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 CHAPTER 1

INTRODUCTION
1.1 Key Performance Indicator (KPI) Definition

A Key Performance Indicator is a measurable value that demonstrates how

effectively a company is achieving key business objectives. Organizations use KPIs
at multiple levels to evaluate their success at reaching targets. High-level KPIs may
focus on the overall performance of the business, while low-level KPIs may focus on
processes in departments such as sales, marketing, HR, support and others.

1.2 Characteristics of Effective KPIs:

A Key Performance Indicator (KPI) is a measurement of performance related to a

specific objective or goal. Typically, KPIs can be thought of in two categories:
Drivers, which measure current and future activity, and Outcomes, which measure
output of past activity. Both types are important to successful performance
measurement and in making informed decisions when applied to Business
Intelligence.

 Simple: KPIs should be simple enough that employees know what the KPI is
measuring and how it is being calculated. It also helps to keep KPIs to a
small, manageable level so as to not overwhelm yourself with too much
information at once.
 Measurable: Even if a KPI can’t be quantitative, it must still be measurable
with clear, concise measurement attributes.
 Actionable: A KPI isn’t effective if employees don’t know what to do with the
information. An effective KPI should answer a question and provide a further
decision to be made based on that answer.
 Timely: The frequency of which a KPI is reported on is important – too often,
and employees can be overwhelmed with data. Too infrequently, and data
can be incomplete or out of date. Businesses should consider the particular
nature of a KPI before deciding on the most effective frequency of which to
report on it.

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  Visible: Making KPIs visible across the organization incentivizes employees
to be more productive and pay attention to their performance. When the
business is more aware of everyday performance, it can make more informed
decisions on how to improve.

1.3 How to define a KPI?

Defining key performance indicators can be tricky business. The operative

word in KPI is “key” because every KPI should related to a specific business
outcome with a performance measure. KPIs are often confused with business
metrics. Although often used in the same spirit, KPIs need to be defined according to
critical or core business objectives. Follow these steps when defining a KPI:

 What is your desired outcome?

 Why does this outcome matter?
 How are you going to measure progress?
 How can you influence the outcome?
 Who is responsible for the business outcome?
 How will you know you’ve achieved your outcome?
 How often will you review progress towards the outcome?

1.4 How to write and develop KPIs

When writing or developing a KPI, we need to consider how that KPI relates
to a specific business outcome or objective. KPIs need to be customized to our
business situation and should be developed to help our achieve your goals.

Follow these steps when writing a KPI:

1. Start with strategy

We should always start with strategy. Without a firm stake in the ground
around what your business is seeking to achieve, it’s incredibly easy to end up with a
dauntingly long list of possible indicators that you feel you could or should measure.

Your strategy therefore acts as a starting point for designing appropriate KPIs.
All companies create a 30–40-page strategy document that no one ever reads or
understands. A great way around this is to create a simple one-page strategy. This

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will help you clearly define your objectives, and help you work out what you need to
put in place to achieve them. 

2. Define the questions you need answers to

Linking KPIs to your strategy will immediately sharpen your focus and make
the relevant KPIs more obvious. Identifying the questions, you need answers to will
further narrow your focus, because questions give the indicators context.

For example, if you plan on executing a simple strategy to increase your

income by focusing on the most profitable areas of your business, you could ask
“Where are we making profit and which processes are most costly compared to the
returns we receive?”

Once you are clear on the questions you need to answer, you can make sure
that every indicator you subsequently choose or design is relevant not only to your
strategy, but also provides the answers to very specific questions that will guide your
strategy and inform your decision making.

3. Identify your data needs

Once you know what questions you’re trying to answer, you need to define
your data needs to establish what KPIs, metrics or data you need in order to answer
those questions. 

4. Evaluate all existing data

Perform a gap analysis by comparing what data you would ideally like to have
with what you already have – that way you can easily see what’s missing. Ask
yourself what you need to change, tweak or implement to ensure the data collection
is completely aligned with the strategy and will fully answer the questions you need
answered. And then come up with the right indicators to deliver those objectives.

Remember, most companies are full of data. Often KPIs are already being
collected for all sorts of different reasons by different divisions and different
managers. It makes sense, therefore, to determine whether what you need is already
being gathered by someone somewhere in the business, or perhaps it’s almost being
collected and a few tweaks to the collection process would deliver exactly what you
need. 

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5. Find the right supporting data

KPIs are incredibly powerful in the right hands, but we need to acknowledge
that we also have access to vast quantities of supporting data that is every bit as
insightful and useful as traditional KPIs. By finding the right supporting data – be it
industry information, demographic data, trend statistics, or whatever – you can
triangulate and verify your findings.

