“A Study on Financial Performance and the Financial

Future of ZOHO CORPORATION PRIVATE

LIMITED”

Abstract:

Financial is regarded as the life blood of a business enterprise. In the modern

oriented economy, finance is one of the basic foundations of all kinds of
economics activities .Finance statements are prepared primary for decision -
making .They play a dominant role in setting the frame work and managerial
conclusion and can be drawn from these statements is of immense use in decision-
making through analysis and interpretation of financial statements . The project
entitled “A Study on Financial Forecasting and Performance of ZOHO
CORPORATION PRIVATE LIMITED '' throw light on overall financial
performance of the company.

Keywords:

Financial Statement, Financial Performance, Financial Forecast, Ratio Analysis

and Its Classification, Research Methodology, Objective of the Study, Scope of
the Study, Company Profile, Global Presence, Brand Value, Industry Profile,
Government Measures.

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Introduction:
A financial statement is an organized collection of data according to logical and
consistent accounting procedures. The income statements give the total of
different expenditure and revenues during the given period and the net result, viz.,
profit or loss during the given period. The balance sheet shows the balance of
assets, liabilities and the capital as on the last date of the accounting period.
Changes in these items between two dates and the effect of such changes. For this
purpose, different tools of analysis are used by managements. Such analysis of
items in the financial statements by using different tools of analysis is called
financial statements analysis. A financial statement is an organized collection of
data according to logical and consist ant accounting procedures. Its purpose is to
convey an outstanding of some financial aspects of a business firm. It may show
a position at a moment of time as in the case of balance sheet, or may reveal a
series of activities over a given period of time, as in the case of an income
statement.

Definition:

According to Metcalf and Titard, “Analysis financial statements is a process of

evaluating the relationship between component parts of financial statements to
obtain a better understanding of firm's position and performance”

Financial Forecast:
Financial forecast or financial plan can also refer to an annual projection of
income and expenses for a company, division or department. A financial plan can
also be an estimation of cash needs and a decision on how to raise the cash, such
as through borrowing or issuing additional shares in a company.

While a financial plan refers to estimating future income, expenses and assets, a
financing plan or finance plan usually refers to the means by which cash will be

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acquired to cover future expenses, for instance through earning, borrowing or
using saved cash.

Corporations use forecasting to do financial planning, which includes an

assessment of their future financial needs. Forecasting is also used by outsiders
to value companies and their securities. This is the aggregative perspective of the
whole firm, rather than looking at individual projects. Growth is a key theme
behind financial forecasting, so growth should not be the underlying goal of
corporation – creating shareholder value is enabled through corporate growth.

Financial Performance:
Financial performance refers to the act of performing financial activity. In
broader sense, financial performance refers to the degree to which financial
objectives being or has been accomplished. It is the process of measuring the
results of a firm's policies and operations in monetary terms. It is used to measure
firm's overall financial health over a given period of time and can also be used to
compare similar firms across the same industry or to compare industries or sectors
in aggregation.

Ratio Analysis:
Ratio analysis is the process of determining and presenting the relationship of
items and group of items in the statements.
According to Batty J. Management Accounting “Ratio can assist management in
its basic functions of forecasting, planning coordination, control and
communication”.

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It is helpful to know about the liquidity, solvency, capital structure and
profitability of an organization. It is helpful tool to aid in applying judgement,
otherwise complex situations.

Classifications of Ratio:
Ratio may be classified into the four categories as follows:
A. Liquidity Ratio:
 Current Ratio
 Quick Ratio or Acid Test Ratio

B. Leverage or Capital Structure Ratio:

 Debt Equity Ratio
 Debt to Total Fund Ratio
 Proprietary Ratio
 Fixed Assets to Proprietor’s Fund Ratio
 Capital Gearing Ratio
 Interest Coverage Ratio

C. Activity Ratio or Turnover Ratio:

 Stock Turnover Ratio
 Debtors or Receivables Turnover Ratio
 Average Collection Period
 Creditors or Payables Turnover Ratio
 Average Payment Period
 Fixed Assets Turnover Ratio
 Working Capital Turnover Ratio

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 D. Profitability Ratio or Income Ratio:

(A) Profitability Ratio based on Sales:

 Gross Profit Ratio
 Net Profit Ratio
 Operating Ratio
 Expenses Ratio

(B) Profitability Ratio Based on Investment:

I. Return on Capital Employed
II. Return on Shareholder’s Funds:
 Return on Total Shareholder’s Funds
 Return on Equity Shareholder’s Funds
 Earnings Per Share
 Dividend Per Share
 Dividend Payout Ratio
 Earnings and Dividend Yield
 Price Earnings Ratio.

