SCHOOL OF BUSINESS

Financial Statement Analysis

And
Performance Management

SUBMITTEB BY-

SWATI SINHA

10SBCM0361

FINANCE- ‘B’

JULY (2010-2012)
 INTRODUCTION
The Indian Compressors Industry is expanding day by day and contribute to
India’s rising GDP through globalization. Kirloskar Pneumatic Company Ltd
(KPCL) is one of India’s leading suppliers of air, gas and refrigeration
compressors. This report is made to show the analysis of the liquidity position
of the company with respect to cash balances and cash from the operating,
investing and financing activities.

Company Name

Kirloskar Pneumatic Company Limited

Industry

Compressors / Drilling Equipment

Data Source

http://www.capitaline.com

Analysis and Interpretation

Company Analysis and Correlation:

• Net cash from Operating Activities and PAT

• Net cash used in Investing Activities and PAT
• Net cash used in Financing Activities and PAT

Industry Analysis and Correlation:

• Industry Net cash used in Operating Activities and PAT

• Industry Net cash used in Investing Activities and PAT
• Industry Net cash used in Financing Activities and PAT

ABBREVIATIONS:
KPCL- Kirloskar Pneumatic Company Limited

NCOA- Net cash used in Operating Activities

NCIA- Net cash used in Investing Activities

NCFA- Net cash used in Financing Activities

PAT- Profit After Tax

r- Coefficient of Correlation

COMPANY ANALYSIS AND INTERPRETATION

NCOA & PAT

r- 0.705038

In KPCL, the PAT and NCOA are significantly positively correlated. This is a
good sign as most part of the profit is constituted by cash from operating
activities. The Correlation Coefficient is 0.705038, which is higher than the
Industry Aggregate’s 0.46046.

NCIA & PAT:

r- (-0.3058)

PAT and NCIA are both negatively correlated with a correlation coefficient of
-0.3058. This is a good sign as most of the income earned is invested after
taking care of working capital requirements.
NCFA & PAT:

r- (-0.44308)
PAT started to rise and didn’t decrease till current year 2010. Cash flow from
financing activity was very high for the initial year till 2002 and then it fall
down drastically to negative. This happened because the company made huge
payment of interest on its short term borrowings and long term borrowings.
Proceeds were not much higher for these years. This negative trend in NCFA
shows that KPCL is paying out huge dividends and is not borrowing from
external sources for its business and capital requirements.

INDUSTRY ANALYSIS AND INTERPRETATION

NCOA & PAT:

r- 0.46046

The PAT and NCOA of this industry are significantly positively correlated
which again shows most part of the profit is constituted by cash from operating
activities. The Correlation Coefficient is 0.46046. NCOA & PAT was highest in
the year increase in the year 2008, NCOA kept increasing but PAT decreased in
2010.

NCIA & PAT:

r- -0.261

The industry’s PAT and NCIA are negatively correlated and has continuously
maintained the trend of negative cash flow from the investing activity which is
very good for the company. It means that the company do not generate its cash
& cash equivalents from the investing activity. The company cash & cash
equivalents major portion do not come from investing activity. It means that
company is not majorly involved into selling of assets & investments. There has
been a large cash outflow from the company side in investing activities.

NCFA & PAT:

r- -0.35168
The cash flow from financing activity is almost negative for all the years and
it’s in very low amount. The company did not make any proceeds or payments
on financial activity. This low amount of negative cash flow is just due to the
other financial activity payments. There is a negative relation between the profit
after tax and the cash flow from financing activity.