The datafication of our world, where vast amounts of information are being

created and stored every minute, means there is a great deal of supporting data that
can potentially provide information that is relevant to your strategy. By finding the
right supporting data, you can make much better sense of the world, much more
quickly, which helps you make better, faster business decisions.

6. Determine the right measurement methodology and frequency

Knowing what you need is one thing, working out how to access and measure
that information is another. Finding the right measurement methodology is critical.
Therefore, once you know what information you need to collect, you need to find the
right measurement methodology to get it. This is especially true if you have to
develop new KPIs or tweak existing ones.

It’s always preferable to align measurement frequency with how and when the
data is used in the organisation, because all data has a “shelf life”. This means
measurement frequency must be in line with the reporting frequency. If it’s not, the
data may lose impact and/or relevance. For example, if you collect customer
satisfaction data via survey in the summer and report on the findings in the winter,
then the findings are already six months out of date. 

7. Assign ownership for your KPIs

Effective KPIs require two types of ownership. The first is the ownership of the
KPI in terms of its meaning and interpretation. Someone needs to be in charge of
looking at the KPI, interpreting its meaning, monitoring how it’s changing and
deciding what that means for the business.

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 The other ownership refers to the data collection. Sometimes you can
automate the process but, more often than not, data collection will require some
human interaction. Perhaps certain personnel are involved in transferring data from
one database to another, or they have to collect it manually. Again, this ownership
needs to be clearly set out and followed through. 

8. Ensure KPIs are understood by people within your organisation

It’s essential that everyone in your business is aware of what you’re trying to
achieve, and how you’re measuring progress towards those achievements. This is
especially important for those who are charged with ownership of the KPIs, but it’s
also important for people right across the business, at any level.

KPIs should form part of the decision-making process for every employee,
and everyone should be able to answer the question, “How will what I am doing
today affect our KPIs?”

You therefore need to ensure everybody understands how the metrics you are
gathering are linked to your strategic priorities. This will increase “buy in” – how
personally involved and enthusiastic your staff feel about your priorities – and ensure
that constant review and improvement are at the heart of everything your people do.

9. Find the best way to communicate your KPIs

It’s always wise to think about how best to communicate your KPIs so their
insights are obvious, engaging and apparent to all. So many KPIs are reported in
long reports full of numbers or tables, perhaps with a traffic light graphic to indicate
urgency. This is not good enough. There is absolutely no point hiding important
insights in excessively long reports that no one ever reads.

Really effective visualisations clearly illustrate trends and variations in data,

and engage the reader. Try to find the right picture for your KPIs and create an
explanation of the insights so that the nuggets of wisdom extracted from the data are
clear, unambiguous, accessible and, most importantly, actionable.

10. Review your KPIs to ensure they help improve performance

If a KPI isn’t useful in helping you or others in your business make better
decisions, which, in turn, will improve your business’s performance, then it’s just

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noise. You therefore need to constantly review the metrics you are measuring to
make sure they are genuinely useful and you aren’t spending hours (or asking your
staff to spend hours) measuring data simply to tick off boxes.

Used properly, KPIs provide a vital tool for improving performance, making
better business decisions and gaining a competitive advantage. I hope these 10
steps help de-mystify KPIs and provide a simple framework for making KPIs work in
your business.

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 CHAPTER 2

COMPANY PROFILE

1.

 Started in 1997.
 Headquarters: Irving, Texas, USA.
 The Flowserve Corporation is an American multinational corporation and one
of the largest suppliers of industrial and environmental machinery such as
pumps, valves, end face mechanical seals, automation, and services to the
power, oil, gas, chemical and other industries.

ABOUT:

The core business is solving complex fluid motion and control challenges for
our customers. Dig a little deeper, and you’ll find that Experience in Motion takes on
an even greater meaning.

It captures the spirit and the actions of Flowserve associates worldwide, and
conveys our ongoing efforts to move forward with advances in technology and
ground breaking industry applications that serve our customers.

 Major clients: Oil & gas, chemical, Power, Water and General industry

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2.

 Founded in 1957.
 Headquarters: San Donato Milanese, a suburb of Milan, Italy.
 Saipem is a global leader in the Industrial pumps, oil and gas engineering &
construction and drilling businesses.
 Mission:
 To complete extraordinary projects by pushing beyond the frontiers of
innovation, opening the way for our clients to the energy of the future.

 Vision:
 To turn the dreams of our clients into reality thanks to our ability to
innovate and our technological competence, supporting their progress
in the energy transition.
 Major clients: Oil and Gas industry, Onshore and Off-shore Drilling industry

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3.

