Topics: Balance sheet, Financial statements, Financial statement analysis Pages: 50 (14694 words) Published: August 24, 2013
Chapter I


“Financial performance of Kirloskar Pneumatic Co Ltd”. It is concerned with examining the profitability position of the company for a period of five years (2007-2012).The main objective of this study is to analyse the financial performance of the company by analysing the financial statements. Financial performance is analysed for capital adequacy, assets quality, management, earning quality and liquidity. Charts and tables are used for better understanding of the company’s performance. The study deals with findings and suggestions for the improvement of the company. INTRODUCTION

Finance is the life blood of a business. Circulation of blood is necessary for maintaining life in human body. In the same way, finance is absolutely necessary for the survival and smooth running of a business. Finance is one of the basic foundations of all kinds of economic activities. It is the master key which provides access to all the sources being employed in manufacturing and merchandising activities. Finance is concerned with the flow of funds and decisions relating to business operations affecting the valuation of the firm. Therefore, finance is the fundamental requirement for any business enterprise, to carry on operations and achieve the goals. Finance may be defined as the provision of adequate amount of money when it is required. FINANCIAL ANALYSIS

Financial Analysis is the process of determining the operating and financial characteristics of a firm from accounting data and financial statements. The goal of such analysis is to determine efficiency & performance of the firm management, as reflected in the financial records and reports. Its main aim is to measure the firm’s liquidity, profitability and other indications that business is conducted in a rational and orderly way. “Financial statement analysis is largely a study of relationship among the various financial factors in a business as disclosed by a single set of statements, and a study of trends of these factors as shown in a series of statements.” – John N.Myer. MEANING OF FINANCIAL STATEMENTS

Financial statements refer to such statements which contains financial information about an enterprise. They report profitability and the financial position of the business at the end of accounting period. It includes two statements which the accountant prepares at the end of an accounting period. They are: •The Balance Sheet

Profit & Loss A/C
They provide some extremely useful information to the extent that balance sheet mirrors the financial position on a particular date in terms of the structure of assets, liabilities and owner’s equity and so on and the profit and loss a/c shows the results of operations during a certain period of time in terms of revenue obtained and the cost incurred during the year. Thus the financial statement provides a summarized view of financial positions and operations of a firm. FEATURES OF FINANCIAL ANALYSIS

To present a complex data contained in the financial statement in simple and understandable form. •To classify the items contained in the financial statement in convenient and rational groups. •To make comparison between various groups to draw various conclusions


To know the earning capacity or profitability.
To know the solvency.
To know the financial strengths.
To know the capability of payment of interest & dividends. •To make comparative study with other firms.
To know the trend of business.
To know the efficiency of management
To provide useful information to management
Financial statements are analysed by different parties for different purposes. The analysis is done from different angles.

On The Basis Of Process of Analysis
Horizontal Analysis: This is used when the financial statement of a number of years are to be analysed. Such analysis indicates the trends and...
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