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Objectives of the Study:
The main objective of the study is to understand the financial position of the
company, refers to the development of long-term strategic financial plans that
guide the preparation of short-term operating plans and budgets, which focus on
analysing the profit and loss statements and preparing the cash budget.

Scope of the Study:

 The study covers the financial performance of the ZOHO PVT LTD.
 The study is made by making comparison of five year of its operation.
 The study covered aims to reveal where the stands in respect to liquidity
and an effective use of asset.

Benefits of the Study:

 Identifies advance actions to be taken in various areas.
 Seeks to develop number of options in various areas that can be exercised
under different conditions.
 Facilitates a systematic exploration of interaction between investment and
financing decisions.
 Clarifies the links between present and future decisions.
 Forecasts what is likely to happen in future and hence helps in avoiding
surprises.
 Ensures that the strategic plan of the firm is financially viable.
 Provides benchmarks against which future performance may be measured.

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Assumptions:
The method used for this study is combination method which eminently works
best for an organization. The assumptions made for forecasting are as follows:

 The sales are expected to increase by 20% every year.

 All expenses are estimated under percentage of sales method.
 Tax is estimated on the basis of profit.
 Proposed Dividend to be increased by Rs. 5,000,000 every year.
 Dividend tax is payable on the basis of proposed dividend.
 Secured and unsecured loans to be decreased by 5% every year.
 Tax liability on percentage of sales method.
 Fixed assets are expected to increase by 2% every year.
 Work-in-progress of capital is expected to decrease by 10% every year.
 Investments are expected to increase by 5%.
 Current assets like inventories and sundry debtors are expected to
increase by 2% every year.
 Cash and it equivalents on the basis of percentage of sales method.
 Loans and advances are estimated to increase by 5% every year.
 Current liabilities are expected to increase by 5% every year.
 Provisions are expected to increase by 10% every year.

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Research Methodology:

Research design:
The study is based on secondary data. Data pertaining behaviour of liquidity
solvency and profitability position were collection from the balance sheet and
profit & loss account of ZOHO PVT LTD. The necessary data were obtained
from published annual report.

Nature of data:
The data required for the study has been collected from secondary sources and
the relevant information were taken from annual reports, journals and internet
etc.,

Tools applied:
To have a meaningful analysis and interpretation of various data collected, the
following tools were made for this study.

 Ratio analysis
 Common -size statement
 Comparative statement
 Trend analysis

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Company Profile:

ZOHO CORPORATION PVT. LTD

ZOHO CORPORATION is an Indian software development company. The

focus of ZOHO Corporation lies in web-based business tools and information
technology, including an office tools suite, Internet of things management
platform, and a suite of IT management software. The company was founded in
1996 by Sridhar Vembu and Tony Thomas in Pleasanton, California, and now
has offices in seven countries with its global headquarters in Chennai. Vembu has
a PhD in electrical engineering from Princeton and started his career at
Qualcomm in 1994.

History:
From 1996 to 2009, the company was known as AdventNet, Inc.

AdventNet expanded operations into Japan in June, 2001. ZOHO CRM was
released in 2005, followed by the releases of Projects, Creator and Sheet in 2006.
ZOHO expanded into the collaboration space with the release of ZOHO Docs and
ZOHO Meeting in 2007. In 2008 the company added invoicing and mail
applications, and claims to have reached 10 lakh (1 million) users by August of
that year.

In 2009, the company was renamed ZOHO Corporation after its online office
suite of the same name. The company launched and grew without outside funding
and is privately owned.

Each year since 2005, ZOHO has released additional applications, and in 2017
released ZOHO One, a comprehensive suite of 40+ ZOHO Applications.

Recently, ZOHO reached a big milestone of 50 million customers across the

globe.

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Global Presence:
ZOHO is headquartered in Chennai, Tamil Nadu and as of 2019 has 12 offices
around the world. Its US headquarters is currently in Pleasanton, California with
plans to move to Austin, Texas by 2021. The research and development campus
is in Estancia IT Park, Chennai. ZOHO has an office at Tenkasi district, Tamil
Nadu, from where their product ZOHO Desk was built and launched. The
company operates in China and also has offices in Singapore and Japan. The bulk
of its support operations are carried out from its office in Chennai. ZOHO also
has an office in Renigunta, Andhra Pradesh and has been operating from this
office since 2018.

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ZOHO headquarters

Type Private

Industry software industry

Founded 1996

Founder Sridhar Vembu

Tony Thomas

Headquarters Chennai, Tamil Nadu, India

Area served Worldwide

Products ZOHO Office Suite, ZOHO Mail, software

Number of employees 8235+

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Brand Value:
Transform the way you work, with a unique and powerful suite of software that
runs your entire business.