 Established in 1888 and incorporated in 1920.

 Headquarters: Pune, India.
 Kirloskar Brothers Limited (KBL) is a pump manufacturing company involved
in engineering and manufacture of systems for fluid management.
 Mission: We shall be known globally as a reliable, innovative and cost
effective solution provider in hydraulic machines & systems.
 Vision: KIRLOSKAR BROTHERS LIMITED will be one of the most admired
engineering companies in the world.
 Values:
o Developing and working with mutual trust.
o Building and nurturing team work.
o Fairness in dealing with stakeholders.
o Quality in everything.
o Commitment towards environment.
 The core businesses of KBL are large infrastructure projects (Water
Supply, Power Plants, and Irrigation), Project and Engineered Pumps,
Industrial Pumps, Agriculture and Domestic Pumps, Valves, Motors and
Hydro turbines.

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4.

 Founded in 1871.
 Headquarters: Frankenthal, Germany
 KSB is one of the world's leading manufacturers of pumps and valves and
also offers a comprehensive range of service activities.
 Mission: We support KSB SE & Co. KGaA & group companies through
professional solutions & services in
o Engineering
o Product development
o Information Technology

to secure strategic objective and operative success of KSB.

 Vision:
To be a reliable organisation in product, delivery and service.

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 CHAPTER 3
METHODOLOGY

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 CHAPTER 4

MEASURES
4.1 ASSET TURNOVER RATIO

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 The asset turnover ratio measures the value of a company's sales or
revenues relative to the value of its assets. The asset turnover ratio can be used as
an indicator of the efficiency with which a company is using its assets to generate
revenue.

The higher the asset turnover ratio, the more efficient a company is at
generating revenue from its assets. Conversely, if a company has a low asset
turnover ratio, it indicates it is not efficiently using its assets to generate sales.

4.2 RETURN ON NET ASSETS

Return on net assets (RONA) is a measure of financial performance

calculated as net profit divided by the sum of fixed assets and net working capital.
Net profit is also called net income.

The RONA ratio shows how well a company and its management are
deploying assets in economically valuable ways, and a high ratio result indicates that
management is squeezing more earnings out of each dollar invested in assets.
RONA is also used to assess how well a company is performing compared to others
in its industry.

Return on Net Assets = (Net income / Total Assets) *100

4.3 INVENTORY TURN RATIO

The inventory turnover ratio is an important measure of how well a company

generates sales from its inventory.

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 Inventory turnover ratio is an efficiency ratio that measures how well a
company can manage its inventory. It is important to achieve a high ratio, as higher
turnover rates reduce storage and other holding costs.

Low turnover implies that a company’s sales are poor, it is carrying too much
inventory, or experiencing poor inventory management. Unsold inventory can face
significant risks from fluctuating market prices and obsolescence.

Inventory Turn Ratio = (total investment in inventory / Annual sales)

*100

4.4 GROSS PROFIT MARGIN

Gross profit margin is a metric used to assess a company's financial health by

calculating the amount of money left over from product sales after subtracting the
cost of goods sold (COGS).

If a company's gross profit margin wildly fluctuates; this may signal

poor management practices and/or inferior products. On the other hand,
such fluctuations may be justified in cases where a company makes sweeping
operational changes to its business model, in which case temporary volatility
should be no cause for alarm.

Gross profit margin = (total revenue – cost of goods sold) / total revenue x 100

4.5 DAYS OF SALES OUTSTANDING (DSO)

Days sales outstanding (DSO) is a measure of the average number of days

that it takes a company to collect payment after a sale has been made.

Days sales outstanding is an element of the cash conversion cycle and is

often referred to as days receivables or average collection period.

A high DSO number shows that a company is selling its product to customers
on credit and taking longer to collect money. This may lead to cash flow problems
because of the long duration between the time of a sale and the time the company
receives payment.

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 A low DSO value means that it takes a company fewer days to collect its
accounts receivable.

DAYS OF SALES OUTSTANDING = (Accounts Receivable / Annual sales) *100

4.6 CASH TO CASH CONVERSION CYCLE

The cash conversion cycle (CCC) is a metric that expresses the time
(measured in days) it takes for a company to convert its investments in
inventory and other resources into cash flows from sales.

Cash to Cash conversion cycle = DIO+DSO−DPO

where:

DIO=Days of inventory outstanding (also known as days sales of inventory)

DSO=Days sales outstanding

DPO=Days payables outstanding

4.7 WORKING CAPITAL

Working capital, also known as net working capital (NWC), is the difference
between a company’s current assets, such as cash, accounts receivable
(customers’ unpaid bills) and inventories of raw materials and finished goods, and its
current liabilities, such as accounts payable. Net operating working capital is a
measure of a company's liquidity and refers to the difference between operating
current assets and operating current liabilities.

