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ANALYSIS OF FINANCIAL

STATEMENTS
Cash Flow Statement

Abstract
The document uses the Cash Flow Statement to compare the companies Asian Paints and
Berger Paints, and draw inferences about the performance on the basis of observations and
understanding from the information provided in the statement.

Amit Pandey (80118140042)


amit.s.pandey@gmail.com
Table of Contents
Objective.......................................................................................................................... 3
Cash Flow Analysis of Asian Paints .................................................................................... 3
Observations ........................................................................................................................... 3
Interpretation for Asian Paints ................................................................................................. 3
Cash Flow Analysis of Berger Paints .................................................................................. 4
Observations ........................................................................................................................... 4
Interpretation for Berger Paints ............................................................................................... 4
Comparison of Asian Paints and Berger Paints .................................................................. 4
References ....................................................................................................................... 6
Cash flow Statement for Asian Paints for the year ended 31st March 2017 ................................. 6
Cash flow Statement for Berger Paints for the year ended 31st March 2017 ............................... 7
Objective
The objective of the document is to compare the Cash Flow Statement for Asian Paints and
Berger Paints and draw inferences from it.

Cash Flow Analysis of Asian Paints


Observations
Asian Paints Operating profit before working capital changes has increased by 9% from
2576.65 crores to 2810.55 crores primarily driven by net profit, and the Adjustments for
various heads are more or less similar to the previous financial year.

The working capital changes on other hand shows significant changes and has been reduced
compared to previous year. There is a significant increase in Trade Receivables 240.57
crores (compared to 34.91 crores last year), and increase in inventories 583.97 crores
(compared to reduction in inventory level by 192.06 last year). The company spending on
financial assets has been 192.60 crores (95% more than 98.98 crores last year)

These factors have pulled down the working capital and effected cash inflow.

On brighter side, the company is doing good in trade and other payables which stands at
465.74 crores compared to 98.33 crores last year.

On Investing Activity, the company continues to purchase property, plant and equipment
albeit at the around the same amount as previous year and there seems to be a slowed
down. The company is heavily banking on parking its investment in terms deposits which
stands at 290 crores compared to 70.04 crores the last year.

On Financing Activity, the company is doing good in terms of paying off its borrowing (25.14
crores compared to 7.48 crores the last year). The company continues to reward it
shareholders by paying out regular dividends (913.58 crores compared to 748.66 crores
distributed among shareholders the previous year).

Interpretation for Asian Paints


1. From the above observation, Asian Paints has gone in to heavy inventory buildup,
which could be in anticipation of projected sales. Further analysis of inventory
buildup in terms of raw materials, finished good, and work in progress needs to be
carried out to understand how soon the company turns their inventories into sales.
2. The company is doing good on Trade Payables, and seems to enjoy suppliers
confidence. It is commendable to enjoy a huge Trade Payables even when it is sitting
on surplus cash and doing business using others money.
3. In absence of any information on share dilution, or bonus shared issued, the
company continues to payout good dividend. Is it the expectation of shareholders or
the company can use the difference in dividend payout compared to expand more
aggressively have to studied based on market scope (whether the market is
stagnating?)
4. The area where the company can improve is on Accounts Receivables, where they
seem to lag compared to last year.
5. The company seems to be on solid ground by going into financing its operations
from its own cash from operations and having good amount of Cash Reserves.

Cash Flow Analysis of Berger Paints


Observations
Berger Paints Operating profit before working capital changes has increased by 10% from
618.37 crores to 678.24 crores primarily driven by its net profit.

Berger Paints has seen a significant dip in Cash generated from operating activity, falling by
over 37% from 535.55 crores to 338 crores.

The fall is driven primarily due to inventory buildup (197.77 crores compared to 41.72 crores
last year. There company is doing good in trade receivables which has gone down compared
to previous year (20.99 crores vs 27.05 crores last year). However, it has not been able to
utilize suppliers confidence, as its trade payables is down to 93.43 crores against 127.77
crores last year, which means it is supplying suppliers bills faster.

On Investing Activity, the company has invested heavily in purchase of plants, property and
equipment, by spending almost twice the amount compared to last year (247.42 crores vs
105.36 crores). It is also aggressively pumping investment in its subsidiaries and joint
ventures which has increased over 6 times (106.57 crores vs 17.30 crores last year).

To generate fund for these activities the company seems to have disposed of investments
and transfer of a paint division. It is also putting off purchasing of investments compared to
last year (32.88 crores vs 46.17 crores the previous year).

On Financing Activity, the companys short-term borrowings has increased (51.61 crores).
The company has paid dividend to its shareholders, although there does not seems to be a
significant return.

Interpretation for Berger Paints


1. Berger Paints is on expansion and investment spree driven primarily by disposing of
its investments and short-term borrowings.
2. The company seems to be not doing good on Trade Payables settling dues faster.
3. The company seems to be doing good on Trade Receivables.
4. The company seems to be regular paying dividend to shareholders which is good,
though it does not look stellar. Further analysis using Ratio Analysis like P/E ratio can
help understands the returns to shareholders.

Comparison of Asian Paints and Berger Paints


1. Both the companies have shown increase in Net profit compared to previous year by
around same out.
2. Berger Paints is expanding more aggressively compared to Asian Paints.
3. Asian Paints seems to be in dominant position primarily due to cash surplus and
assets (Plants and Machinery) under it.
4. Asian Paints enjoys its expansion by utilizing its own investments and refrains from
borrowing, while Berger paints is disposing of its investments and borrowing would
reflect in increased Interest payout next year.
5. Both the companies are regularly paying out dividends to their stakeholders which is
a sign that the market is good.
References
Cash flow Statement for Asian Paints for the year ended 31st March 2017

(Source: https://www.asianpaints.com/content/dam/asianpaints/website/secondary-
navigation/investors/financial-results-
2/2016/Asian%20Paints%20Annual%20Report%202016-17.pdf)
Cash flow Statement for Berger Paints for the year ended 31st March 2017

(Source: https://www.bergerpaints.com/upload/investors/annual-reports/ar-16-17.pdf)