Infosys Debt To Equity Ratio

“The debt-to-equity ratio is of importance, particularly to shareholders, as it highlights the trade-off the firm faces in asset allocation. The firm has a contractual obligation to the debt holders and an implied obligation to the equity holders. Thus, the relationship between the levels of these two is of paramount importance.” A ratio of 0 for Infosys indicates that its debt component is extremely low or negligible when compared to its shareholders equity. Whereas for Idea it is 1.21, meaning it is borrowing around 121€ from its creditors for every 100€ of equity it gets from shareholders to manage its operations.

B.2.14. Interest Cover Ratio:

It is also a debt measure and is defined as the ratio of EBIT (earnings before interest and

for Reliance and Sun Pharma it implies that these companies are not generating enough income to pay the interest amount. The ratio of TCS 309 (i.e. >1) implies that the company generates 309 times more than its interest expense.

B.2.15. Market Capitalization-Sales ratio:

Market Capitalization (Market Cap) is defined as the product of Stock price and Number of shares outstanding. It is also known as market value of equity.

The Market Cap to Sales ratios of the companies are given below (in Multiple “X” terms)

B.2.16.Working Capital to Sales ratio

Working capital is given as difference between current assets and current liabilities. It is defined as the capital requirement for a company to manage its day to day operations.

The Working Capital to Sales ratios of the companies are given below (in Multiple “X” terms)

B.2.17.Cash Conversion Cycle (CCC):

“A firm’s cash cycle is the length of time between when the firm pays cash to purchase its initial inventory and when it receives cash from the sale of the output produced from that inventory.” It can be calculated using CCC formula69

CCC = Accounts Receivable Days + Inventory Days - Accounts Payable Days

Here Accounts Receivable Days = Accounts Receivable / Average Daily Sales Inventory Days = Inventory / Average Daily Cost of Goods

The lower the CCC the better is the liquidity of the company’s working capital. A high CCC implies that the company takes much more time to convert its inventory and credit sales into cash.

The ratios of the companies are given in the next page (in days