Key points:

 A company has negative working capital If the ratio of current assets to

liabilities is less than one.

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  Positive working capital indicates that a company can fund its current
operations and invest in future activities and growth.
 High working capital isn't always a good thing. It might indicate that the
business has too much inventory or is not investing its excess cash.

WORKING CAPITAL = Current Assets – Current Liabilities

4.8 SALES GROWTH

Sales growth is a metric that measures the ability of your sales team to
increase revenue over a fixed period of time. Without revenue growth, businesses
are at risk of being overtaken by competitors and stagnating.

Sales growth is a strategic indicator that is used in decision making by

executives and the board of directors, and influences the formulation and execution
of business strategy.

( Current sales Revenue – Previous sales Revenue )

Sales growth = ∗100
Previous sales Revenu e
%
4.9 EQUITY RATIO

The equity ratio is an investment leverage or solvency ratio that measures the
amount of assets that are financed by owners’ investments by comparing the total
equity in the company to the total assets.

CHAPTER 5

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 PROBLEM DEFINITION
 Identifying KPIs towards a predetermined goal
 The performance measure for the organization is carried out using suitable
key performance indicators.
 Underperformance KPIs are taken for consideration.
 The underperformed KPIs should be reviewed and considered for
improvement process.

CHAPTER 6
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 OBJECTIVE
 The first and foremost objective is to select suitable Key Performance
Indicator for the Organization.
 The KPIs are evaluated by using the collected data or by use of Annual
Report.
 Identify strong and weak KPIs
 Discussion and Further Developments are carried out by comparing with the
close competitors.
 More Sensitive KPIs or closely constrained KPIs are taken for improvement
process.

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 CHAPTER 7

LITERATURE REVIEW
Title and Author Journal Year Major conclusions

1. Sustainability ELSEVIER 201  This Research article

performance 7 investigates sustainability in the
(Procedia)
indicators at shop performance measurement
floor level in large systems of Swedish
manufacturing manufacturing companies.
companies.  A method for identifying and
categorizing indirect links to
Mats
sustainability issues was
Zackrissona*,
defined and used.
Martin Kurdveab,
Sasha Shahbazib,  The results suggest that at shop

Magnus floor level 90% of the indicators

Wiktorssonb, Mats have at least an indirect relation

Winrothc, Anna to one or more of the

Landströmc, Peter sustainability dimensions

Almströmc, Carin economy, environment and

Anderssond, social, of which 26% are at least

Christina indirectly related to the

Windmarkd, Anna environmental dimension.

Ericson Öberge,
Andreas Myrelid

25
 Title and Author Journal Year Major conclusions

2. Key ELSEVIER 2018  This paper highlights the

performance specific process industry’s
(Published in:
indicators for needs for evaluating the
51st CIRP
manufacturing operational performance.
Conference
operations  The ISO 22400 standard
on
management – gap defines and describes 34
Manufacturing
analysis between KPIs for manufacturing
Systems)
process industrial operation management.
needs and ISO These KPI’s were
22400 standard discussed.
 The gaps between the
Li Zhua,b*,
KPIs defined ISO 22400
Charlotta
and process industrial
Johnssonb,
needs are discussed
Martina Variscoc,
based on the survey of the
Massimiliano M.
process industry company
Schiraldic
in Sweden

26
 Title and Journal Year Major conclusions
Author

3. Key ELSEVIER 2017  This paper aims at developing

activities, the various activities, decision
(Procedia)
decision variables and performance
variables and indicators based on the four
performance basic activities under reverse
indicators of logistics.
reverse
The three basic questions –
logistics
 who will collect from the
Kuldip Singh
customer,
Sangwan
 what is to be done on the
collected products and
 where to send after recovery –

were interlinked with the activities

at collection, sorting/testing and
recovery centers will provide the
basic activities, decision variables
and key performance indicators of
the reverse logistics.

Title and Journal Year Major conclusions

Author

27
4. Key International 2019  This paper investigates
Performance Journal of various KPI’s (SC
Indicators on Engineering performance) in an e-
Supply Chain and commerce business process.
Performance Advanced  The rapid development of
Measurement in Technology information technology had a
An Electronic (IJEAT) major change in e-commerce
Commerce industry.
(Science
Wahyu Oktri direct)  Various e-commerce

Widyarto, components were discussed.

