Pioneer Distilleries Limited is a company located in the Dharmabad Taluk of Maharastra manufacturing industrial grade alcohol. The company was registered in the period 1992-93. The promoters went ahead and raised capital from the markets during the same time. We present below the statement of cash flow of the company from three annual reports at very different points in time:

• The first statement of cash flow captures the period of 2001-2002.
• The second statement of cash flow captures the period of 2005-2006.
• The third statement of cash flow captures the period of 2009-2010.

(a) Analyze the company’s statement of cash flow and rate this company on a scale of 1 to 10 during the different points in time, wherein 1 stands for bad financial health and tending towards bankruptcy and 10 stands for excellent financial health. Please mention the reasons behind your above rating of the company.

(b) Are there any possible structural changes in the business conditions? What is happening inside the company (operationally and financially)?

(c) If you were owner of the company’s shares – would you be happy with its change in financial performance? At what points would you consider investing further in the company? And at what points would you be tempted to divest your stake from the company? Support your comments with appropriate reasoning.

(d) Would your reaction change differ for the above question – if you were an existing lender to the company? Comment.

Transcribed Image Text:

Particulars A. CASHFLOW FROM OPERATING ACTIVITIES Net Profit/(Loss) before tax Adjustment for Depreciation Pioneer Distilleries Limited Statement of Cash Flow for the Periods 30 Sep. 2002 (18 months) and 31 Mar. 2001 (12 months) Interest Misc.exps written off Prior Period expenes OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES Adjustment for Inventories Trade and other receivables Trade payables Loans and advances 2001-2002 (599) 268 184 6 - (140) (all figures in lakh) 2000-2001 52 (3) 52 (95) (184) 175 369 4 (4) 359 (201) (13) (32) (178)