sheet of Adobe systems

Annual Data All numbers in thousands

PERIOD ENDING Nov 27, 2009 Nov 28, 2008 Nov 30, 2007

AssetsCurrent Assets

Cash And Cash Equivalents 999,487 886,450 946,422

Short Term Investments 904,986 1,132,752 1,047,432

Net Receivables 488,296 577,947 534,283

Inventory - - -

Other Current Assets 80,855 137,954 44,840

Total Current Assets 2,473,624 2,735,103 2,572,977

Long Term Investments 207,239 283,828 260,069

Property Plant and Equipment 388,132 313,037 289,758

Goodwill 3,494,589 2,134,730 2,148,102

Intangible Assets 527,388 305,603 402,619

Accumulated Amortization - - -

Other Assets 191,265 41,737 37,009

Deferred Long Term Asset Charges - 7,560 3,145

Total Assets 7,282,237 5,821,598 5,713,679

LiabilitiesCurrent Liabilities

Accounts Payable 525,184 518,635 669,092

Short/Current Long Term Debt - - -

Other Current Liabilities 319,369 243,964 183,318

Total Current Liabilities 844,553 762,599 852,410

Long Term Debt 1,000,000 350,000 -

Other Liabilities 257,913 149,961 36,394

Deferred Long Term Liability Charges 289,203 148,684 174,893

Minority Interest - - -

Negative Goodwill - - -

Total Liabilities 2,391,669 1,411,244 1,063,697


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Stockholders' Equity

Misc Stocks OptionsWarrants - - -

Redeemable Preferred Stock - - -

Preferred Stock - - -

Common Stock 61 61 61Retained Earnings 5,299,914 4,913,406 4,041,592

Treasury Stock (2,823,914) (2,957,154) (1,760,588)

Capital Surplus 2,390,061 2,396,819 2,340,969

Other Stockholder Equity 24,446 57,222 27,948

Total Stockholder Equity 4,890,568 4,410,354 4,649,982

Net Tangible Assets $868,591 $1,970,021 $2,099,261

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