Mohamad Jihan  KPI proposal can be used in

Shofa, the measurement of supply

Nugraheni chain performance in e-

Djamal commerce and is expected to

be a new approach in the
development of the supply
chain performance
measurement model.

Title and Journal Year Major conclusions

Author

28
5. How Soft ELSEVIER 2018  This paper suggests a specific
Drink Supply framework of Key performance
(PROCEDIA)
Chains drive indicators (KPI’s) in Soft Drink
sustainability: (Published in: supply chain.
Key 51st CIRP
 It shows how soft drink
Performance Conference
companies can measure
Indicators on
sustainability and therefore
(KPIs) Manufacturin
deploy sustainable strategies
Identification. g Systems)
along manufacturing networks.

Claudia Pinna,  Decision-making process and the

Melissa prioritization were discussed for

Demartini, future strategic actions

Flavio Tonelli,
Sergio Terzi

CHAPTER 8

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 DATA COLLECTION AND PROCEDURE
8.1 DATA COLLECTION

1. Flowserve:
Table 1: Selected Financial data’s in Flowserve corporation during 2016 - 2019

Selected Financial Data 2019 2018 2017 2016

(Amounts in thousands, $)

Net income (Amounts in 406,040 247,538 341,135 276,684

thousands, $)
Net Sales 3,944,850 3,832,666 3,660,831 3,990,487

Current asset 2,505,370 2,383,145 2,558,745 2,297,689

Total Asset 4,919,642 4,616,277 4,910,474 4,708,923

Total investment in inventory 660,837 633,871 884,273 897,690

(net)
(Raw material + WIP +
Finished goods)

Gross profit 1,295,370 1,187,836 1,088,953 1,236,798

Accounts Payable 447,582 418,893 443,113 412,087

Accounts Receivable 795,538 792,434 856,791 882,638

Shareholder’s Equity 220,991 220,991 220,991 220,991

Present sales 3,944,850 3,832,666 3,660,831 3,990,487

Past sales 3,832,666 3,660,831 3,990,487 4,557,791

Current Liabilities 1,112,888 1,080,975 1,242,908 1,178,438

2. Saipem:
Table 2: Selected Financial data’s in SAIPEM Inc. during 2016 - 2019

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 Selected Financial Data 2019 2018 2017 2016
(Amounts in thousands, $)

Net income (Amounts in 2,421,800 1,523,920 264,080 2,308,800

thousands, $)
Net Sales 10,099,890 9,463,860 9,988,890 11,073,360

Current asset 7,783,320 6,894,210 7,484,730 8,642,460

Total Asset 14,439,990 12,961,470 15,857,460 13,974,900

Total investment in inventory 3,236,330 3,536,330 2,101,230 2,488,620

(net)
(Raw material + WIP +
Finished goods)

Gross profit 1,272,060 941,280 956,820 1,008,990

Accounts Payable 154,290 155,400 440,670 186,480

Accounts Receivable 102,210 301,920 476,190 290,820

Shareholder’s Equity 4,578,750 4,479,960 5,104,890 5,422,350

Present sales 10,099,890 9,463,860 9,988,890 11,073,360

Past sales 9,463,860 9,988.890 11,073,360 12,772,770

Current Liabilities 5,776,440 4,917,300 4,980,570 6,294,810

3. KIRLOSKAR PUMPS:
Table 3: Selected Financial data’s in Kirloskar Pumps during 2016 - 2019

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 Selected Financial Data 2019 2018 2017 2016
(Amounts in thousands, $)

Net income (Amounts in 873,215 655,864 329,970 107,774

thousands, $)
Net Sales 22,481,940 19,534,627 18,412,768 17,420,095

Current asset 14,085,748 13,041,904 11,026,936 10,668,068

Total Asset 21,732,707 20,641,002 19,528,817 19,552,002

Total investment in inventory 3,670,251 3,126,530 2,595,112 2,062,218

(net)
(Raw material + WIP +
Finished goods)

Gross profit 2,098,877 1,679,614 1,618,012 953,549

Accounts Payable 155,381 185,826 313,109 408,732

Accounts Receivable 4,712,743 3,817,850 3,339,728 3,566,085

Shareholder’s Equity 158,818 158,818 158,818 158,818

Present sales 22,481,940 19,534,627 18,412,768 17,420,095

Past sales 19,534,627 18,412,768 17,420,095 16,083,473

Current Liabilities 11,462,187 10,609,414 9,875,649 9,759,699

4. KSB PUMPS:
Table 4: Selected Financial data’s in KSB Pumps during 2016 - 2019

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 Selected Financial Data 2019 2018 2017 2016
(Amounts in thousands, $)