Your Life's Work, Powered by Our Life's Work

Unique and powerful suite of software to run your entire business, brought to you
by a company with the long-term vision to transform the way you work.

Our Customers:

Three out of every five Fortune 500 companies trust ZOHO.

Trusted by more than 50 million users globally

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Company’s Promise:

Serious Software, Friendly Company

Software is our craft and our passion. At ZOHO, we create beautiful software to
solve business problems. We believe that software is the ultimate product of the
mind and the hands.
But as much as we love building beautiful software, we think our people and
company culture are our most important assets. Our engineers spend years
mastering their craft, bringing together decades of engineering expertise to
produce a real work of art. When you choose ZOHO, you get more than just a
single product or a tightly integrated suite. You get our commitment to continuous
refinement and to improving your experience. And you get our relentless
devotion to your satisfaction.

Prime Motive:

A private company with a public vision.

We’ve stayed private and we’ve never taken other people’s money. Neither will
change. This keeps us independent and beholden to only the customer, permitting
a long-term view to naturally unfold. We are private, but far from small. With
nearly 7,000 employees across the globe, our style of unconventional thinking
seems to have paid off.
Our investment in people is a vital part of our R&D edge. We have a
comprehensive program to hire high school students and train them - a program
we call ZOHO University. Over 15% of our engineers come from this program.
Not only is the program good for our company, it is also good for the communities
we live in.

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Product Profile:

 ZOHO Projects

 ZOHO CRM

 ZOHO Invoice

 ZOHO Books

 ZOHO Support

 ZOHO Recruit

 ZOHO People

 ZOHO Reports

 ZOHO Creator

 ZOHO Campaigns

 ZOHO Docs

 ZOHO Meeting

ZOHO Projects:
 Easy tracking of tasks and projects
 Data sharing at the company level
 Improved and organized interaction and collaboration among team
members
 Gantt Charts to improve project management
 User-friendly platform that enables you to work on your tasks from just
one page
 Easy documentation and logging of bugs

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ZOHO CRM:

ZOHO CRM is a leading web-based CRM that is designed to attract, retain, and
satisfy customers to boost your business. The software works well for
entrepreneurs and small businesses, as well as large enterprises. It can track sales,
automate daily tasks, and engage customers in multiple platforms. You can use
its mobile platform to work on the go and get updates quickly and in real time.

ZOHO Invoice:

To start, the app is a widely used finance and accounting software that helps
companies create and manage invoices. It has been specifically created for small
businesses and sole proprietors. The system is also used by start-ups as well as
freelancers such as photographers, web designers, and writers. You can use the
software to create, manage, and send professional invoices online. Users can also
track the invoices to follow up the transactions, as well as select from layout
templates, or do their own custom design for their company. Finally, you can
easily generate invoices in multi-currency and in multiple languages.

ZOHO Books:

ZOHO Books offers smart accounting for growing businesses. It is an intuitive

accounting software designed to help small businesses manage their finances and
remain on top of their cash flow. The app is a simple, easy-to-use accounting
application that can help you to smartly handle your business.

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ZOHO Support:

ZOHO Support is a help desk application that offers a dynamic and integrated
suite of features including ticket management, reporting, and automation tools.
Businesses can use the software to create and maintain productive and long-
lasting relationships with their clients. The app enables companies to engage their
customers via multiple channels like email and live chat as well social networks
such as Twitter and Facebook. It automates workflows and makes ticket
management easier, enabling agents to manage large numbers of ticket requests
and provide appropriate responses to the issues.

ZOHO Recruit:

ZOHO Recruit is a cloud-based recruitment platform that is loaded with

customizable features to help businesses find the right candidates quickly. The
solution offers automated recruitment tools for small and mid-size businesses,
staffing agencies, and corporate HR departments. It helps source and reach
candidates, publish job openings, manage resumes, and communicate effectively
with qualified applicants.

ZOHO People:

ZOHO People is a popular HR management platform that offers a full suite of

business applications and tools for small and medium companies. It is a flexible
and simple HR app that covers employee management operations including
records, leave, and time/attendance. The software is designed to work out of the
box and is ideal for firms that want a system that can be implemented easily

without the need for customization.

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ZOHO Reports:

ZOHO Reports is a leading business intelligence software that helps global

businesses make better sense of their company data. It provides comprehensive
and robust reporting and analytics capabilities to offer deep insights to
companies.
The software offers on-demand reporting as well as business intelligence features
to help your organization get new insights into business data. It uses a powerful
web-based business intelligence engine to provide insightful reports in just a few
minutes, with no IT help. ZOHO Reports offers a vast range of report creation
options including dashboards, summary views, tabular views, pivot tables, and
charts.

