A Study on Financial Analysis of Profitability and Liquidity Position of Software Companies in India

Abstract

ABSTRACT

Indian economy stands today as one of the influential and attractive economies. The liberalization moved by the Indian Government in 1990s has given a boost to the Indian economy and put her into a fast track economic growth route. IT industry is one of the successful industries in India. Its rapid growth and development has caught the attention of the world, so that India is now being identified as the major powerhouse for incremental development of computer software. The reason for this attention is not the actual size of the industry but its rapid growth rate over the nineties and the subsequent decade. The growth of the company can be measured in terms of changing investment, sales, profit and profitability. Hence, an analysis of profitability and liquidity is felt relevant. The study is confined to only the IT industry in India. As many as 34 Software companies were selected for the study. The present study was based on secondary data and covers a period of ten years from 2004-05 to 2014-2015. To analyze the profitability and liquidity position of selected Software companies in India, various accounting and statistical techniques have been applied. Accounting techniques including ratio analysis adopted to analyze and interpret general financial statements to assess the profitability and liquidity position. The tools and techniques are Mean, Standard deviation, Coefficient of variation, Analysis of variance, Correlation, and Multiple regressions. The determination of profitability of a company and analyses of overall trend and pattern of profitability of the total sample companies will help to understand the performance of Software companies.