Net income (Amounts in 740,260 677,050 617,550 698,280

thousands, $)
Net Sales 11,197,760 10,008,140 8,528,320 8,496,800

Current asset 8,058,190 2,476,370 6,323,980 6,244.810

Total Asset 12,054,350 10,292,890 9,599,200 9,010,860

Total investment in inventory 3,030,230 2,476,370 2,118,630 1,826,410

(net)
(Raw material + WIP +
Finished goods)

Gross profit 1,116,730 1,046,690 930,090 1,054,880

Accounts Payable 456,800 395,480 216,910 58,820

Accounts Receivable 426,140 1,026,710 26220 85970

Shareholder’s Equity 348,080 348,080 348,080 348,080

Present sales 11,197,760 10,008,140 8,528,320 8,496,800

Past sales 10,008,140 8,528,320 8,496,800 8,029,216

Current Liabilities 4,556,010 3,294,250 3,247,720 3,113,710

8.2 DATA ANALYSIS

8.2.1 ASSET TURN RATIO

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 The Asset turn Ratio is calculate by using Net sales and Total Asset for four
companies and tabulated below.

Table 5: Calculated values using Asset turn Ratio

Company/Year 2019 2018 2017 2016

Flowserve 0.802 0.830 0.746 0.847

Saipem 1.0345 0.9464 0.9429 0.8910

Kirloskar 0.6994 0.7302 0.6299 0.7924

KSB 0.9289 0.9723 0.8884 0.9430

8.2.2 RETURN ON NET ASSET

The Return on Net asset is calculated by using Net income and Total Asset
for four companies and tabulated below.

Table 6: Calculated values using Return on Net Asset (RONA)

Company/Year 2019 2018 2017 2016

Flowserve 0.0825 0.0536 0.0695 0.0588

Saipem 0.0402 0.0318 0.0169 0.0055

Kirloskar 0.1677 0.1176 0.0167 0.1652

KSB 0.0614 0.0658 0.0643 0.0775

8.2.3 INVENTORY TURN RATIO

The Inventory turn Ratio is calculated by using Total investment in inventory

and Annual sales for four companies and tabulated below.

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Table 7: Calculated values using Inventory Turn Ratio (ITR)

Company/Year 2019 2018 2017 2016

Flowserve 16.752 16.539 24.155 22.496

Saipem 16.325 16.005 14.094 11.838

Kirloskar 32.043 37.367 21.036 22.474

KSB 27.061 24.744 24.842 21.495

8.2.4 GROSS PROFIT MARGIN

The Gross Profit margin is calculated by using Gross Profit and Net sales for
four companies and tabulated below.

Table 8: Calculated values using Gross Profit Margin

Company/Year 2019 2018 2017 2016

Flowserve 32.84 30.99 29.75 30.99

Saipem 9.34 8.60 8.79 5.47

Kirloskar 12.59 9.95 9.58 9.11

KSB 9.97 10.46 10.91 12.42

8.2.5 DAYS OF SALES OUTSTANDING

The Days of Sales Outstanding is calculated by using Account receivable and

Annual sales for four companies and tabulated below.

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Table 9: Calculated values using Days of Sales Outstanding (DSO)

Company/Year 2019 2018 2017 2016

Flowserve 73.61 75.47 85.43 80.73

Saipem 76.51 71.34 66.20 74.72

Kirloskar 3.69 11.64 17.40 9.59

KSB 13.89 37.44 1.12 3.69

8.2.6 CASH TO CASH CONVERSION CYCLE

The Cash to Cash conversion cycle is calculated by using the values from
Total inventory days (TID), Days of Sales Outstanding (DSO), Days of Payable
Outstanding (DPO) for four companies and tabulated below.

Table 10: Calculated values using Cash to Cash Conversion Cycle

Company/Year 2019 2018 2017 2016

Flowserve 85.31 87.59 137.01 129.33

Saipem 133.01 125.42 108.84 103.46

Kirloskar 117.49 145.12 80.26 86.64

KSB 101.66 116.10 84.32 79.80

8.2.7 WORKING CAPITAL

The Working capital is calculated by the difference between Current Assets

and Current Liabilities for four companies and tabulated below.

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Table 11: Calculated values using Working Capital

Company/Year 2019 2018 2017 2016

Flowserve 13,92,482 13,02,170 13,15,837 11,19,251

Saipem 26,23,561 24,32,490 11,51,287 9,08,369

Kirloskar 20,06,880 19,76,910 25,04,160 23,47,650

KSB 35,02,180 -8,17,880 30,76,260 -31,07,465

8.2.8 SALES GROWTH

The Sales Growth is calculated by Present and Past sales data for four
companies and tabulated below. The calculated values are in Percentage.