ZOHO Creator:

ZOHO Creator is an online builder that helps users to build apps. It offers an easy
to use drag-and-drop interface and a range of customization tools. Users can
utilize the app to set up unique rules, create workflows, and build custom
solutions for their data collection. The software offers a feature-rich platform and

tools that can be used easily even by those with no coding skills.

ZOHO Campaigns:

ZOHO Campaigns is a widely email marketing system that small to mid-sized

businesses can use to automate their entire marketing process—starting from
handling their email campaigns to overseeing their mailing lists. The solution
allows users to access the right information when they need it. You can use this
tool to engage your clients anytime, anywhere with your social campaigns on
Facebook, LinkedIn, and Twitter.
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ZOHO Campaigns enables you to concentrate more on your target audiences and
message, while it manages the entire marketing process. It lets you understand
which design or subject line works better. The software’s list management feature
makes sure your list is spam-free and clean.

ZOHO Docs:
ZOHO Docs is designed for effective document management. Apart from
documents, the software also helps to manage presentations and spreadsheets in
one place. You can access the system from any device with internet connection
including mobile devices such as tablets and smartphones. The software makes it
easy and productive to share files and collaborate with your team members.

ZOHO Meeting:

ZOHO Meeting enables users to conduct online meetings more efficiently and
reduce travel costs. It can be used by firms with multiple teams in different places
to collaborate and work closely together in real time. The platform’s integrated
audio conferencing allows users to share their desktop and conduct in-person
meeting with clients. You can use the app to demonstrate your software system
across the world without leaving your office. Users can also transfer control to
their customers during product presentations.

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SWOT Analysis:

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Industry Profile:

During the last two decades, the Indian Information Technology sector has
advanced to the status of a vital industrial sector of international significance and
India has built up a reputation that it is one of the world’s strongest software
nations. The major contributor to India’s software success has been the software
services sector.

Using a highly educated workforce with excellent English language competence

as the major input with relatively little capital, Indian firms could satisfy the
foreign clientele (mainly US and other industrialized countries in Western
Europe) with cost effective IT solutions. Driving the sector’s strong performance
is more diversified geographic market exposure and continued expansion of the
service portfolio, leading to steady growth in scale by Indian-origin service
providers as well as Multinational Corporations (MNCs), having operations in
India. Sustained growth amongst indigenous players is being complemented by a
continued flow of MNC investments – reinforcing India’s growing role in the
new world technology order. Now India continues to be the ‘nerve-centre’ for
global sourcing with over 2/3rd of the Fortune 500 and a majority of the Global
2000 firms leveraging global service delivery – now sourcing from India. India
based delivery continues to grow, driven by local firms reporting steady growth
in large contract. While India’s own Infosys, Tata Consultancy Services (TCS),
Wipro, and Satyam are growing into the role of “global players”, world’s leading
players are entering India in a big way. All major names such as Microsoft,
Oracle, Sun Microsystems, Dell, IBM and SAP maintain a significant presence
in India.

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India offers a unique combination of attributes that has established it as the
preferred off shore destination for IT-BPO. A large and growing talent pool,
Sustained cost competitiveness, Keen emphasis on quality and security, Key
Business Infrastructure facilities, Enabling Business Policy and Regulatory
Environment, Enhanced value delivery are some of the factors. The visibly higher
preference for India is driven by its unmatched superiority when measured across
a range of parameters that determine the attractiveness of a sourcing location.

Information Technology:

It can be stated that information technology is one of the most dynamic and
frequently changing and evolving technologies. The concept of information
technology is complex and therefore in past research several unambiguous
definitions have been made in order to define it. In this study the definition given
by Nahar is used. “Modern computing with multimedia capability, computing
networks and communications technologies; their development, implementation
and provision of technical support; and their application for data processing,
storage, sharing, and transmission. All information may be in the same place, or
different places, within the same time frame or different time frames. The major
components of IT are hardware, software, and services”. Companies are
increasingly utilizing information technology in their efforts to internationalize
in order to maintain competitiveness in the marketplace.

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Reasons for Growth of Software Industry In India:

 Government initiative and policies.

 Sizable work force.

 Low cost labour.

 Infrastructure.

 Export based growth industry.

 Location Selection of Indian software Industry.

Key Factors that Explain Success of Indian Software Industry:

 Software industry can be built entirely on human capital. Requires limited

infrastructure and upfront investment. Has good cash flows and is highly
profitable.

 India had an early-mover advantage: repeated positive experience build

trust in outsourcing and validated the Indian brand.

 Early investments in engineering education and privatization of education

created a large talent pool.

 Body-shopping exposed a large population to new ways of working.

 Professionally trained entrepreneurs.

 Highly entrepreneurial IT training and private education industry.

Responded quickly to fill skill gaps and opportunities. Positive government
policies and lack of regulation meant few barriers.

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