Table 12: Calculated values using Sales Growth

Company/Year 2019 2018 2017 2016

Flowserve 2.927 4.694 -8.261 -12.447

Saipem 15.088 6.093 5.698 8.311

Kirloskar 6.721 -5.256 -9.794 -13.305

KSB 11.887 17.352 0.371 5.824

8.2.9 EQUITY RATIO

The Sales Growth is calculated by Present and Past sales data for four
companies and tabulated below. The calculated values are in Percentage.

37
Table 13: Calculated values using Equity Ratio

Company/Year 2019 2018 2017 2016

Flowserve 5.969 6.046 4.140 4.445

Saipem 6.125 6.248 7.095 8.447

Kirloskar 3.121 2.676 4.754 4.450

KSB 3.695 4.041 4.025 4.652

CHAPTER 9
RESULTS AND DISCUSSION

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9.1 Asset turn Ratio:

A s s e t tu rn R a tio
Flowserve Linear (Flowserve) Saipem Linear (Saipem)
Kirloskar Linear (Kirloskar) KSB Linear (KSB)

1.200

1.000
Ratio

0.800

0.600

0.400
2015 2016 2017 2018 2019 2020

Year

Figure 1: Trendline on Asset Turn Ratio for Four companies during (2016 – 2019)

The higher the asset turnover ratio, the more efficient a company is at
generating revenue from its assets. Conversely, if a company has a low asset
turnover ratio, it indicates it is not efficiently using its assets to generate sales.

During the period 2016 to 2018, each of the company has its asset turn ratio
less than 1. During the year 2019, Flowserve has an Asset turn ratio greater than 1,
which implies that it is efficient in generating revenue from its assets. Kirloskar
pumps has a lower Asset turn ratio over a period of study.

9.2 Return on net asset

39
 R E T U R N ON N E T A S S E T
Flowserve Linear (Flowserve) Saipem
Linear (Saipem) Kirloskar Linear (Kirloskar)
KSB Linear (KSB)

18.00

16.00

14.00

12.00
Ratio (Percentage)

10.00

8.00

6.00

4.00

2.00

0.00
2016 2017 2018 2019

Years

Figure 2: Trendline on Return on Net Asset for Four companies

during (2016 – 2019)

The Return on Net Asset (RONA) ratio shows how well a company and its
management are deploying assets in economically valuable ways, and a high ratio
result indicates that management is squeezing more earnings out of each dollar
invested in assets. RONA is also used to assess how well a company is performing
compared to others in its industry.

From the period of study, Kirloskar pumps has a maximum RONA value of
16.77 in 2019, which indicates that the management is extracting more earnings
out of each dollar invested in assets. Saipem has a least ratio over each period of
study. Kirloskar pumps has a major fall on RONA in the year 2017.

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9.3 INVENTORY TURN RATIO

IN V E N T OR Y T U R N R A T IO
Flowserve Linear (Flowserve) Saipem Linear (Saipem)
Kirloskar Linear (Kirloskar) KSB Linear (KSB)

40.000

35.000

30.000

25.000
PERCENTAGE

20.000

15.000

10.000

5.000

0.000
2015 2016 2017 2018 2019 2020

Year

Figure 3: Trendline on Inventory Turn Ratio (ITR) for Four companies during (2016 –
2019)

It is important to achieve a high ratio, as higher turnover rates reduce storage

and other holding costs.

Low turnover implies that a company’s sales are poor, it is carrying too much
inventory, or experiencing poor inventory management.

Trendline is drawn for each firm. Saipem is the only organisation that has a
gradual increase in ratio, while others have a unsteady ratio. Kirloskar pumps has a
maximum ITR of 37.36% at 2018.

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9.4 GROSS PROFIT MARGIN

Gro s s p ro fit ma rg in
Flowserve Linear (Flowserve) Saipem
Linear (Saipem) Kirloskar Linear (Kirloskar)
KSB Linear (KSB)

35.00

30.00

25.00

20.00
Percentage

15.00

10.00

5.00

0.00
2015 2016 2017 2018 2019

Year

Figure 4: Trendline on Gross Profit Margin for Four companies during (2016 – 2019)

The main inference from the Gross profit margin if a company's gross profit
margin wildly fluctuates, this may signal poor management practices and/or
inferior products.

Flowserve has a higher Gross profit percentage aver the period of

study. The gross profit margin for KSB pumps is gradually decreasing,
indicates effective measures should be taken to increase the gross profit ratio.

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9.5 DAYS OF SALES OUTSTANDING (DSO)

D A Y S OF S A L E S OU T S T A N D IN G (D S O)
Flowserve Linear (Flowserve) Saipem
Linear (Saipem) Kirloskar Linear (Kirloskar)
KSB Linear (KSB)

90.00

80.00

70.00

60.00

50.00
Days

40.00

30.00

20.00

10.00

0.00
2015 2015.5 2016 2016.5 2017 2017.5 2018 2018.5 2019 2019.5 2020

Year

Figure 5: Trendline on Days on Sales Outstanding for Four companies during (2016
– 2019)

A high DSO number shows that a company is selling its product to

customers on credit and taking longer to collect money. This may lead to cash
flow problems because of the long duration between the time of a sale and the
time the company receives payment.

A low DSO value means that it takes a company fewer days to collect
its accounts receivable.

Saipem and Flowserve has higher DSO values compared to Kirloskar

and KSB pumps, indicates that the latter has fewer days to collect the
accounts receivable.

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9.6 CASH TO CASH CONVERSION CYCLE

C a s h to C a s h c o n v e rs io n c y c le
Flowserve Linear (Flowserve) Saipem Linear (Saipem)
Kirloskar Linear (Kirloskar) KSB Linear (KSB)

150.00

140.00

130.00

120.00
Days

110.00

100.00

90.00

80.00

70.00
2016 2017 2018 2019

Years

Figure 6: Trendline on Cash to Cash conversion cycle for Four companies during
(2016 – 2019)

The cash conversion cycle measures how many days it takes a company to
receive cash from a customer from its initial cash outlay for inventory.

All the organisation had an unsteady cash conversion cycle. Here all the
cycles during each period is positive, hence there will be a profit.

44
 The cash conversion cycle depends on DSP, DPO and TID. Hence the
change in any one of the values have an impact on cycle days.

9.7 WORKING CAPITAL

Wo rk in g c a p ita l
Flowserve Linear (Flowserve) Saipem Linear (Saipem)
Kirloskar Linear (Kirloskar) KSB Linear (KSB)

4,000,000

3,000,000

2,000,000

1,000,000
$ (in thousands)

0
2015 2016 2017 2018 2019

-1,000,000

-2,000,000

-3,000,000

-4,000,000

Years

Figure 7: Trendline on Working capital for Four companies during (2016 – 2019)

When a company has more current assets than current liabilities, it has
positive working capital. Having enough working capital ensures that a company
can fully cover its short-term liabilities. This is a sign of a company's financial
strength.

Negative working capital describes a situation where a company's current

liabilities exceed its current assets. It typically indicates that the company may
have incurred a large cash outlay or a substantial increase in its accounts

45
payable as a result of a large purchase of products and services from its
vendors.

KSB pumps has a Negative working capital in the period 2016 and
2018.

9.8 SALES GROWTH

S a le s g ro wth
Flowserve Linear (Flowserve) Saipem Linear (Saipem)
Kirloskar Linear (Kirloskar) KSB Linear (KSB)

20.000

15.000

10.000

5.000
Percentage

0.000
2015 2016 2017 2018 2019

-5.000

-10.000

-15.000

Years

Figure 8: Trendline on Sales Growth for Four companies during (2016 – 2019)

Sales growth helps to calculate the growth attained when compared with
previous year. KSB pumps attains a maximum sales growth of 17.35% in the year
2018.

46
 Kirloskar pumps has a negative sales growth during the year 2016, 2017 and
2018. Flowserve pumps too have a negative sales growth during 2016 and 2017.

9.9 EQUITY RATIO

E QU IT Y R A T IO
Flowserve Linear (Flowserve) Saipem Linear (Saipem)
Kirloskar Linear (Kirloskar) KSB Linear (KSB)

9.000

8.000

7.000

6.000

5.000
Ratio

4.000

3.000

2.000

1.000

0.000
2016 2017 2018 2019

Years

Figure 9: Trendline on Equity Ratio for Four companies during (2016 – 2019)

In general, higher equity ratios are typically favourable for companies. A

higher ratio also shows potential creditors that the company is more sustainable and
less risky to lend future loans. 

A low equity ratio is not necessarily bad. A low equity ratio is easier for a
business to sustain in an industry where sales and profits have minimal volatility over

47
time. Conversely, a highly competitive industry with constantly changing market
shares may be a bad place in which to have a low equity ratio.

Saipem pumps had a gradual decreasing Equity Ratio. While others had an
unsteady ratio.

48